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How Gaddafi’s fall will shake Africa

Discussion in 'International Forum' started by Invisible, Feb 27, 2011.

  1. Invisible

    Invisible Admin Staff Member

    Feb 27, 2011
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    [​IMG] Anti-government protesters in the eastern city of Benghazi. Photo/AFP

    By JULIUS BARIGABA - The East African
    February 27 2011

    Captains of Libyan business holdings in East Africa were holed up in meetings last week as the civil revolution sweeping the Arab world reached Tripoli, threatening Libyan leader Muammar Gaddafi’s four-decade grip on the North African country.

    According to sources at the meeting, the agenda was to consider options for survival should the regime in Tripoli collapse.

    Of particular concern were the huge debts racked up by Libya’s key enterprises, largely taken on in an ego-trip fuelled by the assurance that Gaddafi was always at hand to bail them out every time they ran short of cash.

    Governance, a key to success in any business, has according to those in the know been an issue for these enterprises, for whom profit was never the central motivator.

    The oil producing giant has used its wealth to invest outside of Libya in telecommunications in Uganda, Rwanda, Zambia, Southern Sudan, Sierra Leone, Ivory Coast, Niger, Guinea Conakry and Benin; it has interests in hotels, textile manufacturing and food processing in Uganda, as well as oil engineering and retail in Kenya and Uganda.

    The Libyan Arab Portfolio, LAP Green, also has interests in telecoms and hotels in Rwanda as well as Kenya.

    Most of these businesses however, are insolvent and currently balanced on a knife-edge, with the possibility of their collapse no longer far-fetched should the Tripoli money tap dry up.

    They have been kept in operation through regular cash injections from Tripoli and the personal influence of the beleaguered Col Gaddafi.

    Out of LAP’s six or so businesses in Uganda, only National Housing and Tropical Bank seem to have sufficient ballast.

    The others are financially ailing. Sources say Uganda Telecom Ltd, in which LAP Green holds a 69 per cent stake, is technically insolvent, as it owes its competitors more than $13 million in interconnection fees.

    Unable to borrow commercially, it was looking to Tripoli for a bailout.

    According to sources, the competitors were planning to pull the plug on UTL as early as last November but were prevailed upon by industry regulator UCC to hold their horses until after the February 18 presidential polls.

    The health of Libya’s investments in Rwanda and Kenya is no sounder.

    The uprising in Libya has opened a debate across the region about whether these companies can survive without Gaddafi’s largesse, and the impact of their collapse on the regional economy.

    Established with $5 billion worth of investment capital under General People’s Decree No. 15 in 2006, LAP is supervised by Libya’s sovereign wealth fund, the Libyan Investment Authority (LIA), which oversees the spending of Tripoli’s oil dollars.

    However, LIA is controlled by the Gaddafi family and close associates of his regime.

    In short, it is not clear whether LAP is a government investment vehicle or whether it has been fused with the Gaddafi family holdings.

    Wary of this obscure setup, captains of industry fear a spectacular fallout in Uganda where the Tripoli regime controls major stakes in various businesses. Uganda Telecom — LAP’s flagship company in Uganda — tops the list of the businesses that will be hardest hit in the wake of Gaddafi’s gloom.

    Across the border in Rwanda, another LAP Green telco, Rwandatel, is also struggling.

    In 2008, the Libyans bought 80 per cent of the former government-owned company at $100 million, but it is now playing catch-up to the MTN and Tigo brands.

    OiLibya operates mainly in Kenya in the competitive petroleum retail field, which giants like Shell have quit to concentrate on exploration and prospecting.

    However, consumers of petroleum products in Kenya, Uganda and Rwanda, have since 2008, been held hostage by oil engineering firm Tamoil East Africa, a subsidiary of Tamoil Libya that was supposed to have completed the Eldoret-Kampala oil pipeline and started its extension to Kigali by now.

    The project is yet to get out of first gear, as officials point at financial, technical and administrative delays.

    This has in fact become one of East Africa’s most delay-prone infrastructure projects, with the cost shooting up from $80 million in 2007 when the contract was awarded, to nearly $300 million today.

    So, effectively, should Gaddafi’s money taps dry up, East Africa will be the worse for it. Take UTL, for instance.

    Sources reveal that the company cannot borrow because its revenue flow cannot support any financing from commercial banks, a scenario that leaves it with only the Tripoli option.

    An insider told The EastAfrican that its mobile and landline services have not been making money and have saddled the company’s cash cow — the Internet and data division — with liabilities.

    In contrast, when LAP Green came into the picture in 2006, the company’s fortunes were looking up as its capex increased tremendously with cash injections from Tripoli.


    Financial audits show that UTL has been limping for a while, and one government-commissioned audit established that the company is insolvent and owes other operators some Ush30 billion (about $13 million) in interconnection fees related to losses suffered in discounting calls in the tariff wars.

    LAP owns 69 per cent of UTL, having bought out the Ucom consortium that had a majority 51 per cent stake in 2000 when the company was privatised.

    In unclear circumstances, in a capital-debt swap, the Uganda government would later cede 18 per cent of its minority holding to the Libyan outfit, to remain with 31 per cent.

    UTL was, however, unable to hold its own against the other strong brands in the market, especially MTN and Zain (now Airtel), and the company fell behind in terms of subscriber numbers, revenue and profit, the audit reveals.

    In the last quarter of 2010, competitors threatened to lock UTL’s calls out of their system due to the outstanding debt but the Uganda Communications Commission intervened, asking both MTN and Airtel to stay their hand till after the elections.

    As if to worsen UTL’s problems, the crisis in Libya became more intense immediately after the Uganda election.

    “It’s true UCC intervened, and gave the company that time to resolve the matter. They could have got the money from the [Libyan] parent company, but now the timing of this uprising is most unfortunate for UTL. Their competitors are ready to shut out their customers,” a source at UCC told The EastAfrican.

    LAP Green managing director Abdulbaset Elazzabi was unavailable for comment, but an official said that without a doubt, “The situation in Libya will have an impact on all our operations. It has caused a great deal of concern here.”
  2. cartura

    cartura JF-Expert Member

    Feb 27, 2011
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    It was a positive move for Libyan companies to invest in other Afican countries. Tatizo linalokuja ni kwamba utakuta mengi ya makampuni hayo yana connections na viongozi wa kisiasa na ndugu zao; so when the regime shakes, everything goes under the drain
  3. S

    Son of Alaska JF-Expert Member

    Feb 27, 2011
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    dictators should hand over power,but the ramnifications of the aftermath will shock africa to her foundations,in the case of africa its better the devil you know.when the despots are long gone,citizens who disposed them will find nothing has changed,standards of living will remain the same-people will gain freedom but bellies will remain empty,what next-change government again-FREEDOM has a terrible price-lets wait and see
  4. Askari Kanzu

    Askari Kanzu JF-Expert Member

    Feb 27, 2011
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    Others that will suffer include the African Union of which Libya was one of the biggest financial contributors. Naona nchi nyingi za Africa zitayumba kiuchum. Hii hapa chini ni jedwali inayoonyesha mikopo kutoka Libya kwa nchi tofauti za ki-Africa:

    (MILLION USD)* (incl.
    Central African
    Republic 11.32 million euros** 0
    Mali 66.26
    Tunisia 63
    Madagascar 102.92
    Seychelles 3
    Pakistan 53.5
    Burkina Faso 16
    Tanzania 101
    Rwanda 10.04
    Burundi 5
    Congo Republic 18
    Gambia 6
    Ethiopia 243
    Nicaragua 123.38
    Cuba 10.02
    Guinea 20
    Guinea-Bissau 3
    Chad 5
    Niger 22.64
    Mozambique 105.33
    Mauritania 72.4
    Egypt 15
    Somalia 11.75
    Sudan 610.19
    Eritrea 25.66
    Grenada 5
    ex-Yugoslavia 96.57
    Guyana 15
    Syria 215
    Yemen 16.2

    The documents also states that the following countries have
    fully repaid loans to Libya: Hungary, Poland, Benin, Vietnam,
    Panama, Ghana, Algeria, Uganda, Gabon

    * Amounts in millions of U.S. dollars unless otherwise stated
    (Compiled by Ali Shuaib; Editing by Giles Elgood)