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Africa

Quarter I 2014 Quarter III 2014 Issue 59 Vol 1 Number 888 Issue 60 Vol 1 Number 888

CORPORATE CORPORATE

UK £3.95 - US $7.00 - Austria € 6.50 - Canada C$ 7.00 - France € 5.00 - Germany € 5.00 - Kenya KES 300 - Nigeria ₦ 600 - South Africa R 30.00 (Incl VAT) Southern African Countries R 26.30 (Excl Tax) - Suisse CHF 17.50 - Uganda USh 8000 - Rest of Africa, Francophone Africa see local pricing

www.corporate-africa.com

FRIENDS ACROSS OCEANS India - South Africa Trade

NIGERIA 2020

Featuring Petroleum Minister Alison Madueke

SOUTH AFRICA CELEBRATES 20 YEARS Trade Minister Rob Davies reflects on successes


for innovative new diagnostics

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Patients diagnosed with multidrug-resistant tuberculosis (MDR-TB) being treated in an isolation ward in Manila.

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StopTB/World Health Organization 2011/2012 Fact Sheet 2FORTUNE ® Magazine, March 2013 3Ethisphere® Institute, April 2013 Please visit www.bd.com BD, BD Logo and BD MGIT are trademarks of Becton, Dickinson and Company. © 2013 BD

Photo © Gerardo Sabado


CONTENTS Features

4 SOUTH AFRICA CELEBRATES TWENTY YEARS Minister of Trade and Industry South Africa, Dr. Rob Davies, reflects on the nation’s development from the isolation of sanctions to having one of the continent’s strongest economies 10 INDIA AND SOUTH AFRICA SUSTAINS BILATERAL TRADE Trade between South Africa and India reaches record levels. By Sharon Davies. 14 FRIENDS ACROSS OCEANS Chandrajit Banerjee, Director General of the Confederation of Indian Industry, reflects on South Africa and India’s long-standing economic partnership. 16 SOUTH AFRICA GERMAN CHAMBER OF COMMERCE: STRENGTHEN PARTNERSHIPS The South African-German Chamber of Commerce looks back on its history. 18 SOUTH AFRICA – NIGERIA TRADE IS VITAL FOR AFRICA Nigerian Deputy Trade and Industry Minister, Elizabeth Thabethe, discusses the potential to build on the trade and investment relationship between South Africa and Nigeria. 20 PROPERTY RIGHTS ADDRESS IMBALANCES Head of Policy Research at the Institute of Race Relations, Dr Anthea Jeffery, considers the impact of South Africa’s 2013 Investment Bill. 24 REVISITNG A REGULATORY RUBRIC’S CUBE: SOUTH AFRICA’S OIL AND GAS GAME Senior Associate at ENSAfrica, Dr. Luke Havemann, considers the legislative complications that may stand in the way of South Africa’s Oil and Gas Industry.

Technology

Francophone

29 CHINA’S TELECOM FOOTPRINT Andrea Marshall reports on China’s role in Africa’s booming Telecom industry.

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FRANCOPHONE CHALLENGES Philippe Hugon, author of ‘African Geopolitics’, examines the cultural, economic and political challenged faced by African members of the IOF.

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WORKING WITH YOUTH AND WOMEN IN LA FRANCOPHONE The CONFEGES Group discusses its aims and achievements ahead of the 15th Summit of the OIF.

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LA FRANCOPHONE WORLD Ahead of the 15th Summit of the OIF, the organization explains its developing role in the Francophone world.

32 HOW IBM IS BRINGING WATSON TO AFRICA Vice President of IBM Research, Dr. Kamal Bhattacharya, explains how IBM and partners are working to help Africa’s technology sector reach its full potential. 36 SEACOM HELPS SPUR AFRICA’S EMERGING DIGITAL ECONOMY Celebrating five years of success, SEACOM reflects on how it has contributed to Africa’s Telecom Revolution. 38 CONGO’S TRAFFIC LIGHT ROBOTS An interview with the inventor of the DRC’s unique traffic robots, Therese Izay.

Investment and Finance 61

AFRICA AS IT IS Speaking at the US -Africa Leaders Summit , Mo Ibrahim, global philanthropist and telecom industrialist , points out that Africa is not as different from the West as some may think.

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CAMEROON OPENS FOR BUSINESS Corporate Africa speaks to Prime Minister Philemon Yang at the UKCameroon Business Summit in London about Cameroon’s investment climate.

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KENYA REGISTERS RECORD GROWTH IN FDI Moses Ikiara, Managing Director of the Kenya Investment Agency, breaks down a recent report showing record growth in Kenya’s FDIs.

Oil and Gas 40 NIGERIA ENERGY SHAPES ITS 2020 VISION Minister of Petroleum Resources, Diezani Alison-Madueketo, discusses how national resources will shape the country’s future. 44 JEROME FERRIER ABOUT WGC PARIS 2015 Corporate Africa interviews Jerome Ferrier, President of the IGU. 46 MARGINAL FIELDS DEVELOPMENT IN NIGERIA: STRATEGY FOR SUCCESS A look at the successes and challenges of Nigeria’s Marginal Field Development Program by the CEO of SIGMA Technical Agencies Ltd., Dr Soky Amachree.

Agriculture 50 A Private Public Partnership platform to achieve sustainable growth EMRC’s Jessica Frommer explains how vital Public-Private partnerships will be promoted at the 2014 AgriBusiness Forum.

Events 66

EVENTS Corporate Africa quarterly roundup of leading conferences and exhibitions promoting opportunities in the markets of Africa

Published By Times Publications Group Ltd Publisher James Norris Editor Shan Bertelli, Assistant Editor Tsagaye Girma, Advertising Manager Assena Tabélé Graphic Designer Robert Ellerbeck Conference Coordinator Aisha Aingal Special Project Director Jian Ping Sun Administration Assistant Joshua Bismark Project Managers Filipa Ribeiro, Adrien Akkus, Stella Orena, Martin Sutherland Corporate Africa (ISSN 1358-5789) is published quarterly. Subscription details can be obtained from Times Media Group at principal commercial office: 30-32 Tabard Street, London SE1 4JU; Tel: +44 (0) 20 3758 9170 or Fax: +44 (0) 20 7403 1283. Email administration@times-publications.com or visit our website at www. corporate-africa.com. © Times Publications Group Ltd. 2014 — all rights reserved. First Published in 1994. Distributors in Africa: Shama PLC Tel: +251 11 554 5290, MCS/Caxton International PressTel: +27 11 807 9599, Print Excellence Ltd.Tel: +233 243 213 881, Dominion Bookshop, +233 240 695 791, Publisher’s Distribution Services Tel: +254 20 3222 901, PDS Accountant Tel: +254 20 3222 903, Glendora Bookshop Tel: +234 803 304 7091.


Features

SOUTH AFRICA CELEBRATES 20 Years In 1994, South Africa stunned the world as it overcame years of injustice and racial segregation to democratically elect Nelson Mandela as the leader of a new Rainbow Nation. Two decades on and the country has undergone many changes in its social, political, and economic landscape. Dr. Rob Davies, Minister for Trade and Industry South Africa, reflects on his nation’s development from sanctions to having one of Africa’s strongest economies.


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production facilities in South Africa to supply a growing middle class and opportunities across the continent.

Today, South Africa is home to practically every major multinational corporation from across the globe with many locating production facilities in South Africa to supply a growing middle class as well as opportunities across the African continent. ECONOMIC DEVELOPMENT Democracy leads to Black Empowerment

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he world held its breath as millions of South Africans voted for the first time on 27th April 1994. Apart from a few isolated incidents, South Africa’s first election in which people of all races were free to vote and the subsequent transition to a democratically elected Parliament was miraculously peaceful. The transformation of the South African economy has been similarly astounding. In 1994, the South African economy was characterized by deep structural deficiencies which led to an extended period of negative growth, falling per capita incomes, a ballooning fiscal deficit, high inflation, and negative rates of fixed investment. Additionly, the Apartheid

regime’s inward focus and international sanctions had isolated South Africa from international markets and facilitated the development of industrial conglomerates which controlled large parts of the economy through a combination of deeply anti-competitive behavior, high rates of tariff protection and “crony capitalism.” South Africa’s first democratically-elected government consequently prioritized introducing international competition and investment to normalize and restructure the economy. Today, South Africa is home to practically every major multinational corporation across the globe with many locating

South Africa’s Gross Domestic Product (GDP) is, today, almost three times higher than it was in 1994 and the economy has experienced its longest, unbroken period of economic growth since records were kept. Investment (including foreign investment) has risen substantially, inflation is low and relatively stable, and government has worked hard to limit the fiscal deficit. As a result, the South African economy grew at an average rate of 3.1 per cent per annum between 1994 and 2013. This compares favorably with the growth rates of other middle-income developing countries such as Malaysia, Argentina, and Brazil. This rate of growth is also substantially higher than the 1.2 per cent average annual growth that South Africa experienced between 1980 and 1994. This positive growth performance has been underpinned by moderate growth in the manufacturing sector and strong growth in South Africa’s tertiary sector consisting of financial, transport, telecoms and business services. This has created the policy and fiscal space for government to roll-out universal education to all children in South Africa, to expand social grants to alleviate the most entrenched forms of poverty, to invest in infrastructure, and begin to play a significant role in international relations. INTERNATIONAL RELATIONS

Investors strengthen their position in South Africa

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South Africa has prioritized the development of the African continent and a rebalancing of international relations so that developing and least-developed countries are able to actively participate in multilateral organizations such as the World Trade Organization (WTO),


Features

the International Monetary Fund (IMF) and the World Bank. The political and economic stability of South Africa has been accompanied by a concerted effort by the government to promote peace, stability, and economic development across Africa. In order to give meaning to these political ideals, the South African government has led the negotiations for Free Trade Agreements (FTA) in Africa. These include the FTA with the Southern African Development Community (SADC) and the current negotiations for a Tri-partite FTA that will include the Common Market for Eastern and Southern Africa (COMESA), the East African Community (EAC), and SADC regions. When agreed upon, this FTA will encompass almost all sub-Saharan African countries and will have created a market of approximately 600 million people and a combined GDP of over US$ 1 trillion.

South Africa’s Gross Domestic Product is today almost three times higher than it was in 1994 and the economy has experienced its longest, unbroken period of economic growth since records were kept.

In addition, South Africa has strong trade relations with the European Union (EU) through the Trade, Development and Cooperation Agreement while an Economic Partnership Agreement (EPA) with the EU is currently being negotiated. South Africa’s political and economic influence was further cemented by joininh the BRICS country grouping that comprises Brazil, India, China, and Russia. The BRICS group represents the largest developing countries and has rapidly become an important factor in international relations and economic development. FOREIGN DIRECT INVESTMENT As South Africa took its rightful place in the global arena, foreign investors have demonstrated their confidence in its economy with a range of enterprises entering the South African market either through greenfield investments, mergers ,or acquisitions. South Africa attracted FDI of just US$ 379.8 million in 1994, by 2013 this had leapt to US$ 8.2 billion.

New education system in new languages

Moreover, because South Africa has a sophisticated financial services sector, many foreign investors choose to raise debt from the local financial sector which almost certainly results in FDI activities being under-estimated.

Over the past five years, multinationals have affirmed South Africa as a regional manufacturing hub:

The extent to which leading multinational corporations are invested in production facilities in South Africa bears testimony to these firms’ confidence in the domestic economy. Some of the reasons cited by foreign firms for choosing to invest in SA are the world-class infrastructure, political and macroeconomic stability, sophisticated financial, legal and telecoms services, availability and easy access to government incentives, and the ease with which firms located in South Africa can trade with other subSaharan African countries.

The Heineken brewery is South Africa’s largest greenfield investment project with 3m hectolitres capacity. Unilever’s “Indonsa” project is a global first for the group, advancing its focus on modern, sustainable “green” technology. It is Unilever’s second largest plant in the world and its fifth plant in South Africa. Other Fast-Moving Consumer Goods (FMCG) companies such as Procter & Gamble, Nestlé, KimberlyClark, Ranbaxy, Hisense, Samsung, and LG Electronics have either established new plants or expanded their operations. In the Auto sector, South Africa is home to all of the largest original

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social development to 2030. The NDP emphasizes the need for government to work with the private sector to accelerate inclusive economic growth which will benefit all South Africans. Key priorities include the development of Special Economic Zones (SEZs) where foreign and domestic investors will have access to globally competitive infrastructure, investment support, and tax incentives. Government has also announced a range of substantial infrastructure investments which crisscross the entire country, and which offer lucrative procurement opportunities for investors locating in South Africa to supply inputs to the infrastructure build program. South Africa is home to some of the richest mineral deposits in the world. Adding value to these mineral deposits as opposed to simply exporting primary minerals is a policy imperative of government. In areas such as platinum and titanium, South Africa has both the mineral wealth and the technical expertise to process and add value to these minerals. Internationally competitive packages of financial support and access to primary minerals at below international prices are currently being developed and international investors are invited to assess and invest in these lucrative opportunities.

Government has also partnered with the Johannesburg Stock Exchange (JSE) to make it easier for foreign companies to list in South Africa. As a result, foreign domiciled companies are now treated as domestic listings and this important regulatory shift has made the JSE an attractive listing destination for foreign companies.

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South Africa has experienced 20 years of social, political, and economic achievements, but the future appears even brighter. WHAT THE FUTURE HOLDS FOR SOUTH AFRICA The first 20 years of democracy in South Africa have been characterized by moderate economic growth – tempered in particular by the 2008 Global Financial Crisis – economic and political stability, and substantial reductions in the incidence of poverty. Still, significant challenges remain: unemployment especially of the youth remains stubbornly high, infrastructure investment has not kept pace with the needs of industry, and inequality has risen. This realization has encouraged the South African government to develop the National Development Plan 2030 (NDP) that lays out a comprehensive plan for South Africa’s economic and

South Africa’s location and the strength of its political and trade links to the rest of sub-Saharan Africa are becoming an increasingly important source of competitive advantage. Among economists and analysts, the consensus is that Africa represents the next growth frontier. The reasons are easy to see: large and rapidly urbanizing populations, increasing political stability, strong economic growth fundamentals, and very low levels of per capita consumption of consumer goods. Indeed, according to the IMF, while global growth was just 3 per cent in 2013, subSaharan Africa grew 4.9 per cent. The IMF projects that economic growth will accelerate even further in sub-Saharan Africa in 2014 and 2015, with projections of 5.4 per cent and 5.5 per cent respectively. In short, South Africa has experienced 20 years of social, political, and economic achievements, but the future appears even brighter. No wonder that fDi Magazine, a London Financial Times publication, has named South Africa the “African Country of the Future 2013/14.” ■

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equipment manufacturers (OEMs) and assemblers. This includes Mercedes-Benz, BMW, Toyota, Nissan, General Motors, Iveco, Volvo, and Johnson Controls Incorporated. New entrants such as Tata, First Auto Works of China (FAW), Beijing Auto Works (BAW), and Motherson Sumi Systems have also invested heavily in local production or assembly operations. Major Business Process Outsourcing centers have been attracted and established in South Africa such as Amazon, SERCO Global Services, Capita, Teleperformance South Africa, CCI Call Centres, WNS Global Services, and Mindpearl.


A ATNS – celebrating 21 years ars off outstanding Air Traffic Management nagementt Over the past 21 years, Air Traffic and Navigation Services SOC C Limited (ATNS) has supported the grow growth of our democracy by connecting Africans across borders through This year, as h expert air traffic navigation. Th es its coming of age by prou South Africa celebrates 20 years of democracy, ATNS celebrates proudly sharing our key milestones with you: 1993 1995 1998 2001 2005 2009 2012 2013

The founding of ATNS and the start of Project Pronav to upgrade and d exte extend terrestrial navigation systems The founding of the ATNS college ISO accreditation Installation of 2D Air Traffic Control simulator at ATNS’s Aviation Training Academy Satellite communication upgrade system commences Control tower construction at King Shaka International Airport Inauguration of NAFISAT Master Back-up Terminal in Uganda ATNS in conjunction with the University of the Witwatersrand Business School launched the Aeronautical Management Development Programme (AMDP) – the first of its kind in Africa; As part of ATNS’s Women’s Development Programme, 13 female staff members complete this programme 2014 ATNS and its ASIOACG partners are voted and awarded the prestigious Best Service Provider Award at JANES’s annual ATC Awards Ceremony, held in Spain

Here’s to the next 21 years of ATNS and our democracy: may we continue to reach new heights – together! Fo For more information about our comprehensive range of services, please visit www.atns.com or call us on +27 11 607 1000. pleas


Features

INDIA AND SOUTH AFRICA SUSTAIns BILATERAL TRADE

Trade between South Africa and India reaches record levels - Sharon Davies reports.

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lthough India’s contribution to global GDP is 2.4 per cent compared to China’s 10, India’s emerging economy is expected to play an important and growing international role in the future.

As one of the fastest-growing economies during the last two decades, India enjoyed an average annual growth rate of more than 8 per cent between 2001 and 2011. While growth slowed to 6.5 per cent in 2011 and was revised down to 5.5 per cent for 2012, the country’s growth trajectory is forecast to recover to previous levels in the coming years. World trade patterns are changing, and trade with India is of increasing importance to South Africa. Since establishing bilateral relations in November 1993, trade between India and South Africa has grown steadily and consistently. South Africa’s trade with India has doubled over the last five

years, according to national Minister of Trade and Industry, Dr. Rob Davies, with minerals such as gold, diamonds and platinum, base metals, chemical products, and machinery making up the bulk of exports.

Dr. Rob Davies says there is huge potential for further mutually beneficial trade exchange and increased investment channels between the two countries.

Imports, including ships, boats, vehicles, telephones, cell phones, pharmaceuticals, mechanical appliances, and electrical machinery from India grew by 28 per cent over the same period. The balance of trade has historically been in South Africa’s favor, but a trade deficit was recorded for the first time in the 2011/12 financial year.

The ‘South Africa Connect with India’ Trade Show

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India has been among South Africa’s top 10 trading partners for the past few years and its fifth largest export destination, up from seventh in 2011, and sixth largest source of imports, according to the latest data from Statistics South Africa. Bilateral trade for 2013 is on track to reach the 2014/15 financial year target total of US$ 15 billion set in 2010, two years ahead of schedule. Bilateral trade for 2011/12 totaled US$ 14 billion, and trade to date indicates that the US$ 15 billion target will be reached in 2014. Dr. Rob Davies says there is huge potential for further mutually beneficial trade exchange and increase investment, channels between the two countries and Mike Schüssler, CEO of Economic Consultancy Economists.co.za, expects India to overtake Japan and Germany and become South Africa’s third largest export destination by 2015.


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India and South Africa negotiate at SACU (Customs Union) Strong support and a focus on increasing bilateral trade from both governments has underpinned the growth in trade which is, in turn, further supported by the India–South Africa Joint Ministerial Committee, the reconstituted India– South Africa CEO’s Forum, as well as multilateral interaction through the BRICS grouping and the India, Brazil, South Africa Business Forum.

The formula for continued growth in bilateral trade is to find the balance between competiveness and cooperation.

There has also been growth in twoway investment between the two countries. Foreign direct investment (FDI) from India includes investments by companies such as the Tata Group, UB Group; Vehicle Company, Mahindra and Mahindra; cell-phone company, Reliance Communications, and pharmaceutical companies, including Ranbaxy and Cipla. FDI from India, unlike China, has been largely driven by private investors, and is estimated to exceed US$ 6 billion. Investment by South Africans in India has been lower, estimated at around US$ 250

million, led by brewers SABMiller, the Airports Company South Africa, Sanlam and Old Mutual in the insurance arena, as well as pharmaceutical company Adcock Ingram and Rand Merchant Bank. The Bank of India (BOI) opened its first branch in Johannesburg in September 2010 and plans to focus on corporate banking and developing small and medium-sized enterprises, which should further promote trade between the two countries. BOI, like many Indian businesses, sees South Africa as the gateway to expanding not only bilateral

More recently, a ministerial-level agreement was reached to make more of each country’s relative strengths – with a focus on trade and cooperation in sectors such as infrastructure, manufacturing, energy, mines and minerals, oil and natural gas, banking and financial services, tourism, pharmaceuticals, vehicles and vehicle components, textiles and garments, fertilizers, information technology, forestry-based products, and small to medium-sized enterprises. Corporate Africa 2014

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Adding value before exporting goods was another option highlighted by SchĂźssler which would allow South Africa to charge a higher price and benefit more from bilateral trade than it would from exporting primary products, such as unprocessed minerals.

The combination of political goodwill and initiatives, such as the annual Investment and Trade Initiative to promote bilateral trade in targeted sectors, means that trade can be expected to continue to grow, irrespective of the finalization of the PTA. trade but trade with other countries on the African continent.

India and South Africa, as part of the five-member South African Customs Union grouping, are close to finalizing a preferential trade agreement (PTA). The deal, which has the potential to

reduce tariffs and other barriers and further increase trade, has been under negotiation for five years. The formula for continued growth in bilateral trade is to find the balance between competiveness and cooperation, according to Dr. Davies.

In addition, with the Department of Trade and Industry driving a scheme to develop export markets for South African products, including micro firms in the craft market, it looks as though a large number of South Africans, even those based in rural areas, could potentially benefit from the growing bilateral trade with India. â–


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Friends Across Oceans Mr. Chandrajit Banerjee, Director General of the Confederation of Indian Industry (CII), reflects on the enduring economic and historical relationship between South Africa and India.

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ndia and South Africa have enjoyed enduring, warm, and friendly relations based on historical linkages taking place on a continuous basis across the Indian Ocean. Mahatma Gandhi made South Africa his home for over two decades and carried over valuable lessons from his experiences there to his struggle for Indian independence. Nelson Mandela is one of only two non-Indians to have been conferred the prestigious recognition of Bharat Ratna by the Indian government. Our two economies are rooted through multiple ties, which are continuously being enhanced by our governments. South Africa and India are members of two major groupings of emerging economies, namely BRICS and IBSA, which offer opportunities for exchange of visits at the highest levels on a regular basis. Founded on such warm political ties, Indian industry has always appreciated the welcome it has received in South Africa. The commemoration of two decades of the Establishment of Diplomatic Relations between India and South Africa is a good time to build on our friendship for a new level of bilateral economic engagement. Today, the Indian economy is set for a renewed wave of growth and investments, as a new government enjoying a strong parliamentary mandate is in control of the country. Prime Minister Narendra Modi has accorded high priority to accelerating India’s economic engagement with the world which would propel the outward expansion of Indian business as well as a greater participation of overseas business in India. The Indian economy has exhibited deceleration in the last 2 years as GDP growth pace has fallen to below 5 per cent. However, this comes on the back of 8 years

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of sustained growth at over 8 per cent annually, which has provided a new level of income and consumption to Indians. India has pulled over 250 million people from the poverty line and into the middleincome class of consumers. Education levels have risen sharply and a new generation of workers has emerged onto the global platform. Indian companies have seized new sectors of opportunity while expanding in areas of core competence. Based on these factors, the IMF expects India to reach GDP growth rates of close to 7 per cent in 2 years’ time.

The commemoration of two decades of the Establishment of Diplomatic Relations between India and South Africa is a good time to build on our friendship for a new level of bilateral economic engagement. Bilateral economic exchanges have been robust and multidimensional, extending to trade in goods and services, investments, and people-to-people exchanges. As large and diversified emerging economies of their respective regions, the two economies enjoy several complementarities. Total trade between India and South Africa has increased exponentially since the turn of the century from US$ 1.3 billion in 2000-01 to US$ 14 billion in 2012-13, before drifting down in 2013-14 to stand at US$ 11.2 billion. India’s exports to South Africa have multiplied by 2.5 times over the 5 years to 2013-14. India’s imports from South Africa doubled from US$ 5.7 billion in 2009-10 to US$ 11 billion in 2011-12. However, since then the import figure has

contracted to US$ 6 billion, primarily on account of gold imports. Exports from India to South Africa include vehicles and automotive components, pharmaceuticals, engineering goods, chemicals, textiles, and gems and jewelry, among others. Imports from South Africa to India include gold, coal, copper ores and concentrates, phosphoric acid, and other minerals. However, gold accounts for the most significant import from South Africa, with HS Code 71 crossing US$ 7.5 billion in 2011-12. From the investment perspective, top Indian companies such as the Godrej Group, UB Group, CIPLA, and IT companies are present in South Africa, along with several banks and mining firms. There is also growing South African investment in India, led by SABMiller in breweries, ACSA, Sanlam and Old Mutual in insurance, Rand Merchant Bank, and First National Bank, among others. In 2012, about 107,000 Indian tourists visited South Africa while almost 60,000 South African tourists traveled to India in 2011.


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CII’s Anand Sharma and President Jacob Zuma at The Business Meeting, New Delhi, 2010 Indian companies are strongly interested in engaging with South Africa in trade and investments. These enterprises have been wellrecognized in South Africa for bringing in funds, creating jobs, and working with local communities for a multifaceted experience for both sides. With a per capita income of close to US$ 8,000 and a pro-business investment climate, South Africa offers many horizons to Indian industry. Mining and related industries benefit from South Africa’s rich natural resources and growing capabilities in value addition. In infrastructure, Indian firms are interested in bidding for projects in power, telecomms, transport, and urban development. Energy and sustainable development could also be a key area of cooperation, given the need to align with climate change requirements. The manufacturing sector has huge opportunities in FMCG, consumer durables, pharmaceuticals, engineering goods, and transport equipment. The services sectors, too, can be a big area

of cooperation across sectors such as healthcare, education, including longdistance education, skill development and capacity building, professional services, and IT. Similarly, India’s growth can be a potent source of opportunities for South African industry. Indian industry welcomes greater South African participation in areas such as manufacturing, energy, including renewable energy, and services, among others.

Indian companies are strongly interested in engaging with South Africa in trade and investments. These enterprises have been wellrecognized in South Africa for bringing in funds, creating jobs, and working with local communities for a multifaceted experience for both sides.

The Confederation of Indian Industry has been privileged to benefit from continuous support and encouragement of the South African government. CII initiated the IndiaSouth Africa CEOs’ Forum, launched by HE President Zuma during his visit to India in 2010, which has provided useful direction to the overall bilateral engagement. CII has proactively engaged with South African industry, institutes, and academia over the years, and our range of activities in the country has encompassed continuous business delegations in both directions, two India Shows, and participation in sectoral trade exhibitions in South Africa. The 20th Year of the Establishment of Diplomatic Relations between India and South Africa would set the pace for a new level of engagement. CII believes that a new trade target could be set at US$ 20 billion by 2017 which is eminently achievable as both countries grow together. CII looks forward to deepening and strengthening its warm and close friendship with the South African government, its industry, and its people. ■

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Features Siegmar Proebstl, CEO Siemens South Africa, opens science school

GERMAN CHAMBER OF COMMERCE strengthens partnershipS

In celebration of 20 years of democracy, the Souther African-German Chamber of Commerce looks back on its history. Since the advent of democracy 20 years ago, the political, social, and economic landscape of South Africa has undergone dramatic changes: which the Southern African–German Chamber of Commerce and Industry is honored to have experienced first-hand. The SA-German Chamber opened its doors in South Africa in 1952, under very different political circumstances. German companies in South Africa

were among the first to empower, train, and employ black South Africans at the time. The political context of South Africa has been significantly altered but German companies remain dedicated to transformation and training as 2014 marks 125 years of German entrepreneurship in South Africa. The period following 1994 saw a wave of international investment f low into South Africa. Companies from all over

the world came to this country, setting up businesses, creating employment, and driving the economy. Led by the father of the nation, the great Nelson Mandela, this was an incredible time in South Africa, not just socially and politically but also in terms of investment and economy. As a Chamber, German business was also increasingly interested in South Africa and investment reached record levels.


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In 2008, the global recession reached South Africa. Challenges felt worldwide were also felt locally, with the economy retracting by 6.4 per cent at its lowest point. The 2010 FIFA World Cup, however, provided South Africa with economic and psychological support during the recession. This was a definite highlight in the past 20 years. As Germany is a footballloving nation, the World Cup was a fantastic experience for the SA-German Chambersand for all Germans who were privileged enough to attend some games, whether they were based locally or came to South Africa to enjoy the spirit and the “Ubuntu” of the games. Post-2010, Germany is still South Africa’s second largest trading partner with € 4.7 billion (US$ 6.2 billion) being exported to Germany from South Africa; and € 8.5 billion (US$ 11.2 billion) exported to South Africa from Germany.

However, various factors continue to create some difficulties and hamper investment in South Africa, in particular, for small and medium enterprises entering the market.

Opportunities in South Africa abounf, although challenges are also ever-present and must be considered and dealt with.

Issues such as prolonged and violent strikes in all sectors of the South African economy are ever on the increase, such as the platinum strike of 2014 which cost South Africa upward of € 1.7 billion in lost revenue. There is limited direction provided on how South Africa will be able to avoid these devastating strikes and accompanying violence in the future.

Furthermore, the latest Broad-Based Black Economic Empowerment (B-BBEE) codes are further hampering international investment. While transformation must continue to be a priority, the implementation of some of the B-BBEE requirements is difficult and cumbersome. At the moment, the SA-German Chamber represents over 6000 German companies operating in South Africa who create direct employment for over 90,000 people through subsidiaries, production centers, and factories and who remain dedicated to training programs and contributing socially to South Africa.

Opportunities in South Africa abound, although challenges are also ever-present and must be considered and dealt with. Germany is dedicated to the future of South Africa, both economically and socially, and the historical partnership between the two countries is something which is cherished and will be built on in the future. ■

Volkswagen assembly plant in South Africa


Features Lagos, capital of Nigeria, home to many foreign investors

South Africa-Nigeria Trade is Vital for Africa While trade and investment between South Africa and Nigeria has increased substantially since 1999, there is still potential to build on this relationship according to Deputy Trade and Industry Minister, Elizabeth Thabethe.

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Features

South Africa MTN is among the biggest investor in Nigeria

billion in investment altogether, which had created an estimated 5500 jobs. “There are other planned big investments that are yet to enter the Nigerian market, and judging by the way the current investments are doing, these projects will contribute immensely to the Nigerian economy.” Nigerian businesses should be encouraged to take advantage of opportunities to invest in South Africa. Louis Mnguni, South Africa’s High Commissioner to Nigeria, said that partnership between the two countries should focus on the economic ascent of the continent. Economic growth was meaningless, he said, if it was not translated into the development of people in both countries. “South Africa recognizes the need to further strengthen trade and economic ties with Nigeria and is engaging to give businesses in both nations an opportunity to engage.” Nigeria is one of South Africa’s most important trading partners on the continent because of its strategic location, large population, and massive natural resources. The Deputy Minister said that, since 2003, South Africa companies and organizations had initiated 28 large-scale Foreign Direct Investment projects in Nigeria, which amounted to US$ 3.58

Minister Thabethe was accompanied on her trip to Nigeria in 2013 by a delegation of South African business people involved in agriculture, engineering, renewable energy, information and communication technology, mining and chemicals. President Goodluck Jonathan acknowledged that maximum cooperation between Nigeria and South Africa is necessary for Africa to move forward. At a meeting in South Africa, he said that cooperation should include agreements in the fields of Defense, Oil and Gas, Mining, Electricity, Information Technology, Justice, Women and Child Development, and the Environment. Home Affairs Minister, Naledi Pandor,

and Nigerian Foreign Minister, Olugbenga Ashiru, also signed a waiver for visas for those holding diplomatic passports. President Jonathan visited South Africa last May, and remarked that in all its visits to that country, Nigeria had never signed as many agreements there. President Zuma was of the opinion that President Jonathan’s visit had generated a lot of optimism and excitement, given the historical relations between the two countries as Nigeria and South Africa had already fostered strong relations since the launch of a bi-national commission in 1999. He was certain that the South AfricaNigeria Business Forum, which would take place at a later date, would further boost economic relations between the countries, pointing out that over 100 South African companies were already doing business in Nigeria and South Africa had hosted over 73000 Nigerian tourists in 2012, an increase of nearly 14 per cent over 2011. With South African Tourism in the process of opening an office in Lagos, the President urged South Africans to visit Nigeria. He added that the nation had played a prominent role on the continent and in world affairs and that South Africa and Nigeria shared a common vision on the reform of IMF and World Bank and other multilateral organizations. ■

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Features Mining industry rights are being reviewed

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ew commentators in South Africa take seriously Julius Malema’s f lamboyant Economic Freedom Fighters (EFF) and their demand that the State take all land in the country, without compensation to property owners, as “custodian” for the poor. The EFF won only 6 per cent of the vote in the May 2014 general election and their demand seems akin to the red boiler suits they insist on wearing in the hallowed halls of Parliament: a bit of political theatre but currently not a significant threat to the order.

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Corporate Africa 2014

Many do not seem to realize that the ruling African National Congress (ANC) is busy empowering the government to do precisely what the EFF demands via the misleadingly named Promotion and Protection of Investment Bill of 2013 (the Investment Bill). The Investment Bill is being drawn up by Dr. Rob Davies, Minister of Trade and Industry. Minister Davies said in May 2014 that he would “soon” send the measure to Cabinet for their approval, so that it could be placed before Parliament thereafter.

CLAUSES IN THE INVESTMENT BILL The Bill applies to both local and foreign owners of virtually every kind of property used “for commercial purposes.” It covers both land and movables and expressly extends to mining licensees and other such permits from the State. One clause in the Investment Bill echoes the property clause in the Bill of Rights in entitling all such property owners to “just and equitable compensation” in the event of expropriation. But another clause effectively bypasses this protection by stating that various


Features

Property rights ADdress imbalances Dr. Anthea Jeffery, Head of Policy Research at the Institute of Race Relations (IRR), discusses South Africa’s 2013 Investment Bill and considers the impact on property rights in the country. bought an unused coal mining right for R1 million (US$ 94,100). In 2004, when the Mineral and Petroleum Resources Development Act (MPRDA) of 2002 came into operation, the statute transferred all privately-owned mineral resources into the “custodianship” of the State.

actions by the State “do not amount to acts of expropriation” at all. Where there is no expropriation to found a claim for compensation, then zero compensation will, of course, be payable. Many people assume that the Constitutional Court will protect investors against any uncompensated taking of their property. But the clause in the Investment Bill in fact comes directly from a 2013 judgment of the Court in the Agri SA case.

THE AGRI SA CASE The Agri SA case began in 2001, when a company called Sebenza (Pty) Ltd.

If the Investment Bill becomes law, the government could use its rules to do precisely what the EFF seeks. It could then take further steps to vest all agricultural land in the State as the custodian of the nation’s land resources, while simultaneously inviting black South Africans to apply to it for licenses to use portions of this land for specified periods.

The owners of what then became known as “old-order” mining rights could apply for their conversion into “new-order” mining licenses from the State. However, they had to do so within stipulated periods, failing which their old-order rights would “cease to exist” under the MPRDA. Sebenza had a year to apply for the conversion of its unused right, but was in such financial difficulties that it could

not afford the R1.5 million (US$141,151) application fee. Its old-order right thus ceased to exist a year after the MPRDA came into operation, prompting it to seek compensation from the State for the expropriation it had allegedly suffered. Agri SA, a lobby group for commercial farmers – many of whom had earlier owned unused old-order rights to the minerals beneath their land – took over Sebenza’s claim and brought it before the courts as a test case on the consequences of the MPRDA.

The Pretoria high court found in Agri SA’s favor, awarding R750,000 (US$ 70,575) in compensation for Sebenza’s expropriated mining right. However, the high court ruling was overturned by the Supreme Court of Appeal, prompting Agri SA to appeal against this judgment to the Constitutional Court. The Court handed down its ruling in April 2013. THE MAJORITY JUDGEMENT OF THE CONSTITUTIONAL COURT Writing for the majority of the Court justices, Chief Justice Mogoeng Mogoeng found that Sebenza had suffered a “compulsory deprivation” of its right under the MPRDA. In addition, “the custodianship” of this resource was now “vested in the State on behalf of the people of South Africa.” Corporate Africa 2014

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Features Land seizure in Zimbabwe destabilized the economy However, the State had not acquired ownership of the mining right. Instead, it was simply a “custodian” through which “broader and equitable access to mineral resources could be realized.” Since the deprivation of ownership from Sebenza had not been matched by the acquisition of ownership by the State, no expropriation had occurred, the Chief Justice ruled. It followed that no compensation was payable.

THE COURT JUDGEMENT AND THE INVESTMENT BILL The Investment Bill echoes Mogoeng’s judgment, and seeks to turn it into a general principle of law by stating that certain actions by the State “do not amount to acts of expropriation.” Among the actions it lists are “measures 22

Corporate Africa 2014

which result in the deprivation of property, but where the State does not acquire ownership of such property.” Under the Bill, a proviso must also be fulfilled in that there must be “no permanent destruction of the economic value of the investment.”

Experience in Zimbabwe shows that the uncompensated taking of agricultural land by the State is enough to destabilize an entire economy as investment dries up, the growth rate turns negative, and jobs disappear.

If the Investment Bill becomes law, the government could use its rules to do precisely what the EFF seeks. It could then take further steps to vest all agricultural land in the State as the custodian of the nation’s land resources, while simultaneously inviting black South Africans to apply to it for licenses to use portions of this land for specified periods. In these circumstances, commercial farmers would be deprived of their property, but the State would acquire it as custodian rather than as owner. In addition, there would be “no permanent destruction of the economic value” of the land, which would continue to be used by others. This means there would be no “act of expropriation” under the


Features

“done by the State as custodian of the country’s resources,” they said. However, no matter how salient this warning in the minority ruling might be, it does not reflect the judgment of the ConCourt as a whole.

The Investment Bill could, of course, provide a solution. Provided that the State takes land under claim as a “custodian” for land claimants, there will be no expropriation flowing from this deprivation – and hence no compensation to be paid.

THE INVESTMENT BILL AND RESTITUTION ACT The Investment Bill should be read in the context of the Restitution of Land Rights Amendment Act of 2014, which extends the deadline for lodging land claims from December 1998 to June 2019.

rules laid down in the Investment Bill and no compensation to be paid.

REVIEW OF PRIVATE OWNERSHIP When Mogoeng handed down the majority ruling in the Agri SA case, two judges, Johan Froneman and Johann van der Westhuizen, disagreed with his conclusion that no expropriation had taken place.

They also cautioned against the implications of his judgment, saying it could lead to “the abolition of the private ownership of all property” without the payment of any compensation and went on to say, “Any legislative transfer of property from existing property holders” would no longer be “recognized as expropriation” if it was

In the five years in which new claims may now be lodged, the government expects some 379,000 land claims to be submitted. Settling all these claims at market value, or with other lesser value, as the Bill of Rights allows, could cost R179 billion (US$ 16.4 billion). Yet, in the 2013/14 national budget, less than R3 billion (US$ 275 million) was allocated to land restitution. How, then, will the State find the necessary funds? The Investment Bill could, of course, provide a solution. Provided that the State takes land under claim as a “custodian” for land claimants, there will be no expropriation flowing from this deprivation, and hence no compensation to be paid.

THE RAMIFICATIONS BEYOND AGRICULTURE Most commentators tend to assume that the Restitution Act will affect only the country’s 37,000 or so commercial farmers. This is not so. Land claims could be made against land of any kind,

including land now used for mining or other business purposes. Moreover, experience in Zimbabwe shows that the uncompensated taking of agricultural land by the State is enough to destabilize an entire economy as investment dries up, the growth rate turns negative, and jobs disappear.

THE ANC AND THE EFF The EFF is overt in urging the government to take land without compensation and as custodian for the poor. Based on the current content of the Investment Bill, the ANC seems to endorse this perspective, although it has, of course, been careful not to publicly say this. The ANC has recently stressed that it will always respect the property clause in the Bill of Rights. But this assurance means little when the Constitutional Court and the Investment Bill concur in stating that expropriation requires not only a deprivation of property but also a matching acquisition of ownership by the State: and that there is no expropriation to found a claim for compensation when the State takes property as custodian for the disadvantaged.

The Agri SA decision is a wakeup call for those who believe that their property rights will be protected by the Constitutional Court.

Writes Martin Brassey SC, a member of the Johannesburg Bar: “The Agri SA decision is a wake-up call for those who believe that their property rights will be protected by the Constitutional Court... Should a cash-strapped State begin using the Investment Bill to grab land without compensation in pursuit of its land restitution policy, then the protective constitutional cloth so earnestly woven [during South Africa’s constitutional negotiations], already fraying most grievously, will begin to unravel completely.” ■ Corporate Africa 2014

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Features

Revisiting a Regulatory Rubik’s Cube:

South Africa’s Oil and Gas Game Despite its success in the mining sector, South Africa lags behind its northern counterparts in the oil and gas industry. Dr. Luke Havemann, Senior Associate at ENSAfrica specializing in the Oil and Gas Projects Department, considers the legislative complications that may stand in the way of success.

I

n the global oil and gas game, it is perhaps trite to state that Africa is possibly the most noteworthy playing field in the world. Not only were six of the top ten global discoveries by size made in Africa during the course of 2013, but that same year the continent was home to industryrelated transactions that were worth an average of US$ 1 billion every 17 days. Unfortunately, as a player in this game, South Africa has garnered a somewhat pitiful reputation relative to so many of its northern neighbors. The primary reasons for this are twofold. Firstly, the search for commercially exploitable domestic hydrocarbon resources has, since the early decades of the 20th century, been a frustrating and almost entirely fruitless exercise. Even Apartheidrelated sanctions, which played no small part in motivating the regime to develop one of the world’s largest coal-to-liquid plants, did not provide sufficient impetus for the establishment of widespread

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hydrocarbon-focused exploration programs. Consequently, it is unsurprising that domestic production of conventional hydrocarbon is currently limited to the rapidly diminishing output of a single gas-toliquid refinery that is run by PetroSA, South Africa’s national oil company.

Unfortunately, as a player in this game, South Africa has garnered a somewhat pitiful reputation relative to so many of its northern neighbors.

It is public knowledge that this refinery is plagued by the possibility that its feedstock may soon be depleted and that the various options being considered, including the importation of Liquefied Natural Gas (LNG), may not come to fruition soon enough.

The second reason that South Africa has been limping behind so many other African jurisdictions in the oil and gas game is the peculiar nature of its legislative framework. It is the proposed changes to this framework that form the focus of this article. Upstream activities in South Africa are governed by the Mineral and Petroleum Resources Development Act (MPRDA) which is not industry-specific in nature. The MPRDA, which came into force in 2004, regulates South Africa’s well-established mining industry and its nascent oil and gas industry. Ultimately, it is the umbrella-like nature of the MPRDA, whereby it covers two distinct industries, that is the source of the vast majority of the statute’s many ambiguous, outdated and inappropriate provisions vis-à-vis the oil and gas sector. The MPRDA has played no small role in impeding the development of South Africa’s oil and gas industry. Those who are au fait with the MPRDA will be aware of a plethora of problematic


Features

Oil Refinery Western Cape South Africa provisions therein, as well as the unfortunate fact that recent attempts to rectify these provisions have, for the most part, only fostered greater concerns. The most infamous attempt in this instance has been the Mineral and Petroleum Resources Development Amendment Bill (the Bill). For many months, the headlines have repeatedly reported on how problematic aspects of the Bill are out of step with best international practice and how a slew of related representations made by the industry were simply ignored or dismissed without due consideration.

subsequent to public submission by the parliament’s portfolio committee on mineral resources.

The Bill grants the state a 20 per cent freecarried interest in all new exploration and production projects which is not unusual in oil and gas projects but the remaining 80 per cent is problematic. Amendments to the Bill have removed the 50 per cent limit which capped the “agreed price” for which the government could buy the remaining 80 per cent. There was no opportunity for the public to comment on the new proposal as the amendments were introduced

Furthermore, petroleum or gas can be designated as a strategic mineral by the minister. The sections of the Bill pertaining to designated minerals that mark a portion of production for local benefit may breach the World Trade Organization’s General Agreement on Tariffs and Trade (GATT). There are more than 30 instances where rules will be determined not by legislation but regulations decided by the minister. These can be amended at will, denying

Most commentators agree that the MPRDA has given rise to the creation of a regulatory environment that has, for some time, been in need of rectification so as to bring it in line with international best practice.

investors of sureties which may cause them to retract their resources. For example, in April, Anadarko Petroleum declared that it had halted exploration spending in South Africa until it received more legislative certainty. Most commentators agree that the MPRDA has given rise to the creation of a regulatory environment that has, for some time, been in need of rectification so as to bring it in line with international best practice. However, as the Bill has demonstrated, the steps that the South African legislature has taken in an attempt to improve this system have, for the purpose of attracting foreign investment, produced that which can perhaps be best described as a Rubik’s cube of regulatory uncertainty. Although such uncertainty has fostered a substantial sense of frustration among International Oil Companies (IOCs), South Africa’s new Mineral Resources Minister, Ngoako Ramatlhodi, has taken certain steps that

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Features Shale Gas exploration plan for South Africa may bode well for the future of the country’s embryonic oil and gas industry. The Bill was passed by the South African parliament earlier this year and all that remained for it to come into force was President Jacob Zuma’s signature. Ramatlhodi, who only took office in May this year, called on the President not to sign the Bill until such time as he and the Ministers of Energy, Trade and Industry, Economic Development, and Finance had had an opportunity to review it. When commenting on his decision to place the Bill before this select committee of Ministers, Ramatlhodi acknowledged that “oil and gas are new in our country so we need to apply our minds that whatever regime we take in the legislation can be sustained in good times and in bad.” Not only did Ramtlhodi state that consideration should be given to drafting separate laws to govern the oil and gas industry, he said, “We want to unlock investment as quickly as possible. We can’t wait. The development of the upstream oil and gas industry will be a focus during the next five years.”

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Undoubtedly, the fact that Ramatlhodi has pulled the Bill back before presidential assent, together with the apparent rationale behind his actions, was a development bound to sit well with members of the industry.

The steps that the South African legislature has taken in an attempt to improve this system have, for the purpose of attracting foreign investment, produced that which can perhaps be best described as a Rubik’s cube of regulatory uncertainty.

On 15th July 2014, Ramatlhodi addressed parliament explaining that the inter-ministerial committee “comprehensively evaluate and accommodate concerns through the development of robust regulations” that will “give practical effect” to the Bill. Ramatlhodi said that Zuma would return the draft law to parliament only if he believed it did not pass

constitutional muster: “If it is not returned, then what we propose is to open full-blown discussions on the regulations. We have a draft [paper] on the regulations and they are ready for stake holder discussions.” The Minister is committed to “rigorous and transparent” engagement with stakeholders on draft regulations. As an “interim solution” and with the aim of enabling the “significant investment required” the DMR plans to “launch a platform” for debating “draft regulations already developed.” “The potential of the upstream petroleum industry, both shale gas and increasingly offshore deepwater oil and gas, is profound and, if stewarded properly, has the potential to drive the development of our economy,” he said. On the face of it, Ramatlhodi’s desire to revisit the aforementioned Rubik’s cube of regulation is a positive development but whether or not his 11th hour reprieve and the work of ministerial committee will in fact bear any regulatory fruits remains to be seen. ■


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Technology

China’s Telecom Footprint in Africa China plays a major role financing and supplying telecom and ICT equipment to Africa, a precondition for eLearning. Chinese companies have broken the monopoly of Western telecom giants in Africa and helped to bring down charges and contributed to the triumphal success of mobile phones on the continent. They have also donated educational communications hardware worth millions of dollars. However, China’s engagement has attracted mixed reactions and some concern about its security implications. Andrea Marshall reports.

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hina’s noticeable influence in Africa has been expanding dramatically: New railways, roads, airports, hospitals, schools, and stadiums have been built across the continent with help from China. Beijing says in 2010 bilateral trade with Africa increased by 43.5 per cent compared to 2009, a record US$ 114.8 billion, making China Africa’s biggest trading partner.

Beijing says that in 2010, bilteral trade with Africa increased by 43.5 per cent compared to 2009, a record US$ 114.8 billion, making China Africa’s biggest trading partner However, the trade is described as asymmetric. In 2010, crude oil formed 70 per cent of all Africa’s exports to China, with another 15 per cent of exports being raw materials, according to African Development Bank figures. In the African ICT and telecom sector,

China’s contribution generally takes the form of equipment supply to national firms. China has built new infrastructure in many African such as countries like Ethiopia, Ghana and Angola. Two Chinese Telecom Powerhouses The two major Chinese players in this field are equipment manufacturers Huawei Technologies and Zhongxing Telecommunications Equipment Corporation (ZTE). Zhang Zhongxiang (research fellow at the Shanghai Institute for International Studies) wrote that ZTE was active in 50 African countries in 2010, providing communication services for over 300 million users. According to his findings, these two companies have established more than 40 thirdgeneration telecom networks in more than 30 African countries and built national fiber optic communications networks and e-government networks for more than 20 African countries. Huawei, whose name can be translated from Chinese as “China Can,” is the largest telecom equipment

manufacturer and network solutions provider in China and the third-largest in the world. State-owned ZTE is the second in China and the fifth-largest in the world, according to Dr. Lin Sun, a veteran telecom industry consultant with 25 years of experience, currently based in Beijing.

Africa accounts for about 12 to 13 per cent (about US$ 3.5 billion) of Huawei’s revenue. For ZTE, African sales make up a slightly lower portion at about 11 per cent or US$ 1 billion. Lin Sun says Africa accounts for about 12 to 13 per cent (about US$ 3.5 billion in 2010) of Huawei’s revenue. For ZTE, African sales make up a slightly lower proportion at about 11 per cent or US$ 1 billion in 2009 (2010 figures are current unavailable). Annual sales of mobile phones in the region are US$ 4-5 billion a year with an estimated growth rate of 15 per cent.

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Technology Mobile technology increases opportunities in South Africa

A third, less prominent player is ASB (Alcatel Shanghai Bell), a mixed privatepublic French-Chinese joint venture.

equipment. State-owned Chinese banks provide loans on condition that African governments buy equipment and services only from Chinese companies.

Market Strategies The key market strategy of the Chinese companies seems to be their competitive pricing, tailor-made for cash-stricken African countries. When quoted in a 2009 case study by the University of Pennsylvania Wharton School, Huawei’s former head of operations in West Africa, Wilson Yang, said that Huawei managed to achieve tremendous margins while pricing itself only 5 to 15 per cent lower than major international competitors, Ericsson and Nokia. Similarly, ZTE prices were 30 to 40 per cent below European competitors. The study found that another factor in Huawei’s success in Africa is its superior customer service with unparalleled management and personnel response. China is also an emerging financier in Africa. Some deals involve inter-governmental financing tied to the purchase of Chinese

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The key market strategy of the Chinese companies seems to be their competitive pricing, tailormade for cash-stricken African countries.

For a growing number of infrastructure loans the Chinese Export-Import (Ex-Im) Bank is using a deal structure known as “Angola mode,” in which payment is made in natural resources (Foster/World Bank 2009). Analysts also point out that China’s engagement is attractive for African governments because China does not attach political conditions to its economic relations unlike Western countries or international organizations such as the International Monetary Fund or the World Bank.

Telecom expert Lin Sun, however, told eLearning Africa that most Chinese financing is not a subsidy from the Chinese government but comes from the vendors or vendor-guaranteed loans, up to US$ 5 billion a year: “This is not additional ‘investment’ but often part of sales terms to help pay off the balance.”

He Wenping, director of African studies at the Institute of West Asian and African Studies in Beijing, told the Guardian: “African countries […] like that the Chinese are less critical of their internal political affairs and there’s less bureaucracy, so projects and deals are executed a lot faster.”

He points out that Chinese firms are taking on big risks in Africa: “There have been cases where customers defaulted payment for projects which caused financial loss to vendors.”

The “no strings” policy has raised concerns that it may increase corruption levels and create human rights issues (Columbia School 2008). Some critics argue that China is


Technology

engaging with conflict-ridden African nations and teaming up with dictatorial regimes like Sudan (IDE 2009). Some say China “buys” African governments by setting up prestige projects. Chinese Technology and Learning China does not appear to systematically support technology-enhanced learning and training in Africa but equipment donations worth millions have been reported. Huawei, for example, recently donated educational communications equipment to three universities in Ghana.

set up in countries such as Angola, Uganda, Tanzania, and Ghana. Although there is no firm information, it can be assumed that hundreds, if not thousands, of African students, professionals, and officials have been trained in China. Effects of the Chinese Engagement Chinese engagement in Africa seems to give many a sense of immediate and true progress – projects get implemented quickly, at a large scale, and often people benefit directly, be it from improved mobile phone services, new hospitals, or from railways.

Another factor for Huawei’s success in Africa is its superior customer service with unparalleled responsiveness of management and personnel.

A report of the Columbia School of International and Public Affairs (2008) came to the conclusion that the country’s engagement in the African telecomms infrastructure has accelerated general development “to a degree that would otherwise have been impossible.”

The company also established six regional centers in South Africa, Nigeria, Kenya, Egypt, Tunisia, and Angola to provide technical training for up to 2000 local people annually. ZTE has also been training a considerable number of Africans.

According to the Africa Infrastructure Country Diagnostic, a World Bank program, telecom improvements have contributed as much as 1 per cent to per capita GDP growth – a bigger role than changes in monetary or fiscal policies.

China’s government underlines that Chinese enterprises have helped to set up “friendship schools” which promote elementary education in 300 villages in Nigeria alone. Schools have also been

Calestous Juma, a Harvard professor born in Kenya, argues that China is helping technology transfer and higher technological education, as well as reestablishing Africa as a source of valuable commodities for the global market.

However, China is accused of failing to create local jobs, flooding markets with poor quality goods, devastating local industries, securing contracts through outright bribery, and turning a blind eye to human rights abuses in countries such as oil-rich Sudan or diamond-rich Zimbabwe. George Ayittey, a Ghanaian economist at the American University in Washington, says China’s increased engagement in Africa “has impeded the continent’s halting steps towards democratic accountability and better governance.” (The Economist, 22nd February, 2010) The heavy volume of concessionary loans from China is a cause of concern for Sanou Mbaye, a former member of the African Development Bank who fears the effect of a growing debt burden. The former president of South Africa, Thabo Mbeki, has warned of a “new form of neo-colonialist adventure.” (News Africa, March 2007) In addition, concerns about Chinese companies bringing Chinese labor to work in Africa have been raised as well as objections regarding the work conditions of African workers, especially in the Chinese-run mining sector. Scholars from the South African Stellenbosch University conclude that these reports “may to a degree be anecdotal evidence with little substance… [but] there is no doubt that there is room for great improvement” regarding the employment, training, and fair treatment of local workers in Chinese firms across the African continent. ■

Corporate Africa 2014

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Technology IBM: prioritizing relationships with local governments, businesses, and communities

K

ala Fleming grew up on the Caribbean island of Antigua. Her father repaired cars and her mother worked as a nurse. She always dreamed of going to college, and her wish came true. Not only did she graduate with a degree in chemistry from a college in the Virgin Islands, but she went on to get a PhD in civil and environmental engineering at the University of Wisconsin, focusing on water distribution and quality. After working for ten years as a professional, she has brought all of that knowledge and expertise to her job as a scientist at IBM Research, Africa. Kala did not come to Africa convinced that she had all the answers. She understands that, in order to create innovations that are relevant and commercially viable in Africa, she had a lot to learn from the people there.

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Corporate Africa 2014

Indigenous knowledge and ingenuity will be required to produce innovations capable of transforming societies. In the months since we officially inaugurated our research laboratory in Nairobi, we’ve continuously sought to find out how we can use innovative technologies to produce commercially viable solutions for the continent.

Indigenous knowledge and ingenuity will be required to produce innovations capable of transforming societies.

Engagement with local people from the academic, business, government, and startup communities has always been a priority. We need their help in

shaping our research agenda and their partnership in taking on ambitious projects in healthcare, education, financial inclusion, human mobility, energy, agriculture, and water. Last March, we hosted the first IBM Research – Africa Pan-African colloquium entitled “Africa in the New Era of Computing.” More than 200 IBM partners, researchers, and business partners explained the strategy for executing Project Lucy, our ten-year US$ 100 million effort to take on many of Africa’s grand challenges by harnessing IBM Watson and other sophisticated technologies.

We recently used an even more grassroots approach to find out what the people of Africa thought were the biggest challenges they face on a daily basis through our “World is our Lab”


Technology

How IBM

is Bringing

Watson

to Africa

Through a combination of cutting-edge technology, local knowledge, and collaboration, IBM and partners can achieve breakthroughs that will contribute towards Africa fulfilling its potential By Dr. Kamal Bhattacharya, Vice President, IBM Research – Africa.

competition which asked participants to send in a view of their day-to-day life. That initiative created a groundswell of data, ranging from the struggles in a daily commute in Kenya to the hope captured at a health station in the northern reaches of Africa. Through over 1200 images from across 25 African countries, our lab saw firsthand the opportunities and challenges our people face on the ground.

Engagement with local people from the academic, business, government, and startup communities has always been a priority.

Typically, the approach to these issues in Africa has been tackled through

development programs. Decades of development work have significantly helped to raise the standard of living and improve livelihoods for millions. However, traditional approaches have often fallen short because of lack of commercial viability, accurate data, and a domain-specific scope.

Big Data technologies have a major role to play in Africa’s development challenges: From understanding food price patterns, to estimating GDP and poverty numbers, to anticipating disease – the key is turning data into knowledge and actionable insight. The next wave of development in Africa requires a new collaborative approach where non-profit and commercial organizations can work together to consolidate, analyze, and act on the continent’s data.

This was the rationale behind the setting up of the Pan-African Center for Data-Driven Development (CEDD), through which IBM will leverage the latest Watson cognitive technologies to provide its research partners with access to high-frequency and betterorganized data. This will enable scientists and analysts to more accurately calculate social and economic conditions and identify previously unseen correlations across multiple domains. Through our work to bring Watson to Africa, partners will be able to tap into IBM’s unparalleled expertise in cognitive computing across its 12 global laboratories and new Watson business unit. Through CEDD they will gain access to the resources, tools, and knowledge-based services necessary for developing cognitive computing innovations. Corporate Africa 2014

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Technology President Uhuru Kenyatta shakes hands with IBM Research Africa President, Dr. Kamal Bhattacharya at the launch of a new laboratory These multiple points of insight are what drive Kala Fleming and numerous other researchers who are actively engaged with finding creative ways of using technology to resolve Africa’s biggest challenges. Kala’s Water Project shows how we hope to work with ecosystems of partners with their own expertise to solve complex problems. There is very little agricultural irrigation in sub-Saharan Africa, so farmers depend primarily on rainfall to water their crops. That makes ground water an important element of the water supply and often the last line of defense against farm crop failure. Yet little data has been collected to assess the health of aquifers so they can be used in more effective ways.

Kala leads a team of IBM scientists that is developing what they call a “digital aquifer”: a system for mapping and analyzing the status of underground water supplies. They are looking 34

Corporate Africa 2014

into the feasibility of using that data combined with weather information in a community resilience tool for insuring farm crops against failure as well as anticipating dry spells and taking action to secure additional water supplies before crops are damaged.

We recently used an even more grassroots approach to find out what the people of Africa thought were the biggest challenges they face on a daily basis through our “World is our Lab” competition which asked participants to send in a view of their day-to-day life. The team has reached out to water resource management operators, borehole drillers, donor organizations, insurance companies, government officials, and, of course,

farmers, for help in sizing up the situation and designing solutions. Kala’s idea for creating a community resilience tool actually emerged out of a discussion she had with an African friend whose mother is a farmer. He told her, “What farmers want is water, not insurance money.” One never knows from where potentially great ideas will come.

I have been in Africa for just about 2 years after working for IBM for 20 years in the United States and India. We established our first Africa lab in a building on the campus of Catholic University of Eastern Africa. Engaging deeply with people from all strata of society, we have 25 scientists and an internship program running. We are dedicated to the proposition that, through the combination of cuttingedge technology, local knowledge, and collaboration, we and our partners can achieve breakthroughs that will help Africa fulfill its great potential. ■


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Technology

SEACOM helps spur Africa’s emerging digital economy SEACOM celebrates five years of success since the undersea cable was launched in 2009, looking at how it has contributed to Africa’s rapid Telecom Revolution and looking to a bright future.

A

group of private investors established SEACOM in 2007 with a clear purpose and vision: They wanted to make broadband connectivity cheaper and more accessible to people throughout Africa. When they launched the SEACOM undersea cable in 2009, its impact on telecoms across the east coast and southern part of Africa was immediate. From South Africa to Kenya to Ethiopia, telecom prices tumbled while the quality of connectivity improved in leaps and bounds. That, in turn, has helped to spur economic growth, create new ways of providing for the enablement of education and healthcare services to Africa’s people, and enrich people’s lives with access to entertainment and information. “Before SEACOM launched, operators in southern and eastern Africa, as well as Ethiopia, were heavily reliant on slow, expensive satellite bandwidth, while bandwidth in countries such as South Africa was controlled by incumbent monopoly operators. The result was that prices were high, connectivity quality was poor, and the growth of the Internet was hampered.

36

SEACOM saw an opportunity to change that picture and started to raise funds to build a new undersea telecoms cable along the east coast of Africa with Corporate Africa 2014

connectivity to Europe,” says Byron Clatterbuck, Chief Commercial Officer at SEACOM.

When SEACOM went live, it gave African network operators and service providers access to plentiful and affordable international bandwidth for the first time. This helped to set off a telecoms revolution across the continent. Since 2009, wholesale international bandwidth prices have tumbled from US$ 3,000 to less than US$ 100 per Mbps per month. There has been a huge increase in availability of broadband services for end-users in a region where internet access for an ordinary private citizen was prohibitively expensive just four years ago.

Since 2009, wholesale international bandwidth prices have tumbled from US$ 3,000 to less than US$ 100 per Mbps per month. Says Clatterbuck: “Since SEACOM, several other undersea cables have also arrived off the west and east coasts of Africa. We have seen demand for international capacity significantly grow in the past three years as operators roll out a range of compelling and affordable data services. Furthermore, the arrival of the

international cables has also spurred investment in other components of the telecom infrastructure, including the last mile, metro, and national terrestrial fiber networks. All of this new infrastructure investment is also helping to improve the end-user’s internet experience and to drive connectivity costs down.” There is a flurry of innovation underway in Africa’s telecoms market, thanks to new national and international cables. Mobile networks have turned themselves into major data players, innovating with services such as voice-over-IP, video messaging, and video calling. And


Technology

the impact on African consumers and businesses has been remarkable. SMEs are trading on the Web, relying on instant messaging, and even using multimedia Web applications for the first time. For consumers, social media, mobile banking, and other applications are now a part of their everyday lives. E-government, e-health and e–learning applications are also becoming a reality. SEACOM is, however, not resting on its laurels – the company is rapidly evolving from a simple cable operator into Africa’s foremost data network service provider offering a range of private data and IP

solutions to its service provider and operator customers.

“From SEACOM’s perspective, the future will be all about building a continent-wide ecosystem rather than simply focusing on international connectivity.” In 2013, SEACOM made keyinvestments to expand and enhance its infrastructure with the goal of building a faster, more reliable, and affordable Internet service for African telecom users.

SEACOM has made substantial investments in west coast capacity, diverse terrestrial transmission, and a meshed IP-service platform in recent years with the goal of becoming a truly pan-African data network service provider. “The company continues to take advantage of the trends reshaping the telecom landscape,” says Clatterbuck. “From SEACOM’s perspective, the future will be all about building a continent-wide ecosystem rather than simply focusing on international connectivity.” ■ Corporate Africa 2014

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Technology Category of Roads National roads Priority regional roads Secondary regional roads Local roads Total

Kilomatres 20,000 20,000 16,500 114,000 170,500

Percentage 11.7 11.7 9.7 66.9 100

The actual roads network consists of 2,250 Km of paved roads, 15,000 Km of unpaved roads, 43,000 Km of tracks, 21,000 of country roads and 90,000 Km of footpaths. Category of Roads Paved roads Unpaved roads Tracks Country roads Local roads Total

Kilomatres 2,250 15,000 43,000 21,000 90,000 171,250

Percentage 1.3 8.8 25.1 12.3 52.5 100


,

Technology

Congo’s Traffic light Robots:

Q and A With isaie therese In a city with a notorious reputation for chaotic circulation and corrupt traffic officers, a women’s technology cooperative has come up with an unusual solution. Two eight-foot robots stand above junctions in Kinshasa, directing the busy flow with arms and LED display screens. Solar-powered and equipped with cameras that send information to a centralized computer, these “un-bribable” machines have proved a hit with the locals. Corporate Africa spoke to the inventor of the traffic droids, Isaie Therese.

What inspired you to create the robot? Our group, Women Technologies, is an association launched in RDC to stimulate entrepreneurship of women engineers creating activities and to give them the opportunity to make benefits and access to revenue. Then, we met some “genius creators” to solve the problems of traffic circulation in Africa. Indeed, it is the second cause of mortality in Africa. In 2011, 5500 people were on the road, and among them, children are numerous. What is the innovation of the robot? The innovation consists first in the manufacturing process in itself of the prototype. The robot is a humanoid robot, which has sensors and work on a magnetic system. But the robot is also a remedial action to the problem of illiteracy; the robot is able to talk and to warm of the changes in signalization. What is the future of the robot and Women Technologies? Kinshasa has ordered 40 more prototypes. Even Ivory Coast and Uganda have ordered two prototypes. The cost of manufacturing of the robot is, for the moment, between US$ 15,000 and 20,000, but we are currently looking for partnerships or credit to help us to industrialize our manufacture. We would like divide the price of the robot by three or four.

We think that the country could take advantage of our prototypes to reduce the number of traffic lights. We need to adapt the model in consideration of the size of the junctions. We also have to take into consideration the particularities of each situation and adapt our models of the robots. In the last few months, we have participated in forums to promote the robot and we believe in the support of governmental delegation to meet the demand. Our clients are, for the moment, mainly the states; for example, The Commission for Road Safety (CNPR). We have now to find our market and create a sustainable business model. ■

Our group, Women Technologies, is an association launched in RDC to stimulate entrepreneurship of women engineers creating activities and to give them the opportunity to make benefits and access to revenue.

Corporate Africa 2014

39


Oil & Gas

NIGERIA’S ENERGY SHAPES ITS 2020 VISION

Minister of Petroleum Resources, Mrs. Diezani Alison-Madueketo, examined national energy resources and the role they will play in shaping Nigeria’s ‘2020 Vision’.

The Petroleum Industry Bill may be the key to triggering investments, infrastructural developments and increased government revenue

N

igeria has been a significant player in the global industry since the 1970s, producing low-sulfur, light, sweet, crude oil which commands a higher premium than other abundant high-sulfur and heavier crudes.

50 years of production, the Oil and Gas Industry is being reformed through the introduction of legal frameworks that underpin energy policies, boost economic growth and encourage optimism for the country’s future.

Under this model, the Ministry acts as the regulatory institution while the National Oil Company and other operators will be responsible for commercial operations. Its objectives include: •

Crude oil remains dominant in global energy and forecasts suggest growth from 88.8m barrels per day (bdp) in 2012 to 93m bdp of crude oil by 2016. Nigeria has the 10th largest Hydrocarbon reserve and is the 12th producer of oil and gas, contributing 3 per cent to global production. Its Hydrocarbon Reserve is split between gas (47 per cent) and oil (53 per cent). The nation holds 36.5 billion barrels of crude oil and condensates and 180.4 trillion standard cubic feet of gas reserves. The Oil and Gas Sector accounts for over 95 per cent of export earnings and 85 per cent of government revenue in the local economy. Nigeria’s Business Environment Nigeria intends to create a business environment that would allow it to compete on an international level. After

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Corporate Africa 2014

After 50 years of production, the Oil and Gas Industry is being reformed through the introduction of legal frameworks that underpin energy policies, boost economic growth and encourage optimism for the country’s future. An omnibus bill is undergoing legislative processes, seeking to harmonize existing laws and guide operations in the up-, midand downstream subsectors of the industry. At the heart of the Petroleum Industry Bill (PIB) is the separation of roles between policy, regulation and monitoring and build institutions around those principles.

• • • • •

Establish fiscal provisions that are flexible, encourage investment while guaranteeing optimal take for the government; Adjust government take in Large Deepwater PSCs consistent with the Deep Offshore Act; Support for Domestic Gas Utilization through the National Gas Master Plan; Establish good acreage management systems based on international best practice; Establish provision to enhance local content; Strengthen administration with the requisite powers and rules for the effective administration of the industry, and; Proper alignment of the roles and functions of the institutions.


Oil & Gas

Nigeria’s Economic Growth Aspiration & Energy Demand Nigeria hopes to be one of the world’s 20 largest economies by 2020 by efficiently utilizing natural resources. Sectors such as Power (Electricity and Alternative Energy), Transport (Road, Railways, Water and Air), Oil and Gas Infrastructure, and Housing and Water Resources have been identified as challenging. The idea is to bridge the infrastructural gap to unleash economic growth and wealth creation. Nigeria’s national aspirations for the Oil and Gas Industry are to: •

Grow crude oil reserves to 40 billion barrels and production capacity to 4m bdp. After the 2008 Niger Delta crisis caused a production dip, we have systematically restored and regained production capacity now at 24m bdp at the end of 2012. We aspire to significantly monetize natural gas by combining it with the oil sector to form an integrated Oil and Gas Industry, generating as much revenue from gas as oil. Currently, Qatar is the world’s biggest gas exporter with the highest per capital GDP, mainly driven by natural gas. Nigeria new gas revolution agenda will enable us to realize our objectives. Through the promulgation of the National Content Act, Nigeria will strive to domicile a significant amount of the Oil and gas Industryspend within its economy.

Investment in Gas Infrastructure can provide linkages to the broader economy. Currently, less than 1 bcf per day (10 per cent of total gas production) is supplied to the domestic economy. Gas infrastructure will increase this through gas utilization in power and sectors which will have a huge impact by improving GDP import substitution and employment generation. With respect to domestic oil refining, rising demand for petroleum products has created a need for significant refining capacity additions. Nigeria has taken steps toward a deregulated downstream fuel sector which is essential for new investments and will ensure fair market value and product availability. In 2012, deregulation moves by government was predicated on a clear program which included a communication plan, mitigation of negative effects (SURE-P),

building infrastructure to serve all players equitably and developing independent regulators. The latter are long-term plans which would ensure viability and sustainability. Another strategy is to develop new refinery capacity to process the crude domestic and refined export products.

Nigeria has taken steps toward a deregulated downstream fuel sector which is essential for new investments and will ensure fair market value and product availability. According to BP statistics, growing production from unconventional oil sources such as biofuels is expected to provide all of the net growth in global oil supply to. Significant exploitation of these resources has taken place in North America as the US leads the global production of shale oil (accounting for 33 per cent of onshore oil production of the Lower 48 Plays and expected to rise to 51 per cent by 2040). The pace of development is high in the US and Canada where plays break even at US$ 50-$70 per barrel. This may not be so for other jurisdictions with poor infrastructure and higher production costs. Thus, shale oil production will develop at a slower pace outside of the US due to the following constraints and challenges: • • •

High production costs and energy intensive production techniques; Uncertain estimates and lower recovery rates; Continued development dependent upon price signals of hydrocarbons;

Environmental factors hampering development (water waste, ground water contamination, air and noise pollution, and threatening endangered species), and; Extensive use of chemicals and water.

Nigeria has taken steps to diversify its exports from the Atlantic Basin which is dominated by the US. Passage of the Petroleum Industry Bill into Law Nigeria has a robust fiscal system predicated on a risk-reward profile that ensures investors returns, optimizes Government Take and enhances production. The PIB will trigger increased investments, infrastructural developments across the value chain, and increase government revenue. The expected gains include: • • •

Fiscal rules of general application for the up-, mid-, and downstream sectors; Deregulation of product pricing creating open access to the downstream sector; Continued implementation of Nigerian Local Content. We will continue to domicile much of the Oil and Gas Industry-spend increasing economic growth and jobs. NNPC’s long-term vision to be an international NOC with strategic and operational autonomy will become a reality. In 2010, NNPC launched a transformation agenda to be a successful NOC by imbibing, acquiring and modifying internal operational and organizational processes. We aspire to have an NOC ranked alongside Statoil of Norway and Petrobras of Brazil.

Corporate Africa 2014

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Oil & Gas Shell Petroleum Development Company of Nigeria, Ltd. Operations in the Niger Delta •

Despite higher royalties and taxes, the proposed new terms are competitive with other deepwater terms in the world, and are favorable for small fields under low oil prices.

The PIB is crucial legislation required to address the industry’s challenges and is expected increase production capacity to 4 million bdp by 2020. This would require an investment in excess of US$ 130 billion over the next five years from the Nigerian Government and its partners. The Global Oil and Gas Capex is expected to increase by 15.9 per cent, from US$ 1,036 billion in 2012 to US$ 1,201 billion in 2013. Nigeria is set to gain and attract investments worth US$ 200-400 billion. Suffice it to say that successful partnerships have been developed with IOCs over the years. I believe that the PIB will enable a stable and commercially competitive environment removing regulatory uncertainties and attracting investments. The Bill will ensure: •

42

Availability of a New Acreage Management System which includes best practice processes for acreage availability, bidding and awards; A new National Oil Company that will achieve strategic autonomy as a commercially focused corporate entity aligned with national economic development aspirations and will be self-financing with a

Corporate Africa 2014

• • •

distinct competitive edge expressed in assets quality, operational excellence, growth agility and a strong brand name; A new National Gas Company and National Asset Management Company; The establishment of regulatory institutions, and; Transparency and accountability will be entrenched in processes.

The sector is challenged by a few factors which are being addressed and have to be overcome for sustainability. These include security of oil and gas facilities, funding, high costs, product thefts, unsustainable product distribution across the nation, pollution, etc. With respect to security, bunkering and pipeline vandalism remain a major concern. The FGN amnesty has helped with militancy, but criminal activity continues to have a negative impact. Appropriate government agencies are working to address this while the FGN has adopted fingerprint tracing and is seeking the collaboration of the international community. Nigeria has experienced some of the worst cases of environmental pollution in the course of natural resource exploitation as detailed in the United Nations Environmental Reports (UNEP) on Ogoni Land. The

government responded by setting up the Hydrocarbon Pollution Remediation Program (HY-PREP). The focus is on remediation, but our environmental responsibilities must remain paramount if the consequences of artisanal refining, pipeline vandalism and unprofessional oil activities are not addressed. The PIB also provides strong fiscal incentives to eliminate of gas flaring; the requirement for environmental management plans for all licences and leases and obligations to establish environmental remediation funds. Let me assure you that we are working very hard and the government is committed to ensuring that we reduce all the negativity to the barest minimum. The dramatic increase in oil prices in the last decade has been instrumental in the transfer of enormous resources from developed countries to rich developing countries. Opportunities for investment in resource-rich African countries have similarly multiplied. It is Nigeria’s wish that these resources help to shape a bright future for Africa. Let me conclude by reiterating that Nigeria is the largest recipient of Foreign Direct Investment in Sub-Saharan Africa and that the Petroleum Industry remains very strategic to the sustenance of rapid economic growth and development. ■


The 19th Annual

20-22 January 2015 The Eko Hotel & Suites l Lagos l Nigeria www.offshorewestafrica.com

Delivering the premier technical forum on West African offshore exploration and production.

MANAGING WEST AFRICA’S MAJOR PROJECTS BE PART OF AFRICA’S PREMIER OIL & GAS EVENT - REGISTER TODAY!!

The 19th annual Offshore West Africa conference and exhibition is the premier technical forum focused exclusively on West African offshore exploration and production. The conference will provide attendees with the latest technological innovations, practical solutions and lessons learned from leading industry professionals.

Under the auspices of the Nigerian National Petroleum Corporation (NNPC), Offshore West Africa is the leading source of information on new technology and operating expertise for this booming deepwater and subsea market. Offshore West Africa highlights include a high-class exhibition and a comprehensive conference programme including the Opening Plenary Session, open to all attendees on Tuesday 20 January at 10:00am, with participation from:

PennWell is delighted to announce the launch of the Offshore West Africa CPD Conference supported by the Energy Institute. Register to attend Offshore West Africa and gain free membership of the Energy Institute, with CPD points provided as part of the 2015 conference program. This initiative is part of PennWell and Offshore West Africa’s corporate social responsibility strategy. For further information please visit www.offshorewestafrica.com

For Exhibiting and Sponsorship Opportunities please contact:

Dr. Diezani Alison-Madueke Honorable Minister of Petroleum Resources, Ministry of Petroleum Resources, Nigeria *Invited

Dr. Abdu Bulama Honorable Minister of Science & Technology, Ministry of Science & Technology, Nigeria *Invited

Europe, Middle East & Asia Tony B. Moyo T: +44 (0) 1992 656 658 E: tonybm@pennwell.com

Dr. Joseph T. Dawha Group Managing Director Nigerian National Petroleum Corporation (NNPC)

Mr. George Oguachuba General Manager, Corporate Nig. Content, Venture Management & Corporate Geosciences, TOTAL Exploration & Production Nigeria

Africa Dele Olaoye T: +234 802 223 2864 E: q-she@inbox.com

In addition to the Opening Plenary Session, Offshore West Africa is pleased to announce a new addition to the conference program on Wednesday 21 January at 9:00am with a Keynote Address - Regulatory Perspective. This session is open to ALL attendees.

The Americas Desiree Reyes T: +1 713 963 6283 E: desireer@pennwell.com South East Asia Mike Twiss T: +61 437 700 093 or +65 9018 5179 E: miket@pennwell.com

Mr. George Osahon Director Department of Petroleum Resources, Nigeria

Make plans to attend and REGISTER TODAY for this truly West African event. This is your opportunity to join over 1,200 offshore professionals by attending the leading conference and exhibition dedicated to the offshore oil & gas industry in this region. Attend the Exhibition for FREE and visit the industry’s top players in once place by pre-registering online. (On site fees apply)

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Oil & Gas

Jérôme Ferrier about WGC Paris 2015 In June 2015, Paris will host the World Gas Conference (WCG), the most important event of the International Gas Union’s (IGU) triennium. Corporate Africa discusses Africa’s involvement and the goals of the conference with the president of the IGU, Jérôme Ferrier.

What are the goals of the 2015 World Gas Conference?

for this energy sector in tackling major challenges of our time.

The World Gas Conference is a major international gas event taking place every three years. Two other major events for natural gas are the International Gas Research Conference, which was held in Copenhagen in September 2014, and the 18th Liquefied Natural Gas (LNG) Conference to be held in Perth, April 2016.

The overarching theme of this 26th World Gas Conference will be “Growing together towards a friendly planet”.

However, the WGC is definitely the leading event, featuring top managers of major national and international oil and gas companies, as keynote speakers or strategic panelists. We are expecting more than 4,000 delegates and accompanying persons to attend the conference and visit the exhibition of 45,000 sqm. How will this conference differ from previous conferences and what targets are you looking to achieve? We consider this conference as a unique opportunity to showcase progress achieved throughout the current triennium (20122015) under the French presidency and to raise the profile of the gas industry on the world scene, advocating for a central role

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Corporate Africa 2014

Moreover, each day of the four days of the conference will have a specific topic: Day 1 : Natural gas a core pillar for a sustainable future of the planet Day 2 : Gas, renewables and electricity: together a perfect combination Day 3 : Natural gas as a growth factor for new economies Day 4 : Human capital for the future of the gas industry. What is the legacy of the conference and how are investors investing? The WGC is a key moment for presenting the work of our 14 working committees that brought together during this triennium more than 1000 international gas experts to share their experience and know how. The results of their expertise will be the main legacy of the conference, and the NOCs and IOCs who invest as sponsors or exhibitors are pleased to contribute to its successful presentation.

One of the objectives is to create sustainability, what role does Africa play in this area? Especially in regards to generating news investments for the region? IGU is supporting the UN initiative on “Sustainable energy for all” led by Under-Secretary Kandeh Yumkella, who is also a member of the IGU Wise Persons group. Africa is key to this program and we are involved mainly with countries that have gas reserves and are developing domestic power generation to supply electricity to the poor. We maintain close relationships with the World Bank to assist in the development of these African projects. You mentioned the French presidency being involved with the conference. We need to know how French interest is mobilizing investments to partner opportunities in Africa. What areas in Africa do you focus on? The IGU French presidency is in charge of the 26th World Gas Conference.


Oil & Gas

The IGU maintains close relationships with the World Bank to assist in the development of these African projects

The organization of WGC is always under the responsibility of the current presidency and takes place at the end of its triennium. During our campaign to be elected in 2008, we mentioned as one of our main objectives focusing specifically on Africa. In sub-Saharan Africa, Angola, Cameroon, Equatorial Guinea, the Ivory-Coast, Mozambique, Nigeria, and South Africa are already chartered members of IGU. Eastern African countries with potential gas reserves are candidates to join IGU; Tanzania, Kenya, and Uganda will become members in the coming months. The economy and the environment are always changing. In this economic context how valuable is Africa to the gas industry today? How would you describe the oil and gas climate in Africa? Africa represents about 8 per cent of the world proved gas reserves, mainly located

in Nigeria, Algeria, Egypt and Libya, and only 3.6 per cent of the world gas consumption. Prospects for conventional gas reserves in Eastern Africa are great. As far as unconventional gas is concerned, Algeria and South Africa have promising perspectives. Africa must consider developing simultaneously its gas domestic markets for power generation, regional gas hubs to secure supplies and international markets mainly through LNG facilities. What is the future of global gas in terms of sustainability and marketability? How does the current shale gas extractions impact upon the global market? Unconventional gas production, mainly shale gas and coal bed methane, has already dramatically changed the landscape of gas markets in USA and will do so in China. Its

impact in the USA has been critical with a steady decrease of domestic prices and a significant increase of employment in gas production and petrochemical activities. In spite of some difficulties, this is to be taken into account in prospective studies on future gas developments worldwide. What is the role of Africa in the future of the gas market? Furthermore, how can Africa best exploit its competencies to achieve maximum benefits from the future of the gas market? Africa has an important role to play, in view of its proximity with European gas markets that are currently depressed but will grow again to cope with CO2 emissions reductions standards and are also looking for a better diversification of supplies. Eastern reserves could be exported to Asia and particularly to India thanks to a relative proximity compared to other sources of supply. Investments today will serve the needs tomorrow. â–

Corporate Africa 2014

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Oil & Gas MARGINAL FIELDS DEVELOPMENT IN NIGERIA:

STRATEGY FOR

SUCCESS

Dr. Soky Amachree, founder and current Managing CEO of SIGMA Technical Agencies Ltd., takes a look at the Marginal Field Development Program. Examining its successes and challenges, he considers what else can be done to improve the program.

T

he Nigerian Marginal Field Development Program was introduced by the Nigerian government in 2001 with the goal of opening up the upstream sector of the Nigerian oil and gas industry to wider indigenous participation in order to create a vibrant industry that will positively impact the capacity of indigenous exploration and production companies contributing to Nigeria’s reserves.

Marginal Fields are undeveloped discoveries owned by major International Oil Companies (IOCs) and the Nigerian National Petroleum Corporation (NNPC) which have remained non-producing for over ten years due to marginal economics for major oil operators and high fiscal terms. Though the fields fail to match the desired or established rates-of-return (RoR) of the major oil leaseholder, they are profitable for indigenous producers due to low overhead and operating costs. The First Marginal Field Bid Round produced 24 Marginal Fields awarded in 2003. Thereafter, five additional fields were awarded on a discretionary basis. However, ten years after the commencement of the Marginal Fields Program, the contribution of Marginal 46

Corporate Africa 2014

Field Operators to Nigeria’s crude production remains insignificant. In fact, Marginal Fields operations account for only 2.1 per cent of the country’s total crude production, with a daily production of about 60,000 barrels of oil per day.

It may be pertinent to mention that, of all the awarded Marginal Fields, only seven are currently producing. This article attempts to examine the issues militating against the high success rate in the development of the Marginal Fields through its challenges and successes. Recommendation will be given on the strategy to be adopted for subsequent Marginal Field Bid Rounds, to ensure successful and timely development of the Marginal Fields to be awarded.

Th Marginal Fields grew Nigeria’s reseves by 302.6 million barrels in April 2013, from 141 million barrels in 2004: a figure expected to increase significantly by the end of 2014.

The Marginal Fields grew Nigeria’s reserves by 302.6 million barrels in April 2013, from 141 million barrels in 2004: a figure expected to increase significantly by the end of 2014. Ten years after the start of the Marginal Field Program, 7 out of the 24 fields (which represent 29 per cent of the assets) are in a form of sustained production.

Others are at various stages to achieve “First Oil” before the DPR March 2015 deadline for Marginal Field Operators. The seven companies who own these fields are delivering gross production of 34,000 Barrels of Oil Per Day (BOPD) and 35 million standard cubic feet per day (35MMscf/d) of gas.

THE SUCCESS STORY


Oil & Gas

The Niger Delta communities feel that the Nigerian Oil Companies have become insensitive to their needs Indigenous operators contributed about 10 per cent of the nation’s total oil production with only 9 out of the 24 Marginal Fields brought on stream in the last 10 years of their operations. Fiscal terms have improved considerably from the historical rate of 20 per cent royalty and 85 per cent profit tax. Some Marginal Oil Field operators are even forming strategic alliances and economic clusters to overcome funding and operational challenges. ISSUES AND CHALLENGES

Marginal Field Operators in Nigeria are affected largely by the funding capacity of indigenous players and

encumbered economic environment such as high interest rates and stringent conditions prior to funding approval. Other challenges faced by operators: low reserves and productivity, asset vandalism, oil theft, f luctuating assistance from foreign equity partners, and legislative bottlenecks. Additionally, an unfavorable tax regime and multiple taxation have not only rendered the Marginal Field business unattractive to prospective investors but also present a major challenge to local operators. Delays in the government approval process also present a challenge.

The Marginal Field was awarded in 2003; however, the final development approval was received in 2004 as license renewal was delayed causing a significant delay to operations and initial production. SUGGESTIONS FOR THE WAY FORWARD

Funding (i) Government to fully commit to and fast-track the proposal mentioned by The Honorable Minister of Finance & Coordinating Minister of the Nigerian Economy, Dr. Ngozi Okonjo-Iweala on 14th June: “to address the funding challenges confronting Marginal Field owners and other businesses, the Federal Corporate Africa 2014

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Oil & Gas

Government is setting up a development finance institution that will become operational by the end of 2014, to cater for the medium- to long-term financing needs of businesses in the country.” We need lower (single digit) interest rates for Marginal Field & Indigenous Operators. (ii) Establishment of an Energy Bank to be funded by 20 per cent of the Excess Crude Account. Marginal Field and Indigenous Operators can thus access the bank’s funds rather than seek Investors/Technical Partners overseas at high premiums in terms, giving out up to 40 per cent participating interest. The fund could also be made available to Mini-Refinery Operators. (iii) The Shell Petroleum Company of Nigeria Ltd. (SPDC) has set aside US$ 5 billion to support contractors partnering with operators and Nigerian banks to support Marginal Field Operators. Other IOCs should be encouraged to do the same. (iv) A good number of the Technical/ Financial Partnership Agreements are not performing, as most of them start shopping for funds after signing the agreement. HOST COMMUNITY INVOLVEMENT AS STAKEHOLDERS

It cannot be over-emphasized that partnering with host communities is the sure way of operating peacefully in the Niger Delta. This has been proved by a number of the Marginal Field Operators such as Platform Petroleum Ltd., Niger Delta Petroleum Development Company, Ltd., Mid Western Oil & Gas Ltd., and Energia Oil Ltd. Outside the Marginal Field Operators, INDORAMA (who bought EPCL) is applying the same strategy and is doing extremely well.

It cannot be over-emphasized that partnering with host communities is the sure way of operating peacefully in the Niger Delta.

If host communities are made stakeholders in the business, they will ensure that the production facilities and pipelines are protected. 48

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THE SIGMA COMMUNITY ORIENTED PRODUCTION STRATEGY (COPS) MODEL In search of a solution to the problem of the Niger Delta region of Nigeria, I studied the communities in the Niger Delta region and realized that they feel that the oil companies in Nigeria have refused to understand their feelings and have become insensitive to their needs and demands.

The communities feel that they do not get a proportionate/adequate share of the wealth; they suffer the degradation of the environment as a result of the operations of the oil companies and are not adequately compensated; and they do not hate the IOCs but hate being deprived of the benefits from oil operations taking place in their environment with the connivance of past government policies. The people expect the present people-oriented government to change all that by embracing COPS.

In my study, I identified the need for oil & gas companies in Nigeria to operate a policy that shows that they understand the community sentiment and have decided to work accordingly; hence the birth of the SIGMA Community Oriented Production Strategy (COPS) in 2000.

The cardinal objective of the COPS Model is for the host and local communities to be equity stakeholders (10 per cent). They are also to be involved in the operation and maintenance of the production facilities and the pipeline network. This will encourage the host and local communities to take necessary steps to protect assets and facilities in their domain from issues such as oil theft and asset vandalism. The goals and objects of the COPS Model are to create employment opportunities for youths, provide gas to run host community generators (fostering development), generate revenue for the host communities to embark on developmental projects which will ensure lasting peace in the Niger Delta, and generate additional revenue for the government.

RECOMMENDATION AND CONCLUSION The Marginal Field Development Program generally could be judged as successful, though there is room for improvement. It is pertinent to mention that both the Honorable Minister of Petroleum Resources, Her Excellency, Mrs. Diezani Alison-Madueke, and the Department of Petroleum Resources (DPR) have been very supportive of this initiative which is geared toward ensuring wider indigenous participation for the purpose of creating a vibrant and robust industry that will positively impact the capacity of indigenous exploration and production companies to contribute to Nigeria’s oil reserves.

The goals and objects of the COPS Model is to create employment opportunities for youths, provide gas to run host community generators (fostering development), generate revenue for the host communities to embark on developmental projects which will ensure lasting peace in the Niger Delta, and generate additional revenue for the government

However, to enhance the rate of success of the Marginal Field Program, the Nigerian government should fully commit and fast-track on the proposal by the DPR to address the challenges facing the Marginal Field Operators by introducing remedial legislation and actions, especially as some of the operators are beginning to break new ground by unlocking stranded gas fields through the deployment of new technologies, creating opportunity for employment and empowermen. The government should promote greater indigenous participation in the Nigerian oil and gas industry and assist indigenous Marginal Field and Indigenous Operators through favorable policies such as import duty waivers


Oil & Gas

Marginal Field Operators face challenges such as asset vandalism and oil theft and tax breaks, etc. and improve local bank involvement by reducing interest rates.

To ensure the next Marginal Bid Round (expected later this year) is successful and the Marginal Field Operators can hit first oil within the stipulated 24 months after the award, the following recommendations are made: - Prospective bidders to go for Alliance/ Strategic Partnership with indigenous service, so the financial burden of developing the field will not be much on the Marginal Field Operator. It is interesting to note that most of the operators currently producing adopted this strategy.

- Where foreign technical partners are to be considered, intending participants must cite and prove that the bidding company has the minimum fund required to take the field to first oil. From experience, most of the so-called Technical & Financial Partners who parade themselves in the Nigerian oil and gas industry do not have the funds. It’s after signing on with the Marginal Field companies that they source funds with the Farm-in Agreement. Del-Sigma Petroleum Ltd. has gone through this long and tortuous journey and would advise potential Marginal Field Operators to avoid such pitfalls. - There is the need for prompt approval of applications made to the Department

The government should promote greater indigenous participation in the Nigerian Oil and Gas Industry and assist indigenous Marginal Field and Indigenous Operators through favorable policies such as import duty waivers and tax breaks, etc. and improve local bank involvement by reducing interest rates. of Petroleum Resources, and Ministry of Petroleum Resources especially with the renewal of licenses and due diligence on prospective Technical/Financial Partners for Deed of Assignment. â– Corporate Africa 2014

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Agriculture

A Private-Public Partnership

platform to achieve sustainable growth EMRC’s Jessica Frommer explains how the 2014 AgriBusiness Forum promotes Public-Private Partnerships which are vital in Africa’s agriculture industry.

A

lthough the private and public sectors can be considered polar opposites of each other, it has become clear in the last few years (especially in the case of sub-Saharan Africa) that both sectors are not only essential but must cooperate in order to achieve long-lasting and result oriented objectives. Public-Private partnerships are imperative for leveraging the needed funds and sharing the risks of investments. Furthermore, the development of Public-Private partnerships strengthens democratic institutions, opens markets, and mobilizes and uses development resources more effectively. According to Gavin Wall, Director for the Rural Infrastructure and Agro-industrial Division at the Food and Agriculture Organization (FAO): “Only the private sector can make the investments required at a meaningful scale and in a sustainable way. This means that Africa is not different from other regions and that it can look to countries in Asia and Latin America, which have achieved growth in the output and value of their agricultural sectors, as a model for development. FAO, on the other hand, can play an important role in supporting governments to create the enabling environment, including policy development and capacity building of both public and private sector actors in areas such as technology, institutional organization and management.”

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EMRC was established within this same frame of mind: to strengthen Africa’s private sector as a way to ensure sustainable growth. This can be achieved within the frameworks set out by the public sector, particularly in regards to sub-Saharan Africa’s agricultural sector which the majority of the continent’s population depends on. Since 2008, EMRC has regarded the global food crisis as an opportunity for countries with vast unlocked agricultural potential. This is the time for Africa to turn agriculture into a viable solution that could provide millions with much-needed income.

At EMRC we believe that, to achieve growth, small, medium and large farming companies have to work together, share best practices, and establish meaningful partnerships with local, national, and regional as well as international peers. “We have worked tirelessly to involve all the actors in the private sector to garner growth within the continent’s agricultural sector. Without economic incentives, agriculture will not take off and food imports will increase, making many fertile rich countries further dependent on

external products. At EMRC we believe that, to achieve growth, small, medium, and large farming companies have to work together, share best practices, and establish meaningful partnerships with local, national, and regional as well as international peers,” explains Idit Miller, EMRC Vice President and Managing Director. In this regard, the AgriBusiness Forum (EMRC’s flagship event) was established with the particular aim to strengthen the agri-food sector in Africa, by encouraging partnerships, exchanging best practices, and attracting investments. The Forum, the largest pan-African agribusiness forum held annually on African soil, attracts a few hundred leaders and decision makers in the sector, including private entities, financiers, donors, industrialists, researchers, governments, international organizations, NGOs, and others from North and South. It is a key meeting point for those who wish to take part in Africa’s agri-food sector growth and for investors coming from all four corners of the world. This year, the Democratic Republic of Congo will be hosting the AgriBusiness Forum to spotlight its vast arable agricultural lands, of which almost 80 million hectares are still not used and which, if well managed, can provide much needed income and sustainability for the country’s population. Economic growth in DR Congo is healthy. Gross Domestic


According to DRC’s Minister of Agriculture, Jean Chrysostome Vahamwiti Mukesyayira: “Our aim is to achieve inclusive growth and we have set ourselves goals for 2030, focusing on revitalizing the country’s dormant and forgotten agricultural sector,” he explains. “Our goal is to invest and attract investment to our vast and fertile lands, which is why we are hosting a panAfrican forum such as the AgriBusiness Forum,” he adds. “It is now that we must take the lead on agricultural matters and reverse the course of this sector that millions of people depend on. ” Achieving business success is key for the country, which is why MINAGRI is focusing on integrating three types of farming: family farms, medium-sized farms, and industrial parks. All three can benefit from each other with the larger farming zones providing technology and resources to smaller outfits and family run farms

providing much-needed income and food to local communities. All three types of farming have one essential component: income generation. According to the EMRC President, Prof Monty Jones, this is where the issues are: “In the post-independence era it was Africa’s misfortune to become addicted to development projects. Each project brought temporary relief and a sense of hope that was rarely justified in the project’s outcome and it was followed by another that was rarely more successful. Meanwhile the true source of national growth and wealth creation, human capital, was neglected.” Jones adds that: “the creation of human capacity will be futile if the institutional frameworks are not created to facilitate and promote employment and self-employment. In this regard policymakers and development agencies must understand that the public sector is only a small player in national development and that its role is to facilitate the success of the much greater private sector.” Nonetheless, one must not dismiss the role of the public sector. Without a strong

public sector, no African country can establish stability on all fronts. A robust public sector means institutions that work, and policies that provide the basic and essential services to communities. However, in addition to smart and realistic public policies, certain sectors can only achieve long-term and sustainable results with incentives, especially financial incentives. This is where the private sector can and must be further integrated to ensure real growth. A sector such as agriculture needs government support to provide appropriate irrigation, and create markets, and providing subsidies for inputs depends on public sector involvement. However, this sector also brings in much-needed income and potentially thousands of jobs in a region where millions of youth are entering the job market. Putting the spotlight on where the real income can be generated is imperative. AgriBusiness Forum 2014 - 26th-29th October 2014, Kinshasa, DRC. ■ “Toward Inclusive Growth: A Vision for Africa’s Transformation.”

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Agriculture

Product (GDP) is expected to increase 8.7 per cent in 2014. Congolese Prime Minister, Augustin Matata Ponyo, launched several initiatives that aim to transform DRC into an emerging country by 2030, paving the way for economic growth in the long term and social improvement.


Francophone

FRANCOPHONIE CHALLENGES

Philippe Hugon, author of “African Geopolitics,” examines the cultural, economic and political challenges faced by African members of the International Organization of Francophonie.

T

he 15th Summit of the Francophone International Organisation (OIF) will take place in Dakar, Senegal, during October 2014. It is the most important meeting of the Francophone Organisation and is significant to the host country, because Leopold Sedar Senghor was among the founders. He was Head of State of Senegal and a great poet who dreamed of a “French Commonwealth,” and the creation of an Afro-French community. Heterogenous Space with Multiple Objectives The Francophonie is an institutional system, with 220 million people spread over five continents, mainly Europe, North America, and Africa. It is a space

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of linguistic and cultural similarity but also a geopolitical entity. It includes the Commonwealth, Arab League, and Latin Union. The Francophonie is represented by various organizations, professional associations, and intellectual bodies. The OIF contains 77 states, government members, and observers. The main agencies of cooperation are AUF, TV5, AIMF (Mayors Association), and Senghor University in Alexandria. The organization’s objectives include the defense of the French language and culture by supporting educational programs and interaction between members’ cultures. It also includes the establishment and support of democracy, dealing with conflicts and strengthening ties between members. Political emphasis has been

placed upon youth, women, and the New Technologies of Information and Communication (NTIC) in which plays an influential role in Africa. The OIF is a heterogeneous space in which some members play key roles and others (like France and Canada) dominate. African countries are the spinal cord of the Francophone Community as they comprise the bulk of French speakers but have very low economic development levels. However, they have been experiencing significant growth over the last decade. The OIF is among the soft powers of the world. It endeavors to check the influence of emerging powers such as China which may be paradoxical given that their development of alliances in the world is partly due to their involvement with China to the point


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Francophone

that the Chinese have a significant presence and influence in Francophone Africa. Francophonie, Economic Space The OIF plays an important role in the development of trade, by promoting companies who play key roles including jobs creation, especially for young people and women, and new information and communication technologies. The organization has been acting to improve African economies since the turn of the 21st century. Sub-Saharan Africa, which represents more than half of the population, is playing an increasing role in the OIF. Since the start of the 21st century, most African member countries have increased annual growth rates in excess of 6 per cent. Diverse members are involved in ever-increasing commercial relations which have registered a 16 per cent increase. The African part in Foreign Direct Investment (FDI) has grown from 1.2 per cent in 2007 to 3.1 per cent in 2012. The rates of growth have reduced the poverty line of households from 34 to 24 per cent. The Human Development Index (HDI) has grown from 15.6 per cent between 2000 and 2010 and the top 500 African companies are almost three times bigger than at the beginning of 2000. Their sales revenue averaged US$ 700 million in 2010 with profits of US$ 60 million. The 2000 listed African companies have a market capitalization nine times higher than during the 1990s. Most of these companies are concentrated in southern Africa. Marked diversification can be observed in their sources of financing. The financial flow of the Diaspora amounted to US$ 30 million in 2012, and more than US$ 50 million for the FDI so that the Official Development Assistance (ODA) is around US$ 50 million. The saving has increased as the bank rate has doubled in 15 years. The impact of the Francophone Organisation on the economy of member countries is difficult to evaluate. Belonging to the same linguistic zone enables increased economic relations and other benefits, some influenced by common borders, privileged agreements, judicial regime, and colonialism. We estimate that commercial relations have grown by 22 per cent financially and in terms of migration. It can also be observed that average economic progress

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is highest in Anglophone and Portuguese African countries than in Francophone nations. Major companies, financial markets, infrastructure network, and levels of banking are also significantly higher in Anglophone Africa. Various factors are evident, some due to colonial and postcolonial relations. British and Portuguese decolonization involved more conflict but importantly it led to political and military autonomy, and monetary economies in these nations. Other influences include geography, the size of countries, the amount of resources, and alliances. The differences in monetary regimes between the 15 countries of the Franc zone and other countries are often cited as explanatory factors for the dominance of Anglophone Africa. The overall systems of education and, above all, of professional education are less effective in Francophone countries. There is, however, a debate on the sustainability of African economic growth, which in some cases run contrary to sustainable development creating noninclusive growth (inequality) and inflationist pressures, encouraging corruption and doing very little to the challenges of high unemployment

especially among young people. Growth is encouraged by outside influences (raw material prices, rescheduling of national debts, etc.) but inside factors are numerous and have a significant impact upon markets i.e., increase urban markets, better trade climate, financial balance, reduction of conflict, emerging middle class, and investments in agriculture. Francophone Africa must, however, answer huge challenges including demographic, climate change, and job creation especially among young people and women. Sixty per cent of the Francophonie population in Africa live on less than US$ 2 per day; and it is estimated that among the 300 million constituting Africa’s middle class, a third suffer from poverty. An estimated 10 million jobs are required to be created every year to deal with unemployment in the region. The 15th Francophone Summit will address the challenges faced by Francophone Africa and how to deal with them. The management of a common heritage, language, culture, and cooperation between countries in asymmetrical but complementary relationships remains the dream of Leopold Sedar Senghor, which is deserving of consolidation. â–


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Francophone

WORKING WITH YOUTH AND WOMEN IN LA FRANCOPHONE Created in 1969, the Conference of Youth and Sport of French-Speaking Countries (CONFEGES – Conférence des Ministres de la Jeunesse et des Sports dela Francophonie) is an intergovernmental institution for the promotion of Youth, Sport, and Leisure in the Francophone world which will take place in Senegal this year.

T

he 15th Summit of the Organisation Internationale de la Francophonie (OIF) will be hosted in Senegal with the theme: “Women and Youth in the Francophone Space: Vehicle of Peace, Actors of Development.” The Francophone summit is an opportunity for the institution to contribute to the debate on the role of young people and women in society and implement policies in the Francophone member states.

The PPEJ not only provides training and education for young people and supervisors, but it also finances microenterprises.

Exhibition Hall for Young Entrepreneurs CONFEGES has organized an exhibition hall to showcase the beneficiaries of the Program for the Promotion of Youth Entrepreneurship (PPEJ-Programme de Promotion de l’Entrepreneuriat de Jeunes).

Unemployment is increasing, especially among young people who are less certain about the future without individual or collective plans. The economic integration of youths through the creation of microenterprises has become a priority in order to offer hope to this demographic. It was in this context that the CONFEGES launched the Youth Integration Fund (FIJFonds d’Insertion de Jeunes) in 1994, which was renamed the PPEJ in 2013. The PPEJ not only provides training and education for young people and supervisors, but it also finances microenterprises or activities to generate revenue allowing youths who create jobs to promote their businesses. Training, monitoring, and support for young people are provided through an existing system in each country, which includes a National Commission of Monitoring and Support, and National Co-ordinators and Supervisors. Youth projects are supervised by co-ordinators who have been screened by the National Commission and are received by the Secretary General of CONFEGES

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Francophone

where they are subject to a final selection process by the International Selection Committee and Orientation Program. Thus, the purpose of the program is to unlock the potential of young people, states, and governments in member countries. Another of CONFEGES’s initiatives is to promote partnerships and provide a space where young entrepreneurs can hold dialogues with potential development partners. This exhibition aims to: • •

Develop entrepreneurship among young people; Encourage competition between member countries, synergy and networking of young promoters, and innovators at a national and international level; Reaffirm, with the support of political and economic decision makers, that the promotion of youth entrepreneurship is a vehicle for the social and economic development of a country; Introduce and inform the international community about CONFEGES’s initiatives and results, about the economic and professional inclusion of youths, and reinforce the means through which the PPEJ can provide support.

Youth, Sport and Peace A training session on “Youth, Sport, and Peace” is expected to take place in Ziguinchor from 22nd to 28th of September this year. It will hold three workshops which include the training of versatile leaders and the manufacture of sports equipment and clothing. This will bring together about 30 young Ziguinchorois. CONFEGES’s partner in this workshop is the Foundation for Youth and Sport in Africa from Congo, and they wish to provide the Ziguinchor region with young entrepreneurs capable of producing sports equipment, versatile leaders, and frameworks to organize and activities or events promoting peace and citizenship. The workshop has been organized in partnership with the Advisory Working Women’s Group (GTCF – Groupe de

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Participants in the 9th Conference on INGO’s and CSO’s Travail Consultatif des Femmes). Indeed, the implementation of MDGs (the Millennium objectives) by CONFEGES sparked a decision by ministers which led to the creation of a transverse axis, the objective of which was to promote the participation of women and girls in youth activities and sports.

in preparation for the Francophonie Summit. These are International Women’s Day and International Francophonie Day.

This is an excellent opportunity to promote equity and cultivate complementariness which should be reflected in all CONFEGES actions.

The actions of the transverse axis are: •

• The external evaluation of the OIF’s gender program has defined women as a force we should consider appropriate to rely on in the implementation of policies concerning the group. It is, therefore, necessary to focus the actions related to gender and promote women as agents of developments that promote peace.

The external evaluation of the OIF’s gender program has definied women as a force we should consider appropriate to rely on in the implementation of policies.

The specific programming held by the 2014 Francophonie Summit, whose theme was the principle role of women in social life, informed the plan of action according to the theme. National activities which are based on international events have been planned

Participation of the CONFEGES at the GTI General Assembly; Participation in the “Forum on Youth in the Francophone World: Facing the Future,” planned to take place in September in Dakar; A capacity-building workshop for female leaders in technology to mobilize material and human resources and organize activities for sustainable development; The pooling of different national reports of activities from delegates which will be done in a meeting.

Women’s participation in youth activities and sports helps promote the Francophonie, sustainable development, the promotion of peace, citizenship, and socio-economic integration. Other Activities The CONFEGES also contributed to the reflection on youth employment at the forum of young leaders of the United Nations to discuss the OMD (Millennium objectives), the promotion of youth volunteering in Francophone countries, the training of Youth Activities and Sports organizations, the revival of Physical Education in schools, and the participation of women in youth activities and sports as well as many other initiatives under the 15th OIF Summit. ■


Francophone

Ahead of the 15th Summit of the OIF, the organization explains its developing role in the Francophone world, from providing education and economic opportunities to playing an intermediary role in global politics and trade.

Abdou Diouf, Secretary General La Francophone

La Francophone World The International Organisation of the Francophonie (OIF) comprises 77 states and governments united by their usage of the French language. The organization is active in the education, cultural diversity, information technology, and communication sectors but also deals with political and diplomatic issues related to peace, human rights, and economics.

The OIF also supported its weighty adoption of the UNESCO Convention on the Protection and Promotion of the Diversity of Cultural Expression in 2005: a position that was consistent with its programs to support the professionalization of cultural sectors and industries in cinema, performing arts, literature, and media arts.

In 2000, the Francophonie adopted the Bamako Declaration, a normative act on the practices of democracy, human rights, and freedom that endows the organization with means of action in the event of breaches of legal democracy, or serious violations of human rights in its member states. This new political dimension put the organization in a leading role (recognized by the international community), resolving conflict resolution in countries in crisis or transition such as Mali, the Central African Republic, Madagascar, and Haiti.

With these achievements, the Francophonie consolidates its actions by identifying certain priorities among which the economy plays an important role. The OIF uses its intermediary position in Africa and Asia to promote South-South trade between the two areas with high potential for growth. It also supports its member states and regional African organizations in international trade negotiations or the formulation of energy policies.

In more than 40 years, the organization has advanced the cause of the French language at a local level, by training thousands of teachers, and at a global level through hundreds of African, Asian, and European diplomats. Today over 220 million people speak French across the world.

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Corporate Africa 2013

Since 2010 and in conjunction with the Commonwealth, the OIF has been lobbying during the G20 so that the interests of its member states (particularly the smallest, poorest, and most vulnerable countries) are better taken into account, especially where issues of growth and sustainable development are concerned.

Similarly, it continues to foster innovation by bringing together the French players in the technology sectors such as the green, digital, and information technologies.

The OIF increasingly focuses its actions on the Francophone youth. It fosters their employability through an international volunteer program, which allows them to participate in the development of Frenchspeaking countries, and through the modernization of national policies on vocational and technical training. The organization will also gradually support youth entrepreneurship in the digital sector: an area in which it is already mobilizing around the broader issues of internet governance, cyber security, distance learning, and bridging the digital divide.

The Francophonie wants to increase its actions related to gender equality. It is already working on the economic empowerment of women in Africa by funding local development projects, continues to advocate for the increased participation of women in politics, and fights against discrimination and gender-based violence. â–


Speaking at the US-Africa Leaders Summit recently, telecoms industrialist and global philanthropist, Mo Ibrahim, points out that Africa is not as different from Western countries as some might think. “I have always been optimistic about Africa, and Africa is where I make my money without paying bribes. In 15 countries we have built a mobile communications [company] there and we did not pay a single dollar in bribes.”

find out themselves and they come and invest. Why must we come and inform the ‘misinformed’ American businesses? You guys invented Google, invented all these media platforms. Use it, please,” he told a chuckling audience.

This is according to Sudanese-British telecoms industrialist Mo Ibrahim, at the US-Africa Leaders Summit, which was hosted in Washington DC in August of this year. The Summit, the first of its kind, was attended by US President Barrack Obama and close to 50 African leaders to discuss a number of issues concerning US-Africa relations. Ibrahim pointed out the irony of so many African leaders having to travel to the US to discuss opportunities for US businesses in Africa.

Africa is not unlike other regions

“Wherever you go in Africa there are Chinese business people, there are Brazilian business people. None of us went to Brazil or to India and China to tell them to come and invest in Africa: They

the DRC, then known as Zaire, from 19651997) and Idi Amin (President of Uganda from 1971-1979). He argued that the Western world has also had its fair share of bad leaders.

Ibrahim did, however, highlight a couple of misconceptions about Africa, one being that Africa’s 54 different countries are often clumped together and viewed as one homogeneous region. The existence of war or human rights violations in one country is often generalized to the entire continent. He noted when there is war in Ukraine or genocide in Bosnia, no one calls all of Europe a “basket case,” like they do when these events happen in Africa.

“Come on, you had Milošević, you had Berlusconi, you had Hitler, you had Mussolini. You had all those guys. So I just hope for the day that the West recognizes that Africans are just normal people, like everybody else, who are blessed with a huge continent. We have a lot of resources and we have mismanaged it sometimes. We have had some failure in leadership; we accept that as well. We all have our faults but we are dusting ourselves off and trying to move ourselves forward and we have a better, new generation coming through,” he said.

Another misconception is that bad leadership is unique to Africa. Ibrahim said the continent is often remembered for its bad leaders such as Mobutu (President of

“People need to see Africa as it is. Africa is a normal continent. We are normal people just like you, the guys in America, or anywhere else.” ■

Finance

Africa as it is


Finance Cameroon has vibrant timber industry

CAMEROON OPENS FOR BUSINESS Cameroonian Prime Minister Philemon Yang speaks to Corporate Africa about the investment climate in his country at the UK-Cameroon Business Summit in London.

A

ttractive investment opportunities are on offer in Cameroon where companies can be created within 72 hours and the country benefits from a first-rate framework of business incentives. There is a legal judiciary system that works extremely well and is supported by additional organizations which harmonize business and take care of the kinds of legal problems that start-ups usually face. Cameroon is also a cosmopolitan country where English, French, and Swahili are spoken. In an environment of transparency, investors can work without fear in this attractive commercial climate where all questions are answered or attempts are made to do so. Cameroon has a Ministry of Public Contracts which is secure and allows for business to be carried out without the need for bribery. 62

Corporate Africa 2014

In an environment of transparency, investors can work without fear in this attractive commercial climate where all questions are answered. Proper court systems and procedures are in place and transparency is pervasive in public affairs which generates confidence in the business community. Press freedom is omnipresent throughout the country as it is important to have freedom of speech to say what you want as long as it does not affect the freedom of others. Foreign companies such as the AS Corporation from America and a subsidiary

of the UK’s Victoria Oil and Gas operate in Cameroon along with Gaz du Cameron which is based in the city of Douala and Actis which will soon distribute electricity in Cameroon. They are a testament of the ease with which business can be done in the country. All the sectors in Cameroon are virtually untouched. Agriculture, tourism, and energy are among the sectors which have opened up for investors to get involved with and utilize. Cameroon has an investment plan in place called “The Strategy Paper” which was put in place in 2010 and deals with growth and employment. The purpose of this plan is to build up the country’s economy from now up till 2035. The country is confident that it can transform from an emerging nation to a more developed one.


Some of the projects which are in place include a 200-kilometer motorway near Douala to strengthen the links into the capital. In the northwest region a ring road has started construction: This is a vital project for the economy of the region as Nigeria is a big market for Cameroon. The two nations are very close and major trade partners. A hydro-electricity system is also planned with three hydro-electric dams currently under construction. A deep sea project is also expected to be completed by July. Additionally, there is a plant producing 260 megawatts of electricity. The capacity of this plant in Kribi is planned to be doubled in the short term. In the long term, investment in the electricity sector is expected to be buoyant during the next few years as current investments are going very well. The government has increased its ability to invest as every year there is a new investment project and 30 per cent of public investment funds are available for projects. However, public investments

Finance

law allows companies to invest money in Cameroon and repatriate their profits. In fact, under this law, companies do not pay significant taxes until they start to make profits.

The Strategy Paper has become a good example in Africa and is being duplicated in other African countries in preparation for their economic plans. Cameroon’s goal is to acquire robust and sustainable growth: The country is growing but not where it should be yet. The government is satisfied with what is happening, the country is working hard, and there is confidence that the targeted level of growth will be achieved in the near future.

Philemon Yang, Prime Minister, Cameroon alone are not enough. The private sector is vital to Cameroon’s economic needs. The public sector has worked extremely well but does not possess infinite capacity. Societies which are doing well economically have a preponderant private sector, and this is Cameroon’s aspiration. There are diverse options in place to make this possible, including public-private partnership arrangements. The private sector is doing a good job in Cameroon but we are aware that it is sensitive to its environments. Incentives are in place to support the interest of the private sector in Cameroon. Laws were passed in April 2014 that further opens the door to the private sector. The

Another law was passed in December 2013 which allows investors to “invest and export.” Cameroon has to build an economy that exports because constant import is not always the best way. The government believes that national imports are good and there is a lot of capital being imported for development. That is one of the areas where the country is satisfied that it is doing the right thing. It is importing to enable further investment and produce an economy that is stable and attractive enough to woo foreign investors and build the private sector. The government wants to work closely with the private sector and there are many companies that want to invest in Cameroon. This is a sign that the country is doing the right thing, because it attracts investors who want to be involved in Africa. In many ways, Cameroon is a great reflection of the continent and is even attractive for tourism. Fluency in French and English and plenty of culture make Cameroon the place to be. An investor-friendly Cameroon awaits investor partners in a modern society. The country is ready and prepared to work with people and partners who are looking to the future. The country knows where it is now and may not know where it will end up but it knows it is going in the right direction. ■

Opportunities in road construction across Cameroon

Corporate Africa 2014

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Finance

Kenya Registers Record FDI Growth A recent report from Kenya has shown record growth in Foreign Direct Investments. Moses Ikiara, Managing Director of the Kenya Investment Agency, breaks down the statistics for Corporate Africa.

S

tatistics from Kenya reveal that the country received a total of KES313 billion (US$ 3.6 billion) in Foreign Direct Investments (FDI) in 2013, four times more than the amount in 2012, despite the fact that it was an election year and the numerous attacks which created an atmosphere of insecurity. As of 31 April, 2014, the country has received KES29 billion (US$ 329.5 million) in leading sectors: Manufacturing, Agriculture, Energy, Mining, Oil, and Construction. The country is in talks with multinational companies who are set to invest in 2014/2015, many of which want to turn Kenya into a regional hub as they attempt to enter the East African Market.

The report indicates that investors see the three regional hub markets – namely South Africa in the south, Nigeria in the west and Kenya in the east – as the most attractive investment destinations.

Among the companies set to invest include Carrefour (a French multinational retailer), Radisson Blu and Park Inn Hotel, and Business Connexion (a South Africa-based ICT service provider), as well as Imperial Health Science (a healthcare supply chain based in SA) which is set to invest KES1.7 billion (US$ 19.3 million) by 2015. The Kenyan government is seeking legislation that will require all investments in the country to register with authorities in order to facilitate data collection that

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Corporate Africa 2014

will guide it in marketing the country as a major investment hub. Good data is required so that it can help in decision making, as well as track and navigate flows of FDI in both directions. This would have been realized by a “one stop shop” where businesses could have been registered; However, these plans have been stalled due to lack of funding. About KES100 million (US$ 1.14 million) is required to establish the “one stop shop,” and the Kenya Investment Agency hopes it will be set up in the financial budget year 2014/2015. The authority is also planning to use about KES600 million (US$ 6.8 million) to create a promotional video in their attempt to market the country. In the Ernst & Young (EY) “Attractiveness Survey 2014,” Kenya and Ghana featured in the top four rankings for the first time, having previously ranked in the bottom half of the top ten FDI destinations. The report indicates that investors see the three regional hub markets – namely South Africa in the south, Nigeria in the west and Kenya in the east – as the most attractive investment destinations. These three countries account for over 40 per cent of total FDI projects in sub-Saharan Africa. The report ranks Nairobi the third most attractive city for investment in the continent with Johannesburg clinching the first position followed by Cape Town and Lagos taking fourth place. According to the report, in order to attract greater investments, cities need to focus on

the following critical factors: infrastructure (77 per cent), consumer base (73 per cent), local labor cost and productivity (73 per cent), and a skilled workforce (73 per cent). Between 2007 and 2013, FDI projects into Kenya increased at 40 per cent as Kenya attracted the second highest number of FDI projects behind South Africa in 2013. Kenya is now ranked the second fastest growing FDI in Africa behind Ghana which witnessed an increase in FDIs by 51 per cent in 2013. Among the FDI included in 2013 are Scania (KES879 million: US$ 9.9 million) investment, Royal Philips Electronics (KES800 million: US$ 9 million), and GZ Industries (KES8.7 billion: US$ 980 million). The largest investor in the region is, in fact, Kenya. East Africa’s appeal lies in its large market opportunities, recent discoveries of natural resources, and ongoing market integration through the EAC, made up of Kenya, Uganda, Tanzania, Rwanda, and Burundi. Home to approximately 210 million people, the region’s appeal to consumerfacing industries is growing. Opportunities also exist in the TMT sector, with more than 50 million East Africans having mobile phone subscriptions. The uptake of mobiles has jumped 550 per cent in 5 years; making East Africa the world’s fastest-growing market. However, bureaucracy, corruption, poor infrastructure, and insecurity are the major issues that East African governments should look at in their bid to increase FDI in the region. ■


EMMANUEL ESSIS

EMMANUEL ESSIS ELECTED HEAD OF IVORY COAST ELECTED HEAD OF IVORY COAST NETWORK SPEAKING AGENCIES FOR NETWORK SPEAKING AGENCIES FOR INVESTMENT PROMOTION (RIAFPI) INVESTMENT PROMOTION (RIAFPI) Ivorian Emmanuel Essis, Director General at the Ivorian Emmanuel Essis, Director General Centre for the Promotion of investments in at the Côte d' Ivoire (CEPICI) was elected to head Centre for the Promotion of investments in the Francophone Network CôteInternational d' Ivoire (CEPICI) was elected toAgencies head thefor Investment Promotion (RIAPFI). International Francophone Network Agencies for

It also includes negotiating an agreement with the

Investment Promotion (RIAPFI).

the state to work withEmmanuel RIAPFI inEssis relation budget ,convincing and to According to Mr it to involves

Following a General Meeting held on Monday 17 March 2014 in Abidjan, Emmanuel Essis was elected to head the

Following a General Meeting held on Monday 17 March Network by his peers for a term of five years. He is the first

2014 in Abidjan, Emmanuel Essis was elected to head the president elected to head the Network.

It also includes an Network agreement with athe Republic of Côte negotiating d'Ivoire for the to have joint Republic ofwith Côte headquarter thed'Ivoire State. for the Network to have a joint headquarter with the State. According to Mr Emmanuel Essis it involves convincing look for funding and partners to promote investments in the the state to work with RIAPFI in relation to budget , and to Francophone region.

look for funding and partners to promote investments in the Francophone region.

Network by his peers for a term of five years. He is the first

The RIAPFI consists of 16 countries, including Morocco ,

president elected to head the Network. Mr. Essis’ mission will, among other things, put into practice recommendations established during the Mr. Abidjan Essis’ mission amongtheother things, put meeting,will, including constitution for into the practice recommendations established during the Network, rules of procedure, and to set-up its governing Abidjan bodies.meeting, including the constitution for the

Congo Brazzaville , Guinea, France, Belgium , Comoros,

Network, rules of procedure, and to set-up its governing bodies.

The RIAPFI consists of 16 countries, including Morocco ,

Senegal, Mali , Burkina Faso, Cameroon, Niger ,

Congo Brazzaville Guinea, Benin France, Belgium Mauritania, Burundi, ,Lebanon, and Tunisia., ItComoros, also Senegal,three Maliorganizations; , Burkina Faso, Cameroon, NigerBank , includes African Development

Burundi,Organization Lebanon, Benin Tunisia. It also (Mauritania, AfDB), International of theand Francophonie organizations; African Development Bank (includes OIF), andthree United Nations Industrial Development ( AfDB), International Organization (UNIDO) Organization of the Francophonie ( OIF), and United Nations Industrial Development Organization (UNIDO)

Avenue Abdoulaye Fadiga,16ième Etage, immeuble Belle Rive - Plateau - Côte d’Ivoire | contact: +225 20 31 14 00 | www.cepici.gouv.ci


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Corporate africa issue 60 digital  
Corporate africa issue 60 digital  

Corporate Africa over the last 20 year has become the face of 'investments in Africa'. Since 1994, Corporate Africa has guided investors thr...

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