Uganda’s $4bn oil refinery, Kenya’s Looming Debt, Lithium exploration

Good day,

Welcome to Africa Finance Today. 

I am writing this newsletter edition from Bourbon Coffee outlet at MTN Rwanda in Nyarutarama, an affluent suburb in Kigali. I am seated sipping on my favourite black coffee, and there is no better place I could have chosen to have this coffee from than this place because it gives an aesthetic feel.

People here are mostly corporate outfitted in professional and business attire. Others are those buried in their laptops, but it would be hard to spot those who are on dates, which back in time was the case when Bourbon was the poster child of coffee business in Kigali.

Time flies! There was a time when Bourbon Coffee was an iconic coffee shop in town. I remember finishing high school, and every person in my generation wanted to hang out and take their date at Bourbon.

Bourbon, a subsidiary of Crystal Ventures, made a fair share of investment in the coffee business and since 2007 when they rolled out their first coffee shop, the company made a signature statement and since then they have expanded to run retail coffee outlets across Rwanda and abroad.

A lot has changed since then. Hundreds of coffee shops have sprawled across the country and more than ever Rwandans consume coffee than before. No body knew that a people with tea consumption would one day change to become coffee consumers.

Bourbon may have lost its grip in coffee business, but let’s give credit where it’s due! Bourbon helped usher Rwanda into coffee-drinking culture, and managed to market Rwanda coffee brand when they first opened and operated the first Rwandan-owned coffee shops in the United Kingdom and Washington, United States.

Let’s get down to business!

IT’S A WRAP 🎁 
Uganda’s Planned $4bn Oil Refinery, Kenya’s Looming Debt

• 🇺🇬 🛢️ Uganda is building a $4 billion refinery for its crude oil. The planned refinery is expected to produce 60,000 barrels of oil per day and could rid Uganda of oil import bill. The question is how you get investors into buying the idea of investing in a capital intensive project like this.

• 🏦 Uganda has struggled to attract the right investors into its oil project. Last year, it terminated a contract of consortium over its failure to mobilize funding. However, the government announced last week that it was in negotiation with a potential investor from Dubai Royal family. The Dubai-based investor, Alpha MBM Investments, could take on the project if negotiations go as planned.

• 🇺🇬 💸 The project, along with supporting infrastructure, represent $20 billion in investment into Uganda’s economy. This could give edge to Uganda and enable the country to serve its petroleum needs. The country currently spends $2 billion on petroleum imports, but this could soon change.

• 🇰🇪 💳️ Kenya, just like many countries in the region, have been struggling with rising debt levels. Kenya’s piling debt has been keeping policymakers awake. Kenya’s public debt stood at 10.2 trillion Kenyan Shillings in June 2023, from 8.6 trillion Kenyan Shillings in the same period a year before, representing a 70.2 per cent of debt to GDP ratio.

• 🛣️ 🏫 Kenya’s debt service to revenue ratio reached 64.3 per cent in September last year, 34.3 points higher than the International Monetary Fund’s threshold. What this means is that majority of what taxpayers in Kenya pay the government goes to paying back the loans. In essence, that shouldn’t be a big deal because the government needs these loans to build roads, water systems, invest in sanitation, food security and so on.

• 🏥 🧑‍⚕️ What’s problematic about this is the higher levels of the loans the government is holding. This could put the government into position of struggling or failing to pay back the loans, affect its ability to carry out developmental projects and risk putting an entire economy to a halt.

• 🇰🇪 🏤 What can Kenya do? There are a few things that Kenya can do, but the country’s ultimately needs to know how to manage its debt carefully. But there are options that the country can tap into including raising a Eurobond, which it has done in past. President William Ruto signaled this week his country would buy back a maturing bond to be able to go back to the market.

DEEP DIVE
Race to Explore Lithium in Rwanda

• 🪙 🔋 Lithium is a big deal. It is classified as a battery metal because it is the metal you need to produce batteries that power cars, mobile phones, clocks, television sets, remotes and so on.

• 💹 🤘 That says a lot about why most companies are investing in lithium and why countries are racing to attract these investments. These investments are happening at a surprisingly faster pace in Africa.

• 💰️ 🇷🇼 This week, we wrote extensively about how, why and where these investments are happening in Rwanda. We hinted on what Africa can do to continue attracting investors into this space.

• 🤑 🇲🇦 Two companies , Rio Tinto and Aterian PLC, are at the forefront of this race, not just in Rwanda but in other African countries such as Botswana, Guinea, Mozambique, and Morocco, to mention but a few.

BONUS 💸 
World’s Largest EV Maker Finds Footing in Africa

• 🇨🇳 🌍️ Chinese electric vehicle giant BYD is making ask the headlines, and this time for the better. The company is expanding its footprint across Africa more than any other EV firm in the world.

• 🚘️ BYD is the world’s largest EV maker, having overtaken Tesla after selling 3 million electric vehicles and plug-in hybrid models in the fourth quarter of last year.

• 🇷🇼 🇰🇪 BYD just announced entry into Rwanda after Kenya where it has working with BasiGo and Associated Vehicle Assemblers. BYD also operates in Mauritius, Zimbabwe, Morocco and Tunisia through dealerships.

• 🔌 ⚡️ BYD told me in a statement that their collaboration with CFAO in Rwanda “fortifies our competitive position, enabling us to deliver a diverse and cutting-edge product portfolio to meet the evolving mobility needs of the region.”

• 🧧 🫰 There is something incredible about BYD’s business model, and the very recent announcement of expansion into sea freight reflects the uniqueness I am talking about. You should read it here about why we think that model allows them to expand in the region. But to be honest, it will take time before the can take on the African market.