Wednesday, August 27, 2008

Chinafrica (20) Watching for PRC Influence in Africa

Emerging financiers increase African investment

(The take home point worth noting is that what we have is a near perfect match... huge mineral reserves, demand, and means to exploit... "World Bank lead economist and coauthor of the report Vivien Foster says, "The growing cooperation amongst developing economies is driven by strong economic comple- mentarities between China and Africa. China's growing demand for natural resources is matched by Africa's significant and often underdeveloped oil and mineral reserves. Africa's urgent need for infrastructure is matched by China's globally competitive construction industry." So far, however nearly two thirds of Chinese investments are concentrated in Angola, Nigeria, Ethiopia and the Sudan.)


Emerging financiers increase African investment
Published: 15 Aug 08 - 0:00

Emerging financiers China, India and a few Middle Eastern Gulf nations' investment commitments, funding infrastructure projects in Africa, jumped from less than $1-billion a year before 2004 to $8-billion a year in 2006, and $5-billion a year in 2007. This signals a growing trend in cooperation among developing economies, says a new World Bank report.

The report, 'Building Bridges: China's Growing Role as Infrastructure Financier for Sub-Saharan Africa', shows how new infrastructure partnerships are emerging, driven by strong economic growth in the region, an improved business-friendly climate, and rising demand for petroleum and other commodities from China and India.

World Bank vice-president for the Africa region Obiageli Katryn Ezekwesili says, "China's success story in reducing poverty through rapid and sustained growth is remarkable. Massive invest- ment in infrastructure is a key factor. China's growing infra- structure commitments in Africa are helping to address the huge infrastructure deficit of the continent. There are, of course, challenges, which will need to be addressed by African nations and China, coupled with the support of development partners. By working together, win-win partnerships can be created."

Africa faces daunting challenges in improving its infrastructure, the report states. Development experts agree that ageing infrastructure is cutting the growth rate of African economies by as much as one percentage point every year. One in four Africans do not have access to electricity. Travel times on African roads and export routes are two to three times higher than in Asia, increasing the prices of traded goods. Power generation capacity is about one-half the levels achieved in South Asia.

The report notes that the investment being made by emerging financiers are unprecedented in scale and focus on large infrastructure projects. In a changing world, with new actors and financing modalities coming into play, there is a learning process for investors and recipients. This will place new demands on national capacity to negotiate complex and innovative deals, and apply appropriate environmental and social standards needed for the long-term success of such partnerships.

Sub-Saharan Africa's natural resource exports to China have grown exponentially, from just over $3-billion in 2001, to $22-billion in 2006. Petroleum dominates, accounting for 80% of total exports to China. Nevertheless, the bulk of Africa's oil exports still go to the US and Europe, which together receive 57% of the total, compared with only 14% going to China. Other important African export commodities are iron-ore and timber, followed by manganese, cobalt, copper and chromium.

World Bank lead economist and coauthor of the report Vivien Foster says, "The growing cooperation amongst developing economies is driven by strong economic comple- mentarities between China and Africa. China's growing demand for natural resources is matched by Africa's significant and often underdeveloped oil and mineral reserves. Africa's urgent need for infrastructure is matched by China's globally competitive construction industry."

The World Bank is working closely with African countries, China and other development partners, sharing experiences so that the investments have the best development impact.

China is not the only emerging financier playing a major role in Africa. In recent years, India has increased its investments, committing $2,6-billion since 2003. The bulk of Indian investments were in Nigeria. Oil-rich Gulf states and Arab donors are also playing a substantial role in African infra- structure, committing on average $500-million every year over the last seven years.
Report coauthor Chuan Chen says, "While more cooperation amongst developing economies backed by strong infrastruc-ture investments marks a positive trend, the key challenge is to maintain the momentum for lasting development results."

Detailed findings of the report include the sizeable investment commitments made by the nontraditional financiers to sub-Saharan Africa's infrastructure in helping to fill annual needs, estimated at $22-billion by the Commission for Africa. China's financing investments in Africa started from a low base, less than $1-billion a year before 2004, but rose to over $7-billion a year in 2006, and dipped to $4,5-billion a year in 2007.

China has also committed $3,3-billion for ten projects that could potentially boost sub- Saharan Africa's hydropower generation by 30%, or 6 000 MW of installed capacity. The Far East country is financing the rehabilitation of 1 350 km of railway and constructing 1 600 km of new railway lines across the region, an important contribution to the continent's existing 50 000-km rail network. Nearly 70% of Chinese investments are concentrated in Angola, Nigeria, Ethiopia and the Sudan.

Financing terms vary by country, but typically involve a grant element of 33%, close to the benchmark level for concessional finance. About 35 African countries have received Chinese infrastructure finance. Many projects are less than $50-million each. There have also been a handful of trans-actions worth more than $1- billion, showing China's ability to provide large sums of money for specific infrastructure projects.

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Friday, August 08, 2008

Four Legged Friends (Duiker Story)

Duikers, a good little briefing. At…

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Wednesday, August 06, 2008

Due Diligence Exposes Several Bidders For Forest Concession

Wow... this stuff is working! (story below) We are getting the front side of the deal right. All that remains is to follow through.....

Due Diligence Exposes Several Bidders For Forest Concession
The NEWS (Monrovia)

NEWS5 August 2008 Posted to the web 5 August 2008
By George BardueMonrovia

The Forest Management Contract (FMC) Due Diligence Committee has submitted its report to the Inter-Ministerial Concession Committee (IMCC) on the financial and technical capabilities of companies that submitted bids for logging operations in Liberia.

The bids, which were publicly opened for three Forest Management Contracts on April 21, 2008, brought 13 companies bidding for different categories.

Following the bidding process, the Concession Bid Evaluation Panel placed seven companies in the "A" category, three for the "B" category and another 3 in the "C" category with the Tropical Reserve Entrepreneurial Enterprises (TREE) scoring 95 percent.

However, when Due Diligence was conducted on the companies, the Committee discovered that TREE did not provide substantive financial and technical evidence although the Bid Committee declared TREE as provisional winner in the "A" category.

The prequalification standards for a medium FMC require US$15 million in capital including cash and equipment.

The Due Diligence committee's report indicated that TREE claimed to have vehicles and equipment valued at US$1.9 million, adding "it presented bank statement showing funds totaling US$0.3 million. This leaves a net financing requirement of US$14 million. "

In addition to financing its own operations, the Due Diligence Committee noted that TREE has committed itself to finance the operation of five timber sales contracts, three by B&V Timber Company and two by Tarpeh Timber.

The committee said they found out that over the first six months of operations, these companies together will require about US$1.2 million in investment funds.

However, TREE was asked by the Forestry Development Authority (FDA) to provide evidence of additional funds to support five timber sales contracts but it failed to do so, the Due Diligence Committee noted in its report.

The Due Diligence Committee's report also indicated that TREE offered no evidence of financial capability.

"TREE had entered into an agreement with firm named Tropical Africa Business wherein the latter committed to provide US$1.0 million in equipment and spare parts. TREE has also entered into an agreement with a firm named Ningbo Jujin Investment Company Ltd. of the People's Republic of China wherein the latter committed to provide US$2.5 million in equipment and funds," the Committee pointed out.

But it said that these agreements provide an amount far short of the US$14 million required.
The Due Diligence Committee also observed that the agreement with Tropical Africa Business, along with the commitment of US$1 million seems to be flawed.

The Liberia Tree and Trading Company, a declared winner of category "C" of the Forest
Management Contracts with 85 percent also underwent due diligence and participated in the bidding process.

According the Due Diligence Report, the Liberia Tree and Trading Company owed government US$165,000 in back taxes for which the Ministry of Finance advised FDA not to enter into a contract with the company until the matter was cleared.

On the issue of technical capability, the Committee reported that the Liberia Tree and Trading Company holds no equipment, either owned or leased.

"In its business plan, the company indicated that it would lease all of its logging equipment from Logs & Lumber, a Ghanaian company and a parent of Eco Timbers. In discussion with the FDA team in May 2008, the firm indicated that the equipment would be leased directly from Eco Timbers," the report disclosed.

Additionally, the Due Diligence report noted that FDA requested for a copy of the lease agreement or other evidence of Eco Timbers' commitment to provide equipment along with evidence of Eco Timbers' control over the equipment that it proposes to lease.
Touching on the financial capability of the company, the committee found out that the company has a cash bank balance of US$0.1 million as of June 16, 2008, adding "unaudited financial statements shows net assets of US$0.3 million as of December 31, 2007."

"The business plan projected an investment of US$6 million, including equipment, to be made in the first five years of operation. This is to come from three sources: bank loan US$3 million; suppliers US$2.4 million and shareholders US$2.4 million," The Due Diligence Team said.
The FDA's Due Diligence Team in a discussion with the company on May 30, 2008, said it was informed that the capitalization plan was had changed and that a new investor in the firm, Ecotimbers, would lend the company US$6 million.

Of this amount, US$4 million would come from a loan from the Bank of Beirut to Ecotimbers, the Due Diligence Committee indicated in its report.

The winners of the Forest Management Contracts are yet to be announced by the Inter-Ministerial Concession Committee (IMCC).

When authorities at the Forestry Development Authority (FDA) were contacted, Public Relations Manager Anthony Varwen said all of the companies that participated in the bidding process demonstrated financial and technical capabilities.

Mr. Varwen told this paper that no company that did not provide evidence of their financial capabilities was given contract.

He said the Due Diligence Report is in the office of the FDA Managing Director John Woods and cannot be accessed.

Varwen disclosed three companies won the PFC bid but added that the FMC bidding process is still going on.

He noted that the due diligence report would be made public went the Inter-Ministerial Concession Committee (IMCC) approves it. He did not say when it would be approved.
Copyright © 2008 The NEWS.



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