Best of tar 2014 east central africa

Page 1

54 country reports w w w.t hea f r ic a r ep o r t .c om

30 people to watch

in politics, business & culture

Double issue

N ° 6 6 • d e c e m b e r 2 014 - j a N u a r y 2 015

Africa in 2015 China down, Europe out, Africa digs deep

GroUPE jEUNE AFrIqUE INTERNATIONAL EdITION

Algeria 550 DA • Angola 600 Kwanza • Austria 4.90 € • Belgium 4.90 € • Canada 6.95 CAN$ • Denmark 60 DK • Ethiopia 75 Birr • France 4.90 € • Germany 4.90 € • Ghana 7 GH¢ • Italy 4.90 € • Kenya 410 shillings • Liberia $LD 300 • Morocco 50 DH • Netherlands 4.90 € • Nigeria 600 naira Norway 60 NK • Portugal 4.90 € • Sierra Leone LE 9,000 • South Africa 30 rand (tax incl.) • Spain 4.90 € • Switzerland 9.90 FS • Tanzania 6,500 shillings • Tunisia 8 DT • Uganda 9,000 shillings • UK £ 4.50 • United States US$ 6.95 • Zimbabwe US$ 4 • CFA Countries 3,500 F CFA


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frontline | what to watch in 2015

2015 AfricA cup of NAtioNs 17 Jan – 8 feb EQuAtoriAL GuiNEA cafonline.com

iNvEstiNG iN AfricAN MiNiNG iNdAbA 9-12 february Cape Town | south AfricA miningindaba.com

hArvArd busiNEss schooL AfricA busiNEss coNfErENcE 27 feb – 1 March

The hague | NEthErLANds ntaganda faces 18 charges of war crimes and crimes against humanity. icc-cpi.int M

powEr-GEN AfricA 15-17 July Cape Town | south AfricA Conference on electricity provision in africa. powergenafrica.com

cAiNE prizE for AfricAN writiNG July oxford | uK www.caineprize.com

Lima | pEru Bankers and academics discuss global economic governance. 2015lima.gob.pe

22Nd AfricA oiL wEEK November

worLd EcoNoMic foruM oN AfricA 3-5 June Cape Town | south AfricA weforum.org

worLd bANK/ iMf ANNuAL MEEtiNGs 9-11 october

Cape Town | south AfricA globalpacificpartners.com

uN GENErAL AssEMbLy 15-28 september

AfricAcoM November

new YorK | us The world’s presidents and diplomats set out the global agenda. un.org

Cape Town | south AfricA one of africa’s largest technology conferences. africa.comworldseries.com

calendar 2015

icc triAL of coNGoLEsE MiLitAry LEAdEr bosco NtAGANdA 2 June

BosTon | us africabusinessconference.com

AfricA cEo foruM 16-17 March geneva | switzErLANd theafricaceoforum.com

sudAN prEsidENtiAL ELEctioNs 2 April Afdb ANNuAL MEEtiNG 25-29 May aBidjan | côtE d’ivoirE The Board of governors will elect a new president to succeed donald Kaberuka in september. afdb.org

cAr prEsidENtiAL ELEctioNs June

SIA KAMBOU/Afp

32

ELEctioN buzz the year 2015 will be dominated by elections as hundreds of millions of Africans head to the ballot box to vote for new presidents and governments. in west Africa, Nigeria’s president Goodluck Jonathan’s battle for re-election will take centre stage (see page 20) on 14 february, but voters will also elect leaders in Guinea in June, in togo in July and in côte d’ivoire (pictured) in october. the East of the continent is no less busy, with Ethiopian federal elections in May, presidential and general elections in burundi and somaliland respectively in June, and general elections in tanzania in october. the africa report

n° 66

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country profiles

east africa Red Sea

SUDAN

contents

SAUDI ARABIA

128 PeoPle to watch

ERITREA

Massawa

ASMARA

CHAD

YEMEN

130 burundi Gondar

DJIBOUTI

Gulf of Aden

131 comoros

DJIBOUTI Berbera Dire Dawa Hargeisa ADDIS ABABA Harar

SOUTH SUDAN

CENTRAL AFRICAN REPUBLIC

Jima

133 eritrea

ETHIOPIA

Juba

134 ethioPia 136 kenya

Obbia

SOMALIA

UGANDA

138 rwanda

MOGADISHU

KENYA

139 seychelles

KAMPALA Kisumu Lake Victoria RWANDA NAIROBI KIGALI

DEMOCRATIC REPUBLIC OF CONGO

132 djibouti

BUJUMBURA

Kismayo

140 somalia Indian Ocean

Mombasa

BURUNDI

TANZANIA

142 tanzania

Zanzibar

DODOMA

141 south sudan

144 uganda

Dar es Salaam

Mbeya ZAMBIA

300 km

MOZAMBIQUE

cubic metres of gas discovered in East African coastal waters off Mozambique and Tanzania in the past five years

May Ethiopia General elections June Burundi Presidential election June Somaliland Presidential election OctOber Tanzania General elections DeceMber Kenya Tullow to submit oil development plans east africa 2014 GdP (% of regional total)

n° 66

TOTAL

1.5% 0.4% 0.8% 1.9%

Burundi Comoros Djibouti Eritrea

$205.9bn

575 796 394 754

24.2% Ethiopia Kenya

the africa report

869 221

12.7% Uganda

Tanzania 17.8% South Sudan 5.8% Seychelles 0.7% Rwanda 3.9%

east africa PoPulation (millions)

30.5%

d e c e m b e r 2 014 - j a n ua r y 2 015

2015

2030

2050

SOURCE: UNITED NATIONS

5 trillion

calendar 2015

127


128 Country Profiles

east africa

Jonathan Ernst/rEutErs

PeoPle to watch

Kenya

Chris Kirubi One of Kenya’s wealthiest magnates, Chris Kirubi (pictured above with Mali’s President Ibrahim Boubacar Keïta) has of late been unsettling corporate waters. Centum Investment – where he is chairman and controls more than a quarter of the company – has emerged a top deal-maker, leading the consortium that won a $2bn contract for the construction of a power plant in Lamu in September 2014. Centum also launched a disputed takeover bid for agricultural outfit Rea Vipingo that is still ongoing. Kirubi, who also owns radio station Capital FM, is a regular figure in government delegations abroad.

Uganda

Amama Mbabazi Stalled successor President Yoweri Museveni clipped the wings of highflying prime minister Amama Mbabazi, 65, in September. Mbabazi, still secretary general of the ruling National Resistance Movement, was obliged to take a two-month break in October after attracting attention by seeking to be a rival and potential successor to Museveni. The 70-year-old plans to run for another term in 2016. Mbabazi earned the nickname ‘super minister’ when holding three positions – attorney general, defence minister and foreign minister. He will need those skills to navigate the rough waters of succession politics. sarah FrEtwEll/un

Insatiable investor

the africa report

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129

Rwanda

Francis Kaboneka Kagame’s young gun

South Sudan

Paul Malong A man for the front line

the africa report

n° 66

TONY KARUMBA/Afp

Paul Malong is happiest when discussing his many military triumphs, most of them achieved in the war that eventually led to South Sudan’s independence in 2011. General Malong says he was shot several times, but always returned to combat. That martial spirit earned him a fearsome reputation, which continued during his time as governor of Northern Bahr el Ghazal State. When President Salva Kiir named him to lead the army in April 2014, it was interpreted by many as an uncompromising signal to the mainly Nuer rebels led by former vice-president Riek Machar. Government troops are accused of killing Nuer civilians when the civil war broke out in December 2013. Malong reportedly said he would crush the rebellion within 30 days and he was prepared to go to the front lines himself. Malong is a Dinka like Salva, and his influence underlines Salva’s growing reliance on loyalists from his home area.

Kenya

Gladwell Otieno A petitioner with power The founder of the Africa Centre for Open Governance got noticed in March 2013 when she and fellow activist Zahid Rajan filed a petition arguing that President Kenyatta’s victory was so flawed it should be seen as non-verifiable. Although the Supreme Court rejected the petition, Otieno and Rajan established a new principle: that independent citizens, not just aggrieved politicians, had the right to try to challenge disputed election results. For Otieno, a former executive director of Transparency International, the big issues in 2015 will be rooting out corruption and demanding greater accountability from the security forces.

Francis Kaboneka, the new local government minister appointed by President Paul Kagame on 23 July 2014, is one of a rising generation of young leaders in the ruling party. Kaboneka’s skills as a mobiliser will be useful whether Kagame seeks to stay on for another term by changing the constitution or to hand more control to a new generation of leaders. Kaboneka was first elected as a member of parliament in 2003. He is an influential member of the ruling Rwandan Patriotic Front and sits on its disciplinary committee. He is keen on strengthening the management of performance contracts at local government level so the authorities will cooperate better on delivering services and reaching development goals.

tanzania

Edward Lowassa Presidential frontrunner

Having served as minister and prime minister, 61-year-old Edward Lowassa is well placed in the race for the presidency in 2015. The fact that he opted not to run for the office in 2005 but rather campaign on behalf of his friend, President Jakaya Kikwete, could help his case. Lowassa has already resuscitated his campaign infrastructure. He has a formidable army of footsoldiers and allies within the ruling Chama Cha Mapinduzi party. But his rivals, including foreign affairs minister Bernard Membe, are certain to throw as much mud as will stick. The obvious blot on Lowassa’s copy book is his forced resignation as prime minister in 2008 following a corruption scandal involving the national electricity utility and US-based Richmond Development. •

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130 Country Profiles

east africa

burundi

Moving the goalposts The government is not concerned with reconciliation or democratisation

TIGHTENING THE SCREWS

Anger during electoral periods often spills over into violence in Burundi, and all sides are watching each other’s youth wings. The authorities arrested human rights activist Pierre Claver Mbonimpa in May 2014 for announcing that the ruling party had sent members of its youth wing for paramilitary training in eastern Democratic Republic of Congo. Interior

TANZANIA

BURUNDI BUJUMBURA

Lake Tanganyika

100 km

Population: 10.2 million Population growth: 3.2% ■ GDP per capita: $330 ■ Life expectancy: 54.1 ■ Adult literacy: 85.62% ■ Inflation: 6.96% ■ Human development index (out of 187 countries): 180 ■ Foreign direct investment: $7m ■ Current account as % of GDP: -17.38% ■ Mobile phone penetration: 24% ■ Key export: Coffee ■ Last change of leader: 2005 ■ GDP growth (%) %■ ■

4 ■

4.5

4.7

4.8

GDP ($bn)

2.5

2.7

3.0

3.3

2012*

2013*

2014*

2015*

INfRaSTRuCTuRE laCkING

*Estimation Oct. 2014

t

he debate around President Pierre Nkurunziza’s eligibility to run again in the general elections planned for 2015 will not slow him down, and he and the ruling party will maintain a monopoly on Burundi’s political sphere. The opposition, media and civil society complain of intimidation, and many political leaders are set to be excluded from the upcoming vote. In the meantime, the economy is constrained by the lack of electricity and infrastructure. The opposition claims that Nkurunziza cannot run again in 2015 because he will end his second term in office on 26 August 2015. However, he and the ruling Conseil National pour la Défense de la Démocratie-Forces de Défense de la Démocratie (CNDD-FDD) say the constitution allows for two terms through direct elections and that his first term was the result of indirect election by parliament. TheCNDD-FDDhaslargelysucceeded in dividing, intimidating and co-opting the opposition. Former rebel leader Agathon Rwasa will be ineligible for the polls because he has a criminal trial pending. Frédéric Bamvuginyumvira, vice-president of the Front pour la Démocratie au Burundi, is in the same situation. Others, like Alexis Sinduhije of the Mouvement pour la Solidarité et le Développement, are likely to remain in exile.

RWANDA

R.D.CONGO

The economy remains dependent on unprocessed agriculture for export

cipation in April 2014. Oppositionists and activists say the commission will not achieve reconciliation because it is loyal to the ruling party and not charged with bringing human rights violators to justice. The government has not been quick to address development challenges. The state of the main roads linking the capital and the country’s provinces are in a poor state. The RN1, which provides access to Rwanda and Tanzania, was damaged by flooding in February 2014 and is in need of vast repairs. The awarding of a telecoms licence to Vietnam’s Viettel in early 2014, however, and the ongoing work on the country’s fibre-optic network will improve telecommunications capacity and lower costs for consumers.

Lake Kivu

minister Edouard Nduwimana has been tightening the screws on the opposition and limiting its room for manoeuvre. There will be no opposition representation on the communal and provincial levels in the electoral commission in the upcoming elections. The EU and other donors have been calling on the Bujumbura government to stop harassing the media and to allow for civil society and political parties to operate freely. The country’s Commission Vérité et Réconciliation is due to continue its work in 2015 after the government pushed through a severely delayed law on its foundation without opposition parti-

Nickel is one of the country’s important natural resources, but companies cannot exploit it because Burundi does not have the electricity needed or the transportation infrastructure for large-scale exports. The government is targeting electricity production of 370MW by 2017, and the African Development Bank is providing finance for the construction of the 31.5MW dam at Jiji and the 16.5MW dam at Mulembwe. Coffee typically accounts for about 70% of exports, but the government’s privatisation programme, which was set to come to an end in late 2014, has not yet ledtomajorimprovementsinproduction. The coffee harvest dropped by more than 50% to 13,677tn in the 2013/2014 season. The government blamed ageing trees, the lack of inputs and degraded soils for the reduction. The government expects production to rebound to 21,584tn for 2014/2015, and wants to put a renewed focus on food production in 2015. Burundicontinuestocontributetroops to peacekeeping missions in Somalia, Sudan and the Central African Republic. The country’s lack of money is weakening its efforts to be an active member of the East African Community, and it risks being in the second tier of membership with Tanzania, which is dragging its feet on community participation. ●

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east africa

Country 131 Profiles

comoros

Struggling to keep the lights on The year 2016 will bring more debates about the rotating presidency

MORONI

State-run utilities are inefficient and continue to make unsustainable losses

COMOROS

candidates line up

Politicians continue to criticise the rotating presidency. Ahmed Abdallah Sambi, who is from Anjouan and was president from 2006 to 2011, has made it clear he intends to run in 2016 even though he is not eligible. Former vice-president Idi Nadhoim, lawyer Saïd Larifou and former president Azali Assoumani are among the candidates already campaigning for 2016. The country has been relatively stable over the past few years after many coups throughout its recent history, with the last attempted coup in April 2013. Private consumption and public investment remain the main drivers of growth, which is underpinned by donor financing, remittances and revenue from the Eco•

n° 66

NDZUANI (ANJOUAN)

MWALI (MOHELI)

Dzaoudzi MAORE (MAYOTTE) (France)

30 km

Population: 0.7 million Population growth: 2.4% ■ GDP per capita: $998 ■ Life expectancy: 60.9 ■ Adult literacy: 77.76% ■ Inflation: 3% ■ Human development index (out of 187 countries): 159 ■ Foreign direct investment: $14m ■ Current account as % of GDP: -11.41% ■ Mobile phone penetration: 47% ■ Key export: Cloves ■ Last change of leader: 2011 ■ GDP growth (%) ■ ■

3.0 ■

3.5

3.9

3.9

0.8

GDP ($bn)

0.6

0.7

0.7

2012

2013

2014*

dOnORs BacK ReFORMs

*Estimation Oct. 2014

t

the africa report

Indian Ocean

Mutsamudu

he risk of political tension in the Comoros continues to run high as the government machinery is unable to meet the population’s development demands and rivalries between politicians continue to call the country’s rotating presidency into question. President Ikililou Dhoinine has not achieved much during his tenure and is preparing to hand over to a president elected from Grande Comore island in 2016. The government does not have the money or the logistical capacity to organise polls on time and it is struggling to provide basic infrastructure for the islands of Grande Comore, Anjouan and Mohéli. The year 2015 will also be one of elections, with overdue legislative polls scheduled for January and February 2015, at the same time as the vote for the leadership of the islands’ governments. The legislature’s mandate expired in April 2014 and was extended due to the difficulties in planning the polls.

border of Mayotte, the French overseas departmentalsoclaimedbytheComoros. The government has not implemented many structural economic reforms. The agricultural sector still accounts for around half of GDP. The share of the service sector, which includes potentially transformative sectors such as telecoms, banking and tourism, recently declined to less than 40% of GDP. Unemployment remains high, and the public sector is bloated and inefficient. The public wage bill accounts for 60% of the federal government’s budget, and the state was late with several salary payments in 2014.

NGAZIDJA (GRANDE COMORE)

2015*

nomic Citizenship Programme – the controversial scheme that sells Comorian nationality. Exports account for just 15% of gross domestic product (GDP). Oil could change the archipelago’s economic fundamentals. There has been little exploration conducted so far. The Comoros awarded exploration licences for six offshore blocks to two consortiums in March 2014. The blocks are located close to proven reserves in Mozambique and Tanzania, so their potential – and that of the remaining 34 blocks – is thought to be high. The search for oil could cause diplomatic problems, too, as some blocks overlap with the maritime

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The government is drafting its Strategy for Accelerated Growth and Sustainable Development 2015-2019, which seeks to make the economy more competitive. The strategy will prioritise basic infrastructure development – roads and ports in particular – and improvements to the business climate. Donors are backing these reforms: the World Bank’s country strategy for 2014-2017 earmarked $60mforincreasedpublicsectorcapacity, shared growth and job creation. Oman and the Comoros signed a $10m bilateral agreement for infrastructure financing in January 2014. The archipelago also became eligible for the African Development Bank Fragile States Facility, which should significantly increase the bank’s commitment to infrastructure funding. Amongstthemostpressingreformsare those of the energy and telecoms sectors. As part of the International Monetary Fund’s Heavily Indebted Poor Countries scheme, Comores Télécom was meant to be privatised and a licence for a second operator granted to boost competition in 2014. Those projects were delayed due to opposition within parliament. State-owned electricity utility Ma-Mwé is in dire financial straits due to poor management. Moroni,the federalcapital, had no electricity between mid-August and mid-September because the company could not pay for diesel imports. The government is looking to develop solar and geothermal energy. ●


132 Country Profiles

east africa

djibouti

Guelleh’s long goodbye

The government and opposition are on the path towards reconciliation

peace attempt

The government announced in September 2014 that it was prepared to sign an accord with the USN to end the conflict and allow USN members who refused to take their seats to join the legislature. That was the result of direct negotiations between Guelleh and USN leader Ismail Guedi Hared. When The Africa Report went to press, the deal was still unsigned. The political scene in Djibouti was trans-

DJIBOUTI

Gulf of Aden

DJIBOUTI SOMALIA

30 km

Population: 0.9m Population growth: 1.5% ■ GDP per capita: $1,683 ■ Life expectancy: 61.8 ■ Adult literacy: ND ■ Inflation: 3.17% ■ Human development index (out of 187 countries): 170 ■ Foreign direct investment: $286m ■ Current account as % of GDP: -31.43% ■ Mobile phone penetration: 27% ■ Key export: Livestock ■ Last change of leader: 1999 ■ GDP growth (%) ■ ■

4.8 ■

5.0

5.5

5.5

GDP ($bn)

1.4

1.5

1.6

1.7

2012*

2013*

2014*

2015*

withdrawn concession

*Estimation Oct. 2014

p

resident Ismail Omar Guelleh maintains his iron grip on Djibouti’s political space by arresting and intimidating the country’s opposition forces. In power since 1999, he insists that he will finally name a successor and step down in 2016 but there are no signs of that yet. The ruling party continues to use Djibouti’s geo-strategic location between Africa and the Middle East to its economic and political advantage, with China now the newest country seeking to set up a military presence. Chinese investors are putting money into several projects to bolster the country’s infrastructure and strengthen its role as Ethiopia’s main access point for international trade routes. The year 2015 holds the potential for political reconciliation and the peaceful preparation for polls in 2016. The country has been experiencing an unprecedented political crisis since the contested legislative elections of February 2013, when the opposition finally decided to lift its boycott. The Union pour le Salut National (USN) coalition of seven opposition parties claimed victory but ended up with just 10 of 65 seats. Attempts at dialogue in early 2014 failed, and the capital city regularly played host to marches that degenerated into confrontations between security forces and protestors.

ETHIOPIA

growth rates, to the sea. The country is also home to military bases that France and the US use for their anti-terrorism missions. Meanwhile, European navies are using the Djibouti port for their Somali anti-piracy programme. The government is now conducting negotiations with China, its main economic partner, and Russia to allow them to maintain a military presence in the country. Djibouti has a weakly diversified and largely informal economy. The service sector – including transport, communications, trade, tourism and banks – employs about 60% of the active population and represents about 76% of gross domestic product, according to government statistics.

YEMEN

ERITREA

The economy will be boosted by heavy investment from Chinese partners

formed in 2014 when the government refused to legalise the Muslim Brotherhood’s party, the Mouvement pour le Développement et la Liberté, and it joined the opposition. Fearing the spread of fundamentalist Islam, the government arrested three religious leaders who were critical of the government and sentenced them to 18 months in prison in 2013. They were finally released in August 2014. Djibouti remains a poor country where 42% of its 900,000 people live below the poverty line. Djibouti’s location is its principal strength, as it is the link for landlockedEthiopia,withAfrica’ssecondlargest population and high economic

The Djibouti port and Doraleh container terminal are crucial to the economy, but a conflict with an investor has caused worries about the management of the sector. The government filed a legal complaint against DP World, the concessionaire at Doraleh, in July 2012. The government revoked the company’s contract in July 2014, and an arbitration case is pending. The dispute relates to a falling out between the regime and former ports boss Abdourahman Boreh. The government accuses DP World of issuing $150m in illegal payments to Boreh. Both he and the company deny any wrongdoing. New infrastructure spending will boost Djibouti’seconomy.Thegovernmentsays that Chinese investors including China Exim Bank, China Merchants Holdings International and Touchroad International Holdings will provide 45% of the finance needed for projects including the second phase of the Doraleh container terminal, a minerals terminal at Tadjourah, a port for salt exports at Ghoubet, the railroad linking Djibouti and Addis Ababa, an aqueduct to transport water from Ethiopia, a desalinisation plant and a thermal power plant. The projects, which will cost an estimated $6bn, will strengthentheeconomyoverthenextfew years.Thecompletionoftheconstruction of the rail link is due in October 2015. ●

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east africa

Country 133 Profiles

eritrea

A pretence of progress Bribery replaces violence as the regime’s preferred method of maintaining control

MUTUAL SUSPICION

With so many dissidents absconding, those who remain are less likely to mount a resistance to the regime. However, the variousoppositiongroupsabroadremain fragmented and mutually suspicious, making it difficult for them to present a united front. One such group, the Red Sea Afar Democratic Organisation, claims to have some military clout. It held a conference the africa report

n° 66

YEMEN

ASMARA

Assab ETHIOPIA DJIBOUTI

200 km

Population: 6.3 million Population growth: 3.2% ■ GDP per capita: $592 ■ Life expectancy: 62.9 ■ Adult literacy: 67.8% ■ Inflation: 12.26% ■ Human development index (out of 187 countries): 182 ■ Foreign direct investment: $44m ■ Current account as % of GDP: 0.17% ■ Mobile phone penetration: 6% ■ Key export: Gold ■ Last change of leader: 1993 ■ GDP growth (%)

dIPLOMATIC geSTUreS

7.0 ■

1.3

2.0

2.1

3.1

3.4

3.9

4.3

2012

2013

2014

2015*

GDP ($bn)

*Estimation Oct. 2014

f

Eritrea still refuses to engage with its neighbour Ethiopia and denies accusations of supporting the terrorist group Al-Shabaab in Somalia. Eritrea is also at odds with Djibouti due to a border dispute, culminating in the arrest of a Djiboutian soldier in July 2014. In 2014, flag carriers Turkish Airlines and Qatar Airways finalised agreements to begin flights to Asmara. Nonetheless, Eritrea’s relations with Qatar soured as the tensions with Djibouti mounted.

SAUDI ARABIA

ERITREA

Mining investors are in the lead as new business slowly trickles into the country aced with a stunted economy and a dismal reputation abroad, Eritrea is taking small steps towards keeping up appearances with the international community, engaging with foreign investors and changing its heavy-handed approach to the largescale flight of its citizens. The political landscape in Asmara shows no signs of accommodating real change. The ruling People’s Front for Democracy and Justice retains complete control, using surveillance and corruption to keep tabs on the population and confer benefits to its highest-ranking members. President Isaias Afewerki announced plans to create a new constitution in May, but few saw it as a sign of change as the government has not implemented the 1997 constitution. For average citizens, it remains difficult to secure basic foodstuffs, cooking fuel, clean water and electricity. Eritreans continue to flee the country at a rate of more than 3,000 each month. Many of them are young people who want to avoid possibly indefinite national service. But the government’s response is evolving. Shoot-to-kill policies at the border are increasingly giving way to a more corrupt system whereby officials use deserters’ money – in the form of ransoms, bribes and eventually remittances–topropupthefalteringeconomy.

Red Sea

SUDAN

in Ethiopia in August to reiterate its grievances against Asmara. Meanwhile, Isaias continued with his government restructuring programme in 2014, including the appointment of Major General Filipos Woldeyohannes as chief of staff, making him one of the government’s most powerful strongmen. Analysts see the move as a response to ongoing problems with military cohesion, with a rise in mid-level defections disrupting chains of command and complicating outside efforts to assess Eritrea’s military capacity. Morale is reportedly low among national serviceconscripts,whoareforcedto work on infrastructure projects for low wages.

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Despite its pariah status, the Isaias administration has hinted at dialogue with international actors. In 2014, it renewed requests for the UN to independently investigate regional human trafficking. Officials have engaged in technical meetings with the EU on human rights since 2012, and the latest took place in January 2014. In April, several top officials took part in an EU-Africa Summit in Brussels. Analystssaythesediplomaticovertures are driven more by economic necessity than by any real desire for change. Gross domestic product growth in 2014, projected at just 1.9% by the African Development Bank, is driven almost entirely by promising developments in the mining sector. Canada’s Nevsun, with a 60% stake in the Bisha mine, began commercial copper production in late 2013 and has launched a new zinc expansion project. Australia’s South Boulder Mines, with the Eritrean National Mining Company joint venture called Colluli Mining Share Company, has identified more than 1bn tonnes of potassium-bearing salts suitable for potash production. China Shanghai Corporation for Foreign Economic and Technological Cooperation expects to finish works at the Zara gold mine and to begin production soon. Apart from mining, Eritrea has few areasofeconomicpotential.About80%of the population works in agriculture, and output is heavily dependent on increasingly volatile weather patterns, though rainfall was relatively abundant in 2014. High public spending, especially on the military, remains unsustainable. ●


134 Country Profiles

east africa

ethiopia

Successes and strains in the balance

t

he year ahead promises some key reckonings for the government of Prime Minister Hailemariam Desalegn. Federal elections in May will be a test of its popularity and its commitment to political transparency. July marks the end of a national Growth and Transformation Plan (GTP),whichhashadofficialsscrambling tomeetambitiouseconomictargetssince 2010. And in December 2015 comes the deadline for the Millennium Development Goals, which has Ethiopia vying with other countries to make the most progress in spheres including healthcare, education and poverty reduction. At the polls in May, Ethiopia hopes to overcome an electoral history fraught with controversy. Federal elections in 2005 erupted into deadly violence after the Ethiopian People’s Revolutionary Democratic Front (EPRDF) came away with a highly contested majority. The vote in 2010 was largely peaceful, but EU observers criticised the uneven playing field and lack of transparency. A UN electoral-needs-assessment mission will be lending a hand, but concerns remain over the transparency and the independence of the national electoral board. UNEVEN PLAYING FIELD

There are few indications that the EPRDF is in danger of losing its overwhelming majority. Of 547 seats in parliament, only one is currently occupied by an opposition party member. Unity for Democracy and Justice – the largest party within Medrek, Ethiopia’s largest opposition coalition – is working to present a clear policy platform. Its leader, Gizachew Shiferaw, expects the political playing field to be just as uneven as before. Criticism of the ruling party – from within Ethiopia and abroad – continues

Gulf of Aden

DJIBOUTI

ADDIS ABABA

SOMALIA

Dire Daoua

ETHIOPIA

SOUTH SUDAN 300 km

in the Horn of Africa – has strengthened its reputation as a key diplomatic player due to its chairmanship of the Intergovernmental Authority on Development, mediating the fitful peace talks between warringpartiesinSouthSudan.Ethiopian soldiers remain integral to the ongoing fight against Al-Shabaab in Somalia. Ethiopia formally joined the AU peacekeeping force there in late January 2014.

YEMEN

SOMALIA

KENYA

stAtE-DrIVEN EcoNomY

Population: 94.1 million ■ Population growth: 2.6% ■ GDP per capita: $547 ■ Life expectancy: 63.6 ■ Adult literacy: 49.09% ■ Inflation: 7.72% ■ Human development index (out of 187 countries): 173 ■ Foreign direct investment: $953m ■ Current account as % of GDP: -7.09% ■ Mobile phone penetration: 27% ■ Key export: Coffee ■ Last change of leader: 2013 ■ GDP growth (%) ■

8.8 ■

9.7

8.2

8.5

42.6

46.0

49.9

55.5

2012

2013

2014*

2015*

GDP ($bn)

*Estimation Oct. 2014

Cities are expanding at breakneck speed, leaving rural development lagging behind

Red Sea

SUDAN

The 2015 polls will highlight the dangers of a monopolistic political system

to plague the federal government, led by Hailemariam since the death of Prime Minister Meles Zenawi in 2012. The arrests of nine bloggers and journalists, who were charged in July 2014 under the country’s broad anti-terrorism law, were widely condemned. International criticism also followed the July arrest of Andargachew Tsige, a British citizen passing through Yemen, who had previously been sentenced to death in absentia for leading Ginbot 7, an exiled opposition party described as a terrorist organisation. Despite these concerns, Ethiopia – a Western ally long considered a bulwark against volatility

Ethiopia is unlikely to meet all of the targets of the GTP, but it can still boast of considerable progress. The country enjoys one of Africa’s highest economic growth rates. The economy remains heavily state driven even though officials accept the need for a stronger private sector. State-owned companies are pursuing ambitious projects: the Ethiopian Electric Power Corporation is overseeing construction of the Grand Ethiopian Renaissance Dam, set to be Africa’s largest hydropower project (see box); Ethio Telecom is working to unveil a 4G mobile phone network in Addis Ababa; and the Sugar Corporation is continuing its efforts to build 10 new factories by the end of the GTP, with an eye to become a top world sugar exporter. The government argues that these projects will ultimately crowd in private sector growth, but its giant enterprises show glaringdeficiencies.Telecommunications are still unreliable. Electricity is scarce in rural areas, and urban dwellers deal with frequent outages. Sugar production has yet to meet even domestic demand amid delays in factory construction. Furthermore, the state-owned enterprises’ high levels of debt – much of it to the state-owned commercial bank – have concentrated risks in state accounts, making the growth of an independent private sector all the more crucial. The government had planned to join the World Trade Organisation in 2015 but may delay the decision because it would be expected to liberalise its banking and telecoms sectors. The government welcomed its first sovereign credit ratings from global agen-

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135

TARGETING POVERTY

Compared to other developing countries, Ethiopia’s economic growth has been fairly inclusive. Though about 30% of the population still lives on less than $1.25 a day, the country has made real progress on the Millennium Development Goals. The UN says the country is on track to meet its aims in reducing poverty, improving access to education, reducing child mortality and combating

Number of urban households, estimates and projections ('000) 6 000 5 707

5 000 4 759

4 000 3 000 2 000

3 310 2 301

1 000 0

2000

2010

2020

Source: uN-Habitat Global report oN HumaN SettlemeNtS, 2013

cies in 2014 – a B1 from Moody’s and B ratings from both Fitch and Standard & Poor’s – which could open the door to international capital markets and should help to attract foreign direct investment. Currently, the bulk of foreign financing comes from China, which has committed hundreds of millions of dollars in loans to assist the state-owned corporations’ mega-initiatives, as well as projects like roads, bridges and railways. A World Investment Report released by the UN Conference on Trade and Development in June 2014 found that Ethiopia had become Africa’s third-largest recipient of foreign direct investment, with a burgeoning but still small manufacturing industry beginning to attract more overseas investors despite difficulties with red tape and trade logistics. Investors will be paying close attention to Ethiopia’s intentions in 2015, when the government unveils its aims for the successor to the GTP.

2030

1.3 million State sector employees who received a pay rise, some by as much as 46%

HIV by the end of 2015. The government raised civil servants’ salaries in July, with wages increasing by as much as 46% for the lowest-paid workers. The measure affects about 1.3 million people, many of whom had been subsisting on about $21 per month. Still, the move has raised some concerns about inflation, which the government is keen to keep in the single digits. About 80% of Ethiopia’s 94 million people work in agriculture, and the government has been trying to increase harvests by promoting sales of higheryielding seeds, initiating a nationwide

soil-mapping system and constructing new fertiliser blending facilities. Agricultural output is healthy, though export revenues are down due to falling international commodity prices, especially since Ethiopia has a long way to go towards the production of value-added products. Massive land leases to commercial farmers remain controversial. Because of seasonal flooding and poor planning, investors like Saudi Star, owned by Ethio-Saudi billionaire Mohammed Al Amoudi, and Karuturi Global, an Indian corporation, have fallen far behind schedule in their attempts to cultivate lands leased from the government. Cities, rather than farms, are driving Ethiopia’s economic growth. Urban areas continue to develop at a breakneck pace – especially Addis Ababa, where roads, buildings and a new light rail system are under construction. But a new master plan for infrastructural development erupted into controversy in 2014. It envisaged municipal projects extending beyond the capital city and into lands administrated by the surrounding Oromia National Regional State. The master plan became a rallying cause for dissidents who complain that the government isdominatedbynortherners,andprotests at several universities, both within the capital and throughout the Oromia Region, led to clashes between demonstrators and security forces. At least 11 people lost their lives. ●

Under constrUction: hydropower on the grand scale Scheduled for completion in 2017, the Grand ethiopian renaissance dam will be the largest hydropower plant on the African continent. controversy was inevitable because the dam sits on the Blue nile, with egypt worrying that it would impede downstream flows. Strong rhetoric and technical disagreements the africa report

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brought the two countries to an impasse in early 2014, but the may election of egypt’s president Abdel fattah al-Sisi heralded a new era of cooperation. Stalled ministerial meetings resumed in late August. Apart from a $1bn transmission line being financed by china, ethiopia is funding the project independently at an

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expected cost of more than $4bn. A public mobilisation campaign rallied funds from ethiopians at home and abroad, and the stateowned utility ethiopian electric power is funding the rest with its own revenue and loans from the state-owned commercial bank. economists are concerned that the project could limit access to private

credit in a country that already has the world’s sixth-lowest private investment rate as a percentage of gross domestic product, but the government argues that the benefits – including revenues from exporting excess energy to neighbouring countries – will be well worth the sacrifice. ●


136 Country Profiles

east africa

kenya

That engine just keeps rolling Efforts to build on the liberal constitution of 2010 risk being further frustrated

SOUTH SUDAN

Investment is still piling into mining, manufacturing, oil and gas and services

army on the streets

Kenyattaandhisteamhaveturnedalmost reflexively to the political handbook of his Kenya African National Union predecessors. Rejecting calls from opposition leader Raila Odinga for the withdrawal of troops from southern Somalia – where the Kenya Defence Forces (KDF) are now entrenched – in order to prevent a

SOMALIA

UGANDA

K E N YA Lake Victoria

cabinet secretary for security, Julius Ole Lenku, and police chief David Kimaiyo. In June 2014, after Al-Shabaab laid waste to Mpeketoni, a township just outside the coastal tourist resort of Lamu, Kenyatta and his men were quick to blame “local political networks”, a thinly veiled reference to Odinga’s supporters. The thinking seemed to be that because Mpeketoni was dominated by settlers from Kenyatta’s Kikuyu ethnic community, the attack constituted a pogrom on Kenyatta’s own people.

200 km

Kisumu NAIROBI

TANZANIA

Mombasa

Indian Ocean

Population: 44.4 million Population growth: 2.7% ■ GDP per capita: $1,461 ■ Life expectancy: 61.7 ■ Adult literacy: 77.97% ■ Inflation: 7.29% ■ Human development index (out of 187 countries): 147 ■ Foreign direct investment: $514m ■ Current account as % of GDP: -7.99% ■ Mobile phone penetration: 71% ■ Key export: Black tea ■ Last change of leader: 2013 ■ GDP growth (%) ■ ■

6.2

4.6

5.3

50.4

55.0

62.7

70.0

2012

2013

2014*

2015*

4.6 ■

ethnic stronghold

GDP ($bn)

*Estimation Oct. 2014

B

uoyedbytheconfidenceoflocal and international investors, Kenya’s economy looks sufficiently stable to survive the damage done by a sharp drop in income from tourism after a spate of terrorist attacks – and it should remain strong enough to shrug off rising inflationary pressures going into 2015. And yet the economic terrain will increasingly be determined by the state of security in the country, the impact of constitutional reforms and concerns about rising debts over the longer term. Kenya’s political environment will be marked by the drama and tensions of a creeping authoritarianism, ranged against the popular democratic order brought to life by the liberal 2010 constitution. During its first full year in office in 2014, the Jubilee Alliance administration of President Uhuru Kenyatta was beset by growing insecurity and the threat of the Al-Shabaab terrorist insurgency. Having managed to frustrate the prosecution efforts of the International Criminal Court (ICC), Kenyatta still has to face the reality that the means by which his government secured power – using the 2013 elections as a referendum on the ICC – are decidedly not the terms on which it can hope to retain power. Kenya remains a country divided along ethnic lines and impatient for the dividends of more devolved politics.

ETHIOPIA

further escalation of Shabaab-instigated attacks on Kenyan soil, the administration has instead focused on building an increasingly militarised security infrastructure at home. The first signs of this came during the Westgate Mall attack in September 2013, when army units led by the KDF chief General Julius Karangi summarily replaced a paramilitary police squad that appeared to have the terror attack under control. Later, having solemnly pledged to institute a public inquiry into the Westgate affair, Kenyatta quietly reversed this decision, thus giving the appearance of full support to Karangi as well as to the

Kenyatta’s response to the public criticism of his security agencies has been to involve the military further in domestic policing. Apparently heeding the counsel of General Karangi, who has become an influential figure, Kenyatta replaced intelligence chief Brigadier Michael Gichangi with a key Karangi ally, Major General Philip Kameru. Many question the wisdom of continually appointing men from Kenyatta’s Mount Kenya ethnic stronghold. The new security apparatus will have to respond not just to terror attacks buttothegrievancesoverlandownership in economically marginalised regions. Kenyatta faces new political battles. Calls for a referendum precipitated by the familiar themes of insecurity and political exclusion have given Odinga and his allies renewed momentum in the long run-up to the 2017 elections. The politics of devolution will shape the new republic created by the 2010 constitution, and so Kenyatta’s continued reluctance to disperse power in real terms could come at a high cost (see box). Despite such concerns, Kenya’s issuance of a $2bn eurobond in June 2014 was a triumph by any standards. The bond received bids worth more than four times the target, introducing a new dimension in public debt that ushered in the benchmarking of Kenya’s sovereign risk and highlighted the surging demand for a piece of Kenya’s economy. A rebasing of the economy to take into account new sectors also boosted the immediate prospects. The recalculation was

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137

completed in September and raised the country’s 2013 gross domestic product by 25% to $53.4bn. Kenya is, however, struggling to keep the key economic driver of tourism afloat after several Western countries issued travel advisories over insecurity, especially on the coast. The Kenya Tourist Board (KTB) reported that arrivals in the second quarter of 2014 fell 45% to 172,258. Industry players said the full year’s numbers were expected to decline by similar margins because of the insecurity fears. In 2013, tourist numbers had already fallen to 1.5 million from an all-time high of 1.8 million in 2011, partly in response to the sharp price rises forced on the industry by increased value-added tax. regional projects

Altogether more positive is the anticipation of local and foreign investment in the manufacturing, mining, oil and gas and services sectors. Several oil and gas discoveries suggest commercial oil production within five years. After success in northern Kenya, explorer Tullow said it plans to drill more wells. Exploration firms have been on a fund-raising spree, especially through share sales. The economy could also receive a boost from multi-billion-dollar infrastructure projects designed to expand trade across the East African Community as member states push to implement agreements under their monetary union

National and county budget breakdown Total budget (KSh)

1.6 trillion

County allocation (KSh)

1.8 trillion

210 billion FY 2013/2014 budget

226.7 billion FY 2014/2015 budget

Source: KPMG Kenya BudGet Brief 2013 & 2014, deloitte eaSt africa BudGet inSiGht 2014

45%

Slump in tourist arrivals in the second quarter of 2014 protocol. Key projects include the construction of a standard-gauge railway, an oil refinery in Uganda and the Lamu Port-South Sudan-Ethiopia Transport Corridor. A couple of geothermal projects are makingprogress,andthegovernment has the goal of raising electricity production from 1,700MW to 5,000MW by 2017. Banks are increasingly partnering with telecommunications firms, eliminating the gap between the two sectors. Equity Bank, Kenya’s biggest lender by customer numbers, is fighting off regulatory and competitor opposition to launch a mobile banking platform in partnership with

Airtel, to rival Safaricom’s M-PESA. KCB bank has also partnered with Safaricom for a mobile-banking platform. The central bank wants to strengthen the banking sector in 2015. Its new prudential guidelines take effect in January 2015. Banks now need a minimum 14.5% ratio of total capital to riskweightedassets,upfrom10.5%,andsome have been raising capital to meet this. Investor interest at the Nairobi bourse has increased, as seen in the September listing of the Nairobi Securities Exchange (NSE) itself, for which the initial public offering was oversubscribed by 763.9%. The bourse saw its valuation double a week after listing, with its shares expected to be among the most promising on the market. The NSE is eyeing at least 37 new listings in the next four years as it seeks to satisfy demand. Agriculture typically represents about 5% of GDP, but the government is trying to boost the sector and improve food security. Its flagship project is the Galana irrigation scheme in Tana River and Kilifi counties. It has faced a series of obstacles, including for funding, but the government maintains that it is back on track. Some analysts see corruption in governmentasanemergingthreattothe economy in the medium term. Tendering for the construction of the standard gauge railway and the purchase of laptops for schoolchildren were subject to recent parliamentary investigations. ●

The ongoing sTruggle for referenduMs and devoluTion Governor Isaac ruto of Bomet county in the southern rift valley was once one of the most vocal defenders of his namesake, deputy president William ruto (no relation). More recently, he has become an unrelenting critic of the Jubilee alliance’s administration, accusing it of frustrating devolution. Governor ruto’s push for the africa report

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a referendum, dubbed Pesa Mashinani (cash to the grassroots), has ratcheted up the tensions. as chairman of the 47-strong council of Governors, ruto is leading the campaign, although like another referendum campaign by the opposition coalition for reforms and Democracy, dubbed Okoa Kenya (save Kenya), this

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has drawn as much support as suspicion. the administration said that none of the issues – from county finance to the role of the counties in security and the management of natural resources – warranted a referendum. the trouble started even before Jubilee had taken power, in March 2013, when outgoing President Mwai

Kibaki insisted on retaining county commissioners, the government-appointed counterparts to the elected county governors. this contest between the centre and the periphery is as old as independent Kenya itself. In the 1960s, the centrists sabotaged the independence constitution and imposed themselves on a young nation. ●


138 Country Profiles

east africa

rwanda

Political and security rifts

Kagame looks to younger supporters as critics accuse him of stifling dissent

UGANDA

TANZANIA

Rwanda is stepping up regional integration with Kenya and Uganda

CLAMPDOWN ON DISSIDENTS

The reshuffle was followed in August by a harsh clampdown on RPF members thought to have links with the exiled Rwanda National Congress (RNC) based in South Africa. The RPF political bureau accused several named individuals of engaging “in acts of conspiracy”. Top military officials were arrested on charges of tarnishing the image of the government and the country’s leadership, as well as illegal possession of firearms. Later, one of Kagame’s former bodyguards was sentenced to life imprisonment for an alleged assassination plot.

Lake Kivu

KIGALI

R WANDA

BURUNDI

50 km

Population: 11.8 million Population growth: 2.7% ■ GDP per capita: $721 ■ Life expectancy: 64.1 ■ Adult literacy: 70.52% ■ Inflation: 2.55% ■ Human development index (out of 187 countries): 151 ■ Foreign direct investment: $111m ■ Current account as % of GDP: -12.32% ■ Mobile phone penetration: 57% ■ Key export: Niobium ■ Last change of leader: 2000 ■ GDP growth (%) ■ ■

8.8 ■

4.7

6.0

6.7

GDP ($bn)

7.3

7.6

8.0

8.8

2012

2013

2014*

2015*

INvESTMENT INCENTIvES

*Estimation Oct. 2014

a

lthough the government will try to keep the spotlight on Rwanda’s economic advances,itwillbecomeincreasingly difficult to disguise the political rifts within theruling RwandanPatrioticFront (RPF). President Paul Kagame has lost the loyalty of several former colleagues but is working hard to recruit younger supporters. An increasingly critical issue in the next two years will be determining who, if anyone, might succeed Kagame when he comes to the end of his current term in 2017. He has consistently refused to clarify his position about the constitution and its term limits. A July 2014 cabinet reshuffle was the largest since Kagame came to power in 1994. It brought in 10 newcomers, including new prime minister Anastase Murekezi from the Social Democratic Party (SDP). That appointment was seen as a political balancing act, but it was the appointment of youthful RPF parliamentarian Francis Kaboneka to the key ministry of local government that sent signals that Kagame wants fresh blood, either to take over in 2017 or to rally support for his third term.

DEM. REP. OF CONGO

support. In security terms, the biggest threat comes from the remaining Hutu rebels still operating in DRC. The UN has backed Rwanda’s determination to pursue a military solution to this problem, but there has been a major falling out with Tanzania, which Rwanda accuses of supporting the rebels. Rwanda will continue to be prominent in regional and continental security arrangements, contributing more than 5,000 peacekeeping troops to different missions as well as police, helicopters and field hospitals. It has also been allocated security responsibilities under the Northern Corridor Integration Projects between Kenya, Uganda and Rwanda.

In September, a further bombshell came with the resignation of the outspokensenatepresidentJeanDamascene Ntawukuriryayo – an SDP member, but second only to the president in the official hierarchy. Senior RPF cadres in parliament had been planning to censure him for abuse of office and for disregarding advice from the top leadership. Rwanda’s international standing has mostly survived the negative publicity deriving from its earlier support for the Mouvement du 23 Mars rebels in Democratic Republic of Congo (DRC). Finance minister Claver Gatete reported in 2014 that all donors had renewed financial

One of the items high up on the government agenda for 2015 is the creation of a new investment code with provisions for tax and other incentives. Kigali is also looking to reduce its reliance on foreign aid. Real gross domestic product growth is slipping below recent levels, according to the World Bank, which attributed the drop to delayed capital expenditure and a continued slowdown of credit growth to the private sector. Although the trade balance shows a large deficit, this is offset by investment in services, manufacturing, telecommunications, tourism and energy as Rwanda steps up integration with Kenya and Uganda. The three countries plan to hire a contractor in 2015 to build an electricity interconnection system. If, as expected, Rwanda goes to the market in 2015 to issue a second eurobond of up to $1bn, the proceeds will be used to fast-track construction of Bugesera International Airport and energy projects. Holidayresortsandconventioncentres are being built as the country begins to implement the single East African tourism visa. In 2013, total foreign exchange earnings from tourism were $293m. Investors are now sought for spa and golf resort hotels along Lake Kivu and a cablecar system on the slopes of the Volcanoes National Park. ●

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east africa

Country 139 Profiles

seychelles

Catching fish and tourists More Chinese and Indians are expected to boost visitor numbers

SEYCHELLES

SILHOUETTE

VICTORIA

Renewable energy sources are being harnessed, and oil exploration is starting

MAHÉ

MAHÉ

Indian Ocean

10 km

undue influence

The SNP has yet to announce if it will repeat its boycott. The opposition has not won the presidency since the return of multi-party democracy in 1991 and continues to accuse the ruling party of exercising undue influence over the judiciary and other state bodies. The tourist trade was expected to grow again in 2015 after a disappointing first half of 2014, when arrivals from Europe fell by 7%. By early October, the numbers were already up and level-pegging with the record year of 2013, when for the first time the country took in more than 230,000 visitors, earning a healthy the africa report

n° 66

10 km

PRASLIN

LA DIGUE

150 km

Population: 0.1 million Population growth: 0.6% ■ GDP per capita: $15,674 ■ Life expectancy: 73.2 ■ Adult literacy: 91.8% ■ Inflation: 3.6% ■ Human development index (out of 187 countries): 71 ■ Foreign direct investment: $178m ■ Current account as % of GDP: -20.95% ■ Mobile phone penetration: 147% ■ Key export: Tuna ■ Last change of leader: 2004 ■ GDP growth (%)

3.5

3.7

3.8

1.4

1.5

1.5

2013*

2014*

2015*

2.8 ■

GDP ($bn)

1.1 2012

green energy

*Estimation Oct. 2014

G

ently favourable economic trends and the increasingly positive international image of the Seychelles will help President James Michel and his ruling Parti Lepep maintain a firm grip in 2015. While communications breakthroughs are getting citizens better connected and better informed, the main concerns for this small and idyllic country will remain, more than ever, its ability to keep attracting high-spending visitors and to increase the catch of tuna and other fish. Thenextnationalelectionsareplanned for 2016. The opposition Seychelles National Party (SNP) and its leader Wavel Ramkalawan boycotted the 2011 polls, leaving Michel and Parti Lepep to take all but one of the seats in the national assembly. Prior to those polls, the SNP demanded electoral reforms to level the playing field. A multi-year discussion about electoral reform took place afterwards, but the SNP rejected the Public Order Act and other proposed reforms in early 2014, saying they did not reflect the conclusions of the multi-party consultations.

$343minforeignexchange.Germantourists now outnumber those from France – formerly the primary source of visitors – while there has also been a rapid rise in those coming from China. In contrast with its earlier policies of import controls and price restrictions, the government has greatly eased the business environment for the benefit of hotel and tour companies, allowing them to modernise and compete more effectively with other international destinations.FlightconnectionswithEurope, the Gulf and other Indian Ocean airports are also being expanded. Air Seychelles launched flights from Mumbai, Dar es

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Salaam and Antananarivo at the end of 2014, and a new air services agreement has been newly signed with India, which is seen as having the potential to become a huge source of new business. Domestic demand and imports have grown strongly,as hascredit tothe private sector, but the International Monetary Fund remains critical of the preponderanceofpublicenterprisesintheeconomy and has urged more rapid liberalisation. In response, finance minister Pierre Laporte promised greater transparency in public spending, with all government contracts above $755,000 to be scrutinised by a procurement committee. He also confirmed that the state is going to sell its remaining shares in Seychelles Commercial Bank. Wind turbines have been installed on the main island of Mahé. Already producing 2% of electricity generated in the country, these will be complemented by further projects to take renewable energy production to at least 5% of the total in the coming years. The Public Utilities Corporation has plans to establish photovoltaic arrays for solar energy, with the cooperation of the private sector. Great hopes for longer-term energy security are being pinned on exploration for oil and gas. After a review of legislation in the energy sector, the state-owned PetroSeychelles hired a Japanese firm in October 2013 to undertake geophysical surveys and has begun inviting bids for new exploration areas south of Mahé. Among existing licence holders, Ophir has already started collecting seismic data in one block and Afren should soon follow suit in a second. The gradualist liberalisation of the economy is mimicked in the media, where the state still dominates broadcasting but there are now some independent radio stations and news magazines. However, opposition activists accuse the government of blocking their party websites, and individuals have been arrested for posting critical comments about government officials on social media. ●


140 Country Profiles

east africa

somalia

Hope on the rise, but fear not assuaged DJIBOUTI

The battle against Al-Shabaab still rages as the government counts on AU forces

Hargeysa

Economic prospects are recovering despite a high risk of famine

d

ependingontheever-changing perspectives in the region, Somalia still seems set to keep stumbling from glowing prophesy to disastrous implosion. Even since the perceived stability of Hassan Sheikh Mohamud’s government brought the promise of billions of dollars from the EU in 2013, the world’s focus has tended to shift onto the threat of Islamism, Somalia’s dismal bête noire, to the detriment of the nascent economic promise. Improvements there are, and the streets of Somalia’s embattled capital, Mogadishu, have become generally more peaceful. Oil discoveries and the rejuvenation of air and seaports have injected hope into the real prospects for Somalia’s economy. Diplomacy, too, has increased. The US has proposed its first ambassador since 1993 while China, which pulled out in 1991, is returning to reopen an embassy. However, any quiescence in Somalia is relative. Violent attacks, mainly by Al Qaeda affiliate Al-Shabaab, have remained common. Markets throng once more, but Mogadishans speak of a quiet fear that cannot be allayed by the AU and its peacekeeping mission, which has been accused of rape and murder, or by the US, whose drone strikes are mistrusted almost wholesale. INSTABILITY IN THE SOUTH

It was a drone strike, however, which on 1 September 2014 took the life of AlShabaab’s leader since 2008, Ahmed Godane. His place has since been taken by one of his hardline former lieutenants, Abu Ubaidah. It is unclear if Ubaidah, not known for his political or economic nous, can pull together the group’s resources and its estimated 5,000-7,000 fighters. After Godane’s death, Al-Shabaab lost control of its last remaining port of

ETHIOPIA

SOMALIA KENYA

Indian Ocean

MOGADISHU

200 km

Population: 10.5 million Population growth: 2.9% ■ GDP per capita: ND ■ Life expectancy: 55.1 ■ Adult literacy: ND ■ Inflation: ND ■ Human development index (out of 187 countries): ND ■ Foreign direct investment: $107m ■ Current account as % of GDP: ND ■ Mobile phone penetration: 49% ■ Key export: Sheep ■ Last change of leader: 2012 ■ GDP growth (%) ■ ■

ND

out an e-passport scheme, although the next election due in 2015 could pose a tough test of the strength of democracy in the territory. The case for a divided Somalia may have been reinforced by Somaliland’s success, but Puntland, in which lawlessness remains rife, has opened talks with Mogadishu. President Mohamud is also due to face elections in 2016. However, in 2014, he became embroiled in a scandal involving the sale of overseas assets and a US law firm. The prospect of more political instability arose in November when Mohamud’s supporters sought to oust prime minister Abdiweli Sheikh Ahmed. OIL, BOOM OR BUST-UP?

ND

ND

ND

ND

ND

ND

ND

2012

2013

2014

2015

GDP ($bn)

Barawe, 220km south-west of the capital, in October. The AU mission announced in mid2014 that it was adding 4,000 troops from neighbouring Ethiopia. Many decried the decision, but the move could help to overwhelm Al-Shabaab and improve dialogue between Somalia and Ethiopia. The continued instability of the south has deepened the rift between Somalia and Somaliland, a breakaway region. A US Agency for International Development wind energy scheme will power the reopened airport at regional capital Hargeysa and Somaliland’s president AhmedMohamedSilanyohasevenrolled

Investors are still being drawn to Somalia and several oil discoveries along the maritimeborderwithKenyacouldbelucrative, although they also risk inflaming mutual relations. Dialogue is needed to sustain both the joint economic opportunities and anti-terror efforts, as Kenya’s President Uhuru Kenyatta has terrorism problems to fight at home. Livestock, fisheries, grain and minerals also represent huge economic potential. Seaports have been renovated thanks largely to foreign investment and, thanks to falling rates of piracy, ships are now arriving in larger numbers. But just 10% of roads are paved and the government is still failing to provide solid infrastructure for exports. Fake currency is also a big concern, although renewed International Monetary Fund (IMF) involvement will help quell the issue. The IMF will not provide new loans to Somalia until it clears its arrears but will help with technical and other assistance. The challenges are monumental. Almost 70% of young Somalis are unemployed, but mobile and web penetration could help create a more prosperous, fluid market. The biggest danger to the population comes from hunger. In a country where just three years ago 260,000 died due to a massive famine, experts said in October 2014 that 200,000 Somaliswereatgraveriskofmalnutrition, including 50,000 children. ●

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east africa

Country 141 Profiles

south sudan The war drags on CHAD CAR

Oil production has continued but will not be fully restored without peace

SOUTH SUDAN JUBA

sanctions east and west

In a sign of the frustration felt by the international mediators, US envoy Donald Booth warned that his country was considering expanding sanctions against political and military officials on both sides, a measure he hoped could end the fighting and help the fitful peace talks in Addis Ababa. China also halted its weapons sales to the government and promised to send its own peacekeeping troops. The negotiations, hosted by the Intergovernmental Authority on Development (IGAD), continue to break down as the two factions accuse each other of breaching ceasefires. It did not help •

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KEN.

DRC UG.

200 km

Population: 11.3 million Population growth: 4% ■ GDP per capita: $1,044 ■ Life expectancy: 55.3 ■ Adult literacy: ND ■ Inflation: 0.17% ■ Human development index (out of 187 countries): ND ■ Foreign direct investment: ND ■ Current account as % of GDP: -2.51% ■ Mobile phone penetration: 25% ■ Key export: Petroleum and crude oil ■ Last change of leader: 2011 ■ GDP growth (%)

27.1 -47.6 ■

GDP ($bn)

10.2 2012*

19.0 -12.3

14.0 2013*

11.9

13.6

2014*

2015*

that IGAD was seen as biased towards Salva – as evidenced by Uganda’s strong military and political support for him. The Juba government also accuses Riek of receiving aid from Sudan, adding another regional element to the crisis. By November 2014, the two principals seemed close to reaching a powersharing agreement by jointly heading a transitional government of national unity, but hope for that quickly faded. Riek’s troops said that government forces violated a November ceasefire within hours of signing a new agreement. Ethiopia’s former foreign minister Seyoum Mesfin argued that the

d e c e m b e r 2 014 - j a n ua r y 2 015

proposed deal would bring in a wider cross-section of society rather than just the polarised political class. Reconciling ethnic groups, reconstructing the most affected areas and reintegrating tens of thousands of refugees from neighbouring countries will be the main governance challenges of 2015 and beyond. Accountability will be crucial in a situation where the main warring factions have engaged in ethnically motivated killings, rape, looting and the destruction of property. The government in Juba has also been accused of violating civil liberties and cracking down on the press. A major radio station that fosters democracy and free debate remained closed when The Africa Report went to press, and journalists expect censorship to continue as long as the war goes on. economy in tatters

*Estimation Oct. 2014

t

he year 2015 looks to be one of continued instability in South Sudan. There are few signs that the world’s newest country will yet manage to pull itself out of the fratricidal conflict engendered by the fateful events of 15 December 2013. On that night President Salva Kiir’s army turned its guns on supporters of former vice-president Riek Machar, who they accused of plotting a coup. The resulting violence – in which the Dinkadominated army pitted itself against mostly Nuer forces loyal to Riek – cost more than 10,000 lives across the country and drove more than 1.5 million people from their homes. In the process it created food insecurity that could affect up to 2.2 million people in 2015. In late 2014, aid agencies were appealing for assistance. The UN – whose peacekeeping troops were powerless to stop the fighting – estimated that some $400m was needed to provide humanitarian assistance. The UN called off warnings of famine after harvest prospects improved in November.

the africa report

SUDAN ETHIOPIA

Mediators have failed to bridge the gap between Salva Kiir and Riek Machar

Most of the fighting has taken place in the states of Unity, Jonglei and Upper Nile, where the infrastructure now lies largely in ruins and most economic activity has been brought to a halt. The national chamber of commerce reported that the private sector sustained enormous losses in those states as well as in the capital, Juba. Oil production has continued from the Paloch oilfields in Upper Nile but has declined overall to 160,000 barrels per day (bpd) from more than 200,000bpd in late 2013. Production in Unity came to a halt as Bentiu repeatedly changed hands between the government forces and the rebels in 2014. The war has rendered most of the government’s declared economic priorities meaningless and development programmes in most areas have been shelved. A Russian-built refinery near Bentiu with capacity to refine 5,000bpd was damaged in April 2014 and some Russian engineers working on the project were killed. In order to be able to import fuel and commodities to keep prices stable, the government took a revolving $250m line of credit with Qatar National Bank in September 2014. ●


142 Country Profiles

east africa

tanzania

Heads turned by the scent of gas DRC

Final investment decisions soon due for massive gas export projects and plants

BURUNDI

steamrollering

In late 2014 the government forced significant changes to the draft constitution previously tabled by the review commission, so opposition parties boycotted the Constituent Assembly. The main issue at stake was whether the union government should have two or three tiers; the latter option, which was included in the draft, would pose a clear risk to the CCM’s political grip on Zanzibar. The

Lake Victoria

KENYA

Arusha DODOMA

TANZANIA ZAMB.

MAL.

Dar es Salaam

MOZAMBIQUE

7.0

7.2

7.0

28.5

33.3

36.6

40.2

2012

2013*

2014*

2015*

6.9

GDP ($bn)

far refrained from publicly endorsing a successor, but access to substantial financial resources will play a vital part in determining any candidate’s ability to sustain a national campaign. The field will narrow as the polls approach. The frontrunners for the CCM are former foreign minister Bernard Membe, former prime minister Edward Lowassa, Constituent Assembly chairman Samuel Sitta and defence minister Shamsi Nahodha. oppositionists step up

Population: 49.3 million ■ Population growth: 3% ■ GDP per capita: $768 ■ Life expectancy: 61.5 ■ Adult literacy: 70.6% ■ Inflation: 5.87% ■ Human development index (out of 187 countries): 159 ■ Foreign direct investment: $1,872m ■ Current account as % of GDP: -13.72% ■ Mobile phone penetration: 56% ■ Key export: Precious metal ores ■ Last change of leader: 2005 ■ GDP growth (%) ■

*Estimation Oct. 2014

W

ith general elections planned for October 2015, the months ahead promise higher political stakes than ever before in a country long dominated by the heavy hand of the former single party, Chama Cha Mapinduzi (CCM). As President Jakaya Mrisho Kikwete steps down after his two terms in office, the opportunity for political renewal can no doubt be conjured out of the prospects for economic and social change, especially with Tanzania’s offshore gas resources on the cusp of development. However, there is equally a risk of intensified corruption resulting in continued economic exclusion for the majority and widespread political apathy. Overall economic growth is set to remain strong thanks to a rapid surge in tourist arrivals and increased foreign investment in oil and gas plus the added boon of strong results in the agricultural and construction sectors. But the past 10 years has seen a widening rural-urban divide, with agriculture tending to lag far behind the rest of the economy. In the lead-up to elections, the CCM’s declarations on policy will be widely questioned in the light of its failure to deliver on promised constitutional revisions and greater transparency in economic management.

RWANDA

400 km

UGANDA

Indian Ocean

Elections in 2015 will focus on the CCM’s performance, especially on corruption

CCM steamrollered over the opposition in October 2014 and won the support it needed for watered-down reforms. The government is due to organise a referendum on the constitutional changes in April 2015. Nonetheless, the opposition will continue to try to secure a truly independent National Electoral Commission, which has always been staffed by presidential loyalists. Against the established pattern, political competition is intensifying both within and outside the party as an unprecedented number of veteran and younger politicians declare their ambition for high office. Kikwete has so

If there is deadlock, a possible compromise candidate is former chief justice Augustino Ramadhani, who hails from Zanzibar and is a practising Anglican Christian – qualifications that could win a him following in both Zanzibar and the mainland. The standard bearers for the increasingly confident opposition parties will be Wilbrod Slaa from the Chama Cha Demokrasia na Maendeleo (Chadema), Ibrahim Lipumba of the Civic United Front and Zitto Kabwe of the newly formed Alliance for Change and Transparency. Kabwe has been challenging the grounds of his own dismissal from Chadema’s leadership in 2014, but he remains chairman of parliament’s influential Public Accounts Committee. The outward signs for the economy are healthy enough. Finance minister Saada Mkuya Salum is confident that inflation can be contained below her target of 5.2% by the end of 2014. The International MonetaryFund(IMF)notesthatalthough the current account deficit is one of the largest in the region, at 14% of gross domestic product (GDP) in 2014, Tanzania is at low risk of debt distress. The overall fiscal deficit in 2014/2015 is projected at 4.9% of GDP. The government plans to undertake a new infrastructure drive after launching its maiden eurobond in 2015. The IMF urges better monitoring and management of fiscal risks arising from public enterprises and social security funds. In an attempt to force more rigorous investigations into corruption in thepowersector,donors withheld budget support of about $500m for 2014/2015.

the africa report

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143

light at the end of the tunnel

Major construction projects currently under way include the 520km Mtwara to Dar es Salaam gas pipeline at a cost of $1.2bn, which is backed by a Chinese government loan. The pipeline and new power plants should lead to a 1,720MW rise in electricity generation by 2016, more than doubling current national production. More electricity should support the country’s economic development as

Projected gas consumption and export bcm 20

Source: AfricA economic outlook 2014

The harnessing of Tanzania’s plentiful offshore gas, promising export earnings estimated at $3bn per year between 2023 and 2050, has become a preoccupation for policy-makers as much as for wouldbe tycoons. Exploration companies have discovered nearly 50trn ft³ of natural gas, and four major companies – ExxonMobil of the US, Norway’s Statoil, Britain’s BG Group and Italy’s Eni – are busy developing projects, although final investment decisions are unlikely to be made until after the 2015 elections. The lack of clarity around government gas policy has been highlighted by calls in parliament for greater transparency. OppositionMPs have demandedtoknow whether or not bribes have been paid and whether the government will get a fair shareofpotentialrevenues.InSeptember, the Tanzania Revenue Authority backed down from its demand for the renegotiation of existing production-sharing contracts with investors to ensure an enhanced share of revenue.

exports domestic consumption 10

0

2015

2025

2040

20 million

Tanzanians have a mobile subscription with one of the top four providers

industries that demand more power expand. In that vein, Nigerian billionaire Aliko Dangote’s cement plant in Mtwara is due to start production in late 2015. Communications are also playing a crucial role in Tanzania’s growth. AccordingtotheTanzaniaCommunications Regulatory Authority, the country’s four main mobile phone service companies have a subscription base of more than 20 million people – or around half the population. Employment opportunities are opening up as new players join the industry and existing ones expand their businesses. Tigo, a subsidiary of Millicom International, announced plans to invest

$104m in 2014 to expand its rural reach. Tigo Pesa, the company’s money transfer brand, has signed up an estimated 3.5m subscribers. Vietnam’s Viettel won a licencetooperatein2014.Thegovernment is forcing telecoms companies to list on the local bourse, a move expected to be implemented in 2015. The transport sector will also grow significantly as the government focuses on reviving railways, ports and aviation sectors. Huge port investments and the World Bank-funded Dar es Salaam rapid transit bus service for commuters will play a big role in growth through employment and the reduction of the traffic jams in a city with 300,000 cars. Tourism is emerging as a major growth area, having expanded at an annual average of 9% over the past four years. Tourism minister Lazaro Nyalandu promises major investment in hotels and airports with a view to overtaking Kenya and catering for around two million tourists a year by 2017. Tanzania has been able to benefit from the slump in Kenya’s industry resulting from terrorist attacks. Over the past decade, while the economy has grown at an average of 6% per annum, agriculture has recorded growth below 4% and poverty remains widespread in rural areas. A new agricultural growth corridor should pair more than one million smallholder farmers in breadbasket regions with commercial farmers who are expected to bring in capital and modern technology. ●

A tAle of two ports Tanzania WanTS to be a trading hub for the region, and two ports will soon be competing for business. With Britain and the World Bank promising support for a major $565m expansion of Dar es Salaam port, work is also about to begin on another significant harbour only 70km away at Bagamoyo. the africa report

n° 66

Backed by a proposed $10bn loan from Chinese sources, Bagamoyo is intended to be a major container port, with the capacity to handle 20m containers annually, compared to fewer than 1m at Dar es Salaam. Retired Lieutenant General abdulrahman Shimbo promises that the first phase at Bagamoyo

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will be completed by 2017. Shimbo, now ambassador to Beijing after retiring from the Tanzania People’s Defence Forces in 2013, has denied reports that China will use Bagamoyo partly as a military base. The government blacklisted two Chinese contractors due to work on the Dar expansion project in 2014 saying their

involvement was due to public corruption. Crowding and inefficiencies at the Dar port led to anchoring and dwell times of up to 20 days in 2013; the international standard is three to four days. Dar es Salaam is the country’s main port and deals with about 90% of the country’s trade. ●


144 Country Profiles

east africa

uganda

Marching towards another ballot 100 km

Uganda’s intervention in South Sudan underlines the military’s primacy

rival removed

Formuchof2014,Museveniwaspreoccupied not only with the South Sudan crisis but also with attempting to stamp out divisions within his ruling National Resistance Movement (NRM). In September, his dismissal of powerful prime minister Amama Mbabazi was designed to end just such a split, although it also carried the risk of encouraging a potential challenger to come forward. Mbabazi was building up his support as a rival to Museveni. As NRM secretary general since 2005, he has valuable inside

For data sources, see page xxx

i

n the East African arena, President Yoweri Museveni wants to make his mark as the elder statesman of a so-called new “coalition of the willing” that is intended to forge stronger relations withRwandaandKenya,leavingthemore cautious Tanzania on the sidelines. The three presidents penned a joint opinion letter ahead of the US-Africa summit in Washington justifying the need for regional projects in realising their “African dream”. In it, they allocated Uganda the tasks of building an oil refinery to supply the region with petroleum products and of spearheading the development of communications technologies. Museveni’s fortunes in Uganda in the year ahead are more likely to be influenced by his controversial decision in early 2014 to intervene in support of President Salva Kiir’s army in the South Sudan conflict. Although the deployment of the Ugandan military may have strengthenedMuseveni’sprofileasamaster tactician, it blew yet another hole in Uganda’s depleted coffers and put further pressure on the public debt just ahead of what would normally be a spending bonanza when campaigning warms up for elections in early 2016.

Gulu

UGANDA

DEMOCRATIC REPUBLIC OF CONGO

KAMPALA Mbarara

Jinja KENYA

Lake Victoria TANZANIA

RWANDA

Population: 37.6 million Population growth: 3.3% ■ GDP per capita: $685 ■ Life expectancy: 59.2 ■ Adult literacy: 78.39% ■ Inflation: 5.5% ■ Human development index (out of 187 countries): 164 ■ Foreign direct investment: $1,146m ■ Current account as % of GDP: -10.36% ■ Mobile phone penetration: 44% ■ Key export: Coffee ■ Last change of leader: 1986 ■ GDP growth (%) ■ ■

5.8

5.9

6.3

21.2

22.9

26.1

26.9

2012

2013

2014*

2015*

2.8 ■

GDP ($bn)

*Estimation Oct. 2014

Spending on big infrastructure projects threatens to unbalance the economy

SOUTH SUDAN

knowledge of its structures and financing, and is clearly someone not easily cowed into submission. Although his name has appeared in connection with several high-profile scandals, evidence has so far been tenuous. The secretary general’s post is set to be highly contested ahead of the 2016 polls. As the NRM prepared for the upcoming elections in 2016, it discussed how to conduct its primary elections in 2015 in a way that would avoid the infighting and recriminations of past attempts. An investigation into the previous primaries revealed claims that the process was unfair and opaque.

In power since 1986, Museveni is seeking to brush off the Mbabazi affair and to stand defiantly yet again. Former Forum for Democratic Change (FDC) president Kizza Besigye is the only politician ever to have offered Museveni serious competition, but he decided in late 2013 not to run again in the planned 2016 polls. call for term limits

Mugisha Muntu now leads the fractious opposition party and has yet to show that he can outdo his predecessor. The FDC has lambasted the government’s vast public spending and was preparing to select its flag bearer for 2016 in February 2015. The party has continued to call for the imposition of presidential term limits and says the majority of the public supports such a move. For the second year running, the government intended to issue more than USh1trn ($384m) in securities to finance its public expenditure in 2014/2015. “The fiscal deficit expansion is a matter of serious concern for us, as it led to an unplanned increase in issuance of government securities,” noted the government in its letter of intent to the International Monetary Fund in June 2014. The overall level of debt could rise even higher in 2015 as the government seeks to finance its share of major infrastructure projects, especially two energy plants costing nearly $3bn – the 600MW Karumaand180MWIsimbapower schemes. The government hopes to provide more than $400m for those two plants through a petroleum fund and an energy fund, which are yet to be established. There is also the refinery project for which the government has invited companies from South Koreaand Russia to bid. Theestimated cost is $2bn, with investors offered a 60% stake. Current infrastructure spending plans also include financing the construction of 1,700km of roads. Museveni’s administration plans to launch a bid for a public-private partnership for the construction of a toll road linking Kampala to Jinja in 2015. Oil production is not expected to start before 2018. Although some 6.5bn bar-

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145

exports soar in war

South Sudan is still an important export market, with the Ugandan army helping to keep the trade corridor open. Exports to South Sudan were $74.5m in the first quarter of 2014, at a time when the war was almost peaking, compared to $40m during the same period a year earlier. Building materials, foodstuffs and beverages are some of the key products exported. However, not all Ugandan businesses operating in South Sudan have

Museveni's pull at the polls 100 80 60

69.3%

40

59.3%

68.4%

20 0

2001

2006

Source: uganda electoral commiSSion report

rels have been discovered, only 1.4bn barrels are thought to be recoverable. Gas has some potential, with companies already applying for licences to put up power plants. So far, some 500bn ft³ of non-associated gas has been found, but developments depend on the progress of oil production. The government has waited several years to award new licences and has planned a bidding round for 2015. Ahead of the oil era, the government has to look at other export options. Tourism has for the first time surpassed workers’ remittances to become Uganda’s top foreign exchange earner. The sector earned $1.4bn in 2013/2014 compared to $800m from remittances. The Uganda Tourist Board and the Uganda Wildlife Authority have placed more focus on domestic tourism by promoting cheaper accommodationfacilitiesandpublicising national religious and cultural events.

2011

1,700km of new roads have been promised by the Museveni government

thrived, and Juba’s declared intention to expel foreign workers – which was quickly withdrawn – was badly received in Kampala. Many banks are expected to remain cautious about their lending in the coming year. Trouble hit the financial sector when Global Trust Bank, owned by Nigeria’s Industrial and General Insurance, had its licence cancelled by the Bank of Uganda in mid-2014 after years of loss-making and weakening balance sheets. Many banks from West Africa operating in Uganda continue to make losses, with the central bank warning that

some financial institutions are in need of urgent recapitalisation. The urgency applies to the central bank too, which is undergoing a systematic recapitalisation over a four-year period. Government says the recapitalisation programme is meant to “enhance monetary policy independence and central bank credibility” and also to “contain operational and administrative costs”. Not for the first time, the Uganda Revenue Authority has been falling short of its collection targets, complaining that the poor performance by the banks partly affected its tax collection drives. The revenue shortfall and the aid cuts from donors, who remain disturbed by Uganda’s debate over its harsh antihomosexuality legislation as well as a spate of corruption allegations, place more financial pressure on the state. In response, the finance ministry has introduced a raft of tax measures, targeting sectors such as agriculture, which employs three-quarters of the population, and kerosene, a key commodity for many poor rural households. The country’s progress on the Millennium Development Goals has been patchy. It had already reduced poverty levels by 50% in 2013, but its health and education performance has been mixed. It is on course to achieve 10 of the 15 goals by the end of next year, with the spread of HIV/AIDS being one of the areas requiring the most attention. ●

StirringS acroSS the reStleSS kingdomS As politiciAns prepAre to kick off their campaigns in 2015, many will face the delicate act of juggling their party interests and those of their regions of origin. the cultural institutions that embody Uganda’s ancient kingdoms have for the most part worked closely with the ruling national resistance Movement, but several the africa report

n° 66

are becoming disgruntled at what they see as high-handed decisions by the central government. in July 2014, near the border with Drc, 20 people died in bloody clashes over the installation of a new Bwamba king. the rwenzururu kingdom had attacked, claiming Bwamba was part of its territory. the army intervened and

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arrested a number of rwenzururu kingdom officials. the tooro kingdom was not amused either, considering the new Bwamba kingdom part of its territory. tooro King oyo nyimba Kabamba iguru went on a one-week hunger strike. elsewhere, the Bunyoro kingdom is demanding

12.5% of the revenue from any oil produced in its territory bordering lake Albert, rejecting the 7% the government offered. the Buganda kingdom – the highly populated heartland around Kampala and the centre of power – continues to demand a federal system of government, a step that the central government rejects outright. ●



country profiles

central africa contents

LIBYA

ALGERIA

148 PeoPle to watch NIGER

MALI

150 cameroon

CHAD Lake Chad

152 central african reP.

Abeche SUDAN

N’Djamena BENIN

153 chad

NIGERIA

CENTRAL AFRICAN REPUBLIC

CAMEROON

Douala

Yaoundé

Malabo

Libreville Port-Gentil

GABON

156 equatorial guinea 157 gabon

Kisangani

Mbandaka

CONGO

Goma

DEMOCRATIC REPUBLIC OF CONGO

Brazzaville

Pointe-Noire

SOUTH SUDAN

Bangui

EQUAT. GUINEA São Tomé SÃO TOMÉ E PRÍNCIPE

154 dem. reP. of congo

ETHIOPIA

Bukavu

Kinshasa

UGANDA

158 rePublic of congo

KENYA

RWANDA

159 São tomé e PrínciPe

BURUNDI TANZANIA

Matadi Atlantic Ocean

Lubumbashi

ANGOLA 300 km

Expected GDP growth in 2014 for the economies of the six-nation Communauté Economique des Etats d’Afrique Centrale, cut down from a 6.1% forecast

calendar 2015

February Central African Republic Presidential election June Democratic Republic of Congo Local elections June Cameroon Migration to digital TV broadcasting august Gabon African Growth and Opportunity Act forum september Republic of Congo All-Africa Games central africa 2014 GdP (% of regional total) Democratic Republic of Congo Chad 11.9%

24.6% TOTAL

$132.9bn

Central African Rep. 1.3% Cameroon 24.2%

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central africa PoPulation (millions) 316 111

Republic of Congo 10.6% Equatorial Guinea 11.6%

SOURCE: UNITED NATIONS

5.7%

the africa report

MALAWI

ZAMBIA

209 350 143 293

15.6% Gabon Sao Tomé and Principe 0.3%

2015

2030

2050

147


148 Country Profiles

central africa

PeoPle to watch cameroon

Agnès Ndoumbe Mandeng

all rights reserved

Friend to the little guy Democratic republic of congo

In June 2014 Agnès Ndoumbe Mandeng became the director of Cameroon’s first bank solely focused on small and medium-sized enterprises. President Paul Biya announced the creation of the Banque Camerounaise des PME in 2011 and it is now her task to get the institution running before the end of 2014 with the technical and financial assistance of the European Investment Bank. The public institution has an initial capital base of $20m, and its managers will soon be looking for more. She brings her experience as a member of the Commission Bancaire de l’Afrique Centrale and as a former director of monetary and financial cooperation at Cameroon’s finance ministry.

Cindy Le Coeur

Kinshasa’s rumba queen Acrobatic women dancers are standard fare in Congolese rumba, but female singers who rise to stardom for their voices are few and far between. Cindy Le Coeur is without question the most successful female artist of her generation. She began performing on stage with rumba superstar Koffi Olomidé around 2008 and has remained by his side ever since. Cindy recorded her first solo album, Cindy Chante Koffi, in 2010, and followed up with Koffi Central in 2013. Olomidé is as evident in the music as in the album’s titles – his lugubrious, rich delivery the perfect counterpoint to Cindy’s husky yet svelte sound. Word in Kinshasa is that Cindy will release another album in 2015, as well as touring with Olomidé across Africa and the world.

gabon

Jean Ping

The undiplomatic diplomat comes home Since losing his bid to stay on at the head of the AU Commission in 2012, Jean Ping, 71, has been looking for a new job. He returned to Gabon to get into consulting work and launched a charge to rally and unify the opposition against President Ali Bongo Ondimba in 2014. Ping’s opening salvo was an interview in August on the France 24 TV news network, where he called Bongo an “autocratic dictator”. Ping has sought allies within the banned Union Nationale party and launched the Front Uni de l’Opposition pour la Démocratie et l’Alternance in July 2014. He was the late President Omar Bongo Ondimba’s long-serving foreign minister and, without a strong political party to call his own, will have difficulty showing that he offers a credible alternative to the ruling party. His next tasks are getting the opposition to agree on a single candidate for the single-round 2016 presidential election and developing a political organisation with national reach. the africa report

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149

democRatic Republic of congo

Vital Kamerhe

55-year-old opposition leader Vital Kamerhe ended 2014 by telling President Joseph Kabila and his allies to beware the fate of Burkina Faso’s Blaise Compaoré, who was chased from power for trying to extend his time beyond constitutional limits. The Union pour la Nation Congolaise president knows his opponent well and was secretary general of Kabila’s Parti du Peuple pour la Reconstruction et la Démocratie and president of the national assembly from 2006 to 2009. He scored just 7.7% in the 2011 presidential poll that was riddled with fraud. He is seeking the support of 84-year-old oppositionist heavyweight Étienne Tshisekedi to form a united front against a change to the constitution.

Republic of congo

Antoine Evoundou Election expert

the africa report

n° 66

chad

Djerassem Le Bemadjiel Oil-powered minister Abel nAsser GArboA

Speculation may be focused on questions of constitutional change before the presidential election in 2016, but organising the polls is equally crucial. Skilled management of the 2009 poll ensured an easy victory for Denis Sassou Nguesso, with barely a hint of international criticism despite the exclusion of most credible opposition candidates and turnout figures that were far from plausible. The new director general of electoral affairs, Antoine Evoundou, held one of the regime’s most trusted positions as director general of national security. He is also a Freemason, like many senior figures in Brazzaville.

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A trained engineer, 39-year-old Djerassem Le Bemadjiel (left) is new to the game of politics but he has quickly impressed in N’Djamena. He won a prize in Switzerland in 2012 for an autonomous pumping system and became Chad’s new petroleum minister in early 2013. His previous posts were as petroleum adviser to President Idriss Déby Itno and deputy director of Chad’s oil refinery. He has taken an aggressive stance in protecting the state’s interests. Chad received a payment of $400m from the China National Petroleum Corporation in late 2014 for its environmentally destructive practices. He was also a crucial figure in the state’s purchase of Chevron’s stake in the Doba oilfields and the Chad-Cameroon pipeline earlier in 2014. Le Bemadjiel has high hopes for oil and gas exploration projects under his tenure.

Vincent Fournier/JA

Best friend becomes best enemy


150 Country Profiles

central africa

cameroon

Promises and passivity CHAD

The gas sector is promising while agriculture is struggling

opposition disarray

The leading opposition party, the Social Democratic Front, faces the same problems of an unclear succession as does RDPC. The party is struggling to make an impact, and the SDF’s John Fru Ndi, 73, has won a smaller share of the vote in each presidential election since 2004. The country’s many small

Garoua

NIGERIA

CENTRAL AFRICAN REPUBLIC

CAMEROON Douala YAOUNDÉ

Gulf of Guinea EQUATORIAL GUINEA

GABON

CONGO

Population: 22.3 million ■ Population growth: 2.5% ■ GDP per capita: $1,426 ■ Life expectancy: 55.1 ■ Adult literacy: 74.99% ■ Inflation: 3.2% ■ Human development index (out of 187 countries): 152 ■ Foreign direct investment: $572m ■ Current account as % of GDP: -3.47% ■ Mobile phone penetration: 70% ■ Key export: Petroleum and crude oil ■ Last change of leader: 1982 ■ GDP growth (%)

fuel price hike

4.6 ■

5.5

5.1

5.2

GDP ($bn)

26.5

29.3

32.2

34.4

2012

2013

2014*

2015*

*Estimation Oct. 2014

W

ith Boko Haram and the impact of the war in Central African Republic (CAR) proving the largest threats on the domestic front, President Paul Biya’s government is trying to deliver on its promises as the country moves into 2015 with few Millennium Development Goals achieved. There are many challenges: economic growth is narrow, unemployment remains high and the ruling Rassemblement Démocratique du Peuple Camerounais (RDPC) continues to monopolise the political space. Biya, 81, shows no sign of planning for the succession and he is set to run again for another seven-year term in 2018. He remains aloof and has not selected a successor. Should he remain in the post, RDPC secretary general Jean Nkuete will be well placed to influence the competition to replace Biya. Regular cabinet reshuffles and the country’s regional and language dividing lines make it difficult to predict how the succession will take place. The government has very slowly implemented the changes brought in by the 1996 constitution, including the senate and the constitutional council. Biya says that his priorities for this term in office are employment and the population’s living conditions, but the government has not been clear about how it intends to achieve its goals.

About 40% of Cameroon’s 22 million inhabitants live below the poverty line. People complain about the rising cost of living and gross inequalities as the government plans to make the country an emerging economy by 2035 via a spending spree on infrastructure. Nowadays, blackouts and water cuts are common. The government’s lack of capacity in managing major projects, however, will be a stumbling block to its stated goals.

200 km

The government has problems transforming its plans into reality

opposition parties have not been able to form a united front in their attempts to counter Biya. Biya’s 32-year-old regime has weak governance credentials. Faced with international criticism for using the Opération Épervier anti-graft programme to silence rivals, Biya unexpectedly pardoned some 24,000 inmates of the country’s overcrowded prisons in February 2014. One-time presidential aspirant and secretary general of the presidency Titus Edzoa and Franco-Cameroonian Thierry Atangana regained freedom alongside a host of people charged with stealing from the public purse.

In order to find the money to spend on projects, the government has been implementing unpopular decisions. On 1 July, it decided to cut some fuel and cooking gas subsidies, prompting a 14% hike in the cost of a litre of petrol and a 15% increase in the price of a litre of diesel. Government spokesperson Issa Tchiroma said the subsidies have been costing the state more than $600m per year since 2009. Amid consultations to avert a transportation strike as well as a 5% civil servants’ pay raise to cushion the burden, trade unionists and farmer organisations were angered by parliament’s adoption of a draft law authorising Biya to ratify an Economic Partnership Agreement (EPA) with the EU. They fear that the agreement, which took effect in October 2014, will engender lopsided competition, reduce customs revenue and hurt the country’s struggling industries. The government argued that the deal will extend the reach for the country’s exports and lower the price of imports. Meanwhile, output woes persist in the agricultural sector, which employs 70% of the population and represents 42% of gross domestic product. Harvests of coffee, once a flourishing cash crop, hit an all-time low in 2014, with a more than 50% slump from the previous year. Figures from the Conseil Interprofessionnel du Cacao et du Café revealed a drop from 38,000tn in the 2012/2013 season to 16,000tn in 2013/2014. Growers, dealers, experts and farmers’ organisations have called for government subsidies and improved agricultural policies.

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151

delays for dangote

The plant’s growing list of clients includes Dangote Cement. The country’s third cement producer delayed its planned July 2014 start of production due to problems in energy supply and the ongoing construction of access roads. The plant, with the capacity to produce 1m tonnes per year, was due to come online before December 2014. The SNH also reported that national oil production had risen to 8.8m barrels by April 2014 due to new production in the

Under-five mortality rate Deaths per 1000 live births

200 150 100

135

95

50 0 1990

source:IGMe 2013

Elsewhere, the Office National du Cacao et du Café announced in September 2014 that cocoa exports sank by 3.4% from 180,722tn in the 2012/2013 season. Problems in the sector include climate change, lack of access to quality planting material, primitive farming methods and ageing farms and farmers. Actors in the sector are still waiting for the promised state-run agricultural bank that was supposed to be launched in 2014. Cameroon’s natural gas sector is taking off. Plans being discussed include a liquefied natural gas plant and a fertiliser plant. The inauguration in November 2013 of Rodeo Development’s gas production plant in Doualawas a crucialstep for the industry. The Société Nationale des Hydrocarbures (SNH) reported that production hit 4.3bn cubic feet in the first quarter of 2014, up from 93.4m cubic feet during the same period in 2013.

MDG target 45 1995

2000

2005

2010

2015

$600m Annual cost of fuel subsidies since 2009

Dissoni Block and the Douala/CampoKribi basin, a 24.5% increase on the first quarter of 2013. The government expected oil revenue to reach 718bn CFA francs ($1.4bn) for the 2014 budget. The government is investing in the construction of new dams and ports, but progress has been somewhat slow. The 30MW Lom Pangar Dam, partly financed by the World Bank, was about 50% complete in March 2014. Cameroon’sinstalledcapacitystandsat about 1,000MW. The government has set a production target of 3,000MW by 2020 to boost industrialisation. In the mean-

time,Britain-basedinvestmentfundActis became the majority shareholder of electricity distributor AES-SONEL in 2014. The new management announced it will spend 170bn CFA francs between 2014 and 2018 to boost output and expand coverage amid nationwide complaints about load-shedding and blackouts. In July 2014, the Kribi deep-sea port welcomed its first vessels. According to the project chairman, Louis-Paul Motazé, the ultramodern port will not be completed until 2040, but it is already helping to decongest the port at Douala. The government selected Louis Berger in August 2014 to oversee construction of a highway between Yaoundé and Douala and began paying indemnities to dislodged landowners. In Douala, Sogea-Satom and Soletanche Bachy made progress on a second bridge with a rail line over the Wouri River. In the mining sector, the government recruited Geotech Airborne to examine the country’s mineral potential. The surveys should be completed in June 2015. The launch of the venture, with funding from the World Bank, coincided with the suspension of the issuance and renewal of artisanal mining exploration permits after it emerged that many investors were mining rather than exploring. In late 2014, Australian miner Sundance Resources announced it would push ahead with its $3.5bn Mbalam-Nabeba iron ore project despite price slumps. ●

Boko Haram exploits weak Borders Cameroon’s porous borders expose it to refugee flows from the conflict in CAR and to attacks from the Boko Haram Islamist militants from north-eastern Nigeria. Prior to 2014, Boko Haram had little impact on Cameroon. Attacks intensified early in the year and climaxed on 27 July when militants stormed the Fotokol home of deputy the africa report

n° 66

prime minister Amadou Ali, abducting his wife and some 15 others. They were released in October. Reports from Cameroon’s Extrême-Nord region said that Boko Haram has been recruiting young people from the country’s mostimpoverished region. The fighting in Nigeria also provoked the influx of more than 11,000 Nigerian

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refugees. The UN warned that the plight of the refugees was deteriorating amid a cholera outbreak and floods from heavy rains. After declaring war on Boko Haram on 17 May at a summit in Paris, President Paul Biya proceeded in August with the reorganisation of the army. He dismissed senior officers, created a semi-

autonomous combined military force in the Extrême-Nord and deployed more troops. The instability in the north has contributed to political infighting. Regime barons from the south, led by Henri Eyebe Ayissi, accused the northern elite of using Boko Haram to destabilise the country and eventually topple Biya. ●


152 Country Profiles

central africa

central african rep. The trials of Samba-Panza 300 km

The government has not been able to stop the Seleka or Anti-balaka forces

CHAD

The economy will take at least a decade to recover from the effects of the conflict

negotiating with the rebels

Working with both the mostly Muslim Seleka troops and the mostly Christian Anti-balaka fighters will be difficult because of their decentralised organisation and the government’s lack of funds. Seleka is an alliance of former rebel groups that launched political parties, like the Union des Forces Démocratiques pour le Rassemblement and the Convention des Patriotes pour la Justice et la Paix. In October 2014, the government decided to launch a working group with

SOUTH SUDAN

CENTRAL AFRICAN REPUBLIC Berberati BANGUI DEMOCRATIC REP. OF CONGO

CONGO

CAMEROON

Population: 4.6 million Population growth: 2% ■ GDP per capita: $368 ■ Life expectancy: 50.2 ■ Adult literacy: 36.75% ■ Inflation: 7.35% ■ Human development index (out of 187 countries): 185 ■ Foreign direct investment: $1m ■ Current account as % of GDP: -11.84% ■ Mobile phone penetration: 29% ■ Key export: Diamonds ■ Last change of leader: 2014 ■ GDP growth (%) ■ ■

toll of the crisis

1 4.1 ■

5.3

-36

GDP ($bn)

2.2 2012

2.0

1.5

1.7

2013*

2014*

2015*

*Estimation Oct. 2014

t

he challenges that lie ahead for a return to peace and rule by an elected government in the Central African Republic (CAR) are unlikely to be resolved in 2015. Fighting in the country continued throughout 2014 without an end in sight. The transitional regime is supposed to organise elections by February 2015, but the electoral commission says that will not be possible until much later in the year at the earliest. The UN peacekeeping mission, which took over from the AU in September 2014, is not due to reach its mandated level of 12,000 troops until later in the year ahead. The Seleka forces that overthrew President François Bozizé in 2013 still threaten to push for the secession of the north. At the same time, the group was splintering into several smaller units in late 2014. If elections take place, the state is also supposed to redeploy officials all over the country, reorganise the armed forces, restart the economy and complete the disarmament of Seleka forces and the Anti-balaka self-defence groups that sprung up to fight them. The authorities estimate that tens of thousands of people are to be involved in the disarmament process.

SUDAN

about the capacity of the administration. Samba-Panza also provoked a conflict in August 2014 with CAR’s mediators, led by the Republic of Congo, after failing to reach agreement about her appointment of prime minister Mahamat Kamoun. The state has not yet regained control of all of CAR’s territory, so elections in 2015 are unlikely. The transitional road map calls for the simultaneous holding of municipal, legislative and presidential elections in February. Since the beginning of the crisis in 2012, state officials and security forces have been rare in the towns in north and central CAR that were taken by the Seleka forces. The Autorité Nationale des Elections said in late 2014 that it was not optimistic about organising the polls before the end of 2015.

the Anti-balaka forces after they called for a truce. The fighters had at least temporarily withdrawn their demand for transitional president Catherine Samba-Panza to step down because her government cannot provide a solution to the conflict. The government is almost completely dependent on its Central African peers, the AU and donor countries. SambaPanza’s administration has not been able to pay police and civil service salaries, so the World Bank and the UN have stepped in. The International Monetary Fund (IMF) temporarily suspended cooperation with the Bangui government over governance issues and doubts

The humanitarian impact of the fighting has been huge. An estimated one million people have been displaced, with about half living as refugees in neighbouring countries. It will take nearly a decade of pre-crisis levels of economic growth to make up for the 36% drop in the country’s gross domestic product in 2013. The country’s trade and agricultural activities have been impacted by the crisis and have yet to start to recover. The Kimberley Process diamond certification scheme has suspended CAR from its membership and a discussion on the possibility of lifting the ban was due in November 2014. At a donor conference in Brussels in January 2014, CAR’s partners pledged a total of $572m in budget support, humanitarian assistance and development aid. The government faced renewed criticism when investigations found in September that a portion of Angola’s $10m aid package had not made its way into the state’s coffers. In order to raise more domestic revenue, the state must rebuild its capacity to manage tax, customs and the treasury. The African Development Bank, World Bank, IMF and other donors are expected to provide technical assistance for the state in the year ahead. ●

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central africa

Country 153 Profiles

chad

All in the family LIBYA

Elections are being delayed by the introduction of biometric voter registration Oil production is set to peak by 2017, as the government is taking on a larger role

e

NIGER

Lake Chad

SUDAN

N'DJAMENA

strong grip

Saleh Kebzabo of the Union Nationale pour la Démocratie et le Renouveau (UNDR) says that the opposition’s goal for the legislative election is to more than double its representation to at least 65 seats so that it can prevent Déby and his allies from having a two-thirds majority in the 188-seat national assembly. The UNDR is part of the Coordination des Partis Politiques pour la Défense de la Constitution umbrella group and says that the opposition front will choose a single candidate next year to face Déby in 2016.Theoppositionandmediaregularly •

n° 66

NIGERIA CAM.

Moundou

400 km

CENTRAL AFRICAN REPUBLIC

SOUTH SUDAN

environmental dispute

Population: 12.8 million ■ Population growth: 3% ■ GDP per capita: $1,403 ■ Life expectancy: 51.2 ■ Adult literacy: 40.17% ■ Inflation: 2.8% ■ Human development index (out of 187 countries): 184 ■ Foreign direct investment: $538m ■ Current account as % of GDP: -7.18% ■ Mobile phone penetration: 36% ■ Key export: Petroleum ■ Last change of leader: 1990 ■ GDP growth (%) ■

9.6

8.9 3.9 ■

6.7

GDP ($bn)

12.4

13.4

15.8

17.6

2012

2013

2014*

2015*

*Estimation Oct. 2014

lectoralpreparationswilldominate the political debate in Chad in 2015 and into 2016. The election timetable could be thrown off by delays in implementing biometric voter registration and disputes between the government and the opposition. The government resolved its conflict with Chinese investors in the oil sector, and production is set to grow as new fields come online. With the opposition’s history of boycotting polls, President Idriss Déby Itno’s government has set up a dialogue with the country’s political parties to ensure a minimal level of cooperation. In February 2014 that led to a reformed Commission Electorale Nationale Indépendante (CENI) with 17 members each representing the ruling party and the opposition. Local elections were due to take place in 2014 but the CENI was only at the point of studying how to use biometrics at the middle of the year. Oppositionists and electoral officials expressed doubts about the timing of the local elections, the legislative polls planned for 2015 and the presidential vote in April 2016, in which Déby plans to run for a fifth term.

the africa report

CHAD

complain about the domineering role played by Déby and his Mouvement Patriotique du Salut in Chad’s political life. Déby’s grip on power seems as strong as ever and the threat of armed opposition groups has been put to rest due to a lack of support from Sudan. He continues to name members of his family to positions of authority within government and the security services. His son Zakaria Idriss Déby Itno is his deputy cabinet director and has a growing profile. Mahamat Idriss Déby Itno, 29, is second in command for Chad’s peacekeeping forces in Mali. The government and the International Monetary Fund (IMF) expect

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strong growth through 2017 as new oil projects come online and production doubles from its 2013 level by 2016. The IMF warns, however, that production is then set to peak at 88m barrels per annum in 2017 and begin to decline if there are no new discoveries. Commerce, transport and telecommunications are the main sectors driving growth outside of the oil sector. China National Petroleum Corporation (CNPC) is one of the companies that will be increasing production over the next few years. The government revoked the company’s five blocks in July 2014 after it was found to be dumping waste illegally, but they reached a $400m resolution to the dispute by October. The state-owned Société des Hydrocarbures du Tchad is taking a more active role in the sector: it will now manage a 10% stake in the CNPC fields, and the state bought out Chevron’s stake in the Doba field and the Chad-Cameroon export pipeline, with the help of a loan from commodity trader Glencore, earlier in 2014. Despite power cuts and fuel shortages in 2014, the government’s spending priority in the field of infrastructure in 2015 is related to the hosting of the AU summit planned for N’Djamena in July. President Déby has been increasing his diplomatic overtures in recent years by trying to play a mediator’s role in conflicts in Nigeria, the Central African Republic (CAR) and Mali. While Chadian troops withdrew from the regional peacekeeping operation in the CAR amid claims that they shot civilians in March 2014, a much smaller force was back in September to provide security for transitional leader Catherine Samba-Panza. Chad is also a priority partner for France’s anti-terrorism operations in the Sahel, and President François Hollande was in the country in July 2014 to launch Opération Barkhane, France’s new force of 3,000 troops spread across five countries and headquartered in Chad. ●


154 Country Profiles

central africa

democratic republic Presidential wait-and-see

A growing mining sector is not matched by the expansion of infrastructure CAM.

Kabila has not said what he will do when his second term ends in 2016

second-guessing kabila

In the meantime, there have been a succession of public utterances by senior members of Kabila’s Majorité Présidentielle(MP)alliance,presumablyinthehope that they speak Kabila’s mind, arguing in favour of constitutional revision but without spelling out that this should be to allow a third term. Congolese opposition parties fervently oppose constitutional revision, and their view is shared by Russ Feingold, the US government’s special representative to the Great Lakes. In order to protect their privilege, those in Kabila’s inner circle want him to stay in power beyond 2016. Members of the group include Kabila’s sister Jaynet and brother Zoé. Gécamines chairman Albert

Kisangani

CONGO GABON

KINSHASA

Atlantic Ocean 400 km

ANGOLA

UGANDA

Goma

RWANDA BURUNDI

DEMOCRATIC REPUBLIC OF CONGO

TANZANIA

Lubumbashi ZAMBIA

Population: 67.5 million Population growth: 2.7% ■ GDP per capita: $411 ■ Life expectancy: 50 ■ Adult literacy: 63.82% ■ Inflation: 2.37% ■ Human development index (out of 187 countries): 186 ■ Foreign direct investment: $2,098m ■ Current account as % of GDP: -9.26% ■ Mobile phone penetration: 44% ■ Key export: Cathodes ■ Last change of leader: 2001 ■ GDP growth (%) ■ ■

8.5

8.6

8.5

27.5

29.9

32.7

35.6

2012*

2013*

2014*

2015*

7.2 ■

Augustin Matata Ponyo will keep his position and that disgruntled leaders of the MP will be brought into cabinet to shore up their loyalty. Kabila has surprised before when it comes to picking prime ministers and may do so again. Meanwhile, the lethargic electoral commission is set to begin organising a census and/or local elections. The high cost and daunting logistical challenges involved are clear, and the government will swiftly turn to the UN mission and donors for help. donor decisions

GDP ($bn)

*Estimation Oct. 2014

p

resident Joseph Kabila celebrates his 14th anniversary as president of the Democratic Republic of Congo (DRC) on 26 January 2015. Kabila is already the second-longest-serving president of the post-independence period, while first place remains with Mobutu Sese Seko, who ruled from 1965 to 1997. The constitution says that Kabila must step down in 2016, but he has not said what he plans to do. The mining sector and agriculture are growing but are not vastly improving livelihoods. It is not clear that Kabila has decided on any one course of action for 2016. In part, this is because he has never publicly said what he thinks about the matter, in line with a general reluctance to do much public speaking or to be specific about his intentions when he does so. Neither has Kabila taken any action that would indicate clearly what his strategy for 2016 and beyond might be. Instead, the new government he promised in October 2013 remains unformed.

SOUTH SUDAN

CAR

Yuma is influential as are national assembly president Aubin Minaku and Evariste Boshab, the secretary general of Kabila’s Parti du Peuple pour la Reconstruction et la Démocratie. Moïse Katumbi, governor of Katanga Province, is a potential successor and would be likely to protect Kabila’s interests if the latter steps down. Kabila appears to be pursuing a waitand-see strategy into 2015. Presumably, at some point during the year he will announce a new prime minister and a new government will be formed, which will provide clues about his thinking. The current talk is that prime minister

If donors refuse, the process will likely stall. Alternatively, donors might say that they will help but only if Kabila respects the two-term limit. If that happens, everything might also be delayed, at least for as long as it takes for the government to persuade donors that there is not enough time to respect the 2016 time line and that a managed transition that is running late will be better than unmanaged chaos. If donors opt to pay for the census or local elections without conditions, which is unlikely, Kabila can ensure that it all takes as long as possible. The big unknown during 2015 is what ordinary Congolese people will make of all this. In the absence of reliable opinion polls and because of the well-reported serious deficiencies in the official polling data from the previous election in 2011, no one can really say for sure. A useful indicator during the year, however, will be the level of militia activity around the country. Congolese militia traditionally behave like mushrooms, springing up in fertile spots when conditions are ripe and disappearingwhentheripenesssubsides. For at least two years now, northern Katanga Province has been one of those spots, particularly around Manono, Mitwaba and Pweto, where an estimated 500,000 people have been displaced. There are no signs that this will abate during 2015. Big industrial mining companies in southern Katanga worry about this, but will only really start to sweat if the militias make significant inroads closer to their operations.

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155

of congo

mining growth

Congolese economic growth looks impressive on paper, but few Congolese directly benefit from this, since it is almost exclusively driven by rising output from industrial copper and cobalt mines in Katanga. There is some direct benefit from this growth in the form of rising incomes for mining company employees and improvements in infrastructure paid for by mining companies. But because the manufacturing and service industries that once benefited from rising mining

Copper and cobalt production (tonnes)

1 000 000

SourceS: BritiSh GeoloGical Survey World Mineral Production 2008-2012, Jeune afrique, uS GeoloGical Survey

In the east, the Rwandan government appears dissuaded for now from lending its military might to assist a Congolese militia. The result is an uneasy calm in much, though by no means all, the Kivus, which should hold for as long as Rwanda’s President Paul Kagame wants it to. In 2015 the Congolese military and UN troops will continue their operations in North Kivu Province against the Ugandan rebel group calling itself the Allied Democratic Forces. It remains unclear how much effort the armed forces will devote to operations against the Forces Démocratiques de Libération du Rwanda (FDLR). Previous military efforts against the FDLR resulted in the militia melting away into forests, where it was nearly impossible to pursue them. Any lack of commitment will be seized on by Kigali, and possibly used as the rationale for further intervention.

Copper Cobalt

750 000 500 000 250 000 0 2008

09

10

11

12

13

950,000tn Copper production in 2015, according to analyst’s predictions

output have long since disappeared from Katanga, the multiplier effect is much more limited. The sector is set for another bumper year in 2015, as the impact of private investment over the past decade continues to kick in. Analysts predict production of 923,000tn of copper in 2014, rising to 950,000tnin2015.Companiescontinueto complain that they would be producing much more if there was more electricity available. There appears little prospect of anything better than marginal improvement in electricity production during 2015. The Inga III Dam is supposed to

move forward in 2015. Tiger Resources is promising big new investment in the Kipoi copper mine, and Randgold is set to ramp up output at Kibali in 2015. Kabila has promised to boost agricultural production, and investment in new commercial ventures has indeed been rising, including in new agricultural zones. Statistics for agricultural output are too unreliable to set much store by, and a better guide will be whether the proportion of foodstuffs grown domestically and sold in cities like Kinshasa and Lubumbashi starts to rise and whether prices begin to come down. So far, this has not noticeably happened, though consumer price inflation averaged only 2.4% during 2014, according to the International Monetary Fund, which expects it to rise to 4.1% during 2015. The mobile phone penetration rate in the country is estimated at only 44%, suggesting there is still plenty of room for growth in the sector. However, mobile telephone service providers are unconvinced that the Congolese they have yet to reach have much money to spend and have noticeably slowed down their efforts to roll out infrastructure across the country. Instead, competition for existing customers will continue to intensify among the networks. That should keep phone calls inexpensive, but will mean lower profits for the service providers, which will probably further slow infrastructure deployment. ●

The opposiTion prepares for 2016 These are challenging times for opposition parties, which are facing the government’s plans for constitutional revision and talk that President Joseph Kabila could stay on beyond 2016. Etienne Tshisekedi, who insists he was the rightful winner of the 2011 elections, turned 82 on 14 December and is increasingly bedevilled the africa report

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by health problems. He has shown no sign of being prepared to relinquish the reins of his Union pour la Démocratie et le Progrès Social (UDPS). None of his ambitious lieutenants have challenged him openly either. Behind the scenes, groups are fighting attempts by Tshisekedi’s son Félix to organise a family succession.

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Vital Kamerhe, 53, was once president of the national assembly and now heads the opposition Union pour la Nation Congolais (UNC). He is seeking to establish himself as the only credible opposition leader, not only to the Congolese people but also to sceptical foreign donors. The authorities have taken to banning UNC

rallies and beating up Kamerhe’s supporters when they defy the bans, which is earning Kamerhe kudos as a serious oppositionist and helped counter claims that he is in league with Kabila. It is unlikely that the UDPS and UNC will present a single candidate in 2016, but they have been working together to criticise the electoral commission. ●


156 Country Profiles

central africa

equatorial guinea

Obiang’s game to play After failed talks with the opposition, little is set to change in politics

BIOKO

Gas is now an economic mainstay: the government is pushing two big projects

talks BREak DOWN

In November, President Obiang’s government launched talks with representatives of legal and illegal opposition parties located at home and in exile in order to strengthen the country’s democracy. Many in the opposition dismissed this overture, as the government routinely prohibits protests and arrests opposition leaders on dubious charges. Most parties insisted on pre-conditions before participating, and in October the government issued an ill-defined general amnesty for political prisoners and politicians facing charges. Most of the parties that agreed to participate walked out on the second

Bata Atlantic Ocean

EQUATORIAL GUINEA

GABON 50 km

glaRiNg iNEqualitiEs

Population: 0.8 million ■ Population growth: 2.8% ■ GDP per capita: $19,787 ■ Life expectancy: 53.1 ■ Adult literacy: 95.26% ■ Inflation: 3.91% ■ Human development index (out of 187 countries): 144 ■ Foreign direct investment: $1,914m ■ Current account as % of GDP: -10.52% ■ Mobile phone penetration: 67% ■ Key export: Petroleum and crude oil ■ Last change of leader: 1979 ■ GDP growth (%) ■

-4.8

-2.5

16.5

15.6

15.4

13.8

2012

2013

2014

2015

3.2 ■

-7.9

GDP ($bn)

*Estimation Oct. 2014

e

quatorial Guinea will not have another presidential election until 2016, and President Teodoro Obiang Nguema Mbasogo, 72, is following a common script of attempting to stay in power for as long as he can while making as few compromises as possible. November 2014 brought a political dialogue that Obiang initiated in order to co-opt the opposition and make the regime appear to be more democratic. As oil production declines, natural gas is gaining greater importance, and the government continues to talk about the need for economic diversification, which cannot come soon enough for a weakened economy. Analysts expect a familial succession in Equatorial Guinea, with vice-president Teodoro ‘Teodorín’ Nguema Obiang Mangue, who is in charge of defence and national security, taking over from his father. Teodorín has received a cold reception from Washington and Paris but signed a deal with US authorities in October to forfeit some of his property there in order to avoid a corruption trial, thus improving bilateral relations.

expected to have a negative economic growth rate in 2014, demonstrating why the government is seeking to broaden the country’s economic base. The dropping price of oil led the African Development Bank to estimate that the budget deficit would rise to 11.4% of gross domestic product (GDP) in 2014 and 12.8% in 2015. Oil accounts for almost 90% of GDP, while the agriculture sector struggles to meet 30% of domestic demand.

CAMEROON

MALABO

day of talks, arguing that they were unlikely to alter the autocratic systems of the Obiang government. Not all of the regime’s opponents are set to benefit from the amnesty. Cipriano Nguema Mba, a former lieutenant colonel who was kidnapped in Nigeria and brought to Equatorial Guinea, is still set to face trial on the charges of threatening state security. The economy has been in recession since 2013 and prospects for a recovery dimmed in late 2014 when the price of a barrel of oil dropped below $80 from more than $100 earlier in the year. Equatorial Guinea was the only African country

The country’s rapid economic growth since the oil boom of the 1990s has not improved livelihoods across the board. In spite of Equatorial Guinea’s GDP per capita of $19,787, only 14% of the population uses the internet, according to the UN Development Programme. That is below the sub-Saharan African average of 15.2%. The government has been rapidly financinginfrastructuresuchasroadsand power plants over the past several years. It also has ambitious plans for the gas sector. Ophir Energy is set to make an investment decision soon on its plans to buildafloatingliquefiednaturalgasplant. If things go according to plan, Ophir will select a contractor for the plant by the end of 2014 and production at a rate of 3m tonnes per annum will begin in 2019. Another gas project is the construction of a petrochemicals plant at Riaba on the eastern coast. Malabo signed a deal with the companies in blocks I and O to provide gas to the plant and hired India’s Archean Fertilizer to produce plans for the complex in 2014. In early 2014, Malabo organised a conference on the subject of the diversification of its economy. At the conclusion of the summit, it announced the launch of a co-investment fund of $1bn that will be devoted to working with foreign investors outside of the petroleum sector. The priority investment areas are agriculture, tourism and banking. In order to better understand what policies will encourage specific sectors, the government has launched a housing, agriculture and employment census that should be completed by the end of 2015. ●

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central africa

Country 157 Profiles

gabon

Live by oil, die by oil 100 km

The opposition has new life with the return of Jean Ping to the political game

Atlantic Ocean

The oil sector is attracting more interest, but lower prices augur budget problems

foreigners targeted

The opposition has targeted presidential cabinet director Maixent Accrombessi for what they say is his disproportionate influence on the running of the government machinery. Accrombessi is originally from Benin and some oppositionists have been using xenophobic rhetoric about the ‘légion étrangere’ of foreign advisers around Bongo. For his part, Accrombessi seems to be stepping somewhat out of the spotlight. the africa report

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LIBREVILLE Port-Gentil

GABON Franceville

CONGO

Population: 1.7 million Population growth: 2.4% ■ GDP per capita: $13,039 ■ Life expectancy: 63.5 ■ Adult literacy: 83.18% ■ Inflation: 4.74% ■ Human development index (out of 187 countries): 112 ■ Foreign direct investment: $856m ■ Current account as % of GDP: 12.23% ■ Mobile phone penetration: 215% ■ Key export: Petroleum and crude oil ■ Last change of leader: 2009 ■ GDP growth (%) ■ ■

5.5 ■

5.6 5.1

diversification plans stalled

5.4

GDP ($bn)

17.9

19.3

20.7

21.7

2012

2013

2014*

2015*

*Estimation Oct. 2014

c

ampaigning for Gabon’s 2016 presidential elections has already begun. President Ali Bongo Ondimba has launched a series of anti-corruption investigations to improve his governance credentials and is seeking to improve his weak performance in delivering on promises like building 5,000 new housing units per year. Former AU Commission chairman Jean Ping, who resigned from the ruling Parti Democratique Gabonais in February 2014, is looking to unite the opposition. The Union Nationale opposition party – banned by the government but still operating – has lacked direction during the long illness of leader André Mba Obame and a divided opposition has little hope of dislodging Bongo in the single-round presidential election. A falling oil price, however, is the biggest threat that the government now faces. Ping is highly critical of the government, launching a series of heavily publicised and wide-ranging attacks against endemic corruption and the lack of infrastructure, but he has not proposed a strong platform of policies of his own. Withfewoppositionistsinpositionsofauthority, Ping and his allies have a long way to go to build up a national or regional base upon which to challenge Bongo.

oil or minerals. The mining sector is getting more attention with progress on the construction of a metallurgical complex in Moanda. Mining company Comilog produced its first tonne of silicomanganese from that site in August 2014. Iron, gold and other mining projects are moving forward but the flagship Belinga iron ore mine in north-eastern Gabon awaits the results of more studies before new investors are brought in for the mine and associated rail, power and port projects.

CAMEROON EQUATORIAL GUINEA

Thegovernment’sauditsofpastspending revealed large waste and fraud. Current and former regime barons are being investigated, but oppositionists and lawyers’ representatives express extreme doubts about the impartiality of the judiciary.Someofficialshavebegunreturning money in order to avoid prosecution. Bongo insists that he has recognised the mistakes in attempts to improve electricity, water and housing and is now pulling out the stops before 2016. Bongo’s programme targets economic diversification, and he has set a deadline of 2020 for the country to stop exporting raw materials, be they timber,

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India’s Tata Chemicals pulled out of Singaporean company Olam’s planned fertiliser project in Port-Gentil in 2014, meaning there is no clear timeline for building the plant. The government and South Korea’s Samsung have discussed plans for a new refinery in Port-Gentil, but it, too, is unlikely to get started soon. While the government talks up diversification, oil is the main game in town. The reduction in the oil price in late 2014, from more than $100 in August to around $80 in October, represents a seriousthreattoGabon’spublicfinances.The price assumption in the 2014 budget was $97, so there will be significant shortfalls. While Bongo has created new sovereignwealth vehicles to smooth fluctuations in the oil price, they are still too young to make much difference now. Companies have been drilling both onshore and offshore as Gabon’s production continues to decline from its height of more than 370,000 barrels per day (bpd) in 1997. Production was just over 230,000bpd in 2013 and the authorities predict it will fall to 100,000bpd by 2024 without any major new discoveries. Several companies are chasing deepwaterpre-saltreservesanalogoustothose found offshore of Brazil. The government completed a bidding round in October 2013 and companies should be ramping up exploration activities soon. As a sign of the rising role of the state in the natural resource sector, the Gabon Oil Company and the Société Équatoriale des Mines are becoming ever more active. ●


158 Country Profiles

central africa

republic of congo Better late than never 200 km

The main political debate concerns the succession of Sassou Nguesso

CAMEROON

Despite falling prices in 2014, oil projects are going ahead

GENERALS UPSET

The security sector could prove problematic, however. Exiled critics claim there is resentment among senior officers who worry that they may end up on trial in Europe for human rights abuses – such as the 1999 ‘Beach Affair’ disappearance of 353 male opposition sympathisers. In October 2014, French courts confirmed their investigation relating to General Norbert Dabira’s connection to the Beach Affair. The opposition remains enfeebled, held back in part by the regime’s control of the electoral system. But oppos-

GABON Atlantic Ocean

REPUBLIC OF CONGO

BRAZZAVILLE

Pointe-Noire

DEMOCRATIC REP. OF CONGO

CABINDA (Angola)

Population: 4.4 million Population growth: 2.6% ■ GDP per capita: $3,302 ■ Life expectancy: 58.8 ■ Adult literacy: 79.31% ■ Inflation: 2.19% ■ Human development index (out of 187 countries): 140 ■ Foreign direct investment: $2,038m ■ Current account as % of GDP: -3.22% ■ Mobile phone penetration: 105% ■ Key export: Petroleum and crude oil ■ Last change of leader: 1997 ■ GDP growth (%) ■ ■

6

3.8 ■

iRoN oRE GALoRE

7.5

3.3

GDP ($bn)

13.7

13.5

14.1

15.1

2012

2013

2014

2015

*Estimation Oct. 2014

p

residential and legislative elections are not due until mid2016, but the big issues that will almost certainly decide the result are on the table already. If, as widely expected, the constitution is changed to allow President Denis Sassou Nguesso a third consecutive seven-year term, his eventual victory is for practical purposes assured. If the constitution is not revised, the regime has a substitute on the bench, the head of state’s son, Denis-Christel Sassou Nguesso. Although the constitution incorporates safeguards against any change to two key limiting articles – relating to term limits and presidential age – there is little to stop Sassou Nguesso from amending or replacing it. TheimageofSassouNguesso’s17years in the presidency is marked more by memories of conflicts and brutal repressionthanofthelatter-dayeraofeconomic growth. The past few years have revealed a new awareness of development needs and the judgment of posterity, with the grandiose announcement of a Chemin d’Avenir(PathfortheFuture)programme, notable for its ambitious promises to build hospitals, schools and roads.

security and his own diplomatic credentials. His assistance over the Central African Republic, hosting peace talks and sending peacekeeping troops, has been particularly appreciated in Paris and at UN headquarters. After some relatively quiet years, the oil sector is set for a substantial rebound, following discoveries by Eni in the Nene Marine offshore field. During 2015, the Italian group will be working on preparations for the expected 2016 start of production from a field that contains an estimated 1.2bn barrels of crude. Eni has also been studying the feasibility of exploiting Congo’s reserves of tar sands.

CAR

ition parties such as the Union Panafricaine pour la Démocratie Sociale are also hampered by their own factional rivalries and their failure to develop a credible campaign agenda. The government continues to intimidate the media. In the run-up to the September 2014 municipal elections, the authorities arrested Reuters correspondent Sadio Kanté several times and then expelled her. Harassment of the opposition and the media is likely to intensify until the 2016 election. On the international scene, Sassou Nguesso will continue to play the statesmanlike role that serves his country’s

Australia’s Equatorial Resources hopes to begin production at the planned Mayoko iron ore project around the end of 2015. Once an improved rail link and maritime export terminal at Pointe-Noire have been built, production could rise to 10m tonnes per year. Meanwhile, Equatorial, Core Mining and Congo Iron are working on iron ore projects in the north of the country. Development of these will require infrastructure investment, probably connecting to the rail networks in Gabon or Cameroon. The poor condition of Congo’s infrastructure has been a serious drag on development. The heavy concentration of population in the main urban centres has facilitated a relatively high level of power and water service coverage, but the quality of the network has suffered from under-funding. There are plans to improve the Djoué hydropower plant, while initial proposals have been prepared for further hydropower stations at Bas Congo and Sounda Gorge. A recent decline in oil revenue put public finances under short-term pressure. The national budget for 2014 was revised to trim expenditure. Even so, the government plans to accelerate a programme of hospital construction and the building of a flyover at Talangaï, a sports complex at Kintélé, a bypass and new road junctions in Brazzaville as well as new university facilities. ●

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central africa

Country 159 Profiles

SÃO TOMÉ E PRÍNCIPE A triumph for Trovoada The first majority government in years faces ecomonic challenges

PRINCIPE

The government has begun flirting with China and could alienate Taiwan

SÃO TOMÉ

the tables are turned

The three coalition parties that had dismissed Trovoada as prime minister through a vote of no confidence in November 2012 all lost seats. The Movimento de Libertação de São Tomé e Príncipe/Partido Social Democrata (MLSTP/ PSD) went from 21 deputies to 16, while the Partido de Convergência Democrática lost two of its seven deputies. The Movimento Democrático Força da Mudança of former president Fradique de Menezes lost its seat to the União para a Democracia e Desenvolvimento, the party of former prime minister Gabriel Costa, which for the first time succeeded in entering parliament. It seems Trovoada´s long voluntary exile in Portugal – he returned to São Tomé on 3 October 2014 – proved to be •

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Atlantic Ocean 5 km

Population: 0.2 million ■ Population growth: 2.6% ■ GDP per capita: $1,855 ■ Life expectancy: 66.3 ■ Adult literacy: 74.92 ■ Inflation: 6.69% ■ Human development index (out of 187 countries): 142 ■ Foreign direct investment: $30m ■ Current account as % of GDP: -18.2% ■ Mobile phone penetration: 65% ■ Key export: Cocoa beans ■ Last change of leader: 2011 ■ GDP growth (%)

nigeria cuts its losses

4.0 ■

5

5.5

0.4

0.4

2014*

2015*

4.0

GDP ($bn)

0.3

0.3

2012*

2013*

*Estimation Oct. 2014

a

midst the habitual party fragmentation and vote-buying, Patrice Trovoada´s Acção Democrática Independente (ADI) won an unexpected absolute majority in legislative elections on 12 October 2014, increasing the ADI’s share from 26 to 33 of the 55 seats. It is the second time since 1991 that a party has gained an absolute majority. Trovoada aims to combat youth unemployment, reform the judiciary and attract foreign investment. So far, the government has not succeeded in finding finance for the container port at Fernão Dias. Trovoada´s landslide victory is an opportunity for more political stability, but not necessarily a guarantee for efficient andsuccessfulgovernance.Aftertheelections, he promised to seek constructive relations with President Manuel Pinto da Costa, who had become his principal political adversary. It remains to be seen if the two can overcome their differences.

the africa report

SÃO TOMÉ

SÃO TOMÉ E PRÍNCIPE

to his advantage, while the MLSTP/PSD was weakened by internal strife and the fact that the coalition government was not headed by a prime minister from its own ranks. Trovoada’s outspoken stance proved popular. In June, while still abroad, he said he had filed a suit at the International Criminal Court against President Pinto da Costa, Prime Minister Gabriel Costa and other high-ranking politicians for alleged political persecution. That claim lacked credibility in a country that since 1991hasnothadarecordofhumanrights violations. Trovoada’s action is a symptom of a political environment marked

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by personal quarrels between political leaders and a lack of substantive dispute. The prospects for the local economy remain rather gloomy. The cocoa sector has stagnated for years, the growth of tourism has lagged far behind expectations and the likelihood of oil production has become even more uncertain. France’sTotalwithdrewfromitsoilblocks in 2013 and other news of the sector has varied from neutral to negative. In March 2014, Nigeria’s foreign minister Nurudeen Mohammed reported to parliament that the Nigeria-São Tomé Joint Development Zone was a loss-making venture. Parliamentarians declared that Nigeria could no longer fund a project that was of no economic benefit. To fight off the pessimism, the executive directors of the Abuja-based Joint Development Authority claimed, a week after the hearing, that new technologies will allow production from Block 1 to start within 18 months. In its search for foreign investment the countryhasbecomeenmeshedinChina’s politics. São Tomé has been an ally of Taiwan since 1997 but Taipei suffered a setback in November 2013 when Beijing inaugurated an official trade mission in São Tomé. To appease the Taiwanese, São Tomé invited Taiwan’s President Ma Ying-jeou to visit in January 2014. In June, Taipei formally expressed serious concerns when President Pinto da Costa visited China. On 1 October, the government and China’s Guangxi Hydroelectric Construction Bureau signed an agreement for the construction of a new city covering 212ha. Expo Gongá, as it will be called, is to be located in the north of São Tomé. Reportedly, the works will begin within 12 months and last a total of 58 months. TheprojectistobefinancedbyChinaand Angola,butsomeanalystshaveexpressed doubtthatthefundswillberaisedforsuch a prestigious project in one of Africa’s smallest economies. Local media said the planned total investment is $300m, twice São Tomé´s national budget. ●


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dossier transport

Riding the rails Ethiopia and Kenya are in a race to complete ambitious railway projects, but while Addis Ababa is in a frenzy of construction its East African neighbour may have hit the buffers

By Elissa Jobson in Addis Ababa and Marshall Van Valen

A

t Meskel Square, in the heart of Addis Ababa, traffic is even more chaotic than usual as cars, buses and pedestrians weave around the 5.5m-high pillars now straddling an eight-lane highway. Confusion reigns too at Mexico Square to the west and Megenagna roundabout to the east – evidence that work on the city’s light rail transit (LRT) system is progressing at a phenomenal pace. East Africa is home to a series of promising rail projects, from

Kenya’s standard gauge line to the railroad linking the Ethiopian capital to the port of Djibouti. Ethiopia’s projects are far more advanced – they benefit from the wholesale support of the government – while Kenya’s are lagging behind. The railway to link South Sudan to the port at Lamu lacks investment, and the development of the new standard gauge line is bogged down in debates about how the contract was awarded. In Ethiopia, two twin-track lines will bisect Addis Ababa north to south and east to west, diving un-

5,000 km

Planned length of Ethiopia’s national railway network

derground along certain sections and, as in Meskel Square, rising up high on elevated tracks. Trains will run for up to 18 hours per day at intervals of three to six minutes at peak times and will be able to carry a maximum of 60,000 passengers per hour. With journey times from theperipheryslashedbyuptotwothirds, the LRT has the potential to revolutionise transportation in this fast-growing city. “Groundwas broken on31January 2012 and the first trains are expected to start running on 1 January 2015,” says project manager

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Carl de Souza/afp

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Behailu Sintayehu, adding that 52% of the construction has been completed so far. More than 3,000 Ethiopianlabourersandengineers, overseen by the main contractor China Railway Engineering Corporation (CREC), are working in shifts around the clock to meet the ambitious deadline. networking the country

This first phase of the LRT scheme is expected to cost $475m, with 85% of the financing in the form of a loan from China Export-Import Bank. The Ethiopian government the africa report

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is funding the remainder. A second phase,whichwilldoublethelength of the track and reach further into the city’s suburbs, is also planned. Aside from the Addis Ababa mass transit system, the Ethiopian Railways Corporation (ERC) – the body charged with realising the government’s bold rail strategy – has also begun construction of a 5,000km network that will crisscross the country, stretching into almost every area of Ethiopia. “The main purpose of the national network is to connect Ethiopia economically and

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Addis Ababa’s light rail transit system takes giant steps across the cityscape

increase access for imports and exports,” explains Abebe Miheretu, head of information and public relations at the ERC. The routes will link the country’s main productive centres, allowing for the swifter transport of commodities such as sugar, charcoal, potash and coffee, he continues. They will also extend to the borders with Djibouti, Sudan, South Sudan and Kenya. Henok Assefa, managing partner of Precise Consult International in Addis Ababa, is convinced of the economic benefits of the rail network. “Part of the poverty


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dossier | transport

KENYA’S REGIONAL NETWORK PLANS

JUBA

ETHIOPIA

SOUTH SUDAN Mombasa to Bujumbura (Burundi) and Kisangani (DRC) Lamu port to Juba UGANDA (South Sudan) Nairobi to Addis Ababa (Ethiopia) D.R.C.

to ADDIS ABABA

Lokichogio Turkana Lake

KAMPALA

Moyale

Isiolo

SOMALIA

Rongai

KISANGANI

china controversy

Kisumu

KIGALI

Victoria Lake

NAIROBI

KENYA

TANZANIA

BUJUMBURA

Lamu Indian Ocean

Mombasa

Tanganyika Lake

that we have in Ethiopia is a direct consequence of the unintegrated nature of the country,” he says. “Bringing in the resources from the rural areas for processing is a problem. Part of that is transportation costs being high.” The majority of goods entering and leaving this landlocked country travel by road to and from Djibouti. It is an expensive and time-consuming journey that, according to some manufacturers, can cost up to $4,000 per container. “For a country that is looking to grow richer by light manufacturing, where margins are very low, you need to be doing volumes and railways become a very handy instrument,” says Henok. ethiopia thinks ahead

As a result, the ERC’s priority is the linefromAddisAbabatotheportof Djibouti.Thegovernmentawarded this contract to CREC and China Civil Engineering Construction Company, and so far around 25% of the project has been completed. The government is using the first phase of construction of both the LRT and the national rail network to build capacity for domestic industries. Contractors conduct training for local staff and the Institute of Technology has opened at Addis Ababa University specialising in engineering. The government is sending promising undergraduates to Russia, India

The Nairobi government says that the project will be beneficial because it will reduce freight costs from $0.20 per tn/km to $0.08 per tn/km. In late January, Kenyatta said “the standard-gauge railway must and will go ahead for us to achieve our development agenda,” and said that critics are sore losers who lost out on the contract.

and China to continue their education. The government hopes that the second phases of the LRT and rail network projects will be carried out entirely by Ethiopian enterprises, says Abebe. Amid two parliamentary investigations and a court case against the contract for the standard gauge line that will link Nairobi and Mombasa, Kenya’s rail projects have been slow to develop. In November 2013, President Uhuru Kenyatta laid the first stone for the new line, which will compete with the colonial-era narrow gauge line managed by Rift Valley Railways. The company is doubling its number of locomotives this year, but the long-term viability of its concession is now in doubt. China Export-Import Bank has agreed in principle to provide 85% of the finance for the standard gauge line, which estimates put at a cost of $5.3bn. However, transport principal secretary Nduva Muli told the Public Investments Committee in early February that the cost of the project had not been agreed and the finance deal had not been signed. The first phase will cover 500km, while the second phase would link the line to the Ugandan capital of Kampala. Work is expected to begin in July of this year and last four years. The government started the process of buying up land along the railway’s proposed path in February.

60,000 passengers per hour will be the capacity of Addis Ababa’s LRT system

$5.3bn

Estimated cost of Kenya’s new standard gauge railway

The Chinese and Kenyan governments signed a state-to-state contract that includes a provision that China Road and Bridge Corporation (CRBC) will carry out the work. Groups opposed to the deal say that there are no provisions in the constitution for single-sourced deals like this one and point to the fact that the World Bank banned the company from participating in its bids due to corruption involved with a contract in the Philippines. Critics also argue that the deal allows CRBC to conduct the feasibility studies, so there is no independent oversight on costs, which they say are inflated and more expensive per kilometre than its Ethiopian counterpart. The authorities say the deal is structured like this because the previous government under President Mwai Kibaki had shopped around for financiers and found Beijing to be the only party interested. With China Merchants Holdings having signed a deal with the Tanzanian government in May 2013 to build a port, special economic zone and railroad network at Bagamoyo, competition in East Africa’s transportation and other sectors is heating up. The Ugandan government has now agreed to buildapipelinethroughKenyathat could terminate at the new port under construction at Lamu, in northern Kenya. Both the Kenyan and Ethiopian governments would like to serve as South Sudan’s access route to the coast, so being the first across the finishing line is crucial for wooing the Juba government. The ports at Bagamoyo and Mombasa can both attract trade from Rwanda and the Democratic Republic of Congo, providing East Africa with some of the continent’s densest rail networks. ●

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At the crossroads of Africa, the Arab world and Asia

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at KENYA50 kenya at 50 is a supplement to tHe aFRICa RePORt n째56

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history | people | politics | economy | culture

The promise of a New East Nairobi looks to its region and across the Indian Ocean


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editorial By Parselelo Kantai

contents

Project Kenya and the golden jubilee

3 Editorial 4 ScEnarioS for 2030 reimagining a nation 8 opinion Martin Kimani on how Kenya is looking East

K

10 MEMoir

enya’s golden jubilee independence anniversary celebrations on 12 December this year will be unique in at least one respect. It will be the first time in the country’s history when Jamhuri Day is led by a president with no direct memory of colonialism. Born in 1961, President Uhuru Kenyatta was an infant when the Kenyan flag went up for the first time. His deputy, William Ruto, was not yet born. Of the millions who will mark the event, only slightly more than a million of them countrywide would have any memory of the first Jamhuri Day. There is much to celebrate. After decades of misrule, the promulgation of a new constitution in 2010 ushered in a new democratic dispensation. Similarly, the economic stagnation of the 1980s and 1990s gave way to a decade of sustained economic growth. The International Monetary Fund predicts that gross domestic product will increase by 6.2% in 2014. Regional trade and integration have deepened since the revival of the East African Community more than a decade ago. Kenyans now trade more with their regional counterparts than with anybody else. New oil and mining projects promise to raise the government’s revenue. Just as important, the demands for a more equitable sharing of national resources and for the dispersal of executive power is guaranteed under a new devolved county governance system. However, the nation turns 50 at a time when the very idea of nationhood is deeply threatened. Insecurity is rife and there are unprecedented levels of ethnic suspicion. After Kenyans overwhelmingly voted to end four decades of the Kenya African National Union’s autocratic

celebrating 50 years of impunity by rasna Warah 12 litEraturE

Binyavanga Wainaina on Kenyan writers’ global reach

cover credit: Anthony AsAel/Art in All of Us/corBis

14 intErviEW former prime minister raila amolo odinga 16 opinion Bitange ndemo on Kenya’s crucible of technology and business 20 BuSinESS Building an East african commercial hub 26 laSt Word abdi latif dahir

s u p p l e m e n t to t h e a f r i c a r e p o r t

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rule in 2002, two consecutive elections have sharply polarised the political elite and divided the nation along ethnic lines, as witnessed by the 2007-2008 post-election violence. Moreover, economic growth has failed to deliver on the promises made at independence. Kenya’s income disparities are high, and many regions have been marginalised in terms of infrastructure and service provision. For the generations that came of age in independent Kenya, there is a sense of two Kenyas – one of privileges and entitlements and the other of grinding poverty. But it is the problems facing the current leadership – the court cases at the International Criminal Court – that perhaps reveal more about the fundamental issue of elite impunity the country faces. At independence, ‘Project Kenya’ was a euphoric work in progress – a nation would be forged out of the shared history of colonial oppression. It was in many ways meant to be a transcendent project, transforming diverse ethnic groups into a single national unit. That dream was betrayed by a leadership intent on hogging power, patronage and resources. The nation, as the writer Binyavanga Wainaina has remarked, never imagined itself into being. At 50, these acts of the imagination are the ingredients of a hopeful future, but time is running out. Every missed opportunity to resolve deep-seated issues consigns the next generation to a Sisyphean struggle against itself. Having spent the first half-century of its existence avoiding the lessons of the past, the country’s leadership is in danger of repeating its own vexed history. ●

3


Kenya 2030

Reimagining The government has plans to transform the country’s economic production over the next 16 years, but debates about redistribution and inclusivity remain unresolved By Parselelo Kantai in Nairobi

A

t the end of October 2006, President Mwai Kibaki launched the Kenya Vision 2030 project. It was to be the roadmap for economic transformation. Having spent the first three years of his term fixing the economy after a long era of kleptocracy and Bretton Woods-engineered austerity, the Kibaki administration felt sufficiently confident to chart the future. Kibaki was politically isolated because his National Alliance of Rainbow Coalition partners accused him of reneging on a pre-election power-sharing deal. In 2005, he had been dealt a crushing blow during a constitutional referendum. And yet he had fixed the economy.

From negative growth in 2002, it was growing at 6% and reached a high of 7.1% the following year. His opponents used the rhetoric of non-inclusiveness to negate any real political advantage he could gain from his economic successes. As such, at its first launch in 2006, Vision 2030 was seen as little more than a state-sanctioned campaign manifesto. Just 15 months after the first launch of Vision 2030, the document lay in tatters in the wake of the bitterly disputed 2007 presidential elections and the violence that followed. It is almost uncanny that this state of affairs had been predicted almost a decade earlier. In 1999, the Institute of Economic Affairs and the Society for International s u p p l e m e n t to t h e a f r i c a r e p o r t

•

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kenya at 50

Kenyans wait patiently, and ever optimistically, for their politicians to find a way to prosperity that includes everyone

four possible scenarios El niÑo ScEnario: Will confusion and inertia thwart efforts at economic and political reform? if so, the status quo is maintained, tension heightens and Kenya fractures into ethnic districts with new systems of government within them. MaEndElEo ScEnario: Will the transformation concentrate the economy while resisting changes in the political structures? if so, rapid gains will not last long as tensions due to inequalities will emerge.

a nation Development organised a series of workshops called the Kenya Scenarios Project that involved a mixed group of policymakers, academics, professionals and activists. With the economy stagnating and the establishment under President Daniel arap Moi refusing to budge on the business of political and constitutional reforms, there was a widespread feeling that Kenya had “reached the limits of its chosen political and economic models”, according to the two thinktanks. They produced four scenarios (see box). The one that spoke so uncomfortably about the Kibaki moment was named ‘Maendeleo’ – development. It suggested economic transformation engineered without political inclusives u p p l e m e n t to t h e a f r i c a r e p o r t

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ness, “resulting in inequalities and instability”. The Maendeleo scenario may have anticipated the immediate postMoi future, but it also loudly echoed the central issues of the immediate post-independence era. a blueprint for exclusion

Independent Kenya’s holy grail of economic planning – Sessional Paper No. 10 of 1965: ‘African Socialism and its Application to Planning in Kenya’ – is ostensibly a negotiated settlement between the two opposing ideological schools. But, as former prime minister Raila Odinga points out (see page 14), it was fundamentally a blueprint for the economic exclusion of large segments

Marko Djurica / reuters

Katiba ScEnario: Will the transformation focus on the creation of democratic and locally accountable institutions while ignoring economic reform? if so, though responsive institutions will emerge, Kenya will not achieve substantial economic transformation. Flying gEESE ScEnario: Will a reshuffle of the institutions improve representation that reflects the diversity of Kenya’s people? Will this be accompanied by radical transformation of the economy to spur growth and improve distribution? if all the major actors engage, Kenya can achieve democracy and growth.

of the country and the populace. In response to demands from the left for a politics of redistribution, politician Tom Mboya famously remarked: “You can’t redistribute nothing.” Kenya’s economic history has been defined by this debate. Invariably, it is the pro-growth proponents that have won out. This has nourished the bitter politics that has defined the country to this day and is rooted in the land question. The failure of the post-independence government to initiate an inclusive land redistribution project was not merely one of agrarian reform. Land was also the vehicle that the new elites used to capitalise themselves. In economic terms, the immediate result of ● ● ●

5


kenya at 50

Kulwant Singh warah/private collection

6

East African leaders meet in the 1960s: for more on reigniting the regional dynamism, see theafricareport.com ●●● the skewed redistribution of settler lands was a spike in agricultural productivity. With the country’s economy based on agriculture, the resultant expansion, mostly through small-holder production, served as a screen to mask rising levels of group inequality and regional exclusion. It was the suppressed politics of exclusion that would explode violently in 2007 and, among other things, delay the journey toward Vision 2030.

‘visions’ for everyone

In the scenarios publication, ‘Kenya at the Crossroads’, the question of how to chart a transformative way forward to avert the El Niño scenario – economic stagnation and violent political conflict – was everywhere apparent. Can Vision 2030 do the same? Seeking to catapult Kenya into middle-income status within a generation, the roadmap proceeds on three fronts: economic growth – the ambition is to achieve 10% growth annually from 2012; social transformation – through the efficient delivery of and equitable access to social services; and political – deepening democratic reforms and strengthening governance systems. More than seven years after the Vision 2030 launch, Chinese-financed projects are responsible for Kenya’s infrastructure take-off. Flagship projects include roads, railway modernisation and expansion, pipelines, ports and resort cities along the planned northern infrastructure corridor. Across the region, ‘Vision’ projects proliferate. Almost every country in East

Africa has now generated one, courtesy of the McKinsey Global Institute, to whom African governments have outsourced the task of dreaming about the future. They do, however, symbolise a renewed sense of confidence. Deficit spending is the order of the day. Predicated on the anticipation of a mineral resource bonanza and the availability of inexpensive international loans, regional governments, Kenya’s included, are taking advantage of the optimism around Africa’s future to transform their economies. Will there be a price to pay? In Kenya, the government is enthusiastic about middle-class consumerism. In contrast, China – after the three decades in which it focused on manufacturing – is only

ago, while running the Institute of Economic Affairs, she convened the Kenya Scenarios Project. Lately, she has become increasingly sceptical of the goals of Vision 2030. “Vision 2030 anticipates rapid growth and participatory politics,” says Maina. “The reality on the ground is somewhat different. The fundamental problem in Kenya today has always been this lack of inclusive growth. Focusing on high-value tourism, agribusiness investment and ICT [information and communication technology] expansion – all of which are supported by rapid infrastructure growth – runs against the very inclusivity you are trying to introduce. This is because it leaves out the one component at the centre of it all – cheap mass labour.” Despite the current teethIt is possible that the regions ing problems of devolved government, it is quite poswill resolve the debate about sible that the regions will growth and redistribution resolve the debate about growth and redistribution. now starting to move towards a conInfrastructure expansion has the capacity sumer-driven economy. to transform previously marginalised reIn the medium term, it remains ungions in a manner unprecedented since the coming of the railway a century ago. clear how the International Criminal Mineral and other resources in northern Court cases will define the future. The government’s stance could well turn into counties, on the coast and elsewhere full-blown non-cooperation. If economic could change the economic fortunes sanctions – the consequence of nonof both the counties and the country cooperation – were on the cards during – but only if there is a commitment at the 2013 election campaign, the embrace the centre to see the nation beyond the of China was a deliberate strategy to mitprism of ethnic domination. igate those effects. “We’ll just be taking off in 2030,” pre“We are in the Katiba scenario,” notes dicts Maina. “But the next five years are Betty Maina, chief executive of the Kenya critical. I just hope we get tired of fighting Association of Manufacturers. A decade and disagreeing.” ● s u p p l e m e n t to t h e a f r i c a r e p o r t

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kenya at 50

opinion

The keys to Kenya’s transformation Shifts in the global economy uniquely position Kenya to act as a bridge between Africa and the East in trade and investment

F

ifty years after independence, Kenya is ation in revenue collection and therefore poised to be one of the countries that the ability to invest in services. He has also directed the use of crowd-sourcing to allow will define the next phase of global the government to identify bottlenecks and trade and geopolitics. As President Uhuru inefficiencies in its service provision while Kenyatta recently argued in a short essay ensuring that all senior civil servants sign entitled ‘What We See When We Look East,’ geography and the economic opportunities exacting performance contracts as a condiit presents will position Kenya as a critical tion of their employment. bridge in the coming together of an integChanges in Kenyan governance also deepen the country’s ability to be an attractrating Africa and the powerful economic ive destination for investment. Long-term growth and investment in the greater Inpolitical risk – the most important kind for dian Ocean rim. Add to this the transformlarge-scale investments that take years to ative role of technology and the country’s yield profit – is also sharply down following progress in entrenching its democracy in the implementation of a new constitution. a devolved system of government, and you Its underlying principles offer greater prehave a Kenya that has laid the foundations Kenya’s permanent dictability and recourse by delivering the that will define its next 50 years. Firstly, there is geography and the logistics representative to the devolution of power and robust checks and United Nations in of trade and investment. Kenya is part of an balances, as well as the reform of the judiEastern Africa whose fast-growing consumer Nairobi ciary and police. markets are combining with accelerating disKenya’s robust role in seeking the stabilcoveries of commodities and hydrocarbons isation of Somalia also ensures that regional plus the emergence of a single market to political risks are lowered. A critical comoffer unprecedented opportunities to domestic and foreign ponent for a country’s economic prosperity is being closely investors. Advanced plans, backed by strong political will, tied to regional development. to join this region with a world-class transport and logistics infrastructure will increase Kenya’s position as a bridge The third driver is the fundamental realignment in the between the region and the Indian Ocean rim countries that world’s geopolitical order. While North American and Westboast a third of the world’s people, its fastest-growing ecoern European economies fight stagnation, those of Asia and the Indian Ocean rim continue to grow strongly. The result nomies and the bulk of its mega-cities. has been a marked shift in global influence and also a glut of Examples of the next stage in infrastructure development savings over traditional investment opportunities. It allows include an expanded airport that will accommodate 20 million visitors a year, making it the busiest in the region. A modKenya to expand its partnerships in a way that speaks ever ernised railway network stretching from the Indian Ocean more concretely to its national interest and counteracts the jarring paternalism that has characterised too many of Africa’s to Rwanda is soon to be underway, while Mombasa port is relationships with its main partners during the past 50 years. being upgraded. New projects in Lamu, on the north coast, The final trend that is likely to prove transformative is the are set to deliver pipeline, road and rail links to Ethiopia growing production cost and regulatory competitiveness of and South Sudan. Kenya and the East African region. George Friedman, the founder of intelligence consultancy Stratfor, speaks of the The second driver of Kenya’s near future will be the post-China 16. That group is made up of those countries readiness of the people to benefit from global trends. The whose regulatory regimes, production costs and infrastrucrelatively sophisticated labour market makes Kenya an ture position them to pick up 100m jobs from China as its increasingly attractive place to do business from a skillsproduction costs rise rapidly. According to Friedman, the list acquisition perspective. Beyond proving a boon for headof 16 countries that will benefit from China’s rising costs of hunters, the presence of a growing technology sector that has the world’s most advanced mobile-payments ecosystem production include Kenya, Ethiopia, Uganda and Tanzania. is also transforming the country’s economy. More than 30% Kenya’s geography, its ability to open up trade between of gross domestic product now passes through M-PESA, the Africa and the world, the competitiveness of Kenyans’ skills, world’s most utilised mobile-money platform. the resilience of the political system, the regional determination to deliver stability and security, and the shift in global Leveraging this phenomenon, the president has ordered power and wealth from West to East will all combine to define that all payments from the public to government will be Kenya’s next 50 years. ● electronic by April 2014, portending a positive transform-

Martin Kimani

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kenya at 50

pictures: Kulwant singh warah private collection

10

Nairobi felt more integrated in the early 1960s: Warah’s family relaxes in the Stanley, previously a whites-only hotel

MEMOIR

Celebrating 50 years of impunity As Kenya celebrates the 50th anniversary of its independence, wealth remains in the hands of the few and politicians divide the people based on ethnicity

I

was just a baby when the Union Jack was lowered and replaced with the black-red-green Kenyan flag. The flag symbolised both loss and redemption for a people who had regained what had been forcibly taken away during the brutal years of British colonisation. I remember my childhood being a heady, optimistic period. My father, middle class, of Indian origin and living in the new cosmopolitan capital of Nairobi, imagined a future with limitless possibilities for himself and his children. Those were the days when racial barriers were being broken at every level of society: in public schools and universities, in the civil service and in business. An Africanisation policy imposed by the government in the mid-1960s did not deter my father from applying for Kenyan citizenship when thousands of Europeans and Asians were fleeing the country to seek refuge and opportunities

in Britain. He believed that the promise of independence extended to all races and that his identity was inextricably linked to this new entity called Kenya, a place where his forefathers had chosen to settle when the country was being imagined and created. HIStORy’S WROnG tURn

If he were alive today, perhaps he might have wondered what happened to the promises made by the country’s founding fathers. Kenya enters its 50th year of independence with a sense of foreboding, a feeling that the country took a wrong turn at some point in its history and has been unable to retrace its steps or find the map that can take it where it wants to go. In today’s Kenya, ethnic identity has replaced racial identity as a marker of privilege and entitlement. While the country has made giant leaps in some

areas – such as literacy levels, which stand at more than 80% – power and wealth are still in the hands of a few. Recent government data shows that 10% of the country’s households control 40% of the country’s wealth and the bottom 10% control less than 1%. Poverty levels hover around 40%, and the gap between the rich and poor is as wide as the Rift Valley. The recent discovery of oil and the expectation that this natural resource will change the country’s fortunes have not allayed fears that the beneficiaries will be the same cabal of elites that has run the country since independence. The seeds of the crisis that is Kenya were probably sown in 1923 when British settlers officially declared large sections of the colony as “white man’s country”. Twelve years later, 4,700 Europeans held among them 5.2m acres of the most fertile land in the colony, some of it granted to them free of cost, the bulk held s u p p l e m e n t to t h e a f r i c a r e p o r t

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kenya at 50

Warah’s father (above left) taking a portrait of President Moi in 1979; Mboya, Odinga and Kenyatta (right)

Rasna rows a boat on Uhuru Park’s artificial lake

on 999-year leases. The ‘natives’ were pushed onto reserves. Some found work as labourers on land they once owned. The violent Mau Mau uprising restored the land to the people, but the custodians of the land – the founding fathers of independent Kenya – followed the pattern of the settlers by stealing it and alienating and dividing their own people along ethnic lines, which allowed a culture of impunity to flourish. The pro-West founding president, Jomo Kenyatta, who amassed a large fortune during his reign, set the country on a winner-takes-all path to prosperity by planting a particularly insidious form of capitalism in the Kenyan psyche. His successor, Daniel arap Moi, created a society afraid of its own shadow and where sycophancy became the norm. Massive corruption scandals and gross human rights violations turned the country into a semi-pariah state. It took more than 20 s u p p l e m e n t to t h e a f r i c a r e p o r t

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years to dislodge his dictatorial presidency, but by the time Mwai Kibaki took over the reins of power in 2002 corruption had become a defining characteristic of Kenyan society. Promises from Kibaki to end the rot led to naught, and in his first term his government too faced charges of grand corruption. the myth is shattered

Yet Kenya likes to think of itself as exceptional, an island of peace and prosperity in a region scarred by volatility. This myth gained currency in the 1990s when neighbouring Rwanda and Somalia were descending into chaos. However, it was shattered after the December 2007 general election that left more than 1,200 people dead and some 600,000 others displaced. The election and its aftermath reminded Kenyans that they have yet to come to terms with their past. It showed a country reeling from the effects of histor-

ical injustices related to land, corruption, poor leadership and impunity. In 2010, Kenya adopted a progressive new constitution, which has not only expanded people’s rights but also addressed the issue of historical injustices and the inequitable distribution of resources. However, it is under constant threat of being dismantled by regressive forces within the current government. In October this year, for instance, parliament passed a law that would take the country back to the Moi years by severely curtailing press freedoms that were guaranteed in the constitution. In September, after the horrific terrorist attack on Nairobi’s Westgate mall – and the botched rescue operation during which security forces engaged in looting – blogger Gregg Mwendwa noted: “Sadly, mid-life clarity has taught me that education, religion and a large part of Kenyan socialisation is a well-orchestrated ploy to manufacture a deeply complacent but very functional citizen.” It is this seeming functionality in the face of calamity that Ugandan writer Kalundi Serumaga alludes to when he says that violence and impunity have become normalised. Impunity is now an integral part of the country’s DNA, a result of the “acres of cynicism” – to quote Ugandan poet Okot p’Bitek – sown by Kenyatta and Moi in the early years of independence. This cynicism, unfortunately, has now borne fruit in the ‘accept and move on’ mantra that has become the rallying cry of the government led by another child of independence – Kenyatta’s son, Uhuru, whose name means ‘freedom’ in Kiswahili. ● Rasna Warah in Nairobi

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kenya at 50

Literature

Kenyan writers in the world

Authors must follow the lead of music, film and comedy to find new ways of distribution and putting Africans at the centre of their imaginative world

A

SAYYID AZIM/AP/SIPA

n eighty-year-old man from Embu, who had been a teenager in the late 1930s, told how he had been arrested by British colonial authorities for not paying hut tax for the home he shared with his impoverished single mother. His story was remarkable: the British offered him a deal: he could join the King’s African Rifles or stay in prison. He chose the former. As World War II began, he found himself in Ethiopia, then Egypt. After the war, he decided to take his savings and start a church in

Harry Potter and the Deathly Hallows will not help our children build a new continent

Israel. He went home to see his relatives, who shot down his ideas, and he ended up a mild-mannered farmer in Embu. I was moved by the idea of his imagination moving across place and time when the tectonic plates of the world were shifting. We published his story a decade ago in Kwani?*, the Nairobibased literary magazine. My generation lived in different times. We were stranded, often in single-party pseudo-democraciesunderInternational Monetary Fund economics. We were

trapped at home and dreaming of the world, or else we were entering into that fabled world through new immigrant pathways. Then we were preparing for a permanent return to a home that no longer recognisably exists. Things changed rapidly. The new generation of novelists in Kenya no longer hail from the well travelled middle classes. They are children of the internet age, able to find vast archives of material online. Some of these young writers are bloggers. Many make a living as content producers: writing scripts for soap operas or doing social media for corporations. This allows them to develop their personal manuscripts. When writers of my generation were making their way, many of us felt we had to leave the country to have access to well-stocked libraries or to our literary peers: fellow writers, lovers of books and other arty people who do


kenya at 50

not fit into the larger society. Now you can interact and share ideas with your counterparts anywhere in the world through social media. So, the Kenyan in the world, the Kenyan writer in the world, is no longer a diaspora question. The world is here, all of it. The explosion of music, film and more is coming from a younger generation. The members of the new generation seek no subsidy and prefer to produce, direct and market their ideas outside of stale institutions. They have thrived. Those writers who continue to rely on the same old networks are drowning. They want to be like your average writer in the West, able to work and produce inside an ecosystem that was built long ago. In theory, that system was designed to carry and distribute many kinds of writing to differing audiences, but it can marginalise works that are not in vogue or somehow outside of the mainstream.

Young African musicians have built ous enough to seize these opportunities. Meanwhile, we should worry that our dynamic and fast-growing businesses by learning how to distribute their own countries will be inundated by cheap work and build their own networks. They foreign content to influence yet another do not moan about being marginalised. generation of English-speaking Africans. Such moaning makes us victims of often This could continue to alienate our hearts corrupted and dated universities, pubfrom our hinterland. We cannot leave the imagining of our lishing mafias and foreign-supported continent to others. To imagine this conpublishing networks. A decade after the explosion of Nollytinent, this country, our writers need to wood, it is clear to me that Kenyan and start to build small content businesses African writers have been wary of experthatlookintoourownhinterlandsandare imenting with new forms As African writers, we of delivery of literature. I cannot think of 10 genre ficcannot leave the imagining tion stories available online of our continent to others by younger African writers. But there are thousands of relevant to us. The music of a new genindependent films of varying quality, eration of Africans is cutting across conall kinds of music, opinion pieces and manipulated photos all available online, ventional forms and allowing a new genthrough DVDs or even CDs. eration to imagine themselves in forms and styles that expand our possibilities. That level of production can monetIt is such music that will develop great ise itself. Many writers, even younger ones, are moaning that publishers refuse engineers and architects, that is people to consider them. But this is at a time who will not just run to the internet to when the power to find and influence an copy and paste home designs that mean audience is at its cheapest and easiest. nothing in the context of places where we dream, eat, think and work. time to break out If the children of Africa’s middle classes Much of this stagnant mentality comes imagine making a new continent while from the way the educated elites see they buy Barbie dolls, pick daffodils and themselves in the world. Writers, myself read Harry Potter, it becomes easy to see included, fought to find a place in the why we will need Chinese contractors to build our countries. The new possibilitEnglish-speaking publishing networks that are controlled out of London and ies should be at the centre of educating the next generation. We are in a season New York. But these networks are only of the most dramatic changes, and we able to handle three or four African need tens of thousands of adventurers writers at a time. Obiageli Ezekwesili, Nigeria’s former to write our new country into being. education minister and former World Will those Africans with capital and those with real creative abilities see that Bank vice-president for Africa, chided younger African writers for shying away they can come together to grow a new from the new dynamism that has crekind of publishing? They could do so ated fast-growing industries including at a time when hundreds of millions of Africans can afford to spend a little extra film, comedy and music. She used the Port Harcourt Book Festival in October money on thingstoread.It promisestobe to make her point about how writers a great time for literature, for education. must find ways to develop the new creA great start would be to see the outative economy. pouring of hundreds of cheap, cheerful or even bad digital novels, series and stories Those industries have created jobs, – all available through new media. Then the power of advocacy and real influwe can start to imagine worlds that help ence for many. Not enough is being us see our own world with ourselves at done to take creative writing into new places. What about writing in new forms the centre. The market for writing fiction for school children? There is a market is yet to be built. ● Binyavanga Wainaina in Nairobi of hundreds of millions for those adventurous enough to invest their time, *Binyavanga Wainaina was the founding money and creativity to produce a new editor of Kwani? magazine. His memoir ecosystem of reading material. One Day I Will Write About This Place I believe the writers now finishing was published by Graywolf Press in 2011. school may be the only ones adventurs u p p l e m e n t to t h e a f r i c a r e p o r t

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13


kenya at 50

InTervIew

Raila Amolo Odinga

Leader, Orange Democratic Movement and former prime minister

Education is our key achievement The former prime minister reflects on the past 50 years of Kenya’s development and talks to The Africa Report about current affairs and the country’s future

C

ould you give a brief assessment of the current state of the nation? Eight months after the elections, it does not appear that things have settled. This is all connected to what the lead­ ership is going through. It’s caus­ ing anxiety among investors and uncertainty among the people. Coupled with this is the rising cost of living, even though inflation has been contained. Then there’s the state of in­ security. There have been killings around the country. The regular­ ity with which police officers are caught committing crimes sug­ gests that they are systematically abusing their offices. In addition to all this, there is widespread industrial unrest – teachers, nurses, doctors, lectur­ ers and others have all taken strike action at one point or another. Most recently, the teachers have threatened not to mark examin­ ations unless they receive a 300% increase in wages. We are also seeing the emer­ gence of a rogue parliament. Legislators threatened to sack the secretary of the Salaries and Remuneration Commission and

remove themselves from the Public Officer Ethics Act, all to increase their own salaries. Linked to this is the publication of bills attacking the media and civil so­ ciety. There are in all 49 amend­ ments that have been brought under the omnibus Miscellaneous Amendments Bill. If passed and the attorney general is allowed to enact them separately, a num­ ber of these proposed laws can cancel the democratic gains that have been made over the past two decades.

NOOR KHAMIS/REUTERS

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Ethnicity is a disease of the elite in competition over the nation’s resources What would you say are the key achievementsoftheKenyanstate over the past 50 years? Without hesitation, these would be education and manpower de­ velopment, especially if you com­ pare us with other countries in the region. We made education compulsory and available from independence. You will recall, for instance, the early success of the Harambee schools of the imme­ diate post­independence era, the adult education programmes and

the vocational training institutions that were set up across the coun­ try. By and large, we have done very well. And if you consider that at inde­ pendence there were very few doc­ tors, engineers, economists and so onandcomparethatsituation with the current one, it’s possible to say that we have made great strides as far as manpower development is concerned. All the same, much more needs to be done especially with regard to healthcare provision, where we have not done as well as we have in education. I think the colonial regime did more. Here, I’m think­ ing about the establishment of dispensaries that were everywhere in the country. The independence regimes should have done better.

s u p p l e m e n t to t h e a f r i c a r e p o r t

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kenya at 50

From prime minister to oppositionist 7 January 1945 Born in Maseno 1970 Earned a master’s degree in mechanical engineering 1982 Placed under house arrest by the government of President Daniel arap Moi 1992 Joined the Forum for the Restoration of Democracy 2001 Moi named Odinga as his energy minister December 2007 Lost the contested presidential election and became prime minister in a power-sharing government march 2013 Lost the presidential election to Uhuru Kenyatta

borders were closed [once the East AfricanCommunitywasdissolved] and Kenya lost the regional market without an alternative to replace it. The other pitfall is our own economic blueprint at independence, Sessional Paper No. 10, ‘African Socialism and its Application to Planning in Kenya’ – this was our bible. The key element in it was the issue of public investment in so-called high potential areas. Massive public resources were deployed to these areas. The thinking was that marginal areas would benefit from a trickle-down effect. We ended up with major distortions in terms of education, infrastructural development, agricultural development and provision of health and other basic services.

What went wrong? There was visionary leadership among the nationalists in East Africa. In my book, The Flame of Freedom, I praise Mwalimu [Julius] Nyerere. Tanganyika, he said, was preparedtodelayindependenceto wait for Kenya and Uganda so as to form the East African Federation. When we got independence, the nationalists in Kenya split and went in different directions over purely internal issues – the land question and wealth distribution especially. As well, ethnicity became a problem. Ethnicity is a disease of the elite in competition over the nation’s resources, nothing more. Federation, for instance, was a big agenda. But it was undermined and killed by the Kenyan elite. The s u p p l e m e n t to t h e a f r i c a r e p o r t

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Would you have rejected Sessional Paper No. 10 if you were in power then? I would certainly not have gone with Sessional Paper No. 10. It was opposedeventhenbyprogressives. In fact, one of the most eloquent critiques of it was by the late Tom Okello Odongo, who warned that it would result in serious long-term distortions to the economy. If we had at that time a Vision 2030, a clear strategy for economic development, we could havechanged thepaththiscountry took. It’s what the South Koreans did. The late General Park Chunghee in 1970 came up with a philosophy, Saemaul Undong, which transformed the rural areas and transferred rural populations into towns, built industries and catalysed large-scale food production. What does the future hold? I don’t want to cast aspersions on my opponents, but I think that as a grand coalition government we laid the foundations for economic take-off. We have Vision 2030, which is anchored on three pillars–economic,socialandpolitical. There are flagship projects we inaugurated. It is now up to the new leadership to follow through. The plane left the hangar and is taxiing to the runway. And then the captain was replaced. The new pilot now has the easiest of tasks. And what does the future hold for you? Will you run in 2017? I’ve not thought about it. What I am interested in doing is reorganising my own party. Our situation in parliament [where the Orange Democratic Movement/Coalition for Reforms and Democracy (CORD)isaminority]isnotunique even at the present moment. The Labour Party in the United Kingdom, for instance, finds itself in the same situation. Here, the Jubilee Coalition is not much stronger than CORD, but they co-opted 51 additional MPs from the Amani Coalition and the independents to gain an advantage. Our party will continue to highlight weakness in the government. ● Interview by Parselelo Kantai in Nairobi

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kenya at 50

opinion

Kenya, a crucible of technology and business Kenya is a frontrunner in technology and communications, but it must not slacken pace: the next decade will throw up opportunities to succeed in the global arena

K

enya has made a name for itself in the major players. In 2008, KenCall, one technology. Our M-PESA mobileof our major BPO players, won the best money transfer scheme, developed non-European call centre award at the by Safaricom in 2007, is being copied worldEuropean Call Centre Awards. It was a wide. Our East African Community was milestone for the sector. the first to harmonise phone tariffs across The main thrust of Kenya’s technology the region, allowing a Kenyan to talk to a drive is to ease communication with the Ugandan for no extra cost. In 2011, Africa’s rest of the globe’s economies. Money movefirst mobile-phone application laboratment, e-commerce and the fast movement of information about goods and services ory opened in Nairobi, a city that also will enable Kenya to become part of global hosts a research centre from global techsupply chains. nology giant IBM. Blackberry and Google are already here. Our animators have produced award-winning children’s cartoons. Inexpensive and ubiquitous telecomWe are not stopping there. In the next munications have finally obliterated all decade, Kenya’s information and commuimpediments to international competinications technology (ICT) will be radically Former permanent tion, but the dawning ‘flat world’ will not transformed. Broadband, for example, will secretary, ministry necessarily be economically stable. This of information be accessible and affordable for more than calls for the creation of a class of rugged 80% of the population. and communication and adaptable entrepreneurs. Companies in the service sector – telemarketing, acIn turn, the pressure to deal with the counting, computer programming, enginproblem of the youth bulge, the growing eering, scientific research, etc. – will continue to outsource need to empower all citizens, the nearly insatiable detheir activities, and this is Kenya’s opportunity to grasp. mand for data and the emphasis on devolving power to To succeed in the global arena, Kenya must also seek to the counties will become the major drivers of technology provide better and faster services to its citizens. Creating diffusion in Kenya. This will create the opportunity for better education, health and financial services for Kenyans the country to take off and become a major global ICT will deepen our capacity to be global competitors. To this innovation hub. end, the country must move fast to automate many of its Kenya is one of few countries in Africa that has comservices to create local efficiencies. prehensively dealt with the issue of ICT infrastructure, and The aim must be the seamless integration of the national and county governments. Next-generation governments as a result internet penetration jumped from less than 10% in 2008 to 40% in 2013. Studies have found that a 10% drop will depend on mobile platforms. These next-generation in the cost of using the internet adds 1 million more users. governments, with the next-generation citizens, will deThe International Telecommunication Union estimates mand local digital content – a massive source of employment. For example, to improve agricultural yields, a farmer that every 10% increase in the use of broadband leads to will need to consult a mobile phone. To give evidence in 1.3% growth in gross domestic product (GDP). Indeed, a court, you need telepresence. These things and more are recent study by the World Bank shows that ICT accounts what will characterise the future. For all these solutions, for 2% of the GDP growth rate in Kenya annually. It is in we must develop the content that is necessary. M-PESA this respect that there are multiple efforts to drive down has taught us that necessity is the greatest driver of change. the cost of broadband. Finally, we must strive to provide what the developers An increasing number of young people are leveraging need to create solutions. Embracing open data is a cog the internet to create new entrepreneurial opportunitthat is necessary to develop the new applications we need ies. The nascent innovation hubs in Nairobi are fuelling to improve our livelihoods. It is a collaborative effort: the development of new applications, especially on mobile people and governments will drive the future. platforms, to create efficiencies across all sectors. India, Costa Rica and Mauritius have shown how counKenya can become a global innovation centre as well tries can harness global demand for business process as a major player in the outsourcing business, but it will outsourcing (BPO). Kenya is positioning itself to join the only do so by building up its profile from local opportunwave as a way to provide employment for our youth, who ities, creating local efficiencies and developing human are educated but lack jobs. It is only a matter of time beresource capacity. This is what is needed to make the fore the country takes up the opportunity and challenges country competitive. ●

Bitange Ndemo

s u p p l e m e n t to t h e a f r i c a r e p o r t

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kenya at 50

Kenya hopes to leap ahead in the race for first oil with the discovery in the Turkana Basin

nomy would grow by 5.6% in 2013 but was vague about the drivers of growth. “This growth has been as a result of efforts to anchor economic stability through sound fiscal and monetary policies,” said Rotich. If the Kenyan government wants its economic model to work, it needs to overhaul its institutions. The court system, for example, is corrupt, with the Economist Intelligence Unit reporting that it can cost up to 50% of a contract’s value to get it enforced through the legal system. The ruling party often purges judges based upon their loyalties. Companies close to ruling politicians can escape censure and receive state funding, skewing the playing field.

ReuteRs staff/ReuteRs

the impact of oil

Business

Towards a regional commercial hub Commercial oil production, a transportation revolution and agriculture projects are on the horizon as Kenya seeks to profit from its strategic location

A

s Tanzania grappled with President Julius Nyerere’s collectivist philosophy of Ujamaa, Kenya chose a different development route. Sessional Paper No. 10 of 1965 put Kenya on the path to capitalism as many African peers embraced socialism. Kenya Vision 2030 is the country’s first meaningful national development plan since 1965, but it suffered a number of debilitating blows before it could be put into action after its 2008 launch. First, the 2007-2008 post-election clashes disrupted the economy, mostly

affecting the farming, tourism and transport sectors. Inflation spiked to 32%, first due to supply shortages and then due to the surge in global commodity prices including grain and oil. This reduced the purchasing power of ordinary Kenyans. The global financial crisis then took hold before famine struck the land. After two successive stimulus packages to salvage the economy from growth rates of 1.8-2%, stable growth has returned but takeoff seems a couple of years away. In November, treasury secretary Henry Rotich predicted the eco-

These legal and institutional reforms may be harder when oil money starts sloshing through the economy. Irish company Tullow and its partners discovered oil in the Turkana Basin in 2012 – and already Kenya is planning its first exports by 2016. With several onshore and offshore blocks under exploration, the oil and gas sector is already reshaping thinking around infrastructure development, education curricula and county development agendas. Power lines are being extended to remote areas where oil and gas activities are taking place, while Uganda, South Sudan and Kenya are discussing joint infrastructure development that includes refineries and pipelines. But there is concern that oil and mineral exports could cause the Kenyan shilling to appreciate and make manufacturing less attractive. Kenya is positioning itself as a manufacturing hub for the region. The government hopes that the country can compete on labour and energy costs. In about three to five years, inexpensive geothermal and coal-fired power plants are due to begin producing. Kenya has tremendous geothermal power potential and is just getting started. Contractors from South Korea’s Hyundai Engineering are installing turbines for a 350MW venture in the Rift Valley. Another 560MW of electricity is set to come from the same area. Further away at the Menengai crater, companies have plans for two projects, one delivering 400MW and the other 800MW. ● ● ● s u p p l e m e n t to t h e a f r i c a r e p o r t

n° 56


Financing Affordable Housing in 44 African countries for over 30 years US$500 million Shelter Afrique funds raised from African capital markets and International markets into affordable housing

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kenya at 50

Coffee and tea Horticultural Other

20

04 / 20 05 05 / 20 06 06 / 20 07 07 /0 8 20 08 / 20 09 09 / 20 10 10 / 20 11 11 / 20 12 12 /1 3 20 13 /1 4

4,500 4,000 3,500 3,000 2,500 2,000 1,500 1,000 500 0

3,000 2,500 2,000

Capital and remittances inflows ($m) Direct investment (right) Remittances Short-term (net)

1,500 1,000 500 0 04 20 /05 05 20 /06 06 20 /07 07 20 /08 08 20 /09 09 20 /10 10 20 /11 11 20 /12 12 20 /13 13 /14

-500

2,000 1,800 1,600 1,400 1,200 1,000 800 600 400 200 0

Services exports 5,000 4,500 4,000 3,500 3,000 2,500 2,000 1,500 1,000 500 0

($m)

Tourism Other services

04 / 20 05 05 / 20 06 06 / 20 07 07 / 20 08 08 / 20 09 09 / 20 10 10 / 20 11 11 / 20 12 12 / 20 13 13 /14

There are some counterbalancing dynamics. The country could become a net exporter of food if the government’s plans to put more than 400,000ha under irrigation in the next four years succeed. The programme targets maize, wheat and rice production. This should ease that begins or terminates at the port inflation by bringing down food prices, of Mombasa. The northern corridor and it should also provide non-farm is seen as one of the most important rural jobs in agro-processing. transport corridors in Africa because Regional dynamics can also bring it serves up to seven countries: Kenya, fresh vigour. For years, With Lamu Port, Kenya is Kenya failed to take advantage of its position as a hub finally taking advantage of its in the region. This is chanposition as a hub in the region ging. The government has launched some elements of the Lamu Port-South Sudan-Ethiopia Uganda, Rwanda, the Democratic Retransport project at an estimated cost of public of Congo, South Sudan, Ethiopia $25bn. The infrastructure will include a and Tanzania. railway line, an oil pipeline, roads and Already, the railway line from Mombasa to Kampala in Uganda was extena deep-water port. It will also complement the northern ded to Tororo in the west of the country corridor, the term given to any route and to Gulu in the north, just 90km shy

source: imf

Green relief

Goods exports ($m)

20

Geothermal power projects, ●●● while expensive to drill, are extremely inexpensive to operate. Electricity utility KenGen wants to lure manufacturers to the valley. If successful, this could create a sprawling industrial metropolis driven by cheap power. With coal deposits in eastern Kenya, alongside an area that is rich in limestone, the cement industry is likely to thrive. Nigerian industrialist Aliko Dangote announced in September that he will invest $400m in a cement plant in the area. France’s Lafarge and local companies are also staking out their claims there. Housing minister Soita Shitanda says the country needs an additional 210,000 housing units per year to keep up with demand. Only a quarter of those houses are now being built. Developers are setting up a series of satellite projects around the capital such as Migaa and Tatu City, but an estimated 60% of Kenya’s population of 43 million people are living in slums. The realities of the informal economy – the legions of streetside food and phone credit vendors – suggest that the government needs to address youth unemployment quickly. Patricia Ithau, managing director of L’Oréal East Africa, says: “Youth unemployment is a concern. That us why the country has set up initiatives like the Ksh6bn UWEZO Fund to support youth and women enterprise”.

20

22

of South Sudan, in October. Ordinarily, goods have to be transported more than 500km to South Sudan on bad roads. The country’s future as the land gateway to East and Central Africa will contribute to economic growth, and Kenya is also looking to replicate the same in the air. Four hours away from any part of Africa, Kenya is a convenient base for organisations with pan-African operations. Recently, the likes of General Electric, Bharti Airtel, Coca-Cola and ActionAid relocated their African headquarters to Nairobi. Coupled with the country’s position as the largest exporter of cut flowers, Nairobi could well become an aerotropolis if its airport can recover strongly from the fire that decimated passenger terminals in August 2013. There are areas where Kenya’s infrastructure is now strong, such as the telecoms sector. The arrival of several underwater fibreoptic cables has contributed to the slashing of bandwidth prices. Companies are seizing the opportunities, and there are signs of progress in business process outsourcing and the creation of mobile-phone applications (see page 16). There is a large pool of educated workers, competitive labour costs and several clusters for call centre operators. Konza Techno City is still in the planning stages, but it has drawn interest from Samsung, which has proposed to set up a laptop assembly plant there. That could depend on how the government goes about procuring laptops for Class 1 students, a programme it plans to commence next year. With Lenovo, Hewlett-Packard and Samsung scramblingtogetthecontract,theupsidecould be the setting up of more plants that could then service the regional market. But there is much work to be done on training before real takeoff is achieved in the technology sector. A Harvard Business School case study says: “Firms do not believe that [the University of Nairobi’s] programmes offer sufficient training for their entry-level positions and thus are forced to re-train new hires.” It also casts doubt about the usefulness of the Kenya Industrial Research and Development Institute and the Nairobi Technical Training Institute. Better support for education at the tertiary level and industry-specific vocational training could be a solution. ● James Mbugua in Nairobi and Nicholas Norbrook

s u p p l e m e n t to t h e a f r i c a r e p o r t

n° 56


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26

last word

A Groupe Jeune Afrique publication

By Abdi LAtif dAhir

57‑Bis, rue d’Auteuil – 75016 PAris – FrAnce tel: (33) 1 44 30 19 60 – FAx: (33) 1 44 30 19 30 www.theafricareport.com

Being and belonging

A

s the clouds shied away and the airplane neared the ground, the landscape below – dry, flat and monotonous – became clear. The plane wobbled, took a sharp descent, bumped into the runway and came to a jarring halt. With an air of nonchalance, the pilot announced: “Welcome to Wajir International Airport.” I was in Wajir to shoot a documentary about Annalena Tonelli, an Italian humanitarian worker who devoted much of her life to the Somali communities in Kenya and Somalia. In February 1984, Tonelli saved and treated ethnic Somali men who were being targeted by the Kenyan government. Following inter-clan clashes, the tragedy of what came to be known as the Wagalla Massacre saw the Kenyan government single out thousands of Somali boys and men in the name of disarmament and hold them hostage for days, naked and without food or water. After three days of interviewing Tonelli’s colleagues and beneficiaries I left Wajir with a feeling of shame and resentment. Resentment because here we were 30 years later and no one – at least at official levels – could be bothered to discuss one of the worst violations of human rights in Kenya. I was also ashamed because as a Kenyan of Somali origin I belonged to both a country and a government machine that massacred its people and still would not publicly acknowledge its own brutal acts. When we had moved to Mogadishu, my mother told us stories about the traumatic and complex struggle between people and power in Kenya. My mother’s stories filled the yawning gap between the reality I lived in Somalia, and Kenya, where I was

Cha i r m a n a nd f o und e r Béchir Ben yAhMed P ub l i s he r dAnielle Ben yAhMed publisher@theafricareport.com exeCutive Publisher JérôMe MillAn

born and which I called home. Even as the sound of bullets went off in Mogadishu and the incessant litany of strife shaped that nation, she told us about Garissa, about Mandera town in 1985 and the humiliation encountered by many Kenyan-Somalis in 1989 when the Kenyan government adopted a screening process as a mechanism to identify “illegal aliens” coming from Somalia. Enter the new millennium, and as the rest of Kenya benefited from the trove of democracy and multiparty politics – with youngsters in other provinces learning to manoeuvre around the Half a tapestry of cultures, customs and technocentury on, logies that surrounthe Somali ded them – North Eastern Province was communities, still lagging behind in who inhabit the Human Develop20% of ment Index. Four presidents, Kenya’s two constitutional territory, are referendums and six general elections still made to later, Kenya in its feel they do Jubilee anniversary not belong stands as a beacon of hope among many of the countries in Africa. A diamond in the rough, its successes sharply contrast with the institutional failures engulfing countries across the Horn of Africa. Yet, half a century after independence, the Somali communities, who inhabit 20% of Kenya’s territory, are still made to feel as though they do not belong, the ‘other’ in a public discourse that has been developed over decades.●

m a na G i nG e d i t o r nicholAs norBrook editorial@theafricareport.com a s s i s ta nt e d i t o r geMMA wAre e d i t o r i a l a s s i s ta nt ruBy edwArds r e G i o na l e d i t o r PArselelo kAntAi (east Africa) a rt & li f e e d i t o r rose skelton s ub - e d i t o r s Alison culliFord MArshAll vAn vAlen erin conroy P r o o f r e a d i nG kAthleen grAy a rt d i r e Ct o r MArc trenson desiGn vAlérie olivier christoPhe chAuvin sydonie ghAyeB P r o d uCt i o n PhiliPPe MArtin christiAn kAsongo r e s e a r Ch AnitA corthier P ho t o G r a P hy clAire vAtteBled o nl i ne JeAn‑MArie Miny Prince oFori‑AttA sales sAndrA drouet with hélène constAnt tel: (33) 1 44 30 18 07 – Fax: (33) 1 45 20 09 67 sales@theafricareport.com contAct For suBscriPtion: webscribe ltd unit 8 the old silk Mill Brook street, tring hertfordshire hP23 5eF united kingdom tel: + 44 (0) 1442 820580 Fax: + 44 (0) 1442 827912 email: subs@webscribe.co.uk 1 year subscription (10 issues): All destinations: €39 ‑ $59 ‑ £35 to order online: www.theafricareportstore.com d i f Co m internAtionAl Advertising And coMMunicAtion Agency 57‑Bis, rue d’Auteuil 75016 PAris ‑ FrAnce tel: (33) 1 44 30 19‑60 – Fax: (33) 1 44 30 18 34 advertising@theafricareport.com a d ve rt i s i nG d i r e Ct o r nAthAlie guillery with Anngie AvilA cArdenAs r e G i o na l m a na G e r s cAroline Ah king FAdouA yAqoBi

A long longer version of this piece is available theafricareport.com at th

us r e P r e s e ntat i ve AzizA AlBou a.albou@groupeja.com

Abdi Latif Dahir is a Somali journalist based in Nairobi and a fellow at United Press International. s u p p l e m e n t to t h e a f r i c a r e p o r t

e d i t o r i n Chi e f PAtrick sMith

n° 56

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NO ONE CONNECTS AFRICA TO THE WORLD LIKE WE DO

Youngest fleet 200 Daily flights More than 79 destinations in 5 continents 21,900 Star Alliance network connections Winner of Prestigious Awards www.ethiopianairlines.com


Ami ViTALE/PANOS-REA

country focus Ethiopia

Ethiopia has yet to produce private sector champions

Farms and finance The government has a mission to use a strong state to build infrastructure and develop the industrial and agricultural sectors. It argues that it could repeat the rapid growth of East Asia in the 1990s, but critics warn about intimidation of the opposition and the risks of crony capitalism By Nicholas Norbrook in Addis Ababa

the africa report

n° 60

m ay 2 014

T

he rebel army that chased the Derg military regime out of power in 1991 inherited a time bomb that could easily have spun out of control. Massively poor, plagued with chronic food shortages and with a population explosion around the corner, Ethiopia sat in a region gripped by post-Cold War insecurity. Today, the neighbourhood is notanyeasier.Thepopulation hasalmost doubled from 50 million to 92 million people. Now, Ethiopia is mentioned in the same breath as the East Asian miracle and is perhaps on the cusp of massive

51


country focus | ethiopia

Red Sea

SUDAN

52

YEMEN Gulf of Aden

DJIBOUTI

SOMALIA

Dire Dawa

ADDIS ABABA

ETHIOPIA

SOUTH SUDAN

SOMALIA 300 km

KENYA

ETHIOPIA BY NUMBERS PoPulation

91.73 million

urban PoPulation (% of total)

17

inflation

22.8%

life exPectancy

62.3 (2011)

Public sPending on education (% of GDP)

4.7 (2010)

access to electricity (% of population)

23 (2012)

total reserves (includes gold, current US$)

1.78bn (2009)

total labour force

43,591,175

fdi (current US$)

279m

imProved sanitation facilities (% of population with access)

21 (2012)

internet users (per 100 people)

1.5

GdP GROwTH (annual %) 15

Ethiopia

10 5

Sub-Saharan Africa (developing only)

0 2004 05

06

07

08

09

10

11

12

13

ElEcTRIfIEd TOwNS

Source: World Bank

2010/11

5,866 5,163

2009/10

3,367

2008/09

3,367

2007/08

1,620

2006/07 0

2,000

4,000

6,000

8,000

state-driven take off. The unassuming Prime Minister Hailemariam Desalegn tells The Africa Report: “Everyone is now talking about the Ethiopian renaissance” (see page 58 for full interview). Even institutions traditionally at odds with state-led models recognise the progress. In an October 2013 report, the International Monetary Fund praised Ethiopia’s “strong growth performance and impressive progress in decreasing poverty and inequality”. Motorists in both the capital and further afield testify to and occasionally swear at the infrastructure outlay. Addis is one of the few capitals in Africa constructing cheap urban mass transit systems. The $4.8bn self-financed 6,000MW Grand Ethiopian Renaissance Dam is one-third complete and should start generating 700MW by September 2015. an old ModEl

Maternal mortality rates have fallen sharply, and the government is rolling out a pilot medical insurance scheme. Primary school enrolment has climbed to 85%. Investors from the East and West arrive daily at Bole International Airport, with Unilever, Ikea, Tesco and H&M just the latest. New industrial parks are being completed, with factories slowly swinging into action. Ethiopia does not claim to have come up with the model it is following. Several East Asian countries have run developmental states over the past 30 to 40 years: boost agriculture, protect and promote nascent manufacturing sectors, flaunt cheap labour, use the banks to steer progress. It requires tight discipline in the leadership. The ruling Ethiopian People’s Revolutionary Democratic Front (EPRDF) is closely modelled on the Communist Party of China, right down to ‘criticism and self-criticism’ sessions,whereseniorcadrescanbedressed down by hundreds of colleagues. Henok Teferra, vice-president of Ethiopian Airlines, says Ethiopia needs a plan tailored to local realities, but also the capacity to execute plans, including the government’s 2010-2015 Growth and Transformation Plan (GTP): “Action without vision is a nightmare, and vision without action is a daydream, isn’t that what they say?” Will Ethiopia be successful in its developmental state? And can it avoid the crony-capitalism pitfalls of other countries that have taken the same path? Within Ethiopia there is a passionate

debate about it, and not just in the ranks of the EPRDF, whose former prime minister, Meles Zenawi, articulated the vision of an Ethiopian developmental state most clearly. Scholars like Merkeb Negash at Jimma University argue, for example, that while Ethiopia may not have a sophisticated technocratic elite and strong autonomous institutions as do Japan and China, it does not necessarily follow that the state will be captured by rent-seeking business elites. Just as the South Korean government relied on – but never fully trusted – advisers from Japan and the United States, Addis Ababa is importing expertise. There is a strong level of cooperation between ministries, too. One of the international advisers, requesting anonymity, says he was impressed that the customs department allowed the ministry of industry the latitude to draft legislation and procedures for bonded warehousing for the special industrial parks. “It was incredible. Customs people worldwide normally protect their fiefdoms,” he says. This sort of facilitation is also noticeable at the Agricultural Transformation Agency, modelled on the development agencies of South Korea and Malaysia (see page 64). This may appear rosy, but the pitfalls are legion. Bellwethers include the health of state-linked conglomerates, such as the Endowment Fund for Rehabilitation of Tigray – linked to the political elite of

The selffinanced Grand Ethiopian Renaissance Dam is a third completed the africa report

n° 60

m ay 2 014


ethiopia | country focus

Early days of thE statE’s dEvElopmEnt While ethiopia appears confident about the initial stages of the developmental state, it has not yet mastered the creation of private sector champions. Japan and South Korea both created a market mechanism within their ostensibly strong states. Companies had to prove they were hitting their export targets to access foreign exchange and subsidised loans. in ethiopia, it is early days. Guang Chen of the

World Bank admits that regular critiques of certain areas – such as bottlenecks caused by government companies controlling logistics – were actually par for the course in China in the 1980s. and former World Bank chief economist Justin Yifu lin argues that Chinese infrastructure may have been worse than ethiopia’s now. “But the speed at which China was able to attract FDi [foreign direct investment] was much faster than ethiopia,”

the Tigrayan ethnic group, involved in logistics and manufacturing – and the Metals and Engineering Corporation. The latter is run by the top brass of the military and is set to build sections of the country’s dams and 10 sugar factories. The sacking of the top three officials in thecustomsdepartmentforcorruptionin May 2013 suggests the current leadership is aware of the importance of oversight. It is unclear, however, how successfully Ethiopiacansimultaneouslypickwinners and prune bad companies, a hallmark of successfuldevelopmentalstates.Building developmental states requires sacrifice and the ability to forge a national project

says Guang. “of course, China has a special advantage in that the initial pot of FDi was from hong Kong and taiwan. ethiopia could explore getting more ethiopian diaspora to invest.” But the ethiopian government is serious about industrial upgrading and technology transfer, critical parts of the developmental state story. Germany’s Gesellschaft für Internationale Zusammenarbeit is

that a majority accepts, something that Ethiopia’s federal character both helps and hinders (see page 54). Many people have lost their land for dams and big agribusiness projects. The villagisation project that agglomerates nomadic peoples has also been unpopular. The ruling party runs a closed-off political system, as seen in the 2005 elections. There was a large turnout for the opposition, and the government responded with a wave of intimidation and arrests. In its 2013 annual report, Human Rights Watch says “freedom of expression, assembly and association have been increasingly restricted in Ethiopia”.

building 13 universities, and ethiopian engineers and technicians are working alongside them and will build the next 11. “We are creating our own research and development unit in our corporate university and are looking towards manufacturing network equipment, even if that means reverse engineering handsets,” says andualem admassie, acting chief executive of ethio telecom. ● N. N.

One criterion for success of a developmental state is a sustained rise in industry’s share of gross domestic product. In Ethiopia’s case, the sector’s contribution has remained steady at around 12%. Boosters say Ethiopia is only in the very early stages of development. There are a number of projects that will come together in two to three years: a railway to the port of Djibouti, a large motorway that runs alongside the railroad, the dam to generate cheap electricity and a light rail line in Addis Ababa. “It’s a jigsaw puzzle that is only just starting to come together,” says Zemedeneh Negatu, a partner at Ernst & Young Ethiopia.

Tiksa Negeri / reuTers

fInAncIAL rEPrEssIon

the africa report

n° 60

m ay 2 014

But the tension between ambition and the funding reality is ever present. Ethiopia’s debt levels are still low. But when vendor financing is factored into deals, such as the loans for the telecoms upgrade being carried out by Chinese companies Huawei and ZTE, the picture is less clear. “These are only projected liabilities. The huge [$2.4bn] loan from China EximBank has not actually yet been approved because the Chinese government is also concerned about Ethiopia’s ability to repay,” says Guang Chen, the World Bank country director for Ethiopia. “To support this developmental state, they are going to have to find more resources domestically,” he argues. Just like China, South Korea and Japan before it, finance is the steering wheel for Ethiopia’s developmental state. Ethiopia engages in what Shane Shepherd of Research Affiliates calls financial repres-

53


country focus | ethiopia Central government marginalises minorities living in the periphery

sion. It is “a set of policies that keep real interest rates low or negative and regulate a captive audience into investing in government debt, resulting in cheap funding,” he says. Hence the Ethiopian government’s policy that caps interest rates and another that requires private sector banks to spend 27% of their loans on government bonds that go towards building the Grand Ethiopian Renaissance Dam. Alongside getting cheap funding for infrastructure, the government argues that the private sector leaves financing gaps and is unable or unwilling to invest in manufacturing. “Look at Ethiopian private banks – all their loans go to services and trade,” Premier Hailemariam says. “They are not giving long-term loans to industry and infrastructure. So you have to have policy banks which can give low interest rates and support industrial production.” young spenders

Anecdotally, it might be working. Addis Alemayehu, a managing partner at advertising agency 251 Communications, is starting up a company to take advantage of two things: incentives for companies in the manufacturing sector and the huge young population that is starting to have some discretionary spending power. “There are more university students here than the population of Djibouti. Imagine all these people buying soap for the first time,” says Addis. But he says finance is still a problem: “You could have a purchase order from God himself, you still wouldn’t get the finance.” Privately, officials accept they need to do more to create national champions that will become globally competitive. At the 2 April presentation of the GTP at the United Nations Economic Commission for Africa office in Addis, the International Monetary Fund, World Bank and various diplomats stood up for private sector interests, with no representatives from either the private sector or the Ethiopian Chamber of Commerce in attendance. This told its own story. Others say the emergence of private sector companies will take place quickly. Helen Hai, who launched the Chinese shoe company Huajian’s factory in 2012, recalls: “When the first South Korean textile factories opened in Bangladesh, Daewoo trained up 200 workers. After two to three years, half of those had left to set up small manufacturing facilities.” ●

PATRICK WALLET/LE FIgARo MAgAzInE

54

The centre and the regions Ethiopia has a centralised and federal state, but regions are set to assert themselves more

T

he 1995 constitution enshrines a federal state in which “all sovereign power resides in the Nations, Nationalities and Peoples”. It represented a reaction to the strong centralisation of power Ethiopia witnessed during the last century – first under Emperor Haile Selassie and then the communist Derg regime – which failed to accommodate the religious, cultural and linguistic diversity of the country’s more than 80 ethnic groups. The government’s attempt to use the university system as a crucible in which to forge a strong national identity appears to have been unsuccessful at Adama University in Oromia. One student, born and raised in Addis Ababa just 90km away laments that he has no Oromian friends. “I can’t speak Oromiffa, and they refuse to speak Amharic [the official national language],” he says, adding that they see it as the language of their political oppressors. deVoLuTIon oF poWer

In theory, the constitution allows the nine regional states and two autonomous city authorities – Addis Ababa and Dire Dawa – to execute economic, social and development policies. Nonetheless, the devolution of power has been patchy at best. Some analysts say the centralising tendencies of the developmental state – implemented in earnestby Meles Zenawi, the lateprime minister,from2005–havestrengthened the role of central government vis-à-vis

the regions and marginalised minorities living in the periphery. In a lecture at Addis Ababa University last September, professor Christopher Clapham pointed out that the state is giving economic development priority over the rights of ethnic groups, especially in the area of freedom of movement. The hydroelectric schemes in Omo Valley and the agricultural developments in Gambela have led to claims that people are being forcibly evicted from their ancestral lands. Guang Chen, World Bank country director for Ethiopia, says: “Most of the [Ethiopian] regions still depend heavily on federal government fiscal transfers because they have a very limited base to generate their own revenues.” However, Khalid Bomba, the chief executive of the Agricultural Transformation Agency, says he has seen decentralisation in his work with smallholder farmers. “Solutions can be developed in Addis but ultimately the regions themselves have to buy into those solutions to implement them in their own individual regions,” he insists. According to some commentators, the changing of the prime ministerial guard may herald a rebalancing of power in favour of the regions. The resignation of Muktar Kedir, the deputy prime minister, and his subsequent appointment as president of Oromia has been cited as evidence that regional power is increasing. ● Elissa Jobson in Addis Ababa

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Quality and Community are the touchstones of the METAD approach

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ADVERTORIAL

thiopia is at a pivotal point in her development. New roads, new railways and new industries are propelling the country towards middle-income status. But at the heart of the government’s transformation agenda are people: the farming families that make up the majority of the population. METAD Agricultural Development PLC is at the crossroads of these two dynamics. Bringing both new techniques and a strong community approach are the key to their success. “We are very proud to have created the first coffee laboratory in Africa to be certified by the Speciality Coffee Association of America (SCAA)”,says Aman Adinew, Chief Executive of

METAD.“But we also want to keep close to our farmers, help them build up the capacity to support themselves”. The new laboratory will help achieve better prices for farmers, and bring more foreign investment into the country. And, more broadly

We are very proud to have created the first coffee laboratory in Africa to be certified by the Speciality Coffee Association of America (SCAA)

it will help build buyer trust on the quality of Ethiopian coffee, according to Skip Finley, Director on the SCAA board: “When you walk into METAD’s lab you feel like you are in the known coffee quality laboratories in the U.S. or Korea”. Born in Ethiopia and schooled in the US, Adinew worked in a variety of bluechip multinationals before choosing to return in 2009. Seconded to the Ethiopia Commodity Exchange from the UNDP, he became the founding Chief Operating Officer of the Exchange. “It was a fantastic opportunity to get to know all the stakeholders in the sector,from farm, to traders, regional associations, exporters, service providers and so on”, says Adinew.


The METAD executive team has three generations of experience in growing and trading coffee, including a founding Executive and COO of the Ethiopia Commodity Exchange (ECX). And the company also has an outgrower program with 1000 farmers, who are being trained in pre-harvest and post-harvest techniques. They have on average a hectare, and they are been trained on how to plant, maintain and harvest specialty coffee. “We then train them in a very clean way of processing so that they can increase the value of their beans”, says

SCAA Board Director Skip Congratulating A. Adinew on the Successful Accreditation of Metad-Kabu Laboratory as the First in Africa

tors into METAD,“and we have had interest from Europe and Russia, too”, says Adinew, who is using the initial investment proceeds to build a coffee processing facility near Yirgacheffe, in the Oromia region. It all started with our courageous Grandmother, Muluemebet Emiru, who became the first African woman pilot in 1934. After World War II,and upon the return of Emperor HaileSelassie I from exile, she was awarded land in the Harrar region, which had wild coffee trees, where with the help of our Grandfather, they transformed it into a private coffee Estate. Thus began our family’s connection to the land and the beginning of our coffee cultivation traditions. METAD has their owns farms in Oromia and the Southern Nations and Nationalities Regional States,and also source varieties such as Yirgacheffe™, Sidamo™, Harrar™ and Jimma.

Adinew.“And we also help them increase their yield. Currently they are getting 600kg of green coffee beans per hectare, and the goal is to bring that up to 1200-1500kg per hectare”. METAD then buys these beans at 15-20% premium to the market. At present the growers they are given the inputs for free. “But if we make more than we expected, we actually give that back to them as a bonus at the end of the year, to try to create some incentives to improve quality”, explains Adinew. As the project evolves, METAD are working with local banks to set up a microfinance initiative, to allow farmers to be independent, and shake off loan sharks that plague the sector. Another key target for METAD is getting certification, “be it organic certification, or Rain Forest Alliance (RFA) or Fair Trade, any time we can get farmers certified they will get

more money for the coffee”. And it’s not just cash that the company is bringing to the farming families.Though METAD operations starting just 6 months ago,the engagement with the community has started straight away. “We have adopted an elementary school with 308 students, we are helping them with their desks, benches, blackboards,textbooks, The aim is not exercise books,building just to make school buildings”, says Adinew. “We are also money from the topping up the teachco-operative, ers’salaries so that they but to give back won’t leave and will get better qualified. It’s a rural area, and its often very hard to get teachers to stay. So whatever the government pays, we match 50%.We want to help the kids grow, and turn them into productive citizens.The aim is not just to make money from the co-operative, but to give back”. Because of this more community-centric model, both USAID and the government are working closely with METAD, to use the company as both benchmark for what investment can do, and also as a model for others to copy. “We want to show other farmers, and even other investors from overseas what can be done”, says Adinew. “And the regional governments are so happy with the project that they want to give us the whole woreda (district) to manage, to show the rest of Oromia what is possible”. Farming has changed fundamentally in Ethiopia over the last few years.Whether it be the use of mobile phones to know market prices, or the creation of roads that help get produce to markets, or warehouses to store produce that are closer to the farmer, much has been achieved. “And the METAD next step is teaching farmers new techniques, helping them understand AGRICULTURAL the soil type, intercropping, all these DEVELOPMENT things are going to help them boost plc yield”, says Adinew. “I see massive potential.Don’t get me wrong,there is BAWA Center, huge work to be done. But if you look 3rd Floor (Gerji) at Ethiopia 20 years back compared P.O BOX 4695 Addis Ababa, Ethiopia to now, it’s night and day. And people Phone: +251-116-292534 like us came back home to make a dif- Fax: +251-116-292539 ference and to be part of the change.” www.metadplc.com

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This experience lies behind the innovative model METAD operates across the value chain, from farm to processing, right through to retail outlets. METAD’s consumer brand, Kabu Coffee plc, buys green coffee, processes and roasts in-house for retail and cafe consumption in Ethiopia, and soon to be launched in North America and the Russian Federation markets. And international investors have not taken long to seize the opportunity. USAID helped facilitate an initial investment by the US-based the East Coast Angel Impact inves-


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country focus | ethiopia

interview

Hailemariam Desalegn

Prime Minister, Ethiopia

This is a generation that has to sacrifice Prime Minister Hailemariam on the government’s pact with the youth to provide jobs, how to provide representation for opposition supporters, and South Sudan’s missed opportunities TAR : What is driving industrialisation in Ethiopia? HAilEmARiAm DEsAlEgn: We are using our comparative advantage. We have a young population. Land is abundant. We have cheap electricity, and we support priority industrial sectors in terms of financing, at least partially, from our policy banks. Developmental states in Asia were very active in managing corporations. is there that administrative capacity here? In Japan, you had one ministry of trade and industry which was very strong. But if you look at South Korea, there are a number of institutes that support this process. We have chosen the Korean model, as we don’t have the capacity to run things through one ministry. So we have institutes to push skills development and technology transfer, to support these priority sectors in textiles, leather, food and beverages, chemical industries and metals. We are trying to have teams that are assigned to just a few industries that can follow them carefully from the beginning to the maturation of those industries. Since we don’t have much capacity at this time, we opted for bringing professionals from outside. The Korean Develop-

ment Institute is helping us. India is supporting us in textiles and leather. We have institutional links with those countries who have been successful.

Funding the state infrastructure drive is tough. What are your options? Firstly, we are mobilising domestic finance. If you take China and the other recent developmental states, their main source of finance was domestic savings. We have an encouraging trend in Ethiopia. We thought that our savings would increase from 6% of GDP [gross domestic product] to 15% by the end of the Growth and Transformation Plan [GTP]. But, remarkably, it has already passed that figure, reaching 17.7% today, before three years of the GTP had elapsed. So we have revised our plan to make it 20%

in south Korea, a generation sacrificed itself for industrialisation. Are Ethiopians ready for this? You don’t need to take all Ethiopians along with you, but you need a major portion, especially the young. Look at our education system. Our higher education enrolment is 70% in engineering and science, and 30% in social science. So 70% are going for industrialisation. Similarly, nearly all those who can’t get “The most important thing into higher education is changing the mindset. go to technical and vocational training. We want everybody to There is an indoctrinthink about productivity” ation process about where Ethiopia has to go and how this generation has by the end of the GTP [in 2015]. to sacrifice to bring productivity This is the time to squeeze our up. The most important thing is people, to have more saving and changing the mindset. We want to less spending. bring everybody into the moveWe are constructing the $4.6bn Grand Renaissance Dam from ment where they think about these savings. People wanted to productivity and quality, which is the basis of being competitive. contribute for free, but we said: And we will go further in this, to ‘You have to build the culture of high schools later on, to bring the saving, and you have to buy bonds.’ young people into this mindset But that is not enough. We still have a shortfall in terms of finas our national agenda.

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ethiopia | country focus

using that capability and discipline – in the history of mechanical engineering, much has come from the military. That doesn’t mean that METEC will be the only institution that does this, but it will be a leader. Then the private sector has to link with it. METEC is working now with big privatesector engineering companies and also smaller ones, which helps spearhead the process.

Bruno Levy For The AFricA reporT

Looking forward to the 2015 elections, are you expecting the opposition will gain more seats in parliament? As far as the elections are concerned, we want to focus on the process. We have to make the process democratic, free, fair and credible in the eyes of our people. Then the result is up to the people. I cannot predict that this many seats are going to be given to the opposition or the Ethiopian People’s Revolutionary Democratic Front (EPRDF).

ancing, so we are also attracting investment from Brazil, India, China, Turkey, Japan and Korea. We are getting their savings invested here at preferential rates. We also want to go for commercial loans. We have to get a credit rating, so we are working on that, which is going smoothly. Do you think soldiers are the best people to spearhead the africa report

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industrialisation, thinking of the Metals and Engineering Corporation (METEC) in particular? In many countries, military organisations that have very good laboratories and workshops only use them for military use, not for development purposes. So we wanted to use the capacity we have in the military sectors for civil development. METEC is

Do you feel that the process is democratic? Our institutional process and our laws and regulations are perfect. It is not the law that hinders but the implementation of these laws. Therefore, we have put in place the code of conduct of all parties. Strictly abiding by this code of conduct will help the process to be more democratic, free and fair and also credible. If there is a similar outcome to 2010, where only one opposition candidate won a seat in parliament, do you think that may affect the credibility of the government? I don’t think so because if the decision is taken by the people, all of us have to agree to it. We have to accept it whether it is sometimes irritating to some of us. Would it be useful to have an opposition in parliament that could give constructive criticism? The code of conduct is designed in a way that it helps the shortcomings of the parliamentary election. In Addis, for

prime minister’s path 19 July 1965 Born in Boloso Sore 1988 Graduated with a degree in civil engineering from Addis Ababa University 2001 Became president of the Southern Nations, Nationalities and People’s Region 2010 Named deputy prime minister and minister of foreign affairs 2012 Became prime minister

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country focus | ethiopia

example, the EPRDF has dominantly won. But out of the 3 million people in Addis, something like 400,000 voted for the opposition. The 400,000 have a voice that has to be heard, but how can you make it? In that sense, we have an inter-party dialogue mechanism. Those parties who competed in the election can come together before the parliament discusses bills or policy issues. We always wish to have a strong opposition so that it will become a mirror to us. We need somebody from outside criticising us because that helps us to improve, but we are not lucky to have such an opposition. They don’t have their own clear policy. They do not properly evaluate the basis of this government and what it has achieved so far, against all the odds in the region. They seek some kind of violent mechanisms to sweep the EPRDF away so that they will come to power. This is wishful thinking. Are you concerned about the regionalisation of the conflict in South Sudan? In the Intergovernmental Authority on Development (IGAD) region, we have already agreed that we are committed to avoid any regionalisation of the conflict. There will be a deterrent and protection force that is going to be deployed to South Sudan from the region. Sudan and Uganda also agreed not to be part of this force from IGAD. That avoids any kind of regional conflict. The only thing is we have to expedite the implementation of this deterrence and protection force. What is Ethiopia’s position on the Ugandan intervention? Has it complicated the situation? It has not complicated it. It has been helpful because had it not been for Ugandan intervention, you would not see a government standing now. It would have collapsed very quickly. There are views from both Sudan and Uganda, differing views that might lead to some problems

ChArles lOMODONG/Afp

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on the ground, so we want to see a phased withdrawal of Uganda and the non-involvement of Sudan in the armed composition of IGAD.

Ethiopia is wary of the South Sudan crisis turning into a regional war

How are the Ethiopian-led African Union Mission in Somalia (AMISOM) offensives going? I think the game has changed since AMISOM troops and Ethiopia joined. In cooperation with other existing AMISOM troops, we have liberated a number of towns and villages from the yoke of Al-Shabaab. That is only a military achievement. We need to have humanitarian support to those liberated areas quickly. This is our demand. There is some movement, but it is not enough.

There was much euphoria when South Sudan became independent. Are you disappointed with how things have turned out? We were expecting this to happen. We are not disappointed. We have been suggesting to them that this might come because they have forgotten their direction. What their policy is towards a new state has not been properly spelled out. Who is going to lead the process has not been Are you concerned that beproperly [put] in place and incaus e of the visibility of stitution building has been ignored. “We want a phased withdrawal We have deployed of Uganda and the non-involvement 100 technicians and of Sudan in the IGAD force” bureaucrats to South S u d a n . We h av e Ethiopian troops in this ofsigned a number of agreements fensive there will be reprisals to support them in institution at home? building. We have agreed and We were always a target for signed a number of agreements Al-Shabaab. The most importon common infrastructure development. We pushed them, but ant thing is that our people have nothing has happened. We have to be vigilant. Our security seclearned our lesson from our mistor also has to be active in this takes. We wanted to share our exregard. This is our day-to-day perience with them. After rebels business. ● become a government, a proper Interview by Elissa Jobson and transition has to take place. Nicholas Norbrook in Addis Ababa the africa report

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country focus | ethiopia

PEoPlE to Watch

The post-Meles universe takes shape

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1

2

All rightS rESErvEd

hepassingofPrimeMinisterMeles ZenawiinAugust 2012hasshaken up the business and political elite. Prime Minister Hailemariam Desalegn does not favour the top-down and snap decision-making practised by his predecessor, preferring instead to consult more widely. While this leads to a slower governmental machine, it protects the administration from the odd rash decision. This more collegiate style of governance has opened up the space for a cadre of influential top advisers. Old political hands Bereket Simon, who before Meles’s death had been slated to leave office in the next generational purge, and Abay Tsehaye are key members of a brain trust intended to replace the phenomenal intellect of the former Ethiopian People’s Revolutionary Democratic Front (EPRDF) leader. Tedros Adhanom Ghebreyesus (1) has eased into his new role as foreign minister. He had spearheaded the country’s remarkable health reforms and now has room to make a name for himself on the global stage. Unlike Meles, Hailemariam does not seem to crave the international spotlight. Tedros’s popular Twitter feed – he has nearly 24,700 followers – and his strong statements on Africa and the International Criminal Court while chairman of the African Union’s executive council, have given him increased visibility. Hailemariam’sappointment,soonafter taking office, of two additional deputy prime ministers has given further clout to Debretsion Gebremichael (2), deputy chairman of the Tigrayan People’s Liberation Front (TPLF), one of the constituent parties of the EPRDF. Aside from his dual portfolio as deputy prime minister for the finance and economic cluster and minister of communication and information technology – the latter of which sees him in control of the Ethiopian Telecommunications Corporation (ETC) – he

EvAn SchnEidEr/un

Prime Minister Hailemariam is developing a style of consensual politics, but some politicans and businessmen are having difficulty adjusting

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is also chairman of two newly created companies, Ethiopian Electric Power and Ethiopian Electric Services. Arguably, this makes him one of the most influential men in government. Azeb Mesfin, Meles’s once powerful widow, has suffered mixed fortunes since his death. Despite her failure to win the election for mayor of Addis Ababa, losing to former transport minister Diriba Kuma in July 2013, she remains a member of the political bureau of the TPLF, the EPRDF’s executive committee and the Endowment Fund For The Rehabilitation of Tigray. public and private

The business world was rocked by the arrest in May 2013 of more than 30 suspects – including Melaku Fenta, director general of the Ethiopian Revenues and Customs Authority – on charges including tax evasion and receiving bribes. But Ethiopia remains a land of opportunity, if one goes by the number of private equity companiespassingthroughAddisAbaba. The big state businesses like the Sugar Corporation and ETC remain unchallenged by private sector rivals. Brigadier GeneralKinfeDagnewcontinuestolook untouchable as he sits atop the Metals and Engineering Corporation (METEC). A state-owned industrial company consisting of close to 70 engineering enterprises and military hardware manufacturing entities, METEC is the only local contractor involved in the flagship $4.3bn Grand Renaissance Dam project. Another survivor of the Meles era, managing director of Ernst & Young Ethiopia Zemedeneh Negatu, is making a push into technology companies in his private capacity. In a well timed move into mobile banking and IT training, Zemedeneh is poised to reap dividends. Although he was powerful under Meles, MohammedHusseinAlAmoudi (3)’s star is no longer shining so brightly. Workon theSaudiArabian andEthiopian businessman’s enormous five-star hotel, situated on the compound of the African Union’s headquarters, stalled for several months last year. His company Saudi Star’s rice farm is not yielding results, andPakistanicompanyMCGConsulting, which had been working on the project, pulled out at the end of last year. ● Elissa Jobson in Addis Ababa

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country focus | EThiopiA

Some agricultural practices have not changed since Biblical times MichAel PolizA/NAtioNAl GeoGrAPhic/Getty

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agriculture

Gathering data, offering choice Spearheading the government’s interventions in the farming sector, the Agricultural Transformation Agency has already vastly improved yields for wheat and teff

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very successful developmental state in Asia fixed its agricultural sector before it advanced to light manufacturing, and Ethiopia is following the same path. Modelling itself on Malaysia’s Economic Planning Unit, South Korea’s Economic Planning Board and Taiwan’s Joint Commission on Rural Reconstruction, Ethiopia’s Agricultural Transformation Agency (ATA) is the result of a conversation between former premierMelesZenawiandphilanthropist Melinda Gates. It came into existence in December 2010. During the first few months of 2014, researchers fanned out across Oromia, Amhara, Tigray and the south to talk to farmers about the impact of the Wheat Productivity Initiative, an attempt by the Ethiopian government to provide improved seed, fertiliser and techniques to farmers. Though the full report will not be released for several months, Gashaw Abate from the evaluation team says it has been a resounding success for the ATA.Itfollowssimilarresultstheagency has had with the main staple crop, teff. “What we took from these Asian countries is their results orientation and their focus on data and objectivity,” says Khalid Bomba, the chief

executive of the ATA. “We’ve also taken their reporting lines – direct to the head of state – and senior policy-maker buy in.” The ATA has also taken inspiration from the Asian staffing model, using a professional staff rather than a political one, while at the same time working intensively with the ministry of agriculture, “so that they see us as a valued partner rather than a competitor”, says Khalid. The ATA will be folded into other administrations once it has done its job. Cultivated almost exclusively in Ethiopia, teff has not had as much attention from the global research community as rice and wheat. Traditionally, farmers produce teff yields of around 1.2tn/ha. While the ATA is looking at long-term biotechnology solutions, there are a number of low-tech ways to boost yields. “Simple things can have a big 2011/12 2010/11 2009/10 2008/09 17

Flowers

CAGR* 20%

Fruit and vegetables

112 266 131 224

202 170 *compound annual growth rate

40

2007/08 19

Export value ($m) Export revenues are soaring as Ethiopia modernises its agriculture sector

32

266

213

224 184

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impact,” says Khalid, pointing to work done in tandem with the Debre Zeit Research Center, such as row planting, reducing seed crowding and introducing improved varieties. “Before, the seeds were scattered on the ground just like you read in the Bible. In June 2011, we trained 140,000 farmers in the new techniques and saw yield increases of 30-80%. Today some of our best farmers are producing 5tn/ha.” Last year, the ATA trained two million farmers, and in 2014 that will rise to 3.5 million. soil mapping

The ATA is also working on mapping soil types in a project called EthioSIS. “Ethiopia has been using the same fertiliser for 35 years, just DAP [diammonium phosphate] and urea,” explains Khalid, “and the soils are no longer responsive to it.” By the end of the year, the ATA will have a map of the entire country that illustrates nutrient deficiencies at the micro-district level. This will allow it to develop appropriate fertiliser blends. The ATA is also linking farmers to markets. It brokered a deal between the WorldFoodProgrammeandcooperatives in Oromia and Amhara for a 30,000tn maize purchase in 2012. And it has also helped connect Mama Fresh Injera, an Addis Ababa bakery, to the Erer Farmers Cooperative Union. “It’s a risk for farmers to shift to a more commercial mindset. Part of our job is to offer different kinds of choices to farmers, based on the agro-ecology of the area, by finding out what the market wants and ultimately letting farmers make rational choices, like people all across the world do,” concludes Khalid. ● Nicholas Norbrook in Addis Ababa

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country focus | ethiopia

The Danakil Depression holds the world’s largest potash deposit – production should start by 2015

Stocktrek ImAgeS/rIchArd roScoe/getty

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Mining

Green gold of Danakil As companies rush to secure their claim on Ethiopia’s mineral riches, the government is keen to show it supports international transparency measures

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thiopia is in the midst of a gold, oil, mineral and gemstone rush. More than 250 companies are currently scouring the territory hoping to strike it rich. “Ethiopia is a very large country. There is a diversity of geology,” says Tolesa Shagi, the minister of mines. “There is huge potential for different minerals – that is what we understood after we invited foreign mining companies.” Just over half of the country has been surveyed so far and it already appears that there are significant reserves of gold, oil and potash as well as valuable deposits of coal, tantalum, copper, platinum, opals, rubies and other gemstones. The mining sector currently accounts for around 1% of the Ethiopian economy, but the government expects that in 10 years’ time it will represent 10% of GDP. Potash is likely to be one of the first commodities to contribute to this growth. In the remote and arid Danakil Depression, in northeast Ethiopia, lies the world’s largest potash deposit. Three companies – Allana Potash Corporation, Yara International and Ethiopian Potash Corporation – are exploring the reserves. Allana expects to start produc-

tion by the end of 2015 and Yara by the end of 2017, pending the results of its feasibility study. Sanjay Rathore, executive director of Yara’s Ethiopian subsidiary Yara Dallo, says the company expects to extract 600,000tn of high-grade sulphate of potash every year. “This means our project will produce about 10% of the current world market at start-up,” he says, adding that the Danakil deposit is special because all the required chemical components are naturally present in the salt mixture. tax incentives

Commercial mining operations like those planned by Yara are the exception in Ethiopia, where 90% of all mining activity is artisanal and small-scale. There are only two large-scale mines: a state-owned tantalum mine in Kenticha, Oromia (production there has stopped while the government searches for an investment partner) and Lega Dembi gold mine in Adola operated by Midroc, a company owned by Ethio-Saudi billionaire Mohammed Al Amoudi. The government is offering a variety of incentives to attract investors, including tax holidays, import-duty exemptions,

lower royalty levels and guarantees on selling rights. But it is wary of the dangers associated with the exploitation of mineral wealth. “We started our exploration in mining at a good time because we are not learning the hard way. We have seen what happened in different underdeveloped countries,” he says. “That is why we are trying our best to become a member of EITI [Extractive Industries Transparency Initiative]. We have to make a transparent system.” In March, three years after its first application, Ethiopia was accepted as an EITI candidate despite the reservations of some board members and vociferous opposition from international organisations like Human Rights Watch. There are concerns that the legal and political climate for civil society organisations will prevent them from being fully involved in industry oversight – a key requirement of the EITI process. But Ethiopia has been working to build the capacity of local organisations, says Kirsten Hund, senior mining specialist at the World Bank, which has been assisting Ethiopia with the preparation of its EITI application. She says membership is important for the sustainability of the sector: “EITI is not going to solve all the problems in the extractives industry but I think it is a very good way forward, especially because the Ethiopians are starting the process at the very beginning of the take-off of their minerals industry. They are working on a legal mechanism to enforce EITI implementation.” ● Elissa Jobson in Addis Ababa

137 companies are operating in the sector: 35

local companies

36

66

foreign firms

joint venture partnerships

The total number of direct employees in these companies is estimated to be around 6,000 the africa report

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country focus | ethiopia

manufacturing

tax administration and customs and trade regulations as major constraints on their businesses. An underdeveloped financial sector and a dysfunctional foreign exchange market are other impediments, says Jan Mikkelsen, the International Monetary Fund representative in Ethiopia.

If the shoe fits, build zones Textile companies and retailers are setting up operations in and around Addis Ababa to take advantage of the low cost of labour

LEATHER, TEXTILE ZONES

facturing sector: enormous potential that is as yet unfulfilled. United Kingdom-based leather goods manufacturer Pittards is steadily expanding production in Ethiopia, as is Turkish-owned Ayka Textile. Retailers H&M and Tesco are sponsoring training for textile workers with the aim of sourcing garments from the country. Despite this, foreign direct investment (FDI) remains low, reaching $1bn in the 2012/2013 fiscal year. One Western economist blames the modestlevelofFDIon“theheavyhandof the Ethiopian government in the private sector”. A 2012 World Bank study on Chinese FDI in Ethiopia found that 54% and 84% of investors, respectively, cited

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Bole Lemi is one of two industrial zones (IZs) being estabEthiopia slipped 37 places lished in Addis Ababa – the – from 104 in 2007 to 141 second is Kilinto, situated in in 2012 - in the World the capital’s southern suburbs – Bank Trade Logistics Index andthegovernmenthasplansto construct similar complexes in othercities,startingwithDireDawa,Kombolcha and Awassa. These IZs are a key feature of the ruling Ethiopian People’s Revolutionary Democratic Front’s development strategy. The idea is to provide the space and infrastructure needed for light manufacturing to thrive. “We are going to open zones in leather and textiles, but also agroprocessing,” says Sisay Gemechu, the state minister for industry. However, only two of Bole Lemi’s 20 factories are occupied, both by George. Sisay says that all of the completed units are rented and that it is confident the 10 further facilities being constructed will be too. Bole Lemi seems to be a perfect metaphor for the current Ethiopian man-

Trade logistics in this landlocked country are also problematic. According to the World Bank, Ethiopia has dropped from 104th to 141th place in its rankings during the past five years. The majority of Ethiopia’s imports and exports are trucked to and from the port of Djibouti along a treacherous highway and the cost is phenomenal. A new rail link to Djibouti, scheduled for completion at the end of 2015, will reduce costs. Even with these considerable constraints, Helen Hai, former vicepresident of Huajian, argues that Ethiopia will be able to exploit its major comparative advantage – a competitive and young workforce. “The labour cost in shoemaking in China is about 22% of the overall cost portfolio,” she explains. “In China today, the cost of each labourer is $500 [a month]. In Ethiopia it is only $50. So, the question comes down to the efficiency.” She claims that after one year of on-the-job training, her Ethiopian employees were able to achieve 70% of the efficiency of Chinese workers, meaning that other investors could soon follow. ● Elissa Jobson in Addis Ababa

Petterik Wiggers/PANOs-reA

A

t the Bole Lemi Industrial Zone, 15km east of Addis Ababa, Taiwanese footwear manufacturer George Shoe Corporation is preparing to begin production. In mid-April, hundreds of eager new recruits – many of them university graduates – were preparing to begin work, making up to 1,500 pairs of shoes a day. Like its Chinese competitor Huajian – which plans to create a light manufacturing zone on the outskirts of the capital by 2023, providing employment for around 100,000 people – George has big ambitions for its Ethiopian enterprise. In just a few years time, the company plans to open its own industrial park in Modjo, one of the country’s main tannery districts, directly employing 10,000 workers.

TRADINg HURDLES

source: world bank

68

Chinese shoemaker Huajian plans to employ about 100,000 people in Ethiopia by 2023 the africa report

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Ethiopian Airlines remains a strategic tool for the government

airlines A hub in every region The managers of Ethiopian Airlines have an ambitious expansion plan to be implemented by 2025 that involves more training and new infrastructure

E

thiopian Airlines is one of the Ethiopian’s profits in the year leading state-owned compan2012/2013 were $110m, all of which ies in the country. As with the was re-invested in the company. Agricultural Transformation Agency, But the airline remains a strategic tool for the government, for both hortithe government has chosen to pricultural exports – mostly flowers – and oritise professional staff rather than also to bring in tourists and investors. It allow political appointees (see page 64). For Henok Teferra Shawl, the viceopened a new route to Shanghai in late president for strategy and alliances, March, bringing the number of flights to China to 28 each week. the key has been discipline. “They know that this is a company and that expansion it has to be operated on commercial Ethiopian is also starting to map out considerations. This is a very tough the contours of Africa’s airline sector business, the airline business, as you over the next few decades, both to stay know. There’s very little margin for profitable and also take part in the reerror. The competition is global, and gional growth story. “One of the pillars it’s fierce. It’s uneven because, as you of that road map is what we call mulmay well know, there are those who tiple hubbing,” says Henok. “Africa is are endowed with much more capital a huge continent. So one hub serving and access to cheaper fuel.” the continent from Addis Ababa, we felt Developmental states come with was not enough … that we needed multheir own challenges, particularly in the governance of parastatals that are tiple hubs in the various regions used to drive development. Opporof Africa,” he explains. tunities for rent-seeking abound, Hence, the creation especially when the paraof a West African 3 statal operates as a monopartner, ASKY – 1 2/ poly. As a result, there established with 01 2 r a are no free tickets the help of West ye African banks and for civil servants he t private investors in or other favours of for ts fi 2010 – and the purthe kind that took o Pr chase of a 49% stake down Air Afrique, which was managed in Malawian Airlines by West African in 2013. “And a fourth hub will be established governments. : et

hio p

ian

airl ines

m 0 1 1 $

in the Central Africa region. We’re hoping it will be in the DRC [Democratic Republic of Congo], but that’s still ongoing,” he adds. The business plan for Ethiopian Airlines includes the expansion of its current activities and the addition of new business units, some for training and maintenance. The company has invested more than $50m in the Ethiopian Aviation Academy during the last two years, with the purchase of flight simulators. The institution has grown its student body from 200 to 1,000 trainees, including pilots, technicians, cabin crew and marketing and finance personnel. “And, going forward, we aim to invest even more to enable it to have a 4,000 annual intake capacity by 2025, the aim being half of the students being non-Ethiopian Airlines and especially African students because there is a huge demand for aviation skills training in Africa,” says Henok. A major cargo operator, Ethiopian is investing in new cargo planes. The airline covers 48 cargo routes, with six dedicated aircraft. “By 2025, we’ll have at least 18 aircraft,” says Henok, who points to the additional infrastructure work being done. “We are building one of the biggest cargo terminals in the world, with a 1.2m tn annual capacity – 600,000tn in the first phase, 600,000tn in the second phase. It has both dry and perishable storage facilities and, when finished, the perishable facility cold storage will be one of the biggest in the world, even bigger than the Schiphol Amsterdam airport facility.” ● Nicholas Norbrook in Addis Ababa

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ImAgo/StudIoX

country focus | EThiopiA

sou rce

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72

dossier oil & gas

Kenya-Uganda

Who gets

oil first?


By Jeff Mbanga in Kampala and Parselelo Kantai in Nairobi

Oil companies are keen on Kenya’s prospects while firms in Uganda engage in long and difficult negotiations on infrastructure and production contracts. Kenya could edge Uganda out with first exports in 2016

illustratioN By christophe chauviN

T

he race is on between Kenya and Uganda to become East Africa’s first commercial oil producer. Both countries plan to start oil production within the next few years, and regional cooperation will be necessary for infrastructure projects to move ahead. The Ugandan government signed a memorandum of understanding with France’s Total, the United Kingdom’s Tullow and the China National Offshore Oil Corporation (CNOOC) on 5 February, after more than a year of slow negotiations. In Uganda, Tullow discovered an initial field containing an estimated 1.1bn barrels in 2006, but current plans call for production by 2018 at the earliest. CNOOC signed a production contract for the Kingfisher field last year, while Tullow and Total await the signature of a series of contracts. Rather than jumping into action following the signing of the February memorandum, Total has been cautious, while Tullow has been confrontational, showing its frustrations at the pace of development. Tullow’s chief operating officer Paul McDade told the Wall Street Journal on 12 February that the company could reduce its activities in Uganda to finance its projects in Kenya because the fields there are easier to exploit and the government is more supportive. Tullow said that Kenya could beat Uganda to become East Africa’s first oil exporter by starting exports in 2016. When asked for comment on the developments, Total Uganda’s corporate affairs manager, Ahlem Friga-Noy, urged patience and said: “Detailed discussions will soon take place between the government of Uganda and the partners to identify the concrete steps and actions to be taken to ensure a smooth implementation of the memorandum.”

One of the causes of delay has been the Ugandan government’s insistence on building an oil refinery. The planned refinery will have an initial capacity of 30,000 barrels per day, which could be raised to 60,000. The government has shortlisted six companies that could build the plant and expects to announce a winner in the first half of this year. It wants a privatesector company to take up a 60% shareholding, while the government takes the remaining share. Refining the excuses

3.5bn barrels of oil reserves in Uganda, according to new estimates

10bn Estimates of Kenya’s oil reserves in the Turkana Basin

Progress on the refinery is not going according to plan, however, owing to difficulties in compensating families living around the 29km² site in Kabaale, Hoima District, in western Uganda. A draft December 2013 report on development in the region around Lake Albert, where the oil is found, said that many households were dissatisfied with the payout, while others quickly spent the money without developing plans for resettlement. It suggests that this could further delay the refinery. President Yoweri Museveni’s government wants countries in the region to purchase small stakes that will reduce its total shareholding in the refinery. At least $12bn of investment is needed for Uganda to produce oil by its target year of 2018. That includes a planned pipeline, which is expected to cost between $2.5bn and $5bn, to reach the Kenyan coast at Lamu or Mombasa. Talks on the Lamu pipeline have stalled because of fighting in South Sudan, where the Juba government could use the export outlet to reduce its reliance on pipelines through Sudan. Construction of the pipeline and refinery could begin next year. The government has not decided if it will insist on owning part of the pipeline. “The decision on whether the government will in-


dossier | oil & gas

vest in the pipeline or not is dependent on the structuring of the investment [...] This decision will therefore be made later when the financing structure has been decided,” explains commissioner Ernest Rubondo of the energy ministry’s petroleum exploration and production department. greasing the taps

With production yet to begin, the government is already showing signs that it will have difficulty managing the oil revenue. Parliament is set to debate the amended Public Finance Bill 2012, which seeks to create a petroleum fund, among other things, under the auspices of the central bank. The government’s first proposal was to split the fund into two accounts. A reserve account would hold money for future generations, with strong limitations on who could access it, while a holding account would be used to support the national budget. The government no longer supports protecting revenue for future generations. In October 2013, finance minister Maria Kiwanuka argued: “The split effectively prohibits the government from ever accessing the principal of the Petroleum Investment Reserve for budget financing. This is likely to prove incredible in a country with relatively limited oil reserves and large long-term development needs.” Civil society groups are opposed to the government’s change of position. There has been more momentum on the Kenyan side of the border after Tullow made its discovery at the Ngamia-1 well in 2012. Tullow and its Canadian partner African Oil Corporation are in talks with the government to launch field development and the construction of an export pipeline by next year. Africa Oil announced in February that it will drill 20 wells in Kenya and Ethiopia this year. Despite companies’ statements about the government’s support for the industry, it has been slow to set up frameworks. While Kenya’s constitution makes sound provisions for the equitable sharing of mineral resources, the laws that

Tullow explored in Uganda but may divert funds to Kenya, where it feels it is getting more support

20

Number of wells Africa Oil Corporation has announced it will drill in Kenya and Ethiopia in 2014

Tullow oil uganda/HandouT/reuTers

74

give the executive a broad discretionary mandate on how to exploit the country’s natural resources have not been updated for close to 30 years. “ The upstream game is shrouded in secrecy. We know that the Turkana Basin alone contains about 10bn barrels of oil – that’s between three and five times Uganda’s known deposits. But the government is yet to clearly articulate what it is going to do with the oil, for the country generally and the people of Turkana specifically. What, for instance, are the terms of the production-sharing agreements with Tullow?” asks Mohamed L. Baraka, a petrochemical engineer with decades of experience in the oil sector who now runs a downstream oil company. regions demand share

But secrecy should not be understood to mean inactivity. In February 2012, then finance minister Njeru Githae requested a visiting International Monetary Fund (IMF) mission to draw up a fiscal policy framework for the country’s extractive industries. The IMF team delivered its confidential 81page report last April. It makes a

number of recommendations on how to design production-sharing agreements. Notably, the report’s authors introduce what they refer to as the ‘R-factor’ – a built-in ratio that automatically adjusts revenue shares after tax when oil prices rise above existing or anticipated prices. It is not clear how far the government has gone in implementing those recommendations. While a review of the Mining Act is close to being tabled in parliament, there is no word on the progress of a Petroleum Act that would shape the emerging upstream oil sector. But the unaddressed issue of resource sharing is making little progress. Indeed, as the country moves into production mode, the questions of regional equity are only likely to grow stronger. Last year, Tullow’s operations at its Ngamia-1 well were shut down for a month as locals picketed the company’s office demanding jobs. As an indication of the rapidly changing infrastructure terrain, oil services companies – notably Halliburton, Baker Hughes and the Egyptian firm Saxon Energy Services – have set up shop in Turkana, expanding from their Uganda operations. ●

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dossier | oil & gas

interview

Nick Cooper Chief executive, Ophir Energy

This is our most exciting campaign the London-based oil and gas explorer, Ophir energy, is appraising gas finds in equatorial Guinea and tanzania that will be developed into major projects by 2020

O

Ophir EnErgy

phir Energy, an Africafocusedexplorerfounded in 2004, has entered into a crucial year as it appraises major gas fields. With about 1.25bn barrels of oil equivalent in reserves, Ophir is due to make investment decisions on two of its most promising projects within the next few years. Ophir chief executive Nick Cooper tells The Africa Report: “We are in the middle of what we would see as the most exciting campaign we have ever drilled.” Ophir holds an 80% stake in Equatorial Guinea’s Block R, and the company expects to develop Africa’s first floating liquefied natural gas (FLNG) project. Ophir will drill three wells, in a mixture of appraisal and exploration, this year, says Cooper. “In Equatorial Guinea, the main event is around appraising the gas and finding a bit more gas for the FLNG project. But in addition there is the potential that the Niger Delta oil play extends under the acreage, and so we will be testing that.” The company now estimates that it has 2.6 trillion cubic feet (tcf) of recoverable reserves in Block R and

that this year’s drilling will take it up to more than 3 tcf. Cooper says backing the FLNG projecthasbeenalearningprocess both for the company and the government. “FLNG has been talked about for a long time, and I think there was a fair bit of cynicism around it. That said, incrementally, all the parts of the project have been proven elsewhere.” He says Ophir and the Malabo government are both seeking to maximise value: “It is possible to structure them [FLNG projects] like the gas equivalent of an FPSO [floatingproduction, storage and offloading] project, where the oil compan-

ies do not need to own the vessels.” Ophir expects to make a final investment decision by mid-2015 and to produce first gas by 2018, at least two years before LNG projects in Tanzania take off. Ophir partners with BG Group on Blocks 1, 3 and 4 in the Tanzanian offshore. “The scale of the project at the moment is two 5m tonne trains. Each 5m tonnne train needs about 6 tcf recoverable,” explains Cooper. He says that before the year is over, the company is likely to have discovered enough gas to supply a third LNG train. partners to develop

Ophir holds a 40% stake in those Tanzanian blocks, and its activities there highlight the company’s business model. It is in the process of selling a 20% share, valued at $1.29bn, to Pavilion Energy, a subsidiary of Temasek, a Singaporean investment fund. Cooper explains: “Our cost of capital is a lot higher than that of a big oil company, whichmeansweareveryprepared to fully fund and undertake big exploration programmes, and we do that. But when we get to the more mature phases where we have been successful, we bring in bigger oil companieswho can help to fund that development phase.” While Ophir has had its success with gas discoveries, it is now drilling in Gabon’s Padouck Deep field to see if it holds similarities to the fields discovered in offshore Brazil. The company is also evaluating three potential plays on its L9 block in offshore Kenya. In March, Ophir farmed in to two blocks in the Seychelles, continuing its trend of looking for large blocks to operate. “Africa is substantially more licensed by the oil and gas sector than it was say, five or six years ago,” says Cooper. Ophir has the rights to acreage in Western Sahara and Somaliland, two areas seeking international sovereignty. “We believe that we are supporting the appropriate resource holders or else we would not be there. We would love to be investing significant capital into them.” ● Marshall Van Valen

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dossier | oil & gAs

The latest rounds of oil exploration licences have greater strings attached

LicenSinG

More for governments, less for companies Analysts worry that Africa will become less attractive for exploration as states try to get more from the oil and gas sectors

A

frica’s licensing regimes for oil and gas projects are steadily becoming more onerous and less predictable, according to Babette van Gessel, chief executive of Global Pacific & Partners (GP&P). Van Gessel was addressing a select gathering of top oil and gas executives and senior politicians at the 2013 Africa Oil Week organised by GP&P in Cape Town late last year. In Libya, the government has proposed an oil-licensing round for 2014, but protestors continue to block oil exports, making the exercise uncertain. Exploration and production have sloweddramaticallyinEgyptsince late2012,andVanGesselsaidoperators also reported the duplication of functions among the various licensing authorities. In Algeria, the government abandoned a mooted 2013oilandgaslicensingroundfor lackofinvestorinterest–apparently due to tighter conditions. A presidential election scheduled for April is likely to delay matters further. Moving to West Africa, Liberia is due to launch a licensing round in the third quarter of 2014. A new petroleum bill is on its way in Ghana, with higher local-content

picto/graph

75% Is the level of state control of some new gas exploration contracts offered by Tanzania in 2013

requirements and an increased state stake. In Nigeria, the longawaited legislation has still not materialised and prospects for its appearance before the 2015 elections are receding. In the meantime, ambitious local operators are snapping up the assets of international companies. The government allocated new oil blocks in Cameroon in 2013, but GP&P said uncertainties remained about the state’s stake and local-content requirements. IntheRepublicofCongo,10oil blocks are due to be offered during 2014, and there is a planned licensing round in Angola this year too. TheAngolangovernment hadalreadyincreasedthe state’s stake and implementedpreferentialtreatment for local companies. dry wells

Results from exploration in Namibia are proving disappointing. Companies have hit a series of dry wells and are still waiting for big discoveries. In South Africa, Van Gessel noted with approval the lifting of a moratorium on shale gas prospecting in the pristine Karoo but said the government’s proposed 20% free carry was “troubling” investors. Sudan is due to allocate three offshore and two onshore oil blocks by the end of 2014, and South Sudanese officials have talked about some new licences, though heightened political un-

certainty there is likely to deter the fainthearted. In Kenya, a licensing round was delayed in 2013 and no new date has been set. Oil companies have resigned themselves to a new petroleum act imposing tougher terms and a higher free state carry. Tanzania launched a licensing round in late 2013, again with tougher terms, and with a state stake of up to 75%. Van Gessel saidsheexpectedliquidnaturalgas production in Tanzania by 2018. In Uganda, she said the development of the oil and gas industry had “come to a standstill” due to increasingly tougher requirements from the state, which had resulted in the apparently indefinite delay of a proposed 2013 licensing round (see page 72). Mozambique, by contrast, is expected to offer new contracts this year, which should attract significant investor interest. Overall, the trend is towards tougher fiscal terms for international oil and gas investors, higher free state carries and more local content. To those who share her analysis but not her concern – arguing that these are welcome trends indicating that African governments are finally beginning to secure sufficient returns for their irreplaceable natural endowments – Van Gessel replied that Africa was becominglessandlesscompetitive internationally. “Africa’s share of international oil and gas exploration is already too low. Who does it help it if drops lower?” ● Gregory Mthembu-Salter in Cape Town

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PeTer Langer/Design PiCs/Corbis

78


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country focus Rwanda

SHANON JENSEN/HO/Afp

Rwanda’s reduction in infant mortality is the fastest in Africa

Will the bargain hold? In May, finance ministers, central bank governors and thousands of bureaucrats will descend on Kigali for what will be Rwanda’s biggest chance to showcase its economic story. Rwanda is hosting the African Development Bank’s annual meeting at a time when Africa’s average economic growth is outpacing Asia’s By Honoré Banda in Kigali and Patrick Smith

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T

he timing of the African Development Bank (AfDB) meeting on 19-23 May in Kigali is highly symbolic. It will be exactly 20 years since bands of thugs wielding machetes and clubs killed around a million people in Rwanda in three months – the fastest mass murder rate in history. The killers were mainly Hutu militiamen trained by Juvénal Habyarimana’s government, and the victims were mainly Tutsi and those Hutus who opposed the government’s racist ideology.

53


country focus | rwanda

UGANDA

DEM. REP. OF CONGO

KIGALI

R WANDA

BURUNDI

50 km

Galerie Paul KaGame/FlicKr

Lake Kivu

TANZANIA

key facts PoPulation

11.46 million

GDP

$7.10bn

GDP Growth (annual)

Since the 1994 genocide, Kigali’s stateled resurgence has produced spectacular economic results. A leading figure in that economic campaign was Donald Kaberuka, who was finance minister from 1997 until his election as president of the AfDB in 2005. Now, as Kaberuka considers his next move after two terms at the helm of the bank, he is bringing it home to Kigali for a week. It will be Rwanda’s chance not just to make the case for its brand of developmental authoritarianism but to sell its merits as a regional financial, services and trading hub to its fellow African states,aswellastoEuropeansandAsians.

8%

Gni Per caPita at purchasing power parity

$1,320

PoPulation below the national poverty line

44.9% (2011)

PoPulation with access to water source

66%

consumer Price inDex inflation

7.3

BuDGet Balance % GDP

1.9

current account % GDP

10.5

figures for 2012 unless marked otherwise 80life

expectancy (at birth)

poverty reduction

64 48 32 16 0

1995

2000

2005

2010

adult literacy rate (% net)

58

65

66

2000

2010

38

1978

1991

source: World Bank/africa economic outlook

54

Is this realistic? Absolutely, according to the World Bank economists who voted Rwanda the top performer last year in its Doing Business index. It leapt to 52nd position on the ease of doing business rankings from 158th position in 2005. The Rwandan government has also invested millions of dollars in a new national airline and plans for a new international airport with hi-tech cargo clearing facilities. Under current finance minister Claver Gatete, the implementation of an internationally compatible instant electronic payment system is roaring ahead. But it is the social significance of Rwanda’s strategy that has attracted economists such as Professor Paul Collier of Oxford University. He remains “deeply impressed” by Kigali’s hat trick of rapid, growth, sharp cuts in poverty and falling inequality. Pointing to a possible demonstration effect for the meeting in Kigali, Collier says: “This should be happening every-

The memory of the genocide still weighs heavily on the Rwandan psyche

where in Africa […]. Instead it’s nowhere else.” Certainly, Rwanda’s success in cutting the number of people in poverty by more than a million out of its 11 million people since 2005 has rarely been equalled outside China. The key point about Rwanda’s economic growth averaging 8.1% between 2001 and 2012 is how that has changed social conditions: life expectancy has increased to 61 years in 2012 from 36 in 1994, and the government has presided over the fastest reduction in infant mortality in Africa over the past decade. Similarly, large state allocations for education mean 93% of Rwandan children attend primary school. However, two giant questions loom over the development data: how have these leaps been achieved and at what political and social cost? The how is the easier of the two questions. The government is allocating a minimum of 10% of the budget to agriculture programmes, which includes mass distribution of fertilisers, anti-erosionand terracingschemes, better transport and irrigation. may you own a cow

They also veer into social engineering with the Girinka programme. Girinka is Kinyarwanda for ‘May you own a cow’, a popular greeting in the countryside. Introducedin2006,theGirinkaprogramme aims to give every poor family a dairy cow that will produce milk and manure. It is designed to be self-sustaining: when the cow has calves, the calf is handed to the neighbour and the chain the africa report

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rwanda | country focus

continues. The cultural significance is that historically it was mainly the pastoral and minority Tutsi people who owned cows, while the majority Hutu were often established farmers. Girinka aims to end that cultural difference. kagame’s big deal

AsFrederickGolooba-Mutebiargues(see page 56), Rwanda is at no risk of being mistakenforaliberaldemocracy.Instead, President Paul Kagame sets out a grand political bargain: he will run an efficient state, channelling substantial resources into health, education and agriculture and thus raising incomes and improving lives. In exchange, competitive party politics are off the agenda as are the lively media and civic freedoms enjoyed by countries such as South Africa, Nigeria and Ghana. Officially, at least, Rwandans have to buy into the government’s ‘end of ethnicity’ ideology. No one can recruit for political parties on the basis of ethnicity, which may seek to strengthen the position of the majority Hutu at the expense of the minority Tutsi. By most independent calculations the latter hold

the key positions in government, the control despite growing criticism of the army and the civil service. government’s record on human rights, Kagame’s bargain, however, now faces media freedoms and foreign policy. Two cases stand out. After successive heavy economic and political pressure. reports by United Nations (UN) experts Rwanda’s target of reaching middleand officials in the Democratic Republic income status by 2030 requires shifting of Congo (DRC), almost no international several gears in its growth strategy and diversifying rapidly into services and inorganisations or diplomats believe the dustry. That will require billions of dolgovernment’s ever shriller denials that lars of direct investment in new enterprises and further Rwanda’s technocrats have investment in roads, power to persuade investors that stations and railways. the politics are under control Two important new recruits will play a leading it has been arming and supporting the role here. The highly regarded Valentine Rugwabiza, former deputy director genmurderousMouvementdu23Mars(M23) eral of the World Trade Organisation, has militia in the DRC’s eastern provinces. taken over the leadership of the Rwanda Government officials reacted furiously Development Board. And Crystal Venwhen European and North American tures, Rwanda’s answer to South Korea’s governments suspended aid worth more state-directed conglomerates, is now than $85m in 2012 and 2013. Much to headedbyformerinvestmentbankerJack Kagame’s frustration, aid still accounts Kayonga, who will turn it into a private for about 40% of the national budget. venture capital fund. These technocrats Trying to escape from this straitjacket, are as impressive as Kigali’s statistical rethe government floated a $400m eurocords, but they still have to persuade inbond, borrowed more than $20m from vestors that the politics will remain under the AfDB, the Organisation of the ● ● ●

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country focus | rwanda

PetroleumExportingCountriesand the Arab Development Bank. China also offered $35m in grants, but most of this is exceptional and unsustainable funding. The latest reports that M23 is regrouping in eastern DRC, after being defeated by a Tanzanian- and South African-led interventionbrigadealongsideCongolese troops, will return the spotlight to Kigali. The UN is now sending drones to patrol the Rwanda-DRC border to search for suspicious troop movements. In January, Kagame and his colleagues unleashed a tirade against critics and exiled opposition politicians. These accuse his government of running a hit squad that strangled former military intelligence director and leader of the opposition Rwanda National Congress Colonel Patrick Karegeya in a South African hotel room on New Year’s eve, and of trying to assassinate former army chief of staff Faustin Kayumba Nyamwasa, also in South Africa, in 2011.

OpiniOn

●●●

tacit admission

Without admitting direct responsibility for Karegeya’s murder, defence minister James Kabarebe commented: “When you choose to be a dog, you die like a dog.” Kagamewasscarcelymorecautiouswhen he told journalists in Kinyarwanda on 12 January: “My job as president is to confront and defend Rwanda against people who want to destroy what we have been building. It’s a matter of time for anybody trying to undermine Rwanda to face the consequences of their actions anywhere. It’s the first time I am speaking about the Karegeya issue because there was no need. We don’t seek permission to defend our country.” Ultimately what happens internally is the key. Some Rwandans talk of ‘dangerous wobbles’ ahead of 2017, the date when Kagame is due to hand over to an as yet unidentified successor. Insiders say there is absolutely no discussion about the succession and no plans even to talk about it. Seasoned technocrats such as Kaberuka, Rugwabiza or foreign minister Louise Mushikiwabo evince no interest in the job. One mooted solution is that Kagame steps down from the presidency to become an omnipresent chairman of the ruling Front Patriotique Rwandais party and allows a technocrat to become head of state under his watchful eyes. But there is one certainty: all discussions on the issue at the AfDB meeting will be conducted at an extraordinarily low volume. ●

Frederick Golooba-Mutebi Political analyst

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The politics of ‘never again’

ne inescapable question about post-genocide Rwanda is how a poor country that sank to the lowest levels of human depravity during the genocide and mass killings of the 1990s has, within less than a generation, risen to become one of Africa’s shining examples of post-war recovery and development. The answer lies in the decision made by the Front Patriotique Rwandais, the political organisation that toppled the genocidal regime – along with the political parties that had long fought it from within – to reject adversarial political competition and settle for consensus-driven politics. Nonetheless, while these developments have earned Rwanda plaudits across the world, some academics and activists accuse the government of a poor human rights record and of a restrictive political environment in which there is no room for dissent, opposition or freedom of expression. Critics focusing on these domains rarely acknowledge the gains in the economic and social spheres. Certainly post-genocide Rwanda is not a liberal democracy and citizens do not enjoy the same range of rights as in a mature liberal democracy. Nor is politics in the country competitive adversarial multiparty politics. The critique, however, disregards key attributes of Rwanda’s postgenocide political system. The system is highly inclusive, bringing together several would-be rival political parties into a government in which power and responsibility are shared. Collective decision-making within the multiparty government and the absence of contestation that often throws post-war countries into renewed turmoil explain Rwanda’s political stability. The kernel of collective decision-making and responsibility-sharing is the constitutional requirement that no political organisation, however popular or powerful, should allocate all the cabinet positions to itself. Another attribute is the determination by all parties in government to prevent the resurgence of ethnic bigotry. Groups suspected of seeking to pursue sectarian agendas encounter more difficulty trying to register as political parties than those that do not. It is essential, in a society recovering from a traumatic history, to minimise political activism with a potential to destabilise. Activists have long campaigned for media freedom in Rwanda and persisted in presenting the government as anti-media and President Kagame as a mediapredator, a label he was given by Paris-based Reporters Without Borders in 2010. But for about a decade, the government has been implementing reforms, including the enactment of the Access to Information Law and legislation for media self-regulation. Broadcast and print outlets have grown in number to 60, reflecting investment of $13.6m in the media industry over the same period by, among others, the Nation Media Group. For Rwanda, where the genocide and civil war nearly wiped out the media industry, this is huge and reflects change that critics are reluctant to acknowledge. ● the africa report

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ADVERTORIAL

Rwanda Social Security Board

RSSB leading in socio-economic transformation of Rwanda Rwanda Social Security Board (RSSB) was established by the law No.45/2010 of 14/12/2010 that determines its mission, organization and functioning. This institution was established after the merger of Social Security Fund of Rwanda (SSFR) with Rwanda Medical Insurance (RAMA) The mandate of the institution is to administer social security in the country. The branches currently managed include; pension, occupational risks and health insurance. The benefits offered under the different branches are; old age, invalidity, survivorship, work injuries and work related diseases and health insurance. RSSB as a financial institution is supervised by the National Bank of Rwanda according to the banking law N°55/2007 of 30/11/2007 whereas its activities are overseen by the Ministry of Finance and Economic Planning. > VISION RSSB envisions a comprehensive social security system that addresses the social security needs of all Rwandans. > MISSION STATEMENT Provide high quality social security services; ensure efficient benefits distribution, collection of contribution and prudent investment of members’ funds. > CORPORATE VALUES In trying to achieve our vision and mission, we consider to be guided by the following key strategic values: • Integrity; • Collaboration; • Accountability; • Respect; and • Excellence. > MAIN RESPONSIBILITIES OF RSSB Rwanda Social security Board is mandated by government of Rwanda to provide social security services to its affiliates and legal dependents in Rwanda and its key activities are: • Collecting and management of contributions as provided by law; • Paying social security benefits to beneficiaries; • Paying healthcare costs to RSSB medical beneficiaries; • Managing the contributions fund;

• Prudently investing surplus funds; • Giving advice on social security policy issues; • Establishing relations and collaboration with other regional or international institutions with related mission > FUNDING Rwanda Social Security Board is financed by employees’ and employers’ contributions. For the pension and Occupational hazard scheme, the total contribution is 8% of the employees’ gross salary, of which 5% is paid by the employer and 3% is paid by the employee. Of the 5% paid by the employer, 2% goes to occupational hazards and the remaining 3% goes to pension. The total contribution rate under Medical scheme is 15% of employees’ basic salary, of which 7.5% is paid by employer and the other 7.5% paid by employee. > COVERAGE The scheme is mandated to cover all employees working in the private and public sectors. However, an individual may voluntarily register and save with RSSB under the Pension scheme. For private individuals to be registered under the medical scheme, a minimum of 7 employees is required.

> BENEFITS In the event that any of the contingencies occurs, RSSB members or their dependants are entitled to receive benefits as provided by the law. For old age benefits, members aged at least 55 are entitled to pension benefits. However, the police and military servants aged at least 40 and 50 respectively can apply for pension benefits. Under occupational hazards branch, employees are protected when they are at work, travelling to work or on a work related journey. This scheme also covers an occupational disease. The medical scheme covers the following medical care provision: Medical consultations, drugs, including chemotherapy, surgical interventions, dental care including prosthesis, medical imaging, including CT Scan & MRI, Laboratory tests, Physiotherapy, Hospitalization, Eye treatment including provision of; lenses and frames, Lower/ Upper limb prosthesis & Orthesis, Dialysis and Full Medical check-up.

RSSB achievements 1. PORTFOLIO RSSB’s investment portfolio has recorded notable increase from Rwf 301,114,038,655 (approx $ 446 million) in June 2012 to Rwf 371,365,182,453 (approx $ 550.2million) in June 2013. RSSB’s investment portfolio is mainly composed of • Real estate projects > 22.0% • Bank term deposits > 35.7% • Corporate bonds, loans > 1.8% • Treasury bonds/bills > 21.4% • Foreign as well as local equity > 18.6% • Mortgage > 0.5%


Rwanda Social Security Board

The contributions collected has remarkably increased from 2011 Medical scheme 2011/2012

27,607,121,723

2012/2013

31,801,932,957

Pension Scheme 2011/2012

42,890,412,771

2012/2013

55,256,422,716

Total 2011/2012

70,497,534,494

2012/2013

87,058,355,673

RSSB is working in tandem with the realization of Rwanda broader development programs. In accordance with the EDPRS 2 for example where decent affordable urban housing is required, RSSB has striven to develop different projects to feed into the requirements and address the challenges. The on-going projects include: 1. VISION CITY (HIGH END HOUSING)

3. BENEFITS PAID OUT Medical scheme 2011/2012

9,435,099,253

2012/2013

11,050,622,485

Pension Scheme 2011/2012

8,422,992,219

2012/2013

9,914,111,770

Total 2011/2012

17,858,091,472

2012/2013

20,964,734,255

4. CONTRIBUTING EMPLOYEES/ AFFILIATES REGISTERED Medical scheme 2011/2012

Affiliates 165,591

2011/2012

Dependents 200,835

2012/2013

Affiliates 194,228

2012/2013

Dependents 334,145

Pension Scheme 2011/2012

322,888

2012/2013

352,085

It is the biggest residential housing project in Rwanda to-date. It is set on a prime 158 hectare tract of land in Gaculiro, Kinyinya Sector of Gasabo district. It is adjacent to RSSB constructed Vision 2020 Estate and approximately 3 km from the proposed Central Business District (CBD) at Muhima and 6 km from Kigali International Airport. It will consist of over 4,500 units in different configurations ranging from luxury villas to apartments to be built in 4 phases over 7-8 years. Phase 1 is made up of 504 units to be built on 33 hectares. Construction started in November 2013 and is expected to last 21 months. The total cost for phase 1 is $106 million and it will be financed through a combination of debt and equity.

The total number of medical beneficiaries increased from 366,416 in June 2012 to 528,373 in June 2013 5. INVESTMENT RETURNS Medical scheme 2011/2012

5,181,403,301

2012/2013

5,400,009,476

Pension Scheme 2011/2012

10,591,944,530

2012/2013

13,874,630,981

Total 2011/2012

15,773,347,831

2012/2013

19,274,640,457

Phase 1 of Vision City will also feature a town center made up of retail shopping space, recreational and leisure spots (restaurants, sports facilities and club house), a 3 star hotel, office block and a medium size convention centre with a capacity of 1000 people.

Construction is expected to start in May 2014 at an estimated project cost of $50 million. 2. KINYINYA (MIDDLE INCOME HOUSING) This will be the second biggest residential housing project consisting of 3,672 units of 1-4 bedrooms set out in four storey apartment buildings. This layout will maximize the available 100 hectares marked out for development of the estate, resulting in a housing density of approximately 60 units per hectare. Kinyinya will have commercial, entertainment, recreational and public transport amenities for use by its residents. It will be built in three phases over 7-8 years. The units will have lower price points than Vision City units and will cater mostly to middle income buyers. However, residents will still enjoy the same tranquility, modern housing and amenities that will be found in the higher priced Vision City. The total expected cost of phase 1 of Kinyinya is $57 million financed through a combination of debt and equity.

3. LOW COST HOUSING RSSB is in the final stages of acquiring a plot of land on the outskirts of Kigali to construct 100 low cost housing units. Several technologies are being considered to provide cost effective, but efficient modular solutions, which can be replicated at other sites in order to solve the problem of low cost housing in Rwanda.

RSSB Plot 1003, Ubumwe Cell, African Union Boulevard Kiyovu, Nyarugenge PO Box 250/6655, Kigali Tel: +250 598400 Fax : +250 584445 info@rssb.rw www.rssb.rw

DIFCOM/FC - Photos : DR

2. CONTRIBUTIONS COLLECTED AND INVESTMENT RETURNS


country focus | rwanda

PEOPLE TO WATCH

Politicians and business brains step up to the challenge A new slate of leaders in the public and private sectors are seeking to prove their independence, improve credibility and attract investment

R

wanda’s great and good are in a period of flux, with new faces and old hands in fresh roles. As Ebenezer Asante (1) settles into office as the new chief executive of MTN Rwanda, he is faced with the task of ensuring the telco maintains its market share in the face of cut-throat competition.Thefirsttelecomcompanytolaunch mobile telephony operations in Rwanda, its subscriber base has stagnated at just over three million while its rivals, Tigo and Airtel, are eating into its data and voice segments. The year 2014 could be the tipping point as Airtel, the new entrant, consolidates its growth. It is all change in the state-directed sector, too. In May 2013, the government appointed Jack Kayonga as the new board chairman of Crystal Ventures, the investment arm of the ruling Rwandan Patriotic Front (RPF) and the biggest local investment company. Youthful Kayonga is an investment banker credited with turning around the Rwanda Development Bank, where he served as CEO for four years from 2009. The top management of Crystal Ventures has proved to be result oriented, with zero tolerance for underperformance. To keep his job, Kayonga will have to improve the efficiency of its businesses, as the company continues to fight claims that it depends on lucrative government contracts. In October 2013, the fresh-faced Richard Muhu­ muza replaced Martin Ngoga, the longserving prosecutor general. Muhumuza, who has served in the prosecutor general’s office for the

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past 14 years, is the fourth prosecutor general since 1994, when the RPF took power. He will continue to hunt for the key fugitives believed to have masterminded the 1994 genocide, but he will also face pressure to charge members of the old guard who have since joined the opposition and become outspoken critics of the current regime. no to witch-hunt

The long list includes Faustin Kayumba Nyamwasa, who fled to South Africa in February 2010, and Gerald Gahima, who had served as the country’s first prosecutor general after the 1994 genocide. If he does not want his office to be seen as a tool for criminalising political dissent, Muhumuza will have to exercise maximum restraint. Last year, Rwanda’s new lower house was sworn in under the leadership of long-serving Liberal Party politician Donatille Mukabalisa (2), whose rise to the helm of the Chamber of Deputies was no surprise. She was elected almost unanimously, winning 79 votes out of 80. A lawyer by training, the new speaker is

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a veteran parliamentarian who served in the Chamber of Deputies before joining the Senate in 2011. Mukabalisa takes charge as the debate about the 2017 presidential election is beginning to take shape. She seeks to demonstrate that she has the necessary independence in decision-making and to work towards improving the credibility of parliament, which is still widely viewed as a rubber stamp. Veteran journalist Arthur Asiimwe is settling in as the head of the newly formed Rwanda Broadcasting Agency (RBA), which replaces the Rwanda Bureau of Information and Broadcasting. His challenge is to convince Rwandans that the state broadcaster is worth the taxpayers’ money it has received over the years and to transform the RBA into a self-sufficient entity. There has been little debate about whether Valentine Sendanyoye Rug­ wabiza (3), the new CEO of the investment promotion agency, the Rwanda Development Board, is qualified for the job.Notonlyissheatradeandinvestment expert, having served at the World Trade Organisation as deputy director general since 2005, but she is also a seasoned diplomat who was Rwanda’s ambassador to the United Nations in Geneva for three years. She takes charge at a critical time, as the government is under intense pressure to reduce its dependence on foreign aid. ● Honoré Banda in Kigali

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mtn rwanda; FlicKr Galerie Paul KaGame; Bruno levy tHe aFrica ceo Forum/Jeune aFrique

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Profile of DEVELOPMENT BANK OF RWANDA (BRD) The Development Bank of Rwanda (BRD) is a public limited liability company limited by share, with a share capital of RWF 7,808,931,000, and was incorporated on August 5,1967. The company code is 1000003547 with its headquarters in Kigali, Rwanda. BRD provides long term and medium finance that significantly facilitate the emergence of different productive enterprises in the private sector. BRD VISION: “The Leader of productive investment and the most profitable Bank at the service of poverty reduction”. BRD MISSION: “To become the Government of Rwanda’s investment arm by financing the nation’s development objectives with a focus on the priority sectors of the economy”. BRD’s objectives: • Provide development finance for priority economic sectors as defined by the government, which are: Agriculture and Livestock, Exportation, Hotels and Tourism, Social Infrastructures (Education and Healthcare), Manufacturing and Industries, ICT, Energy and water, Microfinance, and Transport and related facilities. • Provide equity investments to stimulate the development of new firms able to participate in Rwanda’s economic development; • Promote exports to reverse the trade deficit and increase Rwanda’s stability to invest in its development; • Refinance microfinance institutions and professional associations; and • Facilitate technical assistance to financed companies, microfinance associations and other stakeholders to enhance sustainability.

SECTORS OF OPERATION Development Bank of Rwanda operates in all sectors of productive investment which generate added value and create employment. In its credit policy, priority is given to the new technologies and export oriented project. The bank’s priority field of intervention covers the following: Agriculture and livestock, Industries & Services, Hotels &Tourism, Housing (Real Estate & Individual Houses), Social Infrastructures (Healthcare & Education), Micro Finance Institutions, Water and energy, ICT, Transport and related facilities. PRODUCTS & FACILITIES Development Bank of Rwanda has a great number of product offerings: BRD provides investment financing in form of: Loans (short, medium or long term), Leasing, Equity, mortgage financing, MFIs refinancing, Guarantee funds, Capacity Building and Advisory. Retail banking products to each client having an account with BRD: Trade Finance, Salary advance, Temporary overdraft, Home equipment Financing, Vehicle loans. In addition, BRD offers other Services such as: Accounts (Savings & current), Syndications, Policy research, analysis & support; and Public/Private sector facilitation. At BRD, if you are an entrepreneur, business man, or simply an Investor - We empower you! BRD’S PHYSICAL ADDRESS: Development Bank of Rwanda (BRD) Boulevard de la Révolution - P.O Box 1341 - Kigali, Rwanda Tel: (+250) 252 573558 /252 575079/80 or (Toll free number) 3288 Fax: (250) 252 573569

ADVERTORIAL

E-mail: brd@brd.rw


country focus | rwanda

intErviEw

and implementation of Rwanda’s first Economic Development and Poverty Reduction Strategy, under which Rwanda was able to reduce poverty by 12% between 2006 and 2011. He chaired development partners’ forums for the government. Rwangombwa also oversaw the drafting and implementation of a five-year public finance management reform programme that led Rwanda to produce its first government financial statements in 2007.

CyRil NdeGeya

62

John Rwangombwa Governor, National Bank of Rwanda

We have reached a turning point in the economy

Loans to the private sector have picked up as rwanda emerges from the effects of delayed aid disbursement, but the country is still too dependent on imports

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ntering2014,Rwanda’s central bank governor, John Rwangombwa, is focused on encouraging banks to extend credit to the private sector, expanding financial inclusion and stabilising the economy after donors cut off aid to the government in 2012. The International Monetary Fund predicts that the economy will grow by 7.5% in 2014 but warns that the financial system is too weak to offer the government the possibility of getting more financing from the domestic market. In response, the government is preparing for the launch of an international sovereign bond within the next year or two.

Rwangombwa is working on improving Rwanda’s macroeconomic performance. President Paul Kagame appointed him as governor of the National Bank of Rwanda on 25 February 2013.

The biggest challenge is that our export base has not been growing fast enough Prior to his appointment, he served as finance and economic planning minister. Rwangombwa had served as the permanent secretary and secretary to the treasury from September 2005. As permanent secretary, he oversaw the drafting

TAR : What are the greatest economic risks that you see ahead in the short and medium term? John RWAngombWA : [There are] two main risks. The biggest one is agriculture because we are still relying on weather. If the weather is not good, it will affect the performance of the economy in 2014. We are still weak in terms of financing international trade. For instance, the experience of last year about the delayed donor support shows how if anything of that nature happens this will affect our growth as well. To what extent has the Rwandan economy recovered from the impact of the shortfall in donor funding? In 2013, we started feeling the challengesofreducedgovernment spending because government is a big player in this economy. Any reduced government spending affects different parts of the economy. Achieving 5.7% and 6% growth in the first two quarters of 2013, I would say, was good compared to the challenges that we had experienced. We are now waiting for the statistics of the third quarter, but I do not expect much difference from that. However, we do see a turning point in the economy in the fourth quarter in terms of the increase in credit to the private sector. [...] We also expect to see trade going up, financial services going up. It shows that we have reached a turning point from the effects of delayed disbursement [of aid] in 2012 and in 2013. We are likely to see growth going back to normal.

the africa report

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rwanda | country focus

The central bank has been easing the interest rate it charges to commercial banks over the past few months as a signal to banks to lower rates. Rates have come down but not as much as the central bank sought. Where do we go from here? We have started seeing positive signs as we had expected. When we reduce our key repo rate (KRR), normally it is the money markets or short-term interest rates that follow immediately and this is what we saw happening. In June 2013, when we reduced the policy rate from 7.5% to 7%, we saw the treasury bill interest rates moving from 10.81% in June to 6.06% in November 2013 and the repo rates going down from 6.68% to 4.42% between June and November 2013. We also saw the deposit rate dropping from 10.6% to 8.5% between June and November 2013. All these factors are playing into influencing the movement

of the lending rates, but this happens with a time lag because by the time the deposit starts going down, banks still have expensive deposits that they took before the decline of deposit interest rates. The lending rates also slightly reduced from 17.6% in June to 17.19% in November 2013. This is a good sign. In addition, banks have been responding to the change in the KRR. We have seen a pick-up in lending to the private sector. New authorised loans are thus likely to hit RWF145.9bn ($221m) in the fourth quarter 2013, compared to RWF116.16bn issued in the fourth quarter of 2012. This might be the highest ever in recent years. The Rwandan franc is weakening. What is happening? To what extent are you concerned about this depreciation? This is expected. It is partly linked to the delayed aid disbursements in 2012. But even

A finAnciAl Ascent 2004 Earned a master’s degree from the Maastricht School of Management september 2005 Named permanent secretary in the finance ministry August 2008 Became director of the East African Development Bank february 2013 Named governor of the National Bank of Rwanda

without that, we expect this trend to continue as we try to build our exports. The biggest challenge is that our export base has not been growing fast enough to catch up with imports. We have had double-digit growth in our exports – almost over 20% this year – but the import bill is still quite high. We have high demand for foreign exchange because our economy is growing and most of the materials and goods used to grow this economy are imported. This exerts pressure on the exchange rate. But as we increase our exports, the depreciation itself is a catalyst to increase the competition of our export sector. Our biggest worry about depreciation is how this translates into inflation. But if it is still at levels where it is not translating into inflation, it is not worrisome. ●

The Exchange’s core function is to ensure integrity of trade

+250 78 819 7000

Interview by Honoré Banda in Kigali

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country focus | rwanda

Tourism

New hotels and infrastructure raise Kigali’s game Global chains, direct flights and a state-of-theart conference centre will bring yet more visitors to a capital in demand

The Kigali Marriott will be the first in sub-Saharan Africa

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wanda’s drive to become a conference hub is gaining speed with the anticipated entry of two global hotel brands in 2014. Rezidor, owners of the Radisson brand, and Marriott are expected to open hotels by the end of this year, improving the country’s competitiveness. The Kigali government had projected revenue from conference tourism to reach $40m by 2012, but the shortage of high-end accommodation denied the capital the competitive edge enjoyed by Nairobi, Kampala and Dar es Salaam. Serena Hotel is currently the only five-star facility in Rwanda. The completion of the $300m Kigali Convention Centre (KCC) – a facility that will house the five-star Radisson Blu with 292 rooms, an information technology office park and a conference hall that can seat 2,600 people – will improve Kigali’s performance in the service sector and also attract tourists and boost revenue. Though

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the KCC might not open until 2015, the Radisson Blu is scheduled to open for business by mid-2014. building on EXPERiEnCE

“Rwanda has attracted many international events and conferences, and now we are strategically positioned as a destination for conferences, which need the right logistic and accommodation in order to be relevant in the global arena of events and conferences,” says Hubert Ruzibiza, the head of services

development at the Rwanda Development Board (RDB). While the service sector currently accounts for 47% of gross domestic product, the government plans for this to rise to 55% in 2020 to make it the leading job creator in the economy. “Such an entry [of five-star hotels] in our market represents a huge opportunity for job creation, with more than 70% of jobs created in Kigali for the past 10 years in the services sector,” Ruzibiza explains.

NCARe

NOUVELLE COMPAGNIEAFRICAINE DE REASSURANCE Rez-de-chaussée Immeuble les Harmonies Abid Abidjan bidjan Plateau 01 BP 5962 Abidjan 01 - Côte d’Ivoire - Tel 00 225 20 21 92 06 - Fax 00 225 20 21 90 73 Email : infos@nca-re.net ; nazaire.abbey@nca-re.net ; demola.bukola@nca-re.net achille.sosso@nca-re.net ; jean-jacques.tah@nca-re.net


Total revenue from tourism climbed to $281m in 2012, up from $251.3m in 2011, according to statistics from the RDB, making it the country’s top foreign-exchange earner. In 2013, the sector generated $217m between January and October, which represents a 4% increase over the same period in 2012. The government is targeting annual revenue of $860m by 2017. training centre

The limited availability of skills also poses challenges for the service sector. As a result, the Kigali Marriott, which will have 237 rooms, has also set up a training centre for its staff. It is hosting some 30 employees attached to its brands in the Middle East. The hotel had been slated to host the 49th annual meeting of the African Development Bank group and the 40th meeting of the African Development Fund in Kigali in May, but the opening has now been delayed until December 2014. Demand for hotel space has surged in recent years with an increasing number of tourists, expatriates and businesses seeking regional expansion. The number of hotel rooms available, currently estimated at 6,500 rooms, is insufficient to meet rising demand.

Tourism is Rwanda’s top foreign exchange earner, and the aim is to triple it by 2017 “Improved availability of accommodation and connectivity means that Rwanda can attract more conferences it is not attracting at the moment. Kigali can be made a preferred destination by making accommodation affordable and available,” argues Solomon Adede, deputy CEO of New Century Development, which owns the Kigali Marriott. Rwanda is also counting on the aggressive expansion of its national carrier RwandAir to boost its ability to host conferences. The airline is purchasing more aircraft and launching new routes and more direct flights to the country. This is in addition to the launch of more directs flights to Kigali by airlines including Turkish Airlines and Qatar Airlines in 2013 and 2012, respectively. Brussels Airlines had been the only international airline operating direct flights from Europe to Kigali before KLM started its flights in 2010. ● Honoré Banda in Kigali

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country focus | rwanda

Rwanda and DRC are milking the cellphone industry’s demand for minerals, but at what cost?

Hereward Holland/reuters

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mining

Contested abundance A damning UN report has cast new doubt on Rwanda’s claim to export only conflict-free minerals, increasing the need for an effective tagging system

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ongolesepoliticiansregularlyaccuse Rwandan actors of exploiting mineral reserves in the east of the Democratic Republic of Congo (DRC). In turn, the Rwandan government denies the country is a conduit for Congolese conflict minerals. But given tense security and diplomatic relations between Kinshasa and Kigali, an improved tagging system could help. In 1996, Rwandan and Ugandan forces had invaded the DRC to topple the regime of Mobutu Sese Seko. Rwanda’s main mineral exports are tin ore (cassiterite), coltan (columbitetantalite) and tungsten ore (wolframite). Revenue from the sector used to be tiny, but mineral export earnings began rising rapidly in 2000. Rwanda earned an estimated $263m from mining exports in 2013, nearly double the $133m brought in from sales of tea and coffee. The 2013 mining export figure was the highest ever for the sector and nearly double earlier forecasts. The International Monetary Fund (IMF) says it expects earnings from mining to keep going up, rising to an anticipated $335m by 2018. In the latest review of Rwanda’s poverty support instrument (PSI), published in December 2013, the

IMF says: “Export volumes for major mineral exports […] have risen following substantial investment in the sector and favourable price developments, especially of coltan. In particular, seven new mines, including foreign-owned and operated, started up in 2013.” smugglers prove adept

Tin, coltan and tungsten ores are found in far greater abundance in neighbouring DRC, and there is a widespread perception that much of the mineral output exported from Rwanda as Rwandan in origin is, in fact, Congolese. According to a leaked version of the final 2013 report of the United Nations Group of Experts, the group “documented cases of smuggling of tin, tungsten and tantalum from Congo to Rwanda”. The report said that during the second half of 2011, Rwanda exported 583tn more minerals than it was recorded as producing, but that production and export figures more or less matched up for 2012. During the first four months of 2013, however, Rwanda officially exported 198tn more than it produced. Since 2011 the Rwandan government has implemented a minerals traceability and tagging system designed to com-

bat smuggling and fraud, devised by the international tin industry association, ITRI. The idea is that the system mitigates the risk of Rwandan mineral exporters financing conflict in the DRC by ‘laundering’ untraced minerals from there that may have benefited armed groups and/or the Congolese army. All mineral exports from Rwanda are now tagged, with the tags indicating the origin of the minerals. Government agents are supposed to apply these tags at the mines. In its 2013 report, however, the UN Group of Experts said that traffickers were smuggling Congolese coltan to Rwanda via Goma and then attaching Rwandan mining tags: “This smuggling takes place by truck at small border crossings […] and normally involves transferring bags of tantalum between trucks close to the border, and payment in cash to Congolese and Rwandan soldiers stationed at the transit point. The smuggled tantalum is then taken to warehouses in Gisenyi where it is tagged.” The ITRI is now experimenting with an improved system in which tags are scanned using devices with a Global Positioning System element recording exactly when and where the scanning took place. This should make it harder for fraudsters to put Rwandan tags on Congolese minerals. The change is urgent, as the latest Group of Exports report has undermined the credibility of Rwanda’s claim to export only domestic and ‘conflict-free’ material. If buyers think they risk purchasing laundered Congolese minerals that have financed conflict, they could stop buying, and Rwanda’s mineral export earnings would then plummet. ● Gregory Mthembu-Salter in Kigali

1000 800

Export earnings 2011-2013 ($m) 820.7

Exports…

650.7

600 400 300

…of which: Minerals Tea and coffee 2013 (new official estimate)

250 200 150 100

2011

the africa report

2012

263.1 159.3 139.3 133.2

2013 (Change between initial & latest estimates)

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38th ANNUAL GENERAL MEETING OF THE FANAF OUAGADOUGOU (BURKINA FASO), FROM 17 TO 21 FEBRUARY 2014 LOCATION: OUAGA 2000 GENERAL THEME:

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DEADLINE: 15 JANUARY 2014 INFORMATION: : www.fanaf.com/prix-de-la-fanaf.html


RAWBANK intends to continue its leading position in the banking sector of DRC for which it is deploying a strategy to that effect. Thierry Taeymans Chairman of the Executive Committee RAWBANK • April 2014

This strategy is based on the following four key aspects, which directly involves the top management and departments of the bank towards a customer centric approach. ! The commercial aspect : the principal objective is to adapt to a continual change in the products and services to meet the needs of different clients in different segments via different distribution channels. ! The client relationship aspect : this aspect aims at consolidating the different competences of RAWBANK staff between the support center and the client managers to harmonize the client-bank relationship. ! The organizational aspect : this aspects aims in strengthening the internal process by adopting the industries best practices and methods. ! The institutional partnership aspect : RAWBANK is joining hands with different internationally recognized institutional partners, to position itself as the preferred banking partner in DRC, ensuring comfort and security to its customers - international as well as local.

Client

advantage We at RAWBANK strive to provide a gamut of products and an array of services, through quality, innovation & creativity and distributed through the different banking channels, thereby providing customer delight.

RAWBANK has signed new agreement with Proparco and the Frankfurt School of Finance & Management thereby adding to the existing list of agreements with the International Finance Corporation (IFC – World Bank Group), the European Investment Bank (EIB), the French Development Agency (AFD) and Proparco. In May 2014, the IFC renews its trust in RAWBANK by making available a new credit of USD 15 million intended for the financing of the SME sector in DRC. Registered Office 3487, Bld du 30 Juin (Gombe) • KINSHASA +243 81 98 32 000

www.rawbank.cd


country focus

Democratic Republic of Congo

Gwenn DuBourthoumieu/afp

Where there’s a will there’s a way: Kabila considers his options

stay

Will he or will he go? Electoral and constitutional changes proposed in June suggest that President Joseph Kabila will attempt to stay beyond the end of his last term in 2016. Political uncertainty has slowed peace negotiations, the national dialogue and improving the economy outside the mining sector By Gregory Mthembu-Salter in Kinshasa

the africa report

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N

othing is moving”, saysaKinshasa-based businessman as he shakes his head. “To move this project forward, I need the go-ahead from the minister. But no one is signing anything. For months now, they have been sitting on their hands,” he explains. Ever since President Joseph Kabila announced in October 2013 that he would bring in a new government, the current administration – headed by Prime Minister Augustin Matata Ponyo – began grinding to a halt. The political class

45


46

country focus | democratic republic of congo

imProveD sanitation facilities (% of population with access)

31%

was awaiting a decision on the new governing team. Months later, the wait continues, and the list of unfinished business grows ever longer. The government and the mainly Tutsi rebels in the Mouvement du 23 Mars signed a peace deal in December 2013, but that has not resolved the question of instability in the east (see page 58). The Forces Démocratiques pour la Libération du Rwanda, made up of Hutus that conducted the Rwandan genocide in 1994, said that the group’s fighters would surrender in May. Diplomats have been dissatisfied with the follow-up on that promise, and the United Nations peacekeepers and national armed forces have threatened new offensives. Problems related to demobilisation, reintegration and amnesties have derailed previous peace efforts in the east. A revision of the 2002 mining code, which has been hotly debated by the government and mining companies for months, is still unfinished. There is no clear timetable about when it might be completed. A law about investment in the oil sector has also not been finalised. The government has not delivered on its promise to draft new legislation on insurance either. A bill intended to encourage private investment in the energy sector sits unsigned on the president’s desk.

aGriculture, value aDDeD (% of GDP)

45%

vexed question

SOUTH SUDAN

CAR CAM. Kisangani GABON CONGO

Goma

KINSHASA

Atlantic Ocean

DEMOCRATIC REPUBLIC OF CONGO

UGANDA RWANDA BURUNDI TANZANIA

Lubumbashi

ANGOLA 400 km

ZAMBIA

drc in numbers PoPulation

65.71 million

life exPectancy

50

infant mortality (per 1,000 live births) GDP (current US$)

100

$17.20bn

GDP Growth (annual %)

7.2%

Source: WorlD BaNk 2012

inflation

1.6% (2013)

total reserves) (includes gold, current US$)

$1.6bn

fDi (current US$)

$2.9bn

fiscal deficit Domestic conflict Plunging commodity prices

Fiscal deficit (% of GDP) 25

Source: IuNDP

15 0.5

-0.5

2012

2013

2014

2015

growth/inflation 700

Inflation, annual average (% left-hand scale)

Real GDP growth (% righthand scale)

600

4

400

2

300

0

Real GDP growth and inflation (1996-2012)

200 Source: IMF

8 6

500

-2 -4

100 0

10

-6 1996 98

00

02

04

06

08

10

-8

two-term limit. Information minister Lambert Mende has insisted that President Kabila will not stay in power beyond 2016 and will not do anything to violate the constitution. His statements have done little to resolve the debate about the succession. In the country’s post-independence history, a head of state has never voluntarily left power. There is a lot of uncertainty about what would happen if Kabila decides to step down in 2016. The country’s civil war officially ended in July 2003, but the central government has not followed through on the holding of regular elections or sharing funds with provincial authorities, as mandated by the constitution. Kabila’s party, the Parti du Peuple pour la Reconstruction et la

In the absence of official information, a plethora of rumours and theories have been circulating in the capital. Prime Minister Matata Ponyo will keep his job or he will be dropped. National Assembly president Aubin Minaku will replace Matata or Senate president Léon Kengo Wa Dondo will. Or maybe it will be someone else entirely. There is a rough conIn DRC’s post-independence sensus, though, that whohistory a head of state has ever heads the new government will somehow have to never voluntarily left power manage the vexed question of 2016. Kabila’s second and final term Démocratie (PPRD), has not openly dein office expires in two years, after which bated the succession and the National the constitution requires elections and Assembly is fragmented and includes many independent candidates and small a new president. The United States government made a personality-based political parties. strong call for Kabila to respect the conSince the end of the national politstitution. Secretary of State John Kerry ical consultations that Kabila organvisited Kinshasa in May and called on ised in September and October 2013, Kabila to abide by and not alter the conopposition alliances have been shiftstitution. Adding to the pressure, the ing. There are now three main opposiEuropean Union has backed Kerry’s call. tion groupings. Longtime oppositionist Congolese public opinion appears firmly Étienne Tshisekedi, who scored 32% at infavourofmaintainingtheconstitution’s the contested 2011 presidential elections, the africa report

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country focus

Baudouin Mouanda for Ja

The new laws would target elections from the local to the presidential level. There may be a way to amend the laws without changing the constitution. Insiders suggest the plan hatched by Kabila and his allies is to amend the electoral law, changing the way the president is elected from universal suffrage to an election by delegates to the National Assembly. In this way, they argue, the president could serve another term without removing constitutional term limits. In addition, they would amend the rules so that local councillors rather than voters elect provincial deputies.

leads one constellation. Senate president Kengo Wa Dondo and former National Assembly president Vital Kamerhe represent the other two. Members of the opposition have formed umbrella groups, such as the Forces Acquises au Changement and the Front pour des Elections Crédibles, but so far none of them have been able to unite Kabila’s principal critics. Tshisekedi and Kamerhe both lambasted the national dialogue held last year and said the government was not interested in real dialogue. Amidst the political uncertainty related to 2016, will the army stay loyal? Will the civil service keep functioning? What will happen in the provinces, and particularly in Katanga, where new rebel groups have become active over the past few years, and what about the east? Would a new

Construction and business projects have ground to a halt because of ministerial phlegm

president leave Kabila and his riches alone or arrest him? Would the country’s interfering neighbours stay out of the issue or get involved? To add to all the unanswered questions about Kabila’s departure, there are many others about how he could justify staying on, particularly since changing the constitution has become problematic. Kabila had sought to use the national dialogue to gather support for another term in office, but in this he was unsuccessful. On 9 June government spokesman Lambert Mende announced the government’s decision to propose new electoral laws and revisions to the constitution.

buying time for kabila

Opposition parties are likely to claim that the proposed amendments are substantial enough to require changes to the constitution, but the newly created Cour Constitutionnelle has come to Kabila’s rescue in the past and can probably be relied on to do so again. A possible compromise, particularly if donors voice their opposition to such plans, would be to put the proposed changes to the electoral law to a referendum. Donors will no doubt refuse to pay, and months could slip by. Since the main motivation behind the plan is to buy Kabila time, all delays would be welcome. Holding a national census could be another reason for delay. There has not been a census in the Democratic Republic of Congo (DRC) in decades. The resulting dearth of up-to-date information hampers development work, so donors might be tempted to pay for one. Conducting a census is bound to be a lengthy, difficult and expensive process. The government is likely to insist that it must be completed before another general election can be organised. ● ● ●

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47


JUNIOR D.KANNAH/Afp

48

The next part of the plan is to hold local elections, which have not happened since the end of the civil war. AfterannouncinginJanuarythatthepolls would be held this year, the electoral authorities announced in late May that they would take place between 14 June and 15 October 2015. Like the census, local elections are set to be slow, pricey and fraught with difficulty. The opposition group Sauvons la République Démocratique du Congo called the election timeline “a provocation” and said that a census covering more than 2.3m square kilometres and an estimated 76 million people will take an unknown period of time to complete. A census and a potential referendum on changes to electoral law could easily take the DRC past the 2016 constitutional deadline. ●●●

economy surges ahead

The final part of the plan could be the trickiest – namely the claim that with a new electoral law in place, Kabila would be entitled to two further terms as president. Opposition parties and Western donors are sure to oppose such an argument. Whether donors would be prepared to attempt to prevent it from happening is another question entirely, particularlywithCentralAfricanRepublic and South Sudan in such turmoil already. For all the political torpor, the DRC’s economy continues to surge ahead. Real gross domestic growth was measured at 8.2% in 2013 and could rise to 9.4%, one of the highest rates in the world, in 2014. Most of this growth is due to rising mining production. According to official statist-

ics, copper output rose from 620,000tn in 2012 to 957,000tn in 2013, a year-onyear increase of 54% and a near-record level of production. The rise is the result of several years of investment in Katangan copper mines by international operators. It would have been higher still if the companies had access to sufficient electrical power (see page 54). There is a growing energy deficit, particularly in the mining sector, with companies often resorting to expensive diesel-fuelled generators to keep their machines running.

Delegates in the National Assembly may be the only ones with a vote in the next election

Outside the mining sector, there is continued growth in telecoms. In midMay, South Africa’s Vodacom Group announced that the International Chamber of Commerce had ruled in its favour in a long-running dispute with its minority partner in the DRC. Company officials said the ruling means that it would now “significantly increase” its $100m annual capital expenditure in the country, where it has 10 million subscribers.

Bandundu Bas-Congo Equateur Kasaï Occ.

Access rate by province (%)

Kasaï Or. Katanga Kinshasa Maniema Nord-Kivu Province Or. Sud-Kivu

SOURCE: MRHE

0

10

20

Urban areas (2011)

Access to electricity

30

40

50

Rural areas (2010)

35%

1%

SOURCE: WATER AND ELECTRICITY MINISTRY

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In other sectors, though, many companies report that economic growth is anaemic and complain that consumer purchasingpowerremainsweak.Reliable statistics are hard to come by, particularly in the agricultural sector, where activity remains almost entirely absent from official data. The government is launching a series of agricultural projects to raise production, fight food insecurity and provide jobs (see page 62). investor caution

Investors, too, have been wary. In late 2012, for example, no suitable companies bidforacontracttomanagebustransport in Kinshasa. The government says that the recent peace deals in eastern DRC will allow foreign investors to return, but most prefer to wait and see. A law about local ownership could deter them from investing in the agricultural drive. Industry analysts say the construction sector has weakened, with a number of private sector projects on hold. The end to a series of disputes with Chinese in-

Mining and telecoms drive the country’s growth, while other sectors face apathy vestors and financial institutions means that the infrastructure and mining sectors will receive a boost (see page 60). The country’s small oil sector, meanwhile, continues to produce more controversy than barrels per day (bpd). Daily oil production remains at just 22,000bpd from a small number of Atlantic offshore wells.TalksbetweentheDRCandAngola, which occupies a number of lucrative offshore blocks that are claimed by the Congolese government, have not led to any progress (TAR 61, June 2014). There is little activity on the Lake Albert oil blocks held by Foxwhelp and Caprikat, twoBritishVirginIslands-registeredcompanies linked to Israeli mining mogul Dan Gertler, who has a close relationship with President Kabila. In April, London-listed Soco International launched a seismic survey of Lake Edward in the UNESCO World-Heritage listed Parc National des Virunga. Following the release of a documentary that appeared to show bribery and payments to rebels, Soco said it would not continue work in the park. Comments by its deputy CEO in The Times, however, suggestedthecompanyistryingtoredraw the boundaries of the protected site. ● the africa report

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Avenue Moswaya, 6 / Ma Campagne Commune de Ngaliema, Kinshasa R. D. Congo - Tel.: +243 815681354 Email: lomakrdc@yahoo.com www.lomakrdc.com LOMAK sarl Eric Okuka Chief Executive Officer

LOMAK construction is the DRC import specialist for: Equipment and tools for construction, Spare parts for vehicles and trucks, Pant and construction equipment, Scaffolds, ladders and other access equipment, Harbor vehicles and machines such as reach stacker, loading frames… Bucket lifts, aerial lifts, loading shovels… Light vehicles, 4x4, heavy vehicles and industrial trucks.

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country focus | democratic republic of congo

mining More digging, more problems

State-owned Gécamines is continuing its restructuring plans but it has not shown a commitment to transparency or an ability to raise funds

T

he Générale des Carrières et des Mines (Gécamines) is one of the country’s most important stateowned companies and controls many of the Democratic Republic of Congo’s most valuable mining assets. Albert Yuma, chairman of the Gécamines board, is close to President Joseph Kabila and this relationship provides Yuma with invaluable protection, especially when he was under attack from Prime Minister Augustin Matata Ponyo and the International Monetary Fund for selling Gécamines assets to companies linked to Israeli magnate Dan Gertler at apparently bargain-basement prices over the past few years. At the Cape Town Mining Indaba in February, Yuma proudly announced to delegates that Gécamines had “at least” 10m tonnes of copper reserves and that the company’s debts had come down from $1.5bn to $1bn. Yuma said he was particularly excited about having purchased the minority shareholding in the Deziwa and Ecaille C copper and cobalt mines in Katanga, which Yuma said would be Gécamines’ flagship mines. He said they could produce 200,000tn of copper per year, but only once they benefit from up to $2bn in new investment. Independent estimates say the mines hold 4.85m tonnes of copper and 402,000tn of cobalt reserves.

Fleurette later reported that Gécamines This has has been a major factor in the used its minority stakes in the Kamoto past, encouraging Gécamines to sell off valuable assets at a discount so long as Copper Company (KCC) and ENRC’s Metalkol copper tailings project as colthere was a substantial signature bonus lateral for the loan. attached to the deals. The stakes are reckoned by most analysts to be worth far more than the value gecamines backs off sale In 2013, the Gécamines management of the loan, but in May Bloomberg reported that African Dawn had relinquished was taken aback by the level of opits rights to the collateral because most position from Congolese civil society of the loan had been paid, according groups and the prime minister to its to Fleurette. proposed selling of The revelations its stake in KCC, and Gécamines 460,000 company backed about the Fleurette annual copper the loan have raised conaway from the sale production cerns about whether in June of this year. (million tonnes) Gécamines has any Yuma now says that other off-sheet loans Gécamines prefers 100,000 and has called into to raise new funds (predicted) question the reliabinstead of selling as40,000 ility of Yuma’s claim sets, but it estimates that the company’s its funding require1986 2013 2016 debt was dropping. ments at $2.7bn. This will make it even The KCC experiharder for Gécamines to persuade scepence is likely to make Yuma warier about tical international investors to contribute attempting similar sales in the buildfunds to develop Ecaille C and Deziwa. up to 2016. However, if the pressure on him from his political masters to deliver As 2016 – the date when presidential elections are due to be held – draws them signature bonus cash becomes too nearer, precedent suggests that the politintense, Yuma could find it hard to resical elite in Kinshasa will be turning ist, no matter how great the uproar. ● Gregory Mthembu-Salter in Kinshasa to Gécamines for campaign funding. SOURCE: GECAMINES

redundancies

Yuma added that Gécamines was committed to becoming a leaner operation as part of its 2012-2016 restructuring plan. He promised to cut the labour force by up to 5,000 people, which he said would cost the company $160m in redundancy payments. YumawascoyaboutwhereGécamines had found the money to buy the stake in Deziwa and Ecaille C. Since the Indaba, however, it has emerged that Gertler’s Fleurette Group lent Gécamines $196m to take over the mines via a company called African Dawn Finance, which is registered in the Cayman Islands.

GWENN DUBOURTHOUMIEU

52

No smoke without fire: Gécamines is shrounded in complex and murky deals the africa report

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1995 > Expansion into the Rest of Africa 2001 > The principal companies in Africa merge and form Exp

EXP-Agency (www.expagency.biz) that ultimately led to the creation of EXP-Comunicart, one of Sub-Saharan Africa’s first marketing agencies. Her work as the country manager DRC of EXP-Comunicart and her other ventures in the Democratic Republic of Congo has garnered much international recognition. In 2012, as part of the 63 young entrepreneurs chosen from 45 African nations, Patricia was invited by the U.S. State Department to the Young African Leaders Summit in Washington, D.C. Her key projects included a business-networking program, a reality television program what will be launching soon, and a bilingual magazine. The business-networking program, My Way Network, was born out of the goal to create a synergy of competencies between the continent’s top business figures and a medium for them to allow their stories, expertise and advice. Patricia’s magazine, International Working Lady, was dedicated to introducing the world to panAfrican female success stories. Patricia was nominated by Dutch multinational Vlisco as Inspired Young Woman of the Year in March 2013, for her accomplishments and potential that could pave the way for a change on the continent. In June 2013, Patricia was invited to Moscow to represent Democratic Republic of Congo at the G20 Summit’s Young Entrepreneur Alliance, with South Africa Delegates in recognition for her work in Africa.

In May 2014, she had a meeting with John Kerry during his Africa Trip where they discussed about the way she impacts women entrepreneur through her microfinance program women of the future.

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In July 2014, Patricia will take part at the G20 Summit’s Young Entrepreneur Alliance to represent Democratic Republic of Congo in Sidney (Australia).

Gombe Kinshasa Tel: +243 151 685 90

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DIFCOM/FC - Photos : D.R.

In March 2014 during woman month, Patricia launched in partnership with the World Bank, UNFPA and DRC ministry of gender, the first women Leadership forum in DRC named “Superwomen Leadership Forum”.


country focus

Harnessing the river: Inga II with Inga I behind. Inga III will add a further 4,800MW capacity

export 2,500MW to South Africa, while directing 1,300MW to the mining industry in Katanga Province and providing 1,000MW for the rest of the country. In order to do that, the consultants say that the production capacity must be 5,500-6,000MW to take into account that production levels are typically 15% less than the installed capacity and that about 10% is lost through the transmission process. The dam’s financing is far from resolved, too. Unusually, the World Bank said that its commitment to fund studies did not mean that it would participate in the dam’s construction. The World Bank is looking to maintain a leadership role in the project because Inga could be one of the most profitable hydroelectric projects in the world – with generation costs estimated at $0.03/kWh – and the African governors in the Bretton Woods institution asked it to support the project. However,non-governmentalorganisaWith the legal framework, tenders, impact studies tions have been pressuring the United and financing still to be finalised, construction States(US)government,thelargestshareof the dam is unlikely to start before the end of 2016 holder in the World Bank Group, not to participate in large dam projects. In Januother companies to submit their bids ary 2014, the US Congress approved an espite the desire of President last October. act that instructs government agencies Joseph Kabila and water reto oppose the financing of major hydrosources minister Bruno Kapandji Before the initial work begins, consultelectric projects through international Kalala to launch the construction of the ants have to complete environmental huge Inga III Dam in October 2015, nufinancial institutions. and social impact assessments for the project, which received finance of $33.4m merous obstacles mean that the date Inga III is a complex project that infrom the African Development Bank last is set to be pushed back. In March, the volves many actors, so further setbacks year. Several technical World Bank’s country director for the are possible. Nonethedecisions have not yet Democratic Republic of Congo (DRC), less, it is still attracting been taken, including Eustache Ouayoro, announced that the interest from across the exact location of first stone would not be laid until “near the continent. The Nithe dam, the depth of the end of 2016”. The World Bank apgerian government The World Bank estimates itsfoundations,theconproved a $73.1m grant for technical asmight be interested that DRC has the potential to generate around structionmaterialstobe sistance for Inga III on 20 March. in electricity imports, Before construction work begins, the usedandtheitineraryof said power minisgovernment will establish the Agence the transmission lines. ter Chinedu Nebo in March. Kapandji is also pour le Développement et la Promotion The lines are set to deof hydroelectric power trying to get the memd’Inga (ADEPI), which will be responsliver electricity to South ible for the management of the project Africa,eitherviaZambia bers of the Southern and Zimbabwe or via and the mobilisation of finance, estimAfrican Power Pool on Kinshasa’s side. “South Zambia and Botswana. ated at $14bn by the World Bank. The Africa is also interested World Bank is working on a special law in the phases that folfor the Inga project that the DRC parliacapacity issues ment will approve. ADEPI will also be The parties involved are low,” Médard Kitakani, communicationsdirectorfortheDRC’sSoalso discussing the size of the dam. The responsible for negotiating electricity ciété National d’Electricité, told The Africa consultants at South Africa’s Trans-Africa sales contracts. Report. The country could import 15% of Projects estimate that the announced The government says it pre-selected Grand Inga’s total generation capacity of capacity for Inga III – 4,800MW – will be three consortiums for the work in June 39,000MW, according to Kitakani. ● and July of 2013, but another group could too low to meet the government’s proFrançois Misser in Kinshasa play a spoiler’s role as Kapandji invited posed commitments. The DRC plans to

power

Inga III will have to wait

Jean-Luc DoLmaire/Ja

54

D

100GW

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country focus | democratic republic of congo

PeoPle to WatcH

Plotters, planners and peacemakers Questions remain about the amnesty and peace agreements in the east, but the political scene in the capital is focused on upcoming polls

Nations, may soon face challenges as senior vice-president for external relations at Tenke Fungurume. The Katangabased mining company is part of the Extractive Industries Transparency Initiative, but in May a dozen associations accused the government of neglecting to monitorinvestmentsinthesector,including at the Tenke Fungurume operations.

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Vincent Fournier/JA

addis ababa agreement

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BAudouin MouAndA For JA

lectionswilldominatethepolitical agenda over the next two years. Critics say that President Joseph Kabila is manoeuvring to stay beyond the end of his last mandate in 2016. Election officials announced in late May that local elections scheduled for the end of the year will finally be organised in 2015 between 14 June and 15 October. The Commission Electorale Nationale Indépendante (CENI) says that holding presidential elections in 2016 is “imperative”. CENI’s president,FatherApollinaire Malu Malu, explains: “CENI will never be part of the group of people wanting to go beyond 2016.” Still, several opposition leaders accuse Malu Malu of plotting to allow Kabila to remain in power. One of the most vocal critics is Vital Kamerhe (1). He was president of the National Assembly and helped Kabila win 2006 elections before creating his opposition party, the Union pour la Nation Congolaise, and running for president in 2011. As the debate goes on, there have been suggestionsthatPrimeMinisterAugustin Matata Ponyo, who has gained the support of the country’s donors, will not lead the government of national unity promised last October after national consultations. A source close to the presidency says National Assembly president Aubin Minaku could be nominated. Others bet on Senate president Léon Kengo wa Dondo, who was fourth in the 2011 presidential election, and Daniel Mukoko Samba, the deputy prime minister and budget minister. There has not been much political debate, on the other hand, since Parti Travailliste Congolais member of parliament Steve Mbikayi tabled a bill aiming at criminalising same-sex relationships late last year. The bill does not appear on the agenda of this parliamentary session. In the mining sector, André Kapanga, former ambassador to the United

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Bruno LéVy For JA

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For a lasting peace in the east, mediators are calling for the full implementation of the February 2013 Addis Ababa agreement signed by 11 African countries. The DRC government promised to implement political, social and security reforms, while the other countries pledged not to support rebel groups. François Muamba (2), the former secretary general of the Mouvement de Libération du Congo opposition party, is president of the Congolese government board charged with monitoring progress. The board’s operations have been slowed by poor organisation and a lack of funds. The parties signed the agreement after the Mouvement du 23 Mars (M23) rebels took Goma, the capital of Nord-Kivu. Government forces and an African intervention force defeated the rebellion at the endof2013.InFebruary,Kabilasignedan amnesty law that does not concern war crimes and crimes against humanity. In May,M23announcedthatitscombatants andpoliticalleadersinUganda–including politicalpresidentBertrandBisimwaand former military chief Sultani Makenga – had applied for amnesty. On the cultural scene, singer Lokua Kanza (3) celebrated his 20year solo carrier in Kinshasa with Fally Ipupa, Jean Goubald, Olivier Tshimanga, Richard Bona and Sara Tavares. Kanza’s main message was peace for the people of Africa and elsewhere. As the son of a Congolese father and a Rwandan mother, he stressed the importance for the two countries to improve their relations. Fashion stylistMeniMbughawill show his creations from 11 to 31 July in Kinshasa. His clothes have black and red symbols inspired by the art of pygmies living in north-eastern DRC. Mbugha’s ultimategoalistoopenaworkshopwhere pygmies could paint fabric to improve their livelihoods. ● Habibou Bangré in Kinshasa

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“ The Gift of God ”

M

ama Safi - just like her mother before her and thousands of other villagers across

the Democratic Republic of Congo - uses the remarkable Mutuzo plant to treat her

and her kid’s skin infections and irritations.

Our research with the National Institute for Biomedical Research has proven what Mama Safi and the Congolese already know – that a natural enzyme found in the leaves of Mutuzo can effectively treat skin infections, burns and rashes. For the first time, we’ve harnessed the natural medicinal power of Mutuzo in a range of aromatic soaps and creams. Our luxury Mateja products gently purify, sooth and cleanse, leaving your family’s skin naturally softened and refreshed – Congo’s natural soap. Learn more: www.marsavco.com


country focus | democratic republic of congo

diplomacy

Peace accords, but the puzzle still perplexes Despite the peace deals signed in Addis Ababa and Nairobi, problems related to Burundi, Rwanda and Uganda remain unresolved

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series of largely unconnected regional political challenges has created stumbling blocks for the government in Kinshasa and the region’s diplomats. Conflict with Uganda revolves aroundthepresenceofAllianceofDemocratic Forces-National Army for the Liberation of Uganda (ADF-NALU) rebels in eastern Democratic Republic of Congo (DRC) and amnesty discussions for the Mouvement du 23 Mars (M23) rebels in Uganda. The government’s relations with Rwanda depend on the status of the eastern-Congo-based Forces Démocratiques de Libération du Rwanda (FDLR) and the issue of refugee return. Meanwhile, the UnitedNations(UN)hasreportedthatthe ruling party in Burundi has sent its youth militia to Congo’s Sud-Kivu Province for training, raising tensions ahead of Burundi’s elections in 2015. Five months have passed since the Congolese government and the defeated M23 rebelgroupsignedtheNairobi accord to put an official end to the eastern DRC’s most recent wave of armed insurrection. As part of the international peace efforts in the Addis Ababa Peace, Security and CooperationFramework,thisaccordtries to resolve other issues with cross-border relevance, such as refugee return. amnesty headaches

The fateof M23 is an essential element for any normalisation of relations between the DRC and Rwanda. However, the Nairobi deal did not address all critical regional issues. The government’s first wave of amnesties included a couple of M23 political cadres. But the majority of

Kenny Katombe/reuters

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its forces, including political and military heads Bertrand Bisimwa and Sultani Makenga, continue to live in exile in Uganda, with others in Rwanda. There are no indications about when and how theirfutureswillbemadeclear.Moreover, there has been little meaningful progress in the repatriation of Congolese refugees, contrary to what is stipulated in the Nairobi deal. Against the backdrop of security challenges, the Congolese government and its partners in the UN peacekeeping mission’s Force Intervention Brigade have focused their recent activities on

The DRC has launched a $170m disarmament strategy aiming to disband 54 militias over 5 years

combating other armed groups, including ADF-NALU, an Islamist rebel group operating from strongholds around the town of Beni. While these operations appear to have been fairly successful so far, there has not been serious action against the FDLR, who are remnants of the Interahamwe groups that carried out the Rwandan genocide 20 years ago. The FDLR leadership made a diplomatic gamble by announcing the voluntary demobilisation of its ‘Nord-Kivu brigade’ in late May. However, the leadership followed up halfheartedly, lead-

The surrender of 105 FDLR rebels in Kateku was considered insignificant by the UN

ing to the surrender of 105 rank-and-file combatants with mostly old weapons to the UN in Kateku. A declaration from the UN and regional envoys described the move as insignificant. kigali drags its feet

While Kigali rejects negotiations with the FDLR, Congolese stakeholders seem divided about whether to push Kigali or to use military means. In this light, the joint Congolese and UN operations against the Alliance des Patriotes pour un Congo Libre et Souverain, a militia based in Masisi, raise important questions about the government’s priorities in eradicating armed groups, as the current UNSecurityCouncilresolutiondemands. The FDLR has massive historical, diplomatic and political relevance to regional stability and is an impediment to the new national disarmament process. UN reports say that Burundi’s ruling Conseil National pour la Défense de la Démocratie-Forces de Défense de la Démocratie has sent its Imbonerakure youth militia for military training in the Ruzizi plains in Sud-Kivu. Though the claims lack independent verification, there is a danger that parts of Sud-Kivu could become embroiled in politicomilitary struggles around the Burundian presidential elections in 2015. The role of President Pierre Nkurunziza is key to regional security due to the historical alliance between Congolese and Burundian armed movements. ● Josaphat Musamba Bussy and Christoph Vogel in Goma

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country focus | democratic republic of congo

china/DRc Sicomines deal back on track

that was to secure generous fiscaladvantagesforSicomineshadnotbeenapproved by the Congolese parliament. As the bank pulled out, the Chinese parties had to reimburse the approximately $1bn that the bankhadalreadydisbursed towards the infrastructure and mining projects.

After pulling out in 2012, China Exim Bank has revived its financing deal for mining and infrastructure projects

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heDemocraticRepublicofCongo’s (DRC) ‘China deal’ – using the profits from a copper and cobalt mine to finance infrastructure and mining investment – is central to President Joseph Kabila’s development plans. In 2013, officials announced that progress was not being made because of a conflict over the financing structure, but the multibillion-dollar deal with China Exim Bank has now been reinstated. Implementation of the infrastructure projects will continue after two years of standstill. A well-placed Chinese source who requested anonymity says that preparatory work on the mining site started in April 2013, and the government has confirmed that the mine will begin production by the end of 2015. mine to reimburse credit

First signed in 2007, the deal brings in a credit line on commercial terms to finance a mining project and infrastructure projects, mostly comprising roads in Kinshasa. The credit line is due to be reimbursed with profits from the mine that is operated by a Sino-Congolese joint venture named Sicomines. It includes the Chinese state-owned enterprises China Railway Engineering Corporation and Sinohydro and the private company Zhejiang Huayou Cobalt. The Congolese parastatals Gécamines and the Société Immobilière du Congo hold a 32% stake. The Sicomines agreement has been troubled since its early days. Civil society

Sicomines mining project

Copper reserves 6.8m tonnes

*before operating costs, taxes and loan reimbursements SOURCE: BCPSC/THE LONDON METAL EXCHANGE

Value* ay) M (as of 28 $47.3bn

surprising rifts

For many Western observers, this was a revelation. Few analysts thought that there could be such disagreement between Chinese corporate actors. The idea of a monolithic China following a coordinated plan for its overseas ventures remains deeply embedded in the view of the Western media. The pullout was not the end of the road, however. In March 2013 when the events were reported, the Congolese workers parties had already been groups criticised the circle look lively for a visit back at the negotiating around President Joseph by their future table for several months. Kabila for non-transparent paymasters, Ekanga has confirmed management of the agreethe China Railway to The Africa Report that Engineering Corp ment, and it was revised China Exim Bank “has resumed the financing since in 2009 following concerns lastyearfortheminingprojectand[since] from the International Monetary Fund this year for the infrastructure projects”. (IMF) that it burdened the DRC with According to Ekanga, the bank went unsustainable debt. To satisfy the IMF’s back to the negotiating table in late 2012 demands, the amount of infrastructure because of the competition offered from financing was capped at $3bn and the China Development Bank and the Bank sovereign guarantee that had covered of China, which had started negotiations the mining loan was removed. The inwith the Chinese parties to the Sicomfrastructure projects remain covered by ines deal. In policy circles there has been the sovereign guarantee, however. widespread concern that Chinese loans In 2013, Moïse Ekanga of the Bureau de Coordination et du Suivi du Programme may cause a new cycle of indebtedness for African countries. However, the prinSino-Congolais (BCPSC) revealed that cipal goal for China’s banks is to ensure there were problems related to the deal. commercialviabilityand,likemostbanks, China Exim Bank had pulled out as the they will only disburse loans if they have financier in early 2012 after some of its firm guarantees for reimbursement. demands had not been met. Namely, The bank has not explained why it dethe bank insisted on taking over the cided to return. However, the adoption Congolese side’s 32% share and mortby the Congolese parliament in February gaging the Chinese parties’ 68% stake 2014 of the law safeguarding the tax exuntil reimbursement was completed. emptions provided to Sicomines is likely The bank also considered the 25-year to be one of the reasons for this. ● reimbursement period too long and Johanna Jansson found it problematic that the law Katrina Manson/reuters

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country focus

The government plans to turn the DRC into a land of plenty

YannicK TYlle/corbis

agriculture

Farming zones to fight rising imports The main policy of the government’s agricultural plan is the creation of 20 agro-industrial parks, but Kinshasa may have trouble attracting foreign investors

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The pilot zone covers 75,000ha at his is a crucial year for the Democratic Republic of Congo’s (DRC) Bukanga-Lonzo in Bandundu Province. ambitious plans to combat food It is due to begin production in 2014 and insecurity with the creation of 20 special involves South African fertiliser company agricultural zones. The zones, which will Triomf,andSuidwes,whichisspecialised be piloted in 2014 and eventually cover in equipment, finance and agricultural consultancy. The agricultural zones will 1m hectares, are the centrepiece of the government’s Plan National d’Investissehave three components: commercial ment Agricole 2013-2020. Agriculture farms with an average size of 1,000ha, minister Jean Chrysostome Vahamwiti support for smallholders working near says the goal is to “favour import substithe sites and the creation of agricultural tution in the field of food production.” cooperatives. SOPAGRI is due to deliver The plan has a proposed budget of $6bn, services and set up processing plants. with two-thirds of the funds due to come South African soil specialists who from the private sector. In June 2013, the started soil testing in February said that government said it and its partners had the land was not easy to work on and already provided $2.5bn for the plan. the topography posed problems. The Vahamwiti says the government plans programme will adfor the site to house dress the weaknesses Price of a basket ❒ 1kg of rice, 24m chickens and ❒ 1kg of beans, of goods of the current system. produce 300,000tn ❒ 1kg of salty October 2012 These include the absence of cassava per year fish, of integrated networks that at full capacity. ❒ 1kg of beef link farmers to consumers, Ghana weak basic infrastructure investors want $15.30 more and limited agricultural Congo B. One of the challenges services. In addition, $17.60 to attracting foreign agricultural industries Côte d’Ivoire tend to be concentrated investmentisthelegal $15.80 around Kinshasa. framework, which inDR Congo cludes a law that enConsultants at South $29.70 Africa’sMozFood&Energy sures a majority share have identified the sites for for local companies the proposed agro-industrial in agricultural conparksandcreatedabusinessplan cessions. According for each of them. The Société de to Vahamwiti, “the Parcs Agro-Industriels (SOPAGRI) government is thinkwill manage them using a publicingaboutreducingthe minimum participaprivate-partnership model. SOURCE: MEENA FINANCE (2013)

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tion in agricultural projects so that this question does not become an obstacle.” The DRC is increasingly dependent on imports after “a drastic drop in per-capita agricultural production”, Vahamwiti says. According to the government’s estimates, agricultural imports will reach $1.5bn this year. Food imports grew more than five-fold from 2001 to 2010. The government estimates that a basket of imported goods costs nearly twice as much in the DRC as it does in Ghana. This trend of a drop in production and rising imports has accompanied a degradation in nutritional outcomes. The number of undernourished people in the DRC increased from 11.4 million in 1990 to 43.9 million in 2006. The displacement due to conflict, the system of subsistence production – which has low productivity, low levels of input use and rudimentary technology – and the reluctance of banks to lend have all contributed to the low levels of food security. Agriculture has not been a high priority for the government, either. In 2013, spending on agriculture represented only 1.75% of the national budget. However, the government is now setting the scene for change. It says it will follow Nigeria and Ethiopia’s example and create the Agence Congolaise de Transformation Agricole to foster cooperation on projects across the many ministries that operate on the sector. John Ulimwengu, the prime minister’s special adviser on agriculture, explains that production at the parks will only rise gradually as each element of the value chain is addressed. He says that the proposed investment in the parks will lead a 2.5% rise in average maize yields per hectare. ● François Misser in Kinshasa

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info@primature.cd www.primature.cd/public/investir


country focus | democratic republic of congo

A pioneer in retail banking, Rawbank was one of the first in the DRC to issue credit cards

Baudouin Mouanda for Ja

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Finance

Rawbank continues to grow despite weak markets The potential of the DRC banking sector is limited, but Rawbank is still seeking to innovate and capture a larger share of the national customer base

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perating in a difficult business environment, Rawbank has gone from a newcomer about a decade ago to the market leader today, controlling more than 20% of the market. The challenges for banking in the Democratic Republic of Congo (DRC) are immense. The World Bank estimates that there are fewer than a million formal bank accounts for a population of around 70 million, which means banking penetration is lower than 2%. The sub-Saharan Africa average is 25%. Rawbank appeared in The Africa Report’s list of Africa’s top 200 banks in 2012, just a decade after the bank’s launch. A subsidiary of the Indian group Rawji, the bank started with a few dozen employees and now boasts more than 500. The youngest of the DRC’s financial institutions, Rawbank now has 36 branches across the country. Part of its success has been achieved through deploying the latest technology to keep costs down. The huge distances and dispersed population have meant that traditional banking has high administrative costs. The country’s older banksdolittleoutsidethecountry’surban

centres. In 2012, Rawbank partnered with computing company IBM to allow customers to access their accounts on their mobile phones via text messages. Rawbank is seeking out Congolese peoplewhodonothaveaccesstobanking services, with accounts aimed at young people, loans for small companies and preferential credit for women business owners. Its Lady’s First programme has loaned more than $3m to Congolese women and their businesses. To boost its reach among small companies, Rawbank received a $15m loan from the International Finance Corporation on 8 May. “This will strengthen our leadingpositioninDRC’sfinancialsystem and enable us to reach more small and medium-sized enterprises, which are the backbone of the emerging economy in DRC,” Rawbank chief executive Thierry Taeymans told reporters.

of its clientele. Among its strategies to target young people, the bank has created the Academia account, which makes up around 10% of deposits. It was among the first Congolese banks to issue credit cards, as well as to allow customers access to accounts on an online platform. But while retail accounts and small consumer loans are growing, the corporate market is still small. Larger companies often prefer to rely on foreign banks or to receive finance from parent companies, especially for large loans that Congolese banks are unable to extend. New economic activity – agribusiness in Equateur and Bandundu, and mining in Katanga and Orientale provinces – is helping to create new business. The decision to join the Organisation pour l’Harmonisation en Afrique du Droit des Affaires, a regionally harmonised business law framework, has brought greater securitytoinvestorsandhelpedtosolidify the arbitration processes. Tofindnewcustomers,Rawbankhasto look elsewhere for growth. The decision of the Congolese authorities in April 2013 to pay government salaries into bank accounts may be one possible avenue. But there is a finite number of retail customers left, argues Michel Notebaert, deputy chairman of Rawbank: “The banks that have recently arrived in the DRC thought that – because of the low level of bank penetration–theCongolesemarketcould be rapidly developed. Their model does not correspond to reality. The growth in accounts is not exponential.” Thepublic,mostofwhomremainpoor, are still wary of banks. The various bank collapses of the 1990s led many families to lose their savings. ● Muriel Devey and Nicholas Norbrook

innovations aplenty

To keep its place as market leader, Rawbank has tried to keep close to its customers and to innovate with new products. The bank was a pioneer in retail banking, which represents 60%

branches nationwide

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democratic republic of congo | country focus

profile

name. “To escape this stupidity, I left this place,” he says. The chosen destinationwasobvious:Kinshasa. Heworkedintheadvertisingsector and, in 1991, founded Les Publications de l’Exocet, a publishing house mainly dedicated to comic books and political satire. “[They] sold like hot cakes, until the day I published Dernier Sandruma na Kinshasa, an account of the 1991 looting. The army started arresting vendors, but none of them denounced me,” recalls Bofane. Having sent his children to Belgium, Bofane took up arms to defend his quarter of Kinshasa in the 1993 looting with a Ninja batallion possessing a single Belgian assault rifle. On arriving in Belgium as an undocumented migrant, he worked odd jobs: construction worker, bouncer in a nightclub and in the voluntary sector. After achieving his first literary success with a children’s story in 1996, he published his first novel, Mathématiques Congolaises, in 2008. His aim was to “give the Congolese people back their dignity” by denouncing “oppressive systems”.

In Koli Jean Bofane Author

Witches’ brew

The Congolese author has wielded both gun and pen in his eventful life. in his latest novel he draws the DrC’s excesses into a heady concoction of humour and horror

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The horror, as Kurtz from Joseph Conrad’s Heart of Darkness put it, began quite early for Bofane. “In 1960, we lost everything and almost got killed,” he explains. A quick escape to Belgium was the beginning of several return trips. In 1974, at 20 years old, he began studying for a degree in communications in Paris. Evasively, he also hints at “a tumultous life, gun in hand”. At some point he was “incarcerated” somewhere in Europe under a false

“you are next!”

pAuline beugnies/Out OF FOcus FOr JA

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he forest is at the heart of In Koli Jean Bofane’s novel Congo Inc., subtitled Le TestamentdeBismarck(Bismarck’s will). Not just any forest though, but the forest that men shamelessly violate to extract the riches clasped between its centuries-old roots. But the pygmy Isookanga – “a globalist who aspires to become a globaliser” – doesn’t care. Hehateshuntingmonkeysorgathering plants from the forest floor for his old uncle Lomama. What Isookanga likes is the brutal and unbridled capitalism of the internet strategy game Raging Trade. “As his virtual avatar Congo Bololo, Isookanga wants it all: minerals, petrol, water, land. Everything is ripe for the taking. In order to reach his goals, he advocates war and all its corollaries: bombings, ethnic cleansing, population displacement, slavery.” Through this litany of violence and oppressionBofaneshowshissense of humour and horror. Bofane was born in 1954 in Équateur Province. His mother left his father to marry a Belgian settler. “To some degree, it explains why I have a completely different view on all the history between blacks and whites”, he explains. As a child, he lived on his stepfather’s coffee plantation where he watched horror movies for the first time. A line spoken by a child in one of those films – “You are next” – stayed with him until it inspired him to create a child-witch character in Congo Inc.

Bofane’s writing is a skilful combination of political erudition, cruel irony and a delight in words. Through several well-chosen characters,CongoInc.brewsupaheady mix of the themes that run through the history of the Democratic Republic of Congo (DRC): the pillage of natural resources, gang rape, the craziness of Kinshasa, the ingenuity of shégués (street children), the abuses committed by neighbouring countries, the sexual lives of ‘expats’, the failings of non-governmental organisations and international agencies, etc. Connecting the local and the global, Bofane reminds readers that the Shinkolobwe mine in Katanga provided uranium for the nuclear bomb that destroyed Hiroshima. In this maelstrom of powerful images, a child from a horror film tirelessly repeats: “Yo waa nnex!” In Bofane the DRC has found a voice strong enough to describe its excesses. ● Nicholas Michel First published in Jeune Afrique

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politics

inTeRview

Moïse Katumbi Chapwe

Governor, Katanga Province

The reluctant politician in Congo’s powerhouse The cowboy hats, jeans and acclamation on the streets tell their own story: Katumbi is every inch a super-star football proprietor. He is also tipped as the DRC’s next president

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heDemocraticRepubup. Today, what is killing Africa lic of Congo (DRC) are those fake promises.” is never more united However strongly he denies it, than when its football Katumbi is widely seen as a conteams are winning. tender for the presidency. On the question of presidential ambitions, So when Moïse Katumbi’s team, Tout Puissant Mazembe, won the he is uncharacteristically coy and Confederation of African Footchuckles: “People always ask me ball Champions League trophy that question. The time for elecin 2009 and 2010, days of national tions is not yet there. We should try rejoicing followed. and help President [Joseph] Kabila Yet Katumbi’s day job since 2007 to realise what he promised to the has been governor of Katanga, a people. There are a lot of surprises province the size of Spain and the which can come.” richest in the country. For many, When pressed on the matter – Katumbi seems far from the madand although there is a ‘Katumbi ding crowd of Congolese politifor President 2016’ campaign on cians. He has some rich corporsocial media – his disavowal of ate backers for sure, but he also interest in the top job intensifies: has popular support and styles himself as Politicians don’t deliver. a reforming governor What is killing Africa are who delivers. In business since their fake promises his late teens, running transport and mining service com“I never wanted to enter politics. panies,hehasunsentimentalviews I don’t like politics. I was a very about politics: “When I came to successful businessman. My target today is to help President Kabila power, I said I’m going to run this province like a business.” In busito finish his mandate.” ness, non-delivery usually means That may be true, but what bankruptcy, says Katumbi, and comes after Kabila’s mandate is he laments that there are no such another story. Katumbi has been sanctions for politicians. “Get the raising his profile on the conferspeeches that African leaders have ence circuit, with corporate barons made and check. They make nice such as Glencore Xstrata’s Ivan speeches, but there is no follow Glasenberg singing his praises.

a man wiTh many missions 28 December 1964 Born in Katanga Province 1985 Earned his first $m in business 2006 Elected to the national assembly February 2007 Became governor of Katanga 2012 Named to the FIFA Strategic Committee april 2013 Refused to enforce the government’s export ban on copper and cobalt concentrates

Among the DRC’s political class, a mere mention of presidential ambition can cause convulsions in Kinshasa. Kabila, a member of the Balubakat ethnic group from Katanga, is due to finish his second term in 2016. The capital is already seething with gossip about how his allies plan to change the constitution to allow him another term or at least prolong the current one. On that subject, Katumbi is categorical: “President Mobutu [Sese Seko] stayed for 32 years in power. You can see the crisis we had because Mobutu stayed too long. I don’t think even President Kabila wants to change the constitution. I’m in his party, and I’m against people changing the constitution. We have to respect our constitution.” armed attacks

No president in Congo has ever left the office voluntarily. A spate ofarmedattacksinDecember2013 raised tensions a month after the armyseemedtobedefeatingrebels in the east. Followers of failed presidential contender Joseph Mukungubila are said to have killed more than 100 people in Kinshasa and Lubumbashi. Who or what was behind the attacks is hard to decipher amid the claims and counterclaims. Some saw them as a shot across Kabila’s bow in case he has plans to stay in office beyond 2016. Whateverthecase,Katumbisays hehasnotimeforsuchtactics:“We needaCongoinwhichpeoplehave been elected, not taking up guns. These people [rebels] are going to understand that they are going to face the law.” For a governor, Katumbi has strong views on national security and the need for a robust and well-trained army. Although militias have ripped across the poorer northern reaches

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politics

of Katanga, security is much improved in the wealthier southern zones, which host most of the foreign mining companies. Katumbi says the population of Lubumbashi, the province’s capital, has quadrupled to about five million since he became governor. Life in Lubumbashi – with new roads, shopping malls and luxury hotels – is far better than in Kinshasa, say the new arrivals and locals alike.

h lAth KAlpes

r IgrA fo

JA

mining transparency

For now, Katumbi’s own project – a business-savvy government with a dose of reform and a more efficient administration – has won him plenty of friends in Lubumbashi and its environs. Katumbi has presided over massive investment in Katanga’s copper and cobalt mines. His target is to get the mines to produce 800,000tn of copper this year. They churned out 750,000tn last year, compared with less than 20,000tn a decade ago. In the process, he has reduced some grand corruption,butitisfarfromeliminated. Indeed, Kofi Annan’s Africa Progress Panel reported that the Congolese state lost $1.4bn from the sale of underpriced assets to mining companies between 2010 and 2012. Katumbi airily dismisses suchclaims:“Thesecompanies are on the stock market. I inviteallthosepeopletocometo my province because we are working in a transparent way.” Rather than hit the companies, Katumbi says it is up to the government to explain what it is doing with tax revenue:“Arethepeoplebenefiting from this money or not?” It is that ability to meld his corporate ties with a vote-winning political platform that has served Katumbi well so far in his political career. If he wants to move onto the national stage, with all its complexities and compromises, his populist style will come under heavy strain. Nonetheless, he has no shortage of supporters urging him onwards. ● Interview by Elissa Jobson in Addis Ababa and Patrick Smith

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country focus Rwanda

Vincent Fournier/JA

Constructing the future means a shift from exporting raw materials into services

Middle-income or bust rwanda’s two decades of recovery have been remarkable. now it faces an uphill struggle to sustain economic growth in order to graduate into middle-income status. a liberalised financial sector has begun the country’s transformation but much will depend on the growth of its service sector

By Honoré Banda in Kigali

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t

he construction cranes shuddering over Kigali tell a similar story to those in so many of the continent’s capital cities. Few, however, have undergone such a dramatic turnaround. In 1994, rebel armies entered Kigali to eject a genocidal regime. Today, economic and social indicators across the board mostly blink green. The regime led by President Paul Kagame for the past 14 years appears well able to sit out the political noise generated by the assassination of former spy chief Patrick Karegeya in January, and United Nations reports that implicate the Rwandan

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country focus | rwanda

UGANDA DEM. REP. OF CONGO

Lake Kivu

TANZANIA

KIGALI

R WANDA

BURUNDI

50 km

rwanda by numbers

Population

GDP (current US$)

Inflation

GDP growth (annual %)

Life expectancy

Total reserves (includes gold, current US$)

Improved water source (% of urban population with access)

Internet users (per 100 people)

11.46 million $7.103 billion

63

81%

8%

$847.8 million

8%

Source: World Bank

4.2%

FdI, net InFlows $200m $150m $100m $50m 0

1994 96 98 00 02 04 06 08 10 12

Source: The World Bank

48

army in Congolese rebel movements attracting foreign investment. In 2013, (see interview page 50). the World Bank rated Rwanda as the Holding out against international second-best reformer since 2005 and public opinion is one thing. Vaulting placed the country 52nd in the world into middle-income status is another, in its doing business rankings. which is where the drying up of foreign exports slow to grow aid may complicate matters for Kigali. But while macroeconomic stability has The transformation requires a structural been achieved and the business envirshift of the economy away from the exonment is strong, there has yet to be any port of unprocessed natural resources real domestic private sector take-off. This into higher-value goods and services. Grossdomesticproduct(GDP)percapita hurts Rwanda most in its trade balance. stood at about $620 per person in 2012, The country faces a dilemma of boosting according to the World Bank, and would exports amid rising investment needs. have to rise to $1,036 to qualify Rwanda The country’s exports, though increasas a lower middle-income country. ing, have been growing at a slower pace A recent economic slowdown has not than its imports. Currently, the country only shaken business confidence but depends on a narrow export base dominated by coffee, tea and minerals. also forced the government to rethink its development financing mechanisms. Gone are the GDP per capita needs to rise days when state-controlled from $620 to $1,036 for Rwanda conglomerates like Crystal Ventures would run the to be a middle-income country only construction and manAnd while the government has been ufacturing concerns in town. implementing its national export strategy “The challenge is how to create an environment that attracts investment by since 2012, most initiatives for export the private sector but also by the public promotion have failed. Dickson Malunda sector from outside the country,” says of the Institute of Policy Analysis and Claver Gatete, Rwanda’s finance minister. Research-Rwanda explains how far Since 2006, the government has made an behind its peers Rwanda is: “Exports intensive effort to privatise state-owned represent less than 10% of GDP, comenterprises and reduce the government’s pared to an average of 32% of GDP for sub-Saharan Africa. The level of exports non-controlling shareholdings in private companies. Foreign investors now own has been growing over the past 10 years, controlling interests in some of Rwanda’s but growth is still less than 5% and only largest firms. just above the average for all of subSaharan Africa. Measured on a per capita opening up the economy basis, Rwandan export performance is John Rwangombwa, Rwanda’s central even weaker – annual exports per capita are just $18, while the average for subbank governor, says the liberalisation of the economy has enabled the growth Saharan Africa is $145.” of private investment and contributed Exports fetched $703m in 2013, up to the expansion of the financial sector. from $590.8m in 2012, largely boosted Today, Kenya Commercial Bank, Equity by mineral receipts, which increased by Bank, Ecobank and I&M Bank are op89.6%. However, coffee and tea receipts erating in the country. “What was done declined by approximately 10% and after 1995 was to open up the economy, 16%, respectively, fetching $54.9m and and in 1997 the central bank was given $55.5m. As a result, the country’s trade total independence. This was a big step deficit narrowed slightly to $1.1bn in towards the right economic manage2013 compared to $1.3bn in 2012. ment, and all controls were removed,” Boosting manufacturing exports has he says. He cites the deregulation of been a traditional way out for emerforeign exchange, amongst other things. ging countries, but Rwanda’s landlocked The International Monetary Fund nature and weaknesses in infrastructure gives the National Bank of Rwanda high place a heavy burden on trade. Some, marks for its management of the reghowever, argue that these very problems could be a boon for domestic production ulatory system. Since 2008, the govof currently imported consumer goods. ernment has undertaken a series of Andrew Mold, an economist with the pro-investment policy reforms to enUnited Nations Economic Commission sure Rwanda remains competitive in the africa report

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49

Changing face of a nation

Jenny Matthews/PanOs-Rea

marie candari’s hopes for her future were shattered by the savagery of the 1994 genocide. Her husband murdered, she was left to raise her three children alone, baring the emotional and physical scars of her ordeal. Jenny matthews photographed marie for the first time in 1995, when she recounted how a vigilante gang killed her husband before turning their attention to her: “i ended up in a toilet, where the killers threw me after having hit me with machetes on the chest and the head.” Homeless and fearful for her safety and that of her family, her future looked bleak. However, 20 years after the genocide, the 48-yearold has managed to get her life back on track. Her children have all grown up and her eldest is now in the army. she says she feels her life has now improved. she has a small income and managed to put enough money aside to buy a cow. Like so many hundreds of thousands who survived the ethnic violence, she lives with the memories of that time but strives not to let it dominate her life. ●

for Africa, underscores the need to avoid adopting a “naive export strategy” where companies must “export or perish” regardless of the conditions of global markets and the inherent disadvantages in their trading costs and geographical location. “Rather than expect a dramatic turnaround in export fortunes to high-income markets, the focus for Rwanda should now be on exploiting products destined for national, regional and other developing country markets,” Mold argues. “There is plenty of scope to start producing many products which are currently imported,” he says, adding that focus should be placed on recapturing the domestic market. Others disagree, pointing to recent interest from Chinese investors, who may build a sock factory for export to China. The government is also looking to expand the services sector and has hired the africa report

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consultants to revise its export strategy. New service sectors, including financial and information and communication technology (ICT), are expected to be Rwanda’s future growth engines. The government is targeting software development, call centres and outsourced business processes. service sector promotion

According to the World Bank, service exports in Rwanda grew annually at more than 10% between 2005 and 2012, starting from a base of less than $40m in 2005 to almost $85m by 2012. To promote the service sector, the government will give incentives including reducing corporate tax from 30% to 15% in the next financial year, beginning July. So far, the country has managed to attract investment from Mara Ison, UST Global and Techno Brain to offer business process outsourcing (BPO) and

information technology services. “BPO creates a lot of opportunities in terms of job creation. It is a value proposition for exports,” says Hubert Ruzibiza, the head of services development at the Rwanda Development Board (RDB). Everything remains embryonic, however. To fast-track private investment, Rwanda’s President Paul Kagame appointed Valentine Rugwabiza, a former deputy director-general at the World Trade Organisation, to lead the RDB last year. Her post was also elevated to a cabinet position, putting Rwanda a step ahead of its counterparts in East Africa, where theinvestmentpromotionbodiesremain semi-autonomous government agencies with little influence on decision-making processes. Her job – to foster the emergence of strong domestic companies – is critical to Rwanda’s dream of middleincome status. ●


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country focus | rwanda

IntervIew

Paul Kagame President, Rwanda

What I don’t accept is interference In a frank interview on the eve of the 20th anniversary of the genocide, President Kagame talked about its repercussions, regional politics and the end of his last term as leader in 2017 TAR : Twenty years after the genocide, do you think the world outside Rwanda has finally come to terms with what happened? PRESIDENT PAul KAgAmE: Unfortunately, no. The image portrayed on the outside is that of a genocide that fell from the sky without any causes or consequences, where responsibilities are multiple, muddled and diluted. It’s a kind of epiphenomenon. Could this lack of understanding be due to the fact that this carnage was carried out by people living together in the same community – a situation unique in modern history? Without a doubt. Our experience was different to that of other people. This led to specific responses, which are often complicated to explain. Even though today it remains a taboo subject, we must not forget the key role some Western powers played, not only in the historical roots but also in the unfolding of the genocide. Today, it is these same Western powers alone who lay down the rules of good governance and set the standards for democracy. They would like Rwanda to be a normal country as though nothing happened,

which would have the advantage for them of making people forget their own role in the massacre, but that’s impossible. Take the French: twenty years later, the only reproach admissable in their eyes is that they didn’t do enough to save lives during the genocide. That’s a fact, but it hides the main point: the direct role of Belgium and France in the political preparation of the genocide and the participation of the latter in its very execution. Complicity or participation? Both! Ask the survivors of the Bisesero massacre in June 1994 and they will tell you what the French military in Opération Turquoise did there. In Bisesero and in the whole area designated a ‘humanitarian safe zone’ they were not only accomplices but perpetrators as well. Another reason why it’s difficult to understand what happened is that you stand out as a very different head of state. Are you aware of this? I have no idea. If there is a difference, it would be due to my experience and my country’s unique history, but in terms of development and governance we’re facing the same challenges as all Africans.

a career In the rpf 23 October 1957 Born in Tambwe 1990 Became the leader of the Rwandan Patriotic Front (RPF) 1994 The RPF took control of the country after the genocide 1994 Became defence minister and vicepresident april 2000 Became president, replacing Pasteur Bizimungu, who resigned

Though your social and economic achievements have been unanimously applauded, the same cannot be said for democracy in Rwanda. What democracy are you referring to? If I were to believe what the West feeds us, democracy is for and by the people: its expressions, its sentiments, its choices. However in Rwanda, when the population freely express its choices, the same people hit back saying: ‘No, you’re mistaken, your decisions are not good for you.’ As long as we don’t adopt the model of democracy they have defined for us, we are doing the wrong thing. This attitude has a name, it’s called intolerance or refusal to accept differences. When I see that elsewhere in Africa their conception of democracy is compatible with corruption, tribalism, nepotism and in some cases chaos as long as they manage to keep up appearances, I tell myself that we definitely don’t share the same view. Do you believe for a second that the social and economic achievements you mentioned could have been accomplished without the participation of Rwandans and against their will? Dignity, unity, the right to start a business, the right to education and to health and integrity are among our key democratic values. No one is in a better position than we are to know our needs and the ways to achieve them. The outside world had better get used to that because we are not going to change. Your term of office ends in 2017, and the constitution prevents you from running again. Where do you stand on that? I’ve always said I will respect the constitution. Nevertheless, I would like to point out that a constitution is nothing other than an expression of the will of the people at one moment and in a given context. All over the world, in the oldest

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rwanda | country focus

It’s difficult to picture you as a 60-year-old retiree, sitting in your Muhazi lake ranch watching over your cows… Why not? I can easily see myself in that picture. Since oppositionist Patrick Karegeya’s assassination and the attack on Kayumba Nyamwasa’s villa in South Africa, your relationship with Pretoria has been stormy. You met President Jacob Zuma in Luanda on 25 March. What did you say to each other? Our discussions were not focused on this issue, but we obviously touched on the subject. My opinion is clear: obtaining asylum in a country implies a duty of discretion and a ban on carrying out subversive activities against your country of origin. So it’s not the right to asylum I’m questioning as such, but the freedom and even high-level complicity that some of these self-exiles in South Africa enjoy in their efforts to destabilise Rwanda and promote terrorism.

FOURnieR /ja

Concerning presidential term limits, for example? On this point, as in others, I don’t know. It’s not up to me, and I am not the writer of the constitution. Why this obsession with me? The only thing you should keep in mind is that I respect the constitution and I will continue to do so. Anything else is not my concern.

How do you explain that not a single Rwandan believes you will step down in 2017? Is it because they’re assuming I want to stay in power or they are expressing a wish on their part? You should put the question to them. One thing is sure: ultimately, if this type of proposal were to be submitted to me by the people, I would have to decide.

Vincent

democracies as in newer ones, fundamental laws are subject to constant changes, revisions and amendments in the interests of the citizens concerned.

Did you ask the South African authorities to extradite KaregeyaandNyamwasa? Obviously we did, and I have the records to prove it. These people were prosecuted and convicted in Rwanda.

But Pretoria doesn’t think your justice system can offer all the guarantees of impartiality... Wrongly so. The South Africans should be careful not to give the unfortunate impression that they themselves are biased. I’m hopeful that with time South

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country focus | rwanda

the day they were relieved of their duties for reasons not related to politics.

KOPANO TLAPE/GCIS/AFP

52

Africa’s government will realise that there’s far more to be gained from listening to us than covering up for a bunch of offenders. Diplomats were expelled on both sides. Will they be reinstated in their jobs? We are in the process of replacing them. Since Zuma arrived in power, your relationship with South Africa has deteriorated. Is it because he chose to form a strategic alliance with the Democratic Republic of Congo? I can’t answer for him. But one thing is sure: I wouldn’t advise anyone to meddle in our domestic affairs. What I’m saying applies not only to South Africa but also to Tanzania, France, Belgium, the media and the non-governmental organisations that take malevolent delight in fanning the flames of resentment. What role did you play in the assassination of Karegeya and the attack against Kayumba? None. There’s nothing, no evidence that links the state of Rwanda to these crimes. The South African authorities say they have evidence, but where is it? The only thing they really criticise us for are my own statements on the matter.

It’s true that you pulled no punches... Are you surprised? I always speak my mind. Why should we cry over the fate of a man who ordered deadly grenade attacks? Regardless of whether this excites journalists. Karegeya, Nyamwasa but also former prosecutor general Gerald Gahima and former cabinet director Théogène Rudasingwa were very close allies until they became your sworn enemies. Does this worry you, these people who leave with secrets? What secrets? Compromising secrets for them, perhaps? These people held military, security,

Zuma and Kagame appeared to bury the hatchet over lunch at the International Conference on the Great Lakes Region in March

“I always speak my mind. Why should we cry for a man who ordered grenade attacks?” judicial or political offices in the Rwandan Patriotic Front under my command. So referring to them in terms of how close they were to me means nothing. As for their secrets, you’ve heard them. These people said all they had to say a long time ago, and it’s nothing but nonsense. I’ve noticed that while we were working together, they never once disagreed with me on anything. They only expressed disapproval

President Jakaya Kikwete of Tanzania incurred your wrath when he recommended opening negotiations with your opponents, including the FDLR Hutu militia. You don’t accept this view? What I don’t accept is interference. It’s inadmissible that Jakaya Kikwete and members of his government should associate themselves in any way with genocide perpetrators, and I see no reason why they should. Six months ago you launched a campaign named Ndi Umunyarwanda (I am Rwandan), which your opponents have interpreted as a way of culpabilising and humiliating the Hutu community. What is it all about? It’s very simple. The aim of this campaign is to emphasise what unites us – our Rwandanness – and eliminate what divided us, and which caused the genocide: communitarianism. Of course, this should be done with respect for our diversity. In this framework and with this aim, those who, by commission or omission, have reason to reproach themselves about the genocide will have the opportunity to express their regrets and commitment to the new Rwanda. Taking this step is purely on an individual and voluntary basis, and no one is being forced. What is your state of relations with the US? Since Hillary Clinton and Susan Rice moved on it seems you have lost your two main supporters in Washington and the State Department is now quick to criticise you. To my knowledge, there isn’t any real problem between us. It was American aircraft that brought our troops to Central Africa and our cooperation on several issues remains good. The few statements you’re referring to are answers given during interviews, they are not official statements. ● Interview by François Soudan First published in Jeune Afrique

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www.olamgroup.com


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country focus | rwanda

Diplomacy

Politics by other means

Rwanda’s transformation from a crucible of genocide into a regional peacekeeper has been an effective diplomatic anchor in a sea of troubled relationships

I

t is not every day that an African president accuses a Western country of complicity and participation in genocide. So some form of diplomatic eruption was likely when Rwanda’s President Paul Kagame told Jeune Afrique, the sister magazine to The Africa Report (see page 50), of his belief about: “the direct role of Belgium and France in the political preparation of the genocide and the participation of the latter in its very execution.” Immediately after the publication of the Kagame interview in Jeune Afrique in April, President François Hollande cancelled the attendance of Christiane Taubira, France’s justice minister, at the 20th commemoration in Kigali of the 1994 genocide. Hours later, Rwanda cancelled the invitation of Michel Flesch, France’s ambassador to Rwanda, to the genocide commemoration on 7 April. Kagame stopped short of accusing Belgium of active participation in the genocide: Belgium’s Prime Minister Guy Ver-

hofstadt publicly apologised to Rwanda aphorism that “war is the continuation in 2000 for failing to stop the genocide. of political intercourse carried on with That is a charge that could have been other means”. Although he runs one of levelled at the entire United Nations the smallest countries in Africa, with (UN) Security Council in April 1994: all just 12 million people, Kagame has beof the five permanent members voted come adept in the use of military force in support of an Anglo-American draffor diplomatic ends. ted resolution calling for the withdrawal of all UN peaceKagame has become adept keepers from Rwanda just in the use of military as the Interahamwe miliforce for diplomatic ends tias careered around Kigali killing at will. Neither was there are any demur from Many Rwanda watchers, especially UN secretary general Boutros BoutrosKagame’s critics, see the latest spat with France as an attempt to use the 20th Ghali at the time. That explains the appearance of his successor, Ban Ki-moon, genocide commemoration to divert atat this year’s commemoration, where he tention from growing concerns about proffered his own nuanced apologies. Kigali’s regional policy, where it has been accused by UN investigators and many words and deeds rights groups of backing the Mouvement The apologies do not matter much to du 23 Mars (M23) militia that laid waste to vast swathes of territory in Nord-Kivu, the relatives of the more than 800,000 the easternmost province of the Demokilled. But they count in so far as they are an effective diplomatic weapon. Prescratic Republic of Congo (DRC). ident Kagame is a student of the works Susan Rice, Washington’s former of Carl von Clausewitz, who coined the ambassador to the UN, worked hard Kigali’s military to limit the damage to Rwanda of the diplomacy UN experts’ report accusing Kigali of training and supplying the M23 militia in eastern DRC. Those UN findings Darfur Mali UNAMID (3,410) MINUSMA (147) chipped away at Rwanda’s position. The Rwandan General subsequent murder on 31 December of Jean Bosco Kazura Patrick Karegeya, Kagame’s former inis military commander Abyei telligence chief and a leading dissident, of the mission FISNUA gouged a further hole. Although Kagame denied any involvement in the murder, he told The Wall Street Journal: “I actually wish Rwanda did it. I really wish it.” However, Faustin Kayumba Nyamwasa, a dissident like Karegeya and leader of the opposition Rwanda National Congress, told The Africa Report by email that the short-term diplomatic damage would be minimal: “The assassinationwasagreatembarrassment to those who support Kagame, Rwanda Côte d’Ivoire Liberia Central but we must appreciate their support UNICI UNMIL African South is not based on observance of human Republic Sudan rights. The aggression and killings in MISCA (850) UNMISS (1,025) Congo should have changed Western Rwandan troops in United Nations/African Union policy towards the Rwandan governpeacekeeping operations the africa report

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Sylvain Cherkaoui for Ja

55

5,000 peacekeepers drawn from a population of 12 million are engaged in multilateral missions

ment. Kagame is supported by powerful people who influence international opinion including [Tony] Blair, [Bill] Clinton, Rick Warren, Susan Rice, etc., etc. All of these are acutely aware that Kagame is a gross human rights abuser. They strongly support him for ulterior motives and will not be swayed by the death of Patrick Karegeya.” Although many Western diplomats reject Kagame’s version of events – that Kayumba Nyamwasa and Karegeya were abusing their asylum status in South Africa to plot terror attacks in Rwanda and team up with armed opponents of the Kigali regime in the DRC – and have cut some aid payments to his government, military and security cooperation continues apace. troops in mali and car

Neither has the spat in April with France unpicked military cooperation between Paris and Kigali: Rwanda’s 800 peacekeepers in the Central African Republic (CAR) are regarded as the most effective peacekeepers alongside the French contingent. Equally, in Mali, Rwanda’s General Jean Bosco Kazura commands the UN stabilisation mission with the help of 150 Rwandan troops, providing another vital force for France’s security operations in the country. the africa report

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not afford to show any sympathy because Likewise, Rwanda has contributed about 3,500 troops to the UN and African his people see him as chronically weak Union (AU) mission in Sudan’s Darfur when it comes to Kigali. region and about 1,000 troops to the South Africa’s policy towards Kigali UN’s mission in South Sudan. Not only is particularly tortuous: the murder of does Rwanda’s transformation from a Karegeya in a Johannesburg hotel in December followed a failed assassination crucible of genocide to a provider of more than 5,000 peacekeepers to critical attempt against Kayumba Nyamwasa just multilateral operations in Africa dazzle north of Johannesburg. In both cases, police have investigated the incidents, and outsiders but it also keeps the country’s there has been tension between South army occupied and well funded. Africa and Rwanda beyond a cursory and It also buys some goodwill from mutual expulsion of each other’s diploRwanda’s fellow African states: presidents from Congo-Brazzaville, Gab on, Kenya, Diplomats may reject Kagame’s Somalia, South Sudan and version of events, but military Uganda all attended the cooperation continues apace sober genocide commemoration. Rwanda’s politics byothermeans–peacekeepinginAfrica’s mats. In March, however, South Africa’s conflicts – wins friends and influences President Jacob Zuma was photographed laughing with Kagame at a meeting of the people. International Conference on the Great The four notable absences from the Lakes Region (see page 52). commemoration were the presidents In the DRC, a regional intervention of Angola, the DRC, South Africa and force – staffed by South African, TanTanzania. Tanzania’s President Jakaya Kikwete said in 2013 that Kagame should zanian and Malawian troops under the open talks with a DRC-based militia, the aegis of the AU and UN – has faced down Forces Démocratiques de Libération du the M23 militia. That looks like a rare Rwanda (FDLR). That led to a chilling in strategic defeat for Kigali in the region. relations between the two governments. Kagame dismisses the intervention force Angola’s President José Eduardo dos Sanas an attempt to protect his sworn entos, whose troops blocked Rwanda’s atemies, the fighters of the FDLR, who tempted takeover of the DRC in 1998, has claimed to protect the Hutus who fled no need to show sympathy for Rwanda. the genocide into eastern DRC. ● The DRC’s President Joseph Kabila canPatrick Smith in Johannesburg


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business

ugandan banking

East versus Uganda is the battleground for foreign banks seeking to profit from oil investment and regional trade. But while Kenya’s banks have made huge gains those from Nigeria are facing difficulties. Kenyan successes have galvanised local banks to look to expansion By Jeff Mbanga in Kampala

T

his was not the plan. When West African banks charged into Uganda’s financial services industry from 2007 onwards, most expected that profitability was just around the corner. Ugandan banks themselves were looking to a profitable new dawn. Today, both the West African banks and domestic banks see Kenyan banks cleaning up and

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companies & markets

would use its financial strength to take over a local bank. It instead chose the greenfield route, setting up from scratch. Global Trust Bank, which is part owned by Nigeria’s Industrial and General Insurance, had also just come into the market and snapped up a lesser-known credit institution called Commercial Microfinance Limited for an undisclosed fee. Togo’s Ecobank launched its services in Uganda in early 2009, promising a large interlinked service network across its 34 African operations. Bigger banks likeStandardBank-ownedStanbic, Uganda’sfinancialbellwether,worried about the new competition.

Banks have increased their lending but losses from non-performing loans are high

West have been left rueing what might have been. Back in 2007, Uganda had just discovered commercial hydrocarbon deposits, supposedly laying the stage for huge investment, with the government promising that oil production would begin in 2011. That was not all. East Africa was gradually turning into one economic bloc as traders and goods crossed borders with greater speed

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163%

increase in write-offs for bad debt at the Uganda branch of Equity Bank

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edward echwalu for tar

big feet, small profits

and ease. A single market of more than 120 million people was slowly being created, spurred by the signing of trade pacts like the customs union and the common market protocol. For several foreign banks, flush with cash from recent stock market listings, this was too attractive an opportunity to ignore. When Nigeria’s United Bank for Africa started operating in Uganda in 2008, analysts predicted that it

West African banks have now widened their footprints across Uganda, but hardly any of them have shown that they can turn that presence into profit. Banks released their annual financial statements in April for the year ending 2013. They show that Global Trust Bank, Ecobank and United Bank for Africa yet again recorded losses, further stretching the time they will need to make it to sustained profitability (see table). The June 2013 supervision report from Uganda’s central bank explains why some of these new banks continue to struggle and sounds a word of caution about non-performing loans (NPLs). “The performance of new banks licensed since 2007 continues to be mixed. Many of the small and new banks, in a bid to increase market share, have increased their lending, but loan quality among these banks remains a concern,” the report noted. It adds: “Overall, most of the new banks are still loss-making, and their NPL ratios have increased as they strive to attain market share.” The number of NPLs across the sector has been rising. Local bank Centenary reported that its write-offs for bad debt rose by 66% to USh7.8bn in 2013. Write-offs for the Uganda branch of Kenya’s Equity Bank increased by 163% to USh2.9bn last year. The lack of profitability in the banking sector is creating ● ● ●

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business | companies & markets

West African banks make heavy weather of Uganda While assets are growing strong... Asset growth (2013)

% change from 2012

Bank

Assets

global trust Bank

USh96.5bn ($38.6m)

40.6%

ecobank

USh238bn ($95.2m)

45%

United Bank for Africa

USh224.4bn ($89.6m)

71%

…profits are still hard to come by gloBAl net loss (2013)

% change from 2012

Bank

Loss

global trust Bank

USh11bn ($4.4m)

17%

ecobank

USh17.2bn ($6.8m)

40%

United Bank for Africa

USh4.6bn ($1.8m)

-26%

● ● ● knock-on effects. Uganda Revenue Authority (URA) reports that it is recording substantial shortfalls in predicted revenue collection due to poor performance in the banking sector. In May, it reported a USh51bn deficit in what it expected to receive from banks in the 2013/2014 fiscal year. Other West African banks that have been in Uganda for more than a decade have also been recording losses. Orient Bank Uganda, which is owned by Nigeria’s Keystone Bank, and Bank of Africa Uganda – from Mali – made profits in 2012 but recorded net losses for 2013. But where the West Africans failed, the top players from neighbouring Kenya – Equity Bank and Kenya Commercial Bank (KCB) – have thrived. While Global Trust Bank and KCB launched their services in Uganda at around the same time, their fortunes have varied greatly.

KCB maKes a Killing

KCB’s profit for the year 2013 went up to USh6.7bn ($2.6m) from USh1.1bn in 2012, an increase of close to 510%. Albert Odongo, the chief executive of KCB Uganda,

SoUrce: company filingS

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the going has been tough for the West african trio of global trust Bank, ecobank and United Bank for africa. the annual net loss at global trust Bank shot up to Ush11bn ($4.4m) in 2013 from Ush9.4bn in 2012. although global trust Bank managed to widen its asset base by 40.6% to Ush96.5bn in 2013, the bank was partly hurt by a decline in interest on loans and advances, which went down by 22% to Ush11.3bn. ecobank made improvements in some of its numbers, with total income rising by 27% to Ush33bn in 2013, driven by an increase in loans and advances, coupled with revenue from investments in government securities and forex trading. the size of its balance sheet also grew by 45% to Ush238bn in 2013 from Ush164bn in 2012. however, those figures were not strong enough to save ecobank from making a net loss, which ballooned to Ush17.2bn in 2013 from Ush12.2bn in 2012, an increase of 40%. the bank’s provision for bad loans more than doubled to Ush15.5bn in 2013 from Ush7.4bn in 2012, pointing to loopholes within its risk management structures. United Bank for africa fared somewhat better, recording a loss of Ush4.6bn in 2013, down from Ush5.8bn in 2012, a 26% drop. its total assets shot up to Ush224.4bn in 2013 from Ush131.5bn in 2012, a 71% increase. the bank was constrained by an increase in expenditure, which was driven by a more than 100% increase in the provisions for bad loans. ●

says the bank’s “robust performance” was due to its loan portfolio, improved interest income and increased earnings from its foreign exchange business. “The performance was further bolstered by significant forex income due to increasing currency trade volume among Uganda, Kenya and South Sudan,” Odongo explains. Other Kenyan banks are performing well. The total assets of Kenya’sEquityBankshotup21%to USh370bn in the year ending 2013. Even Kenya’s ABC Capital, which merged with the Capital Finance Company in late 2008, managed to record a net profit of USh892m in 2013, although this was lower than last year’s figure of USh1.1bn. Otherforeign-ownedbankshave not fared this well. Stanbic Bank and Standard Chartered Bank, the two biggest banks in Uganda, recorded drops in their profits for 2013 of more than 20%. Both institutions blamed the tough times on donor cuts that weakened the economy, coupled with high interest rates that dampened borrowers’ appetites to take on more credit. The central bank, the Bank of Uganda (BOU), has been calling for banks to lower the rates of in-

terest on loans and to extend more financetotheprivatesector.ABOU report in May said that credit to the private sector had risen by 8% betweenJuneandDecember2013.

510%

the Kenyan advantage

increase in profits for Kenya Commercial Bank in 2013 compared to 2012

20%

drop in profits for Stanbic Bank and Standard Chartered’s Ugandan operations

The finance ministry says it will work on reforms to reduce the cost of lending. This year does not look much better for the performance of Uganda’s commercial banks. There have been warnings that the war in South Sudan, Uganda’s main export market, will hurt the local economy. So how did the Kenyan banks manage to succeed where others fellflat?ForKCBUganda’sOdongo, the less successful banks relied on interest income to make their money: “We don’t rely entirely on interest income like most other banks. If you look at other banks, close to 80% of their revenue is from interest income, with the rest coming from commission fees.” The regional network of KCB gives it the upper hand in winning foreign exchange and trade finance business in Uganda. But there is also the issue of overheads discipline. “We kept our costs flat,” explains Odongo. “There are ● ● ●

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business | companies & markets

edward echwalu for tar

60

maybe just two other banks that did that. The costs in most other banks went up by 10-20%.” At least two local commercial banks – Crane and Centenary – continue to give the larger international banks a run for their money. After Stanbic, Standard Chartered Bank and Barclays, these two have the largest asset bases. A.R. Kalan, the managing director of Crane Bank, says it plans to keep competitive when it comes to pricing. “We intend to have some of the best-priced products in the ●●●

marketandlowercharges.Wehave proved that we can do this with some of the best products, like 5% interest on the savings account, which I believe is the best in the market,” he says. crane’s expansion

Kalan adds that Crane is seeking to “cut down on the bureaucracy” when dealing with customers and will open up more branches to add to its network of 41 locations. Crane is the largest local bank, with assets of USh1.4trn. It spent

Created from the purchase of Uganda Microfinance Limited, Equity Bank Uganda has thrived

around$40monexpansionineach of the past two years. As a result, Crane Bank saw its profit slump for thefirsttimeinrecenthistory,dropping to USh47.2bn in 2013 from USh80.3bn in 2012, a 41% drop. The Catholic Church-owned Centenary Bank is almost as big as Crane in terms of assets. It had a much better year than Crane and recorded profits of USh58bn in 2013, up from USh54.9bn, an increase of 5.6%. Uganda’s banks are also emulating the regional shift to keep up with the Nairobi crowd. Crane Bankissettoopenupoperationsin neighbouring Rwanda. “Rwanda is almost ready. We are only awaiting approval from the central bank of Rwanda,” Kalan says. Centenary Bank managing director Fabian Kasi says the bank has “a belief in the power of partnerships” in order to make banking affordable for its customers. In 2012, Centenary Bank signed a memorandum of understanding with Ivory Bank of South Sudan, where the two institutions will share banking services and support clients moving across the borders between Uganda and South Sudan. It might be just the beginning, but Ugandan banks appear to have been galvanised by the performance of financial institutions from Kenya. ●

Insurance fIrms restructure and competItIon IntensIfIes With a national insurance coverage rate of about 2%, insurance companies in uganda are restructuring their businesses and trying to take advantage of economic growth and the demand for services. there is another reason for the changes, too. the insurance act of 2011 took effect in December 2013, meaning that companies had to split their life and non-life offerings into separate companies. the rationale for the law is that the life

sector is different in nature from short-term products and thus should be treated differently. Kenya, rwanda and tanzania are all implementing similar reforms. a 2014 survey commissioned by the uganda insurance association calls for companies to come up with ways to counter the spread of health management organisations (hMos), which are taking a sizeable share of the life business. hMos insure patients but also deliver healthcare.

“the main threat to medical insurance companies is hMos. it would be important to understand why the shift to hMos is occurring and what can be done to increase medical insurance company’s market share,” the survey notes. Kampala’s nakasero hospital terminated its services with insurer sanlam in order to offer its own products. the hospital formed the nakasero health care hMo and received a licence to offer insurance in March.

small insurance companies might not be able to compete against hMos. With stringent regulatory rules such as the increase in the minimum paid-up capital, they might be targets for takeover or merger. in november 2013, sanlam emerging Markets, parent company of south africa’s sanlam, completed the purchase of 49% of Malawi’s nico holdings, which has a presence in uganda. sanlam took over 50.3% of nico’s uganda unit, making it the majority shareholder. ● J.M.

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Banque des États de l’Afrique Centrale

Pillar of monetary cooperation and economic integration in Central Africa ince 1972 BEAC has been the central bank of the six countries in the Economic and Monetary Community of Central Africa (Communauté économique et monétaire de l’Afrique Centrale, CEMAC). There are few equivalents in the world; each country usually has its own central bank. BEAC circulates CEMAC banknotes and coins (the FCFA, the franc of monetary cooperation in Central Africa), carries out monetary policy, keeps the accounts of the member States’ exchequers and manages their exchange assets. BEAC also maintains very close ties with the Banking Commission of West African States (Commission bancaire des États de l’Afrique Centrale, COBAC), which is responsible for chartering and monitoring the sub-region’s banks and credit institutions.

> A solid organisation BEAC’s headquarters in Yaoundé, Cameroon works closely with national branches in each member State and with decentralised agencies, including one in Paris, France. BEAC maintains regular, efficient relations with key international partners such as the World Bank, International Monetary Fund (IMF) and Banque de France. Developing close ties with international and African financial institutions is one BEAC, Banque des États de l’Afrique Centrale BP 1917, Yaoundé, Cameroon Tel.: (+237) 22 23 40 30 - Fax: (+237) 22 23 34 68

of its priorities. This outside cooperation strengthens its expertise and activities at the service of integrating CEMAC into the global economy.

> Guarantor of monetary policy The central bank issues CEMAC’s currency and ensures its stability. Without prejudice to this objective, it supports the six member States’ overall economic policies. BEAC defines and carries out CEMAC monetary policy, implements its exchange policy, promotes financial stability, holds and manages the member States’ official exchange reserves and promotes and ensures the proper functioning of payment and settlement systems.

> A development player BEAC, a reliable partner devoted to serving CEMAC’s member States, economic players and peoples, is also involved in Central Africa’s economic development and integration. It plays an active part in promoting and strengthening capital markets to support economic development and integration in CEMAC better. To that end, BEAC oversees and facilitates the member States’ issuing of government securities and works to build a sound, healthy banking system.


Communiqué

>>> Defines and carries out CEMAC monetary policy >>> Issues the fiduciary currency >>> Implements CEMAC exchange policy >>> Manages member States’official exchange reserves >>> Oversees payment and settlement systems >>> Promotes financial stability BEAC maintains close bilateral ties with several of its African counterparts and actively participates in spreading the influence of the Association of Central African Banks (Association des Banques Centrales Africaines ABCA), of which it is hosting the 38th Ordinary Board of Governors Meeting in August 2014.

> 1972-2012: serving Central Africa for 40 forty years The monetary cooperation agreements laying the groundwork for the Bank of Central African States (Banque des États de l’Afrique cen-

> At the service of economic integration in Central Africa Relying on its member States’ spirit of solidarity and discipline, BEAC is firmly committed to fostering the economic emergence of Central African States for the benefit of their peoples. BEAC’s ability to keep pace with an everchanging environment enables it to continue satisfying all the CEMAC member States’ economic and social development players. The trust that their peoples and that African and international companies put in the CFA franc, the currency it issues, attests to its monetary policy’s rigour and far-sightedness. BEAC’s efficiency, independence, authority and continuous modernisation and development efforts allow the institution to increasingly assert its leading role in Central Africa’s economic integration.

trale, BEAC) were signed in Brazzaville, Congo on 22 and 23 November 1972. BEAC issues the CFA franc, the legal tender in all the countries of the Economic and Monetary Community of Central Africa (Communauté économique et monétaire de l’Afrique Centrale, CEMAC) and guarantees its stability. It also backs the member States’ overall economic policies. BEAC, which defines and implements monetary and exchange policy, manages the member States’ official exchange reserves, ensures the smooth functioning of payment systems and promotes financial stability, is essential for Central Africa’s economic integration. It entered its 40th year of existence with the firm desire to play its role as a reliable partner committed to serving the CEMAC’s member States, economic players and peoples more than ever.

www.beac.int


80

dossier telecoms

Kenya can’t keep up

Nairobi is pitching itself as a hub for tech companies, but recent data – and Kenyans’ own experiences – tell another story. In the race to provide affordable and reliable highspeed internet other African countries are in the lead By Gemma Ware, and Gilbert Nganga in Nairobi

P

romoters of Kenya’s tech space like to think of the country as one of the most wired on the continent. In early September, Liquid Telecom, a Mauritius-based telecoms infrastructure firm that is part of Zimbabwean businessman Strive Masiyiwa’s Econet Wireless group, boasted that Kenya had some of the fastest speeds, lowest internet pricing and largest amount of bandwidth on the continent. “Kenya has achieved a confluence of infrastructure and provision

that has positioned it with the highest growth in internet takeup compared to income per capita in Africa,” argues Ben Roberts, chief technology officer of Liquid Telecom Kenya. “It has effectively become an outlier in its internet take-up and seen Nairobi join Johannesburg as one of Africa’s two regional internet hubs.” Looking at the numbers and the experiences of internet users in Kenya, the country’s performance may not live up to the hype. Data released in September in Akamai’s 2014 State of the Internet report

showed that between March and July, only three countries in the world recorded a drop in average internet speeds – Kenya, Côte d’Ivoire and Zambia. Kenya’s average connection speed fell 1.4% to 1.8 megabits per second (Mbps). This is well below the global average of 4.6Mbps, and lower than South Africa, Nigeria, Rwanda and Ghana. Rwanda was a star improverwithayear-on-yearincrease of 209% to an average of 2.7Mbps. Looking at another metric – the average peak Mbps, a way of measuring the top speed of a the africa report

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Sven Torfinn/PAnoS-reA

81

connection – Kenya, at 8.5Mbps, is way below its African rivals (see graph). But even these low rankings do not fully reflect the daily frustrations of internet users who have to contend with the unreliable provision on Kenya’s congested networks. As South Africa’s internet guru Mark Shuttleworth puts it: “Bandwidth is the lifeblood of the digital economy.” For Susan Nyamboke, the proprietor of InstantConnect, a cybercafé in Nairobi, internet speed is her biggest worry. “My clients are those who cannot easily download the africa report

n° 65

what they want using their phones. As such, they are looking for very fast connectivity. Sometimes I am not able to guarantee this, especially so because even the capacity I have, it is not fast enough,” she says. “I would say if internet costs were to get lower, I would afford more bandwidth to support my clientele,” she explains. prohibitive costs

In the Global Internet Report 2014, put together by the Geneva-based non-governmental organisation the Internet Society, Kenya is 116th

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In April, Safaricom launched free wi-fi on matatus – giving Nairobi commuters something to do in a jam

in the world in terms of affordability, with 15.7% of the average gross domestic product per capita required for broadband access. Its East African neighbours fared no better: Rwanda came 124th, Uganda 130th, Tanzania 131st and Ethiopia 138th. Data from the Communications Authority of Kenya (CAK) shows that there were an estimated 21.6 million internet users in the first three months of 2014 – twice the number from five years ago. The sharp jump in usage is attributed to rising demand for data services,


dossier | telecoms

excess bandwidth

With a number of submarine cables arriving in Kenya, there is a large amount of bandwidth. But of 865,714Mbps in bandwidth that came into Kenya in the first three months of 2014, only 51.6% of this was being used, according to the CAK. This was an improvement on the last quarter of 2013, when total used capacity was 42.4%. It is

to consumers and businesses in Kenya. “The main challenge 23.8 Ethiopia is the lack of last-mile connectivity to the con22.1 Ghana sumer premises,” says 17.7 Nigeria Danson Njue, an analyst at 16.1 Rwanda telecoms research company 13.2 South Africa Ovum. He says that is slowly changing because of a Chinese13.1 Mozambique backed project to build a national 10.2 Uganda fibreoptic backbone. 8.5 Kenya Companies are speeding up efforts to lay fibre in the region in an attempt to offer broadband serdifficult to get comparative figures on bandwidth for other countries vices to middle-class households. in East Africa, explains the InterLiquid Telecom finished its East net Society’s Kende. He says that Africa Fibre Ring in June, linking Kenya, Uganda, Rwanda and Tanwhere demand is still relatively zania. The company says it is also low for data but the fixed cost for shifting towards a strategy of ofdeploying fibre is high, “it is very fering fibre-to-the-home services, common to deploy much more particularly to new blocks of flats. fibre than is currently needed so Rival company Zuku is also offerthat the fibre can be lit or used whenneededatrelativelylowcost.” ing fibre-to-the-home packages in In the first Local hosting can also imNairobi and parts of Mombasa. quarter of 2014 prove the user experience, exIn late September, a package of there were only 1Mbps per month with Zuku cost plains Kende. “Many local and international websites are hosted KSh2,999 ($33.5), including TV broadband in Europe or even the US, which and internet telephone. subscriptions requires the use of international According to the World Bank, in Kenya, a tiny minority of the transit to access,” he says. This is there were 39 internet users for estimated costly. Kende predicts that as more every 100 people in Kenya in 2013, content is hosted locally, it will not up from 10 per 100 in 2009, putting total internet just reduce the use of international it 100th in the world. South Africa users transit but it will also reduce delays came in 80th place with 48.9. If in accessing content. Kenya wants to claim the title of the internet capital of Africa, it has The supply of bandwidth some catching up to do. ● has been slow to trickle down AVERAGE CURRENT PEAK INTERNET CONNECTION SPEEDS (in megabits per second)

SOURCE: COmmUNiCaTiONS aUTHORiTy OF kENya

including the use of social media. But power outages and fluctuations in the service are a constant headache. Michael Kende, chief economist of the Internet Society, says that there are often fibre cuts due to accidents and vandalism. “If the network is not resilient then the connectivity will not work until the fibre is fixed,” he says. Evans Gathungu, who runs a writing bureau outside of Nairobi, explains: “I have to rely on having at least three suppliers at any one time, mainly the three major telcos in the country. This is to ensure that when one is down, I can use the other,” he says. Gathungu spends up to $750 per month on internet bundles – his biggest single cost. “If only internet was cheaper, I could have expanded my business,” he says. He acknowledges that costs have gone down: “What I incur is nearly half what [it] was three years ago when I started the business.”

SOURCE: akamai, STaTE OF THE iNTERNET REpORT/Q2 2014

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1.44m

21.6m

East african providErs racE to dEvElop nEw 4G nEtworks Kenya HaD LOOKeD LIKeLy TO Be first out of the blocks at bringing high-speed 4G mobile internet connectivity to east africa, but it has fast been overtaken by its neighbours. Tanzania and Uganda already have 4G networks up and running, with Rwanda poised to launch its own. In 2013, the Rwandan government entered into a joint venture with KT (formerly Korea Telecom), which has invested $140.1m into Olleh’s Rwanda networks to run the country’s

Long-Term evolution (LTe) high-speed network. It will operate on an open-access model, meaning one infrastructure provider will serve the whole country. Kenya plans to follow a similar model of open access for its 4G infrastructure, but it has been hit by delays. Regulations are still being discussed at the information ministry, with deployment of the network expected next year. 4G networks, of which LTe is a subset, are set to utilise a part of the spectrum that

is used by television channels in Kenya. Danson njue, a telecoms research analyst at Ovum, says the lack of “digital-dividend spectrum due to delay in digital migration may have contributed to the delay in network roll-out.” elsewhere in the region, providers are competing to expand their customer numbers and footprints. In Tanzania, where a number of companies have been gradually rolling out 4G networks since 2012, a 5GB, 30-day bundle costs TSh42,500 ($25) with Smile

Communications. In Uganda, where Smile also operates, there is 4G competition from MTn and Orange – which agreed in May to sell its operations in the country to Lebanese firm africell. njue says there is a lack of affordable LTe-enabled mobile devices. Service providers are “still faced with the challenge of monetising the services,” he explains. In both Uganda and Tanzania, customers mainly access 4G networks via dongles and fixed or mobile routers. ● G. W.

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As a company that was founded right here on African soil, MiX Telematics understands the region’s unique business landscape, challenges and requirements. We also understand that being efficient is not only about saving fuel, but about enhanced vehicle maintenance, effective fleet utilisation and improved driver behaviour. We operate throughout Africa as well as globally, helping customers in over 120 countries.

Our operation is comprehensive, and includes design and development, research, manufacturing, sales, after-sales service and 24/7/365 support – all on your doorstep. So if you’re looking for a world-class provider that delivers excellent value, then look no further. With us, your fleet is in good hands.

To discuss the future potential of your fleet business, call MiX Telematics on +27 11 654 8004 or contact your nearest MiX Telematics dealer.

www.mixtelematics.com


dossier | telecoms

Mobile data

How Nigerians and Kenyans use their phones

A

recent study by telecoms firm Ericsson predicts there will be more than 635m mobile telephone subscriptions in Africa by the end of the year, with this set to rise to more than 1bn by the end of the decade. This staggering growth is echoed on a micro level by a survey carried out by technology group the Co-Creation Hub. As part of an ongoing research series, ‘How I Use My Phone’, comparing phone use among different Nigerian demographics, the team went out to bustling Sabo market in Lagos to quiz market traders. One of the most surprising results of the survey was that more than half of these working-class phone users subscribed to a data plan, with Facebook and WhatsApp the most popular applications. Also how much they spent on their phone credit : while the biggest group (38%) spent N100-N500 ($0.6-$3) a week, 32% spent N1,000-N2,000 and 7.5% as much as N3,000 a week. In a comparative survey of professional users the professionals did not spend significantly more on their phone use, but bought more expensive handsets (see www.cchubnigeria.com). Meanwhile, the mobile phone itself is proving a useful tool to collect data across the continent. GeoPoll conducts its research by mobile, connecting with Africans and others across the developing world using text messaging and other modes of communication. This month for The Africa Report they surveyed the mobile-money habits of Kenyans. ●

MOBILE PHONE USE IN A NIGERIAN MARKET Do you own a phone?

Which phone do you use?

52

21

BlackBerry

Tecno

7

Samsung

3

19

Which network do you use?

24

yes

8

1

no

Nokia

Others

AIRTEL

MTN

How much do you top up in a week? N100

N500

20

N1,000

10

N2,000

17

Which do you perform most, call or text?

N3,000

Call 50

VISAFONE ETISALAT

N200

N100

N4,000

4

27 25

GLO

What recharge denomination do you use?

1

Do you use a data plan?

Text 2

1

3

19

4

recharge card

recharge card

21

23

Most popular apps FACEBOOK WHATSAPP BBM 200 TWITTER INSTAGRAM

yes no

18 15 11 7 4 4

Respondents 22

19

Age grade

53

29

9

24

3 Traders

18-25

26-35

36-50

>50

Gender

Source: co-creation Hub/MXLab

Two surveys – one low-tech and one high-tech – gathered data on phone habits among market traders and mobile bankers

MOBILE MONEY IN KENYA In conjunction with GeoPoll, The Africa Report asked 1,421 Kenyans, across the country, about how they use mobile money. To join the GeoPoll network and answer short surveys like this one, please visit m.geopoll.com

How far do you have to travel to find a mobile money agent ? 7%

9%

What kind of transactions do you use mobile money for ?

Which mobile operator do you use most ? 15%

26%

12% 16%

55%

Agent distance Under 1 km 1-2 km 2-5 km More than 5 km I don’t know

6%

1%

19% 68%

65%

Financial institution use

Mobile operator

Personal Business Both

Airtel Safaricom Orange Yu

Charlie Hamilton

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Source: GeoPoLL

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ADVERTORIAL Lex Van Wyk, CEO

T

he demand for information and communications technology (ICT) infrastructure and related services in Africa is growing fast. Key drivers for this growth include: major infrastructure projects, growth in financial services and an increase in governments’ spend on for among other things transport, infrastructure and citizen centric services. For companies like Teraco, the first provider of resilient, vendor neutral data centres, this demand is an opportunity for growth for the business and also for ensuring that the African continent

alike in terms of the long-term cost saving benefits to the organisation,” he says. Today’s enterprises are increasingly turning to the cloud as a home for their IT infrastructure, applications and services. However, the cloud needs an environment in which to flourish, and that environment is inside colocation data centres, which enable enterprises and cloud providers to offload the risks of growing capital costs, facility management and obsolescence in order to focus on their core mission, says van Wyk. In response to this demand, two years ago Teraco launched Africa Cloud eXchange (ACX), which according to van Wyk has seen organisations able to reduce capital expenditure and increase market distribution through a single infrastructure deployment. Teraco is the single facility in Africa where content and cloud distribution can happen to over 50 African countries at the lowest latency and with the greatest choice of carrier, undersea cable, or terrestrial fibre operator, says Van Wyk.

Teraco team

Teraco is the aggregation and meeting point for technology and services companies. Being a vendor neutral provider means that Teraco clients can connect to any network operator, service provider or any other Teraco client within the data centre, without restriction. Teraco is the only data centre with access to all undersea cables and most African terrestrial fibre networks. CEO Lex van Wyk explains that Teraco’s clients deploy the best of breed technology and “It’s our job to make sure that their technology is always available to a large community and at the lowest distribution cost, therefore allowing their businesses to grow and succeed. Their success is our success,” he says.

NAPAfrica Internet eXchange Point (IXP) is also focusing on assisting with the launch of new exchanges in Africa. There are 23 exchange points live in Africa, which will assist in keeping content local and distributing African content to the world. Van Wyk says to keep abreast with the technological changes and the demands from clients, Teraco has an internal department focusing on ensuring that the company provides cutting edge technologies and services and is also investing in skills. These investments will go a long way to boost the company’s objectives of operating Africa’s largest IXP, aggregating global content locally, being Africa’s central access point and become a model for vendor neutral data centres in Africa, says Van Wyk. Teraco Datacenter Riverhorse, Durban - 2013

In the market where it operates, guaranteed availability, big bandwidth pipes and lowering bandwidth costs are the key driving forces. Teraco’s data centres are the most connected facilities in Africa and currently house the largest peering points on the continent. It provides access to more than 50 African countries via local and global carriers. The advent of the cloud is also driving growth and furthering the significance of data centres. “In many respects, the concept of cloud and that of data centre colocation are

Teraco Datacenter Isando, Johannesburg 2013

For more information please contact: Teraco Data Environments (Pty) Ltd. Tel +27 11 573-2800 - Email info@teraco.co.za

Teraco Datacenter Rondebosch, Cape Town 2012

www.teraco.co.za

DIFCOM/FC - Photos : D.R.

receives the best and most cost effective services that will address the bandwidth hungry market.


74

business | companies & markets

CosmetiCs

Beauty brands primped for profit East Africa is one of the fastest-growing markets for beauty products and as tastes get more discerning local and international companies are cashing in

W

ith East Africa’s middle classes developing a taste for high-quality personal care and beauty products, international cosmetics companies like L’Oréal and homegrown ones like Kenya’s SuzieBeauty are rushing to cash in on this fast-growing market. Lintons Beauty World, a Kenyan retailer, is looking to open its fourth outlet after it started operations seven years ago. “We call ourselves the house of brands. We may all be black, but our skins are different. That is why we decided we are not going to go with one brand. We have

Clarins, Estée Lauder and Clinique, Nimue, Fashion Fair, Black Opal and soon we will be bringing MAC and Essie,” says Joyce Gikunda, the retailer’s director. Trained as a pharmacist, Gikunda began selling cosmetics in 1988 in the pharmacy that was her family business, when the African cosmetics market was dominated by skin-lightening creams. Her idea at the time was to offer safe skincare products. In 2007, the first stand-alone Lintons Beauty World shop opened at the Westgate Mall. In 2013, the family sold the pharmacy business to concentrate on cosmetics.

$231 million Expected size of the East African cosmetics market in 2018

With seven full-time office staff members, 10 sales consultants and a team of six make-up artists, Suziebeauty sells its products online and in a dozen retail outlets in east africa and Côte d’ivoire. They will soon be available in Nigeria. “We are expanding our distribution locally and africa-wide. We have been to Lagos to look into getting into the market there, and there is lots more to come this year,” she says. ● m. L.

minerals Chinese gold miner CNGC seeks deal with Barrick Gold and Newmont

investment AfDB to provide $300m for Nigerian fertiliser and fuel supply schemes

SuzieBeauty Cosmetics company

Runway looks for African skin – and no mixing required make-up in east africa since 2007. in early 2009, she began creating her make-up brand and officially launched it in December 2011. “There was a huge need. The retail cosmetics market is such that everything is imported, and most do not cater to our skin colour or texture. i was constantly mixing and matching products for my work as a make-up artist. i decided to make my own that nobody would have to mix up,” she says.

ticker tape metals Kenya and India plan Kenyan steel plant project

sophisticated tastes

Patricia Ithau, managing director of L’Oréal East Africa, says media and digital platforms promote borderless awareness. According to a recent report by the African Development Bank, East Africa’s middle classes include about 30 million people. This represents 23% of the total population of 140 million. The opportunity has attracted international companies like Revlon, Unilever, PZ Cussons and Beiersdorf. Others are setting up offices in Kenya to serve the greater East African region. In February of this year, India’s Godrej Consumer Products completed the takeover of Kenya-based hair care company the Darling Group. The deal between Godrej and Darling was launched in 2011 and relates to Darling’s operations in 14 African countries. The members of the growing middle classes tend to be more discerning about quality and price, so companies are trying to keep up with this trend. Suzie Wokabi, chief executive of SuzieBeauty, says: “This growing middle class is a clientele that is getting more sophisticated in taste and need for quality products. The access to the world through the internet also helps the African woman raise her

profile

Suzie Wokabi, founder and chief executive of Suziebeauty, dreamed of starting her own beauty brand after working six years in New York. Trained by the professional make-up brand MaC Cosmetics and a media make-up certificate holder from award Studio in California, Suzie has made her name as an accomplished make-up artist whose extensive industry experience runs from print and electronic media to runway and bridal

“We are targeting the middleand upper-class market,” she says. “The Kenyan woman is well educated. She knows the importance of having good-quality beauty products. It is better to spend a little bit more at the beginning than to fix a bigger problem later on in life,” Gikunda explains.

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SveN TorfiNN/The New York TimeS-reDUX-reA

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standards and expect the same from product providers.” SuzieBeauty’s focus has been on cosmetics and make-up products. It plans to launch a skincare line and compete in a wider realm. It has 12 outlets in Kenya and distributors in other East African countries. “We have achieved what we hoped – great product that is affordable – and filled that gap in the market. I have personally created this product for us, the African woman. We have the same needs that SuzieBeauty has and continues to address,” adds Wokabi. “Make-up in general or colour cosmetics are getting more popular each day. Skincare continues to be important with more revolutionary products being necessary.” regional growth

L’Oréal’s Ithau concurs. She says beauty products are moving from the basic to the more sophisticated, including hair colour, hair extensions and cosmetics.

Middle-class East African women are increasingly sophisticated and demand quality cosmetic products to suit their lifestyles

60 50

Value in US dollars of cosmetics sales in Africa

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Kenya Uganda

40

Tanzania

30 20

Ethiopia Congo

10 0

2004 05

06

banking Indian Bank ICICI unveils plans to open branches in South Africa and Mauritius the africa report

According to Euromonitor International, the colour cosmetics market in Kenya, Tanzania and Uganda is worth $152m and is projected to grow to $231m by 2018. South Africa and Nigeria remain the largest markets for personal care and cosmetics in Africa, estimated at €3bn ($4bn) and €1.6bn each, according to consultants at Roland Berger. “The other area I would call out is the entry of men into the beauty market. East African men are becoming more beauty conscious and looking for products

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designed for men. You see this in the number of lotions for men, deodorants for men, even shower gels for men. This has extended to hair and beauty salons, especially in the upper-middle class, where the clientele has become a very even mix of women and men,” says Ithau. In order to expand in the East African market, the regional L’Oréal subsidiary acquired local brand Nice & Lovely in April 2013. Some of the brands have trained Lintons employees to deliver services in their stores, such as facials, massages, nail therapies and consultations on beauty and nutrition. “It is quality service delivery and educating the consumer. I believe ladies think being lighter is beautiful. We need to change our mindset. Use skincare products and makeup to enhance what you have, not to change,” says Gikunda. The biggest concern for the market players are the unsafe skin lightening and counterfeit products. ● Mwikali Lati in Nairobi

petrochemicals US energy giant ERHC to invest $100m in Sao Tome oil block


top 200 banks

east africa technology the key to retail survival In a bid to win clients, lenders are aiming for a supermarket banking model, while also touting lower charges and faster processing times for online transactions

F

resh technological platforms continue to drive East Africa’s financial services sector. Lenders in Kenya – mainly Equity Bank (#68) and rivals Kenya Commercial Bank (KCB, #60), Co-operative Bank (#78), Barclays Bank of Kenya (#85) and Standard Chartered Bank Kenya (#90) – are in a fierce battle for retail and corporate customers, a war that is being fought through new models such as agency and mobile banking. KCB, Equity and Co-operative, all listed on the Nairobi Securities Exchange (NSE), have rolled out agencies across the country where clients can deposit and withdraw money without going to ATMs and branches. This has seen them slow down on opening new branches, effectively reducing operational costs. The agencies, usually manned by a single cashier, are licensed by the Central Bank of Kenya through the respective bank. Such an integrated platform of retail outlets and

country

profits ($m)

bank name

total assets ($bn)

top 10 east african banks rank in top 200

96

51 KCB Group kenya 56 Arab Bank for Ec. Dev. Africa sudan

4.4 163 3.9 0.128

60 Kenya Commercial Bank

kenya

3.7

142

68 Equity Bank Group

kenya

3.2

151

78 Co-operative Bank of Kenya

kenya

2.6

104

85 Barclays Bank of Kenya

kenya

2.4

87

86 Equity Bank Kenya*

Kenya

2.3

89

90 Standard Chartered Kenya*

Kenya

2.3

93

2.2 2.2

14 52

91 Commercial Bank of Eritrea* Eritrea 92 CRDB Bank tanzania

2013 results From top 200 Banks ranking; * In ItalIcs 2012 rEsults

mobile banking is the new frontier for growth, analysts and bankers say – a model that is being replicated across the East African region. A look at the strategic plans and recent pronouncements by the top five Kenyan banks show that the lenders are increasingly pursuing a supermarket banking model that will offer a range of financial services including bancassurance, mortgages, forex trading, diaspora banking and payments processing, with KCB and some others pursuing Islamic banking. “Medium-sized businesses provide better growth opportunities going forward, particularly those in the import trade and others supplying multinationals. This will eventually translate into strong growth potential for credit uptake and fee-related incomes. Barclays Bank, however, will struggle to catch up with peers in terms of innovation and winning back old clients,” says Kenneth Owera, an investment analyst at Stanlib Uganda, an asset management firm.

The country’s banking sector has been on a growth spree over the past few years. Data from the Central Bank of Kenya shows that the customer deposits base increased by 13.3% from $20.1bn in 2012 to $22.8bn in 2013. Loans to customers rose from $15.3bn in 2012 to $18bn in 2013, an increase of 18.2%. Profit before tax increased from $1.27bn in 2012 to $1.46bn in 2013, a jump of 15.8%. “We have begun to reap the benefits of our investment in information technology, agency banking, merchant business and paymentprocessing,” saysJamesMwangi, Equity Bank’s chief executive officer. regional expansion The big banks are also making a killing from a surging demand for credit across the East African Community. A survey by the Central Bank of Kenya in October last year shows that the large banks are charging borrowers up to 2.45 percentage points more than their smaller rivals. They are also paying customers lower

profile

commercial bank of africa cBa’s m-shwari pulls in the punters Kenya’s mid-tier lender commercial bank of africa (cba, #113) has over the past few months overtaken big networked lenders to emerge as the country’s second-largest retail bank, riding on a new product that allows customers to borrow and save using their

mobile phones. the country has seen a fast uptake of m-shwari, a product jointly sponsored by cba and mobile network operator safaricom – which owns another phenomenal financial product, m-pesa. the latest data by the central bank of Kenya shows

m-shwari has boosted the number of deposit accounts in Kenya to more than 21 million, leaving cba second only to equity bank (#68) among Kenya’s biggest retail banks. the product, data shows, highlights the growing shift towards digital banking the afric a report

in the Kenyan banking sector. the adoption of the technology has seen savings in the sector grow to at least $21.9bn. cba is associated with the family of Kenya’s president Uhuru Kenyatta, which is said to have a substantial stake in the company. ● g. n. finance special

s e p t e m b e r 2 0 14


top 200 banks

the afric a report

finance special

s e p t e m b e r 2 0 14

edward echewalu for tar

rates for deposits, widening the interest spread that is the biggest driver of profits. For the Kenyan top lenders, regional expansion is seen as a key thematic area in the coming years. They hope to reduce over-reliance on the Kenyan market, which is increasingly becoming saturated by new entrants. The five listed banks with significant cross-border operations – KCB, Equity, Investment & Mortgages Bank (#115), Diamond Trust Bank (#118) and NIC Bank (#127) – returned a combined profit before tax of $70m compared to a loss of $152m in 2012. “But even after successfully containing the cost base and making profits, there are still a couple of concerns regarding their regional operbanking’s brave new world means ations; and so the question is whether less time waiting in queues – they will be able to sustain this profitaband lower overheads for banks ility going forward. First is the issue of non-performing loans, which continues to record notable growth. This serves to nels, which offer lower banking charges show that there are still potential risks than ordinary services, alongside faster arising from non-performing assets,” says processing times of less than 10 minutes George Bodo, head of banking research for paying bills and checking balances. at Ecobank Group. “The retail market has come under In Uganda, with growth opportunities immense pressure from mobile money amongsmallnicheclientssteadilydiminservices and this has depleted margins ishing, top local lenders have shifted straearned by banks, but it still bears untegic focus towards deepening presence tapped potential,” says Patrick Mweheire, in retail and small and medium-sized executive director at Stanbic Bank enterprise (SME) segments, resulting in Uganda. The country has roughly four more investments in improved transacmillion bank accounts for a population tion platforms and increasing battles for of 35 million people. medium-sized businesses with big ambitions. While the top tanzania has the highest number three lenders by assets – Stanof banks in the region (53) for bic Bank Uganda (#136), the lowest inclusion rate (17%) Standard Chartered Bank Uganda (#159) and Barclays In the corporate segment, Mweheire – relied significantly on a small collecsays, “the SME segment offers more tion of government and private sector clients to drive growth in the past, rising opportunities for lending and growing competition triggered by new players, fee incomes, but exploiting this sector particularly KCB and United Bank for requires restructuring their borrowing needs, which appear very imbalanced.” Africa (#19), has rocked their comfort In Tanzania, while five banks control zones, leading to feverish pursuit of new growth areas. more than half of the banking sector, more are joining in as the central bank, mobile banking potential the Bank of Tanzania (BoT), continues For instance, Stanbic Uganda has inveslicensing lenders to operate. The country ted significantly in its mobile and internet now has 53 banks, compared to Kenya’s banking channels since 2012. It has done 43. Despite this, Tanzania’s level of finso in an effort to expand its retail client ancial inclusion is still less than 20% of the adult population. BoT figures show base, cut long queues in banking halls that in 2006 the proportion stood at and stimulate further growth in fee incomes following a sizeable dip in market 9%, rising to 12% in 2009 and in 2012 share – from 35% in 2012 to around 29% to 17%, or around 3.4 million people. in mid-2013, according to industry data. The rate jumps to 22% formal inclusion Standard Charteredis similarly consolwhen savings and credit co-operatives idating its electronic transaction chan(Saccos) are factored in. Tanzania has

97

a target to reach at least 50% formal financial inclusion by 2016. An economy that has only a handful of large banks with little competition fosters poor service delivery, which was the case when all Tanzanian banks were state-owned, says the BoT deputy governor, Lila Mkila. Individuals and small and micro enterprises are then at a particular disadvantage as big banks target the higher end of the market. a need for consolidation A 2013 study by Serengeti Advisers says that between 2006 and 2009 CRDB Bank (#92), National Microfinance Bank (NMB, #101) and National Bank of Commerce (NBC, #156) together commanded 35-44% of banking business in the country, and the top 10 banks held 80% of total banking assets in 2012. “Tanzania could be better served with 20-25 large and medium-sized banks competing aggressively together, rather than 53 banks of which more than 20 are small and cannot compete with the largest 10 banks that dominate the market,” banking expert Manzi Rwegasira wrote in the report. Serengeti listed the Lebanese owned FBME Bank in first place with 20% of the market share. Management of FBME has since been taken over by the BoT, which in July 2014 was looking for buyers for its branches in Tanzania. In its latest Financial Stability Report, theBoTsinglesoutnon-performingloans among the biggest risks faced by banks in the country, but the operational threat has been receding. According to the regulator, non-performing loans stood at 6.5% of total loans in December 2013, down from 8.1% the previous year. ● gilbert nganga


top 200 banks

BIG BANKS ExPANd BEyONd ThEIR BORdERS Gabon’s BGFI and Cameroon’s Afriland have launched operations in West and Central Africa, but they have yet to prove they can succeed in tougher regulatory environments and amidst stronger competition

bank namE

CountRy

pRoFIts ($m)

top 10 Central african banks totaL assEts ($bn)

CEntRaL aFRICa

Rank In top 200

40 BGFIBank Holding Corp. 58 Afriland First Group

Gabon Cameroon

6.1 3.7

65 23

74 BGFIBank Gabon

Gabon

2.8

38

93 CCEI Bank GE

Eq. Guinea

2.2

25

Congo

1.7

32

114 BGFIBank Congo 130 Société Générale Cameroun

Cameroon

1.4

17

133 BICEC

Cameroon

1.3

21

143 Afriland First Bank*

Cameroon

1.2

1

168 Soc. Comm. de Banque Cam. Cameroon 170 BICIG Gabon

0.9 0.9

17 8

2013 RESULTS FROM TOP 200 BANKS RANKING; * In ItalICs 2012 results

the development of improved riskmanagement systems. BGFI has not ignored its home market, and it opened five new branches in 2013. As a result, it controls 47% of the markets for loans and deposits. BGFIBank Gabon (#74) increased its loans and deposits by 29% and 15%, respectively, in 2013. Besides geographical diversification, BGFI also bought Gabon-based insurer Assinco in 2012.

nicolas eyidi for j.a.

102

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nlyoneCentralAfricanbank has broken into The Africa Report’s top 50 banks, Gabon-based BGFIBank Holding Corporation (#40), which aims to be a continental player. It is unlikely to meet its target of operating in 15 countries by 2015 – it is based in nine at the moment – but the bank it opened in Côte d’Ivoire in 2012 is already making a profit and it has a partnership with insurer OGAR to expand insurance product coverage in the countries where the bank is active. Expansion has temporarily weakened the bank and last year BGFIBank group’s balance sheet dropped by 0.1%. The bank’s performance was strengthened by activities in Côte d’Ivoire and Cameroon and weakened

in yaounde, cameroon, afriland first banK hQ proVes a funKy facade can be an asset too

by its activities in Equatorial Guinea and the DRC. In June 2013, the bank sacked its leadership team in Benin and had to recapitalise its operations after it discovered problems in risk management. In June of this year, BGFIBank president Henri-Claude Oyima said that the next phase of the bank’s expansion would target anglophone countries and acquisitions. Senegal, however, could be the next country to host a BGFIBank subsidiary. Oyima announced the implementation of the ‘Excellence 2020’ plan this year, which also includes the rolling out of new products and

aFRILanD GoEs WEst BGFI’s rival for dominance in Central Africa is Cameroon’s Afriland First Group (#58), which is also planning on regional expansion in order to grow its balance sheet. Both banks began their regional expansions in the early 2000s, but Afriland’s business focus tends to be on small and medium-sized enterprises. Afriland completed its acquisition of loss-making Access Bank Côte d’Ivoire in December 2013. Access Bank has sought to sell its non-essential holdings outside of its home in Nigeria and a few other markets. Paul Fokam, Afriland’s founder, told reporters in Abidjan that the bank would focus its activities on Ivorian agriculture. Not all of its attempts to set up new operations have been successful. In March 2013, Afriland lost out on the bidding for a 55% stake in the Banque Togolaise pour le Commerce et l’Industrie after the government rejected its bid. At home, Afriland spent several months defending itself in a case related to the management of government funds. The bank reimbursed the missing funds and the supreme court dismissed the case in May. Afriland has also not been as quick as its counterparts in publishing annual ● ● ●

the afric a report

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s e p t e m b e r 2 0 14


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top 200 banks

vices and received a big boost in May results and had not issued its ●●● with a $15m loan from the World Bank’s 2013 financial reports by the time The private sector arm, the International Africa Report went to press. Finance Corporation. Rawbank plans to Afriland’s most profitable operause the money to finance loans, espetion is in Equatorial Guinea, where it cially for women and small businesses is the majority shareholder of CCEI (see TAR 62, July 2014). Bank GE (#93). CCEI Bank climbed the most places last year, 14, of any bank in the region. In there are more mobile banking announcing plans for the accounts than traditional ones opening of a bank in Benin, in cameroon, Gabon and the Drc CCEI Bank GE director general Joseph Célestin Tinjou said in Ecobank’s Bodo warns, however, February that the financial institution that the sector is poorly regulated in controls 70% of business in its home the DRC. “I was in the DRC last year. market. Tinjou says the bank will focus on attracting the business of small The regulatory environment is really companies in Benin. not up to the call. Banks do not report on IFRS. There are no clear guidelines George Bodo, the head of bank reon the treatment of non-performing search at Ecobank, is sceptical about the international expansion of Central Africa’s banks. “I do not think it profile will be successful. First, their cost of funds are generally high.” He also points to issues of capital controls in some Central African markets and of customer dynamics, especially in the English-speaking countries.

loans. There are still a lot of significant loopholes that we do not see in other markets,” Bodo says. Another rapid riser on our Top 200 banks list was the Brazzaville-based La Conglaise de Banque (#187), which also rose 10 places this year. The bank, in which Morocco’s Banque Marocaine du Commerce Extérieur (#10) holds a 25% shareholding, trails BGFIBank Congo (#114) in size and has concentrated on strengthening its bancassurance model – one that combines traditional bank offerings and insurance products – in order to increase its market share. In its 2013 results, BMCEBank reported that La Congolaise de Banque’s deposits and loans rose year on year by 8% and 5%, respectively. ● Marshall Van Valen

société générale Cameroun

grab your handsets Bodo explains further that “you do not see strength in the regulatory policy environment. It is not as strong as other markets. For instance, in Central Africa most of the banking aspects are still based on Basel I. Some markets are moving to Basel III. In Central Africa, there is no IFRS [International Financial Reporting Standards] adoption.” In Central Africa, telecoms companies and their mobile banking platforms have been gaining on the traditional banks. While mobile banking has been slower to take off in markets like Chad and the Republic of Congo, the Alliance for Financial Inclusion reports that that there are more mobile banking accounts than traditional accounts in Cameroon, Gabon and the DRC. While telecoms companies have been the most active in supporting mobile banking, the Banque Internationale pour le Commerce et l’Industrie du Gabon (#170) introduced BICIG Mobile in 2012. It already has 70,000 clients, two thirds of them without traditional bank accounts, and the bank has a medium-term goal of reaching 200,000 BICIG Mobile accounts. Rawbank (#175) has a market share of about 20% of the DRC’s banking ser-

credit leader is firing on all cylinders the bank, #130 in our rankinGs, claims a 23% share of the cameroonian credit market, making it the leader in the field. in october 2013, the subsidiary of french bank société Générale opened its 29th branch in the country, changed its name from sGbc to Société Générale Cameroun (SGC) and celebrated 50 years of operations. it opened offices in edéa, foumban and kribi in 2013 and plans to expand to more than 40 branches by 2016. sGc reported a net profit of 12.4m cfa francs ($25.5m) for 2013. in late July, the cameroonian government chose sGc as one of the seven banks to participate in an

emergency action plan that covers several sectors, including health, roads and electricity provision. the banks will evaluate local companies to participate in the projects as well as identify critical projects to develop. in 2012, sGc joined a group of local and international banks in financing the construction of a gas-fired power plant for the port city of kribi. in order to reach the unbanked population, in august 2013 it launched a programme of mobile branches to serve clients who live outside of the cities with sGc branches. the mobile branches are kitted-out vehicles with the information technology tools that allow clients the afric a report

to perform the transactions that would normally be done in bricks-and-mortar offices. in 2012, the bank also launched monifone, a multioperator mobile-payment service to rival the likes of orange money and mtn’s mobile money, which were introduced by telecoms firms. seeking to learn from its competitors, the bank announced in July that it had hired united bank of africa’s Georges Wega as its assistant director general. Wega was head of the nigerian bank’s operations in cameroon. before taking up his new post, Wega warned that bad loans make up about a quarter of the country’s loan book. he brings experience from General electric and barclays. ● M. V. V.

finance special

s e p t e m b e r 2 0 14



lifestyle travel glamping Little Governors’ Camp and some equally glamorous visitors

Glamour and nature in the Maasai Mara Forget sleeping-bags and camping stoves – canvas has never been so stylish. Here are five ways to glamp it up in Kenya’s maasai mara reserve

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lamping – short for glamorous camping – was around in Kenya long before the word itself was coined. Governors’ Camp, Kenya’s first boutique tented camp, started in the 1980s. Now it has a younger, hipper sister, Little Governors’ Camp. Separated by a waterway from the main Maasai Mara National Reserve, the camp is a study in intimacy despite the elephants and warthogs wandering through. Bed down in one of 17 luxury en-suite tents that encircle a watering hole, each with stunning views of the wildlife that comes to drink. The camp has its own private plane service from Nairobi. governorscamp.com The newest kid on the Mara block is Mara Toto (Little Mara in Kiswahili), an impermanent camp on the edge of the reserve, owned by wildlife photographers Dereck and Beverly Joubert. Everything from the wooden verandas to the long dining deck and campfire pit will one day be removed, leaving no trace but footprints. Until then, there are beds soft as clouds to curl up in, long communal lunches with wine to enjoy and Canon D5 cameras with telephoto lenses on hand for every guest. Maasai guards will walk you to your tent after dark in case of four-legged intruders and heat water for use in your copper shower. A kilometre down the road is ultra-plush sister camp Mara Plains. greatplainsconservation.com

Michael Poliza PhotograPhy

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Porini Lion Camp is consistently lauded as one of the best Maasai Mara camps, with glittering ecological credentials including safari tents equipped with solar power. You will sleep under the stars inside the private, 33,000-acre Olare Motorogi Conservancy, hailed as a blueprint for sustainability within Maasai communities. The area has one of the highest lion-to-human ratios in the world, and you will practically have them to yourself. porini.com For something even more conscientious, Jock Anderson’s East African Wildlife Safaris can plan tailored itineraries using mobile pop-up camps throughout Kenya. Anderson – a charming safari expert who has facilitated films in Kenya for Walt Disney and National Geographic – participates in every trip. You will sleep under deep green canvas, tuck into fillet steak and chocolate soufflés and travel in Anderson’s trademark 4x4s, designed for photographers to capture the perfect shot. Every location is special, but it is Anderson’s expertise and respect for tradition that seals the deal. eawsafaris.com Simpler tastes will be sated at The Melting Pot, a French-run tented camp that sticks to the basics, with spacious teepees strung out along the banks of a river, satisfying breakfasts and eco-loos. This is serious hippo territory, so campers are grounded after nightfall. That does not stop hippo grunts and growls piercing the canvas walls – and your dreams. The camp occupies a swathe of lush grassland, studded with acacia trees and with some lovely quiet corners for yoga or Kate Thomas meditation. meltingpotsafaris.com ● the africa report

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DOSSIER | AIRLINES

KENYA AIRWAYS/ETHIOPIAN AIRLINES

Gap widens in East African skies The top two East African carriers contemplated a merger erger last year, but Ethiopian thinks its prospects are strong enough h for it to fly solo

F

rom labour relations and profitability to geographical balance, Ethiopian Airlines appears to have an advantage over Kenya Airways. “From the numbers and global ambitions, one can certainly say that Ethiopian Airlines looks more confident and ready to face the future compared to KQ [Kenya Airways],” says Eric Musau, an analyst at Standard Investment Bank. Ethiopian Airlines became the first African carrier to start flying Boeing’s 787 Dreamliner, receiving its first of 10 aircraft in August 2012 as part of a plan to boost revenue five-fold by 2025. When Kenya Airways mooted plans for a merger with Ethiopian last November to fight off foreign carriers, Addis Ababa was dismissive of the idea. Casual observers read Ethiopian’s reactions as a cheeky shot from an arch-rival, but analysts viewed it as another sign of the growing gulf in the financial health and confidence of the two East African carriers. TURBULENCE

Ethiopian Airlines is a wellmanaged state-owned company, and proud of it. “The fallacy is that whatever government owns is a failure. It is not,” chief executive Tewolde Gebremariam told the Africa CEO Forum last November in Geneva. Both carriers struggled but remained in the black during a tough few years for the African airline industry. Ethiopian recorded net profits of $40m for the year to June 2012, a drop of 40%, while Kenya Airways recorded a 53% drop in net profits to $19.6m in the year to March 2012. Then in NovemberKQissuedaprofitwarning for the year ending March 2013, reporting a net loss of $57m for the six months to September 2012. Analysts attribute the widening gap between the two airlines to their wage bills and labour re-

+25 %

PASSENGER GROWTH 2011-2012

+16.1%

lations, choice of destinations, geographicalsegmentationoftheir phical ntatio oftheir revenue and Ethiopian’s governmentprotection.Airlinestheworld over have faced deteriorating labour relations, but Ethiopian has fared better than its African rivals. Last year the airline convinced its employees to give up part of their salaries and reduce per diem rates in a cost-cutting drive to save $54m. This was happening at a moment when KQ was locked in a vicious dispute with the Aviation and Allied Workers Union over a plan to slash 600 jobs. The union secured a restraining order against the company. The case is still in court. HIGH WAGES

KQ’s wage bill more than doubled over the past six years to $156.3m in the year to March 2012, while the total number of staff members rose by more than 16% to 4,834, meaning that on average each employee pocketed $32,322 a year. In contrast, in the year to June 2011 the 6,286 employees on

$1.9bn

turnover in 2012 for Ethiopian Airlines

$1.3bn

turnover in 2012 for Kenya Airways

the Ethiopian Airlines payroll took home$16,255onaverage.“Thedifference between the two markets is that Kenya has a more liberal labour market [but] with strong unionscomparedtoEthiopia,” says Sammy Onyango, chief executive of Deloitte East Africa. Ethiopian Airlines, with a fleet of 49 passenger planes and 70 destinations, is making faster headway in key growth markets such as Asia. Ethiopian Airlines draws 35% of its revenue from Asia and the Middle East, compared with 19% for KQ. “Ethiopia has a balanced geographic representation and is benefiting from its huge presence in Asia,” explains Mbithe Muema, an analyst at Renaissance Capital. Last September, Kenya Airways chief executive Titus Naikuni admitted that the company’s revenue is “not growing as fast as we had anticipated”. KQ plans to spend $3.6bn over the next five years to increase its fleet and number of routes, including the purchase of 10Embraer190s,nineDreamliners and one Boeing 777-300ER. ● Michael Obiero in Nairobi

THE AFRICA REPORT

N° 50

M AY 2 013



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