Africa

🇿🇲 Zambia will review a hydroelectric-power contract with U.S. company General Electric and China’s Power Construction. “We are disengaging from that contract” to revise the agreements, said energy minister Peter Kapala, according to Bloomberg. The deal, signed in 2019, was to build a 2,400 megawatt facility around the Zambezi, Africa’s fourth longest river. The cost reportedly climbed 23% last year to $5 billion due to debt defaults by Zambia and Zimbabwe, a co-owner of the project. Kapala said the cost was “just too much,” adding that the river’s features may not generate the expected amount of electricity.

🌍 African presidents from South Africa, Egypt, Senegal, Uganda, Zambia and Congo Brazzaville are set to travel to Russia for a peace meeting with President Vladimir Putin as part of efforts to end the war in Ukraine. President Putin said on Tuesday that he had agreed to discuss current issues with the African leaders. The delegation is also expected to travel to Kyiv to meet Ukrainian President Volodymyr Zelenskiy. However, the details of the African delegation’s proposals to end the fighting have not been made public.

🇨🇲 Telecoms company MTN said a Cameroonian court order directing banks to transfer its funds to an escrow account is “a serious risk” to its business in the country. The June 9 order is the latest move in a long-running dispute in which Cameroonian businessman Ahmadou Baba Danpullo is seeking a $427 million settlement from South African lender First National Bank over its seizure and liquidation of his properties in South Africa in 2020. Danpullo is a known ally of Paul Biya, the Cameroonian president. MTN claims its Cameroonian bank account has been frozen since last September due to the case, Reuters reports.

🇬🇶 Equatorial Guinea ordered the seizure of $125 million from Brazilian companies as compensation for what it said were damages incurred during its vice president’s visit to Brazil. Teodoro Nguema Obiang Mangue, son of Equatorial Guinea’s long-time president, was in Brazil with an 11-person entourage in an unofficial capacity in 2018 when authorities found $16 million in cash and jewels while searching the group’s bags. But Malabo said property belonging to its diplomatic service in Sao Paulo was seized and auctioned off, warranting compensation for damages which a Malabo court has determined is $125 million (80 billion CFA francs), AFP reports.

The volume in metric tons of Kenyan carbon credits bought by 16 Saudi regional and international companies — including Saudi Airlines, Aramco and Saudi Electricity Company — during a carbon credit auction on Wednesday (June 14) in Nairobi. The auction’s organizer, the Regional Voluntary Carbon Market Company (RVCMC), touted the event as the largest-ever voluntary carbon credit auction. Demand for carbon offsets is expected to grow as companies target net-zero emissions by 2050.

Nigeria’s Tinubu launches presidency by unleashing market-driven reforms

THE NEWS

Nigeria’s new president Bola Tinubu implemented market-friendly reforms in his first two weeks in office in a bid to overhaul Africa’s biggest economy and attract investment — despite the risk that angry citizens could derail his plans.

The central bank on Wednesday allowed the naira to trade freely against the dollar, prompting its official value to plummet by nearly 40% as it moves towards a single exchange rate. It marked the end of multiple, tightly controlled exchange rates championed by its governor of the last nine years, Godwin Emefiele. Tinubu suspended Emefiele last Friday and the following day security agents confirmed he had been arrested and held in custody for “investigative reasons.”

Tinubu made his intentions clear in his inaugural address on May 29: “The central bank must work towards a unified exchange rate. This will direct funds away from arbitrage into meaningful investment in the plant, equipment and jobs that power the real economy.”

He also announced the scrapping of a fuel subsidy that cost the country $10 billion in 2022.

KNOW MORE

In the last week, Tinubu has also signed laws to overhaul the power sector and provide student loans. The power legislation, signed into law on Friday, allows Nigeria’s 36 state governments to regulate their electricity markets. They were previously controlled by the federal government. Another bill signed on Monday creates a fund to provide interest-free loans to university students.

ALEXIS’S VIEW

Tinubu has begun his presidency with big, bold policy moves that clearly mark an ideological break from the past and could boost foreign investment into Africa’s biggest economy. The central thread that connects Tinubu’s policy changes is a seemingly unwavering faith in supply and demand to dictate the value of the currency and the price of petrol.

“The power reforms could be revolutionary for electricity supply in Nigeria,” Fola Fagbule, a director at multilateral lender Africa Finance Corporation told me. He said devolving certain responsibilities for electricity to state governors frees them up to innovate to attract investment. Poor power supply has long held back the development of Nigeria’s economy.

Exchange rate reforms are significant because they appeal to investors who stayed away due to the statist policies of his predecessor, Muhammadu Buhari. The byzantine web of exchange rates and tight currency controls created confusion and made it hard for foreign businesses to repatriate their profits. We got a sense of investor sentiment on Monday when Nigeria’s international bonds surged in the wake of Emefiele’s suspension.

But there are potential pitfalls. The huge price rises for petrol could stoke inflation. The last attempt to remove the subsidy, 11 years ago, was reversed after widespread protests. That hasn’t been repeated — probably because its removal was well-signaled — although major labor unions nearly called a nationwide strike.

If unleashing market forces causes a steep rise in the cost of living, as many economists predict, Tinubu will be forced to consider what he values more: the backing of international investors or his citizens.

ROOM FOR DISAGREEMENT

Ikemesit Effiong, head of research at Lagos-based political risk consultancy SBM Intelligence, argued that Tinubu’s approach has been driven by the economic malaise Tinubu inherited from Buhari rather than a particular economic vision. “In terms of policy, there isn’t a lot of economic wiggle room,” said Effiong, referring to issues such as the removal of the petrol subsidy and allowing the naira to float freely. “It really was a matter of if, and not when. He really had no choice.”

VIEW FROM LAGOS

In the Surulere neighborhood of Lagos, 40-year-old Edith Pius, who sells rice and stew, from a wooden shack complained that customer numbers had dropped since the petrol price increase, even as costs of her ingredients have soared. She hasn’t raised prices for fear of losing customers to nearby competition but increased the minimum order on some items. “I no longer sell 100 naira rice (21 cents), it’s now from 200, except for school children,” she said.

— Reporting by Alexander Onukwue in Lagos

NOTABLE

• Al Jazeera profiled Godwin Emefiele, Nigeria’s central bank governor whose suspension by Tinubu presaged the new currency regime. Emefiele, architect of an ill-fated cash redesign weeks before this year’s general elections, had been “all powerful.”

Heather Yixuan Li is a bilingual business consultant with a focus on cross-border tech and China-Africa relations. Originally from Beijing, she has lived in Ghana, Kenya and Rwanda over the past two years.

Global finance is failing on Africa’s energy transition

International financial institutions are failing to do enough to help fund the energy transition in developing countries, particularly in sub-Saharan Africa, the head of the International Energy Agency warned in an interview.

Fatih Birol noted that overall solar-power deployment in the region was outstripped by that of the Netherlands, a country with a fraction of the landmass and far less sunlight, and that even though 40% of global solar-power potential was in sub-Saharan Africa, half of its people lacked electricity. But the cost of capital was between three and four times higher than richer countries.

“There is now a major role for the international financial institutions to de-risk those investments,” Birol said. “When we look at our efforts globally … the international financial institutions in Washington and beyond, in my view, they get very bad marks.”

Birol said that though clean-energy investments would outstrip fossil-fuel investments this year for the first time, overall annual spending on green energy infrastructure — currently projected to be $1.7 trillion — would need to increase fourfold, and that 80% of overall spending would need to be focused on developing countries.

“The advanced economies have two jobs to do,” he continued. “One, to do their homework domestically, but also help others, even for their own benefit — leave aside their historical responsibility.”

In particular, Birol said European countries had both a responsibility and an incentive to help their African counterparts grow their economies and shift to clean energy. He warned of the potential of unrest and mass migration were it to fail to do so. “Europe has to make, in my view, more efforts to help Africa … access electricity,” he said. “If you are not able to do that, the consequences will be rather serious for European countries.”

— Prashant Rao

Read the full article here.

Journalist Jori Lewis details how enslaved people in 19th Century Senegal transitioned from commodities to workers producing peanuts for soap makers in Marseille, France’s second-largest city. In her book, Slaves for Peanuts, A Story of Conquest, Liberation, and a Crop that Changed History, Lewis evaluates historical records and notes that during the Industrial Revolution, peanuts were needed for greasing machines leading to increased demand. A chief in Dakar, acting in France’s interests, declared that enslaved people who could bring in enough peanuts to equal their selling price would be spared. The book also reveals that protestants in Paris funded trade outposts in the coastal cities of Senegal, where slaves who escaped could hide until they received their certificate of freedom.

• The CEO of leading Swedish fintech firm, Klarna, told Reed Albergotti how he believes AI will change online shopping and make it more “emotional.”
• Republicans are undergoing a major shift on outreach to Muslim voters, returning to a project that conservatives shelved for two decades, David Weigel reported.
• Ukraine launched its long-awaited counteroffensive to regain territory. An expert who believes it just might work talked to Jay Solomon.

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— Yinka, Alexis, Marché Arends, Alexander Onukwue, and Muchira Gachenge.