Category: News

Egypt set for energy revolution with innovative solar strategies

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Egypt is undergoing an energy revolution, with the share contributed by renewables set to soar. Innovative solar strategies form a central part. 

“The Gulf States have oil; we have solar,” remarks Ahmed Zahran, CEO of the Cairo-based Egyptian solar company – Karm Solar – leaning against the window of a six-story office building in the leafy streets of Cairo’s affluent Zamalek neighbourhood.

Aswan in Upper Egypt ranked the third most sunny place in the world by the World Meteorological Organisation, proves his point.

As Egypt reimagines itself in the wake of the 2011 revolution, the country’s power mix is undergoing a transformation, too. Egypt’s current installed electricity capacity is around 42GW, of which 91% is backed by fossil fuels, the rest renewables. The government, however, envisages a rebalancing, with renewables responsible for 20% by 2022 and 37% by 2035. Solar, alongside hydro and wind, will be the driving force behind this capacity shakeup.

In fact, analysts have argued that if the solar market continues its upward trend, the government projections may turn out to be modest, with the International Renewable Energy Agency predicting that solar alone could contribute as much as 44GW by 2030 – making it the second largest energy source after gas.

Largest solar park

Benban solar park – located just north of Aswan – is set to be the world’s largest solar complex, and after some initial difficulties the project is shaping up as a trailblazer. Comprised of 41 individual solar photovoltaic plants, the park is expected to contribute around 1.6-2.0 GW of power by mid-2019.

In recent years, the Egyptian government has utilised two distinct models to drive investment into solar: feed-in tariffs (FiTs) and competitive tenders. FiTs work on the basis of a set price paid to the producer over a number of years, meaning that the price of the energy is not market-based, and therefore acts like a subsidy.

Benban solar park is the result of a two-round FiT scheme beginning in 2014. After initial interest from a German and Egyptian developer, contracts stalled when the Egyptian government insisted that any arbitration must be held on Egyptian soil. This was amended in the second round of the FiT, and a large consortium of public capital led by the European Bank for Reconstruction and Development (EBRD) stepped in to finance almost all of the projects, which are due to receive $78 per megawatt-hour under a 25-year power-purchase agreement.

In total, 16 development finance institutions (DFIs) are supporting Benban to the tune of $1.8bn, including the International Finance Corporation, the African Development Bank and the Asian Infrastructure Investment Bank.

With the projects underway, the experience is seen as a leading example of crowding in a consortia of development financiers. Furthermore, its developers, faced with logistical challenges and grid constraints, have joined hands to create the Benban Solar Developers Association – soon to become an NGO. Rarely do private solar-developers work effectively together to overcome challenges in the context of competitive emerging markets.

“In many ways Benban is an excellent case study of ways to support large scale renewable infrastructure projects, with a wide body of players and participants coordinating a joint effort,” comments Benjamin Attia, global solar markets analyst with Wood Mackenzie. “The market is now finally booming.”

Going once

With Benban due to come online this year, attention now turns to two competitive tenders: 200MW in the Kom Ombo project in Aswan, and 600MW of capacity in the West of Nile Area. This change in government policy away from FiTs mirrors a global change in strategy to drive investment into solar energy. Some have accused subsidies and government incentives of curbing the European and North American solar markets, arguing that they create unsustainable business models that rely too heavily on government support.

Tenders, otherwise known as auctions, allow governments to define a particular project – including its proposed capacity and sometimes the location – and then invite producers to bid for it. It is the competition associated with the bidding process which results in the market-based price of the energy, and hence the instruments’ growing popularity. The Egyptian Electricity Transmission Company reviewed six bids for the Kom Ombo project, with a Saudi Arabian company outbidding a Spanish developer.

While the jury is still out on the most effective model, Attia explains how competitive tendering can be a useful tool for solar expansion.

“The best way we have seen on a global scale is to create very transparent and regularly cadenced tender schemes,” he says. “Subsidies are no longer necessary for solar projects, particularly in the Middle East, as these are some of the lowest cost projects in the world. When the ticket size is large and the barriers to entry are low – and there are good governance and bankability – these large tenders can draw in big balance sheets from around the world.”

Private sale

Selling energy to government, however, is not the only way to help solar reach its full potential in Egypt. Cairo-based solar company Karm Solar is offering an alternative model: one that produces solar energy and sells it to the private sector.

“What we are doing which is new, even on a global level, is we are able to produce the electricity from central solar stations, and ship that electricity to a distribution network which we own to then sell at the doorstep of shops, offices or houses,” says Ahmed Zahran, founder and CEO. “We are the first company in Egypt to obtain a licence for the generation and sale to the private sector.”

The company has grand production and distribution ambitions, and currently services 15 private clients with a capacity of 73MW. The Egyptian market, Zahran argues, is the most coveted in the region and is ripe for a business model like his, which is motivated by profit rather than incentives. In fact, Karm Solar sell their energy at a cost lower than government prices, he says, and have thus far been almost entirely financed by angel investors.

“We own everything to make sure we are completely in control of the product we are delivering and in control of the costs,” he says. “That’s the only way to be in control of the returns that we want to achieve.”

As the government target of 20% renewables by 2022 looms on the horizon, both the public and private sectors are exploring innovative solar strategies which should convincingly see this target met.

Contribution to Tom Collins (African Business Magazine)

Zimbabwe to launch new Inter-bank forex market

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Zimbabwe’s Central Bank Governor, John Mangudya said it is in the process of establishing a new interbank foreign exchange market.

On Wednesday, the Central bank governor said the new forex market will help remove the fixed exchange rate between the US dollar and its quasi-currency.

“The bank is in the process of establishing an immediate interbank foreign exchange market in Zimbabwe to formalize RBTR balances (real-time gross settlement) and bond notes with US dollars and other currencies on the basis of over-the-counter transactions through banks and exchange offices,” he told the press in Harare.

He said this should also help restore price stability in the Southern African nation.

“To this end, prices in Zimbabwe should remain at their current level or start to decline in line with exchange rate stability as current currency balances have not changed’‘, Mangudya added.

Significant progress on path to Africa Continental Free Trade Area

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The African Continental Free Area (AfCFTA) is a vital step for boosting intra-African trade. Eighteen countries have ratified it so far, and it is highly expected that 4 more will to do so in the coming months – to meet the 22 ratifications required.

From around 750 CE, the town of Gao in modern-day Mali played a crucial role in the trans-Saharan trade route. The town, which lies on the Niger River, thrived as a major trading centre for gold, copper, salt and slaves travelling north towards modern-day Libya.

The town’s importance and wealth diminished when Portuguese explorers in the 15th century opened up new avenues for trade via sea, before the French colonisation of Mali ended much of the empire’s trade with its northern neighbours.

Today, the trans-Saharan trade routes are mostly used by Berber nomads and a sparse number of trucks carrying fuel and salt. The African Union (AU) and African Development Bank (AfDB) have proposed extending the Trans-Sahara Highway from Algiers in Algeria to Lagos in Nigeria via Tamanrasset.

The project reflects a desire to reignite intra-African trade, which was stymied for many African countries during the colonial era. Trade between African nations stands at 18% of total regional trade, compared to 59% in Asia and 69% in Europe.

The African Continental Free Trade Area (AfCFTA), which has been signed by 49 African countries and could boost African economic output to around $29 trillion by 2050, is a vital step in boosting trade among African countries, according to one of the architects of the agreement, David Luke, coordinator of the African Trade Policy Centre (ATPC) at UNECA.

“The reason intra-African trade is so small is that colonialism forced Africans to export their raw materials outside of the continent to Europe and the US; therefore, much of the trading infrastructure was built with this in mind,” he says. “The AfCFTA is a new paradigm which lets African nations reduce tariffs and non-tariff barriers such as red tape and inconsistent standards for products, which will help boost economic activity across the continent.”

The benefit of the deal is clear. However, to date, only 12 out of the required minimum of 22 member states have ratified the accord. The AU had hoped the agreement would be ratified by the end of 2018. The AfCFTA has six main protocols, including rules on trade in goods, trade in services, rules and procedures on dispute settlement, competition policy, investment and intellectual property rights. All the protocols have to be agreed upon by member states by January 2020 for the full adoption.

While some critics have voiced concerns about the pace of ratification, defenders of the deal believe that significant progress has been made, including Vera Songwe, executive secretary of the UN Economic Commission for Africa (UNECA).

“I believe we are doing very well in terms of ratification of the deal and I’m confident that we will reach the minimum threshold by the middle of 2019 despite the fact that Nigeria is yet to sign up to the agreement,” she says. “There is definitely momentum behind the deal but we need to ensure that we are ready to implement the next part of the strategy the day after it is enacted.”

President Muhammadu Buhari of Nigeria announced that the country would delay signing up to the accord pending further discussions with local trade unions and the business community. The absence of Africa’s largest economy has led some to question the viability of the deal. However, Buhari’s decision is based on a political calculation rather than a lack of faith in the deal, says Gerhard Erasmus, co-founder of the South African-based Trade Law Centre (TRALAC).

“There are very powerful lobby groups who would prefer that Nigeria doesn’t enter into any regional trade arrangements that could challenge their interests,” he says. “And, with the elections coming up next year the incumbent President Muhammadu Buhari has indicated that he is quite sensitive about domestic opposition for this agreement and the official line is that they are consulting the relevant players.”

It seems that it will only be a matter of time before Nigeria – which actually chaired the negotiations that eventually led to the AfCFTA – signs up, with government officials, such as vice president Yemi Osinbajo making positive statements about the deal.

The agreement has, however, received a major boost after South Africa’s parliament ratified it in December. South Africa’s total trade with Africa amounted to R421bn ($30bn) in 2017, with exports amounting R311bn and manufactured goods accounting for 64% of exports to the region. The continent’s second-largest economy and the largest contributor to intra-Africa trade is expected to submit the approved instrument of ratification at the 32nd Ordinary Session of the Assembly of the AU in February 2019.

Reforms

Most African businesses pay an average of 6.9% tax on cross-border transactions and that does not include the additional costs of non-tariff barriers such as excessive bureaucracy, regulatory discrepancies and delays. The agreement calls for member states to cut tariffs on 90% of goods traded. However, removing tariffs is only the first step. Serious reforms will need to be implemented by member nations signed up to the agreement.

“I’m not one of those that believe that suddenly when this agreement is ratified, there will be an explosion of booming inter-African trade,” says Erasmus. “Trade agreements around the world only work when there is a consistent, well-designed effort to improve governance and transparency and, most importantly, there is a private sector producing tradeable goods that other countries want to buy.”

“Therefore, African policymakers need to address nontariff barriers to trade, such as limited industrialisation, weak productivity and poor infrastructure,” he adds.

The success of the agreement hinges on African countries implementing pro-private sector reforms and diversifying their economies. While countries including Tanzania, Kenya, Uganda and South Africa have similar diversification levels to other emerging markets, oil export countries such as Nigeria and Angola have become more dependent on revenues from commodities.

Nevertheless, if endorsed by all the countries of Africa, the AfCFTA would potentially create the largest free-trade area in the world, and leverage Africa’s surging population and a combined GDP of more than $3.4 trillion. However, the agreement is only an enabler. Governments need to create the ideal environment to allow trade to flourish.

Credits to: Taku Dzimwasha (African Business Magazine)

Angola-China Trade Surpasses U.S.$26 Billion

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The business volume between Angola and China surpassed last year the USD 26 billion figure, however, the Asian countries authorities predict an increase soon of such value, given the intensity of the bilateral relations.

The information was given last Friday, in Luanda, by the Chinese ambassador to Angola, Cui Aimim, at the end of a meeting with the Speaker of the Angolan National Assembly, Fernando da Piedade Dias dos Santos.

According to the Chinese diplomat, the bilateral co-operation is growing every day, including in the parliamentary domain in which the two states have frequent contacts.

Angola is the main partner of China in the African continent, with the bilateral trade growing rapidly in the past few years. However, the commercial relationship is still too much focussed on crude-oil.

According to Cui Aimim, whose diplomatic mission to this African country is nearing its end, the trend in the coming times will be to diversify the commercial exchanges, with emphasis on agriculture.

“We’ll expand the trade to other goods, such as cassava flour, tropical fruit juices, mineral products besides oil”, emphasised the Chinese diplomat.

How e-commerce supports African business growth

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Africa’s booming e-commerce sector can not only jump-start small businesses but also help large companies enter a market full of energized consumers.

Africa has one of the most digitally connected populations on the planet, with 400 million internet users. Sacha Poignonnec, co-founder and co-CEO of Jumia, Africa’s largest internet group, discusses why the e-commerce opportunity in Africa is so great for companies large and small in this interview with McKinsey’s Georges Desvaux. An edited transcript of his remarks follows.

There are more than 400 million internet users in Africa, which is the second-largest internet-user population on the planet, just after China. And yet distribution for goods and services is challenging. And it’s notorious that in Africa, for consumers, it’s more difficult to find goods and it’s more difficult to shop. Because of mobile and because of the internet, consumers now have a way to access goods and services in a more efficient way.

Understanding Africa’s consumers

Consumers in Africa want the same thing as consumers everywhere else: they want good products at a good price, good quality. It’s the same thing. I speak to a lot of business partners who are thinking about Africa and how different it is. There are some things which are the same everywhere. And for us, consumers want to save time and save money.

In terms of consumer segments, what is surprising is we have a lot of consumers who are not necessarily in the big urban areas. From an outsider, one could think, “OK, e-commerce is for the inhabitants of Lagos and Cairo and Nairobi.” We have a lot of consumers who live in the small villages and in the small cities. Why? Because they see a lot of choice on Jumia, and they don’t really have that choice in the areas where they live. For them, it’s very difficult to have access to the goods.

Overcoming barriers to business

One of the barriers, obviously, of e-commerce is the logistics because we have to move the products from the merchants who are selling the products to the consumer who is ordering the product. And logistics is obviously a big challenge for whoever knows Africa.

In Africa, there’s no address system in most of the cities. For someone to find a consumer, you need to have a local partner who knows where the consumer is, based on very subjective information. And, for example, if you say in a city in Africa, “I live in the third street by the church with the blue door,” that’s the address.

Building Africa’s business ecosystem

I very much believe e-commerce provides a much safer and cheaper way for small businesses to grow, because the investment required is smaller, and yet you are able to reach so many consumers. For example, one of our largest sellers in Tunisia is a person who started from scratch, and he was designing T-shirts. Then he started to sell them online. And then he was selling more T-shirts, and he hired one person to help him with the production of the T-shirts, and now he has 20 employees. And he is selling maybe 80 percent of his merchandise online, and now he opened a store.

This is one of the many examples that we see where someone can start from zero and grow. Start small, invest, and from there you grow, and then you go from online to offline instead of doing the same thing as in Europe or the US, where the merchants go offline to online.

Credits to:

Georges Desvaux is a senior partner in McKinsey’s Hong Kong office. 

Sacha Poignonnec is cofounder and co-CEO of Jumia.

When Investment in Refinery and Petrochemicals is driven by Innovation and Efficiency

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The ongoing investment in refining, petrochemicals, fertilizer, and gas is driven by the desire to bring innovation and efficiency into all aspects of Nigeria’s oil and gas sector, the President/Chief Executive, Aliko Dangote has said.

Dangote, who made this disclosure yesterday at the ongoing Nigeria International Petroleum Summit in Abuja, said the company is committed to the concept of energy efficiency and innovation in the oil and gas sector.

The business mogul, whose 650,000 barrels-per-day capacity refinery is the largest in Africa, was represented by the Group Executive Director, Government and Strategic Relations, Dangote Industries Limited (Dangote.com), Engr. Ahmed Mansur.

Addressing participants at the forum, Mansur said the theme of the conference, “Shaping the Future through Efficiency and Innovation”, was quite apt; given Nigeria’s quest for economic transformation.

According to him, Aliko Dangote is passionate about efficiency and innovation in the oil & gas sector through adding value to the hydrocarbon process.

Mansur said the company’s passion and drive is seen in the building of the project, which will become the world largest single train refinery on completion and therefore a boost to Nigeria’s economy.

He stated: “The Refinery can meet 100% of the domestic requirement of all liquid petroleum products (Gasoline, Diesel, Kerosene and Aviation Jet), leaving the surplus for export.

“This high volume of PMS output from the Dangote Refinery will transform Nigeria from a petrol import-dependent country to an exporter of refined petroleum products. The refinery is designed to accommodate multiple grades of domestic and foreign crude and process these into high-quality gasoline, diesel, kerosene, and aviation fuels that meet Euro V emissions specifications, plus polypropylene”, he said.

Mansur disclosed that Dangote is also constructing the largest fertilizer Plant in West Africa with the capacity to produce 3.0 million tonnes of Urea per year as part of the gigantic economic transformation project. He explained that the Dangote Fertiliser complex consists of Ammonia and Urea plants with associated facilities and infrastructure.

“Nigeria will be able to save $0.5 billion from import substitution and provide $0.4 billion from exports of products from the fertilizer plant. Thus, supply of fertiliser from the plant, which is set for commissioning before the second quarter of 2019, will be enough for the Nigerian market and neighboring countries,” he added.

Speaking further, he said at a time when the oil and gas industry and the global economy is in a state of flux, it is most appropriate that attention should be given to the future especially given the incredible speed and quantum of change taking place in every facet of human endeavour.

“Our economy, in particular, cannot afford to ignore these massive changes. Our decades of dependence on this industry for our economic well-being and the urgent need for diversification has been widely recognized and is clearly the most critical challenge for our policymakers.

“But even as we seek to diversity from oil, and we are, indeed, making observable progress in this regard, we cannot ignore the need to continue to exploit this God-given resources in a more efficient and innovative manner,” he added.

He commended the Management of the Nigerian National Petroleum Corporation (NNPC) for its unwavering support in Dangote’s quest to make Nigeria self-sufficient in the production of petroleum products.

Distributed by APO Group on behalf of Dangote Group.

Ethiopia selected to host 2020 World Economic Forum

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The World Economic Forum (WEF) in 2020 will be hosted in Ethiopia, as the Eastern African nation hopes to attract more investment.

The announcement was made following a meeting between Ethiopia’s prime minister, Abiy Ahmed and Prof Klaus Schwab, Founder and Executive Chairman of WEF.

The office of the prime minister said the two leaders discussed the importance of a collaborative approach among government, the private sector and civil societies in addressing key global challenges

Abiy Ahmed attended the WEF 2019 meeting held in Davos, Switzerland, where he met several business leaders before heading to Belgium.

PM Abiy Ahmed courts investors

Abiy Ahmed, who has championed reforms since taking office in April last year, called upon investors in Davos to take advantage of the huge business opportunities available in the country.

Reiterating Ethiopia’s plans to liberalize the previously state-controlled sectors of telecommunications, banking, and aviation among others, Abiy Ahmed pledged to do more to make it easier to do business for anyone planning to invest in Ethiopia.

“In order to enforce our up word trajectory and achieve even more rapid and sustainable growth, Ethiopia has embarked on a comprehensive reform process since last April,” he said.

Credits to Daniel Mumbere

Ethiopia: How Investment in Irrigation Is Paying Off for Ethiopia’s Economy

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After rapid economic growth averaging 10%every year between 2004 and 2014, Ethiopia has emerged as an engine of development in Africa.

And there are no signs that ambitions for further growth are fading. This is clear from the government’s blueprint to achieve middle-income status – or gross national income of at least US$1006 per capita – by 2025. This would see a rapid increase in per capita income in Ethiopia, which is currently US$783, according to the World Bank.

Ethiopia’s growth has been propelled by at least two factors: the prioritisation of agriculture as a key contributor to development and the fast-paced adoption of new technologies to boost the sector.

A third of Ethiopia’s GDP is generated through agriculture, and more than 12 million households rely on small-scale farming for their livelihoods.

One of the drivers of growth in the agricultural sector has been the expansion of irrigation. The country has seen the fastest growth in irrigation of any African country. The area under irrigation increased by almost 52% between 2002 and 2014.

This was achieved by investing in the sector, and by harnessing technology to expand irrigation to farmers who traditionally relied on rainfall to water their crops. This boosted productivity and income for farmers by helping them extend the growing season and become more consistent in their production.

Meanwhile, only 6% of arable land is currently irrigated across the whole of Africa. This means that there’s huge potential to expand irrigation and unlock economic growth.

These factors are highlighted by a new report from the Malabo Montpellier Panel. The panel convenes experts in agriculture, ecology, nutrition and food security to guide policy choices by African governments. The aim is to help the continent accelerate progress towards food security and improved nutrition.

The panel’s latest report analyses progress – and highlights best practice – in irrigation in six countries. These include Kenya, Mali, Morocco, Niger and South Africa. Other African countries can draw lessons from the report’s insights.

Reasons for success

The report identified a number of common factors in countries where significant progress has been made to expand irrigation, including key policy and institutional innovations.

In the case of Ethiopia, one of the main reasons for its success is that agriculture and irrigation have been featured on the Ethiopian policy agenda since 1991. In addition, specialised institutions have been set up with clear commitments to maximise the benefits of water control and irrigation systems.

In addition, the government has invested in the sector and has plans to continue doing so. It aims to allocate US$15 billion to irrigation development by 2020.

The investment is expected to deliver a number of returns. These include: more efficient use of fertilisers, a reduction in the seasonal variability in productivity and better yields from irrigated crops grown.

Another major area of development has been the collection of data. This is an invaluable asset that allows for careful monitoring and management of resources such as water, especially in times of drought.

In 2013, Ethiopia’s Agricultural Transformation Agency began mapping more than 32,400 sq kms to identify water resources, particularly shallow groundwater, with the potential for irrigation development.

The final results of this mapping in 89 districts revealed nearly 3 billion cubic metres of water at a depth of less than 30 meters. This could allow approximately 100,000 hectares of land to be brought under irrigation, benefiting 376,000 families.

Finally, Ethiopia has harnessed the value of a full range of irrigation technologies. These have ranged small-scale interventions to large infrastructure.

A joint project between the Ethiopian Bureau of Agriculture, local extension officers, and an NGO called Farm Africa, for example, helped women and young people adopt small-scale irrigation. This was part of an initiative to increase their incomes and improve their nutrition.

Overall, the project reached nearly 6,400 women and landless people. The irrigation project also benefited 700 farming families.

NALYSIS By Gebisa Ejeta

“Speed up, scale up and synergise”, says Trade and Development Bank chief – Admassu Tadesse

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Admassu Tadesse, President, and CEO of the Trade and Development Bank (TDB) – shares his thoughts on the bank’s growth strategy and the prospects for drawing more investment into Africa.

Admassu Tadesse is believed by some to be one of the outstanding bankers of his generation. He has an enviable CV, having attended LSE, Wits and Harvard and having gained experience in banking in the US and South Africa. Like many Ethiopians, he is self-assured and determined. Colleagues say he has a very clear reading of situations. He was catapulted to the head of the Trade and Development Bank (formerly PTA Bank) at 41 and has since assembled a strong team of youth and experience, giving them, as he puts it, the reins to grow the bank.

“Systems are developed by people, systems are managed by people and in the end it’s all about talent and the ability to have an eye for what will work and what will not work,” he says.

Since he joined the bank in 2012, its balance sheet has grown from $1bn to nearly $6bn. To put this into context, the AfDB’s loan book stands at approximately $18bn and that of Afreximbank at $12bn. Over that time, he has managed to bring in a number of institutional partners as shareholders to support its growth, including African pension funds and insurance companies. In 2017 the bank grew 20%, despite a challenging environment. We caught up with Tadesse on the sidelines of the Africa Investment Forum in Johannesburg, where he called for partners to speed up, scale up and synergise to ensure greater investments into the continent. Here are excerpts:

How do you see the current economic outlook on the continent?

The year 2018 has been quite a watershed in many respects. We have seen Zimbabwe reset, we’ve seen Ethiopia reset, we’ve seen Angola reset and we’ve also seen South Africa reset. So these are four very significant countries where the political risk perspective is somewhat improved. We’ve also seen South Sudan sign a peace agreement. We’ve seen Egypt advance its reforms and improve its economic performance and prospects. We’ve to see Sudan come out of sanctions.

That’s seven countries where there have been very significant positive developments. We are not operating in any way in Somalia but Somalia also has a government that’s looking much more robust than in the past. So just generally in Eastern and Southern Africa, there has been a positive development. We are seeing sanctions being removed from Eritrea on the back of the wind of peace that is coming out of the Horn of Africa. So that’s eight very interesting developments. It means that there are more prospects for co-financing projects and opportunities with partners.

And the investment picture in your East African base?

We come from East Africa, which is continuing to grow very strongly. We have Tanzania, Kenya, Uganda, Ethiopia, Rwanda. These five countries are all growing in the range of 5 to 9%, so the average growth rate would be the highest in Africa. Mozambique is beginning to recover and they’ve also now closed one or two big deals on the gas front. All of this adds up and translates into a more interesting set of transactions to come on many different fronts.

Will you continue growing at 20% in the foreseeable future?

We have an asset growth strategy that is scenario based, where growth can range from 5-20% per annum. Our base case, our working plan, is to grow assets, mainly loan and investment assets, at between 10-15% per annum. The low case is 5-10% and the high case is 15-20%. If the business environment is enabling, and we are able to originate healthy assets on a diversified basis we can still do 20% per annum.

Historically, the majority of our loan book has been trading finance, roughly two thirds, and our long-term loan book would range between 30% to 40%. Our strategy is to keep trade finance as being a majority [of our loan book]. You don’t just grow for the sake of it, we are always trying to shape our portfolio that meets certain requirements. The success of any portfolio depends on the geographic base on which it sits.

Which sectors are giving you case for excitement?

We are seeing quite a bit of demand coming through on the resources side, gas and mining. Agri-business is also a continuous area of growth. Trade is back as well, dominated by commodities. And with higher valuations, the volumes of trade have gone up again. So that’s also going to give us some good opportunities for further growth in some of those sectors. The power sector is well poised to attract considerable investment. It is attractive as an investment sector now because the cost reflective tariffs today have moved us beyond where we used to be in the past, where power was so deeply subsidized.

Transport is also a sector where we will see more activity. There are a lot of opportunities for spinning off transport projects, such as toll road based projects.

The speed of execution has been a common complaint from private sector operators with regards to DFIs. How is the organisation adapting to respond to their needs?

We’ve introduced innovations in our organizational structures. We’ve established offices closer to the subregions in order to speed up access to the bank and to have people residing in the different sub-regions able to receive applications and process them quicker. At the same time, we’ve strengthened our capacity at the centre to actually process the deals, to do the due diligence, prepare the papers, get the approval systems in place. The committees meet much more regularly. So we’ve been investing in a more efficient and quicker business process.

You mentioned that investment rates need to grow. Can you elaborate on what you meant?

We are actually at record levels of FDI and fixed capital formation has improved. At the turn of the millennium, we were all very critical of the levels of investment in Africa.

We were looking at very low numbers and today, there are many countries that are getting very close to 25% and quite a handful that are well above 25 and several above 30. Twenty-five percent fixed capital formation is considered to be an adequate level of investment to help generate 6% growth. But with African population growth at about 3%, we need to be aiming higher. We’ve seen the Asians invest for sustained periods, 35%, 40%, 45% of GDP.

It’s very important that we keep stimulating the discussions around how to regenerate surplus savings so that we can finance more of our own investment, but that is not going to be very easy to do because savings are very low in Africa. The private sector has a domestic, regional and global character and we need much more of that to come in and boost the numbers.

We’ve scaled up already, we are doing much better than we were 10 years ago, but it’s still nowhere near where we need to be. We have to be much more aggressive, much more proactive and innovative in how we do things. We really have to boost confidence internationally to make Africa a very serious investment destination.

Source: African Business Magazine

Chinese firms to construct Economic Zone in central Zambia

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A consortium of Chinese firms will construct a Multi-Facility Economic Zone in central Zambia’s Chibombo district, with President Edgar Lungu saying the project will go a long way in helping the country in its endeavor to ensure value addition to local products.

The groundbreaking ceremony of the Jiangxi Multi-Facility Economic Zone was held in Chibombo district on Wednesday. It will cover 600 hectares of land, with an initial investment of 300 million U.S. dollars in the first phase which will create more than 5,000 jobs.

Speaking during the groundbreaking ceremony, the Zambian leader said the project by a consortium of Chines companies — the Jiangxi United Industrial Development Limited, marked another symbol of the strong relationship between the two countries which dates to pre-independence period.

The Zambian leader said the project was one of the fruits from his recent visit to China where he attended the Forum on China-Africa Cooperation (FOCAC) summit held in Beijing in September.

Zambia, he said, has already started benefiting from the 60 billion U.S. dollars in funding support pledged by Chinese President Xi Jinping at the summit to serve China-Africa cooperative projects, as evidenced by the industrial park project.

According to him, the Economic Zone was also a culmination of a business forum the Zambia delegation attended in east China’s Jiangxi Province on the sidelines of the FOCAC summit.

“It is indeed a great mark of achievement to see that it’s not long ago that we visited China, but we are already witnessing the fruits of our visit. This is an indication of the importance that People’s Republic of China attaches to the bilateral cooperation with Zambia,” he said.

The Zambian leader further reaffirmed his government’s commitment to create a conducive business environment for their operations and commended the provincial administration in Jiangxi Province to ensure the actualization of the Economic Zone.

He further said his government will continue to encourage the development of multi-facility economic zones, industrial parks and farm blocks in order to foster industrialization and value addition.

Li Jie, Chinese Ambassador to Zambia, said the economic and trade cooperation zone plays an important role in pushing forward the Belt and Road Initiative and industrial capacity cooperation between China and Zambia.

“We believe that the project will fully take the location advantages of Central Province to promote the agriculture, manufacturing and food processing industries, which will contribute to local economic development and regional industrial upgrading,” he said.

Xu Guojian, a representative of all shareholders, said the project was the fulfillment of one of the eight major initiatives proposed by the Chinese president at the 2018 FOCAC Beijing summit where Chinese firms were encouraged to expand their investment in Africa by establishing and upgrading a number of economic and trade cooperation zones.

Source: Xinhua