How can Africa create supportive environments for important innovations?

by Developed Africa 24. January 2017 10:55

Boosting transformational technology

  • Internet prices in sub-Saharan Africa vary wildly. Geography affects prices – landlocked countries pay more than coastal countries. Much of Africa gets its internet via undersea cables, so coastal countries have easier access. New initiatives to provide internet via low-orbit satellites and high-altitude balloons offer the hope of more accessible, cheaper internet for all, though still have a long way to go when it comes to cost and reach.
  • Tech hubs are popping up in Africa in different forms. These hubs enable Africans to gain skills and network through brainstorming sessions, workshops, and business- and technology-related trainings, among others. South Africa, Kenya and Ghana boast the greatest number of tech hubs.
  • For further progress and increased uptake of transformative innovations in 2017 what is required is further improvement in the regulatory environment.
  • Rules and guidelines should encourage prudent behaviour by both the financial institutions and market participants. Regulators should manage the orderly entry and exit of financial institutions in the market, minimising the potential for major disruptions in the financial system.
  • Digital finance has the potential to provide access to financial services for 1.6 billion people - more than half of whom are women - in emerging and developing economies. 

 

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How can Africa grow and stabilise its job market?

by Developed Africa 22. January 2017 12:47

Increasing employment opportunities

  • Sub-Saharan Africa faces a rise in the share of its working-age population (WAP). Population data indicates that the WAP in the sub-Saharan African region will increase by 70 percent from 466 million in 2013 to 793 million in 2030 (Lam and Leibbrandt, 2013).
  • Farming is the dominant occupation of most young Africans. The agriculture that will allow young farmers to prosper will have to draw on quality modern agricultural science – at present it does not.
  • Lack of access to finance for youth and particularly women entrepreneurs further limits growth and expansion opportunities.
  • A broader vision of high-quality education (one that fosters the full breadth of skills needed in a changing world) should be a priority in 2017.
  • Broadening access to education will ensure a steady supply of skilled workers into the labour market to support the transition to higher value added sectors.
  • it is important to diversify economic activity away from the current high concentration in traditional low value added agriculture, as it is in many African economies, to more productive activities such as agri-processing, manufacturing, and high-value added services.
  • For those young self-employed workers in the informal sector, there should be institutional mechanisms that ensure adequate access to credit, in light of the fact that these individuals are likely to be wealth and asset constrained.
  • Event to watch: African Union Assembly Meeting – January 24-31, 2017

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How can Africa manage the commodity slump and attract investment?

by Developed Africa 21. January 2017 21:40

 

American research group The Brookings Institution has just published its annual Foresight Africa project - a series of reports, commentaries and events aimed at helping policymakers and speculators stay ahead of developments impacting the continent.

Mobilising financial resources

  • By early 2016, oil exporters’ current account surpluses had breached a 10-year low. The price of the commodity fell from $112 per barrel in mid-2014 to less than $39 in early January 2016. In 2017, policymakers will continue to face gloomy prospects.
  • Ghana’s growth rate is projected to rise substantially in 2017 following the opening of a new oil field. This may increase the country’s output by almost 50 percent.
  • Côte d’Ivoire, Ethiopia, Senegal, and Tanzania are expected to remain within the top five African countries with the highest growth rates in 2016 and 2017, based on current estimates.
  • Many social challenges that were once exclusively the domain of government budgets and aid groups can today be tackled with help from business
  • Enhancing agricultural productivity is not an outdated concept. Higher productivity would raise the income of farmers and free up resources for other economic sectors.
  • Fiscally vulnerable commodity-rich countries could reduce fiscal deficit by reducing government spending and increasing efficiency in 2017. They could also increase tax rates.
  • Countries like Nigeria and Angola could quickly mobilise revenues from non-commodity-related activities by increasing their VAT rates with relatively small side effects on economic activity.
  • Event to watch: The African Development Bank Group’s 2017 annual meetings – May 22-26, 2017
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Investor sentiment towards Sub-Saharan Africa to remain soft

by Developed Africa 8. December 2016 18:26

Ernst & Young, the global consulting giant, said that it expects investor sentiment towards Sub-Saharan Africa to remain soft, as foreign direct investment will slow over the next few years.

In the year-end update to its Africa Attractiveness Programme released on 7 December 2016, EY said the weakening investor sentiment towards SSA will be due to heightened geopolitical uncertainty around the world and greater risk aversion rather than the region’s deteriorating economic fundamentals. Beneath the averages and headlines, the growth dynamics across different individual countries and sub-regions are very mixed.

“Companies already doing business in Africa will continue to invest, but will probably exercise a greater degree of caution and be more discerning,” EY said. “Some of them will invest at a slower pace, looking to consolidate operations and drive profitability; while others are likely to double down on their investments, using this period of economic slowdown to further strengthen positions in key markets.”

EY further said that although SSA’s growth forecasts for 2016 have fallen to a two-decade low, the growth dynamics across different individual countries and sub-regions are very mixed. Outside of the sub-continent’s three biggest economies – Nigeria, South Africa, and Angola – many bright spots can be seen in the East, Francophone and North African regions. “Economic recovery in Angola, Nigeria and South Africa is likely to be a tough and gradual process,” EY said. “However, a diverse group of other economies – including Cote d’Ivoire, Senegal, Ethiopia, Kenya, Tanzania, Mozambique and Egypt are expected to sustain high growth rates over the next 5 years.”

The 'heatmap' below provides a snapshot of macroeconomic resilience across some of the key sub-Saharan African economies, and illustrates just how variable economic performance is across different parts of the continent. The color of each block represents the longer-term position for that metric - green being positive and red negative. The color of the circle in the block represents the current trend. 

It is clear from this illustration that the three largest economies in sub-Saharan Africa - Angola, Nigeria and South Africa - remain under pressure. In the six months since March 2016, the position of Angola and Nigeria in particular has deteriorated, with the Nigerian economy entering a recession and Angola forecast to register zero growth this year. Sustained low oil prices, and the subsequent deteriorating terms of trade that both economies have experienced since 2014, have led to a growing current account deficit and rising government debt levels. Although growth in South Africa remains low, there have been some improvements in key macro-economic indicators in the past six months - including the current account deficit and a somewhat stronger currency. This indicates at the very least that the economy has stabilised, and may in fact be a signal of a gradual recovery.

At the same time, and in contrast to challenging economic conditions in the big three, many of the East African and Francophone economies have remained resilient. Kenya, Ethiopia, Tanzania, Cote d'Ivoire and Senegal are among the African economies still expected to grow in the high single digits this year and next (and through 2021).

This partly has to do with the major exports of many of these economies being less impacted by declining terms of trade. In addition, investment in infrastructure, domestic consumer spending and the continued evolution of services and manufacturing, continues to spur growth in these economies.

The key to overcoming weak global demand lies in enhancing diversification policies. Economies that span a broad range of sectors tend to fare stronger in such periods. Nigeria and Angola provide strong evidence of reliance on a single commodity, as both economies either face or are already in recession. The resilience in certain African economies reinforces the need to accelerate the process of diversification in others. Diversification clearly requires structural economic reforms, and each country is at a different point along this path. This provides enormous opportunity for growth across the region, as investors respond to pragmatic policy reforms and seek opportunities across growing consumer, services and industrial sectors.

This article is an abstract from EY’s ‘Africa Attractiveness Program 2016: Year end update’.

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Some More Myths About Africa

by Developed Africa 29. November 2016 18:08

Euler Hermes debunks five more myths about Africa

Myth 6: No-one is going to finance African growth

Once the oil aftershock has worn off, Africa will resume growing at an average +3% a year. Some countries still post record growth rates higher than +5%, despite the hard shock. In addition, the financing and rebalancing of growth, including investments to be made, will be the key to a sustainable takeoff. The mix of funding will be crucial. In addition to external resources, particularly from foreign direct investment (FDI), some countries are already able to finance at least part of their growth with budgetary resources. This is the case in South Africa, Egypt and Senegal where they account for 25% and 30% of GDP in 2016. Household confidence and investor confidence will be indispensable to collect savings.

Nevertheless, the way ahead will be thorny: (i) budgetary revenues make up only 14.5% on average of the African GDP, compared with 30% in developed countries; (ii) FDI is only 2% of GDP, compared with 2.4% in developed countries.

Myth 7: African consumers are not bankable

Consumption growth in Africa is well under way. In 2016, Africa reports the highest consumption growth rates, led by Cote d'Ivoire (+6%), Uganda (+7%) and Nigeria (+5%), compared with +1.4% in OECD countries or +2% in Pacific Asia. Consumption development in Africa is driven by the continent's exploding urbanization: by 2045, African towns will be flooded with 24 million people, compared with only nine million in China and 11 million in India.

But African consumption development should follow a different path from that of developed countries. The wealth effect and internet access add to the volume growth of African consumption.

Consumers in Africa are going to skip some steps and force business sectors to reconsider their approach. This is especially striking in distribution, financial services or transports: for example, 70% of Moroccans have internet access (55% in China), and 14% of Kenyans use contactless payment cards (60% of French are still and always using bank checks).Euler Hermes has worked out a proprietary consumption potential indicator combining these three determinants. The verdict is final: Nigeria, Kenya, Morocco, Egypt and South Africa are the leading pack, followed by Ghana, Ivory Coast, Tanzania, Sudan and DRC.

Myth 8: It's hard to work with African companies

Given the payment terms granted by foreign suppliers to African companies, it is indisputable that stronger confidence would free considerable resources for growth. Out of EUR 800bn of goods imported every year by Africa, approx. 60% are paid cash. If transactions were settled at 30 days, this would free EUR 40bn of working capital requirements, equal to the GDP of Tanzania, or to 1.6% of the GDP of Africa.

This situation engenders a sort of vicious cycle for African companies. Their cash flow suffers from the multiplication of cash payments, and this makes them more exposed to possible economic risks. As for domestic trade, this calculation in a country like Nigeria generates EUR 10bn of additional cash flows: a foot on the ladder for growth-seeking SMEs.

Myth 9: Agriculture is a thing of the past

Agriculture is the driver of econom ic growth in Africa: it remains the first contributor to employment and lifts millions of people out of poverty every year. Nevertheless, what is needed is a true green revolution to accelerate the catalyst role of the farming sector, by focusing productivity, market access and technologic contents.

In terms of growth by value of agricultural exports from 2005 to 2015, Ethiopia and Ivory Coast (+30%), Kenya and Rwanda (+20%) have specialised in high-value cash crops. Other countries, such as Zambia, Senegal and Morocco, have managed to use mechanisation and technology to increase agricultural productivity.

Myth 10: It's hard to find entrepreneurs and talents in Africa 

Education levels are increasing in Africa. In particular, access to university education in Cameroon has grown from 4.6% in 2000 to 13% in 2013. However, even in South Africa, the most proficient student, the percentage of youth entering university is only 20% by age group. Furthermore, official statistics on entrepreneurship are disappointing: in South Africa, just to make an example, only two companies are set up every 1 000 inhabitants.

These low figures mask the rampant informal entrepreneurship that is set to remain the basis for human capital development in the short term. Therefore, attention should be focused just on this entrepreneurial environment, apart from access to education. In Nigeria and Uganda for example, the towns of Lagos and Kampala have only recently reformed their registry system, a big problem for all those wishing to start business.

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Developed Africa has joined forces with Riviere Noir

by David Foxman 16. November 2016 16:20

Since setting out to promote African business opportunities we think we’ve learnt quite a lot about the dos and don’ts of investing in African projects – mostly don’ts, unfortunately! One of the dos, however, is the real need for proactivity. It would be nice to think that you can set out your stall of opportunities and that investors and businesses will beat a path to your door, but it doesn’t often happen that way. Absent an obvious arbitrage, political risk and credit risk mean that in most cases projects need a lot of extra selling to US and European prospects. That additional selling isn’t simply promotion per se; it also means structuring, explaining and financing business opportunities optimally.

That’s why Alex Glover of financial consultants Riviere Noir (rivierenoir.com) and I have decided to combine our resources to jointly offer consultancy services that will genuinely help viable African projects get started, and help companies and investors from outside Africa identify and tease out the advantages of opportunities in Africa. Between us we have the insight, hands-on skills, flexibility, experience and – crucially – contacts to do this.

Contact info@developedafrica.com for more information. 

Business Strategy

We can help you achieve your business objectives through the design and implementation of corporate strategies. We have experience across multiple industries and provide in-house business plan evaluation or creation, and the preparation of financial models and valuations.

Capital Structuring and Raising

Access to capital is a critical part of any business and yet can remain one of its most difficult challenges. We have access to an extensive global network of investors and institutions. Alongside traditional forms of raising finance such as finding equity investors and lenders, we can design structured bonds or structured finance capital instruments that are unique to your business.

Financial Products

We can help you navigate your way through the myriad of financial products currently available in today’s market so as to ensure that the risk, return or volatility profiles match your own requirements.

Private Equity Analysis

Through a detail-focused and structured approach, we provide due-diligence services in assessment of operational and investment risk and can assist in the structuring of private equity investment with a view of eventual investor exit.

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UK Government to Knock Down Trade Barriers

by Developed Africa 17. July 2013 09:00

Justine Greening announced new UK investment into breaking down barriers to trade in Africa

It was announced on Monday by Justine Greening the Secretary of State for International Development that the UK is going further than just providing aid to Africa. It is going to break down barriers to allow for free and easy trade, allowing businesses within Africa to flourish.

We need to set the private sector free to create the jobs and incomes that the world’s poor desperately need."

The new deals are providing £27.8 million to Kenya and £30 million to Uganda and Rwanda through the TradeMark East Africa Programmes and promise to improve trade roads as well as modernising custom facilities. But not only this, the UK is also going to invest £7 million into International Trade Centre investigations into trade regulations and bureaucracy. 

This new announcement is very much what Developed Africa is advocating, and hopefully increased trading opportunities will encourage not only African businesses to go beyond what they have been able to do previously, but also will encourage UK investors to have more faith in opportunities and projects within Africa. 

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Need for Increased UK Investment in Africa

by Developed Africa 16. July 2013 09:00

We spotted an interesting article in Corporate Financier Magazine in which Deloitte's support for investment in Africa, especially from the UK, is highlighted by their Director of Research Chris Gentle.

As we recently highlighted in the post about Ernst and Young's Annual Attractiveness Survey of Africa, there is a lot of negativity towards doing business in Africa coming from those who are not currently involved, compared to positive feelings towards interaction with those who are. Gentle noted his concern with the UK's lack of investment in global services markets. More specifically, Gentle is worried that the UK does not perform as well as it should in the fast growing markets of the world - and as we know seven of the ten fastest growing economies are in Africa. He had the following to say:

This is an issue which needs to be addressed, It will require a combination of business investment, practical help for mid-sized firms looking to break through and targeted government support for our successful industries"

Deloitte have also published other materials furthering their support for UK involvement and investment in Africa, their online leaflet highlights the fact that Africa has experienced widespread, significant growth in the last decade and looks likely to go from strength to strength in the coming decades. This growth makes the continent home to a fantastic host of opportunities which Gentle thinks the UK has a great chance to invest in. Developed Africa exists to promote and support increasing interest and investment in Africa. Hopefully Gentle's statements will encourage others to do the same.

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Infographic: African Top 5s

by Developed Africa 5. July 2013 09:00

Africa From Top To Bottom
Image source: www.master-of-finance.org

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Unpicking 0.7%: Investment was always the way forward

by Developed Africa 25. June 2013 09:00

For many years campaigners have fought to set the minimum level of aid spending in the UK at 0.7%. This target was promised by the Cameron government but has yet to be delivered leading many to criticise the current UK government. But where exactly does the figure 0.7% come from and why has it become such a focused target on third sector pressure?

Richard Thomas at African Arguments has recently written a fascinating piece on the history of this target. This particular aspect of the aid agenda stems from the Pearson Commission, a World Bank investigation into the history and future of aid led by Nobel Prize winner Lester Pearson. In 1969, the report 'Partners in Development' was released. As Thomas explains it, this report set out a new paradigm for aid:

Pearson concluded that initially 0.7% should be official (government) aid flows and that approximately 0.3% should come from the private sector. The first part of this formula (0.7%) was adopted by the UN and later by the major donor countries.  Pearson expected that this ratio of 2:1 (government: private) would, within two decades, be reversed. He felt that a more natural relationship was 0.3% from government funded aid flows and approximately 0.7% or more from the private sector. Reducing poverty in Africa and Asia depended on investment, trade, better health and education, adding value locally to primary products etc. Not, in other words giving developing countries fish (aid), but giving ‘them’ a fishing rod so that they could develop themselves.

Private investment would flow, they believed, when internal capacity and investment-friendly institutions had been developed – partly by aid. But it was necessary to begin with a front loaded ‘Marshall plan’ approach, hence the 0.7%. The long term need for 0.3% was to help build and sustain local capacity."

Private sector investment was always intended to become the major influence in development models. The huge amount of aid assistance currently offered is, as Thomas describes it, a misunderstanding of what Pearson recommended for long-term development in the Global South. Thomas argues that an enshrined governmental aid budget of 0.7% will almost inevitably fuel some of the major criticisms of aid - for instance, the problem of dependency and bad budgeting in recipient countries. See the TED talk below for a good example of this critique.

Unlike some critics, Thomas argues that cutting the aid budget isn't the answer; promoting greater private sector investment is.

The piece on African Arguments continues:

A new Paradigm for Aid and Development assistance is needed. The 0.7% model encourages donors to focus on quantity rather than quality and discourages the kinds of reforms which would engender sustainable growth. The Chinese alternative, which is just as exploitative as the western neo-liberal model, appeals to many African elites who are neither reformist nor pro-poor.

Pearson’s expectation that the educational and structural investments achieved by aid would trigger increasing investment and trade has, thanks to the Chinese, been realised (although probably not in ways he expected). But bulk or wholesale aid, whether 0.7 or 0.3, is no longer the key to African development. It could be argued that small scale initiatives which act as a catalyst (adjusting the ‘rules of the game’, removing log-jams, increasing the role and influence of civil society, improving the capacity to audit flows of funds etc) are both cheaper and much more useful to developing countries in the long run."

Governmental aid might serve a purpose but it is not the real solution to long-term development. The 0.7% debate should be diverted to reflect this - the UK government can and should fight for greater investment from British private sector organisations, bringing beneficial partnerships to everyone involved.

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Japan Moves from Assistance to Investment

by Developed Africa 24. June 2013 09:00

An interesting read from over at African Arguments. It would seem that the Japanese government is going to be focusing on various African sectors in the future because of a better understanding of the potential commercial partnerships available on the continent. Here are a couple of choice extracts:

Japan’s relationship with African countries has previously been very ‘soft’ – based largely on development assistance – worthy, but to be honest, boring. This will, it seems, continue, but under the new mantra of ‘Abenomics’ (the economic doctrine of Prime Minister Abe) interaction with the continent will focus more on what benefit Japan can accrue from its investments...

Most notably this will focus on the energy sector – Japan is very interested in developing, and presumably reaping the energy benefits of, for example, Mozambique’s huge new natural gas finds. Tanzania and Angola were also listed as countries of interest in this regard."

[Read the whole post here]

Their briefing refers largely to opportunities in emerging extractive industries but also mentions interest in pharmaceutical ventures. The announcement has been recognised as a major shift in attitude from Japan, traditionally a large donor country to African states. It represents further interest in for-profit development in Africa by East Asian countries, led in the last decade by China.

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Pitching Africa in the City

by Developed Africa 21. June 2013 09:00

Last month Developed Africa joined African Peoples Advocacy at 'Pitching Africa in the City'.

 

Vox Africa covered the event, which was highlighting the opportunities for pitching African opportunities to institutions in the City of London. Ben Oguntala, CEO of Developed Africa, gave a presentation on overcoming the assumptions which undermine efforts to bring trade and investment to the continent. He was joined for a panel discussion by Chris Cleverly, CEO of Made in Africa Foundation, Sylvie Aboa-Bradwell, CEO of African Peoples Advocacy, and Justine Lutterodt, director of the Centre for Synchronous Leadership. The event was chaired by Henry Bonsu, director of Colourful Radio.

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Welcome to Developed Africa

by Developed Africa 19. June 2013 09:00

“A new, inclusive way of doing business in Africa,” Ben Oguntala, CEO of Developed Africa

This website is a new kind of resource for anybody interested in Africa. We foster partnerships between people with big ideas and those searching for new opportunities in a rapidly developing market. We believe that commercial engagement with and investment in African projects is the best way for the continent to develop. The problem is the information deficit that makes companies outside Africa hesitant to do business on the continent.

There are many myths and preconceptions about working in Africa. Much of this stems from the lack of easily accessible information on proposed projects. This website will make such information incredibly easy to search and digest. It also provides a platform for Opportunity Providers to gain a new platform for their ideas.

For too long, development in Africa has been dominated by Western-backed, donor-dominated non-profit models. While these mechanisms have achieved some successes, the development of commercial partnerships is the next step, allowing greater sustainability and initiatives that truly reflect the needs and desires of the people. The aid model creates a systematic imbalance between donors and recipients and a bias against the treatment of African opportunities as serious commercial projects. Developed Africa’s objective is to bring balance to the relationship between developed and developing countries by providing a platform on which all parties can engage as equals.

Please sign up if you have an idea for an Opportunity or are interested in browsing our database for new investment ideas. Check back regularly on the News tab for updates and discussions.

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