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olusegun obasanjo “God is a Nigerian! We have survived much worse”

Seizing African opportunity

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N ° 68 • M A R C H 2015

KENYA Eastleigh, community under siege

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Which way forward? With elections now balanced on a knife-edge, politicians, generals and businesses take their positions for the coming titanic struggle

NIGERIA Which way forward?

Seizing African opportunity

Addis

N ° 68 • M A R C H 2015

BALEKE MBETE “African leaders just want an easy ride”

Seizing African opportunity

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Nigeria Elections

OLUSEGUN OBASANJO “God is a Nigerian! We have survived much worse”

N ° 68 • M A R C H 2015

PUBLIC-PRIVATE

millionaires’ club

contents

INVESTING Senegal 2015

In the footsteps of Asian Tigers Strong states are helping to push Africa’s new champions into global markets

ETHIOPIA SPECIAL

Forget famine and drought, Ethiopia today is producing tycoons in finance, trade and real estate SOUTHERN AFRICA EDITION

GROUPE JEUNE AFRIQUE EAST AFRICA EDITION

The AfricA reporT # 68 - mArch 2015

MONTHLY • N° 68 • MARCH 2015

GROUPE JEUNE AFRIQUE INTERNATIONAL EDITION

GROUPE JEUNE AFRIQUE

Doing Business in Africa

FREE with this issue: an invesTinG guide on senegal. not to be sold separately.

Business

4 Editorial Nigeria’s high-tension vote

68 thE africa cEo foruM Seizing African opportunity The issues that businesspeople are grappling with today in Africa, to mark the third Africa CEO Forum on 16-17 March

6 lEttErs cover crediTs: inTernATionAl: BUlenT Kilic/Afp; isAAc emoKpAe @ iep/YoUTopiA; mArK chilvers for TAr - soUThern: Boris AUsTin/GeTTY imAGes; issoUf sAnoGo/Afp - eAsT AfricA: foToliA; mArK chilvers for TAr

8 thE QuEstion

Briefing 10 signposts 12 intErnational 14 opinion Nicholas Norbrook, managing editor, The Africa Report 16 pEoplE

74 Morocco The CGI’s house of cards crumbles

76 lEadErs Christian de Faria, Airtel Africa CEO

18 calEndar

frontLine 20 nigEria Which way forward? Talk of new election delays and interim governments leaves would-be voters increasingly restive

34 south africa With all due respect... Televised battles in parliament open a new chapter in politics

80 Gas-fired development Mozambique is powering ahead with a $40bn liquefied natural gas project, ahead of first production in the early 2020s 84 stEEl South Africa and Egypt forge ahead, Nigeria dithers

86 intErviEw Andrew Alli, CEO of the Africa Finance Corporation

art & Life

40 opinion Raymond Suttner, activist and scholar

88 innovation Better by design Ingenious designers are finding solutions to Africa’s spatial, mobility and energy problems

42 kEnya After the pain, the politics 46 drc Electoral gauntlet

92 briEfs Johannesburg’s Norwood district gets a makeover; Film-maker Tala Hadid

48 ghana The vote must go on 48 MozaMbiQuE Fractured family

94 lifEstylE Behind the scenes with actress Pierra Makena

49 anansi

94 trEndhuntEr Kampala’s lust for laughter

ethiopia focus 51 Ethiopia Zeal and progress Leaps forward are balanced by frustration at a sometimes heavy-handed government the africa report

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78 hannibal infrastructurE dossiEr

24 opinion A. Igoni Barrett, author

poLitics

78 Ecobank Tanoh wins cases in Côte d’Ivoire and Togo

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96 travEl Cameroon, Africa in miniature 98 day in thE lifE Daniel Nwana, traffic cop

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

Nigeria’s high-tension vote

he difference between serious concern and panic mongering is getting blurred as Nigeria’s political climate swings from jubilation at the prospect of a credible election and political competition to doom-laden forecasts of drawn-out disputes and regional clashes. The reality of a bloody insurgency in the northeast spilling over national borders and the shock waves caused by crashing oil prices further jangle the nerves. Political tensions are evidently rising after the postponement of the elections to 28 March. In Abuja these days, politicians on all sides preface their remarks with a reference to a ‘dangerous time’ for the country. A banker and strong supporter of President Goodluck Jonathan laments that neither the ruling People’s Democratic Party nor the opposition All Progressives Congress have shown a will to accept defeat at all, let alone gracefully. “We don’t have a good record of managing close election results,” he says. Nigeria’s most threatening crises have been resolved by the political, military and business elites stitching together backroom deals. There seems little scope for compromise between backers of Jonathan – the first president from the Niger Delta, who started out with a serious agenda to reform power and agriculture – and his challenger Muhammadu Buhari, a tough former military leader whose anti-corruption record has made him wildly popular in the north and parts of the south-west. Yet following claims last year by Lamido Sanusi, the former central bank governor, that the state oil company had failed to

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

transfer more than $20bn to the government’s accounts, it is the determination of Buhari – himself a former oil minister – to promote accountability that boosts his poll ratings. Now, his message to worried politicians and businesspeople is that he will focus on the future and not spend government time on probes into Nigeria’s multitudinous historic scandals. The big risks will not stop on election day or even at the presidential inauguration due on 29 May. Reforms in the power and oil and gas sectors have nearly ground to a halt and are slowing efforts to The big diversify the economy. Most of all, the money risks will not tree is bare. stop on That is prompting election day, some bold thinking among some business and that leaders and politicians. is prompting If the new government were to privatise the some bold state oil corporation, thinking it could raise well in excess of $100bn – the funds so badly needed to fix the power sector and finance a network of gas pipelines across the country. This would slash energy prices and improve provision. Such a radical move could help to fight the political patronage and commercial corruption that has undermined the industry and distorted Nigerian politics. For now, such radicalism may look problematic – cutting across vested interests as it raises billions of much-needed cash for government. But for whoever holds the government reins on 1 June, high-tension politics and empty state coffers could hold by far the bigger risk. ●

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 a s s o Ci at e e d i t o r MArshAll VAn VAlen 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 s PArselelO KAntAi (eAst AFricA) crystAl OrdersOn (sOuthern AFricA) tOlu OGunlesi (West AFricA) s ub - e d i t o r AlisOn culliFOrd P r o o f r e a d i nG KAthleen GrAy a rt d i r e Ct o r MArc trensOn desiGn VAlérie OliVier christOPhe chAuVin P r o d uCt i o n PhiliPPe MArtin christiAn KAsOnGO r e s e a r Ch sylVie FOurnier P ho t o G r a P hy clAire VAtteBled o nl i ne 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 ‑ $60 ‑ £35 tO Order Online: www.theafricareportstore.com d i f Co m internAtiOnAl AdVertisinG And cOMMunicAtiOn AGency 57‑Bis, rue d’Auteuil 75016 PAris ‑ FrAnce tel: (33) 1 44 30 19‑60 – Fax: (33) 1 44 30 18 34 advertising@theafricareport.com a d ve rt i s i nG d i r e Ct o r nAthAlie Guillery With JeAnny chABOn r e G i o na l m a na G e r s FAdOuA yAqOBi liliA BenAceur elOdie BOussOnniere us r e P r e s e ntati ve AzizA AlBOu a.albou@groupeja.com

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africans in china: tools for integration

TOP 500 companies

EXCLUSIVE

RANKING

AFRICA-ASIA Go East, young man!

w w w.t h eafri car ep or t .c om

RWANDA Kagame faced with stark choices

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any Africans in China are stigmatised Nigeria The men behind at work ‘Africa-Asia: Go East, young man!’ the money [TAR67 Feb 2015], but this was not my experience. I worked in a Taiwanese firm and my colleagues were always welcoming and supportive. I now teach African studies and believe that negative media exposure plays a major part in people’s perception of Africans in China. It is important to understand the culture and make an effort to learn Mandarin. Living and working in Asia is a very rich experience, both professionally and personally, with many opportunities for an MBA graduate like me. A few black expats from Africa have distinguished themselves in China, whether in academia, finance, or even consultancy. These people are aware of the large potential of development of the African continent, and I am happy to be a part of it. Faustino Hyacintha Olaitan, The University of Hong Kong, via email The inside story on the shadowy campaign funders who spend billions on their candidate in the hope of post-electoral rewards

GROUPE JEUNE AFRIQUE

INTERNATIONAL & WEST AFRICA EDITION

the commodity party’s over

declines to fully sober up. That has now happened. So for the next few years the nationalist rhetoric of increased taxes, ownership and royalties should tone down significantly, at least until the ‘next’ bull run.

supply which have now evaporated [‘Commodities’, TAR66 Dec/Jan 2015]. Lower oil prices should be positive for the world economy. Purchasing power will be transferred from oil producers to consumers, who will spend more. Admittedly, there will be some big losers – many in Africa – but the slump in oil prices is potentially good news for producers of other commodities. Costs will be lower, particularly in mining and agriculture. So while oil economies might struggle, other commodity producers could actually benefit.

Julian Jessop Chief Global Economist & Head of Commodities Research, Capital Economics Ltd. via email

where are the african lobbyists?

In this world where notoriety, contacts and influence are major Nothing sobers a person, political assets, no African consultancy firm yet party or whole country up quicker than seems capable of fulfilling the request a bucket of ice-cold water poured over of their clients [‘Nightmare on K Street’, their head. For commodity-producing Peter Major TAR65 Nov 2014]. If Africa produced countries in Africa reality hit in 2014 Mining Consultant, Cadiz Corporate more ethical politicians, once out in the form of rapid and massive price Solutions, via email of office they could easily start another decreases [‘A new landscape’, TAR66 career as advisers, successful lobbyists Dec/Jan 2015]. Few of the senior in the footsteps of former prime people in African governments were looking on the bright minister Tony Blair. Excellencies please in office in 1992-2002. Most have been take note! We need an African way side of the oil slump in power from 2002 until now, when of lobbying that truly serves the African commodities went up every year While most commodities had been agenda and the Africans themselves. at compound rates of 20 to 25% Lionel Kpenou-Chobli weak for years, partly due to the per annum! It always takes the majority slowdown in China, oil was the outlier, Lobbying & Public Affairs Manager, West of partygoers a couple full years of price propped up by fears over Middle East & Central Africa, Optimum Consulting 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: TM HUDU ENTERPRISE, T. M. Hudu, +233 (0)209 007 620, +233 (0)247 584 290, tmhuduenterprise@gmail.com – kenya: NATION MEDIA GROUP, Antony Mutunga,+254 (0)72 15 19734, amutunga@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 • SUBSCRIPTIONS: RAMSAy MEDIA, Karin Mulder, +27 860 100 204, subs@ramsaymedia.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

ADVERTISERS’ INDEX AIR France KLM p 2; NECOTRANS p 5; HEINEKEN p 7; STANDARD BANK p 9; LIEBHERR GROUP p 13; AUTOREDO FZE p 17; MCB GROUP p 19; AFRICA CONFIDENTIAL p 28; DRC PRIME MINISTER’S OFFICE p 29; VODACOM BUSINESS p 37; C2I COMMERCE EASYHALLS p 39; CALDAS ENGINEERING p 39; MIX TELEMATICS p 39; RWANDA DEVELOPMENT BOARD p 45; BLOOMBERG TV AFRICA p 47; ETHIOPIAN AIRLINES p 50; BELCASH p 55; HAILE RESORT p 57; AFRICAN UNION p 59; TAR SUBSCRIPTION p 61; EMRC AGRIBUSINESS p 63; GRATUS INTERNATIONAL p 63; DJIBOUTI PORTS & FREE ZONES AUTHORITY p 66; THE AFRICA CEO FORUM p 71; ADEXEN p 73; KAPPAFRIK GROUP p 73; IMF 2015 SPRING MEETINGS p 77; COOL - WAZOBIA p 77; DDP OUTDOOR p 79; EAST AFRICA COM p 79; TVC NEWS p 83; AFSIC p 87; AFRICA GRI 2015 p 87; TAR DIGITAL APPS p 95; AFRICAN UTILITY WEEK p 95; EKO HOTELS p 97; CNN p 99; ZEMEN BANK p 100 the africa report

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I am A. Kabato Bentu Barley Farmer Beriti Ethiopia

We have learnt that Africa can help us. GROWING TOGETHER.

EINEKEN has had a close relationship with Africa for more than one hundred years. In this time, weâ&#x20AC;&#x2122;ve learnt the importance of partnering for growth. To this end, we are committed to sourcing 60% of our agricultural raw materials from farmers in Africa by 2020. Today, collaborative projects are flourishing in the Democratic Republic of Congo (DRC), Nigeria, Sierra-Leone, Egypt, Rwanda, Burundi, South Africa and Ethiopia. We launched our barley project in Ethiopia in 2013 together with the Dutch Government, our NGO partner Eucord, Ethiopiaâ&#x20AC;&#x2122;s Agricultural Transformation Agency (ATA) and the Ethiopian Institute of Agricultural Research (EIAR). An extensive programme has been put in place: from testing, then selecting the most appropriate barley varieties for the

Ethiopian soil and climate to training smallholder barley farmers. Today, improved seeds are already being used to deliver better quality barley, higher yields and increased household income. So far more than 6,000 farmers have reaped the benefits of our project; we aim to reach 20,000 by 2017. This successful collaboration between community and our company is also beneficial for us. It is helping to create a sustainable source of raw materials, a shorter supply chain, a reduction in transport and importation costs and a lower carbon footprint. We are truly growing together. Many people still believe that Africa needs help. We have learnt that Africa can help us.

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

Norway has recently signed a multi-million-dollar deal with Liberia to stop logging in order to protect the environment, but what will be the impact of such deals on the communities who rely on the industry for their livelihood?

Does logging help poor and developing countries?

President, Liberia Timber Association

Logging helps the poor and in Liberia it has been instrumental in our economic growth. Logging in Liberia has contributed more than 10% of GDP and has been a catalyst for development. Prior to the crisis in Liberia the timber industry created more than 25,000 jobs and was the driving force behind the construction of more than 60% of the country’s roads, enabling rural communities to better access healthcare, education and trade. Almost all of the rural economy was spurred by the timber industry. Since the new logging restrictions, most of the rural economy has ceased, impoverishing the rural areas. When logging is done in a sustainable way it provides a long-term support for development in rural communities. Today, around 48% of Liberia’s landmass is forest, totalling more than 43% of West Africa’s forest. Liberia has always – except during the crisis period – practised sustainable logging as introduced by the German Technical Mission advisory team to Liberia Forestry as early as the late 1950s and early 1960s. The country has by law set aside 30% of the forest area for protection and the rest for various economic uses including commercial logging. However, it has not achieved this owing to taxation and a restrictive legal regime. ●

No JonatHan Gant Senior campaigner, Global Witness

No, it should be stopped because we don’t need more desertification in Africa. Majed Mohmed Yes! The $150 million Norway deal is good for a country such as Liberia but thousands of locals are going to suffer. However, prevention is better than cure and the government has plans for those local lumberers. Peter K. Barya

Yes Hon. RudolpH J. MeRab

your views:

What poor countries have in order to compete with other rich countries are their natural resources. Therefore if one loses their natural ecosystem and environment, reversing it will be very difficult. Therefore it is simpler to maintain [the forests] than to try and recover it back once they are lost. Ephaso Solanbu

Working in Liberia, our experience has been that logging by large companies who export timber to international markets has benefited neither the people who own the forests nor the country as a whole. During Liberia’s 1989-2003 civil crisis, logging companies were linked to arms traders and provided money directly to former President Charles Taylor’s war efforts, leading to UN sanctions. Since logging restarted after the war, companies have failed to pay tens of millions of dollars in taxes that they owe to the government and to communities living in concession areas. This, combined with companies’ persistent determination to break Liberia’s laws, has sorely undermined efforts by President Ellen Johnson Sirleaf to rebuild the country. This is not to say that all logging is bad. Global Witness believes that the people who live in the forest – the people who own the forest – have the right to manage the forest. The 2014 Liberian government’s US$150m partnership agreement with Norway is very encouraging. If Liberia is able to demonstrate that it has reduced its carbon emissions from decreased deforestation, Norway will provide up to US$150m – a remarkable sum. So while industrial logging may not be good for Liberia, the country’s new forest policy may well be. ●

No, it only leads to massive deforestation – at a cheaper price for developed countries. The elites are the biggest beneficiaries, getting richer from those deals, which mostly exclude local communities. After everything has been mowed down, where does the indigenous population get its livelihood? Sen Raphepele If the government really cared about the situation, then logging would be stopped. Gouled Ismail

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briefing

international 1

3 5

1 4

china

$690m

In February, China’s ICBC, the world’s largest bank by assets, bought 60% of the London-based global markets unit of South Africa’s Standard Bank. ICBC is pushing into the commodity market in an attempt to rival giants such as Citi and Goldman Sachs.

Yemen

Conflict out of control

DIMITRI MESSINIS/SIPA

Yemen is on the brink of civil war, warned the UN, as Sunni insurgents mounted a counterattack against the Shia Houthi rebels who seized control from the government earlier in February. Both sides took to the streets of the capital, Sana’a, to protest as several countries, including the US, Britain and Italy, closed their embassies and evacuated staff. The Houthis, said to be backed by predominantly Shia Iran, clashed with Sunni fighters from Al Qaeda in the Arabian Peninsula and local tribes. ●

Greece

Bailout blues

Amidst Greece’s financial problems, Alexis Tsipras and the anti-austerity Syriza party won the 25 January elections, setting up a conflict between Athens and the EU ahead of the expiry of Greece’s bailout package on 28 February. Prime Minister Tsipras and finance minister Yanis Varoufakis quickly launched a charm offensive to win European support for an easing of the Greek debt burden. It proved a failure and set the pro- and anti-austerity factions in Europe on a collision course. The standoff raised fears of a Greek exit from the euro and even the breakup of the euro currency union. Tsipras’s political credibility relies on him setting Greece on a new economic course, but February talks in Brussels between Greece and the troika of international lenders – the International Monetary Fund, European Central Bank and European Commission – struggled to agree a roadmap for the discussions. Tsipras lobbied for a bridging loan and an eventual renegotiation of the bailout terms. Germany, one of Greece’s principal creditors, insisted the debt must be repaid or the deadline extended and refused a renegotiation of terms. Despite the tough talking, analysts expect a deal will be struck. ● 3

Ukraine

Ceasefire with daggers drawn Russia and Ukraine agreed a new – and shaky – peace deal in the latest effort to halt the fighting in Ukraine’s east that has claimed more than 5,300 lives. However, the Minsk II plan agreed in February was on the brink of collapse only days later amid continued fighting in the Ukrainian town of Debaltseve, and new European Union sanctions against Russia. The truce plan came only days after NATO announced it would send an additional 5,000 troops to bolster its security presence in Eastern Europe. ●

italY

“This is

a tragedy on an enormous scale and a stark reminder that more lives could be lost if those seeking safety are left at the mercy of the sea.” S. HoPPER/UNHCR

Vincent Cochetel, Europe director of the office of the UN High Commission for Refugees, on the 300 migrants believed drowned on 11 February while crossing the Mediterranean from Libya in dinghies. the africa report

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The Group

briefing

people

ThE risE of saTa’s succEssor 11 November 1956 Born in Ndola 1981 Graduated with a bachelor’s in law from the University of Zambia 2001 Joined the newly formed Patriotic Front opposition party December 2013 Appointed by President Sata as defence minister

Rogan WaRd/ReuteRs

25 January 2015 Became the sixth president of Zambia

spotlight

Edgar Lungu With the tightest presidential vote in the country’s history behind him, Zambia’s new president is seeking to continue the populist policies of his predecessor while maintaining investor interest at a tough moment Faced with a party divided by the 28 October 2014 death of president Michael Sata, and the lowest copper prices in more than five years, president edgar Lungu is promising to fight graft, improve the livelihoods of the poor and reassure investors. in the 20 January vote, Lungu defeated frequent presidential contender hakainde hichilema of the UpNd (United party for National development) by 27,000 votes,

the narrowest win in the country’s electoral history. the new government has announced it will freeze electricity tariffs for two years for domestic consumers while increasing charges for industrial consumers, a key indicator that the populist policies of the patriotic Front (pF) did not die with Sata, its founder. in January, supporters in key provinces like copperbelt and Lusaka remained disenchanted by the failure

quotes

of the pF to deliver on key 2011 election promises like improving their standard of living and making sure the mining sector contributes adequately to the economy. Zambian workers, a key support base for the pF, said they were let down after the pF government banned salary increments for public-sector workers in 2014 and 2015 to help contain the fiscal deficit, which rose 5.5% last year, its highest level in almost 10 years. whereas Sata’s government imposed a new tax regime on the copper industry last year, Lungu is showing himself to be conciliatory. he re-appointed christopher yaluma as mines minister to find a compromise with companies on delayed value-added-tax refunds and complaints about higher royalties. however, the influence of finance minister alexander chikwanda, who also served under Sata, may mean

“No efforts should be spared, as part of the AU counter-terrorism agenda, to defeat this group.”

“Are you in Tahrir Square? Don’t talk too much or I’ll give you three more years.”

Nkosazana Dlamini Zuma Chair of the African Union Commission. Up to 2,000 civilians were reported killed after the Boko Haram Islamic militant group attacked the Nigerian towns of Baga and Doron Baga in January.

Egyptian judge Mohamed Nagy Shehata responds to ironic applause as he jails 230 activists for life for rioting and violence during the overthrow of ex-President Hosni Mubarak the africa report

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briefing

Benon Kizza

RajindRapaRsad seechuRn

The Ugandan rugby player vanished after the Commonwealth Games in Glasgow in 2014 and was found safe and sound playing for a Welsh club in Cardiff in February. He and teammate Phillip Pariyo are claiming asylum.

The Mauritian ref was suspended for six months for “poor performance” after his decision to award a penalty led to Tunisia being knocked out of the Africa Cup of Nations.

angélique Kidjo

alfRed KeteR

aRMel MingatolouM sayo The Central African Republic sports minister was released unharmed by gunmen believed to be from the anti-balaka militia in February. He had been pulled from his car at gunpoint in January.

Christopher Mwambazi in Lusaka

The Kenyan MP was filmed in late January attempting to intimidate officials at a weighbridge while they detained a lorry owned by another MP. Police launched an investigation into the case. ALL RIGHTS RESERvEd; A. dALSH/REUTERS

The Beninese singer and UNICEF goodwill ambassador scooped a Grammy award for the second time, this one for her album Eve, which she dedicated to the “beauty and resilience” of the women of Africa.

M. HoRWood/REX/REX/SIPA; C. PIzzELLo/AP/SIPA; STR/AFP

some heavy-handedness remains when dealing with the mining sector. Born on 11 November 1956 at Ndola Central Hospital, Lungu grew up in Chimwemwe, in the sprawling township of Kitwe in Copperbelt Province. Lungu was admitted to the Zambian bar in 1983 after stints as a lawyer at the justice ministry, defunct mining conglomerate Zambia Consolidated Copper Mines and Barclays Bank Zambia, among others. He made his entry into politics by joining the UPND in 1999 before ditching the party for the newly formed PF in 2001. In 2001, Lungu stood for, and lost, the Chawama constituency under the PF banner. In 2011, Lungu ran for the same parliamentary seat and won the election. In September 2011, Sata appointed Lungu deputy minister in the office of the vice-president under Guy Scott. In July of the following year, Lungu was promoted to head the home affairs ministry before becoming defence minister in December 2013. After the shocking dismissal of succession frontrunner Wynter Kabimba in August 2014, Sata named Lungu as PF secretary general as well as defence and justice minister. This gave him prime positioning to represent the party at the 20 January vote. ●

Good times

sospeteR Muhongo Tanzania’s energy minister resigned in late January over a scandal relating to a $122m payment linked to an energy deal. The attorney general and the lands minister also lost their jobs over the controversy.

Bad times

DEVIENT

MIDDLE EAST

BECOMES BECOMES

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AfricA ceo foruM 16-17 March GENEVA | switzerlAnd Business and political leaders will gather at the Geneva Intercontinental Hotel for The Africa CEo Forum, organised by Groupe Jeune Afrique. on the agenda, two days of debates and networking as top-level speakers deliver their vision for Africa’s economic development, and delegates thrash out the best business strategies to get ahead in a changing continent. Themes this year include urbanisation and growth paths for the continent. Bringing investors and entrepreneurs together under one roof, the forum will also celebrate the year’s outstanding companies and CEos. theafricaceoforum.com

cArds & pAyMents AfricA 10-11 March

AfricA Business conference At HArvArd Business scHool 27 feb. – 1 March BOSTON | us A new-venture competition, interactive panel sessions, and a tailored networking lunch are among highlights at the 17th edition of the annual HBS conference, this time embracing the theme of ‘A more inclusive Africa’. africabusinessconference.com

AsA BAAko festivAl 6-8 March BUSUA | GHAnA A three-day long festival of music, dance, street performance and visual arts, coinciding with Ghana’s Independence Day, 6 March. asabaako.com

JOHANNESBURG | soutH AfricA Looking at innovation, strategy and security. terrapinn.com/exhibition/cardsand-payments-africaMo

retAil world AfricA 10-11 March JOHANNESBURG | soutH AfricA E-commerce and traditional retail come together. terrapinn.com/exhibition/retailworld-africa M

eXtrActive industries in AfricA 16-17 March LONDON | uk Government ministers from Angola, Ghana and Guinea will join business leaders and academics at Chatham House to debate the future of mining. chathamhouse.org

niGeriA oil & GAs 16-19 March ABUJA | niGeriA The essential gathering for Nigeria’s petroleum industry. cwcnog.com

wHArton cluB of AfricA eXecutive investMent suMMit 17-19 March LAGOS | niGeriA wcaexecsummit2015.eventbrite. co.uk

eMrc AGriBusiness 2015 22-25 March KINSHASA | drc This year’s pan-African forum will focus on ‘Towards Inclusive Growth: A Vision for Africa’s Transformation’. emrc.be

power And electricity world AfricA 24-25 March JOHANNESBURG | soutH AfricA terrapinn.com/exhibition/powerelectricity-world-africa

cApe town internAtionAl JAzz festivAl 27-28 March CAPE TOWN | soutH AfricA Hugh Masekela, Oliver Mtukudzi, Mike Perry and Victor Masondo are among more than 40 acts filling Cape Town with the sultry sounds of jazz. capetownjazzfest.com

AnnuAl investMent MeetinG (AiM) 30 March – 1 April DUBAI | uAe Delegates flock to Dubai to discuss investing in high-growth regions. aimcongress.com

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country focus Ethiopia

DANIEL GETACHEW/EpA/CorBIs

No rest for the construction workers on the future Addis Ababa light rail

Progress and zeal The ‘developmental army’ of Ethiopians recruited by the government has created real momentum, with the economy growing at a double-digit pace each year for nearly a decade. But many people are still struggling, and regular citizens complain about the lack of freedom and top-down initiatives By Jacey Fortin in Addis Ababa

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romhishillyvantagepointoutside the major city of Adama, Lema Mangesha can look in any direction and watch his country developing. Over the past 10 years, the 42-year-old farmer has seen new electrical lines strung up over his land. He has witnessed the construction of three nearby factories: one for metal, one for cement and one for tyres. His northern horizon is dominated by a wind farm erected about two years ago. But while some of his neighbours have got jobs at the new factories, Lema still cultivates teff, barley and wheat.

country focus | ethiopia

DJIBOUTI

300 km

SOMALIA

Dire Dawa

ADDIS ABABA

Gulf of Aden

ETHIOPIA SOMALIA

KENYA

ETHIOPIA IN NUMBERS PoPulation

94.10 million

urban PoPulation (% of total)

18%

life exPectancy at birth

63.6

infant mortality (per 1,000 births)

aid flows

$3.3bn

fdi (current US$)

$953m

GdP (current US$)

$47.53bn

inflation, consumer Prices (annual %) 8.1% 1.9

mobile cellular subscriPtions (per 100 people)

Source: IMF (ethIopIa country report, oct. 2014)

internet users (per 100 people)

URBAN UNEMPLOYMENT 35

Male Female Total

30 25 20 15 10 5 0

2009

2013

GDP GROWTH (annual %) 15

Ethiopia

Sub-Saharan Africa (developing only) 0 2005 06

Source: World Bank

Despite the power lines that criss-cross his fields, his home is not connected to the national grid. “Development has brought changes,” he says. “That doesn’t mean it’s enough.” With official annual economic growth rates averaging about 10% during the past decade,Ethiopiaispoolingeveryavailable resource to invest in roads, railways and industrial zones. It boasts Africa’s largest airline, is working on Africa’s biggest dam and is about to complete its first urban light rail system in Addis Ababa. expansion as encroachment

Ethiopia is an overwhelmingly rural country, and Lema is among the 80% of Ethiopians who live outside of urban areas. And like most rural dwellers, he comes from a family of smallholders. The slow creep of development has hemmed him in on all sides, and the two hectares he works will not be enough to split between his three children. “When a person has a family, he has to expand his property. There’s no way for us to do that,” Lema complains. In Africa’s second-most populous country, the government’s ambitions go far beyond gross domestic product (GDP) growth. Broad-based development is at the heart of its plans. Officials also talk of reclaiming Ethiopia’s status as one of the world’s most advanced civilizations, a legacy that goes back to the Axumite empire and continues into modern times, when Ethiopia was the only African country to repel European colonial armies. Today, the ruling party pursues modernisation with a relentless drive and authoritarian tools. But the results of its efforts are clear. Growth has been relatively inclusive, and Ethiopia has achieved its Millennium Development Goals of halving poverty and reducing child mortality by two-thirds. There are also mega-projects: capital-intensive ventures that aim to meet the infrastructure needs as fast as possible, even if it means going into debt. “There is this conviction among outsiders that Ethiopia is poor and cannot fund such huge projects,” says state finance minister Abraham Tekeste. “The figures we have for the last three years show that Ethiopia is still poor and the majority of people are still struggling, but still they can really save and postpone consumption for a very good cause.” When it comes to electricity, for instance, he says just over 50% of house-

Part financed by citizens’ bonds, the Grand Renaissance Dam mega-project

TikSa Negeri/reUTerS

YEMEN

Source: World Bank 2013, aFrIcan econoMIc outlook 2014, unIted natIonS conFerence on trade and developMent 2013

SUDAN

Red Sea

SOUTH SUDAN

holds have access. But Ethiopia’s generation capacity of 2,300MW will get a huge boost when the Grand Renaissance Dam – financed by citizens’ bondbuying, electricity sales and local borrowing – comes online in a few years to add another 6,000MW to the grid. In a bid to emulate the ‘Asian tigers’ that dominate global manufacturing, Ethiopia is constructing several industrial zones to attract foreign corporations. “Manufacturing is top of the agenda as far as the government is concerned,” says state industry minister Mebrahtu Meles, pointing out that the resulting exports will bring a much-needed boost to Ethiopia’s foreign-currency reserves. In this and other sectors, he adds, it is up to the government to lead the way until the private sector is capable of taking over: “Today, unfortunately, so-called demand and supply, or the invisible hand if you like, does not work. Ethiopia is emerging. It’s a new, infant economy, so we have to make sure that gaps will not be there.” When it comes to agriculture, the government’s programmes include a call centre where farmers can get advice. The ruling party also knows the value of social ties. It uses favoured farmers like Gadisa Gobena, 65, as exemplars. the africa report

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ethiopia | country focus

find funding along the way. It was “really thinking big, believing that you can do things differently,” he says. “That kind of mentality was really the paradigm shift.” But critics say that the EPRDF’s single-mindedness leaves no room for debate. The country’s outer edges are home to many semi-pastoralist communities. Their lifestyles are endangered by mega-projects like sugar plantations in north-eastern Afar and irrigation schemes in the southern Omo, both of which require resettlement into villages for what the government assumes will be a more productive way of life. journalists imprisoned

On the 400ha under his control outside the central town of Ambo, Gadisa grows certified hybrid seeds for sale. “Only about 20% of farmers here are using certified seed,” he says. “We are very behind.” Gadisa also supports a government programme called fiveto-one, where farmers form quintets to assist and monitor each other. It helps them adopt best practices, he says. “With five men in one group, even a man who doesn’t use certified seed is forced to.” mobilising citizens

The five-to-one programme is in line with the government’s concept of a ‘developmental army’, whereby citizens are recruited to implement government policies. For Adama resident Lema and many others like him, the project has been beneficial. But the groupings also serve another purpose: “The five-to-one leader forwards party information to us. We don’t debate it because it comes from a higher level,” he explains. Ethiopia’s ability to mobilise its citizens it what sets the country apart, says Tewodros Hagos, head of politics for the Tigrayan People’s Liberation Front (TPLF). “Ethiopia doesn’t have much money. We cannot do soil and water conservation programmes without voluntary the africa report

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“Eventually, the lifestyle is going to change,” says the TPLF’s Tewodros of pastoralism, adding that any relocation is voluntary. “They have their resources. Is it not goodto encourage them to use their resources instead of others coming and usingit?Isthatacrime?”Long-simmering conflictsinotherregions–liketheOgaden, populated mostly by ethnic Somalis, and Gambela, where Nuers and Anuaks jostle fordominance–maketheseouterreaches even more difficult for Addis to control. Human rights concerns are not limited to the peripheries. In Africa, Ethiopia is second only to Eritrea in the number of journalists imprisoned. The 2005 elections delivered disputed gains to an opposition coalition and resulted in a fatal crackdown on demonstrators. Today, Girma Seifu of the opposition party Unity for Democracy and Justice (UDJ), the lone opposition member in a parliament of 547, says the government is not remotely serious about allowing a multi-party democracy or even per-

participation of the peasant,” he says, referring to projects done in Tigray using ‘developmental army’ principles. “Ultimately, people know they will benefit.” The TPLF is the ruling party in the northern region of Tigray. Outside the organisation’s headquarters in Mekelle, loud music memorialises fighters who helped overthrow the Derg military administration in 1991. Key figures like late Prime Minister Meles Zenawi and influential deputy premier Debretsion Gebremichael (see page 54) were among the masterminds of “This is a unitary country,” that revolutionary struggle. says the lone opposition member Today, Tigrayans are ofin a parliament of 547 seats ten accused of dominating Ethiopian politics – somemitting EPRDF coalition members to thing Tewodros dismisses as “propaganda”.Therulingcoalition,theEthiopian deviate from the script. People’s Revolutionary Democratic Front “This is a unitary country,” he says. (EPRDF), is a multi-ethnic grouping of “And these people are very inefficient, four parties representing each of the even though they have been around for county’s main regions. 24 years. They are still learning by doing, and they are unable to produce human Ethiopia’s foreign minister Tedros capital. You see the same faces from 24 Adhanom describes a “change of mindset” in government just as he was beyears ago.” A national vote is approachcoming the state minister of health in ing in May. Girma says he will not run 2004. Officials decided not to let limited again because the election board has disresources thwart their ambitions, he says. mantled the UDJ by recognising a fringe member as its leader and police have Instead, they would set high goals and then work with international partners to barredthedoorstotheparty’smainoffice.

country focus | ethiopia

With the government all but certain to retain power for at least the next five years, officials say that they recognise the importance of protecting their founding ideals. Corruption is an oft-cited threat to the EPRDF’s efficacy, but Tewodros says all of the regional parties combat this through constant self-evaluation. There is also a problem of credibility. In its zeal for meeting production targets, officials have been known to exaggerate reports of progress. This leads to inconsistencies:agriculturalproductivityclaims thatraiseeyebrows,resettlementschemes thatfailtodeliveronservicespromisedand factories that are commissioned despite technicalproblems.Economicfiguresare also suspect, and the International Monetary Fund has disagreed with Ethiopia’s GDP growth figures for years. PRESSURE TO MEET TARGETS

Hailemichael Gebreselassie, a 30-yearold TPLF member employed by the Commercial Bank of Ethiopia, says these failures are the not the fault of the party but of lower-level officials who feel pressure to meet targets. “Local agricultural officials have lied about reports,” he says while sipping coffee at a pavement cafe in Mekelle. “Last year, they were given a budget to dig wells for irrigation. They reported to their superiors that they had already finished, but they hadn’t done it.” He has also seen first hand how projects like the Grand Renaissance Dam have sapped credit for private enterprises at his local branch of the state-owned bank and how budgeted funds are sometimes siphoned off to pay for personal expenses. “That doesn’t mean you give up on the party,” he adds. “We should discuss these things to make it better.” The government’s plans and megaprojects will continue to encroach the livelihoods of people like Lema, who knows his small farm in Adama is becoming increasingly inadequate as the years go by. But he says he is thankful for plenty of things that have appeared over the past decade: new wells for clean water, a health centre nearby and schools for his children to attend. Those children are already taking work on larger farms and in the city. “People who are deep party members know more about what is being done,” he says of the government’s developmental ambitions. “From my perspective, from the outside, all I know is that this place looks better than it did before.” ●

interview

Debretsion Gebremichael Deputy prime minister, Ethiopia

We want technology transfers

ebretsion Gebremichael rose to eminence within the liberation struggle at the helm of the rebels’ intelligence services. Currently one of three deputy prime ministers, he is also a leading figure in the Tigrayan People’s Liberation Front, the predominant faction within the ruling Ethiopian People’s Revolutionary Democratic Front. His current brief is to oversee the economy, and he belongs to a pragmatic strand of the ruling party that has pushed for things like Ethiopia’s successful $1bn sovereign bond launch in December 2014.

companies we have at the moment in the country are involved in the export of flowers to Europe. It’s not to the extent that we want, but there is good progress. We started it a few years back from zero, now we are the second exporter from Africa. We emphasise that foreign companies work with local partners, with private companies and also with government companies. Through that vehicle, they can transfer skills, knowledge and technology. Local capacity will be built through these encounters. The holy trinity of manufacturing is cheap power, labour and logistics. The first two seem covered, so what about transporting goods? You are raising one of our pains. We have a lot to do in logistics on efficiency in our export corridors. These are very critical, but we know these are the weak points in imports

TAR: How important is it for you that investors also share technology with local players? This is our strategy. One of the important interventions we are looking at doing, in addition to attracting investment, is skills development. We are also looking hard at what kinds of technology transfer we want to have. “To help trade and investment We have not done we have to build the business so much yet, but that environment around logistics” is the emphasis. But we have to secure first the investment, secure the business, then and exports as well. We have started that will follow. It is one of our criteria overhauling with a state company. for picking companies as long as they We have quite a few private companies are also competitive in business. also involved. We have to work on both fronts, consolidating the reforms There is a lot of talk of textiles, that we have undertaken on the state is this now your priority? company and improve the Our country is essentially an agrarian management of the company. country. Our economy is heavily based And then with the private sector, on agriculture: more than 80%, we have to support their capability. I would say, of our labour is employed Then, obviously, we have to work in agriculture; more than 40% of our on the infrastructure. We have to gross domestic product is based on improve our connection with Djibouti. agriculture. If you look at our exports, The cost of transport will go down more than 80% is from agriculture. with this new route. And one of So this is a priority from our the best solutions is the rail link, which government point of view. We see government has given priority number a route to industry through agroone. To help trade and investment, processing. One intervention of foreign we have to improve the business companies, for example, will be environment around logistics. ● in horticulture. Many of the foreign Interview by Nicholas Norbrook the africa report

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country focus | ethiopia

opinion

Merkeb Negash

Senior researcher, Ministry of Foreign Affairs, Ethiopia

Free markets can mean deadly competition

evelopmental states reject the free-market model of development because they do not have the advanced-world assets to compete on a level playing field. For example, despite rock-bottom wages, solid education systems and good infrastructure, Taiwan and Korea had their textile industries devastated by Japan until the 1960s. Even in labour-intensive industries, emerging markets had no comparative advantage since cheap labour was no match for the technology and marketing finesse of advanced countries. Free markets simply meant deadly competition. Thus began their adventurous task of ‘getting the price wrong’ to stimulate industrial transformation. Where those countries had a potential comparative advantage, as in textile manufacturing, the state provided incentives, privileges and tariffs to induce private-sector investment. In sectors where they did not have a comparative advantage, the state had to substitute for, rather than complement, the private sector, and then undertake the task of industrial transformation itself. In an attempt to replicate the East Asian miracle, Ethiopia has adopted and adapted the industrial policies of successful developmental states. The strategy of mobilising incentives and disincentives to induce investment is most vividly observed in the textile sector. On the other hand, the state’s policy of import substitution in strategic industries is best reflected in the army-owned Metals and Engineering Corporation (METEC). Together, these two sectors capture the Ethiopian state’s project of export promotion and import substitution, and the state’s role as both referee and player in the transformative project. Ethiopia’s growing economy, infrastructure boom and huge market, together with its cheap labour and abundant land suitable for cotton production, give it a potential comparative advantage in textile production. The key to industrial transformation, however, remains the classic midwifery role

the government is playing of inducing investment decisions and stimulating the supply of entrepreneurship. The result has been an impressive growth in production and an influx of foreign direct investment. From the vibrant domestic textile industry to the newly arriving Turkish and Chinese conglomerates, Ethiopia is turning into a huge textile factory. From Austria and France to Brazil and India, governments have used state-owned enterprises to engineer their industrial developments. It is with this imperative that the Ethiopian government established METEC in 2010, in response to an urgent need for import-substituting industries in the engineering sector and a weak response from local and transnational capital. There are, of course, risks to this strategy.Forexample,oncepersuaded to enter a sector, firms require cultivating, nurturing and prodding to move ahead as the sector changes. While doing so, the state needs to be wary of being captured by the very groups it has helped create. And where the state engages in direct production, it should engage onlyinareaswherethereisapervasive marketfailureandinsectorscongruent with the talents of the state. The problem is that a state firm created to carry out endeavours apparently beyond the capacity of local capital may end up competing in sectors where no such rationale applies. Worse still is if state firms take away profitable territory from the fragile private sector. Not only does this squash local entrepreneurs but it also damages the state’s legitimacy in the eyes of the private sector, whose support and partnership is vital to the transformative project. METEC’s expansion into the textile, plastic and hotel industries are manifestations of this danger. As METEC grows bigger and stronger, Ethiopia’s leaders should be wary of not being able to control and discipline this emerging giant. ● the africa report

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country focus | eThiopia

Farmers have been obliged to convert to sugar cane – a move that pleases some but not all

Sugar

Sweet and sour harvests The sugar plant at Wonji-Shoa is chugging along, but the government’s 10 other projects – estimated to cost more than $5.5bn – face problems of their own

he tiny, street-side coffee shop run by Senait Ashagre encompasses little more than a short table covered with little ceramic cups, a ring of plastic stools and a clay coffee pot resting on hot coals. Senait, 23, tries to stay open seven days a week. But a few times a month, she runs out of an essential ingredient – sugar – and is forced to close. “I get 2kg of sugar each month from the local government for about 15 birr ($0.74) each, but that’s not enough. So I usually have to buy five more kilograms from the shops, and those cost 32 birr,” she says. “It’s stupid we have to wait in a queue to buy sugar,” says one customer, a young rickshaw driver. “We produce it right over there!” He is pointing toward the WonjiShoa sugar factory, which began producing at nearly full capacity this year. It is run by the Sugar Corporation, a government-owned entity that is spearheading one of the most ambitious development projects in Ethiopia’s history. On top of three working factories, another undergoing testing and another project still under construction, the government is building no less than 10 new sugar facilities across the country.

In the main, these projects are being financed by agreements whereby the corporation hires Chinese contractors in exchange for loans from China’s state-owned banks. Five years ago, when these plans were announced, the cost was roughly projected at $5.5bn. Today the Sugar Corporation is working on a new cost evaluation that will be significantly higher. mother of all industries

crophone stationed behind the main doors. That day’s broadcast informs workers that this year’s output goal is 160,000tn, with the plant having produced 34,921.5tn so far. The upper level of the building houses the office of Furo Beketa Berisso, WonjiShoa’s general manager. “The production level is greatly increasing this year,” he says, noting that the facility processes more than 6,000tn of cane and churns out at least 600tn of sugar each day. In the coming years, extra machinery should double the plant’s capacity. In a giant room for the first stage of sugar extraction, the roar of machinery forces Tsega Kifle, Wonji-Shoa’s deputy general manager, to shout. “This is the only factory in Ethiopia so far that does power generation,” he yells, explaining that bagasse, a cane by-product, is

Of all the massive public investments Ethiopia has made in recent years, these projects are uniquely far-reaching – and not only geographically. According to state minister for industry Mebrahtu Meles: “The Wonji-Shoa uses a cane sugar industry is the mother by-product to generate power of all industries.” The factories can generate their own and will supply to the grid energy and produce ethanol for clean fuel; they can bring smallburned to generate steam. At full capascale farmers into the fold of industrial city, the factory should use about 10MW development; and they can generate and supply another 20MW to the grid. foreign exchange. As sugar is such a hot commodity Outside the Wonji-Shoa headquarters – and cheaper in Ethiopia than neighon a Tuesday morning, two speakers bouring countries – smugglers someare blasting a song about the factory, times spirit sacks away to the border with voiceover from a man with a mito turn a quick profit. Foiling ● ● ● the africa report

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Tobias Hase/dpa/Corbis

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country focus | ethiopia

But given Ethiopia’s track record, banking on ambitious goals is a risky businesses. All 10 of the new factories were meant to start working this year, but most will not. Reports indicate that the country produced around 300,009tn of sugar in 2014, far short of the 2.3m tonnes the corporation once hoped to see for the year 2015. Now that it is churning out sugar crystals at a healthy clip, Wonji-Shoa has become a role model for the new factories springing up. But with even nearby customers like Senait complaining of shortages, it is clear that some system adjustments are still needed. Gesturing to thousands of kilos of sugar in the Wonji-Shoa storeroom, deputy manager Tsega says Ethiopia “has no problem with supply. It’s only distribution.” The trade ministry doesn’t share that opinion and had to import an extra 160,000tn of sugar last year.

The 10 new factories – and the plantations, dams and irrigation they require – are harbingers of the transformation Addis officials hope to see across Ethiopia: a shift away from small-scale farming; more production of processed goods; and an emphasis on modernisation over tradition. the price of progress

Alfredo Bini/Cosmos

● ● ● far-flung rent seekers is tough work for a corporation whose management methods are decidedly topdown. The Addis office is in charge of supplying sugar to the government wholesaler, which pays 11 birr/kg before tax. Demand is greater than supply, so free-market principles have been set aside for a system of regional quotas and price caps. The Sugar Corporation splits its revenue, giving 49% to the factories for operational costs while the remaining 51% gets deposited into the Sugar Industry Development Fund. In a couple of years, someofthatincomewillbegintorepaythe Chinese loans. Sugar exports are “in our short-term plans,” says the Sugar Corporation’s deputy director of finance, Mesfin Melkamu Girma. With a few factories scheduled to commence production this year, he says they will provide enough to meet domestic needs and then some.

Sugar, sugar everywhere, yet not a drop to sweeten a cup of coffee

Sugar cane production in Ethiopia (million tonnes)

2 sourCe: fAosTAT

1 1993 94 95 96 97 98 99 2000 01 02 03 04 05 06 07 08 09 10 11 12 13

In pursuit of these goals, the government has been known to act with a strong hand. The Kuraz sugar project in the southern Omo Region, which encompasses a dam, an irrigation scheme and five factories, has been criticised for displacing tens of thousands of people to make way for plantations. Of Wonji-Shoa’s 17,000 employees, about 10,000 are outgrowers who retain nominal control over their land but cultivate sugar cane for the factory. These farmers get inputs and are paid a small salary every two weeks. Shushay Legesse, Wonji-Shoa’s project manager for agricultural expansion, says these farmers get 50 birr per 100kg of cane they harvest minus the cost of the inputs, leaving them with around 14 birr per 100kg. “If we bought the land, where would they live?” he asks. “So in order [for them] to be part of the industry, we get them involved in sugar cane production.” But outgrower Mengistu Regasso, 50, wants to go back to his life of farming maize. “They forced us into this,” he says. “They called a meeting and told us not to farm anything on our land because it would be for sugar. But for a few years afterwards, the land was totally undeveloped. There are outgrowers whose life has improved, but there are others whose lives have not. They are not looking after us.” The government disagrees. Despite quotas that squeeze Senait’s business, plantations that disrupt Mengistu’s livelihood and loans that create extra liabilities for a cash-strapped administration, it argues that industrialisation, employment and foreign currency revenue are worth it in the long run. “The government looks at this industry as strategic. It’s centre stage to spur the growth of other industries,” says state industry minister Mebrahtu. “So we are borrowing from other countries. We are investing from our own budget. That way we can jump-start the process of industrialisation.” ● Jacey Fortin in Adama

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country focus | ethiopia

interview

Ermias Eshetu

Chief executive, Ethiopia Commodity Exchange

Farmers are getting 60% more of the value Having launched operations in 2008, the ethiopia Commodity exchange has moved out of its pilot phase and plans to ramp up technology to improve speed and traceability TAR: What has the Ethiopia Commodity Exchange (ECX) brought to farmers since its 2008 opening? ERmiAs EshETu: The real innovation of the past five years is that farmers have been able to get up-to-date market information. It used to be that a small buyer would drive into a farm or community on an Isuzu truck, and he would dictate the prices. For the farmer, there was no other option. Now, with the commodity exchange and flow of information to the farmer, they are getting a much fairer cut of the value – at least 60% more, we have calculated. Over the past five years, we have handled over 105bnbirr($5.2bn)intransactions, which speaks for itself. Wherearetheweaknesses?What needs to change? The key to making it succeed is infrastructure – logistics and warehousing but also our surveillance capability, the ability to confirm or validate any discrepancies and track products – so a huge technology infrastructure has to be built. The cross-country rail that is being builtisgoingtobringdownthecost of transport, so we at ECX need to align our strategy with the state strategy for logistics too. some coffee buyers complain of blending with inferior grades. how do you fight this?

One of our major projects right now is traceability. Our objective is that the buyer or even beyond the buyer, someone sitting in New York and taking a sip of coffee, can actually scan that product and find where it came from. so will you confront these brokers who are blending? Rather than confronting, [the exchange] will enhance those who areina genuine internationaltrade relationship. They will be able to askapremiumpricebecauseofthe reputation they will gain through that process. So the market will gainintransparency,whichshould help clean up things.

“Our objective is that someone sipping a coffee in New York can scan and trace its origin” Will you be including new commodities on the exchange? Certainly, given the growth of the economy and the population, there are lots more we could include. All these people consume sugar. We use a lot of chili pepper. With something like teff, which is not on the exchange, we have to be careful as it is the bread and butter of our society. It’s about the survival of the individual household. So if the infrastructure is not built right, if conditions are not right and the market tries to control

that, then it can create unnecessary dynamics [teff scarcity] for the situation on the ground. So teff will come on board, but only when everything is right. how about the payment side? Are you using mobile money? Right now the farmer gets paid cash, then the supplier collects that commodity and brings it to our warehouse on behalf of an owner ‘X’. Once it is in the warehouse, Mr X will agree to accept the certification. Then they will wait to trade that [lot] on the exchange. And when the market is made, the settlement takes place immediately, so we have a mechanism between banks in real time. So how can we extend that? For example, what if a farmer wants to sell a commodity and doesn’t want [it to wait in] our warehouse? We are in the process of creating an application similar to mobile banking, where the farmer can have full access to the market, meteorological data, advice on inputs, fertiliser, etc. You need a smartphone, which is becoming so affordable. A farmer will be able to stick his label on the sack, scan it and submit ahead of time that a load of his product [is arriving at] the warehouse. We will be able to track this, helping us with traceability, and also plan the logistics Interview by in real time. ● Nicholas Norbrook in Addis Ababa

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country focus | ethiopia

Private sector

The Addis millionaires’ club

You wouldn’t know it if you met them on the street, but an elite and growing band of ethiopian entrepreneurs is making it rich despite strict economic conditions

t first glance, Ethiopia would seem like a tough place for business owners to make it big. The strength of the state stands in contrast to the fledgling private sector, where foreign competition is barred in key industries and big sectors are entrusted to stateowned companies. But a curious statistic surfaced in December 2013, when New World Wealth, a research and consulting firm based in South Africa, reported that the number of US-dollar millionaires in Ethiopia rose by 108% between 2007 and 2013 – faster than in any other country on the African continent. In Addis Ababa, these new moguls live in the tonier areas like Bole, an airport-adjacent neighbourhood dotted with embassies and hotels, or the Old Airport area in the south-west, home to the Addis Ababa Golf Club. During the day, they hobnob with government officials at the upscale Hilton and Sheraton hotels. Bars and nightclubs have sprung up to accommodate more expensive tastes, like The Gaslight at the Sheraton and the Suba bar near the centre of town.

firm EY Ethiopia. But, considering that Ethiopia’s gross domestic product growth rates have been in the double digits for much of the past decade, “by default you have to produce millionaires when your overall economy has grown that much,” explains Zemedeneh. An Ethiopian-American, Zemedeneh left Ethiopia for the US as a teenager in 1978 – while the communist Derg was in power – and eventually landed a job with what is now the professional services group PwC. He returned to Ethiopia during the 1990s with the intention of starting a factory, but that dream was deferred in 1998 after war broke out with neighbouring Eritrea. Financial services was a logical fallback, and he has been working with EY since 1999. He is one of Ethiopia’s ultimate optimists when it comes to growth in the private sector.

Ethiopian entrepreneurs, he says, benefit from a low barrier to market entry. And as for challenges, “You need to be persistent. Investments here need to have long-term horizons. This is a very earlystage emerging economy.” less bling for your buck

Zemedeneh points out that many successful business owners are in sectors like financial services, trade and real estate but adds that they tend to keep a low profile. “It’s definitely not part of our culture to display wealth in a garish way,” he says. “You would never know, if you saw them on the street, that they have enormous wealth.” Inside his office in Addis – a room lined with windows on one side and mirrors on the other – coffee exporter Ali Hussein Mohammed points to a photograph of

racing wealth creation

Their number is still relatively small, however. “Ethiopia has done quite well in terms of growth over the past seven years,” says Andrew Amoils, New World Wealth’s head of research. “However, Ethiopia starts from a very low base of dollar millionaires, considering it’s one of the most populous countries in Africa.” Thereportestimatesthatby2013Ethiopia had 2,700 millionaires, far behind less populous countries like Kenya and South Africa. New World Wealth predicts that the number will rise to 4,700 by 2020 due to the country’s rapid pace of economic growth. That will still not be enough to break Ethiopia into Africa’s top 10 countries for dollar millionaires. The pace of wealth creation remains impressive – or worrisome,depending on who you ask – in a country where about one third of the people live on less than $1.25 a day. “That report caught a lot of people by surprise,” says Zemedeneh Negatu, founding partner of auditing

a daughter’s wedding is a time to splash out for addis’s low-key millionaires the africa report

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ethiopia | country focus

Per-Anders Pettersson/Cosmos

himself receiving a trophy from the trade ministry. His company, Alfoz, was named Ethiopia’s best coffee exporter of the year for2012,whenitearnedrevenuesof1.2bn birr ($59.1m). The firm buys most of its beans from the Ethiopia Commodity Exchange. It owns two facilities to clean the beans before they are shipped off, mostly to buyers in Saudi Arabia. Ali’s father and grandfather both worked in the coffee trade, and in 1998 Ali decided to strike out on his own. It was an excellent sector to work in, as coffee is Ethiopia’s largest export by value and the government is keen to support enterprises that bring in foreign currency. “From the government side, policy is always changing because they support us, especially exporters,” says Ali. “They discuss things with us, and then they change immediately. They call us all the time.” The company has prioritised coffee since its inception, but now Alfoz is making moves into another key export sector: livestock. Government statistics show that Ethiopia has the largest livestock population in sub-Saharan Africa, but animals make up only 3% of the country’s exports, according to a World Bank

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report last year. That same report recomseveral university buildings across the mended that the country add value to country.Tsedekesaysheisthinkingabout its commodities through processing, selling the company in three years, when and Ali hopes to move in that direction. he hopes to fetch a price of $50m. In the meantime, he has become one of The company owns machinery – now Ethiopia’s staunchest advocates for the idle in storage – for coffee processing, private sector’s potential to engineer inwhich it may soon dust off. Ali says he clusive growth. “There’s a glass ceiling would also like to transform livestock here in Ethiopia,” he says. “You cannot into packaged meat. grow any further without influencing the In preparation for these plans, Alfoz business environment.” has been conserving its energy since its peak year in 2012. “Our strategy changes MostEthiopianbusinessmenarefamilyear to year. If the market is suitable iar with Ambassador Garment & Trade, a for us, we’ll be working 24 hours [a day]. The last two As certain sectors are closed years, the market was less,” to foreign owners Ethiopians he says. “We expect this year have claimed market share to be better.” Another growing market in Ethiopia is real estate, particularly leading purveyor of men’s suits in Addis in Addis Ababa, where land values are Ababa. It is owned by Seid Mohammed skyrocketing. But Tsedeke Yihune, owner Birhan, who says his path to success of Flintstone Homes, which does condepended largely on government policy. tracting, marketing, design and devel“When the economy is growing because opment, criticises the unsustainability of the government’s strength, consumers’ buying power grows,” he argues. of the current business model. Seid also owns Ambassador Hotel “It’s like a pyramid scheme,” he says. “The developer finds a target customer, – a four-star establishment not far from finds the money from the bank – which the airport that charges up to $200 per the bank originally gets from the same night – and Ambassador Real Estate, customers looking for homes – and then which Seid says is building about 100 builds a few homes which attract even villas, 500 apartments and a new mall more customers, and it just gathers near the prime minister’s office. momentum and credit.” He envisions a Seid’s parents were farmers in Tigray. more holistic system where a developer His education was cut short in the fourth chooses a neighbourhood and boosts its gradeafterconflictswithEritreaforcedhis value by investing in commercial proschool to close. He found a job and saved jects and community centres, thereby 3,000 birr, which got him a second-hand raising residents’ incomes and enticing sewing machine and space for a small shop. Today, his enterprise encompasses them to stay put. 85 stores across Ethiopia. government blessing One of the ways Ethiopia guards its To gain a foothold in the market, Flintdeveloping economy is by closing cerstone, which began in 1991, started tain sectors to foreign owners, including doing things the old-fashioned way. It banking, transport, telecommunications and retail. That enabled Ambassador got exposure with a campaign advertto claim market share that might have ising homes for just 195,000 birr and otherwise been gobbled up by Western delivered 600 units within two years. But Tsedeke has also been working to suit manufacturers. convince officials that more sustainable There have been disadvantages too. development schemes would be well The closed system has made it difficult to worth the investment. attract investors. “Challenges still exist,” Technically, Tsedeke is free to purSeid says. “A shortage of money makes getting a loan very difficult.” sue his ideas, but he is hesitant to do so But his overall take on ruling party without explicit government approval. “The biggest hindrance to private-sector policy is positive. “In this government, development, to innovation in this counat the top levels, there is no corruption. try, is the blessing you expect from the That’s rare. In other African countries like government,” he says. Kenya or Uganda, you’ll find corruption Flintstone currently earns most of its at the top. But here the government has a strategic plan, and that’s important.” ● revenue from government contracting. It has delivered 1,200 housing units and Jacey Fortin in Addis Ababa

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day in the life Extraordinary storiEs of ordinary pEoplE

light on his feet

A police traffic warden in Nigeria’s commercial capital, Lagos, Daniel Nwana is known as ‘the Dancing Cop’ for the finesse he brings to his traffic duties

’m a traffic warden, part and parcel of the Nigeria Police Force. I put in all my energy, talent, time, everything I have. I don’t reserve anything for any other thing. I have two children in the university. I have been 31 years in service and have been promoted only three times. Is this not wickedness? What a wicked world. Is it a crime for one to be truthful, hard-working, dedicated? To abstain from corruption? Because if I say I don’t take bribes, they will say “Are people not giving you money?” But I don’t ask anybody to give me money. I don’t stop and arrest. Instead, I delay him for some time. That’s supposed to serve as a warning to the person. It’s not that I arrest you then I take money. I entered the force on 1 March, 1983 and in June 1991 I was promoted to Corporal. In September 1993 I was promoted to Sergeant, the rank I carried for 11 years before I was promoted to Inspector. It was never my ambition to do police work. I was simply searching for a job. I left my secondary school in 1982. In February 1983, my cousin, who was a police officer, sent for me to come to Lagos. He said they were recruiting traffic wardens. I didn’t want to stay idle. I came down to Lagos. He took me for selection. On 25 February I sat the entrance exam and passed. I started the job, even though I was hoping that when I began to make good money I would continue to further my education. But with time, I found out that the money was not coming. Everything was struggle, struggle, struggle. That was until 1992 when there was a training course for police traffic wardens. We were taught how we can work ourselves into the hearts of Nigerian citizens. They call it the ‘Papa Legge’ System of Control – it involves body language. You point your head or foot in the direction the vehicles should move. After that I got more desire to work. I said I will stick to it.

count your blessings

Since then I have had joy in my life. Because when you serve the people in a way that they love, they will show appreciation that you are serving them. Those that cannot give you something, they will greet you. They will tell you “God will bless you.” They will say “No man can reward you but God will reward you.” I believe that’s a good prayer and that is what you want when you are

Ben FIgo ezeamalu

working, you need something like “God will reward you” and not that “God will punish you.” Whenever I’m controlling traffic, children coming out of school line up and watch me. Sometimes it even causes a hold up in the traffic. You know you will not please everybody. Some will say “What is this one doing? Is this how dem teach you to control traffic?” Some will say “You will soon tire.” I told God, provided you give me strength, I will not be tired. I will do it and satisfy my desire. And he’s an able God, continuously helping me, giving me the strength to work. My only regret is not receiving my promotion, even though I have written to the highest authority. I need my promotion because it will also help me when I retire – it will bring up my pension. I need my promotion for my retirement. ● Interview by Ben Figo Ezeamalu the africa report

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