Nepad Edition 2 by Contact Media

CONTENTS

CONTENTS View from the top 8

10 12 14

Perspective from NEPAD CEO Dr Ibrahim Assane Mayaki Perspective from NEPAD Business Foundation CEO Lynette Chen Perspective from Stanley Subramoney Perspective from World Economic Forum head of Africa Elsie Kanza

African interest 16

Nigeria – a way for inclusiveness in Africa’s MINTed country Nigeria is set to become Africa’s next biggest economy and is one of the world’s next economic giants. Enitan Obasanjo-Adeleye explains what the country needs to make this work.

All-time high for female presidency in Africa In this new era, there are more women heads of state than ever before. But do they have what it takes to improve their people’s future?

Africa’s shooting star Ashish J. Thakker has been acclaimed as Africa’s youngest billionaire. Brenda Nyakudya finds out what makes this man who he is.

Agriculture and food security 28

We can feed the world Africa has the potential to boost agricultural output and become the world’s breadbasket. What does this mean for the continent?

Boosting regional food security With the population of sub-Saharan Africa expected to double by 2050, ensuring citizens have sufficient food is a critical priority.

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Nurturing the mothers of our nations Investing in female farmers is vital if poverty and hunger are to be reduced in Africa.

Regional integration and infrastructure 40

Africa’s construction and property boom Soaring urbanisation on the continent has created rapid growth in the construction sector.

Banking on Africa: South Africa flexes its muscles Financial institutions in South Africa are helping to drive transformation on the continent.

Giving Africa wings Aviation standards need to be upheld if the air transport industry is to play a role in national growth and development.

Africa’s ‘Silicon Savannah’ Africa is on the technological bandwagon, with Kenya leading the continent’s information and communications technology revolution.

No more time to dilly-dally around digital The June 2015 deadline for the analogue-todigital transition for television looms. Will African governments and their citizens be prepared?

Rail revival will boost Africa’s trade Dilapidated railway systems throughout the continent are being fixed at great cost, because they are essential for trade.

CONTENTS

Human development and human capital management 68

Africa surges into the future as minerals boom Africa’s natural resources are drawing investment and putting the continent on a path to industrialisation – but not without hitches.

Is China a threat to Africa? While the Chinese may have a bad name in Africa for colonising resources and taking local jobs, the truth is Chinese investment is benefiting the continent.

African companies boost local growth African companies are now investing in the development of the continent’s own private sector.

The way we do things in Africa While Africa may be enticing for business, foreigners often find it a challenge to forge successful partnerships. What are these challenges?

Africa’s youth hold the key to a brighter future Africa’s future is inextricably linked to its youth. Graeme Codrington says engaging them is an urgent priority, and highlights some essentials to start this process.

Climate change and environment 90

Climate change hits the poor hardest Moving away from fossil-fuelled energy production to that powered by renewable sources is a step towards eradicating poverty from the continent.

Africa requires bold leadership to adapt to climate change Africans may battle to cope with climate change if the root causes of poverty and vulnerability are not addressed.

106 Governance and democracy 100 The changing story of Africa’s development Dr Ibrahim Assane Mayaki looks at the issues facing Africa, and what it needs to change its story to a positive one. 106 Inclusive growth on the continent and filling the gaps African Development Bank chief economist Professor Mthuli Ncube explains what is being done, and still needs to be done, to address unemployment and inequality in Africa. 108 Out of Africa – always something new Africa could soar to become the century’s star economic performer, but investors’ uncertainty about the continent’s future depends on external economic factors. 112 Will Africa remain a priority for BRICS? Africa took centre stage at the last BRICS summit, but will this momentum be sustained?

Cross-cutting issues 114 Rwanda provides a healthy role model Rwanda has shown that healthier citizens mean a productive workforce, which leads to an improved economy. 94

Water and sanitation must be prioritised Ensuring citizens have access to clean water and sanitation is critical, but progress in this regard needs sufficient political will.

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116 Giving Africa an authentic voice Telling the African story from an African perspective was the mission for Kumla Dumor. Shortly before his death, he spoke about what it takes.

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CONTENTS

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122

Social media: Africa’s positive ‘epidemic’ Social media and the internet have taken Africa by storm. This heralds a bright new value-added service sector for the continent.

CREDITS

To market, to market, clickety-click Online shopping is about to explode in Africa, led by South Africa and Nigeria. Banks and internet providers are coming to the party, too.

International Business Gateway Block B Cnr Challenger and Columbia Avenues Midridge Office Park New Road & 6th Road Midrand, Johannesburg

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NEPAD Planning and Coordinating Agency

P O Box 1234 Halfway House Midrand, Johannesburg, South Africa, 1685

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The NEPAD Business Foundation 3rd Floor, Mott MacDonald House 359 Rivonia Boulevard, Rivonia, Johannesburg, South Africa, 2128

Proﬁles 24

Hogan Lovells A local company with global reach

AGCO Grassroots Investments

Bigen Africa Delivering infrastructure solutions through strategic partnerships

Stefanutti Stocks Appiring to excellence in project delivery across the African continent

PPC Cement Growth Opportunies in Africa

MAN Trucks Keep on Trucking

Group 5

Edison Power Group

Railroad Association of South Africa

SekelaXabiso Big players in their own right!

AMSCO Making Managers

Sport for All Q&A with Sport for All’s Kelli Givens

Q&A with Development Franchising’s co-founder, Warren Bond

Scan for life Prevention is better than cure!

102

Wits Business School International L&D Study Tour 2014 Set your mind on fire with a WITS MBA

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Tel: Fax: Twitter: Email: Website:

+27 (0) 87 310 1888 +27 (0) 87 310 1889 http://twitter.com/thenbf info@thenbf.co.za www.nepadbusinessfoundation.org

Acknowledgements

The publishers thank the NEPAD Business Foundation and NEPAD Agency for their support in putting this yearbook together. We especially thank Lynette Chen, Derek Browne, Geoff Rothschild and Sandra Pires – who assisted in directing content development for the NEPAD Yearbook at the NEPAD Business Foundation. We also thank Dr Ibrahim Mayaki, Maureen Nkandu and Millicent Seganoe who coordinated support Agency. &COM M U N Ifrom C A T the I O NNEPAD S

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Editor: Peta Krost Maunder CEO & Development Director: Sean Press Managing Director & Publisher: Donna Verrydt Head of Finance & Operations: Lesley Fox Design & Layout: Janine Steyn Copy Editor: Sarah Taylor Proofreader: Haley Abrahams Production Assistant: Gwen Sebogodi Account Executives: Paul Styles, Damian Murphy, Chioma Didi Okoro Contributors: Lynette Chen, Graeme Codrington, Sharon Davis, Memory Dube, Hannah Edinger, Tanya Farber, Dianna Games, Stuart Graham, Helen Grange, Elsie Kanza, Dr Ibrahim Assane Mayaki, Melina Meletakos, Professor Mthuli Ncube, Bekithemba Ngulube, Brendah Nyakudya, Enitan Obasanjo-Adeleye, Anton Roodt, Dr Grant Sieff, Samantha Smith, Tony Tyler, Liesl Venter and Joanna Wright

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Disclaimer All material is strictly copyright and rights reserved. No portion of this publication may be reproduced in any form without prior written consent of the publisher. Whilst every care has been taken in compiling this publication, neither the publisher nor the NPCA, NBF and its associates give any warranty as to the accuracy of the content. The views expressed in the publication are not necessarily those of the publisher, NPCA, NBF or its associates.

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NEPAD is critical to

Africa’s transformation NEPAD CEO, Dr Ibrahim Assane Mayaki, speaks of reshaping the approach to Africa from poverty management to wealth creation.

n the second decade of NEPAD, the imperative of Africa’s transformation agenda focuses on reshaping the development thinking and approach of the continent, from poverty management to wealth creation. As the implementation arm of the African Union (AU), NEPAD is committed to championing sustainable growth and development in Africa in the context of the AU’s Agenda 2063, which has been designed as a long-term strategy for the next 50 years. It is a pan-African renaissance strategy that will tap into Africa’s rich resources for transformation. Africa today is more united than it was 20 years ago, capable of rallying support around a common agenda and speaking with one voice. The AU has been at the centre of efforts to carve out a more assertive role for the continent on the global stage. Youth unemployment remains a troubling challenge. Seventy-five per cent of the African population is under the age of 35 years. Millions of our young people enter the employment market every year and cannot be gainfully employed in public institutions, or private or industrial enterprises.

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This growing youth population, with access to modern and rapid communications systems and requiring instant results, could impact adversely on the Africa nation state, if social inequality and the current systems of government are not addressed. Inclusive policies are an absolute necessity for political stability and security. Thus, Africa must pay due attention to rural development as a driver of real transformation. For NEPAD, rural transformation is fundamental to realising inclusive growth.

To boost intra-African trade, we need to improve regional infrastructure. In promoting agriculture, food and nutrition security, we continue to support national and regional efforts towards strengthening Africa’s capacity to improve production output, advance agribusiness and processing, and encourage inter- and intraregional trade. The Comprehensive Africa Agriculture Development Programme (CAADP) focuses on transforming Africa’s agriculture for sustained food security and acknowledges the overriding need to empower women in agriculture and farming. With an initial injection of close to US$3 million, NEPAD and its partners have designed the programme specifically to assist grassroots women and smallholder farmers by building their knowledge and analytical capacity. To boost intra-African trade, we need to improve regional infrastructure. That’s why African leaders, in July 2012, adopted the Programme for Infrastructure Development in Africa (PIDA) – a 30-year strategy under the auspices of the AU, and promoted by the AU Commission, NEPAD Agency and African

Development Bank as well as the regional economic communities (RECs). PIDA focuses on regional transboundary projects. NEPAD facilitates the effective and sustainable use of natural resources to the advantage of African countries and, simultaneously, ensures that the continent manages and mitigates the effects of climate change. Progress has also been made through the African Science, Technology and Innovation Indicators (ASTII), coordinated by NEPAD to capture comprehensive information on science and technology in Africa. We are supporting improvements in the capacity of African institutions to respond to and accelerate Africa’s development priorities by creating an enabling environment, capacitating professionals to execute their skills effectively and using indigenous African knowledge to promote growth and development. Given the global context, one of the minimal conditions to facilitate structural transformation in Africa should embrace a less top-down approach in our planning process. This includes promoting private-sector development, tackling social inequality, addressing youth unemployment and dealing with rural-urban migration and economic imbalance. Most African challenges do not necessarily have optimal national solutions. The remedies lie at regional level through integrative cross-border programmes and projects. The decision-making processes at national level should therefore reflect the imperative for more inclusiveness, equity and justice. Indeed, a human rights approach to development is critical. Overall, NEPAD continues to work at country level through the RECs to coordinate and implement development programmes that advance the aspiration for development driven by African citizens living in an integrated, united and prosperous continent.

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A new perspective

on Africa Lynette Chen, chief executive officer of the NEPAD Business Foundation, offers her point of view on the way forward for the continent.

he buzz around Africa’s potential as the next frontier for global investment has been around for decades. As the economic gap decreases between Africa and the rest of the world, international funds are finding safe investment destinations in African countries and industries. This movement is being supported by new government policies stemming from African countries’ need to boost their gross domestic product (GDP) and provide sustainable jobs for their people. Global changes are greatly affecting Africa’s domestic markets and economies, speeding up the rate of industrial transformation within the region. This is good news for the continent, because it means a larger portion of the population are moving towards improved livelihoods, which makes them an attractive new market for international goods and services. Economists are beginning to dispel longheld assumptions about Africa’s ability to consume a notable fraction of gross world product (GWP). Recent GWP growth surveys show that developing countries have high

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GDP growth rates – much higher than the United States, Europe and other advanced economies. This shows that more production businesses are moving their factories to the shores of developing countries to become more competitive. This is boosting income per capita in developing countries and opening

African governments have embraced the reality that they cannot economically empower their people without the private sector’s cooperation and participation. up new local markets, which are exporting finished products to more developed markets. Market surveys between the 2000 and 2010 period show interesting trends developing across the continent. African countries are beginning to have more in common with each other, making it easier for businesses to communicate with a mass market. Some of the similarities are the matching numbers of youth demographics and the new consumer mentality due to exposure to the same media, such as satellite television. Other cross-continent similarities include the alignment of aspirations and the demand for global products and services of high quality by African households. As it stands, Africa is a robust and highly responsive market for both industry and household products and services. Across the continent, governments are doing more to drive business and uplift living standards than most critics give them credit for. African governments have embraced

the reality that they cannot empower their people economically without the private sector’s cooperation and participation. A deep comprehension of the intricate nature of government mechanisms and local markets is vital for private-sector success. And, in this space, neutral bodies that facilitate publicprivate partnerships play a major role in fostering communication and understanding between parties, as well as unlocking business opportunities. As business expansion into Africa continues, it is important to note the need for reinvention and innovation to fit into the local dynamics. The African market is unique, and companies must find new ways to adapt international business processes to fit distinct situations within different countries. As an example, the current challenges experienced in the Zimbabwean banking industry have allowed telecommunications companies to introduce new ways to transact and move funds using mobile phone systems. This case has seen the rise of conventional banking services, such as cash withdrawals, go into the hands of other cash-based businesses. More examples in Kenya and other countries are proving that the conventional business methods that work well in the rest of the world require an avant-garde approach for them to succeed in Africa. On the whole, Africa is slowly heading towards an economic boom, and governments need to continue their efforts to develop congruent policies, which are compatible across borders, to encourage business growth and increase the attractiveness of local industries to foreign investors. To achieve this objective, the importance of bodies that work towards the facilitation of cooperation between African governments and the private sector cannot be overstated.

African Union’s Agenda 2063

Over the last half a century, the African Union (AU) – originally the Organisation of African Unity, which became the AU in 2001 – has worked tirelessly to ensure freedom, democracy and unity throughout Africa, and has succeeded greatly. Early

THE OFFICIAL NEPAD YEARBOOK 2014

evidence of this is starting to show in the form of smoother regime transitions. Also evidence of this are the large number of African leaders who have come into office through the electoral process, and the wide acceptance of the African Peer Review Mechanism by African leaders. This has helped shape the face of African democracy and transparency, and is very encouraging. These changes have formed the foundation that will maintain political stability in the region – a vital factor for Africa’s economic development. When focusing on sociopolitical stability, 80% of African countries are rated as moderately stable. On the one end of the spectrum are Botswana and Tanzania as very stable, and on the other the highly volatile Somalia, Central African Republic and Democratic Republic of the Congo. The countries that are relatively stable continue to have a strong focus on economic gains and business development. This is positively shifting investor confidence. As African governments continue to develop probusiness policies, exponential growth in local industries will be visible. To achieve Africa’s vision of becoming a prosperous, united region and an economic powerhouse, the AU has set out ‘Agenda 2063’ as a roadmap, built upon the backbone of NEPAD. Of the eight pillars built around Agenda 2063, the Integration Agenda is the most exciting. It will focus on connecting African markets, harmonising policies and promoting a collective African economy. This will result in more African countries trading with one another. It will also hedge the African economy against shocks and global downturns, as well as support local industries as they compete with the rest of the world. The execution of this agenda increases the importance of the work conducted by the NEPAD Agency, NEPAD Business Foundation (NBF) and other such organisations across Africa.

The NEPAD Business Foundation’s reflection on 2013

It is part of our mandate to create a conducive environment for private-sector success through government support. So, we have continued to strengthen ties with African governments by aligning some of our projects and programmes in southern Africa to match government goals and targets. In the past year, we opened two more

country offices and we are now operating in Mozambique, Zambia, Malawi and South Africa, with the possibility of further expansion in 2014. We have also experienced tremendous success in our focus areas through our programmatic brands. Under the Agriculture and Food Security pillar, we have established the Southern Africa Agriculture Development Partnership Platform (SAADPP). The SAADPP

Africa is slowly heading towards an economic boom, and governments need to continue their efforts to develop congruent policies… to encourage business growth and increase the attractiveness of local industries to foreign investors. is currently facilitating collaborative and coordinated dialogue between governments and the agribusiness industry in southern Africa. The objective of this platform is to mobilise, institutionalise and increase the voice of the private sector in addressing agricultural growth, trade and investment policy constraints in the Southern African Development Community (SADC) region. With the understanding of the importance of infrastructure as a critical catalyst for development in Africa, the NBF, supported by Transnet SOC, T-Systems, PricewaterhouseCoopers and Grindrod, launched the Africa Infrastructure Desk (Afri-ID) in June 2013. The mission of this desk is to establish a multistakeholder platform where the private and public sectors cooperate in the development of regionally integrated infrastructure in Africa. The AfriID is undertaking research to identify and understand the barriers to implementation of five key rail and port projects in the northsouth corridor. Under Climate Change and Natural

Resource Management, the NBF is the secretariat for the Strategic Water Partners Network (SWPN). This programme, led by the private sector, works in partnership with the South African Department of Water and Environmental Affairs to assist in closing the 17% water gap by 2030 through better management of water resources in the country. One of the early successes achieved by the SWPN is the joint development of the ‘No Drop’ programme between the private sector and government. This programme was adopted by the Department of Water and Environmental Affairs and will incentivise municipalities to reduce water losses from the current 32% to 18% by 2025. This will result in water savings exceeding 600 million kilolitres yearly, with an estimated annual value of over R2.5 billion. Good governance practice in Africa is an area that requires more focused efforts to build governance capacity within the African private sector. The African Corporate Governance Network (ACGN) was successfully launched in Mauritius in October last year with the NBF, the Mauritius Institute of Directors (MIOD) and the Institute of Directors in Southern Africa (IODSA) jointly spearheading this initiative. The NBF serves as the secretariat for the ACGN, which seeks to develop the institutional capacity of members through enhancing effective corporate governance practices towards building better private and public sector organisations and corporate citizens in Africa. To date, 12 African countries have signed up to participate in the ACGN, and we are working actively to increase that number, with Nigeria, Senegal and Namibia lined up to join this exciting initiative. The NBF remains committed to seeing socio-economic growth in Africa. We see it happening through socially responsible and profitable enterprise by business, and the implementation of inclusive policies by governments that benefit all people. We are pleased with the strides we have made thus far and thank the NBF members for their continued support and dedication to the development of the continent. Reiterating the NBF motto, ‘Unlocking African Potential’, as a reaffirmation of our promise of catalysing business for the sustainable development of Africa, we are excited about the road ahead and are dedicated to achieving the prosperity of African people. www.nepad.org

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Africa’s 50-year plan Stanley Subramoney, chairman of the NEPAD Business Foundation, explains where Africa sits now and what the 50-year plan will create for the continent.

frica is at an exciting juncture in its development journey and is poised to become a new pole of global growth. In the last decade, the African Union (AU) has been the anchor of continental unity and cooperation among African nations. Having celebrated its 50th anniversary in 2013, the AU (previously the Organisation of African Unity, which was replaced by the AU in 2001) is now concentrating its efforts on multistakeholder participation and taking ownership of Africa’s development trajectory for the next 50 years. The increase in bilateral relations between African countries shows enhanced cooperation among nations in each region. Initiatives such as the African Peer Review Mechanism are encouraging, and proof that Africa is ready to be more transparent in its governance. These changes have a positive effect on investor confidence and are supported by the steady increase in foreign investment in Africa over the past decade, with figures now above 5% of total global investment. With freedom and democracy achieved to a large extent, the continent is now looking to forge a strong regional and united economy. The AU recently launched Agenda 2063 as a roadmap for Africa’s development for the next 50 years. To achieve the intended development, the AU plans to prioritise and promote regional integration and intraAfrican trade. The AU envisages a stable regional economy, built on balanced trade between the continent’s intercountry local market and its international market. Current figures show that more than 80% of African products and resources are traded with countries outside the continent. The recent erratic nature of the global economy has affected African exports, reduced gross domestic product (GDP) growth and weakened local currencies. The success of localised intracontinental trade will improve GDP growth for struggling nations in the sub-Saharan region and further increase the likelihood of creating of a common African market. www.nepadbusinessfoundation.org

The continent is not only tackling a large number of infrastructure projects, but is also building world-class infrastructure.

Investing in infrastructure

Africa has an abundance of natural resources with a global demand. The intracontinental movement of goods is critical to the growth of the African economy and the creation of sustainable livelihoods. The challenge is that most of these resources are located far from their markets and the infrastructure between these two points is very costly to use. It is difficult and expensive to move goods in Africa due to poorly integrated continental infrastructure. IntraAfrican trade and Africa’s international trade require better infrastructure that will reduce the cost of doing business on the continent. To turn this situation around, Africa is

prioritising initial long-term infrastructure investments. These investments will reduce the cost of transportation over time and this will increase the volumes of goods moved from inland to the ports, making Africa more competitive in the global trade of resources. The Programme for Infrastructure Development in Africa (PIDA) – the AU’s infrastructure programme – is working to mobilise key stakeholders around NEPAD’s efforts to accelerate project implementation. PIDA has identified multiple bankable infrastructure projects in key sectors that will reduce the cost of trading and attract more investment to Africa. These sectors are transport, energy and information and communications technology (ICT). The identified projects include the Ruzizi III Hydropower Project, located on the border between the Democratic Republic of the Congo and Rwanda, and the Serenje-Nakonde Road (T2) Project in Zambia. Both of these projects are currently underway. In addition, the Lusaka-Lilongwe ICT Terrestrial Fibre Optic Project, which is in the pipeline, is a critical enabler and stimulant to economic growth in the region. The importance of investing in Africa’s infrastructure has created buy-in across the board that has seen local governments, private businesses and financial institutions – such as the African Development Bank and the World Bank – working together to implement projects. This is evident in their commitment to huge infrastructure projects happening across the continent, such as the Moatize power station in Mozambique, the TransKalahari railway in Namibia, the Mombasa port expansion in Kenya and the high-speed train line in Morocco. The great news is that the continent is not only tackling a large number of infrastructure projects, but is also building world-class infrastructure. African countries are undertaking very ambitious projects, such as the Djibouti railway in Ethiopia and the Blue Line Lagos project in Nigeria. Also, the BRICS (Brazil, Russia, India, China and South Africa) submarine broadband cable, linking the BRICS nations to the United States

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via South Africa, is among the world’s most highly ranked infrastructure projects. In the past, such undertakings have been viewed as isolated projects and were normally confined to one country and one sector. Over the past decades, the mindset within the region has begun to shift and we are beginning to see governments embrace a consolidated infrastructure development approach, such as the Southern African Development Community (SADC) and Common Market for Eastern and Southern Africa (COMESA) infrastructure masterplans. Also, there is the formation of the Tripartite Alliance between the regional economic communities of SADC, COMESA and the East African Community to coordinate infrastructure implementation across the three regions. It is reassuring that the public and private sectors have been able to work together on a number of infrastructure projects. These continued collaborations are vital to the development of the continent. Such partnerships have been proven to work in other parts of the world, in projects like the Bus Rapid Transit Project of Bogotá in Colombia, the East Coast Road of Tamil Nadu in India and the Urban Water Expansion of Cochabamba in Bolivia. This integrated infrastructure approach has also expanded the scope of focus of governmental bodies. It has given rise to talks about the harmonisation of legislation across borders. Beside transportation routes, border crossings also present a myriad of challenges that create bottlenecks in transporting goods from country to country. These challenges include delays at the border posts, the lack of transparency in border regulations, the inconsistency of service delivery in the processing of documents before crossing, the difference in structures that govern the movement of goods between various borders, and the complicated taxation requirements that vary from country to country. While the infrastructure projects are underway, continental standardisation and improvements at border posts require special notice, as efficiency at these gateways will boost cross-border trade and make African exportation more competitive. Such positive changes will contribute greatly to the growth of the GDPs of regional economies. If the volumes that businesses move can increase because of better transportation routes and more efficient border management, there is an additional benefit of job creation. As the infrastructure projects happening

across the continent continue to propel us into a position of greater economic growth, countries in the region need to start focusing on local competencies that will sustain Africa’s growth. The African boom is not only possible, but is inevitable and has already begun.

Africa’s global economic position

Mahatma Gandhi said, “The future depends on what you do today.” Africa is entering a critical and decisive period that will determine its position in the world economy. Global events between 2008 to 2013 have shifted the security of most investments negatively, and many businesses are reconsidering both their domestic and international financial positions.

The continent has a positive outlook for the future with the continuation of growing economies and improving livelihoods. Africa is in an ideal position for economic convergence. The average income per capita for the region, though rising, remains the lowest in the world when considering that it is derived from a collection of so many individual countries. The economy of the entire continent is about 15 times smaller than any of the three largest economies in the world. This is not an oblique outlook – there are advantages to being the underdog, on which the region has been capitalising for some time now. For example, the direct costs of starting up and maintaining a business in Africa are fast becoming competitive to those in Europe, America and parts of Asia. When using the purchasing power parody measurement, the cost of investment when buying machinery, for instance, is low for a large number of foreign investors, because of the weaker currencies in Africa. This is allowing more foreign investments to enter African markets and industries, resulting in the stimulation of local economies and creation of jobs for the increasingly urbanising continent. Africa’s economic growth trajectory has been steadily moving upward and growing. This is going to continue, and may even speed up dramatically in the coming years. According to the law of diminishing returns,

larger economies cannot grow as fast as smaller economies in percentage terms by marginal gains in productivity. The increase in productivity of large economies results in less gains when compared to the same increase by countries in our region. This gives economies in our region the chance to gain ground against larger nations at an accelerated rate. This has been evident in other countries, such as China, which experienced a double-digit GDP growth over the past couple of decades, while the GDP of the United States has grown at an average of 5% during the same period. Globalisation has allowed less-advanced nations to benefit from the innovations and inventions of more advanced countries. Africa has the advantage of speeding up development using shared technologies with nations that are greatly industrialised. This advantage is not unique to us. It has happened before in European countries after World War II, when they adopted North American technological breakthroughs. The same also happened in Japan between the 1960s and the 1970s, and in South Korea between the 1970s and the 1980s. Adapting successful technologies, inventions, systems and even processes cuts out the time and cost required for research and development, thereby allowing smaller economies to catch up with larger economies. Africa is firmly in the economic race to establish itself as a peer to advanced economies. The continent has a positive outlook for the future with the continuation of growing economies and improving livelihoods. There are many opportunities available for business growth and expansion, as well as safer investment positions in African industries. A growing population with a growing economy makes for a good market for the consumption of global products and services. Long-term commitments to Africa will reap great benefits for investors, as well as the African people and the governments that serve them.

The future

The forecast for the next 50 years is very promising and full of opportunities for both the African people and the world at large. The AU’s Agenda 2063 renews its commitment to the execution of NEPAD’s goals and the forging of an independent and economically successful region. There is hope in this vision. I believe in this vision. Africa is changing, and we are all invited to participate in its exciting growth. www.nepad.org

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Forging inclusive growth,

creating jobs Elsie Kanza, director and head of Africa for the World Economic Forum, provides her perspective on the continent’s future. What vision do you carry for the continent, both as the director of the World Economic Forum’s Africa team and as an individual? The African Union launched Agenda 2063 last year, and it outlines priority actions that will result in an “integrated, prosperous and peaceful” continent in 50 years. For this vision to be realised, a myriad of challenges will need to be overcome. A key success factor will be the ability of the continent to harness the potential of its people. We at the Forum are committed to fostering public-private cooperation to help Africa’s leaders fulfil the continent’s potential. In the context of putting people at the centre of Africa’s growth and transformation, the theme of this year’s World Economic Forum on Africa is ‘Forging inclusive growth, creating jobs’. The meeting will bring together regional and global leaders from government, business, academia and civil society to discuss how to sustain Africa’s growth while creating jobs, reducing inequality and eliminating poverty. I share the sense of urgency to identify and scale up innovative solutions that can address the shortcomings of Africa’s growth story thus far for a better future over the next five decades. What is Africa’s future in the face of an increasing shift of global financial positions and the current instability of some of the greater economies? Africa’s future remains promising, despite the shifting realities. It is estimated that sub-Saharan African economies will continue to grow at above 5% in 2014. West Africa is the fastest-growing subregion, despite contending with the challenge of restoring stability to post-conflict countries. It is fair to say that ongoing policy reforms are continuing to bear fruit, particularly macroeconomic and fiscal policies. To ensure that the current growth trajectory translates into improving the lives of the majority of the African population, it is evident that more needs to be done at the micro level. It is encouraging to see the growing agreement to stem tax leakages and to channel the windfalls from the exploitation of natural resources into important socio-economic sectors, such as education and health. www.nepadbusinessfoundation.org

high and there is a worrying deterioration of human rights. Accordingly, at this year’s meeting, we will focus discussions on three main aspects: • redesigning growth models: leaders will explore how the enabling environment can be accelerated to transform high growth into inclusive and sustainable growth • deepening investment partnerships: leaders will identify opportunities to further diversify and grow across national, regional and stakeholder boundaries • accelerating society’s transformation: leaders will discuss how to continue building resilience and scaling innovations in education, technology and health.

A key success factor will be the ability of the continent to harness the potential of its people. Which key indicators are affirming your optimistic view of Africa’s future? I am optimistic about Africa’s future, while remaining realistic about the risks that need to be addressed. Growth remains an important indicator and, on average, it remains relatively high. Competitiveness is increasing, according to the Forum’s Global Competitiveness Report 2013-2014. Mauritius overtook South Africa as the most competitive country in subSaharan Africa, while Kenya improved its ranking by 10 places. Trade and investment is increasing. Socially, there are significant improvements in some health indicators and the gender gap is narrowing, particularly in the political sphere. Conversely, there are underlying risks that need to be taken into consideration. Youth unemployment is rising, inequalities are widening, poverty remains unacceptably

What is your perspective on public and private sector cooperation in Africa and the importance of being Africa-oriented in the setting of targets and generation of solutions? Africa has tremendous needs that the public sector alone cannot address. For example, according to the World Bank, “48 countries of sub-Saharan Africa (with a combined population of 800 million) generate roughly the same amount of power as Spain (with a population of 45 million).” Given the scale of the continent’s needs, and dwindling overseas development assistance, it is imperative that the public and private sector cooperate in order to bridge current and future financing gaps. For sustainability, this cooperation needs to be grounded in locally determined priorities and co-designed solutions. Above all, as we learn from the past, there needs to be a strong focus on achieving results. We at the Forum have experienced this through our flagship Grow Africa partnership initiative, which was formed by the African Union Commission, NEPAD Planning and Coordinating Agency and the World Economic Forum in 2011, with the objective of coordinating private sector intervention in the implementation of the Comprehensive Africa Agriculture Development Programme. Through innovative and strategic partnership models between African governments, the local and international private sector and smallholder farmers, as well as with development partners, we are starting to see increased collaborative investment in agriculture.

AFRICAN INTEREST

Nigeria – a way for

inclusiveness in Africa’s MINTed country All eyes are on Nigeria since it joined the group of the world’s “next economic giants”, writes Enitan Obasanjo-Adeleye. Obasanjo-Adeleye

igeria’s entry into the group of next major economies at the beginning of 2014 was significant for Africa. As a result, the country’s continued development is of greater importance than ever.

Image courtesy of Shutterstock

Nigeria arguably faces the greatest challenge in ensuring that its economic growth meets the needs of its people.

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Former Goldman Sachs economist, Jim O’Neill, – who originally coined the acronym BRIC for the emerging markets of Brazil, Russia, India and China – adopted a new acronym in January for those countries he calls the “next economic giants”. In his ‘MINT’ economies, he included Nigeria with Mexico, Indonesia and Turkey. And a study was quoted in Forbes magazine that claimed the MINT countries would perform better than both BRICS and the G8 (Canada, France, Germany, Italy, Japan, Russia, UK and the US) countries in 2014. The fact that Nigeria was included – albeit as a late substitution for South Korea–

THE OFFICIAL NEPAD YEARBOOK 2014

marked a significant development for Africa, which otherwise would have been a notable omission. As a consequence, Nigeria’s next moves matter more than ever for international investors as they evaluate Africa’s attractiveness. So what does the country need to do to fulfil its projected promise? Many of the MINT countries are similar in that they have large, youthful populations and face issues of corruption and poor infrastructure. Their socio-economic demographics present both a major opportunity and a challenge. It is clear that significant investment in infrastructure, both physical and social, is required in Nigeria. In this select group, Nigeria has the lowest gross domestic product per capita: US$1 555 compared to Turkey’s US$10 666, according to 2012 World Bank data. Nigeria also has the youngest population, with 44% of its population being younger than 15 years old, compared with 26% for Turkey, according to the World Bank data. Nigeria arguably faces its greatest challenge in ensuring that its economic growth meets the needs of its people. Only if this is achieved can it maintain stability and be an attractive investment opportunity. Discussions on ensuring inclusive growth tend to proffer solutions centred around agribusiness, education, the empowerment of women and private sector engagement. When we compare the percentage of the population that is engaged in agriculture, it becomes very clear that the path to eradicating poverty and stemming the rural urban migration lies in strengthening agriculture. Arguably, more could also be done to look at the potential impact of formalising the informal sector, especially when we look at improving the lives of the urban poor. Like most developing economies, the MINT countries all have large informal

sectors. Nigeria leads the pack, with an estimated 80% of its population engaged in jobs or activities that are not registered or protected by the state. The informal sector certainly plays a significant role in developing countries, providing a productive outlet for those who are self-employed either by choice or necessity.

Because many of those engaged in the informal sector are entrepreneurs, business incubators and accelerators could be key to supporting and promoting this sector’s formalisation. Nigeria and other African governments need to take a look at the barriers to formalisation of the informal sector and devise policies and frameworks to encourage the emergence of this sector. According to the Organisation for Economic Cooperation and Development, formalisation by itself does not promote enterprise growth in the short run. However, bringing more enterprises into the formal economy over the long term should: • provide higher quality, better-paid, more sustainable jobs • reinforce the social contract between citizens and the state • strengthen the reliability of agreements between firms • build investor confidence (and increase investment) • broaden the tax base (potentially permitting lower tax rates)

• increase information on local enterprises to facilitate deal-making and strengthen frameworks for policy advocacy • reduce the cash economy and provide more resources for intermediation by the formal financial sector • improve access to business services, formal markets and productive resources, such as capital and land. Formalisation may also increase the welfare of some marginalised groups by confirming their right to take advantage of market opportunities. At the very least, it helps paint a clearer economic picture and ensures better policies are enacted to support the economy and citizens. Because many of those engaged in the informal sector are entrepreneurs, business incubators and accelerators could be key to supporting and promoting this sector’s formalisation. While incubators exist in Africa – such as the World Bank’s African Incubator Network in Nigeria and NEPAD’s Business Incubator for African Women Entrepreneurs – they are still fairly new and yet to be fully utilised. Business development strategies for Nigeria and other African countries need to be well-defined, articulated and implemented. This should be done with a combination of public, private and academic efforts. And the focus should not be on creating entrepreneurs from technology alone, which tends to be the emphasis, but on supporting the enterprising street vendor to become a store owner one day. Enitan Obasanjo-Adeleye is the managing director of Legacy Investment and Management Company, an investment, project and transaction advisory and management firm based in Lagos, Nigeria.

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AFRICAN INTEREST

All-time high for female presidency in Africa Our continent has entered a new era, with more women heads of state than ever before. Tanya Farber ponders whether they have what it takes to foster more positive futures for their citizens.

hen South Africa’s Helen Zille and Dr Mamphela Ramphele had their political version of a Las Vegas marriage earlier this year, many commentators were immersed in the race debate that underpins the potential energy of each party. Would Ramphele’s running as Democratic Alliance (DA) presidential candidate finally give the DA a foothold in the black electorate? Would the DA’s growing support base be strong enough to hold up the newly born Agang party, which was still gasping for its first breath? But the other mode of analysis that was flying about was a far more exciting one, and one which – for a brief moment in time – galvanised the South African public into imagining a decidedly new era in the country’s history: would we be joining the new wave of female presidential leadership in Africa? Would a gender fault line be cutting a deeper groove in the electorate than any fault line based on race, socio-economic inequality or business interests? Yes, there are currently only three female heads of state in Africa and, of those, one is an interim president – but by historical standards, it is a politico revolution of note. It speaks of something shifting, fundamentally, in the belly of a patriarchal beast. Perhaps the most notable of the ‘big three’ is Malawi’s Joyce Banda. When she made headlines with her substantial salary cut in October 2012, people began to sit up and really take notice. By chopping her salary by 30% from US$60 000 to US$42 000, she wasn’t just talking the talk. Another moment in her leadership, which www.nepadbusinessfoundation.org

There are currently only three female heads of state in Africa and… by historical standards, it is a politico revolution of note. It speaks of something shifting, fundamentally, in the belly of a patriarchal beast. prompted the question of whether female presidents were more compassionate political leaders than men, came in September last year when she announced that she would host the first-ever African Leaders Forum on Intellectual Disability in early 2014. As usual, her rhetoric struck the perfect balance between head and heart. She said at the time: “Malawi has approximately 400 000 people with intellectual disabilities. In many cultures throughout Africa, stereotypes, entrenched stigma and misunderstandings about intellectual disabilities exist and the effects are devastating, with many people with disabilities experiencing severe social isolation and suffering from neglect, abuse and violence. It is our moral obligation to turn the tide from intolerance and inaction to foster understanding and make real commitments to influence change.”

Imagine, one can’t help thinking, if some of her fellow African presidents took the same stance against stereotyping and intolerance of homophobia, for example. But Banda’s growing popularity is not simply about what she says or does, it is about how she says it, too. In the post-event analysis of Nelson Mandela’s memorial and funeral service, it was Banda’s name that came up as the most charming, charismatic and warm speaker who had truly upheld Madiba’s legacy in the final goodbye. Further up north, it is Liberia that has seen itself in the hands of a female president – Ellen Johnson Sirleaf – who took the helm in 2006. Since then, she has had some notable accomplishments, not the least of which is her 2011 Nobel Peace Prize, which she received jointly with her countrywoman Leymah Gbowee and Tawakkol Karman of Yemen. The women were acknowledged for their “non-violent struggle for the safety of women and for women’s rights to full participation in peace-building work”. Sirleaf also made her mark by bringing running water and electricity to parts of Monrovia, which had been without such services for 15 years, and negotiating a revised deal worth US$900 million dollars with steel manufacturer ArcelorMittal. She enforced a free primary public school system which, within a single year, had seen an 80% increase in primary school enrolment. Sirleaf’s ambitious development goals have, from the start, pitted her against what she called “the major public enemy”: corruption. She came to power only three years after the

THE OFFICIAL NEPADYEAR BOOK 2014

country’s 1989–2003 civil wars, which killed more than 200 000 people, displaced another million and severely eroded the rule of law. Advocacy groups have highlighted the proverbial landmines that litter the political landscape in which Sirleaf is trying to make a difference, but have also acknowledged her gains. Human Rights Watch said earlier this year that although corruption and human rights abuses persisted, her administration had at least made some progress in improving arrest procedures and addressing violence against women. And then there is the Central African Republic’s (CAR) Catherine Samba-Panza. Appointed in late January 2014, SambaPanza has not yet had time to prove her mettle or her potential, but what is clear is that anyone – regardless of gender – stepping into this role in CAR at this moment in time will need nerves of steel. Just days after she came to power as an interim leader, she received a baptism by fire that no leader wants to experience: almost immediately after she addressed thousands of regrouped military officers and affirmed the reconstituted army, uniformed army officers publicly lynched a man they suspected of being a Séléka rebel.

“It is our moral obligation to turn the tide from intolerance and inaction to foster understanding and make real commitments to influence change.”

Catherine Samba-Panza, president of the Central African Republic (CAR)

Joyce Banda, president of Malawi

Not only did they lynch him, but they created a spectacle of brutal force by slashing him with machetes, crushing his head with stones, and severing his one foot and his other leg from his body. With this type of killing allegedly being a regular occurrence in the capital city of Bangui, it is difficult to imagine what it would take for any new leader to turn the tide. Within hours of her appointment, she was urged by Amnesty International to “rein in the out-of-control anti-Balaka militias and to make it a top priority to ensure that the Muslim population is safe from attack”. That is an extremely heavy weight for Samba-Panza to carry on her shoulders. Is it heavier than the weight any male president would have to carry? Decidedly not… but being the continent’s third female president ever in its history, her gender (as with the other two) is sure to come up as a primary factor when her successes and failures are tallied at the end of her term.

Image courtesy of ©World Bank/Simone D. McCourtie

Joyce Banda

Ellen Johnson Sirleaf, president of Liberia

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AFRICAN INTEREST

Africa’s

shooting

star

Acclaimed as Africa’s youngest billionaire, Ashish J. Thakkar, founder of the Mara Group and Mara Foundation, embodies all the qualities that make us proud to be fellow Africans. He chatted to Brendah Nyakudya about his life, beliefs and work.

You are a prime example of a ‘citizen of the world’. What is your background? I suppose I am. I was born in the United Kingdom (UK). I currently live in Dubai in the United Arab Emirates (UAE). I am of Indian origin. But our family history spans over 120 years in Africa, so I am truly an African at heart. Your family had to leave Uganda and Rwanda under horrific circumstances… Before I was born, my family had to leave Uganda when then-president Idi Amin ordered the expulsion of the country’s Asian minority. My parents lost everything and started over in the UK. In the early 1990s, my parents wanted to move back home, to Africa. So we sold everything and moved to Rwanda. Then, during the genocide, we were forced to flee and were refugees for a few weeks before returning to a more stable Uganda. We lost everything once again and had to start all over. The Rwandan experience has definitely shaped the way I am today. I was 13 back then and remember everything very well. I learnt to never take anything for granted, and how little wealth matters. In Rwanda, no matter how much money I may have had, I would still have been a refugee. After all that trauma and upheaval, why did your family choose to stay in Africa? Because Africa is our home – we belong here. I really believe that our continent has a www.nepadbusinessfoundation.org

Africa is the single most exciting continent right now in terms of opportunities and for doing business… We are the next big thing. bright future ahead. I’m a fourth-generation African and a proud one, too. You started your first company at 15, buying and selling computers. What prompted you to start this business? I was simply passionate about business. I knew at a very early age that I wanted to become an entrepreneur, rather than finishing school and getting a ‘real job’. At that time, my family needed it too. Having gone into business at such an early age, would you say being an entrepreneur is a case of nature or nurture? Both. You need great ideas, drive and passion. But you also need guidance and mentoring to transform your idea into a profitable and thriving business. In 15 years, you have built an empire (the Mara Group) that is hugely successful by any standards. What practices worked in

your favour to get to this point? Hard work, honesty and perseverance. And, of course, dreaming, which I always do. Have you made any bad investments during this journey? My 16-year journey as an entrepreneur has not been picture-perfect. I have made many mistakes, but I have never given up. You just have to dust yourself off and try again. What lessons, if any, did you get out of those challenging moments? That hard and honest work always pay off. And that it’s never going to be an easy ride – if it was, you should worry. What are the trials, in your opinion, of conducting business in Africa? I really believe in truthfulness, transparency and integrity in business. All business we do is legitimate and nothing is done under the table. So it can be done in Africa. Corruption needs to be tackled not only from the top down, but also from the bottom up. Corruption is a two-way street: governments shouldn’t take, but people should stop giving, too. And the positives? Africa is the single most exciting continent right now in terms of opportunities and for doing business. There are simply endless resources available for economic growth and transformation. We are the next big thing.

THE OFFICIAL NEPAD YEARBOOK 2014

because tariff barriers to intra-African trade have been reduced. But, I suppose, that’s what makes [Africa] such a huge opportunity. With the knowledge that a lot of Africa’s solutions, when it comes to unemployment and economic growth, can be found in small and medium enterprises (SMEs), why is Africa falling behind when it comes to building up entrepreneurs? In the past, too much attention was granted to foreign direct investment. But to create sustainable growth and combat youth unemployment, African governments need to create a nurturing environment for young entrepreneurs and SMEs. They need to provide them with the tools to succeed, including granting tax incentives and creating more of an enabling environment. There are many things to be done. But we as the private sector also have a huge role to play; we can’t expect government to do everything. Being based in the UAE and with your business taking you all over the world, do you still have anything to do with Uganda? Of course, we are still very active in Uganda. We’re building an Intercontinental hotel, convention centre, shopping mall and office park there and have another six companies there. But I don’t spend much time there, as home is now in Dubai, where the group head office is.

Ashish J. Thakkar

What the core principles of the Mara Group? We have four core principles – whatever we do must be pan-African, game-changing, ‘Mara’ branded and have a positive social impact.

don’t get me wrong, but you must keep at it. No pain, no gain!

The Mara Group operates in more than 20 African countries, in various disciplines. What is the biggest challenge when it comes to keeping tabs on all your operations? The key is to have truly motivated teams to make sure the day-to-day business runs smoothly. Empower people and ensure they understand and value your values.

Your vision, principles and drive are what Africa needs to succeed. How can we get more young people buying into this way of business and life? There are so many young Africans out there with amazing business ideas. But we need to inspire and empower them, and create an enabling environment for these young people to be able to start up their own businesses. The small- and medium-size enterprises founded by these entrepreneurs will create employment and make a real difference within their communities.

In a continent that thrives on corruption and a culture of tenders, how have you managed to succeed in building a business that promotes a culture of transparency and integrity? When you do things with a clean intention and a clean heart, it always works out. I am a firm believer in that. It’s tough,

As a pan-African businessman, what do you think is the reason there is so little intra-African trade? Inadequate infrastructure is one of the key obstacles to intra-African trade, [as are] differences in the regulatory framework between the different markets. However, this trend is slowly changing, and particularly

Does being the youngest billionaire in Africa come with any sort of pressure from society or business? I don’t see myself as Africa’s youngest billionaire. Wealth should never be a measurement. However, I want to be a good role model, especially to African women and young entrepreneurs, and give them the same opportunities that I had. Hopefully [in this way, I] will inspire other privileged individuals to give back in a meaningful manner. What are the primary objectives of the non-profit Mara Foundation? The Mara Foundation is our social enterprise that focuses on emerging African entrepreneurs. Our mission is to provide comprehensive support services, including mentorship, funding, incubation centre workspace and business training to African entrepreneurs. We believe that these support services will transform entrepreneurs’ business ideas into profitable and thriving business entities that will employ other Africans and contribute to the local and national economies. In 2012, you initiated the Mara Launch Uganda Fund to assist entrepreneurs. How has this been received? With a lot of enthusiasm! This programme is a venture capital fund investing in innovative and high-growth enterprises. Since the leading cause of business failure is lack of operating capital and encumbered access to capital, we are providing essential funding to entrepreneurs to help bridge www.nepad.org

AFRICAN INTEREST

Ashish J. Thakkar

start-up businesses to the sustainable growth stage in the business lifecycle. Uganda was just the pilot: we are now taking this panAfrican. Young entrepreneurs often complain that it is difficult to find mentorship programmes and mentors. Do you agree with this sentiment? It’s important for young entrepreneurs to find good mentors, but not necessarily easy. Knowing this, we have created Mara Mentor, our foundation’s flagship mentorship programme. The programme is free of charge and universally applicable to all business categories and companies. We tap some of the most influential business mentors to participate, at no cost to the mentees. Within a few months, the mentoring platform will also be available as a mobile app. You are committed to philanthropic initiatives in Africa. Why do you believe it is important to give back to the community? I believe that if you’ve been given the tools to help others, then you must do so. It is all about creating impact, not about how much money you make. At the end of the day, we are all trustees for the Almighty and must make a difference before leaving. You have the honour of being a World Economic Forum Young Global Leader – what does this mean to you? I was extremely flattered to be recognised www.nepadbusinessfoundation.org

[To become an entrepreneur] you need great ideas, drive and passion. But you also need guidance and mentoring to transform your idea into a profitable and thriving business. as a Young Global Leader. Because of that, I have had the opportunity to meet some truly amazing people. I love it! You will be the first African to head out on Virgin Galactic’s quest into space – how do you feel about this mission? It’s something that started off for fun, but it gives me a lot of pride to represent Africa during this trip. I think it’s going to be quite an amazing experience! It’s a way we as a continent can also tell the West that even we have the vision and ability. We hear you are collecting flags from countries in East Africa to take on the trip. Is this true? Yes, it is. In a way, it is sending a strong message to the world that we, as Africa, are ready to play an important role on the global scene. But I’m representing the continent

and not only East Africa. What life lessons do you hold dear that you have learnt from your spiritual leader and guru, Morari Bapu? Morari Bapu has three core teachings, which are truth, love and compassion. He is an amazing inspiration and an important part of my life. He teaches you truth, how to be honest, how to be a better person, how to love everyone around you, regardless of religion, colour and race. He teaches compassion, like how to give back, with no hidden agenda and no particular intention. You do not seem like a man motivated by money. What keeps you going and keeps you excited? Impact, not wealth, is what drives and inspires me. But smiling while doing it is the most important part!

Background

Mara started out as a small information technology (IT) shop almost two decades ago, but since then the group has evolved into an international multisector business with operations in 26 countries. The group is headquartered in Dubai, but its main focus is Africa. Mara’s current businesses operate in a broad range of sectors including IT services, business process outsourcing, agriculture, real estate, hospitality, packaging and asset management.

PROFILE

A LOCAL COMPANY

WITH GLOBAL REACH On the 1st December 2013 global legal firm Hogan Lovells and South African law firm Routledge Modise combined in a partnership of expertise and knowledge. Head of Mining at the newly launched Hogan Lovells SA, Warren Beech, spoke to us about merging, maintaining professional standards and making a mark in Africa as a legal giant.

hen South African legal giant Routledge Modise looked for a company to amalgamate with, it wasnâ&#x20AC;&#x2122;t a decision taken lightly. As an established law firm that has been around for more than 120 years with more than 120 legal professionals and 39 partners it was imperative to find a firm that embodied the same principles and values to ensure long-term success.This partner was found in Hogan Lovells, an international law firm that was looking to make its mark in Africa. With South Africa being the logical springboard into Africa and Routledge Modise being a major player with established infrastructure and a reputable footprint on the continent, it was the perfect marriage. On finalisation in 2013, this union gave rise to a Trans-Atlantic legal giant under the brand Hogan Lovells South Africa. Hogan Lovells SA is a local legal firm with a proven track record and global reach into Africa, Asia, United States and Europe. Armed with knowledge, expertise and expansive networks and relationships across a spectrum of industries including mining, finance, breweries and telecoms, Hogan Lovells provide their clients with creative and practical legal and business solutions

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Warren Beech, Head of Mining, Hogan Lovells SA

that are always delivered with the highest professional standards. As mining and mining related aspects such as natural resources and oil and gas drive most of the activity in Africa, numerous international clients looking to penetrate these fields will find the legal backing they require at Hogan Lovells. As a local firm, their global reach means they are well equipped to cater to the needs of African clients wanting to invest in international markets. With a firm understanding that their core business is to provide good quality practical advice to their clients, Hogan Lovells provides peace of mind by equipping their clients with the best advice possible from their welltrained legal personnel. For clients looking for in-depth expert advice, Hogan Lovells is the only large firm with a dedicated, multi disciplinary mining and regulatory team in South Africa, with a strong focus on health, safety and environmental law, thereby offering in-depth knowledge and experience of not just the applicable laws but the mining industry, and related industries, such as commercial, construction and engineering. The core values of Hogan Lovells will ensure you are more than just a billable client. With a company culture of being a

genuine family where people care for each other and have integrity in all they do, whilst providing quality of service, they ensure clientâ&#x20AC;&#x2122;s needs are holistically taken care of. Over and above this, and most importantly, Hogan Lovells believes in the power of giving back to society. To this end the pro-bono department at Hogan Lovells is dedicated and provides quantifiable, deliverables to communities in need. Whether you are on African soil or international shores, Hogan Lovells is a dedicated legal firm that has the knowledge you need and is but a plane ride away. A local company with a global reach.

PROFILE

GRASSROOTS INVESTMENT

A leading manufacturer of agricultural machinery, AGCO is actively pushing Africa’s agenda as an economic leader

ounded in 1990 and headquartered in Duluth in the United States, AGCO, Your Agriculture Company, is involved in the design, manufacture and distribution of agricultural machinery, which is distributed in more than 140 countries, including the continent of Africa. Following on from the success of the AGCO Africa Summit held in Berlin earlier this year, we spoke to Dr Rob Smith, Senior Vice President & General Manager: Europe, Africa and Middle East, about the business of agricultural machinery, Africa’s potential as a global economic power, and the organisation’s involvement in the World Economic Forum’s Grow Africa Initiative. The term ‘Africa Rising’ is being used in recent times to describe the continent’s potential as a global player. What does this mean for your industry in particular? For the agricultural sector, the African continent has enormous potential. According to McKinsey Global Institute it holds 60% of the world’s uncultivated arable land, however despite abundant land and resources, food insecurity is a common problem and remains a challenge as the population races towards 2 billion by 2050. A Green Revolution will help the continent achieve food security and contribute to sustainable economic growth and prosperity. AGCO has committed to transforming agriculture in Africa. How do you intend to do this? AGCO follows a multi-stakeholder approach to transform agriculture in an economically and ecologically sustainable way. To achieve this we took the decision to involve partners from governments, companies, and other institutions. While mechanization is one important pillar, we realise training and know-how transfer

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are also essential - we need more than agricultural machinery on the ground. Therefore we have implemented our Future Farm concept: where farmers of small to medium sized holdings will be trained on the use and maintenance of tractors and harvesting equipment, grain handling, farm management and storage techniques. Tell us more about the outcomes of this year’s Africa Summit held in Berlin. This year’s AGCO Africa Summit focused on innovation. In several speeches and three panel discussions we spoke about the importance of technology and science for Africa’s agricultural industry as a means to raise productivity for all farmers. We also spoke at length about frameworks and roadmaps that need to be put in place to help small farmers progress sustainably. What is the purpose of the AGCO Africa Ambassador contest? The AGCO Africa Ambassador contest aims to involve young Africans in an international dialogue about their continent. We launched a video contest that reaches out to young Africans with innovative ideas who are willing to contribute to the development of Africa and its future. The main task of the young person who will be selected as AGCO Africa Ambassador is to represent the continent in all of its facets during the AGCO Africa Summit. What are the challenges of doing business in Africa, specifically in the agriculture business? The main challenges for us are on the one hand very heterogeneous political and economical frameworks. On the other hand, we have to work hard on the level of mechanization and the need for training and basic education.

Tell us more about your organisation’s involvement in the World Economic Forum’s Grow Africa Initiative AGCO is engaged in the World Economic Forum’s Grow Africa Initiative and the New Alliance for Food Security and Nutrition of the G8. We are involved in this because we recognize the potential of the agricultural sector to contribute to Africa’s prosperity. At the G8 summit in May 2012, we pledged to invest substantially in Africa over the upcoming years for sustainable economic growth and food security in the long run. Where do you hope to see Africa’s agricultural industry – in terms of growth and development – by the year 2020? By 2020 we should see positive achievements with regards to food security from programs enacted to help smallholder farmers and their families increase production and reduce hunger and poverty. This progress will furthermore allow them to develop and expand their farms and invest in their children’s education. African communities should be economically stronger and more viable.

About Dr Rob Smith

Before joining AGCO as the Senior Vice President & General Manager: Europe, Africa and Middle East, served as the Vice President & General Manager of the global Engine Components Division for TRW Automotive – one of the world’s largest automotive suppliers. A former combat engineering officer with the US Army, with a Bachelor of Science in Engineering from Princeton, and an MBA from the Austin Graduate School of Business, Dr Smith received his doctoral degrees in International Operations Management from the Graduate School of Management in Koblenz, Germany.

AGRICULTURE AND FOOD SECURITY

We can feed

the world

Food security is a growing global concern and agriculture, as a finite resource, is grabbing the world’s attention. Africa, with the largest area of uncultivated arable land worldwide, has the potential to boost agricultural output and become the world’s breadbasket. Sharon Davis finds out what we need to do to make this happen.

Images courtesy of Shutterstock

oncerns about our ongoing ability to adequately feed a growing world population have highlighted agricultural produce as an important, and potentially scarce, resource. Forecasts show that food production would need to increase by 70% between now and 2050 to feed an estimated two billion additional people. This has put food security, and the ability to produce fresh produce, firmly on the political and economic agenda. Arguably, agriculture has the potential to become the next driver of economic growth – the new gold or oil – and Africa, potentially, stands to benefit the most from the renewed focus on agriculture. Some commentators suggest that Africa holds 70% of the world’s remaining uncultivated arable land. The figure is closer to 60%, according to the Food and Agriculture Organisation (FAO) Africa, and the World Bank puts the figure more conservatively at 44%, or about 201 million hectares (Mha) of the 449 Mha of uncultivated land suitable for crops.

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Agriculture has the potential to become the next driver of economic growth – the new gold or oil. Regardless of which estimate is more accurate, it is clear that Africa holds the lion’s share of uncultivated arable land and is seen as having the potential to play a growing role in global food security in the future. With an ample supply of available arable land, Africa has the capacity to ensure that the global supply of food outpaces demand, says Arthur Shipekesa from the NEPAD Business Foundation in Zambia. But he notes: “Africa’s comparative advantage in terms of abundant arable land is yet to be realised in terms of high productivity growth, increased food security and gains from increased terms of trade.”

Agricultural yields in Africa have been traditionally very low, which means that despite an abundance of natural resources, the continent remains a net importer of food and some countries are reliant on outside food aid. This poor performance, however, does not detract from the potential of Africa to play an active role in food security, but rather enhances it. It means that agricultural output from Africa can be increased by improving yields and by cultivating more land – increasing the potential. The main cause of low agricultural productivity in Africa is attributed to the lag in adopting improved farming methods and technology. While poor soil might be part of the problem, at least in some areas of Africa, the use of fertilisers, agrochemicals and better seeds (including seeds genetically modified to perform better in African conditions), has the potential to boost yields to comparable world levels. Malawi provides a good example of what the application of fertiliser can do for yields. It moved from a 43% food deficit in 2005

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to a 53% food surplus in 2009 through the application of fertiliser. Erratic rainfall patterns also play havoc with agricultural production and food security in Africa. Crop irrigation is another option to boost crop yields. The FAO says irrigation increases the yields of most crops by anywhere between 100% and 400%. The World Bank and FAO reported in 2009 that less than 10% of suitable land in Africa was under cultivation. This means that there is a huge potential for Africa to meet the surge in demand for agricultural commodities, as well as the emerging biofuels market. It is unlikely that small-scale farmers will have either the money available or access to capital to invest in land preparation and irrigation – a factor that is further compounded by land tenure and use issues in many parts of Africa. As a result, some sort of public-private partnership (PPP) is seen as one way to ensure the correct level of investment and control, combined with fair deals for land trades and increased rights for rural farmers. “Increased land expansion is one side of the story concerning agricultural productivity. Other areas include increased input intensification and growth in productivity, resulting in higher yields. However, feeding the land in order to feed the people requires complementary investments in infrastructure such as roads, bridges, storage facilities,

electrification…” says Shipekesa. Pieter Esterhuysen, general manager for grain at South African agribusiness Senwes, agrees. “Improved food security demands massive investments in infrastructure like storage facilities, road and rail capacity, as well as port infrastructure,” he says. The issues of infrastructure weaknesses, inefficient markets and a weak policy environment in many African counties also need to be addressed to support some sort of PPP model. However, some experts believe the formula is as simple as providing smallscale farmers with training and better seed, organising them into larger groups and connecting them to markets.

Malawi moved from a 43% food deficit in 2005 to a 53% food surplus in 2009 through the application of fertiliser. The answer probably lies in a mix of strategic government investment and wellmanaged and carefully negotiated private investment, as well as supporting and encouraging Africa’s small-scale farmers, who currently produce about 80% of the continent’s agricultural output. Arable land is a finite resource,

under pressure from urbanisation and the preservation of natural habitats and environmental concerns, and the food security issue has spurred foreign investment in agriculture and related concerns about exploitation and land grabs by foreign countries. In some African countries, speculators have earned themselves a bad name by negotiating long-term leases over large areas of land. But instead of the anticipated investment, jobs and agricultural output, they have left the land fallow, hoping to make money out of the land option value when there is a spike in food prices. This can be avoided with clear agricultural policies to encourage investment yet avoid exploitation. “The surge in demand for cropland by local and foreign investors has Africa poised at the start of a potential trajectory to unlock and unleash her economic potential. But fair deals should be negotiated as land is being traded,” says Shipekesa. Many African countries have eschewed genetically modified seed to retain their share of the EU food market, and fail to encourage agricultural investment. Esterhuysen says a change in government positions on genetically modified crops and more market-friendly policies to encourage the participation of the private sector in the local food value chain are also needed to ensure that Africa reaches its potential as the world’s emerging breadbasket.

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DELIVERING INFRASTRUCTURE SOLUTIONS

THROUGH STRATEGIC PARTNERSHIPS As a provider of engineering, management consulting, development financing and advisory services, Bigen Africa has successfully delivered costeffective, sustainable infrastructure projects in Africa. Chief Operating Officer, Anton Boshoff spoke to us about their partnership ethos and future outlook. What is Bigen Africa’s core business? Bigen Africa is a leading infrastructure development company with a solid base in Southern Africa, a growing footprint in the rest of Africa and a vision to develop sustainable infrastructure that will improve the quality of life for all. Bigen Africa integrates the entire value chain in an infrastructure development process through in-house capabilities and strategic partnerships – from feasibility studies through project preparation, management and implementation to development finance and ongoing asset management – in a bid to successfully deliver cost-effective sustainable infrastructure projects in Africa. With such an impressive portfolio, what is the secret of your success? Our success is a culmination of all facets of the company: a strong history of value-add and innovation in infrastructure development perfected over decades and which have formed the foundation of our S-Vision 2016. At Bigen Africa we interlock world-class, best practice development finance, engineering and management consulting expertise so as to offer our clients structured integrated and sustainable development partnerships. These not only supply tailored infrastructure onsite, but also provide sustainable projects in the context of their broader socio-economic environment. What was the objective of the recently held Bigen Africa Partnership Conference in March 2013? At Bigen Africa we believe strategic partnerships cost-effectively build a sustainable, integrated product and service offering of scale, so at our inaugural conference we brought together best of breed www.nepadbusinessfoundation.org

partners to achieve this. Our partnership approach is crucial to our success in achieving technical excellence and innovation, especially when developing new capabilities and products. Our principle is “together we can do more” and as a result we aim to build, through strategic partnering, capabilities in renewable energy, rails, mining and industrial, mechanical engineering and project delivery services. What were some of the alliances that came out of the conference? We met with a number of stakeholders and potential partners from across the globe for the purpose of forging business agreements that will be mutually beneficial and will improve the quality of life for all. Promising alliances include: • A prospect for international partnering with Parsons Brinckerhoff in the Balfour Beatty stable, and • A strategic partnership agreement that has been signed with Nedbank for an important project in Africa. • A partnership agreement with Urban Dynamics and RAUBEX for Lufhereng – a fully integrated housing development to deliver 24 800 homes for the City of Johannesburg How does the partnership ethos tie in with Bigen Africa’s S-Vision 2016? Bigen Africa’s strategic partnership programme forms part of its S-Vision 2016 and encompasses various activities aimed at forging additional strategic partnerships at both national and international level. Going forward we aim to: • Make use of strategic tendering opportunities.

Anton Boshoff, Chief Operating Officer of Bigen Africa and the driver of the companies’ partnership strategy.

• Build capabilities through strategic partnerships, mergers and acquisitions. • Expand the company’s African footprint, with current focus being on West Africa, and • Solidify key strategic partnerships. What are the benefits of strategic partnerships with Bigen Africa, for corporates and communities? As a leading infrastructure development company, Bigen Africa offers a broad base of knowledge and expertise across the disciplines of engineering, management consulting, and development financing and advisory services. We recognise the need to participate in assisting countries to address their key emerging public policy priorities, which amongst others, include integrated human settlements, rural development, renewable energy, road and rail freight transport, water and sanitation and the operation and maintenance of existing infrastructure. As we work together with our partners and governments, together we can do more to improve the quality of life for all.

Doing Good while Doing Business Contact Details Tel: +27 (0) 12 842 8700 www.bigenafrica.com

AGRICULTURE AND FOOD SECURITY

Boosting regional

food security

With the population of sub-Saharan Africa expected to double by 2050, ensuring that citizens have sufficient food is a critical priority, writes Sharon Davis.

Images courtesy of Shutterstock

he United Nations projects that the world population is likely to reach 9.6 billion by 2050, and that global food production would need to increase by 70% to meet the demand. This has serious implications for global food security. The situation in sub-Saharan Africa is even more serious. More than a quarter of the current 0.9 billion people in the region are undernourished, and the population is on track to double by 2050. Food production in the region would need to increase by 260% by 2050 to feed the projected population – which means that addressing food security must become a priority for subSaharan Africa. Solutions should be found for a number of endemic problems, including unpredictable weather patterns, degraded and poor soils, low agricultural yields, inefficient markets, insufficient infrastructure, political instability and conflict, and poor governance. “Sub-Saharan Africa is a vast and diverse region with intermittent food surpluses and shortages,” says Pieter Esterhuysen, general manager for grain at South African-based agribusiness, Senwes. “One agricultural season in every three is a disaster within the subregions due to drought, floods, or political or civil unrest. This makes the region very prone to incidences of food insecurity.” Sub-Saharan Africa, which currently imports 20% of its food requirements, must also take into account seismic demographic shifts. The population is growing at 3% annually

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and urbanising at 4%, with an expanding middle class. Food consumption is growing at 3% per annum and consumption patterns are changing to more processed and ready-made foods, says Esterhuysen. To keep pace with demand, cereal production must increase by 4% a year, but cereal production has actually been declining in sub-Saharan Africa.

Sub-Saharan Africa should be a cereals exporter of note. It is currently underperforming and in dire need of radical ways to transform the agricultural landscape. “There are some pockets of maize yield improvement in areas like Zambia, Malawi and Tanzania as a result of ad hoc government subsidy programmes, but this is not sustainable due to its artificial nature, as well as dwindling government resources,” says Esterhuysen. Annual seasonal food shortages are experienced throughout the region before the harvest of a new crop, as food supplies run low. This problem is exacerbated by the lower-than-normal level of grain stocks in South Africa and the limited resources of

aid organisations such as the World Food Programme. “However, the region should not suffer from food insecurity. On the contrary, subSaharan Africa should be a cereals exporter of note. It is currently underperforming and in dire need of radical ways to transform the agricultural landscape,” says Esterhuysen. With the potential to increase agricultural production through improved farming methods and by accessing large areas of previously uncultivated arable land (opportunities that are already exhausted in other economies), the sub-Saharan Africa region has the potential to improve harvests from an increasingly scarce global resource and turn it into a driver of economic growth, while improving food security both regionally and globally. According to the 2013 Global Food Security Index, produced by DuPont, sub-Saharan Africa remains at the bottom of the index, although some countries in the region made progress in the past year. Of the 10 countries with the most-improved overall food security scores, five were in sub-Saharan Africa. Ethiopia, Botswana and Niger improved the most in the region, rising an average of eight places in the food security index, mostly as a result of greater food availability and income growth. South Africa is the highest-rated country from sub-Saharan Africa, with a ranking of 39 out of the 107 countries included in the index – but the most food insecure countries in the index are also in the region, with the

THE OFFICIAL NEPAD YEARBOOK 2014

Democratic Republic of the Congo ranking 107th for food affordability, quality and safety. Comparing year-on-year results, the average 2013 Global Food Security Index score dropped slightly to 53.5 in 2013, down from 53.6 in 2012. No region saw dramatic improvements, but the sub-Saharan African region showed the biggest gain, climbing by under one point to around 33.4. In comparison, food security ratings fell in struggling European countries such as Greece and Portugal, with the region still suffering the effects of the global financial crisis. Greece recorded the steepest fall among developed nations, dropping six points, largely on the back of a drop in income per capita, which makes food less affordable. While it is tempting to conclude that this means that sub-Saharan Africa, as a region, performed better than Europe for food security in 2013, this isn’t really the case. Most of the European countries remain in the top 20% of the index and are not in serious danger of food insecurity, while many countries in sub-Saharan Africa are in the lower portion of the index, are net importers of food, and experience malnourishment and food insecurity on a regular basis.

Sub-Saharan Africa is seen as a solution to the future global food crisis, and as an increasingly attractive investment opportunity. A new set of economic drivers are working in sub-Saharan Africa’s favour. These, according to a Boston University report titled ‘The Future of Agriculture in Africa’, include changing world population demographics and perceptions of agriculture, climate change, a growing fear of global food insecurity and technological innovations. The region is seen as a solution to the future global food crisis, and as an increasingly attractive investment opportunity. Should economic development take off on the back of agriculture, subSaharan Africa would see a growing middle class with more spending power – which, in turn, would make it even more attractive as a trading partner. But before this can happen, a number of fundamental changes in the agricultural sector within the region would need to be realised. “Ensuring a real, transformational and sustainable improvement in food security is a very daunting challenge,” says Esterhuysen. These changes include the adoption of commercially oriented technologies such as hybrid fertilisers and agrochemicals by small-scale farmers to increase production yields per hectare, considerable investment in infrastructure, and a “radical change in government policies”. www.nepad.org

AGRICULTURE AND FOOD SECURITY

Nurturing the mothers

of our nations

Investing in female farmers is critical if poverty and hunger are to be reduced in Africa, writes Liesl Venter.

Images courtesy of Shutterstock

omen farmers produce more than half of all food worldwide, accounting for 43% of the global agricultural labour force. “In Africa, these figures are much higher and, in some countries, particularly in subSaharan Africa, women account for some 80% of the agricultural workforce,” says Danielle Nierenberg, an international expert on sustainable agriculture and food issues. At the same time, Africa is facing a hunger crisis of note, with nearly one in four people going hungry on the continent. Estimates are that some 239 million African are hungry, while in sub-Saharan Africa the modest progress achieved in recent years to address the matter has taken a turn for the worse, with hunger rising 2% per year on the continent. For Nierenberg, the solution is straightforward. “Stop ignoring female farmers, as they have a fundamental role to play in alleviating hunger and poverty,” she says. “One must not forget that hunger is expensive. The World Food Programme (WFP) announced recently that child malnutrition in Ethiopia costs Ethiopian birr (ETB) 55.5 billion (roughly converts to US$2.9 billion). That is 16.5% of the gross

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Hunger is expensive... The World Food Programme announced recently that child malnutrition in Ethiopia costs… 16.5% of the gross domestic product: nearly a fifth of the country’s earnings. domestic product – nearly a fifth of the country’s earnings. “Ironically, hunger also disproportionately affects smallholder farmers. According to estimates by the United Nations Food and Agriculture Organisation (FAO), half of the planet’s hungry live in smallholder farming communities. It’s an integrated solution: investing in indigenous crops and agroecological practices can decrease hunger, improve nutrition and increase incomes.” And in the African context, that means investing in its female farmers.

It’s a sentiment echoed by the WFP, which estimates that if women in rural areas had the same access to land, technology, financial services, education and markets as men, the number of hungry people could be reduced by 100 million to 150 million. Hajia Bola Muse is a Nigerian businesswoman who came to realise this some years ago. “I am not your average African farmer, as I came to this game late,” she explains. She is also educated and runs a successful freight forwarding business, and is not dependent on the crop she grows on her 50 acre farm. “We don’t have enough food. There is a gap between the demand and supply of food, not only in Nigeria but across West Africa and probably the rest of the continent,” she says. But, even while she is used to fighting her way forward in the male-dominated freight forwarding industry, Muse was surprised to see the lack of support that exists for female farmers. “We are just not seen as equal to men. There is this deep-seated cultural belief that women cannot do the job of men, and farming is one of them. Women are not seen as strong and capable and efficient, and

THE OFFICIAL NEPAD YEARBOOK 2014

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AGRICULTURE AND FOOD SECURITY

therefore they are not taken seriously, they are not supported and, more often than not, our female farmers are not empowered.” Muse admits that she has had it slightly easier, as her other business ventures support her farming activities. “Most of the women farmers, however, have to use their own personal funds. They don’t get the funding and support like men do. And they are working just as hard as men – out in those fields in the sun, every day. They are feeding their children this way and they could feed many more people if they were just given more help, more empowerment.” Nierenberg says most women farmers struggle to make ends meet, because they lack access to credit and financial services. “They can’t get the necessary loans for seeds, farming equipment and other inputs that their male counterparts get. More so, they don’t have the same access to education and extension services and are often left to their own devices.” She says that women face more practical woes as well. “The farming equipment is made for men – so you have hoes that are too long or bags of seeds that are too heavy. It might seem small and insignificant, but changing just small things would already make a world of difference to these women.” In Niger, a woman farmer was able to up her income from US$300 per annum to US$1 500 within two years of installing a solar drip irrigation system, while in Mali, a woman has started her own seed company where she is figuring out ways to package seeds more efficiently so that women can carry the bags more easily. “The solutions, not just to the plight of female farmers in Africa but small-scale farmers across the world, won’t be found in silver-bullet technologies or billiondollar government food aid programmers,” maintains Nierenberg. “Supporting the world’s small family farmers with the resources they need to grow food for themselves, their communities and the world is the way forward.”

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According to the Worldwatch Institute, cultural norms encourage independence and self-reliance among women farming in subSaharan Africa. “Women produce up to 80% of the agricultural output into his region, though individual asset ownership is limited. Conflict, gendered migration patterns and HIV and AIDS have led to increased reliance on women’s contributions to food security and farming,” reads the latest Worldwatch study on women and agriculture. “Women farmers currently represent between 36% of the agricultural labour force in the Ivory Coast and up to 60% in Lesotho.”

The WFP… estimates that if [rural] women had the same access to land, technology, financial services, education and markets as men, the number of hungry people could be reduced by 100 million to 150 million. The study found that in East and North Africa, the percentage of women farmers in the agricultural labour force has increased 15% since 1980, but only 15% of landholders are women. At the same time, women typically own smaller and lower quality or less profitable assets, such as poultry rather than cattle. They also face substantial yield

losses and cannot participate in a second cropping season, because of ploughing or planting delays caused by poor technology and a lack of financial resources. “Venturing into business in a maledominated society in a male-dominated sector such as freight forwarding was difficult enough,” says Muse. “Going into farming was far worse. It has not been easy.” She says while more governments are taking an active role in encouraging farming and developing programmes to assist farmers, the queues are long and at the front are men. “We seem to forget that women are the mothers of our nations, they are the ones who feed our children, and empowering them and allowing them to be better farmers will ultimately improve the lives of more children on this continent than anything else,” says Muse. “It is time that governments realise women are the pillars of African agriculture.” It is a sentiment echoed by Nierenberg, who says she has come across stories of great success and hope in Africa. “Farming can be used to strengthen communities by providing a means of income and livelihood, nourishing families through improved crop production and protecting the earth through agro-ecological practices. And with 2014 being declared the Year of Family Farming by the United Nations, the time to act is now, and it starts with these women who are already making a difference in their communities.”

REGIONAL INTEGRATION AND INFRASTRUCTURE

Africa’s construction

and property boom

Soaring urbanisation on the continent has created rapid growth in the construction and property development sector, writes Dianna Games.

he rapid pace of urbanisation across the African continent has created a boom in construction and property development as millions crowd into cities looking for opportunities. Skylines of many African capitals are dotted with cranes as new hotels, office blocks, shopping centres and residential complexes emerge in an attempt to keep pace with this trend. Investment is lining up to take advantage of the opportunity with African banks, pension funds and private equity companies looking for first-mover advantage on the continent. Having this competitive edge is renowned for high returns on investment – but also significant challenges. This trend has become particularly apparent given the declining returns to be found in more traditional Western markets and maturing growth markets in Asia and eastern Europe. According to projections made by the African Development Bank, the percentage of Africans living in cities is expected to increase to 50% by 2030 from 37% in 2009. The total population is also projected to grow from one billion people in 2010 to more than two billion by 2060. The rate of urbanisation has created enormous backlogs in all categories of property – housing, office space, commercial centres, warehousing and hotels. New cities are being planned alongside the old to cater for demand in areas where there is simply no space left to build quality developments. The shortages mean the prices of assets and accommodation are rising rapidly in African cities. Luanda, Angola’s capital, was rated by global human resources consulting firm Mercer as the world’s most expensive city in which to live in 2013, out of 214 measured, with rental for a three-bedroomed unfurnished house going for US$15 000 a month, for example. In Nigeria, Africa’s most populated country in sub-Saharan Africa, where more than 50% of people will be living in cities by 2015, the housing shortage is estimated to be 17 million and growing as urbanisation

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continues at an unprecedented rate. Real estate in the commercial centre of Lagos is second only to Luanda in terms of price, with landlords demanding several years’ rent upfront for leased premises. Urban planning in most African cities is inadequate as it has not catered for such growth. Urban areas are becoming clogged, with little space for new developments, which places a premium on what already exists. Although the biggest demand is for residential property, particularly given the huge backlogs in this regard across the continent, it has been tough to get investors interested in this segment of the market because of significant challenges. One of these is the absence or weakness of a mortgage market outside a few markets such as South Africa, Botswana, Namibia and Kenya.

Luanda was rated as the world’s most expensive city in which to live in 2013, with rental for a three-bedroomed unfurnished house going for US$15 000 a month. But initiatives are underway to address this issue. For example, the Nigerian government recently set up the Mortgage Refinance Company of Nigeria to raise funding for residential mortgages. This will help to fund primary mortgage lenders and encourage them to finance homes for low- to middle-income earners, which is where the biggest deficit exists. Organisations such as the International Finance Corporation have been working with countries to establish credit bureaux to make lending more viable for the banks. Other challenges include a shortage of long-term finance, high interest rates, a lack of credit bureaux, high land costs,

the potential for litigation, issues around the security of title deeds and the onerous processes of property registration. Another issue is the high cost of development, which pushes up the overall cost of properties and makes purchases and rentals unaffordable for many Africans – even those at the lower levels of the emerging middle class, estimated to be between 100 and 300 million people. A new US$3.5 billion housing complex, New City of Kilamba – built by the Chinese for the Angolan government on the outskirts of Luanda – is an example. Designed for several hundred thousand people, the high cost of apartments – between US$120 000 and US$200 000 – has resulted in low occupancies. Kilamba is one of the new ‘cities’ or selfcontained residential and commercial nodes being built on the outskirts of existing, highdensity urban areas to address problems of congestion and poor service delivery in overcrowded city centres. They include Tatu City outside Nairobi, the New City in Port Harcourt, the Eko Atlantic development to be built on land reclaimed from the sea in Lagos, Appolonia in Accra and Roma Park in Lusaka. But the cost of these new purpose-built developments is also likely to place them out of the reach of most people. According to property agents Knight Frank, residential and office plots on the first phase of the Eko Atlantic marina overlooking the ocean will sell at US$2.5 million, which is almost on par with the prices charged in one of the world’s most expensive streets – Fifth Avenue in Manhattan. Those away from the waterfront will go for US$1.25 to US$1.5 million. At present, a good deal of investment is being directed into shopping malls and mixed-use developments that combine residential, offices and commercial retail. A lot of it is coming out of South Africa, a country with a sophisticated, well-developed property sector and supportive institutions. Its well-capitalised and experienced developers and property companies have

Image courtesy of Graeme Williams, MediaClubSouthAfrica.com

THE OFFICIAL NEPAD YEARBOOK 2014

Construction of an extension to the Gateway Mall in KwaZulu-Natal, South Africa, already the largest shopping centre in the southern hemisphere.

Low prices and quick turnaround times have brought Chinese construction companies good business, and their firms secured 40% of all contracts on the continent between 2000 and 2012. fanned out across the continent in search of new opportunities and good returns, taking retailers with them as tenants in the shopping centres. But growth in commercial property has been relatively slow so far in many African countries excluding South Africa, which has 180 large regional malls and hundreds

of smaller centres. This is because of high development costs – more than double in some countries – and other challenges. While Nairobi has more than 20 malls of varying sizes, Nigeria still has less than a dozen malls, and other African capitals such as Lusaka, Kampala, Maputo, Accra and Harare have less than a handful. But many developments are underway and there will be greater critical mass over the next decade, particularly with more funding being made available locally through African banks, pension funds and private equity firms. The property boom has been a winner for construction companies in a market where competition is growing. African firms are competing for contracts with international firms from Europe and China, in particular. Low prices and quick turnaround times have brought the Chinese good business, and their firms secured 40% of all contracts on the continent between 2000 and 2012, according

to statistics produced by advisory company, the Beijing Axis. Another area of growing competition is the cement industry, which underpins the construction boom taking place in Africa. Well-established players such as South Africa’s Pretoria Portland Cement and France’s Lafarge are going head-to-head with Nigerian company, Dangote Cement, which has expanded rapidly to 14 African countries in just a few years. Another fast-growing area of construction is hotels, the growth of which is following new investment and the boom in the private sector in African markets. A few years ago, there were about 40 hotel brands operating on the continent. By early 2014, this had risen to more than 70, despite the high costs of constructing world-class hotels in often inefficient markets. All the world’s big brands are looking for a foothold in the fastestgrowing frontier markets in the world. www.nepad.org

PROFILE

PPC CEMENTING

GROWTH OPPORTUNITIES IN AFRICA PPC Ltd. has solidified its position as a growing cement supplier on the African continent when it increased its footprint into the rest of Africa. The cement supplier aims to increase its revenue generated outside South Africa to 40% by the 2017 financial year from the current 22%.

ommitted to the sustainable infrastructure development in the subSaharan Africa, the cement supplier has foreseen that the untapped cement demand in the rest of the African continent is crucial for its future growth. “Progress with our expansion strategy has gathered great momentum in this financial year. Our expansion projects are now bearing much fruit in Ethiopia, Rwanda, Zimbabwe and the Democratic Republic of Congo (DRC),” says Ketso Gordhan, Chief Executive Officer of PPC.

Headway into Rwanda

Towards the end of 2012, PPC announced its acquisition of a 51% equity stake in CIMERWA, a cement supplier in Rwanda, for US$69.4 million. CIMERWA’s operations will benefit largely from this as it increases PPC Ltd.’s CEO, Ketso Gordhan

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its capabilities with new facilities that provide modern technologies such as peat (decomposed heavy fuel oils). This is greatly beneficial as the plant operated on old technology such as wet processing and using heavy fuel oils. CIMERWA’s proximity to the borders of Burundi and eastern Democratic Republic of the Congo (DRC) provides PPC with the added advantage of accessing markets in Rwanda’s neighbouring countries.

Tapping further into Africa

Continuous implementation of its strategy led to PPC signing a memorandum of understanding with the DRC’s Barnet Group towards the end of 2013. The partnership aims to construct a 1 million tonne per annum (tpa) plant 20km from Kimpese in western DRC at an estimated cost of US$260 million. According to PPC’s robust strategy the plant will be commissioned in 2016. “This investment is another of PPC’s commitments to invest in sub-Saharan Africa and we are confident about our partnership with the DRC going forward. We continue to look forward to increased partnerships on the continent and this is more evident in the Habesha Cement Share Company acquisition in Ethiopia,” said Gordhan. Ethiopia is the second-most populous country in Sub-Saharan Africa with a population of around 85 million. The country’s cement demand is estimated to be in the vicinity of around 9 million tons annually This is a significant step in PPC’s African expansion strategy.

Cement production at the HCSCo plant is planned to commence in the third quarter of 2015. The plant’s future development plans will include doubling its capacity to 2.8 million tons per annum.

PPC prepares to enter the Algerian cement market

This year the cement supplier announced that advanced plans were in place to enter the Algerian cement market through a partnership with Algerian private sector investors in the Hodna Cement Company (Hodna). PPC will acquire a 49% stake of Hodna and assume management control which allows for the consolidation of the financial results of this project into the PPC group accounts. “The Algerian cement market is very attractive as consumption exceeds local production by approximately 3 million tons of cement per annum. Moreover the Algerian government has committed itself to large scale capital spending programmes, including the US$6 billion New City Hassi Messaoud project, which will see the rollout of thousands of housing units. This will certainly boost the demand of cement in this country,” said Ketso Gordhan, CEO of PPC. Hodna will be constructing a 2 million ton per annum plant for approximately US$350 million in the Hodna area, roughly 300km east of Algiers.

About PPC Ltd.

As the leading supplier of cement and related products in southern Africa, PPC Ltd. has nine manufacturing facilities and three milling depots in South Africa, Botswana, Rwanda and Zimbabwe. Related products include aggregates from quarries in Gauteng and Botswana. PPC Lime supplies metallurgical grade lime, burnt dolomite. This year PPC will sponsor the Totally Concrete Expo and Civilution Congress in South Africa. Both conferences are intended to promote the construction and cement industries by attracting decision makers in both industries. Follow PPC on Twitter @PPCisCement, like us on www.facebook.com/PPC.Cement and visit us at www.ppc.co.za.

Issued by: Ogilvy Public Relations Worldwide Shantall Ramatsui (Account Director) Direct: +27 (0) 11 709 6600 Mobile: +27 (0) 76 042 5384 shantall.ramatsui@ogilvypr.co.za

On behalf of: PPC Ltd. Nomzamo Khanyile (Group Public Relations Manager) Direct: +27 (0) 11 386 9309 Mobile: +27 (0) 82 870 4235 nomzamo.khanyile@ppc.co.za

(L-R) Leny Ilondo, Managing Director of the Barnet Group, Jean Saidi Bamanisa, Chairman of the Barnet Group, Ketso Gordhan, CEO of PPC and Trevor Barnard, PPC’s DRC Project Manager; during the signing of the MOU in Kinshasa, DRC.

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KEEP ON

TRUCKING On the road to success, MAN Truck & Bus is seeing spectacular growth into Africa

ith 28 years in the motor industry, Shane Naidoo, Head of SubEquatorial Africa at MAN Truck & Bus, is spearheading a startling expansion into Africa for the truck and bus business. “When I was appointed to the board in August 2012, I travelled around 120 000kms in five months, meeting and cementing relationships with our African business partners, while exploring opportunities on the continent,” says Naidoo. Putting those kms on the clock paid off, with MAN comfortably doubling its African sales over the last two years. This year, 2014, Naidoo says that they’re chasing growth targets of a 49% increase in truck sales, and an ambitious 133% for buses. Currently in Africa, MAN has 23 business partners in 12 active countries. We spoke to Naidoo about how his division has managed to rack up impressive sales despite the economic downturn, what some of the challenges of doing business in Africa are, and his ambitious five-year goal for the truck and bus company’s SubEquatorial Africa unit. Tell us more about MAN’s rapid expansion into Africa in the last two years. Personally, I have been driving quite aggressive sales targets since the SubEquatorial Africa division was established four years ago. When I started, we had sold 186 trucks in 2011, and 26 buses. Since then we have seen sales increase year on year. For

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PROFILE

transport. In East Africa and Kenya, we have actually changed the concept of how buses are sold. It costs R120 000 to ship a bus from Durban to Mombasa. We pioneer the complete knock-down unit concept, where buses are partially built in SA, and then assembled when they arrive at their destination. It is zero-rated and has no duties. We also have the advantage of having a base in Kenya – Mombasa is a gateway to East Africa. How is the bus market in greater Africa compared to South Africa’s? Interestingly, the Kenya bus market sees more than twice the MAN bus sales in South Africa annually. As we stand now, 50% of our target for buses for Sub-Equatorial Africa is already ordered for Kenya, and we are only in March. There is also a market for semi-luxury buses in Central Africa, largely due to tourism, and international travel into South Africa.

Shane Naidoo, Head of Sub-Equatorial Africa at MAN Truck & Bus

trucks, an increase of 80% in 2012, another 27% in 2013, and we are aiming for another 49% increase this year – we are already half way there. Buses have seen us more than double (108%) in 2012, with marginal growth of 7.5% in 2013, and another huge leap in sales anticipated this year – 133% increase on last year’s figures. You have set an ambitious goal for your division… When I returned to MAN Truck [Naidoo has been with the company for 14 years, and spent some time in Botswana before returning to head up the Sub-Equatorial Africa business], my vision was to be a R1 billion a year business. This should be achieved in another two years. How are you geared for growth in the African region? A common shortcoming in our business is an adequately equipped after-sales network. It’s been a challenge and will always be a challenge. So we have a focused drive to increase the after-sales footprint in Africa. We are spreading our wings in very strategic areas. Because of the vast distances between towns where you can get a service, we’re increasing our satellite points. We also have mobile MAN container workshops, which we plan to implement along common arterial routes.

“When I returned to MAN Truck & Bus South Africa, my vision was for the SubEquatorial Africa centre to be a R1 billion a year business. This could be achieved within two years.” What is your perception of doing business in greater Africa, particularly in your industry? We do face embargoes in a lot of African countries, which is a problem for investors. Then there are the unstable political situations, as well as the vast differences in types of business acumen that you deal with from country to country. We have the support of MAN Finance International GmbH, backed by world-class leading banks.

What do you count as some of your successes? Apart from MAN’s phenomenal growth, we are proud of our product offering that is so versatile and adaptable to the varying operating conditions. This is why we are doing so well in Central Africa, because we have the right model suited for the right working conditions. What separates you from your competitors in the region? We are unique in that we focus exclusively on trucks and buses. MAN is becoming a very recognisable brand on the African continent thanks to the hard work that we have put in over the last handful of years. We are fast gaining on our closest rivals. What’s your long-term strategy for growing into Africa? Since I took over the company’s SubEquatorial Africa centre, I had a five-year goal of becoming a R1 billion centre: this equates to 1000 trucks and 250 buses per annum. I also have a goal of 15% truck market share, and 12% bus market share on average. We will continue increasing and maintaining our after-sales footprint for all MAN vehicles.

Do you think that access to public transport is improving i.e. are you seeing an increase in sales as a result? In greater Africa, there is definitely a growth in inner city and standard commuter

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REGIONAL INTEGRATION AND INFRASTRUCTURE

Banking on Africa:

South Africa flexes its muscles

Financial institutions in South Africa are helping to drive transformation on the continent, writes Tanya Farber.

f Africa was once seen as the ‘dark’ continent, it is now illuminated – for better or for worse – by the hope in investors’ eyes. Growth is picking up in every sector, and South African banks are at the forefront of continent’s transformation. Nedbank, for example, announced recently that in the next five years it plans to double its African footprint through acquisitions or new operations in East and southern Africa. Likewise, Standard Bank now has operations in 19 African countries, while Absa acquired eight African assets worth R18.3 billion from parent company Barclays – in Uganda, Zambia, Botswana, Kenya, Ghana, Tanzania, Seychelles and Mauritius. According to Ngugi Kiuna, head of investment banking Africa at Rand Merchant Bank, South African banks are particularly playing an increasing role in the rollout of infrastructure projects on the continent. “Their roles range from advisory services to leading and participating in syndications of both debt and equity. Banks are also taking actual proprietary positions in some of the projects happening in Africa at the moment,” he says. It is hardly surprising that a sector which deals in money as its actual commodity would have its eyes fixed firmly on the continent. West Africa is the fastest-growing subregion in the world, while sub-Saharan Africa is showing annual growth of over 5%. And, according to reports from the World Bank, net capital flows into sub-Saharan Africa were up 3.3% to US$54.5 billion in 2012, despite a global contraction of 8.8% in capital to developing countries. Maria Ramos, CEO of Barclays Africa (which owns Absa), said on her return from www.nepadbusinessfoundation.org

the World Economic Forum in Davos in January that “Africa’s financial sector carries huge potential for banks”. But, she cautioned, it is not a one-sizefits-all situation. “The investment potential is enormous, as is the opportunity for growth,” she said. “But we still have a great deal of work to do. We need to make sure that people understand that Africa is a diverse continent with multiple opportunities.”

West Africa is the fastestgrowing subregion in the world, while sub-Saharan Africa is showing annual growth of over 5%. Meantime, according to Michele Ruiters, an analyst at the Development Bank of South Africa (DBSA), the Southern African Development Community (SADC) has identified three principal sectors for development in Africa: bulk water, transport and energy. To this end, the DBSA has spearheaded a comprehensive regional approach in developments such as the Lesotho Highlands Water Project, Kasumbalesa Border Project between Zambia and the Democratic Republic of the Congo, and the Cahora Bassa dam in Mozambique. This fulfils the bank’s mandate to promote commercially viable and regional integration. Ruiters adds that the DBSA can go “to places where strictly commercial banks won’t venture and with a longer time frame, while still ensuring that our business beyond

South African borders is self-sustainable”. But, such investments are not happening in a vacuum. As infrastructure grows, other sectors start to boom, and as this happens, an all-round more fertile set of financial conditions come into play. Kiuna says: “Industries attracting the most attention currently are real estate and big infrastructural projects such as toll roads, ports, rail, airports and power. “We expect to see continued future investment in the power sector, especially as a number of African governments are introducing opportunities for the private sector to participate. We also expect more large investments in water and sanitation projects, and right now, public-private partnerships are an important model for infrastructural projects in Africa.” In Botswana and Namibia, Rand Merchant Bank has added its corporate and investment banking capabilities to sister retail banking brand First National Bank, which already operates in those two countries. “We are exploring an alternative retail banking model in India, which we hope to roll out in Africa too, and which we expect to have a significant impact on our retail banking footprint on the continent,” says Kiuna. One player in this gigantic game of chess that can’t be ignored is China. But just how much power does this country have? The World Bank, in its latest African report, says there is little danger of being too optimistic. It says that the biggest threat is a major pullback from China, but that “the ability and willingness of other actors to avail themselves of opportunities should China forego them are possibly somewhat greater than previously assumed”.

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Another area of burgeoning interest and investment is Islamic banking. Like the Chinese and the Americans, Middle Eastern investors are also targeting Africa – and for them, an appropriate conduit is through the issuance of sukuk (Islamic bonds). Senegal is set to issue a US$200 million sukuk in the first quarter of 2014, and Nigeria issued a sharia-compliant bond of US$62 million in October. According to ratings agency Standard and Poor, in an assessment of the global sukuk market, these two facts are “just two of many small indications that Islamic finance could help Africa pay for multi-billion dollars’ worth of infrastructure projects a year”. Then there are also other African countries that are jostling for a position. Mauritius and Botswana have made headway, positioning themselves as leaders of the new African financial sector and, says Ruiters, South African banks are now moving aggressively to re-establish themselves. “With strong legal frameworks and stable political systems, Mauritius and Botswana have set up an enabling environment for banks to make larger loans, take larger risks and stake a claim in the African gold rush

Industries attracting the most attention currently are real estate and big infrastructural projects such as toll roads, ports, rail, airports and power. which is underway,” she says. Kiuna concurs, highlighting the stiff competition out there. “We expect South African banks to continue to play a key role in the development of financial markets in the rest of Africa. However, the emergence of strong local brands in countries such as Nigeria and Kenya [suggests] formidable competition, as these banks are not only solidifying their positions in their home markets, but are also pursuing growth opportunities beyond the borders of their home countries,” he says. But where South Africa has laid a strong foundation for its banks is through its own service providers and retailers, which have grown their footprint up the continent.

Companies like Shoprite, MTN and Vodacom have been doing this “quite fearlessly”, explains Ruiters, and the commercial banks have had to follow their clients in to facilitate a successful business environment. Bhavtik Vallabhjee, speaking on behalf of Power & Infrastructure at Standard Bank, says business takes time to grow in Africa and Standard Bank is laying the groundwork for the African transformation, “working closely with governments and the private sector to make sure that there is a solid framework for the procurement of power.” If Standard Bank gets it right, the company will be in the pound seats: The Power Africa Initiative, which US president Barack Obama announced on his trip to South Africa in July 2013, will receive US$9 billion worth of government money and US$7 billion worth of private money to provide universal access to electricity for Africa by 2030. This requires a tripling of the number of gigawatts produced each year, so it’s a big ask, but a massive opportunity for investors. Will South African banks be at the forefront of it all? Only time will tell.

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REGIONAL INTEGRATION AND INFRASTRUCTURE

Giving Africa wings

Image courtesy of Shutterstock

Aviation standards need to be upheld if the air transport industry is to play a role in national growth and development, writes Tony Tyler.

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n 1 January, the aviation industry celebrated the centenary of the first scheduled commercial flight. It was a short hop between St Petersburg and Tampa, Florida in the United States. But it launched an industry that has comprehensively changed our world. From how we trade and do business, to how we spend our leisure time, aviation has had a profound and positive impact. So how does this relate to Africa and its growth and development? In Africa, the air transport industry plays a crucial role. A few kilometres of runway can connect even the most remote community to the global mass transit system. In a continent characterised by vast distances between major economic centres, limited and inconsistent road and rail networks and bottlenecks at border customs posts, air transport is often the only viable option to provide the connectivity that drives economic and social development. Already African aviation supports some 6.7 million jobs and US$68 billion in economic activity. Despite these conditions, the performance of African airlines has merely hovered around breakeven for several years. The industry is surviving, but is that enough to attract and support the investments needed for African aviation to seize emerging opportunities? Is it enough to play a greater role in stimulating the continent’s development?

Unfortunately, many governments in Africa ignore [global aviation standards] – treating aviation as a luxury rather than as a vital enabler of development. Some African governments are making success much more difficult to achieve because they have forgotten – or take for granted – the pivotal role that air connectivity plays in growth and development. And that performance is underpinned by global standards. Global standards are the foundation upon which a safe, secure, efficient and integrated global air transport system has been built. The system is so reliable that we don’t often think about the enormous coordination that makes it possible. That is why governments need to be reminded of the value of global standards – to support aviation and their own economic vibrancy.

Safety through global standards

The most obvious role for global standards in Africa is in safety. In November 2013, 33 passengers on board a LAM Mozambique Airlines plane died when the aircraft crashed in Namibia. In February, 77 passengers were killed when an Algerian military transport plane crashed into a mountain in eastern Algeria. In light of these tragedies, improving safety is, rightly, the biggest issue on the African agenda. Over the last century, global standards transformed air travel from a high-risk adventure into a routine part of daily life. And when it comes to operational safety management, the International Air Transport Association (IATA) Operational Safety Audit (IOSA) is the gold standard. IOSA will not eliminate all accidents, but the numbers on safety performance clearly show that airlines on the IOSA registry perform better. IOSA is already helping 25 airlines in sub-Saharan Africa, but the overall safety record for Africa remains a problem that needs fixing. The solution is to be found in global standards. African governments recognised this in the 2012 Abuja Declaration, which aims to achieve world-class safety performance in Africa by 2015. The Declaration focuses on concrete initiatives: • the establishment of independent and sufficiently funded civil aviation authorities

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• the implementation of effective and transparent safety oversight systems by all African states • completion of IOSA by all African carriers • the implementation of accident prevention measures, with a focus on Africa’s particular weaknesses – runway safety and loss of control • the implementation of flight data analysis • the implementation of safety management systems by all service providers. Each of these initiatives relates to implementing global standards. Governments must ‘up their game’ with more effective safety oversight. There has been some significant progress. But, to be frank, overall there has not yet been sufficient urgency in dealing with this fundamental issue. Meeting the Abuja Declaration’s 2015 commitment will require a major acceleration in the pace of implementation.

Economic prosperity requires enabling regulatory and fiscal frameworks

Global standards, of course, go beyond safety. Consistent application of global standards in the regulatory world can also add tremendous value. Unfortunately, that is not what is happening. Take taxation: global standards and recommended practices for fees and taxes exist, particularly with regard to fuel for international flights and infrastructure charges. Unfortunately, many governments in Africa ignore them – treating aviation as a luxury rather than as a vital enabler of development. We need to engage governments in a more robust dialogue so that they understand the consequences of such actions on the industry and, ultimately, on their economies. For example, buying aviation fuel in Africa is about 21% more expensive than the global average (and, perversely, jet fuel is at its most expensive at airports in Africa’s big oil-producing nations). That’s a heavy burden for airlines – limiting their competitiveness and their ability to

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provide efficient connectivity to people and businesses that depend on air transport. Across Africa, there have been comments about the stiff competition that the Gulf carriers are bringing. Governments in Africa should look at the factors that make the Gulf carriers so competitive. In places such as Dubai, Abu Dhabi and Qatar, they build infrastructure to accommodate demand and maintain it at

Africa’s economic success will depend as much upon internal integration as on doing business with longhaul markets. Aviation connectivity needs to be able to support both. world-class standards. And they ensure that the industry is not shackled by heavy taxes and regulations. I would encourage governments in Africa trying to stimulate their economies to follow these examples.

Market access is the key to connectivity growth

Access is another key condition for the industry’s success. Aviation has the potential to open up new markets, bring in new ideas and technologies, create jobs and lift people out of poverty. But there is a fundamental challenge to build connectivity within the continent. It is much easier to reach Africa from other continents than it is to travel within it. There are 13 flights a week to Nairobi from London. But there isn’t a nonstop flight from Nairobi to Dakar. You can get to Istanbul daily from Mombasa in less than seven hours. But to go from Mombasa to Cairo takes at least nine hours and one stop. Africa’s economic success will depend as much upon internal integration as on doing business with long-haul markets. Aviation connectivity needs to be able to support both.

The African Union (AU) has a vision for an integrated, prosperous and peaceful Africa. The Yamoussoukro Decision (1998) envisages a common African regulatory framework to let aviation connect Africans to markets across the continent and, in doing so, help to fulfil this important mission. But that is only possible if African governments recognise the collective benefit that it will bring, and implement it. Right now, there is very little to show for it 25 years after the member states of the then-Organisation of African Unity (OAU) committed to its implementation. Africa is the second-most populous continent in the world and home to an estimated one-seventh of the world’s population. Yet it represents just 3% of global airline traffic. I view this is as a tremendous opportunity. Other air markets have matured or are in the process of maturing; for Africa, the future of aviation is still being created. By keeping and defending global standards at the core of our amazing industry, we will build a future that is successful. For more than 50 years, the AU and its predecessor and genesis, the OAU, have held as their objectives the alleviation of poverty and encouragement of development across Africa. This year, commercial aviation is celebrating 100 years of its existence. Aviation has, without doubt, helped to spread social and economic development wherever it has been able to thrive. So the AU’s objectives and the role of aviation are absolutely in sync. And there is no reason why the next 100 years of commercial aviation cannot become Africa’s century of flight. We look forward to working with the industry and governments across the continent to make that a reality.

Tony Tyler is the chief executive officer and director general of the International Air Transport Association (IATA). With more than three decades of airline industry experience, Tyler is a strong advocate for a safe, secure, efficient and sustainable global air transport industry.

REGIONAL INTEGRATION AND INFRASTRUCTURE

Africa’s

‘Silicon Savannah’

Kenya is leading the continent’s ICT revolution.

enya’s most ambitious step towards becoming the main hub of technological development in Africa is called Konza Techno City. It is a proposed technology park or small 5 000 acre hightech city. Dubbed the ‘Silicon Savannah’, it is meant to attract innovative thinkers, entrepreneurs and multinationals, with a number of big investors like Google, Samsung and Boeing already expressing interest in the project. Like its prototype, Silicon Valley in the United States, Konza will form a technology cluster with an adjoining business and science park. Universities, residential housing, offices, hotels, stadiums, concert halls and sports facilities will complete it. The construction of Konza is part of Kenya’s Vision 2030, a long-term development plan in which information and communications technology (ICT) forms part of the government’s strategy to improve the lives of its citizens. Kenya is already leading the way in forming a thriving technology sector that is making progress in solving local socioeconomic problems and driving development. ICT is one of Kenya’s fastest-growing sectors, averaging 23% growth between 2000 and 2009. The country enjoys faster broadband connections than its tech rival South Africa, thanks to new undersea and terrestrial fibre-optic cables that have increased the speed and reliability of highcapacity bandwidth. Internet tariffs have subsequently fallen by 80% from 2009 to 2010, making access to the internet more affordable. The number of internet users in Kenya has increased from 1.05 million people in 2005 to 16.24 million in 2012 as a result. Until 2005, Kenyans had access to the internet via costly satellite connections. The country has since moved from 2G to 3G technology and is finalising plans to roll out 4G, which will make the speed of internet five times faster. Government will provide the frequencies, while the private sector will meet all deployment and operating costs in this public-private partnership. Despite this, Kenyans have higher access to mobile phones than to the internet. In www.nepadbusinessfoundation.org

2012, 29.7 million people were mobile subscribers, compared to 9.3 million in 2007. This means that 75% of the population are mobile subscribers. Kenya has four mobile service operators: Airtel Networks, Safaricom, Essar Telecom, and Telkom-Orange. Competition between the networks means that tariffs have decreased dramatically, from Kenyan shillings (KES) 29.5 per minute in 2004 to KES 3.5 per minute in 2012. The country has also emerged as an innovator in the development of mobile applications. M-Pesa is a mobile moneytransfer and financial services app developed by Safaricom. It allows users to buy airtime, purchase goods, pay bills and make personto-person transfers, making it safer and more convenient than dealing with cash.

Kenya enjoys faster broadband connections than its tech rival South Africa, thanks to new undersea and terrestrial fibre-optic cables that have increased the speed and reliability of high-capacity bandwidth. A number of start-ups have used M-Pesa as a base for their business. Beba, which was launched by Google, offers a prepaid card for commuters who make use of Nairobi’s local buses, while another project helps schools keep track of the payment of school fees. Kenya has also been at the forefront of developing the crowdsourcing website Ushahidi, which means ‘testimony’ in Swahili. It is an interactive visualisation website that was developed in 2008 to map reports of violence after Kenya’s disputed 2007 presidential election. Its success led to the creation of a non-profit company of the same name, which specialises in free open-

source software for information collection, visualisation and interactive mapping. The model has been used in other situations, such as mapping voting fraud during Egypt’s elections under former president Hosni Mubarak, as well as recording humanitarian efforts after the earthquake in Haiti in 2010. Similarly, smaller ICT firms are playing a role in developing solutions to local problems in the education, health, agriculture, tourism and commerce sectors. Makau Junction, for example, is an online platform that provides cost-effective realestate classified advertising, including listings for properties and brokers and building material suppliers. LnfQuick is a lost-andfound system that registers found items, collects them and sends messages to owners where to collect them, while Gwiji is an e-learning forum for students and teachers. Kenya’s health sector has benefited from various mobile health projects. MedAfrica is a mobile application that lists registered doctors, dentists and hospitals. It also offers first aid advice and basic diagnostic information. Other applications are able to verify the authenticity of pharmaceuticals from texted serial numbers and deliver money via M-Pesa to pay for treatment for very specific medical conditions. Technology incubators are popping up all over Kenya to assist businesses in becoming profitable by helping people who lack the necessary skills and capital to make their business successful. Kenya’s universities act as incubators, but many of the more than 3 000 mobile and web-based software developers in Nairobi operate from incubator iHub. This co-working space, which was established in 2010 by Erik Hersman, offers mentoring as well as a place to share ideas for start-ups that are developing mobile applications. iHub also provides networking with local and international businesses and technology experts. But to sustain Kenya’s position as a technology innovator, the country has to address a number of challenges. ICT infrastructure is vulnerable, as seen by undersea fibre-optic cables being cut twice by ships off the coast of Mombasa

THE OFFICIAL NEPAD YEARBOOK 2014

in 2012. These incidents affected 50% of all networks in Kenya and Uganda, and required costly rerouting of traffic through Seacom’s cable system. Like the rest of the world, Kenya has to find ways of protecting its IT from hackers. As a poor country, its concern is that there are young people who are acquiring IT skills but are finding little opportunity to earn a decent income using these skills. They may resort to hacking the databases of banks and other corporations, government agencies and universities for information that they can sell for money on the black market.

Smaller ICT firms are playing a role in developing solutions to local problems in the education, health, agriculture, tourism and commerce sectors. Small start-ups have to compete with established giants like Google and Safaricom. They require organising emerging ICT talents to tackle large-scale projects and financial backing to commercialise these projects. Potential entrepreneurs have poor business planning skills, which means that even if they can obtain funding, they could also face challenges in marketing and managing their business, which can only be addressed at a university level or through incubators. The African Development Bank says it can support ICT development in Kenya by providing financial and technical assistance. The bank can also help mobilise third-party funding for infrastructure, such as terrestrial fibre-optic cables. It is able to give technical assistance for the development of regulations, including patent rights that will encourage the retention of innovations and encourage their commercialisation. The African Development Bank also has the capacity to provide loans and grants on a public-private partnership model for ICT start-ups similar to the seed capital fund, Savannah Fund. This can also be extended to incubators such as iHub, mLab, NaiLab and @iLabAfrica.

Location of Konza Techno City

Aerial view of Konza Techno City

This article is a condensed version of a study called ‘Silicon Kenya: Harnessing ICT Innovations for Economic Development’. It was done by African Development Bank Group vice president and chief economist, Professor Mthuli Ncube, and chief research economist in the development research department, Peter Ondiege.

Artist’s impression of proposed Konza Techno City

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PROFILE

SMART METERS

IDEAL AFRICA SPECIFIC END-TO-END SMART METER DEPLOYMENT SOLUTION.

The Edison Power Group is the largest electrical contracting company in South Africa specialising in electrical installations in all facets of the electrical industry. As part of our deployment strategy, Edison Power Group forms strategic partnerships with various technology industry leaders to form the ideal Africa specific end-to-end smart meter deployment solution. Group Marketing Executive Mr. Thabiso Ramolefe spoke to us about this exciting innovation.

mart Meters are a new kind of energy meter that automatically send electronic meter readings to the energy supplier. These meters provide real-time feedback on a customer’s energy usage and what it is costing. The Smart Meters solution offers Single and Three Phase stand-alone, which can operate in pre-payment and post-payment modes. The Smart Meter is accompanied by a customer interface unit (CIU) to assist with remote messaging services offered by the city to its customers. The Smart Meter also supports remote connection and disconnection functionalities to assist with proper monitoring and targeted routine maintenance activities. The benefit of this smart system is accurate meter readings that allow for more accurate billing. Furthermore it eliminates estimated meter readings so customers no longer overpay or underpay for electricity - anyone who has had to deal with billing issues will no longer face such inaccuracies as Our Partners:

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now that they will have better control of their usage and costs. Additionally, the accurate meter reading and billing will result in better customer service and create customer confidence and satisfaction. Moreover, the smart meter also benefits small businesses, as City Power is training micro and medium enterprises to accompany their core staff for the project. All of these things ensure that our privacy and safety greatly increase, while lowering costs and energy consumption. MD of City Power, Mr. Sicelo Xulu, describes it best in reference to the smart meters rollout in the City of Johannesburg when he said that the smart meter will “give power to the customer to say: “I want to save on my electricity bill” and at the same time, “I want to contribute to a reduced carbon environment”. Mr. Sol Masolo, City Power Communications General Manager, has estimated that the smart meters will start

being introduced this financial year and conclusion is scheduled for September or October 2015. The initial roll-out will focus on larger power users throughout Johannesburg. To date, City Power has installed in excess of 3000 residential smart meters and 2500 smart meters. It takes less than an hour for a smart meter installation for residential customers. Edison Power Smart Metering Division’s objective is to be the leader in providing a Holistic end-to-end Smart Metering solution offering tailored to the African Continent thereby meeting their the continent’s political, financial and social needs.

REGIONAL INTEGRATION AND INFRASTRUCTURE

No more time to

dilly-dally around digital The June 2015 deadline for the analogue-to-digital transition for television looms. Will African governments and their citizens be prepared? Melina Meletakos investigates.

elevision viewers across much of Africa could be left with blank screens as the race to meet the International Telecommunications Union (ITU) deadline for the migration from analogue to digital terrestrial television (DTT) approaches. African countries are working towards the June 2015 cut-off date, which marks the period from which there will no longer be any international protection from analogue TV signal interference. Digital television promises viewers a wider variety of channels, and improved sound and picture quality. This is made possible by land-based digital transmitters that save radio spectrum by compressing information. Decoders, known as set-top boxes (STBs), will then receive and decode the information. Mauritius is the first country on the continent to make use of this technology. All of its analogue television services have been switched off, although the country experienced numerous problems along the way. STBs were not standardised and some Chinese versions were faulty. This led to issues of poor signal quality and lack of access to particular channels. The first East African country to go digital was Tanzania. It also experienced teething problems, when a number of Tanzanians were left without access to television because they did not manage to get STBs in time. Tanzanian media owners and users said the shift to digital television was hasty and resulted in the government having to halt the second phase of the process to deal with the impact of the first. The first phase included seven regions, while the second phase comprised 14. Kenya, which has positioned itself as the

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continent’s leading technological innovator, has experienced setbacks too. In early January 2014, the Kenyan Court of Appeal suspended the country’s digital migration for 45 days after three broadcasters wanted to overturn a High Court ruling that dismissed their application to delay the analogue switch-off. The basis of the application was that the country was not ready to make the transition, and that it would put analogue broadcasters at a disadvantage.

Digital television promises viewers a wider variety of channels, and improved sound and picture quality. But Kenyan commercial broadcasters were back in court at the end of February, arguing that they did not want their content to be distributed by a third party. They want digital broadcasting licences to transmit their own programmes, instead of having to give their content to Signet, which is part of the Kenyan public broadcaster, for distribution. The court again extended the date of the switchover, pending the outcome of the case. In South Africa, the switchover has been stalled for a number of reasons. Most recently, television broadcasters have been disputing whether the specified STBs will have controlled or uncontrolled signals. In December 2013, the government determined that all STBs must have a control system, but said that it was up to the broadcasters

whether or not to implement this system. At the time of going to print, this situation was still not resolved. South African president Jacob Zuma authorised a special investigation into any “unauthorised, irregular or fruitless and wasteful expenditure” relating to the company that won the Department of Communication’s multimillion rand tender to provide the digital migration public awareness campaign. Meanwhile, Uganda missed its first deadline and had to reset it to December 2014. Rwanda is aiming for a July 2014 switch-off date, after authorities initially set a target for the end of 2013, but had to move the date because of a shortage of STBs. The Rwanda Utilities Regulatory Agency says vendors are not selling the STBs aggressively enough, while the vendors maintain that people are reluctant to buy them because they are unaware of digital migration. International experience shows that the success of digital migration depends on educating consumers to understand that unless they have the correct STB, they will not be able to watch television after the analogue switch-off. People living in rural areas find it difficult to access information at the best of times, and generally require innovative forms of communication. Roadshows are one way of informing the public. A satellite operating company organised roadshows in 15 African countries in 2012, providing a forum to discuss the challenges posed by the switchover. It also offered advice on how to bridge the continent’s digital divide. Sekoetlane Phamodi, campaign organiser of the civil society organisation SOS: Support

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International experience shows that the success of digital migration depends on educating consumers to understand that unless they have the correct settop box, they will not be able to watch television after the analogue switchoff. technology. The campaign included a competition to create a logo and theme song for Digital Tanzania, public education workshops and news briefings. Social media was also used to remind people of the impending analogue switch-off. The success of digital migration also depends on the affordability of STBs, which must have certain minimum specifications to function. Kezias Mwale, a technical coordinator at the African Telecommunications Union, says that roughly 70% of African countries have proposed subsidies for people who cannot afford STBs, although the extent to which

these subsidies cover the cost of an STB differ. While Africa works towards its short-term goal of switching off its analogue technology, the continent will also have to decide how to use the huge portion of valuable spectrum that will be released once the full transition has taken place. The spectrum, which is known as the digital dividend, can be used for new services and technology that benefit the broadcasting industry by creating more channels. This will require a great deal more programming, for starters. However, the spectrum can also help the wireless communications sector deliver high-speed mobile broadband signals, which will help close the ‘digital divide’ by making information and new technologies more accessible to citizens. Despite these potential benefits, the conversation around the allocation of the digital dividend has been dominated by the broadcasting industry. Goldstuck says this is because the migration process has taken so long that the internet community has lost faith in the process and nobody wants to count on it. “Nobody wants to make plans or debate what the benefits of the digital dividend could be when, in all intents and purposes, it doesn’t exist,” he says. Africa can learn two important lessons from Mauritius, says Goldstuck. “The first is the importance of being consumer- and businessfriendly, rather than trying to control every aspect of who gets to do what and how,” he says. “The other is the importance of being visionary and focusing on future possibilities, rather than trying to protect vested interests.”

Image courtesy of Shutterstock

Public Broadcasting Coalition in South Africa, says consumers would have no choice but to buy an STB if they are left without access to television as a result of not being wellinformed. “What happens if you can’t afford a box, you don’t have access to it, or you don’t know that you actually need one? Your ability to access information is at risk. You can’t be part of the national conversation when you don’t know what’s happening in your country because TV provides that for you,” says Phamodi. Charley Lewis, a senior lecturer at the University of Witwatersrand’s LINK Centre, suggests taking advantage of Africa’s high mobile penetration and using alternative channels like SMS advertising to reach and educate people about DTT and how it will impact them. Lewis says such measures could ensure that people don’t wait until the last minute to buy an STB. “A deadline is set and everyone waits until the day before, and suddenly you get great queues everywhere and nobody meets the deadline so you have to extend it,” he says. Arthur Goldstuck, founder of South African information and communication technology research organisation World Wide Worx, says that while South Africa has implemented campaigns to highlight important information about the digital migration, these strategies do not appear to be effective. “It seems to be trumpeting what the government is doing for the people, rather than trying to educate people about what it means. Another reason it hasn’t been effective is because digital migration just hasn’t been happening. You can advertise something that doesn’t exist, but it falls on deaf ears,” says Goldstuck. Countries can also learn from Tanzania’s public awareness campaign, called Digital Tanzania, which used numerous tools to educate those affected by the change to digital

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REGIONAL INTEGRATION AND INFRASTRUCTURE

Rail revival

will boost Africa’s trade Investing in Africa’s dilapidated railway system will give bring multiple economic benefits to the continent, writes Dianna Games.

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THE OFFICIAL NEPAD YEARBOOK 2014

he revival of Africa’s largely defunct railway systems is an expensive but necessary development as more cost-effective and efficient routes to the sea are sought, particularly by commodity producers and mining companies in landlocked states. The gradual decline of African railway systems has pushed freight onto the roads – which has, in turn, eroded the road network of many countries. It has also pushed up the costs of goods for consumers. Many of Africa’s railway networks were built during the colonial time and have run down for a range of reasons, including lack of maintenance and new investment, little rolling stock, inefficiency and poorly constructed concessioning schemes.

A commodities boom has been a significant spur of the rehabilitation of old railways and building of new ones. In South Africa, for example, only 30% of freight moves by rail from the industrial hub of Gauteng to Africa’s busiest port, Durban, while the roads are increasingly congested. Studies done by the country’s transport utility, Transnet, show that rail in South Africa is on average 75% cheaper than road transport. However, the decline of the rail service in the country has forced goods onto the roads, despite the added cost. In recognition of the need to invest in the future, Transnet in 2012 announced a major seven-year infrastructure rolling plan, with rail comprising a significant component. The investment is intended to increase rail volumes from about 200 million tonnes currently to 350 million tonnes up to 2019. Transnet Freight Rail also plans to increase its market share of container traffic from 79% in 2012 to 92% by 2019. It is hoped that this plan, the Master Demand Strategy, which is likely to increase the use of rail for commodities such as iron ore, coal and manganese, will lead to a significant modal shift from road to rail transport. Africa needs to spend an estimated US$50 billion in the next decade to develop 4 000 km of additional rail infrastructure alone, according to Standard Bank estimates. Already, new initiatives are underway, most of them with financing from China, but also with assistance from the African Development Bank and other funding agencies. In Kenya, for example, the government has started building a new US$3.8 billion high-speed railway from the port of Mombasa – the main port for East African countries – to Nairobi in the first phase, and later to Uganda. The new railway, funded by the China Export-Import Bank, will reduce freight costs to eight US cents a tonne per kilometre, from the present 20c. The existing line serving the 470 km route from Mombasa to Nairobi is a narrow-gauge line built during colonial times. It is slow and inefficient because of age, neglect and lack of maintenance, which has driven the bulk of regional freight to the nearby highway. Freight trains currently take up to 36 hours to reach Nairobi from Mombasa. The new line is expected to cut travel time from Mombasa to Nairobi to four hours for passengers and eight hours for freight. A commodities boom has been a significant spur of the rehabilitation of old railways and building of new ones. For example, in northern Mozambique, the need to get commodities to the sea has sparked a rail revival. The country has increased the estimated cost of a railway and port project to boost coal exports to US$5 billion – almost twice as much as its initial projections. Mozambique is constructing a 525 km railway line from Tete province to Macuse in Mozambique’s Zambezia province, and a port able to handle 25 million tonnes of cargo per year. Construction is

due to start in 2016. Brazilian mining giant Vale is planning a new line from Malawi to Mozambique’s Nacala port. Those needing to transport goods have been forced to use the once-defunct Sena line which, despite having been revived, is still well below capacity for the large amounts of cargo needing to move to the coast. There are, however, plans to increase the line’s capacity from the current 6.5 million tonnes a year to 20 million by 2015. The expenditure has become necessary as mining companies struggle to get their lucrative output to the coast for export from the coal-rich Tete province. The infrastructure deficit has led to projects being put on hold or delayed. Rail projects will also unlock transport routes from central Africa to the Atlantic Ocean, potentially opening up rail links between Africa’s east and west coasts. A key project in this regard is the rebuilding of the line from the Angolan port of Lobito through to the Zambian border, with an envisaged link to the southern Democratic Republic of the Congo, one of the continent’s richest mining areas. This will result in a considerable reduction in the costs of moving goods and time to get commodities to Western markets. The 1 344 km Benguela line carried Congolese minerals until it fell into disrepair during the four decades of civil war in Angola. The majority of the Congo’s copper is currently transported about 3 500 km by road from Katanga to Durban, or east to Dar es Salaam in Tanzania. Angola has spent about US$1.9 billion in mostly oil-backed loans from China to rebuild the railway. South African freight and logistics service provider, Grindrod, announced in 2014 that it was to work with Zambia’s Northwest Rail Company to build, operate and maintain a new 590 km Cape (or narrow) gauge railway from Chingola in the Zambian copperbelt to the Angolan border, at a total cost of almost US$1 billion. Nigeria, Africa’s most populous country, is planning expenditure of billions of dollars to link its large cities. The first such project is the construction of a rail link between the capital, Abuja, and the nearby commercial hub of Kaduna in the north of the country, being built by the China Civil and Engineering Construction Company (CCECC), which is also constructing the Lagos Rail Mass Transit System in the commercial capital. Also scheduled for an upgrade is the 312 km Lagos-Ibadan rail line, which is a double-track standard gauge line scheduled for completion in 2016. A US$1.53 billion contract was awarded to CCECC in August 2012 to deliver the project within four years. There are several other routes in the pipeline.

Rail projects will also unlock transport routes from central Africa to the Atlantic Ocean, potentially opening up rail links between Africa’s east and west coasts. In West Africa, multinational mining companies such as African Minerals, ArcelorMittal and Rio Tinto are spending billions on rail infrastructure to move minerals to the coast in Guinea, Sierra Leone and other countries, in the process creating public goods, which governments hope will spur increased economic activity along the routes. Another economic spin-off from the rail revival has been the growth of the sector’s supply side, and a key player in this regard is South Africa’s Transnet. Its engineering company, Transnet Engineering, is assembling locomotives in the country to replace its own ageing fleet and for its African clients. It is already doing business with neighbouring Botswana and it is targeting Angola, Ghana, Tanzania and others for future growth. www.nepadbusinessfoundation.org

PROFILE

SekelaXabiso,

BIG PLAYERS IN THEIR OWN RIGHT! Government is making a plan to ensure that not only big businesses are getting the best jobs. Local accounting firm SekelaXabiso has punched above its weight, winning a huge contract with a parastatal that opens doors for other smaller companies, writes Belinda Moses.

t’s a ”big business” kind of sea out there. One that favours the big, feisty fish… mostly, the piranhas. And when the private sector gets huge government contracts, many in the business world are quick to cry “nepotism” and “corruption”. Often, those deals that raise eyebrows aren’t the easiest to clinch, and seem to empower just a few big players. But one local auditing company is proving that you are never too small to play big. In fact, accounting firm SekelaXabiso played so big it won an internal auditing contract in February 2013 that is arguably the biggest outsource contract of its kind in the world. The contract with the parastatal giant Transnet is worth R1.3 billion over five years. SekelaXabiso – a firm founded, led and managed by black women under the stewardship of Lindani Dhlamini – is

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the lead audit firm of the three chosen by the parastatal, and holds the largest part of the empowerment portion of the contract. SekelaXabiso will have a 40% share of the contract in the first year and Nkonki 20%, while KPMG will have 40%. By the fifth year of the contract, Nkonki’s share will grow to 35% while SekelaXabiso’s share will peak at 45%. SekelaXabiso’s job is to handle Transnet’s internal audits, corporate finance and financial management. Transnet has essentially put its financial faith in the accounting firm. And it is just this kind of match that State Enterprises minister Malusi Gigaba has been going on about. Recently, he said these deals could help revitalise ailing stateowned enterprises and empower the small fish that are usually swimming against the tide. Gigaba had instructed state-owned companies to enter into business transactions that change the character of the sector, and Transnet has led the way in appointing black audit firms. At Eskom, he explains, government is working on a programme for emerging coal mining firms that will change the empowerment game in the mining sector and lead to Eskom procuring more than 50% of its coal from black miners by 2018. So how did it all come together for SekelaXabiso? Dhlamini – responsible for a company that employs 300 people and that has an annual turnover of R200 million – is the daughter of two teachers, and grew up in Umlazi in KwaZulu-Natal. In 1993, at the age of 20, with a BSc in hand, Dhlamini took on a job as a computer programmer. But, after two years, she realised that to follow her passion, she needed to be a chartered accountant. So, after pursuing what she calls the “wrong” degree, Dhlamini went back to UCT

for a one-year BComm conversion course, and did articles with and worked for one of the big accounting firms. Then, she started Xabiso Chartered Accountants in 2003. She said she wanted to prove there was more out there than just working for someone else forever, and took a chance. “I realised back then that it was the Transnets and the Eskoms of this world that were the clients we wanted on our books. So, we formed strategic alliances with established firms to get there and our story to them was, ‘one day we want to be as big as you are’,” Dhlamini says. Dhlamini refused to get clients who fitted her company’s size. She laughs, saying: “No way – that would be thinking far too small.” As with the Transnet deal, she says, “We always wanted to punch above our weight.” “All the big firms put in their bid for this contract, and we demonstrated our knowledge of the business and that we thoroughly understood what the client was looking for. We also responded to what the board wanted in terms of the actual audit,” Dhlamini says. What gave the number-crunching firm even more weight was the fact that it was born out of the merger of two smaller companies with similar goals, which ultimately gave it the edge over the bigger bidders for this colossal audit deal. Sekela Consulting and Xabiso merged last year, having worked closely alongside Ernst & Young for eight years. Abel Dlamini, SekelaXabiso’s chairman, says the hard work started years ago but the company had to grow in skill and resources to win this contract and become a force in its own right. Now, a third of the 300 employees are working on the Transnet account. Dlamini says they are not naïve about this contract. They are aware that this is going to be a tough task – not least because the accounting, tax and advisory industry is fiercely competitive. The pressure is on to

PROFILE

Lindani Dhlamini

deliver, and deliver well. But the Transnet deal “brought recognition for us in the marketplace that no marketing could have done”. Says Dlamini: “Profits will come, but for now it’s not about the money. It’s about giving government, or whoever our clients are, the expertise they need to make sure it’s a seamless job and more than what they would have received if they put their trust in another, big company.” Transnet giving this contract to SekelaXabiso was a very clear message that the government-owned mega transport and logistics company has demonstrated its faith in black companies. Both the chairman and CEO are positive that this company is part of the vanguard that will create something even bigger. SekelaXabiso’s leaders have a big vision for the company, nothing less than achieving a R1 billion turnover by 2020. Dlamini says the government has changed its thinking and now believes that these partnerships can work. This has given him the confidence to realise his dream. He says he’s sick of shouting from the sidelines and now, finally, someone heard has him. “Government has set up great legislation for us, but it needs great implementers. So, for me, a person like Malusi Gigaba has helped implement something. This was a bold step in the parastatal realm to say, ‘yes, we will give a chance to the black professionals too, and we can make this legislation work for everyone’.” Chris Hart, chief strategist at Investment Solutions, says this deal is the government’s way of “grooming” and developing black auditing companies. And, while it is a boost for black empowerment, it should also be a sign that these partnerships are a smart idea,

as Hart puts it, and it “open up the economy”. What’s more, partnerships with small businesses also stimulate growth opportunities and keeps everyone in check, according to Hart and other industry experts. The goal is to expand but never to compromise on quality. “People have been moving on the notion that it is only the established players that can deliver the goods,” says Dlamini. “In the meantime, we have consolidated our act. Yes, we only have 300 employees, but we are no longer a small player in the context of the South African economy.” Nkonki, a 20-year-old black-owned auditing and accounting firm, won the 20% portion of the Transnet contract. This has been a big deal for Nkonki as well, although it already has a number of parastatals and national companies on its client list. These include Telkom, South African Airways, the Development Bank of Southern Africa and the Public Investment Corporation. It has also done internal audits for the Landbank and Telkom’s competitor, Neotel. Nkonki’s management says this deal has done wonders

“People have been moving on the notion that it is only the established players that can deliver the goods,” says Dlamini. “In the meantime, we have consolidated our act. Yes we only have 300 employees, but we are no longer a small player in the context of the South African economy.” for the brand, but it has also turned up the heat, forcing it always to deliver more than what’s expected, with “the focus on training and on the job experience”. Transnet hired SizweNtsalubaGobodo as its external auditors around the same time as the internal auditing deal with SekelaXabiso and Nkonki. The external auditing contract is worth R70 million. According to its website, SizweNtsalubaGobodo is the largest black-

Abel Dlamini

owned and -managed accounting firm and the fifth-largest accounting firm in South Africa. When Minister Gigaba announced this deal, he made a point of saying it was a transformational step and that his department was being “hard on transformation”. He said this was a step in “deracialising the profession”, which is predominantly white and male. “State-owned companies, as entrusted to us by the people of South Africa, are used as agents of change and transformation of our economy.” SizweNtsalubaGobodo has committed to giving a chunk of its fee to helping more black people enter the accounting profession. It will give bursaries to accounting students and support accounting faculties in previously disadvantaged universities. The industry is changing and the government is using state-owned enterprises as agents to reach out to the smaller players. They now have a chance to outperform the big names. For SekelaXabiso, it has opened up a world of opportunities, and for others, the future could be just as successful. Head Ofiice Contact Details Physical Address: 1st Floor Building 22B, The Woodlands Office park, Woodmead, 2052, Johannesburg, South Africa, Telephone: 011 802 4155 Fax: 011 802 5957 Website: www.sekelaxabiso.co.za

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HUMAN DEVELOPMENT AND HUMAN CAPITAL MANAGEMENT

Africa surges

Image courtesy of Shutterstock

into the future as minerals boom

The continentâ&#x20AC;&#x2122;s natural resources have the potential to steer Africa towards a more industrialised future, writes Stuart Graham.

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THE OFFICIAL NEPAD YEARBOOK 2014

decade ago, the Kibali region in the remote north-eastern Democratic Republic of the Congo (DRC) was rising from the ashes after a brutal ethnic war. Thousands had died or been displaced from their homes, and the economy in the mineral-rich area was virtually non-existent. At around the same time, as the world’s major powers were engaged in conflicts in Iraq and Afghanistan, jittery investors began looking for a new safe haven. Gold became the stock of choice. Prices of the precious metal were rising to record highs and geologists were sent out in force to search for untapped sources in remote regions. It didn’t take long for Kibali to capture their attention. Discussions were soon underway between Randgold Resources, AngloGold Ashanti and the DRC government. It was agreed that Randgold would manage the project and take a 45% share. Another 45% would go to AngloGold Ashanti and the rest would go to a parastatal called Sokimo. Randgold chief executive, Mark Bristow, said: “Randgold’s experience has shown that despite the stresses on both sides, mutually beneficial partnerships between governments and miners are still possible. “People in Africa want to work hard. They want it more than ever before, and they want to play a role in the emerging world.” Randgold and AngloGold Ashanti have so far spent US$1.7 billion on the mine at Kibali. Bristow says the project has shown the effect investment can have on an undeveloped region. “Kibali was challenging, due largely to the lack of infrastructure, but since we started drilling, a number of satellite industries, including agriculture, have developed,” he says.

Africa’s focus is shifting from looking to the rest of the world for development aid to unlocking its own investment opportunities. South Africa’s minister of Mineral Resources, Susan Shabangu, believes that Africa’s mining potential is huge, but remains grossly underexplored. “The exploration expenditure per square metre averages US$65 dollars in Canada, Australia and Latin America, whereas the African equivalence remains below US$5 dollars per square kilometre,” she said at the Mining Indaba 2014 in Cape Town. “The mineral exploration prospect of Africa remains extremely high, requiring both local and international partners and investment to unearth.”

Kibali is an example of how Africa’s natural resources are putting the continent on a path to an industrialised future. According to the International Monetary Fund (IMF), 20 countries in sub-Saharan Africa are “resource rich”. The boom caused by mineral exports to the world’s large economies has created wide opportunities for entrepreneurs and big businesses looking to grow. Technology companies, for example, are filling the gaps in Africa’s computing and telecommunications infrastructure, with firms like International Business Machines (IBM) and Microsoft stepping in. IBM expects its revenue from Africa to surpass US$1 billion by 2015. German company SAP, the world leader in business management software and software-related services, said the “boom in business” in Africa could make the continent its main market. Beer is an enormous market. Nigerian Breweries’ Star Lager and Legend Extra are very popular brews in the country of 167 million people. In East and Central Africa, beer has similar appeal. Ice cream is another largely untapped market. Unilever said last year that it was building a R500 million factory in Midrand to cater for Africa’s growing ice cream market. South African retailer Shoprite, which opened its first Africa store in Namibia in 1990, showed the powerful potential of the African market from early on. The retailer’s footprint now stretches from Angola to the DRC, Ghana, Lesotho, Madagascar, Zambia and Zimbabwe. Even ice, which remains an unaffordable luxury in rural and informal urban environments in Africa, is creating growth opportunities. Cape Town-based firm Minus 40 is exporting containerised ice-makers across the continent. Due to the high cost of ice in lesser-developed parts of Africa, the business offers a quick return on investment. The unit pays for itself in less than one year. Africa is “hot”, The Economist magazine pronounced in 2013, saying investors were attracted by the sub-Saharan region’s gross domestic product growth rate of more than 5% over the past three years. Even the normally cautious IMF is optimistic. It expects sub-Saharan Africa’s economy to grow by 6.1% in 2014, while the global economy is expected to grow by 4%. The growth in Africa, however, is not without its challenges. The potential for conflict over resources hangs ominously over solid business deals. The Central African Republic has shown how a conflict over diamonds can rout plans by governments and their business partners. There is also the problem of capital. Africa is short of savings and equity to get projects moving. Infrastructure, too, is sketchy. Often the lack of a road or a bridge will prevent a project from going ahead, while the lack of energy to power up a project is an ongoing problem. Nerina Visser, head of beta solutions at

Nedbank Capital, says African infrastructure development must avoid the mistakes of the past. “The majority of railway tracks were laid between mines and ports, and few of these can now be connected due to structural incompatibilities,” she says. “While this is an obvious source of frustration, it offers invaluable lessons that Africa should take to heart as part of its current technology and financial infrastructure development drive.”

The boom caused by mineral exports to the world’s large economies has created wide opportunities for entrepreneurs and big businesses looking to grow. Visser says it is clear that Africa’s focus is shifting from looking to the rest of the world for development aid to unlocking its own investment opportunities. Much of the continent’s success will depend on its ability to develop infrastructure that facilitates such self-development. Another challenge is that most of the investable opportunities in Africa cannot be fully accessed via the continent’s stock exchanges. “This is particularly true of Africa’s mining and resources sectors, where the complexity and capital-intensity of mining and exploration activities limit the range of financing partners available to these companies,” says Visser. Bristow believes that Africa’s mining countries must try harder to attract and keep foreign investors. He says there is growing uncertainty about regulatory environments and tax regimes in Africa’s mining jurisdictions, and this discourages international investment. “The mining code reviews of the past few years and those currently underway in a number of African countries have undoubtedly aggravated this uncertainty, by creating the impression that their governments not only want a bigger slice of the pie, [but they] want to take the pie before it is even baked,” he says. At the Mining Indaba, the mood among investors and mining entrepreneurs was cautiously optimistic about the continent’s potential. Shabangu appealed for “responsible” investment in Africa, not investment based on “exploitative principles centred on unrealistic rates of returns”. “As you know, mining is a long-term investment, and not about quick wins,” she added. “Those who balance Africa’s mineral development with growth will ultimately receive the greatest reward in the long term.” www.nepad.org

PROFILE

Making MANAGERS E

stablished in 1989 by the United Nations Development Programme and the International Finance Corporation to facilitate a project that would fast-track growth and management and leadership skills in Africa, AMSCO believes that managerial skills are where the true value lies in the development of human capital on the African continent We interviewed Paul Malherbe to find out more about what this ambitious project has achieved in the last 25 years, and what the plans are for the future. The ATMS Project is sub-Saharan Africa’s biggest and most ambitious human capital development effort in the private sector. What does that mean in real terms? ATMS stands for African Training and Management Services, and this project is a collaboration between the United Nations Development Programme, the International Finance Corporation (IFC) and the African Development Bank (AfDB), plus other development finance institutions. These organisations have come together to address the lack of managerial skills in Africa. It is the bringing together of international agencies, government and the private sector to develop the skills within the continent’s private sector, that will eventually leads to the strengthening of the African economy. The point is often made that human capital is an organisation’s most valuable asset. What is AMSCO’s take on this? As an organisation, we really believe that it is people who drive company performance. It makes sense: more competent managers lead to increased performance and thus increased profitability, which in turn leads to the growth of the company with more skilled workers, which means hiring more people from the community, which has a positive impact on alleviating poverty. What skills are most in demand in subSaharan Africa today? Let’s first talk category, and then sector. We are really seeing a need in the youth, technical and managerial categories. A challenge is that young people have to get skilled in an environment where those jobs probably won’t exist in five years. There are too few technically skilled people, for instance artisans, and people in manufacturing,

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accounting and programming. Onto sectors… The first is agriculture; we all know how much arable land there is available in Africa, we just need to find people with the right skills and knowledge to take advantage of it. There is also a need for skills in the financial services sector. Europe is leaving Africa behind in ICT – and consider Asia, specifically India, where call centres and technical support are providing this service on a global scale. Healthcare is always in need of skills, right throughout the African continent. How do you build capacity at a local level, improving the skill sets within companies in the various African countries that you operate? As government is a partner in the ATMS project, we leverage these relationships to help us identify skill shortages in key organisations and sectors within each country. We bring in international expertise, who work there for between three to five

“As an organisation, we really believe that it’s people that drive company performance.” years. During this period, it is a priority to identify and train local talent, providing them with these crucial skills. AMSCO is very invested in sectorial training. What are some of the major challenges facing your industry at the moment? Finding skilled people, it is as simple as that. We have a shortage of 830 000 skilled people in South Africa. Another problem is finding people who have the right skills for the right positions. Sometimes there is an oversupply of skills in some sectors, and other times an undersupply. You have formed a partnership with the Common Market for Eastern and Southern Africa (COMESA). Tell us more about that. It’s a very strategic one. Its footprint is very strong, and will help us build relationships at a country level. We want to take a more regional view when developing skills, and not operate in silos. By regional, let me give you an example. Take East Africa and

its tourism industry. East African countries are competing against each other for tourists, but how about marketing the entire region as a package – its magnificent wildlife, as well as Kilimanjaro? You have an interesting career history (as head of Mentorship and Consulting Services at Business Partners Ltd, South Africa’s leading investor in SMEs). What’s your personal business philosophy? I am guided by integrity and fairness, which comes when seeking mutual benefits in business relationships. When we are looking to form partnerships, working together for the benefit of the African economy always ensures success. What’s your vision for AMSCO in the medium term? Where do you hope to be as an organisation by the year 2020? We have made a strategic decision to broaden the scope of our organisation’s activities. Where previously we would get involved with managerial training at a company level, we are now focusing on sectorial programmes, as well as training interventions, identifying skills that are in short supply and addressing this. AMSCO’s long-term ambition is to make a sizeable impact on poverty reductions throughout the African continent, and hope to do this by closing the skills gap. We are a good partner for government, to help develop skills in each African country’s private sector.

HUMAN DEVELOPMENT AND HUMAN CAPITAL MANAGEMENT

Is China

a threat to

Africa?

While the Chinese may have a bad name in Africa for colonising African resources and taking locals’ jobs, Stuart Graham learns that Chinese investment is benefiting the continent.

ore than a century ago, British engineers working with African and Indian labourers spent years braving man-eating lions, snakes, crocodiles and malaria as they built a 1 000 km railway across Kenya. Thousands died during the project, which stretched from Mombasa to the shores of Lake Victoria, but by the time the railroad was completed, a new frontier had opened up in East Africa. Now, a new multibillion dollar, standard gauge line connecting the coastal city of Mombasa with the Kenyan capital of Nairobi promises to be as much of a game-changer. This time, however, the track is being built not by Britain, but by China. “The project will define my legacy as president of Kenya,” Uhuru Kenyatta said in November 2013 after laying the foundation stone for the construction of the line in Mombasa. “What we are doing here today will most definitely transform not only Kenya, but the whole eastern African region.” The railway is but one example of China’s expansion into Africa, where trade has grown to US$200 billion. Across the continent, China has built bridges, gas pipelines, roads, football stadiums, factories, mines, hotels and conference centres, including the African Union’s headquarters in Addis Ababa for US$200 million. China has expended countless billions on investment and, in turn, is taking advantage of Africa’s rich natural resources to meet the growing needs of its own country. www.nepadbusinessfoundation.org

In Zimbabwe, Chinese investment has increased so much that Chineselanguage signs greet visitors arriving at the international airport in Harare. Tanzania has signed an agreement with China Merchant Holdings for the construction of a new port, a special economic zone and a railway network. The Bank of China is financing a natural gas pipeline to Dar es Salaam and other infrastructure. Mozambique was among the first African countries to benefit from Chinese benevolence, when it received an interestfree loan of US$56 million to finance a series of medical teams to Mozambique – a scheme that continues to provide the country with medical services. The Chinese embassy’s statistics show that Chinese medical staff have treated 1.3 million patients and trained more than 2 000 Mozambicans through the years. China funded much of the All-Africa

China has expended countless billions on investment and, in turn, it is taking advantage of Africa’s rich natural resources to meet the growing needs of its own country.

Games in Maputo, was involved in a multimillion dollar housing project and even a Portuguese language radio station. It built most of the country’s roads, a new international airport, communication networks and a water supply project. It offers scholarships to promising students, with about 200 Mozambicans currently studying in China. It has built a multimillion dollar agricultural technology centre and a national stadium. It also cancelled Mozambique’s US$52 million debt. Somalia, still reeling from years of conflict, is to receive help from China, which has agreed to assist in the reconstruction of the Horn of Africa. China has provided Zambia with roads, schools, clinics and a railway line between Zambia and Tanzania. Chinese investments have expanded in the Copperbelt where new deposits of copper and uranium – and possibly oil – have been found. Greg Mills, director of the Oppenheimer family’s Johannesburg-based Brenthurst Foundation and a special advisor to several African governments, says a decade ago there was a notion that all Africa needed was aid and debt relief. However, thanks largely both to China’s trade and investment, Africa today offers unexploited investment opportunities and increasingly valuable business partnerships. “Trade is just one aspect of China’s relationship with Africa,” he says. “It has made affordable goods available across the continent. But its real impact in the early 2000s came in terms of infrastructure development, with Chinese investment

THE OFFICIAL NEPAD YEARBOOK 2014

“The company has already hired some 500 workers. During the peak season, there will be more opportunities,” she says. “It is already planning to expand the site.” Despite expectations that workers would simply assemble components made in China, in a surprising turn of events workers at the factory are involved in the entire manufacturing process. Chinese engineers are allocated to each team and are training local workers.

It is China’s business to worry about its own country and Africa’s to worry about Africa. “The Hisense experience can be regarded as an exemplary case of Chinese investment with positive implications for local communities,” she says. South Africa’s huge shortage of skilled workers is undoubtedly a major impediment

to development. The lack of sufficient engineers in South Africa makes it necessary for China to bring in trained staff. According to Kim, some 600 000 new engineers graduate annually in China. In contrast, the estimated number of engineers in South Africa in 2011 was between 32 000 and 35 000. Kim says one of China’s main reasons for investing in Africa is its quest for natural resources. The country’s rapidly growing economy has resulted in the need to secure energy resources for future stable development. “Africa’s importance to China’s overseas investment agenda is significant, but when compared with Africa’s traditional partners, such as multinational companies from the UK and the US, these countries remain the biggest players. China is just one of them,” she adds. China is committed to significant and long-term sustainable development in Africa. “It is important that for the technology transfer to be a success, the host country’s human resources [must] be similar to that of the home country,” Kim says.

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playing a major part in shaping the continent’s new image.” China has varied business interests in Africa, Mills says. Not only do Chinese stateowned enterprises bid for African government construction contracts, but a range of independent Chinese companies and other international firms compete for a variety of government and private projects. Many of the projects provide jobs for African workers. While a perception remains in some quarters that “poor Chinese are doing the work of poor Africans”, Mills believes much of this misunderstanding results from the use of statistical evidence showing that China’s trade with Africa has increased from R5 billion to R200 billion in the last 10 years, coupled with China’s growing demand for the continent’s natural resources and raw materials. “A lot of tension in Africa is generated by what is perceived as China’s involvement in crooked deals and in the buying up of Africa’s crown jewels,” Mills says. “That is probably the result of Africa’s xenophobic past and its colonial experience.” He points out that it is not China’s business to worry about the industrialisation of Africa. “It is China’s business to worry about its own country and Africa’s to worry about Africa,” he adds. Labour economist Loane Sharp of Adcorp agrees. “It is anecdotal to suggest that the Chinese poor are doing the work Africans should be doing. It is normal for an investing company to bring in its own experts, particularly where there is a shortage of skills locally. And trade, rather than destroying jobs, creates jobs.” Yejoo Kim, research analyst at the Centre for Chinese Studies at Stellenbosch University, explains that Chinese investors do indeed bring in some of their own workers, especially in mega projects – mainly engineers or staff in higher management positions. “However, there is not a single case of a Chinese company in Africa hiring only Chinese nationals,” she says. “Rather, we look at the percentage of Chinese and Africans. Many African countries have strict labour regulations. In Egypt, for instance, the country has a quota system of non-national employees. “In other words, if an investor wants to hire a foreigner, he has to hire a certain number of local people. It is impossible for foreigners to set up businesses solely. In South Africa, it is very difficult for foreign nationals to obtain work permits, especially for unskilled, temporary work.” With job creation a crucial element in South Africa, Kim points to a successful example of Chinese investment in the South African manufacturing sector that has the potential for technology transfer and job creation. A new factory, Hisense, a home appliance and electronics manufacturer specialising in TVs and refrigerators, was built in Atlantis, Western Cape, last year. The investment has created jobs in an area that has been impoverished for decades.

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PROFILE

Q&A WITH SPORT FOR ALL’S

KELLI GIVENS How does having a SFA franchise in the neighbourhood benefit the community? Aside from offering over 40 000 sport codes to children who have had limited access to quality recreational activities; a Sport For All site also benefits the community through job creation and skills development. Members of the community are recruited and trained to work as coaches for Sport For All franchisees. In many cases it is a first job to school leavers who have the opportunity to develop skills and gain valuable work experience. They then choose to continue coaching or seek other employment knowing they have a documented work history. Each franchisee employs between 3 and 6 coaches at a time, whose schedules can be rotated according to their needs. The simple model means franchisees can also run more than one site in their community and employ more coaches which will positively impact more community members. There is also a benefit to the community through social development as any children who can’t afford fees are sponsored by local companies. How can South African businesses support Sport For All? The South African government recognizes Enterprise Development as an important tool and an essential element towards job creation and ultimately economic growth. The B-BBEE Codes of Good Practice require companies to invest in the growth of the SME sector (code 600) through financial and nonfinancial contributions. Sport For All is an ideal beneficiary for Enterprise Development contributions as the company fulfils all four of the required goals and criteria offering maximum points for the investors’ B-BBEE scorecard. In addition, companies can contribute their Socio Economic Development funds (code 700) towards the sponsorship of membership fees for those children whose families can’t afford them. Many of our supporters have commented positively on the option to strategically combine both their ED and SED contributions towards one beneficiary entity. How does Sport For All fulfil the current B-BBEE goals of Enterprise Development? The first goal is to assist or accelerate development, which we do at community level. Sport For All targets mostly disadvantaged communities where prospective franchisees have the passion but lack the capital. The business uses the www.nepadbusinessfoundation.org

methods of commercial franchising to achieve social goals, specifically child development, youth employment and healthy lifestyles for all family members. The average franchise reaches between 300-500 children with after-school sport training sessions, many of whom have been living completely inactive lifestyles or have experienced limited access to quality recreational activities. The second goal is sustainability which is where our business model comes in as this is based on commercial franchising principles of a proven system of operation and training in how to use it to ensure sustainability. With the establishment of a Sport For All franchise, the budding entrepreneur is provided with all that is required to get a thriving business off the ground, including support. The aim of a Sport For All franchise is to make a profit through membership fees, sales of sports products and equipment and the hosting of mass-participation sports events to plough back into the business to support local initiatives making a difference in the community. If the franchisee follows the system, they are sure to be sustainable long-term. The third goal is financial independence for the enterprise. With the enterprise development funding we receive from corporate South Africa, we are able to identify franchisees and provide them with a funding structure that spans three years and results in 100% ownership after the term. The funding means franchisees can start with little or no debt and have a greater chance of remaining financially independent. The fourth goal is operational stability.

Although our franchisees benefit from skills development training and business support, technology is also provided to manage all day-to-day aspects of the enterprise - from business-centric issues such as tracking cash flows, to monitoring the progress and participation of the children. As each franchise is a total turnkey business-in-abox, the franchisee has operational stability from Day 1! Contact Details Delivery Address: National Bank House Seventh Floor 84 Market Street Johannesburg 2001 Postal Address: PO Box 62246 Marshalltown 2107 Telephone: + 27 87 820 4030 Fax: +27 11 492 3583 Email: info@sportforall.co.za Website: www.sportforall.co.za

PROFILE

Q&A WITH DEVELOPMENT FRANCHISING’S

CO-FOUNDER, WARREN BOND What is Development Franchising’s mission? Utilising a franchise business model as a tool for rapid and efficient growth, Development Franchising promotes sustainable economic development by transforming existing enterprises into profitable, replicable social franchise concepts. How does social franchising differ from commercial franchising? A social franchise is much like a commercial franchise, in that the goal is profitability but with one significant difference, an ethos of ‘profit making, not profit taking’ – profits are sown back into a organisation that’s dedicated to making positive change in its community. All DF incubated franchises will have focus on creating employment for marginalised communities whilst tackling head-on other localised socio-economic challenges. Has the social franchising model been proven in South Africa and whereto from here? We started to develop a social franchise model in 2004 with our highly successful inaugural venture, Sport For All. As the first FASA registered social franchise in the country, Sport For All has since grown to 15 franchises throughout South Africa, with 3 others planned to open in the first half of 2014 and more to follow in the second half of the year. Our goal is to have 15 franchises in each province by 2015. What is the importance of sustainable enterprise development and why is franchising the ideal solution? The South African economy is currently characterised by high levels of unemployment, abject poverty, high illiteracy, low productivity and low international competitiveness. The public sector and big corporates have limited capacity to create new jobs, and the National Development Plan refers to 90% of new jobs by 2030 having to come from small and medium enterprises. However, as 80% of SME’s fail within the first two years of operation, there is a huge focus on boosting the sustainability of developed enterprise. Developing a

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sustainable enterprise network is what franchising is all about as the equity value of any franchisor is in the long-term profitability of their franchisees. The franchising model is based on enterprise development, systems for support as well as operational monitoring.;When combined with replication and scale, franchised concepts are the perfect solution for both maintenance and the ongoing development of successful businesses. Can local companies get involved? Yes, this is a unique opportunity to align with a truly innovative initiative. Development Franchising is the ideal solution for local companies who are looking to focus their Enterprise Development spend on sustainability through entrepreneur or supplier development and business incubation. We are actively seeking partners who are inspired and motivated by the potential of social franchising to actively address social challenges whilst creating jobs for a growing and inclusive economy.

Contact Details Delivery Address: National Bank House Seventh Floor 84 Market Street Johannesburg 2001 Postal Address: PO Box 62246 Marshalltown 2107 Telephone: + 27 87 820 4030 Fax: +27 11 492 3583 Email: info@developmentfranchising.com Website: www.developmentfranchising.com

HUMAN DEVELOPMENT AND HUMAN CAPITAL MANAGEMENT

African companies boost local growth African companies are now investing in the development of the continent’s own private sector, writes Dianna Games.

he business landscape in sub-Saharan Africa is being shaken up by the growth of African-owned companies and a proliferation of local brands that are starting to compete with well-established foreign multinational companies. These firms are using the platform of domestic growth to take their business across borders and developing regional and continental strategies in competition – and in partnership – with Asian and Western companies. As the rest of the world starts looking at high-return, high-growth Africa as an attractive investment destination, so Africans themselves are now investing in their own development. This marks a change from the 1990s, when Africans tended to regard their own continent as a high-risk, poor, inefficient and politically unstable region. They stashed billions of dollars in overseas bank accounts and sent their children to school in Western capitals.

Image courtesy of Gallo/Getty Images

Countries that were once dependent on aid for foreign inflows are now attracting diversified foreign direct investment. Many young Africans took their talent to international markets to find opportunities that did not exist at home. Opportunity is luring back experienced African businesspeople from Western multinationals to grow local companies as part of a new corporate nationalism not seen in Africa before. International funds and investment banks are being led by dynamic Africans, who are targeting opportunities in key African markets. Their job has been made easier by a spate of success stories. In the second decade of the 21st century, Nigeria, Zambia, Ghana, Ethiopia, Tanzania and Mozambique, once among Africa’s poorest and most politically challenged www.nepadbusinessfoundation.org

states, are among the fastest-growing economies in the world. Countries that were once dependent on aid for foreign inflows are now attracting diversified foreign direct investment. Steady demand for commodities continues to push up growth rates, and new oil and gas discoveries across the continent are expected to fuel growth in the future. Sustained growth, averaging 5% annually over the past decade, has unlocked new trends that are driving demand for new goods and services. These include the rise of an emerging middle class, high population growth and rapid urbanisation. Technology has been a game-changer, enabling new efficiencies, effective communications, innovation and a stream of investment into a rapidly growing new sector. It is also assisting the development of supply chains to support regional business initiatives. South Africa has been the main driver of expansion by African-owned enterprises across the continent. After the end of apartheid in the early 1990s, its companies quickly took advantage of a new political and economic openness to move into new markets. Banks, supermarkets, clothing retailers, property developers and traders were among those who took their business to Southern African Development Community (SADC) states and beyond to East Africa. Over time, companies expanded their corporate journey to West and Central Africa. Among those that became household names in new markets to the north were brands such as supermarket group Shoprite, mobile phone companies Vodacom and MTN, financial services giants such as Standard Bank and Rand Merchant Bank, retailers Truworths, Woolworths, Foschini, Pep Stores and Mr Price. The second wave was the emergence of large African companies north of the Limpopo, many of which began as familyowned companies and have grown into large conglomerates. There are a number of key drivers of this corporate growth, which mostly mirror the drivers of South Africa’s expansion across the continent: a search for new markets

THE OFFICIAL NEPAD YEARBOOK 2014

as a result of pent-up capacity, increasing competition in local markets and natural ties with the region. They have also benefited from local networks, intrinsic understanding of their markets and a large appetite for risk, given the difficult operating environments from which most of them emerged. Mergers and acquisitions have also helped to create competitive players, many of them driven by African companies themselves, particularly those from South Africa looking for ways to increase their footprint on the continent. Kenya is moving swiftly to secure its advantage in East Africa, which it already

dominates in terms of trade. Its companies are picking low-hanging fruit in regional neighbours, and companies such as food manufacturer Bidco and supermarket chain Nakumatt are steadily increasing their footprint. Zimbabwean companies such as Innscor and Seedco have expanded as far as West Africa, while Zambia’s Copperbelt Energy Corporation (CEC) is pursuing pan-African power projects. In West Africa, Nigerian banks have spread across the region, with several going beyond their hinterland to set up shop in southern and East Africa. Nigerian cement

company Dangote has set up plants as far afield as South Africa, a country that companies from elsewhere in Africa tend to avoid because of its relative sophistication and high levels of competition. African banks are becoming better capitalised – the results of banking reforms across the continent. It is no longer unusual for big-ticket projects to be funded entirely by syndicated money sourced solely from African-owned banks. Capital raising on local stock exchanges is gaining ground and international institutions such as the International Finance Corporation and African Development Bank are investing in private sector development. There are an increasing number of millionaires in Africa, from Angola to Tanzania and from Cape Town to Senegal. They range from young entrepreneurs such as Ugandan Ashish Thakkar, owner of the Mara Group, and Nigerian Igho Sanomi, founder and CEO of Taleveras Group, to the old timers such as Sudanese-born Mohammed Ibrahim, Kenya’s Manu Chandaria and South Africa’s Nicky Oppenheimer, Allan Gray and Johann Rupert.

The more Africans invest in their own continent, the more invested they will be in its future. Intra-African trade, however, remains low at just 12% of Africa’s total global trade, highlighting the strong trade patterns that remain with international markets, notably Europe and Asia, as well as the ongoing challenges of trading in Africa. The World Bank reports that the cost of doing business in Africa is 20% to 40% higher than other developing regions for a range of reasons, including the high cost of capital, onerous regulatory costs, land rights, poor infrastructure, government interference in business, ineffective institutions, policy uncertainty and corruption. There is a lot of talk on high-level political platforms about the importance of the private sector to Africa’s growth story, and more needs to be done to give substance to the concept. A strong and successful private sector is a win-win for the continent. The more Africans invest in their own continent, the more invested they will be in its future and ensuring that growth trickles down to address pervasive problems such as unemployment. A larger African private sector, with greater lobbying power, will also help to lower risk in African markets, improve the business climate, increase the size of the potential business space and ensure sustainable growth. www.nepad.org

PROFILE

PREVENTION

IS BETTER THAN CURE!

For many individuals, the thought of getting a medical scan sadly only occurs when diagnosed with a life threatening disease. For some unfortunately by this stage it is already too late.

can For Life ®, the first and original Preventative Imaging Medical Centre in South Africa, introduces the most advanced medical Scanning technology currently available worldwide to screen you for the earliest stages of Heart Disease, Cancers and Strokes - long before symptoms are present and when effective management is possible. Doctor, Medical Specialist and Medical Director at Scan For Life® Mitch Kaplan spoke to us about the international successful practice of Preventative Scanning, which is now available in South Africa. At Scan For Life we focus on preventative medicine, particularly Preventative Imaging, which is the specialised Radiological field, which scans part of the body to detect Dread or Serious Diseases, that could affect ones mortality, long before the symptoms exist and threaten your life and livelihood. The services we offer are varied yet specifically targeted:

Heart for Life

Our Heart For Life Scans are the only noninvasive way of accurately diagnosing early Coronary Artery Disease, narrowings and wall plaques before the heart muscle is actually deprived of blood flow. Unlike traditional invasive (tube) Coronary Angiograms, no groin incision or insertion of catheter tubes into the coronary arteries themselves is required, and thus invasive risks are now excluded.

Colon For Life

Colon and Rectal Cancer is the second leading cause of cancer deaths in men and women therefore making it vital to detect the disease before it becomes life threatening. The Colon For Life Scan allows the detection of small pre-malignant polyps and very early Colon Cancers, accurately and non-invasively

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without the use of pipes, needles, IV lines or Anaesthetic / IV sedation.

Lung For Life

The Lung For Life Scan is the most sensitive and accurate method available worldwide for detecting the earliest Lung Cancers. The majority of early stage Cancers found with this technology can be removed and cured.

Brain For Life

The Brain For Life Angiogram Scans provide a non-invasive, highly accurate assessment of the neck arteries (Carotid and Vertebral), which carry blood to the brain; as well as the brain arteries themselves. Narrowings, cholesterol deposits (plaques), Aneurysms and vessel Malformations can all be reliably detected within these critical arteries. The MRI Scan is the most sensitive brain tissue examination available, and is able to detect early Brain Tumours, Strokes, Multiple Sclerosis and other cerebral pathology.

Exec For Life

With the lifestyle of the busy executive, the multiple health risks they face, as well as the current poor executive medical support system, Scan For Life® has developed a combination of targeted Scans that cover these lifestyle dread diseases. They include the Heart For Life, Colon For Life, Lung For Life and Brain For Life Scans, which are combined into one Scan series performed in a single sitting.

Woman For Life

For women Scan For Life® will arrange for your annual screening mammogram, breast ultrasound, and DEXA bone mineral density scan. With an exponential increase in patients, since its launch in 2003, due to people

becoming more educated and proactive about their health and technology improving in leaps and bounds, Scan For Life® is a becoming a way of life and a vital part of a healthy lifestyle for anyone with a family history or other risk factors and men over the age of 40 and women past the age of 50. As opposed to the traditional Whole Body CT Scans that have no real value, the targeted scans done at Scan For Life could save your life, as prevention is indeed better than cure! Contact Details Physical Address: The Rosebank Hospital Ground Floor, 14 Sturdee Avenue Rosebank, Johannesburg South Africa Telephone: +27(0)11-447-5669 Telephone: +27(0)11-447-7669 Fax: +27(0)11-447-7928 Email: info@scanforlife.co.za

HUMAN DEVELOPMENT AND HUMAN CAPITAL MANAGEMENT

The way we do things in Africa Dr Grant Sieff unpicks the challenges of forging successful business partnerships in Africa.

artnership is inherent in business life. With almost every business activity, individuals and teams must find ways to work together and agree on how to provide or receive products and services. Every organisation embodies a

partnership personality of sorts, which we call the organisational culture. Edgar Schein, the father of organisational culture, defines it as the “way we do things around here”. The culture of an organisation is a tacit partnership agreement among all employees that serves to define how to get along and get things done.

Partnerships between organisations pose an additional set of challenges for business leaders, which go beyond trying to position organisational culture in alignment with the operating strategy. These new challenges include effective negotiations and contractual agreements but, for the partnership to be successful and sustainable, other elements are needed. Shared values across organisations, a degree of trust and goodwill, regular communication and an ability to see how both parties benefit from the partnership will all also help to establish successful business partnerships.

Partnership dynamics in Africa

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For organisations aspiring to partner with other entities in Africa – across regions, countries and cultures where legislation and business and social values vary from place to place – the challenges are even more complex. Africa is possibly the most richly diverse continent in the world, with 54 countries spread across vast geographies, and many languages and local cultures. As the least-developed and industrialised continent, it also poses many particular infrastructure and logistical challenges. The most obvious of these is transportation. Poor roads and no significant cross-

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THE OFFICIAL NEPAD YEARBOOK 2014

border rail facilities make it all the harder to do business on the continent. Over the past six months, my consulting work has taken me into all the main geographic zones of Africa. Working in Nigeria, Senegal, Sudan, Tanzania, Kenya and South Africa, I have had the opportunity to engage with business leaders from at least half of the countries that make up the continent. In these engagements, business leaders have, without exception, focused on the strategic challenges of building effective partnerships for sustainable success. And, in all cases, the challenges and growth opportunities in Africa have been about building effective partnerships across countries and regions on the continent.

I donâ&#x20AC;&#x2122;t want to look back on my life and be that person who came and consumed in the sea of all this poverty. Here are 10 challenges to partnership success in Africa:

1. Access

Africa covers a vast geography and includes over 225 cities, with mostly difficult or expensive options for access. A flight from Dakar to Dar es Salaam, across the breadth of Africa, is over 6 700 km, while that between Cape Town and Cairo, spanning the length of the continent, is even longer. There are too few hubs, too few flights, poor roads and no significant intercountry freight rail facilities. The transport corridors of the continent are effectively clogged, too expensive or non-existent.

2. Technology

Unquestionably, modern technology is allowing both businesses and individuals to leapfrog many of the challenges arising from difficult access and poor infrastructure. Cellphone companies are facilitating innovative virtual connections that are, in some instances, replacing traditional ways of doing business. This is particularly apparent in East Africa with M-Pesa, which effectively replaces the need for traditional banks across a range of consumer services. Despite this, slow broadband remains a threat to effective partnerships in Africa.

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HUMAN DEVELOPMENT AND HUMAN CAPITAL MANAGEMENT

Virtual conferencing, online trading, interaction and communication are compromised by limited broadband access. South Africa, positioned as Africa’s most developed and largest economy, has had one of the slowest average broadband speeds on the continent. Fortunately, it appears to be catching up fast. According to the Akamai State of the Internet Report 2013, South Africa’s peak average internet connection speed was beginning to exceed 8 Mbps in first quarter 2013.

3. Infrastructure

Africa is attracting more foreign investment capital than ever before. Largescale infrastructure projects are evident all over the continent, largely fuelled by discoveries of oil and gas. This has introduced new opportunities and complexities into the partnering landscape, with BRICS (Brazil, Russia, India, China and South Africa) countries – China, in particular – funding many infrastructure development projects. While more cash is injected into the African economic landscape with big foreign company players, there are also new business expectations, and new culture and language dynamics at play.

4. Language

Over 2 100 languages are spoken in Africa. The language of business is English in most cases, with French, Portuguese, Swahili and Arabic also dominating in some countries and regions. However, operational partnerships can require a deeper understanding of local languages spoken by workers, stakeholders and customers. Understanding the local language is a critical first step to integrating with any culture. Partnerships between organisations where different languages are spoken need to overcome this hurdle to build relationships and avoid misunderstandings.

5. Culture

There may be 54 countries in Africa, but there are many more established cultures and tribal traditions. Prospective business partners need to orientate themselves to a myriad local customs, especially at the start of a business or partnership relationship. Greeting rituals, hospitality expectations, religious practices, local cuisine and attitudes to alcohol consumption are just a few elements of local culture worthy of investigation.

6. Political instability

Any business partnership in a foreign country carries risks and uncertainties. Legislation is likely to differ, and business www.nepadbusinessfoundation.org

rights may not be clearly assured. Political instability has been cited as a major risk for business in Africa. In the last few decades, there has been a promising shift towards democracy and constitutional government, but the Arab Spring in North Africa has introduced new uncertainty. Much of East Africa is at peace and prospering. Rwanda is cited as a model of how government and business can work together for rapid growth and development. Public-private partnerships in Kenya also appear to be bearing fruit. Yet, there are significant risks in the Horn of Africa. Somalia is a no-go zone for most business activity and Sudan remains embargoed by many countries and governments. Nigeria, despite its large economy, poses many unique difficulties for business, and some regions are considered to be too risky and ungovernable in which to work.

We need aspiring leaders, brave leaders, men and women with morals and values, if we want to take this continent forward. 7. Social norms

Businesses used to trading in more developed countries cannot assume that the same social norms will apply in all parts of Africa. Consumer credit terms cannot be negotiated on the same basis as may apply in South Africa or developed countries, for example, because collection processes cannot be as easily enforced. In many locations, the home addresses or registered domiciles of customers are not necessarily fixed, and legislation may not support companies wanting to get local customers to settle their debts. Also, local credit card usage is not nearly as prevalent in many parts of Africa.

8. Living conditions

If the business partnership requires staff to relocate to cities in Africa, it is worth investigating the living conditions. While there are comfortable middle-class suburbs in many of Africa’s cities, unexpected discomforts can make life miserable for expats. North Sudan is an alcohol-free country. Lagos has no effective distributed water or sewerage system, and borehole water quality can be very poor. Traffic jams and air pollution beset many big African cities, and most have an erratic electricity supply system.

9. Corruption

Unfortunately, corruption and bribes are endemic in many countries on the continent. While good governance and business practice are becoming more commonplace in many countries, the expectation of a bribe and other forms of corruption can compromise a business partnership. Clear, shared business values and standards need to be established upfront between business partners to avoid compromising circumstances later on.

10. Attitude

Perhaps the biggest complaint made by many local businesses engaging in partnerships is the perceived unwillingness of the foreign partner to listen and learn about local norms and adapt business practices accordingly. There are many stories of very successful South African companies failing in other parts of Africa for this reason. On the other hand, there are also great successes reported by those companies that do learn how to integrate and incorporate local intelligence and know-how into their larger Africa operations. Complaints about developed-world arrogance must be taken seriously when engaging in a partnership in Africa.

The future is with Africa

Despite the risks, uncertainties and challenges, there can be no doubt about the huge opportunities and promise awaiting those prepared to partner effectively in Africa. Sub-Saharan Africa, representing the majority of countries on the continent, is experiencing rapid economic growth, with annual rates exceeding 5%. There is an abundance of untapped enthusiasm, energy, goodwill, intelligence and skill among the billion inhabitants of the continent. One only needs to experience Africa as a businessperson or traveller to appreciate why it is so compelling to be a partner in Africa’s growth. And then there is the sheer breathtaking natural beauty of the continent. Whether you are taking in the unspoilt horizon at a beachfront restaurant on the westernmost point of the continent in Dakar, or are overwhelmed by the astonishing sunset skies gracing the east coast city of Dar es Salaam, it is not difficult to appreciate why it makes sense to devote time, energy and passion to Africa. Dr Grant Sieff is CEO of the IC Growth Group, a research, strategy and leadership development consultancy. He consults to leaders at the top levels of organisations across the African continent and abroad.

HUMAN DEVELOPMENT AND HUMAN CAPITAL MANAGEMENT

Africa’s youth hold the

key to a

brighter future

By 2050, there will be two billion people in Africa: one-fifth of all the humans on the planet. The future of the continent is inextricably linked to the fate of these people, most of whom are the youth of today. Graeme Codrington says that engaging Africa’s youth is an urgent priority – not just for Africans, but for everyone, everywhere.

ome of the most beautiful photos from Africa are of groups of beaming children, their bright, white eyes accentuating the tone of their sun-kissed skin. But there is something haunting in these images, too: a knowledge that even now, in the 21st century, the future is tougher for African children than almost anywhere else. About half of the world’s population is younger than 28 and classified as ‘youth’. In Africa, more than two-thirds of the population fits into this category, totalling nearly 600 million young people. This will at least double in the next 30 years. And most of them are not happy, despite what those photos may show. The older they get, the more they realise that they’ve had a really rough start in life in Africa. ‘Africa is not for sissies’ is a legitimate saying for businesses trying to expand across this vast continent. It can be tough. It’s equally true for the people who call it home. To secure Africa’s future, we need to ensure its young people can see beyond current realities and have a reason to believe in something better. This is not merely a humanitarian statement. Africa needs aid, but it needs the type of aid that enables sustainable development and economic growth. It needs the type of assistance that can help lift communities out of poverty and change the trajectory of their future forever. For the sake of the world economy that is now so intertwined, and not just for Africa itself, engaging Africa’s youth needs to be a global priority. A growing population, relatively high fertility, rapid urbanisation, high unemployment, lack of skills and educational opportunities, poor infrastructure and infectious diseases are just a few of Africa’s pressing problems. But some of these can be turned into an advantage. Demographics promise that Africa will remain a growing www.nepadbusinessfoundation.org

marketplace, long after China and South East Asia slow down. Urbanisation has the potential to propel social and economic growth as urban centres grow into hubs of innovation, collaboration and employment. And the installation of the latest technologies will allow Africa not merely to catch up with the rest of the world, but potentially leapfrog other nations in applying the newest advances, without incurring the cost or resource waste of legacy systems.

To secure Africa’s future, we need to ensure its young people can see beyond current realities and have a reason to believe in something better. But the biggest challenge facing Africa is actually a global crisis that affects every nation. Each year, about 10 million African youth arrive on the labour market – and there are not enough jobs for them. Globally, youth unemployment is an epidemic, reaching the highest levels ever recorded in every country in which it is recorded. Economic growth in Africa is creating some employment, but not on the scale required to absorb new market entrants. In countries like Uganda, for example, even waged job growth above 10% a year between 2003 and 2013 absorbed less than one in five new labour market entrants. Sadly, the last decade of growth in sub-Saharan Africa has done little to alter underlying labour market conditions. And Africa’s total labour force is expected to grow by about 70% between 2000 and 2020.

It would be too simplistic to attempt to propose a comprehensive strategy for youth engagement across the many diverse countries and regions that make up the African continent. Maybe the best that can be done is to highlight some of the essential components of any engagement strategy. Here is my tentative list as a starter for discussion: Employment – Governments need to create taxation incentives for those who employ and develop workers, especially young people and first-time job market entrants. The emphasis must shift from protecting jobs to creating jobs. We also need more focus on entrepreneurial training and support. Social grants must not be a substitute for employment, but rather incentivise it. Structural growth and transformation – Many African countries rely heavily on primary-sector activities, but lose significant value for their economies because they fail to incentivise or support supplementary industries that add value. Italian jewellers continue to make more money from South African gold than any South African company does, for example. Manufacturing also needs to be supported and strengthened. In South East Asia, this has remained a constant 31% of gross domestic product in the last decade, whereas its share is dropping across Africa. Skills development – There are many potential jobs available in Africa, especially as labour costs are lower relative to the rest of the world. But more skilled labour is needed. Properly supported and incentivised apprenticeship programmes would make a big difference, too. Freeing up labour markets – The worldwide evidence is admittedly somewhat varied, and vulnerable labourers do need some levels of protection, but Africa would do well to liberalise its labour markets and make it easier for employers to hire-and-fire. Entrepreneurship training – Support for small businesses and protection of

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THE OFFICIAL NEPAD YEARBOOK 2014

entrepreneurs (including reducing the penalties for insolvency) are vital for growth. Young people should be encouraged to become entrepreneurs. Education – The majority of Africans enter the labour market with limited education. Most did not complete primary education and only a minority went to secondary schools. Often, there is an overemphasis on university and not enough focus on vocational training. Empowerment of women – I cannot say this better than former UN Secretary-General and African statesman, Kofi Annan: “There is no tool for development more effective than the empowerment of women. No other policy is as likely to raise economic productivity, or to reduce infant and maternal mortality. No other policy is as sure to improve nutrition and promote health – including the prevention of HIV/AIDS. No other policy is as powerful in increasing the chances of education for the next generation. And I would also venture that no policy is more important in preventing conflict, or in achieving reconciliation after a conflict has ended.” Micro-financing – Already proving successful across Asia and parts of Africa, the availability of funding for micro-enterprise and community development must be part of a youth engagement strategy for the continent. Technology – Africa must continue to leverage the power of new and breakthrough technologies, and continue to encourage the world to develop cheap and accessible technology, fit for emerging markets. Young people everywhere, regardless of their background, connect instantly with the latest

technologies and find it really empowering. Governments could get involved by limiting profits for the data carriers to ensure affordable access for all. Let them be heard – The United Nations Special Envoy for Youth recently launched a programme to encourage governments around the world to set up youth-led advisory

“There is no tool for development more effective than the empowerment of women. No other policy is as likely to raise economic productivity, or to reduce infant and maternal mortality. No other policy is as sure to improve nutrition and promote health – including the prevention of HIV/AIDS. No other policy is as powerful in increasing the chances of education for the next generation.”

groups that can support national ministries and local delegations, and help monitor the implementation of youth policies. Africa should support this wholeheartedly and create structures for the youth to have a legitimate voice. If not, they will find young people marching in the streets. The youth will be heard, one way or another. This is not a comprehensive list. It may very well be a controversial one. The point was not to provide a fully workedout solution, but rather to encourage conversation and action. We may differ on the specifics, but I am sure we all agree that Africa’s future depends in large part on engaging its youth. There are some very encouraging signs in Africa. Mortality is down. Medical science is moving quickly towards solutions for diseases like malaria and AIDS. Extreme poverty is being reduced dramatically. Democracy and good governance are slowly taking hold. Technology is becoming cheaper and more ubiquitous. And wherever you look, young people continue to smile. There is a ‘can do’ attitude that permeates African culture. With just a little bit of support and encouragement, Africa’s young people will soar. But it requires each of us to contribute. What will you do to secure this great continent’s future, today?

Graeme Codrington is an African by birth and by choice. He is a writer, researcher, futurist and board advisor on future trends and disruptive change. He is the author of Future-proof Your Child (Penguin, 2008). graeme@tomorrowtoday.co.za

Koﬁ Annan www.nepad.org

CLIMATE CHANGE AND ENVIRONMENT

Climate change hits the poor hardest Moving away from fossil-fuelled energy production to that powered by renewable sources is a step towards eradicating poverty from the continent, writes Samantha Smith.

“C

limate change, environmental degradation and the pursuit of fossil fuels is the root cause of so much conflict in the world today. While leaders of the world’s richest countries bear the greatest responsibility for rising global temperatures, it is those already living on the edge of poverty who will feel the impacts most acutely... the daily reality of climate change.” These words by Kenya’s late Nobel laureate Wangari Maathai are echoed by African heads of state, leaders of United Nations institutions and scientists. Collectively, we’ve realised that we must move away from fossil fuels if we are to fight climate change, and we must fight climate change if we want to fight poverty. Financial institutions, both public and private, are becoming aware of the social and economic unsustainability of our addiction to coal, oil and gas. This is taking place at a critical juncture, when investors’ decisions will affect our world for generations to come. In less than a year, historic strides have been made by global banks and governments, changing the way money is spent for the greater good. The World Bank and two other major development banks – the European Investment Bank and the European Bank for Reconstruction and Development – announced that they would virtually stop funding coal power, while a number of developed country governments have eliminated coal from their overseas funding.

The only responsible course of action for our planet and our economy is a total transformation of global energy systems from highly polluting fossil fuels to clean, renewable energy. The window of opportunity for the world to make investment decisions towards a positive, sustainable energy future is closing fast. The 2012 World Energy Outlook of the International Energy Agency (IEA) warns that all allowable carbon dioxide (CO2) emissions could be locked in by existing fossil fuel energy infrastructure by 2017. We must take action quickly on our energy choices. Investing in oil, coal and gas is no longer an acceptable way to fuel growth. The only responsible course of action for our planet and our economy is a total transformation of global energy systems from highly polluting fossil fuels to clean, renewable energy. That transformation must start now, says John Podesta, founder of the Center for American Progress. Energy is essential for development. But it’s more than that. Creating jobs, securing livelihoods and ending poverty are all part of www.nepadbusinessfoundation.org

the same story as building renewable energy into rural communities. Governments such as South Africa committing 1% of its gross domestic product (GDP) to renewable energy are also part of this story. The African Development Bank (AfDB) also has its role to play. The cornerstones of development must be clean, just and renewable as we move forward. The AfDB’s mandate is to reduce poverty and promote economic and social development in Africa. Like the World Bank, it lends to governments and invests in companies across the African continent. This funds energy infrastructure and regional partnerships. In 2008, AfDB’s lending in Africa surpassed that of the World Bank for the first time in history, making it the biggest energy infrastructure financier in Africa. In this leading position, the AfDB is looking at financing for reducing emissions causing climate change by investing in renewable energy. A major tool for meeting the challenge to provide more renewable energy – and more reliable renewable energy – in a truly sustainable way will be through the Sustainable Energy Fund for Africa. This will include hydropower, geothermal power, off-grid solar power and biomass power. The challenges ahead include moving away from coal, oil and gas, and doing this in a way that allows for a fair and just transition: enabling development and also taking climate change fully and equitably into account. Other multilateral development banks are working on this same set of issues. The AfDB could play a critical, leading role, particularly in the run-up to the UN Climate Summit in September in New York.

CLIMATE CHANGE AND ENVIRONMENT

UN Secretary-General Ban Ki-moon has called on governments and financial institutions to provide innovative and ambitious commitments towards acting on climate change, especially in the form of renewable energy investment. In recent remarks, Jim Yong Kim, World Bank president, supported government and business moves towards fossil fuel divestment, saying that climate change

Because people living in extreme poverty are more vulnerable than anyone else, they will be the first to feel the brunt of the impact… If we don’t confront climate change, we won’t end poverty. threatens the development gains of the past two decades. He has also said: “Climate change threatens our fragile existence on this planet. And because people living in extreme poverty are more vulnerable than anyone else, they will be the first to feel the brunt of the impact… If we don’t confront climate change, we won’t end poverty.” The world has a responsibility to choose clean, renewable energy as the demand for energy grows across Africa and as efforts are made to ensure energy access for all. The real social and environmental costs of coal, oil and gas are increasingly clear, while the costs of renewable energy are dropping. The world is changing. Multilateral development banks can and will change, too.

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Home-grown sustainable energy successes About 600 million people and more than 10 million micro-enterprises across Africa have no access to clean, safe, reliable and affordable electricity. And many more people still depend on wood for cooking fuel. Despite this long-standing difficult energy context, country leaders have traditionally been more concerned with industry’s needs for electricity than with the rural poor. It is not uncommon in Africa to have less than 10% of people in rural areas with access to electricity. People have been waiting decades for electricity, and many will wait decades more. Sustainable energy is starting to move to the core of energy policy in Africa. In fact, across Africa a wide range of sustainable energy solutions have already been implemented and, in most instances, are working sustainably and effectively. Some examples: Small solar photovoltaic (PV) systems providing electricity for light, mobile phones and radios are spreading quickly. Nearly eight million Africans have acquired them by now. While these

systems do not provide the full comfort of modern electricity services, they are an elegant way to eliminate kerosene and candles and stay in touch with relatives, at an economic advantage. Energy-efficient light bulbs are finding their way to millions of people, including a million Madagascans through a WWFled project. While the upfront cost of such bulbs is higher than incandescent ones, electricity savings enable the consumer to recuperate the investment very quickly. Social enterprises are manufacturing all sorts of efficient and renewable energy-based appliances, such as efficient cook stoves or biogas plants. In Goma in the Democratic Republic of the Congo, the use of such efficient stoves went up from 10% to 60% in just three years. The best initiatives are scattered over the continent. The WWF has compiled a report, Boa Nguvu: An African Sustainable Energy Country, which explores how various successful sustainable energy efforts can be combined in one country to provide energy access for all. Read more on: www.panda.org/climateandenergy.

Samantha Smith is the leader of WWF’s Global Climate and Energy programme and also co-leads the WWF’s global campaign, Seize Your Power, which calls on investors to act on climate change by committing new investments to renewable energy and phasing out investment in fossil fuels.

PROFILE

KEEPING THE LIGHTS ON Behind every successful company, is a power generation solution from Sub Sahara Power Distributors

ith their head office in the heart of the industrial downtown of the Johannesburg central business district, Sub Sahara Power Distributors (PTY) Ltd (SSPD) is a one-stop solution for power generation. Through its distribution network, its network covers South Africa, Lesotho Swaziland, Namibia, Zimbabwe, Zambia, Mozambique and Malawi. SSDP has been in business since 2005, and its sister company Diesel Electric Services (PTY) Ltd is currently celebrating its 21st anniversary. With South Africa’s power grid under immense pressure, it’s no wonder that a company that specialises in petrol, diesel and gas generators, alternators and rotary UPS units is enjoying such success. Their product range consists of: • SDMO – an industrial French company that specialises in manufacturing generating sets, which include fixed gens, portable power (such as residential gensets, welding sets and water pumps), and rental power solutions (for instance, for lighting at events).

• Mecc Alte – an Italian electrical engineering brand that is the manufacturer and supplier of synchronous alternators 4 pole from 5kVA through to 3000kVA and 2 pole alternators. • KST Rotary Solutions – Belgium providers of rotary UPS, for instance, the KST Cleanwave high-efficiency battery and power-electronic free UPS which is a popular choice for ‘green’ data centres. Almost as if they predicted the scheduled blackouts that plagued the county five years ago, it’s no wonder that 2008 was a big year for SSPD. Since warnings went out in November last year that the possibility of renewed scheduled black-outs is higher than ever, 2014 looks set to be another stellar year for the power generation experts as business owners invest in the hardware necessary to keep the lights on and doors open. Not only does the company keep the lights on and the power running for large organisations, data centres and other sites throughout the country when the national power grid goes down, but they are even

helping to power Eskom in what is undoubtedly one of South Africa’s most crucial infrastructure projects underway. In the power generation business, a 24-hour service such as SSPD provides is critical. There are also more than 500 generators on the stock floor; as the immediate need for power is always an emergency. What separates SSPD and its products from competitors, is that they offer a turnkey solution to suit the needs of their clients. Some of SSPD’s well-known clientele include FNB, Standard Bank, the Reserve Bank and the South African Revenue Services. Get in touch with Sub Sahara Power Distributors Address: Sub-Sahara Power Distributors (PTY) Ltd. 40 Rawbone Street Ophirton. Telephone: + 27 11 493 0773 Fax: +27 11 493 0779 Email: sdmosspd@polka.co.za Website: www.sspd.co.za

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CLIMATE CHANGE AND ENVIRONMENT

Water and sanitation

must be prioritised

Ensuring that citizens have access to clean water and good sanitation is critical, but without political will there can be no progress in this regard, writes Liesl Venter.

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eading the statistics of Africa’s water and sanitation situation, one could very well mistake it for the script of a horror movie. In Africa, 115 people die every hour from diseases linked to poor sanitation, poor hygiene and contaminated water. In sub-Saharan Africa alone, 40% of the more than 700 million people live without access to an improved source of drinking water, while further figures show that at least 70% of people in the region don’t have access to adequate sanitation. Over a quarter of the subregion’s inhabitants – 230 million people – practise open defecation. Some 40 billion hours are spent every year, mostly by women, just hauling water.

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That is the equivalent to a year’s labour for the entire workforce of France. The Water Project (TWP) estimates that around half of the young girls in sub-Saharan Africa drop out of primary school because of poor water and sanitation. Lack of water deprives children of an education, which subsequently keeps people in the poverty cycle, says TWP. This organisation, which works to establish wells in rural communities, says the payoff for water provision is big. Every US$1 invested in water and sanitation generates an average of US$8 return in the form of saved time, increased productivity and reduced health costs. But bringing water and sanitation to

Dr Akissa Bahri

Africa’s people is neither easy nor quick. Experts agree that the situation is dire and while efforts to bring about change have increased dramatically, the rising population

THE OFFICIAL NEPAD YEARBOOK 2014

compounds the situation by driving demand for water and accelerating the degradation of water resources. According to the United Nations, Africa’s population (excluding the northern-most states) was about 838 million in 2011 and increasing by 2.6% per year, compared to the world average of 1.2%. By one estimate, its population will grow to 1.245 billion by 2025 and to more than two billion by 2050.

Every US$1 invested in water and sanitation generates an average of US$8 return in the form of saved time, increased productivity and reduced health costs. “Currently, Africa has the lowest rate of access to improved sanitation. Access to water is not much higher, but the situation is progressing faster than for sanitation,” says Dr Akissa Bahri, a coordinator with the African Water Facility (AWF), which is hosted and managed by the African Development Bank. The AWF is a multilateral fund that provides grants and technical assistance to enable governments, non-governmental organisations (NGOs) and public-private partnerships to secure investments and implement sustainable water projects throughout Africa. “Yet, the rate for access to water remains fairly low and practically unchanged over the last decade. From our standpoint, the situation is extremely serious as lives are at stake,” says Bahri. “We cannot say that a crisis has grown or even emerged per se, because the situation has been dire for the longest time. The continent as a whole has, however, made important progress and, though it is still lagging behind compared to the rest of the world, it has come a long way.” Kichime Bawa Gotau, sanitation officer for the African Ministers’ Council on Water (AMCOW), agrees, saying major efforts are under way across the continent – not only in the form of physical projects that ensure the erection of taps and toilets in communities, but in the increase in policy and commitment from governments, for water and sanitation crises are often the inevitable corollary of economic and political crises. Bahri adds: “In Zimbabwe, for example, the government had successfully increased coverage of water and sanitation after gaining independence, reaching 85% for water and 68% for sanitation services by 2000. The subsequent economic collapse and rampant hyperinflation meant municipalities ceased to pay for water or sewerage services, and the coverage levels are now estimated around 25% for sanitation and 40% for water.” Both she and Gotau say economic and political stability are the first keys in unlocking any form of progress in the water and sanitation subsector. “Infrastructure and services suffer from lack of it,” says Gotau. “And you need political will,” adds Bahri. “Without it, there is little hope of seeing any progress. Even if the international community, development partners and civil society agree that the water and sanitation sector needs more attention, you simply cannot impose a water and sanitation agenda on any government. This must come from within, from a conviction that this is the right thing to do and the right time to do it.” Much has been gained in Africa in this regard, with awareness campaigns providing governments with the knowledge and necessary information to make different decisions. It has seen the launch of the African Water Vision and Framework for Action 2025, a shared vision that provides the overarching strategic orientation on water resource management in Africa. This vision is tremendously important, say role players, as it is the single point of reference and the trigger for a number of water campaigns, thematic conferences and initiatives. “The launch of the vision immediately triggered the adoption of the

African Development Bank’s Integrated Water Resources Management Policy and the establishment of the bank’s multidonor Water Partnership Programme,” says Gotau. It might all sound like talk, but without these policies and visions, the continent will get nowhere. “If we don’t get this part of it right and create a platform from where all role players – be they investors, donors, project coordinators, governments, NGOs – can work, it will just be fragmented and undoubtedly fail. One sometimes loses sight of how big the continent is and how varied the cultures and people are,” says Gotau. “The underlying factor is the need for water and sanitation, but how you deliver that changes from community to community. In Nigeria alone, we have 774 local governments. Our outlook and approach is very different to that of South Africa, for example,” says Gotau. And that is before money is even brought into the equation. The investments required to keep pace with the demand and urbanisation of the continent are estimated at around US$50 billion per year for the next 20 years.

Economic and political stability are the first keys in unlocking any form of progress in the water and sanitation subsector. The forecast on annual spending for the water sector reveals there is a sizeable financing gap. Current spending is around US$14.3 billion – about 2% of Africa’s total gross domestic product – compared to the required US$21.9 billion. “We have to create more bankable projects to attract investment and boost the water sector,” says Bahri. “We have been able to mobilise €935 million and hope to reach the €1 billion mark in the next few months. It might seem like a drop in the ocean, but it is making a difference, slowly but surely.”

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CLIMATE CHANGE AND ENVIRONMENT

Africa requires bold leadership to adapt to climate change If the root causes of poverty and vulnerability are not addressed in Africa, people may battle to deal with climate change, argues Samantha Smith.

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THE OFFICIAL NEPAD YEARBOOK 2014

ast year, the World Bank published a series of reports extolling the growing danger of a warming world. It maintains that many communities are already feeling the impacts of climate change today, and many people could experience the harsher impacts of a warmer world within our lifetimes. Africa is especially vulnerable to climate change and climate variability, even though it produces only a fraction of the greenhouse gas emissions that are driving up the world’s temperature. Africa, including Madagascar, is the world’s second-largest and most populous continent (more than one billion people in 2010 and expected to reach three billion by the year 2050). Africa also contains about one-fifth of all known species of plants, mammals and birds, as well as one-sixth of all amphibians and reptiles. These species compose some of the world’s most diverse and biologically important ecosystems such as savannahs, tropical forests, coral reef marine and freshwater habitats, wetlands and montane ecosystems. Beside their intrinsic value, Africa’s ecosystems provide the economic foundation that Africa’s citizens rely on for water, food, energy and shelter. With the predictions of increased population growth, the number of Africans that rely on these systems is set to increase, placing far greater demands on

these ecosystems. Climate change combined with other external changes (environmental, social, political and technological) may overwhelm the ability of people to cope and adapt, especially if the root causes of poverty and vulnerability are not addressed.

Africa has to find a path to development that protects the natural environment while ensuring enough food, water and energy for all her current and future citizens. Climate change is a multiplier of existing vulnerabilities, including insufficient access to water, food insecurity and limited access to healthcare and education. Like all other regions, Africa has to find a path to development that protects the natural environment while ensuring enough food, water and energy for all her current and future citizens. This development tightrope is placed under further tension due to the projected impacts of climate change on the African continent. The United Nations Intergovernmental

Panel on Climate Change (IPCC), in its Fourth Assessment Report, predicted the following climate impacts for Africa: • By 2020, between 75 and 250 million people are projected to be exposed to increased water stress due to climate change. • By 2020, agricultural production, including access to food, in many African countries is projected to be severely compromised. This would affect food security adversely and exacerbate malnutrition. • Towards the end of the 21st century, projected sea level rise will affect lowlying coastal areas with large populations. The cost of adaptation could amount to at least 5-10% of gross domestic product (GDP) scenarios. • By 2080, an increase of 5-8% of arid and semi-arid land in Africa is projected under a range of climates. In October, the IPCC will release its Fifth Assessment Report, and the question will be how much worse the key indicators have gotten. Over the past 100 years, Africa’s temperature has already increased by an average of 0.5°C above pre-industrial temperatures, and predictions are that extensive areas of Africa will exceed 2°C by the last two decades of this century. This temperature increase will lead to drier and warmer conditions in some areas, while

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CLIMATE CHANGE AND ENVIRONMENT

others will experience wetter conditions. These predictions have dire implications for food, water and energy in Africa.

Climate change and food

Both extremes will affect agricultural practices and, hence, human health and livelihoods, people’s purchasing power, food markets and food security on a household level. With millions of people already scraping by under the poverty line, any further pressure on livelihoods could have catastrophic implications for human life and political stability. Around the world, including in Africa, there is evidence of how increased food prices are contributing to social unrest. The global economic crisis is placing additional constraints on economic development efforts, leading to increased loss of livelihood and widespread poverty.

Image courtesy of World Wildlife Fund

Changing the way we produce energy is the most important way for us to tackle climate change while creating the sustainable economy of the future. African economies are particularly vulnerable to the impacts of climate change on rainfall patterns. Much of the agriculture in the region is rain-fed. As a result, it is highly vulnerable to changes in climate variability, seasonal shifts and changes in precipitation patterns. Any amount of warming will result in increased water stress. Roughly 70% of the population lives by farming, and 40% of all exports are agricultural products. One-third of the income in Africa is generated by agriculture, and crop production and livestock farming account for about half of household income. Agricultural production in many African countries is projected to be severely compromised by climate variability and changes in areas suited for agriculture. In some countries, yields from rain-fed agriculture could be reduced by up to 50% by 2020. From the livelihood perspective, African women are vulnerable to the impacts of climate change because they shoulder an enormous but imprecisely recorded portion of the responsibility for subsistence agriculture, the productivity of which can be expected to be adversely affected by climate change and over-exploited soil, according to the IPCC. Natural disasters will be more intense, while pest outbreaks for both crops and livestock will become more frequent. Climate change will change temperatures and rainfall patterns, influencing plant seasons and affecting certain crop yields. The increasing number of tropical storms also poses a significant risk. www.nepadbusinessfoundation.org

Climate change and water

The management of water resources is central to successful adaptation planning and implementation, and to building the resilience of communities and countries. Rivers and lakes supply drinking water for people and animals, as well as being vital for agriculture and industry. Extremes of drought and flooding will become more common, causing displacement and conflict, and less fresh water means less agriculture, food and income. Climate change will have major effects on the world’s water systems, including more floods and droughts. Like forests, oceans are vital ‘carbon sinks’ – they absorb huge amounts of carbon dioxide (CO2), preventing it from reaching the upper atmosphere. Oceans and seas provide food for billions of people. But increased water temperatures and higher than normal CO2 concentrations, causing ocean acidification, are having a significant impact. Already, there is a measurable marine shift of fish stock from tropical regions towards the poles with continuing global warming and acidification. Western Africa could be hit very hard by these, both in terms of income opportunities and food challenges for people.

Climate change and energy

Energy is essential for poverty reduction, yet the means by which we have been producing energy is one of the biggest contributors to climate change. Millions of people still don’t have access to sustainable energy sources, and there is an obligation by African governments to provide energy to those who need it. However, burning more fossil fuels in the form of coal, oil and gas is going to worsen global warming and threaten food and water security further. Changing the way we produce energy is the most important way for us to tackle climate change while creating the sustainable economy of the future. Many countries in the world – such as China,

India and the Philippines – are investing heavily in renewable energy generation. Africa cannot afford to be left behind with stranded fossil fuel-based infrastructure. Every coal power station constructed today will last for decades, leading to massive lost investments if the world transitions to a low-carbon economy that has no place for fossil fuels. African leaders should invest in energy technologies such as solar, wind and geothermal that have a much more sustainable, promising long-term future. There are a multitude of technologies already available that can help us prevent runaway climate change. The World Wildlife Fund’s Energy Report sets out the case for renewables to provide all our energy needs by 2050. Such a transition is not only possible but also cost-effective, providing energy that is affordable for all; creating jobs; promoting livelihood and local economic opportunities; and producing it in ways that can be sustained by the global economy and the planet.

Climate leadership

Climate change can be considered Africa’s greatest challenge, and it will require bold and decisive leadership by political leaders to meet the challenge head on. Political leaders will have the opportunity to define our future as they participate in the processes that will lead to a new global climate deal in December 2015. There is an opportunity for African leaders to develop alternative growth and development models and not follow what has clearly been a failed economic model promoted by industrial nations. Africa can grow and develop in a way that is sustainable and equitable. But bold and swift action will be required to realise this imperative. Samantha Smith is the leader of the World Wildlife Fund Global Climate and Energy Initiative.

THE OFFICIAL NEPAD YEARBOOK 2014

Climate change in the green heart of Africa the greatest potential source of CO2 emissions from sub-Saharan Africa in the years to come are the forests of the Congo River Basin. And scientists expect that continued deforestation will contribute substantially to global climate change within and beyond the Congo River Basin. Although the effects of climate change in the Congo River Basin need further investigation, evidence from a few studies highlight severe impacts in the long term. Many endemic species – found nowhere else in the world – with restricted ranges are most at risk from minor climatic changes. One example is the endangered mountain gorilla (Gorilla beringei beringei), which is found on the borders of the Democratic

Republic of the Congo (DRC), Rwanda and Uganda. The mountain gorilla lives in this small area in altitudes between 2 500 m and 4 000 m, surrounded by a dense human population. That doesn’t leave the species much freedom of movement. As the climate changes, the mountain gorilla’s habitat may also change to such an extent that it will no longer be suitable for the primate. With no suitable place to live in, the species may die out – and become extinct. Clearly, the ability of the Congo River Basin to withstand the current and future impacts of climate change will be seriously compromised if the forests continue to be degraded and destroyed.

Image courtesy of Shutterstock

The forests of the Congo River Basin play an important role in regulating local rainfall and climate. They also absorb carbon dioxide (CO2), a gas emitted in excess by burning fossil fuels, coal, oil and natural gas – and the major driver for global climate change. But what happens when these forests are lost? Forest loss and degradation in central Africa (including the Congo River Basin) are likely responsible for the release of more carbon to the atmosphere than any other land-use practice on the continent. Similar trends of forest loss and carbon release are expected in the future if deforestation continues unabated. Because industrialisation is still low in the region,

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100

GOVERNANCE AND DEMOCRACY

The changing

story of Africa’s development

By Dr Ibrahim Assane Mayaki

he story of Africa’s development is changing. Six of the world’s fastest-growing economies are in Africa. Democratic governance has been strengthened over the last five decades, enabling a platform for stable growth and prosperity in most parts of the continent. The New Partnership for Africa’s Development (NEPAD) is happy to be part of this upward transformation process, through the implementation of its programmes. But while we boast of having some of the fastest-growing economies, what we don’t generally say is that we also have seven of the 10 most unequal economies. If we look at the Gini coefficient (an index that measures income inequality among entire populations), Africa is the most unequal continent in the world. Added to that specificity is the fact that 75% of Africa’s population is under 25 years old. If social inequality and the current systems of government are not revised, this growing youth population could impact adversely on the African nation state. This population mostly has access to modern and rapid communications systems and requires instant results. Inclusive policies are an absolute prerequisite for political stability. By ‘inclusive’, I mean creating jobs for the youth and facilitating access to public services. The equation of the most unequal yet youngest continent is one that could develop into an explosive situation. Tunisia is an interesting model that failed. The North African country was praised for its good transport system, highest penetration of information technology (IT) on the continent, good ports, relatively good airports, fairly good agricultural production, highest literacy rate of girls… but the country imploded. Fundamentally, the majority of the population did not perceive the level of inclusion of the youth as satisfactory. This is why whatever we do in agriculture,

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infrastructure and information and communications technology (ICT), if we do not resolve the key issue of inclusiveness, we are carrying very fragile systems that at one moment or another will implode. But for real development in every sphere to happen, we need to improve our infrastructure. At NEPAD, we believe that infrastructural development is the turnkey to all aspects of social and economic transformation. Antonio Estache and Grégoire Garsous, experts in infrastructure investment in Africa, wrote in their economic notes, ‘The Impact

To boost intra-African trade, we need to improve infrastructure. of Infrastructure on Growth in Developing Countries’, that there is a plethora of anecdotal and more technical evidence that a better quantity and quality of infrastructure can directly raise the productivity of human and physical capital and, hence, growth. For example, providing access through roads can improve education and markets for farmers’ outputs and others by cutting costs; facilitate private investment; and improve jobs and income levels for many. Despite the gains registered in improving regional infrastructure connectivity across the continent since the establishment of the African Union (AU) along with NEPAD, Africa still faces serious infrastructure shortcomings across all sectors, both in terms of access and quality. For instance, only 38% of the African population has access to electricity, the penetration rate for internet is less than 10%, and only a quarter of Africa’s road network is paved. Studies have shown that poor road,

rail and port facilities add 30% to 40% to the costs of goods traded among African countries, thus adversely affecting privatesector development and the flow of foreign direct investment (FDI). Furthermore, a recent World Bank study found that the poor state of infrastructure in many parts of Africa reduced national economic growth by two percentage points every year and cut business productivity by as much as 40%, making Africa – in spite of its enormous mineral and other natural resources – the region with the lowest productivity levels in the world. To boost intra-African trade, we need to improve infrastructure. That’s why we designed the Programme for Infrastructure Development in Africa (PIDA), a 30-year strategy by NEPAD, the AU and the African Development Bank, and involving regional economic communities, focusing on regional transboundary projects. The good thing about PIDA is that it was designed from the bottom up and the priorities are consensual. Given our global context, some of the minimal conditions for structural economic transformation require a less top-down approach in our planning processes. The 4 500 km highway from Algiers to

THE OFFICIAL NEPAD YEARBOOK 2014

Lagos, for example, would not have been possible without the political and technical support of each of the affected countries. Ten years ago, a private-sector operator who wanted to discuss a regional project with two governments would be lacking a rational framework. PIDA is that rational framework. It provides the strategic framework for priority projects to transform Africa through the construction of modern infrastructure into an interconnected and integrated continent that is competitive domestically and in the global economy. PIDA also forms the basis for the Dakar Financing Summit for Africa’s Infrastructure, which will take place in Senegal in December 2014. Hosted by Senegalese president Macky Sall, who is also chairperson of the NEPAD Heads of State and Government Orientation Committee (HSGOC), the summit aims to accelerate the mobilisation of both domestic and international financial support for the implementation of high-impact regional infrastructure projects in Africa. We have selected 16 out of 51 largely programme-based PIDA projects to be discussed at the summit. The objective is to create a dialogue between policymakers,

Africa – in spite of its enormous mineral and other natural resources – is the region with the lowest productivity levels in the world. heads of government and private-sector operators. Financing will develop from publicprivate partnerships. The 51 projects require an estimated US$68 billion for their implementation up until 2020, while an additional US$300 billion is envisaged for the PIDA projects to be implemented through to 2040. With such quantum resource requirements in the long term, there exists a huge financing gap that needs to be addressed for the successful realisation of PIDA projects. When high-level politicians, business entrepreneurs, industry experts and researchers meet in Dakar, it will not be just another talk-shop on Africa’s development. The summit aims to produce results in terms of new approaches to project preparation,

which will lead to an increased level of funding being directed to PIDA projects within a shorter time frame. The Dakar Summit highlights the need to scale-up Africa’s domestic financial resource mobilisation, and will provide a unique high-level platform on which to engage African leaders, businesspeople, regulators and policymakers about specific aspects that have hampered the rollout of transformative regional projects across the continent. Working closely with the private sector, the summit aims to produce tangible outputs that will, over time, contribute to regional transformation. It marks the beginning of a strong collaboration between public and private capital, based on effective project risk mitigation and project structuring to match different investor groups with a range of investment securities. The expected significant outcomes will be an opportunity for NEPAD to be a key point for investment in Africa. The summit will be a novel approach to tackling the changing landscape of Africa’s shifting development paradigm. Dr Ibrahim Assane Mayaki is the chief executive officer of the NEPAD Planning and Coordinating Agency.

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BRIEF SUMMARY OF

WITS BUSINESS SCHOOL W

its Business School (WBS) is well reputed for providing its students with a solid, relevant and globally benchmarked business education. The school is entirely postgraduate in nature and offers a variety of academic degrees and executive education short courses. WBS caters to individuals with a need to continuously improve and enhance their skills in their respective fields.

Overview of School

Wits Business School (WBS) offers a variety of post graduate academic and executive education programmes. WBS also specializes in the design and delivery of incompany programmes, whereby we partner with the client organisation to develop management capacity. The WBS MBA is the flagship academic programme and is accredited by the Association of MBAs (AMBA). Students looking for a more specialised Masters qualification can choose from one of the following topics: • Master of Management in Finance and Investment (MMFI) • Master of Management in Entrepreneurship and New Venture Creation (MMENVC) • Master of Management by Research (MMR) • Master of Management in Business and Executive Coaching (MMBEC) • Master of Management in Strategic Marketing (MMSM) • Master of Business Administration (MBA) The WBS Post Graduate Diploma in Management (PDM) is hugely in demand as well and aimed at students who have a strong undergraduate degree but lack full-time work experience. PDM classes are known for the young and vibrant energy in the classroom. Executive Education offers a wide variety of attendance and certificate programmes ranging from five days to nine months courses, with an option for full time, part time and block release class attendance formats. The Executive Education courses are typically for different levels of managers wanting to brush up or up skill in areas where they may be lacking and even to acquire new skills. The courses range from Finance for non-Financial Mangers, the New Managers Programme (NMP), Project Management and the popular Management Advancement Programme (MAP), all

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the way to the prestigious International Executive Development Programme (IEDP) which is taught in partnership with London Business School. WBS Executive Education courses have been tried and tested constantly with rankings in the global Financial Times Executive Education rankings and PMR Africa rankings. WBS is ranked in the world’s top 65 business schools for executive education by the Financial Times (FT.com) business school rankings, in the open programme providersection. Wits Business School was awarded silver place in the 2013 PMR Africa rankings – an annual national survey assessing academic institutions offering Executive Education short courses. The award recognisedWBS

as a leader in academic institutions that offer Executive Education short courses in South Africa. When it comes to customisation, incompany programmes, the Leadership Development Centre will design and customise a leadership development programme that is relevant and industry specific, based on best practice; thereby offering the client an excellent return on investment.

Wits Business School International Executive Development Program Study tour to Dubai and Singapore

he Wits Business School International Executive Development Program is first and foremost a truly international learning experience. It is designed to lay a solid foundation in the South African context, and then to add the international context with a week at the London Business School, and the study tour to Dubai and Singapore. The intention is to promote your personal development at a global level. One of the great strengths of the programme is the wide variety of delegates from both the private and public sector and also from other African countries. This provides a wonderful opportunity for networking and building relationships that will be mutually beneficial long after the programme has ended.

Who should attend?

The IEDP is ideally suited to senior executives and managers who have had at least ten years experience and who operate at a strategic level or managers who are being fast tracked in their careers. Acceptance on the programme is subject to a selection process based on the applicant’s current position and their career progression to date. Because of the heavy schedule, it is essential that executives be relieved of all responsibilities during the programme.

Programme structure

The structure of the programme covers a host of topics at the strategic level. Below is the list of topics that will be covered at the Wits Business School.

WITS BUSINESS SCHOOL

LONDON BUSINESS SCHOOL

• • • •

London Business School has built an extraordinary reputation, founded on the rigour of their faculty’s research, and the excellence of its teaching. The School is consistently ranked as one of the top business schools in the world. At London Business School you will be part of a community that provides challenging, international and highly enjoyable experiences.

• • • • • • • •

Leadership: Purpose into Action Economics - Global Perspectives Making Strategy Work Strategy Review in Action: As part of this module, group delegation visit organisations and conduct a strategic review and then report back on their findings. Financial Management: Delegates have the option to select either the fundamental or the advanced stream. Strategic Marketing Organisational Design and Development Ethics and Corporate Governance Talent Management Myths and Realities of HIV at Work Business and Sustainable Development International Business

Delegates will stay on the campus in the beautiful Regent’s Park area of London. Find out more about the London Business School at www.london.edu.

Topics covered will include: • • • • • • •

Demographic Change and the Changing Financial Landscape Doing Business in a Networked World Global Economy Inspirational Leadership – Olivier Mythodrama Leading Change Service Innovation and Business Modelling

International study tour

As part of this year’s study tour you will visit London, Dubai and Singapore. Free time is built into the schedule so you will have enough time to enjoy new and different cultures and places as well as shopping!

PROGRAMME FEE

Quick Facts Pre-day and Registration 25 July 2014: 12:00 - 17:00 Programme dates 06 August to 07 September 2014 International Study Tour Airline: Emirates • London Business School 25 – 29 August 2014 • Dubai 30 August – 02 September 2014 • Singapore 03 – 06 September 2014

Visas Required United Kingdom Dubai and Singapore Closing Date for Applications 30 May 2014 Programme Fee R222 000 Programme Manager: Faith Koroloso Senamolela.Koroloso@wits.ac.za +27 11 717 3569

R222 000.00 Additional R67 000 for Business Class upgrade This all-inclusive course fee covers tuition, instructional material, textbooks, lunches, refreshments and accommodation internationally. Accommodation in Johannesburg is for the delegate’s own account.

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SET YOUR MIND ON FIRE

WITH A WITS MBA T

here is a new spirit of optimism at the Wits Business School. The recent appointment of Professor Steve Bluen as the Director and the Head of School has revitalised the school. There is a sense of urgency and commitment to becoming Africa’s leading business school. Added to this, the development of MBA students to become future business leaders has moved to centre stage. We at WBS believe that the quality of both the lecturers and the curriculum design set our MBA apart from all others. Our goal has always been to stimulate critical thought about how to succeed in business both from the individual and organisational point of view. Over 70% of our faculty have PhDs and many are top ranked researchers. The curriculum for the MBA is focused on emerging economies within the context of the global environment. Our graduates are highly sought after by companies as they understand both local and international challenges. To support our teaching we have the largest case study centre in Africa. Students work on cases that are current and relate to South African organisations. The cases range from the study of culture on Montecasino to one on innovation on FNB. To maintain the balance between local and international, all MBA students will participate in an international study tour. Besides the excitement of international travel these study tours challenge the students thinking about different cultures, political systems, people management practices and ways of doing business. Students immerse themselves in countries such as China, India and Brazil. The rich ideas harvested through this process inform the students’ leadership actions when they leave the MBA programme. Besides international study tours WBS MBA students have a unique opportunity as we are the only South African member of the Partnership in International Management (PIM) organisation. This is an association of over 50 leading business schools around the world who collaborate to enhance MBA students’ learning. Wits MBA students can do their electives at partner schools, thereby, covering both local and international aspects of business and leadership. International exposure is also promoted through incoming

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Professor Steve Bluen, Director and Head of the Wits Business School

visiting groups of MBA students and also international case competitions. In recognition of the vital importance of self-awareness for leaders our MBA is designed to promote deep self-reflection. Each student has a number of individual coaching sessions which facilitates the student understanding him or herself as well as promoting knowledge into action. If you are serious about your career in business then a MBA is essential, however, the first question you will be asked is, “where did you do your MBA?” If you answer, “WBS”, recruiters will know that you have been through a programme that has a 45 year track record that is known for its academic

rigour, innovative learning approaches and a dedication to the integration of theory and practical application. If you are looking for a game changer for your career the WBS MBA is a proven path for career success. by Conrad Viedge (Director MBA Programmes, Wits Business School)

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Inclusive growth on the continent and filling the gaps

There may be economic growth in Africa, but it does not equate to less unemployment and inequality. Professor Mthuli Ncube looks at ways to address the gaps.

Image courtesy of Shutterstock

frica has enjoyed a significant increase in economic growth over the past decade; growth that is spread across countries and sectors. This is certainly a welcome improvement after the previous two decades. However, many policymakers and analysts wonder whether this is sustainable. Another concern is that economic growth alone is not sufficient. While the satisfaction with the growth acceleration is nearly universal, the concerns over its limits are quite varied. Some analysts feel that economic growth, while better, remains inadequate to generate rapid development, especially given Africa’s still-high population growth rate. Others are more concerned with the unequal distribution of the benefits of growth, noting that increased inequality has limited the impact of

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the growth on poverty reduction. Still others worry that the growth has not brought with it the structural transformations that are the hallmark of economic development, including growth in employment-generating activities such as labour-intensive manufacturing and services. And some argue that citizens’ well-being, broadly conceived to include non-income dimensions such as health and education, has not improved as much as incomes per se. Recently, there has been concern that growth is excluding disadvantaged groups in society. Most importantly, growth in Africa has failed to deliver jobs. The sectors that have contributed to Africa’s economic performance, in particular the extractive industries, are capital intensive but use little labour. So the majority of the population has not shared

in the benefits of growth. This is in marked contrast to the Asian experience. Growth in China, India and other South Asian economies has been concentrated in labour-intensive manufacturing, lifting millions of people out of poverty. Pro-poor growth has been supported by policies such as land reform, which increased the productivity of the rural poor, and major investments in health and education to create a more productive and therefore a better-paid workforce. One of the overarching objectives of the African Development Bank’s 10-year strategy (2013–2022) is to make growth inclusive by broadening access to economic opportunities for more people, countries and regions, while protecting the vulnerable. Improving the quality of economic growth can put Africa on the path to structural transformation – to moving from primary products to value-added manufacturing and services and, equally important, from low- to high-productivity activities. To ensure that inclusive growth is sustainable, the second pillar of the bank’s 10-year strategy will be helping African countries gradually change to green growth that will protect livelihoods

The main aim of the African Development Bank’s 10-year strategy is job creation and inclusiveness to promote wider access to economic opportunities for Africans across age, gender, ethnicity and geography.

THE OFFICIAL NEPAD YEARBOOK 2014

and improve water, energy and food security. Despite increases in gross domestic product (GDP) over the past decade, African growth is concentrated in just a few sectors and geographic areas. It has not been inclusive enough, nor has it led to deep reductions in poverty and inequality. Strong, sustained and inclusive growth will help countries address the constraints that limit the participation of women and youth in the economy. It will also help fragile states acquire finance and knowledge to build capable institutions. In the spirit of ‘what gets measured, gets done’, the African Inclusive Growth Index (AIGI) is the first attempt to quantify the dimensions of inclusive growth with the objective of providing a comprehensive measure of a country’s progress over time. The proliferation of single indices constructed from high-dimensional concepts in several areas in the last decades have brought to light serious inherent weaknesses. These dilute the fundamental concept they are intended to measure. To mitigate some of these fundamental problems, the AIGI builds on the Human Development Index used by the United Nations Development Programme and adds the following: income inequality, economic sophistication, voice and accountability, and social equality. The bank’s strategy outlines five main pillars to deliver its work and improve the quality of growth in Africa. These are: Infrastructure development – Africa still has massive infrastructure needs. It invests only 4% of its GDP in infrastructure, compared with 14% in China. Bridging the infrastructure gap could increase GDP growth by an estimated 2% a year. The bank has made significant contributions to infrastructure development in Africa, and tens of millions of Africans are now better off thanks to investments in transport, energy and water. The bank intends to increase infrastructure financing to the continent significantly – not just through its own lending but by leveraging its financial resources. It has introduced a new vehicle, ‘Africa50’, which is a fund to target ‘gamechanging’ investments and help close the huge infrastructure gap by tapping into African own resources. Improving governance – Africa’s recent dynamism could not have happened without dramatic improvements in governance, macroeconomic stability and reforms of public institutions. A number of African countries have made progress towards improvements in macroeconomic management and in fostering an enabling business environment. Although African countries are

increasingly getting the basics right, substantial challenges remain. While there has been no shortage of ambitious reform plans and changes to laws and institutions, sustained improvements in government performance have not been achieved. The pace of progress in improving the overall state of governance on the continent has been slow. Therefore, we must strive to better the quality of public institutions and good governance, to curb incentives for opportunistic and rent-seeking behaviour, to encourage prudent management of public resources and to build the state’s capacity to deliver public services.

Growth in Africa has failed to deliver jobs. The sectors that have contributed to Africa’s economic performance, in particular the extractive industries, are capital intensive but use little labour. Importance of deeper regional integration and trade – Africa is endowed with a vast amount of natural resources. The continent is also home to good climate, but the region is highly fragmented. The storyline of Africa’s 54 countries is that over half of them have a GDP under US$10 billion and a population of less than 10 million, 16 are landlocked, and many of them face the challenges associated with small size and small markets. Most African countries struggle to achieve the economies of scale required to be internationally competitive. That is why, through successive agreements, African governments have committed themselves to the pursuit of greater integration. However, in practice, national priorities have often trumped regional initiatives. As a result, the opportunities and benefits of regional integration have been elusive. More than ever before, intraregion trade has tremendous potential to drive Africa’s growth, employment and wealth creation, improving food security and, ultimately, poverty reduction. It is a foregone conclusion that the struggle in Africa is that of economic liberation through closer trade fostered by deeper integration. Therefore, we must address the impediments that hinder African countries from trading more with

one another. Overcoming weak infrastructure networks and streamlining immigration and border procedures could significantly open up the continent, create much-needed quality jobs and improve export competitiveness. Quality education for relevant skills – Successful economies are those that have invested in their people. In Africa, at least one in four primary school-aged children are still not in school. The adult literacy rate of 63% is 25% lower than the global average. In Africa, a mere 5.2% of total secondary school enrolment is in technical and vocational programmes, compared to 9.5% in South East Asia and 11.6% in Latin America. In Africa, 60% of students in higher education are from the 20% richest households, whereas less than 10% are from the 40% poorest households. Yet 20% of recurrent public education expenditure in Africa is spent on higher education, compared to only 15% on lower secondary and 9% on upper secondary education. Increasing budgetary allocations to education and reducing inequalities in access between rich and poor and females and males, could increase Africa’s aptitude and enhance entrepreneurship skills. Private sector development – There is a broad consensus that growth in Africa will be led by the private sector working in close partnership with the public sector. The African private sector contributes about 80% of the continent’s GDP and creates about 90% of all jobs. Micro, small and medium enterprises, 65% of them informal, create 70% to 80% of jobs and contribute 30% to 35% of the GDP. But there is a ‘missing middle’, with medium-size enterprises employing only 20% to 30% of the workforce. Ultimately, the main aim of the African Development Bank’s 10-year strategy is job creation and inclusiveness to promote wider access to economic opportunities for Africans across age, gender, ethnicity and geography. The bank will also continue to invest in infrastructure that unlocks the growth and development potential of the private sector and enhances community participation. It is determined to help improve skills for competitiveness and ensure that training is tailored towards meeting Africa’s skill needs.

Professor Mthuli Ncube is chief economist and vice president at the African Development Bank. This article was written with input from Ncube’s assistant, Basil Jones.

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Out of Africa –

always something new Attractive for its young demographics and abundance of natural resources, Africa could soar to become the century’s star performer. However, investors’ uncertainty about the continent’s future is dependent on external economic factors, over which Africa has no control, writes Anton Roodt.

ho knows what triggered the conception of Africa as the place of the unexpected in the ancient world’s perception of the continent. Translated from the Latin proverb as ‘always something new out of Africa’, it was shortened to the modern-day catchphrase ‘out of Africa’, with its varied interpretations– not least of all Hollywood’s idealised version of Scandinavian author Karen Blixen’s colonial love affair with Kenya during the early 20th century. The historical notion of ‘new’ out of Africa has fluctuated between positive and negative connotations. The early perception of Africa as out-of-the-ordinary is notable in the context of growing awareness of the performance and potential of African economies. This bullish attention coincides with the assertive drive for new growth markets by developed economies that face the systemic fallout of ageing population demographics and low-growth, mature economies. Media headlines in the recent past branded Africa as the hopeless, forgotten continent. This gloomy storyline has become more positive recently. Such a changed www.nepadbusinessfoundation.org

Economies in Africa have achieved commendable annual growth rates, well in excess of 5% during the last decade. outlook speaks of lions on the move and Africa as the world’s new growth engine. These are opinions from eminent sources: the World Bank, McKinsey & Company, the Hong Kong Trade Development Council and Goldman Sachs, for example. The Economist magazine arguably set the tone for Africa optimists with its front cover banner at the end of 2011, proclaiming ‘Africa rising’. In November 2012, Time magazine’s coverline was also ‘Africa rising’, with the article claiming that Africa is “the world’s next economic powerhouse”. In The Economist (2 March 2013), it is said: “African lives have already greatly improved over the past decade… The next 10 years will be even better.” Although the surge in Afro-optimism

is encouraging, all is not well from a global investment perspective. Expectations of emerging markets to deliver bonanzas to investors starved of high returns in depressed global markets, are in reset mode. Brazil, Russia, India and China (BRIC) were touted as a bellwether grouping by Goldman Sachs in 2003. China brought Africa into the fray by inviting South Africa to join the club. Renamed as BRICS, South Africa was very much the junior partner. However, it punched considerably above its weight as proxy for Africa as the mother lode with its rich natural endowment and demographic asset of a young, growing population. The ‘magic’ of BRICS in emerging market sentiment is cooling off. According to The Economist (24 December 2013), this negative turn is mainly triggered by rising prices that reduce the gap with United States’ levels and erode the BRIC comparative advantage. The reality of externalities that affect economic performance and related market expectations is illustrated by the shift from high hopes for BRICS to the cautionary alert on the ‘Fragile Five’ – categorised by US investment bank Morgan Stanley to comprise

THE OFFICIAL NEPAD YEARBOOK 2014

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Brazil, India, Indonesia, South Africa and Turkey (BIIST). These emerging economies are considered to be particularly “vulnerable... to large current account deficits” as the US Federal Reserve ‘tapers’ its mammoth financial stimulus, in place since the 2008 financial crisis. In addition to increasing interest rates to protect falling currencies, the Fragile Five governments “have yet to tackle the difficult domestic reforms, including tax and labour, to free up their economies and attract the long-term investment they need – not least as all five face elections in 2014” (Financial Times, 17 December 2013). Again, the inclusion of South Africa in the Fragile Five group is indicative of how Africa is likely to be viewed by global investors.

Success with banking and social change through the smart use of mobile technology demonstrates Africa’s competence and capacity to use modern technology to create value for the people of the continent. The excursion through the BRICS and BIIST evolution of changing investor sentiments and expectations highlights that Africa will be observed and interpreted in terms of what is ‘new’ to emerge from the continent as an investment destination, both positive and negative. This duality is a harsh condition for the attraction of investment interest in the sense that economic externalities, neither caused nor controlled by African economies, will materially affect essential investor sentiment. According to the World Bank, economies in Africa have achieved commendable annual growth rates, well in excess of 5% during the last decade, which is considerably better than the performance of rich, developed economies since the 2008 financial crisis. The impressive growth notched up by African economies needs to be seen in the perspective of comparative performance off a low base. In terms of competitive performance, the World Bank holds the view that “Africa is at a crossroads, and decisions and actions taken today will have a strong bearing on www.nepadbusinessfoundation.org

whether it places itself on a path similar to that of other regions such as developing Asia, allowing it to transition from resource-driven to higher value-added growth” (The Africa Competitiveness Report, 2013). Goldman Sachs’ factual perspective, Two Decades of Freedom – What South Africa is Doing with It, and What Needs to be Done, gives hard data on the economic performance and opportunities of Africa. It argues that the potential for high growth in Africa is exemplified by the collective impact of mainstream economies such as Nigeria, Angola, Egypt and South Africa. The extent to which these economies become ‘big stories’ of economic growth and potential underpins the hope and expectation of Africa becoming the successful continent of the 21st century. Africa operates from a low base of very little infrastructure in place. This reality creates huge opportunity to leapfrog technology. Telecommunications is a good example. Fixed line connection in Africa is mostly redundant. Mobile connectivity has become dominant, demonstrated by the technological revolution in countries such as Sudan, Nigeria and Angola. Material improvement in the quality of life is delivered through the provision of personal banking services to the previously unbanked masses across vast and remote expanses of Africa through mobile technology. Equally inspiring is the South African social entrepreneur, Anne Githuku-Shongwe. She created Afroes, an award-winning interactive learning tool for children across Africa, based on affordable and accessible mobile technology and teaching life skills such as entrepreneurship, leadership and gender behaviour. The potential multiplier effect of innovative solutions to social needs is staggering in a continent with the youngest age demographics in the world, and with the highest mobile market growth in the world (source: Africa Mobile Factbook 2012 for the third and fourth quarters of 2011). Success with banking and social change through the smart use of mobile technology demonstrates Africa’s competence and capacity to use modern technology to create value for the people of the continent. Economies of scale have been achieved that make a compelling difference in the quality of life in the formerly ‘lost, forgotten’ continent. The mobile success story can be replicated in other emerging sectors in Africa. It also reinforces effective participation in the technological revolution reshaping how people, countries and continents integrate into the

global network of digital connectivity that is the new highway of commerce and communication. No surprise, therefore, in the amplified interest in the continent as potentially the next big success story in investment, growth and development to break the stranglehold of poverty. Out of Africa always something new, indeed. Anton Roodt lectures and consults in strategy, governance, leadership and social entrepreneurship.

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Will Africa remain a

priority for BRICS?

Africa took centre stage at the recent summit of the five major emerging national economies, writes Memory Dube. But can this momentum be sustained?

frica was put on the BRICS (Brazil, Russia, India, China and South Africa) map last year when the fifth BRICS Summit was hosted in Durban – for the first time on African soil. Even the theme resonated with the continent: ‘BRICS and Africa: Partnership for development, integration and industrialisation’. This was relevant to a stated African priority agenda and, despite criticism from some commentators and analysts, it was also relevant to BRICS in light of the grouping’s increasing involvement in trade and investment on the continent. BRICS-Africa trade has been growing at a tremendous pace, having doubled since 2007. Such trade has especially been good for providing a buffer for African economies during the global economic crisis by offering alternative export markets for Africa, and thus diminishing the effects of the crisis. It also mirrors a longstanding call by analysts for Africa to explore and take greater advantage of opportunities for south-south trade, and the need to diversify export destinations. Inherent in this is the need to expand the continent’s economic base, www.nepadbusinessfoundation.org

grow the manufacturing sector and diversify Africa’s export basket. There is also the foreign direct investment element, where BRICS investment in Africa has been growing, especially in infrastructure and agriculture. This has the potential to assist with growing intraregional trade and making regional economic integration more relevant for Africa. Regional integration, coupled with infrastructure development, is one of the stated key priorities of the African Union (AU). Nonetheless, despite the desirability of this diversification of trade

BRICS-Africa trade has been growing at a tremendous pace… [providing] a buffer for African economies during the global economic crisis by offering alternative export markets for Africa.

THE OFFICIAL NEPAD YEARBOOK 2014

partners, the contribution of BRICS to shifting the African export basket has been minimal, as BRICS countries largely demand primary commodities needed for their own continued development and industrialisation. This then begs the question: what role can BRICS play in African regional integration? The answer lies in: • the commitments that BRICS has made to promote regional integration in Africa • Africa’s response to the increased BRICS engagement in Africa • the role played by other actors in Africa, particularly Africa’s traditional partners such as the European Union, Japan and the United States. BRICS countries – with the exception of South Africa, for obvious reasons – have had little direct involvement in regional integration initiatives. Instead, they tend to engage with individual countries, even when such dealings may have regional ramifications. This approach may constitute tacit recognition that given the weakness of Africa’s regional structures, involvement in regional integration based on a top-down approach would be much more political than economic in its effects. China, however, has developed some degree of relationship at a continental level with the AU and, among other things, built the new AU headquarters in Addis Ababa. At the Durban summit, leaders committed themselves to establishing a BRICS Development Bank, which is expected to play a big role in financing infrastructure in Africa. They signed the BRICS Multilateral Infrastructure Co-financing Agreement for Africa, which will be used as a vehicle to facilitate the co-financing of infrastructure development projects in Africa. They also held a retreat with African leaders after the summit, themed ‘Unlocking Africa’s potential: BRICS and Africa cooperation on infrastructure’. This was an opportunity for BRICS and African leaders to discuss ways of strengthening and deepening their engagement for the economic growth and development of Africa. While the retreat was reportedly successful, little came out of it besides reiterations of BRICS’ commitment to African development. This was also echoed by the summit declaration, which supports African countries in their industrialisation process, acknowledges the importance of infrastructure development and the various continental initiatives around that – all of this within the framework of the New Partnership for Africa’s Development (NEPAD). Africa’s response to BRICS has been muted in terms of strategy, with each country much more concerned with its own individual engagement with these countries and, therefore, its own economic

development. An end goal of regional integration, industrialisation and development demands that, in the same way there is a need for the harmonisation of BRICS countries’ individual engagement in Africa, the response of African countries should be based on a common platform. Through South Africa’s effort, the Durban summit was potentially a first step towards providing such a platform and leading the dialogue with the emerging economies on Africa’s development imperatives. This becomes particularly important when one also considers the need to reframe the trading relations away from the traditional commodity-export route. This common and strategic approach to BRICS’ engagement in Africa, however, is still not apparent beyond the events around the 2013 BRICS Summit, and this is a theme with which Africa still needs to engage more seriously. It is also important to remain cognisant of the fact that, while BRICS engagement in Africa is growing, Africa’s traditional partners still remain relevant to the continent’s growth story, especially on regional integration and infrastructure development. This is also particularly as they have donor programmes that focus specifically on these themes. Again, the issue of Africa owning this agenda becomes more apparent when viewed from this lens. Traditional partners have tended to own this agenda when it comes to the projects that they fund and implement. The rise of BRICS and its economic influence in Africa should be utilised as an opportunity for Africa to bargain for greater benefits and more ownership of its own development agenda, as traditional and emerging partners in BRICS compete to increase their scope of influence in Africa. There is much scope for a defined role for the BRICS countries in African regional integration and economic development, but much of this scope relies on Africa itself. Taking the commitments made at the Durban summit and the retreat and translating them into action demands that Africa holds BRICS accountable for its promises. Key to this approach is Africa having a strategic plan of engagement, at a regional level, with both BRICS and other external actors on the continent that influence regional integration. It remains to be seen whether Africa will be a BRICS priority for years to come, and an indicator of this will be the agenda set by Brazil for the 2014 BRICS Summit. However, with Africa being touted as the final development frontier and with developed countries and advanced emerging economies competing for both the African market and political influence, it is likely that African development will remain a priority agenda item within BRICS. The continent, on the other hand, has a responsibility to take ownership of how this agenda manifests itself on African ground. www.nepad.org

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provides a healthy role model

Rwanda has shown that healthier citizens mean a more productive workforce, which leads to an improved economy, writes Tanya Farber.

he link between an efficient healthcare system and a productive workforce is an obvious one: if citizens enjoy an environment where prevention is paramount and treatment is efficiently rolled out, they are able to carry on working. There are, however, a myriad other, less obvious, links between the two. For example, patients often have to spend far longer – or make more frequent trips – than is necessary, because of a backlog at facilities. Time spent getting to and from, and being at, the clinic is time spent away from work. Also, because of other social issues, such as unemployment, breadwinners are often supporting an extended family and therefore cannot afford to take time off. Many people who are ill continue to work when they should seek treatment and, as a result, are less productive and may expose co-workers to infectious diseases. The list goes on. In addition, in a country like South Africa, massive challenges in the healthcare system are exacerbated by problems such as substance and alcohol abuse, lack of transport, socio-economic inequality, poverty, housing shortages and overcrowding. Rwanda has been exemplary in improving its healthcare system and, as a result, the health of its workforce. It has managed to meet the healthcare needs of all its citizens, regardless of how poor they are. Over the past 10 years, the country has seen an 80% drop in deaths from HIV, tuberculosis (TB) and malaria, a 60% drop in maternal mortality, a 63% drop in annual child deaths and an average healthcare cost of US$55 per person per year. “It is currently the only country in sub-Saharan Africa on track to meet most of its Millennium Development Goals (MDGs),” says Rosemary Viljoen on behalf of the African Development Bank, “and, for example, an immunisation campaign against cervical cancer that was initiated in 2011 has reached 93% of eligible girls.” Other successes include an increased number of people receiving HIV treatment, from 870 in 2002 to more than 100 000 in 2012, while retaining 92% of patients in care. About 45 000 community workers have been trained to provide in-home care, as well as psychosocial support for HIV patients and basic primary healthcare. Viljoen points out that South Africa, which spends a relatively high 8.5% of its gross domestic product (GDP) on healthcare per annum, has not been able to achieve anything comparable to this. Dr Costa Gazi, a public health specialist who recently retired from heading up the public health unit at Cecilia Makewane Hospital in the Eastern Cape, says South Africa’s healthcare woes are founded on the

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dire economic inequality that characterises the country. Reflecting on South Africa’s inability to emulate Rwanda’s success, Gazi says: “After the massacre in Rwanda, there was not a lot left in that country and so they did not have this overly resourced privileged class like we have here. They had to develop their health solutions from the ground up.” By comparison, he says, South Africa has “enormous wealth, which is concentrated in the hands of a very few, and economic inequality is the basis for a very poor health service”. He says South Africa has the best health resources in Africa, but

Over the past 10 years, [Rwanda] has seen an 80% drop in deaths from HIV, TB and malaria, a 60% drop in maternal mortality, a 63% drop in annual child deaths and an average healthcare cost of US$55 per person per year. that these are extended to only 15% of the population. “That’s the private sector,” he explains, “and that has been subsidised by R20 million-worth of people who have medical aid. If you are over 65, then your expenses are tax deductible, and this is a huge subsidy to the private sector. This, conversely, ensures that the public sector cannot develop properly.” By contrast, Rwanda’s strategy has ensured universal health coverage. Dr Paul Farmer, a Harvard professor who founded Partners in Health and was instrumental in the Rwandan healthcare strategy, says: “A national community-based health insurance scheme, known as mutuelles de santé, was piloted in 1999 and extended nationwide by the mid-2000s, facilitated by the country’s improved financial situation.” As of June 2013, 90.6% of the population was enrolled, while another 7% are covered by civil service, military or private insurance plans. In addition to annual premiums, subscribers pay 10% copayments at the point of care for services not fully covered. Also, many preventative interventions, such as vaccinations, are fully covered, along with treatment for HIV, TB and some cancers.

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Outside funding has also helped Rwanda along the way. “Since 2006,” explains Farmer, “both premiums and co-payments have been subsidised for the poorest quarter of the population by the Global Fund and other partners.” But, the most important developments come from within the ministry itself. After research showed that lower-income enrolees often faced a high risk of what Farmer calls “catastrophic medical expenditures”, the Ministry of Health introduced a three-tiered fee structure so that poorer people pay smaller premiums. On the upside, South Africa might, in the upcoming years, experience at least some of Rwanda’s remarkable health system overhaul if the National Health Insurance (NHI) plans are rolled out effectively over an envisaged 14-year period. Last year, South Africa’s Health minister, Aaron Motsoaledi, who seems to inspire more confidence than many of his predecessors in this challenging portfolio, said in his budget speech: “There is no way the efficiency and effectiveness of the healthcare system can ever be realised without dealing with the cost of healthcare and healthcare financing. There are people who wrongly believe that the concept of healthcare financing, as envisaged in the NHI, is a pipe dream concocted by the ANC. I wish to advise them that the NHI is not a unique South African concept.” He explained how the World Health Organization is promoting this concept actively, and describes it as universal health coverage, which is a system that “does not discriminate against any citizen of a country”. Motsoaledi said South Africa had reached a “point of no return on this issue of universal coverage through the NHI”, and that a healthcare delivery system “does not exist to create millionaires at the expense of the health of our people”.

South Africa has the best health resources in Africa, but… these are extended to only 15% of the population. It is too early to tell if the NHI will revolutionise the equity and efficiency of the ailing healthcare system in South Africa, or if Motsoaledi’s other strategies will make an impact, but one thing is for sure: Rwanda has provided sub-Saharan Africa with a blueprint for success, and has set the standard in the process.

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Giving Africa an

authentic voice

Shortly before his sudden death in January, Joanna Wright spoke to the BBC’s Komla Dumor about what it takes to tell the African story.

or decades, the African story told in the foreign media was one of lack, famine and violence. But with the continent experiencing economic growth, another narrative has emerged. The Economist

African audiences are changing. Viewers are more sophisticated. The old ways of telling a story can no longer be sustained. caused a stir in 2011 when it ran the triumphant coverline ‘Africa rising’. But this new story ignores the daily lives of many Africans who still lack food, clean water and access to medical care. Komla Dumor, who anchored BBC’s TV current affairs show Focus on Africa, said the key to reporting on the continent is to let Africans speak for themselves, as it is problematic when others tell their story. Dumor, one of Ghana’s best-known journalists, had worked for the BBC from 2006 and started off on the radio

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show Network Africa. He travelled to most countries on the continent and reported on the major events of the past few years, from the 2010 FIFA™ World Cup in South Africa to last year’s Westgate mall siege in Kenya. Dumor died of a heart attack in his London home on 18 January. BBC global news director Peter Horrocks called Dumor a leading light of African journalism. He was “committed to telling the story of Africa as it really is”, Horrocks said after Dumor died. And James Harding, BBC director of news and current affairs, spoke of Dumor’s “singular role in transforming the coverage of Africa”. Speaking to The Wits Business School Journal on his last visit to Johannesburg, the sociology graduate and former radio host looked exhausted, but still managed to fill the room in his charisma and megawatt smile. He had interviewed luminaries such as Bill Clinton and Kofi Annan, but when asked about the stories that really stood out for him, they involved the ordinary people he had met. The key to reporting on the continent, he said, was telling their story “without letting one’s own assumptions take over”. “African audiences are changing. Viewers are more sophisticated. The old ways of telling a story can no longer be sustained,” said Dumor. The BBC has a long history in Africa, having been on the continent for 80 years. Its bureaux in 45 countries are largely staffed by Africans. These are “experts”, said Dumor, “who understand the stories in their complexity.” “At the same time, we are not getting trapped in a single story or narrative. There has always been a recognition [at the BBC] that there are many narratives. The stories aren’t just what is obviously news – there’s a lot happening in business, entertainment, sport…” While Focus on Africa provides a platform where Africans tell African stories, it has a multinational approach, he said. “We want to bring in different perspectives. How do we have this conversation so that everybody can relate to it?” Dumor said that while Africa is huge and varied, there are experiences that unite its people as a continent. The borders between countries were drawn often without the input or consent of the people who lived there, and the legacy of colonial stratifications remains. “Africans are connected through common historical experiences. There are challenges that face working people across the continent and they are the same challenges. The same conversations are being had by Ghanaians, South Africans, Nigerians. They’re all trying to get by, do business; they’re all trying to hold their governments accountable… “And sometimes we are connected by an emotional bond we don’t always recognise. In the 2010 World Cup, Africans would connect with the African teams. I was told that Nairobi fell silent during the game [between

Uruguay and Ghana]. West Africans watching the New York Marathon were rooting for other Africans, people from a different geographic space.” Indeed, Africa needs to be united if it is to compete in the global economy, said Dumor. “As an economic bloc, we need to recognise that these borders were not created with the input of Africans. If you want to deal with major trading blocs, you are at a disadvantage. Ghana on its own can’t negotiate with Europe, but as a bloc, Africa has more power.” For Dumor, there was no one story that defined the African narrative – in opposition to the simple experiences defined by tags like ‘Africa rising’. “I’ve met Africa’s wealthiest people, powerful politicians. And I’ve met ordinary people who have told me a great story. There’s not a single story that defines Africa for me. All of these things come together to create a perpetual optimism in me.”

Social media presents a good opportunity for smart entrepreneurs and marketers because it’s so easy to engage with people in that way. The online population of Africa is growing. But he added that one story which was most interesting to him at the time was the development and role of social media, and how it was changing conversations among young people. “Social media has this transformative power. Powerful conversations and trends are developing on these platforms. Young people are having a very different kind of conversation and deciding how to approach these new issues. “I interviewed Desmond Tutu recently and he told me that he can’t get over how young people are speaking out, how they are prepared to question everything. He said that in his day, people listened to their elders! And the kind of conversations taking place on networking sites are driven by an African agenda.” The subtleties in these agendas are difficult to grasp outside of the continent. Dumor said: “You go to a party [abroad] and someone says they have some great African music: they’ve put it in their world music section. But as someone who has been, when off duty, to every nightclub on the continent, I can tell you that this is not what young people are listening to at all!” Dumor saw a link between this spread of popular culture and social media and

“movements that serve political agendas”. His example was Occupy Nigeria, a social movement organised in response to the cessation of petrol subsidies by the Nigerian government in 2012. Occupy Nigeria, characterised by protests and strikes, was largely organised on Facebook and Twitter. Was it like a Nigerian Arab Spring, then? “That interview with Tutu was very revealing. He said Africa had already had an Arab Spring in [the South African youth movement of] 1976. Why then be afraid of challenging the status quo? Young Africans are very vocal about what’s happening, about what’s wrong. “And social media presents a good opportunity for smart entrepreneurs and marketers, because it’s so easy to engage with people in that way. The online population of Africa is growing.” Another story that stood out for Dumor was that of Manilal Chandaria, a Kenyan businessman and one of the continent’s wealthiest men. Chandaria is a highly successful entrepreneur and award-winning philanthropist – and immensely humble and unassuming, said Dumor. Or that of Jason Njoku, whose online film distribution platform, iRoko, is transforming the way Nigerians consume media. Dumor laughed as he recalled interviewing an Angolan woman for a story on economic disparity in Luanda. After the interview, she insisted that he ‘pay’ her by fetching water for her in a wheelbarrow. “You just realise how the things people deal with day-to-day are the same. There are people who are three hours away from their nearest water. It’s a common human experience.” Faced with this sort of story, how did he represent them fairly, and not as abject victims? Said Dumor: “You have to be honest and truthful with yourself. I’m good at expressing my emotions while working. While I don’t let them rule me, I think it’s important that I tell a story with compassion and understanding. You must be honest with the people you are interviewing. And you must ask yourself: Are you telling their story, or are you telling the story you think needs to be told on their behalf?” And the proof of telling authentic African stories is in the viewership, Dumor said. “The ultimate judge of quality of reporting is the viewer. They will vote with their eyes. African audiences are sophisticated. They know patronising material when they see it. “I am proud that we are able to tell more than one narrative about the continent. A big story may not be one of political relevance. It could be interviewing an actor or a musician, or maybe a science story. People who are changing the way the continent is perceived… What we’ve done successfully is changed the narrative. But there is always an opportunity to tell more stories.” While his legacy lives on, Dumor won’t get that opportunity to tell another story… www.nepad.org

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Social media:

Africa’s positive ‘epidemic’

The rise in mobile internet usage and home-grown IT solutions in Africa heralds a bright new value-added service sector. Bekithemba Ngulube and Hannah Edinger report.

he ‘Africa rising’ narrative has gained substantial momentum over the past few years. The continent continues to be the secondfastest growing region in the world, with companies across diverse sectors and geographies looking to reap opportunities in what is seen as the last frontier of growth, returns and first-mover advantages. Africa has the world’s youngest population, a rising consumerorientated middle class, increasingly flourishing local businesses and a generation of ‘leapfroggers’. So, the rate at which the continent has adopted technology – primarily through social media platforms – comes as no surprise.

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The increase in the adoption of mobile phone technology, coupled with wider broadband access in Africa, underpins the explosion of social media. Given the existence of a very real digital divide, which requires significant levels of investment particularly in infrastructure, mobile technology is expected to lead the way in increasing the number of users that are connected to social media and the internet in general. Due to ease of access, social media is often the primary contact point for internet access across Africa. Access through handheld devices has underpinned the growth in the use of social media and other related apps. Africa now has the second-highest percentage of mobile traffic as a share of internet traffic in the world, at roughly 15%, according to go-globe.com. The continent is furthermore estimated to have over 167 million internet users, representing approximately 7% of the world’s web users, with internet penetration estimated to be 16%, according to a recent McKinsey Global Institute report. A study conducted by Mushroom Networks (international networking vendors) in 2013 indicates that there are over 650 million mobile phone subscribers in Africa. The increase in the adoption of mobile phone technology, coupled with wider broadband access in Africa, underpins the explosion of social media. www.nepadbusinessfoundation.org

A contributing factor is the availability of cheaper mobile devices, made specifically for emerging market economies. Smartphones manufactured by Chinese company Huawei, for example, sell at US$100 or less. The First World struggles of Blackberry Limited in recent years have not been as prominent in Africa. Its relative success on this continent has been driven by favourable data pricing and affordable phones, which have seen the company maintain its dominant position, particularly in the South African smartphone market. This shows how the mobile market in Africa differs from the rest of the world. Facebook, the world’s most popular social networking site, is one of the successful social media sites in Africa, with over 51 million users on the continent in 2013, according to McKinsey Global Institute. Other social media sites and apps that have been making waves across Africa are Twitter, YouTube, Google+, Pinterest, LinkedIn and Mxit. These successes result from Africans firmly embracing technology, wanting to be ‘connected’ and developing uniquely African solutions in the process. At the forefront of these developments is the much-cited M-Pesa mobile payments tool, and various iterations based on this Kenyan innovation in other markets. Mxit, Africa’s largest home-grown social media network, was developed in Stellenbosch, South Africa by founder and former CEO Herman Heunis. This mobile messaging and social media services app has garnered more than 50 million users in 128 countries across the world, according to ITWeb. Another successful locally developed app is the 2go mobile app, created by Alan Wolff and Ashley Peters. 2go has more than 10 million users in Nigeria, reportedly surpassing the country’s Facebook users. According to Ventures Africa, 2go has over 21 million active users in total. Mxit and 2go show that the potential exists for African innovations in information technology (IT) – an indication that the continent is shifting away from being a serial adopter to having its own unique approaches. The paradigm of social media has also shifted towards business. First National Bank (FNB) in South Africa is regarded as highly innovative in terms of the value-added apps it offers its clients. Linked to this is an increasing trend whereby developers license their apps to African vendors or distributors. One such example is Easy Taxi, which

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‘South Africa promises a lot on the local luxury landscape. The leather goods market in particular is flourishing.’

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was developed by German start-up Rocket Internet and launched in Brazil over two years ago. It has been licensed to Bankole Cardos in Nigeria, where it is a great success due to the ease with which it fits into people’s lifestyles by making an arduous task simple and more efficient, and allaying concerns regarding safety. Banking, in particular, offers great promise for mobile applications in Africa. New mobile platforms are forever changing the way in which Africans transact among themselves and with business. The GSMA 2012 Global Mobile Money Adoption Survey estimates that there are 56.9 million mobile money users in sub-Saharan Africa. Africa’s mobile money market is expected to rise to US$160 billion in 2016, up from US$81 billion in 2012, with the latter being worth more than the current mobile money market of Europe and North America. This indicates that Africa’s divergent economic and social structures require a very different solution set to other regions in the world. Only about one quarter of Africans have access to formal or informal financial institutions, and mobile technology has helped to bring these people into the mainstream economy. It is anticipated that the shift towards African-solutions-made-forAfricans will increase – not only in the mobile technology space but also in other sectors, including consumer goods. In the mobile sector, the main driver of this shift will be the increasingly smaller barriers to entry that IT and information and communications technology (ICT) presents compared to other sectors. By placing a computer or mobile device in the hands of people throughout the continent and connecting them to the internet, in particular broadband,

Only about one quarter of Africans have access to formal or informal financial institutions, and mobile technology has helped to bring these people into the mainstream economy. empowering them to take control of their futures becomes a reality. Improving standards of education on the continent, fostering curiosity and translating this into innovation, will be key to ensuring that Africa can create technology clusters that will drive innovation on the continent this century. The changing construct of education globally, with more and more classes being taken online, has provided students with a multitude of resources. One example is the Khan Academy’s plethora of online lectures, which transcend all levels of education. The future of social media in Africa will be determined by the value proposition it presents to its users. While social media is already an extremely powerful tool, its true value for Africans will come in how developers create value-added tools and services that are specifically catered towards them. From a commercial perspective, the traditional view of Africa’s economy as a largely extractive-based continent is already shifting towards creating value through services, among others. Governments and private-sector actors now need to link up to create an enabling environment for technology-based value-added service sectors to flourish, on a peer-to-peer, business-to-business and business-to-consumer level in future.

Bekithemba Ngulube is a researcher and Hannah Edinger a director at Frontier Advisory, a Johannesburg-based advisory firm focusing on frontier and emerging markets.

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To market, to market, clickety-click Online shopping is about to explode in Africa and, led by South Africa and Nigeria, banks and mobile internet providers are coming to the party, writes Helen Grange.

Image courtesy of Shutterstock

he African continent is a wide-open playing field for e-commerce retailers. A lack of fixed broadband and cashless banking platforms might be holding back growth in the online shopping space, but there’s no lack of will on the part of consumers, or investors and retailers willing to take a bold leap into virgin terrain. Although online shopping business in Africa totalled less than US$1.4 billion in 2012, it is expected to grow at about 40% annually over the next 10 years, according to yStats, a German company that does research on international markets. Predictably, South Africa leads the way in online shopping, but countries like Egypt, Morocco and Nigeria have a higher mobile shopper penetration, which positions them for rapid growth that will allow them to catch up quickly, according to yStats. One of the biggest online retailers in Nigeria, Egypt, Morocco and Kenya is Jumia.com – which, like its Western counterpart Amazon.com, sells everything from electronics, books, appliances and fashion to shoes, mobile phones and liquor. The purchased items are delivered to your door, and in traffic-congested cities like Lagos, this is a shopping option for which city-dwellers are readily opting. In just two years since its launch, Jumia.com has sold more than 150 vehicles, including motorcycles to reach homes that aren’t near

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good roads, and they deliver thousands of items daily. In the same period of time, its opposition, Konga.com, has grown its Lagos-based warehouse to more than 11 000 m2 and become the biggest online retailer in Africa. Other big online Nigerian shopping malls are DealDey.com and Adibba.com, and joining the market recently was the South Africanbased fashion store Zando.com, which has extended its reach to Nigeria, Lesotho, Namibia and Swaziland. In Botswana, meanwhile, Skymartbw.com is causing much excitement over its offering of more than 500 products, including items previously difficult to find, and is priming itself for expansion into other African markets. Techno-savvy Zimbabweans are serviced by online malls like Magrosa.com and Zimbiz.com, and in Namibia the electronics and beauty product store, Onlineshoppingnamibia.com, recently started delivering to Zambia, Botswana, Ghana

Analysts predict that up to 50% of all shopping in South Africa will be done online by the end of 2015, as is the case in the United States.

and Kenya. For consumables, there’s a plethora of online shops in most African countries, a big one being Onlinefoodgrocery.com, which delivers to countries throughout Africa, even to places where infrastructure is poor, such as Angola, Ghana, Kenya, Congo, Uganda, Mozambique and Malawi. Folake Adeniji, an online shopper in Lagos, says the spawning online market has made her life a lot easier. “For a long time, I had to rely on people going abroad to come back with clothes and household items. Even if I found the items in shops, they were always overpriced, so these shopping websites are like a breath of fresh air,” she told a BBC News reporter. Millions of dollars are invested in these online stores, and the attitude of the entrepreneurs behind them is bullish, even with the infrastructural hurdles. Nigeria’s large population of 167 million means there is significant potential for e-commerce development, and reports say local and foreign investors have already ploughed more than US$15 million into the online shopping market there. Inhibiting growth, however, are not only bandwidth problems but archaic banking systems, which make online payments more a rarity than common practice. Online fraud and internet scams are also an abiding concern among potential online shoppers. Also, many

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Items purchased online are delivered to your door, and in traffic-congested cities like Lagos, this is a shopping option for which city-dwellers are readily opting. merchants don’t accept credit cards from Africa, another factor slowing progress. But where there’s a will, there’s a way. With the wave of investment confidence over the last two years, banks and mobile internet providers are taking bold steps to enable the e-commerce market. In December 2013, cellphone operator MTN announced it has gone into partnership with Swedish e-commerce company Millicom International Cellular and the German online incubator Rocket Internet, with the intention of expanding mobile connectivity in Africa that will trump fixed broadband infrastructure.

As most online shoppers on the continent transact on their phones, this is the obvious route to go. New cashless policies are being implemented by Nigeria’s Central Bank and First Bank to encourage electronic payments, while continual improvements in information and communication technology (ICT) provide more security for online shoppers. There’s also a new online payment option called PesaPal, an e-commerce platform that has helped bridge the gap between mobile and electronic payments. Card associations like Visa and Mastercard are increasingly accepted by African banks processing online payments – although, according to Peter Harvey, CEO of the webbased payment service PayGate, there is a long way to go. “It’s easier to find a bank that will issue cards than one that will acquire transactions… it’s still hard to find merchants who will accept Visa or Mastercard. But as more cards come into circulation, there will be more demand for online shopping and, sooner or later, the balance will tip,” he says. While all this happens, and to get customers familiar with online shopping,

some online malls like Jumia.com offer payment-on-delivery option. “We are not going to grow by waiting for people to get comfortable with paying online, so we came up with pay-on-delivery, where we actually take the product to the person from our warehouse and then the person pays once they see and touch the product,” said Jumia.com co-founder, Raphael Afaedor. It all points to substantial opportunities for retailers – especially start-ups – in Africa, and the growth of online shops will be driven by consumers themselves. South African consumers are leading the way, and analysts predict that up to 50% of all shopping in South Africa will be done online by the end of 2015, as is currently the case in the United States. Following suit will likely be Nigeria, where there are only a few bricks-and-mortar shopping malls and the traffic jams are notorious. The continuing proliferation of online malls, as well as niche shops, make online shopping all the more enticing, and with a bit of web surfing, you can find and buy anything from flowers to underwear, even if it must be delivered to you in Mombasa. www.nepad.org

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