Recovery in oil prices will depend on recovery in the global economy, says Annabel Bishop, Chief Economist at Investec in Johannesburg.



The recent collapse in the WTI (West Texas Intermediate) oil price has added to negative market sentiment, in an environment where risk aversion was already at high levels. Worsening forecasts of the economic impact of Covid-19 has been a key driver of the elevation in risk aversion in global financial markets, with the global recession expected to be deep and lengthy.



The crisis is unprecedented, and there is no certainty of its length and duration, or the impact it will have. Uncertainty heightens risk aversion in financial markets and the deep recessions forecast around the globe exacerbates risk-off sentiment. Risk aversion in financial markets would indeed be exacerbated further if economic growth forecasts for advanced economies weaken substantially further, and/or if uncertainty around Covid-19 intensifies instead of waning.



While this is not expected, should the path of the pandemic change, the discovery of vaccines and treatment/s be seen to be substantially delayed, the extent of disruptions to supply chains and production substantially greater than anticipated and/or policy responses viewed as insufficient, risk-off in global financial markets could escalate substantially further.



The severe negative impact on health in the United States, as fatalities and infections rise, has likely also been extremely negative for financial markets’ sentiment, with the world’s largest economy expected to see a deep recession this year (-5.9% y/y IMF), and with the negative impacts leaching into next year as well.



Financial markets are still at weak levels, and are likely to remain volatile and weak in the near term until evidence for the beginnings of a recovery in the global economy become clearer.



The collapse in the WTI oil price has come as chronic oversupply of oil has occurred. Storage facilities are close to capacity, inventories are very high, and demand is extremely weak. While WTI was negative yesterday morning at -$4.4/bbl, with pricing on May futures, (with suppliers essentially paying to have deliveries taken off their hands), the Brent crude oil price was at $23.8/bbl. It was expected that soon the WTI pricing would revert to June futures and as a result, the WTI price move back towards that of Brent – this has been in the process of beginning to occur this afternoon as US markets have opened. However, the Brent crude oil price has weakened with its pricing also determined by future contracts. Storage facilities are near full capacity, and demand is exceptionally weak, and production capacity has not been reduced instantly as this is not possible.



WTI and Brent are one of the two main benchmarks for oil prices worldwide, Brent is North Sea crude oil essentially, WTI Texas crude oil, both are light sweet crude oils. The quoted prices are influenced by the futures prices, as noted above, which have collapsed and oil prices in the immediate term are likely to be suppressed. While there are a number of other issues besetting the pricing WTI as well, the prices are not expected to lift until substantial supply cuts occur and demand increases notably. While oil importers will gain, and oil exporters lose substantial revenues, the recovery in oil prices will depend on the recovery in the global economy.



The IMF highlights that “(a) partial recovery is projected for 2021, with above trend growth rates, but the level of GDP will remain below the pre-virus trend, with considerable uncertainty about the strength of the rebound. Much worse growth outcomes are possible and maybe even likely. This would follow if the pandemic and containment measures last longer”. This signals a suppressed view for oil prices for some time.

oil pumps at sunset,  industrial oil pumps equipment.

Oil’s Not Well: ‘Global Recession Expected To Be Deep And Lengthy’

Nigeria has ordered foreign oil and gas companies to pay nearly $20 billion in taxes it says are owed to local states, industry and government sources said, in a move that could deter investment in Africa’s largest economy. 



n a letter sent to the companies earlier this year via a debt-collection arm of the government, Nigerian National Petroleum Corp (NNPC) cited what it called outstanding royalties and taxes for oil and gas production.



Royal Dutch Shell, Chevron, Exxon Mobil, Eni, Total and Equinor were each asked to pay the central government between $2.5 billion and $5 billion, said the sources, who saw or were briefed on the letters.



Norway’s Equinor, which produced around 45,000 barrels per day (bpd) of oil in Nigeria in 2017, confirmed the request.



“Several operators have received similar claims in a case between the authorities in Nigeria and local authorities in parts of the country,” an Equinor spokesman said.



Exxon “is currently reviewing the matter”, a spokeswoman for the U.S. company said.



Shell, Total, Eni and Chevron declined to comment, as did Nigeria’s presidency, petroleum ministry and NNPC.



<h4 class="wp-block-heading">‘NO MERIT’</h4>



The charge came after the central Nigerian government and local states settled a dispute over the distribution of revenue from hydrocarbon production. The sides agreed last year that Abuja would pay the states several billion dollars, three company and government sources said.



The companies were expected to dispute their respective payment claims.



“Equinor sees no merit to the case,” the company spokesman said.



A source at another company said: “This looks like an internal dispute between the federal and local governments. The central government is simply trying to shift to the IOCs (international oil companies) money it owes.”



It was unclear whether the move was linked to the upcoming presidential election in Nigeria, the most populous African country.



The tax demand adds a fresh challenge to energy companies investing in Nigeria, Africa’s biggest oil and gas producer, which have been negotiating production-sharing agreements with the government to develop and operate giant offshore fields.



Oil theft, massive oil spills and corruption further complicate operations in the country.



Nigeria, a member of the Organization of the Petroleum Exporting Countries (OPEC), produced around 2.1 million bpd of oil last year, compared with 1.86 million bpd in 2017, NNPC says.



 Nigeria uses several types of contract with energy companies including the establishment of joint ventures and production sharing, the two most common partnerships for international oil companies in the country.



The companies pay the government in the form of royalties and tax as well as providing the state with oil and gas. -Reuters



-Felix Onuah, Camillus Eboh, Alexis Akwagyiram, Gwladys Fouche, Jennifer Hiller, Bate Felix and Stephen Jewkes

gettyimages-533552151-170667a

Nigeria Hits Oil Majors With Billions In Back Taxes

Total is launching its biggest exploration campaign for years in 2019 as part of a turnaround plan that is ditching the company’s focus on risky long-shots in favor of areas known to contain commercial levels of oil or gas. 



The French major aims to drill 23 wells this year, its senior vice president for exploration, Kevin McLachlan said, in waters off Mauritania, Senegal, Namibia, South Africa, Guyana and Brazil.



While the company declined to say how many wells it drilled in 2018, McLachlan said 2019 would be Total’s largest program in years. The 23 wells planned represent about a trebling of the levels of 2017 and 2016, and is higher even than the 20 drilled in 2013, before the oil price crash.



The company’s new game plan is to concentrate efforts on emerging and mature basins, which offer a greater chance of exploration success. It is moving away from its higher-risk, higher-reward strategy of targeting “frontier” areas that have not been commercially exploited, an approach which yielded scant rewards and saw outlier Total fall behind rivals.



As a result the proportion of its exploration capital the African-focused company is spending on frontier areas has dropped to 15 percent, from 40 percent five years ago.



“We were spending a lot of money in frontier,” said McLachlan, a Canadian geophysicist who joined Total in 2015 to lead the five-year revamp of its exploration strategy. “Now we want balance.”



Most of the wells it aims to drill this year will target known giant fields, he added.



Total has broken ranks with some rivals in recent years and largely ignored the rush to U.S. shale. It is looking to eke out conventional resources, particularly in Africa where it has the biggest industry presence. The strategy carries risks though, and has left the company exposed to the kind of political instability that has deterred others.



McLachlan said Total’s exploration budget would remain broadly in line with 2018, when it was $1.2 billion, and 2017, when it was $1.1 billion. That is still less than half the level of 2014, when the price crash forced all majors to cut spending.



<h4 class="wp-block-heading">LAGGING IN DISCOVERIES</h4>



Appraisals of discoveries in 2018 could offer signs that Total’s shift in exploration strategy is paying off.



The company announced a 1 trillion cubic feet gas discovery off Shetland in the North Sea last year. Appraisals are ongoing for the Ballymore discovery in the Gulf of Mexico with Chevron, and Calypso in Cyprus with Eni.



A major discovery in 2019 could cement the turnaround after a drought between 2009 and 2014 when it spent billions in exploration with little barrels to show for it, while rivals Eni Exxon Mobil and BP, racked up successes.



Yet there is still work to do in terms of converting exploration dollars into commercial success.



Energy consultancy Wood Mackenzie said Total had aggressively snapped up exploration blocks in 2017 and 2018, which took it to the top of the industry table with over 189,000 square km added since 2015 &#8211; around 70,000 higher than its nearest competitor.



But in terms of discoveries since 2015, Total still lags some peers, said Wood Mackenzie analyst Andrew Latham.



“It is clearly behind Exxon Mobil. Exxon’s success in Guyana marks them out as industry leader,” said Latham, adding that Eni’s Zohr gas discovery in Egypt was the next top find.



“Thereafter, it is competing well with the other majors, it has been involved in a string of multi-hundred million barrel big new finds, whereas in the previous four years it would have been one of the weaker or weakest of the majors.”



As part of its turnaround plan, Total has created five regional exploration hubs with a concentration of geoscientists, instead of teams spread out in 38 countries.



Caterpillar shares drop on missed profit



A new, central 10-person leadership team reviews and chooses projects, compared with decisions being made locally before, while people with exploration track records have been placed in executive positions for the first time.



<h4 class="wp-block-heading">S.AFRICA RESULTS EXPECTED ‘IN DAYS’</h4>



Like some competitors, including Exxon and BP, Total is looking to deepwater exploration at a time when technological advances &#8211; particularly in 3D digital seismic imaging &#8211; is aiding a comeback in that area following a decade when industry advances have been focused on onshore shale.



Of the 23 wells in Total’s drill program this year, it has already started work at the deepwater Brulpadda field off South Africa. Two industry sources close to the project say the potential for a discovery is high and could signal a game-changer not only for Total, but also for the country.



“We are expecting the results in the coming days,” Total’s Chairman and Chief Executive Patrick Pouyanne said.



While Total has said the field could hold between 500 million to over 1 billion barrels of oil equivalent, one of its partner in the project is more upbeat.



“The outlook for finding hydrocarbons is extremely high. The question is whether it is gas or oil, and whether it is a good-quality reservoir,” Keith Hill, CEO of Africa Oil Corp, a minority stakeholder in the field, told Reuters, adding that the field could hold 1.5 to 3 billion barrels.



Other oil companies and South African authorities are likely to be watching closing.



“Any potential discovery will ultimately result in the attraction of other oil companies and the growing of the oil and exploration and production industry in South Africa,” said Viljoen Storm, acting chief executive of the country’s state-owned Petroleum Agency. -Reuters



-Bate Felix and Wendell Roelf

Daily Life As Malawi Looks To Economic Growth

Oil Major Total Plans Biggest Exploration Drive in Years

John D. Rockefeller said the secret of success is to “get up early, work late and strike oil.” Uganda has struck oil; around 6.5 billion barrels are scheduled for commercial production in 2020. This drive towards production, which government estimates will attract investment of up to $8 billion, has raised the prospect of increased demand for auxiliary services, including insurance.
“An oil and gas co-insurance syndicate has been established to pool the industry’s technical and financial capacity thereby better positioning us to underwrite oil and gas risks,” says Miriam Magala, Chief Executive Officer at industry lobby, Uganda Insurers Association. “In addition, the syndicate is serving as a capital pooling mechanism.”
Insurance companies in Uganda held around $177 million worth of gross written premium in 2016, up by 3.6% from the previous year, according to the Insurance Regulatory Authority of Uganda (IRA). But this compares poorly with average growth of 17% in the last five years, even as assets increased by 9.3% to $114 million, says Kaddunabbi Ibrahim Lubega, the IRA’s Chief Executive Officer. The market paid $72.8 million in claims, while life insurance registered the most growth at 32.7% in sum assured.
<a href="http://www.forbesafrica.com/focus/2017/09/18/africa-ditch-ubuntu/" target="_blank" rel="noopener">Should Africa Ditch Ubuntu?</a>
Premium growth will likely more than double to 8% this year, according to Magala, on increased regulatory enforcement of workers compensation, motor third-party, ring-fencing of marine insurance, and implementation of a $1.4-million government subsidy for agriculture insurance. The industry expects penetration to increase from just less than 1% of GDP to 3% by 2025, she adds.
“We expect a stimulus effect from large public investments intended to address infrastructure constraints and prepare Uganda for oil production,” says Lubega. “In readiness of the market, an oil and gas syndicate on a co-insurance basis was approved.”
As prospects increase, two of the continent’s largest reinsurers, Africa Re and Zep Re, have set up offices in the capital, Kampala, as they seek to tap cessions emerging from the oil and gas sector.
In anticipation of increased activity, the government pushed reforms through parliament last year to improve the financial system, introducing risk-based supervision where an insurer’s capital requirement will be automatically adjusted – depending on the risk they are carrying. The amendments also covered compliance with insurance core principles and financial action task force (FAFT) regulations, according to a ministry of finance report, which also notes that the amendments also improved harmonization with the East African Community bloc requirements.
A separate amendment also introduced bancassurance, a distribution channel that is expected to promote growth of the sector due to the vast bank network in the country, says Lubega.
<a href="http://www.forbesafrica.com/politics/2017/06/05/agriculture-behind-africas-health/" target="_blank" rel="noopener">Agriculture Behind Africa&#8217;s Health</a>
In agriculture, the insurers lobby estimates companies will underwrite $2.3 million in the next six months, before applying the government subsidy, as the pilot scheme looks to guarantee returns from crop and livestock farming, according to Finance Minister Matia Kasaija.
Insurers needed to work closer with farmers to understand different crop varieties and planting windows in order to reduce commercial premium rates. Corn is covered as high as 23.9% versus a 10% average affordable to farmers, according to Shadreck Mapfumo, the International Finance Corporation’s Senior Financial Specialist.
“I don’t think we are ready to provide sustainable agriculture through insurance when we don’t have the man power,” he told an industry conference, in Kampala, in May.
According to Magala, other areas of opportunity include a new requirement to check for motor third party insurance as part of the mandatory vehicle inspection checks, which should see compliance boosting premiums. The government has also made it mandatory that policies on ships, aircraft and other vehicles registered in Uganda – as well as goods imported from other countries – be issued by locally licensed insurers in Uganda. Unlike many countries, the Ugandan government does not insure its assets. If it did it would see a windfall in excess of $27.5 million covering public sector workers compensation, fire and public liability insurance, says Kasaija.
Despite low insurance penetration in Africa, analysts remain bullish on Uganda.
“Foreign investors are interested in Uganda due to the positive growth trend and favorable business environment,” says Arthur Kamp, Investment Economist at Sanlam Investment Management. “Uganda is going to exceed Kenya in terms of total population numbers by 2040. Population growth is an indicator of development.”
Ugandan insurers are taking note. &#8211; Written by Joseph Burite

Oil And Farming A Boon For Insurers

Lot 234, the Preller, Space Angel, signed and dated ’71, oil and gesso on canvas.
“I have three million one hundred thousand. Three two, thank you. Three four, three five, six, seven, eight, nine, four million. Four million two hundred thousand with you, four million four, four six, yes, I saw that nod, go ahead, five. Now five two, five four, five six, I’m at the back of the room now, she’s got it at five eight, it is with you madam, at five million eight hundred thousand rand, at five eight, all done? This is fair warning, I’m going to sell it …”
Bang, goes his gavel on the desk. “Your number please?” asks auctioneer Dendy Easton in his plummy British accent. We are at the Wanderers Club in Johannesburg on November 7, 2016.
It has taken one minute, 40 seconds for somebody to spend R5.8 million ($440,000) for Alexis Preller’s painting. There is scattered applause.
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“Lot 235, the Edoardo Villa …”
Bidding continues for nearly 300 lots until the final one, Lot 293, a Keith Alexander painting, goes for R360,000 ($27,000).
There is a lot of money in art, and a lot of it in this particular room. Here in Johannesburg, among these bidders, the South African economy looks pretty robust. Apartheid  marginalized South African artists, which means that collectors from China to New Zealand, America to Britain, South America to Europe, are now greedy for South African art. Greediest of all, it seems, are South Africans themselves. While the country’s economy may be stressed, the wealthy have cash for pretty things to hang on their walls. A lot of it.
Of course there are good artists in Africa. Some of the best from the continent are South African.
“The fact that there is so much money for art now is to some extent because we were marginalized. And our artists are good. Very good,” says Emma Bedford, Senior Art Specialist and a Director of Aspire Art Auctions.
“We have a history of good art schools in this country. The rest of Africa doesn’t,” interrupts Ruarc Peffers, the tall, suave and experienced auctioneer of Aspire, a brand new South African auction house that on Halloween night in Johannesburg sold over $2.2-million’s worth of South African art, at an auction a week before the big Strauss one. Discovery boss Adrian Gore is a major Aspire investor, as is Brian Joffe of Bidvest.
It’s a funny business, art collection and auctions.
Frank Kilbourn, Executive Chairman of the biggest and oldest South African auction house, Strauss &amp; Co, which sold the Preller mentioned above, tells me he is reluctant to tell people art is an investment. “But it is,” he adds. “If you bought South African art a decade or two or three ago, you have made a lot of money, or could make if you sell now.”
“The whole world is waking up to our art. It is reaching record prices. If you did invest, you made money. But that’s not what art is all about.”
It is about appreciation, culture, civilization, aesthetics, collecting, pride, knowledge, historicity, philosophy.
To show just how the market is booming, Kilbourn, who has separate degrees in law, commerce and philosophy, explains that three huge new galleries are being built in South Africa.
In Cape Town there is Zeitz MOCAA (Museum for Contemporary Art in Africa) at the Waterfront – old grain silos with a five-star hotel on top of an eight-story gallery; Javett is being built in Pretoria, in collaboration with the University of Pretoria, and the third is a private one being built at Steenberg in the Cape.
“This is a wonderful thing for the country, and for art,” Kilbourn, a collector himself, says with a happy smile. His team tell me I mustn’t fail to mention that their auction in Cape Town earlier this year realized $4.2 million, the second highest ever for an art auction. “And that’s in Cape Town!”
At the Strauss auction in Johannesburg exactly a week after Aspire’s auction, Kilbourn buys two paintings himself. One is an Erik Laubscher Still Life with Pumpkin Slice which was expected to reach R300,000 ($22,000) to R400,000 ($30,000).
At R400,000 the auctioneer pauses, Kilburn just nods, “420?” Easton looks around the room … “430!” he says triumphantly. There is another bidder, bidding against Kilburn. Now it is rapid fire from the auctioneer, finger pointing left then right, like watching tennis at Wimbledon: “440, 480; 500, 520; 550, 580; 600, 620; 650, 680; 700, 720; 750, 780; 800… 820. Fair warning… R820,000, I’m going to sell it, here in the second row.”
Bang goes Easton’s gavel. In half a minute, the price doubled.
While interviewing Kilbourn after the auction he greets somebody mischievously, giving him a big smile, asking “Were you the bastard pushing me up on the Laubscher? I thought you were my friend?”
Small auction rival Aspire has been in business since July this year. They are a chip off the older Strauss house, for which most of them worked. The four Aspire art specialists have qualifications in fine art, art history, art theory, criticism and curating.
Aspire Auctioneer Ruarc Peffers, a graduate of the famous Michaelis School of Art at the University of Cape Town, tells me he has done “Oh, over 100 auctions” in his career, but the Johannesburg one was his first for Aspire. He describes how it is “left foot, right foot” stuff: the auctioneer must ensure he has the momentum on his side, as he goes up in about ten percent increases.
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In South African law the auction house is allowed to bid, so one of the auctioneer’s tasks is to get the bid to a real bidder, not the house. There are a bunch of bidders on phones from New York, Australia, even New Zealand – and they are not ex-South Africans, he says. Plus there are internet bids being controlled by Aspire staff member Rafael Powell. Hunched over his computer, every now and then he lifts his bidding number to bid for somebody on the net, who is bidding from somewhere on the planet to get South African art.
If the reserve price is in the millions, the auctioneer goes up in hundreds of thousands.
Estimates in the catalogue usually have the reserve price as the bottom estimate. If that’s not reached, the item is not sold. Although the auctioneer ‘closes’ at say R450,000, if the ‘estimate’ was R500,000 to R1 million, the item is probably going to remain with its owner.
After the auction a lot of buying and selling activity takes place, people making offers, bringing down reserve prices, offering to buy an already bought item. Frenetic stuff for staff for the 24 hours after the final hammer falls.
I went to both auctions, a week apart, one by Strauss and one by Aspire.
Emma Bedford says: “Modernist artists on our sale who performed best included JH Pierneef, Hugo Naudé, Alexis Preller, Edoardo Villa, Erik Laubscher and Douglas Portway. But what really excited us was how well the contemporary artists did, many breaking records. Like photographers David Goldblatt and Pieter Hugo, as well as artists Peter Schütz, William Kentridge, Diane Victor and Athi-Patra Ruga.”
The top Preller on Aspire’s sale Profiled figures (Mirrored Images) reached $468,000 on the auction.
I ask the Aspire auctioneer: “Why don’t you say something about the painting during the auction? You only say ‘Lot 14, the Irma Stern. I have a bid of 500 (thousand)’ but nothing about the work?”
He says: “Bidders know the works, there were three days of viewing, they have the catalogue. And you only have about three minutes for each lot, otherwise ‘bidders’ fatigue’ sets in, and you don’t want that. We did 121 lots in two hours.”
At the Strauss auction, I realize how right he is. I find myself nodding off when we get to lots 260, 270, 280.
Lot 249, a Preller Woman with Red Hair goes for R2 million ($150,000) although it was expected to only reach R200,000 ($15000), and Lot 248, another Preller, Revelation which was expected to get R400,000 ($30,000) goes for R2.4 million ($180,000) to a telephone bidder. A tiny Preller painting, Ritual Bull, only 7.5cmx9cm, goes for R550,000 ($41,000).
Strangely enough, the real star of the Strauss auction, the so-called lost Preller Adam – a heavy piece of art the size of a big coffin, absolutely exquisite in my untutored opinion, goes for a bid of only R6 million ($450,000), a huge bargain. (Commission of about  $59,000 will be added to the price the bidder will actually pay.)
“This was the wrong audience for that work. It is a museum piece, not really for a public auction,” Kilburn shrugs and says. It was expected to reach $490,000 to $680,000.
This is a world of wealthy people, who acquire art to enjoy it on their walls, invest in it, and show it off. Their disposable income is serious money. Strange then, after watching these folk jump up bidding in hundreds of thousands of rands without blinking an eye, to hear them in the Wanderers’ parking lot debating whether to give the car guard a R5 coin or a R10 note.

Art For Art’s Sake – but give us your Cash

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.

Prepare For  tough negotiations

In the heart of Lagos, the Rose of Sharon Glorious Ministry International is home to an intimate congregation who meet every Tuesday for fellowship and prayer. They are dedicated to a common purpose, to serve God, a vision which has remained intact since its founder, Folorunsho Alakija, made a pact with God decades ago.
“I don’t think I could have got this far if I had not entered into a covenant with God. It was 25 years since I gave my life to Christ. I entered into an agreement that if he would bless me I would serve him all the days of my life,” says Alakija.
The ministry is one of many ways Alakija is keeping her promise to God. Another is through her work with the Rose of Sharon Foundation, a not-for-profit providing care, financial support and scholarships for widows and orphans. In return, God has kept his side of the bargain.
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Alakija is worth a staggering $1.73 billion according to Forbes, making her the fourth richest person in Nigeria and second richest woman in Africa behind Isabel dos Santos. She is the Vice Chair of Nigerian oil exploration company, Famfa Oil, which shares a joint partnership agreement with international giants Chevron and Petrobras. With a 60% stake of block OML 127 of the Agbami field, one of Nigeria’s largest deepwater discoveries, Famfa Oil produces approximately 250,000 barrels of crude per day, according to Alakija. Having just turned 65 in July, Alakija has a lot to be thankful for. She is blessed with a dedicated husband, four sons and grandchildren. Alakija’s feet are firmly on the ground but her journey to becoming one of Forbes’ 100 most powerful women in the world began with an encounter 36,000 feet above sea level.
“I met a friend of mine on a flight on my way to England and she asked me if I could help her partners to be able to lift crude oil from Nigeria. So I called around and set up an appointment with the petroleum minister but he discouraged me. He said are these people willing to invest in Nigeria because the government did not want to encourage more foreigners to come and lift its crude. I asked my friend who said they didn’t want to invest in Nigeria and that was the end of that,” says Alakija.
With that, the new oil opportunity came to an end. But her dogged determination transformed this negative conclusion into one of the most renowned success stories to come from Africa. This tenacity began at an early age.
“I come from a Muslim background and it was a polygamous lifestyle. My father had eight wives and 52 children. All the wives had to cooperate with each other. To them that was how life was, they cooperated with one another, they quarrelled and made up again, most of us were living under one roof in private bedrooms, I think about four floors of a building, in the heart of Lagos Island,” says Alakija.
Born into a family of traders, Alakija cut her teeth in the textiles trade while still a child.
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“My siblings and I used to help my mum in the store and that is where we learned a lot about textiles, textures, colors, patterns and merchandizing. That is where I learned all the practical steps that I later on applied to my fashion business.”
The fashion business came after her stint in the corporate banking world. After qualifying as a secretary in Britain, a place where she also went to school from the age of seven to eleven, Alakija worked as an executive secretary with the bank, Sijuade Enterprises, in Lagos for a year and a half before joining the International Merchant Bank of Nigeria.
“I joined them as a secretary and I was there for about 12 years. I was promoted to other departments of the bank, including heading the corporate affairs department. From there I moved into proper banking, working in the treasury department. I loved it because I was trading with the bank’s money to make money for the bank. Later on, the bank was expanding and they started putting extra cogs between the wheels to ensure that people did not get promoted too fast to get to top positions within the bank. So I asked myself, ‘how long will it take me to get from a treasury officer to a general manager?’” says Alakija.
She quit her job and decided to study fashion design. She enrolled in the American College in London as well as the Central School of Fashion where she obtained a distinction. Immediately after that, Supreme Stitches was born and Alakija became renowned for her haute couture range, which was worn by women around the world.
Alakija says divine intervention persuaded her to rename her fashion business.
“I rebranded to Rose of Sharon House of Fashion because God gave me a revelation that I needed to change the name. It was a revelation initially given through a pastor but I decided I was not going to change it until I heard from God myself. I had a dream a year after the prophecy was given and I saw the new name on the body of my van in the dream and I changed it overnight,” says Alakija.
Then came her foray into printing. Alakija established the Rose of Sharon Prints and Promotions, as well as Digital Reality Prints.
“I wanted a new challenge; I was getting bored of the fashion business… the [printing] business did well for the first couple of years before it got into trouble,” she says.
The Lagos State government clamped down on the printing business because billboards were clogging up the skyline. Sales for her fledgling business plummeted.
“At some point when I went abroad, I saw some printing machines and realized that those were the similar kind of machines I had been shown in [a] dream but those were for offset. I went into the wrong type of printing out of disobedience and ignorance. I misunderstood and I was excited with the large format machines so I didn’t do too much homework into trying to find out more about the pictures that I saw in my dream. So I eventually got into the offset printing five years ago. And it’s been a success. We started out with 30 people and now we have about 100 employees,” says Alakija.
There was a smooth transition from the fashion business into mass-produced t-shirts. Demand for monograms, screen-printing and picture transfers on t-shirts increased. The company set up four departments, including a souvenirs department where they imported souvenirs and gift items from China. Ever the entrepreneur, Alakija was still on the lookout for the next big thing.
Alakija’s encounter with her friend on the flight to England was fortuitous. After her friend decided not to invest in the Nigerian oil industry, Alakija decided to make use of her new contact, Maryam Babaginda. Maryam was the wife of Ibrahim Babaginda, the former president of Nigeria under military rule. As a customer of Supreme Stitches, Maryam was able to secure another appointment for Alakija with the petroleum minister, Jubril Aminu.
“I went back and told the petroleum minister that I would like to render other services, like catering for the oil industry. He said there were already so many caterers on board, various ships on the high seas, and as a result, there were no opportunities available.”
Although disappointed, Alakija did not give up. She decided to do some more homework. After consultations with a close relative who worked for the Nigerian National Petroleum Corporation (NNPC), she was advised to offer transportation services for the petroleum industry. It took a long time to get another meeting with Aminu.
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“I finally got another opportunity and I wrote an official letter saying I would like to offer transportation services to the oil sector. The minister’s feedback was he didn’t think it was a good idea because the government would soon be doing away with the trucks that were being used to transport crude oil and replace them with a lot more pipelines instead. So I said ‘what am I going to ask for now?’”
“He said ‘why don’t you think of exploration?’. He said the government wants to put the resources of its land in the hands of its nationals, because it feels that it is about time that Nigerians begin to exploit its own resources rather than let multinationals continue to take away our wealth. I had given up at this point. I thought he was being sarcastic and he didn’t want to help all along,” she says.
Alakija cried all night. It felt as if a major door had been closed. After seeking consolation from her husband, Alakija went on to inform Maryam of the outcome of the meeting.
“I told her that it was bad news and that the petroleum minister wants to give me a heart attack. I went back to do a lot more homework and consulted with a friend of my husband who was already in the oil business. At the end of the research, I decided to not give up and officially apply for an opportunity to get an oil block,” says Alakija.
Before submitting her letter, Alakija had already found her technical partners and it was now a waiting game. To her surprise, the oil minister was replaced and Alakija had to restart the whole process again. She kept pushing. Everything seemed to be going according to plan when the second oil minister was also replaced.
“At this stage I still wasn’t ready to give up. The third minister finally wrote me a letter to tell me my application was receiving attention after two years. I got the letter and I cried my eyes out in frustration again at the snail’s pace progress the application was making,” says Alakija.
Swaying from one military coup to another, the Nigerian political climate was volatile during the 1990s. While on holiday in the Philippines, news broke about yet another change in the Nigerian regime. Alakija’s oil application was still being reviewed.
“I raced back to Nigeria to find that the current administration had already done the oil block allocations before they left power and my license was waiting for me. It took three years of not taking no for an answer and going back each time the door was shut in my face,” says Alakija.
She finally had her oil block, but the battle was far from over.
“When I was making the application I listed several blocks. I didn’t want to take a chance on someone else taking my block. So I applied for several blocks and the one I was allocated was the one nobody wanted because it was deep offshore and nobody was exploring deep offshore because it was too expensive to explore and there was no technology around to explore that initial depth of 5,000 feet at that time,” says Alakija.
At first, it seemed Alakija had drawn the short straw. She did not have the technology, expertise and money to start the process of exploration. Alakija, with support from her husband, had to use their life savings to secure the license or face losing it after the government threatened to terminate the agreement if full payment was not made. It took Alakija an additional three years to find new partners after her initial partners pulled out. After years of knocking on countless doors, their persistence paid off.
“Texaco was already in Nigeria and looking to expand their business. They went to the Department of Petroleum Resources (DPR), who told them that Famfa Oil was looking for technical partners. So they linked us up. The license we had was not worth more than the paper it was written on until they came in,” says Alakija.
Five years later, Chevron bought Texaco, including the partnership with Famfa Oil.
After receiving a signature bonus, out of which Alakija was able to pay the balance of the license to the government, Alakija started working with her new partners. Chevron set up an office four months after signing the partnership contract, with Alakija holding on to 60% of the shareholding of the oil block and Chevron taking 40%. Chevron later sold an 8% stake to Petrobras in exchange for their deep offshore technical expertise.
“You can find oil, but if what you have spent is more than the quantity of oil available within the block to make your money back in multiples, then it was not worth carrying on and you cut your losses. You could even have a dry hole after spending millions to explore. So when we found oil in commercial quantities, they said they had to announce it to their shareholders and it has been a battle ever since.”
The announcement of the major find in Alakija’s oil block by Chevron attracted the attention of the Nigerian government who had initially assumed that the oil block was one of the worst due to its location. The government snatched an initial 40% stake from Alakija, followed by another 10% stake, leaving her with a meagre 10% stake.
“We felt like it was unfair. We had taken the sole risk and invested everything we had in the business. It had become a family business. We spent six years as a family to ensure this worked out and now that it was bearing fruit, they just stepped in and took away everything we had struggled and worked extremely hard for. I said to myself, ‘Folorunsho Alakija does not give up, my husband does not give up and my children do not give up.’”
Most of her advisers believed it would be impossible to win a legal battle against the government, which, at the time, was notorious for its corruption. Alakija ignored their advice and took the government to court. For her, the case was simple, Nigeria has a constitution and nobody, including the government, is above that constitution. After 12 years of intense legal battle, the courts returned the 60% shareholding back to the family.
“It was bittersweet. There were a lot of sleepless nights and battles. Suddenly we became the plague, friends stopped picking up our calls and people were asking why we could not be content with 10 percent. My husband was a rock, to myself and the family, during that time and I could not have done it without him,” says Alakija.
Dolapo Oni, Head of Energy Research at Ecobank, praises Alakija’s courage.
“Alakija has run a very successful business in Famfa Oil. She was one of the first women in the oil business and her battle with the federal government shows a great deal of tenacity. After they took away her block, she successfully won it back. She was also one of the first women to partner with a joint venture partner, Chevron, which has been very successful,” he says.
Oni, however, feels the oil company needs to branch out.
“I think they are risk averse. Having been as successful as they are, they do not want to explore other opportunities. I personally feel like you have to increase your reserve base, you have to explore other assets and Famfa has traditionally not diversified their holdings in other fields, which I believe could be very profitable for the business as well.”
For now, Alakija seems content. She met her husband, Modupe, a year after she returned to Nigeria from England and they have been married for over 40 years. These days, Alakija spends her time as a proud grandmother and an author, having penned several books, including her autobiography Growing With The Hand That Gives The Rose, The University of Marriage and The Cry of Widows and Orphans.
As Alakija stands amid the melodic songs of praise in her Tuesday fellowship, she is at peace. Interfere with her business, however, and it’s war.

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A Head For Business And  Fists For A Fight

As revenue dwindles from Nigeria’s foreign exchange reserves, calls for the government to find alternative export revenue sources have never been as loud. A return to agriculture, once the biggest industry before the oil boom of the seventies, has been touted as the most viable solution. Mining has come to the fore as another potential revenue earner, though the drop in global commodity prices will have a bearing on investor appetite.
These alternatives can generate significant revenue for the nation but, as seen with oil, a robust and watertight system will be required to ensure that all revenue from mining is redeployed into states where there is mining activity.
There are many factors that have prevented mining in Nigeria being considered a real growth earner. Whereas Nigeria’s oil is internationally recognized, the grade and quality of the country’s minerals are not recognized as meeting international standards. This has led to questionable practices being carried out by miners and traders to ensure that they make a profit on their substandard material. Furthermore, testing centers and labs are few and far between, diluting the viability of finding a buyer.
The recently installed Minister of Solid Minerals and Mining, Kayode Fayemi, has already begun to develop strategies to ensure the development of the sector is maintained from federal to artisanal level. The fragmented nature of the mining sector in Nigeria allows for local cartels to take advantage of what is seen by many as a hostile business. Due to the lack of legislation, locals prefer to sell ores for quick gains to foreign buyers, rather than dealing with the bans and restrictions that come with the legal channels. Foreign buyers are able to get more for their money by capitalizing on the porous laws. The government in Congo is aware that the trace minerals, associated with the ores, amount to something valuable and have made it illegal to export them.
Confidence precedes investment and, with the global mining sector experiencing a downturn, the lack of protection given to mining in Nigeria risks deterring potential investors. Abundant natural resources should be a gift, not a curse. The lack of policy presents an opportunity for the ministry to develop the legislation that governs the sector. This will give confidence to mining companies who want to invest in a robust system. As with the Local Content Act in the oil and gas sector, there are policies that can protect the mining sector to keep the wealth in Nigeria. A ban on importing raw materials that could be mined in Nigeria is a start.
Today, a lot of Nigeria’s mining is at artisanal level. A workforce is usually made up of locals from surrounding villages. Armed with a spade, they get to work using crude techniques to extract the ore. This exposes toxins, leading to poor health and damage to the environment.
When visiting a mine, it is not uncommon to see the landscape punctuated by parcels of land ransacked for their minerals. In countries where mining is prominent, there is a synergistic approach with environmental and mining ministries working together to ensure that the environment and surrounding communities are not negatively affected by the excavation.
Unofficial tax collectors are also known to plague the routes on which the mined material is transported. While  companies have come to expect this in Africa, business will increase if this practice is eradicated in Nigeria. The mining ministry must engage with states and local governments to ensure that royalties and taxes reach federal accounts. With idiosyncratic systems catering to minorities, the fact that no major international mining companies are established in Nigeria is indicative of the lack of confidence they have in the country’s mining sector.
The general perception among Nigerians is that Minister Fayemi has the skills and intellect to successfully navigate his challenging post. During his term as Governor of Ekiti State, he attracted international finance. He is now expected to be just as bullish in Nigeria’s potentially lucrative mining sector.

Natural Resources A Gift Not A Curse

It’s a warm day in downtown Johannesburg, South Africa. As we park, an empty can dances merrily down the street, leaving a sticky trail behind. The streets are packed with the ambitious, in the city of gold. Mpendulo Dlamini wants to leave a big mark with his little kingdom – Umbuso Lubricants.
“I love the name Umbuso because it is kingdom in siSwati and I want to create a kingdom for myself. It doesn’t matter where the business is, but people want to know where you are located because when you say you work from home, sometimes people don’t take you seriously,” says Dlamini.
The lubricants company is Dlamini’s hope of a multi-million-dollar empire.
“I got tired of reporting to a superior and I had to make a decision to be my own boss. I had always had a dream that one day I will start my own company. Entrepreneurship is what Africa needs because it creates more jobs and contributes positively to the economy.”
Dlamini quit his job as a banker at one of the world’s largest banks for this dream. It was a risk.
“It is very difficult when you start your own company and you don’t know how things will go. There is no longer the comfort of a monthly salary to pay the bills and take care of the family. It was tough but sometimes you have to stick with the business even though you have nothing. It takes time for anything to grow,” he says.
“When we started, we wanted to sell diesel and lubricants but diesel was a bit problematic and we have since stopped and are concentrating on lubricants alone.”
The lubricants market is segmented into different sectors, mainly automotive, industrial power and general industrial. Dlamini hopes to grow his business to be a major supplier to big companies.
“I have had an opportunity to supply a lot of products before. Someone wanted a lot of lubricants from me but I didn’t have enough money for stock and I lost him as a client. As a banker, I had a lawyer and a support system. I don’t have that now. Everything becomes a hustle because I have to do things myself but that is the beauty of business. You can be put down but you can always rise again and that keeps me going until you get to where you want to be.”
Like many who come to Johannesburg to make money, Dlamini might just make it as a king of oil.

From Investment Banker To Oil King?

Since its inception 22 years ago, Unique Maritime Group (UMG) has grown from a company with three employees to more than 500; a local business to an international operation with five divisions across seven global regions; and a foray for Himanshu (Harry) Gandhi into entrepreneurship within the oil and gas industry that was purely accidental.
“You’re not born a businessman, you just become one when you grab an opportunity,” he says.
It’s a blistering Middle Eastern morning en route to meet him in Sharjah, United Arab Emirates, where UMG’s headquarters are located in the Hamriyah Free Zone, an industrial area far from the glamour of Dubai, its emirate sibling.
The quintessential businessman, Gandhi has 25 years of industry-savvy and a knack for seizing opportunities to form partnerships and acquire companies to expand his empire. His initiation into entrepreneurship was by chance, but his success has been no accident.
The son of an electroplating engineer born into a middle-class family in Mumbai, Gandhi started out on a different path with a chemistry degree from Bombay University, later studying computer science in Singapore when his father was transferred there in 1981.
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A programmer with Associated Onshore Offshore Services (AOOS) in 1984, Gandhi quickly graduated to sales engineer, ultimately being given the opportunity to open a Middle East branch in Dubai as general manager. The future looked bright but Gandhi was about to meet his first challenge.
“In 1986, there was a big oil price drop and they decided to withdraw from this area,” he says. “I presented my then chairman with a plan and basically became owner with him of the company – so I got into business because my employment was shutting down.”
Restarting in 1993 as UMG, the company grew as a specialized equipment supplier providing offshore and onshore services including the sale, rental, manufacturing and servicing of equipment to the oil, gas and marine industries.
UMG evolved as oil and gas opportunities in the Middle East grew and Dubai became an international hub. Today, Gandhi has grown the business by looking beyond Middle Eastern shores. His investment in African companies has seen technology out of the continent excelling in one of the biggest oil and gas industries worldwide.
One such company in Cape Town, Unique Hydra, began as a small team of engineers. Approaching Gandhi with their diving engineering equipment, he recognized its quality and began selling it in the Middle East. Seeing the potential for growth with financial and commercial help, he provided infrastructure and resources, gave them challenging hi-tech jobs overseas and set up a huge factory.
“The amount of talent we have in South Africa is incredible,” says Gandhi.
As a result, Unique Hydra has grown from a small equipment manufacturing company to the leading diving equipment supplier to the world.
Much of UMG’s technology is developed on the Unique Hydra premises; Gandhi says his company has grown overseas due to their business in South Africa. UMG has spent the last three years investing in research and development there which has culminated in a new product: HYDRACraft. A marine vessel that is used to support diving operations.
“It’s more out of Africa and we globalize it,” says Gandhi.
Also operating in Nigeria as Unique Wellube, exporting their services to various industries, Gandhi says UMG wants to keep growing in Africa. Opportunities exist from Angola, Ghana and Gabon to Kenya and Tanzania.
“As a group, for us, 25% of the market comes from Africa, so we are going to regionally diversify there.”
Gandhi has witnessed a transformation in Africa’s workforce in the last decade.
“There is a lot of demand from the workforce to educate themselves further so that they can economically grow themselves and that is very amazing.”
Building a multinational operation hasn’t been easy.
“Today, I face the same challenge I had when I was a three-man company; finding the right people to do the right jobs and to be loyal.”
Dr. Saeed Alhassan, Director of the Gas Research Center and Assistant Professor at the Petroleum Institute in Abu Dhabi, agrees.
“Sustainable development of the human capital is among the most challenging aspect of the oil and gas industry because training and retaining top notch talent requires a good deal of investment; aligning human development with business strategy has to be accounted for.”
Gandhi says oil and gas is a good industry because of its growth cycle.
“The demand for oil is continuing to grow; there is still not enough oil in the world to take care of the final demands of people.”
He says oil and gas is cyclical and in his 25 years in the industry he has witnessed three cycles.
“It’s the case of it consolidates, it grows, it consolidates, it settles down, then it will grow again.”
Tomorrow is always on Gandhi’s mind, but today he acknowledges he wouldn’t have amassed such success without his team. He says good camaraderie makes employees family and if they value company culture, the organization will always succeed.
Gandhi expects to reach seven divisions in three years by growing UMG’s business lines, appealing to the same customer with different technology.
“We innovate, we learn, we buy the technology or we acquire a company doing that and so we build or business.”
He enjoys giving back, from the Lighting a Billion Lives campaign (LaBL), a solar lighting initiative where he helped light up 23 villages across India, to partnering with the EKAL Vidyalaya Foundation in India to fund 50 schools for impoverished children.
For this CEO, success isn’t represented by his Lamborghini with its elite three-digit license plate or his villa in the posh Emirates Hills district in Dubai; hard work is paramount.
“I still work from nine to five every day!”

Diving Into  An Ocean Of Cash

The daughter of liberation fighters, I was born in Russia, raised in Angola as a refugee, and was blessed to witness the independence of my country Namibia. My parents, both of whom are lawyers, taught me determination and the value of service for the greater good. Their passionate belief in a nation’s right to self-determination imprinted upon me from a young age and they instilled in me the significance of harnessing natural resources as a catalyst for unlocking national development. As a young girl, my late father, Handupula Shimutwikeni, taught me my gender is only a barrier if I chose to see it as thus. My mother, Panduleni Shimutwikeni, by her example, taught me that the world is my oyster and that forging ahead against all odds is the only way forward.
My upbringing influenced my education odyssey across three continents. While in high school, I was awarded a scholarship to pursue a Business Management and Computer Information Systems degree in the United States. After obtaining my Bachelor’s, I returned home and worked in the diamond industry in a public-private partnership, under the pioneering Inge Zaamwani-Kwami, the former MD of Namibia Diamond Corporation. This experience sparked my interest in natural resources. Recognizing the need to bolster the national voice in the international world of negotiations, I went on to attain a LLM degree from Leeds University and a LLM in Mineral Law and Policy at Dundee University, making me one of a handful of Namibians with such a qualification.
However, when I returned home, I was in for a surprise as it was difficult to get a job! I was told I was too young, overqualified and a woman! A ‘triple threat’ as some professionals labelled me. It was discouraging and made me question my purpose. I drew on my mother’s strength and decided to forge ahead, rise above the inequalities and in the process empower others with this truth. Thus I embarked on my entrepreneurial adventure and opportunities opened up in support of my vision. I leapt at the opportunity to consolidate my skills through a contract with the International Telecommunication Union and European Commission to co-draft Namibia’s cybercrime bill under the ‘Harmonisation of ICT Policies in Sub-Sahara Africa’ project.
In 2011, with a fellow Dundee alumnus from Angola, I birthed Rich Africa Consultancy. The Consultancy specializes in natural resources law and policy, and facilitates investment linkages in the sector. A key objective of Rich Africa is to be a trusted advisor and catalyst to unlocking our resource potential. Its creation was inspired by the need to invoke a sense of pride in Africa and its vast natural resources.
Rich Africa launched the Namibia International Oil and Gas Conference in 2012; an initiative I conceptualized and led to fruition with the endorsement of the Namibian government. Themed the ‘Road to Discovery &amp; Beyond’, the inaugural conference brought together decision-makers, and international and national thought leaders to share best practices associated with the discovery of oil in Namibia.
This biennial conference was followed in 2014 with ‘Unlocking and Optimising Our Resource Potential’ which focused on the evolution in the industry. It is a humbling honor that these initiatives have received recognition placing Namibia on the international oil and gas platform.
On this journey, I was often confronted by scepticism because Namibia is considered a frontier territory in the oil and gas arena and such an undertaking was too big for “a petite young woman”. This only strengthened my resolve. I also used this platform to inspire women by presenting a new avenue to transformation through natural resources, a sentiment shared by Bridgette Radebe, one of South Africa’s successful black female mining entrepreneurs, and keynote speaker at our 2014 conference.
Not surprisingly, I do face moments of self-doubt but have been fortunate to have an extensive and supportive network of mentors.
A guiding tenet of my life has been, ‘when writing the story of your life, don’t let someone else hold the pen’. I believe I am here to finish the work my parents started.
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– The writer is one of two mineral lawyers in Namibia, is CEO of Rich Africa Consultancy and an oil and gas entrepreneur.

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‘Young,  Over Qualified  And A Woman!’

One day, the world may go to war over rice. Food is the new oil.
About 795 million of the world’s people, 200 million of them children, are hungry. Most of them are in Africa and Asia. It will cost $267 million per year to end world hunger by 2030. That is $160 annually for each person, according to the United Nations.
The business of food could be the business of the future. Most of the world is putting bricks and concrete over its fields and importing food. This could mean good business for entrepreneurs who harness the fertile red soil of Africa.
FORBES AFRICA dedicates this issue to food and the investment case.
Over 60% of the world’s arable land is in Africa, 65% of Africans work in the fields and 35% of South Africa’s gross domestic product (GDP) comes from agriculture and food, according to Old Mutual Investment Group’s Director of Strategic Projects, Craig Chambers.
At least $25 billion in food imports are coming into Africa; and food is wasted on the continent.
According to Duncan Vink, Joint Managing Director of UFF Agri Asset Management, 39 million hectares of agricultural land in Africa is physically suitable for irrigation but only 7% of this farmable land is currently irrigated, and in sub-Saharan Africa that figure is only 3.7%.
“There is no doubt that the opportunity within African agriculture is really vast, we have a decent pipeline of anything between $200 and $400 million in opportunities in Africa,” says Chambers.
For years, farming was going out of fashion but entrepreneurs are rediscovering it. Necessity may prove the mother of food production ripe for investment.

Food The New Oil

It took the prestigious, New York City-based Columbia University two years to snag Wale Tinubu as keynote speaker at their annual Africa Economic Forum. Not surprising, Tinubu maintains an extremely busy schedule running Oando Plc, the first Nigerian company to list on the Johannesburg Stock Exchange as well as the Nigerian Stock Exchange, with a market capitalization of $1.4 billion and more than a thousand staff.
The forum, in its eleventh year, was held at the Ivy League school’s sprawling campus on the Upper West Side of Manhattan. It highlighted the rise of Africa and provided perspective from various industry titans from the continent. Tinubu, the group chief executive officer of Oando, the sub-Saharan African indigenous integrated energy group, joined Raila Odinga, the renowned politician and former prime minister of Kenya, Rosalind Kainyah, the managing director of Kina Advisory Limited and Emmanuel Nnadozie, the executive secretary of the African Capacity Building Foundation (ACBF) to discuss the continent’s economic rise.
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It has been more than two years since the African oil magnate featured on the cover of FORBES AFRICA. Back in November 2011, Tinubu ended his first interview with the magazine, saying &#8220;Africa is a challenging continent; you fight for water, you fight for food, you fight for shelter. We compete by nature, so it&#8217;s always difficult but we don&#8217;t always know it is difficult because we have a spirit of survival. Here at Oando, we deliver on the tough things.&#8221;
Fast-forward to 2014, it seems that Tinubu still has that philosophy.
Standing in the lofty hallways of the university, dressed in denim jeans, crisp white shirt, dark-colored suede blazer and his signature horn-rimmed glasses, one could have easily mistaken Tinubu for a professor; fashionably modern but unassuming even though he sits at the helm of a $1.7-billion energy conglomerate.
During the chat with FORBES AFRICA, Tinubu discusses his company’s acquisition of the Nigerian upstream oil and gas business of ConocoPhillips, an American multinational energy corporation, in a $1.7 billion transaction.
“We were looking to acquire a company that was three times our size. We had to do several rounds of fundraising, which we successfully did. We did a rights of issue first, then we did a private placement, and then we organized a corporate facility. We had about five or six work series running simultaneously in an environment where we were deemed not to be able to do the transaction because anybody wanting to do a $1.5 billion or $1.7 billion transaction in such a short space of time is unheard of. Finance is still a challenge; it’s always been a challenge in Africa.”
The London-trained attorney-turned oil baron is known for being innovative in identifying funding opportunities from across the globe as well as from different classes of institutions. In 2012, Oando’s upstream business, Oando Energy Resources, became the first Nigerian indigenous company to be listed on the Toronto Stock Exchange with a market capitalization of $184 million.
His company started off as a trading company in oil and gas. It then went into downstream marketing, where they filed registration and diversified into gas, built three different gas fire systems, 130 kilometers of pipelines went into the services industry and now they are finally in the upstream sector.
“Our ultimate goal was to diversify our business to the upstream — exploration and production of oil and gas — because there is a substantial amount of profitability that exists and there’s an incredible value that we can add towards our indigenous participation in our oil industry.”
Tinubu explains that Nigeria is producing around 2.3 million barrels of oil a month but should be producing 4 million barrels. He also says that 65% of the reserves are on land but most of the focus is offshore because of the better return it offers.
“It is not unrealistic for us to build a $10 billion exploration and production indigenous company. When we started 20 years ago, we had no money. Today, we are probably an enterprise of $3.5 to 4 billion and by the time we complete this acquisition we will be around $6 billion and that is with zero equity.”
This is the result of delivering on the tough things.

The Nigerian  Oil Baron  Buying Up America

Archel Bernard sits on a bar stool in the middle of her little boutique in downtown Monrovia as a handful of customers drift in and out. Pieces of West African lapa hang over wooden ladders and colorful African-Western fusion designs sit on either side. A sign beside the counter that is made up of bamboo stakes reads ‘Life is Too Short to Wear Boring Clothes’.
The 25-year-old designer and businesswoman moved from Atlanta in the United States (US) in 2011 to her family’s hometown for a job at the government’s oil corporation, and now moonlights as a fashion designer in her spare time. Bernard established a fashion label called ‘It’s Archel’ and set up a shop called Mango Rags in downtown Monrovia, with her business partner Tania Abraham, who also grew up abroad, mainly in the United Kingdom. The shop celebrated its first anniversary in February and is among a small number of boutiques specializing in contemporary African designs, in a country where small fashion businesses are just beginning to emerge over a decade after the civil war, when shopping for clothes was a luxury many could not afford.
Mango Rags, now a polished little shop located in Bernard’s grandfather’s compound that was formerly a car garage, had less glamorous beginnings. Bernard would chug around the city in a white pickup truck driven by her mother Brenda Bush, a producer and writer for CNN, with a tape measure and notebook into which she would jot down her customers’ measurements. Building up a collection of tailors from the workshops spread throughout the city, she dropped off fabric and sketches of designs in between working her nine to five job producing multimedia for the National Oil Company of Liberia (NOCAL). Bernard began to save money to open and fit the shop; now with a steady stream of mainly expatriate customers, she is looking to expand.
Born and raised in the US, but always identifying as Liberian and African, Bernard grew up in Atlanta, one of the few black kids in her community of Marietta.
When her mother did carpooling, she dressed in funky African clothes and head wraps.
“Can you dress like the normal mums do?” she had asked her, but later grew to appreciate her style. Named Archel, after her father Archie (a cultural quirk in Liberia), few of her schoolmates could pronounce her name, and so her label is ‘It’s Archel.’
When she was 16, Bernard returned to Liberia after the war to visit her grandfather, a businessman who had stayed throughout the 14-year civil war, despite the family’s insistence that he leave.
“When we landed you could have fried an egg on the runway because there was nothing. It was just a stretch of huts and then you approach the city and there are more concrete structures, but it’s still not America,” says Bernard.
She says the government offers few incentives for young educated Liberians to return, but chooses to stay because she wants to help change Liberia, and transform from a chronic charity case to a ‘place to be’ in Africa.
Now a Liberian returnee, self-described “third world socialite”, designer and government worker, Bernard has capitalized on her social networks, family connections and sense of style to build up her business in a climate that is challenging for entrepreneurs and where a fashion scene is fledgling. Three fashion weeks have been held within the past five years, with the most recent being Monrovia Fashion Week that was held in December, and only five designers have boutiques throughout the city.
“I still kind of feel like a fraud in this; I never went to fashion school,” says Bernard.
Most of the local designers haven’t studied fashion and draw on West African lapas and traditional fabrics and the flamboyant Liberian style as inspiration.
“Liberians really like to dress, they always want to have the nicest thing on,” she says.
Bernard’s main buyers are expatriates; she wishes she had more Liberian customers, but a strong bargaining culture coupled with a lack of respect for intellectual property make things difficult.
Like many Liberians who lived in exile with their families in the US during the war, Bernard returned to her family’s homeland in search of opportunity. With only one subject left to complete of her Science Technology and Culture degree at the Georgia Institute of Technology, Bernard decided to head home to Liberia to work in the local media. She harbored dreams of being Liberia’s Oprah and wanted to create a lifestyle series that focused on the more positive side of the nation that would air on local television stations.
Liberia wasn’t quite ready for a ‘queen of talk’, so instead Bernard worked for Monrovia’s controversial former mayor Mary Broh, and presented updates about the Monrovia City Corporation’s work through short broadcasts, and dressed up in African-inspired fashion. One day, Bernard went to her tailor to pick up a dress she had designed for a show and found the designer both wearing it and stitching it together for another customer. She decided to go out on her own and founded her label ‘It’s Archel’.
While Bernard says Liberia has offered her great opportunities that wouldn’t be available in America, she must juggle the business and a full-time job and has found it impossible to export her clothes due to the high shipping costs. Expanding her business beyond Liberia’s shores still poses a major challenge as it does for most Liberian businesses.
“We can’t be global if it costs so much. People are not going to see the point in paying so much for a little piece from Liberia. We used to make cigarettes, we used to make cans for the goods we made here. We are so small scale here,” she says.
Chid Liberty, the founder of Liberty and Justice, Africa’s first fair-trade-certified apparel manufacturer says that although the business climate is improving, lack of access to finance and the presence of “small manufacturers that can produce international quality” remain ongoing challenges for Liberian designers and the expansion of clothing manufacturing.
“I’m actually quite proud of the job Liberia is doing to make things better but we have a long way to go,” says Liberty.
Liberia’s economy is a concession-based economy with natural resources such as rubber and iron ore making up the majority of its GDP. Critics argue the government has done little to move the nation’s economy from the old plantation style model that has dominated throughout its history.
While signs of change are visible in Monrovia, new shops and office complexes have been constructed, roads repaired, the city is a shadow of the one Bernard’s parents grew up in. Access to steady electricity and running water comes at a high price and many buildings stand in a state of disrepair.
The Wealth of Liberia, a short film shot in the 1970s during the rule of President William R. Tolbert, depicted an image of modern Monrovia and industrial development – factories manufacturing paint, cigarettes, soap, windows and cement – a place where tourists flocked and the Liberia in which her parents grew up. While Bernard acknowledges the major developmental challenges ahead for one of the world’s poorest nations and is concerned about the capacity of her business to expand beyond Liberia’s borders, she is confident she can play a role in changing the image of the small nation and first independent republic in Africa.
Inspired by Louis Vuitton’s partnership with iconic alcohol brands Moët Hennessy, Bernard hopes to create a small sewing shop and African cane juice bar in the room next door.
She also has aspirations of going global and sending Mango Rags stores to Brooklyn, Cape Town and even Maui and develop a range for Swedish multinational retail giant H&amp;M and take Liberia to the world.
“We’re still dreamin’ and working,” she says.

What Do You Do If You Can’t  Be Oprah?

Governments all over the world lose billions in revenue from corporate tax evasion every year. In many instances, citizens in a country pay a proportionally higher rate of tax than multibillion dollar companies.
Despite this being a global pandemic, Africa suffers more than most.
While delivering his Nelson Mandela lecture in Johannesburg, Sudanese-British mobile communications entrepreneur and billionaire, Mo Ibrahim, said more money is lost from multinationals not paying tax, through what he calls fancy accounting, than gained from aid.
“Physics and numbers don’t lie, but people do,” he says.
The continent is blessed with resources: Oil in Nigeria; gas and mineral reserves in Botswana; Angola, Ghana, and South Africa; the Democratic Republic of Congo has diamonds and cobalt; Mozambique has natural gas. These resources alone could lift millions of Africans out of poverty.
Former United Nations secretary general, Kofi Annan, wrote that the continent loses a huge amount of money from the use of shell corporations, offshore companies and tax havens by multinationals which often divert their profits.
But Dylan Buttrick, an associate at Norton Rose Fulbright South Africa begs to differ—slightly.
“It is important to understand the distinction between aggressive structures that facilitate tax evasion, and corporations that have tax efficient structures as a result of tax planning. In a world of increased globalization and multinationals, offshore structuring and tax planning is to be expected and remains legitimate,” says Buttrick.
The lack of infrastructure and resources makes it difficult for tax authorities to track payments. Revenue authorities would benefit from more sophisticated collection systems and processes that would help these authorities in enforcing compliance.
According to The Elders, an independent group of global leaders, transfer pricing—the practise of shifting profits to lower tax jurisdictions—cost Africa $38.4 billion every year, a number which Buttrick says is difficult, if not impossible, to quantify.
He says in recent years, African authorities have increased their focus on compliance with transfer pricing.
Buttrick further says the practise in the market is to ensure that transfer pricing policies comply with the South African tax laws, this despite significant chances in recent times, leading to a perceived uncertainty in some circles.
“Most multinationals do not indulge in invasion, i.e. fraudulent reduction of their tax, but may reduce their taxes in a particular jurisdiction through the use of legitimate tax planning tools, but beyond what certain politicians or even the public may deem appropriate,” says Buttrick.
Buttrick says from an exchange control perspective, South Africa’s banking and reporting system is fairly sophisticated and cross-border payments are easily monitored. The inflow and outflow of capital from the country will need to comply with exchange control regulations.
The G20 plans to fight international tax evasion by multinational companies. They will exchange tax information and support the Organisation for Economic Cooperation and Development (OECD) in its plans to prevent multinational companies from avoiding tax by moving profits across borders. The new rules would force companies to pay tax in the countries where they make their money, instead of where the tax rate is the lowest.
Companies like Google, Apple, Amazon and Starbucks are reported to have perfected the art of using loopholes within tax regulations. MercoPress reports that these firms argue that they are doing nothing illegal and have a duty to shareholders to minimize tax payments to maximize profits.
The OECD says that some of the existing tax rules, created in the 1920s, were designed to avoid double taxation of companies operating in more than one country. But this is haunting the industry nearly a century later as these same rules are being used to create double non-taxation.
The G20 leaders agreed to an unprecedented deal to share information on individual taxpayers. They plan to start exchanging information on tax matters among G20 members by the end of 2015.
David Cameron, the British prime minister, says the new tax rules state that only advanced nations will sign on the deal, but it’s important that developing countries participate in sharing tax regulations.
Reforming the outdated global tax framework needs to occur, with governments across the globe working together. Regardless, one question still bothers me: should multinationals be taxed on the basis of where they are doing business or on the strength or weakness of their lawyers?

Tag: Oil

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