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World Bank Advised Ethiopia to Audit Large Telecom Agreements


Business Ethiopia

Reporter

January 11, 2013

The World Bank (WB) in its report on the status of corruption in Ethiopia advised the government to audit Ethio Telecom’s large agreements. 

According to the report launched this morning at the Hilton Addis, focusing on the level of corruption in the country in different sector sectors, the government needs to apply standards to Ethio Telecom that are in line with Ethiopia’s Public Procurement Proclamation.

The report, “Diagnosing Corruption in Ethiopia”, in its subtopic that assessed the level of corruption in the telecom sector also stated that absence of uniform procurement standards is one of the major causes of corruption, among others.

The report highlighted that the vendor financing contract entered into by the then ETC (Ethiopian Telecommunications Corporation now named Ethio Telecom) in 2006 appears to be highly unusual. “…This brief study should not be seen as an investigation or interpreted as alleging in itself that corruption has necessarily occurred. However, the circumstances as perceived both by stakeholders and by independent observers do raise serious questions about the control of risks in this sector.”

The stakeholders of the then 1.5 billion US dollars vendor financing argue that ETC’s financial requirements were not provided in detail to those suppliers (other than possibly the winning supplier –China’s ZTE) that had been approached to consider providing such financing. The report also stated that there is no evidence of a formal tender procedure for the finance package.

“The supplier selected by the ETC to supply the finance package that suited the ETC’s purposes. The equipment supply element of the vendor financing contract was not put out to competitive tender.”
The report stated that generally the contract was not in accordance with the ETC’s procurement procedure and no competitive tender for the contract and subcontracts.

“Difficulty in measuring technical compliance: By appointing one supplier without competitive tender, the ETC has no opportunity to assess the degree of technical compliance of the supplier’s equipment. The contract was also inappropriate and went through unclear procedures for ensuring technical quality and competitive pricing,” according to the report.

In addition, the report further mentioned that Ethio Telecom is vulnerable to corruption because it is under government monopoly.

Health, education, water, justice, construction, land and mining are also the sectors surveyed by the report sponsored by the World Bank, Canada International Development Agency, UK Aid and the government of the Netherlands.

“Some of the recommendations of the report are under implementation,” said Ali Suleman, Commissioner of the Federal Ethics and Anti-Corruption Commission (FEACC).  While the report also recalled that in January 2008, the FEACC 2008 brought charges against a former ETC CEO and 26 former ETC executives for allegedly “procuring low-quality equipment from companies that were supposed to be rejected on the basis of procurement regulations.”

World Bank country Director, Guang Zhe Chen, on his part stressed that the purpose of the study is conducted to support evidence-based policy formation.

Analysis: New law fails to ease oil concerns in Uganda


IRIN NEWS

KAMPALA/NAIROBI, 13 December 2012 (IRIN) – Uganda’s parliament recently passed a law to govern the exploration, development and production of the country’s estimated three billion barrels of oil, a resource whose extraction will directly affect the livelihoods of tens of thousands of people.

While the law streamlines the burgeoning industry, analysts have raised concerns over transparency and over who controls the sector.

“The new law helps set clear guidelines under which the oil sector is to be run and managed, and makes clear who is in charge of what roles,” said Tony Otoa, director of Great Lakes Public Affairs (GLPA), a Uganda-based think tank focusing on oil and governance. “However, there are some concerns about transparency and too much power within the oil industry in the hands of the president.”

The bill was passed on 7 December after weeks of wrangling over its controversial Clause 9, which gives the energy minister wide-ranging powers, including authority over the granting and revoking of oil licenses, negotiating and endorsing petroleum agreements, and promoting and sustaining transparency in the petroleum sector. Many members of parliament (MPs) felt these powers should be held by an independent national oil authority.

“Essentially, the standoff, which has ended, was about the withdrawal of trust from a government that is battered by corruption scandals. Also the way the cabinet operates is that, in the past, the feeling has been that some key ministries, like finance, are effectively run by the presidency after being stuffed by yes-men or -women. The pushback against Clause 9 also comes as the Central Bank opened its vaults to a large withdrawal in 2010 [US$740 million to buy six fighter jets] only for approvals to be sought retrospectively,” said Angelo Izama, a Ugandan journalist and oil sector analyst.

“Loss of trust”

“This loss of trust is behind the resistance to greater control by the executive,” he added. “The executive has not been a bad shepherd of the process so far. Uganda’s negotiating position has been tougher with the oil companies, ironically, without the oversight of parliament. However, public scandals elsewhere have negatively affected the ability of the president to convince lawmakers – especially of his party – that he means well.”

A number of donors – including the UK and Ireland – recently suspended aid to Uganda following allegations of deep-rooted corruption in the Office of the Prime Minister. The prime minister, the former energy minister and the foreign affairs minister were all accused of taking kick-backs from oil companies in 2011, charges that remain unproven but that nevertheless damage the reputation of the government.

“The country lacks trust in the state… Institutions and officials have lost legitimacy, and for such an important bill to vest too much power into a political appointee is a recipe for disaster,” said Stephen Oola, a transitional justice and governance analyst at Uganda’s Makerere University Refugee Law Project.

“Granting and revoking licenses and negotiations are technical in nature. We need an independent commission or authority made up of people of good competence, technical ability and experience, and good morals to guard our oil,” said Frank Gashumba, a local businessman and social activist.

Proponents of Clause 9 say licensing powers are safer in the hands of the cabinet than under an oil authority. “The authority is open, easy to bribe and manipulate. Cabinet is bigger than the authority – members of the executive are answerable to Ugandans because they are elected leaders,” said Kenneth Omona, a ruling party MP.

Those opposed to it say they will challenge the law, which was passed with 149 votes in favour and 39 against; some 198 MPs did not turn up to vote.

“The fight is not complete; the passing of the bill is liable to be challenged in courts of law,” said Theodore Ssekikubo, ruling party MP and chair of the parliamentary forum on oil and gas. “If we fail to go to court, we shall subject the matter to a referendum for all Ugandans to pronounce themselves on this strategic resource. We want to ensure transparency and accountability in the oil sector.”

Transparency

There are also concerns about the law’s confidentiality clause, which limits the amount of information accessible by the public.

“The law is lacking transparency – it imposes confidentiality on officials working within the sector, even after they leave office, so there is no opportunity for whistle-blowing or for the public to have access to information on, say, production-sharing agreements,” GLPA’s Otoa said.

He noted that Uganda still hasn’t joined the Extractive Industries Transparency Initiative (EITI), an international scheme that attempts to set a global standard for transparency in oil, gas and mining, further compounding the sector’s lack of transparency. As a member of the EITI, Uganda and oil companies involved in the country would be required to publish all payments and revenues from the industry.

While Total and the China National Offshore Oil Corporation (CNOOC), two of Uganda’s major oil partners, are listed on Wall Street and are therefore subject to the Dodd-Frank Wall Street Reform and Consumer Protection Act – which requires disclosure of payments relating to the acquisition of licenses for exploration and production of oil, gas and minerals – the Irish firm Tullow Oil, another of Uganda’s main oil partners, is not under any similar obligations.

“I am worried we [legislators] and the public can’t access and scrutinize these agreements. You can imagine the recently negotiated and signed oil agreements have not been accessed by the public, not even by members of parliament,” Beatrice Anywar, former shadow energy minister, told IRIN.

The impact of the oil sector has so far been most acutely felt by communities around Lake Albert, thousands of whom have had to move – some willingly and some forcefully – to make room for an oil refinery, which is expected to take up 29sqkm and displace some 8,000 people.

Land issues

“The government is prosecuting the refinery resettlement by the book. However, managing public expectations and the process of multiple decision makers in Uganda’s complex land legal system [Uganda has multiple land systems, including customary, leasehold and freehold] has contributed some volatility to the process… What is adequate compensation? And who determines that? Is it the market or should this be done by the government?” said journalist Izama.

“As a partner to the oil companies, it’s questionable too if the government can make the best decisions for the affected people as it would look to keep project costs fairly low,” he continued. “It is still a dilemma which is jurisprudential as well as political.”

He noted that much of the oil is in game reserves and a sensitive basin with lakes, rivers and a rare biodiversity, and borders the Democratic Republic of Congo, which could also pose challenges for peaceful production; there has already been some tension between the two countries over their boundaries within Lake Albert.

“The process of consensus-building is still weak, and regardless of how it’s arrived at, displacements will create uncomfortable realities, including land and job pressure.”

According to Otoa, Uganda’s lack of a comprehensive land policy makes compensation issues more complex. “We need clear land policies to ensure people are properly compensated – there is a Resettlement Action Plan in place, but it has not been implemented, and a draft land policy has not been actualized, leaving these communities vulnerable,” he said.

He noted that the lack of education among the local population, both in the oil-rich areas and the rest of the country, had contributed to the continued problems in the sector.

“We have focused too much on educating MPs on the implications and importance of good oil governance. We need to move to people-centred approaches and encourage dialogue in the public sphere, which will lead to people demanding accountability from their MPs and the government,” he added.

Ultimately, Izama said, responsible actions by the government will be the difference between Uganda’s oil making a significant impact on the country’s economy or causing conflict and greater poverty.

“Pressure on public institutions prior to commercial oil production is an effective way of counteracting the resource curse. If this public engagement falters, if the transition [from President Museveni to his successor] is volatile, some of the scenarios of the so-called oil curse are possible,” he said. “Overall the tensions are high, but responsible actions by public and political institutions like the past debate show progress is possible.”

EU donors freeze aid to Uganda over corruption


Bloomberg News

KAMPALA, Uganda (AP) — More Western donors are freezing aid to Uganda after a scam in which up to $13 million in donor money was embezzled in the office of Uganda’s prime minister. The aid freeze is the kind of action long demanded by transparency campaigners who charge that the money oils a corrupt system.

Uganda has a reputation as a corrupt country, but the latest scandal — brought to light by the country’s auditor general in October — is remarkable for its details: More than $220,000 was spent on gas in four days, millions of dollars were diverted to buy luxury vehicles for top officials, and millions were deposited into individuals’ private accounts.

Because the money was for the rehabilitation of parts of northern Uganda devastated by decades of warlord Joseph Kony‘s brutal insurgency, the scandal has provoked a lasting rage around the country and inspired aid cuts that foreign donors had been reluctant to inflict on this East African country.

Roberto Ridolfi, the head of the European Union delegation to Uganda, said in a statement late Tuesday that the scandal and those before it amounted to “a breach of trust” on the part of Ugandan authorities. Sweden, Germany, Ireland, Britain and Denmark have already cut or cancelled all aid to Uganda over the scam, saying they have lost faith in the government’s capacity to spend money responsibly.

Western donors fund up to 25 percent of Uganda’s budget.

Ridolfi said the EU and its development partners in Uganda “will withhold pending budget support disbursements and any further commitments for an initial period of up to (six) months.”

The donors are giving Uganda until April to pay back all the lost money, investigate the scandal, and take action against all the suspects. But investigations of this nature, when they happen, rarely produce the intended results in Uganda, where corruption charges are often politicized and then dismissed. This year three ministers with close ties to President Yoweri Museveni who faced corruption charges were set free by a judge who said they were scapegoats. The three politicians swiftly returned to their jobs […]

Some campaigners who had long urged donors to act tougher against official waste and graft say the audacity of the latest scandal vindicates their calls for the dismantling of an often-comfortable relationship between the state and its donors. They want foreign aid to be channeled through non-state actors engaged in service delivery and for donors to work directly with contractors in cases where the authorities cannot be trusted with cash.

“For the first time the donors are coming out and putting clear benchmarks and I think it’s a good move,” said Cissy Kagaba of the Anti-Corruption Coalition of Uganda, a watchdog group. “But there are other alternatives they can use to ensure that the money reaches the intended beneficiaries.” Read the full article here.

Senegal’s reforms and red carpets


Africa Report

November 27, 2012

Senegal’s President Macky Sall has slashed government spending to finance new infrastructure projects.

Faced with an audit of Wade-era projects, the opposition says he is playing political games. Dakar has been rolling out the red carpet in recent weeks.

Elected in March on a reform ticket, President Macky Sall is in demand as an interlocutor – whether it is by the World Bank, the UN or France’s President François Hollande, who stopped in Dakar on 12 October en route to his more controversial landing in Kinshasa for the Francophonie summit.

This month, the Mo Ibrahim Foundation is holding its annual development conference in Dakar to salute Senegal’s political achievements.

Dakar’s National Assembly gave Hollande the chance to set out his Africa policy, which he insisted was non-interventionist and non-paternalistic.

Hollande seized the chance for a tête à tête with Sall, seeking his help for the regional effort to tackle the worsening in- security in Mali.

Senegal’s troops, alongside Ghana’s, are regarded as the most professional in the region.

But Sall has plenty of local problems to tackle – such as the perennial rainy-season flooding.

The government’s failure to invest in flood defences was one of the reasons for voters turning against former President Abdoulaye Wade.

In September, Macky Sall pushed through a bill to abolish the Senate, the second chamber in the National Assembly.

He promised that the 767bn CFA francs ($1.5bn) would be used to finance a 10-year plan for effective flood defences, storm drainage and sanitation.

Opponents to Sall’s plan accuse him of partisan plotting.

The Senate was dominated by members of Wade’s [I]Parti Démocratique Sénégalais[/I].

But Sall’s supporters insist the plan reflects the need to cut ballooning government overheads inherited from the Wade era.

The Sall government aims to cut the budget deficit from current levels of 7.4% of gross domestic product down to 4% by 2015.

So far, Sall has closed 59 moribund state institutions, banned first-class travel for civil servants and is selling a presidential jet.

To promote accountability, Sall has published details of all official salaries, declared his own assets and promised to cut salaries at state-run companies to below 5m CFA francs per month.

“Humility, sobriety and rigour should govern our politics,” Sall told The Africa Report’s sister magazine Jeune Afrique after his election.

“I assure you that there will be a profound break from the practices that were in force under my predecessor.”

The new government has quickly launched audits of government departments and projects for evidence of illicit disbursements.

This includes projects run by Wade’s son Karim, such as the 650bn CFA franc energy crisis programme, Plan Takkal.

Britain, France and the United States have pledged cooperation in tracking down stolen money.

Sall rejects claims of political vindictiveness: “The only thing that interests us is that the errors of the past don’t repeat themselves,” he said.

The courts will take cases identified by the audit.

His promise to cut the presidential term from seven to five years with immediate effect won local and international plaudits, as did his agreement with the African Union to set up a special tribunal for Chad’s ex-leader Hissène Habré, in exile in Senegal since 1990.

Nigeria Validates Manitoba’s Power-Mangement Contract


Bloomberg

By Elisha Bala-Gbogbo

Nov 21, 2012

Nigeria validated a power-management contract signed by Canada’s Manitoba Hydro Electric Board in July to run the state-owned power utility Transmission Co. of Nigeria after regulatory approval, the Bureau of Public Enterprises, the privatization agency, said.

“We have received ratification from the Bureau of Public Procurement and the contract has been certified,” Chukwuma Nwokoh, a spokesman for the Abuja-based privatization agency said by phone today. Under Nigerian laws, all contracts entered into by the government needs to be certified by the Bureau of Public Procurement.

Reuben Abati, a spokesman for President Goodluck Jonathan, on Nov. 14 announced the cancellation of the contract saying the correct procedure wasn’t followed. Manitoba “did not follow the law strictly” and initial report of the termination was a “misunderstanding,” Jonathan said on Nov. 18 in an interview broadcast on state-rub television NTA

Nigeria, Africa’s top oil producer, is selling majority stakes in power plants and letting private investors buy as much as 60 percent of 11 distribution companies spun out of the former state-owned utility as it seeks private investment to curb power shortages. Blackouts are a daily occurrence in Nigeria, Africa’s most populous country with more than 160 million people. Demand for electricity in Nigeria is almost double the supply of about 4,000 megawatts and the government plans to boost output to 14,019 megawatts by 2013.

Bids worth more than $2 billion by companies including Siemens AG (SIE) and Korea Electric Power Corp. (KEP) were approved by the government for the sale of the companies on Oct. 30.

To contact the reporter on this story: Elisha Bala-Gbogbo in Abuja atebalagbogbo@bloomberg.net

To contact the editor responsible for this story: Dulue Mbachu at dmbachu@bloomberg.net

 

South Africa: Gordhan’s war on incompetence and impunity


Mail & Guardian

By Faranaaz Parker

July 24, 2012

Finance Minister Pravin Gordhan has revealed plans for the national treasury to take a much tighter grip on local governments‘ finances. See the full report here.

Following the release of a damning report on the scale of mismanagement at municipal levels, Finance Minister Pravin Gordhan on Monday revealed that the national treasury would take a tighter grip on procurement processes across the country.

Gordhan announced that treasury would create a procurement oversight unit to actively enforce supply chain management at a national level and would shortly appoint a chief procurement officer. The position would be advertised in two weeks and would be established within the next two months.

“Where there are transactions for a particular size or type within the national domain there must be the ability to assess whether they meet market criteria in terms of prices [and] whether proper processes havebeen followed,” he said.

The announcement was an indictment of local government’s failure to spend and account for public money effectively.

The minister was speaking at the release of auditor general Terence Nombembe’s report on local government audit results, which showed that only 5% of all municipal entities – a total of 13 – had achieved clean audits for the year 2010/2011.

Gordhan said IT systems would be developed to allow the treasury to actively monitor compliance with financial management requirements so that it may demand information regarding procurements, such as how decisions were made and by whom.

Spending fiascos

The move may help prevent public spending fiascos such as the multibillion-rand leasing scandal that saw former police chief Bheki Cele and former public works minister Gwen Mahlangu-Nkabinde sacked last year.

Gordhan said the government should be able to demonstrate that there were consequences for nonperformance and for working outside the law.

“At the moment, those consequences are not there. When consequences are not there continuously then a level of impunity develops,” he said.

He said the new oversight mechanism would require the help of law enforcement agencies, who would bear the responsibility of preparing cases against and prosecuting those guilty of corruption.

With reference to the auditor general’s report, Gordhan said he was particularly disappointed that some large metros, which had better skills and capacity than small municipalities, did not received clean audits.

“If they can’t meet simple criteria in financial management, then it’s a matter the treasury has to take a closer look at,” he said.

Nombembe’s damning report
Nombembe’s report showed there were three root causes behind the slow progress towards clean audits in local government.

The biggest problem, he said, was a general lack of consequence for poor performance. Modified audit results were simply considered the norm, he said.

In addition, over 70% of those audited did not have the minimum competencies and skills required to perform their jobs.

Worryingly, over half of the municipalities audited were slow in responding to the auditor general’s suggestions and were not taking ownership of key financial controls.

Nombembe said if these issues were not addressed, they would continue to weaken governance.

He also complained that most municipalities employed consultants in areas where they already had people to do the work, and even then the results were not as good as they should be.

Cedric Frolick, National Assembly house chairperson, agreed, saying: “What are the employees doing when 70% of the work is being done by people who must be paid for it on top of their salaries?”

“Why are people who are not doing their job, being allowed to keep on [not] doing it?”

Meeting the criteria
But Minister in the Presidency responsible for performance, monitoring and evaluation Collins Chabane said because of the way the three spheres of government were structured, it was difficult to make interventions in local government unless specific criteria had been met.

“It creates a complication where no other authority can intervene, by law, until that municipality makes a decision,” he said.

Chabane said in future, the performance of departments and institutions may be linked to the performance of the heads of those institutions.

“That will begin to bring accountability,” he said.

Meanwhile Subesh Pillay, chairperson of the South African Local Government Association, said it was important to remember that clean audits were a means to an end.

“That end is to ensure that local government become efficient and effective organs of service delivery,” he said.

Nigeria: ‘Oil-gas sector mismanagement costs billions’


BBC News Africa

October 25, 2012

A leaked report into Nigeria‘s oil and gas industry has revealed the extent of mismanagement and corruption that is costing billions of dollars each year.

The report, seen by the BBC, was commissioned by the oil minister in the wake of this year’s fuel protests to probe the financial side of the sector.

It says $29bn (£18bn) was lost in the last decade in an apparent price-fixing scam involving the sale of natural gas.

It also calculated the treasury loses $6bn a year because of oil theft.

Nigeria is one of the world’s biggest oil producers but most of its people remain mired in poverty.

The Petroleum Revenue Special Task Force report is one of several commissioned by the government – and follows an outcry after a parliamentary investigation uncovered a massive multi-billion fuel subsidy scam.

That had been set up after angry nationwide protests in January when the government tried to remove a fuel subsidy.

Earlier this week, a campaign was launched to clean up Nigeria’s oil sector.

It was led by Patrick Dele Cole, a politician from the oil-rich Niger Delta region, who said that 90% of the stolen oil was refined in eastern Europe and Singapore.

The BBC’s Will Ross in Lagos says this leaked report exposes the extent of the rot in Nigeria’s oil and gas industry – all the way from the awarding of contracts to the sale of refined products.

It is staggering just how much money the people of Nigeria appear to be missing out on, he says.

Nigeria’s Oil Minister Diezani Alison-Madueke declined to comment on the specifics of the probe but said a report compiled from several committees set up earlier in the year to investigate the oil and gas sector was in its final stages and would be presented to the president soon.

‘Total overhaul’

The Petroleum Revenue Special Task Force, headed by former anti-corruption chief Nuhu Ribadu, revealed in its report that losses of revenue to the treasury over apparent gas price-fixing involved dealings between Total, Eni and Shell and government officials.

The report does not suggest the companies broke the law but called for measures to be put in place to ensure all transactions are more transparent.

It said that oil and gas companies owe the treasury more than $3bn in royalties.

For the period 2005 to 2011, it said $566m was owed in signature bonuses – the fees a company is supposed to pay up front for the right to exploit an oil block.

The report looked at the issue of discretionary licences which companies do not have to bid for.

Between 2008 and 2011 it found the Nigerian government had handed out seven discretionary licences, from which $183m in signature bonuses had not been paid.

A Shell spokesman said the company would not comment as it had not yet seen the report.

Our correspondent says it is well known that oil theft is a major problem in Nigeria, but the report says it may be reaching emergency levels as 250,000 barrels of crude oil could be being stolen every day – 10% of annual production.

The leaked report said that small-scale “pilfering” had been “endemic since at least the late 1990s”, but it also said it had heard allegations about thefts from crude export terminals, tank farms, refinery storage tanks, jetties and ports.

“Submissions to the Task Force alleged that officials and private actors disguise theft through manipulation of meters and shipping documents,” the report said.

“Yet there is also evidence that members of the security forces condone and, in some cases, profit from theft. The void in effective security likewise appears to increasingly hand over control of coastal and inland waterways to undesirable elements.”

The investigation showed that 40% of refined products – either refined in Nigeria or imported – currently being channelled through state-owned pipelines are lost to theft and sabotage.

Mr Ribadu’s investigation calls for a total overhaul of the industry with an oil sector transparency law requiring all companies to report all payments and publish all contracts and licences.

The Task Force also wants a special financial crimes unit to be established specifically for the oil and gas sector.

Uganda: Museveni’s hand makes graft fight a harder task


The Observer, Uganda

By Hussein Bogere

April 22, 2012

When MPs this week release their report on the troubled national identity cards project, one name that will feature prominently is that of President Yoweri Museveni.

The report, by Parliament’s committee on Defence and Internal Affairs, will include claims by government officials that Mr Museveni instructed them to award the IDs contract to a German company, Muhlbauer High Tech, without following standard procedures. The project, worth about Shs 219bn, has since stalled amid accusations that some government officials are frustrating Muhlbauer.

This is the latest government procurement contract to degenerate into a scandal about management of taxpayers’ money. It all begs the question why the government can hardly execute major contracts without flouting procedures, corruption and loss of public funds.

In his latest report, the Auditor General (AG), John Muwanga, reveals that taxpayers have lost more than Shs 1,000 billion in just 12 months to fraud in various forms and at various levels.

While many people blame this on the culture of greed, our analysis shows that State House regularly comes up in cases of massive loss of public funds. In fact, President Museveni stands accused not just of handling high-level fraud with kid gloves, but also of giving directives that tend to torpedo financial oversight mechanisms.

Botched Deals

Only recently, businessman Hassan Basajjabalaba was in the news for receiving Shs 142bn in compensation after his Haba group lost contracts to operate some city markets and the Constitution Square. Both directives – to cancel the contracts and to compensate Basajjabalaba – came from State House. While the President has since dissociated himself from the figure of Shs 142bn, and two of his ministers resigned over the saga, this matter has left State House’s reputation in tatters.

Early this year, Parliament’s Public Accounts Committee (PAC) heard that government lost Shs 40bn to a ghost company, Dura Cement, after President Museveni cancelled its contract to produce cement at Dura in Kamwenge district. While meeting PAC, Museveni said he could not recall the person who advised him to cancel the contract.

But following that advice from that forgettable individual, Museveni wrote a letter to the then minister of Energy and Mineral Development Daudi Migereko, instructing him to terminate the lease after considering mutually agreed terms. But the history of troubled contracts has not just started.

In 2001, the Ugandan government got excited after signing the Africa Growth and Opportunities Act (AGOA) that would see it export to the United States market, among other products, fabrics, tax free. The government guaranteed bank loans for the hand-picked Sri-Lankan-owned company Apparels Tri-Star in the hope that it would lead to increased revenue from garment exports, create jobs, and revive Uganda’s cotton industry. It didn’t take long for the textile machines to go silent, and government to lose nearly Shs 33bn after dfcu and Uganda Development Bank seized securities that had been guaranteed through bank of UgandaRead more.

Zambia short-lists 11 banks for Eurobond role


Reuters

By Tosin Sulaiman
April 23, 2012

LONDON, April 23 (Reuters) – Zambia has issued requests for proposals to 11 international banks seeking to act as book runners for its debut $500 million Eurobond, a government agency official said on Monday.

Goldman Sachs, BNP Paribas, Standard Chartered and Deutsche Bank were among the banks short-listed from an initial 16 that submitted expressions of interest, an official at the Zambia Public Procurement Authority, who asked not to be named, told Reuters.

There has been strong appetite for African debt and the last such issue from the region – a debut $500 million, 10-year Eurobond from Namibia launched in October – was heavily oversubscribed with an initial coupon of 5.5 percent. It is now yielding 4.95 percent.

The limited supply from African sovereigns has ensured that debut issues are eagerly anticipated, with Nigeria’s $500 million 10-year Eurobond last year attracting heavy demand.

The tender closes on April 27 and it would take a minimum of three weeks to evaluate the bids, the official said. So far, eight banks had confirmed their participation.

“Last week, we had eight confirmations from the short-listed bidders that they will take part in the tender,” he said.

The agency has also issued requests for proposals to two law firms, Clifford Chance and White & Case, seeking a role as legal advisers, he added.

The government of Africa’s number one copper producer announced plans to issue a Eurobond in November when it unveiled its first budget after an upset election victory two months earlier.

In February, tenders were invited for two book runners to act as joint lead managers, to assist in determining the size and pricing of the issue and coordinate road shows.

The official said the size of the issue had been confirmed at $500 million.

The other short-listed banks were Citigroup, Absa Capital/Barclays Capital, UBS, HSBC, JP Morgan, Standard Bank and Credit Suisse .

Proceeds from the Eurobond are earmarked for upgrading Zambia’s dilapidated infrastructure – spending that will create jobs and go down well in rural areas where President Michael Sata is seeking to boost his support.

However, investors may be wary after rating agency Fitch said in early March that it was revising the country’s rating outlook to negative from stable, citing concerns about the direction of economic policy in the southern African state.

It said Zambia’s recent decision to reverse a privatisation deal could undermine property rights, while planned reforms of the mining and banking sectors could negatively impact investment and consequently macro-economic stability.

Alarm bells were subsequently raised by the suspension of the political party status of the main opposition party because it had not been paying its annual registration fees.

“Even if the decision is overturned by the courts, Fitch highlights again the risks associated with sending a negative message on matters relating to economic policy, property rights and respect for the rule of law,” Fitch said. (Reporting by Tosin Sulaiman, editing by Ed Stoddard, Ron Askew).

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