Reporter

DRC not an easy environment, but Real Estate opportunities abound

THERE are a number of opportunities in the Mineral-rich Democratic Republic of Congo (DRC) real estate sector, but potential investors must ensure they have investigated thoroughly before committing huge resources.

Doing business in the DRC is difficult, with the country often considered to be one of the most challenging business environments in the world.

Despite a wealth of natural resources, years of corruption, mismanagement and conflict have left the country impoverished and there is still much work to be done to rebuild the DRC.

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In the World Bank’s Ease of Doing Business Survey for 2018, the DRC was ranked 184 out of 190 countries, reflecting the poor business environment that Investors are likely to encounter.

That being said, there are also many opportunities for property investors looking for a double digit returns over time despite challenges that faces the country.

DRC is the most populous country in the central African region and property developers expect its legal and political structures to synchronise eventually in order to build up the country’s real estate sector.

The country has large areas of arable land and is awaiting “big investments”.

With a population of more than 80 million which covers an area the size of western Europe, a projected GDP growth of 3.8% for 2019 and significant untapped minerals resources, the DRC certainly holds much potential.

Real estate market in the country is vast, especially for urban centres, like Kinshasa, Lubumbashi, Kisangani, Goma, Kolwezi, Bukavu and Matad.

Sustained population growth over the last thirty years and the changing socio-economic development led to a rapid development of Congolese towns and a strong demand relative to supply.

Currently, the sector is characterized by a very low number of property developers and the lack of institutions specializing in funding real estate projects.

Property stands out, in response to Government efforts to address the acute housing deficit, particularly among the urban populations in the cities of Kinshasa and Lubumbashi. However, the price of units (above US$ 25,000) is well above the affordability scale for a typical working lower middle income household in Kinshasa (about US$ 500).

DRC has a housing deficit of about 4 million units, while the annual housing requirement is close to 250,000 units. The housing requirement in Kinshasa alone, is estimated at about 140,000 units annually, according to the Centre for Affordable Housing Finance in Africa (CAHF) 2018 report.

Although the demand for affordable housing is evidently high, the few past and ongoing housing projects are skewed towards the needs of middle-income and wealthy individuals. These individuals earn above US$ 1,000, and constitute less than 10 percent of the population).

The dominant sectors of the Congolese economy are mining, agriculture, fishing and forestry. There is also some manufacturing, particularly of textiles, cement and wood products. The main centres of business are the capital, Kinshasa and Lubumbashi, in the mining district of Katanga.

africapropertynews.com

S.African Property Investors spend R3 billion in UK

South African Property groups are spreading their wings abroad as opportunities in their home market are few and far between.

It’s no secret that 2018 was a difficult year for SA local investors with most asset classes declining in value both locally and abroad. However, one asset class does stand out amongst the rest – SA’s listed property sector.

“The sector is wading off many challenges including a weak economy, a volatile rand and tenant struggles. And much of the sector is now offshore which is providing support to investors returns,” said Ortneil Kutama, Africa Property News Media Director.

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Brexit chaos is battering the UK property market, but SA investors with an appetite for volatility are snapping up real estate in the country.

They are lured by falling UK property prices on the back of a weak pound and looking for favourable returns over time.

According to UK building and project consultancy, Paragon, has advised South African investors on 29 deals with a combined value of R3.38 billion (£190m) in the past few years.

London has seen few large deals with South African investors in recent years, but Paragon has observed a significant uptick in inward investment from the country, driven by discounts on currency as the pound weakens.

Paragon’s joint managing director, John Munday, said in email statement that the trend looks set to continue. “There are always trophy asset hunters looking to make a mark in London, and that is an appealing approach for some. But we’re also seeing many South African investors being hungry for new opportunities and asset classes all across the UK and in every sector.”

“South African investors keep a relatively low profile in the UK, but they’re now looking much more open-mindedly at the whole UK market,” says Munday.

The listed property sector has grown almost six-fold to R600 billion over the last decade.

“The growth was largely fuelled by local property companies expanding abroad and they are likely to continue to make more money offshore than in their own backyards,” Kutama adds.

There has been a change in the thinking of the South African investor community towards offshore diversification in recent years.

“The sector has seen a dramatic shift offshore with about 46% of its value in overseas markets, including eastern and western Europe,“ says Kutama.

Eastern European-focused property stocks such as Nepi Rockastle, MAS Real Estate and EPP NV look set to reward investors in 2019 as they benefit from strong economic growth and improving rentals there.

These companies have exposure to the likes of Poland, Romania and other countries in central and Eastern Europe, which have strong property fundamentals.

The World Bank has projected that the Polish economy will grow about 3.9% in 2019 and 3.6% in 2020. It expects 3.5% and 3.1% from the Romanian economy in 2019 and 2020.

Source: Africanpropertynews.com

King’s dream of affordable housing is still unfulfilled

“We propose the development of a vastly increased supply of decent low and middle cost housing throughout the area.” — program of the Chicago Freedom Movement, by the Rev. Martin Luther King Jr., July 10, 1966.

More than 50 years after King wrote these words, with New Orleanians again demanding decent housing they can afford, the New Orleans City Council must start making it a reality.

When King arrived in Chicago in 1966, he found a city where African-Americans were living with little hope of escaping poverty caused mainly by a lack of decent affordable housing. In order to illuminate the conditions, King moved his family into a Chicago slum apartment, while rallying the community and demanding that City Hall commit to housing reforms. While marching with thousands of Chicagoans on a sweltering July day, King taped the housing reform demands to the City Hall door.

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Like Chicago, New Orleans is in the grips of an affordable housing crisis that has been building for many years. This crisis continues unabated with each new luxury development that fails to include any units affordable to the average worker. The lack of affordable housing is one of the biggest issues facing our city, and a recent poll revealed that 78 percent of residents feel the city must address it by mandating that all new developments include affordable units.

Considering that half of all New Orleans households are already cost burdened, paying 30 percent or more of their income for housing — with many paying more than half of their income on housing — time is running out.

It is the hardworking people and families that have called New Orleans home for many generations that are being priced out. African-Americans are largely responsible for the culture New Orleans sells to the world, but our neighborhoods are losing black people faster than any other group. Neighborhoods like Treme, Bywater, Mid-City and Freret have suffered dramatic drops in the black population, and many of these longtime residents are the teachers, hotel workers, musicians and culture bearers who make New Orleans one of the country’s most welcoming and unique cities.

A recent report from the Louisiana Association of United Ways pointed out that 53 percent of New Orleans households are living below the poverty line or struggling to pay their monthly bills, and the largest monthly cost is housing.

Danira Ford, a single mother with five children, knows what it’s like to struggle. Ford has lived most of her life in the Gentilly neighborhood, sends her children to the nearby Morris Jeff Community School, and wants to continue raising her family in New Orleans. Despite working multiple jobs, she can’t find housing she can afford, leaving her family of six to share a single bedroom in her mother’s house.

After several months of sharing a single room with her family, Ford has begun to feel that her only option is joining the many other families who have been priced out and left New Orleans to find housing and more opportunities for their families.

The New Orleans City Council can halt this exodus by passing the Smart Housing Mix ordinance. The ordinance would fight displacement and rising rents by ensuring that new developments include units that are affordable to the average resident. City Council has researched this proposal for many years, and in 2017 the City Planning Commission issued a study that concluded the Smart Housing Mix was critical for the city’s future and was necessary to preserve what makes New Orleans special.

When we reflect on Martin Luther King’s civil rights work, our thoughts are usually centered on his efforts to end segregation, fighting for voting rights, and his dream for a better world. But King knew that one of the bedrocks of civil rights was the right to equitable housing and opportunity, and his Chicago Freedom Movement eventually led to the passage of the Fair Housing Act.

Now is the time for action. We must continue to demand the City Council pass the Smart Housing Mix, because it will allow us all the freedom to continue calling New Orleans home.

Cashauna Hill is executive director of Greater New Orleans fair Housing Action Centre.

7 Lessons from New York’s New Affordable Housing Design Guide

When we think of public housing architecture in the United States, we often think of boxes: big, brick buildings without much aesthetic character. But the implications of standardized, florescent-lit high-rises can be far more than aesthetic for the people who live there. Geographer Rashad Shabazz, for one, recalls in his book spatializing Blackness how the housing project in Chicago where he grew up—replete with chain link fencing, video surveillance, and metal detectors—felt more like a prison than a home. Accounts of isolation, confinement, and poor maintenance are echoed by public housing residents nationwide.

But American public housing doesn’t have to be desolate. A new set of design standards from the New York City Public Design Commission (PDC)—in collaboration with The Fine Arts Federation of New York and the American Institute of Architects, New York Chapter —hopes to turn over a new leaf in affordable housing architecture.Released earlier this month, Designing New York: Quality Affordable Housing” discusses general best practices in planning affordable housing and provides case studies of successful affordable housing projects already completed in New York.While the document serves as “a reference for New York City agencies and their applicants seeking guidance on affordable housing design,” it’s written in language accessible to people outside of design professions and has been publicly released with the goal of empowering “citizens and community organizations to demand design excellence in affordable housing projects in their neighborhoods.”

The report comes six months after Mayor Bill de Blasio announced  that he would build and preserve 300,000 affordable housing units by 2026. His plan—which is an updated version of a 2014 plan set to be finished ahead of schedule—will “preserve the affordability of 180,000 units of existing apartments and build 120,000 new ones.”

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Architects designing those new units over the next few years will take cues from the design guide. But architects worldwide can learn from the document, too. Here are some key takeaways from Designing New York:

1. Be creative with massing and respectful with scale

Deviating from big-block high-rises that dominated American public housing for decades, Designing New York recommends breaking up massing within a building to allow variation in units and creativity within the zoning code. The Creston Avenue Residence in the Bronx uses unconventional massing to match neighborhood scale (mostly five-story apartments buildings) while maximizing the number of units offered. In that project by Magnusson Architecture & Planning,street frontages “align with adjacent older residences and echo their smaller scale, while the center portion, clad in metal panels, pulls back to create a generous covered entrance.”

2. Design with the neighborhood in mind by integrating absent services

When low-income neighborhoods lack supermarkets with healthy options and venues for physical activity (like parks and gyms), consciously-designed public housing can fill in some of these gaps to improve the health of building residents. At Arbor House in the Morrisania neighborhood of the Bronx, wide stairwells are designed with natural light to encourage use; likewise, an on-site hydroponic rooftop garden meets residents’ produce needs.

3. Don’t make affordable housing “look” like affordable housing

Too often, the divisions between public housing and market-rate housing are made clear by visually differentiated structures. When affordable housing is marked with pejorative architecture, residents can become stigmatized or ostracized from the broader neighborhood. Les Bluestone, an advocate of innovative affordable housing and co-founder of Blue Sea Development Company says, “The best role that design can play is to not define buildings as affordable housing. Anything that we can do to get away from that helps the community.”

4. Structural innovation can overcome a difficult site for the benefit of residents

In a city as built-out as New York, many new affordable housing projects occupy odd parcels of city land. Frost Street Apartments in Williamsburg, Brooklyn, for example, sits adjacent to the Brooklyn-Queens Expressway, a six-lane highway. In order to mitigate noise disturbance in the apartments, Curtis +Ginsberg Architects employed “high-performance windows and a heavy masonry and concrete structure.”

The Schermerhorn in Brooklyn’s Boerum Hill offered similarly difficult conditions, sitting atop two subway lines. According to Designing New York, “building…over the two subway lines that run below the site required a truss and cantilever structure that took up the majority of the construction budget.” The result of building on a difficult site, though, is 109 units for formerly homeless people and people living with HIV/AIDS.

5. Green building is about more than just sustainability

Reminiscent of the vernacular courtyard apartment, Navy Green employs varied building forms (townhouses and high rises of varying sizes) around a central courtyard. Residents, in turn, have access to fresh air, natural light, and green space outside their window, regardless of their unit’s location in the complex.

6. Design won’t solve everything

The Designing New York report offers a promising paradigm shift away from confining architecture and towards community-building architecture, but it’s important to remember, in all of this, that well-designed public housing will help, not solve New York City’s housing crisis. The city continues to struggle with its definition of affordability, which relies on skewed median incomes for the New York area. The Department of Housing Preservation and Development has also come under scrutiny this month for their policy on resident selection. And as low-income New York City residents are pushed out of their homes every day, even a substantial commitment from the city to build new units will likely be unable to keep pace with displacement.

7. Different cities (and countries) need their own design solutions

While we should admire New York City’s attempt to provide dignified housing for low-income residents, architectural history shows us that public housing can’t follow a one-size-fits-all model. If the success of Le Corbusier’s Unite d’ habitation in Marseille, France in contrast with the similar (but failed) Pruitt-Igoe Housing Project  in St. Louis, Missouri is any indication, different regions need different kinds of public housing. The Designing New York report is conscious of this fact, encouraging site-specific, resident-specific projects. Let’s remember that even if the Frost Street Apartments are great for Brooklyn, they shouldn’t be plopped down anywhere in the world. The lessons we learn from these projects’ attention to residential needs, however, should be broadly applied.

Source: archdaily.com

South Africans care more about their cars than their home loans-Report

In a study believed to be the first of its kind in South Africa, TransUnion, a leading global risk and information solutions provider, today revealed which debts consumers prioritise during times of financial stress. 
Contrary to conventional wisdom, people don’t always look to safeguard home loans; rather, they look to protect their automobiles, paying vehicle loans in preference over other forms of credit.
The research, which observed the payment behaviour of approximately 325 000 South African consumers, looked at borrowers with at least one of each of the three primary credit products: a credit card, a vehicle loan and a housing loan.

The study tracked them over time to see what happened when they were unable to meet all their credit commitments, and how they prioritised which obligations to pay above others. This study is important in better understanding the consumer thought process and the choices they make regarding their debt obligations during times of financial stress. 
 
Understanding the ‘payment hierarchy’
 
The payment hierarchy is a common term used in consumer lending and refers to the priorities that consumers place on different credit products when they are facing financial stress and don’t have enough money to pay all their obligations. It looks at which payments people prioritise and pay first, and which they place a lower priority on and pay last.
 
When faced with the choice of which debts to pay and which to miss between a popular set of credit products — credit cards, vehicle loans and housing loans — conventional wisdom may suggest the first product type to enter delinquency (i.e. the one consumers would miss a payment on first) would be a credit card, followed by a vehicle loan. 
 
Further, it might be expected that only in the most dire of circumstances would consumers stop paying housing loans, prioritising those payments above all other debt types. The rationale, so the conventional wisdom goes, is that missed payments on a card do not put any important collateral at risk, automobiles are critical for efficiently getting to daily activities, and of course the home is the centre of one’s family life and the most important asset a consumer can own.
 
However, the TransUnion study revealed that the most commonly seen hierarchy among this set of products is in fact different than conventional wisdom would suggest. Consumers generally place vehicle loan payments first, prioritising those payments ahead of home loans. Credit cards, as expected, are the product in this set that consumers prioritise last and are most likely to miss. 
These study findings do not constitute a recommendation of what choices a consumer in financial distress should make, but rather are observations and insights into the decisions they do make. 
Delinquency rates (one month or more in arrears) after 12 months for consumers who possess and are current on all three credit products at the beginning of the respective performance measurement period.
 
“It might feel counterintuitive that, for most struggling consumers, vehicle loans are prioritised over other prominent credit products such as mortgages,” said Carmen Williams, Director of Research and Consulting for TransUnion South Africa. 
 
“However, there are a number of important factors to consider. It’s not always about protecting your home; it might be the size of the payment required, access to other forms of credit and even what you feel the perceived consequences might be. Consumers and lenders alike often have to wrestle with these problems, and our study looks to shed light on some of the difficult decisions consumers sometimes have to make.”
 
Key findings
 
Cards came last: There are numerous potential reasons for this lower priority on credit cards: lesser perceived consequence (i.e. not forfeiting ownership of a car unlike with a vehicle loan), the availability of substitutes for smaller everyday spends (such as cash or digital payments if still available) or even the access to other sources of liquidity (such as personal loans or retail finance).
 
Vehicle loans prioritised over home loan payments: There are a number of potential reasons why vehicle loans sit above home loan payments in the payment hierarchy. In the majority of cases, the average vehicle loan has a lower monthly payment compared to a housing loan. Missing a mortgage payment would generally give the consumer more cash flow relief and enable them to meet other obligations. As well, there are many viable rental alternatives to home ownership; in contrast, public transportation is usually not an efficient alternative to owning an automobile.
 
The timing of any perceived consequence might also be a factor. Consumers likely recognise that a vehicle could be repossessed relatively quickly after missing just two or three payments, whereas eviction because of default on a home can often take many more months or even years. Finally, a vehicle may be the primary transport to work, or even looking for work, if suitable public transport options aren’t available, making continued access to a car critical to preserving a consumer’s source of income.
 
As part of this study, TransUnion also explored the payment priority among popular unsecured credit products, specifically credit cards, personal loans and retail store accounts. Unsecured products are typically used to finance small purchases and day-to-day living expenses. When looking at roughly 375,000 consumers with this basket of popular unsecured credit products, conventional wisdom again proved wrong. The assumption historically has been that consumers would base their payment hierarchy on the concept of future utility, prioritising credit cards over other forms of popular unsecured credit as a credit card would still be available for further use across other purchases, potentially with multiple merchants. Retail store cards would be next—again, because future utility exists (although only with a single merchant). Finally, personal loans would be last because the funds have already been received and spent, and the loan would be perceived to have no future utility.
 
However, the TransUnion study revealed that the most common unsecured credit hierarchy saw personal loans given the highest priority amongst consumers during times of financial stress. Next came credit cards, with retail cards at the bottom of the hierarchy.
 
Key findings for popular unsecured credit products:
 
Personal loans prioritised over other products: This may, in-part, be due to the prevalence of debit orders for personal loans which are fixed and are often a non-negotiable condition of the loan. Thus, the consumer is less likely to “choose” to pay their personal loan or not, but instead has the loan payment automatically debited, leaving them to make their payment choices among the remaining products.
Credit cards are paid ahead of retail store cards: Here the concept of future utility may in fact influence consumer choice, as paying their credit cards allows them more flexibility to make future purchases from a wide range of merchants compared to their retail store cards.
 
There are other likely reasons for the priority of personal loans in the unsecured product payment hierarchy. For example, personal loans have a fixed end date, and consumers can see a ‘light at the end of the tunnel’ in the near-term if they continue to meet their obligations, giving them relief from this one debt obligation. This contrasts with credit cards and retail store cards, which tend to have no set end date and could potentially continue indefinitely if consumers make only minimum payments on these obligations, and then charge up the remaining available credit in the next month.
 
Difficult Choices During Difficult Times
Williams concluded: “This study is not about delinquency. Rather, it is about choice and the consumer thought process during times of financial stress. When people miss a payment it is often because of significant life events – loss of a job, a relationship breakdown, illness or even other unexpected bills. They are not choosing whether they want to pay or not, but rather are making choices to maximize the benefit of the scarce funds they have available. The choices people have to make are often difficult, and our research gives a glimpse into some of the factors that are potentially important. 
 
“Lenders need to understand the choices that consumers make across their wallets and the interaction effects between different product types in order to inform their underwriting and risk management strategies. Payment hierarchies are extraordinarily complex and dynamic, and can be impacted by external drivers such as unemployment rates, income levels and home prices. As these drivers shift, so can the hierarchy – and the recent economic headwinds could certainly alter consumer priorities regarding their financial obligations. Lenders should always be actively evaluating, refining—and when necessary, redeveloping—their consumer mindset models, in order to anticipate and be able to quickly react when borrower or economic conditions change.”
Source: .iol.co.za

 

Lagos govt lifts bans on construction of filling stations, gas plants

The Lagos State Government on Monday said it had lifted the embargo on the grant of planning permit for the construction of petrol stations with immediate effect. The Commissioner for Physical Planning and Urban Development, Mr Rotimi Ogunleye, disclosed this at a news conference in Alausa, Ikeja.

He said the government had also approved the implementation of a reviewed guideline detailing the requirements to be met by operators seeking planning permits for filling stations and gas plants in the state.

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The ministry announced the ban on granting of permits for the construction of petrol stations. Ogunleye said the state government came up with the ban to ensure safe and orderly siting, operation and management of petrol stations and gas plants for the overall safety of residents.

The state government also placed embargo on the approval of gas plants due to the recurring fire outbreaks as a result of non-compliance with standard safety measures.

The commissioner said with the reviewed guidelines, investors intending to embark on developments of such nature and existing operators were directed to strictly comply with the provisions of the reviewed templates.

“Investors are enjoined to apply for planning information from the Ministry of Physical Planning and Urban Development before embarking on any development. This will allow them have first-hand information about the kind of development that can be done in a specific area of the state,” Ogunleye said.

Mortgage Warehouse Funding Limited: Providing Support To Nigeria’s Mortgage Sector

Tuesday, October 10th 2017 marked a remarkable milestone in the history of mortgage finance in Nigeria with the launch of the Mortgage Warehouse Funding Limited (MWFL); a Special Purpose Company set up with the sole objective of providing short-term local currency, competitively-priced funding to Mortgage Banks in a bid to enhance their mortgage origination capacity.

The Asset Backed Commercial Paper Conduit was incorporated in December 2014, and is initially sponsored by a group of 8 Member Mortgage Banks (MMBs); as mobilised by Mortgage Bankers Association of Nigeria (MBAN), as well as certain other carefully selected parties each of which bring a critical element to the success of the Company including: the Nigeria Mortgage Refinancing Company Plc. (NMRC) as Liquidity & Off-Take provider, CitiHomes Finance Company Limited (“CitiHomes”); a CBN-licensed financial institution as Program Manager, Lion’s Head Global Partners, London through its African Local Currency Bond Fund; as the Initial Subordinated Commercial Paper Subscribers, and Dunn Loren Merrifield Advisory Partners as Financial Adviser and Arranger.

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The activities of MWFL are aimed to complement those of NMRC in that whilst NMRC is licensed to provide long term matching funding and liquidity to the mortgage sector via secondary market refinancing from the bond market, MWFL will serve to provide short term/interim funding for mortgage origination financing to the Mortgage Banks. MWFL will provide this short-term financing, through the issuance of high-quality investment grade rated Senior and Subordinated Commercial Paper Notes under an initial N20Billion Naira Program currently undergoing registration at FMDQ OTC. The proceeds of which will be used to fund a percentage of its Member Mortgage Banks’ pipeline of pre-qualified NMRC conforming mortgage loans.

The MMBs may then from time to time apply for short-term funding from MWFL under the terms of a lending agreement executed between each MMB and MWFL to fund booked mortgages at origination closing. These mortgages are then allowed to season on the balance sheet of the mortgage bank for a minimum period of 6 months before they become eligible for refinancing by NMRC in accordance with the NMRC’s Master Purchase Refinancing and Servicing Agreement.

In attaining its primary objective of providing liquidity to its Member Mortgage Banks to originate NMRC conforming mortgages, a signing ceremony held on Thursday 28th September 2017 where the parties executed all necessary agreements. The highlight of the signing ceremony was the execution of the Liquidity Asset Purchase Agreement between NMRC and MWFL under which NMRC undertakes to refinance NMRC UUS conforming mortgages pre-financed by MWFL.

Introducing Mortgage Warehouse Funding Limited during the launch event in Abuja, Director OFISD at Central Bank of Nigeria Mrs. Tokunbo Martins commended that “Mortgage Warehouse Funding Limited is a welcome idea. It is expected to address the drought of funds available for mortgage origination.

In addition, Head Nigeria Housing Finance Program, CBN, Mr. Adedeji Adesemoye said “the introduction of MWFL into the mortgage eco-system is a laudable development that will help both the mortgage banks and the construction industry”.

According to Mr. Niyi Akinlusi, President MBAN and Director on the Boards of both NMRC and MWFL, “Mortgage Warehouse Funding Limited is expected to significantly increase the fire-power available to mortgage banks for their daily operations”.

With the successful completion of this landmark issue, MWFL will connect the Nigerian mortgage market currently plagued with low deposits level and high cost of alternative sources of funds, to the money market by efficiently inter-mediating short-term funds from the money markets towards the provision of housing finance in Nigeria.

Global Credit Rating Company, an internationally recognised and fully accredited rating agency accorded the indicative ratings of ‘A1(NG)(sf)’ to the Senior Notes of the ABCP, and an ‘A1-(NG)(sf)’ to the Subordinated Notes of the ABCP both with positive outlooks. The ratings underscore the confidence reposed on the credit enhancement of the Transaction.

With its very high investment grade ratings, affirming the underlying credit strength of the CPs, MWFL Papers are expected to be competitively priced at relatively tight spreads above comparable treasury bills, introducing a new asset class that will diversify the portfolio of money market investors.

In a statement confirming the synergy of member stakeholders in MWFL, the Chairman Mortgage Warehouse Funding Limited (“MWFL”), Mr. Sonnie Ayere, said “the launch of this conduit will see us begin to de-risk construction finance as MWFL becomes the funding source of the off-take often required by commercial banks to fund developers”.

Dunn Loren Merrifield Advisory Partners is the Transaction Structure Adviser and Sole Arranger. The company is a member of the Dunn Loren Merrifield Group, a full-service investment house with its headquarters in Lagos and is generally seen as an intermediary that links key sectors of the Nigerian economy such as Micro finance, SMEs and housing to the capital markets.

Source: globalbankingandfinance.com

Tesla’s entry into Nigeria’s power sector unsettles DisCos

Since the story broke that American electric car maker Tesla is planning entry into Nigeria’s power sector, electricity distribution companies (DisCos) have been in a panic mood over what they perceive as threat to their revenue.

“I understand the story has sent panic into the market since it broke,” Chuks Nwani, an energy lawyer, said by phone on Saturday. “The DisCos are taking the threat really seriously.”
Last week, DisCos held meetings on how the industry will respond to the perceived threat from Tesla. The mood at these conversations has been sombre and serious, according to two people who were present in the meetings.

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A key concern is that since DisCos do not have exclusivity over franchise areas, Tesla and any other competitors can easily lure away their choice customers, especially as they seek to focus on industrial customers who pay higher electricity bills.

Babatunde Fashola, minister of Power, Works and Housing, and the Nigerian Electricity Regulatory Commission (NERC) have maintained that DisCos do not have exclusivity over their franchise areas, a situation that creates room for competition in the sector.

This is why projects like the Sura Market Independent Power Project and the Ariaria Market IPP have proceeded despite lawsuits by the DisCos. The Enugu DisCo took Ariaria Independent Energy Distribution Network Limited (AIEDN) to court in June last year, saying it encroached and trespassed on its distribution licensed coverage area by illegally constructing distribution lines without a licence and without the DisCo’s authorisation.

The Nigerian Electricity Regulatory Commission (NERC), the sector regulator, responded by issuing AIEDN a licence the next day.

Also, last year, in Lagos, Eko DisCo bared its fangs against a private company, PIPP LVI Distribution Limited, directing it to remove all the lines it laid on its network and cease soliciting further business from its customers. The directive didn’t stop the company’s work.
Under the Rural Electrification Agency’s Energising Economies programme, markets including Ariaria in Abia State, Sura and Iponri in Lagos and Sabon Gari in Kano have been taken away from the DisCos and handed to private investors who can provide 24-hour power supply at a tariff that is cost-reflective.

Curiously, the same regulator has also prevented the DisCos from pricing electricity sold to the public at market prices.
DisCos are also worried that Tesla’s superior product offering and focus on industrial customers could wipe off a significant chunk of their revenue. The company is said to be mulling providing batteries with a capacity of between 1Kilowatt hour to 1MW, capable of powering an industrial complex or an industrial estate, or between 10,000 to 100,000 homes.
When contacted, Tesla’s Nigerian office referred this paper to the corporation’s US press office. Robert Pierce, an energy communications representative at Tesla, said the company does not have a comment at this time “but we’ll update you if that changes”.

But a source close to Tesla said DisCos have been making enquiries from the company about its plan after the story was published. The company’s Nigerian office has been fielding calls from DisCos, many of the calls borne out of both curiosity and paranoia. This has forced Tesla to reassure them that it was not necessarily coming to deepen their woes but to offer benefits to underserved customers.
Many Nigerians are, however, excited about the prospect of Tesla’s entry into the country’s broken electricity sector.

Many see it as a breath of fresh air as can be deduced from engagements with the story on social media networks. Many also expressed fears about the business environment capable of forcing the company out of Nigeria even as it did Richard Branson.
Analysts say a positive for the power sector is that Tesla’s entry may just provide the right push needed to compel the DisCos to do actual work on improving their distribution systems and get better at collecting electricity bills.

Between October and December last year, Nigeria’s 11 electricity distribution companies collected from consumers only 65 percent of the value of electricity sold but remitted back to other operators only 33 percent of what they collected, according to the third quarter report released by NERC.

In monetary terms, total billing to electricity consumers by the 11 DisCos was N172.9 billion, but only a total collection of N106.7 billion, representing 65.5 percent of billing, was recorded.

10 projects that will shape Africa’s energy sector in 2019

After a year of rebound and recovery, Africa’s old and new hydrocarbons markets have an opportunity to further entrench the continent’s position as the world’s hottest oil and gas frontier in 2019. However, the new year also brings a new set of dynamics and challenges set to influence the future of the industry, from presidential elections to megaprojects developments, amidst intensifying international competition.

New African frontiers opening up

Independents are leading the way in exploring and opening new frontiers across Africa. This year will be key for the advancement of new exploration and production development projects from West to East Africa. Developments to watch notably include Senegal’s SNE field development, where FEED works are ongoing and a final investment decision (FID) is expected by Woodside Energy and Cairn Energy this year; Niger’s Amdigh oilfield development, where Savannah Petroleum’s $5m early production scheme is set to start anytime soon; and the opening up of Kenya’s South Lokichar Basin by Tullow Oil, where FID is also expected before year end amidst rising tensions with the Turkana local community.

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A year to confirm Africa as a global exploration hotspot

Ongoing bidding rounds in key existing and new African hydrocarbons markets will tell if Africa further confirms its position as the world’s new exploration hotspot and manages to attract necessary investment in its oil and gas acreages.

Amongst well-established African producers, OPEC members Gabon and Congo-Brazzaville each have ongoing bidding rounds. Gabon’s 12th shallow and deep-water licensing round is set to close in April 2019 and Congo-Brazzaville’s License round phase II in June 2019.  With both countries struggling to implement their new Hydrocarbons Codes, the success of these rounds will tell if investors have been convinced by policy reforms developed over the past two years.

Two bigger African producers and also OPEC members, Nigeria and Angola, are set to launch landmark and out-of-the-ordinary bidding rounds this year. Nigeria will auction its gas flare sites under the Nigerian Gas Flare Commercialisation Programme, likely to happen after the February general election, and Angola will hold its Marginal Fields Bidding Round, result of a new May 2018 policy enacted by President Lourenço, and to be launched at the Africa Oil & Power conference in Luanda in June 2019. With the Nigerian Petroleum Industry Bill yet to be signed and the ink still fresh on Angola’s new policy regime, both rounds will also be key in assessing investors’ interest for both countries’ business environments.

Also attracting interest is the newest and arguably one of the upcoming entrants – Ghana – holding its first formal licensing round set to close in May 2019 which has reportedly got the attention of 16 oil companies, including majors ExxonMobil, BP, Total and ENI. As a hopeful new East African offshore frontier, Madagascar is also putting 44 concessions on offer until May 2019, none of which has ever been tendered or explored before. For a country without any major oil discovery to date, the ongoing license round is a wager test.

Africa’s struggling FLNG industry

After the start of commercial operations at Golar LNG’s Hilli Episeyo FLNG vessel in Cameroon in June 2018, hopes were high that Equatorial Guinea would soon move forward with its own Fortuna FLNG project, set to be Africa’s first deep-water FLNG development. While Fortuna was to be game changing for the gas industry of Equatorial Guinea and the rest of the continent, the development of the $2 billion project has stalled due to a lack of financing. And the clock has been ticking since.

The lack of progress on this plan has been so slow that operator Ophir Energy has been denied the extension of its license to operate block R (as of January 2019), which contains the giant Fortuna gas discovery. While Equatorial Guinea’s FLNG aspirations look more uncertain than ever, 2019 will tell if the country can find the right partners to put the project back on Africa’s FLNG map.

Meanwhile, new entrants in Africa’s hydrocarbons stage are making remarkable advances towards the development of their own FLNG industry. On December 21st last year, BP finally announced its FID for phase 1 of the cross-border Greater Tortue Ahmeyim development between Senegal and Mauritania, which involves the installation of a 2.5MTPA FLNG facility. It became the third African FLNG project to reach FID after Cameroon’s 2.4MTPA Hilli Episeyo and Mozambique’s 3.4MTPA Coral South FLNG.

Mega projects on the move

Africa’s come back on the global oil and gas map is not only due to the vast natural resources found in its soil and waters, but also to the continent being home to mega energy projects set to transform the future of the industry.

On the upstream side, the recent inter-governmental cooperation agreement between Senegal and Mauritania, and BP’s FID on its cross-border Greater Tortue Ahmeyim development, bodes well for the future of West Africa’s hydrocarbons industry. The project aims at extracting the 15Tcf of gas estimated to be held in the Tortue gas field, located at a depth of 2,850 metres. However, the ability of both Senegal and Mauritania to work out their differences to ensure a more sustainable development of their offshore reserves and facilities around the MSGBC Basin is a factor to watch out for.

African mega gas projects are not the sole property of the continent’s West coast, with Mozambique moving forward with two landmark projects putting the Southern African nation on the global LNG map. Following the launch of the Coral South FLNG project by ENI in June 2017, a FID is now expected in the coming months for the Anardarko-led Mozambique LNG project, an onshore LNG development initially consisting of two LNG trains totaling 12.88MTPA to export the gas extracted from the offshore Area 1, estimated to contain a whooping 75Tcf.

Sub-Saharan Africa’s biggest petroleum producers, Nigeria, is also moving forward with massive oil development projects in 2019. Last year already saw the launch of Total’s $3.3 billion Egina FPSO in Nigeria, where production officially started in the first days of 2019 and is set to peak at 200,000 bopd. FID is now expected on Shell’s Bonga Southwest offshore field in Nigeria early this year, a multi billion-dollars development whose production is expected to reach 180,000 bopd.

International contenders and pretenders

As Africa strengthens its position at the centre of global transformations, it is increasingly becoming the playground for international actors willing to benefit from the continent’s vast resources.

While China has asserted its position of a contender in the continent, will new continental dynamics lead the Asian giant to change its investment strategy or portfolio? With Russia’s intentions on the continent becoming clearer and clearer, will the first Russia-Africa Summit this year translate into more concrete Russian deals across the continent? At the same time, will the US’ “Prosper Africa” initiative launched in December 2018 be able to counter both rising international competition and declining US influence on the continent?

A complex energy diplomacy dilemma for OPEC in Africa

With a majority of its members made up of African nations since the joining of the Republic of Congo in June 2018, OPEC’s evolving relationship with the continent as it strives to manage the global supply glut will be requiring skillful diplomatic ingenuity.

On one side, Africa’s biggest producers and OPEC members Algeria, Libya, Nigeria, Angola and Congo-Brazzaville, are striving to boost their domestic output, which makes it harder and harder for the Organisation to negotiate its production cuts.

On the other side, the continent is also home to a flurry of upcoming petroleum producers like Senegal, Kenya or Uganda, or old players making a comeback like South Sudan, some of them part of OPEC’s Declaration of Cooperation, whose upcoming or increasing output adds another layer of complexity to the formulation of OPEC’s global oil prices management strategy.

An increasing African output from OPEC and non-OPEC member countries only complicates OPEC’s maneuver capabilities and increases its dilemma of both providing a stable pricing environment conducive to investments, while avoiding a worsening of the supply glut that would push prices further down.

Africa’s biggest petroleum producers casts their ballots

Amongst the series of elections happening in the continent this year, from Senegal to Mozambique, none will be more important for the African oil sector than that of Nigeria this February. The Nigerian presidential election is set to shape the future of the industry, not only because Nigeria is Africa’s biggest oil & gas producer, but because what happens in Nigeria impacts the rest of the subcontinent one way or the other. While both Muhammadu Buhari, seeking re-election, and his ally turned rival Atiku Abubakar have committed to the signing of the Nigerian Petroleum Industry Bill, the ability of the future President to get his office in order and get the bill passed quickly will heavily influence investments within Nigeria’s hydrocarbons sector for years to come.

North, Algeria and Libya are also entering an election year, with the 2019 Libyan general election set for the first half of the year, and Algeria’s for April. Both countries are on a transformation path. Libyan authorities plan to more than double the country’s output to 2.1 million bopd by 2021, providing politics doesn’t tamper hydrocarbons governance and the work of the National Oil Company. With Muammar Gaddafi’s son Saif al-Islam Gaddafi set to stand for election and the country still divided between West and East, maintaining the stability required by investors will prove challenging.

In Algeria, where a wave of reform is shaking the entire hydrocarbons sector, elections are expected to maintain a relative status-quo, at least politically speaking. The country’s national oil company, Sonatrach, has launched an ambitious transformation strategy that will see it investing $56bn over the next four years and internationalising its operations across major global energy markets. 2019 could even see the state-owned giant and Africa’s biggest company further expand south of the Sahara.

Angola’s steady road to reforms

Since taking office in the summer of 2017, Angolan President João Lourenço has been implementing a bullish reformist agenda which is drastically transforming the governance of the country’s oil & gas sector. Angola is reforming fast, but will market forces allow changes to happen at that pace and yield the results that the government is looking for?

While international investors seem to think so, with Total and BP signing major agreements to boost their Angolan operations over the past few months, 2019 will tell if the international oil industry is being convinced of Angola’s return as a competitive African frontier or not.

To showcase the work being done by Sonangol and the Angolan government to generate more investment in the country’s oil & gas industry, Angola is backing up an international conference being organised by Africa Oil & Power in Luanda on June 4-6, 2019, where it will be launching the Angolan Marginal Field Bidding Round. This will be the first official investment roadshow organised in Angola under the current administration, and one that is set to unveil a new set of reforms and investment commitments.

South Sudan’s march to peace

The major progression in South Sudan, and one on which the entire economy relies, is that of the peace accords. The Sudanese and South Sudanese authorities have time and again demonstrated their commitment to the peace process, which has remained peaceful for the most part. However, will peace deals translate into investment promises and money being invested into the South Sudanese economy this year? Some signals point to that direction, with South Africa’s Central Energy Fund committing $1 billion to South Sudan late last year, but markets are still skeptics and observers will remain pragmatics and wait to see how the peaceful transition is managed and how oil production resumes before making any concrete moves.

A year to improve market access for East African producers

With Uganda set to join the club of African petroleum producers by the early 2020s, efforts are on the way to develop adequate infrastructure for the evacuation of oil that will be produced from the Lake Albert Basin. The project seemed to be positively moving forward when Uganda and Tanzania exchanged the inter-governmental agreement for the 1,443km East African Crude Oil Pipeline in May 2017. However, the partners in the pipeline’s construction, French major Total, China’s CNOOC and Tullow Oil, are yet to make a final investment decision on the project. Meanwhile, the Host Government Agreements are to be signed this January, but delays in concluding the pipeline’s financial deal have already pushed back Uganda’s oil production ambitions from 2020 to 2021. The pipeline is crucial for the further integration of the East African community and to set a positive record of joint planning, financing and implementation of landmark energy projects in the region.

Source: African Energy Chamber

Environment minister commends biosafety agency on implementation of mandate

Minister of Environment, Surveyor Suleiman Hassan Zarma, has commended the National Bio-safety Management Agency (NBMA) on its ability to properly implement its mandate.

The minister gave the commendation when he visited the agency on a familiarisation tour in Abuja.

The minister however urged the agency not to relent in sensitizing the public to distinguish between its role of regulating for safety and the promotion of the technology, saying that the public is most times confused on the role of the NBMA.

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He also said that the agency needed to be supported and encouraged in view of its regulatory activities.

Zarma promised that the Ministry of Environment would continue to ensure that the NBMA executes its responsibilities as contained in the Act that sets up the agency.

In his presentation, the Director General/Chief Executive Officer of the Agency, Dr, Rufus Ebegba, briefed the minister on the milestones of the agency since inception, noting that one of the greatest challenges facing the agency is the opinion that the agency was established to stop Genetically Modified Organisms (GMOs). Hence what ever it does otherwise is heavily criticised, lamented the DG.

Dr Ebegba however stated that, contrary to the views that the NBMA was established to stop GMOs, the agency is rather established to ensure safety of products making sure that they do not cause harm to the environment and humans.

“One of the greatest challenges facing us is the fact that people think we were established to stop GMOs. Unregulated GMOs are bound to be abused. That is why NBMA was established to ensure safety,” Ebegba stated.

He also highlighted funding as a major drawback for the agency as the budgetary allocation is grossly inadequate to take care of its needs, adding that the agency is blessed with capable professionals and dedicated staff.

The DG/CEO took the minister on a tour of the agency’s GMO Detection and Analysis Laboratory and other offices of the organisation.

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