What do you see as the primary challenges for doing business in 2018?
I think the primary challenge for doing business in Africa will be
the continuing risks for investors in regards to corruption and poor
governance. While there have definitely been improvements over the past
decade, the risks of corruption are still rife – particularly in the oil
and gas sector – and a lack of stable governance could result in
changes to fiscal or sector-specific regulations which can greatly
compromise a company’s bottom-line. While governments do need to focus
on revenue collection, it must be balanced with an incentive for
companies to invest a significant amount of time and money into
exploration, particularly in places without proven reserves. As an
example, Kenya’s revised oil code, which will allocate oil revenue to
different levels of government, has resulted arguments amongst the
government regarding the allocations and thus there have been production
delays as companies await clarity on this issue. On the other end of
the scale, Madagascar has decided to scrap the planned changes to their
oil and mining codes in favour of a more stable regulatory environment
in order to increase investment in that sector.
the continuing risks for investors in regards to corruption and poor
governance. While there have definitely been improvements over the past
decade, the risks of corruption are still rife – particularly in the oil
and gas sector – and a lack of stable governance could result in
changes to fiscal or sector-specific regulations which can greatly
compromise a company’s bottom-line. While governments do need to focus
on revenue collection, it must be balanced with an incentive for
companies to invest a significant amount of time and money into
exploration, particularly in places without proven reserves. As an
example, Kenya’s revised oil code, which will allocate oil revenue to
different levels of government, has resulted arguments amongst the
government regarding the allocations and thus there have been production
delays as companies await clarity on this issue. On the other end of
the scale, Madagascar has decided to scrap the planned changes to their
oil and mining codes in favour of a more stable regulatory environment
in order to increase investment in that sector.
How do you see recent political developments, such as the coup in Zimbabwe, impacting investor confidence in Africa in 2018?
The fall of Robert Mugabe in Zimbabwe, as well as the resignation of
Jacob Zuma in South Africa and the decision of José Eduardo dos Santos
to not run in the 2017 Angolan elections, should all signal to investors
that Africa’s political governance is maturing. In all three cases, the
transfer of power was peaceful and even the coup in Zimbabwe was done
without bullets.
Jacob Zuma in South Africa and the decision of José Eduardo dos Santos
to not run in the 2017 Angolan elections, should all signal to investors
that Africa’s political governance is maturing. In all three cases, the
transfer of power was peaceful and even the coup in Zimbabwe was done
without bullets.
However, it is still early days for the new leaders of these
important countries in Southern Africa, and investors should remain
cautious as new leaders consolidate power. Angola’s new president, João
Lourenço, and South Africa’s Cyril Ramaphosa have both moved quickly to
remove those in state-owned enterprises who were loyal to their
predecessors. Zimbabwe’s new president, Emmerson Mnangagwa, has shored
up support within the military, but Zimbabwe may still be a wild card as
Mnangagwa may decide to resort to Mugabe’s former tactics if he
believes he will not win the July election. Companies investing, or
looking to invest, in these countries should be aware of the fluidity of
politics in the region and be sure they conduct the proper
pre-investment research to make sure they are aware of the potential
risks, and rewards, in any particular country.
important countries in Southern Africa, and investors should remain
cautious as new leaders consolidate power. Angola’s new president, João
Lourenço, and South Africa’s Cyril Ramaphosa have both moved quickly to
remove those in state-owned enterprises who were loyal to their
predecessors. Zimbabwe’s new president, Emmerson Mnangagwa, has shored
up support within the military, but Zimbabwe may still be a wild card as
Mnangagwa may decide to resort to Mugabe’s former tactics if he
believes he will not win the July election. Companies investing, or
looking to invest, in these countries should be aware of the fluidity of
politics in the region and be sure they conduct the proper
pre-investment research to make sure they are aware of the potential
risks, and rewards, in any particular country.
What steps can governments take in 2018 to attract private investments in the coming years?
Governments need to show they are working towards a stable political
and regulatory environment to attract investment. For oil and gas
companies to make the huge investments needed to explore for deposits,
they need to know that their investment will be safe in ten to twenty
years. Any talk of expropriation without compensation, such as in South
Africa, or unilateral decisions to change mining charters, such as in
the DRC, will be detrimental to future investments into those countries.
Regulatory changes need to be done in conjunction with major
stakeholders, which include government departments, civil society and
the private sector.
and regulatory environment to attract investment. For oil and gas
companies to make the huge investments needed to explore for deposits,
they need to know that their investment will be safe in ten to twenty
years. Any talk of expropriation without compensation, such as in South
Africa, or unilateral decisions to change mining charters, such as in
the DRC, will be detrimental to future investments into those countries.
Regulatory changes need to be done in conjunction with major
stakeholders, which include government departments, civil society and
the private sector.
What do you see as the primary opportunities for the sectors in 2018?
While there is a shift towards electric cars, which may decrease
demand for oil while increasing demand for minerals such as cobalt and
lithium, the oil and gas sector will still be important in Africa for
the energy sector. Natural gas, particularly, will be a major
opportunity as the use of natural gas to enhance power generation is
expected to increase greatly across Africa, especially due to recent
finds of substantial reserves along the East African coast. According to
the International Energy Agency, natural gas is expected to become the
leader in meeting future energy needs over oil and coal, ultimately
becoming the world’s primary fuel source by 2050. This is good news for
Africa, which had over 500 trillion cubic feet of reserves at the end of
2016, and for investors as private investment will be needed to recover
and ship the gas. As said above, there are also risks here – this
investment will have to be long-term and investors will want to know
that a change of government will not result in a loss of assets, but
African governments appear to have learned that prosperity is more
likely to come with public/private partnerships rather than solely
government-run.
demand for oil while increasing demand for minerals such as cobalt and
lithium, the oil and gas sector will still be important in Africa for
the energy sector. Natural gas, particularly, will be a major
opportunity as the use of natural gas to enhance power generation is
expected to increase greatly across Africa, especially due to recent
finds of substantial reserves along the East African coast. According to
the International Energy Agency, natural gas is expected to become the
leader in meeting future energy needs over oil and coal, ultimately
becoming the world’s primary fuel source by 2050. This is good news for
Africa, which had over 500 trillion cubic feet of reserves at the end of
2016, and for investors as private investment will be needed to recover
and ship the gas. As said above, there are also risks here – this
investment will have to be long-term and investors will want to know
that a change of government will not result in a loss of assets, but
African governments appear to have learned that prosperity is more
likely to come with public/private partnerships rather than solely
government-run.
