Page 1

Whisky maker takes on Scotch SA business looks to Nigeria Mozambique re-emerges FastJet CEO Ed Winter Issue 02 \ August 2012 Controlled Distribution UK & RSA

Green Revolution Can South Africa create a renewable energy industry? Business | Entrepreneurship | Innovation | Investment | Lifestyle


4 \ Contents \ August 2012

www.GatewayToAfrica.com

CONTENTS Cover Story

Interview

Comment

Investing in South Africa’s green opportunity: How a plan to massively boost South Africa’s generation of renewable energy could drive investment from European partners into Southern Africa, filling the capacity gaps in the country’s professional services, construction and financial industries - if the historical inefficiencies in the power sector can be overcome.

The UK’s leading aviation entrepreneur, Stelios Hadji-Ioannou, is backing a new venture that aims to overcome West Africa’s terminal lack of cheap air transport.

An entrepreneur’s journey from Switzerland to sub-Saharan Africa.

P12 - The Green Revolution:

P16 - Ed Winter - CEO, FastJet:

P8 - York Zucchi, Founder, York Zucchi Partners

P10 - Grant Webber, FDI Adviser How companies should prepare themselves for their first foray into Africa.

Regulars Photo: FastJet

Features P20 - Johannesburg to Lagos: South Africa’s Tiger Brands has just signed an agreement to acquire a majority stake in Nigerian food producer Dangote Foods. Nigeria is on track to overtake South Africa as the continent’s largest economy within a decade, and Tiger’s move shows that companies are aware of the potential, but can South African businesses really cope in the chaos of Lagos?

Photo: Graeme Williams, Media Club South Africa

Photo: Peter Guest

P4 - News and Analysis Recent developments from South Africa and around the continent.

P26 - Country Profile: Mozambique A rash of gas discoveries off Mozambique’s coast has reignited interest in a country that has been on the path to recovery for close to two decades.

P30 - Final Word: James Sedgwick Distillery The award-winning South African whisky maker that is putting Scotch on the rocks.

Photo: James Sedgwick Distillery


5 \ Contents \ August 2012

www.GatewayToAfrica.com

GatewayToAfrica.com is a multi-platform title for businesses looking to take part in expansion opportunities in Sub-Saharan Africa

Leader SOUTH AFRICA’S growth figures have been revised down once again, as the unending saga of Europe’s sovereign debt issues rolls ever on. Even China, still the powerhouse of the world economy, is showing signs of cooling off. South African manufacturing jobs are being slashed, business sentiment is at a 12-year low and the World Bank is warning about economic inequalities. Only the stock market, perversely, is defying gravity at the moment and hitting record highs. It is little surprise, then, that South Africans are looking north, not east, for their expansions. The country has to face

Photo: Peter Guest

that within a decade it may no longer be able to call itself the largest economy south of the Sahara. Nigeria is emerging fast, and South African corporates are waking up. When MTN first announced that it was going to invest in Nigeria in 2001, the market response was far from encouraging. More than a decade on, and the country is the cornerstone of the operator’s international business, contributing a quarter of its total subscribers. South Africa’s banks have struggled to make inroads, but its consumer goods businesses have gained footholds. They are joined this year by Tiger Brands, which is set to buy DFM. Old Mutual hopes to be on the ground by the end of the quarter. Smaller firms, too, are turning up, bidding to run everything from shopping malls to the Lagos State lottery. It is not going to be easy. As experts told GTA, there is an inevitable clash of business cultures when South Africans turn up in the chaotic metropolis that is Lagos (p.20). Many will fail to make inroads - not least because local businesses are increasingly successful and sophisticated. But as Goldman Sachs economist Niall Ferguson, who first coined the term “BRIC” back at the turn of the Millennium, said, at a recent conference in London - those that fail to get in now may, in five years time, realise they’ve missed out on the opportunity of the decade. •

Editor: Heather Walker Publisher: Gordon Glyn-Jones Art Director: Jackie Lampard Sub-Editor: Paul Christopher Daniels Researcher: Nicole Holgate Contributors: York Zucchi, Grant Webber, Morgan Spicer, Pete Guest Illustrator: Bianca Bird Directors: P Atherton, J Durrant, N Durrant and R Phillips

MEDIA PROFILE Magazine: Monthly readership - 50 000 Enewsletter: Monthly readership - 20 000 Digital Edition: Monthly readership - 5 000 Africa Online Network: Monthly viewers - 150 000

• TO ADVERTISE: Email: advertise@GatewayToAfrica.com Tel: +44 (0) 845 456 4910 Account Directors: Bryce Lowry, Gordon Glyn-Jones, Dominic Young, Patrick Atherton

• TO SUBSCRIBE: Email: subscriptions@GatewayToAfrica.com Tel: +44 (0) 845 456 4910

PUBLISHED BY BLUESKY PUBLICATIONS Tel: +44 (0) 845 456 4910 Email: info@GatewayToAfrica.com UK Address: Unit 7C, Commodore House Battersea Reach, London, SW18 1TW

Read more on gatewaytoafrica.com

Find us on LinkedIn and Facebook

South Africa Address: 3rd Floor, Sunclare Building, 21 Dreyer Street, Claremont, 7708

Follow us on Twitter @gatewaytoafrica

Contact us on editor@gatewaytoafrica.com

Printed by: Mortons of Horncastle Ltd

Official Partner Organisations:

Blue Sky Also Publishes:

Content Disclaimer The information contained in this publication has been obtained from sources Blue Sky believe to be correct. However, no legal liability can be accepted for any errors or omissions. Unless otherwise stated, copyright of all original materials is held by Blue Sky Publications Ltd. The printed and online opinions of writers, reader commentators and advertisers are theirs and are not necessarily shared by Blue Sky Publications Ltd and affiliates.


6 \ News \ August 2012

www.GatewayToAfrica.com

NEWS AND ANALYSIS

NEWS IN BRIEF Saipem wins Nigeria contract The Italian oil services company Saipem has won an $800 million contract to construct four gas compression facilities and a central gas production facility in Nigeria’s Delta State, as part of the country’s move to upgrade its gas industry.

Anglo buys into Mozambique Anglo American is to pay $555 million to the estate of the late Australian mining tycoon Ken Talbot for his stake in the Revuboè metallurgical coal project in Mozambique. Talbot was killed in 2010 when his plane went down en route to Congo.

PPC, IDC invest in Ethiopia South Africa’s Pretoria Portland Cement and the Industrial Development Corporation are to pay $21 million for a stake in Ethiopia’s Habesha Cement Share Company, marking the cement maker’s first move into East Africa and a rare foray by a South African company into Ethiopia.

PTT enters Cove endgame Thai energy company PTT is close to completing its $1.9 billion acquisition of East Africa-focused gas explorer Cove Energy, which has access to large gas discoveries off Mozambique. Shell, the rival bidder for Cove, pulled out in July.

Old Mutual eyes Africa expansion Old Mutual has said that it intends to increase its presence in sub-Saharan Africa as it chases new sources of growth. The insurer, which posted a 12 per cent rise in first half profits, is poised to enter the Nigerian market in the third quarter.

Lonmin cuts spending Platinum producer Lonmin is to cut back its spending and limit its 2013 production to 750,000 oz, on the back of falling prices for the metal. The company also noted that labour and power costs in South Africa were rising above inflation.

UK business eyes Africa

image credit Photo:goes Peterhere Guest

A survey by financial and professional services group TheCityUK has found that British businesses are waking up to the potential of sub-Saharan Africa. The poll found that 76 per cent of respondents saw the region as an export opportunity, with 83 per cent image saying credit that they saw high goes here future growth potential there.

image credit goes here Photo: Peter Guest


7 \ News \ August 2012

South Africa Growth Fears THE WORLD Bank has lowered its forecasts for South Africa’s economic growth in 2012 from 3.1 per cent to 2.5 per cent, citing falls in consumer and business confidence, and has warned that inequality risks being entrenched across generations in the country. The country, which exports to the European Union and China, is also highly exposed to the ongoing debt crisis in Europe and fears that an economic slowdown in the developed world was undermining previously strong growth in Asia. On July 19, the South African Reserve Bank warned that the global economy was showing signs of worsening, as the prolonged failure to resolve the sovereign debt issues in Europe continued to dampen sentiment worldwide, which, added to a recession in the UK and evidence of a slowdown in the US, was increasing instability and spilling over into the emerging markets. In that environment, the SARB downgraded its forecasts for GDP growth for 2012 from 2.9 per cent to 2.7 per cent, with 3.8 per cent and 4.1 per cent predicted for 2013 and 2014, respectively. “South Africa is highly integrated with the global economy, and is therefore susceptible to the ongoing slowdown in the Euro zone countries and China, the two principal export destinations for its goods and services,” Asad Alam, World Bank Country Director for South Africa, said at the launch of the South Africa

www.GatewayToAfrica.com

Economic Update” report on July 24. Later in the month, Reuters reported comments made by Pravin Gordhan, the finance minister, that growth was likely to undershoot the government forecast of 2.7 per cent. The country has struggled to resume the high growth rates experienced before the financial crisis, which precipitated a recession in 2009. This has compounded pre-existing issues with poverty reduction and job creation in the country. The World Bank’s report, which included a new methodology for assessing citizens’ access to opportunities, found that progress towards universal access has been mixed, with primary education, electricity and telecommunications now more accessible, while the provision of water, sanitation, health insurance and housing had made less progress. The country is also, the report said, “an outlier” in terms of the level and inequalities in employment opportunities. Young people, township residents and non-whites are still struggling to enter the workforce, relative to other segments of society, the World Bank said. “Our results show that a South African child not only has to work harder to overcome the disadvantages at birth due to circumstances, but having done so, finds that these reemerge when seeking employment as an adult,” said Sandeep Mahajan, World Bank Task Team Leader for the South Africa Economic Update series in a statement accompanying the report’s release. “Moreover, the disadvantages do not stop with that one person—they get transmitted across generations. The policy challenge is to find a way to break this vicious, self-perpetuating cycle of inequality in South Africa.” •

imageAfrica credit goesKirchoff here Photo: Media Club South / Chris

Africa in numbers

$166.3 billion

China’s trade with Africa during 2011, according to Chinese government statistics released in July - an increase of 31 per cent over 2010 trade.

Africa in numbers

$7 billion

The amount the Nigerian National Petroleum Corporation says it is owed in subsidy payments - more than the $6.9 billion the government has available.

US Trade Boost AFRICAN CLOTHING manufacturers stand to benefit, after the US Senate Finance Committee voted to renew a key piece of trade legislation that has created thousands of jobs in the textile industry on the continent. The provision in the African Growth and Opportunity Act (AGOA), which exempts African exporters from import duties on goods shipped to the US, allowed companies on the continent to use fabric made in other countries and still benefit from the act. This provision was due to expire in September, and had been criticised for giving trade benefits by the back door to Chinese and other Asian manufacturers. However, the Finance Committee acknowledged that the act contributed significantly to the creation of productive jobs in Africa, and that the uncertainty over whether or not it would be extended was having a severe impact. Ranking member of the Senate Finance Committee, Orrin Hatch, said on Wednesday: “This is a common-sense measure that will foster prosperity through strengthened trade relations and provide real opportunities for job creation and economic growth both at home and abroad.” AGOA, signed into law in 2000, has been one of the US’ principal trade development vehicles for Africa. According to research by the Brookings Institute, it is responsible for the creation of around 300,000 jobs on the continent, many in productive sectors, such as manufacturing. Congress is yet to pass the bill, but it is understood to have strong bipartisan support. •


8 \ News \ August 2012

www.GatewayToAfrica.com

Ghana: Transition Risks Rise THE SUDDEN death of Ghana’s president John Atta Mills has introduced an element of uncertainty into a country that prides itself on its stability and commitment to democratic rule. Mills’ death was announced on Tuesday night, taking many observers by surprise. Although rumours around the 68-year old president’s ill health have swirled for the past two years, the suddenness of his passing and the proximity to the oilproducing nation’s elections - scheduled for December - have heightened concerns that the country could see major shifts in policy in the near-term. John Dramani Mahama, the vicepresident, was quickly sworn in to replace Mills, who had overseen a narrow victory in elections in 2009. Mills, who had run three times as leader of the National Democratic Congress (NDC), finally won after a run-off on a platform that promised that Ghana’s high and sustained growth rate would be translated into improvements in living standards for the population. The professorial Mills presided over Ghana’s first oil production in 2010, and saw the country jump into middle income status. His successor, Mahama, is unlikely to dramatically alter Mills’ policies in the near term, analysts said, although he may look to spend in order to curry favour ahead of a run for the presidency in December. “Ahead of the December elections, Mahama is highly likely to ensure policy continuity, but concerns over fiscal discipline will probably arise as Mahama increases fiscal spending further to garner support from key NDC leaders, southern powerbrokers, including chiefs and the wider population,” Natznet Tesfay, head of Africa forecasting at consultancy firm Exclusive Analysis, said in an email. If Mahama is unable to secure enough backing to win in December, however, a change in government could see a reassessment of the Mills government’s approach, she added. “An opposition victory will heighten contract risks for firms associated with the outgoing administration, as is typical in Ghanaian political successions,” Tesfay said. “In 2009, when the NDC took power from the NPP’s President Kufuor, the NDC launched probes into energy contracts awarded under Kufuor.” •

IMF Approves Malawi Loan

Photo: Presidency of Ghana

THE NORMALISATION of relations between Malawi and international donors hit a milestone in July, when the International Monetary Fund (IMF) approved a $156 million loan for the country. Malawi’s president, Joyce Banda, took over following the death of the former incumbent Bingu Wa Mutharika of a heart attack in April. Mutharika, who styled himself as “economist-in-chief ” had antagonised donors by ignoring calls for reform and insisting the country could prosper without their assistance. In doing so, he presided over a severe shortage in foreign exchange and the near collapse of the economy. “Malawi’s new administration moved swiftly to devalue the kwacha, adopt a flexible exchange rate regime and liberalize current account transactions to address the country’s chronic balance of payment problems and improve the outlook for poverty reduction and growth,” Naoyuki Shinohara, deputy managing director at the IMF, said in a statement. •

EU Relaxes Zimbabwe Sanctions Photo: World Economic Forum

Photo: World Economic Forum

THE EUROPEAN Union agreed to lift restrictions on providing financial aid directly to the government of Zimbabwe on Monday, offering an olive branch to a government that has been slow to implement social, economic and political reforms. A meeting of EU foreign ministers agreed that the Global Political Agreement (GPA) which threw together the incumbent Zanu-PF with the opposition Movement for Democratic Change (MDC) into an uneasy coalition, was finally being implemented. “The steps taken by the GNU to improve the freedom and prosperity of the Zimbabwean people justify the immediate suspension of the measures hitherto applied under Article 96 of the Cotonou Agreement,” the statement from the EU said. Travel restrictions on president Robert Mugabe and his inner circle remain in place. •


Nedbank Capital is a leading funder of South Africa’s Renewable Energy programme. When you understand the importance of renewable energy, you start to understand that the future won’t be the same without green. Nedbank Capital is committed to making more green deals happen, contributing towards the realisation of our country’s vision for a green economy. www.nedbankcapital.co.za

Nedbank Limited is incorporated with limited liability in South Africa (no.1951/000009/06) and its London branch is registered in England and Wales (no.BR001334), and whose registered address is 1st floor Old Mutual Place, London, EC4V 4GG. Nedbank London is authorised and regulated in the UK by the Financial Services Authority (FSA Register number 204684).

NET#WORK BBDO 8014455/E

Our future won’t be the same without green.


10 \ Views \ August 2012

www.GatewayToAfrica.com

COMMENT:

YORK ZUCCHI Africa: The playground for entrepreneurs I LIVE and invest in sub-Saharan Africa and I am passionate about its potential, but I am not unrealistic. African countries are, in many ways, inefficient markets. They often lack transparency and accountability in their institutions. However, they present many opportunities that are simply not as easily available in the saturated and sophisticated markets of Europe. My company, for example, is in the process of building Africa’s leading healthcare group focusing on sub-acute care – essentially a step down from a hospital, which allows us to offer much more affordable healthcare – at a fraction of the cost of what it would take to build such infrastructure in the US or Europe. This is not to say that investments in Africa are not risky: there are a lot of risks that need to be taken into account that perhaps one does not normally think about in a more developed markets. What is considered “known” about sub-Saharan Africa is usually based on assumptions and headlines. There is substantial confusion between real and the perceived risks - many of the latter are down to cultural differences that can be managed by being aware and sensitive. Some of these “risks” are also opportunities. I live in South Africa, where the strong need for services and products in a market that is far from saturated creates accessible markets.

Unlike the US or the EU, SA does not require fine tuning - a generalisation of course - but rather major steps to cover the needs of the majority. As for the business climate? In some ways, nothing has really changed in just over a century. Johannesburg, for example, still has a mining town mentality with plenty of cowboy capitalists, scam artists, “Tender-preneur” business proposals and those that abuse positions of power. But the truth, as is often the case, is more complicated and – in my view – far more positive. While it is true that a lot of scandals, nepotism, corruption and peculiar tender processes happen each day, it is not something that worries me particularly, insofar as it is something I would expect from a young economy where everyone is trying to “grab the gold” and stake their flag while it lasts. Already we are seeing signs that the gold rush is nearing the end. The empowerment initiatives, which were badly implemented but a good idea in theory, are now being tweaked to become fairer and more representative. There are still a lot of issues, of course, among them poverty, crime and unemployment; as well as a sophisticated infrastructure that is becoming more superficial than real, showing a penchant for grandiose projects of the political elite. The billions spent on a train line to link Johannesburg and Pretoria to the airport could have been far more usefully deployed to build a second rail line to link the ports with the main industrial cities. But there are also good signs: The creation of a special tax haven in SA for international companies wanting to invest across Africa; very efficient and relatively simple tax system; and a rule of law that is far from perfect but on the whole still works. In my experience the risk in SA is no greater than in other countries, provided the sectors and markets are carefully

chosen and one has a trusted partner on the ground who knows their way around - but the opportunities and returns are far more substantial than, for example, in Europe and the US. Africa is waking up and is looking for investors who want to make money together with the local people under the umbrella of mutual respect. •

York Zucchi is the founder of York Zucchi Partners, which invests in and runs enterprises across technology, IT, tourism, publishing and healthcare. Its Hello Healthcare brand employs 1,850 people across 26 countries.


The brightest African talent together with the best companies

Looking for a job or looking to recruit? Global Career Company is the market-leading recruitment consultancy specialising in recruiting the brightest of African talent. Our Recruitment Services include: Recruitment Summits, Search and Selection, Talent Pool Resourcing, Recruitment Days and Campaigns and Recruitment Advertising.

Register now to attend one of our world-renowned Careers in Africa Recruitment Summits: • Houston: 7-9 September • New York: 14-16 September

• Lagos: 26-27 September • London: 19-21 October

• Johannesburg/Cape Town: 9-11 November

Our last summit which took place in May was a huge success… 36 companies participated, 1,264 candidates attended and over 900 interviews took place!

Find out more at www.careersinafrica.com

or contact us today on +44 (0)20 8834 0300 or contactus@globalcc.net We recuit for over 400 companies, including:


12 \ Views \ August 2012

www.GatewayToAfrica.com

COMMENT:

GRANT WEBBER Investing in Africa? Look inwards first NUMEROUS ARTICLES have been published which highlight the commercial opportunities available in sub-Saharan Africa. These tend to package GDP growth and socio-political advances on a regional basis or by country income levels. However, when making a decision to invest alongside those macroeconomic factors, it is important to build a framework around the firm itself as a focal point. The framework to guide new market entry commences with the reasons for investing in the region. These reasons can range from aggressive (growth opportunities), to neutral (form an integral part of an international network) or defensive (forced to follow existing customers or competitors). The second component of the framework articulates the firm’s expectations by ensuring that they are aligned with their reasons for investing. Typically these could include: developing a commercial network through an onshore presence; managing risk and accumulate local knowledge; creating a focus on profitability or growing market share; and growing revenue to invest in new market segments. Having established the reasons for and expectations of entering a new market, the external environment in the host country in has to be analysed. This includes; the socio-economic environment; formal institutional rules; level of political risk;

industry profitability; trends in bilateral trade flows; geographic and social proximity (cultural and historical ties); level of saturation in the home market and industry regulations; and finally the least understood and most difficult factor to understand, informal constraints (customs, norms, and culture). In the emerging market context informal constraints tend to override formal rules and regulations. Based on the reasons, expectations, and the home and host external environment, a relevant strategy for entering subSaharan Africa can then be devised. Typically this would be consistent with and lead to the achievement of the firm’s overall strategic objectives; be built on the proven business model already utilised by the firm; selection of a mode of entry ranging from low to high risk (export/ import, agency, or subsidiary); investment criteria and level of funding; brand strategy; and the development of local host country management (often receiving scant attention and tends to be very difficult to achieve). This initial-entry strategy should be developed based on internal firm-specific competitive advantages. These include; international industry-specific and managerial expertise; IT platform; patents and trademarks; organisational learning capacity; organisational flexibility; and firm size. The ability to learn and adapt is especially important in the sub-Saharan context, where change is often dramatic and deep. The extent to which the firm can make changes to its strategy postentry is pivotal and it is at this stage of investment that firms tend to fail. Reasons for change in strategy post-entry come about due to a change in home country priorities or strategic objectives; or having to adapt to changes in the host country market. This framework links the critical variables and their logical relationships

and assists with explaining sustainable new market entry into the region. Most notably, the firm itself is used as the focal point of the analysis, ensuring that the reasons for investment and the expectations flowing from these reasons are clearly articulated and aligned. By including an analysis of the external host and home country factors an initial-entry strategy can be formulated. The internal firm-specific competitive advantages should be leveraged for this initial-entry strategy thereby allowing for changes to strategy post-entry. In essence, the capacity for organisational learning and flexibility to change, become the most critical firm-specific competitive advantages for the firm’s sustainable new market entry into sub-Saharan Africa. •

Grant Webber is an emerging markets analyst specialising in the strategic decision making process employed by foreign firms wishing to enter new markets in sub-Saharan Africa. Now based in London, he has 25 years of commercial experience in the region.


14 \ Cover Feature \ August 2012

www.GatewayToAfrica.com

COVER STORY:

GREEN REVOLUTION? South Africa has ambitious plans to move away from its dependence on carbon-intensive coal towards low emission renewable energy sources. In doing so, the country hopes not only to improve its energy security and reduce its environmental impact, but to spur the creation of a domestic industry. By Staff Reporter

GLOBAL RENEWABLE energy producers are once again beginning to line up their bids for a slice of one of the largest tender opportunities in the world, as the third round of bidding for South Africa’s Renewable Energy Independent Power Producer Programme (REIPPP) begins. The second round of successful bids, announced in May, total more than 28 billion rand (£2.2 billion). Across the 19 projects - nine solar photovoltaic, seven wind, two hydropower and one concentrated solar power - they represent more than 1,000MW, which is around one-third of the total to be commissioned under the REIPPP. Of the 79 bids submitted, 51 met the criteria for the request for proposal, the Department of Energy said, but due to a cap on the amount of capacity to be commissioned in this round, only 19 were selected. The government released its Integrated Resource Plan in May 2011, outlining the need for a rapid ramp-up in the procurement of alternative sources of energy for a country known for its perennial undersupply. By 2016, it hopes to have nearly 4,000MW of renewable energy capacity installed - rising to 17,000MW by 2030 - and have shifted its energy mix away from its current dependence on coal to ensure that renewables comprise 16 per cent of its total installed capacity. Given the constant struggle to upgrade

South Africa’s grid, such a wholesale reorientation of power generation seems ambitious, if not unrealistic. “You can argue that about any country’s renewable directive,” Fraser Mclachlan, CEO of GCube, which provides insurance services for the renewables industry. “I think everything is possible, it just depends on the people in the country, in particular the politicians. It’s not unfeasible, but it’s a big push if you look at the infrastructure issues that are out there in South Africa with infrastructure and delivering power to grid. It is certainly a challenge. “I don’t think we should be that optimistic and say it’s going to be an easy ride, but it’s never been an easy ride for renewables anywhere in the world.” Others, such as Simon Norris, a partner at law firm Trinity LLP, which has advised on a number of bids, including preferred bidder projects in South Africa, are sceptical as to whether the target is achievable. “Given the delays that are being experienced already in terms of moving the date for financial close for bid round one, it highlights how challenging this whole process is going to be,” Norris said. “My personal view is that the 17,000MW target is incredibly ambitious and that there will be many surprised commentators if that target is achieved.” Even so, Norris said, the opportunity

for professional services firms and engineering companies to fill the gaps in the South African market could be huge. “In terms of consultants and engineers, yes – this is an opportunity for UK or European firms – but given the timing it would be hard for new entrants to get up to speed with the process by entering at the last bid phase. Nonetheless, teaming up with South African firms - who may ultimately have capacity issues if they are on a number of preferred bidder projects is probably the best bet.”

Breaking Coal Dependency Coal currently accounts for 85 per cent of South Africa’s energy generation, and the country’s position as a top-five producer gives it access to a relatively cheap and reliable supply. In a world where commodity prices remain volatile and energy security is a major concern for leaders, it is unsurprising that breaking the current dependency has proved difficult. The next few years will see two major coal-fired power stations begin operation in the country, contributing more than 9,000MW to the grid. When faced with meeting the rising energy demands of the nation and trying to end the drag on economic growth and development caused by under-supply, power producers have defaulted to the quick and dirty solution of coal.


15 \ Cover Feature \ August 2012

www.GatewayToAfrica.com

NUMBERS: 28 BILLION RAND

The value of the 19 solar, wind and hydropower projects commissioned in the second round of the REIPPP totaled 28 billion rand (ÂŁ2.2 billion). 17,000MW

The South African government hopes to have 4,000MW of renewable energy capacity online by 2016, rising to 17,000MW by 2030 - 16% of the total energy mix.

Photo: Graeme Williams, Media Club South Africa


16 \ Cover Feature \ August 2012

The government will contractually be able to penalise private sector power producers if they miss these targets - up

Ga s

consider the large capital expenditure required to set up production bases in South Africa. “Depending on the sector and the nature of the equipment that is being manufactured, it is not an unrealistic expectation. We have seen a number of foreign suppliers open representative offices in South Africa so far although these have tended to be for sales and for negotiating the current deals, as opposed to manufacturing,” Norris said. If they did so, would South Africanbased manufacturing facilities, or even domestic businesses moving into the space, be able to compete with the massive Chinese industry that has emerged in the past decade. “From a cheapness perspective, you’re not [going to compete]. From a reliability perspective maybe you are,” Mclachlan said. “The trouble with some of the Asianproduced equipment is that this stuff should have a design life of 25 years, but some of the stuff that is being delivered extremely cost-effectively is not going to have anything like that. The question is what do you want to buy?” •

o • 48% C Hydr oa l 8%

nergy M E ’s

2030

% 14

uth Africa o S

ix

A major pillar of the IRP is a government insistence that the process lead to the development of a domestic renewables industry and to direct economic benefits for the communities that will host the projects. The ‘local content’ requirements - the amount of any enterprise’s products, services and employment that has to be procured from South African businesses - is as high as 60 per cent in some sectors, which the government hopes will encourage companies to relocate their manufacturing bases, creating long-term productive employment opportunities. The question remains, however, whether this 60 per cent local content requirement - on top of the standard 40 per cent South African equity participation rules - will act as a disincentive for investors already worried about investing in long-term infrastructure projects in an environment of uncertain growth prospects, both globally and locally. “The project documents include binding obligations on the parties to implement economic and social development obligations and the government has been very clear on the importance of these issues - including highlighting that the first round bids did not include sufficient local content,” Kaushik Ray, senior associate at Trinity LLP, said.

ar Nucle • 14%

Local Content

to and including a termination of the power purchase agreement. While it is not certain to what extent this will deter investors, Ray said that this could be better than the alternative. “Our view is that the inclusion of strict economic and social development obligations is infinitely more acceptable to international - and local - investors than a government changing its mind at a later date and acquiring projects or shares or assets compulsorily as has been the case in other jurisdictions, including Zimbabwe,” he added. “This is of course dependent on how closely government sticks to the script and assuming that the inclusion of the social and economic development obligations is itself legal and not open to challenge.” The question of whether the policy will work, however, remains unanswered. The latent demand in Africa is hard to measure. While access to power is a huge challenge for many countries across the continent, the economics of renewable energy in the absence of subsidies mean that large scale demand for renewable energy infrastructure outside of South Africa remains a distant prospect. Whether that potential will be enough for manufacturers to

•16% Renew a ble

The discovery that South Africa may have large reserves of shale gas - natural gas contained in rock strata that is recovered by an increasingly popular, if controversial, process of ‘seismic fracturing’ - adds another potential source of domestic hydrocarbons that could challenge plans to move towards low-emission power generation. Added to this is a constant fear that the economics of renewable power - which in the short term are closely tied to government subsidies - will never exactly square up. As GCube’s Mclachlan explained: “I would say that in certain countries now wind power is self-sustainable - obviously the subsidies help that because they help the profit margins that much better. But if you really wanted to run a utility-grade, multimegawatt wind turbine project in certain places in the world I think you could do it now. I think solar is a different case. It’s still quite expensive... having said that, it will get there,” he said. “The economics are going to stack up.”

www.GatewayToAfrica.com


17 \ Cover Feature \ August 2012

www.GatewayToAfrica.com

Photo: Chris Kirchhoff, Media Club South Africa


18 \ Feature \ August 2012

www.GatewayToAfrica.com

INTERVIEW:

ED WINTER CEO, FastJet How “democratising air travel” could prove a lucrative proposition for a new venture backed by EasyJet founder Stelios Hadji-Ioannou. By Staff Reporter

IT IS a perennial complaint of business travellers to Africa - that to get from A to B tends to involve a lengthy stay in C. The air links between major hub cities on the continent remain underdeveloped, representing a major block on regional trade, investment and tourism. Now, Stelios Hadji-Ioannou, one of the UK’s most visible entrepreneurs and the creator of Easyjet, a name synonymous in Europe with low-cost air travel, is backing a venture that hopes to fill the gaps in African aviation. FastJet, which launches later this year, will operate budget, shorthaul flights across the continent, tapping a huge and growing middle class that needs and wants to travel. “I think it’s exactly the perfect timing for Africa,” Ed Winter, FastJet’s CEO, told Gateway to Africa. The sustained growth in gross domestic product across the continent in the past decade, inward investment and the development of an urban middle class in many of the continent’s economies provided a strong rationale for Winter and Hadji-Ioannou as they looked around for new aviation opportunities. Hadji-Ioannou, whose family still owns a large stake in EasyJet, was bound not to compete with his former company. Early reports suggested that his new venture would take on the existing transatlantic carriers, but by early 2012, a plan to head for Africa was announced. FastJet’s

parent, Rubicon Investments, bought into an existing business - Lonrho’s Fly540, which operates a small fleet of turbo-prop aircraft in Kenya, Tanzania, Ghana and Angola, bypassing the tangled bureaucracy of those countries to acquire operating licenses. “It really is the last continent where low cost airlines haven’t developed, and a very sophisticated aviation network hasn’t developed,” Winter said. “Even in China, Russia, these things are in place, whereas in Africa they are not. If you look at how much air travel actually happens in Africa, there’s one seat per 13,000 people per year. To put that into context, there’s getting on for two seats per person per year in Europe, and in the States three. That shows you the huge disparity between the developed aviation network and what’s happening in Africa.” This is despite an environment that, in many cases, makes air travel the only viable form of transport. Regional road and rail networks are often weak, and distances large. However, partly due to high taxes on departures and on aviation fuel, flights remain out of the reach of most Africans. Average ticket prices are currently more than three times greater than those in Europe. EasyJet and its rivals in the low-cost space, changed the way that Europeans saw air travel. Previously an expensive luxury, the budget carriers commoditised short-haul, meaning that British holidaymakers and businesspeople could jump onto planes for little more than a long-distance rail ticket. Much ridiculed for their “no-frills” approach, these carriers brought regular air travel into the price range of average consumers. They became ruthlessly efficient machines, bleeding the absolute most out of their assets and cutting back their services to the bare minimum that customers required. Winter hopes that FastJet can have the

same effect in Africa. Customers who book well in advance may be able to pick up tickets for $20 plus tax. “At that price, you’ve got a huge population who currently can’t dream about flying, for whom an aeroplane is just something they see in the sky, who have no aspirations at the moment, or any expectations that they’d ever travel on one, who will be able to. We’re democratising air travel,” he said. “I think the time is right for that, because there is a significant proportion of the population who can afford to do it. People who currently can’t go and see their relatives more than terribly infrequently - and when they do they travel by road and make dangerous journeys - will be able to travel frequently. Traders who currently are very limited in the markets in which they can trade suddenly have the region opened up to them.” The prize for the airline could be huge. Rather than pitching for the business of the existing airlines - mainly national flag carriers - FastJet aims to stimulate the creation of a new category of traveller. “We’ve got an air operating certificate in Ghana, Kenya, Tanzania and Angola. Those four countries between them total about 100 million people in population,” Winter explains. “Now, if only about three per cent of that

“At [$20 per ticket] you’ve got a huge population who currently can’t dream about flying, for whom an aeroplane is just something they see in the sky, who have no aspirations at the moment, or any expectations that they’d ever travel on one, who will be able to.”


19 \ Feature \ August 2012

population became customers of ours, and flew twice a year, that’s 12 million journeys. Now, for 12 million journeys we’d need about 40 airplanes. That’s just three per cent of those countries. If we take [the Economic Community of West African States], there’s about 380-odd million people there. If you start to look at the proportion of people who might be able to afford us, you can see how this could grow.” That growth is unlikely to come easily. Winter acknowledges that the logistics of doing business of the continent mean that the EasyJet model cannot be picked up and dropped into Africa. Everything from the physical infrastructure to distribution in countries with low internet penetration and credit card use threaten to add costs to an operation that will have to thrive on its affordability. The company will need to be innovative, and explore other technological solutions, such as mobile money, to make sure that customers can access its services. FastJet takes delivery of its first Airbus aircraft in late October - although it has yet to decide which of its hubs will host them as it works through the tax

www.GatewayToAfrica.com

implications of each jurisdiction. It will begin to market its brand later in the summer, gradually phasing out the Fly540 name as its inherited fleet of turboprop planes is retired. Operations will be scaled up in Kenya, Tanzania and Ghana in the near term, while restrictions in Angola prevent the airline from operating larger planes. From that platform, the company intends to expand to other hubs, offering travel within the major economic communities, and potentially looking at linking regional hubs with each other, allowing affordable travel between East and West and East and Southern Africa. “Strategically we’re already thinking and working towards other bases and other countries. If I look at a map of the continent and look at those four places, there are huge spaces in between,” Winter said. “I think Africa is crying out for something like this. The number of stories of people I hear making horrendous journeys. It’s a nightmare sometimes. It shouldn’t be, it should be an easy, comfortable, convenient and reliable way of travel.” •

Africa in numbers

30¢ per kilometre The cost of air travel in Africa, compared to 7-8¢ per kilometre in Europe. The high cost remains a huge deterrent.

Africa in numbers

1 per 13,000 Africa has one seat for every 13,000 people per year, compared with two seats per person per year in Europe.

Photo: FastJet


20 \ Business Life \ August 2012

www.GatewayToAfrica.com

BUSINESS LIFE:

JOHANNESBURG TO LAGOS South African businesses have woken up to the potential of Nigeria, expanding into its consumer markets, food, construction and banking sectors. However, these two giants are both united and divided by a continent, sharing little of each others’ business culture or market structure. By Staff Reporter

Photo: Gavin Langley, Gavin Langley Studios


21 \ Business Life \ August 2012

www.GatewayToAfrica.com

“The South Africans say that being another African country means they understand operating on the continent better. I’m not entirely sure that’s correct. South Africans go into Nigeria with the same problems as everyone else.” - Dianna Games, honorary CEO, South AfricaNigeria Chamber of Commerce

ON SOME credible forecasts, Nigeria could overtake South Africa as subSaharan Africa’s largest economy some time within the next decade - 2025, according to Morgan Stanley. A combination of rising oil prices and demographic factors has seen the country experience a decade of gross domestic product growth in excess of 5 per cent per annum. Despite a slide in global demand for its energy exports, Nigeria powered through the global economic downturn, and is expected to see its economy grow by more than 7 per cent this year. South Africa, by contrast, found itself far more exposed to external conditions. Although it has since returned to growth, its 2009 recession reminded some companies - particularly those dependent on consumer spending - that strength at home and in neighbouring states is unlikely to be enough to sustain their expansion ambitions. It is this contrast that saw one of South Africa’s largest listed food businesses, Tiger Brands, buy first into UAC foods, and then into Dangote Flour Mills Nigeria’s sheer scale is compelling in itself. The most populous country on the continent, its more than 162 million people are increasingly clustering into cities. Estimates for the population of the greater Lagos area range between 10 and 20 million, an urban sprawl that is still growing, creating a megacity that is coming to dominate its region. Companies that want to capture the African opportunity, particularly in retail or financial services, need to be in Nigeria. For South African businesses, who have in some cases been slow to wake up to the opportunities of the rest of their continent, it is no different. “The South Africans say that being another African country means they understand operating on the continent better. I’m not entirely sure that’s correct,” Dianna Games, CEO of Africa at Work,

and honorary CEO of the South AfricaNigeria Chamber of Commerce told Gateway to Africa. “South Africans go into Nigeria with the same problems as everyone else.” Jostling with cars, Okada motorcycle taxis, hawkers and police, as well as the growing tide of sharply-suited professionals, the Central Business District on Lagos Island is worlds apart from the manicured real estate of Sandton. On the World Bank’s Doing Business rankings 2012, South Africa is rated at 35th in the world, between Israel and Qatar at the tail end of the more developed emerging markets grouping. Nigeria, at 133, is nearly 100 places below it. The business cultures differ hugely between the two countries as well - things that could take days to accomplish in South Africa may take months in Nigeria. “I think that is one of the issues that people have had to grapple with,” Games said. “As business has increased between Nigeria and South Africa, people have become better at understanding each other’s cultures. In the early days of the business relationship there was quite a lot of tension because people just didn’t understand each other and the way business was done. They are opposites in a sense. I think that has been difficult.” South African businesses can mark up some successes in the retail sector brands such as Game, Shoprite, NuMetro and Nandos are the mainstays of the emerging formal retail industry and the keystone clients in several of the malls that have sprung up in Nigerian cities in the past few years. Construction, property management and infrastructure finance businesses from South Africa have been involved in bringing some of these projects to fruition. MTN is a major player in the telecoms sector, as it is in much of the continent.

“These are companies that have succeeded in other parts of Africa,” Games said. “They are used to challenging African environments. They have a product where there is an enormous market gap... And there was not a lot of competition. You have someone like SABMiller, which is a huge global company, really struggled to get into the Nigerian market, and it’s only recently that they penetrated that market, and that is due to the competition in the brewing sector.” The same goes for the banking sector. Standard Bank has a relatively large presence in the country, and Nedbank has entered the market through a tie-up with local player Ecobank. However, the domestic banks still dominate. Other firms have struggled with competition from other international businesses who are more attuned to the cost-driven procurement processes in Lagos. This is particularly marked in key sectors such as engineering. “I’ve found that some of the engineering firms find markets like Nigeria very tricky, because they’ve got to compete with the low cost markets of China, India and Brazil,” Lyal White, the director of the Centre for Dynamic Markets at the Gordon Institute for Business Science at the University of Pretoria, told Gateway to Africa. “My question for the South African contractors is how do you actually compete in these markets? How do you win the contracts? Do you have to lower your costs? The big Brazilian contractors are winning contracts over their Chinese counterparts. What they do is they sometimes get an entity within their company to partner with Chinese contractors.” This model is something that South African businesses may need to adopt if they are to find ways of operating at the cost level that is expected in Nigeria. Companies like Tiger Brands, however,


22 \ Business Life \ August 2012

www.GatewayToAfrica.com

SOUTH AFRICA

NIGERIA

GDP

(Forecast)

2.7% 3.1%

7.1% 7.2%

2011

2011

2012 (forecast)

2012 (forecast)

Population

51Million

160Million

World Rank

35

133

Global Competitive Rank 2011-2012

50

127

(Doing Business)

(World Economic Forum)

may be better placed to succeed, White said, as they are able to leverage existing relationships with retailers, such as Shoprite, to gain entry. As with so much in the continent, getting things done in Nigeria means getting your hands dirty. - “You have to go and immerse yourself in the culture. You have to get on the ground,” White said. Deon Bruwer was business development manager of Shoprite’s Nigerian business for nearly a year, before joining Novare Equity Partners, a South African private equity company, in 2009, to head their African property unit. In that capacity, he returns to West Africa on a monthly basis and oversees a portfolio that includes the Grand Towers Abuja Mall in Nigeria’s capital city. Bruwer has long experience of the West African state’s business environment, which has been caricatured as inefficient and blocked by corruption. These are not necessarily fair criticisms, but institutional weakness in local government, a lack of clarity, poor record keeping and difficulties in understanding and implementing regulations all contribute to the country being “a more challenging environment,” he said. “At the end of the day, if you speak to the right people you can get things done.” This, he said, means finding people with enough influence to make decisions, but skipping the country’s notoriously opaque politics. “We don’t work with the government itself. We stay away from politicians. We buy land on the open market. We will go to the head of town planning in Lagos State or in Abuja, and deal with them. If you speak to nine different town planners you will get nine different stories. You have to be streetwise and know who to talk to.” •

Unemployment Rate Unemployed

Unemployed

Unemployed

Unemployed

Unemployed

Unemployed

24.5%

23.9%

Photo: Peter Guest


AD


24 \ Sponsored Feature \ August 2012

www.GatewayToAfrica.com

REGROUP IN STYLE When engaging in business travel, it’s a smart investment to stay at a comfortable hotel. Here are three in RSA with top pedigrees: BEST FOR DURBAN

OYSTER BOX HOTEL

2 lighthouse road, Umhlanga Rocks 4319, KwaZulu-Natal, South Africa Tel: +27 (0) 31 514 5000 reservations@oysterbox.co.za www.oysterboxhotel.com Durban is one of the busiest ports in the world and will therefore be hosting literally thousands of GTA readers over the next ten years. We have no doubt many will choose the Oyster Box as a base of operations. The freshly re-imagined hotel retains the oldworld feel of opulence but is topped off with a host of modern luxuries. Situated at the ocean’s edge in Umhlanga (near Durban), the eight Garden Villas feature private pools, terraces and bars; the Presidential Suite even has a rim-flow pool. The fact that the oysters are picked from the hotel’s own oyster beds, sets the tone for all cuisine on offer. As well as an award-winning spa, there is hiking, diving, surfing, riding and bird watching within easy reach.

BEST FOR CAPE TOWN

THE TWELVE APOSTLES HOTEL AND SPA

Victoria Road, Camps Bay. CAPE TOWN, South Africa Tel: +27 (0) 21 437 9000 Email: bookta@12apostles.co.za www.12apostles.co.za The Twelve Apostles was voted the Top Hotel Spa in Africa and the Middle East by Travel + Leisure for 2012. Guests enjoy spectacular views of the ocean and mountain in each of the 70 bedrooms; every one designed to provide the utmost in comfort and style. It boasts two swimming pools, three award-winning restaurants and a 16-seater private cinema. The hotel and world-class spa is the perfect distance from City Bowl, allowing easy access to meetings but nestled far enough out in the unspoiled natural fynbos to allow for a true ‘retreat and recharge’ at the end of the day. The 12 Apostles Hotel offers a complimentary shuttle service to and from the V&A Waterfront.

BEST FOR POST SUCCESS TIME-OUT

BUSHMANS KLOOF WILDERNESS RESERVE & WELLNESS RETREAT

Clanwilliam, Western Cape, 8135, South Africa Tel:+27 (0)21 481 1860 Email: info@bushmanskloof.co.za www.bushmanskloof.co.za Bushmans Kloof is a luxurious ecological oasis less than three hours’ drive from Cape Town, situated at the foothills of the Cederberg Mountains. The majestic views, staggering rock formations, open plains and outdoor activities compliment the 16 luxurious suites, award-winning Cape cuisine and a wellness-experience deeply rooted in Nature. So whether you’re an EU business leader or Southern African reconnecting with home, this is something special. Malaria and predator free, Bushmans Kloof is a sanctuary for many indigenous plants, animals and birds, including the endangered Cape mountain zebra. It is also home to over 130 Bushman rock art sites, is recognized as one of South Africa’s natural heritage sites.


SA Poster 600x800.qxd:Revised brief KW

16/11/11

14:05

Page 1

The Red Carnation Hotel Collection South Africa

Umhlanga Rocks, Kwazulu-Natal

Cape Town, Western Cape

www.oysterboxhotel.com

www.12apostleshotel.com

Cederberg Mountains, Western Cape

www.bushmanskloof.co.za

NO REQUEST IS TOO LARGE, NO DETAIL TOO SMALL


26 \ Business Life \ August 2012

www.GatewayToAfrica.com

COUNTRY FOCUS:

MOZAMBIQUE After investments in infrastructure and a number of major discoveries, the country is emerging as a key source of both gas and coal for Asian markets. By Staff Reporter

THE SIGNS of Mozambique’s economic recovery are increasingly plain, investors say. In Tete, a mining town in the country’s west is rapidly becoming a centre of the country’s mining and mineral processing industry and a symbol of its rehabilitation. “It has a small airport, and the rental car agency at the front of the airport is as big as the airport, and every time you get there the cars are nicer. That’s a way to define more money coming in,” David Premraj, head of corporate development for Beacon Hill Resources, which operates a coal mining operation in the country, told Gateway to Africa. “Getting accommodation in Maputo. Our head of country and finance manager, we look after their rent, and what you pay for a three bedroom apartment in Maputo is what you’d pay for a beautiful four bedroom house in one of the more expensive parts of Melbourne,” added. This October will mark the 20th anniversary of the end of Mozambique’s 15-year civil war. After two decades of reconstruction, the country has rebuilt and emerged to become one of Southern Africa’s most significant investment destinations. Its strategic location on the east coast of the continent, with direct shipping routes to industrialised markets in Asia, have hugely increased the attractiveness of its coal resources and its

newfound gas deposits. Since 2001, the country’s gross domestic product has grown by more than 5 per cent every year, averaging 7 per cent over the past half-decade. Investments by major international mining and minerals groups, such as Brazil’s Vale, has seen the beginning of improvements in transport infrastructure, as companies commit to improve the links between mining areas and the sea, and rebuild the terminals themselves. In late 2011, Vale announced that it would invest around $6 billion in increasing production at its Moatize coal mine, including a $4.4 billion project to construct a coal terminal at the port of Nacala, and a 900km railway line connecting the port to the mine. Earlier that year, after a long battle, Rio Tinto paid close to $4 billion for Riversdale Mining, a major producer of coking coal, an ingredient of steelmaking, with a portfolio of assets in the country. This July, Anglo American agreed to pay around $555 million for a majority stake in the Revuboè metallurgical coal project in Moazite, in the north west of the country, close to Tete. As a report by the rating agency Fitch, released on July 20, said: “The economy appears set for a further period of robust growth, supported by new coal mines. Production began at the end of 2011 and could eventually see Mozambique

becoming one of Africa’s largest coal producers. The expansion of the mining industry will not only provide an important new source of government revenue, but will also help diversify the export base and attract significant foreign direct investment.” The country’s position on the east coast of Africa gives it direct access to the growing steelmaking markets in Asia, where demand remains relatively high despite the economic downturn in the developed world. “I think what’s exciting about Mozambique is that... we’re located in quite close proximity to India, which we see as our largest market,” Premraj said. “Whilst logistics is your biggest challenge, it’s developing. We’ve had our first shipment of coal, which took place in December. We’ve proved the concept that coal can be taken out of the country. Like with any of these developing basins, the logistics will come on hand as production increases.” A single rail line from Tete to Beira currently provides the company with a way to move its output out of the country, but it is a single line and relatively unsophisticated. With investments from major mining players, it is now expanding and tripling its capacity. To mitigate this, Beacon Hill began a more expensive trucking operation in order to get its coal to market.


27 \ Business Life \ August 2012

www.GatewayToAfrica.com

Mozambique

Pemba

Mocambique Nampula Tete

Angoche

Mozambique Economy Currency: Metical (approx. 0.3 ZAR) Population: 23.4 million GDP based on PPP: $23.9 billion GDP growth 2012 (2011): 6.7% (7.1%) Head of Government: Armando Guebuza Finance Minister: Manuel Chang Central Bank Governor: Ernesto Gove

Quelimane Chimoio Beira

Mozambique Business Language: Portuguese

World Bank Doing Business rank: 139 World Economic Forum Global Competitiveness rank: 133 Investment agency: Invest in Mozambique (www.cpi.co.mz) Public sector opening hours: Mon-Fri

0730-1530

Private sector opening hours: Mon-Fri

Vilanculos Inhambane Xai-Xai Maputo

0800-1230, 1400-1730 Legal system: Civil law

Getting There Airlines: South African Airlines, TAP, Ethiopia Airlines, Kenya Airways, LAM Visas: South African citizens can enter without a visa; UK citizens can obtain visas on entry Hotels: approx. ÂŁ100-160 per night (based on 6-night stay in September)


28 \ Business Life \ August 2012

www.GatewayToAfrica.com

Photo: Beacon Hill Resources

The strategic location also makes Mozambique an attractive destination for Asian energy businesses. Since the first commercial-scale discoveries began to hit the headlines in 2010, explorers, including ENI, Anadarko Petroleum and Cove Energy, kept hitting gas. Today, analyst estimates suggest that between 30 and 60 trillion cubic feet of gas – equivalent to three to six times the total annual consumption of Germany, France, Britain and Italy combined – lies underneath Mozambican waters. Earlier in 2012, Shell and the Thai national oil company PTT engaged in a five-month bidding war for Cove Energy, an explorer and producer with assets in Mozambique and Tanzania. The aim is to construct the infrastructure to turn this resource into liquefied natural gas (LNG), which is increasingly used as a source of energy by emerging and more developed markets in

Asia. PTT’s bid of $1.9 billion eventually won through, putting the Thai group in a strong place to gain its first foothold in Africa. Despite these major investments in mining and gas, however, the country remains low on the lists of many investors outside of its primary resources sector. Ranked 133 out of 142 on the World Economic Forum’s Global Competitiveness Index, businesses in Mozambique still struggle with access to finance, corruption, inefficient bureaucracy and, as in many countries a generation away from conflict, a lack of education in the workforce. The World Bank’s Doing Business report ranked the country at 139, with access to credit and infrastructure both major blocks to investment and business success. Premraj said that the policy environment is relatively stable and the country remains peaceful.

“Given that where we are - we’re located next to Anglo, Rio and Vale now that the big players are coming in it shows that it is a good place to invest in. I guess with all these things mining legislation is evolving, but that isn’t necessarily negative. The government is working with the miners to make sure the right legislation is in place. The environment is very good. As the Fitch report noted: “Progress on macroeconomic management and strong growth need to be complemented with further improvements to the business environment as well as a continued focus on poverty alleviation and human development. Expanding the infrastructure network, in order to improve the ease of doing business and allowing Mozambique to fully exploit its natural resources is also critical for sustained long-term growth.” •


30 \ Final Word \ August 2012

www.GatewayToAfrica.com

FINAL WORD:

Andy Watts Master Distiller, James Sedgwick Distillery "Since 1994 and South Africa's entrance to the global village, it has become obvious that although the Scots produce outstanding whisky, they do not have the sole right to its distillation." By Staff Reporter WHEN THE Three Ships Five Years Old won best blended whisky at the 2012 World Whisky Awards, there followed a degree of introspection in Scotland. The Scotland on Sunday newspaper claimed that "foreign" whiskies had put traditional makers "on the rocks", as only one Scottish brand picked up an award - for best whisky liqueur.

However, at the James Sedgwick Distillery in Wellington, South Africa, where Three Ships is distilled, there is no doubt where the main competition still comes from. South Africans, like many around the world, see Scotch as a mark of quality, and the country's brand remains strong, despite perennial warnings of its decline. Even so, just as New World wines have taken huge market share from European producers, the threat of New World whiskies cannot be ignored. "Although South Africans have always enjoyed consuming whisky there has been a perception that only the Scots can produce good whisky." Andy Watts, Master Distiller at the James Sedgwick Distillery, tells Gateway to Africa. "When we first started producing whisky in South Africa back in 1977 then the brands we competed against were almost

entirely Scotch whiskies. Therefore the style and characteristics of our whiskies tended to follow the traditional Scottish style. Since 1994 and South Africa's entrance to the global village, it has become obvious that although the Scots produce outstanding whisky, they do not have the sole right to its distillation. Irish, American and even Japanese whiskies are now freely available. "This has allowed us to adapt and develop our styles and although we have the utmost respect for tradition, being such a young whisky producing nation, we are not held back by it." While pedigree helps with the branding, in distilling - often a waiting game - age is an important factor. Lacking the aged whisky that comes with a long history, Watts, who has been master distiller at James Sedgwick for more than two decades, has had to focus on on style. "As we are a relatively young whisky producing country we have not had old, aged whiskies to work with so style has always been the main ingredient in whatever whiskies we have created," he says. "Our warm South African conditions accelerate maturation so we do get surprisingly mature and smooth whiskies at younger ages." The blend itscelf - described as "bold and unpretentious" by the judges at the WWA - is the result of a visit to the Isle of Islay, one of the world's most prestigious whisky regions, by Watts in 1988. He says he "fell in love" with the island and its people - and more importantly, its whisky. Three Ships Five Years Old is an attempt to recreate the taste profile of the island's single malts. •

Photo: James Sedgwick Distillery


Tel: + 31 70 324 6154 Fax: + 31 70 324 1741

Vice Chairman

Babette van Gessel

Sponsor & Exhibition

Registration & Marketing

amanda@glopac-partners.com jodee@glopac-partners.com sonika@glopac-partners.com

babette@glopac-partners.com

jerry@glopac-partners.com

www.petro21.com

29th October - 2nd November 2012 The Pavilion Centre, Cape Town, South Africa Africa’s Premier International Oil & Gas Event Sub-Saharan & Maghreb-North Africa Plus Exhibiton

Separately Bookable Confirmed Speakers Jacques Marraud des Grottes, Senior Vice President, Africa, Total, Immanuel Mulunga, Petroleum Commissioner, Ministry of Mines and Energy Namibia, Dr Abullahi Haider, Senior Adviser to the Ministry, Ministry of Water, Energy, Petroleum & Mineral Resources, Transitional Federal Government, Republic of Somalia, Hon Hussein Abdi Dualeh, Minister, Ministry of Mining, Energy & Water Resources, Somaliland, Carlos Aguilera, VP Business Development, Africa & Latin America, Chevron Corporation, Dr Nick Cooper, CEO, Ophir Energy plc, Keith Hill, President & CEO, Africa Oil Corporation, Matt Wilks, Country Manager, Tanzania, BG Group, Wade Cherwayko, Chairman & CEO, Mart Resources, Joseph Pili Pili Mawezi, Secretary General of Hydrocarbons, Ministere des Hydrocarbures, DRC, Dr Duncan Clarke, Chairman & CEO, Global Pacific & Partners, Yi Zhang, Chief Executive, Addax Petroleum, Ebbie Haan, Managing Director, Sasol Petroleum International, Tim O’ Hanlon, Vice President, Africa Business, Tullow Oil, Galib Virani, Associate Director, Afren, Karl Thompson, Chief Executive, African Petroleum Corporation, Dr Kase Lawal, Chairman & CEO, Camac Energy, Adewale Tinubu, GEO, Oando, Senior Executive, Eni E&P Division, Mthozami Xiphu, CEO, Petroleum Agency SA, Frederik Dekker, Managing Director, Wessex Exploration, Peter Hill, Chief Executive, Global Petroleum, Xiao Zongwei, Managing Director, CNOOC Africa, David Ginger, Director Exploration & New Ventures, Cairn India, Phil Loader, Senior Vice President, Exploration, Mubadala Oil & Gas, Jeff Waterous, Chairman, Deloitte JMW Energy Advisers, Jasper Peijs, Exploration Manager-Eastern Hemisphere, BP plc, Oumar Torbo Djarma, Couseiller Technique, Ministre de l’Energie et du Pétrole, Chad, Ken Kuroda, Sr. Vice President & GM, Energy Business, Mitsubishi, Dr Ketsela Tadesse, Director, Petroleum Licensing, Ministry of Mines & Energy, Ethiopia, Dave Jennette, Exploration Director, Europe, Africa, Middle East, Apache Corp, Fredrik Ohrn, President & CEO, Svenska Petroleum Exploration, Mark Llamas, Managing Director, First Energy Capital, Steve Ilett, Exploration Director, Impact Oil & Gas, Paul Welch, CEO, Chariot Oil & Gas, Christopher Pitman, CEO, Surestream Petroleum, Barry Rushworth, CEO & Director, Pancontinental Oil & Gas, Mark Weller, COO, Madagascar Oil, Lindsay Elliott, Exploration New Ventures, Beach Energy, Steve Noske, Managing Director, WHL Energy, Robin Vela, Chief Executive, SacOil, Peter Wakeling, Managing Director, Bahari Resources, Rob Tims, Managing Director, Standard Chartered Bank, Hon Mohadji Fouad, Vice President, L’Union des Comoros, Eddy Belle, Chief Executive Officer, PetroSeychelles Frank Patterson, Vice President, International Exploration, Anadarko Petroleum, Shi Jicheng, General Manager, BGP East Africa, Nishant Dighe, President Africa, Panoro Energy, Phil Frank, Exploration Director, Sterling Energy, John Downey, Director, International Exploration & New Ventures, Dana Petroleum, Tony Atherton, Head of Exploration, Europe, Africa, Middle East, CIS, Talisman Energy, Campbell Airlie, Technical Director, Seven Energy, Raymond Kargbo, Head, Petroleum Directorale, Sierra Leone Petroleum Directorate, Scott Aitken, Chief Executive, Atlantic Energy, Chris Faulkner, Chief Executive, Breitling Oil & Gas, Robert McBean, Executive Chairman, Wentworth Resources, Jeffery Schrull, Managing Director, Rialto Energy, Sudhir Kamath, Managing Director, Suntera Energy, Halfani Halfani, Director of Exploration & Production, Tanzania Petroleum Development Corporation, Ernest Rubondo, Petroleum Commision, Uganda, Narendra Verma, Director Exploration, ONGC Videsh, Marcio Mello, CEO, HRT, Osten Olorunsola, Director, Department of Petroleum Resources, Nigeria, Elly Karuhanga, President, Chamber of Mines & Petroleum, Uganda, Pedro Augusto Bastos, E&P International Business Development Manager, Petrobras, Ahmed Salem Ould Tekrour, Director General of Petroleum, Ministry of Energy & Petroleum, Mauritania, Rufus Tarnue, VP, Technical Services, National Oil Company of Liberia, Hon Gabriel Nguema Lima, Minister, Ministry of Mines, & Industry & Energy, Equatorial Guinea, Thore Kristiansen, SVP, Development & Production, South America & Sub-Saharan Africa, Statoil, Sumayya Hassan-Athmani, CEO, National Oil Corporation of Kenya, Francisco Pulit, Sr. VP, Corporate Development, Pluspetrol, Ousseini Assane Boureima, Director of Exploration, Ministere des Mines et de l’Energie, Niger, Daniel Gnangni, Director General, Petroci, Ian Craig, Executive VP, Sub-Saharan Africa, Shell E&P Africa, Lagos, Nigeria, Arsenio Mabote, Chairman, The National Petroleum Institute Mocambique, Antoine Rostand, Managing Director, Schlumberger Business Consulting, Tewodros Ashenafi, Chairman & Chief Executive Officer Southwest Energy (HK) Ltd, Lumen Sebastio, Senior Geologist, Sonangol, Angola, Derek Stewart, Senior Vice President, Exploration & New Ventures, Murphy Exploration & Production, Dr Lalaoharijaona Rasoambolanoro, Deputy General Manager, OMNIS Madagascar

14th Scramble For Africa: Strategy Briefing - 29th October 2012 Presentations By Dr Duncan Clarke, Chairman & CEO, Global Pacific & Partners

9th Africa Independents Forum - 30th October 2012 19th Africa Upstream Conference - 31st October - 2nd November 2012 47th PetroAfricanus Dinner In Africa - 29th October 2012

Lead Sponsor 2012

Plus 900 Senior Level State & Corporate Attendees From Across The Continent & Worldwide, Over 70 Exhibitions Dinners, Cocktails, Social Functions, Networking

Key Sponsors

Exclusive International Broadcast Partner

Titanium

Platinum Sponsors 2012

Diamond

Gold

Silver

Bronze


International Money Transfers Sable FX specialises in foreign exchange and international remittance We will help you negotiate the regulatory minefields and assist you with sending money to and from every major global destination, in line with exchange control regulations and Reserve Bank rules.

Why use Sable FX: Worldwide transfers No transfer fees Better exchange rates than what your bank can offer you

IFC

Regulatory form advice and completion tax assistance Secure online payment portal Unrivalled customer service

Sable FX

44165

United Kingdom Castlewood House 77/91 New Oxford Street London WC1A 1DG t: +44 (0) 808 141 5535 fx@sable-group.com

South Africa Regent Square, Block B1 Doncaster Road Kenilworth 7708 t: +27 (0) 21 657 2153 fx@sable-group.com

Mauritius Suite 3 Grand Baie Business Park Grand Baie t: +230 263 4400 fx@sable-group.com

SABLE FX a professional edge

Sable is a group of professional service companies. Sable Accounting Limited is a limited company registered in England and Wales with registered number 03517738. Sable Private Wealth Management Limited is registered in England & Wales, number 04305265, Authorised and regulated by the Financial Services Authority.

www.sable-group.com/forex

Gateway to Africa, Issue 2, August 2012  

Green Revolution - Can South Africa create a renewable energy industry?; Whisky maker takes on Scotch; SA business looks to Nigeria

Read more
Read more
Similar to
Popular now
Just for you