Black Gold in the Congo: Threat to Stability or Development Opportunity?
July 12, 2012 | 0 Comments
EXECUTIVE SUMMARY AND RECOMMENDATIONS *
Although it should provide development opportunities, renewed oil interest in the Democratic Republic of the Congo (DRC) represents a real threat to stability in a still vulnerable post-conflict country. Exploration has begun, but oil prospecting is nurturing old resentments among local communities and contributing to border tensions with neighbouring countries. If oil reserves are confirmed in the east, this would exacerbate deep-rooted conflict dynamics in the Kivus. An upsurge in fighting since the start of 2012, including the emergence of a new rebellion in North Kivu and the resumption of armed groups’ territorial expansion, has further complicated stability in the east, which is the new focus for oil exploration. New oil reserves could also create new centres of power and question Katanga’s (DRC’s traditional economic hub) political influence. Preventive action is needed to turn a real threat to stability into a genuine development opportunity.
Potential oil reserves straddle the country’s borders with Uganda, Angola and possibly other countries and could rekindle old sensitivities once exploration commences. In the context of a general oil rush in Central and East Africa, the lack of clearly defined borders, especially in the Great Lakes region, poses significant risk for maintaining regional stability.
Clashes between the Congolese and Ugandan armies in 2007 led to the Ngurdoto Accords establishing a system for regulating border oil problems, but Kinshasa’s reluctance to implement this agreement and the collapse of the Ugandan-Congolese dialogue threaten future relations between the two countries. In the west, failure to find an amicable solution to an Angolan-Congolese dispute about offshore concessions has worsened relations between the two countries and led to the violent expulsion from Angola of Congolese nationals. Instead of investing in the resolution of border conflicts with its neighbours before beginning oil exploration, the Congolese government is ignoring the problem, failing to dialogue with Uganda and officially claiming an extension of its maritime borders with Angola.
The abduction in 2011 of an oil employee in the Virunga Park, in the Kivus, is a reminder that exploration is taking place in disputed areas where ethnic groups are competing for territorial control and the army and militias are engaged in years of illegally exploiting natural resources. Given that the Kivus are high-risk areas, oil discovery could aggravate the conflict. Moreover, confirmation of oil reserves in the Central Basin and the east could feed secessionist tendencies in a context of failed decentralisation and financial discontent between the central government and the provinces.
Poor governance has been the hallmark of the oil sector since exploration resumed in the east and west of the country. Even with only one producing oil company, the black gold is the main source of government revenue and yet, with exploration in full swing, oil sector reform is very slow. Instead of creating clear procedures, a transparent legal framework and robust institutions, previous governments have behaved like speculators, in a way that is reminiscent of practices in the mining sector. Reflecting the very degraded business climate, they have allocated and reallocated concessions and often acted without considering the needs of the local people and international commitments, especially regarding environmental protection.
The official division of exploration blocks includes natural parks, some of which are World Heritage Sites. It also directly threatens the resources of local populations in some areas. Initiatives to promote financial and contractual transparency are contradicted by the lack of transparency in allocating concessions. The state’s failure to adequately regulate the diverging and potentially conflicting interests of companies and poor communities is clearly causing local resentment, which could easily flare up into local violence that could be manipulated.
In a context of massive poverty, weak state, poor governance and regional insecurity, an oil rush will have a strong destabilising effect unless the government adopts several significant steps regionally and nationally to avert such a devastating scenario. Regionally, it should draw on the close support of the African Union (AU) and the World Bank Group to design a management model for cross-border reserves and help facilitate a border demarcation program. Nationally, the government should implement oil sector reform, declare a moratorium on the exploration of insecure areas, especially in the east where the situation is again deteriorating, until these territories are made secure, and involve the provinces in the main management decisions concerning this resource.
To the countries of the sub-region:
1. Negotiate a framework agreement for the exploration and development of cross-border reserves, with the support of the AU and the World Bank Group, to provide for the involvement of one or more companies, revenue-sharing and dispute resolution mechanisms.
To the Government of the Democratic Republic of the Congo and neighbouring countries:
2. Begin a border demarcation program, with support from the AU Border Programme, before allocating any more exploration blocks in disputed areas, to clarify the situation on various borders; implement the Ngurdoto Accords with Uganda; and seek a comprehensive and amicable agreement to end disputes with Angola.
To the Government of the Democratic Republic of the Congo:
3. Declare a moratorium on exploration in insecure areas of eastern Congo and enforce the ban on exploration in World Heritage Sites.
4. Reform oil governance, including by:
a) defining a policy for the sector and setting up an hydrocarbons code;
b) ensuring contractual and financial transparency;
c) democratising the decision-making process for the awarding of oil rights and the assessment of the implementation of the production sharing contracts signed with the companies;
d) granting exploration and production rights following an open and transparent competition and banning mutual agreements and allocation of exploration and production rights to companies whose beneficial ownership information is not publicly available; and
e) determining clearly the fiscal, social and environmental obligations of companies according to international good practice and making information and consultation of local communities compulsory, as well as a participatory approach for local development.
5. Involve affected provinces in main oil management decisions and, if oil reserves are confirmed, ensure the provinces and local communities benefit from revenues.
To the African Union, the World Bank Group and donors:
6. Provide technical and financial assistance to the Congolese authorities for the border demarcation, the framework agreement for the exploration and development of cross-border reserves and oil governance reform.
7. Support the Congolese civil society efforts to build a monitoring capacity in the oil sector.
To the oil companies:
8. Disclose contracts and payments made to the Congolese government.
9. Respect international laws and agreements and Congolese laws.
10. Include a human rights assessment in their preliminary studies.
Kinshasa/Nairobi/Brussels, 11 July 2012
*By The International Crisis Group
This Is Africa’s New Biggest City: Lagos, Nigeria, Population 21 Million
July 11, 2012 | 0 Comments
The West African metropolis has surpassed Cairo in size, according to the New York Times.
By John Campbell*
In a celebration of Lagos and African urbanization, the Financial Times ran a piece by Xan Rice highlighting Nigeria’s commercial capital’s size, its economic importance, and its government’s energy in addressing concrete urban problems.
The UN estimated the city’s population at 11.2 million in 2011. The New York Times estimatesthat it is now at least twenty-one million, surpassing Cairo as Africa’s largest
city. It is clear that whatever the size, and however the city is defined, Lagos is the center of one of the largest urban areas in the world. With a population of perhaps 1.4 million as recently as 1970, its growth has been stupendous. Rice estimates that Lagos generates about a quarter of Nigeria’s total gross domestic product. The center of Nigeria’s modern economy, Lagos has many millionaires, but Rice estimates that two thirds of the population are slum dwellers.
Lagos is fortunate in that one energetic governor, Babatunde Fashola, succeeded another, Bola Tinubu. Tax revenue now exceeds $92m per month, up from $3.7m per month in 1999. Fashola says that tax rates have not increased–but clearly enforcement has. Tax collection, in a system that recalls tax farming in the New Testament or under Louis XIV, is apparently performed by a private company with links to Tinubu. The company retains 10 percent of all revenue collected over a certain threshold (at present, $43m per month). With the revenue, Fashola has launched genuinely impressive transportation and sanitation initiatives that range from construction of a city rail network, bus lanes, and filling potholes to more efficient trash collection.
The energy and other initiatives implemented by the city government are in stark contrast to the poor governance and paralysis that characterizes most of the rest of Nigeria. Meanwhile, the city continues to grow explosively. If jobs in the modern economy are to be found, it will require substantial new investment in education. Nationwide, there has been remarkably little for a generation, with the exception of the rapid expansion of the university system–itself underfunded. But, Lagos illustrates what is possible when the government enters into a social contract with its citizens whereby in return for taxes, it provides services.
* John Campbell – John Campbell, a former U.S. Ambassador to Nigeria, is a senior fellow for Africa policy at the Council on Foreign Relations. He served as political counselor at the U.S. embassy in Pretoria during the end of apartheid. He blogs at Africa in Transition. Article culled from http://www.theatlantic.com
Brazil competes with China, India to invest in Africa
July 10, 2012 | 0 Comments
By Teo Kermeliotis, for CNN
(CNN) — Brazil has intensified its efforts to forge closer relations with Africa recently, as the sixth largest economy in the world tries to compete with other emerging giants like China and India to take a more central role in the resource-rich continent.
Last month, Brazil’s top investment bank BTG Pactual unveiled plans to raise $1 billion to create the world’s biggest investment fund for Africa, focusing on areas such as infrastructure, energy and agriculture.
The independent bank’s fund, which comes amid a government drive to establish a strategic partnership with Africa, is one of the latest moves signaling Brazil’s increasing interest to extend its economic footprint on the continent — trade between Brazil and Africa jumped from around $4 billion in 2000 to about $20 billion in 2010.
“It does represent a turning point where a lot of these investors and these entities for investments are recognizing that Africa is indeed the last frontier for growth,” says Lyal White, director of the Centre for Dynamic Markets at the Gordon Institute for Business Science in South Africa.
An unprecedented decade of economic growth in Africa, coupled with a series of policy and institutional reforms, has attracted emerging global powers into the continent, seeking to gain a stronger foothold in the continent in their bid to reach more markets and forge new political alliances.
Brazil has kind of been operating under the radar, it is not seen necessarily as one of those kind of players.
Markus Weimer, Chatham House
But while much has been said and written about China’s and India’s strides in Africa, Brazil’s African foray has garnered less attention.
“Brazil has kind of been operating under the radar, it is not seen necessarily as one of those kind of players [China and India],” says Markus Weimer, research fellow in the Africa Program at Chatham House. “The stories of Brazil with Africa have also been less contentious — you’ve heard stories from Zambia about miners being mistreated by their Chinese bosses but you don’t hear from Mozambique or Angola when it comes to Brazilian companies.”
Using Portuguese-speaking countries like Angola and Mozambique as an entry point to the continent, Brazil’s state and private companies have made big inroads in various parts the continent, operating mostly in strategic sectors such as infrastructure, mining and energy — last year, mining giant Vale announced plans to spend more than £12 billion on investments in Africa over the next five years.
But while Brazil, like China, seems to be deeply engaged with the African resource sector, some analysts say its strategy and interests are quite distinct from its resource-hungry BRICS partner.
“Being a resource-rich country and a future major oil exporter itself, Brazil is not pursuing a strategy to secure resources,” says Christina Stolte, research at the German Institute for Global and Area Studies.
“Rather, the South American economy is seeing Africa as a means of diversifying its export markets — for food, seeds, agricultural machinery — and internationalizing the production of its big companies — Petrobras in the oil and biofuels business, Vale in the mining business.”
Although separated by the Atlantic Ocean, Brazil and Africa have long historical and cultural ties, dating back to the days of slave trade in the 16th century, where scores of Africans where shipped to the former Portuguese colony to be exploited as slaves on the sugar cane plantations.
Today, Brazil is quick to use this cultural affinity with Africa as an advantage in its competition with the other powers acting on the continent, analysts say.
“The fact that the majority of Brazil’s population is of Afro-Brazilian origin — making Brazil the world’s largest black population after Nigeria — is frequently quoted by the, almost exclusively white, governing elite of Brazil in order to stress Brazil’s cultural similarities with the African countries,” says Stolte.
Such remarks could often be heard during the 2003-2010 presidency of Lula da Silva, who made Africa a strategic priority for Brazil as part of the country’s efforts to expand its global influence.
During his eight-year tenure, Lula made 12 trips to Africa, visiting 21 countries, more than any of his predecessors. At the same time, Brazil increased the number of its embassies in Africa from 17 in 2002 to 37, boasting today more embassies in the continent than the United Kingdom.
The South American economy is seeing Africa as a means of diversifying its export markets.
Christina Stolte, GIGA
Brazil’s deepening engagement with Africa has also continued under the leadership of Dilma Rousseff, who became president of Brazil in January 2011 — in her first year in office, Rousseff visited Angola, Mozambique, and South Africa.
Analysts say Brazil has adopted a three-pronged approach to its engagement with Africa, with an “almost seamless interaction” between the government, the private sector and development institutions.
“This all kind of comes together as one coherent strategy toward Africa from Brazil,” says White.
Brazilian companies seeking to do business in the continent tend to hire and train local workforce and offer social projects to foster home-grown development — in Angola, Brazilian construction company Odebrecht has become the largest private employer in the country.
In recent decades, Brazil has gone from being a net importer of food to one of the world’s biggest exporters of agricultural and food products. More recently, Brazil’s per capita income rose an average of 1.8% faster than its GDP in 2003-09, according to a World Bank report.
As a result, Brazil’s domestic development experience and success in narrowing social inequality have attracted attention from several African countries who are keen to replicate some of its programs.
Analysts say Brazil is keen to leverage its advanced technological know-how in helping African countries in areas that are key to the continent’s development, including tropical agriculture and disease fighting.
“Brazil therefore sees itself as partner for African countries that is able to offer successful strategies to fight the continent’s most pending problems such as hunger and AIDS,” says Stolte.
*Courtesy of http:edition.cnn.com
One year on, South Sudan struggles to survive
July 9, 2012 | 0 Comments
Feuds over boundaries and oil-pumping fees deprive South Sudan of revenue and bring it close to war with Sudan one year after independence.
By Scott Baldauf*
One year ago, South Sudan became the world’s newest nation. Today, it has oil wealth it can’t ship to market, impoverished citizens it can’t seem to feed or house, and a feud with Khartoum it can’t seem to end.
Turning the landlocked but oil rich South Sudan into a functioning country was never going to be easy, of course. But doing so in the midst of an economic dispute with its neighbor and rival, Sudan – a dispute over how much money South Sudan should pay Sudan to pump oil through Sudan’s pipelines and out to international markets – has been crushing. If South Sudan was a baby, it has been deprived of nutrition for the first year of its life.
More dangerously, South Sudan and Sudan have come close to launching a full-out war, as Sudanese jets bomb villages inside South Sudanese territory, and as South Sudanese troops invaded to take control, briefly, of Sudan’s last giant oil-producing town of Heglig. Both nations claim the Heglig fields and lingering boundary disputes continue to keep these two nations on war footing.
Talks between Sudan and South Sudan resumed Thursday in Addis Ababa, and the United Nations has given the two countries two months to resolve their differences. A previous round of talks ended last week, with no progress.
South Sudan is not the first nation to be born in the midst of conflict, of course. The United States broke away from Britain for very similar reasons as South Sudan had for breaking from Sudan: the sense that the colonial masters were profiting more from America’s natural wealth than Americans were. But just as America’s independence was very nearly snuffed out by much better armed and prepared British troops in the Revolutionary War, so South Sudan is paying dearly for its disputes with Khartoum.
More than 400,000 people of South Sudanese descent have moved to South Sudan since 2010, and hundreds of thousands more remain in Sudan proper. Many of these people have no housing, no regular access to running water or sanitation, or to adequate health care. There are not enough schools to accommodate the children of these newcomers, and not enough jobs for the young men and women who left behind a better economic life in the cities of the north.
“The foundation of a peaceful and prosperous South Sudan can be strong only if we invest in the country’s youngest citizens. They need to be everyone’s priority so that the next generation can play an active and meaningful part in building this new nation,” said Dr. Yasmin Ali Haque, UNICEF representative in South Sudan, in an e-mailed statement. “The children of this country deserve a better future and it is critical that long term predictable investment is available and translates into real gains for them.”
As bad as things are, the West is not going to abandon the new nation that it spent so much time and political capital in bringing to life. Food aid keeps the poorer citizens of South Sudan alive, UN and private aid groups have fanned out across the countryside in white SUVs to help South Sudan develop the capacity to build a sustainable economy, manage its resources, and govern itself.
But the economic reality check of running a country has been a shock. Inflation for fuel and food prices in February shot up 21 percent from the same time last year, and then another 80 percent in May, according to Oxfam International. Inflation like that puts ordinary foodstuffs out of the price range of even those South Sudanese who do have savings; today 9.7 million are facing food shortages.
“The jubilation of independence is now tempered by the reality of a daily struggle to survive,” said Helen McElhinney, Oxfam policy adviser, in an e-mailed statement. “Some people are living on one meal a day and double the number of people are in need of food aid compared to last year. Refugees are enduring dire conditions in border camps with not enough water to go around.”
South Sudan’s rulers – all of them members of a former rebel army, the Sudanese People’s Liberation Movement, turned political party – note that they have the people’s support, and they will finish the task they set out to do. (More than 95 percent of South Sudanese voted for secession in a referendum held in January 2010.)
The question is whether South Sudan can hold itself together until an acceptable deal can be worked out with Sudan. Indeed, this is the same question that Sudan itself is faced with. Losing South Sudan meant the loss of 75 percent of Sudan’s proven oil reserves, and Sudan has responded with cutbacks in subsidies and other austerity measures that have sparked street protests by Sudanese university students in recent weeks. On Thursday, officials from both countries met in Addis Ababa to begin discussions over boundary and oil-revenue disputes.
In the meantime, South Sudanese officials remain defiant.
“We’re not going to collapse, we’re going to survive until the problem of oil is resolved,” said Atem Yaak Atem, a government spokesman, according to Agence France Presse.
*Culled From Christian Science Monitor
Africa on the Rise
July 6, 2012 | 0 Comments
GENERATIONS of Americans have learned to pity Africa. It’s mainly seen as a quagmire of famine and genocide, a destination only for a sybaritic safari or a masochistic aid mission.
So here’s another way to think of Africa: an economic dynamo. Is it time to prepare for the African tiger economy? Six of the world’s 10 fastest-growing economies between 2001 and 2010 were in Africa, according to The Economist. The International Monetary Fund says that between 2011 and 2015, African countries will account for 7 of the top 10 spots.
Africa isn’t just a place for safaris or humanitarian aid. It’s also a place to make money. Global companies are expanding in Africa; vast deposits of oil, gas and minerals are being discovered; and Goldman Sachs recently issued a report, “Africa’s Turn,” comparing business opportunities in Africa with those in China in the early 1990s.
I’m writing this column in Lesotho, a mountainous kingdom (it was snowing the day I arrived!) in southern Africa, on my annual win-a-trip journey. The winner this year, Jordan Schermerhorn, an engineering student at Rice University, and I visited garment factories that make clothing for American stores. This country is Africa’s biggest apparel exporter to America.
One set of factories we visited, belonging to the Nien Hsing Textile Company, a giant Taiwanese corporation, employs 10,000 people in Lesotho, making this its biggest operation in the world. Workers turn out bluejeans for Levi’s and other American companies, and Alan Han, a senior company official, said quality is comparable to that of factories in Asia.
While America may largely misperceive Africa as a disaster zone, China does get the promise on the continent. Everywhere you turn in Africa these days there are Chinese businesspeople seeking to invest in raw materials and agriculture. But American businesses seem to be only beginning to wake up to the economic potential here.
Why does that matter? Because trade often benefits a country more than aid. I’m a strong supporter of foreign aid, but economic growth and jobs are ultimately the most sustainable way to raise living standards.
The American Congress has badly bungled the picture this year by delaying renewal of a provision of the Africa Growth and Opportunity Act, or AGOA. This promotes trade by providing duty-free access to the American market. It’s one of the best aid programs you’ve never heard of — except that it isn’t an aid program but an initiative to help Africa lift itself up and create jobs through exports.
Some 300,000 jobs in Africa have been created because of AGOA, according to the Brookings Institution, but, in the last few months, countless Africans have been laid off because of the delay in renewal. American importers don’t want to place orders unless they are sure that the provision will be renewed and the clothing can enter duty-free. In Lesotho alone, about 5,000 garment workers have lost their jobs because of this maddening Congressional delay.
Granted, African countries themselves have botched trade because of corruption, onerous rules and uncompetitive minimum wages. The minimum wage for garment workers is about $37 per month in Bangladesh, compared with about $120 in Lesotho.
Or consider infuriating red tape. In Swaziland, it takes 12 procedures and 56 days to start a company, according to the World Bank’s superb “Doing Business” report for 2012. In Niger, it takes 326 days to build a warehouse. In Senegal, it takes 43 procedures and more than two years to enforce a legal claim.
Some of the otherwise most impressive countries in Africa, like Rwanda, also undermine themselves with their political repression. Ethiopia’s dictator, Meles Zenawi, is doing an excellent job of raising health and living standards, but he also presides over a security service that kills and rapes with impunity — and imprisons journalists who report on abuses. Last week, a sham trial in Ethiopia found one such brave journalist, Eskinder Nega, guilty of terrorism.
All in all, though, Africa is becoming more democratic, more technocratic and more market-friendly. Yet Americans are largely oblivious to the idea of Africa as a success story.
One of the problems with journalism is that we focus on disasters. We cover planes that crash, not those that take off. In Africa, that means we cover famine in Somalia and genocide in Sudan, terrorism in Nigeria and warlords in Congo. Those are important stories — deserving more attention, not less — but they can also leave a casual reader convinced that all of Africa is lurching between genocide and famine.
So that’s why I decided to start this win-a-trip journey in a delightful country like Lesotho that just had a democratic change of power. Its streets are safe, and it is working on becoming one of the first countries in the world with an electric grid 100 percent reliant on renewable energy.
It’s a symbol of an Africa that is rising.
* comment on Kristof’s column on his blog, On the Ground. join him on Facebook and Google+, watch his YouTube videos and follow him on Twitter.A version of this op-ed appeared in print on July 1, 2012, on page SR11 of the New York edition with the headline: Africa On the Rise.
Africa: Pascal Lamy, Director-General, World Trade Organisation
July 6, 2012 | 0 Comments
By Adam Robert Green*,
History has cast a long shadow over Africa’s trade performance, argues Pascal Lamy, director-general of the World Trade Organisation. Colonial patterns of trade prevented colonised countries benefiting from their comparative advantage in low cost labour. Africa’s trade profile has not changed much over the last half century – it remains dominated by fuel and minerals, and mostly flows along North-South channels rather than regionally.
Neither implies chronic poor performance. Brazil’s trade is also commodity-driven, and the rise of the Brics suggests the predominance of North-South trade is not likely to be the prevailing model going forward. What matters for Africa’s share of global trade are the choices of today’s political and business elites. Mr Lamy claims political energy is key.
“Where there is more energy, there are more results,” he argues, describing the East African Community as “ahead of the curve” with leaders who – while not agreeing on all trade issues – share a common conviction that deepening trade is a regional priority. “If I take central Africa and ECOWAS (The Economic Community of West African States), for the moment there is less political energy.”
Fixing the leaks
Trade liberalisation is a political hot potato, as domestic businesses fear being undercut by more efficient foreign producers. Mr Lamy believes businesses in Africa tend not to lobby for trade openness with the same intensity as those in Europe and the US, as well as Asia and Latin America. The reason, he argues, is that entrepreneurship is in a “pre-emergence” phase in Africa, and people running businesses have enormous day to day challenges, meaning they “have other fish to fry” rather than shaping policy or producing research advocacy in favour of trade changes. However, he points to the existence of a new generation of business leaders with a totally different mindset to the older generation of rent-seekers. While younger business people do appear more economically liberal than their predecessors, the claim that business communities in the West are pro-openness could be contested, of course. The agricultural lobbies in the EU and US, for example, are among the most powerful pro-protectionist blocs anywhere.
Trade reform need not only entail confronting politically difficult changes such as tariff levels or import restrictions. Much trade facilitation can be enabled by doing away with pointless and cumbersome bureaucracy. Even as mundane a tweak as ensuring customs offices in neighbouring countries are open during the same hours can improve process efficiency. Good choices on regulations and standards can also engender real results. “Where has Brazil been most successful?” asks Mr Lamy. “It is in areas like poultry. Does Brazil have a big comparative advantage in poultry? Not especially. The determining factor was when they adopted proper sanitary and phytosanitary standards from the beginning. That is what has driven it. Africa can do that.”
At the World Economic Forum on Africa 2012 in Addis Ababa, Africa’s potential to become a major food exporter was frequently cited, with some delegates predicting this could happen within a decade. “I am convinced Africa will become a net food exporter,” Mr Lamy says. “First, Africa was a net food exporter 30 years ago. There are reasons why it has changed, including rapid growth of the population – because intake per head is what matters.”
Today, changing dynamics in the global economy are working in Africa’s favour. “We know that for 20 years to come we have this structural imbalance between supply and demand. Demand is growing more rapidly than supply, mainly because of nutritional transition. Protein intake grows with your level of revenue and inevitably this creates more demand on protein output. And there are a number of reasons why supply only adjusts very, very slowly. There is not as much land available elsewhere as in Africa. So I am convinced it will happen.” He adds that Africa’s domestic agricultural market is huge, and will probably see the fastest growth.
Structural change in the global economy may also necessitate new tools for measuring trade flows, argues Mr Lamy. The rise of “multi-localisation” – where a given export contains more and more inputs from other locales – means bilateral trade flows are now a misleading indicator of trade intensity.
“The way we measure trade in gross volumes is becoming more and more detached from reality because to produce the same thing today you have three times more trade than in the past, just because production is multi-localised. Each time something crosses the border the full value of the product is attributed to the country.”
Statistically, this makes it look as though a country has a higher trade intensity than is the case. “They are trading a lot, but what matters is not how much they trade, but how much value addition they create through participation in global value chains, because that is what jobs are about.”
Bilateral measures of trade flows can lead to a view of imports as bad, and exports as good “which is economically nonsense”, he argues. A new measure would posit the more interesting question: “How much do I need to import in order to leverage my comparative advantage on the global market?” To provide the data, the WTO is partnering with universities, other international organisations and statistical institutes. The task is long and technically complicated, but it is vital, says Mr Lamy.
“I think it is an important potential contribution to a proper public debate about trade which, when it is focused on bilateral balances, has absolutely no meaning. The US-China trade imbalance is divided by two if you measure it in value added. This is mostly because the import content of Chinese exports to the US is much bigger than the import content the US exports to China. It is half as imbalanced as it looks, if you weigh the trade of value addition on both sides instead of these volumes of trade. That seriously impacts the public debate.”
This new approach does not change the fact that China has an overall trade surplus and the US has a trade deficit, but it will “focus the debate on what really matters for public opinion, which is jobs”, he says. “Take the famous European debate – Germany imports much more than France, but Germany exports much more than France. The reason Germany exports much more than France is because it imports much more than France. And the moment you start looking at things this way, this will lead to a better, more informed debate about trade policy and the impact of international trade on your economic and social fabric.”
Direction on Doha
As head of one of the most important global economic institutions, Mr Lamy is tasked with driving forward a long-stalling worldwide trade deal, now in its 11th year. The ‘Doha Round’ is bedevilled by arduous debate and dispute, endless textual cul-de-sacs and more than occasional public denouncements. With India, the US and China all entering elections or political transitions, willingness to concede ground may be weaker this year and next than previously. Mr Lamy believes a deal can be signed, but acknowledges that trade rounds may need to be pursued differently in future.
“Eighty percent of the job is on the table, that hasn’t changed, but the problem is that the 20 remaining percent block the remaining 80 percent, because of the principle that ‘nothing is agreed until everything is agreed’. That is where we got stalled, which everybody recognises now,” he explains. “There is a strategy we [have been] testing since the end of last year which involves unpacking some of the issues – notably trade facilitation which is a very complex technical agreement treaty, which has a priority and which doesn’t normally entail this big geopolitical conundrum between countries such as the US and China.”
Issues such as pre-shipment inspection and customs procedure – “huge and incredibly technical issues” – have to be standardised at an international level, he claims, and the benefits from doing so could be huge. “The cost of moving trade today worldwide is roughly 10 percent [of trade value]. The purpose of this agreement is to bring this down to 5 percent. The economic impact of this sort of streamlining of red tape and standardisation is roughly 5 percent of the value of trade, which is an enormous amount of money.”
When asked if the next trade round will be structured differently, he is in no doubt: “Yes, I think so. The sort of method we are taking, where you bundle together twenty topics, is the one used in the Uruguay Round. But the number of countries who are now active in the negotiation to promote defensive and offensive interests is such that it is probably too complex. We probably have to consider going back to more sectoral agreements, although the virtue of a single undertaking is ‘give and take’ whereas if you have a sectoral agreement it is difficult to get balanced results of give and take.”
It remains to be seen whether Mr Lamy himself will see the deal conclude. His term of office ends next year, and there are rumours he may be in line for a post in French politics.
*Culled from AllAfrica.com
Africa Rising: when will the West join Africa?
July 6, 2012 | 0 Comments
By Eliot Pence & Bright Simons*
Discussions about Africa’s evolution tend to measure the continent’s ‘gradual’ assimilation into the global mainstream. This may have been understandable in the mid-1980s when by every indicator African economies were seen as hopelessly distorted and needed to be salvaged with what became known as ‘structural adjustment’. But African countries today appear more aligned with the Washington Consensus and Globalization’s ‘best practices’ than the West. On many of the macroeconomic indicators
used to judge conformity with the mainstream – debt to GDP ratio, current account balance, fiscal balance, inflation – Africa is situated closer to the mainstream, while key OECD countries drift away. Data tracking other kinds of flows – in cultural, innovation, and labour flows – point to a continent becoming a key player in the Global South – not just assimilating into the global mainstream, but helping to shape it.
- Population flows – Stories of African migrants struggling to find a route to Europe contrast with recent reports that Europeans are struggling to find working permits in Africa. According to NYU’s Development Research Institute, between 2006 and 2009 the number of visas issued for Portuguese entering Angola increased from 156 to 23,000. In 2012, there were nearly 100,000 Portuguese living in Angola, more than triple the number of Angolans living in Portugal. Spaniards, too, have fled high unemployment looking for work in Algeria, where many Spanish companies have relocated. No longer seeing the US as their best opportunity for professional development, waves of Nigerian-Americans (the most educated Diaspora group in the country), vie for top spots in the new Lagos offices of JPMorgan, McKinsey and Blackrock.
- Innovation and information flows – Reverse innovation, a concept describing inventions that are adopted first in the developing world, is creeping into western corporate board rooms (and publishing houses). Plans to develop a ‘Silicon Savannah‘ in East Africa build on widely successful innovations emerging out of the banking and telecom sectors and now being rolled out in US and European markets. Images of Joseph Conrad’s Dark Continent are receding as the broadband industry turns to Africa for global growth and sustained demand. African policy innovations, too, offer lessons to Europe’s troubled economic union. A recent review of the health of the West African Economic Union by the IMF suggested Europe might learn something from how Africa’s economic unions have faired.
- Financial flows – Though largely still the recipient of foreign direct investment, Africa is gobbling up distressed assets in the West. Gatwick, the United Kingdom’s second largest airport, was recently purchased by a Nigerian and Africa’s richest woman, Isabel dos Santos (daughter of Angolan President Jose Eduardo dos Santos), is the new majority shareholder in Portugal’s leading pay-TV and Internet provider Zon Multimedia. More traditional financial flows, such as remittances from Africans working abroad, are also changing. Already larger than official development assistance by a substantial margin, reports suggest remittances are now flowing to Europe from Africa. Underscoring these trends is reduced dependency on multilaterals (China alone lends more to Africa than the World Bank) and research by Standard Bank estimates that BRIC-Africa trade increased from $20bn to more than $250bn in the past 10 years.
- Cultural flows – A Financial Times editorial recently warned that the West would lose out on Africa’s ‘wave of creativity’ if it doesn’t reorient itself. To be sure, Africa’s cultural place in the larger world has always been evident, even if its recent recognition suggests it hasn’t. Nollywood, Nigeria’s answer to Hollywood, is a half billion dollar a year business and, according to UNESCO, puts out twice as many movies as Hollywood. Its growth also belies assumptions about the importance of intellectual property rights — something it largely exists without — in development. The continent’s cinematic creativity is paralleled by the emergence of its fashion industry, which is increasing in vogue — literally; an entire issue of the magazine was devoted to the continent recently. African-inspired cuisine also stands at the cusp. The “African Food Inevitability Thesis,” a phrase coined by a recent Wall St. Journal article, called Africa the foodies’ frontier and predicted a thriving commercial future for continental cuisine.
Even as a major western newspaper openly wonders how Africa will ‘join the larger world on its own terms,’ across virtually all indicators, evidence suggests it’s doing so largely on its own terms. If the West is stuck in low-growth and political paralysis, while Africa enjoys an economic renaissance, a more pressing question for Western observers might be: When will the West join Africa?
*Eliot Pence is a director at the Whitaker Group, a corporate strategy firm focused on sub-Saharan Africa. Bright Simons is the founder of the mPedigree Network (www.mPedigree.Net), and a Senior Fellow at think tank, IMANI.Previously published in African Arguments
South Africa’s Jacob Zuma on mines, land and leadership
July 5, 2012 | 0 Comments
By Milton Nkosi BBC News, Johannesburg
President Jacob Zuma has for the first time in a long while spoken candidly about major policy issues facing South Africa, including the controversial calls to nationalise the
mines in one of the world’s major producers of precious minerals, such as gold and platinum.
When I met President Jacob Zuma at his official Mahlamba Ndlopfu residence in the capital, Pretoria, he looked calm and confident after last week’s policy conference storm.
Before we could talk about the details of the most contentious policy deliberation by the more than 3,500 African National Congress delegates, we had to clear the air about what actually transpired in some of the closed sessions.
There were newspaper reports saying the plenary descended into chaos with fist fights. I put it to the 70-year-old President Jacob Zuma that the conference was at some point characterized by chaos and physical fighting.
His response couldn’t have been more different: “This was one of the most disciplined conferences we’ve had,” he said.
Far from the truth he said – he explained that it was just one delegate who was overzealous and had tried to grab the microphone from a fellow provincial delegate.
Mr Zuma said that the delegate was disciplined immediately and kicked out of the conference.
Nationalisation or not?
Before the bright television lights started to heat the tastefully decorated lounge, I sought clarification from the president of the 100-year-old ANC, nationalization of mines – did they adopt it as a policy or not?
Again, Mr Zuma was emphatic – it was raised and discussed extensively but in the end it was not adopted and as far as he can tell, it will not happen even at the elective conference in Magaung later this year.
On land reform – will South Africa expropriate land without compensation?
With slight excitement in his eyes, the president sat up from the stately couch and said rather enthusiastically: “No, it will be with compensation. We must do this within the framework of the law and within the constitution.” I then asked about the complex “willing-buyer willing-seller” principle – what are you going to replace it with?
He said the government is planning to set up a land management commission to look into possible solutions.
African Union leadership battle
Mr Zuma reiterated his unwavering support for his ex-wife and former Foreign Minister Nkosazana Dlamini-Zuma to head the African Union.
He highlighted the point that colleagues in the continent know that the Southern Africa Development Community hasn’t had the chance to occupy the most senior role in the AU’s headquarters in Addis Ababa.
Perhaps sensing a possible defeat, Mr Zuma wouldn’t commit to give me an out-of-10 score about Ms Dlamini-Zuma’s realistic chances of getting the top job.
The president said he forgives the artist and the gallery owner who were at the centre of the controversial painting The Spear which depicted Jacob Zuma with his genitals exposed.
He said he harboured no ill-feelings toward them. “None at all”
When asked whether he would want to run for a second term, he said if the ANC decides to change him, he will be part of that decision and if they want him to continue he will heed their call. Clearly he is determined to continue at the helm. This means the stage is set for a showdown with his deputy Kgalema Motlanthe, who is the preferred candidate of the ANC Youth League, which helped propel Mr Zuma to power in 2009.
Mr Zuma spent 10 years in prison with Nelson Mandela on Robben Island and sacrificed his own education fighting to end apartheid.
The question is – can he lead South Africa for a second term or is he a one-term president?
*Culled From BBC Africa
Nigeria Teams Up with US Firm to Build Six Oil Refineries
July 4, 2012 | 0 Comments
By Ricci Shryock*
Nigerian officials announced a $4.5 billion deal that will see the country partner with US company Vulcan Petroleum Resources to build six oil refineries in Nigeria, Africa’s biggest oil producer.
Vulcan said its goal is to build the first two facilities within one year and complete all six within the next 30 months. It said the various refineries will be located at different sites
throughout the country.
Umaru Dembo, a former Nigerian energy minister, said the announcement was a welcome development for the country.
“It means quite a lot…because, up to now, we seem to be dependent on refined oil from somewhere else…the three or four refineries that we have now do not supply the needs of refined products that Nigeria needs at the moment,” Dembo said.
Though Nigeria produces more crude oil than any other nation on the continent, it relies heavily on oil that is refined abroad in order to fulfill domestic energy demands. Nigeria exports more than two million barrels of crude oil a day.
Dembo added that the current refineries in the country produce more than 400,000 barrels of oil a day, and the reported 180,000 barrels a day that the six new refineries would produce is a surprisingly low number. But, he added, it was better than the alternative.
“It is better to get the refineries and have them working then have no refineries at all…than [to have to] depend upon refineries outside Nigeria,” he said.
According to Dembo, the new refineries, which are slated to all be finished in about two and a half years, could have additional benefits for the local economy.
“Definitely, it will mean more jobs for Nigerians if this comes to fruition,” he said. “There’ll be very many things that will be available for the people…we hope there will actually be electricity.”
In January, mass protests were staged throughout the country when the government said it was going to remove the oil subsidy, which was the only benefit many Nigerians said they enjoyed from the nation’s oil wealth.
After a nationwide strike and continued protests, the government later announced a partial rollback of the price hikes.
President Goodluck Jonathan has said Nigeria can no longer afford the $8 billion fuel subsidy. He promised to use the money saved for needed infrastructure and social programs.
*Courtesy of VOA Africa
U.S. Committed to Expanding Trade and Investment with Africa
July 4, 2012 | 0 Comments
By MacKenzie C. Babb*
Washington — The United States is committed to continuing to expand trade and investment in sub-Saharan Africa, a region that “represents the next global economic frontier,” according to Assistant Secretary of State for African Affairs Johnnie Carson.
“In addition to hosting six of the 10 fastest growing economies in the world, a recent McKinsey study documented that Africa offers the highest rate of return on foreign investment of any developing region, and has for some time,” Carson said in testimony before the Senate Foreign Relations subcommittee on Africa June 28.
He said consumer spending also continues to rise, and 43 percent of Africans currently have discretionary income, or could be considered middle-class consumers.
“Over the past decade, Africa’s growth was widespread across sectors including wholesale and retail trade, transportation, telecommunications and including manufacturing,” Carson said. “Foreign direct investment, or FDI, in Africa has also seen tremendous growth.” FDI projects in Africa have more than doubled from 339 in 2003 to 857 in 2011, according to Carson, with inter-African investment growing sharply from 27 projects in 2003 to 145 in 2011.
Combined with natural resource exports that have continued to generate significant revenues, Carson said, this steady growth has helped Africa to weather the global economic crisis more successfully than any other region in the world.
“In short, Africa is a trade and investment destination that cannot be ignored,” the assistant secretary said. “This is a continent on the move, and there are enormous opportunities for U.S. companies to enter the market, make money and create jobs” for both Americans and Africans.
“Greater U.S.-Africa trade is in the interests of both America and Africa, and we are determined to work to strengthen it,” Carson said.
Earl Gast, the U.S. Agency for International Development (USAID) assistant administrator for Africa, said in testimony following Carson that foreign direct investment is approaching $80 billion a year and trade figures have tripled during the past decade.
“This fortune is not the result of good luck,” he said. “It’s the result of years of hard work and better management, governance, capital inflows and business climate.”
To translate this growth into transformational development in poverty reduction, Gast said, President Obama’s recently unveiled strategy for engaging with Africa promotes opportunity and development while spurring economic growth, trade and investment.
The cornerstone of U.S. engagement with Africa will continue to be the African Growth and Opportunity Act (AGOA), he said.
“Since 2001, exports under AGOA have increased more than 500 percent, and the African Coalition on Trade estimates that as many as 1.3 million jobs have been created indirectly by AGOA, supporting upwards of 10 million persons throughout the continent,” Gast said. He added that many of these jobs are held by women, “a vital building block for development given that African women are more likely to invest job-related income into food security, health and education of their families.”
Assistant U.S. Trade Representative for Africa Florizelle Liser said Obama’s new strategy intends to “encourage economic growth, enhance trade and investment, support more jobs in the United States and help realize the full potential of the U.S.-sub-Saharan African economic partnership.”
The strategy was unveiled at the start of the June 14–15 AGOA Forum in Washington.
The 2012 forum brought together more than 600 participants, including top U.S. and African government officials, private-sector leaders and civil society representatives. It was preceded by a two-day civil society program June 12–13 in Washington and complemented by the African Women’s Entrepreneurship Program. The Corporate Council on Africa hosted its infrastructure conference June 18–20 in Washington, and the U.S.-Africa Business Conference was held in Cincinnati June 21–22.
AGOA, signed into law by then-President Bill Clinton in 2000, was designed to promote U.S. trade and investment ties with sub-Saharan Africa. It provides trade preferences to the 40 participating African countries through the removal of nearly all tariffs on their exports. It has broken down many trade and customs barriers in an effort to stimulate economic growth, encourage economic integration and help bring sub-Saharan Africa into the global economy.
Carson, Gast and Liser each emphasized the importance of the pivotal economic development program, and said Obama’s new Africa strategy keeps AGOA at the heart of U.S. engagement with Africa.
What Goldman Sachs thinks about investment in Africa
June 30, 2012 | 0 Comments
BY Kate Douglas*
American investment banking and securities firm Goldman Sachs believes that Africa is the place to invest, according to their Fortnightly Thoughts research report released earlier this year.
“We believe meaningful opportunities for Western consumer companies exist as Africa’s household consumption grows rapidly (it is already greater than some of the BRICs) and that failure to invest now will see others rush in,” said the editor of Goldman Sachs’ Fortnightly Thoughts, Hugo Scott-Gall.
But why should investors consider the opportunities in Africa and what are the challenges?
Africa has fallen behind in its development and has some troubling problems such as immense poverty, political instability, corruption and poor infrastructure. For this reason, Africa is often painted as one homogeneous continent. The truth is that African countries – despite having many similar problems – are considerably diverse with different resources contributing to different economies. It is because of this that investment potential varies from one African country to the next, and so do the challenges. However, a common limitation that cannot be ignored is the poor infrastructure that increases the cost and risk of investing in Africa, impeding economic growth.
Scott-Gall acknowledges the developmental movement and growth we are now seeing in Africa and describes it as a “logical sequencing in the world’s economic evolution”. Africa is swimming with precious minerals, and currently supplies 11% of the world’s fuel and mining resources. “Resources have become more scarce, and hence valuable, as more of the world is industrialised and there are more people alive than ever before,” said Scott-Gall. In this sense, the world needs Africa to succeed and Africa needs world investment to do this.
Africa is also being revolutionised by an extraordinary growth in internet and mobile communication. “Important to the speed of consumption growth is the adoption of technology, which is helping Africans skip ahead on the consumer curve, doing so without established public infrastructure in several cases,” said Scott-Gall.
Technological development has also led to the improvement of the banking system and the development of mobile and internet banking. “As the banking system matures credit growth can enable faster consumption growth as well,” continued Scott-Gall.
With improvements in governmental competence, political stability and wealth being distributed more evenly than before, Africa is heading in the right direction, and an educated investment today could yield momentous revenue over the next few decades.
So why invest in Africa? Because tomorrow’s Africa is going to be an economic force, according to Goldman Sachs. But what are the reasons for this optimism?
Firstly, it is estimated by Goldman Sachs that Africa will have the largest workforce in the world by the middle of the century. “Demographics are becoming very favourable and will be the envy of the world in 20 years time,” predicts Scott-Gall.
Secondly, Africa has abundant land in a world running out of space, and this gives African countries great potential for agricultural exports. “Africa sits on vast tracts of the world’s uncultivated land and also has a lot of existing agricultural land,” said Scott-Gall. “The world needs Africa to substantially improve its agricultural yields, and we suspect it will require private capital to help it here, along with government support and sponsorship, as has been seen in the BRICs, with Brazil a very good example.”
Where to invest?
When it comes to investment, Goldman Sachs believes the best African country to invest in would have “a healthy reserve of diverse resources, and a stable government that not only fairly distributes resource wealth to a young population, but also encourages them to spend it, by investing in infrastructure”. While it may be difficult to find an African economy like this today, it is suggested that this is the direction most African economies are developing.
It is also suggested that investors should look at cities rather than countries as a means of targeting the African consumer. “This could start to make Africa attractive to businesses with more global sourcing, or those targeting the more premium consumer (higher-value categories such as luxury goods, spirits and to a lesser extent personal care),” stated Alexis Colombo, Goldman’s consumer staples analyst.
Five African ‘boom towns’ that should be on every investor’s radar
June 30, 2012 | 0 Comments
By Jaco Maritz
South Africa’s economic hub Johannesburg is often cited as a classic example of the ‘boom town’ effect. The discovery of gold in the 1880s led to a gold rush that transformed the dusty settlement into South Africa’s largest city in a matter of 10 years.
Across Africa there are towns experiencing rapid development, largely off the back of newfound resources such as minerals, crude oil and natural gas. To produce this list of African boom towns How we made it in Africa sought the insight of Brett Abrahamse, a director at Johannesburg-based real estate consultancy Terrace Africa.
Abrahamse says that the towns below offer attractive opportunities from a property development perspective – especially for hotel and retail developments. While the challenges and expenses of working in Africa’s more remote locations may eat away at profit margins, these towns should be on the radar of investors and developers looking for a first-mover advantage.
The remote town of Tete, situated in the centre-west part of Mozambique, is the heart of the country’s new coal mining industry. The area around the town has some of the world’s richest coal reserves.
Rajat Kohli, Standard Bank’s global head of mining and metals, called it the world’s last substantial untapped coal reserve. “About 100 million tons per annum of coal could be produced within the next five years, and that figure could even go further,” he said at a conference last year.
Mining companies operating in Tete Province’s Moatize basin include Rio Tinto as well as Brazil’s Vale.
The coal mines are linked via rail to the port of Beira. Brazilian mining giant Vale has also announced plans to build a railway line from its Moatize mine to the north-western port of Nacala to export coal.
Tete is booming due to mining activity in the area. However, according to Abrahamse, the town has very few formal supermarkets and hotels, creating significant opportunities for more developments. Carlson Rezidor has announced that it will soon launch its new Park Inn by Radisson hotel in Tete.
Solwezi is the core town in the ‘new’ Zambian copper-belt and is also the capital of the North-Western province. From humble beginnings as a trading station servicing the nearby mines and employees, the town has now mushroomed into an important node. Solwezi has seen significant growth in recent years, driven by copper and nickel mines, which are run by First Quantum and Barrick Gold.
Abrahamse says that Solwezi has also experienced an increase in mining-related services and business activities. In addition, trade on the Congolese border 12 kilometres away is further boosting development and business activity in the town. The current airport is being upgraded, and will soon be able to accommodate Boeing 737s, which should see an increase in flights to Solwezi.
According to Abrahamse, there is a strong demand for more retailers and hotels in Solwezi. “There is a dire shortage of formal hotel accommodation in the town and this is evident by the US$200-plus room rate for a two-star room. The current hotel operations at Royal Solwezi Inn and Kansanshi Hotel are running at more than 90% occupancy with extremely high room rates,” he says.
The only formal supermarket in Solwezi is a Shoprite, which cannot alone cater for the growing demand. Abrahamse reckons that Solwezi is in need of small to medium sized commercial property developments with a retail anchor, a hospitality partner, numerous line shops and banking facilities.
First Quantum has also recently begun a new US$1 billion investment in a project called Trident. This consists of three new mines and will have an annual capacity of 300,000 tons of copper per year. The closest town to Trident is Solwezi.
Towards the end of 2010 How we made it in Africa reported that Takoradi, a small coastal town on Ghana’s west coast, was emerging as one of the new hot spots for African property developers. At the time there was considerable enthusiasm about the twin city of Sekondi-Takoradi because it was set to be home to Ghana’s emerging oil industry. Takoradi is the nearest commercial port to the country’s offshore oil fields.
Since then commercial oil production has started in all earnest, but developers and retailers have still not fully capitalised on the opportunities.
A few days ago it was announced that the International Finance Corporation (IFC) has provided a loan of US$5.45 million to Alliance Estates Limited, to build the first Protea Hotel in Takoradi. The 132-room, three-star hotel will help meet demand for business infrastructure as more investors are venturing into the oil producing region of Takoradi. “Ghana’s economy has been expanding at a high level, with growth touching 13.6% in 2011. In Takoradi, international hotels are limited, despite increased business traffic from investors interested in developing the oil and gas industry. The Protea Hotel will be amongst the first to provide international-standard rooms, rates and conference facilities,” said the IFC in a statement.
Juba (South Sudan)
“Juba, the capital of South Sudan, is one of those penny stocks, those risky ones where it could become the next Nairobi, or it could just muddle along and stay as it is forever,” says Abrahamse.
Last year South Sudan became Africa’s newest country after the region voted in favour of secession from Sudan. The referendum was a core component of the 2005 Comprehensive Peace Agreement (CPA) that ended decades of conflict between the Southern Sudan People’s Liberation Movement (SPLM) and the Khartoum government.
At independence there was much optimism that the South Sudanese economy would finally take off. The region has few industries outside the oil sector and almost non-existent infrastructure. Lately, however, there has been renewed fighting between Sudan and its now independent neighbour, South Sudan, sparking fears of an all-out war.
Although the recent fighting took place far from Juba, Abrahamse notes that the city’s fortunes are heavily dependent on peace between the two countries. He says that political risk is the major issue prospective investors in South Sudan should consider and that each business opportunity should be analysed on its merits. Juba’s potential for development is, however, certain. The city is South Sudan’s main commercial hub and one of the world’s fastest growing urban areas due to oil money.
Last year the South Sudanese government announced that the capital would move to Ramciel, some 250 kilometres away from Juba, closer to the border of north Sudan. It is unclear when this will happen.
Pemba is a port city in northern Mozambique. It is traditionally known as a tourist destination, but these days Pemba is an important centre for northern Mozambique’s offshore natural gas fields in the Rovuma basin.
US-based Anadarko Petroleum and Italian oil & gas company Eni, have both recently announced significant gas discoveries in their respective blocks. These discoveries are important because of the size of the reserves as well as Mozambique’s relative proximity to markets in Asia. “This is rather close to the largest potential market for liquefied natural gas (LNG), which is Asia. It is easier to export from offshore Mozambique to Asia than it is from many other places,” Adi Karev, global oil & gas leader at Deloitte Touche Tohmatsu, told How we made it in Africa in an interview earlier this year.
Abrahamse says that Pemba, as is the case with the other towns mentioned in this article, has a lack of accommodation and retail facilities. “An example of the problem with Pemba is there is one five-star lodge that is booked out by the oil companies. The interesting story there is that post the 2008/2009 financial crisis the resorts were struggling, but since they found gas there, these hotels and lodges have been booked out by people working on the gas fields.”
*Culled from http://www.howwemadeitinafrica.com