ea investor (issue01) revised (1)

8/3/2019 EA Investor (Issue01) REVISED (1)

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EastAfricanInvesto

Exusive: EAIaks o MazarsOwen Koimburi

Winter 2011 | www.focusoneastafrica.

12 FDI 2012 Review

22 Power: The on wa forward

52 GroFin: Preparing for success

In this issueISSN 2046-8199

UK 3.00 | Uganda shs 10,000 | Kenya shs 300 | Tanzania shs 6,000 | USA $5 | Europe 4

Bringing to the world East Africas potent

10-pAgE SpEcIAl REpORt: EA REAl EStAtE


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Dear Reader,

It gives me great pleasure to

welcome you to this, the very rst issue

of EastAfricanInvestor. Many of you

will be familiar with this magazines

predecessor, UgandanInvestorthat met

with a very positive response when we

began publishing some 12 months ago.

As with UgandanInvestor, we want

to invite you to let us have your news,

views and opinions. Indeed, it was as a

result of feedback from the public that we

decided to create EastAfricanInvestor.

What you told us was that the Uganda

Investor remit, considering the very

rapid regional economic integrationprocess that is taking place in East Africa,

seemed rather limited and outdated. We

listened, and after some thought agreed,

so now you have a new magazine packed

with the same incisive, lively articles that

you have come to expect from us but

now reporting from every part of the East

Africa region.

The East Africa Community is

central to our editorial coverage, but

we also take a broader view of what

constitutes East Africa, drawing

in countries such as South Sudan,

Ethiopia, Sudan and DR Congo and our

magazine presents a number of articles

that provide a comprehensive outlook

for foreign direct investment into theregion in 2012. This is underpinned by

a conversation with Owen Koimburi

of Mazars (Kenya), an international

accountancy practice that has ambitious

expansion plans for East Africa.

We also have a focus on the regions

booming real estate sector Pent up

demand for housing and commercial

ofce space presents a huge challenge

for property developers, construction

companies, utility providers and the

nancial sector. As we report, these

challenges are being met successfully

and offer huge investment potential.

Elsewhere, we have a comprehensive

round up of the various voice-over-

internet-protocol (VoIP) offerings that

provide telecom links over the worldwide

web and Jane Bordenave examines the

pros and cons of the various services

while David Anderton looks atthe regions capital markets and the

prospects for two of East Africas most

important commodities; gold and coffee.

These stories and much more

await you as you delve deeper into the

magazine. We hope you nd reading

them both informative and entertaining,

but please write in to tell me what articles

you nd useful, or what you believe is

missing from the magazines content. It

would be particularly interesting to hear

from investors in the region, to learn of

their experiences and what we might do

to lobby for East Africa investments to be

better realised.

Edward Katende

Executive publisher

EastAfricanInvestor

Edward Katende is also the Executive

Director of Focus on East Africa

Pubisher:

Focus on East Africa Limited

100 Pall Mall,

St James,

London SW1Y 5NQ,

United Kingdom

Tel: +44 (0)20 7321 3768

Fax: +44 (0)20 7321 3738

Email: [email protected]

www.focusoneastafrica.com

Uganda:

Focus on East Africa

C/o Conrad Plaza,

Plot 22 Entebbe Road,

PO Box 21984,

Kampala, Uganda

Tel: +256 (0)772 507 200

Email: [email protected]

www.focusoneastafrica.com

Editor: Stephen Williams

Specia Correspondents:

Moin Siddiqi, Neil Ford, Adrian

Holliday, Heba Hashem, David

Anderton, Ruari McCallion,

Jane Bordenave

Business Deveopment

& Saes: Rehema Naiga

[email protected]

Creative Director: Garry Smith

Printers: Totum Solutions Ltd

comment

The information contained in this publication is verified

to the best of the authors and the publishers ability

and has been obtained from sources the proprietors

believe to be correct. However no legal liability

can be accepted for any errors or loss arising from

reliance on it. No part of this publication may be

reproduced without the prior consent of the publisher.

EastAfricanInvestor.

The environment is important to us. The EastAfricanInvestoris printed with vegetable based inks on FSC-MIX certified paper to ISO 14001 certification.

03EastAfricanInvestor


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Comment

03Pubishers wecome

Digest

06A round up of the news

11EA Oi & Gas

cover sory

FDI 2012 review

12VIEWS: Maars Owen

Koimburi

16Goodbe Europe, heo

New Word!

20New Word Order

Power

22The on wa forward

Region

26South Sudan

Agriculture

28KARI fights Ug99 threat

Capital Markets

32Divided opinion

Commodities

34GOlD: Set to stabiise

35COFFEE: Exports boom

Diaspora

36GROW: A grass root

approach

Seia Reor

Real Estate

40EAs Mortgage Market

43Are ou read to

strike god?

48Kenas Tatu Cit

is aunched

Finance & Economics

50Pension funds reforms

Business

52GroFin: Preparing

for success

54Ugandas informa

economs woes

56VoIP: In the oop

contents

22 34

48

12



6/60EastAfricanInvestor6

digest

China takeover of

Anvil MiningChinas state-owned Minmetals Resources

has made a US$1.25billion takeover bid for

Canada-listed Anvil Mining, indicating Chinas

increasing appetite for acquiring resource

assets outright. Anvils board has indicated its

acceptance for Minmetals bid which values

the companys shares at CUS$8 (US$7.57),

representing a 30% premium. The companys

main asset is the Kinsevere copper mine in

the DR Congo that is expected to produce up

to 40,000 tons of copper this year. Minmetals

stated: Anvil Resources copper resources are

an excellent t with Minmetals strategy to

build an upstream international base metals

company. Minmetals is already one of Chinas

largest metal commodity traders.

MiningEnergy

Uganda sets up

energy fundUganda has set up a US$8.6million fund to

help nance new power projects. The fund,

a joint project with the World Bank, is to

be managed by the Uganda Energy Credit

Capitalisation Company (UECCC) and is

expected to help the private sector invest

in electricity generation projects through

loans. The projects include mini hydro-

power dams of up to 1MW, solar plants as

well as other renewable energy projects to

supply rural consumers. Statistics show

only 12% of Ugandans are connected to the

national grid, prompting the government

to push through more projects to meet

the energy shortfalls. The fund has a seed

capitalisation of about US$7.2 million and

a further US$1.44 million in the pipeline

from developing partners. Ugandas

banking industry has not been able to

meet the nancing needs of the energy

sector investments, which are long-term in

nature, UECCC general manager Specioza

Kimera Ndagire commented, adding thather company will work with 10 banks that

are participating in the administration of

loans dispensed under this fund, to offer

exible terms for borrowers with 5-7 years

repayment periods.

Uganda aims to generate 3,800MW in the

next ve years, with a mix of the big hydro

projects, such as 250MW Bujagali which

comes on line by end of the year as well as

600MW Karuma, whose construction starts

early next year. This capacity should shore

up the existing 380MW Owen Falls Dam

and several smaller hydro power dams

countrywide, now at different stages of

planning, procurement or construction.

In addition, Ugandas sugar millers

produce varying capacities of electricity from

bagasse for their own use, the remainder of

which they supply to the national grid.

With UECCC, it is envisaged that up to

ve mini hydros will be established.

Education

Rwandas solar

school inauguratedThe Rwanda government and the European

Union have inaugurated the rst school in the

country to be powered by solar photovoltaic

energy. The Musenyi School located in

the Bugesera District is part of a project

dubbed Increase Rural Energy Access in

Rwanda through Public-Private Partnerships

(IREARPPP), a programme which is expected

will benet a total of 300 rural schools in 27

different districts. The supply and installation

of photovoltaic and electrical equipment

for the project is co-nanced by the EU that

provided US$5.15million and the government

which contributed US$2.7million.

The AfDB and the government of Ugandahave signed a loan agreement for

US$60million to be used for community

agricultural infrastructure.


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Cadburys keeps

Nairobi factoryCadburys Kenya, whose UK parent company

was acquired by US-based Kraft Foods, will

retain Nairobi as its hub for the manufacture

and distribution of food and beverages for

East African markets. Nairobis country

director, Marion Gathoga, said its factory

in Nairobi is currently undergoing a major

upgrade that includes the establishment of

automated production lines of dry power

and food drink products as well as an ultra

modern distribution centre. The investment

will position Kenya as a focused manufacturer

of food beverages supplying the broader East

Africa market, she told the press.

Food

Credit Bureau for

Tanzania

The Bank of Tanzania, Tanzanias central

bank, intends to establish a Credit Reference

Bureau (CRB) by the end of the year. The

Bank of Tanzanias governor, Professor

Benno Ndulu, says that commercial banks

lending interest rates could drop to between

10-15% when the CRB comes into effect as

more information for lenders will reduce

loan defaults.

Banks

Econet drives Burundi

3G service forward

Econet Wireless (Burundi), having initialised

the roll out of 3G services in Burundis

capital Bujumbura, has now begun to

extend network coverage to the rest of

the country. The company has earmarked

US$10million for the total project,

which Econet Burundis chief executive,

Darlington J Mandiwenga says will mean

Burundi will be on a technological par not

just with other African countries, but many

developed countries too.

Communication


Equity takes AfricaInvestor Award

Equity Bank Group has won the Africa Investor

Award as the Best Initiative in Support of SMEs

and the Millennium Development Goals.

Group chief executive Dr James Mwangi

received the award from the UK-based

African Investor, an international investment

research and communications group, during

Septembers World Bank Annual Meetings in

Washington DC USA, saying the bank would

continue with its commitment to enhance its

customer product and service offering that

has the capacity to transform their lives and

livelihoods. At Equity Bank, our commitment

is to make banking convenient and accessible

to all our people so that they can become agents

of their social economic transformation.

Meaningful progress can be achieved on the

attainment of the Millennium Development

Goals if organisations and institutions can

develop pro-growth and pro-development

products and services and then ensure that

they are easily accessible and affordable.

Equity has been at the forefront in promoting

the growth of micro businesses to small medium

enterprises in the East African region. By

investing in the education, health, agriculture

and business empowerment of our people, we

lay a strong foundation for the future of Africa. A

prosperous Africa will not only benet its people

but also contribute meaningfully to global

trade, Dr. Mwangi added.

Awards

Group chief executive Dr James Mwangi

Kenyan mobile phone subscriber numbers

rose 28% to 25million in 2010 while

Safaricom, Kenyas largest telecoms

operator and France Telecoms Kenya

unit, Orange, plan to form a joint

infrastructure management rm in thenext three years.

Continued on page 08 >>>


8/608 EastAfricanInvestor

digest

East Africa Agriculturegets a boost

A new Fund has been set up by a group of

investors and a US government agency to

stimulate growth in East Africas agricultural

sector. USAid and others have already

committed US$25million to launch the African

Agricultural Capital Fund (AACF). Pearl

Capital Partners, a Kampala-based specialised

African agricultural investment fund manager,

will be responsible for investing the funds

in at least 20 agriculture-related small and

medium-sized enterprises in East Africa over

the next ve years.

A funding gap exists for small-cap

agricultural businesses across East Africa,

between large-scale commercial banks and

micronance institutions that this new fund

intends to address by providing long-term

capital to entrepreneurs who are building

businesses in the agriculture sector that

can deliver reasonable nancial returns for

investors. Besides targeting positive nancialreturns, the fund wants to have a signicant

social impact through the provision of

employment, securing markets and improving

products for smallholder farmers across

East Africa. The fund manager will focus on

building the skills of local management teams

rather than introducing expatriat management

expertise

The co-investors in the fund are all

members of the investors council of the

Global Impact Investing Network, a non-

prot organisation dedicated to increasing the

scale and effectiveness of impact investments

and whose main funders are JP Morgan, the

Rockefeller Foundation and USAID.

Meanwhile, The East African Community

(EAC) secretariat has started work on the

budget for the nancial year 2012/2013,

this time targeted at improved agricultural

production and implementation of the

food action plan. According to the drafted

priorities, the secretariat wants to target

at least three projects working towards theimplementation of the food action plan by

2013 as well as planning to harmonise and

start applying all regional policies, regulations

and standards on sanitary and phytosanitary

issues by the same year. It is also planned

that the intra-governmental organisation

would have identied and strengthened ve

strategic agro-processing and agri-business

for enhancing value chains. In the next

nancial year, the improvement of livestock

marketing and trade, improvement of regional

management of animal breeding, conservation

and distribution will receive priority attention.

Deputy Secretary General in charge of Finance

and Administration, Dr. Julius Rotich has

explained the need to also intensify regional

infrastructure development and establish

adequate and reliable energy supplies while

strengthening popular participation and a

common East African identity and political will

behind the regional integration process.

Agriculture

Energy

Sino-Germanproposition for hugeTanzania power

investment

The China National Machinery &

Equipment Import & Export Corporation

(CMEC) of China, and Siemens of Germany,

have tendered Tanzanias President Jakaya

Kikwete with a plan for power generation

for six regions of the country. The proposal

states that the two companies will use

natural gas from Millionazi Bay, Mtwara,

as a feedstock to generate 300MW of

electricity and build a 1,100km power

line from Mtwara to Singida region. The

total cost has been put at US$684million

to be jointly funded by the government ofTanzania and by a loan from Chinas Exim

Bank of China. Later, the power will be run

to the north-west regions of Kagera, Kigoma

and Rukwa. Lindi and Ruvuma would, in

due course, also be connected.

Tanzanias President Jakaya Kikwete


9/609EastAfricanInvestor

Hospitality

Top Rwanda hotel on

the market

Soprotel SA is tendering the Umubano Hotel,

an 85-room four-star establishment in Kigali,

to any reputable hotel operator, brand or

consortium for acquisition and refurbishment.

The Umubano, formerly known as the Laico

Umubano, is situated in the embassy district

of Kigali on Boulevard de lUmuganda, about

5km from the town centre and close to the

Amahoro Stadium and Kigali Genocide

Memorial Centre. In addition to an outdoor

pool, Umubano Hotel currently provides a

health club, a sauna, a steam room, and a

tness centre. Umubano Hotel also offers a

restaurant, coffee shop/caf and two bars (one

poolside). High-speed WiFi internet access is

also installed.

Energy

Uganda sets up

energy fund

Uganda has set up a US$8.6million fund to

help nance new power projects. The fund,

a joint project with the World Bank, is to

be managed by the Uganda Energy Credit

Capitalisation Company (UECCC) and is

expected to help the private sector invest

in electricity generation projects through

loans. The projects include mini hydro-power

dams of up to 1MW, solar plants as well as

other renewable energy projects to supply

rural consumers. Statistics show only 12% of

Ugandans are connected to the national grid,

prompting the government to push through

more projects to meet the energy shortfalls.

The fund has a seed capitalisation of about

US$7.2 million and a further US$1.44 million

in the pipeline from developing partners.

Ugandas banking industry has not been able

to meet the nancing needs of the energy sector

investments, which are long-term in nature,

UECCC general manager Specioza Kimera

Ndagire commented, adding that her company

will work with 10 banks that are participating

in the administration of loans dispensed under

this fund, to offer exible terms for borrowers

with 5-7 years repayment periods.



projects, such as 250MW Bujagali which comes

on line by end of the year as well as 600MW

Karuma, whose construction starts early

next year. This capacity should shore up the

existing 380MW Owen Falls Dam and several

smaller hydro power dams countrywide, now

at different stages of planning, procurement or

construction.

In addition, Ugandas sugar millers

produce varying capacities of electricity from

bagasse for their own use, the remainder of

which they supply to the national grid. With

UECCC, it is envisaged that up to ve mini-

hydros will be established.

Taxation

Burundis tax

revenues jump

Burundis imports rose 38% in the first

quarter of the year while Burundis tax

revenues jumped by a similar percentage,

year-on-year, in the nine months to end-September, climbing to Rwf352billion

(US$557.5million). The rise in revenues

is being credited to measures introduced

to combat fiscal and customs evasion.

The government has forecast that total

tax revenues will rise to Rwf432.6billion

(US$708.7million) this year, from less

than US$600million recorded in 2010.

Resources

Tanzania seeks

super profitresource tax talks

Tanzania wants consultations with gold

mining companies operating in the country

to discuss how a super-prot tax might be

implemented if parliament approves the

proposed levy suggested by the countrys

planning commission. The commission had

reported that, considering the increasing

trend in mineral prices, it is optimal

to introduce a super-prot tax on the

windfall earnings from the mineral sector.

Companies including AngloGold Ashanti,the worlds third-largest gold miner,

London-listed African Barrick Gold and

Tanzanite One own mines in the country.

Tanzanias gold output increased to earn

US$1.5billion, ranking behind South Africa

and Ghana and alongside Malis 44.6t

in 2010. The Tanzanian governments

revenues from the sale of gold in 2010

was a relatively paltry US$100million.

US$600million recorded in 2010.



projects, such as 250MW Bujagali which

comes on line by end of the year as well

as 600MW Karuma, whose construction

starts early next year.




digest

TRL seeks fresh bidsfor railwaysTanzania is to invite fresh bids for a stake in its

railway company, Tanzania Railways Ltd (TRL),

after the collapse of a previous concession deal

with Indias state-run Rites Ltd. The WorldBanks International Finance Corporation (IFC),

which part-nanced the Rites privatisation deal

with a US$44million loan, has conrmed it will

consider fresh nance for the TRL after Rites sold

its 51% stake back to the Tanzanian government.

The IFC has advised the Tanzanian government

to make some improvements to the 2,700km

network pending a new ownership structure. The

government has earmarked US$1.16billion over

the next ve years to upgrade all the railway lines

to a common operational standard.

Transport

A new fund is launched

Ugandas rst national collective investment

fund LIFT will be launched to address the

need for appropriate funding structures that

can match the huge economic development

potential of various sectors.

The logic is clear. Uganda is at a crucial

juncture in its economic history with enormous

potential gains from the extractive industry

entering the economy. Huge investments will

be required to fully capture these gains for

Uganda, including developing appropriate

infrastructure, real estate, agriculture and agro-

processing.

Ugandas retail and commercial banking

industry is not in a position to undertake

capital intensive, long-term, real economic

investments due to the unavailability of

funding and/or regulatory constraints. The

high cost of borrowing and stringent collateral

requirements represent other challenges.

Recognising that many enterprises will

require a long-term equity partner with expert

business management and technical capacities

to grow their businesses into more competitive

protable ventures, LIFT intends to:

Mobilise local funds to undertake long-term

investments in key sectors of the Ugandan

economy;

Provide Ugandans with the benet of

participation in Public Private Partnership

initiatives advocated for by the Ugandan

National Development Plan;

Accord investors an opportunity to take

a leading role in Ugandas economic

development;

Target medium to long-term investments in

real sectors of the economy;

Develop sustainable local enterprise through

equity funding as opposed to debt and

ensure management excellence, robust

governance structures, nancial discipline

and prudent risk management.

LIFT envisages three classes of retail

investments: Platinum (US$2,000 a year), Gold

(US$1,000 a year) and Silver (US$500 a year).

An institutional class will invest US$100,000

a year and corporations US$10million a year.

Each shareholder may only purchase one

investment class each year. All funds collected

by LIFT will be ring-fenced, protected and

maintained by a Capital Markets Authorised

Custodian Banks whose approval is required

before any disbursements are made.

Investment


11/60

East Africa Oil & Gas

Ophir Energy

Ophir Energy, a London listed company

made a successful all-share 118million

(US$186million) bid for Dominion

Petroleum in mid-October paying a 64%

premium on Dominions share price.

Ophir, which listed in July 2011, has Indian

steel magnate Lakshmi Mittal as one of its

biggest shareholders. The Ophir board said

in a statement that the Dominion takeover

consolidated Ophirs East Africa operations

where it has already made three discoveries.

Ophir is now one of the largest holders of

exploration acreage in East Africa.

Dominion had recently agreed tofarm-out a 20% working interest in Block

7, deepwater Tanzania to a subsidiary

of Mubadala Oil & Gas. Following the

completion of that transaction, Dominion

held an 80% working interest and

operatorship. Mubadala paid Dominion

US$20million and carried Dominions

remaining 80% working interest in a new

seismic programme expected to commence

this year.Dominion had also signed a Production

Sharing Contract (PSC) in the Lamu Basin

giving the company a 100% working

interest and operatorship. The PSC was

signed between Dominion and the Kenyan

Ministry of Energy in Nairobi. Dominion

had agreed to reprocess existing 2D seismic

data and acquire a minimum of 250sq

km of 3D seismic data in the initial two-

year exploration period. Dominion had

negotiated the option of a second two-year

period by committing to drill an exploration

well. The acreage lies immediately to

the north of Block L8 on the Davy-Walu

structural trend, where the reportedly

1billion barrel Mbawa prospect will be

drilled in mid 2012.

Tullow receives

go-ahead

After long weeks of delay, Ugandas ruling

party has voted to rescind a resolution which

was blocking Tullows proposed farm-down

of assets to Total and CNOOC. While the

countrys parliament will still need to approve

the motion, this is a signicant development

on the path to lifting the oil found in Ugandas

Lake Albert region and for the country to start

beneting from a US$10billion investment

to begin production. The breakthrough was

achieved after a week-long retreat to iron out

various issues.

In early October Ugandas parliament

voted to delay Tullows proposed sale of assets

to Total and CNOOC until the country had

passed new legislation. In what appeared to

be a politically motivated attack, Tullow was

also accused of bribing Ugandan ministers

in order to inuence decision-making,

something the companys chief executive,

Aidan Heavy, steadfastly and at times

vehemently denied. Heavey described the

allegations against Tullow as outrageous and

wholly defamatory, demonstrably false and

appear to be founded on misunderstandings

about how the global oil and gas industry

works. Tullow is also said to be considering

legal action to protect the reputation of the

company and that of its employees. The

company, whose assets are mainly located in

Africa, holds stakes in Uganda where around

2.5 billion barrels of oil has been discovered.

Total control

Totals subsidiary, Total E&P Kenya BV

has acquired a 40% stake in ve offshore

exploration blocks in the Lamu Basin,

offshore Kenya, covering 35,500sq km in

water depths of between 100m and 3,000m.

Total will earn a 20% stake from Anadarko

Kenya, which will continue to operate the

permits with a 50% interest; a 5% interest

from Cove Energy, which will maintain

a 10% interest in the permits; and a 15%

interest from Dynamic Global Advisors,

which is selling all of its interest to Total.

About one-tenth of the blocks are

currently being covered by 3D seismic

survey, the results of which will determine

if the operator will drill one or more

exploratory wells.

Tanzanias current natural gas reserves

are reported to have risen to more than

10 trillion cubic feet (tcf) from a previous

estimate of 7.5 tcf following major gas

discoveries in the countrys deep-water

offshore region. Meanwhile, Brazilian state-

owned oil giant Petrobras has agreed to

grant 50% of its interest in two blocks in

Tanzania to Shell Deepwater Tanzania BV

for an undisclosed sum.


Lakshmi Mittal


12/60

Owen Koimburi is a recognised specialist

in nancial management advisory

services, capacity building and training,

corporate governance and international

nancial reporting. Deloitte trained,

he was a non-executive director of the

Central Bank of Kenya and is a founding

partner of Mazars (Kenya), established

in 2010 and based in Nairobi part of

the integrated audit, tax and advisory

multinational accountancy practice,

with a global turnover of more than

US$10billion.

Mazars now has ofces in 61 countries

and over 13,000 staff. Heading a

60-strong staff in Nairobi, Koimburi

is responsible for the East Africaregion, serving a varied portfolio of

clients including major manufacturers,

nancial institutions, co-operatives,

local authorities, parastatals, charitable

and non-government organisations,

sole proprietors and private companies

so who better to discuss East Africas

investment potential?

It is clear that East Africas potential

has not gone un-noticed at Mazars. Part

of Koimburis brief in the short term

is to help establish ofces in Uganda

Tanzania, Burundi and Ethiopia (there is

already a branch ofce in Kigali, Rwanda)

as well as possibly South Sudan.

Meeting him on a visit to London UK,

where his rm was sponsoring an East

Africa Global Trade and Investment

Forum, organised by Business in Africa

Events, we talked about the regions

strengths, weaknesses, opportunities

and threats (SWOTs for short) in terms

of mobilising investment for sustainable

economic development.

Beginning with the regions

strengths, Koimburi identies three

major strengths from an investmentperspective: the wealth of unexploited

minerals in Tanzania; the oil being

developed in Uganda and the potential

of the renewable energy sector in Kenya.

He was also quick to point out the

inherent advantage to the regions trade

potential of having access to the Indian

Ocean. That in itself is a strength, we

have ready access to world markets as

East Africa is not landlocked.

EAC: So many strengths,

so many opportunities!

Owen Koimburi is a

founding partner of Mazars

(Kenya). He spoke to East

Africa Investors editor,

Stephen Williams about

the strengths, weaknesses,

opportunities and threats that

the region holds for investors.

fdi 2012 review

12 EastAfricanInvestor


13/60

We also have political stability. OK,

we had our problems in Kenya in 2007

and 2008, but in general we have a well-

entrenched democratic process and each

country has held elections in the past ve

years. The political stability is there and

should not be overlooked.

Then we have a developed

infrastructure and economic connections

with our traditional trading partners that

have been in place for many years. They

just need to be upscaled.

But what, I asked Koimburi, of the shift

in emphasis away from traditional trading

partners towards the East, towards the

Gulf, China and India? The focus might

have slightly changed, having shiftedtowards new partners, he replied, but

it is really just a matter of expediency

because these countries have come in

just as our traditional partners have been

confronting their own challenges, if you

look at Europe and the US.

Furthermore, from a geographic

proximity point of view, it is true that we

are nearer to the Gulf, India and China

and you also cannot ignore the fact

that these countries have not imposed

as many conditions about governance,

about anti-corruption measures etc.

These are issues we know we

have to deal with, but sometimes

lets face it Western Europe and

the USs conditionalities have often

been extremely onerous in the face of

edgling democracies .

As I say, we acknowledge that these

are problems we have to deal with,

but getting back to our strengths, the

infrastructure is there.

Trying to clarify what exactly

Koimburi was trying to explain, I asked

him if by infrastructure he meant

physical infrastructure. It seems that hewas being much more subtle than that.

Pentifu human resources

Yes, I am talking about physical

infrastructure as a strength, but I also

mean infrastructure in terms of intellectual

knowledge. We have people who know

how to run businesses efciently, how to

run industries properly.

The other strength is our large

population, a young population, the

majority under 30-years old, and to a

large extent, especially in Kenya, well

skilled all we lack is nancial resources.

But, I would argue, what we dont have

in nancial resources we have in skills,

especially in information technology

and, of course, a huge population. That

is a strength in terms of representing a

huge market for our manufacturing and

services sectors.

So, having explained what he

thought were the major strengths of the

EAC region, I asked Koimburi about

weaknesses. There is no doubt that

the perception of corruption is a major

problem, a major weakness, he said,

before adding this rejoinder.

The political system has looked at it

from the position that no country has the

moral high ground to talk about these

issues because, after all, the corruption

money that has been siphoned off, the

misappropriated money, does not exactly

stay in East Africa. It goes to the capitals




14/60

of the Western economies, sometimes to

be lent back to Africa!

And there are other weaknesses, for

example the markets. We do not have a

well-developed nancial sector and we do

not have lot of say in global commodity

prices. We are generally selling primary

commodities but we know we have to

move towards value addition for export

markets if we want to prosper and

stimulate employment.

That led us neatly on to the

opportunities that exist in East Africa

for investment. I see so much potential

in the region, especially in farming,

agriculture and horticulture if we try

to take it to the next level, to where we

are adding value to produce, developing

agri-businesses.

On a related front, there is a lot

of scope for developing transport,

developing the basic infrastructure to get

our products to market. It is true China

has been assisting us to start to build

modern roads now we need to organise

mass transport systems, including rail.

And I must mention the information

communication technology sector

there is so much pent up demand and

that sector can underpin many service

industries such as business processoutsourcing with call centres, back ofce

services and other enterprises.

However, Koimburi sees each

country of the East Africa region as

having a slightly different investment

potential. He talks enthusiastically

about the minerals sector in Tanzania

with unexploited deposits of precious

metals and gems such as gold, diamonds

and tanzanite standing out, but also

commercially viable deposits of uranium,

nickel, copper and energy coal.

For Kenya, Koimburi is bullish on the

renewable energy sector, pointing out

the support that government has placed

in developing geothermal generation and

building one of the largest wind farms inthe world. It is also interesting to note

the emphasis that the authorities place

on renewable energy when it comes to

approving giant projects such as Tatu

City where all hot water is required to be

solar heated.

In Uganda, he identies the prime

opportunities as being within the

agriculture and agribusiness sectors in

Rwanda, the burgeoning ICT sector and

in Burundi, as in Tanzania, it is natural

resources, as well as agriculture, that

excites him.

You have all these opportunities in

good measure in all countries. But you

know, throughout the region, there are

huge opportunities in tourism, whether

you are looking at ecotourism or the

traditional wildlife safari offerings, or

hosting international conferences.

Financia services

and rea estate

Financial services and the real

estate sector also have huge growth

opportunities. You know, I have seen

some statistics that say that just 10%

of the population own their housing. If

you look at the emerging middle-class,

they generally aspire to home ownership

and I would estimate that, for example

in Kenya alone with a population of

40million, about 50% are earning and

about 40% of them could service a home

loan. So I would estimate the emerging

middle-class if that is the denition

we use to be, comfortably around

10million, yet only about 1.6million

actually have home ownership nance.

We nally turned our attention to

threats to the region that might be

summarised as allowing the cancer of

corruption to fester, exogenous factors

such as terrorism or the fallout from the

Eurozone debt crisis, and the possibility

of not grasping economic opportunities.

But we ended our conversation discussing

the nancial sector and capital markets.

As Koimburi had, earlier, mentioned

the nancial sector and real estate in

the same breath, I wanted to learn if he

felt the banking sector could actuallystimulate home ownership. I think what

we actually need is intermediaries in the

real estate sector because the nancial

sector is relatively undeveloped.

Koimburi had already told me,

without disclosing their identity, that

his portfolio of clients included a fair

number of nancial institutions. Where

I see growth in the nancial sector is that

a large percentage of the population are


fdi 2012 review

On a related front, thereis a lot of scope for

developing transport,

developing the basic

infrastructure to get ourproducts to market.



un-banked, they do not have access to

nancial services.

As for the capital markets, Koimburi

made an important point about raising

capital he insists that companies

should not go to the market simply to

renance but to raise capital for growth.

If it is for renancing, then it should be

accompanied by serious restructuring

Some companies might be tempted

to go to the markets because they have

got themselves into a liquidity problem.We need to identify such problems rst,

whether it is issues of management or of

governance, so we deal with that before

they go to the market.

Nevertheless, Koimburi sees the

capital markets as powerful engines of

growth. My thoughts are that if we had a

secondary market we could have a lot of

family-owned companies listing.

On another point, I have come to

believe that the Capital Markets Authority

in Kenya, and similar authorities

throughout the region, should not be

there solely to provide capital as and

when it is needed, but should also have

a very strong research role to identify

projects and gauge them in terms of

raising capital. Furthermore, I should

like to see a nancial services regulator

umbrella organisation established in

Kenya and eventually across the region.

Such an organisation, which has beendiscussed in Koimburis home market

Kenya for many years, would undoubtedly

give investors comfort. As he explains it:

Equity capital is not just about enabling

a company to renance but it allows many

more people be involved, to partake in

the process, share in the rewards and,

as importantly, to stimulate a culture of

investment and savings.

For Kenya, Koimburi isbullish on the renewableenergy sector, pointing

out the support that

government has placed

in developing geothermal

generation and building

one of the largest wind

farms in the world.

East Africas large, well-motivated, youthful population represents a prime asset to the region



Charm, arms and soft loans are

increasingly in abundance from investors

but not necessarily from Western

Europe and the US any more. Despite its

enormous size, China is resource-poor. So

no surprise she is getting into African FDI

in a big way, and is less concerned with

dealing with some of the continents more

unsavoury regimes as a consequence.

In some cases of Eastern Africa FDI, it

is no sudden lurch. Look at Uganda and

China: the two countries have maintained

diplomatic relations since independence.

Despite considerable Ugandan regimechanges in the 1960s and 1970s, diplomatic

relations remained constant. For example,

roll back to 1971 and to the 26th General

Assembly of the UN where Uganda voted

for the restoration of Chinas seat in the

world body.

Perhaps even deeper has been

the relationship between China and

Tanzania. China built the Tanzam

railway from Dar es Salaam to Zambia in

the 1960s, a huge engineering feat.

Better understanding

Last year the Ugandan Investment

Authority named China as the leading

FDI investor in Ugandas economy,

displacing UK at the top, a position the

UK had held for more than a decade.

Under the Kibaki government, Kenya

has also seen Chinese investment soar.

Much of the investment is pouring into

tourism, energy and manufacturing, as

well as construction. In contrast, UK FDI

is falling sharply, down to Ksh202million(US$2million) recently putting it

sixth in the table. Compare that with

Ksh19.6billion (US$193.75million)

directed at Kenya in 2009.

Developed economies have fully

exploited traditional sectors like

agriculture and are now focused on top-

end infrastructure businesses for which

they charge relatively higher prices,

Sammy Onyango, chief executive of

Deloitte Eastern Africa commented

recently. He also made the point that

emerging powers like China understand

the risks of investing in Africa better

and their projects and promises carry

fewer conditionalities.

But many Western countries like

the UK and German have their own

problems. Germany is wresting with

huge Euro debt concerns and the British

are struggling with public spending, or

rather the lack of it. The mood to invest

in places like sub-Saharan Africa is less

than enthusiastic for many, given the

homegrown pressures and problems.

And it is not just the big new emerging

powers like China that are getting into

Africa. Turkey, Mexico, Iran, South

Africa are all getting involved, says

Tom Cargill from the Africa Programme

at Chatham House, The Royal Institute

of International Affairs in London,

fdi 2012 review

Goodbye Europe, Hello New World!

Are countries like China, India and regions such as south-east Asia and the Middle East

replacing the traditional European investment centres of London, Paris and Frankfurt in

terms of East African FDI? asksAdrian Holliday.



17/60


18/60



fdi 2012 review

expressing renewed interest [in

Africa] as an investment destination.

For example a country like Turkey is

due to have 30 embassies across sub-

Saharan Africa in the next 18 months.

It is probably down to a combination

of economic factors but also domestic

and political push, because of [internal]

tensions and whether Turkey is an Asian

or European country.

In Turkeys case, that split identity

role can cause political complications for

Turkish investors who want to invest in

Asia or Europe. But by investing in Africa,

they avoid all those problems. Turkey

also sees itself as an emerging balancing

power and seeks engagement in African

states, adds Cargill. By comparison, a

country like South Korea is much more

business-focused. Of course, some UN

Security Council politics will remain but

if interest is sustained, then Western

companies will, as they see the success

of the new upstarts, become increasingly

nervous of their waning inuence.

Ke differences

And there are other tensions. For example,

although Chinese FDI may be positive for

some, the benets are limited if China ies

its own foreign nationals in to work onthe projects rather than employing local

people a key part of FDI traditionally.

Recently Chinas ZTE telecoms company

was awarded a large contract to build

bre networks across South Africa and

Burundi, but allegations are ying that

the company will import its own foreign

nationals to work on the projects.

There are also some distinct

regional differences. Some Western

multinationals have shied away from

Kenya in favour of Uganda and Tanzania

over concerns about political tensions in

general, and specically over restrictions

on foreign ownership. Look at 2010

inows, for example. According to

United Nations Conference on Trade

and Development (UNCTAD) gures,

Kenyan FDI levels suffered a massive

drop, sinking from US$729million in

2007 to just US$141million in 2009.

So, does that mean a permanent

goodbye to many Western investors,

letting increasingly powerful players like

China replace them? That seems unlikely

as investment cycles are just that -

cyclical. Because of the current European

currency and investment woes, there is at

the moment a conservative approach to

investment, but that should fall away.

However, many Western companies

are only too painfully aware that if they

do invest in an African country they

can expect to receive disproportionate

interest from Western Non-

Governmental Organisations that could

well impact on their brand, when it is

very possibly quite a small part of their

operations, comments Tom Cargill. Its

a question of reputational risk entering

the investment analysis.But this, Cargill adds, also

all stems from having a very low

knowledge about the opportunities and

possibilities in Africa.

Asian companies do not have so

much pressure in terms of corporate

governance. There are fewer investors

who exert as much pressure on issues

such as human rights and environmental

good practice. Not that Western

companies have a strong record here,

either. But there is certainly a difference

in emphasis, especially in the light of the

credit crunch where increasing numbers

of public pension funds had to revaluate

the ethics of where they were invested.

Tensions

But China and India and other countries

will not be having it all their own way.

In last Septembers election, Michael

Sata was elected as Zambias president.

For some years Sata campaigned on ananti-China ticket. Many Zambians had

become frustrated with Chinese attitudes

to working conditions and Sata had made

it clear that he would initiate capital

controls to restrict foreign exchange

earnings, as well as possibly expelling

thousands of Chinese migrant workers

from the country.

Sata met Chinas ambassador to

Lusaka shortly after being sworn-in

following his election victory. We

welcome your investment, Sata was

reported as saying, but as we welcome

your investment, your investment

should benet Zambians and not just

the Chinese. China a country that has

poured almost US$6billion of investment

capital into Zambia in the last three years

alone - has been warned.

Under the Kibakigovernment, Kenya

has also seen Chineseinvestment soar. Much of

the investment is pouring

into tourism, energy and

manufacturing, as well

as construction.


20/60

FDI investment in Africa declining.

FDI investment in Africa rising. FDI

investment in Africa static. All fairly

familiar headlines but in 2010, Africas

total FDI share amongst developing

nations dipped by 9%, according to a

United Nations Conference on Trade &

Development (UNCTAD) report.

However, East Africa was a slightly

different matter with FDI inows hitting

US$3billion, a 3% increase. And that

upward path looks set to continue says

Tom Cargill from the Africa Programme

at Chatham House, The Royal Institute of

International Affairs in London.

Fascination

East Africa is fascinating. I wish more

investors and policy makers in Africa

would understand how East Africa isdeveloping. Because its on the Indian

Ocean and part of that growing connection

nexus of countries, like Tanzania, whose

population is likely to be the fth most

populous country by 2100.

On the technology side of things,

Cargill goes on, East Africa is much more

plugged in; further ahead in terms of its

neighbours. East Africa is also way ahead

in terms of having an integrated common

market. It will overtake Southern Africa

before too long and start to eclipse South

Africa in the next decade.

But there are also clear regional

differences. In the recent past, some

Western multinationals have shied away

from Kenya in favour of Uganda and

Tanzania over concerns about political

tensions, specically restrictions on

foreign ownership. Look at 2010 inows,

for example. According to United Nations

Conference on Trade and Development

(UNCTAD) gures, Kenyan FDI levels

sank from US$729million in 2007 to just

US$141million in 2009. A massive drop.

Look at the gures over a longer time

frame - between 2005 and 2009 as the

International Monetary Fund did - and

Rwanda, Tanzania, and Uganda can all

claim to be among the fastest growingeconomies in the world during this period,

the IMF said in its Regional Economic

Outlook report earlier this year.

In the top-20 fastest-growing

countries in 2005-2009, Uganda ranked

sixth, Rwanda ninth and Tanzania

sixteenth. Much of the growth is catch-

up from huge bouts of economic inertia

and political instability in the last part

of the 20th century. And economic

fdi 2012 review

New world order

Its boom time but which

parts of East Africa are

seeing signicantly higher

inows of FDI, and what is

driving it?Adrian Holliday

investigates.




growth and income levels would be even

higher were it not for the regions high

population growth.

Rea change

But what about real on-the-ground

change in terms of deals and strategy?

A move by Indian investors to spend upto US$2.5billion buying or renting land

in several countries, including Uganda,

has drawn a lot of attention. This is an

attempt to nd land where a range of

crops vegetables, maize, palm oil, for

example can be grown for the booming

Indian home market, and abroad.

In August, Indian conglomerate

Karuturi Global said it was prepared

to spend up to US$500million in East

Africa, acquiring hundreds of thousands

of hectares of land for a mixture of

sugarcane, cereals and palm oil. Karuturi

Global has emerged as the worlds largest

exporter of fresh cut roses on the back of

its investments in Kenya and Ethiopia

For many Indian investors, it is

undoubtedly an attractive deal. Land

is relatively cheap in Africa and buyers

are welcomed as the deals invariably

provide jobs. But Karuturis move,

should it go ahead, is still a land grab,

and a move that will worry many. In a

UN report earlier this year, concerns

about rich Asian and Western investors

were again articulated strongly. Can

central governments manage and

negotiate such inward investment

competently, it asked? Their role is key

to setting the terms and conditions for

ensuring a proper balance of interests

between local land users and investors,and enforcing such contractual

agreements, the report said.

Part of the upsurge is demand for

food, feed and biofuels. Policies to

substitute biofuels for petroleum and

diesel for the EUs road transport sector,

for example, are generating strong, and

possibly unsustainable, demand for oil

palm, sugar cane and jatropha.

There is frequently little in the

way of binding agreements on local

procurement, processing of produce,

and payment of taxes, warns the UN.

Given that these contracts are usually

kept condential, it is very difcult

for performance to be scrutinised or

investors held to account by government

agencies, parliament, local people, CSOs,or media.

Mixed bag

Greater FDI can haul behind it a litany

of concerns too environmental

degradation, corruption, and more

concern about human rights abuses.

So its mixed news, especially when

there is considerable concern about

many communities being able to feed

themselves properly and sustainably.

On the other side of the coin, such deals

can develop local economies, with often

a highly useful transfer of knowledge

and skills.

But East Africa will need to take a

robust line taken on the contractual

and pre-condition details. A weak state

(and weak negotiators) can easily be

taken advantage of, especially when rich

investors wave large wads of Western,

and increasingly Eastern, cash around.

Yet there is no getting away from

East Africas potential. The IMF recently

reiterated its optimism on the region,

upping its GDP forecast with low-income

countries recovering the fastest. Sub-

Saharan Africas recovery from the crisis-

induced slowdown is well underway,

with growth in most countries now back

fairly close to the high levels of the mid

2000s, read part of the report. And in arecent Ernst & Youngs 2011 survey, the

authors claimed the emergence of the

East African Community (EAC) made

this block of countries a compelling and

accessible marketplace.

So Western companies are plainly

trying to gure out how to nesse rising

population growth and opportunities

for a cheap workforce balanced against

education, skills, taxation and politics.

FDI investors, particularly Western

investors, should not expect East Africa

to revert to greater democracy as it grows

richer and more condent. This is the way

the world is now, says Chatham Houses

Tom Cargill. We already have it [a similar

situation] in South America - immense

riches and sophisticated economies

taking place alongside shanty towns

and deep poverty. None of these East

African countries are going to be liberal

democracies in the Western sense. They

are establishing their own governmental

systems, which may look arbitrary and

authoritarian, but they are putting down

roots fast and their economic competence

is growing quickly.

In the top-20 fastest-growing countries in

2005-2009, Ugandaranked sixth, Rwanda

ninth and Tanzania

sixteenth. Much of the

growth is catch-up from

huge bouts of economic

inertia and political

instability in the last part

of the 20th century.



sector focus

One cannot turn a blind eye to the

expanding population in and rapid

industrialisation of East Africa, nor the

reoccurring droughts that are lowering

the levels of rivers many of which are

used for hydroelectric generation. The

energy crisis is taking its toll on farmers,

households, manufacturers, tourism,

and trade ows, causing major nancial

losses across the region. However,

a series of power plants are now

approaching completion, and renewable

energy sources are being tapped into like

never before, signaling what could be the

end of a power crisis.

Power demand in Uganda is increasing

a worrisome 10% annually, andinsufcient energy supply is slashing the

countrys economic growth by 2% each

year. But the crisis is expected to ease after

the Bujagali and Nyagak hydropower

projects come online towards the end

of the year. The rst phase of Bujagali

will generate 50MW, while Nyagak will

produce 3.6MW, bringing an additional

53.6MW to the national grid. Once fully

commissioned in April 2012, Bujagali

will generate 250MW.

Work on the upcoming 600MW

Karuma hydropower plant is also

scheduled to start early next year, as

the government prepares to procure

a contractor. To fund the project, the

state will use around US$900million

raised from capital gains taxes on recent

oil transactions in the country, and a

US$500million Eurobond is expected to

be issued.

On the border between Uganda and

Tanzania, another hydropower plant

is being constructed, comprising two

generating units of 8MW each. The joint

development of the 16MW Kikagati-

Murongo project will be implemented byan independent power producer, and will

benet both countries.

Even sewage is being seen as a

potential energy source. Ugandas Water

and Sewage Corporation is starting a

project at the Nakivubo Sewage Plant to

capture methane gas and convert it into

bio-gas for electricity for its own use; the

excess to be fed into the national grid.

International grants are

Powering East Africa -

the only way forward

Nearly 93% of Africas

hydropower potential which

accounts for one tenth of

the worlds total remains

unexploited, according to

World Bank estimates. How

is it then that a prosperous

region like East Africa

loses millions of dollars

due to power shortages?

To answer this conundrum

Heba Hashem takes a

close look and reveals robust

developments and movementswithin the energy sector.



simultaneously playing a signicant

role in enhancing the regions

economy. Norway has granted Uganda

US$20million to connect 15,000 rural

households by 2020 a move that

promises to transform the lives of more

than 100,000 people.

Reluctant to invest in energy, the

private sector has had trouble allocating

funding from banks, who usually

provide short-term loans. The recently

established Uganda Energy Credit

Capitalisation Company (UECCC)

a new energy rm set up by the

government to manage the countrys

energy capitalisation trust and extend

credit support will work on mobilisingresources from the government and

facilitating private-led energy projects.

The fund has already attracted a seed

capitalisation loan of US$6.8million

from the World Bank; Ush1.2billion

(US$70million) from the government,

and Euros 250,000 (US$345,000) from

the German Agency for International

Cooperation.

When it comes to renewable energy,

the Belgian Development Agency

is pumping US$800,000 into the

development of clean energy projects

throughout Uganda, selecting Camco

International for technical assistance.

TANzANIA:

Natura gas and soar on

the agenda

Tanzania plans to extend its grid

connection to 29% of the population by

2015, a move that will require 2,046MW

of new generation capacity. Although

the government devotes around

US$358million to power annually, energy

spending needs to reach US$631million

each year between now and 2015 for thecountry to achieve its goals.

In July, national electricity supplier

Tanesco reported alarming transmission

and distribution losses of 26%; nearly

triple the best-practice benchmark of

10%, forcing it to apply power rationing.

For the gold-producing nation, this

threatens the operations of gold-mining

companies as well industries dealing in

the processing of raw commodities, such

as cotton, coffee and tea.

Considering the alternative route

of renewable energy, the Tanzanian

government appears to be hesitant.

The government cannot risk investing

public money in energy potentials whose

outcomes are yet to be conrmed,

acting commissioner for minerals in the

ministry of energy and minerals, Ally

Samaje, told a stakeholders workshop.

At the same time, utilising energy

sources such as coal require long-term

development, including exploration,

which requires a lot of money. This does

not leave Tanzania with many options.

Today, a staggering 93% of Tanzanians

use wood and charcoal as their primaryenergy source, but the trend is likely to

change with the countrys adoption of

renewable energy.

An ambitious US$1million solar-

photovoltaic cluster project was

commissioned recently by the EU, in

which Camco International will install

small-scale solar systems in 15,000


Ambitious solar photo-voltaic projects are now taking shape



sector focus

homes in Lake Victoria region. This is

part of the EUs plans to construct ve

renewable energy projects in the country,

under a US$10.7million scheme that will

connect thousands of rural sites to the

grid using hydropower, solar energy,and biogas. Through the grant, a new

hydropower plant at Msolwa will be built,

and the Mawengi hydropower plant will

be upgraded.

Bordered by the Indian Ocean,

Tanzania is actively working on exploiting

Songo Songo Islands abundant natural

gas estimated to be enough to meet

nearly half of the countrys electricity

demand. The US$258million project

to further exploit this offshore eld is

operated by PanAfrican Energy Company,

and will see a 229km pipeline connected

to a power plant in Dar es Salaam.

KENyA:a successfu renewabe

energ mode

In Kenya, 48% of urban and only 4% of

rural households are presently connected

to the grid. The country recently reported

transmission and distribution losses of

18%, almost double the best-practice

benchmark of 10%.

The Chinese have stepped in to boost

power supply at the new Lamu Port,

with a Ksh100billion (US$991.6million)

electricity project that will connect Rabai

substation with Lamu. Starting this

October, the 200KV line will take one

year to complete, and should boost power

supply in all surrounding areas.

Kenya is one of the best examples

of renewable energy deployment, with

three quarters of its energy coming from

hydropower and a further 11% from

geothermal sources. The country is now

creating one of the biggest on-shore wind

farms in the world, comprising 353 giant

wind turbines around Lake Turkana.

The Lake Turkana Wind Power

(LTWP) project will produce 300MW

when completed in July 2012, adding 30%

or more to Kenyas total installed capacity.

A second wind-farm in the tourist town of

Naivasha is also being studied.

RWANDA:

foreign investments to boost

energ

Rwandas current installed capacity

stands at around 79MW, of which it

imports 14.5MW. But this capacity

is planned to increase to 130MW by

the end of 2012. Egypts Orascom

Construction Industries will be investing

US$130million over the next four yearsin the construction of a 50MW methane

power plant at Lake Kivu, while a

US$91.25million loan is being granted

for the development of the Kivuwatt

power plant in Kibuye. The rst phase

will involve gas extraction from Kibuye

and will produce 25MW, increasing

Rwandas capacity by 40%.

Furthermore, the East African Power

Pool (EAPP) is intending to install 350,000



power connections throughout Rwanda

before the end of next year, of which

225,000 have already been installed.

BURUNDI:

energ hungr andresource-poor

Burundi experienced severe power

rationing towards the end of September,

as the country cut power supply to

consumers to just four hours a day,

following a serious fall in water reserves

at the main hydropower plants.

The landlocked nation of 10million

people has suffered power outages since

drought season began in July, pushing

the government in September to raise

electricity tariffs by 124%. According

to CIA gures, less than 2% of the

countrys population has electricity

at homes. An additional 270MW will

be needed in Burundi in the next ve

years to meet a 13% annual growth in

electricity demand and to enable it in the

exploration of nickel reserves, estimated

at 4.2m tonnes.

Interconnecting East Africas grid

One of the most visionary long-term

solutions for East Africas power

requirements is creating a closed-

circuit system in which power moves

from the surplus to the decit areas viahigh voltage cross-border transmission

lines, such as the one being constructed

between Saudi Arabia and Egypt.

In fact, a grid-interconnection plan

for East Africa was rst proposed in

2005 by the East Africa Power Pool

(EAPP), but remains incomplete due to

a lack of nance. We have to look for

alternative nancing- bring in the private

sector, donors, and independent power

producers, says Jasper Odur, executive

secretary of the EAPP.

The EAPP is now working on three

major interconnection projects: the

Eastern African Interconnection, also

referred to as the Ethiopia-Kenya Line,

for which the design has been completed

and a contractor is now being sought.

The 500KV line should be complete

in the next three years at a cost of

US$800million.

The second, the Kenya-Tanzania-

Zambia project, is a 400KV line that will be

one of the longest when complete in 2015,

funded by the Norwegian government at

a projected cost of US$800million. Andthe third transmission cable will link

Kenya with Uganda. Constructed back

in 1955, the 132KV line will be upgraded

to a 220KV double circuit line at a cost

of US$60million. Other grid-connecting

projects include a 220KB line between

Uganda and Rwanda, and a 220KV line

between Rwanda and Burundi.

Such strides towards hydropower

plants and renewable energy projects,

along with well-planned grid

interconnections, will soon lift the

nations of East Africa out of their energy

misery, and save the governments from

falling into heavy debts owed to thermal

power generators, as witnessed in the

last few months.



South Sudan: From virgin territory to the

regions largest economy?

Political stability and security in the

new nation of South Sudan is likely to

attract international investors, but with

little infrastructure in place, there is

great pressure on the new government

to get things right quickly. This includes

the construction of new roads, bridges,

railways, and power supply.

South Sudan is larger than Uganda,

Rwanda, and Burundi put together, and

the expanse of important roads that

needs to be paved or rebuilt is massive

and presents immense opportunities

for construction companies. Real estate

for the public and private sector is

another area that desperately needs

infrastructure.In Juba specically, where numerous

individual and corporate players are

locating to tap the countrys economic

potentials, there is a huge demand for

residential accommodation and ofces.

In fact, the cost of accommodation in the

capital of 2million people currently starts

from US$100 per night for a standard

hotel. The same type of hotel in Dar es

Salaam would not cost more than US$40.

Such gures imply decits in a market

where demand is greater than supply-even

with the continuous construction work.

Therefore, the infrastructure sector

offers countless opportunities; from

designing and supplying manpower,

building equipment and materials

like steel and cement; to the actual

execution of construction work.

Contractors who feel squeezed out by

larger competitors in Tanzania and

other countries will be pleased to find a

place in South Sudan where the market

does not appear saturated.

Regiona paers venture forth

Besides the development ofinfrastructure, a stimulation of industrial

and commercial activities will lift the

economy to a competing position. In the

capital, small and medium businesses,

including kiosks, restaurants, hotels,

water suppliers, and internet cafes have

already been set up, mainly by small

entrepreneurs from Uganda, Kenya,

Ethiopia, Eritrea, and China. The

Chinese, in particular, are also involved

Rich in natural resources

and valuable mineral

deposits, the new nation of

South Sudan holds immense

opportunities for those with

an entrepreneurial spirit.

Where do potential business

opportunities lie? And who has

ventured into this incipient

market so far.Heba Hashem

reports.

south sudan



in large-scale businesses, one of which is

the Juba Beijing Hotel.

Kenyan banks such as Equity Bank

and KCB Group were on the ground long

before the independence of South Sudan

became a reality. Due to the recently

improved investment climate, KCB is

planning to double its branches in the

country. By 2015, it expects to have 30

branches and 100,000 customers; up

from the current 10,000.

KCB was the rst international bank to be

licensed to operate in South Sudan in 2006.

It sees the best investment opportunities

there in agriculture, telecommunications,

construction, education and health.

UAP insurance is another Kenyan

rm that has ventured into this

nascent market. The company recently

announced it would break ground

on its South Sudans real estate plan,which includes residential homes and a

12-storey ofce block in a joint venture

deal with the South Sudan government

estimated at US$15m. UAP has been

operating its insurance business in the

country for six years now, and is hunting

for more opportunities as it attempts to

diversify its portfolio from the volatile

stock market.

Kenyan investors have been providing

South Sudan with food, manufactured

goods, and specialised services. As

an act of gratitude to the role that

Kenya has played in the run-up of

South Sudans independence, the new

republic is welcoming and facilitating

the establishment of Kenyan businesses.

Every Kenyan company that makes anofcial approach is now getting free

government land to set up their premises.

Supping commodities

Most basic goods and food items are

currently imported into South Sudan,

including rice, maize, beans and bananas,

mainly from Uganda and Kenya. The

same applies to textiles, soap, and other

goods. Similarly, many of the existing

hotels, guesthouses, restaurants and

bars have been established by Kenyans

and Ethiopians.

The only Tanzanian commodity that

can be seen in Juba shops is Azam maize

our, in addition to the presence of some

Massai herbal medicine traders which

could originate from Tanzania, Uganda

or Kenya. Although the Exim Bank of

Tanzania is present, no other Tanzanian

banks have extended their branches to

Juba yet. Banking services like insurance,

micronance, consultancies, and others

are still inadequate in relation to the

demand for them.

South Sudan has a wealth of natural

resources, including oil, gas, gold,

uranium, iron ore, copper, zinc, and

other important minerals; signalling

opportunities for mining and exploration

companies. Other potential investment

segments include utilities, manufacturing,services, and agriculture development.

With political stability ensured,

it then becomes possible to plan and

execute national development projects,

and to attract foreign investments and

partnerships with respect to infrastructure

and skills development, Professor Ufo

Uzodike, Head of School of Politics at the

University of KwaZulu-Natal has observed.

Uzodike adds that the positives are

numerous; South Sudan appears to have

good prospects for rapid transformational

development. As such, it should be

relatively easy for the country to attract

partnership arrangements, particularly in

the most glaring areas of infrastructure,

education and skills development, and

industrial and commercial sectors. The

opportunities are immense for those with

an entrepreneurial spirit. But not without

some risks.

Smart players like KCB and UAP are

making strong gains by entering South

Sudan ahead of others. Moreover, trafc

to South Sudan is expected to increase

with the launch of Gulf Airs new service

to Juba, which will launch in February

2012, operating three ights per week.

With 75% of the former Sudans oil

reserves now coming under South Sudan,

the country is all set for major investment

in social and infrastructure development.

Needless to say, if and when South

Sudan joins the East African Community

(EAC), the business opportunities will

be augmented, considering the market

status of the EAC.

Kenyan investorshave been providing

South Sudan with food,manufactured goods, and

specialised services.

KCB was the rstinternational bank to

be licensed to operatein South Sudan in

2006. It sees the best

investment opportunities

there in agriculture,

telecommunications,

construction, education

and health.



More than 200 farmers, scientists,

industry partners, government ofcialsand schoolchildren attended a eld

day at the Kenya Agricultural Research

Institute (KARI) in Njoro in September

to mark the launch of an important new

initiative in the ght for East Africas

food security.

This eld day celebrates an

opportunity to improve agricultural

productivity, protability and farmers

livelihoods, said Gideon Ndambuki,

Kenyas assistant minister of agriculture

as he turned on a new irrigation scheme

for eld tests of wheat resistant to Ug99.

The adoption of new technologies will

positively impact productivity, the

minister added.

The minister further reminded the

crowd that 80% of all Kenyans are

employed by the agricultural sector, and

the sector contributes 24% to the GDP. He

went on to say that Kenyas wheat supply

does not meet the countrys demand. In2011, Kenya will need 900,000tonnes of

wheat, he said. Currently, we are on

track to produce 300,000tonnes that

means we are 600,000tonnes short.

The event also celebrated KARIs

participation in the international stem

rust screening project known as the

Durable Rust Resistance in Wheat

(DRRW) project, and KARIs role as

one of only two international stem rust

screening nurseries.

Participants saw new KARI releases

of sweet potato, canola, linseed,

cassava, maize and sunower, witnessed

irrigation improvements, including a

1000cu metre water tank and sprinkler

system, and toured the 12ha of land set

aside for screening international wheat

germplasm for stem rust resistance.

Much of the wheat was heavily infected

sector focus

KARI mitigates world wheat threat

Many small-scale farmers in Eastern Africa have given up growing wheat because of Ug99,

the new strain of rust that was discovered in Uganda in 1998. But a new project has been

inaugurated at Njoro, Kenya of eld trials of hundreds of new varieties of high yielding, yellow

and stem rust-resistant wheat.Stephen Williams has the details.



with stem and yellow rust.

KARI wheat breeders were particularly

excited to showcase elds of two new

high-yielding wheat varieties that are

now available to farmersEagle 10 and

Robin. Both varieties are resistant to

yellow rust and Ug99, and show no signs

of infection.

Although the father of the Green

Revolution, Norman Borlaug (who

brought food security to India and parts

of Asia) died before he was able to nish

the job in sub-Saharan Africa, he came

to Mau Narok in Kenya in 2005 and was

shocked to see that most of the wheat

varieties he thought were resistant to stemrust had succumbed to Ug99. As a result,

he mobilised the Borlaug Global Rust

Initiative (BGRI) project and the DRRW.

Stem rusts spread

In the intervening years, Ug99 has

spread from Uganda to Kenya, Ethiopia,

Sudan, Eritrea, Tanzania, Mozambique,

Zimbabwe, South Africa, Yemen, and

Iran. Ug99 threatens the breadbaskets

of Pakistan, India, and Bangladesh and

is poised to infect wheat elds in the US,

Canada, and Australia.

Under the leadership of Cornell

University, the BGRI and DRRW have

put KARI-Njoro front and center in

partnership with CIMMYT, ICARDA

and 16 other project partners to mitigate

the threat of stem rust Ug99. Scientists

around the world nearly all of whom

have spent time in KARI-Njoro are

identifying new stem rust resistant genes,

improving surveillance, and multiplying

and distributing rust-resistant wheat

seed to farmers and their families.

KARI is a fundamental project partner,as scientists at KARI serve the world

wheat farmers by screening promising

wheat lines for resistance to Ug99. Wheat

breeders from national agricultural

centres from across East Africa and all

over the world send seeds of their most

promising varieties of wheat to KARI-

Njoro to plant in the eld and test against

the Ug99 disease itself.

So far, we have screened over 200,000

lines of the worlds wheat at Njoro, said

Peter Njau, director of the DRRW project

at KARI-Njoro. I cant say enough how

much the global wheat community owes to

Kenya, said Ronnie Coffman, the director

of the DRRW project, who is vice-chair

of the BGRI. Kenya and Ethiopia are

shouldering the lions share of screening

for a disease that threatens 70% of the

worlds wheat varieties.

New varieties bring hope

In six short years, three new varieties

of high yielding, stem- and yellow-rust

resistant wheat have been introduced

to East African farmers, three are in thepipeline, and 16 other varieties have

been released or are in advanced testing

by national partners in the rest of the

wheat-growing world, according to Dr.

Macharia Gethi, director of the KARI-

Njoro research station.

Now it is in the hands of farmers to

adopt the new varieties and promote




sector focus

them in their fields, said Ravi Singh,

distinguished scientist for CIMMYT,

who accelerates the wheat breeding

cycle through the Mexico-Kenya shuttle

programme, where stem rust resistant

plants are selected and sent back to

the international centre for maize and

wheat improvement in Mexico forfurther testing.

This season, 27,000 lines from 20

different countries are being tested

against Ug99. This collaborative

screening effort benets KARI in

selecting lines that are best adapted to

local conditions and resistant to stem

rust. When found to be superior yielding,

they can be directly released as varieties.

Nineteen varieties released in eight

different countries is a direct outcome of

the screening activities in Kenya.

We are very happy to partner together

to serve smallholder farmers and protect

food security, said Katherine Kahn,

the programme ofcer for the Bill and

Melinda Gates Foundation. Along with

the UKs Department for InternationalDevelopment, the Gates Foundation has

invested more than US$68million in the

DRRW project.

During the eld day, Dr. Ephraim

Mukisira, the director of KARI, conrmed

that KARI was embracing advanced

science and technology in more than 500

agricultural projects. Technologies that

are on the shelf at KARI need to move out

to farmers, he said. He said all would

benet from public and private extension

efforts, and bankers and government

policy makers who enable progressive

agronomic and market infrastructures.

Global development partners

who work and serve farmers will lead

to a new Africa, one that embraces

science and technology, said Mukisira.The importance of wheat cannot be

underscored. This eld day has exposed

us to the achievements of collaborative

partnerships. You have ignited a process

that will impact the lives of the rural poor

and the entire population of the global

community. I am sure that because of

this work, next year bread prices will be

half the price of today.

KARIs work is directly impacting the lives of Africas rural poor


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A re-evaluation in both the quality of

stocks held, and the possible structuralrisks that national markets contain,

has been a key driver in the different

performance o

ea investor (issue01) revised (1)

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