Tag Archive for: African Economy

Andrew Stegmann

The Future Of African Oil & Gas

Africa holds around 7% of the world’s proven crude oil and natural gas reserves, yet the continent remains largely under-explored. It’s safe to say that the motherland is far from having exploited its full potential. For this potential to bear fruit and translate into economic development and jobs, several things need to happen. Good thing is, they are slowing taking shape.

The rise of the African continent

For example, it is encouraging to see African oil and gas companies becoming more and more a part of the continent’s economic empowerment story. In this context, 2020 is likely to see a continuation in the rise of the African private sector’s contribution to supporting industry growth and jobs creation.

An emergence of strong African oil companies (AOCs) across the value chain, from field operators to services providers, is a key emerging trend for the sector. Many companies from West Africa particularly are seeking regional expansion across the continent and driving regionalization. As most countries strengthen their local content regulations, the trend is likely to accelerate.

Regional and international cooperation

This year will prove whether African nations have learned how to cooperate on transnational energy deals and infrastructure for the benefit of all involved. It could see the unlocking of multi-billion-dollar opportunities through transnational energy cooperation and projects. This applies to planned and stalled pipeline projects in need of revival such as the East African Crude Oil Pipeline for instance, but also to upstream investments and developments, especially in the Gulf of Guinea. Similarly, the way African Continental Free Trade Area (AfCFTA) impacts intra-continental trade could be a boost to the energy sector if properly utilized.

On the international stage and under the leadership of Secretary General Mohammad Sanusi Barkindo, Opec has welcomed more African producers – Equatorial Guinea (2017) and the Republic of Congo (2018) being the latest ones. As the organisation further expands the Opec/non-Opec outreach across Africa to find consensual solutions to market stability while offering technical assistance to upcoming producers, 2020 might be the year a new addition of an African oil-producing country as Opec member.

Expanding midstream and downstream infrastructure

New refinery and petrochemical complexes are being constructed and existing ones will be expanded in the near and medium term. The continent is likely to see the emergence of regional hubs and markets with the strategic ambition of procuring petroleum products and natural gas. Examples include Equatorial Guinea’s LNG2Africa initiative and the Akinokien import and re-gasification terminal, the Dangote Refinery in Nigeria, and Ghana’s Tema LNG terminal project, among others.

Market access is also increasing on the back of several pipeline projects such as the Lokichar-Lamu Crude Oil Pipeline in Kenya, and the intensifying talks over the 5,660km pipeline that could supply gas to as many as 15 West African countries between Nigeria and Morocco. Niger also signed the Transport Convention on the construction and exploitation of the Niger-Benin Export Pipeline, key to Niger significantly increasing its crude oil production over the next five years to as high as 100,000bpd. In East Africa finally, Ethiopia and Djibouti have reached an agreement on a gas pipeline that will offer an exit route for Ethiopia’s gas fields and help unlock tremendous value in gas export potential.

NJ Ayuk, Chairman of the African Energy Chamber.

Africa is transitioning to gas

There is a promising outlook for the African gas sector. Countries without substantial gas resources will be turning to liquefied natural gas (LNG) imports to power their homes and industries. Ghana, for example, will is installing a new floating re-gasification unit in 2020. Ivory Coast, Morocco and South Africa have also looked at installing these units in the near future. The urgent need for rapid industrialization will create tremendous opportunities for gas to fuel African economies in a more cost effective and environmentally sustainable manner. The race is on.

At the end of the Gas Exporting Countries Forum’s 2019 Summit, Equatorial Guinea launched the Declaration of Malabo – a document affirming the importance of retaining rights of member countries for natural gas resources – which will lead to the securing the energy transition Africa needs and to meeting sustainable development goals and attracting investment into gas infrastructure projects.

Technology

Africa’s potential for innovation and leapfrogging is slowly affecting its hydrocarbons sector – we are finally seeing the adoption of sophisticated software and tools such as artificial intelligence (AI) and machine learning (ML) in oil and gas. New ways to drill wells and handle equipment are being adopted, new seismic data collection techniques and petroleum data management tools are being designed.

The trend is also helping the industrial and manufacturing sectors to save cost and address the logistical and power challenges of operating on the continent.

We definitely see international technology providers investing and collaborating with African companies to drive efficiency and environmentally-friendly production methods in 2020 and beyond.

Security concerns

We are likely to see an increase in African governments and oil companies doing more to protect the security of energy infrastructure and assets on the continent. Oil & gas resources and commodities are prone to security risks – leaving countries victims to energy theft, vandalism, piracy. Such acts cost Africa’s oil & gas sector several billion dollars a year in losses and reparations. With insecurity now spreading to East Africa, the industry has taken as a responsibility to seriously address the issue.

Regulatory reforms

With hundreds of blocks and acreages up for grabs in 2020 and a widening energy infrastructure gap, sub-Saharan African countries are increasingly competing for investments and technology. Countries like Senegal, Benin, Gabon, Algeria and Cameroon have already implemented structural and regulatory reforms in 2018/19 to attract new investment. Several others are still restructuring their energy policies to provide more incentives to develop domestic oil & gas reserves (associated and non-associated), fuel for thermal generation and both expand and diversify their energy infrastructure.

 

For information as to how Relocation Africa can help you with your Mobility, Immigration, Research, Remuneration, and Expat Tax needs, email info@relocationafrica.com, or call us on +27 21 763 4240.

Sources: [1], [2]. Image sources: [1], Markus Spiske [2].

Andrew Stegmann

Nielsen Reveals Stabilizing Prospects in Africa

Africa’s markets are never quite what they seem as revealed by the latest Nielsen Africa Prospect Indicator (APi) which shows that amidst relentless change, country prospects are stabilizing on the continent. This is evidenced by the fact that only two markets changed position on the latest APi ranking update, with Kenya remaining in top position, followed by Cote d’Ivoire.

According to the latest results Nielsen Executive Director Intelligence Global Markets Ailsa Wingfield comments; “Looking at the broader macro prospects, it is clear that Sub-Saharan Africa’s momentum will take longer than expected to flourish, with the initial 3.3% SSA GDP forecast for 2019, downgraded to 2.8%. With this slower growth comes subdued advances in consumer prosperity and demand, and business growth will need to be boosted in non-commodity dependent countries, which provide nuggets of opportunity.”

When drilling down to individual country performance, it becomes clear that top performer Kenya, is characterized by strong economic and consumer prospects, however, its business and retail prospects have deteriorated and GDP growth rates are lower with the economy losing steam in Quarter 1, 2019.

Second ranked Cote d’Ivoire’s greatest challenge is its consumer potential which weakened further in the latest quarter. Only 17% of Ivorian retailers feel that consumer spend is increasing and just 15% think that consumers are increasingly willing to try new products.

Tanzania remains steady in third place on the APi ranking with improved retail prospects although these are countered by a weaker business outlook due to restrictive investment regulations and policies.

Ghana in fourth position is forecast by the International Monetary Fund (IMF) as having one of the fastest growing economies in the world. Companies share this positive outlook, rating Ghana as Africa’s second best business prospect, with improved growth expectations. Ghanaian consumer prospects have also increased significantly, with 36% of retailers of the opinion that consumer spend is increasing, compared to only 11% a year ago.

Nigeria retains fifth place which represents its best level in the last three years, and its economic recovery is set to gain further momentum in 2019, with business prospects improving in parallel.

Business prospects

Looking at how businesses rate country growth prospects, the SSA average is moderate for the year ahead, and has remained unchanged for four consecutive quarters. Ethiopia leads the country growth expectation list followed by Ghana, Kenya, Uganda, Cote d’Ivoire and Nigeria, all ahead of the SSA average. While only six markets are regarded as having a ‘good’ growth outlook, businesses back their own growth options more highly. Own business growth expectations exceed country growth expectations in two thirds (12) of Africa’s markets.

Nigeria and South Africa show the biggest discrepancy between country and own growth outlook, where own growth expectations are markedly stronger. Companies maintain a strong conviction that these two core markets remain crucial to success and that growth is achievable despite adverse macro factors.

Consumer prospects

Africa’s consumers are marked by disparate spending intentions and purchasing pressure points. For example, Ivoirians pay 33% more than Nigerians for a common basket of goods and only 15% of Ivoirians are more willing to try products, compared to 44% of Nigerians, despite a GDP per capita of 1.6 times higher than Nigerians. Ivoirians’ purchase decisions are however not primarily based on price. They are firmly entrenched in familiarity and trust, with 84% of consumers saying they choose products with this in mind. For this reason, brand propositions must establish awareness and confidence to gain users and grow spend, not merely provide cheaper alternatives.

In Nigeria, despite higher inflation and lower incomes, consumers are adventurous when it comes to experimenting with new products which provides a window of opportunity to reach and resonate with consumers based on their more positive spending intentions.

This shows that cash constrained consumers don’t only need better price points or are risk averse, but also want value and quality assurances from those they have confidence in. Brand, marketing and retail initiatives will therefore demand very different strategies in different countries.

Retail prospects

Overall, the retailer growth outlook is the most favorable it has been in three years, with Tanzania, Cote d’Ivoire, South Africa and Uganda ahead of the average. That said, the ease of doing business remains challenging. Manufacturers therefore need to work with retailers to bolster sales through optimal stock supply, relevant product portfolios, favorable pricing points and beneficial trading terms.

Smaller players are providing formidable competition on this front in the prolific informal channels. As a result, the top 10 manufacturers account for approximately 55% of sales in Kenya, Nigeria, Ghana and Cameroon but are growing at less than 5% per annum, while smaller manufacturers are growing ahead of 15%.

Wingfield adds; “With temperate growth, business expectations are centered on core countries for success, but now more than ever, strategies need to be flexible, adaptable and focused on consumers.”

 

For information as to how Relocation Africa can help you with your Mobility, Immigration, Research, Remuneration, and Expat Tax needs, email marketing@relocationafrica.com, or call us on +27 21 763 4240.

Sources: [1], [2]. Image sources: Jacques Nel [1], [2].

Andrew Stegmann

Africa’s Output Grew by 3.4% in 2018, Afreximbank’s Africa Trade Report 2019 Shows

Africa’s output grew by 3.4 per cent between 2017 and 2018 despite the slowdown in global growth during that period, a new report by the African Export-Import Bank (Afreximbank) has shown.

The African Trade Report 2019: African Trade in a Digital World, launched today in Moscow during the 26th Afreximbank Annual Meetings, states that Africa’s total merchandise trade in 2018 had a value of over $997.9 billion, noting that the continent remained one of the fastest growing regions in the world.

World Trade Organisation estimates show that the volume of global merchandise trade grew by 3 per cent in 2018, down from 4.6 per cent in 2017.

According to The African Trade Report 2019, the findings highlight the resilience of Africa’s economies to global volatility at a time of rising uncertainty, escalating trade wars and tariffs between the United States, China and others. The resilience reflects the diversification of Africa’s trading partners in the context of South-South trade, growing fixed investment and public and private consumption, boosted by expanding urban populations and softening inflation. These factors reduce Africa’s exposure to the business cycles associated with individual countries and regions.

The report noted that while the European Union remained Africa’s main continental trading partner in 2018 – accounting for 29.8 per cent of total trade – African trade with the South grew significantly over the last decade to account for more than 35 per cent of the continent’s total trade in 2018. China and India further consolidated their positions as Africa’s first and second single largest trading partners, accounting for over 21 per cent of total African trade in 2018. Intra-African trade also increased steadily in 2018, growing by 17 per cent to reach $159 billion.

The report highlights that Africa has the potential to do more, noting that its contribution to global trade remains marginal at 2.6 per cent, up from 2.4 percent in 2017, and that, while intra-African trade rose to 16 per cent in 2018 from 5 percent in 1980, it remains low compared to intra-regional trade in Europe and Asia.

The report states that ongoing digitalisation is paving the way for a new African economy, with e-commerce platforms and internet penetration expediting transactions, reducing costs and leading to a new generation of transnational digital consumers.

The report urges African governments to further capitalise on the opportunities associated with digitalisation, by bolstering regulatory environments and supporting the development of digital ecosystems.

Digitalization, the reports states, can unlock Africa’s potential in driving economic development and the integration of African countries into the world economy. It can also reduce the region’s dependency on raw commodities and natural resources by helping economies diversify into more value-added products that can enhance extra-and intra-African trade.

Prof. Benedict Oramah, President of Afreximbank, said: “It is vital that Africa grasps the economic growth opportunities flowing from the African Continental Free Trade Agreement, growing domestic demand and population and our ever-closer investment and trading links with emerging partners in the South. We must exert concerted action to ensure that we develop, industrialize and diversify our industries and supporting infrastructure to foster regional integration and participate fully in regional and global value chains.”

Chief Economist and author of the report, Dr Hippolyte Fofack said: “Intra-African trade, which grew by 17 per cent in 2018, more than three times the rate of growth of extra-African trade, was the major driver of Africa’s total merchandise trade in 2018.”

 

For information as to how Relocation Africa can help you with your Mobility, Immigration, Research, Remuneration, and Expat Tax needs, email marketing@relocationafrica.com, or call us on +27 21 763 4240.

Sources: [1], [2]. Image sources: [1], [2].

Andrew Stegmann

Operational Phase of the African Continental Free Trade Area Launches in Niger

The operational phase of the African Continental Free Trade Area, AfCFTA has been launched after a day-long summit of Heads of State and Government of the African Union (AU) in the Nigerien capital.

The AfCFTA will be governed by five operational instruments, i.e. the Rules of Origin; the online negotiating forum; the monitoring and elimination of non-tariff barriers; a digital payments system and the African Trade Observatory.

Each one was launched by different Heads of State and Government that included President Cyril Ramaphosa of South Africa, President Abdel Fattah El Sisi of Egypt who is current Chairperson of the AU; Mr. Moussa Faki Makamat, the Chairperson of the African Union Commission; and President Mahamadou Issoufou of Niger, who is the Champion of the AfCFTA.

The launch ceremony included “a roll call of honour”, at which the 27 countries that have ratified the instruments of the AfCFTA were announced, and those that have signed but not yet ratified were mentioned. A commemorative plaque of the signing was also unveiled.

The AfCFTA agreement was adopted and opened for signature on 21 March 2018 in Kigali. The AfCTA entered into force on 30 May 2019, thirty days after having received the twenty-second instrument of ratification on 29 April, 2019 in conformity with legal provisions.

“The speedy entry into force of the AfCFTA is a source of pride for all of us”, said AU Commission Chairperson Mr. Moussa Faki Mahamat. He described the free trade agreement as one of the instruments for continental integration in line with the objectives of the Abuja Treaty and the aspirations of Agenda 2063.

The Chairperson also highlighted the importance of peace building and security on the continent, adding that “it would be a delusion to talk of trade and development without peace and security”. He also stressed that, for the AfCFTA to be effective, there is need to open borders to other Africans. In this light, host President Mr. Mahamadou Issoufou, said the free trade area will tear down borders inherited from Africa’s colonial past and ensure full continental integration.

Egyptian President Abdel Fattah El Sisi stressed the need for the establishment of linkages with the private sector and the business and investment communities, while also calling for the involvement of the youth who will “continue the march” towards development.

The United Nations Deputy Secretary General Ms Amina Mohammed noted that the AfCFTA is a tool to drive growth and innovation for Africa, and to create opportunities for sustainable development and realizing Agenda 2063.

The AfCFTA will be one of the largest free trade areas since the formation of the World Trade Organisation, given Africa’s current population of 1.2 billion people, which is expected to grow to 2.5 billion by 2050.

Meanwhile Ghana has been confirmed by the Heads of State and Government as the host of the secretariat of the AfCFTA, having prevailed over six other countries that had also expressed interest in hosting it.

 

For information as to how Relocation Africa can help you with your Mobility, Immigration, Research, Remuneration, and Expat Tax needs, email marketing@relocationafrica.com, or call us on +27 21 763 4240.

Sources: [1], [2]. Image sources: [1], [2].