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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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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African Transparency: Business is the real winner

by Developed Africa 15. July 2013 09:00

Interesting article over on Devex that outlines the benefits of promoting transparency for governments, civil society and, crucially, business:

The African Development Bank (AfDB) last week became the first multilateral lender to publish its data through the International Aid Transparency Initiative (IATI).

After disclosing on July 1 data on both its public and private sector activities as well as providing precise geocoded information, AfDB joined the ranks of over 160 development organizations that seek to improve transparency on aid spending to make more effective in fighting poverty with IATI.

The decision has significant human and financial resource implications, but the bank fully believes both are justified because this “is the only way for us to conduct our development business,” said Victoria Chisala, AfDB division manager for quality assurance and results.

The AfDB has already made strides in open data - it put in place a disclosure and access to information policy back in February. As we looked at in the last post there remains something of an image problem for commercial ventures in Africa. These kind of bold, broad steps towards global standards will help to combat such problems.

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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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