A West African common currency and Nigeria hosting a summit of the Economic Community of West African States, Somalia pressing Shell and Exxon, and Zambia delaying the introduction of the new sales tax are actions from June 28 that may emerge to become significant factors impacting geomarket developments in Africa.
Nigeria, West Africa: The Nigerian government will on June 29 host a summit of the Economic Community of West African States.
Significance: A leading agenda item will be for the region’s heads of state to approve the launch of a single regional currency. The Eco, as the new currency is to be called, will receive a commitment for political study, but implementing a common currency as early as 2020 among the fifteen diverse economies comprising the bloc who trade little with each other will be far more difficult.
Somalia: The Somalia government stated an agreement was reached with Shell and Exxon to resolve force majeure positions and re-enter the country.
Significance: The Somali government wants to develop prospective hydrocarbons resources, and intends to auction offshore blocks before the end of the year. Clearly the Somali government would prefer the global attention and meaningful financing it would attract were an oil industry major such as Shell or Exxon to commit to a binding agreement to return and operate in the country. The two international oil companies had conducted preliminary studies in the late 1980s but had declared force majeure in 1990 because of widespread insecurity and the collapse of the Somali government. Persistent insecurity and uncertain Somali government capabilities will mean the two foreign oil companies will be very reserved in bringing a material commitment to the country, probably preferring instead to observe the track record of a frontier operator that the Somali government may reluctantly have to approach.
Zambia: Finance Minister Margaret Mwanakatwe stated the government will delay the introduction of the country’s new sales tax to September 1.
Significance: The new sales tax, to replace the Value Added Tax, was to launch on July 1 (which itself was a delay from April 1), and enable the Zambian government to optimize the management of volatile revenue and preserve scarce foreign exchange. Delays had been intended by the Zambian government to provide sufficient time to liaise with domestic and foreign business so as to mitigate any disruptions to the payment of taxes due or refund of tax credits. The delay of the introduction of the non-refundable sales tax is a modest measure of goodwill and will ameliorate negotiations with foreign mining companies, including First Quantum, Glencore, and Vedanta Resources, who have consistently conveyed concerns to the Zambian government that the new costs will price Zambian copper into loss-making territory and result in job retrenchments and reduced output.