Nigeria 2014 growth to exceed 6% despite downwards revisions on previous years

Nigeria's recent rebasing of its GDP continues to lead to statistical adjustments. These include last week’s downwards revision of Nigeria’s 2013 GDP growth rate from 7% to 5.5%. The 2012 GDP growth has also been reduced to below 5% by the National Bureau of Statistics (NBS), although 2014 growth is still expected to exceed 6%.

While Nigeria is still operating from a massively increased GDP "base" level, such a change does raise concerns about future official growth rates and whether growth - quite aside from broader questions of "job creation" and increase in living standards - is being adequately assessed.

Nevertheless, the NBS projects that GDP growth in 2014 will be approximately 6.2%, based on a first quarter GDP growth rate of around this level. NBS director general Yemi Kale claims that Q1 growth is typically slower than growth for subsequent quarters.

Although growth in the oil and gas sector has been modest, optimism about growth in other sectors of the economy abounds. For example, the Renaissance Capital emerging markets bank has recently released a report entitled "Nigeria's GDP: Bigger but slower - Manufacturing is the engine of growth". It suggests that percentage manufacturing growth has been in double digits, with the Dangote-dominated and Lafarge target cement sector being a notable success story. Rencap also cites textiles as a major growth area, a significant development given the decimation of textile producers in West Africa, including in Ghana, because of foreign competition.

The attraction of the diversified Nigeria growth story is also illustrated by analyst observations that at least US$500 million of investment is planned to build a series of major shopping centres by or before 2016. South African banks, retail players, plus the UK’s CDC private equity spin-off Actis, are among the participants in a country with a significant "demographic dividend". South Africa's Shoprite Holdings, which operates a number of shopping centres or malls throughout Africa - including in Lagos' Ikeja district, Abuja and Accra - has just announced a 10.5% increase in its profits through to June 2014, and so interest is likely to continue.

For more news and expert analysis about Nigeria, please see Nigeria Focus and Nigeria Politics & Security.

© 2014 Menas Associates

Morocco: Al Adl leader publicly criticises the monarchy from abroad

 

In Algiers, leading a delegation to the conference of Algerian Islamist party Mouvement de la société pour la paix (MSP), Mohamed Abbadi, Abdeslam Yassine's successor at the head of Al Adl wal Ihsane (Justice and Good Works) movement made a strategic move unlikely to win him much popularity with the Moroccan authorities. Interviewed by the conservative Algerian daily Echourouk, he declared that “power in Islam is based on shura (consultation) and not on heredity … We suffer from the monarchy, and, progressively, if God wishes, we will get rid of it and return to what the Qur'an says”. Abbadi has already made remarks with this content and tone to the media. The difference this time is that it was an Algerian newspaper that published them under the title “We suffer from the monarchy … and wish to see it disappear.”

Al Adl refuses to recognise the Moroccan sovereign's right to the title 'Commander of the Believers', and in turn the Moroccan State refuses to recognise Al Adl. Abbadi's line is that only by strict respect of the principles which prevailed in the earliest Islamic community can the lost power of the Muslim nation or Umma be restored. (The restoration of lost Islamic glories is a recurrent theme in Islamist discourse.) Although Abbadi advocates party politics, his movement has shown no readiness to make concessions to the Palace in order to move into political life. In the interview, he declared: “We do not wish to get into a swamp from which we would not be able to get out. Anyone who gets into such a sector, or rather marsh, is obliged to make concessions at the expense of their Islamic principles. We are not prepared to do this” – unlike the ruling Islamo-democrats of the PJD, he might have added. For the record, on Saturday 4 May, Abderrezak Mokri was elected leader of the MSP.

For more news and expert analysis about Morocco, please see Morocco Politics & Security.

© 2013 Menas Associates

Jeremy Kennan on 5Live Radio

Our Algeria expert Jeremy Kennan speaks to Shelagh Fogarty about the kidnapping of BP oil workers. Please follow the link to hear the interview:


http://www.bbc.co.uk/programmes/b01pw4rs


From 1:26 minutes onward.

For more news and expert analysis about Algeria, please see Algeria Focus and Algeria Politics & Security.



 

Algeria: Trouble with the Senate

 

The Council of the Nation, or Senate as it is usually known, reconvened this week and re-elected the 71-year-old out-going speaker, Abdelkader Bensalah, for a third term of office. Bensalah, a senior RND official, was the sole candidate and was re-elected by 132 in favour with two abstentions. According to the Constitution the speaker of the Council of the Nation is the second top post after the president. In case the post of president is vacant then the speaker would be called to act as interim president until elections are held, Bensalah expressed his faith that the council would “play a more dynamic role in the future as part of the launched reforms.” That is something that has rarely ever been done in the past and is unlikely to do in the future.

In fact, the Senate has come under considerable public criticism in much of the Algerian press when it was revealed that the one third of the seats appointed directly by the President had largely been allocated to those ministers and other 'dead wood' that had been removed from government following last year's elections. The revelation merely confirmed that the Senate was even more decrepit, antiquated, and politically irrelevant than the lower house.

For more news and expert analysis about Algeria, please see Algeria Focus and Algeria Politics & Security. 

© 2013 Menas Associates

 

 

Guinea Presidential Run-Off Rivals Pledge to Push Ahead With Mining Review

Guineans vote in a delayed second- round presidential election on Oct. 24 that pits two candidates who have both vowed to overhaul mining laws in the world's biggest bauxite-exporting nation.

Former Prime Minister Cellou Dalein Diallo, who received 43.7 percent of the June 27 first round, will compete against opposition leader Alpha Conde, who garnered 18.2 percent. The vote will mark the transition from military to civilian rule.

An ongoing review of mining accords has already led to a dispute with London-based Rio Tinto Group over ownership of the Simandou iron-ore project. Other companies operating in the country include Russia's United Co. Rusal, the world's largest aluminum producer, AngloGold Ashanti Ltd., Africa's biggest gold miner, and Brazil's Vale SA, the No. 1 iron-ore producer.

“Political and social pressures for a review of the legal framework governing the mining industry are unlikely to go away,” said Christopher Melville, a senior associate at Menas Associates in London. That may bring the new government “into further conflict with mining companies, many of which have negotiated special terms for their projects.”

Guinea holds as much as half of the world's reserves of bauxite, an ore used to make aluminum, more than 4 billion metric tons of “high-grade” iron ore and “significant” deposits of diamond and gold, according to the U.S. State Department. Aluminum Corp. of China Ltd. also operates in the country.

'Defending Interests'

The election is being held almost two years after army the seized power following the December 2008 death of President Lansana Conte, who ruled the country for two decades. Guinea hasn't had a democratic transfer of power since it gained independence from France in 1958. General Sekouba Konate became the leader in December after an aide shot the coup leader, Moussa Dadis Camara, in the head.

In the period since the first round vote, Conde has become the favorite to win the run-off after at least two defeated candidates pledged support to the 70-year-old leader of the Rally for the Guinean People.

“The momentum has clearly shifted toward Alpha Conde during the period of delay,” Melville said.

While beset with organizational difficulties, the June election was held “freely,” a European Union observer mission said after the vote. The run-off was then postponed for “technical reasons,” Konate has said.

Mining Deal

Conde will “renegotiate mining deals” and develop standard mining policies, Moustapha Naite, a spokesman for the RPG, said in an interview from Conakry, the capital, on Oct. 18. He also favors a stronger state role in the economy and plans to replace the leadership of the Central Bank of Guinea and promote economists who support lower interest rates, his adviser, Mamady Sinkoun Kaba, said in an interview on Sept. 10.

Diallo said in August he would also review mining deals if he wins the second round “to make sure that the interests of Guinea are defended.”

The 58-year-old leader of the Union of Democratic Forces of Guinea was prime minister of the country from 2004 to 2006.

In the run-up to this weekend's vote, supporters of Conde and Diallo were injured in clashes between the two groups. This week, at least one person died when police fired upon backers of Diallo at a rally in Conakry.

A plan announced on Oct. 12 by Conde and Diallo to form a national union government may indicate that “none of these candidates are confident of victory,” Rolake Akinola, West Africa analyst at Eurasia Group, said in an interview on Oct. 15. The plan was reported by state-owned Radio Television Guineenne, which didn't provide further details.

Growth Accelerating

Guinea's political turmoil won't prevent the economy expanding 4.3 percent this year and 4.5 percent in 2011, according to the African Development Bank. Mining generates 24 percent of the nation's total economic output, according to the bank's website.

Per capita income is less than half the sub-Saharan African average of $861, according to the World Bank, and the country ranks 170th out of 182 countries on the UN's Human Development Index, which measures life expectancy, literacy and gross domestic product per capita.

Source: Bloomberg

For more news about Nigeria, please visit the Menas Associates Newsroom.

Bellzone razes risk in Guinea

Bellzone Mining has continued to eliminate the mining risk at its Kalia iron ore project in Guinea with a further increase and upgrade of its mineral resources. With only more good news expected on the resource front in the coming months, the remaining risk centres around the would-be operation's challenging infrastructure demands and existing country-risk.

The updated resource follows work over both Kalia I and Kalia II and has increased the total magnetite resource by 56.5% to 3.74 billion tonnes. More importantly from a risk perspective, 670 million tonnes from an entirely inferred initial resource has been converted into measured and indicated resources. There is also a maiden resource on the way in the fourth quarter for the higher quality oxide ore, on which Bellzone is relying to deliver a direct shipping ore (DSO) element within its planned operation.

The current resource would support a 50Mt per annum operation with a life of 60 years as envisaged by Bellzone, which would be reached with a staged approach. Stage one would see 20Mtpa of DSO produced as early as 2014 and 10Mtpa of concentrate by 2015 before the DSO production climbs to 30Mtpa by 2017 with 20Mtpa of concentrate.

The price tag for stage one has been set at $US3.8 billion, most of which is attributed to related infrastructure requirements – a 285km rail and coastal port, primarily – that China International Fund (CIF) has committed to fund in exchange for a 100% offtake agreement at Kalia.

This is just part of the picture. The current resource at Kalia has been delineated from just 6km of the 19km combined strike length at Kalia I and Kalia II. Bellzone predicts the total magnetite resource could reach more than 13Bt in addition to possible oxide resources of 2.9Bt. In this case, the mine life and production would be increased.

Bellzone managing director Nik Zuks said while the company would continue to look at expansions to the overall resource, focus had turned to producing the oxide resource in the December quarter. Investment bank CanaccordGenuity indicated in a research note last week that the upgraded magnetite resource figures had reduced the discount applied to Kalia and that an oxide resource would have the same effect when released next quarter.

“This upgrade and the major steps achieved over recent months towards project completion reduce the completion risk on this project and, as such, allow us to reduce the 'haircut' we applied previously to our net present value estimate for the completed project,” the bank said.

“We point to the importance of the higher-grade near-surface hematite at this project as a source of DSO. Our site visit and familiarity with these deposits suggest to us that JORC classification of the hematite cap is little more than a formality. When it comes later this year, we will be able to upgrade its contribution to value in Bellzone.”

In addition, Zuks said that both the infrastructure agreement and government agreements in place had “hugely de-risked” the project.

“The detailed agreement with CIF, the presidential decrees which lawfully secure the Kalia convention and exclusive infrastructure development rights, and a proven substantial JORC magnetite resource has hugely de-risked Bellzone's aspirations of building a 50Mtpa iron operation in Guinea,” he said.

With such a large and expanding resource in hand along with a financial partner in CIF, CanaccordGenuity broker Mike Cook believes that delivering an economic feasibility study for the infrastructure component of the development remained the major hurdle for Bellzone.

“[Kalia] is being de-risked because Bellzone is managing to tick a number of boxes,” he said. “The next step to de-risk it further is the feasibility study both on infrastructure and the mine itself. The feasibility for the mine will be the easy bit. The tricky bit is going to be getting the rail to traverse across some fairly tricky terrain – it's not flat like Western Australia but then again we're not talking about the Himalayas.

“The risk is that the feasibility study comes up and says that it's actually going to cost too much and will erode the return on the project; and that it's going to take five years to build the project rather than three. And that's a possibility.”

He said coming up with a positive feasibility over the next 12 months and building the mine and infrastructure over the following three years would be “quite a big ask”.

There is also an element of risk hanging over Guinea – a country that has had its share of troubles over the years and which loves a good military coup. Chris Melville from risk consultancy Menas Associates said the move toward democratic elections (in progress) after a year of military rule and a further nine months of interim government was a positive step for Guinea, but the outlook was uncertain. He said both presidential candidates were similarly accepting of foreign investment in the mining industry, with the frontrunner, Cellou Dalein Diallo also having increasingly strong links with the Chinese.

“This is a country that has been locked down and stagnating under the authoritarian rule of Lansana Conte from 1984 to 2008,” he said. “A lot of the ethnic and political dynamics that were contained under his rule have the potential to re-emerge under a newly democratic order. There is also a risk going forward, given how close the election process has been, that whoever loses it will seek to overturn the result through popular protest or potentially unconstitutional means.

“In a highly personalised and contested political environment such as Guinea's, the personalities of the people in power are hugely important for mining companies, especially those who have signed agreements during a transitional period. A lot of deals have been signed in this period, which creates an underlying level of risk when a new fully legitimate and constitutional government is inaugurated. The key question for the players who signed deals is to what extent have they been able to embed themselves with personalities who will remain important in the post-election period.”

Guinea is seen by many, including the usually conservative Rio Tinto, as a country where the mineral wealth outweighs any risk. Bellzone's position in Guinea and its ability to progress rapidly towards production make the junior one of the standout emerging iron ore players in the market, according to Renaissance Capital.

“Given its growth potential and the fact that the region is now game-on in terms of iron ore development, we think investors should see Bellzone as a highly favourable risk/reward investment,” the bank said. “At the time of Bellzone's IPO, the market was sceptical about management's ability to progress the project over a compressed timeline. This is no longer an issue.

“The project has been de-risked, and actually accelerated, due to the elimination of the usual lengthy period of funding required for a project of this nature.”

Source: HighGrade

For more news and analysis about mining, please visit the Menas Associates Newsroom.

Congo and Areva in uranium exploration talks

Democratic Republic of Congo and France's Areva are in talks over possible uranium exploration at a now-closed site that once produced material for the Hiroshima bomb.

Mines Minister Martin Kabwelulu and Areva's Africa Chairman Zephirin Diabre met this week, both parties confirmed, and additional discussions were likely into next year.

"We are looking to have all the geological data available before a meeting in Paris," Kabwelulu told Reuters by text message on Thursday, adding that the next meeting was likely to take place in March 2011.

"All I can confirm is that they did indeed meet," a spokesperson for Areva told Reuters by email.

Congo's largest uranium mine, Shinkolobwe, provided the uranium that went into the atomic bomb deployed by the United States on Japan in 1945 during the Second World War.

The site in the south of the vast and minerals-rich central African country was officially closed in 2004, but the United Nations has since cautioned that radioactive material from Congo is frequently smuggled out.

The site is in poor condition, likely suffering from leaks that would be costly to contain, and a lack of fencing is has opened it up to smuggling -- raising fears among Western diplomats that some of the uranium is reaching Iran.

"Uranium is the one resource that's always been at the back of everyone's mind -- it explains U.S. interest in a country that was otherwise not very interesting," said Christopher Melville, Africa specialist with London-based risk consultancy, Menas Associates.

Source: Reuters

For more news about Nigeria, please visit the Menas Associates Newsroom.

News Digest: Africa Mining Comment & Analysis – Botswana

The IMF yesterday 2nd September reported that following the contraction of 2009 and the country's first recession since independence, economic growth would be restored to 8 per cent -levels in 2010, driven by a recovery in diamond mining output. The release followed a presentation in Perth on 1st September by the Minerals, Energy and Water Resources Ministry outlining the government's plans to streamline licence and permit applications, and to drive greater local beneficiation and diversification.

Chris Melville, Africa mining consultant with Menas Associates today commented:

“With Botswana's mining industry now back on its feet, the government is once again raising the bar for other pretenders to its title as the most progressive and investor-friendly mining regime in Africa”.

“This is what mining investors like about Botswana - the government's dual commitment to a predictable regulatory framework while making gradual but concerted efforts to enhance the investment environment”.

“Despite Botswana's regular appearance at the top of indices for investment attractiveness in Africa, there is no resting on laurels. The economic crisis exposed Botswana's over-reliance on diamond production and the administration's promotion of diversification is to be welcomed, both from the perspective of the country's long-term economic health and in continuing to spark the interest of global mining companies”.

“As in many mining countries in southern Africa, mining companies face continued infrastructural and operational constraints – however, it is refreshing to see a government prepared to invest heavily to address these deficiencies”.

“Things may be looking a little dicey within the ruling BDP and recent high-level corruption scandals are a cause for concern. But these developments remain notable for their somewhat exceptional nature and it would be wrong to suggest that Botswana's economic and political miracle is under serious threat”.

Background

The Botswana economy contracted by 3.7 per cent in 2009 after the collapse in diamond prices saw multiple mine closures, double-digit declines in employment and significant falls in diamond output (which accounts for 70 per cent of revenues in the crucial mining sector). However, the investment environment continues to enjoy the favour of foreign investors, regularly appearing in the top places in surveys of investor sentiment: a 2010 Fraser Institute report ranked Botswana first among African countries for the attractiveness of its mining policies and 21st of the 72 jurisdictions surveyed.

President Ian Seretse Khama's authoritarian style of managing the ruling Botswana Democratic Party (BDP) is continuing to drive defectors into the arms of the opposition Botswana Movement for Democracy (BMD) splinter party, while Khama's cousin, former defence minister Ramadeluka Seretse was yesterday charged with failing to disclose shareholdings in a company that was awarded a government defence contract.

© 2010 Menas Associates