News Update as @ 1530 hours, Tuesday 5 August 2014Feedback: bh24admin@zimpapers.co.zwEmail: bh24feedback@zimpapers.co.zw

By Rumbidzayi Zinyuke

Despite the agreement reached by Gov-ernment and Essar to resume operations at Zisco Steel, no rehabilitation work has begun on the ground so far, parliamen-tarians heard today.

Industry and Commerce Minister Mike Bimha in May said both parties had reaf-firmed their commitment to the project and agreed to immediately implement interim measures that include injecting fresh funds into the company to kickstart operations and offer relief to workers.

Giving oral evidence to the parliamen-tary portfolio committee on Industry and Commerce, Zisco Steel group chief exec-utive Alex Gowo said the only operations being conducted were the production of sundry products from left over material at the plants. “Zisco is on its own at the moment, there is no other party on the

ground. We are waiting to hear from the shareholder (government) and the strategic partner on the discussions they are carrying on,” he said. Of the com-pany’s total local liabilities, $110 million was related to employee benefits and pension fund obligations and Essar had made a commitment to start paying off the money.

“This particular year, we had the stra-tegic partner coming to Zisco with the shareholder, represented by the Ministry of Industry, with an indication that work would be starting soon on the ground. That a lot of contentious issues that had delayed the projects by more than three years had been resolved.

And in May there were promises that school fees for at least one term would be paid, the workforce was promised three months salary and some payment towards medical aid for Zisco group of

companies,” he said. However, Gowo said only $400 000 had so far been made available to employees through a loan availed by CBZ bank. Of that amount, $300 000 was released for the payment of school fees for employees’ children and $100 000 was released for the group’s medical aid scheme at the

end of May.

He added that the only work being done at the company was production of sun-dry products made from left over mate-rial from production done when the plant was still operational and the money was used to pay utilities. “These are survival tactics we adopted to enable us to pay for utilities so the money we raise is used for minimum maintenance to keep the plant operational.

On average we are raising between $100 000 and $120 000. Whilst we are not managing to pay as we would like, we are making token payments,” he said.

Gowo also said the money is sometimes used to pay part of the workers’ sala-ries when possible. “Whatever funds we accumulate, if they reach 12,5 percent of our wage bill, we pay the workforce. But then it takes a few months to reach that

No progress at Zisco

Zisco Steel

By Lynn Murahwa

The Chinese People's Association for Peace and Disarmament (CPAPD) has donated Information and Communica-tion Technology (ICT) equipment worth $100 000 to the Zimbabwe Parliament.

At a ceremony held this morning, the CPAPD handed over the office utilities and ICT's equipment to aid Parliament in improving its runnings.

China's ambassador to Zimbabwe Lin Lin said the relationship between China and Zimbabwe is a fruitful one. "By donat-ing $100 000 worth of office supplies the Chinese side presents its goodwill to

support the Zimbabwean Government in further improving the efficiency of its daily work. We sincerely hope the ICT

equipment will help you better serve the

nation. "Parliament of Zimbabwe plays an indispensible role, especially in this critical juncture of social and economic transformation in Zimbabwe," he said. Ambassador Lin said it is imperative for Zimbabwe to receive foreign direct investment ((FDI) from China as the two countries are partners.

"In terms of investment the Chinese government rigorously encourages its enterprises and business people to invest in Zimbabwe and in the past three years Zimbabwe has become the top destination among African countries for Chinese investment," he said. He added that China will continue to support Zim-

babwe's economic growth. Receiving the donated equipment, the Speaker of National Assembly Jacob Mudenda said technological advancements have become a pre-requisite to a healthy economy. "Today development is ICT anchored, the economies that are excel-ling now are ICT anchored hence they are popularly known as knowledge econ-omies based on this revolution of ICT's," he said.

He said although more needs to be done to improve the technological aspect of Parliament, the donation from CPAPD will go a long way in improving operations of Parliament. "We still have some deficien-cies in the ICT system in the areas of net-work monitoring software, in the anti-vi-rus software and our operating systems software in terms of Windows server and Microsoft need to be upgraded. "It is our hope that your ICT equipment will pro-vide Parliament with the tools of trade which we shall cherish for a long time. It is our hope that in the next few years as Parliament we should fully operate as an e-Parliament, the best among the best in Africa," he said. •

2 NEWS

Chinese NGO donates ICT's worth $100 000 to parliament

Ambassador Lin Lin

amount considering we are using the same money to take care of immediate needs for the workers.

With the current workforce we pay $120 000 for Zisco Redcliffe workers, it doesn’t take care of Lancashire Steel or Bimco workers,” he added. He said they

had managed to pay workers in June and July using the funds accumulated from the minimum production going on. Zisco is supposed to resume production

within two years at a minimum cost of $650 million for phase one which will push production to 500 000 tonnes per annum. •

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4 NEWS

Zim lose out on cottonBy Lloyd Gumbo

Zimbabwe should adopt the bio technol-ogy in the production of cotton (BT cot-ton) if the country is to realise benefits from the crop, parliamentarians heard today.

Appearing before the Parliamentary Port-folio Committee on Lands, Agriculture Mechanisation and Irrigation, National Biotechnology Authority chief executive officer Dr Jonathan Mufandaedza said there were a number of benefits that the country stood to benefit if it adopted the technology.

Zanu-PF MP for Mbire David Butau chairs the committee. Mufandaedza said other countries in the continent and the world at large were already enjoying the ben-efits from growing BT cotton. “Cotton farming is labour intensive and produc-tion costs are high yet the price is low but BT cotton is not labour intensive, farmers reduce the number of times they spray chemicals from between 10 and 15 times to about two times,” said Mufan-daedza. “Our cotton industry is ailing because of these challenges. So adop-tion of BT cotton will result in low use of

chemicals and less time for weeding and cultivating. “It is against this background that farmers are shifting to other crops. There is also the issue of environmental harm caused by the so many chemicals that farmers are made to spray.

Also farmers are at the mercy of these chemicals as they apply them. BT cot-ton is also good in that it targets specific pests than chemicals that are used now that kill everything, including bees.”

Mufandaedza said lobby against biotech-nology adoption were from an ignorant point of view as there was no scientific evidence to validate claims that there were side effects. He said BT cotton guaranteed quality grades as the crop would not be attacked by bollworm or other diseases.

This, he said, would result in the crop being bought at better prices, a develop-ment that would impact significantly on the country’s economy. He said research indicated that BT cotton would increase yield by at least 24 percent. Mufan-daedza said while Government has been reluctant to adopt biotechnology, the country was already using some of the

technology’s components. “Technology is going to be part of our future and for us to pretend we don’t see technology confronting our lives is unfair. Things are happening and we need to come out as Zimbabwe to do research by Zimbabwe-ans for Zimbabwe.

“If we don’t do research we are losing and we will become net importers of technology done by other countries. If we are not ready as a Government, let’s say so not the lies that are based on perceptions. As an authority we are say-ing bring the facts on the table than lies that are killing the country,” said Mufan-daedza. He, however, said the authority would remain guided by Government on what to do though he expressed confi-

dence that they were ready to cope in the event that biotechnology is adopted. MPs embraced the technology saying it presented an opportunity for farmers to finally realise profits and improve their livelihoods if adopted. Butau, Bindura South MP, Remigios Matangira, Makoni South representative Mandi Chimene and Chiredzi South legislator Callisto Gwanetsa all bemoaned the plight of cotton farmers saying they were farming cotton for a long time yet they remained poor.

They pledged to lobby the executive on the issue while imploring the authority to be aggressive in its quest to have the technology adopted. •

5 NEWS

Oliver Kazunga

POWER generation in the country has improved from an average of 1,200 megawatts at the beginning of the year to above 1,400MW largely due to plant maintenance and refurbish-ment work.According to the Zimbabwe Power Company (ZPC) website, as of yesterday the country was producing 1,437MW.

Hwange Thermal Power Station, which has installed capacity of 920MW, was producing 641MW while Kariba Hydro Power Station was generating 698MW against an installed capacity of 750MW.

The country’s three small thermal power stations – Munyati, Bulawayo and Harare -- as of yesterday were generating 28MW, 40MW and 30MW respectively. Power imports from Hydro

Cabora Bassa were 50MW while the country was also exporting 108MW to regional utilities, Namibia Power Com-pany (NamPower) and 84MW to SNEL of the Democratic Republic of Congo. The country’s power utility, Zesa Hold-ings was exporting power to Namibia and DRC as part of efforts settle elec-tricity debts acquired from NamPower and SNEL a few years ago.

The Zimbabwe Energy Regulatory Authority (Zera) chief executive officer Engineer Gloria Magombo attrib-uted the increased power generation capacity to plant maintenance works at Hwange Power Station. “One of the key issues that have seen power gen-eration in the country improving since the beginning of the year is as a result of the plant maintenance works at Hwange Thermal Power Station.

“In the past, the power station (Hwange) has not been doing well but because of plant overhaul, power gen-eration at the plant has improved add-ing 245MW from about 400MW at the beginning of the year,” she said. Efforts to get a comment from the ZPC man-aging director Engineer Noah Gwariro were fruitless as he was not answering his phone. However, the ZPC indicated that all the six units at Hwange were in service. “At Harare, station 2 was

shutdown on July 25, 2014 at 2145hrs after boilers six and nine developed tube leaks. Repair works are in pro-gress. Boiler 2 is on standby, boiler 6 is on standby, boiler 8 is on boiler tube leak repairs . . . ,” said ZPC.

It indicated that maintenance works were also in progress at Munyati, Bul-awayo, and Kariba. At Bulawayo Ther-mal Power Station, the power company said boiler 5 was on statutory inspec-tion, boiler 6 returned to service on Saturday, boiler 8 was on refractory repairs while generator 3 returned to service on Saturday and refurbishment works at generator 5 were expected to be carried out during the repowering project.

As part of efforts to increase electric-ity generation, Zesa Holdings was in the process of expanding Kariba South power plant by at least 300MW. Expan-sion at Kariba and Hwange plants was expected to see Zimbabwe generat-ing about 2,500 MW against a peak demand of 2,200MW. At the moment, there are a number of projects that are at different stages of development by independent power producers which are expected to improve electricity generation in Zimbabwe in the next few years. ― Chronicle •

Power generation improves

By Heather Charema

Government has directed all housing co-operatives to submit audited finan-cial statements within six months as it tightens screws on poor accountability and gross mismanagement of housing co-operatives in the country.

Minister of Small and Medium Enter-prises Development and Cooperatives Sithembiso Nyoni told journalists in Harare that the Government would get tough on all cooperatives that were vio-lating the laws governing the running of cooperatives. “The Ministry is going to get very tough with any society which will in future contravene any provisions

of the Cooperative Societies Act (Gov-erning the running of cooperatives),” she said. “It is the Ministry’s agenda to bring sanity into housing coopera-tives by bringing all errand societies to book.” Minister Nyoni said most hous-ing coops had no audited books, were not holding annual meetings and were mismanaging cooperative funds.

In addition, she said, some housing coops were mired in double allocation of stands scandals, expelling members without following procedures and had not carried out any meaningful devel-opment over long periods. “The coop-eratives affected most by these prob-lems are housing cooperatives mainly

in Harare,” Minister Nyoni said.

“They are caused by a number of fac-tors, chief among them being lack of transparency and accountability in the use of society’s funds and manage-ment committees desire to perpetuate their tenure.” In terms of section 36 of the Cooperative Societies Act, audited financial statements, audit report of activities throughout the years should be submitted to the Registrar within six months after end of financial year. Sec-tion 48 orders all registered societies to convene annual general meetings within six months after end of finan-cial year. At these meetings, audits are presented and elections conducted.

Cooperatives are required to have bank accounts into which all contributions by members are directly deposited. “All books of accounts and records to the satisfaction of the Registrar of cooper-atives should be produced and audited by a public auditor,” Minister Nyoni said.

“All contributions by cooperators are to be deposited directly into the coop-erative account. No monies should be paid direct to the treasurer or to a land developer or into a land develop-er’s account.” A number of desperate homeseekers have lost thousands of dollars due to corruption and misman-agement of housing cooperatives and land developing companies. •

6 NEWS

Govt gets tough on co-operatives

BH24 Reporter

The cost of living as measured by the Consumer Council of Zimbabwe’s low income urban earner monthly basket for a family of six increased margin-ally in July from $588, 97 in June to $589,14.

The food basket increased by $1.54 from $144.57 in the prior month to

$146.11 by end of July, as a result increases in the price of meat and tea leaves.

According to the CCZ, the price of beef went up 31 cents from $3,99 to $4,30 per kg and tea leaves increased by 27 cents from $1, 60 to $1,87.

Decreases were recorded in the prices of tomatoes which went down by 40c

from $1.20 to 80c, onions by 40c from $1.45 to $1.05 and washing powder which went down by 31c from $1.20 to 89c. Bath soap decreased by 11c from 70c to 59c, sugar by 9c from $1.79 to $1.70, a 2kg bag of rice by 5c from $1.64 to $1.59 and flour by 4c from $1.89 to $1.85.

The price of salt also went down by 1c

from 20c to 19c. Detergents decreased by $1.37 from $10.40 to $9.03 as a result of the decrease in price of wash-ing powder and bath soap.

Prices of the other basic commodities which include fuel, margarine, mealie meal, fresh milk, cooking oil, bread, cabbage and laundry bars remained unchanged from the June figures. •

Cost of living marginally up

BH24

The mainstream industrial index extended by a further 0.94 points to close the day at 190.46 points.

Seed producer SeedCo was 5 cents solid at 85 cents and Delta moved up 0.69 cents to trade at 127.02 cents.

DZHL and ZPI both traded 0.20 cents

higher to 12.70 cents and 1.20 cents respectively. ART gained 0.10 cents to close at 0.40 cents.

Two counters traded in the negative territory; Pearl, which shed 0.14 cents to close at 2.81 cents and Tru-worths which marginally lost 0.01 cents to close at 2.79 cents.

The mining index dropped 4.43 points to close at 90.02 points after Bindura slipped 0.50 cents to trade at 7.90 cents.

Falgod had a firm bid at 3.10 cents whilst Hwange and RioZim were unchanged at previous trading levels. ― BH24 Reporter •

8 ZSE REVIEW

Equities in second day gains

BH24

Government’s deal with Essar was supposed to get Zisco Steel back on track and contribute to the economic turnaround we have all been waiting for.

But three years down the line, there is still no progress. The giant remains asleep. And the same goes for all other arms of the industry that relied on Zisco Steel operations for survival.

The revival of the steel giant will guar-antee about 7 000 jobs and provide relief to its workers who have gone for more than 3 years without salaries.

In May, Government and Essar reaf-firmed their commitment o making sure that Zisco starts operations with immediate effect. The teams visited the company and met the employ-ees and promised them they would be getting their salaries and school fees for their children paid. They were also promised that their medical aid scheme would be paid up. But nothing much has happened since then.

According to Zisco Steel group chief executive, Alex Gowo, only $400

000 out of the $110 million owed to employees in benefits and pension arrears has been paid.

After that agreement was made, we were so sure that Zisco Steel was about to wake up, along with all those struggling companies such as NRZ, Hwange Colliery and a whole lot of steel distributors across the country. Even Bulawayo might have returned to its former glory as the hub of indus-try in Zimbabwe since most opera-tions were linked to Zisco. After all this

time and the effort that has been put into reviving the steel giant, it’s obvi-ous that it hasn’t worked. There is no evidence that there is a strategic part-ner for Zisco. All is quite.

So isn’t it time for Government to rethink its strategy to waking up the giant?

Maybe there is a need to revisit the whole deal and see where they might have got it wrong. There is nothing wrong with admitting that we got it

wrong somewhere. Only then can we map a way forward.

There is every need to get that com-pany up and running again. The live-lihood of thousands of employees (maybe even a million if you count those in the value chain) depends on it.

Not only will this be in line with the ethos of ZimAsset in terms of job cre-ation, it will definitely fast-track eco-nomic recovery. •

10 BH24 COMMENT

Time to rethink strategy to get Zisco up and running again

BH24

OVER 70 percent of all royalties col-lected in South Africa are sent abroad to the intellectual property owners, highlighting the need to foster local creative industries.

The Department of Trade and Industry was working on a strategy to develop South Africa’s music industry as part of its industrial policy action plan to pro-mote local intellectual property, and was planning an incentive to foster it, deputy director-general for consumer and corporate regulation Zodwa Ntuli told Parliament last week.

Amendments to the Copyright Act were also being drafted to tighten up the regulation of royalty payments to ensure that local artists received their rightful dues. "The plight of art-ists has been a problem. People are being ripped off every day," Ms Ntuli said. "The law is not protecting them because intellectual property is a pri-vate right people have to enforce themselves, which sometimes means going to court."

Many people did not have the money to do this, she said.

"We need to protect vulnerable artists. The contracts that they sign are not favourable to them as they don’t have the power to negotiate."

African National Congress MP Zukile Luyenge shared the concern over the plight of artists, particularly those in remote rural areas who were not members of collecting societies.

Trade and Industry Deputy Minister Mzwandile Masina assured him that once the legislative amendments had been promulgated, an outreach cam-paign would be launched — including in remote rural areas — to inform art-ists of their rights and how they could benefit from royalties. The campaign would include an antipiracy message

as this practice caused significant harm to artists.

"Once the legislation is passed we will be able to deal decisively with all the unspent monies in Samro (the South African Music Rights Organisation), etc," Mr Masina said. Money collected by Samro was not distributed before because there was no law protecting artists, with the result that many art-ists would have died without having received payment for their work.

The amendments would be based on the recommendations of the Copyright Review Commission, which was estab-lished in 2011 under the chairmanship of Judge Ian Farlam to investigate art-ists’ concern that royalties were not being distributed to their rightful own-ers by collecting societies.

The commission proposed that the roy-alties for each set of rights — perfor-mance, "needle time" and mechanical rights — should be collected by a sepa-rate collecting society.

Judge Farlam’s report also urged that the SABC, as a major user of locally

produced content, and collecting agen-cies be encouraged to pay royalties to musicians retrospectively from 2006 when the Copyright Act and the Per-formers Protection Act came into force.

The Independent Communications Authority of South Africa should make it a condition of licences issued to broadcasters that they comply with copyright obligations, and failure to do so should result in the cancellation of their licences, it said.

The commission also recommended that collecting societies not be allowed to spend more than 20% of the royalty revenue they collected on administra-tion, and that they be prohibited from distributing the royalties of artists who were not members.

Ms Ntuli said the envisaged regulations would cap administrative costs. Among the commission’s recommendations was local content for public, private and community radio stations be raised to 80%, 50% and 80% respectively.

Stricter copyright enforcement would contribute to the fight against piracy. •

12 REGIONAL NEWS

SA to ensure artists get royalties

BH24

14 DIARY OF EVENTS

The black arrow indicate level of load shedding across the country.

POWER GENERATION STATSGen Station

5 August 2014

Energy

(Megawatts)

Hwange 498 MW

Kariba 720 MW

Harare 38 MW

Munyati 25 MW

Bulawayo 26 MW

Imports 0 MW

Total 1307 MW

Seed Co Limited 19th Annual General Meet-ing Venue: Seed Co Administration Block at Sta-pleford Date: Wednesday 20 August Time: 12:00 hours

National Tyre Services Limited 52nd Annual General Meeting Venue : Boardroom, Stand 4608, Corner Cripps/Seke Roads, Granite-side, Harare Date: 20 August 2014 Time: 14:30 hours

THE BH24 DIARY

BH24

16 ZSE

ZSEMOvERS CHANGE TODAY PRICE USC SHAKERS CHANGE TODAY PRICE USC

ARTD 33,33 0,40 BIND 0,50 7,90

ZPI 20,00 1,20 PEARL 0,14 2,81

SEEDCO 6,25 85,00 TRUW 0,01 2,79

DZL 1,60 12,70

DELTA 0,55 0,69

IndicesINDEx PREvIOUS TODAY MOvE CHANGE

INDUSTRIAL 184.95 183.76 -1.19 POINTS -0.64%

MINING 61.13 66.53 +5.40 POINTS +8.83%

Stocks Exchange

17 AFRICA STOCkS

Botswana 8,664.65 -11.96 -0.14% 12July

Cote dIvoire 246.37 +2.18 +0.89% 07Mar

Egypt 7,949.60 -75.68 -0.94% 06Mar

Ghana 2,301.05 +0.70 +0.03% 01Aug

Kenya 4,943.28 +37.19 +0.76% 01Aug

Malawi 12,662.47 +0.00 +0.00% 07Mar

Mauritius 2,074.51 -3.51 -0.17% 07Mar

Morocco 9,544.10 +21.01 +0.22% 07Mar

Nigeria 41,801.51 -132.89 -0.32% 04Aug

Rwanda 131.27 +0.00 +0.00% 24Oct

Tanzania 2,018.97 +25.40 +1.27% 07Mar

Tunisia 4,624.39 -39.32 -0.84% 07Mar

Uganda 1,503.90 +0.81 +0.05% 10Sep

Zambia 4,242.74 +14.95 +0.35% 10April

Zimbabwe 189.52 +0.21 +0.11% 04Aug

African stock round up Commodity Prices

Name Price

Crude Oil 1,300.91 -0.21%

Spot Gold USD/oz 1,292.63 -0.26%

Spot Silver USD/oz 19.38 -0.46%

Spot Platinum USD/oz 1,421.25 -0.33%

Spot Palladium USD/oz 798.50 -0.64%

LME Copper USD/t 6,770 -0.18%

LME Aluminium USD/t 1,780 -1.17%

LME Nickel USD/t 18,230 -1.73%

LME Lead USD/t 2,095 -1.41%

Quote of the day — "Develop success from failures. Dis-couragement anD failure are two of the sureststepping stones to suc-cess." - Dale carnegie

Globalshareholder.com

Australia’s control of its $12 billion domestic gold mining industry has risen to around 50% recently, with several large overseas-based gold pro-ducers selling some of their Australian mines to local companies, said Mel-bourne-based gold mining consultants, Surbiton Associates, in a news release Monday.

“Recently the pace of overseas sell-ing has increased significantly,” said Surbiton Associates director Dr. San-dra Close. “We have seen locals who already had operating experience expand their gold interests considera-bly.”

Canada’s Alacer Gold sold its Higgins-ville and South Kalgoorie operations to Metals x in late 2013. Earlier this year, Toronto-based Barrick Gold sold Kanowna Belle and Plutonic and its 51% interest in the East Kundana joint venture to Northern Star Resources, which in July also bought Jundee from Colorado-based Newmont Mining.

Barrick also sold its Granny Smith, Lawlers and Darlot operations to South Africa’s Gold Fields, “but this had no

effect on overall Australian control, as the mines went from one overseas company to another”, Close observed.

“Several of the world’s largest gold producers have switched their strategy from chasing ounces to rationalization and cost reduction,” said Close.

“This does not always sit easily in an Australian context as, unlike many other gold producing regions, Austral-ia’s production comes from a consid-

erable number of smaller mines rather than a small number of large mines.”

“Despite Australia having the large gold reserves, a large proportion of these are locked up in iron oxide-copper-gold deposits, such as Olympic Dam and Prominent Hill,” she noted. “It will be many decades before these deposits are fully exploited.”

These are big, long-tern operations with mining based on the rate of pro-

duction of the main ore component, which is copper; the amount of gold output is contingent on the overall pro-duction schedule.

“So, it looks great on paper but the practicalities are that much of our gold reserves are for the very long term,” said Close. “For a sustainable industry we still need production from traditional primary gold deposits and ongoing exploration is as vital today as it ever was.”

“Gold is often overlooked as an impor-tant export earner for Australia,” Close suggested. “Although gold’s export value is less than that of iron ore or coal, it is worth more than export earn-ings from meat, almost double the export earnings from wheat, and four times the earnings from wool.”

“The Western Australian government is currently examining royalty rates, but any adjustment should only be made after very careful consideration and consultation with producers both big and small,” Close advised. “It’s essential to get the right balance. ―Mineweb •

18 INTERNATIONAL NEWS

Half of Australia’s gold mines now in local ownership

By Nicholas Norbrook

At last, African governments are encouraging the development of net-works of small and capable local com-panies that can become a part of global supply chains and win government contracts.

Local content – the phrase has rippled through Africa's energy and mining sectors, gathering strength over the past decade. From workshops to con-ferences, from ministerial briefings to presidential speeches, African govern-ments are devising frameworks that will hitch their domestic industries to the growth that foreign investment brings.

Nigeria, Ghana, Angola, Morocco, South Africa, Uganda, Gabon and Guinea have passed local content bills in recent years, often in the extractive industries. The Nigerian Oil and Gas Industry Content Development Act has tough requirements on giving local companies priority in oil block licens-ing rounds and compels oil companies and service providers to hire Nigeri-ans. Ghana's local content law likewise

gives local companies first preference in bidding rounds for oil blocks and requires a minimum 5% equity stake for Ghanaian firms – not including the government-owned Ghana National Petroleum Corporation – in every oil licence.

The rationale is clear. After decades of natural resource flows out of African countries, economies remain locked into the lowest rung of economic devel-opment, with local companies unable to add value to raw commodities.

The continent's industrial fabric remains threadbare, and the growing number of young graduates will cause chaos if there are not enough jobs to fill.

African Union Commission chairperson Nkosazana Dlamini-Zuma reminded African finance ministers in March that African countries have to "design a comprehensive industrial develop-ment framework [...] to speed up and deepen value-addition of local produc-tion, linkages between the commod-ity sector and other eco- nomic sec-tors". Guinea's mines minister Kerfalla Yansané says: "We have been learn-

ing from our mistakes. Our mining companies were not integrated into the mainstream of our economy. Now we want them to be part of growth corri-dors. There should be a link between mining activities and the whole en- vironment, meaning agriculture, ser-vices, transport, education and so on."

Jobs first

For Jean-Louis Ekra, president of Afreximbank, this economic national-ist moment "is not just happening in Africa, because of the difficulty in job creation you see around the world. In Europe, whenever a company says it will move a factory abroad you have instant uproar from the government."

A panel of experts convened by Brit-ain-based law firm Pinsent Masons earlier this year was unanimous: "Local content legislation [in Africa] is here to stay, and those companies that fail to recognise this evolving investment reality will quickly fall behind."

In places where governments have been working on this for some time, like Nigeria, there are real changes afoot. "One of the best testimonies to

this is local participation in the annual CWC Nigeria Oil & Gas Conference," says Fisoye Delano, senior vice-presi-dent of CAMAC International and previ-ously man- aging director of the Nige-rian Petroleum Development Company.

"The number of Nigerian oilfield ser-vices providers has changed signif-icantly, just as significantly as the number of indigenous exploration and production companies. Eighty-five per-cent of exhibitors in NOG 2014 were local service providers."

Multinational companies tend to fight against the local con- tent policies. When companies have large interna-tional service providers, they can keep costs low and maintain high standards. A senior manager at an oil company operating in Nigeria says: "What they are asking for in local content is just unworkable."Local service providers often ask for higher fees than their international competitors and do not have the same levels of experience. Slippery definitions The complaints of multinational companies are not the only obstacles to the implementation of local content policies. Two additional

19 ANALYSIS

Local content: Cultivating homegrown talent

20 ANALYSIS

challenges are rooted in the historical lack of capacity in local industries.

The first is that the slippery definitions of local content can often lead to front-ing, whereby multinationals structure arrangements so that there is only a semblance of domestic participation.

In Uganda, a clause in the local content law says that "where the goods and services required by the contractor or licensee are not available in Uganda, they shall be provided by a company which has entered into a joint venture with a Ugandan company provided that the Ugandan company has a share capital of at least 48% in the joint ven-ture."

Few Ugandan companies have the cap-ital to set up joint ventures with multi-nationals. Because of the lack of defi-nition of what constitutes a Ugandan company, civil society groups say that local elites can create front companies that help multinationals to com- ply without transferring skills and wealth.

Some of the early black economic empowerment deals in South Africa faced this problem, hence a redou-bled effort by the department for trade and industry to crack down with an

approach that uses scorecards and an agency to investigate the investors. When there is room for discretion in interpreting the eligibility criteria in local content deals, predatory elites can benefit.

The second obstacle to local content policies is the lack of sup- port given to boosting capacity. "Of course we have to build the capacities of our SMEs [small and medium-sized enterprises] and our manpower so that we can actually turn local content into reality," explains Guinea's Yansané.

Capacity building

In 2012, the Moroccan government established a regulation that entitles SMEs to manage 20% of all govern-ment contracts. Ensuring that these companies actually exist is a challenge, but skills and finance are the main con-straints that limit the creation of a fleet of local companies that can seize local content opportunities.

Here, at least, there seems to be more progress. In Angola's oil sector, the international non- governmental organisation CDC Development Solu-tions created an enterprise develop-ment agency called the Centro de

Apoio Empresarial (CAE) in 2005 in collaboration with the Angolan govern-ment, international oil companies and the national oil company Sonangol.

The CAE provides Angolan companies with training that allows them to par-ticipate in the supply chains of large oil companies. CAE consultants also help in the development of business plans, a crucial mentoring service that many African SMEs could use.

Since its founding, more than 1,500 companies have participated in the scheme, winning more than 300 con-tracts worth $214m and creating 2,700 jobs. In 2010, the CAE expanded its mandate to include the provision of finance. Some of the companies that the CAE has helped have grown into much larger companies. Examples of success include the NASA Com¬mer-cial Import and Export Lda, which started off as a small com¬pany with a handful of employees and now sup-plies safety shoes and other clothing to Chevron. Another is the plumbing and electrical repair company Lua-fanda Reparações. It won a $680,000 building main-tenance contract with BP in 2010. Nigerian success But this remains small beer com¬ pared to

Nigerian success. The listing of Cav-erton Helicopters on the Nigeria Stock exchange in late May is just the latest step for the indigenous air services company, which won a contract from Shell worth $760m over five years.

"Today, that company is becom¬ing a regional player, selling ser¬ vices in Ghana," says Simbi Wabote, global local content manager for Shell. He believes it is because of a step up in quality, and especially critical mass. "Doing business with the oil and gas industry is not about small enterprise, these are not Mickey Mouse contracts".

Niger¬ dock's manufacturing for Total is another example, likewise the many vessels servicing platforms offshore that are owned by Nigerians. Most encouraging is that companies that have benefited from local content deals tend to get local banks involved in their op¬erations. Again, Nigeria leads the way. "Banks in the West Africa region are now depending on Ni¬gerian banks for expertise in major oil, gas and power transactions," says CAMAC's Delano. In the long term, strengthening local banks could be far more important to boosting Africa's economies. ● The Africa Report •