Locusts, Climate Change & Oil Exploitation

On Sunday, February 9, 2020, media reports indicated that Uganda had been invaded by locusts. That same day, the 33rd African Union (AU) Heads of State and Government Assembly commenced in Addis Ababa, Ethiopia.

The two-day meeting was held under the theme: Silencing the guns: Creating conducive conditions for Africa’s Development.

As the leaders deliberated on topics such as conflicts in the Sahel region, sustainable funding of Africa’s development agenda and others, scores of Ugandans panicked over the locust invasion.

A government inter-ministerial met to discuss measures to address the locusts, which the public was informed could eat food that could feed 2,500 people per year!

In addition, army officers and others were shipped off to Karamoja, the site of the reported invasion, to address the threat. Several other efforts were engaged in.

LOCUSTS AND CLIMATE CHANGE

While some of the above was ongoing, the AU Heads of State and others deliberated on matters that would improve the wellbeing of African citizens.

However, they did not discuss how African Heads of State in alliance with national and international agricultural, oil and other companies are contributing towards climate change and are exposing Africans to more potential locust invasions.

With the permission of African leaders, activities such as destruction of forests such as Bugoma in Uganda for sugarcane growing and exploitation of fossil fuels (oil, coal and gas) including in eco-sensitive areas such as national parks, lakes, rivers and forests in Uganda, Tanzania and Nigeria among others are ongoing in Africa today.

Both the burning of fossil fuels and deforestation are drivers of global warming and consequently, climate change.

Yet climate change is part of the reason that Uganda, Kenya and other Eastern African countries are in the predicament they are in today. Moreover, this is a predicament that African countries are ill-equipped to deal with.

As pointed out by the UN Secretary General, Mr. Antonio Guterres, warmer cyclones caused by climate change have created the perfect breeding conditions for locusts. Per information from the Food and Agricultural Organisation (FAO), the warmer cyclones resulted in rains in Oman, which enabled the breeding of the desert locusts. 

The locusts invaded Eastern Africa thereafter and have caused serious damage. FAO estimated that 200 billion locusts invaded Kenya. The locusts, which eat their own weight in food every day, destroyed pasturelands which had only been rejuvenated after drought.

Further, the damage caused by the locusts in Somalia was so much so that the country declared a state of emergency after the insects damaged about 70,000 hectares of food supplies in the country and in Ethiopia.

Experience shows that when food and pasturelands, which are major sources of income for many households are destroyed, other impacts follow.  Incomes reduce, children’s education suffers as parents lack incomes to pay school fees, and even domestic violence due to increased poverty in homes is seen.

OIL AND CLIMATE CHANGE

Now, several countries in Africa including Nigeria, Angola, Cameroon Niger, Algeria, Equatorial Guinea, Ghana, the Democratic Republic of Congo (DRC) and others are oil producers. In addition, several countries including Uganda, Kenya, Tanzania, Togo and others are planning or are undertaking activities to become coal, oil and gas producers.

The above countries argue that they need to produce coal, oil and gas not only to create jobs but to generate revenues to support their respective economies among others.

However, the burning of fossil fuels such as coal, oil and gas is the biggest contributor to climate change.

As earlier noted, climate change has been cited as the cause of the biggest locust invasion to be seen in Kenya in 70 years and in 25 years for Somalia and Ethiopia.

To continue to exploit oil to exacerbate climate change is to put the lives of African citizens at risk. Moreover, poorer African states are more vulnerable to the impacts of climate change. African states have too few resources to manage climate change impacts.

Indeed, the Ugandan government’s response to the locust invasion in Uganda on Sunday, February 9, 2020, was a testament to this. The country had no standby expert manpower and equipment such as airplanes to spray the locusts. Communities in Teso reported that they resorted to making noise to scare the locusts away.

One may argue that oil revenues could be used to make African states climate-resilient. However, experiences from Nigeria, Angola and other oil-producing countries show that oil revenues are never used for the benefit of citizens. Instead, they are largely abused by corrupt government officials at the expense of citizens’ wellbeing.

In line with available evidence that says that up to a 75% of known fossil fuel reserves including oil, coal and gas must be left unexploited for the Paris climate target to be attained, African countries must consider leaving fossil fuels unexploited. They should invest in other economic activities such as agriculture, tourism and others.

Further, in line with the AU’s 2020 theme, African countries should demiltarise oil production and should stop attacking citizens that critique oil activities in Africa.

The writer is the Senior Communications Officer at Africa Institute for Energy Governance (AFIEGO).

Why A Delay To Sign FID For Oil And Gas Industry Is Both Good & Bad For Uganda

By Michael Businge

FID means Final investment Decision. And these decisions are taken by the Board of Directors. It can include decisions about financial resources, by finding out whether they are sufficient or not. This is ascertained from developers and in this case oil developers such as Total E&P, CNOOC, etc.

The delay of FID is good anyway, but why?

 It is a blessing in disguise because it has enabled Uganda to put together necessary systems and structures for good oil governance and management.

For instance, unlike countries like Ghana which began oil production without proper oil laws, Uganda had to get enough time to have good laws governing the sector.

Key institutions to oversee proper licensing, regulation and management have been established. Petroleum Authority of Uganda, Uganda National Oil Company, Petroleum Directorate have all been established. This is a plus for us as a country.

It has also given us considerable time to put necessary infrastructure like roads, acquisition of land for pipeline development, preparing people to set up companies to provide goods and services in the oil and gas sector.

It has given us the necessary time to build capacity and manpower to work in the oil and gas sector, for instance, there is an inbuilt capacity for petroleum engineers, tax experts, negotiators, goods and service providers, and so much more.

However, there is has been some recorded negative impact due to the delay to sign FID.

There is a loss of employment for people who were working on the East African Crude Oil Pipeline, in oil camps as cooks, drivers, and so on.

This has also led to fewer goods and services being provided to the oil industry as I write this. Why? There is no much "physical" work taking place due to the delay to reach a decision.

The uncertainty from a section of Ugandans about when the first oil will come out is rising. This is due to the anxiety created where they have continued to ask themselves as to when the potential of 6.5b barrels will be translated to actual tangible values.

Remember, some communities were displaced for oil infrastructure such as the CPF, oil refinery, pipelines, roads and so on.

Therefore, as we wait for the FID, the first oil to drop, communication about concrete processes and decisions have to be told to various stakeholders in time to reduce on the anxiety, for proper planning for masses to benefit from the oil and gas sector.

The writer works as a coordinator at Youth4Nature Uganda

Youth4Nature Uganda is a youth movement that ensures maximum utilization and management of Natural Resources (Land, Forests, Wildlife, Soils, petroleum resources and minerals in Uganda.

 

 

Overcoming Price Volatility: Harmonising The Balance Sheet With Investment

The impact of the energy transition on the mining industry has been profound. It is one of the most energy-intensive industries in the world, accounting for an estimated 6.2% of the total global energy consumption.

It has also historically been a disproportionately large contributor to global warming, through the intensive use of fossil fuels to power operations. But now there is a spotlight on the sector, with increased pressure to move towards renewable energy.

While developments have been made, there remains increased pressure to reduce emissions. Just last week consultant McKinsey reported that mining companies need to go further to diversify their portfolios in order to meet Paris climate goals.[1]

Coupled with this pressure, there has been a period of significant volatility in commodity prices which has resulted in miners needing to keep down costs and improve efficiency. Overcoming this challenge in a context of ongoing decarbonisation is no mean feat, but adopting a rental model could be a way of harmonising balance sheets and keeping operations running smoothly.

Decarbonising versus cost

Aggreko (http://www.Africa.Aggreko.com) recently conducted a global survey to better understand the priorities of decision-makers in the energy sector. Of those surveyed, 50% said that cost is their primary consideration. But with the need to also meet carbon emissions targets, inaction isn’t a possibility. The knock-on effect has been a reluctance across the sector to invest in new green power sources with concerns it could soon be out of date as the pace of change seems to only be accelerating.

Mine operators are therefore facing a dilemma: how to integrate renewable energy into power solutions which require significant CAPEX investment when there’s a backdrop of commodity price volatility making investment unattractive.

The Syama gold mining complex in southern Mali was able to balance this well. Aggreko having recently signed a contract with Resolute has been able to support its ambitions to reduce carbon emissions and improve overall efficiency for the site.

Once installed, Aggreko will operate and maintain a 40 MW thermal power plant and a 10 MW battery storage system, with a further 20 MW of solar power planned in 2023.

The hybrid solution will reduce Syama’s power costs by an estimated 40%. Once all the renewable power sources are fully installed it will also reduce carbon emissions by approximately 20%. By using a rental option, Syama were able to de-risk the investment into greener energy due to not having to invest capital into the power solution.

Long term role of mines versus cost

Advances in technology are also driving change for the mining industry in terms of the pool of metals and minerals that are considered to be a worthwhile investment. The growing popularity of electric vehicles is leading to an increase in the need for cobalt, lithium and nickel, which are important component parts of lithium-ion batteries.

But, while this presents an opportunity for miners, this also means capital investment opportunities in some mines, such as coal, has become more difficult. There’s also a risk in investing in the latest technologies as and when they emerge due to the market changing regularly.

The Tasiast mine, one of the largest open-pit gold mines in Africa, located in the remote northwestern region of Inchiri in Mauritiana, was facing this dilemma. Its off-grid mine was powered by an inefficient fuel source and prone to regular breakdowns, incurring huge maintenance costs.

The life expectancy of the mine was expected to last another decade, and with the added consideration of diesel price volatility, Kinross needed to think about power for the mine longer term, as well as what they could do to alleviate the cost implications they were suffering short-term.

To address their immediate issues, Aggreko offered a solution that was easy to integrate into their current power mix. Kinross now has reliable, guaranteed power 24/7 to ensure its gold production is unaffected by power issues or further shutdowns. Given it was a rental solution, it also gave them the necessary breathing space and time to review longer-term power options for the remaining life of the mine.

Managing capital and project risk

It’s clear that mining is a sector undergoing a deep transformation as a result of the energy transition. The use of hybrid power solutions at mines is only set to increase, while investment will continue to be driven by innovation in green technology.

Mining companies are in the unique position of needing to deploy green energy sources whilst also being a key component in the supply chain for new low-carbon technology. Finding nimble solutions, such as hybrids or microgrids, provides companies with the agility needed to respond to the quickly-evolving energy landscape.

What’s more, a rental power model allows mine operators to do all of this whilst keeping energy costs competitive and only require an outlay of OPEX, rather than CAPEX. This means that companies have greater flexibility to respond to the rapidly-evolving market while keeping costs down.

John Lewis is the Managing Director, Aggreko Africa

Can Uganda’s Oil And Gas Companies Contribute To Clean Energy Transition?

By Sandra Atusinguza

One in every 7 people still lack electricity and most of them live in rural areas of the developing world according to UNDP  2020 report. Investing in solar, wind and thermal power, improving energy productivity and ensuring energy for all is vital if we are to achieve SDG 7 affordable and clean energy by 2020.   As we all wait the delayed announcement of the final investment decision by oil companies, this has greatly increased doubts of fast-track oil by 2020 /2021.

As government calls upon local firms to register with the National supplier data base and talent register for first priority for employment and  to supply good and services however there is limited technical capacity and specialized expertise to fully exploit the renewable energy resources potentials and this has been a great challenge to track faster the implementation of the local content policy.

Uganda’s oil fields have associated natural gas reserves estimated at 500 billion cubic feet and as some oil and gas companies like CNOOC plan to produce gas and use some of it to generate up to 42 megawatts of electricity for the company’s use and for sale to national grid.This natural gas can be used in several clean energy alternative projects which can help to contribute towards climate change mitigation, national energy security and global energy transition. Oil and gas companies must be adopting to the use of biomass, wind turbines and solar panels for oil field operations and other projects.

Ministry of energy and mineral development and ministry of transport must introduce a policy on low carbon transportation and ensure that oil and gas companies adopt it through use of high demand clean fuel vehicles mainly in natural gas( compressed natural gas  or liquefied petroleum gas) which is readily available in the Albertine graben in the next phases of oil production.

Climate change can also be mitigated amidst Oil and gas activities through carbon capture and storage, this solution to climate change help oil production with fewer emissions by capturing carbon dioxide and store it into oil reservoirs.

According to Uganda’s energy and mineral sector in its Midterm sector policy objectives, the oil and gas resources must be used to contribute to early achievement of poverty eradication and create lasting value to society.  The oil and gas industry must therefore heavily invest in new clean energy business models and technologies to transition to decreasing greenhouse gases emissions and promote energy efficiency in the next phases.

Sandra Atusinguza is the AFIEGO field coordinator

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What's This All About?

By Michael Businge

Most times in my language, we call this as Kwetera endobo-shooting ourselves in the foot!
 
On Wednesday, Greta Thunberg, the 16-year-old Swedish Climate Change Activist during the COP 25 in Madrid (climate change summit) challenged leaders at all levels about our commitments. Of course, we have not done much on climate change.
 
She rebuked us about having done nothing. I don't think that we haven't done anything. She was bitter, very emotional and challenged world leaders on having destroyed the environment and having cared less. Is it true that we have done nothing? The answer is yes and no. 
 
Since we ratified climate commitment for a meeting that was held in Paris, we were meant to domesticate and come up with workable commitments. There is a climate change bill( not sure if this has been passed by our Parliament.
 
Of course, we have done some work such as creating awareness, but I feel that we can do more!
 
The journalists have written articles in the national media but there has been little debate on radio stations yet they're the most listened to media. Solar energy and clean cooking have been promoted but I feel we should do more. We must actually stop taxing clean energy technologies.
 
The car manufacturing industries are undergoing reforms to produce "clean" vehicles. Uganda is set to ban importation of second-hand cars. I want to live and see this actually happen. Campaigns have been on leaving the oil in the soil; but is this possible?
 
With infrastructural development which of course is meant to propel us (Uganda) to achieve Vision 2040 has to been done in a sustainable way. Unfortunately, we have destroyed carbon sinks such as forests, built-in wetlands. This will affect mostly the poor who can not afford medical care. 
 
Just recently, in New Delhi- India, pollution levels rose up and this affected major sectors of the country such as transport, people could not breathe well and the health centres were overburdened. New Delhi is far. Our own Kampala has declared a polluted city. Increased cases of pollution have been reported, air pollution is real.
 
Recently, I  got a Safe Boda from Mutungo to Namirembe, but after navigating through, I felt my eyes irritating, could not breathe well. I really wished to breathe Hoima air. But I realized that the atmosphere has no boundary much as there are concentration levels of particulate matter, CO2, and other clorofrocarborns in particular places. 
 
On a world scale, I feel that Africa has played her role. However, the west has acted as bullies and not willing to carry out reforms. Of course, on the negotiation table, we have come with little to offer and our arguments have been irrelevant for the West.
 
For carbon markets- why would they be paying us for the conservation of carbon sinks if they are unwilling to reduce carbon emission quotas? They do not want to invest in expensive clean technology, which is cheap in the long run!
 
The US has threatened to leave the  Paris Climate pact. This complicates the climate change campaign efforts. However, all is not lost because another major polluter (China) said it will reduce her carbon emissions.
 
Whether this is real or rhetoric, I do not know. But why would they (West) own oil companies extracting oil in Africa yet they preach to us about climate change? Why? 
 
We can intensively campaign for subsidies on clean energy technology, create an environment better for our innovative young people.  Most importantly, we need to walk the talk or else the talk will walk us out forcefully.  Maybe we need to learn the hard way! 
 
The writer works as a Programs Officer at Youth4Nature Uganda

Africa Should Be Allowed To Use Its Resources

On the backdrop of the climate change debate, Africa finds itself in an unfortunate position where it is required by the global energy industry to slow down its progress and not explore its hydrocarbons potential to its fullest. This is not right.

At the African Energy Chamber, we do not deny the impacts and severity of climate change. We recognize the role and significance of the Paris Agreement which over 30 African countries have signed. However, we believe the energy transition should be gradual and considerate of the power gap the exists in Africa.

On the continent, our foremost obligation as industry leaders is to ensure that Africa’s people have access to energy. We are determined to address the everyday issues that the continent is faced with.

Energy poverty is Africa’s most critical concern. For us, it is a life and death situation. In Africa, over 600 million people still do not have access to power. And, we remain a net importer of energy yet we boast 125 billion barrels of proven oil reserves, accounting for 7.3 percent of global oil reserves and, 509 tcf of gas – accounting for 7.2 percent of global reserves.

Our natural resources are important for our development. We cannot ignore what the continent needs, in the interest of supporting global trends when our economies remain underdeveloped. Our hydrocarbon potential is vast and Africa is home to a number of emerging economies who are steadfast on taking their rightful place in the global energy sector, our time to industrialize is now.

We applaud our brothers, sisters and friends in the west such as Norway and Germany for having used their oil and gas resources to develop their countries and build thriving economies. But, Africa deserves the same opportunity to build world-class economies.

“At the African Energy Chamber, we understand that issues of climate change are important but, this new drive for environmental colonization bullies African countries to leave their resources and depend on the sun,” said NJ Ayuk Executive Chairman of the African Energy Chamber and author of Amazon best-seller, Billions at Play: The Future of African Energy and Doing Deals.

In the past, Africa has been far too reliant on foreign aid and while in some ways it has been extremely helpful and beneficial, it has also taken away our independence. In several instances, Africa has always taken the passenger seat when it comes to deciding its future but, it must end now.

Our continent needs to be left alone to decide its own fate.

The African Energy Chamber strongly stands against the idea that Africa should ignore its potential and ability to leverage its resources as a means to drive growth, create opportunities for investment and development.

As the voice of the African energy industry, we are proud to announce our counter-campaign on the insistence that the continent should pursue a less carbon-intensive energy future as a way to support global interests which Africa has not yet benefitted from.

Most Heart Diseases Are Simply Caused By Our Lifestyle Choices – Cardiologist

Dr. Okello Emmy, the lead cardiologist from Uganda Heart Institute, has advised Ugandans to embrace healthier lifestyle in order to prevent heart related illnesses.

The cardiologist, speaking at the second edition of the Prudential Heart Camp revealed that heart diseases are preventable and most of them are simply caused by our lifestyle choices.

“I urge all Ugandans to adopt a much healthier lifestyle by exercising, eating right, keeping away from stressful activities, having regular medical check-ups to check your blood sugar levels, BMI, Blood Pressure, that’s the only way we can prevent heart disease,” said Dr. Okello.

Dr. Okello said Uganda Heart Institute received patients who have been diagnosed with heart diseases while others are referrals.

He said people with fresh cases are advised how to adjust their lifestyle in order to live a normal life and how to curb the continued progression of the disease while referred patients are helped to adjust their medication.

“We were glad to receive many people whose hearts were healthy and this is exactly what we encourage, you should not wait to feel pain or other signs and symptoms of heart disease before you see a doctor,” the doctor said at the health organized by Prudential, an insurance company.

The Prudential heart camp was hosted in partnership with Ministry of Health, Uganda Heart Institute, International Medical Centre, NBS TV, Radio One and Akaboozi, Capital FM.

Over 3000 Ugandans had access to free heart check-ups which consisted of ECHO, ECG and advice from professional Cardiologists, Doctors and Nutritionists on how to prevent heart disease.

Other check-ups included BMI, blood sugar and blood pressure all at no cost. In addition, the campaign hopes to reach 10 million Ugandans country wide through TV, Radio and Social Media to spread the message of better heart health through regular check-ups, exercise and better nutrition.

“Our decision to host a Heart camp was prompted by the rise of Non-Communicable Diseases in Uganda. The last national survey published by the Word Health Organization and Ministry of Health indicates that in Uganda alone, 1 out of 4 adults has high blood pressure which is a major cause of heart disease and other heart related complications’’ said Arjun Mallik, MD Prudential East Africa at the press conference during the closing of the camp.

Some interesting statistics from the Prudential Heart Camp include:-

  • 57% were male, 43% were female
  • 64% had abnormal blood pressure, majority of whom were between the ages of 32 to 50
  • 61% were overweight
  • Only 1.5% had high amounts of sugar in their blood

Some of the abnormalities noted include hypertension, enlarged hearts (dilated cardiomyopathy) and diseases of the valve.

How Co-Operatives Aid Development In African Economies

By Edward Israel-Ayide

The rapid advancement of mechanization from the mid-1700s to the early 1800s which is now considered as the Industrial Revolution, resulted in job losses for many skilled workers across Europe. The knock-on effect of this development was a significant rise in poverty.

With a reduction of earnings and often disappearance of spending power, it became difficult for the broader population to contend with middle-men and traders who sought to profit from the situation by institutionalizing unreasonable prices and labor practices.

In 1844 a group of 28 weavers and skilled workers got together in Rochdale, England with the aim of establishing a society to counter the injustice of price fixing and low wage setting, and by launching their own shop they made it possible for the local community to buy staple goods which had become out of reach.

They derived valuable lessons from previous botched attempts to form co-operatives and ostensibly designed the now-famous Rochdale Principles which have become the standard for Co-operative societies globally and which were officially adopted by the International Co-operative Alliance (ICA) in 1937 as the model for Co-operative societies.

This pioneering group, inspired by a genuine concern for the economic wellbeing of their members and community, are now known as the Rochdale Pioneers and are the founders of the modern Co-operative Society which today, reportedly comprises of around 2.6 Million co-operatives with over 1 Billion members and clients.

Since the time of the Rochdale Pioneers, Co-operative societies have progressively become a meaningful part of economic development; not only for society members but also for the wider communities within which they operate.

Across Africa, Co-operative societies have performed a critical role in the fight against poverty by providing opportunities to create wealth through trade and the development of agriculture. According to a World Bank report, co-operatives possess the potential to provide affordable credit to small-scale farmers because they can reduce transaction costs and lower the risk of default.

This is possible because successful co-operative societies provide incentives for members, encouraging a loyalty which also delivers the added benefit of maintaining a competitive position. In providing services to their members, cooperatives generate income through a variety of commercial ventures.

Sustainable, or in other words successful Co-operative societies are those which can balance the concerns of the society with the benefit of aiding the economic growth of the area which it serves.

The perfect illustration of this is the Total E&P Nigeria Staff Multipurpose Co-operative Society Limited (Total E&P Co-op); a Co-operative Society comprising the staff of Total E&P Nigeria Ltd, (a local subsidiary of Total S.A. the French multinational integrated oil and gas company).

Founded in 1984, in the humble surroundings of the mailroom at the Nigerian Oil Company, the staff at Total E&P seized the opportunity that economic downturn presented, to establish a communal economic system, where active members could unite to make bulk purchases of essential commodities at reasonable prices, for distribution amongst its members.

The Total E&P Co-op was born and soon blossomed to incorporate a more sizeable number of staff coming together to establish the forebear of Total E&P Co-op; Total E & P (Nigeria) Thrift and Credit Society Limited which was a savings and loans society.

By 1994, the Co-operative Society had shifted focus to matters of basic human requirement and pooled member funds together towards the purchase of real estate through the collaboration with commercial banks. Today, Total E&P Cooperative’s asset base has grown over a thousand fold from inception.

Thanks to an increasing and constantly motivated workforce contributing their quota to its core areas of interaction between members, together they boast assets in Real Estate, Treasury & Financial Services, and Business Development.

The success and growth of the Co-operative Society has been due to several contributing factors but three factors stand out in providing valuable lessons for other co-operatives (or even governments) across Africa who intend to adopt the Co-operative model to reduce poverty, increase financial inclusion and create wealth.

Combating Poverty and Creating Wealth Through Corporate Social Responsibility

The founders of the global co-operative movement-the Rochdale Pioneers-were striking weavers who opened a grocery co-op to extricate themselves and others from poverty. Their aim was to provide answers to questions about whether the economy should serve the people or vice versa; this belief in economic fairness led to the development of co-operatives as we identify them today.

Since then, co-operatives have carried out a fundamental role in combating poverty and creating wealth, especially at the grassroots level. As stated by Joseph Ventura, an expert on the impact of co-operatives; “In transforming poverty-ridden communities into vibrant economies, co-operatives also contribute to skill-development and education as they bolster gender equality and improve the health and living standards of an entire community. Co-operatives have been instrumental in meeting the Millenium Development Goals, as nations are more likely to stay peaceful by escaping the poverty trap."

For the Total E&P Co-op, these efforts have been at the core of plans for sustainability and the growth of the collective’s commonwealth. It has led to the creation of products and services tailored to the needs of members/cooperators in the real estate, insurance and financial services sectors.

Equally investment in Corporate Social Responsibility (especially through STEM education and in providing quality education to the disadvantaged members of society), help equip young Nigerians with the skills necessary to become more productive members of society.

In a country like Nigeria where over 50% of the population faces extreme poverty, these empowering initiatives help bridge the poverty gap where governments have failed and provide opportunities for the young through job creation.

In his paper “The Role Of Cooperatives In Poverty Alleviation” Christopher Imoisili, Senior Specialist Entrepreneurship & Management Development of the International Labour Organization (ILO) drew attention to how cooperatives help both members and employees to escape from poverty, by offering an umbrella of shelter to those who may be facing the risk of poverty.

He added that “By promoting student and youth programmes and cooperative entrepreneurship...cooperatives can play a major role in bridging the [poverty] gap. They can also influence political processes and legislation in favour of the socially deprived.”

Corporate Governance

While co-operatives are typically run democratically, relying heavily on member engagement; it is important that they balance this with the strategic management of their business in a way that ensures the continued survival of the Co-operative and its viability as a business concern. It has been reported that most co-operatives in Africa and other emerging economies collapse because of weaknesses in their corporate governance or the total absence thereof.

According to a 2014 paper written by Marilyn Scholl, a consultant with CDS Consulting Co-op and Art Sherwood, an Indiana State University Associate Professor of Management; there are four critical pillars upon which corporate governance should be built in any Co-operative organization and strict adherence to this has sustained Total E&P Co-op as a viable business concern.

These four pillars; Teaming, Accountable Empowerment, Strategic Leadership, and Democracy have been at the heart of the various changes that Total E&P Nigeria Staff Multipurpose Co-operative Society has made in its team structure over the years.

For example, it has applied these principles when filling critical leadership roles within the organization with those who not only have the qualifications, but are also experienced in their field of practice and can therefore be held accountable for strategic decisions taken on behalf of the Co-operative.

The co-operative also remains the first and only Co-operative Society in Nigeria to appoint an External Auditor (PricewaterhouseCoopers) to review financial records and determine its compliance with internal and regulatory policies guiding the affairs of the organization.

This system of checks and balances, peer-review and external regulation is a major turning point for public and private institutions looking to remain viable in the face of global economic trends such as price fluctuations in global oil and other commodities.

Strategic Planning 

For institutions looking to achieve viability and sustainable growth, planning for the future is a  critical requirement.  For many societies across Africa, failure to plan for the future and align with trends has been at the heart of the majority of socioeconomic failures. This undoubtedly has had an impact on broader African economies.

As Total E&P Co-op grew its membership and revenue, they created an organizational structure which would allow it to develop a sustainable strategic plan and guide operations for the years to come. Beginning in 1997, the linear business model of the Co-operative had outlived its usefulness and the growing membership base of the co-operative society now had increasingly diverse needs.

To meet these needs, Total E&P Co-op changed their model to one of a multipurpose Co-operative business and made massive investments in human capital, placing a priority to the recruitment of a full-time technical team which ensures they maximise the investments of their strategic business units and profit centers.

The strategic business units identified were those that would enable the business to create long-term profitability and position it as the Co-operative of the future. In line with this, the Banking and Investment desk of the Co-operative was set up as the ‘Treasury and Investment Hub’ whilst it migrate the financial services into a Co-operative Bank to support future ventures.

The real estate development, management, and marketing operations were restructured so that the Co-operative could partner with established property developers and build, operate and transfer investments in the real estate business. This futuristic strategic planning has enabled Total E&P Co-op to become the fastest growing Co-operative Society in Nigeria as reflected by its growth in relation to Nigeria’s GDP.

Total Living, is the culmination of plans to improve the success and sustainability of its cooperative model. They have embarked on the first real estate development project to be certified under EDGE sustainability in West Africa (a Green building standard and rating system for over 150 countries introduced by the IFC/World Bank).

La Definition, as the project is called, is a smart, innovative mixed-use development that sits on 22,000sqm of land located between the Kuramo Lagoon and Lagos beachfront. The project is set to steeply increase revenue for members of the cooperative whilst improving the amenities available to the diverse population of Victoria Island, Lagos’ center of business and commerce.

La Definition will feature some unique solutions to tackle the limited availability of grid infrastructure in Lagos including a water recycling system that will reduce demand for borehole water by up to 80% through the use of rainwater and greywater. An energy center is also planned based on the gasification of sustainable waste streams to produce very clean synthesis gas that will generate electricity and heat for the development with zero CO2 emissions.

For emerging African economies keen on implementing policies and projects geared at economic growth, job creation etc., there are important learning points to be gleaned from cooperatives The successes of Total Co-op provides an insight into how the larger Nigerian society, and indeed Africa, can progress where there is commitment to strategic planning, governance and investment in human capital.

The co-operative model may just hold the key to reversing the poverty rate on the continent with the benefit of strengthening communities and fostering sustainable development.

Edward Israel-Ayide (@wildeyeq) lives in Lagos, Nigeria and comments on socio-political events across Africa.

How To Avoid Sanctions For Breach Of Local Content

By Pablo Mitog

You want to avoid sanctions for lack of compliance with local content norms in Equatorial Guinea? Easy, start complying. We intend here to provide you the key steps to ensure your local content compliance in Equatorial Guinea. For a full diagnosis of your compliance, please make sure to contact our attorneys on the ground.

The common problems that companies have with local content in Equatorial Guinea

In 2018, the Ministry of Mines and Hydrocarbons of Equatorial Guinea informed operators Exxon Mobil, Noble Energy and Marathon Oil that they should stop doing business with several companies because they were not in compliance with local content regulations under the country’s hydrocarbons law and the clauses of their PSCs. The truth is that it was not the first time that happened. In 2015 and 2016, there were also economic sanctions for the breach of local content requirements. With the local content Ministerial order covering only 20 pages, it seems surprising that companies could be risking their operations and contracts over something very straightforward. To understand the catch, read on.

Between 2015 and 2016 in our offices in Malabo, we had the opportunity to assist the Government in a plan that was unprecedented to audit oil and gas companies and verify their compliance with their local content obligations.

We were very surprised to see how the legal departments of large oil companies did not know exactly how to protect their organizations against these demands. Because the number of companies that did not comply was very high, the Ministry decided to adopt a more collaborative than penalty approach, without which all operators and contractors would have been sanctioned in some shape of form.

Reserving the confidential client information, we observed that most of the in-house local content departments of these companies have three common problems: 1. determining who is obligated to do what under local content regulation; 2. knowing what local content includes; and 3. correctly developing a local content plan that meets very specific points required by applicable laws.

To examine these common problems, it is necessary to briefly clarify what the local content is according to the legislation of Equatorial Guinea. The keyword of the local content is “privilegio.” This is a set of privileges that companies or physical entities have and whose purpose is to obtain preferential treatment with respect to other companies and people from other places when obtaining contracts in oil & gas and mining. These privileges belong to local companies, companies of the CEMAC community, or African companies.

The local content regulations in Equatorial Guinea are broader than just those set out the ministerial order. They can be found in five main legal documents: the famous decree 127/2004 (amended in April 18 of 2018 by the decree 72/2018) that ensures local participation in the oil industry, the Law No. 8/2006 of November 3rd regulating Hydrocarbons in its articles 88 to 93, the Ministerial order 4/2013 regulating petroleum operations in articles 156 and 157, the Ministerial order 1/2014 on local content.

Lastly, all PSCs have very specific local content clauses. The Labor Code also contains laws such as Law No. 6/1992 on national employment policy that also affects companies in the sector, and the list goes on. The question is, how do we put together all the requirements of those laws to get a unique list that tells a company what exactly it should do to comply with local content? While complex, the exercise is feasible and quite straightforward when you know where to start and what to consider.

Because the circumstances and needs of each company are different, local content laws are also flexible. Flexibility in the terms of the law does not mean an exemption from compliance, but compliance mechanisms that can be negotiated with the authorities. For example, you can get more time to meet a specific obligation.

Now that we have outlined the basic frame of local content, we can explore the common problems that companies in the oil and gas sector have when they deal with a local content audit in Equatorial Guinea.

Operators or contractors: who is obligated under local content regulations?

The oil and gas industry is governed by agreements, and many companies have to form alliances and joint-ventures to operate together. This may create doubts about who is obliged to comply with local content laws. According to article 2 of Ministerial order 1/2014 on local content all companies that carry out activities in the petroleum and mining sectors are obliged to comply with local content requirements. This includes: operators, explorers, contractors, sub-contractors and their associates even if they are local businesses.

According to this, a) you have to have a contract in the sector and b) you have to operate in Equatorial Guinea. However, despite this clarity, there are many doubts that may arise, for example: what happens to companies that have contracts in the sector but are only licensed to provide material from abroad? Equally, if two companies are linked by a joint-operation agreement, must they comply individually or jointly? Another question that may arise is on whether a local company has to comply with all obligations or if it must simply comply with some.

For example, it makes no sense that a local company would be forced to transfer technology just because it is from the oil sector. For such questions that require an interpretation, companies must work with the local content authority to obtain their interpretation in writing. It should never be assumed that a certain obligation is not applicable to a company. This is part of what we consider being flexibility in the local content laws.

The main obligations that any company should pay attention to

Local content is much more than building a primary school in a village or drilling a small water well in a local community. In our experience, it is very common for companies to present small works carried out in the villages as being works of compliance with local content. While the value of such efforts should not be minimalized and corporate social responsibility should be encouraged, a company could still be sanctioned for lack of local content compliance despite having spent money and time on CSR.

Local content mainly includes five obligations that must be structured in detail in a local content plan. These obligations include:

  1. Procurement of goods and services. All necessary goods and services must be hired in order of preference established by the local content regulations. To prove it, companies must keep their invoices or any other document proving that they hired local services. However, it should be clarified that there are limitations to guarantee that the local procurement obligation does not cause prejudice to a) quality (local goods and services must meet international quality standards) and b) price (local goods and services cannot cost more than 10% of what the same good or service would have cost if it had been brought from abroad). That is why we insist that companies should take advantage of this flexibility to adapt each obligation to their particular needs.
  2. Qualified workforce. All workforce must be hired in the order of preference (local, regional and continental). Foreign workforce can be hired only with an authorization, after demonstrating that the company has made substantial efforts to find specialized local workforce and has not found it. However, the authorization to import foreign labor only gives you an extension of time, because the obligation to train local labor prevents you from keeping your foreign workforce over a long period of time. If you have proven your inability to find local manpower for a specific position, you are still obligated to train local talent to fit that role so that you are able to gradually replace your foreign labor.
  3. Technology transfer. This is another common problem for companies. We know that nobody is going to transfer the tools they can earn a profit from, and which gives them an edge on the market. Technology is the greatest power a company can have and today IOCs dominate the market because of their technology, and their edge over NOCs is not only financial but above all technical and technological. Forcing foreign companies, be them IOCs or oilfield services, to transfer their know-how is very complicated to achieve. However, the spirit of the law is not that business or industrial secrets are transferred to local premises. So how do you know that a company transfers technology within the framework of local content legislation? That question is also not easy to answer. However, the practice followed by the authorities is to verify if the company has a plan to ensure that its local resources are technically capable of carrying out their work with the international quality standards generally accepted in the industry.
  4. Training. The clearest and most difficult clause to ignore is that pertaining to the training of local employees in order to enhance their skills. Although this obligation is already included within labor laws, the object and spirit of both laws (labor and local content) must not be confused. What is the difference? If in the labor laws it is envisage that an apprentice gains experience or acquires the skills of a profession or trade, the purpose of the local content is to specialize these in very specific tasks within the petroleum industry so that they are able to carry them out in the future autonomously with the same technical competence as a foreign expert. So, complying with one doesn’t mean that you don’t have to comply with the other. Basically, the local content laws requirements of training start where the labor laws reequipments ends. With the right advise and the correct approach, both laws can be easily complied because there is not necessarily a conflict between them.      
  5. Social Infrastructures development. What does the local content regulations refer to when they impose the obligation to run infrastructure in the communities, and is any particular infrastructure expected to be developed by oil companies and their contractors? Article 93 of the hydrocarbons law says verbatim that “they must (the infrastructures) be of the widest impact on the public.” In other words, infrastructure must be meaningful and of the quality that a community would need.  It’s very important to make sure that the Infraestrure is also sustainable to the community; You don’t want to build a school without a plan to provide teachers nor learning materials or build a health center in a poor community without any nurse. The community need a school or a health center operational, not an empty building. Practical requirements in this regard have to do with a) sustainability over time b) the importance and quality of the infrastructure to substantially improve the life of as many people as possible in a local community.

What should be in your local content plan?

The local content regulations oblige all oil and gas companies to have a detailed, long-term local content plan and implement it. Companies must also demonstrate that they are reasonably executing the plan they themselves have prepared.

The important thing about this plan is that: a) it is flexible, b) it is a plan that can be adapted to the individual circumstances of each company and c) must be approved by the General Directorate of Local Content. The design of the local content plan, its evaluation and presentation to the authorities when undergoing an audit is the most critical part. Almost all companies that have been sanctioned have breached some of the essential points of their own plan.

We can organize these into four large groups: i) Documentation related to the incorporation of the company; ii) Documentation related to the procurement of goods and services; iii) Documentation related to technology transfer and training of personnel; and iv) Documentation related to infrastructure development. Although we do not intend to address all these aspects in details, the following according to our experience are the ones that can create the most problems for a company.

  1. Documentation related to the incorporation of the company:
  • Notary deed duly legalized and registered in the Commercial Registry,
  • Certificate of Tax Identification Number (NIF),
  • Registration of company in the MMIE.
  1. Documentation related to the acquisition of goods and services.
  • List of all partners and suppliers of the company, as well as the contracts, offshore and onshore signed with them,
  • National Content Development Program and its evaluation plan,
  • Detailed report on contracts awarded to local companies,
  • Proof of semi-annual shipments of the updated list of services that the company needs to contract,
  • Proof of payment of social shares to local partners.
  1. Documentation related to technology transfer and staff training:
  • Detailed reports on job vacancies and jobs to be created,
  • Training plan for local employees,
  • List of local staff and their evaluation and promotion system,
  • Annual internship program for students of the National University of Equatorial Guinea.
  1. Documentation related to infrastructure construction (with social impact)
  • Detailed report on Social Work Projects and their degree of compliance.

How serious is the local content compliance issue?

The highest penalty for breaching local content standards is that the government can order operators to terminate contracts or prohibit them from renewing contracts they have with a company that does not comply; and this has already happened in the past. Other sanctions include financial sanctions that in the past have reached anywhere between $500,000 to $3 million, sometimes more if we analyze the full impact of the consequences of a sanction. Other much lighter sanctions have included a warning with the company being given a short amount of time to meet very specific requirements.

Furthermore, if a company demonstrate a track record of non-compliance, they will lose the confidence not only of the government but of the operators, because every time a company is sanctioned, all its partners are affected in some way.

Conclusion. So far, three things must now be clear: a) failure to comply with local content requirements may jeopardize not just a company's contracts, but its very existence in Equatorial Guinea and its ability to renew or obtain new contracts b) local content is a complex issue but c) managing its compliance is not a big deal providing the right steps are taken early on.

At Centurion Law Group, thanks to the experience that we have accumulated over the years and in several African jurisdictions, we are always willing to assist and advise companies to deal with these problems in the best way so that they can protect their interests and that their operations are carried out without any risk.

Pablo Mitog,Associate Attorney, Centurion Law Group

Fate Of Russia's Impact In Africa Reliant On Continent's Ability To Make Better Deals

Russia's return to Africa has been the subject of wide media coverage, governmental concerns and civil society reactions in recent weeks, especially as Sochi gears up to host the first ever Russia-Africa Summit next week.

Most commentators have come from Europe and North America to voice concerns over Russia's dodgy arm deals in Africa, political meddling with unstable African regimes, and its overall challenging of the status quo on the continent. The problem is, when these comments are not outright hypocritical, they are missing a key point: competition is good for business, which is just what Africa needs right now.

First, Russia's presence in the continent cannot be summarized into sensationalism. It is complex and needs to be put back into context. Its modern relations with African governments and institutions started building up in post-independence Africa, time when the Soviet Union offered key diplomatic and military support to young African nations in need of it.

This assistance was multi-form and much needed for countries seeking fast development following harsh independence wars and conflicts. "The Soviet Union provided significant economic assistance, including infrastructure, agricultural development, security cooperation, and health sector cooperation," wrote Paul Stronski of the Carnegie's Russia and Eurasia Program this week.

Consequently, Putin's vision for Africa is resuming and building up on a cooperation that started in the second half of the 20th century and was only put on hold by the collapse of the Soviet Union in 1991.

In short, while arriving late to the party, Russia is no stranger to the African playground. Beyond military cooperation, its state-owned natural resources companies have already made inroads into the continent and could be a game-changer for many African countries in need of investment and electricity.

Key Russia energy companies such as Gazprom, Lukoil, Rostec and Rosatom are already present in Algeria, Angola, Egypt, Nigeria, Cameroon, Equatorial Guinea or Uganda, while mining and minerals ones such as Nordgold or Rusal are developing world-class mines in Guinea and Zimbabwe.

On a global stage, Russia's involvement in OPEC has also sent strong signals that it is committed to market stability and global energy cooperation, which ultimately benefit African producers.

"Russia's influence is increasing through strategic investments in natural resources, and such investments are welcomed by African governments and companies. They bring in key Russian capital and know-how to the continent which is seeking to diversify its investors basket and attract much needed investment into its energy industry," said Nj Ayuk, Executive Chairman at the African Energy Chamber and CEO of the Centurion Law Group.

"The African Energy Chamber is supporting such efforts and has seen a definite uptick in Russian companies' interests for the continent. We predict a lot of deals to be signed during and after the Sochi Summit for Russian energy companies to develop African resources and do business in Africa. This will be especially beneficial as Africa develops gas-based economies," he added.

Amongst the most recent agreements are for instance the MoU between Atlas Oranto Petroleum and Rosneft in 2018, under which the pan-African E&P company agreed to explore the joint-development of its assets across Africa with the Russian state-owned giant. Another one is the signing of several agreements between Russia and Mozambique this summer, involving again state-owned Rosneft but also Nordgold. In Central Africa, Gazprom is also lifting gas from Cameroon's the FLNG Hilli Episeyo, the world's first converted FLNG vessel.

As such investments and activity picks up, the real game changer will be Africa's ability to make deals that work for its people and its economies. Deal-making is what will shape the future of Russia-Africa relations and will tell whether Russia's renewed influence in the continent is good or bad for its people. Rightly so, the ability and capacity of African governments to make better deals with investors is becoming central to the global business narrative on Africa.

In his much anticipated book coming up this month and already best-seller on Amazon, "Billions At Play: The Future of African Energy and Doing Deals", Nj Ayuk dedicates an entire chapter to the critical art of deal-making. "For Africa to truly realize all of the benefits oil and gas operations have to offer, we need to see good deal-making across the board," he writes. "Clearly, good deal-making has far-reaching implications for African people, communities and business."

Contracts negotiations is in fact the key element missing from the current debate on Russia's increasing influence in Africa. There is no doubt Africa is welcoming Russia's interest for doing business on the continent, not only because it comes without the conditionality of actors such as the IMF and the World Bank, but also because Africa needs critical energy investment and a giant oil producer like Russia has good technology and know-how to export.

The only thing is, sub-Saharan Africa has seen several regulatory developments in the near future, with a particular focus on local content regulations across energy markets. Jobs creation, domestic capacity building and the growth of a strong base of local energy companies is high up on the African agenda. If African governments are able to negotiate contracts that deliver on these expectations and Russian companies are committed to see the continent grow, then the future is bright for Russia in Africa.

At the end of the day, it is all about how African governments and institutions will negotiate future contracts with Russian companies. As Nj Ayuk writes in Billions At Play, "governments must give investors a chance to generate income from the resources they are interested in and recoup their investments. At the same time, governments need to look at creating value for their country and its people. It's a balancing act. It's challenging, but it's doable."

Whether Sochi will result in that balancing act remains to be seen, but the challenge is given and Africa is up for it.

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