Africa in the news: AU summit, Eskom power cuts, and telecom industry consolidation in Kenya

African Heads of State pose for a group photo during the opening of the 32nd Ordinary Session of the Assembly of the Heads of State and the Government of the African Union (AU) in Addis Ababa, Ethiopia, February 10, 2019. REUTERS/Tiksa Negeri - RC1E7E156A00

African Union leadership transition and AfCTA update

Earlier this week, the African Union held its 32nd Annual Summit in Addis Ababa, which saw Egyptian President Abdel-Fattah el-Sissi take over the AU chairmanship from Rwandan President Paul Kagame. Looking ahead, South Africa was elected to hold the rotating AU chairmanship in 2020. Addressing the summit, President El-Sissi announced his goals for the next year including implementation of the African Continental Free Trade Area (AfCTA), rehabilitation of refugees and internally displaced people, and creation jobs for Africa’s youth.

Also at the summit, progress was made toward implementing the AfCFTA with several countries including South Africa and Senegal submitting ratification documents. With these submissions, 18 countries have ratified the agreement with a total of 22 ratifications needed for the pact to become operational. Other developments include the creation of the African Medicines Agency and the “Aswan Forum for Peace and Sustainable Development,” which will be held later this year. The AU will also officially launch its Development Agency in July this year.

Eskom power cuts and restructuring plan

On Friday, Eskom—South Africa’s major power provider—ended rolling blackouts after five days. Eskom is South Africa’s largest state-owned company and provides more than 90 percent of the country’s power. The current round of blackouts, meant to stabilize the power grid, were the most significant in four years, taking away 10 percent of Eskom’s 40,000-megawatt installed capacity on several days. The power grid remained vulnerable even as cuts ended on Friday.

The government is currently in the process of outlining a reform plan for the company as it struggles under $30 billion in debt. Last week, President Cyril Ramaphosa announced plans to split the company into three separate units focused on generation, transmission, and distribution. The government will also provide more details about financial support for the company during the finance minister’s budget speech next week. Labor unions skeptical of the government’s plans led a strike on Wednesday expecting that reforms will lead to job cuts. Hoping to assuage labor concerns, President Ramaphosa addressed the issue on Thursday, noting, “Cost cutting must be understood not to mean retrenchments” and “restructuring is not a path to privatization.”

Telecommunications merger in Kenya

Last Friday, the second- and third-largest mobile service providers in Kenya, Bharti Airtel and Telkom Kenya, announced plans to merge, a move to help compete with the largest-provider in the country, Safaricom. Telkom Kenya and the Indian-owned Bharti Airtel will operate under the joint company Airtel-Telkom. Negotiations for a deal started last year but fell through when Airtel decided not to pursue the merger further. The companies renewed discussions earlier this year, but little information was given about progress toward a deal.

Safaricom—with 29.9 million subscribers, compared to Airtel’s 10.4 million and Telkom’s 4.1 million—will still have a considerably larger control of the market. Safaricom has not hinted at any concerns about the transaction, with CEO Bob Collymore welcoming the merger last month, saying it would increase competition in telecommunications and therefore be good for the industry.

The finalization and closure of the deal is pending approval by the relevant authorities.