Tar60 ethiopia

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

NIGERIA The government’s business scorecard

David Adjaye, Architect

Zweli MKHIzE Is this the man to succeed Jacob Zuma?

Hailemariam Desalegn, Ethiopia’s Prime Minister

Kenya Security dominates Kenyatta’s first year

w w w.t he a f r ic a r ep or t .c om N ° 6 0 • M AY 2 014

Donald Kaberuka, AfDB President

of the future

Architects

Concrete visions for tomorrow

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NIGERIA The government’s business scorecard

N ° 6 0 • M AY 2 0 14

SOUTHERN AFRICA EDITION

The government’s economic scorecard

Architects

of the future Concrete visions for the continent

GROUPE JEUNE AFRIQUE

UHURU KENYATTA Security dominates year one

ARCHITECTS Concrete visions for Africa’s urban future

w w w.t heafr icarep or t.com

NIGERIA 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 FCFA

ETHIOPIA The developmental state takes off

N ° 6 0 • M AY 2 0 14

Zweli Mkhize

The ANC is tough on corruption The man from Jacob Zuma’s heartland makes his move

w w w.t heafr icarep or t.com 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 FCFA

Nigeria on top?

ARCHITECTS Concrete visions of Africa’s urban future

GROUPE JEUNE AFRIQUE

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 FCFA

INTERNATIONAL EDITION

GROUPE JEUNE AFRIQUE

w w w.t heafr icarep or t.com

MONTHLY • N° 60 • MAY 2014

cover crediTs: inTernATionAl: K. lAThigrA for TAr; B. levy for JA; e. lArrAyAdieU/ceo forUm/JA; d. Boshoff for TAr - nigeriA : eKo ATlAnTic - soUThern AfricA : d. Boshoff for TAr; B. cUrTis/Ap/sipA - KenyA : s. mAinA/Afp; d. Boshoff for TAr

ZWELI MKHIZE Is this the man to succeed Jacob Zuma?

KENYA Security dominates Kenyatta’s first year

Donald Kaberuka, AfDB President

KENYA EDITION

KENYA Security dominates Kenyatta’s first year

N ° 6 0 • M AY 2 0 14 Hailemariam Desalegn, Ethiopia’s Prime Minister

THE AFRICA REPORT

David Adjaye, Architect

ZWELI MKHIZE Is this the man to succeed Jacob Zuma?

contents

NIGERIA The government’s business scorecard

N ° 6 0 • M AY 2 0 14

Uhuru Kenyatta

Year One Security trumps all as doubts grow over corruption and the constitution

The AfricA reporT # 60 - mAy 2014

GROUPE JEUNE AFRIQUE

ZWELI MKHIZE Is this the man to succeed Jacob Zuma?

w w w.t heafr icarep or t.com

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 FCFA

NIGERIA The government’s business scorecard

country focus

4 Editorial Triumphs and tragedy

51 Ethiopia Farms and finance A strong state is key to building up the nation’s agricultural and industrial sectors

6 lEttErs 8 thE QuEstion

Briefing 10 signposts 12 intErnational 16 pEoplE 18 opinion Meri Nana-Ama Danquah Our African and American story

22

20 calEndar

frontLine

Business

32

22 architEcturE Africa in the making Fresh from work on the African American museum in the US, design icon David Adjaye outlines his vision for Africa’s cities of the future

38 rWanda The past that mingles with the future 40 ZWEli MkhiZE There is a strong need for redistribution 43 opinion Stephen Chan Modelling the future ANC 44 Mali No peace in the north 45 ZiMbabWE Tsvangirai in trouble 45 burundi Divide and rule

80 south african WinE Pressing for change 82 lEadErs Randgold Resources’ Mark Bristow

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86 financE More bang for the buck dossiEr 90 insurancE New opportunities for South African insurers and mobile micro-insurance in Ghana

51

Art & Life

100

96 artists Africa’s time is now The continent’s contemporary art market hits its stride 100 in briEf Blitz the Ambassador and radio comedy in Abidjan 102 lifEstYlE Hip-hopper Navio and Cairo’s co-working cafes 106 daY in thE lifE Albert Mosoro, recycler This issue carries two inserts between pages 58-59 and 74-75 for selected countries

46 anansi the africa report

76 donald kabEruka People aren’t borrowing for white elephants 78 Eurobonds A good time to hit the market

poLitics 32 kEnYa Kenyatta’s first year Security tops the agenda as President Uhuru Kenyatta’s government enters its second year in office, while terrorism and devolution are putting a strain on the economy

72 nigEria The business scorecard After an updated analysis of the West African nation’s GDP makes it the continent’s largest economy, we assess how its principal sectors really stack up

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editorial

The AfricA reporT A Groupe Jeune Afrique publication

By Patrick Smith

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

Triumphs and tragedy

O

hlange High School, Inanda, KwaZulu-Natal, 27 April 1994. It was a day of change.

Hundreds of us journalists left Durban at four in the morning on buses laid on by the African National Congress (ANC) to Inanda to see Nelson Mandela vote for the first time. He cast his ballot at a school built by John Langalibalele Dube, the founding president of the ANC. Afterwards, Mandela walked across to Dube’s grave beside the school: “Mr President, I have come to report to you that South Africa is free today.”

On that election day, hopes could hardly be higher. Decades of struggle against apartheid were followed by an uneasy and sometimes violent interregnum while the ANC and National Party negotiated a transition to free elections. Two weeks later, the world watched Mandela speak at his inauguration in Pretoria: “The time to build is upon us [...] We commit ourselves to the construction of a complete, just and lasting peace.”

Visiting correspondents had scarcely voiced their homilies to camera about the victory of democracy when news started breaking of one of the worst bouts of slaughter since the Second World War. Correspondents flocked to Kigali where the shooting down of President Juvénal Habyarimana’s plane on 6 April had been the signal for death squads to start a genocide.

As recently launched 24-hour news stations showed hideous footage of mass murder, worldweary pundits rapidly revised their narrative of a new Africa in the time of Mandela. Yet those triumphs and tragedy in the same month started a new chapter in Africa. South Africa’s hard-won

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 e x e Cut i ve P ub l i s he r JérôMe MillAn

liberal constitution, its Truth and Reconciliation Commission, and its promotion of women’s rights set standards across the world. Its capital and technology helped to drive Africa’s economic expansion, quite apart from the social transformation of South Africa itself.

Lessons have not been acted on after Rwanda. Britain, the United States and France jointly drafted a UN resolution to withdraw peacekeepers from Rwanda at the height of the killing spree. A decade after the genocide, the UN General Assembly agreed on a ‘Responsibility to Protect’.Yet this year the death toll in World-weary Syria’s civil war passed 100,000 without any pundits sign of intervention, rapidly and we hear how UN revised their and AUforces in Sudan’s Darfur and the narrative of Central African Rea new Africa public have been palpably unable to protect in the time civilians. of Mandela The lessons learned go beyond UN resolutions to public policy. As Donald Kaberuka, Rwanda’s former finance minister and now president of the African Development Bank, points out this month: “High-quality education is the surest way to stop the transmission of poverty between generations. I was born in a refugee camp, and now I’m running a bank.” On that, Kaberuka and the ANC’s president Dube would surely have found common ground, along with Ghana’s star architect David Adjaye and Ethiopia’s Prime Minister Hailemariam Desalegn, who also feature in this month’s issue. In their different ways they represent an Africa in the making. ●

m a r K e t i nG & d e ve l o P m e nt AlisOn KinGsley‑hAll e d i t o r i n Chi e f PAtricK sMith 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 chArlie hAMiltOn e d i t o r i a l a s s i s ta nt OheneBA AMA nti Osei r e G i o na l e d i t o r PArselelO KAntAi (east Africa) a rt & l i 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 éMeric thérOnd 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 sOlène deFrAncq 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 liliA BenAceur us r e P r e s e ntat i ve AzizA AlBOu a.albou@groupeja.com

the africa report

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Printer: sieP 77 ‑ FrAnce n° de cOMMissiOn PAritAire : 0715 i 86885 dépôt légal à parution / issn 1950‑4810 the AFricA rePOrt is published by GrOuPe Jeune AFrique

THE SOARING PALACE New La Premiere Suite: discover absolute comfort and five-star service throughout your journey.

AIRFRANCE.COM Gradually installed on a part of Boeing 777 fleet as of September 2014.

6

letters For all your comments, suggestions and queries, please write to: The Editor, The Africa Report, 57bis Rue d’Auteuil - Paris 75016 - France. or editorial@theafricareport.com

question of priorities

a

KENyA/ugANDA The race to first oil

gHANA What business wants

Eu/ASIA The world woos Africa

frica as a continent could begin to repair itself financially once the civil strife is under control [‘All Roads lead to Brussels’, TAR59 March 2014]. The more money spent on peacekeeping missions means there is less money being funnelled on the ground to assist the everyday people. In addition, foreign investors Battle for the soul are extremely reluctant to invest in economies of South Africa that are filled with disorganisation and constant pandemonium. “Africa’s economies have gone through almost a decade and a half of growth averaging more than 5%.” Although Africa’s economies have experienced an average of more than 5% growth within the last 10 years, there are other countries such as India which are experiencing astronomical growth with a high per capita income that exceeds that of many African nations.

PaperBag Chase via Facebook w w w.t hea f r ic a repo r t .c om

N ° 5 9 • A P R I L 2 014

the days of African tradition whereby women were restricted from doing certain jobs. The world of today is all about survival of the fittest! Go on, miss. Do your work without trembling.

If any man complains about it, then he can go hang! In fact, you could do even more and encourage other fellow women to join you.

Julie Lamunu via Facebook

After 20 years of freedom, activists want a new generation in power and an end to patronage politics

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

nurturing AfricA’s tech-off Your analysis [‘Top 500 African Companies’, TAR57 Feb 2014] indicates that Africa has a long way to go in developing its tech sector. Increased public and private sector investment in this field, combined with better government policies, is ultimately required for Africa to compete on the international stage. Africa’s growing economy also demands more specialised tech skills to sustain the progress made in recent years. Africa’s tech sector (telecoms plus IT) is expanding at a rapid rate, driven by the phenomenal adoption of mobile phones, increased competition

in telecoms, significant investment by large tech multinationals and the explosion of tech start-ups across the continent. Africa’s tech sector is on the move and its significance will only increase in years to come, both as a key driver of the African economy and as an emerging and increasingly influential force on the world stage.

David Barnard Vice-president: Africa, TechSoup Global

full throttle for equAlity It’s not a crime to be a motorbike rider, is it? [‘Shifting gear’, TAR58 Mar 2014] So why insult [her]? Men always want to put women down. Gone are

BewAre self-interest First of all France and Britain... I know these two have nothing but their own agenda in mind, and are interested only in boosting their ever-so-dismal economies [‘All Roads lead to Brussels’, TAR59 Mar 2014]. They are looking for a means to hijack Africa’s resources in a legitimate way, and this is why there is the Summit. Trust no one, especially those who have brought despair to your lives for 400 Years!

Tensa Rwegasira via Facebook

succession fAirytAles President Sata’s certainly not looking for a successor any time soon [‘Sata’s successor’ TAR58 Mar 2014], hence the delay with Zambia’s revised constitution that proposed an age limit of 75 for presidential aspirants.

He’s 77 and is planning to run in 2016.

Then maybe the succession debate can really start within the ruling PF.

Dimpho Di Motsamai via Facebook

How To gET youR copy of THE AfRIcA REpoRT On sale at your usual outlet. If you experience problems obtaining your copy, please contact your local distributor, as shown below. ghAnA: GREENWICH MAGAZINES & BOOKS, Mr Ernest Asare, +233 (0)208 142 374, greenmaghana@gmail.com – KenyA: NATION MEDIA GROUP, Josephine Bonareri Abuga, +254 (0)20 32 88507, JAbuga@ke.nationmedia.com – nigeriA: NEWSSTAND AGENCIES LTD, Solomon Otinwa, +234 (0)709 8123 459, newsstand2008@gmail. com – sierrA leone: RAI GERB ENTERPRISES, Mohammad Gerber, +232 (0)336 72 469, raigerbenterprise@gmail.com – southern AfricA: RNA DISTRIBUTION, Luisa Rebelo, +27 (0)11 602 9800 • luisar@magcservices.co.za – tAnZAniA: MWANANCHI COMMUNICATIONS, Erasto Matasia, +255 (0)713 512 551, ematasia@ tz.nationmedia.com – ugAnDA: MONITOR PUBLICATIONS LTD, Stephen Eselu, +256 (0)702 178 198, seselu@ug.nationmedia.com – uniteD KingDoM: COMAG, Mark Swan, +44 (0)1895 433791, Mark.Swan@comag.co.uk – uniteD stAtes & cAnADA: LMPI, Sylvain Fournier, +1 514 355 5610, lmpi@lmpi.com – ZiMBABwe: MUNN MARKETING (PVT) LTD, Nick Ncube, +263 (0)4 662755, nickncube@munnmarketing.co.zw For other regions go to www.theafricareport.com

ADVERTISERS’ INDEX ECOBANK p 2; AIR FRANCE p 5; DANGOTE p 7; TOTAL p 9; BANK OF AFRICA p 13; OCP SA p 15; SAHAM FINANCE p 21; IE SINGAPORE p 27; ETHIOPIAN AIRLINES p 29; AfDB p 31; CNN p 35; ADEXEN p 37; NATIONWIDE EQUIPMENT p 37; BLOOMBERG TV p 39; REP. OF COTE D’IVOIRE p 47-50; ERNST & YOUNG p 55; METAD AGRICULTURE DEV. p 56-57; TRAVEL ETHIOPIA p 61; FAIRFAX AFRICA FUNDS p 63; ETHIOPIAN ATA p 65; AUC p 67; INFORMA TELECOM p 69; UNITED INSUR. COMP. p 69; JUPITER INTERN. HOTEL p 71; AFRICA GRI p 79; COOL FM, WAZOBIA p 79; CBSL p 83; EMRC p 85; IMF AFRICA RISING p 85; EMS SAITEX p 87; TERRAPINN SATCOM p 87; FRISOMAT p 89; METALGALANTE p 89; GMA p 93; TAN RE p 94; DDP p 103; EKO HOTELS & SUITES p 105; STANDARD BANK p 107; ZEMEN BANK p 108 the africa report

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8

the question To respond to this month’s Question, visit www.theafricareport.com. You can also find The Africa Report on Facebook and on Twitter @theafricareport. Comments, suggestions and queries can also be sent to: The Editor, The Africa Report, 57bis Rue d’Auteuil, Paris 75016, France or editorial@theafricareport.com

in egypt, since the ousting of President mohamed morsi on 3 July 2013, protests have been violently suppressed and many thousands put in jail. supporters of the muslim Brotherhood say they are being victimised

Is the Muslim Brotherhood being persecuted in Egypt?

Yes Ahmed helmy Egyptian lawyer specialised in political cases

Since 3 July, [which] I call a coup, there have been 8,000 dead and 20,000 political arrests. At first, leaders of the Brotherhood and allied parties got arrested. Then, after the dispersal of the anti-coup sit-ins in August, the arrests became much more arbitrary. The police started taking anyone they suspected of being a Brotherhood member. If the charges mention something against the security of the country, it is 45 days of renewable provisory detention. They often do not have real evidence. They keep people in overcrowded rooms and often inside the police stations. It is very common for the hearings to take place not in the prosecutor’s office, but in the police stations, and the lawyers cannot attend. All of it is even more common since last December when the government officially declared the Brotherhood a terrorist group. But no terrorist attack is directly related to the Brotherhood.

Twice over this past month, defendants were sentenced to death with no lawyer in the court. This political crackdown is happening because of economic interests of those who hail from the Hosni Mubarak regime, and the army, who do not want to let any dissenting voice threaten their expected victory in the upcoming elections. ●

No hAny SAlAh Spokesman, Egyptian Cabinet of Ministers

The Muslim Brotherhood poses a threat to this country, its existence and its very being. The Brotherhood is either directly or indirectly implicated in what has happened since this summer: terrorist attacks targeting security officials, policemen, army personnel, state buildings, Christians […] Terrorism is a threat that is to be confronted with all possible means.

There are no random arrests. The special courts for terrorism that have been established last December follow the same laws as all the other courts in the country. They just want to be quicker, as there are hundreds and hundreds of terrorism cases. These are not political cases. There are tons of evidence which will be presented in due time to the courts. The judiciary system is also trying officials of the Mubarak era. The judiciary is not politicised.

This government does not want to exercise oppression against any political party, but we want to stick to the roadmap: first the new constitution, which has been overwhelmingly approved, and then presidential and parliamentary elections.

We invited them to take part in the transitional process; they refused. We are walking a very thin line, we need to protect the state and its citizens and not violate human rights. ●

ReSpOnSeS to last month’s question:

Is Africa getting fat?

The campaign against importation and consumption of nutrientdeprived foods must continue unabated. Health education cannot be overemphasised in Africa.

Good health is our most cherished asset!

Gifty K. via theafricareport.com Africa ‘getting fat’ would not go well with the Western propaganda of ‘starving and poor’ Africans. In the past decades being ‘fat’ meant being wealthy, just look at the Congolese society where ‘big’ is celebrated.

Angolan Rose via Facebook I think the problem is more prevalent in developing countries like South Africa due to bad eating habits and more fast-food restaurants.

It is also worse because women occupy higher management roles so have no time to prepare healthy meals for their families.

Thandeka Gugulethu Khoza via Facebook The fact that this could even be a question in Africa shows just how far we are moving from a real connection with our food.

Obesity and poverty side by side seems no longer just to be the problem of the Western world.

Trevor Fox via theafricareport.com the africa report

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briefing

siGnposts

central african republic A former Armed Forces soldier in Barengo. The UN Security Council has voted to send 12,000 troops to CAR.

MalaWi President Joyce Banda held

eGYpt Archaeologists unveil two restored statues of Pharaoh Amenhotep III, which have been returned to their original sites at the king’s funerary temple in Luxor.

the launch of her re-election campaign in Lilongwe, ahead of the May 20 vote.

education school enrolMent rates in Ghana

Amid a debate on whether Ghana can afford to make senior schools free by 2015, a report by the IMANI think tank shows enrolment drops sharply at senior level (figures from 2011/12).

Dropout rate at the primary level partly accounts for the lower enrolment rate at the junior level

AFRICA

96.5%

50% of junior high school graduates do not have access to senior high school

31.7%

80.6%

Primary (6-11)

Junior high school (12-14)

finance africa’s external debt sWell

30-70%

According to analysis of a report by the Intergovernmental Panel on Climate Change, food security will be severely affected by changing weather patterns by 2050. The analysis, carried out by the Climate Change, Agriculture and Food Security research programme predicts an alarming decline in crop yields in Africa and fisheries yields in the tropics.

Africa issued

$1bn

Fisheries yields in high latitudes Fisheries yields in the tropics

of foreign

-40%

debt

investMent the 2014 african retail developMent index

34

100

100

66

38

65

72 62 19

100

48 29

Ethiopia

81

53.7

sourcE: ArDI

50

94

17

Mozambique

23

35

in 2003 but this soared

10bn to

$

Time pressure

54.2

54.3

Botswana

71

Tanzania

61

Namibia

22

55

Nigeria

71

80

55.5 28

71

79

94 56

56.9 41

87

6

75

89

19

65

79

58.9

59.5

Market saturation

South Africa

71

60.2

Gabon

100

Country risk

Market size

Ghana

ARDI score 70.3 64.2

Senior high school (15-18) FoToLIA

cliMate chanGe food securitY at risk

sourcE: ccAFs

•

The domain name “.africa” may hit the web as early as May, after a final agreement was signed by representatives of the Internet Corporation for Assigned Names and Numbers group in Singapore.

Rwanda

10

in 2013.

Some of Africa’s fastest-rising stars such as Ghana, Nigeria and Uganda are now in the midst of economic difficulties, leading some bankers to question whether the search for higher investment yields may have led their emerging market portfolios to become exposed.

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briefing

KENya Flomena Cheyech crosses the finish line

GUiNEa Emergency teams try NiGERia Scores of people were killed after two rush-hour to win the 38th women’s Paris Marathon, with a time of to stem an Ebola outbreak that has bomb blasts tore through a bus station outside Abuja, with 2:22:41. Ethiopia’s Yebrgual Melese came in second.. so far killed more than 100 people. suspicion falling on Islamist militant group Boko Haram.

SIEgFrIEd ModolA/rEutErS; AMoS guMulIrA/AFP; KHAlEd dESouKI/AFP; gonzAlo FuEntES/rEutErS; SEYllou/AFP; gBEMIgA olAMIKAn/AP/SIPA

$509.9bn

Nigeria is now the largest economy in Africa after overtaking South Africa. Following a rebasing calculation, the country’s GDP almost doubled to more than $500bn in 2013. Most countries review their GDP assessments every two or three years but Nigeria had not recalculated the size of its economy since 1990.

ESAM Al-FEtorI/rEutErS

“They

did this without telling me – why should I pay for something I did not ask for?”

Libya

Oil terminal stand-off ends

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larger oil terminals at Ras Lanuf and Sidra in the country’s east within four weeks. As part of the deal, the government agreed to pay compensation to the rebels, drop criminal charges against them and withdraw threats of military action.

Without crucial oil funds or a functioning military, the central government has struggled to rein in rebel forces. Oil production slumped by 80% to around 150,000 barrels per day since rebels began their blockade, but the opening of the two terminals should boost daily output by up to 200,000 barrels. ●

South African President Jacob Zuma, explains to local TV news station ANN7 why he does not believe he should pay for the $23m upgrade to his Nkandla residence. rICK BAjornAS/un

L

ibya’s fragile government scored a much-needed victory on 6 April after agreeing a deal to reopen two of four oil terminals that have been blockaded by rebels for more than eight months. The Zueitina and Hariga terminals had been locked down by militiamen seeking to win a greater share of oil revenue and regional autonomy.

Militias in Tripoli and other parts of the country continue to pose a threat to the stability of the General National Congress, Libya’s transitional government.

The immediate handover of the terminals was the first part of the deal, which will also involve the opening of the

11

briefing

InternatIonal 1

7

5 3

6 2

9

1

8 4

CHIna

90%

of the world’s supply of rare earth metals are controlled by China. In late March, following a complaint from the United States government, the World Trade Organisation ruled that China’s export limits and duties do not comply with the organisation’s regulations.

4

IndonesIa

Joko edges poll victory

ChrISTIAn VerOn/reUTerS

President Susilo Bambang Yudhoyono’s Democratic Party was polling in the single digits following corruption scandals before the 9 April legislative elections, allowing the Partai Demokrasi Indonesia Perjuangan (PDI-P) of Jakarta mayor Joko Widodo to clinch a close win. The vote has set the tone for the 9 July presidential poll. Scoring less than 20% in the legislatives means the PDI-P must form a coalition to present its presidential candidate. Golkar, the party of former president Suharto, and Gerindra can also nominate candidates. Tycoon Aburizal Bakrie is Golkar’s choice to face Widodo, who remains favourite to win. ●

2

Venezuela

Maduro agrees to mediation

5

A rapid resolution to the country’s instability remains unlikely. In April, President Nicolás Maduro agreed to meet oppositionists who had been organising street protests for more than two months amid rising crime and shortages of staple goods. Protestors had been calling for Maduro to resign and refused to participate in the talks unless their conditions are met. Officials representing the Unión de Naciones Suramericanas regional body are mediating in the crisis.

The Mesa de la Unidad Democrática, an umbrella group of opposition parties, insisted on preconditions before the talks began to ensure that there were independent mediators and that the government was serious about negotiating. Maduro says that the United States is seeking to foment a coup in Caracas similar to the recent uprising in Ukraine. The government launched a criminal case against opposition leader Leopoldo Lopez on 4 April for organising public protests. Lopez’s political party, Voluntad Popular, said that he should be released from detention before talks could begin. ● 3

saudI arabIa

A second prince in place Worried by the many branches of the family tree that could get involved in his succession should it be unclear, King Abdullah, 89, named a second in line to the throne in late March. Prince Muqrin (69) now follows Crown Prince Salman, 78, in the royal hierarchy. Murqin previously served as governor of Medina and is seen as close to Abdullah. The announcement of Murqin’s appointment suggested the possibility of a dual vacancy of the position of king and crown prince. ●

germany

“We don’t

J. FlUBACher/SWISS-IMAGe.Ch

12

want to be model students, but we think it’s not bad when countries in Europe stick to the rules that they have set”

Wolfgang Schäuble Germany’s finance minister worries about France’s commitment to reducing its budget deficit

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african angles 6

CArIbbeAn

reparations debate the countries of the Caribbean Community and Common Market (CariCOM) formulated an initial 10-point manifesto for european countries to pay reparations and address the impact of slavery. the CariCOM governments were set to file a complaint with their european counterparts before the end of april.

Officials from CariCOM will meet with representatives of european governments within the next two months to discuss proposals including an apology and debt forgiveness. No party has suggested a monetary value for the reparations. ●

7

frAnCe/swITzerlAnd

$44bn swiss firm holcim announced plans to buy French counterpart lafarge, creating the world’s largest cement maker in a merger billed the largest in the industry’s history. lafargeholcim would have annual sales of $44bn with operations in 90 countries.

8

ChInA /TAIwAn

trade and trials The Taipei government’s support for a deal that will allow more Chinese investment in Taiwan led to three weeks of protests in March and April. Before ending their parliamentary sit-in protestors obtained a new bill creating more legislative oversight for deals involving the government in Beijing. Legislators from the opposition Democratic Progressive Party say the investment deal edges China towards greater influence with an eye to reclaiming Taiwan. ●

9

Comfort Ero

Africa programme director, International Crisis Group all rights reserved

14

Elections in conflict zones The security lockdown before the Afghan election on 5 April reminds us that polls can be fraught with risk

H

olding elections in conflict zones is always more complex, volatile and dangerous and tends to lead to controversy. It is a challenge both for the authorities holding the elections and the communities who face the threat of violence in seeking to exercise their rights.

It is a difficult job for the people organising the elections. Beyond the standard challenges of simply making sure people have access to the voting sites, it is a question of making sure they can do so in safety and freely.

If you are attempting to hold an election in a conflict zone, the authorities must be able to ensure the security of the polling stations, especially in flashpoint areas.

Access to polling sites is crucial to ensuring that the vote does not undermine the franchise of those people taking part. Refugees should be allowed to return. Internally displaced people should be able to go back to their homes, too.

Africa has seen its share of elections held in volatile and post-conflict countries, from Liberia in 1997 to Côte d’Ivoire following runoffs that provoked a near civil war in 2011. Of course, there is rarely a perfect time to hold elections when emerging from years of civil war, but the success and credibility of any poll relies on several crucial factors, with two of the key elements being whether the political players and the community are ready for the elections.

Too many times, Africa has witnessed elections in countries that were not ready to move on from the violence that has marked their immediate past. If the country is not ready for elections, if they rush to vote without addressing some of the deep fault lines that caused conflict, this can easily shatter any fragile truce that has been established and hurl a country back into war.

It is a question of delicate timing. Finding a time when the community is ready to put conflict behind them and embrace change is a challenge while ensuring that regional and international partners are not giving life to governments that have run their course.

Look at the case of Guinea-Bissau at the moment. The country is facing an economic crisis.

The country’s political leaders have been driven to the ballot because the government is close to bankruptcy, faces international isolation and is in desperate need of international support.

Often the results of the elections themselves can trigger further instability and set the country on a path to a virtual civil war, threatening not only the security of the country but also of the region.

However, the difficulties do not end after the voting has finished.

It is vital that the international community monitor the development in the post-election period and make sure there is no return to violence or any kind of post-conflict coup. ● the africa report

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briefing MAY

OxfOrd University Pan-african cOnference 3 May OxfOrd | UK The flagship event of the Oxford University African Society (OUAS), this annual conference has become one of the largest gatherings of African students in the United Kingdom since it began three years ago. oxfordafrica.org

nigeria internatiOnal BOOK fair 5-10 May

calendar

african Utility WeeK 13-14 May CAPe TOWN | sOUth africa african-utility-week.com

clean POWer africa 13-14 May CAPe TOWN | sOUth africa clean-power-africa.com

africa financial services investMent cOnference 15-16 May brIghTON | UK afsic.net

careers in africa recrUitMent sUMMit 16-18 May LONdON | UK Leading companies across all sectors will be presenting job opportunities in Africa. careersinafrica.com

african develOPMent BanK grOUP annUal Meetings 19-23 May KIgALI | rWanda The continent’s finance ministers, central bank governors and representatives from the

satcOM africa 2014 20-21 May JOhANNeSbUrg | sOUth africa Satellite communication conference. terrapinn.com/2014/ satcomafrica/

sOUth africa general electiOns 7 May While a fractious opposition poses no great challenge to the ruling African National Congress and President Jacob Zuma, growing discontent with corruption scandals and a lack of service delivery could provoke social unrest around the polls. See page 40.

egyPt Presidential electiOns 26-27 May

AbUJA | nigeria ‘forging Inclusive growth, Creating Jobs’ will be the theme of this year’s forum, which will include talks on innovative structural reforms and investments to sustain the continent’s growth. weforum.org

east africa cOM 20-21 May NAIrObI | Kenya eaafrica.comworldseries.com

LAgOS | nigeria nibfng.org

WOrld ecOnOMic fOrUM On africa 7-9 May

private sector will gather to discuss Africa’s future under the theme ‘The next 50 years: The Africa we want’. afdb.org

Month

MOhAMed eL-ShAhed/AfP

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Former military chief Field Marshal Abdel Fattah al-Sisi is widely tipped to become Egypt’s next elected president. Al-Sisi, who resigned his military post days before the election date announcement, led the push to sweep President Mohamed Morsi and the Muslim Brotherhood-led government from power in July 2013. Leftist hamdeen Sabahi, who took third place in the 2012 presidential elections, is the only other candidate currently in the running.

Egypt has a long tradition of presidents drawn from the military, Morsi being the only non-military state leader since 1952. According to the Election Commission, the results of the first round of voting are expected by 5 June, and a second round will be held on 16–17 June if no candidate obtains more than 50% in the first round. the final results will be announced no later than 26 June.

internatiOnal cOnference Of africanists 27-30 May MOSCOW | rUssia inafran.ru

elearning africa 28-30 May KAMPALA | Uganda elearning-africa.com

West african internatiOnal Mining & POWer exhiBitiOn 28-30 May ACCrA | ghana exhibitionsafrica.com JUnE

africa finance & investMent fOrUM 4-5 June COLOgNe | gerMany emrc.be the africa report

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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

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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

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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

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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

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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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Š 2013 EYGM Limited. All Rights Reserved.

We partner with leading companies to grow, innovate, protect and optimise their business performance.

Our commitment to building a better 2*#:=,! 2*#1) =A #&"&+?&) =, 8 ?#<1. borderless organisation tuned to provide high-performance teams and &0+&(?=*,81 +1=&,? A&#3=+& %<=+:1. 8,) &$$&+?=3&1. 8#*<,) ?@& !1*-&5 EY Ethiopia Tel: +251 11 550 4933 Fax: +251 11 550 4932 2225&.5+*/4>9 7>';6$#=+8

Quality and Community are the touchstones of the METAD approach

E

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

DIFCOM/DF - PHOTO : DR

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-

58

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

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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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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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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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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

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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

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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

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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

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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

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airl ines

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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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The business Following the Nigerian government’s announcement that the country has the largest gross domestic product in Africa, The Africa Report talked to investors and politicians to evaluate its performance in five key sectors

By Monica Mark in Lagos and Gillian Parker in Abuja

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igeria now has the largest economy in Africa, the governmentannouncedon 6 April. With a gross domestic product of $500.9bn, Nigeria should attract more international investment, say officials in Abuja. This has raised debate about what the statistics mean and the performance of President Goodluck Jonathan’s team since he was elected in April 2011.

After leading an election campaign on promises to transform Nigeria’s economy, President Jonathan has often found himself a soft target for criticism. Local and international businesspeople and investors can often be heard quietly cursing dysfunctional infrastructure and an obstructive bureaucracy. But they are just as vocal in their endorsement of the opportunities that Nigeria has to offer, and Jonathan’s supporters point to unprecedented gains.

In 2013, Jonathan oversaw the privatisation of Nigeria’s dysfunctional state power company. This may yet be his enduring legacy.

Electricity provision is by far the most serious obstacle to growth in Nigeria. With 10 new gasfired power stations up for sale,

Nigeria perhaps stands its best chance for decades of ending the chronic power shortages that have weakened the manufacturing base andlefttensofmillionsofpeoplein the dark. Africa’s giant has proven reserves of 180 trillion cubic feet of natural gas, but it flares more gas than any other country bar Russia. Government officials said in September 2013 that flaring is down 20% over the past two years.

Agriculturalreformshavehelped clean up the sector, boosting farmers,whoseactivitiesmakeupabout 40% of gross domestic product. Although it may be some time before theybearfullfruit,afertiliserrollout has proved a success in its pilot phase.Thecreationofnewfertiliser factorieslinkedtothegassectorwill reduce prices. The rice plantation schemes, from companies such as Olam in Nasarawa State, will chip away at Nigeria’s import bill.

Economicgrowthhascontinued to power ahead at an average of 7% and, thanks to an aggressive monetary policy from the central bank, inflation is in single digits for the first time in years. Finance minister NgoziOkonjo-Iwealahasmanaged to keep national budgets tight, for now resisting pressure to spend more ahead of 2015 elections. the africa report

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scorecard

B-

low appetite for risk

GeorGe oSoDI/PANoS-reA

Abuja, seat of political power in Nigeria, has promised a great deal to the business community

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There has also been progress on rebuilding Nigeria’s industrial base, with new car manufacturing schemes and factories opening in the agribusiness and light manufacturing sectors. The government has sought to oil the slowly turning wheels with a planned specialised bank due to begin offering loans with low interest rates from next year. In collaboration with the World Bank and African Development Bank, the 10- to 15-year loans would bolster the manufacturing sector.

But while companies wait for finance, swift industrial growth will remain elusive. “There is limited incentive to create risky assets, although we are seeing some increased appetite to lend to the power and oil and gas sectors,” says Samir Gadio, an emerging markets strategist at Standard Bank. “Addressing these shortcomings will require structural reforms, including the emergence of a credible credit bureau and a corporate bond market, and continued macroeconomic stability,” he says.

Kola Jamodu, the head of the Manufacturers Association of Nigeria, says capacity utilisation jumped to 55% from 44% in 2013, while local raw materials usage reached 51%, up from 47% the previous year. “We have seen government initiatives to improve the sector, and these will help Nigeria maximise its key strategic position within ECOWAS [the Economic Community of West African States],” he tells The Africa Report.

There has been serious backtracking too. A spate of massive corruption scandals surrounding the management of Nigeria’s oil revenue, which the government depends on almost entirely to run the country, have dogged the government. In the most recent one, $20bn appears to be unaccounted

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for at the opaque state oil firm, the Nigerian National Petroleum Corporation. The government’s response was to sack central bank governorLamidoSanusi,thecountry’s most respected economic official, who broke the scandal and called for a massive clean-up.

Banking reforms were one of the success stories in Jonathan’s early years, but the environment is now becoming unsteady.

how the sectors shape up

easy come, easy go

Investors continue to seek a slice of Africa’s most dynamic economy, but many Nigerian governments have misspent their windfalls from the oil industry. Flush with around $11.5bn at the end of 2012, the Excess Crude Account currently stands at some $3.5bn. In March, two credit rating agencies put Nigeria on watch for a possible downgrade.

Other key reforms, such as those targeting the gas sector, which urgently needs to be sorted out to fight power shortages, are stuck in the mud. International oil majors are reducing their exposure to Nigeria’s onshore Niger Delta region as profits are eroded by oil theft, and regulatory uncertainty discourages further investment. Royal Dutch Shell announced in March that it lost nearly $1bn through theft and pipeline disruptions at its Nigerian operations in 2013. President Jonathan has earmarked $1bn for an anti-theft campaign, but few are convinced this money will go to solving the problem. “The Niger Delta-dominated federal government will be unlikely to seriously crack down on bunkering and risk upsetting the regional patronage system,” says analyst Josh Holland at IHS Global Insight.

What follow are assessments of the progress so far, sector by sector, presented as The Africa Report’s government scorecard.

It is an irreverent approximation of the administration’s progress, based on conversations with businesspeople and politicians, analysts and investors. These are their aggregated opinions. Add your voice at theafricareport.com, where the debate continues. ●

Agriculture

A-

Agriculture minister Akinwumi Adesina introduced the Agricultural Transformation Agenda (ATA) in 2011 and has named 2015 as the year by which the country should be self-sufficient in rice production.

The ATA targets improved production for other staple crops. In 2012, the government increased duties on rice imports, which in turn contributed to smuggling. A full ban on rice imports is expected next year.

Adesina says that paddy rice production grew from 1.4m tonnes in 2012 to 2.9m tonnes last year. The government also introduced the Growth Enhancement Support Scheme, which helps to cut corruption out of the distribution chain for subsidised fertiliser.

In 2010, the central bank launched the Nigerian Incentive-based Risk Sharing System for Agricultural Lending, providing about $500m to encourage banks to lend to the sector. Last year, the World Bank allocated $1.5bn over the next five years for agriculture in Nigeria.

The private sector, too, has joined government in the drive to increase production. Dangote Sugar plans to invest $2bn to be spent on sugar projects across six states. India’s Indorama is set to break ground on its urea fertiliser plant in April. Former government fertiliser company Notore is expanding. But the government is still trying to attract investors intro 14 staple-crop processing zones.

C

Oil & Gas

Despite high prices, oil production is likely to continue to stagnate leading up to 2015’s presidential and parliamentary elections, as oil theft and corruption continue to be used as political patronage. One bright spot is local content provisions, which have started a small revolution for domestic companies.

The long-delayed Petroleum Industry Bill (PIB) is supposed to bring clarity to the sector, but suffers from political deadlock. Shell, Chevron, Eni and Total have been in failed negotiations with the government for several years to renew expired licences. With no significant new ventures, the country’s target of producing 3m barrels per day (bpd) by 2020 looks impossible. Output has failed to break far above 2m bpd.

The PIB would also clarify the legal framework for developing Nigeria’s largely wasted gas reserves, the ninth largest in the world. Convoluted fiscal terms demanded by the government have prevented Nigeria’s emergence as a gas giant.

Asset sales by oil majors are good news for Nigeria’s smaller independent oil companies.

Nigeria’s government has a policy forcing any company buying divested assets to partner with a local firm, which should be seen as a positive development. However, some companies have strong political connections and risk being used as vehicles for corruption.

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Electricity

The privatisation of the power sector in Nigeria last year raised $2.5bn and hopes that the key roadblock for major industrialisation was being removed. It began pulling local banks into serious long-term financing roles.

Many customers, while seeing a hike in their bills, have yet to see any improvement. Ten new gas-fired plants, adding an extra 5,000MW – more than doubling production – should be sold off by mid-2014.

But Nigeria has yet to seriously harness its gas in order to power the electricity sector. Investors may be deterred by gas prices, fixed by the government at $1.5 per ft³. An oil investor who requested anonymity told The Africa Report: “If the price of gas was even just $4 per ft³, we wouldn’t hesitate to sell [the gas] rather than flare it.”

George Osahon, the petroleum resources department director, says Nigeria aims to increase domestic gas consumption threefold to 5.4bn ft³ per day, from 1.7bn ft³, by the end of the decade.

Officials repeatedly offer assurances that they will bring gas prices in line with export parity.

“Gas sector reform and the domestic energy market cannot take off until there is a commercially viable pricing structure. But there has been a tension between what is commercially viable and what is politically acceptable,” explains Antony Goldman of PM Consulting.

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Manufacturing

B+

Machines are once again whirring to life in a former Volkswagen assembly plant, as Nissan Motors gets its Nigeria manufacturing operation into gear. For those willing to enter, outsized returns await.

Analysts say Nigeria has a domestic market for up to 3m cars annually, a gap Nissan aims to help plug when it unrolls its first domesticmade 4x4 this April. “There are challenges in power and other infrastructure bottlenecks, but we are confident. Turning to manufacturing is the only way – there’s no alternative solution,” says Parvir Singh, managing director of the Stallion Group.

Electricity output peaks at around 4,000MW and almost every factory has a generator. The manufacturing sector has been knocked about by decades of erratic import bans. But many are still scrambling for a slice of the consumer pie – from Innoson, the company behind the first homegrown car plant, to doll-makers giving imported Barbies a run for their money, to juice processors.

Once boasting direct flights from Milan and Rome, Kano no longer enjoys the reputation as a centre of excellence for leather and textiles that it had before oil. Chinese and Indian investors are in talks with cotton mills and leather manufacturers. “They are saying, ‘OK, there are problems, but it is better to get in early,’” explains Ibrahim Tukur, president of Kano’s chamber of commerce.

Banks

C+

Since a dramatic banking bailout in 2009, Nigeria’s government and the central bank have reformed the financial sector, but progress has been slower than investors and businesses hoped. Banks are still not lending much to the private sector, despite vocal government pressure.

The government and blue chip companies can access credit, but banks see little need to take on riskier debt. The bailout led to a period of tight monetary policies, soaking up extra liquidity and keeping interest rates high. The state-run Asset Management Corporation of Nigeria is yet to clear huge levels of bad debts.

The central bank has pushed ahead with a cashless banking policy, which is ahead of the curve in the sub-Saharan African region and should help reduce transaction costs and deepen financial markets.

There has also been some success in government incentives to open up lending to farmers and the newly privatised electricity sector.

Most analysts fear the appetite for reform will be muted ahead of elections in 2015. President Jonathan rocked investor confidence after suspending central bank governor Lamido Sanusi in February.

There is now a risk the central bank may have reduced independence.

“Once you enter the political arena, it damages the autonomy of the central bank,” says finance minister Ngozi Okonjo-Iweala.

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dossier insurance

Ripe for growth The predicted rise in sub-Saharan Africans earning $5,000 or above represents an opportunity and a challenge for South African insurers looking to widen their footprint on the continent

By Jana Marais in Johannesburg

S

outh Africa’s major life insurers – Old Mutual, which is headquartered in London but earns about 70% of its operating profit in South Africa, Sanlam, Liberty and MMI Holdings – see the rest of Africa as a major growth opportunity, says Willem Loots, an analyst at Fitch Ratings. “Insurance penetration in South Africa is one of the highest in the world. The economy is growing slowly and consumer disposable income is under pressure, making it difficult

to grow premiums. The big four life insurers are looking to the rest of Africa as the main source for growth. While the contribution to profit from these ventures is small at this stage, they are profitable as a group. Looking forward, the rest of the continent will become a bigger contributor to local insurers’ bottom lines,” he explains.

Old Mutual, with operations in eight African countries including South Africa, aims to earn 15% of its operating profit from its nonSouth African operations on the continent by 2015, up from 10%

128m

households earning over $5,000 a year by 2020 (known as discretionary income)

in 2013. Last year, it made acquisitions in Nigeria, Ghana and Kenya, which it sees as the key growth markets on the continent.

Old Mutual added Faulu Kenya, Ghana’s Provident Life Assurance Company and Oceanic’s Life Insurance and General Insurance businesses in Nigeria to the group.

“There is an improved regulatory environment, institutional capacity is improving and profitability is becoming attractive – and all this is happening against the background of the African growth story, with a promised demographic dithe africa report

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vidend, rising income levels and fast-growing economies,” says Johannes !Gawaxab, managing director of Old Mutual Africa. growing client base

By 2020, 128m African households will earn $5,000 a year or more, up from 85m in 2008, according to a 2010 study from consulting firm McKinsey. “This is a great and compelling opportunity for us,” !Gawaxab says.

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– particularly if compared with South Africa – and low insurance penetration rates, says Margaret Dawes, CEO for the rest of Africa at Sanlam Emerging Markets, which operates in 10 African countries outside South Africa.

“We see many markets as being attractive. While we’ve historically been in English-speaking countries, we are committed to expanding to Mozambique and Angola in the near term,” explains Dawes. The group prefers to buy shares in existing operations or find local partners, she says.

Solutions through innovation: Safaricom’s M-PESA is a collection platform for Linda Jamii health insurance

While the growth potential is great, many challenges remain.

Building efficient distribution channels, educating consumers about insurance and other financial products, developing affordable offerings and finding ways to collect premiums are some of the main obstacles, says WJ De Vries, an insurance analyst at Avior Research.

“Typically we see insurers benefiting from a bancassurance model, where they go into a partnership with a bank and sell their insurance products through the

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bank’s branch network. This makes distribution easier, lowering acquisition costs, and it is also easier to collect premiums as customers already have some banking service. The products are simple, featuring few exclusions, ensuring accessibility to all in order to reach scale,” De Vries explains.

Insurers are also partnering with telecommunications operators as a way to collect premiums by taking a portion of the airtime customers load on their phones.

In Kenya, Safaricom’s M-PESA is used as a premium collection platform for Linda Jamii, a microinsurance medical cover product.

An annual subscription is payable and premiums can be paid in instalments. Partial benefits can be accessed as soon as a minimum amount of KSh6,000 ($69) is saved.

Mobile operators have also started to offer free insurance products as a way to build consumer loyalty.

In Ghana, Airtel, MicroEnsure and Enterprise Life launched a product in January offering free life, accidental permanent disability and hospital cover. The cover increases as customers spend more on airtime, with a minimum of ¢5 ($1.90) a month required to qualify for the product. game changer

Partnering with mobile operators is seen as a way to penetrate the informal market, which remains largely untapped. Finding a way to offer simple and affordable products, and to build an effective distribution and payment collection system to service customers outside formal employment, will be a “game-changer”, asserts !Gawaxab.

Innovation is also driving growth in the agricultural microinsurance sector. In Kenya, the Kilimo Salama intiative, which means “safe farming” in Swahili, first piloted weather-related insurance for crop farmers in partnership with companies including UAP Insurance and Swiss Re Corporate Solutions in 2008. Last year, it insured 185,000 farmers in Kenya and Rwanda and is tar-

Sanlam Group: contribution to net operating profit 2003 - R1,968 million Namibia Other international 1% 1%

2013 - R5,429 million Other international 6% India/Malaysia 7% Rest of Africa 3% Botswana 4% Namibia 6%

South Africa traditional 98%

geting one million clients in East Africa by 2015, indicating the huge growth potential in the sector.

In Zambia, South African agricultural group NWK Agri-Services has partnered with MicroEnsure, Focus General Insurance and African Life Assurance, a Sanlam subsidiary, to offer lifeand weather-related insurance products to NWK’s contract farmers. The aim is to increase farmer loyalty and the amount of land dedicated to cotton farming.

Building consumer trust is an ongoing challenge in many markets, says Dawes. In Zimbabwe, hyperinflation in 2008 and 2009 created a lot of distrust in savings products. Fly-by-night insurance companies across the continent have also made people wary of insurance products, she says.

“We try to instil trust by paying out claims as quickly as possible, with a targeted turnaround time of 12-48 hours,” explains Dawes.

Regulatory and cultural differences also pose challenges, and local market knowledge is essential to develop the right products.

“South African insurers aren’t going into these markets with zero competition. Locally established insurers are in most territories already, with well-developed local expertise and an understanding of the market. They find when they enter new markets that they do have to mind the competition,” Fitch’s Loots says.

Building scale is one of the biggest challenges. Insurers like Sanlam and Old Mutual have been

South Africa entry-level 10%

South Africa traditional 64%

expanding through acquisitions and organic growth. !Gawaxab says that potential targets are not easy to find, however, and where available, come at significant premiums. expanding footprints

R54bn

Funds under management

by Old Mutual Africa in 2013, spread over seven countries not including South Africa

Despite the challenges, investors are keen to see companies expand their footprints. Releasing its 2013 results in February, Liberty, which serves mainly institutional clients in Southern and East Africa, assured shareholders it “remains committed to a West African acquisition”. While its earnings grew 28% last year, its African insurance business outside of South Africa remains tiny, contributing only 1.5% to headline earnings.

“Building a life insurance business organically from scratch will take years and years before shareholders see value. The first challenge is to acquire something with scale. Then you have to address education levels of consumers and a lack of, for example, actuarial and financial skills. IT [information technology] platforms, business processes – these are all things we have to take from South Africa,” says !Gawaxab.

The race is on to build an African insurance giant, and !Gawaxab sees two factors that will be key in shaping the future. “The first is the demographic shift: we need to understand and anticipate the changing needs of changing demographics. Secondly, if you can harness technology, that will be a real differentiator.” ● the africa report

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GhAnA

Micro-insurers go mobile Prudential and American International Group are setting up operations in Ghana, but analysts say the smaller and nimbler companies will challenge them for business

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obile micro-insurance in Ghana is transforming the industry and attracting attention from some of the world’s biggest players. For close to 100 years, the insurance sector in Ghana had been limited to general insurance and suffered from a perception “that insurers are there to shaft you,” says Eugène Adogla, MicroEnsure regional operations manager for Africa. Penetration and uptake rates were low.

Since the discovery of oil in 2007 business has been pouring into Ghana on the premise of a richer economy, and insurance companies don’t want to be left out. In December the United Kingdom’s Prudential bought Ghanaian insurer Express Life from private equity firm LeapFrog Investments.

Prudentialplanstolaunchitsactivities in April.

Ghanaian insurance providers are turning the country into a hub for a range of micro-insurance products. “There are a handful of companies, such as Star Assurance, who have invested heav-

ily in micro-insurance and have reaped the benefits,” MicroEnsure regional director for Africa, Peter Gross, explains.

One of the most celebrated products is the Tigo Family Care Insurance pioneered by telecoms company Tigo, MicroEnsure, Bima Mobile and Vanguard Life Assurance at the end of 2010. The insurance plan has insured more than one million people and received two awards.

known as the ‘freemium’ model.

According to Bima, of the 500,000 customersthatinitiallysubscribed, 300,000 chose to continue with the insurance plan. In July and August last year, both Vanguard Life and MicroEnsure left the partnership, leaving Bima – also owned by LeapFrog – to provide full administrative support. Express Life is now the sole underwriter.

Prudential is not alone in its interest in Ghana.

In March, finance minister Seth Terkper told The Africa Report that American International Group will be entering the Ghanaian market. The insurer is already present in South Africa, Kenya, Uganda and Egypt.

Adogla says local and regional companies still have the capacity to compete, as it is essential to use creative means to attract consumers. “It’s a wide-open playing field. Anybody can win,” he says.

Gross points out that across the continent the sector still has a way to go. “The Ghana example shows that growth in insurance comes from the demand side not from the supply side. When customers seeaproductthatworks,theywant more of it. Until that happens, unfortunately, many insurance markets in Africa are likely to remain relatively small.” ●

0 0 0 , 0 0 0 1,

loyalty-based model

“The product piqued the interest of people globally and became the exemplar for loyalty-based microinsurance,” Adogla says. Under the scheme subscribers were given free cover for themselves and one other family member based on the amount of credit the user topped up each month. The offer lasted 12 months, after which customers could choose to pay a premium and double their cover, in what is

The number of people covered by microinsurance product Tigo Family Care Insurance, since it was launched in 2010

Billie Adwoa McTernan in Accra

TANZANIA NATIONAL REINSURANCE CORPORATION LIMITED

For enquiries Contact Tanzania National Reinsurance Corporation Ltd 6th Floor Amani Place, Ohio Street P.O.Box 1505, Dar es salaam, Tanzania Tel: +255 22 2122536/7 - Fax: +255 22 2122528 Email: mail@tan-re.co.tz

TAN-RE is driven by the desire to create and develop business partnerships on a mutually beneficial basis in Africa and the rest of the world. www.tan-re.co.tz

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inTerview

Pathé Dione

Managing director, Sunu Assurances

sunu plans to grow by launching more subsidiaries rather than acquisition. it is also targeting some anglophone countries and piloting micro-insurance

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heFranco-Senegalesebusinessman created Sunu Assurances following the acquisition of the life insurance subsidiaries of French group Axa from Dakar to Douala, between 1999 and 2004. Sunu now employs morethan1,100peoplein11countries. Its turnover has grown from 16bn CFA francs in 1999 to 90bn CFA francs in 2012, with profits of between2bnand4bnCFAfrancsin thepastfewyears.Workingwithhis son Karim and Joël Amoussou, Dione has been a frontline observer of insurance-sector development south of the Sahara for the past 30 years.

TAR: Saham, one of your main competitors, has raised several hundred million euros to speed up its development. That is far from being your case. Why? PAThé Dione: Saham raised this money to buy Colina and to make acquisitions in new countries. In our group’s early stages, we took over Axa’s subsidiaries.

We have preferred to create subsidiaries ever since, as we have done in Guinea and Mali these past few years. We’ve also recently been granted an accreditation for life insurance services in Burkina Faso. It is cheaper and our debt remains low. the africa report

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English-speaking countries are the most promising

Why not consider buying out competitors?

We sometimes make acquisitions, but it only involves companies that we are well acquainted with. In Senegal, we have just acquired the Compagnie Générale d’Assurances, for whom we had already provided technical assistance. However, [acquisitions are] a very difficult task and you may sometimes be in for unpleasant surprises. We prefer managing our own growth this way.

What are your priorities?

Now that we have a good coverageofFrancophoneareas,wewant to expand further to the Anglophone zone – Nigeria, Kenya and

It is not about planting our flag everywhere. We need knowledge of the local market Tanzania – through the creation of subsidiaries. English-speaking countries are the most promising markets. For instance, insurance is developing rapidly in Zimbabwe.

Are you going to expand into this area in 2014?

No. Our foremost concern is to consolidate our gains. It is not about planting our flag everywhere. If we decide to go to Nigeria,we need to prepareourselves seriously with teams who have ample knowledge of the local market. Within the next five years, we

will set up operations in an Anglophone country. Lastly, we also look forward to market liberalisation in theDemocraticRepublicofCongo.

What about micro-insurance?

We have recently created KAJAS, a microfinance establishment in Senegal. We are using it as a pilot.

If the results prove satisfactory, we will offer services to go along with loans or provide other healthrelatedservicestopeoplewhohave restricted access to healthcare.

Will you start insurance services via mobile phone?

We are testing it with Orange in Côte d’Ivoire and with Tigo in Senegal. It’s a way of reaching populations in remote areas. Once contracts are signed, insurers often have difficulty collecting payments because a section of the population does not have a bank account.

Payment via mobile phones will therefore secure transactions.

Are there too many players involved in the market?

There are too many small companies, which are often mismanaged. The capital increase from 500m ($1m) to 1bn CFA francs has failed to compel small companies to merge. A shift to 2bn CFA francs is being discussed. However, [the minimum capital requirement] remains much higher [in Senegal] than in other countries, like Ghana or Nigeria. ● Interview by Frédéric Maury

day in the life

Extraordinary storiEs of ordinary pEoplE

graham boonzaaier

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the transformer Albert Mosoro spends up to seven hours a day collecting scrap plastic, paper and metal to take to a recycling plant in a township in Johannesburg, South Africa

I

don’t want to go to jail. I don’t want the police to find me and arrest me. That’s why I don’t do crime. I know people who do crime to survive, but I don’t. I recycle.

I was born in Johannesburg, and this is where I’ve lived my whole life. I’m 25 years old, and I’ve never been anywhere else. A few years ago, a friend introduced me to this job of recycling. Now, I do it with a group of my friends.

We get up at around 6.30am and start collecting paper, cans and plastic from different areas. There are lots of men who do this work, but no women do it. It’s not a job for women. Luckily, there’s no fighting over who can collect in which area. It’s first come, first served.

We collect the litter on the ground – old toys or shoes – and sometimes we go through the dustbins that people leave outside of their homes, looking for pieces. We put everything we collect into big bags, and then we wheel them on a trolley to a recycler in Alexandra Township.

Sometimes we can wheel these trollies for 30km a day.

In Alexandra, they recycle the waste. I think that the ladies in the township even use the recycled plastic to make jewellery and bags.

I get R2 ($0.20) for every kilogram of waste I bring to the recycling plant. If I fill a big bag to the top, it can be 50kg. My friends and I share the money we make. It’s not

very much, and it’s expensive to start doing this. My trolley cost me R500. I had to save up for that.

It takes six or seven hours a day to fill a bag and take it to Alexandra. The rest of the day we sit around and tell each other stories about life. My friends and I live in this park, right next to the golf course where the rich men play. At night, we like to play games, make a fire and talk to each other. We all help each other survive. Some of these guys will spend lots of money on clothes because they like to look good. I spend my money on food, mostly.

wives are expensive

Joburg can be a rough city. It’s easy to get into trouble here, but I don’t want to do that. I don’t love doing this job. It’s a hard life, but it’s just how it is. I didn’t go to school because we couldn’t afford to pay for it, so this is the best thing for me right now. If you came here and gave me another job, I’d take it. But right now, at least I have this. At least I make honest money.

My brother is a security guard, but I don’t think that is better. He makes the same money that I do. My mom and dad live in town and sometimes I have to help them with money too. One day I hope to have a wife, but they are expensive. Money must come before wives.

Some people in their cars are rude to us when we are pushing the trollies in the road. They shout at us saying: ‘You’re causing traffic jams’ or ‘You’re making a mess on the road.’ But, we’re not making a mess! We’re cleaning it up! So, I try to ignore them. And I know that this recycling is also very good for the earth, so it’s better than just leaving this rubbish in the bins. ● Kim Garner in Johannesburg the africa report

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> Corporate and Investment Banking

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Moving Forward is a trademark of The Standard Bank of South Africa Limited.

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