Thursday, March 28, 2024

Fintech regulation in South Africa


Financial regulation

Regulatory bodies

Which bodies regulate the provision of fintech products and services?

There are currently no fintech product and services-specific laws or regulatory bodies.

As will become apparent from the following questions, however, certain fintech products and services may fall within the scope and ambit of general financial services regulatory frameworks, and so will be subject to the supervision of regulatory bodies charged with the monitoring of those frameworks. As such, the FSCA, the Prudential Authority (PA), the National Credit Regulator (NCR), the SARB and the FIC may each have regulatory oversight in respect of various aspects of the offering of fintech products and services.

To the extent that competition law issues may arise, the Competition Act, No. 89 of 1998 (as amended) (the Competition Act) applies to all economic activity within, or having an effect within, South Africa and, as such, the provisions of the Competition Act may have bearing on the provision of fintech products and services.

Regulated activities

Which activities trigger a licensing requirement in your jurisdiction?

Financial services

The Financial Advisory and Intermediary Services Act 2002 (FAIS) requires any person who seeks to proactively market or provide financial services to clients or investors, whether from within South Africa or on a cross-border basis from offshore, as a regular feature of such person’s business, to be appropriately authorised under FAIS (as a financial services provider or, under certain circumstances, as a representative). The term ‘financial services’, for the purposes of FAIS, comprises ‘advice’ and ‘intermediary services’ in relation to ‘financial products’ (which term is broadly defined to include, among others, shares, derivatives, money-market instruments, bonds, participatory interests in collective investment schemes and deposits).

Services that are currently subject to licensing under FAIS (as ‘intermediary services’) include (but are not limited to): arranging investment deals; making arrangements with a view to investment transactions; and dealing in investments as agent. Acting as an agent or intermediary in relation to forex investments by local clients or investors is also licensable under FAIS. At present, dealing in investments or financial products as principal is not licensable under FAIS, although an amendment to the definition of an ‘intermediary service’, brought about in 2018 (but which is not yet in force), is likely to subject principal dealing in investments with local clients to FAIS licensing requirements in future.

Services that are subject to licensing under FAIS (as ‘advice’) include (but are not limited to) advising on investments and advising on forex trades.

In terms of FAIS, a FAIS-unlicensed financial services provider may not promote or market its business or capabilities to any South African-resident person, whether onshore in South Africa or from offshore on a cross-border basis.

FAIS falls under the purview of the FSCA.

OTC derivatives

As regards OTC derivatives as investment instruments, regulations under South Africa’s Financial Markets Act 2012 (FMA Regulations) provide that a person who, as a regular feature of business and transacting as principal, originates, issues, sells or makes a market in an OTC derivative must be registered as an ‘OTC derivative provider’.

The FMA Regulations fall under the purview of the FSCA.

Credit and lending activities

The provision of loans or any form of credit is regulated under South African law by the provisions of the National Credit Act 2005 (NCA), which requires lenders in respect of whose credit agreements the NCA applies, to formally register as ‘credit providers’ with South Africa’s National Credit Regulator (NCR). The NCA generally applies to every credit agreement between parties dealing at arm’s length and made within, or having an effect in, South Africa.

The NCA does provide for certain general exemptions from its application (NCA Exemptions). In this regard, the NCA will not apply to:

  • A credit agreement in respect of which the credit receiver (borrower) is a juristic or legal person (as opposed to a natural person or individual), whose net asset value or annual turnover, together with the combined net asset value or annual turnover of all persons related to that juristic-person credit receiver, equals or exceeds 1 million rand at the time of conclusion of the credit agreement.
  • A ‘large’ credit agreement (eg, a credit transaction, in respect of which the principal debt under that transaction falls at or exceeds 250,000 rand, where the consumer for the purposes of the NCA is a juristic person having a net asset value or annual turnover falling below 1 million rand).
  • A local applicant credit receiver can formally apply to the Ministry of Trade and Industry in South Africa for a credit agreement that the credit receiver seeks to enter into with an offshore (foreign) credit provider to be formally exempt from the application of the NCA.

Lending will be subject to the NCA, unless an NCA Exemption applies. While there is no specific licensing regime for factoring or invoice discounting, where the NCA applies to the underlying agreements in respect of which the factoring or discounting takes place, the person acquiring the rights to the debts under those underlying agreements will also need to be licensed under the NCA. This is because the NCA includes in its definition of a ‘credit provider’ a person who acquires the rights of a credit provider under an NCA-regulated credit agreement after that agreement has been entered into.

Secondary market loan trading will be subject to the NCA under circumstances where the original loan being traded was subject to the NCA (in other words, where an NCA Exemption applied to the original loan, secondary market trading in respect of that loan will also be exempt from the NCA).

The NCA falls under the purview of the NCR.

Banking and deposit-taking activities

The Banks Act 1990 (Banks Act) requires any person seeking to conduct ‘the business of a bank’ in South Africa to be registered as a local bank or to be licensed as a local branch of a foreign banking institution. Two of the key activities included in the concept of the business of a bank are the marketing or solicitation of deposits (which would include the promotion of bank deposit accounts) and the acceptance of deposits, among others.

The Banks Act falls under the purview of the PA, from a prudential perspective, and the FSCA, from a market conduct perspective. Licensing under the Banks Act is considered by the PA.

Payment services

The National Payment Systems Act 1998 (NPSA) provides for the management, administration, operation, regulation and supervision of payment, clearing and settlement systems in South Africa. It also provides for the establishment of the Payments Association of South Africa (PASA), as the body mandated by the South African Reserve Bank to organise, manage and regulate the participation of its members in the payment system.

The NPSA makes provision for various role players (both bank and non-bank) in the payment system, and requires the role players seeking to participate in the payment system to be formally authorised in order to do so.

The NPSA falls under the purview of the SARB and PASA.

Trading in currencies

Where forex trading involves the buying and selling of foreign currency, such activities can be performed only by Authorised Dealers in South Africa (generally, commercial banks in South Africa that have been appointed as such by the SARB) or, to a limited extent, by Authorised Dealers with Limited Authority (ADLAs).

This falls under the purview of the SARB, in terms of South Africa’s legislated exchange control regime.

Consumer lending

Is consumer lending regulated in your jurisdiction?

See question 4 under ‘Credit and lending activities’, which applies equally here.

Secondary market loan trading

Are there restrictions on trading loans in the secondary market in your jurisdiction?

See question 4 under ‘Credit and lending activities’.

Secondary market loan trading will be subject to the NCA under circumstances where the original loan being traded was subject to the NCA (in other words, where an NCA Exemption applied to the original loan, secondary market trading in respect of that loan will also be exempt from the NCA).

Collective investment schemes

Describe the regulatory regime for collective investment schemes and whether fintech companies providing alternative finance products or services would fall within its scope.

The solicitation of investments in foreign collective investment schemes (CISs) from local investors (including institutional investors) is governed by the Collective Investment Scheme Control Act 45 of 2002 (CISCA), together with the regulations and notices promulgated under CISCA.

In terms of CISCA, no person may market, or solicit investments in, a foreign CIS unless that foreign CIS has itself been formally approved in accordance with CISCA’s requirements by the FSCA. This prohibition is strictly enforced (such that even the naming of an unapproved foreign CIS to a South African prospect of any classification is strictly prohibited). Breach of the prohibition constitutes a criminal offence.

The definition of a CIS includes an open-ended investment company, and provides for a scheme where members of the public are invited to invest money or other assets in a portfolio where investors hold participatory interests (any interest, shares, units, etc) and share pro rata in terms of their investment in the risks and benefits of the scheme.

The applicability (or not) of CISCA turns entirely on whether the definition of a CIS under CISCA is met. As such, certain fintech product offerings could trigger the application of CISCA (eg, crowdfunding offerings could trigger CISCA under circumstances where investments are pooled in a portfolio as defined under CISCA).

Alternative investment funds

Are managers of alternative investment funds regulated?

Alternative investment funds themselves, including private equity funds (but excluding hedge funds, which have been declared to be CISs), are not currently specifically regulated in South Africa.

Such investment funds could trigger the application of CISCA, however (as no express carve-out for them is provided for in CISCA), and so AIFs should be carefully structured and marketed discriminatively to selected (sophisticated) local investors. The application (or not) of CISCA to an AIF needs to be considered on a case-by-case basis.

Where CISCA is triggered, the manager or operator of a foreign CIS will be indirectly regulated by the FSCA.

Where CISCA does not apply to an AIF, the manager of the AIF is likely to be caught by the licensing provisions of FAIS, in that investments in AIFs constitute ‘financial products’ for the purposes of FAIS.

Peer-to-peer and marketplace lending

Describe any specific regulation of peer-to-peer or marketplace lending in your jurisdiction.

There is no specific regulation of peer-to-peer or marketplace lending in South Africa. Activities in relation to peer-to-peer lending, however, are likely to trigger licensing or regulatory requirements under South Africa’s general financial services regulatory frameworks (eg, the NCA, the Banks Act, CISCA and/or the NPSA), where the offering entails engagement in regulated activities or regulated ancillary activities.

In the main, peer-to-peer or marketplace lending will be regulated under the NCA, unless an NCA Exemption applies. See question 4 under ‘Credit and lending activities’ for an explanation of the NCA’s scope.

The offering and structure of the service would also generally need to be assessed for compliance with the Banks Act, CISCA and/or the NPSA in order to ensure that these frameworks are not inadvertently breached (ie, to ensure that the offering does not involve the business of a bank, the pooling of investments or the processing of payments in the regulated space).

Crowdfunding

Describe any specific regulation of crowdfunding in your jurisdiction.

Crowdfunding is not specifically regulated in South Africa. We note, however, that crowdfunding activities may be subject to existing regulation under South Africa’s general financial services regulatory frameworks. For example, the activities may fall within the ambit of:

  • the Banks Act, where activities could be seen as deposit-taking (which constitutes the business of a bank);
  • the Companies Act, where the business in question is a company and the crowdfunding activities amount to offers to the public of securities, which would necessitate compliance with certain requirements including the filing of a Companies Act-compliant prospectus;
  • CISCA, where investments are pooled;
  • FAIS, where the crowdfunding platform can be seen to provide an ‘intermediary service’ or ‘advice’ in relation to a financial instrument or product;
  • the Financial Markets Act 2012, where the online platform can be seen to operate as an exchange, matching investors with issuers or product providers; and
  • the NCA, where crowdfunding is based on a lending model (note that the intermediation of loans is not regulated per se).

Invoice trading

Describe any specific regulation of invoice trading in your jurisdiction.

While there is no specific licensing regime for invoice discounting or trading per se, where the NCA applies to the underlying agreements in respect of which the discounting or trading takes place, the person acquiring the rights to the debts under those underlying agreements will also need to be licensed under the NCA. This is because the NCA includes in its definition of a ‘credit provider’ a person who acquires the rights of a credit provider under an NCA-regulated credit agreement after that agreement has been entered into.

Payment services

Are payment services regulated in your jurisdiction?

Yes. The NPSA provides for the management, administration, operation, regulation and supervision of payment, clearing and settlement systems in South Africa. It also provides for the establishment of PASA, as the body mandated by the SARB to organise, manage and regulate the participation of its members in the payment system.

The National Payment System Department of the SARB has formally clarified that the South African payment system encompasses the entire payment process from a payer to a beneficiary and ‘. . . includes all the tools, systems, mechanisms, institutions, agreements, procedures, rules or laws applied or utilised to effect payment’.

The NPSA makes provision for various role players (both bank and non-bank) in the payment system, and requires the role players seeking to participate in the payment system to be formally authorised in order to do so. Fintech companies that seek to provide ‘mobile money’-type products are likely to be subject to licensing under one of the roles provided for under the NPSA. Electronic money is also regulated in South Africa (albeit under a Position Paper published by the SARB), and only a registered South African bank is permitted to issue e-money. This requirement often means that fintech companies will need to partner with a bank in order to provide certain services within South Africa.

Open banking

Are there any laws or regulations introduced to promote competition that require financial institutions to make customer or product data available to third parties?

No.

Insurance products

Do fintech companies that sell or market insurance products in your jurisdiction need to be regulated?

Yes. Insurers and underwriters are required to be licensed under the Insurance Act 2017, while persons seeking to broker or market insurance products on behalf of an insurer or underwriter require authorisation under FAIS (as insurance products constitute financial products under FAIS and broking insurance constitutes an intermediary services.

Insurers and underwriters are supervised, in the main, by the PA (with the FSCA supervising insurers on market conduct). Insurance brokers (regulated under FAIS) are supervised by the FSCA.

Credit references

Are there any restrictions on providing credit references or credit information services in your jurisdiction?

Yes. These services are likely to trigger registration requirements under the NCA, as being the services of a credit bureau.

Although not expressed in the NCA itself, from a practical perspective, the NCR permits persons seeking to pull credit information from existing registered credit bureaux (as opposed to maintaining that information themselves, on their own database) to register as ‘reseller credit bureaux’. Reseller credit bureaux are subject to a lighter-touch regulatory regime than that to which credit bureaux are subject, and are exempt from compliance with certain obligations imposed by the NCA on credit bureaux proper.

Can AfCFTA solve Africa’s energy challenge?

By Rodwyn Peterson, Head of Litigation Chibesakunda & Co, DLA Piper Africa member firm in Zambia


 The African Continental Free Trade Area agreement (AfCFTA), launched on March 21, 2018, creates the largest free trade area in the world and is designed to create a single market for goods and services across the continent. AfCFTA aims to boost intra-African trade by 52% by 2020, and the removal of non-tariff barriers will make it more attractive to invest in African economies.

While the developed nations of the world enjoy secure, uninterrupted power supplies using significant levels of renewable energy, many African countries experience acute power shortages related to high demand and underutilization of renewable resources.  This is because most African countries have a weak and unstable electrical network system, i.e. a grid whose power generation cannot meet demand, leading to network component overload and continual or persistent power outages or even severe network damage.

Weak and unstable grids are characterized by complete loss of power (power blackouts), partial loss of power (power brownouts) where the voltage level is below the minimum level specified for the system and rolling blackouts – intentionally engineered electrical power outages caused by insufficient available sources to meet prevailing demand for electricity.

In many African countries, including Zambia, South Africa, Cameroon, Nigeria and the Democratic Republic of Congo, rolling blackouts have become a common daily occurrence, resulting from the inadequate electrical supply and ever-expanding demand, coupled with an aging electricity supply infrastructure, non-diversification of energy sources, and overloading of the existing electricity system. The importance of constant regular electricity supply cannot be overstated.

The UN’s Sustainable Development Goals5 state that energy is a vital, integrated element of infrastructure that is critical for reducing poverty and achieving many of the other 16 Sustainable Development Goals. With up to 90% of national electricity generation across Africa coming from hydropower it is clear that current electricity generation methods will not fulfill this goal.

This challenge is compounded by climate change, with analysts projecting a warming trend,particularly in the inland subtropics characterized by frequent and extreme heat waves, increasing aridity and changes in rainfall, with a particularly pronounced decline in southern Africa. This serious shortage of electricity in most African countries creates a need for the introduction of power generation from alternative sources. The challenge of electricity supply is being tackled head on and several high-value projects are underway across the continent. Examples include:

  • The Noor Solar Complex in Morocco;
  • The rehabilitation of the Cahora Bassa hydro powerplant in Mozambique;
  • A EUR620 million wind farm with 365 turbines in northern Kenya;
  • And the Batoka Gorge Hydroelectric power project between Zambia and Zimbabwe.10

All these energy projects have an intra-African connection. For instance, the Cahora Bassa plant exports a significant amount of its production to South Africa, Botswana and Zambia. The African Development Bank served as lead arranger for EUR436 million in senior credit facilities towards the Kenyan wind farm’s cost of EUR623 million. The Batoka Gorge Hydroelectric power station is expected to generate 2,400 MW of electricity to be shared equally between Zambia and Zimbabwe.

Intra-African investment in the age of AfCFTA

AfCFTA guarantees potential investors access to information, as parties to the agreement must publish their laws, regulations, procedures and administrative rulings of general application as well as any other commitments under an international agreement relating to any trade matter covered by the agreement. It is hoped that publishing this information will make the interstate market conditions more transparent and appealing. Part II of the Protocol on Trade in Goods under the AfCFTA provides for Non-Discrimination, which is

divided into three parts: the Most Favored Nation (MFN) Treatment, the National Treatment (NT) and the Special and Differential Treatment. The MFN Treatment requires a country to provide any concessions, privileges, or immunities granted in a trade agreement to one nation to all other member countries, for example if a nation reduces tariffs by 10% for one nation, the MFN clause states that all members will have tariffs cut by 10% into that nation.

The NT focuses on treating foreigners and locals equally. Imported and locally produced goods should be treated equally, at least after the foreign goods have entered the market. This should apply to foreign and domestic services, trademarks, copyrights and patents. In conforming with the objective of the AfCFTA to ensure comprehensive and mutually beneficial trade in goods, state parties must provide flexibilities to other state parties at different levels of economic development or that have individualspecificities as recognized by other state parties.

Part III of the Protocol on Goods provides for liberalization of trade, which looks at aspects such as import duties, general elimination of quantitative restrictions, export duties, elimination of non-tariff barriers and rules of origin; all of which are aimed at making it easier and cheaper to trade goods and services, including energy, within Africa.

Under the AfCFTA, expanded markets and free movement of labor, goods, services, capital and people should promote economic diversification, structural transformation, technological development and quality job creation. The full implementation of the AfCFTA will eliminate all tariffs and will be a game-changer for energy producers across the continent, creating a knock-on impact in multiple sectors of the economy.

The AfCFTA has been signed by 54 out of 55 AU Member States, with only Eritrea yet to join. Gabon and Equatorial Guinea recently deposited their instruments of ratification, bringing the number of countries that have ratified the agreement to 27. There is an undisputed link between global economic growth and energy demand. To grow and prosper, African nations will need more reliable and affordable energy. Free trade and strong investment protections support energy security by encouraging access to diverse energy supplies and production sufficient to meet growing demand. Trade policies and protections also enable effective supply chains and the efficient movement of capital, people, information and all products.

Free Trade Agreements are one of the best ways to open up markets by enhancing rules of trade law, reducing tariff and non-tariff barriers and by creating a more stable and transparent trading and investment environment.  The free flow of commerce is essential to maximizing global economic growth and prosperity, and even has implications for national security. By enabling energy supplies to flow more smoothly between nations, the AFCFTA will, in theory at least, make is possible for suppliers to meet the energy need efficiently and affordably.

But there are several obstacles to the AfCFTA’s success. Key among them is the fact that critical parts of the agreement have yet to be finalized before countries commence trading under the AfCFTA on July 1, 2020. These outstanding sections include details on schedules of tariff concessions and services commitments, and policies around investment, intellectual property and competition. Until these sections are concluded and the AfCTA is truly fully operational, investors may likely find that they have to trade on pre-AfCTA terms.

Investment promotion and protection strengthen successful regional integration arrangements. However, unlike the common practice of protecting foreign investments by building investment protective rights into investment treaties and agreements, the AfCFTA does not guarantee individual investors any rights as regards their investments. This means that while it will be easier to get into a country to trade, an investor must look to multilateral or bilateral agreements that coexist with the AfCTA, such as the Investment Agreement for COMESA Common Investment Area and the ECOWASSupplementary Act on Investments, for investment protection.

AfCFTA opens Africa up to African investors. Its potential to change Africa by making energy cheaper is remarkable but its promise of continental success comes with the risk of investing without inbuilt investor protections. While trade in the AfCFTA age will be easy and bring benefits aplenty for both investors and consumers, investors will still have to look outside of AfCFTA for protection against unlawful state action.

Source: DLA Piper Africa Connected Issue 3: Energy in Africa – Innovation, Investment and Risk

Leveraging private investment in power transmission infrastructure in West Africa

By Joseph Lam, Legal Director DLA Piper


Earlier this year, the Economic Community of West African States (ECOWAS) presented its updated Master Plan for Regional Power Generation and Transmission Infrastructure 2019–2033 (the Master Plan). The Master Plan is part of ECOWAS’s drive to develop the West Africa Power Pool (WAPP) – a cooperative power pooling mechanism for integrating national power system operations into a unified electricity market in the West African region. Like in the rest of sub-Saharan Africa, a vast proportion of the population in West Africa is without access to electricity despite the region’s ample natural resources.

The lack of reliable and affordable electricity has hindered economic development and job creation. Given the small size of the power markets in most of the ECOWAS countries, increasing regional integration can lower the average cost of supply through economies of scale. It can also promote diversification of electricity sources, including renewables, enhancing system reliability and grid stability. This will however require significant investment in a stable and interconnected transmission network with minimal transmission losses that can support load increase, more flexible cross-border trade flows and the intermittent output of renewable power sources.

The Master Plan has identified 28 priority transmission line projects with a total length of approximately 22,932 km at an estimated cost of USD10.48 billion. The majority of them are cross-border interconnectors although some are national projects with regional significance. In this article I will focus on interconnection infrastructure. Government ownership (including through public utilities) has been the dominant approach to financing interconnection projects in Africa. Poor financial health of national utility companies in general and fiscal constraints of most governments in the region limit their ability to invest, even in financially viable projects. Private

involvement in these projects could help ease the financing constraints and bring experience in project implementation and operation as well as better organizational and financial discipline.

This article will look at the possible models for private investment in transmission infrastructure in the region, identify some potential challenges and consider how they may be addressed.

Investment models

 In the context of cross-border interconnections, private investment may take the form of merchant investment or independent power transmission (IPT). Neither model has been adopted in Africa to date. Most interconnection projects in the world have used the merchant investment model. Under this model, the merchant investors build and operate a transmission line. The owner of the line sets the terms and conditions for its access and generates revenue based on the amount of energy flowing along the line and the price differences between the two ends of the line.

Access to merchant lines is usually proprietary rather than open to all transmission users. Many power utility companies in sub-Saharan Africa are vertically integrated, state-owned monopolies. In many cases, their tariffs are set at artificially low levels due to the income level of their customers and political considerations. The resulting lack of flexibility and dynamics in the relevant wholesale electricity markets could undermine the basis of the business case and revenue model for merchant investment which is closely linked to the projected price differentials between two markets.

Furthermore, viability of a merchant line often depends on its ability to maintain a monopolistic position to serve as a link between two markets based on proprietary access. This model does not seem consistent with the stated

aim for the West Africa Power Pool, which is, to develop an integrated unified electricity market.

Independent Power Transmission (IPT)

Another model is to finance, build and maintain the transmission line by way of independent power transmission

(IPT). The IPT model has been identified by the World Bank as the “business model best suited to the conditions in Africa. In essence, it involves the government (or the state-owned utility) tendering a long-term contract whereby the IPT (the winning bidder) will be responsible for building and operating a transmission line in exchange for

contractually defined payments dependent upon the availability of the line. IPT projects have been adopted in many countries, though mostly in the context of in-country transmission. Adopting the model for interconnection between countries is however likely to be more complex, not least due to the need to coordinate between the governments of the relevant countries.

In West Africa, the Côte d’Ivoire-Liberia-Sierra Leone-Guinea (CLSG) interconnection project may point to a way forward. This USD508.2 million project involves the construction of a high voltage (225 kV) transmission line of over 1,300 km and associated substations connecting the four participating countries’ energy systems into the

WAPP. The project is implemented through a regional transmission company (TRANSCO CLSG) which is responsible for the financing, construction, ownership and operation of the project. TRANSCO CLSG is a special purpose

vehicle (SPV) owned equally by the national utilities of the CLSG countries.

To encourage its usage, the CLSG transmission line will have an open access policy. Power purchase agreements have been signed between Côte d’Ivoire’s national utility and those of the other three countries. Each of them has

entered into a transmission service agreement with TRANSCO CLSG. The transmission tariff is set using the postage-stamp methodology  so that transmission costs are effectively charged to the power purchasers based on their relative shares of the trade through the transmission line. To mitigate against the risk of funding shortfall

due to low trading volumes, the shareholders of TRANSCO CLSG undertake to pay for any shortfall from trading revenue.

This pricing methodology both ensures cost recovery and facilitates trade through the transmission line. The CLSG project is currently under construction and is expected to be commissioned in late 2019 or early 2020. While the CLSG project structure does not involve any private ownership of the project company, it is conceivable that a similar structure may be adopted to implement the IPT model, for example by replacing government-owned shareholders of the transmission SPV with private sector project sponsors.

This was in part the structure adopted by the Central American Electricity Interconnection System (SIEPAC) which had been taken into account in the design of the CLSG project.4 In SIEPAC, the transmission company, EPR, owns the 1,793 km interconnector (230 kV) which links the power grids of six Central American countries. EPR is owned

by eight national utilities or transmission companies together with a private company (ENDESA of Spain) which is responsible for managing EPR. During the project design stage, the option of relying entirely on private sector investment was considered. However, it was decided that there may not be sufficient interest from the private sector for such structure due to the perceived project risks and natural monopoly nature of transmission.

However, there seems no reason why, through proper risk management and with adequate financial incentives, such a structure cannot be adopted with entirely private ownership. The challenges faced by the power sector in sub-Saharan Africa are well documented. There are two challenges in particular to highlight in the context of

introducing private investment in interconnection projects, especially IPTs: the regulatory framework and financial viability.

Regulatory Framework

 As reported in the Master Plan, in most of the countries in West Africa, the electricity sector remains vertically integrated with monopoly networks. Although full-unbundling is not a necessary pre-condition for IPT, existing legislation and regulation will need to reviewed to enable the IPT to operate alongside the national utility. The grid code will need to be established or revised to provide operating procedures and principles. In the context of an interconnection project, this will need to be done for each country it connects and could be cumbersome and result in a long development lead time.

This issue is highlighted in the ongoing North Core Interconnector Project (a 330 kV transmission line connecting Nigeria, Niger, Benin and Burkina Faso). According to the Master Plan, the SPV structure adopted in the CLSG project had originally been envisaged also for the North Core project but was not adopted in the end in view of the considerable delay that necessary adjustments to the national legal frameworks would cause.

Financial Viability

 The CLSG project above has provided an example of how transmission tariffs may be set to meet any minimum revenue requirement. Investors will however need confidence that the contractual payments will be received from the transmission line users, which are likely to be national utilities. The general poor financial health of the national utilities in the region is likely to be a concern in this regard. It is instructive in this context to note that many countries in the region have experience in addressing this same issue in independent power projects (IPP) which may provide valuable lessons for developing IPT projects.

For example, possible credit support may be provided through the use of escrow accounts to prioritize payments to private sector market participants. Where this is insufficient, governments may provide sovereign guarantees

(or other government support) for payment obligations to IPTs. Additional security may also be provided by development finance institutions (DFIs). Last but not least – political commitment On a more general note, getting

any large-scale infrastructure project off the ground will require political support, government commitment and strong public governance.

For transmission projects, these factors are key in enabling inter-country negotiations, prioritization of regional projects, effective deployment of state resources and coordination of stakeholders such as regulators and utilities. This will require national governments to take a long-term view on the benefit that these projects will bring through regional energy trade, in terms of energy security, economic efficiency and ultimately the welfare and quality of life of their electorates.

Source: DLA Piper Africa Connected Issue 3: Energy in Africa – Innovation, Investment and Risk

Cannabis: Growing High on our List of Priorities

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By Martha Smit, Fasken partner in the Life Sciences Group & Roxanne Gilbert, Fasken candidate attorney


A lot of attention has been given to the changes in the South African legislative framework in so far as it relates to Cannabis. Of extreme importance is an understanding of these changes and being able to differentiate between cultivation for private use and the sale of CBD products on the open market.

RECREATIONAL USE

  1. Constitutional Court Judgment

On 18 September 2018, the Constitutional Court ruled in favour of Cannabis use by South Africans by declaring that Section 4(b) and 5(b) of the Drugs and Drug Trafficking Act (“Drugs Act”), as well as Section 22A(9)(a)(i) of the Medicines and Related Substances Act (“the Medicines Act”), is constitutionally invalid as it is inconsistent with a person’s fundamental right to privacy. There is however a caveat: an adult person may only cultivate (or grow) Cannabis in a private place for his or her own consumption. Such person may also possess or use it in private for his or her own consumption.

The Drugs Act regulates the use, possession and dealing of drugs in South Africa. Cannabis (including the whole plant or a portion of it) is listed as an undesirable dependence-producing substance in Part 3 of Schedule 2 of the Act.

Section 4(b) of the Drugs Act essentially prohibits the use or possession of any dependence-producing substances (including Cannabis), while section 5(b) prohibits the dealing of such substances, unless an exception listed in one of these sections applies.

The Constitutional Court gave Parliament 24 months from the handing down of the judgment to rectify the invalid sections in the Drugs and Medicines Act. The Court, in the interim, ordered that the sections of these Acts will be read to say that an adult may use and be in possession of Cannabis, for personal consumption, and in private.

By definition and as contained in the Drugs Act, dealing in drugs remains illegal. By no means can the Cannabis-containing products be brought into or cultivated in the country without adhering to the requirements set out in the relevant Acts through which proper regulation is ensured.

This legislative change has far reaching results. It directly affects the rights of the person using Cannabis in his or her personal capacity, as well as the rights of the person/s around them.

 

  1. HAZY AREAS

The only change so far since the Constitutional Court’s decision is an exemption regarding CBD containing products released by SAHPRA. Parliament is yet to amend the invalid sections and now has less than a year to do so.

If Parliament fails to cure the defects in time, the reading in of the judgment will be made final. There are, however, a number of issues in the judgment that the Constitutional Court has failed to address. This has left us with a great deal of uncertainty and challenges, which Parliament will now have to settle.

If this does not happen, we will see many cases dealing with Cannabis rolling through our courts.

Privacy

In the judgment, it refers to “in private” and “in a private place” but neglects to define what exactly these terms mean. The Constitutional Court made it clear that the use and possession of Cannabis is not only confined to a person’s home. Although the Court did not go any further than that, privacy can be extended to your own person, your car, your handbag etc. This, however, is yet to be clarified.

Quantity

A further issue that requires clarification is the amount of Cannabis a person will be allowed to have in their possession and how much they can grow in a private place. After judgment was handed down, the National Commissioner of the South African Police Services (SAPS) issued a directive which provides SAPS with the discretion to determine whether the Cannabis possessed is for personal consumption.

Purchase of seeds

A further concern is access to Cannabis seeds. Cannabis remains an undesirable dependence-producing substance. The Schedule of Medicines contained in the Regulations to the Medicines Act confirms that Cannabis (dagga), the whole plant or any portion or product thereof is considered a Schedule 7 medication. This confirms that a seed forms part of a Cannabis plant and therefore remains illegal. This begs the question – if a person can grow Cannabis in their personal space, will they not be engaging in an unlawful act if they are to sell or purchase seeds for the purposes of growing it in private?

Although a person can grow Cannabis in a private place, the means of obtaining the seeds to cultivate remains illegal.

Other issues

The legalisation of Cannabis for personal use in South Africa will create a causal effect in many other areas of the law that Parliament must address.

Employment and Criminal Procedure laws will have to be amended. The National Roads Traffic Act Regulations needs to be revised – provisions will have to be made to provide for a test similar to the ‘breath analysers’ to determine if a person is under the influence while driving. Many other areas of the law, such as regulating the importation and cultivation of the plant and seeds, will require change.

Consideration should be given to the changes and their effect on the Drugs Act relating to the policing aspect in situations where cultivation was not for private use, but aimed at sale.

No directives dealing with any of these issues have been published thus far.

MEDICINAL USE

  1. The Medicines Act

The Medicines Act plays a pivotal role in how Cannabis is cultivated, manufactured, acquired, imported or exported, distributed, supplied, sold and used. Various licences are available to ensure that these activities are in line with legislative requirements, for example, a Medical Establishment licence or licence to cultivate, manufacture or import Cannabis for medicinal purposes.

A common misconception since the judgment is the fact that many South Africans think they can grow Cannabis at their homes and sell it. Others are also under the impression that buying CBD oil for personal use is legal. Many of these products, available online especially, do not fall within the parameters of the Exemption and are also not registered as Medicines, which makes these products and the sale thereof illegal in South Africa.

The Exemption

In May 2019, the Minister of Health completely removed CBD (not Cannabis) as a Schedule 7 substance, classifying all CBD containing products as a Schedule 4 substance. The Minister created a further exclusion, which allows certain CBD products to be sold over the counter on the open market without a prescription from a medical practitioner.

This will be the case where the CBD containing product contains a maximum daily dose of 20 mg CBD with an accepted low risk claim, which only refers to general health enhancement without referring to any specific diseases or symptoms. This includes products containing a THC percentage of less than 0.001%.

If the CBD products fall within any of the requirements above, it can be sold without being registered as a medicine and can be bought without a prescription.

 CONCLUSION

The Constitutional Court judgment created several questions relating to different Acts and legislation which require urgent review.

CBD oil, when within the parameters of the Exemption, can be imported in bulk into South Africa provided that the specific licence to cultivate, manufacture or import Cannabis is obtained from SAHPRA.

THC remains a Section 7 substance and requires a specific and regulated approach to be imported into South Africa – this is done via a Section 21 application for a specific patient.

 

The role of gas in powering Africa’s future

 

By Simon Collier, DLA Piper, Senior Associate


It is well-known that Sub-Saharan Africa suffers from a lack of access to electricity. At the same time,

there are 22 African countries with proven gas reserves. This suggests that gas should play an increasing

role in meeting Sub-Saharan Africa’s demand for power: but is it that straightforward? Sub-Saharan Africa is, of course, a very large and diverse region made up of countries that have different natural resources, policies and challenges.

There are 13 countries in Sub-Saharan Africa currently consuming gas for power generation. Ten of those countries generate power from their own domestic gas production, two rely on pipeline imports (Togo and Benin) and one uses a combination of domestic supply and pipeline imports (Ghana). At the moment there are no LNG imports in the region, but that could soon change.

Prospects for gas-fired power generation in countries with domestic gas reserves

 There is an opportunity to expand gas-fired power generation from domestic gas production in Sub-Saharan Africa. The demand will arise not only from the need for more power in Sub-Saharan Africa, but also from the opportunity to displace oil-fired power generation with cheaper and cleaner gas. Angola, Ghana, Cameroon, Senegal and Tanzania are all examples of countries with significant gas reserves currently using oil to generate power.

Until recently, Angola was an outlier among gas producing states in Sub-Saharan Africa as it had no gas-fired power generation. In 2017 the Soyo combined–cycle natural gas turbine plant introduced 750 MW of newly installed capacity (using a connecting pipeline from Angola LNG to the power plant). In the short to medium term that project will consume a large part of currently available domestic gas resources. Further expansion in gas-fired power generation in Angola is likely to require the development of additional domestic gas resources or LNG imports.

In Ghana, gas is already a central part of the power generation mix (accounting for nearly 40% of power generation) and its role is likely to increase as oil is displaced. Anticipated demand for gas-fired power generation is such that increasing domestic gas production, pipeline imports and LNG imports may all be required. In Cameroon, Victoria Oil & Gas PLC, through its subsidiary Gaz du Cameroun (GDC), is the sole supplier of domestic gas for power generation. The government has said it requires additional grid power to meet growing demand.

In July 2019, GDC agreed commercial terms to supply gas to a proposed new 150 MW gas-fired power station, a project we are advising on, and there is likely to be scope for further growth in the country. In Tanzania, material expansion of gas-fired power generation capacity is likely to be contingent on a positive final investment decision or its proposed LNG export plant, which seems some way off. Equinor has disclosed that its production sharing agreement would allow for 10% of gas to go to the domestic market.

In Senegal, BP took a positive final investment decision on the Tortue-Ahmeyim gas development project in December 2018. A construction contract has been awarded for a floating production storage and offloading (FPSO) unit to be used alongside a floating LNG facility (a converted LNG carrier) being provided by Golar LNG. As part of that development, a pipeline to supply natural gas to both Senegal and Mauritania is planned. There have also been recent moves to expand gas-fired power generation in Mozambique: a 400 MW gas-fired power project is being developed at Temane in Inhambane province.

The plant will use gas supplied from the Pande-Temane fields. Given the recent positive final investment decision on the Area 1 LNG project in Mozambique, and the probable final investment decision Area 4 LNG project in the coming months, there could be scope for significant further expansion of gas-to-power in the country. One of the challenges is that the planned onshore LNG facilities are 2,500 km from the country’s capital and largest city, Maputo.

In May 2018 Great Lakes Africa Energy (GLAE) announced that it had signed a memorandum of understanding with the Mozambique government to build and operate a 250 MW gas-powered plant at Nacala District in the north of the country using gas from the Rovuma basin, but even that project will require gas to be transported approximately 600 km. GLAE has said it believes that mini-LNG might offer a solution.

Nigeria does not use oil for power generation. There is, however, enormous unfulfilled demand for power domestically and gas is central to plans for expansion of the country’s power sector. That  expansion has been constrained by structural problems and a chain of debt (from gas sellers to power generation companies to the Nigerian Bulk Energy Trading Company to distribution companies to end customers) not helped by the manner of the privatization of the Power Holding Company of Nigeria in November 2013.

The transmission system and gas supply network infrastructure also requires significant investment and reliability of gas supply will also need to be improved to allow a major expansion in installed capacity.

Prospects for new cross-border pipelines in Sub-Saharan Africa

 The only operational cross-border gas pipelines in Sub-Saharan Africa are the 678 km West African Gas Pipeline (which takes gas from the Escravos-Lagos pipeline at the Nigeria Gas Company’s Itoki Natural Gas Export Terminal to Benin,Togo and Ghana) and the 865 km ROMPCO Mozambique to Secunda pipeline (which takes gas from the onshore Pande and Temane fields in Mozambique to Sasol’s operations in South Africa).

In 2009 Nigeria signed an intergovernmental agreement with Niger and Algeria forthe development of the 4,400 km Trans-Sahara Gas Pipeline (1,037 km in Nigeria, 853 km in Niger, 2,310 km in Algeria and 220 km connecting Algeria to Spain). The Nigerian National Petroleum Corporation (NNPC) currently describes that project as “under consideration”.

The Nigeria Gas Company, an NNPC subsidiary, is proceeding with the project to develop the 614 km Ajaokuta-Kaduna-Kano (AKK) pipeline, the first stage of the Trans-Nigeria Gas Pipeline project which is intended to form part of the Trans-Sahara Gas Pipeline system if it proceeds. We are currently advising on the AKK project. The ROMPCO pipeline primarily supplies the PetroSA gas-to-liquids (GTL) refinery at Mossel Bay on South Africa’s southern coast (which was commissioned in 1992 as the world’s first GTL refinery).

Currently there is no gas-fired power generation in South Africa and, if that is to change, it appears more likely that gas-fired power plants would be supplied by imported LNG (import terminals have been proposed at Richards Bay and Port Coega). It is possible that pipeline exports from Mozambique to South Africa could eventually increase with the development of the Rovuma basin reserves, but this is not currently part of the development plan for either the Area 1 or Area 4 project.

The Tanzania Petroleum Development Corporation has mooted supplying natural gas to Uganda and Kenya from the Tanzanian Rovuma basin reserves. As with the expansion of gas-fired power generation in Tanzania, the development of that project will require the LNG export project to proceed, and even then the commercial viability of a gas pipeline project from southern Tanzania is uncertain.

Even where there is the political will, new cross-border pipeline projects are only likely to be developed if they can be commercially justified as a way to monetize gas reserves. In the absence of equity participation from stakeholders in upstream gas projects, governments will face an uphill battle to fund the necessary equity contribution for a new pipeline project.

Could power generated from gas be exported to regional markets?

 There are four existing power pools in Sub-Saharan Africa, within which countries have interconnected power systems: the Southern African Power Pool (SAPP), the East African Power Pool (EAPP), the West African Power Pool (WAPP) and the Central African Power Pool (CAPP). In order to expand gas-by-wire imports, transmission and distribution infrastructure will require significant development to improve capacity and efficiency.

In the medium-term, expansion of gas-by-wire seems most likely in West Africa, where land-locked countries or coastal countries with relatively small markets could take advantage of upstream gas projects (or even LNG import projects) in neighboring countries.

Prospects for LNG import projects in Sub-Saharan Africa

 A number of members of the WAPP have proposed LNG import projects, perhaps reasoning that any shortfall in domestic demand for power generated from gas could be exported around the power pool. Ghana seems closest to realizing this goal, having granted a concession to Tema LNG Terminal Company Limited (Tema LNG), a joint venture between Helios Investment Partners and the Ghana National Petroleum Company (GNPC), to construct an LNG import terminal. Tema LNG has entered into a construction contract with China Harbour Engineering Company to build onshore facilities and Jiangnan Shipyard for floating storage and regasification unit (FSRU).

LNG is reported to be supplied by Rosneftto GNPC under a 12-year supply agreement. When the construction contracts were announced in September 2018 it was said that the FSRU will be ready in 18 months, meaning first LNG imports could come as early as March 2020. One of the challenges for LNG import projects is scale.

The Ghanaian government has said that the import terminal at Tema will supply 30% of Ghana’s power generation capacity, a very large part of the feedstock requirement for a country that has significant gas reserves of its own, with the Sankofa field now supplying gas for 1,000 MW of power generation capacity (a project we know well having advised the lenders on a USD500 million letter of credit facility made available to the Ghana National Petroleum Corporation to support its role in the development of the Sankofa field). Technological developments in small-scale LNG may, in time, reduce the minimum volume requirements and open up a wider range of markets.

In July 2019 Total announced10 an agreement to develop and operate an FSRU located offshore Benin together with a pipeline to supply existing and planned gas-fired power plants, although it remains to be seen how quickly that project will proceed. In November 2016 a consortium led by Total announced that it had been granted rights to construct an FSRU in Cote d’Ivoire11 together with a pipeline connecting the FSRU to existing and planned power plants in Abidjan but no final investment decision has yet been announced.

South Africa continues to explore options for a LNG imports12 and an LNG terminal has also been proposed at Walvis Bay in Namibia. Other LNG import projects in the region have either previously been considered and put on hold (such as in Kenya)14 or are currently under consideration (such as in Mauritius and the Seychelles). Given that a delivered gas price of around USD8/MMBtu is competitive with oil-fired power at an oil price as low as USD50/barrel;17 it is more than possible that the economics will support LNG imports to displace oil-fired power generation and to increase power generation capacity in Sub-Saharan Africa, particularly where funding can be obtained from multilateral lending agencies or development finance institutions.

Although the World Bank has announced that it will no longer finance upstream oil and gas projects (apart from in “exceptional circumstances”), it is expected to continue to finance midstream and downstream natural gas projects.

There are challenges to gas-to-power projects in Sub-Saharan Africa, such as the poor records on collection of power sector revenues in many countries, related problems of creditworthiness of the state utilities who are the natural customers for gas-to-power projects and underinvestment in electricity distribution infrastructure, but those challenges can be overcome and are present whatever the means of generating electricity.

In countries with domestic reserves, gas can undoubtedly play a major role in the development of power generation capacity. LNG import projects are also foreseeable as countries seek to move away from oil as a power generation fuel. New cross-border gas pipelines may be less likely, but LNG imports or increases in domestic production could well result in an increase in gas-by-wire exports, particularly to land-locked countries in the WAPP.

Source: DLA Piper Africa Connected Issue 3: Energy in Africa – Innovation, Investment and Risk

eLearning Africa: Advancing from Abidjan

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eLearning Africa shows the world “what an exciting, innovative continent Africa is” say the organisers of Africa’s leading conference on technology-assisted learning and training, eLearning Africa. This year’s eLearning Africa, which took place in Abidjan, Côte d’Ivoire from 23 -27 October and focussed on “the keys to the future: learnability and employability” was a “great success,” they say.

“eLearning Africa is a content-driven conference and it brings together everybody working in this domain of digital education – people doing research, building tools, teachers, small companies, big companies. It’s a fabulous meeting ground,” says Rebecca Stromeyer, the founder of eLearning Africa and Chief Executive of ICWE GmbH, the German company, which organises the event. “It has really helped to show the world what an exciting, innovative continent Africa is and it has focussed attention on the role technology can play in spreading educational opportunity and meeting the UN’s development targets.”

eLearning Africa has gained a reputation for leading the discussion on key issues in African education and training. Its programme includes a ministerial round table, as well as debates, seminars and discussions. One minister described the event as “the new reference theatre for the inter-generational transmission of new knowledge at the continental level.”

Côte d’Ivoire’s Education Minister, HE Mme Kandia Kamossoko Camara, told the conference that she was convinced that the dual focus on both employability and learnability was vital.

“It concerns the employability of young people in a competitive global context and the appropriation of moral and civic values,” she said. “It is no longer a matter of training office clerks for the needs of the administration (this season is over!); but to build the African of today and tomorrow in relation to the requirements, on the one hand of open and global competition, based on talent and skills at both individual and collective level, and secondly socioprofessional insertion in a world in difficulty with employment.”

Other speakers in plenary sessions of the conference included Martin Dougiamas, the founder of Moodle, which has become the world’s largest education platform, and Professor N’Dri Therese Assie-Lumumba of Cornell University, who is one of the world’s greatest experts on comparative education.

The eLearning Africa conference was accompanied by an exhibition at which international companies and organisations presented new technology-based solutions, services and courses.

eLearning Africa is a lot more than just a conference and an exhibition, though. It is also a network of experts throughout Africa and the world, who are helping Africa to seize the opportunity technology offers to expand the reach of education.

“In its fourteen years of existence, eLearning Africa has made a real contribution to the expansion of education in Africa,” says Rebecca Stromeyer. “Our network of experts from all over the world is unique and it is full of people who are helping to transform the prospects of Africans. At the eLearning Africa conferences, when people from all over the world get together, ideas are exchanged, partnerships are created and friendships are forged. It is a very special event.”

eLearning Africa Conference Background

eLearning Africa, is an annual pan-African conference dedicated to examining sustainable solutions for education, training and skills development, through the use of innovative technology to spread educational opportunity. Since the 2005 launch in Addis Ababa of the event, which visits a different African capital each year, technology-assisted learning has expanded massively and now plays a major role in the delivery of learning, training, and research and development in schools, colleges, universities, companies, and organisations across Africa. It has enabled millions of Africans to expand their horizons and take advantage of the countless possibilities new technology offers to learn and acquire new skills and qualifications.

For more information about both the eLearning Africa conference and exhibition or the associated eLearning Africa Ministerial Round Table, which is attended by Education and ICT Ministers, please contact Rebecca Stromeyer.

eLearning Africa is the key networking event for ICT-supported education, training, and skills development in Africa and brings together high-level policy makers, decision makers, and practitioners from education, business, and government. During its fourteen consecutive editions, eLearning Africa has hosted 18,800 participants from 100+ countries around the world, with over 85% coming from the African continent. More than 3,700 speakers have presented their ideas, opinions and experience. Serving as a pan-African platform, the eLearning Africa conference is a must for those who want to develop multinational and cross-industry contacts and partnerships, as well as enhance their knowledge, expertise, and abilities. The conference and its associated exhibition, featuring the latest products, courses, and solutions from around the world, represent “an outstanding networking opportunity and the best vantage point anywhere in Africa to gain a view of the continent’s edTech market,” according to the organisers.

eLearning Africa, the annual Pan-African Conference & Exhibition on ICT for Education, Training and Skills Development
Secretariat: ICWE GmbH, Leibnizstrasse 32, 10625 Berlin, Germany
Contact: Rebecca Stromeyer, [email protected], Tel: +49 (0)30 310 18 18-0, Fax: +49 (0)30 324 98 33


Rebecca Stromeyer

Watch this Space: South Africa’s space exploration industry primed for lift-off

By Lloyd Christie, Executive in the Natural Resources and Environment department at ENSafrica  and Edwin Berman, Senior Associate in ENSafrica’s Natural Resources and Environment department


Companies the world over have their sights set not on the skies but beyond them. Commercial activities in space are on the rise, ranging from spacecraft launching activities to space mining and space tourism.

South Africa’s Space Affairs Act, 1993 (the “SSA”) regulates the responsibilities and liabilities arising from its national activities in space, which include the launching activities of the State and South African private entities and other space activities that involve the participation of South African private parties and implicate the national interest of the State’s obligations under international space law.

A licence must be issued by the South African Council of Space Affairs (“Space Council”) in terms of section 11 of the SSA before any person may:

  • conduct launching activities, being the placing or attempted placing of any spacecraft from the territory of South Africa into a suborbital trajectory or into outer space, or the testing of a launch vehicle or spacecraft in which it is foreseen that the launch vehicle will lift from the earth’s surface. Launching activities include the launching from or operating of a launch facility in the territory of South Africa and launching from the territory of another state by or on behalf of a South African incorporated or registered juristic person or the operation of a launch facility;
  • participate in activities directly contributing to the launching of spacecraft and the operation of such craft in outer space entailing South Africa’s international law obligations. These are activities that fall short of launching but are closely enough related thereto for a licence to be required; and
  • conduct any other space or space-related activities prescribed by the Minister of Trade and Industry.

There are no prescribed requirements (technical, financial, commercial and spectrum or otherwise) to be met before the Space Council may issue a licence in terms of section 11 of the SSA, save to mention that section 11(2) contemplates that a licence shall be issued subject to such conditions as the Space Council may determine for that particular licence taking into account the minimum safety standards to be determined by the Space Council, the national interests of the Republic and the international obligations and responsibilities of the Republic.

The South African Space Affairs Act also does not place limitations on international operators when compared with domestic operators.

Holders of licences for launching and operating a telecommunication satellite in terms of section 11 of the SSA must also obtain a satellite infrastructure licence (or Electronic Communications Network Services licence) in terms of section 5 of the Electronic Communications Act, 2005 and a radio frequency spectrum licence in terms of section 31.

In order to provide the robust legal framework required for the promotion of South Africa’s burgeoning space ambitions, the Department of Trade and Industry and the Space Council launched a review of South Africa’s space-related law and policy in 2013. Some of the factors motivating the review have been the increasing involvement of domestic and foreign, public and private sector entities in space activities in South Africa, the growth of the commercial space sector locally and internationally since the enactment of the South African Space Act, the need to ensure compliance with international legal trends in outer space and to align the South African regulatory framework with international space treaties and with domestic policies and strategies.

The draft South African Outer Space Regulatory Bill will define new terms and redefine terms used in the South African Space Act such as dual purpose technologies, launching, licence, outer space, space activities, spacecraft, space industry, space-related technologies, suborbital trajectory and weapons of mass destruction. The new statute will cover new applications such as, inter alia, the regulation of the operation of a space facility, the manufacture of space objects, the launch of space objects into outer space, the operation and control of space objects in orbit, the re-entry of space objects and space applications, through proposed regulations, for the attainment of the objects of the newly proposed statute.

Governance of Africa’s mineral resources

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INTRODUCTION

AFRICA’S RESOURCE CURSE: IDENTIFYING POTENTIAL SOLUTIONS TO GOVERN AFRICA’S MINERALS.

The African continent is endowed with abundant natural resources, including about thirty per cent of the world’s mineral reserves.

Historically, however, most resource-rich African countries have been categorized as low income countries. In fact, analysts have observed a negative impact of resource abundance—particularly mineral resources—on long-term economic growth.

To establish the key drivers of the long-term negative impact, analysts have studied the growth in per capita income in forty-seven African countries from 1990 to 2014 and compared it with each country’s primary resource (agriculture, fisheries, forestry and hunting) as well as oil and mineral resource production during the same period.

The results of their analysis indicates that the phenomenon, known as the resource curse, is primarily owing to market related factors (especially commodity price fluctuations) which, in turn, are aggravated by political factors that relate to institutional quality and rent-seeking.

The most significant and insidious effect of resource abundance is often the destabilising effects suffered by other economic sectors when a country becomes overly dependent on exports of a single natural resource.

Studies indicate that there tends to be a direct correlation between commodity prices and gross domestic product (“GDP“).

The fluctuations in commodity prices in turn affect the GDP of the country if the country is largely dependent on the commodity in question. African countries where this trend was recently observed include the Democratic Republic of Congo, Gabon, Sudan and Nigeria.

The effect of fluctuating commodity prices is exacerbated in countries where little economic diversification has taken place, and the economy thus remains overly dependent on the income derived from exports of specific raw commodities.

A leading example is Zambia, where economic development has been hamstrung by over-reliance on copper exports, accounting for over 60 per cent of export earnings in 2018, and insufficient reinvestments of the income from the depletion of its natural capital.

Despite the economic causes underlying the paradox, the impression that African states are not reaping the benefits of their mineral wealth also gives rise to a growing discontentment with the disparity between the profits which foreign investors receive through the exploitation of the mineral resources and the poverty in which the citizens live.

This has given rise to various disputes. Recent examples include those between Acacia Mining plc and Tanzania, First Quantum Mining and Zambia, Vedanta Resources Holdings Limited and Zambia as well as the Gerald Group and Sierra Leone.

In an attempt to address this, a number of African governments have embarked on sweeping mineral law and fiscal reform. As part of the process, the governments often:

  • introduce higher royalties and windfall profit taxes;
  • issue significant new tax assessments;
  • introduce or increase compulsory minimum quotas for:
  • shareholding and board representation by the host state or its citizens;
  • local beneficiation, often through export restrictions;
  • procurement of local goods and services (including financial services);
  • recruitment and promotion of local personnel; and
  • importantly, renegotiate investor-state contracts that stand in the way of these measures.

These changes to a country’s mineral law regime are often without the support of the mining sector, which can lead to further animosity between the government and foreign investors.

Such reforms can likewise constitute a breach of the protection afforded to mineral right holders under the mineral development agreements to which they and the host governments are party. To assert their rights, investors frequently invoke the stabilisation provisions provided for in such agreements and refer these disputes to international arbitration.

Ironically, the disputes between foreign investors and host governments tend to be rooted in the historic imbalances which arise from the mineral development agreements themselves.

While the ability to regulate the economic consequences occasioned by the resource curse lies squarely with the domain of the African governments, it should be possible to better regulate the long term relationship between the host governments and foreign investors.

In this regard, the OECD’s recently approved Guiding Principles for Durable Extractive Contracts (Guiding Principles) set out eight principles that host governments and investors can use as a common reference for future negotiations of enduring, sustainable and mutually beneficial extractive contracts.

The purpose of the principles is to assist host governments and investors using them to:

  • structure their on-going relationship in an integrated manner to promote long term sustainable development, while attracting and sustaining investment;
  • foster alignment of expectations and convergence towards agreed objectives;
  • provide mechanisms that can accommodate and respond in a predictable manner to potentially significant changes in circumstances;
  • build trust to strengthen mutual confidence and reduce risk for both parties; and
  • ensure a fair share for all parties to the contract and optimise the value from resource development through equitable, sustainable and mutually beneficial contracts and operations.

Under the Guiding Principles extractives contracts are likely to be durable if they:

are aligned with the long-term vision and strategy, defined by the host government on how the extractive sector can fit into and contribute to broader sustainable development objectives;

are anchored in a transparent, constructive long-term commercial relationship and operational partnership between host governments, investors and communities, to fulfil agreed and understood objectives based on shared and realistic expectations that are managed throughout the life-cycle of the project;

balance the legitimate interests of host governments, investors, and communities, with due account taken, where relevant, of the specific rights of affected indigenous peoples recognised under applicable international and/or national law;

seek to optimise the value from resource development for all stakeholders, including economic, social and environmental outcomes. This would include identifying and managing potential adverse environmental, health, safety and social impacts of the extractive project and establish clear roles and responsibilities for the host government and the investor for the prevention, mitigation and remediation of those impacts, in consultation with affected communities;

are negotiated and based on the continued sharing, in good faith, of key financial and technical data to build a common understanding of the performance, main risks and opportunities of the project throughout its life-cycle;

operate in a sound investment and business climate which must be underpinned by a fair, transparent and clear legal and regulatory framework and enforced in a non-discriminatory manner;

are consistent with applicable laws, applicable international and regional treaties, and anticipate that host governments may introduce bona fide, non-arbitrary, and non-discriminatory changes in law and applicable regulations, covering non-fiscal regulatory areas to pursue legitimate public interest objectives; and

are underpinned by a fiscal system that is consistent with the governments’ overall economic and fiscal objectives and provides a fair sharing of financial benefits between the investor and the host government, taking into consideration the potential risks, rewards, and country circumstances.

While there is no one ideal fiscal regime, host governments ought to identify the optimal mix of fiscal instruments and terms to meet their objectives. In my experience, a predictable fiscal regime that includes responsive terms defined in legislation and or contracts to adjust the allocation of overall financial benefits between host governments and investors contributes to the long-term sustainability of extractive contracts and reduces the incentives for either party to seek renegotiation of terms.

The costs attributable to compliance with changes in law and regulations, and wholly, necessarily and exclusively related to project specific operations, in turn, should be treated as any other project costs for purposes of tax deductibility, and cost recovery in production sharing contracts.

If such changes in law and or applicable regulations result in the investor’s inability to perform its material obligations under the contract or if they lead to a material adverse change that undermines the economic viability of the project, durable extractive contracts require the parties to engage in good faith discussions which might eventually lead the parties to agree to renegotiate the terms of the contract.

Ultimately, transparency, predictability and a process of continued dialogue between the host governments and investors are key to the success of a project and an equitable sharing of benefits that result from the exploitation of the minerals.

Discover the Magic of Africa

“Travel is personal, and our goal is to make travel matter. We are deeply committed to sustainable travel, uplifting the local communities where we operate and visit, and supporting wildlife conservation efforts that allow animals to be appreciated and experienced without impacting their habitat,” said Cape Town-born Sherwin Banda, president of African Travel, Inc. “We’re able to do this because we know Africa and we have the local knowledge to provide five-star experiences while treading lightly upon the continent, all with the goal of delivering the trip of a lifetime.”

The 30 extraordinary journeys featured will inspire you with unforgettable experiences. As a special incentive, those who book any 2020 African Travel, Inc. brochure itinerary of 5 nights or more by December 31, 2019, will receive a savings of $400 per couple.

Exciting, new highlights include:

Captivating Kenya, a 9-day safari adventure which combines two prime wildlife regions and invites travelers to participate in Kenya’s conservation success story. Guests will explore Kenya’s oldest national park in search of endangered black and white rhino, spend time at the Namunyak Wildlife Conservancy with a behind the scenes experience at the Reteti Elephant Sanctuary, be immersed in the culture of the Samburu people, and discover the untamed beauty of the Maasai Mara and the pristine wilderness of the northern frontier. 9 days, from $12,895 pp.

An 11-day adventure in the “land of a thousand hills” is experienced in Discover Rwanda.  Explore the open plains, woodlands and lakes and wildlife of Akagera National Park through game drives and boating trips before continuing safari to track wild chimpanzees in Nyungwe National Park and the mountain gorillas of Volcanoes National Park.  Luxury accommodations at One & Only Nyungwe House and at One & Only Gorilla’s Nest provide a front row seat to Rwanda’s natural beauty, culture and wildlife.  Learn what makes for the perfect cup of tea during a fascinating walk through a tea plantation, enjoy panoramic views of the rainforest from a scenic helicopter flight, and a tree planted in each guest’s name leaves a legacy in Rwanda. 11 days, from $22,595 pp.

An enchanting new safari lodge, Xigera (“Kee-jera”), opening in June and set in the heart of Botswana’s Okavango Delta will be exclusive to select itineraries and reinvent the very idea of what it means to experience the African bush.  Xigera is the newest member in the portfolio of our sister brand, The Red Carnation Hotel Collection.

As an active partner and supporter of the not-for-profit TreadRight Foundation’s sustainability work and projects, African Travel is dedicated to protecting wildlife, reducing the environmental impact on the planet, and ensuring the communities visited remain vibrant for future generations. The 2020 brochure reflects the “people” pillar of this commitment, encouraging the cultures, traditions and arts of the communities they visit continue to thrive.

African Travel does this through their sponsorship of micro-enterprises, and community-based tourism initiatives that build positive futures for community members and their families—especially children.  For each guest who books an itinerary in East Africa, a contribution is made towards a child’s education in Africa.  South Africa booked itineraries support a Cape Town women’s sewing cooperative through African Travel, Inc.’s partnership with Sexy Socks. The colorful, eco-friendly bamboo socks will be donated to children in need so they can wear them to school.  Guests will also receive a pair.

Reducing environmental impact through travel is also essential to African Travel, Inc. They are committed and dedicated to eliminating all avoidable single-use plastics in their offices and out on the road by 2022.  The company introduced their e-docs program in 2018, giving you the option to receive travel documents digitally and have a tree planted in your name.

Click here to discover the full collection of African Travel, Inc.’s incredible 2020 adventures.

To book the safari of your dreams, contact African Travel, Inc. at (800) 421-8907, or visit www.africantravelinc.com. CST 2071444-20

Follow African Travel, Inc. on Facebook, Twitter and Instagram, and join the conversation using the hashtag #WeKnowAfrica

Terms and Conditions

*Savings of $200 per person is valid on new bookings only traveling between January 1-December 31, 2020 and made by December 31, 2019. Not combinable with any other offers. Prices quoted are in USD and are per person based on double occupancy accommodation unless otherwise stated. A 20% non-refundable deposit is due at time of booking in order to request services. Final payment is due 65 days prior to departure. To protect your investment, travel protection is available at an additional cost. CST #2071444-20

About African Travel, Inc. – “We Know Africa”

For more than 40 years, African Travel, Inc. has helped travelers discover the magic of the wild. “We Know Africa” because we create extraordinary and unforgettable five-star experiences for each guest’s individual needs. From relaxing in spectacular luxury to touching an ancient culture, your African dream awaits you. Our knowledgeable and dedicated experts, who have lived and traveled extensively throughout the continent, will open your eyes to a new and exciting world. Placing local offices in Africa and our headquarters in the U.S. has earned us an enviable position of influence that will leave you knowing Africa like we do. We’re committed to making travel matter by supporting the environment and the local communities we visit through our partnership with The TreadRight Foundation. As a proud member of The Travel Corporation (TTC), a family-owned company with more than 100 years of expertise in luxury travel, we ensure exceptional service every step of the journey. For more information and inspiration, visit www.AfricanTravelInc.com.

About The TreadRight Foundation

Created as a joint initiative between The Travel Corporation‘s (TTC) family of brands, the TreadRight Foundation is a not-for-profit that works to help ensure the environment and communities we visit remain for generations to come. To date, TreadRight has supported some 40 sustainable tourism projects worldwide.

To learn more about our past and current work at TreadRight, please visit us at TreadRight.org.

SOURCE African Travel, Inc.

Access to energy is development key


In Africa energy access is key to development. Now Africans can replace their dirty diesel generators with solar kits, thanks to a renewable energy programme that’s gaining traction

Abdulmumin Doka used to fear the fumes from his home’s diesel generator. He also hated its high maintenance costs.

Then Doka bought a small solar-powered energy kit for his home in Tofa, northern Nigeria. The new system provides regular power for lighting and small appliances.

“I am a happier man now and my family is also happy,” says Doka, whose home is one of more than 4,500 in sub-Saharan Africa that received solar power kits from a programme called the Renewable Energy Performance Platform (REPP). “I sleep better at night knowing that there is more security in my house today.”

The Platform was designed by the European Investment Bank and the United Nations Environment Programme in 2015 to support a UN initiative called Sustainable Energy for All. The United Kingdom’s International Climate Finance programme, through the Department for Business, Energy and Industrial Strategy, provided $67 million to set up REPP in 2015 and added $128 million in 2018. REPP has a five-year mandate to improve access to energy for at least two million Africans. So far, it has committed about $45 million in financing for renewable energy projects across 13 countries in sub-Saharan Africa. The projects involve many different energy technologies, including solar power and hydropower.

Africa energy access knocks down barriers

“REPP’s great strength is its flexibility to address the real barriers faced by companies developing energy access projects,” says Daniel Farchy, an investment officer in infrastructure and climate finance at the European Investment Bank and a member of REPP’s management board. “Access to energy is a critical requirement for economic development, and REPP will enable hundreds of thousands of people to access renewable, modern energy.”

BBOXX makes solar power kits for homes across Africa. ©BBOXX
BBOXX makes solar power kits for homes across Africa. ©BBOXX

Many people in Africa have no electricity, and more than half a billion Africans rely on dirty, expensive diesel generators. In sub-Saharan Africa, the percentage of homes with access to electricity is the lowest in the world. Fewer than one in 20 homes have power in some rural areas.

Dirk Roos, head of energy transition programmes at the European Investment Bank and a member of REPP’s investment committee, sees huge potential in Africa, but also big challenges. It is the only continent where the number of people without access to electricity and those living in extreme poverty are rising, he says.

“Too much attention and investment is being handed over to large, fossil fuel power plants to solve the problem,” Roos says, “when most often what’s needed are small, decentralised renewable energy solutions.”

REPP’s small solutions make a big difference in Africans’ daily lives, says Geoff Sinclair, managing director of Camco Clean Energy, which runs REPP. Developed nations have the means to do much more to help African energy production and distribution, he says.

Africa’s energy problem is the world’s energy problem, not just on humanitarian grounds, but on environmental ones,” Sinclair says. “Ensuring energy access for all is entrenched in the UN Sustainable Development Goals. If the world is to meet the Sustainable Development Goals and the Paris Agreement climate targets then it is essential that Africa’s energy future is clean and sustainable.”

A merchant in Nigeria who uses a solar power kit for lighting and small electrical needs.
A merchant in Nigeria who uses a solar power kit for lighting and small electrical needs. ©Camco

Lack of start-up money and knowledge for Africa energy access

The African energy sector is often held back by a lack of start-up money and a shortage of the knowledge that a new company needs to succeed. Investors are often turned off by high start-up risks or because the projects are too small.

With Camco’s assistance, REPP is helping developers and entrepreneurs find financing and advice that can get their energy projects off the ground.

“The real role of REPP is to unlock the barriers that are stopping the private investments needed to take Africa’s renewable energy sector to the next level,” Sinclair says. “By continuing to demonstrate the sector’s growth potential, we’re telling the investment community, ‘Look, this is where your money should be.’”

As for Doka in Nigeria, he recommends the home solar kit to his friends and neighbours, and he’s going to treat his family to an unexpected gift.

“My family really enjoys their better life at home,” he says. “I am now thinking about getting a television to celebrate our new power source.”ed tags

 

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