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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Categories: Analysis | Business | Communication | Development | Economy | Human Development | Industry | Investment | Technology | Trade

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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Categories: Analysis | Business | Development | Economy | Investment | Trade | Wealth

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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Categories: Analysis | Business | Communication | Development | Economy | For profit development | Foreign Direct Investment | Industry | Information | Innovation | Investment | Trade

Creating Investment Interest in Malawi

by Developed Africa 18. July 2013 09:00

Joyce Banda, the President of Malawi has made several big moves to entice FDI

Mrs Banda recently devalued the Malawian currency to leave it at K250 against the American dollar, which despite causing upset with those is Malawi, it was done with a purpose.

By devaluing the currency Banda hoped to encouraged foreign investors and has definitely increased exports because Malawian goods have become far cheaper, creating more interest.  

The recent article from Ventures, is an interesting read that highlights both the negative and positive aspects of Banda's moves. But importantly it notes that whilst the old President Mutharika might have scared off investors as well alienated his country, Banda has taken many steps to further privatisation and increase interest. In particular regard to the country showing its readiness for change, it is highlighted that:

Mrs Banda hopefully revived such efforts through further privatisation and mandated currency devaluation"

The article, whilst giving both sides to the argument, can be seen to argue that investors should be encouraged by the President of Malawi's efforts and should not fear investing in Malawi's future.

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Categories: Economy | Foreign Direct Investment | Investment | Trade

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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Categories: Business | Development | Investment

Britain Leads in African Investments

by Developed Africa 10. July 2013 09:00

A perhaps surprising article in the South China Morning Post today (via @WhyDev) shows that Britain remains the main investor in Africa over the last ten years.

This is contrary to what you might expect considering the amount of articles reflecting the BRIC expansion into Africa.

Investors have become increasingly attracted to Africa, as it has begun to demonstrate strong economic growth, an emerging middle class, greater political stability and improved government balance sheets.

Britain was the top investor, with 437 deals worth US$30.5 billion since 2003, followed by France (141 deals worth US$30.47 billion) and China (49 deals worth US$20.8 billion), figures compiled by the international law firm Freshfields Bruckhaus Deringer show.

The African Development Bank said that economic growth on the continent would hit 4.8 per cent this year and 5.3 per cent next year, led by West African commodity exporters such as Nigeria, Ghana and Ivory Coast.

China overtook the United States as Africa's largest trading partner in 2009, a report by the US Government Accountability Office in February showed."

[Read the whole article here]

In related news the Ernst & Young annual Attractiveness Survey of Africa was recently released. The report pushes the links between investment and long-term growth, an increasingly common view of the next step for development in Africa. This Survey is incredibly useful for anyone looking to do business in Africa - either as investors or as African businesses seeking investors.

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Categories: Britain | China | Investment

Lack of Information Halting Investment in Africa

by Developed Africa 9. July 2013 09:00

Developed Africa is designed to allow clear, concise information about commercial Opportunities in Africa. A new survey by FTI Consulting suggests that such a service is absolutely vital:

...on the eve of President Obama’s visit to Africa to bolster U.S. - African trade and political ties, eight of every ten, or 80 percent of institutional investors surveyed in the United States are largely unaware of investment opportunities on the continent."

As Obama's visit to Africa has now ended, some commentators have recognised the lack of attention paid to the continent by investors and may seek to heed Obama's call to "come on down" to Africa. As highlighted by FTI Consulting, their research suggests that communication might be the defining issue for investment in Africa,

Africa has the potential to be a destination of choice for U.S. institutional investors given its abundant natural resources, eco-tourism potential and favourable demographics. Many African countries already are capitalising on their various assets and have been identified as high-growth geographies by institutional investors. However, it is critical to sustained economic growth that key African messages are continually heard, expanded and understood so investors are aware of the investment opportunities in during a time of great global trade competition. Our research showed there still is work to be done in this regard.”

While there are some good examples of African business reporting in the mainstream press, services like Developed Africa are an exciting, interactive way of combating the issue of communicating business opportunities from African based commercial entities.

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Categories: Communication | Information | Investment | Trade

No Child Left Offline

by Developed Africa 3. July 2013 09:00

In his successful run for the presidency of Kenya earlier this year, Uhuru Kenyatta has promised to deliver one laptop per child to those attending primary schools from January 2014. This scheme has been met with some scepticism, not least for the potential cost as this article from one of Kenya's largest daily newspapers put it,

However, given the cost implications, the ministry has proposed to roll out the project in three phases. According to the estimates tabled by [Education Secretary] Kaimenyi, each laptop will cost Sh28,000, a sum that may be out of reach of many parents in public schools whose children are covered by the project."

There are other criticisms out there. A recent excellent blog post by Will Mutua (co-founder for Nairobi's Open Academy) summed up the main areas of concern for such a scheme very succinctly,

Lack of Supporting Infrastructure: Many schools in rural areas have no access to electricity, some have dilapidated classrooms and other amenities, not to mention some extreme cases where learning does not even happen inside a classroom. What’s the point of giving these students laptops? Their schools have other more pressing needs.

Lack of Capacity: There are teachers who are computer-illiterate. What happens when computers break down, who will have the technical skills to troubleshoot these laptops?

Timing: It’s just not the right time for such an initiative. There are other pressing matters that can be dealt with instead of ‘throwing away’ money in an impractical project. How about jobs, healthcare etc.? And even if it is a matter of enhancing education – why not first hire more teachers, there’s clearly a shortage of them, or pay teachers better?"

It is interesting that such problems have been highlighted for a government project - if you didn't know what they were about you would be forgiven for guessing that Mutua was criticising a poorly planned charitable project. It lacks sustainability, it lacks a proper appreciation of local context, and seems to seek headlines more than anything else. These are all classic complaints of donor-driven development models.

Promoting computer literacy is a great project, particularly for Kenya as it looks to become the tech hub of Africa. Giving a laptop to every child is something that has been attempted before (see Mutua's article for some good examples of similar schemes in East Africa in recent years) but often falls on the tertiary aspects of promoting computer literacy - you can't just give the equipment, you have to support that equipment and its users as well. Governments and NGOs can start projects like this but it is through commercial partnerships that African nations can really build a lasting, economically functioning tech sector. The talent is there, schemes something like Kenyatta's one laptop per child can open up the opportunity - now it is up to business investors to bring those things together.

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Categories: Investment | Sustainability | Technology

Drugs in Africa: Imports are the problem

by Developed Africa 28. June 2013 09:00

The issue of drug imports to African countries from China was highlighted in an excellent article over on Think Africa Press recently.

Chinese manufacturing dominates much of the imports into Africa and has become the largest trade partner for the continent with deals totalling more than $160 billion in 2011. With many goods, poorly regulated production leads to faults and substandard products. This is usually an annoyance, with drugs it is much more serious than that. As the Think Africa Press article puts it:

Substandard drugs are usually impossible to distinguish from good drugs. They look the same, come in identical packaging, and are manufactured by the same companies that make the good quality drugs. In fact, in the same way we might come across a few shirts with minor defects amidst a pile of perfectly-made clothes, substandard drugs can often be found in and amidst supplies of otherwise good drugs."

 The big pharmaceutical industry in Africa has been somewhat beleaguered following high profile copyright cases that saw many of the world's largest drugs manufacturers losing emerging markets to cheaper or knock-off drugs. While this has made the cost of life saving treatments fall substantially, it has also allowed a far greater fluctuation in quality. A long running dispute surrounding the import of antiretrovirals (commonly known as ARVs) - used for the treatment of HIV/AIDS - is a good example of the difficult and often broken relationship between 'big pharma' and African governments.

With China filling this gap, the poor quality of drugs now coming into the continent is simply the latest downside to an on-going problem. The problem is the lack of pharmaceutical manufacturing within Africa.

In 2010, a factory in Uganda became the first in a 'least developed country' to be regarded as world class. Rather than import for either incredibly high prices or at the risk of flooding the market with substandard of defective drugs, African countries would be better served seeking investment for nascent drug manufacturing. In January 2013 saw the creation of a new body, the Federation of African Pharmaceutical Manufacturers Association (FAPMA), to lobby more strongly for a domestic alternative to imports. Tsingi Moyo, the spokesperson for FAPMA, stated:

Self-sufficiency in healthcare is important for economic growth, for that reason it is dangerous to be dependent on others. Hence the infrastructure problems of Africa should be addressed. This can only be done by directly confronting them rather than giving up and abdicating our future to others."

To move forward, investment in infrastructure in the continent should be sought, promoting mutually beneficial partnerships rather than repeating the pattern of trade and recrimination that seems to have dominated this issue for the last ten to fifteen years.

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Categories: Investment

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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Categories: Aid | Development | Investment

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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Categories: Development | Investment

G8 Highlights Importance of Trade for Africa

by Developed Africa 20. June 2013 09:00

The recent G8 summit held in the UK saw Prime Minister David Cameron directly address the importance of industry in Africa.

Cameron announced new G8 partnerships with developing countries that would focus on ensuring that African states get the full benefit from commodity trading, notably from extractive industries, with hopes that new commitments will encourage much greater profits than the traditional aid model currently in place. A huge part of this project centres on transparency and the importance of clear information in business deals. Cameron wrote in a letter to other G8 leaders,

Too many developing countries are held back by corruption – and this can be reinforced or even encouraged by poor business practice and a lack of transparency from those that trade with them."

[Read the full letter here]

This is an encouraging signal as it clearly emphasises a business-led development strategy. It is particularly worthy as it comes from the Prime Minister of Britain, traditionally an aid focused country. We urge other G8 members to take up this new call for investment and partnership, not just handouts.

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Categories: Business | Industry | Investment | Trade | Transparency

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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