Africa's Public Procurement & Entrepreneurship Research Initiative – APPERI



Ethiopia: High Court Suspends U.S.$34.3 Million Bid Outcome


November 9, 2015

By  Dawit Endeshaw

Yet another bidding process in dispute; this time over PPPDS’ handling of tender process.

A 34.3 million dollar technology contract between the Public Procurement & Property Disposal Service (PPPDS) on behalf of the Information Network Security Agency (INSA) and a US company, has been suspended by a Federal High Court order following a complaint by a Chinese company that was bidding for the contract.PPPDS was handling the tender process for INSA, which wanted to procure Digital Video Broadcasting Second Generation Terrestrial (DVB-T2) Network Rollout solutions. There was a minimum precondition for bidders that the purchase should be on a vendor financing basis, where competent bidders would bring partners who would facilitate the credit service with a minimum repayment schedule of 10 years.

The overall purchase was divided in two lots; for the procurement of system, subsystem, equipment & goods and the remaining and, for the supply of signal measurement & monitoring systems. Nine bidders came forward in June 2015, four of which made it through the technical evaluation. Three of them offered for Lot One, consisting of installing the infrastructure that would serve the implementation of the system, and one bid for Lot Two to supply the measurement & monitoring systems. The sole bidder for Lot Two, Giga Communication Ltd. from the UK, got its contract worth 214.7 million Br uncontested. However, the award of the contract for Lot One to GatesAir, an American company known for its work on over-the-air analog and digital radio/TV stations and networks worldwide, which was said to have offered the lowest price of 34.3 million dollars, was not pleasing to Star Software Technology, a Chinese company, which took its case to court.

In its civil suit filed at the Federal High Court’s First Civil Bench, Star Software Technology claimed that it had offered the lowest price and proposed competitive terms of repayment. The Bench then suspended the contract from November 5, 2015, coinciding with the scheduled contract signing, until December 1, 2015.

The claim by the Chinese company mainly revolved around the loan and its respective offer, said Yigezu Daba, director general of PPPDS, while declining to discuss the issue further, saying it is now up to the court.

Lot Two bidder, Giga, is a subsidiary of Ultra Electronics Group, which boasts of “a portfolio of specialist capabilities, generating highly-differentiated solutions and products in the defence and aerospace, security and cyber, transport and energy markets, by applying electronic and software technologies in demanding and critical environments to meet customer needs.” Its clientele includes such media institutions as BBC, CNN and Al Jazeera, according to its website.

The procurement was meant to transform the current analog based television broadcasting systems into digital systems. The purchase was intended to be made while attached with credit schemes where each bidders was obliged to come up with a third party that would facilitate a loan for the purchase.

Established under a mandate of strategic and framework purchase, the service in the past four months has conducted three billion Br worth of purchases. From this, one billion Br was dedicated to the purchase of wheat, 873 million Br for construction and 935.6 million Br for the purchase of iron bars.

UN documents shed light on African defence procurement

October 12, 2014

Tanzania’s Type 07PA 120 mm self-propelled mortars were seen for the first time in a 26 April parade. China’s submission to the UNODA says it supplied 12 large calibre artillery systems to Tanzania in 2013. Source: IHS/Ping Zhang

The UN Office for Disarmament Affairs (UNODA) recently released two documents that provide additional details of African defence procurement in 2013, including the numbers for some of the acquisitions that countries are known to have made that year.

For example, China said it had supplied 11 unidentified armoured combat vehicles and 12 large calibre artillery systems to Cameroon. This is probably a reference to the Type 07P infantry fighting vehicles (IFVs) and PTL-07 tank destroyers with 105 mm guns that were paraded for the first time on 20 May.

Similarly, China said it had supplied 24 new tanks and 12 large calibre artillery systems to Tanzania. The Tanzania People’s Defence Force paraded Type 63A light amphibious tanks and 120 mm Type 07PA self-propelled mortar systems for the first time on 26 April.

China also said it transferred 30 unidentified tanks to Chad. This suggests the tanks seen on transporters in the Chadian parade in August were not its old T-55s, but newly acquired Type 59s.

Belarus confirmed to the UN that it sold four Su-24M supersonic attack aircraft to Sudan, as well as four Mi-24 assault helicopters, but no additional Su-25s as claimed by the source that revealed the Su-24 sale.

Sudan also bought more armour from Ukraine, namely 20 T-72 tanks, 20 BMP-1 IFVs, and five 2S1 Gvozdika self-propelled guns. It is unclear if the T-72s were exported as kits to be assembled in Sudan as the Al-Zubair tank. Ukraine also sold five 122 mm D-30 howitzers to Sudan.

Having delivered 99 T-72s to Ethiopia in 2012, Ukraine transferred another 29 in 2013. Ukrainian state arms exporter Ukrspecexport announced in June 2011 that the company had signed a USD100 million deal to supply 200 surplus T-72s to Ethiopia. It is unclear if the first deliveries were made in 2011 as Ukraine did not submit any information to the UNODA that year.

Ethiopia also acquired 12 surplus Mi-24 helicopters from Ukraine and 12 MiG-23 jets from Bulgaria. Described as “dismantled, expired lifespan, without armament”, the MiG-23s were presumably acquired so they could be cannibalised to keep Ethiopia’s existing fleet flying.

Bulgaria confirmed that it supplied the 152 mm D-30 howitzers that were seen in a parade by the Armed Forces of the Democratic Republic of the Congo in July.

Most of Russia’s defence exports to Africa went to Algeria, which acquired 101 tanks and 10 armoured combat vehicles. Algeria is reportedly in the process of acquiring a second batch of T-90S tanks from Russia to bring its total fleet up to 305 vehicles.

The only other African export listed in the Russian submission to the UNODA was for four combat helicopters delivered to Ghana: an apparent reference to the Mi-171Sh aircraft it received that year.

Mozambique, meanwhile, appears to have received its first tracked vehicles in 2013. The UK said it exported 40 F430 armoured combat vehicles to the country: probably a reference to surplus British Army vehicles from the FV430 family. The UK also delivered 20 old Saxon wheeled armoured personnel carriers to Mozambique.

Rwanda, meanwhile, acquired just one FV430 from the UK.

300MW solar tender cancelled in Zimbabwe













Lloyd Gumbo Harare Bureau
THE State Procurement Board has cancelled the 300 Megawatts solar projects indefinitely after one winning bidder increased its price, while Zimbabwe Power Company (ZPC) failed to agree with two other firms that had been considered for the other solar plants.
This effectively leaves the government’s quest to find a quick solution to power crisis in the country in disarray as it had hoped that 300MW would be fed to the national grid by next year.

The SPB awarded a tender for a 100MW solar plant in Gwanda to China Jiangxi Corporation, which was the lowest bidder to specification at about $184 million.

However, they then made a U-turn by approving a request by ZPC to engage two other losing bidders — Intratrek Zimbabwe and ZTE Corporation — despite the fact that they had charged $248 million and $358,3 million respectively at the initial tender for 100MW project each.

The ZPC claimed the two firms had agreed to match the $184 million charged by China Jiangxi Corporation.

But correspondences seen by our Harare Bureau indicate that the SPB then cancelled all the three tenders.

SPB principal officer, Cledwyn Nyanhete, on July 31, 2014, wrote to China Jiangxi Corporation managing director cancelling the tender award after the firm requested to increase the price from $184 million to $207 million.

The firm argued that the new price included duties and taxes, a position the SPB dismissed, arguing that the costs were already catered for.

Nyanhete said the reasons for increased costs were not justifiable and in contravention of Section 39 (1) (b) of the Procurement  Act.

“Accordingly, through PBR 0001J of July 17, 2014, the State Procurement Board resolved that; PBR 0001 of January 16, 2014 in favour of China Jiangxi Corporation Ltd for funding, engineering, procurement and construction of 1x100MW solar power project at Gwanda/Plumtree be and is hereby cancelled for failure by the winning bidder to maintain their original tender price of $183,708,238.51 (inclusive of duties and taxes),” said Nyanhete.

“China Jiangxi Corporation for International Economic and Technical Cooperation Ltd should within 14 days of notification pay $900.00 administration fees in line with S.I 159 of October 12, 2012 for violation of Section 39 (1) (b) of the Procurement Act by misrepresenting a material fact in a tender process.

“The board further resolved that you be warned against violation of procurement procedures in future as this may result in sanction in terms of Section 32 of the Procurement Regulations being preferred against you.”

Nyanhete also wrote to Intratrek Zimbabwe P/L managing director on July 28, 2014, advising them that varying the technical partner for Intratrek Zimbabwe from Greenfield Solar Europa GmbH of Germany to Chint Electrical Ltd of China after the tender award was not consistent with primary conditions of mandated negotiations.

He wrote another letter to Intratrek Zimbabwe managing director and ZTE Corporation Ltd managing director on July 31, 2014, saying ZPC had advised the SPB that negotiations with the two firms had failed.

A procurement expert said the SPB should have opened the tender to other bidders soon after ZPC indicated that it wanted variation of the projects from the initial 100MW to 300MW.

“What has happened is that while the SPB may claim to be justified in making this decision, it should have never got to this situation because the tender should have been opened the moment ZPC said they wanted 300MW instead of 100MW,” said the expert.

“This has obviously resulted in almost a year being lost on something that should have been done properly from the word go.

“What is left now is for the SPB to open the tender to other people with a varied requirement of 300MW than the initial 100MW. They cannot award it to any of the three firms without opening it to public tender.”

Energy and Power Development Minister Dzikamai Mavhaire has been pinning hope on solar projects as quick solutions to the power deficit in Zimbabwe.

Zimbabwe’s power plants produce about 1,300MW against a peak demand of more than 2,400MW.

How cars and smartphones ‘inflated’ Huawei’s NetOne Zimbabwe


By Gareth van Zyl

Cars, smartphones and solar powered cell towers were among items that inflated an initial price tag of Chinese telecommunications equipment firm Huawei’s controversial network upgrade deal for Zimbabwean state-owned mobile operator NetOne.

This is according to documents a source has provided to ITWeb Africa regarding the network upgrade deal, which is facing a court case in Harare amid allegations that the over $200 million contract was awarded illegally.

Zimbabwean-born Tafadzwa Muguti, who lives in South Africa, has taken NetOne, Zimbabwe’s State Procurement Board (SPB), Huawei and the Anti-Corruption Commission of Zimbabwe to Harare’s administrative court over the awarding of the $200 million contract.

The businessman, who is the chief executive officer of investment group Africapaciti, wants to find out how Huawei won the NetOne contract, even though the Chinese company did not go through an official tender process.

Because NetOne is a state-owned entity, it is obliged to adhere to Zimbabwe’s procurement laws with regard to the awarding of contracts, Muguti has argued.

Muguti also alleges the contract was awarded to Huawei despite Zimbabwe’s SPB having expressed concerns over an inflated price for the project. The SPB is the first respondent in Muguti’s court case.

And documents detailing the record of proceedings regarding the awarding of the deal, which are in the hands of ITWeb Africa, illustrate the SPB’s initial concerns about the Huawei deal.

In a July 2013 letter from NetOne to the SPB, in which the mobile operator addresses concerns about the Huawei deal to the SPB, an amount of $298.6 million is quoted for the upgrade, which hinged on a loan from China’s Exim Bank.

That figure was then dropped to $251 million, according to the documents, and ultimately — as the documents later reveal — this figure was cut to $218 million.

NetOne officials, in the document, argued that only Huawei could carry out the upgrade deal as the mobile network’s infrastructure is from the Chinese telecommunications firm.

But the State Procurement Board then raised the following issues, which are summarised below:

  • “Members noted with concern that the Secretariat had failed to properly analyse the matter for logical presentation to the board.”
  • “The presentation was jumbled up and comprised of disparate requirements including Upgrades, New Equipment and Construction of a Building.”
  • “The matter was also hastily presented as an urgent item without adequate background and factual information.”
  • “Background was inadequate and lazy.”
  • “There was no clear justification why the current requirements should not go to tender, in light of the unclear relationships between the projects.”

The documents reveal that on 27 June 2013, the State Procurement Board deferred the pending of the contract to await further input.

The board also raised concerns about “the procurement of smartphones and tablets for resale to the public, which are not part of the network upgrade.”

Furthermore, the documents also highlight concerns that Huawei had quoted inflated prices for equipment that may not help with a widespread upgrade to next generation LTE.

Items that the deal was initially planned to include were as follows, according to the record of proceedings:

  • Purchase of 1336 2.75G base stations
  • Purchase of 600 3G base stations
  • Purchase of 400 4G base station
  • Supply of 500 diesel generators to serve as stand-by power at base station sites

NetOne in the documentation does argue that Huawei has quoted it at a lower price for base stations at $170,000 rather than the market price of $180,000.

In the documents, the Zimbabwe’s ministry for transport, communications and infrastructure development, did write to the SPB calling for the upgrade to be given to Huawei.

The ministry argued the deal could help NetOne boost its services, subscriber base and contribute to Zimbabwe’s ICT development.

But a letter from the Transport department then outlines how the project had been scaled down.

“Some of the key components that have either been scaled down or removed as a result, include Base station Towers that have been reduced by half, removal of four wheel drive vehicles for project implementation and maintenance, solar powered Base Stations that were meant to serve as coverage gap fillers, the online charge system, where NetOne will later have to expand the existing system to meet the increased subscribers to be connected,” says the letter.

The response goes on to allay fears regarding the number of 4G stations, as the Transport department said that these would be deployed in highly dense urban areas to cater for demand.

The Huawei-NetOne contract, though, was publicly announced in July while deliberations continued in the background.

And in that same month, concerns about the deal were communicated from the State Procurement Board in a record of proceedings.

Among these included:

  • “Members noted that there were allegations of overpricing some aspects of the project components.”
  • “Members noted with concern that according to the minute from the Secretary for Transport, Communications and Infrastructure Development to Treasury dated June 19, 2013, NetOne and Huawei Technologies of China had already signed a contract for the Works without authority.”

A board resolution on the 18th of July then further deferred the matter.

Further reading into the documents also reveals that the Post & Telecommunications Regulatory Authority of Zimbabwe but that concerns existed that the watchdog had not consulted the relevant industry experts.

The contract price in the documents goes down then to $218 million, while reports in July talk of a deal that was just over $200 million

Court case postponed

Subsequently, on 19 November, Tafadzwa Muguti’s court case against the relevant parties was postponed.

However, in court documents, the SPB has outline that it did finally approve the Huawei deal, despite its concerns outlined in the record of proceedings.

The board then further highlights how it consulted advice from three government ministries and telecommunication and IT engineers.

The board goes on to say in court papers that the urgency of the upgrade drove its decision.

As a result, the board asked that the court reject Muguti’s appeal as “frivolous and vexatious.”

The board also then asks that the court finds that its decision was “prudent and feasible.”

Finally, the board asks that the court throws out the appeal with costs for a lack of merit.

Huawei responds

Chinese telecommunications equipment firm, Huawei, meanwhile has also denied alleged corruption regarding the deal.

“For the project with NetOne, we strictly abide by all procurement laws and regulations in Zimbabwe, our target is to help Zimbabwe people enjoy their life through communication at affordable price,” Jacky Zhang, who works with Huawei Technologies Zambia but manages communications for Zimbabwe, told ITWeb Africa.

“The allegation for over-inflated is not base on the truth,” Zhang told ITWeb Africa.

ITWeb Africa also asked NetOne for comment, but the company has not responded to emails.

How Canada Dominates African Mining

April 18, 2013
Foreign companies from a range of countries compete in Africa‘s mining sector. But according to a number of measures, those from one country dominate: Canada.

Artisanal miners being chased away from a majority Canadian-owned gold mine in northern Tanzania. Photograph by Tamara Herman.

When asked to think about foreign mining contracts in Africa, many people’s minds will jump to China, or perhaps one of the former colonial powers such as the UK or France. China’s construction and agricultural projects in particular are at the core of the ‘Africa Rising’ narrative, as are the Asian giant’s more than 1.3 billion consumers.

Some readers might be surprised therefore to learn that Canada – with a population less than one-tenth that of China’s and geographically about as far from Africa as one can get – has quietly grown to become one of the largest stakeholders in Africa’s mining sector – possibly the largest, depending on how you quantify it.

A grizzly competitor

“We certainly are one of the biggest players [in Africa] in several respects”, Pierre Gratton, president and CEO of the Mining Association of Canada, told Think Africa Press. “It’s a largely undeveloped, unexplored continent, which makes it interesting….A new frontier. Our industry is often one of the first to go where no-one has gone before.”

Countries competing with Canada in African mining include the UK, France, Australia, China, and South Africa, but ranking their relative dominance is all but impossible; countries measure and declare assets and investments using different methodologies and with varying levels of transparency. However, documents provided by Natural Resources Canada seem to portray a relatively accurate picture of the country’s activities in Africa.

According to these documents, in 2011 – the most recent year for which statistics are available – 155 Canadian companies were operating in 39 African countries. Their combined assets* totalled more than $30.8 billion, up from $26.5 billion in 2010.

Canadian firms were most active in East Africa, with $12.7 billion on the ground in 2011. West Africa came next with $9.9 billion invested, followed by Southern Africa ($4.9 billion), Central Africa ($3.4 billion), and North Africa ($36.7 million).

Ranked in descending order by value of assets, Canada’s most important mining partners in 2011 were: Zambia, Mauritania, South Africa, Madagascar, Democratic Republic of the Congo, Ghana, Tanzania, Mali, Senegal, and Eritrea.

While Canada is a major force in African mining, current projects on the continent actually only comprise a minority of Canadian companies’ operations overseas. According to Natural Resources Canada, assets in Africa accounted for just 21.5% of Canadian mining companies’ cumulative assets abroad. The majority are in Latin America.

Taking stock

However, those numbers describe just the interests of companies headquartered in Canada. Expand the picture to take into account other country’s projects financed on Canada’s Toronto Stock Exchange (TSX) and the TSX Venture, and Canada’s role in mining around the world grows even more substantial.

According to a December 2012 report drafted by the TSX, during the first nine months of 2012, 89% of all global mining equity financings were done on the TSX and TSX Venture (up one point from 2011). The document states that only 7% of mining projects traded on the TSX are located in Africa, but that does not diminish the fact that a lot of money for mining sites in Africa is going through the exchange in Toronto.

“There are approximately 315-20 listed [mining] companies that are not African but are doing business in Africa”, says Bruce Shapiro, president of Mine Africa, a Canada-based business and marketing company. “Of those, over 50% are Canadian. So in terms of the companies that we would normally look at, we certainly dominate that market.”

Shapiro explains that what sets Canada apart is the level of access to finance available on the TSX, where there’s a tradition of an appetite for risk. “Capital, at the moment, is impossible to raise”, he remarks, in reference to struggling developed economies. “But if it wasn’t, it would be relatively easy in Canada, compared to some other markets.”

Shapiro notes that Canada has vast deposits of mineral wealth within its own borders, a long history mining those deposits, and is now taking this expertise to Africa. Looking to the future, he continues, prospectors tend to be moving either into less-explored low-risk areas with stable governments or high-risk regions that tempt miners with the potential of very high rewards.

Rocky relations?

But in addition to a favourable private sector, mining companies are also attracted to Canada for a less-flattering reason, suggests Jamie Kneen, a coordinator for advocacy group MiningWatch Canada.

“There are hardly any Canadian laws of international application”, he says. “If something goes wrong, people may be able to sue in Canada, but that’s not entirely clear – it hasn’t worked yet.”

Kneen explains that while countries such as the US have passed domestic laws that govern corporations’ activities abroad, Canada has not done the same. The current Conservative government has actually voted down several attempts to increase accountability abroad.

One of those attempts to regulate the mining sector overseas was initiated by Member of Parliament John McKay. In April 2009, he proposed a bill that aimed to increase corporate accountability in developing countries, but to no avail.

“It died a glorious death”, McKay recalls on the phone from the Canadian capital of Ottawa. “They [mining lobbyists] don’t play to lose.”

He notes that without such legislation, international corporations based in Canada are left to self-regulate their conduct and adhere to the domestic laws of the countries in which they operate as they see fit.

“We have no ability to tell any mining company what to do, when to do, where to do, or how to do it”, McKay emphasises. In much of Africa, that creates potential for abuse. “Canadian companies are venturing into areas they’ve never ventured before”, he says. “There doesn’t seem to be any hesitation to go into conflict zones and areas where you know darn well you’re going to have some difficulties of some kind.”

Indeed, as Pierre Gratton from The Mining Association of Canada notes, Africa’s mining sector is expected to continue to expand, and Canadian interests on the continent to grow with it.

“There’s a recognition that this is something that we do well here, that we’re good at mining”, he says. “It’s one of the exceptions to the Canadian economy – we tend not to necessarily dominate sectors, but in mining, we do.”

*Natural Resources Canada defines mining companies’ cumulative “assets” as “calculated at acquisition, construction or fabricating costs, and includes capitalized exploration and development costs, non-controlling interest, and excludes liquid assets, cumulative depreciation [sic], and write-off.”

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Transnet signs deal for 96 diesel locomotives

Business Report

October 23, 2013

By Roy Cokayne

TRANSNET was to implement a locomotive fleet procurement “of unprecedented scale in South Africa’s history” worth about R35 billion for 1 064 locomotives in the next quarter, Public Enterprise Minister Malusi Gigaba said yesterday.

This new procurement programme was to meet and maintain the volume targets of Transnet’s market demand strategy in line with its R300bn seven-year investment plan.

It would be made up of 599 new dual-voltage electric locomotives and 465 new diesel locomotives and lay a platform for a seven-year strategic partnership between Transnet and its suppliers in the locomotive cluster, he said.

Gigaba was speaking at the official contract signing ceremony of Chinese manufacturer China South Rail (CSR) Zhuzhou Electric Locomotive as the successful bidder for a contract worth about R2.6bn for 95 electric locomotives for Transnet Freight Rail.

The winning bid was awarded to joint venture company CSR E-loco Supply in which CSR has a 70 percent stake and black economic empowerment (BEE) partner Matsete Basadi holds the remaining 30 percent.

Matsete Basadi comprises Matsete Industrial Services, owned by a group of qualified black professionals, and Matsete Dirang, a wholly-owned woman’s group, which both have a 10 percent shareholding in the joint venture. Five percent each is also held by the Matla Sechaba community trust and an employee scheme that still has to be established.

CSR president Xu Zongxiang said it had been working in the South African market for more than eight years and was familiar with local policies, especially BEE requirements.

Zongxiang said three potential partners had been recommended by its employees in South Africa and it had decided to partner with Matsete Basadi because of the consortium’s specialised commercial and industrial expertise and broad-based background.

Gigaba said the tender was historic because it marked the first time Transnet had procured locomotives to provide capacity for its key rail corridors from a Chinese original equipment manufacturer (OEM).

This reflected South Africa’s commitment to the Brics (Brazil, Russia, India, China and South Africa) strategic trade and investment relationships within this emerging economic community, Gigaba said. It also recognised the tremendous progress made in China to build globally competitive capabilities in sectors involving the manufacture of highly sophisticated capital equipment.

The tender awarded to CSR required the suppliers to meet a minimum threshold of 60 percent localisation, but he was unable to quantify how many jobs would be created.

Gigaba said the first 10 locomotives would be assembled in CSR’s factories in China and delivered by December next year, while the remainder would be made in South Africa.

“We believe this will inject massive economic benefits and lead to the development of intermediary sectors who will serve as suppliers because 50 percent of the capital budget will be spent on rail,” he said.

Delivery of the last batch of locomotives is planned for September 2014.

Gigaba said the scale of locomotive fleet procurement was expected to increase in the second phase of procurement in seven years time.

The capital expenditure programme put South Africa on the path of becoming one of a number of manufacturing centres competing on the basis of price and quality, he added.

“We are seeking to partner OEMs not just for the South African market but also for the purpose of exporting to the regional and global market.

“We would like to see our partners make South Africa the design and manufacturing hub for their regional activities, not just in the locomotive supply chain, but in all the spheres in which the OEM is active,” he said.

Does a Growing Africa Need a Foreign Investment Code?

Published: June 06, 2012 in Knowledge@Wharton Law & Public Policy

As managing director of Goldman SachsSouth African office, Colin Coleman has witnessed, and advised, the execution of countless business contracts across Africa. Each deal — from China’s US$9 billion copper deal with the Congo to Walmart’s US$2.4 billion purchase of South African retailer Massmart — highlights the tenuous balance between domestic interests and foreign investment, and raises a set of key questions.

“How do you create a balance of domestic interests in Africa and the interests of globalization?” Coleman asked. “How do you create a balance of interests between the emerging markets and the developed world? Within emerging markets, how does Africa protect its place in an appropriate way?”

These questions become more pressing as Africa’s economy grows and investors take notice. Africa today has 1.2 billion people, a US$1.8 trillion economy and real GDP growth of about 5.5% in 2011, Coleman pointed out. “When you look at the statistics, the fact is that Africa as a whole … is a significant contributor. It has a GDP that compares with any one of the BRICs.”

Such questions led Coleman to wonder: Should Africa create a code for foreign direct investment (FDI) that would guide non-African investors as they increasingly seek out opportunities in Africa’s growing markets? “Is there a case for an ‘FDI in Africa code of conduct’ that should be thought about, articulated, marketed, popularized, bought into and owned by investors, countries, and communities alike?” Read more.

Chinese help Patel

Business report,

By Donwald Pressly

April 29, 2012

It is all about a masterplan called the developmental state where the various spheres of government and their agencies will work together to fast-track job creation, grow the economy and strip away any state fat in the process.

This is the vision for the country that Economic Development Minister Ebrahim Patel pursued during his budget vote in Parliament last week.

Earlier this year Patel, during the debate on the State of the Nation speech, noted that President Jacob Zuma had outlined a R1 trillion infrastructure plan that represented “a bold, strategic and integrated platform” to mobilise the state – with private investors and the South African public – behind “a clearly articulated storyline of South Africa’s opportunities”.

Last week Patel continued the storyline.

It was a week in which he announced a major deal with China, an expanded mandate for the Industrial Development Corporation (IDC) including the launch of a new subsidiary – the Small Enterprise Finance Agency (Sefa), which will focus on providing loans to small business. He reported the agency would have R2 billion in the lending kitty provided by fiscal transfers and reserves, and just short of a R1bn shareholder loan from the IDC.

In addition, the IDC had issued a R4bn jobs bond to promote lending to companies in a bid to boost job creation.

He noted that the IDC had introduced low-cost lending facilities for jobs creating projects “at prime less 3 percent”.

In the last year, IDC funding approvals had grown from R8.8bn to R13.5bn.

Ahead of his budget vote, Patel signed an agreement between the China Development Bank and the IDC. The bank will commit $100 million (about R777m) in funding for small business, which will be disbursed through the newly set up Sefa.

The latter is the amalgamation of three state finance agencies, which Patel emphasised would save about R20m just in reducing administrative red tape costs.

The Chinese loan will be repayable over 10 years and was the first “concrete partnership” arising from the Beijing declaration signed between South Africa and China in 2010, when Zuma went there on a state visit….Patel said the integrated platform required to mobilise South Africa’s talent and expertise was the first step in creating a 10- to 20-year infrastructure project pipeline.

His department took into account “the growing experience” in the state build programme for the Gautrain, Medupi and Kusile power stations, the freeway improvement programme and the major airport revamps.

He told journalists that the current procurement system of government was “purely transactional”. For example, his department had discovered that the file in which a recent speech was stored – on the need to buy South African products – was produced by a German company. These files were the cheapest.

After consultation with a local stationary company, Bantex, the Department of Trade and Industry and Economic Development were using local files and saving R100 000 a year. On top of it Bantex was getting the business and the new arrangement supported local jobs.

Turning to an expanded role for the IDC, he hinted that the corporation which had until now provided funding off the strength of its balance sheet, may turn to the state in future to make “contributions”.

The IDC, nevertheless, reported that it would be spearheading an over R100bn infrastructure investment programme over the medium term off its balance sheet.

Meanwhile, Patel acknowledged that the government had learnt a lesson from the massive bus rapid transport system procurement in the cities of Johannesburg and Cape Town, where they had separately procured buses from Brazil without benefiting from the economy of scale of having one bid. Long-term and pooling procurement procedures were the way to go, Patel argued.

Patel reported to MPs that of the R672m budget of his department, just short of R170m would be channelled to Sefa, which he said would help improve small business performance and strengthen its direct lending capability, while increasing disbursement.

To promote agriculture processing activities, Patel reported that R108m would be earmarked for the IDC for the agro-processing fund.

He also announced that the Public Investment Commission would manage a R5bn green bond issued by the IDC. It would have a 14-year tenure. Read the full article here.

Transparency and Your Natural Resources

Huffington Post

Marcelo Giugale, World Bank’s Director of Economic Policy and Poverty Reduction Programs for Africa

March 7th, 2012

Wouldn’t you want to know how much money your government gets from the companies that exploit your country‘s oil, gas or minerals? It doesn’t have to be exact, but a ball-park figure? And how about taking a peek at the contracts that your leaders sign on your behalf (remember, you and your fellow citizens are the real owners of your national wealth)? And aren’t you curious about where the money goes–or went? It is a bit of a puzzle that only 35 countries in the world have agreed to join the “Extractive Industries Transparency Initiative” (EITI), an invitation dating back to 2003 to publish who pays how much to whom in the business of exploiting natural resources. Of those 35, only one (Norway) can be considered “developed” and 25 are African–respect to them.

You would think that, by now, citizens and markets would have forced more countries and more companies to open their books. After all, commodity extraction is a five trillion dollar a year industry that is projected to grow even bigger, as China and other newly-developed countries compete for access to wells and mines. And that’s only for the portion of the resources that we know about. To give you an idea, it is estimated that only a tenth of Africa’s natural riches have been found (it would take a billion dollars to produce a full geo-data map of the continent). So, with prices bound to stay high and plenty of potential for new discoveries, you would expect breathing-down-their-necks public scrutiny of the whole thing. Nope. It hasn’t happened. Why? Read more.

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