Why SMEs don't easily get credit from banks

Bartholomew Ebong, Group Managing Director of Union Bank Nigeria Plc, explains why SMEs experience difficulty in accessing credit from commercial banks, in addition to other germane issues affecting the growth of SMEs in Nigeria. He spoke with Emeka Ezekiel.

...small and medium scale enterprises play significant role in poverty reduction, employment generation across the globe...SMEs account for about 30 per cent of global GDP and 58 per cent of the world's working population.

In the European Union countries, for instance, SMEs constitute 99 per cent of all firms and employ 65 million people. SMEs account for over 95 per cent of enterprises and 60 to 70 per cent of employment in the OECD countries. SMEs also account for about 60 per cent of the workforce and 25 per cent of the industrial output in Africa today.

In Nigeria, these enterprises constitute the majority - with all the imperfections in the system- and account for about 55 per cent of the total employment and about 50 per cent of the industrial output... SMEs employ a vast number of people...of the labour intensive nature of their production processes.

SMEs also assist in stimulating indigenous entrepreneurship and technology. They serve as vehicles for the propagation and diffusion of innovative ideas.

In addition to their impact in the labour market, the SMEs are known to rely on local raw materials. While others import their raw materials in drums and tonnes, SMEs seem to develop their raw materials locally and of course help in the industries that produce those raw materials. This therefore triggers economic activities in those sectors that produce such raw materials. I am talking particularly about agriculture.

For example, when we talk about oil processing - the palm kernel, the palm oil, the oil itself - it is only the SMEs that are processing them for intermediate use. Since they facilitate the dispersal of economic activities, SME stand to promote even development, thereby reducing rural- urban migration with its attendant consequences. When you have SMEs growing, you tend to stem the drift of people to the cosmopolitan areas.

And it is as a result of the huge potential of SMEs that successive regimes in Nigeria have taken steps to promote and strengthen their growth and development.These efforts were targeted at addressing the challenges facing entrepreneurs in the sector to enable them to fully realise their potentials. These problems are still there today, even though though they are being tackled by government and other stakeholders. It is an ongoing process...

While we acknowledge the potentials of SMEs, it’s also important to note that they face a number of challenges that undermine their realisation of these potentials. Some of these challenges include: unfavourable business environment -this encompasses waste and energy infrastructure, road, water and power supply, telecommunication, etc. As a result, many producers provide their own alternative amenities , which of course, affect their cost structure and competitiveness...

Second, we have a weak legal system which makes it difficult to enforce contracts. The regulatory and policy environment - in particular trade liberalisation and globalisation presents new challenges for SMEs. As a matter of fact, that is why we are running into serious problems in terms of conflict of business interest - we want to play as global people in the marketplace: we've opened our borders to allow imports to come in. And who is suffering the impact of this decision: the SMEs. They have to contend with substitute products from more rich and mature overseas counterparts- China and Indonesia, as it were. They flood our markets with their products and this tends to affect the growth and development of our SMEs.

Also, we have cumbersome official procedures. A typical example includes procedures for complying with regulations of such issues such as company registration and compliance with the requirements for benefiting from government incentives. When government announces incentives, to access these incentives sometimes becomes a Herculean task for SMEs.

Another issue is the macro- economic fundamentals, the degree of stability of the economic environment. But recent reforms have provided a platform for us to move forward in this direction. In this regard, it is instructive to note that Nigeria has a low rating in terms of ease of doing business.

Another major challenge facing SMEs in Nigeria is that of finance. Their main sources of capital include informal savings and loans...funds from these sources are far from being adequate.

First of all, these informal sources of finance are unpredictable. And access to informal sources of finance is rather poor. In the first place, SMEs are handicapped in accessing funds from the capital market. They cannot get easily registered because the listing requirement in the capital market is often considered restrictive by the promoters of SMEs. While it is easy for the big players to raisebillions from the capital market, SMEs find it very difficult to get there. The second-tier market that we have had during these years is growing at a snail's pace.

SMEs find it difficult to get money from banks for a variety of reasons.

First, lending to SMEs entails higher administration and transaction costs, owing to the inadequacy of records and information relating to their operations. Banks tend to devote specific amounts of time to evaluate the viability of the products and projects presented, and then the problem of poor record keeping, coupled with the common tendency of promoters to divert credit to unproductive ventures. These are very common; and that is why SMEs require closer supervision and monitoring.

Otherwise, the money meant for the purchase of machinery can be diverted to buying vehicles and all sorts of items that don't relate to the project for which the loan was given. This tends to make lending to SMEs difficult.

Generally, the promoters of SMEs are not well grounded in terms of modern management principles and practices. This raises the probability of failure of small scale enterprises, which consequently results in loan default

In growing the SMEs, I believe that every sector of the economy has their own role to play: the financial sector has their own role , the government in terms of providing the enabling environment and the infrastructure; and of course the SME practitioners themselves should be a lot more focus to adopt the proper globally accepted business practises as well be dedicated to produce good quality goods while they see growth as a strategic option.

I must say that there have been several efforts by the government to facilitate the growth and development of SMEs. A number of measures have been put in place to counter these adverse conditions affecting SMEs. A number of these initiatives centred on making funds are available to SMEs on reasonable terms. The concentration has been more on the issue of providing funds because people talk more about funds, rather than on other issues and requirements that will help the SMEs to grow.

The emphasis over the years have been laid only on funding. There have been several credit guarantee schemes. The logic behind these schemes is that they will make banks be more willing to lend to SMEs. But I believe that things would be different if the government were to guarantee repayment in the event of default. This will encourage lending. The establishment of Development Banks to promote credit directly to SMEs - all of these are targeted at finance; no other areas. Similarly, the preferential allocation of credit by banks in the past was also done to provide money for SMEs. So, what I am saying is that all these initiatives were essentially on financing. What about the other issues?

It was in realisation of this that the Bankers Committee, introduced in its own way in 2001, a scheme that combines both equity and debt finance. On account of their equity participation or interest, banks were expected to provide expertise or management support. The banks were required to provide not only money, but also to help SMEs to grow the expertise. But as experience has shown now, that has not been easy either, because of the tendency of the promoters of SMEs to hold on and say 'it is my business, I should be the one that should run my business; why do you come to tell me how to do my business. I have been doing it over the past ten years without you.'

Business Day-Nigeria

EAC, SADC leaders to meet on integration issues

Leaders of the East African Community and Southern Africa Development Community (SADC) are planning a summit that will lay the foundation of co-operation between the two economic blocs.

The summit is supported by the Common Market for Eastern and Southern Africa (Comesa).

COMESA secretary-general Mr. Erastus Mwencha said summit participants will discuss ways of co-operation and possible rationalisation of the regional economic blocs. “The summit will take place soon. The process of co-operation has started and will take into account political sensitivities,” he said.

Mwencha stressed that the rationalisation of regional economic communities should be able to assist the continent to resolve some of the challenges it is facing in terms of resource dispersion and inability to consolidate the gains of regional integration.

Mwencha also revealed that COMESA is at the moment encouraging organisations such as the World Food Programme to procure food from the region. He however stressed that the EAC member states should concentrate on achieving economic integration if they are to have a formidable political and eventually a competitive bloc.

“To me, the most important thing is to get the Customs Union to work and to have an economic union which works because at the moment people don’t even know what we are talking about. I would like to see a situation where whatever we do will eventually add up to the five steps supposed to be taken to achieve a full EAC,” said Mwencha.

Three African trade blocs, SADC, EAC and COMESA, from southern and eastern Africa are moving closer to align and harmonise trade rules for increased integration.

Last June, during the fifth meeting of the Joint Task Force (JTF) held in Zanzibar — and attended by delegates of COMESA, EAC and the SADC , it was agreed to hold a joint summit of all COMESA, EAC and SADC member states in due course to accelerate trade, Customs and infrastructure development.

Other signals that the two blocs could be fast pursuing an integration was the announcement by representatives from the EAC, SADC and COMESA mid last year that they had began consultations aimed at creating one currency and a common Central Bank by 2025. The COMESA Secretariat is already carrying out consultations on the formation of a tripartite task force to oversee the roadmap to a monetary union. It is also holding consultations with a general aim of harmonising the region’s payment systems.

A number of Regional Economic Communities and sub-Regional Economic Communities have been organised in the various regions of Africa. However, it is now recognised that there are too many regional integration institutions, with the resultant overlap of membership and duplication of mandates.

Sources said the upcoming EAC and SADC Summit also aims at resolving Tanzania’s position vis-a-vis the two blocs. Tanzania belongs to both SADC and the EAC.

There is overlap of membership in economic communities in the Eastern and Southern African regions to an extent unparalleled anywhere else in the world. The overlap has had a bearing on the costs and benefits particularly of deeper integration. Moreover, membership in more than one Customs Union is technically impossible.

As the economic blocs in the Eastern and Southern African regions wish to move to a Customs Union, member states with multiple membership at present will have to strike the balance of the costs and benefits of belonging to one or another Custom Union.

Solely concentrating on tariffs and revenue foregone will mean missing out on some of the more fundamental aspects of regional integration.

The East African

China's biggest bank to buy $5 billion stake in S. Africa's Standard Bank

China has served notice it is accelerating its investment drive in Africa towards full throttle with the planned $5,6-billion cash purchase of a major stake in Standard Bank by Beijing's biggest lender.

China's Industrial and Commercial Bank of China (ICBC) said it is to buy 20% of Standard Bank, the biggest foreign acquisition by a Chinese commercial bank to date.

So far, China has focused its African ventures on mining companies as well as oil to feed its exploding economy. The planned acquisition, which will also be the largest foreign investment in Africa, leaves no doubt that China has bigger things in mind.

"It opens our eyes to the fact that China's strategy is about more than state-owned mining companies. A big investment in a major South African financial institution in Africa is a step up," said Philip Alves, an economist at the South African Institute of International Affairs (SAIIA).

ICBC's stake in Standard Bank will give it sustained leverage to penetrate financial networks in South Africa - the continent's biggest economy - as Beijing pushes major state firms to expand abroad, particularly in developing countries.

Johannesburg-based Standard Bank operates in 18 African countries, including South Africa, and 21 other countries across the world.

Benefits will flow both ways, an idea that China has been pushing as it expands its economic base in Africa.

Standard Bank will gain access to the world's fastest-growing economy, boost its capital base and its ability to finance trade flows between Africa and Asia, Standard Bank chief executive officer Jacko Maree said.

China's relentless investment offensive in Africa has been welcomed by impoverished countries. But it has drawn fire from Western nations and aid groups, who accuse Beijing of turning a blind eye to misrule, corruption and human rights abuses.

China argues it is spreading prosperity in the world's poorest continent where the West has failed.

"Their engagement with Africa is not dominated by this discussion of how to transform the continent. They are willing to deal with Africa on its own terms and that has been very successful for them," said Chris Alden, director of the China in Africa research project at SAIIA.

China's tactics in Africa have been straightforward: hotly pursue commercial deals and try to avoid politics. It has demonstrated skills in manoeuvring around political minefields in countries such as Sudan, where critics allege its military aid and oil investment has fuelled the Darfur conflict.

Investing has proven risky on the ground. Rebels in Ethiopia killed nine Chinese workers in a raid on an oil installation in April. A Darfur rebel group which said it attacked Sudan's Defra oil field on Tuesday, killing 20 government soldiers and taking two foreign hostages, described the assault as a message to China. Sudan's government denied any such attack, though China's embassy in Khartoum confirmed it. China's CNPC has the biggest stake in the group that runs the field, alongside India's ONGC.

But a steady flow of big deals since President Hu Jintao announced a drive to boost relations with Africa in 2004 suggests rewards may outweigh risks in the foreseeable future.

Chinese loans, donations and debt relief have been made along the way.

Some African government officials wonder why countries like the United States invest in China while questioning the country's record in Africa.

"The Chinese investments are not tied to too much [political or economic] analysis compared with the West, they move quickly," Zambian Commerce and Trade Minister Felix Mutati said.
"If China is good for the West, why should it not be good for Africa? We want to harvest the same benefits the West is getting from China," he said.

Lack of transparency from Beijing on details of its investments and aid in Africa has also alarmed Western donors, who have watched China become a player in countries such as oil-rich Angola, where Chinese credit is believed to be between $4-billion and $11-billion.

"Angolans will probably generally like it. It helps to a degree to alleviate the international pressure regarding the Angolan government arranging its finance facilities from China," said a banker in the Angolan capital Luanda.

"After all, if the scion of South African banking in sub-Saharan Africa takes on a major Chinese bank as 20% investor, that sort of gives the good housekeeping seal of approval to the Chinese in Africa."

Reuters

EU trade commissioner Peter Mandelson is feeling misunderstood

Peter Mandelson is feeling misunderstood.

As EU trade commissioner, he stands accused of being a neo-colonialist trying to railroad through Economic Partnership Agreements (EPAs) with 78 African, Caribbean and Pacific (ACP) countries within the next few weeks. These will allegedly force them to open up their markets for goods to rapacious capitalist European firms - and allow their services sector, even their government contracts, to be privatised and taken over by the very same firms.

The accusations, mainly from NGOs but also from people within the former colonies, of which 42 are the least developed (poorest) countries, have been backed up by protest demos in more than 40 countries.

Now, in a flurry of belated activity, a miffed Mandelsohn; Louis Michel, development commissioner, and their aides have started fighting back - even though officials freely admit they have lost the propaganda war and were always going to lose it.

EPAs, like all trade and development issues, are highly complex and contentious. But the nub of the current issue is that the EU must put in place by the end of the year new preferential trading agreements with the ACP countries that are compatible with World Trade Organisation rules as a legal waiver expires then and non-ACP developing countries insist this should happen.

If a new scheme is not in place by then the EU will have to fall back on the Generalised System of Preferences (GSPs) which offers less generous tariff rates - prompting campaigners such as ActionAid to rail against strong-arm tactics designed to deny food rights and promote hunger.

Mandelsohn and Michel, in a recent conciliatory letter to anti-poverty campaigners, said: "These negotiations are certainly not about EU companies and investments muscling into (ACP) markets ... The problem is that EU businesses and investors have too little interest in these markets, not too much. The EU is not steamrollering ACP regions (six in all) into completing negotiations this year; on the contrary, we are doing everything in our power to be as flexible as we can ... It's simply not true that EPAs will open ACP markets to EU trade at the expense of local businesses and local growth."

In fact, they said, the aim is to help some of the world's poorest countries, especially African, catch up on the poverty reduction and economic growth of Asia and Latin America.

So why are the NGOs so hostile?

Is it because, perversely, countering poverty in Africa by improving economic growth would put their own roles at risk? Is it simply because of Mandelsohn's "prince of darkness" pro-business past?

Here the EU is not trying to be a paternalist masking monstrous designs.

Mandelsohn's aides plausibly argue that Brussels is being ultra-flexible, offering the ACP three options: full regional EPAs, including free access to EU markets; a deal on market access with negotiations on the rest during 2008; and, at worst, GSPs for poorer countries guaranteed market access under the Everything But Arms arrangements (but tariff increases of up to 50% for the rest).

The EU is committed to offering €1bn in aid for trade anyway - not as a lever to force the ACP to sign the EPAs, aides insist - and up to 25 years before liberalisation in sensitive sectors kicks in.

This hardly amounts to neo-imperialism. This time I'm siding with Mandelsohn: the old system has failed and a new one, compatible with the interests of all developing countries, needs to be put in place.

Undaunted, the NGOs rejoinder via Oxfam that EPAs are harmful and the EU is wrongly obsessed with meeting a WTO deadline.

The Guardian

ESA countries should move cautiously on services liberalisation with the EU

By Joy Kategekwa*

The outcome of Economic Partnership Agreement (EPA) negotiations, set for this December, will change a decades-old reciprocal trading regime between the European Union (EU) and African Caribbean Pacific (ACP) countries. Specifically, negotiations on trade in services under the EPAs have important development implications for Eastern and Southern African (ESA) countries.

The countries that constitute the ESA negotiating group are Burundi, Democratic Republic of Congo, Djibouti, Eritrea, Ethiopia, Kenya, Madagascar, Malawi, Mauritius, Rwanda, Seychelles, Sudan, Uganda, Zambia, and Zimbabwe, many of which are also the poorest and least developed in the world. For them, ensuring universal access to basic services such as health, education, sanitation, and water, as opposed to exporting services — which is the rationale behind a free trade agreement, is the real priority, and challenge.

In these countries countries, trade capacity, infrastructure, and regulation of services is weak and for many years, services were viewed as non-trad able, with the State being the sole provider-particularly in health, education, banking, telecommunication, and transport.

In the mid-1980s, the de-regulation process engineered by the International Monetary Fund (IMF) and World Bank led to the privatisation of many previously State-provided services. The absence of efficient regulatory, institutional, and administrative structures to meet the challenges that came with this liberalisation resulted in major reductions in welfare.

Afrcan countries see the EPA negotiations as a process, and opportunity that can help them overcome the challenges they face trying to penetrate and integrate into international services markets: the so-called supplyside constraints, such as inappropriate and weak infrastructure, institutional and regulatory capacity. They look at EPAs as potentially enhancing their capacity to provide, and supply services.

Against this background, the EU is seeking Most Favoured Nation status-over and above what is available in the WTO’s GATS (General Agreement on Trade and Services), for its service suppliers. In effect this would not only give EU companies unlimited access to the ESA market on terms similar to those available to ESA countries in the context of their various regional integration initiatives. They will also get automatic access to the treatment that ESA countries give to all other trading partners, with whom they have services economic integration agreements, or with whom, the ESA process has led to some form of services liberalisation. The scope of this can be far and wide depending on the level of openness of ESA countries which in the service sector is quite high.

More importantly, the EU also seeks national treatment commitments from ESA countries, which entitles EU companies to immediate and unconditional access to the treatment that ESA service suppliers are entitled to in the context of their various regional integration processes, (e.g Common Market for Eastern and Southern Africa, East Africa Community and others).

Aside from making it impossible for ESA to have exemptions, and adopt measures that favour ESA service suppliers, the result of conferring the most favoured nation status and national treatment to EU in the EPAs bars ESA countries from the ability to implement certain policy options, or regulations, that could increase the participation of local service suppliers in domestic and intra-regional trade.

ESA companies involved in supplying services cannot compete with their EU counterparts. While the EU is an important market for ESA services exports (tourism, and transport), ESA countries account for only 6.6 per cent of Europe’s total service imports. And there is no credible research showing that with a trade agreement, this dynamic will change.

Another argument for most favoured nation liberalisation in EPAs is that it would lead to tremendous investment flows. However, in the past, investment has been concentrated in a few areas, like banking, ignoring other essential sectors such as health, and even in these cases, the banks do not extend services to rural communities, but focus on urban areas where people have more money.

The EU also seeks removal of quantitative restrictions like quotas, limitations on the total value of transactions, limitations on the number of operations or the participation of foreign capital, or even restrictions on the types of establishments.

In order for a country to meet its national development objectives, these may be the very restrictions it must condition on market access liberalisation. If a country wants to increase the number of domestic service suppliers in banking for example, limiting foreign participation in some way, or through some conditions, may well be inevitable, and yet this would constitute a breach of agreement if ESA countries were to agree to the sorts of proposals the EU is presenting.

In the WTO’s GATS, countries are expected to be the judge of the extent, scope, and timing of their own services liberalisation, taking into account their national policy objectives. Developing countries can open fewer sectors, liberalise fewer types of transactions and progressively extend market access to others, while attaching conditions thereto aimed at increasing their participation in international trade in services. Asking ESA countries to commit to full liberalisation is contrary to the rationale behind progressive liberalisation: a cornerstone of the GATS.

ACP countries are under no obligation to negotiate a services trade Agreement with the EU. The WTO waiver that covers the Cotonou preferences relates to trade in goods: industrial and agricultural. Its expiry does not affect services at all. Therefore, ESA countries should move slowly and cautiously on services liberalisation with the EU.

Instead of moving in for a reciprocal trade Agreement, ESA countries should consider focusing on strengthening development co-operation in services with the EU, (along the lines of the Lomé Conventions-with many similar provisions in the Cotonou Partnership Agreement), aimed at developing capacity to strengthen the sector domestically and for export, such that over time, they can have ability to benefit from a reciprocal services trade agreement with the EU, and indeed others.

*Joy Kategekwa is programme officer, trade in services, at the South Centre’ Trade for Development Programme.

The East African

Debate over China's motives in Africa rages on

China's push into Africa is prompting growing interest over Beijing's motives in the world's poorest continent with opinion divided over who stands to benefit most.

Speaking at the launch of a new China research programme run by the Johannesburg-based South African Institute of International Affairs (SAIIA), its chief academic said China had "changed the game of development" after years of domination by Western governments and donors.

"I think that's probably the most important contribution that China has made to date in African development," added Chris Alden, who is also a lecturer on China-Africa relations at the London School of Economics.

Trade between China and Africa is estimated to have increased tenfold between 1999 and 2006, with Beijing keen to find alternative sources of oil and other natural resources to fuel its economic drive. While China insists both sides stand to gain, the balance of trade remains heavily in Beijing's favour, with complaints echoing across the continent that cheap Chinese-made goods are dumped on local markets. Sceptics have also pointed to involvement of Chinese construction companies in projects funded by loans from Beijing as evidence that so-called largesse is in fact little more than self-interest.

But, speaking at the SAIIA launch, Singapore's high commissioner to South Africa, Justice MP H'aja Rubin said accusations of exploitation were unfair.

"I share the view with many others that the fears of any hidden agenda and economic hegemony on the part of China are somewhat overstated," he said. "Evidence does not support the insinuation that China is currently on the path of exploitation at any cost."

A senior official at the Chinese embassy said African countries were regarded as equals, echoing previous pledges that Beijing is not about to forge a neo-colonial relationship. "We don't think we have the right to teach them how to run their countries, how to run their affairs," said the diplomat on condition of anonymity. "We prefer to have dialogues on all the serious problems, the environment, good governance, trade."

A frequent criticism of China is that its involvement in Africa comes with no strings attached, as with Western aid, and it has shown a willingness to overlook abuses by countries such as Sudan as it takes its oil.

Prince Mashele, a senior researcher with the Pretoria-based Institute for Security Studies, said Chinese companies have been met with fierce resistance in countries such as Nigeria, Zambia and in parts of Mozambique, where there have been complaints over standards of pay and safety in Chinese-run factories. "One pole is that China is a predator, the other pole is that China is a partner," Mashele said.

Both President Hu Jintao and Premier Wen Jiabao have toured Africa in the last 18 months, partly in order to allay fears about China's motives and announcing further rounds of soft loans and debt cancellations.

In a sign of unease in some quarters, Hu had to scrap a scheduled visit earlier this year to a Chinese-run copper mine in northern Zambia where 50 Zambians perished in a mine explosion in 2005 to avoid planned protests.

Garth le Pere of Pretoria's Institute for Global Dialogue said another source of complaint among Africans was a reluctance of the Chinese to appoint locals to management, even if they are happy to hire them as labour. "The cultural and linguistic distance also does not help," le Pere added.

At the same time, said le Pere, there has been a remarkable lack of a policy response from Africa towards China's engagement on the continent that should not be blamed on Beijing.

"China is simply pursuing its national interest and ... cannot be blamed or held accountable for the absence of appropriate regulatory mechanisms and administrative systems in Africa."

AFP

Egypt top African nation for foreign direct investment

Egypt ranks as the top African nation in terms of foreign direct investment (FDI) flows, beating South Africa for the first time, according to the World Investment Report 2007 published by the United Nations Conference on Trade and Development (UNCTAD).

“FDI into Africa doubled between 2004 and 2006 to a record $36 billion, spurred by the search for primary resources and increased profits as well as by a generally improved business climate,” the report states.

According to the report, cross-border mergers and acquisitions (M&A) as well as green field/expansion investments played an important role in the top host African countries, particularly Egypt and Nigeria. In Egypt — the leading recipient in the region — inflows exceeded $10 billion in 2006, 80 percent of which were in non-oil activities.

“FDI in Egypt is [on the rise] which explains this year’s high ranking,” said Maher Nasser, director of the United Nations Information Center in Cairo. “Investment spreads across an array of sectors including manufacturing, agriculture, tourism, and banking, which highlights another positive trend.”

Generally, the report traces a widespread growth in global FDI, approaching the year 2000 peak level. Global FDI flows, reads the report, grew for the third consecutive year to $1.306 billion. Inflows to developed countries rose by 45 percent ($857 billion), while developing countries recorded a 21 percent growth rate ($379 billion).

This year’s world top ten recipients of FDI inflows are the United States, the United Kingdom, France, Belgium, China, Canada, Hong Kong, Germany, Italy, and Luxembourg.

As for Egypt, the report indicates that FDI flows have almost doubled from some $5 billion in 2005 to more than $10 billion in 2006. It also ranks Egypt the second Arab country in FDI flows after Saudi Arabia, moving up one position compared to last year’s place.

“The current surge in FDI flows to Egypt is a result of a number of measures introduced by the government, especially those related to business start-up procedures, tax reforms, and currency stability,” explained Assem Ragab, newly appointed chairman of General Authority for Investment and Free Zones (GAFI).

He particularly referred to GAFI’s efforts to eliminate bureaucracy and facilitate business procedures through establishing One-Stop Shops that significantly cut time of establishing a business from several months to almost two days.

“Investors seek countries that are proactive on implementing reforms, bureaucracy-free, and will boost their revenues,” he added. “And ranking high on such international reports shows that the government is moving in the right direction and is sincere about implementing reforms, which will in its turn increase investors’ confidence.”

On a global ranking, this year’s UNCTAD report reveals that Egypt has moved up from 68 to 33 (out of 141 countries) on the Inward FDI Performance Index that measures ratio of a country’s share in global FDI inflows to its share in global Gross Domestic Product (GDP). Indeed, recent statistics records that FDI in terms of GDP increased from 4.4 percent to 5.7 percent in 2006.

Egypt was surpassed by countries such as Singapore, Jordan, Bahrain, Lebanon, Sudan, and the United Arab Emirates. It, however, scored higher than countries like the United Kingdom, Israel, Sweden, Saudi Arabia, Turkey, France, and Canada.

As for Egyptian share of investment in global FDI, the country ranked 77 (up from last year’s 81) surpassed by countries such as Switzerland, Bahrain, Kuwait, Israel, United Kingdom, the United Arab Emirates, South Africa, Qatar, Lebanon, and India.

“Egyptian investment in world FDI rose this year due to an increase of acquisitions made by Egyptian companies — such as Orascom Construction Industries — in markets outside of Egypt,” Ragab said.

While the report shows that Egypt’s economic reforms are bearing fruit, there is still a lot of scope for more improvements. “The main [objective] is to utilize these figures [FDI] to increase employment, growth rates, and export capacity,” Ragab added.

Daily News Egypt

Nigeria’s United Bank of Africa seeking continental investment opportunities

Nigeria’s United Bank of Africa (UBA) — the largest financial institution in West Africa with $8 billion in assets — is keen on buying a small bank as part of its expansion plans in Africa.

The bank will join Eco-Bank, which has already expressed interest in the Kenyan and regional financial services market. UBA bought two Nigerian banks in 2005, and subsequently acquired the erstwhile Continental Trust Bank Limited (CTB).

The drive into acquisitions abroad is a result of the huge capital base that Nigerian banks have been forced to meet, which have in turn made them stronger and in a position to absorb more business.

In Nigeria, banks were forced to consolidate beginning 2005 in order to meet the equivalent of $225 million in core capital, a development that forced mergers and acquisitions. The move also led to the collapse of 14 banking institutions that could not survive the increased capitalisation and consolidation regime.

UBA said on its website that it was in the process of “spreading its footprints across Africa to earn the reputation as the face of banking on the continent.”

A source familiar with the bank’s moves in Kenya’s banking industry said that the bank was interested in buying an existing institution.

Another Nigeria bank thought to have pan-Africanist ambitions is First City Monument Bank, which is currently raising $750 million in London and in Nigeria. In the prospectus for the bond issue, the bank says it aims “to be the most effective investment and consumer bank in Africa.”

“Generally Nigerian banks have been raising capital heavily in recent times. They are getting ready for expansion,” said Humphrey Gathungu, investment manager at Stanbic Investment Management Services.

He explained that penetration of banking in Nigeria is still very low compared to its 150 million population and other countries of equal income or gross domestic product.

Founded in 1961, UBA is the largest financial services institution in West Africa with a balance sheet size in excess of just under $8 billion, an equivalent of three quarters of the total assets of Kenya’s commercial banks and more than five million customer accounts, operating out of the two most vibrant economies in the sub-region — Nigeria and Ghana.

Business Daily Africa

African economic growth to persist, but problems remain: IMF

Africa’s protracted economic boom is poised to accelerate from 6.1% in 2007 to 6.8% in 2008—the region's best performance since the early 1970s.

That is the forecast contained in the IMF's October 2007 World Economic Outlook.

“Sub-Saharan Africa is clearly enjoying its best period of sustained growth since independence” it says, adding that while oil exporters are growing the fastest “most others" are also growing strongly and outperforming historic trends. In the decade to 1996 the African economy grew by 2.2% a year; in the ten years to 2006 annual growth averaged more than 5%, meaning that after two decades of decline real incomes per head are now rising at over 2% annually. And while the average gap with the rest of the developing world remains very wide, African policymakers are increasingly confident that they are creating a platform for sustained growth over the next decade, during which time income gaps will start to narrow.

The IMF is at pains to stress that there is more to the African boom than the upsurge in commodity prices. While regional growth did take off in the wake of the commodity price boom, non-commodity exporters are also growing faster than before, partly because they have managed to expand non-traditional manufacturing exports and diversify export market destinations, especially in Asia, where the demand for resource-based products is strong.

That said, the IMF acknowledges that the growth acceleration since 2002 reflects “largely the coming on stream of new production facilities in the region's oil exporting countries, such as Angola and Nigeria”. In 2008, non-fuel commodity prices are forecast to weaken while oil prices are set to show further handsome gains. As a result the region's terms of trade will improve again, providing strong base for continued above-average GDP growth in 2008.

Most African countries are forecast to maintain “relatively high” rates of growth while inflation will “generally moderate,” excluding Zimbabwe, where it forecasts average inflation accelerating from 1,017% in 2006 to 16,170% this year. (There is no forecast for average inflation for the country in 2008 but the year end figure is projected--with pin point accuracy--at 137, 873.1%.)

The most rapid rates of growth are forecast to occur in oil exporters, and in countries undertaking economic reform. Expansion in the continent's largest economy, South Africa, will continue to be boosted by the ongoing investment and construction boom as preparations for the 2010 football World Cup gather momentum. The region's second largest economy, Nigeria, will benefit from higher oil prices—the IMF is forecasting an oil price increase of 9.6%--and production.

The combination of more open economies in a benign external environment, together with improved and more consistent policy reforms to strengthen the business environment and official actions to reduce debt burdens has allowed African countries to attract rising private capital inflows as well as benefit from “some step-up” in aid inflows and remittances. Foreign direct investment has been particularly strong in resource-rich countries. A smaller number of countries have begun to attract interest from private portfolio investors--the bulk of which go to South Africa though other such as Ghana and Uganda are also enjoying rising capital inflows.

Most African countries continue to run “significant” current-account deficits and, oil exporters excluded, foreign reserves remain “quite low”. As a result currency appreciation has been limited, though the challenges of managing currency inflows are “most pressing” for oil exporters. The Fund urges African oil producers to spend oil windfall gains “in a prudent manner” ensuring that increase public spending is accompanied by measures to improve the supply-side response in the non-oil economy.

Indeed, the IMF itself admits that the main risks to its upbeat forecast are on the downside, and that past World Economic Outlook forecasts have "systematically overestimated growth in Africa.

For all the Fund’s talk of economic and political reforms in Africa, the hard fact remains that in a whole host of global league tables--the World Bank’s Doing Business Report, Transparency International’s Corruption Perceptions Report, The World Bank’s Governance Indicators, Indices of Global Political and Economic Freedom and the World Economic Forum’s Global Competitiveness Index--African countries, with a handful of exceptions, cluster at or near the bottom.

As the World Bank’s Doing Business Report (2008) noted recently African countries are reforming but others are doing so more rapidly, meaning that the region is not improving its relative position. The IMF has repeated its call for structural reforms—especially trade and investment openness, transparency, education, and better governance—that will strengthen the investment climate and foster growth driven by the private sector. Making progress with this formidable (if familiar) agenda will be crucial if Africa's recent economic achievements are to be sustained.

The Economist

New website to attract investment into Africa

A new website, www.opportunitiesinafrica.com, has been set up to attract investment trade and business into Africa and equally to promote African trade and business internationally

Supported by UNECA, the aim of this website is to publish a positive image of Africa as a place to invest, trade and do business.

www.opportunitiesinafrica.com offers African companies and governments the opportunity to promote the following:

1). Investment Opportunities.

This area of the website is for governments who wish to promote inward investment opportunities in their country. It is also for companies who either wish to promote a private investment opportunity that they have available or to raise venture capital for their business.

2). Promote a company and its service.

This section is to offer a comprehensive directory of companies and their services, throughout your country, so as to enable working partnerships to be undertaken between international organizations and African business. We advise that all African companies and businesses avail of this opportunity to promote themselves and their services and register in this section

3). Shopping Mall.

This is a facility to allow African companies sell their goods internationally.

www.opportunitiesinafrica.com is free to use and all companies are invited to participate.

S. African fruit canning industry says EU is not playing fair on tariffs

Heavy tariffs on South African canned goods exported to the EU are stifling the growth of the R3.5 billion($520 million) industry and its ability to promote rural development.

Rudi Richards, the chairman of the SA Fruit and Vegetable Canners' Association, said that while South Africa had given the EU complete duty-free access for canned fruit, Europe had only come halfway. Whereas South Africa had waived the most-favoured nation (MFN) tariff that applies to all partners without preferential trade agreements, the EU only gave South Africa a 50 percent cut on the MFN for canned fruit, subject to quota quantity, which had put the brakes on the local industry's growth.

Deputy minister of trade and industry Rob Davies said the country had battled hard in the 2000 negotiations for a trade, development and co-operation agreement (TDCA) with the EU to avoid having canned fruit totally excluded from any benefit.

Newton Adams, a sectoral community representative, said the deciduous fruit industry played a vital role in the economic development of its largely rural workforce.

About 27 000 people are employed in the industry, but only on a seasonal basis, albeit that the season can last between six and 10 months of the year. According to Richards, only one-sixth of the 12 000 factory jobs are permanent. However, preference is given to the same seasonal workers each year, because they are provided with training.

The department of trade and industry is pushing hard for duty- and quota-free access to the EU for canned fruit under the EU's mid-term review of the TDCA. This review has been merged with the negotiations for an economic partnership agreement with countries in the Southern African Development Community region. Talks are due to be completed by the end of December.

"The EU has offered other African Caribbean and Pacific countries duty- and quota-free access for all products except sugar, rice and competitive products from South Africa," Davies said.

South Africa's negotiations are based on the claim that its industry is not a threat to the EU and the call for "equitable treatment." For example, Chile has duty-free access while South Africa, which has greater developmental needs, does not.

The negotiators are also pressing home the rural developmental needs of southern Africa and the importance of regional integration. This, they say, could lead to development in all Southern African Customs Union countries, where joint canneries could be started.

Business Report

South African-led consortium to invest in Kenya-Uganda Railway

A South African-led consortium will invest $29 million in the 106-year-old Kenya-Uganda Railway by June next year to revitalise operations on the decrepit track.

The Kenyan and Ugandan governments handed over the money-losing colonial-era railway to Rift Valley Railways Consortium (RVRC) under a 25-year concession last year, and the company will pay an initial $5 million fee to Nairobi and Kampala, plus 11.1% of gross revenue.

RVRC said in a statement that it had invested $11.5 million since it took control of the facility in November, and planned to inject an additional $17.5 million by June 2008. The cash surpasses $5 million that the RVRC must invest annually over the next five years in infrastructure upgrades under the leasing agreement between the firm and the governments.

The consortrium expects to reap benefits from the recently expanded East African Community - Kenya, Uganda, Tanzania, Rwanda and Burundi - and the creation of a customs union which opened up markets for 90 million people.

RVRC Chief Roy Puffett said 400 railway workers would be retrenched and paid off in full.

"It is important for the media to note that a bloated workforce is counterproductive to our efforts to restructure this organization thus the need to retrench and retain staff in core functions," Puffet said.

Conceived under the British mandate, the Kenya-Uganda railway began service on December 20, 1901 after more than a decade of planning and construction, which was halted more than once by lion attacks on workers.

The line was widely known as the "Lunatic Express" or the "Iron Snake." Derided by lawmakers in London for its enormous cost, the line runs some 900 kilometers (580 miles) from Kenya's Indian Ocean port of Mombasa, through Nairobi, and up the Rift Valley to Kisumu on the shores of Lake Victoria. From there, rail-steamer services go to Uganda, where a separate line runs.

Due to mounting financial woes, the East African Railways Corporation, as it was then known - owned by Kenya, Uganda and Tanzania - halted regional operations after the East African Community collapsed in 1977. Its largest section was taken over by the government-owned Kenya Railways Corporation, but poor management, lack of maintenance and insufficient funds for the purchase of new engines forced it to cut back services.

RVRC is made up of Sheltam Rail Company of South Africa with a 61% share, two other South African firms, Comazar Limited and CDIO Institute for Africa Development Trust, with a total of 14%, a Kenyan company, Primefuels (Kenya) Limited, with 15%, and Mirambo Holdings of Tanzania with 10%.

The consortium's lead investor, the Sheltam Group of Companies, operates railways in South Africa, Mozambique and Zimbabwe while Comazar runs national railroads in Cameroon, Ivory Coast, Burkina Faso and northern Madagascar.

Business in Africa

Low income countries to play a bigger role in IMF

The IMF, under pressure to move with the times, now backs reforms to give low-income countries a stronger voice in its decision-making and defended its response to recent financial market upheaval.

Policymakers from the International Monetary Fund also bowed to insistence from member contries that the Fund shore up its shaky finances, pledging to cut costs and boost efficiency.

The commitment came in a final statement issued after a meeting of the IMF's steering committee, held as the 63-year-old Fund was being pressed to accord greater representation to currently under-represented non-Western countries.

The committee said reforming the IMF "should enhance the representation of dynamic economies, many of which are emerging-market economies, whose weight and role in the global economy have increased." Such countries should see their voting share increased, the committee said, adding that "the voice and representation" of poor countries would also be strengthened.

It said all elements for an internal reform package, including an increase in the quotas that determine a member's voting rights, should be in place by the time of its next meeting in April 2008. The IMF in September took an initial step toward overhauling its management structure by raising the quotas for four rising economies, China, South Korea, Mexico and Turkey.

The Fund is now in the midst of a second round of reforms, which was under discussion here.

While the action taken October 20 was hailed by some IMF officials as a clear advance, outgoing IMF Managing Director Rodrgio Rato cautioned that "we are in an interim moment," adding that details of the reform still needed to be thrashed out.

Brazilian Finance Minister Guido Mantega earlier in the day implied that the IMF had in fact been slow to act on reform, attributing the hold-up to "resistance to change on the part of developed countries, which are over-represented in terms of voting power."

The distribution of quotas is determined according to complex mathematical formulas. Moves to adjust the share-out have been the subject of sometimes bitter debate, with certain industrialized nations reluctant to give ground to emerging-market members.

The Fund also came in for criticism from the Group of 24 developing countries for what it said was the Fund's failure to foresee the recent meltdown on financial markets, which erupted following a collapse of the US high-risk -- or subprime -- mortgage market. The G24 said the IMF should perhaps spend as much time monitoring advanced economies, where the turbulence originated, as it does the economies of less developed countries.

"Allow me to point out the irony of this situation," Mantega of Brazil said. "Countries that were references of good governance, of standards and codes for the financial systems, these are the very countries that are facing serious problems of financial fragility, putting at risk the prosperity of the world economy," he said, referring to major industrialized nations such as the United States.

"The Fund had little to say that was practical about this crisis," he said. "It has been excessively cautious in its recommendations. It justifies this caution by pointing to the unprecedented nature of the problems."

But Rato countered that the Fund last April was "already very clearly stating our worries about the subprime segment in the United States." And at the Group of Eight summit in Germany in June, he said, he spoke in the name of the Fund and had made it clear the IMF was "worried about the complacency and the quality of some of the deals that were being done at the time in the markets."

The IMF, whose mission is to promote international financial stability, is also struggling with its own finances as many newly cash-rich countries repay debt, leaving it without critical interest payments. The current situation had sparked calls from several committee members, notably from the Group of Seven industrialized powers, for the Fund to streamline its finances.

The committee said it "recognized" the need for more predictible and stable sources of Fund income, notably from a reduction in administrative costs and greater management efficiency. It said "a new income model" should be drafted for debate at its April meeting.

The Citizen-South Africa

Chinese aid, loans offer new opportunities for Africa

Cash-rich China offers new opportunities for African development, but countries need to scrutinize Chinese loan terms carefully, Nigeria's finance minister has said.

Shamsuddeen Usman said major development agencies needed to be aware that China and other rising powers presented new sources of lending and aid to Africa, but that concerns raised by traditional lenders about Chinese practices were shared by African borrowers.

"We are trying to get the multilateral institutions, including the World Bank and IMF, to recognize that there are new kids on the block that are ready to give concessions beyond the traditional concessions," he told reporters on the sidelines of the International Monetary Fund and World Bank's semi-annual meetings.

"If China is ready and able to assist a number of countries then that must also be taken into context," Usman said.

But Nigeria's experience with a Chinese railway project showed borrowers must "make sure that you understand those terms very well and analyze them properly to make sure they are in fact as concessionary as they look," he added. Usman did not elaborate, but said Nigeria was "renegotiating" with China some terms of the railway project.

Li Ruogu, president of China's state-owned Export-Import Bank, a key funder of China's push into Africa, said China is spreading prosperity in Africa where the West has failed.

"Western colonialism over 400 years in Africa did not bring any development and wealth," Li said in Beijing. "But China has brought many benefits to Africa."

After $50 billion in debt write-offs for impoverished countries, mainly in Africa, last year Western donors fear China's expanding economic links with the continent could lead to a build-up in burdensome debts all over again.

A lack of transparency from China on details of its investments and aid in Africa has also alarmed Western donors, who have watched China become a major investor in countries such as Angola, Sudan and Zimbabwe, which are accused of violating human rights.

Reuters

India develops more ties with Africa

The China bogey has prompted India to aggressively pursue its strategic and economic agenda in Africa. Though India has already scaled up its African safari in the last two years, it has now decided to further speed up the process as China has recently launched a $1 billion Africa development fund, which is expected to be raised to $5 bn soon.

Minister of state for industries, Ashwini Kumar, said India would now increase its presence in the African continent, and South Africa would act as the gateway. “Already, India’s investment in South Africa has increased substantially in the last few years, and the presence will now increase manifold. China has been aggressively pursuing its Africa policy. We can’t sit idle,” he said.

The creation of the Africa fund by China was one of the eight mechanisms for assisting Africa under the aegis of President Hu Jintao himself. No wonder, the two-way trade between China and Africa surged from about $4 bn in 1995 to $40 bn in 2005.

India’s top leadership too has been cultivating good relations with most African nations with a special emphasis on South Africa. Prime Minister Manmohan Singh, who undertook a two-nation visit to the continent last week to boost bilateral relations with Nigeria, and trilateral ties between India, Brazil and South Africa, had displayed India’s sincerity in following the policy. It is his second visit to South Africa in just one year.

According to the data from India’s industry ministry, the Tata Group, UB Group, M&M, Ranbaxy, Cipla, Godrej and Ashok Leyland are some of the top Indian investors in South Africa.

India Times

Asian demand for African oil rises

Asian demand for West African crude in November rose 100 000 barrels per day from the previous month as China boosted its purchases, taking advantage of arbitrage opportunities, traders said yesterday.

Asian refiners bought 1,17 million bpd of mainly Nigerian and Angolan crude, up from 1,07 million bpd in October.

"China's buying was above average this month as the arbitrage was open temporarily," one trader said.

China, the world's second-largest energy consumer, bought 760 000 bpd of West African crude, up from 552 000 bpd in October.

Benchmark prices on the Asia-Pacific crude market have strengthened to all-time highs in line with oil futures, prompting some Asian refiners to look elsewhere for their supplies. The Tapis/Brent Exchange of Futures for Swaps (EFS) has widened to above US$4 a barrel, making Asia-Pacific crude increasingly expensive when compared with Brent-related West African crude.

The late surge in Chinese buying helped offset lower demand in other Asian countries.

India reduced its buying, taking eight 950 000-barrel cargoes.

That is down from 10 stems in October, traders said.

Taiwan's Chinese Petroleum Corp halved its monthly purchases of West African crude, while Indonesia's Pertamina shunned the region for the second consecutive month.

Traders attributed the widening Brent/Dubai spread, which has made Middle East crudes more attractive than West African grades.

The spread has expanded to its widest in two and half months with the December EFS at around US$5,50.

Reuters

Africa must focus on internal than external trade

by Sanou Mbaye*

Karl Marx predicted that states would wither away in anticipation of an idyllic communist society capable of auto-regulating economic imbalances and empowering the masses. He would have been flabbergasted to see his prophecy realised, not by communism, but by the globalisation of Anglo-American economic liberalism.

Opening up markets to the free flow of capital, not the dictatorship of the proletariat, has rendered state power obsolete. Today's capital markets raise money for governments, corporate clients, and individual customers, manage pension funds' investments, and bet on the level of interest rates or the stock market.

Trading in derivatives by investment banks, hedge funds, and other market participants, reaps huge profits for traders while depriving the real economy of productive investment and job creation.

No population in the world is spared from the harsh treatment of such a system. Some 40 per cent of the world's 6,5 billion people live in poverty, and a sixth live in extreme poverty.

However, the world's black populations are the prime victims.

In the United States, one-eighth of all black males between the ages of 25 and 34 are in jail, and three out of five black American households with children are headed by a single mother. As for African countries, the politics and economics of globalisation have stripped them of their assets and natural resources and left them with an unbearable debt burden. As a result, the percentage of Africa's population living in extreme poverty increased from 41,6 per cent in 1981 to 46,9 per cent in 2001.

On the other hand, in the era of globalisation, regions in which internal trade exceeds external trade have better economic outlooks and stronger social cohesion. This is the case for Europe, Asia, and, increasingly, Latin America, particularly among the member states of Mercosur (Argentina, Brazil, Chile, Uruguay, and Paraguay).

The opposite is true for regional groupings in Africa and in the Middle East, where trade with the outside world is more important than intra-regional trade.

As a result, any country formulating strategies to counter the destructive forces of globalisation should give overriding priority to a self-centred economic development strategy, preferably within a regional framework. This is a prerequisite to defending against market fundamentalism and avoiding the iniquitous conditions of the international marketplace.

In this respect, the Association of Southeast Asian Nations (Brunei Darussalam, Cambodia, Indonesia, Laos, Malaysia, Myanmar, Philippines, Singapore, Thailand, and Vietnam) constitutes an edifying example. The ASEAN economies adopted a united front on international economic issues and accorded priority to internal economic integration and expanding linkages with major trading partners.

Exports have remained the main driver of economic performance for the ASEAN countries, contributing to 5,8 per cent regional GDP growth in 2006. ASEAN foreign direct investment (FDI) flows reached US$38 billion in 2005, up by 48 per cent from the previous year. The outlook for 2006 was also bullish, with preliminary data for the first quarter indicating that FDI flows had already reached US$14 billion, up from US$7,4 billion in the year-earlier period.

By contrast, sub-Saharan Africa's historical legacy of artificial and unmanageable colonial boundaries, ethnic antagonisms, its citizens' deficit of self-respect, and an appalling record of leadership failures has hampered its quest for economic integration.

But a sector-by-sector approach could mitigate these handicaps, and, given the pressing need to address demand for energy and climate change, it might be strategically advisable to start with the energy sector.

Africa is a continent rich in energy, holding two-thirds of the world's reserves of hydroelectric power - trillions of kilowatt-hours representing about half of total world resources. The Congo River alone holds more than 600 billion kilowatt-hours of annual reserves. TheSanaga (Cameroon) and the Ogooué (Gabon) hold half as much.

Technological breakthroughs have made it feasible to transport electricity via high-voltage direct current (HVDC) over long distances without incurring great losses (only about 3 per cent per 1 000 kilometres). Carbon-free hydroelectric power is the right choice as sub-Saharan Africa's principal source of energy. Harnessing the hydroelectric power of the Congo Basin alone would be enough to meet all of Africa's energy needs, or to light the entire continent of South America.

Moreover, establishing an African grid would enable power from the Democratic Republic of Congo to be delivered to southern European countries such as Spain, Portugal, and Italy.

However, while 90 per cent of world reserves of hydraulic energy are concentrated in underdeveloped regions like sub-Saharan Africa, HVDC technology remains the preserve of developed countries.

There is thus an imperative not only for regional integration in Africa, but also for a joint strategic vision and partnership to help build global energy and climate security.

*Sanou Mbaye is a Senegalese economist and former member of the African Development Bank senior management team.

The Namibian

Foreign direct investment into Africa doubles

Foreign direct investment (FDI) into Africa doubled between 2004 and 2006 to a record $36 billion, spurred by the search for primary resources and increased profits and by a generally improved business climate, an UNCTAD survey of investment trends reports.

African FDI outflows also reached a record level in 2006 of US$8 billion, up from $2 billion in 2005, with South African firms being the main investors from the region, said UNCTAD.

In its World Investment Report 2007: Transnational Corporations, Extractive Industries and Development it added that the value of cross-border mergers and acquisitions (M&A) in Africa also reached a record level of US$18 billion in 2006.

About half of those M&As were accounted for by transnational corporations from developing Asia.

But despite these increases, the region’s share of the global FDI declined to 2.7% in 2006 from 3.1% in 2005.

Africa’s portion of global FDI remains small when compared with figures for South, East and South-East Asia (15% of the world total) and Latin America and the Caribbean (6%).

FDI inflows exceeded one billion dollars in eight African countries and rose in 33 countries in 2006.

The top ten African FDI destinations - including Egypt, Nigeria, Sudan, Tunisia and Morocco - received about 90%, or $32 billion, of the continent’s total FDI inflows.

In sub-Saharan Africa, FDI inflows climbed in all sub-regions except southern Africa because of large investments in oil and mining.

Major investment declines, however, were recorded for Angola (-$1.1 billion) and South Africa (-$0.3 billion) due to sales of foreign equity shares to the government in the former case and to local firms in the latter.

"There has been a surge of FDI flows to Africa in the primary sector, mainly oil, gas and mining, over the past few years. The services sector, particularly transport, storage and communications, also continued to attract FDI," said UNCTAD.

Inflows into the manufacturing sector continued to grow in North African countries at a slow but stable rate, while in sub-Saharan Africa, no significant manufacturing FDI occurred.

The search for new resource reserves led to increased FDI inflows to African least developed countries to the tune of $8 billion, after a two-year decline.

As a result, least developed countries received 23% of FDI inflows to the region.

In terms of the investment climate for FDI flows to the region, in 2006 many African countries incorporated measures into their policy and regulatory frameworks to ensure steady inflows of FDI and to increase those flows, which have had a positive impact on the development of their economies.

Prospects for FDI into Africa continue to be positive because of high global commodity prices and as transnational corporations, particularly from Asia, take advantage of good returns on investment.

But some moderation is expected in 2007 due to a pause in large FDI inflows into the oil industries of some countries, UNCTAD said.

Sunday Times-SA

Africa needs more help to achieve U.N. MDGs

"Most African countries are ready to accelerate economic and social reforms, however, they lack resources and means," Benin's representative Jean-Marie Ehouzou told a U.N. General Assembly meeting.

Speaking on behalf of the African nations, Ehouzou criticised the developed countries for their refusal to do away with subsidies to their agricultural sectors and their failure to honour commitments on development funding.

"(They) are reluctant to take necessary measures and lack the political courage to act appropriately," Ehouzou added in a comment on U.N. chief Ban Ki-moon's annual report on the work of the New Partnership for Africa's Development (NEPAD).

NEPAD, a U.N.-backed -- but homegrown -- African strategy for development that pledges better governance in return for increased support from international donors, was first launched in 2001. Its primary objectives are to eradicate poverty, promote sustainable growth and development, integrate Africa in the world economy, and accelerate the empowerment of women.

To accomplish this, NEPAD seeks to attract increased investment, capital flows and funding, providing an African-owned framework for development as the foundation for partnerships at regional and international levels. This strategy has come under fire from some African civil society groups, who argue that NEPAD is based on the premise that investment from the North is essential to the development of Africa, and resent that little popular consultation was undertaken in the programme's formulation.

Addressing the delegates on behalf of the Group of 77, a 130-member political bloc of developing nations, and China, Akram stressed there was need for more resources to be mobilised for the African countries to achieve the MDGs and fully implement the NEPAD programmes.

The MDGs include a 50-percent reduction in extreme poverty and hunger; universal primary education; reduction of child mortality by two-thirds; cutbacks in maternal mortality by three-quarters; the promotion of gender equality; and the reversal of the spread of HIV/AIDS, malaria and other deadly diseases, all by 2015.

Recent U.N. reports and NEPAD representatives acknowledge that most countries in sub-Saharan Africa are unlikely to achieve the MDGs, mainly due to lack of funding from the international donors.

Bringing together some major multilateral and intergovernmental development organisations, Ban recently formed a new body called the Africa Steering Group. He hopes that the group would "galvanise" global action to achieve the MDGs "in full, on time and across Africa."


"We do not want to lose what we have already," he said in response to a question about the U.N. chief's plans to merge the office of his special advisor on Africa with the office of the high representative for least developed, landlocked, and small island developing countries.

"What do we want from the U.N.?" he asked. "We want permanent linkages with all its bodies." According to Mucavele, NEPAD has made significant progress in implementing its programme in the areas of infrastructure, energy, education, science, and technology.

"A lot has been done," he added, "But a lot has yet to be done." The recent NEPAD initiatives also include the creation of the Pan African Fund for infrastructure development, capitalised at 625 million dollars from the South African, Ghanian and Nigerian Fund, an innovative move to raise money from internal resources.

"We have to start with our own money. Nobody is choosing for us. We have to choose for ourselves," he said. "We are trying to make NEPAD a social, economic and political body."

For their part, representatives of the developed countries gave no sign that they would change their existing policy of trade protectionism. However, both Japan and Canada reiterated their promises to double the flow of development aid for Africa in coming years.

IPS

Brazil, India, South Africa pledge greater trade

India, Brazil and South Africa cemented their trilateral cooperation by signing seven agreements and resolved to push for a free trade area, with Indian Prime Minister Manmohan Singh calling for considerably enhancing trade among the three.

The seven agreements signed during the day long IBSA (India, Brazil, South Africa) summit envisage cooperation among the three nations in the areas of public administration and governance, tax administration, arts and culture cooperation, higher education, wind resources, health and medicines and social development.

'We have set ourselves a modest target of $15 billion by 2010 for trade among our three countries. My suggestion to our business leaders would be to aim to achieve this by 2009 and then go on to double that by 2012,' Manmohan Singh told business leaders at the IBSA Business Council.

This is the second IBSA summit. The first was held in Brasilia.

Underlining the need to create the necessary environment for closer intra-IBSA trade and investment, the prime minister asked business leaders to look at innovative approaches to exploit common strengths in science and technology in areas including joint research and development projects in manufacturing, pharmaceuticals and ICT.

Manmohan Singh also laid emphasis on pooling together respective strengths of the three countries in specific areas of energy technologies to achieve energy security for their rapidly expanding economies. 'Brazil has comparative strengths in ethanol and bio-fuels; South Africa in coal-to-liquid and gas-to-liquid technologies. India has strengths in wind and solar energy.'We need to look at how trilateral ventures in these areas can be made viable business models,' he said.

'We all recognise the immense potential of IBSA. With the necessary political will and an outcome-based approach, I have no doubt we will be able to realise this potential,' he said. 'I am particularly pleased that discussions have begun on the India-SACU (Southern African Customs Union)-Mercosur FTA. This is a bold initiative to give an impetus to our trading ties and we will work sincerely to bring it to fruition,' he said.

He was alluding to the ambitious free trade agreement that will connect economically vibrant regions of India, SACU and Mercosur straddling three continents of Asia, Africa and Latin America.

Mercosur, also known as the Common Market of the South, encompasses more than 250 million people and accounts for more than three-quarters of the economic activity on the continent. The Southern African Customs Union (SACU) consists of five member states, Botswana, Lesotho, Namibia, South Africa and Swaziland and forms the most economically active area of Africa.

The prime minister also underlined the need to 'evolve common IBSA positions on important international issues' like the UN reforms, multilateral Doha Round of trade talks, climate change and terrorism. To realise these common IBSA goals, the prime minister made a strong pitch for enhancing air and maritime links between India, South Africa and Brazil, countries separated by vast distances.

India eNews

Rwanda uses ICT to build knowledge-based economy

Sometime in the next two years, nearly every school in Rwanda – from distant mountain villages to swelling urban areas – will be hooked up to the Internet. And it won't be some crummy dial-up service. It will be high-speed broadband, carried by fiber-optic cables.

The fact that Rwanda is closing in on this goal without having the massive oil wealth of Angola or Sudan, the diamonds of Congo or South Africa, or even the copper of nearby Zambia is a testimony to the power of imagination. And Rwanda imagines that one day, it will be the information technology center of Africa.

"In 2000, we decided to transform the country from agricultural subsistence to a knowledge-based economy," says Albert Butare, Rwanda's minister of state for energy and communications. With two fiber-optic rings around Kigali, and cable being laid across the country, Rwanda is well on its way to being wired. "Once we've reached the towns of each sector, it's like you've covered the whole country. In another two years, we should be there."

Rwanda's dream of becoming the an information-technology hub for the resource-rich nations of Eastern and Central Africa – is a point of pride for the government, a matter of concern for some Rwandans, and a curiosity for just about everyone else.

Government officials and business leaders see high-tech as the best way to lift one of the world's least-developed countries into a better position to compete globally. Local human rights activists fret that Rwanda's money could be better spent on things like drinking water and electricity.

Countries like Rwanda, which rank among the world's least developed countries (LDCs), don't easily become high-tech hubs. Sixty percent of Rwandans live below the poverty line, defined by the UN as an income of less than a dollar a day. According to a 2005 study by the Australian National University, LDCs make up 10 percent of the world's population and represent only 0.13 percent of the world's Internet users.

Yet, there are hopeful signs. Nearly 70 percent of Rwanda's adults can read and write. This fact, combined with Rwanda's dense population – almost all of whom speak the same language, Kinyarwanda – make the country a much better place for establishing an Internet hub than Rwanda's resource-rich, ethnically diverse, and less-educated neighbors.

By spending $65 million on broadband, part of a 20-year strategy to turn the country from an agricultural economy into a high-tech service economy, Rwanda hopes to tap into its single most valuable resource: its people. "This country is very hierarchical, and whatever the government decides to do, it will do, and society will follow in a very disciplined way," says Antoine Bigirimana, president of Electronic Tools Company, a Sonoma, Calif.-based software company with projects in Rwanda. "That culture can be used to do very bad things, like the genocide, or you can use it for good, to make the society better."

The key, says Mr. Bigirimana, a top adviser to the Rwandan government on its 20-year technology plan, is to use technology that fits Rwanda's conditions and budget. For urban areas, Rwanda should import refurbished computers in the $200 price range. For rural areas with little or no electricity, he envisions solar-powered 12-volt, 8-watt computers being pioneered by the San Francisco based company Inveneo, priced at around $70.

Tying them all together will be a network of privately owned telecenters, some of them hooked up to fiber-optic cable, others making use of mobile phone broadcast towers for their Internet access.

According to the plan, these telecenters will give every Rwandan town high-speed domestic broadband Internet access. This would allow middle class Rwandans to find out about business opportunities, educated people to find jobs, and farmers to get better prices for their crops. Eventually, it would provide education for those illiterate Rwandans whom the Internet has so far passed by.

"Poverty is not a permanent state," Bigirimana says.

Rwanda's high-tech plans are not universally applauded. One independent newspaper, Newsline, called the plan a misuse of public funds, while several aid groups have criticized it as an investment in the rich at the expense of the poor.

"This idea is far ahead of the current situation for the majority of the people," said one human rights activist, speaking on condition of anonymity. "You can't build a school and take a student to study before you give him something to eat. You can't invest in such a long-term policy when people are so poor."

Peter Niyigena, owner of an Internet café in Kigali, was more enthusiastic. "I don't know if we'll become like Singapore, but it's good to know where we are going," he says.

"This isn't a question of choosing between water and sanitation [on one hand], and providing high-speed broad-band [on the other]," says Laurent Besançon, a senior regulatory specialist and telecom expert at the World Bank office in Johannesburg.

"But if you look at the medium or long term," he says, "public investment in information and communication technology (ICT), combined with sound regulation, can help you go beyond the basics and be a major catalyst of additional private sector investment. In Rwanda, I believe that using ICT will enable not just the half of the population who can read and write to get ahead, but it will also help elevate the other half as well."

CS Monitor