AFRICA BULLETIN APRIL 2020 - Africa Legal Network
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AFRICA BULLETIN
APRIL 2020
UGANDA
Total Acquires Tullow’s Stake in Uganda’s Oil Sector
French oil company Total has entered into an agreement with British oil firm Tullow to acquire the latter’s entire interests in Uganda’s
oil sector, including the East African Crude Oil Pipeline as it strives to raise USD 1 billion this year to reduce its USD 2.8 billion of debt.
In a statement issued by Total, the oil company said that it will pay USD 575 million to acquire Tullow’s shares, which accounted for 33.3
percent in Uganda’s oil sector. In addition, the French company will make an initial payment of USD 500 million at closing and USD 75
million when the partners take the Final Investment Decision (FID) to launch Uganda’s oil project. According to Total, the terms of the
transaction have been discussed with the Ugandan government and an agreement in principle has been reached on the tax treatment
for the transaction. The transaction is subject to, among other issues, China National Offshore Oil Corporation’s (CNOOC) right to
exercise pre-emption on 50 percent of the transaction.
SIGNIFICANCE
With Tullow’s exit, the joint venture partners in Uganda’s oil sector are now Total and the CNOOC. The agreement
is a significant milestone in Uganda’s oil and gas sector and it is being seen as a critical development as the FID is
expected to inject over USD 20 billion in investments. This transaction will enable Total to have over 50 percent in
the oil sector. A final tax agreement is expected to be ironed out with the Ugandan authorities, and both parties are
looking to wrap up the transaction in the second half of 2020.
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TABLE OF CONTENTS
ALGERIA 4 MOROCCO 7
Proposed Tax Measures Set to Improve Doing Morocco Identifies Sectors Ineligible for
Business, Raise Revenue COVID-19 Financial Support
ETHIOPIA 4 NIGERIA 7
National Carrier Secures WFP Deal to Join COVID-19 Impact Props Banks and FinTechs to
Fight against COVID-19 Pandemic Collaborate More
EGYPT 5 RWANDA 8
Egypt Begins Preparing to Reopen Businesses Rwanda’s Proposed Economic Recovery Fund
Post-Coronavirus in the Wake of COVID-19
KENYA 5 SOUTH AFRICA 8
Surging Renewable Energy Capacity Paves Way South African Businesses Call for Accelerated
for Self-Reliance Restart of Economy
MADAGASCAR 6 TANZANIA 9
Madagascar’s Coronavirus Herbal Mix Draws Construction of Tanzania’s First Wind Farm
Demand from across Africa despite WHO Nears Completion
Misgivings
ZAMBIA 9
MAURITIUS 6 Zambia Seeks IMF Funding To Ameliorate
Mauritius Central Bank to Bailout Companies Impact of Coronavirus
in COVID-19 Response
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APRIL 2020
AFRICA BULLETIN
MANAGING COVID-19
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ON DOING BUSINESS
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Engage with us on:4 APRIL 2020 AFRICA BULLETIN ALGERIA Proposed Tax Measures Set to Improve Doing Business, Raise Revenue Algeria’s council of ministers has approved a draft supplementary 2020 budget bill that aims to encourage foreign investment in the country and improve its citizens’ purchasing power during the pandemic, while increasing the country’s tax revenue. The bill proposes to, among other measures, drop certain taxes that hit car imports and increase a withholding rate applied to foreign companies operating in Algeria under a service provider framework from the current 24 percent to 30 percent. According to a news release by the government, the provision is meant to be an incentive to attract more foreign companies to set up in the country. The draft bill would exempt from customs taxes and value-added taxes, for two years, the components acquired locally by subcontractors in the mechanical, electric, and electronic industries. SIGNIFICANCE The draft supplementary 2020 budget bill creates a preferential regime for vehicle assembly businesses, drops preferential tax treatment for automobiles assembled in the country and would allow dealer imports of new vehicles. The bill is further expected to improve the tax revenue by revising the single flat-rate tax, replacing the asset tax with a progressive wealth tax, revising taxes on petroleum products and new vehicles, among others. In order to boost the purchasing power, the bill would extend a tax benefit for income made in the country’s southern regions until 2025, implement an income tax exemption for low salaries, and institute measures to encourage companies to donate and sponsor efforts to aid the fight against COVID-19. ETHIOPIA National Carrier Secures WFP Deal to Join Fight against COVID-19 Pandemic In association with the World Food Programme (WFP), the government of Ethiopia opened a new hub inside Bole International Airport from which COVID-19 supplies, equipment, and humanitarian workers will be transported by air across Ethiopia and Africa. Ethiopian Airlines has secured a World Food Program contract to transport essential supplies and medicines across Africa to fight the current coronavirus pandemic. In response to the current situation, Ethiopian Cargo, the group’s second-largest revenue-generating unit, has extended its reach to 74 destinations worldwide, deploying both its cargo fleet (ten Boeing 777s and two 737s) and its passenger fleet. In March alone, the carrier transported more than 45,848 tons of cargo across the world. These deliveries included test kits and protective devices donated by Alibaba founder Jack Ma to nearly 50 African countries. SIGNIFICANCE The UN agency has selected Addis Ababa as one of eight global centres set up to facilitate the supply chain in the fight against the pandemic due to the availability of aircrafts for cargo services, the number of destinations it serves, the experience gained in effectively coordinating delivery within a short time frame, and the storage capacity of its cargo terminal of up to one million tons per year. According to the CEO of Ethiopian Airlines, the WFP deal is expected to mitigate the losses currently being suffered by Ethiopian Airlines which has recorded revenue losses of about USD 550 million (since January) due to travel restrictions imposed in response to the pandemic. Following further discussions with the Government of Ethiopia, the WFP is planning to organise and process flights for humanitarian personnel through the Addis Ababa hub as well as medical evacuations.
5 APRIL 2020 AFRICA BULLETIN EGYPT Egypt Begins Preparing to Reopen Businesses Post-Coronavirus The Egyptian Government has begun preparations to ease restrictions on businesses once the coronavirus crisis lifts. The Minister of Planning and Economic Development, Hala al-Saeed, and the Minister of State for Immigration and Egyptian Expatriate Affairs, Nabila Makram, organised a video conference with a group of Egyptian businessmen abroad to discuss Egypt’s economic conditions post- coronavirus. Following these discussions, groups were formed to work on executive programs to be implemented in the upcoming period. Among its points of discussion, the committee’s meeting touched on implementing President Abdel Fattah al-Sisi’s orders to consider proposals for the Central Bank of Egypt to work with other banks and negotiate with 93,000 clients subjected to assets seizure to settle their due amounts. The committee also agreed to move forward with the necessary legislative amendments allowing the licensing of projects for industries based on natural gas as a production output, such as fertilisers and petrochemicals, to utilise the free zones system to encourage investments, operations and exports. SIGNIFICANCE The Egyptian economy is expected to achieve a growth rate of 3.5 percent during the next fiscal year assuming the coronavirus crisis lifts by the end of the current fiscal year on 30 June 2020. However, in the event that the outbreak continues until December, Egypt’s targeted growth rate is expected to drop to 2 percent. KENYA Surging Renewable Energy Capacity Paves Way for Self-Reliance Kenya’s efforts to attain energy sufficiency have been strengthened by the different renewable projects in the country, including the Lake Turkana Wind Power project, paving the way for reduction of electricity imports from Uganda and Tanzania. Kenya’s electricity imports from Uganda and Tanzania have increased steadily over the past four years, from 58.8GWh in 2015 to 212GWh in 2019. According to the latest Kenya National Bureau of Statistics data, wind generation increased more than fourfold from 375.6GWh in 2018 to 1,562.7GWh in 2019, following the full operationalisation of the Turkana Wind Power Plant. In addition, solar generation rose from 13.7GWh in 2018 to 92.3GWh in 2019 as a result of the commissioning of the Garissa Solar Power Plant. The addition of the Olkaria V geothermal power plant to the national grid in 2019 expanded the country’s geothermal capacity by 25.0 percent to 828.4MW. According to Kenya’s Economic Survey report (2020) wind power generation recorded the largest increase last year, becoming Kenya’s third largest source of energy. SIGNIFICANCE According to Adam Smith International Africa’s report, the coming on stream of new installed renewable energy capacity - wind, solar, hydro and geothermal - has significantly contributed to the increase in Kenya’s power generation capacity, which now stands at 70 percent renewable energy (2,819MW), noting that the total installed electricity capacity increased from 2,711.7MW in 2018 to 2,818.9MW in 2019. As the demand picks up and the economy regains its momentum it can be expected that the renewable energy projects will contribute even more to Kenya’s self-reliance on energy generation in the coming years.
6 APRIL 2020 AFRICA BULLETIN MADAGASCAR Madagascar’s Coronavirus Herbal Mix Draws Demand from across Africa despite WHO Misgivings Madagascar is putting its plant-based “cure” for COVID-19 on sale and several countries in Africa have already put in orders for purchase, despite warnings from the World Health Organisation that its efficacy is unproven. In April, President Andry Rajoelina launched the remedy at a news conference which he said had already cured two people. Thereafter, a Tanzanian delegation arrived in Madagascar to collect their consignment. The tonic, based on the plant Artemisia annua which has anti-malarial properties, is yet to undergo any internationally recognised scientific testing. While Rajoelina extolled its virtues, the WHO cautioned it needs to be tested for efficacy and side effects. Madagascar has been giving away thousands of bottles of the herbal mix which is developed by the state- run Malagasy Institute of Applied Research. Tanzania, Equatorial Guinea, Central African Republic, the Republic of Congo, the Democratic Republic of Congo, Liberia, and Guinea Bissau have all received consignments of the herbal mix free of charge. However, a legal adviser in the president’s office told Reuters that Madagascar would now begin selling the remedy, which domestically can be bought for approximately USD 40 cents per bottle. SIGNIFICANCE The African Union said that it was trying to get Madagascar’s technical data on the remedy, and would pass that to the Africa Centres for Disease Control and Prevention for evaluation. Once this data is verified, the selling of the remedy is expected to have an immediate economic impact projected in revenues earned from exporting the remedy. MAURITIUS Mauritius Central Bank to Bailout Companies in COVID-19 Response The Bank of Mauritius will play a major role in the government’s effort to protect the Indian Ocean Island’s economy from the impact of the COVID-19 pandemic and will be able to use its reserves to prop up national companies, according to a bill to be presented to lawmakers by Prime Minister Pravind Kumar Jugnauth. The central bank will be allowed to assist the government in its fiscal measures to stabilise the economy, according to the text of The COVID-19 (Miscellaneous Provisions) Bill approved by the cabinet at a meeting on 9 May 2020. According to the bill, the central bank could also use its foreign reserves, which amounted to about USD 7 billion at end of April to invest in any corporation or company set up for the purpose of facilitating economic development. Mauritius, an economy that depends on tourism and exports as the main sources of foreign currency, could contract as much as 11 percent in 2020, according to estimates from the Finance Ministry. Unemployment may accelerate to 17 percent from 6.7 percent, recorded last year. A stimulus package will be included in the 2020- 2021 budget, Le Defi Plus reported. SIGNIFICANCE Once the Bill is approved, of major significance is that the Bank of Mauritius will have the discretionary power to use its foreign reserves, to invest in any corporation or company set up for the purpose of facilitating economic development as well as using its reserves to prop up national companies.
7 APRIL 2020 AFRICA BULLETIN MOROCCO Morocco Identifies Sectors Ineligible for COVID-19 Financial Support The Ministries of Industry, Agriculture, and Energy have published a clarification on a 30 April Official Bulletin listing sectors which are not considered to be in economic difficulty due to the pandemic. These sectors will not be able to benefit from financial support outlined in law 25.20. Law 25.20, passed on 16 April, allows the government to adopt exceptional measures to support businesses negatively affected by the pandemic. One of these measures allows workers whose employers submitted requests to the National Social Security Fund (CNSS), to receive compensation for their work from March 15 to June 30. The law also applies to fishermen who filed for unemployment with CNSS in February. SIGNIFICANCE Although COVID-19 indisputably influences the Moroccan economy, the impact of the lockdown varies from one sector to the next. While tourism-related sectors entered a freefall, some other fields would suffer less, or on the contrary, flourish. The Department of Industry adopted a list of six sectors that are exempt from the special measures: Agri-food products, medical and semi-medical products, and materials, chemicals, plastics, papers and cardboard, and those from the pharmaceutical field. The Department of Energy considered that the import, storage, and transport of hydrocarbons, as well as renewable energy-related work, have not been as negatively affected by the pandemic and therefore, will not receive the exceptional governmental support. It can be expected that most of the sectors excluded by the clarification will not stop their activity during the pandemic. NIGERIA COVID-19 Impact Props Banks and FinTechs to Collaborate More A new report by PwC Nigeria titled: “Changing Competitive Landscape: Fintech and the Banking Sector in Nigeria”, has revealed that the COVID-19 pandemic is expected to have a disproportionate impact on Nigeria’s financial technology (FinTech) companies, depending on which segment each of them operates in, however, the degree of the impact depends on what services each of them offer. The report stated that FinTechs whose core businesses entail lending and offering payment services are bound to be the worst hit by COVID-19. Interestingly, the majority of the FinTechs in Nigeria play in these two segments. The report further revealed that, FinTechs operating in the loan segment would be affected simply because a significant number of their clients will be unable to fulfill their loan obligations. SIGNIFICANCE The payments segment will be impacted by the decline in global FinTech investments, which could hinder capital required for physical upgrade or expansion of digital infrastructure and services. For the digital lending segment, the impact of the lockdown measures on business activities, employers, employees, entrepreneurs, and other entities could affect the ability of lending clients to pay back short- term loan obligations as at when due. The report also pointed out that the pandemic and subsequent lockdown measures that were imposed by the government, helped to shift most transactions online. FinTechs could take advantage of the situation by facilitating easy online payments whilst increasing their profitability in the process.
8 APRIL 2020 AFRICA BULLETIN RWANDA Rwanda’s Proposed Economic Recovery Fund in the Wake of COVID-19 In the coming days, the government will roll out a special economic recovery fund estimated at USD 200 million to support local businesses that are hardest hit by the coronavirus pandemic. The government will inject an initial USD 100 million to kick-start the fund and plans to work closely with development partners, institutions, organisations, foundations, among others to raise the funding. The fund will support businesses through loan restructuring for the tourism sector specifically hotels, providing working capital for businesses most affected by COVID-19 to keep them operational and to avoid lay-offs as well as loan guarantee for SMEs and micro- businesses. The obligations for firms eligible for the funds include paying employees’ salaries for the duration of the lockdown and the commitment to maintain employment during the support period. In the event that a company had outstanding loans, they will have to demonstrate that the business was able to service the level of debt prior to the outbreak. The fund comes in the wake of a report which states that fixing the economic impact of the COVID-19 pandemic could cost the Government over RWF 800 billion (approx. USD 837.6 million) over two fiscal years. SIGNIFICANCE Of immediate impact is the combined effective interest rate for the hotels’ loans which would reduce from an average of 16 percent to around 12 percent, leading to a 24 percent of saving in the annual interest expense for hotels over the loan term. In addition, funds earmarked for large corporations and SMEs, will ensure business continuity by covering working capital, line of credit, trade finance and expenses. SOUTH AFRICA South African Businesses Call for Accelerated Restart of Economy In April, several amendments to the South Africa’s COVID-19 national lockdown rules were announced during a COVID-19 National Command Council briefing. These rules will see more businesses allowed to operateCOVID-19. Now, South Africa’s biggest business grouping, Business for South Africa, has urged the government to accelerate its phased approach to restarting the economy, days after the state began easing a strict nationwide lockdown to control the spread of the coronavirus. The group, which consists of actuaries, statisticians and medical professionals, pointed out that there is an urgent need to accelerate the restart of the economy to minimise hardship, hunger and desperation. These factors have been fingered as possible threats to the rule of law and to weaken South Africa’s capacity to respond to the impact of the COVID-19 pandemic. SIGNIFICANCE The President, Cyril Ramaphosa, announced a ZAR 500 billion (approx. USD 27 billion) stimulus package which is expected to mitigate against the social and economic risks that the country currently faces due to the pandemic, among these a deep recession. South Africa is set to begin relaxing the lockdown from 1 May, allowing the resumption of all agricultural activities, mining, oil refineries, ports, certain call centres, and ‘essential service’ repair and maintenance providers such as electricians, financial services and certain professional services. The Central Bank has forecast that the pandemic will cause the economy to contract 6.1 percent this year, while Business for South Africa projects that there could be 1 million job losses.
9 APRIL 2020 AFRICA BULLETIN TANZANIA Construction of Tanzania’s First Wind Farm Nears Completion The construction of Tanzania’s first-ever wind farm is nearing completion following a recent arrival of the farm’s three 800-kW Enercon wind turbines at the project site in Mwenga, Mufindi District of Tanzania’s Iringa region. The installation and testing of the turbines are expected to be finalised by next month. The wind energy project is funded with a USD 1.2 million loan from the Renewable Energy Performance Platform, which is financed by the UK Government’s Department for Business, Energy and Industrial Strategy. It has been developed and operated by the Rift Valley Energy Group. The network is the first private large-scale rural network in the East African country and it supplies electricity to over 4,500 homes and businesses across the Iringa region. SIGNIFICANCE Upon completion, the new 2.4MW wind power facility will complement an already existing 4MW hydropower plant that has been powering the rural grid network since 2012. The wind is expected to connect an additional 1,500 customers over the next two years and counter the hydro plant’s varying output due to the region’s seasonality of rainfall. Complementing the existing hydro plant with a wind farm is being considered by industry experts as a strategic move that will greatly improve the quality and reliability of the rural grid network, which has already had a transformational impact on thousands of homes and businesses in Tanzania. The success of the project is further expected to have a strong demonstration effect in other countries and provide a replicable solution for complex power supply issues elsewhere in Africa. ZAMBIA Zambia Seeks IMF Funding To Ameliorate Impact of Coronavirus Zambia has applied to the International Monetary Fund (IMF) for a COVID-19-related rapid credit facility as it starts the process of shortlisting financial advisers to help reduce its debt load. According to the finance ministry, discussions with the IMF on the rapid credit facility are continuing. Zambia has also closed a call for tenders for financial advisers over its debt and started the process of shortlisting and selecting the winner. According to the World Bank data, the Zambian government’s external debt stock jumped to 45 percent of gross domestic product (GDP) in 2019, up from 37 percent in the previous year, while the total debt stock is estimated at 89 percent. In April, the IMF forecasted that Zambia’s economy would contract by 3.5 percent in 2020, down from a growth of 1.5 percent in 2019, because of the impact of the coronavirus pandemic on the global economy. SIGNIFICANCE The IMF has so far approved requests for emergency pandemic aid to 50 of its 189 members for a total of about USD 18 billion and now Zambia, the second largest copper producer in Africa is looking to be a beneficiary in light of the pandemic. However, Zambia was already wrestling with a growing public debt even before the new coronavirus outbreak forced lockdowns across the globe, delivering a big blow to demand for raw materials.
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SOURCES
https://www.wfp.org https://nairametrics.com
https://news.bloombergtax.com https://constructionreviewonline.com
https://www.ecofinagency.com https://www.nation.co.ke
https://egyptindependent.com https://www.reuters.com
https://www.theeastafrican.co.ke https://www.thechronicleherald.ca
https://egyptindependent.com https://www.newtimes.co.rw
https://www.moroccoworldnews.com
https://www.bloomberg.com
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