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Nigeria moves into the driving seat Kenya’s Safaricom leading the way Destination: Nigeria Controlled Distribution UK & RSA Issue 10 \ April 2013

Africa takes off

Business | Entrepreneurship | Innovation | Investment | Lifestyle


4 \ Contents \ April 2013

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CONTENTS Regulars

Business Life

6 News and analysis

10 Kenya’s Safaricom leading the way

Recent developments from Sub-Saharan Africa.

30 Destination: Nigeria We put Nigeria under the microscope to see what can be learned about Africa’s most populous country.

Features 16

Mobile phone payment cards open new frontier for Visa & Mastercard Visa & MasterCard bet big on mobile chip technology to crack African market – Our man in Nairobi looks at the battle for untapped riches in Kenya’s growing market for plastic money.

20 East African airlines – the sky is the limit African airlines take off – Mark Kapchanga looks at the new routes and rapid growth of East Africa’s airlines.

Mamello Masote reports from Johannesburg on MTN’s African ventures, and the intense competition among the mobile operators vying for Africa’s growing mobile market.

11 Building Malawi’s air transport infrastructure Air Malawi which folded in 2012 takes to the skies again under the auspices of new owner Ethiopian Airlines

20

East African airlines – the sky is the limit “We hope to strengthen our presence in China by offering superior connection preferences for customers from Africa.” - Dr Titus Naikuni, Kenya Airways CEO

25

22 Mitigating business risk

Internet entrepreneur gets rural Africa surfing

Leading African economist, Dr Jacqueline Chimhanzi tells us why regional integration can mitigate risk for business in Africa.

“We have the technology and we have the knowledge of the market...We consider ourselves to be the next Google.” - Stanislas Nyokas, director of iTM systems

through regional integration

25 Internet entrepreneur gets rural Africa surfing Stanislas Nyokas tells GTA about his revolutionary wireless broadband solution for Africa.

Final word 28 Bad governance and

exploitation is Africa’s curse Karl Ziegler, former Nairobi banker and anti-corruption activist speaks to GTA about his concerns when it comes to Africa’s growth.

28

Bad governance and exploitation is Africa’s curse “Unfortunately, some of the most charming people you would want to have at your dinner table were also some of the biggest crooks. ” - Karl Ziegler

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April 2013 \ Contents \ 5

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GatewayToAfrica.com is a multi-platform title for businesses looking to take part in expansion opportunities in Sub-Saharan Africa Editor: Jeremy Kuper Publisher: Gordon Glyn-Jones Art Director: Jackie Lampard Sub Editor: Brett Petzer Contributors: Grant Mowatt, Dr Jacqueline Chimhanzi, Katherine Purvis, Washington Gikunju, Mark Kapchanga, Mamello Masote Illustrator: Jackie Lampard Directors: P Atherton, J Durrant, N Durrant and R Phillips

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Nigeria moves into the driving seat Charles Robertson, of Renaissance Capital speaks to GTA about why Nigeria is about to overtake South Africa and is destined to totally dominate Africa in the future.

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NEWS AND ANALYSIS:

NEWS IN BRIEF Recent developments from Sub-Saharan Africa

Africa in numbers Sierra Leone a ‘significant addition’ to British Airways

Bluegrass Digital’s Cutting Edge Mobile Money App

Freetown is a “significant addition” to British Airways’ African network, according to the airline’s regional commercial manager for Africa. During a visit to the capital, Ian Petrie said that: “Although we are new to Sierra Leone we are by no means new to Africa.” British Airways has a long and distinguished history in Africa dating back over 80 years, when its predecessor Imperial Airways pioneered air routes the length of the continent. It now serves 18 routes in 15 African countries.

One of South Africa’s leading digital production agencies, Bluegrass Digital, has recently designed and launched a new mobile site for ThinkMoney.co.za. The website allows users to compare, review and rate financial products, as well as apply for them online instantly. Bluegrass Digital’s Director of Operations, Mark Hawkins, said, “Mobile web development is a service that is being requested more and more by our clients… Social Media used to be the buzz word of the day, but there is a new sheriff in town – Mobile App development”.

30% increase

Over the past ten years, real income per person in Africa has increased by more than 30 per cent.

30% of gold

Africa accounts for 30 per cent of global gold production. The main producers are SA, Ghana, Zimbabwe, Tanzania, Guinea and Mali.

$84bn

The stock markets in Nigeria and Kenya alone are worth $84 billion.


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Africa on the move

80%

Africa’s small enterprises, from traders to farmers, contribute to more than 80 per cent of output and jobs in most African nations.

48%

Secondary-school enrolment grew by 48 per cent between 2000 and 2008 after many states expanded their education programmes and scrapped school fees.

$10bn “Hope city” tech hub for West Africa A project for a $10 billion technology city to be built outside Accra was launched last month by president John Dramani Mahama. A stretch of empty grassland outside the Ghanaian capital will be transformed into a huge technology hub over the next three years. Head of RLG Communications, Roland Agambire, is behind the concept, aimed at stimulating major technological advancement in the country. Agambire says the idea is for “an iconic ICT park where ICT players from all over the world can converge to design, fabricate and export software and everything arising from this country.”

Homecoming Revolution broaden operations Homecoming Revolution, a recruitment organisation which for ten years has encouraged members of the SA diaspora to move back, have expanded their focus to Sub-Saharan Africa, including: Nigeria, Ghana, Uganda and Kenya. “African returnees have International expertise, global relationships and an entrepreneurial spirit,” said Angel Jones, CEO. “They can play a fundamental role in societal and economic success.” Through their website, regular newsletters, networking events and specialised workshops, Homecoming Revolution are reconnecting the diaspora with their countries. www.homecomingrevolution.com

Ethiopian Government and Tullow Oil PLC insist “No oil discovered” The British petroleum company Tullow Oil PLC dismissed media reports from the British government that oil reserves had been discovered in southern Ethiopia, near its border with Kenya. Recent reports on a number of news outlets regarding the finding of oil reserves along Ethiopia’s western South Omo block were said to be baseless, according to a spokesperson for Ethiopia’s ministry of mines. Tullow Oil Plc, which is based in London, found crude oil in Kenya last year. It is now conducting an exploration along with Africa Oil Corp. and Marathon Oil Corp. to find potential oil reserves in Ethiopia as an extension from neighbouring Kenya.

EU starts to ease sanctions on Zimbabwe The EU will gradually lift sanctions on Zimbabwe in an attempt to encourage political reform. Sanctions were put in place in 2002 following human rights abuses, political unrest and the absence of free elections under President Robert Mugabe, who will remain subject to EU sanctions. A spokesperson for Mugabe’s ZanuPF party, Rugare Gumbo, voiced his discontent over the partial suspension of some sanctions: “We want them unconditionally removed. There is nothing we have done to deserve these illegal sanctions.” Almost 95 per cent of Zimbabweans recently voted in favour of placing limitations on presidential powers.

Kenya’s CIC Insurance Group plans regional growth

Botswana starts 2013 with a diamond export slump

Kenya’s leading micro insurance provider, CIC, have plans to move into South Sudan and Uganda, after increases in underwriting and shares helped to double their profits last year. CIC, which offers various insurance products including life assurance and pension services, reported a rise in pre-tax profits from 787 million Kenyan shillings to 1.65 billion in 2012. They have also received a large increase in investment income due to high interest rates and steps they have taken to diversify their investment portfolio. In January this year, CIC insurance purchased 417 acres in Isinya, Kajiado with intentions of developing the land.

Botswana’s diamond industry felt the brunt of the global market slump at the start of 2013 with falls in both rough and polished diamond exports, according to the country’s central bank. Recent figures from the Bank of Botswana reveal that rough diamond exports fell from $320.1 million in January to $216.3 million in February. Exports of the country’s polished diamonds dropped to $19.5 million in January, far below its 2012 monthly average of $58.8 million. These figures provide strong indication of the current unstable nature of the global diamond industry with prices falling and demand losing steam in key markets.


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NEWS AND ANALYSIS:

Southern Africa’s unified railway network Botswana signs agreement with South African railway company Transnet to carry coal exports. South Africa’s largest freight railway company will begin transporting the first coal exports from mineral-rich Botswana, signifying a further step towards a cohesive railway system across southern Africa. Transnet Freight Rail (TFR) is expected to sign an agreement with the Botswana government in the next month allowing transportation of the coal from Morupule Colliery near Palapye to the South African coastal city of Durban. Owned by Debswana – a joint venture between the Botswana government and De Beers – Morupule Colliery is the only operating coal mine in the country and produces around 3.2 million tonnes of coal

each year following an expansion in 2011. Initial plans for the transportation include a 35-wagon train carrying the exports from the 30-year-old mine into South Africa twice a week. “We intend to run two test trains from Morupule to Durban before May 1,” said Nyameka Madikizela, TFR’s executive manager for international business. “We will use their [Debswana’s] locomotives to Krugersdorp and then change to ours.” TFR currently operates three rail networks across southern Africa. The North-West Corridor integrates South Africa with Botswana, Zimbabwe and Namibia. The North-South Corridor joins

the country with Zambia, Zimbabwe and the DRC, while the Maputo Corridor brings South Africa, Swaziland and Maputo (Mozambique) closer together. Coal analyst for XMP Consulting Xavier Prevost described the agreement as “interesting” given Botswana’s previous logistical challenges in finding a way to move its reserves. The government had previously considered moving its coal exports through Maputo or Walvis Bay in Namibia. The cost of moving coal to Durban will be high, however, given the distance – around 700 miles - and the large handling costs at Durban port.

Angola restores copper railway Refurbished Benguela railway set to resume copper transportation after a four-decade hiatus. Signalling an important landmark for the post-civil war government, Angola is set to resume carrying copper from central Africa to the port of Lobito. The newly refurbished 1344 -kilometre (835 mile) line will link Lobito with Luau, a town on the border with the Democratic Republic of the Congo, a distance roughly equal with that between London and Milan. The DRC boasts some of the world’s richest copper fields but operations on the Caminho de Ferro de Benguela, the

only railway linking central Africa to the Atlantic coast, were suspended following the outbreak of civil war in neighbouring Angola in 1975. It is estimated that the Lobito Corridor line, which cost $1.9bn in mostly oilbacked loans from China to restore, will handle 20 million passengers and two million tonnes of resources each year. Once a second branch line inside Zambia is completed in December, the line will be in direct competition with ports and other rail lines across sub-

Saharan Africa to carry Zambian and Congolese copper exports, which together account for around 7.4 per cent of world production of the metal. But the Benguela railway will offer shorter access to European and American markets via the Atlantic, and will restore Angola’s history of an 84-year-old transcontinental rail network which has previously carried copper, cobalt, manganese and zinc from Zambia and the DRC into Mozambique and Tanzania.


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10 \ Business Life \ April 2013

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business life:

Kenya’s Safaricom leading the way by Mamello Masote in Johannesburg As the scramble for mobile subscribers on the African continent heats up, intense price wars in some of its key markets have forced mobile network operators to look to other areas of innovation for growth. According to analysis by GMSA Wireless Intelligence, the total number of unique individual mobile subscribers in Africa stood at 356 million in the fourth quarter of 2012. This represents just 33 per cent of the continent’s population. The report also showed that the Western Africa region had about 103 million unique subscribers in the fourth quarter of 2012 with just under half of these residing in Africa’s

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single largest market, Nigeria. Second is the Northern Africa region (101 million), which contains large markets such as: Egypt, Algeria and Morocco, followed by Eastern Africa (82 million), Southern Africa (37 million) and Central Africa (33 million). It is this potential for growth that has attracted large companies like Vodafone, Indian company Bharti Airtel and French telecommunications company Orange to make vast investments into the continent. In Nigeria, a hotly contested country due to its vast population of 162 million, price wars have intensified, with the government issuing a moratorium on promotions to try and stabilise the market. South African-based telecommunications giant MTN, which is the market leader in Nigeria, has shown how harmful the price wars could be to the bottom line when it delivered flat revenue for the first time in Nigeria since it entered the market in 2001. CEO of MTN Sifiso Dabengwa said at the company’s results presentation that their strategy in Nigeria was to increase the network capacity through vast amounts of investment in capital expenditure so that data-enabled devices on the network are increased. “It’s a good idea for MTN to invest in the network because it has been fined for poor network quality in Nigeria and they need to compensate the loss of revenue in voice with data. It’s also a good thing to drive the uptake of data - Safaricom in Kenya has had a lot of success with this. But they [MTN] would also need content and this means working with content providers particularly in the consumer space,” said Mervin Miemoukanda, an analyst at Frost and Sullivan. Safaricom, the biggest mobile operator in Kenya, was faced with a price war

that CEO Robert Collymore called “damaging” when Indian company Bharti Airtel entered the market and reportedly slashed prices by about 80 per cent. Airtel has been able to access markets such as Kenya, Nigeria and Ghana through its acquisition of the African assets of Middle Eastern telecommunications company Zain for about US$10 billion. Its average revenue per user was declining, and so Safaricom decided to focus on data and was the first network to launch 3G. Two years ago they partnered with Chinese manufacturer Huawei and introduced the Ideos phone, a low-cost smartphone which has become one of the best-selling phones in the country. Safaricom has also successfully introduced value-added services such as mobile agricultural and health applications to drive data usage. Data has been a winning strategy for Safaricom and the company now serves about 5.5 million mobile and fixed data users. Perhaps also taking a leaf out of Safaricom’s page, MTN has touted mobile money as an area where it hopes to see growth. The phenomenal success of Kenya’s mobile money transfer service M-Pesa, which tapped into the millions in the hands of Kenya’s unbanked population, is a formula many mobile operators around Africa are trying to imitate. In its September 2012 interim results, Safaricom had increased their 30-day active M-Pesa customers to 9.7-million, which contributed 18 per cent to their total revenue, and about Ksh 80-billion (about £613 million) worth of transactions were done on M-Pesa: 31 per cent of Kenya’s GDP. Safaricom has shown that a smart strategy on driving data usage and innovation are essential to any mobile network operator looking to thrive in the African telecommunications landscape.


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business life:

Building Malawi’s air transport infrastructure A direct flight to Europe may accelerate Malawi’s slow but dogged return to growth by Staff reporter At the opening of the first Malawi trade mission to the UK since 2008, President Joyce Banda declared that “Malawi is open for business.” A British Foreign and Commonwealth Office spokesperson then reaffirmed the UK’s commitment to treble or even quadruple trade with Malawi in the next few years, so that it would overtake aid to the landlocked African country. One factor that appears crucial to Malawi’s growth is a direct flight to Europe to help make the country a viable tourist destination, as it is currently only accessible by air from South Africa and Kenya. However, all that might be about to change. In late 2012, the state-owned national carrier Air Malawi was placed in voluntary liquidation following two unsuccessful attempts at restructuring. And in March 2013, an agreement was reached giving Ethiopian Airlines a 49 per cent share in Air Malawi. The Malawians retain a 51 per cent share, with 20 per cent owned by the government and the other 31 allocated to Malawian citizens and institutions. Malawi’s Minister of Trade and Industry Sosten Gwengwe MP explained the significance of the sale to Ethiopian Airlines to GTA, saying: “ We are hoping now to have a direct flight to Europe. [Given] the expertise and the size of Ethiopian Airlines, that problem [lack of direct flights] should be addressed. In tandem with the restructuring of Air Malawi, the Malawian government is planning to redevelop the runway and the terminal building at Kamuzu International Airport in Lilongwe, with the help of the Chinese Harbour Engineering Company (CHEC). This move is obviously in

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anticipation of an increase in air traffic. According to Clement Kumbemba of the Malawi government, the runway in Blantyre is also due to be extended. In a further move towards achieving their lofty ambitions, the Malawi Airports Authority has been established and is to be operational by July 2014 to support a planned increase in air traffic. Minister Gwengwe dismissed any suggestion that the Chinese were the dominant partner in this relationship. “They’ve given us support, [but] the bigger gain, as far as we’re concerned, is to give us access to their preferential market for most of our products,” he told Gateway to Africa. He explained that the Chinese were extending the finance for the airport redevelopment as a grant and dismissed suggestions this amounted to buying influence. “It’s part of their own way of doing things in Africa,” said Gwengwe. “Every five years they say, what are the

things you’d like us to give you as a grant and what are the things you’d like to get from us as a loan. So the airports, yes, they’ll be helping us with that one.” Overall the upgrade of Malawi’s ageing air transport infrastructure places the country on the right track for their modest growth plans. Joyce Banda’s relatively new, but well-respected government is fully aware that there are many bridges to cross before the country can join the other successful Sub-Saharan African economies and take advantage of the region’s boom. Malawi has never been well endowed with the mineral resources that are found in so many other countries in the region, but a new geological survey funded by the World Bank and recent discoveries of uranium may change all that, just as oil and gas are changing Tanzania and Mozambique’s fortunes. For now, Banda is putting in place the building blocks the country desperately needs to get it back on course and primed for growth.


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COMMENT: Charlie Robertson

Nigeria moves into the driving seat Charlie Robertson, Renaissance Capital Global Chief Economist, Head of Macro-Strategy and author of ‘The Fastest Billion’ explains why he thinks Nigeria has turned a corner and will be overtaking South Africa soon. by Jeremy Kuper From his office overlooking the Bank of England and the Shard, Charlie Robertson, one of the leading emerging market economists in the City, shows me his charts and graphs. According to his research, what started as a boom for raw materials will culminate with the complete transformation of the African continent by 2050.

Nigeria’s reinforced foundations

“...My first point is corruption does exist, it is an obstacle. However, you’ve got good people in place to do the right thing. If you look at transparency scores for Nigeria, in 2001 it had a score of 1; today it’s got a score of 2.4. That was the 3rd best improvement of any country since 2001.” - Charlie Robertson, Renaissance Capital Global Chief Economist

The Nigerian economy will eclipse South Africa, which by then will become just a regional player. I query whether the growth in countries like Nigeria is built on shaky foundations, and whether corruption will undermine its prospects. “All I can talk about is what I’ve seen,” says Robertson. He points to Sanusi Lamido Sanusi, Nigeria’s Central Bank Governor since 2009, “who is remarkable…I haven’t heard anyone suggest that he’s in any way corrupt.” And Sanusi is not alone. “If you go to the central government side, you’ve got Ngozi Okonjo-Iweala who could have been the World Bank chief, if the Americans and Europeans hadn’t stitched up who gets the top job at the IMF and the World Bank… she’s that good.” There is also the agriculture minister, “who looks great,” the trade and industry minister, the stock exchange chairman. “You seem to have a whole load of people with global and western skills in Africa pushing for change in the right direction.”


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However, he concedes that Nigeria’s reputation for corruption is something that cannot be brushed aside. “I’m not naïve,” he says. “One of the key things I talk about is corruption and I say, well there’s a lot of corruption. This is normal at this income level, and inevitable, but you have got countries that are making a big difference.” He points to a chart showing corruption linked to per capita GDP, with scores of one to ten given by Transparency International. “Now the thing about all of these countries that are getting a good score, is that they are all rich…If you are poor, if your per capita GDP is $7000 or less, you are perceived to be corrupt.” This suggests that the growth of the middle class in many Sub-Saharan African countries will mean an increase of educated people who are starting to question the government and demand accountability. “Basically we’re all pretty badly behaved when we’re poor, and as you get richer you begin to demand more transparency and more improvement. It’s not even about democracy versus dictatorship, because a lot of these countries like Qatar and Singapore don’t get great scores on democracy. But they are nonetheless seen to be quite un-corrupt, compared to poor countries,” says Robertson pointing to his chart. “So my argument is that corruption

is a problem and it will continue to be a problem until Sub-Saharan GDP is at $10,000, which we’re not going to get to for another 20 years, before you start to record scores in a three to six range instead of a two to four range. It’s going to be a very long process I suspect.” “So my first point is corruption does exist, it is an obstacle. However, you’ve got good people in place to do the right thing. If you look at transparency scores for Nigeria, in 2001 it had a score of 1; today it’s got a score of 2.4. That was the 3rd best improvement of any country since 2001.” Nevertheless, when it comes to Africa, it is, of course, not all plain sailing. Robertson admits there is a risk of countries going backwards, but he says: “That’s true for almost all the African countries.”

Democracy happens at $6000 GDP There is an element that Robertson refers to as the democratisation risk. When per capita GDP reaches US$6000 p.a. all countries become democracies other than oil exporters, but before the country reaches that level of GDP there are inherent risks of failure in the system. To support this theory he points to the fact that every country in the world which had a per capita GDP above $6000 in 2009 is a democracy of sorts, apart from six countries. The exceptions are China, which he predicts will democratise within

Nigeria overtakes

a decade, Belarus, Cuba and Singapore. Tunisia and Thailand, the other two of those six countries, are now both democracies. “Tunisia obviously led the whole Arab revolution, and the reason it led it in my view, was because their per capita GDP was over $6000: the middle class was ready for democracy.” “Now that’s good; as you get richer, democracy gets stronger, and never ever dies. There is no case in history of a country above $10,000 losing democracy, it’s never happened. But sadly if you’re at $2000 or less of GDP, there’s quite a high chance - in fact, in any given year there’s about an 8 per cent chance of losing democracy,” Robertson explains. Hence the democratisation risk. “A year ago when I started writing this book an 8 per cent chance basically told me that one or two of them were likely to fall to a coup in any given year. And they did: Mauritania and Mali…and there should be, statistically, another coup this year in a nice, but fragile, democracy.” “Mali was a great story,” says Robertson. “Mali was one of the best reformers according to the ease of doing business reforms of the World Bank. This was a really reform-minded government that was doing great things…and what happens? The reforms hadn’t produced enough growth yet to get incomes up, it was going to happen but not yet, and as a result they were vulnerable to a coup. A coup happened, then you start a civil war, [and] Mali is set back at least 5 years.” “So the primary problem isn’t necessarily corruption, because that’s normal; what bothers me is risk of a coup undermining a good reform effort in various countries.” A few days later reports emerge of a coup in the Central African Republic, not completely unexpectedly.

The lack of a single trading block presents opportunity Most of the professionals I meet who are engaged in Africa bemoan the lack of one trading block. The 54 individual African countries with different economies present obstacles in the form of tariffs, different tax regimes, and regulations. However, unlike many analysts, Robertson sees potential opportunity and flexibility that a massive country like India is not able to provide. “Some [African countries] are going to be more radical and exciting than others. If you go to India you are constrained by the overall macro for the entire country. While in Africa you have a Rwanda which is doing amazing reforms on the


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Africa GDP in 2050

ease of doing business and that could be an amazing story. And you have the capability of really quite exciting trends going on in some of these countries, which you’re never going to get at the state level in a larger group. So I say there’s almost an advantage in Africa not being one homogenous mass.”

Africa’s low debt bucks the global trend Another advantage is Africa’s relatively low structural debt compared to much of the global economy. “It’s a big deal,” Robertson confirms. “What happened in the 2000s was a massive debt forgiveness programme. When I say massive it was about $30bn, but the total bailout for about 30 African countries was actually less than the total bailout for Greece.” “This write-off was only given to countries that had done the right reforms. So you weren’t giving it to Zimbabwe, which still has a very high level of debt. But the countries that did [participate] saw their debt levels reduced a great deal and governments started to run budget surpluses.” “And so you’ve got these responsible governments running sensible budgets, they haven’t run up too much debt, they’re much less vulnerable than they were which means your macro framework is stable and good. And that makes a big shift from 10-15 years ago.” Secondly, he points out, this low level of debt gives African countries the opportunity to borrow more money. “Nigeria has got one of the lowest levels of external debt in the world right now. It’s 3 per cent of GDP, so if Nigeria wants to borrow $5bn or $10bn, which is still

“By 2014 already, Nigeria’s going to be pegging level with SA. And then with the growth rates we are assuming, it’s going to be vastly bigger. But it won’t be as rich per person. I don’t know when it catches up on a per person basis, not for a very long time. The average South African will remain richer than the average Nigerian for a very long time.” Charlie Robertson, Renaissance Capital Global Chief Economist

Legend: Strong autocracy Strong democracy Weak autocracy Weak democracy Key: US$20bn per box

going to be less than 5 per cent of GDP, that’s not a problem at all. And that money if used well by people like Ngozi Okonjo-Iweala, who I think is doing a great job, could make a huge difference.” “Just investing in the electricity sector alone could make a huge difference, so you can now carefully use your low debt profiles to help support growth, to help boost infrastructure. Should global investors be cautious about this? You’ve had debt written off, you go out and borrow...yes, I think people should be cautious.” “But I doubt that the governments which had to experience what it was like to run a country with this level of debt, 80 per cent of GDP – who would have remembered [the choices they used to face:] do I pay that foreign bank, or do I educate our kids, do I fund nurses in a hospital, do I pay their wages, or do I pay a foreign bank in London? You don’t ever want to be in a position to have to make that choice they were having to make 10 years ago. At these [current] levels of debt, you can do both.” Robertson appears to believe that a combination of more responsible government and the experience of a decade ago means that it is unlikely that debt will become a major burden in Sub-

Saharan Africa soon. Growth is above 5 per cent in most of the region and this makes the job for government easier.

Nigeria set to overtake South Africa For South Africans, perhaps the more emotive aspect of the runaway growth of the continent is the prediction that Nigeria will overtake South Africa in terms of GDP soon. Robertson’s graphs predict that by 2050 Nigeria, with a population of 400m and a $6tn economy, “is going to be totally dominant if our forecasts are right.” This will be far larger than the South African economy. “By 2014 already, Nigeria’s going to be pegging level with SA. And then with the growth rates we are assuming, it’s going to be vastly bigger. But it won’t be as rich per person. I don’t know when it catches up on a per person basis, not for a very long time. The average South African will remain richer than the average Nigerian for a very long time.”


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feature:

Mobile phone payment cards open new frontier for Visa and Mastercard The success of mobile phone payment systems in Africa has leapfrogged the infrastructure gap, prodding the giants of plastic money to enter the fray

by Washington Gikunju in Nairobi The runaway success of mobile phonebased transactions in Africa has opened a new business frontier for Visa and MasterCard, the world’s leading providers of cashless payments technology. Faced with a stubborn resistance to the use of credit and debit cards in the African market, Visa and MasterCard are in the process of rolling out a massive trial of new mobile phone embedded payment cards. The two global plastic card giants are banking on the huge success of Kenya’s M-Pesa, a world-acclaimed mobile phone based money transfer and payments service, which has enrolled 20 million users in about

Number of customers subscribed to mobile-phone money transfer and payment services (Millions) 20

10

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five years, to tap into the high demand for financial services in Africa. “The uptake of mobile-based financial services points to an interesting fact: give consumers a secure, convenient and affordable service that addresses their daily challenges, and they will quickly adopt it even if it is based on a technology that is new to them,” said the MasterCard Vice President for East Africa and Indian Ocean Islands, James Wainaina, in an interview with GTA Magazine. MasterCard has signed an agreement with Equity Bank, Kenya’s largest lender by customer numbers, which will see up to five million of the bank’s clients get free smart cards that will be embedded onto their mobile phones. The cards may be used at retail pay points by plugging the buyers’ phones into an internet connected device, forming a mobile point of sale (MPOS) terminal. The cards also have “PayPass” technology for swiping at the MPOS terminals, similar to the Near Field Communication (NFC) software that is already a common feature in Japan and is gaining traction in the West. MasterCard has also signed an agreement with a Kenyan university student organisation and East Africa’s largest retail chain, Nakumatt, through which it hopes to sign up more users of the smart cards. Visa, on the other hand, has already launched its own version of the mobile phone payment card in South Africa in

partnership with a local bank. It also has plans to roll out in Kenya by the middle of the year. “We see this as an opportunity for small businesses to have low-cost and convenient access to point of sale devices. MPOS is about enabling smaller retailers to accept cards instead of simply cash,” said the Visa Country Manager for Southern and East Africa, Jabu Basopo, in an interview. Visa says it has over seven million card users in Kenya alone, out of a total 9.9 million debit and credit cards in use in the country (Central Bank of Kenya, June 2012). Despite being in Africa for more than half a century, Visa and MasterCard have never quite marshalled the critical mass of plastic card users in sub-Saharan Africa that could bring their business there to the size it has in the West and other regions that long ago embraced plastic money en masse. Visa first ventured into Africa in 1968 and oversees its regional business from an extensive network of head offices in Casablanca, Cairo, Lagos, Nairobi, Kigali, Johannesburg and Cape Town. MasterCard similarly has a strong presence on the continent covering Nigeria, Kenya, Tanzania, Mauritius, South Africa, Egypt, Tunisia, Morocco, Botswana and Zimbabwe among others. There are several key reasons behind this failed take-off. Slow economic growth on the continent has in the past limited the number of potential takers of both debit and credit cards, as


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the majority of the population remained locked out of the formal banking system with little disposable income. Infrastructural shortcomings have limited connectivity only to urban areas, which are the only areas with the reliable fixed telephone lines necessary for transmitting user information for electronic payments. Incidences of fraud, especially helped by easy-to-copy magnetic strip cards, have spawned a deep mistrust for virtual money, and have deepened fear of credit cards among potential users. The success of mobile phone-based cash transfers and payments has forced the two firms to re-think their Africa penetration strategy, with their target being a piece of the huge revenue pie that mobile connectivity has created in Africa. “Our desire is for consumers to know that they do not have to carry cash with them because they can use the MPOS devices wherever they need to carry out a transaction, no matter how low the value of the transaction is,” said Mr Wainaina. MasterCard showcased its MPOS technology at the February World Mobile Congress in Barcelona, touting it as the next big thing in the electronic payment industry. The fact that both Visa and MasterCard have chosen Africa as their launchpads demonstrates the continent’s leadership in embracing mobile phone technology, having leapfrogged the personal computer era. The value of transactions passing

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through mobile phones in Kenya stood at an equivalent of about $11.6 billion in the twelve months to June 2012, compared to the $7.8 billion that was made through cards. With M-Pesa already enabling small transactions and giving users the advantage of an affordable, high-speed money transfer service, the plastic card firms are keen to differentiate MPOS as a distinct product that offers value even to M-Pesa users. Mr Wainaina says that, unlike M-Pesa, whose transaction volumes and amount of deposits is limited due to concerns around the possibility of money laundering, the smart cards will be directly linked to customers’ bank accounts. The direct linkage will help users to buy goods and services without worrying about limits on transaction values, while also cutting retailers’ cash handling costs. “We want our cardholders to be able to go to the kiosk to buy milk using a chip card that is compatible with MPOS, rather than have to go to the ATM to withdraw money first before they go to the kiosk to buy milk,” said Mr Wainaina. A major constraint for the MPOS technology, however, is the reliability of the internet connection on which the system is anchored. Though the uptake of smart phones supported by 3G technology is gaining speed on the continent, most users still have devices that run on 2G connections. This means bandwidth constraints may

hinder the speed and uptake of the MPOS technology, even though the card firms say it is configured to operate even with 2G connected devices. 

“We see this as an opportunity for small businesses to have low-cost and convenient access to point of sale devices. MPOS is about enabling smaller retailers to accept cards instead of simply cash,” - Jabu Basopo, Visa Country Manager for Southern and East Africa

Number of ATM, credit, debit and charge cards in circulation in Kenya (Millions) 10

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20 \ Feature \ April 2013

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Feature:

African airlines take off Africa’s leading airlines are launching expansion plans that will see them compete directly with other players in the United States, Europe and Asia. Dr Naikuni

by Mark Kapchanga Kenya Airways, Ethiopian Airlines, EgyptAir, South African Airways and RwandAir have already laid down the grand strategy, which aviation analysts say has been prompted by the recent high growth rates in Africa. Increased foreign investment has also given rise to the popular idea that the continent is on the right trajectory to become the next global economic powerhouse. Ethiopian Airlines, Africa’s fastest growing airline, announced its network extension in Asia by adding three new destinations. Beginning mid-June, the Addis Abababased airline will be operating in Ho Chi Minh City, Manila and Seoul. Flights from Addis Ababa to Hong Kong will no longer have a stopover in Bangkok. Instead, Hong Kong will now be served via a daily express service from Addis Ababa. “The expansion is a continuation of our efforts to achieve our goal of connecting Africa to the world by adding multiple points in Asia,” said Tewolde Gebremariam, the chief executive officer of Ethiopian Airlines. The move will give the airline two gateways in Asia: Bangkok will serve mainland Southeast Asia and Hong Kong will serve East Asian cities. The strategic trade link between Africa

and Asia was conspicuous late March when China’s President Xi Jinping made an epic visit to the continent. The new Chinese leader said that China-Africa relations had reached a ‘golden period’, stressing the need for further mutual co-operation ‘to achieve all-round development’. Currently, China is Africa’s largest trading partner. Business between the two grew from about $10 billion in 2000 to around $200 billion last year. As at April 2012, China’s accumulative investment in Africa had reached $15.3 billion. With its fleet of 13 Q400 NextGen aircraft, Ethiopian Airlines is the principal operator of the Bombardier-manufactured Q400 aircraft in Africa. The airline recently phased in five new Q400 NextGen aircraft that were the first to be outfitted with a dual-class configuration on Bombardier’s production line. “Regional intra-Africa travel is set to boom in the coming years. We see a bright future in our relationship with Bombardier. In line with our Vision 2025 strategic roadmap, we will need more regional aircraft, not just to cater for our own fastgrowing domestic and regional network [but beyond that]” said Mr Tewolde. But it may not all be a smooth flight for Ethiopian Airlines in Asia. Its key competitor, Kenya Airways, is also set to start daily flights between Bangkok, Guangzhou and Nairobi this April.


April 2013 \ Feature \ 21

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The new routes are projected to boost the connections between Africa and China, where passenger and cargo traffic are significantly growing. Kenya Airways Chief Executive Officer, Titus Naikuni, said the daily service would contribute towards sustainable development in Africa by linking it to the rest of the world. Last December, Kenya’s national carrier announced its expansion into China through a code-share agreement signed with China Eastern Airlines. The agreement provides an outline for China Eastern Airlines to market and sell Kenya Airways’ flights from Shanghai and vice versa for Kenya Airways. “We hope to strengthen our presence in China by offering superior connection preferences for passengers from Africa,” said Dr Naikuni, adding: “We have also introduced new direct flights between Hong Kong and Dubai, operating three times a week.” The new flights are part of the airline’s new Hong Kong summer schedule for March 31 to October 26. Dr Naikuni said passenger and cargo business between Africa and Asia is one of the factors that will drive the growth of the airline’s revenues. “There is a big shift as to the engagement between Africa and the East. We are positioning ourselves to take advantage of these emerging opportunities,” he said. Last year, Kenya Airways introduced a 120-tonne cargo plane that will fly from Nairobi to China. RwandAir, one of the emerging airlines in the continent, is also expanding its network within Africa. By June, the airline says it

East African airlines in profile

Destinations Ethiopian Airlines Kenya Airways RwandAir

would have launched its 15th destination. RwandAir CEO John Mirenge says they will be entering Accra in the middle of this year as the airline seeks to bolster its presence in West Africa. Plans are also underway for new destinations such as Sudan, Zanzibar, Zambia and Zimbabwe. “We are growing fast. It is exciting, but [also] somehow challenging. The challenge is that we already have huge giants in the market. However, the exciting bit is that the market is responding quite positively to our business,” he said. Mr Mirenge said the growth plans would be supported by the acquisition of more modern planes from Germany’s TUIfly in April. The change extends the fleet’s operational variety as the airline’s two older Boeings faced limitations on the longer routes such as to Dubai, Johannesburg or Lagos. The more recent models, like B737-700s, can fly these routes with full passenger and cargo load efficiently. “Further expansion is envisaged for 2014, when the two options for another two Bombardier CRJ900NextGen will be turned into firm orders, ahead of the delivery of two B787’s due by 2015 and 2016,” said Mr Mirenge. The government of Rwanda’s support has been key in the airline’s fast growth. Recently, President Paul Kagame said Kigali was seeking a strategic partner to help bolster RwandAir’s expansion plans. Already, the country is preparing to float $300 million of Eurobonds in its first global debt offering this year. Part of the amount generated is set to fund the expansion and modernisation of the country’s only major

Fleet size

“We are growing fast. It is exciting, but [also] somehow challenging. The challenge is that we already have huge giants in the market. However, the exciting bit is that the market is responding quite positively to our business” John Mirenge, RwandAir CEO

airport—the Kigali International Airport. More than $15 million is needed to carry out the works. Rwanda’s Civil Aviation Authority (CAA) says the expansion will speed up service delivery at a time when traffic is constantly building up at the airport. The work is being carried out in three phases. It began with the departure lounge. The arrivals area will be expanded next, followed by the luggage zone. “As the economy burgeons, the number of passengers will increase. We want to avoid any congestion by expanding the airport,” said Tony Barigye, the Civil Aviation Authority communications officer. Passenger traffic at the airport has been increasing at 15 per cent annually. Meanwhile, British Airways says it will increase the number of flights on the NairobiLondon route from seven to eight per week. The new scheduled flight will begin this May. The London-based airline’s announcement follows its thrice-a-week direct-flights withdrawal in Tanzania amid suggestions that the route was unprofitable. “Kenya is a growing economy and the additional flight has been scheduled as an overnight service so our customers, particularly those travelling on business, can make the most of their time,” says Ian Petrie, regional commercial manager for Africa. In March, British Airways launched flight operations in Sierra Leone. “We are not afraid of competition. As we have done in other markets around the continent, we will differentiate ourselves by the products we provide in the air and on the ground, as well as the service and value we offer,” he said.


22 \ Business Life \ April 2013

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BUSINESS LIFE:

Mitigating Business Risk in Africa Through Regional Integration by Dr Jacqueline Chimhanzi South African President Zuma recently proclaimed that “Africa is rising and it is clear for all to see.” A key determinant of Africa’s sustained rising, is regional integration. However, regional integration is still not happening fast enough and undermines Africa’s continued progress and competitiveness. The African market remains highly fragmented. With a similar population size to China and India, in comparison, Africa is 54 markets, China one and India one and therein lies the challenge for a company wanting to access African opportunities and do business on

Image by Abri Le Roux

the continent. The need for regional integration cuts across discussions on trade, energy, financial services, tourism, infrastructure development, agriculture, healthcare, capital and bond markets. It is observed that 27 of Africa’s countries are small, with populations of fewer than 20 million and economies of less than US$10-billion. Infrastructure systems, like their borders, are reflections of the continent’s colonial past, with roads, ports and railroads built to facilitate the export of raw materials, rather than to bind territories together economically or socially. In short – they are doubly challenged by size and connectivity. A 2012 World Bank report shows how

African countries are losing out on billions of dollars in potential trade earnings every year because of high trade barriers with neighbouring countries, and that it is easier for Africa to trade with the rest of the world than with itself. On average, only about 10 – 13 per cent of African trade is with other African nations, whilst 40 per cent of North American trade is with other North American countries, and 63 per cent of trade by countries in Western Europe is with other Western European countries (African Union, 2012). Regional integration also features heavily in discussions of how South Africa could better leverage its ‘connector’ status as the ‘conduit’ between Africa and the


April 2013 \ Business Life \ 23

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BRICS forum. As part of the G20 and the BRICS forum, South Africa represents the broader view of Africa and has an onus to ensure that regional trade bodies function effectively. This will bestow on South Africa more negotiating muscle at the BRICS forum as part of a larger, interconnected SADC market of 250 million people that are connected. In addition, South Africa’s influence would extend to a functioning SADC-COMESA-EAC Free Trade Area of 26 countries with a combined population of 530 million (57 per cent of Africa’s population) and a total GDP of US$ 630 billion (53 per cent of Africa’s total GDP). There is power in numbers. Only when this is achieved will there be weight and credibility to the positioning of South Africa as the ‘gateway into Africa’. On the trade front, both the private and public sectors concur that doing business in Africa, and especially across borders, is particularly fraught with challenges and that these challenges are, in turn, associated with greater risk – real or perceived. Challenges include but are not limited to: • Delays in moving goods across borders within and between regions. Delays at African customs are, on average, longer than in the rest of the world: 12 days in SubSaharan countries compared with 7 days in Latin America, less than 6 days in Central and East Asia, and slightly more than 4 days in Central and East Europe. These delays add a tremendous cost to importers and exporters, and they increase the transaction costs of trading among African countries. For food and other perishable goods, such delays can be devastating. (African Union, 2012) • High volume of paperwork to be processed • High cost of clearing goods at borders • Cumbersome visa requirements for the movement of people.

By way of illustrating these trade barriers, the story of the experience of a South African retailer with a presence across the continent is often told on the conference circuit. In a report examining the barriers that stifle crossborder trade within Africa, the World Bank revealed that the retailer spends US$20,000 a week in import permits to transport meat, milk and other goods to its stores in Zambia alone. Given its presence on the continent, approximately 100 single-entry import permits are applied for every week and can rise up to 300 per week in peak periods. On average, according to the World Bank, there can be up to 1600 documents accompanying each truck the retailer sends with a load that crosses a border in the region (World Bank, 2012). Another example of trade barriers relates to the costs arising from the administrative requirements for certificates of origin, which can account for nearly half the value of the duty preference. Yet another South African retailer opts not to use SADC preferences at all in sending regionally produced consignments of food and clothing to its franchise stores in non-SACU SADC markets. Instead, it simply pays full tariffs because it currently deems the process of administering Rules of Origin documentation to be too cumbersome. A large global manufacturer of cellphones, freighting some 30 000 containers annually into the rest of the continent from South Africa, bemoans the lack of visibility in the process as products cross through various borders to their destination. Their strategy? To keep their fingers crossed and be relieved when the containers arrive safely. While regional integration has long been touted, starting with Ghanaian President Kwame Nkrumah in 1957, now more than ever, when Africa finds herself on the cusp

“The African market remains highly fragmented. With a similar population size to China and India, Africa is 54 markets, China 1 and India 1 and therein lays the challenge for a company wanting to access African opportunities.” Image by Sir James

of realising her greatness, there is a need to heed these calls to action. While in 1957, regional integration was a concept that the continent aspired towards, in 2012, the lack of it is the very obstacle to increased trade on the continent, similar to Europe post-war. But what does regional integration really mean? It is a highly-used but nebulous term. To rephrase, if the three trade zones SADC, COMESA and EAC were fully integrated within themselves, what would it look like? Characteristics of an integrated trade zone include but are not limited to the following: • No restrictions on the movement of goods, persons and services • Simplified border procedures: • Limited number of agencies at the border • Increased levels of professionalism of officials


24 \ Business Life \ April 2013

• Removal of a range of non-tariff barriers to trade, such as: • Restrictive rules of origin • Onerous and costly import and export licensing procedures • Harmonised and well-coordinated trade instruments and nomenclature so that country trade laws “speak to each other”. Based on this “ideal”, what is the status of regional integration on the continent and which blocs are close to realizing it? Two African regional blocs, at different levels of maturity, will be compared. The East Africa Community – EAC – comprising: Kenya, Uganda, Tanzania, Rwanda and Burundi - is at an advanced stage of development and integration and is often touted as the best example of a well-functioning regional bloc. First formed in 1967, there is a history of co-operation and integration amongst East African countries. Since 1967, the Community has gone through many phases, some failures and collapses – for example, in 1977 – and is, as a result of these learnings, stronger today. The regional integration bodes well for foreign investment with investors increasingly picking one of the EAC countries as a manufacturing hub and distributing into the rest of the region. The collective population of the EAC bloc stands at 150 million. The EAC will go online in 2014 with the following: Image by arclient

Image by NJR ZA

Image by Shine

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• Free Movement of Goods • Free Movement of Persons • Free Movement of Workers • Free Movement of Services • Free Movement of Capital • The Right of Establishment • Right of Residence There is also evidence the EAC integration is underpinned by a programme of infrastructure development in order to operationalise the union and lower transport costs in the region. While infrastructure is vital to Africa’s development, it is pivotal to any regional integration efforts. CEMAC – the Economic and Monetary Community of Central Africa – is comprised of: Cameroon, Gabon, Chad, Central African Republic, Equatorial Guinea and Republic of Congo. CEMAC’s key objectives are the promotion of trade and the institution of a genuine common market. In 1994, it succeeded in introducing quota restrictions and reductions in the range and amount of tariffs. Currently, CEMAC countries share a common financial, regulatory, and legal structure, and maintain a common external tariff on imports from non-CEMAC countries. In theory, tariffs have been eliminated on trade within CEMAC, but full implementation of this has been delayed. However, the movement of capital within CEMAC is free. Since the ratification of the CEMAC treaty in 1999, the region has been moving, albeit slowly, towards fuller economic and monetary integration. Macroeconomic convergence has improved with greater country adherence to both fiscal and nonfiscal criteria of convergence modeled on the EU experience. However, limited progress has been achieved in enhancing the functioning of the customs union. Administrative hurdles and an absence of economic complementarities continue to hinder the flow of goods, services, and people in the subregion. Intraregional trade still remains low – even in comparison to its West African counterpart. CEMAC’s progress has been hampered by the lack of functional transportation corridors among CEMAC countries. This is the prominent infrastructure bottleneck that hampers trade and limits the gains from regional integration. As a result, the CEMAC region trails the overall subSaharan African oil exporters grouping in non-oil GDP growth (IMF). However, these physical challenges of moving around the community are set to be alleviated with the announcement that the regional grouping’s airline will strategically partner with a leading international airline to begin operating scheduled flights among the member countries of the sub-regional bloc.

Case Study The Chirundu One Stop Border Post Chirundu is a border post between Zambia and Zimbabwe located on either side of the Zambezi River. It is a very busy border with between 300 and 400 trucks crossing the border each day. The Chirundu One Stop Border Post programme is managed by the Secretariat of the Common Market for Eastern and Southern Africa on behalf of the COMESA-EAC-SADC Tripartite. The main purpose of the Chirundu OSBP is, by working in a sequenced and harmonised way with other initiatives on the North-South Corridor, to reduce the costs of cross-border transport by reducing the time taken to cross a border. The Chirundu one-stop border post was officially opened on 5th December 2009 and is Africa’s first functioning OneStop Border Post. The establishment of the one-stop border post has provided some significant improvements. For example, passengers and commercial traffic stop only once to complete border formalities for both countries, and waiting times for commercial traffic have been reduced from about four to five days to a few hours. Source: WTO and OECD – AID-FOR-TRADE CASE STORY “Improving Service Delivery and Reducing Clearing Times at Chirundu Border Post”, 2011

So what is the way forward? Infrastructure development is a crucial starting point. Deloitte’s view is that a relatively “quick win” in the process towards integration in customs modernisation to create a one-stop customs system e-border to allow for the easing of tax clearance, goods declaration and immigration processes. An upside of customs modernisation is the increased flow into the fiscus from collected taxes. This modernisation process has practical challenges including, but not limited to, a general skills gap and inadequate ICT systems and processes. However, as the Chirundu One Stop Border Post case study illustrates, these challenges are not insurmountable with adequate and appropriate planning. To conclude, it is clear that regional integration will go a long way towards reducing the challenges and risk of doing business across borders on the continent. The World Bank’s Africa Director for Poverty Reduction and Economic Management expresses it succinctly, “The final prize is clear: helping Africans trade goods and services with each other. Few contributions carry more development power than that.” Dr Chimhanzi formerly of Deloitte


April 2013 \ Business Life \ 25

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BUSINESS LIFE:

Internet entrepreneur gets rural Africa surfing A lack of fibre-optic networks in much of Africa means that internet network providers need to come up with more cost-effective and creative solutions to help get rural Africa online.

by Jeremy Kuper

“iTM’s solutions offer wireless on a much greater range at speeds normally only reached by fibre-optic networks.” Stanislas Nyokas, director of iTM Wireless Communications Solutions

Stanislas Nyokas Peterborough based, Brazzaville born, is director of iTM Wireless Communications Solutions. He is someone who is operating at the forefront of technological innovation, and he claims to have developed his own broadband solution for Africa, which is capable of leapfrogging a shortage of telecoms infrastructure, particularly in the rural areas. “We know the broadband in Africa is the biggest problem. Having a telecom and network-backed plan and being expert in Cisco technologies, we felt that we needed to come up with a solution which will help Africa,” explains Nyokas. One of the main reasons that African economies haven’t exploded like Asia is this lack of internet and broadband infrastructure. Nyokas, a former Intel engineer, says he has devised a wireless solution to circumvent the lack of fibre-optic networks in the continent. “In a rural area people will have access to good quality internet without paying a fortune,” Nyokas tells me. He points out that the computer giant Intel had a project, now abandoned, to bring wireless to rural areas of Asia and this could reach 60 km (in range). This new generation of wireless networks can reach high enough speeds to deliver broadband over a 40 km area, says Nyokas. In technical terms iTM’s networks deliver a bandwidth of over 1gb (and up to 4gb), that will allow 500 users to concurrently use a system of up to 2mb. This is achieved by placing

so-called backhaul units on towers up to 40 km apart and firing up the network between these two points. Existing broadband systems in the western world are very expensive and are often unsuited for Africa. “Our technology has been built with Africa in mind,” he says. “As a result, this is one of the only technologies on the market which is able to do that. Because if you take traditional wireless at the moment, if you connect it from one point to another point, the maximum [coverage] you can get is about 200 metres.” iTM’s solutions offer wireless on a much greater range, at speeds normally only reached by fibre-optic networks. According to Nyokas, many African countries have been trying to adopt an infrastructure-heavy model which is not suited for the continent. The European model of fibre-optics is too expensive for African purposes. “Yes, you will say it’s been done in Rwanda [laying down fibre-optic cables], but Rwanda has been financed by America. You may say what about other countries like Congo, and yes Congo has fibres almost everywhere, but it’s not connected to the undersea fibreoptics.” “Therefore whatever technology we’re going to try to follow, it needs to be designed for Africa, for the African people.” And this requires very costeffective technology. “And this is why we came up with this technology which is unique – to offer wireless technology for all African people,” not just city dwellers, or those living in the more developed parts of the continent.


26 \ Business Life \ April 2013

His technology has been tested in Nigeria, Ghana and Gabon where iTM has carried out a number of limited trials and the system is now ready to be rolledout into other parts of Africa. Nyokas has recently signed a deal with the Malawian government to provide this high speed wireless broadband solution to up to one million customers. A combination of his own technological innovations and the use of cloud technology allows iTM to link up the rural areas to eachother. “The idea is really simple, for us to deploy technology to as many customers as we can…each customer will act as a hub for the next customer.” Nyokas is supported by anonymous Swiss backers, but remains open to other backers. “We have the technology, and we have the knowledge of the market which not many companies have.” A combination of this tech savvy and cultural sensitivity gives Nyokas and his company iTM a possible advantage in Africa, he believes. Previous trials of his system have taken place in cities like Libreville and Lagos, so this Malawian connection gives him the opportunity to test the effectiveness of his systems across a whole country at a cost of less than £10m for the entire network. Nyokas’ system, could allow many African countries to circumvent a relative lack of infrastructure...if it works. “We have tested it extensively, downloaded gigs of data, and it works beautifully.” “The point is, where people have difficulties [and] the environment provides challenges, or obstacles, our technology is as good as fibre. Our technology is very quick to deploy and very cost effective. The idea is really to start with Malawi and try to deploy this technology throughout Southern Africa.” In Malawi, iTM has a team of nine engineers. “All of them are Ciscocertified network professionals. And they are very good, they’ve been trained in most of our products and they are ready to be the front line.” Nyokas adds that if more engineers are needed, they will be trained up and put in place to support the customer base in Malawi as it grows. “At the time we started the company our focus was working with the military, because [they] need a lot of security, they have a fair amount of money and they will pay.” However, as Nyokas points out, security concerns mean that it is difficult to get testimonials from these kinds customers.

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iTM also works in the areas of video surveillance, and security. Nyokas says that this part of the business grew on the back of his wireless network. “The wireless was designed and developed to allow it to carry video surveillance in a very secure manner.” Video surveillance will allow for improvements in security like in the west where CCTV is already very developed, and in some cases replace the need to have security people on the ground. I ask him what’s next for his company in Africa. “The next challenge is to penetrate the Nigerian market more deeply and to provide something like a national infrastructure of video surveillance using our wireless

“Our technology is quick to deploy and very cost effective. The idea is really to start with Malawi and try to deploy this technology throughout Southern Africa” - Stanislas Nyokas, director of iTM Wireless Communications Solutions

technology. In that same infrastructure we [then] need to carry voice and data,” says Nyokas. “We consider ourselves to be the next Google,” Nyokas suggests, maybe slightly over-enthusiastically. And he adds confidently, “we know we’re going to do it.” Can it be done?…watch this space.


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28 \ Final Word \ April 2013

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FINAL WORD:

Bad governance and exploitation is Africa’s curse Karl Ziegler former banker and anti-corruption campaigner gives his first hand account of Africa’s failings by Katherine Purvis and Jeremy Kuper

GTA: How and when did you become involved in Africa? I’ve been involved in Africa since 1969, when I first went to the West Coast. One of the initiatives that the Kennedy administration started was a combination of various banking groups in America who were asked to basically encourage their corporate customers to invest in Africa because American investment was very, very minimal compared to British and French investment. At the time, I was working for the First National Bank of Chicago in their London Branch. I said that I wanted to go to Africa and try to get our major corporations from Chicago to invest… and then suddenly a job opened up amongst our core group called the Mid-American International Development Association (MIDA). I became the Head of the Nairobi branch [for First Chicago Bank] and frankly I never looked back. I had the ten most wonderful years of my life, working with then finance minister [Mwai] Kibaki and the Kenyan government, trying to do a lot of good things getting American

companies involved. We organised Kenya’s first three Eurodollar loans. On my return to London, I helped to arrange Nigeria’s $1.2 billion general purpose loan. All have been repaid.

GTA: And you went on to become one of the founding members of Transparency International? I was in London at the creation of Transparency International (UK) with people like Laurence Cockcroft and George Moody Stuart. I had been discouraged by African corruption for a long time. Africa’s got its own dictatorship in terms of ruling elites who will continue to behave as badly as the so-called old colonial powers in the past. And the African ruling elites are very helpfully supplemented by the new colonials from China. The Chinese will bribe anyone, anywhere, to get things done because they’re hungry for all kinds of resources. And the masochists – or perhaps we should call them opportunists – who are the ruling elite of Africa…are essentially perfectly happy to play the game for whatever amount of money they can receive as bribes offshore.

“Unfortunately, some of the most charming people you would want to have at your dinner table were also some of the biggest crooks. They were basically looking after themselves and their extended family and tribe.” - Karl Ziegler

So a lot of African resources are being taken out of the continent, at below market worth, because some ruling elites are so happy to deal with whoever bribes the most. And it’s sad. It’s tragic. There are so many resources in Africa, it’s inevitable that they will be sold, but the beneficiaries are not yet the middle classes and the students that are waiting their turn.

GTA: Would you accept that political corruption is cyclical and it’s associated with poverty? No, corruption is ongoing and is associated with the behaviour of ruling elites. An increasingly educated population is terribly important. I think that’s one of the positives – there are more educated people dissatisfied with the corruption of the past, but the tribalism that still drives politics from Kenya to Nigeria, is a real roadblock to total democratisation. The ruling elite will continue to be the ruling elite. Botswana is an exception because it has a very small population, and the best diamonds in the world, so it’s very difficult not to satisfy the ruling elite. Botswana tries to make sure its students, universities and schools are educating its indigenous people extremely well because it has the financial capacity to do it.

GTA: But there comes a point when even the most entrenched, violent ruling elite like Colonel Gaddafi is overthrown by the same means that


April 2013 \ Final Word \ 29

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Karl Ziegler

put him into power. Look at the last two general elections in Kenya where democracy has prevailed. Unfortunately, some of the most charming people you would want to have at your dinner table were also some of the biggest crooks. They were basically looking after themselves and their extended family and tribe. I don’t see that changing very much yet in Kenya. Nigeria is a place that has huge resources and huge problems. I think the dilemmas in the Arab North of Nigeria are going to continue to cause trouble [as will] some of the revolutionaries and the terrorists in Mali. We’re looking at a continent that is being torn between many different forces, [among them] greed and democracy - and democracy is not really winning.

GTA: Is it completely fair to blame the Chinese for what they’re doing now after more than 100 years of complete destruction and neglect by the West? I don’t accept the premise of your question. The traditional investors in Africa when I arrived there were the French,

and the English, and to a smaller extent the Germans and Portuguese. They built roads and developed both agricultural and industrial exports. Nigeria was developed by leading international oil companies, who were very influential in the early days… cutting deals with the ruling elite wherever oil could be found. The war in Biafra was tragic and reflected an early race for resources. I went to the Côte d’Ivoire when the French were still running it and Houphouët-Boigny was the titular President, but every ministry of government in independent Côte d’Ivoire had two or three French advisors really steering the programmes. The same goes for Senegal and other Francophone West African countries. In many cases the resources had been developed by technocrats from Western countries. The reality was that so much of the groundwork of the revolution of Africa was left behind, and it’s still being steered with some resentment in South Africa. The Anglo-American Corporation

has been a major pioneer in developing some of the resources of South Africa and they’re getting kicked out by ruling elites who want to take an increasing share of the cake… and the school kids and the poor people of that country are not reaping the benefits of the enormous growth and future potential of South Africa’s development. And I’m afraid that I see that in many other countries.

GTA: Are you still involved in anti-corruption work? I’m working with people like Richard Leakey and others on trying to minimise the poaching of elephants and rhinos. Unfortunately, the people who are profiting from poaching in Kenya are some of the very senior politicians, and so poachers who are caught are quickly released. In the long run, people will not go to go to Kenya if it doesn’t have The Big Five. Tourism, Kenya’s major employer and foreign exchange earner, is going to suffer if responsible politicians will not conserve wildlife.


30 \ Destination \ April 2013

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DESTINATION:

Nigeria Nigerian Economy

Currency: Nigerian Naira Population: 162.4 Million GDP based on PPP: $2,290 GDP growth (2011): 7.36% Head of Government: Goodluck Jonathan Finance Minister: Ngozi Okonjo-Iweala Central Bank Governor: Mallam Sanusi Lamido Sanusi

Nigerian Business

Language: English, Yoruba, Ibo, Hausa World Bank Doing Business rank: 131 World Economic Forum Global Competitiveness rank: 115 Investment agency: Nigerian Investment Promotion Commission Public sector opening hours: 0730 – 1530 Private sector opening hours: 0830 – 1700 Legal system: A mixed legal system of English common law, Islamic law (in 12 northern states), and traditional law.

Getting There

Airlines: British Airways, South African Airways, Virgin Atlantic and Arik Air Visas: UK - Single entry visa costs £50 Hotels: £65 - 250

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Nigeria is a former British colony that was one the first countries to be granted independence in Africa. Since Nigeria’s independence in 1960, Benin the country has been plagued by military rule, corruption and ethnic and religious tensions. However, Nigeria has enjoyed civilian rule since 2003 - the longest period in their history. The 2007 elections marked the first civilian-to-civilian transfer of power. Despite the challenges, Nigeria has enormous potential to grow into an economic powerhouse as it is Africa’s largest oil-producer as well as its most populous nation. In addition, President Jonathan has created an economic ministry that aims to create greater transparency, diversify the economy and modernise the banking system. The result of this has been GDP growth between 6.4 per and 7.3 per cent since 2003. Unlike most African countries, oil, rather than agricultural produce, is the main export of Nigeria, responsible for 80 per cent of the budget revenues. A lack of infrastructure has hamstrung the country’s development, but the government is working towards developing stronger public-private partnerships for roads, agriculture, and power and recently, it privatised five of

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Niger

Chad

NIGERIA Abuja

Cameroon

its power stations. Nigeria is ranked 153rd in the human development index with a per-capita income of $2,290 in 2012. Abuja, the capital, was built in the 1980s, to replace Lagos. It now has a population of around 2,245,000 and the airport is served by regular international and domestic flights.

Lagos This is the largest city in Nigeria and the economic hub of the country with a population of 7,937,932. Major corporations and banks have their headquarters here, and the city boasts a port which is one of the largest and busiest in Africa. The airport has regular international flights as well as domestic flights.

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8000+

16TH ANNUAL

ATTENDEES

300+

VISIONARY SPEAKERS

300+

12-14 NOVEMBER 2013 CTICC CAPE TOWN SOUTH AFRICA

EXHIBITORS

100+

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BUILDING AFRICA’S DIGITAL ECONOMY

COME AND SEE THE FUTURE OF DIGITAL AFRICA... NEW

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Advance Notice

25th - 29th November 2013 Cape Town International Convention Centre - South Africa 15th Scramble For Africa: Strategy Briefing - 25th November 2013 10th Africa Independents Forum - 26th November 2013 20th Africa Upstream Conference - 27th - 29th November 2013 54th PetroAfricanus Dinner - 25th November 2013 Celebrating our 20th Africa OIl Week Join us as we celebrate our 20th Africa Oil Week 2013 in Cape Town, where we shall again host the world’s leading meeting on Africa for corporate deal-making and senior-level networking across the oil/gas industry in and on Africa. This is now the landmark Conference occasion for Africa, a meeting with a global reputation, and one of the top world-class Conferences held annually in the international industry Calendar. The event was sold out in 2012 and Conference was host to: • Over 1,200 Delegates from Six Continents - 90 Presentations made during the Week Ministers/Government Delegations in attendance - African and Foreign State Firms/National Oil Companies and State Officials on the Program - 90 Exhibitions In 2013 the conference will take place at a new venue - the Cape Town International Convention Centre - from 25th - 29th November 2013. The venue is able to accommodate 1,500 in the Auditorium and has added capacity for exhibition stands and parallel sessions. The Week includes separately bookable Events plus; Annual Awards - 2 Conference Dinners and Networking Receptions - Champagne Breakfast - BBQ-Braai - Parallel Sessions: Corporate & Investor Showcases. We recommend early bookings/confirmations for Sponsors & Exhibitions, and for your earliest registration/s as delegates to the different events held across the Africa Oil Week during this year’s much expanded event.

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Sponsor / Exhibition/ShowCase Enquiries

Pre-Registration:

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Amanda Wellbeloved: amanda@glopac-partners.com Sonika Greyvenstein: sonika@glopac-partners.com

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tanya@glopac-partners.com jodee@glopac-partners.com


Gateway to Africa April 2013