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European Commission aid in sub-Saharan Africa, opportunities for Suez?

In 2006, Suez had a turnover of 600 million euro in Africa, employing 3,250 people.[1] Activities are mainly in the sectors of electricity and gas as well as water management. Ondeo-Suez, a Suez subsidiary specialised in water delivery, states to have been 'present on the African continent for more than 50 years' and to be 'involved at every stage in the water cycle for municipal and industrial customers from Casablanca to Johannesburg'.[2]

Of importance in this context is the fact that Suez already now benefits from EU aid budgets for African development. One example is the contract worth 22 million euro won by Ondeo-Degrémont (fully owned by Suez) in 2005 for the construction of four drinking water plants in Tanzania. The biggest of the plants, in the city Mwanza, is 80% funded by the European Development Fund (EDF).[3] Three other plants in the capital Dar Es Salam are funded by the European Investment Bank. The European Development Fund is managed by the Commission's DG Development;[4] the Commission also plays an influential role within the European Investment Bank.[5] It should be noted that the construction of the four plants is not linked with a privatisation process; water supply in Mwanza and Dar-es-salam is publicly managed.

The Suez group is also present in many other African countries (see below).

EU infrastructure aid programmes for sub-Saharan Africa

The European Commission has numerous aid programmes (like the EU Water and Energy Initiatives, the European Development Fund etc.) that include a strong role for the European private sector.

A major new EU project under preparation by the European Commission is the EU-Africa Partnership on Infrastructure. DG Development and the Development Commissioner will play an important part in implementing this. Based on funds from the 10th EDF, a massive budget of several billion euros will be available for the implementation of infrastructure projects by private firms, including Suez.

Two of the four top priorities of the project are the energy and water sector which are also the sectors in which Suez is active in Africa. The EU "aims to substantially increase EU investment in African infrastructure and delivery of transport, energy, and water and ICT services" and also considers that "a stronger involvement of the private sector [both domestic and foreign] is necessary".[6]

Energy

In the energy sector the focus will be on interconnectivity. The Suez group is well placed to get involved in the West African region, including in the creation of the West African Power Pool.[7] It is already present in Burkina Faso where it is constructing a grid to the capital Ouagadougou. Suez also has knowledge of the region due to its Togo experience.

The infrastructure partnership also opens opportunities for an extension of its activities in South Africa in relation with the Southern Africa Power Pool.[8] In case the merger with Gaz de France is completed, the new group will probably have a stake in the planned Nigeria – Algeria Gas pipeline.[9]

Water

Lake Victoria and the Senegal basins are priorities for the ACP-EU Water facility.[10] Suez' engagement in the city of Monzwa at Lake Victoria gives the company an advantage in this basin. The same goes for its Senegalese experience. The European Commission will start releasing the second wave of funds under the EU Water and Energy Initiatives in the end of 2007.[11]

Financial guarantees

The infrastructure partnership will fall into two broad categories: the facilitation of studies and the physical investment. The European Commission recognises the need of "support for sections of the African networks, particularly for roads and water, which by nature, are not suitable for loan financing" and proposes founding a Trust Fund providing risk guarantee mechanisms. The European Commission will be in the steering committee of the Trust Fund.[12] Investment risks are among the most serious problems for transnational corporations aiming to expand in Africa. The EU now creates a framework to address this problem.

Examples of Suez activity in sub-Saharan Africa

Burkina Faso

In 2002, Ondeo signed a 19 million euro contract for the construction of a new drinking water production plant, financed by the French Development Agency.[13] The contract is still running.

In February 2007, Ineo, a Suez subsidiary in the electricy sector, won a contract for the installation of a transmission line of 360 kilometres to the capital Ouagadougou.[14] More electricity sector tenders are expected in Burkina Faso in the coming years.[15]

Senegal

In this country Suez is constructing a drinking water production installation based on sea water desalination. Ondeo signed this 17 million euros contract in 2002.[16] According to the Suez website the project is still underway.[17]

South Africa

The presence of Suez in South African water supply goes back to the apartheid era.[18] Today Suez is however active only in the energy sector.

In December 2001, Suez subsidiary Tractebel signed two 'memoranda of understanding' with the South African company Sasol Gas for the development of the South African cogeneration market using gas.[19] This cooperation continues today.[20]

Suez also had a contract for the 'management of water and sanitation services and waste collection and treatment' in Johanesburg, but this has recently been terminated (although the Suez website continues to refer to it).[21] Three other water contracts (Queenstown, Sutterheim, Nkonkobe) had been terminated earlier.[22]

Nigeria

In 2005, Ondeo-Degrémont concluded a 14 million euros contract for the rehabilitation of three drinking water plants in Ibadan. The duration of the contract with the Water Corporation of Oyo State was expected to be 22 months.[23]

DR Congo

In 2005, Ondeo-Degrémont started work on a contract worth 7 million euro for the rehabilitation in Kinshasa (on behalf of Société des eaux de Kinshasa).[24]

Until very recently Suez was also present in:

Togo

The involvement of Suez in this country was terminated by the Togolese government in 2006. In January 2006, Suez subsidiary Elyo had signed a 20 years-concession to generate, transmit and distribute electricity in the country. This included the operation of the Lomé thermal power station, the construction of a hydro-power dam and the connection of the electricity grids of Togo and Benin. A dispute between Elyo and the Togo government over electricity prices is now in arbitration at the ICSID.[25] Elyo's website, interestingly, remains silent about these developments.[26]

Uganda

A Suez management contract in the water sector (between 2002-2004) was not renewed.[27]

Notes

  1. Des solutions adaptées aux enjeux des collectivités et des entreprises, Plaquette Commerciale, Suez, April 2006. For 2004, see Suez: The endeavour to evolve from a French flagship utilities to a European corporation (1982-2006), Hubert Bonin, page 18.
  2. Ondeo (SUEZ) wins two new contracts in Africa, Suez press release, 20/02/2002.
  3. Degrémont remporte 100 millions d'euros de contrats sur le continent africain, Suez press release, 03/06/2005.
  4. European Development Fund, Overseas Development Institute, accessed 29 March 2007.
    Programming in the ACP countries (10th European Development Fund), European Commission, DG Development website, accessed 29 March 2007.
  5. EIB and the Commission, EIB website, accessed 29 March 2007.
  6. COMMUNICATION FROM THE COMMISSION TO THE COUNCIL AND EUROPEAN PARLIAMENT: Interconnecting Africa: the EU-Africa Partnership on Infrastructure, COM(2006) 376 final, European Commission, 2006. Pages 3, 6 and 11.
  7. Ibidem, p. 22.
  8. Map of Africa – Electricity interconnections, EU Africa Partnership on Infrastructure, 'Europe cares' website, accessed 29 March 2007.
  9. Interconnecting Africa: the EU-Africa Partnership on Infrastructure, op cit, p. 22.
  10. Ibidem, p. 27-28.
  11. Ibidem, p. 35.
  12. Ibidem, p. 10-11.
  13. Ondeo (SUEZ) wins two new contracts in Africa, Suez press release, 20/02/2002.
  14. French Win Electrification Deal, AFRICA ENERGY INTELLIGENCE N°436 - 14/03/2007.
  15. Appels d’offres, (Call for tenders), Société Nationale d'Electricité du Burkina, SONABEL website, accessed 29 March 2007.
  16. Ondeo (SUEZ) wins two new contracts in Africa, Suez press release, 20/02/2002.
  17. Suez Environment Presence around the world, accessed 29 March 2007.
  18. Suez in South Africa, Public Citizen, 13 August 2003.
  19. Tractebel and Sasol Gas sign Memoranda of Understanding, Suez press release, 10/12/2001.
  20. The UNDP's wrong turn on water rights, Patrick Bond and Greg Ruiters, Pambazuka News, 23 November 2006.
  21. Suez Environment Presence around the world, accessed 29 March 2007.
    See also: The battle over water in South Africa, Patrick Bond, AfricaFiles No. 6 - February 2004 and Degrémont à travers le monde, Ondeo Degrémont website, accessed 29 March 2007.
  22. Pipedreams: The failure of the private sector to invest in developing countries, Public Services International Research Unit and World Development Movement, March 2006. Page 19.
  23. Degrémont remporte 100 millions d'euros de contrats sur le continent africain, Suez press release, 03/06/2005.
  24. Ibid.
  25. La lettre du Continent 14.9.2006 and Africa Energy Intelligence 17.2.2007, 8.3.2006, 14.9.2005 and 23.11.2005. See also Conciliation of international investment disputes remains under-utilized, Damon Vis-Dunbar, Investment Treaty News (ITN), 19 July 2006, page 7.
  26. Elyo website, accessed 29 March 2007.
  27. Pipedreams: The failure of the private sector to invest in developing countries, Public Services International Research Unit and World Development Movement, March 2006. Page 19.