IPSA News, Events & Articles
News & Events

Africa Commercial Insights, Issue 9

Summary:

  • Senegal: A new petroleum code for 2017
  • Morocco: AU bid aims to cement Morocco’s position as North Africa’s regional economic hub
  • Angola: Banks’ bailout request highlights fragility of the Angolan economy

For more information on IPSA’s Africa Services, click here.

Details:

Senegal: A new petroleum code for 2017 

The Issue: The Senegalese government is in an on-going consultation process to reform its 1998 Petroleum Code. The code governs the prospecting, exploration, exploitation and transportation of hydrocarbons, as well as the fiscal regime of those industries operating in Senegal. This move is part of a broader effort by President Macky Sall’s administration to develop and capitalise on the discovery of significant offshore oil and gas fields within the last few years. The Senegalese economy, which up until now has been underpinned by agriculture, has escaped largely unaffected from the commodity price slump that has affected much of Africa and is expected to grow at over 6% this year. Wary of the “oil curse” experienced by many other African jurisdictions the Senegalese civil society has been vocal in its effort to ensure the country does not suffer the same fate.

The Insight: According to a senior diplomatic source in Senegal, expectations are that the new Petroleum Code will be in place by the second half of this year. Whilst a reformed code will bring with it new compliance requirements – likely including tax reform, environmental regulation and employing local workers –  IPSA’s source stated these are unlikely to veer far from the conditions in which companies operate for other regional jurisdictions. The reason is that Senegal is an Extractives Industries Transparency Initiative (EITI) country candidate and is in the process of becoming a compliant country. Whilst civil society and local and international NGOs will be included in the reform process, Senegal is keen to consolidate its credibility with public and private partners and is unlikely to adopt stringent conditions on oil firms as it attempts to develop a nascent industry. This will be in spite of protests over the extent to which local people will benefit from oil and gas production. The primary focus is on transparency and tackling corruption. President Sall already suffered an embarrassment when it emerged his brother, Aliou Sall, secured a 90% stake in two offshore fields in 2012. Without a more transparent tendering process such deals will continue to fuel speculation of illegality and nepotism. One of the many political challenges Sall’s administration will face moving forward is convincing the electorate that they too will benefit from Senegal’s lucrative oil and gas prospects.

Morocco: AU bid aims to cement Morocco’s position as North Africa’s regional economic hub

The Issue: This week the Moroccan parliament ratified the AU Constitutive Act, which represents one of the final steps in the country’s efforts to be readmitted into the African Union (“AU”). Morocco requires the support of 28 AU member states to rejoin, and its foreign minister, Salaheddine Mezouar, currently maintains it has secured the support of at least 40 African Union states. With its readmittance looking likely, questions nevertheless remain over the Kingdom’s ultimate priorities. Whilst the country has adopted a strong pan-African trade and investment focus in recent years, sceptics fear it will use its AU membership to renew lobbying efforts against POLISARIO Front, and press for the expulsion of the Sahrawi Arab Democratic Republic (SADR).

The Insight: While it is almost certain Morocco will use its AU membership to push for the resolution of the Western Sahara matter in its favour, IPSA assesses that much of the impetus behind rejoining the AU is nevertheless focused on its pan-African foreign policy ambitions. This is showcased by the recent announcement of a joint venture with the Nigerian government to build a new 2,500 mile gas pipeline from Nigeria to Europe via Morocco, a signed deal to build a USD $3.7 billion fertilizer plant in Ethiopia, as well as a number of newly signed bilateral and multilateral trade agreements with several African nations, such as Senegal and Tanzania. Morocco’s commitment to the African market and intra-African relations appears genuine and would only be strengthened by the country’s admittance into the AU. A well placed diplomatic source in Rabat noted that Morocco sees itself as the bridge between EU and African markets – something it wants to exploit – and has already expressed a keen interest to be prioritized amongst African countries for a Brexit trade deal with the UK. IPSA anticipates that as Morocco’s sphere of influence continues to grow on the continent, particularly should it be voted into the AU, its position as a regional platform for businesses and investors looking to expand both into and out of Africa will also increase. This is complemented by its relative economic and political stability, particularly when compared to many of its North African neighbors.

Angola: Banks’ bailout request highlights fragility of the Angolan economy

The Issue: Angolan banks appealed to the Dos Santos administration to put together a bailout package that will address the country’s growing liquidity crisis. A global slump in commodity prices has deprived Angola of dollars, and significant devaluation of the Kwanza, Angola’s national currency has led to strong inflation in a highly import-dependent country. Financial assistance could come directly from the public purse or through a shared platform between all of Angola’s 28 operating banks. Chairman of the Angolan Banks Association, Amilcar Silva, warned that without some sort of public support package the entire banking system could be compromised.
The Insight: This would not be the first time the Dos Santos administration has had to respond to a banking crisis. In 2014, Banco Espírito Santo Angola (BESA), one of the country’s largest lenders, collapsed after excessive lending and the accumulation of billions of dollars in bad debt – an economic crisis from which the country is still reeling. The latest bailout request is further indication of the severe stress the Angolan economy has faced since a fall in commodity prices in 2014. Oil alone accounts for nearly all of Angola’s foreign exchange earnings, and its centrality to the Angolan economy is part of the reason Isabel Dos Santos was brought in to reform the troubled state oil firm, Sonangol. Proposals to restructure the firm into three separate companies are yet to materialise however, and the oil firm’s debt continues to climb – in October 2016 the company owed its creditors over $1bn. Sources IPSA spoke to within Angola’s financial services sector assessed that were Angolan banks to go into administration, it would be the savings and deposits of foreign investors that would be most exposed, while the assets of MPLA and Angolan business elites would invariably find themselves protected. Given the clear fragility of the Angolan economy, those with in-country economic interests and connections to Angolan banks should follow the development of this story closely.

 

 

 

Comments are closed.