Business Times Magazine Dec. 2016

Entrepreneur Watch - Baba Yabdow The Three Challenges Facing Nana Addo Mugabe’s Grip On Zimbabwe Loosens Over Phoney Money Opinions: Sunil Kaushal, Sean Drake, Sofia Faruqi, Moono Mupotola 2016 / VOL.8 / NO.5

INTERVIEW WITH

KENNETH

KWAMINA

THOMPSON South Africa................... R29.00 (incl. VAT), Uganda ................... Ush6000.00, Botswana ..........................30 Pula, Ghana ...........................Ghc10.00

Nigeria.......... N500.00, Zimbabwe ......................S$3.00 Kenya.................. Ksh220.00 Other Countries ...............US$4.50

WHY AFRICA NEEDS ASIA NIGERIA’S MONEY-CHANGERS SOUTH AFRICA’S NEW ENERGY PLAN

EDITORIAL

An alternative look at democracy Ghana delivered yet again, at a time when democracy in Africa appears to be under threat from totalitarian regimes bent on circumventing the will of the people. The West African nation on December 7 voted to make opposition leader Nana Akufo-Addo the president-elect, defeating President John Mahama by 53.8 percent to 44.4 percent and in doing so cemented the country's reputation as a standard bearer of democracy in a rather fractious region where coups and civil wars are the norm. Since its return to multi-party democracy in 1992, Ghana has successfully held six democratic elections.

The December 7 elections are the third time since 2000 that the government of the day has been voted out of office, reflecting the Ghanaians’ lack of patience with performers that fail to meet expectations.

The fact that in each time, power has transferred peacefully has advanced the indisputable view that Ghana is one of the most mature democratic countries in West Africa. Love him or hate him, outgoing President John Mahama hit the nail with his concession statement: Every election is a hard-fought battle, and this one was no exception. For those of us who choose to be contenders and go into electoral contests, we go about it as a win-lose proposition. We believe that only one person can emerge as the winner. And while it is true that only one person can be elected President, in reality, and certainly in a democracy such as ours, every election is an opportunity for the people of this nation to express their will, to have their say in who will lead them in the shaping of Ghana’s future.

In this way, each victory belongs to the people. And the true winner is always Ghana.Contrast Mahama’s graciousness with that of Gambia’s long time ruler, President Yahya Jammeh who, after initially accepting the results of the December 1 election that the country’s elections commission say was won by opposition candidate Adama Barrow, has chosen to dig in, with a challenge at the country’s Supreme Court. While the electoral challenge in itself may seem a democratic right to the loser, there was nothing democratic about Jammeh’s 22 years of autocratic rule during which he took an axe to the country’s democratic institutions. We hope the courts appreciates the Gambian people’s desire for change and respects their wishes. Africa is full of despots, Jammeh’s defeat brings hope that the other pariahs can be shovelled peacefully out of office.

Alfonce Mbizwo

EDITORIAL TEAM Editor Alfonce Mbizwo alfonce@businesstimesafrica.net West African Editor William Selassy Adjadogo Marketing Executive Dorina Nana Adwoa Danquah Business Development Manager Arnold E. Nanabanyin Arhin t +233 30 2785366/7 F +233 30 2775449 C +233 244561052 arnold.arhin@thebftonline.com Advertising advert@businesstimesafrica.net Sales and Circulation Ebenezer Sasu ebenezer.sasu@businesstimesafrica.net

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2016 / VOL. 8 / NO. 5

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COVER STORY

INTERVIEW WITH KENNETH KWAMINA THOMPSON

IS NIGERIA READY FOR REVIVAL?

48 AKUFO-ADDO'S NEW CHALLENGE 6 Business Times Africa | 2016

UPFRONT 06 An alternative look at democracy 09 Briefing OPINION 14 Making "Made in Africa" Last 16 Land Management is Crisis Management in Africa 18 Why Africa cannot ignore credit ratings 20 Africa has an air pollution problem...

22 Why Africa needs Asia to reach its growth potential 23 Widening Africa’s startup ecosystem FEATURES 24 Ambition and reward – the story of Baba Yabdow 26 Nigeria’s Money-Changers Are Going Underground 32 South Africa has a new energy plan 30 Zimbabwe's money runs out 44 Alphamin’s DRC mining gamble 46 In Egypt, IMF money to flow as austerity bites 48 Political unrest hits Ethiopia FDI 54 Kenya-UK Trade and Investment Forum has upbeat mood 53 Can a cashless society save zimbabwe?

64 How Barack Obama changed America 66 After the revolution, Egyptian cinema plots comeback

ADVERTORIAL

Accra City Hotel: Redefining hospitality service delivery

T

he beautiful thing about life is the inner verve to find satisfaction for our desires. Accra City Hotel continues to epitomise satisfaction for aficionados of pleasure in Ghana’s chief city.

As the reigning Best 4-Star Hotel in Ghana’s capital and the Best Hotel in Customer Service, the hotel is striding in keeping a tab on the changing needs of its cherished guests and the hospitality industry, when it comes to food and beverages offering and delivery. The Hotel has a number of pleasure centres ready to give you an indelible, thrilling experience.

Fihankra is our any time, any day restaurant whose name is derived from the Adinkra symbols assemblage.

It means a safe house or a house in security. Fihankra Restaurant is your safe haven for your much cherished dainty delicacies: local or continental. The meals here are natural, fresh and luscious, just the way food is expected to look, smell and taste. You will not see any 86’d on our menu. Every item on our menu is already available.

Freshness, quality and assortment are three watchwords for our Chef De Cuisine. The menu offers a wide range of meals, including assorted starters, salads and soups as well as a varieties of vegetarian dishes.

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“Our food quality assurance management is topnotch and uncompromising. Our highly skilled brigade of chefs create the highest quality dishes with passion and flair. We put a contemporary twist on our classic meals,” says Chef Lucky, the Chief Culinarian.

Our back-of-the-house space and items including the garde manger, the charcuterie and commissary, are squeaky-clean. The dining area ambience reflects this approach as well. The colour scheme and palettes

8 Business Times Africa 2016

deployed with style creates an alluring contemporary servicescape. The hybrid of the local and exotic upholstery and interior designs styles give the restaurant, on the one side, an organised, modern look and feel, and on the other hand, a sensation of being in a large living area of a home. Suffice to say, Accra City Hotel has an excellent fit-out.

“At Accra City Hotel, we offer beyond food and beverages; we create an exhilarating ambience for a great refreshment experience. We’re the discoverers delight,” Yaw Mamphey, the Sales and Marketing Manager, Accra City Hotel.

The beverage concept of our Lounge Bar is one that appeals to guests of all origins and palates. Our wide ranged signature drinks including our chasers are some of the finest, sparkling and frothiest wines in the world.

We also have an al fresco arena – Pool Terrase, adjacent our swimming pool for your thrilling eating and relaxing. Our Pool Terrase, Lounge Bar and the Fihankra Restaurant intersperse easily with one another, allowing the food and beverage operation to concentrate its activities in a large, demarcated area, instead of having the outlets spread around the Hotel.

This allows guests to stroll from one area to the next with ease.

If you would like a little bit of extravagance, let the Hotel create a menu just for you. Accra City Hotel can create the most memorable private dining experience tailored to the requirements of you and your guests.

If you have any dietary requirements or food allergies please let us know before your next visit and we will do our utmost to meet your needs.

The unparalleled experience we deliver to our guests has increased greatly, the footfalls to Accra City Hotel. At the end of your indelible experience at The Business Haven, you will say “Thank You” and we will say, “It’s a privilege serving you.”

BRIEFS

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Africa

AfDB approves $25 million investment into bond fund The African Development Bank (AfDB) has approved a seed equity capital investment of $25 million into the African Domestic Bond Fund (ADBF). The ADBF was conceived as part of the African Financial Markets Initiative (AFMI, www.africanbondmarkets.org), dating back to 2008. Its objectives are to contribute to the development of local debt markets in Africa, by strengthening the domestic bond market infrastructure and investing in local currency-denominated debts. The AFMI’s activities are implemented through its two pillars which are the African Financial Markets Database (AFMD) and the African Domestic Bond Fund (ADBF).

The ADBF is expected to be a game-changer for the investors’ community to access the African markets. It is structured as an enhanced Exchange Traded Fund (ETF) listed in Mauritius, but will also be listed in other stock exchanges in order to invite other investors to invest in the fund. It will be managed by an external fund Man-

ager – MCBIM (Mauritius Commercial Bank Investment Management Co Ltd.). “The ADBF aims to stimulate the development of African domestic bond markets through the provision of an innovative and efficient product in the form of an enhanced Index Bond Fund to broaden investor’s participation” as confirmed by the Bank’s Finance Vice-President and chairman of AFMI steering committee, Charles Boamah.

The ADBF will address the perception and challenges that create barriers for investors to commit to local currency fixed income in Africa. The markets show that African credit risk is not the stumbling block for international investors. Capital has been staying on the side-lines because of technical barriers that can mostly be overcome.

Beginning with the premise that investors are deterred by these factors, structuring a product that mitigates these concerns is an opportunity to attract local and international capital to African markets. While strong

demand for Eurobonds demonstrates appetite for African sovereign risk, this does not generally translate into appetite for local currency bonds despite the currency yields being higher and often being adequate enough to compensate for currency exchange risk.

According to AfDB’s Director for Financial Sector Development, Stefan Nalletamby: “In developing markets, it is particularly important for the lead institutions to act to reduce financial market impediments and instill local and international investor confidence. AfDB is leading the establishment of the ADBF as a sovereign fixed income ETF investing in different countries which will be the first time institution of this kind established in Africa. AfDB is the premier development Bank for Africa and the Bank’s leadership in the establishment of ADBF is demonstrable of the Bank providing a local solution to several structural weaknesses.”

MTN chair sell $8,8 million shares before new CEO arrives

MTN Group Ltd. Executive Chairman Phuthuma Nhleko sold shares worth about 123 million rand ($8.8 million) as he prepares to hand over the day-to-day running of Africa’s biggest wireless company to incoming

Chief Executive Officer Rob Shuter. Nhleko will also benefit from the termination of share options valued at 130 million rand, the Johannesburg-based company said. He will return to his previous role as non-executive chair-

man when Shuter joins from Vodafone Group Plc on March 17, 2017.

MTN said in November 2015 Nhleko would retake the helm after CEO Sifiso Dabengwa resigned in the wake of a record $5.2 billion fine in Nigeria. The chairman led negotiations with the country’s authorities, eventually agreeing to pay about $1 billion and list the local unit on the country’s stock market.

He also hired Shuter as his successor. As CEO for almost nine years until 2011, he transformed MTN from a small South African wireless carrier into a telecommunications giant with customers in 22 countries. The chairman sold about 1.08 million shares at 113.86 rand each. He had just over 2 million shares at the end of 2015, according to MTN’s annual report. MTN shares declined 0.6 percent to 113.20 rand by the close in Johannesburg, extending the year’s decline to 15 percent. That values the company at 217 billion rand.

2016 Business Times Africa 9

West Africa

Ivory Coast to Double Cocoa-Auction Charges to Curb Speculation Millions of West Africans to benefit from ban on toxic fuel imports Five West African countries have agreed to stop importing toxic fuels from Europe in a move that could improve the health of more than 250 million people, according to the United Nations. Nigeria, Benin, Togo, Ghana, and Ivory Coast have pledged to introduce strict standards to ensure they use cleaner, low-sulphur fuels for their vehicles, effectively stopping Europe from exporting its dirty fuels, the U.N. Environment Programme (UNEP) said. European trading firms have been exploiting weak regulations in West Africa to export fuels with levels of sulphur up to 300 times higher than is permitted in Europe, campaign group Public Eye said in a report published in September.

Public Eye described the issue as a "ticking time bomb" as cities grow across Africa and populations boom in major hubs including Nigeria's Lagos and Ghana's Accra. "West Africa is sending a strong message that it is no longer accepting dirty fuels from Europe ... they are placing the health of their people first," said UNEP head Erik Solheim.

"Air pollution is killing millions of people every year and we need to ensure that all countries urgently introduce cleaner fuels and vehicles to help reduce 10 Business Times Africa 2016

the shocking statistics," Solheim said in a statement released in early December. Sulphur is responsible for deadly heart and lung diseases, health experts say. The five countries have also agreed to upgrade the operations of their national refineries - public and privately owned - to improve the quality of their fuel by 2020, UNEP said. Nigeria's environment minister Amina Mohamed said the agreement would massively improve the air quality in its cities and allow the country to set modern vehicle standards.

"For 20 years Nigeria has not been able to address the vehicle pollution crisis due to the poor fuels we have been importing," Mohamed said in a statement.

A combination of low-sulphur fuels and advanced vehicles emissions standards can reduce harmful emissions by up to 90 percent, according to the UNEP. Outside of West Africa, Kenya, Tanzania, Uganda and Morocco have all increased fuel quality requirements in recent years. But better quality drives up costs, and with many nations facing severe shortages in public finances, they are wary of angering people with higher pump prices, analysts say. – TRF

Ivory Coast, the world’s biggest cocoa producer, will double the deposit needed to buy beans for delivery next season as part of measures to curb speculation in the chocolate ingredient, people familiar with the situation said.

The industry body, known as Le Conseil du Cafe-Cacao, will raise the deposit to 5 percent of the fixed export price, according to people familiar with matter who asked not to be identified because they aren’t allowed to speak to the media. It will also increase to at least 400,000 metric tons the amount of beans auctioned to international companies that don’t have a presence in the West African nation. That’s up from about 220,000 to 250,000 tons now.

Beans bought under such contracts will be shipped by local exporters appointed by the regulator and who are members of the International Traders’ Association known by its French acronym GNI, the national union of cocoa-export cooperatives known as UNACOOPEXCI and the cocoa economic-interest group known as GIE, the people said.

Cocoa has dropped 28 percent this year in New York to the lowest in more than three years. In London, it’s declined to the lowest since May 2014 partly as funds pulled out of the market in expectation of increased output in West Africa, which accounts for about 70 percent of global production.

Ivory Coast wants to prevent smaller exporters from buying beans directly through the auction system, the people said, without providing more information.

Southern Africa

Zimbabwe says bond notes a success, to increase circulation

Zimbabwe's central bank said it would increase the circulation of its new "bond notes", hailing the new currency's launch a success as it maintained its 1:1 peg to the U.S. dollar. The Reserve Bank of Zimbabwe (RBZ) introduced the bond notes at the end of November to ease chronic cash shortages, raising fears of uncontrolled money-printing that would cause hyperinflation.

John Mangudya, the RBZ Governor said the bank plans to introduce $75 million worth of bond notes by end of the year. Banks have continued to impose stringent limits on cash withdrawals even after the introduc-

tion of bond notes. Some opposition activists had tried but failed to stop the launch of the bond notes, while everyday consumers have raised concerns about the quality of the $2 notes and $1 coins - criticisms the central bank governor shrugged off.

"The rubbing off of ink and the variation of the security thread on the notes are quite normal," said Mangudya, adding that the bank would soon introduce $5 notes.

Zimbabwe is grappling with a devastating drought that has left more than 4 million people facing hunger, while the worst financial crisis in seven years has fuelled some of the

biggest anti-government protests in a decade. The country dumped its inflation-ravaged currency — the Zimbabwe dollar — in 2009 after printing a $100 trillion note that could not buy a loaf of bread and adopted the use of multiple currencies, chiefly the US dollar and major trading partner South Africa’s rand. President Robert Mugabe’s government says the new currency, which he has described as a surrogate of the US dollar, is designed to curb the smuggling of physical greenback from the informally dollarised economy and boost flagging exports — both major factors cited for a biting shortage of US dollar bills that has seen long lines at the banks since the turn of the year. The surrogate currency, dubbed ‘bond notes’ as they are backed by a $200 million Afreximbank bond facility, has been pegged at par with the greenback and will circulate alongside the US dollar, rand and other currencies in Zimbabwe’s official multi-currency basket. The introduction of the bond notes has stoked fears of a return of hyperinflation, which peaked at 500 billion percent in December 2008 according to the IMF, as well as pervasive shortages of basic goods and foodstuffs. Rtr/BT

Botswana's Debswana says expanded mine to produce first diamonds in 2017 Botswana's Debswana, the world's biggest diamond producer by sales value, is on track to produce its first diamonds from the expanded Jwaneng mine by next year, a company official said on Tuesday.

Known as Cut 8, the $3 billion expansion project aims to prolong the Jwaneng mine's life by a further seven years and produce 100 million carats."The Jwaneng pit expansion is on track and will start delivering first

ore to plant in 2017," Debswana Corporate Affairs Manager Matshidiso Kamona said.

The project involves the widening of the existing pit as an alternative to going deep underground. - Rtr 2016 Business Times Africa 11

North Africa

Morocco and Nigeria sign gas pipeline deal to link Africa to Europe Nigeria and Morocco have signed a joint venture to construct a gas pipeline that will connect the two nations as well as some other African countries to Europe. The agreement was reached during a visit by the Morocco's King Mohammed to the Nigerian capital Abuja, Geoffrey Onyema, the minister, said, adding that the pipeline project would be designed with the participation of all stakeholders.

"In this agreement both countries agreed to study and take concrete steps toward the promotion of a regional gas pipeline project that will connect Nigeria's gas resources, those of several West African countries and Morocco," Onyema told reporters in Abuja. Onyema said the project aimed to create a competitive regional electricity market with the potential to be connected to the European energy markets. No timeline was given for when the pipeline construction work will start and how much it will cost.

Nigeria is rich in hydrocarbons but produces little electricity, making its industries uncompetitive. Its economy now faces a recession caused by a plunge in crude prices. Militants in its oil producing heartland of the Niger Delta have also blown up pipelines in a quest for a bigger share of Nigeria's oil wealth, which has cut crude output this year. "Nigeria and the Kingdom of Morocco also agreed to develop integrated industrial clusters in the sub-region in sectors such as manufacturing, Agro-business and fertilizers to attract foreign capital and improve export competitiveness" the foreign minister added. – Rtr 12 Business Times Africa 2016

Egypt's beekeepers under threat as economy slumps Egypt's beekeepers say their hives are under threat because of a shortage of sugar, as are the flowers and crops that their bees pollinate.

Sugar became hard to find in recent months after the government took control of stocks to counter what it said was an epidemic of hoarding by merchants reacting to rising prices as a result of a shortage of foreign currency.

Bees are fed sugar to tide them over the winter and to compensate for honey harvested from their hives.

Beekeeping in Egypt can be traced back to the time of the Pharaohs, with the first hieroglyphs of bees dating back thousands of years.

"There is a sugar crisis and the bees have to receive nutrition through their winter hibernation," said commercial beekeeper Saeed Hagras.

With sugar in short supply, beekeepers had to let their bees consume honey instead. "So now instead of profiting from taking the honey produced and selling it, we are now supplying it for

the bees again instead of the sugar," Hagras told Reuters Television at his farm in Shibin El Kom, the capital of the Nile Delta province of Menoufia.

His son Mohamed said the government should step in to help, particularly as there were opportunities to export honey profitably to the United States and Canada.

"We are calling on the government to help the beekeepers to provide support. This will create employment opportunities to the youth and open up investment."

Mohamed added: "Many will be employed and the country will receive hard currency. We are in dire need of hard currency and investment." Another beekeeper, Rayhan Meligy, said crops would suffer if bees were allowed to die out.

"The crops are pollinated through bees. There will be no crops and the corn will decline, the harvest will decline and the clover will decline. All the crops will decline," he said. – Rtr

East Africa

Tanzania, Nigeria's Dangote Cement haggle over price of natural gas

Tanzania is in talks with Nigeria's Dangote Cement on the supply of natural gas to a manufacturing plant for the building material, but negotiations are currently held up over prices, said a government body in the East African country. The $500 million cement factory in the south-eastern Tanzanian town of Mtwara, set up last year with an annual capacity of 3 million tonnes, runs on expensive diesel generators and has sought government support to reduce costs. The company, whose majority owner and chairman is Africa's richest man, Aliko Dangote, halted production at the plant at the start of December over technical issues.

State-run Tanzania Petroleum Development Corporation (TPDC) said talks were expected to conclude in January, with price disagreements yet to be resolved. "Dangote has held protracted talks with TPDC on the pricing of natural gas. The Dangote Cement factory has asked for gas supply at below market prices, equivalent to the price of raw natural gas from producing wells," TPDC said in a statement.

"TPDC cannot sell natural gas (to final consumers) on at-the-well price

because there are additional costs incurred in processing and transporting the gas," it said.

Tanzania announced in February it had discovered an additional 2.17 trillion cubic feet (tcf) of possible natural gas deposits in an onshore field, raising its total estimated recoverable natural gas reserves to more than 57 tcf.

Dangote, Africa's biggest cement producer, has an annual production capacity of 43.6 million tonnes and targets output of between 74 million and 77 million tonnes by the end of 2019 and 100 million tonnes of capacity by 2020. The company plans to roll out plants across Africa. In Tanzania, Dangote seeks to double the country's annual output of cement to 6 million tonnes. Meanwhile, three companies plan to invest as much as 20 trillion shillings ($9.2 billion) in Tanzanian cement production in projects that could double the nation’s installed capacity, Trade and Industry Minister Charles Mwijage said.

The government of East Africa’s second-biggest economy, with gross domestic product of $45 billion, has infrastructure projects planned, in-

cluding the $10 billion Bagamoyo port development, a $7-billion railway and a $4-billion crude oil pipeline from neighboring Uganda that will require cement.

Units of HeidelbergCement AG of Germany, Jona, Switzerland-based LafargeHolcim Ltd and Afrisam Investment Holdings Ltd. of South Africa already operate in the country and have installed annual capacity of 10.3 million metric tons. Production in Tanzania is about 7.1 million tons a year, while local consumption is 4.1 million tons, according to Mwijage.

The surplus is exported to neighboring countries such as the Democratic Republic of Congo.

Demand for cement is expected to grow as much as 8 percent a year in the “medium-term,” London-based Exotix Partners said in an October research note. Last month, Lake Cement Ltd., a closely held Tanzanian producer, announced plans to almost quadruple capacity to 1.9 million tons by building a new plant at Bagamoyo at a cost of $150 million, according to Standard Investment Bank, the Nairobi-based lender.

Dangote Cement Plc, owned by billionaire Nigerian investor Aliko Dangote, last year commissioned a 3-million ton plant in Tanzania’s southeastern region of Mtwara. The plant stopped production last week on some technical issues that have now been fixed, spokesman Carl Franklin said in e-mailed comments. When Dangote began production in Tanzania in February, it undercut competitors such as Tanzania Portland Cement Co. and Tanga Cement Co. by selling at about $80 per ton, compared to a national average of about $90$100 per ton, according to Exotix.

“We expect aggressive cost management strategies from all players to protect the bottom line,” Exotix said in its note.

2016 Business Times Africa 13

OPINION Making "Made in Africa" Last

By Moono Mupotola

Africa now accounts for just 1% of America’s $350 billion textile and apparel market Moono Mupotola (Project Syndicate) – If you’re ever shopping for a pair of jeans in an American mall, check the label. If it was made in, say, Lesotho – a tiny mountainous country surrounded by South Africa, with a population of around two million – you probably have the African Growth and Opportunity Act (AGOA) to thank for it.

The AGOA, which was implemented in 2000, allows more than 6,400 products from eligible sub-Saharan African countries to enter the United States market duty-free. According to Lesotho’s National AGOA Strategy, the country’s annual garment exports to the US increased from about $129 million in 2001 to $330 million in 2015, representing 80% of total external demand for the country’s textiles and garments. With 44,000 employees, Lesotho’s garment industry is now the country’s largest private-sector employer. The AGOA has underpinned other “Made in Africa” success stories, too. Some may complain that the AGOA favors petroleum products, but the figures speak for themselves. According to the 2016 AGOA report, released by the Office 14 Business Times Africa | 2016

of the US Trade Representative, nonoil exports to the US under AGOA nearly tripled, from $1.4 billion in 2001 to $4.1 billion in 2015. Automobiles from South Africa and apparel from Kenya, Lesotho, Mauritius, and Swaziland were the leading exports.

The AGOA has also been criticized

MOONO MUPOTOLA Moono Mupotola is the director of the NEPAD Regional Integration and Trade Department at the African Development Bank.

for excluding some agricultural products, for which Africans have a comparative advantage. The products that are not excluded face complex health and safety regulations, further hampering Africans’ ability to export agricultural products to the US. But bold, export-ready African countries have

OPINION: MAKING "MADE IN AFRICA"LAST Nissan Patrol Nigeria assembly

managed to overcome these hurdles. Namibia, for example, recently became the first African country to gain eligibility to export boneless (not ground) raw beef products to the US. There is no doubt that the AGOA has created important opportunities for the countries involved. But it will not last forever. Having been extended for another decade last year, it is now set to remain in force until 2025. In other words, countries have just nine years left to ensure that the industries that have grown under the AGOA not only survive, retaining the thousands of jobs that have been created, but continue to grow.

Given that Africa now accounts for just 1% of America’s $350 billion textile and apparel market, there is plenty of room for expansion. But competition will be fierce. If the US eventually ratifies the Trans-Pacific Partnership trade deal, countries like Vietnam could erode Africa’s share of the US market in textiles and apparel.

The key to success for African countries will be to strengthen the skills base and build competitive industries in the textile and apparel sector. A country that could emerge

as a key player is Ethiopia, which for the first time was named as a possible global sourcing destination in a 2015 McKinsey survey of 40 global chief procurement officers. The challenge for Ethiopia – and for other African countries – is to raise its status from sourcing option to business priority.

To do so, countries should take the invaluable lessons provided by the AGOA to stimulate their export industries’ growth and seize market share not just in the US, but also in other economies, including within Africa. In fact, the AGOA has helped enhance intra-African trade by enabling producers in different countries to create new, cross-border value chains that benefit all. Botswana, for example, now exports leather to South Africa, where it is processed into upholstery for luxury cars and exported to the US. The African Development Bank also has a role to play, particularly in infrastructure development. By promoting regional integration, improved infrastructure can enhance trade and support skills development.

Here, the AfDB’s Industrialize Africa strategy, which emphasizes regional

value chains, will be particularly valuable, as it recognizes the opportunities that industries in one country can provide to those in neighboring economies.

At the same time, the AfDB must continue working to help meet demand for trade finance in Africa, currently estimated at $120 billion, with a focus on export-oriented small and medium-size enterprises (SMEs).

Important strides have already been made. The AfDB’s Trade Finance Program, established in February 2013, has so far supported more than 85 domestic banks in 27 African countries, catalyzing approximately $3.4 billion in trade in vital sectors such as agriculture, manufacturing and construction, and energy. More than 60% of the transactions involved SMEs. At last month’s Ministerial AGOA Forum, African trade ministers recognized the urgent need to plan ahead, committing to the creation of a task force to outline strategies for US-Africa trade and investment relations beyond 2025. This is a good start. But the clock is ticking, and Africa’s AGOA privileges will soon be eliminated. We must be ready.

2016 | Business Times Africa 15

OPINION

Land Management is Crisis Management in Africa

By Sofia Faruqi Sofia Faruqi Sofia Faruqi is the manager of the New Restoration Economy initiative at the World Resources Institute

Continent-wide, 65% of land has been degraded, and 3% of agricultural GDP is lost annually, owing to soil and nutrient loss on farmland WASHINGTON, DC – Ethiopia is experiencing its most severe political turmoil in decades. After months of escalating protests and conflicts that have killed hundreds of people, on October 9 the Ethiopian government announced a state of emergency.

Ethiopia’s conflict is being driven partly by ethnic tensions and resentment against a small elite’s hold on the country’s wealth and power. But another crucial, if relatively overlooked, factor is Ethiopia’s land-management system. Indeed, the crisis began last year when a severe drought left ten million people hungry and triggered disputes over land ownership and protests against the government’s land-expropriation policies.

Ethiopia is hardly the only recent example of how conflicts over land rights can set the stage for political and humanitarian crises. Competition for arable land contributed to the Rwandan genocide in 1994. A historic drought may have created the conditions for Syria’s civil war. And food insecurity stemming from land mismanagement is an important factor driving migrants to Europe.

16 Business Times Africa | 2016

OPINION: CONVERTING TWEETS INTO FEET

Land-related issues will continue to threaten global stability, especially if the effects of climate change exacerbate existing problems. Deforestation and unsustainable land use have degraded soils, altered rainfall patterns, and increased the incidence of extreme weather events, especially in Africa. Continent-wide, 65% of land has been degraded, and 3% of agricultural GDP is lost annually, owing to soil and nutrient loss on farmland.

In Ethiopia, agriculture accounts for 80% of employment, so even slight drops in agricultural productivity can negatively affect income levels. And across Sub-Saharan Africa, damaged land is not only an environmental burden, but can also spell economic disaster. When trees and vegetation are cleared, heavy rainfall washes away the soil and destroys economic opportunities for local populations.

I saw this firsthand in Kenya’s Tata Magadi gully, which extends for 104

miles (167 kilometers) and at first resembles the site of a meteor strike.

Gullies are the ditches left after rainwater has washed away the topsoil.

When they are large enough, they can sweep away entire homes and the productive farmland on which rural communities depend for their livelihoods.

Fortunately, there are ways to reverse land degradation, while simultaneously augmenting crop yields and household incomes. Tree planting on degraded land, for example, can increase agricultural productivity by anchoring farmland, increasing soil fertility, and providing shade for crops and livestock.

After farmers in Malawi expanded their tree cover, crop yields increased by 50-100%. And, as a Kenyan maize farmer told me, “No trees, no rain.”

Indeed, farmers have always intuitively known what scientists are now confirming: trees and other vegeta-

tion can stimulate more rainfall.

To accelerate restoration efforts in Africa, communities must be mobilized, and farmers must be empowered to restore their own land. This basic concept has gained traction in Kenya, where “community forest associations” have formed to protect and manage woodlands. In Ethiopia, every Abraha Atsbeha villager volunteers three days each month as part of a self-organized effort to rehabilitate the surrounding landscape; and other villages in the region have followed suit, giving rise to a growing local restoration movement.

Land restoration is not just a technique to improve subsistence farming; it can also deliver financial returns for businesses and investors, which explains why many small and medium-size restoration enterprises have emerged. These include distributed plantations and sustainable-beekeeping companies, as well as Green Pot Enterprises, a fast-growing East African firm that leases shares of restoration sites to individuals, who can then collect an annual return on their investment. But for restoration businesses to scale up, they will need more access to growth capital and better-functioning domestic markets.

National governments also have an essential role to play, and 17 African countries have made commitments to restoration through the Bonn Challenge and the AFR100 initiative, which aims to restore 100 million hectares (247 million acres, or an area roughly the size of Ethiopia) in Africa by 2030. Africa’s proactive approach to restoration bodes well, because the effects of climate change are expected to hit the continent harder than any other world region.

Land restoration is not a choice; it is a necessity. If African countries’ land is not salvaged, they will fall into a vicious cycle of poverty and political turmoil, similar to what we are now witnessing in Ethiopia. More severely degraded land is tougher to restore, so every day restoration is delayed is a lost opportunity for the environment, the economy, and peace.

2016 | Business Times Africa 17

OPINION

Why Africa cannot ignore credit ratings

By Mampho Modise MAMPHO MODISE Post graduate researcher, University of Pretoria

Credit ratings provide an independent and objective assessment of the credit worthiness of countries and corporations Three of the world’s major ratings agencies, Moody’s, Fitch and Standard & Poor’s (S&P), are reviewing South Africa’s credit rating. Mampho Modise explains the significance of the reviews.

What do the agencies look at in the process of reviewing a country?

In their rating methodologies, rating agencies have developed rating criteria for assessing the performance of key macroeconomic and socioeconomic indicators. By assessing the indicators, the rating agencies are able to determine the borrower’s ability and willingness to honour debt obligations.

Rating criteria focus on the following components and indicators: Economic structure and performance: Real GDP, per capita income, headline inflation rate, gross investment as a percentage of GDP and gross domestic savings as a percentage of GDP. Government finances: Government revenue to GDP, government expenditure to GDP, gov18 Business Times Africa | 2016

ernment debt to GDP, debt interest payment to revenue and the budget balance as a percentage of GDP. External payments and debt: Current account balance as a percentage of GDP, the ratio of external debt to GDP and level of official reserves.

Susceptibility to event: Political risk,

socioeconomic risk, external vulnerability risk and institutional independence. When reviewing the sovereign ratings, rating agencies hold discussions with various stakeholders in government, labour, civil society and the private sector. The reason the private sector is included is for the rating

OPINION: WHY AFRICA CANNOT IGNORE CREDIT RATINGS

What happens to a country downgraded to junk status?

agencies to get an independent view on government policies and strategies.

What do they do with their results?

Once their reviews are concluded, the agencies will announce credit rating opinions which will reflect the borrower’s credit worthiness. That is the likelihood that the borrower will pay back a loan within the confines of the loan agreement, without defaulting.

A high credit rating indicates a high possibility of paying back the loan in its entirety without any issues. A poor credit rating suggests that the borrower has had trouble paying back loans in the past, and might follow the same pattern in the future. The credit rating opinions are used by various stakeholders and for different reasons.

Firstly, investors use credit ratings as a guide to their investment decisions. Credit ratings provide an independent and objective assessment of the credit worthiness of countries and corporations. This assists investors to decide how risky it is to invest money in a certain country or corporation.

Secondly, for corporations and governments who want to raise money in the capital market, a favourable rating means a country will be able to obtain funds at a lower cost.

Lastly, governments could also use credit ratings as a measure for gauging their performance relative to peers to effect improvements.

Which political developments in South Africa are likely to have an impact on the reviews?

A few areas of concern have been cited. The outcome of South Africa’s 2016 local government elections is one. The rating agencies are concerned that a drop in the voter percentage could result in fiscal loosening to draw votes back to the ruling party. Another concern is the charges instituted against the Minister of Finance Pravin Gordhan and later withdrawn. This threatened the institutional stability and integrity of the National Treasury. And the political disagreements on the findings of the state capture report threatened the institutional independence of the office of the Public Protector and the courts. Finally, the upcoming elective conference for the governing African National Congress (ANC) in 2017 is raising a concern on policy continuity and predictability.

Do the agencies operate in every country around the world?

Not necessarily. Rating agencies can operate unsolicited. But major rating agencies such as Moody’s Investors Service (Moody’s), S&P Global Ratings(S&P) and Fitch Ratings (Fitch) are solicited by countries to provide credit ratings. Moody’s operates in 36 countries, S&P in 28, and Fitch in more than 30 countries.

Junk status is associated with high risk. Therefore, high borrowing costs.

This is the main reason why a sovereign has to avoid being downgraded into a junk, or sub-investment grade.

For fund managers (who are representing the investors) a downgrade to junk status means they will have to sell the assets (bonds) they hold.

Their mandates require that they only invest in investment grade assets.

For an ordinary person it means paying more interest, leaving little money for savings and expenditure on rent, school fees and food.

For governments it means allocating more to debt servicing costs (interest payment). Less money will be available for social grants, investment priorities, creating jobs and ultimately reducing the GDP growth potential of the country. More interest payment also crowds out other critical spending. Social services is an example.

Is it possible for a government to simply ignore their ratings?

Not really. Solicited credit ratings ensure easy access to international capital markets. Favourable credit ratings imply low borrowing costs. The South African government has solicited credit ratings from the top agencies to ensure that it can easily and cheaply access foreign funding needed to accomplish its economic development agenda. South Africa therefore can’t ignore the credit ratings assigned to it, especially given that foreign investors hold more than 30% of government debt.

Which agency is taken most seriously?

Sovereign credit rating is the most concentrated industry. There are approximately 70 rating agencies globally. But most investors base their investment decisions on the credit ratings published by Moody’s, S&P and Fitch. These three control approximately 95% of the rating business.

2016 | Business Times Africa 19

OPINION

Africa has an air pollution problem but lacks the data to tackle it

By Janine Wichmann

JANINE WICHMANN Associate Professor, University of Pretoria

A man burns rubbish on the side of a road in Dandora in Nairobi, Kenya. Reuters/Siegfried Modola

The World Health Organisation (WHO) recently launched BreatheLife, a campaign to make people more aware about the fact that air pollution – which it calls the invisible killer – is a major health and climate risk. “Invisible” may refer to the lack of awareness that air pollution is a major health risk. In fact, air pollution levels exceeding the WHO air quality guidelines are often very visible, particularly in developing countries. This is especially true for billions of people living in close contact with air pollution sources. Those 20 Business Times Africa | 2016

who, for example, cook on inefficient stoves with fuels such as coal. Or live in an industrial area.

The WHO has air quality programmes for most of the world’s regions. These review the effects of air pollution on health and help countries develop sustainable air quality policies. But none exists for sub-Saharan Africa. It is not clear why. A possible explanation may be that environmental health risk factors are overshadowed by other risks like malnutrition, HIV, tuberculosis and malaria.

Despite this, we do know something about the continent’s air pollution levels. In the first major attempt to estimate the health and economic costs of air pollution in Africa, an Organisation for Economic Co-operation and Development report found that air pollution in Africa already causes more premature deaths than unsafe water or childhood malnutrition. It warned that this could develop into a health and climate crisis.

But how bad are air pollution levels in Africa? Which countries have the worst air pollution levels?

OPINION: AFRICA AIR POLLUTION

What are the main sources and drivers of air pollution? Are the main sources and drivers of air pollution different from those on other continents?

The answers to these questions are severely hampered by a lack of data as well as poor regulation and laws in African countries. The only country on the continent that has ambient air quality standards enforced by air quality laws and regulations is South Africa. Other countries have either ambient air quality standards or air quality laws and regulations, or none at all.

What’s known Air pollution is a complex mixture of many components. The WHO’s air quality guidelines, as well as country-specific laws, have identified a few air pollutant components: particulate matter smaller than 2.5 micrometer (PM2.5) and 10 micrometer (PM10) in aerodynamic diameter, sulphur dioxide (SO2), ground-level ozone (O3), carbon monoxide (CO), benzene, lead and nitrogen dioxide (NO2).

The most dangerous are PM2.5 and ultrafine particles (UFP); the latter are smaller than 100 nanometer in aerodynamic diameter. PM2.5 and UFP penetrate deeper into the lung alveoli and may pass into the bloodstream.

PM10 and PM2.5 are important indicators of long-term air quality and of health risks. Based on data of ground measurements conducted in 20082015, Africa’s PM10 levels are not the highest in the world.

The database is the largest of its kind and covers over 3,000 human settlements – mostly cities – in 103 countries. The number one spot belongs to the Eastern Mediterranean region, followed by the South-East Asia region and then Africa. But the WHO acknowledges numerous limitations to the data sources. Fewer sites globally measure PM2.5, hence the focus is on PM10.

The PM2.5 data based on the

WHO air quality model show that the number one spot again belongs to the Eastern Mediterranean region, followed by the South-East Asia region and then Africa. Given the lack of PM2.5 ground measurements in Africa, the PM2.5 data derived from the WHO air quality model for Africa should be viewed with caution.

Where is the air worse in Africa?

It is hard to say what the real picture is. The modelled PM2.5 data supplements the data from ground monitoring networks, especially in regions with no or very little monitoring, as is the case in Africa.

The PM10 data, based on ground measurements conducted between 2008 and 2015, show that all African countries with PM10 data exceeded the WHO annual guideline of 20 microgram/cubic meter (µg/m³).

Onitsha in Nigeria had the highest yearly PM10 level of 594 µg/m³ globally, nearly 30 times higher than the WHO annual guideline. But the quality of the data is questionable. The level for Onitsha is based on PM10 data collected only in 2009 and only at one site. The database also does not mention on how many days the 2009 yearly level is based as missing data can lead to a distorted yearly level.

The lowest yearly PM10 level was recorded at Midlands in Mauritius (20 µg/m³). But this is based only on 2011 data collected again at only one site without mention of how many days in 2011 were measured.

It is also difficult to know exactly what the contribution of different sources of air pollution are in Africa.

The amount of air pollution in any given location is affected by a combination of local, regional and distant sources. It is also affected by the dispersion of pollutants, which in turn depends on numerous weather conditions such as wind direction, temperature and precipitation.

A recent review indicated that very few studies in Africa conducted source apportionment of PM2.5 and

PM10. The review concluded that (based on the few studies) 17%, 10%, 34%, 17% and 22% of PM2.5 levels in Africa are due to traffic, industry, domestic fuel burning, unspecified source of human origin and natural sources - such as dust and sea salt.

For PM10 the corresponding source distribution is 34%, 6%, 21%, 14% and 25%, but should be viewed with caution due to the few studies.

Based on the limited number of PM10 and PM2.5 source apportionment studies in Africa, these tentative conclusions can be drawn. Traffic is a major source of PM10 levels in Africa as in many other global regions. The other two major sources of PM10 in Africa are domestic fuel burning and natural sources. In other regions of the world, industry and the ambiguous “unspecified source of human origin” contribute more.

Domestic fuel burning is the major source of PM2.5 in Africa, followed by traffic and natural sources such as dust. In other regions of the world, traffic, industry and the ambiguous “unspecified source of human origin” contribute more to PM2.5 levels.

Air quality interventions Regardless of the exact global source contributions, the main sources of air pollution should be tackled globally in management plans and interventions. Obvious interventions include clean energy technology such as solar power, to minimise domestic fuel burning and emissions from coal-fired power plants. Other initiatives include clean public transport, bicycle lanes to cut traffic emissions, recycling and controls on industrial emissions.

Air pollution does not stop at country or continental borders. It is a major risk factor for climate change. A disregard for air pollution levels in Africa may have a major impact on global climate change in the years to come. – Janine Wichmann is an Associate Professor and the University of Pretoria – The Conversation 2016 | Business Times Africa 21

OPINION

Why Africa needs Asia to reach its growth potential

By Sunil Kaushal

SUNIL KAUSHAL Standard Chartered Bank’s Regional Chief Executive Officer, Africa and Middle East

Asia is poised to play dominant role in Africa’s future growth in the wake of Brexit. Western governments and multinationals have played a significant role in Africa’s growth in the past with the European Union (EU) being the continent’s biggest trading partner. But, in a post-Brexit world, Africa will be looking increasingly to the East for investment and expertise.

Asia-Africa trade has been growing exponentially in the past decade.

Alongside China’s ‘One Belt One Road’ initiative, more Asian economies are now showing interest in ramping up their African investments, attracted by rising urbanisation and consumerism across the continent.

The fact that Japan chose to host its annual Tokyo International Conference of African Development in Africa for the first time is just one example of the growing ties between the two continents. The conference in 22 Business Times Africa | 2016

Nairobi at the end of August explored the potential improvements in Africa’s health system, paving the way for stronger multilateral cooperation and future trade partnerships.

Asia’s leading financial centres are keen to play a central role as finance, shipping and aviation hubs for increasing Asia-Africa trade.

Singapore’s expertise in consumer industries such as airlines, education and healthcare could pave the way for more Asia-Africa business collaboration. The city state is already sharing its experience in how to achieve sustainable economic development through its Singapore Cooperation Programme, and we expect to see more growth-supporting initiatives like this in the future.

Improving business prospects Of course, trade between Asia and Africa is not without its challenges, limiting near-term trade potential.

Red tape and poor infrastructure make investing in Africa harder, but as relationships between African and Asian governments strengthen, longterm business prospects will improve.

While some people worry the slowdown in global growth and subdued commodity prices will impact Africa’s growth and investment potential, the continent is demonstrating resilience.

Its key drivers for growth remain intact, including attractive demographics, urbanisation and a rise in consumerism.

Côte d’Ivoire, Tanzania, Kenya, Senegal and Ethiopia are just some of the African economies currently performing well, and Sub-Saharan Africa is expected to post growth of 4.1 per cent in 2017 and 5.2 per cent in 2018.

Attractive opportunities abound, including in the power sector. Africa has about 13 per cent of the world’s population, but only half of its citizens have access to electricity, so the opportunity for Asia to play larger role in powering Africa is huge.

Investing in Africa requires strategy and commitment. However, given European growth uncertainties in the wake of the UK’s decision to leave the EU, we expect Africa’s relationship with Asia to evolve. By investing in the growing opportunities and sharing expertise, Asia is set to play a bigger role in Africa’s future.

OPINION

Widening Africa’s startup ecosystem

By Sean Drake SEAN DRAKE Sean Henry Drake is the founder of The Wealth Project - www.thewealthproject.org

The African start-up ecosystem is growing at a rapid pace and will produce large liquidity events for early-stage investors over the next 5-10 years. Africa is the second-largest and second most populous continent on earth with an estimated population in 2016 of 1.2 billion people. With little or no measures in place to address the issue, the 2.4 billion prediction for 2050 is entirely plausible.

Across Africa, necessity is the mother of invention. Re-using and re-combining is a way of life and, in many cases, the lack of infrastructure, even old infrastructure, gives Africa a “clean slate” for new solutions.

South African government statistics show that small businesses currently contribute 57 percent to the country’s gross domestic product and account for 56 percent of employment, 77 percent in the “informal sector.”

• According to VC4Africa, a large community of very-early-stage start-

ups and investors, investments in startups listed on the platform more than doubled in 2014, rising from $12 million to $26.9 million, while the average investment grew from $130,000 to more than $200,000.

• According to VC4Africa, the increase of capital is driven by three key trends: growing interest in startups from the African diaspora, the rise of local angel investors, and an increase in cross-border investments.

Entrepreneurs contribution to GDP Confidence in both domestic and global economic prospects remains relatively bouyant, with 71% of global entrepreneurs feeling optimistic about the economic direction of their domestic market. 66% feel good about the economic direction of the global economy on the whole. Those in China, India and Middle East/North Africa are almost twice as optimistic as those in France, Australia and Japan.

Entrepreneurship and Job Creation

2015 Scenario: 47% of global entrepreneurs expect to increase their total global workforce in the next 12 months, while 49% expect their workforce to remain the same size. But only 4% think it will decrease. 77% of our roster of the world’s most dynamic entrepreneurs — EY Entrepreneur Of The Year participants — expect to increase their total global workforce in 2015. Either way, entrepreneurs are clearly leading the way when it comes to expanding their workforce.

Another EY report, the April 2015 Capital Confidence Barometer, which tracks job creation in large public and privately held companies in 54 countries, shows that only 29% of 1,600 senior executives surveyed expect to create jobs or hire in the next 12 months. Among those entrepreneurs who anticipate adding talent, the expected average increase to employee numbers is 17%. Chinese entrepreneurs are most confident about their workforce growth — with 67% expecting to add people in the next 12 months, followed by entrepreneurs in Sub Saharan Africa (61%), India (54%) and Mexico (52%). Brazil and Japan are least likely to forecast workforce growth (30% and 33% respectively).

To conclude, Africa needs to focus on investing in soft infrastructure, especially education and Technology as an access to global leadership in Entrepreneurship.

2016 | Business Times Africa 23

ENTREPRENEUR WATCH

Ambition and reward – the story of Baba Yabdow Baba Yabdow, the CEO of Yabco Focus Company Ltd, is a former accountant whose passion for entrepreneurship made him resign from his work to set up a fruit processing factory which has now become one of the most successful businesses in the Upper East Region.

B

aba Yabdow, is a native of Walewale, Northern Region of Ghana. He is a certified chartered accountant from the University of Professional Studies, Accra, Ghana. After his tertiary education, he was employed by the Controller and Accountant General’s Department in 1994. He was then posted to the Upper East Region office as a Regional Accountant and progressed to the rank of a Deputy Regional Director. He was later posted to the Ministry of Youth and Sports as the Chief Internal Auditor.

Against this background, everyone will expect a man with such a secured and lucrative career to be satisfied with life and wait till he retires and enjoy his retirement package. But such was not the case with Baba Yabdow. He still felt a sense of emptiness within him. Why? “Civil service was not what I really wanted. I was passionate about creating my own business and providing jobs for people. So, I was not satisfied with being a civil servant. Something within me felt I should resign and do my own business.”

Entrepreneurial journey begins While still an employee at the Ministry, he was able to raise some money and established a car washing bay. The business was growing but he didn’t want to combine working in the government sector with his private business.

Finally, he resigned in 2008 to focus on his car wash business. The next year, 2009, he added

24 Business Times Africa | 2016

AMBITION AND REWARD-THE STORY OF BABA YABDOW

a new business—sachet water production. The business also well, but but Baba realised a situation that he describes as worrying.

“I realised that people were just cutting the fruit trees down anyhow for infrastructural developments. Especially the baobab and mango trees. But I knew there were a lot of nutritional values in the baobab fruits. So, I wanted people to know the economic and nutritional value of the fruits so that they would stop chopping them down. The option of making drinks then came to mind.

Challenges Baba says the major challenge he has had to go through as an entrepreneur is the power shortfall that intensified in 2015 and plunged the country into darkness. The country had to shed power of between 600-800MW daily due to growing demand, as well as challenges with the main hydroelectric power plant of the country, the Akosombo dam, not operating at full capacity. Many companies, including Yabco Focus, had to buy standby generators and fuel it every other day before they could operate. This, Baba reckons, put a very big strain on his company and led to dwindled profits. However, the situation has been better this year and has provided some relief to businesses.

Another challenge he has faced is the lack of adequate storage facilities in the country. Fruit processors have to find their own means of raising huge capital to buy their own cold facilities.

But the capital-intensive nature of those facilities makes it difficult for such a budding business to undertake.

The present state of the business Yabco Focus Company Ltd, a company which started with just GH¢1,600 and with three employees, has been received well by the market.

The business has been able to build the needed capacity to be able to access loan from Zenith Bank which would be used to purchase a cold van for distribution of his juice.

The company has been awarded by the Enhancing Growth In New Enterprises (ENGINE) programme with £6,000 for expansion projects.

Baba feels he is living the dream of providing jobs to the people. Currently, he provides direct employment to 37 people and an additional 10 indirect employment, taking the total number to 47 employees. He said: “I don’t think I would have been able to provide employment to about 50 people if I was still working in the civil service.”

Vision Yabco Focus Company Ltd has the vision of extending its boundaries across the length and breadth of the country and plans to get his products in every shop.

He further wants to cross boundaries to other parts of the continent and beyond in the shortest possible time.

Advice to the entrepreneurs and the youth Baba believes his business is still growing because of his hard work and commitment to move out of his comfort zone to be a job creator.

He wants fellow budding entrepreneurs and the youth to emulate such fine qualities in order for them to succeed in their business ENTREPRENEURS endeavours.

“The youth these days want success to happen overnight. But I SHOULD ALSO want to advise them to move out EXERCISE of their comfort zones and make the necessary efforts to raise cap- PATIENCE WHEN ital and start something. Nobody will come and give you capital. THEY INVEST So, you have to make the effort THEIR MONIES and show commitment so that when someone see your serious- INTO ANY ness, they can help you out.

Entrepreneurs should also exer- BUSINESS cise patience when they invest their monies into any business. They should not expect to make profit at the go. As I speak now, I don’t always make profit from the juice business, but I remain confident that things will bounce back and that has helped me to still be in business.”

2016 | Business Times Africa 25

NIGERIA

Nigeria’s MoneyChangers Are Going Underground Lagos, Nigeria. Photographer: Peeter Viisimaa via Getty Images

NIGERIA’S INTERBANK MARKET SETS THE NAIRA’S OFFICIAL VALUE AND IS MEANT TO SERVE BUSINESSES

26 Business Times Africa | 2016

On the teeming streets of Lagos, the Nigerian mega-city of 15 million people, the once omnipresent money-changers are going underground.

O

n the teeming streets of Lagos, the Nigerian mega-city of 15 million people, the once omnipresent money-changers are going underground. They’ve become the latest target of authorities desperate to bolster the naira and crush a black market for foreign currency that’s boomed since the crash in oil prices strangled the inflow of dollars and battered the economy. This month, the central bank capped prices that non-bank dealers can charge their customers for foreign exchange, effectively pegging the black-market rate, with intelligence agents threatening to jail anyone who doesn’t comply.

That’s creating a parallel market within the black market, according to analysts at Lagos-based Afrinvest West Africa Ltd. One trader in the Lagos suburb of Surulere, who asked not to be identified as he feared arrest, said he would continue using the old rate with trusted customers and refuse to sell dollars to others. Anyone he doesn’t know may be a government spy, he said.

THE CENTRAL BANK HAS MADE SEVERAL ATTEMPTS TO DEFEND THE NAIRA AFTER IT PLUNGED IN LATE 2014 ALONG WITH CRUDE PRICES

NIGERIA'S MONEY-CHANGERS ARE GOING UNDERGROUND

THE CENTRAL BANK HAS MADE SEVERAL ATTEMPTS TO DEFEND THE NAIRA AFTER IT PLUNGED IN LATE 2014 ALONG WITH CRUDE PRICES

The central bank has made several attempts to defend the naira after it plunged in late 2014 along with crude prices. Governor Godwin Emefiele tightened capital controls and restricted banks’ ability to trade foreign-exchange, then tried a currency peg that deterred foreign investment and worsened the shortage of dollars companies need to pay for imports of raw materials and equipment.

As the economy shrank and inflation soared, Emefiele relented, devaluing the inter-bank rate in June and saying he would let it float freely. The naira slumped 38 percent within two months, prompting central bank intervention that has since held it around 315 against the dollar.

Stock and bond investors are staying away from Nigeria, pointing to the wide gap between the official exchange rate and the black-market one of about 470 as evidence that the central bank is still manipulating the currency. Forward prices suggest the naira will depreciate further on the official market, with 12-month contracts trading at 441 against the greenback.

Hoarding Dollars On Nov. 9, Nigeria’s intelligence arm, the Department of State Services, raided bureaux de change and black-market traders and instructed them to cap their rates at 400 per dollar. As a result, people with hard currency are hoarding it rather than selling at an artificially low rate, according to Haruna Usman, a money-changer in Lagos. “It’s a struggle even to get someone to sell us $200, whereas before they’d often sell us $1,000 or $5,000,” the kaftan-clad Usman said from the mosque compound where he trades. “Now, they’re only exchanging when they’re desperate.”

The central bank is in no mood to back down. Emefiele said this week that “the security agencies should sustain their checks on the activities of illegal foreign-exchange operators in order to bring sanity to that segment of the market.” It’s another signal to foreign investors that Nigeria’s currency policy is broken, according to JPMorgan Chase & Co. “The Central Bank of Nigeria is clearly not ready to embrace a truly free-floating exchange rate and arguably has further undermined the confidence in the exchange-rate regime,” Yvette Babb and Sonja Keller, analysts at the New York-based lender, said in a note to clients on Nov. 18. “These events are likely to deter inflows.”

‘New Level’ “The black market will go further underground,” said Omotola Abimbola, an analyst at Afrinvest. “The fact they went as low as getting security forces on the streets shows a new level of desperation.” Nigeria’s interbank market sets the naira’s official value and is meant to serve businesses. But the scarcity of foreign-currency has forced many to go to licensed bureaux de change and the unofficial, or black, market of informal street traders, both of which sell dollars at a higher rate.

‘Panic Button’ Nigeria isn’t the first country to clamp down on black-market trading. Egypt also arrested street dealers while pegging its currency’s official rate, until a dollar-squeeze forced it to devalue on Nov. 3. Nigerian authorities are running out of options and they probably won’t be able to enforce their clampdown beyond this year, according to Teneo Intelligence. “It absolutely won’t work,” said Manji Cheto, senior vice president at Teneo in London. “This is akin to a person in a room that’s caught fire just slamming every panic button they can find because they don’t know which will open the door.”

– Bloomberg 2016 | Business Times Africa 27

POLITICS

Akufo-Addo's new challenge Ghana’s President-elect Nana Akufo-Addo was graceful in victory in the December 7 elections that brought him to the Flagstaff House at the third time of asking. The challenges that await him, however, have no time for graceful acclimatisation.

By Alfonce Mbizwo

28 Business Times Africa | 2016

GHANA'S POLITICAL FOES BET ON AGRICULTURE

THE PERCEPTION OF CORRUPTION HAS HAUNTED MAHAMA’S ADMINISTRATION AND HIS ACCEPTANCE OF A $100,000 VEHICLE FROM DJIBRIL KANAZOE, A BURKINABE CONTRACTOR

I WILL NOT LET YOU DOWN. I WILL DO ALL IN MY POWER TO LIVE UP TO YOUR HOPES AND EXPECTATIONS

AKUFO-ADDO CAMPAIGNED ON THE PROMISE OF CONSTRUCTING OF AN IRRIGATION DAM IN EVERY VILLAGE OF THE THREE NORTHERN REGIONS OF THE COUNTRY

I

t is the impatience of Ghanaians that outgoing president Johm Dramani Mahama was only given one term. A worsening economy. Critics have claimed that his victory in 2012, was a sympathy vote following the death of John Atta Mills a few months before the polls, and that he has failed to convince in the top job.

Eight years of the National Democratic Congress rule has been dogged by a decline in global commodity prices and perceived economic mismanagement and corruption. Economic growth has become stagnant while employment has remained stubbornly high, frustrating Ghanaians.

The perception of corruption has haunted Mahama’s administration and his acceptance of a $100,000 vehicle from Djibril

Kanazoe, a Burkinabe contractor, who was awarded a $650,000 contentious deal to build a security wall at Ghana's embassy in the Burkina Faso capital, Ouagadougou showed terrible judgment, according to anti-corruption campaigners.

The footholds in the beginning However, new oil and gas is set to come onstream in 2017 and 2018 from a $7.9 billion offshore field being developed by Italy's ENI which the NDC government says will boost revenue and help resolve power deficit that has dogged Ghana in recent times.

But the incoming administration has criticised the deal, and argue that Ghana will overpay for its gas A recovery in gold prices in the past year should help Ghana's major gold producers. In agriculture, cocoa farmers say they are bracing for a strong 2016-17 crop. Also, Ghana is emerging from a fiscal crisis under the supervision of an International Monetary Fund (IMF) programme.

Akufo-Addo campaigned on the promise of constructing of an irrigation dam in every village of the three northern regions of the country namely Northern, Upper East and Upper West Regions. This he believes will improve food production in an area seen as the breadbasket of the country.

Indeed, the agricultural sector has been the backbone of the Ghanaian economy but its contribution to the Gross Domestic Product (GDP) has declined over the years, as it is beset with lack of inputs and high post-harvest losses because of the inability of farmers to transport their produce to major commercial centres, a consequence of 2016 | Business Times Africa 29

AKUFO-ADDO WELCOME NEW CHALLENGE

poorly maintained roads.

The sector also lacks post-harvest technological know-how and insufficient central government support.

In 1992, the share of agriculture to the GDP was 23.6 percent, growing to about 41 percent in 1995. But the Ghana Statistical Service reports that this declined from 29.8 percent in 2010 to 22 percent at the end of last year.

A report by the World Bank Group showed that about 21 percent of the Ghanaian population has moved out of agriculture to other more productive economic sectors over the 18year period between 1992 and 2010.

Akufo-Addo also faces rising inequality against the backdrop of declining poverty and may need to rethink of Ghana’s growth strategy to achieve some of his campaign promises to create jobs, restore rapid growth, build a factory in every district. The promise to give each constituency the equivalent of $1 million per year to pursue development projects will be eagerly anticipated as well.

The country holds promise, as evidenced by its attaining lower-middle income status in 2011, and Ghanaians are eager for change. He appears to recognise this desire in his rather short victory statement: "I will not let you down. I will do all in my power to live up to your hopes and expectations."

Some of the challenges he faces are below courtesy of a paper by Ernest Aryeetey. Professor of Economics and Vice Chancellor, University of Ghana and William Baah-Boateng Senior Lecturer, Economics, University of Ghana published in The Conversation.

Slower employment growth A key indicator of the health of an economy is the availability of jobs and their quality. This is measured by rates of unemployment and joblessness as well as poverty incidence and income inequality. Employment growth in Ghana has generally been slower than 30 Business Times Africa | 2016

economic growth, raising concerns Thus, fixing the problem of the deabout the quality of the country’s clining manufacturing sub-sector growth. Ghana’s employment growth and raising productivity in agriculture lags behind economic growth, with should be the priority of policy towards an estimated employment elasticity of more inclusive growth. This calls for output of 0.47. This suggests that every investment in areas that would pro1% of annual economic growth yields mote manufacturing and agricultural 0.47% growth of total employment. activities where the potential for job Beside the slow rate of job creation creation is high. is the dominance of vulnerable em- The business operating environployment and the working poverty ment must also be addressed. Macrate. In 2010, seven out of ten jobs roeconomic instability culminating in were estimated to be vulnerable. Only high interest rates, and high taxes couone out of five jobs could be consid- pled with chronic energy problems ered as productive jobs that meet the make manufacturers less competitive. standard of decent work.

This makes them more fragile within Robust economic growth, shortage a trade environment where firms face of skills Economic growth and job cre- global competition. ation depend on the size and quality Investment in the energy sector of the labour force. The availability of to ensure a consistent power supply human resources in the right quan- within a stable macroeconomic entity and quality form the foundation vironment would be a major step toof growth and development. Ghana’s wards reducing constraints facing the population of 26.3 million has been manufacturing sector. The business growing at an annual average of 2.5% environment could also be improved over the last three decades. if the country’s institutional arrange The size of Ghana’s labour force in ments and regulatory framework are 2013 stood at 12.31 million (94.8% in properly streamlined in line with best employment and 5.2% unemployed). practices. On the supply side, low This is up from 6.04 quality of labour remillion in 1992, which A KEY INDICATOR quires urgent policy translates into 3.4% OF THE HEALTH OF attention. Education annual growth on avand skills developAN ECONOMY IS ment have seen some erage. Thus the ecoover nomically active – 47% THE AVAILABILITY improvement of total population – are the last three decades.

OF JOBS AND responsible for feeding But the pace appears to be slow. The link the entire population.

THEIR QUALITY Ghana has a shortage of between education high skilled professionand productivity is als. It is also short of semi-specialised quite clear. A comprehensive review skills, such as technical and vocation- of the education system is needed al skills. Anecdotal evidence suggests to assess the medium and long term that when Ghana started producing relevance of education and skills deoil commercially in late 2010, there velopment. Ghana could also leverage were specific skills that were difficult the strong growth performance of low to obtain domestically. These include labour absorption sectors of mining engineers, drillers, production and and oil extraction to boost growth in operation workers. The industry had other sectors. It could do this by chanto rely on people from Côte d’Ivoire nelling returns from these sectors into and Nigeria. infrastructure to support growth in agriculture and manufacturing.

Crafting a new growth strategy

SOUTH AFRICA

South Africa has a new energy plan. But will it break the bank?

By Stephen Labson

T THE PLAN ASSUMES TREND GROWTH IN ELECTRICITY DEMAND OF 2.7% PER YEAR.

he release of South Africa’s long awaited update to the Integrated Resource Plan is certain to inspire renewed debate about the country’s energy future. Once public consultation has taken place the plan will drive policy decisions on the mix of renewables, nuclear, coal and gas fired power generation to be added to the grid until 2050.

In briefing the media, Energy Minister Tina Joemat-Pettersson pointed to a number of factors that had been incorporated in the updated plan. Importantly, it addresses the fundamental shift in South Africa’s electricity demand; the implications of technological innovation in decreasing the costs of renewables; and the addition of new generating capacity that has quickly turned the country’s electricity deficit to surplus.

But one important matter is surprisingly absent in the discussion. Can the county afford the energy plan?

Funding the plan In normal times an energy plan might not need to focus on issues of finance and funding. But with South Africa’s credit rating under review, the National Treasury’s ability to provide support to the sector reaching its limits, and Eskom’s finances under threat, normal does not apply. In looking at funding issues, the first point to clarify is that private sector development of power projects offers no panacea. It is largely irrelevant whether these facilities are developed by the private sector or through public-private partnerships. In either case government will need to

32 Business Times Africa | 2016

provide financial guarantees to make them bankable. This has been the case for government’s partnership with the private sector in bringing more than 1800 MW of renewable power generation online, and for Eskom’s capital expansion programme which will add well over 10000 MW of new power generation capacity to the grid by 2022.

The problem is that government guarantee exposure to the power sector is already very high. At some R368 billion at the start of the financial year, this represents the lion’s share of total government guarantee exposure of some R467 billion.

This very point was raised by two rating agencies late last week. Moody’s Investor Services highlighted the “downward pressure” on the nation’s credit rating brought about by the accumulation of these contingent liabilities while FitchRatings cited concern over the level of government guarantees to independent power producers.

Eskom is essentially the “man in the middle”.

Government is relying on the utiliy’s ability to repay borrowings used to fund its capital expansion programme, and pay for power supplied from the private sector. Government stands as guarantor for both. How is Eskom proposing to meet its obligations? First up, it sees tariffs needing to increase by some 13.6% year-on-year through to 2021 to cover the costs of power purchases. Add to this the cost of borrowings needed to complete Eskom’s build programme. This could add another R50 billion or more to the tariff base by 2022.

The probability of Eskom receiving double digit tariff increases to the end of the decade has to be low. Consumer sentiment is negative, and there is a growing backlog of tariff determinations awaiting resolution in the Courts. If adding to these risk factors the hundreds of billions of added exposure

SOUTH AFRICA HAS A NEW ENERGY PLAN

indicated under the Integrated Resource Plan “base case”, the question to put to Treasury is – “are you feeling lucky”?

The tricky question of forecasting demand With power cuts still in the minds of many, it is perhaps difficult to appreciate the significant shift from deficit to surplus power supply achieved this past year. With two of the world’s largest power generating stations under construction and electricity usage trending downwards, South Africa may have an excess of generating capacity for some time to come.

In addressing these issues, the revised plan has set back new build nuclear power plants to 2037, and re-phased other new build dates as well. Still, significant levels of additional generation capacity are called for as early as 2021. These accumulate throughout the decade and beyond.

Planned-for generating capacity is driven by assumptions on future electricity demand, and studies will have been carried out in forming these estimates. To the degree that the assumptions on future demand drive investment plans – and they do– there are a

couple of points worth mentioning.

The plan assumes trend growth in electricity demand of 2.7% per year.

This is probably overstated for two reasons. First, there is the tendency to be overly optimistic on assumed GDP growth, which largely drives estimates of electricity consumption. This was the case in the 2010 version of the Integrated Resource Plan, and the same could be said for the revised plan.

Perhaps of greater significance is how electricity demand is assumed to respond to price increases. In looking at inputs to previous iterations of the plan, the price response catered for was based on the assumption that a doubling of tariffs leads to a 0.02% decrease in usage.

This is wrong, as backed up by numerous studies and just plain common sense. Electricity usage at residential, commercial and industrial levels does respond to large price increases. The tariff increases needed to recover the costs of additional generating capacity are substantial, and would no doubt add downward pressure on electricity demand.

This matters a great deal because the assumption about how much more demand there will be drives the plan’s capital expansion requirement. It

points to the need to add, on average, almost 4200 MW of generating capacity per year for the duration of the planning horizon – roughly equivalent to building another Medupi power station every 14 months up to 2050.

A bankable energy plan The process for finalising the plan includes Cabinet approval. Perhaps this is why the plan does not focus on investment and funding. That said, does it make sense to develop an energy plan that is unlikely to be bankable?

But let’s hope that this assumption is wrong, and that tariffs can remain stable in the face of increasing costs, that Eskom’s finances are strong, and that the National Treasury can sustain further increases to its exposure to the power sector.

With the contentious issue of nuclear build seemingly pushed back to 2037, perhaps there will now be time to consider these more pressing issues facing the energy sector. – Stephen Labson is Managing Director at SLECONOMICS PTY LTD, Senior Research Fellow, University of Johannesburg - The Conversation

2016 | Business Times Africa 33

ADVERTORIAL

interview with

KENNETH KWAMINA TH – CEO Dalex Finance & Leasing Co. Ltd

D

alex Finance and Leasing Company Ltd. (DALEX), won ‘Business of the Year’ and its CEO, Kenneth Kwamina Thompson, won the ‘Business Man of the Year’ at the 2016 Ghana Economic Forum Excellence Awards. Kenneth Kwamina Thompson was interviewed on the double awards.

To what do you attribute these awards?

Business growth and the triumph of business strategy even in adverse economic circumstances. The results of this triumph are: • Average Asset Growth of over 50% year-on-year; • Average Revenue Growth of over • 60% year-on-year; • Employees from under 170 in 2013 to over 2,200 in 2016; and • Introduction of Dalex SWIFT – first mobile money investment product How did Dalex Finance and Leasing Company Ltd. come about?

Circa 2006, Alex Bruks, an ex-staffer of the International Finance Corporation invites me to join him in setting up a finance house. I had at that time just moved on from Fidelity Capital partners where I managed the Fidelity Equity Fund I. My claim to fame then was that I had made some interesting private equity investments in the Information Technology sector. BusyInternet and theSOFTtribe were the biggest and most promising IT companies in Ghana and they were my “babies”.

I am an accountant by profession and had worked in some fairly large chartered accounting firms and also in Barclays Bank Plc all in the United Kingdom. Alex Bruks and I chose to set up a finance house because: our experience was primarily in the financial sector and the capital requirements though heavy were not as onerous as that of a commercial bank. At that time our desire was not really to be trail blazers. We looked around us for what products and stratagems worked for finance

36 Business Times Africa | 2016

houses and copied them.

Circa 2012, DALEX is now a Non-Bank Financial Institution licensed by the Bank of Ghana and offering SME loans, Salary Loans, Equipment Leasing and Fixed Deposit Accounts (FDA). We had grown: from a single office to offices in over 10 locations; staff size from 3 to over 150; given out over GHC 90 million in loans, and, served over 20,000 persons and organisations.

What drove the growth of DALEX in the first 6 years?

First, the economy of Ghana was experiencing fast and steady growth in those years. A reasonable well managed company would grow by just being in the right place at the right time.

Secondly, I was an accountant at heart. The bean counter in me was risk averse in a sector where my competitors were typically taking huge risks and they were periodically taking hits. The market rewarded DALEX’s prudence with bigger and bigger funds managed under our FDA product.

Thirdly, the increase in FDA funds correspondingly funded the increase in SME Loans and also in Salary Loans. Again, because of our prudence we had lower Non-Performing Loan ratios than was average in our sector.

Finally, the firm run by ‘the accountant’ was far more operation and cost efficient than most in the sector. Bank of Ghana statistics indicated that we had the one of the highest return on capital ratios.

Here was the big ‘BUT’, our growth was not founded on a clear business strategy. Our business was not founded on a desire to be different. Our value proposition to the various markets and clients was at best vaguely defined. DALEX at the end of 2012 lacked clarity, focus and direction since we were unsure of who we were and where we were going.

INTERVIEW WITH KENNETH KWAMINA THOMPSON

THOMPSON

2016 | Business Times Africa 37

INTERVIEW WITH KENNETH KWAMINA THOMPSON

What drove the exceptional and even phenomenal growth of the last 3 years?

It was the triumph of business strategy even in an adverse economic environment.

Circa 2012, but this time looking into the future: The election results are inconclusive… the parties are in court providing the highest rated daytime TV soap opera (or reality TV show) in Ghana.

The economy of Ghana is comatose as everybody and every business plays the wait and see game. The silence is at the same time eerie and deafening.

The Cedi exchange rate starts to take a dive.

In 2012 November, I had my epiphany at a leadership course at the Wharton Business School in Pennsylvania, USA. ‘The accountant’ was now a convert to the essence of business growth, strategy, culture, innovation and all the latest business jargon.

The ‘Bean Counter’ now had a deep desire to grow DALEX albeit in a much more difficult economic environment. DALEX would need to segment markets, identify competitive advantages, position brands and align strategy.

To succeed we would need to innovate rapidly in both markets and products. 2013-2019 was my opportunity to lead DALEX to a 7-year vision with ‘Big Hairy Audacious Goals’. To achieve the new growth goals, the practice of business strategy, culture, etc. would have to deliver beyond the expectations of my Wharton lecturers.

In practice, what did DALEX do?

• Convene business strategy sessions using external facilitators and best practices.

These sessions were designed to exploit the in-depth practical knowledge of staff and the external perspective of non-industry practitioners.

• Undertake Design Thinking tournaments to speed innovation where the range of participants were broadened to span markets rather than just industry experts.

• Undertake detailed branding exercises for existing and new products seeking to clearly establish our brand distinctiveness and comprehensive alignment of all elements of business and marketing strategy.

• Take a venture capitalist approach to piloting 38 Business Times Africa | 2016

new ideas and products ensuring that ideas and products were comprehensively tested and learnings were rigorously extracted. The objective was to apply the learnings and not for pilots to necessarily succeed.

How did the strategy impact the DALEX business?

The most significant impact was on the distribution and transaction speed of Salary Loans: • Distribution was changed from a primarily urban focus to a rural and peri-urban focus.

This was literally to move from a ‘Red Ocean’ to a ‘Blue Ocean’ market. Our higher priced loans were better able to compete in the rural and peri-urban areas.

• Distribution changed to a Fast-Moving Consumer Good (FMCG) model. From a branch sales model to an independent agent model. This enabled us to reach every district in Ghana without the cost of “brick and mortar” branches.

• Transaction speeds were greatly improved by technology in the form of innovative mobile phone apps. The mobile apps allowed independent agents to undertake credit scoring and also initiate disbursements.

• Loan disbursements were made from a single central source over the mobile money platform. This provided several benefits: improving speed of disbursement, removing cash carrying risk of agents, and, providing convenience to the clients through the network of over 50,000 mobile agents.

What were the business results?

Salary loans business results were outstanding: Between Jan 2013 and July 2016, Salary loan disbursements increased by 1,375% from an average of GH¢ 800,000.00 to GH¢ 11,000,000.00 a month.

• Salary Loan sales agents increased from 120 to 2000 persons from 2013 to 2016.

• Salary Loans profits went up by over 500% from end 2012 to end 2015 What do you say to emerging businesses like DALEX? Do not neglect strategy! Be different!

ZIMBABWE

As Zimbabwe's money runs out, so does Mugabe's power In Zimbabwe, where worthless $100 trillion notes serve as reminders of the perils of hyperinflation, President Robert Mugabe is printing a new currency that jeopardizes not just the economy but his own long grip on power

AFTER A 2008 MULTI-BILLION PERCENT INFLATIONARY MELTDOWN CAUSED BY RAMPANT MONEYPRINTING

40 Business Times Africa | 2016

I

n Zimbabwe, where worthless $100 trillion notes serve as reminders of the perils of hyperinflation, President Robert Mugabe is printing a new currency that jeopardizes not just the economy but his own long grip on power.

Six months ago, the 92-year-old announced plans to address chronic cash shortages by supplementing the dwindling U.S. dollars in circulation over the past seven years with 'bond notes', a quasi-currency expected at the end of November.

According to the Reserve Bank of Zimbabwe (RBZ), the bond notes are officially interchangeable 1:1 with the U.S. dollar and should ease the cash crunch. The central bank also promised to keep a tight lid on issuance.

After a 2008 multi-billion percent inflationary meltdown caused by rampant money-printing, many Zimbabweans are sceptical. The plan has already caused a run on the banks as Zimbabweans empty their accounts of hard currency.

Internal intelligence briefings seen by Reuters raise the possibility that the bond notes, if they crash, could spell the end of Mugabe's 36 years in charge.

A Sept. 29 Central Intelligence Organisation (CIO) report revealed the powerful army was as unhappy as the rest of the population with the new notes and had told Africa's oldest leader to "wake up and smell the coffee". "Top security officers have told Mugabe not to blame them if

TOP SECURITY OFFICERS HAVE TOLD MUGABE NOT TO BLAME THEM IF ROME STARTS TO BURN Rome starts to burn," the report said.

Reuters was unable to determine the author of the report. It is also unclear if Mugabe has seen the report, whose final audience is not specified. Mugabe's spokesman did not respond to requests for comment, nor was the CIO available. But the report offers a rare glimpse into the thinking of Mugabe's security forces - the backbone of his power - and their concerns about the implosion of what used to be one of Africa's most promising economies.

"Mugabe was openly told that the bond notes are going to cause his downfall," the report said.

Waiting For The Drop The notes' first test will come in the informal foreign exchange markets on the streets of Harare.

If they fall heavily in value, they are likely to un-

REUTERS/PHILIMON BULAWAYO/FILE PHOTO

ZIMBABWE'S MONEY RUNS OUT

President Robert Mugabe Addresses To His Supporters During An Election Rally In Chitungwiza, Zimbabwe June 26, 2008

leash an inflationary spiral that could bleed the banking system of its last few dollars and wipe out Zimbabweans' savings for the second time in less than a decade, economists say.

The same happened in 2008: powerful individuals with access to dollars at the official 1:1 rate were able to buy bond notes at a discount on the unofficial market and then convert them back to dollars IT'S LIKE BEING at face value.

ON DEATH ROW. "You start with one dollar, then you've got 10, then YOU DON'T you've got 100, then you've KNOW WHEN got 1,000 - and it's not even lunchtime," said John RobTHE HANGMAN IS ertson, one of Zimbabwe's respected private econGOING TO OPEN most omists.

In Harare's chaotic Road YOUR CELL DOOR Port bus station, the main terminus for those heading to and from South Africa, Zimbabwe's biggest trading partner, some bus operators are fearing the worst.

Required to pay nearly all their expenses - fuel, road tolls and police bribes in Zimbabwe and

South Africa - in hard currency cash, they are particularly exposed.

"It's like being on death row. You don't know when the hangman is going to open your cell door," said ticket-seller Simba Muchenje, pulling a wad of worthless 2008 Zimbabwe dollars from his briefcase and tossing them onto the counter. "It's just taking us back to the bad old days."

In interviews, none of eight money-changers trading South African rand and U.S. dollars said they would accept bond notes at their $1 face value because of fears of immediate depreciation. The rand and the U.S. dollar have become Zimbabwe's currencies since the local dollar was scrapped in 2009 "The banks may say 1:1, but here we say 2:1.

We can't afford to pay the same as the banks. I'm running a business, not a bank," said Patience, a 32-year-old money-changer.

Reassuring Words Given Zimbabwe's recent history of hyperinflation, the RBZ is keen to allay fears the printing presses are about to go into overdrive, and that the bond notes are a roundabout route to a new Zim2016 | Business Times Africa 41

ZIMBABWE'S MONEY RUNS OUT

An illegal foreign currency trader counts notes at a local bus station in the capital Harare, Zimbabwe, November 18, 2016. Picture taken November 18, 2016. REUTERS/Philimon Bulawayo

babwe dollar. "The introduction of bond notes does not mark the return of the Zimbabwe dollar through the back door," it said in a statement on its website. Instead, the bank has presented the notes as a 5 percent "export incentive" - a top-up added by the central bank to the accounts of those receiving foreign exchange either from overseas remittances or via farming, manufacturing and mining exports.

They are backed by a $200 million "loan facility" from Afreximbank, a Cairo-based lender owned by the African Development Bank and dozens of African governments and central banks. Afreximbank declined to comment.

Given monthly exports of roughly $250 million, the 5 percent 'top-up' suggests a monthly liquidity injection of just $12.5 million, or $1 for every Zimbabwean. In public statements, the RBZ has given assurances it will not exceed the $200 million issuance ceiling. "Upon withdrawal, banks have an option to pay in any one of the legal tenders," the RBZ said. RBZ Governor John Mangudya missed a scheduled interview with Reuters and did not respond to emailed questions.

42 Business Times Africa | 2016

No Dollars, No Fun Few Zimbabweans interviewed believed the RBZ would stick to the issuance limits, especially while a large current account deficit continues to suck dollars out of the country.

After the bond notes' announcement, #ThisFlag and #Tajamuka, social media campaigns targeting the new system, drew the biggest anti-Mugabe protests in a decade before being crushed by riot police and the CIO. Meanwhile, tens of IN HARARE, WHERE thousands across the country queue through the night to MOST U.S. DOLLAR empty their accounts the mo- BILLS ARE STAINED ment their pay or pensions arrive, exacerbating the liquidity DEEP BROWN WITH crunch. Banks have respondGRIME, A CRISP ed with daily withdrawal limits: $100 one day, $50 anoth- 2009-EDITION $100 er, none another. Customers have no idea until the banks NOTE IS NOW WORTH open their doors at 8 a.m.

AS MUCH AS $115 "Sometimes you get to the end of the queue and there's no money," said industrial fitter Edmund Panga-

ZIMBABWE'S MONEY RUNS OUT

nai, 40, outside a CABS building society branch in Harare. Every month, it takes him at least seven nights of queuing to get his hands on his pay. In Harare, where most U.S. dollar bills are stained deep brown with grime, a crisp 2009-edition $100 note is now worth as much as $115. Conversely, the plastic and mobile money introduced to ease physical cash shortages is depreciating, forcing vendors to charge a 10-15 percent premium.

One prostitute, who had been relying on e-wallet payment systems such as Ecocash, run by mobile firm Econet Wireless , said she and other sex workers were turning away customers without hard cash. "Ecocash? No thank you. Dollars, dollars, dollars," said Patience, a 22-year-old working a Harare street corner. "No dollars, no fun."

Army rationed Combined with unemployment at 90 percent and a government budget crunch that has seen delays in payment of state wages, the discontent is also pervading the army. The Sept. 29 CIO report said soldiers had applauded the social media protests Zimbabweans queue to withdraw cash from a local bank in the capital Harare, Zimbabwe November 2, 2016. REUTERS/Philimon Bulawayo because they had led to an improvement in daily rations.

"Before the demonstrations government had stopped supplying them with breakfast. At lunch ing him for the "serious plight" of the economy they were being fed with sadza (maize meal) and and discord in the ruling ZANU-PF party. cabbage without cooking oil. Mugabe instructed "We are dedicated to stop this rot," they said in for the army officers to be given descent meals so a statement. As fears over the bond notes have they will rally behind him," the report said. Othgrown and the battle to succeed Mugabe has iner intelligence reports from late tensified, they have continued September and early October THE ISSUE OF THE to flex their muscle."Once you suggested Mugabe was having go wrong with us, you automatBOND NOTES IS doubts about the bond notes. ically go wrong with the whole Reuters was unable to confirm GIVING MUGABE state apparatus," veterans leadthis. er Chris Mutsvangwa told Reu "The issue of the bond notes is SLEEPLESS NIGHTS ters. giving Mugabe sleepless nights,"

The veterans enjoy warm ties MUGABE IS SERIOUS one said. "Mugabe is serious with the army and security serthinking of delaying the intro[SIC] THINKING vices, and want Vice-President duction of the bond until January Emmerson Mnangagwa, a forOF DELAYING THE next year." Another report said mer security chief nicknamed army officers were frustrated INTRODUCTION OF "The Crocodile", to take over with pay delays and withdrawfrom Mugabe, political anaal limits."They are very angry as THE BOND lysts say. On the other side is a they are failing to access their faction attached to Mugabe's money from the banks and do 51-year-old wife, Grace. not want to be issued with bonds," it said. "These Mugabe responded to the growing pressure on junior and middle-ranked officers reckon that Nov. 19 with an address in which he admitted falMugabe has failed, hence he needs to step down libility and gave a rare hint at retirement. "If I am for new blood to replace him." making mistakes, you should tell me. I will go," he Veterans At War said, before adding: "Change should come in a In July, veterans of the 1964-1979 liberation war proper way. If I have to retire, let me retire properthat brought Mugabe to power broke ranks, acly." - Rtrs cusing him of "dictatorial tendencies" and blam2016 | Business Times Africa 43

DRC

Risky business: Alphamin’s DRC mining gamble Investors say there is no reward without risk, but some take this credo to greater extremes than others.

M THE BISIE MINE IS EXPECTED TO PRODUCE SOME 9,900 TONNES OF LOW COST TIN CONCENTRATE FOR 12 YEARS

44 Business Times Africa | 2016

ining firm Alphamin is intent on building the Democratic Republic of Congo’s (DRC) a mine in the northeastern province of North Kivu. It will be the first modern mining operation in this historically insecure region of the Congo. The Toronto-listed firm is breaking ground at a site called Bisie, in the Walikale territory of North Kivu. It boasts among the world’s richest tin deposits. However, the challenges – from poor infrastructure to roving militant groups – are all too real.

Alphamin plans to put $134m into pre-production investment, then to raise debt and equity through 2016 and 2017 to fund the ramp-up phase and working capital. The Bisie mine is expected to produce some 9,900 tonnes of low cost tin concentrate for 12 years, with first yields expected at the end of 2018 according to the firm. With a promised 48.4 percent internal rate of return for investors, it is easy to see how many would bite despite the risks.

However the project has certainly not been easy. The remote location and lack of infrastructure in much of the DRC means the company has had to build its own road to the site using little more than manual labour. A mobile phone tower only recently went up in the area.

Then there is the question of security.

Walikale is now safer than many parts of conflict-prone North Kivu. However as recently as 2014, militant groups operating in the area attacked Alphamin’s base camp, which fell within the territory of three competing armed groups.

One might wonder why a company would choose to set up operations in one of the DRC’s most unstable areas even as a constitutional crisis over the rule of president Joseph Kabila

threatens to tip the entire country back towards conflict.

Boris Kamstra, chief executive of Alphamin Resources Corp, says the firm had been exploring various commercial options but decided that tin stands out as a particularly interesting commodity. Prices for the metal are on the rise, and changes in technology are fueling demand.

“The demand profile for tin changed completely when it was included in electronic solders to replace lead. You have a historic lack of exploration and underdevelopment of tin assets, which looking forward gives you a declining supply,” Mr Kamstra explains. He downplays the risk from armed groups, saying most are now based outside Walikale and further eastwards, while stressing the work Alphamin has put into developing ties to the local communities in which it operates.

However rebel groups still act as competition to outsiders arriving to mine in ‘their’ areas, as well as targeting companies for extortion and banditry. DRC has a long history of its rich mining assets being coopted by militant groups to fund their violent campaigns. A 2013 UN report estimates that 98 percent of the gold sold from Congo that year was smuggled out, mostly through neighbouring Uganda.

Fueling conflict?

Alphamin does attempt to address the problem of conflict minerals explicitly. The company says the Bisie mine will comply with the US DoddFrank Act.The Act, a wide-ranging reform bill focused mostly on financial sector reform after the 2008 financial crisis, includes a requirement that all US-listed companies determine origins

RISKY BUSINESS: ALPHAMIN'S DRC MINING GAMBLE

Workers for Alphamin Bisie Mining built a 32 kilometer access road to the Bisie tin deposit

for gold, tin, tungsten and tantalum sourced from the DRC or an adjoining country.

The idea is that transparency in value chains will weed out conflict minerals, starving the groups that depend on their revenues. This is much easier to do in theory than in practice.

At present more than 50 different armed groups still operate in the DRC's borderlands, often forcing the local population to join their ranks, participate in their military and logistical activities or to turn a blind eye to criminal activities. Determining loyalties, as well as origins of mineral exports, is difficult in this fluid context.

Henri Ladyi, who leads the Centre Résolution Conflits (CRC) peace group in North Kivu, says that rebel groups have been forcibly recruiting workers and fighters during a string of bloody raids in 2015 and 2016. They target and kidnap “strong young people” who, after being trained in the bush, are used to help the militias.

He says armed groups also try to trick younger recruits into joining them.“Some local people are getting information that there are number of [plots] available for them for agriculture, so they are moving from their village into the zone that is controlled by rebels,” he says. Criminalised rebel groups can pose as credible employers or protectors because many young Congolese have grown up with the instability caused by these armed groups and see the situation as normal.

There are also very few legitimate alternatives in North Kivu, exacerbating the conflict and risks for companies that come into the areas.

Bjorn van Wees, Africa analyst at the Economist Intelligence Unit, does not think that the arrival of a large Western mining company like Alphamin will make much of a difference to the employment prospects of young people in the region. “Investment projects are clearly a very important part of any peacebuilding process.

The creation of jobs and revenue-generating activities can help boost stability. Unfortunately in the DRC, the authorities are ill-equipped to make good use of the revenues generated by mining projects,” he says.

He also warns that bringing in a project of this scale and then failing to live up to local expectations can have serious consequences. “A failure by the government to ensure that benefits from the new tin mine...go beyond jobs could heighten tensions if government revenues from the project are not invested back into the community,” he points out.

Breaking the longstanding link between the area’s abundant natural resources, illicit smuggling networks and armed groups will only happen if the DRC’s government can provide the security that legitimate large and small employers need to return to the area.

Until then, the only companies that will venture out to North Kivu will be the ones like Alphamin who can afford to bring their own private security with them – and even then their ventures will be met with scepticism in many quarters. – This report if from ThisIsAfrica

2016 | Business Times Africa 45

EGYPT

In Egypt, IMF money to flow as austerity bites On the surface, the November 11 announcement of the approval of a $12bn IMF loan package to Egypt is a blessing for a country that is in desperate need of external financing.

EGYPT'S DEBTS TO INTERNATIONAL OIL AND GAS COMPANIES ROSE TO $3.6BN IN OCTOBER

46 Business Times Africa | 2016

O

n the surface, the November 11 announcement of the approval of a $12bn IMF loan package to Egypt is a blessing for a country that is in desperate need of external financing.

The long list of deeply entrenched problems with Egypt's economy have piled ever higher over the past year as a crippling dollar shortage has hit the country's financial institutions.

Revenues from the largest industry, the tourism sector, fell more than 40 percent in 2016, diving well below already depressed levels. Youth unemployment levels have remained in the critical 30-40 percent range.But IMF support, announced with slick public relations materials, comes alongside fiscal austerity measures.

The question, according Heba al-Laithy, professor of statistics and economics at Cairo University, is whether the country and its people can bear the further strains.“This deal will of course show some improvement in macroeconomic indicators. However at the micro level it will probably have very serious consequences for living standards, and for inflation in this very high unemployment rate environment,” Ms al-Laithy says. The austerity programme includes an electricity price hike, a cut to petrol subsidies, privatisation of state-owned companies, civil service reductions, and the floatation

on November 3 of the Egyptian pound. Egyptian citizens, already used to years of economic pain, will be feel the pinch even more.

Businesses hope that the currency devaluation will tempt foreign investment into Egypt's capital markets. The finance ministry has promised inflation will remain under control, but there are already signs of severe inflationary pressure.

The effects, Ms al-Laithy claims, could be very serious for the poorest Egyptians. “Around one third of the population are already in poverty, without access to basic needs, and in my assessment that number is going to increase by at least 10 percent even with the increase in subsidy allowance,” she warns.

However other options for President Abdel Fatteh el-Sisi and his government to turn the economy around are running out. Egypt's debts to international oil and gas companies rose to $3.6bn in October, and the budget deficit is also growing. It reached 12.2 percent of GDP in 2016.

Some fear that, despite the government and the IMF’s assurances, the loans will be frittered away paying off existing debts to foreign creditors including to international oil companies rather than on investment in poverty reduction measures and job creating sectors of the

IN EGYPT, IMF MONEY TO FLOW AS AUSTERITY BITES

economy. Critics of the deal are not standing idly by. Ali Ayoub, a lawyer based in Cairo, will challenge the IMF deal in the courts. He filed a lawsuit at the administrative court in Cairo challenging the agreement on November 15.“This deal is against the Egyptian constitution, specifically articles 101 and 127, which clearly say that such agreements must be presented by the government to parliament, which was never done,” Mr Ayoub says.

“There is no plan for this money, there are no new economic programmes, no projects to support the economy – this money will just be used to pay off the debts to the foreign oil companies. Parliament should have a say over this.”

Ms al-Laithy at Cairo University concurs that information on the government’s plans for the IMF funds remain thin. “We are not yet sure exactly how the money will be spent, but much of it will likely go towards servicing other debts.

I do not anticipate that it will go towards supporting the productive sectors of the economy at all,” she says. The new fiscal programme includes a commitment that an additional one percent of GDP be allocated for protecting the poorest citizens from rising inflation, which in August reached north of 15 percent. So far it is unclear how this might be implemented.

The ministry of international cooperation has already announced that in addition to the IMF loans, Egypt is seeking $800m in loans from European Union member states to support poverty alleviation.

Some are concerned that the government will repeat patterns of taking on debt with little trickle down effect into the rest of the economy. “We are going to get loans from everywhere. Maybe the interest rate is a bit lower in this case but in the end it will evaporate like all the other loans we've had without improvements in living standards,” says Ms al-Laithy.

There are already signs of popular unrest prompted by the knock on effects of austerity.

On October 18, large protests were held in Port Said condemning rent hikes and shortages of state-subsidised baby formula.

In Alexandria, taxi driver Ashraf Shahin protested rising living costs before setting himself on fire in front of a military club. He later died of his wounds.

On the day the IMF agreement was approved S&P upgraded its outlook on Egypt from negative to stable. Should fiscal austerity take further tolls, however, the assessments of distant ratings agencies will provide scant protection for the poor against destitution and for the regime against popular anger.

“What Egypt really needs is investment in the productive sectors of the economy, in education, and in health, not loan repayments on imports – this is just a kind of aspirin approach,” says Ms al-Laithy.“I can't see any chance that the funds will be spent on improving education, health, or the productive sector,” she concludes. – This report is by ThisIsAfrica

ON THE DAY THE IMF AGREEMENT WAS APPROVED S&P UPGRADED ITS OUTLOOK ON EGYPT FROM NEGATIVE TO STABLE

2016 | Business Times Africa 47

NIGERIA

Is Nigeria ready for revival?

Nigeria was once feted as Africa's leading economy. However, attacks on its oil infrastructure and a dollar liquidity crunch have pushed it into recession. But the government is determined to push through strategies that will revive this regional powerhouse.

N

igeria’s ascent to assume the mantle of Africa’s leading economy is one of the more impressive emerging market growth stories of recent times. But, in common with many of the country’s peers, this trajectory has been volatile, characterised by surging highs and challenging lows. The past two years have been no exception, as lower oil prices have hit the economy hard. Today, Nigeria is dealing with several vexing problems, including a dollar liquidity crunch and growing insecurity in the oil-producing Niger Delta.

In July, inflation hit an 11-year high of 17.1%, while second-quarter growth figures revealed that the economy had entered into a recession for the first time in more than 20 years. These difficulties are having a material impact on the wellbeing of a population that is increasing more quickly than gross domestic product (GDP) growth, which is projected to contract by about 1.8% this year.

Infrastructure spending But the authorities are responding to these setbacks with a mix of policy changes and supportive spending plans to bring about positive change. In June, the Central Bank of Nigeria

48 Business Times Africa | 2016

(CBN) implemented a flexible exchange rate for the naira, while the administration of president Muhammadu Buhari is trying to push ahead with ambitious spending plans to develop the country’s infrastructure.

For Nigeria, there will be no easy or immediate fix, though the government is now handling the situation with an improved set of policy tools. With further reforms, there is a strong chance IN JUNE, THE it will be able to bounce back CENTRAL BANK more quickly than expected. To its advantage, Nigeria boasts a OF NIGERIA (CBN) solid banking system, a large emerging middle class and an in- IMPLEMENTED vestment opportunity suite that spans multiple sectors. Leverag- A FLEXIBLE ing this potential while shielding EXCHANGE RATE it from the worst of the current crisis is now at the top of the gov- FOR THE NAIRA ernment’s agenda.

Indeed, a number of business leaders view the current environment as an opportunity to achieve lasting economic reform.

“Nigeria’s economy is facing a number of serious challenges today. But there is an abundance of latent potential and I think the current situation will be a turning point in terms of achieving

IS NIGERIA READY FOR REVIVAL?

greater diversification,” says Peter Amangbo, chief executive of Zenith Bank, the country’s largest lender.

Oil attacks For now, however, Nigeria’s most invidious problem – that of a dollar liquidity shortage – must be corrected. Collapsing crude oil prices were the proximate cause of this deficiency.

But the initial challenge has been exacerbated by the country’s declining crude oil production as a result of rising militant activity in the Niger Delta. By early 2016, attacks on oil facilities had become so severe that Nigeria lost its status as Africa’s biggest oil producer to Angola. In doing so, it lost a crucial source of US dollar revenue.

“During the [former president] Goodluck Jonathan era, the main problem facing Nigeria’s oil sector was the issue of bunkering [theft from pipelines]. Today, it is militants’ attacks on oil facilities in the Niger Delta that is shutting in production,” says Yvonne Mhango, director and sub-Saharan Africa economist at Renaissance Capital. “Even if oil prices rebounded, it won’t have a material effect on the country because production levels are so depressed.”

The impact has been challenging as government revenues and exports have both taken a hit, diminishing public investment and cutting off much needed supplies of hard currency.

There have also been knock-on effects for the non-oil economy.

Broad-based recession In the second quarter of 2016, the national statistics agency revealed that Nigeria had entered into a recession, which appeared to be relatively broad-based across both hydrocarbon and non-hydrocarbon sectors.

“The slowdown in non-oil growth is related to the lack of dollar liquidity. Though the nonoil economy accounts for 90% of GDP, it relies on the hard currency generated by the oil sector to secure imports,” says Oyin Anubi, sub-Saharan Africa economist at Bank of America Merrill Lynch.

Collectively, in June 2016 these challenges led the CBN to abandon its administrative dollar peg, which had been in place since February 2015. While this policy helped to stabilise the currency and ward off inflationary pressures that would have affected ordinary Nigerians during the period, it also earned the criticism of investors and other market participants due to the various restrictions put in place to achieve 2016 | Business Times Africa 49

IS NIGERIA READY FOR REVIVAL?

the peg. These included import restrictions and trading limits on the interbank market, among other measures.

Welcomed FX strategy

THE SLOWDOWN IN NON-OIL GROWTH IS RELATED TO THE LACK OF DOLLAR LIQUIDITY

50 Business Times Africa | 2016

As such, the CBN’s move to a flexible exchange rate regime was welcomed by both local businesses, particularly those reliant on imports, and international investors, who viewed it as a way to boost foreign exchange liquidity and invigorate trading activity. “This was a very bold move by the central bank. It has helped a lot in terms of restoring confidence in the market,” says Mr Amangbo.

Although it had an immediate impact – the naira lost 30% of its value against the dollar on June 20 – in the intervening weeks, a gap between the official and parallel exchange rates has emerged once more.

“The level at which the foreign exchange market is now operating is not considered to be a sufficient adjustment by some businesses and investors. There’s a still a gap between the parallel and official rates,” says Abubakar Suleiman, executive director at Sterling Bank.

According to research from pan-African lender Ecobank, this reflects a structural mismatch between US dollar supply and demand.

Here, the steep drop-off in oil production is playing a big role in diminishing the quantity of dollars in Nigeria’s economy. By May 2016, production had fallen to about 1.4 million bar-

rels a day (b/d) from an average of 1.8m b/d in the first quarter of the year and 1.9m b/d in the fourth quarter of 2015. At the time of writing more recent data was unavailable, although further production declines were anticipated.

“Given the lack of progress in talks between the government and the Niger Delta militants, we expect production to remain depressed in the second half of 2016. This could further weaken the naira, along with Nigeria’s balance of payments position,” says Renaissance Capital’s Ms Mhango.

Liquidity boost To improve liquidity levels on the interbank market, it will be vital to stabilise and then increase oil production. The government’s drive to secure external financing in support of a record $19.4bn budget, which includes a tripling of capital expenditure, will also provide an indirect boost. In early September, Bloomberg reported that the federal government had agreed to long-term loans with the World Bank, the African Development Bank, China and Japan, though the value of this financing was unclear.

Nigeria was expected to borrow about $3bn from the World Bank and African Development Bank, following comments made by the country’s finance minister in June. It is also expected to raise about $1bn in Eurobonds before the end of the year.

“Dollar liquidity remains constrained and

IS NIGERIA READY FOR REVIVAL?

until the sovereign attracts new dollar funding, Nigerian corporates will continue to struggle. Securing external financing will improve dollar flows between the banks in Nigeria. Once this happens, the backlog of outstanding transactions [on the interbank market] can then be settled and the market will begin to function effectively,” says Mr Suleiman.

If the government’s spending plans can be realised, they will go some way to addressing some of the country’s current ills, including high unemployment. Moreover, the emphasis on infrastructure development will give a much-needed boost to the sectors of the economy that have escaped the current malaise, such as agriculture and mining. And, with these improvements in place, there is every chance that their growth could accelerate further in the coming years.

“Growth in the mining and agriculture sectors has been strong in recent times and it appears to be quite sustainable [over the long term],” says Mr Suleiman.

Agriculture and healthcare For their part, Nigeria’s banks stand ready to support this booming growth and are actively seeking to diversify their loan books away from traditionally dominant sectors. Zenith Bank, the country’s largest lender, has identified the agricultural sector as a key pillar of its growth, for instance.

Similarly, Sterling Bank is supporting investments in both the health and education sectors.

But the country’s banking system has not been immune from many of the current challenges. Even the largest lenders are feeling the pinch of slower economic growth, exposure to the oil and gas sector and higher operating expenses.

“The near-term challenges facing the banking system are broadly hinged on macroeconomic uncertainties. The slowing economy and contraction of GDP in the first half of the year reflect the weak level of economic activity occurring in the country and [more limited opportunities] for banking sector growth,” says Mr Ugochukwu Nwaghodoh, group chief finance officer at United Bank for Africa.

Today, Nigeria is at a juncture. With the right reforms and a commitment to the further liberalisation of the economy, this could be an excellent opportunity to re-

vive a regional powerhouse. Much will depend on the government’s commitment to meaningful change as well as the restoration of confidence among both local and international investors.

Better transparency Early signs have been encouraging – the transparency of key public institutions has increased, while reforms have strengthened the ability of the country’s financial sector to weather adverse economic conditions. “Today there is unprecedented transparency in the Nigerian National Petroleum Corporation and a number of opaque contracts have been cancelled.

The banking sector is in better shape than it was before the previous crisis [in 2008], and reforms from the central bank have helped,” says Ms Anubi at Bank of America Merrill Lynch.

Nigeria’s progress from here is unlikely to be linear. But there is every chance it will continue on a forward march. – This report is from The Banker

THE NEAR-TERM CHALLENGES FACING THE BANKING SYSTEM ARE BROADLY HINGED ON MACROECONOMIC UNCERTAINTIES.

CENTRAL BANK OF NIGERIA 2016 | Business Times Africa 51

ETHIOPIA

Political unrest hits Ethiopia FDI Violent protest could spell the end of Ethiopia’s impressive upward economic trend.

A

AN ESTIMATED 24 FOREIGN COMPANIES HAVE SUFFERED MILLIONS OF DOLLARS IN DAMAGE

52 Business Times Africa | 2016

nti-government protests in Ethiopia have been reignited after 55 people were killed at a festival-turned-protest in early October. Widespread demonstrations followed and foreign businesses have become symbolic targets for anti-government protest. A six-month state of emergency now prevails, alongside a plethora of tough counter-measures. An estimated 24 foreign companies have suffered millions of dollars in damage this October, according to UK-based consultancy Verisk Maplecroft. News site AllAfrica reports that 11 factories have been burned and seven foreign-owned flower farms damaged, such as AfricaJuice, which employs 2000 people.

The violence follows a wave of unrest that began last November among the Oromo, Ethiopia’s biggest ethnic group. Originally, protesters railed against the government’s plan to expand Addis Ababa into surrounding Oromo lands. However, their demands have escalated to include broader reforms, not least because 500 people have been killed by security forces since last year, according to Human Rights Watch.

The Oroma claim they are politically and economically marginalised. The People’s Revolutionary Democratic Front (PRDF), dominated by the Tigray minority, has ruled since 1991 and maintained an ambitious economic programme that relies heavily on FDI. Ethiopia’s GDP growth has been exemplary, averaging nearly 10% since 2004, according to the World Bank. However, industrialisation has been crudely implemented, with Oromo and Amhara land being a prime target.

Protesters contend that they have received scant compensation for their displacement and benefited very little from the country’s stellar GDP growth.

For their part, foreign investors have reaped more obvious rewards and privileges as the government “attracts FDI by providing land and services cheaply”, says Awol Allo of the law department at the UK’s Keele University. Foreign investors have thus been increasingly targeted, especially of late.

The US has issued travel warnings, while the PRDF is limiting the movement of foreign nation-

als, because a US citizen was killed recently during a protest, possibly by accident.

Dutch company Esmeralda Farms and a USowned farm have already pulled out of Ethiopia.

“The government is rattled by the prospect of capital flight,” according to The Economist, and the state of emergency is “an attempt to reassure foreign investors [that] security is under control”.

However, although tough counter-measures such as arbitrary arrests and press limitations have restored stability in the past, the US government fears that the scale and nature of this episode may render such tactics “counter-productive” if grievances are not addressed.

Fitch Ratings states that “the key near-term risk from the unrest is… in particular, lower FDI.” According to greenfield FDI tracker fDi Markets, the number of greenfield investment has significantly fallen since last year. In 2016 to date, Ethiopia has secured only nine projects, while this time last year it reported 25 and in 2014, 31. More worryingly, Ethiopia’s main sources of FDI – the US, South Africa, India, Turkey, the UAE, Germany and the UK – have not undertaken any greenfield investment since November 2015, an unusually long but unsurprising interval.

Contrastingly, the latest greenfield investment from China, Ethiopia’s second largest source of FDI, was in July 2016. This reflects China’s commitment to increased outward investment – specifically the One Belt, One Road project – as does the recent completion of the $3.4bn Chinese-built railway between Ethiopia and Djibouti. For some, this is more evidence of China’s geopolitical gains in Africa, while some see the west as floundering.

The PRDF has fallen back on geopolitics to explain the recent unrest. It accused “foreign enemies”, namely sub-state Egyptian and Eritrean groups, of “arming, financing, and training those elements” intent on violence, terrorism and unrest, that is, the protesters.

As it stands, the Ethiopian government is keeping a lid on the cauldron. However, this time there is a sense that, should grievances remain unaddressed, instability could ensue and, with it, the ironic loss of PRDF’s prized FDI.

NIGERIA

Kenya-UK Trade and Investment Forum has upbeat mood Officials at a recent forum in London explained how Kenya is one of Africa's economic stars, and is attracting investment through its open and stable economy. However, security issues and a creaking infrastructure are still a cause for concern.

W

hile many of Africa’s key economies face falling growth and economic volatility, east Africa’s economic heartland and primary investment destination, Kenya, appears to be bucking the trend. The country’s growth in recent years is reflected by dramatic increases in inbound FDI. According to the World Bank, inward FDI to the country climbed from $163m in 2012 to $1.5bn in 2015, a 920% increase despite terrorist attacks carried out by militant group Al Shabaab in that time.

According to greenfield investment monitor fDi Markets, Kenya received its highest inflow of greenfield FDI in 2015, through 96 projects. This was a 55% increase from 2014, which saw the highest rate of investment since fDi Markets began monitoring investment in 2003. Thus, Kenya contributed to 12% of Africa’s inward FDI projects in 2015, making it the second most attractive location for FDI in Africa, second only to long-time powerhouse South Africa.

According to the IMF, Kenya’s GDP grew by 5.9% in 2015, which was followed with a further 6% growth in the first quarter of 2016. A 6.1% growth is forecast for 2017. The World Bank and the Kenyan central bank are projecting similar figures. Thus, Kenya’s performance and prospects continue to outpace most African counties – the IMF’s average GDP growth forecast for sub-Saharan Africa is a lowly 3%.

54 Business Times Africa | 2016

ACCORDING TO THE IMF, KENYA’S GDP GREW BY 5.9% IN 2015, WHICH WAS FOLLOWED WITH A FURTHER 6% GROWTH IN THE FIRST QUARTER OF 2016.

Additionally, EY’s Africa Attractiveness Index named Kenya and east Africa as a foremost growth region within the continent, and ranked it the fourth most attractive country for investment and business in Africa.

Forum enthusiasm The Kenya-UK Trade and Investment Forum, hosted in London by consultancy Developing Markets Associates in September, was coloured both by understandable optimism and occasional notes of caution from various private sector audience members. Driving the enthusiasm were Kenyan and UK government panellists, who were there to showcase Kenya to British businesses.

As the officials emphasised, Kenya and the UK enjoy a historic, healthy and lucrative relationship, reflected by their balance of trade and

KENYA-UK TRADE AND INVESTMENT FORUM HAS UPBEAT MOOD

Kenya’s cabinet secretary for foreign affairs, elaborated on the country’s attractions for FDI. With its business-friendly environment, she says, Kenya has “the right regulatory framework is in place” and commercial laws and courts have been improved.

Kenya is reputedly one of sub-Saharan Africa’s foremost open economies. The World Bank’s Doing Business report ranks it as one of Africa’s top five countries by this measure (although it fares poorly by global standards). Since 2013, president Uhuru Kenyatta has introduced a number of business-incentivising policies, such as lowering energy costs and offering a 10-year tax holiday for foreign investors setting up shop in the country.

However, Mr Kenyatta’s recent cap on bank loan interest rates, criticised by some as a populist move, could yet dent Kenya’s reputation and FDI attractiveness. On this matter, the country's central bank governor, Patrick Njoroge, says: “[Sometimes] one takes two steps backwards to leap forward. Kenya is wedded to market-based solutions… something we’ll go back to. Our positive direction is clear.”

Mr Njoroge also emphasises the resilience, diversity, stability and ongoing growth of the Kenyan economy. “Kenya has navigated shocks for 50 years. The story is of east Africa rising, not Africa,” he says. Indeed, in 2015 Mr Njoroge was widely praised for the manner in which he stabilised the Kenyan currency marAMBASSADOR AMINA MOHAMED, KENYAN DIPLOMAT ket. the fact that the UK is Kenya’s top exporter and source of FDI, making up 23% of inbound investment. Tobias Ellwood, a UK memIN 2015, EY ber of parliament and the country's minister for the Middle East and RANKED KENYA’S Africa, announced at the forum INFRASTRUCTURE the government’s impending inAS ‘MODERATE’ vestment of £500m ($651m) into AND THE WORLD Kenyan renewable energy, which was “an example of post-Brexit ECONOMIC FORUM business as usual”.

GAVE IT A SCORE OF 4.16 OUT OF SEVEN.

Kenyan allure In her keynote address and interview with fDi, Amina Mohamed,

Infrastructure and talent When it comes to Kenya's immediate prospects, Ms Mohamed says: “Seven percent GDP growth is possible for 2017. [No wonder] foreign companies in Kenya number 210, compared with 100 in 2010.” Ms Mohamed is also keen to emphasise Kenya’s position as east Africa’s main logistics and trade hub, which makes the country the gateway to surrounding markets. Like many emerging markets, bridging the infrastructural deficit is essential for Kenya, and with FDI and trade increasing, the country has shown signs of struggle. For example, Nairobi’s traffic is notoriously slow moving, and delays at Mombasa’s port 2016 | Business Times Africa 55

KENYA-UK TRADE AND INVESTMENT FORUM HAS UPBEAT MOOD

often force freighters to go elsewhere.

However, Ms Mohamed adds that Kenya’s “ongoing infrastructural improvements”, such as the Lamu Port South Sudan Ethiopia Transport corridor, which is bankrolled by Chinese investors and is expected to improve east African and pan-African connectivity through a series of new railways, highways and ports.

Separately, the current construction of a standard gauge railway, to replace the existing network in Kenya, which dates back to the colonial era, will reduce travel times from Mombasa to Nairobi by one-third. In 2015, EY ranked Kenya’s infrastructure as ‘moderate’ and the World Economic Forum gave it a score of 4.16 out of seven.

Another area that gives Ms Mohamed hope for the future is Kenya's workforce, which is, she says, young, well-educated, ambitious, fluent in English and tech-savvy – as shown by Kenya’s burgeoning ICT sector. She says numerous foreign companies, impressed by local talent, have abandoned plans to bring to the country a 50% more expensive foreign workforce. The United Nations Development Programme ranks Kenya’s education levels among the top 10 in Africa.

Security and corruption Reassuring those concerned about security issues is a key challenge in for Kenya. Ms Mohamed says that large-scale terrorist attacks carried out in the country are “isolated incidents”, with the last one being in May 2015, while adding that terrorism is an “international problem… no one is safe”.

She says Kenya has acquired the “latest equipment and technology” when it comes to countering terrorism and that it is leading east African efforts on this score, referring to the country's co-operation with the African Union Mission in Somalia and the UK. In light of the security forces’ much-criticised response times to the terrorist attacks on the Westgate Mall in 2013 and Garissa University in 2015, Ms Mohamed stresses that Kenya has improved inter-agency coordination and acquired 3000 new security vehicles to improve mobility, mainly to rural areas. “We’ve done everything we can,” she says.

However, technical improvements aside, Kenya’s forceful counter-terrorism strategy has drawn criticism from within the country and outside.

When it comes to corruption, Ms Mohamed says that “stamping it out” is a top priority, with both the World Bank’s and World Justice Project’s 56 Business Times Africa | 2016

corruption indices ranking Kenya among the bottom third countries in African countries when it comes to dealing with the matter. However, Ms Mohamed is keen to stress that “there are no serious challenges to inward FDI. Everything is in place – Kenya’s open for business.”

Private sector perspectives Most private sector investors at the Kenya-UK Trade and Investment Forum were non-Kenyans with ongoing operations in Kenya or Africa who were generally keen to sing Kenya’s praises.

Listed among the 100 most powerful telecoms giants by Global Telecoms Business, Nic Rudnik, the billionaire CEO of Liquid Telecoms and a specialist when it comes to operating in Africa, says: “Kenya is one of the most open economies on the continent. It’s already easy to invest there. Traffic’s the biggest impediment but [it is] investing in infrastructure.

“The legal system is good. You have got an independent judiciary, and there is lots of trust and respect for the system, from lawyers and businessmen to ordinary people.”

Peter Zwager, CEO of Oserian, one of Kenya’s largest flower exporters, adds that kenya is “great for busi- KENYA IS ONE OF ness and free trade”. However, he and Edwin White, THE MOST OPEN chairman of Nairobi-based ECONOMIES ON Daima Energy, add that government agencies and THE CONTINENT. bureaucracy in the country are too slow, and claim that IT’S ALREADY the legal system is ineffi- EASY TO INVEST cient, not least due to Kenya’s devolution of power in 2010. THERE. TRAFFIC’S They also voice concerns THE BIGGEST about its infrastructure. All three businessmen agree IMPEDIMENT BUT that terrorism is an issue for [IT IS] INVESTING IN prospective investors, but mainly because of distorted INFRASTRUCTURE perceptions or fear of Kenya’s inability to competently respond to threats. Mr Rudnik says: “Security is a global issue but it remains the biggest concern [in Kenya].” However, Mr Zwager believes security is only an issue for people living near the Kenya-Somali border. Indeed, all three investors reflect upon what EY calls "the wide perception gap” between settled investors and prospective investors that are unfamiliar with Africa.

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MOZAMBIQUE

Conflict targets mining sector in financially troubled Mozambique The escalating conflict between Mozambique's ruling party and the militant wing of Renamo, the opposition party, is weighing on the country's economic growth as anti-government fighters target key transport routes linked to the mining sector.

RENAMO REFUSES TO ACCEPT THE RESULTS OF MOZAMBIQUE'S 2014 ELECTION AND WANTS TO TAKE POWER IN SIX OF THE COUNTRY'S 11 PROVINCES.

58 Business Times Africa | 2016

R

enamo refuses to accept the results of Mozambique's 2014 election and wants to take power in six of the country's 11 provinces. The two parties fought on opposite sides of the country’s bitter civil war, which lasted more than 15 years and officially ended in 1992.

The country has stabilised and held elections since, but throughout 2016 attacks by Renamo have increasingly disrupted Mozambique's commodity exports, increasing costs for companies and scaring away foreign investment.

The attacks have raised concerns that the country could enter a cycle of increasing political instability and worsening financial problems that will ultimately lead to a sovereign default. The government approached bondholders at the end of October about restructuring its unsustainable debt load, which which currently stands at 130 percent of GDP. The deteriorating security situation looks set to compound the country’s economic problems. In January, fighting between government troops and Renamo forced around 2000 Mozambicans to flee the country's coal-mining heartland of Tete, according to the UN Refugee Agency.

Road and rail traffic linked to the coal mines has also been regularly targeted by militants. In June and July, Renamo gunmen carried out a series of attacks on the Sena railway line, one of

two lines used to export coal from mines in Tete province. This led to the Brazilian mining company Vale indefinitely suspending its use of the Sena line, reducing capacity to export from the company's Moatize coal mine. The mine started producing in 2011 and is the fourth biggest coal mine in the world. These incidents were followed by two more in October targeting the remaining Nacala railway line, sparking fears that it too might see shipments suspended.

The disruption to the mining sector is likely to to take a significant toll. “When it comes THE to stabilising Mozambique's econo- DETERIORATING my the importance SECURITY of Mozambique's SITUATION mining sector should not be underesti- LOOKS SET TO mated,” says Chris COMPOUND McKeon, an analyst THE COUNTRY’S at political risk firm ECONOMIC Verisk Maplecroft.

“If a mine closes PROBLEMS or reduces output it sends a shockwave through the economy – negatively impacting a wide range of businesses – from logistics compa-

CONFLICT TARGETS MINING SECTOR IN FINANCIALLY TROUBLED MOZAMBIQUE

nies, to businesses that provide services to mine workers and those that supply building materials.”

OVER 2016, MOZAMBIQUE'S CURRENCY, THE METICAL, LOST AROUND 40 PERCENT OF ITS VALUE AGAINST THE DOLLAR

Troubled economy

In addition to its ballooning debt load, Mozambique fell foul of international creditors earlier this year. The IMF suspended its programme in Mozambique in April when it emerged that the country's government had hidden loans worth $1.4bn from the Washington-based lender while finalising a bailout package.

Prior to the programme's suspension the IMF was due to disburse the first $117.9m instalment

of a $283m standby credit facility by December.

Talks have since resumed between government officials and the IMF, but the country's position remains precarious. By its own rules, the IMF will not be able to intervene until the government takes steps to rectify its debt distress.

Over 2016, Mozambique's currency, the metical, lost around 40 percent of its value against the dollar. On September 30, the central bank announced that it had been forced to bail out the country's fourth largest lender, Moza Banko.

On September 29, the IMF said that it expects growth to be 3.7 percent in 2016, down from 6.6 percent in 2015.

The disruption to Mozambique's mining sector is also limiting the country's access to foreign currency at a time when it needs to bolster reserves in order to service dollar-denominated debt and fund imports. According to data published by Mozambique's central bank, the country had foreign reserves of $1.9bn at the end of June – a 26 percent drop year on year and the equivalent to only 3.2 months worth of imports.

Reserves are considered inadequate if they dip below three months, according to a rule of thumb used by economists at the IMF. “Even if the numbers reported are accurate – Mozambique's lack of foreign reserves is worrying,” says Mr McKeon.

“It will be interesting to see what deal, if any, they are able to make to avoid defaulting.”

The outlook for political stability over the coming months is bleak according to both analysts and private sector participants – with recent events casting a shadow over planned negotiations between Mozambique's ruling party, Frelimo, and Renamo.

On October 28, officials announced that the latest round of peace talks between the two parties had failed to produce any tangible results.

Peace talks were undermined on October 8 when the senior Renamo negotiator Jeremias Pondeca was shot dead whilst jogging on the beach in Mozambique's capital, Maputo.

The day before the shooting, Renamo president Afonso Dhlakama rejected a ceasefire proposed by international mediators, saying that the group would lose out if it agreed to stop militant activities. “Frelimo accepts some things because it is losing on the ground,” he told the Portuguese news agency Lusa, of talks with the ruling party.

“If we accept a ceasefire now without an agreement with Frelimo, negotiations might take two to four years, because they are in power now and there would no longer be any discomfort for them.”

2016 | Business Times Africa 59

ZIMBABWE

Can a cashless society save Zimbabwe?

Zimbabwe's banks are running out of cash and there's a sense of distrust, panic and frustration among locals.

S

ince the hyperinflation of 2009, Zimbabwe has depended largely on the U.S. dollar.

But given the country's political and economic troubles and the introduction of "bond" notes, many have begun hoarding cash. The cash liquidity crunch is extreme.

Locals are forced to queue for hours outside banks for the chance to withdraw a maximum of $50 from their account each day -- and some are even being turned away simply because the banks don't have enough cash in their vaults.This country has nine currencies -- and formerly had a 100 trillion dollar bank note IHS economist, Alisa Strobel, told CNN the cash-flow crisis has been evolving for a few years and is fueled by low confidence in the country's banking sector.

"The rise of uncertainty over the impact of the introduction of bond notes ... has led to fears by the population of a repetition of 2009's hyperinflation." She says people are making "panic withdrawals" because of the fear that the country is running out of money and that retailers are unlikely to willingly accept payments in bond notes.

President of the Bankers Association of Zimbabwe (BAZ), Charity Jinya, told CNN that banks are working on a solution to reduce the heavy reliance on cash. p+-Banks have streamlined daily cash withdrawals and continue to encourage wider use of electronic [or] digital payment platforms," she said. So perhaps now is the perfect opportunity, analysts argue, for Zimbabwe to

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LOCALS ARE FORCED TO QUEUE FOR HOURS OUTSIDE BANKS FOR THE CHANCE TO WITHDRAW A MAXIMUM OF $50 FROM THEIR ACCOUNT EACH DAY really embrace the latest technological developments and adopt an alternative solution to their crisis: a completely cashless society.

An electronic, cashless society While the idea of a cashless society is new, Zimbabweans have only begun embracing digital payments purely out of necessity. "It's no longer an issue of choice, but [instead] what's available to you as a means of making a payment or transaction work," tech analyst, Nigel Gambanga told CNN. "Over the past few months there's been a lot of optimism about how plastic money has surged -- it's going up a rate of 15% each month."

Locals are increasingly using mobile money, he said, estimating that three quarters of the

CAN A CASHLESS SOCIETY SAVE ZIMBABWE?

Zimbabweans can queue for hours outside banks after government slapped limits on cash withdrawals and announced the introduction of bond notes

population had an account which enabled them to send and receive payments at a push of a button. BAZ president Jinya said mobile money transfers are just one of the ways Zimbabweans were "embracing the use of digital payment platforms."

Others included internet banking and the use of 'plastic' money -- like debit cards -- at point of sale machines. But while Gambanga said a cashless society is a good idea, it's not a long term fix: "The government still needs to fix the problems related to the monetary supply." He also added that while many large retailers and grocery stories "gladly" accept e-payments, many locals still face some challenges when buying items, particularly from the informal sector.

THE CRISIS AND THE NEED FOR HARD CASH HAS ALSO FORCED MANY INTO THE BLACK MARKET

Fighting the demand for cash Because many Zimbabweans work in the informal sector, cash is still being demanded as the only means of payment during sales. "There's still transactions that people face every month that requires a bit of a cash," Gambanga said. Many prefer cash payments because they import goods from across the border using foreign currency, he said, adding that if someone can only pay electronically, a premium will be added onto the final price. "They'll tell you it'll cost $5 in cash but if you pay in mobile money it'll cost you $7.50 because they'll need to figure out how to access the money."

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CAN A CASHLESS SOCIETY SAVE ZIMBABWE?

BAZ's Jinya said the association realized that the informal sector needed help adapting. "Opportunities exist for the informal sector which needs technology that is easy to use and that will assist them to transact especially in low values."

The crisis and the need for hard cash has also forced many into the black market, IHS economist Strobel said, where dealers are trading the dollar for electronic dollars for a higher rate.

A cashless society: a useful legacy of the crisis?

Laurence Chandy, a fellow at Brookings Institution's global program, said that while a cashless society is "a way of lessening the chaos" in Zimbabwe, it can't fix the crisis alone -- people need to start trusting financial institutions again.

"People have reason to be distrusting," he said, adding that a cashless society in Zimbabwe is only feasible if it can tick three boxes: confidence, affordability and reliability. While Chandy believes payments in Zimbabwe's could go completely digital, there's still a lot of work to be done People need to be confident their electronic money will be accepted as tender with anyone they transact with, there can't be any additional charges for making the payments and the digital infrastructure needs to be flawless to ensure every payment goes through successfully. "What mobile can do is deal with the affordability and 62 Business Times Africa | 2016

reliability issue, but they can't do much about the credibility issue. "Ensuring confidence among its users isn't entirely in a telco (telecommunication) company's control." If broader reforms were made by the government and financial institutions which encouraged foreign investment and exports, Chandy explained, a cashless society could be highly beneficial in the long term for Zimbabwe. "It would lend itself to an economy which is much more secure where transaction costs are much lower and where the informal economy could be incorporated into the formal sector because transactions can be monitored effectively." "I think that's the possible upshot of all of this," he said, "it might end up being a useful legacy of the crisis." "If we see broader reforms then it'll accelerate Zimbabwe into this future paradigm cashless society."

IF WE SEE BROADER REFORMS THEN IT'LL ACCELERATE ZIMBABWE INTO THIS FUTURE PARADIGM CASHLESS SOCIETY

UNITED STATES

How Barack Obama changed America

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n May 2010, Time magazine tells us, Barack Obama invited a group of America's most distinguished presidential historians to dinner at the White House. He was searching for ideas, examples and "lessons from his predecessors."

"But as the conversation progressed," Time reported, "it became clear to several in the room that Obama" was most interested in the accomplishments of Ronald Reagan.

Reagan on first glance was an unlikely role model -- an arch-conservative, actor-turned-politician who was better known for his anecdotes and humor than analysis and intellect.

But Obama saw that Reagan had been a transformational president, someone who, as he said while campaigning in 2008, had "changed the trajectory of America in a way that Richard Nixon did not and in a way that Bill Clinton did not."

Clearly that was Obama's aspiration as well -- to change the trajectory of America. Did he?

If I had been taking stock in mid-2016, the case would have been overwhelming. The Obama administration passed near-universal health care. It fundamentally reshaped America's energy policy to combat climate change and fuel a clean energy revolution.

It enacted the largest reorganization of the financial industry since the Great Depression. It rescued the auto industry. And most of that happened in the administration's first 18 months.

Obama has argued, with merit, in the first two years in office, he accomplished more in domestic policy than any president since Lyndon Johnson. But of course, all that is in jeopardy.

Donald Trump has vowed to erase the Obama presidency. Some of it he can easily erase; other parts might prove more indelible. About 22 million people are on Obamacare. Clean energy is now a huge American industry with millions of jobs. Obama's foreign policy, focused on diplomatic solutions and wary of military interventions and nation-building, reflects the mood of the country. But on the whole, from financial reg-

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ulations to immigration to criminal justice reform to the environment, many of his policies will be under pressure and could be rolled back entirely.

How did this happen? When looking back at presidents like Johnson or Franklin Roosevelt it's clear that to sustain a long legacy, you need to not just get elected president but also to forge a political coalition. Johnson and Roosevelt had congressional majorities that lasted. Barack Obama was

HOW BARACK OBAMA CHANGED AMERICA

OBAMA'S FOREIGN POLICY, FOCUSED ON DIPLOMATIC SOLUTIONS AND WARY OF MILITARY INTERVENTIONS AND NATION-BUILDING

an intensely charismatic politician. But he was not able to build a political base underneath him. In fact, during his eight years, the Democratic Party has suffered a historic set of defeats at the state and national levels, putting them in the worst position they have been in since the 1920s. Was that Obama's failure? A lack of political skill? Perhaps, though it is equally likely the currents were stronger than any one person could shift. In recent years,

America has gone through enormous economic, technological, political and cultural change, and in some parts of the country, there has been a growing backlash to that change -- and to an African-American president. In that interview about Reagan, Obama noted that Reagan "put us on a fundamentally different path because the country was ready for it."

It remains unclear whether the country was ready for Obama's vision. The most dramatic bet he made was health care. He spent the first few years of his presidency and all his political capital on passing it. And I would argue that even if Donald Trump finds a way to repeal and replace it, it remains a historic achievement.

Barack Obama did what seven presidents failed to do -- he made health care a fundamental right. Whatever you call it, however you reshape it, that right will likely endure, and because of Barack Obama's ambition. It's the signature achievement of a consequential President. But presidential legacies also exist above and beyond laws and policies.

We remember John F. Kennedy for the energy, vitality, elegance and intelligence he brought to the White House. And in that sense, Obama has left an indelible mark. He and his family occupied the White House with dignity, grace and good humor. He ran an administration that was largely scandal-free. He celebrated and promoted American excellence in every sphere, from science to art to sports. And he did it all while under a microscope, because he looked different. In a sense, America made a big bet in electing Barack Obama as its first African-American president. And with respect to his personal character and intellect, most of the country believes that it was a bet that paid off. – CNN 2016 | Business Times Africa 65

UNITED STATES

After the revolution, Egyptian cinema plots comeback After years of instability, there are signs that the Egyptian movie powerhouse is coming back to life.

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HOW BARACK OBAMA CHANGED AMERICA

Mohamed Diab and Amr Salama at The 15th Annual Webby Awards

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n 1896, several exclusive venues in Alexandria and Cairo hosted some of the earliest known screenings of the world's first movies, directed by the Lumiere Brothers. Egypt went on to establish a dominant position as the capital of the Arab film world. The "Hollywood on the Nile" enjoyed a sustained Golden Age in the mid-20th century, powered by the mighty Studio Misr and international stars such as Omar Sharif and Faten Hamama. But the glory days could not last, and the industry suffered a devastating blow with the 2011 revolution.

Curfews were imposed that severely reduced cinema audiences, and production slowed to a crawl. The aftershocks continued with the overthrow of President Mohamed Morsi in 2013, and subsequent violence across the country. But after

years of instability, there are signs that the Egyptian movie powerhouse is coming back to life.

Green shoots?

Earlier this year, romantic comedy "Hepta" demonstrated that audiences are returning to cinemas, breaking the box office record for the genre with takings in excess of $3 million.

Egyptian films are also earning international critical acclaim. Mohamed Diab's "Eshtebak" (Clash), set entirely in a police van during the revolution, earned strong reviews at the Cannes Film Festival and is being tipped for an Oscar nomination. Filmmaker Amr Salama, who won several international awards for his groundbreaking portrayal of an AIDS patient in "Asmaa", believes the industry is flourishing.

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CAN A CASHLESS SOCIETY SAVE ZIMBABWE?

Asmaax Egyptian movie by Amr Salama confronts attitudes to HIV and AIDS

"I believe there is a new wave in Egypt," Salama told CNN. "There is a new type of film-making... and I am very proud if I can consider myself one of the talented directors that formed the wave."

Egyptian cinema is recovering strongly, according to Sherif Mandour, producer and executive board member of the government's Chamber of Cinema. He claims that 40 feature films were made this year, which will rise above 60 in 2017, compared with just 20 in 2011.

"After the revolution it was not secure to go to cinemas but now people are going again, and it is becoming a fruitful business," says Mandour.

The official adds that the government has increased funding for film-makers from 20 million Egyptian Pounds ($1.11million) to 50 million ($2.77 million) per year, which will support increased production, with an emphasis on innovation. Mandour acknowledges that rival Arab industries such as Morocco and Algeria have stolen a march on Egypt, but says it is a national priority to regain pre-eminence -- and points to a key advantage. "Cinema was a huge part of our soft power over history," he says. "It is not the same now and the competition is increasing, but Egypt has a space because we have the only language that is understood in all 22 Arab countries."

Creative compromise A growing number of Egyptian films are gaining critical or commercial success -- but rarely both.

Hala Khalil's "Nawara," the story of a downtrodden maid's experience of the revolution, scooped 68 Business Times Africa | 2016

international prizes but mediocre returns at the box office. The director claims that studios have too much power and demand "popcorn" movies over more serious material. "The big distributors and producers don't support our films because they say audiences don't like them," says Khalil.

"They talk badly about movies that are not action or comedy." "We have a big industry but it is not for directors like me that make serious films. The producers and distributors control everything and they decide if your film succeeds or not."

Censorship is another barrier, according to Khalil. "There are three taboos; sex, religion and politics," she says. "You have to be conservative as a director, and as my films deal with social issues it is difficult with those taboos."

Directors must be creative to "find an angle" that will allow a controversial script to pass censors, says Khalil, such as setting an interfaith relationship in the past for her next movie. The nature of censorship is changing, according to critic Mohamed Andeel, which he believes reflects the government's hostility to the Islamist values of opponents the Muslim Brotherhood. "I noticed a drop in the number of works that challenge the police or army, or talk about corruption," he says. "At the same time there is a rise in TV shows and movies with drug or alcohol consumption."

New frontier Andeel believes that Egyptian cinema is seeing individual successes rather than a movement.

The current generation of film-makers lack the unity and purpose of the 1980s New Realists, according to the critic, or the grand resources of the 1950s Golden Age. But a new movement could emerge from a surprising source. Andeel is optimistic that a generation of internet amateurs, who can bypass the censors and the studios, will reshape the landscape.

"The internet is encouraging so many people every day to become artists and create new forms of film-making," he says. "Many Egyptians are doing it all the time and I'm fascinated by that."

Andeel acknowledges that the work of internet directors typically lacks polish and resources. But with growing interest in this emerging field - including a new online film festival - he expects them to mature and flourish. "I hope as more young people start making Vines and YouTube videos they become interested in making artwork with a slightly longer life," he says. "I expect there will soon be a lot of film-making for the internet which will open completely new topics and challenge taboos."

Egypt's next revolution may be underway. – CNN