Plans for Nairobi to enter the Global Financial Centre Index (GFCI) – a ranking of the competitiveness of financial centers around the word – finally appear to be on track, following the recent introduction of the Nairobi International Financial Centre (NIFC) Bill. Although the city is yet to be included in the global rank, it’s already among 16 associate centers expected to join the index in the near future.
One of the key roles of the NIFC will be to attract international financial services and multinational corporations to grow and develop the market for financial services in the region. It will help all NIFC-licensed firms to generate new and sustainable revenue streams. On this front, Nairobi is already playing host to several representative offices of global lenders, such as HDFC Bank, Nedbank, First Rand and Bank of Kigali. In addition, the NIFC will provide access to local and regional investment opportunities. Business can be transacted inside or outside Nairobi, in local or foreign currency. This is to allow businesses to operate both locally and internationally. For this reason, plans are already underway to make Nairobi Africa’s first clearing house for the Chinese yuan.
According to the GFCI ranking, for Nairobi to become an international financial center, it will need to enhance five key areas of competitiveness: financial sector development, business environment, infrastructure, human capital, and reputational and general factors. With this in mind, it was encouraging to hear the Cabinet Secretary for the National Treasury, Henry Rotich, propose changes for the local debt market during this year’s budget speech. To start with, market players will now see the introduction of electronic bond auctions which will spare investors from the current manual process of submitting paper bids, the separation of retail and wholesale components of the market and the introduction of primary dealers and market makers. It is likely to attract international portfolio funds looking to investment in the region.
Furthermore, Rotich, through the Financial Services Authority (FSA) Bill will set the stage for mergers across the existing non-banking regulators. The move is expected to address issues around consumer protection, existing regulatory gaps and issues of market conduct. Once enacted, Nairobi’s international status is expected to become even more essential. Some leading institutions have already taken notice. Ecobank Transnational is now planning to upgrade its Nairobi office to be the regional hub of operations for 18 countries. Similarly, global financial services firm, SWIFT, plans to open a regional hub in Nairobi.
A further indication of Nairobi’s increasing competitiveness is the improving business environment. In the 2016 FinAccess survey, Kenyan’s access to financial services stood at 75.3%, up from 66.7% in 2013. But, issues revolving around corruption and rule of law are also key. Kenya would not be an ideal international financial center if its people are corrupt, lazy and lawless. In view of the current financial scandals that have rocked some of the major financial centers, such as the Panama Papers scandal, it’s obvious that reputation is a vital asset that needs to be protected. In fact, reputation has become more important than reality. It is no surprise to see Athens and Moscow at the bottom of the global ranking.
While Nairobi gears up for a leap forward, its efforts so far have attracted attention. Kenya was ranked number 42 out of 140 countries by the World Economic Forum Global Competitiveness Report 2015/16 in financial market development. In 2015, the country was also ranked first in the world for leveraging technology to drive inclusion by the Brookings Financial and Digital Inclusion Project (FDIP).
Looking at this trend, it is safe to say that it’s only a matter of time before Nairobi catches up with the big boys.

Giant Leap Forward

In the weeks since Muhammadu Buhari was elected president several lists have emerged purporting to show his ministerial nominees; the frenzied list-making an expected outcome of Nigeria’s speculation mills tilting into overdrive during periods of political transition.
That federal cabinet, when finally constituted sometime in June, will, like all others before it, comprise a blend of technocrats and politicians. What is yet unclear is which of these groups will dominate, and if there will be a critical mass of reformers, similar to the group that dominated the second term of President Olusegun Obasanjo and helped him achieve landmark reforms in pensions, electricity legislation and Nigeria’s foreign debt position.
Buhari has said he will work to downplay the involvement of the cabinet in the award of contracts, and instead remake it as a “policymaking” body. He has also said he will not be depending on the governors to constitute his cabinet. If he follows through on this vow, it will be a break from a tradition set by the People’s Democratic Party, which has ruled Nigeria since 1999.
Nigeria’s constitution stipulates that all of the country’s 36 states must be represented in the federal cabinet. This means that there will have to be at least 36 ministers, regardless of whatever cost-cutting ambitions a president might have. During his first spell as president, Buhari’s preference for a relatively smaller government was backed by the near-absolute authority he held as military ruler.
The finance minister role gained unprecedented power under the Goodluck Jonathan presidency, when its occupant, Ngozi Okonjo-Iweala, was concurrently designated the coordinating minister of the economy’ – likened by observers to an unofficial prime minister role. Considering the dire state of Nigeria’s finances, and also of its prospects in the short to medium-term, the choice of finance minister will be one of the most important decisions Buhari has to make.
The three people who represented the incoming government at the spring meetings of the World Bank in Washington DC in April – Ifueko Omoigui-Okauru, a former head of the Federal Inland Revenue Service; Wale Edun, who ran the Finance Ministry in Lagos State between 1999 and 2004, and is also a co-founder of Stanbic-IBTC Bank; and Abba Kyari, a former CEO of UBA – have all been tipped to get the job. All three previous Finance Ministers have come directly to the office from the executive ranks of multinational banks – Mansur Muhtar from the African Development Bank, Olusegun Aganga from Goldman Sachs, and Ngozi Okonjo-Iweala from the World Bank.
The Petroleum Ministry will also be keenly watched, as it is oversees the lifeblood of the government and the economy. Buhari has previously served as Chairman of the Nigerian National Petroleum Corporation (NNPC), the national oil company, and Minister of Petroleum, and may be tempted, like President Obasanjo did for all of his eight years in office, to retain direct control of the all-important sector.
Anyone looking for possible insight into the nature of the Buhari cabinet might have to look at the Transition Committee he assembled in April, to liaise with the outgoing government and help lay a policy foundation for the new one. The membership of the committee drew from various blocs: the old guard (like Tam David-West, Buhari’s Petroleum Minister 30 years ago; and Committee Chairman Ahmed Joda, already a powerful federal bureaucrat in the 1970s when Buhari was taking on his first government role), and a crop of younger technocrats like Doyin Salami, a professor at the Lagos Business School, Wale Edun, and Bola Adesola, CEO of the Nigeria office of Standard Chartered Bank.
Some ministries have traditionally been regarded as A-list because of the relatively larger capital spending budgets they wield, and will therefore see a lot of intense lobbying from interested people and interest groups. They include health, federal capital territory, education, defence, works and water resources. Sources say Buhari’s plans to focus on diversifying Nigeria’s natural resource base beyond oil and gas will elevate the Ministry of Solid Minerals into this elite club.
Beyond the cabinet there will be hundreds, perhaps thousands, of appointments to be made over the next four years. Primary ones will include the cabinet secretary (secretary to the government of the federation), chief of staff, principal private secretary, a spokesman (‘special adviser on media’), a chief economic adviser, and, possibly – in keeping with recent presidential tradition – a quietly influential special assistant on domestic matters.

Who Will Run Nigeria?

It’s no secret that South Africa, the biggest and most power-rich country in Africa, faces an energy crisis. It has left the country’s growing industry and mining sector lagging. Government says the 485 tcf (trillion cubic feet) shale gas reserve, could be an answer.
Hydraulic fracturing, also known as fracking, involves horizontal drilling to create fissures. The insertion of pressurized water, sand and fracking fluids release the gas. The tight-rock shale gas reserve is compared to extracting small pockets of gas from cement. Conventional fracking requires a high volume of water, up to 20 million liters per well. The process is heavily criticized for its potential environmental damage such as water usage and contamination; the pollution resulting from the production process and spoiling the biodiversity and aesthetics of the Karoo—a vast, largely untouched, landscape just to the north of Cape Town.
“The focus has been on the bad things, but there are many good things,” says Rob Jeffrey, managing director of Econometrix, who presented their economic predications for fracking at the Fossil Fuel Foundation conference on May 29, in Johannesburg. Organizers were disappointed that no government officials or policy-makers attended.
“South Africa is an energy-intensive country… If we want high growth, we need more energy. Fracking will encourage local industry development and create many jobs because the gas industry will be built from the bottom up, unlike in the States. It will result in poverty alleviation, by building downstream and upstream industries,” says Jeffrey.
The National Energy Regulator of South Africa (NERSA) is in charge of licensing; Petroleum Agency South Africa (PASA) is in charge of gas production and the government would be in charge of distribution. The time is now, says Ethel Teljeur of NERSA.
“South Africa [might] miss the window of low gas prices if it doesn’t invest in gas infrastructure,” she says.
Teljeur gave the example of missed opportunity in South Africa when home-grown energy company, Sasol, bought shale gas interests in Canada (Talisman) worth over $2 billion and would invest R10 billion ($1.17 billion) over the next five years; money that could have been invested at home.
An argument for fracking could find favor with the government. Dipuo Peters, South Africa’s Energy Minister, was one of the cabinet members who placed a moratorium on fracking. She says fracking should go ahead, if it can be done in a safe and responsible manner.
“The government is cognizant of the controversies associated with shale-gas extraction processes such as ground water and soil contamination, however with on-going developments I am confident that these challenges will in the not-so-far future come to pass,” she said in late March.
In her budget vote speech at the end of May, Susan Shabangu, Minister of Mineral Resources, said the investigation into the feasibility of shale gas in the Karoo will be presented to Cabinet in July.
“We should not have to sue the minister [Shabangu] to get the information which each citizen is entitled to know,” says Jonathan Deal—chairman of the Treasure the Karoo Action Group (TKAG). He took legal action, when in spite of letters and applications, little information was forthcoming. The TKAG won the case.
“When it was being established we needed to know who was on the task team; what they were investigating; who they were consulting; what reports they were considering; whether they had visited America or not or anywhere where fracking was happening. And essentially, what their activities were. We were concerned that it was being manipulated, or orchestrated. We wanted transparency, in revealing the information,” he says over a telephone interview from his Karoo farm.
Deal is an entrepreneur who is not opposed to economic development, as he has often been accused; on the contrary, he supports it, if it is done in a sustainable and responsible manner. He notes that there are more than 140 places worldwide, where fracking is under a moratorium, restriction or a ban.
Deal claims he has attended more public participation meetings than any other South African. He has sat with lobbying gas companies and their consultants.
“They are misleading and side-step the real issues. They have obfuscated and clothed it [public participation meetings] in technical details. And then they are allowed to tick a box to say they have visited wherever and consulted with the local community,” he says.
“One of the fatal flaws gas companies face is the millions of people in this country who will be directly affected by fracking but know nothing about it. They are the rural people that work on the farms, who do not have email, cellphones, telephones or a car to the nearest library to digest Shell’s technical English EMP [Environmental Management Plan].”
The energy industry is trying to get around these fears, with new technology. Andrew Kinghorn, of Shava Mining Enterprise, spoke about GasFrac’s Liquid Petroleum Gas (LPG) gel. The American-based company has eliminated conventional fracking fluids and the use of water for fracking. They pride themselves in being friendlier to the environment.
The waterless LPG gel remains liquid throughout the stimulation process. After the frac closes the gel returns to a low viscosity and supports sand in the fractures. When using water, around 20% to 50% of the fracture never contributes to gas production because it is in contact with water.
“Nearly 100% of the LPG gel is returned with the flowback in a much shorter time, 10 to 15 days, than conventional fracking methods,” says Kinghorn.
The gel’s properties include low surface tension; low viscosity and low density. It is soluble in hydrocarbons, which enables 3 to 5 times longer fracs; higher long-term production and quicker time to the market.
“It results in the elimination of water, water wells, ponds, handling facilities, frac tanks, additional cartage, disposal costs and the reduced flowback cost due to quick clean up. By using LPG, we are able to realize a higher yield of oil or gas and we don’t take water away from other uses or have the demanding logistics of transporting millions of gallons of water to a well,” he says.
Another positive advancement in the industry, as pointed out by Doug Bentley, of Schlumberger, is that all hydraulic fracturing chemicals are biodegradable. The only question which remains is, are gas companies willing to pay for the more expensive, environmentally friendly fracking fluids? Bentley emphasizes that: “Well placement is the number one issue for improved production. Drilling needs to be planned in 3D as soon as possible.”
There are numerous factors to be considered: the social, economic and ecological. Philip Lloyd, research professor at the Cape Peninsula University of Technology refers to gas as the “beautiful fuel” which provides an opportunity to develop our power system in a clean, relatively low-carbon way.
The reserve might be overestimated, due to the disappearing of gas through volcano-like cone escape structures over billions of years, according to Professor Maarten de Wit from Nelson Mandela Metropolitan University. Scientists are unsure of the amount of escaped gas and how much remains.
“The South African landscape differs vastly from that of the United States because of the dolerite outcrop and needs to be assessed in a different way,” he says.
For now, gas companies and South Africans, alike, are holding their breath ahead of the outcome of the task team’s findings later this month.

Tag: cabinet

FORBES AFRICA SOCIAL MEDIA

Giant Leap Forward

Who Will Run Nigeria?

Fracking At Face Value