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African Business 2021

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The 2021 edition of African Business is the second issue of this useful guide to business and investment on the continent. The positive reception accorded the inaugural edition in 2020 was encouraging and we are optimistic that this publication and future issues will continue to meet the need for timely and relevant information in an exciting time for African business. African Business 2021 has articles on recent trends plus overviews of the key economic sectors on the continent and regional and country profiles. There is an in-depth analysis of the implications for trade on the continent of the introduction of the African Continental Free Trade Area agreement (AfCFTA) and an article on the growth and importance of exploration for minerals, gas and oil. Namibia and Botswana feature in an article on how cooperation can drive economic growth and an opinion piece focusses on the role that digital technology can play not only in the financial sector, but in the driving progress in a broader sense. Global African Network is a proudly African company which has been producing region-specific business and investment guides since 2004, including South African Business and Nigerian Business, in addition to its online investment promotion platform:


SPECIAL FEATURE The Gamsberg open-pit and concentrator project is being developed by Vedanta Zinc International as part of a 0-million investment into South Africa. Credit: Kevin Wright/Vedanta Zinc International Baxter noted that the Johannesburg Stock Exchange (JSE) has just 10 emerging/exploration mining companies listed, against 705 on the ASX and 1 193 on the Toronto Stock Exchange. Access to reliable data is an area where a lot of work has to be done. The extent of digitisation of resources in Africa is low: this presents a challenge and an opportunity. There is great potential to explore exponentially larger areas with airborne geophysics and drones. Other risks to investment in African resources are primarily related to governance. The “Africa 2020 Mining Outlook” published by Investing in the African Mining Indaba points to three countries where “resource nationalism” is on the rise, the Democratic Republic of Congo (DRC), Swaziland and Zimbabwe. In the DRC this involves trying to seize operators and preventing exports. The Fraser Institute’s global “Annual Survey of Mining Companies” released in 2020 includes five African companies in the bottom 10 when it comes to the perceptions of investors. The DRC and Zimbabwe feature again, as do Tanzania, Guinea and Zambia. Another area where Africa can do better is spending on infrastructure. According to Deloitte only the Republic of the Congo, Equatorial Guinea and Gabon are regularly spending 30% of their GDP on infrastructure, a figure regarded as the minimum for development to advance. In terms of tackling corruption, the adoption by 24 African countries of the Extractive Industries Transparency Initiative (EITI) is a good sign, and Deloitte lists Cape Verde, Rwanda, Ivory Coast and Senegal as places where efforts against corruption are paying off. Gas markets expanding Africa has 7.1% of the world’s proven oil reserves and 7.5% of global gas reserves. China recorded a 15% rise in natural gas consumption in the seven years to 2017. Nine African countries are developing liquified natural gas (LNG) facilities. There are 21 African countries where oil is among the top three commodities exported. Nigeria earned .6-billion from petroleum exports in 2018. Discoveries of natural gas (estimated at 180 trillion cubic feet) off the coast of Mozambique have spurred massive infrastructure building and encouraged further exploration. Four LNG plants are under construction. In Nigeria, the -billion Dangote refinery and petrochemical complex is expected to be working in 2021. The East African Crude Oil Pipeline (EACOP) will be able to carry 216 000 bbl/d of crude oil 1 443km² from an oilfield in Uganda to the Tanzanian port of Tanza. Big mergers have been a feature of the LNG sector AFRICAN BUSINESS 2021 18

SPECIAL FEATURE in recent years as companies prepare to deal with greater volumes. Shell and BG Group merged in 2016, Total bought Engie’s LNG division in 2018 and recently acquired Anardarko’s share in the Mozambique project for .9-billion (Norton Rose Fullbright). Transnet, the South African state-owned entity that runs railways, ports and pipelines, is investigating using its pipelines for inland gas transmission and “virtual” LNG pipelines. The World Bank is a partner in the -million study. The probability that national utility Eskom will be broken up into three units (generation, distribution and transmission) will have a big impact on the gas market and South Africa is in the process of developing a Gas Utilisation Master Plan. The country’s Integrated Resource Plan (IRP) anticipates 6 380MW of installed capacity (or 8.1%) to come from gas by 2030. The biggest news for South Africa came in 2019 and 2020 with the announcement by Total and its partners of finds of gas condensate off the coast of Mossel Bay. The block, in the Outeniqua Basin 175km off the southern coast, covers an area of about 19 000km² in water depths of 200-1 800m. If Total goes ahead, the PetroSA GTL refinery at Mossel Bay (Mossgas) could be revived and the gas market in South Africa would get a massive boost. Petroleum Agency SA (PASA), which encourages exploration and regulates the oil and gas industry, has noted the significance of international oil companies committing to exploration off South Africa’s coast. Increased confidence by such companies can only lead to growth in the industry, and with the massive gas finds in the Rovuma Basin off Mozambique, there are sure to be more companies interested in South Africa’s potential. In addition to adjudicating on coastal fields, the agency has awarded coalbed-methane-gas exploration rights in KwaZulu-Natal and natural-gas exploration permits in the Free State. More than 90% of Africa’s gas production comes from Algeria, Angola, Egypt, Libya and Nigeria (Deloitte). Countries with great potential in oil and gas include Tanzania, Uganda (which will start producing oil in 2021), Ghana (the continent’s newest oil producer), Gabon and the Republic of Congo, which has joined OPEC. Mining Africa’s mineral resources are vast. In several categories, Africa is either the global leader or it has the second-biggest reserve. These include cobalt, phosphate rocks, bauxite, industrial diamonds, platinum-group metals (PGM), zirconium and vermiculite. Iron ore, copper, nickel, zinc, uranium, manganese, vanadium, ilmenite and gold, the continent’s biggest resource, are also found in large quantities. The mining sector is responsible for 90% of the exports of the Democratic Republic of Congo (DRC) and the figure is about 80% for countries such as Botswana (which has gold, nickel, copper and soda ash in addition to its rich diamond resource), Guinea (gold, diamonds, alumina and bauxite), Senegal (phosphate and diamonds) and Sierra Leone (diamonds). Ghana exported gold to the value of .3-billion in 2017, which was just less than half of the total value of exports, including crude petroleum. South Africa’s top three exports (out of a total of 8-billion) were gold (.9-billion), diamonds (.8-billion) and platinum (-billion) (OEC). Global demand for copper is rising because of its versatility and relevance for energy storage, renewable energy and electric vehicles. In 2019, more than 20-million tons of copper from new sources was mined globally. The Central African Copperbelt (encompassing parts of DRC and Zambia) increased mined volumes to 2.2-million tons in 2018, more than twice the 800 000 tons mined in 2008, but developments in Zambia in particular make major investments unlikely in the near future. Serious debt problems have led to the government targeting mining companies for extra revenue. The critical metals in new battery production are lithium, graphite, cobalt and nickel. A research body estimates that the global lithiumion battery market could be worth as much as -billion by 2024 (Transparency Market Research). The DRC and countries such as Madagascar, Morocco, Mozambique, Namibia, Zambia and Zimbabwe all stand to benefit from this boom. ■ 19 AFRICAN BUSINESS 2021

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