South African hotels in the spotlight for developers and UAE tourists

CAPE TOWN // Hotel developers will invest billions of dollars in African projects over the next few years as they seek to take advantage of a fast-expanding middle class and growing business travel.

Overall room revenue in the five markets of South Africa, Nigeria, Mauritius, Kenya and Tanzania rose 6.7 per cent in 2015, the largest gain since 2011, according to PwC’s Hotels Outlook: 2016-20 report. Tanzania had the largest increase with a 14.4 per cent gain, the result of a large increase in the average room rate that offset a drop in stay unit nights. Tanzania’s market is heavily dependent on foreign tourism.

For UAE residents, South Africa is a prime location.

The South African consul general in Dubai, Manabile Shogole, says his country is increasingly becoming a favourite among Emiratis.

“There has certainly been an increase in the number of Emirati travellers to South Africa. Particularly large groups of families who are travelling.”

From April 2014 to March 2015, more than 8,500 visas to South Africa were issued in the UAE, according to statistics data, rising to more than 8,800 last year. For the first seven months of this year, almost 7,000 visas were issued.

PwC says South Africa, Nigeria, Mauritius, Kenya and Tanzania as a group will increase at an 8.6 per cent compound annual rate to 53.4 billion rand (Dh13.69bn) in 2020 from 35.4bn rand in 2015.

It is forecasts like those that have spurred a boom in hospitality investment on the continent.

According to JLL, the US-based financial and professional services firm, nearly US$3.5bn will be invested in hotels over the next two years.

JLL sees the medium-term outlook as broadly positive with a growth of up to 5 per cent in total in the coming two years, it says in a study on sub-Saharan Africa’s hotel prospects.

“From an investment perspective, we forecast $1.7bn to be invested in hotels in sub-Saharan Africa in 2017 and a further $1.9bn in 2018,” says Xander Nijnens, the senior vice president for hotels and hospitality, sub-Saharan Africa at JLL, speaking at the launch of the report in Rwanda, one of the fastest-growing tourism destinations on the continent.

“The new supply pipeline continues to grow with greater efficiency in realising new developments as the sector matures,” he says.

The growth is all the more remarkable as it comes against a backdrop of declining commodity prices that underpinned many African economies.

JLL research indicates the region’s GDP growth has slowed to 3 per cent, down from an average of twice that between 2010 to 2015. However, it is expected to accelerate to 4.1 per cent in 2017 and 2018, driven by the large regional markets.

“Long-term investment fundamentals for the region remain positive despite the short-term challenges that have impacted the hotel sector in sub-Saharan Africa in the past two years,” Mr Nijnens says. “Macro-economic development and government policy towards tourism, investment and economic growth remain critical in a corporate demand-led sector.”

Already international brands have been announcing plans to expand or increase African exposure. Marriott International, the world’s largest hotel company, this month opened its first African property, the Marriott Hotel in Rwanda’s capital, Kigali.

Marriott recently completed its purchase of Starwood Hotels and Resorts, which the US company says will help it to expand its presence in regions such as the Middle East and Africa.

A few days after the Kigali property opened its doors, Marriott announced plans for the construction of three new hotels in Cape Town. This will add another 500 beds to the city, which TripAdvisor recently declared the top destination in sub-Saharan Africa. Marriott also has another two hotels scheduled to open in South Africa’s commercial capital Johannesburg in 2018.

“Africa is particularly important to Marriott International’s expansion strategy because of the continent’s rapid economic growth, expanding middle class and youth population, as well as the increase of international flights into the continent,” says Arne Sorenson, the president and chief executive of Marriott International.

“With over 850 million people in sub-Saharan Africa alone, there are enormous opportunities.”

Over the next decade the company says it will roll out up to 200 hotels and expand to at least 27 countries with 37,000 rooms.

A notable element of this trend is that it is a departure from the bedrock of African tourism, the safari industry. Animal viewing has been a small but important contributor to some countries’ economies, mainly in southern Africa, although Kenya has also benefited.

Safari parks are aimed squarely at leisure tourists and are usually far from the urban centres of the countries in which they are located. One of the world’s largest nature reserves, the Kruger Park in South Africa, is some 400 kilometres from Johannesburg, the country’s industrial heartland.

As a result, the rapidly growing urban centres around Africa have drawn little advantage from tourism. The recent investment in hotels, however, will change this. According to JLL, hotel investment is now almost entirely aimed at business tourism.

This is changing the face of African cities and bringing in a welcome diversion from the focus on commodity investment. The Hilton Group, for instance, is building what it claims will be Africa’s tallest building in Nairobi, Kenya’s capital.

The 330-metre Hilton Nairobi Upper Hill in Kenya’s capital will be completed in 2020 and will underpin a drive for the US company to almost double its presence in Africa. Hilton plans to have at least 80 hotels across the continent within the next five years, the company has said.

Other brands familiar to UAE travellers are also piling in; Best Western, which operates a resort and spa in Abu Dhabi, and Carlson Rezidor, the operator of the Radison Blu brand, have also said they will be expanding across Africa.

Rezidor’s president and chief executive Wolfgang Neumann says that since opening its first African facility in South Africa in 2000, the continent has become the group’s largest growth area.

“We have opened a new hotel in Africa every 60 days over the past two years,” Mr Neumann says. “This year, we have already opened six Radisson Blu hotels and expect to open a Park Inn by Radisson in South Africa in the next six months. We intend to keep up this momentum of signings followed by successful openings.”

Two elements are crucial to fostering hotel investment. The first is the decline of conflict across Africa. The other is a continued growth in continent-wide business.

This has made lenders more willing to consider providing capital for the hotel sector. The hotel industry, as with many other sectors, lives or dies on its ability to raise finance for new ventures. As Africa’s risk perceptions lower, money has become available, notes Mr Nijnens.

“Long-term investment fundamentals for the region remain positive despite the short-term challenges that have impacted the hotel sector in sub-Saharan Africa in the past two years,” he says.

“Macro-economic development and government policy towards tourism, investment and economic growth remain critical in a corporate demand-led sector.”

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Hotels in African cities are more than just a place to put your head down. Many must also provide facilities that few local residents enjoy.

When the Paris-based Louvre Hotels Group opened its 80-room Golden Tulip in the Nigerian city of Lagos’s upmarket Lekki district two years ago, it also had to provide a service most Nigerians still dream of: electricity for 24 hours a day.

The developers of the hotel installed three huge diesel-powered generators, in essence a mini-power station for the facility. These had to be engineered to kick in at a moment’s notice, without blowing the electronic devices of guests.

On a good day the whole of Nigeria – a country of 150 million people – only gets about a third of the electricity available to Abu Dhabi. So these generators are not emergency backup, instead they are the primary source of energy for the hotel.

Providing electricity and water are among the biggest items on many hotels’ operating costs.

Some countries have also had to contend with militant attacks, and many hotels in Kenya now provide additional security for guests. According to the country’s national bureau of statistics the efforts are paying off. Tourist arrivals through Kenya’s two main airports increased by 9.6 per cent from 170,374 in the second quarter of last year to 186,685 tourists during the same period this year.

Increasingly, business is challenging leisure tourism as the main reason for African visits. According to the Johannesburg consultancy Corporate Traveller, nine out of 10 business travellers to African countries stay in four or five-star hotels, costing at least 3,000 rand (Dh772) per night. Almost half of these guests stay in five-star hotels, while most of the rest opt for four-star lodging.

“Proximity to work site, office or meeting venue is the primary driver in what accommodation is selected,” says Raylene Pienaar, Corporate Traveller’s general manager. “Almost all customers surveyed indicate these as determining factors; this is often due to the traffic conditions in the destination city.”

Ms Pienaar says travellers also prefer chauffeur-driven cars to self-drive rentals. Other considerations for business travellers include Wi-Fi access. Security, too, plays a part in decision-making. Executives travelling to countries such as Nigeria are concerned about kidnapping and will select hotels in which they can hold meetings, or that are close to their venue.

Visas remain an immediate restriction to corporate travel. South Africa, for instance, introduced tightened visa requirements a couple of years ago that resulted in an immediate drop in total arrivals. Following an outcry from tourism operators and airlines these were lifted last October. Arrivals jumped by 16 per cent the same month, according to data released by PwC.

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Investors keeping close watch on South Africa power struggle

Johannesburg // South Africa’s struggling economy took a hit this week after the country’s prosecuting authority said it would press ahead with corruption charges against the finance minister.

On Tuesday the head of South Africa’s National Prosecuting Authority Shaun Abrahams said the organisation would press ahead with its bid to bring Pravin Gordhan to court to face charges that he illegally helped a former colleague retire early with benefits to which he was not entitled.

The news sent the country’s currency plunging and wiped nearly 50 billion rand (Dh12.78bn) off the value of the Johannesburg Stock Exchange.

Mr Gordhan’s impending arrest is widely viewed as an attempt to remove him from office as part of an internal power struggle within the ruling African National Congress. His job security is being closely watched both at home and by international investors, who see him as a fiscal bodyguard against state overspending.

“The announcement about Gordhan will exacerbate an already negative investor sentiment towards the country,” said Prof Philippe Burger from the department of economics at the University of the Free State. “To investors it is a sign of an ongoing slow erosion of the country’s key institutions, and heightens fears that once the Treasury falls, we may see a profligate fiscus, mounting public debts and even more corruption.”

Mr Gordhan is seen as the key obstacle to the ambitions of a political faction led by his boss, the president Jacob Zuma, to build a fleet of nuclear power stations as well as several other big budget capital projects.

These projects have long been the subject of speculation in the local media, which has repeatedly linked them to a group of influential businesspeople who are part of the president’s inner circle.

The country’s constitution requires Treasury approval for large capital projects, and Mr Gordhan has consistently held back his signature over afford­ability concerns.

Mr Zuma has shied away from simply firing Mr Gordhan because the last time he replaced a finance minister the markets reacted violently and sent the local currency into a nosedive.

In December 2015 Mr Zuma fired his finance minister and replaced him with a political ally. But the market reaction forced Mr Zuma to appoint Mr Gordhan as finance minister a few days later.

Mr Gordhan’s opponents may be gambling that removing him through fraud charges would blunt investor reaction. If so, it appears they bet wrong.

“The immediate impact on South African markets would be negative – with a much more pronounced reaction if Gordhan is removed as finance minister,” said Razia Khan, head of economics at London-based Standard Chartered Bank.

Mr Gordhan’s legal troubles have come at a particularly bad time for the country. Ratings agencies will conduct a review in December that could result in South African debt being cut to junk status, Ms Khan added.

At the same time countrywide student protests have shut down universities and led to running battles in the streets between protesters and police.

South Africa is also struggling with record unemployment with about a third of its working age population jobless.

Mining, the biggest private sector employer, has been especially hard hit by a weakening demand for raw materials. Industry body Chamber of Mines has also reacted strongly to Mr Gordhan’s prosecution.

“The chamber’s view is that no individual is above the rule of the law,” it said in a statement. “At the same time, legal means should not be used to opportunistically pursue allegedly nefarious agendas under the guise of justice and due process. The chamber is deeply concerned about the state of public institutions in South Africa and will raise the matter with the presidency.”

Many have taken to social media to support the minister.

Ilunga Ntengu, who runs a Joh­annesburg engineering firm but was in Europe as the news broke, said on Twitter: “Out here in Germany telling Germans to invest in South Africa and guess what? Shaun Abrahams charges #PravinGordhan and we have to explain it”.

Mr Gordhan himself has denied wrongdoing and insists he is the victim of a political conspiracy to get him out of office. In a statement he said he would continue to do his job and manage state finances.

“The cause of defending ethical leadership in government and throughout society is too important to allow ourselves to be deterred by this kind of harassment,” he said. “The fight against corruption‚ maladministration‚ and waste of public resources will continue.”

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South African finance minister in the firing line on corruption charges

Johannesburg // South Africa’s struggling economy took a hit this week after the country’s prosecuting authority said it would press ahead with corruption charges against the finance minister.

On Tuesday the head of South Africa’s National Prosecuting Authority Shaun Abrahams said the organisation would press ahead with its bid to bring Pravin Gordhan to court to face charges that he illegally helped a former colleague retire early with benefits to which he was not entitled.

The news sent the country’s currency plunging and wiped nearly 50 billion rand (Dh12.78bn) off the value of the Johannesburg Stock Exchange.

Mr Gordhan’s impending arrest is widely viewed as an attempt to remove him from office as part of an internal power struggle within the ruling African National Congress. His job security is being closely watched both at home and by international investors, who see him as a fiscal bodyguard against state overspending.

“The announcement about Gordhan will exacerbate an already negative investor sentiment towards the country,” said Prof Philippe Burger from the department of economics at the University of the Free State. “To investors it is a sign of an ongoing slow erosion of the country’s key institutions, and heightens fears that once the Treasury falls, we may see a profligate fiscus, mounting public debts and even more corruption.”

Mr Gordhan is seen as the key obstacle to the ambitions of a political faction led by his boss, the president Jacob Zuma, to build a fleet of nuclear power stations as well as several other big budget capital projects.

These projects have long been the subject of speculation in the local media, which has repeatedly linked them to a group of influential businesspeople who are part of the president’s inner circle.

The country’s constitution requires Treasury approval for large capital projects, and Mr Gordhan has consistently held back his signature over afford­ability concerns.

Mr Zuma has shied away from simply firing Mr Gordhan because the last time he replaced a finance minister the markets reacted violently and sent the local currency into a nosedive.

In December 2015 Mr Zuma fired his finance minister and replaced him with a political ally. But the market reaction forced Mr Zuma to appoint Mr Gordhan as finance minister a few days later.

Mr Gordhan’s opponents may be gambling that removing him through fraud charges would blunt investor reaction. If so, it appears they bet wrong.

“The immediate impact on South African markets would be negative – with a much more pronounced reaction if Gordhan is removed as finance minister,” said Razia Khan, head of economics at London-based Standard Chartered Bank.

Mr Gordhan’s legal troubles have come at a particularly bad time for the country. Ratings agencies will conduct a review in December that could result in South African debt being cut to junk status, Ms Khan added.

At the same time countrywide student protests have shut down universities and led to running battles in the streets between protesters and police.

South Africa is also struggling with record unemployment with about a third of its working age population jobless.

Mining, the biggest private sector employer, has been especially hard hit by a weakening demand for raw materials. Industry body Chamber of Mines has also reacted strongly to Mr Gordhan’s prosecution.

“The chamber’s view is that no individual is above the rule of the law,” it said in a statement. “At the same time, legal means should not be used to opportunistically pursue allegedly nefarious agendas under the guise of justice and due process. The chamber is deeply concerned about the state of public institutions in South Africa and will raise the matter with the presidency.”

Many have taken to social media to support the finance minister.

Ilunga Ntengu, who runs a Joh­annesburg engineering firm but was in Europe as the news broke, said on Twitter: “Out here in Germany telling Germans to invest in South Africa and guess what? Shaun Abrahams charges #PravinGordhan and we have to explain it”.

Mr Gordhan himself has denied wrongdoing and insists he is the victim of a political conspiracy to get him out of office. In a statement he said he would continue to do his job and manage state finances.

“The cause of defending ethical leadership in government and throughout society is too important to allow ourselves to be deterred by this kind of harassment,” he said. “The fight against corruption‚ maladministration‚ and waste of public resources will continue.”

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Weather technology helps Africa's farmers plan for the future

CAPE TOWN // Indigenous people such as Bedouin tribesmen and African farmers have long depended on traditional knowledge to help them coax food from the earth.

Now a researcher hopes to meld this with science to create a drought-busting tool.

Muthoni Masinde grew up in Kenya and currently works in South Africa as a weather scientist using advanced data-collecting tools to help to predict rain patterns. She is now combining the knowledge acquired through her PhD in computer sciences with the lore of local communities in order to map rainfall.

“People have always depended on signs to predict weather and use them as a way of telling when to plant crops or prepare for poor rains,” she says. “It can be the appearance of a type of pale frog, or the cattle acting skittish.”

However, these methods would depend on luck as much as anything else and farmers could end up making wrong decisions. For instance, planting too soon before the rains come could mean the crops die and the farmer is then left with no seeds and no way of replacing them.

“Commercial farmers are better able to mitigate risk through crop insurance and bank loans as well as technical advice,” Ms Masinde says. “Small-scale farmers have to carry the entire risk when they plant, which is why they need to have accurate information.”

What is needed is a scientific element to shore up local knowledge so that farmers can make the right decisions. Ms Masinde has devised a system of electronic sensors which can be placed with local communities and used to gather data necessary for computer modelling.

The wireless sensors measure humidity and upload the data to a central server for analysis. These sensors are built from off-the-shelf parts and are considerably cheaper than conventional weather stations. This will allow them to be widely distributed.

At the same time researchers will gather local knowledge that will also be sent to the central server.

The combined information will be used to draw up a picture of the microclimate for participating communities, effectively providing them with their own weather service. The information is returned to the community via a mobile phone service such as SMS.

“This is a tool developed specifically for small farmers,” says Ms Masinde. “We can’t stop drought but we can help farmers make decisions that will help them prepare for it.”

Mobile phones are used to spread information since few farmers have computers or internet access, while most own a handset. Messages are simple and non-technical, for example: “There will be adequate rain during the first two weeks of the season; you are advised to plant early to take advantage of this rainfall”.

The system has been tested in Mozambique, Kenya and South Africa’s KwaZulu-Natal province. Its value goes beyond the commercial, as more than 70 per cent of Africa’s rural people depend on agriculture for subsistence.

So successful has it been that Ms Masinde’s work has attracted the attention of the South African Weather Service (SAWS), the largest on the continent. The institution recently approached her and set up a collaborative effort to track weather patterns and work on drought prevention.

“The more information and history we have the better we will become at anticipating weather anomalies such as drought,” says the SAWS senior manager of research Nhlonipho Nhlabatsi.

“The old guys living on a farm know the patterns of their area and this can now be added to our database to help determine the likelihood and timing of rain.”

SAWS already draws on a network of experts and scientists based at universities around the country. It is one of the most research-intensive organisations in Africa.

“Water is a precursor to everything we need – it is essential for food security,” Mr Nhlabatsi says. Research is especially important now as the country undergoes a crippling drought. Eight of South Africa’s nine provinces have been declared disaster areas because of the lack of rain. According to SAWS this past year has seen the lowest rainfall since 1904.

Only Gauteng, the country’s industrial heartland with little agriculture is not a declared disaster area. However, residents of Johannesburg live with severe water use restrictions and face heavy fines for overuse.

Farmers have been resorting to slaughtering cattle as herds starved from lack of grassland feed. South Africa only managed to produce 7.2 million tonnes of maize, down 28 per cent from last year’s 9 million tonnes. The country needs about 11 million tonnes annually, which means it will have to import some 4 million tonnes to feed itself. A study by South Arica’s First National Bank estimates the imports will cost around 22 billion rand (Dh5.88bn).

Usually, rain falls in the spring for most of the country, which is the current season in the southern hemisphere. As yet there is little sign of it. Not only is South Africa affected, neighbouring countries such as Zimbabwe, Malawi and Mozambique are also struggling with a lack of water. Recently the UN Food and Agriculture Organisation said about 23 million farmers in southern Africa needed urgent assistance as the drought depletes their resources.

While drought cannot be prevented, good planning should soften its effects, Mr Nhlabatsi says. Rather than treating drought as a natural disaster, policy planners should view it as a recurring anomaly and make preparations.

Farmers can build up feedstocks and water-saving schemes can be implemented ahead of time to ensure that dams are full. The national treasury can prepare for the expected increased expenditure on imports, Mr Nhlabatsi says.

At present, officials and farmers tend to ignore warnings and hope for the best instead of preparing for the worst.

“We knew this [drought] was coming,” Mr Nhlabatsi says. “What we needed was for people to listen to scientists and prepare.”

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Weather technology helps Africa's farmers plan for the future

CAPE TOWN // Indigenous people such as Bedouin tribesmen and African farmers have long depended on traditional knowledge to help them coax food from the earth.

Now a researcher hopes to meld this with science to create a drought-busting tool.

Muthoni Masinde grew up in Kenya and currently works in South Africa as a weather scientist using advanced data-collecting tools to help to predict rain patterns. She is now combining the knowledge acquired through her PhD in computer sciences with the lore of local communities in order to map rainfall.

“People have always depended on signs to predict weather and use them as a way of telling when to plant crops or prepare for poor rains,” she says. “It can be the appearance of a type of pale frog, or the cattle acting skittish.”

However, these methods would depend on luck as much as anything else and farmers could end up making wrong decisions. For instance, planting too soon before the rains come could mean the crops die and the farmer is then left with no seeds and no way of replacing them.

“Commercial farmers are better able to mitigate risk through crop insurance and bank loans as well as technical advice,” Ms Masinde says. “Small-scale farmers have to carry the entire risk when they plant, which is why they need to have accurate information.”

What is needed is a scientific element to shore up local knowledge so that farmers can make the right decisions. Ms Masinde has devised a system of electronic sensors which can be placed with local communities and used to gather data necessary for computer modelling.

The wireless sensors measure humidity and upload the data to a central server for analysis. These sensors are built from off-the-shelf parts and are considerably cheaper than conventional weather stations. This will allow them to be widely distributed.

At the same time researchers will gather local knowledge that will also be sent to the central server.

The combined information will be used to draw up a picture of the microclimate for participating communities, effectively providing them with their own weather service. The information is returned to the community via a mobile phone service such as SMS.

“This is a tool developed specifically for small farmers,” says Ms Masinde. “We can’t stop drought but we can help farmers make decisions that will help them prepare for it.”

Mobile phones are used to spread information since few farmers have computers or internet access, while most own a handset. Messages are simple and non-technical, for example: “There will be adequate rain during the first two weeks of the season; you are advised to plant early to take advantage of this rainfall”.

The system has been tested in Mozambique, Kenya and South Africa’s KwaZulu-Natal province. Its value goes beyond the commercial, as more than 70 per cent of Africa’s rural people depend on agriculture for subsistence.

So successful has it been that Ms Masinde’s work has attracted the attention of the South African Weather Service (SAWS), the largest on the continent. The institution recently approached her and set up a collaborative effort to track weather patterns and work on drought prevention.

“The more information and history we have the better we will become at anticipating weather anomalies such as drought,” says the SAWS senior manager of research Nhlonipho Nhlabatsi.

“The old guys living on a farm know the patterns of their area and this can now be added to our database to help determine the likelihood and timing of rain.”

SAWS already draws on a network of experts and scientists based at universities around the country. It is one of the most research-intensive organisations in Africa.

“Water is a precursor to everything we need – it is essential for food security,” Mr Nhlabatsi says. Research is especially important now as the country undergoes a crippling drought. Eight of South Africa’s nine provinces have been declared disaster areas because of the lack of rain. According to SAWS this past year has seen the lowest rainfall since 1904.

Only Gauteng, the country’s industrial heartland with little agriculture is not a declared disaster area. However, residents of Johannesburg live with severe water use restrictions and face heavy fines for overuse.

Farmers have been resorting to slaughtering cattle as herds starved from lack of grassland feed. South Africa only managed to produce 7.2 million tonnes of maize, down 28 per cent from last year’s 9 million tonnes. The country needs about 11 million tonnes annually, which means it will have to import some 4 million tonnes to feed itself. A study by South Arica’s First National Bank estimates the imports will cost around 22 billion rand (Dh5.88bn).

Usually, rain falls in the spring for most of the country, which is the current season in the southern hemisphere. As yet there is little sign of it. Not only is South Africa affected, neighbouring countries such as Zimbabwe, Malawi and Mozambique are also struggling with a lack of water. Recently the UN Food and Agriculture Organisation said about 23 million farmers in southern Africa needed urgent assistance as the drought depletes their resources.

While drought cannot be prevented, good planning should soften its effects, Mr Nhlabatsi says. Rather than treating drought as a natural disaster, policy planners should view it as a recurring anomaly and make preparations.

Farmers can build up feedstocks and water-saving schemes can be implemented ahead of time to ensure that dams are full. The national treasury can prepare for the expected increased expenditure on imports, Mr Nhlabatsi says.

At present, officials and farmers tend to ignore warnings and hope for the best instead of preparing for the worst.

“We knew this [drought] was coming,” Mr Nhlabatsi says. “What we needed was for people to listen to scientists and prepare.”

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Lack of rain has wider effects than simply the loss of crops, a study by the South African Weather Service (SAWS) shows.

The country is now in the grip of its lowest rainfall in more than a century, and previous droughts created a legacy that lingers today. One in the early 1990s resulted in thousands of people abandoning farms to move to the cities, never to return.

Nasa scientists have pointed to a similar event in the Middle East that forced millions of people out of the countryside to towns, and say this is a significant contributor to the conflict in Syria.

A similar mass movement of people is now underway across the southern African region, according to Refugees International. More than four million people face hunger in Zimbabwe and many are moving into the country’s cities or fleeing into South Africa.

Zimbabwe itself is at risk of becoming overwhelmed by people fleeing there from Malawi, Mozambique and other countries hit by poor rainfall.

The resulting strain on Zimbabwe’s food sector means that millions will require assistance. “World Food Program (WFP) and partners are significantly augmenting operations to reach 13.2 million people by the peak of the lean season in January 2017,” the charity says. Emergency food provision will be needed until next April and it is expected to cost US$636 million, the WFP adds.

For commercial farmers, drought adds to the ongoing struggle of staying in business and in South Africa farmers will need as much as 16.6 billion rand (Dh4.44bn) in the next six months in state aid, farmers union Agri SA say, further straining an already struggling economy. This will be needed to fund feed purchases, cover grants and interest-rate subsidies for growers in financial distress, and also to pay workers.

Another result of drought is one South Africans know all too well; runaway fire. These flare up during hot windy days and destroy remaining grasslands that farmers depend on to feed their cattle. They also destroy large commercial agricultural operations such as timber plantations and fruit orchards. Once destroyed these take up to a decade to return to full production.

Fires also take lives. A devastating conflagration in 1992 killed nine people and destroyed millions of hectares of farmland, SAWS noted.

The country’s famed wildlife parks are also being hit hard. The Kruger Park, which is about the size of Belgium, said last month it would begin culling – shooting – animals to reduce pressure on the land.

Hippos and buffalo will be initially targeted as both species are plentiful. Hippos are especially vulnerable to drought as the pools in which they spend their time dry up and leave them exposed to the sun, which will eventually kill them. By reducing their numbers park rangers hope to reduce suffering and increase the survival rates among the rest.

Meat from the cull will be distributed free to communities living around the park, Kruger Park officials have said.

Cattle farms are also suffering. Herds have been reduced by around 15 per cent, which has resulted in a spike in the cost of dairy products. As the country enters the rainy season, the hope is that the drought will end soon. That may be a forlorn hope.

“There is no indication that we are at an end yet,” says the SAWS senior manager of research Nhlonipho Nhlabatsi. “The data we are seeing suggests drought conditions will persist for a while longer.”

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Acwa's Redstone solar project hits cost roadblock

Cape Town // A Saudi Arabian energy company’s pioneering molten salt solar plant in South Africa is under threat from the state electricity utility unhappy with the cost of renewables.

Riyadh’s Acwa Power together with the US company SolarReserve is developing the Redstone project, a molten salt central receiver in the Northern Cape province of South Africa. This is the first in the continent of a new generation of solar plants that are garnering interest around the world.

The technology uses a ­tower containing salt that is then ­heated by mirrors reflecting sunlight in a process known as concentrated solar power (CSP). As the salt heats, it is used to boil water which then turns a steam turbine, thereby generating electricity.

The novelty of using salt as storage is that it stays hot long after the sun is down, up to 12 hours in the Redstone case. Unlike photovoltaic solar, passing clouds have little effect on it. Redstone incorporates 1.2 giga­watt hours of energy storage, which enables it to produce during peak periods.

Owing to its ability to generate electricity when the sun is down or the array is under cloud cover, Masdar Institute scientists in Abu Dhabi are also looking at developing energy storage for the solar industry, The National has reported.

The Redstone project was slated for completion by 2018, and the South African government has already approved it. One of the last steps before construction was the signing of a purchase agreement with the state energy corporation Eskom.

Media reports say Eskom had twice declined to sign the agreement during a meeting with Acwa representatives in late Aug­ust, a claim which the utility refutes. “Contrary to some media reports, Eskom has not decided to put on hold any renewable energy contracts,” Eskom spokesman Khulu Phasiwe told The National.

“In fact we have signed power purchase agreements with all successful bidders and we’re committed to signing all the remaining contracts under the current bid window 4.5 of the department of energy [DoE],”said Mr Phasiwe.

However, he did say that the utility has submitted a written request to the DoE asking for clarity or dialogue regarding the next contracting phase of independent power producers (IPPs) beyond the current window. “This does not mean that a decision has been taken to abandon the IPPs,” he said. The DoE could not be reached for comment.

That has not stopped the Eskom chief executive Brian Molefe from saying on a number of occasions that the utility is unhappy with contracts that compelled it to buy electricity from solar and wind providers, even when extra electricity was not needed.

Eskom is especially un­happy with the guaranteed price it paid to providers, while limited by law in what it could charge consumers for electricity. “We are also concerned about the prices we need to pay for some of these projects,” Mr Phasiwe says. “Some of them sell electricity to Eskom for 5,000 rand [Dh1,277] per megawatt hour [MWh], and yet we are expected to sell the same electricity at 800 rand per MWh. That is not sustainable.”

The electricity price is set by an independent body, the National Energy Regulator of South Africa (Nersa), which has consistently rejected Eskom’s appeal for price hikes of up to 25 per cent. Nersa spokesman Charles Hlebela says the regulator had not been approached about increasing tariffs.

According to the utility, the cost of the project, including a 20-year supply arrangement, had risen to 62 billion rand. “For Eskom to commit to 62bn for something that we don’t need? In any other company that would be called a wasteful expenditure.” Mr Phasiwe says.

Yet a standard power purchase agreement for a solar project, particularly with a public utility, includes payment for all electricity generated, not just what is used at specific times. This is what makes such projects bankable.

The utility faces a funding crisis with a looming 28bn rand gap at a time when bond holders are shying away from its debt issue. Last month Futuregrowth Asset Management, South Africa’s biggest specialist fixed-income manager, said it would no longer offer loans or roll over existing debt for state companies including Eskom, citing questions over corporate governance.

In the meantime, those com­panies that are still waiting for final contracts say they are in a bind.

“The delays make planning very difficult for our members and we are concerned that this may result in projects being abandoned,” says the South African Photovoltaic Industry Association (Sapvia). Up to 49 projects are affected and many have already spent money securing land and deploying technical experts, according to the association.

“Projects in preferred bidder status have spent up to 15 million rand on securing land, legal fees, bidding and design. Abandoning a project means this money is wasted and thousands of jobs may never materialise,” Sapvia warns.

While both Acwa and SolarReserve say they are not in a posi­tion to comment on the Redstone negotiations at this time, SolarReserve says it is a “long-term player in South Africa so we will be patient”.

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Platinum deficit to widen this year

Declining investment by platinum producers in South Africa, the world’s largest supplier, has begun to weigh on supply of the metal used for investment as well as jewellery and autocataly­tic converters, new data shows.

Yesterday, the World Platinum Investment Council (WPIC) released data that showed show a market deficit of 520 000 ounces for 2016, from 455 000 ounces forecast in the previous quarter.

South Africa produces about 80 per cent of the world’s supply from the Bushveld region in the north of the country.

Mining is cash-intensive and over the past decade companies have cut back on investment into new production to save costs amid an environment of a stagnating platinum price.

“Our research in 2015 showed that between 2006 and 2015 capital expenditure on platinum mining in South Africa reduced from nearly US$4 billion per annum to below $1bn per annum,” said Trevor Raymond, director of research at the World Platinum Investment Council. “Annual refined platinum output from South Africa was 5.4 million ounces in 2006 compared to the forecast level of 4.19 million ounces in 2016.”

The WPIC noted that the extent to which vaulted investor holdings are available to meet the forecast deficit was shrinking.

Stock levels were down more than 50 per cent since 2012, and positive sentiment has reduced the propensity of holders to sell platinum to meet deficits.

As such, the WPIC said, it was worth medium-term investors taking into account the reduced likelihood of investor sales to meet deficits.

Jewellery remained a key growth market, Mr Raymond said. “Platinum jewellery manufacture in 2015 was 35 per cent of demand.”

He added that platinum jewellery is actively promoted in its main growth markets of China, India and the US by industry bodies such as the Platinum Guild International.

The average platinum price fell to $1,627 an ounce from $2,199 an ounce a year ago, Bloomberg data shows.

Meanwhile demand would be robust this year as overall mining supply would fall 3 per cent, and recycling would probably decline 2 per cent, the WPIC data show.

The overall picture for platinum in 2016, which has enjoyed a significant rebound in price over the course of the first half of the year, continues to be one of supply constraint, robust demand and ultimately a large supply/demand deficit in 2016, Mr Raymond said.

Other leading industry figures have also warned of constricted supply in the years ahead.

“There is an absolute lack of investment in the platinum industry,” Terence Goodlace, the chief executive of the world’s second largest producer, Impala Platinum, told shareholders in Johannesburg at the company’s results presentation on Monday.

Mines typically plan up to 10 years ahead when building new shafts, and the window to meeting increased demand was closing fast.

“We’re not too far from 2020, 2021 and 2022, when supply from this country is going to drop off a cliff,” Mr Goodlace said.

Wade Napier, an Avior Capital Markets investment analyst in Johannesburg, said platinum itself was set to benefit from continued growth in demand against flat supply.

“Overall the outlook is positive for the price, and we expect a material change to manifest by 2018.”

Mr Napier noted that while jewellery sales had “disappointed”, demand for catalytic converters to limit vehicle emissions were likely to grow.

“On the investment side, it’s hard to predict how people will react. At some point investors will want to take profits and this could influence the price at certain points.”

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The South African construction firm Murray & Roberts, which helped transform the UAE skyline by raising landmarks such as the Burj Al Arab, is to quit the building sector.

The surprise announcement was made this week as the 114-year-old company released its interim results for the six months to December 31.

The Johannesburg-based company is to focus on three core sectors in future – underground mining, oil and gas and power and water said Henry Laas, the chief executive. The move marks the exit of a company that was an integral part of the UAE’s construction charge since the 1990s.

“The decision to dispose of the infrastructure and building businesses supports the group’s long-term strategy to focus its business on the global natural resources markets, and follows an extended period of careful planning and consideration,” Mr Laas said.

The company has been saying for some time now it wanted to exit from construction, which it no longer considers to be central to its business. “Nothing obvious comes to mind, although they have been describing their building and infrastructure business in South Afirca and the Middle East as noncore for some time,” an unnamed analyst told Business Day newspaper in Johannesburg.

Founded in 1902, the company had in recent years become closely associated with the UAE’s surging construction drive. The Burj Al Arab, which it built in collaboration with the Al Habtoor Group, was the Murray & Roberts’ first project award in the UAE and it oversaw building the main structure and interior fit-out of the 7 star, suites-only hotel.

Completed in 1999, the Burj Al Arab set the pace for many architecturally significant buildings that have come to dominate the UAE’s profile.

In the years since then, Murray & Roberts has grown throughout the GCC with its headquarters based in Dubai and operations in Abu Dhabi, Qatar, Saudi Arabia, Bahrain, Oman and Kuwait.

Murray & Roberts has also participated in constructing landmarks such as the Shangri-La Hotel and Goldcrest Views towers in Dubai.

It built the Al Attar Business Tower and participated as a subcontractor in The Palms. Murray & Roberts is also behind the raising of the 33 story National Bank of Abu Dhabi.

In South Africa, the company was for many years the country’s largest construction firm, building the Cape Town stadium for the 2010 Football World Cup, for instance.

However, the group has struggled with a fall in commodity prices and a softening construction sector in the Arabian Gulf. It has also had to contend with outstanding legal claims such as a continuing dispute relating to its participation in the construction of Concourse B at Dubai International airport. The group is still trying to settle an outstanding payment for the work, for an undisclosed sum.

At the results presentation, Mr Laas said that total outstanding claims came to two billion rand (Dh51m), which included the amount it was demanding from Dubai International. This figure also covered another dispute relating to the construction of a light rail network in South Africa.

The group reported revenue of 15.3bn rand, down from the 15.9bn rand in the corresponding period last year.

Mr Laas said that oil and gas and underground mining had traditionally contributed 80 per cent of group profit. The company would now focus on oil and gas in Australasia and the US and Canada. Underground mining would concentrate on South Africa and the rest of the continent, as well as Australia, Canada and the US.

There are no plans to pursue further projects in the Middle East, a company spokesman confirmed. Outstanding construction work in the UAE will be completed by next year with no further work planned.

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