† 4 thewest.com.au WESTBUSINESS Tuesday, June 3, 2014 POPULATION GROWTH, PROFIT IMPERATIVE Competitive destination: East African countries Tanzania, Kenya and Uganda are hoping foreign resources investment will underpin rapid economic growth. Picture: Getty Images Untapped riches propel East Africa into global growth zone ■ Kim Macdonald The East African countries of Tanzania, Kenya and Uganda have boldly forecast annual economic growth of 10 per cent within a few short years, as they exploit the world’s biggest untapped deposits of oil and gas. It was not that long ago the countries were economic basket cases but they now expect to exceed China’s lofty growth rate in two or three years time, albeit from a low base. With the United Nations predicting one in three of the world’s children will be born in Africa in 2050, there is huge need for new sources of energy. And there is an equally big potential for profit; US President Barack Obama last year proclaimed Africa “the world’s next major economic success story”. There is a particularly heady atmosphere in Tanzania after it quadrupled its estimates to 46 trillion cubic feet of gas in 2012, prompting The Economist magazine to label it an Eastern El Dorado and its port workers “the Mtwara Rockefellers”. To put these deposits in perspective, the gas fields off WA’s North West Shelf contain an estimated 33tcf. Tanzanian Energy Minister Sospeter Muhongo forecast 10 per cent growth from about 2017 — up from 8 per cent this year — partly because of foreign investment in the fledgling gas economy. He bases his estimate partly on the continued expansion of its power capacity — from 20 per cent in 2005 to 36 per cent now. But he concedes that monetising Tanzania’s resources and maximising its potential in the longer term also requires development of crucial infrastructure, including roads and the $20 billion LNG plant due in 2020. This relies largely on foreign investment. In a discussion with West- Local listing: Swala Energy’s David Mestres Ridge, second from the left, with from left, Deus Nyamasi, Beauty Mkelemi, George O’Ging and Neema Kiwelu. Swala listing promotes Tanzania’s growth, stability environment over the years. “There is an appetite to bring in foreign investment and a realisation that this — and foreign expertise — have a role to play in the development of the region,” Dr Mestres Ridge said. “This includes a discussion on fiscal and political stability, which is such an important prerequisite in attracting the foreign direct investment that the region needs.” An Australian company is the first foreign group to attempt listing on the local stock exchange in the emerging gas economy of Tanzania. Swala Oil & Gas (Tanzania) plc, a company in which Perth’s Swala Energy has a 65 per cent equity interest, is seeking to list on the Dar Stock Exchange with the IPO to open on June 9. Tanzania’s Energy Minister Sospeter Muhongo praised Swala Energy for leading the way on ethical foreign investment, claiming a local listing would help promote Tanzania’s economic growth and stability. Swala Energy’s managing director David Mestres Ridge said it was appropriate to give local investors a chance to participate in any growth in value that occurred as a result of activity in their country. Swala’s preference for full-par- ticipation included giving local companies preference in supply contracts, as well as creating local job opportunities. Swala’s eight local staff told WestBusiness they were impressed with the training opportunities on offer and with the company’s ethical outlook. Swala won two licences in 2012 — at Pangani and Kilosa-Kilombero — and has been satisfied with Tanzania’s business Kim Macdonald Business, Mr Muhongo sells the country’s regulatory credentials hard, citing act after legislative act introduced to fight corruption. He claims vested interests fight him “night and day” because he will not pursue their interests over the population’s. Despite these efforts, Tanzania’s ranking in Transparency International’s Corruption Perception Index 2012 is still high, at 102 out of 174 countries. “We are not only competing with Western Australia (for investment funds) but we are also competing with other African countries and other nations with oil and gas,” he says. “We’re going to be one of the energy giants of Africa but the difference is we’ll rely on quality business that’s corruption free.” Uganda’s Energy Minister Irene Muloni estimates similar double-digit growth patterns within years following the discovery 3.5 billion barrels of oil. Ms Muloni acknowledges infrastructure problems, though she says advanced plans for a refinery and a pipeline are a big step. “We acknowledge and appreciate the shortcomings, so we can ensure the foundation for building is firm and strong,” she says. “We need (foreign investment) for energy, we need roads, we need railways, we need air trans- port, we need schools, we need hospitals, we need to modernise agriculture.” Ms Muloni says some countries were jumping at investment opportunities — such as China — but Uganda was forced to spruik for funds from those concerned about its regulatory framework. She says she was aware of global concern about heavy investment from China, Africa’s biggest individual trading partner. “China has identified that Africa is still virgin — there is plenty of opportunity and plenty of natural resources that have not been exploited,” she says. “While you wait (to invest), others have already recognised that it is a stable environment.” Kenyan principal Secretary for Energy Joseph Njoroge expects 10 per cent growth within years — following the 2012 discovery of commercial quantities of oil. “The plan is to develop our own infrastructure and do a lot of investment in the energy sector so we can become a competitive destination for foreign direct investment,” he says. “I don’t think we can ever get sufficient funds.” PricewaterhouseCoopers says a double-digit growth forecast is too optimistic. However, it says East Africa is one of the world’s fastest growing regions.