Items filtered by date: Sunday, 24 March 2019

The Ministry of Energy has blocked a plan by South African-owned Mining, Oil and Gas Services Company (MOGS) to construct a US$1 billion 550-kilometre fuel pipeline from Beira to Harare, arguing that the sector is oversubscribed and has no space for new players, an official has confirmed.

Zimbabwe's fuel sector, often described as opaque, is dominated by Sakunda Holdings which is owned by businessman Kudakwashe Tagwirei. The company also has interests in Puma, which is owned by Glencore and Trafigura

According to government sources, MOGS' bid to build a second fuel pipeline collapsed at a meeting held in December last year where the Ministry of Energy reportedly proposed a new fuel pipeline from Namibia to service the southern parts of the country.

Tagwirei, whose company controls the Beira to Harare pipeline that supplies Zimbabwe with most of its fuel, is allegedly blocking the construction of the second pipeline that is earmarked to go as far as Botswana.

Sakunda recently invested US$11 million into the refurbishment of the Beira-Feruka oil pipeline, and is jointly running the pipeline with the National Oil Infrastructure Company (Noic) as it recoups its investment.

Sakunda has enjoyed a monopoly over the pipeline, a move that has drawn the ire of other players.

MOGS, which has the backing of President Emmerson Mnangagwa's advisor Chris Mutsvangwa, has been pushing for a deal to build a second pipeline but some politicians have been reportedly blocking it.

Mutsvangwa, who has been vocal about dismantling Sakunda's monopoly in the fuel sector, approached Mnangagwa with a proposal to have MOGS build a second pipeline. The presidential adviser has been actively promoting the MOGS deal alongside former MDC legislator Eddie Cross.

In the meeting held in December, MOGS representatives were told that Zimbabwe was already getting sufficient fuel supplies through the existing pipeline, therefore there was no need to build another pipeline.

Speaking to the Zimbabwe Independent, the permanent secretary in the Ministry of Energy, Gloria Magombo, expressed government's reluctance to allow a new player into the fuel sector.

"So far, government is satisfied with the manner that Noic has operated the pipelines. There are no plans to bring other players to run the existing pipeline other than Noic," said Magombo.

While government argues that the pipeline is run by Noic, Sakunda has enjoyed a monopoly over the strategic facility.

Magombo was unavailable for further comment on Sakunda's monopoly over the pipeline although she had promised to respond. Energy Minister Joram Gumbo's phone was being answered by his aide who said he was busy. The MOGS deal was initially tabled in 2009, but failed to take off due to resistance from former president Robert Mugabe.

Tagwirei was also in partnership with Mugabe's son-in-law Simba Chikore in the controversial Dema Power Plant project which was producing electricity through diesel-powered generators for sale to Zesa at exorbitant prices in 2017. Zesa was making advance payment for the electricity.

MOGS proposed to construct a pipeline with capacity to move 500 million litres of fuel in the country compared to the 110 million litres supplied through the Sakunda-controlled facility.

MOGS was also promising Zimbabwe six months' steady supply of fuel and to provide government with foreign currency to assist in stabilising the economy.

Magombo said government had received numerous unsolicited proposals from potential investors in the energy sector.

"Besides MOGS, government received numerous unsolicited proposals from other investors who also wanted to invest in the fuel infrastructure. In all the instances, discussions are held in confidence and neither party can disclose such discussions without the express authority of the other," said Magombo.

Presidential spokesperson George Charamba last year said there were no laws impeding new players from venturing into the fuel sector, saying the only way to stop Sakunda's monopoly was to get a new player.

The pipeline from Beira to Mutare is owned by a Mozambican company, Companhia do Pipeline Mozambique (CPMZ), while Zimbabwe pays for the use of the pipeline up to Feruka.

The second part of the pipeline, which runs from Feruka to Harare, is owned by the Petrozim Line (Pvt) Ltd (PZL), a company 100% owned by the government.

Zimbabwe has endured crippling fuel shortages which are likely to be worsened by the devastating Cyclone Idai which has reportedly destroyed port facilities and fuel pump infrastructure in Beira.

 

Source: Zimbabwe Independent

Published in Engineering

Tanzania says it plans to conclude talks in September with a group of foreign oil and gas companies led by Norway’s Equinor on developing a liquefied natural gas (LNG) project in the East African country.

Construction of an LNG export terminal near huge offshore natural gas discoveries in deepwater south of the country has been held up for years by regulatory delays.

“The government has officially decided to begin talks in early April for construction of the LNG project,” Tanzania’s energy ministry said in a statement issued late on Friday.

“We are keen to implement this key project for the economy and we plan to ... conclude the talks in September this year,” the ministry said. 

The country’s central bank believes just starting work on the plant would add another 2 percentage points to annual economic growth of around 7 percent. The talks are aimed at negotiating a host government agreement, which is seen as a crucial step towards reaching a final investment decision for the long-delayed project.

The decision to speed up the talks was reached following a meeting on Friday between the African country’s energy minister, Medard Kalemani, and Mette Ottøy, a senior vice president at Equinor, who is also the company’s country manager in Tanzania.

Equinor, alongside Royal Dutch Shell, Exxon Mobil and Ophir Energy, plan to build a $30 billion onshore LNG plant. The firms plan to develop the project in partnership with the state-run Tanzania Petroleum Development Corporation (TPDC).

Tanzania invited bids in April 2018 for consultancy services to help the government conclude negotiations for the host government agreement. Tanzania has estimated recoverable reserves of over 57 trillion cubic feet (tcf) of natural gas.

Tanzania President John Magufuli wants to speed up negotiations to set the commercial and fiscal framework for the LNG terminal development to boost revenues to finance other infrastructure projects.

 

- Reuters

Published in Engineering

Mr Habibu Adam, an Economist, has attributed the depreciation of the cedi to the structure of the economy, allowing foreign portfolio investments into the domestic bond market and the speculative attacks by either politicians or ‘rogue traders’ in the forex market.

Mr Adam said Ghana recorded trade deficit of USD$1.69 billion in 2016 as in many other years previously “this transformed to trade surpluses of about USD$1.19 billion and USD $1.78 billion in 2017 and 2018 respectively for the first time in decades. So why should the cedi be under pressure”.

The Senior Economist said this in interview with the Ghana News Agency in Accra.

Mr Adam said allowing the foreign portfolio investments (investments by non-resident Ghanaians) into our domestic bond market for which some of them are now moving their funds to their parent countries as it tapers, its rates higher as against the downward trend in the Ghanaian interest rates.

He said the other reason for the depreciation may be due to the huge interest servicing being made by government.

“Just before the IMF intervention in our economy, experts including then Vice-Presidential Candidate Dr Mahamudu Bawumia had warned of excessive borrowing which will cloud out fiscal space for government.

“Spokespersons of then government argued that as far as the debt level had not hit the unsustainable debt level of 70 per cent, they were not doing anything wrong.

“The end result was that, they left government leaving a debt level of 73 per cent of Gross Domestic Product (GDP) for the new government to grapple with,” Mr Adam said.

He said the resultant effect of the binge borrowing was that interest payments ten years (2008) ago was only GH¢ 679 million. This rose to GH¢10.7 billion in 2016 and is expected to hit GH¢18.6 billion by the end of 2019 (2019 Budget statement).

The Senior Economist said external debt constitutes 49.9 per cent of the public debt, therefore, “government will need to service the interest in foreign currency bringing additional burden on the cedi”.

Mr Adam said the final contributor to the depreciation of the cedi was the structure of the economy where “we export raw commodities and import almost everything in their value-added form.

“If the structure of the economy remains the same, no government will be able to halt the fall of the cedi. How can we be importing USD$2.0 billion worth of rice, USD$320 million worth of sugar and USD$ 374 million worth of poultry just to mention few and expect the cedi to be stable? All these commodities could be produced here”.

Mr Adam said in the last eight years before the current administration, the cedi had depreciated by 247 per cent giving an average annual depreciation of 30.9 per cent.

“The first two years of former President John Dramani Mahama’s administration recorded annual depreciation of 34.9 per cent.

“This compares to 6.43 per cent annual depreciation as at the end December, 2018 in the first two years of President Nana Addo Dankwa Akufo-Addo’s administration.

“Though a significant reduction; it is still not good enough. It is also important to acknowledge that the cedi has witnessed over 5 per cent depreciation in the first quarter of 2019 and it will be interesting to find out how it ends the year,” the Senior Economist said.

“In my opinion, the only way to end the cedi’s perennial depreciation is to embark on a comprehensive industrialisation policy together with improvements in infrastructure as well as modernisation of the agriculture and tourism,” he said.

GNA

Published in Economy

Cyclone Idai, which struck the coastline of Mozambique on 14 March, has caused devastation and heavy loss of life.

The UN says 1.7 million people in Mozambique lived in the path of the cyclone, with a further 920,000 people affected in Malawi and many thousands more in Zimbabwe.

So how common is extreme weather in southern Africa, and were these countries sufficiently prepared?

MAP

Tropical cyclones in this part of the Indian Ocean are not that rare. Most form in the central Indian Ocean, sufficiently far enough off the coast for some preparations to be made.

Cyclone Idai was unusual in that it formed in the Mozambique Channel, close to the coastline, giving governments and aid agencies less time to issue warnings and make plans.

"The cyclone was by no stretch of the imagination the most powerful... but what made it so devastating was where and how it hit," said Clare Nullis, spokeswoman for the World Meteorological Organization.

"The ocean floor along the coast by Mozambique is conducive to give storm surges, which reached roughly 3.5m-to-4m in the coastal city of Beira - which is absolutely huge."

The low-lying coastal areas of central Mozambique are highly vulnerable to natural disasters but the budget for preparing and responding to them is very small.

Last year, the government received support from international donors for a disaster fund of $18.3m (£13.9m) for 2018 and 2019. This contingency plan is the main source of funding for any disaster response and is intended specifically for search and rescue within the first 72 hours.

For a major disaster such as Cyclone Idai, most of the funds for recovery and reconstruction are raised after a disaster has struck.

And even without this latest emergency, Mozambique was facing economic strains as a result of a controversial loan deal in 2016 which resulted in a suspension of some international donor aid to the government.

How much warning?

The meteorological office of Mozambique, Inam, issued weather alerts as the storm developed. Three days before the cyclone struck, the government raised the alert to the highest possible level, telling people to evacuate threatened areas.

Some people were moved out by boat beforehand, but many didn't respond to warnings or weren't aware of them.

"These public alerts were made in a timely fashion but it's always down to actors along the chain to decide how to act on this type of information," says Joao de Lima Rego, an adviser at Deltares, a research organisation focusing on coastal regions and river basins that has helped develop a forecasting system in Mozambique.

As part of the forward planning for severe weather, safe zones had been created in rural areas for evacuation above the flood plain. On this occasion, however, the flooding was far more severe than anticipated.

Preparations in urban areas

The port city of Beira, with a population of half a million, had introduced measures to strengthen resilience to cyclones and flooding.

Preparedness has focused on drainage systems, says Dinis Juizo, associate professor of hydrology at the University of Eduardo Mondlane in Maputo. Drainage canals and flood-control protection, such as a large water basin, have also been introduced.

However, much of the population of Beira outside the city centre live in informal housing often made of materials unable to withstand severe weather.

"The level of investment has not been high enough for an event of this scale," says Dinis Juizo.

Malawi and Zimbabwe

The storm that eventually became Cyclone Idai had caused deaths in Malawi, to the north of Mozambique, in early March. 

People in lowland areas were warned, but because warnings about flooding and rainfall are an annual occurrence during the rainy season, many people were reluctant to move and didn't anticipate the extent to which the country would suffer.

In Zimbabwe, there were also warnings about the approaching storm.

But Zimbabwe's Minister of Defence, Oppah Muchinguri, has said her government failed to anticipate its strength. By the time the storm reached Zimbabwe it had weakened considerably and was no longer a tropical cyclone.

Nevertheless, it had a severe impact on the eastern regions of the country.

Published in Opinion & Analysis
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