Risk and Reward: Will the Evolving Security Threats to West Africa Ever Affect Energy Investment in the Region? George Kobani

Risk Management: Maintaining an appropriate balance between risk

and reward

Threats

• Piracy

• Militancy / activism

• Terrorism

• Industrial scale oil theft

• Disenfranchised Communities

Reality Stats Vs. Perception Shipping activity vs. Piracy correlation

Piracy in West Africa

2014 (Jan-June) 2013

49 Attacks

63

Kidnaps

3

Fatalities

116 Attacks

134 Kidnaps

20

Fatalities

Impacts of Insecurity • Higher costs (compensation

premiums, security, etc.)

• Weak investor confidence

• Short termism

• Weak capital investment

• Siege mentality

• Less local engagement

Terrorism: Northern Nigeria’s Boko Haram

• Boko haram and its splinter group Ansaru have a fluctuating connections AQIM and al Shabaab.

• Boko Haram’s activities can have destabilizing effects in Northern neighbours Chad, Cameroon and Niger

• Boko Haram’s activates have particularly stifled investment in infrastructure, power and telecoms and business in Northern Nigeria

• Boko Haram’s activities and support base will be limited in Southern, Christian regions and coastal areas

High Risk Areas (HRA) Nigeria

HRA 1: Central Niger delta Bayelsa / Delta States

HRA 2: Eastern Niger delta Akwa Ibom/ Cross Rover States

Rewards • According to the report, Africa’s share of global FDI projects reached 5.7 percent in

2013, the highest level recorded in the past 10 years. The number of new FDI projects in sub-Saharan Africa (SSA) increased by 4.7 percent, with the average size of FDI projects increasing from $60.1 million in 2012 to $70.1 million in 2013.

• Growing insurgency in Nigeria and Kenya notwithstanding, Ernst & Young regarded them as one of the “emerging hotspots for investment”. Other countries are Zambia, Mozambique, Tanzania, Uganda and Ghana. South Africa remained the number one go-to place for investment in Africa.

• The African growth story is built on “strong macroeconomic growth and outlook, improving business environment, rising consumer class, abundant natural resources, democratic dividend and infrastructure development,” the report indicated.

• Africa has started diversifying economic activities, with oil-rich countries like Nigeria looking at other opportunities like Agriculture, thereby growing employment levels and creating a new consumer class.

Effective Strategy Execution • Purpose

• Planning

• Perspective

• Portfolio

• Partnership

• People

• Patience

Planning • Determining security costs and budgeting

through risk analysis and risk vs. cost • Transfer options: Service providers In-house-

Consultants • Assessment of resource pooling, selecting

security services vendors and managing • Insurance premiums: Community engagements,

risk insurance, • Security departments: From cost centre to

business contributor and enablers

West African champions

• UPS, Coca Cola, Airtel, MTN, GE, Tullow, Total

What can really go Wrong? • Failure of democracy

• Separating policy& politics

• Civil War / Sustained Ethnic Conflict

• Drastic change in government regulation / onerous business climate – Guinea Bissau

– Niger delta

– Liberia, Sierra Leone

• Organized crime networks

The best security is Economic opportunity