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Kenya Has Just Sealed Its First Oil Export Deal Worth Sh1.2 Billion

August 3, 2019

Time for early investors and startups in Kenya to leech onto the country’s blossoming petroleum industry! It is now safe to say that Kenya is now an oil-producing nation in the world, the only nation in the whole of East Africa, after South Sudan to actually export oil.

The country has just sealed its first oil export deal worth Sh1.2 Billion ($11.6m). With 60,000 to 100,000 barrels per day, Kenya is set to displace either Ghana, Brunei or Chad in the ranking of oil-producing and exporting countries by production capacity.

“We are now an oil exporter. Our first deal was concluded this afternoon with 200,000 barrels at a price of 12 million US dollars. So, I think we have started the journey and it is up to us to ensure that those resources are put to the best use to make our country both prosperous and to ensure we eliminate poverty,” Kenyan President Uhuru Kenyatta said

Here Is The Deal

This deal which is the first-ever in the whole of Kenya’s history saw Kenya selling off 200,000 barrels of oil at a price of Sh1.2 billion ($12m).
Kenya discovered commercial oil reserves in its Lokichar basin in 2012 and Tullow Oil estimates the basin to contain an estimated 560 million barrels in so-called 2C proven and probable oil reserves.
Tullow has said this would translate to 60,000 to 100,000 barrels per day of gross production.
Tullow Oil is a multinational oil and gas exploration company founded in Tullow, Ireland with its headquarters in London, United Kingdom. It has interests in over 150 licenses across 25 countries with 67 producing fields and in 2012 produced on average 79,200 barrels of oil equivalent per day.

**Source: Statista 2019; Oil Production in Africa from 2001 to 2018 (in 1,000 barrels per day)**

The government and Tullow Oil had expected to start exporting crude under the Early Oil Pilot Scheme (EOPS) by June this year but that appeared unlikely with the company only having trucked about half of the amount that will be needed for the first shipment.
In May, Kenya’s Ministry of Petroleum said about 88,000 barrels of oil had so far been trucked to Mombasa and was targeting to accumulate 200,000 barrels that would form the first export cargo.
The oil that has been ferried to Mombasa was produced in 2015 during an extended well testing exercise. By end of March, Tullow had shipped all the oil stored in Lokichar and has been setting up an Early Production Facility, which will produce 2,000 barrels a day.

Currently, major oil producers in Africa include Nigeria (0.0449), Libya (0.0101), Egypt (0.0418) and Algeria (0.0913), producing a total of 0.1881 trillion cubic feet of gas cumulatively which is 5.4 percent of the world’s total production.

In 2018, Africa’s total oil production amounted to around 8.19 million barrels of oil per day.

Africa’s production rate is, however, decreasing at a rate of 1.1 percent per annum. Africa’s consumption rate is at 138.2 billion cubic meters at a growth rate of 1.4 percent. It would take Africa 68 years to completely deplete its reserves.

Charles Rapulu Udoh

Charles Rapulu Udoh is a Lagos-based Lawyer with special focus on Business Law, Intellectual Property Rights, Entertainment and Technology Law. He is also an award-winning writer. Working for notable organizations so far has exposed him to some of industry best practices in business, finance strategies, law, dispute resolution, and data analytics both in Nigeria and across the world.

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Zimbabwe Set To Give Foreign Investors 100% Equities In Local Companies

August 2, 2019

Zimbabwe is set to repeal the Indigenisation and Economic Empowerment Act as the country moves to enhance the attractiveness of the minerals sector to foreign direct investment (FDI). This is remarkable because it is the first time in 11 years since foreign investors stopped owning 100% stakes in companies they set up in Zimbabwe. For the economy, this is by far a direct way of telling investors to come to do business in Zimbabwe.

Here Is The Deal

Under the new arrangement, the Indigenisation and Economic Empowerment Act will be replaced by a more “business-friendly” Economic Empowerment Act, but in the interim, the Indigenisation Act has been amended to remove the critical diamond and platinum sub-sectors from the reserve list.

“Government, through the 2018 Finance Amendment Bill amended the Indigenisation and Empowerment Act and platinum and diamonds are now removed from the reserve list and shareholding will depend on negotiations with investors.

“Subsequently, the Indigenisation and Economic Empowerment Act will be repealed and replaced by the Economic Empowerment Act, which will be consistent with the current thrust “Zimbabwe is Open for Business,’’ Zimbabwe’s Finance and Economic Development Minister Mthuli Ncube, was quoted as saying while presenting the Mid-term Fiscal Policy Review statement and Supplementary Budget in Parliament yesterday.

The Indigenisation Act which is due for repeal requires foreign companies to give shareholdings of up to 51% in joint ventures to local partners.

The Implication Of The Intended Repeal

This repeal is expected to be revolutionary. First, it now means that local shareholding will depend on agreed terms by investors, while foreign shareholding can reach up to 100 percent.
Then again, it means that foreign investors can now work under an environment with less threat of breach of contract.
Such threats had a negative effect on the global investor community on Zimbabwe as a breach of contracts is anathema to investors.
The mining sector remains a key driver of Zimbabwe’s economic development, typically contributing circa 10 percent to the country’s gross domestic product (GDP) and around 60 percent to exports.
And true to form, during the first half of the year, the sector contributed US$1.3 billion, about 68 percent of the total exports of US$1,9 billion during the period.
The scrapping of the Indigenisation and Economic Empowerment Act is one of the measures that is expected to provide impetus to the economic contribution of the sector.

Expect More Foreign Direct Investment In The Zimbabwe Mineral Sector

The Indigenisation Act has already been amended to remove the critical diamond and platinum sub-sectors from the reserve list. The rest of the minerals have also been removed from the list.
The Indigenisation and Economic Empowerment Act worked to discourage and alienate much-needed FDI and investment as the way it was implemented threatened business.
Around 2013, the indigenization programme shook a lawfully and morally binding agreement between Zimbabwe’s largest platinum producer, Zimbabwe Platinum Holdings (Zimplats) and Government.

Comprehensive Strategy Already In Place for All Foreign Companies

The Zimbabwean government has over the past several months secured a number of mining investment deals, with the latest being a joint venture agreement between State-owned diamond miner, the Zimbabwe Consolidated Diamond Company and Russian firm, Alrosa.
The new diamonds agreement will see about US$12 million being invested in the exploration of diamond deposits over the next three years.

Minister Ncube yesterday said that Government will put in place a “comprehensive strategy” to see the coming into fruition of these deals.

“These investments will, however, take some time (up to 10 years of production) to give visible net benefits in view of long gestation periods for mining projects.

“Government will, therefore, in the second half of the year unveil a comprehensive strategy and roadmap towards a US$12 billion mining industry by 2023,” he said.

“The attainment of this milestone is not an event, but a process, which is well underway with concrete start-ups and expansion of projects in a number of minerals, which include platinum, gold, ferrochrome, coal and hydrocarbons, lithium, diamonds, iron ore, among others.”

Charles Rapulu Udoh

Charles Rapulu Udoh is a Lagos-based Lawyer with special focus on Business Law, Intellectual Property Rights, Entertainment and Technology Law. He is also an award-winning writer. Working for notable organizations so far has exposed him to some of industry best practices in business, finance strategies, law, dispute resolution, and data analytics both in Nigeria and across the world.

Facebook: https://web.facebook.com/Afrikanheroes/

Here Is Why It Is Difficult For Foreign-owned Startups To Exist In Ghana

July 28, 2019

Take it or leave it, laws and regulations say who does or does not do business in a country. Ghana is one of those countries whose local laws are not only bad for wholly foreign-owned startups but almost murderous of all foreign-owned startups desiring to exist and do business in the country.

Now, here is the interesting part: Ghanaians seem to have discovered one of these laws and are now relying on it to chase away wholly-owned foreign businesses. They are fixing attention on Section 27 (1) of the Ghana Investment Promotion Centre (GIPC) Act.

Ghanaian traders want this law which has been left a white elephant since its passage to be enforced by the authorities. In the next three months, if threats are anything to go by, expect a massive war against foreign-owned retail businesses in Ghana.

Here Is Why

According to Section 27 (1) of the GIPC Act, a person who is not a citizen or an enterprise which is not wholly-owned by a citizen shall not invest or participate in the sale of goods or provision of services in a market, petty trading or hawking or selling of goods in a stall at any place. The list of prohibited trading activities are:

The sale of goods or provision of services in a market, petty trading or hawking or selling of goods in a stall at any place;
The operation of taxi or car hire service in an enterprise that has a fleet of less than twenty-five vehicles;
The operation of a beauty salon or a barbershop;
The printing of recharge scratch cards for the use of subscribers of telecommunication services;
The production of exercise books and other basic stationery; f. the retail of finished pharmaceutical products;
The production, supply, and retail of sachet water;
All aspects of pool betting business and lotteries, except football pool

Consequently, enterprises eligible for foreign participation and minimum foreign capital requirement are as follows:

A person who is not a citizen may participate in an enterprise other than an enterprise specified in section 27 if that person

In the case of a joint enterprise with a partner who is a citizen, invests a foreign capital of not less than two hundred thousand United States dollars in cash or capital goods relevant to the investment or a combination of both by way of equity participation and
The partner who is a citizen does not have less than ten percent equity participation in the joint enterprise; or
Where the enterprise is wholly owned by that person, invests a foreign capital of not less than five hundred thousand United States dollars in cash or capital goods relevant to the investment or a combination of both by way of equity capital in the enterprise.
A person who is not a citizen may engage in a trading enterprise if that person invests in the enterprise, not less than one million United States dollars in cash or goods and services relevant to the investments.
For the purpose of this section, “trading” includes the purchasing and selling of imported goods and services.
An enterprise referred to shall employ at least twenty skilled Ghanaians

Chase Away Foreigners?

Ghana Union of Traders Association (GUTA) is planning a mammoth demonstration against the government in three months if it fails to enforce laws governing retail trade, said Dr. Joseph Obeng, President of the Association, at a press conference held at the Central Business District (Opera Square)

GUTA is insisting that if the government does not do as expected and the time comes for the demonstration, its members will not be stopped.

*Source*: Manuel Orozco, Rachel Fedewa, Micah Bump, and Katya Sienkiewicz, 2005. “Diasporas, Development and Transnational integration: Ghanaians in the U.S., UK, and Germany.” Washington, DC: Institute for the Study of International Migration and Inter-American Dialogue.

GUTA President said these confrontations are just actions by local retailers to preserve Ghana’s retail space and should not be seen as xenophobic attacks.

“We are going to declare the destiny day demonstration in three months, where all other laws will not be regarded if our pleas are not being noticed,” he said to the delight of the traders.

Meanwhile, the Accra Region Police Command has described the shutting down of shops belonging to foreigners by some Ghanaian traders as an act of vigilantism that is criminal and could lead to arrests.

*Source*: Commission of the European Communities: Eurostat, Netherlands Interdisciplinary Demographic Institute (NIDI). 2001. Push and Pull Factors Determining International Migration Flows, “**Why and Where: Motives and Destinations.**”

Nigerian traders in Ghana, for instance, have also been calling for a review of Ghana’s trade laws, to complement already existing ECOWAS treaties that permit free trade among African economies.

According to the President of the association of Nigerian traders in Ghana, (NUTA), Chief Chukwuemeka Nnaji, a review of existing trade laws in Ghana could help tone down “unnecessary tensions between foreign and retail traders.”

“I’m still surprised that the Ghanaian Parliament has still not amended the laws. Let that law be amended to suit the ECOWAS Trade Treaty. I think we have to change our minds. I believe there is an issue with misinformation which must be dealt with,” he argued.

Charles Rapulu Udoh

Charles Rapulu Udoh is a Lagos-based Lawyer with special focus on Business Law, Intellectual Property Rights, Entertainment and Technology Law. He is also an award-winning writer. Working for notable organizations so far has exposed him to some of industry best practices in business, finance strategies, law, dispute resolution, and data analytics both in Nigeria and across the world.

Facebook: https://web.facebook.com/Afrikanheroes/

Foreign Investment In Africa Increased By 13% With South Africa, Congo, Ethiopia, Ghana Leading The Largest Investment

June 14, 2019

More foreigners are starting to commit more funds to Africa by way of investment. African countries put together saw a 13% inflow of foreign investment in 2018 alone according to the United Nations Conference on Trade and Development. Aggregate investment volumes climbed to $32 billion, challenging a global downward trend and reversing two years of decline.

Which Countries Foreigners Are Choosing To Invest In

At the head of all these are some African countries which performed better than others. A breakdown of the performance of African regions and countries is as follows:

The Southern Africa region performed the best, taking in FDI of nearly $4.2 billion, up from -$925 million in 2017.
Foreign investment in South Africa more than doubled to $5.3 billion. Though much of the South African jump came from intracompany loans, new investments included a $750 million Beijing Automotive Group plant and a $186 million wind farm being built by the Irish company Mainstream Renewable Energy. President Cyril Ramaphosa, who took office last year pledging to revive the economy, is seeking to attract $100 billion in FDI to Africa’s most developed economy by 2023.
Investments in northern Africa jumped seven percent or $14bn from the previous year. This increase in FDI helped to offset less investment in Egypt, which was down eight percent. However, despite the decline in FDI for Egypt, UNCTAD data shows that the country was still the largest recipient of FDI continent-wide.
Ethiopia remained East Africa’s top recipient of FDI at $3.3 billion, despite an 18% drop compared with the year before. Kenya, another East African country, received $1.6bn worth of FDI. These investments were mainly in manufacturing, hospitality, chemicals, and the oil and gas sector.
Generally, Kenya, Uganda, and Tanzania all saw increases in FDI inflows. Foreign investment in Uganda jumped 67% to a record $1.3 billion, boosted by the oil and gas development of a consortium that includes France’s Total, CNOOC of China and London-listed Tullow Oil.
Ghana, which is in the midst of an oil and gas boom and saw inflows of $3 billion, making it West Africa’s leading destination for foreign investment. Italy’s Eni Group was behind Ghana’s largest greenfield investment project.
By contrast, inward FDI to Nigeria, a major oil producer, plunged 43% to $2 billion. Investors were put off by a dispute between the government and South African telecom giant MTN over repatriated profits. Banks HSBC and UBS both closed representative offices there in 2018.

**Op investor economies in Africa, 2013 and 2017**
(Billions of dollars) Source: UNCTAD

AfCFTA Is Going To Be A Game Changer

Much like the European Union, the newly ratified African Continental Free Trade Area Agreement could be a huge game changer on FDI, especially in the manufacturing and services sectors.

“The ratification of the African Continental Free Trade Area Agreement could also have a positive effect on FDI, especially in the manufacturing and services sectors,” the report said.

The AfCFTA aims to eliminate tariffs between member states, creating a market of 1.2 billion people with a combined GDP of more than $2.2 trillion.

Also the development of new mining and oil projects, a new U.S. development-finance institution could further boost foreign direct investment (FDI) in 2019, the report said.

**Africa: economies with the most SEZs, 2019**
(Number of zones) Source: UNCTAD

Again, the creation of the U.S. International Development Finance Corp could help support FDI inflows this year. A replacement for the Overseas Private Investment Corp, it will have a budget of $60 million and a mandate to make equity investments.

Right now, Africa stands in sharp contrast to developed economies, which saw FDI inflows plunge 27% to their lowest level since 2004, the United Nations Conference on Trade and Development wrote in its “World Investment Report”.

**African FDI Inflows: Top 5 Recipients**
(Billions of dollars). Source: UNCTAD

Comments

This report shows Africa is continuously becoming a new market for international investors. Indeed, this new report shows Africa is defying the current slowdown in global foreign direct investment. In fact, for the third year in a row, foreign direct investment (FDI) is down all over the world, but not in Africa. In 2017, France was the top foreign investor in Africa, followed by the Netherlands, the United Kingdom, and the United States. Critically, UNCTAD’s data shows that from 2013 to 2017, Chinese FDI in Africa grew 65 percent, only topped by the Netherlands, for which FDI was up more than 200 percent. Most African countries are also resorting to creating zones. In fact, in 2018, Burkina Faso, Côte d’Ivoire, and Mali launched an SEZ spanning border regions of the three countries. Similarly, Ethiopia and Kenya recently announced their intention to convert the Moyle region into a cross-border free trade zone.

UNCTAD notes that stronger regional cooperation also creates scope for more ambitious regional and cross-border zones.

This is exactly what AfCFTA is proposing. So expect more inflows of FDI before this year ends, but mostly in countries that have agreed to be part of AfCFTA.

Charles Rapulu Udoh

Charles Rapulu Udoh is a Lagos-based Lawyer with special focus on Business Law, Intellectual Property Rights, Entertainment and Technology Law. He is also an award-winning writer. Working for notable organizations so far has exposed him to some of industry best practices in business, finance strategies, law, dispute resolution, and data analytics both in Nigeria and across the world.