Senegal: AfDB approves US$ 33.5 Million to promote youth and women employment
November 1, 2013 | 0 Comments
The Board of Directors of the African Development Bank (AfDB) Group) on Wednesday, 23 October 2013 in Tunis, approved a loan amounting to US$ 33.5 for Senegal to help the country finance the Project to Support the Promotion of Employment for Youth and Women (PAPEJF).
This project embodies the vision of the authorities of Senegal in the fight against youth unemployment and underemployment as defined in the « Company Project of Senegal ». It represents an ambitious program in terms of job creation and is in complementary with the initiatives implemented by other development partners.
This project seeks to create decent jobs and sustainable incomes through skills development through the promotion of micro, small and medium-sized enterprises (MSME) for the youth and women, especially in agricultural and services value chains. The project will generate at least 15,000 sustainable decent jobs in rural and semi-urban areas (60% for youth of both sexes and 40% for women) and develop the technical and managerial skills of 17,000 entrepreneurs.
It thus provides for the creation of 156 integrated agricultural, aqua cultural and poultry farms which will entail the development of approximately 1000 ha of land. It will also involve the construction of 18 training centres for handicraft trades, the establishment of 15 multifunctional platforms and 40 trading kiosks, and the refurbishing of 3 agricultural vocational training centres.
Focusing on youth and women entrepreneurship in the agricultural and services value chains it will broaden employment and income opportunities in the in the rural and semi-urban areas targeting particularly the regions of Kaolack, Fatick, Thiès, Casamance Naturelle (Ziguinchor, Kolda and Sédhiou) and in the surburbs of Dakar. By consolidating the development of the agricultural, poultry and aquaculture value chains, this project will enhance the outputs and specific potential of the selected areas, thus increasing employment and income creation opportunities.
The PAPEJF is aligned to the first pillar of the 2013-1017 National Economic and Social Development Strategy (SNDES), which target “growth, productivity and wealth creation”, in particular regarding employment promotion, rural sector development and integrated development of the rural economy. This project meets also the objectives of the New National Employment Policy (NPNE) which focuses on the creation of sustainable jobs and better management of the labour market.
Moreover, it is consistent with CSP 2010-15 and the Bank’s strategy for 2013-2022 which seeks to “support inclusive growth through economic diversification and integration”. In this regard, The PAPEJF is consistent with three of the five operational priorities of the 2013-2022 strategy (skills and technology; private sector development; and infrastructure development) and targets two of the three special interest areas (agriculture, food security and gender).
As of 23 October 2013, the active portfolio in Senegal was nearly 302 million U.S. dollars for 12 active operations in the public sector, and U.S. $ 221.8 million for five others in the private sector.
Think tanks chart the path for Africa’s accelerated transformation through regional integration
October 29, 2013 | 0 Comments
Africa is well positioned to chart the path for transformation through regional integration. But it should go beyond the narrow focus on trade in goods. This was the conclusion reached, following an afternoon discussion that brought together a high-level panel on regional integration featuring representatives from African think tanks and the African Development Bank on Sunday in Johannesburg.
Intra-African trade in goods was reported to be insignificant and the high-level panel suggested that regional integration should also cover: the movement of people to ensure labour mobility, which is vital in bringing wages down; the movement of talent through the promotion of mutual recognition of qualifications in fields such as medicine; and the movement of capital by facilitating stock exchanges cross-listing to enhance capital mobilization.
For Africa to fast-track regional integration and successfully increase value addition and integrate into global value chains, think tanks also expressed the need for leveraging commodities for industrialization, job creation and economic transformation.
The Bank’s Energy, Environment and Climate Change Director, Alex Rugamba, underscored the relevance of the theme of this year’s African Economic Conference – “Regional Integration in Africa” – “for Africa seeking larger markets that can support economies of scale and create suitable conditions for investment.
“Regional integration has gained prominence in this continent’s development agenda,” he said.
NEPAD and Regional Integration Director for the AfDB, Janvier Litse, provided a broad picture of the continent’s regional integration status, noting that despite ongoing efforts to support regional integration, “Africa remains the most unintegrated region in the world.”
Litse also pointed to the weak implementation of agreements by African leaders, urging participants “to critically examine the status quo, to dissect the emerging issues and find practical solutions” to these challenges. “Together we can shape the continent’s integration trajectory and make regional integration a success for Africa,” he said.
Presenting the Bank’s regional integration vision, Regional Integration Division Manager Moono Mupotola explained the institution’s commitment and strategy “to unlock Africa’s potential” to enable the efficient flow of goods, services and people. She emphasized the need to consolidate Africa’s small and fragmented markets and address common cross-border issues such as security and climate change. She also affirmed that challenges remained, even though the Bank had invested huge amounts in hard and soft infrastructure as well as in transformative projects.
For her, the challenges include limited capacities to implement common regional projects as well as differences in national priorities, weak productive capacities, major infrastructure gaps, weak implementation capacity at national and regional levels.
With regard to lessons learned, she stressed the need for selectivity, with more focus on policy and institutional aspects of integration, as well as increased political dialogue. “There is a need for more project preparation and mobilizing private funding for regional operations,” she said, adding that the Bank has a lot of ideas, but project preparations have been a challenge.
AfDB’s Research Division Manager, also a discussant, Issa Faye, for his part, made a strong and thought-provoking point, underscoring the need to wonder if the Bank was on the right track, and if its regional integration achievements have effectively benefitted African populations. “Our institution has achieved a lot in terms of procedures, but there is still room for improvement in the area of implementation,” Faye said, further highlighting shared prosperity, politics and democracy as key elements to take into account.
The five panelists who spoke during the second session, chaired by Steve Kayizzi-Mugerwa, Director, Development Research at the AfDB, focused on the priorities and policies with regard to how regional integration can support industrialization. The panelists expressed the need to think outside the box and be strategic in funding regional integration. Other suggestions included ownership of integration issues by Africans, institutional capacity building, provision of adequate budget for research and tackling the challenges and opportunities in creating a vibrant private sector in Africa.
The Chief Economist and Vice-President Mthuli Ncube said integration cannot take place without investing in infrastructure, skills training and education. “Infrastructure is at the centre of regional integration as it enables connectivity,” he said.
However he emphasized the need to place enhanced emphasis on the often neglected issue of soft infrastructure, such as one-stop border posts. In a continent with the highest number of landlocked countries, Ncube observed the need for efficient ports, arguing that all ports are in fact regional assets. These ports should be served by efficient corridors enhanced by trade facilitation measures. He also highlighted the importance of measuring results, noting that the Bank has made some headway in this area, but more needs to be done.
Victor Murinde, Director of the African Development Institute, recognized the quality of the debates and participants, disclosing that this year’s networking session with African think tanks charted the path for accelerated transformation through regional integration.
AfDB to Cooperate with South Sudan in Water Sector
October 29, 2013 | 0 Comments
The USD 5.4 million grant, extended from the Fragile States Facility, will benefit some 170,000 people living in those 11 towns.
The low levels of access to safe and potable water and adequate sanitation coupled with poor hygiene awareness has been the principal cause of water-related diseases such as diarrhea, cholera and guinea worm in the country. Despite the availability of surface and ground water resources in South Sudan, two out of three people in the country do not have access to safe and potable water services whereas eight out of 10 people do not have access to adequate sanitation.
The grant will finance the feasibility study and detailed designs for water supply and sanitation infrastructure facilities in the identified towns. In order to address the sustainability of the planned infrastructure and operations, a framework for capacity building of sector institutions within the study area will be developed. Based on an integrated approach, the study will address the challenges to sustainable provision of water supply and sanitation services in a holistic manner.
The study will cover aspects of water resources management, knowledge management and capacity building among local institutions as well as facilities for monitoring and evaluation.
The study is anticipated to be concluded in September 2015 and the knowledge generated will enrich the AfDB’s continued learning process, and its support to African countries, especially in fragile states.
The 11 towns selected for the study are: Fangak, Mbili, Jikou, Leer, Ayod, Gokmachar, Tonj, Mundri, Cueibet, Terekeka and Kapoeta.
On account of the impact of lack of access to water, South Sudan Government has labeled the water supply and sanitation sector as an extremely high priority and a key entry point to its development objectives. The water sector is therefore one of the top six expenditure priorities as articulated in all the Government’s key strategy documents.
The study outcome will be ready to finance and implement project documents for the identified priority 11 towns in South Sudan. This will provide opportunities for the government to access investment funding for water and sanitation infrastructure development, for which the AfDB will be ready to provide the support.
Into Africa: Start-Ups Swarm The Continent
October 28, 2013 | 0 Comments
By Connor Sheets*
LAGOS, Nigeria – In Nigeria, it’s not uncommon for a person to carry three or more cell phones, each optimized for a different one of the country’s wireless carriers.
Even deep in the impoverished Oto-Ilogbo Extension slum, built atop a massive landfill in mainland Lagos, there is a makeshift school where youths learn how to use the Internet on an old computer miraculously connected to the web.
A technological revolution is sweeping across Africa, bringing with it deep Internet penetration and exploding rates of smartphone usage. The phenomenon is ushering in a new era of savvy entrepreneurship, resulting in new investment opportunities that have attracted a number of major international players to what was until recently a mostly localized market.
One of the leading players in this tech transformation of the African continent is Jumia, perhaps best described as “Africa’s Amazon.”
Like Amazon, Jumia is an all-online shopping platform that promises expedient delivery of tens of thousands of products to consumers within its rapidly expanding network.
Jumia is the brainchild of two young Lagosian men who met at Harvard Business School, where they earned MBAs before returning to their chaotic home city. It has become one of Africa’s best-known success stories since its founding in June 2012 under the name Kasuwa.
It has already gone from five employees to more than 500, attracted tens of millions of dollars of investment from J.P. Morgan Asset Management, Summit Partners and other Western firms, and expanded its delivery area from Lagos to the entirety of six African countries from Kenya to Côte d’Ivoire.
Jumia’s story would have seemed impossible 10 years ago in a conflicted nation like Nigeria, but experts say that the firm is just one of the more visible outgrowths of a trend toward modernization of African business and society that offers massive potential for investors and entrepreneurs around the world.
Jeremy Hodara, co-CEO of early Jumia investor Africa Internet Holding, says that Africa’s metastasizing Internet connectivity and rising “appetite for consumption” have combined to create a conducive environment for tech start-ups across the continent.
“In Africa not only do you have a stronger demand than what people think – because when people think of Africa they think there is no money, but that is not true – but what’s interesting is there is no supply at all,” he said.
As such, Hodara believes the time is ripe for tech-minded business people to enter the market with bold, proven ideas for Internet start-ups, which are all but guaranteed to succeed as African infrastructure improves.
Jumia co-founder Tunde Kehinde painted a picture of the booming tech scene in Nigeria – which mirrors that of other advanced African economies – while seated on a leather couch in Jumia headquarters.
“My sense is that in the last two years you’ve really seen a sizeable jump in big start-ups coming up in the tech space, and now there’s so much more activity around so many different verticals,” he said. “In Nigeria you can buy groceries online, buy plane tickets online, and send money to your loved ones online.”
Already that theory is proving accurate, as numerous entrepreneurs are finding great success by creating blatant, Africanized copies of dominant Western companies.
Various African markets are now served by their own versions of established Western web firms and apps like Seamless (Hello Food), Uber (TaxiPark), Trulia (N-Soko), Hotels.com (Jovago) and eBay (BidorBuy), and the race is on to bring such offerings to the remaining underserved markets.
Companies like Rocket Internet, a German firm that was Jumia’s first key backer, are swiftly moving into the African sector, garnering millions of dollars in international investment and, in Hodara’s parlance, “leapfrogging” the traditional offline retailers most African countries never really had in the first place.
“I think for me it’s less about the online model that you translate from America to Africa; to me it’s more about industries that are going online directly,” he explained. “For instance in America you have Hotels.com. Before you had Hotels.com you had to go to travel agencies, and then they had Hotels.com. In Africa you will never have a travel agency on every corner. It will skip straight to online.”
But the African market is not as open and accessible as the success stories may suggest. Doing business there comes with a set of challenges not seen in many other markets around the world, as Hodara has found.
“The challenge is to execute it, because it sounds beautiful when I explain it like that, but it’s very difficult to execute,” he explained. “There is a lot of demand but little supply, so it looks very good on paper, but the complexity to execute is so high.”
As the continent continues its inexorable march toward modernity, more visionary investors and entrepreneurs will take the chance on Africa’s markets, as the reward proves ever more likely to be worth the declining risk.
Uganda not a failed state but a state that fails (The Agriculture politics nexus)
October 27, 2013 | 2 Comments
By Nelson Kukundakwe*
Born in 1931, the cooperative movement in Uganda awoke counter exploitation of local farmers by companies in Europe and Asia that monopolized the domestic and export markets of some cash crops like coffee and cotton.
The crops later formed the fundamental ground of cooperatives, attracting interest of colonial and post independence governments paving way for farmers to glimpse hope.
However, their demise left many like Bansigaraho counting loses even after a decade; Bansigaraho Moses is a professional teacher in Katenga Mitooma district who deserted to coffee farming business.
As an aging farmer who’s been in the sector for decades, he reminisces the time him and his Father would acquire skills on verities of coffee seeds, topography, growth and production of coffee and markets for the product thereafter “we never used to get worried during that time, everything was sorted, all that a farmer needed was the conscience” he says. As a grown up youth then, he shows me a three acre piece of land from which he could listen to a coffee machine making uncontrollable noise that would give them a glimpse of hope for next term’s school dues as they harvest coffee berries, how his father could enthusiastically push them to school with dues paid in time, how sad it is to call these rhapsody of realities history. Well, they finally gave way leaving farmers ‘at everyone for himself’. Bansigaraho describes life then as “terrible” “it was a terrible period, we were cheated by middle men who then stayed in business and enjoyed monopoly powers”
Tom Karuhanga the manager Banyankore Kweterana cooperative union in western Uganda one of the famously known says the quality of coffee lowered because the business lost control. He says middle men could buy substandard coffee seeds which eventually led to its loss of international market hence failure to realize profits.
However, Metuseera Beinemigisha a farmer in Isingiro district says unions suffered maladministration pointing at people they trusted. He says they could present exorbitant figures which subsequently led to their collapse. Metuseera a renowned aquaculture farmer in western region is one of those who vow never to return into these unions. Maturimaayo Rwakahamira the Kitagata farmer’s cooperative manager says efforts to bring farmers back into the unions has proved difficult because
farmers still have the trauma of the past loses. He is however optimistic that with massive sensitization and support from the government they may come back. The literature behind the collapse of cooperative unions explicitly attributes it to political unrests and affiliations that brought the current government in power in 1986 though the sign of collapse started to manifest in early 1970’s. But Moses Kahima the Sheema district commercial officer disagrees. “I don’t agree with anyone saying unions collapsed because of external factors” he said, “it was entirely due to internal political disorganizations” he bases his argument on the fact that cooperative unions had enough assets that would have kept them moving. By 1961 cooperative movement owned 31 coffee factories34 pulpariesan, an annual turnover of 147,000 metric tons of clean coffee beans and other assets estimated at 500million shillings.
Banyankole Kweterana that was equally affected together with Masaka Co-operatives that incurred heavy war losses in the form of people and property like vehicles, clean coffee and animals during the war.
By the time Tito Okello toppled Obote’s regime in July 1985, cooperatives were lifeless.
This came with the collapse of mechanized farming. The tractor population had risen from over 500 in 1960’s to 1, 778 five years later and peaked in 1970 at 4,200. Kahima who also doubles as a commercial agriculture consultant in western region says if farmers are to benefit from this sector, they must shift from subsistence farming to large scale mechanized farming. He blames the government for spoon feeding farmers instead of giving them skills.
Efforts to revive of cooperatives started in the 1990s with the obsolete Entandikwa credit scheme and the Youth Enterprise Scheme (YES) that started and buckled due to maladministration that the Government lost over sh9b, recovering only sh358m out of the total sh9.433b loaned out because the beneficiaries took it of a ‘thank-you token’ for their persistent allegiance to NRM. But Amon Mutabarura the Mbarara district commercial officer says their failed resilience emanates from failure to operate on principles of cooperatives.
In 2006, the Savings and Credit Cooperative Societies (SACCOs) under the Prosperity-For-All (PFA) scheme kicked off. The scheme embodied four main pillars, namely: production and productivity which encompasses National advisory for agricultural development (NAADs), value-addition and marketing, information systems
at sub-county level and micro finance. However, NAADS has for long been criticized for political intrusion. In the recent state of nation address, President Yoweri Museveni revealed plans to divert funds from NAADS to SACCOs but these saving cooperatives do not help a farmer like Bansigaraho who deals in a perennial crop. He says SACCOs start counting interest barely after a month which doesn’t suit a farmer, he appeals to the government to reconsider the revival of Uganda cooperative bank (UCB) that was farmers bank.
The Government policy is, each of the 1,098 sub-counties in the country must have a SACCO. Presently, over 800 SACCOs are fully registered.
Their successes and vibrancy is due to the adherence to cardinal co-operative principles of ‘member owner, member-user and member control’ as well as to the values of honesty, transparency and accountability, they are mainly to provide farmers with financial support but Kamanyiiro Eclestus a grape farmer in Mbarara says politicians have used them to solicit votes among the electorate.
*This story is funded by international centre for Journalist (ICFJ) in partnership with African media initiative (AMI).
Farmers in Cameroon to benefit from US$25.70 million for AfDB rural infrastructure and development support project
October 26, 2013 | 1 Comments
Farmers in the North-Western region of Cameroon will benefit from a loan and a grant amounting to US$25.70 million (UA 16,800 million) approved by the African Development Bank’s Board of Directors to help finance the Grassfield Rural Infrastructure and Participatory Development Support Project, Phase II
The Project aims to improve agricultural production and incomes of beneficiary communities by creating rural infrastructure and building capacity. It will help to reduce poverty in the rural communities in the area covered by the project.
The project will be implemented in Cameroon’s North-West region, which has a population of 1,850,000 and a poverty rate of 51%, and is home to 13% of the total number of the rural poor.
As a continuation of the first phase of the project from 2005-2011, the operation will be implemented in basins with strong production potential, namely Widikum, Santah/Tubah, Gayama and Mbaw/Mbonso covering 8 of the region’s 36 council areas, with a concentration on the first two to maximize impact. It will help to improve agricultural production and the incomes of the beneficiary communities by creating rural infrastructure and building the capacity of the actors. The estimated outputs are: (a) irrigation development on 610 ha; (b) rehabilitation of 278 km of rural roads; and (c) establishment of socio-economic support facilities and capacity building for the different partners.
At least 250,000 people (producer organizations, processors, traders, councils, etc.), half of whom are women grouped in 50,000 households will benefit from the project. It is expected to raise agricultural production by about 37,000 tonnes as well as an annual increase in income per producer from CFAF 250,000 in 2013 to CFAF 357,910 in 2018, and CFAF 477,210 in 2024.
The project has the potential for a high degree of complementarity with the Bamenda–Enugu Corridor Project financed by AfDB, which will help to increase trade with Nigeria, Cameroon’s neighbour to the west. The project will also scale up actions carried out under the Institute of Agricultural Research for Development (IRAD’s) basic seed production operation financed by a Nigeria Technical Cooperation Fund (NTCF) grant.
Through the establishment of a market information system that will be a major decision-making tool, the project will help to generate knowledge. It also envisages the adoption of an innovative approach involving the implementation of a pilot activity to establish an information system platform on agricultural markets called ‘AgriTechnology Cameroon (ATC)’. It will be based on the use of mobile telephony services (SMS) and other media for real time dissemination of information and appropriate services.
In the longer term, the project will result in the revitalization of agricultural production development and an approximately 25% reduction in poverty in the country’s North-West Region.
The project will be implemented in five years from April 2014, and will have over 250,000 direct beneficiaries half of whom are women in 50,000 households plus transporters and traders. In addition, it will help to build the capacity of cooperatives, agricultural professional associations and regional and local technical administrations. At full development, the project will increase agricultural production by about 37,000 tonnes in the intervention area. The beneficiaries will participate through the planning, implementation and management of the different activities.
The project’s total cost is estimated at UA 25.600 million. It will be jointly financed with resources from the ADF loan and grant amounting to 16.800 million (CFAF 12,563 million) representing 66% of the project’s total cost. The Government of Cameroon will provide the remaining UA 8.80 million.
Ten West Africa clean energy projects celebrated in Accra by Sustainable Energy Fund for Africa
October 26, 2013 | 1 Comments
Ten clean energy projects representing a total aggregate investment of over USD 80 million in bio-fuels, solar, biomass and hydro-power initiatives developed by West African entrepreneurs and companies were presented to investors in Accra at the West Africa Forum for Clean Energy Financing (WAFCEF).
WAFCEF was the final stage of a business plan competition launched in March 2013 by the Climate Technology Initiative Private Financing Advisory Network (CTI-PFAN) and the Ecowas Center for Renewable Energy and Energy Efficiency (ECREEE), in partnership with theSustainable Energy Fund for Africa (SEFA) and other regional partners.
The event was deemed a success with the participation of more than 100 financiers, clean energy experts and representatives of financial institutions from across Africa and overseas.
According to Joao Duarte Cunha, Coordinator of SEFA, “this initiative united like-minded partners interested in harnessing the entrepreneurial talent of the region to promote economic progress by using West Africa’s vast clean energy resources. WAFCEF really connected all the dots – entrepreneurs, ideas, advisory support and financing – and provided a platform for the often neglected smaller clean energy projects to succeed”.
The contest entailed the presentation of ten qualified project sponsors that will have the opportunity to present their business plans to potential investors and make a pitch for financing. The goal was to identify the most promising business ideas and unlock renewable energy and energy efficiency investment in West Africa.
The 10 projects had been selected from over 70 submissions from across the ECOWAS region for their economic viability and environmental benefits. Before being presented at the Forum, each of them had received intensive mentoring from professional consultants.
SME Funds Bioethanol Scale-Up Project from Nigeria was picked as the winner of the WAFCEF 2013 business plan competition. This project is looking to raise USD 21 million of investment for the spinning-off of a successful second-generation bio-ethanol production and cook stove manufacturing operation.
The bioethanol is produced from sawdust and water hyacinth, using proprietary and patented technology, and then further refined to produce a safe and highly efficient bio-gel for use in specially manufactured cook stoves, which are also produced by SME Funds, for distribution through a unique distribution network to service rural and peri-urban Nigeria.
The judges also selected three runners-up in the business plan competition:
- Azuri West Africa, a regional project of Azuri Technologies, looking to raise USD 6.6 million to expand its existing solar light distribution business into West Africa, using an innovative pay-as-you-go payment model based on proprietary software and hardware, to provide base of the period customers with affordable light in rural West Africa;
- Moyamba 11 MW Hydro Project, developed and presented by Smol Powa, to construct and operate a small hydro power project on the Gbangba River in the Southern Province of Sierra Leone for captive off-take by three bulk users, including the local community through the power utility;
- The Wave2O Project by Resolute Marine provides reverse-osmosis desalination powered solely by wave energy. The project involves the installation of the first Wave2O system in Cape Verde which is projected to have a capacity of 4,000 m3/day, and will supply more.
For investors WAFCEF was a great opportunity to access a select group of clean energy projects with high profit potential, verified environmental and development benefits, which are ready for investment.
“WAFCEF 2013 was one of the most enjoyable and inspiring events I can remember. The business ideas they had created were varied and compelling. This was 21st Century Africa at its very best,” said.
Andrew Reicher, Chairman of Berkeley Energy Africa, manager of Africa Renewable Energy Fund (AREF). AREF is the new USD150m renewable energy fund for sub-Saharan Africa jointly sponsored by the Sustainable Energy Fund for Africa and the African Development Bank.
SEFA is housed in the Energy, Environment and Climate Change Department of the African Development Bank.
Climbing value chains: Options for African policy makers
October 26, 2013 | 0 Comments
Africa’s economic landscape has changed considerably over the last twenty years. After two decades of sustained economic growth, Sub-Saharan Africa’s GDP is almost $1.5 trillion. Its middle class rose to 350 million people in 2010, up from 126 million people in 1980 and in 2010, consumer spending stood at approximately $600 billion.
Yet, despite all these improvements, Africa’s position in the global trading system places the continent at a great disadvantage in terms of trade dynamism and developmental potential. The continent’s predicament is usually characterized by African firms being stuck at the bottom of global value chains, primarily exporting raw materials while importing finished goods. In 2011, Angola produced 1,785,000 barrels of crude oil per day but its refinery capacity represented a meagre 39,000 barrels a day, half of its daily consumption rate of88,000 barrels. The difference is met through a costly import bill. Another example of inefficient integration in global value chains is in the coffee sector where Germany alone, a non-producer of coffee, exports more coffee than the whole of Africa combined, with the value of its exports almost double that of Africa!
The reasons for Africa’s failure to participate more effectively in global value chains are numerous. They range from inadequate transport, energy and telecommunications infrastructure to cumbersome border procedures, poor business environments, lack of technology, skills and low institutional capacities.
In this blog, the objective is not to focus on the challenges but on the opportunities presented to African firms by the rise of regional and global value chains. The argument put forth is that in the short-to-medium term, most opportunities for African firms to integrate into regional and global value chains are likely to be within agroindustry, trade in tasks (for goods or services) or industrial migration.
Opportunity 1: Agroindustry
Agroindustry may present the most straightforward opportunities for Africa to link to regional and global value chains. This is primarily because population growth, increased dietary changes, rising incomes and urbanization in many parts of the developing world (particularly Asia) shall continue to drive up demand for agro based products. In this market environment, Africa has great potential for increasing agriculture based exports.
Opportunities exist for value chains upgrading in many sectors especially rice, maize, sugarcane, dairy, cocoa, cotton, tea, coffee and oil palm. However, constraints to value chains upgrading are difficult to pinpoint since they are specific to each value chain and its corresponding markets (local, regional or global). This highlights the need for policy makers to remain vigilant and to deepen their understanding of relevant value chains so as to ensure that policy interventions are targeted and efficient.
With more than 450 million hectares of land, the continent is home to nearly 50 percent of the world’s arable land. Private sector’s interest in African agriculture is at an all-time high. This is evidenced by the massive increases in agriculture related land acquisitions over the last few years. With the right policy mix, negotiations of better land deals and investments in technological upgrading and standards infrastructure, Africa could commercialize its agriculture sector and position itself to capture many higher segments in regional and global value chains for a wide range of agro based products.
To achieve this goal, governments and business leaders will need to revamp their policy frameworks in support to agriculture, farmers, and agribusinesses. Scaling up agricultural research and facilitating access to affordable capital, water, energy, transport and inputs will also be key.
Opportunity 2: Trade in tasks
With globalization and the rapid improvement in transportation and communication technologies, international trade is increasingly characterized by trade in intermediate goods with different countries contributing to the production of a final good. A product might read “Made in China” or “Made in Japan” when in actual fact it was made in two, three sometimes four countries with each country specializing on the production of a specific task or input along the value chain. This process is generally referred to as trade in tasks or trade in intermediates. The figure below depicts the various components that go into the construction of a Boeing 787:
Source: Boeing Co
If one includes additional parts not shown in the figure above, a total of 10 countries participate in the construction of the Boeing 787.
Trade in tasks is the way through which most East Asian nations climbed the global value chains ladder. It is also likely that most opportunities for African firms to integrate global value chains will be through trade in tasks. After all, focusing on the production of a “task” or “input” along the production chain is far less daunting and capital intensive than breaking into global markets with a final product like a personal computer or a television. Once plugged into a global value chain and as technological know-how increases, African firms may then look for opportunities to move up the value chain.
The concept of trade in tasks for goods also applies to services value chains. According to OECD estimates, the global offshore services industry has grown from a little less than 50 billion USD in 2005 to more than 250 billion USD in 2010. Depending on a country’s endowments (its language, availability of skills, etc.) policymakers may wish to explore opportunities to tap into information technology outsourcing (ITO) or business process outsourcing (BPO) markets. In BPO services, firms could capture many of the lower-value chains such as network management, payroll and call centers, accounting or document management. In ITO, some of the higher value-added activities such as support to IT infrastructure and software development are within the range of certain firms and countries.
Opportunity 3: Industrial migration
Finally, industrial migration particularly from Asia may offer opportunities for African countries with conducive investment climates to rapidly upgrade their production systems. This is because currency appreciation and/or rapid increases in wage rates in Asia are likely to push labor-intensive firms to relocate to countries where labor costs are lower.
Industrial migration may also be driven by Africa’s rising consumer spending levels which is projected to surpass 1 trillion USD by 2020. Countries with enticing business environments could position themselves as future manufacturing hubs for either regional or global exports and we may already be witnessing a move in that direction. In 2008, the Chinese electronic company Hisense set up shop in Egypt and together with its local partner Sun TV is currently estimated to produce 100,000 LDC TVs a year. In Kano, Nigeria, Hong Kong based Lee Enterprises produces plastics, steel, ceramic tiles and leather hides. There are many more such examples on the continent.
Industrial migration is happening, creating numerous opportunities for value chains upgrading and the structural transformation of African economies. Whether Africa countries benefits from this process will depend on the extent to which industrial migration happens within a policy framework that encourages local production, employment and gradual technological transfer.
Africa’s current trade structure is unsustainable. Policies and incentives must be put in place at national level to restructure the composition of exports and gradually move from the production of primary commodities towards more value-added goods and services. In this particular regard, there may be a need to reconsider the adequacy of existing investment, export and industrial promotion frameworks to see whether they provide all the elements needed to accelerate industrialization.
In the short to medium term, most of the opportunities for African firms to integrate regional and global value chains are likely fall within the three areas mentioned above. The “quick-wins” are likely to be concentrated in agroindustry sector. Trading in tasks in both goods and services value chains shall also present a menu of opportunities for African firms. Finally, policymakers will need to keep a “watchful eye” on the unfolding industrial migration process in order to entice strategic industries and capitalize on opportunities as they arise.
In many ways, the most important success factor in whether African countries succeed in climbing value chains will be the extent to which policy makers invest resources in enhancing their understanding of global trade and production patterns. Increasing analytical capabilities on trade and production patterns would enable African policymakers to identify niche markets they could tap into and industries that they could attract in relatively near future. Failing to do so will almost surely lead to poor policy interventions and inefficient resources utilization.
*Source ADB . Jean-Guy Afrika is a Senior Trade Policy Analyst at the AfDB. He is the task manager of the Africa Trade Fund (AfTra), a trade-related, technical assistance facility with the objective to accelerate the integration of African countries and regions into the global trading system
Wikipedia pilots articles-via-SMS service aimed at Africans
October 26, 2013 | 0 Comments
By Dave Lee*
The online encyclopaedia has partnered with mobile operator Airtel to offer the free initiative which is being tested out in Kenya.
It is hoped the service will be used to reach people who do not have internet access.
The trial will be active for three months, said Dan Foy, technical partner manager for the Wikimedia Foundation.
“Throughout most of the developing world, data-enabled smartphones are the exception, not the rule,” he wrote.
“That means billions of people currently cannot see Wikipedia on their phones.”
To activate the service – called Wikipedia Zero – users need to dial *515#, after which they will receive a text message prompting them to search for articles.
Next five billion
Adoption of cheap mobiles in Africa is widespread, and in many regards the mobile industry across the continent is more advanced than in more developed parts of the world.
For instance, the sending of money via text message is extremely popular – one service, M-Pesa, boasts 17 million users in Kenya alone.
Western technology companies see the region as a major source of future growth. Facebook, for example, is approaching saturation point in its current markets, and so it is looking at methods to adapt its services to suit those with more basic technology.
The social network also launched a drive to get other technology companies looking at ways to make access easier – starting with bringing down costs of accessing mobile data.
Tom Jackson, who edits African technology news website HumanIPO, said Wikipedia’s initiative would be warmly welcomed.
“There has been a steady move towards putting educational material online in many African countries, led mainly by the private sector rather than governments, but access to the internet remains a problem given that most Africans surf on their phones rather than browsers.
“This step increases the chances of access, especially as there is functionality to provide Wikipedia via SMS. Feature phones are still dominant in Africa, so this is a helpful addition.”
He added: “I just hope it comes with the same warnings that European and American kids are given about taking Wikipedia at face value!”
Can democracy deliver for Africa?
October 22, 2013 | 0 Comments
By Mary Morgan*
Multiparty democracy swept across Africa in the early 1990s, as single-party states and authoritarian leaders bowed to pressure from outside and within. Activists hoped greater political freedoms and strong institutions would lead to more government accountability – and more effective development. But two decades later, is this the reality?
Pallo Jordan is a member of South Africa’s governing African National Congress (ANC) and was part of the first cabinet in 1994. For him, there is no denying that they are better off with democracy.
“We have made tremendous progress in this country, with respect to everything. Just the most basic things like the right of the governed to choose their own government.”
It is what people fought for, in South Africa and across the continent. But not everyone is happy with the outcome.
Even within South Africa, many feel marginalised in the new democracy.
Economically, South Africa is still one of the most unequal societies in the world. The same party has been in power since the beginning of multi-party democracy, and that does not look like changing any time soon.
There is also a difference between democracy in theory and democracy in practice.
Is Uganda a democracy?
Uganda is officially a multiparty democracy. Its President, Yoweri Museveni, has been in power since 1986, and oversaw the transition from a single-party to multi-party state.
Yet many complain that democracy there is a mirage.
Arthur Arok, Uganda director of the international development charity ActionAid and an outspoken activist, says: “Opposition and civil society are seen as anti-progress and enemies of development. There is little space for real debate – and that goes against the spirit of democracy.”
Mr Arok was arrested and detained back in January as part of the Black Monday movement against corruption, and questions the reality of democracy in his country.
“Is Uganda democratic? No, it’s quasi-democratic, still under construction. There has been some improvement but the ruling elite are not really interested in democracy, they only want to entrench their own interests.”
President Museveni has won four elections, changing the constitution to allow himself an unlimited number of terms. The most recent polls were deemed by European Union observers to be highly compromised.
Chris Zumani Zimba, author of Democracy Under Attack, describes Mr Museveni as one of a new group of “perpetual democratic leaders”.
“Democracy is often undermined by leaders themselves, who are elected to office but then try to consolidate their power and make themselves more permanent,” he says.
Cameroon’s President Paul Biya has also removed term limits – and former Nigerian President Olusegun Obasanjo unsuccessfully tried to do the same.
Holding on to power
Another threat to democracy in Africa is seen to come from those who fought for it in the first place.
Wallace Chuma, a former Zimbabwean newspaper editor and now an academic at the University of Cape Town, says there is a familiar pattern of former liberation movements in government.
“They failed to tolerate internal processes of democracy. I think they have become hostage to their own successes as liberation movements. The tendency is to be closed to the outside and closed also to fresh ideas.
“If you look at the rhetoric from Angola to Mozambique to South Africa to Zimbabwe, you get the sense that any criticism against liberation movements in government is considered as being a traitor.”
There is some debate as to what constitutes democracy, anyway. Even when elections are deemed to be free and fair – what happens in the period between ballots?
Corruption and impunity at the highest level are a sign that the balance of power still sits firmly with those in office – and not those who vote them in.
According to the African Union, more than $148bn (£93bn) is lost to corruption in Africa every year – much of it through public officials employed by democratically elected governments.
Poverty and underdevelopment can also be seen as a challenge to democracy, with a hungry and poorly educated electorate easily bought by politicians welding gifts and promises.
Indeed, some argue that democracy is not the most stable base for economic development anyway.
Alex Ngoma, a political scientist at the University of Zambia, points to the Asian Tigers’ example, “where democracy is less of a priority and they waste less time talking – but get economic results. It’s proof that there is more than one way to get things done.”
China is consistently ranked as one of the fastest growing – and most powerful – economies on earth. Within Africa, Ethiopia and Rwanda are among the most successful – their growth built on a model of strong central government and limited political freedoms.
How to ‘Africanise’ democracy
Speaking this year on the death of Ethiopia’s Prime Minister Meles Zenawi, Rwanda’s President Paul Kagame was clear about both countries’ lukewarm relationship with a Western version of democracy.
“Invariably, the question has been raised about whether the emphasis on development and the role of the state in it is not done at the expense of democracy and people’s rights.
“Those who disagree with or criticise our development and governance options do not provide any suitable or better alternatives. All they do is repeat abstract concepts like freedom and democracy as if doing that alone would improve the human condition. Yet for us, the evidence of results from our choices is the most significant thing.”
President Kagame is not alone in questioning multi-party democracy in the African context. Indeed, US historian William Blum in a recent book describes democracy as a Western imposition on Africa – “America’s deadliest export” and foreign policy tool.
Consequently, there has been some discussion as to how to “Africanise” democracy. Mr Zimba suggests incorporating traditional power structures into formal government.
“At the moment chiefs are seen as political footnotes, even though they are often more effective and revered than politicians. Politicians recognise the influence of traditional leaders on how communities vote during elections and try to manipulate this. A better system would be some kind of bicameral government, even giving traditional leaders legislative powers.”
As with any healthy democracy, there is a range of opinions and robust debate, but the consensus seems to be that whilst democracy is not delivering as well as it could be for Africa, it remains the most viable form of government for the continent.
Mr Ngoma sums it up: “Democracy on paper is very beautiful, but the practice depends on what practitioners actually do – and often they’re not doing very well.”
AfDB launches 3-year USD 500 million Inaugural Green Bond
October 12, 2013 | 0 Comments
On Thursday, 10th October 2013, the African Development Bank (AfDB), rated Aaa/AAA/AAA, launched its inaugural Green Bond transaction.
As the momentum in Africa builds toward development embedded with climate action, the AfDB Green Bond program is providing countries with financing for programs in sustainable energy, resilient rural coastal and forest landscapes, and globally scalable knowledge on low-carbon and climate resilient solutions. Investors can make a difference with their investment by financing climate change solutions through AfDB’s Green Bonds.
The proceeds of the Green Bond support the financing of low carbon and climate resilient projects in line with AfDB’s long term strategy which focuses on inclusive and green growth. Projects to be financed include those in renewable energy generation, energy efficiency, vehicle energy efficiency fleet retrofit or urban transport modal change, biosphere conversation projects, solid waste management, fugitive emissions and carbon capture, urban development, and water supply and access.
With the market clear of competing USD supply due to the stalled US budget discussions, the AfDB decided to take advantage of the clear issuance window and announced their inaugural 3-year Green Bond transaction in the London afternoon of Wednesday, 9th October. Initial pricing thoughts for the 3-year USD 500 million transaction were shown at midswaps plus 5 basis points area and quickly attracted indications of interest from US and European socially responsible investors. Following continued interest overnight from US and Asian accounts, the lead banks officially opened books for the transaction in the London morning of Thursday, 10th October. Books finally closed at around 14.30 London time with orders approaching USD 550 million, and the oversubscribed transaction was priced at midswaps plus 5 basis points later on in the afternoon, in line with the initial guidance of the transaction.
“This first Green Bond of the African Development Bank is part of its quest to use public-private partnerships to meet the challenges of development in Africa. It is another opportunity for private capital to earn market rates of return, while supporting sustainable and low-carbon growth in the continent,” says Donald Kaberuka, President, African Development Bank Group.
The transaction was placed with 36 investors including the Third Swedish National Pension Fund, AP4, BlackRock, CalSTRs, Calvert Investment Management, Inc, Nordea Investment Management, Pictet Asset Management, Praxis Intermediate Income Fund, State Street Global Advisors (SSgA) for their High Quality Green Bond Fund, TIAA-CREF, and Trillium Asset Management, LLC.
Very strong support came from investors focused on socially responsible investing, who bought 84% of the bonds. The distribution by investor type was as follows: 43% with asset managers, 28% with central banks and official institutions, 28% with insurance companies and pension funds, and 1% with retail and private banks. In terms of geographical distribution, 52% of the bonds were placed with accounts in the Americas, 39% with EMEA, and 9% with Asia.
“Nordea Investment Management has integrated ESG in the investment processes. In the International Fixed Income Team it is a part of our analysis and ESG methodology. We only invest when the risk/reward looks attractive. AFDB´s Green Bond is an attractive investment in a trustworthy AAA-rated Organization,” says Rolf Ohlson, Senior Portfolio Manager at Nordea Investment Management.
“The African economy is growing fast and through the green bonds we get exposure to this interesting market. Green bonds that help to finance the transition to green growth in Africa is important for us as a long term investor. This bond will be earmarked for climate friendly projects,” says Christina Hillesöy, Head of Communications & Sustainable Investments at Third Swedish National Pension Fund.
“With this inaugural Green Bond, AFDB successfully demonstrated that its platform of projects for Green growth is meeting specific demand in the capital markets from investors willing to be involved in the financing of those projects. The success of this transaction is another milestone in the development of the Green bond market and it will help increase both awareness around the product and confidence for more investors to get involved.” says Matthieu Batard, Frequent Borrowers Syndicate at J.P. Morgan.
“With their inaugural $500mm Green Bond transaction, the African Development Bank (AfDB) has emphatically announced its presence as a major force in promoting climate change solutions in Africa. AfDB dedicated significant time to engaging with SRI focused accounts ahead of this transaction, and the deal’s success is reflected in its oversubscription and in the number of new investors that have been attracted to the AfDB name. Morgan Stanley is very proud to have been involved in this outstanding bond issue, as part of our ongoing commitment to developing sustainable finance,” says Navindu Katugampola, Vice President, SSA Origination, Morgan Stanley.
“SEB are proud to support AfDB in launching their inaugural Green Bond transaction. AfDB has by this transaction reached a wider group of investors and the continuous effort to support awareness and development of positive climate change initiatives have been reinforced by including such a well reputed issuer. The format and platform under which these securities have been issued reinforces the Green Bond structure initially developed together with the World Bank, providing investors with a solid framework and a recognizable structure that is becoming a standard through the financial community,” says Hans Beyer, Global Head of Capital Markets at SEB.
- Issuer: African Development Bank (AfDB)
- Format: Global Debt Issuance Facility (SEC exempt)
- Amount: USD 500 million
- Settlement date: 18 October 2013
- Maturity date: 18 October 2016
- Issue price: 99.707%
- Coupon: 0.75%
- Issue yield: 0.849%
- Spread: Midswap +5 bps and +15.5 bps over the 0.625% UST due October 2016
- Denomination: USD 1,000 or integral thereof
- Listing: Luxembourg Stock Exchange
- Joint-Lead Managers: J.P. Morgan, Morgan Stanley and SEB
- ISIN: US00828EAX76
- *Source ADB
AfDB Invests US $70 Million in PTA Bank to Boost Trade and Economic Growth in Africa
October 4, 2013 | 0 Comments
Tunis, October 2, 2013 – The Board of Directors of the African Development Bank (AfDB) approved on Wednesday, October 2, a financial package consisting of US $20 million in additional equity and a US $50-million line of credit (LOC) to finance projects in the Eastern and Southern African Trade and Development Bank (PTA Bank) member states. This financial package will allow PTA Bank to finance a mix of small- and medium- scale enterprises as well as regional infrastructure projects. Moreover, this package will contribute to mobilizing financial resources for development of the Tripartite Free Trade Area (TFTA) region, which will ultimately contribute to economic development and generate employment opportunities.
PTA Bank was established in 1985 as the financing arm of the Common Market for East and Southern Africa (COMESA) and is headquartered in Bujumbura, Burundi. The bank’s shareholders include Burundi, Comoros, Democratic Republic of Congo, Djibouti, Egypt, Eritrea, Ethiopia, Kenya, Malawi, Mauritius, Rwanda, Seychelles, Somalia, Sudan, Tanzania, Uganda, Zambia and Zimbabwe as well as the AfDB and the People’s Republic of China. PTA Bank’s mandate is to foster economic and social development in regional member states through regional integration, trade and project finance. Its financial performance in recent years has been robust, despite the global financial crisis, and has consistently posted healthy profits and achieved good asset quality over the last five years, and has also strengthened its corporate governance and risk-management structures and processes.
The provision of the financial package builds on the existing strong partnership between PTA Bank and AfDB based on synergies stemming from complementary sources of comparative advantage. PTA Bank, with its field presence and market knowledge, provides a logical channel for AfDB to reach out to end-customers by efficiently leveraging its scale. Moreover, AfDB’s subscription of new equity in PTA Bank is expected to play a catalytic role and hence encourage more institutional shareholders to boost the bank’s capitalization. Finally, the financial package is complementary to the financial support provided by other debt financiers, among others, the European Investment Bank (EIB), Agence Française de Développement (AFD) and KfW (a German government-owned development bank). The financial package will further enhance PTA Bank’s capacity to serve as a financial intermediary through which other developmental institutions can channel their funds, such as the recent accreditation as a regional intermediary by the the Organisation for Economic Co-operation and Development (OECD)’s Development Assistance Committee (DAC).
By focusing on trade finance and financing of small and medium enterprises and infrastructure projects, the financial package to PTA Bank will have positive impact on inclusive growth, private sector development and job creation through increased taxes and government revenues in Eastern and Southern African countries and also across the continent through leverage stemming from regional trade and regional infrastructure projects.
Contacts: Sabrina Hadjadj Aoul, Senior Communications Officer, T. +216 71 10 26 21 / C. +216 98 70 98 43 / firstname.lastname@example.org
Julius Karuga, Senior Investment Officer, T. +216 71 10 16 63/ email@example.com