South Africa: Africa Business In Brief Issue: 57

Last Updated: 16 April 2014
Article by Edward Nathan Sonnenbergs

Most Read Contributor in South Africa, September 2016


Ghanaian president's appeal for West African trade integration likely to be frustrated by protectionism and poor transport links

  • Ghanaian president John Mahama has said the 15 members of the Economic Community of West African States (ECOWAS) urgently need to lower tariffs, promote free movement of goods and services, and deepen integration in order to promote growth.
  • Mahama, who took over last month as ECOWAS chairman, said West African nations in particular have struggled with poor transport links and a dependence on commodity exports. He pinpointed wariness of greater competition as a primary reason for holding back liberalisation of trade policy. Many of the region's smaller nations fear being overrun by the economic might of Nigeria, Côte d'Ivoire or Ghana, and are too dependent on "the taxes they collect on goods and services", said the Ghanaian leader.
  • One of the few advances so far has been a limited agreement on external tariffs at a summit in Senegal in October 2013 under the ECOWAS Trade Liberalisation Scheme (ELTS). Mahama said his immediate goal as chairman is to ensure all countries allow duty-free goods under this programme to promote the region as a free trade area.
  • Significance
    ECOWAS has to concentrate just as much on lifting barriers to trade as on making regional trade flows meaningful enough to attract investment. Progress on trade liberalisation is certain to be piecemeal and hard-fought, given the high degree of regional governments' revenues on tariffs.
  • However, improvement of transport links, such as extension of the railway between Côte d'Ivoire and Burkina Faso, is a prerequisite for tangible progress in ECOWAS's efforts to boost regional trade. That railway is optimistically scheduled for completion in 2017, but many more such road and rail projects are needed to make ECOWAS a true regional market of 300 million people, which would then attract investment in manufacturing and agriculture. Without that, even the limited progress towards free movement of goods and services that ECOWAS will be able to achieve will have a negligible effect on West African trade.


Technical committee's report on allegedly corrupt acquisition likely to accelerate Guinea's recovery of lucrative Simandou mining rights
  • A Guinean technical committee investigating the acquisition of two iron-ore mining concessions at Simandou issued a report on 9 April recommending that BSG Resources (BSGR) be stripped of rights it alleges were obtained by corrupt means.
  • The rights to the northern half of Simandou were stripped from Rio Tinto in 2008 shortly before the death of former president Lansana Conté and awarded to BSGR, which sold 51% of its stake to Vale – which has not been accused of any wrongdoing – in April 2010 for USD2.5 billion, after spending USD160 million on development work.
  • Much of the evidence in the committee report is based on an investigation by the FBI in the United States in April 2013 when former BSGR adviser Frederic Cilins was taped agreeing to pay Conté's fourth wife Mamadie Touré – who co-operated in the sting – to hand over or destroy documents sought by the FBI. BSGR maintains that Cilins stopped working for them in 2006 and he faces four years in prison after pleading guilty on 7 March to obstructing a criminal investigation. BSGR insisted it would prove the committee's allegations were false.
  • Significance
    The clear recommendation by the committee and detail contained within its report makes it highly likely the government led by President Alpha Condé will proceed with moves to regain control of the concession. Although this would give Guinea a basis for putting Simandou back out to tender, BSGR will continue to fight its case and said it will pursue international arbitration to halt the government's "illegal" move. That legal battle will necessarily be lengthy, so Guinea will need to find a buyer convinced that BSGR's claim will ultimately fail.


Guinean iron ore mining faces significant disruption as firms lock down operations and pull out foreign staff
  • Foreign mining firms operating in Guinea have suspended work at their sites and ordered expatriate staff to leave the country as a major outbreak of the Ebola virus has spread to the capital, Conakry.
  • Cases of the viral haemorrhagic fever, which has a fatality rate of around 90%, have centred on the remote southeastern region of Nzérékoré, but it took around six weeks to identify the disease as Ebola. The death toll in Guinea stands at 84, but new infections have occurred in Conakry, home to two million people.
  • Mining companies have said they are much more concerned by those cases than what was occurring in the southeast. A number of major iron ore projects are located there, including the Simandou project, ownership of which is split between Rio Tinto and a Vale/BSG Resources joint venture, as well as Sable Mining's Mount Nimba operation. Firms said it is relatively easy to prevent people entering or leaving mines, but in Conakry local employees have been told to stay at home, and foreign staff sent on indefinite leave.
  • Significance
    The high mortality rate of Ebola virus has caused understandable panic amongst expatriate staff, particularly with infections emerging in Conakry. The swift geographical spread is also complicating authorities' efforts to control the epidemic, with cases also emerging in Sierra Leone and Liberia, close to Guinea's southeastern border. Those two countries are now likely to follow the example set by Senegal, which closed its border with Guinea on 31 March. This suggests severe and prolonged disruption to the Guinean economy because of transport difficulties and suspended production.
  • The biggest impact is likely to come in mining because of the key role of foreign workers, who will stay away until their safety can be assured. The production and export of bauxite, of which Guinea holds a quarter of global reserves, will be disrupted for months, while the long overdue development of rich iron ore deposits now faces a further long delay.


Attack on Mozambique's Sena railway unlikely to herald escalation of Renamo attacks on commercial or military assets
  • At around 2100 hours on the night of 1 April, unidentified armed men opened fire on two trains on the Sena railway line, near Semacueza, between Muanza and Dondo, Sofala province. Both trains were en route from Moatize to Beira; one train was operated by Brazilian mining company Vale, the other by Mozambican Railways (Caminhos de Ferro de Moçambique: CFM). Both drivers were injured by gunfire, but rails were not sabotaged and the trains did not stop.
  • Vice-Minister of Interior, José Mandra, accused opposition party Renamo of the attacks in a statement, and media also reported the incident as Renamo attack. However, Renamo denied responsibility for the attacks venturing that "counterintelligence forces" might have staged the attack to discredit Renamo.
  • Significance
    Renamo could have attacked the Sena line since stepping up its armed attacks on police and army units in April 2013. The attackers are likely to have been a group of armed bandits; if they were Renamo members they were most likely to be acting independently, reflecting a lack of communication between the party's political leadership negotiating in Maputo with the government and small bands of fighters in the bush, but we do not assess an escalation of attacks as likely.
  • Small armed groups active in Sofala province are unlikely to have the capacity to severely disrupt the rail line with improvised explosive devices or grenade attacks, and the deployment of further security forces to the area is likely to mitigate risks of further attacks.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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