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Most Hard Hit African Countries Amid COVID-19 And Oil Price Plunge Named

Angola revises national budget and suspends CAPEX; Senegal’s first oil development faces debt arrangement challenges; Nigeria poised for a major revenue loss; Analysts predict Ghana will get half its projected revenue; Cameroon can expect to see a three percent drop in economic growth.

African oil-producing and reliant countries have been among the most hard hit by the COVID-19 pandemic and declining oil price. In particular, Senegal, Nigeria and Angola continue to face new challenges each day amid the threat of economic fallout.

Angola

In 2020, the Angolan government led by H.E. President João Lourenço, had set out to focus on economic diversification and uplift the country from nearly five years of recession. However, in the face of the oil price slump, the oil-reliant country has slowed the implementation of its planned economic reform strategy, which had included the privatization of state-owned companies and plans to reduce public debt to less than 60 percent of GDP by 2022 from approximately 90 percent in 2018 and, over 100 percent in 2019.

In response to the current market instability, the Angolan government which relies heavily on oil revenue has declared a state of emergency and made the decision to review its national budget. With this, it will object its budget on a reference oil price of $35 per barrel maximum - a significant cut from the initially drawn up $55 per barrel, Finance Minister Vera Davis de Sousa revealed on Friday, explaining that the country’s oil production is expected to tumble to 1.36 million barrels per day(bpd).

Further, Davis de Sousa shared that Angola would also be freezing 30 percent of its goods and services budget and its CAPEX would be suspended pending completion of the budget review. Meanwhile, the Angolan sovereign wealth fund has agreed to offer $1.5 billion on condition of future repayments through increased tax in the Bank of Angola’s growing debts.

“In this time, the Angolan economy will be best served by swift government action,” said NJ Ayuk, Executive Chairman of the African Energy Chamber. “With the finance minister already confirming that the country’s economy will shrink by 1.21 percent this year, signally a fifth year of recession, Angola needs a solid action plan that involves intense renegotiation strategies with domestic and foreign creditors, if it is to make it out on the other side,” he added.

Senegal

Since discovering oil and gas in 2014, the West African country emerged as a major player in the global oil and gas industry, with it moving rapidly on setting up a new Petroleum code in 2019, creating new entities such as COS-Petrogaz and revising local content regulations. As a result, the country has enjoyed increased foreign investment and entry of international majors. However, global market turbulence has had a hard knock-on effect on Senegal’s promising oil future.

In particular, the country’s first oil development, the $4.2 billion Sangomar deepwater offshore project has suffered immense pressure as project partner FAR Ltd fails to finalize debt arrangements. Citing current environment as a major contributor, FAR said: “the company’s ability to close the Sangomar Project debt arrangements that were ongoing during this time have been compromised such that the lead banks to the senior facility have now confirmed that they cannot complete the syndication in the current environment,” adding that neither the junior nor mezzanine facilities that were being arranged will be able to be completed for the foreseeable future. Project operator, Woodside and partner Cairn, continue to explore other options to see through project development.

The current global environment also stands to slow down the country’s other activities in the sector specifically, the country’s first offshore licensing round which was launched earlier this year by the national oil company, PETROSEN as a means to further push the countries exploration and production.

Though the government is yet to share incentives for companies to continue activities, it has set up a fund to support the local economy.

“Senegal is undoubtedly one of the most promising oil and gas producers Africa has to offer. Led by H.E. President Macky Sall, the country is primed for new growth and investment. Despite what is happening in the global market, we hope to see Senegal build on its eight oil and gas discoveries, and enjoy first oil from the Sangomar oil field and first gas from BP’s Greater Tortue Ahmeyim LNG project,” said NJ Ayuk, Executive Chairman of the African Energy Chamber.

As it stands, Senegal has also seen Cairn Energy reduce its planned investment to below $330 million from the initial forecast of $400 million.

Nigeria

Nigeria is projected to suffer substantial revenue losses. With it having planned for an oil  price of $57 in 2020, the low oil price presents massive struggles for Africa’s largest oil producer. To this point, Group Managing Director of the Nigerian National Petroleum Corporation, Mele Kyari said at a crude oil price of $22 per barrel, high-cost oil producers like Nigeria should count themselves out of the business.

To this, the Atlantic Council has predicted that COVID-19 would cause the country to suffer the biggest lost in the continent with $15.4bn, representing about 4% of the nation’s GDP, a fair assessment considering the country has over $58bn in oil projects set to suffer delays or cancellations.

Though the country is yet to announce incentives for continued oil exploration and production, it is set on protecting its oil production which contributes generously to its economy. Specifically, the country’s petroleum regulator has, according to Reuters, ordered oil and gas companies to reduce their offshore workforce and move to 28-day staff rotations in order to avoid the spread of coronavirus.

“Nigeria is at risk to suffer the biggest loss. With the low oil price pushing the country to cut its budget and companies to reduce their CAPEX, the global is waiting to see Nigeria’s next move,” said NJ Ayuk, “Although it is hard to see the light for Nigeria, with the commitment of companies and resilience of the government, the country can certainly weather the storm, “ he added.

Ghana

The fall in oil prices coupled with COVID-19 has also had heavy impacts on Ghana’s oil industry, which has been on a path of steady growth for over 10 years since Kosmos Energy’s oil discovery west of Cape Three Points in the country’s offshore. And, more recently, Springfield Group’s historic 1.5 billion barrels.

Having set a benchmark of $58.66 oil price per barrel until the end of 2020, Ghana’s projected oil revenue is set to take a hit, with analysts already predicting the country will get half its projected revenue.

Oil production activity is also expected to see delays as Tullow Oil revises production targets and terminates the drilling contract with Maersk Drilling for the Maersk Venturer drillship offshore Ghana.

“If prices should stay around the US$30 mark, then the government is less likely to get half of the revenue that it projected. Already, we’ve seen Tullow cut back it’s production. So aside the international fall in crude oil price that we have to match with in selling our own bit of oil that we get as a country, production is also falling in our own shores,” said Paa Kwasi Anamua Sakyi, Executive Director at the Institute for Energy Security.

Cameroon

According to an analysis of the economic and financial impacts released by the Press Secretariat of the CEMAC Economic and Financial Reforms Programme, Cameroon can expect a three percent drop in growth in light of the global crisis.

Operations in the oil also stand to be affected with the country already seeing a turn. Specifically, with companies such as Tower resources declaring force-majeur on its development in the Thali block in the country’s offshore. The company also revealed that activity on the NJOM-3 offshore well may also be suspended.

Although the government has not announced any incentives for continued activity in the sector, it has acknowledged the non-oil commodities that will contribute the most to the country’s economic decline.

Now is an extremely challenging time for African oil development, the African Energy Chamber encourages Africa’s oil producing countries to adapt to the changes, implement incentives and plan for the future. This global crisis can only be worked through with continued commitment, support and collaboration.

Meera Investments Wants Finance Minister To Suspend Tax Amendment Bills 2020 Over Coronavirus

Meera Investments through their lawyers have Kampala Associated Advocates have written to Finance Minister, Matia Kasajia objecting some of the proposed amendments in the Tax Amendment bills-2020 which is before a committee of parliament.

According to Eagle Online, Meera Investments which is the top taxpayer for the rental category in their letter to the minister said the bill will have an adverse effect on many businesses given that the entire world will be resurrected from the effects of Coronavirus.

Government has introduced the Tax Amendment Bills 2020 and now before parliament with the hope of filling that taxation gaps in the budget. However, the bill is facing resistance from real estate developers and owners given the proposals contained in the bill.

“During the current lockdown, we were made aware of the tabling of the 2020 Tax Amendment Bills. We have had consultations with our tax lawyers, Kampala Associated Advocates, and we write to inform you that some of the bills will have an adverse effect on many of our businesses and we seek your indulgence to prevent adversity. Below are the amendments that we humbly propose you further scrutinize and change based on areas of speciality” reads part of the letter from KAA.

The proposed amendment is that an “owner of more than one commercial building shall account for the tax on each building separately and shall not claim input of incomplete buildings.

However, Meera Investments says many of them in the real estate industry run their businesses through companies and therefore, one company will have may be five to fifty buildings. Under the proposed amendment, it would mean that for each of the fifty buildings one must account for the tax separately. This creates the following complications:

“It would mean that if I have ten acres on plot 41 Kampala Road and on them I have ten buildings, I have to account for each building separately. This means that I must now demarcate between buildings one to ten and each must have its own tax identification number (TIN). The reason that each must have its own TIN is because I must account for the tax separately.

The effect of this is that at the end of the day, I shall have one company with ten to fifty TIN numbers. Worse still, this also means that I shall have one company with ten to fifty different invoices for the same project. This makes accounting difficult and will create confusion among the real estate companies. The company would also have to obtain various tax clearance certificates for each of the buildings. This would be outrageous because one company would have over 50 tax clearance certificates”.

SSOURCE: Eagle Online (click for full story)

Museveni Finally Replaces Scandal Burdened Kasekende

Any chances of Dr Louis Kasekende returning to Bank of Uganda in the capacity of deputy governor have been flushed down the gutter after President Yoweri Museveni announced that he had appointed Dr Michael Atingi-Ego as the new deputy governor subject to parliament's approval.

The president also appointed John Musinguzi Rujoki as the new Commissioner General(CG) of Uganda Revenue Authority  (URA). Rujoki replaces Doris Akol, who has spent five years in the CG job, having replaced Allen Kagina in 2014.

“By virtue of powers granted to me by the Constitution, I have appointed Mr John Musinguzi Rujoki as the new Commissioner General of URA This appointment takes immediate effect. I have also appointed Dr Michael Atingi-Ego as the new Deputy Governor, Bank of Uganda. I have forwarded his name to Parliament for vetting,” the president said in a brief message.

The deputy governor job fell vacant upon expiry of his contract early this year. Despite frantically seeking the president’s audience in an effort to be reappointed, Kasekende was unsuccessful thanks to the scandals hanging under his name at the central bank.

Kasekende’s name and the wrong key decisions he made were prominent when parliament was investigating the central bank for irregularly selling seven commercial banks, the latest being Crane Bank.

Parliament heard that Kasekende and former executive director in charge of supervision at Bank of Uganda Justine Bagyenda sold Crane Bank to dfcu Bank via a phone call breaking all legal procedures involved for such a deal to happen.

The Inspectorate of Government was also investigating Kasekende for not declaring all of his wealth and the manner in which he acquired all the riches registered to his name directly or through accomplices.

And while the president awaits parliament to approve his appointments, Dr Adam Mugume was appointed by Bank of Uganda board to carry out the duties of deputy governor in an acting capacity.

Dr Atingi-Ego, according to Watchdog News, is a seasoned economic policy official who obtained his first degree from Makerere University and later proceeded for postgraduate studies in the United Kingdom where he got a master’s degree from the Cardiff Business School, University of Wales and a PhD from Liverpool University.

He started his career at the Bank of Uganda rising through the ranks to become the Executive Director, Research. In 2008 he took up an assignment with the International Monetary Fund (IMF) as Deputy Director of the African Department (AFR).

Centre For Budget & Tax Policy Has Suggested These Fiscal Measures To Help Govt During COVID-19

Centre for Budget and Tax Policy (CBTP) has suggested to President Yoweri Museveni ‘bold and drastic fiscal measures’ that when implemented will stabilize the current disruptions that have been caused by coronavirus disease (COVID-19).

These measures by Centre for Budget and Tax Policy will according to a letter from the NGO’s executive director Patrick Katabazi to President Museveni and copied to the Prime Minister and minister of finance will go a long way in setting a firm foundation for future economic recovery. 

“It is therefore paramount that the measures being undertaken currently to avert the spread of the infection are matched with social protection measures to cushion the population through this period by smoothening consumption patterns among the poor and vulnerable,” Katabazi wrote to the president.

And with the biggest working population in the country not being able to go to work because of the directives by the president, Katabazi notes that curtailing this labour supply has dire consequences on households. He said that the drastic fiscal measures they are proposing will support both poor and non-poor during this period.

“These unprecedented measures are necessary to stabilize the current disruptions that have been occasioned by the impact of the COVID-19. They may seem radical but we implore the government to look at them critically and either adopt them or improve them,” he added.

To begin with, Centre for Budget and Tax Policy wants the government to improve the Senior Citizens Grants programme to cover older people from the age 60 years something that will increase the number of beneficiaries from 200, 000 to 1.2m people in rural areas to 300, 000 urban centres. Also, the monthly money paid should increase from Shs25, 000 to Shs50, 000.

By targeting this population, which is 2m, the government will be directly supporting about 10m Ugandans indirectly given that an average household in Uganda has about 5 people, the NGO said, adding that this intervention requires additional funding of Shs257.54bn for at least 4 months. The programme currently costs a total of Shs142.46bn

The NGO wants public servants earning less than Shs500, 000 like teachers, nurses, police officers among others to be given a top-up of at least Shs100, 000. This will cover about 150, 000 people at a cost of Shs45bn. A similar approach according to the NGO should be extended to the formal private sector where workers getting less than 1m are also topped up with Shs100, 000 because they pay PAYE.

Also, it is suggested that people in the informal sector like boda boda riders supported with an income stimulus to avert income disruptions they are facing. And for that needs to liaise with landlords to reduce the pressure on tenants during this period.  

And in recognition of people directly battling the virus in the country like medical workers, security guards and journalists, the think tank says special consideration should be made in form of allowances and insurance cover to the dedicated professionals on the COVID-19 frontline.

Centre for Budget and Tax Policy recommends that government pays its domestic arrears to businesses it owes money and for it to renegotiate with creditors in an effort to restructure the country's public debt portfolio with a view of rescheduling repayment timelines.

The advocacy group is also in support of government releasing payment for pensioners in a timely manner as well a designing a plan for clearing area.

 "The senior citizens are not only vulnerable economically but also highly susceptible to having adverse effects when infected by the virus," it said.

The NGO is of the view that government suspends non-critical projects during this period and also shut down non-essential government business like workshops, traveling abroad, field trips and consumables to save.

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