TAR105_Ghana_Mauritius

NIGERIA Atiku Abubakar I will make Nigeria work again

• Energy: New rigs take advantage of oil price • Finance: Are the banks now safe?

• South Africa: Perfect storm for land reform

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THE AFRICA REPORT

Ghana

MONTHLY • N° 105 • NOVEMBER 2018

Reality Check The economy is racing, but do the sums add up?

JEUNE AFRIQUE MEDIA GROUP

GHANA EDITION

Algeria 550 DA • Belgium €5.90 • Canada CA$ 7.95 • DR Congo US$ 9 • Denmark 60 DK • DOM 8 € • Ethiopia 130 Birr • France €5.90 • Germany €5.90 • Ghana GH¢ 12 • Italy €5.90 • Kenya KES 700 • Morocco 40 DH • Netherlands €5.90 • Nigeria 1300 NGN • Norway NK 70 • Portugal €5.90 • Rwanda RWF 6,000 • Sierra Leone LE 15,000 • South Africa R40 (tax incl.) • Spain €5.90 • Sweden SEK 70 • Switzerland 9.90 FS Tanzania TZS 10,000 • Tunisia 5.4 DT • Uganda UGX 10,000 • UK £4.50 • United States US$ 6.95 • Zambia 48 ZMW • Zimbabwe US$ 4 • CFA Countries 3,500 F CFA • Euro Zone €5.90

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THE AFRICA REPORT # 105 - NOVEMBER 2018

BUSINESS

COVER CREDITS: INTERNATIONAL EDITION : MORTENFAUERBY.DK; JOHN WESSELS / AFP - EAST AFRICA EDITION : JOHN WESSELS / AFP; PIUS UTOMI EKPEI / AFP - GHANA EDITION : REINER ZENSEN/PHOTOWEB/SIPA; PIUS UTOMI EKPEI / AFP

04 EDITORIAL Consequences of a crunch

62 MAURITIUS Offshore on the radar With plans to double the size of the financial sector within the next 12 years, the government must respond to international pressure for fairness and transparency

06 LETTERS 08 THE QUESTION

BRIEFING

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10 SIGNPOSTS 12 PEOPLE 14 INTERNATIONAL 19 CALENDAR

68 RWANDA Keeping up with Kigali 70 LEADERS Tewolde GebreMariam, chief executive officer, Ethiopian Airlines

20 OPINION Elhadj As Sy, secretary general of the International Federation of Red Cross & Red Crescent Societies

72 FINANCE Nick O’Donohoe, chief executive officer, CDC Group 73 HANNIBAL

FRONTLINE 22 DRC After Kabila The country’s long-awaited elections have been set for December and national and international forces are desperate for a fresh start

POLITICS 32 NIGERIA Clashes and conflict The battle for land and water will be a key issue in 2019’s elections as herder/farmer clashes escalate and criminal gangs profit from the chaos

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82 ART Freefall and futures Daring works and critical engagement at the sixth 1-54 African art fair in London 86 FOOTBALL Ready or not, here we come 88 LIFESTYLE South African folk musician Bongeziwe Mabandla

44 ANANSI

88 TREND HUNTER Digital okadas get Lagos out a jam

COUNTRY FOCUS 47 GHANA Hope hits reality Akufo-Addo’s plans are weighed down by bureaucracy, partisan point-scoring and sums that don’t add up N ° 10 5

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78 NIGERIA The MTN muddle

ART & LIFE

42 SOUTH AFRICA Healthcare in a hurry

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74 Airtel vs. Safaricom Airtel Kenya continues biting at the heels of Safaricom, but never makes any profit. Is it fair?

80 INTERVIEW Sacha Poignonnec, co-CEO, Jumia

36 INTERVIEW Atiku Abubakar, presidential candidate, People’s Democratic Party, Nigeria

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89 TRAVEL Dakar, the de facto chill capital of West Africa 90 DAY IN THE LIFE Samuel Muzimbi, South African shoemaker

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THE AFRICA REPORT A Jeune Afrique Media Group publication

BY PATRICK SMITH

57‑BIS, RUE D’AUTEUIL – 75016 PARIS – FRANCE TEL: (33) 1 44 30 19 60 – FAX: (33) 1 44 30 19 30 www.theafricareport.com

Consequences of a crunch

CHA I R M A N A ND F O UND E R BÉCHIR BEN YAHMED P UB L I S HE R DANIELLE BEN YAHMED publisher@theafricareport.com

S

hould any African presi­ dent suffer from a bout of irration­ al exuberance, the latest reports from the IMF and the World Bank make for sobering reading. The message, less varnished than usual, is that the economic and technological gulf between Africa and the industrial economies, and many developing ones, is widening. Without a strategy, the chasm will grow.

One set of reasons are about strategy: low investment in edu­ cation and slow adoption of new technology at the macro level lead­ ing to a rising productivity gap.

So it’s more than the gloomy headline figures, although both the IMF and the Bank have downgrad­ ed their GDP growth projections for Africa this year to 3.1% and 2.7% respectively. On average, growth per capita will rise 1% this year; then it is projected to rise 1.5% a year for the early 2020s.

On that basis, it would take until 2063 for per capita incomes to dou­ ble across the continent.

There are a raft of global factors responsible, in part, for this stasis: deepening effects of climate change on productivity and live­ lihoods; the laggardly market for many commodities; the financ­ ing squeeze and lack of access to international markets; a stronger US dollar and rising debt service costs to which can be added the indirect costs to Africa of the trade war between the US and China.

Between the lines the Bretton Woods reports acknowledge such constraints but focus on the policy and strategic actions that governments could take to mitigate these pressures. And in most cases that isn’t happening.

Slow growth and weak commod­ ity markets are causing a capital

E X E CUT I VE P UB L I S HE R JÉRÔME MILLAN

crunch, squeezing investment in infrastructure and social pro­ grammes. The consequences of this are spelled out in the Bank’s new ‘Human Capital Index’ which measures performance in terms of health and education outcomes.

Reporting some of the lowest scores for Africa, the Bank ar­ gues that lack of investment there is depressing the productivity of its economies.

The IMF’s analysis of the ef­ fects of the ‘Fourth Industrial Revolution’ sketches out two scen­ arios for Africa. First, an upbeat assessment that the technological leapfrog­ The lack of ging achieved by mass use of cellphones and investment internet access could in health be extended to other and sectors, to complement and speed up econ­ education omic development. in Africa is A grimmer scenario is that robotics and AI depressing will replace much of productivity the current workforce, leading to many of the manufacturing and service indus­ try operations set up by foreign firms in developing economies re­ turning to their countries of origin.

That would mean vast swathes of Africa would not get on that first rung of industrialisation, at least via international investment.

The IMF boffins offer caveats for both scenarios, but the dangers in their analyses are as clear as the Bank’s assessment of Africa’s progress on education and health.

With the combined research cap­ acity of the AfDB and UNECA, it must be time for these institu­ tions take up this gauntlet, focus­ ing on strategies to address the economic travails

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M A R K E T I NG & D E VE L O P M E NT ALISON KINGSLEY‑HALL E D I T O R I N CHI E F PATRICK SMITH M A NA G I NG E D I T O R NICHOLAS NORBROOK editorial@theafricareport.com A S S O CI AT E E D I T O R MARSHALL VAN VALEN R E S E A R CH & P R O D UCT I O N OHENEBA AMA NTI OSEI RE G IO NA L E D I T O R CRYSTAL ORDERSON (SOUTHERN AFRICA) A RT & L I F E E D I T O R BILLIE ADWOA MCTERNAN S UB - E D I T O R ALISON CULLIFORD P R O O F R E A D I NG KATHLEEN GRAY A RT DI R E CT O R MARC TRENSON DESIGN VALÉRIE OLIVIER (LEAD DESIGNER) SYDONIE GHAYEB CHRISTOPHE CHAUVIN (INFOGRAPHICS) CAMILLE CHAUVIN R E S E A R CH SYLVIE FOURNIER P HO T O G R A P HY CLAIRE VATTEBLED ALICE FOURNIER XAVIER ROUSSEAU SALES A JUSTE TITRE Tel: (33) 9 70 75 81 77 contact‑ajt‑sifija@ajustetitres.fr CONTACT FOR SUBSCRIPTION: Webscribe Ltd Unit 4 College Road Business Park College Road North Aston Clinton HP22 5EZ United Kingdom Tel: + 44 (0) 1442 820580 Fax: + 44 (0) 1442 827912 Email: subs@webscribe.co.uk ExpressMag 8275 Avenue Marco Polo Montréal, QC H1E 7K1, Canada T : +1 514 355 3333 1 year subscription (10 issues): All destinations: €39 ‑ $60 ‑ £35 TO ORDER ONLINE: www.theafricareportstore.com A D VE RT I S I NG D I F CO M INTERNATIONAL ADVERTISING AND COMMUNICATION AGENCY 57‑BIS, RUE D’AUTEUIL 75016 PARIS ‑ FRANCE Tel: (33) 1 44 30 19‑60 – Fax: (33) 1 44 30 18 34 advertising@theafricareport.com PRINTER: SIEP 77 ‑ FRANCE N° DE COMMISSION PARITAIRE : 0720 I 86885 Dépôt légal à parution / ISSN 1950‑4810 THE AFRICA REPORT is published by GROUPE JEUNE AFRIQUE

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MORE INTROSPECTION FOR THE IMF

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TOP 200 BANKS EXCLUSIVE RANKING

Faces of Finance Abiola Bawuah, UBA; Admassu Tadesse, TDB; Laurence do Rego, Ecobank; Bolaji Akinboro, Cellulant

our interview with Christine Lagarde [TAR103 Sept. 2018] rightly highlighted the Christine Lagarde, progress the IMF has made in re-examining its traditional orthodoxies and becoming more aware of the social impacts of its prescriptions.

The fund, however, could use more introspection in its role creating moral hazard in the region; The IMF is back particularly the perceived “anchoring” effect that Fund programs can provide for governments who are then able to run up commercial debts that later turn out to be unsustainable. The rise of index investing in emerging market bonds means that it takes little policy credibility for a government to borrow in the external commercial markets.

Countries that benefit from the implicit policy backstop of an IMF programme have found it particularly easy to borrow in the eurobond market, which is ironic given how often the proceeds have not been used for economically productive purposes.

Brian Holmes, Financial analyst, UK N ° 10 3 • S E P T E M B E R 2 018

w w w.t h e a f r i c a r e p o r t .co m

EXCLUSIVE INTERVIEW

Managing Director, International Monetary Fund

A new role for the fund as spiralling debt triggers alarm

JEUNE AFRIQUE MEDIA GROUP

conditions are embracing of trust and confidence among the principals of the parties to the revitalised Agreement on The Resolution of the Conflict in South Sudan. […] The great challenge facing the power-sharing deal in South Sudan is the personalisation of the political solution to the political crisis the nation is facing.

Edmund Yakani, Executive Director, CEPO, South Sudan

INTERNATIONAL EDITION

Algeria 550 DA • Belgium €5.90 • Canada CA$ 7.95 • DR Congo US$ 9 • Denmark 60 DK • DOM 8 € • Ethiopia 130 Birr • France €5.90 • Germany €5.90 • Ghana GH¢ 12 • Italy €5.90 • Kenya KES 410 • Morocco 40 DH • Netherlands €5.90 • Nigeria 800 NGN • Norway NK 70 • Portugal €5.90 • Rwanda RWF 6,000 • Sierra Leone LE 15,000 • South Africa R40 (tax incl.) • Spain €5.90 • Sweden SEK 70 • Switzerland 9.90 FS Tanzania TZS 10,000 • Tunisia 5.4 DT • Uganda UGX 10,000 • UK £4.50 • United States US$ 6.95 • Zambia 48 ZMW • Zimbabwe US$ 4 • CFA Countries 3,500 F CFA • Euro Zone €5.90

HOMEGROWN SOLUTIONS TO IRREGULAR MIGRATION

The European Union pouring more aid into Niger and other Economic Community of West African States [ECOWAS] members will not help tackle the root cause of irregular migration [‘Niger at a crossroads’, TAR102 July/Aug. 2018]. ECOWAS BOARDROOMS ARE NOT in political positions, I am afraid that member states need to first prioritise until we deal with these issues we will their own homegrown solutions THE ONLY BATTLEGROUND fail to move forward. It is hard to say independent of any foreign assistance, I am proud to see women represented that any gender would be better suited which will improve the quality of in boardrooms and senior management to tackle corruption and achieve life and welfare of their own citizens. positions across the continent. On economic progress, but we must build Creating a safe and conducive the other hand, I still think more can a community that holds feminism and environment would eventually attract be done to encourage feminism equality in all aspects in high regard. local as well as foreign investment, Arnold Dublin-Green, Senior portfolio which will encourage economic growth [‘A woman’s place is in the boardroom’, manager, Ecobank Asset Management and create high employment prospects TAR103 Sept. 2018]. There is still wage inequality, and women are less for the millions of young people represented in the labour force than entering the job market. So dedication their male counterparts. Beyond POWER-SHARING PROBLEMS to homegrown solutions is the best the work environment, most countries option to discourage people from still struggle with issues such as sexual South Sudan’s power-sharing deal seeking refuge in foreign countries, cannot be sustained if certain and gender-based violence, female and it will go a long way to reduce abject conditions are not met [‘The Question’, poverty and raise the standard of living. trafficking, etc. As proud as we Kokil K. Shah, Kenya TAR104 Oct. 2018]. Among the key are to see women on boards and

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To respond to this month’s Question, visit www.theafricareport.com. You can also find The Africa Report on Facebook and on Twitter @theafricareport. Comments, suggestions and queries can also be sent to: The Editor, The Africa Report, 57bis Rue d’Auteuil, Paris 75016, France or editorial@theafricareport.com

The MP for Kyaddondo East, Robert Kyagulanyi Ssentamu, known by his stage name Bobi Wine, has become an icon for opposition in Uganda with his slogan of “people power” and refusal to be silenced by thuggery.

Is Bobi Wine shaking up Ugandan politics?

Yes FREDERICK GOLOOBAMUTEBI Researcher and analyst, Uganda

During the 56 years Uganda has been independent, it has tested multipartyism, military rule, one-party rule and even no-party politics. Each time some kind of formal organisation has propelled the leadership that emerged. Since it returned to multiparty politics in 2005 there have been instances when politicians not aligned with any political party have emerged. These, however, have never had much of an impact in terms of rallying people or forcing political parties to counter them or forge alliances. Musician-turned-politician Robert Kyagulanyi Sentamu, aka Bobi Wine, is the first politician with no formal links to any political organisation or party to truly shake up politics in Uganda.

First, he has managed to rally large numbers of Ugandans, old and young across the country, to his cause of seeking change from the increasingly unsatisfactory status quo presided over by 74-year-old Yoweri Museveni to a new, hope-filled dispensation. Second, his mobilisation capacity has forced parties that have long battled to remove the Museveni government and failed, to seek not only his support but also formal alliances with him in a bid to increase their chances of finally dislodging Uganda’s ageing autocrat. He may never stand for the presidency. He may even not win if he does so. However, that he has truly shaken up the political terrain is beyond dispute.

No ANGELO OPI-AIYA IZAMA Ugandan journalist and analyst

The most interesting dimension of Bobi Wine is an increasingly wider contention by Uganda and other governments of the politicisation of age and its potential ramifications. Age has been activated in Uganda before, and Bobi Wine did not invent the inclusion of young people – sometimes illegally and immorally – into political struggles. Uganda in the 1990s held the spotlight for child soldiers within the ranks of the National Resistance Movement, Museveni’s army, which took power in 1986. That tradition was infamously continued by Joseph Kony of the Lord’s Resistance Army. Bobi Wine’s appeal is a different dimension of young people in political struggle. He may articulate their frustrations with jobs and the violence of poverty and urban fragility, but I do not think ‘People Power’ without an organisation behind it can impact the current political order in any significant way. His tool is not revolutionary struggle but rather a broadening of the political arena and greater efficiency in government services. He does not want to change the system – only the leaders – and will take to the ballot not the bullet to see it through. At most, People Power will highlight upsets in the 2021 election and deliver higher-octane pressure on the presidential poll. But it is not yet a movement capable of putting young people in charge with a different vision for the country.

He [Bobi Wine] symbolises disruptive politics which mobilises outside membership groups. I find him more of an early warning system for possible national defiance than a force that can cause large-scale defiance.

Gerald K. Karyeija Bobi Wine combines many attributes that none of the regime opponents, not even President Museveni’s closest rival Kizza Besigye, possess. For instance, he appeals to the youth, who are the majority, his music career has enabled him to capture the hearts of many and […] his ghetto background makes the poor and disadvantaged feel like he’s one of them.

He is from the Central region which is a plus because of the feeling that people from the Western region have been promoted at the expense of other regions over the past 32 years of Museveni’s rule.

Agather Atuhaire He [Bobi Wine] has no political base, no appeal in the establishment (unlike Kizza Besigye), so he cannot dismantle the behemoth that is the Museveni regime now.

Regardless, he is a welcome addition to the forces of change in Uganda, and will definitely be a considerable headache to the regime in Kampala for the foreseeable future.

Bernard Sabiti

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This land was made for you and me

B

ack in the Wild West days of the United States economy – when robber barons still ruled and farmers and small businesses were being relentlessly gouged by ruthless monopolies – a rabble-rouser and friend of the people nearly became president. In a mesmerising speech while running to be the Democratic Party’s presidential nominee in 1896, William Jennings Bryan decried the actions of the financial elites he believed were ruining the lives of the majority of the population for their own selfish ends: “You shall not crucify mankind upon a cross of gold.”

It was a turning point not just for the Democrats. It also helped to create space for President Theodore Roosevelt to fight his own Republican Party and drive through the trust-busting reforms that led to the ‘Progressive Age’. Better the devil you know than the true revolutionary…

So is it possible that the chaotic South African politics of the day may actually be pushing in the right direction for land reform? The revolutionaries are making speeches again: Julius Malema and the Economic Freedom Fighters (EFF) have made it a cause célèbre. “We remain a conquered nation because white monopoly capital still owns the means of production, and at the centre of that is the land question,” Malema said during a parliamentary debate in 2017. That was the year when the EFF drove the land reform question into the frontline of South Africa’s political landscape, taking advantage of Jacob Zuma’s deep unpopularity. “People of South Africa, where you see a beautiful land, take it, it belongs to you,” Malema added.

On the other side of the debate lies the Democratic Alliance (DA): historically white and sympathetic to – and funded by – the land-owning class. The DA has been steadfast in its opposition to any idea that land should be taken without proper compensation. Its case is not helped by fringe group AfriForum, whose hysterical appeals for help over what they call a ‘white genocide’ are in poor taste given the generations of black men and women press-ganged to work for a cup of wine on white farms.

This debate has now come to the boil – helped by a very public and very uninformed September intervention by US President Donald Trump, who instructed his vice-president to look into the issue of land seizures and farm attacks. But, perhaps, this has given President Cyril Ramaphosa the space to act.

His first move was in July – proposing an amendment to the constitution to allow land expropriation without compensation. But, in what is becoming Ramaphosa’s tradeIs it possible mark, it will go through a process that the that tries to keep all parties on board. In a recent opinion colchaotic umn, Ramaphosa said that the South African amendment would ‘prohibit the arbitrary deprivation of property’. politics of Critics will say that this is the day may Bill Clinton-style triangulation, positioning on an issue actually that sucks the oxygen out of be pushing your opposition. But others in the right say that, for a change, serious voices have entered the converdirection for sation. Professor Ruth Hall, for land reform? example, has been appointed

by Ramaphosa to the advisory panel on land reform. If anyone can transplant the pioneering ideas of the late, great Sam Moyo on deep but sensible land reform in Zimbabwe to the South African context, it is her.

What is certain is that land reform in South Africa is not working. The majority of land remains under white ownership, and just 10% of the land owned by whites has been transferred to black hands since the end of apartheid. And while the white population has remained stable, the black population has grown quickly.

After the Second World War in Japan and South Korea, governments booted landed elites off the land. Rigorous, locally determined land reform handed out 3ha plots to millions of families. The result was the largest historical boom in agricultural employment, and, over the next few decades, the creation of a huge consumer class. Perhaps, while history never really repeats itself, might it rhyme?

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47

Ghan Gh na

President Akufo-Addo has not succeeded in explaining to the people why the country was in debt, says one critic

XANDER HEINL/PHOTOTHEK VIA GETTY

Hope hits reality Sweeping to power in January 2017, President Nana Akufo-Addo’s government was riding high on hopes for economic change and social progress. Almost two years later, the euphoria is over as his plans are weighed down by a creaky bureaucracy, partisan point-scoring and sums that don’t add up

By Nana Yaa Mensah in Accra

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P

romising free secondary education, a reformed national health insurance scheme and a new factory in every one of the country’s then 216 districts, President Nana Akufo-Addo’s government was courting a crisis of expectations from the start. It had inherited a slow-growing and debt-ridden economy from the government of John Mahama. More than that, dissonant voices within Akufo-Addo’s own New Patriotic Party (NPP) saw its thumping parliamentary majority as a chance to push for their own interests.

48 COUNTRY FOCUS | GHANA

8.5%

UIG VIA GETTY

SOURCE: GHANA STATISTICAL SERVICE

Business wanted lower taxes – an end to one of my suppliers, and he confirmed to the so-called nuisance taxes – while to me what many other people have been the public-sector trade unions wanted saying:thereisnomoneyflowingthrough the system. There’s a general problem guarantees over jobs in the civil service and the dysfunctional state-owned with cash payments from people who enterprises. Even with an impressive owe me, even those I’ve worked with for six months or longer. People who turnaround – Ghana’s economy grew trade are having problems at the ports.” by 8.5% in 2017, more than double Customs reforms at Tema and Sekondi the level of the previous year – the have led to loud complaints from the government is far from delivering the Ghana Union of Traders’ Associations, wider transformation it promised.

While policy advisers are an upstart rival to the estabtrying to get the reforms lishedAssociationofGhana throughthesystem,amuch Industries. And reforms by bigger matter dominates the Bank of Ghana have led to forced mergers of seven the thinking of party politiGhana’s economic Ghanaian-owned banks, cians: are Ghanaians better growth in 2017. including at least one off than theyweretwoyears The AfDB expects ago? As the election in 2020 connected to the former it to continue at this nears, that measure will rate, then fall in 2019. ruling National Democratic outshine all other issues.

Congress(NDC)–uniBank.

More upheaval is possible before the end The NPP’s 2016 manifesto offered visions of transformation in everything of the year, when regulatory benchmarks for minimum commercial bank holdfrom fuel prices to corruption. A power ings of capital reserves rise from 120m crisis left much of the country sitting in the dark between 2014 and 2016 and ($25m) to 400m (see page 60). compounded the effects of a 2012/2013 Insecurity has crept into the marfinancial squeeze. The NPP said the ket, heightened by events such as the situation would be better under an early-October crash of Menzgold. The buccaneering precious-metals dealerAkufo-Addo government: the economy would be managed effectively enough ship, led by a twenty-something “creative to finance high-quality education and arts” entrepreneur called Nana Appiah Mensah, had clashed repeatedly with the health services.

Securities and Exchange Commission, BACKLASH FROM SUPPORTERS the precious-minerals regulatory agency But NPP supporters are now among the and the central bank. All three claimed loudest critics of the government. An Menzgold was unlicensed and had no entrepreneur from one of the party’s right to operate under their guidelines.

The company hired the international founding families who owns a start-up law firm Baker McKenzie and issued a beauty business in one of Accra’s more defiant response to the bank’s directive affluent districts is blunt. “Things have ground to a halt,” she says. “I spoke today ordering it to stop trading. The Menzgold

fiasco triggered a mini-crisis, with depositors in cities rushing to their local banks, intent on withdrawing their money.

“The lack of liquidity stems from a lack of confidence in the local banks and Ghanaian institutions,” says the beauty-shop owner, who has laid off half her staff in the past couple of months.

“In the past, even if your business didn’t make sense, you could find liquidity to

Oil and gas sold short FROM QUIET BEGINNINGS, with first oil from the Tullow-run Jubilee field in December 2010, policy-makers in Ghana’s petroleum industry spoke of fending off the threat of the ‘resource curse’. International experts descended on Accra, advising that Ghana should choose ‘Norway over Nigeria’ when it came to a development strategy.

It hasn’t worked out like that. Jubilee’s development was marred by a dispute over preferential terms given to Kosmos Energy in partnership with two minority shareholders from the New Patriotic Party (NPP), the ruling party at the time.

Government revenue from oil and gas amounted to $444m in 2011; it was up to $541m the following year. Stagnation followed, due to high exploration costs and political uncertainty. Oppositionists accused John Mahama’s National Democratic Congress (NDC) government of negotiating its own opaque deals and rushing through the Petroleum

(Exploration and Production) Act in 2016 on terms that left Ghana with less than 20% of total oil and gas revenue.

The launch in August 2016 of Tweneboa Enyenra Ntomme in Tullow’s Deepwater Tano block seemed to offer a revenue boost. Negotiations on the Eni/Vitol-backed Sankofa oil and gas field, on the other hand, were shrouded in controversy.

Industry experts said Ghana, advised by the International Finance Corporation (IFC), had mishandled the negotiations for the $7.9bn deal. The new NPP government promised to renegotiate the deal but no details have emerged in public.

The latest venture, Springfield, in the West Cape Three Points block, is exciting Ghana’s industry-watchers. It is managed by the young oil trader Kevin Okyere, known for his deals in Nigeria in the era of oil minister Diezani Alison-Madueke, and is the first exploration site wholly owned by Ghanaians.

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GHANA | COUNTRY FOCUS 49

Tax breaks offered to AngloGold Ashanti to restart the Obuasi gold mine proved contentious

– a return to form after a record-breaking 14%in2011ascommercialoilproduction began under the then president John Atta Mills of the NDC. “We also inherited strategic state enterprises that lacked the balance sheet to be able to do any meaningful business,” Pianim says, singling out the case of the perennially mismanaged energy sector.

Boakye Agyarko, an ex-Wall Street banker who was dismissed as energy minister this year after a row in the government about the renegotiation of power deals, says the government is still 2.3bn in arrears on its energy sector debts and adds 60m to this debt every month. This is despite its issuing two bonds to clear legacy debt to the Electricity Company of Ghana (ECG).

ILL-ADVISED CUTS

LESSONS IN ECONOMICS

Sowah argues that people had allowed themselves to get used to practices that were unsustainable: “[GCB] deposits have been going from strength to strength. But conservatism in terms of financial arrangements is the only sustainable way of doing business.”

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SOURCE: GOVERNMENT OF GHANA

plug the gap. Now people are sitting on their cash or moving out of the country.”

She lambasts the Bank of Ghana: “The reforms should have been done quietly and in a way that does not cause panic. […] The beneficiaries of this crisis are the foreign banks, which do nothing to prop up locally owned businesses.

There’s actually a run on the banks but everyone wants to save their business so they don’t call a spade a spade.”

The state-owned GCB Bank has easily met the new capital requirements.

Managing director Ray Sowah defends the central bank’s actions: “This environment does not want to accept that business was being done in a wrong manner. They want to see it as a niche market. There’s nothing like that. If Bank of Ghana does not regulate the market, we will all have ourselves to blame.”

According to Pianim, the Akufo-Addo government’s March 2018 cut in the electricity tariff worsened the situation. “[It] meant that ECG doesn’t collect enough money. ECG doesn’t pay Volta River Authority (VRA), the power generator. Then VRA doesn’t pay Ghana Gas, which also meant that at one point the Nigerian gas distributor WAPCo (West African Pipeline Company) stopped supplying us. If we had retained the The economist Kwame Pianim, an electricity tariff where it was, we might elder statesman of the NPP, is critical have been able to start rebuilding the of the government’s approach to setting balance sheet of these strategic stateout its economic agenda. The governing owned enterprises.” party has failed to explain to people Ghana’s national gas supplier is critical how the previous government did so to plans for decentralised industrialisationunderthegovernment’sOneDistrict, much damage to the economy, says One Factory programme. Agyarko says Pianim. “It was an economy with very unstable macroeconomic fundamentals. the cabinet is not yet committed to saving But the Akufo-Addo government did on the state’s energy bill and suggests that well in stabilising the cedi some close to government and improving the macrohave a vested interest in the manipulation of the price economy, giving renewed certainty to investors.”

Ghana pays for its industriInflation shrank from al gas. It was those sorts of Savings the interests that controlled the 15.4% in December 2016 government says gas prices under Mahama’s to 9.6% in April this year. it will make from government, he argues.

The government debt renegotiating power Akufo-Addo’s governedged down from 73% of purchase agreements. gross domestic product in ment claims that its preDecember 2016 to 69.2% by the end of decessor signed way too many power 2017. However, ratings agency Moody’s purchase agreements (PPAs), and that predicts a rebound to 72.4% by the end Ghana now has too much supply that of this year, driven by the cost of cleaning it cannot use. The Accra government up the banks, and then a decline to now wants to renegotiate and cancel 68.9% by the end of 2019. some of those deals. If it is successful, it stands to make up to $7.2bn in savings The surge in growth in 2017 was powered largely by oil and mining. Ghana is on excess-capacity charges from PPAs expected again in 2018 to be among the over a 13-to-15-year period, at an estifastest-expandingeconomiesintheworld mated cost of just $520m, says Agyarko.

$7.6bn

50 COUNTRY FOCUS | GHANA

“Cancelling all liabilities was agreed in cabinet, cleared with the attorney general, and it was left to renegotiation of payment terms with the ministry of finance,” the former energy minister says.

But this was followed by foot-dragging, he told The Africa Report in September, when terms were still not agreed.

At the Financial Times Africa Summit in London on 7-8 October, President Akufo-Addo announced that his government has accepted recommend­ ations for a thorough review of the PPAs and now anticipates making $7.6bn in savings over a 13-year period. Critics say the government will not save nearly that much and may have difficulty cancelling deals.

INFLATION, AVERAGE CONSUMER PRICES

CHEAP GOLD, EXPENSIVE COCOA

-2

20 * staff estimates 15

SOURCE: IMF

10

5

2010 11 12 13 14 15 16 17 18* 19*

CURRENT ACCOUNT BALANCE (percent of GDP)

0

2010 11 12 13 14 15 16 17 18* 19*

-4 -6

-10

* staff estimates

-12

our agreement to set a producer price in cooperation with Côte d’Ivoire, the situation has improved – we will lose $200 for every tonne of cocoa.”

Growing collaboration with the Ivorians also includes plans to process up to 50% of cocoa grown locally and engagement with an African Development Bank-backed programme aimed at attracting young farmers into the sector.

SOURCE: IMF

-8

Akufo-Addo’s government will face heavy pressures to boost spending in the run-up to elections in 2020. Its graduation next April from International Monetary Fund supervisionmay presage a race to open the coffers and find treats for disillusioned party supporters.

The President and his team are trying to shift the spending emphasis away from direct handouts to the faithful to general social initiatives. The Free Senior High Schoolprogrammelaunchedlastyearhas given 180,000 disadvantaged teenagers access to higher-level education, but also sparked a fierce debate about educ­ ational standards and how the system can be financed. Some are calling for means-testing so that the better off will be forced to pay fees.

On 17 October, Akufo-Addo inaugurated the Nation Builders Corps, sending 100,000 unemployed graduates into a three-year public service training scheme. With the IMF’s backing, the government imposed a freeze on publicsector hiring in 2015, pushing up youth unemployment. The Nation Builders Corps scheme is one interim measure.

Although such social inclusion programmes may help the NPP’s political fortunes, the core measures of its success will be the effect on their pockets.

As Sowah of GCB says: “You have to understand that we are dealing with a populace who don’t care about structures. They are interested in food on their table and full bellies. So you can make all the noise you want but is it really going to do much? That’s the real issue that we have to confront.”

Debates are raging about how to finance Ghana’s education system and raise its standards

CHRISTEL JEANNE/DIVERGENCE

While the NPP has been critical of the deals the NDC agreed, the opposition lambasted a May 2018 tax break worth $259m that the government agreed with South African firm AngloGold Ashanti so that it would relaunch operations at the Obuasi mine, which was closed in 2014 due to disputes over security and artisanal mining.

As a former chairman of the Cocoa Marketing Board (Cocobod), Pianim laments the government’s timidity in addressing problems in the cocoa sector.

Cocobod has an historical debt of up to $10bn, he says, accumulated by paying local producer prices consistently above the world price and exacerbated by alleged graft by past NDC-appointed officials. “We used to lose $300 for every tonne of cocoa we sell. This year, with

(percent change)

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KWEKU AWOTWI:Wewouldnot.

There was a case we could make at $55 or $60 at the beginning of the year, but by bringing on a rig you’re spending $60m-$70m for a well. And your cash flow better be able to support that. So higher oil prices have definitely made the bringing on of a second rig a much more attractive economic venture.

Kweku Awotwi

Managing director, Tullow Ghana

Local content has to be a priority The head of Tullow’s Ghana operations, buoyed by the oil price, looks ahead to a new licensing round and the drive towards domesticating the industry

I

n September 2017, the International Tribunal for the Law of the Sea drew a line in the ocean sands: ending a long-running dispute over the rightstounderseaoilbetweenCôte d’Ivoire and Ghana, the tribunal ruled in favour of Ghana.

“It meant that we could resume drilling – for two and a half years we had done no drilling,” says Kweku Awotwi, the managing director of Tullow Ghana, who was appointed on 1 March 2018.

Awotwi joined the company from

the Volta River Authority and has worked across the power, energy and mining sectors.

The tribunal decision has meant asharpuptickinthepaceofexplor­ ation, and Tullow has drafted in a second drilling rig. Given the needs of the Ghanaian treasury, all parties are happy. That also puts the company in a good position for the oil-licensing round in 2019.

TAR: Would you have taken another rig had oil prices been at $45 per barrel?

How often do you review these kinds of capital expenditure decisions?

Therewasadiscussionaboutthe possibility of bringing in a second rig as part of the 2018 budget. But it was put in the contingent fund bucket. So there was a thought that we could possibly mobilise a second rig, but it would have to depend upon oil prices. So it’s not something you do week by week.

We did provision for it, conditions triggered, and we were able to act.

What kind of oil price are you budgeting for in 2019?

I’m not sure it’s finalised, but I suspect it’s around $70-$75.

Ithinktheonlyguidanceonecould have is what the forward markets are doing. Right now the forward markets are fairly bullish.

Whatareyourexplorationplans?

If we’re talking about Ghana, Tullowisverykeentodevelopwhat we call the near-field areas, which are close to existing infrastructure that we may not have rights to.

So that’s something that we are pursuing quite diligently. And then,ofcourse,we’vealsosignalled that we’re going to participate in the newly announced licensing round. There are about five or six blocks in the western part of the country that are going to be up for this licensing round. I think the applications will be put in some time early next year.

GivenyourtimeattheVoltaRiver Authority, what’s your perspective on the state of the wider energy market in Ghana? Do you think that the pinch points of the past, particularly

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54 COUNTRY FOCUS | GHANA

TULLOW

Tullow has brought in a second rig at Jubilee Field

in power provision, have company, the main one. So when been smoothed out? you put all those things together, I do think we’re on an upward more gas available, a bit more trajectory from where we were just liquidity, an attempt to be more two or three years ago. The country efficient in the value chain, I do as a whole [previously] suffered think some of the pain points of the from inadequate power capacity. last couple of years are behind us.

And some of that inadequate power capacity was really inadequate Critics of Eni and Vitol’s Sankofa deal say it costs Japan less to fuel availability, right? Whether it import gas from Qatar than it is wasnotenoughgastoruntheplant or not enough money to buy the goingtocostGhanatouseitsown gas. Is this really the best way to fuel to run the plant. I think things have significantly improved, even deal with Ghana’s energy needs? from a gas point of view, where today “I do think some of the pain Jubilee could be points of the last couple of using over 160m years are behind us” cubic feet a day between Jubilee It’s a reasonable question to and Tweneboa Enyenra Ntomme. raise. I can’t speak to the specifOf course, Eni has started up, so gas is less of an issue. Even with ics. What I can say is that, yes, it customgaspipelinesit’sproducing is expensive gas, but you have to more gas this year than it has in remember that it’s not associated previous years, I think they’re up gas [not found with deposits of to 80m-90m cubic feet a day. So the petroleum] – compared to Jubilee, gas supply picture has improved say. The economics of non-assoc­ significantly. […] iated gas are that it requires its own infrastructure. And let’s not forget The government of Ghana that for a long time we had no gas. issued a bond to pay off some […] It’s easy to query these things outstanding debts in the power when you have 20/20 hindsight. Is sector because liquidity was also there an opportunity to improve a problem. And they made some the terms and conditions and progress […] possible pricing? Perhaps there And maybe the third thing is. I don’t know. It might be helpful. worth mentioning is that they’ve also just awarded a privatisation Why do you think the previous concession to an outside utility job government’s liquefied natural manager,an electricitydistribution

OIL, GOLD AND POWER 1990 Graduated with a master’s in business administration from Stanford University in California 1998-2004 Worked as managing director for strategic planning at AngloGold Ashanti 2009-2013 Served as chief executive of the Volta River Authority (VRA) October 2017 Named chairman of the VRA March 2018 Appointed managing director of Tullow Ghana

gas and gas processing scheme was cancelled and the Russians brought in?

I have no idea. I wish I did!

What about local content?

Some boosters of local content in Nigeria will point to the 2010 Content Development Act and say we are starting to see the fruits of that with companies managing to get pretty serious engineeringjobs,finishingofrigs – a fair way up the value chain as well. Is that something you might see in Ghana?

I’m not familiar with the details of the Nigerian law, but in Ghana we have L.I. 2204 [the local content act] of 2013. That is a very important law, and I think we probably took aleafoutofthe Nigerian book.

But there is no question that local content has to be a priority for everybody in Ghana – Tullow and the Jubilee partners especially. It would be a shame if all Tullow and the partners did was produce oil without weighing capacity and expertise of the local economy and helping to create secondary industries that are locally based and supported.

Whether they are the law or not – and in fact in the Jubilee partners’ stability agreement there was a commitment to meet what at the time were our own local content targets when there was no law – there’s no question that local content is very important.

Can you point to a success story from Tullow local content?

There are many companies who started out very small that have grown up with Tullow. Just the other day I ran into a company called Conship, who do a lot of our freight and procurement, and they’ve grown over the years. They were there at the beginning and they’re doing very well at expanding and growing their operations.

But they’re just one of several companies that we’ve outsourced to. A number of local companies help us in our warehousing. There are numerous examples, and it’s something that actually we take very seriously.

Interview by Nicholas Norbrook

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56 COUNTRY FOCUS | GHANA

PEOPLE TO WATCH

Taking care of business The Africa Report profiles businesswomen, a banker, a minister and a budding entrepreneur who play key roles in growth sectors of the Ghanaian economy

Alloysius Attah Farming networker

ALL RIGHTS RESERVED

Attah co-founded Farmerline, a start-up focused on farming and technology, with Emmanuel Owusu Addai in 2013. It has been growing ever since. Farmerline helps farmers to boost yields with improved information, finance and access to inputs.

It also collects data and improves communication between growers and other players in the agricultural sector. Farmerline has raised about $1m, now employs about 30 people and has operations in 10 African countries. Attah had created a few other start-ups before Farmerline but none had met with this much success.

Bank builder

S RE SE R

VE D

Jim Reynolds Baiden

AL

LR IG H T

The managing director of Ghana’s largest privately owned local bank needs to keep a cool head as others crumble. While several other local banks have collapsed, Baiden says Fidelity Bank will meet new minimum capital of 400m ($82.7m) before the end of the year and is also working on plans to raise 70m from listing on the Ghana Stock Exchange in 2020. Baiden has been leading the bank for two of its 11 years of existence and was one of Fidelity’s co-founders. He has big plans for Fidelity, saying that he wants it and other indigenous banks to help spearhead the country’s economic development. Fidelity co-managed a 10bn bond in 2018 to help the government solve the energy sector’s financial problems, and a subsequent eurobond.

Lucy Quist

FRANCOIS GRIVELET FOR JA

Diamonds in business and on the pitch Lucy Quist, a high-powered telecoms executive, is lending a hand to turn around the national football association after investigative journalist Anas uncovered vast corruption earlier in the year. She is vicepresident of the football association’s so-called normalisation committee. Quist is the founder of business consultancy Quist Blue Diamonds, a board member of the Ghana Climate Innovation Centre and former managing director of Airtel Ghana. Between advising businesses she has been giving pep talks to young footballers. Her recent words to fellow business leaders could be those of a team coach: “We should not look down on ourselves. Each of us is made in Ghana and therefore we should be proud of who we are, and not pull each other down but build each other up.”

Patience Akyianu Insuring success

The former managing director of Barclays Ghana takes up the reins of South African insurer Hollard Group’s Ghana operations in October. Hollard is a small player, so Akyianu’s goal is to increase its market share in the general and life insurance sectors.

While at Barclays, she was vocal about improving the banking sector, saying: “It’s not about the number of banks.

It’s about capacity, size and strength.”

John Peter Amewu Eyes on electricity and oil

With a new oil-licensing round and a series of power agreements to renegotiate, Ghana’s new energy minister is making key decisions in two sectors.

The co-founder of the Africa Centre for Energy Policy and National Patriotic Party chairman for the Volta Region took up the post in August 2018 after his predecessor fell out with President Nana Akufo-Addo about changes to the controversial AMERI power deal.

The government is encouraging more local participation in the oil sector but critics say there are few firms with the right knowledge and funds to get involved. In September, Amewu criticised companies that act as fronts for foreign firms, saying they are denying Ghanaians the right to participate in oil production.

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58 COUNTRY FOCUS | GHANA

Nana Kwame Bediako

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Chief executive, Wonda World Estates

We will cut down on importation

The backer of a new free zone outside of the city of Takoradi talks to The Africa Report about the importance of the local private sector

T

he CEO of Wonda World Estates, Nana Kwame Bediako, has joined forces with UK-based property developer and hotelier Azad Cola to create a new free zone, designed to service the emerging Ghanaian energy sector. Known as Petronia City, the planned development includes a series of industrial, commercial and residential projects located 8km from the port of Takoradi in western Ghana. Wonda World Estates has been developing apartment projects in Accra.

TAR: Why did you decide to partner with Azad Cola?

NANA KWAME BEDIAKO: We decided to come together and build an industrial platform which is going to become the last word in African industrial development, something that was supposed to be done in Africa maybe 100 years ago. We want to bring in plants to manufacture steel. Based on that, we will cut down on importation.

We are interested in producing glass, and all other manufactured goods that are being imported into Africa, which are stalling Africa’s growth. Much of this is down to inefficiency – you have to wait for eight weeks for things to arrive in Africa, before they move from bonded warehouses into the retail markets. We want to do that starting in the western part of Ghana, in Takoradi – which is

a very rich area, with over 10 different resources based in this area.

We think it is going to become the hub of West Africa, and we will be able tap into other countries, like Liberia, which have their own resources and can supply raw materials for the plants that we intend to put onto the industrial platform. To do that, we needed to apply for free-zone status, so that some of these companies who will be our partners will have tax exemptions.

We were successful with the free-zone application and land acquisition. We are the first people in West Africa to have a parcel over 1,500 acres, that’s 8.9km².

“Takoradi is a very rich area […]. We think it is going to become the hub of West Africa” Do you have partners for a steel plant?

We have a few who have given us a letter of intent. But we are doing it with our choice of partners.

We believe it is going to be the Asians. We believe the Asians are the best when it comes to hardware. They have already supplied the world with standardised steel.

But our interest is not to go straight to the Chinese. Our interest is to work with the Singaporeans because we are looking at their template of development.

Does Ghana have the administrative capacity to drive an Asian-styledevelopmentmodel?

Singapore did use a strong national government. In Africa, we don’t need to rely on the government. The private sector needs to work with the government. People think that the government can build roads, can build factories […]. The government can’t do it. If they could do it, they would have done it a long time ago. We have cut out the private sector locally in Africa. We need to build it up.

Foreign multinationals are not here to develop Africa, they are only here to extract or do business.

The only thing you can do with government is get a licence.

How will you keep freight costs low for manufacturers in your zone, given the costs of coming through Takoradi?

Youknowwhyit’shard?Because the only source of being able to get anything in the country is importation. All the containers leaving the country today are empty, there is nothing in them. It even costs the shipping lines $320 to bring a container back empty.

Therefore,oneofthegovernment’s main sources of revenue out of the port is taxes. But if you are manufacturing in-country, then you don’t have to import anymore, so you avoid the taxes.

Interview by Nicholas Norbrook

THE AFRICA REPORT

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60 COUNTRY FOCUS | GHANA

It’s been a tense time for the central bank, which closed down seven banks in 12 months

NICHOLAS SEUN ADATSI/GETTY

the International Monetary Fund to help it tame the country’s debt and budget deficit. The government overlooked its already strained budgetary resources and issued ¢2.2bn in bonds to GCB and ¢5.7bn to Consolidated Bank to meet the gap between liabilities and assets.

Since taking over, GCB has sacked some 450 members of staff of the failed entities, with plans to cut another 250 workers. Consolidated Bank Ghana has laid off 700 staff as part of a plan to axe 2,000 workers from the defunct banks.

These numbers compare with a total 1,400 workers who lost their jobs when the Bank for Housing and Construction and Ghana Cooperative Bank collapsed FINANCE in 2000, according to a report by PwC. The assets controlled by the troubled banks are worth $2.1bn, compared with $14m during the year 2000 crisis.

Despite the trauma and job losses caused by the In September 2017, the central bank it failure of several small Ghanaian banks, the sector now increased the minimum capital requirement from ¢120m to ¢400m,giving banks looks stronger with credit growth likely to accelerate up to the end of 2018 to comply. Finance minister Ken Ofori-Atta told reporters: hana is slowly emerging from uniBank and Royal Bank. In all cases, “It is strong individual institutions that its worst banking crisis ever. the Bank of Ghana noted negligence make a strong banking sector.” He added: Several times this year deposi“From next year we can expect to see inon corporate governance procedures stitutions that are very well-capitalised, tors massed in the branches of insolvent and/or disregard for provisions of the lower non-performing loans and higher banks wanting to take their cash, despite banking law. assurances from central bank govercredit growth to the private sector.’’

Former bank directors have been nor Ernest Addison that their money Nineteen out of 30 banks already assisting the Economic and Organised met the new minimum capital requireCrimes Office in investigations to unravwas safe. Some fixed-term depositors el the causes of the bank ment, Addison said. On 3 even approached the newly formed failures. The founder of October he added: “Our Consolidated Bank to redeem their banking system is becominvestments, unsuccessfully. uniBank, former finance ing stronger. […] The idea Panic withdrawals also hit local banks minister Kwabena Duffuor, that had not been declared insolvent, is challenging the lender’s is to position the sector Value of assets such as Premium Bank, GN Bank and closure in court. as a major growth driver of troubled banks Heritage Bank, as customers speculated While several small to support an inclusive, in the 2017-18 crisis, the banks would soon be closed down. banks have recently colbroad-based economy.’’ compared to $14m So serious was the situation that the in the 2000 crisis lapsed, the majority of the Analysts say the drive founder of GN Bank, former minister of sector has already met new to improve bank perforstate and flagbearer of the Progressive mance is paying off. Edem Harrison, an minimum capital requirements designed economist at Frontline Capital Advisors People’s Party Paa Kwesi Nduom, went to strengthen the industry. Those banks on public campaigns telling people to now have more firepower to lend to big in Accra, says: “The adoption of Basel II stop the panic withdrawals. risk-based supervision framework by the and small companies in the sectors that will be driving the economy forward. regulator this year is going to strengthen Ghana’s central bank closed down seven banks in the 12 months leading up to banks’ risk-management system and JOB LOSSES enable them to curb loan losses.’’ He August2018duetorisingnon-performing loans and the lenders’ inability to meet predicts the industry’s capital adequacy To protect depositors, the Bank of Ghana ratio could increase to 23% by the end capitaladequacyrequirements.Itrevoked named GCB Bank and the newly created the licences of UT Bank and Capital Consolidated Bank Ghana to take over of 2019, up from 19.1% in August, and Bank in August 2017, after providing a the liabilities and selected assets of the that credit growth will likely accelerate to at least 15% from an average of 3.4% combined ¢1.5bn ($310m) in liquidity defunct banks. The government has in the first eight months of the year. support.Ayearlater,itfollowedwithBeige stepped in, but its means are limited, as it Honoré Banda in Accra Bank,ConstructionBank,SovereignBank, is coming to the end of a programmewith

Banking bust

G

SOURCE: PwC

$2.1bn

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Mauritius

Offshore on

The government wants to double the size of the financial sector within the next 12 years, but to do that it needs to find new growth strategies and respond to international pressure on jurisdictions that help companies avoid paying corporation tax

By Kervin Victor in Port Louis

P

ristine beaches and murky accounting have long been associated with the Indian Ocean nation of Mauritius, and so it was that the transparent waters of Balaclava Bay provided a gentle reminder of what was at stake as representatives of the government launched a new blueprint for the offshore financial centre at a major conference on 19-20 September.

Improving the image of the financial services sector and driving its expansion are high

on the government’s agenda for growth. Announcing plans to double the sector’s size by 2030, Prime Minister Pravind Jugnauth said: “The sector continues to face its share of challenges both locally and internationally. As an innovative and forward-looking nation we have to demonstrate our capabilities in turning these challenges into opportunities, while ensuring economic resilience.”

The financial sector is at a crossroads: changes to a treaty with India mean that it has to look to new markets in Africa; African

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COMPANIES & MARKETS 63

FABA/GETTY

the radar

governments want to protect their tax bases; and campaigners continue to criticise the country as a tax haven that hides beneficial owners of companies and allows firms to avoid paying tax in their own countries.

FORWARD PLANNING

‘Mauritius International Financial Centre – Forward Looking’ was the name of the two-day conference at the InterContinental Mauritius Resort, organised by the industry regulator, the Financial Services Commission (FSC).

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Prime Minister Jugnauth’s government says it wants to support the growth of the financial sector while responding to its critics and increasing transparency to meet rising international standards.

The government’s plans include signing more double taxation avoidance agreements (DTAAs) in Africa and beyond, abolishing a class of companies that attracted international criticism (for allowing shell companies and companies that do little more than move money around the world) and focusing on three main

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In 50 years Mauritius has ridden the waves of successive growth models, with finance now coming to the fore

subsectors – namely cross-border investment; corporate banking and finance; and private wealth.

Mauritius currently has 44 DTAAs around the world and is looking for new business partners.

Mauritius’s top banks all have a role to play if the sector is to double in size by 2030. According to Bank of Mauritius figures, total deposits from global business banking at the end of June 2018 represented 14.4% of total deposits, or Rs544bn ($15.7bn). The country’s biggest bank,MauritiusCommercialBank, reports that 40% of its net profit for

64 BUSINESS | COMPANIES & MARKETS

the first half of 2018 – Rs7.2bn – came from foreign sources.

Meanwhile, HSBC Mauritius is using the country as a platform for renminbi operations capitalising on China’s One Belt, One Road initiative,andAfrAsiaBank’sglobal business operations represented 71% of non-interest income for the 2017/2018 financial year.

ESTIMATED SIZE OF THE MAURITIUS BANKING REVENUE POOL

CROSS-BORDER SHORTFALL

Total banking revenues

$1.314bn $270m $92m

$829m

$123m

$352m

Retail

Other

Total corporate

$477m

Domestic corporate

Cross-border corporate

CONTRIBUTIONS FROM MAURITIUS INTERNATIONAL FINANCE CENTRE, 2016 % of total contributions

Other Insurance 2 Capital markets 1 Private banking and wealth management Corporate banking 3

8%

8%

2%

100% = $976m 1% 5%

$178m

11,260 employees

0% 0%

1%

9%

2%

0% 1%

3%

0% 1%

25%

33% 88%

70% SOURCE: GOVERNMENT OF MAURITIUS

The government’s blueprint lays out several targets. The main centre of activity will be corporate banking and finance, which the government hopes to see grow at a rate of 9.6% per year over the next decade. That is to be followed by cross-border investment, which could grow at 5% per year. And private wealth is a nascent subsector that the government argues can grow at 6.7% per year from its current low base.

Some influential people do not agree with the government’s rosy projections. Sunil Benimadhu, chief executive of the Stock Exchange of Mauritius and chairman of Global Finance Mauritius – the apex body of private-sector financial operators – says that to double the size of the sector in 12 years will require each of those pillars to grow at a compound rate of 6%. “When we take a step back and look at the current growth rates of these pillars, it would seem that one of them, namely the cross-border investment, has over the last four years grown at around 2%. This is quite far from the 6% target,” he says.

There has been an uptick in deals recently, with international firms buying up companies to get a presence in Mauritius. In April 2018, Ocorian bought Abax Corporate Services to help it target businesses in the Middle East and Africa. Also, SGG Group acquired Cim Global Business in May 2017, and Sanne Group bought Mauritius-based International Financial Services in early 2017.

Elections in 2019 are unlikely to mean much change for the country’s financial sector, which has support from across the political spectrum. Indeed, the left-wing opposition says the government

Domestic Cross-border

Mauritius revenues before risk cost, 2016 (USD)

Cross-border investment

61%

IFC revenues

(private sector profits) USD

9.6% Target annual growth for corporate banking and finance over the next decade

SOURCE: GOVERNMENT OF MAURITIUS

Employment

Tax revenues USD

is not doing enough to support the industry. At a 6 October press conference, Mauritian Militant Movement leader Paul Bérenger criticised the September conference: “These two-day meetings have not brought anything concrete. There is zero strategy.

Already the Mauritian jurisdiction has been outpaced by the jurisdiction of Singapore concerning investment in India. And things will get worse because of the lack of strategy from the government to help a sector which is to become the most important one of our economy,” he said.

Politicians point to the financial sector as evidence of the country’s continuing ability to adapt to changing economic circumstances. At independence in 1968, the sugar industry enabled Mauritius to move from a lowincome, agricultural economy to

Nb. of jobs

a middle-income, diversified one.

From the 1980s manufacturing – mainly textiles – took over. Now, with the weakening of Mauritian export revenue, it is the turn of financial services.

Mauritius is among the few countries that have witnessed a sustained growth of its financial sector after the global financial crisis, with an average of 5% growth over the past 10 years.

The government predicts that it will account for 11.6% of gross domestic product in 2018, compared to 13.1% for manufacturing.

INTERNATIONAL SCRUTINY

It will not be smooth sailing, however. Jurisdictions that provide levels of secrecy and compete with other countries by allowing foreign investors to pay lower, or even no, taxes are under fire from tax-justice campaigners

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TOEING THE LINE

With US companies like Google and Amazon in the headlines in Europe for the low levels of corporate tax that they pay, tax is rising high on the international agenda.

The OECD and G20 have rolled out the jargon-filled Inclusive Framework on Base Erosion and Profit Shifting (BEPS), which the OECD elucidates as ‘tax planning strategies that exploit gaps and mismatches in tax rules to artificially shift profits to low or no-tax locations where there is little or no economic activity.’

With the threat of being blacklisted by the OECD and the European Union if Mauritius does not sign up to the BEPS agreement, Jugnauth said earlier this year that the government will harmonise its fiscal regime for domestic and global business companies. “We have also brought changes to our legislative framework to combat money laundering and the financing of terrorism”, he told attendees at the September conference.

Mauritius has three types of companies: domestic, Global Business Company 1 and Global Business Company 2. Previously, GBC1s, like domestic companies, weretaxedat15%ontheirchargeable income but could claim foreign

HSBC is using Mauritius as a platform to capitalise on China’s One Belt, One Road programme

SHIFT TO AFRICA

“We have to demonstrate our capabilities in turning these challenges into opportunities ” Pravind d Jugnauth Jugnauth, prime minister of Mauritius

YANN BOHAC/SIPA

and intergovernmental groups like the Organisation for Economic Cooperation and Development (OECD). Alexander Ezenagu, a researcher at the International Centre for Tax and Development, told journalists last year: “Some of the most important ways of stripping profits from African countries are done through offshore jurisdictions, including Mauritius.”

While denying that Mauritius is a tax haven, the government is making moves to improve governance and address the detractors’ concerns. Harvesh Seegolam, chief executive officer of the FSC, tells The Africa Report: “The main factor that is impacting directly on the way we operate as a financial centre is to do with international developments.”

tax credit of 80%, thus resulting in a maximum effective tax rate of 3%. GBC2s were exempt from tax. With the harmonisation of the fiscal regime, all companies in Mauritius will now benefit from 80% tax exemption on specified income like foreign dividends, interest and royalties. The government also plans to abolish the zero-tax GBC2 regime in January 2019. According to official statistics from the FSC, as at end of July there were 12,039 GBC1 companies and 10,400 GBC2s in Mauritius.

For decades, Mauritius’s financial centre focused on the Indian market. But the government there complained of too much opacity and the loss of revenue from companies domiciling themselves in Mauritius to pay less tax, so the two sides agreed to renegotiate their double taxation avoidance agreement (DTAA), making Mauritius a less attractive hub for investors looking for opportunities in India.

The bourse’s Benimadhu argues that India could still be an important market for Mauritius because of the knowledge developed and relationships formed: “In the light of the amended DTAA with India, there is a need for Mauritius to sit down and come up with a new value-added proposal for India.”

The government says it is currently in talks with Algeria, Burkina Faso, Comoros, Mali, Sudan and Tanzania on tax treaties. And Mauritius should, according to Parik Tulsidas of AfrAsia Bank – a regional bank headquartered in Mauritius –now focus more specifically on how to become more relevant to Africa. “Having advantages is certainly a must but I believe that in many ways, we have reached a ‘mature’ stage in our development as a financial jurisdiction. Hence how do we get to the next level and up our game?

This for me is more topical, especially with the recent renegotiation of the DTAA treaty with India, the decision taken in the recent country budget to discontinue GBC2s, as well as unwarranted negative press on the Mauritian jurisdiction,” he says.

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Rubber soLE Samuel Muzimbi’s makeshift stand, hung with his self-made shoes and accessories, has been a landmark in Melville, Johannesburg, for 11 years

N

obody can make enough money from the arts in Zimbabwe and that is what I wanted to do, and so in 2006 I moved to Johannesburg.

This was 12 years ago and I have not left since. I currently stay in Auckland Park with my wife, who works as a childminder. This is where I also have my workshop, Big Fish Arts, where I make my bags, belts, wallets and shoes.

I grew up in a working-class home in Chitungwiza, a small town in Harare. We call it Chi Town. I remember growing up there, playing soccer on the streets and being a naughty teenager.

I always liked to draw. I drew on everything that I could find in the house. I do not remember ever drawing at school. Then I did not even know that art was a thing that one could study. One day I went to a market in Harare and saw a man who was selling bags and wallets. When I asked him if he had made them, he told me that he did not and that these he had imported from Johannesburg in South Africa.

I was young then but I knew that I wanted to go to Johannesburg. I did not know how to make any of those things but I knew that that is what I wanted and somehow I had the inkling that I was good at it.

I have been selling my bags, belts, wallets, shoes and paintings from the same spot on 7th Street in Melville for 11 years. My brother Sheppard helps me mind the store when I have orders to make at the workshop.

I started by making belts and then moved on to wallets, shoes and bags. Everything is designed and

sewn in my workshop at home. Some of the things I sew by hand and some by machines.

A lot has changed in Melville because life changes all the time. I have seen many shops that open and close and some have stayed for as long. Peak season for the business is really unpredictable but Melville sees a lot of tourists lately so sometimes I make good money.

LONG TIME AWAY

On a perfect day, sketching the shoe and sourcing the material to make it takes about three days. Sometimes, depending on the design of the shoe, it takes me longer to source the material. On some of the shoes I use leather for the sole and then on some I use recycled motor tyres. I prefer the recycled motor tyres to normal shoe sole as it lasts and looks really beautiful.

I take orders sometimes and that pair would be made to the specification of the customer but mostly I design the shoes myself and make them however I want.

My entire family is in Chi Town. I go back at least twice a year to see Nashe and Nyasha, our children, who are staying with their grandmother. I miss them very much but I have to work. Every time I go home I always feel as if I do not belong there because I have been away for so many years.

I love Zimbabwe but I have not thought of going back to work there because the art industry is still as it was 12 years ago, non-existent.

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