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Prepare For tough negotiations

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The tense, but eventually successful, haggling of a natural gas supply deal between Tanzania and Nigeria’s Dangote Cement is a pointer to what awaits East Africa as the region sets off the delicate journey of exploiting its new found vast reserves of oil and gas.

Tanzania’s President John Magufuli on December 10 announced that an agreement had been reached to supply natural gas to Dangote’s $500-million cement factory in the East African nation’s southeastern town of Mtwara, ending tensions after price negotiations with the state-owned Tanzania Petroleum Development Corporation (TPDC) stalled.

“They (Dangote Cement) will now buy natural gas directly from the state-run TPDC instead of going through middlemen,” Magufuli said after a meeting with the company’s chairman, and Africa’s richest man, Aliko Dangote.

Magufuli blamed unspecified middlemen for “interference”, saying Dangote Cement had sought “at-the-well prices” and that the issue had now been resolved to supply the company with the commodity at a “reasonable” tariff.

The Tanzania-Dangote price haggle offers a sneak-peek of the tough oil and gas supply contract negotiations that authorities in East Africa are certain to face in the exploitation of newly struck reserves.

East Africa has caught the attention of the global energy industry following the discovery of huge reserves of oil in Uganda and Kenya and natural gas in Tanzania. An estimated 6.5 billion barrels of oil were discovered in Uganda’s Albertine basin near the border with the Democratic Republic of the Congo (DRC). In Kenya it is estimated that the recoverable reserves total 750 million barrels of crude.

Tanzania said in February 2016 that it had discovered an additional 2.17 trillion cubic feet (tcf) of potential natural gas deposits, increasing its total estimated recoverable natural gas reserves to more than 57tcf.

The exploitation of these vast reserves will however require caution to ensure the region avoids the pitfalls of the unpopular oil curse. The nature of contracts reached with buyers has a direct impact on the country’s development.

Supply contract negotiations are not an easy task because one has to juggle maximizing revenue for government and investor protection from high cost of doing business. Given the lengthy life and complex nature of supply contracts, a miscalculation has monumental effects on either of the negotiating parties and it is vital that keen attention is paid during the entire process to attain a balance.

“One of the key concerns is that African governments that are major producers of fossil fuels (and other minerals) do not receive sufficiently large rents or revenues from the production of these extractive products. This is attributable to a number of reasons, including contracts and regimes that are not designed to extract maximum rents,” the African Development Bank (AfDB) and the African Union (AU) say in a joint study titled Oil and Gas in Africa.

Oil and gas supply contracts are particularly complex because they are not fully driven by demand-supply factors; at times they are driven by geopolitical factors. Newcomers in the game must tread carefully or risk being short-changed by the more experienced industry insiders who are privy to sale strategies.

The middle-men have a nose for quick cash and will not miss a chance to ride on the inexperience of new players in the industry to profiteer through deal-cutting. The middle-men, in most cases, fan graft in order to thrive, leaving in their wake massive damage.

Benchmarking with peers and best practice is the way to beat such odds because it helps build on contract experience. The World Bank-backed Extractive Industries Transparency Initiative (EITI) can help address such challenges by laying bare all the deals.

“Accountability and transparency in the management of public resources is critical in ensuring positive development results impact – and perhaps nowhere more so than when significant natural resource wealth such as oil and gas are present,” the AfDB and AU say in the report.

Under the EITI, mining firms are required to publish payments made to governments and to make public revenues received available for audit and monitoring. The EITI monitors and reconciles company payments and government revenues. Each signatory country owns the process, which is overseen by participants from the government, companies and national civil society.

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Economy

Cryptocurrency for Africans

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George Gordon is on a quest to revolutionize the financial system. The director of Africa Master Blockchain Company talks digital currencies, blind risks and board games.


What is this new African cryptocurrency you are offering?

Where the majority of current digital currencies are based on speculative models, AfriUnion Coin (AUC) and the AfriNational Tokens (ANT)are designed for a transactional purpose allowing international payments, remittances, foreign direct investment as well as day-to-day transactions at local retail stores and other outlets. While the option for speculative trade is available with AUC, the focus is not around that.

Each African country will have a specially-designed ANT which will allow users to pay for goods and services and bills easily through completely digital means without requiring any bank account. AUC and ANT will be fully interchangeable to one another and there will be no fees for the user.

It’s the natural next step for digital finance from mobile banking which most Africans are accustomed to. The ability to freely have the power to send and receive money locally and internationally will allow the freedom of choice and spending power many Africans don’t have currently.

What is your own investment philosophy?

I am a gambler! I believe in taking risks and putting things on the line. That being said, blind risk or whimsical guesses don’t get you very far. Always acquire enough information to understand to a reasonable level what the thing you are planning on investing is or how it works and then trust your instinct and gut feel.

What advice would you give entrepreneurs wanting to invest in blockchain?

First, do some research in terms of what the blockchain technology is being applied for or created in terms of its application to an industry or project. Thereafter, check the white paper for the design of the platform as well as its functionality and applicability to what it is trying to achieve. If it aligns with your personal investment rules, then go for it,however, remember that blockchain is continuously evolving and thus you need to explore outside the usual and standard.

First cash-less, now card-less. What is the future of online banking?

If we are looking into what is currently science fiction, I would say the future is digital contact lenses that will be able to connect you to all your social media accounts, internet, news as well as make payments by just looking at QR codes or specialized barcodes to approve and accept payments.

Now, realistically we are not far off from such innovation and technology, but for the time being, I think the next step is scanning of QR codes at retailers and having the transaction automated from your wallet to the retailers digitally.

What is your most prized investment and why?

My mind. I believe that the work I have put into developing my mind, and continue to do so every day, is the number one investment that I have ever done. It allows me to look at things in a unique perspective as well as provides me with the tools to push boundaries and create new opportunities.

Money, success, fame? Which is most important to you?

I would have to say success… because it is most likely going to bring the other two as well, right? But success in the form of starting something and letting it grow and succeed and knowing that something new exists because of your efforts.

What do you spend your money on mostly?

Board games. I love board games and believe it’s a fantastic way to expand your mind as well as have fun with friends.

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Investment Guide

King Price CEO On Why He Invested On Insurance

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King Price Insurance’s CEO Gideon Galloway, who built an insurance company in South Africa worth over $226 million in six years, talks investments, industry trends and how self-driving cars will change the entire car insurance landscape.

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Economy

Offering The American Dream

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Gar Lippincott and Daniel Ryan of Atlantic American Partners were in South Africa recently looking for high-net-worth individuals wanting to invest in the US.

It’s a warm spring day in September, and Gar Lippincott and Daniel Ryan have just arrived in South Africa. It is Lippincott’s first time in the country, and he is jet-lagged.

A little over two months ago, he was booked to fly here from the United States (US) but was turned back at immigration.

“At Atlanta airport, the lady looked at Daniel’s visa and let him through and she looked at my visa and she said ‘I am afraid you can’t get on the plane because you have to have a blank page on your passport’. I said ‘I have three blank pages’ and she said ‘no, it’s supposed to be the one that says visa on it’. She said it’s the rules in South Africa so I had to sadly go back home… now when I was coming, I was told that’s not an issue anymore so I am happy they have made traveling into the country easier,” says Lippincott.

With a brand-new passport, he’s here with Ryan looking for people who want to invest in the US in exchange for a green card.

Lippincott, the Managing Partner of Atlantic American Partners, says he has always been keen on South Africa for its growth opportunities and prospects.

“From what I understand, the things that are causing short-term decline in the economy in South Africa are set up to provide long-term growth and hopefully people will understand this,” he says. Ryan, the company’s Managing Director of Emerging Markets – Africa, agrees: “I lived in Malawi for 12 years and South Africa is still considered the shining one throughout the continent. Even with all the problems, everyone still wants to come here because of the opportunities.”

According to an AfrAsia Bank report, South Africa comes second to Mauritius in boasting the highest number of high-net-worth individuals.

These are the kind of people Ryan and Lippincott target through their work at Atlantic American Partners. The company has real estate investors and professional private equity fund managers that manage money for banks, insurance companies, and pension funds. In addition, they help people get US green cards and ultimately US citizenship through the US government’s EB-5 Immigrant Investor Visa Program.

“Basically we look for people who want to move to the United States and we help them do so legally by investing and the nice thing is, with our program, they are also able to get a nice return on investment,” he says.

According to Lippincott, for a $500,000 investment that creates 10 jobs for American workers, you could get a green card in about two years and be a US citizen in about six or seven years. “Twenty seven countries have an investor visa program but with most of them, it’s essentially a fee you pay, or you need to be actively engaged in the day-to-day operation of a business. For example, you invest $1.5 million in Australia, but you need to hire employees and generate a certain amount of revenue. One of the biggest advantages with our program is you actually invest the $500,000 into a fund. We act as a trustee of that money and within five to seven years, they get that money back with a bit of return on investment and you are a permanent citizen in the US.”

Atlantic American Partners invests the money in real estate developments like hotels, apartments and student accommodation.

“What’s nice about the program is it doesn’t only cover the investor; it covers the spouse and children under 21. Our biggest family was a Hungarian family with seven children so they got nine green cards for $500,000,” says Lippincott.

The company says it has had positive response in South Africa. “Two months ago, we were here and we had scheduled six presentations for 100 people and we ended up speaking to 450 people. Most were business people, people worried about the economy, people worried about the political future of South Africa and people concerned about the education future of their children,” says Ryan.

According to Lippincott, despite the news of the clampdown on immigration, the US economy is booming and will perish without immigration. In the era of Donald Trump and his anti-immigrant views, that’s heartening news indeed.

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