Africa Brief: political difficulties of investment in Africa, Sasol, infrastructure issues hinder coal project, and more

FirstRand experiences the political difficulties of investment in Africa

FirstRand is proving that acquisitions in Africa can give one a serious headache. The bank was thoroughly wrong-footed by political currents in Zambia where it thought it had acquired Finance Bank, only to have the deal jettisoned by Michael Sata’s new government in 2011. In Ghana, FirstRand has almost bought out Merchant Bank, a once-successful corporate bank that got itself into a serious mess of bad debt involving large, politically-connected entities. The Supreme Court of Appeal (SCA) two weeks ago delivered a resounding victory for Netl UEPS, the company awarded the tender to distribute all 15-million social grants made every month around the country. The judgment gave a scathing rebuke of Absa subsidiary AllPay’s claims that the tender process had been problematic. In the SCA case, AllPay produced transcripts of a recording of a meeting between an employee of the South African Social Security Agency (Sassa), which adjudicated the tender, and one Roedolf Kay, where the Sassa employee described the process as “blatantly dirty” and told how key people took cash. The SCA ruled these revelations inadmissible, mainly on procedural grounds. The Securities and Exchange Commission is looking into Netl’s disclosures around the mess.

For the full story, read FirstRand experiences the political difficulties of investment in Africa, by Stuart Theobald, published by Business Day on 08/04/13

Sasol weighs sale of assets in Papua New Guinea

Sasol, the world’s largest maker of petroleum from coal, is exploring the sale of its gas assets in Papua New Guinea. The company — which started exploring for natural gas in Papua New Guinea during 2008—is also in discussions to sell its 50% stake in Iranian unit Arya Sasol Polymer, which it co-owns with Pars Petrochemical of Iran, a unit of National Petrochemical. In addition, in 2010, Sasol had entered into negotiations with buyers interested in acquiring its exploration assets in Nigeria, which were concluded last year for a total consideration of R36m. Sasol is in the process of running many megaprojects, especially in the US, where the expected cost and implementation thereof remain uncertain.

For the full story, read Sasol weighs sale of assets in Papua New Guinea, by Bloomberg, published by Business Day on 08/04/13

Group to buy stake in Kenya

The Kenyan government planned to sell a large part of its stake in a domestic wines and spirits marketer to South Africa’s Distell Group. Distell would purchase 26 percent of Kenya Wine Agencies Limited (KWAL) for an undisclosed amount. As part of the sale, Distell will sign a long-term supply agreement with KWAL for the marketer to have exclusive rights to sell Distell products in Kenya.

For the full story, read Group to buy stake in Kenya, by Reuters, published by The Star, Business Report on 08/04/13

Tete’s lack of infrastructure hinders coal projects

New coal projects in the resource-rich Tete province, in Mozambique, may stall due to infrastructure constraints. Tete holds substantial thermal and metallurgical coal resources but its small rail infrastructure — which links the Moatize coal basin to the port in Beira — can handle only about 3-million tons of coal a year. Diversified resources mining giant Rio Tinto was the first to announce it was reviewing its coal assets in the region, after incurring a $3bn write-down on its Riversdale project. Anglo announced its maiden move into Mozambique in July last year, trumpeting a deal that would have given it a majority stake in Minas de Revuboe, a deposit sandwiched between a Vale mine and a Rio Tinto project. Nippon Steel & Sumitomo Metal Corporation —which owns a third of Revuboe—received the go-ahead to start developing what is stated to be a 5-million-ton-a-year coking coal mine. Since the country is not industrialised enough to absorb more electricity and there are no deals with SA or Eskom to buy that extra power from them, they cannot generate more. Coal stock levels remained high in both Europe and Asia, with China’s weak domestic prices causing a lack of interest in imports.

For the full story, read Tete’s lack of infrastructure hinders coal projects, by Monde Maoto, published by Business Day on 08/04/13

David Okwara

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