Investors to give billions to ‘Power Africa’ initiative - Dangote, Citibank, World Bank amongst others

Citibank has pledged to source US$2.5bn in incremental capital to improve access to electricity for millions of people across Africa as part of the ‘Power Africa’ initiative. Business Day, Nigeria reports that Power Africa is a multi-stakeholder partnership between the US government, governments of several African countries and other public and private sector entities, working to accelerate investment in Africa’s power sector over the next several years. 

The report says Citi will also leverage its financing expertise in renewable energy to encourage the adoption and implementation of the appropriate technologies for specific markets. The bank will work with key stakeholders in local capital markets to introduce innovative debt securities and to enhance financial infrastructure. According to the report, Citi operates in over 40 countries in Africa with offices in 16 countries, including key markets such as Nigeria, Ghana, Kenya, Tanzania and SA.

The World Bank Group has also announced it would commit US$5bn in new technical and financial support for the electricity project. THISDAY reports that the World Bank’s financial commitment was announced on the second day of the inaugural US-Africa Summit by the president of World Bank Group, Dr Jim Yong Kim.

Also from the on fringes of the US-Africa Summit:

The Boss of Nigerian industrial conglomerate Dangote Industries Aliko Dangote has announced a 50/50 partnership with New York private equity company Blackstone to invest US$5 billion in Africa’s energy infrastructure over the next five years.

Mr Dangote, who outlined the deal while at the Power Africa summit taking place in Washington, said there will be a particular emphasis on power, transmission and pipeline projects.

Dangote said: “For too long, inadequate energy infrastructure in Africa has been a major obstacle to the continent as it seeks to fulfill its economic potential. I am pleased to partner with Blackstone and the Black Rhino team, who have experience of successfully developing large-scale infrastructure projects, to address this issue in a socially conscious way.”

The two companies have agreed to jointly incorporate, own and operate a management company that would be responsible for the development and management of projects identified and agreed upon across the sub-Saharan African.

The investment is facilitated by Black Rhino, a portfolio company of Blackstone Energy Partners and affiliated funds managed by Blackstone, and Dangote Industries.

Ataf has action plan to address tax base erosion

Multinational companies shifting their profits from Africa to low-tax jurisdictions are only partly responsible for the erosion of the continent’s tax revenue bases. Business Day reports that the African Tax Administration Forum (Ataf) believes some countries have signed away their tax revenue because of weak domestic policies, and ill-conceived tax incentives and mining contracts. 

For two years the Organisation for Economic Co-operation and Development (OECD) has been on a drive to address profit shifting and base erosion and the report says, Ataf agrees with the need for an action plan and has embarked on a drive to address problems that cause base erosion in Africa but are not on the OECD’s agenda. Ataf executive secretary Logan Wort says domestic policies and ofte, badly written mining contracts, erode tax bases in Africa. Ataf will address the tax challenges of e-commerce, hybrid mismatch arrangements, abuse of double tax treaties, the establishment of dummy headquarters and the requirement to disclose aggressive tax-planning arrangements.

Kenya is to impose capital gains and windfall taxes on oil, gas and mining companies within months to ensure it maximised benefits from its mineral resources. Business Report quotes President Uhuru Kenyatta as saying: ‘This is something that we are very clear about. We want to ensure that we as a country also are able to benefit from both the windfall and capital gains tax.’ Tullow Oil and partner Africa Oil have found oil reserves in northern Kenya and the government wants to avoid a similar situation to that in Uganda, where Tullow is contesting in court the state revenue authority’s demand that it pay capital gains tax following its sale of assets.

Global heavyweights in the race for $3bn East African oil pipeline project

International firms, some individually and others as consortia, are vying for the contract to build a multibillion-dollar petroleum pipeline connecting the oilfields in Kenya, Uganda and South Sudan to the proposed Lamu Port, on theKenyan coast.

Designs for the $3-billion Hoima–Lokichar–Lamu pipeline have been received from Tullow Oil and Africa Oil, which has submitted a design for the Lokichar–Lamu route; Toyota Tsusho (Hoima–Manda Bay–Lamu), Tullow, Total and CNOOC (Hoima–Lokichar–Lamu), Lapsset (Juba–Lokichar–Moyale–Lamu) and Total (Hoima–Eldoret–Lamu/Mombasa.

The submission of the designs follow on the request for proposals (RfP) issued by the governments of Uganda, Kenya and South Sudan in June 2014. The three governments intend to hire a consultant to oversee the feasibility study and preliminary engineering designs of the proposed pipeline.

The consultant will also supervise the imple-mentation of the project, which will include theconstruction of tank terminals in Hoima, Lokichar and Lamu, pumping stations and a 9-km-long pipeline from the Lamu tank terminal to offshore mooring buoys.

“The feasibility study and preliminary design will be jointly financed by the partner States, ensuring that the entire pipeline is designed to the same standards and codes,” the three governments say in a joint communique.

The proposed pipeline will be used to export crude oil from Kenya and Uganda through the Lamu port.

Earlier this month, East Africa Community heads of State (except Tanzania’s PresidentJakaya Kikwete) met in Kigali, Rwanda, where they resolved to accelerate the project.

“Uganda is to submit comments on the RfP to the project steering committee for approval by July 10, 2014, and issuance of an addendum to the RfP [is expected] by July 11, 2014,” reads the communique, which was issued at the end of the summit.

After settling on the design issue, the partners plan to embark on a fundraising campaign. The pipeline project will be one of the largest joint infrastructure projects in the East Africa region.

The pipeline, which is part of the multibillion-dollar Lamu Port, South Sudan–Ethiopia Transport, or Lapsset, Corridor Project, is a key priority for Kenya and Uganda, which have discovered crude oil reserves in the last few years.Uganda’s endowment is estimated at 3.5-million barrels, while Kenya is determining the level of its reserves.

By John Muchira

Stockport Exploration exporing in Western Kenya

A Canadian firm, Stockport Exploration, is prospecting for gold in Western Kenya. The firm will be working with a service provider to procure equipment and provide managerial services, process tailings and other services. Extraction is expected to start as soon as analysis is completed; it is expected that revenue from Stockport’s operations will only be realized towards the end of the year. Stockport joins Red Rock Resources (in Migori) and African Queen Mines (in Homa Bay and Siaya) who have been operating in the region.

Migori County is also rich in copper, which has a selling price of US$700/ton. Though Kenyan companies only have exploration licences, there was a recent attempt to illegally export copper worth Kshs.120m that would have led to a huge loss in government revenue. This highlighted the need to have high-level equipment such as scanners at the Kenya Ports Authority to enable it to curtail cases of illegal exports such as this. 

Source: ICES Kenya 

New Enhanced Stoves launched in Kenya

New wood and charcoal cookstoves with high levels of fuel efficiency and significantly reduced emissions have been launched into the market in Kenya. The stoves have the potential to transform cooking practices in Kenya. What makes these stoves unique is that they are made by local Kenyan businesses and they retail at a price which is well below the cost of imported high efficiency stoves.

GVEP has been working for the past year with a group of experienced local stove makers to develop an improved design with much higher performance at a price consumers can afford. Manufacturing of the stoves is within the capabilities of the local businesses. The technical redesign work was carried out by Kenya Stove Works and prototypes tested with users and in the lab. The designs went through several iterations until the best balance between user acceptability and efficiency had been struck. Funding support came from the Global Alliance for Clean Cookstoves.

Riumba-ini Energy Saving Stoves is one of ten companies making the new stove. They are based in Kiria, Muranga County, in Central Province north of Nairobi. The business has been operating since 1998 and has large well organised workshops making and assembling the stove components. They recently serviced a large order from UNHCR. Charity Gatchanja who supports her husband Kenneth in the running of the operation is very pleased with the stove. ‘It is like cooking with gas’ she said. ‘It is very quick to cook.’

The stoves incorporate a metal cylinder which sits above the fire chamber and which increases the efficiency of combustion. James Gatima, the GVEP technical advisor on the project explains: ‘In traditional stoves the gasses given off in burning are cooled by the mass of clay which lines the stove and so are not burned fully. So you get smoke. In the improved stove the metal cylinder keeps the gasses away from the thermal lining, keeping the temperature high and ensuring almost complete combustion.’

The stoves are made using heavier gauge metal than the typical locally made stove. This makes them durable. The fire chamber cylinder will need replacing every few years but the rest of the stove could last ten years if looked after.

Grace Nyambura in the nearby community of Ngaru is one of the first customers to experience the stove. She is very enthusiastic about the fuel savings and lack of smoke. ‘With just one piece of wood I cooked dinner last night, breakfast and lunch and there is still some wood left,’ she said. Before buying the stove she cooked on an open three stone fire. Four pieces of wood cost 50 Ksh and used to last just one day. Now the same amount of wood lasts three days. Grace’s kitchen is a hut in the compound, separated from the house because of the smoke which used to come from the fire. ‘With the new stove I can even cook in the house,’ she said. ‘There is no smoke.’

Mary Njeri, one of her neighbours who also bought the stove, agrees that it is high quality. She says that her daughter was unable to help with cooking before because of the smoke which made her eyes run. With the new stove she is able to cook without any problem. ‘It is very fast, and the heat remains in the stove,’ she said. ‘We are very, very happy.’

All of the companies making the stove are large by Kenyan stove making standards. GVEP deliberately sought out businesses with the capability of manufacturing the new stoves in significant volumes and with the distribution channels in place to get the product to market. Some of the businesses GVEP worked with under an earlier programme, helping them grow from small beginnings to the current scale of production.

But even these larger local businesses still use manual processes. The metal cladding and the pot rests are cut and shaped by hand which is slow and arduous. The heavier gauge metals used in the enhanced stoves presents a challenge. GVEP has been working with the businesses to find suitable locally available machinery which could be used for cutting and shaping metal. Metal cutters driven by compressed air and metal folding equipment has been identified. The businesses will be assisted to purchase equipment with funds from the Global Alliance. What were once small artisan workshops are being transformed into small, highly organised factories.

Companies which import stoves made abroad generally face a challenge with ‘last mile distribution’. By working with an existing local value chain GVEP hopes to be able to circumvent these problems. The stove manufacturers already have established relationships with various wholesale customers, retail outlets and sell directly themselves at local markets. The new stoves are already in demand. At 2500 Kshs the stove is not cheap but the price is around half what someone might pay for an imported Envirofit stove.

Production is now underway not just in Central Kenya but in Kisumu in the west of the country. The next phase of the project is tooling up the businesses to improve efficiency of production, and a big marketing push to help the new stove find a market.

Final results of emissions tests are still awaited but will be published in due course.

Posted by Meghan Smith

Standard Bank: East African oil and gas discoveries to kick-start economic transformation,

East African oil and gas discoveries are poised to fundamentally transform the economies of the region as the fuel resources usher in new investment in road, rail, power and industrial infrastructure, according to Standard Bank.

Uganda, Kenya, South Sudan, Ethiopia, Tanzania and Mozambique have emerged as one of the most prolific oil and gas exploration regions in the world over the last 10 years, says Mr Simon Ashby-Rudd, the London-based global head of oil and gas at Standard Bank, Africa’s biggest lender. These discoveries will establish the region as a major hydrocarbon province in the decades to come and drive wider economic growth throughout East Africa.

“Over and above the traditional oil and gas regions in Africa, notably West Africa, East Africa has essentially been a forgotten desert in terms of upstream oil and gas exploration over the last 40 years,” said Mr Ashby-Rudd. “This has changed completely over the last decade, oil and gas companies are starting to realise the potential in nations along the East African rift valley and Standard Bank believes this is going to fundamentally transform the region’s economy.”

Oil exploration in East Africa was sparked off by the discovery of between 1.5 and 2 billion barrels of commercially viable oil reserves in northern Uganda in the middle of the last decade. Last year the country announced that total known oil reserves in the country were estimated at about 3.5 billion barrels.

The discovery of oil in Uganda coupled with the fact that exploration licences in East Africa were comparatively cheap due to the fact that the region was not regarded as an oil rich area, ushered in further exploration activity in other countries along the Rift Valley. As a result, further oil discoveries were made in southern Ethiopia and Kenya with additional gas finds in Tanzania and Mozambique.

One of the biggest indicators that the region is likely to experience an oil- and gas-led boom in the next half decade is the fact that several projects in East Africa are likely to come on stream at similar times.  Mozambique and Tanzania’s gas and liquefied natural gas projects are expected to come on stream in 2019 with Kenyan and Ethiopia expected to begin commercialisation of their oil deposits over the next six to seven years. Uganda is set to begin oil production by 2018/19, while South Sudan is already producing.

“Oil investment could accelerate the economic growth of several economies in the region,” said Mr Ashby-Rudd. “While the discoveries might be fairly modest in a global context, they’re very significant in a regional economic context.”

Plans are now underway to construct an oil pipeline linking Uganda’s oil fields to the coastal port of Lamu in Kenya. In February this year Uganda signed a memorandum of understanding (MOU) with oil companies operating in the country to facilitate the development of an oil refinery in the country as well as a pipeline that enables crude reserves to be exported.

“A pipeline would really kick-start economic growth in the region as it would usher in additional investments, the necessary infrastructure which in turn will enable further investment in industrial operations,” said Mr Ashby-Rudd. “Oil thus becomes the catalyst for an economic transformation across the region. An oil pipeline could become the backbone on which an entire infrastructure corridor could be constructed.”

Mr Ashby-Rudd says Uganda’s efforts to link its oil reserves to the coast to facilitate exports could be replicated by other landlocked nations in Africa.  This would allow additional infrastructure corridors to be developed as a means of harnessing the economic potential of central and east African nations such as Tanzania and the Democratic Republic of Congo.

Burgeoning economic growth in East Africa is also likely to result in increasing demand for fuel within that region, which imported a collective $10bn of fuel and petroleum products in 2012. Standard Bank expects total demand for petroleum products in East Africa to treble by 2030 with Kenya likely to remain the largest market in the region, which the bank estimates will record compound annual growth rates of between 5% and 7% over the next half decade.

This is press release by the Standard Bank South Africa

New World Bank Project to support Kenya better & sustainabily manage its oil and gas development

The World Bank’s Board of Executive Directors today approved US$50 million for the Government of Kenya to strengthen its capacity to manage the oil and gas sector and the distribution of its revenues to create sustainable growth across all areas of the country’s economy.

With the recent discovery of oil, the International Development Association (IDA) credit for the Kenya Petroleum Technical Assistance Project (KEPTAP) will focus on development measures to generate more private investment in the country’s oil and gas industry, boost more efficient production, manage the impacts, allocate higher government oil and gas revenues for development priorities, and increase collaboration between the these extractives sectors and the domestic economy.

“The Government of Kenya acknowledges that the development of a successful petroleum sector is never about petroleum alone, but also about managing its impacts for sustainable development”,” said Diarietou Gaye, the World Bank’s Country Director for Kenya. “The World Bank supports the government’s efforts to streamline the petroleum sector to increase efficiency of decision-making related to policy formation, planning, investments, and private sector participation,”

Successful implementation of the project will pave the way for economic growth and enhanced well-being for the people of Kenya, contributing to poverty reduction and shared prosperity. Transparency and good governance in oil contracts and revenue will be ensured through stronger collaboration between the national and county governments hosting the new petroleum resources and also with civil society organizations, private sector and local communities in these areas.

In order to help stimulate economic growth in Kenya, the project will promote petroleum activities to contribute to fiscal and foreign exchange revenues. It will also support entrepreneurial activities by improving the investment climate for the private sector and enhancing the oil and gas legal and institutional framework.

In addition the project will support the drafting of key policy and planning documents as well as capacity building among existing government institutions and clarification of their roles and responsibilities. There is significant emphasis on training so government staff is well equipped to deliver the expected outcomes. The project will also increase vocational training capacity for the oil and gas sector of Kenya therefore increasing the availability of trained staff to the private sector.

“The project supports effective government management of the oil and gas industry through capacity building, technical assistance, training programs, and the development of a legal and institutional framework,” said Alexander Huurdeman, the World Bank Task Team Leader for the project. “We are excited for its implementation and the potential to create sustainable impacts for Kenya, including the development of a petroleum industry, improved transport infrastructure, expanded power supply, job creation, and positive economic benefits from strategic investment of the revenues generated.

Africa Oil & Tullow Oil likely to seek partner for Kenyan oil fields

Canadian explorer Africa Oil Corp. and its partner Tullow Oil are likely to bring in a third partner to help develop their oil discoveries in northern Kenya, Africa Oil's chief executive officer said.

The firms discovered oil reserves in Block 13 T and Block 10 BB in northern Kenya's South Lokichar Basin, estimated at a combined 600 million barrels.

Experts say those reserves are enough to make a pipeline viable even without factoring in crude deposits of 3.5 billion barrels, found in neighbouring Uganda.

"We will likely bring on a partner to help develop Lokichar Basin reserves but no timetable has been set," Keith Hill said in an email response over the weekend to questions from Reuters.

Oil discoveries in Uganda and Kenya and gas deposits found off Tanzania and Mozambique have turned east Africa into a hot spot for hydrocarbon exploration.

Kenya, Uganda and Rwanda have invited bids for a single consultant to oversee a feasibility study and initial design for the construction of a 1,300-kilometre (808-mile) pipeline to transport crude to the Kenyan coast.

In April, executives of both Tullow and Africa Oil said they aimed to submit development plans to the Kenyan government in late 2015 for their discoveries.

Africa Oil also holds licences for exploration blocks in Ethiopia and in Puntland, a semi-autonomous enclave in Somalia.

Hill said Africa Oil plans to spend some US$1.6 billion this year and next in exploration activity on its blocks in the three countries.

"Our gross budget this year is over US$800 million ... and we would expect a similar amount next year but (that) budget has not yet been approved," he said.

Africa Oil and its partner Marathon Oil Kenya Limited B.V., a unit of U.S.-based Marathon Oil Corporation have also discovered gas in Block 9 in northern Kenya.

Hill said while the amounts had not been proven, they estimated the gas discovered at the block's Sala-1 well at between 0.5 trillion and 1 trillion cubic feet, although tests were still being carried out.

"(We) will spud Sala-2 appraisal well before end of July to help confirm," he said.

When announcing the discovery in late June, Africa Oil said it had held discussions with the government and power companies to see how to fast-track a gas-to-power project at the site.

"We have held several meetings with GofK (Government of Kenya) to progress gas-to-power project terms and believe these will be sorted out in next 60 days," Hill said.

Source: Reuters

ESME grant enables solar light distributor to become key player in the Kenyan off grid market

Mibawa Supplies Limited is a Kenyan enterprise working to provide solar products to customers who cannot afford the high upfront costs associated with ‘one-off’ payment products. Selling the IndiGo product from Azuri Technologies a cost-effective pay-as-you-go alternative they are working to scale –up their distribution outlets and expand their reach across Kenya.

There is a solid solar technology network operating in Kenya. All products on offer have defining qualities that enable customers to choose which characteristics, power outputs and financial requirements are most suited to their needs. Due to the rapidly expanding nature of this sector, marketing has become a very important component in the business plans for many solar enterprises. Some of the most unique factors seen in the market today include pay-as-you go payment methods, which enable customers to pay for energy as they use it.

Since receiving the first installment of their ESME grant, Mibawa have doubled the number of outlets and increased their staff head count to 15. The focus for the funds to date has been on marketing, increasing their visibility and also training staff to become technical advisors. They have also hired a marketing manager, produced radio adverts and used targeted advertising campaigns to increase awareness and knowledge of the benefits of their product of choice: the IndiGo solar system from Azuri that combines mobile phone and solar technology allowing customers to buy scratch cards to pay for their energy, just as they would for their mobile phones.

Besides creating a smart marketing strategy, an important factor in their success is the price of the IndiGo product, coupled with the repayment procedure. The deposit required for the IndiGo model is USD $151 (13,300KES) considerably cheaper than other models available. They also have a different repayment options, the repayments can be spread over 20 months or 80 weeks, where customers repay USD $1.5 (KES 140) per week through scratch cards top-ups. The initial deposit required of USD $17 (1,500KES) is also smaller than others on the market. Once the total sum has been paid, a small unlock fee of 600KES is required (USD $7) after which customers can own the light without any further payments.

To date, Mibawa Supplies Limited has sold 7000 units and now works to achieve a monthly sales target of 500 models. Looking forward, Mibawa wish to further increase their sales, and have been benefiting from a GIZ programme which links trained entrepreneurs to enterprises looking to scale-up. This initiative has permitted Mibawa Supplies to grow their staff team in both a quick and low cost manner.

"We have been very impressed with the progress that Mibawa has made to date and are confident that they will continue to succeed in this growing sector” says Martin Theuri, GVEP Business Mentor. The remaining ESME funding will assist Mibawa scale-up from the current customer base of 7,000 to over 10,000 as revenues from sales will be re-invested into the business and assist in sustainable growth.

An Independent Evaluation Committee has approved the disbursement of the last 30% of funds which the team plan to use for expansion in other regions. GVEP will continue to support Mibawa in an advisory and monitory capacity as they continue to grow.

ESME is an initiative that aims to support Energy SME Development in sub-Saharan Africa to foster local private entrepreneurship and invest in the provision of energy services in remote, un-served or under-served regions.

Posted by Meghan Smith

IMF advises Kenya to implement robust mining and monetary policies.

Kenya has to develop wise policies for natural resource management to mitigate geopolitical risks and weather related shocks, the International Monetary Fund mission to Kenya has said.

It told the government to also maintain a careful fiscal position consistent with the country’s medium term debt targets and strengthen capacity building in public financial management. It said the measures will strengthen the economy’s resilience from global shocks and support sustained growth.

“Once the recent oil and gas discoveries are confirmed to be commercially viable, they will have the potential to further accelerate economic growth and reduce drought-related risk and investment risks due to political changes,” head of the mission, Mauro Mecagni said.

He said Kenya’s strong reform record and economic performance in recent years shows a sustainable growth that is key in reaching the Vision 2030 development targets.

“Policies need to consolidate macroeconomic stability, address infrastructure gaps, and support the integration of the country in the global economy,” he said.

The IMF mission on Wednesday concluded a 14-day visit to Nairobi after holding consultation discussions with the state, the private sector and other stakeholders