The hotspots of African investment

"Laying the first stone - a turning point for Chad"

By Briony Hale BBC News Online business staff

Foreign investment is seen as one of the best ways to kickstart the development of African economies.

Africa's vision for future growth - shortly to be discussed by the world leaders at G8 - is to win yearly investments of $64bn, more than five times last year's total.

BBC News Online takes a closer look at some of the continent's investment hotspots.

Click below to read a case study

Tapping Chad's oil dreams

Mozambique metal outshines Coca-Cola

Building phone networks in a war zone

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Chad's pipe dreams

"Laying the first stone, a turning point for the Chadian people," reads the banner at the inauguration of ExxonMobil's oil project.

Chad's hopes are so high because its other prospects are so low.

This one ambitious investment is projected to account for 45-50% of Chad's national budget when it starts pumping oil in 2004.

As the fifth poorest country in the world, Chad's annual exports total a mere $125m and it has a gross national product of just $1bn.

Now, a foreign consortium led by ExxonMobil has invested $3.7bn in developing oil fields and constructing a pipeline through Cameroon for export from an offshore terminal.

Chad is far from an ideal choice of where to set up business: it has a poor record of human rights while conflict and rebel groups have been endemic.

"Dealing with conflict has been an integral part of our role as both a guest and a participant in varied societies," said Exxon's executive vice president Rene Dahan in a recent speech.

There have been almost 900 village-level consultations

But while investing in high-risk areas is a fact of life for international oil companies, many have suffered significantly from unwanted political and religious entanglements.

Shell's alleged actions in Nigeria, for example, have prompted international outrage and incalculable damage to its brand.

The depth of information on ExxonMobil's website about the Chad project is, in itself, a testimony to the firm's determination to avoid such negative publicity.

The firm stresses its commitment to consulting local residents in multiple meetings that began seven years before construction got underway in October 2000.

The project is expected to generate $900m in Cameroon

Almost 900 village-level public meetings have been notched up, including 165 meetings with Pygmy settlements in Cameroon.

That process led to more than 20 adjustments to the pipeline's planned path, with the whole 1,070km route being walked by experts.

Nevertheless, there are still unwanted difficulties.

Up to 150 families may need to be displaced where the oil itself will be produced, while construction work is likely to interrupt farmers' access to their land.

Chad is already celebrating the hope of future prosperity

These people will be compensated for any lost income.

But such actions always bear the risk of getting messy.

During the project's 30-year lifespan, the estimated economic value to Chad is $5bn. And indirect economic activity is expected to reach $3.5bn.

But countries such as Angola and Nigeria have notoriously squandered and siphoned off a large proportion of riches earned through oil.

And there are still many observers questioning whether future oil revenues will really benefit Chad's poor.

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Mozambique's aluminium

Mozal - an aluminium smelter - is a better known name than Coca-Cola in Mozambique, according to recent research.

That demonstrates the impact one large-scale investment can have on a country where few international companies choose to go.

The existing plant employs 767 workers

"Mozambique is known for poverty, civil war and political turmoil, it took a lot of time and effort to convince the board to invest there," Mohammed Seedat, BHP Billiton's chief operating officer for aluminium in southern Africa told BBC news Online.

Having first invested in Mozambique four years ago, the mining giant is now in the middle of a $1bn expansion to the existing aluminium plant by constructing Mozal II.

"The success of the project has been proved by the fact that, this time round, there was no difficulty in persuading the board to invest," said Mr Seedat.

Mozal is held up by the World Bank as a shiny example, and praised for its social initiatives such as building a local police station and installing running water in schools.

Mozal has turned into a well known local brand

But there has been no shortage of problems to overcome.

Roads and bridges needed to be checked and improved in order to carry the heavy loads of building materials, while using the port has often turned into a logistical nightmare, explains Mr Seedat.

There was also a severe lack of expertise, and part of the investment agreement had stipulated that 90% of workers should be Mozambican.

The local university qualifications in engineering were not up to the required standard, so BHP Billiton is now working alongside the university to train workers.

It is also working with the local cement company to ensure high enough quality to stop it importing cement from abroad.

Mozal II was given the go-ahead in June 2001

Mozal spends about $2m a month buying goods and materials from local companies, that's about a third of its total spend.

"Whilst travelling through the surrounding area, you can't help but notice the impact on the local economy," said Mr Seedat.

Mozal II is expected to increase Mozambique's gross domestic product by 7% and create 5,000 jobs during the construction phase.

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DR Congo's mobile network

War may increase the risk of investing in a country, but it can also decrease the competition for the firms that choose not to take the plunge.

The Democratic Republic of Congo is an area that many companies would shy away from at present.

Vodacom spent $94m on its DR Congo expansion

But Vodacom, a consortium led by South Africa's Telkom and the UK's Vodafone, has just completed rolling out its mobile phone network there after investing $94m in the region.

The fact that many of its competitors had chosen to avoid the area, increased Vodacom's impetus to go ahead.

Unlike in Nigeria, where competition is strong and new entrants are forced to invest in national coverage as quickly as possible, in Congo we can roll out more slowly and spread the capital investment over time, explained Vodacom spokeswoman Joan Joffe.

"Vodacom recognises that political risks still exist in Congo, but they are currently manageable," Ms Joffe told BBC News Online.

"Expansion to other areas will only occur when sustainable peace is achieved over the whole country."

Vodacom says Congo's market potential is huge and that it will become one of the most profitable networks in Africa.

The war-torn country currently has extremely low mobile and fixed-line telephone penetration, even by African standards, with just 100,000 landlines spread between a population of 60 million.

During the first three weeks of Vodacom Congo launching in May, it acquired more than 50,000 customers, and is aiming to quadruple this customer base by March.

And the lack of landlines means it is banking on a significant average revenue per user of $25-30 a month, three times the amount generated per mobile user in South Africa.

"It was a major investment for us," said Ms Joffe.

"And we view it as a springboard to develop expertise in other difficult countries."

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