From Juba to Nairobi – how companies are making money on the new frontier
September 15, 2012 | 0 Comments
By Peter Guest*
Driving through the outskirts of Juba, the capital of South Sudan, Africa’s 54th state, the city – then little more than a town – gives way to flat scrub, decorated with the rusting skeletons of trucks and then, quite suddenly, to a huge industrial facility – Southern Sudan Beverages Ltd. It is a strange symbol for a country battered by decades of civil war, but an important one. The only manufacturing plant of scale in a nation the size of France, the brewery exists as a sign that, despite all of South Sudan’s turbulent history and difficult present, the country is open for business.
The plant itself was a chimera, buckled together from two different facilities in Europe that were dismantled and shipped to Mombasa in Kenya, then moved overland to Juba, up the trunk road that turns into a sucking mire in the rainy season. Not all of it made the journey intact. One of the 750 gallon brewing vessels slipped its bindings during a storm and was lost somewhere off the East African coast.
The facility was, and still is, run by Ian Alsworth-Elvey – a garrulous, white-bearded South African who goes lurid pink and sweats profusely in the fierce heat inside and outside – and his team of uniformly tall, broad and bearded colleagues, all veterans of SABMiller’s operations around the continent. Behind the brewery, surrounded by a fence made of wound thorns, is a near-perfect replica of a suburban Cape Town house, with sleek leather furniture and humming fridges, which Alsworth-Elvey shares with his wife.
In the four-by-four, driving around Juba – still a low-rise agglomeration of semi-permanent structures bathed in diesel fumes and grey smoke from charcoal burners – the brewers and their wives joke about the gaping potholes, the police roadblocks and the meat shortages that are a daily challenge, using the kind of tone a yuppie housewife in London might complain about the local deli running out of olives.
This was late 2010, in the last few weeks before the South Sudanese went to the polls to vote overwhelmingly for independence. The world was holding its breath, expecting the region to descend back into violence. George Clooney had just breezed through town calling for peace, to the derision of many local businesspeople, for whom the impending threat of war had receded significantly. The sense then was that civil violence was far more a present threat for policymakers in London and Washington DC than it was for the merchants importing meat, cement, petrol and the other necessities of a city being rebuilt from the ground up; or for the engineers building and servicing the country’s cellphone networks; or for the brewers, whose White Bull lager, newly launched ahead of independence, was branded to ride the wave of national identity and pride.
The war did not come, and despite continued low-level violence after independence in the summer, and the cessation of oil exports threatening the country’s fragile economy, Juba remains at the far frontier of Africa’s consumer potential. Even after independence, which may have created the poorest country on earth, it was an opportunity for businesses, small and large. At that time, there were rumours that rival brewer Diageo was scoping out the market, and there was a thriving grey market trade in Heineken, brought in by the crate by Eritrean merchants, supplying the small lean-to bars in town, which are decorated with a colourful array of international merchandise – Coca Cola, Tusker, and of course, White Bull.
South Sudan’s future is by no means one of unmitigated success. The country has suffered from chronic underdevelopment during its decades of civil war. It has entire generations whose education has been in the bush or in refugee camps in Kenya or Ethiopia. Its government, despite the efforts of the international community, is sorely lacking in capacity and its education system needs massive investment. Its oil industry – the main source of its revenue – is still the victim of disputes with its previous rulers in Khartoum, and there is still violence along its unsecured northern border. Juba is not for the faint of heart. It is Africa in extremis, the furthest frontier of the continent’s frontier markets, which makes the snarled traffic of distant Nairobi feel like Stockholm, but it offers some valuable lessons: that a history of insecurity is not always an indicator of a grim future; that international concern and the presence of Hollywood stars is not always correlated with business sentiment; and that poverty, no matter how deep or deep-rooted, is not an absolute barrier to entrepreneurialism and commerce. As in all emergent markets, first movers stand to win – and win big.
In 2012, the north and south looked to be teetering on the brink of another war, as disputes over their once shared oil reserves turned violent. But, regardless of the pessimists insisting that history was doomed to repeat itself, peace talks in May bore fruit, the armies stood back, and negotiations resumed. The same month, SABMiller completed a doubling of its capacity in the White Bull brewery, replacing the second-hand equipment with brand new machinery.
Africa is buying fast moving consumer goods at an incredible rate. These are not the hand-to-mouth markets that are portrayed in sepia-toned adverts at Christmas time. They are thriving, consumptive and growing in size and wealth.
The raw numbers are compelling. In 2011, sub-Saharan Africa’s total population was estimated to be around 900 million people. Including the Maghreb puts the continent at more than 1 billion human beings, who, despite the prevailing belief in the West, are not trapped in a developmental stasis. That population is growing at a greater rate than any other region, and is forecast to reach 2 billion by 2050 – which has its concomitant risks and challenges – but also creates massive opportunities as those populations are moved from rural subsistence to urban consumption, a shift which is happening at a startling pace. In 2010, the United Nations’ Human Settlement Programme – UN Habitat – forecasted that by 2030, more than half of all Africans will live in cities, from around 40% in 2009. By the early 2040s, there will be more than 1 billion people living in the continent’s cities.
Today, these cities show the dichotomy of Africa’s growth. In Nigeria‘s commercial capital of Lagos, a sprawling conurbation draped across an estuary in the country’s south, artisanal charcoal burners sit cheek-by-jowl with the brand new Porsche dealership on Victoria Island, which boasts some of the world’s most expensive real estate. In Abidjan, Côte d’Ivoire, men and women compete with the white cranes to pick through the city’s detritus in the shadow of neon signs advertising Samsung televisions.
On the other side of the continent, in the heart of Kenya‘s capital, Nairobi, a stone’s throw from where sleek concrete and glass towers are rising to house the region’s new technology champions, the Kibera slum stretches on for miles, a corrugated iron and wood city-within-a-city with its own shops and bars, its own public transport and Pamoja FM, its own radio station, serving a population of several hundred thousand. On the edge of the sprawl new housing projects are stretching up out of the ground. The slow march of formalisation has seen sanitation and permanent structures eat into the slum, and while it remains an ugly scar for the television cameras and the swarms of gap year missionaries that flock to Nairobi every year, even Kibera is rising. It is that rise, from the base of the pyramid up towards its peak, that is Africa’s great potential.
It is something remarked on, but often dismissed, that almost anywhere in these cities, a visitor can buy a Coca Cola and watch English Premier League or Spanish Primera Liga football. The stores stock instant coffee and milk powder made by Nestlé, Unilever tea and hygiene products. Tusker, Kenya’s iconic beer, whose logo is worn as a souvenir on the chests of those same gap year students, is bottled in Nairobi by East African Breweries Limited, a subsidiary of the drinks giant Diageo. Lined up in glass cases in garishly painted stalls dotted around the city, merchants are doing a roaring trade in Nokia and HTC mobile phones. Africa’s urban population already buys branded necessities and small luxuries in huge and growing quantities. However, the turnover of goods, the increasing formalisation of these micro-economies, the construction of infrastructure and the inflow of international capital is also creating something new and powerful.
In the central business district, snarled as ever with traffic, urban professionals sip lattes at Java House, the country’s equivalent of Starbucks. They are not the wealthy elite, nor are they the struggling poor. They are aspirational, consumptive, creative and entrepreneurial. They are the new face of Africa’s cities, and the engine of the continent’s emergence. They are Africa’s middle class.
*Source http://www.howwemadeitinafrica.com. This article is an edited extract from Peter Guest’s book, Africa’s Century: Making Money On The New Frontier (Endeavour Press, August 2012). Available at Amazon.
Safaricom Kenya unveils ‘sustainability’ report
September 9, 2012 | 0 Comments
By Dinfin Mulupi*
Kenya’s leading mobile operator Safaricom has launched its first ever sustainability report, outlining the firm’s commitment in safeguarding the environment, shunning corruption and embracing innovation.
The sustainability report was prepared by auditing firm KPMG South Africa after an assessment of the current actions and investments that Safaricom is making and their impact on the future.
Safaricom chief executive Bob Collymore said that by adopting the highest benchmarks in all its operations, the firm’s positioning in the investor market would be enhanced.
“We have taken the bold move to embrace sustainability reporting since we know business today has to move from just doing the right things to doing things the right way,” said Collymore.
The report covers eight strategic pillars including regulatory environment, energy and network security, innovation, ethical supply chain conduct, corporate ethics, environmental impact and employee engagement.
Some of the efforts Safaricom is currently pursuing in line with the sustainability report includes reducing the use of diesel by diversifying into solar and wind energy to power its 3,000 base stations.
The firm also has an employee wellness programme which gives staff access to nursery school facilities and subsidised gym facilities. The firm’s offices have been redesigned to be disability-friendly.
Safaricom is also seeking to even the ratio of male to female employees which currently stands at 1:1.3 female to male ratio.
The mobile operator has pumped millions in community initiatives focusing on sports, environment conservation, education, health, water and food security.
“The sustainability report is not about corporate social investments that we make. It looks at the ripple effect created by our actions and decisions to the climate, political environment, lifestyles and the economy, among other fundamentals. It is about our collective future,” said Collymore.
Other Kenyan companies that have adopted sustainability reporting include the Kenya Commercial Bank (KCB) and Nation Media Group (NMG).
Sustainability reporting is a concept based on the 1987 report of the Brundtland Commission whose goal was to create a united international community with shared sustainability goals.
IBM expands operations in Morocco
September 9, 2012 | 0 Comments
By Simnikiwe Mzekandaba*
Multinational technology and consulting firm IBM has expanded its technology operations capital city of Morocco Rabat, in a bid to capitalise on the country’s encouraging economic growth rates.
According to the World Bank, last year Morocco’s GDP growth rate was 4.5%.
Subsequently, IBM has announced that it would be opening a second office in Rabat as part of plans to enhance its existence in that country and broaden its investment programmes.
“IBM is placing a strong emphasis on investment in Morocco as we recognise the opportunities presented by high growth rates and an increasingly competitive market,” said Abdallah Rachidi Alaoui, IBM general manager, Morocco.
Alaoui adds, “Strengthening our presence in Rabat, we are able to offer the most advanced technologies and solutions to our local partners and clients.”
IBM is currently present in more than 20 African countries including South Africa, Senegal, Ghana, Nigeria, Kenya, Tanzania, Egypt, Tunisia and Algeria.
Through IBM technology the Moroccan government says it has been able to put in a range of online services to its departments.
“Moroccan citizens can now pay taxes or income returns online, and a company can clear goods through customs in a simple click,” said Nizar Baraka, minister of Economy and Finance.
Africa innovations: 15 ideas helping to transform a continent
September 9, 2012 | 0 Comments
Bright ideas: A cellphone database for dairy farmers and a strain of sweet potato that can help fight child blindness. These are just two of the imaginative new ideas that are tackling Africa’s old problems
1. Hippo water roller
Idea: The Hippo water roller is a drum that can be rolled on the ground, making it easier for those without access to taps to haul larger amounts of water faster.
Problem: Two out of every five people in Africa have no nearby water facilities and are forced to walk long distances to reach water sources. Traditional methods of balancing heavy loads of water on the head limit the amount people can carry, and cause long-term spinal injuries. Women and children usually carry out these time-consuming tasks, missing out on educational and economic opportunities. In extreme cases, they can be at increased risks of assault or rape when travelling long distances.
Method: The Hippo roller can be filled with water which is then pushed or pulled using a handle. The weight of the water is spread evenly so a full drum carries almost five times more than traditional containers, but weighs in at half the usual 20kg, allowing it to be transported faster. A steel handle has been designed to allow two pushers for steeper hills. “Essentially it alleviates the suffering people endure just to collect water and take it home. Boreholes or wells can dry out but people can still use the same roller [in other wells]. One roller will typically serve a household of seven for five to seven years,” said project manager Grant Gibbs.
Verdict: About 42 000 Hippo rollers have been sold in 21 African countries and demand exceeds supply. Costing $125 each, they are distributed through NGOs. A mobile manufacturing unit is set to begin making them in Tanzania. Former South African president Nelson Mandela has made a “personal appeal” for supporting for the project, saying it “will positively change the lives of millions of our fellow South Africans”. Monica Mark
2. The iCow app
Idea: To harness the power of cellphones to encourage best practice for dairy farmers and increase milk production.
Problem: Small-scale dairy farmers often living in remote areas don’t have access to valuable information about latest prices of milk or cattle, and they may not keep accurate records of important details such as their cows’ gestation periods or their livestock’s lineage—often resulting in inbreeding and disease.
Method: Created by Kenyan farmer Su Kahumbu, iCow is an app that works on the type of basic cellphones farmers own. Each animal is registered with the service, which then sends SMS reminders to the farmer about milking schedules, immunisation dates and tips about nutrition and breeding or information about local vets or artificial insemination providers. UK-based foundation the Indigo Trust helped fund iCow’s development. Its executive Loren Treisman says: “It’s exciting to see a technology-driven project targeting such an unexpected constituency. Farmers have been empowered to improve their own lives through accessing critical agricultural information as opposed to depending on aid. What particularly excited us is that as a social enterprise, the iCow team have a sustainable business model which will enable them to expand rapidly and maximise their reach and impact without dependence on ongoing funding.”
Verdict: “The wonderful thing with iCow is that by the time you have used the app and adhered to all the instructions, your cows end up healthier, bigger and stronger. They can easily fetch you more money in the marketplace. Every smart farmer will use iCow,” a small-scale farmer based in the cental highlands of Kenya told Forbes magazine. Ian Tucker
3. Farmer managed natural regeneration
Idea: Farmer managed natural regeneration (FMNR), which restores existing trees on drought-stricken land, to improve Senegal’s dwindling harvests.
Problem: Senegal is suffering its third drought of the decade, resulting in reduced crops and inflated food prices. The World Food Programme assisted more than nine million people in the Sahel region of West Africa this year, including 800 000 in Senegal.
Method: Attempts to tackle the resulting problem of soil fertility have largely flopped so far. Trees planted as part of reforestation schemes have seen only a 5% success rate and fallowing is not an option, with 80% of African farmers owning under two hectares of land, which need to be utilised year in, year out. This puts the emphasis on reinvigorating the stumps of nitrogen-fixing trees, which were formerly cleared to maximise crop space. Farmers are thus encouraged to prune the stems and branches of trees like Faidherbia albida, giving new life to the vegetation already there.
Verdict: FMNR is an inexpensive way for farmers to make improvements with the resources they already have, increasing millet harvests from 430kg to 750kg a hectare, and saving money on fertilisers, with restored trees producing leaf litter (forming humus) and giving shade to livestock (for manure). It gives the ecosystem a holistic boost, encouraging wildlife like bush pigeons and rabbits to return, and providing welcome human benefits such as wood cuttings for cooking and new food sources such as tamarind. Mina Holland
4. Portable water pumps
Idea: Portable irrigation technology helping sub-Saharan smallholder farmers grow crops out of season.
Problem: When it comes to food supply, Africa faces enormous instability due to unpredictable climate and poor resources. Only 6% of Africa’s cultivated land is irrigated, limiting the volume of crops that can be grown out of season, but increased access to irrigation systems stands to increase food productivity by up to 50%.
Method: Kick Start, a not-for-profit organisation that specialises in irrigation technology, is making portable water pumps accessible to farming communities across Africa—most significantly in Kenya, Tanzania and Mali. These cost anything from $35 to $95 but, putting the emphasis on entrepreneurship, Kick Start are selling the pumps to farmers rather than giving them away.
Solution: Kick Start told The Atlantic that, since 1991, their pumps have lifted 667 000 people out of poverty, helping to “create an entrepreneurial middle class, starting with the family farm”. They have pumped new revenues equivalent to 0.6% of the GDP in Kenya alone. MH
5. The Cardiopad
Idea: A computer tablet diagnoses heart disease in rural households with limited access to medical services.
Problem: Cardiovascular diseases kill about 17-million worldwide annually. In many African countries, those at risk often have to spend huge amounts of money and travel hundreds of kilometres to reach heart specialists concentrated in urban centres. The Cameroon Heart Foundation has noted a “sharp spike” in heart disease among its 20-million-strong population, which is served by fewer than 40 heart specialists.
Method: A program on the Cardiopad, designed by 24-year-old Cameroonian engineer Arthur Zang, collects signals generated by the rhythmic contraction and expansion of a patient’s heart. Electrodes are fixed near the patient’s heart. Africa’s first fully touch-screen medical tablet then produces a moving graphical depiction of the cardiac cycle, which is wirelessly transmitted over GSM networks to a cardiologist for interpretation and diagnosis. “I designed the Cardiopad to resolve a pressing problem. If a cardiac exam is prescribed for a patient in Garoua in the north of the country, they are obliged to travel a distance of over 900km to Yaoundé or Douala,” Zang says.
Verdict: At the Laquintinie, one of the country’s biggest hospitals, cardiologist Dr Daniel Lemogoum said that, in a recent survey, three in every five persons who uses the Cardiopad has been diagnosed as hypertensive, or at risk of heart diseases. “These are people who would not necessarily have been aware they are hypertensive. It means sudden deaths might be preventable.” MM
6. Nigerian computer tablet
Idea: The Inye computer tablet that can connect to the internet via a dongle surmounts the price and infrastructure barriers in one go.
Problem: Tech-savvy youths, who make up the bulk of the continent’s population, face being left behind by a growing “digital divide”. While much of Africa has skipped the desktop internet era and gone straight to mobile tech, big name brands retail in price ranges that remain out of reach for a majority in sub-Saharan Africa. Infrastructure is also straining under rapid population growth, and wireless and broadband technology is not yet widely available in many public places.
Method: Co-founders Saheed Adepoju and Anibe Agamah, aimed to plug a gap in affordable mobile devices with the Inye tablet in Nigeria. They say its strongest selling point is its price—currently around $315. Run on Android systems, it can be connected to the internet via widely used dongles rather than wirelessly. IT provider Encipher also offers add-on bundles from games to specifically tailored apps. Local developers are designing apps that address issues such as HIV, water and sanitation and education.
Verdict: The group is now retailing its Inye 2 model to popular demand. Long-term, there are plans to expand beyond Africa’s most populous country. MM
7. Ethanol cooking oil plant
Idea: Refining locally sourced cassava into ethanol fuel to provide cleaner cooking fuel.
Problem: Forests in Africa are being cut down at a rate of 4m hectares a year, more than twice the worldwide average rate. Some of this is fuelled by demand for wood and charcoal, which the UN estimates is still used in almost 80% of African homes as a cheaper option to gas. The smoke from cooking using these solid fuels also triggers respiratory problems that cause nearly two million deaths in the developing world each year.
Method: CleanStar Mozambique, a partnership between CleanStar and Danish industrial enzymes producer Novozymes, has opened the world’s first sustainable cooking-fuel plant in Mozambique. CleanStar has steered clear of monoculture crops in favour of sustainable farming methods. One-sixth of the final yield comes from locally harvested cassava, which requires farmers to plant in rotation with other edible crops to keep the soil fertile. A Sofala Province-based plant transforms the products into ethanol, which is sold on the local market along with adapted cooking stoves also produced by the company.
Verdict: “City women are tired of watching charcoal prices rise, carrying dirty fuel, and waiting for the day that they can afford a safe gas stove and a reliable supply of imported cylinders,” CleanStar marketing director Thelma Venichand said. “They are ready to buy a modern cooking device that uses clean, locally made fuel, performs well and saves them time and money.” The plant aims to produce 2-million litres of fuel annually, and reach 120 000 households within three years. MM
8. Refugees United
Idea: Danish brothers David and Christopher Mikkelsen founded Refugees United in 2008 after they helped a young Afghan refugee in Copenhagen search for lost family members. Realising the futile paper trail that many refugees were faced with when looking for missing relatives, the brothers wanted to find an easier way that refugees could trace their families.
Problem: There are 43-million forcibly displaced people worldwide with hundreds of thousands of refugee families scattered across the globe. Before 2008 all family tracing was done by refugee agencies, which still rely on paper forms and postal systems to try to locate people. There was no online global data bank that could be accessed or used by refugees themselves.
Technique: Refugees United is an online search tool, where refugees can create a free profile and start their search for family via an online database using the internet or a mobile phone. It works through an open-source model, partnering with not-for-profit refugee organisations including the Red Cross and the UN Refugee Agency (UNHCR) as well as corporate tech partners such as Erickson and Google.
Verdict: More than 100 000 people are registered on the Refugees United family tracing platform. It is available in dozens of different languages and contains searchable information on refugees from more than 82 countries. It is currently helping 15 000 people trace family in the Kakuma refugee camp, home to 80 000 refugees and asylum-seekers, in Kenya. The main challenge is actually reaching the refugees, often the poorest of the poor, who don’t have ready access to computers or cellphones. Annie Kelly
9. DIY aid supplies
Idea: To make Africa self-sufficient in emergency relief supplies.
Problem: For a continent so in need of quick, affordable emergency relief, not to mention so riddled with unemployment, there’s a cruel irony about the provenance of emergency supplies. Smaller African manufacturers have traditionally been unable to compete with Chinese prices, or to meet the vast demand for emergency goods within Africa. As a result, aid agencies such as Unicef have forged links with foreign producers better able to produce these supplies at the scale, cost and quality required. Yet this inevitably requires longer lead times and higher transportation costs than sourcing goods locally—and Africans lose out on the work.
Method: Advance Aid is an organisation that wants to make aid destined for Africa available within Africa, from blankets and mosquito nets to basic cooking equipment and hygiene kits. The organisation acts as an intermediary between large aid agencies and African producers, putting together packages of aid supplies sourced locally. This has been very effective in Kenya, where Advance Aid have supplied 5 000 locally sourced emergency kits to World Vision and another 14 000 jerry cans to Catholic Relief Services, who distributed them in Dadaab, the refugee camp near the Somalian border.
Founder David Dickie says: “Aid is not working. I’m trying to turn the market on its head by creating jobs in Africa. Building this capacity in Africa will make a real difference to agencies, to the beneficiaries of the aid and to local businesses … [It] is a very efficient way of bringing together the development and humanitarian agendas.”
Verdict: Advance Aid’s work in Kenya in 2011 marks the first time that emergency relief goods produced in Africa have been provided for an African emergency, with 80% of goods sourced within the country. It put $1.5-billion into the Kenyan economy and brought orders to 12 local manufacturers. MH
10. Sickle cell disease research
Idea: To carry out scientific research on sickle cell disease (SCD) and show that large-scale, cutting-edge genomic studies are possible in Africa.
Problem: Every year, 300 000 children worldwide are born with SCD, a genetic blood disorder that can result in severe anaemia. Seventy percent of these children, or 210 000, are born in Africa. Tanzania has one of the highest annual birth rates of SCD in the world and without treatment up to 90% of these children will die in early childhood. However, many of these deaths could be prevented by early diagnosis and treatment. A better understanding of the genetic and environmental mechanisms of the disease will lead to improved diagnosis and therapies.
Method: Dr Julie Makani from Muhimbili University in Tanzania is working with the Wellcome Trust to conduct a genome-wide association study (GWAS) in order to better understand the genetic and environmental factors affecting SCD. The Muhimbili Wellcome Programme originally aimed to follow 400 children but is now following 2 500, making it one of the largest, biomedical SCD resources in the world. Makani says that the work “provides validation that it is possible to conduct genomic research in Africa”.
Verdict: Professor Lorna Casselton from the Royal Society says: “SCD has a severe toll on Africa, and high-quality research to lessen the burden is much needed. Dr Makani stands as a role model for other young African scientists wishing to make a difference.” Olivia Honigsbaum
Idea: To offer emergency credit through cellphones to people who don’t have access to credit cards or bank loans.
Problem: Credit cards are still rarely available to Kenyans and bank loans are only authorised for large amounts of cash or as investments for buying homes or starting businesses. Often the only source of emergency cash is loan sharks, increasingly big business in Kenya, with borrowers signing ambiguous photocopied contracts and tying themselves into interest rates of 50% or more. M-Pepea was launched to try to bridge this gap.
Method: M-Pepea, set up in late 2010, provides its customers with emergency funds within a few hours. It partners with Kenyan businesses, with employees then able to use M-Pepea to get immediate loans of up to 20% of their monthly salary. The money is accessed through their cellphones, with M-Pepea sending a special pin code to be used in cash machines. Money can also be collected at branches of Safaricom, one of Kenya’s largest cellphone operators, and then deducted from the borrower’s pay packet at the end of the month. M-Pepea charges around 10% interest rates on the loans, which are paid in full at the end of the month.
Verdict: M-Pepea has currently partnered with 20 businesses and has around 300 subscribers, and is hoping to have increased this to 20 000 by the end of 2013. Its partnership with Safaricom is encouraging but the company has run into problems with businesses defaulting. “We’re still in our initial phase, but we’ve seen how positively people have responded to the service,” says David Munga, M-Pepea’s 33-year-old founder. “If, like many Kenyans, you’ve found yourself at the side of the road with a broken car, no credit card and no money in the bank, it’s a way of getting yourself that money without having to get into trouble.” AK
12. The Tutu van
Idea: The brightly coloured “Tutu Tester” van is a mobile clinic that incorporates screening for tuberculosis (TB) and HIV into a general health check-up in order to overcome the stigma associated with these diseases.
Problem: South Africa is at the centre of an epidemic of TB/HIV co-infections. An estimated 5.7-million people are infected with HIV and, fuelled by HIV, the country’s rate of TB has increased over the last 20 years to the point where it now has the third highest TB burden in the world. In the case of HIV, voluntary counselling and testing (VCT) is vital for preventing and treating the disease. However, data from the Desmond Tutu HIV Foundation conducted in communities most affected by HIV shows that VCT is often inaccessible or inadequately performed. This results in missed opportunities for prevention and increased morbidity and mortality—hence the need for new control strategies to keep the epidemic in check.
Method: The Tutu Tester is a mobile clinic that takes sophisticated testing equipment and trained staff (including a nurse, a counsellor and an educator) into areas without adequate health facilities. By framing TB and HIV screening within a battery of other healthy living tests, including pregnancy, diabetes and hypertension, people are encouraged to get tested for the diseases. Dr Linda-Gail Bekker, a leading scientist working with the foundation, says that data from these screens shows that “the increase in TB has quite clearly tracked the increase in HIV rates”. Further, the introduction of antiretroviral therapy (ART) for HIV has also led to a decline in the incidence of TB. This suggests that ART programmes, if sufficiently implemented, may greatly assist in reducing TB mortality.
Verdict: There is still a stigma attached to HIV and TB. But as Liz Thebus, a healthcare worker at the Tutu Tester says: “The outside world does not know whether someone wants to be screened for HIV or diabetes. They are in that respect much more anonymous.” OH
13. Orange sweet potato
Idea: Breeding sweet potatoes to contain betacarotene, to help in the fight against childhood blindness.
Problem: More than three million children in Africa suffer from blindness caused by vitamin A deficiency; in Uganda it is estimated that 28% of children are deficient. Currently aid agencies combat this problem by giving children vitamin A supplements, but addressing this issue with a locally grown food would be more sustainable.
Method: A new strain of sweet potato was conventionally bred which contains between four and six times as much betacarotene as a regular sweet potato—betacarotene is converted by the body into vitamin A. The OSP (orange sweet potato) was distributed to 10 000 farming households in Uganda; at the end of the two-year study vitamin A deficiency in non-breastfeeding children aged between 12 and 35 months fell from nearly 50% to 12%. Dr Christine Holz from the International Food Policy Research Institute who led the project said: “Overall, these results add to the growing evidence base that OSP provides large amounts of vitamin A in the diet.”
Verdict: Similar results were obtained from a sister project in Mozambique; now the scheme is being scaled up to reach 225 000 households by 2016. IT
14. Speaking Books
Idea: A range of easy-to-use audio books designed to get potentially life-saving health messages out to millions of isolated people struggling with depression and mental health problems.
Problem: In 2003, Zane Wilson, the founder of the South African Depression & Anxiety Group (Sadag), the country’s largest mental health initiative, was horrified at how suicide rates among young South Africans were spiking. Mental health carries a huge social stigma across Africa and information booklets designed to help people with depression or mental health problems simply weren’t working, especially in remote communities with high illiteracy rates. People weren’t getting the help they needed—a 2009 study showed that only a quarter of the 16.5% of South Africans suffering from mental health problems had received any kind of treatment.
Method: Speaking Books created a range of free books with simple audio buttons talking the user through each page. The first Speaking Book, voiced by South African actress and celebrity Lillian Dube, was called Suicide Shouldn’t Be a Secret and focused on how depression is a real and treatable illness, encouraging people to get help when they need it.
Verdict: Speaking Books have now produced 48 titles in 24 different languages and are now used in 20 African countries across the continent. The books now tackle a number of critical healthcare issues outside of suicide prevention such as HIV and Aids, malaria, maternal health and clinical trials. Speaking Books has also expanded to China, India and South America. “The situation we face in rural South Africa is the same in any other African country—low literacy compounded by lack of access to services and affordable healthcare,” says Wilson. “This means that patients are often not able to get help for many health problems. We believe that this interactive, durable, high-quality, hardcover book engages the user or patient, and allows them to build self-confidence and skills with a simple action plan”. AK
15. Narrative exposure therapy
Idea: Narrative exposure therapy (NET) for Uganda’s former child soldiers, encouraging storytelling to help come to terms with their experiences.
Problem: Abducted and forced into conscription by the Lord’s Resistance Army (LRA), over 25 000 Ugandan children were pushed into violent atrocities during a civil war that lasted 22 years, often killing their own families. The majority were left with severe post-traumatic stress disorder (PTSD)—with symptoms including depression, flashbacks and suicidal thoughts. Moreover, hostility from their former communities has left countless child soldiers alienated, making PTSD a longer, lonelier battle.
Method: NET was introduced to Ugandan child soldiers as a means of making conscious their deeply repressed traumas. The technique highlights the importance of story, creating a kind of fiction from real-life experience as a vehicle for coming to terms with it. Nick Taussig, co-founder of the Mtaala Foundation—a charity that sets up educational communities in Uganda, empowering Ugandans to help their own youth—says that narrative exposure, though not a new concept, appeals to Ugandan culture, “There’s a strong oral tradition in Uganda, and these treatments build on that by committing the children’s stories to paper, investing them with added meaning.”
Verdict: A study of 85 former child soldiers conducted by Bielefeld University, Germany, demonstrated that 80% of those who underwent NET showed clinical improvements. MH – guardian.co.uk © Guardian News and Media 2012
Outsourcing: The Indian connection and Africa
September 8, 2012 | 0 Comments
By Gemma Ware and Michael Omondi in Nairobi *
As Africa struggles to position itself as an outsourcing destination for global clients in Europe and North America, Indian companies are raking in the few local contracts up for grabs.
A couple of years ago, confidence was running high that Africa would soon be winning a barrage of lucrative outsourcing contracts to serve clients in the United States and Europe. These global ambitions have faltered. In North Africa, buffeted by the Arab Spring, the industry has struggled to win back the confidence of multinationals.
Further south, while the flow of international outsourcing contracts has dried up, in its place there is a small but growing supply of work supporting the African operations
of multinational corporations. Driven initially by demand from the telecoms sector, experienced Indian business process outsourcing (BPO) players are snapping up many contracts, covering everything from data entry to fielding calls from customers.
North Africa’s attractiveness as an outsourcing destination took a hit during the political upheaval in 2011. In Egypt, some left for good. Vodafone New Zealand, which had a 180-seat call centre in Cairo, shut down its operations and then withdrew completely in May 2011. Others scaled back. Indian information technology (IT) services firm Wipro, which had opened a service centre in 2007 that was employing 150 people doing IT back office and Java support, decided to pull back in September 2011. It now employs just 50 people doing the same type of work but mainly placed within its clients’ operations.
Companies have not reacted uniformly to the political uncertainty in the region. In Tunisia, French technology firm Solutions 30 transferred its call centre from Tunisia to Morocco. Teleperformance, one of the largest French outsourcing companies, opened its sixth call centre in Tunisia – employing 200 – this April and plans to add another 500 people by the end of the year to take it to 6,000 employees in the country.
However, Tunisian workers are demanding more under the new dispensation. On 15 February, Teleperformance was affected by a one-day strike that hit a number of companies. “Our actual operations remained open during this activity with minimal disruption,” said Brigitte Daubry, Teleperformance’s president for Central Europe, the Middle East and Africa. In late May, a wave of protests hit Tunisia, and judges and training doctors went on strike. Industrial action may become more frequent as trade unions and secular parties try to make things difficult for the ruling Islamist Ennahda party.
Shielded from the political turmoil of Egypt and Tunisia, Morocco is pushing ahead with an aggressive plan to build ready-made infrastructure to host offshoring companies. “Morocco has been one of the few countries not to be touched by the upheavals,” says Abderrafie Hanouf, general director of MedZ Sourcing, which currently hosts 20,000 employees in two outsourcing parks – Casanearshore in Casablanca and Technopolis in Rabat. Both parks are operating at 90% capacity, offering office space for call centres and shared service centres from which companies can offer IT outsourcing. Hanouf says outsourcing players in neighbouring countries have done due diligence on the opportunities in Morocco. In June his company opened the first phase of Fès Shore, a park it is building at a cost of Dh1.2bn ($120m). A second project, Oujda Shore, is also under construction.
Politics in Europe may make it harder to fill these new centres. French companies may start using more companies at home, as President François Hollande strains away from austerity towards a more growth-led recovery strategy for the eurozone. The US presidential election has also put offshoring centre stage, with President Barack Obama’s campaign running an advert attacking Republican nominee Mitt Romney for outsourcing US jobs. In January, Obama announced plans to encourage ‘inshoring’ and to remove tax incentives for companies to operate offshore.
However, analysts insist that multinationals will seek out the cheapest place to do business. Despite increasing wage inflation in India, a collapse of the rupee – which depreciated 11% against the dollar between March and May – means US and UK companies are still saving 60-70% by offshoring to India, according to Shyan Mukerjee, an India-based BPO analyst at Everest Group. The global BPO industry was worth $45bn in 2011, says Mukerjee, but Africa makes up less than 7% of that. The sector’s growth in Africa is coming from servicing local operations rather than answering calls from the US and Europe.
Ghana has had early success at winning this sort of business. In February 2011, Nestlé opened its first shared service centre in Accra to provide financial and human resources support to its African operations. In September of the same year, Swedish company Ericsson chose Ghana for its first African regional support centre. Firms such as Indian IT company HCL and US firm Aegis Global have been looking at the opportunities in Ghana, where the government began building a 20ha IT park in May and is developing a BPO incubation centre. The industry may have brought in more than 1,500 jobs in the past two years, but it is still a far cry from the government’s target of 7,000.
“Because of the global pressures and US companies themselves facing a lot of issues, some of these decisions have not been taken or are on the back burner,” laments Gurmeet Chopra, a consultant at Indian firm Avasant, which just completed a two- and-a-half-year contract with the Ghanaian government to improve Ghana’s attractiveness as a BPO destination.
Elsewhere, telecoms companies and banks have been the main driver of demand. Seven months after India’s Bharti Airtel bought Zain’s African operations in 2010, it announced it was outsourcing customer service management to IBM and Indian firms Tech Mahindra and Spanco. More contracts have followed. Tech Mahindra now has delivery centres in seven African countries that employ more than 2,000 people. “Currently, we are serving only regional/African clients in Africa,” explains Prasenjit Roy, Tech Mahindra’s director of marketing and head of corporate communications. As well as the Bharti contract, the company is working for a Ghanaian and a Zambian bank.
India’s Wipro also leveraged a new expansion into East and West Africa on the telecoms sector. “We identified Africa as a high-growth market,” says Ramachandra Yadavilli, who moved to Nairobi last year to become Wipro’s new head of business for Africa. Wipro is focusing on three sectors – telecoms, banking and oil and gas – and on picking up local business rather than offshore work.
With BPO turnover in Africa of around $30m in the last financial year, the continent still represents less than 0.5% of Wipro’s global operations. It is now employing around 500 people in Africa, the majority in South Africa. Despite plans announced last year to open a 1,000-seat service centre in South Africa, Yadavilli said clients still preferred to have in-house staff – such as the 250 employees it has working at a large South African bank. “Unless there’s a critical mass, service centres don’t make sense,” he argues.
In Kenya, this influx of foreign firms is frustrating local BPO players already suffering from a slowdown in offshoring work. “We have been affected by the weak global economy and the competition from India and the Philippines,” says Nick Nesbitt, chief executive of Kencall. Back in 2008, Kenya’s pioneer BPO firm had a target to employ 5,000 employees by 2013. It had 700 but now has 500.
Kenya’s BPO sector has shrunk from 45 firms in 2007 to just nine today, according to the Kenya ICT Board. This could dampen the government’s target to generate 20,000 direct jobs through BPO operations by 2013 and increase its contribution to the national economy to KSh10bn ($110m). The anchor of this plan was the construction of Konza Technology City, 45km south of Nairobi, which has been delayed by government bureaucracy and a lack of funding.
To keep afloat, seasoned Kenyan operators like Horizon Contact Centers, Kencall and Techno Brain have turned to local contracts. In 2010, Horizon snapped up a multi- million-dollar contract to manage mobile phone operator Orange’s customer care services. Kencall is now working with the African Medical and Research Foundation.
“For the last two or three years, there has been a big push for local business, but uptake has been slow because it’s still a new concept in this market,” said Munjal Shah, director of Techno Brain. “Experienced foreign firms have joined the fight for the local contracts and maddened the outlook further.”
Foreign firms such as Accenture and Tech Mahindra have also won outsourcing contracts worth millions of shillings from the public sector and multinationals, while South African firm Payment Solutions won a government tender to manage the public-sector payroll in December 2010.
Local operators are asking the government for protection. “Local BPOs lack the experience being enjoyed by our competitors from countries like India, and this is why we are asking the government to change the procurement rules and make it a must for the foreign firms to partner with the locals,” said Nesbitt.
As North Africa’s political climate settles, the region remains an attractive offshoring destination. But sub-Saharan Africa has a long way to go if it wants to steal substantial offshoring contracts from Asia. “In the Philippines, the industry is worth $9bn and has 500,000 jobs. What they excel at is English-language voice to the United States,” says Everest Group’s Mukerjee. “Africa has to carve a niche for itself, a story for itself and the industry is large enough for it to get a fair share of jobs”
Ethiopian Airlines:Ethiopian dares to Dream
September 8, 2012 | 0 Comments
AFRICA’S booming aviation industry reached another landmark in August when Ethiopian Airlines became the first carrier outside Japan to operate the Boeing 787 Dreamliner (pictured), a state-of-the-art passenger jet. The introduction of the 787 to African skies could transform the nature of air travel across the continent—and even worldwide.
With its lightweight carbon-composite wings and fuselage, the 787 is 20% more fuel-efficient than the similar-sized Boeing 767, an existing industry workhorse. In a world where fuel typically accounts for around 30% of an airline’s total costs, such efficiency is extremely attractive, and Ethiopian has ordered ten planes.
The carrier’s arch-rivals, Kenya Airways and Nigeria’s Arik Air, have not stood idly by: they have ordered nine and seven of the 787s respectively. But theirs won’t be delivered for years, as severe supply-chain delays mean Boeing’s backlog of the Dreamliner has reached an eye-watering 841 planes. In the meantime, Ethiopian can enjoy the significant cost advantages that accrue from being among the 787’s first operators.
Ethiopian may elect to pass on its cost savings to customers, which is good news given that airfares in Africa are the highest in the world per kilometre and stymie trade between countries that badly need growth. Or the airline may choose to reinvest the savings into buying yet more aircraft to add to its 42-strong fleet, in which case it would probably overtake South African Airways to become sub-Saharan Africa’s biggest carrier.
In any case, Ethiopian’s 787 operations are likely to have ramifications far outside the African continent. Since the 787 has a massive 14,200km range—roughly equivalent to a 20-hour non-stop flight—Ethiopian can now operate direct flights from its hub at Addis Ababa to almost any city on the planet. As if to prove the point, the airline will this year begin its first ever flights to Latin America, with São Paulo rumoured to be the first of many new destinations. Tewolde Gebremariam, the chief executive, also talks of significant expansion throughout Asia; this October, Kuala Lumpur will become his airline’s 70th international destination.
Intercontinental passengers should start to benefit from the central location of Ethiopian’s hub at Addis Ababa. Situated between west Africa and the Middle East, and between Europe and sub-Saharan Africa, Ethiopia’s capital could become a Gulf-style ‘aero-city’, providing much-needed competition to Dubai and Doha, the glitzy transport hubs where Emirates’ and Qatar Airways’ intercontinental passengers currently change planes.
In short, frequent flyers may soon find themselves getting acquainted with the facilities at Addis Ababa’s Bole airport. In anticipation of a passenger boom, the once-grim airport was comprehensively remodelled last year: the runways were extended, an expo centre was built, and a new automated baggage handling system was introduced. It can handle 11,500 suitcases per hour—as many as London Heathrow.
Some aviation analysts are sceptical, because Ethiopian Airlines is somewhat hamstrung by its emaciated regional network. Unlike Kenya, whose national airline offers services to economic boom-towns in neighbouring Tanzania, Uganda and Rwanda, Ethiopia is surrounded by unfriendly neighbours like Eritrea and Somalia, so Ethiopian Airlines flies to just five regional destinations. When competition or recession trims margins in intercontinental markets, the airline has no local fiefdom to which it can retreat for easy profits.
Partly in an effort to overcome this dilemma, in 2010 Ethiopian launched ASKY Airlines, a Togo-based subsidiary, to cash in on the buoyant performance of west Africa’s regional air market. The move has worked effectively, and ASKY became profitable within months.
Ethiopian is well managed, and has consistently exceeded the profit targets set out in its strategy plans. It is unusual among state-owned African airlines in being able to raise its own debt and finance its own expansion without government cash. Its ten new 787s have been bought with a $1bn loan guarantee from America’s Export-Import Bank, and it is currently tendering for an additional 15 single-aisle jets to solidify its African presence.
It could, in other words, be the example that others follow. Too many African carriers are plagued by debt and managed with the sole aim of satisfying the short-term interests of their cash-hungry owners. Africa’s fragmented economy desperately needs airlines to facilitate trade, tourism and growth, as well as to provide employment and technical skills. With its ten modern 787s and its confident global ambitions, Ethiopian Airlines has not just Africa, but the whole world, in its hands.
By 2035, Africa will have the world’s largest workforce-bigger than China’s or India’s
September 8, 2012 | 0 Comments
Africa at work: Job creation and inclusive growth
Over the next decade, we calculate that Africa has the potential to create between 54 million and 72 million more wage-paying jobs, with nearly half of them in manufacturing, agriculture, and retail and hospitality.
By David Fine, Arend van Wamelen, Susan Lund, Armando Cabral, Mourad Taoufiki, Norbert Dörr, Acha Leke, Charles Roxburgh, Jörg Schubert, and Paul Cook*
Africa is the world’s second-fastest-growing region. Poverty is falling, and around 90 million of its households have joined the world’s consuming classes—an increase of 31 million in just over a decade. But a new McKinsey Global Institute report, Africa at work: Job creation and inclusive growth, shows that the continent must create wage-paying jobs more quickly to sustain these successes and ensure that growth benefits the majority of its people.
Despite the creation of 37 million new and stable wage-paying jobs over the past decade, only 28 percent of Africa’s labor force holds such positions. Instead, some 63 percent of the total labor force engages in some form of self-employment or “vulnerable” employment, such as subsistence farming or urban street hawking. If the trends of the past decade continue, Africa will create 54 million new, stable wage-paying jobs over the next ten years—but this will not be enough to absorb the 122 million new entrants into the labor force expected over the same period. However, by implementing a five-part strategy to accelerate the pace of job creation, we estimate that Africa could add as many as 72 million new wage-paying jobs over the next decade, raising the wage-earning share of the labor force to 36 percent.
1. Identify one or more labor-intensive subsectors in which an African country has a global competitive advantage or could fill strong domestic demand. Lesotho, for example, capitalized on the African Growth and Opportunity Act (2000), granting some African exports duty-free access to US markets. A landlocked nation surrounded entirely by South Africa, Lesotho developed industrial zones for the apparel industry and built rail links between them, offered incentives to foreign investors, and simplified the regulation of the sector. Today, Lesotho’s apparel exports to the United States are almost 100 times as large as South Africa’s on a per capita basis, and the sector is the single largest creator of jobs, employing about 40,000 people in 2008 in a country of just two million.
2. Improve access to finance in target sectors. Cape Verde, for instance, encouraged foreign direct investment to ease financial constraints on its tourism sector. To capitalize on the country’s beautiful beaches, it offered investors a five-year tax holiday, exemption from import duties, and unrestricted expatriation of profits. Revenues generated by foreign tourism increased from $23 million in 1999 to $542 million in 2008, and the sector now employs 21 percent of Cape Verde’s workforce.
3. Build a suitable infrastructure. Countries that remove infrastructure constraints in target subsectors, particularly in export-oriented industries, can reap sizable benefits. Mali’s exports of mangoes to the European Union, for example, grew sixfold between 2003 and 2008 after a concerted public–private program helped the country build integrated road, rail, and other infrastructure necessary to access export markets. These moves cut the transit time for shipments in half.
4. Cut unnecessary regulations. Removing needless red tape in certain sectors is also important. In Rwanda, for instance, streamlining the procedures needed to open a business dramatically increased the number of new companies, from only 700 a year before the reform to 3,000 a year today.
5. Develop skills in target sectors. Around 40 percent of African workers now have at least some secondary education, and that share will rise to 48 percent by 2020. Few employers in our survey of businesses in Egypt, Kenya, Nigeria, Senegal, and South Africa reported that a lack of skilled workers was a top barrier to growth. Still, Africa’s educational attainment lags behind that of other regions, and the continent would undoubtedly benefit from continued improvement. Two things are of particular importance: work readiness among school graduates and, in some countries, specific vocational skills.
iROKING – Africa’s “Spotify” – hits 100,000 registered users
August 29, 2012 | 0 Comments
iROKING, the largest, legal distributor of Nigerian music, announces that it has 100,000 subscribers in just seven months. iROKING is Africa’s number one music platform and allows free, easy and legal access to lovers of Nigerian and Ghanaian music.
Launched in January 2012, iROKING was developed by the owners of online Nollywood-sensation iROKOtv, as a means of showcasing the very best of African music. iROKING is the only African music platform that is accessible anywhere in the world and on a number of devices, including the iOS, Android, Windows and Symbian (Nokia) mobile handsets. The application allows access to thousands of the latest Nigerian tracks and streams songs over Wifi or 3G. iROKING also manages over 80 YouTube artists pages for Nigerian stars that have seen over 100,000,000 views in the past 12 months, averaging 15 million hits each month.
Michael Ugwu, CEO of iROKING says: “iROKING is all about helping African artists and their fans connect with each other. iROKING came onto the scene to improve the channels for Nigerian artists to reach their fans, generating additional revenue for them and therefore helping to fuel the musical ecosystem. This is a revolutionary approach to streaming Nigerian music, hopefully one that will grow. We are also bridging the global publishing & distribution gap directly to platforms such as iTunes and Amazon, as we are a local partner who can publish work on behalf of the artists.
“The raw musical talent in Nigeria is out there. For us, we just wanted to build a simple, beautiful platform that showcases the artists and their work. What we’ve done with iROKING is bring awesome Nigerian music to the rest of the world; whether it’s on a computer, tablet or smart phone, iROKING is Nigerian music anytime, anywhere.”
Since its launch iROKING now boasts over 200 recording artists and 35,000 tracks in its catalogue. iROKING’s biggest stars include Bez, 2face, Bracket, Flavour, Omawumi, Timaya, Djinee, Duncan Mighty – more are signing up every day. Bez, who was the first African artists to premier a music video on BET says: “iROKING is changing the entire landscape of Nigeria’s music scene – giving power to the artists and also giving music lovers what they want – easy access to the incredible music that’s being produced right here in Nigeria. I’m loving what iROKING is doing for the industry and look forward to the first million registered users, which I’m sure can’t be far away.”
iROKING users can create their own exclusive playlists, tag their favourite tracks, search by genre/artist and even click through to iROKING-managed YouTube channels to see the latest music videos.
iROKING is part of iROKO Partners, Africa’s largest legal online source of Nigerian film and musical entertainment and YouTube’s largest African partner.
Check out what some of the iROKING-signed artists think of this milestone of 100,000 registered users on the official iROKING YouTube channel
For further information please contact:
iROKO Partners firstname.lastname@example.org
Jessica Hope +44 203 176 2808
Pelham Bell Pottinger +44 20 7861 3925
AfDB Readies Ambitious Infrastructure Bond Programme to Boost African Economies
August 29, 2012 | 0 Comments
Africa has established itself as the continent with the world’s second-fastest economic growth behind Asia, and its momentum seems positive
IHS, 20 August 2012
The African Development Bank (AfDB) plans to launch a new bond programme, targeted at infrastructure development, which will raise up to USD40 billion. Approximately half of this amount will be drawn from the considerable reserves now held by central banks around the continent. The programme, if it comes to fruition, will make AfDB Africa’s largest multilateral financer. However, it would close the continent’s huge infrastructure gap only partially.
The central banks of African countries hold about USD450 billion in aggregate reserves, with much of this money in safe but low-yielding investments in the financial systems of the world’s traditional industrial powers. Therefore, the African Development Bank (AfDB) programme, in part, represents a repatriation drive. The announced initiative heralds a significant augmentation of multilateral infrastructure financing, but it will not be enough to displace China from its position as the dominant funder of infrastructure projects on the continent. As the AfDB estimates the full cost of adequate infrastructure provision for Africa at USD93 billion annually for a considerable period, even a favourable outcome will leave many needs unmet.
Aim to leverage central bank reserves to boost development funding
On 7 August, AfDB president Donald Kaberuka announced plans for a massive new bond programme targeted at expediting basic infrastructure improvements across the continent. The principal focus will be road and rail transportation and energy generation. AfDB, an AAA-rated institution, is particularly eager to tap reserves held in African nations’ central banks. These total an estimated USD450 billion, with much of this wealth parked in safe but extremely low-yield instruments in the Northern Hemisphere. Kaberuka pointed out that shifting just 5% of these national reserves into the new AfDB bond programme would raise an impressive USD22 billion. Projected subscriptions from non-African sources, largely institutional investors, bulk up the anticipated size of the bond programme to about USD40 billion. This sum far surpasses the USD19 billion per year currently committed to Africa by the AfDB and the World Bank combined.
AfDB officials intend to outline their proposal at the International Monetary Fund (IMF) meeting this October, so the launch of the programme is not quite imminent.
Another recent initiative under way is a swap arrangement under which the AfDB and the World Bank-affiliated International Finance Corporation can each issue paper in any local African currency for which either entity has transaction authorisation. Activity under this scheme has bolstered a trend of rising investment in Africa. For instance, the first tranche in a series of medium-term debt issues denominated in Ugandan shillings, designed to raise an eventual total equivalent to USD500 million, was oversubscribed. Cultivation of African financial markets and making a greater range of options available for African investors must count as side benefits of the initiatives described here. The continent lacks the capital to bootstrap development on its own, and this constraint will persist far into the future. However, among all continents, Africa now boasts the world’s second-fastest rate of economic expansion behind Asia. Sounder macroeconomic management, the emergence of functional financial markets, although most are still rather rudimentary, and nascent regional economic integration put a promising spotlight on Africa for investors. While seemingly intractable stutters in the economic performance of industrial nations dampen the global investment climate as a whole, Africa’s relative competitiveness as an investment destination is on the rise.
Closing Africa’s infrastructure gap
Africa will not realise its considerable human and economic potential until it progresses much further in closing its enormous infrastructure gap. A 2011 study by the AfDB, Flagship Report of the Africa Infrastructure Knowledge Program, estimated the cost of bringing the continent’s physical infrastructure up to acceptable modern standards at USD93 billion annually on a sustained basis. This is more than double the value of infrastructure projects that have come on-stream in Africa during the recent past.
China is the paramount developer of infrastructure in Africa, and this will almost surely remain the case even if the financing initiatives discussed here reach their projected magnitude. Observers from all corners of the continent report positively on the outcomes of Chinese-funded projects, particularly in transportation sector upgrades. One extraordinary example is the Kigali-Kibuye road in Rwanda, which has cut travel time on this 75-mile route from up to eight hours to less than two hours. Chinese-built roads link Angola’s provincial capitals, and an upcoming project in Cameroon will link the national capital Yaoundé and commercial centre Douala with a new six-lane highway.
However, Chinese investment in Africa often fails to deliver associated employment opportunities for Africans. Most deals stipulate lucrative contracts for Chinese construction companies and Chinese nationals commonly fill even ordinary labourer positions. Moreover, China’s involvement in Africa revolves around establishment of resource extraction projects and thereby gaining access to African resources, especially oil and metal ores. The accompanying infrastructure development is considerable, and of great benefit to local communities. Yet, in the long run, African countries can only prosper if they broaden their economic base to rely less on primary commodities and more on expanding and interlocking secondary and tertiary sectors.
UN posits 7% growth
On the same day that the AfDB unveiled its prospective bond programme, Tegegnework Gettu, Africa section chief for the UN Development Programme (UNDP), speaking at a conference in Kenya, pointed to 7% aggregate GDP growth for the continent as soon as 2015 as an ambitious but viable possibility. The nominal increment of a stepped-up pace of infrastructure emplacement would be part of this upsurge, but gains from efficiency, widened business opportunity, and the classic multiplier effect of rising incomes would be even more instrumental.
Intra-African development, benefiting from improving institutional competence and transparency and proactive moves toward regional integration, is the key to keeping more of Africa’s wealth inside Africa. Realisation of this scenario would also go far in better insulating African economies from the vicissitudes of international financial crises and commodity price shocks. However, numerous factors reduce the likelihood of a best-case outcome. Political crises or potential crises affect more than a few African countries. Commodity dependence will characterise most African economies well beyond 2015. Furthermore, the possibility of a serious spike in food prices overhangs Africa’s prospects in the near term. Perhaps, one should interpret the UNDP mention of potential 7% growth as an exhortation to good leadership, combined with a wish for unusually good luck, rather than as a calculated forecast. The IMF is in the process of marking down Africa’s expected growth: it now estimates it at 5.4% for this year. IHS Global Insight forecasts 2012 real economic growth averaging 5% and 4.7% respectively, for sub-Saharan Africa and the African continent as a whole.
Outlook and Implications
If its proposed bond programme, largely predicated on leveraging some of the USD450 billion in reserves now held in African central banks, takes shape as envisioned, the African Development Bank will emerge as the leading multilateral financer of infrastructure projects on the continent. The plan is to make up to USD40 billion available, compared with USD19 billion disbursed this year through the AfDB and World Bank combined. Provided the projects financed are well chosen and executed capably and honestly, the continent will receive a tremendous direct and indirect economic boost. China’s position as the top investor in African infrastructure projects is not likely to be challenged. The numbers in play at this time will not close Africa’s infrastructure gap, and poverty eradication will progress slowly in the near term. Nevertheless, Africa has established itself as the continent with the world’s second-fastest economic growth behind Asia, and its momentum seems positive.
Kenya ahead Nigeria as IBM sites Africa’s ICT lab in Nairobi
August 20, 2012 | 0 Comments
By PATRICK ATUANYA*
The choice of Kenya as the location for International Business Machines (IBMs) first research laboratory in Africa is raising fears that Nigeria is being left behind with regard to Information and Communication Technology (ICT) development.
When IBM, the $230 billion American Information Technology (IT) and Software Company sought a spot in Africa to build its new research centre, it didn’t pick Nigeria with its 168 million people and $270 billion economy.
It chose Kenya instead, a country whose economy at $34 billion, is about the size of Lagos (Nigeria’s commercial capital), and has a population seven times smaller than Nigeria’s.
IBM, with an annual research budget of $6.5 billion, runs similar research facilities in 11 other countries, but this is the first in Africa.
The new research centre project announced last week, is a joint venture between the Kenyan government’s ICT Board and IBM, with each contributing $10 million of funding over the next five years.
For stakeholders, this highlights the risk that Nigeria may be falling behind peer countries such as South Africa, Kenya and Egypt in IT, software development and skilled ICT manpower development.
“In terms of education we are behind. Kenya’s tech scene did not just explode over-night, they had it coming,” Francis Onwumere, a Nigerian developer at Digital Craft Studios, the company behind prowork project management application that makes team collaboration easy, said.
“They invested in competence and they are reaping the benefits.”
The choice of Kenya (which aims to be an IT hub in Africa) by IBM did not come by accident, as the country has been an incubator for software development and has plans to build its own Silicon Valley, called Konza, a 5,000-acre site which will eventually be a cluster of technology companies plus a university.
Kenya is also a global leader in mobile money, with its award winning MPESA service.
IBM’s Kenya laboratory will seek to develop technology-assisted solutions to the problems of Africa’s fast-growing cities (Africa has 52 cities of more than a million people — more than are in Europe).
Lab-location decisions are based mainly on the lure of “smart people and real-world problems and opportunities,” said John E. Kelly, I.B.M.’s senior vice president for research.
In addition, it will be the center for a “resident scientist programme,” which will bring in researchers from Nairobi and elsewhere in Africa to collaborate with I.B.M. scientists.
Nigeria, which however had high hopes of becoming a hub for ICT in Africa, seems to be under performing, and not leveraging on its seeming advantages.
Osamuyi Stewart, (a Nigerian) services strategy manager for IBM said, “Other African governments are beginning to formulate plans, but Kenya is very advanced – they were ready for this in terms of know-how.”
Nigeria has the most internet users in Africa with 44 million users, 54 percent of which is mobile browsing according to data from international telecommunications union (ITU).
There were about 2.4 million Blackberry devices in the country’s four GSM networks MTN, Globacom, Airtel and Etisalat, as at December 2011, up from about 925,000 about a year ago.
The country however ranks low on major ICT indices. In the 2010 – 2011Global Information Technology Report, Nigeria ranks 104 out of 138 countries in terms of network readiness.
The Abuja Technology Village which was conceptualised in 2004 and expected to cost $400 million to create “Africa’s preferred technology research, incubation, development, and outsourcing destination,” is only 55 percent complete some eight years later.
The Special Adviser to the Federal Capital Territory (FCT) Minister on Project Implementation and Monitoring, Ajah Nwabueze Igwe, expressed worry over the slow pace of work on the Abuja Technology Village project, during an inspection visit to the site in February 2012.
Nigeria’s pioneer ICT Minister, Omobola Johnson, who is well regarded as competent for the job, and was s former Country Director of Accenture, a global management consulting and technology services firm, is certainly aware of the challenge.
“The poor ranking of Nigeria in the Global competitive index underscores the magnitude of the task…The challenge for the nation is to improve significantly her ratings in all spheres of knowledge- based economies,” Johnson said at an ICT conference in Georgia, USA, earlier in March.
ICT enhances productivity growth and business performance. According to the World Bank, every 10 percent of incremental broadband penetration will result in a 1.38 percent Gross Domestic Product (GDP) growth rate.
Ethiopia gets Africa’s first Boeing 787 Dreamliner
August 19, 2012 | 0 Comments
Ethiopian Airlines received Africa’s first Boeing (NYSE: BA – news) 787 Dreamliner on Friday, making Ethiopia the only country aside from Japan (EUREX: FMJP.EX – news) to operate the innovative aircraft.
“As a continent this shows how much we are making progress as Africans… competing on the global stage and changing our image,” Ethiopian Airline CEO Tewolde Gebremariam told reporters at Addis Ababa’s Bole International Airport.
The plane arrived from Dulles airport in Washington, DC, home to the largest Ethiopian diaspora population globally.
State-owned Ethiopian Airlines — Africa’s fastest growing carrier — has purchased ten 787 Dreamliners from Boeing. Each has an official list price of some $207 million, although airlines rarely pay such figures, especially for bulk orders.
Tewolde said the delivery of the Dreamliner, dubbed “Africa First,” is an achievement for all of the continent.
The aircraft is constructed with lightweight carbon, as opposed to heavy aluminium found on other planes, consuming 20 percent less fuel.
Transport Minister Deriba Kuma said the delivery of the 787 was especially notable given the financially strained climate.
“This achievement of Ethiopian Airlines is all the more remarkable given the very bad global context for the airline industry,” he said.
Despite the fanfare at the landing ceremony, Deputy Prime Minister Hailemariam Desalegn said the country expects greater achievements from the airline in the future.
“My people and my government are expecting to see Ethiopian Airlines as one of the best airlines in the world, not only in Africa,” said Hailemariam, who is also Foreign Minister.
Ethiopian Airlines was established in 1945 and now operates to 86 cities throughout Africa, Europe, Asia and North America.
In 2011 Ethiopia had a GDP per capita of $374, according to the World Bank, but has showed strong economic growth of 11%, according to the government, and 7% according to the International Monetary Fund.
Uganda the key in East Africa’s oil-driven energy revolution
August 19, 2012 | 0 Comments
By Hannah Waddilove, AKE Group*
But political instability and poor regulation could herald appearance of ‘resource curse.’
In January 2009 Heritage Oil, in partnership with Tullow Oil, announced that exploration on concessions in the Lake Albert Basin in Uganda contained over 2bln barrels in reserves, far outstripping the commercial viability threshold. The Lake Albert find has enhanced foreign investor confidence in eastern Africa’s energy potential, while for Uganda, it promises to boost its heavily aid-dependent economy.
Despite the euphoria, prospects for Uganda’s oil industry are off to a rocky start. With a frail regulatory environment, oil politics disrupting Uganda’s parliament, and insecurity (both internal and external) threatening the oil-rich border regions, investors are warned that Uganda is showing signs of the so-called ‘resource curse’, with ensuing political and security risks.
When Museveni was recently criticised for spending around $US780m on six SU-30 MK2 Russian-made fighter jets, depleting national reserves, he claimed that the purchases were critical to secure oil investments, citing ‘unfriendly neighbours’.
An increasing number of attacks by armed gangs around the Uganda-DRC border do present potential problems for the industry; the border cuts straight through Lake Albert while its shores on both sides run along the Albertine Rift where the majority of the oil has been found. Sporadic skirmishes between Uganda and DRC government forces, militias, and local people have erupted in the Lake Albert area since Heritage hit oil there in 2006. Over 100 people have been kidnapped in this area in attacks linked to fights over ransoms, minerals and oil. The most recent attack on the border town Mutungo on 2 August by the Mai-Mai militia displaced 70,000 residents.
The most persistent oil security problems however are likely to be internal. Several land disputes have already been sparked in the oil-rich Bunyoro region by the activities of land speculators, with complaints by farmers that compensation for the destruction of crops was insufficient (after the government lowered the rates earlier this year) or were not paid at all. Public anger and anti-government riots are on the rise in Uganda, and disputes between landowners, IOCs and the government are likely to intermittently spill over into violence.
Uganda is not set to produce oil until 2015, and yet the limitations of its frail regulatory environment, compounded by the Ugandan government’s inexperience, are already apparent. The on-going dispute regarding Heritage’s supposed capital gains tax debt to the government is indicative of this. This sporadic tax demand reflects governmental disarray, as well as irritation over a deal that saw President Museveni trumped by corporate know-how. Existing income and tax laws are clearly inadequate for Uganda’s burgeoning oil industry and the government is increasingly demonstrating that it does not understand the unique nature of the sector.
Recent claims that Tullow Oil made corrupt payments of US$22.59mn to Uganda’s Foreign Minister, Sam Kahamba Kutesa, and other state officials have been discredited. However, the fact that the allegations were tabled by parliament on 10 October, in a clear aggressive attempt to discredit Tullow, proves that murky oil politics are already posing a threat to Uganda’s industry. In a state of upheaval, parliament subsequently suspended the deal and placed a moratorium on approving oil deals until new transparency laws were passed. This series of events places a question mark over the sanctity of contracts.
New laws have been drafted but not passed and are likely to be subject to Uganda’s trademark legislative delays. Despite this, it is possible that the US$2.9bln agreement that will enable French Total and Chinese CNOOC to obtain Tullow’s 33 per cent stake in Blocks 1, 2, and 3A has gone through, with confusing reports coming out of Uganda’s parliament but no local media coverage. If the deal has been approved behind closed doors, the ruling party will meet with strong parliamentary opposition, likely to cause further disruptions to the industry. A local activist group has also already filed a suit against the government and Tullow oil at the constitutional court, deeming a premature go-ahead of the deal a legal violation.
Political intervention in commercial transactions is already a reality in Uganda. Museveni has also started to demand changes to the three main production sharing agreements. In September he attempted to eradicate a ‘stabilisation clause’, so as to allow the companies to be taxed more heavily in the future. Tullow reportedly offered to uphold stricter environmental standards but stood firm over the risk premium. Museveni is already playing a risky game with the oil companies; across the border in the DRC, political intervention in negotiations has all but frozen work on oil production.
Eastern Africa stands on the cusp of an oil-driven energy revolution and Uganda holds a key position in the regional domestic energy market. But its volatile politics and frail regulation make it primed for the ‘resource curse’. Museveni’s oil motto of ‘Norway not Nigeria’ is not convincing. The absence of an oil-specific revenue framework and oil deals shrouded in secrecy raises the prospect that Uganda is ill-prepared for this ‘revolution.’ Managing revenues and local populations in ways that exacerbate internal insecurity, coupled with a failure to develop a transparent, accountable sector are likely for the short term and present challenges to energy security for Uganda’s burgeoning oil sector.
Hannah Waddilove is the sub-Saharan Africa analyst for AKE Group, a political and security risk firm based in London.
An earlier version of this article was originally published in the Energy Supplement of the Aberdeen Press and Journal, www.pandjenergy.co.uk