Current Trade News

THE Tanzania Livestock Research Institute (Taliri) has come up with a new technology to determine chicken body weight, which they say, will help farmers to sell their chickens depending on their actual weight unlike before.
The new tech was researched and developed by Taliri-Mpwapwa Centre scientist Mary Magonka.
Presenting the findings before a team of researchers and reporters during training coordinated by Tanzania Commission for Science and Technology (Costech) recently, Ms Magonka said chickens were sold on face value and not on actual weight, thus reducing farmers' bargaining power for price and market value.
With the new findings, farmers will now sell their chickens using scientific measurements to determine the weight, a move that will make them benefit from poultry farming after spending more time on it, adding that a marketing system would now be formalised.
According to Ms Magonka, the main objective of this study is to determine the relationship between body weight and linear body measurements of chickens and develop regression equations for predicting the body weight.
"At least 119 improved chickens (Sasso) aged 20 weeks of both sexes were involved in the study and 62 of them were roosters, while 57 were hens," she noted.
She explained that a simple and multiple regression model was used to measure the regression of body parameters on body weight.
The results, according to her, suggest that there is a positive correlation coefficient between body weight and other body measurements.
In addition, the findings suggest that the chest circumference and body length have high and positive correlation coefficient to body weight.
Tanzania is home to some 83 million chickens, according to the 2019/20 Agriculture, Livestock and Fisheries Census conducted by the National Bureau of Statistics (NBS).
According to the census, about 75.1 million chickens were owned by smallholders and 12.6 million chickens were owned by large-scale farmers. Zanzibar had 3.1 million chickens in the same period.
Some farmers say the new findings suggest that they are likely to improve the performance of their business.
Source: The Daily News, Tanzania.
Historic moment for African trade - South Africa readies for exports under new trade agreements with African Union countries and with the UK implemented from 1 January 2021
Today marks the start of preferential trade for South African firms under two new Trade Agreements.
They are with countries ready to trade under the African Continental Free Trade Agreement and with the United Kingdom under the SACU, Mozambique -UK Economic Partnership Agreement.
South Africa has put in place the legal and the administrative processes for preferential trade under the African Continental Free Trade Area (AfCFTA) on 1 January 2021 in line with the decision by the 13th Extra-ordinary Session of the Assembly on the AfCFTA on 5 December 2020 to start trading under the AfCFTA on the basis of legally implementable and reciprocal Tariff Schedules and Concessions, with agreed Rules of Origin.
The AfCFTA Agreement has been signed by 54 of the 55 African Union member states and thirty-four (34) countries have already deposited their instruments of ratification to the African Union Commission and have become State Parties. The current State Parties are Angola, Burkina Faso, Cameroon, Central African Republic, Chad, Côte d'Ivoire, Congo, Djibouti, Egypt, Eswatini, Ethiopia, Equatorial Guinea, Gabon, The Gambia, Ghana, Guinea, Kenya, Lesotho, Mali, Mauritania, Mauritius, Namibia, Niger, Nigeria, Rwanda, Saharawi Arab Democratic Republic, Sao Tome and Principe, Senegal, Sierra Leone, South Africa, Togo, Tunisia, Uganda and Zimbabwe. A number of the signatory countries have begun to put the domestic administrative arrangements in place to enable trading under the new terms. These should be progressively expanded within the next few months.
In addition, trade for local firms with the UK commences today under the new Economic Partnership Agreement between six southern African countries and the UK, replacing the European Union partnership terms for the UK market that was in place until 31 December 2020.
Minister of Trade, Industry and Competition, Ebrahim Patel today called on South African farmers and manufacturers to gear up for the new opportunities in export markets.
"Trade with the rest of the continent is a critical source of output and jobs growth. African countries recognize that industrialization is critical to the development of the continent. The new Agreement that comes into effect today will take some time to be fully operational but has the potential to be transformative for Africa, breaking our dependence on a neo-colonial pattern of trade that characterized trade. Our continent exports raw materials and imports finished goods, with substantial value added in the process," Minister Patel said.
"Covid-19 simply reminded us of the enormous price we pay for not developing advanced economies. This is Africa's moment to build resilient, innovative economies on the back of the large markets that the free trade agreement puts in place. It will take dedication and disciplined implementation over the next few years to fully realize the benefits," he said.
Minister Patel said that the Summit Decision to commence trade under the AfCFTA was historic and a milestone in the continent's longstanding efforts to integrate and industrialise.
"AfCFTA presents South African producers and manufacturers with an opportunity for expansion to new markets in West, Central, East and North Africa, and provides alternative markets for the export of value-added goods, as well as services. In addition, exports to the United Kingdom can continue seamlessly with the new agreement with the UK in place," Minister Patel said.
The UK Agreement effectively retains the terms of trade in the existing EU Agreement and will govern the bilateral trading relationship between each of the southern African countries (South Africa, Lesotho, Eswatini, Namibia, Botswana and Mozambique) and the UK.
Both the EU and the UK are significant trading partners for South Africa.
On January 1, 2021, the African Continental Free Trade Area officially took off. It is the culmination of interminable years of political momentum towards Africa-wide free trade. Nosa James-Igbinadolor looks at the place of Nigeria within the new free trade area
The African Continental Free Trade Area (AfCFTA), has finally taken off across the continent. Originally scheduled to kick off on 1 July last year, the coronavirus crisis, and other factors stalled the proposed take-off.
It was in March 2018 that African heads of state and government held an extraordinary summit in Kigali, Rwanda and agreed to establish the Free Trade Area.
The agreement to create the AfCFTA went side by side with the Kigali Declaration, which called for the "operationalization" of the AfCFTA and for the start of the more ambitious Phase II talks, which would cover competition policy, intellectual property and investment. A protocol on the free movement of people was also signed.
The AfCFTA, according to South Africa President, Cyril Ramaphosa, will boost intra-African trade, it will promote industrialization and competitiveness and contribute to job creation, and it will unleash regional value chains that will facilitate Africa's meaningful integration into the global economy. The AfCFTA will also improve the prospects of Africa as an attractive investment destination. It will help advance the empowerment of Africa's women, by improving women's access to trade opportunities which will in turn facilitate economic freedom for women, and expand the productive capacity of countries. "To support this, we must strengthen women's participation in the continental economy by ensuring there is greater public procurement earmarked for women-owned businesses. We must ensure that there is sufficient support given to women-owned SMEs and cooperatives in both local and regional economies," the South African leader emphasized
In addition to increased trade flows both in existing and new products, the AfCFTA has the potential to generate substantial economic benefits for African countries. These benefits, according to the International Monetary Fund, include, "higher income arising from increased efficiency and productivity from improved resource allocation, higher cross-border investment flows, and technology transfers. Besides lowering import tariffs, to ensure these benefits, African countries will need to reduce other trade barriers by making more efficient their customs procedures, reducing their wide infrastructure gaps, and improving their business climates. At the same time, policy measures should be taken to mitigate the differential impact of trade liberalization on certain groups as resources are reallocated in the economy and activities migrate to locations with comparatively lower costs."
The expectation is that services and goods should be flowing freely in and out of the participating countries, making the continent the biggest free trade area in the world.
The free trade initiative could create an integrated market with a total GDP of over $3 trillion, according to US think tank, Brookings Institution.
The AU says that the agreement will create the world's largest free trade area. It also estimates that implementing AfCFTA will lead to around a 60% boost in intra-African trade by 2022.
The continent currently lags behind other regions of the world in terms of continental trade. According to the African Development Bank (AfDB), intra-Africa exports amount to only 16.6% of total trade.
In 2018, the African Export-Import Bank reported that only 15% of international trade by African countries takes place within the African continent. This percentage compares unfavorably with other continents such as Europe (67%), Asia (58%) and North America (48%).
In July 2019, Nigeria finally signed the AfCFTA after pulling out days before the agreement was due to be signed in March 2018. President Muhammadu Buhari said he needed further consultations in Nigeria.
Trade within Africa is dominated by trade within regional blocs and not trade between regional blocs, therefore, most trade and investment takes place close to home.
Intra-regional trade in sub-Saharan Africa is currently very concentrated, with some 66% of the regional demand for intra-regional exports accounted for by just 10 countries, including Côte d'Ivoire, the Democratic Republic of Congo, South Africa and some other Southern African countries
Tensions continue to exist between smaller and larger states across the continent when it comes to trade and market access. This is because the possible forward and backward linkages between their economies - the creation of transborder value chains - have not yet been established.
As noted by Professor Carlos Lopes of the University of Cape Town in 2018, "once studies have been done, it will be possible to establish which countries can specialize in which elements of which supply chains. For example, the South African car industry uses leather, but South Africa is not a major leather producer; but other African countries could supply the leather. So, the key is to establish these linkages. Once the agreement is ratified, the opportunities will emerge."
For Nigeria, the prospects for increased trade across the continent represents an opportunity to expand its balance of trade as well as its balance of payment.
The country's trade with the other countries that belong to the Economic Community of West African States (ECOWAS) remains poor--as do aggregate trade flows among all the ECOWAS member states. The vast majority of Nigeria's exports to the ECOWAS are mineral fuel and oils, agricultural and manufacturing forming a miniscule percentage of the country's exports to the sub-region. The figures are even more dire when it comes to trade across the wider continent.
Simply put, Nigeria is not doing much trade with other African countries and the AfCFTA represents a veritable opportunity to expand trade, grow the economy and engender development.
The service sector makes up 65% of the world's output and over half of Nigeria's economy, and as Gbemisola Alonge noted in Stears Business, "for Nigeria to fully reap the benefits of a closer Africa, it needs to think beyond the ancient focus on goods and position itself to win in the services game. The service sector is an escalator for new economic growth in Nigeria and plays a more significant role than industry in the economy through its contribution to Gross Domestic Product (GDP), capital imports, and employment.
In August, just a few months after celebrating its signing the AfCFTA, Nigeria imposed a ban on the movement of all goods from countries with which it shares a land border: Benin, Niger and Cameroon, effectively banning all trade--import and export--with its neighbors. The border closure has impacted Nigerian consumers and exporters with traders being refused entry of goods, even those for which they have already paid customs duties, and consumers facing inflated prices of imported food products--with some products having doubled in price.
The closure of the Nigerian border went against the spirit, and the letter of the AfCFTA, and as noted in a Brookings Institution report, is "inconsistent with its 44-year long commitment to the Economic Community of West African States (ECOWAS), West Africa's Regional Economic Community which Nigeria spearheaded in 1975, and is one of the eight building blocks of the AfCFTA. Under the ECOWAS Protocol, member states committed to the establishment of a common market, including through the liberalization of trade by abolition, among member states, of customs duties levied on imports and exports, and the abolition, among member states, of non-tariff barriers in order to establish a free trade area... Specifically, all 15 ECOWAS countries are committed to eliminating customs duties, quotas and quantity restrictions and accord each other most favored nation treatment."
Supply side constraints such as the current government's topsy-turvy macroeconomic and monetary policies as well as underdeveloped physical and institutional infrastructure remain a threat to Nigeria's effective participation in and efficient derivation of critical trade and economic benefits from the AfCFTA. Thus, while market access is there, supply-side constraints limit the country's ability to respond to the opportunities inherent in the AfCFTA and remain a barrier to Nigeria's competitiveness.
Nigeria's inability to take advantage of the US designed African Growth an Opportunities Act (AGOA) might be pointer to the country's ability to take advantage of AfCFTA.
The AGOA project initiated by the United States of America in 2,000 was to help develop trade and facilitate exporting over 6,000 goods into America with no tariff. The trade agreement primarily set out to galvanize the African economy.
Though AGOA programme has been on for the past 20 years, Nigeria has never taken full advantage of the potentials due to its overreliance on oil. The country is said to have exported goods worth less than $10 million to the U.S under the programme in 20 years.
It is pertinent that Nigeria responds to the opportunities presented by AfCFTA by designing policies and promote market access for Nigeria's exporters of goods and services, spur growth and boost job creation.
It is also critical that the country moves swiftly to eliminate barriers against Nigeria's products, spur the industrialization of the country by providing an expanded platform for Nigerian manufacturers and service providers for connection to regional and continental value chains, improve competitiveness, and stimulate increase in exports of goods and services across the continent. The government must also provide a platform for Small and Medium Enterprises (SMEs) integration into the regional economy and accelerate women's empowerment.
Source: This Day
The Zimbabwean government on Monday launched the agricultural commodities exchange that will ensure farmers get market determined prices for their commodities.

Zimbabwe previously had a commodity exchange which was closed when the government gave the monopoly to buy and sell maize and wheat to state grain procurer, the Grain Marketing Board (GMB) in 2001.

Finance Minister Mthuli Ncube launched the commodities exchange which will be supported by a warehousing receipt system. This means the government will no longer fix prices of agricultural commodities.

"The commodities exchange will provide an organized market of players across the agricultural commodities value chain which include small-scale to large-scale farmers, buyers, regulators, retailers, banking institutions and warehouse operators," he said.

"This will close the existing arbitrage gaps caused by middlemen and stimulate price discovery," Ncube said at the launch.

He said the exchange will encourage formalization of small-scale farmers, thereby ensuring sustainability of farming activities, access to credit facilities through collateralization of agricultural produce and enhance farmers' contribution to employment creation.
Source: The African Markets
The East African seaboard is the last great energy prize going. But its potential is not yet realised.
When, in February, Somalia’s ambassador to Kenya found himself bundled aboard a direct flight to Mogadishu after hasty instruction from the Kenyan government, it was clear that the long-standing Indian Ocean border dispute between Kenyan and Somalia had reached a new low.
With both sides laying claim to a 100,000sq km triangle containing potential offshore oil and gas, the long-standing row – which was taken to the International Court of Justice (ICJ) in 2014 – was triggered once more after Kenya accused Somalia of auctioning off four contested blocks to bidders during a conference in London earlier this year.
While the Mogadishu government strongly denies this claim, Kenya’s foreign affairs principal secretary, Macharia Kamau, hit back by saying:
“This unparalleled affront and illegal grab at the resources of Kenya will not go unanswered and is tantamount to an act of aggression against the people of Kenya and their resources.”
As diplomats and ministers continue to trade blows, accusing one another of undermining national sovereignty and threatening regional stability, the standoff reminds the region of its lucrative hydrocarbon reserves and the high stakes involved in their exploitation.
Substantial discoveries made over the past decade have drawn the focus of large international oil companies (IOCs) – some of whom are beginning to produce at established sites along east Africa’s India Ocean seaboard – and have triggered the interest of a flurry of smaller exploration companies and eager parastatals looking to pioneer the next big find.
Africa’s Indian Ocean sits directly opposite the energy-hungry Asian markets of India, Southeast Asia and China.
With liquefied gas able to ship directly from source to port across the ocean, the positioning acts as a huge draw for investors looking to minimise their transport overheads and reach their Asian customer base.
With industry experts believing the relatively unexplored region may hold significant oil and gas reserves, the lucrative sector could fast-track development if governments are able to capture, realise and democratise the profits.
Ed Hobey-Hamsher, senior Africa analyst at global risk consultancy Verisk Maplecroft, argues that oil and gas potential in the region is vast.
“I don’t think anyone wants to be left behind,” he says.
“It’s not an easy place to do business but that certainly doesn’t mean that IOCs can afford to overlook it.”
Regional potential
Darren Woods, CEO of Texas-based ExxonMobil, the world’s largest publicly traded oil company, stunned industry observers last year when he announced plans to spend more than $200bn over the next seven years to increase his firm’s production of fossil fuels, along with investing in petrochemicals and refining.
This announcement came against a backdrop of modest capital expenditure in oil and gas by industry majors since the price of crude tanked in 2014.
As oil prices tentatively rebound, with Bank of America Merrill Lynch’s energy outlook for 2019 expecting Brent crude to settle at around $70 – although the risk of price volatility is high in the context of global trade disruptions – many IOCs are looking to ramp up output and increase profits.
ExxonMobil is banking on increased demand, despite global efforts to diversify the energy mix, and frontier markets like East Africa’s Indian Ocean will come to represent an ever-increasing share of industry portfolios, say analysts.
Two substantial discoveries over the last decade – gas in northern Mozambique and oil in Uganda – have directed the industry spotlight towards the East African and Indian Ocean regions, with many believing these finds are just the tip of the iceberg.
Italian oil major ENI along with US explorer Anadarko (which was acquired by Chevron in April for a total cost of $50bn) made a series of discoveries in Mozambique’s Rovuma Basin in 2010, in what was billed as the biggest natural gas find in recent decades.
With proven reserves of 100 trillion cubic feet (tcf), and resource estimates of 150 tcf, the Rovuma field holds enough gas to supply Germany, Britain, France and Italy for 15 years.
If these reserves are exploited effectively, experts predict that Mozambique could become the world’s third largest exporter of liquefied natural gas (LNG).
Workers on a rig in Mozambique’s offshore Coral Field. The Coral natural gas field located in Area 4, offshore Mozambique, is being developed by Eni as the operator.
In 2006, Uganda discovered oil in the Albertine Rift Basin near its border with the Democratic Republic of Congo (DRC).
Reserves are estimated at 6bn barrels, with production expected to begin in 2022 and plateau at 230,000 barrels per day (bpd).
Although this pales in comparison with Nigeria’s capacity of 2.5m bpd, the ability of Uganda to kickstart production by partnering with large companies – in this case French major Total and China National Offshore Oil Corporation – is regarded as a prototype for the region.
Matthew Richmond, owner of Dar es Salaam-founded Samaki Consultants, believes the success or otherwise of these two projects will ultimately determine the overarching appetite for investment in oil and gas throughout the region.
“All eyes are on how it will work out with Uganda exporting their crude and how it will work out with Mozambique exporting their liquefied natural gas,” he says.
“Those are the two benchmarks on what happens in eastern Africa.”
Bringing Mozambique’s LNG online
After considerable industry to-ing and fro-ing following setbacks that include instability in the region and Mozambique’s hidden debt scandal, Maputo is awaiting final investment decisions (FIDs) from Anadarko and ExxonMobil – the two largest stakeholders in its gas fields – amounting to $20bn and $30bn respectively.
ExxonMobil’s Darren Woods has stated that the firm’s decision will be made later this year, as the company evaluates bids submitted by groups competing to build a pair of mega-liquefaction trains to liquefy gas in Mozambique’s north-eastern Cabo Delgado region – home to the Rovuma Basin.
Anadarko’s decision may come earlier, with chairman Al Walker saying they are “very close” after having secured a sales and purchase agreement (SPA) with India’s Bharat Petroleum Corporation, which has undertaken to purchase 1m tonnes per annum (tpa) of LNG for 15 years.
This brings the total number of locked-in gas sales to 8.5m tpa out of a 12.88m tpa capacity – a level Anadarko has previously said would allow it to make the investment.
Anadarko, an LNG and Africa novice, was forced to secure export destinations before it was able to secure finance and ultimately commit to the project.
ExxonMobil, with its large balance sheet and global network of buyers, along with extensive experience on the continent, is able to commit with far fewer stipulations from its partners.
No quick payoff
While the FIDs signal the biggest steps yet towards unlocking Mozambique’s gas potential, Verisk Maplecroft’s Hobey-Hamsher emphasises that the two fields aren’t predicted to come online until 2024, meaning that stakeholders – particularly the Mozambican government – shouldn’t expect dividends anytime soon.
“If you talk to the government, they are still talking about LNG coming online in 2022 and that’s just not feasible,” he comments.
“We expect the fields to come online in 2024 but in terms of the government revenues that will be 2027.”
This, he argues, represents significant political risk for Mozambique as there are “massive discrepancies” between what the government is promising and what it will be able to deliver.
Other hindrances that continue to blight the country’s investment climate include the discovery of $2bn worth of hidden public debt in 2016, which saw the IMF cut funding and confidence in Mozambique plummet.
Al-Shabaab affiliated militants also continue to wreak havoc in Mozambique’s Cabo Delgado region, with an attack on Anadarko LNG infrastructure earlier this year resulting in the death of a company contractor.
Such political and security risks mirror issues in other resource-rich areas across the continent and are often the deciding factor in whether governments can capitalise on their natural wealth or not.
Contrasting investment climates
The Rovuma field extends into Tanzania, but the latter country’s political climate is retarding investment and activity in a sector with an estimated 55 tcf of gas reserves.
In many respects, Tanzania was first out of the blocks in terms of developing its gas fields, with the shallow offshore fields of Songo Songo and Mnazi Bay feeding gas into places including Dar es Salaam since the start of the millennium.
However, under the presidency of John Magufuli much of the foreign capital needed to continue developing resources has dried up.
Verisk Maplecroft’s 2019 Resource Nationalism Index puts the country in the “extreme risk” category.
In its crackdown on the extractive industries the government has hiked taxes, changed contracts and demanded stronger local content requirements.
While Tanzania should be commended for aiming to get more back from its latent wealth, the erratic and unilateral manner in which it has pursued these goals has strained ties with the business community.
In the energy sector, government talks with Norwegian firm Equinor have languished: the final investment decision on a $30bn onshore LNG export terminal still looks distant.
Richmond explains that much of the delay has been caused by tough demands from the Tanzanian government.
“In the past, if there was an issue with a contract it was arbitrated in an international court,” he says.
“Now Tanzania has said it has to be done in the local court – how do you think that will work out?”
While Mozambique, in contrast, has greater security and legacy issues, its government is more welcoming to foreign companies, which is reflected in the number of multinationals clamouring to do business there.
Mozambican President Filipe Nyusi recently announced plans to establish a sovereign wealth fund to govern gas revenue and focus spending on infrastructure development, poverty reduction and economic diversification, as well as protecting capital from corruption.
This mirrors Norway’s $1 trillion sovereign wealth fund, the largest in the world thanks to years of oil revenue, and suggests that Mozambique is at least nominally working towards effectively managing its gas sector.
Maputo is now set to launch its sixth licensing round in the second half of this year with Hobey-Hamsher predicting a full house.
“I expect all the major IOCs to be very interested in whatever acreage Mozambique makes available during that licensing round, should it go ahead,” he says.
Disputes in Somalia
In contrast with Mozambique’s progress, the spat between Somalia and Kenya playing out further up the coast only adds to Somalia’s long-standing difficulties in developing its significant offshore potential.
According to seismic surveys conducted by Spectrum Geo and Soma Oil and Gas, Somalia could hold as much as 100bn barrels worth of offshore potential.
Yet fortunes have gone from bad to worse as the government mismanages the sector and is repeatedly undermined by al-Shabaab attacks and the constant wrangling over authority with the autonomous regions of Puntland, Jubaland and Somaliland, the last of which has declared itself independent.
British company Soma Oil was one of the first energy explorers to enter Somalia in 2013, after nearly two decades of conflict.
The excitement abated after the company was accused of “appearing to fund systematic payoffs to senior ministerial officials” by a UN report and was investigated by the UK government’s Serious Fraud Office (SFO).
However, in 2016 the SFO concluded that there was “insufficient evidence to provide a realistic prospect of conviction”.
The conference in London earlier this year – which was organized by Spectrum Geo and the Somali government and led to Kenya’s allegations that Somalia was auctioning contested blocks – looks to have reignited activity in the sector.
Somalia promoted 15 new offshore blocks, including the four contested ones, with the government saying it will accept bids for exploration licences in November.
Industry remains sceptical
Industry insiders, however, are sceptical that any of the major players will take up Mogadishu’s offer despite the attractive offering presented in the geological surveys.
As President Mohamed Farmaajo’s government hurriedly works to push a new petroleum law through parliament and create a Somali Petroleum Agency from scratch, observers and opposition figures argue that Somalia does not have the institutional and regulatory capacity to handle large oil deals.
In this context, making a deal with the Somali government looks all too risky for many in the private sector.
Hakim Abdi, postdoctoral researcher at Lund University, believes any contracts the government signs will be vulnerable to corruption.
“I am afraid that the government will siphon off the money and leave nothing for the development of the country and the enhancement of its citizens,” he says.
Any funds accrued from oil development may also serve to further destabilize the already shaky relationships between Mogadishu and its regional detractors, he adds.
“There is already wrangling over authority, and who controls where; imagine what will happen if there is oil money involved,” he comments.
The dispute with Kenya adds to fears that oil will threaten regional stability as the Horn witnesses the souring of a relationship which is key to keeping al-Shabaab at bay.
The withdrawal of the Kenyan Defence Forces from a military base in Somalia, although not directly linked to the oil discord, speaks of strained relations between Nairobi and Mogadishu that could do without the complications of resource tussling.
As it stands, Somalia is hoping that the ICJ will award it the blocks, whereas Kenya would prefer a bilateral settlement that would involve some form of compromise.
Silas Olan’g, Africa co-director at the National Resource Governance Institute, an independent think tank, believes that if the court sides with Somalia, it may cause a domino effect to ripple down the Indian Ocean as other nations seek to redefine their maritime borders for strategic interest.
Comoros promise
Most of the large oil and gas finds thus far have hugged east Africa’s coastline, meaning that maritime borders – extending 200 miles (321km) according to the United Nations Law of the Sea – are extremely important in ownership disputes.
Outside this limit, the Indian Ocean gives way to a number of tiny African island nations that have been at the centre of much speculation and exploration since the gas bonanza in Mozambique.
Sitting just 300km opposite Mozambique’s Cabo Delgado region and its lucrative gas fields, the Comoro Islands are perhaps the next in line for a major discovery.
According to initial data from London-based exploration firm Discover Exploration, the archipelago – with a population of just 850,000 – could be sitting on as much as 7bn barrels of oil and 1.1 tcf of associated gas.
To put this into perspective, the US has 36.5bn barrels worth of oil according to 2017 data from the CIA World Factbook – only around five times more than the Comoros.
However, proven reserves and estimated resources are two very different things, meaning interest in three offshore blocks by Discover Exploration, which is leading the Comoros push, is a speculative undertaking.
“It’s a very undeveloped part of the world despite the fact that it’s very close to big discoveries in Mozambique,” says COO Alexander Mollinger.
“It is very risky and we as the contractors take all the financial risk; but we see that there is huge potential.”
British firm Tullow Oil, with a relatively large footprint across Africa, has partnered with Discover Exploration to conduct a 3D seismic survey of the area in the third quarter of 2019, depending on government approval.
The public sector, in fact, has been relatively quick to act, with Mollinger describing how the government managed to create a petroleum bill and push it through the Comoros assembly in just six months after Discover Exploration first made contact in 2012.
At the same time, political instability surrounding an election in which President Azali Assoumani controversially claimed over 60% of the vote – despite opposition claims of fraud and observer reports of irregularities – have threatened to spark unrest in the coming months.
Analysis from the African Energy consultancy group states that while private sector interest from UAE, Chinese, French and Italian energy entities has spiked in the past few years “all bets are off should political instability descend into a full-blown crisis”.
Operating in a volatile environment, and with no guarantee of making a discovery, Mollinger explains how companies such as his account for risk by spreading it over a large portfolio of similar assets.
Discover Exploration, for instance, has similar projects in Gabon and New Zealand along with a low-return low-risk project in the North Sea.
If one asset strikes black gold, the operational costs of the rest are covered as production begins to generate income.
The Comoro Islands and the surrounding region, however, are perhaps the most compelling area due to their strategic positioning in relation to neighbouring markets.
“It’s a direct line to the energy-hungry Asian markets,” he says. “It’s literally a straight line and you don’t have to pass through major conflict areas which exist around the Suez Canal.”
Prospects in Seychelles
Elsewhere in the Indian Ocean, the Seychelles is one of Africa’s most remote island nations – located around 1,800 km east of the Kenyan port of Mombasa.
Although the subject of less industry speculation, the tectonic history of the 115 islands making up the archipelago presents a strong case for the future of oil and gas finds, says Patrick Samson, exploration manager at national oil company Petro Seychelles.
Currently the government has four wells and is still in the early phases after creating what Samson calls the most attractive “benchmark” petroleum legislation for the region in 2013.
Sub-Sahara Resources, an Australian firm, has recently moved into the area and is looking to get lucky after the Japanese National Oil Company left last year. Indeed, Samson points out how the government is experiencing heightened interest and numerous survey requests since the Indian Ocean region has come into the fore.
Further south, the Seychelles government is partnering with Mauritius to explore areas located outside the maritime boundaries of both nations, with the dividends of any discovery to be shared equally among both parties.
This partnership stands in direct contrast to the dispute between Kenya and Somalia, and the collaboration – through the combining of funds and the sharing of best practice in terms of governance and legislation – will help unlock any potential in the region.
As Aly-Khan Satchu, CEO of Nairobi-based investment advisory firm Rich Management, says:
“The East African seaboard is the last great energy prize going.”
Source: African Business
In his bestselling memoir, The Boy Who Harnessed the Wind: Creating Currents of Electricity and Hope (2009), William Kamkwamba laid bare the challenges faced by millions of Malawians living in rural areas without access to electricity.
Kamkwamba's epic memoir, in which he recounts how, forced to drop out of school at 14 because famine had ruined his family's harvest leaving them unable to pay his fees, he used books from the local library to teach himself how to build a windmill using scrap materials to generate electricity.
His innovation and determination to provide his village, Kasungu, with electricity and water garnered first national and then international attention. Today the teenager, whose story culminated in a book and a film (available on Netflix) is still changing lives through his Moving Windmills project. The Environmental Studies graduate and entrepreneur and Moving Windmills project have a long-term plan to distribute power using low-cost technologies, which will be anchored by solar, wind and rivers (mini-hydros).
The challenge is huge. Some 83% of Malawi's population of approximately 19 million people lives in the rural areas. Online energy portal Energypedia noted in a 2020 report that: "[Malawi's] National Energy Policy estimates that 93% of total energy demand is met by biomass. Households consume 84% of the total primary energy. A staggering 99% of household energy is supplied by biomass. Less than 2.3% of the total national energy demand is met by electricity, 3.5% by liquid fuels and gas, and 1% by coal." Energypedia's report said that only 18% of the population has access to the grid, while the almost blanket use of charcoal and firewood for domestic use is "exerting significant pressure" on the country's forest resources.
A 2017 study, published in the Proceedings of the National Academy of Sciences (PNAS), found that Africa has huge untapped resources for renewable energy, which must be used to meet increased demand.
Meanwhile, the Malawi Renewable Energy Strategy estimates that the country could actually connect 27% of the population by establishing decentralised mini grids in communities of 250 people located at least 5 km from the national grid. However, since the Malawi Rural Electrification Project (MAREP) rolled out 40 years ago, 96% of the country's rural population still remains off grid. At the present rate, Malawi needs at least 960 years to connect every rural home or institution and achieve energy for all.
"I'm very interested in finding ways to use the knowledge that I have gained through my education and interacting with people to solve some of the problems people are facing in Malawi," Kamkwamba told Africa in Fact.
Malawi's Department of Energy Affairs agrees that the country cannot eliminate the huge unmet need for electricity by extending the national grid alone. The country's revised National Energy Policy recognizes the challenges of continually extending the grid because some rural populations live in hard-to-reach places. Instead, the policy recommends that Malawi diversify the generation and distribution of electricity by embracing the use of solar, water and wind mini grids to accelerate rural electrification.
"Rural access is to us still on the lower side; we wish we could have done more [by now]. The 2018 census shows that 84% of people in Malawi live in rural areas. This means we are still doing them a disservice," Edgar Bayani, the Director of Community Energy Malawi (CEM), says. Bayani suggests that Malawi's energy woes would be met if the government operationalized key policy documents such as the National Energy Policy, Renewable Energy Strategy and Action Agenda.
Kamkwamba, meanwhile, is actively pursuing his ambition to assist Malawi by coaxing a cadre of youngsters to embrace innovation from a very young age. This includes the creation of an innovation centre in Kusungu, which will be a hub for "students, mentors and community to create innovative solutions to Africa problems".
"We talk about wind and solar because it's a simpler and cheaper way to give us electricity and irrigation," Kamkwamba says. "Clean water and power are our right as humans on this earth, and for too long our governments in Africa have failed to provide these things."
The Moving Windmills Foundation is working with five primary and secondary schools in Kasungu to solarise their power and has installed internet-in-a-box systems with the primary goal of bringing consistency to every school day for hundreds of students.
"We have been able to build three classroom blocks with two classes each for the local primary school, Wimbe Primary School," Kamkwamba says. "These new classrooms have solar panel installations that allow the students to study late into the night. We have also installed solar panels and systems in Kachokolo High School, which has allowed the students to use computers for their studies for the first time in their lives."
Malawi needs to invest $3 billion to leverage abundant renewable energy resources to save money, while providing reliable electricity for growth and rural electrification, according to a 2019 study by the Rocky Mountain Institute. "Malawi has an abundance of resources with which a sustainable energy sector could thrive. Ending energy poverty and ensuring that no country or person is left behind must become a priority for all stakeholders," the study said.
David Keith, an African energy sector expert at Tetra Tech International Development Services, agrees that billions of dollars in investment in Africa's electricity sector are needed. "The key here is we really believe the energy sector is just another industry--it is not a government enterprise. And if we could get that sort of belief across, then governments will get out of the power business," said Keith, who has worked on energy projects in South Africa, Malawi, Uganda, Ghana, Benin, Tanzania, and for the West Africa Power Pool.
To augment Kamkwamba's efforts in powering and lighting Malawi, the country's government is now working with Independent Power Producers (IPPs) to help the country in power generation endeavours. It has engaged 14 IPP companies to generate solar power and others to use wind, geothermal, waste and coal.
Helping to fill the energy void in his home village and lessening energy poverty, Kamkwamba's Moving Windmills Foundation has established a biogas digester project in Kasungu that uses cow dung to generate gas, which is used for cooking and lighting homes. It has also taught villagers how to fix water wells to avoid cultivating diseases that come from lack of maintenance.
"Deforestation is a huge problem in Malawi, which only adds to the problem," he said. "People cut down trees because they have no power to run electric stoves, etc. So, they use firewood. This is a problem all over Africa. The windmills don't produce enough power to operate a stove, but with some more innovation, this could be easily solved."
Kamkwamba still regularly speaks at conferences and other events, where he continues to explore various renewable energy sources that could have the potential to help Malawi.
"Africa is blessed with renewable energy and does not need fossil fuels to help people access energy and create growth, and the cost of renewables has come down significantly and is much lower than that of fossil fuels," Mohamed Adow, the founding director of the Nairobi-based think tank Power Shift Africa told Africa in Fact.