Archive for the Present Category

political-cliffAccording to data released by KenInvest, the Kenya Investment Authority, total investments (both local and foreign) in the country in 2012 amounted to $712 million, down 61% from the 2011 figure of $1.84 billion. The number of new projects approved by KenInvest fell from 130 in 2011 to 103 in 2012. These significant falls in investment are thought to be attributable to the political, economic and security risks the country is currently facing.

Kenya’s invasion of Somalia has been answered by sporadic terrorist attacks. There has been a significant wave of inter-ethnic violence, possibly politically motivated, in the coastal area. With the March elections likely to be hotly contested, there are fears that the wholesale riots could develop, as they did after the last elections in 2007. Recent moves by the government to require majority Kenyan ownership of mining projects would have scared away foreign investors.

One of the biggest deterrents to investment is uncertainty, and there is considerable uncertainty concerning the future of Kenyan politics. One of the leading presidential candidates and his vice-presidential running mate have been indicted by the International Criminal Court, with their trials to be held after the elections. Only very brave investors would be willing to risk their money in such an environment.

hefty-rewardsKenya’s members of parliament are among the best-remunerated politicians in the world, although the country is one of the poorest. One of the reasons may be that the members of parliament have set their own levels of remuneration through legislation. When the term of a parliament nears its end, they have typically passed laws granting themselves substantial bonuses and other perks and privileges.

All that was supposed to end when the country’s new constitution was adopted. Under the constitution, parliamentarians no longer have the power to set their own remuneration; this task has been given to the Salaries and Remuneration Commission. However, that has not stopped creative legislators from trying. A few months ago, members of parliament passed an act awarding themselves substantial bonuses, but after a public outcry the president refused his assent.

Last week, members of parliament tried again. This time they passed two acts, one giving the president substantial retirement benefits and the other giving themselves enormous bonuses as well as bodyguards for life, diplomatic passports and a government-funded funeral. Once again, following public outcry, the president has refused his assent to the act giving benefits to members of parliament, but he has assented to the act which gives himself hefty rewards.

political-warsGenerations of animosity have been allowed to develop between north and south in Sudan, and the tensions have continued since South Sudan gained its independence 18 months (less one day) ago. South Sudan has the bulk of the oil, but is landlocked, and relies on oil exports for 98% of its revenue; Sudan has the ports and the military aircraft which it is not afraid to use, but wants a hefty financial cut from the oil transported across its territory from South Sudan.

The  leaders of the two countries – Omar al Bashir from Sudan (who also happens to be wanted by the International Criminal Court on charges of crimes against humanity relating to his actions in Darfur) and Salva Kiir from South Sudan – met a few days ago in Ethiopia in an attempt to hammer out some sort of resolution to the ongoing skirmishes. They had previously agreed in September 2012 to resume oil exports and secure the border between the countries, but had since failed to follow through.

Former South African president Thabo Mbeki has been fulfilling the role of mediator on behalf of the African Union, and the parties have agreed to establish a demilitarised buffer zone between the countries, allowing oil exports to resume. It is easy to be cynical, but the terms of this round of agreements seem to mirror the terms of the last round of agreements. We now wait to see whether the new agreements will be respected.

tightening-conflictWhile most people in the world are celebrating the New Year peacefully, uncertainty surrounds the future of the Central African Republic as Seleka rebel forces advance on the capital Bangui. The streets have been eerily quiet under curfew conditions the past few days. The rebels started their movement some three weeks ago near the border with Chad, and so far they have met with little resistance from the government army.

The Central African Republic’s army is under-resourced, under-trained and under-paid, leaving the soldiers demoralised and, as often happens in poor countries, in a position of having to find their own income by extorting it from others. Consequently the soldiers have no particular reason to be loyal to the current government, and every reason to be interested in any opportunities which might enhance their meagre income.

Approximately 80% of the country’s population identifies as Christian, while the other 20% is split evenly between indigenous religion and Islam. The rebels are said to be predominantly Muslim. Many fear the possibility of a Muslim takeover, while on the other hand Muslims are now lying in fear of their non-Muslim neighbours who have been forming anti-Muslim vigilante groups. For the moment, uncertainty prevails.

untimely-endCerinah Nebandah was buried in Butaleja, Uganda on Sunday. She was a 24-year-old member of parliament, and she died in mysterious circumstances on Friday 14th December. The previous day she had been in parliament, making an interjection to the effect that the prime minister had been taking bribes, and complaining about the shortage of medicines in her electorate. On the Friday morning she was seen around parliament.

In the evening, Nebandah went to Buziga to visit her boyfriend. At around 6pm she made a phone call to her mother complaining of abdominal pains. She was driven to a nearby clinic, which referred her to a larger clinic, but she died before arriving there. The official story provided by a government doctor is that Nebandah died of cocaine and alcohol intoxication, but friends and family have denied that she took either.

Another doctor approved by both the parliament and Nebandah’s family was hired to conduct an independent investigation in South Africa, but he was arrested at the airport and prevented from leaving the country. At Nebandah’s funeral on Sunday, the crowd was in an angry mood, refusing to listen to the president’s message of condolence. Another member of parliament was arrested the following day for inciting violence by speaking against the government autopsy report.

missing-piecesTwo of the four prominent Kenyans who have been indicted by the International Criminal Court for crimes against humanity following the 2007 Kenyan elections, Uhuru Kenyatta and William Ruto, are vying for high office in the Kenyan elections in March next year. It currently appears likely that Kenyatta will be standing for president and Ruto for vice-president. The pair have joined together, notwithstanding that they were deadly enemies in the 2008 violence.

This leads to the awkward question of whether people indicted by the International Criminal Court, particularly in respect of offences allegedly flowing out of elections, can validly stand for high office while the indictment remains and the cases have not yet been heard. And then, if they did get elected, what would be the attitude of other countries, and would this be to the disadvantage of Kenya?

It has been speculated that the US has already imposed travel bans on the two, but the US says it will not express any position until the two apply for a US visa. It seems likely that a number of countries will at least cut the aid which they provide to the country. If the pair are convicted but refuse to present themselves for incarceration, a situation similar to that which applies in Sudan (where president al Bashir is an ICC fugitive) might arise.

The CEO of BP who became the focal point of community anger after the Deepwater Horizon oil spill off the US coast in April 2010 has not just faded into obscurity. Tony Hayward, who famously incited anger with his “I’d like my life back” comment and various other statements which were perceived as selfish and insensitive, resigned from BP later in 2010. Less than a year later, he was one of the founders of a new resources company, Vallares.

A few months later, in November 2011, Vallares completed the reverse acquisition of a Turkish oil company, Genel Enerji, with the merged company being a British listed company Genel Energy plc, and Tony Hayward as the CEO. Genel has significant exposure to high-risk oil investments, with a major part of its operations in Kurdistan, a troubled part of Iraq that is considered highly susceptible to sovereign risk.

Genel Energy has now received a licence from the Somaliland government to search for oil and gas, and has agreed to invest $40 million in exploration efforts, starting this month. According to most countries, Somaliland forms part of Somalia, up until recently one of the most troubled countries in the world. According to the Somaliland government, however, Somaliland is a different country. Genel’s investment in Somaliland follows the launch of a $17 million Coca-Cola plant earlier this year.

Less than two years have passed since Egyptian dictator Hosni Mubarak was ousted from the presidency in a popular uprising, and the new incumbent is already showing signs of taking over where the last one left off. President Mohammed Morsi has been seeking absolute powers, leading to a strong suspicion that the new head of government is going to be no less anti-democratic than his reviled predecessor.

Specifically, on 22 November, Morsi issued a decree which purported to remove from the judiciary the power to challenge his decisions. The members of Egypt’s Supreme Constitutional Court were scheduled to meet to determine the legitimacy of the body which drafted the new constitution which is scheduled to be the subject of a referendum in two weeks’ time; however, they were physically prevented from attending the meeting by the president’s Muslim Brotherhood supporters.

In response, the Supreme Constitutional Court has suspended all work, and the Judges’ Club has issued a statement indicating that the judges will not oversee the forthcoming referendum in accordance with their traditional role. It is widely believed that the draft constitution undermines basic freedoms. Egypt’s troubles seem set to deepen.

Sovereign risk is high for companies that do business in developing countries, as illustrated by the Mwakwere Rule, introduced in Kenya in September this year by Kenya’s environment minister Chirau Ali Mwakwere. According to the Mwakwere Rule, all foreign mining companies are required to transfer 35% of their shares to local investors and institutions. Base Titanium Limited, a subsidiary of Australian company Base Resources Limited, is significantly affected.

Base Titanium has been implementing the Kwale mineral sands project, Kenya’s first large-scale mining project. When the Mwakwere Rule was introduced, it was assumed that, in accordance with international norms, the new laws and regulations would apply only to future projects, not applying retroactively to pre-existing projects. However, the Ministry of Environment wrote to all mining companies including Base Titanium asking them for details on how they would transfer shares.

This places Base Titanium in an awkward position, as its financial resources are fully committed through a $170 million loan, and it is in no position to be handing over any shares. While many countries are seeking a greater share of the profits of mining companies, the most likely outcome of the Mwakwere Rule seems to be that the Kenyan political elite will be the ones snaffling the shares and pocketing the wealth.

Britain has suspended all aid to Uganda in view of the blatant misuse of funds in the Ugandan prime minister’s office. The Daily Monitor reports that almost $800,000 in aid sent for post-war recovery efforts in northern Uganda and the Karamoja region was used to purchase three luxury vehicles, including a Mercedes Benz worth $150,000 for the prime minister and five luxury vehicles for five other ministers.

Meanwhile, the Ugandan government’s spokesperson Ofwono Opondo has put a bold face on the donor funding cuts, saying that Uganda can do without donor funding, and the economy will not collapse. Uganda currently receives between $350 and $400 million in foreign aid each year, of which $100 million is direct budget support. Donor funding accounts for more than 25% of the Ugandan government’s budget.

The incident highlights a difficult issue with aid. Donors typically accept a small amount of embezzlement as a cost of ensuring that at least some funds get to the target recipients; it is only when large-scale embezzlement occurs that significant complaints are raised. Unfortunately aid tends to increase corruption, because it is seen as a large amount of “free” money, ripe for the taking.