The Africapitalist by The Africapitalism Institute

ideas . actions . people . places

Moving Africa forward

Volume 2

Wanted:

jobs for Africa’s youth

Exclusive interviews Goodluck Jonathan • Ellen Johnson Sirleaf • Carlos Lopes

Contents

Letter From The Founder

June 2014

Tony O. Elumelu

90 Days

From luxury hotels to attracting Middle Eastern sovereign funds to invest in Sierra Leone

13 Interview With Jendayi Frazer Former American diplomat on how to transform African agricultural markets.

Nigeria Rebasing

New Economy, New Opportunities

Interview with Goodluck Jonathan The Nigerian president talks to The Africapitalist about the government’s plans to drive reforms, cooperation with China and the economic outlook.

Perspective UN Economic Commission for Africa’s Executive Secretary Carlos Lopes on why Africa must industrialise for inclusive growth.

Africapitalism Institute

Q&A: Ellen Johnson Sirleaf Lessons on moving from conflict to stability from Liberia’s President.

Africa In Numbers

A look at the worries, hopes and dreams of Africa’s youth

A List

Africa’s most inspirational women in Finance.

Spotlight

The creator of a new university that aims to bring the continent’s elites together

Cover Feature: Wanted : Jobs for Africa’s youth

Feeding Africa

Turning the poor man’s crop into gold

Africa’s young population is a huge demographic advantage over the long term. But the lack of employment opportunities over the short term means the continent’s potential is wasted and the risk of social unrest is big. The Africapitalist looks at the best ways to deal with the issue of youth unemployment.

Commentary

Why delivering soft infrastructure matters in Africa

Country Feature

Botswana: A model state for Africa

City Guide

Where to relax in Nairobi, the city in the sun

The AfricapitalIst is published quarterly by the Tony Elumelu Foundation. 1, MacGregor Road - Ikoyi, Lagos, Nigeria. Web: www.tonyelumelufoundation.org Tel: +234-1-2774641-5 Founder: Tony O. Elumelu, CON.

Director, Africapitalism Institute: David Rice.

CEO: Dr. Wiebe Boer.

Communications Manager, Marketing & Corporate Communications: Singto Saro-Wiwa.

Director, Corporate Communications: Nigel Sonariwo.

Africapitalism institute launched to address Africa’s grand challenges

Editor: Allan Kamau. Project Manager: Orina Andrew. Design & Art Direction: Teddy Murimi. Cover: Erica Weathers.

Final Word

Rockefeller’s Judith Rodin on impact investing Contributors: Morten Jerven, Peter Guest, Felicity Heywood, Sarah Rundell, Sapna Chandaria, Samba Yonga, Ramah Nyang’, Tom Stevenson, Elliot Ross, Renee Kamau, Michael Dynes, Abel Oyuke, Bolanle Omisore

theafricapitalist | 3

â&#x20AC;&#x153;Independent of any other factor, unemployment threatens to derail the economic promise that Africa deserves.â&#x20AC;? Tony O. Elumelu

4 | theafricapitalist

Letter from the Founder

t the beginning of May, global leaders met at the World Economic Forum on Africa in Abuja, Nigeria, to discuss the essential topics of inclusive growth and job creation. Africa is growing at an unprecedented rate – the African Development Bank recently published a report stating that Africa’s economy (excluding Libya) should expand by 4.8% this year, compared with 4.2% in 2013 – so it is crucial that its potential is harnessed swiftly in order to generate the necessary employment opportunities and drive inclusive growth.

I firmly believe that this will only be achieved through cooperation between the public and private sectors to address structural and socio-economic challenges. The philosophy of Africapitalism – the concept that Africa’s private sector must play a leadership role in transforming the continent – emphasizes the importance of the private sector in driving Africa’s development through long-term investments in strategic sectors, to create economic prosperity and social wealth. In order to democratize and expand the philosophy of Africapitalism, The Tony Elumelu Foundation launched the Africapitalism Institute at WEF Africa. The Institute is a pan-African, non-profit think tank, which aims to unlock the private sector’s capacity to create, preserve and multiply local value. The Institute will also deepen investors’ understanding of the African market, as well as highlight potential opportunities and challenges. The Institute will focus on researching and advocating for public policies and business practices that will unlock opportunities for all Africans. It will conduct research to address the structural problems at the root of the continent’s economic and social challenges.

This second edition of The Africapitalist magazine takes an in-depth look at youth unemployment and focuses on Nigeria and the rebasing of the economy. Unemployment remains Africa’s biggest challenge for inclusive growth. Independent of any other factor, it threatens to derail the economic promise that Africa deserves. Despite the strong economic growth we have recently experienced, job creation in Africa is progressing at a rate that is far too slow, with only 54 million new jobs expected to be created by 2020, for an expected 122 million Africans entering the labour force in that time frame. Africapitalism can be a tool for job creation and consequently ensuring security in the region.

April 7, 2014, marked a historic day for Nigeria, with the rebasing of her GDP to over $500 billion. This new figure makes Nigeria the largest economy in Africa and the 26th largest in the world. This rebasing means that, globally, people will pay even more attention to Nigeria. However, it also means that to compete effectively, the country has to focus on further diversifying its economy, improving the business climate and reducing income inequality. This is not just a concern for Nigeria, but for all African economies across the continent that are trying to achieve economic prosperity and spread social wealth. Beyond looking at unemployment and Nigeria, I would like to thank the contributors to this edition of The Africapitalist Magazine, who include Carlos Lopes and Judith Rodin – people who are driving the conversation about Africapitalism. Carlos, Executive Secretary for the Economic Commission for Africa, writes on the role of industrialisation as an essential precondition for inclusive economic growth, while Judith, who has had an illustrious career as President of the Rockefeller Foundation, looks at impact investing on the continent. It is my great pleasure to see that, across the continent and the globe, people are embracing the principles of Africapitalism and are committed to moving Africa forward. Together, we can lead conversations on new ways to spur Africa’s development. I hope this edition is a clear reflection of how far we have already come as well as the progress we will make in the coming years.

Tony O. Elumelu Founder of the Tony Elumelu Foundation Chairman, Heirs Holdings

theafricapitalist | 5

africa in review | news briefs

90 days

The first financial quarter of 2014 saw heightened focus on investment in Africa. It also witnessed the launching of various high-profile leadership programmes for women across the continent and the strengthening of Africa’s ties with Asia.

Felicity Heywood

Palm Wine harvesting in Nigeria.

MARCH Nigeria Marriott adds luxury Nigeria hotels amid travel boom Marriott International Inc. the owner of brands including the Ritz-Carlton and Renaissance, is strengthening its position in West Africa as economic growth in Nigeria and Ghana boosts travel and tourism. Through its recent acquisition of Protea Hospitality Holdings, the group is building five-star and three-star hotels in Lagos, Nigeria’s commercial capital, adding 400 rooms to the 700 it has in the country. Marriott, the largest publicly traded hotel chain after Hilton Worldwide Holdings Inc. (HLT), will almost double its rooms in Africa to about 23,000 with the acquisition of Protea, helping it expand in a continent where a growing middle class and rising travel are fueling the fastest pace of hotel development in the world.

Rwanda

Boost to women in business Women who own businesses in Rwanda

ninety days in numbers

510billion

Size of Nigerian economy after re-basing.

6 | theafricapitalist

20%

Proportion of seats held by women in national parliaments in Africa.

300billion

Estimated contribution by the internet to Africa’s GDP over the next 10 years

were given a US$ 1.7million boost by Accenture, the global management consulting company and the Cherie Blair Foundation for Women. The initiative aims to reach 15,000 women entrepreneurs and help them, through training and mentoring, to improve their skills.

East Africa

Strengthening Indian-African ties A six-year initiative to explore the trading potential between East Africa and India got underway. The project will promote exports from Ethiopia, Kenya, Rwanda, Tanzania and Uganda to India through investments and transfer of skills.

Nigeria

Unveiling of African emoticons Oju Africa, a division of the Nigerian mobile phone company Mi-Fone, has released its own African emoticons to rival the solely Caucasian illustrations used to animate and bring fun to digital messaging. Oju in Yoruba translates as “faces”.

3-1

Tanzania’s winning score at the Street Child World Cup in Rio de Janeiro in April

68%

Number of Kenyans who regularly use their mobile phones to send and receive money

africa in review | news briefs

The Next 90Days UK: Institute of Export on Britain, China and Africa Doing Business

10 June

“We wanted to do something that only Africa could pull off, something that could become so iconic that it would have the world talking.” EserickFouché, Creative director of Oju Africa, a division of mobile manufacturer Mi-Fone.

Zambia: Africa Trade Show, pan-African textile expo

19-20 June

Kenya: 2nd Annual Africa Investment Funds and Asset Management Forum

30-31 July

APRIL Kenya Plans for new Dubai near Nairobi Chinese investors announced plans to build a new Dubai-style “city” with skyscrapers and infrastructure just outside Nairobi. Involving at least 100 Asian investors, construction on the 65bn Kenyan Shillings project is expected to start later this year.

Liberia Sirleaf launches women’s forum Women were encouraged to use their voice and become involved in national decision-making at the launch of the Women’s Leadership Forum in the capital Monrovia. President Ellen Johnson Sirleaf said women were ready to take the stage in society and the workplace alongside men.

Dhabi-based sovereign wealth fund, to explore new investments and partnerships in Sierra Leone’s strategic sectors such as bauxite, alumina and iron ore.

Nigeria Finance Minister honoured Nigeria Finance Minister and Coordinating Minister for the Economy Dr. Ngozi OkonjoIweala was one of the recipients of the David Rockefeller Bridging Leadership Award, for her courage and capacity to deliver on the economy.

US: US-Africa summit takes place in Washington DC

5-6 Aug

South Africa: The Inaugural Annual Africa Tripartite Institutional Investment Conference

27-29 Aug

Sierra Leone Exploration in UAE The West African nation sent a delegation to the United Arab Emirates to meet with Mubadala Development Company, the Abu theafricapitalist | 7

africa in review | news briefs

African Development Bank Annual Meeting 2014 in Kigali, Rwanda.

“Africa has taken its destiny into its own hands. Now is the time to build the future” IMF chief Christine Lagarde

8 | theafricapitalist

MAY Kenya China in Africa Chinese Premier Li Keqiang visited Ethiopia, Nigeria, Angola, and Kenya on his first trip to Africa since assuming office. Speaking at the headquarters of the African Union, he said he imagined a day when all African capitals would be connected by high-speed rail—quickly adding that China’s experience and technology could “help make this dream come true”. Trade and investment ties between China and Africa have grown rapidly over the last decade.

africa in review | news briefs

IN NUMBERS

Mali Poll shows preference for unity Nine out of ten Malians want the country to remain a united nation, an Afrobarometer survey revealed.

the amount of US investment in a Ugandan programme to educate and train young people for the labour market.

4.7%

Director of Mission Support Paul Buades visits a polling station in Bandiagara a small town near Mopti.

the percentage increase in 2013 of foreign direct investment in sub-Saharan Africa. North Africa has seen a decline in FDI.

5.8%

growth expected in sub-Saharan Africa in 2014 according to AfDB

60%

of Africaâ&#x20AC;&#x2122;s population is below 35 years of age.

President Kagame of Rwanda and President Hollande of France at the EU-Africa Summit in Brussels.

H.E. President Ali Bongo Ondimba giving his closing remarks during the New York Forum Africa in Libreville.

U.S. Secretary of State John Kerry and Charge dâ&#x20AC;&#x2122;Affaires Heather Merritt at the American Embassy in Luanda listen to comments by members of the Angolan civil society in a meeting with them during his visit to Angola.

theafricapitalist | 9

INTERVIEW | GOODLUCK JONATHAN

“An economy that is worth half a trillion dollars is where people want to invest. It will now attract more foreign direct investment.”

10 | theafricapitalist

INTERVIEW | GOODLUCK JONATHAN

Taking action on the

economy

Ramah Nyang sat down with Nigeria’s President Goodluck Jonathan during the 2014 World Economic Forum on Africa to discuss Africa’s newly crowned leading economy.

BY RAMAH NYANG’

olicymakers in Africa’s largest economy are done celebrating the news that Nigeria’s GDP has leaped ahead of South Africa and are now focused on attracting increased investments to further drive the country’s economic growth, based on newly recalculated data. Nigeria hosted the 2014 World Economic Forum on Africa in Abuja in early May, in the wake of its economic rebasing exercise. It was the first time the meeting was held in West Africa; most of the 23 prior meetings have been held in South Africa. For President Goodluck Jonathan, the development holds a lot of potential for the rest of the continent. “[This year’s meeting] focuses on job creation and inclusive growth,” he said. “You know, the biggest problem that most African countries have is financial inclusion and in Nigeria, where we have a very large youth population, we have not been able to create enough jobs for our young people. The World Economic Forum will focus on these areas, and give us plenty of opportunities to expose Nigeria, and indeed the rest of Africa, to the world.” The rebasing formed part of President Goodluck Jonathan’s initiative to improve Nigeria’s revenue mobilisation effort. With

gross domestic product now recorded at over $500 billion (see pages 14-17), the president believes new investors will find compelling reasons to enter the market. According to him, attracting investors to Nigeria is now more crucial than ever to the growth of the national economy.

“Through [the forum], quite a few ministers of business will be able to know what they can get through investing in Nigeria, so it will bring huge benefits to us,” Jonathan said.

The rebasing was a credible move on the government’s part and international organisations such as the International Monetary Fund and the World Bank have given a nod to the exercise, according to Jonathan, who admitted that for those who have followed the country’s progress closely, the outcome was not a surprise. “People in the business environment know that the economy is big. Because when you invest in a country, the returns you get tell you the size of its economy,” he said.

“An economy that is worth half a trillion dollars is clearly where people want to invest. It will now attract more foreign direct investment. That is the key. That is the most important thing for us.” Combined with more aggressive revenue

mobilization and accelerated infrastructure development, Nigeria has the potential to chart a new course for economic development. The success of this programme, however, hinges on policymakers’ ability to sell investors on a cohesive, long term vision. ENTER THE CHINESE China’s Prime Minister Li Keqiang was the only non-African head of state at the forum, a significant indication of China’s strengthening relationship with the continent and particularly of their plans to deepen economic ties with Nigeria.

Currently, total direct investment from China to Nigeria stands at more than US$15 billion, and Nigeria’s trade investment with the Asian giant has surpassed the $10 billion mark. Li’s visit, said Jonathan, “will help us open new areas that we think we will place before the Chinese government to handle.”

Chinese companies have already made substantial investments in the oil sector and in infrastructure, such as power and transportation, including rail, where China has helped with financing new projects via its national banks. President Jonathan’s administration is placing a heavy emphasis on Chinese-funded rail investment, and a project to build a new rail line between the capital Abuja and Kaduna in the north-west of the country is 70% complete. theafricapitalist | 11

INTERVIEW | GOODLUCK JONATHAN

“You know, the biggest problem that most African countries have is financial inclusion and in Nigeria, where we have a very large youth population, we have not been able to create enough jobs for our young people.” Chinese investors are also involved in building a railway between Lagos and Kaduna and from the coast to the north of the country.

“We want to start a new one from Lagos through the south to the north, which is a major area, passing through the east. We have not started but this is a project we will discuss with the Chinese premier,” Jonathan said of an upcoming tête-a-tête with the Asian leader.

Additionally, Jonathan opined that manufacturing, which is part of his administration’s new strategy to further diversify the economy, would also benefit from Chinese investment. “South Africa is number one in terms of manufacturing, followed by Nigeria, but even then, activity in this area is still quite low,” he said, adding “For you to really create jobs for your people, you must go, at least, into light manufacturing, which in most African countries is still quite minimal.” Jonathan revealed numerous deals in this area were discussed during Li’s visit, some of which are pending and some that are being introduced for the first time. Among them is the development of a petrochemical hub in Delta State, located in the oil-rich Niger Delta. “We have been relating with China for funding so we believe we are going to conclude that. It is going to be the biggest in Africa,” he declared.

The hub will focus on making better use of natural gas, which Nigeria currently exports but below its potential. With the introduction of a petrochemical hub, the country would be able to produce more of its finished products domestically, for local consumption and export to neighbouring countries. “The petrochemical hub is where we will convert gas into polypropylene and other products,” Jonathan stated.

“We have a petrochemical plant in Port Harcourt, but that’s just a single investment,” he adds, referring to Indonesian-owned Indorama Eleme Petrochemicals Limited. Indorama Corporation, which owns the plant, is the largest producer of polyolefins in West Africa. “We want a situation where so many companies will come and do different businesses in terms of converting gas into different uses,” continues the president, conjuring visions of plants in Nigeria producing fertilizer, fuel, paint and many other items for both domestic consumption and export to neighbouring countries. CAUTIOUS OPTIMISM As a leading nation in sub-Saharan Africa, Nigeria is likely to play a central role in triggering renewed trade and governance dynamics, and the world is watching closely to see that if it will fulfill that role. Ergo, recent news stories highlighting insurgency in the country and criticizing the govern-

“For you to really create jobs for your people, you must go, at least, into light manufacturing, which in most African countries is still quite minimal.” 12 | theafricapitalist

ment’s ability to manage the crisis have put Jonathan’s administration on the defensive, but he is optimistic.

“We are totally committed [to fighting terrorism],” he said, adding that the administration is building its counterterrorism capacity daily, as international partners like the United States proffer assistance in affected areas. “We are changing our security architecture and luckily for us, we are fairly robust. Nigeria can spend $1.5 billion to combat crime. Not every African country can easily do that, looking at their GDP and their budget,” said the president, as he called on all countries to band together to fight terrorism across international borders.

The juxtaposition of Nigeria’s security woes and its rising economic potential presents a possible solution to the crisis: increased youth engagement in nation building. As more and more opportunities present themselves to unemployed youth, the lure of sustainable economic gain will propel many more of them toward gainful activities and away from destructive ones. With that, Nigeria may yet maintain its position at the top of the African economy for years to come. TA Ramah Nyang is an anchor and reporter with CCTV.

China PM Li Keqiang(centre) with Pres. Jonathan and Klaus Schwab Founder, WEF.

Interview | Jendayi FraZer

Supporting Africa’s farmers

AFEX’s Jendayi Frazer on technology, warehousing and agricultural financing

frica Exchange Holdings (AFEX), a provider of commodity exchanges and warehouse storage facilities in Africa, has reached an important milestone in its development. The company, which runs Rwanda’s East Africa Exchange (EAX), launched in 2013 and now has warehouse and receipt operations in Nigeria. The operations enable AFEX to certify the quality and quantity of agricultural products coming into its warehouses, says Jendayi Frazer, AFEX’s managing partner and President/CEO of 50 Ventures, a founding investor in the organization.

Not only can farmers achieve higher prices with certified quality goods, but product guarantees also mean producers are better able to access agricultural finance, one of the driving aims that has guided AFEX’s founding investors, which include the African investment company Heirs Holdings and New York-based Berggruen Holdings.

Thus, farmers’ financing issues are eased

through warehouse receipts that act as a security against capital to finance another agricultural cycle.

“Our farmers are now being issued with electronic warehouse receipts against which banks will lend. These guarantees ensure the products won’t be damaged,” explains Frazer, adding, “The current market is characterized by a lack of formality and non-standardized goods. Now all products are checked and graded, offering the buyer more guarantees of what they are buying.” TRAINING FOR GROWTH Another milestone the company has reached is the furthering of job creation and skills training that AFEX provides. “Agriculture is the primary employer in Africa and our exchange is a mechanism to introduce entrepreneurship and skills into agriculture, beyond the adoption of sustainable farming methods,” says Frazer. Through its Nigeria operations, AFEX is rolling out training and services that will reach Jendayi Frazer (left) with Dr. Akinwumi Adesina, Honourable Minister of Agriculture, Federal Republic of Nigeria.

100,000 smallholder farmers across seven states by the end of 2014, and 225,000 farmers by 2016. In East Africa, the East Africa Exchange (EAX) has trained 200 potential members in using its NASDAQ electronic trading platform, and has reached out to 50 farmers’ cooperatives to provide training on the exchange’s services. This month EAX is launching an extensive outreach campaign to provide additional resources and knowledge to smallholders, cooperatives, and traders, and aims to reach about 8,000 farmers in the vicinity of EAX’s 13 warehouses.

Problems encountered Progress has been sure, but slow. AFEX continues to encounter problems. Clearing customs in Nigeria, where it is importing new equipment to upgrade warehouse facilities, is challenging. “The ability to do things quickly is difficult and there is always a financial cost when things take time,” says Frazer. Another enduring challenge involves work to harmonise regional trade regulations so that they work in practice. “Maize in Uganda may not be recognised in Kenya, even though on paper it is all agreed. We are helping countries get a better understanding of cooperation.”

Going forward, AFEX is looking at ways to partner with existing exchanges, particularly the new Mozambique commodities exchange. “We want to work cooperatively rather than compete,” she says. THE FUTURE AFEX is expanding its operations into Uganda and Kenya ahead of planned exchanges in these countries, and hopes to introduce a futures market and broaden the commodities traded on its exchanges to include metals and minerals. “It’s a lot of work,” says Frazer. TA

Jendayi Frazer is Managing Partner of African Exchange Holdings.

theafricapitalist | 13

Feature | Nigeria rebasing

NEW ECONOMY NEW OPPORTUNITIES Recently crowned Africa’s biggest economy, Nigeria must now modernise and build its middle class

wo months after it was revealed that Nigeria had overtaken South Africa, the challenges of becoming Africa’s economic kingpin have emerged, especially as the scale of the reform task ahead becomes ever clearer. Back in April, Yemi Kale, Nigeria’s Statistician-General, announced that the country’s gross domestic product (GDP) stood at $509.9 billion in 2013, up from the previous estimate of $286 billion, due to changing the base year for calculating the GDP from 1990 to 2010. Sectors such as telecommunications and information technology, as well as the entertainment industry, increased their contribution, reflecting the shift towards a more modern, diversified economy.

Nigeria aspires to be among the world’s top twenty economies by 2020. The rebase boosted its economic output by a far bigger than expected 89 per cent, lifting the country’s global ranking from 36th to 26th. Analysts had expected the rebasing exercise to boost the economy by between 40 per cent and 60 per cent at the most. With an economic growth rate of around 7 per cent a year, Nigeria is now on course to become Africa’s first trillion-dollar economy sometime in the first half of the next decade.

Picture by Victor Ehikhamenor

14 | theafricapitalist

Feature | Nigeria rebasing

“Nigeria is widely seen as a highly promising market, and the rebase exercise just reinforces that perception.” David Cowan, Citibank’s Senior Africa Economist

THE NUMBERS

70%

of total fiscal receipts rely on oil and gas.

Global Ranking of the Nigerian Economy 7 per cent economic growth rate in a bid to becoming the 1st African trillion-dollar economy

509.9

$ bn

was what the Nigerian stood at GDP in 2013 according to Yemi Kale, Nigeria’s Statistician-General

52.2%

is the contribution of the service industry in the Nigerian economy up from 29.0 per cent.

POWER GENERATION David Cowan, Citibank’s Senior Africa Economist, is however urging caution about Nigeria’s jubilation that it has eclipsed its long-standing economic rival South Africa. “What is really worrying about the new data is the declining contribution to overall economic output made by industry and manufacturing. This is going to be difficult to reverse without a dramatic improvement in power generation.” Nigeria, as is the case with other African countries, needs manufacturing and industry to create large numbers of low-skilled jobs to make any impact on unemployment. The tipping point of the Nigerian economy, which must follow the rebase exercise in order for it to be impactful, will still take some time to reach. Given that the country’s population is 170 million compared to South Africa’s 51 million, it was only ever a matter of time before Nigeria occupied the continent’s number one slot, analysts have pointed out.

But Nigeria continues to trail South Africa in terms of infrastructure provision, power generation, and income per capita, while at the same time remaining host to the third-highest poverty rate in the world after China and India, with more than 100 million people living on less than $2 a day. Samir Gadio, Standard Bank’s Emerging Market Strategist, hailed the rebase in a research note as a “positive statistical exercise allowing for a more effective capture of the size of the economy.”

But he also warned that this was no time for the government to rest on its laurels, insisting that the outcome of the rebase exercise offered an opportunity for “government and policy makers … to push through key reforms, and accelerate the pace of structural transformation of the economy.” BREAKING DOWN THE FIGURES “While there is [sic] some kudos in becoming the biggest economy in Africa, beyond that, there is not

A SERVICES ECONOMY Nigeria is now predominantly a services economy, with the contribution made by services to overall economic output ballooning from 29.0 per cent to 52.2 per cent. At the same time, the telecoms and information sector increased from 0.9 per cent to 8.7 per cent, while Nollywood – the film industry - increased from zero to 1.4 per cent of GDP. On the other hand, the GDP contribution of the oil and gas sector – a mainstay of Nigeria’s economy – fell by almost half, to 14.4 per cent; agriculture fell from 34.7 per cent to 21.9 per cent, and industry and manufacturing now account for a quarter of GDP, down from 36.3 per cent.

much significance in the new economic data,” said Cowan.

“By itself, the rebase exercise changes little. It had been widely anticipated for many months. The point of the exercise is in simply trying to improve your understanding of the data, and this is hugely important for policy makers.” “Yes, Nigeria is a bigger economy

theafricapitalist | 15

Feature | Nigeria rebasing

“Nigeria’s new economic data highlights fundamentally how the African growth model differs from the Asian growth model.” David Cowan, Citibank’s Senior Africa Economist

The rebase is a “positive statistical exercise allowing for a more effective capture of the size of the economy.” Samir Gadio, Standard Bank’s Emerging Market Strategist

than had been previously recorded and is widely seen as a highly promising market,” Cowan added. “The rebase exercise just reinforces that perception. It may encourage more companies to see Nigeria as a promising investment destination, but that has been happening anyway,” Cowan added. The rebase exercise, which has been verified by the IMF, the World Bank, and the African Development Bank, simply confirms what economists had long expected: that the rise of the new sectors – telecoms, banking, consumer services, and even the Nollywood film industry, has been far greater than the former methodology for calculating GDP had been able to capture.

“Half of all Nigeria’s economy is now services,” Cowan said. “This trend has been the case in much of Africa, for most of the past decade. Nigeria’s new economic data highlights fundamentally how the African 16 | theafricapitalist

growth model differs from the Asian growth model, which has relied more on manufacturing and industrial development to create jobs,” he added.

away from its traditional over-dependence on hydrocarbons, but the government is still reliant on oil and gas for 70 per cent of total fiscal receipts.

With an economic growth rate of around 7 per cent a year, Nigeria is now on course to become Africa’s first trillion-dollar economy sometime in the first half of the next decade.

Increasing corporate and individual income tax will not be popular, as is the case with other much needed reforms such as the abolition of the remaining fuel tax subsidy – especially with presidential and legislative elections looming.

REVENUE COLLECTION Kale may have welcomed the rebasing exercise as evidence that Nigeria is diversifying

“Nigeria’s fiscal deficit will be lower as a result of the rebase, but revenue collection as a percentage of GDP is extremely low – even by African standards,” Cowan said. “Nigeria needs to raise more revenue from more sources. Nigeria’s inability to collect more tax from companies and individuals is brought into stark contrast by the new data,” he added.

Failure to secure passage of the long-de-

COMMENTARY | Nigeria rebasing

THE REAL ISSUE WITH NIGERIA’S DATA By Morten Jerven

layed Petroleum Industry Bill is also widely seen as having slowed Jonathan’s reform agenda. The bill seeks to break up the lumbering state-owned Nigerian National Petroleum Corporation and transform it into a commercially viable national oil company, and experts say it needs to be revived for the government to deliver on its reform prospects. But they admit that it is unlikely to happen until after next year’s elections. Revival of the power sector – which the World Bank estimates could add up to three percentage points to Nigeria’s overall economic growth rate - also holds out the prospect of resurrecting Nigeria’s long-neglected solid minerals sector.

Higher natural gas production could also be harnessed to contribute to increasing production of low-cost fertiliser – greatly boosting agricultural production, job creation, slashing the huge annual food import bill, while at the same time transforming Nigeria into the breadbasket of Africa. The rebase exercise has highlighted the scale of the economic reform still to be accomplished before the real economic take-off takes place. But it also clearly demonstrates that Nigeria is steadily moving from a frontier to an emerging market economy. TA

f course, it is a good thing that Nigeria is richer than we thought. But most of all, it is a symptom that the now biggest economy in Africa is working to improve the data needed for economic governance – and an example for others on the continent. A lot has been said and written about the political motives and the veracity of Nigeria’s new numbers. They are indeed preliminary estimates, and have not yet been validated with data on the demand side of the economy (the new numbers are derived from estimating total output). Scholars will continue to struggle to square higher income and higher growth, with continued high levels of poverty. The really startling fact about the rebasing is perhaps that it comes so late that its economy doubled from one day to the next. Is the new number too high or too low? Experts can debate this issue without any prospect of a final settlement. Gross domestic product is always an approximation. Any GDP estimate depends on a range of assumptions and data points that can all be contested. To make an analogy, badlyadjusted bathroom scales will show you a weight that is wrong by a few grams

or by several kilograms, depending on how bad the disparity is. This does not matter if you are only interested in whether you are gaining or losing weight. The problem appears when you compare your own weight to your neighbour’s. Or if the scales changed overnight and now they tell a totally different weight. That is what happened in Nigeria. They changed the scales. The previous scales were using data from 1990; the new ones are based on 2010 data. The same happened in Ghana when they changed the benchmark year from 1993 to 2006. Until 2014, Nigeria had used data from 1990 to estimate economic gains. How could it take almost a quarter of a century before the data for economic governance was updated? The answer is that, until not long ago, good data had not been a priority for many African countries. GDP numbers are a product of the national statistical system and many national statistical offices have been neglected since the 1980s. There were more pressing concerns than investing in reliable and regular data on economic activities. But data for economic governance has been neglected for too long. As the information is updated, there are bound to be a few more surprises ahead. The credibility of official statistics will benefit from a transparent and open process. TA

Morten Jerven is Associate Professor at the Simon Fraser University, School for International Studies. His book “Poor Numbers: how we are misled by African development statistics and what to do about it” is published by Cornell University Press.

theafricapitalist | 17

FEATURE | AFRICAPITALISM INSTITUTE

A new think tank for

Africa

Conversations about Africaâ&#x20AC;&#x2122;s growth and development are moving beyond headline gross domestic product (GDP) and statistics on foreign direct investment (FDI). The Africapitalism Institute has been launched to lead a more nuanced debate around what that growth looks like, how it is sustained and how it changes peopleâ&#x20AC;&#x2122;s lives and livelihoods in meaningful and tangible ways.

FROM LEFT TO RIGHT: David Rice, Director of the Africapitalism Institute; Dr. Raj Shah, USAID Administrator; Dr. Carlos Lopes, Executive Secretary of the United Nations Economic Commission for Africa; Tony O. Elumelu, Chairman of Heirs Holdings; Dr. Donald Kaberuka, President of the African Development Bank; Kola Karim, CEO of Shoreline Energy Group; and Matthew Bishop, US Business Editor and New York Bureau Chief for The Economist (not pictured), announce the launch of the Africapitalism Institute at the World Economic Forum on Africa in Abuja, Nigeria.

18 | theafricapitalist

FEATURE | AFRICAPITALISM INSTITUTE

BY DAVID RICE

frican institutions can and should play a leadership role on convening these conversations and shaping how talk moves into action. A pan-African think-tank headquartered in Africa and funded by Africans, the Africapitalism Institute was created to accelerate and broaden economic prosperity and social progress across Africa and to advocate for sustainable growth on the continent.

The recent World Economic Forum on Africa (WEFA) in Abuja was convened to explore the theme “Forging Inclusive Growth, Creating Jobs.” The abductions of the schoolgirls in the north of the country put the theme into sharp focus: jobless, uneven growth will fail to create the socio-economic transformation needed to lift people out of poverty and will create highly volatile and polarised societies at risk of further unrest. Africa has more people aged under 20 than anywhere else in the world and the continent’s population is set to double to two billion by 2050. Its rise in population means that African nations have to prioritise tackling these structural problems, which will only magnify over time without targeted action. Economists expect Africa to create 54 million new jobs by 2020, but 122 million Africans will enter the labor force during that time frame. Adding to this shortfall are tens of millions currently unemployed or underemployed, making the human and economic consequences nearly too large to imagine. African leaders who live and work in these societies have a firsthand, personal perspective on the dynamics of these societies and are uniquely qualified to identify opportunities to build new growth models which are designed to create shared value and stimulate entrepreneurial opportunities along the value chain. TRANSFORMATION THROUGH INDUSTRIALISATION The businesses they are building have evolved from the pure extraction of natural resources to new sectors such as financial services, media and ICT. However, they also recognise that abundant natural resources can be the driver for an industrial revolution. Developed economies across the world have all undergone a relatively similar process in

Ideal scenario for a country’s economic growth

Agriculture

Manufacturing/ Industrialisation

Services

In a bid to compete globally, most African economies are making the leap from agriculture directly to services, completely by-passing the industrial age - a pivotal contributor to the knowledge and skills that ensure that the leap is continuous and sustainable. Figure. 1

The development path of most African countries

Agriculture

which their dominant economic sectors of agriculture and labor-intensive production have evolved to an industrial/manufacturing age before eventually graduating to a services-driven economy. In a bid to compete globally, most African economies are making the leap from agriculture directly to services; completely by-passing the industrial age — a pivotal contributor to the knowledge and the skills that ensure the leap is continuous and sustainable. Africa’s future will be determined by how policies that promote commodity-based industrialization are designed and implemented. Such a transformation is both imperative and possible. But it requires courage, vision and a new mindset from the continent’s business and political leaders to overcome the challenges which continue to hold back the building of a successful and dynamic industrial base in Africa.

Indeed, African countries’ growth over the next decade will be determined by the ability of the continent’s economies to create and multiply local value across core sectors. Governments are increasingly taking this into account through the form of local content legislation. The concept has become broad, moving beyond extractives. Buoyed by competition for access to African natural resources and African consumer markets from a diverse group of potential investment partners, they are increasingly able to dictate the terms of engagement. They are requiring foreign investors to develop ‘local

Services

content’: to create jobs, open equity to local partners and invest in local supply chains. The national objective is the transfer of knowledge and value to the local economy and to indigenous companies. The incentive for business should also be clear: businesses that can develop talent, procure inputs and market goods and services locally should be able to develop better operating margins and to protect long-term license to operate. While attention is being directed at driving investments into key sectors that propel economic growth, a strategic and targeted approach has to be employed that is specific to the African business landscape and its developmental needs.

PRIVATE SECTOR-LED GROWTH Policymaking is shifting to mainstream local value addition and job creation but progress is patchy and more can be done to support governments to regulate and legislate effectively. In this context, The Tony Elumelu Foundation launched the Africapitalism Institute, a pan-African, non-profit think tank which aims to unlock the private sector’s capacity to create, preserve and multiply local value. As a fully African-funded and-led think tank, the Institute will focus on academically rigorous, practically applicable research and multi-stakeholder engagement to advocate for public policies and business practices that will unlock opportunities for all Africans. Africapitalism, the concept that Africa’s

theafricapitalist | 19

FEATURE | AFRICAPITALISM INSTITUTE Africapitalism is a sustainable and scalable way for economies to transition from agriculture to services by first emphasizing the importance of knowledge creation and capacity building acquired in the development of the manufacturing sector.

Manufacturing/ Industrialisation

Agriculture

Services Services

Knowledge

Figure. 2

private sector must play a leadership role in transforming the continent, calls for a new kind of capitalism – a version in which Africa leapfrogs other models, creating a more inclusive, broad-based and sustainable economy. It emphasizes the private sector’s critical role in Africa’s development through long-term investment in strategic sectors of the economy that creates economic prosperity and social wealth. The Africapitalism Institute will codify and seek to pioneer this philosophy. The Institute will also deepen investors’ understanding of the African market, as well as highlighting potential opportunities and challenges. The potential to transform and put Africa on an equal economic footing with the world is in the hands of Africans. The Africapitalism Institute’s preliminary research shows that not all growth is created equally. It emphasizes the difference between a country’s rate of economic growth versus the amount of growth from local value creation and multiplication. In addition, the Africapitalism Institute is currently working on several projects in collaboration with the Tony Elumelu Foundation. These include building out the Africapitalism economic philosophy in collaboration with the University of Edinburgh and several universities based in Africa, Europe and North America. Secondly, the African Insti20 | theafricapitalist

tution of Technology, founded and led by Dr. Ndubuisi Ekekwe, has developed a detailed map of Nigeria citing the location and nature of key industries based on the way in which they are concentrated in certain areas around the country.

The purpose in identifying these clusters of activity is to then develop ways in which they can be supported and made to thrive. Thirdly, in collaboration with the Brenthurst Foundation, the Institute is publishing a book that analyzes the challenges and best practices of African direct investment. And finally, the Institute will soon be publishing its first significant research project called Reimagining Incentives: Public Policies to Facilitate Africapitalism. Using a unique econometric model, this research will provide an evidence-based analysis of a new concept designed by the Institute known as performance-based incentives. The Institute’s Global Advisory Board is made up of a distinguished group of renowned thought leaders across a range of practices including H.E. Jose Maria Asnar, Former Prime Minister of Spain; Dr. Jim O’Neill, former Chairman of Goldman Sachs Asset Management and creator of the BRIC and MINT cohorts of emerging economies; Matthew Bishop, US Business Editor and New York Bureau Chief at the Economist;

Amir Ben Yamed, Editor-in-Chief of Jeune Afrique and President of the Africa CEO Forum, and Dr. Tandeka Nkiwane of the Development Research Institute in South Africa and Special Advisor to the CEO of NEPAD.

Beyond the advisory board, several African leaders have shown support for the initiative, such as Dr Donald Kaberuka, President of the African Development Bank, who attended the launch and hailed the power of the Institute to foster “ideas coming from African wealth creators and risk takers who act as role models,” and offered the Bank’s full support in advancing the Africapitalism agenda.

The success of the Institute will ultimately be measured in how its ideas and initiatives are shared, debated and acted upon by different stakeholders. As Tony Elumelu remarked at the launch “the Africapitalism Institute belongs to all of us”. By supporting African-led research and policy advocacy, the Institute is demonstrating the key tenet of Africapitalism – that Africans should lead the continent’s development and engage all stakeholders to pursue a shared agenda for inclusive growth. TA David Rice is the inaugural director of the Africapitalism Institute. For more information, visit http://www. africapitalisminstitute.org/

perspective | CARLOS LOPEs

Africa’s transformation DEPENDS ON THE NEXT

CRUCIAL STEP

n an era of high volatility and deep crisis, Africa has been an economic success story. A combination of high commodity prices, increased domestic demand and stronger trade and investment ties with other developing economies has helped African countries record, on average, an impressive 5% annual GDP growth over the past 10 years. But while this should be reason for celebration, Africa’s growth has not been inclusive, as it has not provided the new jobs its people desperately need.

What are the reasons for this disappointment? The root cause, according to the 2014 Economic Report on Africa, was the continued heavy dependence on primary commodity production and exports. Industrialisation is an essential precondition for inclusive economic growth. But it cannot be left to the markets, the report argues. The main lesson from

“Industrialisation is an essential precondition for inclusive economic growth.”

developing countries that have already successfully made the transition to developed ones is the importance of industrial policy intervention to overcome market failures. So what might such policy look like, and why have African countries so far failed this test? The report found that past attempts at industrial policy in Africa have relied on state institutions that failed to adapt to the changing needs of industry and to national, regional and global conditions.

It calls on Africa to be wary of imposing a straightjacket based on what has worked in very different conditions, or one-size-fits-all blueprints that rely solely, for example, on tax holidays and access to cheap credit, and to focus instead on tailored policies. An effective industrial policy framework requires high-level policy coordination as well as ongoing dialogue between the state and the private sector. Highly skilled bureaucrats must be embedded in the system, with the autonomy to act without pressure from either the political elite or the private sector.

There is a strong need for the creation of pockets of efficiency and infrastructure, as well. The setting up of industrial zones, for example, can enable resources to be targeted effectively. The report also stresses the role that enhanced regional integration can play in enabling industrialisation across the continent, by ensuring increased and diversified investment. Africa has made a strong start to the century. But to enable it to play its full role in the global economy, the next stage is critically important. It is time for African countries and development partners to focus their efforts on establishing the industrial policy frameworks needed to deliver sustained and inclusive growth. TA

- Dr. Carlos Lopes is Executive Secretary of the United Nations Economic Commission for Africa

theafricapitalist | 21

DATA | YOUTH UNEMPLOYMENT

Tunisia

Morocco

he African continent has been referred to as the youngest continent because of its comparatively larger youth population. This continues to pose challenges to governments and policy makers in providing opportunities that enable youth to live decent lives and contribute to development of their countries. Food shortage was a recurring problem from 2003 reaching critical levels in 2005. National surveys by the pan-African research network, Afrobarometer across 34 African countries show that African countries continue to experience significant development challenges especially when viewed through the lenses of the youth.

Development problems facing African countries as perceived by the youth

Algeria

Egypt

Niger

Mali Senegal

Sudan*

Burkina Faso

Guinea

Nigeria Ghana Ivory Coast

Sierra Leone

Cameroon Togo

Liberia

Benin

Uganda Kenya

What are the most important problems facing African countries that governments should address, in the eyes of the youth?

Burundi Tanzania

Afrobarometer Surveys covering 34 African countries show that the youth in Africa rank unemployment as the most important problem facing their countries. This is followed by poverty/destitution, management of economies and famine/shortage of food.

KEY

Mozambique Zambia

These considerations play out similarly across the regions. The youth in West, South and North Africa perceive unemployment as the most important while those in East Africa rank management of economy as the most important problem. Poverty and destitution is ranked as second most important problem by youth in South, East and North Africa.

Poverty/Destitution Wages, incomes& salaries

Malawi**

Food Shortage Infrastructure/Roads Rates & Taxes

Zimbabwe Botswana

Water Supply

Madagascar*

Ethnic Tension/Political Violence Namibia

Unemployment Management of the Economy

West African youth consider food shortage and famine as the second most important problem. While several African countries define their youth differently, in this analysis the youth are taken to be between 18-35 years of age. *Sudan: Respondent age not captured hence not included in the crosstab ** Countries whose most important problem overall is different from that of the youth

SOURCE: AFROBAROMETER INFOGRAPHIC BY TEDDY MURIMI

South Africa

Lesotho

What does the youth view as most important problems facing their countries over the past two decades? Food shortage was a recurring problem from 2003 reaching critical levels in 2005. Management of the economy-a major concern in 1999-2001, has re-emerged as top concern in 2001-13. Round 5 (2011-2013) Round 4 (2008) Round 3 (2005)

Management of the economy has been a persistent problem only being surpassed by unemployment in 2011-13.

Management of the Economy

Political instability

Unemployment

Food shortage/Famine

Management of the Economy

Food shortage/Famine

52% Food shortage/Famine

Management of the Economy

Food shortage/Famine

Management of the Economy

Poverty/destitution

42% Management of the Economy

48%

Round 2 (2003) Round 1 (1999-2001)

Food shortage was a recurring problem from 2003 reaching critical levels in 2005â&#x20AC;&#x2122;. Political instability has since topped concerns among the youth in 2011-13.

Malawi

100%

Mali

Zimbabwe

100%

Unemploym the start of

growth needs to create jobs Majority of the African youth perceive unemployment as the most important problem facing the continent that the respective

quarters (76%) of the continentsâ&#x20AC;&#x2122; population were interviewed in the surveys between October 2011 and June 2013.

governments should tackle. Over 51,605 adult Africans of at least 18 years of age and representing approximately three

Crime and security Wages, incomes and salaries Health

What are the most important problems regionally? Unemployment remains the biggest challenge for the youth in West Africa. Water Supply 8% Infrastructure/roads 8% Poverty/destitution 8%

Food Shortage

10%

Education Wages, incomes & salaries 9%

Crime & Security 4%

Corruption 3% Education 3%

NORTH AFRICA

Poverty/Destitution

10%

Management of the economy 10%

Unemployment 20%

Unemployment 39%

Electricity 5% Health 5% Management of the economy 5%

Crime & Security

Unemployment remains the biggest challenge for the youth in North Africa.

Management of economy 13%

Management of the economy 7%

Poverty/ destitution 9%

Poverty/ destitution 12%

Unemployment 27%

Food Shortage 6%

Wages, incomes& salaries 5% Infrastructure/Roads 5%

EAST AFRICA

Crime and security 4% Health 5% Infrastructure/Roads 5% Corruption 4% Rates and taxes 5% Education 4%

Water Supply 7% Food Shortage/Famine

In terms of importance, what is the youth ranking of the problems? Unemployment ranked as the major problem followed by poverty and destitution. Management of the economy and food shortage/famine both ranked third. Water supply and infrastructure both ranked fourth; Education ranked fifth while wages/ incomes/ salaries, crime and security and health all ranked sixth.

Water supply Infrastructure/ Roads

Poverty/Destitution

23%

Unemployment

Crime & Security 6%

Unemployment remains the biggest challenge for the youth in Southern Africa.

ment has been ranked a major issue since the survey in 1999

Unemployment

SOUTHERN AFRICA

Management of the economy Food shortage/ Famine

Housing 8%

Education 8%

WEST AFRICA

Transportation 1% Health 1%

Corruption 7%

Management of the economy stood out as a major challenge in East Africa.

Unemployment remains the single most important problem for the youth over the last two decades.

Unemployment remains the sole most important problem in the minds of youth over last two decades.

Unemployment remained the most important problem between 2003-2005 but was overtaken by concerns on Management of the economy soon after post-election violence for over half a decade

Unemployment

Management of the Economy

49%

Unemployment

Management of the Economy

49%

Unemployment

53%

Unemployment

Botswana

100%

Lesotho

54%

Unemployment 100%

36%

Unemployment

Unemployment 0%

Namibia

100%

No data available 0%

Kenya

100%

FEATURE | COVER STORY

WANTED:

JOBS FOR AFRICA’S YOUTH Africa’s unemployed youth are an untapped reservoir of economic potential. The Africapitalist looks at what is being done to maximize this human resource.

BY TOM STEVENSON

t’s been over a year since Mohammed Khairy finished his university degree in history. But except for a short stint working in a hotel, the

24 | theafricapitalist

young resident of Cairo hasn’t been able to find work.

“I’ve applied for plenty of jobs, recently I had an interview to work for Vodafone UK in a call centre, but they were look-

ing for someone with a better British accent,” Mohammed says.

“I’ve been trying to get a job with the government too, but there are so few jobs and whenever one comes up hun-

FEATURE | COVER STORY

THE NUMBERS

605m

Projected number of young people by the year 2050 (between ages 10 and 24), according to ILO data

60%

Jobless youth in Africa

70%

Unemployed in South Africa, below the age of 30. dreds of people apply for it.”

Mohammed is not alone in his predicament. Youth unemployment is approaching 30% in Egypt and remains high even among university graduates. In fact in most African countries the economy is failing to provide enough jobs for the continent’s youth. Young people make up around 40% of Africa’s aggregate working age population yet they are disproportionately represented in unemployment figures, accounting for 60% of all the continent’s jobless. Youth unemployment in Nigeria, recently reclassified as the continent’s largest economy (see page 14), was over 50% according to the country’s National Bureau of Statistics.

In South Africa the rate is the third highest in the world according to local unions, who claim as much as 70% of the country’s jobless are under the age of 30. World Bank figures show around 52% of those aged 15 to 24 don’t have a job.

Damaging consequences Persistently high rates of youth unemployment could bring the risk of widespread discontent and damage the social fabric, business leaders, analysts, and academics who study youth unemployment have warned. Sub-Saharan Africa’s population is the youngest in the world, and looks set to stay that way. According to ILO data, by 2050 the total number of young people in Africa (between ages 10 and 24) will be 605 million.

And as the average age of a society changes, the importance of youth unemployment changes too, says

“There are so few jobs and whenever one comes up hundreds of people apply for it.”

Mohammed Khairy, unemployed history graduate in Cairo

Ben Leo, a Senior Fellow at the Centre for Global Development. The social and economic impacts of rising youth unemployment and a growing population are very severe, he tells The Africapitalist.

“The risks when countries with large and growing youth populations get it wrong on youth employment are massive. In Kenya and Nigeria over 80% of young people think the government is not doing enough on unemployment, and this is a reliable predictor of widespread dissent and even political violence,” he says. However when economies are properly structured to support productive work, not only can the risks be dissolved, but a large youthful population can represent a major opportunity for development.

2014 The year the AU themed “Year of Agriculture” to stress the industry’s potential for sustainable development

80%

Young people in Kenya and Nigeria dissatisfied with government action on unemployment

“A big youth population isn’t in itself a problem, that depends on whether the economy is working, and if governments get it right they’re set for massive economic expansion over many years,” Leo says. theafricapitalist | 25

FEATURE | COVER STORY

iHub is Nairobi’s innovation hub for the technology community.

“A big youth population isn’t in Choked businesses So what are African economies getting wrong? High youth unemployment appears to primarily stem from systemic imbalances in African economies, which affect young people worse than the general population.

Poor infrastructure, complex and even corrupt regulatory procedures, and limited access to international credit all prevent the continent’s businesses from expanding at the rate needed to create enough new jobs for the growing youth population.

In addition, research by the African Development Bank shows that over dependence on export revenues from choice commodities, and on external financial flows such as aid, have held back the kind of sustainable growth in the private sector needed to create new jobs. Even educated youth are struggling. Gradu26 | theafricapitalist

itself a problem, that depends on whether the economy is working, and if governments get it right they’re set for massive economic expansion over many years.” Ben Leo, a Senior Fellow at the Centre for Global Development.

ates often find themselves stuck in difficult conditions with qualifications that are of little relevance to the needs of the economy. In many cases unemployment is is more prevalent among young people with higher education degrees than among those without.

New growth The answer has to come from new growth, driven by domestically-led private sector ini-

tiatives, economists, analysts and specialists working for international NGOs agree. But which sectors must lead that growth is still a matter of dispute. One idea put forward in the debate surrounding youth unemployment in Africa says that the solutions will come from the development of traditional labour-intensive industries, such as manufacturing.

FEATURE | COVER STORY

A worker at a Kenyan coffee factory.

procedures for renting agricultural lands at preferential prices,” Jomaa said.

The knowledge economy Others say the road to fashioning economies that can properly support the needs of Africa’s young workers lies in knowledge-based service industries.

Manufacturing occupies a disproportionately small part of the continent’s economies at present, in total making up less than 10% of sub-Saharan Africa’s GDP in 2012. No single African country saw a manufactured product make it into the list of top-three exported goods last year. But it is the most traditional industry of all, agriculture, that is particularly popular as a potential solution to youth unemployment at present. The African Union declared 2014 the year of agriculture in a bid to stress the industry’s potential for sustainable development. “New empirical evidence suggests that the rural poor are more likely to exit poverty by increasing their productivity in agriculture,” says Luc Christiaensen, senior economist at the World Bank. Agriculture offers the opportunity for some African countries to develop comparative advantages. But this requires large scale private investment, something that is currently being seen only in Mozambique and Zambia.

At the FAO Regional Conference for Africa last month, Tunisian Prime Minister Medhi Jomaa took the opportunity to push for

Jon Gosier heads Apps4Africa, an organization that started out providing seed funding for African entrepreneurs and now supports local businesses by providing advice and business development as well as financing.

“Our thesis is that when you look globally at where jobs are coming from, overwhelmingly it’s in knowledge economies: technology, media, data.” Jon Gosier heads Apps4Africa

more private investment in agriculture and linked the policy to benefits for the continent’s youth.

“Tunisia urges young promoters to invest in the agricultural sector by granting them property loans as well as facilitating the

“Our thesis is that when you look globally at where jobs are coming from, overwhelmingly it’s in knowledge economies: technology, media, data,” he tells The Africapitalist.

Gosier argues that in Africa there’s actually too much emphasis on traditional industry, which he says has been shown to be an unstable source of employment for young people. His organization is investing in young people who have ideas in the technology, or data industries. One example is Su Kahumbu’s Kenya-based venture iCow, a phone application available in both English and Kiswahili that combines the technology and agricultural industries.

The app helps dairy farmers to increase their yields by giving them best practice tips and theafricapitalist | 27

FEATURE | COVER STORY

Nick Vilelle

Dr. Jacob Omolo

Diego Rei

Luc Christiaensen

Director at LIONS@FRICA

Lecturer at the Department of Applied Economics in the School of Economics at Kenyatta University

Senior Adviser on Youth Employment in Africa for the International Labour Organization

Senior Economist at the World Bank

SHIFT YOUR MINDSET

COMMITMENT AND IMPLEMENTATION NEEDED

ADAPT THE EDUCATION SYSTEM

USE THE INFORMAL SECTOR

The structural problems facing youth unemployment in Africa need to be addressed simply because of the potential the youth hold. It is important to take a proactive step to avoid the youth from feeling suppressed and thus causing social disturbance. From an economic point, the role of the government is not to create employment opportunities; it is to facilitate employment creation to the private sector. The government, thus, needs to facilitate growth and competitiveness for the private sector to spur employment for the youth. Agriculture may not be in a position in the short term to create high quality jobs, governments thus need to promote conditions to get the youth absorbed and venture into gainful agribusiness. The information technology sector has great potential for the youth, as it has created 14000 jobs in the year 2012 from a projected 7500 jobs in Kenya. Interventions should be put in place for promoting productivity and competitiveness within the information technology sector coupled with the right skills. Universities have started partnering with organisations to see how the students can be trained on the right skills. Ultimately what is needed is commitment and the will to implement critical action points from policy makers. Industry should ensure that attachments and internships are implemented and backed up with solid monitoring and evaluation mechanism negating.

It is vital to enhance investments beyond primary education and to systematically start to think about quality of education, rather than only quantity. Core employability skills such as “learning to learn”, “communication”, “teamwork” or “problem solving” are particularly helpful for young people. It is also key to strengthen the links between the educators and employers. An often repeated mantra is the disconnection between the job market needs and the education system and something must be done to address it. The most pressing need is for a dynamic process for developing curricula that is not predetermined but, rather, evolves through continuous dialogue with employers to align the training programme with business needs and local realities. To achieve this goal two elements are pivotal: to associate theoretical training with practical experience through a dual system type of training, and to warrant the involvement of the private sector, which is the ultimate beneficiary. The more young people, particularly the most disadvantaged, know about career prospects, employment trends, occupations, and expected returns from education, and the more information about formally and informally acquired qualifications is systematically available and recognized by employers, the more the training system will have to adapt to respond to the educated demand for training services and a better overall outcome will be achieved.

I believe that the involvement of both the public and private sectors is going to be vital to building a strong entrepreneurial ecosystem in Africa, and that this ecosystem will need youth with the right skills, in the right sectors, to grow the economy. The really big thing is changing the mindset of youth towards entrepreneurship. Education is a broad term, and rote learning is not going to teach a culture of entrepreneurship, or provide the answer to boosting youth unemployment, but what should be done is the introduction of programmes that help create an entrepreneurial curriculum in schools. This new type of education could have a wide impact. There are good examples of this already happening. We are helping to promote a programme called Africoderdojo, which helps teach African kids to code computer programmes. Folks sign up to do the programme in their homes or towns, then the team bring them in and teach them valuable skills. The kids learn the coding skills and what can be done with them, and in addition they learn that entrepreneurship is not a last resort after failing to get a government job, it’s a positive career choice. The technology sector is also a strong sector for youth. It’s not as well developed as other sectors, so there’s less competition and a lot of opportunity for growth as the market comes up. When you put entrepreneurship in front of the right people, and celebrate it rather than deriding it, they will run with it and they will create the much needed jobs for Africa’s youth.

28 | theafricapitalist

The IT sector can employ youth directly, for example by providing IT services, and young people are well positioned for these jobs, that is, at least the ones who are more highly educated. Technology can help in important ways to raise incomes in informal household enterprises in Africa. Firstly it can make credit and insurance more accessible through micro-credit provision, and secondly it can raise agriculture incomes through better extension services and the provision of market information. Microfinance is truly changing the way the poor can become “financially included” which is an important first step to access financing for any kind of business enterprise. Innovative new approaches are even pushing the concept by using the record of on-time payments to establish a credit rating which would allow further leveraging for borrowing. But as with export manufacturing, for example, it will take a long time for the sector to create a sufficient number of jobs to employ a sizable number of young people. One thing is for sure, since the public sector cannot productively absorb and employ these new cohorts, the private sector has to take the lead. That said, the private sector is broadly defined here and comprises both formal wage labour (for example in IT or labour intensive export oriented manufacturing) as well as informal household enterprises, both on and off the farm. And it is especially the latter, informal sector which will have to employ the majority of the youth in the foreseeable future.

FEATURE | COVER STORY

Su Kahumbu’s Kenya-based venture iCow is an app that helps dairy farmers to increase their yields works on even very simple mobile phones, helping the business expand in poor rural areas.

helping them keep track of the cows’ gestation period. It works on even very simple mobile phones, helping the business expand in poor rural areas.

Gosier says there’s a huge need for data on Africa from both governments and businesses and that the data and information industries of which iCow is a part could significantly boost youth employment across the continent. “We’re trying to support knowledge-based local businesses so they can grow and create jobs, especially for young people. Early stage companies that have the potential of growing and creating jobs are the targets and these have to come from local nationals in order for them to be really sustainable,” he says. The skills young people and investors alike

learn while working on small private sector projects like these have an additional educational value that transfers through local communities, Gosier adds.

Private sector initiatives Education itself is vitally important, because where unemployment is high key sectors of an economy are usually struggling to find workers with necessary skills, according to Dahlia Khalifa, head of the International Finance Corporation’s Education for Employment (E4E) programme. “The question is how can you match up the supply and demand. We say identify growth sectors that are constrained by lack of skills then work with industry leaders on building training curriculums that promote those skills,” she tells The Africapitalist. Whether the solutions to Africa’s youth un-

employment crisis lie in new industries, old industries, or training, there is broad consensus that it is private sector initiatives that will have to step up to tackle the problems. “Clearly government can’t do it all on youth unemployment. The reality is governments are tightening their belts across the board, so it’s the private sector that has to play the predominant role in boosting youth employability,” Khalifa says.

With governments unwilling or unable to find the solutions, she says, it is the African private sector that has to find the answers that will provide real opportunities for young people like Mohammed.

“It’s all hands on deck: education providers, employers, investors, governments, and youth themselves - all have a part to play in fixing the problems.” TA

Vocational training in Angola.

theafricapitalist | 29

FEATURE | YOUNG AFRICAPITALISTS

Young Africans making a

DIFFERENCE All over Africa, more and more young people are the driving force behind enterprises and charities in order to change lives. Here are some examples: BY SARAH RUNDELL

THE IDEAS INCUBATOR

wenty eight year-old Neliswa Fente’s social enterprise SpringAge targets South Africa’s chronic unemployment through a network of leaders and entrepreneurs. Via a hub system, SpringAge incubates and nurtures business ideas and helps people find work. “South Africa is full of potential but everyone is working in isolation. “We have created a collaborative space where young people and corporations/businesses/the private sector can innovate together.” Her hope is that the initiative leads to the creation of more small businesses that in turn create employment “for young people creating a positive change in society.” Fente, whose inspiration came from her belief that the for-profit sector often fails “to develop people, or help society,” has had to overcome initial teething problems. “One of the biggest challenges at the beginning was how to sell our services. People always wanted to see a product and we were selling a process,” she says. It has also been challenging convincing established businesses/corporations that young people have a valuable idea to share, she says.

30 | theafricapitalist

( w w w. s p r i n g a g e. co.za/)

“One of the biggest challenges at the beginning was to sell our services. People always wanted to see a product and we were selling a process.” - Neliswa Fente, SpringAge

FEATURE | YOUNG AFRICAPITALISTS

THE INSPIRATIONAL BUSINESSMAN Kenyan Wiclif Otieno set up Kito International in 2011. The non-profit organisation helping young people escape the street was inspired by his own experience growing up in Nairobi’s Mathare slum. Orphaned at seven, he spent most of his adolescence on the streets, as a labourer but also engaging in gang activities and taking drugs. Kito International provides young people with a two-month formal training programme in entrepreneurship, personal

finance, sales and marketing, leadership and teambuilding. Graduates of these programmes spend four months working with EcoSafi, a social enterprise run by Kito. “Give street youth an economic opportunity and they will work their way out of poverty and stay off the streets forever,” says Otieno. At EcoSafi, young people can put their new skills into practice and gain hands-on experience in a business environment.

More than 70 people have completed Kito’s programme and gone on to start their own businesses, find full-time employment or continue their education with the help of the organisation’s scholarship scheme. “A job signifies a bridge to social reintegration. For those who have never been employed a job is a source of pride and security,” says Otieno. (www.kitointernational.org)

T HE SKILLS DEVELOPER Malawian Rosebill Satha’s social enterprise JARDS Products manufactures affordable, high quality eco-friendly furniture. Satha’s team also train young people and women in furniture making crafts including bamboo weaving and bead working, as well as entrepreneurial skills. Satha, who started out weaving wedding baskets for friends, was encouraged to incorporate JARDS’ social element by her mother, who works for the Ministry of Gender and Children Welfare of Malawi and has worked with disadvantaged women groups in villages. JARDS specifically targets disadvantaged women and youth in semi-urban areas, often “forgotten when it comes to development programmes,” she says. Her ultimate goal is that JARDS grow into a skills development centre. She also wants JARDS to become a sought-after brand. “When a basket is

picked up I want people to know it is a good quality, handmade product.” She also wants Malawi to be recognised as a country with skilled artisans on the “weaving map.” The business was rocked by the economic slowdown. “I almost closed as people were only buying what they needed, not what they wanted. As we needed the money to conduct the entrepreneurship trainings, things were coming to a standstill,” she recalls. Since then, milestones include Satha’s selection as a 2012 Community Solutions Fellow and a One Young World (OYW) Delegate. She was chosen as role model entrepreneur of the year for the National Association of Business Women of Malawi and won OYW’s social business accelerator grant. “This has helped us to keep on doing the work we love,” she says. (http://jardsproducts.wordpress.com/)

THE SERIAL SOCIAL ENTREPRENEUR At 26 years of age, Kenyan Kiziah Philbert is a serial social entrepreneur. His latest for-profit venture aims to boost micro agriculture. Hunger Below Zero provides infrastructure and training through a franchise model to boost small-scale agricultural production. “Millions of people who live in disadvantaged communities in Kenya suffer from poor nutrition. They need easy access to affordable, fresh, organic

vegetables on an ongoing basis. People are also subject to escalating food prices and hefty travel costs,” Philbert says. Key initiatives under the business’s slogan “Plant, Eat, Repeat” include improving the quality of soil in many disadvantaged areas and boosting farming skills. The organisation’s biggest challenge is commitment from funders. “The government doesn’t pay

enough attention to issues around food security, even in areas where hunger is killing people in this modern age,” he says. He also established the independent community bank PesaPedia, which brings financial services to marginalised groups, and the not-for-profit organisation Sponsor a Child Kenya. (@HungerBelowZero)

theafricapitalist | 31

A list | African Women in finance

African

women in finance

Female leaders are still rare in African business and finance but things are slowly changing. The Africapitalist has put together a list of leading women in African finance: List compiled by Renee Kamau

Maria Ramos Chief Executive of Barclays Africa Group.

Dr. Ngozi OkonjoIweala Minister of Finance, Federal Republic of Nigeria.

Prior to joining Absa she was group Chief Executive of Transnet Ltd, and Director-General of the National Treasury in South Africa’s first post-apartheid government. She has previously served as a nonexecutive on the boards of Sanlam Ltd and SABMiller, and currently serves on the Executive Committee of the World Economic Forum’s International Business Council and the Executive Committee of Business Leadership South Africa. She has twice been named one of the most powerful women in international business by Fortune Magazine.

Before this appointment, she was one of the managing directors of the World Bank (between October 2007 and July 2011) and was Finance Minister and then Foreign Minister in Nigeria between 2003 and 2006. She was the first woman to hold either of those positions. She is Harvard educated and the co-founder of NOI-Gallup Polls, the Makeda Fund, and the Centre for the Study of Economies of Africa (C-SEA). Dr Okonjo-Iweala was a senior fellow of the Brookings Institution, Washington DC and earlier this year, received the prestigious David Rockefeller Bridging Leadership Award.

Linah Mohohlo Governor of the Bank of Botswana Gill Marcus Governor of the South African Reserve Bank.

She is the ninth governor, and the first female to hold this position. Ms Marcus was elected to Parliament in 1994 and has since served as the first chairperson of the Joint Standing Committee on Finance, Deputy Minister of Finance and deputy governor of the South African Reserve Bank. Ms Marcus has previously held positions in the ANC party, and has worked as a professor of policy, leadership and gender studies at the Gordon Institute of Business Science. She is currently the Chair of the Rhodes Scholarship Fund and the non-executive Chair of the Absa Group.

32 | theafricapitalist

She became governor in 1999 after 23 years with the central bank and service with the International Monetary Fund in Washington. She sits on the boards of several major companies in Botswana and elsewhere. Among her several international engagements, she was appointed Eminent Person in 2002 by the former Secretary General of the United Nations (Kofi Annan), charged with the responsibility of overseeing the evaluation of the United Nations New Agenda for the Development of Africa in 1990s. She served in Tony Blair’s Commission of Africa which published “Our Common Interest” in 2005. She is also a member of the Investment Committee of the UN Pension Fund and of the Africa Progress Panel.

A list | African Women in finance

Bouare Fily Sissoko Economy and Finance Minister, Mali

Dr. Dambisa Moyo Economist and best-selling author

Antoinette Monsio Sayeh Director of the African Department, IMF.

Dr. Moyo is a Harvard and Oxford educated economist and the author of 3 New York Times bestsellers. Dr. Moyo serves on the boards of Barclays Bank, SABMiller and Barrick Gold. She was an economist at Goldman Sachs, where she worked for nearly a decade, and was a consultant to the World Bank. She was named by TIME Magazine as one of the 100 Most Influential People in the world in 2009 .She is currently the CEO and founder of the Mildstorm Group, a boutique firm that analyses global macro-economic trends and financial markets.

As Minister of Finance in post-conflict Liberia, she led the country through the clearance of its longstanding multilateral debt arrears and its first poverty reduction strategy. Before joining President Ellen Johnson Sirleaf’s Cabinet, Ms. Sayeh worked for the World Bank for seventeen years, including as country director for Benin, Niger, and Togo, country economist on Pakistan, and Afghanistan. Before joining the Bank, Ms. Sayeh worked in economic advisory positions in Liberia’s Ministries of Finance and Planning.

Arunma Oteh Director General of Securities and Exchange Commission of Nigeria

Maria Kiwanuka Minister of Finance, Planning and Economic Development, Uganda. Before her nomination as Minister, Ms. Kiwanuka served as a governor of the Islamic Development Bank, director of Uganda Development Bank, Stanbic Bank Uganda Limited, member of the board of governors at the African Development Bank and the Eastern and Southern African Trade and Development Bank. She has also worked as the managing director of Radio One and Radio Two, in Uganda. Ms. Kiwanuka previously worked for more than ten years with the World Bank, as an economist and financial analyst for the East Asian and Southern African regions.

Mrs. Sissoko is an experienced economist who is trained in development law, economics and strategic planning and budgeting of public programmes. She worked for the World Bank in Bamako as well as consulting for the Malian Comptroller General of State, State Controller, Deputy Director General of Customs. She has also occupied the portfolio of State Domains and Land Affairs as well as communications.

Nialé Kaba Minister of Economy and Finance, Ivory Coast She is the first woman in Ivory Coast to be in charge of this department. In the past, Ms Kaba held highly important posts in the Ivoirian government such as Minister for the Promotion of Housing and Office Director for the Minister of the craft industry. She also served as Deputy Office Director for the Finance Ministry. She is trained in statistics and economic engineering and holds a postgraduate degree in international development economics from the University of Paris 1 Panthéon Sorbonne.

Ms. Oteh became the Director General of the Securities and Exchange Commission (SEC) in Nigeria in January 2010, In this position she is responsible for regulation of Nigeria’s capital markets, including the Nigerian Stock Exchange. Before that, Ms. Oteh served as the Vice President of Corporate Management & Corporate Services of African Development Bank (ADB), served as Director of Treasury Department at ADB until March 2, 2006. She was Bank Group Treasurer, and also held positions in treasury and lending since she joined the AfDB in 1992. She serves as a Member of Advisory Board at Africa Investor Ltd. Ms. Oteh holds an MBA from Harvard Business School.

theafricapitalist | 33

Spotlight | African School of Economics

Artist’s impression of the ASE campus.

new home for

frican economists A pan-African university will soon open its gates to create the continent’s future researchers and historians.

BY SARAH RUNDELL

wenty five years ago, when he was a student, Leonard Wantchekon was imprisoned and tortured for organizing university protests against the dictator Mathieu Kérékou. He fled Africa to pursue an academic life abroad. He earned an MBA and a PhD, followed by faculty posts at New York and Yale universities, which have led to his current position as a Professor of Politics at Princeton. But his irrepressible activism has drawn him back to his native Benin, where he is currently leading a project to create an elite pan-African university that will partner with Princeton. “I have been an activist since I was very young. I suppose I’ve always had this strong commitment to development in Africa,” Wantchekon says.

The African School of Economics (ASE) is modelled on the multi-disciplinary approach of schools like the UK’s London School of Economics. It will open its doors to 130 stu34 | theafricapitalist

dents from 20 African countries this August, who will either be taking masters in economics, maths and statistics or will be entering MPA and MBA programs. Wantchekon argues that combining social sciences and humanities in the curriculum is crucial and it is a formula that will set the ASE apart from rival African schools. Disciplines will be blended through a core curriculum comprising maths, statistics, and history. This means management and economics students will also study history, or humanities students will take statistics and economics as well. Graduates studying national education policy will be able to set this in the context of Africa’s pre-colonial and colonial education systems and historians will have to apply the rigour of statistics and hard evidence, he says. This will broaden the students’ understanding of their topics. “Misconceptions about Africa come from not knowing African history. Similarly, I believe it is critical that people studying history use data.” The MPA will be focused on “training bureaucrats”

Spotlight | African School of Economics

“Misconceptions about Africa come from not knowing African history.” with analytical skills and lessons that “blend knowledge with the law and ethics,” he says.

PAN-AFRICANISM Along with this focus on analysis and history, the ASE is also rooted in Pan-Africanism, another key concept shaping Wantchekon’s vision for the university. The idea draws on his own perception as equally Beninoise and African. He insists the ASE will benefit the continent as a whole rather than its own pocket of West Africa, since it has been born from both a continent-wide economic progress and a continent-wide dearth of first-rate tertiary education. “Africa has a more positive outlook now than ever before. There are fewer conflicts, democracy is spreading, economies are moving from negative growth and there is a revival of Pan-Africanism with many big corporations increasingly pan-African. In contrast, our human capital is not catching up with all these opportunities,” saysWantchekon. Although he praises public universities for increasing access to higher education, he believes a high-quality, elite education is still hard to come by. “Many people tend to leave Africa and go abroad [to study] and may not always come back.” One motivation driving Wantchekon is his desire to nurture the first generation of indigenous African academic experts, a voice he believes is still absent in the African debate which remains dominated by Western scholarship. “I am frustrated by the fact there is a limited African presence in the academic debate on African development. I believe this is a problem, because the stakes are simply not

as high if you are not African,” he says.

Wantchekon’s own highly distinguished career in academia, recently recognised with membership of the American Academy of Arts and Sciences, is unusual. Those who do graduate with PhDs in Africa typically choose jobs in the International Monetary Fund or abroad, rather than take local faculty positions, he says. He doesn’t doubt the passion of young Africans to join the academic debate but argues that universities don’t provide enough academic rigour or training. He hopes the ASE will also raise and lead the global debate on African development through a series of conferences and events he plans to run at the university every July. “It is crucial such a place exists in Africa and Benin is very central,” Wantchekon says. INTERNATIONAL APPROACH Other distinguishing factors at the new university include each Master’s programme having its own research institute. The ASE will also collaborate with other universities from Canada, the US, Europe, and Latin America. It will promise joint research but also faculty and student exchanges that would bring an international perspective to the classroom. “Our plan from next year is to aggressively recruit from overseas so that between 15% and 20% of our student body will eventually come from outside Africa,” says Wantchekon.

The research element of the courses will mean students carry out surveys, impact evaluations for government programmes and policies and market research, using the data generated to write their thesis.. The biggest challenge remains raising finance for the project. Wantchekon says he is in ongoing dis-

cussions with pan-African and local banks, as well as big corporations for the next round of fundraising. Although a gruelling process, he feels “very positive” and believes “the financing will sort itself out” once the university opens come August. Crucial elements like the ability to offer scholarships are now in place, although he says the number on offer is still “far off target.”

Raising finance for such a project is particularly challenging against a backdrop of the continent’s more obvious needs like primary education, “feeding the hungry, or fighting AIDS”, when this specific kind of education is only for the few. Yet Wantchekon insists solving the continent’s more obvious challenges “still needs managers.” The campus, which will be state-of-the art and built on land secured in the city of Akassato in southern Benin, is still far from completion - but he says this hasn’t dulled student enthusiasm.

Recruiting faculty has been one of the easier elements of the job. Top young African professors, some of whom have left posts in Canada and Europe, are on board for the next academic year with a faculty count of six which will grow to nine with visiting professors. It is from this group that he hopes to eventually find a provost, or senior academic administrator with responsibility for the ASE’s academic and budgetary affairs. As founder and president of the ASE,Wantchekon now wants to hand over the day-to-day operations and play to his strengths as a faculty mentor and his ability to shape the research element of the ASE. He also plans to teach two semesters every year at the ASE, an institution he describes as “the best achievement” in his long list of accolades. TA

“Africa has a more positive outlook now than ever before. There are fewer conflicts, democracy is spreading, economies are moving from negative growth.” Leonard Wantchekon

theafricapitalist | 35

Q&A | Ellen Johnson SirlEAf

Lessons on moving from conflict to

STABILITY

Liberiaâ&#x20AC;&#x2122;s President Ellen Johnson Sirleaf is making great strides in restoring and transforming the postconflict nation. The Africapitalist speaks to the Iron Lady about economic reforms and social development.

he Africapitalist: Liberiaâ&#x20AC;&#x2122;s transition to peace has been a remarkable success over the past decade. However, other countries around the region are struggling to achieve social cohesion and security. What lessons can Liberia offer? President Sirleaf: With the support from key partners such as the United States and the United Nations, Liberia built a new professional army and has undertaken a security sector reform, which included institutional rationalisation and restructuring and capacity development. This was buttressed by political compromise for reconciliation. These could be useful lessons to countries moving from conflict to peace and stability.

36 | theafricapitalist

Q&A | Ellen Johnson SirlEAf

TA: After a decade of talking about “Africa Rising”, there are some big questions being asked about the structure of the growth. How does the President believe economies such as her own can turn growth into equality and make sure that the progress made over the past 10 years is sustainable and durable? President Sirleaf: As growth continues at a rapid pace, African economies will need to ensure that the growth is transformative by investments in infrastructure and human capital to create value addition in natural resource; and expansion in local business and job creation.

TA: Liberia is among several West African countries that could soon have a domestic oil industry. How is the country preparing for that possibility? President Sirleaf: We are hopeful at the prospects of a commercial discovery in the near future and we are working with regional and international experts to develop a worldclass petroleum law that ensures equal benefits to all citizens and to future generations.

TA: Liberia, along with several of its neighbours, has scored poorly on recent surveys relating to transparency and corruption. How does the President believe that the negative perception of her country and others in similar situations can be addressed? President Sirleaf: The negative perception, initiated by local domestic problems, is simply dead wrong when compared with the reality. While systemic corruption remains a problem, Liberia’s score on the Millennium Challenge Corporation, the Transparency International, and Africa Corruption indices have shown and recognized positive, diligent and robust efforts in the fight against corruption.

BIO: Ellen Johnson Sirleaf Liberian President Ellen Johnson Sirleaf is the world’s first elected black female president and Africa’s first elected female head of state. Born in Liberia in 1938, Ellen Johnson Sirleaf was schooled in the United States before serving in the government of Liberia. A military coup in 1980 sent her into exile, but she returned in 1985 to speak out against the military regime. She was forced to briefly leave the country again. When she won the 2005 election, President Sirleaf became the first female elected head of state in Africa. In 2011, she was one of a trio of women to win the Nobel Peace Prize.

President Sirleaf: Liberia has set up extraordinary arrangements to combat corruption including the establishment of an independent, Anti-Corruption Commission, adoption of a code of conduct, applicable to all branches of government, establishment of the Whistle Blower Protection Mechanisms and an independent autonomous auditing commission. Additionally, Liberia is the lead country in promoting transparency particularly in areas relating to our national resources. TA: Liberia’s transition to peace has been a remarkable success over the past decade. However, other countries around the region are struggling to achieve social cohesion and security. What lessons can Liberia offer? President Sirleaf: With the support from key partners such as the United States and the United Nations, Liberia built a new professional army and has undertaken a security sector reform, which included institutional rational-

isation and restructuring and capacity development. This was buttressed by political compromise for reconciliation. These could be useful lessons to countries moving from conflict to peace and stability. TA: The President is co-chair of the UN high-level panel on the post-2015 development agenda. How does the President believe the new framework can work to reduce the gap between the rich and the poor and between men and women in African countries? President Sirleaf: The new framework calls for the eradication of poverty in all its forms. We can eradicate poverty if we eliminate all forms of inequalities and this includes empowering women, reaching gender equality. The framework would lead to equal opportunities for all and provide women with the chance of make strides in areas where they were kept on the sidelines, including education, access to credit and farmlands. In Africa, although women work harder and more both in the house and on the farms, their work was not valued as it should. The new framework will remove these discrepancies and reduce or eliminate the gap between men and women. Our national policy of prioritising the education of girls is aimed at just doing that.

TA: Michelle Obama was quoted recently as saying “girls around the world risk their lives to pursue their ambitions.” How does the President see this issue being addressed in Africa? President Sirleaf: We need stronger laws for the protection and participation of women. Also, affirmative action to expand girls’ education aimed at creating a critical mass of women leadership at all levels in the society throughout Africa. TA

theafricapitalist | 37

FEATURE | Feeding Africa

Turning the poor man’s crop into Africa is far from self-reliance when it comes to food supplies. But officials and companies alike are stepping up their efforts to open the markets to local farmers

GOLD E

BY PETER GUEST

arlier this year, at the Economist conference in Nigeria’s commercial capital of Lagos, businesspeople lured by the promise of the West African powerhouse’s economy were confronted by mounds of pre-packaged white bread. The loaves, though unremarkable to look at, and incongruous in the glossy Intercontinental Hotel, represented part of the Nigerian economy’s future. Mixed in with the expensive imported wheat flour was 20% cassava flour. Turning local crops into commercial businesses has manifold development benefits. Import substitution is a strategic priority for governments across sub-Saharan Africa, and none more so than Nigeria, which has historically laboured under a huge bill for processed food and grain.

In 2011, the country imported $11 billion worth of food; of this, $4 billion was wheat. Allowing this structure to continue was to

perpetuate the de-capitalisation and de-industrialisation of the economy, sending jobs overseas and importing inflation at a point when the country needs far more of the former and far less of the latter, says Nigeria’s Agriculture Minister Akinwumi Adesina. With Nigeria—and many other African countries—facing a huge shortage of jobs for young people, agriculture could be the solution. Between 60-70 per cent of the workforce is already employed in the sector, but many jobs are at a low level. Adesina, who has repeatedly stated that he wants to turn smallholder farmers into businesses, believes that by modernising and expanding the farming industry, and by moving up the value chain into manufacturing, the sector will create high value, productive jobs by the millions. The ministry has a target of 3.5 million jobs created by 2015. Many of these roles will be in rural areas that may otherwise be left behind by the country’s urban development.

“We believe you must bring the factory to the farmer, you must not ask the farmer to come to the factory. If you do that, you don’t have that infrastructure problem.” Peter Bolt, Dadtco CEO

38 | theafricapitalist

FEATURE | Feeding Africa

closer to their end markets in Africa. Major consumer goods companies—in particular brewers, such as Diageo and SABMiller, and diversified food and healthcare companies, such as Unilever and PZ Cussons— have sought out growth markets in West Africa. Cassava being transported to the market.

As part of a wider initiative to rebuild the Nigerian agricultural industry from the ground up, Adesina’s ministry has begun to promote the expansion and commercialisation of staple crops that have the potential to replace imports not only of grain, but also of sugar and food additives.

Cassava, a root vegetable that is an important source of carbohydrates and is consumed across the continent, is almost entirely produced at a subsistence or small-scale level, and the infrastructure needed to store and process the crop is severely underdeveloped. This, according to the agriculture minister, is a missed opportunity.

“We are the largest producer of cassava in the world. If we are the largest producer, we must also necessarily become the largest processor of cassava in the world,” Adesina says. Nigeria’s raw production of cassava is almost as much as that of the second and third producers—Brazil and Indonesia—combined. However, it processes less than a quarter of what it grows. “Today only 10% of our cassava is used in industry. We’re changing that,” Adesina says. “We’re now using cassava for starch, cassava

for sweeteners, cassava for ethanol production, for fillers in medicine. And also cassava as high-quality flour to substitute for wheat flour in bread.” CREATING A MARKET The Nigerian government has begun a programme to encourage bakeries to substitute 20% of the wheat flour in bread with cassava flour—the product of which was piled up at the Economist event. This, alongside broader support for industrialisation, is creating an end market for the crop.

“Cassava used to be a poor man’s crop, and we’re turning it into gold for our farmers,” Adesina says.

Nigeria’s agricultural initiatives are, as is befitting the largest economy and most populous country in Africa, an order of magnitude larger than its neighbours. But across the continent, governments, development agencies and private companies have begun to wake up to the potential for these local commodities. Localisation has also become important for multinationals as they move more of their supply chains onshore and

Buoyed by economic growth and demographic expansion, Nigeria and Ghana have increasingly been the focal points for international investment over the past decade. The localisation of manufacturing, however, is a relatively recent trend.

SABMiller introduced its Eagle brand cassava beer in Ghana in March 2013, following on from its successful launch of Impala, another cassava-derived brew, in Mozambique in late 2011. In Uganda, SAB’s subsidiary, Nile Breweries, sells another brand called Eagle, made from sorghum.

These brands are typically aimed at low-income consumers, with the breweries able to achieve cost savings by avoiding expensive imports of barley. Once the local supply chains are up and running, they can mitigate some of the pricing volatility that comes with buying from international markets. Lower-priced beers open up poorer communities—the so-called “sub-pyramid” space—that were previously captured by illicit or artisanal alcohols.

GREATER CONFIDENCE Buying locally and bringing farmers into the supply chain gives smallholders

“Cassava used to be a poor man’s crop, and we’re turning it into gold for our farmers.” Dr. Akinwumi Adesina, Nigeria’s Agriculture Minister

theafricapitalist | 39

AGRICULTURE | Feeding Africa

SABMiller introduced its Eagle brand cassava beer in Ghana in March 2013, following on from its successful launch of Impala, another cassava-derived brew, in Mozambique in late 2011.

access to a guaranteed end-market for their product, allowing them to invest with greater confidence in their farms.

“Most of these multinationals who are transparent and have shareholders looking over their shoulders are trying to localise.” Peter Bolt, Dadtco CEO

Some companies have built access to finance and extension services into those supply chains to expand farmers’ capacity. This, in turn, improves the quality and volume of their crops, improving the security of supply and their livelihoods—the kind of developmental positive feedback loop that major investors have been preaching for a decade. There is another motive too, says Peter Bolt, the CEO of Dadtco, an agricultural processing and trading company that works with multinationals across Africa.

In import-dependent countries with relatively weak governance, such as Nigeria, powerful import monopolies have developed and hold enormous pricing power. Just as private individuals suffer from the import cartels’ power, so too do multinationals. “Nigeria imports most of its staples, and there are three com-

40 | theafricapitalist

NO EASY TASK

panies importing most of those staples,” Bolt says. “They have no interest in local production, because they can make more money on imports.

Commercialising cassava production in West Africa is by no means a straightforward task. Although there is growing political will amongst the region’s policymakers and a surge in interest from consumer goods companies, huge infrastructure challenges remain. The crop is mainly grown at a subsistence or smallholder level, and the consequence of the lack of its commercial exploitation has been a failure to invest in storage and transportation facilities.

Bolt’s company has been working with some of the biggest food and beverage companies in Africa as they expand their use of local commodities.

Cassava’s usefulness as an industrial crop deteriorates rapidly the longer the root is out of the ground, meaning that there can be considerable wastage of the crop. There are close to a hundred processing facilities in Nigeria alone, but most of them stand idle because of the lack of supporting infrastructure.

“Most of these multinationals who are transparent and have shareholders looking over their shoulders are trying to localise.”

“These companies are keen to localise their raw materials, but also have the problem that they are also stuck to those importers. For example, there is a major brewer in Nigeria who has to buy his sugar for brewing at a price that is four times the world market price. He wants to buy local sugar, but he can’t get it.” If local substitutes, such as cassava-based sweeteners, can be found, the cartels’ pricing power is dismantled—although there is still considerable opposition to change. “If you take 400,000 tonnes out of the market, these people lose $200 million in import profits. They’re not taking it lying down,” Bolt says. TA

Dadtco, a Dutch company with operations across Africa, has carved out a niche working for brewers and food companies looking to build cassava into their supply chains. “If you are a big global company and you say you want to centralise your processing and put in a 200,000 tonnes per annum plant there, you can forget about it. There’s no infrastructure,” Bolt says. His company’s approach acknowledges that infrastructure gap. It has created mobile processing vans that feed into larger hubs. “We believe you must bring the factory to the farmer, you must not ask the farmer to come to the factory,” Bolt says. “If you do that, you don’t have that infrastructure problem.” TA

Commentary | Ronak Gopaldas

Why delivering soft infrastructure matters in

AFRICA

espite almost a third of African countries growing at a rate of 6 percent and more, and some of them routinely being among the fastest-growing economies in the world, there is little connection between high growth rates and reductions in inequality. Inclusive growth remains an elusive concept on the world’s poorest continent and threatens to undermine the considerable gains made over the past decade across the areas of macro-economic reform, political stability, and improving business and regulatory environments.

In light of these trends, infrastructure investment remains a key element to Africa’s economic success.

However, the paradigm with which such investment is viewed needs to assume a new form, with the recognition that both “soft” and “hard” infrastructure are critical to unlocking the continent’s economic potential. At present, Africa struggles with major deficits in both these areas.

Hard infrastructure refers to the physical facilities and/or installations needed to operate, manage and monitor a system with the intention that the structures are permanent. For example, when power lines or communication towers are built, the goal is for them to stay in place indefinitely. Other examples include railways, dams, roads and satellites. Soft infrastructure is more about institutions that maintain standards of a culture such as health, law enforcement, emergency services and education.

Both hard and soft are essential for progress of a nation.

Naturally, building up and investing in a country’s hard infrastructure has an immediate, catalytic effect on growth. Because investment is a component of gross domestic product, increasing investment

will increase growth.

The economic pay-offs from building up soft infrastructure are not immediate but show up only in the long run.

The pay-offs are not necessarily reflected in the rate of the growth but rather in the quality of growth, which tends to be more sustainable.

In most countries, the combination of social problems on the scale exhibited in Africa – those of unemployment, massive inequality and a general deterioration in social indicators – tend to result in a sharp and pronounced rise in political risk. There is therefore an urgent need to improve human development.

Income inequality remains unacceptably high and is falling in only about half of Africa’s countries; hundreds of millions remain trapped in poverty. Growth needs to be inclusive if it is to improve human welfare and ensure increasing social and political stability. This view is echoed in a report published by Africa Progress Panel. “The deep, persistent and enduring inequalities in evidence across Africa have consequences,” the report said. “They weaken the bonds of trust and solidarity that hold societies together. Over the long run, they will undermine economic growth, productivity and the development of markets.”

Forty years of almost continuous war had left Angola in disarray when peace accords were finally signed in 2002. Today, inequities characterise Angolan society; while the economy has been growing by theafricapitalist | 41

Commentary | Ronak Gopaldas

more than 7 percent a year, 38 percent of Angolans live in poverty.

The Gini coefficient, a measure of inequality, stands at a massive 58.6 for Angola. Angola has invested heavily (and will continue to do so) in infrastructure repair and development, education and health care on the back of significant proposed economic and structural reforms to facilitate economic growth and wider participation.

It will be essential for Angola to convert this desire and articulation of reform into concrete actions to prevent socio-economic instability over the longer term. South Africa needs to adopt a “different” kind of growth to absorb the social problems accumulated during the apartheid era and to deal with the problems that have arisen since 1994. The role of the private sector, the government and the development world are vital in 42 | theafricapitalist

89%

Reduction in the number of Brazilians living in extreme poverty in the past 10 years. creating the correct type of developmental state, which balances various imperatives, particularly in terms of “soft” infrastructure. In this regard, wealth creation by the private sector must be done differently in Africa if it is to have any meaningful impact on the continent’s development.

Implicit in this is an acknowledgment of the risks of non-inclusive growth. This is because social and political conflict in Africa can happen because of fast growth, not despite it. Such complex dynamics bring the spotlight on “Africapitalism”, an economic philoso-

phy that is gaining attention across Africa and in other key centres across the world. It is essentially a call on the private sector to lead Africa’s development through longterm investments in strategic sectors that can create both economic prosperity and social wealth.

According to Tony Elumelu, the chairman of Heirs Holdings who first coined the term: “Africapitalism is not simply capitalism for Africa. “On the contrary, Africapitalism’s intention is to – yes – create wealth for the investors who invest sustainably in Africa, but equally to benefit the broader population by the jobs it creates and the catalytic sectors it develops in its attempt to move Africa forward.” He adds: “Africapitalism is as much about financial return – and for that we make no apology – as it is about social good. The two are interdependent and the relationship can

Commentary | Ronak Gopaldas

been globally praised for its fight against poverty, in which 35 million people have risen into the lower middle class.

Latin America’s largest economy has achieved an 89 percent reduction in the number of its citizens living in extreme poverty in the past 10 years. During this time, Brazil has implemented the world’s largest family income support programme, the Bolsa Familia, which gives about 50 million people, or one in four of the country’s population, a monthly slice of government money. The Bolsa Familia benefit payments are contingent on all family members under the age of 16 going to school and receiving basic vaccinations.

Once they meet these requirements, families below the poverty line earn between 32 and 38 Brazilian reais (between R150 and R180) a month for each child. Families below the extreme poverty line get 70 reais per child. Funds are normally received through a type of bank card mailed to the female head of the household.

“Africapitalism is as much about financial return – and for that we make no apology – as it is about social good.”

About 13 million families have registered for the scheme, which has prioritised health care and education.

perhaps be best explained as the space where business and philanthropy meet. AfriTony Elumelu, Chairman of Heirs Holdings capitalism marries the finanAfrica is vulnerable to political cial motives required for business and social upheaval due to rising unto exist with the good intentions that employment, which has defied impressive drive philanthropy to create a powerful economic growth. The failure to share the fruits of unique force that Africa needs today.” rapid economic growth with a wider section of sociFrom the public sector perspective, policies are ety creates the prospect of systemic instability. needed to make growth inclusive by reforming the business environment, promoting good governance, This has highlighted the urgent need to invest in the and improving the quality of public investment and provision of quality and efficient infrastructure services, both hard and soft, which are essential to realspending on human development. ise the full potential of the continent. Moreover, an effective employment policy will be necessary for matching labour supply and demand, Successfully making inroads into these challenges and improving vocational training. Improving access requires a co-ordinated effort from African governto finance and financial sector intermediation is also ments, their citizens, the private sector and donors. TA critically important. Brazil’s success in this regard serves as a prime example for other developing nations. The country has

Ronak Gopaldas is a country risk analyst at Rand Merchant Bank. This article was first published in the IOL Business Report on June 4th 2014 .

theafricapitalist | 43

COUNTRY FEATURE | BOTSWANA

Is Botswana the Real Black Star of

Africa?

Sound economic management and political stability provides a shining model of how African states can develop

BY BOLANLE OMISORE

estled in the center of Southern Africa, the Republic of Botswana had a tough start as one of Africa’s poorest countries after independence in 1966. But in recent years, it has enjoyed a meteoric economic rise and now, the tiny country of two million people is among the fastest-growing economies in the world. What’s more, the growth that has carried Botswana to the top of the most important development and investment indices is clearly the type of growth that could help establish the country as a leading Africapitalist economy.

Botswana’s Rise With sound fiscal policy, solid institutions, and good governance, among other things, Botswana has been able to achieve the highest sovereign credit rating in Africa, the fourth highest gross national income, and the second highest Human Development Index of continental sub-Saharan Africa. In May, economist Daniel Altman, creator of the Baseline Profitability Index-- a tool for assessing the attractiveness of investing in markets around the world-- named 44 | theafricapitalist

Botswana the top investment destination in the world for the second year in a row.

“Botswana has created a fairly transparent business climate that has improved the environment for entrepreneurship and its ability to trade with the rest of the world and attract foreign investment,” Altman said.

Botswana has become one of the most attractive destinations for foreign direct investment in the world and soon, the country, its people and its investors will begin to reap the benefits. And while it didn’t happen over night, the government of Botswana has gone from being categorized as a Least Developed Country, to a model for other nations across the continent—and all for its application of Africapitalism principles.

Unemployment: A Pan-African Problem Although topline data reflects a shiny story of sustained growth and coming prosperity, it is important to note the disparities and inherently flawed economic reporting that mask the fuller picture of Botswana’s story; a story of growth slowed by low employment (17.6 per cent), income inequality (20.7 per cent of Batswana live in poverty) and an export-driven economy.

With a per capita GDP of over $7,000, the country is relatively wealthy by regional standards. But this masks large income disparities and high unemployment levels, because despite impressive rates of primary and secondary education completion, there is a shortage of skilled labor, which makes corporate success hinge on companies finding their own solutions to labor constraints; an expensive undertaking. Indeed, according to Jay Salkin, an economist at the Botswana Institute for Development Policy Analysis, the country is still facing big challenges that are centered on employment.

“The non-mining sectors are growing at

COUNTRY FEATURE | BOTSWANA

five per cent per annum now, he said. “And while that’s quite good by international standards, it’s not good enough to absorb the growing labor force, and to move as many people out of poverty as the government is committed to doing.”

THE NUMBERS

Life expectancy at birth

18.4% 5.4% of the population classified as extremely poor

SOURCE: WORLD BANK AND AFDB DATA

growth in GDP in 2013

But according to the African Development Bank’s African Economic Outlook, the government’s “National Economic Diversiﬁcation Drive Strategy (NEEDS) is expected to have a signiﬁcant contribution to employment.” Plus, research out of the Lagos-based Africapitalism Institute (see page 18) indicates that Botswana’s growth goes beyond topline indicators like GDP and reflects the value-added growth that is

desirable for long-term sustainability; Botswana ranked the highest among African countries with economies growing steadily and with above-average value-added level growth as a percentage of overall GDP.

Stuck on Diamonds Like many other nations “blessed” with abundant natural resources, Botswana’s economy is deeply dependent on those resources for revenue. The economy was built on the diamond-mining industry and at one point, mining made up 42 per cent of the nation’s GDP. In fact, an expansion in mineral production led to average real GDP growth of 5.7 per cent between 2002 and 2007. theafricapitalist | 45

COUNTRY FEATURE | BOTSWANA

“The non-mining sectors are growing at five per cent per annum now and while that’s quite good by international standards, it’s not good enough to absorb the growing labor force, and to move as many people out of poverty as the government is committed to doing.” Jay Salkin, an economist at the Botswana Institute for Development Policy Analysis Still, shrewd administration of diamond resources is the trademark of Botswana’s remarkable economic performance. In 2011, the rebound in world demand for diamonds led to robust economic growth, and quarterly real GDP in the country increased by 6.3 per cent, 5.7 per cent and 7.8 per cent in the first, second and third quarters, respectively. Unlike in past years, when mining and quarrying drove growth, now it is mainly driven by construction and manufacturing; clear indicators of diversification, and two sectors that typically create a large number of skilled labor jobs.

So, while it is clear that investment in the private sector is needed to diversify the economy away from dependence on diamonds and government spending, Altman insists that top line information on Botswana’s diamond dependence doesn’t tell the whole story. “Undoubtedly, natural resources have helped it to grow, but we’ve seen many other countries mismanage such resources,” he said. “Botswana, by contrast, 46 | theafricapitalist

has actually turned the income from those resources into more sustainable sources of growth. What’s left for Botswana is to further diversify its economy and take advantage of the firm foundation it has established. ”

Can the Rest of Africa Learn from Botswana? Although seven of the ten fastest growing-economies in the world are in Africa, Africapitalists argue that their growth is driven by export driven activity, which is inherently unsustainable. If those economies wish to take advantage of that growth and see real, sustainable development, they must pick up some of the things Botswana has long emphasized in practice. “There are some indigenous factors that have helped Botswana to grow that can’t be duplicated by other countries; having natural resources being one,” Altman said. “There are also some aspects of its legal systems and other institutions that are difficult to change in a short period of time. However many of the other positive factors that Botswana has can be duplicated-- by relaxing capital con-

trols, improving budget balance, fighting corruption and protecting investors from exploitation.”

In spite of the clear challenges for Botswana-style growth and development, Altman believes that there are clear challenges for other African nations in attempting to replicate Botswana’s progress. “Several countries are making progress in those things and their expectations for economic growth are reflected in their rankings on these indexes.

So, while there are still areas for improvement, Botswana offers a mix of positive forecasts and good institutions that is hard to beat around the world; which might just make the country the real Black Star of Africa after all.

While there are still areas for improvement, Botswana offers a mix of positive forecasts and good institutions that is hard to beat around the world.; which might just make the country the real Black Star of Africa after all.” TA

COUNTRY FEATURE | BOTSWANA

THE STORY BEHIND THE SURGE In spite of its lack of competitive advantages— when compared with countries like China and India— Botswana has enjoyed some of the fastest growth in the world for three main reasons, according to Altman.

profile remains low, but its economic growth potential remains high, and the openness of the economy allows for the free-flow of crossborder capital; all of which makes the country very attractive to investors.

“First, Botswana has high expectations for Botswana’s competitive banking system is one economic growth and a low probability of of Africa’s most advanced and as the country problems with security or financial crises, generally adheres to global standards in the so investors can be sure that growth will be transparency of financial policies and banking supervision, the financial realized,” he said. “In addition, sector provides ample access the environment for protecting to credit for entrepreneurs. The investors and the investment country’s transparent investment once earned is quite good and regulations and streamlined and it’s relatively easy to bring a Botwana’s per open bureaucratic procedures are return home from Botswana as it capita GDP in USD hallmarks of Africapitalism. has some of the lightest capital controls in the world.” Though the government has “Finally, there’s room for Botswana’s real stepped back from operating industries after exchange rate to appreciate, meaning that privatizing a number of industries, it has goods from Botswana will be worth more worked to create a conducive environment compared to other countries over the next for business. For example, the constitution several years,” Altman said. “That means prohibits the nationalization of private property someone that buys a chunk now will have and provides for an independent judiciary, and the government has thus far respected those a more valuable bit…later.”

7000

bounds. In fact, Botswana is ranked second only to South Africa among sub-Saharan Africa countries in the 2009 International Property Rights Index; a fact that ensures a level playing field and the opportunity for anyone to accumulate wealth. On top of this, the fledgling downstream diamond industry, including the marketing, cutting and polishing of rough diamonds, is growing and can take advantage of the large existing supply of diamonds in the country. In 2012, the Botswana government took great pains to ensure that the old methodology of mining and shipping raw diamonds from Botswana and processing them abroad— thereby exporting the most valuable part of the process—was largely eliminated. Now, Botswana processes, markets, sorts and sells 10 per cent of gem stones from the country in what Botswana’s Vice-President Ponatshego Kedikilwe described as a landmark move. “From humble beginnings to becoming the leading diamond producing country by value, we now embark on another segment in the journey chain,” he said. TA

These three attributes are essential to Botswana’s continued success as an Africapitalist economy. The strength of its governance means its risk

theafricapitalist | 47

city guide | NAIROBI

TRIBE HOTEL Location: Limuru Road, The Village Market, Gigiri Phone: +254 20 720 0000 Email: stay@tribehotel-kenya.com

This luxury boutique hotel has previously been selected by Conde Nast Traveller for the HOT LIST, recently awarded a Wow Pick by Kiwi collection as well as a listing on the prestigious Robb Report for their top 100 hotels last year. Make the most of your trip by taking some time to relax at the Kaya

Spa. Its massage and spa services on site are some of the best you will find in Nairobi. Multilingual staff can provide tour/ticket assistance, express check-in and express check-out. If you are traveling for business, then this hotel has free wi-fi and secretarial services.

HOTELS

VILLA ROSA KEMPINSKI NAIROBI This 5-star hotel currently features two dining experiences with tantalizing menus: the Italian Bistro, LUCCA, with its own bakery,

and Cafe Villa Rosa which serves internationally inspired cuisine. The hotel also boasts four bars, a library, free wi-fi and state-of-the-

art banqueting and conference facilities. Unwind and relax with deep soaking bathtubs in the guest rooms, at the spa or by the poolside.

Location: Chiromo Rd, Westlands Phone: +25420 3603000 Email: reservations.nairobi@ kempinski.com

From the modern galleries to the luxurious restaurants, Nairobiâ&#x20AC;&#x2122;s alluring world-class experiences make it an unforgettable destination

City in the

Sun 48 | theafricapitalist

ibrant Nairobi combines the rush of a leading business and technology hub with an array of experiences to help you unwind after a hard dayâ&#x20AC;&#x2122;s work and let the worries of the world melt away. What began in 1899 as a simple depot on the railway linking the port of Mombasa to Uganda quickly grew to become the capital of British East Africa in 1907, and eventually the capital of the newly independent Kenyan republic in 1963. Today, Nairobi is a diverse multicultural centre of arts and entertainment.

Of course, it has its fair share of big city drawbacks, such as traffic jams and a fast paced life; but here are some places to help you relax and ease the pressure of long work days. TA

city guide | NAIROBI BARS AND LOUNGES

SEVEN GRILL AND LOUNGE

CIN-CIN AT FAIRMONT THE NORFOLK

This innovatively-designed lounge decked out in hand crafted agate and local artwork offers a great place to relax and enjoy premium cocktails, an extensive wine list and a mouthwatering bar menu in a chic, elegant atmosphere. Visit East Africa’s first Champagne bar officially endorsed by VeuveClicquot and sample the full range of Veuve Champagne, signature Champagne cocktails, Martinis, Fish Bowl cocktails as well as ice cream cocktails with names like Strawberry Shortcake or Cookies’n’Cream. Location: The Village Market, Gigiri or ABC Place, Westlands Phone: ( 254) 737 774 477 for Village Market or (254) 737 774 477for ABC Place Email: reservations@experienceseven.com

This is a combination of contemporary and classic furniture designs, giving the room timeless elegance. It flows seamlessly with the predominant Victorian architecture of the property. The patio area boasts a display of ultra-modern furniture, consisting of large lounge sofas and marble top tables, successfully creating a chic and cosy atmosphere. Its impressive wine and spirit selection showcases a wide range of international labels. The Champagne Bar, its most recent addition, is lustrous, elegant and has a daily offering of Taittinger. A delectable food menu is also available for guests who wish to accompany their fine wine with dinner.

Location: Harry Thuku Rd Phone: +254 20 2265555 Email:susan.mburu@fairmont.com

EXPERIENCES

GOLF AT THE WINDSOR The Windsor Golf Hotel and Country Club is undoubtedly one of the best golf courses in Kenya and is said to be the best in Africa for a host of golfing events. The championship design and length (7,277 yds.) of the course is the centre of attention, and deservedly so. It threads its way through coffee farms and indigenous forests with high and low terrain, giving it character and design quality. The Golf Course features lush, springy fairways, fast, true greens and a sprinkling of attractive water hazards. Location: Kiowa Road, Ridgeways off Kamba Road Phone: +254 722 203 36 Email: reservations@windsor.co.ke

BRUNCHING WITH GIRAFFES Giraffe Manor is one of Nairobi’s most iconic historical buildings, dating back to the 1930s and reminiscent of the early days of Europeans in East Africa. A herd of resident Rothschild giraffes tend to visit the Manor in the mornings and evenings to greet guests and sniff out some snacks before venturing out into their sanctuary of 140 acres.

SHOPPING

SANDSTORM Sandstorm Kenya make stylish and durable travel bags, work bags, wash bags, as well as small accessories made from canvas and leather. The brand caught the eye of the English Royal family who use the bags in their travels.

Location: Lenana Forest Centre Phone: +254 20 3877380 Email: retail@sandstormkenya.com

Location: Karen Hardy Phone: +254 202513166 Email: info@thesafaricollection.com

TRIBAL GALLERY

MooCow

This is the ultimate source of wonderful hand-crafted Kenyan furniture, carpets and fabrics to spice up your home. Have a piece of culture in your space with their unique pieces that are works of art in themselves.

This Kenyan fashion brand sets the bar in authentic Kenyan garb by incorporating high fashion and traditional materials. The result is quality African glamour. Their garments include leather waistcoats, beaded fringed belts, traditional Turkana aprons, beaded sandals and modern African jewelry.

Location: Lavington Curve, James Gichuru Road Phone: +254 732 354 996 Email: info@tribal-gallery. com

Location: Silver Springs Hotel, Hurlingham Phone: +25402519676 Email: moocowkenya@yahoo.com

For the latest in the hottest trends, UP Magazine is the perfect guide. UP Magazine is Kenya’s one stop for what’s new in the social and entertainment scene. With a knack for selecting the finest dining experiences and live events, you will be up to date with what’s hot in Nairobi. For wide coverage of the trending stories and events in Nairobi, visit www.upnairobi.com

theafricapitalist | 49

final word | Judith Rodin

impact investing

UNLOCKING THE

TRILLIONS Philanthropy alone cannot come up with the amounts needed to solve the world’s biggest problems. This is where impact investing comes in. BY JUDITH RODIN

The philanthropic sector is leading the way on impact investing for two reasons. The first is that there is a growing recognition of the fact that, while philanthropy is still a transformative force for good, we just don’t have enough capital to solve all of the world’s problems. To fully address global challenges like water scarcity, poor health, or climate change, would cost in the trillions, but philanthropy and government only have billions to spend.

So there is a clear need to unlock the trillions of dollars in capital markets. Second, philanthropies increasingly see impact investing as another tool for meeting impact objectives, alongside grant-making strategies.

Impact investing has grown out of the excitement and success of a number of earlier models, such as microfinance. While it shares a number of characteristics with other types of social investments, there a few distinct differences, most significantly the dual objectives of achieving social and environmental goals, as well as financial ones, which makes it distinct from philanthropy or venture philanthropy which rely on a grant-making model. And unlike in the case of microfinance, enterprises, rather than individuals, are at the heart of im50 | theafricapitalist

pact investing, because they can scale solutions more broadly and reach larger numbers of people.

One compelling example is a programme-related investment the Rockefeller Foundation made to Centenary Rural Development Bank in support of its efforts to raise the incomes of smallholder farmers in Uganda who grow bananas and other cash crops, by improving their access to financial capital.

We provided a guarantee of $500,000 and we structured it initially so that the bank would leverage our guarantee two times that amount. Three years later the bank wanted to renew it and we did so, but on different terms, because when we looked at the default rate it was as low as 1-2%, which means the risk was substantially lower than first assessed.

We restructured so that the bank would leverage the guarantee eight times. By the end of the lending programme, up to 8,000 farmers had got access to credit. We lost a small percentage of money on the deal, but it was in line with our expectations and the impact was absolutely greater than even we anticipated. TA

“The impact was absolutely greater than even we anticipated.”

Judith Rodin is the President of the Rockefeller Foundation and co-author of the e-book, The Power of Impact Investing: Putting Markets to Work for Profit and Global Good. To purchase, please visit www. rockefellerfoundation.org/ impactinvestingbook.

Investing in Africaâ&#x20AC;&#x2122;s future: Power

Transcorp Ughelli Power Plant, Delta, Nigeria

With a $300million investment in a 1,000MW gas-fired electricity generating plant, we are committed to unlocking Africaâ&#x20AC;&#x2122;s economic potential. This is just one of many such investments we are making in Africa. Heirs Holdings is a pan-African proprietary investment company. Our businesses are helping to build economies, create value and drive prosperity. If you are serious about investing in Africa, talk to us. www.heirsholdings.com

Financial Services

Power

Oil & Gas

Real Estate & Hospitality

Agri-Business

Healthcare