As 2019 draws to a close, Ressources looks back at the five highlights of African commodity news over the past twelve months
To remember the highlights of a given period is to know how to distinguish the essential from the futile in a history in perpetual motion. This is a delicate – and necessarily subjective – task that the editors of Ressources wanted to try. Between the cocoa-producing countries’ battle for better pay for their work, the deal of the year with Total’s takeover of Anadarko’s African assets, the gradual recognition of legal cannabis, the announced rise of Mozambican gas and the removal of the last obstacles to exploiting the continent’s largest iron ore deposit, Ressources offers you its retrospective of the five highlights of African commodity news in 2019.
Deal of the year: Total’s takeover of Anadarko’s African assets
Key date: May 5 – Total announces an agreement with Occidental to acquire Anadarko’s African assets
The acquisition in August for 38 billion dollars of the American Anadarko by his compatriot Occidental Petroleum will also have made the happiness of a third partner, a French one: Total. Earlier, in May, the company headed by Patrick Pouyanné had unveiled an agreement allowing it to control Anadarko’s assets in Africa, should the latter be taken over by Occidental Petroleum from its competitor Chevron. With the deal validated, Total has thus completed its biggest financial operation since the takeover of Elf in 1999, putting $8.8 billion (€7.8 billion) on the table to dispose of an additional 1.2 billion barrels of proven and probable reserves, located in Algeria, Ghana, Mozambique and South Africa. This will make the French group’s African portfolio even more attractive, as it currently exploits a quarter of its world production there (700,000 barrels per day out of 2.8 million in 2018). At a time when some people are predicting the end of France-Africa, the leading French company in terms of turnover (209.4 billion dollars and nearly 14 billion in net profit in 2018) continues to weave its web on the continent.
Key date: 12 June – Côte d’Ivoire and Ghana announce suspension of cocoa sales
As far as the cocoa sector is concerned, 2019 will go down in history as the year in which the Ivorian-Ghana cartel, which accounts for two thirds of world bean production, used all its influence to change the course of brown gold prices. What is at stake in this battle? To better remunerate small producers, the eternal poor relatives of the cocoa value chain. Of the 100 billion dollars in annual sales that the sector represents, only 6% or even less goes to farmers. An intolerable situation for Abidjan and Accra. In an attempt to remedy the situation, the two countries decided in June to suspend their sales in order to impose a more advantageous floor price on farmers. And against all expectations, this pressure paid off: at the end of October, the addition of a subsistence income differential for the 2020/21 campaign was agreed by the multinational Olam, while Mars had earlier given its support to the Ivorian-Afghan initiative. However, it is not sure that this is enough to make all the industrialists bend, many of them, armed with large stocks built up before the beginning of hostilities, playing for time. As the year draws to a close, Côte d’Ivoire is said to have sold less than 400,000 tonnes of beans, almost 30% less than at the same time last year. Ghana, for its part, has seen its volumes shrink by 40%… All the more reason to want to accelerate the transition towards more local processing in order to depend less on large international groups.
Le pays de l’année : le Mozambique, où les majors s’enflamment pour le potentiel gazier national
Key date: June 18 – Anadarko confirms construction of gas liquefaction terminal
Long neglected by investors, Mozambique is becoming Africa’s new gas Eldorado, with the discovery of major gas fields in recent years propelling the country to the forefront. Currently at zero, Mozambique’s liquefied natural gas (LNG) production is expected to exceed the entire current production of sub-Saharan Africa by 2025 (32 million tonnes per year compared to 28 million), according to the Africa Energy Outlook 2020 study by the African Energy Chamber. This spectacular increase in capacity has been made possible thanks to the huge investments made by the major private operators in the sector. In June, the American energy company Anadarko – whose African assets have since been taken over by France’s Total – gave the go-ahead for the construction of a gas liquefaction terminal worth 25 billion dollars in Mozambique. A titanic investment, described by the Mozambican government at the time as « the largest ever made in sub-Saharan Africa in the hydrocarbons sector ». It was without counting on the American giant Exxon, which unveiled in early October another liquefied natural gas project even more important financially (from 27 to 33 billion dollars) than the one carried by Anadarko. These amounts are quite staggering given the current economic size of this southern African country ($14.4 billion GDP in 2018), which is now one of the poorest in the world ($420 GDP per capita) and which certainly expects a lot from this new and very promising sector.
Project of the year: the announced start of mining of the Simandou iron deposit
Key date: November 13 – SMB-Winning consortium reallocated Blocks 1 and 2 on Mount Simandou
For the Guinean authorities, the reallocation in November of Blocks 1 and 2 of Mount Simandou to the Guinean-Chinese consortium Société minière de Boké (SMB-Winning) is the happy epilogue of an extraordinary saga: the development – constantly hoped for and always postponed – of the largest iron deposit on the African continent. Billions of tons of ore of the highest quality, an annual production capacity of up to 100 million tons, tens of billions of dollars of investment required: the figures for the project to exploit the Mount Simandou deposits, prospected since the 1990s, are commensurate with its colossal potential. It is not surprising in these conditions that it has attracted operators with sometimes sulphurous practices, such as the Israeli miner Beny Steinmetz Group Resources (BSGR) which, after years of litigation with the Guinean state, finally ceded its rights to Blocks 1 and 2 of the Simandou iron deposit in February. These were then put out to tender for reallocation in July, ultimately won by SMB-Winning. The Sino-Guinean has, it is true, pulled out all the stops to win the bid: in addition to the construction of the much-anticipated Transguinean – a railway line of more than 650 kilometres that will carry iron through Guinean territory, the cost of which is estimated at more than $20 billion – the company has committed itself to building a deep-water port on the Matakong peninsula, 50 km south of Conakry, for the export of ore out of the country. A massive investment made possible thanks to the very powerful support of SMB-Winning’s shareholders, aluminium producer Shandong Weiqiao and port operator Yantai, two Chinese groups determined to meet the gargantuan needs of their domestic market, the world’s leading consumer of iron.
The regulatory breakthrough of the year: (legal) cannabis is gaining ground in Africa
Key date: 16 December – Zambia legalizes cannabis for therapeutic use.
Pending the green gold rush for legal cannabis that many specialist studies are already predicting – a fad fuelled in particular by the medical uses of the plant – the legalization of cannabis is now well underway in the south of the continent. On 16 December, the Zambian government gave its « agreement in principle … for the cultivation, processing and export of cannabis for economic and medicinal purposes. With this decision, the country became the fourth in southern Africa, after Lesotho, Zimbabwe and South Africa, to relax its cannabis legislation. Earlier, in September, South Africa’s Labat Africa announced its first investment in the legalized cannabis industry. A pro-cannabis dynamic for the time being confined to the southern part of Africa, with the rest of the continent still waiting, if not reluctant, to change its legislation. Proponents of legalized green gold, however, want to believe that the current doubts of the reluctant rulers will gradually be swept away by the force of economic argument: according to the think tank Prohibition Partners, the African cannabis market could represent 7.1 billion dollars in 2023. This is one more lever for continental development for some, and a confounding naivety on social issues for others. To each his camp.