The Blue Nile in Guba, Ethiopia, during its diversion ceremony. The $4.2 billion Grand Renaissance Dam hydroelectric project had to divert a short section of the river -- one of two major tributaries to the main Nile - to allow the main dam wall to be built.  William Lloyd George / AFP
The Blue Nile in Guba, Ethiopia, during its diversion ceremony. The $4.2 billion Grand Renaissance Dam hydroelectric project had to divert a short section of the river -- one of two major tributaries Show more

Ethiopia and Egypt face off over billion-dollar Nile dam project



Nicholas Bariyo

Ethiopia, Egypt and Sudan will hold discussions next week over the effect of a new billion-dollar hydro plant along the river Nile, which Egypt fears will hurt water supply to its 84 million people.

The meeting will be the first since experts submitted their recommendations on the $4.3bn (Dh15.79bn) Grand Ethiopian Renaissance Dam project more than three months ago.

“The meeting is scheduled to take place ... on Oct. 22, 2013 between officials of the three countries,” the Ethiopian foreign ministry said.

Egypt fears the 6,000 megawatt plant is likely to hurt its water supply when it comes on-stream around 2017. The majority of the Egyptian population is centred near the Nile valley and the desert nation depends on the river for around 95 per cent of its water.

In June, former Egyptian President Mohamned Morsi said that Egypt would “defend each drop of the Nile with our blood”. Egypt is fiercely opposed to the dam but years of political turmoil have weakened the nation’s influence in the region.

The experts’ report is yet to be made public but according to Fekahmed Negash, the director of boundary and trans-boundary rivers at Ethiopia’s Water, Irrigation and Energy ministry, the experts recommend further studies to analyse the effect of the dam on Egypt’s water supply. Ethiopia plans to take up to six years to fill the dam’s 74 billion cubic-metre reservoir but insists this will not adversely affect the river’s downstream flow.

Addis Ababa, which is fully funding the project, has pledged to sell excess power to Egypt. Early this year, Ethiopia ratified the Nile River Cooperative Framework deal, challenging the colonial-era treaty that guarantees Egypt “natural and historic rights” over the Nile waters. Lower basin nations including Ethiopia, Kenya, South Sudan and Uganda are all opposed to the treaty. In June, Uganda’s President Yoweri Museveni said that Egypt should not continue to “hurt countries” in the Nile River basin by restricting power projects along the river. Uganda is developing several hydro power projects along the Nile.

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Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.

Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.

Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.

Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.

“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.

Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.

From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.

Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.

BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.

Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.

Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.

“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.

Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.

“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.

“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”

The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”

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