The Continent, January 2016, Vol. 2 Issue 5 by The Continent Magazine

East African business news and analysis | www.thecontinentmag.com $3.99

January 2016 Vol.2 Issue 5

“BE GAME CHANGING, +

BURUNDI: A COFFEE HUB? TOP 5 CITIES TO DO BUSINESS IN IN EAST AFRICA TEFF TIMES AHEAD FOR ETHIOPIA WHAT WOULD MAGUFULI DO?

BE DIFFERENT,

BE BOLD ASHISH THAKKAR ”

MARA GROUP FOUNDER

Q5.15

CONTENTS 6

News Gulf investment, Kenya’s railway, and Uganda’s first car

Innovation Diary Keep your eye on Bitwalking and Li-fi

On the Map Deals to watch from North to South

Five Questions SAP Africa Chairman Pfungwa Serima

16 ON TOP OF

THE WORLD

Ashish Thakkar on growing his business, and going to outer space

10 Ways To improve employee engagement Shopping Online Mara Sokoni is set to launch

20 24

Cup of Conflict Is Burundi the region’s next coffee hotspot?

Mobile Technology What’s hot and what’s next The Bulldozer Looking forward with John Magufuli

30 32

Ancient Grains Growing teff to grow Ethiopia

7,000 Acres Agility shares its large-scale development plans

Retail Revs Up Tech, infrastructure, and brandconscious youth Changing the World Nine African innovations

City Scape The top five places to do business in East Africa

40 42

Growing SMEs Patience and flexibility are in demand

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UP FRONT

EDITORIAL Can one man do it all? appears so prominently in this issue. We were there for the Africa Global Business Forum, which brought together several dozen of Africa’s political and business power players at the Atlantis Hotel on the Palm Jumeirah. As well, I got a chance to visit Ashish Thakkar at his head office in the Burj Khalifah, the tallest building in the world. While I loved the glitz and glamor of it all – who doesn’t – it made me wonder why we were all there. Why were we here to work in Dubai and not in Africa itself? Why did we need to rely on geographic outsiders for our own success? The fact is that Dubai made practical decisions to promote and foster business in the emirate. Thakkar is there because it offered him a logistics hub to grow his business in his early years. African leaders gather in Dubai because they perceive it to be safe, and I suspect because their wives (in some case husbands) think the shopping is great. As quickly as Dubai rose in global status, perhaps one of our cities will rise to this level as well. In this issue, we look at the top five cities to do business in East Africa. Nairobi and Addis tend to capture most of the attention, but personally I have my eye on Kampala. So much cultural and intellectual richness is coming out of Uganda these days, that I imagine one day the economy will match this wealth. The upcoming presidential and parliamentary elections will tell us, however, if Ugandans believe that Yoweri Museveni, who has been president since 1986, is the one to take them to this place. Or perhaps Dar es Salaam is the next hot spot now that John Magufuli is in power in Tanzania. It is certainly a cleaner place since he began picking up garbage and sacking ineffective officials. It will be interesting to see how much change one man can create. If he faces a system that is well entrenched on his own, perhaps we should expect a return to status quo; but if Tanzanians support his measures and continue to back him, then we can expect the hope surrounding his presidency to become real. Speaking of backing one man, as we go to print Rwandans will be deciding in a referendum whether or not to offer President Paul Kagame the option to run for a third term. This will be a fine line in the global experiment of democracy and development, particularly in the area of business growth. On the one hand, investment wants to see stability, which Kagame has created. On the other hand, it wants to see innovation from new leadership, as well as the honoring of contracts, including constitutions and their terms. What is best for the country, it is hard to tell. We will have to let Rwandans decide this for themselves.

FUNNY HOW DUBAI

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Kathryn Semcow, ed ito r editor@thecontinentmag.com a@thecontinentmag

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January 2016

Editorial EDITOR

Kathryn Semcow SUB-EDITOR

Jeremy Daniel CREATIVE DIRECTOR

Craig Willers CONTRIBUTORS

Anthea Rowan Jeremy Daniel J.A. Young Scott M. Brodie Victor Owuor Paul Okaru Colin J. Browne EDITORIAL ENQUIRIES

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Gulf Investors Look Beyond Commodities Firms from oil-rich countries such as UAE, Saudi Arabia, and Kuwait favor investment in East Africa, with an eye for financial services, retail, tourism, and logistics

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UP FRONT

US$2.7 BILLION THE AMOUNT OF FOREIGN DIRECT INVESTMENT BY GULF FIRMS INTO SUBSAHARAN AFRICAN IN THE FIRST HALF OF 2015

Gulf investors are particularly interested in co-investment with private equity funds.

to a report released by the Dubai Chamber of Commerce at the Africa Global Business Forum, East Africa is the most appealing region for non-commodity investment from Gulf countries such as UAE, Saudi Arabia, and Kuwait. South Africa notwithstanding, the East Africa region is proving the main draw for Gulf investors, with manufacturing in Ethiopia, leisure, retail, and tourism in Mozambique and Kenya, and education in Uganda being of particular interest. Preferred sectors across the continent include retail and hypermarkets, automotives, commercial banking, and tourism. In the first half of 2015, Gulf firms provided US$2.7 billion in foreign direct investment into Sub-Saharan Africa, for a total of US$9.3 billion between 2005 and 2014. Kenya and Uganda, along with Nigeria and South Africa, have attracted the largest number of investors from the region – between 10 to 25 firms each.

CCORDING

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January 2016

Gulf investors employ multiple modes of entry to the East African market, including co-investment with private equity funds, purchase of private equity businesses, and direct buyouts or minority share acquisition. Co-investment with private equity funds is particularly interesting as foreign companies use the experience of private equity players to gain exposure to African markets. With the exception of South Africa, stocks and shares remain of limited interest to Gulf investors. According to the report, Gulf firms are well positioned to play a part in the growth of shopping centers and hypermarkets, but progress is slow. While consumer spending is increasing, large-scale retail centers are lagging, partly because of the difficulties of developing commercial real estate in crowded capital cities. East African markets, especially Kenya, are more accessible than other regions. Gulf companies such as MAF Group and Landmark have

a comparative advantage thanks to a track record in franchising and adapting brands to local tastes and cultures. These firms are also skilled at managing the logistics of multicountry distribution. Travel and tourism have enjoyed high growth and Gulf brands are among the front-runners in newer markets such as Mozambique. Gulf airlines have played a role in opening Africa to international tourists, and now direct tourism investments are evident. Gulf investors such as Rani Investments, Kingdom Holdings of Saudi Arabia, and Kuwait’s IFA Group own approximately 20 hotels and resorts in Sub-Saharan Africa. The tourism sector, however, faces challenges in countries that face terror threats, such as Kenya and Somalia. This supply chain sector for fastmoving consumer goods is growing rapidly in many lower-middle to middle income countries. DP World, Aramex, and Agility are active players in logistics and distribution. At the forum, Agility’s Tarek Sultan noted that access to stable, cost-effective power is a major challenge, and called for continued infrastructure development. The company is rolling out a plan to build 70 100-acre logistics parks across the continent over the next several years..

NEWS IN BRIEF Automotives ~Uganda and Zimbabwe Kiira Motors has announced that it will launch the first Ugandabuilt car in 2008. The joint venture between Makerere University and the government of Uganda is expected to break even in 2023. Partners include RLE International and National Instruments from the US, Arup Group from the UK, Automotive Investment Holdings from South Africa, and Valmet from Finland. Meanwhile, Zimbabwe has plans underway to develop its own automobile. The government recently signed an agreement with the Italian firm El Badaoui Group to design the model.

Banking ~Kenya The governor of Kenya’s central bank says that by March it will have a clearer idea of how to deal with Imperial Bank, which it placed in receivership in October due to allegations of fraud, according to Reuters. Authorities have allowed depositors with less than 1 million KES (US$9,800) to receive their money back, but will conduct an

examination of larger deposits Investor Presentation before returning March 2015 their cash.

Aviation ~Tanzania Fastjet is blaming a decline in November passenger traffic on fallout from the Tanzanian elections, according to the Financial Times. The delay in appointing a cabinet and approving a budget the airline says “has reduced demand from governmental and civil service traffic, and has an adverse effect on travel more widely in the country.” The London-listed airline says November passengers were down 0.5 percent in 2015 compared to 2016, although total passengers increased by 39 percent over the year due to the opening of new routes.

Agriculture ~Rwanda Rwanda is expecting to earn around US$150 million from stevia production in the next two years, according to KT Press. International beverage firms such as Coca Cola are demanding the leaves, which when processed can serve as a lowercalorie alternative to sugar. “We are still testing the adaptation of stevia on Rwandan soil,” says Jean Marie Vianney Munyaneza with the National

Agricultural Export Board. “But it is clear the plant will earn the country much more than coffee and tea on a smaller surface.”

Agriculture ~Mauritius The Food and Agricultural Research and Extension Institute in Mauritius says it has identified three varieties of onion that show promise for commercialization. The organization has spent three years testing 29 varieties to reduce imports, which it says average 11,000 tons annually.

Transport ~Kenya A US$1.5-billion loan from China will allow Kenya to extend its railway, according to a spokesman from the Kenyan government. The loan will allow an extension from Nairobi to Naivasha in the Rift Valley. The railway from Mombasa to Nairobi is slated for commercial operation in mid-2017.

Mining ~ Kenya Canadian mining company African Queen is pulling out of Kenya due to concerns over terror threats and political instability related to corruption. The company has worked in the Rongo Gold Fields in Odundu since 2010. “While we had some early success in our exploration program at Odundu in 2012, the

deteriorating political and social situation in Kenya has led us to curtail our expenditures there and we now conclude that investing further dollars in that country at present would be contrary to the best interests of our shareholders,” says CEO Irwin Olian. “The political and personal risks far outweigh any potential economic gain from our project there and we have serious reservations concerning the security of expatriate investments in Kenya's mining sector going forward.”

Telecoms ~Uganda Google has launched a Wi-Fi network in Kampala, going live in 120 locations across the city. The initiative is part of a project to increase access to affordable highspeed internet. The goal is to allow local telecom companies to provide faster broadband to customers at lower rates. Google estimates the cost of accessing unlimited data through the network to be Ugsh1,000 (US$0.30) per day.

Agriculture ~Tanzania India’s Jain Irrigation systems has signed a contract with Tanzania’s Dar es Salaam Water and Sewerage Authority to supply and install a water distribution network in Dar es Salaam, according to siliconIndia News. The company is working to expand its w w w. t h e c o n t i n e n t m a g . c o m

UP FRONT presence in Africa where in 2012 it pledged to invest US$375 million.

10.1M

VERBATIM

Aviation ~Tanzania Abu Dhabi-based airline Etihad Airways recently launched regular service to Dar es Salaam. The airline will use an Airbus A320 for the flight with 16 seats in business class and 120 seats in economy class. This is the airline’s third destination in the region, with flights already taking place to Nairobi and Entebbe.

Telecoms ~Djibouti Djibouti Telecom has signed a cooperation agreement with China Telecom at the ChinaAfrica Forum in Johannesburg, according to Agence Ecofin. Under the agreement, China will finance and collaborate with the government-run monopoly to help improve its infrastructure and service.

Oil and Gas ~Madagascar Madagascar Oil is seeking US$50 million in funding to develop the Tsimoiroro field with projected production of 1.7 billion barrels. The company has brought on new leadership to tackle the project, including CEO Robert Estill, who worked on the Duri project in Indonesia, and NonExecutive Director Michael Duginski, who was formerly COO at Berry Petroleum.

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“YOU HAVE THE ‘BRAIN DRAIN,’ AND THE ‘BRAIN GAIN’; AND THEN YOU HAVE THE MIDDLE – ‘BRAIN IN THE DRAIN.’” Cheick Modibo Diarra, Former Acting Prime Minister of Mali, explaining the need to keep African minds on the continent

“THE CURRENT GROUP MANAGING DIRECTOR AND CHIEF EXECUTIVE OFFICER, MR. MBUVI NGUNZE, WAS THE CHIEF OPERATING OFFICER OF KENYA AIRWAYS FOR THREE YEARS. THE COMMITTEE OBSERVED THAT AT THE POINT OF BEING RECRUITED TO THE POSITION OF CHIEF OPERATING OFFICER, MR. NGUNZE WAS NOT QUALIFIED FOR THAT POSITION AS OUTLINED IN THE KENYA AIRWAYS OPERATIONS MANUAL.” Excerpt from a report by a committee of Kenya’s senate, which is calling for Ngunze to be fired and for the board of Kenya Airways to be disbanded following an investigation into the causes of the airline’s downfall

“CORRUPTION TAKES AWAY OUR JOY, OUR PEACE: CORRUPT PEOPLE DON’T LIVE IN PEACE. CORRUPTION IS SOMETHING THAT EATS INSIDE, LIKE SUGAR. SWEET, WE LIKE IT, IT’S EASY. AND THEN WE END UP BADLY.” Pope Francis speaking to schoolchildren on his recent visit to Kenya

“I PERSONALLY AM TARGETED FROM EVERYWHERE. I DON’T KNOW WHO CAN HIT ME FIRST AND I’M SURE THAT THE ONE WHO SUCCEEDS IN DOING SO WILL TRY TO BLAME IT ON SOMEONE ELSE.” Burundi’s main opposition leader Agathon Rwasa on fearing for his life in the wake of civil violence in his country

“WE CANNOT INTEND TO END AL SHABAB WITH WAR AND FIGHTING… RECONCILIATION IS VERY IMPORTANT.” Somali President Hassan Sheikh Mohamud at the Africa Global Business Forum in Dubai discussing the need for a pragmatic approach towards Al Shabab militants

Number of people the Ethiopian government expects to face critical food shortages in 2016. The emergency response to the country’s worst drought in 50 years is expected to cost US$1.4 billion, according to Save the Children.

The increase in the price of aspirin in Zambia over the past year due to inflation, which was at 19.5 percent in November, according to Bloomberg.

The age Robert Mugabe will be when he runs – yet again – for the Zimbabwe presidential election in 2018.

22%

The percent of Africans who have had contact with public officials and admit to paying them a bribe, according to Transparency International. The rate in Kenya is 37 percent, 83 percent in South Africa, and only 1 percent in Botswana.

¤1.8BN

The amount European leaders have offered to African countries in return for agreeing to the deportation of unwanted migrants from Europe.

The fall in Chinese investment in Africa in the first half of 2015 compared to the first half of 2014, according to the Chinese government, which attributes the decline to the global recession, international commodity prices, and concerns over Ebola.

INNOVATION DIARY Tech worth talking about T WO N E W I N N OVAT I O N S,

Bitwalking and Li-fi, may not be household words yet, but they have terrific potential to impact everyday life for both city and rural dwellers with their compelling platforms. Make Money by Walking

being paid simply to walk – walk to work, walk to school, walk to keep fit. Bitwalking is a new application for smartphones that provides incentives for people to keep fit. The platform tailgates on the concept of fitness tracking but goes a step further by offering currency in the form of Bitwalking dollars that can be converted to actual currency. In some places, in the developing world for instance, walkers can literally earn the equivalent of their own monthly salaries. For people who already do a lot of walking, this app could be life changing. The Bitwalking project has been developed by Nissan Bahar and Franky Imbesi with the help of Japanese investors. Bahar and Imbesi also founded the Keepod, which was launched in Kenya just last year. The small USB-sized Keepod literally has the power to act like a computer, but costs under US$10. The unique selling point of the Bitwalking app is to promote fitness in both developed and developing countries. As the amount offered per 10,000 steps (about 5 miles) is just US$1 Bitwalking dollar, the concept may not necessarily appeal to walkers in developed nations, but for countries where the average daily wage is about US$1.50, the idea of adding income to one's daily wage simply through the act of walking is a powerful incentive.

IMAGINE

There is still much to be ironed out for the new app, so it is only being launched in the UK, Japan, Kenya, and Malawi for now. Not only are the developers working to prevent multiple accounts and an easy way to automate currency transfers, but it also must garner further investments in order to sustain the program. Even so, Bitwalking's founders are hopeful that their compelling concept has legs and will hit the ground running once all the details are ironed out. Light Switch Connectability: Welcome to Li-fi

I M A G I N E B E I N G A B L E to connect to the internet simply by flicking on your lights. This seemingly futuristic concept is already being tested at one Estonian startup. Li-fi is a new method for delivering data online that abandons radio waves in favor of traveling via light waves. Not only is Lifi an alternative to Wi-fi, it promises to be far faster than Wi-fi too; according to a BBC report, Li-fi can provide internet access “100 times faster” than Wi-fi as we know it. In order to operate, a Li-fi system requires a light bulb such as a standard LED bulb, a photo detector, and an internet connection. The new system was recently tested in Talinn, Estonia in an industrial space where workers could all connect to the internet via the light waves. Li-fi will not work outdoors as direct sunlight can interfere with wave transmission, but it can work remarkable well indoors provided that that space is open and not divided by walls. With testing going swimmingly, the hope is that Li-fi could reach the open market within a few years. As the visible light spectrum is far larger than the radio wave spectrum, the potential for uninterrupted connectivity is huge. Be sure to keep your eye on these two newly developed technologies. Within a short span of time, they could be introduced to your region where they could positively impact life in East Africa as you know it. w w w. t h e c o n t i n e n t m a g . c o m

UP FRONT SUDAN

ERITREA

DJIBOUTI SOMALILAND ETHIOPIA

Malawi President Peter Mutharika has announced on his personal Facebook page that the Duke of York, Prince Andrew, has offered to serve as an investment ambassador for the country to help shift it to an export economy, according to the Nyasa Times. Mutharika says the UK is currently Malawi’ largest bilateral donor.

SOUTH SUDAN

SOMALIA UGANDA KENYA

ON THE MAP

RWANDA

Mozambique The Republic of Mozambique Pipeline Investments Company (ROMPCO) has announced that it will expand the capacity of its existing gas pipeline from Temane in Mozambique to Secunda in South Africa. The US$210-million project will initially serve South Africa, with the potential to serve other markets as gas becomes available.

BURUNDI

TANZANIA

Deals to Watch MALAWI

Burundi recently released 97 prisoners

Djibouti has confirmed that

who were in jail for protesting against President Pierre Nkurunziza’s extension of his presidential term. Meanwhile, the United Nations says it is drawing up plans to send peacekeepers to quell political violence in the country.

China will build a naval base in the country. “The goal of the base is to fight against pirates… and most of all to secure the Chinese ships using this very important strait that is important to all the countries in the world,” Djibouti Foreign Minister Mahamoud Ali Yousuf told Agence France-Presse.

Eritrea Canadian mining company Sunridge Gold Corporation has executed a share purchase agreement to sell its interest in the Asmara Mining Share Company, holder of the Asmara Project, to China’s Sichuan Road and Bridge Mining Investment Development Corporation Ltd for US$65 million. Ethiopia and Kenya have signed a trade deal worth US$200 million intended to promote development and end cross-border conflicts that have left more than 54,000 people displaced. The UN-backed deal aims to created jobs in the energy, mining, and livestock industries.

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Mauritius and India are undergoing talks on revisions to their bilateral tax treaty, according to the Business Standard, with officials saying the talks are “positive.” Issues under discussion include concerns that Indian citizens are using Mauritius to route illicit funds into India.

Kenya has invited bids for ownership of five stateowned sugar companies. The government will sell 51 percent stakes in the milling companies to strategic investors and retain 24 percent for farmers. Once the mills are profitable, the government then plans to sell off another 25 percent in an initial public offering.

Rwanda South African cement ZAMBIA

manufacturer PPC has commissioned a 600,000-ton plant in Rwanda to expand its presence in the rest of Africa and offset declining sales at home. The company aims to earn 40 percent of its revenue outside of South Africa by 2017.

MOZAMBIQUE

ZIMBABWE

hospitals to US$85,000, according to Somaliland Press.

South Sudan says it will increase oil output in the Upper Nile state and resume production in Unity state, according to Bloomberg. President Salva Kir says the government will also fire state employees to invest more money into non-oil projects.

Sudan The Sudanese Ministry of Minding has signed a number of agreements for mineral exploration in the country, according to Sudan Vision. This includes with Italy’s Kobe International to prospect for minerals in Dalgo, where the company says it has already begun fieldwork.

Tanzania Toshiba Corporation has signed a memorandum of understanding with Tanzania Geothermal Development Company to help develop geothermal power generation in the country. Tanzania, according to the company, has resources of more than 5,000 megawatts (MW), which can help it reach its targets of producing 10,000 MW of power by 2025. Uganda Chinese groups have pledged to develop an industrial park outside of Kampala, according to StarAfrica. com. President Yoweri Museveni says the project will provide 10,000 jobs for Ugandans.

MADAGASCAR

Somalia Prime Minister Omar

Madagascar The IMF has offered US$42.1 million in assistance to Madagascar to help meet its balance of payments needs. “The recovery that began in 2014 has failed to gain further momentum due to falling commodity prices, weather-related shocks, and deep-rooted structural weaknesses,” says the organization. “Against this background, private investment has also remained weak.”

Abdirashid Ali Sharmake had named two new cabinet ministers. Abdrirashid Mohamed Ahmed will replace Abdirahman Abdi Osman as Minister of Commerce and Industry, and Mohamed Mursal Sheikh Abdirahman will replace Mohamed Hassan Aden as Minister of Water and Energy.

Somaliland mobile operator Telesom has donated US$50,000 to the Hargeisa Group of Hospitals for a new emergency ward, bringing the company’s total donations to the

Zambia Botswana-based grocery chain Choppies has opened its first store in Zambia, in Tafika Commercial Center in Lusaka. The store is the first of five slated for the country by the end of 2016. Zimbabwe and China recently signed 10 agreements and memorandums of understanding in the areas of energy, aviation, telecommunications, and investment promotion during a visit by Chinese President Xi Jinping. Over 100 Chinese companies are already present in the country, with China being its largest customer of tobacco. w w w. t h e c o n t i n e n t m a g . c o m

ON THE SPOT

5 QUESTIONS WITH | PFUNGWA SERIMA

Speaking of price-consciousness, you are pushing for the use of SAP software to support African agriculture. How would this work for our farmers?

Ariba business network is enabling African corporates to source from, and transact with, SMEs more easily, thus fostering and sustaining entrepreneurship and a more inclusive economy. That same SAP Ariba network is bolstering Africa’s agrarian economies by enabling a Rural Sourcing Management solution that already touches around 500,000 small-scale farmers in Africa and Latin America, bringing them new capabilities such as smallholder registration tools, pricing broadcasts, payments, SMS notifications, farmer buying and truck loading operations, and transactional and geographical analytics that enable these small scale enterprises to capture more value.

SAP’S

FIVE QUESTIONS WITH

Pfungwa Serima Chairman of SAP Africa You are a large company on a large continent. What specific markets are you targeting? Which of your products are most likely to sell?

vision is to help the world run better and improve people’s lives. A key element to achieve this vision is the “Run Simple” strategy, a companywide effort and commitment to our customers and partners. SAP Africa’s

SAP’S

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vision is to help Africa run better and run simple by driving best practices in strategic industries, empowering Africans with cloud solutions on mobile devices, and leading transformation and good governance. Our entire product portfolio is selling well across the continent with both on-premise and cloud solutions thriving. We are seeing more and more of a demand for mobile and cloud-based solutions as myths about the cloud are dispelled. Our industry-specific solutions (we cover 26 different industries) are also flourishing. SAP sees tremendous opportunity in Africa now and for the future and the company is serious about growing and investing into the greater Africa region. SAP is committed to playing a vital role in creating a level playing field for Africans, driving the innovation agenda and building an environment that promotes education and entrepreneurship to foster

economic growth. Doing business well also means investing in the communities in which we operate. Driving the technology agenda across the continent requires skills development, and appropriate skills development translates into job creation. This, and our SAP Skills for Africa initiative, is something about which I am passionate. Your products are known to be high quality, yet expensive. Our markets, however, tend to be more price-conscious than those in other parts of the world. How are you addressing this?

believe that our products provide value above and beyond the purchase price point. However, we also believe in being able to address the entire market by providing pre-configured technology solutions specifically targeted at small- and medium-sized organizations (both on-premise and in the cloud), which allow for flexibility in ownership.

You have talked a lot about “networked economies” and “networked enterprises.” What would these look like in the East African context?

A new world of real-time, digital connections across businesses, people and devices has converged to create a new global Digital Networked Economy (estimated to be worth US$90 trillion by 2020), which has come to be known as the Internet of Things. Now we can embed and extract data and intelligence out of every imaginable physical object, from machines and cars, to containers and even people. In parallel, the explosive growth of “smart” mobile technology enables vast quantities of real-time data to create and deliver entirely new digitally driven experiences. Almost everything can be connected to sensors and done on a phone: buying goods, booking travel, making payments and navigating using maps. Machines can translate information on the fly and guide you through “hyper-precise” mapping of the physical world. The boundaries between the physical worlds and

“We have to give Africa's youngsters the tools to make them relevant to the job market,” says Serima.

PROGRAMMED FOR SUCCESS Serima, who became SAP’s Africa Chairman last summer after serving as CEO, says in his new role he has been most proud of Africa Code Week, which SAP hosted in October to teach youth programming skills. “Initially, the coalition aimed to teach 20,000 youngsters aged 8 to 24 software coding skills across 17 African countries,” he explains. “But as the network of partners grew to 100 organizations, including local governments, NPOs, NGOs, educational institutions and businesses, Africa Code Week 2015 ended up impacting over 80,000 youth.” He says SAP plans to continue and expand the program. “We have to give Africa’s youngsters the tools to make them relevant to the job market – both here and internationally,” he insists. “Contrary to perception, the IT industry is one of the few that is still generating jobs.” The region, he says, has the potential to become a programming hub, but not without regulatory support. “Like any profession, there has to be an adherence to global coding standards,” he explains. “East Africa boasts some of the smartest people across the continent but it’s important to more effectively harness this potential by directing it through a globally accepted coding standard. As such their services would be accepted anywhere in the world.”

virtual worlds are blurring, creating opportunities to create entirely new digital experiences. The implications are mind-blowing. In terms of East Africa, we are seeing many customers pursuing the path of digital transformation in the context of the Digital Networked Economy. The level of this varies, of course, depending on the maturity of an organization – we have organizations that want to manage their supply chains much more precisely in order to have better control over costs and we have customers dealing in consumer products, for example, who are now directly managing intricate relationships efficiently and transparently “from the farm to fork.” This allows them to be a lot more agile in reacting to changes in the business landscape. If you were to pick an upcoming technology to bet on in our region, what would it be?

pick mobile technology. There are already great examples of digital transformation happening in East Africa powered by mobile – more than 35 percent of Kenya’s GDP flows through M-Pesa mobile payments and money transfers. SAP leads the enterprise mobility market with the most comprehensive mobile portfolio via the cloud. Mobile is the key disruptive force in the world today and nowhere more so than in Africa. The possibilities are truly endless. I’D

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10 WAYS TO ...

10 WAYS WITH | COLIN J. BROWNE

IMPROVE YOUR WORKFORCE Organizational culture guru Colin J. Browne explains how to create an environment of employee engagement

A S A M A N A G E R of an organization, you almost certainly desire high levels of employee engagement. What you are striving for is a culture where employees consider their occupations to be far more than simply a way to put food on the table, but something they inherently, deeply believe has meaning and merit, and adds real satisfaction to their lives. Ultimately, this is the way to get more work out of your staff. The following 10 tips are key to creating an engaging, productive environment.

1 BE WILLING TO EXTEND TRUST I T is altogether too common for organizations to build systems with a siege mindset. Managers write processes and policies that protect us from the 3 percent of people who might mess us around, but only serve to handcuff the 97 percent who would operate professionally even if the policy was not in place. In an effort to remove any room for error from the company’s operations, we actively strip out the humanity and intuition within our

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who can contribute excellent ideas and a company is immeasurably strengthened when it chooses to learn from the collective knowledge of its workforce. This goes to the heart of engagement: people will share what they know if we give them the space to do so. Smart companies make organizational learning a priority and make a point of acting on good ideas no matter where they come from.

3 DE-EMPHASIZE HIERARCHY M O S T organizations are hierarchical in their nature. This is a necessity of organizational design and in and of itself, not a problem. It becomes a problem when those at the top end have a disproportionately more comfortable life than everyone else. Those unjustifiable differences create distance and resentment, which makes bad business sense. What we want is fewer barriers, not more. Leaders who are visible, accessible and seen to be fair have a much better chance of creating engaged people.

walls. Companies that choose to believe people are good and can be trusted to play a role in establishing their parameters have far more productive and engaged workforces.

2 DEVELOP A TASTE FOR LEARNING A legendary former CEO of HP, Lewis Platt, once said that if HP knew what HP knows, it would be three times as profitable. What he meant was that in any organization there are individuals

4 RESPECT THE TWO-WAY STREET A S an employee, I know what is expected of me because it is stated clearly in my employment contract. What I need to know is what I am getting in return, and please don’t tell me it’s a paycheck. I am expected to grow the company, but I also have expectations of personal growth. Human resource development is key and plenty of research indicates that employees who feel they are growing worry less about compensation.

5 CREATE AN OBSESSION WITH VALUES Y O U R business probably has a set of core values, but do they really reflect who you are? The sole purpose of values is to give us all something to stand behind; to find commonalities among our differences. Yet most values statements utterly fail to reflect who we really are, what we live and die by, and what we care most deeply about. The result is that we are fundamentally undefined and therefore unable to identify people who share our common values at hiring time. This is one of the biggest reasons for internal conflict and one of the most common reasons we hire badly.

6 HIRE PEOPLE, NOT SKILLS O N the subject of hiring, there is a world of difference between someone who can do the work, and someone who actually will. Skills are necessary and experience matters, but faced with a group of candidates who are all technically able to do the work, the only thing you should care about is whether the person standing in front of you is likely to fit in to your organization productively. Ultimately, it is people that come to work, not just their skills.

7 OVERHAUL YOUR INDUCTION PROCESS T R A D I T I O N A L induction processes do very little to provide new employees with the information they need to attach emotional anchors to

GET ENGAGED The five hallmarks of engaged organizations TRUST: An underlying belief that people are good and would prefer not to disappoint. COMMUNICATION: A desire to learn from the collective wisdom of the organization as a means of improvement. ACCESSIBILITY: Leaders are visible and expect to be approached by employees who are comfortable doing so. GROWTH: Employees generally feel that they’re better this year than they were last year as a result of being here. SHARED VALUES: We know what we believe and we know why we believe it therefore we have solid guiding principles we can share.

the workplace. What do we want here? We want them to walk out of induction excited and inspired by who we are, what we believe in, why we do what we do, and how it makes the world better. Energy spent explaining processes and procedures is an opportunity squandered. Wrong time. Wrong place. This is your first opportunity to build engagement. That should be your primary goal.

8 SEEK IMPROVEMENTS THROUGH COACHING T H E normal corporate cycles of regular evaluations can deprive you of your most important opportunities for improvement. Increasing evidence shows that ongoing, on-the-spot daily coaching is more effective than structured evaluation. This requires different skillsets from managers and may require some difficult decisions about their suitability to that role.

9 THINK DIFFERENTLY ABOUT TEAMS W E often hear about the importance of avoiding silos in the workplace. In fact, silos can be very effective at building focused expertise and deep group affiliation. Nevertheless, the company is broader than any individual group, making it a good idea to create as many opportunities as possible to bring people together across disciplines. Consider sending randomly selected employees to lunch together to create an environment for communication that would otherwise never happen.

10. FORMALIZE TALENT DEVELOPMENT T H E HR department is one of the least popular in any company because, among its many roles, it is traditionally the home of restrictive policy-making and disciplinary procedures. But HR departments are uniquely positioned to make intuitive people decisions. The depth of knowledge they maintain, not just about groups but about individuals, is of massive potential value to your company because it enables you to supercharge real employee engagement efforts such as talent identification and development. Browne is the founder of Happy Sandpit, a think tank dedicated to organizational culture and leadership across Africa. He is also the author of How to Build a Happy Sandpit, a look at how Southern African companies create culture that drives engagement. www.happysandpit.com w w w. t h e c o n t i n e n t m a g . c o m

BUSINESS MARA GROUP

BEYOND EXPECTATIONS

With one of Africa’s fastest growing businesses, an office in the tallest building in the world, a new book, and a ticket to outer space, Ashish Thakkar is flying high. In an interview with Kathryn Semcow, the 34-year-old phenomenon gets deep about his success

s I take the elevator to the 146th level of the Burj Khalifa to meet Ashish Thakkar, I have a clear picture in my mind of the man I will meet. Ascending the tallest building in the world takes only seconds, and I am expecting a manner equally as fast – an African version of Richard Branson, dashing around the full-floor office, waving his pen like a light saber as he shouts motivational slogans to beleaguered staff. Thakkar and Branson, after all, have many similarities. Branson dropped out of school at 16 and started a magazine; Thakkar left school to develop his computer business at the age of 15. By the age of 34 Branson owned Virgin Atlantic and Virgin Megastores; Thakkar at the same age is already running the Mara Group empire, which includes 11,000 employees working in banking, real estate, infrastructure, and technology, as well as Riley Packaging which Thakkar started earlier in his career. Branson is known for being a billionaire, while press often refer to

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Thakkar as “Africa’s Youngest Billionaire” – a tag Forbes disputes and Thakkar himself shuns, saying he would much rather be known for the value he creates. Either way, Branson and Thakkar both have lots of money to burn. The two also maintain a connection in outer space: Branson is the first to launch commercial space flights with Virgin Galactic; Thakkar was the first African to purchase a ticket, and this year will be the second African in history to travel – literally – out of this world. And last but not least, Thakkar’s new book The Lion Awakes highlights the continent’s economic potential, and the back cover features Branson’s review. My meeting with Thakkar, however, flips these assumptions over. In this instance, I am the one who dashes into the office, while Thakkar greets me calmly. I am babbling and bouncing, while he remains composed. I stand back and take in the surprise. The personality in front of me is more sage than light saber, more Yoda than Branson. Thakkar is soft-spoken, pensive, almost shy.

I begin our interview with the understanding that Thakkar is a confident character, who was confident even as a child when he boldly made his first sale – a computer his father had given him as a gift. I ask him where this confidence comes from and anticipate a pep talk telling readers to “fake it until they make it” and that anyone can accomplish what he has. But instead of spewing out slogans, Thakkar waxes and wanes: “I have never looked at it as confidence per se,” he says in a tone suggesting an older mind in a young man’s body. “I think it is more about truly believing in something.” “The difference between confidence and truly believing in something is that confidence can lead to arrogance,” he adds. Humility is important to Thakkar, who warns against the ego game of business. “You get caught in that rat race and even if you win you are still a rat,” he says thoughtfully. “I have seen that too many times, even in seasoned, older entrepreneurs.” w w w. t h e c o n t i n e n t m a g . c o m

BUSINESS | MARA GROUP

He insists that while ranking high in a market is desirable, it is by no means an end goal. “I have seen a lot of entrepreneurs and businesses which are all about knocking down the number one in a market and taking that position,” he says. “I have no respect for that. I don't think it is sustainable, I don't think it is prudent, I don't think it is intelligent.” Thakkar applies the same philosophy to the Atlas Mara Limited banking group, which he co-founded with former Barclays executive Bob Diamond in late 2013. Through a strategy of acquisitions and organic growth - so far in Botswana, Zimbabwe, Zambia, Tanzania, Mozambique, Rwanda, and Nigeria - Atlas Mara aims to rank within the top five of each of its markets. Since its inception, the public entity has raised US$625 million of equity capital on the London Stock Exchange and maintains more than US$6 billion in assets. Purchases include Union Bank of Nigeria, Botswana’s BankABC, and Rwanda’s BRD Commercial. According to Bloomberg,

the group is aiming to add Finance Bank of Zambia to its portfolio this year in a deal worth around US$60 million in cash and stock. Thakkar is positive Atlas Mara will continue to grow, despite press reactions to the group’s faltering share price, which has declined significantly over the past year. The group has recently begun buying back shares, pledging to spend up to US$10 million to raise their value. Thakkar insists Atlas Mara is on the right track: “We have always maintained a long-term strategy; we are building an institution,” he says, pointing out that the group has booked three quarters of profits, reduced its non-performing loans, and increased its deposits. “We are going to be two years old in December 2015. We are a very young organization, but it has been an amazing journey. With the kind of management team we have been able to build, and the kind of board we have assembled, Bob and I couldn't be happier.” “We are very confident that we are going to become the leading financial services institution in Sub-Saharan Africa,” he adds. “We don't mean the biggest, we mean the best. I think we have already proven that in the little time we have had.” Thakkar also takes a balanced perspective on the global recession: “You have got to take into consideration what is going on around Out of this World the world,” he says. “HowevVirgin Galactic, after a number of delays and last year’s er, on a practical note, when loss of a spaceship and pilot, has promised Thakkar you think about Africa and that his day-long flight will take off in 2016. Thakkar’s IMF revising our growth parents purchased the ticket for him almost ten years projections, we still have real ago. A flight on the SpaceShipTwo, currently costs growth. That's the point that US$250,000 and is capable of reaching more than everyone misses.” 100,000 kilometers above earth, according to the Surely this positive spirit Virgin Galactic website. must have its down days. Thakkar says he has already undergone centrifuge I remind Thakkar of the training, with a 6.5 g-force pushing him back and 3.5 double exodus his family pushing him down to prepare for the flight that will experienced – first kicked travel up to 700 miles per hour. “Amazing,” he says of out of Uganda by Idi Amin, the experience. “Out of this world. The adrenaline is on followed by settlement in a whole new level.” the UK where Thakkar was

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born, then a return to Africa, to Rwanda, where they found themselves in the middle of the genocide and once again had to flee, first to Burundi and then to Uganda as refugees. His family has “lost it all” twice, yet says has no fear it will happen again. “My spiritual leader says you should never drive your car looking in the rearview mirror because you will hit the car in front of you,” he says, referring to Hindu preacher Morari Bapu, whom his family has followed since he was a child. “You can learn from the past but I don't think you should use it as a reflection of the future.”

THINKING BIG AND SMALL

that his journey through life and work has been unique. “There are plenty of people out there who also have that real ambition, but remember everyone has their own path,” he says, noting that leaders such as him will always need a supporting team. “There are entrepreneurs, but there are also intrapreneurs, those people who are entrepreneurs within an organization. I think everyone has their own thing.” While he encourages ambition, he recommends entrepreneurs start small. “Just because you have a big dream doesn't mean you have to start in a big way. I think that's where people go wrong most of the time. They start too T H A K K A R I S AWA R E

“I HAVE SEEN A LOT OF ENTREPRENEURS AND BUSINESSES WHICH ARE ALL ABOUT KNOCKING DOWN THE NUMBER ONE IN A MARKET AND TAKING THAT POSITION. I HAVE NO RESPECT FOR THAT. I DON'T THINK IT IS SUSTAINABLE, I DON'T THINK IT IS PRUDENT, I DON'T THINK IT IS INTELLIGENT.”

big; they try to run before they walk.” “I am a hypocrite for saying this because I have always sprinted before I knew how to crawl,” he adds. “But it is one of those things where you can trip up.” True to form, Thakkar is rapidly pursuing his grandest venture yet. Mara Group is developing an online shopping platform supported by a social media platform, last-mile logistics, and a Mara-branded phone (see page 20). Mara Sokoni, as it will be known, aims to offer Africans access to international brands, but will also allow them to trade amongst themselves on a local, regional, and pan-African scale. When asked how the platform will compete with existing players, Thakkar insists Mara Sokoni is the first of a kind. “This doesn't exist, he says. “As an ecosystem approach no one has done it like this.” “Be game changing, be different, be bold,” he says. “That is what we are trying to achieve in the various businesses of ours.”

DOING WELL AND DOING GOOD

C H A N G I N G ” I S a term Thakkar uses repeatedly, along with an emphasis on fueling African growth. In 2009, he launched Mara Foundation, a social enterprise that supports entrepreneurs, particularly youth and women, with seed funding, incubation, and mentorship. Mara Mentor is an online community that connects entrepreneurs with experienced business leaders. Since going live in 2012, the platform has gathered almost half a million mentees. As Thakkar outlines in his book, the group plans to take Mara Mentor farther, with a full social media portfolio, including an app for communication, one for employers and jobseekers, and another for fashion and entertainment trends. In many ways, Thakkar has become a poster child for African development. Not only does his book focus on the subject, but he is a regular speaker at high profile global events. His CV includes “GAME

Good Advice Thakkar’s tips for growing your business, adapted from his book The Lion Awakes 1. Be Honest There are only takers if there are givers. In other words, bribery is a two-way street. Bribery is a slippery slope, and you open yourself up to compromise and danger down the road. On the other hand, if you refuse to pay a bribe you go some way toward changing a culture.

2. Build Relationships Be authentic, genuine, and respectful to everyone, in whatever position they are, and relationships will follow. I always try to follow up with people whom I have spoken to at an event or a conference who have made an impression on me, especially young people.

not want to move, even if another supplier is cheaper. My relationship matters. Money will follow. Also, stand by your partners, even if they go through tough times.

5. Be a Mentor Help people on the way up. Remember, you were at the bottom once. Also, you never know if you are going to meet them on the way down!

6. Call People Back Take the call, even if you owe people money. My father taught me this. There is nothing more annoying than when someone ignores you. Keep communicating and call them before they have to call back.

3. Take Calculated Risks

7. Have a Long-Term Mindset

When I started out I was fearless, some might say reckless, but largely because I had little to lose. As Mara has grown there are more responsibilities and more is at stake, so plan well when making decisions. When it comes to running your business, governance has to be formal. Eve if you’re family owned (like we are), always act like you’re a public company.

You can’t approach African business as a getrich-quick proposition, at least not anymore. You simply won’t last. People will see you are there for the wrong reasons, and it will come back to haunt you. But if you demonstrate your are in it for the long haul, the rewards – and the money – will follow.

4. Be Loyal Stick with people who have stuck with you. I do

8. Diversify Some countries grow fast then slow down just as fast. You should always prepare for the downturns; if you are

in only one market, you will be hit hard. Operate in several markets and you cover yourself for the downturn or failure of one.

9. Be Patient There is often a lot of red tape in Africa. It’s improving, but don’t always think things will happen instantly or overnight. If you have a long-term plan, and you should, this should not matter. That said, when doing a deal, move fast to tie it up.

10. Get Up and Dust Yourself Off You are going to get knocked down, but you have to keep going. The rewards are there. I know, as my parents do, that nothing comes easy in business. But if you persevere, and do it for the right reasons, you will succeed. 11. Do Good & Do Well Don’t go into business to make money, or at least only to make money. Do it for the right reasons; you have an idea, you want to succeed, you feel strongly about something. Always look after employees and your social commitments. Trust, respect, and being seen to do the right thing will go a long way.

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BUSINESS | MARA GROUP Charles Brewer, Managing Director of Mara Sokoni

“THERE ARE ENTREPRENEURS, BUT THERE ARE ALSO INTRAPRENEURS, THOSE PEOPLE WHO ARE ENTREPRENEURS WITHIN AN ORGANIZATION. I THINK EVERYONE HAS THEIR OWN THING.” Chair of the United Nation Foundation’s Global Entrepreneurs Council, Board Member of New York creative space The Africa Center, and Member the Global Agenda Council on Africa for the World Economic Forum, which named Mara Group as a Global Growth Company in 2010. Harvard Business School has even adopted Mara as a case study for its Program for Leadership Development. “We want to truly change people's lives, and how do we change lives by doing good and doing well at the same time,” says Thakkar, describing the center of his business strategy. He says the growth of private and corporate philanthropy on the continent is encouraging. “I'm just hoping people become bolder in their initiatives and that foundations become bolder in their approach,” he says. “We have a big task ahead of us. There is a lot to do.” The meeting with Thakkar is over and he is back at his desk while I wait for a signed copy of his book. He is checking his phone, but remains so calm it is difficult to tell if he is at work. He is working indeed: “It is very busy with so many people in town,” he tells me apologetically. These “people” happen to include Paul Kagame, who is in Dubai for the Africa Global Business Forum, and who is scheduled to visit the Mara headquarters in less than an hour. I remember this and grab the book, rushing out of the office as quickly as I arrived. Kagame is coming, and Thakkar has a lot to do.

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OPENING SHOP Mara Group is gearing up to launch its online shopping ecosystem, which includes something truly groundbreaking: the first Africanbranded phone. Charles Brewer, the new Managing Director of Mara Sokoni, explains the vision for the new venture

Mara Group will launch Mara Sokoni, an online shopping service complemented by a social media platform, last-mile logistics, and a Mara-branded phone. The ecosystem intends to provide full service to entrepreneurs in need of support in areas such as marketing, distribution, and business advice. “The purpose of this is to truly allow global brands to plug in and sell locally,” says Mara Founder Ashish Thakkar. “But more importantly the purpose is to enable our local brands, local entrepreneurs, and locally made goods to plug in and sell nationally across their own countries and regions.” The group is seeking to raise US$100 million for the project, according to the Wall Street Journal, and Thakkar has brought in power players such as Christian Unger of Partners Group Holding and THIS YEAR, THE

Charles Brewer, previously Managing Director of Sub-Saharan Africa for DHL Express. Brewer, who serves as Managing Director of Mara Sokoni, says he joined the venture inspired by Thakkar’s vision of promoting African business and trade. He notes that the continent has hundreds of thousands of SMEs in need of learning, connectedness, and an effective marketplace. “I would argue it is the most entrepreneurial region in the world,” he says. “I have worked in all of them and I have never seen so many people survive by their own ingenuity and entrepreneurship.” Brewer recalls a Tanzanian woman he once met who struggled to develop a market for her homemade face cream. The Mara Sokoni model would offer an online store for her to sell her product; a phone for her to connect to the platform, and a social media service that offers coaching and the opportunity to build a community around the product; as well as a delivery service to reach customer homes. While existing e-commerce platforms such as Jumia still struggle to make a profit, Brewer insists Mara Shopping will be unique. The model, he says, will offer a shop within a store, similar to China’s Alibaba or Japan’s Rakuten. “We don’t hold the inventory ourselves, we facilitate the brand to reach the marketplace,” he explains. “If you want to buy a t-shirt or a phone, you go onto the website, directly into a store within it.” He admits the model has its pros and cons: “The upside is you can be quicker to market,” he says. “The downside is you have a lot of fakes and copies coming into the market. So you have got to be very careful with your quality assurance to make sure that doesn’t happen.”

MOBILE ASPIRATIONS

is a reason Brewer says Mara is also developing a mobile phone. “Africa has been a dumping ground for poor quality goods,” he says. “You see a lot of second-hand, even third-, fourth-, fifth-, sixth-, seventh-, DEMAND FOR QUALITY

eighth-, ninth-, and tenth-hand goods, whether that be vehicles, clothing, or phones.” In response to this, Brewer says Mara will create Africa’s first home-branded phone. As a “truly pan-African device,” it will feature the Mara lion logo and offer services that Africans favor. Attributes include a focus on trade, mentorship, and SMEs. “I can’t give away the secret sauce just yet, but they will be things that connect SMEs locally and across borders so that they can sell their products online and to neighbors and other countries,” he adds. The group is also staying hush on which companies it will partner with to develop the device, and is set to announce the details in early 2016. From a marketing perspective, the question arises if a local mobile device can compete with international brands such as Samsung and Apple. Africans, after all, are known for being brand conscious. A survey by McKinsey, for example, found that 29 percent of Africans see international clothing brands as more fashionable than local brands. Countries and regions ranked differently, however, with only 17 percent of Kenyans agreeing, compared to 67 percent in Ethiopia. Brewer insists demand exists for a mid-range phone targeted to the African user, regardless of its origin. “The biggest mistake we can make is to think that everybody wants the global brand,” he says, noting that the best-selling phone in Nigeria comes from little-known Chinese brand InJoo. “In this space it is about the value that the product brings,” he adds. “Our aim is to make sure that it is packed full of value and features that the consumer wants, that it is really relevant for the African consumer, and that it creates emotional connectedness.”

DELIVERY ON DEMAND

to create value by adding Mara Xpress to its portfolio, a supply chain division that will focus on last-mile logistics. Brewer says he is MARA ALSO AIMS

using his more than 30 years experience at DHL to develop a model that improves customer experience. “Last-mile logistics and last-mile delivery in the online shopping space globally is a headache,” he says, noting that on average it takes a courier company 1.4 times to deliver a consumer product purchased online. “If you go out for five minutes you can guarantee that that is the five minutes when you come back and find a sticker on your door saying they attempted to deliver,” he adds. “The whole experience is horrific. It is such a waste of life.” Brewer says the company will cut costs and improve service by offering a range of delivery speeds for customers to choose from, as well as narrow delivery windows to reduce the time spent waiting at home. Mara Xpress will also provide the option of picking up packages from local delivery points so customers can collect packages at a time and location that is convenient for them. “We are looking at a vast footprint of retail networks, both formal and informal, and also locker box solutions,” says Brewer. “You can choose to wait to have the package delivered, or you can choose to collect it.” Brewer says his team will launch Mara Xpress in Dubai this January, before rolling it out across the continent. “We have some really hard 'optimizing' yards ahead of us and want to deploy quickly across all African countries,” he says. Nigeria will be the first African market for Mara Sokoni, followed by other countries shortly after. “The real excitement starts with African country number two, three, four, etcetera,” says Brewer. “This is just the start of a new and very exciting chapter for the Mara Group and Africa - the lion awakes.”

“OUR AIM IS TO MAKE SURE THAT [THE PHONE] IS PACKED FULL OF VALUE AND FEATURES THAT THE CONSUMER WANTS.”

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XX | XX

ENERGY & RESOURCES

BURUNDI BREWING International roasters are taking notice of Burundi’s great-tasting coffee. Yet with recent violence and a history of shortchanging farmers, will the country’s production continue? Scott M. Brodie explores widespread violence broke out in Burundi for the first time in a decade. At the same time, US roaster and retailer Intelligentsia Coffee sold 12-ounce bags of Burundi coffee for US$130. Although this offering from Intelligentsia was an outlier (they price most single-origin coffees around US$20), the coffee, which was harvested, processed and exported before violence erupted, illustrates the heights that Burundi's coffee industry can reach. While the ongoing fighting may temporarily threaten the sector, the future looks promising for Burundi's coffee industry – and that is good news for the country. Historically, civil war has kept Burundi from successfully entering the lucrative specialty coffee trade, even though the country is well-suited for growing excellent coffee. Many of the farms have rich volcanic soil, equatorial temperatures, plenty of rain, and altitudes 1,500 and 2,000 meters – conditions well-suited for growing specialty-grade coffea arabica beans. Yet the farms stand unattended because their owners have either fled or been killed. In 2011, less than half of the country's original coffee farms were still active. Burundi's most recent civil war, which lasted from 1993 to 2005 and resulted in an estimated 300,000 deaths, was particularly devastating to the coffee industry. The war's effect on the entire country should not be overlooked, yet its timing was especially harmful for coffee growers and producers. The specialty coffee industry in the IN APRIL 2015,

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Jesse Harriott, (left), owner and roaster for Copper Horse Coffee, described Burundi coffees as having “really nice citrus, floral, and light herbaceous flavors.”

United States grew at a phenomenal rate during the 1990s and early 2000s, but Burundi was unable to take advantage of the expanding market. As Starbucks was hiring tens of thousands of baristas and expanding its footprint in the US, hundreds of thousands of farmers in Burundi had to flee their homes. In 2005, when peace finally came, Burundi was well behind its neighbors Tanzania and Rwanda in the specialty coffee trade. However, with the peace of 2005 came hope for Burundi's coffee industry. Through presidential decree, President Pierre Nkurunziza began reinstituting reforms that were initially launched back in 1992 but suspended when violence broke out in 1993. These reforms, called Projet d'Appui à la Gestion Economique (PAGE) were designed to get the coffee industry out of a “low-quality low -quantity” trap. Prior to 1992, the Burundi government controlled the coffee industry. Families owned and operated the farms, while public agencies oversaw processing, milling, and exports. The law required farmers to sell their coffee cherries only to government organizations, which paid them a predetermined price. In order to remain competitive on the international commercial-grade coffee market, the government kept these prices artificially low. Since farmers only received a low, predetermined price, they had little incentive to grow beans that would command higher prices. Farmers produced low-quality coffee cherries, which earned minimal profits and left farmers with little incentive to grow coffee in the future. Some farmers even replaced their coffee trees with other crops that would at least provide food for their families. Burundi's “”low-quality, low-quantity” problems continued through the 1980s, despite significant investment in washing stations during this time. In theory, washing stations would increase the quality of Burundi's coffee, because the washing process includes sorting coffee beans, discarding bad ones, and properly drying beans to 10 to 12 percent moisture. Authorities, in turn, anticipated higher profits and corresponding increases in production. The increase in production never occured, however, because the government failed to pass profits from higher-grade coffees on to the farmers. Between 1983 and 2007, Burundi exported an average of just

AS STARBUCKS WAS HIRING TENS OF THOUSANDS OF BARISTAS AND EXPANDING ITS FOOTPRINT IN THE US, HUNDREDS OF THOUSANDS OF FARMERS IN BURUNDI HAD TO FLEE THEIR HOMES.

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ENERGY & RESOURCES | BURUDI BREWING

29,400 tons (26,700 metric tonnes) of coffee annually, which was comparable to its production in the 1950s and 1960s. PAGE aimed to give farmers and producers a financial incentive to produce higher quality coffee that could be sold on the more lucrative specialty-grade market by privatizing the coffee industry. The program aimed to privatize the country's washing stations and depulping mills, transform the government agencies into private organizations and let Burundi farmers negotiate contracts directly with producers, wet and dry millers, exporters and roasters – including roasters in the US. By 2005, both Tanzania and Rwanda had instituted reforms similar to PAGE.

ONCE PEACE RETURNS TO THE COUNTRY, THE FUTURE IS FULL OF OPPORTUNITY FOR BURUNDI’S COFFEE INDUSTRY – AND THAT WILL BRING NEW HOPE.

NEIGHBORHOOD WATCH

in 1994 and 1995 that opened its coffee markets to privately negotiated contracts for the first time in 30 years. Tanzania's reforms, however, saw only moderate success. While growers of arabica beans saw their share of export prices jump from 60 percent to 73 percent, the real prices paid to farmers, which are adjusted for inflation, actually declined from 640 Tanzanian shillings (Tsh) per kilogram to 612 Tsh per kilogram. Several outside factors contributed to this muted success. First of all, the legislative change lacked accompanying investment in infrastructure, trees, or human capital. Secondly, the costs of production factors such as materials and labor rose during this TANZANIA PASSED LEGISLATION

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time. Finally, coffee wilt disease hurt the country's trees in 1997, affecting the livelihood of an estimated 70,000 family farms. According to John Baffes, a senior economist at the World Bank, the decline in real prices would likely have been greater without the reforms, but farmers still saw a decline in how much they made per kilogram. Tanzania's example showed that opening coffee markets up to private negotiations helped the coffee industry, but that it required complementary reforms. In addition to legislative changes, the industry was in need of investment and improvement. (Tanzania is currently in the midst of another program that aims to increase its coffee production from 50,000 tons in 2011 to 100,000 tons by 2021.) In the late 1990s and early 2000s, Rwanda faced many of the challenges Burundi would deal with in 2005. The country had been devastated by genocide in 1994 that left 800,000 dead, and its coffee industry was also stuck in the “low quality-low quantity” trap. Between 1999 and 2002, Rwanda instituted the Rwanda National Coffee Strategy, a series of reforms that were more comprehensive than Tanzania's and similar to the ones Burundi drafted in 1992. Rwanda's reforms saw great success, which two examples show. The first cooperative formed in the country sold its coffee for US$0.20 per kilogram in 2002. In 2011, the same co-op earned US$3.50 per kilogram. In 2008, a select lot of Rwandan coffee sold at auction for US$40.00 per kilogram – Rwanda had successfully entered the specialty-grade coffee market. Both Tanzania's and Rwanda's reforms showed that reforming Burundi's coffee industry could elevate it to new heights. Rwanda's program had been widely successful, and Burundi's program was similar to Rwanda's. Although Tanzania had less success, Burundi's reforms were more robust than Tanzania's legislative changes, and Burundi's reforms were accompanied by infrastructure and investment. Burundi already had 133 washing stations from the country's 1980s investment program. Additionally, roasters, importers, non-governmental organizations, and governments began investing in even more infrastructure, and training coffee growers and producers in the country when President Nkurunziza reinstituted the coffee reforms in 2005.

Reforms of Burundi’s coffee industry require complementary investment in infrastructure.

HOPE AHEAD

2008, the publicly controlled Office du Café du Burundi, which set prices for coffee sales, was disbanded. All pricing and contract restrictions had been eliminated, and Burundi's coffee reforms were fully in effect. Almost immediately, Burundi's reforms were a success. Stumptown Coffee Roasters, Dunn Brothers Coffee, Cafe Imports, all respected roasters from the US, purchased Burundi coffee in 2008, as did Schluter SA of Switzerland. Olympia Coffee Roasting Company in Olympia, Washington has an ongoing relationship with Long Miles Coffee Project in Burundi. Jesse Harriott, owner and roaster for Copper Horse Coffee, described Burundi coffees as having “really nice citrus, floral, and light herbaceous flavors.” Roasters in the US are interested in Burundi coffees for these flavors, as well as their body and acidity, which is why so many well-known roasters bought Burundi coffee as soon as the country's reforms were fully in effect. Although they have been successful, the reforms in Burundi are not perfect. Coffee production fell to around 11,000 metric tonnes in 2014, down from 23,000 in 2013 and 18,000 in 2007. More coffee can be processed domestically and traceability to specific farms can be further improved. The immediate interest in 2008 and more recent offering from Intelligentsia, though, show that Burundi's coffee future is promising. Burundi has the resources and infrastructure to produce great coffee and it has the policies and systems in place to let farmers compete on the specialty-coffee market. Harriott sums up the state of Burundi's coffee industry well when he says, “more investment would be good.” There is great potential for Burundi's coffee industry, and that potential is worth investing in. The recent violence incited by President Nkurunziza's attempt to secure a third term as president poses problems for Burundi and its coffee industry. Already, 240 people in Burundi have died, and around 200,000 more have fled to Tanzania and Rwanda. Moreover, dangerous travel conditions will deter foreign roasters and importers from going to remote coffee farms. In the midst of the current violence, there may be hope for the coffee industry. First, there are signs that the current conflict may be a short battle that sets the country and coffee industry back temporarily, rather than a long, more devastating civil war. International governments and organizations are already either taking or pre-

O N D E C E M B E R 1 7,

paring to take action: The US and EU have placed sanctions on President Nkurunziza and select leaders, and the UN Security Council is watching the situation closely. Also, the battles being fought now are over President Nkurunziza's claim to a third term, not over tensions between the Tutsi and Hutu, such as those that fueled Burundi's last civil war and the 1994 genocide in Rwanda. Both Tutsis and Hutus oppose President Nkurunziza's claim to a third term. Secondly, of the 200,000 that have fled to Tanzania and Rwanda, many are coffee farmers. As part of the diaspora, they will see coffee farms and talk with fellow growers in Tanzania and Rwanda. Burundians will get a glimpse of what coffee could do for their country. When there is peace and they return home, not only will they have the infrastructure and systems in place to profit on the specialty-grade coffee market, but they will also have inspiration. (Because the reforms had such quick success and a lot of outside investment, it is unlikely that whoever is president next will repeal them.) Thirdly, the quality of Burundi's coffee continues to be ideal for growing specialty-grade coffea arabica beans, which command the highest prices. Throughout all of Burundi's violence, the country's land has always been there. When violence settles, the land will still be there, ready to grow great coffee. It will take time for Burundi's coffee industry to recover from this year's conflict, but the sector's future still looks bright. In a country where 80 percent of export earnings come from coffee and 50 to 75 percent of the population relies on coffee for their income, a promising future for the coffee industry is a promising future for the country. When the conflict is over, the coffee industry will come back. As it grows, it will provide a more stable economic situation, which should lead to more peace. “People are just getting to know what's from there,” Harriott says of the Burundi coffee market. He is speaking of roasters and coffee drinkers in the US, but the same may be true of farmers and producers in Burundi itself. Once peace returns to the country, the future is full of opportunity for Burundi's coffee industry – and that will bring new hope.

BETWEEN 1983 AND 2007, BURUNDI EXPORTED AN AVERAGE OF JUST 29,400 TONS OF COFFEE ANNUALLY – WHICH WAS COMPARABLE TO ITS PRODUCTION IN THE 1950S AND 1960S.

Brodie is a freelance writer who spent eight years working as a barista in coffee shops, where he learned to love African coffees. w w w. t h e c o n t i n e n t m a g . c o m

TELECOMS | ROOM FOR REVOLUTION

TELECOMS

ROOM FOR REVOLUTION Africa, particularly East Africa, is well ahead of the rest of the world when it comes to mobile technology. Competition to retain disloyal customers may suggest market saturation, yet under-served markets such as mobile banking in South Africa and niches such as retail and healthcare offer further potential, writes Jeremy Daniel a South African who has been living in Nairobi for the last two years. In South Africa she used her mobile regularly, but she was unprepared for the mobile sophistication of East Africa. Now, every time she steps out of her door, she lives the mobile revolution that has transformed life in East Africa for everyone. Taylor admits that she uses the mobile banking application M-Pesa every single day. “When I go to the local supermarket I’ll pay via M-Pesa, then I may buy some chicken food on the side of the road, pay my nanny for looking after the children and even hire MEGAN TAYLOR IS

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an electrician to come and fix something in the house. All without using any cash at all. M-Pesa has changed everything,” she says. The mobile phone has become ubiquitous throughout Africa and has arguably done more than any technology in history to uplift people and create new economies that are changing the face of the continent. Competition is fierce amongst mobile providers, retailers, app developers, and all sectors of society and business to secure topof-mind awareness with consumers. According to loyalty marketing and

customer relationship management analysts ICLP smartphone penetration in the Middle East and Africa is expected to double from 67 million in late 2014 to 112 million during 2016, making it the second largest mobile phone population of any region. It is clear that the stakes are high and that there is incredible potential to be tapped on a continent where economies are growing at a strong pace and creating an emerging, strong middle class. While the large mobile providers all spend big money on trying to grow customer loyalty, anecdotal evidence suggests that consumers are not brand loyal when it comes to their providers. “It is not unusual for ordinary people to have two or three phones, with different contracts from different providers,” explains Taylor. “Depending on the time of day or the special offer that is running, they will switch between phones to make use of free data or cheap, bulk messaging options, even free airtime minutes, in order to save money.” The volatility of the market and the lack of loyalty amongst users comes down to the fact that the entire system is run on pre-paid subscriptions. In 2013, 98 percent of Kenyans used the pre-paid option for their mobile use. This fact, coupled with the ubiquitous use of services such as Whatsapp and Facebook Messenger have increased the pressure on mobile providers seeking to deliver profits to shareholders. The largest mobile player in Africa is the British-based multinational Vodafone, which owns 65 percent of African operator Vodacom and 40 percent of the Kenyan-based Safaricom, as well as other Vodafone-branded businesses in Ghana and Egypt. Worldwide the company has over 430 million subscribers, giving it tremendous power and the ability to undercut many competitors. The Indian-owned company Airtel is the next largest on the continent with operations in nine African countries and a subscriber base of 227 million users. The largest indigenous African operator is South Africa’s MTN group with a base of 150 million subscribers, particularly in Nigeria, South Africa, and Ghana.

UNLIMITED BANKING?

mobile landscape in Africa has been profoundly transformed by Kenya’s mobile banking juggernaut M-Pesa. Its reach extends not only into the world of mobile technology but touches on all aspects of life in East Africa. The money transfer and micro-financing service was launched in 2007 by Safaricom in conjunction with Vodafone and quickly became the dominant player in mobile transactions. It has even spread beyond Africa to India, Afghanistan, and Eastern Europe. According to SAP Africa Chairman Pfungwa Serima more than a third of Kenya’s GDP flows through M-Pesa mobile payments and money transfers. One of the greatest benefits to the Kenyan way of life has been the seamless move away from a largely cash-based society and into a more formal financial system. While M-Pesa has been a runaway success and a commercial juggernaut in much of the continent, it is interesting to note that it has failed to achieve the same success in South Africa, where Vodacom has attempted to launch the service three times with rather insipid results. Analysts speculate that this is due to the fact that South Africa already had a sophisticated banking system which had launched a number of products catering to the lower-income groups before M-Pesa’s arrival. In addition, one of the major food retailers, Shoprite, has a countrywide money transfer service which is deeply ingrained in the culture. The South African legal system also makes it difficult for foreign nationals to operate outside of the banking system here. Mobile banking is big in South Africa, but M-Pesa is yet to find a way to make the kind of impact they are used to making. THE

HEALTHY GROWTH

not only in banking where Africa’s mobile culture is making waves. In the area of health too, mobile technology has changed the way things are done. From medical helplines to appointment IT’S

reminders and “telemedicine,” Africa has developed many initiatives using mobile technology. ChildCount+ is a mobile organization using standard text messages to monitor newborn babies’ development, co-ordinate mothers and health-care workers and register new babies. Founder of ChildCount+ Matt Berg explains the choice of text messaging (SMS) as a platform. “For health interventions, while SMS is more expensive then data, the use of toll-free SMS numbers allows us to control costs centrally which is critical as it means we don’t have to try and manage credit with our end users,” he says. “They can participate without any incurring any costs. It is usually the small things like this that actually pose the biggest challenges when implementing projects.” In recent days, Kenyan startup MitiHealth received notice that it had been awarded a US$100,000 grant from the Bill and Melinda Gates Foundation in order to expand the use of mobile tools amongst Kenyan private health providers. Developed by Standford University students who had worked in the Kenyan healthcare sector, MitiHealth’s software “allows users to record sales, manage inventory, generate reports, reorder medication, and receive special offers through the platform.”

EASY SHOPPING

next frontier for mobile penetration appears to be in the retail sector, a part of the East African economy that is poised for explosive growth over the next few years as the middle class starts to mature and international brands stake a claim to the burgeoning market. Omnichannel is the buzzword of the day, and appears to be something East Africans will embrace readily. Imagine a consumer sees a product that she likes on Instagram, then a few days later receives an email newsletter from the store telling her that product is on special. She asks her Facebook friends if they have any experience of the product and receives a few recommendations. Finally, she goes into the shop to purchase the item and while there, notices THE

an iPad displaying other goods that she wants so she picks them up too. Omnichannel marketing, with its seamless integration of digital and real-world commerce, is suited well to the African lifestyle. “The modern consumer is enlightened and mobile, unlike the old, traditional retailer which still dominates the market,” explains Titus Korir, Founder and CEO of Retail Insight East Africa. “Technological innovation within Kenya, such as the mobile payment platform M-Pesa has made retail management easier with its integration to banks and suppliers.” NewMediaFarm is one such app developer who is ready to make this a reality in Kenya. The company produces mobile loyalty cards for customers that live on smartphones rather than in the wallet, mCoupons to offer consumers’ special offers, as well as mobile barcodes for any products or business processes you can think of. From “increasing brand awareness to create a personal relationship with your staff to tracking customer activity, viewing staff locations, and running reports from your online admin panel,” it is all a matter of delivering a better shopping experience for mobile-savvy consumers explains New Media Farm on its website. As Suzie Kotabi, founder of online beauty retailer Suzie Beauty says, “Online is growing rapidly as a retail channel and has a huge potential in Kenya and Africa as a whole.” The mobile revolution is well and truly entrenched in Africa, but the sense of enthusiasm and passion that this lifestyle-shifting technology evokes in people points to the fact that there is still room for much innovation and application. Africans are proudly taking the mobile tools available and shaping products and services that solve local problems and, in the process, create industries that are changing the face of the continent. Daniel is a freelance journalist living in Cape Town, South Africa who writes primarily about the disruptive power of mobile technology in Africa. w w w. t h e c o n t i n e n t m a g . c o m

GOVERNANCE | JOHN POMBE MAGUFULI

WHAT WOULD MAGUFULI DO? The explosive debut of the new Tanzanian president ushers in a wave of hope, writes Anthea Rowan time since his inauguration in November as Tanzania’s fifth president, John Pombe Magufuli has become a sensation. Social media, the press, and neighboring countries are all buzzing with conversation about him and his unorthodox approach. Online, under the hashtag #WhatWouldMagufuliDo, ordinary Africans have been poking fun at the effects of the unexpected austerity measures he has imposed on the elite. Meanwhile, the press run stories with dramatic headings such as “Magufuli Makes Radical Changes,” “Magufuli Strikes Again,” and “Outrage in Tanzanian Elite as Magufuli Intensifies Rwandanisation” – as his new policies are compared to Rwanda’s popular, and globally respected president, Paul Kagame. Neighbors in Kenya and Malawi look to the new leader admiringly, comparing his corruption-busting plans with their own leaders’ apathetic approaches. Kenya’s Star newspaper recently observed that “Kenyans are aghast online at the Tanzanian Tornado that is newly installed President John Magufuli,” while Malawians “shun uninspiring President Mutharika, and turn to Tanzania’s Magufuli” beneath which a reader has commented, “if presidents IN THE SHORT

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were imported like equipment, Malawi would have imported the Tanzanian leader to do some patching in a government that has failed us.”

THE BULLDOZER

D R . J O H N P O M B E Magufuli has been a member of the ruling party, the CCM, since 1977. He was elected as a minister in 1995 and then as Works Minister in John Kikwete’s outgoing government in 2000, where he earned the nickname “The Bulldozer” – not just for driving a program to build roads to service parts of the country previously hampered by poor access, but for his single-minded determination to see jobs through to the end. His position in executing mega infrastructure meant he had access to millions of dollars – as one ex-PM observed, “he could have been the richest politician in the country” – yet his reputation remains unblemished. A devout Catholic and family man with five children, he holds a PhD in Chemistry from University of Dar es Salaam, and was a math and chemistry teacher before he entered politics. He says he believes fervently in a foundation of hard work; one of his campaign slogans

that has stuck is “Hapa Kazi Tu,” meaning “We are here to work.” But Magafuli has never been part of the CCM inner circle. His candidature for presidency surprised people and enraged the other main contender, Edward Lowassa, an ex-Prime Minister with a muddied reputation, who, upon losing out to Magufuli, was so indignant that he neatly hopped the fence and joined Chadema, the opposition party which ran a close second with 40 percent of the votes. If Magufuli’s candidature was the first big surprise, he has followed with more. The population at large has been hugely inspired by his actions since assuming the presidency. Even those who didn’t vote for him admit that “for so long we have watched the government grow fat whilst we had nothing to eat.” But those in cabinet are less thrilled at Magufuli’s pronouncements and explosive presidential debut. Within days of being inaugurated, Magufuli personally visited government offices and the largest hospital in Dar es Salaam. Officials who weren’t at work on time were quizzed as to why not and, in some cases, fired. Civil servants are less tardy now; as one observer noted: “For the first time ever, they have to get to work at 8 am like the rest of us, not wander in mid-morning.” The hospital had long out-of-service equipment repaired within days and Magufuli, who insisted on access to parts of the hospital not usually visited by VIPs, was appalled at the numbers of patients who lay on hospital floors awaiting treatment. He promptly fired the hospital’s Executive Director and slashed a parliamentary budget for a cocktail party by more than 90 percent from US$127,000 to less than US$12,000, then promptly used the saved cash to purchase mattresses, sheets, blankets, stretchers, and wheelchairs which were delivered to the hospital within three days of Magufuli’s visit. Tanzanians were amazed, but Magufuli was just getting started. He promptly declared that, seeing as Tanzania was well represented worldwide by ambassadors, the need for expensive

overseas travel was mostly voided, thus saving the budget more than US$50 million. He himself has only travelled abroad six times over the past twenty years and explained that, apart from being a necessary austerity measure, it was imperative for civil servants to remain in country and visit their remote constituents in order to comprehend the challenges faced by ordinary Tanzanians. He has already demonstrated a clear understanding of the valuable role women play in the country. He selected Samia Suluhu Hassan, a woman, as his running mate during the campaign, which drew female voting support and then named her as Tanzania’s first female Vice President. His newly appointed Prime Minister, Kassim Majaliwa, a little-known, hardworking, and modest teacher, bears many of Magufuli’s traits and is free from any trace of corruption. While the country’s elite was reeling from the changed political climate, Magufuli declared that Independence Day, December 9, usually celebrated with a fanfare of expensive pomp, ceremony and speeches would instead be a national cleanup day, particularly in light of recent cholera outbreaks. Magufuli justified his decision by announcing that “it is totally unacceptable to celebrate 54 years of independence while people are dying of a preventable disease.”

demoralized by the scale of Tanzania’s corruption? His response to lazy civil servants who are characteristically unbothered to get to work on time inspired an eager District Commissioner (DC), Paul Makonda, to lock twenty of them up after they arrived late for a meeting. Human rights groups criticized his act, insisting that rules need to be observed: “If someone does not show up for work, then we have to follow the laws and procedures we have,” says Onesmo Olengurumwa of the Tanzanian Human Rights Defenders' Coalition. Lack of punctuality and long tea breaks are a persistent source of complaints from citizens seeking services from public offices so the DC’s action understandably drew nationwide support from ordinary Tanzanians. It also meant that the same group of people arrived two hours early for the next meeting. But the primary hurdle to Magufuli being able to sustain the pace will likely be that not enough public servants exhibit the same vigor as the enthusiastic Makonda. President Magufuli is clearly determined to implement radical reforms, yet he has inherited a public service which has steadily deteriorated into a shambolic, corrupt state over the past twenty years. “I cannot tell to what extent President Magufuli understands that the public service machinery is in disarray and whether it has the capacity to implement his plans,” says a retired permanent secretary anonymously. The modus operandi which Magufuli has adopted in his new role is unfamiliar in government circles who no doubt anticipated that the comfortable status quo would sustain. A sound, supportive public service is vital to Tanzania’s future, and whether Magufuli can re-invent this will be the real test of his abilities and the only way to maintain the country’s growing momentum.

WILL HE BURN OUT, OVERWHELMED AND DEMORALIZED BY THE SCALE OF TANZANIA’S CORRUPTION?

A CAUTIONARY TALE

inspiring as Magufuli’s busting idle hospital executives and shaking up the Ministry of Finance are, though, no man can sustain the energy of such micro-management. Will he receive support in maintaining a similarly dynamic, disciplinary approach by his cabinet, many of whom will be adversely affected by recent policies? Will he burn out, overwhelmed and AS EXCITING AND

Turning to Uganda Museveni versus the rest On February 18, Ugandans head to the polls for critical presidential and parliamentary elections. The winner of the presidential election will preside over the nation through to 2021. Having led Uganda since 1986, President Yoweri Museveni is clearly the most experienced of the eight candidates seeking office. However, opposition to the incumbent is strong with many believing that change has finally come in the form of one of the other candidates: Amama Mbabazi, Abed Bwanika, Benon Biraaro, Venansius Baryamureeba, Joseph Mabirizi, Faith Maureen Kyalya Walube, and Kizza Besigye. Although Western nations like the US have recently criticized Africa's “life-long presidents,” there is a high chance Museveni will hang on to power. Syria and other pressing matters have the world’s attention and Museveni's tactical savvy has won him the vote many, many times before. If Museveni remains in office, the climate of politics and business is likely to remain business as usual. If one of the formidable challengers manages to make history and oust the incumbent, however, then a new day will dawn in Uganda. The hope for a post-Museveni Uganda is that the new leader will finally exploit the nation's oil reserves, a prospect that, according to the World Bank, could “pull the country up from an average per capita income of about US$572 in 2013 to middleincome territory within a generation.” In addition, change could mean a reduction in the bureaucracy, which would pave the way for greater investment and business opportunities. But change can also prove to be a wild card, and it is still uncertain if Ugandans are ready to accept the unknown over the familiar.

Rowan is a Nairobi-born freelance journalist based in Western Tanzania. w w w. t h e c o n t i n e n t m a g . c o m

RESOURCES | TEFF

NEW MARKETS FOR ANCIENT GRAINS Ethiopia has lifted the ban on teff in the hope to boost exports. Yet the government proceeds with caution out of concerns price increases will harm the poor, writes J.A. Young

Ancient Beginnings Nourishing sustenance, and beer

While teff has enjoyed a long history nourishing people of East Africa, it is extremely difficult to grow and has only been successfully grown in the highlands of Ethiopia.

THIS GRAIN IS GOOD FOR YOU

in protein and loaded with eight amino acids and fiber, teff is known to help control blood sugar and boasts high concentrations of calcium, iron, aluminum, phosphorus, manganese, and vitamin C. Being low in sodium, it is also ideal for people who want to lower their blood pressure and maintain heart health. It is also low fat, versatile, tastes great with its telltale nutty flavor, and, of course, is gluten free. Touted as a super food, teff is highly marketable in the global climate where whole grains are proving to be a food trend with staying power RICH

grain which has sustained Africans for centuries looks set to become the new darling of the international whole grains movement. Native to Ethiopia and Eritrea, Eragrostis tef, more commonly known as teff, has been banned for exports by the Ethiopian government since 2006, due to fears that worldwide demand might drive up the domestic price of the grain, which happened with quinoa in Latin America. But this year the government has decided to lift the ban, which could be a windfall for Ethiopia's 6.3 million teff farmers. For export purposes in 2015/16, 6,000 hectares of land is to be cultivated, with an expected yield of 2,000 to 3,000 kilograms per hectare, all of which will be exported. As the international market for gluten-free whole grains grows, demand for teff could signal a major new export for the Ethiopian nation. While teff has enjoyed a long history nourishing people of East Africa, it is extremely difficult to grow and has only been successfully grown in the highlands of Ethiopia; although recently, some farmers in Spain have had a degree of success. For this reason, it is still little known outside of the region, although that may be about to change. T E F F, T H E A N C I E N T

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FEEDING THE GROWING DEMAND FOR TEFF

has been making inroads into Western markets via the Ethiopian diaspora. Diaspora communities have long enjoyed teff products that were not banned for export, but are certainly part of the growing demand for raw teff. This grain is traditionally used by Ethiopians to make Injera bread, for instance, which is eaten regularly and used to scoop up stews or consumed on its own. As worldwide demand for this ancient grain ramps up, Ethiopia will need to closely monitor exports to ensure that its growers don't suffer as many of quinoa's poor growers have. In poor regions of Bolivia and Peru, quinoa proTEFF

Injera or taita is a sourdough-risen flatbread with a unique, slightly spongy texture. Traditionally made out of teff flour, it is a national dish in Ethiopia and Eritrea.

duction has led to land conflicts. Such issues led directly to the government of Ethiopia banning exports back in 2006. Although the ban has been lifted, officials still fear that demand for teff will cause increases in price that make it impossible for the nation's poor to afford. As it is, most small-scale farmers already sell the bulk of their crops to cities and reserve spare portions for themselves. With 20 percent of the nation's young children (aged five and under) suffering from malnutrition, teff availability is a priority for the government which will be monitoring domestic rates closely.

DOUBLING PRODUCTION

US Development Agency reports that â&#x20AC;&#x153;exports are expected to begin in early 2016 with annual totals the first year expected to reach between 6,0008,000 metric tons.â&#x20AC;? As a result, Ethiopia is expected to double its production of teff, but this huge increase is dependent on new planting techniques. While Ethiopia's economy is growing, its position as a developing nation has meant that it hasn't had a lot of funding to steer into teff research and development. The government hopes to use some of the extra teff to support school meals. Analysts with the UN's Food and Agriculture Organization say, however, that THE

People of the Ethiopian Highlands likely domesticated teff around the year 4000 BC or within the centuries just after. Found in storage jugs in the tombs of Egyptian pharaohs, this ancient grain appears to have been exported to surrounding regions quite early on. Regarded as the world's tiniest grain, teff is named after the Arabic word teffa which means lost, probably due to the fact that it is difficult to find if it slips through your hands. While the grain is often used to make injera flatbread, it is thought that pharaohs like Tutankhamen may have enjoyed an ancient beer brewed with teff. Many brewers worldwide are beginning to experiment making teff beer, which is big news to people with gluten sensitivities as teff is naturally gluten free.

the government must make sure that small-growers are supported so that they, too, share in the profits of this large-scale endeavor. Specialty stores and markets in the UK and the US are already carrying teff flour and teff products. While the nation's small farmers are still not exactly poised to bargain with the trade's big players, the hope is they will benefit just as Ethiopia's economy will benefit from the worldwide sales. Moreover, as teff production begins to displace other crops, Ethiopia's agricultural scene will definitely see some shifts, but the government seems to have planned it well and staggered the release of teff onto the world food stage. All that remains is for western palettes to take to this healthy grain that has sustained Africans for centuries and a whole new export industry will be born. Young is a freelance writer with a background in academic libraries and medical research who has written extensively about Africa. w w w. t h e c o n t i n e n t m a g . c o m

XX | XX

LOGISTICS XXXXX | AGILITY | XX

supply chain company Agility will embark on an initiative to build 70 100-acre logistics parks across Africa. Beginning with a facility in Ghana slated for completion in April, the Kuwaiti company will provide facilities for its clients and competitors, with the promise of continual electricity, internet connectivity, and security. Geoffrey White, CEO of Agility Africa, who has spent much of his career working on the continent, says the initiative is necessary to fully tap into market potential. “As someone who has been in Africa for 25 years plus, we spent the initial decades explaining the African opportunity,” he says. “Now everyone understands the size of the markets and the opportunity. They are writing business plans on how to access the market, and the missing link, or one of the many missing links, is international-standard logistics capability to support global businesses.” He notes that multinational investors often complain of lost productivity due to infrastructure issues. “Fascinating how many of our customers I have spoken to who have operations in Africa, but say they spend three days a week trying to get the lights back on,” he remarks. “It is surprising how many multinationals are operating in sub-standard infrastructure purely because they have to.” He describes the planned logistics parks as “little enclaves where things work,” noting that customers will have access to real-time data on their goods. “Our three mantras are: the power will never go off, the internet connectivity will be guaranteed, and it will be secure,” he says. “With those criteria you transform business’ ability to actually do business.” White says the company will be able to provide this by purchasing or long-leasing land from governments and combining global expertise with on-the-ground experience. “This is really replicating what we do for our customers in the US and Europe and the Far East,” he says. “We will build you the same quality infrastructure in

Moving Mozambique

THIS YEAR, GLOBAL

LOGISTICS

SCALING UP CEO of Agility Africa Geoffrey White shares the Kuwaiti logistics provider’s plan for developing 7,000 acres of logistics parks across the continent

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Priority locations for logistics parks in East Africa include Tanzania, Kenya, and Ethiopia.

an African environment and offer you exactly the same services that we offer you around the world.” “We have got businesses within Agility that have been operating within Africa for 60 years,” he adds. “We understand the environment, we understand the operations.” White insists the company will be able to accomplish this without playing into corruption. “The reality is that there is a clear acceptance by every government official… that this kind of infrastructure is desperately needed to support African growth,” he says. He insists bribes are out of the question. “There is no need nowadays,” he says. “It may take a bit longer, but the reality is you just sit there and say ‘sorry we don't do that.’” He notes that on an individual level each development is too small to attract the attention larger infrastructure products receive on the political radar. “In any individual location, this isn't a huge nationally important project,” he explains. “Individually [the parks] have relatively small impacts

on the economy. Collectively, they have a huge impact on Africa.” White says he expects the network of parks to have significant impact on regional and interregional trade. “Regional trade in Africa is minute right now,” he says. “If you look at developed countries in Europe and the Far East, regional trade from country to neighboring countries is about 55 percent of all trade. In Africa it is about 10 percent.” Agility is taking a hybrid approach to the development, building space on demand for customers as well as to lease out later. The company has even made the decision to provide space to competitors. “If DHL want to lease space in one of our distribution parks, or Kuehne + Nagel or Schenker, they are all welcome,” says White. “The reality is that in Africa the market is growing so quickly and the lack of infrastructure is so huge that often competitors work together to help bring solutions.” Multinationals are not the only target customer, with local SMEs expressing interest. White notes that his first customer in

“IF YOU LOOK AT DEVELOPED COUNTRIES IN EUROPE AND THE FAR EAST, REGIONAL TRADE FROM COUNTRY TO NEIGHBORING COUNTRIES IS ABOUT 55 PERCENT OF ALL TRADE. IN AFRICA IT IS ABOUT 10 PERCENT.”

White says Agility is moving forward to develop an oil and gas compliant logistics gateway for Mozambique, which is slated to become the third largest natural gas producer in the world. He says the project is crucial, with extraction taking place at the north end of the country and shipments relying on Maputo in the South. “What is missing is a final-mile delivery solution,” he says. “It is easy to bring things from China, Rotterdam, or around the world into Mozambique, but from Mozambique how do you deliver it to the project site?”

Ghana was an African company that was planning to build its own warehouse, but would have had to borrow money from a South African bank at an interest rate of 29 percent. “Now that company doesn’t have to raise that US$5 million itself,” he says. White says Agility will approach the price-conscious, low-quality market with a mid-range offering. “Currently everything is a broken-down old pickup. You can't come in and say here's a Rolls Royce,” he says. “The reality is you are looking for a good Toyota equivalent that is reliable, robust, and provides a step change, but then can be upgraded as markets become more sophisticated.” He says he expects the development to provide margins healthier than in other areas of the world. “Globally, warehousing margins are quite skinny,” he says. “Where you are building the infrastructure and a step change in the market, clearly you can improve those markets.” White says Mozambique is next on the list of developments following Ghana, and that Agility has recently completed an agreement with the government of Angola. Priority markets in East Africa include Tanzania, Kenya, and Ethiopia. The completion of all 70 parks is expected to take five to ten years, says White. “We are hoping to have the first five rolled out by the end of 2016.” w w w. t h e c o n t i n e n t m a g . c o m

RETAIL

RETAIL ON THE RISE International retailers are set to mix up the regional market, posing a threat to traditional stores. Despite the questionable size of the middle class, staggering growth projections mean consumers will further demand quality retail and global brands writes Jeremy Daniel FOR

GENERATIONS,

AFRICAN

growth has been inextricably linked to its vast mineral resources. That process has brought negative and positive consequences to the continent, but following the global crash of 2008, the world sat up and took notice when it was reported that seven of the ten fastest growing economies in the world were African. Naturally that kind of growth has led to a burgeoning class of African consumers with disposable income and this has resulted in tremendous growth in the continent’s the retail sector. Multinational financial advisory firm Deloitte, in its annual report, notes that “a number of forces are converging to make Africa more prominent in the global consumer economy, as an urbanizing and rising middle class drives demand for consumer products and improved services.” Retail growth is premised on a thriving middle class. In 2010, there were 200 million Africans who were considered to be middle class, while projections for 2030 foresee over 355 million. “The middle class are hungry for brands that have an international touch and a strong value proposition,” said Muchiri Wahone, CEO of Kenyan fashion retailer Deacons, at the recent Retail Africa congress in Cape Town, South Africa. The Africa Report backs this up, stating that “international retailing brands are showing a great deal of interest in the opportunities that the growing middle classes can bring.”

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What is good news for multinationals with their eyes on the East African market, however, may be bad news for local retailers who struggle to compete. Wahone speculated that “traditional non-branded stores will feel the heat as more international players enter the East African market.” Samuel Siringi, a lecturer at the University of Nairobi agrees. “Kenya's economy is actually highly liberalized, which has helped to beckon many international organizations,” he says. “As a result, there has been a lot pressure on local firms to pull up their socks to survive the competition.” Investment news from the continent reinforces the sentiment that international players are moving in to this space. South Africa’s Massmart has launched its first mixed-retail Game store in Nairobi’s Garden City Mall to the tune of US$250 million, while the Botswana-based Choppies chain announced the signing of a deal for 10 supermarkets from Kenya’s Ukwala Supermarkets for US$10 million. Furthermore, the French multinational Carrefour will launch its first Kenyan supermarket when Nairobi’s Two Rivers development is completed in 2016.

The Kenyan government’s Vision 2030 is in line with this notion of vast retail potential. The ambition is to create an economy which achieves a GDP growth rate of 10 percent per annum by providing macro-economic stability, addressing the low savings to GDP ratio, as well as increasing foreign investment and overseas development assistance. Infrastructure spend has already increased considerably, and Kenya’s Standard Gauge Railway (SGR), a 609-kilometer line from Mombasa to Nairobi is a case in point. The cost of the line is US$3.6 billion, with 90 percent of the funding coming from the Chinese government and the remaining 10 percent coming from Kenya itself. As the South African online news site The Daily Maverick reports “The SGR is part of the grand trans East African railway project, one of many ‘mega’ infrastructure projects currently under way in that region. It is a direct effort to connect East Africans and their economies, and in so doing build economies of scale, lower the cost of doing business, attract foreign investment, and ultimately accelerate growth and development.” The upgrading of infrastructure has a direct impact on the efficiency of the retail sector. When infrastructure is solid, goods are able to reach markets faster and for a lower cost. This encourages greater retail spend from consumers. Newton Siele, Country Manager of Novo Nordisk explains the significance of these improvements. “The upgrading of the port at Mombasa has facilitated the ease of importation into the country of goods by sea,” he

A REPORT FROM SOUTH AFRICA’S STANDARD BANK SUGGESTS THAT IN KENYA THERE ARE TECHNICALLY ONLY ABOUT 400,000 HOUSEHOLDS THAT COULD BE CONSIDERED MIDDLE CLASS.

says. “Investment in the energy sector has seen increases in power generating capacity, minimizing blackouts and reducing costs of electricity.” Kenya is joined by others in the region in pursuit of mega projects. The Ethiopian capital of Addis Ababa recently saw the completion of a Light Rail Project which is easing traffic congestion in the city considerably and making it more viable for over one million people to get around the city efficiently.

The Deloitte 2015 report cites five key pillars as essential to the retail and consumerist opportunity which is unfolding in East Africa: Africa’s exponential population growth, the rise of the middle class, rapid urbanization, the fast adoption of digital technologies, and Africa’s youth. The population of Africa is now currently around one billion but is expected to add a further billion people by the year 2040. “This popu-

lation increase, combined with GDP growth, and rising household income and purchasing power, makes Africa a very attractive market for investors,” explains the report. Needless to say, population growth consists of predominantly young people and they are the drivers of the retail boom. With a global, connected mindset, the youth sector is demanding an international standard of goods and services. From food to consumer goods, entertainment and clothing, Africa’s empowered youth are no longer content to settle for brands that do not convey their newfound confidence and status. There is a cautionary note to all this feel-good and progressive data coming from the continent. The newly emerging middle class is extremely fragile and not equipped to deal with unexpected economic shocks. A report from South Africa’s Standard Bank suggested that in Kenya there are technically only about 400,000 households that could be considered as middle class, while the Nairobi think-tank, the Institute of Economic Affairs, was even more cautionary. Using a monthly expenditure of US$500 as a base, the institute remarked that fewer than 300,000 individuals could be considered as middle class: “This is hardly a 'middle class. It is a tiny elite on whom the 'Kenya rising' narrative rests. These figures offer a glimpse into an economy whose fundamental structures of inequity have remained unchanged since the colonial era.” Nevertheless, the signs are clear that the retail sector in many African countries is on the cusp of a major boom and is set to become far more of a dominant force in the economic mix of countries. The scourge of terrorism has had a massive effect on international tourism, while the Chinese economic slump has dented the profits from the export of raw materials. Adding a strong retail industry to the economic mix is necessary if Africa is to assume a more developed profile in the global economy. Daniel is a freelance journalist living in Cape Town, South Africa. w w w. t h e c o n t i n e n t m a g . c o m

INNOVATION | HOW AFRICA CHANGED THE WORLD

INNOVATION

Victor Owuor, PhD, sums up nine modern innovations from the continent to forget that Africa was the cradle of civilization. Egypt existed as a unified state from as early as 3150 BC with the ancient Egyptian pharaohs credited with bringing together Upper and Lower Egypt to form a settled, unified kingdom. They gave us the pyramids, considered to be the world’s oldest monumental structures and to this day, a few are deemed to be the largest structures ever built, covering up to 123 acres with sides of 252 yards and a height of 160 yards. The Great Pyramid reportedly built for kings of Dynasty IV in 2500 BC is twice the size of St. Peter’s Basilica in Rome. Much more recently, the African continent has produced inventions and discoveries that the rest of the world greatly values without realizing that they came out of Africa. IT IS EASY

1 OPEN HEART SURGERY O P E N heart surgery has become a common medical procedure today. The first recorded successful human heart transplant was done by the late Dr. Christian Neethling Dr. Christian Barnard Barnard in Cape Town, South Africa on December 3, 1967. On this day a young woman, Denise Darvall, was fatally injured in a vehicle accident and succumbed to her injuries at the hospital where Dr. Barnard was managing a middle-aged diabetic, Louis Washkansky, with chronic heart disease. Denise had the same blood type as Louis. Dr. Barnard successfully replaced Louis’ malfunctioning heart with Denise’s still-beating heart. Louis only lived for 18 days after this procedure, following a bout of double pneumonia, but the procedure

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Mozambique, employing 34,000 people worldwide. In terms of commercial development, coal conversion is experiencing a strong acceleration despite a slump in global energy prices. Sasol remains at the center of the world-leading technology for the conversion of lowgrade coal into value-added synthetic fuels.

2 THE CAT SCAN

axial tomography, or the CAT scan, was developed by South African physicists based at Tufts University in England. The CAT scan uses a computer to take data from several X-ray images of structures inside a body and converts this data into pictures that can be viewed on a monitor. The two physicists, Allan Cormack and Godfrey Hounsfield, created a technique that earned them the 1979 Nobel Prize in the Physiology of Medicine. The process is particularly useful for capturing 3D images of parts of the body such as soft tissue, blood vessels, and the brain. Because CAT scans are able to distinguish tissues within an organ, the detection of organ tear and organ injury for accident victims has become a lot easier and is also the preferred method of diagnosing many malignant tumors including pancreatic, lung, and liver cancers.

COMPUTERIZED

THE DIGITAL LASER I N 2013, Sandile Ngcobo and his colleagues at the University of KwaZulu-Natal in South Africa built a laser that can be controlled and shaped digitally. Prior to this invention, physicists changed the shape of a beam by bolting various beam-shaping devices to the front of the laser. Any change to the shape of the beam therefore, required expensive custom optics. The team found a way to create a device with an inbuilt spatial light modulator that generates patterns electronically, allowing them to change the beam shape at the touch of a button.

SHARK SHIELD M A R I N E sports lovers are aware of the dangers of sharks in oceans. In the 1990s the KwaZuluNatal Sharks Board of South Africa invented a Shark Shield, a portable electronic device that emits an electromagnetic field and is used to repel sharks. Additional iterations of this device meet the needs of a broad range of ocean-users and are available globally. Indeed, Diana Nyad, an acclaimed long-distance swimmer used a Shark Shield device without the aid of a shark cage in her swim from Cuba to Florida.

COAL-TO-OIL EXTRACTION T H E process of creating “oil from coal” comes from Sasol, an integrated energy and chemical company based in Johannesburg, South Africa with operations in 38 countries, including the United States, Qatar, Australia and

www.worldfoodprize.org

HOW AFRICA CHANGED THE WORLD

became a milestone in the field of life-extending surgery. The numerous open heart surgeries since conducted all over the world, owe their success in no small part to Dr. Christian Barnard’s daring act.

DOLOS T H E erosive force of ocean waves are problematic to countries with extensive coastlines. Following

a major storm in East London, South Africa in 1963, two harbor engineers, Eric Mowbray Merrifield and Aubrey Kruger, developed uniquely shaped concrete blocks that “did not break up when struck by sea; that were cheap; and did not require precise placement.” The blocks known as “dolos,” are made from a concrete material in a complex geometric shape and weigh up to 20 tons. Dolos are now used in the United States to control erosion, prevent channel migration, and create and restore salmon habitats, as well as to protect important public infrastructure.

7 TANZANITE A L T H O U G H not technically an invention, is the 1967 discovery of the precious stone Tanzanite outside Arusha, Tanzania is worth mentioning. Tanzanite is a vivid blue and blue-purple gemstone that is similar to a blue sapphire, but with brilliant

violet overtones. A part-time gold prospector, Manuel de Souza, stumbled upon the stone, which was later identified by a Tanzanian government geologist, Ian McCloud. Tiffany’s, which sought to capitalize on the gem’s rarity, renamed it Tanzanite. In 2002, the American Gem Trade Association chose Tanzanite as a December birthstone.

8 M-PESA T H E success of money transfer system M-Pesa has captured global attention. Launched in 2007 by Safaricom, M-Pesa usage has exploded. It is now used by more than two thirds of the Kenyans and provided 20 percent of Safaricom’s revenue in 2014. Originally designed as a mobile platform to allow micro-finance repayments, it was later broadened to become a general moneytransfer scheme that has since been replicated in many other countries. With M-Pesa, people in urban areas can quickly and effortlessly send money to those in rural areas. M-Pesa enables cashless merchant payments and trade between businesses and their customers while improving efficiency, and is now the preferred avenue for paying bills for most Kenyans.

Dr. Monty Jones

9 NEW RICE FOR AFRICA T H E continent’s growing need for rice has led to the development of New Rice for Africa, or NERICA. Although traditional African rice has been in cultivation for at least 3,000 years, these varieties have had relatively low yields. The need for improved food security has been a critical issue for many African countries. To reduce dependency on imports, the NERICA Project under the direction of Dr. Monty Jones, a renowned plant breeder from Sierra Leone, created a rice species which has high growth with low uptake of water making it suitable for long periods of cultivation in dry environments including Asia and Latin America. The adoption of NERICA by rice farmers is expected to save tens of millions of dollar every year. For his efforts, Dr. Jones was named a co-recipient of the 2004 World Food Prize. Owuor is a Research Associate at One Earth Future Foundation, which leads initiatives to improve systems that prevent armed conflict. A Kenya native, his research focuses heavily on East Africa. w w w. t h e c o n t i n e n t m a g . c o m

HOT SPOTS

THE TOP FIVE CITIES TO DO BUSINESS IN EAST AFRICA The African continent boasts a number of thriving, up-and-coming commercial centers that are creating a buzz in both domestic and international business sectors. Some of these markets are based in East Africa and with their fast-improving business infrastructures and untapped potential, these cities are poised for expansion and already attracting startups and investors. If you or your business are searching for an East African location to launch or expand, then be sure to consider the pros and cons of each of these five cities. KIGALI, RWANDA RWANDA'S RENEWED

P O L I T I C A L stability and a government which is firmly behind the private sector have made Kigali one of the most talked-about places to do business in East Africa. The capital city has been dubbed the easiest place for doing business in East Africa because of some revolutionary reforms regarding tax breaks, credit approval, and construction deals. The World Bank cites these reforms as a primary reason for the nation's

NAIROBI, KENYA

A S O N E O F the most sophisticated and developed urban economies in East Africa, Nairobi is rich in natural assets and human resources and is strategically located to facilitate local and international business. As Kenya's capital and largest city (as well as the largest city between Johannesburg and Cairo), Nairobi's presence on the list will come as no surprise – the city is already home to Africa’s fourth-largest exchange. But it hasn’t all been smooth sailing in recent years. Although exports have kept pace with imports, economic growth has dipped in the last few years due to drought, a high inflation rate (October's 6.72 percent inflation rate

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is up nearly two percentage points since August), and various global events which have had a massive impact on tourism. Nevertheless, growth is projected for several reasons. Firstly, the discovery of oil, gas, and titanium is destined to spur growth in the mineral commodities sector. Secondly, Nairobi's information and technology sector is set to lead the way in terms of economic growth followed closely by energy, construction, and agribusiness sectors. New businesses and startups involved with any of these industries would do well to closely consider all that Nairobi has to offer.

positive business outlook. At the same time, there are real challenges for business, such as the relatively poor infrastructure and the limited availability (and high cost) of electricity. Kigali is a hub for mobile banking and the finance sector, in particular microfinancing. While tourism has steadily increased in the past decade and helped to fuel the economy, construction in Kigali has also increased. Between 2002 and 2009, the nation's GDP grew by more than 250 percent. Much of this growth is attributed to the new-found ease of doing business in Kigali thanks to effective government reforms and macroeconomic stability.

DAR ES SALAAM, TANZANIA narrowly makes it onto this list, but holds massive potential and a few good reasons to register on the continental business radar. Tanzania’s capital city has DAR ES SALAAM

some compelling developing sectors, like telecoms and ICT, real estate, energy, and agribusiness. Problems include bureaucratic pitfalls which make doing business there difficult, as well as structural problems such as poor infrastructure, intermittent power supply, and a high inflation rate; but the hope is that these issues will be dealt with in the short term and the new president, John Magufuli is ushering in a new era of hope in the country. Tanzania’s economy has already begun to enjoy more government support in the form of incentives for domestic and international investors. Its stable political environment makes it extremely enticing for businesses looking to establish themselves in the region. Finally, with plenty of human resources and natural resources just waiting to be tapped, the city is poised for growth in ways that are appealing to business.

ADDIS ABABA, ETHIOPIA THE CAPITAL AND

largest city in Ethiopia, Addis Ababa boasts a diverse economy, and this is easily one of its greatest strengths and the reason for its recent influx of investors and startups. Although poverty is still a challenge facing the city, new high-rises hint at the wealth that has been seeping into the city. In fact, a recent report by CNN stated that Ethiopia represented the “optimism” of the continent and its growing prosperity is a sign of good things to come. With a 10.8 percent economic growth rate, good things have started happening in Addis Ababa. Challenges for businesses still exist –infrastructure is

still relatively poor and tax assessments are inconsistent, but experts believe that sectors such as agriculture, hydroelectricity, and fisheries all have significant growth potential. Moreover, rising incomes, abundant human resources, and an excellent transportation network will all play integral roles in the city's projected business growth.

KAMPALA, UGANDA OFTEN REFERRED TO

as the “pearl of Africa,” the Ugandan capital city of Kampala has experienced a steady rise in GDP – to the tune of 6.3 percent – since 2012. With its large population (two million) and an inexpensive labor base, Kampala is proving attractive to many businesses hoping to lay down roots in East Africa. Limited available credit and the slow development of infrastructure remain as hurdles to doing business in Kampala, but public investment, according to the World Bank, is likely to drive the economy solidly forward. Despite being one of the least developed countries in the world, Uganda boasts incredibly fertile land and many natural resources that are helping to fuel the nation's various industries. There is no doubt that the business sector in Kampala suffered stumbling blocks in the past due to political instability and the government's poor fiscal management, but those problems appear to have been ironed out and forecasters are confidently predicting steady economic growth.

w w w. t h e c o n t i n e n t m a g . c o m

LASTWORD

Meeting in the Middle Paul Okaru, on the virtues of patient capital S M A L L -T O - M I D - R A N G E

P R O J E C T S I N sectors such as oil and gas, telecommunications, pharmaceuticals, infrastructure, and manufacturing are critical to Africaâ&#x20AC;&#x2122;s development. These enterprises, however, face considerable challenges in raising domestic funding, particularly due to crippling interest rates from local banks. An example is a US$48-million project we have been involved in to build a 77-million liter petroleum storage tank farm, including a network of filling stations and a fleet of trucks to transport the petroleum. This mid-tier segment, ranging between US$5 million and US$100 million, makes up what we know as SMEs, which are the key drivers of economic growth anywhere in the world. While private equity is on a commendable rise on the continent, this form of investment tends to overlook the mid-tier enterprises due to its stringent qualifying criteria related to enterprise track records and pressure to exit from the investment. Hence, mid-tier enterprises increasingly turn to financiers based in Europe and other overseas markets to secure funding. Mid-tier projects frequently boast good management and capable teams well versed in the nuances of doing business in the local African context, but not necessarily with regards to meeting the financial reporting standards of an overseas private equity financier. We do not expect overseas financiers to reduce their high standard for vetting the viability of a project in a select

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African country; but we also do not expect them to fully apply the same standards and criteria applicable to their overseas jurisdiction to an African context. With this in mind, we would like to see an approach towards the mid-tier segment we describe as a combination of flexible and patient capital. Rather than following strict criteria that are not necessarily applicable, appropriate, or relevant to the African country in question, investors should rather take into account factors such as first-mover advantage, existing competition, and government incentives. Historical performance in other business areas can also indicate potential.. Further, when an opportunity makes good business sense but company leadership is weak, a financier may well decide to bring in a new management team. When speaking of patient capital we do not mean to imply that we expect a foreign investor or financier to be patient in waiting to receive a return on investment: it is realistic to expect a return after one, two, or even three years. By patient we mean that we expect foreign investors to

RATHER THAN FOLLOWING STRICT CRITERIA THAT ARE NOT NECESSARILY APPLICABLE, APPROPRIATE, OR RELEVANT TO THE AFRICAN COUNTRY IN QUESTION, INVESTORS SHOULD RATHER TAKE INTO ACCOUNT FACTORS SUCH AS FIRST-MOVER ADVANTAGE, EXISTING COMPETITION, AND GOVERNMENT INCENTIVES.

take a long-term view of the country selected, and a long-term view of the people they work with and the issues they face. Patient means taking time to understand the environment you are operating in and challenges faced such as infrastructure deficiency and precarious power supply. Such challenges may well increase costs, but may also offer an opportunity to provide a solution and add to your business. You may also be dealing with people who are resourceful in handling a challenging local environment but not necessarily in the Western European or American model of MBA standard management skills. In this context, patience has more to do with the attitude of the investors in question than when and how much money they make.

EAST AFRICAN BUSINESS NEWS AND ANALYSIS

A GOOD IDEA

In our role as business and project development consultants we have found that some enterprises may have good ideas, but that those ideas do not necessarily translate into projects that will appeal to an investor or financier. This offers an opportunity to set up a fund composed of experts from various sectors to provide assistance to early stage projects to bring them to a level where they are investable. As with all early stage financing, the risks are considerable and thus investors may demand higher equity than if they came in at a later stage. With such strategies, the potential for SMEs to participate in projected growth on the continent will over time prove to be well worth the leap.

Okaru is Managing Director of Sub-Sahara

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Africa Ventures Ltd., a specialist business and project development company with a focus on Africa. www.ssavltd.com

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