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.


Philippine government to suspend excise taxes on petroleum products if oil hits $80

Updated 1 min 38 sec ago
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Philippine government to suspend excise taxes on petroleum products if oil hits $80

DUBAI: The Philippine government will suspend the collection of excise taxes on petroleum products if global crude oil prices hit $80 a barrel to soften its impact on Filipino consumers, a presidential spokesperson said Tuesday.
The announcement comes after oil companies on Tuesday implemented their biggest price hike for gasoline products so far this year of 1.6 pesos per liter ($0.03), and prices of diesel and kerosene products up by about 1 peso a liter, with what they claimed was to reflect ‘movements in the international oil market.’
“Excise taxes will be suspended when prices, If I am not mistaken, reach $80 [per barrel]. We are ready when to suspend the collection when oil prices reach that level,” presidential spokesperson Harry L. Roque said during a press briefing.
“The collection will be suspended,” he said, as part of contingencies to protect the public from a possible oil-price shock.
The new duties on fuel – and other items such as cars, tobacco and sugary drinks – are part of the Tax Reform for Acceleration and Inclusion (TRAIN) law which took effect at the start of the year.
The first tranche of the Philippine government’s tax restructuring has been blamed for the rise in consumer prices, which rose 4.5 percent in April and breached the year’s target of between 2 percent and 4 percent.
Finance Secretary Carlos Dominguez, however, said the roughly two-thirds of the April inflation rate was due to the demands of a rapidly-expanding economy, with the TRAIN accounting for only 0.4 point of the increase instead of the estimated 0.7 point.
“We will coordinate with the Department of Finance and the Department of Budget and Management if the benefits [for poor families] aside from the P200 monthly subsidy [as part of the amelioration program] have been released,” Roque said. “There are still other benefits to be given to soften the effects of TRAIN.”