Libyan Oil Exports Set To Resume Following Rebel Takeover

In the most recent developments of Libya’s protracted civil war, rebels from the east of the country seized two of the country’s largest oil terminals, Zueitina and Ras Lanuf. Despite fears of an upturn in violence following the events, an agreement was reached to resume exports from the captured oil ports. The consequences are likely to be positive for Libya, as oil remains its most valuable commodity export. Globally however, concern for a glut in supply has seen Benchmark Brent crude futures fall to a two-week low of $45.52, with the resumption of Libyan exports identified as a key reason for the downturn.

 

Libya’s oil production had fallen to record lows since the toppling of the Gadaffi regime in 2011, as the country descended into civil war. At its peak, Libyan oil fields were producing 1.7m barrels per day, before falling to around 270,000 p/d in 2016.  The seizure of Zueitina and Ras Lanuf by forces hostile to the UN-backed Tripoli government of national accord (GNA) was symbolic of the continued battle for not only control of the country’s oil production, but overall political control.

The faction responsible, General Khalifa Haftar’s Libya National Army (LNA), has gained increasing support across eastern Libya following successes against extremist forces, such as Daesh. The capture of the oil fields has been recognised as a further extension of the LNA’s power, as the incumbent GNA has been unable to stem their advance whilst caught up in their own battle with Daesh closer to the capital Tripoli. The agreement between General Haftar and the National Oil Corporation to resume exports can be seen as part of the wider struggle for Libya. As argued by International Crisis Group’s Senior Libya analyst  Claudia Gazzini, General Haft could ‘potentially cast himself as the person who allowed Libya’s oil to flowagain’.

http-%2f%2fmarkets-ftWhat may be good for Libya is likely to have wider consequences for global oil prices. Downward pressure on Brent crude from an increase in production in not only Libya, but also Nigeria and Iran, is already being felt on the international markets. Libyan production, if necessary repair works are completed, could rise once more to around 900,000 barrels, whilst the ExxonMobil have moved to export Qua Iboe crude from offshore sites in south-eastern Nigeria for the first time since July. It has been two years since global oil prices were last above the $100 per barrel mark, as forecasters predict oversupply will continue into the foreseeable future.

 

 

Libyan Oil Exports Set To Resume Following Rebel Takeover

Brexit and Africa: How will the referendum result affect the continent?

It has been over a month since the United Kingdom voted to leave the European Union. Britain’s relationship with the world is set to change, none more so than with Africa; the continent has already been ‘downgraded‘ by the Theresa May government. Economists have declared Africa as a potential victim of the vote, but is it all doom and gloom?

 

Although the affects of Brexit on the UK economy are still far from crystal clear, recent developments indicate significant concern in the financial sector. The Bank of England this week reduced interest rates to an all time low of 0.25%, whilst house prices continue to fall.

The heavyweights of the banking industry have unanimously provided analysis forecasting recession, with Credit Suisse amongst those predicting the loss of up to 500,000 jobs in the British economy. Whilst much of the analysis has covered the affects of Brexit upon the wider European economy, little attention has been given to the wider impact of the vote upon developing nations. The potential impact on Africa in particular has been somewhat neglected by researchers, politicians and journalists alike.

Those who have spent time focusing on Brexit and Africa have mostly been divided. Economists have pointed to the significant slow-down in economic growth across sub-Saharan Africa, reaching just 1.4% in the first half of 2016, the slowest pace of growth in several decades. In particular, Nigeria, South Africa and Angola, the leading lights of the African economy, have experienced economic difficulties. Pre-existing economic difficulties are predicted to worsen across the continent due to uncertainty created by Brexit, as weakened global demand could cause key commodity prices to fall further. Other sources of inward investment, such as London-based capital investment flows and even the number of British tourists visiting the continent, are expected to fall.

In contrast, Edward George writing for African Arguments has pointed to the ‘huge opportunities’ presented by Brexit. Over the next century, Africa is set to be the world’s fastest growing region, coinciding with a growth in  purchasing power, urbanisation, and demand for goods and services. George suggests that the post-Brexit strategy of courting the world’s largest economies is resulting in a missed-opportunity. Africa has slipped down the list of priorities and been ignored by key policy makers.

The private sector has indicated that it could take the initiative, as retailers are set to increase the quantity of fruit, vegetables and other produce imported from Africa following the UK’s vote to leave the EU. UK businesses are expecting to explore untapped markets prior to the agreement of new tariffs on non-EU goods. Kenya in particular could benefit from a reduction of tariffs, as a quarter of its exports, including cut flowers and black tea, end up in the UK market.

Moving forward, Britain requires a strategy to deliver trade agreements beneficial for both Africa and the UK. Currently, the UK accounts for just ‘3.5% of Africa’s total trade, around half the level of France’ despite the positive attitude towards Britain across the continent. A fairer, mutually beneficial trade agreement is possible, replacing the much criticised EU Economic Partnership Agreements. However, a concerted effort on the behalf of the British state is needed – moving Africa back up the list of priorities.

Brexit and Africa: How will the referendum result affect the continent?

Zimbabwe, Economic Instability and the IMF

The latest period of economic turmoil in Zimbabwe could not have come at a worse time for 92 year old President Robert Mugabe. Economic hardship has forced protestors out onto the streets of Harare in violent clashes with police, whilst an internal political struggle over who should succeed Mugabe continues. Severe cash shortages faced by the ruling Zimbabwe African National Union – Patriotic Front (ZANU-PF) government has forced rapprochement with international financial institutions, as new conditional loans from the International Monetary Fund (IMF) are sought for this coming September. Yet several questions, including whether Zimbabwe can meet the required IMF criteria for the loans, remain unanswered.

 

Acts of defiance and violent protests are rare in Zimbabwe. The hegemonic presence of Robert Mugabe may have dissuaded millions from protesting in the past. However, clashes on 4 July are the latest indication of the changing material conditions within the country, as protestors in the eastern suburbs of Harare – angered by  ‘police harassment’ – launched stones at riot police. This incident was the latest in a string of recent political disturbances. Last Friday, a warehouse was burnt on the border between South Africa and Zimbabwe in protest over a government ban on certain imports. Doctors and other public sector staff have also planned to strike in protest over the late payment of June salaries.

Zimbabwe’s economic instability has been assigned to, amongst other things, the devastating effects of climate change in the region. In May, The IMF pointed to ‘drought, erratic rains, and increasing temperatures, [which] have reduced agricultural output and disrupted hydropower production and water supplies.’ Economic analysts have pointed to potential shortages of food and fuel in particular.

Mugabe’s government has done little to ease the worries of the population. The recent ban on imports is likely to accelerate shortages and inflation, whilst the climate for foreign direct investment remains distinctly unattractive. Rapprochement with international financial organisations has meant a decline in anti-Western rhetoric from leading political figures, as Zimbabwe has been forced by circumstance into asking for a loan of over $1 billion from the IMF. Zimbabwe had been praised for its reforms and cuts to the budget deficit during 2014 and 2015, however, the conditionality of international financial agreements has raised questions over whether the loan will materialise. In particular, there are concerns over the lack of transparency in government finances and the already significant national debt.

A crucial component of ZANU-PFs strategy for meeting the conditions of the potential IMF loan is to relieve financial pressures in the public sector, particularly in the civil service. However, as argued by Liesl Louw-Vaudranradical cuts would be political suicide; the swollen civil service following the 2013 elections was a way of rewarding those loyal to the ruling party. The fear of loosing the support of important officials at a time of infighting within ZANU-PF adds to the political instability of the country.  The reformist wing led by Vice-President Emmerson Mnangagwa and the ancien régime led by Mugabe and his wife, Grace, are seemingly distracted by the battle for succession, as the country descends into economic uncertainty. Political questions, rather than economic, will continue to shape Zimbabwe’s immediate future.

Zimbabwe, Economic Instability and the IMF

Kenyatta Government Bans Political Protest Ahead of 2017 Election

Following protests that led to violence in several cities across Kenya, the government of Uhuru Kenyatta has banned all “unlawful demonstrations”. Ahead of the elections scheduled for 2017, tensions are already rising in fear of a repeat of the violence that marred the 2007 election.

 

For the past several weeks, opposition parties have turned Mondays into a day of protest in Kenya. The electoral commission, which is deemed deeply corrupt by the opposition led by former Prime Minister Raila Odinga, have been the focus of the protests. Odinga has maintained that the electoral commission is bias towards the ruling Kenyatta government, calling for the resignation of current officials and the imposition of a new, neutral commission. The former Prime Minister does have grounds for concern; the electoral commission failed to facilitate the transfer of power when Odinga seemingly won a majority in 2007, triggering widespread violence between the supporters of Odinga’s predominantly ethnically Luo party, and the opposing mainly Kikuyu party of Kenyatta.

Recent protests had been mostly peaceful, including those on Monday in downtown Nairobi. However, in Mathare in the north of the city, Odinga supporters erected barricades in the streets and threw stones at vehicles. In Kisumu on the shores of Lake Victoria, police battled with protesters; 50 people were injured and at least two had been killed. According to witnesses, police had opened fire on the crowd, shooting a five-year old boy in the back and leaving him in a critical condition.

The moves to ban “unlawful protests” are unlikely to help matters. Odinga’s party has condemned the action of the government and said it will intensify calls for a change to the electoral commission. The ban also contravenes the Kenyan constitution which was reconstructed in 2010 to allow for greater civil liberties. But, from the perspective of the Kenyatta government, the protests are threatening to derail the Kenyan economy at a time of relative prosperity. It is one of only a handful of sub-Saharan African economies growing, with a stable exchange rate and benefiting from the low price of oil. According to one investment adviser in Nairobi, Aly-Khan Satchu, the country loses the equivalent of $5 million each day the protesters take to the streets; mainly due to the closure of businesses and the damage to property.

As the 2017 elections approach, things are unlikely to improve without intervention on both sides of the political divide. Following the violence in 2007-08, Kenyatta and Odinga have a responsibility to keep their own supports in check and to keep Kenya and Kenyans safe from violence.

 

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Odinga supporters in 2008
Kenyatta Government Bans Political Protest Ahead of 2017 Election

Does China’s Relationship With Sub-Saharan Africa Need To Be Reassessed?

The China Africa Research Initiative at the Johns Hopkins University has over the past week released its data concerning Chinese investment in Sub-Saharan Africa.[1] The figures show the sum of Chinese loans to be less than commonly assumed, whilst demonstrating that the “Angola Model”, using commodities as collateral, account for only a third of the total loans.

 

China’s investment in Africa has over recent years received much attention, and deservedly so. China is now by far the largest donor to sub-Saharan Africa outside of the OECD countries, funding diverse development projects in agriculture, education, economic infrastructure and extractive industries. Chinese investment is nothing new, as the relationship with states such as Zambia dates back to the 1960s and the construction of the Tan Zam railroad in part to facilitate China’s access to the Copperbelt. In the context of the Cold War, Africa provided China with an opportunity to increase its political power in a time of tension with the Soviet Union.

However, since the early 2000s, Chinese loans have dramatically increased to sub-Saharan Africa. The data provided by the China Africa Research Initiative demonstrates that the Chinese financial commitment to the region has grown from $0.2 billion in 2000 to almost $17 billion in 2013. Between 2000 and 2014, ‘the Chinese government, contractors, banks and contractors extended $86.9 billion worth of loans’ to sub-Saharan Africa. Although the findings grab the headlines, commentators argue that the figures show Chinese investment in Africa is actually far less than commonly reported.

The research, based upon 1,123 reports, demonstrates that only 56% of the loans materialised and are being used, whilst the rest have either been cancelled or turned out to be mistakes. Where the loans go also makes for interesting reading. Oil-rich Angola receives by far the largest proportion of Chinese investment ($21.2 billion) and are almost exclusively based upon oil as collateral. Yet elsewhere, including the second largest benefactor Ethiopia, Chinese investments have avoided the use of commodities as collateral. Despite being resource-poor, Ethiopia has been deemed a stable investment due to political stability and a growing tertiary sector. Only a third of the investments have followed the so-called “Angola model”. Political alignment between the Chinese and the two largest recipients of the loans has gone hand in hand, with Ethiopia and Angola both following Chinese approved state-development models.

Whilst China’s investment in sub-Saharan Africa is less than previously thought, the research demonstrates that development assistance loans will continue to grow. The Export-Import Bank of China has not yet overtaken the World Bank as the largest provider of development assistance loans to Africa, it is scheduled to do so in the coming years.

africa-china-trade-007
source: http://www.diplomaticcarrier.com

 

[1] All information and statistics for this piece are drawn from the China Africa Research Initiative at the Johns Hopkins University. For the report see – https://observingafrica.files.wordpress.com/2016/04/77387-chinaafricaloansbriefingpaper_saiscari.pdf

Does China’s Relationship With Sub-Saharan Africa Need To Be Reassessed?

Fears of Islamist Attack in Ghana Increase Following Leaked State Document

An internal state document has been leaked to the press in Ghana detailing concern over possible attacks from Islamist insurgents. Security fears have increased in the country since Ghana’s neighbour, Côte d’Ivoire, was targeted by Al-Qaeda in the Islamic Maghreb (AQIM) last month.

 

The document reports that evidence had been passed on to the country’s National Security Council Secretariat (NSCS) showing Ghana and Togo to be the next targets in the region. The information is thought to have been extracted following the interrogation of the man suspecting of orchestrating the attacks in Côte d’Ivoire during March 2016, where 18 people were killed at a beach resort. The memo called for tightened security along the northern borders with Burkino Faso, in order to prevent militants passing through the country from Mali, the origin of the March attackers.

In recent months Al-Qaeda in the Islamic Maghreb (AQIM) has notably increased its operations, committing high profile attacks in Mali in November, as well as in Burkina Faso’s capital in January 2016. On both occasions hotels frequented by Westerners were the target. Following the attack on the Grand Bassam beach resort last month, AQIM stated that the attack was in response to French operations against Islamist militants across the Sahel region. France has played a pivotal role, particularly in Mali, in containing the spread of militias since December 2012. Yet, France’s role in Africa is not without contrasting interpretations given its previous colonial status, though its recent interventions were at the behest of the Malian government and with the backing of a UN resolution.

The Ghanian President John Mahama has warned against panic in the country following the leaked document. Ghana’s status as a leading democratic and prosperous African state is not threatened to any great extent, and the country has not had any experience of Islamist attacks in the past. Intelligence sharing in the region is underway in order to tackle the threat. More is needed on the behalf of the Africa Union to combat terror and tackle instability, especially in northern Mali, where AQIM has been able to operate freely. The transnational mobility of AQIM, to which borders do not represent any serious barrier, requires intelligence sharing and joint operations similar to those seen in Europe.

The temptation in the age of global terrorism is to join the dots between the various Islamist groups operating across the Sahel and into the Middle East. AQIM is reportedly linked to Al-Qaeda in the Arabian Peninsula (AQAP), which was established in 2009 through a merger of the Yemeni and Saudi branches of al-Qaeda. Yet communications and links between groups is at best questionable. In reality, these organisations are operating in regional isolation, without the support of a joined up network. We must not simplify Islamist threats by banding together often extremely different branches of terrorist networks, which each have their different identities, causes and explanations.

Fears of Islamist Attack in Ghana Increase Following Leaked State Document

Washington Strengthens Ties With Nigeria

secretary_kerry_meets_with_nigerian_president_buhari_at_the_2016_nuclear_security_summit_in_washington_282555206418429
U.S. Secretary of State meets with President Buhari at Washington D.C. Nuclear Security Summit. Source: Wikimedia Commons

In Abuja this week, the U.S. Embassy announced a proposed increase in development aid to Africa’s largest economy to 600 million dollars over the course of 2016. The agreement is set to be part of a broader strengthening of relations between the two countries, as Nigeria continues its battle against Boko Haram with the support of the U.S.

 

The announcement followed successful bilateral meetings between Secretary of State John Kerry and President Buhari during the nuclear security summit in Washington D.C. Kerry was reportedly impressed with the actions of the Buhari government since coming to power in May 2015. The diversification of the Nigerian economy, top of Kerry’s list of priorities for economic development, has meant departing from an over reliance upon oil for export earnings. Washington has also been impressed by the president’s commitment to fighting the Boko Haram insurgency.

The U.S. already has several schemes in place to support development in Nigeria, including the U.S. Power Africa project. The programme initiated by the Obama administration has aimed to increase sub-Saharan African energy production by 30,000 Megawatts from new clean sources of power. In Nigeria alone, 6,504 Megawatts have  been generated. Education has also been high on the agenda, with development aid contributing towards schooling programmes to increase literacy, especially in the north of the country where Boko Haram has mainly operated.

U.S. assistance to tackle Boko Haram will remain conditional, with government transparency, continued economic development and enhanced business conditions all desired. John Kerry also emphasised the importance of adhering to internal human rights laws in the fight against insurgency. Under Buhari’s predecessor, Goodluck Johnathan, U.S. assistance for the Nigerian military came to a halt following claims of corruption and human rights abuses by the army. Johnathan’s failure to investigate these claims was met with criticism from the U.S. and his decision to cancel U.S. Army training of the Nigerian military for combat against Boko Haram. Since coming to power President Buhari  has hoped to regain U.S. support.

The latest economic agreements between Washington and Abuja have been seen as part of the broader strengthening of relations between the two countries following the departure of Goodluck Johnathan. Economic development in Nigeria, particularly in the northeast of the country, is to be one of the many components needed to tackle the Boko Haram insurgency.

 

secretary_kerry_chats_with_nigerian_president_buhari_before_their_meeting_at_the_2016_nuclear_security_summit_in_washington_282588394358029
Source: Wikimedia Commons

 

Washington Strengthens Ties With Nigeria

Oil in East Africa: The Pipeline Question

In the midst of continued low oil prices and geopolitical instability, competition for a pipeline to transport Ugandan oil is hotting up as Kenya and Tanzania go head to head for the contract. Resolving the pipeline route is crucial in influencing the final investment decisions of the oil companies involved.

Screenshot 2016-03-21 14.12.13
Source: Apple Maps

As presidents Museveni and Kenyatta meet today with oil executives to discuss the proposed Kenyan route to the coast, the Tanzanian option remains very much on the table. The talks in Kenya were accelerated after president Magufuli of Tanzania announced last week that the French company Total had set aside $4 billion for the pipeline through Tanzania. Total has a large stake in the Ugandan oil fields on Lake Albertine, along with the Irish company Tullow and China’s CNOOC (Chinese National Offshore Oil Company).

In August 2015, Kenya and Uganda supposedly reached a deal for the pipeline. This route was predicted to cost around $4.5 billion and would be part of the wider Lamu Port-South Sudan-Ethiopia Project (LAPSSET) to create Kenya’s second transport corridor. It also involves the construction of an extensive road network and a coal-fired power station. The proposed route would also connect the oil reserves in Kenya which has 6.5 billion barrels of its own that it wants to get to market. The Irish oil company Tullow has investments in the Kenyan and Ugandan oil fields, and has made clear its own preference for this particular route. However, the announcement last week by president Magufuli of Tanzania that Total has other intentions has caused particular concern in Kenya. Tullow and its local partner, Africa Oil, would have to foot the bill itself for the project if the Tanzanian route is decided upon.

Total has consistently voiced its security concerns about the Kenyan pipeline. Lamu, the suggested port, is not far from the Somali border and has experienced attacks from militants since Kenya entered into the conflict against the al-Shabaab. Lamu also borders Garissa county, where al-Shabaab was responsible for the brutal attack on Garissa University killing 147 students last April. Various commentators have referred to the resurgence of al-Shabaab in the region which, until recently, had been deemed to be on its last legs. The security risk, along with the sub $50 per barrel oil prices, is likely to make Tullow and Africa Oil think twice about the Kenya pipeline. Whilst these two risks continue, the pipeline is likely to be put on hold.

The other option is Tanzania. The proposed route would see Ugandan oil connected to the port of Tanga, and would employ 1,500 people directly. Magafuli hopes to get the construction started in August 2016 with the prospect of oil companies finding further oil in Lake Tanganyika that could be transported using the pipeline. If Tanzania does manage to snatch the pipeline away from the Kenyans, it would be a symbol of Tanzania’s rise to prominence as the regions largest economy. According to economists like David Ndii, Tanzania is scheduled by 2020 to have overtaken Kenya and to have an economy that is 20 per cent larger.

As discussions continue regarding the outcome of the pipeline, there are ongoing concerns over the stability of Uganda since the February elections. The largest political-regulatory risks still facing the oil industry is the development of a regional pipeline, but, since February, Museveni’s position has also been called into question. In a paper published by the Oxford Institute For Energy Studies, Museveni has been criticised for failing to counterbalance the negative consequences the industry can have on livelihoods.  The oil infrastructure plans will  displace thousands without the required countermeasures from the Ugandan government.

museveni
Campaign poster for President of Uganda, Yoweri Museveni. February 2011 – Wikimedia Commons

 

 

 

Oil in East Africa: The Pipeline Question

Angola’s President of 37 years to step aside in 2018?

Last Friday, Angolan president José Eduardo dos Santos announced he would bring his rule to an end in 2018, after what would be almost four decades in power. Whether dos Santos does stand down remains to be seen, as it is not the first time the Angolan leader has announced his intended departure. Either way, talk of his retirement is exaggerated.

President dos Santos is one of Africa’s longest-serving leaders, having led the People’s Movement for the Liberation of Angola (MPLA) government since 1979 following the death of Angola’s first president, Agostinho Neto. Chosen quietly as Neto’s successor, dos Santos has overseen the transformation of Angola into the third largest economy in Africa, dominated by the wealth generated from the state oil industry. Since the defeat of the UNITA rebels in 2002 and the assassination of Jonas Savimbi, dos Santos’ has been unchallenged internally and circumvented the  formal institutions of state.

The president’s surprise announcement that he would be would leaving “active political life” in 2018 comes in the wake of continued economic turmoil following the collapse of oil prices. Angola has been shaken to the core, with revenues down 60 per cent. Civil service salaries have gone unpaid, food prices have shot up and discontent has grown in the public sphere leading to a brutal response from the Angolan state. Critics have regarded dos Santos as responsible for the failure to convert the countries enormous oil wealth into meaningful development and the diversification of the economy away from the dominant oil industry. The richest person in Angola, the president’s daughter, is a billionaire, despite many in Angola living without electricity or access to healthcare.

Weary Angolan’s are sceptical about Friday’s announcement, as this is not the first time he has announced he wants to leave. In 2001 the president promised not to stand in the next presidential elections, only for them to be delayed until 2008 by which time dos Santos had forgotten about this pronouncement. Others are more trusting, and see dos Santos as moving to secure a successor that will protect his legacy and financial status.However at this point, dos Santos very much remains in control in Angola. Any change of leadership, in 2018 or later, remains questionable whilst the president is still alive and in the presidential palace. The 73 year-old dos Santos remains a resilient character, and may do for some time to come.

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Source: Agência Brasil, Wikimedia Commons.  

 

 

Angola’s President of 37 years to step aside in 2018?