African Business March 2022

African The B est selling Pan-Af r ican Bu siness Maga zine

BUSINESS An IC Publication

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57th Year

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N° 491

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March 2022

Features Moody’s criticised over African ratings Namibia hits oil and eyes green hydrogen China strengthens lithium grip Kenya finds strong voice in Ukraine crisis Special reports Rwanda targets post-pandemic growth Pandemic shakes up transport & logistics

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Cover story: Africa enters the metaverse 4

Business Intelligence News and deals from around Africa

Cover story: Africa and the metaverse 14 Can Africa enter the metaverse?

Special reports 30 Transport and logistics: Overcoming pandemic upheaval 48 Rwanda: 18-page focus on the country’s growth prospects Focus on Namibian resources 42 amibia hits first oil 44 Namibia eyes green hydrogen future Opinion 20 EU’s Africa pledges fall short 22 Africa must learn to compete with hinese firms 24 How lopsided trade agreements harm Africa

Features 26 SAA and Kenya Airways go into partnership 28 Ghana slams ratings agencies 34 Nigerian growth grinds to a halt 36 Interview: Slim Feriani, CEO, Djibouti Sovereign Fund 38 China tightens grip on Africa’s lithium 46 Nigerian punters bet big on Afcon Countryfiles 66 Nigeria: Can farmers repay their loans?

68 DRC: Mystery over coup plot Obituary 70 Emmanuel Tumusiime-Mutebile, Governor, Bank of Uganda Book review 72 A Bigger Picture

by Vanessa Nakate Editor’s View 74 Kenya slams invasion of Ukraine

4 African Business March 2022

Business Intelligence News

French President Emmanuel Macron has announced the withdrawal of French and European troops from Mali within four to six months. France has been engaged in fighting jihadism in Mali and across the wider region since 2013.

More recently France has been winding down its presence in favour of Takuba, a European task force, but relations with the military regime in Mali have broken down in recent months. “We cannot take action with authorities with whom we cannot agree,” said the president.

The centre of European operations in the region will now shift to Niger, he said.

Turkey’s Erdogan shortens Africa trip due to Ukraine crisis

Africa’s first AI research hub opens in Republic of Congo

Turkish President Recep Tayyip Erdogan prematurely ended his latest Africa tour amid the escalating UkraineRussia crisis. Erdogan, who has made Africa a priority area for diplomacy and investment, cancelled a planned trip to GuineaBissau and returned home from Africa early for talks with NATO leaders. Erdogan was on a three-day trip with cabinet members to the Democratic Republic of Congo, Senegal and GuineaBissau which had been scheduled to conclude on 23 February.

The UN’s Economic Commission for Africa and the Republic of Congo have opened a centre to advance artificial intelligence research to boost digital technology in Africa in the areas of digital policy, infrastructure, finance, skills, digital platforms and entrepreneurship. The African Research Centre on Artificial Intelligence, in the Denis Sassou-N’guesso University of Kintélé, will provide a regional hub for the development of emerging technologies and is the first of its kind in Africa, say the founders.

France announces military withdrawal from Mali

Kenyatta backs Odinga in Kenya presidential race Kenya’s President Uhuru enyatta has o cially endorsed opposition leader Raila Odinga, a one-time rival, to succeed him in the presidential elections set for 9 August. Kenyatta urged his supporters to back Odinga, who he said had the country’s best interests at heart. The endorsement sets Odinga up to run against Kenyatta’s deputy president and former Kenyatta ally William Ruto, who will be seeking the presidency on the United Democratic Alliance ticket. Kenyatta and Odinga fought a disputed election in 2017, leading to a rerun ordered by the Supreme Court after an appeal by Odinga. Odinga ultimately boycotted the rerun, cementing Kenyatta’s re-election.

6 African Business March 2022

Business Intelligence Deals Africa50 invests $20m in PAIX Data Centres The African Development Bank says it will commit $379.6m to the Desert to Power G5 Sahel Financing Facility over the next seven years. The facility, covering Burkina Faso, Chad, Mali, Mauritania, and Niger, aims to assist the countries to adopt low-emission power generation by boosting solar potential. The facility will focus on utilityscale solar generation through independent power producers and energy storage solutions, backed by technical assistance.

Infrastructure investment platform Africa50 has completed a $20m equity investment into PAIX Data Centres. The funding forms the first tranche of AI ’s Series financing by Africa50, which will be used to fund the company’s data centre capacity expansion and growth plans into new African markets. PAIX currently operates two data centre facilities: one in Accra, Ghana, and another in Nairobi, Kenya.

AFDB commits $379.6m to Sahel solar projects

AgDevCo announces $90m package of new funding

Coastline Exploration signs Somalia production sharing agreements

AgDevCo, an investor in early-stage African agribusinesses, has announced a $90m package of new funding from the CDC Group, Norfund and DFC to allow it to grow its investments. Supplementary funding of up to $5.4m has also been announced from CDC, Norfund and the UK’s Foreign, Commonwealth and Development O ce for AgDevCo’s integrated technical assistance facility. The investor says that its existing capital to agribusinesses has directly created or sustained more than 15,000 jobs.

Coastline Exploration, an upstream oil and gas company based in Houston, US, has signed seven production sharing agreements covering offshore, deep water blocks off Somalia. oastline will proceed with plans to explore for oil and gas on the prospects identified in the offshore blocks. The financing arrangements were not disclosed. Chairman Jake Ulrich said the deal paved the way for other oil and gas companies to participate in the current licensing round and negotiate with the government.

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8 African Business March 2022

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Business Intelligence News Africa could secure tech startup funding of more than $90bn by 2030, if policymakers pursue significant reforms to drive growth, according to a new report from the Tony Blair Institute for Global Change, writes David Thomas.

Using data that covers the past six years, the former UK prime minister’s institute projected a business-as-usual scenario versus an improved policyenvironment scenario.

Projected until 2030, the improved scenario sees African startup funding reaching $93.9bn, based on the assumption that gains from the past few years are maintained.

To achieve the goal, governments need to enable more tech financing, cultivate the business environment and strengthen networks, says the institute.

The improved policyenvironment case is based on the compound annual growth rate of venture-

capital funding to Africa between 2015 and 2020.

“Recognising the importance of these ecosystems for jobs and growth, governments are putting in place bold measures to support tech entrepreneurs. With the creation of the AfCFTA, the possibility of a continentwide single digital market is now real. If current positive trends are sustained, and the transformative potential of technology is unlocked, Africa could secure techstartup funding of more than $90bn by 2030,” the report says.

By contrast, based on Africa’s lowest positive year-on-year growth rate of 32% between 2015 and 2016, the business-as-usual case comprises a funding projection of $62bn by 2030. It assumes limited government and stakeholder intervention in fostering the tech ecosystem, a business environment that continues to stifle startup growth, no

significant incentives to attract additional investment and underdeveloped networks.

Startup funding continues to grow

African tech startup funding is now growing at a rate six times faster than the global average: in 2021, $4.9bn was raised, the amount more than tripling in one year. However, cumbersome regulations, the digitalskills gap, limited funding and fragmented markets mean that Africa currently accounts for just 0.2% of the value of global startups.

The report - which says that Africa’s tech sector is at an “extremely hopeful moment” - sets out ten recommendations for “supercharging” the tech startup ecosystem, including establishing a public data-sharing platform on tech startups, developing innovation funds and a fund of funds, developing a panAfrican startup network, and

enabling a supportive policy environment.

“Governments should provide a platform on which investors can access reliable information about tech startups to reduce information asymmetries [imbalance of knowledge between parties]. The near absence of credible public databases on African startups increases the costs of transactions and due diligence while reducing investor confidence and diminishing financing inflows to tech innovators.”

“To connect tech stakeholders from across the ecosystem, and offer a forum for sharing best practice and problem solving, we propose the launch of a “PanAfrican Startup Network”.

The network would aggregate and magnify the views of startups and their stakeholders to directly influence policy as well as establish panAfrican targets for the tech ecosystem.”

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African tech startups could unlock $90bn with reforms

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10 African Business March 2022

Business Intelligence News thiopia generated its first electricity from the controversial Grand Ethiopian Renaissance Dam (GERD) in late February, putting further pressure on negotiations with downstream stakeholders Sudan and Egypt, who claim the hydropower plant will threaten their water supply, writes Tom Collins.

On 20 February, prime minister Abiy Ahmed o cially inaugurated the $4.2bn megaproject, situated on the Blue Nile River in western Ethiopia, which began producing power from a 375 MW turbine. Abiy said Ethiopia had reached a historic milestone with the dam, which with a total capacity of 5.15 GW is planned to more than double the electricity output of Africa’s second mostpopulous country.

“Ethiopia’s main interest is to bring light to 60% of the population who is suf-

fering in darkness, to save the labour of our mothers who are carrying wood on their backs in order to get energy,” he said. “As you can see, this water will generate energy while flowing as it previously flowed to Sudan and Egypt, unlike the rumours that say the Ethiopian people and government are damming the water to starve Egypt and Sudan.”

But Egypt’s foreign ministry said that Ethiopia is “persisting in its violations” of a preliminary deal signed between the three stakeholders in 2015, prohibiting any of the parties from acting unilaterally. Sudan also issued a statement rejecting all unilateral measures in relation to the dam.

The 2015 agreement, signed in Khartoum by all three parties, revolves around 10 principles that lay out the objectives of the

dam, how it should be used, how parties should cooperate with each other and how disputes should be settled.

“The three states will settle their conflicts emerg ing from the interpretation or implementation of this accord by consensus through consultations and negotiations according to the principle of good intentions,” it says.

However, disagreements continued after the deal was signed and the countries have failed to formalise a legally binding agreement, despite successive rounds of talks mediated by the US, the World Bank and the AU. The Blue Nile contributes approximately 85% to the volume of the main Nile River, leading Egypt and Sudan, which both depend heavily on the river for agriculture and irrigation, to see the GERD as an existen-

tial threat. In contrast, the Ethiopian authorities hope that the dam can revive an economy which has been battered by a 15-month conflict in the Tigray region, rising fuel prices and the Covid-19 pandemic.

When the second phase of filling the reservoir was completed last July, former Egyptian minister of irrigation, Mohammed Nasr Allam, said that “what Ethiopia is doing is an aggression and a clear threat to Egyptian and Sudanese national securities”.

Both Egypt and Sudan have made veiled threats of military action against the dam. Egyptian president Abdel Fattah al-Sisi has stressed that there must be a legally binding agreement between Ethiopia, Sudan and Egypt for the rules of dam operation and reservoir filling.

Ethiopia switches on GERD

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12 African Business March 2022

Europe-Africa

The summit of European and African leaders in Brussels on 17-18 February announced an investment package of €150bn for Africa, but did it succeed in its aim of completely overhauling the relationship between the continents?

Charles Dietz reports

Does AU’s ‘renewed partnership’ with EU serve Africa’s needs?

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he sixth summit of European Union (EU) and African Union (AU) heads of state and government concluded in Brussels on 18 February with the issuing of a “Joint Vision for 2030” that aims to consolidate a “renewed” partnership between the two continents.

But while the document promises an investment package of €150bn for Africa over the next seven years along with support for the delivery and production of Covid-19 vaccines, it falls short on African demands relating to gas and fossil fuels, the waiver of intellectual property rights on Covid-19 vaccines, the reallocation of IMF special drawing rights (SDRs) and migration.

Energy

In his speech on the first day of the summit, resi dent Macky Sall of Senegal, speaking in his capacity as chair of the AU, underlined the commitment of African countries to the Paris Climate Agreement, but stressed Africa’s need to continue to develop gas as a source of energy.

“In a continent where more than 600m people live in the dark, our priority as Africans is clearly universal access to electricity and industrialisation.

On this point we expect a great deal from this summit,” he said. “The continent needs to make use of its natural resources and expects a very precise form of solidarity from Europe. That is why we are for the

March 2022 African Business 13

maintenance of financing of the gas industry and hydrocarbons for a fair and equitable energy transition that takes account of the needs of the continent.”

However, while the joint declaration recognises “the importance [for Africa] of making use of available natural resources within that energy transition process” and contains pledges on investing in Africa’s transition to renewable energy, it falls short of recognising resident Sall’s specific demand.

Vaccine production

In the document, the rea rms its commitment to provide at least 450m doses of Covid-19 vaccine to Africa by mid-2022. Europe will mobilise €425m ($478m) to ramp up the pace of vaccination, and in coordination with the Africa CDC, will support the e cient distribution of doses and the training of medical teams while boosting the capacity of analysis and sequencing.

The document also recognises the need to support fully fledged health sovereignty for Africa in order to respond to future health crises. However, its commitment “to engage constructively towards an agreement on a comprehensive WTO response to the pandemic” falls short of the African demands for support of a waiver of intellectual property rights to make production in Africa more affordable.

President Cyril Ramaphosa of South Africa, who has been outspoken in his condemnation of the “vaccine apartheid” that has seen richer countries hoard vaccines, told SABC News that some progress had been made towards a patents waiver during the summit, but that Europe had been standing in the way in order to protect the holders of those rights.

Reallocation of SDRs

In his speech on the first day of the summit, resident Sall said that Africa expected the support of Europe in achieving the reallocation of SDRs. SDRs are supplementary foreign exchange reserve assets allocated by the IMF to member states, which can exchange them for hard currencies such as US dollars, thereby providing governments with greater liquidity. Last August the IMF issued $650bn in SDRs to help countries cope with the pressures caused by the Covid-19 pandemic. However, as SDRs are allocated by size of economy, less went to the countries that need them most, with Africa receiving only $33bn.

Africa, said resident Sall, needs additional financing of $250bn by 2025 to cushion the shock of Covid-19 and aid recovery and wishes to obtain a reallocation from rich countries of $100bn of SDRs. While the joint statement welcomes the $55bn that has been pledged already by rich countries and recognises that several EU member states have so far pledged $13bn, its statement that “[we] encourage more EU member states to consider contributing to this global effort” falls short of a firm pledge.

Investment package of €150bn

Speaking before the summit, President Sall said: “Let’s be blunt. We need money – we need resources to fund the energy transition, to fund the building of facilities and infrastructures, to retain the African youth, to deliver the right training, the right education. And Europe will actually win out of this.”

Left: African and European leaders line up together at the start of the second day of the summit at the European Council Building in Brussels.

The Joint Vision announces an Africa-Europe investment package of at least €150bn over the next seven years, composed of an investment, a health and an education package, which will be delivered through Europe’s Global Gateway scheme.

In infrastructure, the top priority will be energy, with an emphasis on the transition to renewable energy and bringing electricity to the 600m Africans without access to it. Physical and digital connectivity will also be important areas, with more roads, railways and waterways to help the African Continental Free Trade Area realise its potential, and internet connections to help Africa’s young entrepreneurs flourish.

In terms of health investment, in addition to the provision and rollout of Covid vaccines, the investment will take a strategic perspective that goes beyond the pandemic, helping Africa to produce its own vaccines.

There will also be investment in “inclusive and equitable quality education” and “opportunity-oriented” technical and professional vocational education and training.

Such investment may help to develop more possibilities for African youth on the continent. However, the Joint Vision’s statement that “pathways for legal migration opportunities will be further developed between both continents and within Africa” falls short of African demands on solid proposals for legal immigration into Europe.

And while €150bn is an impressive amount, some commentators have questioned how much of it is new: “The figure is a projection based on a combination of grants, loans, and budget guarantees designed to spur more private investment and drawn largely from the EU’s existing 2021-2027 budget”, commented Vince Chadwick, Brussels correspondent of Devex.

Resetting the relationship

“The hope from the European side was to close the summit with a feeling that the region was closer than ever to Africa, including versus China. The problem was it didn’t,” says China-based economist Hannah Ryder in her assessment of the summit on pages 2021 of this issue.

For her, little progress was made by the Europeans in recognising what Africa brings to the partnership or listening to its needs.

Inge Kaul, senior fellow at the Hertie School in Berlin, levelled similar criticisms before the summit. In an article entitled “Pressing the reset button on the Europe-Africa relationship” she argued that the EU’s pre-summit discussion document revealed an ignorance of “now long-standing, often repeated demands for a more effective voice and a partnership of equality” by public and private actors in Africa.

Writing on the same blog, Brussels-based commentator on affairs Shadia Islam criticised the enduringly “paternalistic” attitude of Europe towards Africa, although she also argued that “African elites… will have to take on responsibility for their own part in creating aid dependencies”.

However, for Kaul, the summit saw only hesitant steps towards understanding by European leaders, while African leaders remained business-like in their approach. “If a reset happened, then it was Africa who pressed the button – not the EU,” she told African Business. n

14 African Business March 2022

Cover story: The metaverse

Big tech is pumping billions into its pet concept and African tech companies are taking their first tentative steps, but with costs and tech barriers prohibitively high, Will McBain asks how Africans will be able to participate in the metaverse

Can Africa enter the metaverse?

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s much of the world stayed indoors during the pandemic, there was still somewhere to get dressed up, buy land, and take trips to distant locations. But instead of walking into a shop, meeting an agent or getting on a plane, all this could be done from the comfort of a home. Through the portal of a virtual reality (VR) headset, users can enter the metaverse, a virtual universe made up of different worlds that could have a trillion dollar real world economic impact.

Analysts are predicting the metaverse could be the next incarnation of the internet, with extended reality (XR) technologies like VR and augmented reality (AR) – which merges the digital and physical world – providing an immersive consumer experience.

For its sceptics, the metaverse is a vague concept that muddles our understanding of existing technologies, or a bluff that’s as likely to become real ity as the science fiction novel Snow Crash, which coined the term. A future defined by participation in the digital realm seems even more out of reach in sub-Saharan Africa, where, despite vast improvements, just 28% of the population was connected to the internet by the end of 2020, according to GSMA. Yet the tech giants are taking the metaverse very seriously. Facebook rebranded itself to Meta last October, to reflect its ambitions in the metaverse, and announced 10,000 hires in a new $10bn metaverse division tasked with creating XR hardware, software and content.

In January, Apple’s share price jumped 8% on the same day that CEO Tim Cook announced his firm was investing in the concept. rands, banks

and musicians are all planning their futures in the metaverse, and JPMorgan Chase predicts the concept could eventually realise $1 trillion in yearly revenues.

“The metaverse will take time to develop as its boundaries have not yet been clearly defined,” says Rupantar Guha, project manager for thematic research at GlobalData. “But if the big tech companies succeed, the metaverse will represent a new iteration of the internet, where users will flip through virtual worlds instead of apps and tabs on internet browsers.”

Experts believe the concept will emerge over time as new hardware technologies come to market to enhance the virtual realm, including improvements to graphics, sensors and visual aids. Metaverse users create parallel digital identities through avatars, and can socialise, work, game and shop using cryptocurrencies.

African companies move forward

While much of that may seem a pipe dream in Africa, some firms on the continent are already alive to the possibilities that the metaverse can provide. Nigeria’s Thrill Digital, founded by Delz Erinle and artist Niyi Okeowo, uses AR and VR, crypto and gaming, to create a fashion metaverse.

The firm won a , grant from pic ames, a US video game and software developer investing in metaverse development, to start Astra, a playto-earn crypto game where players try to amass as many tokens as they can within an allotted time to win real-life luxury fashion items.

“The metaverse is built for our virtual selves, the person we’ve crafted on Instagram, or the voice we’ve

Black ownership in

March 2022 African Business 15

Some firms on the continent are already alive to the possibilities that the metaverse can provide

16 African Business March 2022

Cover story: The metaverse

built on Twitter, and so the next step is to have a 3D representation of this self, and to build services around that,” says Erinle.

It’s a rudimentary outline for now, but Thrill Digital’s team of African developers are building a metaverse made up of digital “cities,” where partnered brands can sell digital fashion to buyers wishing to adorn an avatar, or physical items to be shipped around the world.

“In the metaverse it will be like a blank slate, people can be whoever they want to be,” says Okeowo. “Your avatar can be ultra-realistic and lifelike or you can change your hair every day, if that allows you to accept yourself to the fullest.”

Morgan Stanley estimates the virtual fashion market alone could be worth more than $55bn by 2030. Digital couture garments are costing in excess of thousands of dollars as non-fungible tokens (NFTs) provide proof of digital ownership. Nike premiered Nikeland on gaming platform Roblox to reach 47.3m daily active users worldwide, and Gucci recently sold a virtual handbag on Roblox for $4,115.

The digital real estate market

The decentralised metaverse will be built on Web 3.0 blockchain technology – a kind of successor to the mobile internet with financial assets in the form of NFTs generating the cryptocurrency needed to build a digital economy. Crypto has propelled a virtual real estate boom, as buyers snap up parcels of digital “land”. In December, Barbados used cryptocurrency to buy “land” in Decentraland – one of the leading metaverses – to build a new embassy, and Gucci recently paid $2.43m for a plot of virtual real estate to build a virtual store selling digital clothing.

The value of digital real estate is determined by its scarcity and location within each platform: Decentraland, for example, contains 90,000 parcels of land. When all the parcels of land sell out, brands, businesses and virtual event organisers will have to lease the land from the owners. Buyers get a digital receipt of the property with an NFT, and can arrange a mortgage, before contacting a real world architect to design a building.

The architects then send their designs to a 3D modeller to work with coders. Sales of real estate in the metaverse topped $500m in 2021, and it’s expected to double this year, according to MetaMetric Solutions, a consultancy firm. Whether that is rooted in speculation or genuine economic potential remains to be seen, but some African companies are talking up the sector.

In Africarare, Africa’s first metaverse, artist orman Catherine has developed a collection of 3D avatars for consumers to wear. The firm has a plan to build the virtual realm of Ubuntuland, which will contain villages, art galleries and wildlife parks. Land is to be rented or sold for business meetings, art exhibitions, and other events, and the realm will be further developed in collaboration with architects, coders and software developers, says the firm.

“We make special events and campaigns for brands, including a walk-in virtual art gallery for a bank that you can enter with a headset. It’s going to be a way for either a global brand or an African company to own a virtual piece of Africa using these

Big tech firms insist that the metaverse will gradually open up economic opportunities in Africa

March 2022 African Business 17

worlds. It will shift the whole concept of work,” says Mic Mann, CEO of Africarare.

Opportunities for African brands

The metaverse could also provide a significant opportunity for African brands to advertise themselves.

Captive metaverse audiences present a massive opportunity for brands, marketers and advertisers, says Jason Velliquette, executive vice president of digital marketing consultancy R3.

“We need to think about the metaverse as a continuous evolution and journey. And so marketers and brands need to make decisions about how they’re going to participate with this evolution. Amazon already has this opportunity with some products where I can take an AR version of a couch, and see how it fits in my living room. And what about being able to sit in a Tesla and see the entire dashboard and learn the different controls ” In the future, as customers walk through virtual worlds, brands will be able to buy billboard placements, and over time, the metaverse could provide new mediums for storytelling. African brands could invest in sophisticated degree videos for specific ad campaigns, and create full-scale experiences that allow users to interact with a product and influencers.

One of the greatest attractions of the metaverse for early adopters is its decentralised nature, as users take advantage of blockchain technology to enjoy user-owned experiences. The personal information that brands collect could be enormous. Advertisers currently gather information from clicks and time on sites, but in the future they may be able to learn how much time a consumer spends reading a label, or whether they picked up and touched a particular product, while being able to read biometric data like facial expressions and eye movements from headset wearers. That raises the question of metaverse regulation to ensure safety, privacy and standards.

“We expect self-regulatory actions in the emerging metaverse platforms over the next couple of years, but regulators will eventually police these platforms as more countries adopt GDPR-like privacy systems to protect user data from being misused for profits,” says lobalData’s uha.

Future possibilities

But for most African users, getting lost in in a virtual shopping mall or having their biometric data swiped by a company is far down the list of concerns. For all but the most digitally savvy and economically active, accessing this new world anytime soon is unforeseeable. Internet bandwidth speeds lag behind most of the rest of the world, and data prices are high. Only half of Africa’s population has access to 4G mobile internet networks, and sub-Saharan Africa ranks as the most expensive region for mobile data.

Yet as Africa’s population becomes the largest workforce in the world by , big tech firms insist that the metaverse will gradually open up economic opportunities in Africa, pointing to its relevance to the evolving post-pandemic world of work. Derya Matras, Meta’s vice president for Africa, the Middle ast and Turkey, says that work in physical o ces by software developers, architects, crypto accountants, artists, gamers, storytellers, educators, marketers

18 African Business March 2022

Cover story: The metaverse

and project managers will increasingly start to migrate into the metaverse.

“We know there is huge talent here on the continent, and nowhere is it more exciting to witness than in the creative and tech space, with local solutions being created for global problems and challenges,” she says. “We see technology giving people new opportunities every day to become entrepreneurs and content creators, and I believe the metaverse has a big role to play here.”

Meta has deployed its two-year $50m XR Programs and Research fund to build the metaverse, which includes funding for its “Future Africa: Telling Stories, Building Worlds” programme. The programme will see the company partner with Africa No Filter, Electric South and Imisi3D to support creators amplifying African voices and pushing the boundaries of digital storytelling. By using immersive technology such as 360 video, VR, AR and mixed reality, creators can receive funding of up to $30,000 and mentoring from Meta to grow their skills.

“The future of social technology is changing, and so are we. It won’t happen overnight, but over time, the metaverse will unlock new opportunities for people and communities globally and across Africa,” says Matras.

Problems of affordability

Another major challenge is the affordability of technology for consumers. Global research and advisory firm Omdia reported that . m headsets were sold in 2021, and anticipated the market to grow to 70m units sold by 2026. But the best-selling Oculus Quest 2 retails for $299, placing it far beyond the reach of all but a tiny number of African internet users until costs can be further reduced.

Above: Kenyan game developer Nathan Masyuko tries on virtual reality goggles during a gaming expo in Cape Town.

Still, the technology is already finding applications within elite African settings, particularly in higher education.

Louise Claassen, a programme directer at Henley Business School in Johannesburg, has designed courses for her students using them. Claassen has worked with Kenya-based production company lack hino to film African environments using 360 cameras and XR technologies to build global case studies that transport students to cities in Africa and help them to better understand their economies.

“Students experience embodiment, feeling like your body is transported to that other place. For educators it can become a paradigm shift. If you’re studying biology, you can go on a field trip through the heart. And history students will be able to stand on ancient battlefields,” says laassen.

A new way of being

In today’s globalised world, business meetings and conferences could increasingly take place in the digital realm, building on the shift to digital technologies after Covid-19. Microsoft founder Bill Gates has predicted that within three years most virtual meetings will move to the metaverse, where the technology will allow avatars to sit face to face and read each other’s expressions. The pandemic has certainly helped to move this vision along, and it’s a world that Claassen says is increasingly attractive to many.

“Virtual reality allows us to see ourselves in technology again. So for a while people have left with this idea that technology is here to reduce our scope and our role in the world. Once people click into it, the metaverse will give us a new way of being in the future.”n

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20 African Business March 2022

Opinion

L

ast month, a much-publicised summit took place between the EU and AU, ostensibly to chart the two regions’ relationship for the next few years (see also pages 12-13). Postponed for a year, the summit was the sixth in a series that has been ongoing since 2000, the same year that China-Africa summits began as well.

The unusual feature of this summit, however, was the first ever commitment from the to spend a specific sum of money in African countries – €150bn ($168bn) – over the next seven years – that’s close to $25bn a year. To understand the scale of this in terms of public finance, the uropean Investment Bank (EIB), a key EU Development Finance Institution, has invested a total $65bn in the continent since it started operations there in 1965. Or, to understand the scale of the promise in investment terms, the current stock of European FDI in Africa in 2017 was around $250bn, suggesting a significant uptick.

Exciting times perhaps, especially after headlines on the China-Africa summit, held two months prior, which focused on an “underwhelming” $40bn

Even if the EU-Africa summit didn’t bring the two regions much closer together, the potential for a transformed and more equal relationship remains, argues Hannah Ryder

EU’s Africa pledges fall short of potential, but all is not lost

financial commitment from hina over three years (these headlines were wrong, but that’s for another day!). The hope from the European side was to close the summit with a feeling that the region was closer than ever to Africa, including versus China.

The problem was it didn’t. Which means the next steps will be complex, especially on the European side. ut first, why didn’t the emerge “winning”, despite the big money pledge?

Little to no progress

Prior to the summit, African experts and commentators broadly focused on three asks.

First, for the EU to really listen to African demands and anchor new commitments in pan-African visions for the future, such as Agenda 2063 – including the expansion of the African Continental Free Trade Area (AfCFTA) and local manufacturing of vaccines.

Second, for the EU to review and strengthen the commitments already made 22 years ago, many of which have not been fulfilled, such as on trade.

And third for the EU and AU to start moving the relationship towards learning from each other and recognising what Africa brings to the partnership, rather than a traditional donor-recipient framework, including in areas such as migration or intellectual property.

It is possible that in preparing for the summit, the European Commission spent too much time coalescing member states around the financial pledge, meaning that other issues became overshadowed. Furthermore, from the African side, it is also clear that translating the broad asks above into a clear unified position through African Union bureaucracy posed challenges.

That said, even where there were clear African demands – such as on a waiver to enable transfer of intellectual property for local vaccine manufacturing – the summit made little to no progress. Contrast this to a surprise announcement at the preceding ChinaAfrica summit for a donation of 600m vaccines plus 400m locally manufactured vaccines.

Three steps for Europe

So what next for the EU and African countries? Since many African demands and aspirations remain unanswered, three steps now lie with the European side.

Make the financial pledge a reality First, Europe should ideally work hard to make the financial pledge a reality. This will be a challenge, not only because the pledge is very broad – for instance there is no clarity on what proportion is public or private, or a division between sectors it will focus on – but more because of fundamental internal changes it requires.

As mentioned earlier, the EIB, as well as many member states’ banks and firms, already has a footprint in Africa, but it is either fairly small, or where there are larger financial investments they are skewed towards natural resources and extractive industries.

By contrast, Asian counterparts such as China and Japan have delivered on infrastructure. This is partly because institutions that uropean money flows into such as the World Bank, Germany’s KfW or France’s AFD are risk averse and inadequately organised to deliver on regional projects (even in the exciting digi-

March 2022 African Business 21

tal arena) or more focused on policy-related lending.

Being laissez-faire about the financial pledge, even if ex-post monitored, will not deliver.

trade agreement would show the EU recognises that imbalances need to be addressed.

Rebuild trust Second, Europe should also start to work hard to seriously rebuild trust, for example through its approach to intellectual property as well as other issues such as migration. The opportunity on vaccines was there, yet kicked across to Geneva’s World Trade Organisation. Expanding pathways to legal migration are as important as managing refugees. What Europe does in international forums and domestically in the next few months and years on these issues will be watched closely for signs of real shifts.

Can Africans also act? Certainly. Africans should immediately put in place an independent African entity to assess progress on the agreed outcomes of the summit especially the new financial pledge, perhaps via some sort of “EU-in-Africa” monitor.

Africans should also continue to come up with and push ideas such as those above that will make good the intentions of the summit. We can look to Europe’s own policy vis vis other countries to find ideas. For instance, the EU itself seeks to establish geographical indications in markets such as China to raise the value of its own trade – Africans can do the same with respect to both the EU and Chinese markets.

If we don’t articulate our demands, we will never get them. Even if the summit didn’t bring the two regions much closer together, the potential for a transformed and more equal relationship remains. n

Review approach to trade And third, Europe will have to review its approach to trade, which did not progress at the summit, although an acknowledgement of the AfCFTA crept its way in. But the fact remains that Europe’s Economic Partnership Agreements as a bilateral mechanism are divisive and not delivering balanced trade for Africa. Exploring a continental-wide preferential

Europe’s Economic Partnership Agreements as a bilateral mechanism are divisive and not delivering balanced trade for Africa

What can Africa do?

Below: Gabon’s President Ali Bongo Ondimba is welcomed to the EU-AU summit by Charles Michel, president of the European Commission, as Ursula von der Leyen, president of the European Council, and France’s President Emmanuel Macron look on.

Hannah Ryder is CEO of Development Reimagined, an African-led international consultancy based in China.

22 African Business March 2022

Opinion

The onus is on African nations to learn from how China grew the capacity of its local firms during its development phase. African firms have never really been peer competitors, and that needs to change, argues Gyude Moore

Africa must learn to compete with dominant Chinese firms

I

n 2018 the German Network for Architecture Exchange and the country’s Ministry of Foreign Affairs brought together policy and con struction industry representatives at an event focused on Germany’s relationship with Africa.

Part of the conversation was on resolving the question of China’s growing dominance in the African construction market. any uropean firms have lost bids to hinese contractors, with Chinese bid submissions sometimes 20% below European ones. According to the European International Contractors, China took 62% of the African construction market in 2018. This is an incredible reversal of positions, since according to The Economist, in 1990, American and European companies scooped up more than 85% of construction contracts on the continent.

This changing of the construction guard is illustrative of an important, but overlooked, aspect of the Africa-China relationship – the dominance of hinese, and not African, firms in the continent’s construction sector. While the arrival of the Chinese has increased competition and driven down the cost of infrastructure, it has also entrenched the trend of external actors dominating an important sector.

If China is serious about a qualitatively It is time for African better relationship with Africa, this will governments to have to change. China is keen to tout its restructure their “all-weather” friendship with Africa, as was stressed by foreign minister Wang procurement rules to Yi, in a 2020 CGTN interview noting that increase the capacity “China and Africa have always shared and turnover of local weal and woe.” But a shift from European firms to hinese firms at the e pense of the

growth of African ones retains the character of an unequal relationship. The onus, however, is on African nations. They would do well to learn from how China tackled this problem growing local firm capacity during its development phase. Knowledge transfer and building local capacity was a direct function of state policymaking.

As Deborah Brautigam recounts in The Dragon’s Gift, in the late 1970s China turned to Japan to drive its modernisation. It sought Japanese assistance with both turnkey projects and technical expertise for capacity building. Later, through joint ventures and technology licences, the Chinese government ensured that its enterprises built capacity in the areas where they sought assistance.

And while hina has provided significant capacity building assistance, African governments need to zero in on the infrastructure building sector. About 68% of China’s lending to the continent has been in the infrastructure space, so building African capacity in executing complex civil works projects at scale is the natural place to start. On a rapidly urbanising continent, the World Bank predicts demand for infrastructure spending in Africa will be more than $300bn a year by 2040. It will be irresponsible for African governments to surrender this space entirely to hinese firms, but that is the path we are on.

A Business Daily analysis of almost $700m worth of road projects under the Kenya National Highways Authority (KeNHA) with World Bank and Kenyan government financing, revealed that all of the awards were made to hinese firms. p to December , hinese firms “controlled of e A road pro jects.”

It is not unreasonable to suspect that this is indicative of China’s share of construction markets in many countries across the continent. However, it is important to point out that the requirements of African governments as expressed through procurement rules inadvertently ensure this dominance.

When hinese firms first arrived in Africa two decades ago, they occupied a niche where they were cheaper than their European counterparts, if lower on uality, but better than local African firms. Over time, they have matched uropean firms on uality while besting them on price, essentially edging out the uropeans. African firms have never really been peer competitors, and that needs to change.

Governments can do more

As a former minister of public works in Liberia, it is easy for me to see how and why hinese firms con tinue to see their market share grow. Our procurement rules are designed to extract as much value as possible for every dollar spent. We require bidders to demonstrate relevant expertise by presenting evidence that they have previously executed projects at the scale, complexity, and scope of the one they are bidding for, over a certain period, usually five years.

Since many hinese firms are e tensions of provin cial and state-owned companies, they usually have a large, recent portfolio of similar if not larger projects.

Our bid documents might also require experience in the African market. This is an added advantage to hinese firms, since borrowing from hina for infrastructure is usually tied to using hinese firms

March 2022 African Business 23

for project implementation. This practice also rules out African firms. Since many hinese firms first entered the market over the last two decades on Chinese government-funded projects they easily tick the box on experience. Since as noted above, they are more competitive than uropean firms on price and maintain the same level of quality, Chinese firms consistently beat uropean firms and will only continue to grow their market share.

The benefit of cheaper infrastructure notwith standing, this arrangement is not in the best interests of Africa. It is time for African governments to restructure their procurement rules to include substantive arrangements that increase the capacity and turnover of local firms.

Building African infrastructure giants

In the spirit of value for money, African governments need to ensure that infrastructure financing delivers more than just roads, ports, or energy plants and grids. The goal must expand to include building local firms and domestic capacity. olicies should be designed to build skills transfer into procurement rules, ensuring substantive participation by local firms in comple projects.

The fi rst step would be to create a list of such firms with a set of criteria including valuation and turnover baselines. This will lead to consolidation of the sector as fi rms combine or are eased out of competing on large projects. Firms should then be required to remain in good standing with the re-

Below: Construction of the Nairobi Expressway, a project that was undertaken by China Road and Bridge Corporation (CRBC).

sponsible ministry or agency including by providing clean annual audits.

The ministry or agency can improve the objectivity of this process by inviting the country o ces of the African Development Bank and the World Bank to collaborate on maintaining the list, with input on inclusion and sanctions. Their presence will provide a third-party oversight that gives comfort to nonresident actors and acts as a defence against local capture.

Secondly, procurement laws should be amended to include this skills transfer element, with a provision that contracts e ceeding a certain dollar figure require a local company in the substantive aspects of the work. International firms bidding on these contracts should be required to select a local partner from the approved list. These local firms would then be able to build portfolio experience, meet turnover requirements, and gain crucial expertise. They would eventually bid themselves or submit joint bids with other local firms and move up the value chain.

By including these provisions into the procurement laws, even Chinese loans will be compelled to abide by the rules enabling African contractors to participate in the construction of their infrastructure, regardless of funding source. n Gyude Moore is a senior policy fellow at the Center for Global Development a former minister of public works of Liberia.

24 African Business March 2022

Opinion

Africa needs a more equal trade relationship with Europe where African countries are treated as partners, not serfs, argues Odrek Rwabwogo, Uganda’s presidential advisor on exports

Lopsided EU trade agreements are harming Africa

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or many nations in Africa, the turn of the New Year was marked by a sense of hope.

After a period of economically damaging lockdowns – the only public health tool at most African governments’ disposal owing to a continent-wide dearth of vaccines – economies are now beginning to reopen. We are at last embarking on our respective, though interconnected, journeys to economic recovery.

For many of us, this means an urgent need to fast-track our industrialisation agendas, which have been slowed – or in some cases halted entirely – by the pandemic.

In Uganda, some two years of lockdown of the entertainment, tourism and night economies have exerted pressure on productivity. The manufacturing and light assembly sectors hold the most promise of creating the kinds of jobs that can put our economy back on track.

Moreover, like most African economies, ours is dominated by agriculture, with some 70% of our near 50m population employed by the sector. Many of these are small holder farmers, who lack su cient access to crucial services like finance and bank ing. Making the shift from raw materials exports to agro-processing is critical therefore not only to our post-Covid economic recovery, but to bringing millions out of poverty in general.

However, the lingering economic impact of the pandemic is not the only hurdle to our efforts to in dustrialise. Restrictive trade policies from wealthy, western countries and blocs keep African countries chained to raw materials exports while hampering our efforts to move up the manufacturing value chain.

These policies keep Africa prisoner, while making the countries and blocs that implement them wealthier still. It is of course natural that any trading entity should seek terms most favourable to them.

But the deals African countries are forced into are unique in just how lopsided they are; and more so in how they are prevented from making any progress to improve their lot.

It is di cult to distinguish such relationships from the colonial-era protectorates of the past.

EU’s coffee tariff punishes producers

Odrek Rwabwogo is a Ugandan agriculture entrepreneur and senior advisor to the president of Uganda on exports and enterprise building for young people.

Right: A Ugandan fairtrade coffee farmer delivers coffee beans to the Gumintindo coffee co-operative, Mbale, Uganda.

The most prominent offender in this regard is of course the most powerful trading bloc in the world: the European Union (EU). There are too many examples to list, but one of the most egregious that illustrates the issue is coffee.

The EU slaps Africa with punishing tariff charges on processed, roasted coffee, but not unroasted, raw green beans. aturally, this deters our coffee producers from investing in the technology to process the commodity while bullying them into exporting it raw.

To add insult to injury, European countries can then process and re e port for great profit and at great expense to poor African farmers. In 2019 Uganda earned just $470m from over 250,000 tonnes of coffee e ports Swit erland earned some . bn from processing and re-exporting just 80,000 tonnes.

Indeed, all Africa earned just $1.5bn from the crop in 2014. Yet Germany, a leading processor, earned nearly double that from re-exports.

Moreover, lopsided EU trade agreements see African countries flooded with cheap, subsidised goods while able to export little in return. Africa imports a staggering 80% of its food, despite being a continent dominated by agriculture.

The impact on the farmers of what are already some of the poorest countries in the world is obvious. They simply cannot compete. Again, punishing EU standards require heavy investment in the value chain for African produce, which prevents African producers from improving their productive capabilities beyond raw exports.

Still, African leadership must take some culpability. More than 60 years since the end of direct colonialism and there has been little urgency in efforts to modernise agriculture, enhance intraregional cooperation and foster unity on matters of security, trade and investment.

March 2022 African Business 25

Africa should speak with one voice through the AfCFTA

The recent establishment of the African Continental Free Trade Area (AfCFTA) promises some hope in providing African nations for the first time a platform to trade as a bloc and speak with one voice. But if divisive EU trade policies continue to create incentives for struggling, individual African nations to enter into separate and typically unfavourable bilateral agreements, the issue can only persist.

As a result, many African nations are today aggressively seeking to diversify their export markets. In Uganda, for example, we have been actively building ties with the Middle East and particularly member countries of the Gulf Cooperation Council. We made a strong showing at the Dubai Expo, where Uganda secured some $650m of investments in just two weeks – the start of our broader ambitions to secure some

$4bn for our economic recovery and to fast-track our industrialisation agenda. Closer to home, we are approaching our regional economic community of Eastern and Southern Africa (COMESA) with a renewed focus – a $760bn market with a youthful population of some 600m. But we do not want to lose access to the world’s largest trading bloc. We just want to be treated like equals and partners, not serfs.

We have a lot to offer. Africa’s collective population is one of the world’s youngest and fastest-growing – projected to double by 2050 and with a median age of less than 20. We are a continent of innovators and entrepreneurs – Uganda alone is a leader in electric vehicles – including Africa’s first solar powered bus – and a key driver of the African health tech revolution that has flourished during the pandemic.

We will seek partners where we can, but it is partners, not imperial-era protectorates, that we want. n

26 African Business March 2022

Aviation

A strategic agreement between troubled South African Airways and Kenya Airways after years of competition could be the first stage in the formation of a new African airlines group. Will McBain reports

SAA and KQ explore cooperation to survive

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n a year in which Africa’s airlines continue to struggle against the long impact of Covid-19, the stakes are particularly high for two of the continent’s biggest airlines, which are tentatively pooling their resources in a fight to survive.

Kenya Airways (KQ) and South African Airways (SAA) signed a Strategic Partnership Framework in South Africa last November, which if implemented, is e pected to improve the financial viability of the two carriers by cutting costs, increasing the size of the available fleet at their disposal through code sharing, and potentially leading to a new pan-African airline group by 2023.

Kenyan President Uhuru Kenyatta told his listeners during his New Year’s address that KQ and SAA will “join hands” to overcome the economic difficulties they both face. Through the arrangement, tourism, trade, and social engagement in Africa can be boosted, he said. Spokespersons from the airlines have denied that a full merger is on the cards but have talked up the planned cooperation.

Both KQ and SAA have lost market share in Africa to the profitable thiopian Airlines over the last decade, while the strategic advantages that Middle astern carriers enjoy flying in and out of Africa as a result of cheap fuel, ideal hub locations, and strong support from cash-rich governments, has accentuated problems caused by financial mismanagement, debt and pilot shortages.

“It’s impossible to survive if you don’t have a critical mass, so SAA in its heyday had maybe 30 to 40 aircraft, Kenya Airways has 34 aircraft, and if I look into the future of airlines in Africa, then we have very little chance to survive on our own longterm without continuous taxpayer support, because our si e is just too small to be cost effective and to compete on a level playing field with the big guys,” says KQ chairman Michael Joseph.

March 2022 African Business 27

“We need to have some sort of merger or joint venture arrangement between airlines to give us that critical mass,” he tells African Business.

With the odds stacked against them, KQ and SAA are placing their bets on returning to profitability together, after years of heavy losses and bankruptcy.

The stringent travel restrictions imposed by African governments during the pandemic caused severe revenue losses throughout the last two years, causing a collective loss of nearly $8.6bn in 2021 for Africa’s airlines, according to a report by the African Airlines Association Afraa . With . less tra c volume across Africa from January through to December 2021, and following a stuttering start to 2022 in the wake of Omicron, Africa’s airlines are again battling cash flow issues.

Is a new group on the cards?

Some industry experts believe a new airline group could cut costs by conducting staff training together, while sharing maintenance duties, catering, HR and aircraft purchases. This could result in economies of scale, allowing the group to compete and offer cheaper tickets and prices for passenger and cargo segments, says Joseph.

The partnership will mean each airline still maintains its own brand, aircraft, hubs and strategic positions, while boosting tra c density and the exchange of knowledge, expertise, innovation, and best practice.

KQ reported losses of more than $333m in 2020, and then went on to lose a further $100m in the six-month With the odds stacked period up until July 2021. Despite pivagainst them, KQ and oting its operation to focus on cargo to minimise losses during the worst SAA are placing their of the pandemic, the carrier’s business bets on returning to operation is hanging by a thread. In profitability together, une last year, couldn’t pay its staff on time even after cutting employee after years of heavy losses salaries by 5% to 30% in January 2021, and bankruptcy for six to 12 months. was the last financial year was in profit, when it saw gains of m after a decade of profitability following its privatisation and listing on the Nairobi Securities Exchange. After years of losses, the Kenyan parliament voted to nationalise KQ in June 2019, and trade in shares on the NSE was suspended.

But the National Aviation Management Bill is still to be finalised, and the I F says the government has now dropped plans to nationalise the flag carrier.

The government’s 48.9% stake in the airline remains, and a $473m cash injection has been provided in direct budget support in the fiscal year ending une . enya’s finance minister kur atani said the government would take on $827m of KQ’s debt.

SAA’s fortunes have been similarly bad, with the airline running up massive losses until bankruptcy demanded that the South African government initiate a painful restructuring process in December 2019.

After 17 months in administration, SAA exited its “business rescue” in April 2021, and only resumed commercial flights in September last year, after news that it would be privatised by selling a 51% stake to

the Takatso Consortium, consisting of Global Airways, which owns low-cost airline LIFT, and infrastructure investment firm arith eneral artners.

Marcel Langeslag, director of aviation for Africa at Netherlands Airport Consultants in Johannesburg, says that a codeshare agreement – numbering a flight with the airline’s code even though the flight is operated by another airline – and interlining – a voluntary commercial agreement between individual airlines to handle passengers travelling on itineraries that re uire multiple flights on multiple airlines will likely form an initial part of the cooperation and broaden both airlines’ international reach.

“Once both management teams start working together with that low-hanging fruit, then they can work their way up to more di cult things like joint purchases of aircraft,” says Langeslag.

Airline partnerships are di cult to pull off, especially when they are flag carriers. The Air France roup has seen significant growth since getting together in 2004. But their unity has been tested by working disputes between the two carriers. A sense of injustice has festered following allegations that French pilots are paid more than the Dutch, and disputes over legacy cost structures have stoked further division among staff.

An academic study showed that 50% of strategic alliances fail due to cultural differences, mistrust or poor operational integration. Airlines based in high-income countries operating in liberalised skies, with large domestic tra c bases, fare much better.

“National and political prestige is keeping the two airlines [SAA and KQ] going, as letting a big company that employs a lot of people go bust is a di cult sell to your electorate. You could think about the sort of geographic location that complements each other quite well in this partnership. But when you look at it from the business perspective, it’s very hard to see how they will really pull it off,” says angeslag.

Market liberalisation is essential

More important than partnerships to the future profitability of Africa’s airlines is liberalising air tra c on the continent, says Eric Tchouamou Njoya, lecturer in air transport economics at the UK’s University of uddersfield. Africa has at least mostly small airlines that face a high cost of operation and market protectionism.

In 1999, 44 African countries agreed in Yamoussoukro, Côte d’Ivoire, to deregulate air services and promote the opening up of regional air markets to transnational competition, but the implementation has been painfully slow and inconsistent. The latest incarnation of that attempt is the Single African Air Transport Market (SAATM), launched in 2018, and signed by 35 of Africa’s 54 countries. The African nion says that air tra c would be boosted, resulting in reduced taxes, greater competition and cheaper fares by an average of 26% for the average intra-African passenger.

“Africa will soon have almost 2bn inhabitants, and so the market is there if the connectivity is provided.

African airlines need to build stronger hubs and KQ and SAA are well positioned to do that. But they need market liberalisation, the right business strategy and the right aircraft,” says Njoya. n

28 African Business March 2022

Finance

Ghana has accused international credit ratings agencies of institutional bias against African countries, while the recent acquisition of an African agency

by Moody’s has prompted calls for stronger regulation of the agencies’ decisions. David Thomas reports

Ghana slams ratings agencies after Moody’s downgrade

M

oody’s decision to downgrade Right: President Nana Akufo-Addo Ghana’s long-term foreign curat a recent meeting rency sovereign rating has been with other West met by fury, amid renewed accuAfrican leaders. sations that African economies are harshly treated by international credit ratings firms.

Moody’s downgraded Ghana’s long-term foreign currency sovereign rating from B3 to Caa1 (with a stable outlook) on 4 February and said it faces an increasingly di cult task in addressing li uidity and debt challenges. hana’s finance ministry responded that it was “gravely concerned” that key data had been omitted in the decision, including “2022 budget expenditure control measures and upfront fiscal adjust ments”.

The ministry also alleged the use of “inaccurate balance-of-payments statistics” and hit out at a process which it said was “based entirely on a desktop exercise [and] virtual discussions” without a visit to Ghana from Moody’s country analyst.

Ghana’s criticism has reignited a years-long vigorous debate over whether Africa’s sovereigns are treated fairly by the global credit ratings market, which is dominated by the “Big Three” of Moody’s, Fitch and S&P Global Rat- Ghana’s criticism has ings. Credit ratings remain a highly in- reignited a yearsfluential tool used by investors in their allocation of capital. The outcry came long vigorous debate just days after Moody’s announced that it over whether Africa’s would enhance its African coverage with sovereigns are treated the purchase of a majority stake in Global Credit Rating Company Limited (GCR), an fairly by the global credit ratings market Africa-focused credit rating agency.

Outcry against ‘leviathan’

While Moody’s decision initially sent Ghana’s sovereign bonds tumbling, Moody’s is not the only credit rating agency to have recently downgraded Ghana.

In January, Fitch downgraded Ghana’s long-term foreign currency issuer default rating to B- from B, with a negative outlook. By contrast, S&P Global atings a rmed hana’s rating at with a stable outlook in February.

In its statement, hana’s fi nance ministry al luded to wider African concerns with the credit rating market: “We are gravely concerned about what appears to be an institutionalized bias against African economies in this aspect… with little regard for the adverse impact on the cost and access of financing for African Sovereigns We shall actively continue to support the global outcry against this leviathan.”

The ministry’s criticism was supported by the African Union’s African Peer Review Mechanism (APRM), which called on Moody’s to review the decision and its coverage of the country.

“The APRM supports and corroborates the observations made by the Government of Ghana in its statement which highlights significant fundamentals that contradict the downgrade action by Moody’s,” it said in a statement.

The organisation, an instrument of AU states whose mandate is to encourage conformity with regards to political, economic and corporate governance values, codes and standards, cited “technical inaccuracies” on behalf of Moody’s and said that the decision to assign only one primary analyst to assess hana “significantly enhances the probability of negative analyst biases”.

The report echoed Ghana’s criticism of the alleged appointment of a primary analyst just days prior to the rating decision, who it claimed “is based outside the country and has never visited Ghana in the period of assessment”.

At the time of writing Moody’s had yet to publicly respond to the criticism.

Moody’s increases Africa footprint

The controversy flared days after oody’s announce ment that it would acquire a 51% majority stake in Africa-focused credit ratings provider GCR, which has operations in South Africa, Nigeria, Senegal, Kenya, and Mauritius.

GCR traces its origins back to 1996 when it was established as the African arm of the New York Stock change listed Duff helps. The firm is licensed as a ratings agency in a number of markets, including Kenya, Mauritius, Nigeria, Zimbabwe, and South Africa. Last year it acquired a majority stake in West Africa Rating Agency to boost its Francophone coverage.

Following the Moody’s transaction, which is expected to close in the second quarter, pending regulatory approval, GCR will continue to develop its own rating methodologies, issue its own credit ratings, and maintain a separate management team.

“This is an important milestone in the history of ,” said arc offe, chief e ecutive o cer of GCR. “This transaction will enable us to build on our deep local market insights and a quarter-century of

March 2022 African Business 29

growth across the continent. It will also provide the opportunity to further develop solutions that meet a range of customer needs, including credit ratings, credit risk solutions, and ESG capabilities.” ob Fauber, president and chief e ecutive o cer of oody’s, said the deal offered a “uni ue opportu nity to expand Moody’s presence in a high-growth region”.

Danger of more negative bias

However, in an article for academic website The Conversation, Misheck Mutize, lead expert researcher at the APRM on supporting countries on their engagements with international credit rating agencies, expressed his concern at the deal.

“African-based rating agencies mainly assign ratings for domestic issuances. Their ratings are more detailed and significantly higher than both international ratings issued The African Peer by the ‘big three’. This is because they understand the local contexts and that Review Mechanism domestic borrowings have no exposures called on Moody’s to to exchange rate risk. The danger is that review the decision Moody’s entrance into the domestic ratings market ushers in the challenge of and its coverage of the negative analyst biases against African country

countries. This trend has been visible in the international ratings market.”

Mutize argued that Moody’s record of providing “unsolicited ratings” – sovereign ratings that are assigned without being requested by either the rated country or its agents – means that it may not consult adequately with government representatives during the review process, thus misunderstanding government strategy in tackling downside risks. He called for greater regulation of ratings agencies, arguing that the AU should establish a regulatory appeal body along the lines of the European Securities and Markets Authority and the US Securities and Exchange Commission.

The topic has also been taken up by policymakers.

In his inaugural speech as chair of the AU in February, President Macky Sall of Senegal condemned the high rates of interest that African countries pay due to what he called “subjective” judgements on the part of the international ratings agencies. e called for the establishment of an A financ ing task force, which should consider pressing for reforms to the rules of the OECD, the establishment of a pan-African ratings agency and the setting up of a financial stability mechanism, a project on which the African Development Bank is already working. n

30 African Business March 2022

Special report

Transport and logistics The French giant’s decision to leave the continent and the ongoing impact of Covid-19 are prompting upheaval in Africa’s goods transportation industry, reports Neil Ford

Bolloré exit and pandemic impact shake up transport and logistics

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frican ports, like their counterparts elsewhere in the world, have been profoundly affected by the ovid crisis. Trade volumes tumbled during the early months of the pandemic but a small number of ports actually managed to record some growth over the course of the crisis. However, the recovery has pushed up demand for containers, resulting in record freight rates, which in turn have increased the cost of moving cargo in and out of Africa. Port development continues to focus on West Africa, while the continent’s biggest operators have announced some interesting strategies over the past few months.

Investment by the Chinese government and Chinese state-owned companies in African transport projects has declined dramatically in recent years but port investment remains strong as international operators have been joined by at least one development finance institution in upgrading port, warehouse and inland port infrastructure. However, it remains to be seen whether reduced Chinese loans for African road and rail projects will be replaced.

Exit Bolloré

One of the biggest recent surprises in the African logistics sector over the past few months has been Bolloré’s decision to pull out of the industry. The French conglomerate has been a major player over

March 2022 African Business 31

many decades, with operations ranging from ports and shipping to rail and warehousing, and the firm had expanded its operations over the past two years, despite losing its concession for Douala container terminal in Cameroon. It is in exclusive talks with Swiss-Italian shipping line MSC over the sale of its entire logistics operations on the continent. MSC has offered . bn.

The sale appears linked to founder Vincent Bolloré’s decision to retire in February 2022 and hand control of the company over to his four children. Moreover, a French court imposed a m fine on the company over financial irregularities relating to a port concession in Togo. The sale will see the family conglomerate lose about half of its current operations, with its 27% stake in media group Vivendi its biggest remaining asset. Bolloré’s logistics operations employ 20,800 people, including at 16 African container terminals, mainly in West Africa.

The sale of Bolloré assets to a single Whatever the outcome buyer should not weaken competition in of the divestment, the the African port sector. Indeed, if the sale fact that the Bolloré to MSC is completed as envisaged, it could lead to greater integration between the assets will be sold to a division’s logistics operations and MSC’s single buyer should not shipping services, which already connect weaken competition in African ports to the rest of the world.

The deal will be watched with great the African port sector

interest by Bolloré’s main competitors in logistics and terminal operation in Africa, such as DP World and APM Terminals. Although headquartered in the Netherlands, the latter handles port operations as part of Denmark’s Maersk group. Maersk is currently the world’s biggest shipping line, just ahead of MSC.

Maersk merger

In November, Maersk announced that it would merge its inland container terminal business in Africa with the container logistics business of South African firm Grindrod, creating an integrated company with interests in road, rail and sea transport, container depots and warehousing. The Danish firm will take a controlling 51% stake in the new company.

The two firms have cooperated for many years and Grindrod subsidiary Ocean Africa Container Lines (OACL) already provides feeder services for Maersk.

Jonathan Horn, Maersk Southern Africa and Islands Area managing director, said: “We will have a far greater ability to seamlessly integrate solutions between ocean and the landside whilst weaving into our organisation an increased capability and experience through colleagues from Grindrod, who has long held a strong reputation in the landside logistics space.”

Meanwhile, Dubai-based DP World has recently concluded its own cooperation agreement, in this case with the government’s development finance

32 African Business March 2022

Special report

Transport and logistics institution CDC, which is to invest $320m in the DP World-operated ports of Sokhna in Egypt, Berbera in Somaliland and Dakar in Senegal. The money will be used to support the development of the ports and associated free zones, inland cargo handling facilities and inland transport infrastructure. DP World will add another $1bn to the money it has already committed to the three ports. Another $400m will be invested by CDC over the next several years, although the intended investment targets have not yet been announced.

Bright times for Berbera

DP World appears to be developing Berbera in direct competition with Doraleh container terminal in neighbouring Djibouti, which it previously operated, although it is not clear if it was ejected from its concession by the government of Djibouti because of its interest in Berbera, or whether it expanded its plans for the Somaliland port once the government of Djibouti had made its intentions clear. Whatever the cause, the Port of Berbera is now being developed as the centrepiece of Somaliland’s economic strategy.

CDC’s decision to support the project provides more economic support for the territory, which has ambitions of being recognised as a sovereign state.

The UK government is broadly warm to the territory but does not currently recognise Somaliland’s independence despite support in parliament. In addition, a fact finding mission from the S ongress visited Somaliland for the first time late last year. Somaliland has generally been more stable and enjoyed more rapid development than Somalia itself over the past three decades.

Berbera will provide Djibouti with competition for the landlocked Ethiopian market, particularly given the Ethiopian government’s decision to invest in the emerging port. In a statement, CDC said that the investment would “help drive much needed development for some of the most vulnerable in Somaliland and support the continuing growth of Ethiopia, which will have a positive knock on effect on the wider orn of Africa region”.

DP World to build new port in Senegal

While DP World has already upgraded the Port of Dakar, in January it began work on building the new port of Ndayane, just 50km south of Dakar, just over a year after it was awarded a 25-year concession to operate the port.

It had originally planned to build a new container terminal at Dakar but ultimately settled on the new location, where far more land is available closer to the new airport of Blaise Diagne International, creating what DP World has described as “an integrated multimodal transportation, logistics and industrial hub”, with road, air and sea components.

Ndayane will be developed at a cost of more than $1bn in two phases, with 1.2m TEU/year handling capacity provided in Phase 1 alone. A TEU is a 20-foot equivalent unit, the standard container measurement.

The company says that dredging of the harbour and entrance channel will allow access for some of the world’s biggest container vessels, which suggests that it will be at least 16m deep and possibly up to 19m.

Senegal’s President Macky Sall said: “With the Port of Ndayane, Senegal will have state-of-the-art port

Berbera will provide Djibouti with competition for the landlocked Ethiopian market, particularly given the Ethiopian government’s decision to invest in the emerging port

March 2022 African Business 33

infrastructure that will reinforce our country’s position as a major trade hub and gateway in West Africa.

It will unlock significant economic opportunities for local businesses, create jobs, and increase Senegal’s attractiveness to foreign investors.”

The biggest port in West Africa is Tema in Ghana, where Phase 2 was completed in October. With annual handling capacity of 3.7m TEU, the consortium operating the container terminal includes two of Africa’s biggest operators, APM Terminals (35%) and Bolloré Transport and Logistics (35%), alongside Ghana Ports and Harbours Authority (GPHA) (30%). Tema and Ghana’s second port, Takoradi, have been greatly expanded on the back of Ghana’s economic development over the past decade, and in December the GPHA asked for expressions of interest from potential developers in financing and building the first m phase of a third port at Keta.

Tanzanian priorities

In East Africa, the entrance to the Port of Dar es Salaam is to be deepened from 11.5m to 15.5m to allow access for much bigger vessels, while berths 8-11 will be deepened from 8.5m to 14.5m. The government of Tanzania has also sought to revive plans for a new, modern port at Bagamoyo, 75km north of Dar es Salaam.

The late President John Magufuli had objected to the terms of a preliminary deal to allow China Merchant Port Holdings to develop the port but his death last year has opened the way for the project to be developed. However, as with Kenya’s new port of Lamu, the plan for eventual handling capacity of 20m TEU/ year is a very long-term vision with a much smaller capacity e pected in the first instance.

In addition, the governments of Tanzania and urundi have finally signed an agreement to e tend the new standard gauge railway (SGR) into Burundi.

Work on building the east-west line in Tanzania is already well underway but the government has always been keen to extend rail links into the landlocked Great Lakes region in order to encourage more cargo to flow through Dar es Salaam at the e pense of Mombasa. Work began on Kenya’s own SGR several years earlier but the apparent cessation of Chinese funding has seen progress on extending that line into Uganda stall.

Southern African logistics have always been dominated by South African state-owned utility Transnet but very weak economic growth and trade volumes have limited port and rail investment over many years.

Transnet has finally unveiled its bn . bn aster Plan for its biggest container port, Durban, but the big stumbling block remains funding.

The country’s powerful trades union movement and much of the ruling ANC opposes the privatisation of port infrastructure, yet Transnet will struggle to finance any projects on remotely that scale. Its application to the Ports Regulator of South Africa for average tariff increases of for financial year were rejected, with a far more modest 4.8% average rise imposed, while the government is in no position to finance such a megaproject on its behalf. As a result, the leading position of South African ports is eroded with each year that goes by, with Durban now clearly displaced by Morocco’s Tanger Med as the leading container port in Africa. n

34 African Business March 2022

Nigeria

Despite a bump in oil prices the Nigerian economy is stagnating, with vaccine rates, insecurity and upcoming elections all dragging on current and future growth, writes Tom Collins

Nigerian growth grinds to a halt

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igeria’s growth came to a near standstill in the last quarter of 2021, dimming hopes that Africa’s most populous country will make a swift recovery from Covid-19.

Capital Economics, a London-based economic research firm, suggests that year on year growth of just was achieved in . The firm said that “hard activity indicators” like imports and oil production paint a “much less rosy” picture of Nigerian growth than other economic analysis has suggested.

Oil production in Nigeria’s laggard sector slumped from 1.57m bpd in Q3 to 1.50m bpd in Q4 on the official measure.

“Over Q4 as a whole, the oil sector was probably a drag on headline growth in quarter-on-quarter terms,” said Virag Foriz, emerging markets economist at Capital Economics.

Imports also dropped sharply in December, according to Capital Economics’ model which uses data from Nigeria’s three largest import partners rather than national statistics. In fact, imports decreased at the fastest pace seen since July 2020, as Nigeria’s late 2021 Omicron wave and foreign exchange issues weighed on the demand for imported goods.

Holding a below-consensus view, Capital Economics predicts that Nigeria’s GDP will grow by just 2.3% in 2022. Against this backdrop, “the central bank is likely to refrain from tightening monetary policy over the coming months,” it said.

IMF predictions

The IMF projects growth of 2.7% this year as the Nigerian economy gradually rises to its feet based on the rise in oil prices and government support. Other positives include a decline in headline inflation from 18.2% year-on-year in March 2021 to

Oil production in Nigeria’s laggard sector fell from 1.38m barrels per day in November to 1.34m barrels per day in December

15.6% in December, boosted by a new harvest season and the opening of land borders closed during the pandemic.

“After registering a historic deficit in , the current account improved in 2021 and gross FX reserves have improved, supported by the IMF’s SDR allocation and Eurobond placements in September 2021,” the global lender said.

However, the IMF added that low levels of immunisation in Nigeria will hold back growth. Only 2.75% of Nigeria’s 215m population are fully vaccinated, according to the African Centres for Disease Control and Prevention (Africa CDC). The authorities hope to vaccinate 26.6% of the population by January 2022.

The government’s budget deficit is also e pected to widen in 2021 to 5.9% of GDP due to fuel subsidies and higher security spending aimed at countering armed bandits and jihadists in many areas of the vast country. The IMF said that Nigeria’s 7.5% consolidated government revenue to GDP ratio remains among the lowest in the world.

“Higher debt service to government revenues (through higher US interest rates and/or increased borrowing pose risks for fiscal sustainability. A worsening of violence and insecurity could also derail the recovery,” it said.

Oil and elections

With President Muhummadu Buhari stepping down next year, uncertainty over policy shifts by a new administration will rank high in the run-up to elections in February 2023.

Economic activity is expected to soften in the quarter preceding the elections as investors adopt a wait-and-see approach. Activity is expected to remain muted in the two quarters following the election due to the transition from one administration to the next, says Yvonne Mhango, an economist for sub-Saharan Africa at Renaissance Capital.

March 2022 African Business 35

“In Nigeria’s case, it takes several months to appoint a cabinet, as it must be representative of all 36 states. When Buhari won the presidential election in March 2015, it took him six months to put together a full cabinet.”

In January, some candidates began to express their intention to run for the presidency with the most notable so far being Bola Ahmed Tinubu, the national leader of the ruling All Progressives Congress (APC).

Tinubu, a Muslim from the South West region, was governor of Lagos state in 1999-2007 where he gained repute as the “godfather of Lagos” by leveraging his political capital in the city to influence regional and national affairs, says hango. “ is influence and wealth, and track record as governor in Nigeria’s wealthiest state lead us to believe that he may be more effective at delivering policy outcomes than his predecessor. His tenure as governor of Lagos state suggests that he would promote investment into education and transport infrastructure if he became president.”

Below: Nigerian President Mohammadu Buhari inspects a guard of honour mounted by the navy.

As the oil price climbs (after a long upward trend it topped $100/barrel as African Business went to press, following Russia’s invasion of Ukraine) the higher price provides a boost for Nigeria’s external sector, delivering limited GDP growth of 2.9%, mainly driven by the non-oil economy, says Mhango.

“The Dangote refinery is set to start producing in in the second half of 2022, which should help boost manufacturing activity. However, uncertainty in the oil sector implies a limited contribution from this sector to growth,” she says.

The pickup of the oil price is a big deal for Nigeria, but with the country’s burgeoning population growth the economic benefits will be limited, said harlie Robertson, Renaissance Capital’s chief economist, at a conference in February.

“A country like Nigeria has a lot of oil, but not when it’s divided over 200m people. To be as rich as Botswana [with a population of 2.3m], for example, we’d need to see the oil price at $400/barrel, not at $88… we’re obviously not going to see that.” n

36 African Business March 2022

Interview

Dr Slim Feriani, CEO, Djibouti Sovereign Fund In 2020, Djibouti announced the launch of its sovereign wealth fund. Speaking with Omar Ben Yedder, CEO Dr Slim Feriani describes how he plans to deploy it to help diversify Djibouti’s economy

Djibouti a ‘hidden gem to polish,’ says sovereign wealth fund head

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jibouti has often punched above its weight. This small country, in terms of landmass and population, is today one of the most sophisticated logistics hub in Africa. Strategically located in the Red Sea, it is effectively a shipping gateway into Ethiopia, a country with a population of 120m.

But the country’s ambitions are much larger. The route from Asia up the Red Sea and through the Suez Canal accounts for 30% of the world’s shipping activity.

As such Djibouti does not only want to service the east coast of Africa but also serve as an important hub for transhipments and other shipping activities along this route.

At the heart of its longer-term strategy is rapid economic diversification to become a leader in telecoms, finance, tourism, as well as develop new sectors such as renewables, sustainable natural resources and fintech.

The leadership in Djibouti has strategically hosted both US and Chinese military bases, building close relations with both superpowers. With other military

bases also present in Djibouti, the country makes a considerable amount of income from the economic activity they generate.

Man with a plan

The person hired to run and manage the newly established Djibouti Sovereign Fund (Fonds Souverain de Djibouti – FSD), is Dr Slim Feriani, a Tunisian national based in London. He has over 25 years’ experience in international capital markets and recently served as minister in his home country of Tunisia where he led two portfolios, those of industry and SMEs as well as energy, mining and renewable energy.

The FSD is expected to help catalyse investments in strategic sectors of the economy, such as telcos, tourism, financial services, tech, infrastructure, mining and renewable energy, he says.

“This is a key part of the plan for economic diversification. Djibouti is not resource dependent,” says Feriani.

Explaining the structure of the fund, Feriani says the government has placed its shares in three state-owned enterprises under its management. One of these is Djibouti Telecom and Feriani expects by the end of this year up to 40% of its

shareholding will be acquired by an international strategic partner.

Demonstrating the scope of the telecoms group, in which FSD currently has 100% ownership, he points to a map which indicates the eight undersea cables passing through Djibouti and the potential in terms of the country acting as a connectivity hub for Africa, as well as a conduit between East and West.

“Djibouti Telecom, like Djibouti, is a hidden gem. Hidden gems, once you polish them, they shine and rise. With its location and subsea cables, Djibouti Telecom should be a key player in interconnectivity within Africa and then, from Africa and to the rest of the world.”

Besides the dividends from its underlying portfolio companies, recurring cash flow for the FSD includes annual rent that the different military bases are paying the government of Djibouti.

Finally, as per the FSD law enacted in 2020, its mandate also includes managing 60% of the reserves of the CNSS, the state social security fund. The objective is to diversify some of the funds into different asset classes. He cites other successful funds such as that of Chile or Australia’s superannuation fund as examples to follow. Right now, the risk appetite will be measured, he says: “We have to be conservative and prudent. We’ll take measured risk, starting with a bit of real estate and normal asset classes you identify with pension funds.”

Inspired by Singapore

“In many ways, our fund resembles Temasek, the Singaporean sovereign wealth fund, one of the most established funds in the world today,” he says. The two countries are similar – both are small yet at the heart of large and dynamic regions.

“Singapore started Temasek with Singtel, Singapore’s telecom company, roughly 40 years ago. They didn’t have much in terms of oil revenues or any other resource. FSD has been set up with what I feel are the jewels of the country: Djibouti Telecom is the national champion of telecom, 100% now in our portfolio.

“We also have 40% of the national holding company, Great Horn Investment Holding (GHIH). GHIH owns 27 companies. It accounts for a significant part of the economy because it has all the ports infrastructure and a number of important businesses.

“The port’s activities today account for three quarters of the economy. The third one is Electricité de Djibouti, again the national champion in terms of energy.

These businesses, in terms of historical book value, are worth over $1bn already.”

The FSD, according to Feriani, will start

March 2022 African Business 37

by investing in Djibouti itself, followed by projects that enhance regional integration before looking at diversifying its assets internationally in the medium to long term “The fund will be run with a diversified portfolio - by asset classes, by sectors and by geographies,” he confirms.

Feriani says that ticket sizes will vary depending on the industry and the complexity. In general, the FSD will be a minority investor with up to a 20% stake in projects.

Source of ideas

Feriani’s job will be to originate opportunities for global investors: “Part of our job is to make sure we are a source of ideas; and bringing in international co-investors is a crucial part of our job,” he says.

Djibouti has built a competitive advantage in logistics as a hub servicing Ethiopia. Roughly 90% of Ethiopian trade goes through the country, which means that the country is exposed one way or another to Ethiopia’s economy. He says the combination of Covid-19 and the Ethiopian crisis has impacted on Djibouti’s growth numbers although these have since picked up. The fact that many primary goods get through has reduced the impact of these two factors.

“We have a vested interest as a neighbouring country and as a brotherly country to see things settled. Ethiopia was consistently one of the fastest growing economies in the world. We benefit from them continuing to develop their country.”

“We have to be conservative and prudent. We’ll take measured risk, starting with a bit of real estate and normal asset classes you identify with pension funds”

Creating an impact

Feriani knows that he will need to deliver some quick wins to show the impact the fund can have and to validate the rhetoric.

“The future is very exciting and we will be investing for the long term but the short term is important too,” he says. “Our view is we need to make things tangible already because people want to see things changing.

There will be some investments realised this year.”

One of the first projects he’ll be launching will be a crowdfunding platform to help start-ups and SMEs – something he initiated successfully in Tunisia. He is also working on starting the first leasing company. These greenfield projects are in line with the country’s strategic focus on financial inclusion and diversifying access to finance, Feriani adds. Another investment that should bear fruit this year is in data centres, in parallel with the Djibouti Telecom transaction.

Djibouti’s sovereign wealth fund is in very good hands. There will be plenty more exciting developments to look forward to from this small nation with an explosive punch. n

38 African Business March 2022

Mining

China is increasingly focused on African mines to provide the sought-after minerals used in the manufacture of electric vehicle batteries, but Tonderayi Mukeredzi asks whether the continent is prepared to maximise the historic opportunity

Zimbabwe deals helpChina tighten African lithium grip

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hree Chinese energy companies have Opposite: View of Bikita Minerals snapped up controlling shareholdings mining plant in in Zimbabwean lithium mines during Bikita, Zimbabwe. the past four months, as China, the world’s biggest EV market, increasingly gravitates towards Africa to diversify the supply of lithium, one of the most sought after minerals used in the booming manufacture of electric vehicles (EVs).

Chengxin Lithium Group opened up the spate of acquisitions last November with the attainment of a 51% interest in Max Mind Investments’s Sabi Star Lithium mine in eastern Zimbabwe at a cost of $77m.

Chengxin Lithium tells African Business that the investment in Zimbabwe – “an attractive investment destination for Chinese new energy companies” – will increase the leading lithium compound producer’s lithium resource reserve, guarantee the company with resource supply for capacity expansion, especially abroad, and further enhance its competitiveness in the industry of lithium new energy material.

Max Mind owns 40 mining claims of rare metal ore blocks in Zimbabwe, with Chinese mining firms a total surface of 2,637 hectares. Five of have invested heavily them have a total ore resource of 6.883m tonnes while the remaining 35 mining in Africa over the claims are in exploration and the early years, as part of the work stage. authorities’ goal to set Lithium-ion battery producer Zhejian Huayou Cobalt followed in December by up a stable supply of purchasing an 87% stake in Zimbabwe’s ores

Arcadia Lithium Project for $528m from Australia’s Prospect Resources.

On 8 February, the Sinomine Resource Group announced that it had shelled out $180m to acquire 100% of African Metals Management Services and Southern African Metals and Minerals, which jointly own 74% of Bikita Minerals.

The growing importance of lithium

Zimbabwe possesses Africa’s largest lithium reserves and the fifth largest globally but the resource has re mained largely untapped due to a lack of investment.

Lithium has become a vital raw material required in the transition to a green economy. Lithium ion batteries are commonly utilised in EV manufacturing and in electric devices or solar panels to store excess solar energy.

Battery metal specialists say the drive for clean technology initiatives and off grid power storage has created an enormous demand for lithium batteries and electric vehicles in recent years. Demand is expected to accelerate rapidly.

Fitch Solutions estimates there are about nine lithium projects currently being developed in Africa – in Zimbabwe, Namibia, Mali, Ghana and the Democratic Republic of the Congo (DRC) but the projects are still small relative to the number of projects being developed in the Americas, Australia and Europe.

Sabrin Chowdhury, Fitch Solutions’ mining analyst, says high lithium prices, significant reserves and a strong demand outlook from the battery sector in the coming decade cement a bullish outlook towards Chinese investment into Africa for strategic minerals including lithium and cobalt.

In the DRC, Chinese companies have gained control of a sizeable share of the country’s mining sector, including key cobalt and lithium resources.

In September , private investment firm Su zhou Cath Energy Technologies paid $240m to attain a 24% share in Manono, DRC’s leading lithium project from Australian company AVZ Minerals.

Last June, another Chinese company, Ganfeng ithium partnered Firefinch of Australia to develop the Goulamina lithium mine in Mali, but the project faces an unstable political environment in the country.

“While China is the world’s largest and main refining hub of battery minerals, the country mostly imports ores from Africa, Latin America and Australia. In general, hinese mining firms have in vested heavily in Africa over the years, as part of the authorities’ goal to set up a stable supply of ores, and as part of their Belt and Road Initiative, a multi-decade geopolitical and economic strategic policy aiming to increase hina’s influence in key markets around the world,” Chowdhury says.

Profiting from China’s interest

Just as investing in Africa’s lithium sector is beneficial to hina, African countries stand to benefit from Chinese investment through job creation, taxes, the transfer of technology, and significant funding, which all help to develop Africa’s mining industry, he adds. But a rally in mineral and metal prices in 2020-21 and improved prospects for green transition minerals – which include copper, nickel, lithium and

March 2022 African Business 39

In the DRC, Chinese companies have gained control of roughly 70% of the country’s mining sector, including key cobalt and lithium resources

40 African Business March 2022

Mining

benefits between stakeholders at local, central and national levels.

“These deals present potential benefits and it takes time to see if these benefits can be achieved and distributed, which is always a big challenge for the host government when new treasures are found.

From the perspective of African governments, they need to make autonomous decisions when addressing these considerations on opportunities and challenges without being trapped in geopolitical struggles and narratives,” he observes.

The Africa Finance Corporation states that as the world becomes more conscious of the need to pursue net zero carbon emissions, a global battery and electric industry is growing at a fast pace and projects its worth at $8.8 trillion by 2025 and $46 trillion by 2050.

Because Africa is home to key battery minerals such as cobalt, copper, lithium and manganese, the continent can profit immensely from the global movement towards decarbonisation. cobalt coupled with economic and fiscal hardships and rising social inequality in the wake of Covid-19 are seen as providing strong incentives for a rise in government intervention in the global mining sector.

“Resource nationalism can take several forms, including renegotiation of existing mining contracts to get better terms, increase in taxes/royalties on the mining sector, asset nationalisation (forced equity transfers or the threat of them , in country beneficiation, or export restrictions. In this way, African countries also stand to improve the extent of gains they have been making from Chinese investment in the coming years,” says Chowdhury.

Technology transfer

Above: A worker holds up a handful of tantalum, a rare, hard, blue-gray transition metal, at the Bikita Minerals mining plant.

Wei Shen, a research fellow at the Institute of Development Studies in the UK, says the deals provide precious opportunities for African countries to get involved in the crucial value chain of lithium battery industries not only for the EV industry, but for other renewable energy projects that also need energy storage facilities.

“These deals can facilitate technology transfer to African countries and enhance their preliminary industrial process capacity in the coming years...

Financially, these resource exports can be particularly crucial to relieve the debt service pressure in the short run as the price of lithium has been and is expected to continue to rise sharply in the coming years,” he tells African Business.

He notes that China has been developing more stringent environmental impact evaluation systems for its overseas activities, led by the Ministry of Ecology and Environment and Ministry of Commerce. As such, the lithium deals would provide good opportunities to see The deals provide how these new policy documents are im- precious opportunities plemented on the ground, particularly in comparing Chinese-owned and jointly- for African countries owned (with Australian partners) mines. to get involved in the “So beyond the big challenge to bal- crucial value chain ance short term financial gains and long term technological/industrial capacities, of lithium battery there is also a challenge to distribute the industries

Forging value chains

At present, the disparity between Africa’s contribution of raw materials to some of the world’s most lucrative industries compared with the value chain benefit is unsettling, with the D , for instance, currently supplying 70% of the world’s cobalt used in electric vehicle manufacture but capturing only 3% of the battery EV mining value chain.

Localising the lithium-ion battery value chain thus presents Africa with an opportunity to establish itself as the global EV manufacturing powerhouse.

The DRC has already expressed an intention to locally produce batteries for EVs and to develop a green value chain given the country’s rich reserves in new energy minerals.

But Chowdhury says that despite the potential and opportunities for strong growth for lithium and other minerals in the coming years, he does not expect Africa to develop a value chain that can make it a global EV manufacturing powerhouse anytime soon.

The continent is currently a very small player in the global lithium sector, accounting for about 5% of global reserves.

“Apart from lithium, the cobalt industry is highly geographically concentrated, mine production wise, with a single country in Africa, the DRC, accounting for 67% of the global supply in 2020, and we expect this dynamic to continue over the coming decades. Along with this comes high supply chain risks as there are concerns linked to the DRC regarding political stability, labour issues, corruption and transparency.

“Additionally, while the intermediate processing is mostly done where the cobalt is mined, mainly in the D , this is then e ported overseas for refining. obalt refining is also highly concentrated in a single country, China, which will broadly remain the case in the coming years. There is very limited African cobalt production outside the DRC,” he says.

The key question is how African countries can benefit from the abundance of lithium as a relatively new strategic resource in the foreseeable future while avoiding the so-called resource curse. n

42 African Business March 2022

Namibia resources

Discoveries by Shell and TotalEnergies have raised hopes of an economic windfall, but Namibia’s history of mismanaging its gas reserves offers a cautionary tale, reports Shoshana Kedem

Namibia hopeful of oil industry after offshore discoveries

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il majors have recently announced new finds in amibia’s Orange asin that have the potential to transform the country into an oil producer, but only if the government can implement a successful regulatory regime to encourage

investment.

On 4 February, Shell announced that it has hit oil in amibia’s raff offshore well, marking the first time that oil has been found in the country after a decades-long hunt.

Maggy Shino, petroleum commissioner at the Ministry of Mines and Energy, said it was too early to provide exact volumes of oil encountered at the deep offshore well, which has been drilled to a depth of 5000 metres. Shell holds a 45% stake in Petroleum Exploration Licence 39 where the well is located.

Qatar Energy holds a 45% interest and the National Petroleum Corporation of Namibia (NAMCOR) holds the remaining 10%.

On 24 February, French major TotalEnergies also announced the discovery of light oil and associated gas in the Orange Basin, this time in its Venus prospect. Block 2913B covers approximately 8,215 sq km in deep offshore amibia. Total nergies is the operator with a 40% working interest, alongside QatarEnergy (30%), Impact Oil and Gas (20%) and NAMCOR (10%).

Together the discoveries have the potential to recast the economic and energy destiny of the middleincome coastal country, experts say, but only if policymakers avoid repeating the mistakes that dogged e ploitation of the udu gas fields.

“If you have two massive wells, raff and enus, that really could make Namibia an oil and gas producer and that’s a significant income coming in for the population and the country,” says Nicolas Bonnefoy, a partner in oil, gas and mining at London-based international law firm ASAFO and o.

The country and oil companies now face the high-

stakes challenge of managing exploration, extraction and first production. The government hopes to achieve first production by .

“This is a di cult moment as the bargaining power changes hands from the oil company to the state and their respective interest may not always be completely aligned,” cautions Bonnefoy. “This is also where the lack of technical skills, political interference, short term financial interest and personal political agenda often come in the way.”

Delivery time

Right: A drilling rig is seen in the distance across Namibia’s Walvis Bay.

The success of commercialising the petroleum depends on how the government has laid the groundwork of its petroleum regime, says Bonnefoy.

The discovery has the potential to trigger a wave of new investment across the entire energy value chain in infrastructure, power generation and distribution and production. The birth of a domestic petroleum market in the country could also deliver thousands of jobs to the local population while creating demand for services and new domestic companies in transport, logistics and education.

“It acts as a magnet to attract all the other companies. This is a key, critical time for Namibia because the momentum and excitement for investors gathers and is rising. They need to build on it,” Bonnefoy says.

If the oil is too expensive to extract, or if the development is held back by the regulatory environment, infrastructure or low demand, the oil may well stay in the seabed.

“A great discovery, a large discovery does not necessarily mean that oil is coming out of the well any time soon,” Bonnefoy explains.

If the discovery can be commercialised, the country will start collecting its share of the spoils as production commences, subject to the terms of the petroleum regime. The country must then design an e cient local content regime to ensure its businesses and people

March 2022 African Business 43

are involved in and benefit from operations.

In the longer term, the discoveries could also bring energy security to the sparsely populated nation that relies heavily on petrol imports and intermittent hydropower. The development of a consistent domestic energy supply will be critical for powering the economy, while reducing imports from neighbouring countries.

Policymakers will need to hammer out a sound oil and gas bill that provides regulation, certainty, and environmental protection. The bill should aim to improve certainty and transparency across the industry, providing international oil companies and domestic companies with clarity about industry procedures and policies, ensuring productivity and trimming the time taken to get projects off the ground. It should also govern the regulation of the industry, providing clarity on tax, risk, ownership and safety.

Cautionary tales

On 4 February, Shell announced that it has hit oil in Namibia’s Graff 1 offshore well, marking the first time that oil has been found in the country after a decades-long hunt

As recent Orange Basin discoveries kickstart a new era of exploration, the historical failure to exploit amibia’s udu gas fields offers a cautionary tale. amibia discovered a giant gas field containing an estimated 1.3 trillion cubic feet of gas in 1974.

Twenty-nine years later, despite a number of companies holding licences, the reserves have failed to be monetised due to concerns over the project’s viability along with wrangling between oil companies and the government on export agreements.

Political interference from the state and debates over ta , interest and refineries all dogged the project, Bonnefoy says. Initially discovered by Texaco, the well’s operations were passed to Shell, Energy Africa, and later Tullow Oil. In 2017 a subsidiary of BW Group took over, supported by Namibian state oil company NAMCOR. “All the small players are gone. Tullow just threw the towel at it and said it will never work. That’s what you want to avoid in Namibia.”

In this chequered past lies opportunity for the country to cherry-pick industry practices from around the world in designing their oil regime, says Frank Fannon, a former US assistant secretary of state for energy resources and current managing director of Fannon Global Advisors.

“Namibia’s lack of discovery success in the past has meant that it could watch the rest of the world test different models. I would encourage the country to integrate the best elements and reject the bits that compromise the country’s values… The country would also like to ensure a long-term industry. The regulatory conte t and fiscal regime should incentivise those goals rather than short-term returns,” says Fannon.

A discovery of this magnitude has the potential to be high-jacked by political ambitions, with politicians overspending on infrastructure, accelerating timelines and cutting corners to meet political timelines rather than business cycles, Fannon warns.

“I would encourage the country to stay on a disciplined path. To focus on the technical elements, safety, and environmental performance, among others. The world, investors, and the broader industries are watching how Namibia manages this discovery.

It will be important that the country and the private sector execute the plan.” n n

44 African Business March 2022

Namibia resources

A German consortium has been enlisted for an ambitious $9.4bn green hydrogen project, but questions remain over the country’s competitiveness and regulatory framework, reports Amine Dinar

Namibia eyes green hydrogen future

T

he Namibian government has announced that it will choose the German consortium Hyphen Hydrogen Energy as the preferred bidder for its green hydrogen project in the Tsau Khaeb National Park.

The large-scale green hydrogen project is the most notable project in the government’s Southern Corridor Development Initiative (SCDI) in Kharas, the country’s southernmost region. James Mnyupe, economic advisor to the president and hydrogen commissioner, noted that the region is particularly suitable due to its large solar and wind resources and proximity to the coast. Hyphen has described the park as one of the top five locations in the world for the production of low-cost hydrogen.

The agreement grants the company the right to operate the project for 40 years with operations set to begin in 2026 and plans to produce up to 300,000 tonnes of green hydrogen per year. With an eventual project size of $9.4bn, the country wants to establish itself as a major power in the production of green hydrogen.

Although the green hydrogen sector currently represents less than 1% of global hydrogen production, African countries including Egypt, Morocco and

March 2022 African Business 45

South Africa are all attracted to its potential in a world shifting towards renewable energies. The World Platinum Investment Council estimates that the sector will be worth $2.5 trillion by 2050, supporting 30m jobs. Japan alone is planning to import up to 800,000 tonnes of the product annually from 2030.

At present, global hydrogen production is based on stripping hydrogen from fossil fuels such as methane, natural gas or coal. In contrast, green hydrogen energy is produced using electrolysis, a process that separates hydrogen molecules from desalinated water using wind turbines or solar energy. This process converts electrical energy into chemical energy without carbon emissions. The hydrogen recovered makes it possible to obtain energy in two ways: through its direct combustion with oxygen or in the form of electricity via a fuel cell.

Green hydrogen may be used to decarbonise sectors which are hard to electrify, such as steel and cement production and has widespread possible applications in the transport sector, thus helping to limit climate change. But with the technology requiring extensive new investments in infrastructure, Namibia and its partners have their work cut out to make the project a success.

The potential of green hydrogen

One German government expert expects a kilogram of hydrogen from the country to cost approximately $2

Green hydrogen has been increasingly earmarked for growth. The reduction of greenhouse gas emissions was at the centre of debates at November’s global climate change conference in Glasgow, where the Cop26 Energy Transition Council set the objective of doubling investments in green energies by 2030. eanwhile, vulnerable to the effects of climate change and highly dependent on the agricultural sector, Namibia has recently experienced extreme drought. To address climate change, Namibia has pledged to reduce its emissions by over the ne t five years and reach net ero by . amibia is the first country in Africa to include environmental protection in its constitution and green energy is a major pillar of its economic recovery plan launched in March 2021, Harambee Prosperity Plan II. Namibia plans to exploit its renewable energy potential to reduce the region’s reliance on carbon-based fuels. By fighting against climate change and taking advantage of its natural resources, Namibia says it hopes to attract significant foreign direct investment to the green energy sector.

One German government expert expects a kilogram of hydrogen from the country to cost approximately $2, a competitive price that would place Namibia among high-potential green hydrogen producers and position it as a major domestic producer and exporter. Namibia has abundant reserves of platinum and iridium, two metals used to separate hydrogen from water.

In addition, there are vast tracts of unused land in Namibia, and the country enjoys over 3,500 hours of sunshine and ideal wind speeds. These factors allow it to exploit solar and wind energy to meet its needs.

Challenges for Namibia

Below: Tsau Khaeb National Park, the site of Namibia’s proposed green hydrogen project.

Despite the Namibian government’s optimism, the country faces several challenges as it seeks to become a major

producer of green hydrogen. The amount of water needed to produce hydrogen is a challenge in a largely desertified country marked by water scarcity in which desalination can be very expensive.

The cost of the electrolysis used in the hydrogen manufacturing process is also high. Namibia is counting on the low cost of its green hydrogen to become one of the world’s leading exporters, but the competitiveness of Namibian green hydrogen is not guaranteed. Without a net advantage in terms of price, amibia could find it hard to compete with more experienced producers such as Australia, Chile and Morocco, the last of which has strong links to the European market.

Concerns have also been expressed about the cost and feasibility of developing hydrogen infrastructure in Namibia. The size of the investment almost equals the entire GDP of Namibia in 2020 ($10.7bn), and Namibia will need to source extensive capital from DFIs and the private sector if the $9.4bn budget is to be realised. The initial phase of the project will be a more modest $4.4bn prior to a planned expansion in the late 2020s.

Policies and regulations are essential for the government to attract investment in sustainable energy and provide investors with a stable environment.

While Namibia has committed to producing a legal framework for green hydrogen exploitation, no such framework currently exists.

Benefits for the country

Still, if the project does get off the ground, it could position the country as a distributor for Southern Africa and Europe, and would make it possible to collect concession rights, a contribution to the sovereign fund and taxes. At least 18,000 direct jobs could be created, including 3,000 permanent roles, and the surrounding communities will benefit from the surplus water desalinated by the plant.

The initiative aims not only to bring Namibia into the global energy market but also to decarbonise all sectors of the country and strengthen the Namibian job market. With the country’s economy ravaged by the Covid-19 pandemic, the Prosperity Plan aims to kick-start Namibia’s economic recovery and growth, creating meaningful jobs and new industries. Growth of 3.6% is expected this year after 1.3% in 2021, but the economy contracted by -8% as the pandemic hit in 2020.

Hyphen director Tobias Bischof-Niemz said that the consortium involved in the project comprised shareholders and technical partners that were world leaders in their respective fields “This collective deep technical expertise across the entire green hydrogen value chain, combined with our financial strength and experience in developing, fundraising and implementing infrastructure projects in Africa, will be crucial in successfully delivering a project of this magnitude and complexity.”

“This is a milestone project,” said Nangula Uaandja, head of the Namibian Investment Promotion and Development Board. “This is exactly the kind of project the board aims to attract as it is directly aligned to our mandate of unlocking investment opportunities that drive the economy forward, and most importantly, improve the quality of life for most Namibians.” n

46 African Business March 2022

Gambling

Football fans across the continent were gripped by the African Cup of Nations, and none more so than Nigeria’s burgeoning community of dedicated gamblers, writes Pelumi Salako

Nigerian punters bet big on Afcon

O

n 6 February, Africa’s biggest footballing competition, the African Cup of Nations (Afcon), came to a riveting crescendo in a final match between the Teranga ions of Senegal and the Pharaohs of Egypt, with the former emerging victorious in a penalty shootout after a tense goalless contest.

The tournament, Africa’s most important footballing showcase, ended up being truly captivating, showcasing moments of ingenuity and sportsmanship from opposing finalists like Sadio an and o Salah and helping to cement the global prestige of the continent’s game. The 33rd edition of the biennial competition served as a catalyst for economic activity in the cities of host country Cameroon, which witnessed an influ of tourists from different parts of Africa and the world.

In neighbouring Nigeria viewers had an additional reason to remain glued to the tournament. In Nigeria, sports betting, especially on football, thrives, and the tournament helped to reinforce an interest in gambling. On game weekends, betting shops are filled with young males queuing and raucously debating sporting topics. After several bets, many walk out with a frown, and a very lucky few go home with a smile. Others bet at home on their mobile phones and computers as the uptake of technology continues apace and international gambling firms flood the internet with advertising.

Oladimeji Olalekan, a betting shop manager in Ilorin, says that every major football tournament ushers in a wave of gambling by regular customers and casual stakers alike, with most ending up in the red due to their penchant to bet on the outcome of too many games in the hope of securing a high return.

Afcon and other major tournaments like the Fifa World Cup, the Uefa European Championships and the Uefa hampions eague offer a vital source of revenue for Nigeria’s emerging gambling industry.

“Afcon means more customers and sales. We get a

lot of stakes during competitions like Afcon because of the passion people have for it,” says Olalekan.

Ibrahim Abiola, a legal practitioner and sports analyst, says that the emotional bond that many customers enjoy with their favourite teams helps to drive gambling interest in the tournament, as does the possibility of predictable results in mismatched ties.

“Afcon is viewed as ‘our competition’ by most youths. They believe that since it’s for Africans, the betting opportunities are more. Also, the gulf in class among African countries is quite high. It’s easier to predict the outcome of matches in Afcon, because it is not played every day. The beginning of Afcon showed that there are some high possibilities and it’s easier to predict the outcome of matches. The only thing that will draw a better’s attention faster is a sure game.

The first few results of Afcon matches followed a particular pattern and this made it a sure game for gamblers,” he says.

Betting takes off in Nigeria

Sports betting in Nigeria has become endemic. Some 60m people between the ages of 18 and 40 are thought to be involved in active sport betting, with football by far the most popular attraction. Beyond simple entertainment, Abiola says that the major causes of gambling among youths in Nigeria are entrenched poverty and a get-rich-quick mentality encouraged by persistent betting advertising from an industry which sees Africa as the next frontier in gaming amid the potential for heavier regulation in mature markets.

Over 35 licences have been granted to sports betting firms to operate in the country, according to ige ria’s The Guardian newspaper.

“Gambling is seen as an easy way to make money with less stress. The continuous advertisements of sports betting companies during football matches have proven effective. They stimulate youths who love sports and draw their attention easily,” says Abiola.

Olayemi Ademola, a civil servant who started to bet five years ago after he was taught the basics by a friend, said that Afcon has stimulated his betting habit, with betting on variables like the number of fouls and bookings during games proving particularly tempting.

“It is a big tournament with big players from all over Africa. Afcon is our tournament where African players showcase their talent to the rest of the world.

The beautiful thing about the tournament is that the games are easily predicted because it is more physical than any other tournament in the world and this can be seen in the number of fouls committed and the number of bookings during the games.”

Ademola, unlike casual stakers, tends to pick his bets carefully and limits them to a few matches in order to maximise his chances of a return. He says that the tournament provided an opportunity to deploy his strategies.

“As someone who bets and knows his way around the betting arena, winning becomes easy, because goals are not much in the matches and first half draws have been a scenario that played out in many Afcon matches.”

Gambling attracts youth

Gambling is particularly attractive to the young – a key demographic for the industry – but can prove prob-

March 2022 African Business 47

lematic. Jesse Alenyika, an undergraduate student at the University of Ilorin, was inducted into betting by a friend and says that that he sometimes went hungry as a result of his losses. He says he has since learned how to bet more effectively. nlike many emotional punters, he says he viewed Afcon with a detached indifference and only bet on more predictable variables like the outcome of games when the bookies offered attractive odds on results.

“The odds of the last Afcon games were nice.

There’s always a favourite except for some exceptions.

I was lucky a few times as the Afcon odds were high.

Either I play straight winning or just back a team to win or draw,” he says.

For many betters, keeping their passions in check is far more di cult, especially as losses mount. While most Nigerians leave the betting shops with less money than they entered, the continued efforts of the industry, and the growing popularity of both football and gambling, are likely to keep punters returning again and again. n

Some 60m people between the ages of 18 and 40 are thought to be involved in active sport betting

Special Repor t Rwanda

Rwanda is at a crossroads, and has made strides in its development. But with many of the low-hanging fruits already harvested, the second phase will be more challenging.

Lars Larsson introduces a special report focusing on the country’s growth prospects in agriculture, finance, technology, vaccine production and aviation, including indepth interviews with Rwanda’s finance minister and the CEO of national carrier RwandAir.

Rwanda plots next growth phase after pandemic

A view of the downtown district of Rwanda’s capital, Kigali.

F

or many years, Rwanda has been a darling of the donor community: a country where human development metrics were on the rise, supported by enviable economic growth rates and an ambitious government keen to promote itself as an exemplar and a regional leader.

But critics worried that its state-driven model of growth would ultimately prove limited. They feared that the country’s small size – it has just 13m people – could limit growth, and that building on its initial rapid economic expansion from a low base would become ever more di cult. astly, they contended that state-driven development is limited by its nature and that at some point the private sector would need to flourish if Rwanda is to truly succeed.

Despite a di cult past couple of years – the pandemic saw the economy contract by 3.4% in 2020 – Rwanda remains a country on the move. Having rolled with the Covid-19 pandemic’s punches (see pages 60-61), double-digit growth of 10.2% for 2021 could be on the cards when figures are delivered this month, while the country is set to deliver 7% growth this year according to the IMF (see pages 54-55). A society that just a generation ago was tearing itself apart in one of history’s bloodiest displays of division is now working towards a shared purpose with the zeal of the convert.

At the heart of Rwanda’s model todate have been ambitious long-term plans, and the government has hitherto attributed many of the economic advances to its Vision 2020 plan, which successfully harvested much of Rwanda’s low-hanging fruit, in everything from internet connectivity to healthcare, over the past two decades. Under the plan, the administration of President Paul Kagame, in power since 2000, has focused investments in priority areas that maximise the benefits to businesses and the broader population.

At the heart of the country’s approach has been a raft of pro-business policies, which helped Rwanda to rise to 29th place in the World Bank’s 2019 Ease of Doing Business index, the second best in Africa after Mauritius. Indeed, the successful adoption of economic plans has driven development indicators.

Rwandan life expectancy increased from 49 to 66.6 between 2000 and 2017, while extreme poverty fell from 40% to 16%. From 2014 to 2019, average economic growth was 9.2%, reaching 10.2% in Q4 2019, before contracting in the wake of the Covid-19 pandemic. But as the country recovers from the pandemic era, it is targeting ambitious plans amid a di cult global economic backdrop. y December, the government had surpassed

“

GROWTH RATES OF UP TO 12% ARE TARGETED UNTIL 2035, LEVELLING OFF TO AROUND 10% FROM 2036 TO 2050 Shooting for the moon Of all the headline-grabbing news that has come out of Rwanda in recent years, the announcement of the Rwanda Space Agency (RSA) in 2020 may be the most ambitious. The agency’s primary objective is to build its upstream capabilities to launch two “constellations” of its own satellites to join the two individual satellites that have been in operation for some years.

RWASAT-1 is a communications satellite built in partnership with the Japanese Aerospace Exploration Agency, and Icyerekezo, built in partnership with the UK’s OneWeb, provides internet to schools in remote parts of Rwanda.

The inspiration behind the formation of the RSA is the benefits that it will bring to the key industries identified in Vision 2050. The RSA works in close coordination with government ministries to provide actionable information on everything from urban planning to monitoring natural disasters (as it did during the eruption of Mount Nyiragongo in DRC in May 2021). Illegal mining anywhere in the country can be detected, as can violations of regulations by legal mining operations and other businesses.

Satellite technology has made huge advancements in the past few years.

The most visible result of this has been a new generation of compact but sophisticated satellites that can be launched and operated at low cost, especially when combined with reusable launching facilities. For now, most of the government’s space ambitions are being served through partnerships with existing satellite operators, while it gears up to develop its upstream capabilities (in design and fabrication) in the near future.

This has allowed Rwanda to expand its downstream data-processing capabilities using advanced machine learning software to interpret the vast amounts of data produced. The RSA is forming partnerships with private investors and universities to build its capacities and has an MoU with the Smart Africa Alliance to start a working group to promote African space programmes.

Over view the World Health Organisation’s target of over 40% of citizens fully vaccinated, but the pandemic has nevertheless exacerbated poverty, unemployment, and gender inequalities, according to the IMF, which warns that it risks reversing hardwon social and economic gains.

In a bid to counteract these impacts, the country is forging ahead with Vision 2050, which has laid out the objectives of making Rwanda a middle-income country by 2035 and a high-income one by 2050. Growth rates of up to 12% are targeted until , levelling off to around 10% from 2036 to 2050. The planned driver for the next phase of national growth will be the expansion of key areas of the economy, including agriculture, health, infrastructure, manufacturing, tourism, finance, education, energy, and the extensive use of technology in both government and business.

Drawing together these disparate ambitions is a grand plan to establish Rwanda as a laissez-faire proof-of-concept location where innovative solutions are developed before being exported to other parts of Africa. The hope is that this will overcome the challenge of Rwanda’s small domestic market and limited spending power by utilising its central location to offer investors access to markets across Africa.

“The fi rst thing that investors are looking at is market size, and while the Rwandan market is not big, our geographical location makes us the perfect proof-of-concept test bed for all the larger markets around us”, says Diane Karusisi, CEO of the Bank of Kigali.

Prioritising education

With an average age of 19 and only 22% of its population above 35, Rwanda is one of the world’s youngest countries.

Rwandans’ interactions with the wider world are enriched by their multilingualism. The country’s o cial language, Kinyarwanda, has a large degree of commonality with the region’s other Bantu languages, and most Rwandans are also proficient in both French and nglish.

With an eye to the country’s future, the government has prioritised its education system. Under Vision 2020, 100% of both boys and girls were enrolled in the government’s free universal basic education scheme. Vision 2050 has set the target of broadening educational provision to include secondary and tertiary education with a focus on vocational skills, particularly relating to technology. These ambitions extend across the region as Rwanda hopes to attract students and ideas from neighbouring countries to learn their trade in Rwanda, and then stick around to apply their skills in Rwandan startups.

Over the past couple of years, three

Special Repor t Rwanda universities have been built in Kigali Innovation City (KIC) to attract and develop the skills that Vision 2050 requires. Spanning 61 hectares and located in the Kigali Economic Zone, the KIC was founded in 2021 to attract investors and contractors with incentives such as a slashed rate of corporate income tax (15% as opposed to 30%) and exemptions from import tax and VAT on ICT equipment. The project is backed by Africa50, the African Development Bank’s infrastructure investment platform. It recently passed the development phase and is now mobilising financing to get buildings and infrastructure in place.

Boosting tech

Boosted by the Covid-19 pandemic, more and more public and private services are being automated and moved online.

This is best demonstrated by Irembo’s e-governance platform (see box, right), which provides Rwandans with access to hundreds of government services and is another example of private capital developing its service offering in wanda with a view to exporting it across Africa. et these plans envisage a large fi nancial commitment from government and lenders. Rwanda is hoping to plug that gap with the Kigali Financial Innovation Centre (KIFC), announced in December 2019, which has a mandate of transforming Rwanda into an international financial destination for inves tors seeking opportunities across the African continent. In November 2021, the KIFC received a boost with the launch of the $250m Virunga Fund, whose anchor investors are the Qatar Investment Authority (QIA) and Rwanda Social Security Board (RSSB).

Another wandan financing initia tive that has been drawing attention is the Green Fund, which aims to drive development of the country’s nascent solar power industry. Most of its energy consumption is met by hydropower, but to date, little has been done to harness the power of the ever-present equatorial sun. As technological capabilities have grown, off grid, small scale solar energy is presenting a practical way of reaching the government’s goal of spreading electrification to of wandans by 2024. The Green Fund is expediting the process by nurturing both supply and demand for solar panel installation in remote parts of the country.

Challenges for tourism

Reviving tourism, another focus area of the country, is likely to be more challenging in the pandemic era. In 2019, Rwanda registered its best ever year for tourism, netting $500m, the country’s biggest source of foreign currency, and registered $2.46bn of local and foreign

Irembo – seamless digital access to public services One of the best examples of Rwanda’s adoption of technology to “leapfrog” conventional systems is the creation of the country’s e-governance platform, Irembo (meaning “gateway” in Kinyarwanda). Launched in 2015 and modelled on the UK’s gov.uk portal, Irembo offers Rwandans bureaucracyfree access to over 106 government services, ranging from paying parking fines to registering births.

Although improvements and additions to the platform will be necessary, the government is hoping to have hundreds more digitally deliverable services available on Irembo by 2024, including services aimed at community-level recycling and aiding the establishment of SMEs. This expansion presents the private sector with both opportunities and incentives. Irembo currently works with 4000 agents and franchises across the country, and helps to support Rwanda’s bid to improve the ease-ofdoing-business by offering services to companies far past the set-up phase.

“When the huge public expenditure of a country like Rwanda is channelled into going digital, it opens up a whole new world of economic possibility and drives the right behaviour, which has been very good for the country,” says Faith Keza, Irembo’s CEO. Irembo also demonstrates Rwanda’s plans to turn its business ecosystem into a proof-of-concept testing ground for firms with wider continental ambitions.

“We see a need for our services across Africa, where we can offer governments a ready-to-go system that just needs to be configured to fit local government structures, without the need for long-drawn-out tech tenders or designs, which tend to be costly and slow to roll out,” says Keza.

Right: Faith Keza, CEO of Irembo.

investment. Many visitors head to the Volcanoes National Park, one of the only places in world where visitors can see wild mountain gorillas.

The tourism industry was fuelled by an increase in the number of international airlines flying to igali in recent years, and a partnership between national carrier RwandAir and Qatar Airways.

Phase one of Bugesera Airport, which will be 60% owned by Qatar, is due to be completed in late 2022, at which point it will be able to handle over 1m passengers and 150m tonnes of cargo per year.

But since the Covid-19 pandemic sucked the wind out of the hospitality sector’s sails in 2020, hotels and tour companies have received government support in the form of subsidies and loan support. While the industry had shown encouraging signs of organic recovery in 2021, the devastating emergence of Omicron dealt another blow to Africa’s struggling travel industry. Future variants could again place recovery in doubt.

Success in hosting events

That murky picture complicates Rwanda’s plans to gain a strong foothold in the MICE (meetings, incentives, conferencing, and exhibitions) industry. In 2019 Rwanda hosted the second-highest number of conferences of any country in Africa (after South Africa), with many delegates flocking to the built igali Conference Centre prior to the pandemic.

Yet the country’s recent focus on hosting high profile international sports events, even during the pandemic, could help to assure visitors that the country is ready for the new era of safety first tour ism. The Ministry of Sport has the task of making Rwanda a leading contender to host major international sporting events.

“Hosting events is part of the strategy to attract investors by offering them an opportunity to find new client bases in new places,” Aurore Mimosa Munyangaju, Rwanda’s minister of sport, says. “We always make sure the private sector is informed of the opportunities that result from developments in sport.”

After successfully hosting the NBA/FIBA Basketball Africa League in May 2021, Kigali was booked to host both the men’s and women’s International Volleyball Championships in September 2021. It has since been announced as the host of the Ironman Triathlon (August 2022) and the Worldwide Cycling Championships (2025).

“By working with the tourism and infrastructure ministries, we have won the

“

REVIVING TOURISM, ANOTHER FOCUS AREA, IS LIKELY TO BE MORE CHALLENGING IN THE PANDEMIC ERA

Over view

Below: A group of tourists with their guide in Rwanda’s majestic Volcanoes National Park.

Special Repor t Rwanda trust of international organisations for hosting big sporting events,” says the minister. Large investments are being made in sporting infrastructure, including the upgrading of the Amahoro Stadium into a multipurpose arena that can host football, basketball, volleyball, tennis, and Paralympic competitions. Seating capacity will be boosted to 45,000. The 24-month project is being undertaken by Turkish construction company SUMMA, which just two years ago completed the nearby Kigali Arena, the biggest indoor arena in East Africa.

Another aspect of Rwandan engagement with international sport is Visit Rwanda’s sponsorship of the Arsenal and Paris St-Germain football clubs, the latter of which has since opened a training academy in Kigali for football coaches and players.

Export-led growth

While the country is hoping to import visitors, it also has ambitions in manufacturing-led export growth.

The launch of the African Continental Free Trade Area (AfCFTA), of which Rwanda has been a major supporter, should allow the country to capitalise on new regional markets for its manufactured products. Although its results are yet to be fully felt because of the Covid-19 pandemic and some details remain to be ironed out, Af FTA is set to remove tariffs on 90% of intra-African trade.

To enable economic integration, regulations are being harmonised, visa requirements relaxed, and borders between historical rivals are being opened to people and capital. For Rwanda, that means increasing import substitution and lifting exports, especially of fast-moving consumer goods F s , to nearby tariff free markets in Burundi and DRC. Several high profi le manufacturing initiatives have an eye on this future. Volkswagen opened wanda’s first car plant in .

The $20m investment created 1000 jobs and is expected to cater to a growing regional market for Uber-like vehiclesharing service providers.

The opening of one of BioNTech’s two African “fill and finish” vaccine manu facturing plants, planned for mid-2022, offers a chance to boost the country’s biotech capacity.

Meanwhile, fashion brands are being urged to adopt “Made in Rwanda”, with local creatives like Moses Turahirwa and his Moshions clothing label rising to the challenge. Agricultural and mining modernisation are also priority areas under the 2050 plan.

While Rwanda has outperformed the expectations of sceptics, the next few years will be a major test of whether the country can continue its encouraging momentum. n

Big advances in renewable energy

Renewable energy accounts for an increasing proportion of Rwanda’s energy consumption.

The country’s network of hydropower facilities, ranging from 2 to 20 MW of capacity, account for 53% of energy production, while the 8.5-MW solar farm at Agahozo-Shalom Village, 50km east of Kigali, was the first utility-scale solar power plant to be opened in East Africa and contributes 6% of Rwanda’s energy generation.

Only 11% of Rwanda’s energy comes from the petroleum imported through the Kenya-Uganda-Rwanda pipeline, and the country’s only large-scale hydrocarbon production is of methane gas extracted from Lake Kivu, which is used for local industry.

Still, fossil fuels such as wood, charcoal, and peat represent 80% of household energy usage. As a result, attention is now turning to off-grid solar energy to boost clean household electricity without the necessity of large-scale investments in grid infrastructure.

“The cost of connecting every home in Rwanda to the grid is huge, and some households consume very little power,” says Diane Karusisi, CEO of Bank of Kigali, which installs solar panels in remote parts of the country as part of its CSR initiative. “A transitional solution is off-grid, small-scale solar capabilities installed on the roofs of rural family homes.”

Clare Akamanzi, CEO of the Rwanda Development Board (RDB), says “Solar farms require a lot of land, which is not ideal for a small country with very fertile land and a growing agricultural sector.

We see off-grid as the way to go.”

Around 10 local and international companies have begun the task of installing solar panels. Their work is subsidised by the RDB to foster economies of scale, and allow Rwandans to secure low-interest loans to pay for installation.

Solar energy is just one area of focus for the RDB, which has also launched a Green Fund to encourage startups in green innovation and offer support in the form of grant, low-risk financing and investment de-risking.

A good example of this is the RDBsupported electric motorcycle producer, Ampersand, which launched in 2019 and

by November 2021 had also secured a $9m loan from the US International Development Finance Corporation.

The company has also expanded into Kenya and is now gearing up for wider expansion in the East African region.

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RWANDA’S AGAHOZOSHALOM VILLAGE 8.5-MW SOLAR FARM CONTRIBUTES 6% OF RWANDA’S ENERGY GENERATION

Over view

Below: Technicians installing panels at the Agahozo-Shalom Village solar farm in 2014. The project was completed in less than 12 months.

Special Repor t Rwanda

Uzziel Ndagijimana, Minister of Finance and Economic Planning, Rwanda Rwanda’s long era of economic growth was disrupted by the pandemic, but the government believes that its next long-term plan will entice investors back. Uzziel Ndagijimana, minister of finance and economic planning, talks to African Business about the country’s recovery plans.

‘We are spending $150m to promote new investments and support recovery’ How has the Covid-19 pandemic affected Rwanda’s economic growth?

The sudden emergence of the Covid-19 pandemic disrupted our previously fast pace of progress. Economic growth in was . , which was our first con traction since the total economic collapse of 1994 brought about by the genocide.

The virus o cially reached wanda in mid arch , but had affected our economy before that because of the disruption of international supply chains and travel. Despite this, economic growth in was . , but dropped off sharply as the government started to impose tight measures to prevent the spread of the virus.

Prior to that we had time to put in place measures and procedures to limit the impact of the virus on the population.

This had the effect of minimising the loss of life, but also of constraining economic activity. These effects were fully felt in Q2 2020, when growth plunged to -12.4%.

Growth remained negative in Q3 and Q4, but also showed signs of improvement as we adapted to the ever-changing situation by loosening restrictions on some parts of the economy. Q1 2021 registered growth of 3.5%, and year-onyear growth in Q2 was a record-breaking 20.6%, before stabilising at 10.2% in Q3.

The data for Q4 2021 will be released in March 2022, but the average growth over 2021 is expected to be 10.2%, the highest rate in Africa, and revised up from the 5.1% that was projected in 2019.

How has the Rwandan government managed the recovery from the Covid-19 pandemic?

Covid management has become the main determiner of economic growth, so getting the restrictions right was crucial.

The country’s executive showed strong leadership and oversaw close coopera-

tion between different ministries and other parts of government to present a targeted, coordinated approach. A national standing committee, chaired by the prime minister, met every two weeks to discuss progress and strategy, and was guided by the latest scientific advice. In April 2020, the government adopted a recovery plan, which was arranged into a three-pronged approach: medical, social, and economic.

We used all channels to acquire the necessary testing and tracing capabilities, and invested in testing and isolation centres. These measures were aimed at making sure the health system did not become overwhelmed and that there were always ICU beds and respirators for anyone who needed them.

This was aided by the imposition of several total lockdowns, mainly in Kigali but also in some other cities. Individuals entering the country were tested immediately and then required to isolate for three days. To avoid further slowing the economy, this requirement was waived for truck drivers entering or leaving Rwanda, who were tested and then monitored – sometimes by satellite – to make sure that they stuck to their routes and designated hotels until their results were known.

Another example of an imaginative deployment of technology at this time was the use of robot carers at hospitals to ease the burden on nurses at treatment centres and minimise human contact.

To provide employment and use the opportunity to pursue pre-existing development plans, we released investment funds and accelerated the implementation of public works to keep the economy going. We fast-tracked plans to expand the number of classrooms in schools in rural areas to provide jobs now and better education in the future.

Within 10 months we had constructed over 20,000 classrooms at a cost of $200m, half of which was provided by the World Bank. Such a project would normally have taken us three years and disrupted the education of students, who at this point were studying from home anyway. When they came back to school they had more, bigger, and better-ventilated classrooms. Similar programmes were instituted for road construction.

We also tried directly to help the private sector with the creation of the Economic Recovery Fund (ERF) of $100m to support the most affected businesses. Our first target was the hotel industry, which had been badly affected by the collapse of tourism from the beginning of 2020.

Most of these companies had taken out loans that they were now unable to pay, and mass defaults would have further damaged the banking sector.

Around 90% of the ERF has now been spent, and the programme has been effective, though there is still work to be done. In 2021 we borrowed enough money to increase the ERF from $100m to $350m, which was put to use in January 2022. We are spending $150m to promote new investments to support the recovery and stimulate key parts of the economy.

Most of it has gone to small businesses in need of startup capital. This programme existed before the pandemic, but we ramped it up when we felt the time was right and distributed it across the whole country.

What has been the response from the international financing community to Rwanda during the pandemic?

The Covid pandemic has presented an opportunity for resource mobilisation.

The international financing community became more responsive to requests for financing. We received m from the

Inter view Asian Infrastructure Investment Bank as a new member, half of which went into the ERF, along with $150m from the World Bank. In 2020 we successfully raised a Eurobond of $650m, the biggest in Africa.

This demonstrates that investor confidence in wanda is very high, even in the middle of a pandemic and in the face of strong competition. We could have raised as much as $1bn, but we didn’t need it since we had the pandemic under control, and because it didn’t fit with our debt strategy.

In which sectors of the economy are you seeing growth?

The country and its work culture has re-

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AVERAGE GROWTH OVER 2021 IS EXPECTED TO BE 10.2%, THE HIGHEST RATE IN AFRICA, AND REVISED UP FROM THE 5.1% THAT WAS PROJECTED IN 2019

mained resilient throughout. Agriculture has been strengthened. Manufacturing grew consistently throughout the pandemic, from around 16% to 19% of the economy. The service sector is showing signs of a speedy recovery. This is particularly true of ICT, which is believed to have grown by 30%, and which is so important to the government’s future plans under Vision 2050.

Technological advancement actually received a boost from the pandemic as digital solutions were applied to encourage social distancing, and continues to grow apace. Transport was affected but is recovering fast, including aviation. The hospitality sector is still below the preCovid level but is also seeing increased activity.

How are you positioning Rwanda as a regional financial centre?

We are diversifying our economy and exploiting our geographical location.

As a landlocked country, import and export costs are very high. But we can also turn this into an opportunity by investing heavily in regional logistics and high-value services, particularly ICT and finance. This is a key part of the i sion 2050 plan and central to our ambitions as part of the African Continental Free Trade Area. To accomplish this we are creating an environment of trust, good governance, low corruption, and compliance with international financial standards.

After some further legal reforms and capacity building, we plan to position ourselves as a regional financial cen tre. That was the inspiration behind the creation of the Kigali International Finance Centre (KIFC), which is managed by Rwanda Finance Limited. The objective is to attract funds, banks and financial management companies to i gali to finance developments both in and outside Rwanda.

We are set to further reform regulations relating to business and finance, which were passed with the help of international consultants working to international standards. This will offer confidence and fa miliarity to international investors. The centre has attracted a lot of investment already. Some 35 companies have already expressed interest, 20 of which have already incorporated in Rwanda.

These include fintech st a r t ups, i nvest ment companies, law firms, and banks. n

Special Repor t Rwanda

Diane Karusisi, Managing Director and CEO, Bank of Kigali Diane Karusisi was appointed MD and CEO of Bank of Kigali, the largest commercial bank in Rwanda by assets, in 2016. She talks to African Business about the growth outlook for Rwanda and the country’s plans to become an international finance hub

‘2022 will show clear recovery from the Covid-19 pandemic’ What is your perspective on the outlook for the Bank of Kigali, and by extension, for Rwanda?

As of September 2021, our assets have grown by more than 28% and our net loans have grown by , reflecting de mand from the private sector and showing the appetite to invest in the economy.

This correlates positively with the growth of GDP. We have seen a fantastic 2021 Q2 with growth of 20%, and growth of more than 10% in Q3. This year we expect to see double-digit GDP growth.

As Rwanda’s largest bank, this augurs well for us and future demand for our services. Rwanda showed its maturity in its handling of the Covid crisis. This has helped all sectors, and the Bank of Kigali is at the centre of all these developments, for the simple reason that all these sectors transact. I believe 2022 will show clear recovery from the Covid-19 pandemic.

In which sectors of the economy are you seeing growth and which sectors have struggled?

Some sectors, such as hospitality, are still struggling due to travel restrictions and curfews. Public transport and the private companies that operate it are still down due to curfews and work-from-home policies. Luckily they have received support from the government in the form of subsidies and loan restructurings, which has kept them alive, and kept the country moving. ut when you look at trade flows, investment and manufacturing, we see significant growth, which shows how resilient our economy is. With the logistical constraints that come with our geography, and restrictions on trade in the past two years, we are seeing a good deal of import substitution in sectors like cement, the local demand for which is close to being met 100% by local supply, up from just 30% about four years ago.

The FMCG segment in particular is doing very well, with companies setting up small factories – many of them thanks to foreign investment – to meet demand for basic household items, which is helping us overcome our logistical import problems.

Furthermore, these companies are discovering export markets in places like DRC, which used to be a re-export market for Rwanda; this presents a huge opportunity to new Rwandan producers.

The government is offering incentives, like low energy costs and low taxes, to promote the development of manufacturing capabilities. The Bank of Kigali is growing on the back of these developments and we are seeing appetite from local investors. And these are sectors that also produce a lot of jobs, which is going to create a virtuous cycle and have wider reaching effects on the broader economy and the quality of life for ordinary Rwandans.

What does the establishment of the Kigali International Financial Center (KIFC) mean for the Bank of Kigali and Rwanda’s plans to become a financial hub?

The government’s plan is to build a centre of financial innovation, e cellence, and service provision at the heart of Africa. This plan rests on legal reforms to attract investment towards key areas such as green energy financing, private e uity, fund management and fintech, concentrated in the KIFC. These services can then be exported to other parts of Central and Southern Africa that do not have a lot of access to finance. The ank of igali’s holding company is registered with the KIFC, where we have great financial incentives, such as group-level corporate income tax of 3%, as opposed to 30%. We hope that this will allow us to attract more investors from various sectors to the Bank of Kigali and expand into more parts of the financial industry.

How does the Bank of Kigali tailor financial products to promote sustainable energy?

When you look at our energy portfolio, most of the producers that we finance are actually from the green space. Most are hydropower plants – usually small ones producing a couple of megawatts and some producing as much as 20 megawatts.

We see a possibility for us to refinance these loans with more affordable facili ties. The green finance pool is uite big, and we are looking for opportunities to pass on incentives to our clients so that they can get better financing at afford able rates.

In general we need to improve our knowledge of the sector to better understand where the opportunities are, how green energy is certified, and what projects can attract financing not only in Rwanda but in the region – to create a knowledge hub in Kigali to tap into these opportunities and allow our economies to grow in a sustainable manner.

Part of our CSR is supporting rural homes in getting solar panels installed for household use. The cost of connecting every home in Rwanda to the grid is huge, and some households consume very little power because they don’t use many appliances, so it doesn’t make business sense to connect all the households to the grid for the time being.

A transitional solution is having off grid, small scale solar capabilities installed on the roofs of rural family homes. Installation is not expensive and it is getting cheaper as it catches on, with economies of scale. The government’s target is 100% access to electricity and the uickest, most affordable way of reaching that in the short term is off grid solar.

Are there enough large banks in Rwanda to finance big transformative transactions?

Before Covid we saw a new bank entering the market every year, such as Bank of

Inter view

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INVESTORS SEE MANY OPPORTUNITIES AND FEEL COMFORTABLE OPERATING IN THE REGULATORY FRAMEWORK THAT WE HAVE CREATED IN RWANDA

Africa, from Morocco. So we have seen a lot of movement in the banking sector.

Fewer than 40% of Rwandan adults are banked at the moment, which presents a big opportunity. The ratio of banking assets to GDP in Rwanda is about 44%, which is quite low compared to other countries, where it can be as high as 200%.

Because we have a growing economy and have segments that are still excluded, banks are attracted to Rwanda. We also have a stable regulatory environment, and the approach of the banking regulator, the Central Bank, is very collaborative. Whenever they want to try something new they first discuss it with the Bankers’ Association and agree on if, how, and when new regulations can be implemented.

So investors see many opportunities and feel comfortable operating in the regulatory framework that we have created in Rwanda.

How important is fintech to Rwanda’s future?

Fintech is very important in bridging the gap and making sure everyone is included in the fi nancial system. ut fintech offerings need to be meaning ful by not only providing the means of transaction, but also by offering loans to grow businesses and protecting wealth from risk.

Fintech is helping us to do that on the back of close to 100% 4G internet coverage. Even if Rwandans do not all have internet access in their homes, all they need is a phone to be able to access financial services, whereas in the past we had to open a branch or have an agent in every part of the country. So I see a lot of potential for collaboration between fintech companies and traditional banks, to offer people fi nancial services that allow them to transact but also to grow small businesses. n

Special Repor t Rwanda

Yvonne Manzi Makolo, CEO of RwandAir The Covid-19 pandemic precipitated an airline industry crisis, but Yvonne Manzi Makolo, CEO of RwandAir, says that after a tough time the company, now 49% owned by Qatar Airways, is looking beyond the pandemic to Africa’s huge aviation potential

RwandAir: Pandemic offers new chance to gain market share How has the Covid-19 pandemic affected your expansion plans and your medium- to long-term strategy?

We had a lot of momentum in the lead-up to the pandemic. We were expanding and had 29 routes running and more planned, both within and beyond Africa, but when Rwanda went into lockdown we had to shelve most of these plans. wanda closed off its airspace to com mercial flights between arch and Au gust , so we had to ground our fleet and re-evaluate our business model. The government of Rwanda has taken the pandemic very seriously, but has been very supportive of affected businesses, including those in aviation. Our staff were considered front-line workers, so we were able to get everyone vaccinated quickly.

We were able to operate cargo-only flights to support the e port sector, as well as bringing in medical supplies like PPE. We converted our cabins to allow us to transport high-value exports like avocados, chillis, French beans, and flow ers to lucrative markets in Europe and the Gulf.

We also carried out several repatriation flights, mainly to and from urope, North America, and China, not just for Rwandans but also for citizens of other Central African counties.

By the time we resumed commercial fl ights in August we had shrunk our network to remove less profitable routes, including to Senegal, Juba, and Tel Aviv, which have still not been restarted.

Unfortunately we were also forced to lay off some staff, though we have started rehiring them now. We had to cut back on in flight services to focus more on safety and security procedures, which was obviously our priority.

We were on the road to recovery when the Omicron variant was recognised in December 2021, which was peak travel

season. That knocked us back again as we had to stop all our Southern African routes, as well as major long haul flights, to London and Dubai for example. Now that the Omicron outbreak is being managed things are once again picking up and we are seeing increased passenger numbers. We hope to see consistent improvements between now and the 2022 summer season.

Covid has created challenges, but also opportunities, with SAA’s privatisation and Kenya Airways restructuring its network.

How is RwandAir planning to fill new gaps in the market?

We had to pull out of some of our own routes, which other airlines are now eyeing, while we are looking at moving into new routes that have become available and which fit with our location and model.

Africa was already underserved and less connected than it should be, so there are lots of opportunities for airlines to gain market share at the moment. Even during the pandemic we opened a few new routes. These included Bangui (CAR), and Goma and Lubumbashi (DRC), which have been doing extremely well since we opened them in 2021. So we are still working towards our objective of connecting Africans with each other and with the world.

In 2020 it was announced that Qatar Airways was purchasing a 49% stake in RwandAir. What is the state of negotiations, and how will they help RwandAir establish itself as a global airline?

Commercial initiatives, such as codeshares, between RwandAir and Qatar Airways were agreed upon in September 2021 and have been operation since December 2021. These have linked Kigali’s air transport hub with that of Doha, which allows

us to e pand our network significantly.

We can now reach most of Eurasia, while Qatar can reach most of Africa. Travellers can earn and exchange air miles between loyalty schemes, while we have access to Qatar Airways’ training facilities for pilots and cabin crew.

Qatar Airways has also purchased a 60% stake in Rwanda’s Bugesera International Airport. How does this arrangement benefit both Qatar and Rwanda?

The joint venture is still being worked out but is probably a few months away from being finalised. This will give wanda a large, modern airport, which is central to our plans to make Rwanda a transport hub, as well as Qatar’s plans to service the African continent. This will allow Rwand Air to expand and allow the economy to benefit from ripple effects such as tourism and job creation.

It’s a massive project, around 25km outside Kigali, that is set to grow into an “airport city”, with housing, hotels, and entertainment centres, which presents a world of opportunity to local businesses.

The first phase is set to be completed in 2024-25, which will give the airport a capacity of 7m passengers.

The second phase will expand on that, but details are yet to be finalised. The whole project is a good example of the government’s preferred private-public partnership (PPP) model, and there will be opportunities for further PPPs in everything from construction to service provision as the project advances.

How is RwandAir embracing innovation to attract customers and establish itself in the international market?

We are always looking for ways to make travel easier, add value and differentiate ourselves from the competition. We have invested in digitising and automating a

Inter view

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NOW THAT THE OMICRON OUTBREAK IS BEING MANAGED THINGS ARE ONCE AGAIN PICKING UP

lot of things, such as online sales and online check-ins, which has actually been helped by the pandemic and the emphasis that was put on getting things done remotely. Qatar Airways has always been on the front line of innovation, and Rwanda is a very IT-focused country, so the deal between the two will let us complement each other’s innovative spirit perfectly.

How important is the African Continental Free Trade Agreement (AfCFTA) to RwandAir, and what is your role in the promotion of African trade?

The finalisation of AfCFTA will be a game-changer as it will force change across the continental economy, including in aviation. It will become impractical to operate a free trade area without broad “open skies” agreements, inclusive visa policies, and other provisions that will make it easier for people to use our services.

At the moment many barriers still exist across Africa, including complicated visa procedures, inconsistent infrastructure, a lack of ground handling facilities, prohibitively high airport taxes, and unmaintained or unlit runways, all of which have to be addressed before Africa can develop a sustainable and affordable aviation industry.

For Af FTA’s benefits to be felt in full, governments need to look at the continent holistically and address some of these bottlenecks so that aviation isn’t a limiting factor. As Rwanda becomes a regional centre for sport, tourism, and the MICE (meetings, incentives, conferences and exhibitions) segment, while promoting travel-friendly policies at home and abroad, AfCFTA presents Rwandans, RwandAir, and our partnership with Qatar with the opportunity to play a crucial role in Africa’s future. n

Special Repor t Rwanda

Having successfully vaccinated a significant proportion of its own population, Rwanda is now aiming to become a vaccine manufacturing centre through a deal with BioNTech

Rwanda aims to forge vaccine production hub in BioNTech deal

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wanda’s health sector has been praised for its adaptability in the face of the Covid-19 pandemic, including the e cient rollout of vaccines and virussuppression measures.

By mid-February, nearly 7m Rwandans had been fully vaccinated against the virus. At 53.7% of the population, this is one of the highest rates in Africa and the developing world.

Centralised leadership and a coordinated strategy based on the latest data

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THE IDEA IS NOT JUST TO PRODUCE COVID VACCINES, BUT VACCINES AGAINST OTHER DISEASES THAT EXIST ACROSS AFRICA

were rewarded with broad public compliance with tough virus-suppression measures. ICU capacity in provincial capitals was greatly expanded to avoid Kigali being overwhelmed, which helped prevent the spread of the disease and increased survival rates through quicker administration of treatment.

Oxygen production and distribution was ramped up to cover domestic needs.

The country has o cially reported deaths from just under 130,000 cases.

Much of the response was built on the

Health country’s existing Community Health System, which ensures access to basic healthcare provision and advice at village level across the country through a network of health facilities.

“Having trained people who can give practical advice at a community level helped prevent the healthcare system from being overwhelmed with minor or asymptomatic cases, which allowed resources to be concentrated on serious cases,” says Dr Daniel Ngamije, Rwandan minister of health.

This system was bolstered by investments – including $150m from the World Bank – in testing, tracing and vaccination capacity.

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HEALTHCARE IS HIGH ON THE LIST OF THE GOVERNMENT’S PRIORITIES AS IT SHRUGS OFF COVID-19

Vaccine production plans

Rwanda is now hoping to build on that progress by becoming a centre for vaccine production in Africa. BioNTech’s choice of Rwanda and Senegal as manufacturing and distribution centres represents the most serious effort to date to address the stark global inequalities in vaccine access.

The German company’s partially prefabricated “containerised” labs are slated to be installed in July 2022 and are expected to reduce construction time by around months. The fi rst vaccines produced on Rwandan soil are due to roll off the production line months later.

“It takes international solidarity to allow the transfer of knowledge, skills, and facilities, but this is just what BioNTech is doing for us,” the minister says.

Ownership and operation will be gradually transferred from io Tech staff to Rwandan management. BioNTech expects its Rwanda-Senegal “production line” to have the initial capacity to produce 50m vaccine doses per year.

But although BioNTech is best known for its ground-breaking messenger RNA A ovid vaccine, the signifi cance of its two new African manufacturing centres will most probably outlive the current pandemic. At the time of writing, attention was already turning to perennial scourges of the African continent, such as malaria and tuberculosis.

“Mastering new-generation MRNA technology is key to fighting many dis eases as they are very effective and can be developed quickly,” says Dr Ngamije.

Clare Akamanzi, CEO of the Rwanda Development Board, has her eye on how this development dovetails with the country’s wider ambitions to become a centre of scientific e cellence and innovation.

“The idea is not just to produce Covid vaccines, but vaccines against other diseases that exist across Africa,” she says. “The agreement with BioNTech represents an opportunity to up-skill our people and produce the level of scientists that this kind of facility depends on.”

Boosting healthcare investment

Healthcare provision, not just as a right of Rwandan citizens, but also as an opportunity for private investment, is high on the list of the government’s priorities as it emerges from the Covid-19 pandemic and limbers up to take on the targets of Vision 2050, the country’s ambitious plan to reach high income status by midcentury.

“The pandemic has shown the value of investing in a healthy population and specialised doctors”, Dr Ngamije says.

This same system is largely to thank for life expectancy increasing from 49 in 2000 to 66.6 in 2017, and for maternal and child mortality dropping by 80% and 70%, respectively, between 2000 and 2014.

Access and administration are being further improved by the digitisation of health services, while the government is also trying to ensure that Rwandans are able to afford healthcare services through a system of community-based health insurance.

Other research and investment priorities include cancer research and heart operations, for which dedicated facilities were built mid-pandemic. Specialisations in imaging solutions, diagnosis, pharmaceutical production, medical technology, and radiology are priority areas for investment.

Dr Ngamije is particularly dedicated to improving access to cancer treatment through investments in nuclear medicine and radiation, which are in short supply in the region.

“We aim to have this capability by 2023, which will only be the second of its kind in Sub-Saharan Africa, along with South Africa’s,” he says.

Private clinics have proliferated and expanded during the pandemic and the aim is to integrate them into an advanced medical ecosystem.

Drone-based delivery services Top: A medical worker gives a patient a second dose of AstraZeneca vaccine in a Covid-19 vaccination centre in Kigali.

Above: A laboratory technician processes samples for testing Covid-19 at the Rwanda Biomedical Centre (RBC).

Opposite (left to right): Co-founder and CEO of Geman biotechnology company BioNTech, Ugur Sahin; President of the European Commission, Ursula von der Leyen; President Paul Kagame of Rwanda; and President Macky Sall of Senegal at the launch of the Vaccine Equity for Africa project in February.

One of the most eye-catching partnerships to emerge is between the Rwandan government and California-based drone company Zipline. In 2016, Zipline approached Rwanda to use it as a proofof-concept location for a drone-based delivery system that was particularly suited to Rwanda’s geography and the needs of its health sector. Working out of two distribution centres, Zipline makes 5000 deliveries of medical supplies to 375 health facilities per month.

“Because blood can be delivered from storage to anywhere in the country in under 30 minutes, the Zipline system has decreased the amount of expired blood by 50%,” says the minister.

Zipline has since exported its concept to Ghana and the US, with plans to move into Nigeria, India, and the Philippines.n

Special Repor t Rwanda

As the AfCFTA boosts opportunities for agricultural exports and technology offers new farming methods, Rwanda is planning to reform an agricultural market which has long been based on smallholders

Rwanda targets move away from subsistence agriculture

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griculture has long served as the backbone of the Rwandan economy and today employs 70% of Rwandans and accounts for 31% of GDP and 90% of domestic consumption. With regional food insecurity mounting and the African Continental Free Trade Area (AfCFTA) promising to greatly increase intra-African trade, Rwanda is targeting a role as a food exporter.

After Rwanda’s rural economy was reduced to ashes by the ethnic violence of 1994, farming was targeted as a priority area to drive economic recovery. Studies were conducted on the country’s varied geography to reveal a range of differ ent soil types and microclimates. The rop Intensification rogramme of trained farmers in best practices, provided access to high-quality seeds, and increased the use of fertilisers from 5% to 70%. Subsidies were provided, rang-

ing from 15% and 35% for mineral fertilisers and 50% and 80% for improved seeds.

Much work remains to be done, however. Between 2010 and 2015 rates of chronic malnutrition among children under the age of five decreased from to but are still among the highest in the world.

The World Food Programme estimates that 20% of Rwandans are food insecure.

Despite recent improvements, fertiliser use remains below the regional average.

Advantages of geography

The Great Lakes Region holds 27% of the world’s freshwater, and Rwanda’s equatorial location and altitude mean a steady climate throughout the year, punctuated by two rainy seasons (around October and April). This allows year-round cultivation with one harvest per rainy season.

The use of artificial irrigation even ensures a third harvest of many crops.

Rwanda’s high altitudes (the country’s lowest point is 950m above sea level) and hilly landscape are perfectly suited to the cultivation of tea and coffee. ut the country’s geography does have its disadvantages as well, in the form of unusual crop and livestock diseases endemic to the region, and a range of demanding soil varieties.

Africa is also the most vulnerable continent to climate change despite being the lowest emitter of greenhouse gases.

Food insecurity is a looming worry across Africa as weather patterns change, crops fail, and cities continue to grow at some of the fastest rates in the world.

These issues, however, are being overcome through rigorous research into which crops and inputs are best suited to different parts of the country. igh value crops such as avocados, passion fruits, French beans, chilis, and mushrooms are currently receiving the most attention.

In response to the Covid-19 pandemic, Rwanda maintained agricultural subsidises and food deliveries to disadvantaged groups, moves that kept the sector moving. ational carrier wandAir’s fleet was repurposed for delivery of high-value food exports, of which the airline transports 120 tons per week to North Africa, the Gulf, and Europe.

Structural changes

Agriculture is a priority growth area. The country’s over-arching Vision 2050 has at its core a plan to reform Rwandan agriculture by moving towards more commercial farming practices.

“That means moving away from subsistence farming and providing the structural changes that will make that possible,” says Gérardine Mukeshimana, Rwandan minister of agriculture. “More and more people are going to be moving to non-agricultural sectors in line with the government’s development plans, which will mean a move away from subsistence farming and an increase in the size of plots.”

One of the government’s priorities is the formation of cooperatives to phase out small, unproductive subsistence-level farms (which account for 75% of agricultural production) and move towards a market-oriented agricultural sector.

This is done by offering farmers access to subsidies, oversight, inputs and technology, all of which offer economies of scale.

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AGRITECH IS INCREASING PRODUCTIVITY, REDUCING INPUTS AND FREEING UP HUMAN RESOURCES

Above: Emmanuel Ahimana, owner of a Rwandan company that applies Chinese technology to produce mushrooms more profitably.

The Rwanda Cooperative Agency is charged with promoting cooperative farms to increase productivity and increase farmers’ access to financial so lutions, advice, and competent management. Its current priority is the promotion of Savings and Credit Cooperative Societies (SACCOs), which allow farming communities to cover risks and provide collateral against receiving credit.

Vision 2050 will seek to include all farmers in this system to encourage a virtuous circle of investment and scale economies.

“Cooperatives give banks even more appetite to work in agriculture”, says Diane Karusisi, CEO of Bank of Kigali, “as the transaction costs are lower and our own interests are better protected from risk.”

Small-scale farmers, too, are being helped by the Smart Nkunganire System (SNS), a partnership between Bank of Kigali and the Bill & Melinda Gates Foundation. The SNS is a vast database of individual farms that drives data-based decision making on exactly what sort of interventions and inputs are needed at individual farm level. This includes the provision of financial products, such as pay at harvest loans for tea and coffee producers.

Agriculture As Rwanda’s economy develops and an entire generation of would-be subsistence farmers are equipped with a technical education, the country is set to see a rapid expansion of its technological capabilities across all sectors, including in traditional industries like agriculture.

Today the sector is dominated by primary production and export of raw materials but aims to move towards value-adding agro processing in the coming decades.

Further upstream, agritech is increasing productivity, reducing inputs, and freeing up human resources for the rest of the economy.

Looming over these encouraging developments is one of the world’s biggest developments in international trade. It is di cult to e aggerate the importance of the AfCFTA, which is set to unite 1.3bn Africans in a single market worth around $3.3 trillion. The biggest regional free trade area in the world aims to remove tariffs from of goods traded within the continent.

Harmonising regulations and lowering trade barriers will expand continental infrastructure to ease logistics and distribution, which is particularly important to agriculture.

“This will help attract investment, boost output, add value, reduce food waste, extend shelf-life, and most importantly increase productivity,” says Mukeshimana. “Seizing this opportunity is the answer to the food insecurity trap that many African countries are facing, while addressing a range of related issues such as unemployment.”

Attracting investors

To boost exports, Rwanda plans to attract private investors to provide cold trucks, cold rooms, warehouses, research, irrigation, and inputs.

“We are trying to boost partnerships to encourage both import substitution and exports. There is no silver bullet, which is why the government’s public spending is spread across all these areas,” says Mukeshimana.

Incentives offered include duty free import of inputs, tax exemption for agricultural equipment, seven-year tax holidays for new export ventures, and a 50% reduction in corporate income tax for prolific producers and e porters. Farming contracts guarantee farmers a reliable income and integrate small-scale farmers into the global trade system, while the provision of credit to install irrigation systems is allowing year-round production.

If Rwanda can develop its potential in infrastructure, tech, and finance while making the most of the opportunities of the AfCFTA, farming will continue to enjoy a central role in the Rwandan economy. n

Special Repor t Rwanda

The Rwandan authorities have launched the Kigali International Financial Centre and the Kigali Innovation City in a bid to set the country up as a regional hub and attract technology and financial investors, reports Dounia Ben Mohamed from Kigali

Rwanda sets ambitious goals in finance and tech

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n early 2020 Rwanda launched the Kigali International Financial Centre (KIFC), a project driven by Rwanda Finance to transform Kigali into a major financial hub capable of attracting foreign investment and encouraging the creation of highly skilled jobs in the finance sector.

To help achieve this goal, the country’s authorities have undertaken an ambitious restructuring of the local banking and financial sector backed by a legal and fiscal framework including no capital gains tax for business angels backing a local startup and tax holidays of up to seven years in some business sectors.

“The country has some solid assets it can promote, with the stability, growth and judicious planning of Rwanda being unanimously acknowledged across Africa,” says Pierre Célestin Rwabukumba, director of the Rwanda Stock Exchange and one of the architects of the restructuring of the financial sector in wanda.

Progress is overseen by a task force consisting of international finance e perts. Since November 2020, Ivorian Tidjane Thiam, ex-boss of Credit Suisse, has been chairman of the board of Rwanda Finance, the company responsible for promoting and developing KIFC. Fellow board members include Liban Soleman Abdi, e chief of staff of president Ali Bongo in Gabon and Umulinga Karangwa, CEO and founder of South African investment consulting firm Africa i a Investment.

Partnerships will be key to the centre’s vision, says Nick Barigye, CEO of KIFC. Rwanda Finance has already entered into strategic partnerships with BPI France, the Belgian Finance Center (BFC), and Casablanca Finance City (CFC), another si eable financial platform on the continent.

“We want KIFC to be a new destination for pan-African investment,” says Barigye. “We want to be the jurisdiction of choice for the e cient consolidation of capital and be able to deploy it effectively across the continent. We want to connect

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THE COUNTRY’S AUTHORITIES HAVE UNDERTAKEN AN AMBITIOUS RESTRUCTURING OF THE LOCAL BANKING AND FINANCIAL SECTOR international investors with opportunities throughout Africa, and we want to connect African entrepreneurs with global capital, as well as connecting the people of Rwanda with the world.”

KIFC announced in November 2021 the launch of the Virunga Africa Fund, an investment vehicle of $250m focused on impact investing and jointly funded by the Qatar Investment Authority and the Rwanda Social Security Board. ore recently, on February, the finance agency made o cial the launch of the first African fund focused on financial technologies. Endowed with $50m and supported by the teams at the South African firm y rowthFund enture artners, the fund will concentrate on fintech companies operating in Africa.

In December 2021 BK Group (Bank of igali became the first local holding company to register with KIFC. Ntoudi ouyelo, chief investment o cer at Rwanda Finance, said that onboarding roup is key for IF ’s efforts to build a community of local and foreign businesses that can benefit from the centre.

“When developing KIFC, it is important to demonstrate that we have the framework to build local champions, meaning local companies that can be referenced beyond Rwanda. Onboarding roup as our first platinum member is key for IF ’s efforts around building this community of local and foreign businesses that can benefit from the services of our biggest bank by market share,” he said.

KIFC recently made its debut on the Global Financial Centres Index (GFCI), a ranking of the competitiveness of financial centres across the world. The index rates financial centres, combining assessments from financial professionals with quantitative data. In the ranking, igali featured in fifth place on the continent after Casablanca, Cape Town, Johannesburg and Mauritius but ahead of Nairobi and Lagos.

Technology goals

Alongside the financial ambitions, the country is further aiming to digitally transform the economy and society, building on earlier priorities. The country’s Vision 2050 programme aims to make Rwanda a high-income country by 2050, with digital technology playing a pivotal role.

The ICT sector has enjoyed rising levels of investment during the Covid-19 crisis, with the pandemic further accelerating ongoing digitisation. The result is that the country has mobile penetration of over 80% and an extensive 4G network.

Similar to its ambitions with KIFC, the country has launched the Kigali Innovation City (KIC) project, a “smart city” located in Kigali’s special economic zone, whose purpose is to serve as a catalyst for all ICT initiatives in the country, both public and private.

I , which benefits from a partnership with the AfDB Africa50 fund, aims to produce and attract the human capital required to meet the future needs of the tech industry not only in the country, but right across Africa. Already operational, the Rwandan campus of Carnegie Mellon University will soon be followed by that of the African Leadership University.

The arrival has also been announced of international tech companies and companies specialising in biotechnology such as the erman firm io Tech, which will set up the first production units on African soil for vaccines using mRNA-messenger technology in Rwanda and Senegal.

Finance The overall objective is to generate $150m in annual exports, attract over $300m in foreign direct investment, and create 50,000 jobs in the tech industry.

Education is a key part of the digital drive. Operational since 2016, the Rwanda Smart Classroom programme aims to equip Rwanda’s educational establishments with computer infrastructure in order to facilitate the digitisation of teaching and learning in all subjects and at all levels of the educational system.

Below: Rwanda’s President Paul Kagame visits a school equipped with a “smart classroom”.

According to data from the Ministry of Education, some 1,783 secondary schools and 365 vocational schools (52% of the total number of establishments in question) had access to “smart classrooms” in August 2021.

More than 4,000 primary schools (35% of the total) were also connected to the internet. The country also plays host to increasing numbers of coding schools and establishments specialising in ICTs. n

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SOME 1,783 SECONDARY SCHOOLS AND 365 VOCATIONAL SCHOOLS HAD ACCESS TO “SMART CLASSROOMS” IN AUGUST 2021

66 African Business March 2022

Countryfile

Nigeria Niger

The Nigerian government launched an ambitious loans programme to support the long-neglected farming community, but many cannot repay, or do not want to, reports Kelechukwu Iruoma

Kano Kaduna

Nigeria Lagos

A gift or a loan?

Cameroon Port Harcourt

Nigeria’s farmers’ loan programme faces repayment crisis

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n 2015, the Nigerian government of Muhammadu Buhari launched a major programme to support farmers across the country with loans in a bid to boost productivity as one of its flagship agricultural policies.

But now, the Central Bank of Nigeria (CBN) has accused some farmers who collected loans through the Anchor Borrowers’ Programme (ABP) of refusing to repay, with local agents of the bank going as far as threatening to arrest and jail defaulters.

In December, the bank’s comptroller in Bauchi state, Saladu Idris, said that farmers had agreed to pay back the loans as soon as the harvest was completed, but many had defaulted. While the defaulters could be “arrested and locked up” until they repay the loans, those who paid back fully on time would be “rewarded with a higher amount of money and more inputs,” he said during a press briefing.

Though the authorities later denied that farmers have been arrested or jailed, the threat is symptomatic of a dysfunctional loans system that is failing to deliver value for either the government or farmers.

The loans were disbursed through recognised partners known as participating financial institutions, including development finance institutions DFIs , microfinance banks, and deposit banks.

The programme established conditions, including that farmers would repay loans in cash or with produce when the harvest is complete.

Noble goals

The project began with ambitious aims.

It was launched in a bid to fulfil uhari’s promise to help local farmers gain access to credit facilities while improving foreign exchange and reversing the negative balance of trade in food. Agriculture has long received a small percentage of support from the country’s financial sector – as recently as 2019, the sector accounted for less than 5% of loans from Nigeria’s banks.

“The programme has been designed as a one-stop solution for the agricultural value chain by creating economic linkages between farmers and processors to not only ensure a clear agricultural output but to also reduce dependence on imported food,” Buhari said at the programme’s launch in 2015.

Farmers, including smallholders in far flung communities who had no access to credit facilities, were the main targets. Producers eligible for loans are active across Nigeria’s agricultural value chains including cotton, roots and tubers, sugarcane, tree crops, legumes, tomato, and cereals. In January, the government estimated that 4.8m farmers had benefited from the programme.

But shortly after the launch, challenges surfaced, with evidence emerging that many of the farmers did not properly understand the loans they took out, with some mistaking them for a gift from the federal government not requiring repayment.

In the far north of Nigeria, the source of much of President Buhari’s political support, some believed that grants were being disbursed as a reward for backing the president. A 2018 investigation revealed that politicians hijacked the scheme to compensate their followers and shut out other local farmers.

“When the loan came, people thought it was not a repayable loan and so they collected for their wives and children and now, it is di cult for them to repay the loan,” says Fidelis Akosu, chairman of the Rice Farmers Association of Nigeria (RIFAN) in the country’s north-central state of Benue.

Akosu says the association helped to secured loans for 2,264 farmers, less than 1% of whom have repaid. N301.8m ($725,665) was disbursed by the CBN to rice farmers in the state through RIFAN but only N5.1m has so far been repaid, leaving a balance of N296.6m, as of January this year. The Nigeria Security and Civil Defence Corps has been tasked with recovering some of the loans.

That reflects a wider failure of the scheme at a national level: N615.4bn ($1.5bn) had been loaned but just N152.3bn had been repaid as of the end of March 2021, according to the CBN’s monthly economic report for April 2021. The amount loaned out rose to N927.94bn by the end of December 2021, according to a statement by governor odwin mefiele in early February.

Why aren’t the loans being repaid?

As well as confusion around the nature of the financial support, challenges like climate-change-induced irregular rainfall, drought, flooding and low crop yields all limit farmers’ abilities to repay loans in a timely fashion.

Nigeria’s farming community is rocked by periodic insecurity – in December 2020, Islamist terrorist group Boko Haram hacked 76 farmers to death on their rice

March 2022 African Business 67

farms in a village in Borno state. In January gunmen attacked and killed 13 farmers in their farms in Nakudna and Wurukuchi villages in the Shiroro local council area of Niger state.

Such attacks have devastating impacts on farming, disrupting productivity, harvests and the security of land tenure. Conflicts between pastoralists and farmers have also undermined the sector.

Meanwhile, education around the scheme is limited, meaning that the purpose and nature of the loans continues to be obscured, and critics say that it is too easy for the scheme to act as a conduit for fraudulent applications.

To achieve the programme’s aims, challenges like insecurity must be fi ed and measures to mitigate the impacts of climate change must be implemented, says Bamgboye Emmanuel, managing partner of Empyrean Professional Services, an accountancy and ta firm in agos.

“Beyond security, there should be policy consistency that gives the farmer some form of guarantee while making projections for the future.”

Others say a shift in the attitudes of farmers is long overdue. Paul Alaje, senior economist and partner at SPM Pro-

fessionals, says that many citizens long neglected by the state believe support from the federal government should not be returned but kept as a rare benefit of citizenship. The programme has shown that what some of the farmers really need is not access to credit facilities but a change of mindset and readiness to be creditworthy, he says.

Future of the programme

Still, Emmanuel says that despite the programme’s mixed success and the improbability of large amounts ever being recovered, the government is continuing to take a long view.

Improving the scheme rather than abolishing it appears the more likely of the options, he says. The government is concentrating on the apparent achievements of the programme – in January, Buhari said that rice production in Nigeria

In January, Buhari said that rice production in Nigeria has increased to over 7.5m tonnes annually from less than 4m when the programme began

has increased to over 7.5m tonnes annually from less than 4m when the programme began.

“It will not discourage the CBN or any government agency from providing credit facilities and interventions to farmers because that is one of their core responsibilities,” says Emmanuel. “If the facilities are properly channelled, they can lift the economy and create more employment.”

On the other hand, Alaje says the CBN should be more serious about whom it disburses funds to in order to ensure that only genuine farmers who need the funds have access.

“The CBN should not think that suddenly people will become more responsible,” says Alaje, adding that it should hire consultants to monitor the progress of the farms and ensure prompt repayment.

Prosecuting those who are not genuine farmers would deepen credit access to more farmers, Emmanuel added.

“When the CBN shows more seriousness with recovering the loans, it will become clear to everyone that the intervention is not a national cake and only genuine farmers who need the loans and commit to paying back will go forward to access it.” n

A farmer and his son harvest crops in Sokoto state.

68 African Business March 2022

Countryfile

DR Congo Could the government’s claim to have dismantled a coup plot in February really be a concealed attempt to remove one of its opponents? Tom Collins investigates

SUDAN

CAMEROON

CONGO

GABON

Democratic Republic of Congo

Kinshasa

Kananga

TANZANIA

Kisangani

ANGOLA

Mystery over DRC coup plot raises suspicions of foul play ZAMBIA

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ack of details around the Democratic Republic of Congo government’s claim to have dismantled a security threat early in February have led to confl icting opinions over whether a plot to overthrow the government really existed.

The government said it found “serious evidence” of a national security threat after the arrest on 5 February of François eya, one of D ’s most influential intel ligence figures, who had links to former President Joseph Kabila.

Beya, who was a special security advisor to President Félix Tshisekedi, held influential positions in the former re gimes of Mobutu Sese Seko, Laurent-Désiré Kabila and Joseph Kabila. At time of going to print he is reportedly still being held at the headquarters of the National Intelligence Agency (ANR) in Kinshasa.

More than a week after his arrest 5,000 heavily armed members of the national army walked through the streets of the capital city in a show of force, but the government has not released any further information on the supposed perpetrators or their possible motives.

“There is not any o cial announce ment from the government about who was responsible for the threat. The only announcement was from the president’s spokesman to confirm that his main se curity advisor [Beya] has been arrested,”

said a inshasa based o cial working in the mining sector, who chose to remain anonymous.

The lack of information has led to speculation that the existence of a plot against the government was manufactured by the authorities in a bid to remove eya from his position of influence.

“Beya has been becoming a pest to Tshisekedi. He was more or less the last remnant of the Kabila regime and he was proving near impossible to oust. I’ve said for a long time a coup attempt is super unlikely. And I think this remains true for now,” says a DRC analyst, on condition of anonymity.

After rising to power in a 2018 election victory that was widely seen as rigged in a secret deal with the former president, Tshisekedi has sought to aggressively dismantle the power structures tied to Kabila, who has spent much of his time in South Africa since he stepped down.

Despite winning the presidential vote, Tshisekedi has had to work with a Kabilalinked majority in the country’s national

Recent political manoeuvres suggest that Tshisekedi is continuing to break away from Kabila’s grip, a trend which has been ongoing since he came to power

assembly. But recent political manoeuvres suggest that Tshisekedi is continuing to break away from Kabila’s grip, a trend which has been ongoing since he came to power. In December, he announced the end to a coalition with the former president’s supporters following a prolonged deadlock.

In February, lawmakers elected a speaker of the house who was loyal to Tshisekedi after a lengthy battle to remove the former speaker, Jeanine Mabunda, a Kabila ally. This follows the removal of prime minister Sylvestre Ilunga Ilunkama, another Kabila-linked politician, after a vote of no confidence.

“I think the political and security situation in Kinshasa is uncertain. Some of the key players of the majority coalition have been pushed out. But can just one person really organise a coup? That leads us to think that is just a struggle around power,” says the anonymous Kinshasa resident.

Security issues

After decades with very few coups, Africa has recently been rocked by a wave of undemocratic takeovers. There have been seven coups and coup attempts across Africa in the last 18 months. Military leaders in Burkina Faso, Chad, Guinea, Mali and Sudan succeeded in seizing power while they failed in Niger and Guinea-Bissau.

This has led analysts to fear that disenfranchised political parties and personalities may feel emboldened to steal power across the continent, raising the risk in the DRC. eanwhile, conflict continues in east ern DRC. Tshisekedi had promised to bring peace to the region but state-led initiatives have seen muted results, with Islamist groups like the Islamic State-linked Allied Democratic Forces (ADF) growing in strength.

In February Islamic State claimed responsibility for freeing around 20 prisoners during an attack in eastern DRC’s North Kivu province, according to SITE Intelligence Group.

DRC economy looks strong

Despite the ongoing security issues and the possible coup plot, the DRC’s economy is e pected to grow significantly this year after a slight pandemic-related dip.

The IMF predicts growth of 6.2% in 2022, bolstered by increased demand for cobalt and copper.

Reserves in the central bank jumped from $800m in 2020 to $3.3bn in October 2021, thanks to increased payments from Chinese buyers and $1.4bn worth of IMF special drawing rights (SDRs). The DRC is also close to being accepted into the East African Community, which should unlock

March 2022 African Business 69

significant economic opportunities for the eastern part of the vast country via linkages to the regional markets of Burundi, Kenya, Rwanda, South Sudan, Tanzania, and Uganda.

The DRC is the largest exporter of cobalt worldwide and the fifth largest e porter of copper. In January, DRC-based Shalina Resources signed a $600m deal with Trafigura in a bid to considerably increase supplies of high-grade cobalt hydroxide and copper cathode from the DRC. Demand for the metals, particularly cobalt – an essential component of batteries used in mobile phones and increasingly in electric vehicle batteries – has been rising steeply.

However, the industry’s potential has been stymied by decades of corruption allegations, including the recent “Congo Holdup” scandal, which originated in a leak of documents that investigative journalists say reveal a web of resources industry corruption linked to networks around the former government. n

Below: Congolese soldiers patrolling the streets.

The lack of information has led to speculation that the existence of a plot against the government was manufactured by the authorities

70 African Business March 2022

In memoriam

Emmanuel Tumusiime-Mutebile, Governor, Central Bank of Uganda Bank of Uganda governor Emmanuel TumusiimeMutebile, who passed away at the age of 72 in January, was respected at home and abroad for his stewardship of the economy. Anver Versi pays tribute to him.

Uganda says goodbye to respected central bank governor

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frica has produced a crop of outstanding central bank governors over the decades, people who have blown away the cobwebs in dusty and somnolent institutions, injected discipline and e ciency in often sprawling and sluggish central banks, or by dint of foresight and decisive action, have rescued economies that were on the brink of going under.

Among this resplendent collection, Emmanuel Tumusiime-Mutebile stood out like a glittering star – a diamond among rubies. He was the longest-serving of any African central banker and almost certainly the most influential in shaping the economy of his country. e first came to national prominence while president of the students’ guild at Makerere University, Kampala. This was during the tumultuous period in the early 1970s when Idi Amin, who had deposed the elected President Milton Obote, was becoming increasingly tyrannical and unhinged. Amin, out of the blue, issued a diktat giving all Asians, citizens or not, three months to leave the country.

In the international hue and cry that followed, Mutebile, as the student leader,

He was the longest-serving African central banker and almost certainly the most influential in shaping the economy of his country was asked for his opinion on live radio. He condemned Amin’s decision in no uncertain manner and in the process signed his death warrant. Somehow, by disguising himself as an expelled Asian, he managed to get the last flight out of the country to the UK and thus escaped Amin’s clutches.

In the UK, he faced a fresh challenge, making his way in a totally alien country and discovering the barbs and degradation of racism and life in exile. He continued his education at Durham University where he read economics and government and then went to Balliol College, Oxford. He returned to East Africa and joined the University of Dar es Salaam as a lecturer while working on his doctorate in economics.

Meanwhile Uganda was going through another series of convulsions. Idi Amin, who had engaged in several verbal jousts with President Julius Nyerere of Tanzania,

invaded the neighbouring East African country in 1978 and tried to annex the Kagera region. Tanzanian forces quickly forced him to withdraw and pursued his defeated army into ganda. Amin fled to Saudi Arabia and Yusuf Lule was installed as president.

Lule, an academic with little or no political nous and a haughty, arrogant manner, was at sea trying to reorganise what was effectively a failed state where violence ran rampant. He lasted just 68 days before being removed from power by the National Consultative Commission, which was then the supreme governing body of the Uganda National Liberation Front (UNLF), a coalition of former Ugandan exiles who had helped remove Idi Amin. Lule was replaced by Godfrey Binaisa, who had been attorney-general in the Milton Obote government.

But with the economy in tatters, ethnic conflicts in full flow and the towns and cities devastated and lacking virtually all essential services including water and electricity, politics had reverted to basic personal grabs for power. Binaisa lasted barely a year before he was overthrown by a military coup and Milton Obote returned to the presidency, ushering in a vicious ethnic conflict. e in turn was ousted by another military coup and replaced by General Tito Okello.

With the country disintegrating by the day, Ugandans heaved a sigh of relief when Yoweri Museveni, who had waged a long guerrilla battle against Idi Amin, moved into Kampala and scattered the remnants of Okello’s army.

He took over the presidency and pledged stability and security to the desperate population.

The solution-finder

This was when Emmanuel Tumusiimeutebile came into his own. ot satisfied with watching events from the relative safety of the University of Dar es Salaam, he offered his knowledge of high level economics as well as his deeply considered analysis of the structures, the weaknesses and the strengths of the economic bedrock of the country to whoever was in charge of running Uganda at the time.

While the political leadership was locked in a tooth-and-nail struggle for survival and plotting and counter-plotting, a small band of civil servants and the occasional minister tried to keep the machinery of government functioning.

One of Mutebile’s colleagues from those times was to tell me years later that Emmanuel was a very welcome addition to

March 2022 African Business 71

the severely understaffed and underpaid coterie of civil servants. “He had a sparkle in his eyes, as if he had found the perfect destination. He was very enthusiastic and cheered us up. He believed a solution for all problems could be found.”

Mutebile’s brave stand against Amin stood him in good stead among his colleagues as well as the political class and his Durham and Oxford education elevated him within all the departments he worked in from 1979 to 1986, when Yoweri Museveni took hold of the reins.

His positions ranged from deputy principal secretary to the president at State House, to undersecretary in the Ministry of Planning in 1981, senior economist at the ministry and then chief economist in 1984. In 1992, he was appointed permanent secretary to the newly combined Ministry of Finance, Planning and Economic Development.

Decisive reform plan

In a warm obituary in the Financial Times, Sir Paul Collier, the British economist and author of the Bottom Billion –who worked with

and remained friends with Mutebile for 30 years – describes the meeting between Museveni and Mutebile: “Finding Tumusiime-Mutebile, once a fellow student, now chief economist at the ministry of planning, the new President promptly ordered him to stop rampant inflation by revaluing the o cial e change rate. Tumusiime-Mutebile patiently explained why this common piece of economic illiteracy would not work, only to be overruled by his overconfident new boss.

“He was fond of telling the story, laughing, of how he replied: ‘Yes Mr President, but will you permit me to remind you when you have to reverse it that I told you it was wrong.’ It is credit to Museveni that he did not treat this remark as insubordination, and his subsequent decision to reverse the policy was a first step on a tough journey for both men.

“Only when faced by an accelerating economic crisis in 1992 did Museveni realise that key economic policies must be left to Tumusiime-Mutebile, who was raised to permanent secretary of a newly combined ministry of finance and plan ning. There, the economist launched a decisive reform programme – he invited me to work with him.”

Sir Paul then goes on to say that the partnership between the economist and the military leader turned president resulted “in a series of well-implemented decisions that helped a nascent private sector to take advantage of a coffee boom. It also laid the foundations of a vibrant economy.”

A keenly felt loss for Africa

Since then Uganda’s economy has taken many twists and turns and Museveni has remained firmly at the helm.

Emmanuel Tumusiime-Mutebile was constantly at his side, shaping, guiding and directing the economy of the country as it navigated the di cult currents and eddies of our times.

With Tumusiime-Mutebile gone, Museveni will be hard pressed to find a re placement for someone he once called “irrepressible”. Ugandans will feel the loss keenly because as long as he was at his desk in the central bank, there was always a feeling that however bad the economic situation was, there was somebody there who could handle it.

Africa as a whole will also feel his loss as he was a well-admired role model for other government bankers and finance ministers - and all who met him will regret the passing of perhaps Africa’s greatest central bank governor. n

72 African Business March 2022

Review A BIGGER PICTURE: MY FIGHT TO BRING A NEW AFRICAN VOICE TO THE CLIMATE CRISIS

BY Vanessa Nakate £20 Pan Macmillan ISBN: 978-1-52907568-7

In her new book, Ugandan climate activist Vanessa Nakate brings a youthful African voice to bear on the biggest issue of our time. Review by Stephen Williams

The bold young female voice leading Africa’s climate fight

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t is especially appropriate that a young African woman – the 25-year old Ugandan activist Vanessa Nakate, should be a leading voice of the continent as it faces the existential threat of climate change. Appropriate because Africa’s demographic profile is so youthful: according to the African Union, of the continent’s total population, no less than 75% are under 35 years of age. er gender is also significant. In her new book, A Bigger Picture: My Fight to Bring a New African Voice to the Climate Crisis, Nakate presents a convincing argument that climate change is disproportionately impacting the lot of rural women, a trend she first noticed in her own country.

“Floods, heat-waves, and drought were destroying the crops on which the vast majority of Uganda’s people depend for

their livelihoods, and food insecurity was a huge issue in Uganda. The resulting poverty, made worse by the climate emergency, meant that too many girls weren’t in school because their families couldn’t afford the fees. Others were being married very young so their parents could receive some food or money in exchange, which could be crucial to their survival, but disastrous for the girls themselves.”

These are probably not aspects of the impact of global warming that are immediately apparent to the non-African world, but Nakate, a graduate of Makerere University Business School who emerged to prominence with solitary protests outside the Ugandan parliament, is determined to speak not only to her fellow Africans but to the wider world, who she suspects seek to ignore Africa’s climate emergency.

Invitation to Davos

Nakate’s outspoken assertion that Africa is fully entitled to take part in the global debate concerning the disaster that is already unfolding is absolutely clear.

While she insists that she is just one of a team of African climate activists, she has carved out a reputation as one of the most charismatic and articulate in her appearances at global forums, from the UN Youth Summit to the Davos World Economic Forum.

But as she recalls with refreshing candour, much of the closeted world of international forums was alien to her when she was first asked to attend Davos at the invitation of Arctic Basecamp, an organisation of scientists raising the alarm about the rapid warming of the Arctic.

“At that point, I’d never heard of Arctic Basecamp or Davos or, for that matter, the World Economic Forum,” she admits.

“When I told a friend who’s also now an activist that I’d accepted the invitation, she said she’d researched the event and that many rich people would be attending.

That didn’t interest me as much as the prospect of seeing snow for the first time.

I knew that Switzerland was a mountainous country, and since it was January in the northern hemisphere, I assumed it would be cold. Arctic Basecamp’s team told me they’d be supplying the winter gear I’d require, so I needn’t worry.”

Arriving by train in Davos, she only had her Ugandan clothes when Arctic Basecamp found her and put her in a hotel to thaw out for the night. Nakate subsequently spurned the luxuries of a warm hotel to spend her time in a tent undertaking a trademark bout of outside advocacy. But as thrilling and varied as the initial experiences of global activism were – especially the opportunity to speak Africa’s truth to rich and powerful business leaders, financiers, and politicians – her early experience of the ingrained prejudices of the international press was a wake-up call.

Cropping out a continent

Nakate was invited to speak at a press conference by Greta Thunberg’s Fridays for Future organisation, and subsequently photographed by the Associated Press alongside white European climate activists Greta Thunberg, Isabelle Axelsson, Loukina Tille and Luisa Neubauer.

That evening, checking the news feeds on social media, she was astonished to find that she had been cropped out of the photo.

“My heart nearly stopped. It was clearly the picture I’d been in, since you could make out the edge of my coat on the far left of the frame. But I was nowhere to

March 2022 African Business 73

be seen. I’d been cropped out… [I was] frustrated, angry, and embarrassed. As I looked at the image, it became impossible to ignore that of the five women who’d posed for that photo, I was the only one who wasn’t from Europe and the only one who was Black. They hadn’t just cropped me out, I realised. They’d cropped out a whole continent.”

For Nakate, that harmful act was emblematic of the world’s marginalisation of Africa in the international climate debate.

This was especially galling considering the devastating impact that global warming has had and is projected to have on Africa.

As Nakate writes: “People in Uganda, in Africa, and across what’s called the Global South are losing their homes, their harvests, their incomes, even their lives, and any hopes of a liveable future right now.

This situation is not only terrible, it’s also unjust. Although the African continent has just 15% of the world’s population, it

Vanessa Nakate speaks to the press in front of a huge open-cast coal mine in Luetzerath, western Germany.

is responsible for only between 2% and 3% of global energy-related carbon dioxide emissions. The average African’s greenhouse gas emissions are a fraction of those of people living in the US, Europe, China, the United Arab Emirates, Australia, or many other countries.”

An Oxfam study concluded that a person in the UK will have emitted more CO2 in the first two weeks of than the citizens of seven African countries, including Uganda, will in the whole year, while the African Development Bank says seven of the 10 countries most susceptible to the harshest effects of the climate crisis are in Africa.

Nakate, a graduate of Makerere University Business School, is determined to speak not only to her fellow Africans but to the wider world

Never despair

But this gloomy prognosis does not mean that Nakate is despairing. “Even though the climate forecasts are terrifying, I still believe we can have hope. We have to.

There isn’t any other option.”

Having made her mark through passionate speeches, her actions are now going beyond activism and climate strikes into the realm of practical solutions. She has embarked on a comprehensive programme, the Vash Green Schools Project, to install energy e cient cooking stoves and solar panels in schools as well as ensuring climate issues are on school curriculums. And she complements her inspiring life story with a chapter that sets out 10 ways that the reader can stand up “for what is right and just”.

As climate change worsens in the years to come, Africa is likely to need the bold voice of Nakate – and her entire generation – as they too demand the global change that is right and just. n

74 African Business March 2022

Editor’s View

Ambassador Martin Kimani’s powerful speech at the UN offered a principled vision for an independent African foreign policy, says David Thomas

Kenya projects a strong voice on Russia-Ukraine crisis New vision of African diplomacy

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Left: Kenya’s permanent representative to the United Nations, Martin Kimani.

n 21 February, as Russia planned the fullscale invasion of Ukraine that would be unleashed just three days later, Ambassador Martin Kimani, Kenya’s Permanent Representative to the United Nations, gave a powerful speech at the UN Security Council notable for its moral clarity, historical awareness and defence of the rules-based international order.

After Russia illegally recognised the Ukrainian regions of Donetsk and Luhansk as independent states, a precursor to a wider invasion, Ambassador Kimani stated that “the territorial integrity and sovereignty of Ukraine stands breached”.

He explained his reasoning further: “We do not deny that there may be serious Ambassador Kimani security concerns in these regions. But has made the best they cannot justify today’s recognition of Donetsk and Luhansk as independpossible case for a ent states. Not when there were multiple permanent seat for diplomatic tracks available and underway Africa at diplomacy’s that had the ability to offer peaceful solu tions.” top table

For many years, the foreign policy of African nations has understandably been dictated by economic necessity and a post-colonial policy of non-interference in the sovereign affairs of nations. et in his bold speech, Ambassador Kimani lucidly sketched a new vision of African diplomacy, drawing on the continent’s dismemberment at the hands of the colonial powers to send a stark message to Russia about the dangers of imperial revanchism.

“Kenya, and almost every other African country, was birthed by the ending of Empire. Our borders were not of our own drawing. They were drawn in the distant colonial metropoles of London, Paris and Lisbon... we believe that all states formed from empires that have collapsed or retreated have many peoples in them yearning for integration with people in neighbouring states. This is normal and understandable... However, Kenya rejects such a yearning from being pursued by force. We must complete our recovery from the embers of dead empires in a way that does not plunge us back to new forms of domination and oppression.”

The speech stood in stark contrast to the decidedly neutral words of South Africa, which urged “all parties” to increase diplomacy and de-escalate tensions, even as Russian tanks poured across the Ukrainian border. Ambassador imani’s intervention offered a refreshing alternative to the staid great power politics of the UN Security Council, which has been dominated for far too long by veto-wielding members Russia, the UK, US, France and China at the expense of smaller and developing nations.

Kenya currently serves as one of 10 non-permanent members of the council – which hold their seats on a rotating basis by geographic region – alongside fellow African states Gabon and Ghana.

Through his strident assertion of Africa’s independent voice in defence of a threatened nation, Ambassador Kimani has made the best possible case for a permanent seat for Africa at diplomacy’s top table. n