Ripples of discontent shake Gulf and Western investors in Africa

US Navy personnel at the opening ceremony of an oil terminal facility in Djibouti. A decision to terminate a contract that allowed Dubai’s DP World to operate the Doraleh container terminal is being watched closely by Gulf investors. (Reuters)
Updated 26 February 2018
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Ripples of discontent shake Gulf and Western investors in Africa

LONDON: Djibouti’s decision to terminate a contract that allowed Dubai’s DP World to operate the Doraleh container terminal has once again focused attention on resource nationalism in Africa.
It coincided with the Gabonese government’s seizure last week of the water and electricity distribution unit of French utility group Veolia in the country.
Both events may give Gulf investors pause for thought.
Djibouti’s ousting of DP World from Doraleh was linked to long-standing disagreements between the two sides and growing Chinese influence, London-based Chatham House told Arab News.
Ahmed Soliman, research associate of the Africa program at the geopolitical think-tank, said that the move was in part related to a deal between Djibouti and China Merchants Holdings in 2013 when the Chinese acquired a 23.5 percent stake in the Port de Djibouti for $185 million.
That transaction also gave the Chinese rights to two thirds of the Doraleh terminal, leaving DP World with a third. China later helped to bankroll a huge extension called the Doraleh Multipurpose Port to provide additional capacity for 8.2 million tons of non-containerised goods, he said.
A second issue harked back to February 2017 when Djibouti lost a long, drawn-out arbitration case that threw out claims that DP World made illegal payments to win the Doraleh concession.
Soliman told Arab News: “Given that arbitration case, you could say the relationship between DP World and the Djibouti government soured some years ago. Additionally, Djibouti is now able to look at a wider number of strategic alliances, particularly with the Chinese government, and China Merchants Holdings,” he said.
DP World is not the only company facing issues related to country risk in Africa.
French environmental services group Veolia said it was “examining the legal consequences” of the Gabonese government’s seizure last week of its water and electricity distribution unit, SEEG.
The government has complained for years about frequent water cuts in the capital Libreville and threatened to freeze Veolia’s concession.
But Paul Melly of Chatham House, whose brief includes Gabon, told Arab News: “The political climate in Gabon is edgy, after president Bongo’s highly contentious re-election in 2016 and just months before legislative elections where the opposition could aspire to major gains. Against this testing context, the president has sought to rebuild his popularity through a renewed focus on essential services and public services. This may explain his decision to take a tough line over SEEG.”
He added: “But in taking such a confrontational stance toward Veolia, the government does risk jeopardizing wider investor confidence in Gabon, even if a compromise outcome is eventually negotiated with the French utilities group.”
Country risk has long been viewed as an issue for investors in Africa, especially in the mining sector. Only last year, London-listed Acacia Mining found itself in conflict with the government of Tanzania over disputed tax payments. Barrick — Acacia’s largest shareholder — eventually agreed to cede 16 percent of Acacia’s three gold mines in Tanzania to the government and pay $300 million toward resolving the row.
This year, the Democratic Republic of the Congo (DRC), the world’s biggest cobalt producer, has confirmed it will increase the royalties miners pay on exports of the metal to 5 percent from 2 percent, a move that is opposed by mining groups such as Randgold and Glencore. They claim the measure may deter future investment.
However, Anver Versi, editor of London-based Africa Business, told Arab News that he did not think there was an upswing in populist nationalism in Africa, describing Djibouti and Gabon as “localized” issues.
He told Arab News: “Djibouti is ranked quite high in the World Bank’s table of ‘ease of doing business.’ So it would fly in the face of what they have been doing for a long time, which is trying to attract international investment.”
He added: “Returns from Africa are excellent. Cobalt prices are sky-high and if you are a cobalt producer, you will want to be in the DRC. And if the royalties go up, I think that’s a price most companies would be prepared to pay, given the high price of cobalt.”
Versi said resource nationalism and an appetite for nationalization in Africa was more of an issue in past decades when a popular view was that nationalizing resources would create huge profits that would flood into the country, but it never happened, he said.
Nor does Versi envisage a sovereign debt crisis in Africa as interest rates rise.
He said Africa has turned the corner mainly because oil prices have gone up, “so that is going to change the picture in Nigeria, Ghana and Mozambique.”
On debt, Gambia and Liberia were talking to the IMF to try to reduce their debt burden.
“But it’s not crippling debt. Six out of the ten fastest-growing economies in the world were in Africa in 2017, so the curve is upwards, Versi said.


US poised to end waivers for 5 countries importing Iranian oil

Updated 22 April 2019
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US poised to end waivers for 5 countries importing Iranian oil

  • Japan, South Korea, Turkey, China and India were exempted from sanctions until May 2
  • Since November, Italy, Greece and Taiwan have stopped importing oil from Iran

WASHINGTON: The Trump administration is poised to tell five nations, including allies Japan, South Korea and Turkey, that they will no longer be exempt from US sanctions if they continue to import oil from Iran, officials said Sunday.
Secretary of State Mike Pompeo plans to announce on Monday that the administration will not renew sanctions waivers for the five countries when they expire on May 2, three US officials said. The others are China and India.
It was not immediately clear if any of the five would be given additional time to wind down their purchases or if they would be subject to US sanctions on May 3 if they do not immediately halt imports of Iranian oil.
The officials were not authorized to discuss the matter publicly and spoke on condition of anonymity ahead of Pompeo’s announcement.
The decision not to extend the waivers, which was first reported by The Washington Post, was finalized on Friday by President Donald Trump, according to the officials. They said it is intended to further ramp up pressure on Iran by strangling the revenue it gets from oil exports.
The administration granted eight oil sanctions waivers when it re-imposed sanctions on Iran after Trump pulled the US out of the landmark 2015 nuclear deal. They were granted in part to give those countries more time to find alternate energy sources but also to prevent a shock to global oil markets from the sudden removal of Iranian crude.
US officials now say they do not expect any significant reduction in the supply of oil given production increases by other countries, including the US itself and Saudi Arabia.
Since November, three of the eight — Italy, Greece and Taiwan — have stopped importing oil from Iran. The other five, however, have not, and have lobbied for their waivers to be extended.
NATO ally Turkey has made perhaps the most public case for an extension, with senior officials telling their US counterparts that Iranian oil is critical to meeting their country’s energy needs. They have also made the case that as a neighbor of Iran, Turkey cannot be expected to completely close its economy to Iranian goods.