june+2013+african+infrastructure+review

Review

African Infrastructure

06

03

2013

|

_

African Infrastructure Review June/August 2013 1

Executive summary

The decision by the BRICS nations to set up a development bank for infrastructure

programmes in the major emerging economies poses as many questions as it

answers, not least what will it mean for Africa? ..3

The African Development Bank (AfDB) calculates that Africa needs around $390

billion over the medium term and trillions of dollars in the longer term to finance its

infrastructure development but that the continent should play a bigger role in raising

the vast sums of finance that is needed.....31

Chinas interest in Africa is by no means limited to acquiring resources, according to a

new analysis of its spending......32

Table of Contents

News & Analysis

Transport and Distribution....7

Energy...11

Telecommunications 15

Water.............................................19

Inputs.22

Companies.........................26

Finance and Investment29

Policy.....34

Market Indicators ...37

Summary of Recent News ...38

African Infrastructure Review is a quarterly

report produced on behalf of Nedbank Capital

by the VM Group.

Editor: Mike Cassell

Email: [email protected]

Analyst:

Paul Hannon

Email: [email protected]

_


`

Escape from Bretton Woods? The Big Five emerging economies have agreed, with a great sense of urgency

according to South Africas Finance Minister Pravin Gordhan, to establish a

development bank that will help to boost infrastructure spending across the developing

world. The decision by the so-called BRICS group of nations Brazil, Russia, India,

China and South Africa represents the fledgling organisations first significant attempt

to move beyond well-meaning rhetoric to a phase of decisive action. But how decisive

and successful will it prove to be in setting up an institution that may not be in business

to see off the World Bank or the International Monetary Fund but which its founders

believe will reflect an irrevocable shift in global economic power and influence?

The idea may sound fanciful, but plans to connect Brazil, Russia, India, China and

South Africa via a 28,400 km marine telecommunications cable are deeply symbolic.

The proposed link, says South African President Jacob Zuma, will remove

dependency on developed nations, allowing the five BRICS countries to communicate

directly on a south-south basis. The $1.5 billion project is, therefore, about a great

deal more than providing them with sound information and communication technology

infrastructure; it is seen as a tangible indication of the BRICS resolve to enable the

major developing nations to reduce their historic independence on Western institutions

they believe have served them badly.

As ambitious as it may sound, however, the marine cable may prove a lot easier to

bring about than the other ground-breaking initiative dubbed a new paradigm

embarked upon by the five BRICS countries at the start of April. At their Durban

meeting they proposed the establishment of a development bank, possibly armed with

$50 billion of seed capital and a $100 billion cushion in the shape of a contingency

reserve. Its job, to fund infrastructure projects across their own nations, worth anything

up $4.5 trillion. Despite talk of a new rival on the block, the new bank is essentially

being seen as an alternative, though not a replacement, to Western-dominated

financial institutions the Washington-based World Bank and the International

Monetary Fund that were created at Bretton Woods, New Hampshire, in 1944,

primarily to promote US interests. BRICS countries may be deeply enmeshed in the

status quo structure of international development finance but, in focusing on their own,

developing world, they believe they will be reflecting a shift in global power and

influence. The time has come, they say, to reflect the seismic shift in geo-political

dynamics by constructing an institution with a different ideology and new value system

that can end dependence on lenders who impose neoliberal conditions ranging from

privatisation to premature market liberalisation.

If a new, post-crisis international monetary order is, indeed, emerging then there is no

doubt that the BRICS nations have a strong hand to play. Together, they represent

43% of the worlds population, something over 20% of global GD a share that is

_


rapidly rising and have combined foreign exchange reserves of more than $4 trillion.

Trade within the group surged to $282 billion in 2012, up from just $27 billion in 2002,

and it may reach $500 billion by 2015. Foreign direct investment into BRICS nations

reached $263 billion last year, accounting for 20% of global FDI flows. Given the

increasing frequency and magnitude of global financial crises, the addition of another

fund that can be rapidly mobilised in times of crisis and a new development bank that

promotes desperately needed infrastructure investment must be welcome. The World

Banks budget is clearly insufficient to finance required levels of global infrastructure,

while the processes involved in the release of its funds are complex and can be quite

burdensome. Neither does the creation of a new institution necessarily imply that it will

find itself competing with the likes of the World Bank and the IMF, especially as the

BRICS nations are deeply integrated in the existing order and are most unlikely to

become decoupled from it; it may be able to secure greater leverage in these

organisations but its foundation will be more of a response to an internal need, as

opposed to an externally focused agenda bent on dominating existing financial

institutions.

But the devil will be in the detail and the banks creation poses as many questions as

answers. The initiative has been met with considerable scepticism, not least in the

developed countries, which is nothing less than its supporters would have expected,

but even its backers acknowledge there is much work to be done before a new

institution can emerge. BRICS leaders meeting in Durban declared the proposal

feasible and viable but some difficult problems have to be resolved before any new

development bank could be up and running. Do they, indeed, have enough in common

and hold enough shared goals to function effectively? Intra-BRICS differences and

tensions are as significant as their similarities and the reality is that, since its first full

meeting in Russia in 2009, its achievements have been limited. As for making common

cause on global economic governance they failed to back a single candidate in the

search for a new IMF chief, resulting in the failure of a Nigerian candidate to get the

top job can they do it when it comes to much broader, bigger issues? Member

_


countries hardly invest in one another, preferring the developed worlds major

economies; just 2.5% of BRICS foreign investment goes to other countries in the

group, while more than 40% goes to the European Union, the US and Japan. Brazil,

South Africa and Russia are big resource exporters while China and India are

importers. There are also border tensions between India and China and a fight for

influence in Central Asia between China and Russia.

A major factor is the likely dominance of China in any new institution set up by the five-

nation club, a country that has been much more successful in projecting its economic

power globally than its other partners and which must be wondering what it can

achieve via a BRICS bank that it cannot continue to do through its own, state-

controlled financial institutions. The BRICS states have wide differences in GDP, with

Chinas economy four times larger than Russia or India and around twenty times that

of South Africa, so how, for example, will the initial $50 billion capital be carved up?

Will China inevitably dominate and, essentially, use its seat at the table to leverage

more business not only from other BRICS countries but also from those within their

realm of influence? The Chinese are renowned for offering no-strings development aid,

particularly in Africa, as opposed to the conditional aid demanded by many other

lenders, but the unbalanced nature of its trade links on that continent are already

giving rise to concern. They stand accused of taking a neo-colonialist approach to the

continent and of exploiting its natural resources; it recently doubled to $20 billion its

loan pledge to Africa, sparking a recent warning from President Zuma that Africa

needed to be cautious when entering into partnerships with other economies. The

governor of Nigerias Central Bank said last month that Chinas approach to Africa was

in many ways as exploitative as that of the West, a significant contributor to Africas

de-industrialisation and underdevelopment.

Per Capita GDP. Source: BRICS

South Africas role and standing in any new development bank is, in itself, a critical

issue. Its inclusion boosts its efforts to become an investment gateway into Africa and,

although the continent has its own, home-grown development banks, access to

another source of funds on the scale held by a BRICS bank offers the chance of a

massive additional injection of infrastructure finance. There are those who question the

validity of South Africa, a relative economic minnow, being a member of BRICS, given

its size and its ability to put up funds like its larger partners but failure to include an

African representative in the line-up would have left a gaping hole in the new

organisations claim to represent the developing world. Few, however, would deny that

the need to develop the continents physical infrastructure is critical to its continuing

_


.

economic development.

Estimates suggest that Africa will need to invest at least $100 billion over the next

decade to extend and upgrade its infrastructure if it is to maintain its economic growth.

Africas collective GDP is forecast to rise from $1.6 trillion in 2010 to $2.6 trillion by

2015 while its economies will expand by an annual average rate of 5.5% over the

same period. But a recent World Bank study found that the poor state of infrastructure

in sub-Saharan Africa, including electricity, water, ports, roads, rail and IT, reduced

average national economic growth by two percentage points ever year and reduced

business productivity by as much as 40%. With properly targeted infrastructure

development, the continents GDP could rise significantly, although the availability of

specialist skills needed to deliver enabling legislation, regulation and development

itself will be as important as the availability of funds.

Value of Imports and Exports of Goods/Commercial Services. Source: BRICS

But can South Africa, which invited observers from 15 other African nations to the

Durban summit, rise to the challenge? It vehemently defends its inclusion within the

BRICS grouping and claims that, given its comparatively well developed infrastructure,

the country can act as a catalyst within the new organisation to help the entire

continent deliver the infrastructure that is required. Through BRICS, it will be expected

to help encourage the integration of African nations, which in turn should attract

investment flows and encourage intra-Africa trade. The joining together of Rwanda,

Kenya, Tanzania, Uganda and Burundi under the East African Community umbrella is

considered to be working well, as is the Southern African Development Community, a

socio-economic union of 15 countries. A new development bank should also be able to

assist in the shift away from dependence on agriculture to manufacturing. Existing

development institutions, such as the Development Bank of Southern Africa, certainly

have no problems with the idea, claiming a BRICS development bank would play a

critical role in funding development and regional integration on the continent.

There is another set of questions to be asked if the bank gets off the ground. What will

be its lending criteria? Will it intend to lend at market rates and what policies of

conditionality will, if any, be attached to loans? The World Banks soft loan arm, the

International Development Association, lends money on easy terms, charging little or

_


no interest, with repayments stretched over anything up to 40 years. So will there be

any strings attached to BRICS development bank loans? Much of the continent is still

suffering the debt hangover of the 1980s and early 1990s, following intervention by the

World Bank and the IMF who came to its rescue, demanding policy implementation in

return from privatisation, government spending cuts and higher interest rates. More

flexible policies have done little to change the negative perceptions of these institutions

across Africa. But the first steps at least have been taken. Everyone within BRICS

thinks that a development bank is a good idea, though no actual decision has yet been

taken. The positioning to ensure maximum influence within the group is underway and

haggling over issues such as initial funding and where the new bank will be based will

heat up. The BRICS leaders, however, have to remain realistic about just how far their

pledge to co-operate can go. If they can create a BRICS bank that can do the job, it

will be a tremendous fillip for them and for the status and self-confidence of the

developing world. There will be an interim BRICS meeting when the G20 gathers in

Russia in September, followed by a full BRICS summit in Brazil next year. Perhaps

then the organization will emerge with an agreed blueprint that enables it to aspire to

being a global force. But if the fanfares and cheering are eclipsed by the sound of

disagreement as old tensions resurface, then it may be well advised to drop the idea

before the plan becomes a lasting political embarrassment.

BRICS..Banking on each other

_


Transport and Distribution

News

May 23: Selective charging of road users with the use of tolls was

critical to help pay for and maintain South Africas roads, Transport

Minister Ben Martins said.

May 21: A R2.3 billion project to upgrade the rail network between the

manganese-rich Northern Cape, South Africa, to the port of Ngqura in

Eastern Cape was approved by Transnet Freight Rail.

May 20: The Nigerian Federal government and the World Bank

agreed a $330 million loan to help finance road projects in the country.

May 14: Poor operations at Mombasa port was limiting Kenyas

economic growth, World Bank economist Wolfgang Fengler claimed.

May 8: The South African coal line to Richards Bay would include a

Botswana link in seven years time, operator Transnet said.

May 3: The East African Community said partner states had to re-

invest heavily in railways systems to take the strain off the regions roads.

May 1: The Chinese government agreed to a $3.3 billion financing

package for the 753 km Ethiopia-Djibouti railway link.

April 29: Ekurhuleni, in Gauteng Province, South Africa, finalized

plans for its Aerotropolis project, which will integrate the city with the OR

Tambo international airport.

April 29: The World Bank said it would provide $80 million towards

the cost of the Ganta-Fishtown Highway in Liberia.

April 28: Transnet of South Africa started on-site feasibility tests near

Durban for a new port that could cost R100 billion ($11 billion).

April 23: Rwandas national road maintenance fund had only half the

resources it required for planned projects, the government said.

April 22: African transport costs are among the highest in the world,

constituting up to 50% of export values and hitting competitiveness,

according to a joint report from the African Development Bank and the

OECD.

April 18: The African Development Bank approved loans worth $232

million for the 157 km road project from Arusha-Holili in Tanzania and

Taveta to Voi in Kenya.

April 16: Rwanda awarded a contract for the new international airport

at Bugesera to the Chinese State Construction Engineering Corporation.

April 12: The Maputo Port Development Company said it was

investing $400 million, rising to $1.7 billion over the next five years, to

expand the facilities handling capabilities.

April 11: South African contractor Group Five announced a R1.8

billion road upgrade contract in Zimbabwe.

April 9: Ghana Airports Company said work would soon start on the

planned international airport at Tamale, the countrys northern capital.

April 5: Dube TradePort Corporation and Indian conglomerate Action

Group signed a R2 billion deal to develop a hi-tech industrial park near

King Shaka International Airport, Durban, South Africa.

April 4: Ghanas transport minister said Africas 3% share of global

air traffic was woefully inadequate.

_


Analysis

Chinese back Transnet expansion

While the BRICS countries push ahead with plans for their own

development bank, China continues to shore up its role as Africas

major lender with mega-deals such as the March agreement to help

Transnet, South Africas state-owned ports and rail operator, upgrade

its infrastructure. An agreement with China Development Bank to

jointly finance, build and upgrade Transnet assets and also to pursue

cross-border infrastructure projects across the continent came with a

pledged R 46 billion ($5 billion) funding package. Last year, Transnet

announced an unprecedented R 300 billion investment programme

planned over the next seven years to expand railways, ports and

pipelines to help boost commodity exports; it indicated at the time that

the finance would come from its own resources and from fund-raising

on the capital markets. The deal, unsurprisingly, was hailed as an

example of what BRICS nations could achieve together it was

finalized at the BRICS summit in Durban though it also gave weight

to those observers who would claim such deals demonstrate that

creating a BRICS development bank is hardly necessary. Chinas

decision to back Transnet represents another measure of the

importance it attaches to ensuring that badly-needed commodities can

be easily transported, without incurring the bottlenecks that occur even

in countries with relatively well developed infrastructure such as South

Africa. For Transnet, the deal is a critical step in its plans to overcome

a long legacy of under-investment notably high port charges, long

waiting periods and the handling limitations of a rail network in need of

upgrading. Despite such problems, however, South African ports

remain regionally dominant and are unlikely to face serious challenges

to their position, at least in the short term, despite new investment

programmes being undertaken in neighbouring countries. While, for

example, Angolas recently upgraded line between the port of Lobito

and the Zambian border will help ease exports for landlocked countries

it will have minimal impact on South Africa. In similar fashion, Namibia,

Mozambique, Kenya and Tanzania are all planning to improve port

services. The port of Maputo, in Mozambique, for example, has shown

dramatic growth but it remains a comparatively minor player. By 2050,

however, it plans to be handling 50 million tonnes of cargo annually,

against 15 million tonnes currently. But rising competition between

regional ports should also improve the flow of trade in and through

South Africa.

_


The Lamu Port-South Sudan-Ethiopia Transport (LAPSETT) corridor

Kenyas mega-port plans advance

Kenya expects big things of its new port at Lamu, part of a $25.5 billion

project intended to link landlocked South Sudan and Ethiopia to the

Indian Ocean port via a major highway, railway and oil pipeline. The

plan, first mooted in the mid-1970s, is to boost cross-border trade and

boost tourism and agriculture in particular. April saw another advance

for the plan when a Chinese company, China Communications

Construction, won a KSh 41 billion ($484 million) tender to build the first

three berths at the Lamu complex. China Communications in 2011

signed a deal to expand the number of berths at Mombasa port, east

Africas largest, and last year it agreed a $2.66 billion deal to update

some of Kenyas railways. Kenya believes that the corridor project, due

to be completed by 2016, will add between 2% and 3% to Kenyas GDP

by 2020 and says Lamu will boast 32 berths when completed in 2030.

At Lamu, the hope is that by starting work with the Chinese on the first

three berths, the government can encourage private investors to

become involved and enable the port to be fully developed. But the

corridor project is not without its critics. Some have called it a vanity

project, insisting the funds would be better spent on upgrading existing

infrastructure while environmentalists claim the port development will

destroy delicate marine life and choke coral groves and mangroves

while the transport corridor will disrupt communities along the route.

Even so, the Development Bank of Southern Africa has reportedly

expressed interest in contributing up to $1.5 billion towards the Kenya-

South Sudan-Ethiopia link. In April, the Kenyan government set up an

independent body to monitor the project, drawing its members from

government and the private sector.

_


Uganda enlists World Bank help for roads

Ugandas poor road network only 4,000 km of the 20,000 km total are

tarmac surfaced stands as testament to historic budget restrictions but

there is now growing confidence in government that a new era of public-

private-partnerships can begin to redress years of neglect and under-

investment. In a move intended to fast-track the construction of four,

multi-billion dollar road projects, the government has secured the

technical assistance of the World Bank in pursuing the projects while

also inviting Trademark East Africa, a trade organization funded by a

range of development agencies, to provide oversight and support to the

Uganda National Roads Authority, who will be managing the

construction programme. Agreements with both organisations should be

completed by the summer. In what will comprise the most ambitious and

expensive road projects in the countrys history, the government plans

to follow up construction of the $476 million Kampala-Entebbe

expressway with four projects worth more than $1.5 billion. They are:

the 80-km million Kampala-Jinja expressway, the Kampala Southern by-

pass, the Kampala-Mpigi expressway and the Kampala-Bombo

expressway. Unlike the Chinese-funded Kampala-Entebbe route, they

will all be financed through public-private partnerships, with investors

recovering their investments through toll income over a 20-25-year

concessional period.

More road tolls for South Africa

If cash-strapped governments do not want private investors to fund their

roads then another option is always to charge the motorists who will use

them. Toll roads are hardly new in South Africa, where they were first

introduced in 1983, but their spread has been rudely interrupted by

protests that brought embarrassment to the government and did their

cause no good. New tolls roads were due to be introduced in Gauteng,

the countrys richest and most populous province, in 2012 with the

South African National Roads Agency (Sanral) arguing it needed to

impose the tolls to repay the R20 billion loan it had taken to repair and

improve 185 km of congested freeways in and around Johannesburg

and Pretoria. But the plan was met with a wave of protests from

objectors who said they had not been consulted and could not afford it.

Trades unions staged a one-day strike and, despite a government offer

of a one-off payment to subsidies the tolls for private users, the protests

continued and the tolls were not implemented, pending a judicial review.

But now, given a legal all-clear, the government is set not only to

introduce the Gauteng tolls in July, Sanral says it is studying the

feasibility of building five new toll roads across the country. It says it is

increasingly forced to consider tolls because of insufficient funds to

build, upgrade and maintain national roads and its controversial stance

is being backed by ministers. Opponents are calling for a ring-fenced

road maintenance fund, claiming that fuel levies originally intended to

finance road schemes had been spent on other projects.

_


Energy

News

May 25: Tanzania said it would continue building a Chinese-funded

$1.2 billion gas pipeline from the south to Dar es Salaam despite violent

protests over the project.

May 24: Egypt announced an electricity project that will connect it

with Saudi Arabia and allow for the exchange of 3,000 MW of power.

May 19: Democratic Republic of Congo officials announced October

2015 as the start date for work on the $14 billion Inga III hydro-electric

dam.

May 13: Officials said work would start soon on the power connector

between Rwanda and Burundi following agreement on EU funding.

May 9: Nigeria said the 4,000 km Trans-Saharan gas pipeline,

agreed in 2002 between Nigeria and Algeria, was now under review

because of changing gas market conditions.

May 7: The World Bank and African Development Bank said they

will fund 80% of the $1.26 billion cost of the 2,000 MW Ethiopia-Kenya

power transmission line.

May 7: The African Development Banks Climate Investment Fund

approved plans by six north African nations to proceed with an updated

version of a plan to create 1,120 MW of solar-powered energy.

May 6: Construction of the Lake Turkana wind power project should

start by the end of this year, the African Development Bank said.

May 4: South African power utility Eskom said sub-Saharan

countries should together create a super power grid for the region.

April 25: Mozambiques National Hydrocarbon Company said it was

to conduct a study for a 2,100 km gas pipeline that would cost $4 billion

dollars. Work could begin in mid-2015.

April 24: The Power Holding Company of Nigeria and the World

Bank signed a $145 million partial risk guarantee for Nigerias gas

sector, enabling the countrys Egbin power station to secure long-term

gas supplies.

April 24: Zimbabwes Multi-Donor Trust Fund, managed by the

African Development Bank, made $35 million available for improving the

countrys power infrastructure.

May 23: Africa needs an extra 22,000 MW of cross-border

transmission line capacity to close the continents energy gap, according

to the Tanzanian government.

April 15: A World Bank official called Ghanas plan to extend

electrification to rural areas as insane, given that the country already

suffered severe power shortages in its main population centres.

April 10: The Indian Electrical and Electronics Manufacturers

Association said it wanted to boost power transmission and distribution

exports to the African continent.

April 9: The African Development Bank made a $157.6 million loan

to the Republic of the Congo to implement a rural electrification project.

April 8: NamPower of Namibia and Eskom of South Africa said they

intended to acquire stakes in the Kudu power station in Namibia, due to

come on line in 2017.

_


Analysis

Slow cure for Nigerias ailing power sector

Nigerias dysfunctional power sector has been on the receiving end of so

many political pledges about its impending improvement that

expectations of progress seem are scarce as uninterrupted electricity

supplies. Decades of bad management, political infighting and the

squandering of huge chunks of investment some calculate $40 billion in

two decades intended for the power sector have reduced it to a wholly

inadequate system that generates around 4,000 MW for a country of 170

million people. That is one-tenth that of South Africas, despite the

country being Africas top oil producer and holding the worlds ninth

largest gas reserves. Around $13 billion a year is spent on diesel, most of

it imported. So reforming the countrys power generating and

transmission sector is critical to its economic well-being the current 7%

GDP annual growth rate could hit double figures if it was resolved and,

since his election in 2010, it has been declared to be President Goodluck

Jonathans number one political priority. The countrys Finance Minister

said in May that the country planned to sell $1 billion in Eurobonds to

finance power projects while the Minister of Power said the federal

government was working around the clock to expand grid capacity by

2014. The dismantling of the old state power monopoly reached a

milestone in April when private sector bids worth $2.3 billion were

approved for 15 of the 17 state-owned generation and distribution groups

comprising ten generators and five distribution operations. A sixth plant

was not sold because bids failed to meet technical standards but it is

being re-offered for sale. The identities of some of the new owners have

raised doubts about the chances of success of the newly-unbundled

sector, although the inclusion of several recognized technical partners

such as Siemens has given some cause for optimism. But the

privatization programme itself is months behind schedule and the

government has disclosed that it will need about $3.4 billion to fund the

planned expansion and upgrading of the national grid between now and

2016, simply to enable it to take the generated power available. The

African Development Bank is providing $150 million to help transmission

improvements and some of a $1 billion debut Eurobond will also be

allocated to upgrades. Ministerial suggestions that most of the

investment finance will be provided by government, international

development banks and multilateral agencies was met with complaints

that Nigerian banks could themselves could fund transmission projects.

When President Jonathan launched his electricity reform programme in

2010, he said Nigeria could boost generation from 3,000 MW to 10,000

MW by the end of 2013 (from the present 4,000 MW) and to 40,000 MW

by 2020. That seems unlikely but investor interest has been high, with

companies from India, Israel and Kenya joining those from Europe and

North America. More likely is an increase to around 6,000 MW within the

next two years, rising to around 9,000 MW by 2020. But with potential

demand as high as 140,000 MW, the challenge is daunting. In early May,

the President forecast that, following the completion of the privatisation

programme, an annual investment of $10 billion was likely over the

following ten years. Even so, it could take 50 years before Nigeria attains

the same per capita electricity consumption as South Africa.

_


South Africa must rethink energy plans

When South Africa has stopped patting itself on the back over the giant

strides it has been taking towards introducing renewables into its energy

mix, it had better take another long, hard look at its electricity blueprint up

until 2030, according to the findings of a study commissioned by the

countrys National Planning Commission. The study, conducted by the

Energy Research Centre at the University of Capetown (UCT), says that

the countrys 2010 Integrated Resource Plan (IRP) is already so out of

date that it is no longer valid for planning and that if it continues to form

the basis for investment decisions on electricity generation then the result

could be very costly to the economy, leaving South Africa with surplus,

stranded, expensive power plants. A new plan, it concludes, must be

developed. The IRP is, indeed, intended to be revised every two years

and a re-think is due now but the Department of Energy says it will not be

carried out until the master Integrated Energy Plan has been finalized.

When it does get round to it, the UCT conclusions will give it plenty of

food for thought. Its principal conclusion is that electricity demand growth

will prove to be much lower than forecast in 2030 running below 2007

levels because of a variety of factors, including demand responses to

higher electricity prices, and structural changes in the economy. It

calculates that actual demand by 2030 will reach 341 TWh (50 GW peak)

compared to the 454 TWh (67.8 GW peak) foreshadowed in the IRP.

Installed capacity by 2030 will be around 61 GW instead of the 89 GW

anticipated and, because of the lower demand growth and already

committed investment plans, very little further investment will be needed

before 2025, after which new capacity will be dominated by gas, with

solar thermal, wind and imported electricity meeting the remaining

requirements. And in a passage that will strengthen the arm of nuclear

power opponents, the study says nuclear costs will be considerably

higher than envisaged. Neither can it can see any reason for nuclear

power to be required before 2029 at the earliest and possibly not until

2040, compared to a date of 2023 in the governments IRP. Therefore, it

declares, a decision over whether or not to opt for nuclear power was by

no means a matter of urgency and could be made once more

information on issues such as the availability of shale gas, the costs of a

gas pipeline from Northern Mozambique and LNG prices was available.

The report, however, concedes that after a few years of stagnation in

demand growth, there could be a sharp rebound, implying higher growth

levels. The authors may get things wrong but the government is expected

to get them right.

Ghana struggles to end load shedding

Ghana needs all the electricity it can get so when a Chinese contractor

threatens to pull out of a $700 million project to help improve the

countrys gas supplies, alarm bells start ringing. Sinopec International

Petroleum Service Corporation warned in April that it would stop work on

the Atuabo gas processing plant in the Western region of the country

because it had not been paid. The project is being funded by the

government with a $3 billion loan from the China Development Bank and

the problem appears to have centred on late payments to the

contractors. When completed, the plant will treat raw gas from the

_


floating production and storage vessel Kwame Nkrumah, which services

the Jubilee Field, for use in the countrys power plants, adding a

potential 1,000 MW to generating capacity as well as producing

valuable by-products such as liquefied petroleum gas. The issue was

resolved in early May but infrastructure projects such as Atuabo are vital

if the country is to resolve its ongoing energy crisis. Industrial and

domestic consumers have seen the addition of 265 MW of power to the

nations generating capacity in early 2013, notably from one of the units

at the $800 million, 400 MW Bui Hydro project and from a thermal

power plant at Takoradi, west of Accra, Ground has also been broken

on Takoradi 2, which will expand installed capacity from 220 MW to 340

MW when it is commissioned at the end of 2014. The situation will

improve further when the West African Gas Pipeline project, under

which natural gas from Nigeria is supplied to Benin, Togo and Ghana,

finally starts pumping natural gas to the Sonun Asogli plan, which will

generate 200 MW. The government says that Ghanas electricity

demand is rising about about 10% annually, requiring an extra 200 MW

of capacity each year. Since 2009, capacity has risen from 1,810 MW

to 2,576 MW and President John Dramani Mahama has pledged to

double installed capacity to 5,000 MW by 2016.

Kenya insists it will go nuclear

Shipping off eleven people for training in South Korea as nuclear

scientists suggests that Kenya, despite widespread domestic cynicism,

remains set upon developing its own nuclear energy sector to help

overcomes its power shortages. In September 2010 the government

said it aimed to build a 1,000 MW nuclear power plant by 2017,

describing it as a less expensive alternative to more thermal power

stations. The technology would be South Korean and the cost is now

put at around Sh250 billion ($3 billion), although officials have admitted

they have no funds lined up. The original deadline now looks fanciful

and, more realistically, if any nuclear project does go ahead it is unlikely

to start until around 2018, implying completion in 2022. It would add

1,000 MW to a national generating capacity that currently stands at

about 1,400 MW. The students will be taking post-graduate nuclear

engineering studies at the Kepco International Nuclear Graduate School

in Ulsan, South Korea and the intention is that they will return home to

help the Kenya Nuclear Electricity Board, along with South Korean

nuclear specialists, get the proposed nuclear programme off the ground.

Kenya-Ethiopia power highway launched

The official start of work on the 1,068 km high-voltage electricity

highway between Kenya and Ethiopia in May means that, within five

years, surplus power generated in Ethiopia should be flowing to

industrial, business and private consumers in Kenya. The $1.26 billion

project will not only improve access to affordable electricity for almost

900,000 households by 2018 it will also generate important, additional

revenues for the power generators and open up the possibility for power

trading across the wider East African region. The new transmission line

will run for 437 km in Kenya and 631 km in Ethiopia and will be capable

of carrying 2,000 MW in either direction. The African Development

Bank, the World Bank and the governments of Kenya and Ethiopia will

finance the power link and the French Development Agency is also

expected to part-fund the project.

_


Telecommunications

News

May 22: Researchers at IBM said they had redrawn bus routes in

Ivory Coast using mobile phone data. They said such data could be used

for planning infrastructure projects.

May 17: Indias Tata Communications denied suggestions that it

planned to sell Neotel, its South African subsidiary.

May 13: The 17,000 km Africa Coast-to-Europe submarine, fibre optic

cable was inaugurated in Ghana. The $700 million project will link Ghana

with 22 other countries.

May 9: The Independent Communications Authority of South Africa

shut down the operations of Eastern Cape-based Amatole

Telecommunications Services for non-payment of licence fees.

May 8: Epsilon Telecommunications linked with the SEACOM and

West Africa Cable System, giving the company undersea sable

connectivity that circumnavigates Africa.

May 3: An internet exchange point being developed in Tunisia should

cut costs and help the countrys efforts to attract business, according to

the Internet Society.

April 26: The Nigerian government enacted long-awaited mobile

number portability (MNP), allowing subscribers on the countrys four

major mobile networks to switch providers but retain their numbers.

April 26: Globacom of Nigeria signed a $750 million deal with Huawei

Technologies to expand the capacity of its Glo network.

April 24: Vodafone Group said it was boosting its investment in Africa

to offset stagnant earnings in Europe.

April 23: The Nigerian arm of MTN of South Africa signed a $3 billion

loan facility to expand its network. The loan was arranged by Nigerias

GT Bank but Citigroup, Standard Chartered and Nedbank were among

the lenders.

April 16: Rwanda was ranked among the top 10 countries in Africa in

a position to benefit from new communication technologies, according to

an index compiled by the World Economic Forum and the European

Institute of Business Administration.

April 10: Mauritius-based Liquid Telecom announced improvements

to its fibre network along the East African coast.

April 9: The Nigerian Communications Commission said that the

countrys CDMA (Code Division Multiple Access) operators had lost 1.4

million active subscribers to GSM (Global System for Mobile

Communications) over the previous year.

April 2: Finnish mobile maker Nokia and Indias Bharti Airtel

announced a partnership to sell communications services in Africa.

April 1: France Telecom agreed a deal to outsource more than 2,000

mobile towers across the Ivory Coast and Cameroon to African

infrastructure group IHS.

March 25: Zambia Telecommunications (ZAMTEL) said it would

introduce broadband services to rural areas.

_


Analysis

Nigerian mobile market still racing ahead

Given that 60% of Nigerians are living below the $2-a-day poverty mark,

millions of people would have to spend around 21 days of their food

budget to buy a basic mobile phone and thats what many of them must

be doing. A new analysis of the Nigerian mobile phone market by Gfk

retail and Technology Nigeria shows Nigerians spent NGN181 billion

($1.2 billion) in buying 21.5 million mobile phones in 2012. Of that total,

smart phones only accounted for about 4% of total sales. The figures

show that, driven by lower prices and a growing demand for broadband

services, subscriber growth rates mean Nigeria, with more than 100

million mobile phone users, has become Africas biggest and one of its

fastest-growing telecom markets.

Such rapid growth has led to problems with network congestion and

quality of service and huge amounts of foreign investment are pouring in

to provide additional base stations and fibre optic transmission systems

to support rising demand for increasingly cheaper bandwidth services.

Major infrastructure sharing deals have been concluded and several

high-speed long-term evolution (LTE) networks are being rolled out,

although commercial launches have been hindered by delays with

frequency spectrum allocations. Despite such rapid development, there is

also plenty of further potential for growth, given that market penetration is

estimated at somewhere between 75%-77%, with rural areas where

network rollouts are expensive yet to catch up.

Rural infrastructure delaying mobile spread

The economic growth potential of the African continent already ranks

among the highest in the world but it will only capitalize on its vast

opportunities if it pursues the rapid development of modern information

and communications technology, according to Lars Linden, the outgoing

head of Ericssons sub-Saharan business. ICT is the business that

enables other business to do business, he says and for every 10%

increase in broadband and mobile phone penetration GDP will increase

by one percentage point. Doubling of connection speeds alone can add a

further 0.3% in GDP. At present, the continent has about 45% mobile

phone penetration, compared with a global average of 70%, so there is

still plenty of scope for expansion and Linden says that although Africa

may be a challenging region in which to work, the combination of a less

mature market with rapidly rising demand laid the platform for explosive

_


growth as related infrastructure expands. The African Development Bank

(AfDB) estimates that the continents mobile industry contributes $56

billion to the regional economy, around 3.5% of total GDP and believes

that although the market will continue to grow, extreme pricing pressures

and regulatory risks will impact the investment environment. Factors such

as poor road infrastructure make it expensive to transport equipment to

set up mobile towers in the rural areas that yet have to be penetrated,

while a dependence on diesel generators to power towers in remote

areas also drive up investment costs. Tower sharing is one option now

being considered by operators in a bid to reduce infrastructure costs.

There are also immense challenges facing fixed-line infrastructure

programmes, although there has been some progress, with around one

dozen countries having launched plans for the development of national

backbone networks over the past two years. But many nations,

particularly in central and western Africa, where private sector investment

has been discouraged because of the diversity of regulatory frameworks

and the high cost of opening up new routes. While public sector spending

on ICT has increased significantly over the last decade, the private sector

continues to be the key driver for investment, injecting close to $50 billion

over the same period. The AfDB says huge potential exists for African

countries to build the requisite infrastructure, legal and regulatory

environment, as well as to develop advanced skills in software

engineering and project management.

Mathematics by mobile

The advent of mobile telephony has already had a massive impact on the

African economy but the communications revolution is also having an

increasing role to play in education across many parts of the continent.

So-called mobile learning is supporting and extending education in a

variety of ways that were previously impossible. As mobile hardware and

the networks that support them become more powerful, dynamic and

affordable, the mobility of these technologies offers new options for

teaching and learning. An example is Nokia Life, an information service

available in Nigeria, where its information channels deliver exam

preparation tips for middle and high school students and English

language learning. Mxit, Africas largest home-grown mobile social

network, not only allows youngsters to stay in touch but it also provides

live tutoring for mathematics homework. A project launched in 2007 has

already helped 32,000 school pupils work through maths problems by

connecting them with tutors for live instruction. But the barriers to

realizing the full educational potential of mobile technology remain

plentiful; tariffs may be falling but they remain too high for many Africans;

additional obstacles include a shortage of local language content and low

numbers of smartphones and tablets than can enrich and expand the

learning experience. But with 735 million mobile subscriptions already up

and running across the continent, accessibility is rising exponentially,

bringing with it open-ended education opportunities that may help to

compensate for any deficiencies in traditional education services.

MTN denies anti-competitive claims

MTN may be Africas biggest mobile phone company but it has denied

claims from the Nigerian Communications Commission that it has

become dominant in Nigeria, with 44% of the mobile market. The

Commission says that phone calls between MTN Nigeria customers cost

_


a third of the price to other networks, amounting to a calling club for

MTN subscribers. Its remarks form part of an industry shake up that it is

pursuing in an effort to reduce call charges for the countrys 109 million

mobile phone users. MTN is market leader with 47.4 million customers

and the Commission says it must now reform its mobile tariff policy and

will face further scrutiny to ensure competition between providers

remains fair. The company says it is mystified by the criticism the

Commission has not said the company has abused its market position or

made it clear whether or not it has to change its tariffs and is seeking

talks with the regulator. MTN in unfazed and says it is proceeding with

plans to sign up an extra 7 million subscribers by the end of this year, a

target that it may even surpass, given the arrival of almost 4 million new

mobile users in the first three months alone of 2013. It claims that, with

prices charged across Nigerias mobile phone operators dropping by half

over the last twelve months, competition would appear to be alive and

well.

_


Water

News

May 25: The Ghana government said it needs $225 million annually

to construct sustainable water and sanitation facilities.

May 23: Uganda became the first African nation to become a member

of the Water Cost Index, developed by water consultancy Waterfund and

IBM. It will calculate the cost of producing water in an effort to attract

funding for water projects.

May 21: The South African Department of Water Affairs said it would

start rolling out its new interim water supply programme, aimed at

clearing the backlog in municipal water-related services.

May 21: South Africa needs to invest an estimated R670 billion

($69.9 billion) in new water and sanitation infrastructure over the next

decade, the countrys Water Affairs minister said.

May 20: The African Development Bank launched a project to cut the

acute shortage of water in Burkina Faso.

May 20: There could be a shortage of clean water in South Africa if

consumers did not conserve it, the government warned.

May 17: South Africa approved the R12 billion ($1.25 billion) second

phase of the Lesotho Highlands water project, which will supply extra

water and electricity for Lesotho.

May 14: Djibouti was given a $35 million loan by the Arab Fund for

Economic and Social Development to improve drinking water supplies.

May 7: Aging water infrastructure in South Africas Gauteng province

meant 106 trillion gallons of water were lost in 2011-12, according to

official figures.

April 30: The Namibian government reiterated its determination to

continue with the Neckertal Dam, despite challenges to the tender award.

The dam will irrigate 5,000 hectares of land.

April 23: A water supply and sanitation system supported by the

African Development Bank was launched in Malawi. The project will cost

$80 million and supply water to seven centres.

April 16: The Zimbabwe Multi-Donor Trust Fund implemented the

first phase of its $29 million Urgent Water Supply and Sanitation

Rehabilitation project in five municipalities.

April 11: Nigerias Minister of Water Resources said the government

needed to spend $2.4 billion annually to deliver water services to the

population.

April 6: Libyan ministers and officials met a delegation of Egyptian

businessmen to discuss co-operation on water and sanitation

infrastructure projects.

_


Analysis

Urgent need for South African water skills

South Africa needs to spend an astonishing R670 billion ($74 billion) on

its water resources over the next decade if the country is to meet

demand for clean, potable water. With a huge funding gap already

apparent, the challenge is not only to finance new water infrastructure but

to fund the maintenance and refurbishment of existing systems that

invariably provide insufficient supplies of poor quality. Above all,

however, according to Prof Tally Palmer, director of the Unilever Centre

for Environmental Water Quality at Rhodes University in Grahamstown,

an equally crucial infrastructure issue centres on wastewater treatment

works and the need to improve water management skills which given

the critical shortage of water engineers in the water sector could

provide an important new source of sustainable employment. She claims

that inadequate wastewater treatment is reducing water quality and

diminishing the capabilities of river systems to cope with contaminants

and that industry as well as government has to play a role in improving

standards. In South Africa, the intervention that would make the most

difference to river health is efficient and sufficient waste water treatment.

Many of our treatment works are currently held together and are

operated beyond design capacity by engineers. But with a yawning

funding deficit the countrys National water Resource Strategy has put

it at more than R300 billion significant tariff increases for consumers

somewhere along the line look increasingly inevitable.

Ghana faces water emergency

Ghanas economic growth may be outpacing many of its neighbours but

the resulting demand for water is also running far ahead of the countrys

ability to supply it. The country, according to its president, is burdened

with a water emergency, the legacy of stagnating investment over the

past 50 years. Ghana Water cannot account for 55% of the water it

produces, either because consumers illegally siphon it off from pipes or

because an aging water supply infrastructure breaks down or leaks.

Recently, the endemic shortages have been made worse by the crisis in

electricity production, exacerbated by the failure last year of the West

African Gas Pipeline, cutting the supply of gas to thermal power plants

and reducing the power available to water treatment facilities. Companies

faced with no water have to resort to paying private water hauliers rates

many times higher than those levied by Ghana Water and complain that

the problem is directly impacting upon economic output and profits.

Domestic consumers are also badly hit; almost one quarter of Accras

four million population do not get water from a tap while the national

figure is nearer 40%. In rural areas, around 63% have sustainable

access to safe drinking water, a figure which is only marginally higher in

urban centres against a 70% target for 2015, set down under

international targets. Foreign investors are co-operating in the

construction of water treatment and desalination plants but more

resources are required. With water and sanitation two of the key drivers

for infrastructure development in Ghana over the medium to long-term,

the government has initiated a programme intended to improve water

_


supplies to 600,000 people living in rural areas via the provision of

20,000 boreholes. Progress may be slow but, by comparison with nations

like Malawi and Zambia, Ghana can at least be said to be making some

advances.

Source: Unicef

Water subsidies must end

Despite heavy investment in water infrastructure, water utilities across

the African continent continue to make losses, requiring governments to

sustain them with huge subsidies a situation that can no longer be

afforded, according to Tanzanias Minister for water. Tanzanias water

problems reflect those in many African states, according to Prof Jumanne

Maghembe, who challenged water companies to reduce losses, many of

them the result of water theft or leakages through the supply chain.

Ghana Water, for example, cannot account for 55% of the water it

produces, either because consumers illegally siphon it off from pipes or

because an ageing water supply infrastructure breaks down or leaks.

Prof Maghembe said there was a notion among consumers that water

was free but they had to realize that they had to pay to reflect the heavy

investment made to carry drinkable water to populations centres.

Tanzania itself is currently investing $1.4 billion improving the water

supply in Dar es Salaam, where water coverage is around 68%. The

target is to reach 100% coverage by June 2015. In rural areas, coverage

is only about 58% and the government wants to raise this to 75% by

2016.

Source: UN Aquastat/World Bank

_


Inputs

News

May 21: The Turkish Steel Exporters Association said it wanted to

explore co-operation and business prospects with South African

companies.

May 20: The former Cement and Concrete Institute of South Africa is

to continue as a newly-constituted body the Concrete Institute.

May 19: The Nigerian government said it intended to impose tariffs on

imported bulk cement because of a glut in the domestic market.

May 16: PPC, South Africas biggest cement maker, said it aimed to

see 40% of its production outside its home base by 2016. It plans to

build a $200 million cement plant in the Democratic Republic of Congo.

May 20: Tanzanias government is losing large tax revenues because

of cement smuggling and improperly taxed imports through Zanzibar,

according to Erik Westberg, managing director of Tanga Cement.

May 20: South Africas National Union of Mineworkers said it wanted

pay rises of up to 60% from gold and coal producers.

May 17: South Africas Aggregate and Sand Producers Association

said the countrys quarries were not being used to their full capacity

because of lack of skills.

May 16: Zambias National Council for Construction attacked cement

price increases, warning that they would raise construction costs.

May 16: Double-digit wage hikes in South Africa were unacceptable,

according to the UNI Global Union, which represents 15 million trade

union members worldwide.

May 13: Sasol Chemicals faced a Competition Tribunal to reject

claims that its propylene and polypropylene prices are excessively high.

May 10: South African steel shipments from ArcelorMittal rose by

4.2% in Q1 2013 compared to the last quarter of 2012.

May 9: Dangote Cement said it would build a crude oil refinery in

Nigeria to reduce petrol imports.

April 23: The National Union of Metalworkers of South Africa

demanded a 20% across-the-board pay rise for workers in auto

assembly, tyre making, iron, steel and base metal manufacturing sectors.

April 17: Aviation fuel sold in Africa is, on average, 21% more costly

than in other international markets, the International Air Transport

Association said.

April 17: The Cement Manufacturers Association of Nigeria called for

a review of the industrys code of standards to make them more robust

and uniform.

April 17: Shares in steel maker ArcelorMittal rose after news that the

fire-damaged Vanderbijlpark steel plant had resumed output.

April 10: In an effort to stem rising fuel costs, the Zimbabwean

government approved a new ethanol blend 85, in addition to the already-

approved E5.

April 10: Egypt-based Suez Cement said it had scaled back output

last year by as much as 30% because lack of fuel supplies hit production.

April 9: South African cement maker Afrisam said it would expand

into other African countries.

March 27: Demand for cement in Zambia may double over the next

10 years, according to the local unit of Lafarge SA. It rose 13% last year.

_


Analysis

South African steel sector suffers

South Africas steel manufacturing sector has been having tough times,

with production falling sharply in the early months of this year, record

imports of cheaper steel from Japan and Korea, ongoing technical

problems at mills, strikes and a dearth of new mining and other industrial

capital projects. Output, according to the World Steel Association was

down 12.5% in March, having fallen by almost 17% in the previous month

bringing Q1 production down 11.3% year-on-year. Steel producers

usually track growth in GDP but this has not been the case in South

Africa, where both major operators have been recording losses and

failing even to match production with growth in a weakened economy.

Demand from the construction industry has been falling, given delays in

major infrastructure projects and even the automotive sector, the fastest-

growing customer market for steelmakers, has lost steam. Neither does

the outlook appear to be any better, given not only the domestic picture

but the difficult conditions in global markets, where long-term steel pricing

contracts are, increasingly being replaced by spot market prices, driven

by Chinas rapid economic growth. Chinas own steel output the

industry is a major importer of South African iron ore grew by just over

9% year-on-year in Q1 of this year, against a global production increase

of 2.3%. No wonder that some eyebrows are being raised at the

governments apparent enthusiasm for establishing a new steel producer

that, it says, would create competition in a market dominated by

ArcelorMittal and Evraz Highveld. A feasibility study, the Department of

Trade and Industry says, has made significant progress and a number of

overseas investors, including the Chinese, are being approached. Given

the recent funding deal between Transnet and China Development Bank,

the Chinese are being tipped as a likely backer of any new steel

production project, especially given its heavy involvement in the countrys

metals and minerals sector. In the meantime, the government says it is

planning to intervene in the steel sector by setting steel prices, setting

national production targets and limiting exports of iron ore. The idea is to

secure local steel at developmental prices, making it available for

downstream manufacturing industry. Critics say the measures wont do

anything to make South Africas steel industry more competitive in

markets dominated by much bigger players.

New controls to halt price-fixing

The common perception that corruption and malgovernance in South

Africa was a creature of the public sector has been shot to pieces by the

revelation that all of the countrys major civil engineering and construction

companies have been involved in infrastructure related collusion and

price-fixing. Economic Development Minister Ebrahim Patel declared in

April that the problem was huge and pervasive and that the government

was now taking steps to wipe it out. The State has reportedly lost billions

of Rand as a result of contractor malpractice on several completed

infrastructure projects. Inquiries by the Competition Commission, which

included several stadium developments and the rapid transport rail

system in Gauteng Province, found evidence of collusion and price fixing.

Around 400 admissions of collusion have already been made and, under

_


a fast-track system intended to save time and avoid a lengthy legal

process, voluntary disclosure and a commitment to end any cartel

arrangements would be followed by appropriate fines and penalties. The

competition authorities have used the findings of their investigations to

identify networks and channels used by companies to collude and these

will be subject to internal, preventive controls to ensure they are not

repeated. In addition, any company awarded an infrastructure contract

will be required to sign an integrity pact that commits them to

competitive and non-corrupt practices. Chief executives will carry

personal responsibility and liability for such a commitment; the new

conditions are already being piloted in a number of current infrastructure

tenders and should be fully implemented over the remainder of the year.

Bitumen tariffs lifted in South Africa

There is a long-running argument over whether concrete or bitumen is

the best material for making roads but, while it continues, South Africa

has run into a shortage of bitumen that has already hindered road

building plans and threatens to continue to do so, unless supplies are

improved. The shortages, exacerbated by unplanned shutdowns at

refineries where the bitumen is produced as a by-product of oil refining

meant imports were brought in from Singapore and Malaysia at a 20%

price premium over local supplies. With the countrys four main refineries

unable to meet demand, local bitumen output only accounted for bout

80% of demand, leaving 17,000 to be imported annually. Major road

builders such as Raubex and Basil Read have secured supplies for this

year to avoid contract delays and are confident that, barring further

unplanned refinery closures, supplies will prove sufficient this year. Basil

Read is also building a plant in Western Cape to produce specific grade

bitumen from a local refinery. Even so, the government has moved to

ensure no further shortages arise by effectively waving the 10% import

tariff on bitumen for the next three years, through a rebate scheme

organized by the Revenue Service. The decision should see imports rise

above 20,000 tonnes this year.

Dangote starts to export cement

Lagos-based Dangote Cement, Africas biggest building material

producer, said it had started to export cement supplies in the first quarter

of 2013 and it expected other African markets it will target 13 other

nations and invest $2.5 billion to provide a large chunk of its future

growth. The companys revenues and profits rose by 24% in 2012 after it

opened two new plants in Nigeria, bringing domestic production capacity

to 19.25 million tonnes a total it intends to raise to 29 million tonnes by

2015. The companys output means that Nigeria is now self-sufficient in

the building material and that Dangote has almost 60% of the Nigerian

cement market. Retail cement prices in Nigeria are amongst the highest

in the world and per capita cement usage demand rose by 16% in Q1,

2013 is still low by African standards; a huge housing shortfall should

help maintain recent rates of growth in demand.

_


Nigeria explores alternative cement product

The Cement Manufacturers Association of Nigeria is welcoming efforts

to produce an alternative cement for use by the construction sector but

has warned that it must meet industry standards. The Nigerian Building

and Road Research Institute is working on the production of an

alternative product, known as Pozzolana cement, which can use fly ash,

volcanic ash, pumice or any material blend which reacts with lime and

water to form a mass. The manufacturers describe the initiative as a

potentially useful boost for the construction sector, provided standards

are met. The Institute is developing a machine with a daily production

capacity of up to 5,000 tonnes a day and says the alternative cement

could also be used in conjunction with Portland cement to provide an

affordable construction material for housing and other building projects.

Warning of higher SA fuel prices

The South Africa government has been warned that its determination to

see cleaner petrol and diesel production by 2017 will have to be passed

on to consumers, with a knock-on impact on the economy. The South

African Petroleum Industry Association said that its members would be

unable to foot the bill for making the conversion to cleaner fuels and that

the government would have to ensure that the costs would be recovered

through the price structure, which meant passing them on to end-users.

The refineries stress that with fuel prices regulated by the government,

they were being squeezed between higher production costs and price

controls; they have been encouraged by this years budget which spoke

of a support mechanism for biofuel production and refinery upgrades but

the governments intentions remain uncertain. The refiners said they

were conducting talks with the Department of Energy and the National

Treasury and were hopeful that policy would become clearer during the

summer.

Official Retail Fuel Prices in Sub-Saharan Africa March 2013

Country Type Local price/litre $ /litre

South Africa (Gauteng) Petrol R13.08 $1.43

Diesel* R11.92 $1.30

_


Companies

News

May 23: Equinox International, the infrastructure technology

company, said it was opening a new headquarters in Lagos, Nigeria.

May 15: South African state rail and ports operator Transnet said it

will invest R15.7 billion ($1.71 billion) in fiscal year 2014, up 12% from

the preceding year.

May 1: General Electric of Nigeria said the sustainable development

of Nigerias infrastructure was a key factor in attracting foreign direct

investment into the country.

April 23: Bharti Airtel, Indias largest telecommunications company,

agreed to buy Warid Telecom in Uganda, The deal will make it the

second-largest telecom operator in the country.

April 23: Total South Africa said that following agreement on a new,

15-year lease with Transnet National Ports Authority in Durban, it would

invest R140 million in upgrading its Durban Island View lubricants plant.

April 14: Indian engineering company Larsen & Toubro said it was

seeking partners in Africa to bid for airport and power projects.

April 12: Telecommunications group MTN said it may spend $8

billion on acquisitions in Africa, Asia and the Middle East.

April 4: Rail engineering group Racec, based in Cape Town, said it

had secured short-term finance to fund any dispute resolution

proceedings arising out of a railway project in Sierra Leone.

April 1: Chinese mobile phone maker Tecno has agreed a deal with

local partner Zenco Communications to exclusively market its phones in

Lagos, Nigeria.

March 16: Airports Company South Africa said international

passenger traffic using its airports rose by 2% last year.

March 4: Egyptian authorities barred the chief executive of Orascom

Construction Industries from leaving the country while allegations of tax

evasion are investigated.

Analysis

BPs growing confidence in Africa

BPs decision to invest more than R5 billion in South Africa and

Mozambique over the next five years on building and upgrading

infrastructure represents a clear vote of confidence in its ongoing role

across the African continent. Much of the investment is focused on South

Africa, where the company has recently opened with Sasol a fuel depot

at Alrode outside Johannesburg, and where it will now invest in various

projects, including refinery, terminal and rail network operations.

Upstream, the group is also pursuing business opportunities in Angola,

Algeria, Namibia, Libya and Egypt while, downstream, it is improving and

upgrading fuel import infrastructure in Mozamibique.

_


Transnet defends monopoly

South African state transport operator Transnet mounted a vociferous

defence of its monopoly ownership of the countrys eight ports and 16

cargo terminals, declaring that it would make no sense to allow other

operators to enter the market. Transnet chief executive Brian Molefe said

the business represented a natural monopoly as ports did not compete

against each other, so the only question to be asked was whether they

performed better in state or private hands? Income from its ports and

terminals account for around 40% of Transnet earnings, with revenues

running at $1.7 billion one-third of group sales. But it will be the

government and regulators who decide whether Transnet continues to

have a free run on the sector and that cannot be guaranteed with

companies like Bollore of France openly making clear its interest in

expanding its African ports operations. Bollore manages 14 ports but

says it wants to raise this to 19 and is investing around 300 million

annually to expand and improve its African assets. It is particularly keen

to expand in South Africa and the authorities may soon have to consider

whether some degree of private participation in the countrys ports

management, not least to share investment and risks, is desirable.

Mi-Fone to manufacture in Nigeria

Mobile phone maker Mi-Fone, based in Hong Kong but with regional

headquarters in the United Arab Emirates, says it is finalizing plans to

build a $30 million manufacturing plant in Nigeria. The new factory is due

to come on stream later this year and while its output will be destined for

the rapidly growing Nigerian market, the manufacturing base will enable

to company to pursue its strategy for becoming a pan-African phone

brand. It already supplies phones to 14 African nations. Chief executive

Alpesh Patel says Mi-Fone will focus on affordable smartphone sales,

although low-end models would also be available, though the emphasis

will vary, depending on local market needs.

African Clean Energy sets the pace

Indian wind turbine maker Suzlon Energy and its local partner African

Clean Energy Developments (ACED) started work on what will be the

continents largest wind farm the 138.6 MW Cookhouse project about

150 km north east of Port Elizabeth in Eastern Cape. The first batch of

giant turbines there will be 66 in total arrived in early April and the

farm should be supplying power to the countrys electricity grid by Q2 of

2014, providing enough energy for 145,000 low-income homes. The R2.4

billion project was among the first selected in the first round of the South

African governments renewable energy procurement programme. ACED

is a joint venture between African Infrastructure Investment Managers,

owned by Old Mutual Investment Group and Macquarie Capital, and

Mauritian-registered AFPOC. It is fast establishing a platform for the

development of renewable energy assets and its plans embrace in

excess of 1,500 MW of wind and solar projects under the governments

renewable programme. The Cookhouse Wind Farm Community Trust,

whose beneficiaries are the local communities, holds a 25% stake in the

project.

_


Wind Towers builds Port Elizabeth factory

South Africas first wind tower manufacturing plant, to be built at a cost of

R300 million outside Port Elizabeth, will produce its first units by

November and reach full output early next year, owners DCD Wind

Towers announced. The company, a subsidiary of South African based

engineering group DCD, will supply around 100 tubular towers a year,

possibly rising to 180, which will be used by successful bidders in rounds

two and three of the governments independent power producers

programme. The unit will create nearly 600 construction jobs and 200

operational posts once it is in production and will help lend weight to

efforts by organisations like the Coega Development Organisation (the

factory will be sited in the Coega Industrial Development Zone) and the

Industrial Development Corporation to establish the Eastern Cape as an

energy hub.

Tanzanian company powers up rural areas

A Tanzanian-based energy company has big ambitions to grow a

business that sells pre-paid solar-powered electric to rural consumers,

forecasting that it could be supplying 10 million off-grid homes across

Africa within the next decade. Off.Grid: Electric, located in Arusha, has

developed a system for delivering power through a system that retrofits

off-grid cell phone towers as solar charging hubs and then distributes the

power to local communities. Consumers who would otherwise be using

kerosene lamps and back-up generators can access electricity under a

plan that costs as little as $6 to install and $1.25 a week to run for two

house lights and a cell phone charger. The major obstacle was the

location of the towers, which are invariably some distance from peoples

homes, requiring costly distribution lines. But the company has

developed systems that can be deployed inside users homes. The

company claims the technology will allow it to serve consumers that the

national grid does not find profitable enough to supply.

_


Finance and Investment

News

May 27: The African Development Bank said it plans to inject more

than $9.5 billion into its African Development Fund for onward grants and

loans to African countries.

May 23: The Nigerian government said the $500 million African

Development Bank loan to fund power infrastructure had been activated.

May 24: The African Development Bank launched its second Uganda

shilling denominated bond on the domestic capital market.

May 17: The Moroccan government said it was expecting an annual

loan package of $1 billion from the African Development Bank for

infrastructure projects over the next four years.

May 17: Africas economic development was being back by a

hemorrhage of illicit financial flows, which may be getting worse, the

African Development Bank warned.

May 16: African nations should focus on smaller infrastructure

projects that required less financing, Jay Ireland, chief executive of

General Electric Africa said.

May 15: Ghana said it planned a Eurobond worth up to $1 billion to

refinance debt and to fund infrastructure projects.

May 14: The Development Bank of Southern Africa said it aimed to

attract local and foreign pension fund money into infrastructure

investments.

May 10: The City of Johannesburg said it had budgeted R30 million

for infrastructure development for the next three years.

May 8: The Central Bank of Kenya cut its central bank rate for the

first time in a year, from 9.5% to 8.5%.

May 2: Diamond Bank of Nigeria said it was planning its biggest ever

fund raising up to $750 million in shares or bonds to finance more

projects.

April 29: African states were ready to provide favourable conditions

for Russian business to join infrastructure projects, Russias foreign

minister said after talks with the African Union Commission.

April 26: The African Development Bank said it would hold a future

annual meeting in Ghana if the country was ready to host it.

April 25: Nigerias National Economic Council approved a $9 billion

loan from lenders for investment projects.

April 24: South African metalworkers pension funds said they would

invest $1 billion in renewable energy projects within the country.

April 22: The World Bank confirmed it was working on setting up a

global infrastructure facility to channel finance into priority projects.

April 20: More than 800 infrastructure projects worth a combined

$706 billion are in assessment, planning or construction stages in Africa,

according to a report from Ernst & Young.

April 15: Stanbic Bank of Ghana lent Tanzania $600 million to

finance road and energy projects.

_


Analysis

AfDB - African capital markets must do more

The African Development Bank (AfDB) calculates that Africa needs

around $390 billion over the medium term and trillions of dollars in the

longer term to finance its infrastructure development and that the

continent should play a bigger role in raising the vast sums of finance

that is needed. Early May brought news that the bank itself is trying to

help solve the problem via the creation of an infrastructure bond that

could be as large as $50 billion, first targeting the foreign reserves of

African banks and, secondly, sovereign wealth funds, pension funds and

other global investors. If African banks alone contributed 5% of their

reserves to the bond, the AfDB acting as an investment conduit could

raise $22 billion. The development followed publication of a new report

by the AfDB on structured finance techniques and economic growth in

Africa. It says that rapid economic growth across the continent is creating

a pool of financial resources and now that domestic capital markets are

growing and becoming more sophisticated in several countries, Africa

must start to leverage its own resources

june+2013+african+infrastructure+review

Documents

Transcript of june+2013+african+infrastructure+review