Nepad Edition 1 by Contact Media

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Contents View from the top 6 8 10 11

Foreword from Lynette Chen Perspective from NEPAD CEO Ibrahim Mayaki Perspective from NEPAD Business Foundation Chairman Stanley Subramoney Perspective from World Economic Forum Head of Africa Elsie Kanza

Regional integration and infrastructure 40

Africa’s integration champions Who is championing regional integration and the building of infrastructure in Africa and what have they achieved?

Continental make-over Africa has developed a number of ambitious plans to improve the continent’s economy, but can the Programme for Infrastructure Development in Africa encourage continental growth and increase trade?

African interest 12

Africa rises Not long ago this continent was considered hopeless but today it is attracting positive world attention for all the right reasons.

Corporates changing the face of Africa Through empowering women, building infrastructure and encouraging small business, multinationals operating on the continent can and are making a big difference.

Industries soaring on the continent Certain industries are doing phenomenally in Africa. Find out which they are and why.

The long road to feeding the world African governments must step up to the table to boost food security.

Agriculture and food security 30

Unlocking new growth Farmers in Africa are struggling to overcome numerous obstacles, but there are plans afoot to improve the situation.

Towards fairer food production To successfully remedy the problems of food insecurity and gender inequality, these two have to be addressed in tandem.

One person’s waste is another’s livelihood In Africa, the poor are incredibly resourceful in turning rubbish into something useful. Malawi is a case in point.

Rwanda: Africa’s great economic hope Once synonymous with human tragedy, Rwanda is rising from it genocidal ashes and proving to be an ideal place to set up business.

Making creative connections While art and sport can divide people, they also have the power to unify divided societies.

Human development and human capital management 66

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Youngsters – the key to getting Africa to work Professor Mthuli Ncube has a blueprint for harnessing the potential of this continent’s young people to ensure its future prosperity.

Content Listings

Rise, Women! Are female entrepreneurs changing the face of African economies or getting stuck on the glass ceiling?

Kenya hatching healthy businesses Business incubators give entrepreneurs a chance to grow their enterprises. Kenya has cottoned onto this unique way of assisting people in growing businesses.

Governance and democracy

Unlocking the great leaders within Business executive Isaac Shongwe was a poor boy who made good and is determined to make a difference by developing the next generation of community-based, value-based, ethical leaders by providing them with the tools.

To frack or not to frack – that is the debate There is no easy answer to whether or not hydraulic fracturing should be allowed in the Karoo and what the impact of fracking would be in Africa.

Leadership for Africa’s future For this continent to be successful, it needs to find approaches that are uniquely suited to the continent and its needs. Here is how it can be done.

African women carry heavy loads Joyce Banda’s sudden appointment last year as Malawian president has given many observers hope. But can she dig the country out of the mess left by her predecessors.

Saint of the slums A midwife has – with the help of her dedicated team of healthworkers – changed the odds in the war on HIV-Aids and malnutrition in one of Nairobi’s poorest settlements.

Climate change and environment 78

Cross-continental green trading Are carbon credit projects helping to reduce greenhouse gas emissions as intended?

Water for Africa: reduce, recycle and replenish Water and sanitation are the most important drivers of human development. They play a vital role in addressing the continent’s socio-economic crisis.

80 98 Getting on top of the goals To reduce poverty and donor reliance, African countries need to focus on growing their economies in a strong and sustained manner. 104 Leadership lessons from Africa There is much that the ‘mother continent’ can teach the world about creating change and stimulating progress. 106 Africa must lead itself For Africa to take off economically, it is vital that its own model of leadership is created. 108 Taking leadership to the next level

Cross cutting issues

Is acid rain a problem in Africa? Data on acid rain on the continent is more scarce than a thunderstorm in the Sahara but that doesn’t mean it isn’t a real threat.

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116 The secret of the cement king’s success Africa’s richest man believes manufacturing, not just trade will create wealth. Find out what makes Alhaji Aliko Dangote tick. 118 Time to bring Gucci and Dolce into the marketplace Luxury brands have historically avoided investing in Africa, but that is attitude is clearly changing.

Content Listings

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Africa’s millionaires’ club An economic boom in Nigeria has led to the rise of the super-wealthy, a small minority of the population with extravangant tastes in homes and lifestyles.

Credits

The middle class rise in the ‘lion economies’ There is an African middle class that is so different from any former image of an African. Who are they? What do they want in life and how do they live?

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

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NEPAD Planning and Coordinating Agency

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

Tel: Fax: Email: Website:

+27 (0) 11 256 3600 +27 (0) 11 206 3762 info@nepad.org www.nepad.org

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

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

Advertorials

The Publishers would like to 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, Sandra Pires and Watson Hamunakwadi - 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 from the NEPAD Agency.

The Takeover Regulation Panel

PricewaterhouseCoopers Rebranding the Continent

CFG Group Special Delivery

John Deere Committed to the land

Marefa International

ECIC Protecting your African Assets

Johannesburg Stock Exchange Infrastructure debt listings on the JSE

Bigen Africa Closing the infrastructure gap

PDNA From grassroots to global

Rio Tinto Untapped wealth

Wits Business School International L&D Study Tour 2013 WBS International Executive Development Program

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City of Joburg The city that never sleeps

Contributors: Tracey Bester, Siobhan Cassidy, Lynette Chen, Keith Coats, Graeme Codrington, Jeremy Daniel, Sharon Davis, Tanya Farber, Dianna Games, Stuart Graham, Helen Grange, Sue Grant-Marshall, Elsie Kanza, Ibrahim Mayaki, Pauline Muindi, Professor Mthuli Ncube, Glenda Nevill, Brendah Nyakudya, Malcolm Pannell, Cynthia Schoeman, Stanley Subramoney, Stephen Timm, Stacey Vee, Liesl Venter and Joanna Wright.

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SekelaXabiso The lion’s share

Repro & Printing

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Sage VIP Payroll Information at your fingertips

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ENS Choosing the right local partner is key

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& C O M M U N I C AT I O N S

Published by

Contact Media & Communications (Pty)Ltd

& C O M M U N I C AT I O N 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: Carrie Cleminson Production Assistant: Gwen Sebogodi Account Executives: Paul Styles, Bokang Seritsane, Zinhle Mtshali, Damian Murphy, Mark John, Chioma Didi Okoro

Kadimah Print

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.

T h e O f f i c i a l NE P AD y e a r b o o k 2 0 1 3

Programmes Contacts

Nepad business foundation Office of the CEO, NEPAD Business Foundation Email: Jackie.Kanusu@thenbf.co.za Tel: +27 87 310 1892 Stakeholder Relations and Communications Email: Sandra.Pires@thenbf.co.za Tel: +27 87 310 1884 Mozambique Office Email: Helder.Buvana@thenbf.co.za Tel: +258 21498 468

Agriculture and Food Security Removing the Barriers in Agriculture Programme Email: Geoff.Orpen@thenbf.co.za Tel: +27 87 310 1898

Human Development and Capacity Building 1 Million Africa Leaders Connect Email: info@thenbf.co.za Tel: +27 87 310 1888

Economic and Corporate Governance African Corporate Governance Network Email: Derek.Browne@thenbf.co.za Tel: +27 87 310 1888

Regional Integration and Infrastructure Infrastructure Investment Desk Email: info@thenbf.co.za Tel: +27 87 310 1888

NEPAD Agency Office of the CEO Email: Jacintan@nepad.org +27 11 256 3633 Communications Email: Maureenn@nepad.org +27 11 256 3626

Agriculture and Food Security Comprehensive Africa Agriculture Development Programme (CAADP) Email: Bwalyam@nepad.org +27 11 256 3605 TerrAfrica Email: Rudom@nepad.org +27 11 256 3658 The Fertilizer Support Programme Email: MariaW@nepad.org +27 11 256 3600 Fisheries â&#x20AC;&#x201C; Partnership for African Fisheries Email: Sloansc@nepad.org +27 11 256 3606 Rural Futures Programme Email: EstherineF@nepad.org +27 11 256 3644

Climate Change and National Resource Management Environment Email: EstherineF@nepad.org +27 11 256 3644

Regional Integration and Infrastructure ICT

Email: edmundk@nepad.org +27 11 256 3600 Transport Email: Adamad@nepad.org / johnt@ nepad.org +27 11 256 3678 Energy Email: MosaE@nepad.org +27 11 256 3674

Human Development Education and Training Email: mzobanzim@nepad.org +27 256 3647 Science and Technology Email: Aggrey@nepadst.org +27 12 841 3688 African Science, Technology and Innovation Indicators (ASTII) programme Email: LMumba@csir.co.za +27 12 841 4661 African Medicines Regulatory Harmonisation (AMRH) Email: margarets@nepad.org +27 11 841 2980

Cross-cutting themes Gender Development Email: RosalieL@nepad.org +27 11 256 3658 Capacity Development Email: Florencen@nepad.org +27 11 256 3632

Economic and Corporate Governance African Peer Review Mechanism (APRM) Email: Assefas@nepad.org +27 11 256 3401 www.nepadbusinessfoundation.org

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Foreword from NEPAD Business Foundation CEO Lynette Chen considers Africa’s future.

he world is experiencing phenomenal economic and political power shifts. Brazil, Russia, India and China are emerging powers shaping the world today. There is growing interest and focus on Africa for its mineral resources, arable land and potential markets in this new age. The continent is viewed as the bastion of growth, putting Africa at a crossroads. Africa has to have a game-plan with real political and social will to structure the continent’s unique value proposition in line with the future of the world’s economy. A collective commitment by society, the private sector, politicians and government has to be the bedrock of this unified way of thinking.

A vision and a plan

The vision of NEPAD created a unique reference point for African governments to consider their national priorities within a continental context. This provides us with a framework – a collective way of thinking about infrastructure, agriculture, capacity development and natural resources management. The vision of NEPAD therefore, is beyond a platform of conversation – it is an action plan. Its success depends on commitment and prioritisation.

Africa and a new tomorrow

As CEO of the NEPAD Business Foundation (NBF), I lead a team of dynamic people to find mechanisms of encouraging the private sector to play its role in the sustainable development of Africa – through investments. We aim to ensure return on social and economic capital invested. We envisage that society and the African economy’s development can be achieved, in part, through private-sector investment. However, pure return on investment should not be the only motive. Return on progressive social investment should also be a goal. Cooperation between the private and public sectors will create an environment more conducive to socio-economic growth. We cannot ignore the challenges that the private sector faces in doing business in Africa. We have to face these head-on. As Africans, we have to view challenges as our own – they may or may not be of our making but we have to own the circumstances in which we find ourselves and commit to finding a pathway out of this situation together. Corruption, crime, lack of education, infrastructure, poor healthcare and unaccommodating political regimes are rampant in Africa. Who will solve these challenges if not us?

Our vision

My vision of Africa is of

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our people mastering their own economic destiny. I see an Africa where young people have jobs, hunger is eradicated, trade among African nations is growing, infrastructure adequately caters for populations and healthcare is provided to the majority and accessed by most. Witnessing the vast opportunities and potential of the continent, I have often felt that change comes slowly or is not enough. Africans are ready – but current efforts have not been able to reduce inequality and poverty at a satisfactory pace.

The continent is viewed as the bastion of growth putting Africa at a crossroads - Africa has to have a game plan with real political and social will to structure the continent’s unique value proposition in line with the future of the world’s economy. Why are private-sector companies unable to integrate national priorities into their business strategy? Our role as an institution is to promote and impress upon the private sector the need to develop their strategies in line with continental, regional and national development priorities. This is challenging because while social and economic goals are finding intersection, the mechanism with which to manage willing partners under conditions of mutual trust and consistency of purpose still eludes us. There are too few functional forms of public-private partnerships which could used to accomplish complex projects that neither party can achieve alone. Africa has to deliver infrastructure, education and agriculture initiatives quickly – while ensuring that beneficiation begins to happen on the continent. More importantly, Africa needs to develop social capital. Our people have to find each other and unite with the aim of building, developing and growing economies. Mindsets at all levels of society have to change in order for us all to take personal responsibility and be committed to our collective plan.

Emerging African challenges

The NBF prioritises agriculture and infrastructure and this resonates in our flagship projects. We aim to remove barriers that are hampering investment in these two sectors at a macro and a micro level. We believe that, as a result, Africa will be nourished and intraAfrican trade will grow. The next generation of leaders will have to achieve faster rates of growth. The advent of urbanisation will lead to a growth in formal and skilled work. This will be an advantage if we build industry, or a disadvantage if economic and trade growth is not achieved. Technology is providing access to information that is changing population behaviour and desires. Our governments have to keep up. With globalisation, skills are no longer fixed to a country but can migrate. The African Union, NEPAD Agency and NBF, as institutions geared for an African renewal, will have to be the institutional drivers that unlock and deliver Africa’s potential. We remain committed to the bright future of the continent.

view from the top

Perspective from

NEPAD CEO Ibrahim Mayaki On the eve of Africa’s 50th anniversary of its unity, Ibrahim Mayaki outlines the status of the continent and where it is heading.

Image courtesy of Jenny Leigh

frica is preparing to celebrate half a century of continental unity, since the founding of the Organisation of African Unity, now the African Union (AU), in 1963. Presently the NEPAD agency – through its strategic orientation and new mandate – is well placed to continue supporting the vision of African leaders in transforming the continent over the next 50 years. NEPAD has embarked on a critical turnaround with exciting new prospects. One of the special concerns of our mandate is to facilitate the continent-wide coordination of priority programmes and projects. Each one of our activities is aligned to the strategy developed within the AU. We will therefore continue to put forward and support bold and innovative approaches in priority sectors. The story of Africa’s development is changing. Eleven of the world’s fastest growing economies are in Africa. Democratic governance has been strengthened in the last five decades, enabling a platform for stable growth and prosperity in most parts of the Continent. NEPAD is happy to be part of this upward transformation process, through the implementation of its programmes.

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Since its inception in 2001, NEPAD has made significant accomplishments, including the Comprehensive Africa Agricultural Development Programme (CAADP), the Environment Action Plan, the Consolidated Science and Technology Plan of Action and the African Peer Review Mechanism in terms of governance. The agricultural sector in Africa grew by 3.2 percent a year during the 10 years of CAADP implementation. Although this is moderate, it is the highest average for the last four decades and is beginning to show signs of improving the lives of poor people. This growth can be attributed to the CAADP emphasis on increasing productivity as well as private-public investment in the agriculture sector. NEPAD has played an essential role in helping to strengthen Africa’s position in the international debate on climate change. Even before the 17th Conference of the Parties (COP17), NEPAD supported the establishment of a coalition of partners to mobilise investment and promote measures to cope with climate change at country level. Three years ago, NEPAD launched the Programme for Infrastructure Development in Africa (PIDA) and its component, which is supported by a number of heads of state through the Presidential Infrastructure Champion Initiative (PICI). PIDA is the AU’s key programme to guide the continental infrastructure development agenda, policies, trans-boundary water sectors and investment priorities in transport, energy, information and communication technology up to 2030. It also provides the much-needed framework for engagement with Africa’s development partners, willing to support regional and continental infrastructure. Through our other programmes on gender, capacity development and education, we have, and continue to work with our partners at the national, regional and international level to support transformation and growth. The development and emergence of a dynamic domestic private sector in Africa is fundamental to the continent’s development. NEPAD is enthusiastic about the prospects of increased private sector support to African governments’ development priorities, to ensure steady and continuous groundbreaking economic growth. Africa must accelerate its integration into the global economy through joint ventures between international and domestic private sectors to achieve a much-needed economy of scale. Lastly, it is imperative that African countries leverage their private sector competitive advantages and resources to sustain and surpass Africa’s current economic success.

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Perspective from

NEPAD Business Foundation chairman Stanley Subramoney Stanley Subramoney reflects on doing business in Africa.

here’s no greater time than the present for business to venture into Africa. Africa’s growth rates are evidence of the time in which we live, defining our future. Our people are ready, investors are ready and government’s commitment to growth is stronger than ever before. In 2001, African presidents collaborated on an ambitious vision and plan to accelerate African cooperation which, if successful, could forge a path for all. It’s no surprise that, as part of the private sector, I felt that such an initiative responded to the need for greater continental cooperation. In the private sector, policy consistency and sustainable economic management are two critical areas that determine the attractiveness of nations. For me and for the business sector, NEPAD was the long-awaited solution. We understand that governments may change, but if sound policy and economic management remain, they provide the necessary conditions for investment to thrive.

Succeeding at coordination – where are we now?

For the private sector, the most important outcome of NEPAD and the interaction of business in this plan has been the renewed and enhanced political convergence that enables countries to cooperate more effectively. Through the Programme for Infrastructure Development in Africa, the Presidential Infrastructure Champion Initiative and the Comprehensive African Agriculture Development Programme, there is clearly an improved reference point for business to understand Africa. Beyond this lies the opportunity for investment. Companies from both developed and developing nations are finding opportunities in Africa and Africa’s www.nepadbusinessfoundation.org

private sector must seize the opportunity. At PricewaterhouseCoopers our continental reach is extensive and we tend to be exposed to the continental dynamics moving business forward or taking it back. Technology is increasing consumerism and sharing of knowledge. The use of information communication technologies is improving government-administered processes, thereby removing bureaucratic barriers. In countries like Rwanda, South Africa and Kenya, technology also plays a crucial role in social and economic development, enabling consumers to be more agile and small businesses to become more aware of market trends. Small businesses and entrepreneurs have a significant role to play in communities, and the emergence, survival and perseverance of these enterprises are creating commercial opportunities which will reduce rapid urbanisation and disperse development geographically. Political stability is assured in many African countries today; a scenario that has seen an increase in the number and diversification of investors. Increased policy regularity is also making Africa an attractive investment destination. Reduced conflict is an important indicator of a commitment to peace and stability. Regional cooperation – particularly in infrastructure – is the most important development. The need to promote intra-African trade and investment can only work if the infrastructure supports this. Governments are realising the need to cooperate more closely in this regard, and it’s clear that public-private partnerships are the vehicles through which these projects could be delivered.

NEPAD and the private sector

As chairman of the NEPAD Business Foundation (NBF), my role is to continue to convince our counterparts in the private sector of the importance of playing a direct role in continental development. The NBF views the private sector as a very important stakeholder in economic development. Creating innovative ways in which the private sector could influence and work with governments is how we will unlock Africa’s potential. Smart collaboration in the form of public-private partnerships has to become the mainstay of how government and business use technology, skills and resources in implementing projects. All stakeholders must come to the party with a defined contribution to which they commit. Africa’s citizens must be committed to the efforts in civil society sectors which are, in my view, much closer to the ground. On 26 March 2013, in Durban, South Africa, the first gathering of Brics (Brazil, Russia, India, China and South Africa) leaders on African soil took place under the theme ‘Brics and Africa: Partnership for integration and industrialisation’. Further more, for the first time in the bloc’s history, the African Union and high level representatives from Africa’s regional economic blocs were invited to attend. The African story is now firmly on the Brics agenda. Together, a new Africa is possible! Stanley Subramoney is the chairman of the NBF and the strategy leader for PricewaterhouseCoopers Africa’s south market.

T h e O f f i c i a l NE P AD y e a r b o o k 2 0 1 3

Perspective from

World Economic Forum Head of Africa Elsie Kanza Elsie Kanza, Director, Head of Africa for the World Economic Forum, explains her views for Africa in this Q&A. What vision do you have for Africa in your World Economic Forum position and as an individual?

My vision for Africa in the 21st century is inspired by the sacrifices made by Mwalimu Julius Nyerere (first president of Tanzania) and others who inspired political liberation in the 1960s. Their actions – and achievements – are directly responsible for my own decision to focus my professional life on promoting pan-Africanism and regional integration. At the World Economic Forum (WEF), our vision is to turn Africa’s promise into reality by acting as a catalyst for growth and transformation. We believe the only way to deliver solutions to issues critical to Africa’s growth and development – such as competitiveness, green growth, natural resource management, infrastructure development and youth employment – is by facilitating dialogue and action among all stakeholders.

What do you believe is crucial for Africa’s development and why?

Africa’s current growth trajectory is testament to bold monetary, fiscal and structural reforms taken by many governments. These are delivering socio-economic transformation in the form of better living standards, healthcare and the quality of education. Some African nations are also leapfrogging more developed regions in areas such as gender parity, which I believe is very promising for the future of the continent.

committed to seeing these commitments materialise. As a member of the Forum’s Young Global Leaders community, and as a young woman, I am also committed to continuing to promote leadership, especially public service leadership. We need a critical mass of excellent and exemplary leaders with a clear succession plan in place for at least the next 50 years.

How will the WEF continue to be a relevant player in Africa as an investor?

Delivering on Africa’s promise calls for bold insights and courageous commitment to pursue and scale up innovative solutions, partnerships and initiatives. At a regional level, we will continue our co-operation with the African Union Commission, the NEPAD Planning and Coordinating Agency and the African Development Bank with respect to our Grow Africa and Africa Strategic Infrastructure initiatives. Over the next year, we will also be working to boost economic competitiveness by hosting a number of workshops in eastern, southern and western Africa. The NEPAD Business Foundation (NBF) is a strategic partner in the forum’s engagement in Africa and we look forward to strengthening our collaboration. The WEF congratulates NBF CEO, Lynette Chen, and her team on their important contribution to catalysing Africa’s transformation agenda.

What challenge or goals must the next generation accomplish to develop the continent economically and socially?

Let’s be clear: growth is a prerequisite for change but it does not guarantee change. Unemployment remains a big problem, as do inequality and overdependence on primary commodities. Climate change also looms large over the continent. Africa’s current generation of leaders need to address these issues now by being bold and visionary. This is why the WEF on Africa this year is focused on getting the basics right in order to deliver on Africa’s promise. We will focus on three aspects, namely: accelerating economic diversification, boosting strategic infrastructure and unlocking the continent’s talent. This means bringing together some of the world’s best minds to formulate new ideas and models to help deliver growth in nonresource intensive sectors, plug Africa’s gaps in economic, social and soft infrastructure, and unlock the talent needed to help us benefit from a potentially huge demographic dividend.

In your position at the WEF, what do you aim to accomplish and how will that impact Africa’s future?

We want to help Africa become a force to be reckoned with on the world stage. Currently, this means focusing on our flagship initiatives which are targeted at accelerating private sector investment in agriculture and infrastructure. Last year, United States President Barack Obama announced private sector commitments to invest more than $3 billion in the Grow Africa Partnership initiative as part of the G8’s New Alliance for Food Security and Nutrition initiative and we are www.nepadbusinessfoundation.org

african interest

Africa rises

At the start of the 21st century, Africa was described as the hopeless continent. Today its vast natural resources and great tracts of arable land are attracting positive world attention, writes Sue Grant-Marshall.

Image courtesy of Shutterstock

frican leaders in the public and private sector need to work together to resolve Africa’s challenges. Can Africa become the next China? Put that question to a roomful of businesspeople, economists, futurists and experts on Africa and you are likely to receive two responses: a qualified ‘yes’, and a definite ‘no’. The answers reflect the reality that is Africa today – a continent of 54 countries, with a population of over a billion, speaking hundreds of different languages and dialects that reflect vastly differing cultures and traditions. Thirty percent of the globe’s natural resources are to be found on the continent, as is 60% of the world’s arable land. Over one billion people currently live here and it is estimated that, at current rates, Africa’s population by 2050 will be two billion. “It will have overtaken India (projected to be 1.6 billion) and China (1.4 billion) and as a result of this growth, not only will one person in five then be African, but also one in four workers,” says Dr Greg Mills. He is director of The Brenthurst Foundation, which was established in 2005 to strengthen African economic performance. He has written numerous books including ‘Why Africa is Poor – And what Africans can do about it’. He is one of many who pose the question: “Can Africa, in creating the number of jobs required, become the next China?” His answer is a qualified one. He points out that few of the continent’s vast natural resources “have benefitted some 400 million people who still live near or below the poverty line”. Mills urges African countries to transform their wealth in minerals and other natural resources to benefit “their entire society, not a tiny elite”. He also suggests that many African leaders need to “end their public and private enmity towards business”. “It may have its origins in colonial rule but its perpetuation is often grounded in self-interest.” He explains that either business is kept very close, “and therefore evolves into a client of government rather than a source of dynamism, or it is regarded with hostility, a prey to be devoured if circumstances demand”. Moeletsi Mbeki, businessman, entrepreneur and author of two books on Africa – ‘Advocates of Change: How to Overcome Africa’s Challenges’ and ‘Architects of Poverty’ – mentions some of Africa’s difficulties and how to overcome them. www.nepadbusinessfoundation.org

“The foundation of Africa’s problem is its lack of technical skills, some lost during the colonial era, in terms of artisans, scientists, technicians and engineers,” says Mbeki, adding that Africa needs to invest in education in the manner of China, which sends hundreds of thousands of students to study in the United States each year. Mbeki also believes that Africa needs to follow the example of South Korea where “about 30% of its students are studying science and engineering”. He is concerned about, “Africa’s lost wealth” for approximately 40% of Africa’s savings, “is kept abroad, according to the United Nations”. He attributes this to an unstable political environment in Africa, which leads to fear that savings are not safe here. “Foreign investors are coming to Africa to invest in oil, gold, platinum etcetera, but in the process they create enclaves, like Cabinda in Angola.” There, explains Mbeki, most consumables, ranging from drilling rigs to hamburgers, come from outside the country, “and so they do not have linkages to the local economy”. But Mbeki has quick fixes. Democracy is one: “a transparent system open to all people, such as Mauritius has created”. “Almost every time they hold an election there a new party comes in, creating a sense that the system is fair to all,” says Mbeki. There are two branding benchmarks for Africa, according to Dr Martyn Davies, CEO of Africa Advisory Services, a leading research, strategy and capital advisory firm that specialises in emerging markets. One we saw on the May 2000 cover of The Economist magazine, which portrayed Africa as ‘The Hopeless Continent’. “The second is ‘Africa Rising’, around which there has perhaps been too much hype. Will Africa be the next Asia? I think the jury is still out on this one,” says Davies. He predicts a 2013 growth rate of about 5.4% for sub-Saharan Africa, “and that goes up to 6.6% if you exclude South Africa”. He attributes future growth to buoyant commodities due to the “China-drive super cycle”; to aid continuing to underpin many African

‘The foundation of Africa’s problem is its lack of technical skills… in terms of artisans, scientists, technicians and engineers.’

T h e O f f i c i a l NE P AD y e a r b o o k 2 0 1 3

states’ government budgets; and to nascent and emerging consumer markets and foreign capital seeking yield in Africa. He does not, however, believe that Africa should be seen as a monolithic entity, pointing out that there are states facing political and/or economic difficulties such as the Democratic Republic of Congo, Mali, Swaziland, Somalia, Malawi and Sudan. “But, will we see economies like those of Malaysia, Taiwan and Singapore emerge in Africa?” asks Davies. “Well, Namibia, Rwanda, Ghana and Ethiopia are some of the countries that have done well because of good institutional management, technocratic leadership and long-term development visions.” Additionally, he believes that the “character and calibre” of African states’ leadership will eventually determine the developmental trajectory of African countries. Professor Mthuli Ncube, chief economist and vice president of the African Development Bank, agrees with a projected growth rate of 6.6% for Africa. He lists several risks for the continent. These include macro economic mismanagement, political risks such as war in Mali, and a fall in oil and commodity prices. If the latter were to happen, “it would affect countries in Africa that are dependent on oil exports for their growth”. But Ncube emphasises that while there are many things that could go wrong, “from where I stand I see very little risk of that”. He urges structural diversification of economies, advocating the resources that countries get from oil, for instance, “be invested in other areas of the economy”. He lights up as he mentions Botswana and its diamonds. “Botswana set up a sovereign wealth fund (SWF) some time ago, and Angola has now set up one of $5 billion. Nigeria is trying to set up one of $1 billion.” The term SWF has been used to cover a spectrum of government investment vehicles from central banks and monetary authorities to government-owned enterprises that invest in specific economic sectors. “There are many countries with commodities, such as gas and oil, that are trying to set up SWFs and it will diversify their economies,” says Ncube. He mentions that “in the next few years (gas- and coal-rich) Mozambique will be among the top five countries in the world, so we need to plan the creation of jobs, downstream and through beneficiation, there.” The best way to spread the new wealth that’s being generated in Africa is for the continent to understand the message of entrepreneurship, according to Clem Sunter, scenario planner, international lecturer and author of numerous books on the topic of our future. He uses the M-Pesa to illustrate the point he makes about Africa being able to come up with its own solutions to problems, particularly in Small and Medium Enterprises (SMMEs). Kenya and Tanzania developed the M-Pesa (M stands for mobile and pesa is Swahili for money) as a mobile- (cellphone) based money transfer and micro financing service. Users with some form of identification can deposit, withdraw and transfer money easily with their mobile phone. “A salary is credited to a cellphone which is then swiped at retail outfits,” explains Sunter. “It makes money more secure.” He predicts the M-Pesa could well migrate to the United States.

Greg Mills

Moeletsi Mbeki

“Africa has jumped a couple of generations of technology and is using smart phones in new ways. For instance, 70% of downloads on the continent are on to cellphones, and not on to laptops.” Africa, he explains, has made a quantum leap in technology, with most Africans never having had a fixed telephone line. Technology is being used to great effect in Nigeria, “which now has the second largest film industry in the world, Nollywood,” says Sunter. He doesn’t foresee Africa taking on the Far East in the mass production of consumables, such as television sets or cars, but he believes that high tech will thrive in Africa, with Nigeria showing the way. Sunter is not of the view that Africa needs a “sort of European Union. We can have an east African or a west African trading group. After all we have SADC, but I am not sure that the idea of a pan-African trading group will work”.

‘The best way to spread the new wealth that’s being generated in Africa is for the continent to get the message of entrepreneurship.’ He points out that it’s not happening in Europe, “and in Africa everyone has their own history so I don’t see one continental trading group here”. He does believe, however, that the African Union is good, “because we need a continental body”. The one issue that almost everyone seems united on is the need for the continent to have visionary, pragmatic, focused and clean leadership. Once that happens, the rest will flow, as do the mighty rivers of this ancient and potentially rich continent.

A word from NEPAD Business Foundation... The continent will need to emerge with a strong consumer force that can absorb a considerable amount of the goods and services produced here. Only with a determined labour and consumer market can the continent improve intra-African trade from its 10% level. The viability of businesses (profit) and governments (tax) depends on the level of growth domestic product (GDP) far more than it does the growth rate of GDP. While the fastest growing economies are from Africa, their GDP per capita remain low and therefore the consumer market is depressed. The NEPAD Business Foundation and NEPAD Agency collaborate annually, sponsored by the Absa Group, to ensure business and government interact on key issues affecting Africa. At the African Leaders in Dialogue dinner on 8 November 2012, Kennedy Bungane, CE and Head of Strategy for Barclays Africa, spoke of the need to invest more in infrastructure to enable trade and investment. He emphasised that banks have a role to play by financing infrastructure projects which are long term and will expand Africa’s economic base.

Mthuli Ncube

Clem Sunter

www.nepadbusinessfoundation.org

african interest

Corporates changing

the face of Africa

Through empowering women, building infrastructure and encouraging small businesses, multinationals operating on the continent can make a big difference – as well as a profit, writes Joanna Wright.

s Africa becomes synonymous with abundance and opportunity for many multinationals, powerful corporates have the opportunity to improve the lives of the communities in which they operate. We spoke to a few companies who are doing just that: changing the lives of ordinary Africans by leveraging their core capabilities and engaging in investment that is not only socially responsible, but also makes good business sense.

Coca-Cola: Empowering women

Coca-Cola’s 5by20 programme aims to empower five million women worldwide by the year 2020. In 2011, the initiative was piloted in four countries, one of which is South Africa, and has now been expanded to eight others, including Kenya, Nigeria, Uganda and Egypt. In each region, women with small businesses are brought into the company’s supply chain and provided with business skills training and access to financial support and mentors. In South Africa, 5by20 has partnered with United Nations Women, and focuses on retailers. Last year, the first year of the project, 5by20 aided 5 890 businesses. It aims to reach 10 000 in 2013 and 110 000 by 2020, says its head of franchise capability, Onwell Msomi, who is also head of 5by20. Says Msomi: “Bringing women in is a business imperative. Women make up just www.nepadbusinessfoundation.org

‘Every time you empower a woman, you empower a whole household… Women share what they have, multiply it and grow it.’ over half of the population and (the female population is) getting younger. The ability of the formal industry to absorb them is limited. Yet every time you empower a woman, you empower a whole household. This empowerment happens with men, but just not to the same extent. Women share what they have, multiply it and grow it.” For Msomi, it’s important that in empowering these small, medium and micro-sized enterprises (SMMEs), Coca-Cola focuses on what it knows how to do best, which is selling beverages. Before 5by20 was launched, Msomi says he got a lot of experience at dealing with small franchisors. “We often get requests from people wanting to expand and sell Coke. We send a market developer to look at the business, usually something like a spaza. We provide a cooler, supply access to credit and so on and give them point of sales and merchandising material,” he says. 5by20 brought a focus on

women, but this makes sense as 60 to 70% of SMMEs in South Africa are owned by women. Msomi adds: “The level of business skills and education among these women is pretty low, so there’s a high failure rate. If you teach them basic business skills, you double their success rate.” 5by20 also helps women leap social and structural hurdles they encounter. These hurdles could include difficulties getting financing, like putting up collateral in a country where women traditionally have no land rights. Coke’s interest in 5by20 isn’t purely philanthropic – these women sell a lot of Coke. Says Msomi: “These 5 890 businesses sell an average five cases a week. That doesn’t sound like much, but if you multiply it, that’s 1.5 million cases that were not being sold before.” The retail market can’t expand indefinitely, however, so Msomi and his team will start looking at other points along the chain where they can bring women in. Under the 5by20 programme in Kenya, rural women grow fruit to supply Coke’s MinuteMaid brand. In Zambia, they have organised women around rainwater harvesting. Similar initiatives could be started here. In South Africa’s eastern KwaZulu-Natal province, 5by20 is looking into organising women sugar cane growers. They are also planning more partnerships with organisations already working to develop women.

T h e O f f i c i a l NE P AD y e a r b o o k 2 0 1 3

A Coca-Cola representative and a beneficiaries of Coca-Colaâ&#x20AC;&#x2122;s 5by20 programme outside her small business

www.nepad.org

african interest

Old Mutual Investment: building infrastructure

Africa has a major infrastructure backlog and if the continent is to develop, this needs to be addressed. This is the philosophy of investment house Old Mutual Investment Group of South Africa (Omigsa), says Jurie Swart, who heads Omigsa’s Infrastructure and Development Impact Funds, which is part of the group’s alternative investments boutique. These funds focus on transport and energy, says Swart, with telecommunications secondary. They partner with the best developers they can find to build and maintain infrastructure like highways, shopping centres and, recently, wind farms. The funds under Swart’s aegis include the socially responsible IDEAS Managed Fund, to a range of equity funds grouped under the African Infrastructure Investment Managers (AIIM), set up in 2000 as a partnership with Macquarie Group of Australia. IDEAS operates mostly in the Southern African Development Community (Sadc) region, while AIIM has broader interests on the continent. Says Swart: “How much infrastructure is needed in Africa? Well, how long is a piece of string? But we’ve seen what economic corridors can do for development.” One of Omigsa’s projects has been such a corridor: the Bakwena concession to design, build and maintain the N4 West. This stretch of highway runs from Witbank in South Africa to Maputo in Mozambique. “It’s really developed the harbour at Maputo because the road has now opened up access there,” says Swart. IDEAS, which is limited recourse project finance (a form of private equity), has produced considerable returns since its inception in 1998. Swart attributes this success to Omigsa’s early recognition of the potential of infrastructure as a separate asset class. “The big thing for us has to have been the toll roads, these economic corridors. But the fund is diversified. We have a stake in Bloemfontein private prison. We have piped Sasol gas to the border of Mozambique. We have done a railway line to Zimbabwe. And we have a stake in the Beit Bridge. We have also done some public private partnership buildings with the Department of Trade and Industry.” Swart’s fund is now focusing on renewable energy, with four wind and six solar power projects currently in the early stages of development. Omigsa Alternative Investments also operate a R9 billion fund that invests in building housing that is affordable to lower income earners in South Africa. These investments all have a social responsibility investing (SRI) aspect, but they are fundamentally profitable enterprises. Says Swart: “We used to see projects as SRI, but now we prefer to see what we do as a commercially focused fund with feel-good results. Everything we do has a strong feelgood aspect to it. Renewable energy, well www.nepadbusinessfoundation.org

that speaks for itself. Also, the renewable energy projects create jobs in deeply rural areas... The economic corridors have created SMMEs and jobs. The grass cutting next to the road, painting the lines – a whole lot of small businesses have sprung up to service the highways.” Says Swart: “What really drives my thinking is that when you pitch a project as SRI, there’s much excitement but you never get money. So we changed our pitch and are now commercially focused. If there’s SRI, there’s an element of giveaway; we can’t afford to do that. We are using people’s long-term savings; we can’t afford to play with those.”

SABMiller: Developing enterprise

Brewers SABMiller believe in integrating small businesses into their value chain at every stage, from farming to logistics. This kind of inclusive business model improves conditions for the communities in which the corporate operates and fosters markets of healthy, thriving consumers, says head of Enterprise Development and Community Partnership, Hepsy Mkhunga. Mkhunga says: “It’s about asking: How do you support the value chain using the resources you have? Where do you bring people in? ... We want to upscale small-scale farmers and enable them to produce the

‘We do this because small businesses are the ones that create jobs.’ yield we need. We want to empower the communities in which we operate, to turn casual businesses into professional ones.” To this end, South African Breweries (SAB) has a number of established projects in place, never deviating from its core capabilities. There is the Owner Driver Scheme, which helps SAB truck drivers to own their own vehicles. There are programmes in place to professionalise taverns and shebeens by offering them access to funding and card payment speedpoints, and helping them adhere to their licensing conditions, among other interventions. Project Promote uses SAB’s own logistical network to transport and distribute condoms in areas that the government finds hard to reach. Says Mkhunga: “We have calculated that for every 500 condoms delivered, we avert an infection – and our target is to distribute 845 million condoms. We are using our own infrastructure for this. It’s a sustainable model of assisting without investing lots of money. We are using our best assets; it’s operationalised through our systems.” Mkhunga’s unit also runs KickStart, which aims to develop entrepreneurs who may have great ideas but no money or business knowledge. Beneficiaries are selected annually through a national competition and whittled down to a top 60. These

entrants are then taken through the basics of running a business and return later to pitch their ideas in a much more refined manner to SAB and potential investors. They are then further narrowed down to the top 15 and these finalists go through a growth strategy assessment to see what they need to be independent in three years time. Says Mkhunga: “It’s very in-depth. We ask: do they need operational systems, a marketing plan? Do they need leverage funding? How will the funding be dispersed? It’s often not what the entrepreneurs think they need. After that they are tracked and mentored. “We are there to move constraints. It’s hands-on and a very big investment from our side. Once they get on their feet, these entrepreneurs can then be filtered through our value chain.” Mkhunga says that KickStart has helped 22 000 start-ups and has been so successful that they have exported the model to Lesotho, Swaziland and even to Colombia. Beneficiaries have gone overseas to exhibit the project at the United Nations. “We do this because small businesses are the ones that create jobs. It’s the ultimate reason to get involved. We want more people with jobs, comfortable lives and disposable income, so they can spend their money – yes, on things like beer! “We have to improve conditions where we operate. And in these communities, one educated person can raise a whole family. Education and job creation are the only things that will save this country,” says Mkhunga. Luvuyo Rani is a beneficiary of KickStart. He and his brother, Lonwabo, run Silulo Ulutho Technologies. Rani, based in Khayalethu, Cape Town, has expanded the information technology business – which began selling computer parts from the boot of a car – to employ 92 people at his 23 shops in the Western Cape and Eastern Cape. Silulo Ulutho shops are present in townships where computer skills are generally lacking. They provide one-stop shops for end user needs, offering accredited skills training, computer parts and internet cafés. Rani is planning to expand into more townships, wherever there’s a need. “And there is a need,” says Rani. “You find, for instance, that government will donate a computer lab to a school, but no one will know how to use it. So we feel strongly that we should be expanding. I have my eye on Umlazi, Tzaneen, Magaliesburg...” He adds that this growth would not have been possible without the KickStart programme. “You’re taught how to manage a business. My brother and I never had the opportunity to learn this kind of thing. I’ve learned about cash flow, managing people, how much things cost... we have a business model now. Also, it wasn’t just about the mentorship. Their public relations exposed us to many different media.”

Advertorial

The Takeover Regulation Panel

A regulator of mergers and acquisitions for the protection of shareholders.

he new Companies Act No 71 of 2008 as amended (“the Act”), became effective on 1 May 2011. With effect from that date a new regulator, The Takeover Regulation Panel (“TRP”) was established in terms of section 196 of the Act. This body replaced the Securities Regulation Panel which was created in terms of the Companies Act 61 of 1973. The Act also creates a committee of the TRP, The Takeover Special Committee, whose function is to hear and decide matters referred to it by the executive of the TRP and, will also review the decisions of the Executive Director of the TRP. The TRP regulates mergers and acquisitions (“M&As”), (defined in the Act as, (“Affected Transactions” and “Offers”), undertaken by certain companies as set out in the Act and the regulations (“the TRP provisions”).

Which companies are regulated by this body?

The TRP regulates transactions undertaken by private companies that have provided in their Memorandum of Incorporation that their M&A transactions will be subject to the TRP provisions. In addition, private companies that have transferred more than 10% of their issued shares in a period of 24 months must also comply with the TRP provisions. All public companies and state owned companies must also comply with the TRP provisions whenever they undertake a M&A. See section 118 of the Act.

Which transactions are regulated by the TRP?

The TRP regulates M&As as defined in the Act as being; amalgamations or mergers; disposals of all or the greater part of the assets, or undertakings by companies; schemes of arrangements, (all these three transactions are also referred to as fundamental transactions); mandatory offers, which are triggered when 35% or more of the issued shares of a company are acquired; acquisitions of the remaining voting securities not already held by a person;

compulsory acquisitions; and, the disclosures requirements in respect of acquisitions of any 5%, 10%, 15%, 20% or any multiple of 5%, of the issued shares of a company.

What is the mandate of the TRP?

The TRP must regulate M&As; investigate complaints in respect of M&As; may apply for a court order to wind up a company, in appropriate circumstances; must consult with the Minister of Trade and Industry in respect of additions, deletions or amendments to the Takeover Regulations. The TRP may also offer consultations; issue, amend or withdraw policy in respect of M&As and, may also receive and deal with representations relating to M&As and, finally, it may perform any other function assigned to it by legislation. See section 201 of the Act.

Why is there a need to regulate M&As?

The aim of regulating M&As is among others; ensuring integrity of the marketplace; fairness to shareholders; provision of the necessary information to shareholders in order to make informed decisions on such transactions; allowing shareholders and companies enough time to obtain advice in respect of such transactions; ensuring that shareholders are not denied an opportunity to consider the merits of an M&A; ensuring that shareholders are treated equally, and equitably. See section 119 of the Act. By ensuring that these provisions are enforced and adhered to, the TRP assists in protecting the interests of shareholders. The TRP does not consider the commercial advantages or disadvantages of M&As. In other words, the TRP does not decide whether an M&A is in the interest of shareholders or, not. The shareholders must make that decision based on the disclosed information.

What are the powers of the TRP?

Any person undertaking a M&A must comply with all reporting or approval requirements set out in the TRP provisions. M&As must not be effected, unless the TRP has issued a compliance certificate with respect to

Mr Lucky Phakeng Executive Director

the transaction, or granted an exemption for that transaction. See section 121 of the Act. The TRP may also wholly or partially; with or without conditions; exempt application of any of the provisions relating to an M&A where there is no reasonable potential for prejudicing the interests of any party to the transaction; the cost of enforcing compliance will be disproportionate to the transaction; or where exemption is reasonable and justifiable in the circumstances, taking into consideration the principles and purposes of the Act and the TRP regulations. See section 119 (6) of the Act. Parties failing to comply with the Act and TRP regulations may be issued with a compliance notice. Failure to comply with a compliance notice may lead to a criminal conviction by a court, which may lead to imprisonment. Among others; is an offence to; improperly influence the TRP; anticipate the finding of the TRP; provide false information to the TRP. The TRP may also apply to court for an administrative fine for non-compliance with the takeover provisions. An aggrieved shareholder may also lodge an appraisal claim requesting that his shares be bought at a fair value by a company, where the M&A being undertaken is a fundamental transaction. In addition, shareholders may have a civil claim against any person for loss or damage suffered by such a shareholder, as a result of any contravention by such a person of any provision of the new Act. See Chapter 7 of the Act dealing with remedies and enforcement. For any enquiries contact: Mr Lucky Phakeng, Executive Director of the TRP at Telephone No 011 642 1301, Fax 011 642 9284. Physical Address: Takeover Regulation Panel 1st Floor, Block B Sunnyside Office Park 32 Princess of Wales Terrace Parktown, Johannesburg, 2193. www.nepad.org

african interest

Industries soaring

on the continent

Certain industries in Africa are doing exceptionally well. Joanna Wright finds out about some of them.

ver the last decade, a new narrative about Africa has emerged to conquer the colonial stereotype of ‘the Dark Continent’. Corporates are now saying that with consistent GDP of around six percent, a youthful population and vast mineral wealth, Africa – or parts of it at least – is lighting up with opportunity. Industries that are soaring are those exploiting the continent’s raw materials, those providing the infrastructure to do so, and those servicing the needs of a rising number of Africans with disposable income. This is reflected in the fact that the top 10 companies operating in Africa in terms of turnover, according to Africa Report magazine’s rankings, included petrochemicals producers, telecommunications companies, insurers and a retailer, Shoprite Holdings. With China and India eyeing African resources to fuel their rampant industrialisation, mining and exploration are maintaining their status as major industries on the continent. According to Africa Investor magazine, Africa has the majority of the world’s known supplies of minerals like cobalt and chrome, which are crucial in the production of automobiles and mobile electronics. Petrochemicals, too, are a major export; in fact, petroleum and gas are Africa’s largest exports by value and the continent is a rare source of light, sweet crude. These industries are still largely in the control of Western companies like BP. However, in 2010, the highestearning oil and gas company – in fact the highest earning company of any industry – was Sonatrach, owned by the Algerian government. Projects like Mozambique’s aluminium smelter Mozal, a partnership involving that country’s government and the www.nepadbusinessfoundation.org

private sector, notably mining company BHP Billiton, have the potential to help revive shattered economies. Information and communications technology (ICT) has grown hand-in-hand with the minerals industry and with economic growth in general. It is because of this sector that Africa has become known as a place of innovation, particularly when it comes to mobile technology. Kenya’s Safaricom is often credited as an example of innovation in mobile application (app) development with their multi award-winning M-Pesa app that is the most sophisticated of its kind. Kenyans and Tanzanians can use M-Pesa to transfer, deposit and withdraw money using their cellphones. App development is certainly going to be a core competency for

‘Seven of the 10 fastestgrowing economies are in Africa.’ ICT company Business Connexion (BCX), says its group executive: international, Rodwell Zvarayi. “On the continent there are more and more cellphones. So the winners are going to be those writing mobile apps like M-Pesa,” he says. ICT infrastructure is rapidly improving on the continent, adds Zvarayi, whose company is the leading business solutions provider in Africa. He says: “We’ve started seeing increased connectivity, with lots of governments and private companies putting out broadband. Just to give you an idea of how ICT has grown: five years ago, MTN South Africa was the biggest among the group’s 22 operations. Now it’s the third biggest behind Nigeria and Iran. Nigeria has

just 75 million cellphone users and it has a population of 170 million people, so there’s obviously massive potential there.” In countries like Kenya, increased competition has meant increased affordability. Says Zvarayi: “In Kenya, for example: there’s so much fibre on the ground. They can provide services to watch TV online. They have lots of fibre, lots of bandwidth. If you compare the costs with South Africa, it’s definitely cheaper... The Kenyan government has a big strategy to become a business project outsourcing destination, providing support to the East and the United States. It says a lot that IBM’s support centre is in Kenya, not in Johannesburg.” There are also a lot of skills and talent in Africa, adds Zvarayi. BCX employ mostly locals at all their offices. This 33-year-old South African company realised years ago that growth would happen north of South Africa’s borders. They now have a footprint in Namibia, Mozambique, Kenya, Botswana, Zimbabwe and Zambia. They recently launched a data centre in Lagos; and are soon to open one in Kenya. BCX provides a diverse array of business and storage solutions for major companies in industries that are fast expanding into Africa: mining, retail and financial services, among other sectors. “As they grow into Africa, we follow them,” says Zvarayi. BCX’s dominance in Mozambique, for example, began when they followed BHP Billiton there when the mining company formed Mozal. “Angola is also looking like a good place to be; we are looking at going there. The big retailers like Shoprite are all headed there. The Chinese are really sorting out the infrastructure,” Zvarayi adds. Zvarayi predicts that apps will become even more important and that companies

T h e O f f i c i a l NE P AD y e a r b o o k 2 0 1 3

Gawaxab adds that Old Mutual is “significantly ramping up our operations in Kenya”. “Nigeria and Kenya are high growth markets and we need to build a market that does not exist today in East and West Africa in an innovative way.” But he would not be drawn on whether Old Mutual has plans for North Africa, saying only: “There are four main markets on the continent: Nigeria, Tunisia, Algeria and Egypt. And it would be silly to ignore that.” Old Mutual is not the only South African financial services group with their eye on Africa. Standard Bank operates in 18 African countries. Absa this year made a deal with Barclays to take over the latter’s African operations. Despite development, Africa can be a difficult place to do business, with civil strife, poverty and a lack of infrastructure among the problems business faces. Sonatrach were reminded of this in January when 37 of their workers were killed in an Al Qaeda attack on one of their plants in the Algerian Sahara. Governments can make their countries unattractive to foreign investment, as Zimbabwe may have done with a law that compels foreign companies to give up a majority share to locals. Gawaxab says that from his perspective, challenges include establishing “an evolving regulatory environment. Building a trusted relationship with the regulators and

‘ICT has grown hand-inhand with the minerals industry and with economic growth in general.’

Johannes Gawaxab

like BCX will be developing apps that do everything from reminding people about doctors’ appointments to helping them apply for a passport online. Africa’s middle class is growing faster than any in the world and this will mean more people with more disposable income. This is one of the reasons long-term savings house Old Mutual think Africa is a great potential source of new revenues. The company is focusing on a strategic push into the continent where they already have an established presence in South Africa, Namibia, Zimbabwe, Malawi and Swaziland. Over the last few years, Old Mutual has divested itself of units, like those in the Nordic countries, acquired during a prefinancial crisis expansion into Europe. Africa is now seen as the place where growth is happening, says Old Mutual MD of African business, Johannes Gawaxab. “Seven of the 10 fastest-growing economies are in Africa and we expect a significant number of African consumers with disposable income, adequate to purchase our solutions, over the next decade. This stems largely from the

positive impacts of financial reforms, the continued demand for commodities and the emergence of an ever-growing middle class. Financial services form the backbone of a thriving economy, they facilitate this growth,” he says. Financial services have a relatively low penetration into Africa and Old Mutual is likely to gain first-mover advantage in some regions. “Awareness of the benefits of insurance and savings is relatively low. The opportunities to make a meaningful difference to the financial well-being of people and businesses are therefore significant,” says Gawaxab. Nigeria could be Old Mutual’s hub for expansion into sub-Saharan Africa. The group recently acquired a majority stake in Nigeria-based Oceanic Life, with the balance held by Ecobank of Togo. This partnership is seen as very important to Old Mutual’s plans, says Gawaxab. Moving into Nigeria and then into neighbouring Ghana would give Old Mutual access to a large proportion of the region’s population.

government is key to success”. To this he adds: “The main challenge in a fast-growing environment is finding experienced people who also have an appreciation of the needs of the consumer. The hunt for talent in Africa is certainly on. We believe the best way to address this is to grow people yourself.” Old Mutual does this by “going into these communities and training local people to advise the other locals. So it’s not Johannes from Namibia telling people how to do things; it’s the people they understand, relate to and who understand them.” Weathering such storms can give a company an advantage, though, as Old Mutual discovered in Zimbabwe. It made the difficult decision to remain in Zimbabwe through that country’s troubled times over the last few years. This has now left them with an 80% share of the market, as other players pulled out. As foreign investment, especially in emerging markets, increasingly sees Africa as a land of promise, industries that soar on the continent are those that are committed and innovative enough to take advantage of the African growth story. www.nepad.org

ADVERTORIAL

Rebranding the

Continent

‘Today Africa is rising; it is a story of growth, optimism and prosperity,’ says PricewaterhouseCoopers’ strategy leader.

ricewaterhouseCoopers is one of the leading professional services firms on the globe, with a large African footprint. Stanley Subramoney, strategy leader of PwC’s South Market area, shares his insight on changing ideas about doing business on the ‘dark continent’ the importance of the public and private sectors to work together. Subramoney is also the Chairman of the NEPAD Business Foundation, and the Chairman of Business Skills for South Africa Foundation.

PwC has a substantial footprint in Africa. What do organisations need to keep in mind when expanding into African territories? PwC’s footprint across the continent is indeed significant with more than 8 000 people operating from over 70 offices, in 29 countries across the continent, sharing their thinking, experience and solutions to offer fresh perspectives and practical advice. One needs to remember that Africa is not a homogenous mass, but rather 54 different countries, all with their own challenges. Accordingly it is important to understand the local policies, the culture and some of the unique characteristics of the local economy. In every country in which PwC operates, we bring appropriate local knowledge and experience to bear, and use the depth of our resources to provide our clients with a highquality, professional service tailored to meet their requirements.

Which of PwC’s services are proving to be the most in demand in African regions? We find that all our services are needed across Africa. We offer Assurance, Advisory and Tax services and find that clients need all these services. Foreign investors prefer a seamless “one stop” service and we are able to assist them across the continent. www.nepadbusinessfoundation.org

As the Chairman of the NEPAD Business Foundation, you recently spoke on the importance of ‘branding’ the African continent to appeal to investors.

For too long Africa has been regarded as the ‘dark continent’ with no hope and future. Images of child soldiers, chaos and poverty were portrayed in the media. Today Africa is rising. It is a story of growth, optimism and prosperity. We need to communicate the successes of the continent and to encourage and promote

PwC’s footprint across the continent is indeed significant with more than 8 000 people operating from over 70 offices, in 29 countries across the continent, sharing their thinking, experience and solutions to offer fresh perspectives and practical advice. investments into Africa. Brand Africa has a new story to tell, a story of a continent rich, not only in resources but in people. It is a continent that is leapfrogging technology hurdles and creating new markets and opportunities.

How important is it for the public and private sectors to work together to grow a country’s economy? It is crucial for a vibrant partnership between public and private sector; in fact,

the relationship cannot be stressed enough. Successful economies across the world point to strong relationships between their private and public sector. Both parties bring essential skills, knowledge and expertise to the table, allowing for better execution of economic policies and goals.

Lack of infrastructure can be a major constraint on doing business in developing African countries. Which are the most crucial types of infrastructure need going forward?

The most crucial infrastructure Africa needs for development includes: • Basic needs infrastructure such as electricity, water and sanitation, for the population and • Logistical infrastructure such as roads, rail, ports and ICT to promote investments, trade and tourism Africa is poor because Africa is expensive. The cost of doing business in Africa compared to its trading partners is still too high because of ageing or lack of infrastructure. It is estimated that Africa needs approximately $97 billion a year in infrastructure spending. Modern infrastructure will ensure that Africa becomes competitive in a fiercely competitive global environment.

What is your vision for Africa emerging as a global economic player in the next 10 years? Africa is on the move and has some of the fastest growing economies in the world. My vision is that Africa will take her rightful place in the global economy, a continent that is at peace with itself and a continent with new hope and new vision. Generally smooth elections together with better economic management and fast growing populations are a sign that Africa is coming of age and that the future is bright. Africa is the next frontier.

NEPAD - 2013 Official year book

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T h e O f f i c i a l NE P AD y e a r b o o k 2 0 1 3

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ADVERTORIAL

Special

Delivery How the South African Post Office Logistics is delivering a reliable and speedy service, right across the southern half of the continent.

ven though mail volumes are dropping as email communications become more prevalent, businesses on every level, from SMEs to large corporates, still rely on South African Post Office Logistics to get vital parcels from point A to B, not just within its borders, but also to neighbouring countries. These parcels contain anything from chronic medication to much-need textbooks and learning materials, to urgent documentation. With the increase in brands that are amalgamated under the South African Post Office (SAPO) umbrella, like Speed Service Couriers, XPS, PX and Docex, it made sense to bring the courier and freight groups together into a single, integrated stable. This saves SAPO up to 10 percent in transport costs, amounting to more than R300 million a year. The assets at the newly formed South African Post Office Logistics division’s disposal are staggering: PX has 9 000 containers, with each delivery truck carrying 12 containers. Speed Services Couriers moves almost 1.1 million parcels every month. We find out more about SAPO Logistics’ ideas around providing an integrated, comprehensive logistics and transport solution, working together with other African countries and how they manage making those crucial deliveries to even the most remote and rural areas. www.nepadbusinessfoundation.org

All companies with a widespread footprint require a reliable courier and freight service to allow them to render a reliable, appealing service to their customer. This applies – even those trading in the digital industry, such as computer companies. Hardware breaks down and needs to be replaced urgently. Africa is seen as the continent with the highest

What was the thinking behind consolidating the courier and freight group brands into a single entity – South African Post Offices Logistics?

The Post Office has a well-established reputation for delivering mail and parcels. The company has been present in South Africa for more than 200 years. It makes sense to use the brand SA Post Office Logistics, as the name explains what the company’s business is and it ties in with the Post Office’s reputation for delivering to even the smallest, remotest village or town.

How important is a reliable courier and freight service for organisations with a large footprint in Africa?

With the increase in brands that are amalgamated under the South African Post Office (SAPO) umbrella, like Speed Service Couriers, XPS, PX and Docex, it made sense to bring the courier and freight groups together into a single, integrated stable. potential for growth. This implies that the infrastructure is still developing in certain areas and that everything is not readily available there. This makes a reliable logistics and courier partner absolutely vital.

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What strategies are implemented to combat mail crime and illegal activities when delivering parcels?

Speed Services Couriers, part of the SA Post Office Logistics, has the most extensive domestic overnight express network in Southern Africa. What are some of the challenges of delivering services in our neighbouring African countries? Speed Services Couriers has a strong working relationship with its partners in neighbouring countries and an in-depth knowledge of customs procedures at the border posts. This allows us to offer a seamless service over the whole of Southern Africa.

The SA Post Office Logistics Group has a special unit that focuses on preventing crime rather than solving crimes after they have been committed. To this end, all sorting centres are equipped with technology such as closed-circuit TV and strict access control. Each parcel gets a unique barcode and it is scanned at each point where it is handed over to the next sorting procedure. All this information, including the identity of the person who receives the item at the end, is captured on our track-and-trace system. All vehicles have satellite tracking devices. We regularly run internal campaigns to make staff understand how important it is to handle freight and parcels with the care that our customers deserve.

With a large national footprint, SA Post Office Logistics is perfectly placed

to drive community projects. What types of CSI projects were undertaken in the previous financial year?

We have partnered with the Winter Warmth campaigns of Radio Good Hope and Radio Port Natal, where we take care of the storage and delivery of donated items. We have partnered with Stop Hunger Now SA in the same way, where we have delivered thousands of food parcels to destitute, rural communities where malnutrition is a very real problem. We also partner with Lusitoland in Johannesburg, an organisation that supports differently abled children.

What lessons learned does SA Post Office Logistics have to share with developing African postal services on providing an effective service in more rural areas?

The SA Post Office Logistics Group partners with the SA Post Office to render an effective service in remote, rural areas. Integrating the routes and freight of both entities not only makes it viable to go there â&#x20AC;&#x201C; it improves the service. We would therefore advise you to tap into local expertise where possible. www.nepad.org

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ADVERTORIAL

Committed to those linked to the land John Deere South Africa is helping farmers from large to small across its territories in Sub Saharan Africa.

ohn Deere is one of the most recognised and respected brands in the world, and has been operating in Southern Africa for the last 50 years. Until 2005 the company manufactured implements and assembled tractors from its factory based in Nigel, South Africa. Today the South African branch, under which the whole of Sub Saharan Africa falls, imports its John Deere products from factories around the world and supports customers and dealers in 49 countries. The new John Deere warehouse near Johannesburg’s airport is just one of the investments than is being made in Africa, and it will stock up to 35 million US dollars’ worth of inventory, and handle 600 000 pieces per month. From this point, the equipment and parts will be distributed from Cape to Cairo. As a brand, the John Deere name has always been closely linked with its commitment to the land. In addition to its agricultural machinery, John Deere also manufactures equipment for construction and forestry, commercial and consumer projects, and power systems. John Deere Water provides irrigation solutions for the agriculture sector, and John Deere Financial offers financing solutions.

Agriculture and food security is one of the six themes that NEPAD focuses on. How does John Deere contribute in this area?

John Deere provides mechanisation solutions for farmers across all segments. We want to make a difference in the lives of people in Africa, regardless of the size of their operations, whether they are smallholders or large commercial farmers.

Does John Deere intend increasing your African footprint in the years to come? What is your strategy? Yes, we are focusing on nine African countries for now and are fixing our dealer channel and establishing satellite offices in Kenya, in Ghana by the end of 2013, and in the future, Nigeria. www.nepadbusinessfoundation.org

What are some of the unique challenges that John Deere experiences as you expand further into African territories?

As we have grown we’ve encountered challenges with regards to infrastructure, country-specific rules, finding the correct dealer partners, and finding suitable staff with the right skills. For John Deere South Africa to meet some of this last challenge we have a number of ways that we support our territories. We provide or dealers with world-class training through the John Deere University, which is run through a web-based system where instructors from all around the world provide live, interactive training on-camera to our trainees. There is also the John Deere apprentice academy, where we train our apprentices to become tractor technicians. We also provide training for our operators for agricultural machinery. John Deere dealers based in Africa are also fully supported by the technical assistance centre.

Which industries is John Deere seeing the biggest demand for your machinery?

At the moment, cassava and sugar production is very much a growth sector. We have product solutions for a wide variety of crops, though – such as maize, wheat, sugar, cotton and rice is still on the horizon.

What is your company’s outlook on Africa’s potential as an economic powerhouse in the future?

We believe that most of the future growth in our industry will come from Africa; most of the other counties are mature and saturated, hence the reason for us investing in the continent.

Do you believe investment in economic growth in Africa should be prioritised by more developed nations? Many counties have a footprint in Africa and do make investments, especially China, but not always for the benefit of the continent. I believe essentially that Africa has

to grow on its own.

Where do you see Africa in 2020 as a global competitor?

We believe that by 2018 we will be selling three tractors in Africa for every one tractor sold in South Africa, and are of the opinion that the tractor market will be good for over 18 000 tractors per annum.

What kind of community upliftment projects is John Deere involved in? At the moment we are focused on the development and support of smallholder farmers in particular.

What is John Deere’s take on sustainability and protecting the environment?

We are fully supportive of such initiatives. At a global level, taking care of the environment is a priority to John Deere. Responsible resource management is vital to the company, its employees, customers, neighbours and the planet. All of the John Deere products are specifically designed to minimise damage to the environment and are built and maintained with the environment in mind.

What is your vision for John Deere in Sub Saharan Africa for the next five years? We are expecting monumental growth and a strong dealer channel. For instance, the huge increase in demand for John Deere equipment we’ve seen in Sub-Saharan markets has necessitated that we invest R150 million in a new parts warehouse that is located close to OR Tambo International Airport in Johannesburg, South Africa – which is one of the major distribution points in the SADC region. The warehouse has increased our storage capacity by 33% and is three times larger than our previous warehouse facility. We place regular stock orders from Europe and the US to meet the needs of our customers.

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AGRI C U LT U RE AND FOOD SE C U RITY

Unlocking new

growth

Farmers in Africa are struggling to overcome numerous obstacles, but there are plans to improve the situation, writes Stephen Timm.

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ith its sub-tropical climate and favourable altitude, Mozambique’s Manica province should be ideal for farming, yet farmers are struggling to produce crops productively. This means that parts of the country rely on fresh produce imports from South Africa. In recent years the countries along the Beira Corridor – Malawi, Mozambique and Zambia – have seen sharp declines in customs tariffs. However, many of these benefits have been eroded by escalating nontariff measures. The number of non-tariff measures – including those special licences, quality standards, bureaucratic delays and export restrictions – increased by more than three times between 2000 and 2010. On a visit to the corridor last year, the NEPAD Business Foundation (NBF) found that farmers face a number of challenges. They are hampered by difficult access to land and finance, lack of water storage facilities and polluted rivers. The high cost of obtaining an electricity connection, the poor quality of seeds and the small size of the market also stand in the way. This is not helped by the fact that many farmers in the region are illiterate. The region’s farmers also face several regulatory challenges including having to wait up to nine months for an operating licence from Mozambique’s investment promotion agency, which is supposed to take no longer than two months. A fuel rebate aimed at assisting farmers is also not being implemented by the government. The NBF report also found that Mozambique’s labour ministry issues exorbitant fines of up to $20 000 for small issues such as workers applying chemicals without protective clothing.

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When it comes to reducing the barriers that farmers face in the Beira Corridor, the NBF believes that broad and all-encompassing reforms are required. These should include, not only financial support, but also a political willingness and improved government co-ordination. The current mining boom in Tete, along the Zambezi River in Mozambique, is expected to unlock new opportunities for farmers to supply fresh produce, but some mining companies are not going out of their way to buy from local farmers. Many farmers need help to connect to markets and keep up to date with the better

technology, but support like information on markets and technical agricultural information is in short supply. Because of these obstacles, the large majority of farmers – smallholders, emerging and more commercial ones – are struggling. Yet these are barriers faced by farmers all over Africa. For example, nearly half of all African farmers live five or more hours away from a market, making it difficult to sell their produce, according to the African Development Bank (ADB) in its Agriculture Sector Strategy 2010-2014. On top of this, the roads to the markets are often badly potholed and transport costs in Africa are among the highest in the world – reaching as much as 77 percent of the value of exports. Farmers also face natural barriers such as unreliable rainfall and large areas with leached soil. This is made worse by the infrequent use of fertiliser, with African farmers using about a tenth of the amount of fertiliser used by their peers in Asia and Latin America. But this is not surprising as fertiliser can easily cost African farmers three

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times what is paid by their counterparts in Brazil, India or Thailand, according to the UN’s International Fund for Agricultural Development (Ifad). On top of this, less than 2.5% of African farmers use improved seeds, and only about three percent of Africa’s farm land is under irrigation, compared to 36% in Asia, according to Ifad. This, says the ADB, is compounded by the failure of African governments to allow regional trade in food staples, which limits both the ability of markets to respond to food deficits and private investment in agriculture. Weak regional co-operation in transboundary river and lake basins also means water resources are not adequately shared. The NBF maintains that Africa’s share as a percentage of world agricultural imports (exports from Africa) has steadily dropped from 5.4% to just three percent in the last 20 years. Intra-regional trade of all goods in Africa is limited to less than 12%. So what can be done? When it comes to reducing the barriers that farmers face in the Beira Corridor, the NBF believes that broad and allencompassing reforms are required. These should include, not only financial support, but also a political willingness and improved government co-ordination. More private-sector engagement is also

necessary and strategic partnerships will have to be established with the Mozambican government and local communities. To help mobilise the private sector to address these challenges, the foundation last year helped set up the Southern African Agriculture Development Partnership Platform (SAADPP). The platform, which receives support from USAID, is being driven by private-sector led interventions. Henri Minnaar, the head of the NBF’s agriculture and food security programme, says the platform includes officials from Mozambique and Malawi. The interventions are being led by three organisations, with South African agriculture company Senwes tasked with improving regional market integration, accounting firm Deloitte investigating alternative funding streams and multinational development agency Capdev addressing capacity building. The three will evaluate and fund agriculture development and investment projects within NEPAD’s Comprehensive Africa Agriculture Development Programme (CAADP), as well as investment plans and government-approved ventures within Malawi, Mozambique and Zambia. In the Beira corridor, the NBF supports a supply-chain management and entrepreneurship development programme

at the Instituto Superior Politécnico de Manica in Mozambique. After completing their studies, top achievers will be assisted to develop their business ideas. The foundation is also partnering with the University of Pretoria to identify inclusive agriculture models in Mozambique, Zambia and Malawi. One project the NBF plans to take on is the free movement of seed between neighbouring Southern African Development Community (SADC) members. Minnaar says the foundation plans to sensitise border officials and others who are responsible for moving seed, to SADC directives, which allow the free movement of seed across member countries. He says the SAADPP is based in South Africa, but that the foundation is keen to create similar platforms in Malawi and Mozambique. At a conference held in November 2012 at the Development Bank of Southern Africa’s offices in Pretoria, delegates called on African governments to allow the private sector to provide services to the agriculture sector while it revisits issues like pricing and other barriers. Delegates also agreed to monitor and report non-tariff measures at a regional level to deter instigators of prohibitive and nontransparent trade measures.

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Towards fairer

food production

If food insecurity and gender inequality are not addressed in tandem, any efforts to remedy these problems are bound to fail, writes Tanya Farber.

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‘F

ood insecurity’ and ‘gender equality’ are two terms that plague the African continent and leave development professionals in a state of utter frustration. But what is also of huge importance is the unhealthy relationship between the two. From high-end professionals, to women tilling the soil, there is consensus that the two problems are so closely interwoven that any possible solution which only looks at the one and not the other will fail. Food security expert Shaun Ruysenaar says that food security is not just about the production and availability of food, but accessibility too, and that is an area where gender is a cross-cutting issue. “Access to food generally relies on a source of income to purchase it,” he says, “and women are generally not ‘earners’ within the household as ‘traditionally’ it is men who are the bread winners. With such an inequality within income structures between men and women, women, who are usually the ones who physically provide food for the family, are in no position to do so. This has led food security scholars to consider the importance of intra-household dynamics of ‘who gets the food’ – and it is definitely not skewed in women’s favour even though, as they are the www.nepadbusinessfoundation.org

‘Agriculture is generally undervalued and neglected in Africa … (and) as a majority of the workforce, women bear the brunt of an already problematic labour system.’ real providers, clearly it should be.” And, he says, there are also ramifications at a more macro level. Availability of food relies on agricultural production, and farm labour consists largely of females rather than males. “Agriculture is generally undervalued and neglected in Africa and is also on the unfair end of a hugely uneven global agro-food complex,” he explains, “and certainly gender plays a significant role in the way in which workers may be exploited. As a majority of the workforce, women bear the brunt of an already problematic labour system.” According to African Studies academic Mirjam de Bruijn, systemic change has been hampered by a romanticised view of women as agents of ecological change.

“Women tend to be the first and most severe victims of environmental degradation,” she says, “because of the strict sexual division of labour attributing to women the chores of fetching water and fuel wood, growing food and collecting fodder. Women are considered the main experts and educators as concerns environmental knowledge and skills based on their close interaction with the natural resources. Women then are called day-to-day environmental managers, barefoot ecologists, whose work is done in harmony with nature.” She says that this harmonious and romanticised view of the relationship between women and the environment may easily overlook the harsh realities in which most women live, and that in many cases, women are working the land by sheer force of circumstance as the more remunerative forms of employment are reserved for men. She cautions that if these images of women capable of ‘making’ their world are not replaced by a more realistic model, development programmes will keep to rhetoric and discourse instead of influencing practice, and the eradication of poverty will take a millennium. The reality of Rodah Nafula Wekesa (35), an HIV-positive widow living in Kenya, highlights the myriad ways in which gender

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inequality affects food security through less obvious ways like reproductive health and customary law. She contracted HIV from her husband, and since his death, customary law has disempowered her further and cut her off from playing an active role in her family’s food security. The couple and their children had been living in a small town called Kisumu, but when her husband died in 2002, she moved to his ancestral land. “In the Luo community, people have houses back in the ancestral homes even when they are working away in other towns,” explains Nancy Ondeng who works at Kelin (Kenya Legal and Ethical Issues Network on HIV and Aids). “A man and his wife are usually given part of the ancestral land where they move back to after retirement. Not everyone stays in the rural areas. Most people move to urban areas to seek employment and only visit those back at the rural areas. They, however, maintain their houses in the rural homes.” The house that had been built for her in the rural area was demolished by her in-laws, and she was then denied access to her livelihood. “After my husband’s death, I was not allowed to till land and produce foodstuff like I did before because it was said that being the www.nepad.org

AGRI C U LT U RE AND FOOD SE C U RITY

wife to the first son, I would bring a bad omen to the rest of the family members since I did not have a man to ‘be with’ [have sexual intercourse with] when the planting season began.” Rodah, however, is forced to remain in this context because of a custom that says that after the death of her husband, a widow is regarded as property and is inherited by her husband’s family. Another important component in relationship between food insecurity and gender equality is that of trade liberalisation. According to researchers at United Nations Women Watch, trade liberalisation has had more of an adverse effect on women than men because of the fact that women are predominantly engaged in the agricultural sector and typically in subsistence production. “Trade liberalisation has often had the effect of increasing the production of export (cash) crops, while increasing imports of food crops that compete with locally produced crops and therefore depress their prices,” they explain. “This affects men and women differently, as women are usually small-scale

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‘Although the majority of those who produce, process and market Africa’s food are women, only one in four agricultural researchers is female.’ food-crop farmers, while men are typically more actively engaged in the production and marketing of agricultural commodities traded in regional and international markets.” So where can inroads be made? What possible solutions exist? Vicki Wilde, director of African Women in Agricultural Research and Development, says one solution lies in increasing the number of female professionals doing research and driving policy. “Although the majority of those who produce, process and market Africa’s food are women,” she explains, “only one in four agricultural researchers is female, according to a 2008 benchmarking study conducted by the Association for Water and Rural Development.” Even fewer – one in seven – hold leadership positions in African agricultural research institutions, and she believes that effective solutions for food security will come through empowered women scientists. The example she gives is that of Dr Susan Ikerra, who was up-skilled by Award to take up a more managerial role. “She is proof of how the right training for the right scientist can have a measurable impact,” says Wilde. “For decades she was one of Tanzania’s leading fertiliser experts, but she was repeatedly passed over for promotion. www.nepadbusinessfoundation.org

She never understood why. Once she gained the team management skills she was lacking, things changed. Today, she is executive director of the Tanzanian Fertiliser Regulatory Authority, a position of tremendous influence.” She says that African women scientists are helping to create an agricultural sector that is gender-smart and responsive to the needs and contributions of women and that their ideas, talents, and productivity will prove vital in addressing the urgent imperative of smallholder farmers’ success. Ruysenaar also advocates a holistic approach rather than one based on ‘silo’ mentalities. “I think from a food security and gender perspective specifically, there is a tension in looking too singularly at it or working in silos when considering the two together,” he says. “Food security is complex, and needs to be broken down into composite parts but really what we need to do is try and link things back together to see the big picture. It seems more and more that the quick fix aimed at one or another element of food security is wholly inadequate. Understanding the dimensions of gender, culture, politics and other components that surround them also cannot be neglected.” A luta continua!

A word from NEPAD Business Foundation... Rural Mozambican women ululated in celebration when they received the title deeds for their land in Mozambique at a handover ceremony on 5 March 2013. These title deeds will give them access to finance and resources that they need to improve their farming techniques and sell their produce at higher prices. For these women, it means they can achieve food and income security for their families. The NEPAD Business Foundation (NBF), working with the Foundation for Community Development, assisted these rural women farmers in accessing the rights of land use in Chimoio, a town in the country’s Manica province. At domestic banks, these women were unable to access finance and resources. With just the title deeds, these women are able to change the dynamics of their family’s ability to secure income for education and a better livelihood. Speaking at the handover ceremony, NBF CEO Lynette Chen said, “ Women are the backbone of Africa’s agriculture. Empowering women will empower households and change the destiny of Africa’s children whose primary care is administered by these courageous women.”

ADVERTORIAL

Marefa International M

arefa International strives to be the Preferred Partner in Packaging Solutions. The company name, Marefa, is derived from the Swahili word for ‘insight’. It is through insight that Marefa understands and satisfies its customers’ needs and has achieved its reputation as Preferred Partners in Packaging Solutions. Marefa has been supplying and servicing the bottle filling industry since 1999. Building a sound reputation based on the manufacture of world-class liquid packaging equipment with excellent After-Sales service and Turnkey* solutions. Marefa is more than just a company that designs and manufactures quality liquid filling equipment. It provides solutions that include turnkey projects, filling, conveyoring, line control and capping, labelling and After Sales service.

Marefa is more than just a company that designs and manufactures quality liquid filling equipment. It provides solutions that include turnkey* projects As a South African company, Marefa is proud that more than 95% of its components and equipment are manufactured in-house, along with its R&D, design and assembly. This ensures consistency in design, development and quality. Marefa International has many satisfied clients across the globe with an ever growing market-share across Africa. We currently have clients in Angola, Zimbabwe, Mauritius, Kenya, Rwanda and Botswana. Some of the industries we cover include: • Dairy (milk, flavoured milk, yoghurt and drinking yoghurt) • Beverages (juices, soft drinks, spring water, concentrates and cordials). • Sauces and other condiments • Cosmetics • Pharmaceuticals • Jams, spreads and margarine • Cooking oils and other edible oils • Vehicle oils and fluids • Household chemicals and cleaning agents • Wine and spirits www.nepadbusinessfoundation.org

Marefa International’s range of equipment is made up of the following: 1. Rotary Bottle Filler/Cappers. This is a range of gravity based filling equipment. It is designed to handle PET, HDPE and glass bottles via base or neck handling. 2. Pump Filler for bottles, buckets and drums This is a range of in-line pump machines available in either semi-automatic single head units or single and dual lane multi head machines. Used for filling medium to high viscosity products. 3. Tub Filler Range of single or dual lane tub fillers that can fill up to 1L tub on a single piston stroke. 4. Step Filler for bottles Semi-automatic gravity filler that is pneumatically driven and can have up to 8 filing valves. 5. Labeller Marefa produces a range of labellers that incorporates self-adhesive labelling and high speed labelling which are able to do gate, panel, back to back, and wrap around labelling. 6. Supporting Solutions Marefa International can also provide you with all the supporting solutions you require. These include: bottle silos, debaggers, bottle un-scramblers, conveyors, accumulation tables, bottle & belt washers,

conveyor canopies, air-conveyors and blowers, separation tables, orientation scrolls, cap elevators and change parts trolleys. Marefa also has a dedicated After-Sales service which is managed by a team that passionately delivers services, technical support and revitalised equipment to its customers. The After-Sales service includes the following: spare parts, refurbishing of equipment, service and repair, breakdowns, installation and commissioning, upgrades on existing or nonMarefa equipment, training, maintenance, warrantees on Marefa equipment, advisors for system improvements and technical advisors. Marefa International has over a decades’ experience in the industry with a great reputation for excellent service and quality and believes in the development of people and economies in Africa. Are your current packaging requirements being satisfied? Let Marefa International be your Preferred Partners in Packaging Solutions. *Turnkey: refers to a project, in which a single contractor has responsibility for the complete job from the start to the time of installation or occupancy.

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AGRI C U LT U RE AND FOOD SE C U RITY

The long road to

feeding the world

African governments must step up to the table to boost food security, writes Stephen Timm.

frica has the potential to become the world’s leading supplier of food but governments on the continent must address the serious challenges that remain to enable Africa to improve food security and boost agricultural exports. Agriculture supports the livelihoods of 80 percent of the African population, according to the African Development Bank (ADB) and the McKinsey Global Institute estimates that the continent holds about 60% of the world’s uncultivated arable land. Yet despite this, Africa, which was once a net food exporter in the 1960s, now imports about 20% of grain products consumed on the continent, according to the ADB. In droughtprone countries, imports of cereals can make up as much as 50% of all grain consumed. Much of the agricultural sector’s failure to take off can be attributed to low farm yields.

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A farm of the same size in Asia produces about a quarter more grain, vegetable or fruit than one in Africa and eight times more in Latin America, according to the development bank. Because of this, food scarcity continues to plague Africa. The ADB estimates that over 70% of Africa’s poor live in rural areas where food scarcity is prevalent, while 16 of the 20 least food secure countries ranked by the International Food Policy Research Institute’s Global Food Security Index in 2012 are located in Africa. A report by the institute last year found that agriculture-led growth has the potential to make the largest impact on reducing poverty rates. It points out that in Rwanda and Kenya, for example, a one percent growth in GDP there, driven by agriculture, has led to three to four times more poverty reduction than growth driven by non-agricultural sectors.

The researchers also suggested that growth driven by staple crops generally reduces poverty to a greater extent than growth driven by export crops. Last year’s United Nations Development Programme’s Africa Human Development Report revealed that more than one in four Africans is undernourished. It also said that African governments were partly to blame for low food production, as they continue to burden domestic agriculture with high, arbitrary taxes; this while farmers struggle to compete against heavily subsidised farmers from developed countries. The report noted that any production increases in agriculture have come from expanding cultivated land area – not from making farming more efficient. What is needed, it says, is more fertilisers and seeds, stronger research and

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‘The poor infrastructure among African countries has made it cheaper to import food.’ However, he believes foreign land deals can boost investment in Africa and improve food security, but that appropriate policies and regulations are needed. But if the continent is to grow agriculture it will also have to improve support to smallholder farmers who, according to the UN’s International Fund for Agricultural Development (Ifad), produce about 80% of food consumed in sub-Saharan Africa. Bogale says multiple interventions may be required to enhance the productivity of smallholder farmers – including helping

smallholder farmers into the market and supply chains; ensuring security to land rights through proper land reform; and ensuring improved access to appropriate inputs and extension services. But John Purchase, chief executive of the Agriculture Business Chamber (Agbiz), believes that smallholder farmers alone won’t help boost Africa’s agriculture sector. He says the continent needs commercially viable value-chains and more large industrial enterprises. Brazil’s success in agriculture, he says, is based on the South American country’s ability to integrate smallholder farmers into the value chain. What Africa needs, Purchase says, is to develop more value-added sectors such as milling, canning and animal feed. He says policymakers in Africa need to set up market institutions and bring buyers and sellers together, while also improving infrastructure in the region. The Malawian Government’s subsidies to farmers, following a 2005 drought, helped turn the country from a net importer of maize into a surplus producer of maize, but Purchase says Africa shouldn’t rely on subsidies to its farmers, arguing that subsidies create a perception of entitlement among farmers and don’t drive efficiency. Indeed, some have criticised Malawi’s subsidies for crowding out investment from the private sector. Purchase says, compared to developed countries, South Africa’s agriculture sector is one of the least subsidised, adding that this makes the country’s farmers “more lean and mean”. Subsidies can also be problematic. Thomas Jayne, professor of international development at Michigan State University’s Department of Agricultural, Food, and Resource Economics says in Zambia investment in storage facilities has been stifled by government policies, which ensure that highly-subsidised products are placed on the market. “Consequently, very few traders or millers stored maize for later in the season, and this has given rise to the current dilemma of maize meal scarcity after a major bumper harvest nine months ago,” says Jayne. He argues that governments don’t necessarily need to put in place everything

for well-functioning marketing systems, but should ensure that a stable policy environment is present to attract investment. Ultimately, the private sector will be crucial to developing agriculture on the continent. Martin Bwalya, who heads up NEPAD’s Comprehensive Africa Agriculture Development Programme (CAADP), points out that the implementation, research and financing of farming interventions will all come from the private sector. The CAADP, which was set up in 2003, aims to improve food security and increase African incomes by raising agricultural productivity by at least six percent a year and increasing public investment in agriculture to 10% of national budgets per year. A total of 43 African countries have adopted the CAADP process and 10 countries on the continent have achieved consistent six percent in the sector, says Bwalya. Six countries currently invest over 10% of their national budgets in agriculture. Through the programme, NEPAD has assisted African states with building systems to track and monitor the progress of agricultural interventions. NEPAD has also helped states to improve the quality of their planning and take steps towards institutional reforms – by improving coordination across government departments and involving civil society and the private sector in formulating policies. He says African governments have come to appreciate that developing the agricultural sector requires not just sufficient budget, but also the right institutions as well as accountability and good governance.

A word from NEPAD Business Foundation... In supporting the Comprehensive African Agriculture Development Programme and the promotion of efficient value chains, the NEPAD Business Foundation (NBF) has developed a supply chain and entrepreneurship curriculum for southern Africa. This is already being run as part of agriculture course at Mozambique’s Higher Polytechnic Institute of Manica, and the NBF also aims to promote market access to small and rural farmers. Speaking at the launch of the curriculum in February 2013, NBF CEO Lynette Chen said, “Ensuring market access is as important to small farmers as the growing of the crops. Without adequate financial returns, farming ceases to be gainful. Agriculture will be the sector which moves people out of poverty quicker on the continent.” Under the Removing the Barriers in Agriculture Programme, the NBF ensures candid policy conversations between government and private sectors. This will develop technical capacity for government agencies that promote agriculture and assist rural farmers to gain rights for the use (title deeds) of their land. These efforts will accelerate the development of agriculture in the southern African region.

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Image courtesy of Shutterstock

development, and a more coordinated and responsive extension system staffed by experts versed in the behaviours and habitats of local farming communities. Professor Ayalneh Bogale, the director of food security at the University of KwaZuluNatal’s African Centre for Food Security, echoes this, saying policymakers must also look at strengthening market infrastructure and policies affecting trade among countries. “The poor infrastructure among African countries has made it cheaper to import food from South and North America, Asia, Europe and Australia even if some countries in Africa produce the same products in surplus,” he points out. The increasing number of foreign land deals is also threatening African food security, as they often do more harm than good. The deals involve foreigners buying up huge swaths of land. A BBC report in April 2012 revealed that almost five percent of Africa’s agricultural land had been bought or leased by investors since 2000. The land deals are being driven by a massive increase in world food prices – over 133% in the last decade, according to the UN’s Food and Agriculture Organisation (FAO). Bogale says many foreign land deals lack clarity of the process of acquisition, are marred by corruption, and have displaced those who originally were settled on the land without proper compensation.

REGIONAL INTEGRATION AND INFRASTR U C T U RE

Africa’s integration

champions

Who is championing regional integration and the building of infrastructure in Africa and what have they achieved? Sharon Davis investigates.

he Programme for Infrastructure Development in Africa (PIDA), approved under the aegis of the African Union early in 2012, has given renewed focus to bridging the infrastructure gaps and provided more impetus for regional integration across the continent – a key component for developing a stronger African economy. Some of the champions of this integration drive can be found within the Presidential Infrastructure Champion Initiative (PICI), a high-level sub-committee with representation from Algeria, Benin, Senegal, Egypt, the Democratic Republic of the Congo (DRC), Nigeria, and Rwanda, with South Africa in the chair. The aim of the PICI is to facilitate the completion of key infrastructure projects – the ‘missing links’ in the current network across Africa. They have selected seven of the 51 regional and cross-border projects that form part of PIDA’s Priority Action Plan (due to be completed by 2020). Each project is championed by an African Union member country, with the goal of removing any obstacles – whether political or financial. One example is the completion of the missing links in the 4 500 km Trans-Saharan Highway, linking Algiers in Algeria to Lagos in Nigeria, via Niger. Various portions of this road have been under construction since the 1970s. However, with Algeria championing this project for the PICI, the construction of the missing links between north and west Africa are on schedule and the finance ministers of Algeria and Niger have submitted a joint application to the African Development Bank (AfDB) to request funding for the $40 million shortfall for the construction of the project. A fibre optic cable project linking the three countries is also considered a missing link and falls under the PICI. Algeria reports that finance for their section of the project is approved, and the countries plan to meet to get the project moving. Another important link is the NigeriaAlgeria gas pipeline. The $20-billion project with the capacity to transport 30 billion cubic metres of natural gas from Nigeria to Niger and Algeria is close to reaching www.nepadbusinessfoundation.org

political sign-off and approval under Nigeria’s championship. Similarly, the Dakar-Ndjamena-Djibouti road and rail projects, which cross Africa from east to west, are being facilitated by Senegal. The overall feasibility study has been completed, with the next phase being a detailed feasibility and design for the first section of the transport corridor. Other vital infrastructure links under the PICI include the feasibility study into the road and rail bridge connecting Kinshasa in the DRC to Brazzaville in the Republic of Congo under the Republic of Congo’s championship. Another one relates to the facilitation of discussions on Information and communication technology (ICT) regulations in the region to allow for the efficient rollout of ICT projects with neighbouring states, which is facilitated by Rwanda.

‘You can’t afford to ignore social imbalances. If you ignore unemployment, your returns on investment are not guaranteed in the long-term.’ Work on the vital North-South Corridor, a trans-continental rail and road corridor running from north to south across the continent, also falls under the PICI and is facilitated by South Africa. Originally planned to run from Durban to Dar-es- Salaam (with 59 road, 38 rail and six bridge projects) it has now been extended to include Cape to Cairo (with 81 road, 48 rail and six bridge projects). This is one of the larger and more ambitious infrastructure projects – and one that is close to completion. Infrastructure aside, there are hundreds of other integration champions among the many people working to realise the long-held ambition of regional integration, with its expected continent-wide economic benefits. The tripartite merger – the integration

of three regional economic communities in eastern and southern African – Common Market for Eastern and Southern Africa (Comesa), East African Community (EAC) and the Southern African Development Community (Sadc) – is one example. Once complete it will connect 26 African countries, including more than half of Africa’s population, and contribute 58 percent to GDPs, under one free trade agreement – which will make it easier, cheaper and faster to trade across the continent. Expected to happen “within the next five years or so”, according to Ralph Olayé, manager of the AfDB’s NEPAD and regional infrastructure division, who adds: “This is an exciting development for regional integration and getting trade going in Africa.” The North-South Corridor infrastructure, together with reforms to customs and streamlined border crossings, should reduce many of the well-documented border control costs and trade bottlenecks for trade within and from Africa. Another way to look at regional integration champions is to consider all those who have eschewed the short-term profit potential and focused on longer-term development objectives and goals. These are the true champions of regional integration – whether forward-looking governments or individual businesses. “The global financial crisis was caused by short-term focus and greed,” says Elias Masilela, CEO of South African headquartered Public Investment Corporation (PIC). “We can’t invest as if it is business as usual. It’s not healthy or sustainable for some businesses to flourish within a sea of poverty.” He says that businesses need to take a longer-term view for the betterment of the continent and think about projects from a development perspective. “You can’t afford to ignore social imbalances. If you ignore unemployment, for example, your returns on investment are not guaranteed in the long-term,” says Masilela, hinting at the potential for social unrest in situations where income inequality persists. “We need all the players on the continent to take long-term views of their investments

T h e O f f i c i a l NE P AD y e a r b o o k 2 0 1 3

and consider the link between the macro economy and financial performance.” Masilela, who is involved with financial market development and integration discussions with the Johannesburg Stock Exchange, says the regional integration of financial markets ought to be another area of focus as it is the key vehicle for attracting private equity. This form of finance is vital to help drive integration, infrastructure development and economic growth in the region. Another major champion of regional integration is NEPAD. With 10 years in the role of promoting continent-wide integration the African Union initiated economic development programme has promoted and facilitated economic integration across Africa. Initiatives such as the Short Term Action Plan, established in 2002, the Infrastructure Project Preparation Facility, the African Action Plan and the more forward-looking PIDA, among many other projects, have helped to create an environment of regional co-operation and encouraged the various political representatives to implement policies and reforms, including harmonising regulatory systems. The promotion of continent-wide sustainable growth through infrastructure development is obviously a long-term project. But a decade down the track, the benefits of these and other initiatives – such as facilitating partnerships with the private sector and creating opportunities for networking and knowledge sharing – are a lot closer to being realised.

A word from NEPAD Business Foundation...

Image courtesy of Getty/Gallo Images

Private sector companies are beginning to take steps to benefit from Africa’s infrastructure build. A recent conference looked at opportunities for the private sector in the north-south corridor hosted by the NEPAD Business Foundation (NBF) and Built Environment Professions Export Council*, Transnet’s general manager for Africa, Mervin Chetty, announced the establishment of a dedicated Infrastructure Desk to be run by the NBF and resourced by the rail, port and pipeline operator. This desk will solicit opportunities, coordinate key role players to pursue these and engage governments on challenges impeding infrastructure investments. The Investment Desk will serve private sector companies that want to invest or pursue infrastructure opportunities by providing research, linkage, relationship and coordination services. * The Built Environment Professions Export Council is a non-profit public-private partnership that supports export-ready firms to export built environment services internationally.

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REGIONAL INTEGRATION AND INFRASTR U C T U RE

Continental

make-over

Africa has developed a number of ambitious plans to improve the continent’s economy. Sharon Davis investigates whether the Programme for Infrastructure Development in Africa (PIDA) can encourage continental growth and increase trade.

t is widely accepted that improved regional integration and infrastructure development across the African continent has the potential to reduce gaping inefficiencies and increase both intra-African trade and trade between Africa and the greater global economy. Increased trade, in turn, has the potential to boost economic growth and improve the economies of the individual countries that make up our diverse and vibrant continent. This is why integration has been a priority on the African Union’s agenda, and why there have been a number of attempts to turn the 54 independent African economies into a more coherent and integrated market. The recently approved Programme for Infrastructure Development in Africa (PIDA), a long-term plan for regional integration spanning 2012 to 2040, aims to address the pressing infrastructure deficits and encourage continent-wide economic growth at an average of six percent per annum. This entails complex projects with a budget in excess of $360 billion to meet the continent’s growing power needs; allow for an increase in road, rail, port and waterway traffic of up to 14 times in some countries; ensure food and water security; and expand information and communications twenty-fold to meet growing demand. “Infrastructure is essential for integrating regions, realising socio-economic potential and fast-tracking development in Africa,” says Adama Deen, NEPAD’s head of Infrastructure Programmes and Projects. And www.nepadbusinessfoundation.org

the PIDA is expected to play a critical role in removing a number of infrastructure barriers to both inter-regional and global trade. “It breaks the vicious cycle of not trading because there is no infrastructure in place, and not building infrastructure because there is not enough trade,” says Ralph Olayé, manager of the African Development Banks (AfDB’s) NEPAD and regional infrastructure division.

‘Infrastructure is essential for integrating regions, realising socio-economic potential and fast-tracking development in Africa.’ PIDA’s short-term goals, covered by a Priority Action Plan to 2020, include the completion of 51 infrastructure projects with a budget of $68 billion. The PIDA is based on careful research, consultation and planning, and the priority projects have been specifically selected to remove any bottlenecks or impediments to regional integration and growth, a move that Olayé describes as “a major step forward”. A joint initiative by the African Union Commission, United Nations (UN) Economic Commission for Africa, AfDB and NEPAD, the PIDA aims to develop a connected transport hub of highways stretching for 37 200 km, and railways spanning 30 200 km. There are

also plans to add 54 150 MW of hydroelectric power generation capacity in addition to laying 16 500 km in new power lines and the ability to ship an extra 1.3 billion tonnes from the various African ports by 2040. The benefits of improved regional integration will be seen at all levels, from an increase in jobs to improved living standards and welfare, to a reduction in poverty, says Tunis-based Olayé, especially as “the industrialisation agenda entails a move up the value chain” and also looks more to the provision of services rather than relying only on commodities. Other benefits will include food and water security, increased global connectivity, lower power and transport costs – all of which will help Africa move from a number of small isolated markets to larger, integrated markets that operate more efficiently. “Energy takes a lion’s share, in terms of project finance, in the PIDA’s priority list for 2020,” says Olayé. “There is a real energy deficit that hinders industrialisation on the continent.” Hydropower and other regional power initiatives outlined in the PIDA are expected to save the continent $30 billion a year (or $850 billion by 2040) in electricity production costs and provide electricity to an additional 800 million people. Similarly, the African Regional Transport Integration Network is expected to save $172 billion in transport-related costs, with the potential for greater savings as trade corridors open.

Image courtesy of Getty/Gallo Images

T h e O f f i c i a l NE P AD y e a r b o o k 2 0 1 3

For many African countries it is easier to trade with Europe and Asia than it is to trade with other African countries, says Elias Masilela, CEO of South African asset management company, Public Investment Corporation. It is expected that more efficient transport networks will boost intra-African trade and reverse Africa’s diminishing share of global trade, which has risen from an alltime low of 2.3% in 2000 to 3.2%, but is still down from five percent in the mid-1960s and eight percent of total world exports in 1948.

‘It breaks the vicious cycle of not trading because there is no infrastructure in place, and not building infrastructure because there is not enough trade.’ Projects such as the Mombassa-NairobiAddis, Tema-Ouagadougou-Bamako, TransMaghreb and Bamenda-Enugu road corridors, and the Kazangula Bridge between Zambia and Botswana already show promising progress, which suggests that the PIDA could deliver the results it promises. “Regional integration is really underway. There are a lot of exciting developments

happening, and they are all at different stages of development – some are in the planning stage, some are already completed,” says Olayé. “There is good progress in the energy sector. Several new hydro-dam projects will be online in a couple of years – and this will also help to manage Africa’s limited water reserves, he says, adding that a good example is the $348 million Kenya-Ethiopia Electricity Highway project. “The line from Ethiopia to Djibouti opened four months back, providing a 30% reduction in power costs along with better reliability than before.” The Eastern Africa Submarine Cable System (EASSy), a 10 000 km submarine fibre-optic cable deployed along the east and south coasts of Africa, is another success story. It has reduced the cost of internet broadband by 20-times and made it more affordable to use. While full integration across the continent is a long way off, progress is being made on a daily basis, says Olayé. Although the PIDA budget to 2040 is large, at 0.2% of GDP or 1% of national budgets, it is affordable, and Olayé believes that “moving up the chain of value-addition” will provide an economic rate of return that will enable infrastructure development to compete effectively with other important needs, such as health and education. Will the PIDA prove to be the effective trade catalyst everyone expects it to be? Time will tell, but the sound preparation, inclusive

planning and regional commitment, combined with its early successes, suggest it has the potential to succeed where earlier initiatives have failed.

A word from NEPAD Business Foundation... Developments on the continent, such as the BRICS-Africa partnership, confirm Africa as an attractive investment option. The Brazil Russia India China South Africa (Brics) Summit, held in March 2013 in Durban, committed to a partnership with Africa through NEPAD for infrastructure development and industrialisation – key developmental and economic priorities. At the Brics Summit, NEPAD Business Foundation CEO Lynette Chen spoke of the need for Brics to view NEPAD and the Programme for Infrastructure Development in Africa as the platforms to use when investing in infrastructure. “The BRICS Development Bank has to be a different kind of lender by providing funds, which take away inherent risks in infrastructure projects. This will encourage banks to invest, as normally they shy away from investing in infrastructure,” she said. Additionally, the Brics countries can also develop domestic technical skills and prioritise the use of local suppliers and contractors.

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ADVERTORIAL

Protecting your

African Assets The Export Credit Insurance Corporation of South Africa takes the risk out of doing business on the brave new frontier of global investment…

he Export Credit Insurance Corporation of South Africa (ECIC SA) is one of the driving forces of the development of trade and industry on the African continent, making it easier and less risky for international investors to take advantage of the diverse opportunities available in Africa. Mandisi Nkuhlu, acting CEO at ECIC SA, discusses what his organisation does, the synergies that exist with the NEPAD and gives a view on the potential for the growth of African economies in the near future.

In what way does ECIC assist the promotion of investment and trade in Africa?

We underwrite bank loans to foreign buyers of capital goods and related services and investments against political and commercial causes of loss.

Some would say that doing business across borders in Africa is far too risky. However, your company has built a business on it. What advice can you give to business wanting to expand into Africa?

Our advice would be to seize these opportunities as the potential is huge, and to manage the associated risks responsibly, as you would in any other region. Intra-Africa trade is of huge importance for Africa as a continent. As regards political risk linked to foreign jurisdictions, ECIC is your partner for risk mitigation.

What are the factors that most determine a country rating with regards to imports and exports? www.nepadbusinessfoundation.org

Risk Assessments for external environment or international trade in each country are based on factors such as the openness of the country to international trade, diversification of the export basket, currency transfer and convertibility risk, foreign reserve adequacy and regulatory risks.

Intra-Africa trade is of huge importance for Africa as a continent. As regards political risk linked to foreign jurisdictions, ECIC is your partner for risk mitigation. ECIC takes a hard stance against corruption. Tell us more about your anti-bribery policy.

In December 2011, ECIC adopted and implemented the Anti-Bribery Policy in ECIC Supported Transactions that seek to ensure that our organisation does not knowingly support transactions – particularly export contracts and investment contracts – that have been secured through bribery, including bribery of foreign public officials. The policy is benchmarked to the OECD Recommendations on Export Credits published by the OECD Working Party on Export Credits and Credit Guarantee.

How do you perceive Africa’s opportunities with regards to the associated risk of trading on the continent, and how do you manage that risk?

We see Africa as offering great investment opportunities. This sentiment follows on the heels of a strong decade of economic performance. The continent is forecast to grow significantly faster than the world average over the next five years. According to the Lions on the Move report on the progress and potential of African economies, released by the McKinsey Global Institute, it is estimated that these sectors could generate approximately $2.6 trillion in revenue annually by 2020. However, several risks weigh on Africa’s generally positive economic outlook. The narrow production base in much of the continent and heavy dependence on natural resource exports make many economies vulnerable to external shocks. The natural market and focus for ECIC’s supported products remains Africa, and approximately 82% of the corporation’s exposure is spread across the continent.

How does your organisation support NEPAD as a vision through your business? The NEPAD Business Foundation is the vehicle we use to raise the profile of ECIC, with a view of facilitating investment and trade in Africa. The support of the NEPAD Business Foundation could culminate in ECIC facilitating more finance from South Africa towards infrastructure projects in Africa as well as other commercial applications in the region.

ADVERTORIAL

Infrastructure debt listings I

nfrastructure remains one of Africa’s greatest needs with the lack of infrastructure cited as a main factor inhibiting trade and economic development on the continent. According to the African Development Bank Group, Africa will need to spend a staggering $93 billion a year over a decade in order to build the infrastructure it needs to support growth and meet its development goals. Infrastructure development will also require consolidated efforts from African governments, public private partnerships as well as significant ongoing investment. Fortunately the investment demand for Africa is there; with fast-growing economies, an appealing demographic profile and huge economic potential, Africa is attracting investment into the infrastructure sector. Strong uptake in sovereign debt issues, such as Zambia’s Eurobond issue of $750 million in 2012 at 5.6 per cent that was 15 times oversubscribed, indicates a sustained demand for infrastructure investment opportunities on the continent. This uptake is from institutional investors - such as pension funds and insurance companies in need of assets to match their long term liabilities – searching for higher yields than those offered in the developed world. As an example, Standard Bank’s African sovereign bond total return index (ex. South Africa) rose over 25 percent in 2012. Yet despite this demand only 13 out of 54 African countries have issued debt on international markets – mainly because of the availability of alternative sources of external financing for governments such as multilateral and bilateral financing, commercial bank loans and other private creditors. However, some experts believe that this will change and expect to see more African countries turning to debt markets to raise this much needed infrastructure finance. The Johannesburg Stock Exchange (JSE), already the world’s fourth largest exchange by total value of bonds traded in 2012, believes that much of this investment can be channelled through the South www.nepadbusinessfoundation.org

on the JSE

African exchange, and need not go off the continent. In 2012, the exchange had 1,452 bonds in issue with a total value traded worth US$22 billion. The JSE’s interest rate market is active in both the primary and secondary markets and has been growing consistently year on year. Offering a more affordable option than international debt markets, the JSE nevertheless offers access to significant capital as well as world class systems and regulation. A first step in the JSE’s drive to build a debt listings venue for Africa was the Republic of Namibia’s first Randdenominated government bond listing on the JSE in late 2012. The bond was twice oversubscribed indicating the demand from South Africa’s institutional investors for African sovereign debt listings.

Fortunately the investment demand for Africa is there; with fast-growing economies, an appealing demographic profile and huge economic potential, Africa is attracting investment into the infrastructure sector. The JSE now seeks to partner with other African exchanges and proposes a dualissuance model. This model would mean listing debt on both the JSE as well as the local market – allowing African issuers access to the deep capital pools that South Africa offers while benefiting from local market participation and international investment. Dual issuance on the exchange will allow foreign fund managers with mandates to invest in World Federation of Exchange market the opportunity to take advantage of these opportunities as well. Dual issuance of this type for infrastructure funding would

be suitable for both domestic and regional infrastructure projects. In addition to this, this model of dual issuance in conjunction with domestic financial market practitioners will allow a flow of skills across markets. The better developed Africa’s financial markets; the more attractive they will be to investors. The intention to collaborate with other African markets to co-issue debt is part of a broader JSE drive to work with other African exchanges and support African development projects. The JSE’s collaboration with other African exchanges is through its memberships in the Committee of SADC Stock Exchanges (CoSSE) and the African Securities Exchanges Association (ASEA) with the aim of fostering functioning capital markets, which in turn could help put the continent on the path to faster, more sustainable growth. The JSE has been a founding member of both associations and currently runs the CoSSE secretariat. Key focus areas for CoSSE include attracting investment into product on African exchanges, harmonisation of listings requirements, financial education and the development of commodity derivatives markets. The JSE’s work in development projects is primarily through its membership of the NEPAD Business Foundation (NBF). The JSE has played a role in the NBF since its inception in 2002 believing that African businesses need to co-ordinate their efforts to provide the corporate support to the most needed and wanted development projects on the continent. The JSE is particularly proud of the work that the NBF has accomplished in the Water Resources Group Initiative partnership with the World Economic Forum and the Department of Water Affairs South Africa. For more information on the JSE’s debt listing offering please contact Tamsin Freemantle, Business Development on tamsinf@jse.co.za or tel +27 11 520 8588. For further information please visit the following websites: JSE: www.jse.co.za CoSSE: www.cossesadc.org ASEA: www.africansea.org

ADVERTORIAL

Closing the

infrastructure gap Firmly committed to the African Union agenda, Bigen Africa is making great strides towards the development of much-need facilities and utilities across the continent.

igen Africa is a leader in infrastructure development in Southern Africa and is pioneering a smarter approach to more appropriate and sustainable infrastructure solutions. Chief executive officer, Dr Snowy Khoza, talks about infrastructure across the continent, the challenges faced by African countries hoping to improve their economies and the company’s strategy of ‘One Africa for all Africans’.

Africa has a huge infrastructure gap; what is Bigen doing to help address this?

We are an infrastructure development company that operates in various social and economic sectors, such as health, education, agriculture, water and sanitation, land development (residential, retail and commercial), energy, road and rail and mining. Given this focus, and with our experience in infrastructure development of over 30 years across Africa, we have already contributed to closing this infrastructure gap. Our development impact is most pronounced in project implementation, fund mobilisation, job creation, poverty alleviation and skills transfer. Through our programme management services we have assisted in delivering infrastructure close to R200 billion over the past ten years. This is a tangible contribution, although we realise that billions will be required to close this gap. We remain committed to supporting the African Union agenda and in our small way will continue making a contribution to ensure that this infrastructure gap is reduced, if not closed completely.

An important theme at Bigen Africa is ‘sustainable’ infrastructure…

We emphasise ‘sustainable’ infrastructure, because we believe in building long-term, beneficial infrastructure. By this I refer to durability and usability, with multi-purpose www.nepadbusinessfoundation.org

utilisation to the benefit of communities and the economy. Furthermore, for infrastructure to be sustainable, it must be used for purpose and maintained – an aspect in which our asset management approach adds value.

What are some of the major issues that African countries face in improving their infrastructure? Our continent is resource-rich in terms of land, minerals and human capital. Infrastructure development requires all three resources. Of land we have more

Dr Snowy Khoza, CEO of Bigen Africa

minerals accordingly. Obviously we require finance to be able to fund infrastructure on the continent, but I believe that there is enough money around the world that can be mobilised to fund projects as long as the funders’ agendas are aligned with our African Development Agenda. The agenda takes into consideration reasonable-risk pricing, cost of funding and terms and conditions that do not strip our continent of its natural assets.

What is your organisation’s Africa strategy?

Our Africa strategy is ‘One Africa for all Africans’. We believe that, as Africans, we can, through integrating infrastructure regionally, create a continent on which we can all enjoy the same benefits wherever we are, such as best education, quality health and a flourishing economy. As an infrastructure development company we have started expanding our African footprint, not only in Southern Africa, but also in West and East Africa, with focused plans to enter Central and North Africa by 2016. To us Africa is like an elephant and, as the Shangaan axiom says: ‘We shall eat the elephant piece by piece’. This we will not do alone, but with our strategic partners, including the various country partners, to support localisation, indigenisation and regionalisation. Our Africa strategy also includes a sector-focused approach for different countries. We do not believe that we should be everywhere and do everything. For example, in West Africa our focus is on land development (residential, retail and commercial), energy (mainly electrical distribution), transport (roads and rail), water and sanitation, and mining. With this strategically focused expansion plan we believe that, by 2016, we would have been fully established with offices in the three regions – South, West and East Africa – and with project offices in central and North Africa and still sector-focused per region.

REGIONAL INTEGRATION AND INFRASTR U C T U RE

One person’s waste

is another’s livelihood

In Africa, the poor are incredibly resourceful in turning rubbish into something useful, writes Tracey Bester.

hen Africans hear stories about how one can wander around the streets of First World cities and find a houseful of usable furniture, thrown away by residents who simply wanted a better version of the item they tossed, their eyes grow wide. For here, everything that can be used is used, and if you don’t want it yourself, you always know of someone who does. In Malawi, one of the poorest countries in the world, nothing is wasted. Here, car tyres, which in the rest of the world are a scourge of non-reusable rubber, are a valuable resource. There is a village where the work of the men is to strip the tyres down to their layers of nylon string encased in rubber. These strips are sold all over the country. They are known as linya, and as someone once put it: “The whole of Malawi is tied together with linya!” It is used as thatching string, to tie up bundles of anything from reeds to grass mats, to lash scaffolding and wooden buildings together; it is even used to make soccer balls. Entire cars are reused once they have been crashed. All engine parts are sold for spares and the metal frame is made into fuelefficient wood-burning stoves and hoe blades. One can buy wonderful oil or paraffin lanterns made from a single tin. They come www.nepadbusinessfoundation.org

in various designs and are used all over the country for lighting. Tiny lamps are made from single light bulbs, metal parts removed, upended onto an aerosol can (another difficult item to recycle). The resulting lamp is a work of art, and functional too. Children in the villages make toys out of anything and everything. Apart from the soccer balls already described, cars and trucks are made using wire, cartons and bottle tops.

‘The alternatives to the second-hand clothes and shoes are poor-quality Chinese imports.’ Local bands create instruments out of plastic bottles, tins and perhaps a bit of goatskin to stretch over a drum made from a petrol can. And these bands sound good! But the tragic side to this is that such resourcefulness and creativity come out of abject poverty. People make these wonderful things because they can’t afford to buy a ready-made item. It seems that as soon as we don’t have to reuse everything we have

because we can afford more, we lose our desire to make good use of what we have. In the Western world, people have become so far removed from understanding the intrinsic value of anything that false value is created for goods based on labels and their inflated price tags. In Malawi, a badly made Chinese nylon frock is seen as more valuable than anything second-hand. If you can buy a Chinese torch with 10 LED globes, which uses batteries as though they are a limitless resource, that is what you buy, rather than the lamp made from the used light bulb. One of the ways in which the First World does recycle, which has benefits in Africa, is through the bales of second-hand clothes which, when they have done their time in the charity shops of Europe and America and are still unsold, are sent south, via aid agency DAPP (Development Aid from People to People). Although detractors quote a diminished demand for local cloth, the benefits would appear to outweigh the negatives. Twenty years ago, Malawians were desperate for clothing, to the extent that they would trade valuable ebony carvings with tourists for a T-shirt. Now everyone, even the poorest person, can buy something wearable from the clothing markets. Once the

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REGIONAL INTEGRATION AND INFRASTR U C T U RE second-hand clothes get to Malawi, they are sold to local vendors, who make a living from selling them at travelling markets throughout the country. In this way, a huge number of people have access to a cash-generating job (rare in Malawi), and everyone has access to cheap, good-quality clothing. In the same way, shoes are traded, and it is amazing to see how discarded First World shoes are refurbished and sold on. The alternatives to these clothes and shoes are poor-quality Chinese imports, which are more destructive to the environment, more expensive and more of a threat to Africa’s local economies than DAPP’s clothing bales. DAPP uses the money raised from selling the clothing to fund training colleges, vocational schools, a farmers’ club, and HIV and Aids programmes. Meanwhile, the trade in local cloth, known as chitenje, is little affected, as every Malawian woman wears a chitenje over her Western dress. They are also used as baby slings, shawls and sheets. They are still a vital factor in local ceremonies, where they are given as gifts. In cities, tailors sew them into outfits. With all manufactured goods being relatively expensive (in an economy where few have access to cash), people will use an item until it is absolutely beyond repair – and even then might find an alternative use for it. Old chitenje cloth can be woven into mats or made into patchwork; flip flops are reused as

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floats on fishing nets, as are plastic bottles; and bottle tops can be wired together to make baskets and mats. One of the most inventive projects to make craft from waste is the Ilithalomso project in Kommetjie, Cape Town. ‘Ilithalomso’ is Xhosa for ‘a new dawn’, and is a very apt designation for a project that gives both junk and the people who make the crafts a new lease on life.

‘Old chitenje cloth can be woven into mats; flip flops are reused as floats on fishing nets; and bottle tops can be wired together to make baskets and mats.’ This project sprang from Working for the Coast, a poverty-relief project where unemployed people earn a basic wage in return for collecting litter. The concern was what to do with the non-recyclable rubbish once it had been collected. Project manager Wally Peterson looked into the idea of creating craft from it, which would serve the dual purpose of reducing landfill material and providing an income for more people.

Product developer and artist Monique Fagan’s creativity inspires the project as she comes up with ideas and designs for products. The team of crafters is enthusiastically led by coordinator, Yandiswa Mazwana. When the workshop began, it employed six craftspeople, but is now so busy that eight more have been employed. Profits from sales are split equally among the workers. Their tiny showroom is brimming with astounding objects, artworks and functional products. Ilithalomso is a model for what can be achieved through the synergy of innovative design, skilled craftwork, inspired project management and a sound knowledge of the marketplace. With a formula like this, the project can only continue to grow, providing jobs and skills to previously unemployed, keeping the environment clean and creating unique objects of usefulness and beauty. You could also spend thousands buying a recycled plastic lampshade by Heath Nash, who proves the point that recycling can be hot, hip and happening. Nash’s Flower Ball lampshades are objects of great beauty, handcrafted with skill and are exported all over the world. All of which goes to prove that all of us could take a long, hard look at what we value and what we could do to reduce the waste we generate, or to reuse it creatively. One man’s rubbish can be another man’s functional object, work of art or livelihood!

REGIONAL INTEGRATION AND INFRASTR U C T U RE

Rwanda Africa’s great economic hope Once synonymous with human tragedy, Rwanda is rising from its genocidal ashes and proving to be an ideal place to set up business, writes Jeremy Daniel.

ince 1994, the name Rwanda has conjured up images of human atrocities. The genocide that devastated the country lasted 100 days from 6 April, left approximately 800 000 Tutsis and Hutu sympathisers dead, and shook the region, and indeed the world, to its core. Yet, gradually but forcefully a new narrative is unfolding in Rwanda of a country that is, in many ways, a leading light in what progressive business-friendly African governance can and should be today. Alex Perry, writing for Time magazine, elegantly stated that: “If yesterday Rwanda was Africa’s great tragedy, today, to many, it is its great hope.” The world is taking note of the efforts of this tiny, landlocked nation of 10 million. On the 2012 Ibrahim Index of African Governance, Rwanda ranks 11th on the continent when it comes to ‘Sustainable Economic Opportunity’ and 16th for ‘Human Development’. Overall it is rated 23rd on the continent with its performance in Safety and Rule of Law (31st) and Participation and Human Rights (29th) dragging it slightly down. Entrepreneurial activity is encouraged and the World Bank ranks Rwanda eighth in the world when it comes to ease of “starting a business” and 23rd in the area of “getting credit”. Charlotte Philips, interim country director for VSO (Voluntary Service Overseas) www.nepadbusinessfoundation.org

Rwanda says these figures are real although she worries that they are a little skewed towards the middle classes. “The World Bank is right – it is very easy to set up a business here in Rwanda, although as anywhere it takes the initial investment to do so.” The government has embarked upon a determined and well-planned programme to create a ‘middle-income’ economy, which it has laid out in its Vision2020 programme, and a large sector of that programme relates

‘If yesterday Rwanda was Africa’s great tragedy, today, to many, it is its great hope.’ to the creation of a vibrant information technology (IT) sector, driven by the Rwandan Development Board. The infrastructure that has been set up already is impressive: a fibre optic cable spanning Kigali; a broadband backbone providing equal access across the whole country; an innovation lab; data centre and much more. These steps have greatly increased access and are driving down costs of broadband for ordinary people. As Russell Southwood of Balancing Act

Africa, a telecoms consultancy specialising in Africa, explains: “In the more competitive markets, the price of internet access (particularly on mobiles) has come down. So for the first time it’s possible to see local content emerging and beginning to be successful, and to see the enormous growth of social media. Again there are challenges posed here by multiple handsets and operating systems but a market for local content has begun to develop.” Forbes magazine reports on the country’s ambitions, stating: “The Rwandan government is seeking to become the regional leader in information and communication technologies,” and the Rwandan Development Board is tasked with overseeing the great technological leap forward. The board demonstrates that “Rwanda’s internet penetration grew from less than one percent in 2000 to 7% at the end of December 2011”. A closer look at the figures shows that mobile penetration has also been growing steadily. MTN Rwanda is the biggest mobile operator with 3.4 million subscribers as of December 2012, and cellular penetration of the country as a whole increased from 44.4% to 53.1% between July and December – a significant increase which will have a profound effect on the way people access information. Yet social media analysis company

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like Kenya and Uganda, and are sure to be a catalyst for IT in the country. Ara Nashera is a 25-year-old economics graduate from Kigali University, and one of a new generation who are embracing the digital age and using the resources provided by kLab.

‘Kigali is a hotbed of innovation and education in the IT sector.’ “kLab in the next decade will have produced market savvy candidates,” explains Nashera, “since it provides a space that newbies and experienced businessmen in technology interact.” And he thinks it won’t just be in Kigali, as “the government already has cyber-business centres all over the country so it is only a matter of time before people not in the capital can access kLab’s resources.” Erik Hersman is a TED fellow and a technologist from Nairobi who was part of the team that created crowdsourcing platform Ushahidi, one of Africa’s most successful start-ups thus far. He explains: “As far as the tech hubs/labs across the continent, we’re seeing a huge impact on entrepreneurship. In Kenya we’ve seen a large jump in the

number of new tech start-ups in the last three years, and similar patterns seem to emerge wherever a tech hub pops up in other countries around Africa.” It’s well documented that the mobile revolution in Africa is changing the continent. People have access to information, to a vibrant, engaged worldwide community and the ability to organise like never before. From education, to health, to agriculture, the web is re-shaping Africa. Nashera explains how “most start-ups in Rwanda are in consulting, construction and real estate since they are easier to set up, and the start-up scene in software fields is not as extensive since there is no incentive in micro-finance for such businesses focused in technical products.” But with the government prioritising a business-friendly environment with a set of goals that seeks to create a middle-income economy by 2020, Rwanda is attracting more positive attention than it has for a long time. Many factors are in its favour: a governmentprivate partnership which prioritises growth in IT services; a general decrease in the price of broadband worldwide; and the success of the Kenyan tech industry as an incentive. It seems that the signs are all there that Rwanda is set to write a new, more positive history and close the book on its painful, divided past.

Image courtesy of Getty/Gallo Images

Socialbakers identifies only 186 000 Facebook users and a penetration of the population of only 1.69%. President Paul Kagame has the most popular Facebook page with 27 000 ‘fans’, followed by MTN Rwanda and Christian worship leader, Don Moen. Mobile operators, French sports sites, religion and music dominate the topics of conversation on Facebook; growth is steady at around 10 000 users per month but clearly there is still huge scope for social media activity. With regard to infrastructure, there are big plans afoot to make the whole country wireless, yet anecdotally it doesn’t seem to be quite there yet. “Although some internet fibre optic cable has been laid in rural areas,” says Phillips, “it doesn’t seem to be active yet and mostly it’s Kigali residents that benefit. In rural areas, the internet connection – unless you work for local government – is still largely through internet ‘dongles’ supplied by mobile phone companies that run on mobile airtime.” Nevertheless, the capital city of Kigali is a hotbed of innovation and education in the IT sector. One of the most significant developments in Kigali recently has been the growth of kLab, an innovation hub and startup incubator where people with a love for and interest in growing the IT sector can gather and share their skills. KLab-style incubators have been tremendously effective in places

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ADVERTORIAL

From grassroots

to global

South African engineering firm PD Naidoo & Associates is pioneering an Afrocentric way of growing talent and doing business.

lready a major powerhouse in some of Southern Africa’s most exciting construction and development projects, PD Naidoo & Associates (PDNA) has concluded a global deal, now awaiting approval from the Competition Commission. This will see the 600-employee strong engineering consultancy forge an alliance with an international contingent of 15 000 specialists who have worked on some of the largest rail and power projects in the world. Despite its global aspirations, PDNA remains Africa-centric. “I grew up in a township; most of our staff grew up in townships,” says executive chairman Dempsey Naidoo. “We know what it is like to not have services. Now that we have joined forces with a global powerhouse, I would like my people to retain the true essence of engineering. Engineering, for me, goes to the heart of public health.” “It goes to the wellbeing of the human being and civilization. And if you want to be relevant in Africa you can’t only do the Oil & Gas projects which largely benefits the developed world.”

PDNA prides itself on projects that contribute to the development of Africa – what are some of these projects? We are involved in fundamental municipal-type projects in the SADC region, such as US aid-funded work in Namibia on the leisure parks, like the Etosha National Park, as well as major waterworks in Lesotho where we’re providing water to five towns via very simple dams and treatment plants. There are electricity projects in Botswana and Mozambique, and housing projects in Namibia, Botswana and Mozambique. Some of the larger projects include assisting major global corporations on the oil and gas fields of Mozambique, rail projects in the same country, and large-scale port to distribution centre logistics in Mozambique and Namibia.

Does Africa’s complex regulatory environment discourage investment in improving African infrastructure? www.nepadbusinessfoundation.org

If you take the land lease system in Mozambique, the VAT and tax complications, obtaining licenses for practicing in countries, and even our own Home Affairs - it’s been a very challenging environment.

Which sectors are you currently seeing the most investment in, in greater Africa?

We’re seeing major development in Oil & Gas, Energy, Water & Utilities, Logistics, and electricity transmission and distribution.

“Now that we have joined forces with a global powerhouse, I would like my people to retain the true essence of engineering. Engineering, for me, goes to the heart of public health.” What is your strategy for expanding your business into Africa?

We have a very aggressive growth path in Africa for the next two years. PDNA is one of the foremost start-up BEE companies in South Africa. We don’t believe in only buying into companies to obtain our credentials. For instance, in Mozambique we have created a 100% indigenous-staffed office of 20 people, guided by experienced mentors. In Botswana we have an indigenous 20-man office as well. This model we’re growing in the rest of Africa – PDNA plans to have a West Africa and East Africa office within the next 12 to 14 months. Together with our new global partner, we will develop local talent for the benefit of the long-term engineering in each country. Engineering is not a two-year career. It does

Dempsey Naidoo, Executive Chairman PD Naidoo & Associates

take a responsible period of mentorship and training. PDNA is a responsible mentorship company, not a quick fix front.

In your experience, what are some of the challenges that local organisations hoping to increase their footprint in Africa face?

The expense of the exercise: you’re facing very large costs to set up an office with the necessary connectivity, technology and suitably trained people. Then you have huge marketing efforts to get your name off the ground. Complex regulatory environments are a factor, as well as corruption and improper practices of procurement. Other problem areas are very vague RFPs, and lack of appropriate technology, which leads to all manner of operational and maintenance issues.

Sustainability is a major theme for NEPAD. You are committed to ‘green’ engineering – what does that entail?

In South Africa the company is engaged in some of the foremost green projects. For example, PDNA is currently engaged as the consultant of choice to design a government building, which is now being built, which will reportedly be one of the most stringently-assessed green buildings in South Africa. It was designed as a four-star to meet the RFP, but we intend to exceed that. In terms of energy efficiency, water efficiency, heating and cooling, the utilisation of space, health and safety - our designs are showing remarkable success. We’re planning to export this green building model into Africa. There is so much confusion to what the standards are in various scenarios. What is good in Mozambique versus what is good in Botswana? Governing authorities in the built environment need to come together and create standards that apply across the board. At the moment there are pockets to suit particular industries, as opposed to suit the complete environment in Africa. An authority like the Association of African Engineers representing the continent is well-placed to drive this process.

REGIONAL INTEGRATION AND INFRASTR U C T U RE

Making creative

connections While art and sport can divide people, they also have the power to unify divided societies, writes Stuart Graham.

he death of Nigerian author Chinua Achebe earlier this year was met with widespread sorrow and reverence for the groundbreaking body of work he left behind. Achebe’s 1958 novel ‘Things Fall Apart’ broke the colonial stereotypes of Africans created by generations of western writers, and opened up the way for new wave of African literature. Achebe gave Africa a voice. Nigerian novelist Chimamanda Ngozi Adiche told Channel Television that Achebe had written stories the way he wanted to and paved the way for other African writers to do the same. “I am able to write because Chinua Achebe wrote,” Adiche said. “Before Achebe wrote, some well-meaning English person would give an account of tribal life and it would be an African novel. What Achebe did was he told stories and he gave us dignity.” While literature, the visual arts, music or sport have often shown how they can divide people, they also have the power to unify societies across Africa. Peter Clarke, an artist who lives in Ocean View, Cape Town and whose work is currently on exhibition in London, firmly believes that visual arts – and sport – are major factors in uniting a still-divided nation. The son of a dock worker and domestic servant, Clarke was born during the great depression of the early 1930s. His was an impoverished family and their lot was made worse when half a century ago, as part of the Group Areas Act, they were forcibly removed www.nepadbusinessfoundation.org

from their home in Simon’s Town. It was a traumatic experience which left long felt scars. His parents ‘made do’ to support the children, his dad often bringing home metal scraps he’d picked up during the day which he turned into saleable items. Young Clarke watched his father at work and decided to use his talent for art to earn extra money. His art attracted attention and soon he was selling to people of different political persuasions. They may not have wanted him in Simon’s Town, but they were prepared to buy his work.

‘(Music) is the one sphere of life where people have always been treated exactly the same. It’s what they can do that counts.’ He was just 18 when he had his first exhibition in 1957 – in the old offices of the Golden City Post in Cape Town. Artistically, he has not looked back since but he cannot return to his old – Simon’s Town – without a sense of displacement. “I walk through the streets much like a ghost,” he says. “The town has grown but it is still familiar and I wonder who the strangers are living there. Apartheid warped us all. It was something evil, which damaged us all: whites, blacks and coloureds. It filled us with suspicion and fear which none of us can easily recover from. It was such an awful waste of time.”

He tells the story of a young white child who asked her mother to tell her what life was like during apartheid. When her mother tried to explain how people of different races were divided, the child listened and then exclaimed: “That’s a story, isn’t it, mother? It can’t be true.” He says it is not easy to talk about apartheid, but it is something from which you never recover. That is one reason why he believes so unreservedly in art as a unifying element in a still-divided society. Most of his clients are white, many have become friends. And though, at 83, he is an internationally acclaimed artist, he stills sees art as a way of expunging the past – and this is why he conducts workshops for young artists, regardless of race. The unifying effect of music on the other hand can be seen in the work of the late Nigerian musician and human rights activist, Fela Kuti. Kuti was the pioneer of Afrobeat music, a fusion of jazz, funk psychedelic rock and traditional West African chants and rhythms. He sang in pidgin English so that his music could be enjoyed by individuals across Africa. Béninoise singer and songwriter Angélique Kidjo has brought people together by singing in some of Africa’s many languages, including French, Yoruba, English and Swahili. Richard Cock, South Africa’s acclaimed conductor, choral trainer and musical director, says race, colour or creed has never been a factor in music. “It’s the one sphere of life where people

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Peter Clarke, South African artist

have always been treated exactly the same,” he says. “It’s what they can do that counts.” It was inevitable that when the late Aggrey Klaaste, then editor of the Sowetan, was looking at ways in which to rebuild the social structure between the races that he should turn to Cock. It was 1988 and he saw music as a means of fostering reconciliation with community singing as a rallying point. Cock was the perfect person to move the project forward and he did so with enthusiasm. The first Massed Choir Festival was held in Johannesburg in 1989 – a year before Nelson Mandela was realised from jail – and at a time when political violence was escalating. The festival, involving young people of all races, reached as far as Namibia and other neighbouring states. The Nation Building Massed Choir Festival became a beacon of hope and a symbol for social reconstruction. It also served as a springboard for many young musicians and singers. While Cock has never been competitive about music, those choirs proved “that we were winning”. In fact, the impact of the nation-building project has become part of the South African culture, says Cock. But just as music can be emotionally inclusive, Cock realised it could also be very exclusive. It became important, he says, to demystify the classics. The emergence of South Africa’s own brand of “cross-over” music was inevitable as musicians and choirs made

connections between a variety of art forms and musical styles. “Cross-over music” is a phenomenon that first developed in the United States linking the musical styles of various racial communities. Having witnessed an increasing sense of togetherness among South Africans, Cock believes music, increasingly, is uniting the people of South Africa. “There is so much going on that I get a little irritated by the doomsayers,” he says. “Nation-building through music works.” South African author Mike Nicol says literature doesn’t necessarily have a unifying effect, nor should it.

‘As for using (literature) as a nation-building tool, that sounds like prescription and censorship. It smacks of state intervention.’ “The literature of a country tells the story of that nation and for some this might give a sense of purpose and unity, but equally it might not. “As for using it as a nation-building tool, that sounds like prescription and censorship. It smacks of state intervention. “Writers have a responsibility to their stories – be these fiction or non-fiction. If the story is non-fiction the concern is with

writing a narrative that is true and based on verifiable facts. If the story is fiction then its concern is with story and character and the reality of verisimilitude. “If writers were to write to a political or social agenda they would be writing propaganda. However, much current writing does reveal a desire for a better country.” On an icy winter night in 2010, a gloomy groan hums across a plaza at Johannesburg’s upmarket Melrose Arch shopping and restaurant complex. Uruguay has beaten Ghana in a penalty shootout in the quarter finals of the 2010 World Cup and in every corner of the plaza shoulders are hunched, heads are shaking and half-drunk glasses of beer have been left on tables. A waiter stands with his hands on his hips staring at the large television screen that flickers action replays above the plaza. The disappointment is tangible, but there’s also something congenial and endearing about the mood. Those watching the game aren’t Ghanaians. They’re South Africans, a handful of Nigerians, Zimbabweans and Ivorians. The violence of two years earlier, where mobs of South Africans chased and beat “foreign” Africans out of their homes and businesses, was a hazy memory. The continent had silently, unanimously picked Ghana as its team after all other African sides were knocked out of the tournament. Ghana was Africa and all Africa was behind it. www.nepad.org

H U MAN DEVELO P MENT AND H U MAN C A P ITAL MANAGEMENT

Youngsters - the key to

getting Africa to work

Professor Mthuli Ncube has a blueprint for harnessing the potential of this continent’s young people to ensure its future prosperity, writes Peta Krost Maunder.

“D

eveloping youth in Africa is the most important thing we as leaders of this continent can do,” says Professor Mthuli Ncube, chief economist and vice president of the African Development Bank (AfDB). Ncube, former dean of the commerce law and management faculty at the University of the Witwatersrand and head of Wits Business School (WBS), made this his urgent and overarching focus at the AfDB this year. It was while watching the beginning of the Arab Spring (the revolutionary wave of demonstrations around the Arab world) in December 2010 in Tunisia – where the AfDB headquarters are situated – that he realised this had to be Africa’s number one priority. “I could see that there are so many unemployed graduates who can’t get jobs,” he says. “They can use social media, they can communicate and they are smart. They are a part of a whole middle class that is excluded from the economy and entrepreneurship but they shouldn’t be.” Ncube explains that while this is the situation in Tunisia, it is similar to that in South Africa and most of the other African countries. In May this year, former United Nations secretary general and chairperson of the Africa Progress Panel, Kofi Annan, tapped into this idea when he called on African leaders to focus on the growth and development of young people. The number of young people in Africa is set to double by 2045, so countries have to boost job creation and help the youth acquire new skills, according to the African Economic Outlook 2012. “Creating productive employment for Africa’s rapidly growing young population is an immense challenge but also the key to www.nepadbusinessfoundation.org

‘Creating productive employment for Africa’s rapidly growing young population is an immense challenge, but also the key to future prosperity.’ future prosperity,” according to the report, which was co-written by the AfDB. It also states that only 16 million jobs for young people were created between 2000 and 2008, despite massive economic growth rates and a better-educated youth. “The continent is experiencing jobless growth,” Ncube says. “That is an unacceptable reality on a continent with such an impressive pool of youth, talent and creativity.” Today, the youth represents 60 percent of the continent’s unemployed, and of these 40 million youths, 22 million – many of them women – have given up on finding a job. Ncube echoes the report in saying that youth unemployment figures will increase unless Africa moves swiftly to make youth development a priority, turning human capital into economic opportunity. “Africa’s resources are its demography,” he explains. “I see this as an opportunity because we have a population wanting to work but who are ill-equipped, not adequately or correctly trained and lack the opportunities.” Ncube sees this as ultimately the best thing for this continent, because “Africa can become the source of skilled labour for the world, because this is the only region globally whose population will grow at a pace in the world. Every other region is experiencing a

population slowdown. It is simply a matter of harnessing it correctly.” He explains that he had come up with a two-pronged approach, intervening from both the supply and the demand side to make it work. “What we have right now is a supply and demand mismatch. By supply, we are also talking about the quality of the graduate as well as whether they are job-ready or not. What is clear is they don’t have the vocational skills that will make them job-ready for what is demanded on the job. So, what will be done is to upscale this type of training, but make sure that there is a compulsory apprenticeship programme that goes with it. In other words, there can be no course unless there is a corresponding apprenticeship.” Ncube says it is also essential to have total buy-in from governments and corporates to make it work. Ncube is already an expert in the supply side, with his academic background, particularly at WBS, and having launched the Centre for Entrepreneurship. He aims to use the African Development Institute that he supervises, and other educational facilities at his disposal, to retrain the youth in management and entrepreneurship. “We go to the regions, find the talent and train them. We are running a north African programme in Tunisia and we ran one in Togo, for example, in west Africa. And now, we are working on programmes for east and southern Africa.” The second part of Ncube’s strategy is to bring the government into the process on a holistic level so it understands what type of policies need putting in place. “If you really want to deal with youth development, it needs to be a multi-ministerial campaign,” he explains. “The issue of youth development is not a ministry of finance issue – it is for all

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Arab Spring uprising in Tunisia

the ministers because it is about education, the right macro environment, so that’s finance. It is also about companies getting involved in vocational training to work with the training colleges, it is about [the] Department of Trade and Industry.” In July, Ncube and his team had a workshop in Lusaka with a host of Zambian ministers, as well as visiting ministers from Mauritius, Angola and Madagascar where they thrashed out this strategy and what was needed. “They are committed to this strategy,” he says. “I now intend to engage with the South African government and others throughout the continent to sensitise them to this multisectorial plan and what it needs.” Then, Ncube explains, the corporate sector needs to ‘come to the party’ by first making it clear exactly what skills they need and lack. “That way we know what skills training is necessary and where the appropriately retrained graduates can be employed. In most of our countries we have an unemployment problem, as well as a skills shortage. With this plan, we can bridge the gap, send the unemployed graduates back to school to complete shorter vocational courses to be retrained,” says Ncube. “These trainees must then do apprenticeships with the companies that needed the particular skills to get them job-ready. Then, these graduates will most likely be employed by these companies, who

need their particular skills.” Ncube insists it is necessary to introduce far more entrepreneurship training. “Youngsters doing undergraduate degrees or diplomas need to be able to write business plans, understand finance and marketing, and have the skills to launch and run their

‘It is essential to understand business so that you remove the fear and hesitation in entrepreneurship. It is essential to train emerging entrepreneurs.’ own start-up businesses. It is essential to understand business so that you remove the fear and hesitation in entrepreneurship. It is essential to train emerging entrepreneurs.” But what is in it for the corporates and those who will be financing the training? “Resources,” says Ncube. “Also, government needs to incentivise corporates through tax breaks.” So, now that he has the Zambian government’s buy-in, Ncube’s next stop is South Africa and becoming a part of the

clear-cut strategy in Planning Minister Trevor Manuel’s National Development Plan. “I am very familiar with the supply part of the plan in South Africa, which is a great start,” says Ncube.

A word from NEPAD Business Foundation...

The employment of Africa’s young population is vital for the creation of a new generation of middle class. With information and globalisation being the mainstay of a new social dispensation, Africa has to retain its own work and consumer force. Avid efforts have to be made to ensure that training is geared towards what our economies need and what can make our young people fulfilled while regarding global technological evolutions. At the NEPAD Business Foundation, our 1MALC programme addresses these and other issues with Africa’s senior business and youth leaders.

www.nepad.org

H U MAN DEVELO P MENT AND H U MAN C A P ITAL MANAGEMENT

Rise,

women!

Are female entrepreneurs changing the face of African economies or hitting the glass ceiling? asks Tanya Farber.

oday it seems as if every tourist brochure from sub-Saharan Africa is custom-fitted with an image of a smiling and brightly-clad woman surrounded by the colourful fruits and vegetables of her small one-woman business on a ‘bustling road’ somewhere in Africa. On the other end of the spectrum, statistics from development agencies working across the globe paint a far more grim picture of the burdens – both real and abstract – carried by women on the African content. And these, it would seem, are the antithesis to the empowerment that comes with entrepreneurship. But on closer inspection, when it comes to shifting economies in Africa and the role of women entrepreneurs therein, there is no space for a ‘one size fits all’ homogeneity. According to Claire Mathonsi, executive director of Businesswomen’s Association of South Africa, there are certainly more women entering the entrepreneurial space on the continent, but it is equally true that stronger challenges to entry are in place than for men. “The foundation that potential women entrepreneurs are coming from is a context of unequal gender relations,” she says, “so from the outset, entering the economic sphere has been more difficult for women because it is traditionally a male space.” She says a barrier for many women is based on stereotyping around a woman’s ability to run a business and the level of knowledge and skills she may possess. “This is a barrier in terms of getting www.nepadbusinessfoundation.org

funding,” she says, “and many women therefore opt for an alternative from the more formal route of securing funding.” And, she adds, it is important to explore the diversity within the ‘women entrepreneurs’ space itself. “From the woman selling oranges on the street to the one running a million-dollar enterprise, certainly they both face challenges but they are completely different challenges.” Catherine Morris, founder of biodegradable food packaging company Green Home, says she found that the most fundamental key to succeeding as an entrepreneur in a tough and often maledominated context is to be as resourceful as possible and to plan properly. “How I got my business from concept to a fully functioning business was first to think through all the practical steps required like finance, warehousing, staff, operating

‘How I got my business from concept to a fully functioning business was first to think through all the practical steps required like finance, warehousing, staff, operating systems and many others.’

systems and many others,” she says. “For each of these things, I used whatever resources I had around me. I started my business in my bedroom and then a garage, and now we have three offices nationwide. I also asked for help from those around me. As I did not have cash, I had to be resourceful via trade exchanges and loans in order to get help. With a clear vision, people around you feel motivated. Lastly, there are many organisations that offer funding. See what is applicable to you.” For Katie Apleni, who lives in a township far flung from the commercial centre of Cape Town, being an entrepreneur is a somewhat abstract idea. “It is hard – if you have grown up without any money – to start your own business. You don’t see your parents doing it and when you too are an adult, you need money urgently every month. So the quickest thing is to take a job, any job,” she explains, “But, you do find women doing the things they do in these traditional communities, and then selling a little bit to earn extra for the family. Someone might cook something and sell to passersby outside their house. Another lady might have a small spaza shop selling sweets and batteries and small items like that. To start a real business, though, you already have to have something like money or education in running a business, and most of us just don’t have that.” On the other end of the spectrum, says Professor Jenni Case, who specialises in academic development in the chemical

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engineering department at the University of Cape Town: “All our degrees do now have components related to business planning and entrepreneurship, which make up an explicit part of the curriculum, and we also just about have gender parity in our classrooms. But, that doesn’t mean female entrepreneurs will necessarily emerge.” She says that environmental factors will play a much more deciding role, and that South Africa, when compared with a country like the United States, is not a conducive environment to overcoming barriers to entrepreneurship whether they are gender-specific or not. “Here there is a fear of failure, and less scope to ‘remake yourself’ if a venture fails,” she says, “and there is also less access to capital.” Those who do break through the glass ceilings potentially serve as useful role models. The New York Times recently celebrated a batch of women entrepreneurs in Africa, saying that they had ‘pushed into the national scenes of their countries as movers and shakers’. They highlighted people like Sibongile Sambo, who leads an exclusive charter-aircraft company in South Africa; 23-year-old Kenyan Ory Okolloh who co-founded Ushahidi, a Web 2.0 crowdsource software now used by Google; Nigerian Adenike Ogunlesi who built a regional children’s clothing empire which began with selling pyjamas out of the trunk of her car; and Ugandan Lovin Kobusingya whose company, Kati Fish Farms, sells 500 kg of fish

sausage a day. Philippa Reiss Thorne, who heads up a grass-weaving design initiative in Swaziland called Gone Rural, which was started by a woman and which exclusively employs women, says that there are long-term benefits for a country and an economy if more female entrepreneurs are engaged in the economy. “Women prioritise family and education,” she says, “so with entrepreneurship there is development towards more equitable distribution of income in the household and the confidence to be the decision-makers around a great many issues, including family planning. “Being able to pass this knowledge on to their daughters can be the difference between leaving school at 15 because of pregnancy and a future career that they have dreamed of. We need women leaders to be advocates and to defend the rights of all women.” She says that women entrepreneurs act as role models for other women and that they are more likely to save additional income and plan for the future of their children and family. In many rural districts across the continent, this type of empowerment is sorely needed, but, says Mathonsi, “In most rural areas, the driver of economic opportunity is the state because they are isolated and not many people invest in those regions unless there are minerals, for example.” She says that in such areas, potential entrepreneurs are competing for fewer

opportunities and that there are even more entrenched stereotypes of women in society than in urban areas. “Traditionally women are not owners of assets and start-up capital,” she explains, “and there are many assumptions made about what women can do versus what men can do.” But, she adds, whether talking about rural or urban Africa, one must caution against lumping all women together. “Sometimes our terms hide the complexities,” she says, “and all black women are put into one group, but they make up an extremely diverse demographic and come from a wide range of different backgrounds. We need to get smarter in enterprise development and understand the demographics we are dealing with to make it a smoother transition.” Morris takes a positive outlook on the transitions that are already happening, and says, “In recent history, our economy and social structure have been predominately male-dominated, but the pendulum has already started to return. Modern, linear systems have proven not to be sustainable and the platform for feminine and holistic ways of doing things in the world economy is growing stronger. This means, for example, incorporating triple-bottom-line principles into work places. All things considered, the growth of female entrepreneurs has only just begun.” Let’s hope she is right.

www.nepad.org

H U MAN DEVELO P MENT AND H U MAN C A P ITAL MANAGEMENT

Kenya hatching

healthy business

Business incubators give entrepreneurs a chance to grow their enterprises, reports Stuart Graham.

Image courtesy of Shutterstock

n a hatchery, incubated eggs have the potential to crack open and produce little chicks which, when given the right care, will grow to be hens that lay eggs or roosters that crow at the crack of dawn. This was the case with Kenyan agriculture software company MFarm, which was taken on by a business incubator, after co-founder Jamila Abass and her friend came up with a novel idea to provide trade information to Kenyan farmers by cellphone text messages. Business incubators, which can be privately or government funded, first started as development projects in the United States and Europe in the 1980s. The idea – in which an ‘incubator’ provides resources and services such as mentoring, networks of important contacts and finance – took on in Africa in recent years as governments recognised the importance of developing small businesses. Many business incubation programmes are sponsored by economic development organisations, such as the World Bank’s Information for Development (infoDev) which focuses on developing technology-focused small businesses, or by government entities, universities and private incubators. MFarm’s path into incubation started when Abass decided to do something about the exploitation of farmers by middlemen over bad prices. She told a friend about the problem, and she was also keen to make a difference in society. “Because we had been raised in farming environments, we both identified with the plight of the farmers,” Abass says. “So we started writing down ideas on how to help the farmers.” The MFarm founders heard about the IPO48 start-up competition, a boot-campstyle initiative to build new web and mobile services in just 48 hours. They entered the competition and won the €10 000 prize. The cash became the seed money that incubated the business idea. MFarm hit the road to actualise its innovative concept of connecting farmers directly with buyers and suppliers of agricultural inputs using the MFarm App. The Incubator, Techfortrade, “fell in love”

www.nepadbusinessfoundation.org

with MFarm’s social mission and gave the company grant money to strengthen its market reach. “Techfortrade has helped by connecting the three of us to mentorship programmes that are shaping our business and individual skills,” says Abass. “Techfortrade in particular has been instrumental in helping us scale up the idea in product diversity and geographical reach.” Today the main product offered by MFarm is a transparency tool through which Kenyan farmers send a cellphone text message and receive information about the retail price of their products. They are also given information on where to buy their farm inputs directly from manufacturers at favourable prices and where to find buyers for their produce. But like any other business, rethinking ideas was a constant for the company. “We are on our umpteenth version of the original idea,” Abass says. “The sector we work in is both challenging and organic. Without a background in agriculture we had

‘Small businesses are the most important vehicle in creating a vibrant and inclusive economy. Innovation generates innovative activity.’ to learn on the go. Our innovation had to match the needs of farmers and the more we interacted with them, the more we shaped our solution to fill the existing gap.” Another “incubatee” is the Kenyan company Uhasibu, which offers an accounting platform built for the legislation and work-flows relevant for small companies in east Africa. “Back in 2007 I worked closely with a small Kenyan company and it gave me first-hand experience on the ways Small to Medium Enterprises (SMEs) operate in this region,” says Uhasibu founder Michael Pedersen. “At that point I implemented some

invoicing systems and advised on a few other areas where things could be improved. In 2010 when I returned to Kenya I started thinking about a project to tackle. Since cloud-based accounting systems are very successful elsewhere, I decided to combine my knowledge of Kenyan SMEs with my experience in the area.” Incubator mLab approached the company after it won the business category of Pivot 25, a start-up pitch competition in east Africa in mid 2011. “At that point I had a single desk at iHub, and had just hired my first employee, but we lacked space and it sounded like a good idea to take up more established office accommodation at mLab,” he says. “mLab has been a great facility for us. We hold free training seminars on a monthly basis and the equipped training room that is part of mLab is a great asset to have available for this. “In addition, being part of mLab has given us considerable exposure and access to trade fairs to showcase our product, as well as putting us in contact with leads and in other ways helping us grow our business. “Understanding the importance of governance, procedures, and compliance is all well understood within our company, as it should be since we help our clients and neighbours with these issues.” Hlonela Lupuwana, the CEO of South Africa’s Small Enterprise Development Agency (Seda), says research has shown that more than 80 percent of small businesses fail within two years of launching. However, 80% of businesses that had entered incubator programmes survived the first two years and went on to sustain themselves. “Entrepreneurs who have ventured into small business have to contend with various challenges during this time and tend to throw in the towel in large numbers and discontinue their operations,” Lupuwana said at the launch of the government’s Incubation Support Programme that will see 250 incubators set up throughout the country by 2015. Although the cost of establishing and

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maintaining an incubator is very high, the returns on the investment are “immensely immeasurable”, Lupuwana says. Pavlo Phitidis, the CEO of the business incubator, Aurik, says it is vital that African governments develop small business. “Small businesses are the most important vehicle in creating a vibrant and inclusive economy,” says Phitidis. “Innovation generates innovative activity.” In South Africa, he says, small businesses are responsible for 68% of private-sector jobs. “Entrepreneurs provide a product or service that doesn’t exist. It comes into the market, takes a grip and fulfils a need.” Phitidis says governments too often focus on survivalist entrepreneurs and not innovative entrepreneurs. “Some believe that an entrepreneurial individual goes to the side of road and sells to succeed,” he says. “But that inevitably leads to failure. The survivalist entrepreneur is not sustainable and does not create jobs. His is a desperate attempt to make a living. It doesn’t create businesses.”

‘Our innovation had to match the needs of farmers and the more we interacted with them, the more we shaped our solution to fill the existing gap.’ Incubator programmes focusing on survivalist entrepreneurs are “very superficial”, he says. “What you are doing is educating people to get into formal economy. But at the first opportunity they will throw away their business to get a job. The best investments are in entrepreneurs who have been in business for three-to-five years and who have seen some success. Those are people who are overwhelmed by the pressures of operating a business and who desperately need support that will empower them to grow their business.”

As an incubator you attempt to build someone else’s business, he says. “The focus of our incubator is around skilling and resourcing entrepreneurs to take control of their own destiny.” The problem with entrepreneurs is that if you “give them stuff for free” they don’t respond well to it, Phitidis says. “They must have demonstrated that they have sacrificed hard. If they haven’t, they are not going to have a business in any case.” Government-supported incubators create a softer client, he says, while private incubators create a harder client who is more aggressive in business. “It is very risky for incubators to be involved in the pre-start-up phase and private incubators shouldn’t play there. The role of the government should be focused on that phase with market information, access to technology and very simple basic training. Once they have started generating results, the government or non-governmental organisation should come on board and pay for value.” www.nepad.org

H U MAN DEVELO P MENT AND H U MAN C A P ITAL MANAGEMENT

Unlocking

the great leaders within

Barloworld executive Isaac Shongwe is more than just another township boy made good. He not only wants to make a difference – he does. He is doing so through the African Leadership Initiative, which seeks to develop the next generation of community-based, value-based, ethical leaders by providing individuals with tools to be better leaders. Liesl Venter reports.

ow would you describe your life just before you die? That is, if you were Isaac Shongwe – the executive director of strategy, innovation, solutions development and sustainability at Barloworld. Affluent, successful, intelligent, bigbusiness player and well-networked come to mind. And, yes, he could say all those things at the pearly gates, but that would only be half of it, for the man who welcomes me into his spacious Sandton office, just a stone’s throw from the township where he grew up, is not about money and influence. He has always wanted to make an impact on society; even a small one would do. Shongwe is phenomenally inspiring – a visionary who is much more than just another township boy made good. “I don’t want to look back on my life and be that person who came and consumed in the sea of all this poverty on this continent. I have much bigger plans than that for myself, my country and even the continent,” he says. He could just as well have said the world as well. For Shongwe, how much is enough? A holiday house at the coast and a yacht or maybe some fine costly wine and food with friends in a trendy restaurant? “If you are doing it all alone in a corrupt society where you can’t trust anyone, it really is pointless,” he says. No doubt Shongwe appreciates the finer things in life, judging by his attire and the art in his office. “It’s all just things,” he says, “and yes, it makes life a lot easier, but this is not my legacy and not what I want to be remembered for.” Simply put, Shongwe wants to change Africa by creating a new movement of capitalists who not only want to make a difference, but do. “Mine was not a quick walk across the highway,” he points out, gesturing towards www.nepadbusinessfoundation.org

Alexandra. “Alexandra is not a place for sissies. My only saving grace was education.” Oxford educated, it is hard to picture Shongwe as a poor, scantily clad township boy running around a slum looking for food. But that is exactly what he was, and today he heads up a world-renowned company.

‘I don’t want to look back on my life and be that person who came and consumed in the sea of all this poverty.’ However, making money and forgetting about his past – bar the odd cheque to a non-profit organisation to feed the poor – is not on his agenda. He is determined to give back. “For a long time I did not know how I was going to do it, until I was invited by Peter Reiling, executive vice president of the Aspen Institute, to take part in the organisation’s Henry Crown Fellowship community leadership project in Aspen in the US.” This programme, established in 1997, seeks to develop the next generation of leaders by providing them with tools to be better leaders in their communities. The result of Shongwe’s participation in this programme in the early 2000s was the African Leadership Initiative (ALI). “ALI is goosebump stuff,” says Shongwe. “When I was a child, no one cared if I was dead or alive. The world should not be like that. My goal was always to work as hard as I could to be able to afford social change of some kind. ALI is geared to creating leaders that care if a child is dead or alive, and who take action to ensure the society they live in cares.” In ALI he found the means he was

looking for to give back; to change the world in which he lives. But, he is realistic enough to realise that real change needs real money. “This is not a soup kitchen or a project that goes out and physically changes the environment that people live in. No, ALI changes the leaders in our society and they then activate change within their communities, but that costs money. Real change in this country has to come from its leaders, regardless if it is government or business or civil society,” he says. “We, as leaders, live in our northern suburbs homes with high walls and hi-tech security from where we monitor the world outside. It is a bankrupt culture that we are embracing, because we tolerate dishonesty, we tolerate bad politics, we tolerate mediocrity, we tolerate corruption. We need aspiring leaders, brave leaders, men and women with morals and values, if we want to take this continent forward.” Based on the Henry Crown Fellowship, ALI identifies leaders in government, civil society and business and invites them to attend four seminars. Through the seminars, readings and deep discussion, the perspectives of the fellows change and thought leads to action. “The entire concept is based on these specific individuals who we choose – who are all successful in their own right before becoming a fellow – being put into action in their societies. They facilitate the change through their own actions, once they have taken part in the four seminars.” Ferial Haffajee, City Press editor, admits to being sceptical when first approached by Shongwe to become an ALI fellow. “It meant four weeks out of the office to attend the seminars and that can be a difficult feat for an editor, but he persisted, and today I am deeply grateful that he did,” she says.

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ALI changed her life. “It altered my ideology and forced me to take a deep look at myself, not only as a leader but also on how I impact on society.” Haffajee has since become one of the moderators at the seminars, facilitating the discussions between fellows. Through her involvement with ALI, she has undergone enormous growth and learning as an individual. This has resulted in her becoming

‘Alexandra is not a place for sissies. My only saving grace was education.’ a better leader, she says, because she has been exposed to the quality of people that she and her fellow fellows aspire to be like. According to Reiling, at some point many social entrepreneurs consider their role in society at large and how they can affect change, but often they have a certain naiveté, the perception that social issues are easy to fix. Through ALI, this is changed, because the seminars equip the participants to overcome their fears and doubts and to have a greater impact, due to their action orientation and skill. For Haffajee, there is no doubt that South Africa needs a range of such leaders to bring about change for the country. And ensuring those leaders are properly equipped for the task is essential for success. ALI ensures that. It is especially through the readings that ALI fellows change, says Shongwe. “It is not a feel-good seminar where everyone comes and sits down and listens and leaves feeling all happy but nothing ever happens after that. No, you are expected to (and you do) look at and rethink your own role and responsibility by reading about people like Mahatma Gandhi, Jean Monnet and Nelson Mandela. You have to build a vision of the society you want to be part of by relating to thinkers ranging from Plato to Julius Nyerere, and then you have to commit to making that vision a reality and affecting change. This is all a very intense, very internal process that you do with like-minded people.” According to Malik Fal, managing director of Endeavour SA, it is very difficult to describe how ALI impacts, but it does. “Before your first seminar, you receive this thick binder with reading material, and while I was going through this, my imagination was captured,” he recalls. “I realised very soon that something very special was happening in my life, but it was only during the first seminar that I fully came to understand the scope and depth of what ALI entails.” According to Fal, the programme changed his perspective. “As an individual, it shook a lot of my dormant values into action, as it really forced me to take a long and hard look at my own demons and baggage. It unlocked the potential within me and brought a transformation I never expected.”

Isaac Shongwe

But what does this mean, I ask Shongwe? “It means that people in privileged positions have a responsibility to contribute to a better society, and business is one of the big drivers of that.”

‘We need aspiring leaders, brave leaders, men and women with morals and values, if we want to take this continent forward.’ Fellows are encouraged to design and carry out high-impact leadership projects of their own after the four seminars. In this way, ALI has led to an HIV and Aids prevention project, a conference on government challenges, a project that addresses the needs of orphans in the country, a mentorship for high school children and a news columnist service to help influence world opinion about Africa, to name but a few. ALI engages with

its fellows, making them aware of the society in which they operate, while providing them with an amazing structured platform where they can reflect and make choices around where their leadership is heading, says Fal. “Practically put, it is about being a Mandela or a Malema – you make the choice,” he says. Shongwe says ALI encourages its fellows to do something significant, to live up to the values that underlie the programme – the same values to which they were exposed during the seminars; those values that made Mandela, Mandela or Gandhi, Gandhi. “It is within all of us to be great leaders,” he says. “But it is firstly a choice and, secondly, it requires action. As businessmen, we know how to make money for ourselves. This programme requires us to use those very skills to change the world by ensuring the knowledge our leaders need is in their hands. We need community-based, valuebased, ethical leaders. Through ALI we go to society and choose people who are already showing these capabilities, and we just enhance them.” www.nepad.org

H U MAN DEVELO P MENT AND H U MAN C A P ITAL MANAGEMENT

Saint of the

Slums

Alice Njoroge, a midwife-turned-clinical director, leads a team of dedicated healthcare workers, many of them voluntary, who are changing the odds in the war on HIV and Aids, TB and malnutrition in one of Nairobi’s poorest settlements, write Siobhan Cassidy and Pauline Muindi.

Image courtesy of Carol Mandi

eter, an HIV-positive casual labourer, used to work day-after-back-breakingday in the hazardous and dusty stone quarries outside Nairobi. When he first noticed his worsening cough, he dismissed it as the result of the stress of hard manual labour and slum life. He was living alone in a shanty in Mathare slum, eastern Nairobi, which is home to several hundred thousand of the most vulnerable members of Kenyan society. Residents have little or no access to electricity, running water and sewerage. Peter had left his family in rural Kenya when he came to seek work in the city. His health deteriorated rapidly, leaving him too weak to care for himself. Fortunately, a neighbour alerted the Eastern Deanery Aids Relief Programme (Edarp), a nurse-led healthcare organisation, and a healthcare worker came and literally carried him to the clinic. Peter tested positive for Tuberculosis (TB) and was put on medication. He is recovering well and has been reunited with his family. But, Joseph Ihugo Mwaura, the nurse in charge of the Mathare clinic, one of 14 run by Edarp, says: “Peter’s health is very delicate. He won’t be able to go back to work as a casual construction worker.” He says the team at Edarp are working with the couple to find a suitable incomegenerating project. Helping people to find income-generating projects might seem beyond the call for a clinic facing high demand for critical health services, but Edarp is a holistic healthcare programme that works to address the physical, sociological, psychological, social and spiritual needs of patients. It is a nurseled programme of care delivered largely by Community Health Workers (CHWs). Originally founded by Catholic priest, www.nepadbusinessfoundation.org

Alice Njoroge

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Father Edward Phillips, in the early 1990s as a response to the scourge of Aids in the slums, Edarp has grown exponentially under the leadership of Alice Njoroge, a nurse and midwife. Initial funding for the programme was provided by Maryknoll Fathers and Brothers, and Misereor, a German Roman Catholic development agency.

‘Our work touches lives and changes them for the better. The most amazing thing is that most of the Community Health Workers are people who have been beneficiaries of the programme. The fire keeps burning!’ Recent figures showed that with a total of 455 clinical and administrative staff – including 80 nurses, 41 clinical officers and just three doctors – Edarp had 42 077 patients enrolled, and 26 765 HIV and TB patients active in care. The programme provides wider health services for a catchment area of 1.2 million, largely marginalised people. This is possible thanks to the dedication of 1 218 CHWs, very careful management and the strong leadership of clinical director, Njoroge. The 55-year-old refuses to take credit for the programme’s success, insisting that be given to Father Phillips who, she says, was an excellent mentor and manager. Though she shuns publicity, it is clear that Njoroge leads from the front. This formidable mother of eight and grandmother of four waxes lyrical when talking about the motivating influence of Father Phillips and tells how she is frequently humbled by the “Christ-like” dedication of CHWs. Njoroge’s previous job had prepared her well for work with Edarp. In her 10 years practising as a midwife in Nairobi her role had evolved to include working with the community, particularly educating people about HIV and Aids. She quickly took to her new position at Edarp, which involved all aspects of caring for the sick. “The work I had been doing at the hospital was similar, but at Edarp, I was more involved. I would go and visit patients in their homes and it was at a time when HIV and Aids patients were highly stigmatised so they really appreciated it.

“At Edarp, we were working with the poorest of the poor. People who struggled to put food on the table and lived in tiny tin shanties in the most appalling environment. At the time, I had my own nine-month-old baby and I would be so touched that I would use the money meant for my baby to buy food for patients.” When Njoroge had no material things to share, she shared her time and love. In the early days of the Aids epidemic, little could be done and most people saw HIV and Aids as a death sentence. Most patients came forward for treatment at the very last stages, when it was too late. It was in response to this overwhelming burden and sparse medical weaponry that Edarp focused on a holistic, patient-centred approach that addresses all needs of the patients. When Edarp staff began to notice increasing numbers of TB cases among their patients, the programme lobbied the national TB programme for support to set up a diagnostic lab and introduced testing for TB. Soon this expanded to include treatment for TB. Working in collaboration with the national TB programme and the Centre for Disease Control Kenya (CDC), Edarp now has a total of four labs with 28 lab technicians. The programme is a participant in the International Council of Nurses (ICN) TB project. Gini Williams, director of the ICN TB Project, advocates strongly for holistic programmes such as Edarp, saying: “the alarming rate of drug-resistant TB is a result of the overwhelming emphasis which has been given to clinical aspects of care”. “When nurses are able to implement individualised, patient-centred care and address wider needs, the chances for effectively diagnosing and successfully treating patients is much greater, nurses are happier and health systems are stronger.” Njoroge admits to being astonished by the growth of the programme. “About four years ago when we opened our seventh clinic, we thought we were already big enough… We try to clip our wings not to grow too huge, but it is useless. We cannot turn a blind eye to need and, as long as our services are in need, we can’t help but grow.” The programme has stuck with its successful formula of holistic care delivered from within the community even after being selected as a beneficiary of Pepfar (President’s Emergency Plan for AIDS Reliet), which Njoroge describes thus: “We were given the opportunity for our dream to come true,” by being given funding to roll out antiretroviral treatment. “Of course this shocked many in the donor world because Edarp was not attached to a national university or medical school.

People wondered who we were and how could this priest from Boston [Father Phillips] with a Kenyan nurse run such a programme,” says Njoroge. While the value of international recognition and funding are appreciated by all at Edarp, the programme remains very rooted in its community. All of the CHWs are residents of the neighbourhoods they serve and many of them were once patients of Edarp’s clinics. The work is voluntary and they are given a small stipend. The communities around the clinics choose who will assume this service, and they are trained within their parishes and commissioned at the main mass on Sunday to care for the sick. All Edarp sites offered integrated care before the present World Health Organisation (WHO) recommendations. Njoroge says, “Consider Edarp being like one-stop shopping. All services are integrated within the site so the client has no difficulty in accessing the different services that he/she may need.”

‘When nurses are able to implement individualised, patient-centred care and address wider needs, the chances for effectively diagnosing and successfully treating patients is much greater, nurses are happier and health systems are stronger.’ Since 2010, Njoroge has become increasingly involved with the administrative side of Edarp and she admits that she does miss nursing and midwifery. “I especially miss being a midwife… But I haven’t lost at all, I am still a nurse, only at a different level. Now I am training nurses and CHWs to be better caregivers and to treat patients unconditionally; to be people who can anticipate patients’ needs and meet them. “The rates of infection have dropped considerably and hopefully, they will keep on dropping. Our work touches lives and changes them for the better. The most amazing thing is that most of the Community Health Workers are people who have been beneficiaries of the programme. The fire keeps burning!” www.nepad.org

ADVERTORIAL

Untapped wealth Mining giant Rio Tinto is luring investment into Africa, with its diverse and successful operations across the continent as bait. What types of services is Rio Tinto able to offer to the African member countries wanting to do business in SA and abroad?

Our strategy of investing in large, long-term, low cost mines and businesses means that we operate on extended time horizons. Some of our projects last 40 years or more from mineral discovery through to closure, representing large-scale, long-term investments in fixed capital, often situated in remote locations. Through the work of the Rio Tinto Exploration (RTX) team, Rio Tinto has had a long history of success in Africa and an unrivalled track record of discovery that has positioned the company for future growth in the continent.

How do your corporate social initiatives uplift the communities in and around your mining activities?

Good community relations are as necessary for our business success as the effective management of our operations. This belief is at the heart of our overall approach to communities work and it is why we build good quality relationships with the people in the areas where we operate. We accept that we cannot meet everybody’s concerns and expectations, but wherever we operate we seek to do so with broad-based community support. Our Communities and Social Performance work is guided by The way we work, our global code of business conduct. Our Communities policy and standard provide the framework for the work, while guidance notes provide specific requirements in areas such as consultation and engagement, social impact assessment, complaints, disputes and grievance, community agreements, and resettlement and compensation. We also refer to external policies such as the International Finance Corporation’s standards and the United Nations Declaration on the Rights of Indigenous Peoples. Rio Tinto is committed to providing employment and career development opportunities to local communities. Local employment contributes directly to growing local economies while providing a stable workforce for our operations. In 2012, Rio Tinto businesses supported just under 2,800 socio-economic programmes covering a wide range of activities including health, education, business development, housing, environmental protection and www.nepadbusinessfoundation.org

agricultural development. Overall, we spent US$292 million on community programmes, 37 per cent went directly to community programmes and a further 51 per cent were direct payments into benefits receiving trusts associated with community agreements. Our management costs for these contributions were twelve per cent. In South Africa, through Richards Bay Minerals, which is 74% owned by Rio Tinto, the company spent over R1 billion to date on various community development initiatives.

What does sustainability mean to Rio Tinto, and how do you address this crucial issue at your operations?

Sustainable development is commonly defined as “development that meets the needs of the present without compromising the ability of future generations to meet their own needs”. While it cannot be achieved by one organisation on its own, we believe that our business can make an important contribution to the ongoing, global transition to sustainable development. Because we recognise that we have a responsibility to all our stakeholders and to the wider world, our commitment to sustainable development is integrated in everything we do. To build and protect our reputation, we have a relentless focus on embedding and living our values - accountability, respect, teamwork and integrity - and on deepening our sustainable development capabilities. By communicating and raising awareness of our approach to stakeholders, we are embedding a sustainable development culture that influences every part of our organisation.

What does the rehabilitation of areas where mining takes/took place entail?

Respect for the environment is central to our approach to sustainable development. Wherever possible we prevent - or otherwise minimise, mitigate and remediate harmful effects of our activities on the environment. We have developed a number of practical programmes for environmental management, which include input from our local communities, as well as from experts in these fields. The dune forest rehabilitation programme at Richards Bay Minerals has received international accolades. The programme is part of RBM’s commitment to

sustainable development, and it has seen 35 years of continuous and dedicated efforts to maintain the ecological processes that drive the restoration of indigenous dune forest on a third of the company’s mining lease area. The rehabilitation programme provides for the regeneration of a coastal forest typical of the region, on mined sand, that is shaped into dunes.

Mining is very much a maledominated industry. Does Rio Tinto have any programmes that empower female employees?

We are committed to increasing the representation of women, and achieving a better gender balance in the short term, and in ethnicity and nationality in the medium term. We are also committed to developing a more diverse leadership cadre, specifically to ensure that local nationals in emerging regions have the capability and experience to lead our operations. At Richards Bay Minerals, women make up 25.04% of management (junior, middle and top). Some of our Group diversity targets for 2015 are: • Women to represent 20 per cent of our senior management • Women to represent 40 per cent of our graduate intake

In your opinion, as a large global entity, what more could be done to attract investors to African industries?

At Rio Tinto we believe our operations have the ability to promote regional investment and that by supporting the development of robust institutions and governance we will ensure the benefits of our operations are felt by the country. We can achieve this by acting as a coalition convener, building upon our reputation and expertise to attract new investment into the region and advocacy that sees our partners mutually supporting each other to promote activities and strengthen reputations.

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Cross-continental green trading

Image courtesy of Shutterstock

Are carbon credit projects helping to reduce greenhouse gas emissions as intended? Stuart Graham reports.

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he gas pipes and tanks at the Johannesburg headquarters of MTN are an unusual feature for a cellphone company but the equipment has an important purpose. The ‘tri-generation plant‘ uses offshore natural gas pumped from Mozambique to produce electricity, heating and cooling for the company’s entire head office, at the same time earning MTN valuable

‘African states can earn credits by running carbon reduction projects and selling their credits to entities in developed countries.’ carbon credits which are sold to a French company. The company, EDF Trading, is one of the world’s leading electricity utility companies and uses the credits from MTN to meet its carbon emissions target. Carbon credits give a monetary value to the cost of polluting the air with a single credit equal to the reduction of one tonne of CO2 emissions. Emissions effectively become an internal cost of doing business and are included on a company’s balance sheet. A business that owns a factory pumping out some100 000 tonnes of greenhouse gas emissions in a year, but with a quota of 80 000 tonnes, for example, can buy carbon credits from businesses in developing African countries to offset the excess. African states are not legally required to reduce their carbon emissions, but can earn credits by running carbon reduction projects of their own and selling their credits to entities in developed countries at a market-determined price. Standard Bank, which finances solar water heaters that provide hot water services for low-income households in South Africa, is another unlikely earner of carbon credits. Solar water heater installers can register projects of 1 000 heaters or more with the Standard Bank’s Low Pressure Solar Water Heater Programme. The small businesses earn Euros from the carbon credits generated by their projects and are sold on their behalf by Standard Bank’s carbon trading division. Nedbank is also developing several carbon credit projects to help it reduce emissions and electricity costs. Once the projects are completed, the bank will be able to claim credits. The transactions costs involved would range between R100 million and R150 million. Nedbank Capital, meanwhile, has bought verified carbon units from the eThekwini municipality for the environmental benefit arising from renewable energy power generation using landfill gas. The units represent almost half of the reported yearly emissions of the bank. But, despite these small successes a shortage of suitable projects, the lack of proper carbon trading market and the slow world economy have raised doubts about whether the carbon credit system have a viable future in Africa. The World Wide Fund for Nature (WWF) living unit head Saliem Fakir says indications are that carbon credit projects have not been leading to the reductions they should be. “In the WWF there is a debate about the value of carbon credits,” he says. “We are looking at whether they are having an impact on emissions reduction. Indications are that they are not leading to the reductions they should.” Many carbon credit offset projects had potential, says Fakir, but were hampered by government regulations.

“It is true that in the last 10 or more years the carbon credit market was not rosy,” he says. “There has been a lot of difficulty in finding projects that are suitable of the scale above 50 000 tonnes.” Good public policy is needed to get companies to take a longterm view, he says. “Companies take a short-term view and are not engaged in public sector in the right way. People want quick returns and forget about the future. At the same time the government is not driving the agenda.” What is needed to reduce emissions, says Fakir, is “top-down regulation” that imposes carbon caps. He says if African countries could roll out large-scale renewable energy, there would be a significant shift in carbon reduction. “We could decarbonise the energy sector, which would create new jobs and enterprise,” he says. Crispian Olver, the chief executive of Linkd Environmental Services, believes South Africa was slow on the uptake with carbon credit projects and has missed a golden opportunity. “We had some good early stage developers and some innovative projects, but we seemed to miss out,” he says. “The window is now closed. Projects that weren’t registered by the end of last year won’t be accepted by the European trading scheme.” There isn’t really a local carbon-trading system in South Africa, he says, because no one is currently buying carbon credits. Olver believes this might only change if the treasury introduces a carbon tax that includes a provision for offsets. A carbon tax would give companies the impetus to start investing in local carbon-offset initiatives because it would lower their exposure to the new tax. That should create a formal market, which would have credits that could also be traded on overseas markets. “It is a good step forward. But it still isn’t clear when the tax will take off,” says Olver. The carbon credit plan is also being hampered by cash-strapped European companies and governments that are struggling with more “pressing” social responsibilities.

‘If you were a politician with €100 million, would you spend it on an environmental project in Africa or would you spend it on creating jobs?’ Kevin Whitfield, the head of carbon: Nedbank Capital, says carbon projects create jobs, but not enormous numbers. “Solar, wind and hydro farms, for example, which create natural energy, create opportunities but not an enormous numbers of jobs,” he says. “The biggest job creator in many instances is the spin-off of sub-projects.”The economic crisis in Europe has seriously suppressed “compliant” carbon credit projects, he says. “The world is managing a financial crisis as well as a humanitarian and job creation crisis. With the economy contracting, the ability to source free money is going to be more difficult. In many cases we are finding companies looking to close expenditure in nonessential services.” The world, Whitfield says, is in a holding pattern in terms of many conflicting responsibilities and the ability to access carbon credits and to do deals is directly impacted. “Politicians are swayed by votes and people in many developed countries are demonstrating on the streets. If you were a politician with €100 million, would you spend it on an environmental project in Africa or would you spend it on creating jobs?”

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Water for Africa:

Reduce, recycle and replenish

Water and sanitation are the most important drivers of human development, writes Glenda Nevill.

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ater is one of Africa’s most precious resources. And one of its most scarce. It has a vital role to play in addressing the continent’s social-economic crisis. Water, says Dr Andrew Hudson, who works on the water governance programme in the United Nations Development Programme, is a key component in the Human Development Index (HDI). The HDI measures how societies are functioning in a social and economic context. “Obviously there are many drivers of human development,” Hudson told the BBC. “But water is the most important. It was striking: I looked at access to energy, spending on health, spending on education – and by far the strongest driver of the HDI on a global scale was access to water and sanitation,” Hudson said. The Economic Commission for Africa agrees, saying that central to clean water and water security in Africa is investing in the development of Africa’s potential water resources, reducing drastically the number of people without access to safe water and adequate sanitation, ensuring food security by expanding irrigation areas and protecting the gains of economic development by effectively managing droughts, floods and desertification. It’s a big ask, and one that governments across the continent are tackling, but it’s not one that only they can answer. Addressing Africa’s water needs requires the participation of big business and the non-governmental organisation (NGO) sector too. SustainableWash.org, and its WASH Sustainability Charter – WASH stands for Water, Sanitation, Hygiene – is an initiative that

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has aligned business, governments, civil society as well as NGOs. Its mission is to “collaboratively promote the delivery of safe water, sanitation, and hygiene services that produce high-quality, lasting benefits to consumers”. Coca-Cola was the 100th signatory to the Charter, and the first Fortune 500 company to do so. The Coca-Cola Africa Foundation has also created the Replenish Africa Initiative (RAIN) that aims to provide safe water access to over two million people in Africa by 2015, and is underpinned by a $30 million investment from Coca-Cola.“Through RAIN, we have always looked to develop supply chains, means of

‘We must plan for water to flow every day; our projects must be sustainable.’ communication, and a finance stream for communities to be able to sustain the safe water and sanitation systems we help provide, which is one of the biggest challenges facing the water sector,” says Greg Koch, director of Global Water Stewardship in the Corporate Sustainability Office at the Coca-Cola Company. “Signing the Charter strengthens our commitment to enable lasting community ownership and operation of these water access and treatment systems.” Coca-Cola’s Africa initiatives are aligned with what it calls its “three-tier global water stewardship strategy, which is focused on

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reducing, recycling and replenishing the amount of water used in Coca-Cola beverages and their production”. Ned Breslin, CEO of Water For People, a contributor to and fellow endorser of the WASH Sustainability Charter, says that by signing the Charter, the Coca-Cola Company is signalling to the entire water community that water investments must last; must truly transform lives; and must be accounted for over time. “It is no longer sufficient to only plan for and celebrate the first day that water flows in a community; rather, we must plan for water to flow every day; our projects must be sustainable.” SABMiller recently entered into a partnership with the River Trust (an NGO), to bring clean and healthy water to communities surrounding the Wilge River in Frankfort, in the Free State province of South Africa. The global brewer, too, has a philosophy of reducing, reusing and recycling and has clearly articulated its values through its processes.

‘We need to design operations today that can cope with the expected challenges of tomorrow.’ This includes using less water to make more beer and manage effluent standards in the brewery; working with suppliers and farmers to identify water risks and options to reduce water use across the supply chain; identifying community projects that will help provide safe and sustainable drinking water; in terms of governance procedures, mobilising employees to save water, engaging with government on policy issues and contributing to the Water Futures Partnership (a joint venture between SABMiller, WWF-UK and German Development Agency, GIZ). “But simply focusing on our internal operations is not enough if we want to secure adequate water, energy and agricultural supplies for our breweries. We have built a number of partnerships with governments, NGOs and academic institutions to tackle the sustainable development challenges we face – examples being the Strategic Water Partnership Network in South Africa and our extensive smallholder farming programmes across Africa and India,” says executive chairman Graham Mackay in his board overview of sustainable development. South African state energy utility Eskom is a large user of the country’s freshwater resources, accounting for approximately 1.5% of the country’s total water consumption annually. Of course, with the increased demand for electricity comes increased need for water. “Eskom has, over the last two decades, introduced a number of innovative technologies to save water. These include dry cooling, desalination of polluted mine water for use at the power stations, and technical improvements on treatment regimes to maximise the beneficial use of water. In so doing, more than 200 million litres of water are saved every day,” it says. Energy and chemical giant, Sasol, also needs significant volumes of water in its daily operations. As such, it has a multi-faceted approach to water in South Africa with its water strategy and activities being aligned with the six key focus areas of the international United Nations Global Compact CEO Water Mandate. These six areas are direct operations, supply chain and watershed management, collective action, public policy, community engagement and transparency. It believes that scarce water is a significant business risk and as such, responding to the issue is a “business imperative”. Sasol New Energy has established a dedicated water function that is sponsoring and driving Sasol Water Sense, an initiative within Sasol that is bringing the principles behind the Water Mandate to reality. Sasol CEO, David Constable, in the 2012 sustainability report, says water is “a critical feedstock for our business. As many of our operations are located in water-scarce areas, we are implementing internal water efficiency measures and developing water-conservation partnerships with various stakeholders. “These partnerships address critical infrastructure issues, including the provision of domestic water supply as well as other beyond-the-

fence conservation initiatives. Our success in identifying energy efficiency opportunities supports ongoing reductions in both carbon emissions and water use.” Mining operations are harsh on the environment, and successive generations of bad miners have led to acid mine drainage and polluted water sources. As Anglo American says, acid mine drainage is “a challenge inherent in the coal mining industry”. But the company has become a global leader in water purification technology. “Investing in water treatment and relevant technology innovation speaks to the development and installation of some of the largest mobile water treatment units in the southern hemisphere by Thermal Coal at New Vaal Colliery. The Mantoverde water desalination plant in Chile is another example,” said Anglo American’s group water manager, Richard Garner, in an interview posted on the company’s website in 2012. Garner said the company needs large volumes of the “right quality of water for our mineral processing activities – as well as for mining operations. Yet more than 70% of our mines are in waterstressed areas where the water that we need is just as important to local people for domestic, agriculture and sanitation uses”. Like other global businesses operating in Africa, and cognisant of the challenges that water scarcity and security bring, Anglo American believes that climate change is a long-term issue, but one for which careful planning is needed. As Garner says: “We need to design operations today that can cope with the expected challenges of tomorrow.”

A word from NEPAD Business Foundation... In a publication entitled ‘Closing the water volume gap by 2030’, which was released at COP17 and the World Economic Forum in Davos last year, the South Africa Minister of Water and Environmental Affairs Edna Molewa said, “I believe that closing the water volume gap will require the commitment of the public and private sectors, and our citizens. As such, my ministry is leading the Strategic Water Partners Network – South Africa (SWPN-SA) with pioneer partners including the Water Resources Group supported by the World Bank and the International Finance Corporation, the World Economic Forum, South African Breweries, Coca-Cola, Anglo American, Sasol, Nestlé, Eskom and the NEPAD Business Foundation, in an initiative to close the water gap by 2030.” Crucial to the success of any innovative partnerships to address water challenges in South Africa, and in Africa, is the willingness of the government to allow a broad range of stakeholders to cooperate and tackle these challenges together – a virtue displayed by the SWPN-SA. This is an innovative approach by government and the private sector to address South Africa’s water challenge.

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Is acid rain a problem

in Africa?

Data on acid rain in Africa is scarcer than a thunderstorm in the Sahara, writes Liesl Venter.

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esearch the topic ‘acid rain’ in the United States of America and be prepared to be overwhelmed. You will find that the National Atmospheric Deposition Program (NADP) at the University of Illinois’ Illinois State Water Survey maintains three networks with more than 350 deposition-monitoring sites. Intimidating scientific speak but nonetheless impressive. In layman’s terms this means every week across the country at 350 different sites, water samples from rain or snow are collected and tested. The data is sent for analysis and stored in a national research base allowing authorities to know exactly what is falling from the sky at any given point. Research ‘acid rain’ in Africa, however, and one comes up almost empty-handed. “For some unknown reason, acid rain data is generally scarce in Africa,” says Dr Anthony Turton, a former vice president of the International Water Resource Association, author, and all-round water researcher and scientist. “As far as I have been able to ascertain there are tons of rainfall data, some going back a century, especially in South Africa but one of the parameters missing is the measuring of pH. We are, therefore, unable to determine what trends might be occurring in the acidification of rain over time.” Acid rain is best described by the American Center for Disease Control (CDC) as chemicals falling to earth in the form of rain, dew, drizzle, fog or snow after moisture in the air has interacted with nitrogen oxide and sulfur www.nepadbusinessfoundation.org

dioxide released by factories, power plants, and motor vehicles that burn coal or oil. This interaction of gases with water vapour forms sulfuric acid and nitric acids or what is then commonly referred to as ‘acid rain’. The effects of this rain can be clearly seen, according to Rico Euripidou, environmental health campaigner for groundWork in South Africa.

‘A factory in South Africa could result in acid rain in one of the neighbouring countries and vice versa.’ “In the European Union and the US, when air pollution was becoming a big issue, the visual effects of acid rain were very visible as statues in public squares could be seen crumbling,” he says. But with a vigorous and pro-active approach, including the launch of an acid rain programme, American researchers could establish over a period of more than 30 years the frequency and concentration of acid rainfall and whether it had increased or decreased. In their case it had decreased. In Africa, however, the lack of data means we have yet to establish the extent of the problem while benchmarking against global trends is just about impossible. “In fact we don’t know much. We are unable to determine what trends might be occurring in the acidification of rain over

time,” says Dr Turton. “And because we cannot benchmark ourselves we have no idea if the situation is getting better or worse.” According to the experts, part of the problem is that Africa – unlike the States –– is not one big country and to truly measure the impact of acid rain it would be dependent on each country to collect data for analysis. Collaboration between countries would also be needed as it is commonly accepted that the impact of pollution can be felt hundreds of kilometres away from the actual site of a factory or power plant. Says Dr Turton: “A factory in South Africa could result in acid rain in one of the neighbouring countries and vice versa. We not only need to collect data from an individual country perspective, but also have to start working together within our regions to address an ever-increasing issue.” Experts also agree that now more than ever there is a need for data collection on acid rain in Africa in an effort to raise it in the public domain, as well as among decisionmakers, more so in the light of mining and coal-fired energy becoming the foundation of national economies. “As more and more coal-fired factories go up and more motor vehicles are sold in Africa, pollution increases and so also does acid rainfall on the continent,” says water expert Jeremy Westgarth-Taylor. “This is not good news for Africa. The impact of acid rain is very scary and goes much further than us not being able to see the blue in the sky because there is too much acid in the water

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falling from the sky. We will lose the fish in our rivers and seas; we will affect the ground in which our food grows. The reality is if we don’t address acid rain, food production will be directly affected in Africa. Without food people starve. That is something this continent can ill-afford.” Dr Turton agrees, saying one of the more significant risks of increased acid rain is the increased level of aluminum in soil. “Africa is largely dependent on maize.

‘The impact of acid rain is very scary… We will lose the fish in our rivers and seas; we will affect the ground in which our food grows.’ Maize is specifically sensitive to aluminum in soils. Increased aluminum levels in soil are directly caused by an increase in the soil pH, which in turn is caused by acid rain. If left unattended, acid rain will mean we are no longer able to grow maize,” he says. He, like many others, believe that if not monitored or addressed, acid rain will slowly but surely result in a gradual loss of maize production capacity on the continent. Euripidou takes it further saying not

only maize crops are at risk but most grains and cereal food production along with the possible effects to water supplies and the impact on livestock. “It can contaminate fish with toxic substances; it can damage foliage and weaken trees; it can lead to excessive levels of nitrogen in soil; and ultimately it can contribute to human respiratory diseases such as bronchitis and asthma,” he says. Part of the problem, says WestgarthTaylor, is that too many people are oblivious to acid rain. “Africa has some very big challenges, including the eradication of poverty and addressing unemployment. Acid rain is not high on the agenda as there are seemingly bigger fish to fry, but this is exactly where we are wrong. If we don’t look at acid rain and at least try to get some data together about what is going on – in other words, where it is increasing, by how much and what is causing it – we are going to feel the effects for much longer than anyone is anticipating.” In 2010 the Water Research Commission (WRC) found in a study that communities with low socio-economic status are most vulnerable to climate change as they do not have the capacity or resources to protect themselves or their properties from possible impacts. Africa remains a continent plagued by poverty where the majority of people live below the breadline. As they lack the ability to make informed decisions about the risks

posed by climate change, the need for scientific data becomes greater. “I believe, across the continent, we should start by commissioning high confidence peer-reviewed scientific research designed to quantify the magnitude of the problem that can also allow us to start developing credible ways of addressing this problem,” says Dr Turton. “We can only start stopping the impact of acid rain if we know how far the reach is.” With African research still heavily dependent on donor funding and in the light of the multitude of challenges facing the continent, acid rain can seem insignificant, says Westgarth-Taylor. “But when people have no food to eat and the rain that falls keeps burying holes in the ground, it might just be too late to do anything. The time to act is now.”

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To frack or not to frack

that is the debate

There is no easy answer to whether or not hydraulic fracturing should be allowed in the Karoo, writes Liesl Venter.

Image courtesy of Shutterstock

ndoubtedly one of the most contentious topics on the South African agenda is a fight that is far from over with the battle lines having only just been drawn. The emotionally charged respondents on both sides of the boxing ring are gearing up for the next round following South Africa’s decision in September last year to lift its moratorium to allow for the exploration of shale gas in the Karoo. This could pave the way for hydraulic fracturing. Whatever happens, onlookers are taking notes as the outcome will have a significant impact on the entire continent. Hydraulic fracturing or fracking is a drilling technique used to extract natural gas from underground. It involves the injection of millions of litres of water, sand and chemicals at high pressure down and across horizontally and vertically drilled wells as far as 3 000 m below the surface to crack layers of rock to extract natural gas from the earth’s shale, a type of rock made up of clay, quartz and other minerals. Environmentalists maintain this process in the Karoo will devastate the area, causing major contamination of drinking water, which in turn poses a massive health risk to residents. Oil and gas companies, on the other hand, say the industry has been fracturing vertical wells for more than 60 years, and horizontal sections for more than 20. Over that period of time, the technology has improved significantly and today it is nothing more than a routine operation used to make reservoirs give up more oil or gas. In the United States, fracking has been used for more than 60 years with more than

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‘Africa is being raped every day of its resources and its land… By fighting fracking in the Karoo, we are fighting the African fight.’ a million wells having been drilled to date. While the super power has faced its fair share of criticism, authorities maintain that thanks to fracking the country will in time gain energy independence as the economy moves from an energy importer to that of an energy exporter. At the same time fracking has also led to a massive drop in natural gas prices. But South Africa, and by and large Africa, is not America, say the experts. “Oil and gas governance in Africa remains extremely contentious with too many of these transactions not being transparent,” says Paul Mulindwa of the Centre for Conflict Resolution (CCR). “It will be interesting to see how South Africa handles the entire fracking debate in terms of governance and transparency, and if they will be able to set a precedent from which other African nations can learn.” With Minister of Mineral Resources, Susan Shabangu, set to issue the first exploration licences to Shell, Falcon Oil and Bundu Oil & Gas within the next few months (at the time of going to press, the ministry said the issuing was “imminent”), Africa is on the alert despite fracking only being considered as an extraction method in South Africa. Jonathan Deal, chairman of the Treasure Karoo Action Group (TKAG), says the

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devastating effects of fracking are clear to see all over the world, with several countries including the United Kingdom and France banning the practice. As great a concern as fracking itself, says Deal, is the message that is being sent to the world’s corporates about Africa should they get their way and frack away the Karoo. “It will be tantamount to announcing a free-for-all in Africa. It will be saying to corporates all over the world that Africa’s resources are there for the picking by

corporates, who have the power and the money to negotiate with governments. Africa is being raped every day of its resources and its land. Our farmlands are being sold off and leased out to companies on 99 year long concessions and the same thing is happening to our resources. By fighting fracking in the Karoo, we are fighting the African fight,” he says. While Deal and the TKAG have been at the forefront of the fight against fracking in South Africa, they are stepping it up a notch in terms of Africa. “We have reserved

‘Oil and gas governance in Africa remains extremely contentious with too many of these transactions not being transparent.’

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the domain name whatisafrica.com and whatisafrica.co.za to use to publicise the African issue. We believe we can keep these big, powerful companies at bay. If we do succeed in beating them when it comes to fracking in South Africa, then we are undoubtedly sending a message to the fossil fuel industry everywhere in the world. Also, if we can fight this, taking into account the odds against us, then we are also encouraging the rest of Africa to take a stand and not just be the gas profit maker for some international company.” Global oil and gas expert Dr Duncan Clark says there is no denying the role of the oil and gas industry in Africa, as they are massive contributors to economic growth. “But Africa’s governing policies remain a massive concern,” he says adding, however, that African governments need to clean up their act and not the companies mining the continent. Deal believes that fracking in the Karoo

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is really only the tip of the iceberg in the African context. “Every year more and more companies are entering the continent with explorations on the increase. Governing: that is where the focus must be. We have to make sure that these corporates are being monitored every step of the way.” Mulindwa says this has not been the case in Africa to date. “In west and east Africa, exploration is happening all over, but how the companies have entered into these agreements with governments remains unknown. In fact, what the agreements are is even a secret. In Uganda and Kenya one is told outright that it is handled within the President’s office and is not for public knowledge, full stop.” Like Deal, he believes that if South Africa should go ahead and allow fracking it will have to be closely scrutinized, with a completely transparent process open for public comment. This, he says, could prove to be a major learning curve for the rest of the continent. “We have concerns about such a process though,” says Deal. “The government is struggling to manage the mines on its books at present with reports that there are more than 40 mines operating without water licenses. How are they going to stay in control of the thousands and thousands of wells that these corporates are planning to drill?” Shabangu has maintained that when, and if, fracking were to eventually happen it would be under the strict supervision of a monitoring committee. She has kept an open mind on the issue, commissioning a report on the economic potential of fracking. This report found that if 30 trillion cubic feet of gas could be produced the financial implications would be around R1 trillion while thousands of jobs would be created – facts that remain difficult to ignore in the light of poverty and unemployment, not just here, but across the continent.

ADVERTORIAL

International

L&D Study Tour 2013

ustainability is the next great leadership challenge! To remain competitive, South Africa, like many developing economies, needs to build and retain skills and talent. With the severe shortage of managerial and professional skills, South Africa needs to adopt global best practices to become more effective and productive. Learning how some of the world’s foremost companies and business schools grow talent and build the necessary skills required for competing in the future, are essential to HR and L&D professionals in this country. The International L&D Study Tour, initiated by Wits Business School in 2010, aims to expose South African Executives, HR and L&D leaders to cutting edge thinking and best practice through visiting and interacting with organisations in various sectors which apply these cutting edge initiatives. In 2011, a number of senior and high potential HR and L&D professionals from some of South Africa’s leading companies visited top global companies and Business Schools in New York and Boston. In 2012 a similar visit was facilitated to London and Paris.

2013 Global Company Visits:

Feedback from our participants indicates this experience was of enormous benefit both to them and to their organisations. This year, 2013, the programme will, once again, visit New York and Boston and visit leading corporates, consulting companies, executive search firms and business schools. Boston is not only one of the intellectual centres of the US, it also boasts some excellent companies. New York and its surrounds offer access to top global companies and Business Schools.

Broad themes to be addressed:

To provide insights into cutting edge Learning and Development thinking and practice, the following themes will be explored: • Incorporating Talent Management into the organisational DNA • Leadership Development • Learning and Development Strategy • Technology in Learning and Development • The role of the CLO • The role of Corporate Universities and Academies • Organisational Learning

Participants:

This programme, comprising 20 – 30 participants, is aimed at HR Directors, senior and high potential HR or L&D professionals from leading South African companies as well as some Faculty from WBS. www.nepadbusinessfoundation.org

Participants should be working in a strategic position and be able to use this experience to make an impact on their organisations.

Programme dates:

• Thursday 19 September – Friday 04 October 2013. • Preparatory Workshop at the Wits Business School: Thursday 19 – Friday 20 September 2013 • Depart for the USA: Friday 20 September 2013 • Arrive back in South Africa: Friday 04 October 2013

In 2011, a number of senior and high potential HR and L&D professionals from some of South Africa’s leading companies visited top global companies and Business Schools in New York and Boston. In 2012 a similar visit was facilitated to London and Paris.

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international leg of the programme prior to departure Gain exposure to business conditions in key global economies considered to be amongst the world’s best Gain an insight to organisations from a variety of sectors which will give different industry perspectives which enhances and facilitates innovation Interact with senior leaders in different industries and organisations where talent and leadership development is owned and shaped by top executives Gain exposure, insights and new perspectives of organisations that have different strengths from high level technology to leadership development to the building of high performance cultures. Develop a number of personal and professional networks amongst themselves and the organisations that are visited Influence the attraction, development and retention of the skills the economy as a whole requires to be globally competitive in a “post financial crisis world”.

Facilitator:

The Facilitator will be Terry Meyer, an independent consultant and a past Faculty Member of the WBS. There will also be at least one current WBS Faculty Member who will also be participating on this programme.

Programme cost:

The cost of the programme is R120 000 per person. This includes flights and bed-and-breakfast accommodation at a 4 or 5 star hotel. Although hosts often provide lunch, any other meals (apart from breakfast) are for personal accounts. Where required, transport by bus has been included. Any local travel by taxi or train is not included and will be for individual accounts. Quotations for Business Class travel are available on request.

Organisations visited on the 2011 and 2012 tours included:

Benefits:

The international companies visited are top league global players, many of which feature in the top rankings of best companies to work for, most admired companies and best leadership companies. They all bring together a great team to share their experiences with the group.

This life changing experience includes an opportunity to:

• Engage with some strategic South African L&D issues to contextualize the

Contacts: Terry Meyer can be contacted at: +27 (0)83 2515019 terry@leadershipsa.com The Wits Business School Programme Manager will be Senamolela (Faith) Koroloso. She can be contacted at: Senamolela.Koroloso@wits.ac.za

Wits Business School International Executive Development Program Study tour to Dubai and Shanghai in China

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 Shanghai in China. 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. 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.

• • • • • • • •

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

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 Shanghai. In Dubai we will explore the rise and fall of this once flourishing economy. The final stop is Shanghai; itself a symbol of the transformation of China, and you will get a better understanding of the Chinese economy and culture through company visits. 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 26 July 2013: 12:00 - 17:00 Programme dates 06 August to 08 September 2013 International Study Tour Airline: Emirates • London Business School 26 to 29 August 2013 • Dubai 31 August to 02 September 2013 • Shanghai 03 to 07 September 2013

Visas Required United Kingdom Dubai and Shanghai Closing Date for Applications 7 June 2013 Programme Fee R206 000 Programme Manager: Faith Koroloso Senamolela.Koroloso@wits.ac.za +27 11 717 3569

R206 000.00 Additional R51 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.

GOVERNAN C E AND DEMO C RA C Y

Leadership for Africa’s future

For Africa to be successful it needs to find approaches that are uniquely suited to the continent and its needs. As one of the world’s best-travelled speakers and researchers, futurist Graeme Codrington has some inkling from where these new ideas might come and where they could lead.

Image courtesy of Shutterstock

am an African. In the words of that famous 1996 Thabo Mbeki speech: “I owe my being” to this glorious continent. I am an African. Maybe I need to say this more than once because of my British heritage (four generations ago), because of my white skin, because I married a British-born South African and have the right to a British passport, or because I spent four years living outside my mother Africa. Yes, I am proudly African: by birth and by choice. And I am excited about the future of this continent. Together with many other Africans – and an increasing number of people around the world – I am energised by the potential in Africa right now. There is a growing consensus that over the next few decades, Africa’s billion inhabitants will emerge from poverty, conquer the many ills that beset them, and live in the fastest-growing markets in the world. Africa is the final frontier of human development. You wouldn’t know this, though, if you pick up almost any newspaper across the continent. From Cape Town to Cairo, Dakar to Dar es Salaam, the mass media is filled with ranting and raving, doom and gloom, and pessimism about the state of the nations they represent. They have many good reasons: corruption, unemployment, social ills and collapsing – or non-existent – infrastructure. That is the paradox of Africa: so much potential; so much tragedy. And yet, as an African, I am hopeful about the near future. I am hopeful that Africa will reach its potential by dreaming new dreams, establishing new visions, finding new approaches, and – maybe most importantly – developing new leaders. These must not just be imported models and methods, but rather African-specific solutions, incorporating the best of who we are with the best of what is available in the world around us. We must www.nepadbusinessfoundation.org

learn, adapt and adopt; but we must also innovate, create and develop.

A model worth watching

A few years ago I was watching a video produced by The Global Poverty Project, an organisation supporting charities that aim to eradicate extreme poverty within a generation. It was an interview with a young South Korean woman, Andrea Choi, who was proudly talking about how far her country had developed in just a few short years. Her grandparents had lived in simple houses made with their own hands, and had no education. Her parents were the first generation to live in apartments, and have electricity and indoor plumbing. And now she is a professional, living in an aluminumand-glass high-rise in bustling Seoul – a truly

‘Where Asia is now, is where Africa’s future can be… by the end of the next decade.’ world-class, modern city. South Korea was the first aid recipient nation to become an aid donor. Choi’s story is echoed in many cities and countries across the Asia-Pacific region. I have a simple thesis: where Asia has come from is almost identical to where Africa is now. And where Asia is now – the exciting, rapidly growing, shiny-new, pulsating place that everyone wants to be part of – is where Africa’s future can be… by the end of the next decade. The growth has begun. Over the last few years, only a few countries in sub-Saharan Africa have experienced negative GDP growth (recession), and then only briefly (South Africa, for example, experienced negative growth for just three quarters in 2009).

The average economic growth rate for subSaharan African countries is over five percent, with five of the countries experiencing near 10% growth. Between 2001 and 2010, it was the fastest-growing region in the world, with seven countries in the world’s top 10 fastestgrowing economies over the decade. Sub-Saharan Africa has also seen remarkable discoveries of natural resources over the past few years, including Ghana opening up the second largest oil field in the world, Mozambique’s new coal fields and more recent discoveries of shale gas across the continent. But it’s not just energy – Africa has significant natural resources of all types that have not yet been developed as well as they can be.

T h e O f f i c i a l NE P AD y e a r b o o k 2 0 1 3

On top of this, Africa’s people represent its greatest potential untapped resource. Like Asia two decades ago, many African countries have not developed their women, have inadequate education and healthcare, and have the potential to develop dramatically and fast.

Where Asia was, Africa is

If we consider South Asia, including Indonesia, Malaysia, Singapore, Vietnam, Cambodia, Thailand, and also look at The Philippines, India, China, Hong Kong, Taiwan and possibly even Japan, we can draw strong parallels between where they were as a region 30 years ago and where sub-Saharan Africa is now. Politically in Asia, there was a mixture

of states, from emerging and hybrid democracies to dysfunctional governments and a few tinpot dictators. Most of the countries were aid recipients. Their industries were underdeveloped and the outputs of their economies derided as bad quality. Very few trusted brand names had yet emerged. One or two of the larger countries were beginning to find their international voice, but were still largely ignored or sidelined. Infrastructure was ageing or nonexistent and public spending on development erratic and strategically deficient. Dodgy politicians enriched themselves, and corruption was rampant. Socially, the societies were largely rural, under-educated, under-skilled, subsistence-

minded and lacking in confidence to compete in the global market. Family planning didn’t exist (except in China), maternal health was bad, life expectancy low, healthcare almost non-existent and a profusion of non-Western languages and cultures made the region feel inaccessible and even dangerous to the world’s business leaders. But since then, this region has leapt into the global spotlight. Asia has turned around the negative indicators and is currently the engine for the world’s economy. It’s not uniformly good, but it’s better than it used to be. By far. I believe that there are paths in Asia that Africa needs to follow. And I believe that Africa can move even faster than Asia did. www.nepad.org

GOVERNAN C E AND DEMO C RA C Y

In fact, in many issues it should be possible for Africa to leapfrog other nations.

How can we get there?

There is no one-size-fits-all solution that will work across the continent, but there are some principles that Africa needs to consider. Here are just a few: • Vision: Almost every one of the successful Asian countries has a vision statement that reaches down through society and provides individuals and organisations with guiding principles for behaviour. In simple terms, these countries know who and what they want to be. Very few African countries have such a vision. There are some examples, most notably Ghana: recently rich from oil revenues, the country has set itself a vision of becoming the first African nation to become an aid donor instead of aid recipient. And it seems that this vision is on everyone’s lips throughout the country, from CEOs to security guards. It may seem too easy, but this is definitely the correct starting point. • Technology: Africa may have more cellphones than any other continent, but slow speeds and high costs of data restrict the adoption of technology. Asian countries made this a priority, with both Japan and South Korea recognised world leaders.

Image courtesy of Shutterstock

‘Between 2001 and 2010, Africa was the fastest-growing region in the world, with seven countries in the world’s top 10 fastest-growing economies.’ • Leapfrogging: Africa should not be aiming to ‘catch up’ with the rest of the world, but rather find ways to bypass some of the dead-ends and detours taken by other countries. This can happen especially with technology implementation, but also in education, healthcare and social policies. It’s a matter of mindset, which is an issue of leadership. • Leadership attitudes: there isn’t a single style of leadership that works best in Asia – or anywhere else: some countries have had single parties ruling them since independence, others have no democracy at all, and still others apply religious law. Hybrid systems abound. The lesson for Africa is therefore not in the choice of leadership model, but rather in the attitude of the leaders themselves. One example stands out for me: when asked what kept him up at night, the CEO of Petronas, Malaysia’s state-owned oil company, said simply that it was his responsibility to the nation. Knowing that the revenues from his company’s profits contributed a significant www.nepadbusinessfoundation.org

percentage to the country’s coffers, any slip by him or his team would mean fewer schools and hospitals, and less drinking water for the people of Malaysia. • There are two lessons here for Africa’s leaders: we need our leaders to have both big visions and the ability to reduce those visions down to tangible issues that affect every day life, and, secondly, we need less of the ‘big man’ African leader and more of the ‘father of the nation’ type. • New economic models: Asian economies also exhibit remarkable diversity. Unfortunately for rabid supporters of free market capitalism, some of the better performing Asian countries have nationalised key industries. But, they typically let them run under professional, world-class leaders without interference, and they find leaders who have the nation-building mindset. • Trade: Trading with rich nations is obviously first prize. But even trading with each other adds significant value. Africa should follow Asia in promoting intraregion trade partnerships. Of course, this is not a comprehensive list. And a topic of this significance deserves a more detailed study than this short article allows. But I believe that this is the correct approach for Africa. We need to look at the rest of the world and learn lessons from where others have been. Then we need to adapt these insights for Africa, and prepare to move

quickly and decisively in the right direction. This requires leadership, which is possibly the resource that Africa is missing most right now.

Worth it

Africa’s rise will not happen overnight, or in a simplistic A-B-C programme. The change comes from government, from business, from civil society, from young and from old, from every part of society slowly shifting mindsets, attitudes and actions. Possibly, above all, it is about self-belief. What stories are we telling our young people in Africa? Are we telling them the stories of Asia? Or of a lost continent? Are we filling them with the visions of what Africa could be? I choose to believe in the brightest possible future for Africa. I choose to believe it’s the Last Frontier of development on our planet. And as Thabo Mbeki said on 8 May 1996, on the day South Africa adopted one of the best constitutions ever written for a country: “Today it feels good to be an African.” Indeed it still does. Graeme Codrington is founding partner of strategic insights company, TomorrowToday. He works from bases in Johannesburg and London, researching the forces causing disruptive change in the world right now. He can be contacted at graeme@tomorrowtoday.co.za

GOVERNAN C E AND DEMO C RA C Y

African women

carry heavy loads

Joyce Banda’s sudden appointment last year as Malawi’s president has given many local and international observers hope. But can she dig the country out of the socio-economic conundrum left by her predecessors? Glenda Nevill reports.

alawi’s presidential jet went on sale in January, a story that made headlines around the world. That an African president would shun the trappings of office and insist ministers and officials fly on regular airlines was cause for comment. The subtext, of course, was that Africa’s ‘big men’ need their bling. The difference, of course, is that Joyce Banda is a woman, a mother and a president. Feeding the nation is more important than costly aeroplanes, she said, promising that the proceeds of the sale would do just that. The 14-seater Dassault Falcon 900EX was bought by her predecessor, the late Bingu wa Mutharika, for $13.3 million. Donors cut $4.4 million in aid because of it. She also sold most of Mutharika’s fleet of luxury cars. Banda knows that for Malawi to regain traction with the international donor community and investors means she has to be seen to be do things differently. Jets are a politically charged issue, and she has more important matters to deal with, like the austerity measures that will ultimately put the economy back on track. “I don’t know how I feel about this job,” Banda says in a film titled ‘Madam President: Meeting Malawi’s Joyce Banda’ made by Lucy Lambie, Nick Francis and Marc Francis. “How much can I do in the time allocated? That is my worry.” She doesn’t have much time. Malawi holds elections in 2014, and Banda has a lot of work to do if she’s to remain in power. “Rural women love her,” says a South African with business interests in Malawi. “Her ticket to the vice presidency was foregrounding the interests of rural women. She recently visited our area near Cape Maclear to lay the www.nepadbusinessfoundation.org

foundation stone for a maternity facility at the existing Billy Riordan Memorial Clinic. The women turned out in their droves, wearing orange chitenjes with a design of an opening padlock, and Banda’s face on it.

‘In five years’ time what I would like to see is a Malawi where people speak freely, human rights are respected; there’s no corruption, no nepotism. I want to see a Malawi where at household level people are living a better life, by encouraging entrepreneurship, by supporting small business.’ “But the men don’t seem to have as much faith in her. She inherited problems from Bingu, and she’s now being blamed for them. It’s a shame, but the average Malawian is poorer since she devalued the Kwacha. Bingu kept it an unrealistic level because he knew devaluing it would be unpopular.” Banda was unexpectedly elevated to the presidency when Mutharika died suddenly in April 2012. Banda, as the elected vice president, inherited one of Africa’s poorest

countries, a dearth of donors, a currency pegged way beyond its real value, and a government riddled with policy failures and a reputation for human rights abuses. “It’s heavy on me because my feeling is that we wasted 50 years. There has been very little progress in changing the status of people at grassroots. It’s heavy, but I’m able to carry it. Why? Because I’m an African woman. And African women carry heavy loads,” she says in the documentary film made exclusively for The Guardian website. Some Malawians call her the “accidental president” and resent the fact that their already low standard of living has dropped further as a result of Banda devaluing the Kwacha by 40 percent. It was a move she had to make, if she was to receive help from the International Monetary Fund (IMF), but it was not popular. She said she had no idea of the “terrible shape of things” when she came to power, and that it caused her pain to see her countrymen suffer. Banda immediately cut her own salary, and that of her deputy, by 30%. But some analysts are sceptical. The Malawi Economic Justice Network (MEJN), a coalition of over 100 civil society organisations, said the pay cuts were not enough. Its leader, Dalitso Kubala told The Daily Times the MEJN “advocated for an immediate reciprocal cut on their subsistence allowances especially for cabinet ministers, for the austerity measures’ symbolism to be complete and truly make a difference”. They said Banda’s pay cut was a political gesture, not a fiscal measure. While Banda looks to the future, she’s firmly rooted in the present and hasn’t been afraid to upset the status quo. The previous

T h e O f f i c i a l NE P AD y e a r b o o k 2 0 1 3

Joyce Banda

regime banned homosexuality, and was widely condemned for enforcing that law. Banda said in her first state of the nation address that: “Indecency and unnatural acts laws shall be repealed”, and would be done so as a matter of urgency. She said the Malawian government needed to “normalise” its relations with the outside world, many of whom had stopped aid due to what she calls Malawi’s “bad laws”. Nevertheless, her approach has made foreign governments, who had frozen aid to Malawi during Mutharika’s reign, sit up and take note. Banda recently made Foreign Policy’s 100 Global Thinkers list. She was listed with Burma’s Aung San Suu Kyi, Hillary Clinton, Malala Yousafzai and United States president Barack Obama, among others. Malawian political analyst and media scholar Jimmy Kainja says her inclusion in the magazine’s list is “flawed”. Writing for Africa is a Country, he says reversing Mutharika’s policies “was the most straightforward and predictable task before her. Anyone coming into her position would have needed to do it; the main challenge for President Banda was to come up with her own policies, and this remains a challenge. Apart from the

30% pay cut she and her deputy have taken, lavish government spending and misplaced priorities are still endemic in Malawi”. Kainja says while he is happy Banda made the list, and that she deserves it, he believes her grounds for inclusion should have been for her global achievements, rather than for those at home.

‘The main challenge for President Banda was to come up with her own policies, and this remains a challenge.’ “Mutharika left the country’s economy in tatters and it was a nation of people without hope. Joyce Banda’s elevation gave people hope, both Malawians and those in the international community,” he says. The international community has rallied behind Banda. On a recent visit to Brussels, to meet representatives of the European Union, Banda said it was a “tragedy” that Malawi is going to be dependent on aid for a while. “If

our friends and the international partners don’t come; if they packed up and left, we are dead,” she says. But she stood before them and told them: “Malawi is on a journey of transformation” and she got the aid. “I’m grateful because some of this money will help cushion the shock that devaluation has brought about,” she said. Banda has a dream, and that’s for a Malawi unburdened of its current shackles. “In five years’ time what I would like to see is a Malawi where people speak freely, human rights are respected; there’s no corruption, no nepotism. I want to see a Malawi where at household level people are living a better life, by encouraging entrepreneurship, by supporting small business,” she said in the documentary. She’s hopeful: “We’re just discovering that we have huge deposits of natural resources in this country. Minerals, oils and gas. I want to ensure Malawians are the beneficiaries. That’s where we need to be going as a nation.” Whether she’ll realise the dream remains to be seen. She has to win the elections in 2014 first. As one woman told the ‘Madame President’ filmmaker: “If we are not satisfied, we will not re-elect her.” www.nepad.org

GOVERNAN C E AND DEMO C RA C Y

Getting on top of the goals

To reduce poverty and donor reliance, Africa countries need to focus on growing their economies in a strong and sustained manner, writes Professor Mthuli Ncube.

frican countries have made good progress towards achieving the United Nations Millennium Development Goals (MDGs), agreed to by all 193 member states at the Millennium Summit in 2000. The goals, set to be achieved by 2015, include eradicating extreme poverty, reducing child mortality rates, fighting disease and epidemics such as Aids, and developing a global partnership for development. The aim

of the MDGs is to encourage development by improving social and economic conditions in the world’s poorest countries. The response and speed with which African countries have progressed varies across countries and regions. As many as 17 countries – including Ethiopia, Benin, Kenya, Mauritius, Malawi and Uganda – are on target to meet four or more MDGs. At the other end of the scale are countries that are likely to meet a maximum of one of the MDGs, and these are concentrated mainly in Central and West Africa. They include Chad, the Democratic Republic of the Congo (DRC), Central African Republic, Nigeria, Côte d’Ivoire, Niger, and in the east include Sudan and Somalia; and in the south, Swaziland. The financial crisis and Africa’s response has shown maturity, flexibility, skill

and understanding of macro-economic management. Compared to previous crises, African countries weathered the crisis relatively better, with growth dropping overall to two percent from over 6% before the crisis. Going forward, economic growth was 4.9% in 2010 and expected to be 3.7% for the whole of Africa. However, in sub-Saharan Africa, the growth is expected to be above 4.6% in 2013, which is where it sat in 2012. Growth is expected to rise to further in 2014. Fiscal tightening by big donor countries,

‘Fiscal tightening by big donor countries means that aid flows to Africa will be stagnant at best.’

Image courtesy of Shutterstock

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as they exit from fiscal expansion, means that aid flows to Africa will be stagnant at best, or could decline. If aid declines, how will MDGs be financed? The growing importance of emerging economies such as Brazil, India, Russia, China, Turkey and South Korea, as ‘new partners’ for Africa, calls for a repositioning of the continent. Africa must begin to see itself as a ‘new growth pole’. Economic growth that is strong, sustained and shared will reduce poverty in Africa. (Shared growth here refers to ‘inclusive growth’ that is poverty reducing.) MDGs are largely attainable through a strong, sustained and shared type of economic growth. Therefore, Africa should focus on economic growth, which should be strong, sustained and shared. How can such growth be achieved? There are several strategic pillars for achieving it. First, African countries should pursue macro policies that are pro-growth, as opposed to merely stabilising concerns. The adept reaction to the financial crisis by African economic managers shows mature capacity for enacting such pro-growth macro policies. These policies should also be clear on industrialisation and trade policies, which should be supportive of the private sector and entrepreneurship activities. Indeed, there is room for countries in Africa to have higher inflation, but even higher economic growth. Second, African countries should embrace new partners Brazil, Russia, India, China (the ‘Bric’ countries), Turkey and South Korea as sources of trade activities and foreign direct investment, and for knowledge-sharing purposes. Already, trade and investment activity between Africa and these emerging economies is thriving. Chinese imports of minerals and oil are driving economic growth in some countries. The correlation between Africa’s GDP growth and Bric countries’ growth in the last 15 years is very strong, in the order of 90%. Third, Africa’s infrastructure deficit/ need of $93 billion a year is a drag on strong economic growth. Such infrastructure includes energy, roads, rail, air transport, seaport quality, and information and communications technology (ICT) infrastructure, among other things. There is a dire need to invest in infrastructure, promoting ‘green infrastructure’. In doing so, Africa should be innovative by using instruments such as infrastructure bonds, which will help deepen domestic capital markets and develop a yield curve for pricing other assets. Some of Africa’s new partners, especially China, are using different ways of financing Africa’s infrastructure by allowing countries to leverage their natural resources. Such deals have been made with Angola, the Democratic Republic of the Congo (DRC), Nigeria and Ghana, where infrastructure loans are backed by oil or cocoa receipts. Indeed, if the rest of the countries

in sub-Saharan Africa could invest in the infrastructure to the same extent as Mauritius, their compatriot, economic growth could increase by an extra 2.5%! Fourth, infrastructure investment should be driven by private–public partnership arrangements between government and the private sector. Regional connectivity should be promoted. Here, the way forward is not merely to narrow intra-Africa trade but to invest in regional infrastructure, intraAfrica investment and free movement of labour across African sub-regions. Regional infrastructure – such as roads, rail, seaports and border posts – increases trade among countries. Labour movement increases the flow of remittances across countries. IntraAfrica investment is often understated, and yet this has been a strong source of foreign direct investment. Examples are South African companies investing in the rest of Africa – such as MTN, Standard Bank and Anglo-American. At the same time, Nigerian banks have spread across Africa, operating in countries such as Benin, Burkina Faso and Ghana in West Africa; Cameroon and the DRC in Central Africa; Kenya, Rwanda and Tanzania in East Africa; and Zambia in southern Africa.

‘Africa can only develop knowledge economies if it has strong knowledge institutions.’ Fifth, African countries should focus on promoting and growing the private sector. Africa needs its own conglomerates. African entrepreneurs need to be unleashed and supported. A strong private sector will also result in shared growth through the process of employment creation. Africa has a large population of unemployed youth, to the order of 60% of the population in fragile states like Liberia and Sierra Leone. If this problem is not dealt with, there is the risk that such youth, with limited employment opportunities, become the recruitment ground for civil wars. Therefore, youth entrepreneurship should be promoted and small- to medium-scale enterprises should be promoted. Promoting the private sector is also a way of growing the tax base and improving domestic resource mobilisation, in the face of declining international aid flows. The growth of the private sector is at the core of sustainable and shared economic growth. The private sector is also a source of economic diversification, which improves economic resilience. Sixth, so far there has been a strong emphasis on primary education. This is legitimate. However, there is an imperative to focus on higher education and skills development. African universities and vocational training schools have been neglected somewhat. In the 1970s, the

universities of Makerere (Uganda), Nairobi (Kenya) and Fourah Bay College (Sierra Leone) were strong institutions, which have been weakened by wars and general neglect. While attempts have been made to revive them, efforts should be redoubled. Africa can only develop knowledge economies if it has strong knowledge institutions. Seventh, the bulk of people in Africa are unbanked and largely excluded from the financial sector. Financial inclusion needs to be addressed. There is good progress in countries like Kenya, where mobile banking products like M-Pesa have brought a large population into the banking system. Access to finance by small to medium enterprises (SMEs) will be greatly improved by such innovative mobile-based solutions. These solutions should be promoted across Africa. Even within the context of traditional banking models, innovations such as the Mzansi accounts in South Africa – which between 2004 and 2008 brought an additional six million previously unbanked adults to the formal banking system – should be encouraged. Eighth, the agricultural sector in Africa supports about 65% of the population in most countries. There is a need to target agriculture to raise productivity. Strategies for doing this include access to markets, improving rural transport, extension services and raw material provision. Ethiopia has established a commodity exchange that gives rural farmers access to global prices, storage facilities and liquidity. It is, in fact, an economic ecosystem. This Ethiopian model should be promoted across Africa. African agriculture could also learn from Brazil and Vietnam, which have been successful in this area. Equally, moving up the value chain by promoting agroprocessing industries is imperative. Finally, there is a growing middle class in Africa. This middle class – or what we could refer to as ‘the middle of the pyramid’ – is a source of dynamism in Africa. It needs to be better understood and supported, as it is the key to economic growth in Africa. This ‘middle of the pyramid’ comprises the consumers, professionals, air travellers, cellphone users, car purchasers, credit card users, private education consumers and luxury goods consumers, among other things. This ‘middle of the pyramid’ is largely urban-based. By focusing on strong, sustained and shared economic growth, Africa will not only reduce poverty and reduce aid dependency, but position itself as the next growth pole for the global economy. Professor Mthuli Ncube is African Development Bank Group chief economist and vice president. He was dean of the University of Witwatersrand faculty of Commerce, Law and Management and, prior to that, director and head of school at Wits Business School (WBS). www.nepad.org

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ADVERTORIAL

A world-class

investment city Joburg is Africa’s economic powerhouse and one of the world’s leading emerging market economies. It is also an attractive investment destination.

he City of Johannesburg is one of the jewels of Africa. Contributing 17% of gross domestic product to South Africa, it is arguably the economic heartbeat of the country, and also the fourth-largest city in Africa in terms of population. Here’s what makes the ‘city of gold’ as it is called the first port of call for investors considering growing their business into Africa.

What are some of the factors that make Johannesburg attractive to investors? Joburg is based in a country with a politically stable democracy and well-

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‘On the financial front, we have a sound banking and financial system, a sophisticated financial market and we are home to Africa’s largest stock exchange.’ structured regulatory environment, and the quality of our institutions have been recognised in global competitiveness surveys.

There are excellent transport and telecommunications infrastructure services available, good road infrastructure, as well as cheap electricity and affordable labour. On the financial front, we have a sound banking and financial system, a sophisticated financial market and we are home to Africa’s largest stock exchange. Joburg City itself has a good credit rating and financial governance. We strive to create an enabling environment and incentives for investors on national, regional and city levels. Johannesburg is also a freight and logistics hub: we are Africa’s largest inland port, SA’s largest container depot and Africa’s largest

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freight and passenger airport hub. We are a spring board to Africa’s markets. Johannesburg has been rated as the most affordable city in the world for foreigners in the Worldwide Cost of Living survey, regarded as the world’s most comprehensive study of this type. Out of 214 cities on five continents, Johannesburg was found to be almost three times cheaper than the most expensive city, Tokyo. It is a vibrant city that is a shopping Mecca for sub-Saharan Africa, with strong cross-border trade.

Which other African cities stand-out in terms of driving investment on the continent? Recent studies undertaken by Mastercard on African cities identified Accra, Lusaka and Luanda as having the greatest potential for growth in the next five years. Cairo has been surpassed by Lagos as an investment destination.

What types of opportunities are available to investors in Johannesburg?

There are a great variety of opportunities currently open to investment in the city, including green component manufacturing,

financial services, light industrial manufacturing, agro-processing, the tourism industry (business, leisure, medical and sports) and even film production.

How does CoJ support potential investors as they investigate doing business in the area?

We offer a comprehensive service to potential investors to help guide them, including: • Promotion of investment opportunities • Marketing of investment projects • Information on the various investment sectors and industries within South Africa • Facilitation of investment missions, including travel itineraries • Introduction to key stakeholders in private and public sectors • Introduction to potential joint venture partners and black economic partnerships • Consultation on the prevailing regulatory environment • Information on incentive packages • Guidance with plant/site locations – Industrial Development Zones • Assistance with work permit applications • Logistical support for relocation • Dedicated aftercare service • Input into policy formulation

In your bid to become a worldclass African city, what are some of the Joburg’s areas targeted for improvement in the near future?

We’re looking at rolling out more socioeconomic infrastructure throughout the city, as well as taking an upbeat approach to infrastructure maintenance. One of the key areas in need of improvement that we are addressing is IT infrastructure, primarily through the provision of high-quality networks and greater liberalisation of telecommunications.

What, in your opinion, are the five must-see Johannesburg attractions when international investors find themselves in our city?

It’s hard to stick to five – there is so much to see and do! From a historical point of view Museum Africa, the Walter Sisulu (or Freedom) Square in Kliptown, Constitution Hill, the Apartheid Museum, and the Hector Pieterson memorial are a must. Then there’s the Market Theatre and Jo’burg Zoo. There are also a number of art galleries and urban markets to explore – and for the best view of the city, visit the Carlton centre observation deck.

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Leadership

lessons from Africa

There is much that the ‘mother continent’ can teach the world about creating change and stimulating progress, writes Keith Coats.

any years ago, I was directly involved in a regional initiative to assist ‘street children’ in South Africa. The effort was aimed at identifying and addressing the root causes of their destitution and ultimately getting these young people off the streets and into communities where they could have a ‘normal’ life. It was an overwhelming challenge and one that was to impact on my life. However, embedded in this experience was a lesson I have never forgotten that showed me what Africa has to teach the world when it comes to leadership. At the early stages of this initiative my (and those with whom I shared the journey) unspoken assumption was that we had everything to give – and nothing to receive. We were the ones who had the resources, the expertise, the strategy, the experience – we had what was needed to deal with the problem and we knew what to do. However, it wasn’t too far into this journey when this assumption was turned on its head. As we engaged with these young people, we were the ones who had it all to learn. We learnt about commitment, loyalty, community and resilience. We learnt unexpected lessons from unusual sources in unanticipated ways. It changed my perspective forever. When it comes to global leadership, Africa has indeed got much to teach the world. I have encountered on numerous occasions a barely disguised attitude of ‘What can we learn from you as an African?’ It is always unspoken but easily detectable. Here then are three things the world has to learn from Africa when it comes to the theory and practice of leadership.

Valuing relationships more than transactions

Kevin Kelly, executive editor of Wired magazine, and member of the Global Business Network, writes in ‘Rethinking the Future’: “The network economy is reshaping and revolutionising every sector of business”. In this network economy, or what we refer to www.nepadbusinessfoundation.org

as the, ‘Connection Economy’, relationship forms the core organising principle. It represents a fundamental shift in the way we think about the world and in how we understand leadership. In the new economy, relationships will ultimately be more important than transactions. While efficient, cost effective transactions remain important business practices, more will be required in tomorrow’s world. For leaders to grasp this and begin translating it into tangible organisational or corporate practice is in essence to plot true north in navigating the future. Smart leaders will be those who are able to create and build process and relationship into the very DNA of their company. They will change what they pay attention to in the organisation. They will focus on things more fundamental to strong relationships and will be attentive to the workplace’s capacity for healthy relationships in addition to its organisational form in terms of tasks, functions, span of control, and hierarchies. Smart leaders will need to become savvy about how to foster

‘In the new economy, relationships will ultimately be more important than transactions.’ relationships and participate in networks as a means of nurturing growth and development. In Africa, the concept of ‘ubuntu’ (an ancient African word referring to the significance of the individual being located in the collective whole) underpins all relationships. This deep-rooted ubuntu worldview provides an ideal platform from which to understand and operate in the connection economy.

Storytelling

Stories matter. So do stories about stories. Increasingly smart leaders will be seen as the

‘storytellers’ within the organisations they lead. Stories inform life. They hold us together and keep us apart. We inhabit the great stories of our culture. We live through stories. We are lived by the stories of our race and place. Look for the stories. Stories provide content; they give context; they bring about coherency; they foster and nurture connection and can be used as a catalyst for change. The traditional lists of words describing the attributes and skills that define a leader have never included ‘storyteller’ among them. That term has found a more likely home within the realm of attributes associated with a mother, teacher, producer and author, but not that of leader. I think that is about to change. In a connection economy, the smart leaders will be those who understand the power of the corporate or collective story. They will look for the synergies between the individual stories of ‘their people’ and that of the collective whole. They will understand that the two are inextricably connected and

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they will know how to use that in building the corporate culture. Africa is a continent that knows the value of storytelling. It is a place where stories are embedded in the way things are done – how wisdom is transferred, lessons learnt, warnings given and meaning emphasised. As the role of story is rapidly gaining attention in leadership literature, Africa provides a deeper understanding of the role and place of story in the leadership context.

Embracing diversity

Diversity is the soil from which the twin challenges of (healthy) conflict and innovation will grow and flourish. Research shows that diversity leads to resilience and what leader would not want a resilient company or organisation? Years ago I heard a demographer at the United Nations (UN) in Bangkok say that while South East Asia is the most diverse region in the world (according to the criteria as to how the UN measures diversity), South Africa is the most diverse country. South

‘Diversity is the soil from which the twin challenges of (healthy) conflict and innovation will grow and flourish.’ Africans deal with up to seven times more diversity in their everyday working lives than their peers or counterparts worldwide. In a connected and complex world, leading and managing diversity is becoming a critical core competency for any leader. South Africa has much to offer in the challenge of creating opportunity out of adversity around the challenge that diversity poses. This is not to say that South Africa has all the answers in this regard. It does not. However, for anyone curious enough to observe, ask and learn, the South African story contains rich and inspiring insights as to what

can be achieved and what is required when it comes to embracing and engaging diversity. Learning from Africa will mean embracing the marginal, the fringe. But this is where the future is to be found. Physicist David Bohm once said: “The ability to perceive or think differently is more important than the knowledge gained.” Smart leaders know where to find the fringe and how best to learn from it in order to create change and stimulate progress. For the world at large, Africa is that fringe. It takes bold explorers to find and navigate the fringe but as they do, so it changes the map of the world that we had always assumed was reality. Keith Coats is an international strategic leadership expert based in South Africa and is on the international advisory board of the Global Leaders Conference. keith@tomorrowtoday.co.za www.nepad.org

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must lead itself

For Africa to take off economically, it is vital that its own model of leadership is created, writes Malcolm Pannell.

frica must develop its own leaders to take advantage of current opportunities and ensure sustainable economic development. The continent is clearly on a growth path but needs to avoid the traps of the past. We cannot import leadership and hope to build our economies into the future. To benefit from this latest ‘scramble for Africa’, we must focus on developing our own model of leadership; one that capitalises on the strengths of our people and is sensitive to the specific context of Africa. In the past, African economic development was dominated by an extractive model characterised by expatriate leaders, foreign-owned companies and a limited level of sustainability. Now, with Africa poised on the brink of another growth wave, history should not be allowed to repeat itself. We need to build real leadership within Africa, along the lines of other successful developing nations. One of the problems, however, is that there is no real culture of building leadership in Africa, despite the fact that leaders such as former South African president Nelson Mandela, Archbishop Emeritus Desmond Tutu, Herman Mashaba, Patrice Motsepe and Nigeria’s Aliko Dangote are world renowned. Although we have these examples, there are not enough of them for the challenge that confronts the continent, and seemingly no national, regional or continental plan to fill the void. It is vital that we develop more leaders quickly. We need to transform the huge reserves of potential in the continent via a critical mass of leadership at all levels and within all aspects of society; not only in business. Education, health, civil society and government are also in desperate need of suitable leaders. Similarly, leadership is needed urgently to realise the desired outcomes of the high-level pan-African campaigns, programmes and projects such as NEPAD, for example, and, within South Africa, the National Development Plan (NDP). Only if we develop broad-based leadership capability will we be able to capitalise on the significant opportunities presented by the current rapid growth across the continent, the positive investment flows and our underdeveloped resources. Without a new body of home-grown leadership, Africa may well end up with new mining operations, glittering shopping centres, even world-class infrastructure, but these advances will be isolated and the benefits will fade in the next downturn in demand for commodities. The danger is that we will revert back to an extractive economic model in which Africans on the whole do not enjoy sustainable benefits. What is the way forward for leadership development in Africa? Leadership is, largely, a set of behaviours, which are a function of the individual and of the situation. Clearly we can learn what these are from the rest of the world, but Africa’s situation is very different from that of developed economies. Lessons from other emerging markets are more relevant, but these must still be viewed in an Africa-specific context. Large-scale leadership development, by the way, is a huge issue in all developing economies; Africa is not alone in this. China, for example, with its rapid development, is busy with the challenge of developing leaders on a similar scale to what Africa has to do. In India, our organisation was involved in a national programme that saw government and business come together to undertake extensive research into leadership excellence. The goal was to identify www.nepadbusinessfoundation.org

characteristics that would lead to the development of a leadership model and map the way forward in terms of leadership development for India. The study, which was sponsored by Indian businesses, was backed by India’s Prime Minister and attracted the nation’s attention. It compared typical Indian leaders with those who were considered truly outstanding. The research identified the essential competencies that lead to success in India and produced a model of excellence for future development. This group of abilities is probably somewhat different to those needed in Africa and definitely different from those found in developed nations. So it becomes necessary to identify leadership characteristics that really make a difference within a specific context. The Indian study clearly demonstrated two distinct aspects of leadership: threshold and differentiating abilities. The former, threshold abilities, includes aspects encompassed by knowledge, experience and basic cognitive capabilities. Leaders, in any context, have to possess these capacities. Differentiating abilities were in the realm of emotional and social

‘Large-scale leadership development is a huge issue in all developing economies; Africa is not alone in this.’ intelligence, systems thinking and interface management. These were found to be the abilities that set leaders apart and made them great. They were not the same as differentiating abilities in the developed world. It is this set of differentiating abilities that we need to understand and develop in Africa to grow true leaders. We have a unique opportunity to do this right now as the world looks to Africa as an investment opportunity. Like India, we need a campaign that captures the needs of all sectors of the economy, to change mindsets, generate energy and build impetus for excellence in leadership. Once a model is built, we can then roll out concrete plans and define: • the roles that governments and leadership institutes should play in leader development; • what public and private boards need to do in terms of leader identification; • the role of the media in promoting leadership; and • what schools and the education system as a whole should do to support the next generation. Leadership development will not happen by accident. We need to develop leaders by design, and to do so, we must understand what makes African leaders successful. We cannot impose a model from abroad, or worse, impose leaders from abroad. There’s a real danger today of replacing the colonisation of the past with just another foreign intervention. Let’s rather look to ourselves and develop our own leaders before it’s too late, this takes a common vision and a combined effort from government, the public and the private sectors. Malcolm Pannell is the managing director of Hay Group South Africa, an international management consulting firm focussing on leadership development.

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Archbishop Emeritus Desmond Tutu, Jimmy Carter and Nelson Mandela

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Taking leadership

to the next level

For there to be positive and long-lasting growth in Africa, a long-term, holistic vision is vital.

Image courtesy of Shutterstock

here is a need for a change of mindset in order to overcome Afro-pessimism and develop a new culture of work that is responsive to societal demands and is results- and impactdriven with tangible economic outcomes. The core vision of NEPAD’s capacity development strategic framework (CDSF) is to optimise and harness African resourcefulness for achieving set development objectives. The continued application of short-term, quick-fix and fragmented leadership development intervention is inadequate and incapable of addressing Africa’s real capacity challenges in a sustainable manner. This requires a strategic and longer-term perspective, which will ensure the fulfilment of the vision of the African renewal as espoused in the NEPAD framework. Africa is pursuing this leadership agenda in a challenging, complex, and ever-changing environment. Following the successful implementation of the African Leadership Development Programme from 2007 to 2012, the NEPAD Business Foundation (NBF) has partnered with the Centre for Creative Leadership (CCL) to scale the programme to reach one million leaders www.nepadbusinessfoundation.org

across the continent. The One Million African Leaders Connect (1MALC) initiative delivers leadership training programmes for senior leaders, as well as community and youth leaders throughout Africa. It equips African leaders to understand their context and, within it, their roles as the main movers and shakers of the development and transformation of the continent, and to organise themselves so they can foster their own development while strengthening and supporting their institutions in a responsible and accountable way. The 1MALC key differentiating factors are: • the unique opportunity to interact and network with African leaders across 54 countries; • the link to the NEPAD continental strategic framework for capacity development in Africa (CDSF); • knowledge about the five NEPAD focus areas and their implications for business and governance; • the unique opportunity to connect to leaders across 54 African countries and collectively grapple with current African issues; • focus on leadership at various levels, thereby building a global

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community of emergent African leadership across youth, community and management tiers; and • partnership with CCL provides a unique learning process grounded on decades of research and practice. The vision of the 1MALC is “a core of African leaders motivated by a principle-centred, knowledge-sharing mentality that can drive sustainable economic growth throughout the continent”. This vision is consistent with NEPAD’s policy objectives, which encompass issues related to the sense of ownership, the notion and style of leadership, mindset and attitudinal aspects, as well as internal and external dynamics and context. The 1MALC covers Africa from a continental, regional, and country-specific perspective and addresses development in NEPAD focus areas. These are: agriculture and food security; climate change and natural resources management; human development and capacity building; regional integration and infrastructure; and economic and corporate governance. The mission of the 1MALC initiative is to: • build a continent of leaders driven and informed by a principlecentred, sustainable knowledge-sharing mindset; • shift and develop the management and leadership mindset and behaviour of African leaders, across all sectors; • foster a new generation of visionary African managers and leaders with integrity and socio-cultural understanding who can drive economic growth across the continent; • elevate the knowledge base of managers and leaders in both the public and private sectors with respect to opportunities throughout Africa; and • provide detailed case-oriented business intelligence on conditions aligned to the NEPAD focus areas.

The programme is structured around four themes (leading self, leading others, business acumen and environment) in four contextual dynamics (society, organisation, groups and individual). This highly experiential programme, based on principles of holistic inside-out leadership, is delivered in four modules supported by assessments, intercessional assignments, team coaching, business-driven action learning projects and mentoring. The programme is designed for and aimed at senior managers with experience in the workplace who have demonstrated leadership and managerial ability. These individuals are involved in influencing and leading groups of people within their organisations and/or society. The applicant profile for 1MALC is someone with at least seven years’ work experience, five years’ management experience, a tertiary qualification and is currently in or has recently been in a position for expansive work on the continent. This includes expatriates leading in an African country. The fee of R45 000 includes tuition, course material, functions and excursions, lunches and teas on the programme. It excludes travel to and from the venue and accommodation while on the programme. The cost also excludes the study tour. Please note that 1MALC does not charge VAT on tuition fees. No registration will be confirmed without payment.

DATES

The course takes place annually and consists of 16 days of classroom facilitation delivered over four modules, and a study tour.

For further information on this programme and for an application form please contact Agnes Sibanda on +27 87 310 1882 or admissions@1malc.org

Taking Africa to the Group of Zero The 1MALC programme begins in June 2013, embarking on a new journey towards the G-0 for attending candidates. However, there is increasing energy around the idea of a Group of Zero (G-0) world, where the playing field is flat and the opportunity for dominance is not pre-determined. This idea was put forward by Dr Ibrahim Assane Mayaki, CEO of the NEPAD Agency, at the launch of the One Million African Leaders Connect (1MALC) initiative on 13 February 2013. The G-0 concept creates a scenario in which a country as small as Lesotho can negotiate and compete with a behemoth like China. Dr Reuel Khoza, Nedbank Group chairman, responded to Dr Mayaki at the 1MALC launch, likening the prospect of a G-0 to a “dance of mice and elephants”, where leaders from economically small states can band together to form a collective with the influence and moral responsibility to effect change at a massive scale. Lynette Chen, CEO of the NEPAD Business Foundation (NBF), said: “A new calibre of African leaders in the public and private sectors, communities and among youth is required of this continent in order to move forward, toward the G-0 ideal. Transformed leaders have to create a refreshed status quo, where African pioneers charter a new continent that is rid of all forms of poverty – in particular, that of the mind. Shared values, self-reflection, an African identity, ethics, spiritual and emotional quotients, and consciousness of environment have to be at the core of this generation of leaders.” Simon Rwengoyoza, Centre for Creative Leadership (CCL) Sub-Saharan Africa’s regional director, said: “Today, leaders are faced with decisions within an environment that is more volatile, uncertain, complex and ambiguous than ever before.” The idea of G-0 requires a paradigm shift that necessitates African leaders to be decisive, responsible, accountable and self-authored. “Self-authored leaders have the capacity to generate original ideas and concepts which respond to national interests without compromising regional ones,” said Dr Reuel Khoza.

Speaking at the 1MALC launch, Rwengoyoza said: “Connectedness among these leaders will create a much stronger base of individuals who share information, understand regional dynamics and act ethically. By understanding their society, organisation, group and individual, a transformed leader can more effectively deliver change within and outside of their immediate spheres.” The 1MALC programme is a transformative leadership programme developed by the NBF and the CCL. 1MALC seeks to transform one million senior, youth and community leaders in Africa and equip them with introspective tools, people skills and business acumen to be most effective in their environments. Equally important, the programme seeks to build a critical mass of transformed leaders connected by a shared vision, grounded on shared values, consciousness of environment and an acute sense of identity as an African, key concepts toward achieving a G-Zero. “The new African leader has to be inter-dependent of others and leverage the knowledge and experience of peers. One of the key pillars of the 1MALC initiative, I am an African, serves as the context and common ideology of what will create emerging shared experiences of this new breed of pioneers,” Rwengoyoza added. The unique partnership between the NBF and CCL combines a worldclass organisation that has conducted and applied research-driven practical transformative leadership learnings for decades across six continents with an organisation with a mission to effect social and economic development in Africa through the private sector. The NBF integrates the five NEPAD focus areas into CCL’s customised leadership journey to ensure that African leaders are not only transformed from the inside out, but they are also keenly aware of the regional political, economic and social environment in which they operate. To register visit www.nepadbusinessfoundation.org

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ADVERTORIAL

The lion’s

Having just been awarded one of the largest internal audit contracts in the world, SekelaXabiso is set to become an African powerhouse in accounting.

n September 2012, two professional services organisations merged – Sekela Consulting and Xabiso Chartered Accountants – SekelaXabiso is one of the country’s largest black owned auditing firms in SA. In late March of this year, this new partnership saw SekelaXabiso land the lion’s share of a R1.3-billion contract for internal auditing services by state-owned Transnet. The five-year contract, which is the largest ever awarded by the transport and logistics giant, is seen as a nod of approval and encouragement from the government. The internal auditing contract is also one of the largest of its kind in the world, according to South African Deputy Public Enterprises Minister, Bulelani Magwanishe, who made the announcement. “Last year’s merger was a response to the market need for consolidation and capacity,” says CEO Lindani Dhlamini. “Large corporations and public entities want the assurances that only bigger firms can provide. So our objective in deciding to merge was to enable us to focus strongly on internal audit in particular, and to have a meaningful impact in that area.” Dhlamini believes the new contract demonstrates the trust that Transnet has in the recently merged entity. Both Chair and CEO, formerly of Sekela and Xabiso respectively, take great pride in having established fully BEE-compliant and gender empowered companies, which have now joined together as an even greater expression of the principles defined in government’s BB-BEE policies. “South Africa is widely regarded as having some of the best corporate governance guidelines in the world,” says Dhlamini, “but, like the provisions of the constitution, these need to be living principles in order to be meaningful. One of the best ways in which to ensure this happen is through the application of impeccable and transparent internal audit procedures.” While the vital role of internal audits is often not acknowledged, their value is becoming more widely understood, both in www.nepadbusinessfoundation.org

government and in the country as a whole. Dedicated to capacity building from a grassroots level, SekelaXabiso has a track record of appointing graduates from previously disadvantaged backgrounds, and these staff members make up approximately 20% of the 300-strong employee base, says the firm’s chief executive officer Lindani Dhlamini. The firm also has an impressive client list in the public sector, including Eskom, the Passenger Rail Agency of South Africa (PRASA), the Department of Public Works, Correctional Services, MIBFA, and Royal Bafokeng and the Department of Arts and Culture.

Dedicated to capacity building from a grassroots level, SekelaXabiso has a track record of appointing graduates from previously disadvantaged backgrounds, and these staff members make up approximately 20% of the 300-strong employee base, says the firm’s chief executive officer Lindani Dhlamini. SekelaXabiso’s lead director on the Transnet account, Lucky Mabokela, tells us more about what signing this prestigious contract means both for this young and ambitious firm, as well as for the audit and accounting landscape in South Africa, and on investment in and the further development of business in the continent of Africa.

What does signing the Transnet contract mean for SekelaXabiso?

It dispels the myth that a black accounting firm does not have the capabilities to play at this level. That the

South African government has chosen to put its faith in SekelaXabiso, through the awarding of this contract, shows its commitment to supporting organisations such as ours. From our side, we now need to rise to meet this challenge, and show that we can step up to the plate and deliver on our promises.

What does it mean, for the Big Four auditing firms, that a parastatal such as Transnet has chosen to hand the biggest Internal Audit book in the continent to your firm?

For starters, it means that we are now being taken more seriously. It also means that the public sector space is no longer being dominated by the Big Four, and that no public projects can be considered too large to award to an emerging firm of black talent such as SekelaXabiso.

Having landed such a large public sector account what is SekelaXabiso’s growth strategy for the new future in terms of capacity building?

Something that is in our favour is that we have worked on this account in the past, which has already allowed us to build capacity in certain skills areas. However now we are in a position where we can go to markets and actively recruit more high level technical skills. The good news is that the expertise that we gain working on such a large public sector account will, in the long run, make SekelaXabiso the go-to specialists in this area.

Does SekelaXabiso have plans for expanding the footprint of your firm further into Africa?

This is definitely an issue that we are discussing at the moment. It would be naïve of us not to consider making the move, and of course some of the bigger firms in the field are already making strides into establishing offices in neighbouring countries. Having landed this large public sector contract, and becoming more established among the players in our industry, growing into Africa in the near future is very much on the table.

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ADVERTORIAL

Information at

your fingertips

Sage VIP is taking African business into the future, with modern payroll and HR solutions.

“P

roviding a superior payroll and HR solution is what we do at Sage VIP,” says Gerhard Hartman, the head of the International Division. He talks about the complexity of legislation, taxes and people across multiple African companies, adopting new technologies and a bright future for economic growth across the continent.

How do your products contribute to development of business in Africa?

We assist clients to better manage their employees with through our software and services. Most businesses the various African countries that we are operating in have traditionally administered their payroll and HR manually. Over the past few years we’ve seen a massive switch towards acquiring dedicated payroll and HR software that can add value to businesses. Our software enables companies to instantly view their monthly salaries expense is and, through intelligent reporting, provides information that adds true value to the business. For example, executives will ask how much the current monthly salary expense is compared to the previous month or what happens with the salary cost if the salary bill is increased by 5% throughout the company? By having the right information available at your fingertips is the key to managing your payroll effectively. HR software allows companies to now manage the employee life cycle from recruitment and appointment, through to performance management, job profiling and skills development. This adds massive value to a business from a Human Resource management perspective.

Sage VIP Payroll and HR in Africa has been making massive strides into African territories. What do you attribute your success to?

Our success can also be attributed to the launch of our partner network throughout Africa. Having dedicated, local partners in every country who knows the software inside www.nepadbusinessfoundation.org

out and who can provide local support to the customers is key. Sage VIP has a dedicated call centre for our partners and clients in Africa to assist them to solve any query. Our software should be statutory compliant every country and our payroll system should integrate with any Time and Attendance system and general ledger platform. We also provide integration with local banks for transmitting salaries electronically. Sage VIP is the only company that is statutory compliant in 15 African countries, including Namibia, Botswana, Mozambique, Angola, Zimbabwe, Malawi, Zambia, Kenya, Uganda, Tanzania, Rwanda, Ghana, DRC, Nigeria and Mauritius.

Our success can also be attributed to the launch of our partner network throughout Africa. Having dedicated, local partners in every country who knows the software inside out and who can provide local support to the customers is key. What are some of the challenges that organisations face expanding their businesses across the continent? Challenges vary from country to country, but if you venture into the rest of Africa you need to invest for the long term. You need to create infrastructure. Make sure that you do your homework properly before deciding to open offices in a specific country. Legislation in some of the countries is more complex compared to South Africa. You should also

never underestimate the local competition in the country.

What about adoption of new technologies in Africa – for instance, cloud computing? It is taking off?

Definitely! If you follow the expansion of MTN throughout Africa you will quickly see where the latest telecommunication infrastructure is being deployed. To successfully deploy a cloud solution you need good communication infrastructure. There is a massive move towards cloud computing in Nigeria and Kenya. Cloud computing may be a new concept to the average African user but when you do a cost comparison it is a cost effective option for small businesses.

Tell us more about your Africa Tax Module.

The Africa tax module was developed to accommodate all the statutory legislation per country. This includes the tax table per country and the statutory reports that need to be submitted on a month or annual basis. The tax engine is updated when there are statutory changes in a country.

How do you see doing business in Africa improving in the next decade?

Looking at how business in Africa improved over the past three years, it is going to be an exciting decade ahead. Other African countries want to do business with SA and businesses want to invest in infrastructure and software to streamline business processes to give them a competitive edge. Political stability is the key. So far the countries where we do business in with our local partners have paid off massively for us. I expect a massive growth in the payroll and HR software market in Nigeria and Ghana, followed by continued growth in Kenya and Tanzania. Zambia and Zimbabwe in the south part of the continent will lead the way in the next three years.

NEPAD - 2013 Official year book

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The secret of the cement

king’s success

Africa’s richest man believes manufacturing, not just trade, will create wealth, writes Dianna Games.

Image courtesy of Shutterstock

frica’s richest man works long hours to keep building his amazing business empire. But he’s happy to take time out from a punishing schedule to lead other budding entrepreneurs along his golden path. Alhaji Aliko Dangote, who has become a symbol of success for all Africans, built his empire from small beginnings and has done it the old-fashioned way – by applying solid business principles with flair, determination and simply working hard. By 2013, the multi-faceted Dangote Group had operations in 14 countries and was one of the biggest investors in subSaharan Africa. The Nigerian entrepreneur supreme has become the richest man in Africa, according to Forbes magazine, with his personal wealth estimated at about $12 billion in 2012 – nearly double that of the second richest, South Africa’s Nicky Oppenheimer. He is also in Forbes’s top 100 richest people in the world.

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‘Manufacturing not only improves your business status, it also helps you give back to your community and country, with respect to job creation and economic development.’ A hallmark of Dangote’s success has been his refusal to be daunted by the challenges of doing business in Africa. Dangote built his empire in one of the most challenging environments in the world – Nigeria. The lessons learnt in conquering this market have enabled him to succeed in other markets in Africa, including the

Democratic Republic of the Congo, Ethiopia, Senegal and Cameroon. Instead of complaining about the continent’s well-known infrastructure deficits, he has, on more than one occasion, simply built his own roads and bridges, generated his own power and provided his own water supply in order to ensure that a project goes ahead. This experience is likely to be useful in the company’s first forays outside Africa to other complex markets such as Iraq and Myanmar. The Dangote Group is the only large African multinational to have ventured into South Africa, a market most believe African companies view as too challenging because of high levels of wellestablished local competition. Dangote’s business empire embraces a wide array of sectors from pasta through to fertiliser, oil and even electricity. It has ventured recently into the power industry, churning out up to two gigawatts for the national grid. And more power stations are

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Alhaji Aliko Dangote

an integral part of his $7 billion investment programme for the next four years. Such determination and ingenuity are vital to the continent’s development. The success of this soft-spoken and private businessman is a source of pride for Nigerians who believe he has shown the world what Nigerians are capable of. Dangote himself believes that Africans in general, and Nigerians in particular, are naturally blessed with business acumen and, sooner rather than later, they will fuel an economic boom on the continent. Despite a punishing schedule, he makes time to provide advice and pass on his knowledge and experience to other African entrepreneurs, speaking regularly at the Lagos Business School, for example, and funding many social initiatives. In an interview in the December 2012-January 2013 ‘Person of the Year’ issue of Forbes Africa, Dangote said: “I believe there are lots of Dangotes operating under the radar in Nigeria… Many Nigerians are beginning to put a bold foot forward and are contributing to the growth and prosperity of this country and the continent at large.” Anyone hearing of Aliko Dangote for the first time might be forgiven for guessing that his wealth is largely to do with the vast oil riches of his homeland Nigeria. They would be wrong. He built the early foundations of his business by trading in food commodities and later constructed the edifice of the Dangote Group on the company’s great success in manufacturing and selling cement. Dangote was born into a fairly prosperous Muslim family in Kano, northern Nigeria, in April 1957. His father Mohammed

was a commodity trader and his maternal grandfather, Alhaji Sanusi Dantata, was a noted Hausa businessman in the colonial era. Young Aliko’s business bent was revealed early when, at the age of eight, he started making sweets at home, packaging them and organising family employees to sell them on the streets. After school, he studied for a business degree at Cairo’s Al-Azhar University. Back in Kano he worked in the family commodity trading business. But by 1977, the young man was itching to branch out on his own, which he did with the help of a 500 000 naira ($3 300) loan, repayable over three years. He paid it off in just three months with the proceeds of trade in rice, millet, sugar, salt, vegetable oil and pasta.

‘Competition is healthy for business. It keeps you, the entrepreneur, on your toes.’ Within a year he moved to the commercial hub of Lagos in order to grow his enterprise. And grow it did – into a multi-trillion naira conglomerate with interests in cement, food, real estate, banking, transport, minerals, oil and gas – steadily putting a footprint from West Africa to the southern tip of the continent. The Dangote Group dominates the Nigerian Stock Exchange with four listed entities, Dangote Cement being the largest with 30 percent of the market capitalisation and a value of about $15 billion in 2012. What is the secret of his success? “Manufacture, don’t just trade,” he says.

“There is money in manufacturing even though it is capital intensive. To achieve a big breakthrough, I had to start manufacturing the product I was trading in – commodities. Manufacturing not only improves your business status, it also helps you give back to your community and country, with respect to job creation and economic development.” Dangote Cement made a quantum leap in growth when it started making its own product, rather than importing it to sell. The company’s Obajana Cement Plant is the largest on the continent. But never one to stand still, in 2012, Dangote opened the new $1 billion Ibese plant near Lagos, thereby boosting Nigeria’s cement capacity by 10 million tons a year, creating 7 000 jobs and turning the country from a net cement importer into an exporter. Another of Dangote’s maxims is to sell quality products at an affordable price. But a rider to this is that one should avoid pricing the competition out of existence. “Don’t kill the competition,” he says. “Competition is healthy for business. It keeps you, the entrepreneur, on your toes.” Much of Dangote’s success can be attributed to his firm belief in the economic potential of his country – even in times when political upheaval cast a dark shadow across Nigeria. He said recently that all the investments he needs to help him realise group targets “are nowhere but in Africa”. But perhaps his most telling message relates to his single-mindedness of purpose: “I enjoy myself a lot but I derive more joy in working. I believe in hard work and this is one of my business secrets. I don’t rest until I achieve something.” www.nepad.org

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Time to bring Gucci and Dolce

into the marketplace Luxury brands have historically avoided investing in Africa, but that looks set to change, writes Helen Grange.

Image courtesy of Google images and Distributed on behalf of Richie Rich by: Tracy Hyams Tuck

ook for dedicated stores selling European luxury brands like Louis Vuitton, Gucci or Tag Heuer, and you’ll notice that they’re everywhere. Everywhere, that is, except the vast middle section of Africa. This reality is particularly jarring when you search for luxury brands owned by the Louis Vuitton Moët Hennessy (LVMH) group, a world leader in luxury goods with over 60 brands in its stable, and it lists Morocco as the only African location in which any of its brands are represented. This is paradoxical, given that Africans love luxury brands. The counterfeit Louis Vuitton bags that proliferate throughout the continent bear testimony to this, imitation being the best form of flattery. Consider too that Africa has more millionaires than Russia,

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with the continent’s 40 richest moguls worth $72.9 billion (Forbes). And that its economy has been growing faster than anywhere else, at five percent a year over the past two years. So why the dearth of top-end products? And what are the chances they’ll ever mushroom in cities like Lagos, Nairobi, Accra, Brazzaville, Gaborone, Maputo, Luanda and Lilongwe? “In general, the luxury industry is quite ignorant about the real dynamics of doing business in Africa,” comments Uche Okonkwo, executive director of the Luxe Corp consultancy, which works with brands like Chanel and Dior, part of the LVMH group. That may be so, but there is a definite trend to redress this, as international companies begin to wake up and recognise the potential

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â&#x20AC;&#x2DC;South Africa promises a lot on the local luxury landscape. The leather goods market in particular is flourishing.â&#x20AC;&#x2122;

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in a continent with a rapidly growing middle class. “The competition for consumer spend is keen and growing, and international brands want a piece of the action,” notes Rick de Kock, director of Africa operations for advertising company TBWA/Africa in the recently published book by Dianna Games, ‘Business in Africa’. Games, a leading commentator on trends and developments in Africa, points however to the fact that luxury brands in particular need safe, suitable places to trade, and the lack of Western style shopping malls presents a considerable obstacle to growth in this sector in Africa. “For example, in Lagos, a city of anything between nine and 15 million people, there are only three retail malls. In Accra, up to three million people are served by one Western style mall,” she says. But if that’s how the ball gets rolling, it is at least rolling. “There are high expectations for retail property development in Africa. In Ghana, about four malls are in the pipeline, and six in Nigeria. Several are planned in countries such as Kenya, Mozambique and others, some as standalone malls and others as part of mixeduse developments,” says Games.

‘Africa has more millionaires than Russia, with the continent’s 40 richest moguls worth $72.9 billion.’ Malls, agrees Claudia D’Arpizio, Milanbased partner of Bain & Company’s luxury goods, will certainly spur the entry of multiple brands into Africa. “There is big potential in Africa. For sure, this (malls) will be a big engine for growth for luxury goods in the future,” she says. One of the pioneers taking luxury brands into these spaces is the Swiss-owned Richemont group, chaired by South African Johann Rupert. Under the Richemont umbrella is German fashion house Hugo Boss and jewellers Cartier, both already active on the continent. Cartier is now in Luanda, Accra, Casablanca and Ouagadougou. Another believer is Italian made-tomeasure menswear brand Ermenegildo Zegna, which is planning to open stores in Lagos and Luanda, adding to those in Egypt and Morocco. It is also reportedly looking at Kenya and other African markets. Gucci, too, is looking at entering Nigeria and Angola. And late last year, luxury menswear Bond & Carnaby opened a flagship showroom in Nairobi, Kenya. Bond & Carnaby CEO David Melta said at the time: “Africa has long been viewed as a bystander in the world of luxury goods, but I feel with some real infrastructure development and opportunity to create luxury environments for brands to

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come in, this market has enormous potential to become a key luxury destination”. Industry insiders predict that once big name luxury brands make a foray into the continent, others will certainly follow, although those at the very high end are still reluctant. Guillaume de Seynes, MD of Hermes International, said at a conference in Rome last November highlighting Africa’s potential as a luxury goods market: “We have not yet found any opportunities to make business in Africa or to open a store… These markets are maybe not yet mature enough to welcome a Hermes store.” That said, the top and bottom ends of the continent – Morocco, Egypt and South Africa – tend to be excused from these criteria, South Africa in particular being home to many luxury brands. South Africa’s inclusion in 2010 into the BRIC (Brazil, Russia, India and China) has also boosted its allure as an international luxury brand destination, and a gateway for luxury goods into the rest of Africa. Ironically, as Melta observed, Africa plays a substantial role as a “muse” to brand designers and a source of raw materials. In turning these assets into locally, as opposed

to internationally produced luxury brands, South Africa again takes the lead. Luxury leather goods like Cape Cobra and Okapi, a new brand by Rupert’s daughter Hanneli Rupert, are good examples. “South Africa promises a lot on the local luxury landscape. The leather goods market in particular is flourishing,” notes Silvana Bottega, CEO of the Southern African Luxury Association. African Fashion International executive chairperson, Dr Precious Moloi-Motsepe, has wasted no time in leveraging this reality, and has been consciously flaunting South African design talent to the world, and buyers on the continent. “Africa is an emerging luxury goods market, powered by a steady growth of its middle class and the harnessing of talent,” she observes. Hanneli Rupert, who prides herself on sourcing materials only in Africa and fuelling job creation in the luxury industry on the continent, is planning an international launch of the brand this year. It remains to be seen how many African locations will be included. After all, there is poetic justice in an African country taking a lead in the future battle of luxury brands in Africa.

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Africa’s millionaires club An economic boom in Nigeria has led to the rise of the super-wealthy, a small minority of the population with extravagant tastes, writes Brendah Nyakudya.

Image courtesy of Shutterstock

n incredible boom in the Nigerian economy in recent years saw its gross domestic product (GDP) reaching a high of $243 billion in 2011 and its economy growing by 6.48 percent in the third quarter of 2012. On the continent this growth put it in second place to South Africa, which has a GDP of $422 billion. While oil has always been the country’s main source of revenue, other industries such as construction, banking and telecommunications have emerged and have played a significant part in boosting the economy since 1999. While a healthy GDP sadly does not equate to wealth distribution, as is seen by the dismal infrastructure and poverty levels of the masses in Nigeria, it has, however, brought about a class of extremely wealthy businessmen with expensive tastes and lavish lifestyles. Alhaji Aliko Dangote has the enviable position of being the richest person in Nigeria and Africa. At the age of 54, he has amassed a net worth of $12 billion. His fortune, which has only increased year-on-year, comes from dealing in commodities such as sugar, flour, cement, oil, gas and real estate. His listed company, Dangote Cement, operates in more than 13 countries across Africa and constitutes a quarter of the Nigerian Stock Exchange’s total market cap. (See profile in this edition) Joining Dangote in the class of the affluent is Mike Adenuga – Nigeria’s second richest man and one of the top five richest men in Africa. Adenuga, who has an impressive solid net worth of $4.3 billion, started from humble beginnings selling lace and distributing soft drinks. Today he is the owner and chairman of telecommunications company Globacom, which is Nigeria’s second largest telecom company. Boasting more www.nepadbusinessfoundation.org

than 30 million customers in Nigeria alone, Globacom also has operations in the Republic of Benin and has recently acquired operating licences in Ghana and the Ivory Coast. Adenuga is also chairman of Conoil and has a stake in the Equatorial Trust Bank. In total, Nigerians make up 11 of the 40 richest Africans. Included on this list are banking giant Jim Ovia; oil tycoons Folorunsho Alakija and Theophilus Danjuma; and Oba Otudeko, a manufacturing giant. These men and women are not just rich by African standards: they share the same stage as international millionaires and billionaires.

Palatial properties

If financial guru Suze Orman was correct when she said: “Owning a home is a keystone of wealth – both financial affluence and emotional security”, then the Nigerians must be very emotionally secure considering their spending patterns when purchasing property. On Victoria Island, which has become the home of Nigerian commerce due to a migration of companies from overcrowded and dilapidated Lagos, you will find some of the country’s most exclusive places to stay. Should one be looking to rent a townhouse apartment on Victoria Island, it will cost about $6 300 per month.

‘Nigerians make up 11 of the 40 richest Africans.’ Due to a plethora of amenities, including restaurants, malls, nightclubs, movie theatres, schools and businesses located on the island, one has to fork out more than the average price for the privilege of staying there. An upmarket luxury house in Nigeria will cost as much as $7.6 million.

For that price one can purchase a five-storey Manhattan townhouse! On Banana Island, Mike Adenuga’s manmade island and new playground for the rich and famous, the price of property is tagged at $2 million. Those looking to rent will be slapped with a bill of $15 000 a month, prices not dissimilar to real estate rentals in New York, as an executive four-bedroomed penthouse located on the Upper East Side can be leased out for $17 995 per month. Adenuga’s own estate, valued at nearly $6.4 million and housing two watchtowers, a yacht deck and a helipad, would fit in right next door to the New York elite. There is no scrimping when it comes to the value that is given with these upmarket prices. While their American counterparts find value in location, window views and fittings such as Jerusalem marble floors, Herringbone and Subzero wine coolers, in Nigeria security, water and electricity are of paramount importance as the infrastructure

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‘Nigerians have collectively spent more than $6.5 billion in the purchase of private jets.’ is severely lacking. A top-selling property will include bulletproof doors, a server, water closets, jacuzzi, indoor cameras, tennis and squash courts, video door telephone system, a jetty, sewage treatment plant, two generators and a water treatment plant. All this paints a picture of a country that is on an economic high, but in reality the rich are but a small minority in Nigeria. Luxurious lifestyles With their accumulation of wealth, the small crop of wealthy Nigerians has adopted a certain style of opulent living and extravagant spending with wild abandon. According to McKinsey & Co, the consumer spending of

Nigeria’s capital city Lagos alone will exceed $25 billion by the year 2020. No expense is spared as they build and acquire the gadgets and toys befitting a millionaire’s lifestyle. Other than erecting elaborate houses, private Bombardier jets and elegant yachts are just some of the luxuries money is spent on. A report by Desert Herald claims that Nigerians have collectively spent more than $6.5 billion on the purchase of private jets – this has pushed the country to the top of the list as the leading client base in Africa for aircraft manufacturers. First-class flights are no longer filled with businessmen as, increasingly, they are opting to fly around the world in the personalised luxury of their own jets. Their retail therapy takes them far and wide, including Paris, New York, Milan and London. So regular are they as clients that Debenhams in London’s Oxford Street now has signs in Hausa, a Nigerian dialect. Locally well-loved international brands

have set up shop on Nigerian soil to get a piece of the pie in customer sales. Porsche, Louis Vuitton and Hennessey are only a fraction of the luxury brands whose products fly off the shelves as Nigerians live the lifestyle of the rich and famous. French magazine Jeune Afrique recorded that a total of 593 000 bottles of champagne were consumed in Nigeria alone in 2010, placing them as top consumers in Africa. There is no doubt that there is wealth in Nigeria as a result of natural resources and entrepreneurial opportunities. A certain number have clearly tapped into the offering. But the top tier of earners does not represent a country’s wealth; it’s based on how far down that wealth trickles into serving the people on the ground. Currently this isn’t happening in Nigeria but with the recent gesture of South African billionaire Patrice Motsepe, who gave half his fortune to charity, maybe a different story will be told in the years to come. www.nepad.org

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The middle class rise

in the ‘lion economies’

Africa has been showing unprecedented economic growth recently, leading to the emergence of wealthier citizens, writes Brendah Nyakudya.

nown by the world as the ‘dark continent’, Africa has finally, and against all odds, begun to show steady signs of growth. This has not only caused foreign investors to rethink their perceptions about Africa, but has brought about the emergence of a much-celebrated ‘middle class citizen’.

A ravaged continent

For as long as recorded history, the majority of Africans have been dealing with one form of oppression or another. Once colonisation had been thwarted, many of the countries found themselves either at war or struggling to recover from the effects of war. Famine was synonymous with countries like Ethiopia and Somalia, and apartheid held South Africa’s future in the balance. For those who were fortunate enough to have neither war nor famine, most had to contend with bad governance at the hands of power-hungry dictators looking to plunder the wealth of their own countries for their own gain. Not many African countries were spared these concerns and as a result growth on the continent was sluggish and progress non-existent. African governments made it difficult for foreign investment companies to register and operate in their countries, and those that did get the green light had to deal with a lack of infrastructure that made business near impossible to execute. Greasing of palms was the order of the day and soon the mineral-rich landscape lost its appeal to investors and became totally reliant on donor aid. It was a sad and pathetic sight with no hope for a better tomorrow. Over the years, however, analysts have noted minor but not inconsequential change that has caused a rethink of Africa. While the Western economies were being battered by the recession, Africa was showing signs of growth and continuing to grow faster than almost any other region in the world. According to the International Monetary Fund, economies in subSaharan Africa alone will increase by 5.75 percent in the following year. Further up north, countries like Nigeria increased their GDP from £29 billion in 2000 to an impressive £158 billion in 2011. Nicknamed the ‘Lion Economies’, these African countries have experienced faster growth than their Asian counterparts, the ‘Tiger Economies’ of South Korea, Taiwan and East Asia.

Image courtesy of Shutterstock

Reasons for growth

Almost unnoticed, a semblance of political stability has slowly crept into some African countries, signalling the end of a turbulent and destructive era. While problems still plague other countries, there has been general improvement across certain platforms that have made it easier for foreign investment in the country. Politically, some wars have come to an end and many a dictator has fallen. Democracy, though often stilted and at risk of being tampered with to suit personal needs, is finally finding a place in governance as two out of three countries now hold elections. The new crop of leaders being ushered in is of a calibre that acknowledges the need to encourage investment for the betterment of their countries. Technology has also played a major part in the forward movement of www.nepadbusinessfoundation.org

the continent. Mobile internet services cover one-tenth of the continent’s landmass with a total of 600 million users recorded, according to Groupe Spéciale Mobile Association. Its late entry into the technology world has been a blessing for Africa as it has immediately started reaping the benefit of more advanced systems and infrastructure. This major boost in technology has directly and indirectly improved other industries such as healthcare, farming and communication. Interesting to note is that of the growth recorded, the majority percentage is not based on the vast mineral source that Africa has to offer, which has always been a defining factor. In a report entitled, ‘The Rise and Rise of the African Middle Class’ compiled by Deloitte, “rampant consumerism” makes up two-thirds of Africa’s GDP with services being concentrated in the financial, telecommunications and retail arenas.

‘These educated and ambitious young Africans are moving away from the traditional way of rural living.’ Nigeria’s service and agriculture sectors equally match its oil supply and East Africa, which happens to be the fastest growing region economically, has very few minerals to offer. This not only buffers the continent’s growth from international commodity price fluctuations, but it also confirms the opening up of other opportunities and markets around the continent.

Emergence of middle class

The welcome changes in various countries have not only brought about opportunities and wealth for the countries, they have inadvertently brought about the emergence of what many have termed ‘the African middle class’. The African middle class has been described by the African Development Bank as “anyone who spends between US$2 and $20 a day (purchasing power parity),” a bracket that fits more than 34% of the populace, or approximately 350 million people. Though this 34% is no longer just concerned with where their next meal will come from, it’s not to be compared with the Western definition of middle class, for, unlike their Western counterparts, they are still to enjoy certain middle-class staples. Good health care, credit cards and holidays are still considered luxuries, but this in no way negates their place in a society where 61% falls below the $2 poverty line and 44% below the $1.25 poverty line. Geographically North African countries have a much higher concentration of the middle class among their population with Tunisia, Morocco and Egypt each having the highest at 89.5%, 84.6% and 79.7% respectively. Reasons for the emergence of the middle class differ from country to country. In countries like South Africa, the government-driven Broad Based Black Economic Empowerment (BBBEE) laws have assisted people who were living below the poverty line to secure steady, salaried

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employment. In Liberia and Tanzania, it is the diaspora returning home to rebuild their countries that push the figures up. These educated and ambitious young Africans are moving away from the traditional way of farm and rural living and migrating to the urban areas to establish larger and more permanent homes for their families. With regard to occupations, the move from the farming way of life means they are not likely to be farm labourers or manual workers, but rather small-to-medium enterprise owners or stable salaried workers with a regular weekly or monthly income. For most, the life of a self-starter holds the most allure as they live in a still-developing continent that offers a myriad of opportunities, and governments are in turn making it easier for self-starters to get funding and assistance. Those looking for employment are drawn to technology and the service industries in the private sector, where they are making a marked contribution with renewed confidence. History has shown that it is usually the middle class that accumulates the most capital, be it physical or human. As a result these aspirational individuals with disposable incomes to spend are in the acquisition stage of their lives. They own their homes and are rampant procurers of cars, motorcycles, fridges, TVs and mobile phones. In Ghana alone, possession of cars and motorcycles increased by 81% since 2006! With more people being exposed to TV and mobile phones, they are in turn becoming brand conscious when it comes to fashion and opting to spend that much more on familiar top quality brands. This spend is likely to reach $1.4 billion by the year 2020 according the McKinsey Global Institute. When it comes to human capital, this grouping want more out of their lives and those of their children and realise the value of a good education. To this end they are inclined to invest a large chunk of their salaries towards schooling and a university education for their offspring. This is made financially possible as the middle class are opting to have fewer children than their poorer counterparts. If not satisfied with the government standard of education, statistics collected by the African Development Bank in their report ‘The Middle of the Pyramid: Dynamics of the Middle Class’ show that more and more of the middle class are sending their children to

private schools for their primary and secondary education. Not only are they ambitious, they are also technologically savvy with a presence on social platforms, which leads to them being socially aware of their responsibility and potential for political clout. Due to the vulnerability of many in this bracket, more so those at the lower end of the spectrum who face a serious risk of easily slipping back into poverty at the slightest political unrest or economic instability, the middle class is now armed with a new understanding of their own citizen rights. They demand more from their leaders in terms of service delivery, human rights and the use of public funds. When accountability and transparency are not forthcoming they are more than able to effect change as they are well aware of what is at stake and what they stand to lose should political instability occur. A clear example of this was played out in countries such as Egypt, Tunisia and Libya, during the Arab Spring. The middle class has serious potential to be a ‘catalyst class’.

‘As they invest in themselves and their children, the middle class are bringing up a generation that will be able to provide skilled labour in future.’ Despite its vulnerabilities, the emergence of the middle class has the potential to reduce poverty in the respective countries. With citizens becoming entrepreneurs, they are in turn able to hire others and reduce unemployment one step at a time. Their spending power has attracted many foreign investors who are looking to capitalise on this boom; this investment will bring with it many benefits for a country, including economic growth. As they invest in themselves and their children, the middle class are bringing up a generation that will be able to provide skilled labour in future. Despite the foreboding sentiment of Trinidadian-British writer V.S. Naipaul, who once wrote that “Africa has no future”, all these are major reasons not only to see the future, but to be optimistic about it.

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NEPAD Business Foundation members and partners Founding partners

partners and strategic alliances

platinum members

Corporate Members

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Unlocking African Potential â&#x201E;˘ www.nepadbusinessfoundation.org

Email: info@thenbf.co.za

Tel: +27 87 310 1888

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ADVERTORIAL

Choosing the right local

partner is key

Law firm ENS is uniquely placed to understand the realities of doing business in Africa.

NS has offices in South Africa, Burundi, Rwanda and Uganda. Its vision is to be a pan-African law firm, creating infrastructure in African countries by establishing offices – a strong commitment to sustainable growth on the continent. The firm empowers it local lawyers with access to technology, legal best practice and a platform to best service clients in Africa. By operating as one team ENS offers its lawyers based across Africa the opportunity to collaborate across borders. Here some of the specialists on ENS legal teams offer their thoughts on investing in the continent.

What advice do you give your clients who are expanding into Africa?

Organisations have too-generalised an approach, as if Africa is one country. The reality is that it’s a continent of 54 countries, each with its own mix of political, cultural, religious and language factors. There are many different legal systems in place and investors should be cautious if they think they can go into a country and establish themselves without local legal or tax advice. Choosing the right local partner is the key. Extensive due diligence on the industry, and on individuals’ position and reputation in the local business community through the use of risk consultancy advisers is essential. If one is investing in natural resources or infrastructure projects, it is also important to fully assess the country and political risk and to evaluate the impact of regime change. Furthermore, investors should monitor their investment on an on-going basis – this requires active involvement and presence in-country. Given the size of the continent and the lack of direct flights between countries, this presents its own challenges. Finding good management is often seen as one of the major challenges.

What are the most common risks www.nepadbusinessfoundation.org

that organisations hoping to expand further into African territories experience?

The top three risks are political instability, regulatory issues and economic uncertainty.

Choosing the right local partner is the key. Extensive due diligence on the industry, and on individuals’ position and reputation in the local business community through the use of risk consultancy advisers is essential. A growth typical scenario is that a large South African corporate seeks to expand its business into Africa. A new regulation allows companies listed on the Johannesburg Stock Exchange to incorporate one whollyowned subsidiary company to house all its African and offshore investments. How is this beneficial?

This special type of holding company will be deemed to be a non-resident for South African exchange control purposes and would then not be subject to foreign exchange restrictions. This is to incentivise companies to manage their African and offshore operations from South Africa, instead of from an offshore jurisdiction, thus maximising the benefits to the South African economy. Specific benefits of this include: The ability to freely raise and deploy

capital offshore, provided that these funds are without South African guarantees. Operating as cash management centres with unrestricted cash pooling. Local income generated from the cash management will be freely transferable. Firms may choose their functional currencies and operate foreign currency accounts and a ZAR-denominated account for local expenses.

NEPAD has recently called for joint Africa efforts to curb counterfeits. This is one of ENS’s fields of specialisation…

We’d recommend that a bespoke workshop on the regulation of counterfeits be designed to educate NEPADs employees, the different government authorities and the relevant regional regulatory bodies. Cross-border teams should also be able to assist the appropriate inspecting bodies in legal disputes that may arise.

Corruption is a common issue when transacting across African borders. How could NEPAD tackle this problem? There are many practical steps to take to minimise the risk when investing, particularly in a new country. You need to understand the environment in which you are operating in. NEPAD could help put compliance systems in place for member countries, providing clear rules as to how to deal with corruption when it arises, as well as avenues for confidential reporting of illegal activities.

In your view, which African markets will see the most investment in 2013?

Countries such as Nigeria, Kenya, Ghana and Angola are attracting global investors who are seeking opportunities in sectors such as infrastructure, oil and gas, mining and others.

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