Business Times Africa Magazine 2017 /vol 9/ No2

EDITORIAL TEAM

EDITORIAL

Editor Alfonce Mbizwo alfonce@businesstimesafrica.net West African Editor William Selassy Adjadogo

Alfonce Mbizwo

AFRICA’S ENERGY PROBLEMS ARE SURMOUNTABLE

Business Development Manager Nicholas Ofoe Quarmyne T: 0302 775449 /0244523627 nicholas.quarmyne@thebftonline.com Marketing Executive Gabriel Adu Asare Advertising advert@businesstimesafrica.net Sales and Circulation Ebenezer Sasu ebenezer.sasu@businesstimesafrica.net Graphic Design E. T. Mensah et.mensah@outlook.com T: 020 002 8385

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In 2014, a special report on Africa Energy Outlook showed that two thirds of sub-Saharan Africa’s population, some over 620 million people, do not have access to electricity.

As of 2016, an estimated 1.2 billion people – 16 percent of the global population – did not have access to electricity. Over 95 percent of those living without electricity are in countries in sub-Saharan Africa and developing Asia.

In this edition, we have several reports on how Africa can move forward. Columnists Carlos Lopes and Aliko Dangote point out that authorities can make it easier, safer, and more financially attractive for private investors to enter power markets to boost competition, thereby spurring innovation and lowering costs.

African countries could seek opportunities to share infrastructure and create cross-border power pools, they argue. Renewable energy offers Africa another way to self-reliance, with ‘exceptionally rich portfolio of clean-energy assets, including almost nine terawatts of solar capacity, more than 350 gigawatts of hydropower capacity, and more than 100 GW of wind-power potential.’

This is more than enough to meet the continent’s future demand.

Strive Masiyiwa and Richard Branson and Richard Branson make another point; mini-grids -localized electricity networks that supply several users, whether households or businesses. Mini-grids can have a major competitive advantage over grid extension in rural and remote areas, because they can provide electricity more quickly and at much lower cost, they noted.

Because mini-grids require less capital investment than grid expansion, it can be easier to secure financing for them, meaning that they can electrify communities that might have to wait years for a grid connection.

AFRICA Ghana Ebenezer Sasu Tel No: +233 (302) 785869/785561/785367, +233 (0)24 6918914, +233 (0)20 8182377, Fax: +233 (302)775449 Email: ebenezer.sasu@businesstimesafrica.net Nigeria Mr Taiwo Adedoyin, Country Director Press House, 3rd Floor, 27 Acme Road, Ogba industrial Estate lkeja, Lagos, Nigeria.

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2017 / VOL. 9 / NO. 2

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WE NEED TO TALK ABOUT ZAMBIA AS IT FALLS FROM GRACE UNDER PRESIDENT LUNGU

ROMAN KRABEL DARE TO DIFFERENT

63

WHY AFRICA SHOULD GO CASHLESS

50 MAURITIAN BANKS THINK BEYOND HOME COMFORTS

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68 LAGOS IS AFRICA'S MOST VALUABLE STARTUP ECOSYSTEM AKUFO-ADDO’S TUNNEL VISION IN ATTRACTING INVESTMENT 6 Business Times Africa | 2017

UPFRONT 08 Three ways to make rich Africa work for poor Africa 10 Briefs OPINION 15 Mo Ibrahim: Africa is at a tipping point 16 A Big Bond for Africa 18 Africa's economic transformation to create a third centre of global power 20 Powering Africa’s Transformation FEATURES 22 Akufo-Addo’s ‘One District, One Factory’ draws investors 24 ENTREPRENEUR WATCH 26 Banks vs startups: Who leads Africa’s fintech innovation?

34 South African protesters echo a global cry 38 Bolstering growth and wealth in a blue economy 42 To stabilise Ghana power, the answer is simple: money 49 Rwanda moves swiftly towards cashless society 46 Keeping Zimbabwe afloat: trading on the streets and off the books 54 Why businesses in Nigeria need to take sustainable finance seriously 56 Africa can lead global energy utility revolution 58 All roads to sustainable energy lead to the sun 64 Why the role of the media is so important to free and fair elections in Africa

AFRICA

Three ways to make rich Africa work for poor Africa Elsie S. Kanza

Elsie S. Kanza is the head of Regional Strategies – Africa and a member of the Executive Committee of the World Economic Forum Geneva. This article was originally published by the World Economic Forum.

By Elsie S. Kanza At the age of 20, I aspired to be president; and at the age of 30, I was appointed to work in the office of the presidency of my country.

A decade on, I developed a healthy respect and deep sense of humility about what it takes to successfully lead and fulfill expectations of all citizens in a poor developing African state. With 70% of Africans under the age of 30 – mostly poor unemployed and unemployable – I believe there is a dire need for a heightened sense of urgency in the face of growing global and regional political uncertainty.

C

enturies ago, Africans were caught off guard by the advent of the First Industrial Revolution, which manifested itself in superior fighting and transport technology. Centuries later past the Scramble for Africa, wars of independence from colonialism, and half a century of struggle to attain economic independence, the continent is confronted with the rising challenge of the Fourth Industrial Revolution. While the first revolution was dominated by land ownership and stretched over hundreds of years, the fourth revolution is primarily about knowledge ownership and is moving at the speed of light. This new challenge comes at a time when leaders are grappling with the reality of the failure of past growth to create jobs and reduce poverty and inequality.

8 Business Times Africa 2017

Leaders around the continent are facing myriad challenges, ranging from investment downgrades and droughts exacerbated by climate change, to illegal migration and civil protests. More worryingly, the 2016 Ibrahim Index of African Governance highlighted that, among others, the rule of law has declined in over 30 countries since 2006.

The path to inclusive growth In this context, the theme of the forthcoming World Economic Forum on Africa in Durban, South Africa, in May

2017 is achieving inclusive growth through responsive and responsible leadership.

Building on global-oriented conversations at our annual meeting in Davos this year on responsive and responsible leadership, we hope to expand the conversation on identifying new mechanisms to deliver inclusive growth and development with the regional and global leaders gathered in Durban.

In addition, there is a sense of urgency as more and more young people are turning to violence to express their frustration about

THREE WAYS TO MAKE RICH AFRICA WORK FOR POOR AFRICANS

lack of progress. Countries like Estonia have shown that it is possible to craft a national digital social order that delivers for all.

Accordingly, below are three areas in which the continent’s leaders in Durban will explore how to grapple with these new challenges while addressing the inclusivity challenge by embracing the Fourth Industrial Revolution.

1. Mobility-related technology is connecting the continent in unparalleled ways under land, overland and above land. Over 70% of Africans now have unprecedented access to mobile technology. This digital infrastructure offers new opportunities for the majority of poor Africans in rural and informal economies.

After Zipline’s successful launch of dronedelivered blood and medical supplies in Rwanda last year, it is increasingly evident that drones are revolutionising the small cargo delivery supply chain.

And, with the launch of the EthiopiaDjibouti train last October, Africa’s highspeed railway network is becoming a reality. Transnet is also leading the way with the first locally “designed, engineered and manufactured” train – the Trans African Locomotive – launching in April 2017.

This year, Africa is expected to launch the Continental Free Trade Area (CFTA).

The key objectives of the CFTA are to boost intra-African trade and investment by easing the movement of goods and people on the continent and to improve Africa’s competitiveness and economic growth by reducing the cost of doing business.

Intra-African trade stands at about 15% of total volume, compared to 60% of intercontinental trade in the European Union, 53% in East Asia, 41% in North America and 20% in Latin America and the

Caribbean. Achieving this milestone will start to make regional integration a reality.

The next step will be to make it easier for Africans to travel within Africa without a visa.

2. Disruptions to manufacturing technology such as the internet of things and 3D printing are liberalising access to technology and decentralising production.

At Gearbox in Kenya, makers from the informal industry, including jua kali artisans without formal engineering skills, are using 3D printing to manufacture quality products faster and cheaper.

Elsewhere, technologists like David Sengeh, inspired by the plight of amputees in Sierra Leone, are harnessing artificial intelligence and machine learning to develop the next generation of prosthetic devices.

These developments notwithstanding, Africa still lags significantly behind the rest of the world in terms of manufacturing.

According to the African Development Bank, the continent’s manufacturing exports doubled between 2005 and 2014 to more than US$100bn, with the share of intra-African trade rising from 20% to 34% over the same period. However, Africa’s share of global manufacturing exports remains less than 1%, compared with over 16% for East Asia.

3. Emerging African inventors are reimagining solutions suited to the African context. It is estimated that, by 2050, over 700 million new housing units will be needed. This implies a radical rethink of what kinds of shelter to construct. Elijah Djan from South Africa is ahead of the curve with his invention of bricks made out of paper, essentially creating a sharing economy by finding a new use for waste.

In order for African innovators to thrive, though, policy-makers need to provide a

conducive intellectual property regime and make it easier to do business competitively.

For the continent to fully leverage opportunities presented by the Fourth Industrial Revolution, dramatic investments need to be made to ensure that Africans are equipped with the right skills for the future of jobs. For example, the overall shortage of engineers is estimated at one million.

In addition, more efforts are required to reverse the widening gender digital divide.

When all is said and done, successful implementation will depend on Africans’ shared values and identity. True integration is a bottom-up cultural process, not a top-down political or technical process.

Moreover, we cannot assume that we can work together if we do not deliberately build bridges across languages and borders, as well as actively prepare for intergenerational transitions between leaders. In Durban, home to the largest tribe in South Africa and largest diaspora of Indians outside of India, we will discuss how to build a shared understanding and nurture collective responsibility to navigate the transition from Africa 1.0 to Africa 4.0 while strengthening our united socio-cultural heritage.

As we look back to see forward, it is equally important to stop bad traditional practices. Madam Graça Machel and Archbishop Desmond Tutu have been longterm advocates for Girls Not Brides, a global initiative to end child marriage. Recently, Global Shaper Rebeca Gyumi made history in Tanzania by managing to pass a landmark court ruling against child marriage. Leading change under 30 is possible.

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BRIEFS

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BRIEFS: WEST AFRICA

AMCON to sell Peugeot plant to Dangote The Asset Management Company of Nigeria (AMCON), the country's 'bad bank' set up following the banking crisis, is close to selling Peugeot Automobile Nigeria (PAN) Ltd, a local car assembly joint venture, to Africa's richest man, Aliko Dangote, and two Nigerian states.

"We have concluded all processes on the bids since about two months ago, all we are waiting for (now) is the approval of the central bank," Ahmed Kuru, AMCON's chief executive, told Reuters on Friday.

PAN, a Nigerian vehicle assembly plant located in Kaduna state, has PSA Peugeot Citroen as its technical partner with a capacity to assemble 90,000 cars a year, according to its website.

Dangote, in alliance with the states of Kaduna and Kebbi and the Bank of Industry (BOI) development bank made a bid to acquire a majority stake in PAN last year as AMCON seeks to sell off some of the assets it acquired in the wake of the banking crisis.

Dangote's eponymous group of com-

panies is active in cement, oil, food and sugar, and is expanding into farming.

The automaker is worth over 15 billion Nigerian naira ($49 million) according to its last valuation, Kuru said, but declined to name the company Dangote and his partners are using to acquire the automaker.

AMCON, set up in 2010 to clean up the banking system following a $4 billion rescue of nine lenders that came close to collapse, took over PAN after buying up its debt and converting it to equity.

GetRooms launches to be a hostel ‘Airbnb’ for travellers and students in Ghana GetRooms, an online room booking platform for students and travellers has launched in Ghana in a move expected to simplify the student hostel booking process which is majorly offline and undisrupted while the majority of students are tech savvy.

Founded by Kekeli and Abigail Buckner, GetRooms, which grew out of hostel management platform Trackist, is targeting nearly 400,000 students per year who join universities and colleges across the country according to Ghana’s National Accreditation Board’s 2015 Tertiary Education Statistics Report. With a growing number of students each year there will be a spike in demand for hostel facilities which GetRooms aims to help meet.

Now with 3,000 plus student bookings, the founders say the platform is currently the largest hostel booking website in Ghana and offers a free platform for hostel owners while charging a small commission to students. The team was inspired by the fact it’s frustrating to 10 Business Times Africa 2017

search, find and book a hostel in Ghana online therefore students normally rely on friends and family or walk door-todoor to see the conditions of the hostels.

“If you have ever schooled or are still schooling in any of the Universities or tertiary institutions in Ghana then you might have had that unique experience of living in a hostel,” said the team. “Hostels are fun, you cook your own food, live with roommates, clean you room, plan your day, you are practically living on your own. For some living in a hostel is their first taste of independence. Finding a hostel that suits your pocket and needs can be very difficult not because there is a scarcity of hostels but because the hostels cannot be found online.”

With GetRooms, users will search for hostel rooms online, book it online and pay for it so that hostel managers receive payments and connect with the students via emails and text messages. Uganda’s RentHostels is relaunching to do the same in Kampala, Uganda.

BRIEFS: SOUTHERN AFRICA

World Bank approves $600 million in loans for Zambia over 3 years The World Bank will lend Zambia $600 million under its International Development Assistance (IDA) programme over the next three years, the southern African nation's presidency said on Friday.

Presidential spokesman Amos Chanda told journalists after World Bank vice-president for Africa Makhtar Diop paid a courtesy call on President Edgar Lungu that $150 million would come in direct support for the budget.

"The World Bank is very confident with the steps that Zambia is taking to stabilise the economy," Chanda said.

Zambia is likely to receive $1.6 billion from the International Monetary Fund (IMF) later this year, the presidency said on April 21, with a review meeting set for June to finalise the agreement. – Rtrs World Bank calls on Botswana to make large mining contracts public The World Bank on Thursday called on Botswana to make details of its large mining contracts with companies public to improve transparency in the diamond rich country's business dealings.

Botswana earns 89 percent of its foreign exchange income and 30 percent of national revenues from mining, predominantly diamonds. It has various large-scale mining, sales and marketing contracts with Anglo American's diamond unit, De Beers.

World Bank Group consultant Nils Handler said in a report the government’s decision to keep the negotiation process around contracts for diamond mining and large integrated projects confidential was a cause for concern.

"A more open process, including published contracts, would assist Botswana in becoming a more transparent and accountable jurisdiction,” he said.

The government could not immediately be reached for comment.

De Beers and Botswana currently jointly own Debswana and DTC Botswana which are involved in the exploration, mining, manufacturing, and trading of diamonds. – Rtrs

Zimbabwe proposes to withdraw unused gold mining claims Large gold mines in Zimbabwe could lose unused mining claims to the government, which is seeking to increase the number of small producers as part of its economic empowerment drive, a ministry of mines draft policy paper showed on Friday.

Gold is Zimbabwe's third largest export earner after tobacco and platinum.

Small-scale miners have in the last four years ramped up output to nearly half of total production in 2016 on the back of financial and equipment support from the government.

A paper titled "Proposed Command Mining Initiatives" distributed at an annual meeting of the Chamber of Mines in Victoria Falls proposed to "implement the use it or lose it policy on mining claims (for) large mines sitting on unused mining claims."

The government planned "allocation of mining land from reserved areas to small-scale miners" and to reduce fees paid by mining companies and the time

it takes to register a mine.

The paper did not specify which companies could lose mining rights. Gold producers operating in Zimbabwe include Caledonia Mining Corporation, Freda Rebecca, which is owned by AIM-listed Asa Resources Group and unlisted London-based Metallon Corporation.

Zimbabwe's total gold output was 22.7 tonnes in 2016, according to national treasury figures, which has set a target of 30 tonnes this year.

Deputy Governor of the Reserve Bank of Zimbabwe Khupikile Mlambo told industry officials at the meeting that earnings from mining jumped to $853 million between January and May 12, up from $669 million in the same period last year.

Mlambo said gold exports had benefited from a 5 percent export incentive that producers receive in the form of "bond notes", a surrogate currency officially pegged at par with the U.S dollar.

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BRIEFS: NORTH AFRICA

Tunisia’s graft fight

Worst over for Egypt?

Egypt has had a tough few years, but the results of Oxford Business Group’s inaugural Business Barometer: Egypt CEO Survey suggest the worst is finally over.

Since 2011 the country has seen its GDP growth slow, the value of its currency drop and its foreign reserves shrink. Inflation has spiked, debt is creeping upward and the deficit has widened. The country’s tourism sector, a key foreign exchange earner, suffers from security concerns, while a shortage of natural gas has curtailed industrial output.

These challenges have not proven easy to solve, and are made all the more urgent by Egypt’s youthful 92 million citizens, who are searching for jobs and hoping for a better life.

However, while there is still a lot of work to do, recovery is – at last – gaining crucial momentum.

For example, this year GDP growth should see a slight increase of 20 basis points. A much-needed process of fiscal reform is also under way, resulting in a new value-added tax, a reduction in fuel subsidies and a slate of proposed privatisations – all of which have the capacity to bring the deficit down to single digits.

12 Business Times Africa 2017

The Tunisian government has confiscated the property and frozen bank accounts of eight prominent businessmen arrested in May on suspicion of corruption in an unprecedented government campaign against graft.

Tunisia has been praised as a model of transition after its 2011 revolution. But it still struggles with economic reforms and corruption six years after the fall of President Zine el Abidine Ben Ali in protests triggered in part by official graft.

Mounir Ferchichi, head of the Confiscation Committee, a state-financed agency, told reporters the government had seized property and frozen bank accounts of eight businessmen arrested this week on suspicion of involvement in corruption.

Chafik Jaraya, who maintains political contacts in Tunisia and Libya and helped finance the Nidaa Tounes ruling party during the last elections in 2014, was among those detained, officials said.

"Jaraya was not arrested, but abducted by the Interior Ministry forces. What is important now is his safety and we will speak later about corruption", said Faycel Jadlaoui, lawyer for Jaraya.

The arrests came days after Imed Trabelsi, the son-in-law of former president Ben Ali, apologized to the Tunisian people for corruption and accused businessmen who worked with him of still being involved in customs crimes.

Prime Minister Youssef Chahed has announced a crackdown on corruption as he comes under pressure from protests in the south over gas production and also from international lenders over slow progress in delivering economic reforms.

The country's anti-corruption committee says graft is still widespread since 2011 and that it threatens Tunisia with billions of dollars a year in losses. The committee has said it presented cases against 50 senior state officials believed to be involved in corruption.

Chahed pledged last year in his first speech since taking office that fighting corruption would be a priority for the government, but he said he believed battling graft would be more difficult than fighting terrorism. – Rtr

BRIEFS: EAST AFRICA

M-pesa money service target Africa expansion Vodafone's popular mobile financial services M-Pesa will expand into more African countries, giving millions of people access to banking services without the need for a bank account.

M-Pesa was set up a decade ago by Safaricom, Vodafone's Kenyan business, and has long been expected to push further across Africa. Its technology lets users with even a basic mobile handset borrow money and save through partnerships with local banks.

M-Pesa, regulated by the Kenyan central bank, accounts for more than a quarter of Safaricom's annual revenue, growing 21 percent in its year to March 31.

This month, UK-based Vodafone, one of the world's top telecoms operators, transferred its 35 percent stake in Safaricom, Kenya's biggest company by market value, to its majority-owned South African subsidiary Vodacom.

It retained a 5 percent stake in Safaricom.

The share transfer nullified South African government objections to expansion moves by Safaricom. South Africa wanted Vodacom to be the vehicle for Vodafone's African expansion.

"This removes that effect today," said Bob Collymore, who has led Safaricom since 2010.

When analysts have previously queried why Safaricom did not expand into neighbouring markets such as Ethiopia, Collymore has said Kenya was still growing. Now, he says, the business is ready to expand.

"For us, the obvious advantage is that it (Vodafone/Vodacom deal) now gives us an opportunity to try some stuff overseas," he said.

The platform, which even allows users to buy government securities in Kenya, has attracted attention from

other African nations such as Liberia, Ethiopia and Togo.

"The courtship started a little while ago. We are respected in Kenya as the mobile money country," Collymore said.

Safaricom would now look at all African markets, apart from South Africa, where an M-Pesa-like product previously failed; and Tanzania, which already has a thriving mobile money service also called M-Pesa operated by Vodacom, Collymore said.

About 38 percent of Kenyans have commercial bank accounts compared with 77 percent in South Africa, according to FSD Kenya, a development programme funded by Britain that works to expand access to financial services.

Expansion of M-Pesa was not expected to require a lot of capital as the critical investment is the skills that Safaricom has acquired in the past decade, the CEO said.

"I'd like to be able to talk about something before the end of the year," he said.

The $2.6 billion share transfer deal also means that Vodafone no longer has a veto over the selection of a chief executive for Safaricom.

Under the previous shareholding structure, Vodafone had the right to veto the appointment but not the right to appoint the company's CEO. Future selections will be guided by terms to be agreed on by the shareholders, Collymore said.

2017 Business Times Africa 13

BRIEFS: NORTH AFRICA

Economic growth in Africa is on the upswing

Economic growth in Sub-Saharan Africa is rebounding in 2017 after registering the worst decline in more than two decades in 2016, according to Africa’s Pulse.

The region is showing signs of recovery, and regional growth is projected to reach 2.6% in 2017.

However, the recovery remains weak, with growth expected to rise only slightly above population growth, a pace that hampers efforts to boost employment and reduce poverty.

Nigeria, South Africa, and Angola, the continent’s largest economies, are seeing a rebound from the sharp slowdown in 2016, but the recovery has been slow due to insufficient adjustment to low commodity prices and policy uncertainty.

Furthermore, several oil exporters in the Central African Economic and Monetary Community (CEMAC) are facing economic difficulties.

The latest data reveal that seven countries (Côte d’Ivoire, Ethiopia, Kenya, Mali, Rwanda, Senegal, and Tanzania) continue to exhibit economic resilience, supported by domestic demand, posting annual growth rates above 5.4% in 2015-2017.

These countries house nearly 27% of the region’s population and account for 13% of the region’s total GDP. The global economic outlook is improving and should support the recovery in the region.

Africa’s Pulse, a bi-annual analysis of the state of African economies conducted by the World Bank, notes that the conti-

14 Business Times Africa 2017

nent’s aggregate growth is expected to rise to 3.2% in 2018 and 3.5% in 2019, reflecting a recovery in the largest economies.

It will remain subdued for oil exporters, while metal exporters are projected to see a moderate uptick.

GDP growth in countries whose economies depend less on extractive commodities should remain robust, underpinned by infrastructure investments, resilient services sectors, and the recovery of agricultural production.

This is especially the case for Ethiopia, Senegal, and Tanzania.

A stronger-than-expected tightening of global financing conditions, weaker improvements in commodity prices, and a rise in protectionist sentiment represent downside external risks to the outlook.

On the domestic front, risks to the current recovery stem from an inadequate pace of reforms, rising security threats, and political volatility ahead of elections in some countries.

Albert G. Zeufack, World Bank Chief Economist for the Africa Region, said: “As countries move towards fiscal adjustment, we need to protect the right conditions for investment so that Sub-Saharan African countries achieve a more robust recovery.”

“We need to implement reforms that increase the productivity of African workers and create a stable macroeconomic environment. Better and more productive jobs are instrumental to tackling poverty on the continent,” he said.

The environment of weak economic

growth comes at a time when the continent is in dire need of necessary reforms to boost investment and tackle poverty.

Countries also have to undertake much-needed development spending while avoiding increasing debt to unsustainable levels.

In this environment, fostering public and private investment, notably in infrastructure, is a priority.

The region experienced a slowdown in investment growth from nearly 8% in 2014 to 0.6% in 2015.

The Africa’s Pulse report dedicates a special section to analyzing the region’s infrastructure performance across sectors, revealing dramatic improvements in quantity and quality of telecommunications contrasted by persistent lags in electricity generation and access.

“With poverty rates still high, regaining the growth momentum is imperative,” said Punam Chuhan-Pole, World Bank Lead Economist and the author of the report.

“Growth needs to be more inclusive and will involve tackling the slowdown in investment and the high trade logistics that stand in the way of competitiveness,” he said.

Overall, the report calls for the urgent implementation of reforms to improve institutions that foster private sector growth, develop local capital markets, improve infrastructure, and strengthen domestic resource mobilization.

Mo Ibrahim: Africa is at a tipping point

OPINION

Africa is at a tipping point. Whether it continues rising or falls back depends, above all else, on whether the continent creates the conditions in which its greatest resource – its young people – can shine.

Already six out of 10 of Africa’s people are under 25. Between 2015 and 2050, Africa’s youth population will almost double, growing from almost 230 million to 452 million.

Their potential to drive Africa’s progress goes far beyond numbers. As a group, they are more adventurous, more entrepreneurial and spend longer in school than past generations. They also have set their sights higher, wanting to emulate their counterparts in other continents rather than achieve goals set by their parents.

But this demographic dividend is in danger of turning sour. Nothing better highlights the problem than the fact that the more time young people in Africa spend in education, the more likely they are to be unemployed. It is a failure which draws attention to how the commodity cycle of recent years may have supercharged the gross domestic product of many African states, but has created almost no jobs and greatly widened inequalities. It also highlights the worrying mismatch between the skills our young people are taught and those needed by the contemporary job market. This is a recipe for frustration and anger.

The same is true of the alarming disconnect between democratic politics and young people. Again, there has been real progress on the continent with 109 elections in the decade since 2006, leading to 44 changes of power.

But this is not translating into greater faith in democracy. Scepticism about elected representatives is growing. African citizens put their trust first in religious leaders, then the army and traditional leaders. Presidents come a distant fourth.

Democratic fatigue is most severe among the young, with their electoral turnout declining. An average age gap of 44 years between the people and their

leaders fuels a belief that those in power disregard young peoples’ interests.

This combination of lack of economic opportunity and political disenfranchisement may become a toxic brew. Devoid of economic prospects and lacking any say over the direction of their countries and futures, young people are increasingly attracted to other alternatives. The dramatic increase in terrorist attacks in Africa over the past decade, and the rising numbers of those abandoning their homes to risk the perilous crossing of the Mediterranean, show where frustration, anger and despair can lead.

As well as fuelling conflict and instability, terrorism can also claim to be one of Africa’s fastest-growing business sectors, with increasing involvement in the drugs trade, human trafficking and the black market. The income and status terrorism offers are as important to their appeal as extremist ideology.

These challenges underline the crucial

importance of wise leadership and good governance for Africa’s future. Without them, high hopes can quickly lead to deep frustrations. If the energy and ambition of Africa’s youth is wasted, they could become a seriously destabilising force.

Africa needs leadership that will harness the energy of young people, and create the conditions in which their rightful expectations can be met. For a start, governments and businesses must come together to ensure that schools and colleges across the continent are equipping young people with the skills they need to make their mark on the world.

Right across Africa, we must put in place the policies and environment that allow our young people to thrive. As former German president Horst Köhler said at our Governance Weekend in Marrakech recently: “A leader doesn’t just manage the present. A leader shapes the future.”

This article was originally published in the Financial Times.

2017 | Business Times Africa 15

OPINION

A Big Bond for Africa

By Nancy Birdsall and Ngozi Okonjo-Iweala Sustained economic growth is essential to maintain progress on reducing poverty, infant mortality, disease and malnutrition.

The Big Bond approach represents a much-needed update to the ODA framework – one that supports higher and more sustainable growth in recipient countries, while lowering the burden on donor countries.

16 Business Times Africa | 2017

The countries of Sub-Saharan Africa have reached a critical juncture.

Strained by a collapse in commodity prices and China’s economic slowdown, the region’s growth slipped to 3.4% in 2015 – nearly 50% lower than the average rate over the previous 15 years. The estimated growth rate for 2016 is lower than the population growth rate of about 2%, implying a per capita contraction in GDP. Sustained economic growth is essential to maintain progress on reducing poverty, infant mortality,

disease, and malnutrition. It is also the only way to create sufficient good jobs for Africa’s burgeoning youth population – the fastest growing in the world. As Gerd Müller, Germany’s development minister, noted at a recent press conference, “If the youth of Africa can’t find work or a future in their own countries, it won’t be hundreds of thousands, but millions that make their way to Europe.”

One way to sustain growth and create jobs would be to collaborate on planning and implementing a

OPINION: A BIG BOND FOR AFRICA

massive increase in infrastructure investment across Africa. Public infrastructure is particularly important.

This includes highways, bridges, and railways linking rural producers in landlocked countries to Africa’s urban consumers and external markets; mass transit and Internet infrastructure to accommodate greater commercial activity; and electricity transmission lines integrating privately financed power plants and grids.

Major regional projects are also needed to knit together Sub-Saharan Africa’s many tiny economies. This is the only way to create the economies of scale needed to increase the export potential of African agriculture and industry, as well as to reduce domestic prices of food and manufactured goods.

While governments in Africa are spending more on public infrastructure themselves, outside finance is still required, especially for regional projects, which are rarely a top priority for national governments. Yet aid from Africa’s traditionally generous foreign donors, including the United States and Europe, is now set to shrink, owing to political and economic constraints.

But there may be a solution that helps Africa recover its growth in a way that Western leaders and their constituents find acceptable. We call it the “Big Bond” – a strategy for leveraging foreign aid funds in international capital markets to generate financing for massive infrastructure investment.

Specifically, donors would borrow against future aid flows in capital markets. That way, they could exploit current low interest rates at home, as they generate new resources. With 30year US Treasury rates of about 3%, donors would have to securitize only about $5 billion to raise $100 billion.

That money could come from the $35 billion in annual official development assistance (ODA) to Africa (which totals about $50 billion) that takes the form of pure grants.

Donors would pass on the interest cost to African countries, reducing

their own fiscal costs. For African countries, the terms would be better than those provided by Eurobonds.

In fact, as audacious as it may sound, passing on the interest costs to recipient countries could actually bolster their debt sustainability.

According to a study of eight countries by the African Development Bank’s Policy Innovation Lab, a 3% interest rate in US dollar terms would be lower than the marginal cost of commercial borrowings undertaken by several African countries over the last five years. Moreover, far longer maturities and grace periods, compared to market finance, would ease growing pressure on foreign-exchange reserves.

Frontloading aid in this way is not new. Doing so in the early 2000s to finance vaccines saved millions of lives in the developing world. Big Bond resources, managed by the African Development Bank, could be used to help guarantee financing for major regional infrastructure projects that have long been stuck on the back burner, such as the East Africa Railway connecting Tanzania, Rwanda, and Burundi, and a highway stretching from Nigeria to Côte d’Ivoire. Such projects could also be co-financed by private investors.

Moreover, the Big Bond could help to reinvigorate the relationship between donors and African countries.

And, as it supports investments with important country-level benefits, it could serve as an incentive for African countries to pursue reforms that increase their absorptive capacity, in terms of choosing and executing public infrastructure investments.

The Big Bond approach represents a much-needed update to the ODA framework – one that supports higher and more sustainable growth in recipient countries, while lowering the burden on donor countries. At a time when aid is under political pressure, perhaps such a bold approach to maximizing the efficiency of donor resources is exactly what the world needs.

One way to sustain growth and create jobs would be to collaborate on planning and implementing a massive increase in infrastructure investment across Africa.

Nancy Birdsal President Emeritus and a senior fellow at the Center for Global Development.

Ngozi Okonjo-Iweala a former finance minister of Nigeria and managing director of the World Bank, is a distinguished visiting fellow at the Center for Global Development.

2017 | Business Times Africa 17

OPINION

Africa's economic transformation to create a third centre of global power

By Brett Parker I believe that Africa will emerge to be the third centre of global power, settled in between the worlds of the East and West. The world needs Africa. It needs its resources, its people, its skills and its insights and Africa is rising to meet those expectations

What a difference a century makes.

If we stepped back in time to a hundred years ago we'd find a primitive China; a Middle East that had yet to discover the riches of oil and most of Southeast Asia consisted of countries that were barely distinguishable from medieval societies. It was an entirely different world.

Roll back two hundred years and many European nations would be far removed from the modern countries they are today. It is an enduring myth that fools us to believe everything has always been like it is today; that the societies at the top of the pile have always been there. Technological and social revolutions have molded the modern world and opportunity is out there for the taking.

When asked why I am so optimistic about Africa my answer is simple: look at how far we have come and look at how fast we are moving forward.

By 2050, it is estimated that Africa will boast a $29trn economy. It will have the largest youth labour market in the world and if guided and educated correctly, the same youth will be the workforce of that world.

Even today, the future is starting to glow in Africa. Many projects and

18 Business Times Africa | 2017

OPINION: AFRICA'S ECONOMIC TRANSFORMATION TO CREATE A THIRD CENTRE OF GLOBAL POWER

Brett Parker Brett Parker is the Managing Director of SAP Africa

initiatives are delivering and being joined by new catalysts every day.

According to Jake Bright, co-author of The Next Africa: An Emerging Continent Becomes a Global Powerhouse, there are already over 200 innovation hubs on the continent, 3,500 tech-related ventures and $1bn in venture capital injected into local startups.

Africa is modernising at an unmatched rate. Its tremendous mobile device adoption proves this fact. African companies and people simply accept that new technologies will improve their lives and if what they need does not exist, they will create it. From new solar power systems to the much-celebrated M-PESA mobile banking, Africa innovates at the edge. While other countries wonder about delivering packages with quadcopters, we are already pioneering intelligent drone systems sophisticated enough to track poachers. It was an African student who developed a new rocket fuel - in his mother's rural kitchen!

This culture of innovation leapfrogging is one of Africa's secret weapons, supported by a rising tide of SMEs.

Though policy and leadership have been slow to respond, we hear new voices promoting SME and innovation cultures every day. Rwanda, for example has reduced new business registrations from over 18 days to as little as 6 hours through a series of reforms that include technology and paperless processes. As a result, more companies were registered there in 2009 than the total five years before that - and it keeps growing.

Skills are central to Africa's future and I see a lot of promise in the growing pool of related projects across the continent. Technology skills are being brought to schools everywhere with innovations including container classrooms and maker hubs. Tertiary skills are also being reinforced through partnerships with universities, as well as award-winning programmes such as SAP Africa's Skills for Africa and Africa Code Week, the latter which trained over 86, 000 youngsters in basic coding skills last year.

But this is not a services revolution.

Africa's resources and agriculture remain important. They benefit acutely

from innovation. One example is the partnership between SAP and GIZ, developing systems used by cashew farmers in Benin, Burkina Faso, CĂ´te d'Ivoire, Ghana, and Mozambique to better manage their supply chain.

Thanks to the continent's demand for hardy and meaningful technology, which is being driven by partnerships that reinforce Africa’s role in creating a better world, Africa is where others will look for the best in new innovation. The SAP Rural Sourcing Management solution is one direct result of this. Refined on African farms, it will serve as a blueprint to meet agriculture and food challenges across the world.

I believe that Africa will emerge to be the third centre of global power, settled in between the worlds of the East and West. The world needs Africa. It needs its resources, its people, its skills and its insights and Africa is rising to meet those expectations. Yes, it has not been a smooth ride, but the winds of change are blowing in the right direction. This will be Africa's century.

2017 | Business Times Africa 19

AFRICA

Powering Africa’s Transformation Carlos Lopes, Aliko Dangote and Tony Elumelu "Africa has a chance to bring hundreds of millions of people without electricity into the modern economy; and we have an opportunity to pioneer the next investment frontier. "

A

frica has a bright future ahead of it. Productivity and growth will improve as African economies continue to place more emphasis on services and manufacturing, pursue commodity production, and achieve quick gains in agriculture and light industry.

But African countries’ success presupposes that they generate and manage energy sustainably to keep up with increasing demand. In the next 35 years, Africa’s population will continue to rise, with a projected 800 million people across the continent moving to cities. And Africans are already disproportionately exposed to the adverse effects of climate change, even though they are collectively responsible for less than 4% of global greenhouse-gas emissions.

Urban areas will have to reduce environmental stresses by promoting low-carbon energy systems, electric mass transportation, and energy-efficiency initiatives, as well as the use of cleaner cooking fuels. And rural areas can create new opportunities that reduce the need for urban migration, by expanding renewable energy systems and energy access.

But even with these measures, providing enough energy for a modern, inclusive economy will not be easy.

Africa already experiences frequent power outages, even though more 20 Business Times Africa | 2017

POWERING AFRICA'S TRANSFORMATION

CARLOS LOPES former Executive Secretary of the United Nations Economic Commission for Africa, is a Professor at the University of Cape Town and a visiting fellow at the Oxford Martin School, University of Oxford.

than 600 million people there do not have access to electricity, and current demand is relatively modest.

To avoid the harmful spillover effects of high-carbon economic growth, Africa will have to undergo a “climate smart” energy revolution.

African countries will need to build climate-resilient infrastructure and tap into the continent’s abundant renewable-energy resources. Doing so will broaden access to energy, create green jobs, reduce environmental pollution, and enhance energy security by diversifying sources.

At the same time, Africa’s energy revolution will itself be challenged by some of the worst effects of climate change. For example, as rainfall becomes more erratic, hydropower production and revenues may decline. This risk can be managed by modifying existing investment plans to account for large climate swings.

Still, for the region to adapt, the United Nations Environment Programme estimates that it will need annual investments of about $7-15 billion by 2020, and $50 billion by 2050.

Rather than treating new climate-related risks as hurdles to overcome, we should view them as opportunities for investment and innovation. We are standing on the threshold of an exciting new era in which technological progress allows us to use a range of conventional and unconventional energy options (excluding nuclear energy).

ALIKO DANGOTE Founder and Chief Executive of the Dangote Group and Chairman of the Dangote Foundation, is the Co-Founder of the African Energy Leaders Group.

TONY ELUMELU Chairman of Heirs Holdings and United Bank for Africa (UBA), founder of the Tony Elumelu Foundation, and Co-Founder of the African Energy Leaders Group.

African countries can now combine energy sources to adapt to realities on the ground. Unlike in past decades, they no longer need be tied to a single energy source. And, because much of Africa’s energy infrastructure remains to be built, governments have a chance to get their energy and infrastructure policies right the first time, thereby maximizing returns on investment.

Policymakers should take a few key steps to help transform Africa’s energy sector and boost long-term economic growth. For starters, making it easier, safer, and more financially attractive for private investors to enter power markets would boost competition, thereby spurring innovation and lowering costs. Moreover, African countries should seek opportunities to share infrastructure and create cross-border power pools.

Another important step is to invest in renewable energy. Africa has an exceptionally rich portfolio of clean-energy assets, including almost nine terawatts of solar capacity, more than 350 gigawatts of hydropower capacity, and more than 100 GW of wind-power potential. This is more than enough to meet the continent’s future demand.

At the same time, renewable-energy sources are becoming less expensive, making them increasingly competitive with fossil-fuel alternatives.

For example, the price of utility-scale photovoltaic solar energy in Africa

fell by 50% between 2010 and 2014, and continues to decrease today. And South Africa’s Renewable Energy Independent Power Producer Procurement Programme has seen an overall decline in bid prices and oversubscription rates.

Innovative off-grid and mini-grid electricity-distribution systems, meanwhile, are already transforming Africa’s energy landscape and multiplying the ways to exploit clean-energy sources and expand electricity access for the poor, particularly in areas where consumers are widely dispersed. Companies such as M-kopa and Mobisol have made small solar-energy systems available to thousands of African homes, by allowing their customers to pay in installments on their mobile devices.

Still, to accelerate a market shift on the scale that Africa needs will require increased financing from export credit agencies, development banks, commercial financial institutions, and other cross-border sources.

Africa has a chance to bring hundreds of millions of people without electricity into the modern economy; and we have an opportunity to pioneer the next investment frontier. Getting Africa’s energy transformation right, by pursuing a mix of policies and investments that boost diversity and strengthen resilience, will ensure a brighter future for us all.

– Project Syndicate

2017 | Business Times Africa 21

GHANA

Akufo-Addo’s ‘One District, One Factory’ draws investors

By Obed Attah Yeboah

G

hana’s industrial sector, which as recently as 2011 used to be the largest contributor to the West Africa country’s Gross Domestic Product (GDP), has seen its fortunes dwindle in the past few years.

The sector grew at a rate of 19.2 percent in the first quarter of 2011, increased further to 42.5 percent in the second quarter and further jumped to 54.4 and 50.7 percent respectively in the third and fourth quarters.

Today, the sector’s growth has taken a nose dive. The quarterly GDP figures released by the Ghana Statistical Service (GSS) in April show that the sector recorded a year-on-year annual GDP growth rate of -1.4percent for 2016.

It is now contributing only 24.2 percent to GDP and has been taken over by the services sector, which now contributes to 53.2 percent.

The sector’s woes are worsened by the manufacturing sub-sector which has also performed abysmally in recent years.

The sub-sector, last year, recorded the lowest growth of -1.1 percent in quarter 4, although it ended the year at 2.7percent.

The above situation has largely contributed to the high rate of youth unemployment in the country. A 2016 World Bank report dubbed: “Landscape of Jobs in Ghana” said 48 percent of Ghanaian youth are unemployed.

This, the Institute of Social, Statistical and Economic Research (ISSER)

22 Business Times Africa | 2017

of the University of Ghana, has called a time bomb.

The Association of Ghana Industries (AGI), the umbrella body for manufacturing industries, has persistently warned that if deliberate policies are not implemented by government to revive the manufacturing sub-sector, the industrial sector will continue to shrink and Ghana risks losing its industrial base.

There are a lot of people who are now asking questions about what they can do, where they can find information about what is available in the districts in terms of raw materials

AKUFO-ADDO'S 'ONE DISTRICT, ONE FACTORY' DRAWS INVESTORS

To address this situation, the administration of President Nana Addo Dankwa Akufo-Addo has rolled out two major policy interventions, namely: providing a stimulus package for industries and the establishment of a factory in each of the 216 districts in Ghana.

In line with this, the Ghanaian government has approved GH₵256million for the resuscitating of 100 commercially viable but distressed companies.

“One District, One Factory” US$3billion pledges The “one district, one factory” project is the vision of President Akufo-Addo to set up a competitive industry in all 216 districts of the ten regions of the 27million-populated country to boost economic growth and to partly address the unemployment problem.

Ever since the new government took over in January 2017, many investors have expressed their preparedness to partner the government in the implementation of this novel idea.

In February, the CEO of the Ghana Investment Promotion Council (GIPC), Yofi Grant, said investors had inundated his office to inquire about the districts industrialisation projects. “‘The one-district, one-factory’ content has sparked very interesting discussions and interests from investors both here and abroad. There are a lot of people who are now asking questions about what they can do, where they can find information about what is available in the districts in terms of raw materials. Some, too, are asking about demographics.

Some are also asking about incentives that might be available to investors once they invest in the rural areas etc,” Mr. Grant said.

National Coordinator of the One District, One Factory Secretariat, Gifty Ohene-Konadu, also told the media that: “The programme has so far generated investment pledges and commitments to a tune of three billion dollars (US$3billion). These are

pledges made from local and foreign investors,” she said.

She further stated that a total of 40 business plans are currently being reviewed, with many coming from the agro-sector.

According to Mrs. OheneKonadu, financial support for the programme will range from US$5, 000 to US$5 million, depending on project size and operational categorization; with an exit plan that allows the government to sell its equity stake on the Ghana Alternative Market (GAX) after a five-year period.

She announced that the project will take-off fully by mid-2017, with ten factories expected to be inaugurated to mark the official commencement.

Other policy initiatives Besides the district factories project, government has outlined a programme dubbed: ‘Accelerated Programme for Industrial Transformation’ to serve as a blueprint to set the industrial sector on the path of growth.

Speaking at the maiden edition of the National Policy Summit (NPS) organised by the Ministry of Information and the Business and Financial Times (BFT), Alan K. Kyerematen, Minister of Trade and Industry, said that government has developed ten key elements, which includes providing stimulus package for industries, creating a friendly business environment, building export market, among others, to drive this agenda.

“First is what we call the stimulus package for existing local industries.

There are exiting industries in Ghana that are potentially viable but are operationally distressed for various reasons. And so, government seeks to provide a stimulus fund to support these distressed companies.

The second is what we describe as the one district one factory. We are committed to work with the private sector to ensure that all 216 districts in the country, at least, one commer-

cially viable medium to large scale industrial enterprise is established. And we hope that industry will be able to fundamentally affect the economy of each district,” he said.

“We are also going to promote aggressively export development. In this regard, we have access to the market of Europe through the EPA, we have access to United States through the AGOA, and initiative to make Africa one continental free zone.

While we build our export market, we will also improve our domestic retail market; support aggressively the growth of our small and medium enterprises through a number of initiatives; and to develop a business-friendly regulatory environment,” Mr. Kyerematen added.

The country’s economy has long relied on cocoa and gold for its export revenue, neglecting other essential cash crops.

A report by the Guardian, UK, shows that: “plummeting global commodity prices have pummelled Ghana’s economy. Export revenues for oil, gold and cocoa declined from $8.2bn (£5.8bn) between January and September 2014 to $5.8bn a year later.”

Government aims to diversify the economy by roping in other commodities that will shift focus from the traditional export commodities; and develop the domestic market.

“The third one is what we call strategic anchor industries. As a country, we have depended on cocoa and gold which accounts for about 85 percent of our export revenues. We want to diversify to other areas and so these strategic anchor industries are meant to do that,” Mr. Kyerematen said.

Mr. Kyerematen further stated that government will support SMEs and continue engaging the private sector to ensure that policies formulated are linked to the growth of the industrial sector.

2017 | Business Times Africa 23

ENTREPRENEUR

The Yoghurt Bar …Zenobia’s quintessential innovation When it was time for her to choose a career in life, people suggested to Zenobia that her natural beauty could earn her everything she wanted in life. Some advised her to participate in beauty pageants, enter the movie industry or even be a broadcaster. But Zenobia was not swayed by these flatteries. She chose to produce yoghurts—a drink, which when absent in her meal, she will never eat as a child.

About her Zenobia Bou-Chedid, the CEO of Zeno’s Yoghurt Bar, is the only child born to a Lebanese father and a Ghanaian mother. She attended the Jack and Jill School located at the Airport Residential Area in Accra, and also a product of Wesley Girls Senior High School in Cape Coast.

24 Business Times Africa | 2017

Her passion for learning could not make her stay for a whole year to await her results when she completed SHS. So, she took a year’s programme in American Field Service (AFS) in Switzerland. There, she learned German.

When she returned to Ghana, she was not too sure what she wanted to study in the university. And then again, she travelled outside, but this time, to France and studied courses in French cuisine and hospitality for eight months.

At this moment, she had fallen in love with the hospitality industry and decided to take a programme in hospitality at the university. She gained admission to the University of Nicosia in Cyprus to study Hospitality Management and graduated in 2012 as the best student in her department.

Even though her parents sponsored her education to the very best, she did two to three part-time jobs at some point to support herself rather than rely on her parents for every little thing. Then, after university, she moved back to Ghana to do her national service at Ewutu Senya West Municipal Assembly, Kasoa, in the Central Region, where she worked at the social welfare department.

Why she chose the hospitality industry Zenobia didn’t plan to be in the hospitality industry from the beginning. Growing up, she wanted to study law. But she was passionate about travelling, enjoying good food and drinks, meeting people from different cultures, among others. That moved her to enter the hospitality industry as she felt that was the only industry that could

ZENOBIA'S QUINTESSENTIAL INNOVATION

Zenobia has the vision of setting up her yoghurt bars across major cities in the country, and even move to other neighbouring countries. help her realise her interests.

Her love for yoghurts Owing to the fact that Zenobia’s love for yoghurts started at a very tender age, she ventured into the business.

“My mother told me that when I was a baby, I didn’t like any food apart from yoghurt. So, anything they wanted to give me they had to blend it in yoghurt. So, my father’s friend asked my parents why they don’t produce yoghurts in large quantities and sell them? That was when the yoghurt business began.”

The business was very successful but after five years, they had to move to another country and so it was closed down.

But the vision of the business didn’t die so far as Zenobia, through whom the business was founded, was still alive.

Zenobia, through her father, borrowed money from some family friends to start the business. However, she didn’t just want to tow the same business line started by her parents. She wanted to do something unique that has never been experienced in the country before.

She opened what she calls a yoghurt bar; a place where people can sit and relax while refreshing themselves with yoghurts.

Currently, she has a bar at East Legon at the A&C Mall and will open another one next month.

She has also successfully introduced other yoghurt products onto the market.

The products are: sweetened yoghurt, which comes in cups and bottles, Honey Bottom yoghurt, Plain Set unsweetened yoghurt, Labneh yoghurt, and Greek unsweetened yoghurt; first to be introduced into the country. All products have no preservatives in them.

How she markets them As usual, todays small businesses can-

not overlook the power of social media on their businesses. Zenobia has taken advantage of this and frequently advertises her products on her social media platforms like Facebook and Instagram.

The bar, which serves as the point of sale for her products, has also been a medium for advertising.

The yogurts can also be found in major shops like Palace supermarket, Marina Mall, Shoprite, Game, Maxmart, Koala, Shell shops, Melcom, Shop and Save, and the Baatsona Total shop.

Challenges Zenobia’s kind of business is very capital intensive. Setting up one yoghurt bar in Accra is no small task, she says. But living in a country where access to capital from financial institutions has become almost impossible, getting capital to expand her business has been a major challenge.

Another thing she finds challenging is the business environment in the country.

“I remember I once broke down in tears at the Tema Ports when they told me the amount I was supposed to pay for a machine I imported.”

Also, a challenge she faces on a daily basis is the fact that a lot of people feel she is in the wrong business. A lot of people judge her by her looks and tell her she should have been in the fashion or movie industry, or probably, be on TV hosting some shows.

Education’s role in her business Having a degree in hospitality management has benefited her immensely. She believes education has given her training on how to relate with customers in order to meet their expectations.

Zenobia also believes internship programmes she undertook during her time in school have been very helpful. She has served as a waitress and a house keeper

at Golden Tulip hotel in Accra, where she was assigned to clean 16 rooms in a day.

She also served as a waitress in La Palm hotel in Accra. She believes all these have contributed to her training and helped her to be a better manager.

Vision Zenobia has the vision of setting up her yoghurt bars across major cities in the country, and even move to other neighbouring countries.

How government can support From the challenges highlighted above, Zenobia wants government to help ease the business environment for small businesses, especially when it comes to the area of capital acquisition and reducing duties and taxes on machines they import for their businesses.

Again, she wants government agencies to make it simplified for small businesses to acquire certain certificates and permits to start operations.

“I remember the first week I started my business, police officers came along with Ghana Tourism Authority that I do not have approval to do this business because my kind of business is under tourism and hospitality. Something I didn’t even know.

So, if there could be a way we can have access to all these information at one central point without having to go around looking for it, it will be fine.”

Advice to young entrepreneurs “I will advise young entrepreneurs to pursue their passion and develop it to become a business. And once you begin, make sure you don’t kill the initial vision you started with.

And to the ladies out there, I will also advise them not to only think that fashion, beauty pageants, and the like, are the only sectors they can succeed in. They can enter into business and inspire others too.”

2017 | Business Times Africa 25

FINANCE

Banks vs startups: Who leads Africa’s fintech innovation?

With the pressure on to improve financial inclusion, banks are looking for innovative ways to reach Africa's unbanked.

With the pressure on to improve financial inclusion, banks are looking for innovative ways to reach Africa's unbanked.

Often slow to come up with new digital products, banks are eyeing Africa’s innovative fintech start-ups for answers. But can upstarts with an agenda to disrupt mesh well with incumbents?

Only an estimated 34 percent of Africa’s adult population has any form of formal bank account. This is an improvement from a decade ago. Much of this progress can be credited to the growth of mobile and agent network-based banking solutions.

26 Business Times Africa | 2017

To scale up the trend, banks need to figure out how to effectively join Africa’s fintech innovation ecosystem.

A number of banks have launched bespoke accelerator programmes in a bid to reach out to African entrepreneurs and startups. Barclays, Standard Bank, Citi, and DBS Bank are just a few. Others seek to partner directly with startups to develop new products and services.

In Cape Town, for example, Barclays has launched a business accelerator programme called Rise in a bid to encourage mutually beneficial collaboration between banks and startups. The programme takes on 10

startups each year. So far the bank has gone on to collaborate with five graduating ventures after the accelerator programme ended.

Barclays’ approach to startup collaboration is targeted. It has conducted extensive research into market challenges and opportunities across Africa in order to ascertain areas ripe for collaborative innovation. Financial inclusion, alternative lending, group savings, and artificial intelligence solutions are all top of the list.

“We believe that collaboration between banks and fintech startups delivers some of the best and most disruptive solutions to customers.

BANKS VS STARTUPS: WHO LEADS AFRICA'S FINTECH INNOVATION?

Startups typically bring innovative solutions to the table quickly while banks have the scale, data and resources to deliver these solutions to millions of customers,” says Camilla Swart, ecosystem manager at Rise, Barclays Africa.

Others agree. In east Africa, KCB Bank has partnered with more than 10 startups on projects and is involved with multiple projects supporting entrepreneurship in the region. This is bearing fruit: the bank’s mobile banking app was built by a startup.

KCB says that far from posing a threat, there are significant advantages to partnering with newcomers.

“Fintech startups have significant advantages in how they are organised, with a refreshing perspective to solving existing friction in delivering financial services to consumers,” says Edward Ndichu, KCB’s head of digital financial services.

“For KCB, it is a model of attracting new ideas and innovation, and continuing to remain relevant all the while supporting entrepreneurs [as they] build great businesses.”

What’s in it for startups?

It is clear why banks see fintech startups as a ripe source of innovation. But what does partnering with traditional banking behemoths offer Africa’s innovators?

South African startup Peach Payments offers payments solutions for online and mobile merchants, enabling them to accept payments across multiple channels. For businesses like Peach, the head start banks can offer in terms of scale and acceptance by regulators is an advantage.

“Since financial services are highly regulated globally, sometimes only banks are able to offer certain services and access certain market segments. Also they have the advantage of scale and usually deeper pockets,” Rahul Jain, the company’s co-founder, explains.

Peach Payments took part in the Barclays accelerator in 2016. Upon completion, it signed a proof of con-

cept with the bank to explore further collaboration.

“Being part of Barclays Rise helped us engage with the Barclays Africa executive team and explore partnership opportunities. It also helped us discover new opportunities across the different business areas of Barclays Africa,” Mr Jain says.

Not everyone sees the bank-fintech relationship as symbiotic, however.

South Africa-based accelerator Sw7 supports numerous fintech startups.

It has also partnered with financial sector heavyweights including Standard Bank and Rand Merchant Investing (RMI) as they look to engage with startups.

However Keith Jones, co-founder at Sw7, believes that despite their efforts banks have so far failed to develop a mechanism to effectively engage with startups.

While the intent is there, he says, the strict corporate mindset of financial institutions has meant they are slow to adapt to new solutions and models. They can also have a tendency to “smother” small businesses rather than help them to thrive.

“We see corporates competing for brand positioning in the innovation sector. If a small business shows promise, the corporate engages the emerging business, and a long, complex and undefined procurement process ensures, or they strike a deal with the small business that either has exclusivity clauses or comes with strong branding rights,” he explains.

This way of working can slow promising startups down. For these collaborations to work, he thinks financial institutions need to treat working with startups more seriously - rather than as an interesting, often informal side project.

“It needs to be treated as a proper business transaction for it to work, which is not really happening right now. We see much of the engagement [happening at] arm's length and not having any real commercial substance. This needs to change.?”

Is internal innovation the answer?

Reaching out to startups is one way big banks try to remain at the forefront of digital product innovation.

The other is to encourage internal employee-led innovation.

Internal hackathons are becoming increasingly common at big corporations around the world. Many banks now have in-house innovation teams.

But can these initiatives ever effectively mimic the fresh thinking collaboration with outside startups brings?

According to Kevin Johnson, head of Innotribe innovation programmes at Society for Worldwide Interbank Financial Telecommunication (SWIFT), the answer is no. Innotribe seeks to boost innovation in the financial services space through global events and research initiatives.

But there is a caveat to his answer.

He says in-house corporate innovation teams are precisely the “missing link” Sw7’s Mr Jones is referring to. These divisions make serious bank-fintech collaboration possible.

Without internal teams, Mr Johnson says, effective implementation of innovative solutions just does not happen.

“If you look at companies that most people would consider to be innovative, part of this is driven by internal teams, and part of this is through the acquisition of startups who bring new ideas, technologies or processes to the table,” he says.

Johnson predicts that when successful engagement is put in place, more African fintech innovators will scale their solutions globally.

“Through our Startup Challenge we have seen a number of solutions that are solving local problems, but these local problems exist in multiple places,” he says.

“I can see some amazing innovations coming out of Africa and making a real difference across the world.”

- ThisisAfrica

2017 | Business Times Africa 27

ADVERTORIAL

ROMAN KRABEL

DARE TO BE DIFFERENT

R

oman Krabel, General Manager of the 4* Accra City Hotel (formerly Novotel), winner of “4 Star Hotel of the Year 2016” in the Greater Accra Region from the Ghana Tourism Authority, talks about all things in hospitality, sharing his experience and knowledge with us.

Roman Krabel origin from Germany started his career in culinary arts; he was a Chef for many years. In 2000, he made career switch to Sales & Marketing, Human Resources and Food & Beverage Management and eventually, this led him to become a successful GM. His culinary art and F&B background gave him self-discipline and the mentality for attention to details.

You must feel passionate about living in Ghana to stay for over 5 years?

Something must be right! I think there are several things; the dynamic of the hospitality industry here is great. There’s a real passion here for the industry as well, the constant reinventing of yourself and reinvestment in the property etc.

Ghanaians are unique as well; you’ll see for yourself, they are very friendly, flexible, great for hospitality industry, you see smiles everywhere. All the great Ghanaian food which you can experience at my restaurant in Accra City Hotel too. I think the multicultural nature as well, all the different people coming to visit Ghana, etc. You can go to the North of Ghana for fantastic trekking. You can go to the South for beautiful beaches. And Accra is fantastic, you have everything in Accra and it’s really a hub too.

What made you apply for this job?

I was contacted by one Shareholder for this role, and as I knew of the hotel and its reputation, I was instantly interested. When I came to the hotel for my interview, it was clear that Accra City Hotel (formerly Novotel) has a good philosophy and work culture. As a General Manager, I knew that my beliefs

28 Business Times Africa | 2017

would fit in with the rebranding from the branded Novotel to independent Accra City Hotel and I could make a positive difference to our guests, staff and overall business.

Are there benefits to being independent?

It’s much tougher. Some of us are big enough to have affiliations with groups or brands. But for those who cannot, it’s much harder. In many cases, the brand does not pay off because you would be working for them rather than working for yourself.

Depending on the market and location, some products do as well as independents and some do not. It requires hard work.

You have worked for several companies; what is unique about Accra City Hotel?

Accra City Hotel is different as it is a privately owned and run company. Rather than having to deal with all the layers of bureaucracy often needed in International companies, you have a direct relationship with the owners, which makes decision making faster and our work more efficient. Things happen quickly and that gives fabulous opportunities to impact business. However, you are also left to run your hotel as business; they empower and trust their General Manger which, as hotelier, is what you want.

Do you have exciting plans for the hotel?

Yes, we are planning a major renovation and extension of the property, actually. The hotel is made of two different wings. The South wing is the original hotel which includes all Guestrooms. In the modern wing of the hotel we have the sloping front with a deluxe restaurant and modern Conference and Banquet rooms.

We will hopefully complete that next year. The hotel is actually 29 years old and was the first 4-star hotel in the late 80s which has developed a lot since. Now with new hotels coming, it’s important to update and build upon what we have.

ROMAN KRABEL, DARE TO BE DIFFERENT

ROMAN KRABEL General Manager of the 4* Accra City Hotel (formerly Novotel)

2017 | Business Times Africa 29

ROMAN KRABEL, DARE TO BE DIFFERENT

The location still works very well and the loyal staff has been here quite a long time too. The overall feel is you can go to hotels that are very trendy but the only cater for certain types of clients. If it’s more neutral like us, you can cater for a larger range of people. That is our goal.

The new restaurant menu is coming up soon, are looking forward to it?

Oh, yes, the food at Accra City Hotel is fantastic! It is freshly prepared on board, changed seasonally and with fresh ingredients.

I am very proud that our food is something that our guests come back for! There is such a strong team in the kitchen, our chefs are very inventive and always looking to impress – I feel some real positive vibes in our galleys! Chef Lucky is creating our new menu and he is so creative, with an imagination that seems to have no limit! He also has a great eye for color and presentation and I like that! I can’t wait to see his new menu now!

How important is innovation in a chef’s life?

You have to innovate if you want to learn, develop and grow as a chef, as well as make sure that your food remains at the level that you want it to be, technology in the kitchen gives you more possibilities, as well as more safety.

Advice young chefs?

Work hard and discipline yourselves.

Too many young chefs want it all these days and they want it now. They want the Michelin Star, the endorsement deal, the book deal et cetera, but what they don’t realize is how much they’ll have to work for it and how much discipline that requires. As a chef, all you have is your reputation and you have to build and maintain it, and that comes with years of dedication and sometimes blood, sweat and tears, as they say! Find your path, define your goal and stick to it. Keep working on it until you get there, and once you get there, keep working some more, but do also make sure you take the time to enjoy yourselves every now and then. And remember one thing: your restaurant is for your 30 Business Times Africa | 2017

guests and nothing else; not for the stars, not for the books. Always remain committed to your guests, and they will remain committed to you.

Which Assurance you give to provide the best Quality at Accra City Hotel?

I am pleased to inform that Accra City Hotel implemented the system ISO 22000:2005 (Food Safety Management System) and ISO 14001:2015 (Environmental Management System).

Being the first hotel in Ghana to acquire both certifications is a proud accomplishment for our Accra City Hotel ladies and gentlemen, for consistently upholding uncompromising standards in food safety, assuring our guests with trust when visiting our restaurant, banquets and outside catering. Obtaining ISO 22000 and HACCP certifications will continue to strengthen the hotel’s credibility and reputation, build customer satisfaction and trust, reduce operating costs and increase operational efficiency.

The ISO 14001 standard specifies a path for continuous improvement and control of Accra City Hotel’s environmental performance.

It enables the Hotel to identify and control the environmental impact of its products, processes, and services and also to improve its environmental performance.

What are the Advantages of Hotels that have implemented quality managing system ISO? The certificate ISO proves that the Hotel possessing it respects all the international and national quality standards, and regularly surveys the quality system that has been incorporated in its business practice. A correctly implemented and completed quality system brings certain internal and external advantages to the hotel.

However, it is necessary to emphasize that the benefit amount is directly proportionate to the success of implementation and commitment of all employees.

Why did you decide to work in hospitality?

ROMAN KRABEL, DARE TO BE DIFFERENT

I have been working since I was 16, and as a teenager the easiest place to get a job was in the bars and restaurants starting with washing up! I do think it’s important to star with basics. I realized that I enjoyed it and was good at it, and decided to become a certified Chef and certified Restaurant Manager.

What have you always enjoyed about the hospitality industry?

I enjoy the variation the hospitality industry offers. It’s both challenging and rewarding with every day being different. As a General Manager, you have a real opportunity to make difference to both customers and their experience, but also to staff and their work satisfaction.

What do you enjoy most about your job?

Dealing with people, be it customers or staff; this can be most rewarding.

I remember how much my General Managers influenced me and my development, as a young employee.

I was given this unique opportunity, and I want to give back to my staff, by helping them develop and grow. My staff’s success is indeed my success.

When you dine in a restaurant, what else do you look at besides the menu?

Actually, I look at many things, such as: the concept of the restaurant, then design and size, the atmosphere, the type of guests and their behavior as well as the behavior and selling skills of the employees. And of course, the food must be good, tasty and presented well.

Essentially, I look at the whole package.

Of course, it really depends on the guests’ expectations. At times, you may want to be spoiled by the quality of food and service. On other occasions, the atmosphere and environment is very exciting and the food and service may not be the most important thing.

What are the most challenging issues you are facing on your current job?

When you work in a competitive city such as Accra, you have to pay attention to what is changing around you. We live in such a fast-moving world; the

2017 | Business Times Africa 31

ROMAN KRABEL, DARE TO BE DIFFERENT

greatest challenge is keeping up with the new trend and adapting to them.

Our business is constantly evolving, for example, the booking industry has changed. Guests have many choices nowadays; we have to keep up with the changes. We have to present on all sales channels. The other challenge is that you need to understand what is important to today’s generation. Our industry is often challenged to find good and motivated young people to join us. You need to know that their philosophy and values in life have changed so much, compared to my generation; and adjustments in management styles to be made to accommodate this change.

What is best compliment you’ve ever received?

It’s a difficult question to answer. When guests are happy and they compliment the courtesy of my colleagues; when we achieve our goals and the team receives recognition, it is certainly a time to be proud; and of course, when young people consider me as their mentor. To me, these are the best compliments.

If you must take choice, would you do the things right or would to the right things?

To me, it is more important to do the right thing at the right time. The most important thing is to have values and as long as you do the right things based on your values, I think it will be alright.

People always say that we can learn from our mistakes, but why do you think so many people are afraid to make them?

I think no one should be afraid to make a mistake every now and then --- as long as you don’t make the same mistake repeatedly. If you are afraid to make mistakes, you will never change anything and you won’t learn anything.

When you make anything an honest mistake, it shows that you are trying new things. You learn from it and you should not be punished for trying.

Can you think of a time you made the impossible become possible?

One of the greatest tasks I was given in

32 Business Times Africa | 2017

my career was that I had to cater for 6500 people. I thought about it for many days and at the time, I did not know how this could be accomplished. To make a long story short, finally I discussed it with colleagues and managed the task as a team and it was a success story for all of us.

What is the single best quality your employees can possess? The right attitude! They must genuinely please our guests. All the technical skills you can learn in time.

What do your employees expect from you?

I would say the same thing - but not just having the right attitude towards pleasing guests, but also having the right attitude towards the employees to ensure that they are treated fairly and motivated to achieve as a team.

“The best managers are also the best teachers.” Do you agree?

What advice would you offer to those who aspire to become a GM in the hotel industry someday?

You need solid education and diversified work experience. You need to understand the importance of managing people as well as the technical aspects of the business. Of course, in order to be successful, the most important thing is that you need to focus on your guests.

What are your greatest strengths and weaknesses? My strength is that I know my weaknesses.

At work, what puts a smile on your face? Receiving compliments from guests such as: “I’m really looking forward to coming back.”

What puts a frown on your face? Team members not having the right attitude and not taking care of our guests.

What’s next? I don’t know. I feel fortunate! I live in a fantastic city and I work in a beautiful hotel. I am content.

I don’t know if a teacher can be the best manager. I think being a teacher means “teaching”, and being a manager is more about coaching. I believe that a coach and a manager are more the same --they try to bring out the best in their people.

About Accra City Hotel

And what is the difference between management and leadership? In what ways are each important?

Accra City Hotel with 196 fully furnished guest rooms of varying sizes with good quality interiors and complimentary mini-bar is located on Barnes Road in the heart of the Ghanaian Capital, in close proximity to the City's business and entertainment districts.

My personal opinion is that we all manage situations, events, people, but managers tell other people what to do, and leaders guide and lead others to make the right decisions for themselves.

So what makes a good leader?

A good a leader is a visionary that inspires, engages challenges, develops and empowers his team to exceed expectations... drive further and grow.

What is the importance of empowerment?

Empowering our associates is a corner stone within Accra City Hotel’s culture.

When associates are empowered, they are engaged within the business which directly relates to our financial performance.

The luxury 4-star Accra City Hotel is managed by his General Manager, Roman Krabel and threw its doors open to the public for the very first time in September 1988.

The property is 15 minutes away from the Kotoka International Airport. Accra City Hotel has facilities which every guest is looking for. The hotel offers sophisticated dining experience with its Fihankra Restaurant — an all-daydining restaurant, Lounge Bar and 24hour Room Service offers an extensive menu. An option of hosting any kind of event either indoor for up to 200 people or outdoor is also available. Every month, Accra City Hotel provides a special Food & Beverage promotion with tempting dishes of commendable prices.

ADVERTORIAL

“Accra City Hotel” Ghana’s first and only ISO certified Hotel

F

urther enhancing its commitment to ensuring consistent quality standards, the 4 star “Accra City Hotel” in Accra, one of the iconic properties in West Africa is the first hotel in Ghana to achieve the international standards of ISO 22000:2005 Food Safety Management System and ISO 14001:2015 Environmental Management System standards certified by international register of certified auditors “Professional Evaluation and Certification Board” (PECB) from Canada.

The Accra City Hotel (former Novotel) is known as the land mark and the place of memories in Accra, and is also recognised as an institution for hospitality professionals where they have learnt the skills and have uplifted the reputation of hospitality business to the highest levels.

“I am extremely pleased that Accra City Hotel has been awarded the ISO certification, the first Hotel in Ghana that has achieved such a prestigious certification, which will re-energize, propel and invigorate our commitment to always deliver and maintain the highest possible quality and standards

to our valued guest. The certification is a seal of Accra City Hotel’s compliance to strict, internationally-set standards”, said Roman Krabel, General Manager of Accra City Hotel.

“We have discreetly been pursuing our long sought aspiration of introducing and implementing the ISO System. This important project has been on-going for a year with the valued guidance and assistance of top Consultants from “Quality, Safety, Health & Environment Resources” (QSHE - www.qsheresources.com).

They were on site since February 2016 preparing for the Audit which was conducted by PECB from Canada that carries out audits around the World and is renowned for its reputed Hospitality faculty that carries out Audits and issues certifications”. General Manager Roman Krabel credits his 13-member ISO working team and Managers for the recognition which an accreditation signifies. “They devoted long hours over the past year”, he said.

“Being the first hotel in Ghana and possibly in West Africa, to acquire both certifications is a proud accomplishment for our Accra City Hotel ladies and

gentlemen, for consistently upholding uncompromising standards in food safety, assuring our guests with trust when visiting our restaurant, banquets and outside catering. Obtaining ISO 22000 and certifications will continue to strengthen the hotel’s credibility and reputation, build customer satisfaction and trust, reduce operating costs and increase operational efficiency.

The ISO 14001 standard specifies a path for continual improvement and control of Accra City Hotel’s environmental performance. It enables the Hotel to identify and control the environmental aspects and impact of its products, processes, and services and also to improve its environmental performance. I am very convinced that Hospitality has a huge role to play in the future of our Country, and international standards and certifications are major pillars in going forward,” Roman Krabel said.

Accra City Hotel is dedicated to maintaining quality and a high-level of service to exceed guest expectations, including in the area of high-quality food safety and environmental management.

2017 | Business Times Africa 33

SOUTH AFRICA

South African protesters echo a global cry: democracy isn’t making people’s lives better

By Carin Runciman

CARIN RUNCIMAN Senior Reseacher, Centre for Social Change, University of Johannesburg

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ecent violent protests in South Africa have refocused attention on the growing number of demonstrations over government failure to provide basic services, such as water and electricity. The country is known as the “protest capital of the world”.

Research by the Centre for Social Change, University of Johannesburg seems to bear this out. Based on estimates from South African Police Service data, we found that between 1997 and 2013 there were an average of 900 community protests a year. In recent years the number has climbed to as high as 2,000 protests a year.

The situation in South Africa is not unique. Protests have been increasing globally, particularly since the 2008 global economic crisis.

In a new book, my colleagues from the Centre for Social Change and I attempt to understand South Africa as part of the global protest wave.

On the face of it, protests in South Africa look quite different. They tend to be fragmented and happen mostly in black townships and informal settlements. The occupation of central

34 Business Times Africa | 2017

SOUTH AFRICAN PROTESTERS ECHO A GLOBAL CRY: DEMOCRACY ISN'T MAKING PEOPLE'S LIVES BETTER

public spaces in towns and cities, as we are seeing in Venezuela, happens seldom.

While there are important differences there are also commonalities. Whether protests focus around the “1%” as they did during the Occupy movement or around the lack of service provision in townships, protesters around the world are critiquing the failure of a representative democracy to provide socio-economic equality.

Broken promises South Africa’s governing ANC came into power in 1994 on the promise of a “better life for all”. There have been important gains, such as increasing access to electricity from 51% of the population in 1994 to 85% in 2012, but inequality remains endemic. Recent data from the World Bank confirms that South Africa remains one of the most unequal countries in the world.

As part of research by the Centre for Social Change we spoke to protesters all over the country. A new book from the centre highlights the extent to which protesters are raising not just concerns about the quality of service delivery but also about the quality of post-apartheid democracy. As Shirley Zwane, from Khayelitsha, near Cape Town, explains: For Shirley the quality of postapartheid democracy is linked to the provision of basic services. She is not alone in this view.

Research by Afrobarometer has found that compared to other countries in the region South Africans are much more likely to emphasise the realisation of socio-economic outcomes as crucial to democracy. That South Africans should view housing and services as central to post-apartheid democracy is unsurprising given that apartheid systemically denied the majority of people these rights.

Crisis of affordability Community protests are fundamentally about the exclusion

from democracy experienced by many black working class citizens since the end of apartheid in 1994.

Although the provision of services to the previously marginalised black majority has increased substantially, black working class households face an increasing crisis of affordability.

In sectors covered by a minimum wage, the real median wage increased by 7.5% between 2011 and 2015. But last year inflation on an average working class food basket was 15% and certain staple foods, such as maize meal, increased by as much as 32%. This has put a real squeeze on working class households especially when, due to high levels unemployment, each black South African wage earner supports four people.

Structural challenges The crisis of affordability facing black working class households also compounds the structural crisis within local government.

In South Africa local governments are responsible for delivering services. Over the past 15 years local municipalities have increasingly had to find ways to fund these services through their own tax base. Many have resorted to cost recovery measures, for example by introducing prepaid meters. Their introduction has been behind many protests.

The financial difficulties for local and provincial governments looks set to get worse. In the country’s latest budget the National Treasury cut their funding as part of R25 billion budget cuts. In the case of Gauteng, the scene of the most recent protests, this amounted to a R2.9 billion rand cut over three years.

To fill the gap, municipalities and provinces are going to have to look increasingly to their own tax base to fund service provision. A difficult prospect when slightly more than half the population survives on R779 or less a person a month.

A global crisis

As Professor Michael Burawoy argues in our new book, the nature of the crisis varies from country to country. In South Africa the crisis represents the forcible exclusion of many black working class households from democratic institutions, largely because of their inability to afford socio-economic goods. For instance, while access to electricity has increased, access is increasingly mediated by prepaid meters, therefore the ability to access service is inextricably linked to the ability to afford them.

It’s this exclusion that leads many to say that democracy is only for the rich.

Globally, people are beginning to search for new solutions to these problems with many being drawn to left-wing movements and political parties, such as Podemos in Spain. Whether such a comparable movement can emerge in South Africa remains to be seen.

Carin Runciman is a Senior Reseacher, Centre for Social Change, University of Johannesburg.

On the face of it, protests in South Africa look quite different.

They tend to be fragmented and happen mostly in black townships and informal settlements.

2017 | Business Times Africa 35

ZAMBIA

We need to talk about Zambia as it falls from grace under President Lungu

NIC CHEESEMAN Professor of Democracy, University of Birmingham

the headlines, and whether one agrees with the bishops’ evaluation or not, one thing is clear: it’s time to start talking about Zambia.

Democratic success

EDGAR LUNGU President of Zambia

Z

ambia has often been ignored by the international media. One reason for this neglect is that it’s been comparatively unexceptional, on a continent with more than its fair share of extremes.

Since the reintroduction of multiparty politics in 1991, the country has neither been a clear democratic success story like Ghana or South Africa , nor a case of extreme authoritarian abuse, as in Cote d’Ivoire and Zimbabwe.

Instead, Zambia has occupied a

36 Business Times Africa 2017

middle ground lacking a hook with which to sell coverage of the country, journalists have tended to steer clear.

But in the last few months things began to change. First, the opposition leader Hakainde Hichilema was arrested on trumped up treason charges.

Shortly after, the Conference of Catholic Bishops released a strongly worded criticism of the government that concluded: Our country is now all, except in designation, a dictatorship.

As a result, the country has returned to

Until now, Zambia’s progress under multi-party politics has been quietly impressive.

Although the level of corruption has remained high, and a number of highly controversial, elections, the country has consistently pulled back from the brink when authoritarian rule appeared a possibility.

Things appeared to be going downhill, for example, when Zambia’s second president, Frederick Chiluba, manipulated the constitution to prevent his predecessor, Kenneth Kaunda, from running against him on the grounds that he was not really Zambian. This strategy was clearly illegitimate. After all, Kaunda had run the country for over two decades.

But, Chiluba’s position was weaker than he understood and he overplayed his hand by trying to secure an unconstitutional third-term. He ultimately left office when his second term expired at the end of 2002.

While Zambians have been willing to

WE NEED TO TALK ABOUT ZAMBIA AS IT FALLS FROM GRACE UNDER PRESIDENT LUNGU

defend their new democracy, political leaders have shown a greater willingness to share power than in many nearby states. On the one hand, presidents from a number of different ethnic groups have occupied State House, which has helped to manage tension. On the other, opposition parties have been able to use populist strategies to attract support in urban areas and build effective political machines. As a result, Zambia is one of the only countries on the continent – along with Benin, Ghana, Madagascar, and Mauritius – that has experienced two transfers of power.

Over the last year, though, things have changed.

Zambia’s fall from grace According to the Conference of Catholic Bishops – one of the most influential bodies in the country – Zambia doesn’t deserve to be called a democracy. Instead, under the leadership of President Edgar Lungu and the Patriotic Front it has become a dictatorship - or getting there.

This statement needs to be taken seriously for two reasons. First, the bishops rarely speak out publicly.

Second, many catholic leaders were seen to be sympathetic to the governing Patriotic Front, when it won power under Michael Sata in 2011. So, their actions cannot simply be put down to party political bias.

So what has changed? The bishops identify a number of recent developments as causes for concern.

First, they point to the treatment of opposition leader Hakainde Hichilema.

Not only was his arrest conducted in an unnecessarily brutal manner, but the government has not yet provided any evidence to substantiate the treason charge. Instead, it appears that his detention is punishment for refusing to recognise the legitimacy of the president, who Hichilema believes won the last election unfairly.

For obvious reasons, his detention and the question of whether he will be released, has been the focus of recent media coverage. But for the Bishops, Hichilema’s arrest is clearly just the tip of the iceberg. The worries expressed in

their statement are less about the fate of the opposition leader, and more about the systematic weakening of the state.

For example, the bishops lament the fact that the Constitutional Court failed to effectively hear the opposition’s election petition, believing the judiciary have “let the people down”.

They also note that the politicization of the police force has resulted in the violation of citizens’ rights and that, partly as a result, the media has become entrapped in a “culture of silence”.

The Bishops suggest that the political manipulation of these institutions has enabled the government to launch attacks on a number of civil society groups that have dared to challenge its authority, including the Law Association of Zambia.

While the charges against Hichilema may have triggered the Bishops to act, their letter is underpinned by a deeper and broader concern about the declining quality of governance under President Lungu.

What next?

This is not the first time that a Zambian president has sought to consolidate their authority my manipulating state institutions. Nor is it the first time that opposition leaders have been arrested, or civil society groups intimidated. In the recent past, these moments of high political tension have often been resolved peacefully and it’s not impossible that a similar thing will happen this time.

For example, the president may decide to release Hichilema and to pull back from the prohibition of the Law Society of Zambia in the wake of considerable criticism. If the recent spate of attacks has been designed to intimidate his rivals, Lungu may feel that his goal has already been achieved and that he has little to gain by following through with his threats.

But even if this were to happen, it’s unlikely that it would signal a period of a more accountable government, or that Lungu will cede his quest to remain in office. Many things have changed since Chiluba failed to secure a third term in office almost twenty years ago.

While Zambians have been willing to defend their new democracy, political leaders have shown a greater willingness to share power than in many nearby states.

First, key civil society groups such as the trade unions have been weakened by privatisation, informalisation and unemployment.

Second, the Constitutional Court that’s responsible for interpreting the constitution was handpicked

by Lungu, and is highly unlikely to oppose him.

Third, Lungu’s case is more complicated than Chiluba’s. In 2001, the second president had served two fill terms in office and wanted one more. Today, Lungu is arguing that he should be allowed to have a third term because his first period in office did not count, as he was just serving out the final year of Michael Sata’s term following his untimely death in office.

This reading of the constitution is highly questionable. The clause that stipulates that a period in office only counts as a full term if it’s longer than three years is limited to a set of cases that doesn’t include the way that Lungu actually came to power. But, it is less clear-cut than Chiluba’s power grab.

All of this means that Lungu is likely to get his way. But, his third term will not come without a cost.

Opposition protests are inevitable, as is some civil society criticism. If past form is anything to go by, Lungu’s government will respond with threats and intimidation, fuelling public fears that Zambian politics has become significantly more violent since the 2016 election campaign. Given this, the Bishops’ recent letter is unlikely to be their last, and we need to talk about Zambia for some time to come.

2017 | Business Times Africa 37

GHANA

Bolstering growth and wealth in a blue economy PATRICK PAINTSIL Aerial view of the Tema port expansion

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hana’s sea trade business sector has seen some landmark interventions over the recent few years during the reins of the immediate-past National Democratic Congress (NDC) government; notably among them being the US$1.5 billion five-phased expansion works at the Tema Port with similar works at the Takoradi Port and the gradual push towards

38 Business Times Africa | 2017

seamless documentation and transactions process leveraging the National Single Window regime.

Operator of the country’s two seaports, Ghana Ports and Harbours Authority (GPHA), has also embarked on an aggressive port automation drive as it moves closer to an e-port status. The port operator has currently installed electronic gates at the entry and exit points of the Tema Port as

BOLSTERING GROWTH AND WEALTH IN A BLUE ECONOMY

part of efforts to improve security within the port community.

The electronic port management system will protect the ports’ stakeholders from the issues of corruption, extortion, petty thievery as well as other unethical practices that dent the image of the port industry in the public eye.

Sister industry associations including the Ghana Shippers’ Authority (GSA), the Ship-owners and Agents Association of Ghana (SOAAG), the Importers and Exporters Association of Ghana, and the Ghana Institute of Freight Forwarders (GIFF) are all actively engaged in one form of activity that seeks to shore up the economic gains from sector.

The strong cooperation that exists among the various private sector stakeholders is commendable as it will go a long way to bolster productivity and business growth.

This is the kind of bond that the maritime guru and board chair of Meridian Port Services (MPS), Alhaji Asuma Banda, has tasked the various stakeholders in the maritime industry to hold on as they collectively work towards seamless and conducive transactions at the country’s ports.

He said at a recently held New Year cocktail event organised by the Shipowners and Agents Association of Ghana (SOAAG) of which he is the president: “My advice to shipping lines, clearing agents and other industry actors is for them to work as a team; there should be no need for competition between the port operators and shipping lines.

Every one engaged in the port business must be part of that team, and there should be no segregations in the sector. By doing the right thing, we can position the port industry for higher gains to drive national and socio-economic growth.”

It is all bright for the blue economy

and it is without a doubt that the change of government to the ruling New Patriotic Party (NPP) has come with its own breeze of hope and growth for the dominant sea trade sector.

The promise of tax cuts and the abolishment of industry-specific duties such as the Special Import Levy, import duties on raw materials and machinery and spare parts have kept industry actors upbeat about the industry.

The icing on the cake that has got the various maritime stakeholders highly optimistic is the creation of a dedicated ministry for railway development headed by the astute lawyer and former Attorney-General, Joe Ghartey.

The fact remains that the economic potency of a robust rail transport system are enormous; from saving cost to shippers and opening up the rural economy to enticing more business through our ports.

Significantly also, the cargo haulage business has entered into the multimodal era, where you do not need only one mode of transport handling the carriage of goods while rail is cheaper and could haul large volumes at a go.

Deputy Chief Executive Officer of the Ghana Shippers’ Authority (GSA), Sylvia Asana Owu, told the B&FT in an interview: “An efficient rail system will open up our corridors for effective transit business; this will attract other countries to do business through our ports and that will create jobs for the people and open up the economy.

When transit cargo is moved through our ports, people will be engaged to work on the cargo, truckers will be involved to cart the goods along the transit routes; they will buy fuel and sleep in hotels.

All these activities will generate incomes to the service providers and open up the economy as money will

come into the system.”

Figures from the Ghana Shippers’ Authority (GSA) indicate that total transit and transshipment figures, as at the third quarter of 2016, stood at 772,744 metric tonnes, which is a 12.23 percent rise over the 2015 figure of 688,565 metric tonnes, within the same period.

These figures give a fair reflection of renewed confidence in Ghana’s economy by its landlocked neighbours of Burkina Faso, Mali and Niger, coupled with improved security along trade corridors, has steadily pushed up transit trade figures over the last few years after a long period of decline.

Currently, the haulage sector provides an average of 97,000 trucking jobs -- drivers and mates -- per year for the northbound transportation of transit cargo destined for the Sahelian countries, generating a yearly income in the range of US$81 million for local haulage companies.

With this huge prospect, it is less surprising that importers and exporters are exceedingly jubilant over government’s decision to rebuild and operate a robust rail transport network that will link the southern and northern parts of the country.

Captains of the industry opine that an efficient rail transport network, similar to that of Cote d’Ivoire and Benin, will reduce cost for businesses in the landlocked countries of Niger, Burkina Faso and Mali.

To her, a properly linked rail network to the Boankra Inland Port will boost trade on our corridor, making rail a laudable initiative that government is right to focus on.

The GSA deputy boss added: “We have always believed that the Boankra Inland Port is a very good project that is why we have not given up on it; and it is equally significant that the Transport Ministry has not given up on it.”

2017 | Business Times Africa 39

BOLSTERING GROWTH AND WEALTH IN A BLUE ECONOMY

The Boankra Inland Port operating on running rail connectivity could fast track the gains from transit trade as the chunk of cargo throughput to the Tema and Takoradi ports are moved to the Ashanti Region for onward carting to the hinterlands and transit destinations.

It is heartwarming that government has hit the ground running with developing the rail sector, going by the words of the Finance Minister, Ken Ofori-Atta, when he presented the maiden budget in Parliament.

He said: “This government believes that rail will be a major catalyst to drive the growth that we envisage in the coming years as rail transportation provides safer, cheaper and faster way of moving goods and people to facilitate trade and support economic activity.

Our vision is to open up the country and provide new opportunities to our people to do business and trade among themselves.�

Approximately 133.6 kilometres (km) representing 14.1% of the entire rail network of 947 kilometres that is currently operational is faced with an obsolete network and poor track infrastructure, resulting in the closure of greater part of the Western and Eastern lines and the entire Central line -- leading to a high incidence of derailments that lead to loss of operational hours and damage to rolling stock.

Available data show that the rail sector commanded an over-70% market share of freight and passenger transport in the country during colonial days until the 1970s, and carried over 2 million tonnes of freight and 8 million passengers annually in the 1960s and 1970s.

However, due to inadequate funding for maintenance, the rail network started to deteriorate; leading to the diversion of freight traffic onto 40 Business Times Africa | 2017

It is all bright for the blue economy and it is without a doubt that the change of government to the ruling New Patriotic Party (NPP) has come with its own breeze of hope and growth for the dominant sea trade sector.

roads, exacerbating deterioration of the roads.

The Eastern Railway Line which covers a distance of 330km and starts from Accra to Kumasi with a branch line from Achimota to Tema; the Western Line which starts from Takoradi and terminates at Kumasi having two branch lines namely, Dunkwa to Awaso and Kojokrom to Sekondi, covering a distance

of 340km; and the Central Spine which stretches from Kumasi to Paga covering a distance of 700km to be developed in sections: from Kumasi to Buipe and Buipe to Paga; have all been captured in the 2017 budget.

Government will also complete the Sekondi to Takoradi via Kojokrom section and continue with the section from Kojokrom to Tarkwa through Nsuta.

BOLSTERING GROWTH AND WEALTH IN A BLUE ECONOMY

This, according to the finance minister, will help improve the operational performance and revenue of the Ghana Railway Company Limited (GRCL) to better position the company to wean itself from government support.

Railway Development Minister Joe Ghartey has indicated that investors are already trooping in to partner government in the expansion of the

country’s rail network from the south to Paga in the Upper East.

The project is estimated to cost about US$5 billion and according to him, government will consider a cocktail of Build Operate and Transfer (BOT) and other several examples.

He told the Appointments Committee of Parliament: “Due to the government’s pro-business policies, investors have shown interest to

partner government.

It is estimated that the cost of road haulage is 50 percent more than the alternative of using railway lines. This affects the bottom line businesses that rely solely on road transport to cart their goods.

2017 | Business Times Africa 41

GHANA

To stabilise Ghana power, the answer is simple: money

T

o produce power, one needs huge capital investments.

Inadequate investment in the power sector over the years, is the bane of Ghana’s energy sector.

For decades, the energy sector has been riddled with numerous challenges; among them is efficiency, corruption, and mismanagement.

But the biggest is money. Should the nation get the required financial investment and revenue collection

42 Business Times Africa | 2017

FOR DECADES, THE ENERGY SECTOR HAS BEEN RIDDLED WITH NUMEROUS CHALLENGES

is streamlined, the perennial issue of power rationing, otherwise known as ‘dumsor’ in Ghana will be solved.

Many analysts, policy makers, politicians and other stakeholders have agreed that with the right financial investment, Ghana’s energy solutions will be second to none around the world and the subject of exporting energy or power will not be a myth but reality.

The main power distributor, the

TO STABILISE GHANA POWER, THE ANSWER IS SIMPLE: MONEY

Electricity Company of Ghana (ECG), says it is reeling under GH¢1.6billion of government debt alone, The amount constitutes unpaid bills by Ministries, Departments and Agencies (MDAs), the Ghana Water Company Limited (GWCL,) as well as accumulated subsidies as at the first quarter of this year, which, workers say, continues to put a strain on its operations.

Figures obtained from the ECG indicate that as at March this year, MDAs owed more than GH¢621 million while debt accrued by the Ghana Water Company also stood at GH¢324 million. In terms of subsidies, government has an outstanding debt of GH¢654 million to settle.

Workers of the troubled power distributor, belonging to the Public Utilities Workers Union (PUWU) of the Trades Union Congress, argue that the debt, among other things, is preventing the ECG from rolling out initiatives such as one-day service connection as announced in 2014.

According to the General Secretary of PUWU, Michael Adumata Nyantakyi, several efforts to make the MMDAs settle their bills have been frustrated, sometimes by pressure from politicians, such that the company was forced to reconnect organisations it had disconnected from the grid.

Also more than half of the total number of banks are owed by energy sector players from Volta River Authority (VRA) through Ghana Grid Company (GRIDCo) to ECG again, which are crippling the banks with almost a US$1billion debt.

The President, Nana Addo Dankwa Akufo-Addo, delivering his first State of the Nation Address to Parliament, said: “efforts by the previous government to resolve the energy sector challenges have come to naught. We have inherited a gargantuan heavily indebted energy sector, with the net debt reaching US$2.4billion as at December 2016.”

He further stated that, “Indeed the huge indebtedness of the energy

sector constitute a major hurdle to Ghanaians enjoy a reliable power, disclosing that US$800 million of the debt, was owed to local banks, which if not paid could lead to the collapse of the financial sector.

"I have to point out an alarming fact that, 800 million dollars of this debt is owed to local banks, which threatens their stability and that of the whole financial sector," he said.

The country has had to grapple with half a decade of power generation and supply challenges that necessitated a power rationing regime. At the height of the load-management period, government was forced to turn to emergency floating power vessel to address the shortfall.

At the core of the power challenge is finance and non-availability of fuel for power generation. The largest public power producer, the Volta River Authority (VRA) alone, has an installed capacity—hydro and thermal--of about 2,434MW; enough to meet the current demand of 2,225MW. Financing challenges with retooling some of the old installations and the lack of fuel have been the main drawbacks.

The Energy Sector Levies Act (Act 899) passed by the erstwhile government, therefore, seeks to harmonise energy sector levies and taxes on petroleum products, with proceeds from the levies used to ringfence the various energy sector legacy debts.

The Akufo-Addo-led government has promised significant cuts in the exiting levies in order to “recover the momentum of our economy.”

The World Bank since 2013, has diagnosed Ghana’s energy sector as performing below expectation and called on the government to fix the problems in the sector as a path to ensuring that the country’s economic growth and ambition are not stymied by a lack of electricity.

The bank over time had blamed successive governments for their inability to solve the problems within

the nation’s energy sector stating that the problems and solutions of the sector were well known.

In its diagnosis of the problems confronting the energy sector, the World Bank have always been of the view that the energy sector faced two challenges arising from forces external to the sector.

The challenges, the bank said, were lack of adequate and secure quantities of reasonably priced fuel for power generation, and the lack of adequate public funds to finance the sector’s investment requirements.

The challenges, according to the World Bank, were exacerbated by the poor technical and financial performance of the Electricity Company of Ghana (ECG) and the Volta River Authority (VRA), and policies and practices that seriously damaged the financial health of ECG, VRA and the Ghana Grid Company Limited (GRIDCo).

Coupled with that the country would have to pay about US$680million annually for excess power capacity if it goes ahead with all 43 Power Purchase Agreements (PPAs) signed with various companies by 2020, Energy Minister, Boakye Agyarko, has said.

“We have created numerous PPAs that have created potential over capacity. We have signed and discussed, as a country, about 43 power purchase agreements with various power producers, technically committing us to about 10,800MW of power when in actual fact we need less than 5,000MW. Potentially, we have an over capacity of about 5800MW. If we allow this situation to proceed, it means that the capacity charges that this country will have to pay will amount to some US$ 680m annually by 2020. That is capacity procured but unable to use,” the minister said at the recently held National Policy Summit.

The power deals signed for and on behalf of the country have come under intense scrutiny for over a year.

2017 | Business Times Africa 43

TO STABILISE GHANA POWER, THE ANSWER IS SIMPLE: MONEY

Energy think-tank, Africa Centre for Energy Policy (ACEP), barely a week after 2016 general elections, demanded that the new government reviews all existing Power Purchase Agreements.

ACEP argues that it was imperative for government to pull out of some of the agreements since most of the companies have not yet secured funds for the projects even though they have expressed interest.

“All emergency power contracts that have failed to deliver on time would have to be cancelled or renegotiated into a regular IPP to save cost. The high tariffs associated with the emergency plants are not appropriate for long-term economic planning and protection of industries,” the energy policy think-tank said.

Millennium Compact The government of the United States of America (USA) has agreed to support the nation’s energy sector with a US$500million grant, but Ghana must meet some criteria before the release of the money.

As part of the conditions for the release of the Millennium Challenge Compact money, the US government insisted that the government of Ghana settles its bills, which is part of the socalled legacy debt in the energy sector, and for which the Energy Sector Levies were introduced.

The government has since made some payments, although the huge chunk remains to be cleared. Last year government, a report of the Finance Committee of Parliament said government had, in five quarterly instalments, paid a total of GH¢180million to the ECG, in what is christened the Electric Distribution Utility Payment Action Plan.

The Committee referred to the payments as constituting “substantial compliance” with one of the conditions the country must meet before the US$498million MCC money is released in full.

As part of the Millennium Challenge Compact II, government is expected 44 Business Times Africa | 2017

to settle all its outstanding debts to ECG before a private entity takes over the management of the company.

The money from the compact is to be used for, among other things, an ECG Financial and Operational Turnaround Project, a NEDCo Financial and Operational Turnaround Project, and a Regulatory Strengthening and Capacity Building Project.

The country’s power generation situation Current electricity demand for the country stands at about 2,225MW. This is growing by 10 percent per annum and is expected to hit 7,000MW by

2030.

Presently, VRA and other Independent Power Producers (IPPs) together have an installed capacity of 3,644MW. However, constraints on fuel sources for power generation -- crude oil, gas and water for hydro power generation -- have necessitated the need for exploring cost-effective, reliable, and clean energy and power sources.

Given the current gas demand of about 450Mscf per day, indigenous gas and limited supply from the West Africa Gas Pipeline are unable to meet demand. Available indigenous

TO STABILISE GHANA POWER, THE ANSWER IS SIMPLE: MONEY

gas is also expected to run out by 2036, according to energy experts.

The country does not have enough indigenous gas to fuel power plants sited in the Western Region, and will have to augment gas supplied with crude, following the delivery of the AMERI power plant.

The Jubilee Oil field produces about 100,000 barrels of oil per day. The field also crucially produces about 120million standard cubic feet of gas per day (mscf/ day) to power thermal plants within the Aboadzi power enclave.

NGas, made up of Chevron, Shell and the Nigerian National Petroleum Corporation (NNPC), is also contracted

to supply 120mscf of gas per day via the West African Gas Pipeline. However, supply of the commodity has been below the contractual volume, amid issues of debts owed the suppliers.

This, however, is not enough to cater for the estimated total gas demand of about 350mscf/day needed to generate enough thermal energy to meet the daily 2,200megawatts of electricity demanded at peak.

Gas exported on-shore from the Jubilee Field and processed by the Ghana Gas Company Limited for onward delivery to VRA and other Independent Power Generators in Takoradi represents a crucial source of cheap fuel for the

generation of power. At full throttle it supplies about 120million standard cubic feet of gas.

Additional gas is expected to be generated from the TEN project.

The project derives its name from the three fields -- Tweneboa, Enyera and Ntomme -- and has a current scope to develop 300million barrels of oil equivalent (mmboe) over the lifetime of the field, which is approximately 20 years. Around 80% of this is oil and 20% gas.

When this comes on-stream, it will help address the fuel shortage situation facing the country.

2017 | Business Times Africa 45

ZIMBABWE

Keeping Zimbabwe afloat: trading on the streets and off the books As long lines keep forming outside banks, the continuing decline of the formal economy has raised fears of a repeat of the 2008 hyperinflation crisis

D

usk falls and thousands of vendors fan out across central Harare. Through the night, they hawk their wares — vegetables, clothes, kitchen utensils, cellphones — from carts, wheelbarrows or even the pavement, transforming the city’s staid business district into a giant, freewheeling village market.

On Robert Mugabe Road, around the corner from the city’s remaining colonial-era luxury hotel, the Meikles, Victor Chitiyo has sold dress shirts since losing his job as a machine operator at a textile factory several years ago.

“Since then, I’ve never been employed,” Mr. Chitiyo, 38, said under the dim light of a street lamp. “If the economy improves, I’d want to be employed at a company again. But I don’t think that will happen. It’s been a long time since we were optimistic in Zimbabwe.”

Harare’s night market is the most visible evidence of Zimbabwe’s swelling informal economy, which the government estimates now employs all but a small share of the country’s work force.

Even as Zimbabwe’s government, banks, listed companies and other members of the formal economy lurch from one crisis to another,

46 Business Times Africa | 2017

KEEPING ZIMBABWE AFLOAT: TRADING ON THE STREETS AND OFF THE BOOKS

the thriving informal economy of street vendors, traders and others unrepresented in official statistics helps keep the country afloat. For the government of President Robert Mugabe, that parallel economy is both a source of stability — and a potential challenge.

Once one of Africa’s most advanced economies, Zimbabwe has rapidly deindustrialized and shed formal wage-paying jobs, forcing millions like Mr. Chitiyo to hustle on the streets in cities and towns.

From 2011 to 2014, the percentage of Zimbabweans scrambling to make

a living in the informal economy shot up to an astonishing 95 percent of the work force from 84 percent, according to the government. And of that small number of salaried workers, about half are employed by the government, including patronage beneficiaries with few real duties.

Many more people are joining Mr. Chitiyo on Harare’s streets as the formal economy shows few signs of improvement. An acute cash shortage persists despite the introduction of a surrogate currency in November.

The government, unable to pay its workers their Christmas bonuses, has offered them land instead. And despite repeated visits to Washington and European capitals, and promises of political and economic reforms, Zimbabwean officials have failed to secure fresh loans from skeptical international lenders.

“The government is moving into an increasingly untenable situation, and they are in desperate need of a bailout in the billions to restore liquidity in the country,” said John Robertson, an independent economist in Harare.

“The formal sector has collapsed. The informal sector is now very much bigger, and it is actually keeping alive a very much higher percentage of the population.”

As long lines keep forming outside banks, the continuing decline of the formal economy has raised fears of a repeat of the 2008 hyperinflation crisis, which was fueled by the unrestrained printing of the old Zimbabwean dollar, including a $100 trillion note. Anxieties are mounting as a visibly frail Mr. Mugabe — who last month celebrated his 93rd birthday at a lavish party attended by thousands — was recently selected to lead his increasingly fractured party in national elections scheduled for next year.

The government has occasionally cracked down — sometimes violently — on the street vendors, who are not

licensed, describing their activities, near the seat of government and businesses, as an eyesore. Some of the vendors have also staged protests against Mr. Mugabe’s rule.

But the government mostly turns a blind eye, clearly calculating that a permanent crackdown on the livelihoods of an increasing number of its citizens would result in greater political instability. According to an unspoken rule, the street vendors are allowed to operate only after dark on weekdays and starting in late afternoon on weekends.

“If I come too early, the police will take my wares away and I’ll be broke,” said Norest Muza, 28, who sold popcorn and chips while carrying her 2-year-old son on her back.

“Evenings, the police don’t come.”

Many of the street vendors arrive in Harare’s business district at dusk and spend the night on the streets before going home at dawn with the morning’s first taxis and buses.

“How else can we survive when things are tough for everyone here in Zimbabwe?” asked Tichaona Murwira, 25, who was hawking cellphone chargers, sweets and cigarettes. “I’m a vendor because there is no job for me although I passed my secondary school education.”

Zimbabwe’s per capita gross national income peaked with independence in 1980, when Mr. Mugabe seized power, and bottomed out with the hyperinflation crisis of 2008. Though it has been slowly rising in recent years, it remains well below the level at independence.

Mr. Mugabe’s violent seizure of white-owned farms starting in 2000 precipitated a decline in manufacturing and a process of deindustrialization. Manufacturing peaked in 1992, accounting for about 30 percent of the gross domestic product. Now it is 11 percent and declining.

2017 | Business Times Africa 47

KEEPING ZIMBABWE AFLOAT: TRADING ON THE STREETS AND OFF THE BOOKS

On Harare’s outskirts, industrial areas have been gutted. Abandoned factories are now used by the homeless, drug dealers, prostitutes and churches.

In Southerton — the district where Mr. Chitiyo, the street vendor, once worked as a machine operator — Philda Chinyoka, the pastor at the True Covenant International Ministries, a Pentecostal church, said she had moved her church to the area in 2014.

“The building was just empty,” she said. “I hear it used to be a tissue paper-making company.”

Inside a nearby abandoned building, with missing doors and broken windows, prostitutes operate day and night.

“The company that used to manufacture net wire here — I forget its name — closed shop in 2006,” said Esther Munetsi, 27, who has worked in the building as a prostitute for the last nine years.

With manufacturing’s sharp decline, as well as the resulting drop in exports and spike in imports, Zimbabwe suffers from a steep trade imbalance. That imbalance’s effect on the economy is exacerbated by the American dollar, which Zimbabwe adopted in 2009 to combat hyperinflation.

48 Business Times Africa | 2017

Because of the ballooning trade imbalance and widespread hoarding of the greenback, Zimbabwe has experienced a crippling shortage of dollars since last March. Efforts to encourage the use of plastic money — and the introduction, so far, of nearly $100 million into the market of a surrogate currency called bond notes — have helped, though not enough.

Customers still stand for hours in long lines outside banks to try to withdraw the few dollars available.

With the government now strictly controlling the transfer of dollars outside Zimbabwe, companies dependent on trade are finding it increasingly difficult to import critical goods.

“We have companies scaling down or discontinuing certain lines that are heavy on import requirements,” said Busisa Moyo, president of the Confederation of Zimbabwe Industries.

At a small auto parts shop in central Harare, called Track Board, Prince Mapira, 23, said American dollars had vanished from the marketplace.

Customers now pay only in bond notes, which are recognized only inside Zimbabwe, creating a problem for his business.

The auto shop needs American dollars to import parts from South

Africa or Japan. So Mr. Mapira takes the bond notes, which are supposed to be the equivalent of the American dollar, to exchange on the black market.

“If you go there with 100 dollars in bond notes, they give you $70 or $80,” he said. “It’s not equal on the black market.”

As the formal economy keeps shrinking, more and more people have been crowding the area where Mr. Chitiyo sells shirts on Robert Mugabe Road.

Across the street, a girl’s voice was crying, “Twenty-five cents for a cob!”

It belonged to Tariro Dongo, 13, on her first evening working as a street vendor. It was past 9 p.m. Tariro said she was good in school and wanted to become a teacher.

She had bought 20 corn cobs for $2 near her home in Epworth, a poor township outside Harare. If she sold everything, her profit, after transportation, would amount to a couple of dollars. Sitting on a black bucket and fanning the coals in a small charcoal burner with a piece of cardboard, Tariro roasted the cobs.

She was happy with the money she had made on her first day, Tariro said.

“Twenty-five cents,” she cried.

“One cob left!” – NewYorkTimes

RWANDA

Rwanda moves swiftly towards cashless society

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wanda is continuing with its move to be the first cashless society in Africa, extending an agreement with Mastercard to strength its digital payment sector, it was announced at the World Economic Forum being held in Durban, South Africa, this week.

Government of Rwanda and Mastercard have reaffirmed their shared commitment to the development of strong digital platforms to meet the needs of the country's citizens and work towards Rwanda's goal of promoting a cashless society.

According to FinScope 2016, 68% of adults in Rwanda have/use formal financial products/ services.

The partnership agreement signed between MasterCard and the Rwanda Development Board at the World Economic Forum on Africa in Kigali in 2016 will have a significant impact on this number. Through the partnership, great momentum has been achieved, resulting in the agreement with Mastercard being renewed to incorporate the digitization of Rwanda social subsides under one inflows and outflows digitization project.

"Named SIKASHI, the project is focused on digitising numerous state services to improve the efficiency and transparency of public services and ultimately promote the move to a cashless society - a critical pillar of Rwanda's broader Vision 2020 to create a knowledge-based economy

in a world beyond cash," says Clare Akamanzi, CEO of Rwanda Development Board and Cabinet Member.

Key focus areas of SIKASHI include school fees payment digitisation, providing an online payment gateway services for RwandaOnline, contributing to the creation of an interoperable mobile banking platform, addressing the national healthcare claims disbursement and payment processes, and contributing to the effective management of foreign exchange process flow.

"In the last year, the Rwandan government and Mastercard have leveraged each other's strengths to deliver on a number of these goals, particularly in the payments, disbursements and subsidies of health, pensions and education: centralized and digital platforms for the three areas have been built and tested and will be rolled out for the widespread benefit of our citizens," says Daniel Monehin, Division President for Sub-Saharan Africa and International Markets Lead for Financial Inclusion, Mastercard.

This covers a centralised digital platform to drive efficiency, access to and payments of the annual subscription fee of the communal healthcare system "Mutuelle de SantĂŠ", of the mandatory pension scheme targeting workers and those in the informal sector, of school fees for all primary and secondary public

schools, as well as a digital ecosystem for all the government's social inflows and outflows, with emphasis on the Vision 2020 Umurenge Program for poverty eradication, the Genocide Survivors disbursement, and agriculture subsidies programmes.

The healthcare and pension programmes conceptualised as part of SIKASHI pilot will be the first to be rolled out to the country's citizens and is set to begin this year. This will be followed by the introduction of the Long Term Savings Scheme project, which Mastercard and social enterprise firm Pinbox Solutions partnered to provide technical assistance for Rwanda's Ministry of Finance and Economic Planning. The scheme will be demonstrated at the first global micropension inclusion summit in Rwanda in July.

Online payment gateway and mobile payments have been a key contributor to making government services more accessible to the country's citizens through the RwandaOnline service named Irembo. Irembo is the face of all current and future solutions and provides a one-stop- shop for the Rwandan government and the country's citizens to seamlessly apply and pay for Government Services Irembo provides 50 e-services from ten +government agencies to citizens and allows them to pay using debit, credit or prepaid cards and mobile money services.

Building on the success of Irembo so far, Mastercard and RwandaOnline have strengthened their relationship through the signing of a two-year Strategic Partnership Agreement to innovate around all citizen-to- government (C2G) and business-to- government (B2G) payments.

"Rwanda is a vital market in East Africa and the snowballing positive impact of the solutions implemented through SIKASHI have illustrated the power of ground-breaking digital systems and collaboration between government and the private sector to drive the financial inclusion of all citizens," concludes Monehin.

2017 | Business Times Africa 49

MAURITIUS

Mauritian banks think beyond home comforts IN RECENT YEARS, LOW DEMAND FOR CREDIT AND HIGH CAPITAL INFLOWS HAVE CONTRIBUTED TO AN EXCESS OF BOTH LOCAL AND FOREIGN CURRENCY LIQUIDITY IN THE MAURITIAN BANKING SECTOR

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areful cost management and diversification have yielded solid profits for Mauritius’s banks.

And with the government now focusing on SMEs, many banks are now developing their services for this sector while also expanding their footprint abroad.

Faced with a regional economic slowdown and a sub-optimal domestic operating environment, Mauritian banks should be struggling. Instead, the country's lenders have overcome these challenges to post solid growth numbers in the past year.

This performance reflects the efforts by most banks to cut costs, diversify their activities and develop innovative products and services to support growth.

For a relatively small market, these achievements are one of the more promising stories emerging from the region in recent times.

Research by Swan, a Mauritian financial services provider, puts sector-wide return on equity at 9.3% for the year ending 2016, while return on assets was about 1.2%. Though these numbers show a decline from recent years, they nevertheless contain some standout individual performances, particularly regarding the country’s largest and most well-established lenders.

Profits up The MCB Group, of which the Mauritius Commercial Bank (MCB) is the main constituent, saw its profit attributable to shareholders expand by 15.8% to $184m in the 2015/16 financial year. Notably, earnings from foreign sources and non-banking operations contributed to about 60% of the group’s results during this period.

50 Business Times Africa | 2017

MAURITIAN BANKS THINK BEYOND HOME COMFORTS

Meanwhile, the State Bank of Mauritius Group (SBM), the country’s second largest bank by total assets, saw aftertax profits jump by 43% for year-end 2016. This was partly due to a reduction in impairment charges. “SBM’s performance in 2016 was good and at par with our peer group.

The key takeaway is that there has been growth momentum in our bottom line parameters while our top-line performance has exceeded national growth,” says SBM Holdings chairman Kee Chong Li Kwong Wing.

But it was AfrAsia Bank, which focuses on corporate and investment banking, as well as global business, private banking and treasury and financial markets, that produced the country's standout performance according to most key indicators. The group’s net profits grew by 148% in the 2015/16 financial year – a record – with net interest income growing from MRs860m ($24.4m) to MRs965m over the period, while the bank’s return on average equity hit 19%.

“AfrAsia is on a journey to reach its full potential as a business," says Sanjiv Bhasin, chief executive of AfrAsia Bank. "We have started this journey by doing what we can in the best way we can to increase our revenue and profit streams. On a more structural basis, we are working to improve governance procedures, invest in our technology and ensure our customer service is market leading.”

Infrastructure boost The good news for Mauritian banks is that the domestic economic environment looks set to improve.

Supportive government spending under the Mauritian Public Sector Investment Programme, which has allocated about $4.3bn-worth of investment between now and the fiscal year 2020/21, is expected to provide a boost to the country’s gross domestic product growth.

MCB, the country’s largest lender, expects the economy to expand by 4% in 2017 – assuming there are no delays in project implementation – up from 3.7% in 2016. “Looking ahead, it is [worth taking note] of the array of policy measures that have been

identified and are being implemented by the authorities in order to gear up the productivity and competitiveness of the economy, notably via the unfolding of large-scale infrastructure upgrades and real estate projects,” says Raoul Gufflet, deputy chief executive of MCB. In the pipeline are plans to expand the harbour in capital city Port Louis, designed to capture a greater share of the region’s container traffic, increase the country's share of the Indian Ocean’s bunkering activities, as well as to install the necessary processing infrastructure to position Mauritius as a seafood hub. In addition, the development of the Metro Express, a light rail project that falls under the government’s road decongestion programme, is expected to provide a major investment boost.

“I think the new budget and the government’s big public infrastructure programmes will kick-start significant demand for credit. This should help address some of the excess liquidity in the market,” says Mr Li Kwong Wing.

Liquidity challenge In recent years, low demand for credit and high capital inflows have contributed to an excess of both local and foreign currency liquidity in the Mauritian banking sector. For most lenders, this situation has been problematic. In many cases, the bulk of this excess liquidity has been allocated towards Treasury bills, where the average yield was below some banks’ savings rates, particularly during 2014 and 2015. For lenders with a growing deposit base, these trends placed unhelpful pressure on profitability and margins.

But since 2015, the country’s central bank, the Bank of Mauritius (BoM), has taken a proactive role in sterilising this excess liquidity. Moreover, reductions in the base interest rate in late 2015 and mid-2016 helped the banks to improve their margins. These actions have partly alleviated the challenges linked to the country’s excess liquidity situation, although there is still some way to go.

According to data from Swan, banks’ excess cash holdings in March 2017 were about MRs11.6bn.

Nonetheless, Mauritian banks are 2017 | Business Times Africa 51

MAURITIAN BANKS THINK BEYOND HOME COMFORTS

encouraged by the new outlets for liquidity, such as infrastructure projects and other developments. MCB’s Mr Gufflet says: “The current expansion of our loan portfolio is an encouraging sign, which is being confirmed by our pipeline of projects. The latter should be further boosted in the periods ahead and, thus, further support our revenue generation if announced sizeable domestic public and private investment projects are executed as planned.”

SME opportunities The multiplier effects of this project spending are expected to stimulate new opportunities for small and medium-sized enterprises (SMEs).

Indeed, under the government’s economic development agenda, the authorities are promoting SMEs as a means of stimulating the economy and driving the next stage of the country's development. The banks, in turn, are looking to bolster their SME offerings to capitalise on this opportunity.

SBM, for example, is supporting these businesses as they expand their activities across mainland Africa. Mr Li Kwong Wing notes that exporting into the Common Market for Eastern and Southern Africa will be vital for Mauritian SMEs in their hunt for higher growth opportunities. To support this objective, SBM offers trade insurance cover, as well as the discounting of receivables, among other services, to its SME customers.

“SBM is now trying to revitalise its operations in the SME sector in order to accompany the growth in the regional market,” says Mr Li Kwong Wing.

MauBank moves in Meanwhile, MauBank, which was created through the merger of Mauritius Post and Cooperative Bank (MPCB) and National Commercial Bank (NCB) in early 2016, is benefiting from its historical know-how in the SME segment. About one-third of its total assets are geared towards SMEs, of which it has 6000 customers, thanks to MPCB’s strong offering in this business line.

Sridhar Nagarajan, chief executive 52 Business Times Africa | 2017

SRIDHAR NAGARAJAN CEO, MauBank

of MauBank, says: “Our bread and butter is SMEs. Our team knows how to work with SMEs because we are a truly local bank. We have started adopting new techniques for SMEs, including clustering industries for appraisal. For example, we are very quick in assessing and understanding plantations based

on aggregated knowledge of the industry.”

MauBank hit the headlines in 2016 for turning in a profit just a few months into its existence. Mr Nagarajan points to the bank’s dynamic board and its ability to swiftly execute credit decisions as two factors that have helped to

MAURITIAN BANKS THINK BEYOND HOME COMFORTS

drive MauBank’s success. The lender has ambitious plans to capitalise on its strong SME and retail offerings to further its growth.

“The merger of MPCB and NCB has given MauBank a market share of 8%.

Our aim is to reach 15% and become the third significant bank in Mauritius,” says Mr Nagarajan. “We will do this slowly because our job now is not to grow the balance sheet but to put the bank back on track. We have actually shrunk the balance sheet slightly because we had too many high-cost deposits. Reducing these deposits has helped to push us into profitability.”

International expansion Beyond the domestic market, a number of Mauritian banks are focusing more of their efforts on international growth.

Indeed, many lenders have for some time looked towards mainland Africa and Asia as an engine of future growth, and capturing opportunities along the Africa-Asia corridor is a central theme for most Mauritian banks. Many already boast a footprint across multiple markets in Asia and Africa, but there is a strong trend to capitalise on these positions by leveraging relationships and market knowledge to drive new growth.

AfrAsia Bank is no exception. “As a bank, our bandwidth is restricted due to our size. So we have defined the markets where we have sound local knowledge and significant relationships. In this respect, South Africa and India are two markets in which we have excellent local connectivity as well as strong understanding of the business landscape,” says Mr Bhasin.

“Gradually, we want to diversify our country coverage on the asset side. We have started looking at smaller markets because we think we can understand these places better than some of our larger competitors. In this respect, we are carefully looking at opportunities in Sri Lanka, Bangladesh and Indonesia,” he adds.

Other lenders are also making ambitious moves. SBM has been aggressively pursuing geographic expansion in recent years, which has seen it enlarge its presence across south

Asia, sub-Saharan Africa and the Indian Ocean.

“Our long-term growth strategy is built around regional expansion in order to cover the Asia-Africa corridor. Today, we have a presence in India, Madagascar and Myanmar, and soon in Kenya and Seychelles,” says Mr Li Kwong Wing.

“We also want to open a representative office in Hong Kong, Dubai and South Africa. We are developing our footprint across this corridor to facilitate the flow of business, trade and capital between

“GRADUALLY, WE WANT TO DIVERSIFY OUR COUNTRY COVERAGE ON THE ASSET SIDE. the two regions.”

India focus This kind of international connectivity has long been a key ingredient to Mauritius’s economic success. In terms of financial services, the country's long history with India, characterised by its decades-old double taxation avoidance agreement (DTAA), has positioned the country as a successful international financial centre. But changing political currents in India have led to a renegotiation of this treaty, which reinstates capital gains taxes on Mauritian residents upon the transfer of Indian securities. The move was expected to hit the country's economy, as well as its offshore business, hard. But to date, the impact has been negligible.

“The revised DTAA with India will not have any meaningful impact on Mauritius," says Mr Bhasin. "Indeed, we expect business flows to increase in the coming years. This is because the DTAA was attractive primarily for equity investments with India.

“Moving forward, to support much-

needed infrastructure developments, the debt markets are likely to play a much bigger role. And Mauritius can play a significant part here because it has a deep connectivity with, and understanding of, India. In addition, Mauritius benefits from abundant foreign currency liquidity,” he adds.

African connections But the treaty change is giving Mauritius’s banks and wider financial services community fresh impetus to build closer ties with Africa. Most lenders are now looking to enhance their business lines with the continent by harnessing their accumulated specialised knowledge to position the country as a hub for treasury management and trade services, among other activities.

“Fundamentally, MCB is truly African at heart and we are on the continent to stay. In fact, the African continent is an integral part of our medium- and longterm vision,” says MCB’s Mr Gufflet.

But as Mauritian banks reap the rewards of regional expansion, they must also face up to a greater level of risk. In recent times, sub-Saharan Africa has been a source of political and economic volatility as commodity prices crashed and national currencies tanked.

Political risks are also mounting in key markets, as shown by the South African government’s sacking of respected minister of finance Pravin Gordhan, replacing him with Malusi Gigaba, who has announced plans to radically transform the country’s economy. The move led Standard & Poor’s to downgrade its sovereign rating to junk status.

Mr Bhasin says: “The regional credit cycle is not showing any signs of improvement. South Africa, in addition to a number of other African markets, is showing signs of a slowdown. We are hoping that South Africa’s recent downgrade doesn’t negatively impact the performance of the country’s corporates and banks.” TheBanker

2017 | Business Times Africa 53

NIGERIA

Why businesses in Nigeria need to take sustainable finance seriously

By Kenneth Amaeshi

M

any people will have heard of the UN Sustainable Development Goals. But less well known is the concept of sustainability at the root of these goals.

Sustainability has recently become a mantra, a philosophy of sorts.

The contemporary interest in sustainability can be traced to the 1987 Brundtland Commission report, Our Common Future. The commission had been set up to find ways for countries to meet their present economic objectives with less negative impact on the physical environment, society, and the ability of future generations to meet their needs. It first gave rise to the Millennium Development Goals, which have now been replaced by the global sustainable goals.

The literary meaning of sustainability simply suggests longevity or the ability to survive under counteracting pressures.

While longevity or resilience are integral, they tend to project

54 Business Times Africa | 2017

a somewhat narrow and limited view of sustainability.

The broader view underlines the value of environmental, social, and economic considerations in decision making.

It’s directly linked to a quest for development that doesn’t inhibit or harm future generations. It recognises the nested inter-dependency between the economy, society and the environment.

In other words, the success of the economy is dependent on the viability of society. The success of society on the other hand is also linked to the viability of the natural environment. As such, without the environment there will be no society, and without society, there will be no economy. The three are interwoven.

Evidence suggests a positive relationship between sustainability practice and the global competitiveness of a country.

This is very much at the heart of the sustainable goals.

WHY BUSINESSES IN NIGERIA NEED TO TAKE SUSTAINABLE FINANCE SERIOUSLY

Why sustainability is good for business

KENNETH AMAESHI Professor of Business and Sustainable Development, University of Edinburgh

Nigerian businesses have treated sustainability as a dispensable philanthropic option

There’s significant evidence that sustainability is good for business. A recent study by Harvard and London business schools found that corporations that voluntarily adopt sustainability policies have better organisational processes.

They thus perform better when compared to a matched sample of companies that adopted almost none of these policies.

It has also been found that if financial institutions “integrate sustainability criteria in their risk assessment and decision making procedures, they will strengthen their financial soundness” Such institutions also “improve systemic financial stability and contribute to a more ecologically sustainable, just and peaceful world.”

In sum, sustainability is a quest for effectiveness and efficiency. It’s first and foremost rooted in a commitment to reduce negative impacts and increase positive effects. Positive impacts include low carbon emission, fair employment practices, responsible product promotion and good corporate citizenship practices.

Corporate sustainability is therefore a form of self-regulation driven by the values and philosophy of a business.

But for a long time, Nigerian businesses have treated sustainability as a dispensable philanthropic option. The focus of most businesses has been on survival. As such, the pursuit of sustainability is seen as not necessarily good for business.

No longer an option for Nigeria Nigerian businesses need to go beyond the piece meal approach of corporate social responsibility. There’s at least one green shoot that suggests this process might be underway.

The Nigerian government is committed to implementing a national sustainability roadmap for the financial sector.

Backed by the United Nations Environment Programme Finance Initiative, it requires each member of Nigeria’s Financial Services Regulation Coordinating Committee to develop a sustainable development model. This model is for themselves - as organisations - and the industries they regulate.

The committee brings together all

the regulatory agencies. These include banking, insurance, securities, pensions, commodities, taxation and fiscal policy sectors. These will be expected to address the integration of environmental and social risks in investment and lending decisions.

According to the UN programme, Nigeria is arguably the first country to adopt this approach to sustainable finance.

Nigeria, like most African countries, didn’t achieve many of the Millennium goals. This is due to poor governance and the inability of many governments to stimulate sustainable development. The sustainable goals present a new lease of life, which the government of President Buhari has committed to.

What should businesses in Nigeria do?

The full spectrum of the Nigerian financial regulatory community is on board.

This means that all sources of finance in Nigeria – borrowings and investments – will soon be required to respect and reflect sustainability principles.

At the moment, the Central Bank of Nigeria expects most large projects to meet these requirements. Agriculture, power, and oil and gas are especially in focus. These projects will be required to demonstrate that they do not cause social and environmental harms, in addition to being profitable.

Banks have been mandated to develop robust social and environmental management systems to guide their lending and investment decisions. In practice, the banks are expected to adopt social and environmental management systems similar to those found in the UK and the Global Alliance for Banking on Values.

Very soon, the sustainable finance approach could be extended to all projects, no matter how small. Finance is the lifeblood of any business. There’s a global appetite to incorporate environmental, social and governance risks in lending and investment decisions.

As long as Nigerian businesses want to thrive locally and globally, they cannot escape the current demands of sustainability. The earlier they understand and embrace it, the better for them.

2017 | Business Times Africa 55

AFRICA

Africa can lead global energy utility revolution

By SAM SLAUGHTER, MATT TILLEARD AND JAKE CUSACK

Traditional power utilities are dying. Dramatic declines in the cost of solar power and battery storage are finally giving consumers power over their own power supply.

Most utilities are hoping it will all just go away. In some ways, the disruption of electricity is following the familiar script of most transformational technological change.

However the setting for this script might surprise many. The blueprint for our energy future could arrive first in Africa.

The traditional utility acts as a one-way pipeline moving electrons from large centralised generation to passive consumers.

The utility of the future will be more like a stock exchange: a mesh network that bal-

56 Business Times Africa | 2017

MORE THAN 500 MILLION AFRICANS DO NOT HAVE ANY POWER AT ALL.

ances distributed nodes of generation, storage, and consumption.

This global energy revolution will be the defining technological change of our century. A multi-trillion dollar industry will be completely disrupted. Entrepreneurs and large companies are already scrambling for the Schumpeterian spoils from this creative destruction.

Before the advent of mobile phones, few Africans had access to modern telecommunications.

Now nearly every African has a mobile phone and mobile money is more ubiquitous in Africa than in developed nations.

Africa “leapfrogged� the old system of copper landlines with sufficient inertia to lead the future of mobile, not just catch up.

AFRICA CAN LEAD GLOBAL ENERGY UTILITY REVOLUTION

Globally, the revolution in power resembles telecommunications two decades ago. New business models are threatening the old guard while promising a better future for consumers. Africa has the same big advantage in this transition: fewer change-resistant incumbents. More than 500 million Africans do not have any power at all.

From household to micro-grids Africa’s energy leapfrog has already begun with the explosive spread of Solar Home Systems (SHS). These small, autonomous power systems incorporate a solar panel and a battery. They can power lights and charge of mobile phones. This can transform the life of low-income households previously reliant on firewood and kerosene lanterns.

Over the last five years, companies like Off-Grid:Electric, M-Kopa, d.light, and Mobisol have provided solar home systems to more than half a million customers in Africa. Soon they will reach millions. SHS’s success has galvanised large amounts of venture capital and debt financing into Africa. Solar on the continent increasingly looks like an exciting opportunity rather than speculative experiment.

Light and a charged phone dramatically improve the lives of the un-electrified poor. But the technology can do more.

The average American home uses 300 times the power the average home solar system produces. The next step is to provide ‘productive power’: more robust electricity for heavier duty and income generating use like power tools, cooking and irrigation.

The path to widespread provision of

SAM SLAUGHTER co-founder of PowerGen Renewable Energy, the market leader in solar micro-grids in East Africa.

productive power is increasingly clear.

Larger power systems with increased functionality called ‘micro-grids’ are coming of age.

Micro-grids, as the name suggests, are miniature electricity grids that distribute power through traditional power lines and provide power comparable to main grids. Solar, which scales elegantly upwards and downwards, serves as a modular generation source.

Battery technology to store power at the village level has become viable.

Smart metering and mobile money enable low-friction billing and customer management. Micro-grids have arrived and will accelerate Africa’s march towards a distributed future grid in two important ways.

First, and most importantly, aggregating demand and generation on a micro-grid unlocks the provision of productive power. The key difference between a micro-grid and a solar home system is the efficiencies created when generation and load are aggregated and “smoothed” among many customers.

Simply put, aggregation enables lower pricing. Autonomous systems are less efficient and even a steep reduction in the cost of battery storage will not change this fundamental reality.

As an extreme example, when you power your TV remote with AA batteries you are paying well over $100/kWh. Most solar home system companies sell power for around $5/kWh. Compare that to the $0.10-20/kWh that most ongrid customers pay, and the economic imperative for sharing and spreading through a grid becomes clear.

Second, micro-grids are autonomous but can also be building blocks of a larger smart grid that delivers even more

MATT TILLEARD co-managing partner of CrossBoundary Energy, Africa’s first investment fund for commercial and industrial solar.

aggregation and smoothing. Eventually micro-grids can become capillaries of a distributed grid, solving another key challenge that plagues African utilities: connecting people within the last few hundred metres of their power lines.

In Kenya, for example, more than half of the off-grid population lives within 600m of a low voltage line, with the segment within 200m sometimes referred to as “under grid” households. Building distributed micro-grids to connect these people, and then integrating these micro-grids into the main grid, solves the problem of building this final component of connectivity.

Battery storage and solar PV on the micro-grid can also provide stabilisation and additional power to the main grid, creating a national smart grid from the ground up.

Micro-grids are not a theoretical idea.

Companies like PowerGen are already making them a reality. Every day in east Africa, customers on micro-grids are pressing a few keys on their mobile phones to transfer money to their energy accounts.

They are instantaneously rewarded with a balance confirmation that assures them continued use of their lights, blenders, TVs, refrigerators, and other appliances. Businesses like movie halls, restaurants, and hair salons are blossoming. Productive power allows communities to prosper.

We will all benefit from the transition of power taking place around us. Power will be cheaper, smarter, cleaner, and more flexible.

The foundations for that energy future are being laid today, and in Africa the setting is perfect to build the optimal architecture from the bottom up.

JAKE CUSACK Co-managing partner of CrossBoundary Energy, Africa’s first investment fund for commercial and industrial solar.

2017 | Business Times Africa 57

ENERGY

All roads to sustainable energy lead to the sun HUMANS CONSUME 221 TONNES OF COAL, 1,066 BARRELS OF OIL, AND 93,000 METRIC CUBES OF NATURAL GAS PER SECOND.

By Werner van Zyl Transparent solar cell.

T

hese materials were wonderful for the industrial revolution that started in Britain in the 18th century and made use of “new energy” sources such as coal and petroleum. At the start of the 21st century, however, it’s time to reassess the notion of “new energy”. Fossil fuels have no place in any long-term sustainable energy solution for the planet. It needs to be replaced with renewable energy sources. But which ones?

Sooner or later humanity needs to get its head around the fact that the only long-term sustainable energy solution is

58 Business Times Africa | 2017

EARTH PRESENTLY CONSUMES ENERGY AT A RATE OF ABOUT 17.7 TRILLION WATTS (17 TERAWATT, TW), THAT WOULD REACH 30 TW BY 2050

solar energy. This is simply borne out by the immense amount of energy potential that the sun can provide versus any other renewable resource such as wind, nuclear, biomass or geothermal. To place that in perspective: the theoretical potential of solar power is 89 terawatts (TW), which represents more energy striking the Earth’s surface in 90 minutes (480 Exajoules, EJ) than the worldwide energy consumption for the entire year 2001 (430 EJ) from all other resources combined.

Off-grid solar should be Africa’s energy future. Off-grid simply means a system

ALL ROADS TO SUSTAINABLE ENERGY LEAD TO THE SUN

where people don’t rely on the support of remote infrastructure, like connectivity to a centralised electricity transmission line, but instead use a stand-alone independent power supply. Such systems are perfect for people living in rural areas. Access to energy should be a basic human right for the 620 million people across Africa deprived from it. To achieve this, one should look beyond the grid for future power solutions.

In my years of teaching an advanced level sustainable energy course, it’s clear that the ‘sustainable energy’ solution requires a multidisciplinary approach and needs expertise from the fields of chemistry, biophysics, biology and materials engineering.

For example, photosynthesis is nature’s solution to sustain life and its complete understanding touches many disciplines. Can science learn from it to provide a sustainable energy solution? Yes, through a process called artificial photosynthesis.

Large-scale photovoltaic (PV) panels dot the landscape in solar farms. Can we imagine transparent solar cells with the look of glass that can be brought to the city? The answer is yes.

Say yes to the sun Energy is the most important resource for humanity and solar energy is the ultimate energy source.

The sun as a solar energy source has a number of advantages: it is abundant, it is essentially inexhaustible, and it doesn’t discriminate but provides equal access to all users.

Earth presently consumes energy at a rate of about 17.7 trillion watts (17 terawatt, TW), that would reach 30 TW by 2050 assuming a similar population growth rate. The solar energy irradiating the surface of the Earth is almost four orders of magnitude larger than the rate our civilisation can consume it. This is obviously more than sufficient if harnessed properly.

The energy potential of the sun is 120,000 TW at earth surface. More

practically, assuming that only 10% efficiency and covering less than 2% of earth surface would get us 50 TW; Wind is at 2-4 TW at 10 meters; nuclear 8 TW, build one plant every 1.5 days forever - due to decommissioning; biomass 5-7 TW, all cultivatable land not used for food; geothermal 12 TW. The solution should thus be clear: focus on the sun, nothing else gets the required numbers. The solar and wind duo has been considered a viable option at least for Africa’s future. The challenge is that solar energy only becomes useful once it’s converted into usable energy forms like heat, electricity, and fuels.

Below are two state-of-the-art new technologies that convert solar energy into electricity or fuels.

New technologies Black solar photovoltaic (PV) panels are the most familiar to generate electricity. A game changer will be a new technology where such PV panels are transparent. This could then replace regular glass, wherever one finds glass. For example, on large buildings, the vertical “glass panels” can literally become the source that powers the building.

The solar company Onyx Solar has already demonstrated proofof-concept by applying PV glass for buildings in 70 projects and in 25 different countries. Its only current competitor, Ubiquitous Energy focuses more on mobile devices. On a mobile phone, the glass screen will become the power source, potentially making batteries redundant.

In simplest terms, photosynthesis is a process where green plants use the energy in sunlight to carry out chemical reactions. One such reaction is to break water molecules into its constituent parts of oxygen and hydrogen.

Artificial photosynthesis is a process that mimics parts of natural photosynthesis to suit our needs, like forming hydrogen. And because hydrogen is considered the fuel of

the future, a large research focus is to capture and convert sunlight into energy with storage of hydrogen.

Say no to nuclear energy In South Africa, the nuclear energy landscape has been tainted by political greed, rather than scientific reasoning. Fortunately, in April 2017 all further developments for a nuclear future were halted by a high court.

Let us not repeat the deadly sins of considering nuclear power as an option, but remind ourselves of two consequences.

It takes 10 years and billions of rand to commission a nuclear power station, let alone eight. Once commissioned, such stations don’t last forever, but after 50 years has to be decommissioned again, costing the same amount in time and fiscal.

Suppose South Africa is a country with stockpiles of enriched uranium and nuclear plants, such utilities become primary targets for terrorists and are expensive to safeguard. Why even take the risk?

It’s now 31 years since the Chernobyl nuclear disaster. It devastated Ukraine and the 2,600 square kilometres of surrounding land is still considered unsuitable for humans.

A colossal radiation shield is now concealing the stain on that landscape. Is such a risk worth it for South Africa when the sun has so much potential? -

WERNER VAN ZYL Associate Professor of Chemistry, Lecturer in sustainable energy, University of KwaZulu-Natal

2017 | Business Times Africa 59

AFRICA

Lake Tanganyika is changing, and the fate of millions lie in the balance By Andrew Cohen Lake Tanganyika Image from NASA's SeaWIFs project

S

tanding on the steep rocky shores of Lake Tanganyika at sunset, looking out at fishermen heading out for their nightly lamp-boat fishing trips, it’s easy to imagine this immense 32,900km2 body of water as serene and unchanging.

Located in the western branch of the great African Rift Valley it’s divided among four countries; Tanzania, the Democrat-

60 Business Times Africa | 2017

ANDREW COHEN University Distinguished Professor Joint Professor, Geosciences and Ecology and Evolutionary Biology, University of Arizona

ic Republic of the Congo, Burundi, and Zambia. It’s one of the oldest lakes in the world, probably dating back about 10 million years.

That expanse of geological time has permitted literally hundreds of unusual species of fish and invertebrates to evolve in isolation - organisms that are unique among the world’s lakes. Every day mil-

LAKE TANGANYIKA IS CHANGING, AND THE FATE OF MILLIONS LIE IN THE BALANCE

lions of people rely on the lake’s riches.

But despite being a world class reservoir of biodiversity, food and economic activity, the lake is changing rapidly and may be facing a turbulent future.

Lake Tanganyika was recently declared the “Threatened Lake of 2017” – adversely affected by human activity in the form of climate change, deforestation, overfishing and hydrocarbon exploitation.

The threats Beginning in the late 1980s scientists studying the lake began to notice significant and concerning changes caused by human activity.

But at the time worldwide attention was focused on other African Great Lakes, particularly Lake Victoria where evidence was beginning to emerge of the enormous impact the Nile Perch – an introduced species – was having.

The problems in Tanganyika were somewhat different. Fortunately, no major exotic species introductions have occurred up to now. Instead, evidence shows that underwater habitat degradation is taking place adjacent to hill slopes. They are being rapidly deforested – converted to agricultural lands or for urban expansion –in the fast growing population centres around the lake. This activity has led to a rapid increase in the amount of loose sand and mud being washed into the lake which is smothering the lake floor.

Danger of sediment The biodiversity of Lake Tanganyika can be imagined like a thin bathtub ring. It hugs the shallow zones around a deep and steep bottomed lake, up to 1470m in its deepest parts. The hundreds of species that inhabit the sunlit shallows give way to a dark expanse of water lacking oxygen and, so, animal life.

This narrow strip of extraordinary biodiversity is on the front line. Eroded sediments are being carried into the lake, affecting this strip.

Researchers have begun to document where the impact is being felt. They are also looking back in time by collecting sediment cores with fossils of the many endemic animals to see when the impact was first felt.

They have found that some heavily populated regions lost much of their diversity more than 150 years ago. Other regions, particularly in the more southerly past of the lake, are seeing these effects unfold only in recent decades.

Other pressures Excess sedimentation is just one problem. Fishing pressure and climate change are also affecting the lake. Large scale fisheries for the lake’s small sardines started in the 1950s, quickly mushrooming into a major industry. They export up to 200,000 tons of fish per

year and make up a very large portion of the average person’s animal protein intake in the surrounding regions.

In recent years this fishing yield has declined dramatically. This has been partially caused by the unsustainable growth in fisheries, and exacerbated by large numbers of refugees flooding into the region because of conflicts in Rwanda, Burundi and the DRC during the 1990s.

It’s now increasingly clear that another factor has also been at play.

Starting in the early 2000s, scientists began to document that the surface waters of Lake Tanganyika were warming rapidly. This is most likely because of global climate change related to an increase in greenhouse gas emissions. This warming has had serious consequences for the lake’s fragile ecosystems.

Warming lake Warm water is relatively light and struggles to mix with the deeper layers of the lake. This in turn keeps the vast pools of nutrients from being churned back to the surface by waves. It cuts down on the growth of floating plankton, which is what the lake’s many fish populations eat.

Scientists have been able to show that the decline in fish populations began well before the onset of commercial fishery in the 1950s. This implicates climate change and lake warming as the probable cause for much of the fishery’s long-term decline.

Unfortunately, this trend is unlikely to be reversed as long as the climate in the region continues to warm.

A related consequence of the reduction of mixing in the lake, is a continuous shallowing of the transition from the oxygenated to deoxygenated waters on the lake floor. This means there’s less of an oxygenated ring, reducing the habitat area within the bathtub ring of biodiversity from below.

As if scientists and lake managers at Lake Tanganyika didn’t have enough on their plates, a new problem has emerged: the search for oil and gas deposits.

Rift lake sediments of the type found in Lake Tanganyika are well known among geologists as reservoirs of hydrocarbons, as over millions of years vast quantities of plankton have died and settled on the lake floor.

The consequences of actual production are still unknown. But the recent record of catastrophic oil spills, for example along the Niger River Delta, highlight the critical need for very careful study and environmental planning before production proceeds in fragile Lake Tanganyika.

The biological and economic riches produced by 10 million years of evolution could lie in the balance.

2017 | Business Times Africa 61

AFRICA

Why Africa should go cashless

By Carl Manlan

CARL MANLAN Economist and Chief Operating Officer of the Ecobank Foundation. He is a 2016 Aspen New Voices Fellow. – Project Syndicate

D

espite early missteps and frustrations, it will turn out to be a change for the better for the country’s 1.31 billion people. Africa should set a similar goal – and take the first step by establishing a monetary union.

Of course, achieving a cashless society is not an end in itself. Rather, it is a means to help advance financial inclusion, security, and prosperity.

Today, an estimated 326 million Africans – 80% of the continent’s adult population – use no formal or informal financial services. But stashing banknotes under the mattress is no way to safeguard families’ savings, much less enable households to accumulate enough capital to escape chronic poverty.

Similarly, millions of Africans are scratching out a living in the informal economy, which represents about 41% of GDP in most parts of the continent.

This leaves them unprotected, and without pathways to financial stability and wealth creation. Moving toward a cashless society would force citizens, companies, and policymakers to devise mechanisms to bring all Africans into the financial sector, drastically improving the lives of the millions who are now underand unbanked. And it would bring many

livelihoods into the formal economy – a major economic opportunity for African countries.

The goal should be to achieve prosperity through financial inclusion linked to economic activity. What small businesses and micro-enterprises need is fresh capital to create employment and expand the economic pie, and bank accounts connected to economic activity ensure that even those selling goods by the roadside can secure a piece of that pie.

But financial inclusion is not a natural by-product of the shift away from cash.

On the contrary, as Harvard economist Kenneth Rogoff argues, successful demonetization requires a comprehensive and implementable plan to increase financial inclusion and use of banks.

Such a plan should focus on building the right ecosystem for economic activity.

In Africa, that means not just delivering financial services, but also advancing financial literacy. Newly established bank accounts have few positive effects if they lie dormant. To ensure that financial inclusion actually enables economic transformation, Africans must gain the knowledge and tools to make the most of financial services.

Of course, none of this will be easy – a point made clear by India’s challenging experience implementing its radical demonetization process. Success will require, among other things, a gradual approach. Africa must not allow cash scarcity to cripple the informal economy, as it has in India.

But if Africa succeeds in this transition, the benefits will be profound.

Demonetization would probably even save countries money. MasterCard estimates that countries worldwide spend as much as 1% of their GDP each year to mint, process, and distribute banknotes.

That is money that could be better spent on meeting the United Nations Sustainable Development Goals, further improving the lives of Africa’s poor.

There is reason to believe that Africa can succeed in going cashless. Already, a large share of Africans uses digital payment systems like M-Pesa and EcoCash –

precisely the types of innovative platforms that can play a pivotal role in the shift away from cash.

While hyperinflation is far from the ideal catalyst for such a shift, Zimbabwe’s experience proves that citizens can and will adapt to challenging circumstances.

For example, some stores in the country will give credit to mobile money accounts in lieu of change.

But, to achieve a broader shift to a cashless Africa, progress toward monetary union will be essential for deepening economic integration across the continent. That, in turn, would foster a continent-wide digital financial services ecosystem capable of underwriting a massive expansion of intra-African trade – the quickest route to lifting people out of poverty.

Already, 14 countries in West and Central Africa share the CFA franc, which is pegged to the euro. And South Africa shares a monetary policy with Lesotho, Namibia, and Swaziland. We cannot stumble where the road is clear.

Africans are latecomers to the demonetization movement. But we can use this to our advantage, by learning from countries that have already made the transition or are on the way. These include not just India, but also Denmark, Norway, and Sweden. We must view this as a strategic advantage in the muchneeded structural transformation of the African economy.

With a smart strategy, underpinned by patience and commitment, Africa can build a cashless economy, with high levels of financial inclusion supporting economic prosperity and security. Before too long, buying a “Kofi broke man” – a roasted plantain with groundnuts – by the roadside in Ghana could be a cashless transaction, one that helps the vendor prosper in the present – and save for the future.

2017 | Business Times Africa 63

AFRICA

Why the role of the media is so important to free and fair elections in Africa

By George Ogola

T

he news media is usually one of first casualties of bungled or contested elections. From the recent US elections, the UK’s Brexit vote to Zambia’s controversial 2016 presidential elections, the mainstream news media bore the brunt of much of the criticism that followed.

In Africa, biased media coverage, most often in favour of incumbent presidents, is one of the reasons voters have little faith in the legitimacy of election outcomes.

In South Africa for example, the public broadcaster routinely comes under intense criticism at election time for being a propaganda outlet for the ruling African National Congress.

Kenya’s state broadcaster has often shed its public mandate to become the governing party’s mouthpiece during general elections. In countries such as Uganda, Tanzania, Zimbabwe, Malawi, Swaziland and Zambia public broadcasters openly canvas for incumbent governments during elections.

Kenyan opposition leader Raila Odinga briefing the media in 2008 after post-election turmoil

Media as independent arbiter Over the last few years, the nature of political campaigns in Africa has changed significantly. Politicians and political parties are now actively shaping their public profiles. They are engaging powerful PR agencies and even starting their own media organisations to market themselves.

In Kenya, Uhuru Kenyatta’s governing Jubilee Party has engaged the services of British PR firm BTP Advisors, as well as the data mining com64 Business Times Africa | 2017

pany Cambridge Analytica (CA).

CA played a key role in Donald Trump’s win in the US presidential elections, and in the UK’s Brexit vote through aggressive data driven campaigning.

This changing political landscape has complicated the media’s role in the coverage of elections. But there’s still an expectation that the mainstream news media should play the

role of impartial arbiter.

They are expected to provide an open platform for broader public deliberation particularly at election time.

It’s this expectation that informs criticism when the media fails to fulfil this important mandate. Indeed, while digital technologies such as social media have now been widely adopted in Africa, millions remain

WHY THE ROLE OF THE MEDIA IS SO IMPORTANT TO FREE AND FAIR ELECTIONS IN AFRICA

MEDIA OUTLETS THAT ARE OWNED BY POLITICIANS HAVE BEEN KNOWN TO TAKE SIDES EITHER COVERTLY OR OVERTLY

unconnected to the Internet. This means that that these new platforms are inaccessible to the masses.

Traditional media - particularly radio therefore remain an important platform for public engagement. At election time, these kinds of legacy media formats are critical in enabling the public to make informed choices.

Elections in Africa are fiercely fought because the state is seen as a resource. Winning elections makes accessing the state possible, usually to the exclusion of those who lose.

Because the stakes are so high, when people lose faith in the credibility of an election some resort to violence. This was the case in Kenya following the disputed 2007-2008 elections.

This led to post-election violence. Over 1000 people lost their lives, 600,000 were displaced and property worth millions of Kenyan shillings was destroyed.

The peace narrative

GEORGE OGOLA Senior Lecturer in Journalism, University of Central Lancashire

This August, Kenya goes to the polls again in what’s expected to be another bruising political context. For the country’s news media, the coverage of these elections will be extremely challenging.

The last elections held in 2013 were largely peaceful even if the outcome of the presidential tally was disputed. The peaceful elections, which were fought with as much passion as the disputed 2007 poll, didn’t happen that way by accident.

The Kenyan media adopted a new approach in 2013 after having been accused of contributing to the violence that engulfed the country in the aftermath of the 2007 elections.

“Peace” journalism was uniformly adopted by all mainstream media. Controversial stories were not covered. Meanwhile, reference to politicians’ ethnic identities was avoided in media coverage.

Ethnicity remains an important characteristic of political competition in Kenya hence the sensitivity to ethnic markers of identity.

But “peace” journalism remains controversial and the Kenyan media was widely criticised for adopting it.

Many argue that focusing on peace at the expense of the credibility of the elections, ignoring for example numerous electoral anomalies, was a case of self-censorship.

Indeed, renowned writers such as Michaela Wrong likened the Kenyan media to “a zombie army”. She argued that it had “taken up po-

sition where Kenya’s feisty media used to be, with local reporters going glaze-eyed through the motions”.

Local journalists didn’t agree. They argued that erring on the side of caution was a sacrifice worth making in light of the 2007-2008 post-election violence, when the news media was accused of irresponsible coverage which contributed to it.

Changing media landscape As the news media decides which approach to adopt in the coverage of the next general election, it must recognise that its role has changed considerably in Africa and around the world. While mainstream media remains an important space for public debate, it can no longer be regarded as an impartial arbiter due to three key changes.

First, the African media has become an active participant in the political process because quite a few outlets are now owned by politicians. In Kenya for example, the current president owns Media Max, a company with diverse media interests including TV, radio and newspapers.

Media outlets that are owned by politicians have been known to take sides either covertly or overtly. While this tradition is part of the political culture in the United States and Europe, such partisanship is still only grudgingly accepted in Africa.

Second, elections have become an important source of revenue for the media with wealthy candidates and political parties spending large amounts of money in political advertising. As such, coverage is skewed in favour of those who can afford the high cost of advertising.

In Kenya for example, a staggering 8 billion shillings ($77 million) was spent on radio campaigns alone during the 2013 election cycle.

Finally, the number of news content providers has grown exponentially. Mainstream media now has to fight for audiences like never before. This has forced it to ignore some of the most fundamental features of journalism like the verification of stories and strong gate-keeping processes.

As political campaigns evolve in Africa, so must media coverage of elections. However, it remains incumbent upon the press to act responsibly and in the interest of democracy.

2017 | Business Times Africa 65

NIGERIA

YabaCon Valley For the past few years, the biggest question over Yaba, the old Lagos neighborhood that has grown to become Nigeria's ground-zero for startups and techies, has been what to call it. Some settled on "YabaCon Valley", but in truth, Yaba faces a much bigger question about its validity as a tech cluster for startups.

The debate follows the exit of two of Nigeria’s most successful startups from Yaba over the last 18 months. In January, Andela, a startup that trains and deploys developers, moved out of Yaba to new swanky five-floor office across town soon after a receiving a $24 million backing by the Chan Zuckerberg Initiative. Leading online retail giant Konga moved out to Ikeja, one of Lagos’ major business districts in October 2015 The exit of both companies, from what is believed to be the epicenter for startups in Lagos, has put a dent in Yaba’s standing as a 66 Business Times Africa | 2017

leading African tech cluster.

But Bosun Tijani, CEO and co-founder of Co-Creation Hub (CcHUB), Nigeria’s best known startup incubator, says while the exits of Konga and Andela are noteworthy, it does not serve as a death knell to Yaba. Tijani argues their moves signal the next problem Yaba faces in its life-cycle as a tech cluster: an infrastructure deficit.

Yaba is one of Lagos’ oldest neighborhoods and is known for its late colonial-era architecture made up

mostly of small, one-story buildings and narrow roads with barely enough room for the heaving traffic of the fast-growing city. Part of the appeal of Yaba’s narrative is that it has never been the most obvious location for 21st century Nigerian businesses with an eye on the future. Typically, most modern commercial real estate development in Lagos happens on the upmarket island neighborhoods of Ikoyi and Victoria Island, but those locations are often too expensive for startups.

"YABACON VALLEY"

YABA WILL BE A LOST OPPORTUNITY IF WE USE OUR OWN NARRATIVE TO KILL IT. “Both companies left because they needed bigger spaces,” Tijani tells Quartz. “Like any cluster, you need infrastructure and Yaba needs investment in big enough, befitting structures.” For smaller startups, Tijani says the real estate infrastructure problem isn’t one to worry about yet and argues that Yaba remains the “best cluster for tech companies” because of factors such as its location in central Lagos and its proximity to talent hubs like Yaba College of Technology and University of Lagos. As such, he considers talk of Yaba’s demise premature. “Yaba will be a lost opportunity if we use our own narrative to kill it,” Tijani says.

Thinking long-term To solve the infrastructure problem, CcHUB is planning a $8 million innovation center in Yaba which Tijani says will be operational by 2020.

The 10-story building will serve as CcHUB’s new location while also providing other startups in the cluster with office space for lease. Additionally, Tijani hopes the innovation center will provide enough space to host large tech events and conferences—another pressing need.

The planned innovation center is the latest bold step CcHUB has taken in growing the Yaba ecosystem.

Since it was founded in 2011, the hub has proven crucial to the growth of several successful startups including BudgIT, a civic enterprise focused on government accountability, WeCy-

clers, a waste recycling start-up and LifeBank, a health start-up focused on improving access to and transportation of blood. Over time, CcHUB has gradually evolved into an accelerator funding startups in exchange for equity.

In December 2015, to mark its fifth anniversary, it announced a $5 million social innovation fund focused on social tech ventures hacking local solutions to pressing problems. But while it is bound to impact startups directly, the hope, Tijani tells Quartz, is that CcHUB’s Innovation Center will inspire more expensive real-estate bets in Yaba and help other investors realise “there’s an opportunity” in Yaba.

The soul of Yaba Now home to over 50 startups and many more techies hoping to create the next global unicorn, Yaba’s demography has slowly evolved. As such, the neighborhood has undergone a gentrification of sorts with savvy businesses—a coffee shop chain, serviced homes and restaurants— opening up shop looking to service Yaba’s new residents.

While Tijani is working on the big-ticket project, other Yaba insiders are looking to fix another problem: the lack of a sense of community in the cluster. Mark Essien, founder of Hotels.ng, an online hotel booking platform, and Tomi Davies, a serial startup investor, have teamed up to

create Yaba4Tech (Y4T), a monthly meeting of startup founders, developers and entrepreneurs based in Yaba.

The objective, Davies has said, is for techies to meet each other, engage and discuss common issues.

If sustained, there’s a chance these meetings can help foster a deeper connection between founders and startups as parts of a larger collective.

That sense of connection is currently sorely lacking, Akinola Falomo, co-founder of Devcenter, a marketplace startup for African developers based outside Yaba, says. “I get the idea of a tech cluster but to some extent it’s a big balloon,” Falomo tells Quartz. “I go around Yaba and it feels like more hype than reality compared to Silicon Valley where it doesn’t just mean a place but there’s a connection between businesses and founders.”

As the hype around Yaba has grown, it has attracted interest, including a well-covered visit by Mark Zuckerberg last August. Having gained momentum over the past few years, Tijani says it’s important now to keep the cluster together as that’s critical to developing it. “When you cluster, capital projects that will be typically difficult can be carried out.”

Tijani cites the deployment of high speed internet fiber cables in Yaba as an example. Delivered in partnership with MainOne Cable and the Lagos state government, the project, led

by CcHUB, now provides startups in the area with faster internet speeds, compared with other Lagos neighborhoods.

The next target, Tijani says, is partnering with Lagos state again to improve power supply in Yaba, possibly helping startups save millions in operational costs of running private generators. If startups were sparsely distributed across Lagos, he says, these projects will be ultimately less beneficial to the ecosystem in general. “Together, it’s easier and cheaper to solve problems,” Tijani tells Quartz.

“Silicon Valley was not built in a day and that’s what Yaba can be but it’ll take years and we need to stop thinking short-term.” - Quartz Africa

2017 | Business Times Africa 67

NIGERIA

Lagos is Africa's most valuable startup ecosystem

L

agos has the most valuable startup ecosystem in Africa, with the local entrepreneurship scene worth US$2 billion, according to a new report.

The recently released Global Startup Ecosystem Report and Ranking 2017, produced by Startup Genome in collaboration with the Global Entrepreneurship Network (GEN), was based on conversations with entrepreneurs and data on startups.

No African country made the top 20, but Lagos, Cape Town and Johannesburg warranted mention in the report. At US$2 billion, the Lagos startup ecosystem is the most valuable in Africa continent, but only second after Cape Town in terms of the number of startups.

The Lagos ecosystem has the ninth highest rate of founders with an undergraduate degree at 59%, while 93% of them have a technical background, the third highest rate in the world.

However, Lagos startups have one of the lowest rates of foreign customers, suggesting challenges to going global. Only 11% of startups plan to go global.

“While Nigeria is busy adding six million new internet users every year, the feverish entrepreneurial energy of Lagos and its estimated 400-700 active startups stayed consistent by providing them with useful new technologies,” the report said.

“At the same time as the business mod-

68 Business Times Africa | 2017

els of local startups become more robust and innovative over time, we also see more of them also make headlines by receiving big checks from top Silicon Valley VCs including Greycroft, Khosla Impact, Green Visor, Social Capital Partnership, and many others.”

Cape Town Cape Town is the largest startup ecosystem on the African continent, with between 700 and 1,200 active tech startups in the city. The whole ecosystem, however, is valued at US$172 million, well below both Lagos and Johannesburg.

One-third of Cape Town startup founders have gained at least two years of prior experience in a fast-growing startup, making them five percent more experienced than the global average. Yet Cape Town startups have one of the lowest utilisation rates of startup advisors in the world, with only 0.85 advisors with equity per startup.

“Much of Cape Town’s talent comes to the ‘Silicon Cape’ for its solid academic institutions and stays for its moderate living expenses and friendly people,” the report said.

“Cape Town is an emerging city that is not yet plugged into the global ecosystem and its fluid exchange of resources. However, above average startup experience, low cost of engineering talent and relatively solid funding factor in the regional

comparison are bright spots to build upon during the next years to come.”

The ecosystem with the highest global connectedness was Johannesburg, which also has an ecosystem value of US$1.36 billion. The city has the third highest percentage of startups globally that experienced positive corporate interest and involvement, at 67%. The global average is at 51%.

Meanwhile, 27% of startups reported they are offering a product that is the first of its kind globally. Only 10% of startups immediately target the US or UK markets, far below the global average of 36%.

Johannesburg startups have 0.9 advisors with equity, indicating a lack of support systems for founders.

Johannesburg “Johannesburg is already home to an estimated 200-500 currently active tech startups. Johannesburg’s rapidly growing tech scene had over 180 startup events last year, while the city’s combined financial resources infused funding of nearly US$252 million for its most promising companies. The high concentration of talented people in the area helps new startups move quickly,” the report said.

“Johannesburg is facing challenges around its relative lack of Startup Experience, Funding, and Global Connectedness. The average valuations of local startups are currently outperforming considering those handicapping factors.”

Globally, Silicon Valley ranked first, for everything other than talent, with New York second and London third. Beijing and Boston completed the top five. “Such research increases the global exposure of smaller ecosystems and the innovative new recipes that can now be invented anywhere. In doing so, it puts third-party objective analysis and credible input into hands of many more entrepreneurship champions in a mission to capture their cities’ fair share and standing in this new economy,” said GEN president Jonathan Ortmans.