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eBola The world finally wakes up

SoUtH aFrICa Malema pushes for Zuma arrest

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MInIng End of the Iron Age

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the africa report

NIGERIA

monthly • n° 64 • october 2014

Game of Thrones President Goodluck Jonathan has to tackle insurgents and forge ahead with power reforms to win the 2015 elections

InternatIonal edItIon

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

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EBOLA The world finally wakes up

SOUTH AFRICA Malema pushes for Zuma arrest

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MINING End of the Iron Age

N ° 6 4 • O C T O B E R 2 0 14

EBOLA The world finally wakes up

NIGERIA Game of Thrones

SOUTH AFRICA Malema pushes for Zuma arrest

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EBOLA The world finally wakes up

N ° 6 4 • O C T O B E R 2 0 14

NIGERIA Game of Thrones

THE AFRICA REPORT

contents

MINING End of the Iron Age

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JULIUS MALEMA

“We need to arrest Zuma” EXCLUSIVE INTERVIEW

The leader of the Economic Freedom Fighters wants to deliver a knock-out blow to the president

KENYA’S COAST

NIGERIA

President Goodluck Jonathan has to tackle insurgents and forge ahead with power reforms to win the 2015 elections

GROUPE JEUNE AFRIQUE

INTERNATIONAL EDITION

Paradise lost Can Malindi survive billionaire playboys, a rampant sex trade, mafia exiles and terrorist threats?

GROUPE JEUNE AFRIQUE

EAST AFRICA EDITION

MONTHLY • N° 64 • OCTOBER 2014

Game of Thrones

The AfricA reporT # 64 - ocTober 2014

GROUPE JEUNE AFRIQUE SOUTHERN AFRICA EDITION

4 Editorial A plague on all our houses 6 lEttErs 8 thE QuEstion

Business

64 Mining End of the Iron Age As low prices and high supplies drive down iron ore prices, small producers feel the squeeze

cover crediTs: inTernATionAl: AfolAbi soTunde/reuTers/phoTo monTAge chrisTiAn KAsongo for TAr; Jordi mATAs/demoTix/corbis - souTh AfricA: Jordi mATAs/demoTix/corbis - KenyA: foToliA

Briefing

69 BaroMEtEr Price rises for soft commodities

10 signposts 12 intErnational 16 pEoplE

70 MEdia Coming to a TV screen near you

18 calEndar

frontLine

20 Education We are what we teach The stark challenge: in the coming decades, the student population is set to explode. How will Africa’s schools cope with the sudden influx?

74 rEtail Bigger is better for Ghana’s malls 76 lEadErs Konza Technopolis Development Authority Acting CEO Catherine Adeya 80 FinancE A taste for chicken 80 hanniBal

poLitics

dossiEr

30 ExclusivE intErviEw “We need a person who will arrest Jacob Zuma” South Africa’s Economic Freedom Fighters head Julius Malema insists Zuma must repay the Nkandla funds

82 sustainaBlE dEvElopMEnt Fairtrade is no silver bullet The scheme is helping get Ghana’s youngsters into school but is doing little to cut poverty

34 KEnYa Paradise lost 38 intErviEw Sierra Leone’s President Ernest Bai Koroma 45 ZiMBaBwE Parallel power plays 46 liBYa Shock and/or 46 ghana Mahama seeks cash 47 anansi

country focus 49 nigEria Games of Thrones Amid a backdrop of conflict in the north and top-level intrigues among the two main political parties, the nation prepares to go to the polls in 2015 the africa report

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86 opinion General Sir Nick Parker

Art & Life 88 Fashion Designers spread their wings Five African designers who are shaping innovative new looks on the continent’s catwalks 92 in BriEF Afro-fusion band VILLY & The Xtreme Volumes and Rabat’s new state museum 94 liFEstYlE Outlawing plastic bags, and music-streaming guru Tim Rimbui 96 travEl All aboard for Africa 98 daY in thE liFE Anele Khoza, computer programmer

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

A plague on all our houses

othing should concentrate the mind like an epidemic. But, for the first nine months of this year, the only minds focused on what President Barack Obama and the UN now call an “international security crisis” were a few hundred health workers. It is the worst Ebola outbreak since the virus was identified in 1976. It picked up pace rapidly: more were infected with the virus in August than all the previous months combined. Liberia’s President Ellen Johnson Sirleaf wrote to President Obama asking for urgent help to stem a regional disaster, and the UN warned that more than 20,000 could die from the outbreak before it ends. The first lesson learned is about the strength and bravery of those African doctors and nurses, and their foreign counterparts, who worked against all odds to fight the virus. Among those to whom the highest honours are due are two Sierra Leonean doctors, Sheik Humarr Khan and Olivet Buck, and senior nurse Mbalu Fonnie. After treating 80 patients at a time and working 16-hour days in Kenema, in upcountry Sierra Leone, all three caught the virus. By mid-year they were all dead. Before that they had saved hundreds of lives. This was partly because Kenema has basic diagnostic facilities but mainly because of the doctors’ and nurses’ commitment to and knowledge of the community. Tackling Ebola requires medical knowledge but also political will. Teams of trained individuals have to work with communities, test for the virus, then isolate and treat those infected. They have to bury the dead while respecting cultural norms, trace patients’ contacts

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

during the incubation period, manage outreach and education, and even ensure food supplies. Much of this work upcountry was unrecognised and almost unsupported by governments in Conakry, Monrovia and Freetown. The second lesson is that Africa’s healthcare systems are in crisis and that the reformers must work with the doctors and nurses who have stayed on – more than 50% of African-trained docEbola raises tors are working overseas – to tackle chronic the question: under-investment and are we ready bad management. to finance The laggardly response to the killer an effective virus by governments, international international organisations and drugs health companies invites agency? a festival of blame passing. Everyone has tough questions to answer: one is whether we are really prepared to finance an effective international health agency. When the national response was overwhelmed in the Ebola-hit countries, why didn’t the World Health Organisation (WHO) launch a massive intervention? The third lesson concerns the decision by the rich countries financing the WHO to cut its budget to $4bn for 2012/2013, $500m less than the previous two years. Much of that $500m was taken from emergency response funds. This was curmudgeonly and inhumane but also economically stupid: failure to tackle the spreading virus quickly has cost thousands of lives and could cost billions of dollars in lost output and social disruption. It is time to think and act to stop yet another rerun. ●

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 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 sydOnie GhAyeB christOPhe chAuvin 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 r e G i o na l m a na G e r s cArOline Ah KinG FAdOuA yAqOBi liliA BenAceur elOdie BOussOnniere us r e P r e s e ntat i ve AzizA AlBOu a.albou@groupeja.com

editorial@theafricareport.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

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

south sudan’s missing voices

Cote d’ivoire Economic phoenix rises from the ashes

united states Soldiers, spies and summiteers

ConstruCtion Lafarge and Dangote battle for dominance

Double issue

hree alarming issues emerge from The Africa Report’s interview with Riek Machar [‘The people are forced to fight this war’, TAR63 August/September 2014]. First, South Sudan must reckon with its political leadership in and out of rising government. In a sobering decision, Machar chose stars Peter Gadet – whom the EU and US claim led massacres of his own – to find those responsible for slaughters in Bentiu and Malakal. Second, South Sudan’s people must prepare for prolonged suffering. Machar refers to his supporters as a ‘young resistance movement’ likened to the early SPLM – the political group holding power after decades of war. Finally, missing are the voices of South Sudan’s marginalised civil society – women’s, religious, and other non-violent movements. They certainly will be the ones to collect the broken pieces and rebuild the shattered lives, once the warring leaders finally negotiate a truce. Mark Fathi Massoud, author of Law’s Fragile State: Colonial, Authoritarian, and Humanitarian Legacies in Sudan, via email w w w.t heaf ric arep or t .c om

N ° 6 3 • a u g u s t- s e p t e m b e r 2 014

The

Mehdi Jomâa • Okwiri

ele • Jo-Ann Phuti Mahany

Pohl

Oduor • Sim Shagaya •

Botsalo Ntuane Jack Nkusi Kayonga

Moctar El Hacen • Maria Ivone Soares • Sia Tolno

Igho Sanomi • Ganzeer • Joel Embiid • Omar Victor Diop

Ismaïl Ism

Thiam Douiri • Amadou

• Eric Mboma

• Rachel Mwanza

Nelson Chamisa • Lupita

Nyong’o

GroUPE jEUNE AFrIqUE

internationaL edition

supporting islamic finance Islamic finance has the potential to play a key role in developing Africa [‘Islamic Finance: Searching for sukuk’, TAR63 Aug-Sept 2014]. It can provide an alternative source of infrastructure financing and promote financial inclusion. However, the extent to which Islamic finance is able to grow and contribute to the development of different African countries will depend on whether they have supportive legal and regulatory regimes. As Islamic finance is based on sharia principles, there is a need to change the banking,

financial and tax laws to accommodate the industry and level the playing field. Professor Habib Ahmed, PhD, Sharjah Chair in Islamic Law & Finance, Durham University, UK, via email

what future for ghana’s youth? The Republic Day (1st July) demonstration on the streets of Accra was indeed avowedly non-partisan, having been initiated by middle-class Ghanaians who could not just sit while the country’s crisis lingers on [‘Rein ’em in, Mahama’, TAR63 Aug-Sept 2014].

This said, some top officials and die-hard supporters of the ruling NDC broke ranks and joined in the protests. I am frantic about the future of Ghanaian youth. The enabling environment for enterprise development and innovation is being stifled. If current trends in the economy persist, the country may in the long term consider the option of what I’ll term ‘modern colonialism’; a system in which foreign countries or investors buy portions or all of a country.

Kwame Adu-Appeah, a concerned Ghanaian, via email

gécamines’ secret sales Reading Gregory Mthembu-Salter’s report on the DRC’s state copper miner Gécamines [‘More digging, more problems’, TAR62 Jul 2014] I was struck by the contrast between Gécamines’ avowed efforts to restore its fortunes and the track-record of the company. As the Africa Progress Panel revealed last year, Gécamines was central to the ‘secret sales’ scandal, which saw the Congolese state losing out on $1.4bn as a result of selling underpriced assets to companies associated with Dan Gertler, a friend of the president. If Gécamines wishes to reassure international investors, it needs to adopt basic standards of transparency. At the moment it doesn’t even publish annual accounts. That would be a start.

Daniel Balint-Kurti, Campaign Leader, DRC, Global Witness, via email

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, Butch Courtney, +27 (0)11 602 9800 • butchc@mad.co.za – tanZania: MWANANCHI COMMUNICATIONS, Emmanuel J Lyimo, +255 716 500 500, elyimo@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

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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

RESPOnSES to last month’s question:

moody’s downgrading of south african banks in august and Ghana’s government in June raises questions about whether external rating agencies have sufficient local knowledge to chart african risk.

Do oil companies care enough about oil spills?

Should Africa establish its own credit ratings agency?

Yes AlexAndrA MousAvizAdeh COO of Arc Ratings

It’s incredibly important for the development of Africa’s capital markets and the increase in investment across all asset classes. An African ratings agency would mean you have an entity that is taking an in-depth look at the transaction and balance-sheet activities of entities across the region. One of the issues across Africa is that it is hard to get this kind of information. A lot of companies are not comprehensively audited so the more ratings penetration across the region, the more comfortable investors are going to be about getting into the market and that will drive investment. You are looking at a continent that has a very low level of penetration into the capital markets, and a ratings agency is crucial to understanding credit quality. The problem is that it is important to be benchmarked on an international scale. You therefore want the combination of deep local knowledge and international benchmarking. The credibility of any ratings agency lies in the strength of the analysis and the ratings. It is essential to have solid analysis that backs up the reasoning for the rating outcome. The reason it has not been done before is that the markets were not mature enough. But that is changing. The demand for ratings is growing and the supply will follow that. ●

No Jonty levin Partner, Alkebulan

Credit rating agencies exist to reduce the information asymmetry between investors and borrowers, so instilling in investors the confidence that the instruments in which they invest are suitably structured and priced relative to the risk they assume. In a globalised financial world, investors seek guidance from ratings agencies that have depth of knowledge and insight and demonstrable track records in terms of their analysis and guidance; in short, ratings agencies that they trust. The contrived establishment of local agencies would not provide prospective investors with the confidence that they seek and so would rapidly prove superfluous to requirements. If the sentiment is that the global credit rating agencies do not provide good input on African debt issuers or issuances then the challenge is less about establishing rival entities and more about identifying areas in which the existing industry participants need to be educated and informed, and ways to achieve this. Perhaps there is the opportunity to work with the credit rating agencies to establish the veracity of, and therefore the validity of taking into account, risk mitigants that are unique to African societies. Alternatively, if the concern is that African entities are not suitably rated, then efforts need to be expended in improving governance and disclosure levels so as to secure the desired levels of scores. ●

I believe they care if those spills will lead to substantial revenue losses. Perry Dzivenu via Facebook Maybe the question should be whether we, mankind, care enough about oil spills. Do we care enough when we are thousands of miles away from the spills and live our lives in ignorant bliss? Do we care enough to stop using oil? If not, then why point our fingers at the oil companies? The Last Barrel of Oil via Facebook When oil spillages happen in developing countries, big oil corporations just get spanked by paying small fines. But the last time BP and its agent (Deepwater) screwed up in southern US, the fine was about $50 billion. It reminds me of [George] Orwell’s quote: “All animals are equal, but SOME animals are more equal than OTHERS.” Toyin Ogunsuyi via Facebook I think they care enough about profit. Sello Cry via Facebook Try having African oil giants that are actually owned by Africans who give a damn about Africa and it’s ecosystem!! Quit whining about Shell BP, don’t invite them to your house. Isaac Imanishimwe via Facebook

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briefing

InTERnATIonAL 1

2 5 4

7 8

9 1

ARGEnTInA

$1.3bn

Money claimed by vulture funds that bought up debt after Argentina’s 2001 default. US courts blocked the country’s payment of a bond coupon in September because the funds are holding out for more money. Argentina has passed laws to restructure the debt.

ISRAEL

Land grabbing

RUSSELL CHEyNE/REUTERS

In late August, Israel triggered a fresh wave of international condemnation after it announced it would take possession of around 1,000 acres of West Bank land for settlement expansion, the largest such appropriation in some 30 years. The US and the EU called on Israel to reverse the decision to occupy the land, which will be used to expand a settlement outside Bethlehem, amid claims it would scupper any chance of restarting stalled peace talks. The ceasefire between Israel and Palestine that started in late July has held and the UN mediated an agreement to allow rebuilding efforts to begin in Gaza, the site of a recent two-month conflict. ●

SCoTLAnD

Och-aye the ‘no’

Scotland voted against breaking away from the UK in a close-run independence referendum held on 18 September. The ‘No’ campaign won with 55.3% of the vote against the ‘Yes’ campaign, led by Alex Salmond’s Scottish National Party. The campaign, which frequently turned heated, captivated the UK and triggered huge debate, as displayed by the 86% turnout, a level of participation in a nationwide poll not seen since the 1950s. The independence campaign was weakened by worries over what currency the new nation would use and membership of the EU, crucial for Scotland’s economy. Westminster offered Scots a “devo-max” deal in which a large swathe of powers will be devolved to the Scottish parliament. This may in turn offer hope to other European regions driving for independence, such as Catalonia in Spain. Prior to the vote, a host of financial institutions and multinational firms had warned they would relocate operations south of the border should Scotland leave the UK. International markets responded positively to the result, with the London Stock Exchange rising in early trading and the pound hitting a two-year high against the euro. ● 3

“He

portrayed himself as the man who doesn’t like the rich. In reality, the president doesn’t like the poor ”

TIBET

President Zuma keeps Dalai Lama away The Tibetan spiritual leader, the Dalai Lama, cancelled a planned visit to South Africa in September after learning his visa application would be denied. China, a key business partner for South Africa, has regularly pressured foreign governments not to meet the Dalai Lama. In February, US President Barack Obama met him despite warnings from Beijing that the talks would “seriously damage” ties. During his presidency of South Africa Nelson Mandela hosted the Dalai Lama twice, in 1996 and 2004. ●

FRAnCE

Valérie Trierweiler a former girlfriend of France’s President François Hollande, painted a damning picture of him in her new book

LCHAM/SIPA

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CMA CGM

briefing | international

african angles 6

RUSSIA

gas tit for tat Tensions between Russia and the West continued after Russian statecontrolled energy giant Gazprom reduced its gas exports to Poland in mid-September. The cut raised suspicions it was a retaliation for Warsaw’s export of gas to Ukraine, where separatists have been fighting the government in the country’s east since mid-April. Meanwhile, the EU introduced a series of sanctions against divisions of Gazprom, limiting their access to European financial markets. The US Treasury is now forbidding Gazprom from having access to US deepwater, Arctic offshore and shale technology. ●

IRAQ

In August and September, the US carried out more than 150 air strikes against fighters from the radical Islamist group Islamic State who were threatening targets in Iraq including the Haditha Dam, in the country’s north-west.

QATAR

QNB in africa In September, the Middle East’s largest bank, Qatar National Bank (QNB), bought a 23.5% stake in the Togo-based Ecobank for an estimated $503m, making it the pan-African bank’s largest shareholder. With domestic competition limiting QNB’s profits it is seeking to boost its African interests and has pledged to become the largest bank in the Middle East and Africa by 2017. In 2013, it bought Société Générale’s Egyptian division for $2bn. ●

Ogaga IfOwOdO

Nigeria’s Christian Zionists israel’s violence against Palestine provokes few questions amongst nigerian believers

s the horrors of the latest battle in the unending Israeli-Palestinian war shocked the world and Nigerian Christians cheered Israel to victory, I recalled a Pentecostal church service I attended in the southern city of Warri at the insistence of my born-again niece. The pastor urged his congregation to pray for Israel, once again threatened by her philistine neighbours. Then ensued a paroxysm of prayer and speakingin-tongues. The pastor stoked the frenzy: “Nothing the Palestinians could do would make God break his promise to his chosen people.” “So why pray?”, I blurted out. No one noticed. I turned to my niece and asked her: “Didn’t Jehovah create the Palestinians? Aren’t they his children too? Why would he promise the land belonging to some of his children to some other children? Why would God the father play favouritism with his children?” Her response: “You can’t question God.” Three decades later, I ask the same questions of a cousin in whose living room we are viewing images of Israel’s unrestrained use of force in Gaza. He tells me the Palestinians do not deserve pity. Firstly, they are fighting a hopeless battle over land God promised to Abraham, and, secondly, “the Arabs are a problem everywhere, terrorising the world with their violent religion”. It does not help that the atrocities of Boko Haram in north-eastern Nigeria and of the Islamic State are also in the news. I push for a sober answer and he says: “We can’t question God.”

I suppose every good Christian is a Zionist, meaning he or she who believes in the literal and immutable truths of the Old Testament. My Nigerian brethren are more Zionist than Ari Shavit, whose greatgrandfather collaborated with Theodor Herzl, Zionism’s founding father. In My Promised Land: the Triumph and Tragedy of Israel – an astounding personal narrative history that everyone should read – Shavit utters what the Nigerian Christian would call blasphemy: that Israel was founded upon a great historical injustice, beginning with the conquest of Arab towns and villages and the expulsion of their populations during the 1948 war. “The nation I am born into,” Shavit explains, “has erased Palestine from the face of the earth. Bulldozers razed Palestinian villages, warrants confiscated Palestinian land, laws revoked Palestinian citizenship and annulled their homeland.” Christian Nigeria’s biblical literalism notwithstanding, the world recoils increasingly from the brutal reality of Israeli colonisation of Palestine. Israel runs the risk of becoming a pariah, much like apartheid South Africa. Maybe this suits the Jewish sense of abandonment poignantly expressed by the Zionist hero Yitzhak Tabenkin, who said: “Bitter is the knowledge of our solitude and the knowledge that the world is our enemy.” True, perhaps, before the liberation of Auschwitz, but does Israel wish now to be the world’s enemy instead? The question does not cross the mind of Nigerian Zionists. ●

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briefing

cAlendAr

iPAd drc mininG & infrAstructure indAbA 21-23 october

OCTOBER

AfricA GlobAl business forum 1-2 october

kinshasa | drc ipad-drc.com

Dubai | uAe africaglobalbusinessforum.com

zAmbiA 50th AnniversAry of indePendence 24 october

us-AfricA infrAstructure conference 7-9 october Washington DC | us this year’s CCa conference is on ‘building Resilient Cities’. infra2014.africacncl.org

nobel PeAce Prize 10 october oslo | norwAy nobelprize.org

world bAnk & imf fAll meetinGs 10-12 october Washington DC | us imf.org

AfricAn develoPment forum 12-16 october MaRRakeCh | morocco uneca.org

world investment forum 13-16 october

MoniRul bhuiyan/aFp

botswAnA PresidentiAl & PArliAmentAry elections 24 october

The unexpected death of Gomolemo Motswaledi, leader of the Botswana Movement for Democracy (BMD) and vice-president of the country’s main opposition group, the Umbrella for Democratic Change (UDC), just months before the election, has heightened tensions in the country. A police investigation after the fatal car crash on 30 July ruled out foul play, a decision that angered opposition party members who accuse President Ian Khama and the ruling Botswana Democratic Party (BDP) of a political assassination. With the absence of Motswaledi, whose party was not set to pose a serious threat to President Khama’s reelection, the odds remain high that the incumbent will sail to victory, with the support of loyalists who have continuously voted the BDP into power since the country gained independence from Britain in 1966.

mozAmbique GenerAl/ PresidentiAl elections 15 october

tunisiA PArliAmentAry elections 26 october AGribusiness forum 26-29 october kinshasa | drc aimed at the challenges and seizing opportunities in the agri-business sector in africa, this year’s forum is themed ‘the Future for agriculture in africa: inclusive growth’. emrc.be

28-30 october lagos | niGeriA power-nigeria.com

eAst AfricA oil And GAs summit 15-17 october

lAGos fAshion & desiGn week 29 october – 1 november

naiRobi | kenyA eaogs.com

lagos | niGeriA lagosfashionanddesignweek.com

geneva | switzerlAnd unctad-worldinvestmentforum.org

RenaMo and FReliMo go head-to-head. see page 16.

liberiA senAtoriAl election 14 october

PrivAte equity in AfricA summit 15 october

the GlobAl AfricAn investment summit 20-21 october

however, the poll remains in doubt due to the ebola crisis.

lonDon | uk event.ft-live.com

lonDon | uk tgais.com

NOVEMBER

AfricA oil week 3-7 november Cape toWn | south AfricA www.globalpacificpartners.com the africa report

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ADVERTORIAL

Dr. Lanre Towry-Coker Ph.D Biopic

r. LanreTowry-Coker is the son of a distinguished Civil Engineer who in the early 60’s was the planning adviser to the late Malayan Prime Minister,Tunku AbdulRahman. Dr. Lanre Towry-Coker was educated at the popular St. Matthias Roman Catholic (Primary) School, Lafiaji, in Lagos, and at the Kingston College, Surrey, in the United Kingdom, where he obtained the GCE ‘O & A’ Levels. He later received his academic training at the prestigious Architectural Association School of Architecture, London, (after passing the entrance examination). He then went to Thames University where he completed his Royal Institute of British Architects’ part 1 exams. He completed his RIBA part II at the N E London University. Dr. Lanre Towry-Coker, who holds a Post-Graduate qualification in Architecture from the University of North East London, completed his professional training at the World famous Royal Institute of British Architects (RIBA). He is also an Associate of the Chartered Institute of Arbitrators in the United Kingdom (ACI.Arb.) and a Fellow of the Nigerian Institute of Architects (FNIA). A graduate of the renowned Harvard University Graduate School of Business Administration (OPM), in the United States of America (which he attended as a full-fledged professional in the course of his brilliant career). He later undertook a five year PhD programme at the Lagos State University, culminating in the award of the Degree of Doctor of Philosophy (Urban planning and Geography), with his thesis subject, “Housing Policy AndThe Dynamics Of Housing Delivery In Nigeria UpTo 2008: Lagos State As Case Study”. A seasoned Architect, who started his own architectural practice in 1976. Dr. Lanre. Towry-Coker has originated numerous prestigious buildings all over Nigeria and has won numerous competitions. He was one of the original planners of Abuja and takes credit for originating the initial concept of the first hotel in the relocated Federal Capital, Abuja Sheraton Hotel (now re-christened NICON Luxury Suites Hotel) and won the competition to design the Abuja Conference Centre both of which were completed. Not long ago he was adjudged the best entry in an international competition (WHICH ATTRACTED A TOTAL OF 110 ENTRIES) to design

the World Bank Resident Mission Headquarters, and Residences in Abuja, which was commissioned. He has in his professional career designed and supervised several major buildings all over Nigeria, and trained over 150 archtects. A past Chairman of the Public Relations Committee and International Relations Committee of the Nigerian Institute of Architects (NIA). Dr. Lanre. Towry-Coker has led numerous delegations of the NIA to different types of organized parallel international and regional professional bodies. He was NIA’s representative at the World photo – voltaic association arranged by the International Union of Architects and led the Institute’s delegation to a forum held in Australia under the auspices of the Commonwealth Institute of Architects. More

recently in 1997, he was the head of a Nigerian mission to the United States Building Business Symposium. He is an ex-member of the Lagos StateTenders Board. In 1999, Dr. Lanre Towry-Coker was appointed the pioneer Honourable Commissioner for Housing in Lagos State. He served as a full cabinet member for 4 years, and subsequently was a key adviser to President Olusegun Obasanjo, before returning to the private sector in 2003. He was a Member of the Presidential Committee on Housing and Urban Development, inaugurated by the President Commander-in-Chief of the Armed Forces, Chief Olusegun Obasanjo, in 2001-2002. During his tenure as Hon. Commissioner he completed no less than four large abandoned estates and initiated another ﬁfteen housing estates in Lagos State. Dr. Lanre.Towry-Coker, entered partisan politics in 1992 when he contested the Lagos Central Senatorial Seat under the banner of the former Social Democratic Party (SDP). He has over the years authored different publications on wide-ranging topical subjects which are of timeless relevance. These include ‘Towards a Lagos State Environmental Protection Agency’ (a seminar blue print), “Low-income Housing”, “Technology Transfer: The Construction Dimension” and “The Metro –Line Affair (a review / plan for mass Transportation in Lagos State”). In 2011, he published a 350 page-book titled “Housing Policy and the Dynamics of Housing Delivery: Lagos State as Case Study” to coincide with thirty-ﬁve years of architectural and urban planning practice. A much traveled individual whose professional practice has taken him to no fewer than 36 countries scattered all

over six continents. He is a member of the Nigerian-ASEAN Chamber of Commerce, Nigerian-British Chamber of Commerce and the Nigerian Institute of International Affairs (NIIA). A founder member of the Nigerian-German Business Council. He is also a member of the Nigerian Finnish Chamber of Commerce. He belongs to the boards of a number of companies and bodies including charitable organization like the Chris Ogunbanjo Foundation, Centre for Conﬂict Resolution and the Centre for the Promotion of an Industrial Society, United Way Nigeria, where he is a member of the Governing Board. A warm and outgoing personality who in 1984 was nominated Outstanding Young Person (OYP) of the metropolis by the Jaycees (diminution of the Junior Chamber of Commerce International), a non-governmental organization. Dr. Lanre. Towry-Coker is a member of a number of charitable, social and sports clubs and organizations, notably the Lions Club International, Metropolitan Club (Lagos), Ikoyi Club (Lagos), Polo Club (Lagos), The Lagos Motor Boat Club and Yoruba Tennis Club, all in Lagos. Architect, Urban –Planner- Transportation Planner, Project Manager and Author all rolled into one, Dr. Lanre. Towr-Coker speaks French, and has studied German, Russian. He enjoys writing, and organizing in addition – doing charity work. He plays badminton, golf, squashrackets and tennis occasionally. Dr Lanre Towry-Coker was awarded a Doctorate degree in Urban Planning, after defending his thesis titled ; «Housing Policy AndThe Dynamics Of Housing Delivery In Nigeria UpTo TheYear 2008: Lagos State As A Case Study».

Nigeria TowryTowers, Plot 1,Towry Close, Off Idejo Street, Victoria Island, Lagos, Nigeria.

England 47, Park Street, Mayfair, London W1K 7EB, England.

Tchad B.P: 5894, Rue 3258 Porte: 65, Quarier: Klemat N’Djamena, TChad.

Portugal Beco da Igreja, 2B, 8600-013 Barao de Sao Joao, Portugal.

T. +234 (1) 903 235 4/5 T. +351 282 688 542 E. lanretc@hotmail.com E. lanretc@gtisa.co.uk w. www.gtisa.com.ng w. www.towrycoker.com

DIFCOM/FC - Photos : D.R.

DR. LANRE TOWRY-COKER. PHD RIBA. FNIA. DIPL.ARCH. ACI.Arb. OPM (HARVARD), Ph.D (Planning and Geography)

business Mining

End of the iron Age Sishen mine in South Africa does not have the heavy transport costs of the Central African deposits

companies & markets

Low prices and high supplies are driving iron ore prices down. Analysts say large companies will survive the crunch but many smaller producers and explorers may be faced with tough decisions By Honoré Banda in Douala

NaDiNe HuttoN/BloomBerg via getty images

n a red and muddy clearing along Cameroon’s densely forested border with the Republic of Congo, a fleet of diggers stands idle. High above the canopy of trees, dark clouds start to gather. It is an ominous portent for an iron ore project billed as transformative for the country. Three years ago, the Mbalam mining project, spearheaded by Australian explorer Sundance Resources, was hailed by Cameroon’s President Paul Biya as a potential game changer for the Central African country. Now, as Sundance courts fresh investors to shore up its dwindling cash reserves while iron prices fall, the prospects look bad for the construction of a $5bn railway needed to make the mine economical. Across the continent, a similar pattern emerges. From Guinea to Angola, mining projects set up to feed China’s seemingly insatiable appetite for raw materials face an uncertain future. Demand from the world’s largest consumer of iron ore is now cooling, and the determination of the three biggest producers – Rio Tinto, Vale and BHP Billiton – to plough ahead with expansion plans is bad news for smaller rivals, many of whom have chosen Central and West Africa’s undeveloped – and thus higher cost – deposits as their way into the mix. The combination of reduced demand and oversupply is pushing prices down. Since the beginning of the year, the price of seaborne iron ore has fallen 37% to just over $84/tn in September. The sharp fall in prices evident this year is

in some ways the corollary to the boom years between 2004 and 2010. Prices jumped from $25/tn to $170/tn by the end of the decade as China built the skyscrapers, roads and bridges needed to serve its rapidly expanding economy. In response, iron ore producers invested in new mines, thus ensuring a supply shortfall would be replaced with a glut. Now, with inventories at Chinese ports close to record levels, coupled with a seasonal fall in demand, prices have headed south. So much so, in fact, that Goldman Sachs, the New York-based investment bank, said 2014 would come to be seen as “the end of the iron age”. MINNOWS GET CAUGHT

This may not be too big a problem for companies like BHP Billiton and Rio Tinto, which benefit from vast economies of scale that allow them to remain profitable even at iron prices of around $30/tn. For smaller companies like African Minerals, London Mining and Bellzone, which operate a comparatively tiny portfolio of mines at much higher cost, a sustained fall in the iron ore price is a far harder squall to surmount. African Minerals and London Mining operate mines in Sierra Leone, while Bellzone is in Guinea. All three miners have been seeking fresh funding to relieve some of the pressure on their balance sheets. In August alone, London Mining got a fresh credit facility from two banks, while African Minerals and Bellzone received cash injections of tens of millions of dollars from ●●● Chinese partners.

business | companies & markets

However, building the mines and extracting the ore from Rio Tinto’s two blocks is one thing, getting it from the remote forests of south-eastern Guinea to the coast is quite another. It requires the construction of a railway across 700km of the country’s undeveloped and mountainous interior. How much it finally ends up costing is anyone’s guess. Rio Tinto, which has agreed to spearhead efforts to help court investors, privately expects the final bill to come in somewhere between $14bn and $20bn. rio tinto

Casting a further pall on proceedings, the Ebola outbreak in Liberia, Sierra Leone and Guinea also risks further crippling their fragile economies, as the movement of goods and services seizes up. Even for ArcelorMittal, the number-one steelmaker in the world and owner of several iron ore mines in Liberia and Guinea, current conditions pose challenges. In August, the company declared force majeure on an expansion project in Liberia due to risks from the disease. ●●●

winners and losers

To sum it up, the picture is bleak. However, it does not spell the end for iron ore investments in Africa. There will of course be winners and losers. The winners will likely be the big producers that can afford to sit out the tough times and wait. The losers will be the smaller producers and the African countries that hoped to make a mint and thought that the short-term gains of mining would soon be in evidence. The smaller explorers have been the worst hit so far, especially those in Central Africa. In July,SouthAfrica’sAngloAmerican and Kumba pulled out of a proposed deal to finance the Mebaga iron ore project owned by Ferrex in Gabon. Even the ambitious Chinese firms that hoped to stake out their futures producing iron ore in Africa

may be having second thoughts. Chinese state-owned firms that piled into African mining projects inordertosecurelong-termsupply deals are now having to share the pain. Bankers say deals like Shandong Iron and Steel’s 2012 decision to pay $1.5bn for a 25% stake in African Minerals and the Hong Kong-based China International Fund’s 2010 agreement to fund Bellzone’s Kalia project to the tune of $2.7bn could become a thing of the past. The trend is now turning to infrastructure investment, where giant Chinese interests, including lenders and export credit agencies, agree to help build roads and railways in exchange for mining offtake. In a different sort of deal in the iron ore value chain, stateowned Hebei Iron and Steel Group announced it would develop a steelmaking plant in South Africa’s Limpopo Province in September. So, what do lower prices spell for the various projects across the continent? Certainly, location, development stage and the size of the deposit matter, but issues of quality and grade will dominate. One project stands out from all others. Simandou has come to embody all the dynamics at play in African iron ore. It is a huge deposit of unquestionable potential, which former Rio Tinto chief executive Tom Albanese described as the “biggest tier-one iron ore asset in the world today”.

Simandou is one of the largest and richest deposits in the world, but its development requires a railway

licences revoked

Rights to the other two blocks at SimandouwereacquiredbyIsraeli businessman Beny Steinmetz’s BSG Resources under the dictatorship of the late Guinean president Lansana Conté in December 2008. President Alpha Condé’s government has fallen out with BSG and its partner Vale and revoked the rights to the blocks this year. A tender for the licences previously owned by BSG Resources and Vale is expected to take place later this year, and Guinean officials say they have already lodged high levels of interest from some of the world’s largest mining companies. Glencore could be one of them. Chief executive officer Ivan Glasenbergadmittedthatthe project holds some allure, but only if its huge infrastructure issues could be sorted out, at little or no cost to the companies that mine the iron ore. “Guinea is a tough one,” Glasenberg told journalists on a conference call in late August. “There’s a massive capital expenditure required for the rail line and port. If Guinea does what they say they’re going to do and gets an infrastructure company to build the rail and port [...] then we don’t have massive cost. It’s just a matter of developing the mine and utilising the rail and port at a cost, but not with a massive capital commitment up front. But there’s a long way to go.” With iron ore prices in the doldrums, mining majors may not be in any rush to see the project developed in a hurry. ● ● ●

$140bbnn 2 Estimates of the cost of developing Guinea’s Simandou mine range from $14bn to $20bn

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● ● ● Instead, the real objective may lie in gaining – and then maintaining – control of the deposit. Simandou’s value as a deposit lies not only in its size, but perhaps more significantly in the quality of its iron ore. For the majors, projects like Simandou mean securing fresh sources of large, low-cost supply in another 20 years, when their big long-life mines are no longer profitable. Most mining analysts agree that Simandou is one of the only undeveloped deposits in the world that can bear comparison with Australia’s Pilbara and Brazil’s Carajás, the heartlands of Rio Tinto and Vale, respectively. According to Paul Gait, a senior analyst at Bernstein Investment Research, “Simandou’s economics are such that neither Rio, nor Vale, if they were to act rationally, would see its development as value-accretive. To the extent that the incumbents can hold onto the project and avoid developing it as long as possible, it does not pose a threat to the global iron ore supply and makes strategic sense.” That strategy is not without its risks. The Senegalese government won damages of $150m from ArcelorMittal in June after the company failed to develop the Falémé mine that it had planned to develop since 2007. The awarding of the two Simandou blocks to BSG Resources could also be seen as a symptom of the fact that Rio Tinto first won the rights to all of Simandou in 1997 and had not been quick to invest.

nimba could be nimble

Guinea’s other major iron ore plays may notgarner thesame headlines as Simandou, but the two Mount Nimba projects – one run by ArcelorMittal and the other by US giant Newmont – arguably offer a more realistic snapshot of the current state of African iron ore plays. The projects more likely to survive the market downturn are those with relatively easy routes to market, whether through the availability of pre-existing infrastructure or cross-border routes that can be quickly tailored to suit an investment.

The magnificent seven

Guinea Simandou 1 + 2 (North) Reserves 26,500 Mt Grade 42% Peak production 50 Mtpa*

Simandou 3 + 4 (South) Reserves 2,254 Mt Grade 66% Peak production 100 Mtpa*

Mount Nimba Reserves 900 Mt Grade 63% Peak production N/A

One of the most sought-after concessions in world mining, it is at the centre of a legal wrangle between Rio Tinto, Vale and BSG while the government retenders the rights.

Owner Rio Tinto, with Chinalco and the World Bank’s IFC, is trying to drum up $20bn to fund the rail and port infrastructure needed to get Simandou’s ores to export markets.

Co-owned by ArcelorMittal and Newmont, the project has the advantage of proximity to the Liberian port of Buchanan. Guinea is likely to agree to this as an export route.

Republic of Congo Mount Avima Reserves 580 Mt Grade 63% Peak production 35 Mtpa*

Sierra Leone Tonkolili Reserves 127 Mt Grade 62% Peak production 20 Mtpa Owned by Frank Timis’s African Minerals (AM), the mine beneﬁts from rail and port infrastructure ﬁnanced by AM and Shandong Iron & Steel at a time of higher iron ore prices and demand.

Mt = million tonnes Projected ﬁgures

On a high ridge in Congo’s north. Privately-owned Core Mining, headed by Socrates Vasiliades, has been developing the mine since 2013 and expects to start exporting early 2016.

South Africa Sishen Reserves 864.1 Mt Grade 59% Peak production 43 Mtpa

Khumani Reserves 727 Mt Grade 65% Peak production 16 Mtpa

Anglo American’s iron ore powerhouse in Northern Cape. The company has reduced annual production to use it for longer and says it will last 19 years.

Export-only heavyweight operated by Assmang – co-owned by Assore and Patrice Motsepe’s African Rainbow Minerals. Production will rise from 10 to 16 Mtpa with a second phase.

Unlike Simandou, for which the government has mandated the construction and use of a multipurpose railway that will open up Guinea’s remote interior, with MountNimbaPresidentCondéhas shown more flexibility to mining companies. As the area is close to the Liberian border, ArcelorMittal and Newmont could be granted a special right to route their exports via the Liberian port of Buchanan, using a railway operated by ArcelorMittal.Thatadvantage,denied to Simandou’s owners, has already been granted to London-listed junior Sable Mining, which operates a smaller project in the same district as its larger peers. The managers of the Avima iron ore mine in the Republic of Congo hope this will be another project withflexibletransportoptions.British Virgin Islands-headquartered Core Mining has proposed a trucking solution to allow it to produce 3m tonnes of iron ore per annum from 2015. The trucks would pass throughBoouéinGabonuntilarail

link could be built to Gabon’s own planned iron ore mine at Belinga. Avima has also discussed the possibility of working with Sundance to transport ore through Cameroon.TheGabonesegovernment kicked out its Chinese partners from Belinga in 2012 after they failed to develop the mine and associated infrastructure projects quickly enough. Vale had expressed an interest in the Gabonese mine before the government decided to partner with the China Machinery Engineering Corporation. And while the enthusiasm of Chinese investors for riskier iron ore ventures may begin to wane, Asia’s other fast-growing behemoth, India, appears to be picking up some of the slack. In AugustAustralianexplorerLegend Mining announced the $17.5m sale of its Ngovayang project in southern Cameroon to Indian steelmaker Jindal Steel & Power, partofanemergingtrendofIndian

5 . 7 $1 Jindal Steel & Power bought rights to the Ngovayang project in southern Cameroon for $17.5m in August

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The country’s 27-year civil war disrupted the development of its mining industry, which started under Portuguese colonial rule. In the 1960s and 1970s the country was exportingmorethan5mtonnesper year of iron ore concentrate. One advantage the country has over its neighbour, Congo, is pre-existing infrastructure. For example, the Cassinga mine is linked to the Atlantic coast by the Moçâmedes railway. However, attracting fresh investment is going to be difficult. For now, South Africa remains the continental iron ore heavyweight. Anglo American’s Sishen mine in Northern Cape should be able to produce around 37m tonnes annually for another 19 years. At a unit cash cost of around $24/tn, Sishen is one of the lowestcost mines operating on the continent and a major profit centre for the London-listed company. Less well known, but an established player nonetheless, the Khumani mine, lying 30km south of the town of Khatu, sends an annual 10m tonnes to the westcoast port of Saldanha Bay. Operated by Assmang, the iron ore and ferro-alloy producer co-owned by AssoreandSouthAfricanbillionaire PatriceMotsepe’sAfricanRainbow Minerals, the mine will feed steel mills for plenty of years to come. But until global demand returns to the halcyon days of 2008, the outlook for some of the continent’s newer players will be mired in uncertainty. ● the africa report

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Price rises for soft commodities 3,400 3,200

ICE cocoa prices US$/tn

3,000 2,800 2,600 01/01/14 20/02

11/04

31/05

20/07

102 98 94 90 86 82

Cotton prices US cents/Ib

78 74 01/01/14 20/02 240 220 200 180 160 140 120 100 80 60 01/01/14 31/01

11/04

31/05

20/07

Arabica

Arabica & robusta prices US cents/Ib

Robusta 01/04

31/05

30/07

The considerable surge in prices for agricultural products such as coffee, cocoa and soybeans is having an impact on the market after us chocolate giant hershey raised consumer prices by an average of 8% in July. Mars followed suit in north america shortly thereafter, raising prices by an average of 7%, the first price increase in three years. due to greater demand and shortages caused by poor weather conditions in cocoa-producing countries, analysts predict a sustained increase in prices for the 2014/2015 crop. The two main beans in the coffee sector, arabica and robusta, have also risen. arabica prices surged by 69.3% since January to $2.18/lb by July, while robusta prices rose by 20.8% to $1.05/lb. high arabica prices benefit producers in ethiopia, Kenya and Tanzania. strengthening robusta prices encourage higher output in uganda and côte d’ivoire. cotton has underperformed so far in 2014, and the price pinch could become severe due to a significant decline in cotton imports from china. ●

Analyst’s view

Bouncing beans, limp cotton set to continue Soft commodity priceS have had mixed fortunes in 2014, reflecting the dynamics affecting each market. cocoa has been the most consistent performer, continuing a rally that started in mid-2013, with the price rising by 17.2% to reach $3,263/tn by end-July. However, the weather will play a key role in determining prices in the second half of the year, with the likely return of el Niño driving down yields in West Africa and widening the global deficit. High prices will benefit exporters of beans from West Africa but will put pressure on regulators in Edward George Head of group research, côte d’ivoire and Ghana to substantially increase Ecobank farm-gate prices in 2014/2015. this could prove politically difficult to achieve. the poorest performer in the soft commodity space is cotton, which has lost 11.3% of its value since the start of the year, ending July at $0.796/lb. the slump started in June, and price weakness is likely to continue while the world market remains in surplus, keeping prices well below the three-year average of $1.11/lb. this will weigh heavily on Africa’s key cotton-producing regions – francophone West Africa and Southern Africa – and could undermine efforts to boost production and introduce new high-yielding Bt [genetically modified] varieties.” ● ecobanK

ANGolA’S proS ANd coNS

barometer

SOURCES: INTERCONTINENTAL EXCHANGE (ICE); COTLOOK A; INTERNATIONAL COFFEE ORGANISATION

companies making a move into the African commodities space. Tothesouthofthecontinent,the iron ore picture becomes one of sharp contrast. On one hand, there is South Africa with its well established powerhouse producers; on the other there are ambitious upstarts like Angola waiting for fresh opportunities to come their way. Angola’s state-owned company Ferrangol aims to start producing iron ore in the next few years but is still trying to attract investment. The country has potentially large deposits but still needs to do geological surveys to ascertain the full scale of its reserves.

EPA/DAI KUROKAWA/EPA/cORbIs

business | compANies & mArKeTs

Media

Coming to a TV screen near you

The living rooms of Nigeria and Kenya are the focus of a scramble for market share by production and distribution companies as the number of TV households multiplies

frica is in the grip of a television gold rush as production and distribution firms race to control key markets and satisfy soaring demand for programming. A continent that has for decades been overlooked by international distribution companies is now at the forefront as global television networks vie to secure contracts to provide content to growing middle-class populations with more disposable income. The sub-Saharan market has traditionally been dominated by South Africa’s MultiChoice in Anglophone Africa and French firm Canal+ Overseas in the Francophone regions. They are now competing with rivals such as China’s StarTimes, which has launched an aggressive expansion strategy, pledging to increase its pay-TV subscriber base from its current level of around 4 million people to 20 million in five years. Backed by a number of Chinese banks, including the ExportImport Bank of China and the China Development Bank, StarTimes has already signed deals to provide content in around 15 African countries, explains Simon

Murray, the principal analyst at the media consultancy Digital TV Research. It plans to double this to 30 by the end of the decade. The firm has deep pockets, having reportedly secured more than $400m in loans since 2012, and is increasingly threatening MultiChoice’s position as the largest pan-African provider. In Nigeria, a joint venture between the government and StarTimes pushed MultiChoice from the top spot in 2013 as the largest pay-TV provider, as measured by the size of its subscriber base. Smaller rivals are also appearing on the scene and helping to

drive down prices for consumers. “In Kenya, Wananchi [Group] and [its platform] Zuku are successfully challenging MultiChoice by offering a wider range of channels and at lower prices,” adds Murray. The firm has already expanded into Uganda and Tanzania and has announced plans to launch operations in Malawi soon. Despite losing ground, MultiChoice still has a key advantage in its control of rights to UEFA Champions League football matches, plus English Premier League football and rugby, which remain a powerful draw for viewers. have money, get tv

Predicted split of the sub-Saharan African television market in 2020 (TV households, million) 15.1 1.8 1.9 2 2.4 2.4 2.6

16.4

10.5

5.7 3.6

4.3

Nigeria Tanzania Ghana South Africa Côte d’Ivoire Mozambique Ethiopia Uganda Angola Kenya DRC Others

Source : Digital tV reSearch

The sector has recorded promising growth over the past decade as the continent’s economic expansion fuelled an increase in the number of viewers, with a consequent rise in income from television services. Revenue generated from pay-TV products in sub-Saharan African, which was around $1.8bn in 2010, is set to nearly triple to $5.3bn by 2020, according to data from Digital TV Research. This is being driven by a surge in the rollout of services, as analysts predict the number of homes in sub- ● ● ●

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Africans Building KappaCity

Ka Petrol Ka Power

Indigenous Oil & Gas Companies Production Exploration Associated Services & Industries

Kapp Oil & Gas Pipelines Water Network Power Transmission & Telecom Lines

Hydro Power Generation Gas Fired Power Generation Associated Services & Industries

www.kappafrik.com

Expatriate Recruitment 5#80"':(#+: )! ,!0'89+ 70);*#. 2 -)89* 1)+:#+: /)*'8'#. ."//)0: 45 1)+."*:'+% 2 3:9!! 9..#..(#+: Executive Search 69+/)&#0 ."//*$ Paris (France) Lagos (Nigeria) Accra (Ghana) Luanda (Angola) Abidjan (Ivory coast) Casablanca (Morocco) +33 1 71 19 47 32 contact@adexen.com www.adexen.com

FUTURE OF AFRICA

ARE THE

business | companies & markets

● ● ● Saharan Africa with access to television will jump from 48m in 2010 to 68m by 2020. The expansion began in South Africa, which saw a rapid rise in television sector revenue at the end of the past decade, with satellite subscriptions up 20% in 2009 and 15% in 2010, according to PwC’s South African Entertainment and Media Outlook report 2013-2017. This in turn drove up advertising revenue and fuelled an expansion of channels to satisfy choice-hungry viewers.

geographic shift

The growth in South Africa was in part a response to the 2008 economic crisis in the US and Europe, which drove investors to seek out new investment opportunities outside of the developed economies, says Audrey Iwanczyszyn, an international media consultant specialising in Europe, the Middle East and Africa. “South Africa was a tremendous investment opportunity at that time. You had a

young demographic with a rising standard of income who were keen to have access to television,” she says. “MultiChoice was, and still is, the primary player in that market and has a very professional operation, with good PR [public relations] teams, marketing and customer services, so it was an obvious choice for firms looking to invest in the sector in Africa.” But as South Africa’s doubledigit growth peaked and gave way to more modest yet steady expansion, investors have now turned to the markets of Nigeria and Kenya, where they say there is much untapped potential. With a population of 166 million people, Nigeria had only 1.8m pay-TV households by the end of 2012. At the same time, Kenya had 232,000 subscribers for a population of 42 million people. “We expect to see an increase of around 20m additional TV households in sub-Saharan Africa between 2013 and 2020,”

Source: Pwc

232,000 Pay-TV households in Kenya in 2012

satellite into orbit

profile

Africa Media Distribution TV content provider

Making life easy for new pay-TV platforms Since launching in January, lagos-based africa Media Distribution (aMD) is an example of one of the firms looking to profit from the ongoing growth in africa’s television market. it aims to serve a growing appetite for television content, selling both bundles of international channels and its own four branded channels to programmehungry african TV platforms. aMD, whose managing director lindsey Oliver worked for al Jazeera english, cnBc, and as international commercial

director for Bloomberg TV, aims to provide low-cost programming primarily to new platforms. it has hit the ground running, already penning agreements with consat and Montage in nigeria and intelvision in the Seychelles. aMD is in talks with other West african outlets. “We hope that we will have deals with three more platforms by the end of the year,” Oliver says. While the company’s initial focus is to provide content, it plans to broaden the business into consultancy work, helping new platforms to raise

explains Digital TV Research’s Murray. “This will equate to only 38.4% TV penetration by 2020 and shows the long-term potential for the region, with plenty of growth expected beyond 2020.” Technology is key to the development of the industry. Nigeria, Kenya and a number of other key markets all intend to switch from analogue terrestrial television services to digital by June 2015, in line with a deadline set by the International Telecommunication Union. This is part of a plan that will free more of the radio spectrum for use by mobile telephone and broadband internet companies. The industry relies largely on satellite dishes to provide content, with 8.5m of the total 11m pay-TV subscriptions using dishes to receive services, according to Digital TV Research. South Africa currently contributes around five million of these subscribers with Nigeria adding around two million.

viewer numbers. “What we are finding is that for a lot of these new platforms, they don’t have a lot of experience of launching a pay-TV platform,” she says. “What aMD aims to do is take away a lot of the heavy lifting for them. But also, because we are B2B [business-to-business], we are not only supplying the content to the platforms that are growing up, but we are also helping the international channels who don’t have the time and resources to traverse the african continent finding new platforms and doing deals with them.” ● C. H.

The total number of satellite TV subscriptions in sub-Saharan Africa is expected to leap to more than 25m by the end of the decade. Much of this expansion will come from the rapid growth of uptake in Nigeria, where satellite subscribers are set to triple to more than six million, combined with other markets such as Kenya, Tanzania and Uganda. As the reach of television increases, so too does the appetite for new channels and extra content. In response, a host of companies are springing up to feed this demand. One such company is Lagos-based start-up Africa Media Distribution (AMD), which aims to match international television channels looking to sell their content with new African platforms seeking to buy programming. Managing director Lindsey Oliver says: “The market has responded very well. We are trying to be a service to the platform providers, delivering them content or channels – both third-party channels that we get the rights to from Europe or the States and our own AMD branded channels.” ● Charlie Hamilton

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ADVERTORIAL

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The African Reinsurance Corporation (Africa Re) is owned by 41 member states of the African Union, the African Development Bank, Development Finance Institutions (IFC, Corneille Karekezi Group DEG, PROPARCO), IRB-Brasil Re (leaManaging Director and CEO of Africa Re ding reinsurer in Latin America) as well as 109 African insurance and reinsurance companies from the 41 member countries. Headquartered in Lagos, it has built up the largest commercial network in reinsurance on the African continent with more than 6 regional ofﬁces (Casablanca, Cairo, Abidjan, Addis Ababa, Nairobi, Mauritius) and subsidiaries in Egypt and South Africa. Established in 1976 with the primary mission of retaining reinsurance premiums and developing insurance markets on the continent, Africa Re has become today the leading reinsurer in Africa and the largest in Africa and the Middle East. Through its activities, Africa Re gathers much needed funds for African economic development.

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Standard & Poor’s also affirmed Africa Re “international” financial rating of A - / Strong with a Stable Outlook in August 2014. The revised outlook by A.M. Best reflects the excellent risk-adjusted capitalization, improved earnings as well as the proceeds of the fourth capital increase, which amounted to US$ 159 million with shareholders’ funds growing to US$ 677.5 million as at the end of 2013.

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> Leading Role in African Insurance Industry Africa Re plays a leading role in the African insurance / reinsurance industry through the provision of the strongest African underwriting capacity as testiﬁed by its current ﬁnancial ratings comparable to leading reinsurers in the world. It also contributes to unmatched initiatives to empower African insurance professionals and markets through capacity building, product innovation and industry advocacy.

> Strong and Excellent Rating A.M. Best (leading insurance rating agency) afﬁrmed the ﬁnancial strength rating of A - / Excellent and revised the outlook from Stable to Positive in June 2014. African Reinsurance Corporation Plot 1679, Karimu Kotun Street - Victoria Island - P.M.B.12765, Lagos - Nigeria

DIFCOM/FC - Photos : D.R.

> Historical Background and Mission

business | companies & markets

Retail

Bigger is better for Ghana’s malls New shopping centres are sweeping the continent, and they are bigger, shinier and busier. In West Africa, Ghana is taking the lead with the largest in the region

Chris stein for JA

30-minute drive from central Accra along the Accra-Cape Coast motorway takes you to Weija, a rapidly developing neighbourhood soon to be home to West Africa’s largest shopping mall. A grand site and a new road bypass are currently being constructed as part of the West Hills Mall development. The $100m complex will be the second built by the Atterbury Group after the Accra Mall built in 2007, and the South African property developers are upbeat. “We want to create a ‘Little Dubai’ in Ghana,” enthuses Johan Venter, Ghana retail manager for the group. Oncethefirstphaseiscompleted attheendofOctober,theWestHills Mall will cover 27,700m². After the second phase, the mall will cover 39,000m², which is 12,000m² more than the largest shopping mall in the region, Polo Park Mall in Enugu, Nigeria. Ghana’s Social Security and National Insurance Trust (SSNIT) owns 40% of West Hills Mall Limited with Delico Investments owning 60%. Delico is 75% owned by Att Africa (Atterbury)and25%ownedbyGhanaian businessmen. For Atterbury, Ghana is the ideal location in West Africa. Political stability, lower costs and the ease of doing business have meant that retail investors can plan for the long term and

use the country as a growth hub, attracting customers from across the region. Malls, however, have a long way to go to attract more consumer spending. “Currently, the formal retail sector in Ghana is very limited. Yes, retail is huge, but the biggest component of that industryisinformaltrade,” explains Moses Luri, head of retail leasing at property manager Broll Ghana.

the shiny new malls are aimed at middle-class Ghanaians, but also attract big spenders from Nigeria

GHANAIAN SHOPPING HABITS IN EVOLUTION According to a recent academic study, most Ghanaians still do their weekly shop at street markets (69%) or from street vendors (26%), while 17% now shop in supermarkets SOURCE: MENG ET AL (2014)

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17%

26%

69%

oil Lukoil announces a potential new oil and gas find at its Ghana block

“People still go to the markets to shop. People still prefer to buy their essentials from a corner shop next to their homes.” Though the formal retail market in Ghana is visibly and rapidly expanding, statistics for the sector remain anecdotal. Household consumption levels have jumped hugely in the past 10 years. They reached $28.4bn last year, compared with $6.2bn in 2003. The World Bank put the country’s per capita gross domestic product for 2013 at $1,850, compared with $426 in 2004. Investors take long vIew

The usual suspects – the growing middle classes – have been instrumental in the growth of the formal retail market. The one-stop-shop malls provide an easy alternative to the often difficult-to-manoeuvre open markets in Accra.

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companies & markets | business

Ghana as other markets across the continent, Venter is confident that the country’s population is large enough to support the industry. “We have Fifth Avenue, where you can go in and buy a Mont Blanc pen for 10,000 cedi [$2,600],” says Venter.

RAfAelyAGhoBZADeh/hAnslucAs.com

Photo12/AlAmy

big malls, big spending

Ghana’s government sought the intervention of the International Monetary Fund in August to help it fight large budget deficits and a depreciating currency, but its current economic crisis has not deterred investors. West Hills Mall has signed up 65 shops, not including restaurants and the two anchor supermarkets, ShopRite andPalace.Withthemall’stenancy mix, Venter says the group hopes to cater for the aspirational and high-middle-income customers with shops like Mr Price, Mango, Woolworths and Edgars. Atterbury also has its eyes set on the upmarket shopper. Though income levels are not as high in

$65 Average price per square metre for retail space in Accra, according to Broll

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Despite the optimism, a recent study by market intelligence company Sagaci Research shows that Senegal and Nigeria are more desirable locations for international brands. Ghana does not feature in Sagaci’s top five target markets in sub-Saharan Africa, excluding South Africa. The study places Sea Plaza in Dakar second, with the Ikeja City Mall in Lagos and Polo Park third and fourth, respectively. South African companies are leading the way in retail development in Ghana regardless. Atterbury is from South Africa and Broll Ghana is a joint venture between Sandton-based Broll, the State Insurance Company and the SSNIT. Atterbury is developing other new sites in Ghana, including the $55m Achimota Mall and one in Kumasi costing $110m. The group will also spend $130m on the second phase of the Accra Mall, and all three sites will be complete by 2017. RMB Westport, an affiliate of Rand Merchant Bank, is financing the construction of the Junction Shopping Centre in Nungua, greater Accra. Interest is also coming in from the US, with real estate group BGI working on malls and other retail and leisure developments in Accra and Kumasi. Joe Ofori-Atta, director of Woolworths Ghana, says that now is the time for Ghana to capitalise on the investment in retail and create a sector to rival that of oil and gas. “Retail could also bring in a big scale of GDP contributions. You’re bringing in big malls, big players and big spending,” says Ofori-Atta. He explains that a growing retail sector could also open the way to

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a more competitive local manufacturing industry and could help Ghana to become a regional distribution centre. Retailers, particularly from Togo and Nigeria, regularly visit the country. “People use Accra Mall as a shopping hub, where they come and shop in huge quantities to go and stock their shops in Lomé or LamaKara or wherever,” says Olympio Agbodza, the Accra Mall centre manager for Broll Ghana. OforiAtta also points to several occasions where Nigerian shoppers have gone into Woolworths and spent tens of thousands of dollars in one visit. need for speed

Not wanting to miss out on the opportunity such spending presents, Ofori-Atta calls on the government to keep ahead of the game by providing a conducive environment for those in the retail industry. It can take up to 42 days to get imports through Ghana’s ports, according to the World Bank’s Doing Business report. “Policy-makers should acknowledge and understand the benefit of retail into our market. We’re going to have sustainable careers and a big expansion in the services industry,” says Ofori-Atta. West Africa still has some way to go if it is going to catch up with other regions across the continent. Itaccountsforjust12%ofshopping centres in Africa excluding South Africa according to the Sagaci report. But with at least 100,000m² of shopping centre space to be constructed within the next year, according to Broll, Ghana is making headway. Venter explains: “We are longterm investors, we do not try and squeeze the last drop of blood out of a deal. We always leave something on the table for everybody to share, so it’s a worthwhile investment for us and the retailers that come with us.” ● Billie Adwoa McTernan in Accra

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business | leaders

profile now translating this into a physical development plan, which it will then break down into smaller action plans so that construction can begin, says Adeya. government funding

DiAnA ngilA/nATiOn MEDiA grOup

Catherine Adeya Acting CEO, Konza Technopolis Development Authority, Kenya

Konza will create jobs for the whole region still in the planning, Konza Technology City holds the promise of a silicon Valley for east africa. The Africa Report talked to the woman at the tiller as it sets sail

he Kenyan government plans to create a ‘Silicon Savannah’ – an environment where technology companies, researchers and outsourcing firms can innovate and find solutions for African and globalproblems–andKonzaTechnology City is the centrepiece of that vision. Dr Catherine Adeya is the acting chief executive of the Konza Technopolis Development Authority (KTDA) and a driving force behind the government’s attempts to get infrastructure built and to attract investors. The KTDA operates under the authority of the information, com-

munications and technology ministry, which is spearheading the development of the 2,000ha site located 60km south of Nairobi. The government is seeking to capitalise on Kenya’s fast-growing economy, its booming technology sector and an increasingly well-educated and tech-savvy workforce. According to Adeya, the job prospects alone are something for Kenyans to be optimisticabout.“Weestimatethat there will be 16,675 jobs created in the next five to six years,” she says. “We also expect around 30,000 residents eventually to live here.” In 2012, the Kenyan government had international designers draw up a master plan. The KTDA is

InJune,theKTDAsignedacontract worth $25m with Tetra Tech, an American company that will oversee the first development phase. “In this current phase, there has been a lot of public funding. The Kenyan government is presently funding the basic infrastructure, but we would also like to see a certain amount of funding coming from public-private partnerships,” Adeya explains. She also says that one of the biggest challenges is convincing people just how much money is needed. The KTDA expects Konza City to cost KSh800bn ($9bn), with most of the money expected to come from the private sector. The project has its critics, too. Those opposing it say plans to build such a city will only serve the elite and exacerbate inequality. “Some of the criticisms so far havecomefromthewaytheproject has been marketed,” she says. “But many mistakenly see Konza as a real-estate project. They must understand that it’s a project connected primarily to technology. And it’s about having the creative space to understand that technology. I’ve also heard people saying things like: ‘Why are you spending this money on technology when there are people starving in Kenya?’ But that, I believe, is the old way of thinking about Africa. What people don’t realise is that you can actually move forward and solve those problems by utilising the technology at your fingertips,” she adds. In 2008, the government of President Mwai Kibaki and Prime Minister Raila Odinga launched Vision 2030, a development programme that aims to transform Kenya into a prosperous middle-income country. One of its primary goals is to achieve annual gross domestic product growth of 10%. Konza is part of Vision 2030 and ● ● ●

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BLOOMBERG TV AFRICA PRESENTS THE AFRICA ENERGY REPORT With an immense amount of wealth in energy and natural resources Africa is well positioned to reap the rewards. Yet in spite of natural reserves being discovered regularly, almost half the region faces an energy crisis. The Africa Energy Report investigates what Africa can do to harness its full potential and confronts the challenges of meeting the demands of a growing economy and translating this wealth into prosperity for its people. ON BLOOMBERG TV AT 7:00 PM (GMT) ON TUESDAY, 7:30 PM (GMT) ON THURSDAY, 7:00 PM (GMT) ON SATURDAY AND SUNDAY ACROSS AFRICA ON DSTV CHANNEL 411, STARTIMES CHANNEL 328, AND ONLINE AT BLOOMBERGTVAFRICA.COM

business | leaders

● ● ● Adeya says that its success should encourage smart thinking about technology in Kenya and across the East African region.

how long to build a city?

But many people have been asking when the words will give way to bricks and mortar. “It’s a difficult question because it’s the equivalent of asking how long does it take to build London or Nairobi? There is no immediate answer,” Adeya says. “With the first 400 acres we should be able to do something in the next five years. It will eventually grow organically, but in terms of a full build-up, I would give it around 20 years. These are just estimates, of course, but we have a four-phase plan over the two decades.” President Kibaki broke ground at Konza in January 2013, but its development has been delayed by land demarcation and other problems. Without a firm time frame to reassure investors, some com-

a career in ict 1998 PhD in information and development from Edinburgh Napier University 1998-2002 Research fellow at the UN University 2003-2011 Independent ICT consultant 2012 Joined the information and communication ministry 2013 Acting chief executive of the KTDA

panies have turned to rival projects in other African countries. Nonetheless, Kenya’s Equity Bank announced in late May that it will build a data centre at Konza City. Adeya says that working for the information and communications ministry has given her a greater appreciation of the different ways of thinking between the public and private sectors. She explains: “I’ve only been in government about a year and a half. Before that, I worked in the private sector. But working in the government has helped me a lot with this project for Konza City. I feel I’ve brought an injection of private sector thinking into the environment. In the private sector, people tend to want to get things done very quickly, but working in the Kenyan government I’ve realised that you have to be a bit patient. And I’m just still trying to understand some of the bureaucracy.” Havingworkedabroadandstudied in Britain and the US, Adeya

describes Konza City as the perfect opportunity to entice Kenyans back to the country. “Many of the Kenyan diaspora want to come home. And the older they get, the more they want to be able to share some of the qualities that they have learned out in the West. But they need the right kind of jobs, and that is why Konza is so attractive to them.” Adeya says the project will create jobs for the East African region too. “I can see Konza creating jobs not only for Kenyans, but also for people from surrounding countries. Because Konza is not just for Kenya, it’s also for people who want to have striking distance from home.It’ssoeasytocommutefrom Kenya. It is right at the centre of Africa, and it has really good connectivity.” She remains an eternal optimist. “Konza City really is a field of dreams,” she says. “And like any field of dreams, if you build it, people will come.” ● Interview by J. P. O’Malley

The Corporate Council on Africa

6TH U.S.-AFRICA INFRASTRUCTURE CONFERENCE

WHO SHOULD ATTEND:

U.S. and African businesses involved in infrastructure, power, water and ICT Financiers looking for bankable projects ■ U.S. and African government officials in the infrastructure sector ■ Individuals looking for networking opportunities, including one-on-one meetings with government officials ■ ■

U.S.-Africa Infrastructure Conference

BUILDING RESILIENT CITIES OCTOBER 7-9, 2014 | WASHINGTON, DC

business | finance

hannibal

Private equity

A taste for chicken Funds are investing in businesses that can meet the rising demand for poultry south of the Sahara

s Africans spend more on chickens and eggs, the poultry sector is attracting more private equity investors. 8 Miles, an investment group that includes former star Bob Geldof, bought a stake in Uganda’s market leader in the production of dayold chicks, Biyinzika Poultry International, in June. Injaro, a fund that focuses on West African agribusiness, invested in the Ivorian poultry inputs distributor Proveto inMay2013beforeclosingits$49m West African agribusiness fund. Acumen, a ‘patient capital’ impact investment charity, injected money into Mekelle Farms, Ethiopia’s own market leader in chicks, in March. The company says new chicken breeds and increased egg production will help to meet the country’s food needs. The Meat Atlas, published by the Heinrich Böll Foundation, points to some major market trends. In South Africa, there was an average consumption of 37.8kg of chicken per person in 2012; that figure could rise to nearly 50kg per person by 2020. Other trends are less encouraging for the bean counters. European dumping of frozen chicken wings has devastated local producers. “The wholesale prices of imported chicken pieces are so low in Accra or Monrovia that they would cover only half their production costs back in Europe,” says the report. That has not discouraged all local investors. The $10m Southern Chickens Processing Plant in Siavonga, Zambia started operations in June with a capacity of 2,000 chickens per hour. ● Nicholas Norbrook

Lessons from Washington and Beijing in Africa It does not matter how many conferences President Barack obama holds in Washington with african leaders, the optics are not great. Clamour and controversy surround the planned $22m 25-bed field hospital to be financed by the Us in ebola-hit Liberia. a Us official said that the unit will only be for foreign health workers. on top of that, obama has just held up the Us engagement in somalia – hardly a resounding success – as a model for tackling Islamic state militants in Iraq and syria. How much happier are the Chinese in their relationships in africa, with Beijing promising just trade and no messy strings attached?

Deals and discord tHIngs are not aLWays easy. sinopec has threatened to pull out of the construction of a gas plant in ghana, claiming the government has not kept its side of the bargain. the government and the China development Bank have also fallen out over the terms of a $3bn deal. Investments in africa are becoming more tightly appraised by Beijing. In august, the Chadian government revoked licences awarded to the China national Petroleum Corporation after the company dumped crude oil in pits, violating environmental standards. the fighting in south sudan, where asian companies have many investments in the oil sector, has led China to take a larger diplomatic role – one that has yet to bear fruit.

Business is business InCreasIngLy, China is taking a stance on particular countries. Whereas Beijing had hitherto been gung-ho in support of Zimbabwe’s President robert mugabe, it has been taking a harder line on african debtors. though mugabe and China’s President Xi Jinping praise each other effusively, Zimbabwe’s finance minister Patrick Chinamasa admitted in september that Beijing had forced Harare to “cough up” $180m in loan repayments. China has lent more than $1bn to Zimbabwe over the past decade and says that it will now help the government to set up special economic zones.

From one factory to another BUt tHe fUtUre sUreLy LIes in the myriad smaller relationships being created by Chinese mid-sized corporates keen to find new markets and low labour costs in africa. one of the active proponents of this is former World Bank chief economist Justin Lin, who is now a professor at Peking University. He has been leading delegations of business to senegal, rwanda and ethiopia, mainly from the textiles and shoe-making sectors, to introduce them to african governments keen to give them incentives to set up shop. C&H garments and the rwanda development Board signed a memorandum of understanding in July. In morocco shanghai electric announced in september that it plans to invest more than $2bn in solar energy projects, with five power plants of 3.5gW each on the drawing board. ● the africa report

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dossier sustainable development

Fairtrade is no Fairtrade is not having a major impact on poverty levels in Ghana, but it is helping cocoa workers to send their children to school. Meanwhile, producers of other crops are calling for the expansion of Fairtrade markets for the regular income and social benefits they can deliver By Joan Nimarkoh in Accra

rosper Tamakloe has worked as a farmer on a Fairtrade banana plantation in the Volta Region for 18 years and admits that he can get higher wages working for a non-Fairtrade company. “I am happy to work on a Fairtrade plantation since my children have had the chance to further their education. My eldest son has already received his fees to go to senior secondary school,” he tells The Africa Report. Prosper earns around $45 a month, $10 less than some producers on the neighbouring private farm. Prosper says that non-Fairtrade

firms can have lower running costs that allow them to channel more into wages. Fairtrade plantations can have higher costs because they have to spend to maintain their certification. Fairtrade certification works like this: in addition to the minimum guaranteed price that Fairtrade offers, it provides a premium that is used for projects chosen by the community of farmers, be it drinking water wells, building schools or investment in production. The Fairtrade label – managed by the United Kingdom-based Fairtrade Foundation – has long been part of the trade justice debate for

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Through Fairtrade, Kuapa Kokoo cooperative aims to empower women farmers

poor farmers across the globe but has lately been attracting more criticism. From cotton to cocoa, Africa’s farmers and rural labourers have actively engaged in various Fairtrade schemes with promises of significantly higher returns than trading on the open market. However, research from London’s School of Oriental and African Studies published in May found evidence that Fairtrade labourers were often worse off that those working elsewhere and that social welfare services paid for by Fairtrade premiums were not universally accessible to the beneficiary communities. the africa report

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¢4

Fairtrade premium paid for each 64kg sack of cocoa sold

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Ghana’s Kuapa Kokoo (KK) - a cocoa farmers’ cooperative – has been engaged in the Fairtrade market since 1995. A 2013 report on the Fairtrade cocoa trade in Ghana that covered the period 2009 to 2013 and was financed by Britain’s Department for International Development found “the impacts are limited, and it does not seem that KK cocoa farming households are escaping poverty or moving up a wealth ladder as a result of Fairtrade certification.” It blamed structural problems in the cocoa industry, the fact that the Fairtrade-guaranteed minimum price was lower than the

wages remain low

Aubrey WAde/PANOS-reA

silver bullet

government’s minimum price and problems of transparency and accountability for the lack of benefit to individual farmers. When the market offers a price higher than the Fairtrade minimum, Fairtrade producers earn the market price. KK was established in 1993 as a response to market liberalisation and represents more than 85,000 farmers. The cooperative currently supplies about 40% of its members’ produce onto the Fairtrade market via the Ghana Cocoa Board (Cocobod). The Fairtrade premium, in contrast to its guaranteed price, now stands at ¢4 ($1.11) a bag above what farmers would otherwise receive from Cocobod, which is ¢212 per 64kg bag. KK points to the schools being built in Fairtrade areas as one of the benefits of the Fairtrade premium, and the educational investments are restricted to members of producer organisations that represent farmers on Fairtrade farms. In general, Ghana’s agricultural workers face difficult conditions marked by low wages and few opportunities for social protection or insurance provision. When Fairtrade pays more than the traditional market for other crops, the increase is usually modest, says Edward Kareweh, deputy general secretary of the Ghana Agricultural Workers’ Union (GAWU), the leading trade union for agriculture. He says that Fairtrade typically offers farmers an income only marginally above the minimum wage. Ghana is a leading supplier to Fairtrade cocoa markets – KK represented more than a quarter of the global Fairtrade cocoa market in the 2008/2009 season – and is one of the largest overall cocoa producers in the world. From 2009 to 2013 the Ghanaian cooperative sold an average of just 7% of its production on the Fairtrade market, according to the DfID-financed report. After the 2008/2009 ● ● ●

dossier | sustainable development

ThorsTen FUTh/LAIF-reA

season, KK’s Fairtrade production rose rapidly, increasing from 6,750tn in that season to 29,175tn in the 2011/2012 harvest – but Fairtrade still accounted for just 3.3% of Ghana’s 878,524tn production. The UK’s Cadbury company made a commitment in 2009 to purchase from Fairtrade sources, significantly increasing KK’s market share. Fairtrade also signed a new deal in January 2014 with German, Japanese and Swiss companies to expand its international reach. KK cites competition from other African markets as one of the reasons for its small share of the Fairtrade market prior to 2013. Despite Fairtrade’s limited contribution to fighting poverty, KK’s managersremainoptimisticabout ●●●

the future of Fairtrade cocoa. “As long as Fairtrade can continue to pay above the government price, we are happy continue working with them. The issue is whether we get an adequate share of the market,” says Francis Frimpong, the cooperative’s communications officer. Frimpong says that KK is considering opportunities with other international companies outside of Fairtrade as part of its long-term business strategy.

Kuapa Kokoo’s managers say Fairtrade brings benefits but getting a fair share of the global market is problematic

negotiation hurdles

The potential for Fairtrade to make a difference to farmers is evident in the Northern and Brong Ahafo regions, where the shea nut sector is experiencing high demand. Small-scale labourers,

the majority of whom are women, earn a meagre income on the free market. One kilo of unprocessed shea nut is sold for only ¢2 in local markets. Less than 5% of shea nut workers have the opportunity to sell their produce to companies that purchase Fairtrade goods such as The Body Shop. Oxfam Ghana says that more needs to be done to build the capacity of women labourers to negotiate collectively a fairer market price and take advantage of potentially lucrative export markets. Prospects for equitable trade measures lie in the capacity of producers to negotiate better conditions and wider access to markets. Strengthening producer organisations can provide a buffer against the vagaries of the global market, although low rural literacy and organisational capacity, limited experience in market negotiation and policy preference towards big agribusiness mean that Fairtrade producers face many obstacles. GAWU’s Kareweh says there has been some disappointment in the lack of impact Fairtrade has had on working conditions, which remain similar to those on private farms. He says there is a lack of partnership between Fairtrade outfits and agricultural labour unions at a policy and strategic level. Their interaction has been ad hoc, he adds. This can have an impact on Fairtrade producers’ ability to influence regulation around working conditions, which would be difficult to enact without policy support. ●

Fairtrade Focuses on aFrican Farmers For Fairtrade to make a major difference, its involvement in strengthening grassroots rural organisations is key, alongside a concerted effort to raise agricultural wages. africa plays a central role in Fairtrade’s success. in 2013, 61% of all farmers and labourers working under Fairtrade provisions lived in africa according to a Fairtrade report.

roughly 30% of global Fairtrade premiums are provided to african producers, but the prominence of the cocoa sector means that two thirds of those premiums are channelled to Ghana and kenya alone. Within africa, Fairtrade products are marketed in only two countries – South africa and kenya. Fairtrade africa was established in

2005 as the african Fairtrade Network (aFN), an affiliate of the Fairtrade Foundation based in the Uk. there were 164 african certified producer organisations in 2006, which has grown to 300 today. the entire Fairtrade enterprise covers an estimated 700,000 african farmers and workers. kenya is the leader in terms of workers in the Fairtrade domain, with 256,8000 in

2013, followed by tanzania with 157,400. in 2012, there were 82 certified labour and producer organisations in kenya, 38 in South africa and 55 in Côte d’ivoire. Fairtrade-certified products include bananas, cocoa, coffee, cotton, cut flowers, pineapples and tea. african producer organisations received $25.5m from Fairtrade premiums in 2013. ● J. N.

the africa report

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dossier | sustainable development

opInIon

General Sir Nick Parker

Senior associate fellow at the Royal United Services Institute in London and former commander of land forces for the British Army

M. CARdy/Getty

Human security is the heart of sustainable growth

t is not possible to promote development without a foundation of physical security. But so often this is allowed to deteriorate to a level where it has to be treated as a priority at the expense of all other activity. My personal experience in the United Kingdom’s armed forces over the past 15 turbulent years has reinforced a conviction that last-minute intervention in the security affairs of fragile states, by coalitions made up from largely Western democracies, is not the most effective way to generate sustainable human security. Human security is made up of seven components: economic, food, health, environmental, personal, community and political security. There is an urgent requirement to bring the host nation, the private sector, development agencies and local partners together to address all the components of human security in an integrated and sustainable manner. Africa, while it has huge development potential, is an obvious target for a new approach to addressing security. Recent analysis from the Blavatnik School of Government at Oxford University tackles the nexus between security, economic growth and social development. The initial focus of this new approach to security problems is on a ‘gateway’ city – such as Accra or Mombasa – and its surrounding corridors. The city has the potential to apply considerable and growing influence over a wide area. Importantly, the new approach aims to harness and amplify the power of the private sector and to integrate the efforts of the private, public and social sectors, always remaining aligned with the strategic goals of the local and national governments. The framework links directly to a new research programme based out of Oxford University. This will ensure that decision-making is based on the best evidence and analysis, and that there will be a culture of learning and adaptation. So why is this new approach so important? Western militaries are re-evaluating their capabilities in the light of increased financial pressure and their experience in Iraq and Afghanistan. Recent conflicts highlight three

fundamental weaknesses: our response is too late, it is significantly constrained by the domestic considerations of contributing nations and it is usually packaged in silos that do not collaborate effectively either with each other or with the host nation. The early stages of intervention are currently largely constructed around donor aid, delivered by governments or their partners, and based on economic or social, rather than security, needs. There is a requirement to adopt a much more collaborative approach that will address all the human security requirements concurrently. The military has learnt a great deal in Iraq and Afghanistan and has developed planning techniques that are directly transferable into this complex multi-agency environment. While it should not lead, it has expertise that can contribute to successful outcomes. Current practice appears to delay intervention until the security situation has deteriorated to the extent that it is too dangerous to take a collaborative approach. International interest in fragile states may be driven by a sense that ‘something must be done’ or a perception that the instability is generating a threat back in the homeland. This is a recipe for confusion, short-termism and a lack of sustained and coherent cooperation. As international interest wanes, enormous expectations are then placed on the host government to sustain reconstruction across all seven lines of human security. And this at a time when this government may be aggrieved at years of demands from a coalition that might have been seen as culturally insensitive, when the international community will feel that is has invested enough and when internal governance is probably fragile. Future security models must give an absolute priority to the ownership of the solution by the local government. They must also integrate and exploit the power of the private sector, which remains the principal driver of economic growth. ● the africa report

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Meet the new generation of African entrepreneurs finding ingenious ways to turn their ideas into profitable business. Weekly, only on CNN International.

In association with:

cnn.com/africanstartup

day in the life

Extraordinary storiEs of ordinary pEoplE

Julia SeStier for tar

cracking the code Anele Khoza, 25, moved to Johannesburg from Zimbabwe. At work, he codes. After hours, he takes photos around the city and his home, a neighbourhood known locally as ‘Little Africa’

was born in Bulawayo and moved here seven years ago, I think. It’s hard to remember exactly. In Zim, the economy wasn’t stable and the teachers were always on strike. My brothers had moved here before me, so it made sense to come here too – although now my brothers live in the township and I live in the city. I’m far more complicated than they are. We are completely different. I think I’d just cause them stress if I lived with them. Initially, I was working in a camera shop warehouse. Then equipment started to go missing, and they fired a whole bunch of workers. I didn’t steal anything, of course, so I fought legally to get my job back. Then – gosh, they got me – they told me I could come back and work in the ‘service department’. I agreed. It turns out, the service department was actually washing customers’ cars. It was terrible, especially in winter. Luckily, an ex-colleague got me a job at a digital agency. Despite the fact that I had a bursary to study brand communication, my new boss convinced me that I’d learn more if I was working. So, I didn’t go to university. I started working on coding, web development and graphic design. Now people who went to school are asking me

questions. Breaking things apart and rebuilding them is the best part of what I do. I like to see the back end of everything, I want to see how it works, what is going on in the background that makes it cool. I live in a suburb called Yeoville, and it’s great. It’s filled with foreigners, as if the whole of Africa lives there. It’s always pumping, and it’s filled with different music and different smells of food.

there's a place for you here

The people aren’t always nice. There’s still tension between South Africans and African foreigners. Cultural stereotyping still exists. I haven’t experienced xenophobia directly. Most people don’t know where I’m from because I don’t speak to them that much. I don’t really like talking. I have security issues, I think. Although I haven’t encountered crime here, other people’s stories make me feel scared. When I’m not working, I’m taking photos for Instagram, mostly. In central Johannesburg there are so many things to photograph. There’s an old building nearby that looks like it burned down. From the inside, there’s a beautiful view of the Joburg skyline. I don’t know how many times I’ve photographed that skyline. Look, life in Joburg can be hard, and it’s fast paced. But if you’re confident in who you are, and if you want to pursue something you’re passionate about, there’s a place for you here. ● Kim Garner in Johannesburg the africa report

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