TAR109 OCT DEC 2019

N° 109 • OCTOBER-NOVEMBER-DECEMBER 2019

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THE AFRICA REPORT

AFRICAN BANKS get ready for disruption

SOUTH AFRICA Cyril Ramaphosa’s inner circle MUSEVENI INTERVIEW ‘Uganda needs East Africa for prosperity’ Aliko Dangote

INVESTIGATION The darker side of mobile banking

QUARTERLY EDITION • N° 109 • OCTOBER - NOVEMBER - DECEMBER 2019

Pioneering a new Nigeria

ETHIOPIA Abiy tries to keep it together

32-PAGE SPECIAL

From L-R, Kayode Fayemi, Jim Ovia, Tiwa Savage

JEUNE AFRIQUE MEDIA GROUP INTERNATIONAL EDITION

Algeria 610 DA • Belgium €7.90 • Canada CA$ 12 • Denmark 80 DK • Ethiopia 200 Birr • France €7.90 • Germany €7.90 • Ghana GH¢ 35 • Kenya KES 1000 • Morocco 45 DH • Netherlands €7.90 • Nigeria 2000 NGN • Norway NK 95 • Rwanda RWF 7,500 • Sierra Leone LE 67,000 • South Africa R75 (tax incl.) • Sweden SEK 100 • Switzerland 10.90 FS • Tanzania TZS 20,000 • Tunisia 15 DT • Uganda UGX 40,000 • UK £7.2 • United States US$ 15.99 • Zambia 80 ZMW • Zimbabwe US$ 6.20 • CFA Countries 3,900 F.CFA • Euro Zone €7.90

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EDITORIAL

REVERSAL OF FORTUNES

Irony may be the poet’s last resort in a geopolitical crisis, but it highlights some essential truths. So Nigeria’s Nobel laureate Wole Soyinka touched a nerve when he called on the Commonwealth to investigate British Prime Minister Boris Johnson’s suspension of parliament as he tries to take the country out of the European Union.

Scottish appeal court judges in early September concurred with Soyinka’s view and ruled the suspension was done to stifle debate and therefore illegal. Now it will be argued out in the Supreme Court.

This is far from an obscure legal argument. None other than the usually hyper-optimistic Akinwumi Adesina, president of the AfDB, warns that the economic instability caused by Brexit and the US’s trade war with China could force his economists to cut their 4% growth forecast for Africa this year.

On current form, Africa’s resource-rich countries could see their growth cut by as much as 2.5%, says the AfDB. There are many things wrong with Europe’s policies towards Africa – its internal subsidy system makes Africa’s farm exports uncompetitive and its 'Fortress Europe' policy is crude and ineffective. But there is no sign that Britain’s exit would foster a more coherent Africa policy in Whitehall or Brussels.

It’s a matter of economic karma that geopolitics follow the dollar and now the renminbi.

Europe and North America are getting less relevant to Africa. So a call by Macky Sall, Senegal’s President, to China’s President Xi Jinping last year to work jointly for a more “balanced, just and inclusive global governance system to safeguard multilateralism and oppose protectionism” is determinedly practical politics.

When President Donald Trump levied tariffs of more than $250bn on Chinese goods in January, Beijing responded with a hit of $100bn on US exports. That slashes Africa’s trade too. Officials in Beijing say it could mean cuts in demand of around $75bn in commodity exports from Africa, the worst fall since the financial crisis of 2007.

So when Western politicians warn about the perils of China’s 'debt diplomacy', African officials find the argument hard to take. It’s true that Africa owes China more than $80bn, some of it in terrible and usurious deals; the US owes China $1.1trn. It’s in no one’s interest to blow up the system, but the risks of what the IMF calls “policy uncertainties” are mounting by the day.

Africa and China are roiled by these unknowables, but many Western politicians miss the plot. Washington’s sanctioning of China’s technology giant Huawei looks self-defeating. It has already lost the fight in Africa, where Huawei built 70% of the mobile phone masts and has, along with fellow Chinese tech giant Transsion, about half of Africa’s mobile phone market. More than half the world’s e-commerce is in China and its tech platforms such as Baidu, Alibaba and Tencent are pulling Africa into that orbit. In this digital race in Africa and beyond, Western tech giants risk losing out badly. Breaking up economic unions and starting trade wars will offer Western states little compensation for that.

THEAFRICAREPORT / N° 109 / OCTOBER-NOVEMBER-DECEMBER OCTOBER NOVEMBER DECEMBER 2019

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#109 / October-November-December 2019 THE AFRICA REPORT 57‑BIS, RUE D’AUTEUIL 75016 PARIS – FRANCE TEL: (33) 1 44 30 19 60 FAX: (33) 1 44 30 19 30 www.theafricareport.com

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What comes after the celebrations in SA?

03 EDITORIAL 06 MAILBAG 08 OBITUARY / Robert Mugabe 10 COFFEE WITH THE AFRICA REPORT / Daphne Mashile-Nkosi 12 INTERVIEW / Yoweri Museveni 16 THE QUESTION 19 Q4 / Oct. / Nov. / Dec. 38 OPINION / Elo Umeh

77 NIGERIA FOCUS The new government only has a small window of time before a ballooning demographic makes the path to development more perilous

114 It’s risks ahoy for African

banks in a global era of tighter money and tougher competition

FEATURES 40 PROFILE / Team Ramaphosa After the initial euphoria, critics now say Cyril Ramaphosa does not have the foot soldiers to govern effectively. In the face of popular protests and factionalism in the ANC who can he count on to help rebuild South Africa?

52 INVESTIGATION / Kenya, the world’s fintech lab

142 TELECOM DOSSIER MTN will focus on messaging, mobile money and streaming to keep customers in its growing ecosystem

With Kenya having become a world leader in mobile-money and fintech innovations, The Africa Report looks at what is moving fast and what is broken

150 JAPAN/AFRICA

60 WIDE ANGLE / Keeping it together

Tokyo hints that its infrastructure projects are better than China’s

Ethiopia’s ongoing liberalisation and ethnic federalism are creating a combustible situation as ethnic groups in the country seek more autonomy on economic, political and security matters

68 CULTURE / Nigeria’s musical moment Nigerian musicians are hitting global stardom. Behind the VIP-studded parties and signings with major labels is the 110% Naija ecosystem that got them there

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THEAFRICAREPORT / N° 109 / OCTOBER-NOVEMBER-DECEMBER 2019

154 LAST WORD Give credit where it’s due, writes former trader Funmi Adebayo

COVER CREDITS: STEPHANE DE SAKUTIN/AFP; CHRISTOPHE MASENGESHO/ACF/JA; LOGO OLUWAMUYIWA ADEYEMI FOR TAR;LEON BENNETT/GETTY IMAGES FOR ESSENCE

GIANLUIGI GUERCIA/AFP

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MAILBAG

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DARK NIGHTS INVADE ZIMBABWE AGAIN

Zimbabwe is plunged into another post-Mugabe era of no electricity as the country failed again to pay for imports of electricity to Mozambique and South Africa. This unavailability of electricity is causing massive land degradations as people cut down trees in farms which were for white farmers. Schools, hospitals, shops and food outlets are all grounded to a halt as the solutions are not within the proximity of President Emmerson Mnangagwa.

The government should be responsible enough to manage the country effectively or otherwise President Mnangagwa should resign and let those capable take over.

Tapiwa Muskwe, U.K.

TURBULENCE AND PROTESTS

Political turbulence in the form of street protests has become the common hallmark of incidents witnessed not only in Africa but in many other

PARADOXES AND CONTRADICTIONS

www.theafricareport.com

N° 108 • JULY-AUGUST-SEPTEMBER 2019

AFRICAN COMPANIES

From L-R, CEO of OCP, Mostafa Terrab; CEO of Steinhoff, Louis du Preez; and Exec VP of Globacom, Bella Disu

Growth returns for Africa’s Champions ANGOLA In search of missing billions TECH Job killer or job creator?

GHANA Grand plans seek finance

EXCLUSIVE KAGAME AND MUSEVENI, BROTHERS IN ARMS

SOUTH AFRICA Agribiz confronts land issue INTERNATIONAL EDITION Algeria 610 DA • Belgium €7.90 • Canada CA$ 12 • Denmark 80 DK • Ethiopia 200 Birr • France €7.90 • Germany €7.90 • Ghana GH¢ 35 • Kenya KES 1000 • Morocco 45 DH • Netherlands €7.90 • Nigeria 2000 NGN • Norway NK 95 • Rwanda RWF 7,500 • Sierra Leone LE 67,000 • South Africa R75 (tax incl.) • Sweden SEK 100 • Switzerland 10.90 FS • Tanzania TZS 20,000 • Tunisia 15 DT • Uganda UGX 40,000 • UK £7.2 • United States US$ 15.99 • Zambia 80 ZMW • Zimbabwe US$ 6.20 • CFA Countries 3,900 F.CFA • Euro Zone €7.90

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parts of the world [‘The youth wave’, TAR107 Apr-June 2019]. Rather than confront governments on issues of shrinking civic space for a society to express opinions and lack of job opportunities, can the new demographic tide manage to reverse the current trend of negative economic growth to a more prosperous future by reversing back soaring food prices, which would be a fulfilment to the ideals of a common citizen’s dream of a basic right to access nutritious

The paradox in the accumulation of wealth by a few and the appropriation of poverty by the majority is one of the contradictions of market globalisation and the capitalist economy ['The Question’, TAR108 Jul-Sep 2019].

As a 2019 report by Oxfam warned, the "fortune of the world’s billionaires increased by $2.5bn per day, while 3.8 billion people who make up the poorest half of humanity saw their wealth decline by 11%". Africa is no different from this reality. The rise of a few billionaires in Africa has not translated into faster economic growth.

Said Adejumobi, Zambia

food, clean water and sanitation? This is a big challenge to overcome with the current resultant slowdown of global economies and leaner prosperity.

Kokil K. Shah, Kenya

TRAIN UP A CHILD...

As someone whose mother hails from Kaiama, I was very pleased to read about the new drive to improve education in that town [‘From Timbuktu to Toru-Orua’, TAR107 Apr-June 2019]. For years, both the federal

and state governments have neglected the town and that has been a contributing factor to the anger of the youths in that area. As the Holy Book says in Proverbs 22:6: “Train up a child in the way he should grow and when he is old, he will not depart from it.”

Nothing could be truer than this. So it brightens my eyes and calms my heart to see that the governor did this; more grease to his elbows, as we say in Nigeria.

Abiye Isokrari, Construction engineer, Nigeria

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THEAFRICAREPORT / N° 109 / OCTOBER-NOVEMBER-DECEMBER 2019

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MARK CHILVERS/PANOS-REA

OBITUARY

Arrogant, spiteful, opportunist, Mugabe left a bitter legacy

ROBERT GABRIEL

MUGABE 21/02/24 – 06/09/19

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THEAFRICAREPORT / N° 109 / OCTOBER-NOVEMBER-DECEMBER 2019

The closest I have to feeling anything is quiet, seething rage. Rage that this man who killed thousands and destroyed so many livelihoods has died without facing justice for his atrocities. He escaped justice in this life, I pray it is waiting for him in the next.

Many say they are conflicted about Robert Mugabe – whom they call a pan-Africanist, father of the Zimbabwean nation and a hero turned villain. I personally do not suffer from this conflict. Credited by some for his gallant role in leading the Zimbabwe African National Union (ZANU) in the last, very short leg of the liberation struggle from 1975 to 1979, he gets far more credit than he deserves. The gallantry and heroism, according to his closest comrades, is manufactured.

His recruiter into the liberation struggle, Edgar Tekere, wrote in his book of a reluctant, scared and unwilling participant of the struggle into which he was foisted because, with his multiple academic degrees,

he spoke and wrote well compared to the other guerillas.

Mugabe wanted everything done his way. He never tolerated dissent during the liberation struggle nor thereafter.

He stoked controversy with his role in the 1979 death of Josiah Tongogara, a Zimbabwe African National Liberation Army (ZANLA) commander, in order to ostensibly consolidate his control over ZANU-PF. Tongogara preferred a united front under Joshua Nkomo.

After independence and deciding Zimbabwe would be a one-party state, Mugabe demanded and required full obedience and loyalty.

When his comrades questioned it, they were sidelined or worse. He jettisoned erstwhile right-hand comrades like Tekere, Eddison Zvobgo, Dzikamai Mavhaire, Margaret Dongo, Enos Nkala, Solomon Mujuru, Moyo Mutsvangwa, Didymus Mutasa and Emmerson Mnangagwa. Then he toyed with them by bringing some of them back when he felt they had learnt their lesson – the lesson that there is only one leader. And his name is Mugabe.

He maintained a divide-and-rule system built on fear and suspicion.

His comrades both feared him and mistrusted each other, and could never muster a revolt against him. Attempts to do so were sure to be fatal, with many dying in suspicious circum­ stances (car accidents, alleged poisonings or other undisclosed sudden illnesses – methods which his comrades readily used against each other).

Private army

To ensure his comrades toed the line, he built a zero-sum, kill-or-be-killed party system in which you were either in or out. Once out, you either fled into exile or were stripped of everything the party had allowed you to accumulate.

Mugabe was aloof and cold. Vengeful and unforgiving. In 1980, fearful of Nkomo, his party and better trained guerillas, Mugabe spent considerable resources to build his own militia. The 5th Brigade was a private army with instructions to kill, rape, torture and

plunder Nkomo and his supporters in a campaign known as Gukurahundi.

It did not stop until 20,000 people were dead. Mugabe would never have stopped had Nkomo not capitulated and sworn allegiance to his authority.

There is nothing in Mugabe’s record that shows benevolence or democratic credentials. He never sought to build a nation but stoked and amplified tribal differences, benefiting his Zezuru clansmen and entrenching a sense of exclusion amongst other clans.

His demagoguery left Zimbabwe collectively carrying his individual guilt and responsibility and a sense of exclusion and grievance. He pretended to be inclusive by appointing yes-men from different ethnic groups.

In 1990, he warned supporters of the Zimbabwe Unity Movement (ZUM),

His demagoguery left Zimbabwe collectively carrying his individual guilt and responsiblity

led by his erstwhile comrade Tekere, that one way to die was to vote for the ZUM. The result was an unleashing of violence that culminated in the shooting of Patrick Kombayi by officers of Mugabe’s Central Intelligence Organisation.

He would later give the two officers amnesty after they were convicted for attempted murder. He readily gave all his comrades amnesties whenever they transgressed – a clear indication of his disdain for rule of law.

In the 2000s, he unleashed the ZANU-PF militia against Morgan Tsvangirai’s Movement for Democratic Change (MDC), killing hundreds.

Simultaneously, sensing that he was running out of cards, he turned on white commercial farmers, who had

supported him earlier and then showed disloyalty and support for the MDC. In a masterstroke, with land reform he hit at both the white farmers and the MDC. He claimed the ultimate prize of winning back votes by giving back land whilst claiming the anti-colonial moral high ground in Africa and elsewhere.

Land reform for the few

No sane Zimbabweans could question the need to redress the land problem.

But Mugabe kept the best farms for himself and his cronies, who went on a looting spree.

Realising that the opposition drew its support from urban centres, he unleashed his wrath on the urban population in 2005, destroying homes in Operation Murambatsvina, which the UN characterised as approximating crimes against humanity.

His arrogance and hard-headedness meant that even his comrades were afraid to contradict and challenge him. It also meant that he surrounded himself with like-minded violencemongers who readily did his bidding and personally benefited from it.

He was unforgiving and willing to rewrite the history of the nationalist struggle for independence so that he was the only leading nationalist. He always placed his contribution above and beyond far worthier forebears.

In the end, his comrades overcame their fear and deposed him. That they had to use the army demonstrated the entrenchment and instrumentalisation of violence to retain and obtain political power. This was the legacy he left, 40 years into his rule.

Compare this to other liberation movements in the region, which saw many successive, democratic and party-sanctioned changes of presidential power. Mugabe bestrode ZANUPF and Zimbabwe like a colossus expecting to concede power to the only thing that did not fear him – death.

SIPHOSAMI MALUNGA is a Zimbabwean lawyer. He writes here in a personal capacity.

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THEAFRICAREPORT / N° 109 / OCTOBER-NOVEMBER-DECEMBER 2019

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COFFEE WITH THE AFRICA REPORT

DAPHNE MASHILENKOSI STEEL SMILING The Africa Report speaks with Kalagadi Manganese’s executive chair about her mining roots, time in prison and the frustrations of being a female business leader

By OHENEBA AMA NTI OSEI and NICHOLAS NORBROOK Daphne Mashile-Nkosi is readying herself for a flight back home, chatting to a daughter on a video call.

It is a relaxed side to her that not everyone gets to see.

Back in 2006, when Anglo American and BHP Billiton were unbundling assets in South Africa’s iron ore sector, Mashile-Nkosi was part of a five-man and two-woman team who were pitching to acquire the assets that would end up being owned by Exxaro. After being heavily involved in the run-up, she found herself being sidelined.

“Apparently I was good enough to put together the [corporate] structure and to do the presentation to both Anglo and BHP, but I was not good

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enough to actually sit on the board.

They said I must be just a committee member,” recalls Mashile-Nkosi in cut-glass tones.

“And, of course, I was going to have none of that,” she says. “I was a board member because I was capable but also to protect my interests as a shareholder. Even those who believe in you don’t want you because

Mashile-Nkosi helped to organise the school uprising in Soweto under apartheid

THEAFRICAREPORT / N° 109 / OCTOBER-NOVEMBER-DECEMBER 2019

they know you will ask the most difficult questions.”

She remains on the board of Exxaro, which has both coal and iron ore assets. It is the fourth-largest coal company in South Africa and is listed in London and New York.

These frustrations are part of what Mashile-Nkosi calls the loneliness of being a woman leader in business. “So many times I wanted to throw in the towel,” she says. “And then I wake the next morning and say, ‘I cannot [give in], let me push myself’. We are expected to bring up these designer kids; you want to be the best cook, the best wife, the best of everything.”

And though her nickname today is ‘Iron Lady’, this determination runs back through her earliest days.

“I was an ugly duckling at school,” explains Mashile-Nkosi. She recounts a story from her childhood: Though she had a great voice, when the time came for the school choir to travel to singing competitions, the teacher always made her stand at the back.

“The judges must look at those with the English nose, with the long hair, the pretty little ones. But I didn’t care.

I knew that when I was in class, I was number one.”

She was born in Pilgrim’s Rest in Eastern Transvaal, where gold was discovered in 1860. Her parents moved to Johannesburg, the ‘city of gold’, to make money for the family.

“My grandfather worked the mines.

Mining has always been in my blood.

As a young child, I walked to school with no shoes. My mother never went to school. She was a seamstress with four children to feed,” recalls Mashile-Nkosi. “I have slept without food simply because there was not enough food for everyone.

Somewhere in my subconscious as I was growing up I decided my children would never do that.”

The fight started early. Helping to organise the school uprising in Soweto under apatheid, she regularly found herself in prison. There she met her

Her company won a court case against ArcelorMittal, forcing it to meet obligations

owner of steelmaker ArcelorMittal, was one substantial opponent of hers.

Things had started off well.

Mashile-Nkosi and her husband had launched Kalahari Resources, gaining a prospecting licence in 2005 for a plot in the Kalagadi manganese basin, which contains nearly 80% of the world’s manganese.

ArcelorMittal invested in Kalagadi Manganese in 2007 – a joint venture to extract and process manganese ore in which Mittal owned 50%, Mashile-Nkosi’s Kalahari Resources owned 40% and the Industrial Development Corporation 10%.

But ArcelorMittal did not pay up when the next steps in the development of a sinter plant came due, claiming corporate governance concerns. Mashile-Nkosi – whose husband died in 2008 – took ArcelorMittal to court, winning her case in June 2012 and forcing it to meet its obligations. Kalahari Resources

ILLUSTRATION JEAN-MARC PAU FOR TAR

husband, Stanley Nkosi, who was to be convicted for terrorism alongside future deputy president Kgalema Motlanthe and sent to Robben Island prison for 10 years. “The survival strategies I have in business were actually shaped by the fact I had to survive during those days,” says Mashile-Nkosi.

That determination has been regularly tested in the knockabout world of industrial mining. Lakshmi Mittal,

eventually bought ArcelorMittal out in a R3.9bn deal.

There were other challenges. In 2011, she received a call from the bank to say her business was being hijacked. “They were saying: ‘We have four people that are actually saying that they now own the business. They are here to transfer money that is in the bank account,’” says MashileNkosi. “I didn’t know what to do.

They had removed me as director, removed all the other directors. I had to go to court on an urgent basis for a week to prove who I am. When we did a check on these people, it turns out seven of the eight were mental institution patients who were declared criminally insane. So I will write a book when I retire.”

Despite the ups and downs, Kalahari’s mine is operational. “My proudest moment was the first blast underground. We have sunk a shaft, the most dangerous moment in the mining sector, without killing people.”

And the 2.4m tonnes-per-annum sinter plant was delivered in 2014, one of the largest in the world.

“We are now looking at the smelter to produce high-carbon ferro manganese and silico manganese, which are beneficiated products that are actually used in steel making,” she says. “I will not sell an ounce of ore.”

And though she has not been able to get the hoped-for smelter project off the ground – the sintering process puts ore into an intermediate stage before smelting – this determination to add value is part of her vision for the role of business in Africa.

N° 109 / OCTOBER-NOVEMBER-DECEMBER 2019

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INTERVIEW

YOWERI MUSEVENI

‘THE OPPOSITION ARE JUST OPPOR Uganda’s President could face one of his toughest opponents yet in elections planned for 2021 as politicianpop singer Bobi Wine whips up anti-Museveni sentiment Interview by PATRICK SMITH and PARSELELO KANTAI Zig-zagging the country on the campaign trail, chairing cabinet meetings, addressing international conferences on development and security – all this three decades after winning power in a guerrilla war… President Yoweri Museveni’s political energy is undimmed.

He broke off from a cabinet meeting at State House to talk to The Africa Report about how African governments should manage digital technology and have no choice but to process the

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continent’s resources locally. He added a critique of the identity politics which he says have held back many countries in the region, before dismissing his political opponents as lacking relevant ideologies. This is a rare interview with one of Africa’s longest-serving leaders, who is facing what may be the greatest political test of his career with the coming national in 2021.

TAR: You have introduced the ‘olugambo’ tax – targeting social media. How do you justify it?

It is working. The telephone companies have been under-declaring

THEAFRICAREPORT / N° 109 / OCTOBER-NOVEMBER-DECEMBER 2019

but we are now able to know the magnitude of their under-declar­ ation. Our tax policy is very clear: we don’t tax production when you are making inputs into production for industry, for agriculture. But when it’s consumption, that’s where we tax.

You have said that striking oil would transform Uganda’s economy. Do you still believe that?

The oil sector is important, although it’s a finite resource. Agriculture and tourism will be there forever, as long as we don’t destroy the environment.

The products of the human brain will be there forever, as long as it’s trained.

The money from oil is for limited

Museveni in conversation with The Africa Report

MARATHON RUNNER 15 September 1944 Born in Ntungamo, Uganda 1986 Overthrew the Milton Obote regime after launching a bush war to oust him

first and foremost. Because if the other tribe – the cultivators, the non-cattle people who buy my milk, who buy my beef –, if they didn’t buy from us, our tribe would be the first to suffer.

So why would they form a party based on my identity group, which doesn’t solve our needs? […] Where does prosperity of my group come from? It does not come from my tribe, it comes from the other people who buy my milk, buy my beef.

1996 Museveni’s government organised its first elections, which Museveni won

TUNISTS’ time but we shall use it in such a way that it creates a durable capacity – by training our children, by supporting science education in the universities.

You talk about ideological impediments to economic development.

Can you elaborate?

When you have politics where you emphasise identity, you emphasise tribes and religion, it can cause so much damage – as you’ve seen in a country like the Sudan. […] In the 1960s, we rejected this politics of identity and we said what is correct are interests. In my tribe, I am a cattle keeper. But members of my tribe do not buy milk from me. They don’t buy meat from me because they have meat and milk. They have what I have.

So when I highlight politics of identity I am an enemy of my tribe,

RACHEL MABALA

2018 Parliament removed age limits for presidential candidates, allowing Museveni to run for a sixth term

Do you think Sudan can make a transition to democracy?

I don’t know. What I can say is that it’s not just civilian versus military, it is ideological. It doesn’t matter whether the doctor is a soldier or a civilian, if he does a misdiagnosis of society, the patient will not be cured. It is not a technocratic question, it is philosophy, it is ideology. The problem of the Sudan did not start with [former president] Bashir, the civil war started in 1956, soon after independence.

How concerned are you about the risk of Africa taking on more debt?

Well, I don’t think the debt is the problem because we have been losing money by exporting raw materials.

That’s a big loss. For example, in 1969 Uganda produced 480,000 bales of cotton – a bale is about 185kg. If all that cotton had been converted into a textile industry, how much money would we have earned?

So Africa is losing, whether we borrow or we don’t borrow. So I think if one borrows but creates a better base for business, you see what will develop.

On the campaign trail, you have been talking about a political war. How do you justify this?

You see in Europe and in America people are running countries. Here in Africa we are building countries.

So here it’s a struggle, a struggle of direction. Do we do this or that? And they are all very serious issues. Some people think that when I lead, people are doing me a favour. In fact, it’s a sacrifice because you are pioneering so many things.

If the diagnosis is right, you succeed; if it’s wrong. you fail because you are pioneering, you are building systems, you are charting directions.

On the issue of integration, we are the ones who insisted on it. […] Uganda is not enough to support the prosperity of the Ugandans – for that you need East Africa, you need Africa to support prosperity.

What’s wrong with the opposition parties, in your view?

‘On the issue of [regional] integration, we are the ones who insisted on it’

They have no ideology. They are just opportunists. Our old opponents were the Democratic Party and Uganda People’s Congress. I was a member of both of them in the 1960s – these are the ones we disagreed with because their line was the politics of identity. […] The opposition is trying to inherit the base of those sectarian groups […] but we have been defeating those sectarian groups democratically.

So that battle between us and the old groups is the basic struggle, although there are some new ideas about social issues, which is good, the lack of jobs. But these are being used by those people [opposition parties] opportunistically. People are no longer so much interested in identity. The opposition is trying to latch onto social issues.

THEAFRICAREPORT / N° 109 / OCTOBER-NOVEMBER-DECEMBER 2019

13

Orange multi-service operator Healthcare, education, agriculture, solar energy and ďŹ nancial services

THE QUESTION

HARTMUT WINKLER Professor of physics, University of Johannesburgg

YES, but...

NJERI KABEBERI

GREENPEACE

ALL RIGHTS RESERVED

To respond to the Question, visit www.theafricareport.com. You can also find The Africa Report on Facebook and on Twitter @theafricareport. Comments, suggestions and queries can also be sent to: The Editor, The Africa Report, 57bis Rue d’Auteuil, Paris 75016, France or editorial@theafricareport.com

Greenpeace Africa’s executive director

NO

The new wave of climate consciousness has been The world is facing a major climate-change crisis that will growing in Africa. Africa’s environmentalists and civil society are working to protect the environment and threaten agricultural production in many African countries and lead to an increase in weather-driven disasters. This safeguard the human rights of the communities affected by coal mining. There is a huge appetite for the collapse climate change is to a strong degree driven by coal burning, of coal in tandem with a global consensus that renewable whether in large coal power-stations or on smaller, even domestic scales. The world energy is a cleaner and safe must action its exit from the energy option! This is steadily coal-driven energy production disrupting the energy sector reality it finds itself in. The masthat has largely been fossilsive price drops over the past fuel reliant. In March 2019, few years mean that renewable Greenpeace Africa analysis based on a full year’s satellite power has become cheaper than what could be achieved from data confirmed that the coal the construction of additional power and industrial cluster in coal plants. Countries such as Mpumalanga in South Africa is still the world’s worst hotspot Costa Rica have shown that functioning on 100% renewable for SO2 and NO2 emissions from coal-based power generation. energy is not a pipe dream. Can Mpumalanga does in fact have this transition happen overnight in Africa? Unfortunately not, the most polluting cluster of South Africa’s Eskom is building as the electricity systems of coal-fired power stations in the new coal plants, but is it realistic many countries are currently world. In addition, South Africa for African governments to invest completely dependent on coal is in the midst of an air-pollution in solar, wind and other renewable plants, and closing perfectly crisis within an electricity crisis. functioning plants while buildAnd the study revealed that the projects at the current costs? utility’s almost complete reliing new renewable plants entails additional financial burden. ance on coal leads to about 2,100 Furthermore, running a national power grid off renewables premature deaths every year and that Eskom’s application alone requires additional technologies to cover periods to postpone complying with [South Africa’s] minimum when wind or sunshine are not favourable, such as natural emission standards would cause an additional 16,000 gas plants or extensive electricity storage facilities. All of premature deaths over the remaining life of Eskom’s power these come with additional financial outlay. plants. We do not want this for Kenya or the rest of Africa!

Is green energy a luxury in Africa?

Europe and America after reaping the benefits of coal from the industrial revolution to present day now want to tell us (read Africa) that that we should cut it out of our energy mix. It should be a part of Africa’s energy source. @daniel_ogwang, Twitter

16

Green energy should not be considered as luxury. It is sustainable. Thermal energy is unsustainable and detrimental to climate. Renewable energy sources are the future.

Africa should embark on encouraging them.

Channa Basavaiah Madapathi, Facebook

THEAFRICAREPORT / N° 109 / OCTOBER-NOVEMBER-DECEMBER 2019

I am really interested in this green energy. As has been rightly pointed out, it’s the future.

Lekweke Ernest, Facebook

Sun and wind are sustainable sources of energy.

It is not luxury to use those sources, it is the best way towards a common future of all peoples on the planet.

If Africa leads, hopefully other continents will follow.

Gabriele Luise Schmitz, Facebook

@africaceoforum #ACF2020

8th edition

The foremost international meeting for African CEOs, bankers and investors www.theafricaceoforum.com

CO-HOST

9 & 10 March 2020 ORGANIZER

JUAN HERRERO

Quarter

The Africa Report’s exclusive guide to the quarter ahead features key events from the worlds of politics, business and culture.

Find out more about how to plan your October, November & December, whether it is keeping track of elections in Southern Africa (see page 20), scouting for innovators in the tech space at the continent’s major hubs (above, and page 32) or dancing in the sand with West Africa’s finest musicians (see page 34).

THEAFRICAREPORT / N° 109 / OCTOBER-NOVEMBER-DECEMBER 2019

19

Q4

/ OCTOBER

ELECTIONS

Voting season in Southern Africa Namibia The dominant governing South West Africa People’s Organisation (SWAPO) expects to win November’s elections, giving President Hage Geingob a second four-year term.

As SWAPO focuses on orderly transitions, eyes are glued to the succession rivalries, with vice-president Nangolo Mbumba and SWAPO vice-president Netumbo Nandi-Ndaitwah jockeying for position. Younger voters are pushing SWAPO to take a more radical path on land reform and foster economic opportunities for the country’s youth. The natural resource sector attracts the most foreign investment in Namibia but it creates few jobs. % of the vote

16.2 76.5

13.8 75.3

SWAPO CoD Opposition 7.3 Others

8.3 86.7

2004

DTA 5

RDP 10.9 2004

Frelimo Renamo Others % of the vote 4.6 63.7 31.7

8.6

75

16.4

2009

2014

2009 6.4

57 2014

Mozambique Opposition Others % of the vote

22.2

51.7 2004 53.3

24.8 21.9 BNF

2009

23.5 30 UDC

46.5

2014

Botswana October’s legislative elections will highlight the tensions between President Mokgweetsi Masisi of the Botswana Democratic Party (BDP) and former president Ian Khama. The two have fallen out, and Khama left the BDP to launch the Botswana Patriotic Front.

The BDP has a strong base in rural areas, but its share of the vote has been slipping. It won 37 out of 57 elected seats in the national assembly in 2014. The IMF predicts the economy will grow 3.9% this year, and voters will be looking to see how the BDP government delivers on promises of diversification and job creation.

STRIVE MASIYIWA The Zi Zimbabwean businessman plans tto launch an IPO for telecoms operator Mascom on the Botswana stock exchange with the hope of raising funds for its growth and expansion.

FORTUNE CHASI Zimbabwe’s energy minister has a tough task ahead of him as the water-starved Kariba Dam plant, which provides 57% of the country’s electricity, could stop producing power as early as October.

20

THEAFRICAREPORT / N° 109 / OCTOBER-NOVEMBER-DECEMBER 2019

RINGO CHIU/ZUMA/REA

26.1 BNF

ALL RIGHTS RESERVED

BDP

The planned October elections will be a first big test of a peace deal signed

by President Filipe Nyusi and Renamo leader Ossufo Momade in August.

It seeks to end the country’s conflict in exchange for amnesty for rebels involved in attacks. With the economy still reeling from the previous government’s more than $2bn in opaque loans, the ruling Frelimo party will likely face tougher times at the polls in October as Nyusi runs for re-election.

The elections’ stakes are also huge because the new leaders will oversee the transformation of Mozambique’s economy due to the development of huge natural gas reserves.

‘By 2030, we hope to identify and shine a spotlight on 100 African entrepreneur heroes who will inspire the continent’ BETH YU of the Jack Ma Foundation on the launch of the $10m Netpreneur Prize in Africa. The 10 finalists who will pitch to Jack Ma and compete for the prize money in the Grand Finale event in Accra, Ghana, are due to announced in October.

SOURCES: ELECTORAL COMMISSIONS OF BOTSWANA, MOZAMBIQUE, NAMIBIA

36.6

Q4

/ OCTOBER

‘I am busy here, trying to stay out of jaiI’ JACOB ZUMA South Africa’s former president, who cited the above reason for missing Cyril Ramaphosa’s inauguration, is due back in court in October

DEJI AKINPELU/AKE FESTIVAL

01:10

Shareholders in the National Bank of Kenya (NBK) will get one share of KCB for each 10 NBK shares when Kenya’s largest bank completes its purchase of the troubled lender.

The integration of the two banks’ operations is set to take about two years.

CULTURE

Art appreciation Launched in 2013, Nigeria’s Aké Arts & Book Festival is now a key node in the continent’s creative circuit. Held on 24-27 October in the Ikoyi neighbourhood of Lagos, this year’s festivities will be based around the theme ‘Black Bodies. Grey Matter.’ Speakers at the events are to include Helon Habila, author of Travellers, EbonyLife TV boss Mo Abudu, columnist Mona Eltahawy and sci-fi writer Nnedi Okorafor. Aké’s days will be filled with talks, concerts, art exhibitions and other events about the continent’s whirring creative industries. Normally held in Abeokuta in Ogun State, this year Aké’s main attractions will be at the new Alliance Française building in Lagos.

This is the first English translation of awardwinning Franco-Congolese writer Alain Mabanckou’s satirical novel about the damages wrought by war, published in French in 2002.

The last day of October was when South Africa’s power utility Eskom was due to run out of money. The government has stepped up with more bailout funds and is pushing ahead with plans to split the company under the leadership of chief executive Jabu Mabuza into three as a means of dealing with its R440bn ($29bn) in debts.

22

SPORT

Marathon-runner Eliud Kipchoge is on a mission “It will be history for the human family,” said Kenyan runner Eliud Kipchoge of his plans to break the marathon record in Vienna in October. Hype is high around the 34-year-old world-record holder’s plans to run 42.2km in less than two hours – he likened the challenge to Neil Armstrong landing on the moon. If Kipchoge does make history, it will not stay in the record book because he will be using running pacesetters and other tools to help him along the way.

Kipchoge already holds the record for the fastest unofficial time, running a 2:00:25 marathon on the Monza track in Italy in 2017, and set a new world marathon record in Berlin in 2018 at 2:01:39.

Ahead of Vienna, Kenya’s top long-distance running is training at home in Kenya.

THEAFRICAREPORT / N° 109 / OCTOBER-NOVEMBER-DECEMBER 2019

IAN STEPHEN/PROSPORTS/REX/SIPA

BOOKS

Q4

/ OCTOBER

Eyes on the China prize Botswana is the next country to start upping its game in supplying the growing Chinese consumer market. Botswana is cattle country – population estimates say that there are more cows than people there – and in October it is due to start exporting beef to Chinese markets. The state-run Botswana Meat Commission, which oversees slaughtering and export for the industry, is leading the diversification effort. Other countries are seeking to build export links with Chinese customers, and to go beyond raw materials. The Rwandan government is working with China’s Alibaba to send Rwandan coffee to China. Sandrine Urujeni, deputy chief executive of Rwanda’s National Agricultural Export Development Board told reporters in January: “It is a great opportunity that [the] Chinese embassy is promoting our roasted coffee in China. It is our vision to export coffee with value addition.”

MINT IMAGES/REX FEATU/REX/SIPA

TRADE

‘Our kids [...] are dying like flies here’ The South African sugar producer is set to take an important step in its recovery in October by publishing its financial reports. After an accounting scandal rocked the firm in April, it lost 85% of its share price and suspended trading.

RUSSIAN ACTIVITY IN AFRICA

SHAFIEK FAURE a resident of South Africa’s Cape Flats, told reporters July’s army intervention was necessary as the police had lost control in the face of gang violence.

The army will stay until at least October.

ALGERIA

$4-7bn Egypt’s plans for eurobonds in the 2019-20 fiscal year according to finance minister Mohamed Maait.

The government will end its $12bn IMF bailout deal in October.

IMF/WORLD BANK MEETINGS Against the backdrop of the United States/China trade war and escalating concerns about global growth trends, many of the world’s central bankers and finance ministers will be in Washington DC on 14-20 October to discuss responses to the world’s economic challenges.

EGYPT

SUDAN CENTRAL AFRICAN REPUBLIC Russian security forces training troops

GUINEA Bauxite project GHANA NIGERIA

SOURCES: FT RESEARCH, SIPRI

ANGOLA Supplying national satellite system Major Russian arms importer Oil project

BOTSWANA

Nuclear research project Diamond project

24

THEAFRICAREPORT / N° 109 / OCTOBER-NOVEMBER-DECEMBER 2019

RWANDA ZAMBIA MOZAMBIQUE ZIMBABWE Platinum project

SOUTH AFRICA Nickel project

DIPLOMACY

Moscow launches its first Africa summit President Vladimir Putin’s government is focusing its interest on the African continent, and the Russian city of Sochi will host the inaugural Russia-Africa Summit on 24 October. Economic deals and security will be high on the agenda, with Russia taking a more robust role in places where the West is paying less attention, like the Central African Republic, Sudan, Libya and the Horn of Africa.

Q4

/ NOVEMBER ‘The realisation of the visa regime will literally allow us to double our tourism numbers THULANI MAVUSO

SOUTH SUDAN

Salva Kiir (R) and Riek Machar (L) are in no hurry to form a government

ALBERT GONZALEZ FARRAN/AFP

Home affairs acting director-general Thulani Mavuso on South Africa’s eVisa programme, which launches in November 2019. The online system will make it easier to visit the country.

96m

The number of souls who would would join the East African Community if Somalia (pop: 15 million) and the DRC (pop: 81 million) are accepted; they would be the first new members since South Sudan in 2016. The regional grouping celebrates its 20th anniversary on 30 November against the backdrop of big questions about its future.

Plodding towards peace?

26

THEAFRICAREPORT / N° 109 / OCTOBER-NOVEMBER-DECEMBER 2019

BRAZIL

Building fruitful ties SOURCE: BRAZIL’S MINISTRY OF INDUSTRY, FOREIGN TRADE AND SERVICES

A government of national unity is due to be inaugurated in South Sudan by 12 November under a peace deal signed in late 2018. A problem is that neither side is so keen to see it through. The accord resurrects the government that led to post-independence strife, headed by President Salva Kiir, with former rebel leader Riek Machar as his deputy. They failed to meet the 12 May deadline to form the government and may miss this one too. Salva previously said that the sides may need until 12 May of 2020 in order to achieve the nearly 60 tasks enshrined in the peace deal before a new government can be formed.

Issues such as security and territorial administration remain stumbling blocks. The government is struggling to pay civil-service salaries and has consequently been slow to follow through on its commitments to finance the cantonment of troops and create unified national armed forces. Machar says concerns about security are one reason why he has not returned to the country.

Salva and Riek also disagree about how many states the country should have. South Sudan reached independence in 2011 with 10 states and Salva increased them to 28 in 2015 and 32 in 2017. A border commission is supposed to rule on the issue but is in a deadlock and says that a political decision must be taken on the issue because it is not a technocratic matter.

Both sides accuse each other of bad faith. For example, the government agreed in the deal to the creation of a hybrid court to try those accused of war crimes; it has since hired lobbyists in Washington DC with the goal of countering US pressure for the court. Meanwhile, the government accuses Machar of disingeniousness, saying that by refusing to return to South Sudan he is playing for time while seeking support to strengthen his hand. Mediators worry that with so little trust between the parties a unity government may not last long – if indeed it is eventually set up.

More high-level diplomacy will be demanded of Africa’s leaders in the months ahead. With trade ties lagging, the Brasilia government is organising the Brazil-Africa Forum on 12-13 November to focus on projects related to agriculture and food security.

BRAZIL-AFRICA TRADE (billion $) 30 25 20 15 10 2010

2012

2014

2016

2018

Q4

/ NOVEMBER

$250m

THE-SOLE-ADVENTURER

Amount raised by Nigeria’s fintech sector between 2014 and late 2018. The sector (see page 134) is the focus of Nigeria Fintech Week in Lagos from 28 October to 1 November.

ART

Lagos, burgeoning art capital Founded by Tokini Peterside in 2016, the Art X Lagos fair will highlight the bright lights of the Nigerian and African art scenes on 1-3 November. It targets both the Lagos glitterati and the masses, with VIP events and interactive projects.

This year 26 galleries will exhibit, up from 18 last year. Amidst the expansion, there will also be a focus on 20th-century modern and performance art.

BOOKS

Nigerian-British writer Irenosen Okojie’s “weird, wild, dissident” (her own words) collection of short stories, Nudibranch, is due out on shelves in November.

‘SAPZs have the potential of attracting about $1bn from the AfDB’ KAYODE FAYEMI The governor of Nigeria’s Ekiti State on the benefits of Special Agro-Processing Zones – to be discussed at the Nigeria Governors’ Forum on 5-7 November.

SOUTH AFRICA

Courting controversy DEAAN VIVIER/FOTO24/GALLO IMAGES/GETTY IMAGE

EFF leader Julius Malema is continuing his strategy of political provocation and will be back in court in November.

He has been a vocal supporter of land reform, and helped push the government to the left on the issue. The National Prosecuting Authority is now trying him in Bloemfontein under the apartheid-era Riotous Assemblies Act for telling his comrades to seize vacant land in 2014, which he is challenging in the Constitutional Court.

28

THEAFRICAREPORT / N° 109 / OCTOBER-NOVEMBER-DECEMBER 2019

Q4

/ NOVEMBER ‘[Manipulation] must not rear its ugly head in the Kogi and Bayelsa elections’ IDAYAT HASSAN

ALL RIGHTS RESERVED

In a damning report in August the director of the Centre for Democracy and Development dubbed Nigeria’s 2019 election collation the “most chaotic” ever. November’s governorship election re-runs will be a test for INEC.

INNOVATION

INVESTMENT

South Africa sets out its stall with brighter wares

Building blocks

After raking in $20bn in investment commitments at the inaugural South Africa Investment Conference last year, President Cyril Ramaphosa and his government will be at it again for a second instalment from 5-7 November. South Africa is the continent’s largest economy, but growth has been slow since the recent collapse in commodity prices.

The International Monetary Fund predicts it will record growth of just 1.2% this year.

Investors are worried about the current state of the government’s finances – especially the health of electricity utility Eskom and the country’s creditworthiness – and have been slow to follow through on promises to invest.

By August 2019, just R35bn ($2.3bn) of the projects discussed at the first investment conference had been launched.

In order to win over the holdouts and go-slowers, Ramaphosa’s government is expected to talk up wider reforms to the business environment, while seeking to get more money for projects in manufacturing and processing the country’s raw materials.

Rwanda’s Kigali Innovation City, backed with investments from the government and the Africa50 fund, will take a big step forward in November when the US-based Carnegie Mellon University opens its new campus there. Offering degrees in information technology and engineering, Carnegie Mellon will help Rwanda provide the human resources for its ICT-focused growth goals.

Education in Rwanda is attracting more investment and, since 2013, Kigali is also home to Kepler, a non-governmental organisation that uses massive open online courses and other tools to help provide students with the skills needed for the growing Rwandan and East African economies.

‘This year’s theme highlights the importance of sustainable development as an engine and catalyst for economic and social progress in Africa’

4MW

The expected capacity of a floating solar power plant for which the Seychelles plans to award a contract in November. Floating solar power is a solution that offers hope to smaller island countries that lack the land for terrestrial projects.

30

RENEWABLES Construction of a 30MW solar plant at Mwale Medical and Technology City in western Kenya is due to begin in November and be completed before the end of 2020.

THEAFRICAREPORT / N° 109 / OCTOBER-NOVEMBER-DECEMBER 2019

RICK BAJORNAS/UN

HAMAD BUAMIM The President of the Dubai Chamber of Commerce sets the tone for the Global Business Forum on Africa, which the country hosts on 18-19 November.

The theme of ‘Scale Up Africa’ includes a focus on startups.

Q4

/ DECEMBER

1,400MWh

JUAN HERRERO

South Africa has launched an ambitious battery storage programme to back up its renewable energy projects, the first 800MWh phase of which should be completed in December.

The project has AfDB and World Bank financing.

INVESTMENT

Tech on tour

‘The Tanzanian government, […] with the Burundian government, wants to bring us back home by force’ RENOVAT NDUWAYO

Global investor interest is growing in Africa’s tech space. The Africa Future Summit is organising a tour of the tech ecosystem of 10 African countries, which will be capped by the Ghana Tech Summit on 13 December. Africa Future Week will be held from 16-20 September in New York and then trips will be organised from October to December to hit the highlights of the tech hubs housed in Cape Town, Nairobi, Cairo, Lagos and other major African cities.

a Burundian refugee, on the pact to send all Burundian refugees back before the end of the year, despite concerns about security.

AGRIBUSINESS LIBERIA

As a sign that the big land deals signed in many African countries are falling out of favour, Malaysia’s palm-oil giant Sime Darby is preparing to step away from its 63-year deal for 220,000ha in Liberia that was signed in 2009. Factors in its decision to sell off its stake by the end of 2019 include the Ebola crisis, pressure from environmental groups and rounds of new government regulations on the agribusiness sector. The company’s withdrawal will hit western Liberia hard – the company employed over 1,700 workers and contributed $1.2m a month to the economy through taxes, purchasing, etc.

‘[The] NNPC is intensifying efforts towards the rehabilitation of the refineries to meet [the] December 2019 target of ending fuel importation’ NNPC OPERATIONS AND FINANCIAL REPORT, SEPT. 2018 The Nigerian National Petroleum Corporation is vastly optimistic about its ability to improve its ageing refinery infrastructure. The NNPC infrastructure would compete with Aliko Dangote’s new plant (see page 88).

32

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GREEN ENERGY Egypt is making a huge commitment to renewable energy with its 1.6GW Western Desert solar park, which should be operational before the end of the year with an estimated cost of $2bn. The government’s goal is to take renewable energy from 3% to 40% by 2035.

APPOINTMENTS

MCEBISI JONAS The well-regarded former deputy finance minister will take over as chairman of South Africa’s MTN Group in December.

He is part of a raft of new senior officials at the telecom giant (see page 142).

MIKE HUTCHINGS/REUTERS

Surrender for Sime Darby

GIVING WASTEWATER A SECOND LIFE The Namibian capital Windhoek has become the first city in the world to produce drinking water directly from the city’s wastewater.

Thanks to Veolia, the new plant provides 35% of the greater city’s drinking water, supplying water to almost 300,000 people with its daily treatment capacity of 21,000 m3 and its state-of-the art treatment process.

Q4

/ DECEMBER

ZIMBABWE

ZIMBABWE TAX REVENUE Percentage of GDP

Austerity bites

Others taxes Fuel excise Electronic transactions tax 20

The Harare government’s mixed messages on the economy continue as it prepares to launch a new local currency before the end of the year.

Overspending and the lack of capital inflows have hurt the indebted Zimbabwean government, which has been using foreign currencies like the US dollar since its most recent bout of hyperinflation in 2009. In July, President Emmerson Mnangagwa argued: “A country cannot develop using another nation’s currency.” But the previous month inflation had hit 175%, suggesting that a planned new currency might rapidly decline in value due to the lack of confidence in the economy. The government owes about $2bn to international lenders like the World Bank and the African Development Bank. They will not consider new lending until the arrears are paid off. Finance minister Mthuli Ncube says that talks with those financiers are not due to take place until early 2020.

2019 projections 15

10

5

0

ZIMBABWE: SOVEREIGN, CURRENCY AND BANKING SECTOR RISK SCORES 86

Sovereign

Currency

2014

2015

2016

2017

Budget

SMP

A WORSENING FISCAL POSITION IN RECENT YEARS...

Fiscal deficit (percentage of GDP)

Banking Sector

84

0

2014

2015

2016

2017

2018

82 -2

80 78

-4

76 -6

74 SOURCES: EIU, IMF

72

-8

70 -10

68 Nov 2015

Feb 16

Aug

Nov

Apr 17

Jul

Oct

Apr 18

Jul

Oct

Apr 19

Jul -12

MUSIC

Afro Nation in Accra ANDRE MACHADO/MAI MAGAZINE

After the first Afro Nation Festival in Portugal’s Algarve this summer, West Africa’s favourite musicians – including Davido (see page 68), Alkaline, Burna Boy, Shatta Wale, Stonebwoy and Wizkid – come together again for the home crowd at Afro Nation Ghana on Accra’s Laboma Beach from 27-30 December, just in time to warm up for New Year’s Eve.

34

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/ DECEMBER

SMOKING DOGS FILMS.2

Q4

ART

Telling what was untold Ghanaian-British artist John Akomfrah’s Mimesis: African Soldier multiscreen installation will be at the New Art Exchange in Nottingham, UK, until 31 December 2019. Describing his interest in the Africans who participated in the First World War, he said his focus is on “honouring the untold sacrifices made by the many thousands of soldiers, labourers and carriers from a colonised Africa”.

COP25 CLIMATE SUMMIT IN CHILE Climate change’s huge impact on Africa will be on the ageda at the next UN conference on the subject in Chile in December. Here are a list of some of the biggest funding commitments to the continent from the Green Climate Fund’s $2.2bn in finance for Africa:

2m

The number of unqualified teachers in Nigeria, according to an estimate by the Nigeria Union of Teachers. The government plans to enforce licensing regulations from 31 December that could see them lose their jobs.

$1.4bn

BOOKS The second book in the ‘Legacy of Orïsha’ trilogy by Nigeria’s Tomi Adeyemi is due out on 3 December.

Her first book, Children of Blood and Bone, debuted at number 1 on the New York Times Young Adult Hardcover bestseller list. 20th Century Fox has bought the rights to turn the magical fantasy stories delving into West African myth and identity into films.

36

The GCF-EBRD Sustainable Energy Financing Facilities provides funds to the private sector for transport, manufacturing and agriculture projects

$1bn

The Egypt Renewable Energy Financing Framework backs renewable energy projects.

$821.5m

Climate Investor One targets 11 African countries with blended finance for green energy developments.

THEAFRICAREPORT / N° 109 / OCTOBER-NOVEMBER-DECEMBER 2019

GHANA Ghanaians will vote on 17 December in a national referendum about instituting direct elections for metropolitan, municipal and district chief executives. If they vote yes, people will have more of a say in choosing their local officials.

TOTAL SERVICE STATION SEEN FROM THE SKY We are solarizing our 1000th station.

A significant milestone for Total’s commitment to solar energy and the plan to install solar panels in 5 000 service stations worldwide.

– Photo credit: JM Vives.

The total solar capacity to be installed is equivalent to the amount of electricity used to power a city of 125 000 people.

More information about this program on total.com

OPINION

THE BATTLE FOR CRYPTOCURRENCY O UMEH ELO CEO and co-founder of Terragon Group

Facebook’s envisioned digital currency Libra continues to make headlines. Although Libra faces a clouded future, not helped by a mounting ‘techlash’ [public animosity to the Silicon Valley tech giants], Facebook has not let go of its ambitious vision for its digital currency: to bank the world’s hundreds of millions of people who lack access to financial services.

As Facebook looks to launch Libra, it will no doubt turn to emerging markets, and in particular to Africa. Bearer of the largest young population, and the most rapidly urbanising, a decade from today its working-age population will exceed 1 billion. Two-thirds of Africans are unbanked, excluded from the current financial system.

Facebook already has access to a large potential user base for Libra; it counts 139 million users per month, making it the most popular social network on the continent. Unlike in the US and Europe, where its popularity is waning, Facebook commands a trust premium among African users who use it to communicate and buy and sell goods and services.

Despite its strengths, Facebook’s Libra will likely face stiff competition.

Chinese companies have emerged as commercially astute operators in Africa and have succeeded in overcoming the region’s connectivity difficulties to access hard-to-reach consumers. They are building the

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platforms to offer financial services and could eventually branch out into digital currencies. To ensure Libra’s long-term success in African markets, Facebook needs to watch out for Chinese companies – unencumbered by regulation – which are expanding aggressively on the continent.

When Africans get online, it is largely via mobile phones. Chinese companies are supplying the lion’s share of devices (both smart and feature phones). In controlling the handset market, Chinese companies act as a gatekeeper in getting Africans online and use devices as a distribution and marketing channel for new services. Transsion, the largest handset manufacturer in Africa, dominating 33% of the smartphone

To gain control of its African user base, Facebook may have to make handsets

THEAFRICAREPORT / N° 109 / OCTOBER-NOVEMBER-DECEMBER 2019

and 60% of the feature phone market, supplies its phones with its own pre-installed apps. For example, it has diversified into music streaming with its app Boomplay attracting 50 million users in three years. In a sign of its future ambitions, Transsion recently partnered with Kenyan fintech Wapi Capital to identify and back early-stage fintechs on the continent. With its dominant position in hardware, Transsion can charge other developers to host apps and can ultimately choose the content on its handsets. Such a strategy – using a hardware “moat” to double down on services – is reminiscent of Apple, which uses the iPhone’s dominant 39% market share in the US to pivot to services via its App Store. If Transsion were to follow what Apple’s competitors allege is monopolistic behavior, Libra could face difficulties in accessing African consumers.

Chinese companies also bring a wealth of experience in cashless payments that would serve as a competitive advantage should they ever launch a digital currency in sub-Saharan Africa. In China, Tencent’s WeChat and Alipay – owned by Alibaba – dominate the economic landscape so completely that cashless payments in yuan are the default means of exchange, 50 times larger than the comparable market in the US. Libra could upend global financial services, in particular bringing the world’s unbanked population into formal markets. But, in African markets, which needs to boost financial inclusion, Libra risks being eclipsed

by Chinese companies with strong market share and effective distribution channels. To stave off competitors and gain control of its African user base, Facebook might have to explore making its own handsets. But Libra could die a premature death if a harsher US regulatory trend takes hold, making a showdown between it and a Chinese competitor in Africa a moot point.

For more see www.theafricareport.com

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Features

40 PROFILE Team Ramaphosa After the initial euphoria, critics now say Cyril Ramaphosa does not have the foot soldiers to govern effectively. In the face of popular protests and factionalism in the ANC who can he count on to help rebuild South Africa?

52 INVESTIGATION Kenya, the world’s fintech lab With Kenya having become a world leader in mobile-money and fintech innovations, The Africa Report takes a look at what is moving fast and what is broken

60 WIDE ANGLE Keeping it together Ethiopia’s ongoing liberalisation and ethnic federalism are creating a combustible situation as ethnic groups seek more autonomy

68 CULTURE Nigeria’s musical moment Nigerian musicians have hit global stardom. Behind the VIP-studded parties and signings with major labels is the 110% Naija ecosystem that got them there

THEAFRICAREPORT / N° 109 / OCTOBER-NOVEMBER-DECEMBER 2019

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FEATURES /

TEAM RA

PROFILE

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THEAFRICAREPORT / N° 109 / OCTOBER-NOVEMBER-DECEMBER 2019

GIANLUIGI GUERCIA/AFP

Past ANC leaders have quickly asserted their authority. President Cyril Ramaphosa – who prefers a more consultative style – is having a rougher time. If he is to succeed in fixing South Africa’s problems, his key ministers and officials need to know that he has their backs

Surfing a wave of support: Ramaphosa just before the elections in May 2019

MAPHOSA

By CRYSTAL ORDERSON in Cape Town and MARSHALL VAN VALEN THEAFRICAREPORT / N° 109 / OCTOBER-NOVEMBER-DECEMBER 2019

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FEATURES / PROFILE / Team Ramaphosa

ENTER THE CYRIL SPHERE Ramaphosa’s closest advisers and trusted allies reflect his chameleonic past: from UDF comrades of South Africa’s struggle to business associates, and from Mbeki-era ministers to Zuma-era corruption-busters TREVOR MANUEL

The early September World Economic Forum (WEF) was meant to be President Cyril Ramaphosa’s big moment: addressing African peers and global business to ramp up the investment drive so desperately needed.

South Africa had different ideas: xenophobic attacks and protests against an upsurge of violence towards women in the country grabbed centre stage.

“Where is the President?” went up the cry. It took more than 24 hours to get a response from him. To many people’s surprise, Ramaphosa cancelled his WEF address and sent finance minister Tito Mboweni in his stead. Protesters refused to sing the national anthem, chanting “Enough is enough!” and singing the struggle song ‘Senzeni Na’? (‘What have we done?’).

‘Ramaphoria’ – the term coined when Ramaphosa took office in 2018 – was shortlived. Many saw in Ramaphosa’s background as a union leader, business leader and constitutional negotiator (TAR107) the skills needed to turn the country around quickly from the rot promoted under the leadership of former president Jacob Zuma.

So who is in his corner? Who are the women and men who are driving his agenda? And when will they finally be able to get to work?

Right now Ramaphosa’s crisis-management teams have their jobs cut out for them. In late

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UN PHOTO/ESKINDER DEBEBE; ZHAI JIANLAN/XINHUA-REA; LINKEDIN; TWITTER (2);ZHAI JIANLAN/XINHUA-REA; GETTY

THOKO DIDIZA Agriculture, land reform, rural development This old ally, who was minister of agriculture under Thabo Mbeki, has one of the hottest political potatoes on her brief – land reform.

PRAVIN GORDHAN Public enterprise A redoubtable force against Zuma’s cronyism, Godhan’s UDF days and work building South Africa’s tax authority make him a natural fit with Ramaphosa.

Former minister of finance Known to Ramaphosa from their UDF days organising against apartheid from within South Africa, Manuel is also a big symbol of the Thabo Mbeki days that preceded Zuma.

INNER CIRCLE

JACKSON MTHEMBU

Minister in the presidency The stand that Mthembu took against corruption in the ANC – eventually pushing for a hearing on state capture – endeared him to Ramaphosa.

Minister of international relations One of Ramaphosa trusted cabinet ministers, Pandor has brought an intellectual vigour to the department.

While a supporter, she is not scared to disagree with him.

STEYN SPEED Political adviser to the President Though he keeps a low profile, Speed is one of Ramaphosa’s most trusted lieutenants. He was head of comms at Shanduka.

MARION SPARG ANC activist A former MK soldier and political prisoner, Sparg was the strategist for the CR17 campaign, and worked alongside Ramaphosa writing the constitution.

August, the CR17 scandal erupted about leaked emails from Ramaphosa’s campaign for the African National Congress (ANC) leadership in 2017. While the economy convulses – with an all-time high unemployment rate of one in three people without a job and the mismanagement of parastatals like South African Airways and Eskom being felt every day – South Africans got to see the millions of rand Ramaphosa had spent and received. Leaked bank statements

THEAFRICAREPORT / N° 109 / OCTOBER-NOVEMBER-DECEMBER 2019

NALEDI PANDOR

MCEBISI JONAS Former deputy finance minister

SIBONGILE BESANI Head of the ANC presidency

The man who refused to be bribed by the Gupta brothers, and close to Pravin during his time at the Treasury, is a stalwart for Ramaphosa in the Eastern Cape.

Besani is Ramaphosa’s right-hand man.

He supports the president in fulfilling his duties and staying true to the values of the ANC party.

SOLLY MAPAILA Deputy Sec-Gen, SACP A virulent corruption critic, Mapaila was threatened by Zuma’s acolytes for denouncing the former president. He will not stay silent if he sees no change.

ENOCH GODONGWANA ANC economic policy guru

PEMMY MAJODINA

Godongwana has been the ANC's head of economic transformation for the past decade, a crucial ally for Ramaphosa on questions like the mandate of the Reserve Bank.

ANC chief whip at Parliament Well-known for her flamboyant personality, Majodina is a long-time member of the ANC party. Like Ramaphosa, she is an advocate for increased MP voting discipline.

ANC

Eastern Cape provincial chairperson

Former justice and correctional service deputy minister, Nel has been praised

by ANC veterans for his work with the national working committee and the NEC.

Mabuyane was elected as the provincial ANC chairperson in 2017 with an overwhelming majority. He supported Ramaphosa during his presidential campaign and is considered a close ally.

ZAMANI SAUL Northern Cape provincial chairperson Former provincial secretary for the ANC, Saul endorsed Ramaphosa during his campaign in 2017. Since then, he has been known for his fierce protests against personal spending amongst MPs.

SENZO MCHUNU Minister of public service and KZN ANC member After fiercely opposing Jacob Zuma and his “loose ethics” in 2018, Mchunu emerged as one of Ramaphosa’s strongest supporters in Zuma base Kwa-Zulu Natal.

COLIN COLEMAN

IRENE CHARNLEY

Goldman Sachs CEO for SSA

Smile Telecom CEO

Having met Ramaphosa in his student leader days in the 1980s, Coleman is a staunch centrist supporter of the president’s ‘third way’-style marriage of free markets and social justice.

Charnley knows the president from her days at mobile giant MTN, where Ramaphosa was chairman from 2002 to 2013.

BUSINESS CHERYL CAROLUS Former Gold Fields chair A former ANC cadre, Carolus is an old friend of Ramaphosa from the struggle and constitution-writing days.

detailed donations from the prison services provider Bosasa (implicated in the state capture probed by the Zondo Commission) and payments to a host of cabinet ministers including Khumbudzo Ntshavheni, Fikile Mbalula and deputy minister Zizi Kodwa. Ramaphosa had promised a “new dawn” but things quickly took on an air of business as usual.

These moments also fuel intra-ANC rivalries, just at the moment where Ramaphosa and

MARIA RAMOS Former Absa CEO, now on the board of the Public Investment Corporation Another UDF struggle ally, Ramos (partner to Trevor Manuel) is also strongly identified with Thabo Mbeki technocracy, and has deep financial and state-run-company experience.

ALL RIGTS RESERVED (2); LINKEDIN; PETER MCKENZIE/WWF-CANON

Deputy minister for cooperative governance and traditional affairs

OSCAR MABUYANE

OECD; TWITTER (3); ANC; PA.ORG.ZA; FACEBOOK (3)

ANDRIES NEL

his allies need to keep the governing party together and ensure that secretary general Ace Magashule does not plan a move against him at the 2020 National General Council. There is no doubt that Ramaphosa is under tremendous pressure, not only on the economic front but in politics too.

After the CR17 crisis broke out, a confident Ramaphosa addressed parliament for his quarterly question-and-answer session. Ramaphosa

THEAFRICAREPORT / N° 109 / OCTOBER-NOVEMBER-DECEMBER 2019

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was forthright and to the point, answering some hard questions on the funding scandal and on the state of the economy. He said: “Unemployment is the single biggest risk the country is facing – particularly amongst young people. Businesses are now panel-beating various job proposals. We have to move much faster and quicker. It’s a national challenge.

We all need to work together to address it. It’s a major, major risk.”

Listening intently were key cabinet ministers and allies like international relations minister Naledi Pandor, minister in the presidency Jackson Mthembu and deputy minister for state security Zizi Kodwa. Compared to Zuma’s backers this may seem a thin crew.

Factions running deep

Throughout Jacob Zuma’s tenure as president, his supporters were a force to be reckoned with. Even during his testimony at the Zondo Commission into state capture, former ministers Malusi Gigaba, Des van Rooyen and Mosebenzi Zwane, and Umkhonto we Sizwe chairperson Kebby Maphatsoe, were there to back Zuma, to name but a few.

This imbalance has led Ramaphosa critics to say he lacks a strong constituency, which has made governing difficult. Former ANC member of parliament and ambassador to Ireland Melanie Verwoerd tells The Africa Report: “I do not buy that […]. What we know is factionalism is very deep, and I feel at times his supporters are less vocal than Jacob Zuma supporters. And I am not always sure how they organise the fightback in the Ramaphosa camp, or whether they’re just focusing on governing.”

Former senior Congress of South African Trade Unions executive Tony Ehrenreich is also fighting Ramaphosa’s corner. “He is clearly the only one that can take the country forward.

No one else has the trust – half of the ANC is discredited and fighting factional battles. He is the only one in the country standing between us and a bailout from the IMF.” Ehrenreich also credits Ramaphosa’s choice of team members. In the ministerial appointments announced in May, Ramaphosa had a free hand on two choices, with the rest agreed on with the ANC leadership. He picked the GOOD party’s Patricia de Lille to be public works minister (see box) and Ebrahim Patel to be minister for trade and industry. Ehrenreich tells The Africa Report: “I have seen countries

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Patricia de Lille was one of two ministers chosen by CR himself

PATRICIA DE LILLE Stoking the flame of hope The surprise appointment as public works and infrastructure minister of Patricia de Lille – who is also the only non-ANC member in cabinet – took even De Lille by surprise. The former DA Cape Town mayor has known Ramaphosa for more than 30 years and believes the naysayers must stop and focus on rebuilding SA Inc. De Lille says she believes the Ramaphosa cabinet wants to improve delivery on all fronts.

De Lille tells The Africa Report that she believes Ramaphosa “has restored confidence as a leader and he has generated hope. Considering that we were on the verge of a cliff, with him being elected as president the flame of hope started burning again. And we should not let that flame of hope go down. […] But that’s what makes it so interesting, because in every mess there are always opportunities.”

She adds: “I agree with the president that there’s no more time for new policies, debates and discussions. We should just be talking about implementing. And you know, for us as ministers, he gave us a format of how he wants us to report. Who, what, when, where. Practical details and your budget, because you need a budget to implement. We’re signing performance agreements at the end of September.”

She concludes that political changes are also needed to get South Africa out of its rut. “The political ground is also shifting in a way that lets us acknowledge we can come from different backgrounds and ideologies, but we have to rise above it for the sake of the country. And I hear even many opposition parties in parliament are also saying we must do it together.”

going to war because of the tensions. And Ramaphosa is measured. He has some good ministers, like Ebrahim Patel in trade and industry. There are clear plans and actions […]. You have competent people with no greed and the focus is on people.”

The consensual style also jars with the political culture of the past. The author of Ramaphosa’s Turn, Ralph Mathekga, tells The Africa Report: “The ANC is a traditionalist party – it thrives on authority. [People] are asking, where is the authority? [...] With CR, we have a different approach to leadership. He might not be aware. He comes from the United Democratic Front, the movement [where] no one knew who was the leader.”

THEAFRICAREPORT / N° 109 / OCTOBER-NOVEMBER-DECEMBER 2019

SIPHIWE SIBEKO/REUTERS

FEATURES / PROFILE / Team Ramaphosa

At the crossroads of Africa, Asia and the Arab World

The future is on the move

A diversified economy A regional logistics and transport hub International standard infrastructure and services New tourism opportunities

A home port for investors

Š V. FOURNIER for J.A. - and DR

An environment conducive to innovation

FEATURES / PROFILE / Team Ramaphosa

WERNER HILLS/FOTO 24/GALLO IMAGES VIA GETTY IMAGES

Mcebisi Jonas: ‘Remember the lessons of the unions’

MCEBISI JONAS Don’t look for heroes A strong voice for reform and focusing on people rather than the party, incoming MTN chairman and former deputy finance minister Mcebisi Jonas is a strong voice in the caucus for change. He has some advice for Ramaphosa: “The President must utilise the skills he learnt when he was with the trade unions and during the negotiations to build consensus.

He needs to move the debate along and we as a nation must up our game.” In

order to boost growth and job creation, Jonas argues that the administration must focus on reforming state-owned companies, education and labour laws.

Promoting his new book After Dawn: Hope After State Capture in Cape Town, he delivered some cutting conclusions: “We are in a broad crisis of leadership across society.” He continued: “You ask yourself: ‘Where are we taking the country at a critical moment where you

Ramaphosa’s past is significant, of course, and will be for as long as the his generation is still around. Unlike Zuma and many of Zuma’s supporters he was in ‘inzile’ – mobilising civil disobedience from within rather than planning armed struggle from exile.

Many of Ramaphosa’s trusted allies share this history – Trevor Manuel, Pravin Gordhan and Maria Ramos to name but three.

Parliamentary division

While intra-ANC rivalries are less visible in cabinet, they are on display in the ANC’s choice of parliamentarians. Secretary-general Magashule had a key role in appointing people like Zuma supporter Zwane, ousted North West premier Supra Mahumapelo and disgraced communications minister Faith Muthambi.

Mthembu used to be Ramaphosa’s enforcer in parliament as chief whip. Now parliamentary speaker Thandi Modise has stepped into the enforcer’s role, challenging public protector Busisiwe Mkhwebane as she targets Ramaphosa and his appointees.

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needed a stronger message of what we want to do and where we going?’

We might not get the heroes now.”

Though a loyal ANC cadre, Jonas called on people to look beyond ‘politics as usual’: “I think we need to break out of the entrapment of party politics and realise citizens are a powerful force. […] I can assure you politicians and parties [...] will always take advantage of the problems and […] pretend to champion change. We have to find new ways of social agency in the country.”

Asked about finance minister Tito Mboweni’s economic policy plans, Jonas said that top-down solutions are unlikely to work: “We need a new national agenda and a plan that is a common vision as the nation that binds us – if we don’t do that we are in a chronic state of decline and we will have social and political disruptions from those that are excluded.” As a final call to arms to implement new and grounded economic and other policies, Jonas warned: “History will judge us so badly, so very badly, if we do not do anything.”

Zuma’s people are still a force to be reckoned with at the grassroots of the ANC. An ANC MP says: “Importantly, some [of Ramaphosa’s key people] are not rooted in their branches.

This means they are not on the ground to hear what ANC branches are saying. If you do not do that, then there will be problems.”

Another senior ANC member adds: “We as ANC members feel CR is too reliant on outside opinions, especially from business.

This means he is not listening to what the rumblings are within the ANC, and that means he does not have the foot soldiers needed when he is attacked.”

It can sometimes feel like Ramaphosa would rather not have the political fight, but would prefer to concentrate on business. He regularly turns to his wider pool of friends from the business world for advice and to help overhaul state-run institutions. Former Absa head Maria Ramos and Smile Telecoms chief executive Irene Charnley, who worked with Ramaphosa during his MTN days, have been brought in to the Public Investment Corporation’s board

THEAFRICAREPORT / N° 109 / OCTOBER-NOVEMBER-DECEMBER 2019

He regularly turns to friends from the business world for advice

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to oversee its clean-up after the ousting of former PIC chief executive Daniel Matjila.

Political analyst William Gumede says that white English-speaking business leaders like former Bidvest CEO Brian Joffe, Discovery CEO Adrian Gore and Investec CEO Stephen Koseff are close to Ramaphosa. An insider who requested anonymity adds: “There is also so much arrogance in the private sector. When I hear how they talk and around economic issues, they know they have the ear of the President.”

Outside of government, politician Roelf Meyer is one of Ramaphosa’s trusted advisers.

He keeps a low profile but when it comes to key policy issues Ramaphosa calls on him – as with the land expropriation debate, where Meyer was dispatched to speak to key business and farm owners. Their relationship dates back to the negotiating of the constitution in the 1990s.

Mining ambiguity

Given his history, Ramaphosa has deep connections to the mining and energy sectors. But James Motlatsi, who came up with Ramaphosa in the National Union of Mineworkers, protests he does not have the president’s ear. “We have been working together since 1982,” he told eNCA. “We are friends, but I am not his adviser!” Motlatsi oversaw the fundraising for Ramaphosa’s election campaign.

Billionaire mining magnate Patrice Motsepe, however, is close – he is Ramaphosa’s brotherin-law. Eyebrows were raised when Motsepe was seen accompanying the President on an official trip to Saudi Arabia and the Middle

Though several women have claimed that Jacob Zuma tried to rape them, it is on the watch of his successor Cyril Ramaphosa that women’s anger against a wider rape culture has exploded into street protests

Team CR has been slow to come up with detailed plans for change

East. Also along for the ride was Jeff Radebe, a long-serving minister and Ramaphosa confidant who is married to Bridgette Radebe – the older sister of Ramaphosa’s wife, Dr Tshepo Motsepe, and herself active in the mining sector.

Other than challenges like fighting corruption, turning around ailing parastatals and improving the economy, Ramaphosa and his team have been slow to come up with detailed

THE THREE MAIN CHALLENGES CORRUPTION Much of the responsibility for ensuring that those targeted in the ‘state capture’ probes face justice falls to National Prosecuting Authority boss Shamila Batohi. Appointed by Ramaphosa in December 2018 to replace Shaun Abrahams, a Zuma appointee, she cut her teeth as director of public prosecutions for KwaZulu-Natal and was an adviser to the prosecutor of the International Criminal Court. Managing expectations about how quickly and methodically she will proceed, in September she said: “People need to understand that there’s a difference between testifying at the inquiry and getting a watertight case to charge people.” She also says the NPA needs more funds and human resources to do its job properly.

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THEAFRICAREPORT / N° 109 / OCTOBER-NOVEMBER-DECEMBER 2019

THE ECONOMY South Africa’s economic woes are so widespread that that there is plenty of work for finance minister Tito Mboweni, public enterprises minister Pravin Gordhan and trade and industry minister Ebrahim Patel. Mboweni is on the frontline trying to protect South Africa’s credit rating while Gordhan is overseeing troubled parastatals like South African Airways.

Splitting up Eskom and getting the electricity utility on firmer footing could help to convince investors that the government is serious about problem-solving. Patel, who has more of a statist bent, wants to see the government play a stronger role in supporting economic transformation and is calling for new ways of implementing Black Economic Empowerment policies.

main economic team members favour neoliberal economics.

After Mboweni’s Treasury published a framework for South Africa’s economic transformation in September, the South African Communist Party (SACP) – part of the governing tripartite alliance – came out guns blazing for Mboweni. The SACP’s Blade Nzimande panned the plan to the media: “It’s a one-sided call for the poor and the working class to make sacrifices, without saying what sacrifices it’s expecting from the rich.”

GUILLEM SARTORIO/AFP

The Mbeki crowd

plans about what they want to change in South Africa. With the first few big programmes announced, the reception has not been very warm, even amongst factions on Ramaphosa’s side.

Finance minister Mboweni is a lynchpin of Ramaphosa’s economic team and came back into government after last being Reserve Bank governor in 2009. While Julius Malema and the Economic Freedom Fighters have been outflanking the ANC on the left, Ramaphosa’s

A DIVIDED ANC Treasurer general Paul Mashatile is one of the friendliest faces toward Ramaphosa in the ANC’s ‘top six’. He helped to broker a deal to get David Mabuza – now deputy president – to side with Ramaphosa over Nkosazana Dlamini-Zuma at the December 2017 elective conference. Relations between Ramaphosa and ANC chairman Gwede Mantashe, who is also now mining minister, are not as bright these days. But Mantashe still has been tamping down rumours of internal ANC machinations that would threaten Ramaphosa’s political longevity. Ace Magashule, the ANC secretary general and former Free State premier, represents the Zuma faction’s interests, and deputy secretary general Jessie Duarte is a long-time Zuma backer.

Mathekga, the author, says that he finds it very interesting how Ramaphosa has brought back a lot of people that were prominent under former president Thabo Mbeki – himself a fiscal conservative – like Maria Ramos and former Reserve Bank governor Gill Marcus to lead the PIC probe. “It’s very interesting who he has been bringing. [...] The problem is that they were not as bad as JZ people, but when you bring them in you resuscitate the old guard because this is also making the Zuma people hardened.”

Not much is publicly known about Ramaphosa’s big ideological influences. He has the reputation for being a pragmatist and a keen negotiator. Those who know him say that religion shaped his worldview at an early age. He is an avid reader and often uses poetry – especially from the generation of struggle artists – in his pronouncements. He invoked Hugh Masekela’s ‘Thuma Mina’ lyrics in his first major State of Nation address and ended it by quoting from a poem by Nigerian writer Ben Okri: ‘Our future is greater than our past.’

Ramaphosa’s first term will be judged not so much by what he reads but by how he leads and how the teams he chooses are able to address the country’s biggest challenges on the ground (see left). That means finding ways to attract the investment needed to create jobs, provide quality and affordable education to the country’s young people, keep the lights on and balance the books so that the country does not go into debt that it will struggle to pay off. Ramaphosa will have to play the long game if he wants to shift the dial, as weeding out corruption and turning around huge loss-making state-owned enterprises take years of sustained effort that can easily be derailed by the day-to-day news cycle

THEAFRICAREPORT / N° 109 / OCTOBER-NOVEMBER-DECEMBER 2019

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CÔTE D’IVOIRE

From agriculture to agribusiness

@ NABIL ZORKOT / JA

National Development Plan (NDP). The objectives are still ambitious: increasing the sector’s growth to 9% per year, so that it stimulates the entire national economy while ensuring food security throughout the country; promoting the local processing of agricultural products and encouraging the building of an agro-industrial fabric, in order to create over two million jobs and thus reduce poverty.

≥ An oil palm plantation in Irobo, in the Lagoons region.

Since Côte d’Ivoire gained independence, the agricultural sector has been one of the main drivers of its economic growth. If we include forestry, hunting and fishing, as well as animal production, the primary sector as

a whole accounts for more than a quarter of national wealth creation each year. Therefore, when the government drew up the various development plans implemented since 2012 to set the country on the path to economic emergence, its consolidation and modernisation were made a priority. By processing its agricultural raw materials locally, Côte d’Ivoire intends to transform the entire structure of its economy, while creating much-needed jobs for its young people.

Côte d’Ivoire’s natural agricultural potential is unparalleled in the sub-region in terms of climate, water resources and arable land, with more than 13 million hectares of cultivable land still available. Already the world’s largest producer of cocoa beans and the second largest producer of cashew nuts, the country has been able to diversify its production and ranks among the leading African producers in some key sectors, from palm oil to rubber, cotton to coffee, and bananas to pineapples.

Major national plans With agriculture being so pivotal to Côte d’Ivoire’s economic growth, the sector and its stakeholders are benefiting from successive and complementary support and development plans. For example, the National Agricultural Investment Plan (PNIA), covering the period 2012-2015, was first updated, and then bolstered by the 2016-2020

©WICHITPONG

Agriculture has always been a mainstay of Côte d’Ivoire’s economy. It is an unparalleled source of employment and wealth for a country with enough arable land to sustain a primary sector of rare diversity in the sub-region. It is precisely to strengthen this role as the agricultural breadbasket of the Economic Community of West African States (ECOWAS) that the government has made the consolidation of the sector a key component of its 2016-2020 National Development Plan (NDP), with the objective of significantly improving the processing rate of agricultural raw materials.

Unrivalled potential in the sub-region

≥ Côte d’Ivoire produces 800,000 tons of cashew nuts every year.

MESSAGE

INTERNATIONAL AGRICULTURE MEETS IN ABIDJAN From 22 November to 1 December, the fifth edition of theAbidjan InternationalAgricultural and Animal Resources Fair (SARA) will take place in Côte d’Ivoire’s economic capital, with France as the guest of honour. The theme of this year’s edition is intelligent agriculture and technological innovations. The event has become, in the space of a few years, an essential rendezvous on the continent for the various sector stakeholders, as well as an invaluable showcase for promoting the wealth of Côte d’Ivoire’s agricultural, livestock and fisheries sectors. As well as highlighting the significance of Côte d’Ivoire’s agriculture in the sub-region, the hosting of such an exhibition demonstrates the determination of the State to attract the capital and skills needed to modernise the sector and make it competitive on an international scale.

Processing as a growth factor

≥ A pineapple plantation in Koutrou.

d’Ivoire still only locally processes 10% of the 800,000 tons of cashew nuts produced every year. Given that the sector already employs nearly 250,000 people, mainly in the north of the country, the employment potential is therefore promising. This is a model to be replicated in other sectors in other production regions, so that the whole of Côte d’Ivoire can benefit from its tremendous agricultural potential.

FIGURES

26.9% Agriculture’s share of Côte d’Ivoire’s GDP. 40% Côte d’Ivoire’s share of world cocoa production.

46% The proportion of Côte d’Ivoire’s population working in agriculture.

62% Agricultural product share of Côte d’Ivoire’s exports,

excluding oil.

© MOUAHÉ / WIKIMEDIA.ORG

To create jobs and wealth, Côte d’Ivoire aims to add value to its cash crops by processing them prior to exporting them, especially its two most important sectors. Currently, 30% of cocoa beans are processed locally, which is still far from the 50% targeted in the NDP, but new tax incentives to motivate industrialists are soon to be introduced. Special attention is also being given to the cashew nut sector because, despitebeingthelargestproducerinAfrica,Côte

© D.R.

Subsistence farming, comprising a wide variety of tubers and cereals, has also seen its volumes increase to such an extent that it is now able to cover overall nationwide needs.

This is not yet the case in the livestock sector which, despite its dynamic nature, does not produce enough to meet domestic demand for meat and milk. However, the country has the means to import the shortfall, due to its agricultural trade balance, which has been largely positive in recent years, in the wake of the steady increase in its export volumes.

≥ A team of maize shuckers in Ferkéssedougou (Ferké) in the north of Côte d’Ivoire. They transport the harvested maize from the fields to the cleaning machines and then, forming an assembly line, strip the leaves and kernels from cobs.

FEATURES /

Mobile, motivated and risk-taking: Kenya’s fintech generation

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THEAFRICAREPORT / N° 109 / OCTOBER-NOVEMBER-DECEMBER 2019

INVESTIGATION

Kenya, the world’s fintech lab ‘Move fast and break things’ is many a startup founder’s motto. With Kenya having become a world leader in mobile-money and fintech innovations, The Africa Report takes an exclusive look at what is moving fast and what is broken

NICHOLE SOBECKI/VII/REDUX-REA

By MORRIS KIRUGA in Nairobi

THEAFRICAREPORT / N° 109 / OCTOBER-NOVEMBER-DECEMBER 2019

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access to formal financial services had jumped from 75% to 83% in three years, largely on the back of fintech products. The 2016 study found that M-Pesa alone had increased per capita consumption and lifted 2% of Kenyan households out of poverty. The effects were more pronounced in female-headed households.

Regulation brings innovation

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The desire to enter the fintech market has trumped security

GLOBAL SPREAD OF REGISTERED MOBILE MONEY CUSTOMERS (December 2018)

1.4% Europe & Central Asia 5.6% ME/NA

3.1% Latin America & the Caribbean

THEAFRICAREPORT / N° 109 / OCTOBER-NOVEMBER-DECEMBER 2019

45.6% Sub-Saharan Africa

11.0% East Asia & Pacific

33.2% South Asia

SOURCE: GMSA

Fintech products undoubtedly present incredible opportunities for the economies they serve – market traders can get short-term loans to buy produce and banks are signing up customers at a break-neck pace. The main bone of contention though, as they replace micro-credit and other facilities, is whether they really are the panacea for poverty alleviation that some would have us believe.

As with microfinance before it, institutions such as the IMF and the World Bank have been urging poor countries to “embrace the promise of fintech”, even as policymakers struggle to catch up with the fast pace of innovation and the growing number of products in their jurisdictions. Kenya has been the continent’s most innovative country in that domain – it is home to Bitcoin miners, a vast startup ecosystem, and will soon be the site of a new, $500m Chinese-built tech hub. Here, The Africa Report takes a deep dive into the advantages and disadvantages of fintech experimentation in the East African nation.

As the world’s most successful fintech product, Kenya’s 12-year-old M-Pesa mobile-money platform has been the subject of multiple research studies on its impact on financial inclusion. The FinAccess survey by Kenya’s Central Bank and FSD Kenya released in April 2019 found that the proportion of Kenyans with

Regulation and incentives help to create an environment for innovation. Banks’ main sources of profit have been choked, not just by growing competition from hungry fintech startups, but also from stifling regulation.

After the interest-rate cap on commercial lending went into effect in 2016, commercial lenders redoubled their efforts to find new revenue streams. The obvious choice was mobile lending, which falls outside the rate cap. Participating in the fintech sector was no longer a choice but a priority, and it did not disappoint.

In August 2018, for example, Barclays Bank launched Timiza, a mobile-loan app. Although there were already big players in the market, the app still attracted three million customers in just nine months. It was astounding growth for the bank, which has had a presence in Kenya for more than a century.

“Timiza has in the first year grown to reach over three million new customers, something we have been unable to do in our long existence,” Absa Group head of corporate citizenship Sazini Mojapelo said. Similarly, Equity Bank CEO James Mwangi told an investor briefing that 93% of the loans the bank issued in the first six months of 2018 had been mobile loans.

The numbers are impressive from a business standpoint, but they mask just how potentially destructive unregulated fintech products can

LUIS TATO/BLOOMBERG/GETTY

be. Mobile loans can have sky-high interest rates and reports say that credit-reference bureaus have already blacklisted around 2.5 million borrowers – out of Kenya’s 50 million population – for failing to pay back their loans.

Security and fraud are also big concerns.

In mid-June, a trader called George Omondi received a phone call from people claiming to be bank staff. He had just opened a new account with Kenya Commercial Bank and made deposits totalling KSh230,000 ($2,200) within the span of three days. Then fraudsters cleaned out his account in three successive withdrawals via M-Pesa over two days, leaving him with a balance of just KSh1,151 . “I had not even received my ATM card by the time the

thieves struck,” Omondi told reporters at the time. “I did not engage them in a conversation and the callers kept sending me messages asking me questions and telling me to give them codes that were being sent to the phone.”

While telcos, traditional lenders and others involved in the fintech sector are cagey on how prevalent such fraud has become, there is a general feeling that their desire to enter the fintech market has trumped the need to build secure services. In a report titled Digital & Mobile Financial Transaction Fraud 2018, Myriad Connect found that at least 71% of Kenyans had been a victim of financial transaction fraud, while 90% of banking leaders identified SIM-card-swap fraud as a major issue in the Kenyan market. Almost half of all fraud goes unreported, and a majority of the victims never get their money back.

REASONS FOR DIGITAL BORROWING IN KENYA 37% 35% 20% 15% 10% 10% 7% 5% 4% 4% 3% 3% 3%

Phishing from prison

SOURCE: FSD KENYA

Business Day-to-day needs Education Airtime Pay bills Personal/Household goods Medical emergency Try it out Lend to others Chama contribution Repay other (non-mobile) loan Repay other mobile-loan Betting

Cryptocurrency miner Eugene Mutai working at home in Nairobi, Kenya, at the height of Bitcoin mania in 2017; Kenyan activity on crypto exchanges is still vigorous

A morbid joke has been that many of the phishing text messages that mobile service subscribers get are from Kamiti, a maximum-security prison in the outskirts of Nairobi. That has now evolved to phone calls and unexplained transactions using both mobile-money and traditional financial services, in addition to the in-person kind of fraud conducted by those not currently inside (see box).

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A law-enforcement officer, who requested anonymity as he is not authorised to comment, says that while the police seem to have the organisation to investigate fraud and other such crimes, they do not have the resources nor the manpower to handle most of the criminal activities taking place through fintech products. Investigations into the dark side of fintech tend to get the most attention when they are connected to other, more serious crimes.

“Dark money is not moving as stacks of cash furtively stuffed into paper sacks. It is laundered digitally through the world’s financial system and the amounts are not trivial,” Patrick Njoroge, the governor of Kenya’s central bank, wrote in Business Daily in July 2019.

After the 16 January 2019 terrorist attack on DusitD2, an upmarket hotel and commercial space in Nairobi, law enforcement agencies zeroed in on the role mobile money had played in facilitating its planning and execution.

Among the people they eventually charged for helping the attackers was an M-Pesa agent named Hassan Abdi Nur. In the span of the last three months of 2018, Nur had registered 52 M-Pesa accounts through which he received a total of KSh9m from South Africa. Then, in the weeks before the attack, he withdrew the money in 13 tranches from Diamond Trust Bank, a mid-tier lender in Nairobi. Another man, a law student named Abdinoor Maalima Osmail, was also charged after records showed he had received nearly KSh100m that went into funding the terror attack.

Mobile money laundering

The potential of M-Pesa and other fintech products to facilitate such money laundering and terrorist financing has always been a known risk. As traditional financial services battle for market share and progressively integrate with fintech, they have also eroded some of the gains they had made towards curbing such illicit financial flows.

Regulators and legislators have considered various solutions on how to close the gaps, but the general fear is that excessive regulation would reverse the gains the country has made.

Coupled with a widening budget deficit, the focus is instead on tax collection and revenue generation, which means industry players have to do even more to attract new customers as well as encourage existing ones to transact more.

Although current anti-money-laundering laws

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and policies say banks must report transactions above a certain amount, there is technically no limit to how much a mobile-money agent can transact, and there is normally no follow-up for such transactions.

Big players such as Safaricom have integrated anti-money-laundering rules, but they are insufficient in tracing just how and why money is flowing through its systems.

In February, then Safaricom chief executive Bob Collymore explained that the telco had flagged the irregular transactions and filed suspicious transaction reports on “some of the Dusit transfers”. The company had also terminated the M-Pesa numbers before the attack, but by that point it was already too late.

While such research confirms the long-held idea that fintech, and services such as M-Pesa, have a positive impact on poverty reduction, unsecured mobile loans with high interest rates are becoming a bigger problem. In a paper addressing the issue, Milford Bateman, Maren Duvendack and Nicholas Loubere see it as yet another failed messiah. “Fintech is very clearly designed to hoover up value and deposit it into the hands of a narrow global digital-financial elite that are the main forces behind the fintech revolution,” they wrote in the paper published in June 2019.

The appetite for mobile loans presents a revenue opportunity for lenders, but pundits have been concerned about what such on-thego credit facilities mean for the people who use them. While they fill a significant gap in the economy, they exist in a regulatory haze that is not only years behind in setting the rules, but is now also itself getting involved in such products. In mid-May 2019, for example, the central bank and five commercial banks

Patrick Njoroge, governor of Kenya’s central bank, which has become a player in the fintech space with the launch of mobile-lending app Stawi

Fintech in Africa and beyond The perils and promise of online finance solutions are not just issues for Kenya. At its best, these innovations can accelerate financial inclusion: Nigeria’s agritech app Farmcrowdy is turning investors’ money into agriculture produce and profit, for example.

But too often fintech seems to be more about opening up markets to unscrupulous lenders who previously

THEAFRICAREPORT / N° 109 / OCTOBER-NOVEMBER-DECEMBER 2019

did not have such wholesale access to the poor. In South Africa, payday brings groups of thick-set men to ATMs around midnight, waiting to extract cash from the borrowers whose accounts have just been credited by their employer.

Without regulation, fintech can lead to a rise in bad debts, particularly connected to sports betting.

Uganda admitted there was a problem

HALDEN KROG/BLOOMBERG VIA GETTY IMAGES

Another concern is how such fintech products have facilitated social ills such as sports-betting addiction. Although mobile-based gambling is not a financial service, it is built atop fintech services such as mobile-money transfer and digital lending apps. As with fintech itself, the government is forced to play catch-up on how to regulate the runaway growth of gambling, especially on sports. It has progressively added taxes on sports-betting firms, stakes and wins.

partnered to launch a mobile-lending app named Stawi, targeting small and mediumsized enterprises.

From an economic angle, the main concern is the high interest rates that fintech products charge. With annual percentage rates ranging from 12% to 621%, customers are often paying far more than they would if they borrowed from the brick-and-mortar side of the same financial service providers. It is understood as the cost of the added risk, since mobile loans are unsecured, but the costs are astronomically high. For borrowers, this means higher interest with shorter repayment periods, as well as running the risk of being listed as a defaulter with a credit reference bureau.

in February and announced that no new licences will be issued to sports betting companies. The top two African markets for online gambling – Nigeria and South Africa – introduced a 35% tax on operators last year. The horse has already bolted, however.

Addiction rates have rocketed in many countries, hitting the fragile jobless youth demographic the hardest.

Digital borrowers are twice as likely to have tried mobile gambling

The fintech wave and its impacts are global phenomena. In Indonesia, the total amount of peer-to-peer lending loans broke $1bn last year, with around three million borrowers.

There are many tales of loan sharks who buy up debt at abusive interest rates. The lack of regulation allows local and foreign operators easy access to unbanked populations.

A scourge on society

A survey of 3,000 people by FSD Kenya in 2018 found that while only 3% of the respondents reported getting a loan to bet, ‘digital borrowers are almost twice as likely to have tried mobile gambling compared to nondigital borrowers’. In April, interior cabinet secretary Fred Matiang’i said that about half a million young people had been blacklisted by lending agencies for unpaid loans they took to stake. In June, he added that the number of gambling-related suicides was “worryingly high” and said that, left unregulated, betting would “destroy the country’s moral fabric”.

In July 2019, the government took a step further and revoked the licences of 27 betting firms. That same month, Matiang’i also ordered the deportation of 17 foreign directors of betting firms. The deportees were mainly from Eastern Europe. At the launch of Kenyan betting firm SportPesa in 2014, a Bulgarian member of the European Parliament who had been named as the head of a mafia grouping in leaked US diplomatic cables, travelled to Kenya and called one of the betting firm’s founders his best friend, fuelling speculation that the firm was linked to the Bulgarian mafia. While no evidence of such has yet been offered, fintech products have made money laundering easier to conduct and harder to flag.

For bettors and betting firms, the July 2019 crackdown slowed down what has otherwise been a rapidly growing market. Betting and sports-related sites now dominate the top Google searches in Kenya. Betting firms are also splurging on traditional advertising. A report by TIFA on Kenya’s media landscape showed that betting and gambling advertising spending went from 0.3% to 22% of total advertising spending between 2014 and 2018.

And those firms have struck their jackpot, as growing unemployment, a stalled economy and a lack of opportunities contribute to lure more

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INSIDEFOTO/SIPA USA/SIPA

FEATURES / INVESTIGATION / Kenya: the world’s fintech lab

people into gambling. A 2017 study by GeoPoll found that Kenya has the highest proportion of youth who have participated in gambling of six sub-Saharan African countries polled.

In terms of tackling fraud, illicit financial flows and other such crimes Kenya has barely scratched the surface, despite a growing body of evidence that the fintech ecosystem is attracting all kinds of criminals and is a potential risk to its macroeconomic stability. After Kenya introduced new bank notes in June, with a 30 September deadline for demonetising the old KSh1,000 notes, law enforcement officers made several arrests of people distributing fake currency notes. The forgers’ favourite targets were mobile-money and bank agents in towns outside Nairobi, where they could quickly swap the fake money for mobile float on their phones.

A key problem on the consumer side is also a lack of understanding of data privacy, a situation which further exacerbates the dark side

Betting advertising in Kenya now accounts for 22% of total advertising spending – rising from 0.3% in 2014

Only now is Kenya working to plug regulatory holes

of fintech by increasing the number of ways Kenyans can and do lose money. A September 2019 UNCTAD report found that Kenya has the lowest concern about data privacy and online security among 25 countries polled. While Kenya has a data-protection draft bill, the fact that it has not had one before despite the exponential growth of mobile-, mobile-money and internet penetration is worrying.

There are numerous lessons to learn from Kenya’s experience with the fintech revolution.

A key one is that while a laissez-faire approach to regulation is a good thing for growth, it presents critical challenges that need to be addressed promptly and decisively. Without such interventions, fintech could reverse the gains made against financial fraud, terrorist financing and money laundering. Industry self-regulation is not sufficient, even in the current scenario where the regulator is also a player in the sector.

Fintech, specifically mobile money, is now one of the pillars of many sub-Saharan economies. The region is the only one in the world where close to 10% of GDP in transactions are done through mobile money, according to the IMF. Mobile-money subscribers now surpass bank accounts in the region and capital continues to pour into the sector, yet policy-makers are only now working to plug the regulatory holes that expose account-holders to multiple risks. Without such laws and regulations on data protection, financial literacy, predatory lending and related downsides, the many benefits of fintech products will be eroded.

Trust, traceability and passing the buck One morning in March 2019, Samson Kimani*, 75, received three young visitors in his office. Although the three – two men and one woman – did not have an appointment, unscheduled visitors were not uncommon for Kimani.

“They said they wanted to a pitch a new mobile product to me,” Kimani tells The Africa Report in his office in Kiambu, outside Nairobi. Although he does not remember what exactly the new product was, he remembers that morning’s other events vividly because they left his mobile wallets in the red. As he engaged one man and the woman, the second man

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asked to see his phone to check whether it would be compatible with the product.

“As I talked to the two, the third was quiet and seated on the opposite side,” Kimani recalls. The meeting took about half an hour. After his visitors finally left, Kimani checked his phone. Not only had his mobile wallets been emptied of about KSh35,000 ($3,400), but the three con artists had also taken out loans from two mobile-loan products he was subscribed to. He now owed about KShs30,000.

Traceability is one of the strengths of fintech products, but knowing to whom the money was sent is not the same as

THEAFRICAREPORT / N° 109 / OCTOBER-NOVEMBER-DECEMBER 2019

getting it back. Kimani reported the fraud to the police, where it was recorded and an investigation promised. Off the cuff though, an officer told Kimani to forget the money because the system is overwhelmed by the many crimes, new and pre-existing, that are now linked to fintech. It was not, the officer told him, a serious enough crime to warrant the attention he expected. His best option would be to engage the telcos and the bank involved. The bank’s response was to refer him back to the police. *Name changed to protect his identity.

FEATURES /

Keeping it WIDE ANGLE

A referendum on Sidama’s statehood is set for November

together

By TOM GARDNER in Hawassa

TIKSA NEGERI/REUTERS

Ethiopia’s ongoing liberalisation and ethnic federalism are creating a combustible situation as ethnic groups seek more autonomy on economic, political and security matters

FEATURES / WIDE ANGLE / Keeping it together

when violence broke out in June 2018. He plans to leave the city after the referendum: “There is no rule of law, no peace and security.

Everything is stuck.”

The south is just one of many hotspots on Ethiopia’s federal map, almost all of which intensified in the wake of Abiy’s appointment and the ‘big bang’ liberalisation he set in motion last year. This inconsistent and at times chaotic process has consisted, principally, of the release of political prisoners and the return of others from exile; the decriminalising of opposition parties; the unmuzzling of media and revision of draconian laws; improved relations with neighbouring Eritrea; and a package of liberal market reforms.

Ideological disputes

Some fear a bloody Yugoslaviastyle break-up

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By the end of 2019, barring an upset, Sidama will be Ethiopia’s tenth semi-autonomous state.

A referendum on statehood, which should have taken place in July, is now scheduled for November. Leaders of the country’s fifth-largest ethnic group are energetically preparing for the enhanced autonomy statehood will bring.

Work has begun on a constitution. Billboards have been erected, welcoming visitors to the would-be state as they enter Hawassa, its putative capital. The result of the vote, assuming it happens, is a foregone conclusion.

The ‘Sidama question’ is a headache for prime minister Abiy Ahmed and the Ethiopian People’s Revolutionary Democratic Front (EPRDF) government. Scores were killed in July following the referendum’s delay, with protesters confronting security forces and angry mobs chasing non-Sidama from their homes. The status of Hawassa is contested, and many minorities are worried about their future there. Meanwhile, the Sidama peoples’ quest for statehood has prompted at least 10 other ethnic groups in the south to follow suit, likely precipitating the break-up of the multi-ethnic and volatile Southern Nations Nationalities and Peoples’ Region (SNNPR).

“Our country is sliding down,” says Admasu, a resident of Hawassa and ethnic Wolayta, whose home was destroyed by a Sidama gang

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But as the state loosened its grip and free speech blossomed, various conflicts escalated. Nearly 3 million people were internally displaced in 2018 (see map), more than anywhere else in the world. Tensions between states, especially the three most powerful – Oromia, Amhara and Tigray – worsened as relations in the EPRDF soured. This June there was, according to the government, a regional coup attempt in Amhara, and on the same night the head of the federal army was killed in Addis Ababa.

When Abiy took power, the main tasks were thought to be democratisation and reducing the outsized influence of the EPRDF’s historically dominant Tigrayan wing, the Tigray People’s Liberation Front (TPLF). Both were key demands of the protest movement that forced then-prime minister Hailemariam Desalegn to resign – paving the way for Abiy’s Oromo faction, the Oromo Democratic Party (then the Oromo Peoples’ Democratic Organisation), to take the helm of the coalition. But now, with national elections due next year, the challenge has become a more existential one: holding the country together and preventing further fragmentation. For the most pessimistic observers, it means averting a bloody Yugoslavia-style break-up.

Ideological disputes as well as personal animosities are paralysing an organisation once renowned for its rigid, if sometimes brutal, discipline. Internal EPRDF battles increasingly burst into public view, such as in July when the TPLF issued a highly provocative statement about its sister party in Amhara, the Amhara Democratic Party (ADP), demanding it take

Forced from their homes

100,000

Internally displaced people per woreda (district) and causes

Kamashi

Between October and December 2018, around 62,000 people fled Kamashi Zone in Benishangul-Gumuz state following ethnic violence after the killing of three local police officers.

Climate

50,000 25,000 10,000

Tigray

Conflict Other

ERITREA

DJIBOUTI Afar

Bahir Dar Amhara BenishangulGumuz Kamashi Westeern Oromia

SOUTH SUDAN

Amhara’s claim to Wolkait and Raya territories is a source of tension. Tigray security forces have repressed protesters in Raya, while Amhara protesters and militia have killed Tigrayans.

Bahir Dar

Dozens of people were killed in fighting during an alleged foiled coup by a rogue state militia in Ethiopia’s Amhara region in June 2019.

Jijiga

Inter-communal violence in Jijiga led to the displacement of 140,000 people in just a few days in August 2018. Local Somalis targeted non-Somalis from highland Ethiopia and attacked churches.

Gambella SNNPR

Western Oromia

SOURCE: MAP EC, THE AFRICA REPORT

Jijiga

ADDIS ABABA

Amhara/Tigray

In January 2019, the federal government announced it had launched military operations in western Oromia as part of a counter-insurgency campaign against the Oromo Liberation Front.

Gedeo/Guji

About 800,000 mostly ethnic Gedeos fled West Guji between April and June 2018. Nearly 700,000 were still displaced as of March 2019. It is the single-largest forced displacement to date.

Hawassa

Moyale

Gedeo

Somali

Guji

Moyale KENYA

responsibility for the events which led to the alleged coup attempt. A break-up of SNNPR, meanwhile, would likely mean disintegration of the EPRDF’s southern wing, the Southern Ethiopian People’s Democratic Movement, further complicating the politics of a coalition which ostensibly relies on consensus.

The risks of fragmentation are aggravated by the expanded autonomy of the most powerful states, all of which are equipped with their

Hawassa

SOMALIA

In June 2018 around 2,000 non-Sidamas were chased from their homes in Hawassa, the zone’s capital. In July 2019, dozens of Sidama protesters were killed in other parts of the zone.

In late 2018, violence in Somali Region’s Dawa Zone, including in and around Moyale town, displaced up to 150,000 people.

In 2017, nearly one million people were displaced.

Burayu/Addis Ababa

Dozens of people from ethnic minorities were killed near Addis Ababa in September 2018 when mobs from the surrounding region of Oromia arrived in large numbers to attend a rally in the capital.

own regional security forces. This is most pronounced in Tigray, where TPLF leaders have decamped since Abiy ejected most of them from high office.

No longer kingpins in Addis Ababa and with some in its ranks wanted on corruption and human rights charges, the TPLF has focused on building up the region’s police and militia, and developing its economy. Most controversially, it has refused to hand over the former

THEAFRICAREPORT / N° 109 / OCTOBER-NOVEMBER-DECEMBER 2019

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FEATURES / WIDE ANGLE / Keeping it together

national intelligence chief, Getachew Assefa, to federal police, leading to a stand-off.

“The problem is the regions are not only asserting their constitutional powers but they are going beyond them,” says Yonatan Fessha, a constitutional lawyer. “And you don’t get the impression that the federal government is asserting its own powers where it should.”

Redirecting capital

The shifting balance of power between regions and the centre is apparent in economics, too.

Getachew Teklemariam, a former government adviser, says that regional capitals are seeing much more investment, as ethnic elites in Tigray and Amhara in particular redirect capital towards their home states: “There is a change in the nexus between the federal government and the regions – and this is benefiting the regions like no economic incentive would’ve done.”

He adds that regional investment bureaus have grown more powerful in decision-making, especially with regard to land allocation.

“If you are a foreign investor, you need to be

much more convincing at the regional level than before,” he says. A particularly striking example of this dynamic came in August 2017 when the Oromia government refused to provide land after the federal investment commission had signed a deal with a Chinese manufacturer. More recently, Tigray has taken the step of reviving its own investment bureau, and set up a new institute for policy research.

Many see greater regional autonomy in economic policy-making as a good thing, should it allow states to experiment and develop strategies more attuned to local needs.

“So long as the federal government uses its authority to avoid a race to the bottom, then it’s positive,” says Fiseha Haftetsion Gebresilassie of the Tigray Institute of Policy Studies. A more balanced distribution of investment might also help diffuse political tensions.

But few are sanguine when it comes to security, which is already highly devolved and now resembles an arms race. Each village, or ‘kebele’, chairman heads a militia consisting of, on average, 50 armed men. Each region

CONSTITUTIONAL CHANGE REQUIRES CONSENSUS ZE EMELAK A. AYELE Direector, Centre for Federalism and Governance Studies, Adddis Ababa University

Following Abiy Ahmed’s assumption of the premiership in April 2018, several legal and political reforms have been introduced in Ethiopia – and others are being debated in various forums.

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Among those issues is the fate of the 1995 constitution. What to do with it – and not simply some aspects of it – is a subject of much controversy. I observed two polarised views on this.

THEAFRICAREPORT / N° 109 / OCTOBER-NOVEMBER-DECEMBER 2019

Activists say hundreds have been imprisoned and others charged under the draconian anti-terror law that prime minister Abiy Ahmed had promised to reform

The first view is that the constitution is a sacred document that should be left untouched since it helped usher in a democratic order and allowed the rights of hitherto marginalised ethnic communities to be respected.

This view is generally held by members and supporters of the Ethiopian People’s Revolutionary Democratic Front (EPRDF), the Tigray People’s Liberation Front (TPLF) in particular, and other groups who concur with the TPLF’s diagnosis of the root causes of Ethiopia’s political problems (ethnic-based oppression) and its solution (ethnic federalism).

On another extreme are those who deem the constitution to be the source of all evils, especially the grisly inter-communal conflicts that keep occurring. In this group are those who claim to be liberal democrats and advocate what they call ‘citizenship politics’. For this group, the constitution is unsalvageable as it has been tainted by EPRDF’s Stalinist

TIKSA NEGERI/REUTERS

“Under the constitution regional states are supposed to have police forces just to maintain law and order – nothing more than that. The special forces are much more than that. They are readied for combat,” says Zemelak Ayele, director of Addis Ababa University’s Centre for Federalism and Governance Studies.

commands its own police, including thousands or even tens of thousands of constitutionally dubious “special police” equipped with combat weaponry. The June ‘coup’ attempt in Amhara was reportedly precipitated by efforts to clip the wings of the region’s special police, which its then-security chief, retired Brig. Gen. Asaminew Tsige, was rapidly expanding – apparently in response to parallel developments in Oromia and Tigray.

ideology. They also suppose the constitution enjoys little support from the Ethiopian people and maintain a constitution, while above all other laws, is beneath the sovereign – the people – who made it. It is thus appropriate to rescind the constitution altogether, even extra-constitutionally, and replace it with a new one.

In fact, these people consider simply rescinding the constitution as the only route out of the political quandary and do not envision constitutional amendments as an option. The reason is that the constitution is designed in such a way that the most problematic aspects of it – those pertaining to the management of ethnic diversity – could be changed only through unanimity and that cannot, at this stage, be secured.

Both views on the constitution seem not only flawed but also unhelpful in terms of moving the country to a democratic order. Contrary to the claim of its proponents, the constitution is far from perfect. Its ideological underpinnings, the historical

The question of legitimacy

In a recent interview Mustafa Omer, the acting president of Ethiopia’s Somali Region, concurred: “One of the biggest mistakes made along the way [was] creating autonomous security structures in the regions. No country can survive that.”

For much of the past year Abiy appeared helpless, barely speaking about ethnic violence in public. But, more recently, faint outlines of a strategy have begun to emerge.

First, elections – which many thought would be delayed or even postponed indefinitely – seem likely to happen on time next year. There is, at least inside the EPRDF, reportedly some consensus that a postponement would risk

assumptions that it is based on and the institutional mechanisms that it has adopted for dealing with historical inter-communal hostilities remain divisive and contentious.

Yet, simply getting rid of it will be wrong for at least three reasons. First, the proposal to annul it is premised on the supposition that the great majority of the Ethiopian people support this idea, even though there is no cred­ ible evidence to back up this claim.

Second, annulling the constitution means returning to the political habit

‘South Africans refrained from simply scrapping laws from the apartheid era’

of employing unconstitutional methods for replacing the constitution. Third, a transition to a democratic order is likely to rest on firm ground when it is based on the rule of law and rescinding the constitution will be against this principle. It should be noted that the process of transitioning to a democratic order is as important as the end result.

That is why South Africans refrained from simply scrapping the laws from the apartheid era and ensured that their transition to a democratic order was founded on rule of law.

Introducing a major change might not be conceivable given how rigid it is and how politically polarised we are.

However, constitutional practice that eschews strict adherence to the most problematic clauses in the constitution may be useful in terms of minimising problems associated with the latter.

In the meantime, constitutional and political bargaining should continue until such time that the constitution takes a shape that is agreeable to the great majority of Ethiopians.

THEAFRICAREPORT / N° 109 / OCTOBER-NOVEMBER-DECEMBER 2019

65

FEATURES / WIDE ANGLE / Keeping it together

The renewed commitment to elections comes with strongarm tactics

Arbitrary arrests

TIKSA NEGERI/REUTERS

Electoral board president and oppositionist Birtukan Mideksa in Addis Ababa in September 2019

pan-Ethiopianist parties could win control of city councils, in particular Addis Ababa.

But it is unlikely to be an entirely free or fair contest, and indeed the renewed commitment to holding elections has been accompanied by a return to some of the strong-arm tactics favoured by Abiy’s predecessors. Hundreds were arrested, seemingly indiscriminately, in the aftermath of events in Sidama in July and in Amhara in June. Amhara activists claim that around 300 Amharas were imprisoned following the alleged coup attempt and several are to be charged under the draconian anti-terror law Abiy had criticised and promised to reform.

more instability, even if preparations by the electoral board – headed by oppositionist Birtukan Mideksa – remain behind schedule.

After May 2020, Abiy and the EPRDF will have no constitutional right to govern, meaning that at the heart of this calculation lies the question of legitimacy. Many in the ruling coalition are also acutely aware that elections in 2015, in which the EPRDF won every seat in parliament, were almost universally considered a sham. Added to this is the fact that since coming to power in 1991 the EPRDF has controlled all tiers of government. The protest movement that catapulted Abiy into office was propelled at one level by this profound democratic deficit, and for political tensions to stand any chance of diminishing, the EPRDF will have to relinquish some of its monopoly.

A free contest next year would open the door for opposition parties to take at least some seats in parliament and possibly government offices. In Oromia, factions of the formerly outlawed Oromo Liberation Front (OLF) – allied with other nationalist opposition – might see substantial gains, providing it is permitted to formally register as a party.

Similarly, in Amhara, the National Movement of Amhara should take a large chunk of votes from the ADP, assuming it is allowed to campaign freely. And in urban areas

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THEAFRICAREPORT / N° 109 / OCTOBER-NOVEMBER-DECEMBER 2019

The government has resorted to internet shutdowns and has sent the federal military into several regions in the past year. Even in Oromia, Abiy’s supposed base, opposition parties complain of harassment and arbitrary arrests. In a recent address Abiy declared that he was ready to confront lawlessness “not with a pen, but with a Kalashnikov”.

There are several dark spots on the horizon. The response to delaying the Sidama referendum shows how dangerous it could be if further volatility compels the government to postpone the election, though others contend that holding a messy election with an unpredictable outcome would be worse.

Similarly, any efforts to revise the constitution (see page 64) – Abiy has hinted he would like to introduce an elected presidency, and others are keen to scrap some of its most controversial ethnic provisions – could spark a backlash.

Alemayehu Woldemariam, a constitutional lawyer, argues: “As to the fear that Ethiopia might go the way of Yugoslavia, yes it’s highly improbable, but not impossible.”

It remains an unlikely scenario for a country with a far longer experience of nationhood than any of the former communist federations.

Serious secessionism is a minority pursuit, even in Tigray where a vocal group of young activists increasingly champion it. More likely, suggests historian Shiferaw Bekele, is simply “continuous, debilitating crisis”, though he is optimistic. “One of this country’s virtues is respect for the state. [...] When they come to the negotiating table, and the spectre [of breakdown] is in front of everyone, they will do what they can to stop it.”

FEATURES /

DAVIDO A sell-out gig at London’s O2 Arena has become a rite of passage for Nigerian musicians out to conquer the world

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THEAFRICAREPORT / N° 109 / OCTOBER-NOVEMBER-DECEMBER 2019

Nigeria’s musical moment CULTURE

MATT CROSSICK/PA WIRE/ABACA

Davido, D’banj, Wizkid, Tiwa Savage… Nigerian musicians who have hit global stardom. But behind the VIP-studded parties and signings with major labels is the 110% Naija ecosystem that got them there

By NICHOLAS NORBROOK in London, Lagos and Abidjan

THEAFRICAREPORT / N° 109 / OCTOBER-NOVEMBER-DECEMBER 2019

69

“Are you ready?” Amped up by a string of warm-up acts, the audience at the O2 Arena in London loses it completely as Idris Elba jogs out onto the runway. “Are you ready for Davido?” asks the screen idol, rhetorically.

A curtain falls to reveal the singer – white T-shirt and black shades. He stands on a circular platform suspended from the roof, some 10 metres in the air.

Flames and smoke engulf both platform and Davido, who keeps singing. Pyrotechnicians quietly high-five backstage.

The crowd are young. They know all the words to this newly global pop sound. Soft harmonies and synth, thudding bass and the omnipresent rrrat tat tat, tat-tat. Knee-high black leather boots. Dreads, with the occasional red weave and shaved sides. Big coats from Italian designers. Swaying, singing, dancing.

Davido is slowly lowered from the sky to the stage. He is being gently manoeuvred into the consciousness of the wider listening public, too. “You have to let people feel they are discovering things for themselves,” says a senior executive of LiveNation, the UK’s largest live music music promoter. He is impressed by the turnout for the gig. “Not so many people are selling out the O2 these days.”

But only cave-dwellers would be ignorant of Nigeria’s sustained global musical moment.

70

Not just since the appearance of Nigerian musician Burna Boy on The Daily Show with Trevor Noah in August – though the pinnacle of prime-time US television featuring African entertainment giants on either side of the interview desk is in itself notable.

In 2017, at the MOBO Awards, Wizkid beat Jay-Z, Drake and Kendrick Lamar to win Best International Act, and Davido walked away with Best African Act for ‘If’, a tune that has now exceeded 90m views on Youtube. Davido’s subsequent single, ‘Fall’, is knocking on 140m views. A year later, Davido won at the BET Awards in Los Angeles and implored global artists to “come to Africa”.

Wizkid sold out at the O2 Arena in 2018, a year before Davido. Beyoncé, never shy of jumping on popular directions, brought together Nigerian stars such as Tiwa Savage, Mr Eazi, Tekno, Yemi Alade, Wizkid and Nigerian super-producer P2J, as well as other African artists, on her companion album to The Lion King movie. Many of these Nigerian acts are making the US festival circuit their new home.

Behind the global phenomenon, however, the demography and purchasing power of Nigerian consumers is driving the industry.

When Nigeria rebased its GDP, adding in things like the music industry and Nollywood, Nigeria’s output leapt from $270bn to $510bn.

The music you hear in Lagos nightclubs today is almost exclusively Nigerian – a far cry from a few decades ago.

“I only began to realise that Afrobeats was going to be big when we were all fighting over the D’banj single, which eventually went to Kanye’s label in the summer of 2012,” says Ferdy Unger-Hamilton, president of Columbia Records UK, a subsidiary of Sony Music. “And I was silly enough to think this was going to be a one-off. [...] Until I noticed a few weeks later that D’banj had just sold out the Hammersmith Apollo. The music has now been adopted into the wider culture.”

Pan-African audience-building

Back on stage, “Are there any Nigerians here tonight?” asks Davido, rhetorically, as the crowd roars. “Any Ghanaians?” Again a huge response. South Africans, too. The click beat to his hit ‘Coolest kid in Africa’ – jointly produced with South African rapper Nasty C – starts to unfurl, with its shout-outs to countries on the continent. It feels almost

THEAFRICAREPORT / N° 109 / OCTOBER-NOVEMBER-DECEMBER 2019

ZACHARY MAZUR/FILMMAGIC/GETTY IMAGES

FEATURES / CULTURE / Nigeria’s musical moment

TIWA SAVAGE & EFE OGBENI

When the Ikeja-born singer and songwriter wanted to make the jump to a major record label Ogbeni (inset) brokered her $1.1m deal with UMG. He will also executive-produce her future albums/releases, as he does for Davido.

PRINCE WILLIAMS/WIREIMAGE/GETTY

studied, a conscious attempt at pan-African audience building. Go to far-flung villages in non-anglophone countries, and you will find people who know many of his hits.

For those who have followed Davido’s career for a long time, this is no surprise.

Davido is strategic in his use of the whole toolbox. He is, for example, one of the few Nigerian musicians to use songwriters. And Davido is being strategic in management, too. His aim: crack the US. He has asked Efe Ogbeni, co-founder of Stealth Management and a stalwart of the industry, to get him there.

After the gig is over, the pungent dressing-room party is in full swing. The A-list of black London then rolls through Davido’s chambers: supermodel Naomi Campbell, Vogue UK editor Edward Enninful, former Arsenal midfielder Alex Iwobi to name a few.

Ogbeni is all smiles. As the gig ended, he ran on stage to spray Davido with champagne.

A few hours earlier, however, things were very different….

We arrive in a 4x4 at the artist gate at the O2 arena. Security guards, with the smirk of security guards around the world, ask who we are. “It’s my event,” says Ogbeni, visibly irritated, trying to keep his temper under control.

After some mutterings into a radio the gates finally open, and the car sweeps under the lip

of the giant white tent known as the Millennium Dome, a New-Labour folly of the late 1990s that seats 15,000 people.

“I have to keep it cool; otherwise they tag you as the angry black man,” says Ogbeni. “I have been fighting this all my life.” His long push to bring Africa to the world started with Moroccan producer RedOne, with whom he brought artists like Lady Gaga to prominence.

Record-breaking record

Part of the frustration is with the lack of radio airplay that Davido had ahead of the O2 gig. No matter: he sold out the arena any­ way. “Right now LiveNation and AEG are the landlords and gatekeepers. The radio are the gatekeepers,” says Ogbeni. “But next time we want to book the O2, we will be able to go straight to the venue – we have proved that we can sell tickets. And the radios in the US are now playing Davido on heavy rotation.”

Five months on from the O2 gig, and Ogbeni has helped push Davido’s single ‘Fall’ to number 13 on the Billboard chart, where it made history as the longest-charting Nigerian single in Billboard history.

“It’s connecting Africa to the world and connecting the world to Africa,” says Ogbeni,

Davido is strategic in his use of the whole toolbox

THEAFRICAREPORT / N° 109 / OCTOBER-NOVEMBER-DECEMBER 2019

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FEATURES / CULTURE / Nigeria’s musical moment

Artists are a product, and they need to fill a pipeline of hits for the majors to be interested.

Slowly but surely, big media corporations are identifying – and fighting for – Nigeria and Africa’s top talent. African artists – no pushovers themselves – are surfing on this new wave of interest. The most sophisticated are riding it to global supremacy. And as the internet upends business model after business model, the streaming generation of musicians and industry players are trying to keep up.

In May 2019, for example, Tiwa Savage, a huge star in Nigeria and winner of the MTV Europe Music Award for Best African Act, was signed to Universal Music Group (UMG).

Of the US major labels, UMG, Sony and Warner Music Group are taking Africa seriously. Warner has just signed up Nigeria’s influential Chocolate City label, which boasts Femi Kuti (Fela’s son) and M.I Abaga. Sony’s deal with Davido was preceded by the signing of D’banj in 2012. The world’s second-largest record company opened a West Africa office in Lagos in 2016. They were followed by the world’s largest, UMG, in 2018.

UMG is a behemoth – cash-rich and courted.

Its parent company, Vivendi, is said to be

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GUIDO DE BORTOLI/GETTY IMAGES FOR JOHNNIE WALKER BLUE LABEL/AFP

Rush of the majors

seeking to sell up to 50% of its shares and is in talks with Tencent, the Chinese media giant, which already sublicences UMG’s catalogue in China. Together, they are building ‘Abbey Road Studios China’.

“They are not pressed. They have got cash, top acts. They can influence the whole world,” says Ogbeni. “So I knew if I pitched Tiwa to them they would jump on it. It’s a small deal, but a €1m ($1.1m) commitment is a lot.”

Now we are sitting in the late bar of the Hotel Ivoire in Abidjan, in early April.

ALL RIGHTS RESERVED

as we meet this time at the Eko Hotel in Lagos.

“So I took Naomi Campbell to the Shrine last month, and Femi [Kuti] did what he has never done before, he came up here and performed with her on stage. With the editor of British Vogue there. Then I go to Morocco for Idris Elba’s wedding. I took Davido to do a surprise party. I shoot the clip of Davido dancing with Christian Louboutin with their red-bottomed shoes. That’s culture, that is connections.”

Ogbeni adds: “I have been battling the gatekeepers for years. But Joel Katz is my mentor.

I don’t fuss. People get to know me in the end.” Katz, the lawyer to James Brown and Michael Jackson, works for US law firm Greenberg Traurig and is considered an untouchable in the music industry. He is the legal representative to the Grammys and to 70% of the top labels in the US.

THEAFRICAREPORT / N° 109 / OCTOBER-NOVEMBER-DECEMBER 2019

DON JAZZY & REMA

The legendary producer is generous-spirited about artists leaving his Mavin Records to try their luck in the US. New talent comes to replace them: currently Rema (below), the 19-year-old freestyler discovered

by Don’s brother, D’Prince

The great and the good are milling about after hours, gathered for the Mo Ibrahim Foundation’s governance weekend. Bono is propping up the bar. We dodge the conversation to grab some large sofas with Don Jazzy, Nigeria’s answer to Dr Dré.

A super-producer and musician, Don Jazzy looms large in the Nigerian musical psyche, instrumental in creating a new sound for Nigerian pop, much as Dr Dré spearheaded G-Funk in the US. Don Jazzy set up Mo’Hits Records in 2004 alongside singer D’banj and helped launch the careers of Nigerian musical heroes like Wande Coal, while working with Jay-Z, Kanye West and Beyoncé. In 2012, when D’banj left the label, he launched Mavin Records with the aim of being “the powerhouse of music in Africa in the shortest possible time”.

“You can’t blame someone for being ambitious,” says Don Jazzy. Though the news has not yet dropped that Tiwa Savage is leaving Mavin Records, he is obviously aware that something is afoot. “When you are growing, you are getting to the point – like Tiwa Savage now – where you think, okay what’s next? There’s the big three: there’s Universal, there’s Sony and there’s Warner. If they are knocking on your door and they are like: ‘We can make you like this...’ You need to remember, most of these artists, they look up to the Beyoncés, the Rihannas of this world.

They have the right to actually try to see if they can achieve that in partnership with people that have done it before.”

Premiership tactics

A footballing analogy helps to explain how the music scene works. Ogbeni is the super-agent that can get you into Real Madrid and hopefully switch on the entire world to what Nigeria can do. Connected across all the major labels, able to bridge African and global markets, close to musical godfathers like Quincy Jones, Ogbeni can turn you into a star.

By contrast, what Don Jazzy wants to do with Mavin is to create an academy like Barcelona’s La Masia – an ecosystem to nurture the entire industry. “More than building global superstar artists that are going to be big in America, Asia, whatever. It is actually about growing a sector in Africa – have students go to school who can aspire to actually work in the entertainment business,” says Don Jazzy. “We don’t have people that go and read entertainment

With Mavin, Don Jazzy wants to create an academy

law, for example. There’s a whole lot of job security that we are trying to actually put in place, more than getting a superstar there.”And, for Don Jazzy, avuncular on the sofa, as one star walks away, another arrives.

As we talk, Mavin’s latest addition is filling four out of the top 10 slots of Nigeria’s Apple Music charts. Rema is certainly blunting any pain at Tiwa Savage’s departure. Identified

by Don Jazzy’s younger brother, known as D’Prince, Rema is a clear talent, but one who also has clear plans. “They [Mavin] accept my sound for what it is, crazy as it sounds.

The trap and the rock and everything. Most people would try to change your sound, but they believe in mine,” Rema told journalist Debola Abimbolu in May.

Taking back control

That contrasts with Davido, who has complained of creative differences with Sony, leading to his renegotiating how he makes music back in 2017. He posted on social media: ‘Creative control returned, new music in 2 days.’ Indeed, after his contract was tweaked to allow him to release music in Africa on his own terms, compared to the total control Sony was demanding for his international releases, he released ‘If’ under his own label.

Bobby Pittman, the affable former senior official for Africa under President George W. Bush, now runs Kupanda Capital, a US private equity firm. In January 2019, Kupanda announced a multimillion-dollar investment into Mavin. He takes up the idea of creating the ecosystem required to help new artists focus on their creativity. “We have lawyers, accountants, we have social media teams. We have a full suite of data professionals and are really building an engine so that [Don Jazzy] can do what he does – develop artists,” says Pittman. “There are not enough of these platforms today, the majors are not in these geographies really as horsepower builders, right?”

But while there may not be enough of them, Mavin and Don Jazzy are not alone. Along with the sophistication of Davido’s approach, there is now a whole raft of new entrepreneurial artists with designs on being the next platform.

Take Mr Eazi – born Oluwatosin Oluwole Ajibade in Port Harcourt and now based in Ghana. He is no stranger to using data.

Ajibade founded an e-commerce company, took it through an accelerator and ran it for

THEAFRICAREPORT / N° 109 / OCTOBER-NOVEMBER-DECEMBER 2019

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FEATURES / CULTURE / Nigeria’s musical moment

KEVIN WINTER/GETTY IMAGES FOR COACHELLA/AFP

MISTER EAZI

some time. He is no stranger to hustle either.

In 2016, he was selling phones in Lagos’s Computer Village, a sprawling tech market in Nigeria’s rowdy commercial capital.

His latest initiative is to create his own incubator for African musicians. While it may not have the polish of Mavin, it has a similar quest to hand autonomy to artists. His platform, emPawa, help boosts the careers of talented up-and-coming artists by rewarding the best with funding and all-important mentorship.

A blessing to watch

It has been a rewarding project for the 27 year old. “Watching these artists go from amateur Instagram videos to having their careers, successful singles, touring, has just been a blessing to watch,” Mr Eazi tells The Africa Report after a concert in South Africa.

“If you ask me what’s the one thing I’m proud of in this music career, the only thing I can tell you is emPawa. What’s about to happen in Africa this year is we’re gonna be changing everything. We’re launching emPawa Distribution, emPawa Publishing and other platforms to empower artists. The end goal for that is to build a new incubator for African music within Africa and the African diaspora.”

Now he has moved his business to London and is striking deals with US artists. And even the structure of his songs has evolved in line with the streaming economy. “Take his last three releases, for example. All two-minute songs or slightly shorter. Why?” asks The Africa Report’s West Africa editor, Eromo Egbejule. “Music economics to game the system and maximise streaming revenue.”

Mr Eazi recently told Rolling Stone: “In the

74

West I can make gambles and book venues by myself, because I have data [about my listeners]. I know that in New York, I have about 500,000 listeners a month. So I know I can have 1,000 people at my concert. And I know 30% are from Brooklyn so I can do a show near where they live. I don’t have that data back home. Nigeria has 36 states. I’ve not even toured 10, and that’s partly because my fans are consuming the music in an alternate way that is not trackable.”

Beyond the music lie those who (mostly) consume it; the kids. And in Africa, whether or not the kids are alright is proving a vexed question. Both for African governments desperately trying to keep pace with job creation, and for terrified eurocrats, trembling at the thought of migrants crossing the deserts. For Ogbeni, ultimately, this is the vision. “The youths listen to those artists more than they listen to governments. So I have to be responsible. If I have the number-one female and the number one-male [artist], that is real influence.”

What if the real importance of musicians was their ability to transmit messages? Back in the 1970s and 1980s, Nigerians were well aware of the political impact their musicians could have. Today’s crop appear more interested in shifting product and branding deals.

That might not prevent another Fela Kuti emerging. Already, Davido has weighed into Nigerian politics, backing his uncle’s failed bid to become the governor of Edo State in May. As Davido once told reporters: “I know eight presidents personally, so you can imagine what I can do.”

THEAFRICAREPORT / N° 109 / OCTOBER-NOVEMBER-DECEMBER 2019

Additional reporting by SHINGAI DARANGWA in Johannesburg

The former street hustler and pioneer of Banku music is devoting a lot of energy – and $300,000 – to his emPawa project, a platform that empowers (as you would expect) talented emerging artists in their quest for global superstardom.

Mr Eazi is prouder of emPawa than of anything else in his career

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AFRICAN BANKS get ready for disruption

SOUTH AFRICA Cyril Ramaphosa’s inner circle MUSEVENI INTERVIEW ‘Uganda needs East Africa for prosperity’ Aliko Dangote

INVESTIGATION The darker side of mobile banking

Pioneering a new Nigeria

ETHIOPIA Abiy tries to keep it together

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Alliance Française de Lagos MIKE ADENUGA CENTRE

© JEFFREYOLALEKAN

A celebration of arts and culture in Lagos

lliance Française de Lagos’ headquarters now nestles within the brand new purpose-built Mike Adenuga Centre on Osborne Road in Ikoyi. The new headquarters was pre-inaugurated on the 4th of July last year by French president Emmanuel Macron, then Lagos State governor Akinwunmi Ambode, Nobel laureate Prof. Wole Soyinka and chairman of the centre, Dr. Mike Adenuga.

Besides its headquarters, which moved from Yaba to Ikoyi, Alliance Française de Lagos has branches in Ikeja (in partnership with the Lagos State Ministry of Education) and in Victoria Island (in partnership with Lycée Français Louis Pasteur).

The 60-year-old French language and cultural centre in Lagos is a member of the world’s largest cultural network, boasting upward of 840 members around the globe. In Nigeria, Alliance Française has a total of ten associations strategically situated across the country – in Enugu, Ibadan, Ilorin, Jos, Kaduna, Kano, Lagos, Maiduguri, Owerri, and Port Harcourt, each of which is a not-for-profit association led by a Nigerian board.

As a gesture of support for Alliance Française de Lagos’ goals for cultural diversity and integration, Dr. Mike Adenuga graciously offered to build a new cultural centre in the heart of Ikoyi.

The project was completed and delivered under the vigilant supervision of Bella Adenuga Disu, daughter of Dr. Mike Adenuga, and its immaculate finish testifies to her preference for excellence.

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9 Osborne Road • Ikoyi, Lagos, Nigeria

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The new headquarters was pre-inaugurated on the 4th of July 2018

by Emmanuel Macron, then Akinwunmi Ambode, Wole Soyinka and Dr. Mike Adenuga.

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NIGERIA FOCUS Transport corridors are a large part of the government’s focus

The people crunch The new Nigerian government only has a small window of time to get the solutions right and break out of a cycle of low growth before a ballooning demographic and technological change make the country’s path to industrialisation and development more perilous

By PATRICK SMITH in Abuja It was a rare call to the urgency of now from President Muhammadu Buhari. Addressing his new ministerial team in late August, he warned that the doubling of the country’s population to 411 million by 2050 might seem a frightening prospect. “But only if we sit idly by and expect handouts from so-called development partners. The Continued on p80

THEAFRICAREPORT / N° 109 / OCTOBER-NOVEMBER-DECEMBER 2019

77

NIGERIA FOCUS / The people crunch

Continued from p77 director of Financial Derivatives Ltd. in Lagos: “The ultimate objective of all economists is to promote growth. There have to be clear signals. […] You cannot have a command economy in policy terms and a market economy in practice.”

‘More actions, less documents’

Such signals might be, says Rewane, the concessioning of the four biggest international airports or a new generation of interstate highways. “We need more actions and less documents […] to break out of this vicious circle of low growth.”

A senior economic adviser to the government in Abuja insists that plans for new transport corridors are already under way.

“As part of our special economic zones strategy, we have organised finance for the Lagos to Ibadan railway […] and new rail routes from Lagos to Warri and on to Abuja as well as an eastern spine from Port Harcourt to Maiduguri.”

This year’s budget, he says, sees the biggest-ever allocation towards public investment projects as the government tries to consolidate the economic recovery in the wake of the oil price crash of 2015 and 2016.

As concerns mount over the international outlook amid the USChina trade war and other geopolitical tensions, economists warn

AUDU MARTE/AFP

solution to our problems lies within us.” Buhari’s re-election in March with a margin of 4m votes, although disputed by the main opposition candidate Atiku Abubakar, looks far less onerous than delivering on his pledges to fight corruption, diversify the economy and consolidate security.

Alongside exhortations for national self-sufficiency and scepticism about outside interventions, Buhari was sounding alarms about the most pressing demands on the country: low growth and stalling revenue, import dependence and slow industrialisation, corruption and dysfunctional politics, national and regional insecurity, and booming population growth that would make Nigeria the world’s third-most populous country by mid-century.

Business leaders and economists share the view that these issues are pushing Nigeria to a crunch point.

Although technically the country is out of recession – as defined by two quarters of weaker growth – in practical terms it is not. With projected growth of 2% over the next year, population growth of 2.6% and inflation around 10%, that translates into what economists call ‘stagflation’.

Radical measures are needed to kickstart the economy according to Bismarck Rewane, managing

that the oil price could fall below $50 a barrel again. This year’s budget is premised on a $60-abarrel price, optimistic on current trends. It makes boosting oil production still more important.

Mele Kyari, the new managing director of the state oil company, forecasts that Nigeria will be producing at least 2.5m barrels per day (bpd) by the middle of next year, mainly by fixing damaged pipelines and dealing with security problems. Kyari’s officials reel off a list of ongoing and planned projects involving France’s Total, Italy’s Eni, the US’s ExxonMobil and Chevron costing some $50bn and generating another 1m bpd. One, Total’s Egina field which will produce another

Security

Inflation

‘Pressure on the military in the north-east has left a vacuum in other parts of the country and our weak criminal justice system has allowed impunity…’

‘Nigeria isn’t out of recession … with GDP growth at 2% you’ve got stagflation [high inflation, high unemployment and stagnant demand].’

KAYODE FAYEMI

DAVID COWAN

Governor of Ekiti State and chairman of the Nigeria Governors’ Forum

Managing director, Citibank

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THEAFRICAREPORT / N° 109 / OCTOBER-NOVEMBER-DECEMBER 2019

SUICIDE ATTACKS AND RELATED DEATHS 100 attacks 80 60 40 20 2011 12

13

14

15

16

17 2018

90 395 109 867 1989 560 559 297

Boko Haram jihadists in the north are disrupting efforts to boost agricultural production and commodity processing

200,000 bpd, has started; the final investment decision on another – Shell’s Bonga South West to produce another 150,000 bpd (see page 86) – is due next year.

How far and how fast other projects move will depend on getting the national assembly to agree to long-delayed reforms mooted in the Petroleum Industry Bill (PIB), due to set out new fiscal terms and equity rules for oil companies. The PIB’s chances improved after Buhari’s party won substantial majorities in both houses of the national assembly in March. “There are now no fundamental differences on the PIB,” said the senior economic adviser.

“There are legal drafting matters

to resolve but no ideological issues outstanding.”

If he is right, that could give Nigeria’s oil and gas industry the fillip it needs. With oil reserves at 37.5bn barrels and the world’s ninth-biggest gas reserves at more than 200trn cubic feet, Nigeria would attract billions of fresh investment, according to David Cowan, Africa economist at Citibank. If the reforms go through, says Cowan: “The idea that Nigeria could be a 3m-4m bpd producer is quite possible.”

If higher oil production is to boost growth, it has to generate more revenue. But Nigeria’s revenue take lags well behind that of Kenya and South Africa, which

SOURCE:NST

Deaths

have about a quarter the population of Nigeria. For example, Nigeria’s annual budget spending of N8.92trn and Kenya’s of KSh3.1trn are about the same (around $29bn).

Low rates of taxation and inefficient collection have been hitting revenue in many areas of Nigeria.

Its revenue-to-GDP ratio of 7% is one of the lowest in the world, less than half that of South Africa.

Nonso Obikili, chief economist for the Lagos daily Business Day, says it is a political conundrum: “If you go back to the 1970s, Nigeria was an oil state. Now it’s how you transition to a tax-collection state.” Although the government is pushing up tax rates, a substantial change in the structure – bringing more plutocratic Nigerians into the system and unpicking the tax avoidance tactics of some companies – would require constitutional change, says Obikili.

Focus on faster growth

There are heavy implications for public spending on education and health. Inefficient collection amounts to a “perverse social contract”, writes tax economist Uzochukwu Uchechukwu Alutu: ‘The notion that citizens can decide to not pay taxes in exchange that the state is not held strongly accountable for the delivery of services needs to change.’

Investment

Exchange rate

‘The leadership have to accept that with investment-led growth you cannot have a command economy in policy and a market economy in practice.’

‘I would prefer to see a mechanism where there is an automatic adjustment to the exchange rate to deal with changes in underlying circumstances.’

BISMARCK REWANE

ANDREW ALLI

Managing director, Financial Derivatives Ltd.

Group chief executive officer of SouthBridge

THEAFRICAREPORT / N° 109 / OCTOBER-NOVEMBER-DECEMBER 2019

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NIGERIA FOCUS / The people crunch

REAL GDP Annual percentage change, at 2010 market prices 3.0 2.5 2.0 1.5 1.0 0.5 0 -0.5 -1.0 -1.5 -2.0

2016 17 18 19 20 21 22 23 24

Herder-farmer clashes and terrorist militias in the Middle Belt and the northern states, respectively, are disrupting efforts to boost agricultural production and commodity processing. Yet there are states – mainly in the southern coastal regions such as Lagos, Rivers and

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The focus has to be faster growth and on the minimum conditions for industrialisation, says Charles Robertson, chief economist for Renaissance Capital: “That means 70% adult literacy, electricity of 300 kilowatt hours per person and an investment rate of 25% of gross domestic product – but Nigeria’s is running at about 13%.”

Industrialisation, with the jobs and ancillary services that it generates, would take growth up to 4-5% a year, says Robertson. With growth from agriculture and natural resources, the country could get up to 7-8%: “You do that for 10 years and you start to look like China.”

Early steps would have to include an adult literacy campaign and changing policy incentives to ramp up investment, he adds.

Akwa Ibom – that meet conditions for industrial growth: “In Lagos, you have about 16 million people, adult literacy rates of over 80% and it’s one of the top-10 economies in Africa,” says Robertson. Still, with its ruthless expansion of tax collection over the past two decades, much more needs to be done in Lagos to rebuild viable production lines after the de-industrialisation of the past three decades.

Following Buhari’s warning about the country’s population boom, one of his allies told us that pressure was mounting on the government to speed up efforts to restructure the country’s economy and politics.

“The danger is that if these are not tackled now, that economic and social fissures widen and the country starts drifting apart.”

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NIGERIA FOCUS / Green light at last for the Bonny Island plant extension

Top projects for 2020 Oil, gas, processing and transport infrastructure hold the potential to turn Nigeria’s slow-growing national economy around when five mega-projects hit their stride

By EROMO EGBEJULE in Lagos In 2015, Muhammadu Buhari became Nigeria’s president, promising to tackle insecurity, to address corruption and to boost the economy. Despite criticism about the lack of progress and taking one of Africa’s biggest economies in and out of its first recession in about three decades, the retired general was reelected in 2019.

The long-term infrastructure drive stands out as one of the signature dividends of democracy in Nigeria: the Buhari administration has been completing projects started by his predecessors as well as beginning a few of its own. A few private-sector-driven projects are also expected to inject muchneeded vigour into the economy.

The following five projects are likely to have positive knock-on effects, boosting industrialisation, attracting investment and creating jobs. But challenges will remain in terms of electricity provision and other areas that require sustained attention from the public and private sectors.

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AKINTUNDE AKINLEYE/REUTERS

ECONOMY

NLNG TRAIN 7 Nigeria’s gas-powered growth engine The Train 7 project – a plant expansion project of the Nigerian National Petroleum Corporation (NNPC)’s most profitable subsidiary, Nigeria Liquefied Natural Gas (NLNG) – has been mooted for over a decade. It is now moving ahead with the backing of NLNG’s shareholders: the NNPC (49%), Shell (25.6%), Total (15%) and Eni (10.4%). The final investment decision on the seventh LNG plant is due in October. NLNG has plans to raise about $7bn in funding in order to see it through its next phase of expansion.

In August 2018, NLNG, which is currently led by Tony Attah, awarded the front-end engineer­ ing design contract to two consortiums. Valued at $12bn, the project aims to increase the production of liquefied natural gas from 22m tonnes per annum (mtpa) to 30mtpa. It is expected to provide direct or indirect employment to more than 10,000 people and spark a cycle of opportunities, especially in engineering, procurement, construction, logistics and financial and insurance services. Local content is a major government priority, and economic players from Rivers State, where the plant is located,

THEAFRICAREPORT / N° 109 / OCTOBER-NOVEMBER-DECEMBER 2019

as well as the economic capital of Lagos are expecting to benefit from NLNG’s expansion.

Apart from the huge revenue in terms of taxes and export sales that the facility is due to bring to the government, a side effect of this project should be a drastic reduction in the use of firewood for cooking, aiding Nigeria’s gradual transition to a green economy. Attah is now canvassing for ideas about what NLNG should do after Train 7 becomes operational. Nigeria has a lot of un-utilised and under-utilised natural gas that could be exported or put to work to increase domestic electricity production.

The country has 202trn cubic feet (tcf) of proven reserves and potentially an additional 600tcf of unproven ones. Exploration has slowed recently, but Italy’s Eni made a big 1tcf find in the Niger Delta in late August, which could spur on others to keep at it.

10,000

direct or indirect jobs are expected from the Train 7 LNG plant extension, sparking local content opportunities

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The controversial Second Niger Bridge, neglected by past governments despite calls from marginalised communities in south-eastern Nigeria, was finally included in the 2018 and 2019 national budgets. Construction is to be overseen by the integrated federal ministry of power, works and housing in collaboration with the Nigerian Sovereign Investment Authority. They have awarded the construction contract to German builder Julius Berger. The cost of constructing the bridge, which is scheduled for completion in 2020, is N206bn ($565.7m). A key piece of national infrastructure,

it will open up new pathways in the region and the adjoining Delta and reduce strains on the existing Niger Bridge, which has been in use since December 1965. A project first launched by the government of former president Goodluck Jonathan, the second Niger bridge was more than a quarter complete

by August of this year.

The work comprises the construction of a 1.6km-long bridge and 10.3km highway as well as an interchange and a toll station.

The new bridge will boost the overall economy of the southeast. It will provide an alternative means of delivering goods into

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the popular Onitsha international market – reputed as the largest outdoor market in West Africa – easing traffic on the old bridge, which has been a constant source of congestion due to the influx of containers coming from different ports in the country. Other major beneficiaries would be the Ariaria (Aba) and Nnewi market hubs, which house manufacturers of spare parts, textiles, bags and shoes. Those regions already export goods to Gabon, Equatorial Guinea and Cameroon.

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NIGERIA FOCUS / Top projects for 2020 Groundbreaking ceremony for the Lagos/Ibadan railway

PIUS UTOMI EKPEI/AFP

DANGOTE OIL REFINERY Industrial investment Construction began on Africa’s largest refinery – also the world’s largest single-train refinery – in 2017. Work was scheduled to be completed in late 2019, but a series of delays in importing steel and equipment conspired to push the launch of operations back for at least one more year. The 650,000 barrels-per-day integrated refinery is situated in the Lekki Free Zone of the commercial capital, Lagos.

Analysts say that, when fully operational, the Dangote refinery will not only increase Nigeria’s refining capacity two-fold and help meet the increasing domestic fuel demand, but it will also create a whopping 30,000 jobs. It would also potentially save Nigeria the enormous amount it spends annually in exporting crude oil and then importing finished products. In addition, millions allocated to subsidies and under-recovery could also be saved – good news for Nigeria, whose fast-depleting sovereign wealth funds would benefit from the lifting of that burden.

LAGOS/IBADAN RAILWAY Righting the rails

BONGA SOUTH WEST Barrel bonanza project. The country produced an average of 1.7m bpd in April 2019, so Bonga South West would help production to reach nearly 2m bpd. Shell has other big Nigerian projects, and is working on developing the Assa North/Ohaji South gas field in Imo State.

NIGERIA’S CRUDE OIL PRODUCTION (million barrels) 2.5

2.0

1.5 2016

2018

2020

2022

SOURCE: IMF

Shell’s Bonga South West deepwater oil field, located off the coast of the country, is another project with tremendous potential for Nigeria. The completion of this project would positively impact the economies of states in the Niger Delta, especially Bayelsa State. Shell has suspended the final investment due to fluctuating oil prices, but it should be concluded in 2020. The project, valued at about $10bn, will have a new floating production, storage and offloading (FPSO) facility, with an expected peak production of 225,000 barrels per day (bpd). Shell is soon due to receive bids for the FPSO

Contracted to China Civil Engineering Construction Corporation at a cost of $1.5bn in 2012, the 156km standard-gauge railway was scheduled to be completed three years ago. The contractor has attributed the delay to rising insecurity in the country but has, however, assured the government of its completion by 2020. The project, which has about 5,000 local staff members and a 79% completion rate according to immediate past transport minister Rotimi Amaechi, could potentially reduce the cumbersome nature of mass public transport in Nigeria. Amaechi has blamed the government in part for being slow in its administrative procedures.

Aside from easing the stress of civil servants and businesspeople alike, the railway line will help in no small measure in decongesting the roads in Lagos, as it will link with the city's port of Apapa. The success of the Lagos-Ibadan line will be an important step to show if the government can implement its other grand rail plans.

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NIGERIA FOCUS /

PROFILE

Aliko Dangote African hero, ruthless businessman Africa’s richest man is due to launch a refinery and fertiliser plant that will put his business into a class of its own in Nigeria and across the continent

By JULIEN WAGNER On the verge of a fivefold increase in his income by 2021 thanks to a pharaonic refinery and fertiliser plant, the richest man in Africa – Aliko Dangote – continues his irresistible rise. “Dangote, Dangote, Dangote, Dangote still dey find money o...” The prince of Nigerian Afrobeats, Burna

Boy, etched the industrialist into Nigeria’s cultural landscape.

Released in March, the track praises the billionaire from Kano: a symbol of success, a beacon of aspiration for Nigeria’s toiling classes. But, sotto voce, Burna Boy seems to ask a difficult question: how can one be so rich in a country where a world record 87 million people live in extreme poverty?

‘We were able to overcome all the other challenges’ When will your refinery launch?

ALIKO DANGOTE: Financing is in different tranches. We are putting in more money, and we still targeting next year for the commissioning. There are quite a lot of challenges, but we are moving.

Where is access to forex on your list of day-to-day priorities?

As you know our company is fully diversified, in the sense that we are looking forward to supplying more foreign exchange in the domestic

88

market, than requesting foreign exchange. By next year, we will start exporting almost 2m tonnes of urea and ammonia out of our 3m tonne capacity ... We will export almost 35% of the petroleum products.

You have made a journey from trader to manufacturer. What have been the most important things that have helped you?

Consistency in what we want to do, the vision, and the execution of that vision. You know in Africa one of the greatest issues is that when you have

a project or you don’t know how to execute a project, if it drags on for long. Because of the high interest rates that we have, you will end up having too much of the costs overrun, devaluation … When we started the refinery, the exchange rate was 157 to the dollar, now it is 360 today. Because we already overestimated what we were going to spend, we were able to overcome all the other challenges because of the financial strength of the group.

THEAFRICAREPORT / N° 109 / OCTOBER-NOVEMBER-DECEMBER 2019

Interview by NICHOLAS NORBROOK

The richest man on the continent – his fortune is estimated at $16.7bn by Bloomberg, $10.3bn by Forbes – is a complex and ambivalent character. Both hero of Africa and ruthless businessman, ‘son of’ and self-made man, he is a great advocate of the opening of African markets to his cement and tireless opponent of competition in Nigeria.

At 62, his rise seems more certain than ever. Almost unknown outside Nigeria 10 years ago, he now enjoys a status worthy of a head of state – he holds an African Union passport – and his image expands beyond the con­ tinent’s borders.

Since 2014, the most ambitious project in Africa has been underway on this waterlogged strip of land east of Lagos. Dangote is spending more than $15bn for an oil refinery (minimum $10bn), a fertiliser plant ($3bn) and kilometres of pipelines ($2.5bn).

‘The audacity’

“Everything about this refinery is huge,” he said. To this end, Dangote has acquired 2.7m square metres of fallow land – a “jungle” and “marshes”, he conceded, which he has covered with 365m cubic metres of sand excavated from the Nigerian coast.

The financing structure has not been disclosed, but according to various sources, Dangote committed $5bn-$6bn of his own money to make the project feasible. This is a similar move to what he still calls the best decision of his career when, in 2005, he built his first cement plant. Then, he personally invested $319m alongside a $479m loan from the World Bank.

Costly delays

STEPHANE DE SAKUTIN/AFP

According to Dangote, in the year the refinery project goes into production, “Dangote Group’s revenues will increase from $5bn to $28bn”. This represents just over 7% of Nigeria’s gross domestic product and the equivalent of the national budget in 2018.

Its holding company includes MEGA MAGNATE more than 10 10 April 1957 companies, four Born in Kano of which are listed on the Lagos Stock 1977 Exchange: Dangote Set up the Dangote Group Cement, Dangote as a company Sugar, Dangote Flour Mills (DFM) 1992 Created Obajana Cement and National Salt in Kogi State as a Company of Nigeria. first move into the sector Cement generates the majority of 2000 its revenues ($2.5bn Launched Dangote Sugar in 2018) and most of its profits 2005 ($1.2bn in 2018).

Built first cement The company has production plant become pan-African 2017 in the last 10 years fertiliser plant, with Construction began on with the expansion a capacity of 3m the refinery and fertiliser of its activities tonnes per year, project in Lekki in Ghana, South will export ammonia Africa, Cameroon, and urea, probably Zambia, Ethiopia to South America. and Senegal, Tanzania, Congo “Imagine building such a complex and Sierra Leone, but the group’s near Lagos. [...] Who else would growth is not going smoothly. have the audacity to undertake Originally scheduled for 2018, this project in Nigeria?” said the refinery is now expected in a European banker who worked 2020 and some observers anticipate with Dangote.

“We had to build 136km of roads and our own port in order to be able to receive and transport the huge machines needed,” he said in his low, almost shy voice in April in Abidjan at the annual conference organised by his billionaire friend Mo Ibrahim.

With a capacity of 650,000 barrels per day, this mega refinery alone could process one-third of Nigeria’s total production. The

THEAFRICAREPORT / N° 109 / OCTOBER-NOVEMBER-DECEMBER 2019

89

NIGERIA FOCUS / Aliko Dangote

Brutal opportunism

A pious Muslim – he has made several pilgrimages to Mecca, observes Ramadan and prays five times a day – ‘Alhaji’ leads a life described as “austere, almost monastic”, according to someone who has known him well.

But this devotion to work is not the only factor that explains Dangote’s success. The billionaire seeks to operate in non-competitive environments, showing fierce, even brutal opportunism. Whether

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CEMENT VOLUME GROWTH (m tonnes) 25 20 15 10 5 0

2013

2014

Nigeria Senegal Cameroon Sierra Leone Rep. of Congo

2015

2016

2017

South Africa Ethiopia Tanzania Ghana Zambia

in sugar or cement, he has made investments in sectors which have put his companies in monopolistic or quasi-monopolistic situations.

His frenemy, the billionaire Abdul Samad Rabiu, founder of the BUA Group, said at the Africa CEO Forum in Kigali in March: “Aliko loves nothing as much as the monopoly. He’ll do anything to protect his business.

Whether you are his friend, cousin, brother or daughter does not matter, he will defend his interests in the same way. It’s in his blood.”

He is close to former president Olusegun Obasanjo, whose re-election campaign he financed in 2003, as well as vice-president Yemi Osinbajo, former Lagos governor Bola Tinubu and Emir of Kano Sanusi Lamido Sanusi.

Dangote has a reputation for relying on political relations to help his businesses.

Between 2010 and 2015, Dangote was also an economic adviser to then-president Goodluck Jonathan.

“It’s not that he’s doing anything illegal,” says a prominent Nigerian banker, “he’s just getting the most out of the benefits of the system.

For his own benefit. Look at the price of cement in Nigeria, it is two to three times higher than elsewhere. This means higher costs for all infrastructure projects.

I find that the image he enjoys in the media lacks perspective.

The question that should be asked

THEAFRICAREPORT / N° 109 / OCTOBER-NOVEMBER-DECEMBER 2019

DANGOTE CEMENT

it will not be until 2021. Delays have already cost the company several hundred million dollars.

This is probably the yardstick against which to interpret the various asset disposals made in recent years or still in progress.

“Between 2015 and 2018, Dangote sold more than 10% of its shares in Dangote Cement (from 95% to 85%), equivalent to nearly $550m,” says a Lagos-based analyst. This year, he is expected to sell DFM. Singapore’s Olam offered $363m for it in April.

Known for his frugality, the businessman, who lives on Victoria Island, a wealthy enclave in Lagos, is not afraid to spend when it comes to business. “Oil is a huge challenge,” says our analyst.

“This is not his field at all.

But with him, anything is possible.

Initially a novice in cement, he became number one. In sugar, the same … When he chooses a target, it’s to take everything.”

His inclination for risk is reinforced by his extraordinary know-how and involvement. “What makes the difference is his ability to execute,” observed a banker who worked with him. “He is meticulous and a visionary, and his ability to deal with risk comes from his involvement in execution. For the refinery, for example, it is he who negotiates directly with suppliers, as he did for his cement plants.”

is: ‘How much benefit does he bring Nigerian citizens?’”

In 2016, a Bloomberg Intelligence report highlighted the incredible profits made by Dangote Cement, which controls 65% of the Nigerian cement market. In 2015, profit margins were 42.3%, compared to an average of 17.2% worldwide for cement producers.

King of cement

Another World Bank report, also published in 2016, shows how the Nigerian government gradually phased out cement import licences from 2012, at the very time Dangote Cement was intensifying its production.

“There is only one alternative,” commented the Nigerian banker.

“Either Aliko Dangote is a genius without equal in the world or the system helps him.”

The mixed success of Dangote Cement’s African subsidiaries reinforces this impression that Nigeria

Originally scheduled for 2018, the refinery is now expected in 2020

Now known as ‘Nigeria’s most powerful man’, Dangote seems to have no limits. “The fertiliser plant will bring him huge money,” said an expert in the sector. “The basic input of urea and ammonia is gas, and it will receive this gas at the most competitive price in the world. He’s sure to win.”

from Kano. Raised from the age of 8 by his maternal grandfather after the death of his father, Dangote launched a business transporting food after graduating from Egypt’s Al-Azhar University.

In the early 1980s, he acquired a cement import permit and went to Lagos. It took Dangote more than 20 years to make the move from wealthy trader to billionaire, targeting import markets. By the mid-1990s, Dangote had managed to enter the inner circle of power in Abuja. In 1996, his younger brother, Bello Dangote (whose daughter Aliko later adopted), died in a plane crash alongside the son of General Sani Abacha, then head of state.

‘Too big to fail?’

Dangote’s influence and hustle are not always rewarded, even in Nigeria

TOM SAATER/BLOOMBERG VIA GETTY IMAGES

is particularly favourable to the billionaire. In production in nine African countries, the company made a profit of $1.36bn in Nigeria in 2018, compared to a cumulative net loss of $242m outside its home base. However, this is not enough to dissuade the ‘king of cement’ from pursuing his African expansion: in addition to a fourth cement plant under construction in Nigeria, two new plants are planned in Côte d’Ivoire and South Africa.

But his influence and hustle are not always rewarded, even in Nigeria. “During the currency crisis in 2015,” said the Nigerian banker, “Aliko did everything he could to ensure that [President Muhammadu] Buhari did not devalue the naira.

For the Lekki project, he borrowed billions of dollars and devaluation was a big risk.”

The status Dangote acquired was not a given for this child from the north – even for the grandson of Sanusi Dantata, a rich merchant

As for the refinery, “isn’t it too big to fail?” asked the banking source. “The banks have put too much money into it, and the government is too eager for the refinery to go into production …

I don’t think he can lose.”

However, Lekki is not the only ambition that keeps Dangote awake. He is pursuing what would be another crowning achievement: the listing of Dangote Cement on the London Stock Exchange. “It’s a bit like the pinnacle of everything he’s been doing for years,” said a banker who worked with him. This would help him to break out of the African elite and into the highest echelons of the global business class. The takeover of the Premier League football club Arsenal, for which he has shown interest on several occasions, can also be seen as a similar quest.

While the magnate surrounded himself with international management, and in particular Indian management, he took a new step in 2017-2018 with the recruitment of experienced business leaders, from Europe in particular. These appointments, however, will not change an organisational chart dominated by Dangote: his brother Sani is vice-president and his cousin Abdu Dantata is executive director in charge of logistics and distribution. But attracting the most attention is his daughter, Halima.

Increasingly present alongside her father, she joined the group in 2008 and is now the ‘number three’.

A successor, perhaps.

THEAFRICAREPORT / N° 109 / OCTOBER-NOVEMBER-DECEMBER 2019

91

NIGERIA FOCUS /

AKINTUNDE AKINLEYE/REUTERS

Software developers at the iDEA accelerator in Yaba

BUSINESS

What Nigeria’s young CEOs want The country is famed for its entrepreneurs, yet Nigeria makes it tough to succeed.

Startup founders tell The Africa Report what government could do to ease business

By EROMO EGBEJULE in Abuja At the Quartz Africa Innovators summit in September 2015, Kenya’s Ory Okolloh delivered what sounded like a stinging assessment of the African entrepreneurial ecosystem, which she has played a key role in developing. “We can’t entrepreneur our way around bad leadership. We can’t entrepreneur our way around bad policies,” the director of investments at Omidyar Network said. “There is growth in Africa, but Africans are not growing. And we have to question why there [is] this big push for us to innovate ourselves around problems that our leaders, our taxes, our policy-makers, … to be quite frank, should be grappling with.”

Over the past decade, there has been an astronomical rise of technology on the continent. Hubs

92

in Kenya, South Africa and Nigeria have burst onto the scene, incub­ ating an assortment of startups offering wide-ranging services.

However, a number of these revolutionary ideas have come unstuck for reasons beyond their control, including the ubiquitous dearth of physical and economic infrastructure for entrepreneurs to hook up to in order to keep their young businesses thriving.

Basic problems of epileptic electricity and the nightmare of logistics for delivery continue to kill small and medium-sized businesses. Rent-seeking governments

12/54

Nigeria came 12th in Africa and 101st in the world in the 2018 Global Entrepreneurship Index (thegedi.org)

THEAFRICAREPORT / N° 109 / OCTOBER-NOVEMBER-DECEMBER 2019

also come in the way of success.

In May 2019, motorcycle hailing startup Gokada – conceived as a solution to frustrating traffic gridlocks in Lagos – announced a round of funding to the tune of $5.3m. Two months later, news reports revealed that, apart from the expected regular taxes, the state government was planning to enforce a new N25m ($70,000) licence fee for every 1,000 bikes and an additional N30,000 ($83) per extra bike.

Greedy officials

That same month, Ada Osakwe, whose Nuli Juice restaurant chain lost its Lagos outlet to belligerent state government officials overseeing a demolition spree in September 2016, launched a frantic appeal to vice-president Yemi Osinbajo. She complained on Twitter about ‘antagonistic

Need for capital

The massive youth demographic in Africa is still increasing and could make or mar the future of the continent. There were 226 million people aged 15-24 in 2015, according to the UN – one fifth of the population on the continent.

It is expected to be more than double that by 2050.

This is a huge market pool for the continent’s many entrepreneurs, despite concerns about brain drain to Europe and North America.

Still, a lack of access to land and capital remain major factors acting against entrepreneurial success on the continent. Stakeholders say reducing red tape is key to improving the ease of young people doing business and also urging some of its most privileged citizens to lend a helping hand.

In 2014, Nigerian banker and philanthropist Tony Elumelu launched a 10-year, $100m initiative handing out seed capital and mentorship to young business owners. Even he has called for proper infrastructure to be put in place, as well as access to more capital to create an enabling environment for a “deregulation of wealth”.

“We have to de-risk lending to businesses led by youth,” concurred Akinwumi Adesina, president of the African Development Bank, in July at the 2019 edition of the Tony Elumelu Entrepreneurship Forum. “We must begin to put our capital at risk for the young people of Africa. [...] Governments are

For Nigeria to benefit fully from the AfCFTA, it must first set its house in order

not doing enough in creating jobs,” Adesina said, while urging other private-sector leaders to support young entrepreneurs.

Toma Ijatomi, 30, runs Rherhe Fashion, a swimwear company using indigenous fabric designs.

She complains about “poor power supply […] and access to capital and credit. These have had a great impact on the growth of my business and impeded my ability to scale at a faster pace,” she tells The Africa Report. “Government should play a more enabling role in providing access to capital and more constant power supply.

Also, [it needs] to create an enabling environment for femaleled businesses. Women are 50% of the population, but not 50% of entrepreneurs.”

Delivery sometime soon

Export processes are long-winded too, says Bisola Adeniyi, the chief executive of the Lady Biba fashion line, which exports to the US and the UK from Lagos. “When you try to do exports with NiPost [Nigerian Postal Service], you can’t tell when the products will get to the CREDIT CONCENTRATION BY SECTOR (2018) 5%

6%

6%

30%

4% 4% 4% 9% 7%

15% 4%

Oil and gas Manufacturing Household Information and communication General commerce Government Real estate

6% Construction Agriculture, forestry and fishing Finance and insurance Power and energy Other sectors

SOURCE: CENTRAL BANK OF NIGERIA

agencies & regulators seeking to pull SMEs down’. ‘[We are] currently being hassled by police for a bribe or they threaten to give Nuli Juice a hard time,’ Osakwe lamented. ‘Imagine!

We are compliant in all: taxes… licences. We are creating jobs, adding value but these wretched officials must chop!’

customer. Delivery infrastructure is terrible,” she says.

In July 2019, the African Continental Free Trade Area (AfCFTA) was launched, effectively making the continent the largest trade zone the world has ever known in terms of countries.

Analysts say this could open up a window of opportunities for Nigerian firms to become more competitive, as well as increase sales, foreign investment and the pool of competent technical know-how available.

For Nigeria to benefit fully from such a milestone opportunity, it must first set its house in order by resolving the basic problems, says Jide Ojo, an Abuja-based public affairs analyst. “How well-positioned are Nigeria’s businesses to take advantage of the agreement?” he asks. “Where is the infrastructure? […] For Nigeria to gain maximally from AfCFTA, government at all levels must work together to promote the ease of doing business.”

Nigeria has a long way to go to improve its business environment. In the World Bank’s Doing Business rankings the country is a good performer in issuing credit, but trails far behind its peers in terms of cross-border trade, paying taxes, providing electricity and dealing with construction permits.

Youth entrepreneurship is not a chicken-and-egg issue: young business leaders can get on with things in a rough environment, but they will not deliver on transformational change if the hard and soft infrastructure that businesses need are not there.

THEAFRICAREPORT / N° 109 / OCTOBER-NOVEMBER-DECEMBER 2019

93

NIGERIA FOCUS /

CHRISTOPHE MASENGESHO/ACF/JA

Kayode Fayemi, chair of the Nigeria Governors’ Forum

STATES

The rise and rise of governors

States are getting a larger slice of the national pie, but without checks and balances it may not lead to very significant changes throughout the country

By PATRICK SMITH in Abuja

Greater powers over spending, security and social investment are in the works as Nigeria’s 36 states prepare for some radical reforms.

The policy arguments are still playing out but the 36 states are likely to get a bigger share of the country’s oil revenues and the right to establish their own “community police forces” and bring more federal health and educational institutions under local management.

96

With those powers comes greater responsibility. State governors and their local administrations will have to take their share of the blame if economic growth remains sluggish and joblessness worsens.

There is consensus on the national political scene that Nigeria needs more devolution of political authority and revenue. At the same time, there are concerns about the lack of checks and balances on the considerable executive powers of the state governors.

THEAFRICAREPORT / N° 109 / OCTOBER-NOVEMBER-DECEMBER 2019

Aside from a few notable exceptions, the state assemblies are uncritical supporters of the governors under whom they serve. Next to the president, state governors wield more executive power than anyone else in Nigeria’s system. In general, they are under less scrutiny than the president.

Already, state governments and the local governments under their indirect control receive nearly half – 47% – of Nigeria’s consolidated revenue. Apart from Lagos State, which generates well over half of its revenue from local income and property and sales taxes, the other 35 states depend critically on transfers of federal revenue from Abuja.

According to Eustace Ezechukwu Uzor, now an evaluation officer with the African Development Bank, there is no incentive for state governments to boost local revenue by stepping up tax collection efforts or broadening the tax base. The fiscal sustainability crisis reported in many states after a decade-long oil-price boom was ‘evidence of fiscal indiscipline and large-scale corruption’, Uzor wrote in a research paper for the London School of Economics.

Agreeing that decentralised fiscal spending ought to improve the delivery of public services, Uzor argues that transfers to states from the centre, and particularly bailouts, should be based on compliance with agreed fiscal rules such as a debt sustainability ratio and priority for productive infrastructure spending. Open access to public finance data of state governments would also help to highlight how funds are being used, he adds, while federal officials could devise an incentive structure using grants.

Some officials in Abuja say they are looking hard at such policies.

The tussle for power and money between the states and the centre is not going away any time soon.

NIGERIA GOVERNORS’ FORUM Building closer cooperation

@IAOKOWA/TWITTER

In the changing geography of power in Nigeria, the power of its 36 state governors over money and policy is expanding. After years of tussling over national conferences and restructuring, the state governors are on the winning side of the argument.

Now both main political parties profess to support more devolution of political power and control of resources to the states and local governments. Yet some officials in Abuja want strict controls and performance monitoring on that redistribution.

At the centre of this power shift is the Nigeria Governors’ Forum, which coordinates the policies and programmes of all 36 states. Its chairman is Kayode Fayemi, who was re-elected governor of Ekiti State last year after a stint as federal minister for mines.

A senior figure in the ruling All Progressives Congress (APC) who has worked closely with President Muhammadu Buhari since 2015, Fayemi is an adept politician able to build consensus across the partisan divides in the Governors’ Forum.

exclusive control of the federal government. Ceding those powers to state governments is still contentious for many officials in Abuja.

Control over education is split Having cut his political teeth between the states, which run campaigning against military rule, primary and secondary education; Fayemi warns of the dangers of the federal government runs dysfunctional civilian politics: “It’s tertiary education. Now the states not a foregone conclusion that this want to run all educational instit­ democratisation is irreversible.” utions, leaving the central Governors of all parties government to monitor have moved closer and regulate them. together over national There is also restructuring. In this greater cooperyear’s elections, ation between the governing APC Ekiti State states in the and the opposition country’s six geoPeople’s Democratic political regions.

Party promised “It’s becoming constitutional reform. the norm. In western “We have a committee Nigeria [we] take headed by my colleague, advantage of our compargovernor Nasir El-Rufai of ative knowledge [with] initiatives Kaduna, to work out the modalithat will pool resources in agriculties,” Fayemi tells The Africa Report ture or education or coding – “the details of what we would like and information technology.” to see in a restructured federation.”

Civil servants, as well as political Fayemi adds: “The question office holders, are brought into is the extent to which we should the planning process, too. “They go in restructuring the federation? have to draw up plans common […] Is it just allocation to different states’ civil services of resources or should it include in terms of monitoring, discipline, essential services?” For now, regulation,” Fayemi explains. security and management of More contentious, against the natural resources are under the backdrop of growing insecurity, are the calls for state police. Critics of the plan to have police forces under the control of state governments – or “community policing” as vice-president Yemi Osinbajo calls it – warn that authoritarian state governors could abuse such powers over armed units.

“I don’t necessarily share those fears,” says Fayemi, arguing that the misuse of power within the political system isn’t unique to state governors. “I have been a victim of [federal] police brutality, even as a sitting governor with immunity.

Governors at their Forum: I was teargassed in this state during the gathering is marked my election in 2014 when the by growing consensus federal forces invaded Ekiti.”

THEAFRICAREPORT / N° 109 / OCTOBER-NOVEMBER-DECEMBER 2019

97

NIGERIA FOCUS / The rise and rise of governors

Fayemi wants a dual control system. “To have a supervening authority [… ] that is what happens in most federal entities. There is no federal entity that has a unitary police system. Every federal entity has a multi-level policing arrangement, whether you talk about Australia, the United States, Canada, India.”

Bringing in state or community police is not a rejection of federal police, Fayemi argues, it is an

campaign. Now there are just 370,000 police for 200 million people. An effective force would require about two million.

“We’re going to need more money, a lot more human resources. More officers at the local level, so every community at the very least would have two to four police officers known to them that can track what is going on and be local to that community,” Fayemi concludes.

addition to the security system.

The Nigerian Police Council, whose members include the president, all the state governors and the top security commanders, should be strong enough to counter misuse of police powers, Fayemi says. “A legitimate claim could be made against a state governor at the police council.”

However the system is structured, there will have to be a widespread police recruitment

FACEBOOK

Governor Emeka Ihedioha is picking up the pieces

IMO STATE Flyovers to nowhere Like a giant broken tooth, the unfinished flyover juts over one of the main commercial arteries criss-crossing Owerri, the capital of Imo State. It is a flyover like no other. This greying, mildewed edifice does not lead anywhere and was shoddily built in an opaque deal with politically connected contractors.

Critics say it is a perfect symbol of the reign of Rochas Okorocha, the previous governor of Imo State.

The new governor of Imo, Emeka

98

Ihedioha, calls it a “glittering example of how not to run a state”.

Under investigation by the Economic and Financial Crimes Commission in Abuja for many months, former governor Okorocha is now the subject of an arrest warrant issued by the new government in Imo State.

His legal status is complicated by his current role as a senator in the national assembly.

The succession saga points to a familiar problem in states

THEAFRICAREPORT / N° 109 / OCTOBER-NOVEMBER-DECEMBER 2019

where incoming governments find an empty treasury with only the most cursory accounting records, coupled with an inheritance of unpayable debts.

A tour around Owerri and its environs shows a succession of would-be prestige projects that are crumbling fast. There are concrete bridges, built without steel reinforcement rods, that are now closed to traffic. There are highways with potholes that have grown to the size of giant sinkholes.

Most of the public-sector projects, including new government offices, look shaky and ramshackle. Some are on the brink of collapse. Many were built by construction companies said to be very close to the former governor.

Okorocha has pushed back, denying all wrongdoing, arguing that the arrest warrant against him could trigger instability in the state. He complains that he and his vast property portfolio are being unfairly targeted by investigators.

Yet there is scant support for him in the state in recent months.

Instead, workers and companies want his successor to spell out his plan to restart the local economy.

Since his election in March 2019, Governor Ihedioha has been picking up the pieces. His new administration has been

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NIGERIA FOCUS / The rise and rise of governors

100 THEAFRICAREPORT / N° 109 / OCTOBER-NOVEMBER-DECEMBER 2019

HEALTH AND WEALTH: NIGERIA’S 36 STATES COMPARED

State

Life expectancy at birth (2016) Age

Internally generated revenue per capita N (2017)

Abia

52

3,895

Adamawa

43

1,418

Akwa Ibom

51

2,813

Anambra

48

3,055

Bauchi

45

646

Bayelsa

50

5,341

Benue

47

2,096

Borno

43

822

Cross River

54

4,549

Delta

49

8,874

Ebonyi

48

1,723

Edo

50

5,824

Ekiti

53

1,472

Enugu

52

4,849

Gombe

48

1,568

Imo

53

1,227

Jigawa

47

1,108

Kaduna

45

3,120

Kano

47

3,139

Katsina

49

747

Kebbi

52

959

Kogi

46

2,439

Kwara

52

5,969

Lagos

49

25,772

Nasarawa

50

2,374

Niger

50

1,134

Ogun

53

13,877

Ondo

52

2,270

Osun

52

1,335

Oyo

51

2,767

Plateau

46

2,500

Rivers

47

11,842

Sokoto

50

1,751

Taraba

47

1,826

Yobe

44

1,055

Zamfara

50

1,292

SOURCE: BUDGIT AND NATIONAL BUREAU OF STATISTICS

The Okorocha government built saddled with horrendous 27 hospitals, of which none are levels of debt by his predecessor, currently functioning. “Most are he tells The Africa Report. overgrown by bush now. Not one “The worst examples of was furnished or equipped. […] financial impropriety by the last The unaccounted billions wasted administration,” says governor on these so-called hospitals could Ihedioha, “include the transfer have been deployed to fixing the of statutory allocations including primary healthcare clinics which [those] meant for Universal Basic are all moribund.”

Education into private accounts.”

Calculating the scale Contractors on some of financial loss of the biggest projects to the state is tricky in the state were paid because there in cash, and the was no formal Okorocha governhandover from ment hired sundry the Okorocha agents to collect administration revenue “without a Imo State to Ihedioha’s credible framework team. “We have for accounting estimated [losses of] for such funds to the N119bn ($328m) misappublic treasury”. plied and misappropriated, Governor Ihedioha is but we reckon it’s far more than an experienced politician at the that if we take into account local state and federal level but says council funds, oil and gas derivahe was taken aback by the devtion funds, ecological funds astation in the state. To address and the Paris Club refund monies.” the crisis, he has appointed a This leaves the Ihedioha seven-strong financial advisory government little room to team led by Abraham Nwankwo, manoeuvre. Although they have former director general of the Debt spent much time on cleaning Management Office in Abuja. up and rebuilding state instiThis team is to “review and audit tutions, officials in Owerri say the financial transactions of the they cannot afford to dwell state government with banks and on the past. “We have focused others to ascertain that charges, 90% of our efforts in rebuilding fees and other expenses associated and developing the state,” says with those transactions are approIhedioha, “with the very limited priate,” explains Ihedioha. resources at our disposal. We The advisory team will also set out to repair roads and improve advise on government structures sanitation while taking measures and processes, particularly in to enhance revenue.” organisations such as the Board The first signs of success, of Internal Revenue as well as says Ihedioha, will be the return other key ministries, departments of investors to the state. The and agencies. Fixing the revenueeconomy in Imo State is largely generating agencies will be top dependent on agriculture. priority for the new government.

Investors have been pitching new The problems go beyond money. projects in agro-processing, light As the new government undertakes manufacturing, information techits inventory of inherited projects, nology and the creative economy it has to make tough choices: – several Nollywood stars and film whether to try to rehabilitate faulty directors hail from Imo State. projects or to demolish them.

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PROFILE

Godwin Emefiele The first governor of the Central Bank of Nigeria since the return to civilian rule to get two five-year terms, Emefiele is a crucial player in Buhari’s economic strategy

By PATRICK SMITH in Abuja For three months this year, Central Bank of Nigeria (CBN) governor Godwin Emefiele was the sole ambassador of Nigeria’s economy in the interregnum between the elections and the announcement of President Muhammadu Buhari’s new cabinet. Emefiele used the opportunity to set out his priorities: macroeconomic stability, financial inclusion, more lending and mortgages, higher productivity in the factories and on the farms, and lower inflation. In May, Buhari’s

quick reappointment of Emefiele for a second term – there were four other contenders – pointed to how close the two men have become.

They are an odd couple: the stern general-turned-civilian politician with a sceptical view of the business world paired with the veteran commercial banker, alumnus of Harvard University and erstwhile enthusiast for market economics.

“Emefiele is a transaction banker,” says Bismarck Rewane, managing director of Financial Derivatives Ltd. “He looks at things from the point of view of net revenue from

102 THEAFRICAREPORT / N° 109 / OCTOBER-NOVEMBER-DECEMBER 2019

ALL RIGHTS RESERVED

‘For us to achieve growth, banks must lend’ funds, interest rates spreads, provisions for bad loans, and he has a background in accounting.”

Emefiele’s relationship to Buhari has provoked criticism because the institution is supposed to be politically independent. When Buhari announced a ban on the use of official sources of foreign exchange for food imports in August, his office said that “the president has directed the central bank to stop providing foreign exchange for importation of food.”

Will the the food import ban boost production much? Nonso Obikili, chief economist of the Lagos daily Business Day, is sceptical: “It’s not a good strategy.

If you’re looking at large imports – what about fuel? If you look at the list of banned imports,

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Nigeria is not self-sufficient in many of these things.”

Achieving food self-sufficiency would take four to five years, at least, says Rewane. “Access to forex is not the only factor. […] There is the need for more rural roads, availability of inputs, logistics, security and the risks of export smuggling.”

David Cowan, chief Africa economist at Citigroup, has been tracking Nigeria’s rice imports, which are mainly from Thailand.

Soon after Emefiele banned forex for rice imports in 2015, Thai exports to Nigeria dropped precipitously but rose sharply to neighbouring Benin.

With a population of about 12 million, Benin’s rice imports quickly found their way across the border to Nigeria’s market, which is almost 20 times bigger.

The Nigerian government response was to announce a “partial closure” of the border, with extensive security checks on all trucks to intercept the smuggled rice.

Penalties, regulations

For Rewane and Cowan, the episode emphasises the limits of the central bank’s powers over economic policy. Spending on food imports in Nigeria, now running at about $4bn a year, has been growing, partly due to local supply disruptions and security problems such as the insurgency in the northeast and herder-farmer clashes.

“Emefiele sees his role as not just about exchange rates, monetary policy and price stability,” says Rewane. “He has a development-finance agenda.”

The aim is to promote growth and local production. In March, the central bank cut rates and has been using new penalties and regulations to get banks to lend more to small and medium-sized businesses, with mixed results.

Nigerian banks are reluctant to lend to all but the biggest private

TWO-TERMER 4 August 1961 Born in Lagos 1986 Earned a master's in business administration specialised in finance from the University of Nigeria, Nsukka 2001 Named deputy managing director of Zenith Bank 4 June 2014 Appointed central bank governor by then-president Goodluck Jonathan 16 May 2019 Confirmed for a second term as central bank governor

companies. Loans from banks and other financial institutions are about 21% of Nigeria’s gross domestic product, compared with about 60% in South Africa.

Banks in Nigeria prefer to put their cash in high-yielding government securities, rather than make riskier loans to small businesses.

“For us to achieve growth, those whose responsibility it is to provide credit must be seen to perform that responsibility,” Emefiele said after a meeting of the bank’s monetary policy committee in May. He added that the committee was looking at a mechanism to limit the capacity of banks to put customers’ deposits into government securities.

Nigerian banks have been told they should use at least 60% of their deposits as loans to businesses by the end of September; the ratios

‘IT’S NOT JUST ABOUT PRICE STABILITY. HE HAS A DEVELOPMENTFINANCE AGENDA’

104 THEAFRICAREPORT / N° 109 / OCTOBER-NOVEMBER-DECEMBER 2019

in Kenya and South Africa are 76% and more than 90%, respectively.

Rewane says other policies will be needed to boost the private sector. “CBN activity is not enough. […] There is a need for moral suasion and financial incentives.”

‘Targeting the wrong thing’

But the policy for which Emefiele has been most criticised is the adoption of multiple exchange rates and use of reserves to defend the naira’s value – a policy objective he shares with Buhari. “If you want to stimulate local production […] you ensure imports are more expensive and exports cheaper,” says Rewane. “We’re targeting the wrong thing. […] We should be targeting the market structure.”

Cowan sees big limitations in Emefiele’s current stance on the naira. But he adds: “The central bank has overseen an enormous devaluation of the exchange rate over the past five years and has mitigated its worst effects.”

Effective monetary policy should pre-empt crises rather than try to solve them, he adds. “The job of the central bank governor is to take away the booze before the party gets started. […] That didn’t happen when the last oil boom – with prices of over $100 a barrel or more – and the hangover was pretty severe.”

Charles Robertson, chief economist for Renaissance Capital, argues that falling prices will push down the value of the naira and growth rates. A quick deal in the China-US trade war could bolster oil prices.

For Emefiele, so much will depend on factors beyond his control. If world oil prices head back towards $100 a barrel, the naira could growth trend towards 8% per year. But if they fall below $50, growth and investment will tumble again. And like the naira, the battle-hardened Emefiele will be in the firing line again.

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NIGERIA FOCUS /

From the political power centres of Abuja to the cultural constellations of Lagos, here are some movers and shakers making their mark on contemporary Nigeria

Aisha Yesufu

KOLA SULAIMON/AFP

Tireless defender

Ahmed Lawan

On a powerful perch

Nigeria’s new number-three man, Senate president Ahmed Lawan, has been in federal parliament since the return of democracy in 1999. A native of Yobe in the north-eastern region, where Boko Haram attacks continue with varying frequency, he is serving his fourth consecutive Senate term. A loyal party man, he is likely to stick to the script handed to him by the presidency and top brass of the ruling All Progressives Congress (APC). Lawan’s installation comes four years after an unsuccessful attempt to outsmart the wily and independent Bukola Saraki in 2015.

ETTY

106 THEAFRICAREPORT / N° 109 / OCTOBER-NOVEMBER-DECEMBER 2019

Austen-Peters’ Terra Kulture is one of the most popular landmarks in Lagos. The vast complex on Victoria Island is home to exhibitions, theatre and dance productions, a food lounge, bookshop and even a school for Nigerian languages. AustenPeters, daughter of legal luminary Afe Babalola, was a UN lawyer before devoting herself to Nigerian culture.

Her company, BAP Productions, is behind several smash-hit musicals and co-produced the film 93 Days, telling the story of the female doctor who saved millions of Nigerians from contracting Ebola in 2014.

IREIMAGE/G

In 2007, Nigeria’s Daily Trust newspaper described Hajiya Aishatu Jibril Dukku as “the teacher who got her reward here on earth”. Dukku had just been appointed education minister in the Umaru Yar’Adua administration – a post she held until 2010 – in recognition of her work improving girl child education in her native Gombe state in north-east Nigeria. For years, the career teacher has run a non-profit organisation that builds classrooms in remote areas of her state and fosters education for the underprivileged. This year, she was elected into the House of Representatives and seems set to continue her good work.

Bolanle Austen-Peters

Queen of Nigerian culture

S/W CHE ROSALE

Aishatu Dukku

Exemplary educator

A co-convener of the #BringBackOurGirls campaign and in stern opposition to injustice since her time as a student union activist in Kano and Kaduna states, Aisha Yesufu’s activism credentials are indisputable. Yesufu’s voice, as one of few women from the usually conservative, Muslim-majority northern Nigeria to speak out, remains crucial for fostering social change. Despite being both loved and hated by different camps on social media, she continues snarling at the heels of sexual abusers and corrupt politicians.

Yewande Sadiku Business booster

In 2016, Sadiku was poached from Stanbic Bank to chair the Nigerian Investment Promotion Commission. Among other things, she has focused on improving ease of doing business and fostering publicprivate partnerships. Sadiku has her work cut out as she tries to convince a diverse range of investors to ignore the government’s unorthodox business policies.

Akin Alabi A sure bet?

The 42-year old is the owner of Nairabet, one of the top sports betting firms in Nigeria. One in a line of many young leaders from Oyo State, Alabi was elected to the House of Representatives earlier this year. Political pundits predict that he could end up with a strong run for governor of the state in 2023.

Mary Remmy Njoku

Entertainment maven

The Nigerian actress and filmmaker forms a power couple with Jason Njoku, the tech entrepreneur whose iROKO group of companies brought Nollywood to millions of viewers online.

In 2013, Mary Njoku launched ROK Studios to shoot their own movies, and the outfit has since evolved into a leading production house and television studio, broadcasting content across Africa and parts of the UK and US. In July 2019, French television giant Canal+ acquired the ROK film studio for an undisclosed sum, with Mary Njoku remaining director general.

Sharon Ikeazor Tough technocrat

Easily one of the better performers of Muhammadu Buhari’s first term, Sharon Ikeazor’s reforming exploits ensured that veterans who fought in the Nigerian civil war in the 1960s were finally paid their pensions. Consequently, the lawyer, a Buhari ally from their days at the defunct Congress for Progressive Change, is now minister of state for the environment.

Jump-starting startups

The co-founder of Jobberman, the biggest job-search engine in West Africa, has delved into the world of venture capital. In June this year, Adewunmi became co-CEO of fast-rising motorcycle ride-hailing app Gokada, which raised $5.3m in series funding from an impressive array of investors including Rise Capital, his venture capital firm.

AFOLABI SOTUNDE/REUTERS

ROK

Ayodeji Adewunmi

Mele Kyari

Oilman on the rise

All eyes are on the newest head of the Nigerian National Petroleum Corporation (NNPC). President Buhari, who has been obsessed with exploration of the Lake Chad basin for almost four decades, will almost certainly have the full cooperation of Kyari, who hails from Borno in north-east Nigeria.

THEAFRICAREPORT / N° 109 / OCTOBER-NOVEMBER-DECEMBER 2019

107

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At BHGE we leverage the best minds and the most advanced digital solutions to invent smarter ways to bring energy to the world. bhge.com

NIGERIA FOCUS /

INTERVIEW

Andrew Alli ‘Around Africa, Nigerians are very competitive’ The chief executive of financial services firm SouthBridge says that Nigerian companies should be excited rather than worried about the continental free trade deal Interview by PATRICK SMITH One of the founders of the Lagosbased Africa Finance Corporation, Andrew Alli is notching up even more frequent flyer miles in his new job as chief executive of SouthBridge, the financial services group founded in 2017 by Donald Kaberuka, former president of the African Development Bank, and Lionel Zinsou, former prime minister of Benin. An investment and development finance expert, Alli says SouthBridge is working with companies and governments “to build African champions”.

The ‘bridge’ part of SouthBridge reflects its ambition to link Africa with international networks and markets, especially in the global South.

Speaking at a string of conferences in Nigeria, Alli is keeping

a keen eye on economic developments in his home country: “I did a study of the Nigerian economy a year ago, and I found that if you’re a dollar-based investor, holding naira for a five-year period over the last 15 or so years, there’s an almost 90% chance that you will suffer a devaluation.”

That means companies have to build extra resilience to accommodate the exchange-rate risk and rapid changes to the regulatory environment. Alli tells The Africa Report: “Those businesses that have figured out how to operate in Nigeria do very well. […] It is a very large and growing market.”

A strong supporter of the African Continental Free Trade Area, Alli argues that the sceptics in Nigeria are exaggerating the threats of dumped goods. “The idea that some Chinese company is going

110 THEAFRICAREPORT / N° 109 / OCTOBER-NOVEMBER-DECEMBER 2019

ALL RIGHTS RESERVED

to start something in Benin to dump products on the Nigerian market at below the manufacturing costs just doesn’t make a lot of sense to me.”

Instead, Nigerian manufacturers should concentrate on remaining internationally competitive, argues Alli. “I would say that some manufacturers enjoy the lack of competition, the fat margins they can earn without working to be competitive.”

Looking at the numbers

The idea that Nigeria would be a passive victim in commercial competition across Africa is implausible to Alli. “You go around Africa and you see Nigerians being very competitive. […] If anything, it’s the other countries that should be more afraid of what is going to come out of Nigeria.”

Although he concedes that Aliko Dangote’s oil refinery due to start late next year will create massive downstream opportunities (see page 88), Alli doubts that it will have the “game-changer” effect on Nigeria’s economy that many are forecasting.

He urges economic planners to look closely at the numbers: “You [need] 650,000 barrels, which is a third of today’s production, and a lot of that production is tied up with long-term contracts to oil marketers.” With national oil production hovering around 2m barrels per day, allocating just under a third of that to a local refinery would radically change the structure of the country’s oil industry.

And the savings in foreign exchange from importing oil products would be more limited than many expect, argues Alli.

“The savings in forex comes down to the refining margin, of about 5% maybe 10%, and the transportation costs of sending the crude abroad and bringing it back,” he says. “But I don’t think it’s going to be enough to allow you to have a pump price of N145 ($0.40) a litre without a subsidy.”

NIGERIA FOCUS /

INTERVIEW

Gbenga Agboola

The founder and CEO of Nigerian payments company Flutterwave talks to The Africa Report about its plans and new partnerships with Visa and Alibaba

By EROMO EGBEJULE in Lagos TAR: Flutterwave has said it wants to be the superhighway for payments. What’s the strategy to achieve that?

Our plan is to do all the plumbing work behind the scenes to integrate the most popular payment methods on our payment gateway, making it easy for our merchants to receive payments and for their customers to pay them with their preferred means of payment. We recently partnered with Alipay to help Flutterwave merchants receive payments from China.

In three years, during which you have secured more than $20m from investors, what are the numbers that have put Flutterwave ahead of the pack?

We have over 60,000 Rave merchants, and 100m transactions worth $2.6bn since inception. For our retail product, Barter, which we officially launched in January 2019 in partnership with Visa, we also have over 60,000 users.

Beyond Nigeria, what is Flutterwave’s geographical focus?

We say: “Africa is not a country but we make it feel like one.” We are currently present in 13 African countries including South Africa, Zambia, Uganda, Nigeria, Ghana, Tanzania, Rwanda, Kenya. We are looking to expand into other regions like Francophone and North Africa, targeting countries like Côte d’Ivoire and Egypt.

What are your thoughts on the central bank’s entry licence and minimal shareholder funds policy for fintech companies?

The Central Bank of Nigeria is one of the most forwardthinking regulators in Africa.

And by proposing ways to manage the ecosystem, part of its objective would be to ensure that financial payment is protected and the economy as a whole is thriving, while still supporting innovation and businesses.

There’s been a lot of talk about fintech startups leapfrogging

112 THEAFRICAREPORT / N° 109 / OCTOBER-NOVEMBER-DECEMBER 2019

FLUTTERWAVE

‘Banks are very important to our business’ banks. Do you have any bank partnerships?

We view banks as very important to our business. They have created the rules on which we build our technology. One of our primary objectives is to be the technology connecting Africa to the world and enabling secure and seamless transactions. That is our core strength as we look to work with other financial players in the system.

You released an April 1st prank ad about ‘GlovePay’ – paying artisans with a handshake wearing fintech-enabled gloves.

Do you have any innovative products due out soon?

Our team is continually discussing ways to innovate. What’s to say GlovePay cannot be achieved?

There are reports that Interswitch is set to launch its initial public offering (IPO) on the Nigerian and London stock exchanges simultaneously. Is this a path your company could be following?

An IPO is something we’ve talked about as a team and a milestone we’re really looking to achieve soon. Interswitch leading the race to an IPO is good news for the fintech industry as a whole. Congratulations to them.

Plot 1415 Adetokunbo Ademola Street, PMB 12724 Victoria Island, Lagos, Nigeria, Tel: +23412772700-5 (ext,6124) +23414606100 -29 Fax +234 1 2704071 sales@ekohotels.com, reservation@ekohotels.com banquet@ekohotels, www.ekohotels.com

20

TOP

ADOBE STOCK

AFRICAN

0

It’s risks ahoy for African financial institutions in a global era of tighter money and tougher competition. After the effects of the commodity crunch taught some banks a lesson, the regulators have been hard at work – not always with beneficial consequences.

And if you are a mid-tier African bank, you will have three choices: scale-up, embrace digital services or die

BANKS

By NICHOLAS NORBROOK

Neither a borrower nor a hoarder be

Nigeria’s central bank has pushed through a law requiring loan-to-deposit ratios to be 60% by 20 September 2019 – a move it hopes will force banks to start lending rather than hoarding. Kenyan lawmakers attempted the same, this time using an interest-rate cap, which most analysts agree has not been successful, often driving borrowers into the hands of under-regulated online lenders (see page 52).

116 THEAFRICAREPORT / N° 109 / OCTOBER-NOVEMBER-DECEMBER 2019

TOTAL ASSETS BREAKDOWN

North Africa West Africa Central Africa East Africa Southern Africa

$1.51trn

$1.49trn

$1.46trn

$1.74trn

$1.66trn

2014

2015

2016

2017

2018

TOP 5 FOR ASSET GROWTH %

+92 +62

US$bn

+56 +41

1.05

1.04

ECOBANK COOPERATIVE ZIMBABWE BANK OF OROMIA Zimbabwe Ethiopia

1.11 FIRST BANKING CORP. HOLDING Zimbabwe

1.85 BARCLAYS BANK OF GHANA Ghana

+34 2.49 EXPORT DEVELOP. BANK OF EGYPT Egypt

TOP 5 FOR ASSET DECLINE % BANCO DE POUPANÇA E CRÉDITO Angola

6.15

-45

US$bn BANCO CAIXA GERAL BANCO TOTTA DE MILLENNIUM ANGOLA ATLÂNTICO* Angola Angola

BANCO SOL Angola

BANCO DE FOMENTO ANGOLA Angola

1.68

5.49

1.17

4.38

-40

-37

-34

-32

Regulators have been active in Ghana, too, demanding in 2017 a capital increase from ¢120m ($22.2m) to ¢400m, with a deadline of end-2018. The multi-year banking crisis that ensued – with 420 institutions failing – has been much criticised, including by President Nana Akufo-Addo, who called the Bank of Ghana’s response “lax”.

Chinese investment has provided some respite. Likewise, the cutting of US interest rates – the first time it has happened since the financial crash of 2009 – could precipitate a new wave of investors seeking yields in frontier and emerging markets. That in turn could see a fresh influx of cash and offer banks some space to consolidate and grow.

But there are other rocks in the water, especially for those banks stuck in the middle. The mobile revolution has allowed a new swath of ‘branchless’ banks to enter the market. South Africa’s TymeBank is just one of several digital banks to rock the boat for the mid-tier competitors

*Ex Banco Privado Do Atlantico

From the commodity crashes to the rise of a new breed of technology-driven niche players, the traditional era of banking is finished. Our exclusive list of Africa’s Top 200 banks shows it: the profitability of Africa’s Top 200 banks in US dollars in 2018 took a sizeable hit – reaching the lowest level since 2014. Africa’s top 10 profitable banks represent nearly 50% of the total profits of our Top 200.

A special mention should go to Stanbic Uganda (#158), which made number 10 on that list – proof that size and profitability are not necessarily correlated.

Of course, some wounds are self-inflicted. Attijariwafa Bank (#7) is still trying to digest its purchase of the Egyptian subsidiary of Barclays Bank. Others have hitched a lift on an economic upswing. The top three Egyptian banks – Misr (#8), CIB (#18) and Alahli (#23) – have all climbed in our ranking compared to last year.

But the collapse in oil and other commodity prices that began in late 2014 and continued through 2015 has wreaked havoc with economic operators across the continent. The banks in big commodity exporters were among the first in line to suffer and non-performing loans (NPLs) bloomed.

Take First Bank of Nigeria (#22), which is well diversified across the economy. Its exposure to problematic companies proved a significant hiccup, pulling down its asset quality and preventing it from taking on other, more productive lending. On an earnings call, Urum Kalu Eke, director of FBN Holdings, which owns First Bank, explained how “the NPL ratio is down to 14.5% as of June 2019, from 25.9% at December 2018. […] It [offers] significant headroom for us to increase our exposure in the very lucrative oil and gas sector, where we’ve been shut out effectively over the past three years.”

Still at number one, South Africa’s Standard Bank (#1) managed to post profits of more than $2bn in 2018 but is constrained by the sinking sovereign rating, which is drying up the flows of capital towards South Africa.

South Africa’s problems are echoed elsewhere on the continent. As the US Federal Reserve slowly started raising rates in recent years, yield-hunting investors withdrew from Africa. The knock-on for banks has been limited, partly because governments are dependent on financing from domestic financial institutions. But while that works out OK for banks in the short term – see the stellar results for 2017 – the result is industry, services and agriculture all struggling to get loans, which drags the economy down.

TOTAL LOANS ($bn) North Africa West Africa Central Africa East Africa Southern Africa

500

TOP 10 MOST PROFITABLE Standard Bank Group South Africa $2bn

400 300 200 100 0 2014

2015

2016

2017

2018

AFRICA’S DEPOSITS ($bn)

500

300 200 100 2014

2015

2016

2017

$1.94bn

Commercial Bank of Ethiopia Ethiopia

$1.29bn

Standard Bank of South Africa South Africa

$1.11bn

Nedbank Group $934m South Africa

400

0

FirstRand Banking Group South Africa

2018

TOTAL NET INTEREST INCOME BREAKDOWN ($bn)

50

Attijariwafa Bank Morocco

$704m

Zenith Bank Nigeria

$635m

National Bank of Egypt Egypt

$564m

Banco de Fomento de Angola

$561m

ABSA Bank South Africa

$555m

Angola

40 30 20

SOURCE: THE AFRICA REPORT

10

30

0

2014

2015

2016

2017

2018

NUMBER OF BANKS 49

25

22.4

21.4

21.6

2014

2015

2016

19.8

25.2

25.3

2017

2018

20

8 56

TOTAL PROFITS ($bn)

31

56

15 2013

such as African Bank (#125), which are neither able to service blue-chip customers nor to battle at the bottom of the pyramid like they used to.

Meanwhile, telecoms and fintechs are snapping at banks’ heels, carving out strips from what used to be the hunting preserve of general service banks. In sub-Saharan Africa there are more than 450 million unique mobile phone owners according to industry body GSMA, and 350 million adults lack a bank account, says the World Bank.

Africa’s biggest mobile phone company, MTN, has been granted a mobile-money licence in one of Africa’s largest economies – Nigeria. This does not necessarily imply sudden death for Nigerian banks – immediately after listing in Lagos in May, MTN Nigeria took out a $653m loan from seven local banks. That suggests they will benefit, even indirectly, and optimists will argue that a greater circulation of money in the economy will float all boats.

METHODOLOGY WE COMPILED OUR RANKING of Africa’s Top 200 banks by sending out detailed questonnaires to more than 1,000 financial institutions spread across the continent. Their replies were used to create a systematic ranking of Africa’s top banks based on total asset size. Our list features only the top 200 banks. All data is communicated to us by the banks or their parent companies. These figures relate to the 2018 financial year. Where that information was unavailable we used 2017 figures, indicated in the rankings by italics.

Banks are removed from the list if they do not supply data during two consecutive years. The data was converted to US$ using the exchange rates applicable on 31 December 2018. Numbers in the ‘Rank 2018’ column refer to a bank’s position in The Africa Report’s ranking of September 2018.

THEAFRICAREPORT / N° 109 / OCTOBER-NOVEMBER-DECEMBER 2019

117

‘Significantly more urgency is required with the implementation of structural reforms [in SA].’

MIKE BROWN CEO of Nedbank (#6)

Rank 2019

Rank 2018

Diff.

Bank

1

1

0

2

3

+1

3

2

4

6

5

5

0

Absa Bank

6

7

+1

Nedbank Group

Country

Total assets

Net interest income

Loans

Deposits

Standard Bank Group

South Africa

147 249 579

7 292 065

77 583 846

94 977 952

Firstrand Banking Group

South Africa

105 755 194

5 857 758

77 080 544

87 800 532

-1

Standard Bank of South Africa

South Africa

94 170 938

4 833 500

64 498 753

70 077 791

+2

National Bank of Egypt

Egypt

86 101 818

ND

24 028 889

56 607 390

South Africa

74 746 177

3 237 541

50 897 896

41 928 942

South Africa

72 270 028

3 538 138

50 974 395

5 717 013

7

8

+1

Attijariwafa Bank

Morocco

53 317 833

2 339 082

31 897 040

34 714 504

8

9

+1

Banque Misr

Egypt

49 313 264

339 156

12 326 957

37 349 872

9

10

+1

Banque Centrale Populaire

Morocco

41 467 422

1 779 635

25 536 523

29 626 917

10

12

+2

Investec Group

South Africa

32 925 996

573 709

18 120 053

23 656 583

11

13

+2

BMCE Bank of Africa

Morocco

32 519 709

1 383 691

19 028 275

20 125 103

12

11

-1

Rand Merchant Bank

South Africa

31 367 005

1 246 002

20 445 073

14 870 535

13

16

+3

Banque Extérieure d’Algerie*

Algeria

26 913 172

ND

ND

ND

14

14

0

First National Bank of South Africa

South Africa

25 912 097

ND

ND

ND

15

15

0

Banque Nationale d’Algerie*

Algeria

24 382 816

674 791

14 225 371

14 727 477

16

17

+1

Ecobank Transnational Inc.

Togo

22 582 196

1 825 171

9 168 669

15 935 999

17

19

+2

Commercial Bank of Ethiopia

Ethiopia

19 656 780

ND

3 499 637

15 704 568

18

20

+2

Commercial International Bank

Egypt

19 100 382

1 012 045

5 929 927

15 916 292

19

22

+3

Crédit Populaire d’Algerie*

Algeria

16 572 240

593 405

10 399 924

11 473 672

20

21

+1

Zenith Bank

Nigeria

16 318 645

809 928

4 995 324

10 111 408

21

18

-3

Wesbank

South Africa

15 814 417

ND

ND

ND

22

23

+1

First Bank of Nigeria

Nigeria

15 257 186

778 620

4 613 648

9 553 533

23

25

+2

Qatar National Bank Alahli

Egypt

14 132 512

718 450

7 711 549

11 565 980

24

24

0

Zenith Bank Nigeria

Nigeria

13 577 919

667 628

4 756 821

7 729 721

25

29

+4

Access Bank Group

Nigeria

13 574 390

475 604

5 462 481

7 027 849

26

27

+1

African Export-Import Bank

Egypt

13 419 370

489 833

11 134 424

2 365 385

27

30

+3

United Bank for Africa Group

Nigeria

13 343 082

844 517

4 699 881

9 176 589

28

26

-2

Arab African International Bank

Egypt

12 346 830

75 860

4 371 471

8 837 949

29

28

-1

BADR*

Algeria

11 791 258

438 908

7 493 819

9 792 702

30

32

+2

Crédit Agricole du Maroc

Morocco

11 218 289

415 175

8 104 045

7 847 113

31

33

+2

MCB Group

Mauritius

10 953 584

480 561

5 650 098

8 440 334

32

34

+2

Access Bank Nigeria

Nigeria

10 872 634

30 173

4 608 028

5 640 945

33

35

+2

Soc. Gén. Marocaine de Banques

Morocco

10 722 921

494 588

8 559 449

6 702 141

34

38

+4

MCB

Mauritius

9 915 696

426 923

5 345 931

8 094 832

35

41

+6

United Bank for Africa Nigeria

Nigeria

9 840 176

373 467

3 325 815

6 642 056

36

37

+1

Guaranty Trust Bank

Nigeria

9 007 319

609 469

505 912

6 230 495

37

36

-1

Bank of Africa Group

Senegal

8 776 697

549 474

4 718 605

6 160 974

38

42

+4

Banque de Développement Local*

Algeria

7 777 671

347 946

5 668 521

6 171 868

39

40

+1

Banco Angolano de Investimentos

Angola

7 296 725

572 534

1 788 825

5 820 222

40

43

+3

BMCI

Morocco

7 247 443

316 552

5 489 144

4 817 612

2018 results in thousands of US dollars; *in italics 2017 results; NA: not available

118 THEAFRICAREPORT / N° 109 / OCTOBER-NOVEMBER-DECEMBER 2019

WALDO SWIEGERS/BLOOMBERG VIA GETTY IMAGES

1-40

$58m is KCB Group (#42)’s valuation of National Bank, which it is seeking to take over despite its 49% NPL ratio

41-80 Rank 2019

Rank 2018

Diff.

Bank

Country

Total assets

Net interest income

Loans

Deposits

41

48

+7

Dev. Bank of Southern Africa*

South Africa

7 204 757

349 603

ND

ND

42

46

+4

KCB Group

Kenya

6 971 691

700 808

4 449 392

4 795 672

43

44

+1

Capitec Bank

South Africa

6 952 613

1 008 589

3 081 752

5 292 191

44

49

+5

CIH Bank

Morocco

6 791 159

235 139

4 951 779

3 874 218

45

58

+13

SBM Bank Mauritius

Mauritius

6 417 706

277 219

2 894 767

4 802 050

46

47

+1

Atlantic Business International

Côte d’Ivoire

6 264 663

289 931

3 271 466

3 386 186

47

31

-16

Banco de Poupança e Crédito

Angola

6 149 156

314 410

2 203 729

3 899 959

48

56

+8

Kenya Commercial Bank

Kenya

6 068 015

613 614

4 072 167

4 639 862

49

51

+2

Crédit du Maroc

Morocco

5 851 596

240 802

4 288 319

5 353 890

50

52

+2

Al Barid Bank

Morocco

5 805 196

88 606

451 530

5 292 045

51

62

+11

HSBC Bank Egypt

Egypt

5 632 330

378 073

1 868 252

4 475 315

52

59

+7

Equity Bank Group

Kenya

5 596 235

404 281

2 900 935

4 126 123

53

57

+4

Trade & Development Bank

Burundi

5 557 573

173 529

ND

ND

54

53

-1

55

39

-16

Banco Economico*

Angola

5 520 598

ND

1 072 910

3 898 872

Banco de Fomento Angola

Angola

5 486 004

902 144

952 613

3 967 453

56

55

-1

BGFIBank Holding Corp.

Gabon

5 458 380

356 700

3 694 020

3 775 800

57

66

+9

Faisal Islamic Bank of Egypt

Egypt

5 376 893

ND

ND

ND

58

60

+2

Ecobank Nigeria

Nigeria

5 361 714

382 181

2 538 736

3 515 894

59

69

+10

Bank of Alexandria

Egypt

5 306 498

310 858

2 132 978

4 394 461

60

54

-6

61

98

+37

62

64

+2

63

67

+4

64

75

+11

65

65

0

66

74

+8

67

-

-

68

61

-7

Banque Int. Arabe de Tunisie

Tunisia

5 259 686

277 256

3 547 226

3 824 971

Bank of Khartoum*

Sudan

5 068 109

ND

ND

4 155 139

Arab International Bank*

Egypt

4 924 365

144 389

1 078 470

3 112 873

Arab Bank for Econ. Dev. in Africa

Sudan

4 895 046

ND

1 755 281

Fidelity Bank

Nigeria

4 712 479

190 668

2 325 931

2 683 592

Société Arabe Int. de Banque*

Egypt

4 686 640

105 743

1 569 338

3 742 805

Stanbic IBTC Chartered Bank

Nigeria

4 558 431

214 293

1 185 634

2 213 076

Africa Finance Corp.

Nigeria

4 487 478

150 985

133 769

2 901 941

West African Development Bank

Togo

4 468 652

94 496

3 134 645

ND

Banco Millennium Atlântico

Angola

4 375 246

216 479

1 353 252

3 358 217

Equity Bank Kenya

Kenya

4 279 846

312 378

2 181 997

3 334 237

69

50

-19

70

73

+3

71

45

-26

Banco BIC

Angola

4 210 812

615 213

1 275 942

2 964 642

72

82

+10

National Bank of Kuwait – Egypt

Egypt

4 099 613

154 579

2 155 562

2 965 205

73

76

+3

Co-operative Bank of Kenya

Kenya

4 037 426

426 816

2 395 205

2 992 029

74

72

-2

Union Bank of Nigeria

Nigeria

4 010 971

151 659

1 297 286

2 349 805

75

83

+8

Land Bank*

South Africa

3 996 572

103 244

3 506 475

ND

76

87

+11

Bank Audi Egypt

Egypt

3 969 078

125 633

740 033

1 782 506

77

68

-9

Banque de l’Habitat de Tunisie

Tunisia

3 957 609

151 417

3 029 666

2 176 629

78

85

+7

First City Monument Bank

Nigeria

3 921 757

198 851

1 734 516

2 251 588

79

113

+34

Faisal Islamic Bank Sudan*

Sudan

3 895 637

218 957

ND

ND

80

70

-10

Banque Nationale Agricole

Tunisia

3 833 480

183 979

3 076 236

2 591 467

2018 results in thousands of US dollars; *in italics 2017 results; NA: not available

THEAFRICAREPORT / N° 109 / OCTOBER-NOVEMBER-DECEMBER 2019

119

Sterling Bank (#93) reported 19.1% growth in net interest income to N30.1bn ($83.5m) in the first half of 2019 compared to H1 2018.

81-120 Rank 2019

Rank 2018

Diff.

Bank

Country

Total assets

Net interest income

Loans

Deposits

81

84

+3

Oragroup SA

Togo

3 778 994

220 590

2 184 335

2 544 411

82

78

-4

Diamond Trust Bank Kenya

Kenya

3 686 541

255 424

1 884 406

2 760 714

83

77

-6

84

97

+13

85

79

86

88

87

71

-16

88

94

+6

Société Tunisienne de Banque

Tunisia

3 495 109

157 278

2 370 003

2 112 039

Al Baraka Bank Egypt

Egypt

3 487 435

105 145

878 321

3 041 985

-6

BSIC*

Libya

3 480 412

143 373

1 249 004

2 058 823

+2

Egyptian Gulf Bank

Egypt

3 437 608

78 080

ND

ND

89

92

+3

90

104

+14

91

91

0

92

89

-3

93

93

0

HSBC Mauritius

Mauritius

3 426 421

55 020

1 761 050

2 240 091

AfrAsia Bank

Mauritius

3 413 352

82 290

795 685

3 157 778

Société Générale Côte d’Ivoire

Côte d’Ivoire

3 310 494

222 668

2 210 851

2 678 902

Barclays Bank of Kenya

Kenya

3 170 435

308 362

1 730 972

2 024 300

Société Générale Algérie

Algeria

3 150 388

184 085

2 155 653

2 452 034

Barclays Bank Mauritius

Mauritius

3 087 939

131 005

2 257 454

1 482 847

Sterling Bank

Nigeria

3 022 004

209 443

1 701 587

2 084 066

94

109

+15

Crédit Agricole Egypt

Egypt

2 987 521

167 012

1 139 393

2 450 564

95

80

-15

Amen Bank

Tunisia

2 928 031

124 590

1 969 851

1 832 969

96

103

+7

Ahli United Bank Egypt

Egypt

2 872 015

ND

1 281 995

ND

97

81

-16

Attijari Bank

Tunisia

2 846 821

144 994

1 807 441

2 246 196

98

115

+17

Stanbic Holdings

Kenya

2 835 966

118 385

1 430 856

1 869 866

99

96

-3

Housing and Development Bank

Egypt

2 830 736

179 405

759 124

1 888 375

100

128

+28

African Banking Corp. Holdings

Botswana

2 804 726

287 490

1 154 113

1 631 797

101

100

-1

Standard Chartered Bank Kenya

Kenya

2 785 543

279 112

1 158 039

2 189 016

102

126

+24

Abu Dhabi Islamic Bank – Egypt

Egypt

2 755 883

139 226

ND

2 225 002

103

90

-13

First National Bank of Namibia

Namibia

2 728 384

110 494

1 975 259

2 183 944

104

118

+14

Suez Canal Bank

Egypt

2 644 548

53 722

752 894

2 155 115

105

108

+3

Banque Atlantique – Côte d’Ivoire

Côte d’Ivoire

2 613 619

122 649

1 347 106

1 566 947

106

105

-1

CRDB Bank

Tanzania

2 595 216

190 423

1 344 495

2 015 485

107

99

-8

Bank Windhoek

Namibia

2 585 160

165 427

2 060 538

1 897 517

108

101

-7

Ecobank Côte d’Ivoire

Côte d’Ivoire

2 554 113

147 590

1 313 592

1 511 930

109

138

+29

Export Development Bank of Egypt

Egypt

110

106

-4

111

122

+11

112

112

0

113

117

+4

114

132

+18

115

123

+8

116

110

-6

117

137

+20

118

116

119

120

120

125

+5

2 489 300

64 740

1 113 678

1 936 054

Banco Comercial e de Investimentos Mozambique

2 479 773

228 128

959 365

1 868 555

CBZ Bank

Zimbabwe

2 449 933

80 394

486 996

2 079 155

National Microfinance Bank

Tanzania

2 442 823

211 570

1 398 271

1 860 871

Banco Int. de Moçambique

Mozambique

2 434 042

212 203

809 665

1 787 137

I&M Bank

Kenya

2 426 722

152 546

1 440 805

1 867 421

Commercial Bank of Africa

Kenya

2 392 243

206 918

1 185 873

1 918 111

Standard Chartered Bank Mauritius

Mauritius

2 344 832

81 557

942 156

1 440 203

Banque Al Baraka d’Algérie

Algeria

2 300 000

105 400

ND

ND

-2

First National Bank of Botswana

Botswana

2 272 726

204 846

1 414 620

1 605 491

+1

Gulf Bank Algeria*

Algeria

2 214 140

116 945

1 325 974

1 723 537

GCB Bank

Ghana

2 207 867

199 165

576 435

1 708 724

2018 results in thousands of US dollars; *in italics 2017 results; NA: not available

120 THEAFRICAREPORT / N° 109 / OCTOBER-NOVEMBER-DECEMBER 2019

‘The changes that we have seen in the banking industry will lead to sustainable growth.’

TERENCE DARKO Chairman of Ecobank Ghana (#123)

Rank 2019

Rank 2018

Diff.

Bank

Country

Standard Bank Namibia

Namibia

BNP Paribas El Djazair

Algeria

Net interest income

Loans

Deposits

2 193 079

114 805

1 539 482

1 743 999

2 193 007

144 759

1 366 361

1 718 746

Total assets

121

111

-10

122

119

-3

123

129

+6

Ecobank Ghana

Ghana

2 152 897

104 000

854 756

1 609 009

124

107

-17

Arab Tunisian Bank

Tunisia

2 129 382

81 860

ND

1 546 660

125

102

-23

African Bank

South Africa

2 123 146

ND

ND

ND

126

124

-2

Banque de Tunisie

Tunisia

2 116 614

111 709

1 504 720

1 202 619

127

131

+4

NIC Bank

Kenya

2 034 056

124 451

1 140 485

1 410 330

128

121

-7

Union Internationale de Banques

Tunisia

2 029 123

120 503

ND

1 557 807

129

127

-2

130

145

+15

131

130

-1

132

134

+2

133

152

+19

134

139

+5

135

165

+30

136

140

137

141

138 139

Coris Bank International

Burkina Faso

2 004 906

98 667

1 109 664

1 218 539

Citibank Nigeria

Nigeria

1 995 800

52 530

296 621

1 053 401

BGFIBank Gabon

Gabon

1 929 887

ND

1 251 275

1 590 689

Development Bank of Ethiopia*

Ethiopia

1 926 235

ND

1 024 724

18 557

Awash International Bank

Ethiopia

1 921 119

146 046

1 079 265

1 510 370

Société Ivoirienne de Banque

Côte d’Ivoire

1 861 431

114 737

1 232 498

1 357 082

Barclays Bank of Ghana

Ghana

1 852 340

134 010

660 009

972 131

+4

CBAO Groupe Attijariwafa Bank*

Senegal

1 815 144

131 868

1 214 167

1 375 185

+4

Afriland First Bank*

Cameroon

1 802 114

94 439

1 109 809

1 316 688

146

+8

Union National Bank Egypt

Egypt

1 806 076

53 658

710 012

1 533 104

144

+5

Investec Bank Mauritius

Mauritius

1 785 547

48 626

1 034 269

1 036 836

140

-

-

141

158

+17

142

135

-7

143

95

-48

144

-

-

Attijariwafa Bank Egypt

Egypt

1 771 684

127 680

827 106

1 369 734

Stanbic Bank Zimbabwe

Zimbabwe

1 769 228

67 736

387 344

1 508 054

NSIA Banque Côte d’Ivoire

Côte d’Ivoire

1 763 071

109 049

1 215 872

1 256 421

Banco Sol

Angola

1 713 881

213 887

ND

1 307 399

Rawbank

DRC

1 679 534

155 294

1 159 416

665 230

145

150

+5

Société Générale Sénégal

Senegal

1 618 774

127 893

1 052 105

1 341 975

146

156

+10

Standard Bank Mozambique

Mozambique

1 613 002

149 271

456 694

1 193 384

147

167

+20

Standard Bank Mauritius

Mauritius

1 587 170

47 479

228 032

1 387 631

148

169

+21

Dashen Bank

Ethiopia

1 578 986

62 954

801 480

1 250 901

149

164

+15

Ecobank Burkina Faso

Burkina Faso

1 558 669

73 776

696 780

1 220 641

150

151

+1

Société Générale Cameroun

Cameroon

1 556 079

119 799

1 123 360

1 218 350

151

153

+2

Barclays Bank of Botswana

Botswana

1 555 907

127 241

1 081 571

1 083 394

152

154

+2

Standard Chartered Bank Botswana

Botswana

1 508 439

46 879

684 076

1 118 516

153

133

-20

Banco de Desenvolv. de Angola

Angola

1 506 084

267 720

309 253

15 583

154

142

-12

Bank of Africa – Benin

Benin

1 498 166

68 533

737 577

1 007 684

155

155

0

Citibank NA Algeria*

Algeria

1 478 959

62 693

597 056

1 166 441

156

-

-

157

168

+11

BNP Paribas South Africa

South Africa

1 473 206

3 974

129 515

908 096

Central Africa Building Society

Zimbabwe

1 469 030

107 530

779 650

1 167 230

158

157

-1

159

173

+14

Stanbic Bank Uganda

Uganda

1 456 126

100 148

677 383

1 050 920

Fidelity Bank Ghana

Ghana

1 449 459

145 004

301 260

820 444

160

136

-24

Standard Bank de Angola

Angola

1 427 254

117 230

172 905

1 084 536

2018 results in thousands of US dollars; *in italics 2017 results; NA: not available

THEAFRICAREPORT / N° 109 / OCTOBER-NOVEMBER-DECEMBER 2019

121

ALL RIGHTS RESERVED

121-160

Wema Bank (#165) recorded profits before tax of N2.6bn ($7.1m) in the first half of 2019, up from N1.8bn in the first half of 2018.

161-200 Rank 2019

Rank 2018

Diff.

Bank

Country

Total assets

Net interest income

Loans

Deposits

161

160

-1

Bank of Africa – Burkina Faso

Burkina Faso

1 375 999

68 979

892 811

990 145

162

170

+8

Natixis Algérie*

Algeria

1 378 028

59 444

661 137

ND

163

161

-2

164

187

+23

165

184

+19

166

171

+5

Nedbank Namibia

Namibia

1 349 098

56 000

844 826

608 097

BGFIBank Congo

Rep. of Congo

1 341 540

ND

ND

ND

Wema Bank

Nigeria

1 339 324

102 412

691 000

1 011 607

Stanbic Bank Botswana

Botswana

1 323 107

47 982

1 051 494

1 092 274

167

-

-

Banque Malienne de Solidarité*

Mali

1 317 424

62 727

661 119

749 855

168

159

-9

BICEC

Cameroon

1 306 489

90 283

775 301

1 051 773

169

174

+5

Misr Iran Development Bank

Egypt

1 292 675

33 145

386 839

1 115 186

170

148

-22

UBCI

Tunisia

1 285 146

75 884

915 038

872 359

171

179

+8

Banque de Dévelop. du Mali*

Mali

1 282 841

63 382

646 226

848 783

172

177

+5

Stanbic Bank Ghana

Ghana

1 277 860

96 035

532 300

881 899

173

185

+12

Stanbic Bank Zambia

Zambia

1 235 115

125 742

ND

940 088

174

190

+16

Standard Chartered Bank Ghana

Ghana

1 227 710

100 666

268 153

885 969

175

172

-3

Ecobank Sénégal

Senegal

1 220 488

73 860

551 493

823 246

176

-

-

177

175

-2

Bank of Baroda Kenya

Kenya

1 200 621

62 828

405 731

995 113

BICICI

Côte d’Ivoire

1 179 348

84 889

860 428

1 026 499

178

143

179

196

-35

Banco Caixa Geral Totta de Angola

Angola

1 166 544

ND

257 136

901 135

+17

Zenith Bank Ghana

Ghana

1 147 595

87 199

150 971

701 749

180

162

-18

181

-

-

182

189

+7

183

200

+17

184

-

-

185

-

-

186

182

-4

187

180

188

192

189

198

+9

190

-

-

Grindrod Bank

South Africa

1 138 147

9 797

457 343

1 043 976

Bank One

Mauritius

1 134 159

28 216

585 963

947 792

National Bank of Kenya

Kenya

1 123 800

77 934

466 321

58 762

CalBank

Ghana

1 116 050

106 936

498 983

634 024

First Banking Corp. Holding

Zimbabwe

1 113 977

65 199

405 508

627 900

Bank of Abyssinia

Ethiopia

1 111 729

ND

ND

ND

Société Générale Burkina Faso*

Burkina Faso

1 091 632

47 534

731 669

728 754

-7

Banque Zitouna

Tunisia

1 091 680

46 378

822 846

939 864

+4

SCB Cameroun

Cameroon

1 078 081

84 696

568 809

923 881

Ecobank Mali

Mali

1 054 437

63 444

332 954

613 689

Ecobank Zimbabwe

Zimbabwe

1 050 300

80 400

206 200

913 700

191

-

-

192

183

-9

193

-

-

194

176

-18

195

-

-

Cooperative Bank of Oromia

Ethiopia

1 038 908

42 743

511 373

882 631

Mercantile Bank

South Africa

1 027 925

63 872

683 931

721 201

Al-Nile Bank for Comm. and Dev.*

Sudan

1 004 173

55 135

ND

ND

Bank of Africa – Côte d’Ivoire

Côte d’Ivoire

1 003 855

57 129

524 460

660 085

Banque Nat. d’Investissement*

Côte d’Ivoire

997 961

57 456

15 603

ND

196

-

-

Bank of Kigali

Rwanda

982 690

103 757

636 277

595 794

197

-

-

Prime Bank

Kenya

977 327

36 719

358 939

693 692

198

-

-

United Bank

Ethiopia

974 355

60 356

516 877

686 904

199

-

-

Letshego Group

Botswana

973 878

188 645

794 986

45 486

200

178

-22

FMB Capital Holdings

Malawi

971 019

138 399

243 300

359 148

2018 results in thousands of US dollars; *in italics 2017 results; NA: not available

122 THEAFRICAREPORT / N° 109 / OCTOBER-NOVEMBER-DECEMBER 2019

Being named best bank in Egypt

year after year was only the beginning

WORLD’S BEST BANK IN THE EMERGING MARKETS

SOUTH AFRICA

Pain at home and joy abroad Economic prospects are muted in South Africa, but Standard Bank's investments elsewhere in Africa offer bright spots as it doubles down on digitalisation and cost cutting

from 17.1% a year earlier. Hollingworth highlights that personal banking is especially strong: “This is a bank with a rising trajectory of profitability.”

Growth in costs is outstripping growth in income, however, and there is a need for greater cost control, he argues, pointing out that tighter cost control would mean more scope to invest in growth markets. “They need to keep an eye on their efficiency goals,” Hollingworth says.

Standard Bank continues to shed its non-African operations in order to focus more on the continent. In August, it sold all of its remaining stake in Standard Bank Argentina to the Industrial and Commercial Bank of China (ICBC).

Announcing half-year results and a 5% increase in profit, chief executive Sim Tshabalala told reporters that he has his eye on West Africa: “We’re also saying that we’re quite comfortable to contemplate appropriately priced acquisitions to the extent that they might fit with our risk

By DAVID WHITEHOUSE

A focus on the continent

Hollingworth argues that the bank has a robust outlook.

Operating in 20 sub-Saharan countries outside of South Africa, it is geographically well diversified, with strong liquidity ratios, he says. It has shown a “remarkable” ability to retain profitability even during economic stress.

The bank’s return on equity increased to 18% in 2018

124 THEAFRICAREPORT / N° 109 / OCTOBER-NOVEMBER-DECEMBER 2019

MIKE HUTCHINGS/REUTERS

As the largest bank by assets in Africa, Standard Bank (#1) has advantages of diversification and has demonstrated that it can withstand hostile operating environments.

With Moody’s the only ratings agency still giving the South African government an investment-grade rating, the bank has yet to prove that it can manage rising costs in its crucial home market. Analysts and investors are worried about slow growth, corruption and high debt levels in South Africa’s economy.

Preventing costs from rising faster than income is “the key issue for all banks in South Africa,” argues Bradley Preston, head of listed investments at Mergence Investment Managers in Cape Town. “It’s a tough ask.”

Standard Bank got rid of about 2,100 employees between June 2018 and June 2019 in order to help reduce its costs.

Preston points out that a potential downgrading by Moody’s would automatically affect South Africa’s membership of some global bond indices. This, he says, would have a short- to medium-term impact on the flow of money into South African banks, which would in turn raise their cost of financing. Though he sees the long-term effect of a downgrade as already priced into the market, Preston expects that non-performing loans (NPLs) and credit-loss ratios will increase for all South African banks.

Standard Bank is well placed to withstand even a worstcase scenario. Paul Hollingworth, managing director at Creative Portfolios in London, says that the bank’s rapid growth is bound to lead to a rise in NPLs. Yet Standard Bank has “good underwriting discipline” and has proven that it can evaluate risk, he says.

R80bn

CORPORATE AND INVESTMENT BANKING TOTAL INCOME BY PRODUCT (%)

Compound Annual Growth Rate: South Africa 6% - Africa regions 11% - International 20%

16

22

R64bn

17

22

R48bn 17

R32bn

2017

R16bn

2018 21

17

21

23 24

0 2013

2014

2015

2016

2017

2018

R38.7bn

R43bn

R46.3bn

R50.6bn

R52bn

R52.3bn

R9bn

R11.2bn

R13bn

R15.3bn

R14.2bn

R15.4bn

R852m

R1.1bn

R1.4bn

R1.7bn

R1.6bn

R2.2bn

appetite.” The bank obtained an operating licence in Côte d’Ivoire in 2016 and is launching operations in Senegal, the second-largest economy in the Union Economique et Monétaire Ouest Africaine regional grouping. In the first half of 2019, Standard Bank’s earnings rose in its Africa operations and stayed relatively flat in South Africa.

According to Tshabalala, prospects for sub-Saharan Africa overall are good, with economic growth expected The bank has retained profitability even during economic stress

Global markets South Africa Global markets Africa regions Investment banking Transactional products and services South Africa Transactional products and services Africa regions

to accelerate from 2.9% in 2018 to 3.5% in 2019. More than a third of the countries in the region are expected to grow at more than 5% per annum, he says.

A key part of Standard Bank’s strategy lies in expanding its digital presence to tap into that growth. The bank has the scale to multiply small bets on digital banking in new markets and launched digital-only banks in Botswana, Zambia and Zimbabwe in June, to be followed

by Nigeria in September. It rolled out digital offerings in Uganda, Tanzania, Ghana and Kenya in the first quarter of this year, and in Côte d’Ivoire in 2018. In its 2019 first-half results, Standard Bank branches will shut in reported that in-person transacSouth Africa as part of the new plans released tions dropped by 13% year on year

by Standard Bank in and that nearly all transactions June, an increase from are now through digital services. the previously Digitalisation is a double-edged announced 91 sword because it also intensifies competition. Banking branches are among the first casualties. In June, Standard Bank increased its branch closure plan in South Africa to 104 branches, from 91.

Another 1,200 Standard Bank employees could lose their jobs in the closures.

104

New digital players

According to a report from professional services firm PwC, South African retail banking is set to experience a “significant uptick” in competition due to digitalisation.

PwC says that new digital entrants in South Africa are unconstrained by legacy operating systems and will be able to establish an “almost unassailable advantage” over the universal banks as they are able to launch new products in as little as three to six months. Established banks often take between 12 and 24 months to launch new products, PwC explains. One of the new digital players in South Africa, TymeBank, is targeting one million customers by the end of 2019.

THEAFRICAREPORT / N° 109 / OCTOBER-NOVEMBER-DECEMBER 2019

125

SOURCE: STANDARD BANK

PERSONAL AND BUSINESS BANKING TOTAL INCOME

STANDARD BANK’S 2018 PERFORMANCE IN AFRICA

Strong performance* Moderate performance* Focus to improve* SOURCE: STANDARD BANK

Preston at Mergence says that Standard Bank has passed its peak in terms of information technology (IT) spending and that IT amortisation costs will decline. But it is too early to judge the success of the bank’s digitisation strategy and the heavy costs involved, he says.

The digital strategy also aims at deepening trade and financing links with China. In June Standard Bank – Industrial and Commercial Bank China (ICBC) is a minority shareholder – launched its Africa China Agent Proposition, which connects African importers and Chinese exporters. The aim is to help African importers in sourcing goods from China, while easing cashflow pressures on African businesses. Chinese suppliers can get a letter of credit for Standard Bank’s Chinese partner ICBC, which will enable them to supply goods before payment. Standard Bank’s head of Africa-China integration, Manessah Alagbaoso, says current arrangements where importers in Africa have to pay suppliers upfront before goods are shipped is unsustainable for African businesses.

Scale allows Standard Bank to hedge its bets. The bank is one of the largest oil and gas lenders in sub-Saharan Africa and has financed companies such as Petrobas in Nigeria, Kosmos Energy in Ghana and Tullow Oil for its African expansion. That leaves it well placed to benefit from a string of exploration projects over the last decade that has seen the number of African countries with proven oil and gas reserves rise to 28.

Fintech investments

Standard Bank is also investing in smaller fintech companies as a means to keep tabs on innovations in the financial sector. In August, it purchased an undisclosed stake in startup Nomanini, which links up informal retailers, their customers and banks. In October 2018, Standard Bank also invested in Founders Factory Africa, which is focused on incubating fintech startups across the continent. They announced their first five investments in June of this year.

The home market remains key to Standard Bank’s financial performance. Preston agrees that South African HEADLINE EARNINGS AND RETURN ON EQUITY CORPORATE ANNUAL GROWTH RATE 2013-2018: 10% Return on equity (%) 20

R24bn

16

R18bn

12

R12bn

8

R6bn

4

0

2013

2014

2015

2016

2017

2018

0

R17bn R17.1bn R22.2bn R23bn R26.3bn R27.9bn 14.2

13.0

15.6

15.3

17.1

18.0

126 THEAFRICAREPORT / N° 109 / OCTOBER-NOVEMBER-DECEMBER 2019

SOURCE: STANDARD BANK

Headline earnings R30bn

Single representation/ development phase

*Determined based on inputs including growth, resilience and returns

banks have shown they can continue to generate positive, if unexciting, earnings in tough economic conditions. But to do better than that, the banks need a better environment. “To really grow quickly, they will need to see an increase in business confidence, economic growth and credit extension.”

Currently there is little sign of such transformational change. South Africa’s President Cyril Ramaphosa has to walk a tightrope between popular demand for land expropriation without compensation on one hand and the fears of international investors on the other. A report on land restitution by an inter-ministerial committee led by deputy president David Mabuza was submitted in June.

Standard Bank chief executive Tshabalala is right to highlight the strengthening of property rights (see box) as a prerequisite to South Africa’s sustained growth, says Indigo Ellis, Africa analyst at Verisk Maplecroft in London.

“But we do not expect South Africa to strengthen property rights over the next couple of years, rather to confirm their slow degradation, particularly in relation to land reform.”

State electricity utility Eskom presents special dangers too. Ramaphosa plans to unbundle Eskom into three entities – generation, transmission and distribution.

This is the “real elephant in the room” but Ramaphosa’s “hands are tied”, Ellis says. She expects very little private investment to be forthcoming for the utility.

Christopher Marks, head of emerging markets EMEA at Mitsubishi UFJ Financial Group, argues that South Africa is not standing on a cliff edge. He points out that Moody’s still has a stable outlook on South Africa – and there is still an intermediate step available if the agency was to lower that. “Moody’s have been very patient with Ramaphosa and are doing their best to give him

F. MAVUNDA/GALLO VIA GETTY

the benefit of the doubt,” he says. “The executioner is not yet coming.”

Regardless of the ratings outcome, Hollingworth says that South Africa has been heading in the right direction since former president Jacob Zuma stepped down in February 2018. The banks “weathered the Zuma storm and if they can do that, they will do even better under Ramaphosa.”

But if Moody’s downgrades South Africa tomorrow, there will be an investor “exodus”, Hollingworth says.

Loss of the investment-grade rating “wouldn’t be the biggest surprise in the world,” however. The bank seems well prepared and markets have had plenty of time to

digest the prospect, he says, though he does not believe the risk is fully priced in by markets. The investment grade rating is “not coming back tomorrow if they lose it. It takes time.”

The darkest cloud could even turn out to have a silver lining. A Moody’s cut might benefit Standard Bank and the South African economy in the long term, Hollingworth argues.

A cut would “put pressure on President Cyril Ramaphosa to deliver. It might encourage the government to be even more pro-active and committed to economic reform.”

In that case, the hit for Standard Bank in terms of financing costs could ultimately turn out to be a price worth paying.

SIM TSHABALALA Chief executive, Standard Bank

‘SUSTAINED GROWTH WILL REQUIRE REFORMS’ TAR: How do you see the economic outlook for South Africa? Will South Africa hold on to its last investment grade credit rating with Moody’s?

The South African economy will remain sluggish for the rest of the year, with the International Monetary Fund forecasting 1.5% growth and the Reserve Bank expecting only 1.2%. Standard Bank is optimistic for a moderate recovery of the South African economy over the medium term. However, a return to sustained growth at a pace that can reduce unemployment and inequality will require more comprehensive structural reforms, including reforms to stabilise and strengthen property rights.

To set South Africa firmly on the path to prosperity, our country also requires new large-scale investments in infrastructure by both the public and private sectors. Major reforms of our primary, secondary, tertiary and vocational education systems, of the justice and health systems, and of many other local, provincial and national departments

and agencies are needed. We will not be able to generate the resources required for these larger and longerterm projects unless we implement the urgent reforms listed above.

How is your blockchain project in foreign-exchange payments progressing? When will your blockchain become interoperable with that of Industrial and Commercial Bank of China (ICBC)?

The cloud-based blockchain solution will go live in the second half of 2019 and will initially support both Standard Bank and Stanbic Bank partner banks, customers and intermediaries directly involved in trades, as well as the interbank network Swift. [...] We are hopeful that when the blockchain system finally goes live, it would foster straight-through

1.5%

The IMF is forecasting sluggish growth in South Africa’s economy, while the Reserve Bank is expecting only 1.2%

processing of international transactions, speed up foreign-exchange payments and settlements while also bringing a new level of transparency in trades. Working together with ICBC means that our private permission blockchain foreign-exchange payments and settlement solution provides clients potential access to similar ecosystems around the world.

How successful has the bank been in reducing costs?

We are very serious about cost discipline. As a result, our South African operations were able to accelerate cost-cutting initiatives in the second half of 2018. However, this was not enough to offset other pressures, such as lower income from interest rates charged on loans.

That resulted in expenses growth exceeding revenue growth in 2018.

Do you think that non-performing loan (NPL) levels in South Africa are likely to increase in the coming year?

Because risks have been heightened we have had to be stricter on our risk acceptance criteria and have been tighter in certain market segments. So while we do think that NPLs will rise, we are sure they will remain well within risk appetite.

Standard Bank is confident lending will pick up with the improved economic outlook for South Africa.

Interview by DAVID WHITEHOUSE

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LOGO OLUWAMUYIWA ADEYEMI FOR TAR

INTERVIEW

JIM OVIA

‘Banks will surf the wave’ Zenith Bank’s co-founder and chairman talks to The Africa Report about risks and rewards in the Nigerian banking sector Interview by NICHOLAS NORBROOK in Lagos Jim Ovia’s office at Zenith Bank (#20)’s headquarters, next to the Civic Centre in Lagos, dominates the lagoon that ultimately leads out to the Atlantic Ocean. As the photographer puts a good-natured Ovia through his postures, the sun starts to shift the stubborn clouds that have left the roads in their usual sodden state. “The improvement [at Zenith Bank] no doubt mirrors the recovery of the Nigerian economy,” says Jim Ovia.

The weather is certainly improving for Nigeria’s banks.

There are signs of changing fortunes, including a recovery in the oil price after the late 2015 collapse and the ability for the strongest banks to get out from under a pile of bad energy-related loans. Zenith – one of Nigeria’s largest banks – has done just that. After ratings agency Moody’s downgraded Zenith in late 2017, one year later

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rival Fitch revised the bank’s rating upwards, in large part due to Zenith’s solid blue-chip corporate loan business.

The bank’s half-year audited results for 2019 show gross earnings up 3% to N331.6bn ($916.7m), profits before tax up 4% to N111.7bn, and a big jump in fees earned from mobile banking, which the bank puts down to “significant progress in our retail banking initiative”.

But Moody’s also spotted another strength at Zenith: its people. “Decision-making is well spread across a broad number of executives to minimise reliance on individuals,” reported Fitch. That team-building strategy is paying off, giving the founder of Nigeria’s second-most profitable bank in 2018 more reasons to be cheerful.

Talent spotter

Several former staff members are now in influential positions. A former Ovia protegé, Uchechukwu Sampson Ogah, was appointed in August as minister for mines and steel development. Central Bank of Nigeria (CBN) governor Godwin Emefiele was at Zenith for many years in executive roles. “I have been proven right after his tenure was recently renewed, a feat that has not been achieved since the return of Nigeria to democratic rule in 1999,” Ovia tells The Africa Report.

REACHING THE ZENITH 4 November 1951 Born in Agbor, Delta State, Nigeria 1979 Earned a master’s in business administration from the University of Louisiana, US 1990 Co-founded Nigeria’s Zenith Bank 2010 Stepped down as CEO of Zenith Bank due to new CBN regulations 2014 Appointed chairman of Zenith Bank's board of directors

Not everyone is so enthused with the central bank’s current decision-making though. Malte Liewerscheidt of consulting firm Teneo told reporters: “The CBN’s obsession with the exchange rate has led the Apex bank to sell more and more open-market operations securities that offer a high-yield, risk-free alternative for banks, effectively preventing them from handing out more loans to the real economy.”

With 30% of its loan book concentrated in oil and gas, is Zenith still too exposed to the energy sector? “Not necessarily, because we have a robust risk-management strategy”, says Ovia. “The outlook for global oil demand is positive and, barring any significant disruption to domestic crude production, there is not much to worry about.”

Global investors are less convinced, with the share price falling 33% in the last six months. Another systemic issue for African banks in general, and Zenith in particular, is their high amounts of ‘idle’ capital – large levels of liquidity. Some Nigerian bankers claim this is down to a lack of properly structured opportunities; others attribute it to the high returns available

at low risk by lending to the government. But for Ovia, “It’s never a problem to have an adequate capital ratio – far better than the reverse. Opportunities do come, and we shall continue to advance credit to various sectors of the economy, especially the non-oil sector.”

The Zenith supremacy dates back to a $4m bet that Ovia made with some co-investors in the 1990s under dictator Ibrahim Babangida. “The licensing was done in the military era!” says Ovia, reflecting on the ad hoc nature of the times. “But I knew there was an opportunity, so I used it to jump-start a more structured banking business and pushed to computerise it.”

Zenith was one of the first banks in Nigeria to bring computers into the back office, kicking off a new era. But it was under President Olusegun Obasanjo (1999-2007) that banking in Nigeria really took off.

Risk and innovation

“The return of Nigeria to democratic rule in 1999 and the attendant unleashing of market forces no doubt heralded what we can now call a golden decade for the Nigerian economy,” adds Ovia. “The liberalisation of the telecommunication sector opened the sector for explosive growth.

The banking sector consolidation of 2004-2006 strengthened Nigerian banks and improved their resilience. The decade also witnessed a lot of creativity and innovation.”

That came to a grinding halt with the ‘over-exuberance’ of many Nigerian banks, which, with too much capital and not enough opportunity, piled into the stock market.

They often invested in their own stocks to inflate their price. The resulting financial crisis made clear to Ovia that “capital and liquidity are prerequisites for the survival of any financial institution.”

It was a period that checked Ovia’s own ascension, too. The CBN governor at the time of the banking crisis, Lamido Sanusi, passed regulations which prevented bank CEOs from running institutions for more than 10 years – a rule that affected both Ovia and Tony Elumelu, who was CEO of United Bank for Africa (#27).

Ovia is also an entrepreneur in the telecoms space, founding Visafone in 2007 after buying up several other telecom operators. It was eventually sold to South Africa’s MTN in 2015. Might that have been a strategic misstep? After all, MTN is now launching mobile-money services in Nigeria, a serious threat to banks like Zenith.

Ovia recognises the risks, saying that banks that are not innovative in adopting digital services will suffer.

He sees “a situation where many banks will collaborate with fintechs to smoothly surf the wave.” Given his team-building nous, this will be a space to watch.

‘THE OUTLOOK FOR GLOBAL OIL DEMAND IS POSITIVE […], THERE IS NOT MUCH TO WORRY ABOUT’

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DEBATE

Private equity vs. public markets

Should investors looking to get the most out of their money be putting their cash into listed shares or private-equity deals? The Africa Report talks to the experts to find out the pros and cons

By DAVID WHITEHOUSE The choice between public and private markets is complex enough for investors in developed countries. The standard argument is that while private equity – investing in firms that are not listed on stock exchanges – outperforms over the long term, it is logical for investors to give up some of this performance in return for the liquidity that public markets provide.

The calculations in Africa are a bit different. Figures from the African Private Equity and Venture Capital Association (APEVCA) at the end of 2018 show that returns from public and private markets in Africa are closely balanced, with private equity showing annual returns of 5.23% and 7.25% over 10 and 15 years, respectively – slightly less than the 6.15% and 7.75% for the MSCI Emerging Frontier Markets Africa index. Still, private equity held up better in the fourth quarter of 2018 as public emerging markets tumbled, with a 0.67% return in Africa versus a loss of 3.84% for the MSCI Africa index. The association bases its figures on the Africa Private Equity & Venture Capital Index, made up of 47 private equity and venture capital funds.

Insufficient liquidity

But the lack of that liquidity in many of Africa’s public markets changes the rules of the investment game. In June, Sanjeev Gupta, executive director at the Africa Finance Corporation (AFC), told The Annual Debate forum on African investment in London that public markets in Africa are suffering from a “very deep-rooted malaise”. There are plenty of consumer plays available, but that is at the expense of production, he said. “The continent’s productivity potential is not represented in the capital markets.”

That echoes the consensus among global investors that sufficient liquidity does not exist in African markets and that it will not for the foreseeable future. According to Capital Markets in 2030, a study by PwC and the Economist Intelligence Unit (EIU), fewer than 10% of

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27

national stock markets make up the African Securities Exchanges Association, prompting calls for a ‘super exchange’ on the continent

survey respondents expect either South Africa or Nigeria to lead in terms of initial public offering (IPO)-originating issuers by 2030, with China and India forecast to dominate.

The survey drew on 370 equity capital market participants and was carried out in July 2018. The investors polled considered liquidity by far the most important factor in choosing an exchange to list.

“There is zero reason to have 27 exchanges across the continent. Zero,” Gupta argued. As with airlines, he said, every country wants to have its own. A “super exchange” for Africa is needed, but Gupta sees no chance of that happening. In the meantime, the only practical way forward is for new exchanges to keep costs as low as possible by using new technology, he said.

Edoh Kossi Amenounvé, chief executive of the Bourse Régionale des Valeurs Mobilières (BRVM) regional stock exchange based in Abidjan, says that lack of liquidity is “always used as a pretext” for avoiding African public markets. Liquidity in African markets is much better now than five or 10 years ago, he argues. The idea that African

ADRIA FRUITOS FOR TAR

markets lack liquidity is “too quick” of a conclusion, he says: “Lack of liquidity is not a fatality.”

Liquidity cannot be achieved by decree, Amenounvé tells The Africa Report, but must be built over the long term, through wider choices of securities, new types of financial instruments and liquidity contracts. Low freefloat levels need to be increased, more stock splits are needed to cut the price of some shares and make them easier to trade, and the lending and borrowing of shares has to be facilitated, he says. The analyst research function in Africa also has to be developed. “There is still work to do, and we will do it.”

‘Fear factor’

At the AFC, Gupta still sees a dearth of strategies for attracting small and medium-sized enterprises (SMEs) to public markets. Instead, he argues, there exists a range of “subtle deterrents” to listing. In many parts of the continent there is a “fear factor” around disclosing personal wealth and the uses to which that information might be

put. That implies a need for much greater flexibility in terms of disclosure requirements, he argues. “Regulators won’t like to hear what I have to say.”

There is no obvious prospect of such flexibility being granted. Disclosure is “a hurdle that entrepreneurs have to get their heads around,” argues Nicky Newton-King, former chief executive of the Johannesburg Stock Exchange (JSE). “It’s the price of coming to capital markets.” She can’t imagine any easing up of JSE disclosure requirements. “It’s not how capital works.”

Newton-King says the JSE aims to end perceptions it is an emerging market exchange. She wants it to be considered on a par with London and New York. She says cross-national themes such as green investing are the way forward and sees potential in the development of green and global exchange-traded funds. Yet she acknowledges that South African institutional investors are “deeply risk averse”, with large funds reluctant to invest in SMEs. The PwC-EIU survey offered little comfort on the prospects for achieving such a goal. In terms of exchanges

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50

law firm. That was caused by an 80% drop in that global issuers will be considering beyond their home turf in 2030 for IPOs, Johannesburg domestic capital raising in Africa, with IPOs was mentioned by only 13% of respondents, raising just $85m, compared with $419m a year earlier. Baker McKenzie attributes the behind Singapore at 15%. Only 5% saw Nigeria African private equity as a possible destination. No other African decline to political and economic uncertainty exits are running country even got a mention.

– though e-commerce company Jumia’s listing at a fairly stable level A growing South African economy is needed this year on the New York Stock Exchange is of up to 50 per year, excluded from their figures. to create new listings, Newton-King says. That according to the chief executive of APEVCA requires the state balance sheet to be sorted Not many companies will follow Jumia’s example of listing on a developed market. out. There would be “significant implications” if South Africa’s last investment-grade rating with Christopher Marks, head of emerging markets EMEA Moody’s was lost, she says. Newton-King estimates that at Mitsubishi UFJ Financial, draws a contrast between she spends about 40% of her time on issues that concern Africa and Russia. In the Russian case, he says, the legitSouth Africa Inc., rather than the exchange. imisation that was achieved by corporate listings on the London Stock Exchange was often as important as the The Steinhoff corporate governance scandal has done little to improve the JSE’s prospects. Newton-King agrees cash that was raised. “There aren’t that many pan-African that Steinhoff has left behind a feeling that regulation in candidates that need the legitimacy at this stage,” he South Africa has not worked. There’s still “quite a bit of says. Management efforts to transform companies are work to do” in terms of proving the exchange’s commitprobably more important now, he argues. ment to regulatory standards. It is a challenge that the Public markets in Africa face difficulties of scale and exchange can’t tackle alone. “Guardians of governance have not shown that they are a “natural nursery” for dyneed to be more noisy,” she says. “When things seem to namic new companies, Marks argues. Public exchanges be going well, boards should ask the hard questions.” in Africa are “vulnerable to a high preponderance of glamour trades” which in turn leaves investors vulneraTrading costs ble to disappointment, he says. César Pérez Ruiz, chief investment officer at Pictet, agrees, arguing that listed Newton-King points out that the JSE has much lower companies in Africa are often state-owned enterprises execution costs than other African exchanges due to and are not run for the benefit of shareholders. economies of scale. According to the Bright Africa 2018 report published by RisCura, limited pools of licensed Public markets in Africa remain “relatively shallow,” says brokers in other African markets mean investors have Alexandre Alfonsi, a partner at Paris-based private-equity very little scope to switch to a competitor. Yet the low advisory firm Axonia. Public markets give only the tip volume of trades on African exchanges means that broof the iceberg of investable businesses, he says. Private equity provides greater diversification: “the investment kers charge more to cover costs. Egypt’s relative high liquidity, in comparison with Nigeria, which has a similar universe in private equity is so much bigger.” Axonia free float, is partly due to trading costs, the report says. this year supported the African private-equity manager EXEO Capital in a $146m fundraising.

Overall, RisCura says that investors in Africa need to consider alternative asset classes.

Stock market investors demand rising share prices, while debt funding often requires tough covenants from Capital raised by African issuers declined by 28% in the first half of 2019 to $341m, according to Baker McKenzie the company, argues Michelle Kathryn Essomé, APEVCA’s

80

4 60

2 40

2

Real Estate

Financials

Utilities

Energy

Consumer Discretionary

Information Technology

Telecommunication Services

Materials

Industrials

Healthcare

20

1 0

Consumer Staples

0 2013 2014 2015 2016 2017 2018

ZMSE

LUSE

132 THEAFRICAREPORT / N° 109 / OCTOBER-NOVEMBER-DECEMBER 2019

UGSE

DAR

NGSE

CBSE

NASE MUSE GHSE

CASE

BSM

SOURCE: AVCA, S&P CAPITAL IQ AND RISCURA ANALYSIS

AFRICAN STOCK EXCHANGES RELATIVELY ILLIQUID Daily traded value by sector (one-year average) $m

AFRICAN PRIVATE EQUITY FUNDRAISING ROSE SLIGHTLY IN 2018 ($bn)

Former chief executive, Johannesburg Stock Exchange

‘The JSE is well placed to engage in order to fill a crucial gap in the market and to collaborate with our listed companies, to educate and look after their shareholders end-to-end.’ chief executive. These may not be easy hurdles for a small African company to overcome. Private equity can provide financial, strategic and operational support with the potential to transform a company, Essomé says.

Alfonsi likens investing in public markets to sitting in the back seats of a plane: “You don’t see what is happening in the cockpit.” In private equity, you can see the cockpit and the flight instruments, and talk to the pilot. Private equity will “put the muscle and sweat in”, and appoint new management if needed, Marks says. Essomé points to Kenya’s Java House coffee shop chain as an example of a small company that has been able to achieve scale but wouldn’t have been able to do so without private equity.

African private equity exits are running at a fairly stable level of 40 to 50 per year, says APEVCA’s Essomé.

Boots on the ground

Essomé says that the most attractive opportunities now can be found in real estate, financial services, education, consumer staples and discretionary spending. In geographic terms, she says, South Africa still leads, while Nigeria has also developed a deep private-equity market. Egypt and Kenya are also promising markets that are attracting more interest, she says. Due diligence for investments, Essomé adds, requires “boots on the ground.”

The investment case for private equity in Africa can be compelling, but liquidity is the Achilles heel. Finding an exit for private-equity investments in Africa is “a big question,” Alfonsi says. Possible paths are an IPO – leading back to the liquidity constraints of public African markets – or a sale back to managers.

MICHELLE KATHRYN ESSOMÉ Chief executive, African Private Equity and Venture Capital Association

‘Private equity has played a leading role in backing and nurturing promising companies in Africa, stepping in to provide funding to enterprises that have been unable to raise funding from other sources.’

TIISETSO MOTSOENENG/REUTERS; ALL RIGHTS RESERVED

NICKY NEWTON-KING

The unpredictability of events in many African countries makes finding the exit a “stop-go” process, Alfonsi says. Due diligence by potential buyers takes longer than in developed markets, he points out. “People have to pioneer what makes sense for them.”

Private equity in Africa has come a long way since the early 1990s when development finance institutions would invest in government-backed projects.

Increased investment from pension and endowment funds has reduced the concentration of development finance funding in private equity. The total value of African private equity fundraising increased to $2.7bn in 2018 from $2.4bn the year before, APEVCA data shows, with information technology (19%), consumer discretionary (15%) and consumer staples (13%) accounting for almost half of the total number of deals.

More specialised and targeted funds are emerging, such as the Mano River Transition Fund launched by Truestone in June. The fund will invest up to $50m in SMEs in Sierra Leone and Liberia.

Ultimately, the choice between public and private routes may prove to be a false dichotomy. Sub-Saharan economies that are based on debt need to achieve a transition to public markets, argues Amenounvé. Private equity, rather than being in competition with public markets, is a way to achieve this transition, he says.

Current exit routes will not be enough to support the volume of investment into Africa, Amenounvé says. In China, private equity helped to create the stock market, he says. In Africa, likewise, “private equity will feed the public market of the future.”

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FINTECH

Is there a bubble in Nigeria?

Telecoms firm MTN is going big into the mobile-money sector. Will it crash valuations or raise all boats in the financial ecosystem?

By KANIKA SAIGAL

Now Nigeria is in the midst of a fintech revolution.

The drive towards financial inclusion includes a young, Interswitch – a digital payments and commerce company tech-savvy population and the prevalence of smartphones, from Nigeria – is planning to list on both the London and creating an effective environment for new and nimble fintech companies to take off.

Nigerian stock exchanges by the end of the year. The company has sought advice from international bank At the same time, the Central Bank of Nigeria has introduced a number of initiatives. Critically, there was heavyweights including JP Morgan, Citi and Standard the National Financial Inclusion Strategy creation of a Bank on the initial public offering (IPO). Estimated valuations for the company are as high as $1.5bn. sandbox for fintechs to trial new products – products Dual listings from Nigerian companies are usually aimed to encourage access to finance for those that have been traditionally left out of the system. reserved for the likes of telecoms company Airtel – large multinationals that have built scale and reputation over This is an incredible about-turn by regulators and the government from 10 years ago when mobile money in time. But Interswitch’s ambition and valuation shows that Africa – particularly in East Africa – started fintechs are gaining ground. to take off. Strong lobbying by the banks in Nigerian fintechs offer a broad range of financial products to customers. Payment Nigeria at the time prevented non-bank players processing company Flutterwave (see from entering the financial landscape like Safaricom had done in Kenya, for example. page 112); Lidya, which lends to small and The number of startups medium-sized enterprises (see box); online Many have the opportunity to flourish in operating in Africa’s an environment where incumbent financial savings platform PiggyVest; and money-transfintech space has services are unwilling to invest in expensive fer company Paga are just some of the comgrown by more than panies in Nigeria that have created apps to bricks and mortar. Fintechs are also buoyed by 60% in the past make saving, spending, money transfer and the rising middle class, supportive regulation two years, according access to credit easier. to Disrupt Africa and the drive towards financial inclusion.

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Companies like Lagos-based Paystack have created apps to make saving, spending, money transfer and access to credit easier

– not at all. At the end of the day, investors are just going to pay what they think these companies are worth,” says Segun Aina, president of the Fintech Association of Nigeria (FAN). “Nigerian fintechs are developing at the margins. It’s a young, vibrant sector and there is plenty of room for growth and investment,” he says.

Between January 2015 and June 2019, fintech companies across Africa raised $320m, with the majority focused on South Africa, Kenya and Nigeria according to data compiled

by Disrupt Africa. And while there has been exceptional growth in the sector – 60% in the last two years – this is only a drop in the ocean. Globally, fintech companies raised $39.6bn from investors in 2018, up 120% on 2017’s numbers, according to data company CB Insights.

‘Suitcase banking’

SOURCE: CBINSIGHTS

AKINTUNDE AKINLEYE/REUTERS

But whether a bubble is forming boils down to something as straightforward as the definition, says Ameya Upadhyay, principal at VC firm Flourish, a spin-off of the Omidyar Network investment company.

INVESTMENT IN AFRICAN FINTECH “Look solely at the amount of cash AS OF FEBRUARY 2019 flowing into the Nigerian fintech Total funding ($m) Deals space, just a proportion of the $320m 300 100 into Africa, and there isn’t a bubble.

Fintechs in the country can easily absorb this amount of cash given 50 just how big the opportunity is,” says 150 In the past few years, a number of Upadhyay. “But the issue in Nigeria accelerator programmes have popped is that some companies gain much more attention than others. As such, up to offer support and advice to 0 0 2015 2016 2017 2018 2019 a lot of the investment is focused on develop Nigerian startups. Others have been accepted on prestigious a small group of companies and there accelerator programmes in the US. International invesis a growing risk that valuations are becoming distorted.”

‘Suitcase banking’, which African markets continue to tors are beginning to take note. Mastercard, Visa and grapple with, despite increasingly becoming ingrained Tencent have all invested in the sector, and a number in the global financial landscape, is a major part of the of global venture capital (VC) companies have helped some of Nigeria’s most promising fintech startups raise problem. Armed with cash but with little local knowledge, early-round funding. investors fly in – or worse, assess investment targets from hubs in Europe or the US – hoping to find the next big thing.

Building scale Could this be the case with Interswitch? “Whether a “An IPO is one measure of success – perhaps one of the fintech deserves this attention is subjective, and this most visible,” says Tahira Dosani, managing director at may influence valuations,” says Upadhyay, without mentioning specific companies.

Accion Venture Lab. “And for many fintechs in Africa it’s the holy grail,” she says. Nigerian startups will need to In August, South African telecoms giant MTN was build scale first. Mergers, acquisitions or exits through granted a “super-agent” licence by the Central Bank of secondary sales are essential steps towards an IPO, but Nigeria, which will allow the largest telecoms company in the country to provide financial services to its subnews that Interswitch is making plans show just how much the Nigerian fintech landscape is evolving. scriber base. With these newfound powers, Nigeria’s As Nigerian fintechs gather momentum, questions are burgeoning fintech sector could come crashing down, fulfilling fears of a bubble. emerging around whether their valuations are inflated. For those with local expertise in Nigeria’s fintech ecosystem, But Accion Venture Lab’s Dosani is not worried. “Mobilemoney licences are positive for the ecosystem, creating however, there is not a bubble in what companies are worth. more payment options for consumers and helping drive “For the most part before an IPO, fintech valuations are the adoption of digital services. If anything, it creates a under wraps. But companies are not necessarily overvalued

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Fear of an exodus

37

Nearly 37 of every 100 adults in Nigeria are still unbanked, according to the EFInA Access to Financial Services in Nigeria 2018 Survey

Data from the EFInA Access to Financial Services in Nigeria 2018 Survey shows that 36.8% of Nigeria’s adult population is still unbanked, so the pie may be big enough for everyone.

For the FAN’s Aina, discussions around whether a bubble is emerging distracts from the more pressing issues facing Nigerian fintech. “As more international investment comes in, there is a real risk that controlling interests leave Nigeria,” he says.

“Eventually, as fintechs grow and turn a profit, Nigeria’s economy will not benefit from this growth if they end up moving operations and ownership offshore. There needs to be a lot more discussion around how we can develop a dynamic fintech sector in the country and create incentives to encourage local investment and for Nigerian fintechs to stay here,” he says.

Aina points to the fact that Africa-focused e-commerce company Jumia is incorporated in Germany, has a tech team based in Portugal and is now listed on the New York Stock Exchange. Meanwhile Flutterwave’s headquarters are in San Francisco, digital credit platform Mines also relocated there, and Paystack now has offices in Lagos as well as San Francisco.

Another challenge for Nigerian fintech growth? The bulk of liquidity is still offshore. “Nigerian capital markets are developing, and money is making its way over here. But there is a lot to be gained if companies such as ours go to investors in places such as London and New York,” says Kehinde. Nigeria’s capital markets will need to evolve just as quickly as the fintech sector, if the country wants to keep hold of these new, nimble financial services companies.

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TUNDE KEHINDE Chief executive, Lidya LIDYA

payment infrastructure that fintechs can leverage, driving more fintech opportunity. I don’t think this escalates bubble fears,” she says.

Other players in the sector agree. “The market is very far from a bubble,” says Tunde Kehinde, chief executive of Lidya. Banks that have stayed away from SMEs in the past now see a viable route to banking them by partnering with fintechs in the country. This also means that they are able to meet financial inclusion goals. For them, fintechs entering the space is less of a threat and more of an opportunity. “There is such a large gap for financial services and a lot of room for more entrants and more solutions for customers,” he says. “More solutions from new entrants will be great for consumers and will spur innovation as fintechs, alternative financiers, telecoms companies and banks look to be the partner of choice for their target customers,” he adds.

‘THIS IS SOMETHING BANKS JUST CAN’T AFFORD TO DO’ Micro, small and medium-sized enterprises (MSMEs) in developing countries have an unmet finance need of $5.2trn each year, according to data collected by the International Finance Corporation.

In Africa – where small businesses are the backbone of economic growth and development – the figure stands at $331bn. Nigeria accounts for a third of Africa’s funding hole. “Nigerian banks tailor solutions to meet the needs of large, valuable corporate customers but this is something they just can’t afford to do for smaller companies in the market for smaller, shorter-term loans,” says Kehinde.

“Companies like ours are the only ones that can fill this gap,” he adds. Kehinde speaks in his role as chief executive of financial services platform Lidya, while leaning on his experience as co-founder and former managing director of online retailer Jumia and co-founder of logistics company ACE. He has seen first-hand how the exclusion of small Nigerian businesses from the financial landscape has stifled economic growth. “We saw it through our logistics company,” says Kehinde. “Smaller businesses in Nigeria couldn’t get scale because they couldn’t get access to credit for growth and couldn’t use our services. Something had to give, so Lidya seemed like an obvious solution.”

Founded in 2016 with his business partner Ercin Eksin, the company focuses on providing access to credit for SMEs across Nigeria via its online platform.

Loans can go from $500 to $50,000 at a time.

Decisions usually take around three days for new customers, but subsequent loans are usually issued within 24 hours – as long as there haven’t been any issues with previous payments. The fintech accesses data from a number of different enterprise partners to carry out the necessary due diligence on those applying for loans without the need of audited financials, collateral or even bank statements. “We have automated data collection, which cuts costs and time in terms of ‘know your customer’ anti-money laundering legislation and a number of other timely processes,” Kehinde says. To date, Lidya has issued more than 7,000 loans.

Interview by KANIKA SAIGAL

London

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ENERGY FINANCE

More wary of betting on barrels

A series of gas deals are getting approval as investors deal with shifting winds in the global energy market and concerns about the future of world economic growth

By OHENEBA AMA NTI OSEI

30 Capital expenditure (US$ billions)

25

20

20

15

15

10

10

5 0

138 THEAFRICAREPORT / N° 109 / OCTOBER-NOVEMBER-DECEMBER 2019

35 30

25

5 Eni Sonatrach NNPC SpA SpA

Cost of delays

The final investment decision (FID) on Shell’s long-stalled Bonga South-west offshore field project in Nigeria has suffered considerable delays due to an outstanding tax dispute with regulators. In February this year, Shell’s head of upstream Andy Brown told Reuters that FID on the multibillion-dollar project, which is expected to produce 180,000 barrels of oil per day, will not happen until the issue is resolved.

And delay costs can add up quickly. “Delayed FID can also mean you delay other aspects of the project’s value chain. So you’re thinking of bringing ancillary

Number of projects

A new wave of LNG projects is taking shape

Shell Sonangol Exxon Ode-Aye EP Mobil Refinery

0

SOURCE: GLOBALDATA

Amidst strong shale production from the US Permian Basin, trade wars and low oil prices, 2019 has not been a blockbuster year for oil and gas financing in Africa. Paul Eardley-Taylor, head of Standard Bank’s (#1) oil and gas sector coverage activities for Southern Africa, explains: “In the last few years, the world’s energy balance has completely changed as a result of the Permian. So any project is now competing against the Permian for the next decade.”

Getting promising African projects off the ground does not come cheap and boosting investments in the energy sector will be key moving forward. According to GlobalData, an estimated $194bn will be required to fund 93 oil and gas projects planned across the continent between 2018 and 2025. Africa’s oil and gas industry will also require $1.6trn and $721bn cumulative infrastructure investment between 2013 and 2035, respectively, according to data from Africa Oil & Power.

And with commercial and political risks as well as regulatory setbacks also hindering investments, the bill could be much higher. Rolake Akinkugbe-Filani, head of energy and natural resources at Nigeria’s FBNQuest Merchant Bank, says African banks have not been big players in oil and gas finance. “Most of these projects require long-term funding, and because of some of the regulatory challenges the financial services sector and capital markets in Africa had over the last decade – particularly since the financial crisis in 2008 – the ability to source money for seven to 10 years tenure locally is increasingly limited. Commercial banks aren’t really able to stretch for that long,” she says.

CAPEX SPENDING ON PLANNED AND ANNOUNCED PROJECTS ACROSS THE OIL AND GAS VALUE CHAIN IN AFRICA 2018 19 20 21 22 23 24 25

93

PERENCO

infrastructure into the country; that is delayed. from the Australian and the American projects coming online. That didn’t happen because You may have placed orders for certain component parts of drilling equipment; that may the Chinese started buying LNG. And with also be delayed. Some of these things have that sort of Chinese demand, it gives people oil and gas projects huge costs, and obviously time is money,” a lot of confidence for the next wave of FIDs.” are being planned Akinkugbe-Filani adds.

After several successful natural gas discovacross the continent The lack of sufficient demand is another eries, Mozambique is set to become a top LNG between 2018 and 2025, exporter in the next few years. The country’s barrier hindering energy financing across requiring funding Coral FLNG project was able to reach FID in the continent. Initially expected in mid-2016, amounting to an estimated $194bn 2017 – first gas is expected in June 2021 – deFID for Equatorial Guinea’s Fortuna floating liquefied natural gas (FLNG) project has been spite the volatile and uncertain global pricing delayed several times due to Ophir Energy’s inability environment. In June 2019, another LNG project led by US to source the $1.2bn needed to finance the project. In energy firm Anadarko reached its $20bn FID, the largest January 2019, the UK-based firm lost its licence to the single LNG project approved in sub-Saharan Africa oil block that contains the Fortuna discovery. and gas. FID on ExxonMobil’s multibillion-dollar Rovuma LNG project is also expected by the end of 2019. On the On the positive side, other projects are picking up, with a new wave of liquefied natural gas (LNG) projects leading import front, France’s Total signed a deal in July with the the pack. The Paris-based International Energy Agency electricity utility in Benin for a new floating storage and predicts gas will overtake coal by 2030 to become the regasification unit to supply power plants. world’s second-leading fuel. Gas will play an increasingly significant role as a transition fuel in Africa.

Looking beyond banks Standard Bank’s Eardley-Taylor explains: “You’ve got Other LNG projects awaiting FID on the continent include prices coming back, which means that companies have Tanzania’s $30bn LNG venture in the country’s Lindi more free cash flow. You’re expected to have a glut of LNG Region, UK-based NewAge’s 1.2m tonnes per annum (tpa) FLNG project in the Republic of Congo and a seventh LNG train in Nigeria that would expand the country’s LNG production capacity from 22m to 30m tpa. With a focus on gas, Akinkugbe-Filani says that Africa can look farther afield for good examples: “Qatar has been able to monetise its gas resources effectively to trigger and spark industrialisation across a number of energies as well as petrochemicals, fertilisers, LNG for export and then using that as a base to develop vibrant cities.”

In some cases, financing these big projects has required looking beyond traditional banks to more creative nonbank and capital markets-based funding such as infrastructure bonds, quasi-debt and private equity funding.

Sourcing funds from development finance institutions, international and multilateral finance institutions is another alternative because they are a “key source of de-risking a project and opening it up to other sources of funding,” says Akinkugbe-Filani.

However, Standard Bank’s Eardley-Taylor argues that fundraising problems are market- and project-specific and in many countries a traditional finance model has an important role to play.

“The example of LNG in Mozambique is where traditional banking models are absolutely working,” he explains. “So I think a lot of that is about the underlying type of projects we’re talking about and what the client’s drive is. If the client is looking to avoid to put in equity as it happens from time to time, then absolutely you’re going to need unconventional stretches because there’s no equity in there.”

THEAFRICAREPORT / N° 109 / OCTOBER-NOVEMBER-DECEMBER 2019

139

INTERVIEW

‘We’re creating a cashless economy’ The chief executive of Ecobank Transnational (#16) reveals how using tech to formalise remittance flows will benefit both banks and African economies Interview by PATRICK SMITH TAR: How important is finance from the diaspora for African economies?

We’re looking at over 50 million people. Each of those people earns on average more than 10 times the average per capita income of people on the continent. Their ability to transfer money home to improve purchasing power and demand capacity is there. The responsibility for the banking system is to figure out how to reduce friction in that transfer process. With the current level of technology and economics, people can remit money to the continent in a friction-free way almost instantly.

Many remittances go through informal channels because they are faster and cheaper. What are the benefits from formalising remittances?

It’s better for the remittance to go through the formal financial system.

When it goes through informal systems, it’s not predictable. The country cannot plan. If you look at a place like

Nigeria, if it knows that it would get $20bn annually in foreign remittances through official channels, it becomes a predictable capital flow.

How will you persuade people to use the banks and money transfer companies?

The financial services institutions, development financial institutions and the African Union [AU] want to bring the price down and improve the quality. It means making the exchange rate very close to the market exchange rate and making execution almost instantaneous. We should allow free competition to ensure that the banking system behaves responsibly. We cannot get good flow at the current rate of 7%-10%. So we believe that the price needs to come down substantially.

I wouldn’t encourage the AU or any other union to determine the price.

‘WHEN REMITTANCES GO THROUGH INFORMAL SYSTEMS THE COUNTRY CANNOT PLAN’

140 THEAFRICAREPORT / N° 109 / OCTOBER-NOVEMBER-DECEMBER 2019

ERIC LARRAYADIEU/ACF/JA

ADE AYEYEMI

What do you think is a fair fee for remittances?

I think anything more than 3% is too high if you’re going to supply it instantly. If it’s going to take some time to execute, then you should be looking

central bankers need to recognise that the remittances don’t have to go only to individuals. It’s much better if they flow through the [formal] financial system of choice by the person doing the remitting or receiving it. Once those things are done, then people would demand products based on who can offer the right service.

at as low as 1%. Then that makes it at a level that can remunerate capital for supplying the remittance product and that can also attract people that want to do the remittance.

What will the data from formalising remittances and boosting mobile money be used for?

M-Pesa is a great product because a problem was solved by including people in financial services, but the government of Kenya was ready to trade control for inclusion. […] Why should people care? It allows more information to be available in the days of big data and the ability to analyse that data. And you can see a higher level of the transactions passing through. Because […] you compare the GDP of Ghana to the GDP of New York, and Ghana is much less than New York. And you start asking the question: ‘Are we counting this differently? Are we not able to predict the right demand and therefore the right inBANKING BEYOND vestment level in these various countries?’

BORDERS A lot of investments are based on a leap 1998 of faith. But including large numbers of Got his first job in banking, transactions in the financial system in working at Citibank Nigeria a cashless way allows those things that were happening to be measured. You March 2006 can say: ‘There are lots of people that Promoted to director can demand this product that I want to for Citibank Kenya, Tanzania, invest in.’ That allows you to make that Uganda and Zimbabwe decision in a much more informed way.

September 2013 Named director for subWhy did mobile money take longer Saharan Africa at Citibank to get established in West Africa

than East Africa?

September 2015 How can remittances play a more proAs somebody who lives in Togo, a small Became chief executive ductive role in economies? country, [I can say] it’s not a function of of the Togo-based Ecobank The first thing is a recognition that there your [country’s] size. You need leadership Transnational to be able to create innovative solutions are a lot of people living outside that want to and to be able to put it to market. Kenya support the economies of the countries they came from. [This] will help to keep people in just demonstrated a faster agility than West Africa. But I think that’s probably because Kenya those countries and improve demand capacity. We always talk about migration. But if the resources sit in the North, didn’t have oil and they needed to innovate quickly. the people in the South will come looking for resources.

They’ve done that. The rest have learnt from them.

By the way, the payment systems in some of the West There has to be a recognition that remittances are African markets are faster than some of the US markets. important and policy should support them. There is a lot of conversation about remittance as if it’s a ‘black flow’ It’s just a question of people who have a problem. They want to solve it. The current level of technology allows that doesn’t need to be discussed in official quarters. them to get that done and we don’t have investment in The World Bank is now looking at their size and saying legacy systems that impair the institutions from getting something needs to be done. that done. So today across the continent, the ability to And there are a lot of people that are working, but they make payments instantly is something that we feel very don’t have papers. We should try and figure out how to include them in the financial and banking system [in Africa] happy about and we can do payments across African countries as fast as we can do payments in Europe. so that remittance flows can serve a higher purpose. African

THEAFRICAREPORT / N° 109 / OCTOBER-NOVEMBER-DECEMBER 2019

141

TELECOMS DOSSIER

MTN becomes a platform player

Three years into the job, Rob Shuter, CEO of Africa’s largest telecom company, has outlined his long-term strategy. Voice revenue will decline, so MTN will focus on messaging, mobile money and streaming to keep customers within the telco’s growing ecosystem

By BRENDAN PEACOCK in Johannesburg

SIPHIWE SIBEKO/REUTERS

Smartphone users are still in a minority in most of MTN’s markets

Under the leadership of chief executive Rob Shuter, South Africa’s telecom giant MTN would like to become the Tencent of Africa. MTN is present in 21 countries in Africa and the Middle East, and is the market leader or second player in all of them. Like the major Chinese player, and following in the footsteps of several telcos in developed markets, MTN is opting to position itself for the expected decline in mobile voice revenue by branching out into digitally distributed financial services, streaming media and messaging. By offering social platforms and digital content, mobile operators are encroaching upon traditional content-distribution business models through creating their own integrated digital ecosystems.

Analysts agree that Shuter’s long-term strategy is sound but say there are likely to be short-term challenges. Shuter took over from Sifiso Dabengwa after he resigned in 2016 in the wake of the Nigerian authorities fining MTN $1.7bn for the use of unregistered SIM cards.

With data monetisation remaining a challenge, mobile money and other digital services are important revenue streams for mobile operators looking to leverage their network infrastructure. Airtel Africa, a subsidiary of India’s Bharti, this year raised $1.25bn primarily to boost its average revenue per user through its Airtel Money service. MTN and France’s Orange are also investing in mobile content – using their digital networks to cash in on demand for streaming content, chat services and gaming.

In November 2018 MTN and Orange – the two largest mobile network operators in anglophone and francophone Africa – teamed up to offer a continent-wide mobilemoney service, Mowali. This is an example of interoperability of mobile-money ecosystems. Pioneered by Tanzania and now being explored by the likes of Ethiopia and Angola, interoperability projects have the potential to connect consumers to fintech, banks, merchants and other mobile ecosystem players, according to a 2019 GSMA Intelligence report on sub-Saharan Africa’s mobile economy.

Everything to play for

Speaking in August at MTN’s interim financial results presentation for the six months ended June 2019, Shuter described the markets it operates in as characterised by “significant population growth, youthful demographics, low levels of smartphone penetration and data and digital adoption, as well as large unbanked populations”.

Shuter said that MTN is active with its fintech offering in 14 countries, with four more in the pipeline. Of those, South Africa and Nigeria offer the most potential. “In Nigeria, every month we register 2.4 million customers for mobile voice. At the same time we can register them for other services,” he explained. The company obtained a ‘super agent’ licence in Nigeria in August. It is now applying for a payments banking licence, which will pave the way for its rollout of financial, streaming and other data services.

MTN also wants to get into the hardware game. The group has struck a deal with South Africa-based Mobicel to produce

THEAFRICAREPORT / N° 109 / OCTOBER-NOVEMBER-DECEMBER 2019

143

TELECOMS DOSSIER / MTN becomes a platform player

Hurdles ahead

MTN’s share price rose strongly in the past six months, but there are potential bumps in the road. The group still faces a court date with Nigeria’s auditor-general in October over claims of unpaid taxes.

Iran was hit by US sanctions last year, and a 50% currency slide and persistent difficulty in repatriating funds to South Africa has dampened its contribution to group revenue. With revenue growth in South Africa also disappointing, the market’s reaction to MTN’s

GEORGE OSODI/BLOOMBERG VIA GETTY IMAGES

MTN takes the rough with the smooth in Nigeria

$20

interim results was to send the share price down by nearly 5%.

Hannes van den Berg, co-head of South African equity at Investec Asset Management, says that, despite improving fundamentals at MTN, regulatory headwinds are stalling investment appetite.

“Investors can see the upside of MTN aiming to be something like the Tencent of Africa, but mid-single-digit revenue growth guidance is lower than before. Also, data prices in Africa at the lower end of the package curve are high – more expensive than in Europe.

Regulators want consumers to have access to cheaper data, so when network operators apply for licences or renewals that is always part of negotiations.”

cost of the smartphone MTN will distribute in Africa to encourage more people to buy digital services

MTN’S BIGGEST MARKETS (In millions of subscribers)

11.7m Uganda

18.6m

11.4m

Ivory Coast

Ghana

60.3m

30.0m

44.8m

South Africa

144 THEAFRICAREPORT / N° 109 / OCTOBER-NOVEMBER-DECEMBER 2019

Nigeria

Iran

SOURCE: MTN

a $20 smartphone which it intends to distribute in Africa to accelerate the adoption of digital services.

MTN’s medium-term targets are 300 million subscribers (currently 240 million), 200 million mobile internet subscribers (currently 82 million) and 100 million active customers for digital services (currently 30 million). Currently, excluding Iran, Shuter said MTN subscribers typically use just 1.5GB of data per month – a figure he said should expand rapidly.

Shuter added: “Formal banking and financial services adoption will also move from one-third to twothirds and we will ride on the back of that internet adoption. Then we will be able to provide an attractive return profile. We are well-posit­ ioned for the long term, our asset realisation programme is on track as we rebalance the portfolio and we are improving our leverage.”

The company has been disposing of non-mobile assets that are not important to its new digital operator strategy. Online travel booking business Travelstart, some tower company investments and an investment fund were first to hit the chopping block. Shuter also anticipates turning around some divisions that are currently experiencing difficulty, such as the prepaid voice market and enterprise services division in South Africa.

Van den Berg says that while MTN faces no obvious competitive difficulty in rolling out its strategy, the resilience of voice revenue has surprised everyone. “People thought it would go backwards in double digits. Combined with data growth of 20% in constant currency terms, revenue is stronger than we’d anticipated a few years ago.”

He says MTN is clearly dreaming big in its African plans, but legacy issues for the group – not attributable to the current leadership, which he praised for disclosure and transparency – mean that investors are waiting to see more evidence of MTN’s strategy coming to fruition.

“MTN’s free cash flow per share is lower than the dividend being paid out, which means they’re funding some of the dividend from their balance sheet. That is concerning, though management believes the one-offs will pass and the operational health of the business warrants it. The

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TELECOMS DOSSIER / MTN becomes a platform player

amount of dollar-denom­ inated debt is also worrying, given the rand’s weakness,” he adds. In the first half of 2019, MTN’s group debt stood at R70.9bn ($4.8bn).

Ashburton Investments senior fund manager Nick Crail says he is very happy with MTN’s strategic direction but finds it difficult to assess and price in the regulatory risk Africa poses. He is also concerned by MTN’s debt burden: “The global macro-economic picture is affecting two of its key markets in Nigeria and Iran.”

Regulatory surprises

CHRIS RATCLIFFE/BLOOMBERG VIA GETTY IMAGES

Crail says the relative lack of maturity of some African markets presents a great opportunity to keep capitalising on voice revenue

growth as penetration increases.

“Ultimately, we know where the voice versus data trend goes, but it hasn’t played out as expected over the last 10 years. So there is lots of opportunity, but some of the regulatory activity seems counterintuitive. For example, where China sought to roll out best-of-breed infrastructure to bring economic benefits and promote competitiveness in its economy, in Africa regulatory interference focused on widening competition has often lessened the user experience.”

Though Shuter flagged ongoing engagement with the Ugandan authorities regarding MTN’s licence renewal (which has been a protracted affair in which Uganda wanted MTN to pay $100m), he

MTN CEO Rob Shuter has an impressive address book

All aboard the all-star board MTN chief executive Rob Shuter is shaking up the telecom company’s leadership. In July, MTN unveiled a new group chief digital and fintech officer, Yolanda Cuba, previously of rival Vodacom.

Cuba joined MTN as the group paid the last instalment of

its Nigerian fine and made significant improvement in its financial fundamentals.

Her goal will be to drive data services uptake across the group’s 240 million subscribers.

Cuba’s appointment is one of several key moves by MTN

146 THEAFRICAREPORT / N° 109 / OCTOBER-NOVEMBER-DECEMBER 2019

did not mention that several senior MTN Uganda executives had been deported for reasons ranging from compromising national security and espionage to money laundering and tax evasion.

Crail says management is starting to deliver, and this may ultimately include a sale of the Iranian business – though whether MTN can achieve its target price and upstream the proceeds remains to be seen. “Repatriation of funds has been an issue for the last seven years. It could be a significant problem for MTN in a meaningful asset. That’s one of the reasons we’re staying clear of MTN right now – uncertainty in key markets.

It’s hard to make a call one way or the other,” Crail says.

in the first half of 2019. A consistent target for regulators on the continent either moving to protect consumers from high data prices or to open up the sector to more competition, MTN has a history of regulatory headwinds which have slowed its progress.

To this end, the announcement of new members of its board and the establishment of an international advisory board (IAB) in May 2019 seemed like a shrewd move.

Phuthuma Nhleko, who has been in either the CEO or chair’s position for 18 years, will step down from the board in December, to be replaced by South Africa’s former deputy finance minister, Mcebisi Jonas.

On 13 August, Jonas launched a book capitalising on his stature as one of the first whistleblowers against ‘state capture’ under ex-president Jacob Zuma, after turning down

a R600m ($40.6m) bribe in 2016. Other members of the board include the Emir of Kano, Nigeria’s Sanusi Lamido Sanusi and Kenyan Vincent Rague, formerly of the US-based International Finance Corporation.

Regional experience on the board should help MTN to deal with regulatory difficulties, and the IAB is due to provide advice to the company while advancing telecommunications and connectivity in Africa and the Middle East. The IAB will be chaired by South Africa’s former president Thabo Mbeki, who will be joined by Ghana’s former president John Kufuor, the former African Union commissioner for political affairs Aisha Abdullahi, former director general of the International Atomic Energy Agency Mohamed ElBaradei, oil company Total’s president of marketing and services Momar Nguer and MTN’s current chair, Nhleko.

A monthly programme on BBC World News Each month on Talking Business Africa in association with Zenith Bank, Lerato MbeleRoberts visits dierent parts of the continent and meets African business leaders.

From the leaders of large multinational companies through to entrepreneurs just starting out, Talking Business Africa ďŹ nds out how they got there, what motivates them and the challenges they face.

Upcoming shows run across the weekends of 6 July, 3 August and 7 September. Plus, look out for extracts from the show broadcast on BBC World News throughout the day every Friday.

In association with

TELECOMS DOSSIER

in the DRC, Ghana, Kenya, Niger and Uganda. American Tower chief executive James Taiclet said the deal “positions ATC to take even better advantage of the growth opportunity in the region as 4G mobile data technology is deployed to serve millions of Africans over the coming years.”

ATC is a big global player and owns more mobile towers across the world than are currently on the African continent.

4G technology is causing a rush to serve Africa’s new data generation

ATC

Players large and small

TOWERS

Reach for the sky

Acquisitions, IPOs and expansions are on the cards for independent tower companies as they bet on continued growth of the African telecoms sector

By HONORÉ BANDA After the stalling of several planned initial public offerings (IPOs) in late 2018, there is now a buzz of investor activity in the African telecoms tower market.

Firms including Eaton Towers, IPS Towers and Helios Towers put off their plans for IPOs due

to the lack of funding appetite.

Helios now plans to go ahead in September with an IPO that could value the company at up to $3bn, while in May American Tower Corporation (ATC) announced its $1.85bn plan to purchase Africa-focused rival Eaton Towers.

The Eaton deal will give ATC access to an additional 5,000 sites

148 THEAFRICAREPORT / N° 109 / OCTOBER-NOVEMBER-DECEMBER 2019

Mobile phone subscription growth in Africa has been high, and analysts expect it to continue that way. Swedish telecoms firm Ericsson predicts that subscribers in sub-Saharan Africa will grow by about 40% to 990 million by 2022.

Independent tower companies controlled 39% of the contin­ ent’s estimated 150,834 towers as of 2018, according to analyst TowerXchange, and IHS Towers remains the biggest player amongst them (see graph). Chief executive Sam Darwish told reporters in April that an IPO could be back on the agenda: “At one point we might look at a bigger fund-raise that could include a listing on one of the big stock exchanges such as New York or London.”

During the planning phase of the abandoned IPO, there was talk that South Africa’s MTN would use the occasion to reduce or totally offload its 29% stake in IHS, giving the opportunity for new investors to come onboard and helping to cut MTN’s debt (see page 142).

A smaller African player has recently entered the market. Lagosbased Pan African Towers launched operations in 2017 and now has 1,000 towers in Nigeria and 300 in Ghana. Its chief executive, Wole Abu, told the local media that he wants to raise funds to meet local telecoms demand: “We need about 38,000 more towers to provide

are interested in a potential sale of that infrastructure or getting involved in building plans in case those assets are not privatised.

As more African countries develop the latest in mobile network technology, rolling out 5G infrastructure, there is due to be a big uptick in activity. Helios created a South Africa-focused joint venture in January and announced plans to build 1,000 new towers there over the next three years. Helios will face competition from traditional players like South Africa’s Telkom.

“The need for investment in both rural and urban areas is massive,” Alex Leigh, Helios Towers’ chief commercial officer, told media.

“Operators will need more efficiency, and that comes from sharing and converging infrastructure.”

TOWER OWNERSHIP BY AFRICA’S FOUR LARGEST INDEPENDENT TOWERCOS (2018) 25 000

20 000

Uganda

Cameroon

Tanzania

Niger

Kenya

Rwanda

S. Africa

Zambia

Nigeria

Congo B.

Ghana 15 000

Burkina F. DRC Cote d’Ivoire

10 000

5 000

0

IHS American Helios Towers Towers Towers

Eaton Towers

SOURCE: TOWERXCHANGE

coverage in Nigeria. We are in position to provide that.”

Other major deals are in the works. Indian telecom Bharti Airtel has been selling off some of its tower assets to improve its balance sheet. The independent tower operators are now bidding for ownership of some 1,400 towers from Airtel’s Tanzanian subsidiary as its prepares for its own IPO. The towers were on the market in 2014 but did not find a buyer.

Telecoms companies are also eyeing the Ethiopian market as the government of Prime Minister Abiy Ahmed discusses plans to privatise Ethio Telecom and bring in more competition. For such a sizeable market, the country only has an estimated 7,000-8,000 towers. Towercos

INSIGHT /

JAPAN/ AFRICA Quality over

150 THEAFRICAREPORT / N° 109 / OCTOBER-NOVEMBER-DECEMBER 2019

In the competition for African deals, Tokyo says that its infrastructure projects may be more sustainable than China’s in the long run, and pledges to support the continent in the fields of education and medicine

By MARJORIE CESSAC, YUTA YAGISHITA, OLIVIER CASLIN for Jeune Afrique and HONORÉ BANDA With China’s African presence looming in the background, quality and sustainability were big themes of the seventh Tokyo International Conference on African Development (TICAD), held in the city of Yokohama in August. The government of Japan’s prime minister Shinzo Abe set a target of $20bn investment from the private sector over the next three years and is due to provide more detail about the Free and Open Indo-Pacific, its rival to China’s Belt and Road Initiative.

Many African leaders made it to TICAD, including South Africa’s Cyril Ramaphosa, Rwanda’s Paul Kagame, Mali’s Ibrahim Boubacar Keïta, Guinea’s Alpha Condé, the Democratic Republic of Congo’s Félix Tshisekedi, Niger’s Mahamadou Issoufou, Madagascar’s Andry Rajoelina, Djibouti’s Ismaïl Omar Guelleh and Cameroon’s Paul Biya. One of Japan’s big diplomatic goals is to gain enough international support for reforming the United Nations Security Council, with Tokyo getting a coveted permanent seat.

‘Urgent need’

Japan’s prime minister, Shinzo Abe, with Chad’s President Idriss Déby

SAYYID ABDUL AZIM/AP/SIPA

quantity

Japan had made a similar $20bn pledge for private-sector investment at the last summit in 2016 in Kenya, but it only made that target by changing its accounting methods. Katsumi Hirano, vice-president of the Japan External Trade Organisation (JETRO), told sister magazine Jeune Afrique: “Since Nairobi, we have seen a stagnation, or even a decline in some years, in our trade with the continent and in the volumes of investment made there.

There is therefore an urgent need for Japan to redevelop and strengthen its economic ties with Africa.” Japan’s trade with Africa was just $17bn last year and about half of 2008 levels. That is less than a tenth of China’s Africa trade, at $204bn in 2018.

Without naming China – which has lent for projects in Ethiopia and Kenya that are struggling to create the revenue to repay debts – Abe took aim at Beijing at the TICAD summit: “If partner countries are deeply in debt, it interferes

THEAFRICAREPORT / N° 109 / OCTOBER-NOVEMBER-DECEMBER 2019

151

JAPAN/AFRICA INSIGHT / Quality over quantity

with everyone’s efforts to enter the market.” He added: “We believe that quality infrastructure that is affordable over its entire life cycle is fundamental to sustainable economic transformation.”

Abe mentioned as a priority the need for cooperation with the continent in the fields of human resources, education and medicine.

In Kenya, Tokyo has pledged to support the government in its universal health coverage project as well as the development of a special economic zone near the Indian Ocean port of Mombasa. Over the next three years, Japan will also contribute to training of experts in financial risk and public debt management in 30 African countries.

African officials and business leaders at TICAD called on Japan to up its game. “Indeed, there is a real incongruity in seeing Japan, the world’s second-largest power, rank only seventh in terms of trade relations with Africa,” said Hippolyte Fofack, African ExportImport Bank’s chief economist, who says there is a certain “timidity” on the part of Japan with regard to the continent. However, Japan remains the fourth-largest overall aid donor in the world, providing $14.2bn in development assistance in 2018. One notable Japanese aid programme of late was a $1.5m donation in April 2019 to support community projects in Nigeria’s Adamawa, Borno and Yobe states, which have been the victims of the Islamist rebel group Boko Haram.

Currently, 796 Japanese companies are reported to be operating in Africa is already a cause for concern for Japanese companies, which are confronted each year with an ever more pronounced shrinking of the domestic market. The third ‘arrow’ of the famed ‘Abenomics’ strategy is precisely about Japan’s integration into international trade.

Currently, 796 Japanese companies are reported to be operating in Africa, compared to 250 in 2010. They are mostly concentrated in a few countries: South Africa alone has a third, far ahead of Egypt, Kenya and Morocco.

Hirano explained why Japanese companies are slow to invest in Africa: “Our companies are used to the economic context of Southeast Asian countries, China and the United States. But, with some notable exceptions, such as Toyota and Komatsu, the Japanese private sector is still in the process of discovering the African market.”

Tokyo wants to further strengthen the presence of its

Japanese companies have a strong incentive to look abroad.

For the moment, Japan is the only developed country affected by a demographic decline, with a predicted population of 100 million citizens in 2048, down from to 126 million today. This

JA ILUSTRATION

Demographic decline

152 THEAFRICAREPORT / N° 109 / OCTOBER-NOVEMBER-DECEMBER 2019

private sector on the ground, and more than 150 companies were in attendance at the TICAD summit in Yokohama. The TICAD forum gave rise to several announcements. Among them was a preliminary agreement signed between the Japanese car giant Toyota and the Ivorian government to eventually set up a vehicle assembly plant in Côte d’Ivoire.

Playing to their strengths

Toyota also has a project in Angola. Hideki Yanase, the company’s vice-president, announced a $200m investment in an assembly line and spare parts unit.

For its part, the conglomerate Mitsubishi Corporation has entered the African off-grid energy sector by taking part, as lead manager, in a $50m fundraising campaign for the British holding company BBOXX. Also, the Africa Finance Corporation, which aims to catalyse private-sector investment in African infrastructure, has obtained a $150m two-currency term credit facility with two Japanese institutions: MUFG Bank and Sumitomo Mitsui Banking Corporation. This is the financial institution’s first credit facility denominated in an Asian currency.

JETRO’s Hirano explained that Japanese firms should play to their strengths in Africa: “Our pharmaceutical industry could take advantage of this opportunity to extend its know-how around the world, particularly in Africa. The same is true for the new technology, infrastructure, agribusiness and even education sectors.

While Africa’s ongoing development must attract the interest of our economic sectors in general, our own challenges require us to focus on these priority sectors.”

SAGE MESS

A major player in Africa

as a Japanese development aid agency

countries can achieve economic take-off when, and only when, they have a thriving private sector. Second, for the private sector to thrive, countries must have well–educated human resources, basic infrastructure, and efficient institutions. And third, again, for governments to have these, political stability is essential.

Derived from Japan’s own history of modernization and its post WWII economic recovery, these beliefs are widely shared among many Japanese development policy makers and practitioners.

And I believe they are more than ever relevant to the contemporary Africa, as an increasing number of African countries are now coming to enjoy – though with varying degrees – the three conditions I mentioned above.

However, there are dozens of countries performing quite well, gaining strength and confidence in their economic and political management. Interestingly, no visible commonalities seem to exist among HIROSHI KATO, such-good performers: Guided by these beliefs, they include both natuSenior the Japan International Coral-resource rich and poor Vice-President operation Agency (JICA) is countries, both coastal prepared to stay engaged Japan International and landlocked countries, with Africa in a consistent Cooperation Agency (JICA) and both populous counand steady manner, and tries and countries with with a long-term perspecsmaller populations. This tive, to support its partners observation of divergence in economic performance in their march toward the achievement of the SDGs leads us to postulate that what matters, after all, is and Agenda 2063. The upcoming TICAD 7 (The not what natural and other endowments countries 7th Tokyo International Conference on African Depossess, but what kind of policies are employed and velopment) in Yokohama on 28-30 August, 2019, what types of political institutions are in place. will be a good opportunity for both African and Japanese stakeholders to deepen their mutual I would argue that there seems an internationally understanding and explore possibilities of further cooperation bringing more private sector and innoaccepted understanding about some necessary vation into African development.

– if not sufficient – conditions of success. First,

www.jica.go.jp

JAMG - Pictures : D.R.

While Africa is growing steadily and its future looks brighter than ever, many countries are still faced with deeprooted problems and challenges, such as massive youth unemployment, stagnating productivity in industry and agriculture, questionable quality of public services, and worsening inequality. All of these are indeed difficult challenges that defy easy fixes.

LAST WORD

GIVE CREDIT WHERE IT’S DUE FUNM MI ADEBAYO Writer aand former treasury and markets Africa trader and creedit analyst at Zenith Bank

As a Britgerian, you get used to requests from relatives based in Nigeria. These requests range from the strange, such as sending Cadbury’s chocolate bars from the UK as they prefer the taste, to the typical ask of money – because “we dey suffer oh!”. I’d like to say that the requests for money are valid and fair, but increasingly they’re coming packaged as some sort of investment proposition. I’ve had several relatives as of late ask for my time, so they can lay out their extravagant “no risk, but plenty of returns” plans for a farm or business idea their associates introduced them to. Details?

A cashflow model? Why would I need any of that? After all, they’re promising to give me my money back if anything goes wrong, so there’s no risk at all. I usually consider giving in as my part to play in much-needed remittances, so believe me when I say I’m not writing this to complain. Rather, I find the increase in the trend worrying and frustrating. What is driving this intense uptake in loan requests from relatives I’d otherwise view as quite business-savvy?

After being intensely harangued by relatives successively in the space of only a few weeks, I decided enough was enough. I challenged one particular relative on if they’d sought local

154 THEAFRICAREPORT / N° 109

means of financing. They let out a long sigh and explained that they did try to approach banks, much to their chagrin. They sent me their business plan, which to be fair was a decent one, as proof of their endeavours.

Due to so many rejections, they were pushed to seek money from an institution pedalling itself as offering “microfinance” and were completely ripped off by extortionate rates.

As somebody who has worked on credit analysis of banks, I’ve always been disappointed by the lack of retail credit facilities as a diversifying asset for their books. However, listening to a relative pour out their heart – and seeing how they were left with no other option but to endure loan-shark behaviour and inevitably ending up in dire financial straits – it made me see the stark reality of how vulnerable consumers are facing the dearth of retail credit facilities on offer by Africa’s banks. This of course isn’t only happening in Nigeria, as reports of illegitimate microfinance institutions have popped up all across Africa. And with other major economies like Kenya and South Africa facing lower economic growth rates too, it will increasingly leave the farmers and market workers of Africa extremely vulnerable to this sort of extortionate financing.

According to the International Finance Corporation, small and medium-sized enterprises are significant drivers of economic growth across sub-Saharan Africa, accounting for up to 90% of all businesses in these markets. If the traditional banks of Africa step up to the challenge of addressing this longstanding issue, there is room for a more sustainable, non-exploitative dispersion of consumer credit.

Isn’t it time banks, along with governments, started to support 90% of their economies through affordable and accessible financing, with a better regulated environment conducive to doing so? At the end of the day, I’d still happily send my aunty all the Toblerone she wants. I just want her to have a market stall to sell it on, if she pleases.

BELOVED AFRICA Lands of plenty Lands of contrasts Lands of opportunities

From the stoneage to the future

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