NJ: Ayuk: Underneath Coronavirus panic lies opportunity for African oil producers

NJ Ayuk

Sometimes it is easy to forget how interconnected human lives across the globe have become. Perhaps we no longer talk as much about globalisation as we used to in the 1990s because it is no longer an issue to be discussed or protested against, it is simply the reality that surrounds us. And there is no cruder evidence of that than the Coronavirus.

Despite the fact that the virus hasn’t yet affected African nations in any way as seriously as other regions of the world, a fact the World Health Organisation is still unable to explain, forecasts already indicated that just through reduced demand for African exports, the virus was expected to wipe at least $4 billion in revenue from the continent’s economy. Most of that was simply because China in particular, and Asia and Europe in general, were reducing oil and gas consumption dramatically as transport and economic activities came to a standstill in light of the epidemic that already forced several dozens of millions of people to be put under quarantine.

Last week, news reports indicated that oil traders in Africa were unable to find buyers for fifty-five Nigerian oil cargoes as global demand crashed. By last Friday morning, the virus had wiped the equivalent of $5 trillion in value from the global stock markets. That’s two and a half times the GDP of the whole African continent.

And all that was before OPEC+’s Friday meeting in Vienna. Wasn’t that one surprising?

I believe it is safe to say that few people could have expected this outcome. After all, for the last three and a half years, the world, and the oil industry in particular, had learned to trust the alliance of OPEC countries with Russia and other oil producers to work together to stabilise the markets and guarantee a sustainable price for the barrel of crude.

Through their decision to cut down oil production to address reduced demand and balance out the effect of the US shale play, all together, they were keeping 1.7 million barrels of oil per day away from the market, a landmark decision of cooperation like we had never seen in history. Perhaps also because of its novelty, of its width and because it was dependent on the will and cooperation of so many, it also fell victim to the infestation this virus has brought.

The Saudi-led consortium of nations was proposing a combined further cut of 1.5 million barrels per day to continue to match the decline in global demand. The Russia-led group was not going to go further than 600,000. The conclusion… no new cuts at all and no renewal of the previous cuts. The OPEC+ alliance that saved the industry from collapse in 2016 has, at least for the moment, come to an end. All bets are off. At the end of April, when the current agreement ends, all restrictions will be lifted and the world is bracing for an oil flood.

The markets have already factored that in, with the Brent and the WTI registering its biggest daily crash since the beginning of the first Gulf War. While oil seems to have rebounded slightly, it will take time to make up for Monday’s 25% crash. That is, if the recovery is anywhere in sight, since Saudi Arabia announced it was ramping up production and selling its oil discounted by as much as $8 per barrel, on a barrel priced at little more than $30.

In all honesty, the situation looks bleak. If Saudi Arabia and Russia do go on having a price war, a $20 barrel is possible, if not probable.

But what does this mean for Africa?

Several African petroleum and energy ministers were in Vienna last Friday, both as members of OPEC and as members of APPO. Shortly before the announcement on the fall of the agreement, they had decided to strengthen cooperation between African oil producers, promote synergies, intra-African trading, and knowledge exchange. Surely, we need that more than ever.

For the moment, however, there is no reason to panic. Surely, things might get worse before they get better, as the world battles this rapidly spreading virus. And surely, some oil-dependent African nations will suffer with reduced revenue. Angola’s state budget, for instance, was designed for an oil price of $55, not $35. But we have survived the oil price crisis of 2014, and we will survive this one too. Further, most African producers have learned from the past experience and have adjusted themselves to respond to price crashes. The progressive economic diversification the continent has witnessed in recent years will also contribute to minimise the impact of this situation. Yes, final investment decisions might be slightly delayed until the situation stabilises, but they will come in due time.

So what’s next?

If 2020 is showing itself challenging for African energy, 2021 will be a year of opportunity, but for that to happen, we have to start adapting now, laying down the policies that will allow us to take advantage of the future opportunities. It is in moments of crisis that true leaders have the opportunity to shine.

While it is difficult to predict the future, there are a few deductions and inductions we can try to make with some certainty.

One, is that neither Russia nor Saudi Arabia want a low oil price and there is a limit to how long they are willing to sustain it. No one gains from it and if anyone has the capacity and funds to sustain it for a longer period of time, it is Saudi Arabia. So, it is not really a price war, since it can’t really be a war if you already know the winner at the head start. Already, Russia has suggested it might be open to negotiate coordinated cuts within OPEC+ during the group’s next meeting in May/June.

What seems likely that will happen, is that the first to suffer from this will be American shale producers. This sector was already finding it hard to finance itself in recent years but continued to unbalance the market with its rapid response times to price fluctuations. These producers are highly leveraged, and it is likely that most will go bust in the present situation. This is something Russia and Saudi Arabia tried to do back in 2015/2016. While it did not succeed at the time, it might have better chances now.

Further, in three months’ time, at the time of the next OPEC+ meeting, the virus situation might also be very different. This week, president Xi Jinping visited Wuhan, the epicentre of the epidemic, for the first time since the beginning of the outbreak, in a clear demonstration of a strong response to a rapidly evolving situation that seems to be stabilising. China itself is an extremely leveraged economy and cannot afford to slow down for much longer. It can be expected that demand in the country will start rising again in the foreseeable future. If that happens in a scenario when the US shale sector is no longer able to respond, it might just be that the price will climb higher than it was before the virus, and with Saudi Arabia securing for itself a much larger slice of the global marketplace. Again, things will get worse before they get better, but they will certainly get better.

So, for African nations, this is the time to position ourselves correctly, and that will require close attention to international developments and close cooperation, to be able to take advantage of new opportunities. The African Energy Chamber will be instrumental in that, but so will be the African members of OPEC. The time to show statesmanship and stay close to Saudi Arabia and the decision-making table is now. To grow Africa’s relevance on the international oil stage by showing level-headedness and cooperation in the face of a global crisis. If we take that route, we will come out of this stronger than ever.

NJ Ayuk is Executive Chairman of the African Energy Chamber, CEO of pan-African corporate law conglomerate Centurion Law Group, and the author of several books about the oil and gas industry in Africa, including Billions at Play: The Future of African Energy and Doing Deals.

Source: NJ: Ayuk: Underneath Coronavirus panic lies opportunity for African oil producers



The novel coronavirus disease (COVID-19) outbreak, recently declared a pandemic by the World Health Organisation, has taken the world by surprise. The good news is that tremendous scientific and technological advances have permitted scientists to understand a lot about this virus in a short amount of time.

Within just two months of the first case, the causative virus has been identified, its genetic makeup has been determined, and detection methods have been optimised. Scientists have also found that there is more than one strain circulating.

Despite these rapid advances, there is still significant uncertainty. Scientists don’t yet fully understand its transmission route, although person-to-person transmission, through inhalation of droplets in the air, is the most common mode. Another uncertainty is its low detection rate, especially with mild or asymptomatic cases. A third is how weather could affect transmission.

Currently, Africa has very few cases of COVID-19 compared with most other parts of the world. The highest number of cases has been reported in Egypt (currently 126 cases). It remains unclear why this is so. But the trend has generated several kinds of reactions, such as doubts around the slow spread despite the weak health systems in most of the countries, and some attributing the low spread to a low level of urbanisation.

Other factors being cited include the fact that cases are more recent, giving countries more time to prepare, as well as a lack of testing capability.

There is also speculation that the virus has not spread because it cannot thrive in warmer regions, like much of sub-Saharan Africa.

The environment and respiratory virus transmission

Among the several environmental factors that influence the survival and spread of respiratory viral infections, air temperature plays a crucial role. Cold weather makes the respiratory system sensitive to infections. This is why people tend to suffer from respiratory infections during cold winter months. In tropical climates, influenza and respiratory viruses are transmitted more during the cold rainy seasons.

Despite the uncertainties surrounding its spread, the SARS-CoV-2 virus may be following this pattern.

Other members of the coronavirus family have displayed a certain degree of sensitivity to weather patterns. For instance, cases of the Severe Acute Respiratory Syndrome (SARS) were 10 times higher in lower temperatures than higher ones.

However, the effect of air temperature is also related to other factors, such as relative humidity as these viruses prefer low humidity.

Also, the Middle East Respiratory Syndrome (MERS) coronavirus was stable in air at low temperatures which could favour its spread. Despite this, the virus did not observe a seasonal trend but rather occurred sporadically. Other factors, such as animal (camel-to-human) transmission and weakened immune systems, also favoured its spread.

Temperature and SARS-CoV-2

A look at the temperature data of the most affected countries outside China – South Korea, Italy, Iran and Spain – shows that the mean monthly temperatures between January and March of 2020 range between 6 and 12 degrees Celsius.

In sub-Saharan Africa, most countries that have recorded cases of COVID-19 – such as South Africa, Nigeria, Senegal, Togo, Cameroon and Benin – had mean monthly temperatures of 20 to 32 degrees Celsius in this same period. Meanwhile, Algeria and Egypt – North African countries that have seen cases – had monthly temperatures between 11 and 17 degrees Celsius.

Therefore, previous coronaviruses spread more during the colder winter months. Also, there are marked temperature differences between the most affected (colder) and least affected countries (warmer) in the COVID-19 pandemic.

But this pattern alone cannot fully explain the current low number of cases in affected African countries.

The first reason is that following the onset of the outbreak in December in China, measures were taken to prevent the transportation of the virus to other places outside China. This allowed many countries to prepare for any new cases. Secondly, the cases in the African countries are recent, and the first affected persons have been quarantined. Thirdly, many countries do not have adequate capability to test for the virus.

These factors, together with the higher temperatures, could contribute to the apparent lower spread.

African countries need to prepare more

Now that the virus has made its way into Africa, countries on the continent need to be more prepared for greater action to contain the virus, especially if it follows a seasonal pattern.

For example, the peak circulation of flu in South Africa is in the winter season between April and July. In Senegal, the peak season is in the rainy season, from July to October. Many other African countries experience these peaks during the cold rainy season. This could mean that the preparedness of most African countries may soon be tested when these seasons come, especially as many more countries are confirming imported cases into the continent.

African countries need to strengthen their capacity in terms of identifying new cases. Health-care facilities and personnel need to be well equipped to manage identified cases. The general public needs to be sensitised on how to go about getting medical attention if they suspect any signs or symptoms. Personal and household hygiene practices using detergents, such as bleach, need to be encouraged to prevent possible environmental transmission.

The Conversation

Akebe Luther King Abia is affiliated with the Antimicrobial Research Unit, University of KwaZulu-Natal. He is also an Aspen New Voices Fellow, Class of 2020.

Source: COVID-19 in Africa: fewer cases so far, and more preparation needed



Coronavirus will hit
African economies hard

By Richard Li While the number of COVID-19 cases in China is on the decline, there has been a drastic increase globally and various governments are scrambling to put together contingency plans to contain the coronavirus spread within their respective territories. The immediate fallout of this viral outbreak is the slowing down of global economic activities. To make matters worse, failing to control and contain this coronavirus can potentially lead to a global recession.

As for Africa, there are now at least 99 confirmed cases in nine countries with Egypt having the most cases, according the World Health Organisation (WHO) data, as of March 10th. While some African countries have suspended flights from China and blocked/put in quarantine travellers from there, most of the imported cases seem to be coming from elsewhere. Unfortunately, with this outbreak, the African continent is being hit by a double whammy with demand and supply shocks, that will definitely impede the recovery of the larger economies in the short term. Even if the number of COVID-19 cases in Africa is still relatively low, the impact on African economies should already be felt by now.

COVID-19 impact on the global outlook

The main finance news headlines are currently being monopolised by some of the major consequences of the coronavirus outbreak, like Brent crude prices crashing by about 24% to hit below $35 on March 9th as well as the American stock market index, the Dow Jones Industrial Average, slumping by more than 2,000 points and down by about 20% since its February 12th closing peak. However, since 2017, the global economy was already on a steady decline with major economies like China, Europe and Japan slowly decelerating. Even the American economy is also slowing down, after being boosted by the tax cuts from the Trump administration in 2018. Now with the spread of the coronavirus, the global economic outlook is looking grim and this is indeed not good news for the African continent.

Both the World Bank and the International Monetary Fund (IMF) are revising downward their global growth estimates. As a result, the African continent will not be spared and will definitely be hit hard if the COVID-19 outbreak eventually becomes a pandemic. Besides China, all other major economies that are Africa’s major trade partners, are not in any better shape. In Asia, the Japanese economy shrank by 7.1% in the fourth quarter of 2019 and is on the brink of a recession, whereas South Korea is not only trying to stimulate its economy with nearly $10 billion, but also battling a major outbreak of COVID-19 within its territory. Even growth in India, a major economic partner of Africa, decelerated to stagnate at around 5%.

As for the European Union (EU), its economy is stalling and risks falling into recession with its top three economies – Germany, France and Italy – stagnating and barely growing. In the last quarter of 2019, Germany barely grew while both France and Italy contracted. Adding on to its economic woes, Europe is experiencing a rapid increase of coronavirus cases and Italy is now under lockdown. For the United States (US), the Federal Reserve cut interest rates three times in 2019, 25 basis points each time. In addition, even if the US central bank did an emergency rate cut of 50 basis points at the beginning of this month to prevent an economic slowdown, the financial markets are expecting more drastic cuts. As IMF chief Kristalina Georgieva warned last October, the global economy is experiencing a synchronised slowdown. Making matters worse with COVID-19, a global recession may even happen. With no doubt, African economies will also be sucked into this maelstrom of global events, that will affect them negatively.

African exports affected by global slowdown

China is the largest trade partner of the African continent. The latest economic data from China shows that its purchasing managers’ index (PMI) for manufacturing and services sectors collapsed to 35.7 and 26.5 respectively in February (a PMI reading below 50 indicates contraction). Moreover, due to supply chain disruptions with the coronavirus outbreak, the Chinese exports fell by a significant 17.2% over the first two months of this year. Chinese imports also fell by 4%. In the short term, China is facing a slump in its growth and is also struggling to rev up its economic engine. As a consequence, Africa will face a twin shock of a declining demand for its commodities used in Chinese manufacturing as well as more expensive Chinese products.

With the Chinese government extending the Lunar New Year holidays as well as locking down the Hubei province and many other affected areas, it has created a domino effect within the global value chains. China is now a global manufacturing hub and the repercussions of the extended manufacturing shutdown are estimated to reach a $50 billion drop in global exports in February, according to the analysis by the United Nations Conference on Trade and Development (UNCTAD). The top three most affected economies are the EU, the US and Japan with an estimated output decline of $15.6 billion, $5.8 billion and $5.2 billion respectively. This means that the negative economic spiral affecting global manufacturing and trade will eventually impinge on the overall global growth, business confidence and investment. With the global slowdown, demand for commodities will drop and the financial markets are already re-pricing downward commodity prices. Being mainly a commodities exporter, the African continent will be hard hit. Except for gold, prices for most hard and soft commodities have declined over the last two months.

Ebola economic impact and now COVID-19

Besides the economic costs, Africa will have to incur significant costs in dealing with a potential COVID-19 outbreak within the continent. An important amount of funding will be required to deal directly with a public health crisis in terms of mobilising doctors, healthcare workers as well as needing the necessary medical infrastructure, including lots of medical and safety equipment. Africa is indeed familiar with deadly viral outbreaks with the ebola virus. The biggest ebola outbreak in 2014-2016 affected mainly three west African countries – Guinea, Liberia and Sierra Leone – infecting 28,610 people and causing 11,308 casualties, according to the WHO. Besides the human costs, the direct economic impact on these three countries was estimated to be $2.8 billion by the World Bank. With ebola in the headlines, the whole African continent also suffered from intangible and incalculable losses with Africa being perceived as a high risk investment destination.

As for COVID-19, there is no doubt that the virus will continue on spreading further in Africa and globally. While African countries should remain vigilant and not fall in panic mode, they must already start taking all precautionary measures to detect and isolate suspected cases, especially at border areas. Doing so, Africa will not only be able to avoid major coronavirus outbreaks, but also mitigate any potential economic losses.

Richard Li is a Partner with STEEL Advisory Partners, a management consulting firm that serves clients across industries. Having spent his working career in strategy consulting, he worked with various global clients and covers themes such as corporate strategy, transformation, digital innovation and risk management. He is an avid observer of world affairs and emerging markets, particularly the African continent.

Source: Coronavirus will hit African economies hard


Accra, Africa, AfroFuture, Angola, Cairo, Cape Town, Casablanca, Durban, Egypt, Ghana, Johannesburg, Kenya, Lagos, Luanda, Morocco, Nairobi, Nigeria, Pretoria, South Africa


Africa’s 10 wealthiest cities:

1. Johannesburg (South Africa): $276 billion


2. ​Cape Town (South Africa): $155 billion

3. Cairo (Egypt): $140 billion

4. Lagos (Nigeria): $108 billion

5. Durban (South Africa): $55 billion

6. Nairobi (Kenya): $54 billion

7. Luanda (Angola): $49 billion

8. Pretoria (South Africa): $48 billion

9. Casablanca (Morocco): $42 billion

10. Accra (Ghana): $38 billion

source: https://bigthink.com/strange-maps/richest-cities-in-africa


Africa, AfroFuture, Egypt, Morocco, South Africa, Tunisia
  1. According to projections by the United Nations World Populations Division, one fifth of the worlds population will be African by 2030. In simpler terms 1 in every 5 people walking the earth in 2030 will be African.

    Let that sink in…

  2. Since 2000 at least half of the world’s fastest growing economies are located in Africa. To boot, Africa’s most advanced economies —Egypt, Morocco, South Africa, and Tunisia— are diversified. Services, such as banking, telecom, and retailing, have accounted for more than 70% of GDP growth in these countries over the past decade.

  3. 93% of Africans have access to the mobile economy. The overwhelming majority of Africans today have access to a mobile phone service. According to research by Afro Barometer, mobile phone networks have grown faster than any other area of core infrastructure.

  4. Africa has the worlds fastest growing middle class. Currently only 5% of Africans pass the “Fried-Chicken Test” (can afford to spend $10 on a fried chicken lunch). In 2008, 16 million African households had incomes above $20,000 a year—a level that enabled them to buy houses, cars, appliances, and branded products. Another 27 million households earned $10,000 to $20,000. In addition, 41 million households reported incomes of $5,000 to $10,000—the level at which families start spending more than half their income on nonfood items. By 2020 the total number of households in all three segments will reach 128 million, which should make Africa one of the fastest-growing consumer markets of this decade.

  5. 25% of the worlds workforce will reside in Africa by 2050. The number of people in Africa in the 25-59 year age bracket – classed as the main working-age population – is projected to reach one billion by 2050. This implies the proportion of the world’s working-age people who are based in Africa will double – and they’ll make up almost a quarter of the world’s potential workforce.

The World Economic Forum has stated it best: The Future Is African.

Africa, South Africa

In recent times, South Africa has become one of the global best-emerging markets. The country has witnessed significant improvements due to a combination of advanced first-world financial markets and a fast-paced economy. As a result, existing and new products or services are gaining market entry.

As part of efforts to record a meaningful international growth in her economy, South Africa has provided a unique investment environment and entrepreneurial motivation programs that would, unavoidably, bring about global opportunities and competitive advantages. Some of these processes are captured in the National Development Plan (NDP) that aims to eradicate poverty by 2030 by expanding economic opportunities by ensuring exports diversification, encouraging market entry for new and existing businesses, implementing reforms to reduce the cost of doing business, and motivating innovation and entrepreneurship.

Why Existing and New Businesses Should Take Advantage of Market Entry?

With the international growth the country is enjoying, now is the best time for new and existing businesses to gain market entry. And here are some of the reasons to come on board:

  1. Construction and Improvements of Infrastructure

From a forward-looking perspective, the Government has committed to upgrading existing infrastructure and building new ones as evident in the construction of ports, railway systems, electricity plants, hospitals, and dams.

  1. Diversification of the Economy

South Africa’s manufacturing sector has been diversified to allow different types of business to gain market entry and grow stronger. The major sectors include metal fabrication, agro-processing, automotive, clothing and textile, pharmaceuticals, leather and manufacturing, capital and rail transport equipment, advanced manufacturing companies among others.

  1. Introduction of Incentives

That the country is gaining international growth is not enough to achieve a significant change in the economy of South Africa. The government offers a wide range of incentive schemes aimed at stimulating and encouraging market entry by various products and services. The incentive can be in the form of tax relief or provision of funding.

  1. Stable Exchange Rates

One of the factors that discourage market entry by new businesses is the volatile foreign exchange rate. However, the Rand- Dollar exchange rate has remained less volatile and tends to be predictable in the medium time. Thus, the differences in the cost of doing business will not be staggering.

  1. Developing Market Opportunities

South Africa is considered to be the stepping stone and a link for creating market opportunities in Sub-Saharan Africa. With this development, more suppliers will come up. A conservative market bias will also be eradicated and the door will be opened to new investors and businesses.

If you are a new startup or an existing business, South Africa is one of the best countries to take your business to. It is cheaper to run your business and expand your reach. Maximize the potential of your business by making a market entry in South Africa.