Angolan Sovereign Wealth Fund's economic diversification investments under way, but non-payment risks remain high.
On 22 April 2014 the chairman of the Sovereign Wealth Fund (Fundo Soberano de Angola: FSDEA), José Filomeno de Sousa Santos ('Zenú'), said in an interview with Bloomberg that investments will commence in two funds.
The FSDEA was founded in October 2012 with an initial capital of USD5 billion to support diversification from the oil production-led economy. The two funds will focus on the development of some 50 business hotels in sub-Saharan Africa, including Angola, and investments in commercial infrastructure, such as seaports, airports, and roads. The FSDEA is expected to be further funded by the sale of approximately 100,000 barrels of crude per day.
However, such revenue is unlikely to be appropriately ring-fenced, given political rivalries between the Finance Ministry, the FSDEA, which is controlled by the family of President dos Santos, and state oil company Sonangol, which currently has the remit to spend the bulk of oil-production revenue.
Operation of the FSDEA will increase non-payment risks for state contractors in Angola as it diverts oil export revenues and reduces currency reserves that would be available in the event of a sharp fall in oil prices. When oil prices collapsed in 2009, Angola's foreign-exchange reserves shrank by one-third versus the end of 2008 to USD12.1 billion, then equivalent to 2.5 months of imports. The subsequent currency crisis led to unpaid arrears of USD9 billion to mainly Portuguese and Brazilian construction firms.
Projects undertaken by Chinese companies are at a lower risk as they are funded by separate, oil-backed credit lines managed through the China Investment Fund.
In the three-year outlook, the FSDEA is unlikely to reduce dependency on oil exports, currently 98% of total exports. Since the FSDEA will be directed by close associates of President dos Santos, it is unlikely that funds could be diverted if needed to the Finance Ministry, which is accountable for paying state contractors. After three years, the FSDEA is likely to make a significant contribution to Angola's economic diversification and reduce non-payment risks.
Planned strike by dockers' union raises risk of recurring disruption to cargo operations at Côte d'Ivoire's main seaport.
The union of dockers (Collectif National des Dockers et Dockers Transit pour la Défense de Leurs Droits: CNDD) at Abidjan port have issued a strike notice for 2 May 2014, according to a report by a local news agency, Connection Ivoirienne, on 19 April 2014. The CNDD is demanding an increase in dock workers' daily wages from XOF6,000 (USD12.59) to XOF10,000. However, such a strike at the port will cause disruption to cargo, particularly cocoa beans, the country's main export.
Last month, the union held a 24-hour strike that was cut short when riot police used teargas to disperse the protestors, resulting in some minor injuries. The police arrested 11 protesters, who were later released. Cargo operations at the port were partially disrupted for the rest of that day, but resumed the following day after an agreement for further negotiation was reached between CNDD and employers. However, with the new strike notification, it is apparent that the negotiations are not achieving the desired results for CNDD.
The risk of a recurring one-day strike is elevated, with the potential of contagion to the port in San Pedro. The advance warning, though a legal requirement, is likely a part of the union's bargaining tactics to put pressure on employers to accede to their demands. The warning will also generate greater mobilisation and a bigger turnout of dock workers on the day.
In the event of a strike, workers are likely to be more prepared for confrontation with the police, thus raising the risk of increased violence and collateral damage to peripheral property, such as stationery vehicles.
Abidjan port was closed for more than a week in April 2011 during fighting in the city following the disputed presidential election in December 2010, resulting in a blockade of several tonnes of cocoa exports, However, the risk of a future union-authorised strike causing more than three days' disruption is low; no previous dockers' strike has exceeded two days without reaching a resolution.
Risk of BSGR-Vale's Simandou mining contract cancellation could be mitigated by licensees' willingness to renegotiate with Guinean government.
Minister of mines Kerfalla Yansané said that there was sufficient evidence of corruption against BSG Resource (BSGR) in acquiring the Simandou mining concession according to a report by local news agency Guineenews on 19 April. The news agency published an exclusive interview with the minister a week after the release of a report by the Guinean technical committee (Comité Technique de Revue des Titres et Conventions Miniers: CTRTCM), which was charged with investigating BSGR's acquisition of two iron-ore mining concessions at Simandou.
The committee's final report recommended that BSGR be stripped of rights on the grounds that its licences were obtained by corrupt means. BSGR issued a press release challenging the findings of the report and denied any wrongdoing in acquiring the concessions.
According to Yansané, the committee's recommendations do not automatically translate into a binding decision. He noted that the main purpose of reviewing mining contracts including BSGR's was to ensure a level playing field for mining operators and safeguard the interests of the Guinean government. He added that his ministry's priority was to conclude the review process as a matter of urgency in a bid to reassure current mining operators and attract potential investors in the mining sector.
Following the committee's recommendation, it is now left up to President Alpha Condé to take action, either by cancelling BSGR's licences or renegotiating a new set of contractual terms. However, one mitigating factor against cancellation of licences would be the willingness of Vale, now the majority-stakeholder, to make significant concessions with the government, including demonstrating willingness to take part in the joint-financing of Simandou infrastructural projects.
Cancellation of the BSGR-Vale licence will mean the Guinean government will have to put Simandou back out to tender, which can be time-consuming, and will raise the risk of further delays to Rio Tinto's start date for production set for 2018, initially scheduled for 2015.
Kidnap of oil workers highlights severe risk of targeted attacks on foreigners in south and east Sudan.
Unidentified gunmen abducted eight oil workers from the Greater Nile Petroleum Operating Company (GNPOC) at Kanar oilfield, between Muglad and El Heglig, in Sudan's South Kordofan province on 18 April. Sudanese security sources reported to local media that the abductees, including two Chinese nationals and one Algerian, were transported to the South Sudanese border.
One of the largest rebel groups in the area, the Justice and Equality Movement (JEM), denied any involvement, with their spokesman stating the attack was carried out by an armed group led by Abu Ki'aan. JEM claim that Ki'aan split from its movement in 2012, joining a government militia. JEM previously abducted five GNPOC oil workers from the Defra oil fields, South Kordofan, in October 2007; they were released one month later. Further, in June 2013, the Sudanese army accused JEM of attacking the Ajaja pipeline in northern Abyei, South Kordofan.
The government launched a new offensive in November 2013 following rebel advances earlier in the year, including an expansion in their area of operation to North Kordofan. The government's offensive has becoming increasingly reliant on pro-government militia, who lack clear command-and-control structures.
On 20 April, the UN announced it would deploy 6,000 peacekeepers in South Darfur following repeated attacks by pro-government militia on internally displaced people's camps. News website Africa Intelligence reported on 21 March that both JEM and the Sudan People's Liberation Movement/Army – North (SPLM/A-North) had received finances for supporting the South Sudanese government during the recapture of Bentiu, in Unity state, in January. South Sudanese officials have denied JEM or SPLM/A-North's involvement in the fighting in South Sudan.
Both government militia and rebel groups are likely to target oil and humanitarian workers, notably foreign nationals, in kidnap-for-ransom attacks to raise finances. This risk is most severe while in transit in South Kordofan, Darfur and Blue Nile states, with a high risk in southern North Kordofan. There is also a high risk of damage to oil assets in South Kordofan, particularly in the disputed Abyei region. Companies with operations in these areas include GNPOC, Soma Group, China National Petroleum Corporation and Petronas.
Cargo and NGOs at risk as South Sudanese rebel offensive intensifies during rainy season.
Ousted Vice-President and leader of the South Sudan armed opposition, Riek Machar, announced the formation of a formal armed resistance against President Salva Kiir Mayardit's government on 21 April. Machar's announcement follows the largest outbreak of inter-ethnic violence since the onset of civil conflict in December 2013.
On 15 April, ethnic Nuer militia aligned to Machar seized control of Bentiu, capital of oil-rich Unity state, and targeted rival Dinka and Shilluk civilians, leaving more than 200 people dead. On 17 April, in Bor, the capital of neighbouring Jonglei state, some 350 youths overran the security perimeter of a United Nations base and staged retaliatory attacks against Nuers, killing more than 50 people.
On 20 April, youths in Bor threatened further protests if 5,000 internally displaced persons (IDPs) were not relocated within three days, even though a senior UN official vowed peacekeepers would resort to 'lethal force' to protect civilians.
Ahead of and during the rainy season (usually May to October), opposition forces aligned to Machar will probably intensify their campaign, taking advantage of the army's reduced mobility. After capturing Bentiu, opposition forces claimed to be advancing on Warrap state and Machar has threatened to spread fighting to Bahr-el-Ghazal and Equatorian states.
Oil operations face severe risk of disruption and ground cargo movements are at high risk of extortion and theft. Rising anti-UN sentiments in government and around IDP camps in Bentiu, Malakal, Bor and Juba, expose humanitarian and non-governmental organisation operations to attacks, including looting, from ethnic militia, and to a high risk of detention and discrimination by government forces.
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