Africa Monthly. June 2014

Transcription

1 Africa Monthly June

2 Contents 1 Editorial 2 Water 2 Infrastructure 2 TMT 3 Oil & Gas 3 Power 4 Renewables 4 Mining

3 Editorial Closing Africa s Infrastructure Gap Africa has experienced significant economic growth over the last decade, fuelled by government reforms, exploitation of its natural resources and increased private investment. However, it is far from realising its potential. One of the biggest constraints to Africa s growth and competitiveness has been fragmented, inadequate and underperforming infrastructure systems in terms of transport, ICT, energy and water. The key to unlocking Africa s growth potential is investment in infrastructure. Shem Simuyemba, Chief Infrastructure Economist, African Development Bank Infrastructure is central to inclusive growth. Countries cannot improve education and job opportunities without reliable electricity and internet access. Food security is reliant on effective transport infrastructure as are African businesses. Citizens need access to clean water, adequate sanitation as well as reliable and affordable electricity supply and transit systems. Progamme for Infrastructure Development in Africa (PIDA) To fully address Africa s infrastructure deficit it is essential that the continent s numerous local, regional and pan-continental needs are co-ordinated. Commitment from all relevant organisations is crucial to achieve meaningful progress in African countries. PIDA is an initiative led by the African Union Commission, the NEPAD Secretariat and the African Development Bank (AfDB), which aims to address the infrastructure deficit by establishing a strategic framework for the development of infrastructure. Changing Landscape: Transport PIDA predicts the average economic growth rate for African countries will be 6% per year from 2010 to This expansion will be driven by discoveries of natural resources, better education and greater access to technology. Infrastructure Funding Gap Financing PIDA s projects is estimated to require US$360 billion by 2040 and US$68 billion by Over the past five years the AfDB has committed around US$13 billion to infrastructure against an estimated funding gap of US$48 billion per year. Greater private investment is crucial to closing this deficit. PIDA acknowledges various obstacles to private investment such as political stability and stakeholder buy-in, a pipeline of viable projects leading to stable returns, fairer more reliable and transparent procurement, enforceable contracts, shared risk and well-defined and consistently applied rules and regulations. Harnessing public-private partnerships will be essential to addressing the infrastructure deficit. However, incentives must be introduced to attract private entities and overcome the hurdles to investment. In turn it is crucial to stimulate African economies by contracting with local businesses. To tackle the issues involved in private investment, an innovative new infrastructure fund Africa50 launched by the AfDB is expected to become operational this year. The fund s main objective is to raise US$3 billion of capital from regional and global pension funds, insurance groups, institutional investors and sovereign wealth funds. Africa50 will focus on high impact national and regional projects and aim to cut project delivery time from idea to financial close from an average of seven years to less than three. The Future Without a strong infrastructure framework African countries will fail to achieve their potential. However, changing perceptions and an improving risk profile are acting as a magnet to investment. This increased appetite must be harnessed through development of a solid infrastructure programme to maximise the benefits of increased investment and accelerate economic growth. June 2014, Pinsent Masons LLP. It is projected that transport volumes will increase on average by six to eight times and up to 14 times for some landlocked countries. Port throughput will rise from 265 million tonnes in 2009 to over 2 billion tonnes in This equates to 37,200km of highways and 30,200km of railway capacity. Regional integration and the development of trade corridors are essential to unlocking this growth potential. 1

4 Africa Update Water Ghana faces potential power crisis due to reduced water levels Due to reducing water levels at the 400 megawatts Bui Hydroelectric Dam in Accra, the capital city of Ghana, production has had to be scaled down. The Bui Power Authority have reported that the dwindling reservoir levels are due to The exceedingly high level of generation support that the Bui Generating Station has been providing to the national electricity grid since the commissioning of the Bui plant. The Bui Power Authority have been operating at two and a half times the target rate but this cannot be maintained with the reduced water levels because the turbines are at risk of being damaged. (All Africa) Opportunities Kenyan demand for power imports from Uganda increases fourfold 80% of Kenya s electricity is generated from hydro therefore the lower levels of rainfall during the long rains season this year have resulted in reduced water levels at power generation dams. This has led to a fourfold increase in demand for power imports from Uganda. Figures from the Kenya National Bureau of Statistics reveal that in January imports from Uganda stood at 3 million kilowatts per hour whereas they have now reached an average of 12 million kilowatts per hour every month. (Coast Week) Infrastructure Nigeria: FEC Approves U.S.$242.3 Million for Lagos State Projects A US$200 million extended credit facility from the International Development Association has been approved by the Federal Executive Council, announced Labaran Maku, the Nigerian Minister of Information. The funds are to be used by the Ministry of Finance as part of the second Lagos state development for various construction projects, including a 27km light rail, schools and a water works plant. (All Africa) Kenya: State to Spend Sh1 Billion for Mara Roads Ruto The Kenyan government has pledged to spend Sh1 billion (US$11.39 million) for improvement works on an 85 kilometre road leading to the Masai Mara Game Reserve. As well as benefitting the local community, it is hoped the works will provide a boost to tourism through improved access to the park. (All Africa) Ethiopia to Build Five New Airports Plans are underway to construct five new airports in Ethiopia, revealed the Ethiopian Airport Enterprise. This will go some way to helping to achieve the Growth and Transformation Plan s aim of having 21 airports in Ethiopia by the end of the 2014/15 fiscal year. (All Africa) Opportunities South Africa: PPP for next 5 years The South Africa president, Jacob Zuma, who was re-elected in May 2014, has emphasised the country s continued commitment towards infrastructure investment. President Zuma launched the National Infrastructure Plan in 2012, which is part of the Vision 2030 initiative to create jobs and eradicate poverty by There is expected to be a drive towards encouraging private investment, and for a greater amount of projects to be structured as PPPs. (Inspiratia) TMT Airtel to conclude African tower sales Bharti Airtel is expected to close the sale of its African towers imminently according to sources close to the company. Shares in the company have dipped in recent days in spite of expressions of interest form Helios, ATC, Eaton and IHS. (Business Day Online) South African Telecoms sector unites MTN is in the process of acquiring a 50% stake in one of South Africa s leading hosting and internet service providers, Afrihost. The deal is indicative of the consolidation in the ICT sector, following Vodacom s takeover of Neotel. The purchase will allow MTN to leverage Afrihost s competitive pricing and expand its enterprise broadband offerings. The deal is however, still subject to regulatory approvals. (IT Africa) Etisalat to refinance Maroc Telecom loan Etisalat finalised its acquisition of Vivendi s majority stake in Maroc Telecom last month. The deal provides Etisalat with access to new African markets such as Burkina Faso, Mauritania and Mali. Etisalat currently operates in a number of African countries such as Nigeria, Tanzania and Sudan. The telecoms operator now plans to issue a 3.1 billion bond in order to refinance its Maroc Telecom loan. The bond will be split into four tranches and will represent the largest deal of the year so far. (The National) 2

5 African laws prevent full Vodafone spy disclosure Strict African laws are currently preventing Vodafone from fully disclosing the extent and nature of state-backed spying on the continent. Vodafone operates in Africa via its subsidiary Vodacom in countries such as South Africa, Mozambique and Ghana and also has a controlling stake in Kenya s biggest mobile operator Safaricom. The phone company last week unveiled its Law Enforcement Disclosure report, which provides insights into agency and authority demands for lawful interception and communications data for the period 1 April 2013 to 31 March However, the company reveals little about the nature of requests in its African jurisdictions, largely because the disclosure of lawful interception and communications data is deemed unlawful. (IT Web Africa) Opportunity MTN plans $250m Ivory Coast Telecom Network Upgrade MTN Group, Africa s largest telecommunications operator, plans to spend around 120 billion CFA francs ($250 million) upgrading its network in Ivory Coast. (Money Web) Oil & Gas Lekoil to develop marginal field for cash flow Cayman Islands registered Lekoil has acquired a 40 per cent. stake in the Otakikpo marginal field for a reported sum of $11m. Following an investment of approximately $70m the company plans to start production in 2015/2016. The field also contains an estimated 31bcf of gas and Lekoil have committed to the development of small-scale gas utilisation products by 2017/2018. The field is contains an estimated 36m barrels of oil. (African Energy) Small firms will lead East Africa s oil and gas development The risks involved in the development of East Africa s oil and gas reserves has led risk-adverse senior executives of oil and gas firms to avoid the projects. This is regardless of the fact that the estimated 180 trillion cubic feet of gas reserves in Mozambique s Rovuma Basin would be enough to supply Europe for over a decade. It will therefore be the smaller oil explorers, who are willing to take such financial and operational risks, who will get projects off the ground with companies such as Taipan Resources hoping to start drilling in Companies currently involved in exploration of the area include a mix of small and large companies including, Anadarko, Buzi Hydrocarbon, Eni, Petronas and Sasol. (Reuters Africa) Power Sierra Leone : 50mw Electric Power for NPA In Sierra Leone, Copperbelt Energy Cooporation has signed a Power Purchase Agreement to provide 128 MW of power to the country as part of the governments plan to upgrade the electricity supply. The project will be split into three phases: the first to generate 50MW by 2015 with each subsequent phase generating an additional 39MW to be completed within 18 months of the preceding phase. (Awoko) Namibia faces electricity supply challenge until 2018 Nampower, the national provider of electricity in Namibia announced that when current agreements with Zimbabwe and South Africa and Mozambique to supply power come to an end (within the next year to two years), the country could face a deficit of up to 750MW of power. This deficit will continue until the Kudu gas plat is operational in Nampower has indicated that it will need government support if it is to continue to provide a reliable service and avoid an increase in tariffs. (ESI Africa) Namibia: Arandis Power Station Awaiting Final Approval In Namibia, final agreement from the government to go ahead with the Arandis project is awaited. Before agreement can be reached the government need to consider the political situation and give assurance to investors that a stable government will continue to avoid investment being affected by politics in the region. The Arandis project is a hybrid project utilising solar power and oil fuel and should be operational by It is a short term solution to the country s energy crisis until the Kudu gas powered project is developed in Arandis will meet a quarter of the country s energy requirements. (All Africa) 3

6 Renewables US launches $1 billion push for off-grid Africa power As part of President Obama s bid to bring power to Sub-Saharan Africa the US have confirmed 27 investors are interested in projects in the continent which will see $1 billion invested in renewable energy. A drop in the price of setting up renewable energy projects and the ability to set up such projects quickly and without requirement for existing infrastructure being in situ has made such projects more attractive to investors. (Yahoo) Globeleq completes two solar farms in South Africa Globeleq have completed the first two solar projects in South Africa in 20 years. The 50MW projects are located in the Northern Cape and utilise the natural resource of the sun to create clean energy. During build, the project involved the local community and now that it is operational it is envisaged that a percentage of revenue will be invested back into community projects. (African Review) Opportunity MAECI, GE and Princeton Power Systems collaborate on large African microgrid project A 5MW solar project in Equatorial Guinea is set to provide electricity to the 5,000 residents of Annobon Island Provence. Residents will benefit from power 24 hours a day, seven days a week, and the project will eliminate the current need for residents to spend up to 20% of their income on power. This is the largest project of its type in Africa. General Electric have been awarded the contract. (Renewable Energy Focus) Mining Update Rio Tinto and Chinalco sign $20bn Guinea iron ore deal Following the coverage in our last issue of Rio Tinto and Chinalco s recent investment in Guinea, it is reported that construction of the Simandou iron ore mine will cost at least $13.5 billion including the cost of a 430 miles railway, a deep water port and other supporting infrastructures in order to transport iron ore to Guinea s Atlantic coast. Under the conditions of the $20 billion deal, a thirdparty consortium will build, own and operate the infrastructures for 30 years. In order to meet a deadline for first production by 2018, $300 million has been allocated to commence feasibility studies. (Reuters Africa) Zimbabwe seeks full land ownership of minerals The finance minister of Zimbabwe said the Government is planning to amend its indigenisation and black empowerment laws such that it will have 100% control over the minerals and land. This apparent move towards further nationalisation is on top of the current requirement to divest 51% of mine ownership to indigenous Zimbabweans, and will be of concern to foreign investors including, potentially, existing mining operators Anglo American Platinum and Impala Platinum. (Reuters) Base Resources in constitution dispute with Kenya Base Resources, an Australian and AIM listed company developing the Kwale mineral sands project in Kenya is disputing an invoice received from a regional government for a $57/tonne levy on exports. It has been advised that the Kwale county government does not have the legislative authority to impose such a levy under the Kenyan constitution. Base Resources is in talks with the Kenyan national government to have the levy repealed and says it may take legal action against the county government if the situation is not resolved. (Mining Weekly) Opportunity Wesizwe looking for acquisition opportunities Wesizwe Platinum, a South African focused platinum miner currently 45% owned by Jinchuan Group, a large Chinese mining group, is looking for opportunities to acquire South African platinum assets as larger corporations such as Lonmin, Impala Platinum and Anglo American Platinum are suffering from prolonged labour strikes. (Mining Weekly) For any enquiries please contact the Pinsent Masons Africa Team at africadesk@pinsentmasons.com. This note does not constitute legal advice. Specific legal advice should be taken before acting on any of the topics covered. Pinsent Masons LLP is a limited liability partnership registered in England & Wales (registered number: OC333653) authorised and regulated by the Solicitors Regulation Authority and the appropriate regulatory body in the other jurisdictions in which it operates. The word partner, used in relation to the LLP, refers to a member of the LLP or an employee or consultant of the LLP or any affiliated firm of equivalent standing. A list of the members of the LLP, and of those non-members who are designated as partners, is displayed at the LLP s registered office: 30 Crown Place, London EC2A 4ES, United Kingdom. We use Pinsent Masons to refer to Pinsent Masons LLP, its subsidiaries and any affiliates which it or its partners operate as separate businesses for regulatory or other reasons. Reference to Pinsent Masons is to Pinsent Masons LLP and/or one or more of those subsidiaries or affiliates as the context requires. Pinsent Masons LLP For a full list of our locations around the globe please visit our website: