MENU

Business
Category

Nigeria’s central bank intervening in currency market: traders

27 June 2016 Comments (0) Africa, Business, Latest Updates from Reuters

LAGOS (Reuters) – Nigeria’s central bank asked for bid-offer quotes from currency traders on Monday as it sold dollars on the interbank market to boost liquidity, traders said.

After abandoning the naira’s 16-month old exchange rate peg a week ago, the central bank sold dollars at an auction to clear a backlog of demand and keep markets active.

Currency traders said they had tightened the differential between bids and offers to 0.5 naira from one naira set when the currency was floated last week.

 

(Reporting by Chijioke Ohuocha; Editing by Catherine Evans)

Read more

Western-trained talent returns to Ethiopia

27 June 2016 Comments (0) Africa, Business, Featured

Talented Ethiopians who grew up abroad are returning to their homeland, sparking hope and driving change in the once stagnant nation.

For a long time, Ethiopia has struggled as one of the poorest countries in Africa. 1974 saw the end of the iconic Haile Selassie’s rule, as the brutal Derg communist dictatorship seized power. The following years were harsh, and so began a long-lasting trend, whereby many of Ethiopia’s most skilled citizens left the nation to seek better lives in the western world. The once great kingdom languished under corruption, war, famine and drought.

Prior to the Derg regime, mass migration from Ethiopia was non-existent; sadly that was due to change. George Mesfin, an American-Ethiopian who fled with his family at the age of 14, summed up the situation by saying, “During the Derg years, for a while, everyone who could get out, got out.”

After the despotic government fell in 1991, it took a long time for the country to start making progress. However, members of the Ethiopian diaspora have started returning to their homeland, attracted by a growing economy and a more stable political situation. Making a difference seems to be the motivation that drives some to give up their comfortable lives in the western world. Many of the diaspora recognize the opportunity to use their western skills for the betterment of Ethiopia. The chance to become leaders who drive the nation forward resonates deeply within the souls of the patriotic. Those who have chosen to go back are helping to change the country in dramatic ways.

Returning Home

One of Ethiopia’s more famous returnees is Tadiwos Belete. Belete moved back to Ethiopia after developing a successful luxury spa business in Boston. He has since used his skills to create a thriving Ethiopian spa empire which employs over 1,500 people and focuses on using a solely local supply chain. In a 2013 interview Belete said, “The profitability is here, you can see it, you can feel it, you can touch it. But as well, as a human being you can make a difference here.”

While official figures are not available, Ethiopian economist Bisrat Teshome estimated that Ethiopians returning from other countries have injected more than $1 billion into the economy while starting over 2,000 new businesses. The influx of foreign-earned capital that comes with the returning migrants is a welcome source of investment for the country, where access to foreign currency and corporate investment are still lacking.

Western Influences

In the nation’s capital Addis Abbaba, a profusion of cafes, restaurants, fashion boutiques and other western-inspired businesses have appeared. Less visible, but no less important, the returning diaspora is investing in property development, agriculture, technology and a host of other sectors.

Kaldi's Coffee located in Addis Ababa

Kaldi’s Coffee located in Addis Ababa

However, Tesholme feels that improvements can be made “if that money was pumped into the industry sector, then it creates more jobs.” He went on to say that the manufacturing sector is underdeveloped in Ethiopia, and that manufacturing has the scope to create significantly more jobs for similar start-up costs, while also benefiting from foreign trade.

Ethiopia is also growing culturally through the return of its lost children. Some have found that their presence has positively influenced cultural attitudes towards workplace productivity and business best practices. Others have commented that Ethiopia has started adopting western standards of health and hygiene. Perhaps even more significantly, Ethiopia may stand to gain from the homecoming in a political sense. Shanta Devarajan, head of the Africa region at the World Bank, feels that the returnees have a positive role to play in political reform: “The diaspora might bring strengthened governance to African societies. These are people who have been outside the system and are able to observe it from afar, and that might actually strengthen government, something that we need so badly.”

Looking to the Future

Ethiopia faces issues such as a bloated bureaucracy, which is criticized as being slow to act and is an obstacle to international business. Additionally, the government is criticized for being ineffectual at a local level. Ethiopians who have experienced a more sophisticated system are well positioned to drive for reform and facilitate positive change.

The success of the diaspora is encouraging ever more ethnic Ethiopians to consider returning. In the last six months 2,600 have already made the trip home, a fourfold increase on the same period last year. If the new arrivals continue in the same vein as those who came before them, then Ethiopia’s reemergence on the world scene looks exceedingly likely.

Read more

Egypt’s Beltone files lawsuit against heads of bourse and watchdog

26 June 2016 Comments (0) Business, Latest Updates from Reuters, Middle East

CAIRO (Reuters) – Egypt’s Beltone Financial has filed a lawsuit against the heads of the Cairo stock exchange and Financial Supervisory Authority over the repeated cancellation of trades on its stock, according to two sources and a court document seen by Reuters.

Shares in asset manager Beltone jumped by more than 550 percent in three months after it was acquired by billionaire businessman Naguib Sawiris’s OTMT in November for 650 million Egyptian pounds ($73 million).

The price spike lifted Beltone’s market value to 4 billion pounds before the stock exchange, at the end of February, began to stop trades in the shares on an almost daily basis. The exchange referred to rules allowing such cancellations in cases where the head of the bourse considered that trades had taken place at unjustified prices.

Beltone’s share price stood at 7.34 pounds on Sunday, compared with 21.97 pounds in mid-April.

“Beltone filed a lawsuit before the Administrative Court against the head of Egypt’s stock exchange, in person, and against the chairman of the financial regulator,” said two sources who are close to the matter.

The lawsuit contests that the head of the stock exchange’s decisions were incorrect and an illegal abuse of authority.

The head of Egypt’s stock exchange, Mohamed Omran, was not immediately available for comment.

Sherif Samy, chairman of the Egyptian Financial Supervisory Authority, said that Beltone had filed a grievance with the regulator earlier this month.

“The decision of the commission did not come in its favour and that is why they are resorting to court, and that is the right of any party,” Samy said.

($1 = 8.8799 Egyptian pounds)

 

(Reporting by Ehab Farouk; Writing by Asma Alsharif; Editing by David Goodman)

Read more

The end of OPEC?

26 June 2016 Comments (0) Africa, Business, Featured

opec meeting

OPEC’s refusal to impose production limits and an evolving global marketplace signal diminished clout for the oil cartel.

When OPEC ministers once again failed to agree on production limits to bolster oil prices in early June, it was yet another signal that the days of the oil cartel’s dominance in the global marketplace are over.

Members of the Organization of Petroleum Exporting Countries may continue to be important players in world oil markets, but “the cartel has lost its privileged ability to control global oil prices,” according to Global Risk Insights, which assesses political and business risk around the world.

OPEC nations, led by Saudi Arabia, traditionally have been the world’s swing oil producers, with enough reserves and daily production to control the price of oil. But that has changed in recent years as the United States, Russia and other smaller non-OPEC countries increased production.

Non-OPEC production rises

Total OPEC production is nearly 37 million barrels a day compared to non-OPEC production of nearly 57 million barrels daily, according to Global Risk Insights.

Despite waning influence, OPEC’s refusal to set production limits has played a major role in creating an oil glut, precipitating a two-year crisis that has seen the price of oil drop to as low as $26 per barrel earlier this year before climbing to $52 this month. That compares to prices of about $110 per barrel in 2014, when the crisis began.

Some OPEC nations, led by Saudi Arabia, have been willing to absorb the financial shocks of plummeting oil prices in order to preserve market share, reasoning that the low prices would drive competitors, notably U.S. shale oil producers, out of business.

OPEC has rebuffed calls to limit production by members Algeria and Venezuela, which have been hard hit by the slump.

Saudis take a financial hit

Saudi Arabia itself has not been immune to the financial impact of low oil prices.

The Gulf nation has spent more than $150 billion of its reserves in less than two years and posted a deficit of $98 billion last year.

Earlier this year, the Saudis borrowed $10 billion from a consortium of international banks, its first foreign debt in 25 years. The government also was considering asking creditors to take IOUs because it cannot pay its bills.

Oil rig at Bakken Formation

Oil rig at Bakken Formation

The OPEC strategy to let oil prices fall in order to wound its competitors has had mixed results, especially in the United States.

While 59 shale oil companies in the U.S. have filed for bankruptcy, production has dropped only slightly because of more efficient production. While financially troubled, the U.S. shale production should be able to rebound quickly once oil prices start rising, perhaps as early as next year.

Deal with Russia falls through

OPEC also came under fire from a top Russian oil executive in the spring, after a proposed deal between OPEC and Russia to freeze output fell through.

Igor Sechin, an ally of President Vladimir Putin, said tensions between Saudi Arabia and fellow OPEC member Iran have undermined the oil cartel. Saudi Arabia and Iran are vying for political dominance in the Middle East, and Iran, freed from Western economic sanctions, has vowed to significantly increase its oil exports.

“At the moment a number of objective factors exclude the possibility for any cartels to dictate their will to the market,’’ Sechin said. “As for OPEC, it has practically stopped existing as a united organization.”

Saudis pledge economic reform

Meanwhile, the Saudis have pledged sweeping economic reforms that signal their intention to go their own way on oil prices.

The reforms aim to diversify the country’s oil-dependent economy by increasing non-oil revenue to $141 billion by 2020. However, Saudi Arabia said it would maintain its output of 12.5 million barrels per day until 2020.

Deputy Crown Prince Mohammed bin Salman said his hope was that in 20 years the country would no longer be oil-dependent. The Saudi kingdom relies on oil for 80% of its revenue.

Saudi Arabia has vast oil reserves and has modernized production at a time when other oil producers including Venezuela and Iran have let their industries deteriorate.

At the OPEC meeting in early June, the Saudi oil minister also alluded to the waning clout of the cartel, saying that the market would determine prices.

“I think managing in the traditional way that we tried in the past may never come again,” Khalid al-Falih. Oil producers should “let the market forces continue to seek and find that equilibrium price between supply and demand.”

Read more

Ushahidi: An African technology with global reach

25 June 2016 Comments (0) Africa, Business, Featured

Ushahidi

The mobile crowdsourcing platform, launched by Kenyan entrepreneurs nearly a decade ago, has been used by an estimated 90,000 projects worldwide.

Ushahidi, the mobile crowdsourcing software used to alert people of danger during civil unrest and to help aid agencies provide relief in disaster zones, is taking the world one text at a time.

Used in 159 countries and 31 languages, the software was developed and first deployed during post-election violence in Kenya nearly a decade ago. Today, Ushahidi estimates 90,000 projects worldwide have used the software, which is available as a free download.

Ushahidi, which means “witness” in Swahili, has grown from an ad hoc team trying to save lives in a crisis into a sophisticated nonprofit software development organization that aims to help solve global problems.

Its widely used open source crowdsourcing tool enables people to share information and interactive maps on their phones using SMS text messaging.

Platform documented violence

Four Kenyan technologists developed the software in 2007. As protests over disputed elections spiraled into violence at the end of that year, an estimated 1,500 people were killed in two months. In Nairobi, unwittingly walking into a neighborhood where violence had erupted could mean injury or death.

Enter the Ushahidi crowdsourcing software, which enabled residents to report flare-ups. The software mapped these reports to show people what areas they should avoid in real time, potentially saving hundreds of lives.

The initial deployment drew 45,000 users in Kenya who documented hundreds of incidents of violence that might have otherwise not been reported.

It was developed in a few days by an ad hoc group of technologists and bloggers “trying to figure out a way to gather more and better information about the post-election violence,’’ according to co-founder Ory Okolloh, who said the group believed the government and police were underreporting the number of deaths.

Ushahidi map

Helped aid workers after Haiti earthquake

The platform gained international prominence in the aftermath of the 2010 earthquake in Haiti, when it was used to identify and map locations where rescue and aid were needed. Within days, a live Ushahidi map had 2,000 individual reports that were mapped using satellite imagery. The platform was credited by aid workers with saving hundreds of lives.

Use of the platform has grown exponentially and has adapted to different situations.

While it is impossible to know how many people are using the platform because it is a free download, Ushahidi estimates it has been deployed for 90,000 projects with 6.5 million posts that have potentially reached 20 million people.

Deployed in media crackdowns, war zones

In Nigeria, Mozambique, Zambia, Colombia and Albania, groups used the participatory platform to detect election fraud. It is being used in Sweden to collect reports of anti-gay discrimination. It was also used during media crackdowns in Egypt during and after the Arab Spring. Organizations including the United Nations Office of Humanitarian Affairs have used it to coordinate aid activities in Libya, Syria and Afghanistan.

In Nigeria’s election-monitoring, one report found that use of the Ushahidi software increased voter turnout by 8% in 2011.

In a 2015 election in Nigeria, social media was a force in keeping the polling process transparent but the Ushahidi data-collection platform offered more credible information, according to Liesl Louw-Vaudran, a consultant with the Institute for Security Studies.

“Lively activity on social media also has a downside, however, with rumors of violence, cheating and slandering of opponents being rife on Twitter,” Louw-Vaudran said. “This is almost impossible to control, but data-gathering software like Ushahidi, can serve to provide early warning of potential election violence.”

Global software developer

With philanthropic support, Ushahidi has grown into one of Africa’s major software developers. Headquartered in Nairobi, it has global operations. Backers include the Omidyar Network, the Ford Foundation, the Knight Foundation, the MacArthur Foundation, Humanity United, Google and Cisco.

While the crowdsourcing software is a free download, organizations pay Ushahidi for support and customization, as well as other software products it has developed including data collection, management, visualization tools and enterprise systems.

Another Ushahidi project includes partnership in the Resilient Network Initiative, which trains community organizations to use open-source tools to engage with their local governments.

Read more

South Africa’s rand recovers slightly, stocks down on Brexit

24 June 2016 Comments (0) Africa, Business, Latest Updates from Reuters

JOHANNESBURG (Reuters) – South Africa’s rand recovered some its losses against the dollar after falling heavily on Friday as Britons voted to quit the European Union, stunning emerging markets currencies.

Stocks also suffered, but gold shares soared in tandem with the metal’s price which surged 8 percent to its highest in more than two years as demand for safe havens assets like bullion and silver rose after the shock vote to leave the EU.

Investors fear Brexit could spark anti-establishment movements in other European countries, some of which have seen decline in traditional political parties.

South African President Jacob Zuma said local banks and financial institutions could withstand the Brexit shock, as they did during the 2008/09 global financial crisis.

Finance Minister Pravin Gordhan said Treasury and the central bank would take measures to deal with any Brexit shocks to Africa’s most industrialised country, which has strong trade ties with the EU.

By 1200 GMT, the rand was 4.52 percent weaker at 15.0510 per dollar after tumbling more than 8 percent in early trade to a three-week trough of 15.6800. The rand closed at 14.4400 in the previous session.

Implied volatility on the rand jumped 16 percent to six-month highs in an already highly traded session.

Capilis Asset Managers head of forex Giacomo Bonavera said the rand decline was over done. “The sellers will come back in and bring the price back down,” he said.

Government bonds also weakened, with the yield on the benchmark instrument due in 2026 adding 25 basis points to 9.13 percent, having jumped as much as 28.5 basis points earlier.

On the bourse, the JSE securities exchange’s Top-40 blue chip index dropped 4 percent to 45,502 points, while the broader All-Share index slumped 3.7 percent to 51,579 points in line with global weakening of equities due to Brexit.

Most shares were in the red with exception of gold miners.

The biggest losers were real estate firms Capital & Counties Properties and Intu Properties, who both have interests in the United Kingdom, and fell 17 percent and 14 percent respectively.

Financial services firm Old Mutual, which has a primary listing in London, and food services firm Bidcorp, which makes nearly half its sales in Britain, fell 7 percent.

Anglogold topped the gainers on the bluechip index, soaring as much as 14.54 percent to 267 rand, while Sibanye Gold, Goldfields and Harmony also shone on the wider index, each rising more than 16 percent.

 

(Reporting by Mfuneko Toyana; Editing by James Macharia)

tagreuters.com2016binary_LYNXNPEC5N0GV-VIEWIMAGE

Read more

Nigeria’s Dangote shifts focus from cement to oil and gas

24 June 2016 Comments (0) Africa, Business, Latest Updates from Reuters

LAGOS (Reuters) – Africa’s richest man, Aliko Dangote, plans to launch Nigeria’s first private crude oil refinery by 2019 while almost doubling his cement production on the continent by adding plants in eight countries as he shrugs off a regional economic downturn.

Dangote told Reuters the $12 billion refinery would have a capacity of 650,000 barrels a day, cornering the market in Africa’s most populous country, where fuel shortages are a perennial problem.

Until recently, Nigeria was Africa’s biggest crude oil producer but it imports 80 percent of its fuel because poor maintenance means its four refineries never reach full output. Its current daily consumption is 260,000 barrels, according to the International Energy Agency.

A slump in commodity prices has hammered Nigeria’s economy – along with many others on the continent – and raised the cost of borrowing but Dangote, whose business empire stretches from cement to flour and pasta, is pushing hard into oil and gas.

“It will be ready in the first quarter of 2019,” the billionaire founder of Dangote Cement said of the refinery. “Mechanical completion will be end of 2018 but we will start producing in 2019.”

Dangote said the plant, which will include a $2 billion fertilizer unit, was being funded through “loans, export credit agencies and our own equity”.

Some $3.25 billion had come from local and foreign banks, while the central bank had also chipped in. The IFC, the private sector arm of the World Bank, has lent $150 million.

Dangote also has plans for a gas pipeline through West Africa. Nigeria has the world’s ninth largest proven gas reserves, at 187 trillion cubic feet (tcf), but loses half of it to flaring and re-injection.

Despite the new focus on oil and gas, the business magnate said he planned to build cement plants in Cameroon, Ethiopia, Kenya, Mali, Niger, Nigeria, Senegal and Zambia by 2018. Another plant will open in Congo Republic by September, he added.

A cement plant in Ivory Coast would triple output to 3 million tonnes, up from an initial target of 1 million, he said, while two new plants in Nigeria would add 6 million tonnes annually.

“As at now, what we have in operation is almost about 45 million tonnes, so we have just another 40 million tonnes to go,” he said, affirming an Africa-wide production target of 85 million tonnes a year by 2018.

 

FX CRISIS

The collapse in oil prices has hit Nigerian companies hard, with many unable to access dollars due to central bank foreign exchange restrictions imposed to prop up the naira.

The worst-affected have gone to the wall or shed large numbers of staff, but a study by Reuters of an 11-week period in March to May showed that Dangote firms managed to secure a healthy share of dollars at the cheap official rate. [nL4N19E3JX]

Dangote said the $161 million bought during that period from the central bank merely reflected the size of his business and did not represent preferential treatment.

“We have been badly affected like any other company,” he said, arguing that operational costs totalled $100 million each month due to recurring expenses such as the purchase of parts for cement production and running a fleet of 9,000 trucks.

“When you are talking about 20 billion dollars worth of projects, what is 161 million? One-hundred-and-sixty-one million dollars is my six weeks’ need,” he said.

Dangote’s sugar refinery in Nigeria had reduced capacity by 15 percent as a result of the dollar crisis. “We ended up owing a lot of dollars,” he said.

This week, the central bank removed the peg that has held the naira at the official rate of 197 for the last 16 months, leading to a 30 percent devaluation as the currency traded freely on the interbank market.

Dangote said the decline had pushed up costs. [nL8N19F31Y]

“This devaluation alone, we have lost over 50 billion naira ($176 million),” he said.

“The gas, which is our main source of power, is priced in dollars. If there is 40 percent devaluation, your price will go up by 40 percent. Every single aspect of the production will go up by that percentage,” he said.

Dangote also said he was eyeing a listing on the London stock exchange “within the next year or two”.

($1 = 284.1500 naira)

 

(By Alexis Akwagyiram. Editing by Ulf Laessing and Ed Cropley)

Read more

Morocco enters free trade pact with China

24 June 2016 Comments (0) Business, Featured, Middle East

morocco china trade

The north African nation seeks to diversify its trading partners through agreements with the Asian giant as well as India and Brazil.

Morocco has signed a free-trade agreement with China, the North African nation’s largest trading partner in Asia.

While the overall effect on the Moroccan economy is under debate, experts say the agreement will create more purchasing power for Moroccans, who will have access to Chinese goods that are typically less expensive than those produced in country or elsewhere.

The move underscores China’s growing role in the economy of the continent as well as Morocco’s determination to diversify its trading partners. Morocco has also entered trade agreements with Russia and India and an agreement with Brazil is under negotiation.

China is Morocco’s fourth largest trading partner after Spain, France, and the United States. Morocco is China’s seventh largest trading partner in Africa. While trade between Morocco and China has grown in recent years, it is still dwarfed by Chinese trade with neighboring Algeria. Trade between China and Algeria reached $8.6 billion in 2013 compared to $2.3 billion in trade with Morocco.

Experts debate impact

Analysts say the new agreements could have mixed results.

Moroccan textile factory

Moroccan textile factory

On the plus side, competition from Chinese goods could force Moroccan industries to better serve consumers in their country and Moroccan businesses will gain greater access to one of the largest markets in the world.

At the same time, they say, more than half of Moroccan exports are minerals, fertilizers and metals produced by large industries while small businesses struggle to compete.

Some argue that the opening of trade will cost jobs in Morocco, but others note that Moroccan and Chinese workers seldom compete for the same jobs. China’s economy is based on heavy and light industry, while agriculture, food processing and precision manufacturing dominate Morocco’s. The two countries do have some direct competition in textiles and leather.

The agreement will create more wealth in Morocco. With access to cheaper goods, even poor Moroccans will gain spending power.

Economic progress

With a gross domestic product of $252 billion and a population of about 33 million people, Morocco has made significant progress in integrating its economy into the global market through efforts including streamlined procedures for operating a business and launching a nascent aeronautics industry, according to the Heritage Foundation.

After a strong performance in 2015, with growth in the gross domestic product of 4.4%, the Moroccan economy has slowed this year, according to the World Bank. Drought has reduced cereal production, and GDP growth is expected to be less than 2% in 2016.

While Morocco has been a U.S. trading partner, as well as a key ally in the war on Islamist terrorism, the nation in recent years has sought to expand its trading partnerships, notably with members of the BRICS coalition of emerging economies that seeks to break Western domination of the global economy.

BRICS is made up of the emerging markets of Brazil, Russia, India, China and South Africa.

Agreements with India, Russia

In October, Morocco and India signed agreements designed to encourage more trade between the two nations. Morocco’s major exports to India are rock phosphates and phosphoric acid.

In November, Morocco announced a free trade agreement with Russia. Morocco is Russia’s main trade partner on the continent and its exports include citrus fruit, vegetables and frozen sardines.

In June, Moroccan representatives met with trade officials of Brazil to discuss a possible free trade agreement. Brazil is another importer of Moroccan phosphates and its derivatives.

Chinese influence grows

Meanwhile, China is a major trading partner with other African nations including South Africa ($20 billion), Nigeria ($15 billion) and Angola ($36 billion).

China in recent years has been developing relationships with many African countries through investment, aid and trade relationships, driven largely by China’s energy needs.

Morocco, a net oil importer with strong ties to the United States and Europe, has not been of great interest to China until recently. However, Morocco has sought allies in its territorial dispute with the separatist Polisario Front in the Western Sahara.

Given China’s strong trade ties to Algeria, it seems unlikely, however that the Asian nation would support Morocco in that dispute.

Read more

Zimbabwe to import 250,000 tonnes of maize from Mexico

23 June 2016 Comments (0) Africa, Business, Latest Updates from Reuters

HARARE (Reuters) – Drought-hit Zimbabwean will import more than 250,000 tonnes of maize from Mexico to fill the shortfall caused by the severe drought sweeping through the southern Africa, the agriculture minister said on Thursday.

Joseph Made said Zimbabwe would also import the staple crop from neighbours South Africa and Zambia, as well as from the Ukraine but did not give precise figures for these imports.

“We anticipate anyway upwards of 250,000 tonnes will be coming from Mexico. The other maize will obviously be coming from Zambia as well some from South Africa and Ukraine,” Made told reporters.

An El Nino-induced drought has hit southern Africa, slashing the output of the staple maize crop.

Zimbabwe’s government previously said the drought forced it to cut the 2015 growth forecast to 1.5 percent from 3.2 percent, with the 2016 output unlikely to be any better.

The U.N. World Food Programme said earlier in June that output in Zimbabwe would fall below 60 percent of the five-year average of between 700,000 and 1 million tonnes.

 

(Reporting by MacDonald Dzirutwe; Writing by Mfuneko Toyana; Editing by James Macharia)

Read more

Tunisia struggles to attract foreign investment

23 June 2016 Comments (0) Business, Featured, Middle East

tunisia oil

Tunisia reports slowed growth as international companies show concern about the difficulty of extracting oil and phosphates as well as high taxes.

Growth of foreign investment in Tunisia has slowed amid concerns about a lack of government incentives and the difficulty of extracting the North African nation’s oil and phosphates.

Direct foreign investment in Tunisian industry amounted to $81 million in the first four months of 2016, an increase of less than 5% over the same period in 2015. A year earlier, direct foreign investment had doubled as the country adopted its first constitution and formed a government in the aftermath of Arab Spring.     

Tunisia lacks appeal to investors for a number of reasons, according to experts.

“Insecurity, high taxation and the difficulty of extraction of potential reserves are the main obstacles that prevent Tunisia from being attractive to foreign investors,” said Radhi Meddeb, chief executive officer of the engineering company Comete.

Tax policy cited

Only 15% of oil company executives believe Tunisian tax policy encourages investment, according to Global Petroleum Survey 2015.

Under the nation’s tax policy, the state gets 80%of the revenue on the sale of oil while the operating companies receive only 20%, even though they bear all of the costs with no help from the government.

Tunisia also has more limited reserves than other sources of oil and phosphates. The Global Petroleum survey estimated the country’s oil reserves amount to the equivalent of about 850 million barrels, compared to nearly 24 billion in Texas. Reserves of phosphates amount to 100 million tons, 20 times less than in Algeria.

While relatively stable compared to other nations that were part of Arab Spring, Tunisia is not immune to political and economic upheaval. For example, Gafsa Phosphate posted nearly $10 million in losses in 2014 amid recurring strikes by transport workers.

Production drops sharply

While 50 foreign companies were operating in the extraction industry in 2010, when the Arab Spring began, fewer than half that many operate in Tunisia today.

Nationally, phosphate production has dropped by nearly 60%, from 8.5 million tons in 2010 to 3.5 million tons. Oil production has fallen by half, from about 90,000 barrels a day in 2009 to 45,000 this year, according to Trading Economics.

On the plus side, Tunisia has announced it will join the Initiative for Transparency in the Extractive Industries, a global standard that promotes accountability and fights corruption in the use of revenues from extracted resources.

Tunisia first applied to join the initiative in 2012, but political instability prevented its membership, according to Kais Mejri, head of governance at the Ministry of Industry.

Tunisia believes that the initiative will make the nation more attractive to foreign investors compared to rivals who are not part of the initiative. “We hope to return next year to the same (foreign investment) rates as before 2011,” said Ridha Bouzaouada, Tunisia’s Director General for Industry.

Part of larger, regional struggle

Tunisia is not alone in its economic challenges.

More than five years of turmoil across the region has created a negative economic outlook, according to Hamdi Tabbaa, president of the Arab Businessmen Association.

Tabbaa estimated regional economies have lost about $1.2 billion in the past five years as Syria, Iraq, Yemen, Libya, Egypt, Lebanon and Tunisia saw an average decrease of 35% in their gross domestic product.

Direct foreign investment in the region was also dropping. It declined from $48 billion in 2014 to $44 billion last year, well under half of the record high of $96 billion in 2008, according to the Arab Investment and Export Credit Guarantee Corporation.

Read more