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Prawn To Be King

It could be the greatest story ever told. How the fourth poorest country in the world overcame a civil war and poverty to become a wealthy player in the lucrative global energy market – the Russia of sub-Saharan Africa. All it needs is powerful investors, with nerve, who can live with a raft of new rules laid down by Mozambique – the place of prawns that could become a king of African energy. FORBES AFRICA Managing Editor Chris Bishop reports from Maputo.

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A large advertising hoarding at Maputo Airport claims Mozambique has the best prawns; one of the most hackneyed boasts in Africa. Mozambique has a deep, sheltering, offshore ridge stretching along the floor of the Indian Ocean. In these fertile waters prawns thrive in the warm flow of the gulfstream to become big, juicy, and world famous.

Under the sea bed in these same blue waters is another natural resource that could make Mozambique more famous than it is for prawns.

Twenty-two years after the guns of a bitter civil war fell silent over this poor and weary land, Mozambique is on the cusp of an energy boom. In a generation, this boom could transform the country into a rich player in the lucrative business of supplying an energy hungry world.

Energy appears to be a field where African prosperity could lie. It is a sign of the times that when FORBES published its list of the world’s top 10 oil and gas finds in 2013 – six of them were in Africa – a remarkable number in year of scarce finds, called lackluster by the industry; in a year when exploration giant, Tullow, drilled 20 holes only to find them dry.

The biggest find of 2013 was 80 kilometers off the shores of Mozambique. Italian energy company, ENI, struck gas more than six kilometers under the sea in the Agulhas field. The company says it has between five to seven trillion cubic feet of gas (tcf), worth the equivalent of 700 million barrels of oil (BOE). That’s about two years’ worth of Nigeria’s oil production.

This rich find is merely the tip of the iceberg. Industry estimates say Mozambique has the world’s fourth largest gas reserves after Russia, Iran and Qatar. This year, the energy giants from Texas, Anadarko and partner ENI, will decide whether to build one of the world’s largest liquefied natural gas facilities in the world, off the coast of Mozambique. The complex would pave the way to tapping deep off-shore gas fields that could rival Australia and Qatar as the largest liquefied natural gas reserves in the world.

Mozambique’s hopes will enrich an economy rated by the United Nations as the fourth poorest in the world, with most of its more than 23 million people living on less than a dollar a day.

It is likely to prove a long and expensive road to prosperity. Mozambique has a huge skills and infrastructure gap coupled with meager state coffers. One look at the potholed roads of the capital, which turn into a river of mud in heavy rain, will tell you how far Mozambique has to go. An encounter with corrupt policemen on the street will tell you why hard work and enterprise could also struggle.

These are among the many obstacles to vast and unimagined wealth lying under the sea. The most promising discovery is in the massive Rovuma Basin, which is 30,000 square kilometers – about the same size as Lesotho. Since 2010, there have been 10 offshore discoveries in the basin promising 190 trillion cubic feet (tcf) of natural gas. The industry believes a supply and demand gap for natural gas will open up by 2020, sending prices soaring. If Mozambique can get its industry together by then it will be able to compete, albeit from a low base, with the big world players like Russia, Australia and Canada.

A senior government advisor in Maputo told me that Mozambique aims to be shipping gas to Thailand, South Korea, Japan, South America and the United States by 2019. The infrastructure bill for this dream is likely to be immense. One of the reasons why investors often fight shy of gas, unlike coal and oil, is because it is difficult to move it to market.

It is a sobering thought that investors have sunk more than $1 billion into extracting Mozambique’s gas with very little to show for it – it is going to take many billions more in foreign investment. This, at a time when the new Basel III banking rules are tightening around the world and it is getting tougher every year to summon up interest in this kind of 20-year, high-risk, infrastructure.

The next step on the road to gathering this foreign investment is the fifth round of licensing bids, expected this year, most of which will be for the Rovuma Basin. Exploration data is doing the rounds among interested investors, but a few are also looking at their watches.

“This is all taking too long for us,” one investor told me in Maputo.

One reason why it is taking so long is that Mozambique has little experience in running an energy industry and wants to make sure the national exchequer gets its fair share. Mozambique has studied how other African nations have been by-passed by their resources booms and is tightening legislation.

The fear in Maputo is: most of the revenue will flow overseas; the equipment will be bought in from elsewhere, as will highly paid expatriates, leaving the people of Mozambique as bystanders in a land where their government owns all the mineral rights.

“We are striving to make the market more stable and predictable for investors… If you align your project with Mozambique’s priorities, you will have a strong chance of success,” says Leopoldo de Amaral, the manager of natural resources for the Maputo legal company Sal and Caldeira Advogados, told the MMEC conference on mining and energy in Mozambique in March.

These priorities will be laid out in the amendments to the Petroleum Bill, on its final passage through parliament, which will lay down new rules for foreign investors. The bill is expected to be published in the next few months, before parliament dissolves ahead of elections on October 15, and has a tough job ahead of it. The plan is to maximize revenue for Mozambique and provide certainty and clarity for investors, without jeopardizing competitiveness.

Under the bill, crude oil will be subject to 10% production tax and for natural gas, 6%. It stipulates that 5% to 20% of the capital of foreign companies be placed on the Mozambique Stock Exchange, within five years, for sale to locals.

Furthermore, investors must inform the state of discoveries within 24 hours and remit the proceeds of exports back to Mozambique within 90 days. Ample discretionary power is given to the minister, giving he or she a say over the transfer of mining rights and the right of the state to participate in projects. This is unlikely to impress foreign investors.

Another worry for foreign investors is a hefty capital gains tax of 32% that came into force on January 1. The rules stipulate that the tax will be levied on the sale of equity in any operations in Mozambique, no matter where in the world transactions take place.

On top of this, foreign companies will have to set aside a hefty budget for training. The bill says foreign companies, operators and subcontractors alike, must train workers from Mozambique: 5% for big companies; 8% for medium-sized companies and 10% for small companies.

Mozambique also plans to take advantage of the end of a 10-year agreement with energy giant Sasol, to supply cheap piped gas to South Africa in order to encourage the building of infrastructure. Under the agreement, Mozambique was selling around $700 million of gas to Sasol at around one fifth of the price. According to the watchdog, Centre Integridade de Publica de Mozambique, the country was making as little as $10 million out of the deal.

With the expiry of the deal in March, Mozambique will be able to reap more from its gas and there will be more space on the pipeline to do so. Sasol is going to spend $190 million on the 865 kilometer pipeline, from Pande to Secunda, in South Africa, to increase its capacity by up to 30%. The energy giant is also going to spend $135 million on a new processing plant to be opened in 2015. Sasol is having to revise its prices now that the sweetheart deal from Mozambique is over and is already suffering a volley of criticism from customers.

The very fact that one of the biggest energy players in Africa is prepared to put its millions into Mozambique bodes well for investor confidence. Despite this, many investors are likely to look at the country’s new rules and scratch, if not shake, their heads.

Mozambique, rated as the fourth poorest nation on earth, has a long, long, way to go before it can become a player in the world energy market and become more famous for power than prawns.

Arts

Oliver Mtukudzi The Soldier With A Big Voice – Yvonne Chaka Chaka

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In January, Africa lost Oliver Mtukudzi. His friend and fellow musician Yvonne Chaka Chaka fondly remembers the global icon. 

In October 2012, Zimbabwe’s Oliver Mtukudzi, South Africa’s Yvonne Chaka Chaka and Kenya’s Suzanna Owíyo produced Because I Am Girl with musicians from around the world.

It was released to promote the global launch of Plan International’s ‘Because I am A Girl’ campaign, marking the first UN International Day of the Girl Child, on October 11.

READ MORE | Tribute To Oliver Mtukudzi – Zimbabwe’s ‘Man With The Talking Guitar’

Dressed in African prints, they sang together, spreading the word about the empowerment of the girl child.

Mtukudzi’s bass and Chaka Chaka’s soulful voice in harmony, they became more than co-artists; they become brother and sister. It was the first performance of many for the two.

Seven years on, Chaka Chaka is teary-eyed about Mtukudzi’s death 23 days into 2019, when not just she, but Africa lost a music legend.

In a strange coincidence, Mtukudzi died the same day the continent lost the father of South African jazz, Hugh Masekela, last year.

On the phone for this interview, Chaka Chaka describes Mtukudzi as a soldier at work.

“When he was on stage, he was a totally different man. When he had his guitar, it was like a soldier. Like a soldier who has a gun at work,” she tells us.

“I think there were two different people. Offstage, he was just an ordinary man, and on stage, people ate out of the palm of his hand.

“I’ve never known Oliver to never be fit. He has been a skinny man and he would just twist that body with a guitar and that gravel voice of his. A big voice in a small body,” she says.

“He has never called me Yvonne, he has always called me Fifi… Fifi means sister.

“The man was always humble, he never raised his voice, I have never seen him angry and all he has ever wanted is just to see Africa thriving. He wanted to see Africa beautiful. He wanted to see Africa with less disease, less hunger, less corruption, a happy Africa – that was his wish.”

One anecdote Chaka Chaka shares is when Mtukudzi was made a UNICEF Goodwill Ambassador in Zimbabwe in 2011.

“You know he sat there with me and asked, ‘so, what does this entail, my sister? You have been a goodwill ambassador for a long time. You will tell me what needs to be done. How should I act? How should I react? How should I do things?’

“And I’m like, ‘no, but you know, you are more of a star than me and you have been in this industry long before I’. He was just so down-to-earth and had no chip on his shoulder.” 

The last performance the two did together was in October last year in Harare during the Jacaranda Festival, attended by more than 2,000 people and other artists around the continent.

“Oliver was not in his changing room or at home. He stayed there and watched other artists perform, which was so great,” says Chaka Chaka.

“This year, he promised that we would do it [the Jacaranda Festival] in Bulawayo,” she said. They had planned to make it a big show and use their status as goodwill ambassadors to encourage and inspire more youth.

 But sadly, that promise will never be fulfilled.

“The legacy he will leave behind is a legacy of love, the legacy of pro-African and I think for me he was a pan-Africanist. That’s what he was,” she says.

READ MORE | Zimbabwe’s Oliver Mtukudzi Dies At 66

To this day, Neria is still one of Chaka Chaka’s favorite songs by him.

 Mtukudzi, who died aged 66 of diabetes, was laid to rest on January 27 in his home village of  Madziwa.

Thousands sang and danced to the melodies of his songs.

President Emmerson Mnangagwa declared him a national hero, posthumously, a status that has previously been reserved for ruling party elite and independence veterans.

He may be gone but his music will live forever in the hearts of the fans that loved this legend who soldiered on until the end.

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Economy

What A Failed Johannesburg Project Tells Us About Mega Cities In Africa

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Six years ago a major development was announced in South Africa. Billed as a game changer, it was meant to alter the urban footprint of Johannesburg, Africa’s richest city, forever.

The Modderfontein New City project was launched amid much fanfare, expectation and media hype.

Zendai, a Chinese developer, bought a 1600-hectare site north-east of Johannesburg for the development, which it quickly dubbed as the “New York of Africa”. Early plans showed it was to include 55,000 housing units, 1,468,000 m2 of office space and all the necessary amenities for urban life in the form of a single large-scale urban district. The cost estimate was set at R84 billion.

The developers believed that Modderfontein could function as a global business hub and would become Johannesburg’s main commercial center, replacing Sandton. The project would also change Johannesburg’s international profile by strengthening relations with Asian corporate interests.

But, despite the release of futuristic computer-generated images which led to significant publicity for the project, it was never built. Instead, the land was eventually sold off. Another developer has since begun construction on a much more scaled down project, in the form of a gated-community style housing development.

Modderfontein has faded away from the public consciousness. The story of why it failed has never been adequately told in the media.

Our research, which took place over the course of several years, sought to understand the factors which led to the project’s demise. We also wanted to find out how Modderfontein’s failure relates to the broader African urban context.

We found that the project was hindered by conflicting visions between the developer and the City of Johannesburg. Moreover, unexpectedly low demand for both housing and office space meant the original plan for the project was incompatible with the city’s real estate market.

The project’s trajectory also shows how African “edge-city” developments, which are generally elite-driven and marketed as “eco-friendly” or “smart”, can be influenced by a strong local government with the means and willingness to shape development.

Conflicting interests

Zendai’s aspirations to produce a high-end, mixed-used development did not fit with the City of Johannesburg’s approach. Rather than a luxurious global hub, the city wanted a more inclusive development – one which reflected the principles outlined in its 2014 Spatial Development Framework.

At the heart of the framework is the desire to reshape a trend that saw capital leave the old central business district for affluent Sandton at the dawn of democracy in 1994. This was accompanied by an upsurge in securitised suburbs further north towards Pretoria, the country’s capital city.

These spatial trends were incompatible with the ideals of South Africa’s new democratic government and its strategy to mitigate the effects of apartheid-era planning. During apartheid, black people were prohibited from living in more affluent areas, which were reserved for the minority white population. Instead, they were forced into sprawling “townships” on the periphery of cities, far from work and economic opportunities.

To this end, the city demanded that Zendai include at least 5 000 affordable homes in its plans. It also wanted to ensure that the development was compatible with, and complemented, Johanneburg’s public transport system. The city was willing to contribute funding for the necessary infrastructure and inclusive housing.

Yet Zendai remained steadfast in its commitment to its vision, eventually deciding against fully integrating the city’s wishes into its planning application. This saw the city draw-out the planning process.

Meanwhile, problems were mounting for Zendai. The owner, Dai Zhikang, was eventually forced to sell his stake in the project to the China Orient Asset Management Company. Rather than continuing with the project, the asset managers sold the land to the company behind the new housing development on the site.

Smart cities in Africa

Over the last decade, a variety of developments like Modderfontein, including Eko-Atlantic in Nigeria, New Cairo in Egypt, and Konza Technology City in Kenya, have been touted by both public and private sectors as panaceas for Africa’s urban problems. The thinking is that as the developments are disconnected from the existing urban landscape, they won’t be burdened by crime or informality. However, these projects can take badly needed resources away from the marginalised areas of the city.

To make them more palatable to domestic and international audiences, the developments are usually marketed as “smart” or “eco-friendly”.

But these developments can fail at the point of implementation. This is because, as speculative projects, they generally don’t recognise the need to fit in with the wishes of the local authorities or adapt to the existing city. In the case of Modderfontein, the city government had the capability to push back against the developers and, in the end tried to shape the project to better fit Johannesburg’s urban realities. – The Conversation

-Ricardo Reboredo; PhD Candidate in Geography, Trinity College Dublin

-Frances Brill; Research fellow, UCL

The Conversation

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Focus

4 Ways To Develop Employment-Ready Graduates

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Chris Pilgrim, the new CEO of Transnational Academic Group West Africa and Lancaster University Ghana, on the potential game-changers in higher education on the continent.


It is to a verdant academic campus in Ghana   that Chris Pilgrim will be packing his bags from the dunes of Dubai. As the new CEO of Transnational Academic Group (TAG) West Africa and Lancaster University Ghana, Pilgrim will provide students across emerging markets access to post-secondary and executive education.

TAG currently owns and operates Lancaster University’s campus in Ghana, Curtin University’s Dubai campus, and South Africa-based ABN Training in partnership with the Australian Institute of Management in Western Australia.

Pilgrim, who has helped develop TAG’s expansion in Africa and has over 25 years of experience in the higher education sector, spoke to FORBES AFRICA about skills-building, STEM and job creation:

READ MORE | Education Quality and the Youth Skills Gap Are Marring Progress in Africa

1. Are more universities looking to set up here?

A. With over half a million African students studying abroad annually, the continent has the highest outbound student ratio (number of outbound tertiary students/total number of tertiary students) in the world. Along with this annual migration of students comes capital flight, increased brain drain, and a hesitancy to build further world-class higher education capacity on the continent.

TAG partners with globally top-ranked universities to provide the highest quality of higher education in emerging market nations, thereby reversing, albeit modestly, the flow of students.

Our campus in Ghana, in partnership with Lancaster University (ranked sixth in the UK), provides world-class higher education capacity for West Africans, and it has seen students from other countries, including outside of Africa, take up enrolment.

TAG’s Lancaster University Ghana is the only comprehensive UK university campus in mainland Africa, and while TAG is undertaking steps to open similar branch campuses in other African countries, other investors and top-ranked universities have not moved to open campuses in the region.


Chris Pilgrim, the CEO of Transnational Academic Group West Africa and Lancaster University Ghana.

2. How can Africa build skills, capacity and create more jobs?

A. While there has been a modest growth of employment in the formal job sector in some countries, many of Africa’s youth are more likely today to take up work in the informal sectors and in family enterprises.

Africa, as a region, has the largest youth population in the world, and with over 11 million young people expected to enter the job market each year, its economies are stretched to productively absorb Africa’s greatest asset – this youth population.

While the continent’s education capacities and output are integral to leveraging this youth population into a potential demographic dividend, investments, both private and public, into relevant higher education capacities, particularly STEM (science, technology, engineering and maths) capacity, are limited.

In the long-term, addressing the underlying causes of unemployment and skills-gap lies in increasing enrolment in secondary and tertiary education, with a focus on STEM, thus enabling graduates to participate in the new economies and globalization emerging with the Fourth Industrial Revolution (4IR). Innovation, technology, and entrepreneurship are fundamental to creating the jobs of the future.

3. What is the increasing role of STEM programs?

A. While the vital importance of STEM education to infrastructure development, healthcare, energy security, agriculture, and the environment are well cited over the past decade, the role of STEM and digital skills in preparing for 4IR are potential game-changers.

READ MORE | Kenyan Approach Holds Promise for Boosting Early Childhood Education

African nations need to develop “future-ready curricula that encourage critical thinking, creativity and emotional intelligence as well as accelerate acquisition of digital and STEM skills to match the way people will work and collaborate in 4IR” (Source: WEF 2017 The Future of Jobs and Skills in Africa).

Lancaster University Ghana has been delivering relevant computer science curriculum since its inception, and is set to launch programs in engineering this year, followed by additional programs in STEM disciplines.

4. How are you creating future leaders?

A. TAG Ghana works closely with Lancaster University to assure that our students receive an education that is relevant both locally, and in the global context. We work closely with industry and the community to understand their needs so our graduates are employment-ready.

Interviewed by Methil Renuka

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