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Eni steals march on East African LNG rivals with Mozambique plant approval

25 February 2016 Comments (0) Africa, Business, Latest Updates from Reuters

MILAN (Reuters) – Italy’s Eni said on Wednesday it has won approval from the Mozambique government to build its planned Coral floating liquefied natural gas plant.

The company, which aims to sell all the LNG from the plant to British oil company BP, is expected to make a final investment decision this year but has now overcome one of the biggest hurdles.

The pace of development of giant gas export schemes has slowed globally as liquefied natural gas prices have plummeted with oil prices, prompting many companies to delay funding decisions until business conditions brighten.

Eni is moving ahead in Mozambique despite the added challenge of using a relatively untested technology to ship the gas.

Its floating LNG (FLNG) export plant will be moored above the Coral gas field, containing 5 trillion cubic feet of gas, in resource-rich waters off Mozambique.

One of the world’s poorest countries, Mozambique is hoping to fuel future prosperity with revenue from an estimated 180 trillion cubic feet of offshore gas.

Eni’s plans include drilling six subsea wells and installing a floating LNG facility with a capacity of around 3.4 million tonnes per year.

Regional LNG rival Tanzania has struggled to match Mozambique’s pace of progress in getting its own fledgling industry off the ground, hamstrung by regulatory uncertainty and other factors.

Large latent capacity in the United States to export LNG at relatively low cost has also raised the competitive bar for what rival projects elsewhere in the world must do to attract customers, industry sources say.

LNG prices are around a quarter of what they were two years ago as a wave of new supply has overcome demand growth, depressing the market, with yet more supply on the horizon as the United States starts exporting.

Eni CEO Claudio Descalzi said approval of the Coral POD was a historical milestone for the development of the group’s discovery of 85 trillion cubic feet of gas in the Rovuma Basin.

“It is a fundamental step to progress toward the final investment decision of our project which envisages the installation of the first newly built FLNG facility in Africa and one of the first in the world,” Descalzi said.

Eni is the operator of Area 4 with a 50 percent indirect stake owned through Eni East Africa which in turn holds 70 percent of the Area.

U.S. energy company Anadarko Petroleum plans to build an onshore LNG export scheme in Mozambique, but is expected to lag Eni’s project.

 

(By Oleg Vukmanovic and Stephen Jewkes. Editing by Francesca Landini and Susan Fenton)

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South Africa guarantees Eskom’s power purchase agreements

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

CAPE TOWN (Reuters) – Power purchase agreements between South African power utility Eskom and independent power producers (IPPs) are now categorized as contingent liabilities, adding about 200 billion rand ($13 billion)to government’s guarantee exposure from 2015/16, National Treasury said on Wednesday.

The government issues guarantees, which will amount to 467 billion rand at 31 March 2016, to several state-owned companies, with Eskom accounting for 74 percent of the total guarantee portfolio.

The portion of the guarantees that firms borrow against, known as the exposure amount, is a contingent liability and creditors can call on government to pay the debt should any default occur.

“The probability of default is low, since the regulator generally approves tariff increases that accommodate these agreements. However, significant deterioration in Eskom’s financial position may increase government’s risk exposure,” the Treasury said.

Exposure amounts are projected to increase to 258 billion rand at the end of March, from 226 billion rand in 2014/15, with Eskom accounting for most of the increase.

Africa’s most advanced but struggling economy is diversifying its energy mix away from an over-reliance on coal-power plants to include greener wind and solar projects.

A successful independent power producers program, started in 2010, is expected to provide 7,000 megawatts of energy with 47 projects fully operational by mid-2016, up from the 6,377 MW procured at the end of December.

Treasury reiterated on Wednesday that government’s plan for 9,600 MW of new nuclear power would continue “at a scale and pace that is affordable.”

Additional funding of 200 million rand was available in 2016/17 for transactional advisers and consultants on the nuclear programme.

Energy investment amounts to 70 billion rand this year and will be over 180 billion rand over the next three years as construction on Eskom’s Medupi, Kusile and Ingula power stations is completed, said Finance Minister Pravin Gordhan.

($1 = 15.3266 rand)

 

(Reporting by Wendell Roelf; Editing by Tiisetso Motsoeneng)

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Sugar Refining in the Middle East Faces a Squeeze

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

Al Khaleej Sugar

Middle Eastern sugar refining faces a squeeze as global demand and prices drop, and production capacity across the region rises

The UAE’s Al Khaleej sugar refinery sells to ICE Futures Europe

The expansion of Middle Eastern sugar refining has pushed one of the region’s leading producers to sell through the London Investment exchange, the first time a company from the region has done so in a decade. In a deal worth around $200 million, UAE-based Al Khaleej Sugar Company delivered just over 200,000 metric tons of white sweetener to ICE Futures Europe, which was bought in full by ED&F Man Holdings. But the move signals a difficult time for sugar refining in the Middle East.

Al Khaleej, which refines, produces, and distributes refined and raw sugar and sugar syrup, was founded in 1992, and was one of the first home-grown sugar refineries to see success in the Middle East. Importing raw sugar from Brazil and India, it has an annual output of around 1.8 million tons, and is one of the world’s largest sugar refiners. Although it may seem odd that one of the world’s leading sugar refineries is based in a region without the correct weather to produce its own sugar, the World Trade Organization’s decision to cap exports from the European Union in 2006, formerly the largest exporter of white sugar to the MENA region, left a huge gap in the market.

However, a decade later sugar prices have dropped, and there is a global sugar surplus, while consumer demand is weak. Al Khaleej’s rare move to sell through the ICE – at a time when it is operating at 70% capacity, well below its production capacity of around 2.5 million tons per year – has only underscored these concerns. As analysts comment, the London exchange is seen as a last resort buyer, signaling that there is not much of a market. Al Khaleej has said that where last year’s weak demand was compensated by high sugar premiums, the company is looking to 2016 with some trepidation.

Sugar refining capacity expands in Middle East

The choice to sell outside of the MENA physical market also highlights the excess refining capacity of the region itself. Inspired in part by the success of Al Khaleej during the 2000s, a significant number of new refineries have come onstream in recent years, notably in Saudi Arabia, Iraq, Sudan, Yemen, and Bahrain (which has the $150 million Arabian Sugar Company which produces 600,000 metric tons per year). The MENA region’s refining production is around 8.5 million tons, although its total capacity stands at around 13.5 million tons, and consumption is around 12-15 million tons.

Between 2016 and 2018, that capacity is expected to increase by around 4.7 million tons thanks to a stream of projects which were planned and approved before demand dropped. A new Al Reef Sugar Refinery is due to start operations in Jizan, Saudi Arabia by the end of 2017, with a planned refining capacity of 1 million tons annually. It also has plans to acquire land in East Africa to grow its own cane sugar crop in the long term. A second refinery in Saudi Arabia, the Durrah refinery, is also under construction, with a planned refining capacity of 750,000 tons.

Further refineries are also in development across the Middle East, including in Oman, where work on the Sultanate’s first ever sugar refinery, the $250 million Oman Sugar Refinery Company, has commenced, and in Algeria, where production has just started at a new refinery with a capacity of 350,000 tons per year. That figure will increase to 700,000 tons annually over this year to serve the domestic Algerian market which consumes 1.2 million tons a year. Bahrain, Yemen, and Iraq have also expanded their sugar refining capabilities in recent years.

Production outstripping demand

However, it is feared that this significant expansion will create a production capacity far in excess of forecast consumption. Indeed, it is estimated that processing capacity in the region will be producing a 6.1 million ton surplus by 2018.

In Saudi Arabia white sugar consumption is around 1.2 million tons annually, a figure already matched by the Saudi refinery, United Sugar Company (a subsidiary of the Savola Group). The two further refineries currently under development in the Kingdom will push production capacity to saturation, especially considering that United is already operating at a loss and has plans to expand its annual capacity by 500,000 tons by 2017. Similarly in Oman, a new refinery with a planned annual capacity of 700,000 tons seems unnecessary in a country that consumes only 100,000 tons a year. Like Iraq, many countries across the Middle East are now self-sufficient. So as raw sugar futures drop to a three and a half year low, Middle Eastern sugar refining should be expecting a squeeze.

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South Africa’s Standard Bank sees FY profit up 30%

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

JOHANNESBURG (Reuters) – South Africa’s Standard Bank said on Wednesday its full-year profit would rise by up to 30 percent higher, boosted by lower losses from discontinued operations outside Africa, sending its shares up.

Standard Bank said its diluted normalised headline earnings per share (EPS) will be between 20 percent and 30 percent higher for the 12 months to end-December from the previous year.

Headline earnings per share is the main profit gauge in South Africa and strips out certain one-off items.

Standard Bank last year completed the disposal of its controlling interest in its British unit, since renamed ICBC Standard Bank, to China’s ICBC, which also holds a 20 percent stake in the South African bank.

The previous year included the British unit’s loss of 3.7 billion rand which has narrowed substantially in the twelve months to end-2015, the company said.

Shares in Standard Bank were up 4.7 percent at 113.88 rand by 0748 GMT, compared to a 0.9 percent decline in the Johannesburg Securities Exchange’s Top-40 index.

 

(Reporting by TJ Strydom; Editing by James Macharia)

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Mali economic growth to rise to 6% in 2016

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

BAMAKO (Reuters) – Mali’s economy will grow 6 percent this year, bolstered by agricultural and mining production, the ministry of economy and finance said on Tuesday, up from an expansion of 4.9 percent in 2015.

According to preliminary figures, the West African nation produced 8.04 million tonnes of grain this season, up from 6.98 million in 2014-2015, and 550,370 tonnes of cotton, an increase from 548,000 tonnes in 2014-2015.

“The prospects are good,” Oumar Diall, head of Mali’s forecasting and economic analysis division, told Reuters. “The growth performance will be particularly in agricultural cotton but also gold exports,” he added.

President Ibrahim Boubacar Keïta said last month that Mali produced 50 tonnes of gold in 2015 and hopes to produce more in 2016 as new mines comes online, though no specific forecast has been given.

The projected economic growth this year would represent a turnaround for Mali, one of the region’s leading cotton producers, whose growth slipped to 4.9 percent last year, down from 7.2 percent in 2014.

Malian government forces are embroiled in a conflict with Tuareg separatists in the north of the country. Although a peace deal was signed last June, mediators have struggled to enforce it and militants have continued to stage deadly attacks including at a hotel in the capital Bamako in November.

 

(Reporting by Tiemoko Diallo, writing by Edward McAllister; editing by Gareth Jones)

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Bank Turned Think Tank: Attijariwafa’s Newest Foray

23 February 2016 Comments (0) Africa, Business, Featured

Attijariwafa-Bank

The African Development Club, launched in February by banking giant Attijariwafa, promises to be an exclusive club providing members with access to a platform connecting developers and investors.

Morocco’s largest bank, Attijariwafa, has recently announced a new development forum called the African Development Club. This club was created by the Casablanca-based institution to provide developers and investors with a platform for meetings and exchanges across the continent. Since January 25th, representatives from Africa’s biggest banks have crisscrossed the continent, presenting this new initiative to the leaders of Africa’s most substantial companies. Attijariwafa Bank is the largest bank on the continent in terms of branches: 3,400 outlets across the continent. The bank is often recognized for its ability to connect Morocco with greater Sub-Saharan Africa through trade relations. It is for this reason that Attijariwafa was able to create its own think tank.

Going Their Own Way

Attijariwafa Bank is more than 100 years old, has more than 6.8 million customers and employs more than 16,000 Africans across the continent. As part of the King of Morocco’s holding company, Attijariwafa has unprecedented access to Moroccan business opportunities–which is why Attijariwafa was so well equipped to launch this exclusive development group.

At the 2015 African Development Forum, hosted by Attijariwara Bank, Mohamed Kettani said that “South-South cooperation is vital. So we must create larger, cross-frontier trading spaces. We have to make the most of the mutualization and the complementarity of our resources and our economies. But we can’t do it without the North, because today in Morocco we are meeting international investors, from Europe, the US, and Asia, who are making Morocco a platform where part of the value is created in Morocco, another part in the North, and a third part in the countries south of Morocco.” Instead of waiting for change to happen, Kettani took matters into Attijariwara’s capable hands.

In December of 2015, the African Development Club was launched: Kettani promoted it as “an open African community whose purpose is to build an inter-priority network of decision makers and economic operators, development opportunities generator and reflections on trade and investment on the continent.” By creating a network of businesses, Attijariwafa is doing what many believe African governments have failed to do in the past: inspire real development through cross-continental economic ties, unhindered by the weight of political relationships. Perhaps unsurprisingly for a club developed by a financial institution, this club will only be open to those willing to pay.

Getting Down to Business

Attijariwafa Presences

Attijariwafa Presences

Mounir Oudghiri, director and general manager of Attijariwafa’s Senegalese subsidiary, explained the African Development Club as “a kind of Bluetooth, a private network open to those who want to be a part. This is an accelerator and integrator of mastering the best information possible to speed up the business.” The club gives access to more than 30,000 of Africa’s most influential business people. Not only will this group make use of its existing strengths, but it aims to provide vocational training for emerging business experts. Attijariwafa Bank prides itself upon its educational opportunities for its thousands of employees. As a self-designated pan-African bank, ensuring that all employees, from all backgrounds and regions, are up to par with their international counterparts is of the utmost importance. It stands to reason that Attijariwafa would similarly emphasize the importance of capacity building between and amongst club members.

The club will also provide its members with a database of potential connections in more than 180 countries and is primarily aimed at business leaders, the influential and the wealthy both inside and outside of Africa. Attijariwafa has strategic partnerships with several Chinese banks, and as China’s investment in Africa grows, this can only be a promising region of investment for the business savvy. By working across state borders to forge economic ties, members of the African Development Group will be able to draw upon the experience and various fields of expertise of their peers, thus giving way to a rich business environment.

Will it Work?

There are, of course, a variety of potential flaws to this plan: by requiring members to pay a fee to belong, budding entrepreneurs without the capital to cover the costs will be excluded. This threatens to widen the income gap between the wealthy elite, who will be members and thus have access to an enormous number of important individuals and businesses, and small businesses that have thus far been excluded from development. If the members of the African Development Club choose to invest in their communities–be it through a micro-lending program, infrastructure development or encouraging young people to stay in school with vocational training incentives–then this club could very well change the face of development in Africa.

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Egypt’s Midor signs $1.2 billion loan agreement

23 February 2016 Comments (0) Business, Latest Updates from Reuters, Middle East

CAIRO (Reuters) – Egypt’s state-owned Middle East Oil Refinery Company (Midor) has signed an initial loan agreement with three banks for $1.2 billion, the state news agency said on Tuesday.

The loan represents around 80 percent of the cost of its $1.4 billion Alexandria refinery lab expansion, while the remaining $230 million will be self-financed, Midor Chairman Mohamed Abdel Aziz said.

The agreement was signed by Abdel Aziz with the heads of a banking consortium that includes French banks Credit Agricole and BNP Paribas and Italy’s CDP.

The expansion at Midor aims to increase the company’s refining capacity to 160,000 barrels per day (bpd) from 100,000 bpd.

Egypt has struggled with soaring energy bills caused by high subsidies it provides on fuel for its population of more than 80 million.

 

(Reporting by Asma Alsharif; editing by Jason Neely)

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Kenya’s Mumias Sugar sees better second half, losses widens in H1

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

NAIROBI (Reuters) – Kenya’s Mumias Sugar expected to perform better in the second half after posting a wider pretax loss for the six months ended Dec. 31, the company said on Tuesday, adding falling prices due to illegal imports could pose a challenge.

The heavily-indebted firm has been struggling with cash flow problems in recent years, forcing the government to step in with bailout funds and has hired a new chief executive, Errol Johnston, to drive its turnaround.

Mumias said losses widened to 2.26 billion shillings ($22.23 million) from a loss of 2.08 billion shillings in the year ago period, due to increased finance costs.

Finance costs nearly doubled to 732.6 million shillings from 378.7 million shillings in the six-month period ended Dec. 31, 2014, it said in a statement.

“During the six-month period, high interest rates coupled with a depreciated Kenya shilling adversely affected the company in terms of high cost of finance and foreign exchange losses,” it said.

“This coupled with high operating and administrative costs saw the company post a pretax loss … which is 9 percent higher than the … loss incurred during a similar period last year.”

The shilling hit lows last seen in October 2011 in late 2015, while interest rates peaked above 22 percent.

Mumias said net revenue for the period rose 11 percent from a year ago to 2.98 billion shillings, while administrative expenses shot up to 1 billion shillings from 820.9 million shillings.

Mumias – which also faced hurdles from raw material shortages and low sugar prices – said it was seeking an additional 2 billion shillings cash injection from the government.

Kenya has used high tariffs to protect its sugar farmers but the policy has encouraged smuggling of cheaper sugar imports.

It said loss per share widened to 1.04 shillings, from 0.95 shillings during the first half ending December 2014.

($1 = 101.6500 Kenyan shillings)

 

(Reporting by George Obulutsa; Editing by Biju Dwarakanath)

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Zimbabwe orders diamond mines shut, says not nationalising

22 February 2016 Comments (0) Africa, Business, Latest Updates from Reuters

HARARE (Reuters) – Zimbabwe ordered diamond mining firms to stop operations immediately on Monday and leave the Marange fields as their licences have expired but denied the government was seizing the mines.

The diamond fields in the east of Zimbabwe near Mozambique are mined by nine firms. Eight, including two Chinese-run companies, are joint ventures 50 percent owned by the government and the other one is wholly owned by the state.

“The JV companies neglected or failed to renew the special (mining) grants. Some expired as far back as 2010 and others in 2013,” Mines Minister Walter Chidhakwa told reporters and executives from the mines in question.

“Since they no longer hold any titles, these companies were notified this morning to cease all mining activities with immediate effect,” he said, adding that Harare’s position was final and not negotiable.

Monday’s move follows months of wrangling between the mining companies and the government over its plans to merge the mines into one new entity to ensure efficiency and transparency, a proposal opposed by some of the firms.

Chidhakwa said the state-owned Zimbabwe Consolidated Diamond Company (ZCDC) will now hold all the diamond claims in the country, but said the state was not nationalising the mines.

“We are not expropriating. Remember the concession that we are taking does not belong to the company … it vests in the state. We are not touching the equipment, the bulldozers, the excavators, everything that you have put up remains your assets,” Chidhakwa said.

The latest move by President Robert Mugabe’s government could further tarnish the country’s image as a risky investment destination, with investors already unnerved by Mugabe’s drive to force foreign-owned firms to sell majority shares to locals.

“We have created a very unstable and threatening investment environment, no matter which sector you invest in Zimbabwe you will be interfered with,” said economic consultant John Robertson.

Zimbabwe was the eighth largest diamond producer in the world with 4.7 million carats in 2014, according to industry group Kimberly Process. Last year, the government received $23 million in royalties and other fees from diamond mines, down from $84 million in 2014.

Chidhakwa gave the firms, including Chinese-run Anjin and Jinan, 90 days to remove their equipment and said company officials now required government approval to access the mines.

He said companies in Marange had not fulfilled their investment promises and refused to be part of a new ZCDC, which was part of the reason why the government had to cancel the expired licences.

Robert Mhlanga, chairman of the largest mine in Marange, Mbada Resources, declined immediate comment on the move.

 

(By MacDonald Dzirutwe. Editing by James Macharia and David Clarke)

 

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Will Djibouti become the Singapore of Africa?

22 February 2016 Comments (0) Africa, Business, Featured

Ismail Omar Guelleh

The tiny country on the Horn of Africa hopes to use its strategic location to boost trade and diversify its economy.

The tiny nation of Djibouti has set its sights on becoming the Singapore of Africa, a trade hub that takes advantage of its location on one of the world’s busiest shipping routes.

China’s recently announced plans to build a naval base in the Horn of Africa country gave a boost to Djibouti’s ambitions. Other plans, with a price tag of $12.4 billion, include expansion of port facilities, two new airports, as well as a $4 billion rail link with Ethiopia, Djibouti’s land-locked neighbor.

“We want to follow the path of Singapore,” Dijbouti president Ismail Omar Guelleh said.

China provides significant assistance

China is playing a significant role in Djibouti’s development as the Asian nation seeks to expand its influence in the region and secure trade routes with its “One Belt, One Road” initiative. Chian is financing most of the $12.4 billion in improvements as well as the $4 billion rail link with Ethiopia.

Work is expected to start soon on the Chinese naval base, which will be located at the new multi-purpose port of Doraleh.

The two countries have agreed to a 10-year lease for the base with China paying rent of $100 million per year. The base will house about 10,000 Chinese troops and is expected to boost local employment and businesses.

The United States and France already maintain naval bases in Djibouti.

Djibouti’s plans call for development of a second port, also at Doraleh, designed to handle container shipments.

Two new airports will be built

China is also providing support for two new airports Djibouti is building at a cost of nearly $600 million. With these projects, Djibouti hopes to increase both cargo shipping and tourism, which makes up a small part of its economy.

One airport at Ali-Sabieh, south of the capital will be capable of serving 1.5 million passengers and moving 100,000 tons of air cargo annually. It is expected to begin operating in 2018.

A second, smaller airport will be built in northern Djibouti. Designed to handle more than 750,000 passengers a year, it is expecting to start operating in 2016.

Rail line to link Djibouti, Ethiopia

China also is building a $4 billion railway line that will link Djibouti with Ethiopia, one of the fastest growing economies globally, which gets about 90 percent of its imports through Djibouti. The rail line will give land-locked Ethiopia a link to the sea while Djibouti will gain access to a market of 95 million people.

Djibouti, one of the poorest countries on the continent, envisions becoming a middle-class country in two decades in its “Djibouti Vision 2035” blueprint drafted with the help of the World Bank.

Ports and trade are already at the center of Djibouti’s economy but the nation hopes to diversify.

More than two thirds of Djibouti’s gross domestic product comes from the services, primarily port and trade-related operations. The remainder is from manufacturing and agriculture. Poverty is prevalent and unemployment is 60 percent in urban areas. The literacy rate is 70 percent.

Seeking economic diversification

Djibouti seeks to further diversify its economy by becoming a regional financial hub for foreign investment, including Islamic banks. China and Djibouti also signed deals for banking and free trade zones.

“Nowadays we are shifting to a much more integrated development plan. We’re trying to diversify our economy,” Djibouti finance minister Ilyas Dawaleh said.

Dawaleh noted that his country has enjoyed strong economic growth in recent years – 6.5 percent of gross domestic product in 2015 and 5.7 percent in 2014.

He predicted Djibouti will achieve double-digit annual growth in the next three years. “This is our target with our diversification strategy we are undertaking now,” he said.

Dijbouti is one of four countries that make up the Horn of Africa and the only one that has been largely peaceful for the past two decades while its neighbors across the Gulf of Aden – Somalia, Eritrea, and Yemen, have endured conflicts. This has enabled Djibouti to emerge as the main military and maritime hub in the troubled region even though the country is largely undeveloped.

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