1. Africa's FDI inflows reach a record $53 billion in 2007: UNCTAD
2. Nigeria is China's third-largest African trading partner
3. British exports to Nigeria worth £2 billion between 20006, 2007
4. Common West African external customs tariff would boost development
5. Ghana, Senegal good places to do business
6. Aid can be given, received effectively
7. Africa-China trade to top $100 billion in 2008
8. Uganda attracts $368m in investment in 2007
9. Tanzania's Foreign Direct Investment inflow up by 15 per cent.
September 30, 2008
Africa's FDI inflows reach a record $53 billion in 2007: UNCTAD
Africa received record foreign direct investment (FDI) inflows of US$ 53 billion in 2007, according to this year's World Investment Report of the UN Conference on Trade and Development (UNCTAD). UNCTAD released the report Thursday, saying the continent also trumped the world's other developing regions by providing the highest rate of returns on FDI for the past two years.
According to the report, subtitled "Transnational Corporations and the Infrastructure Challenge", the surge in FDI to the region and its profitability, were driven by the boom in global commodity prices and by Africa's changing policy environment.
In terms of policy measures, African governments and their partners adopted various new laws and took other steps to attract more FDI, which continues to gain in importance as a form of international economic transactions and as an instrument of international economic integration.
Africa's FDI inflows in 2007 continued to be geographically concentrated, with the top 10 host countries accounting for over 82 per cent of total inflows, while nine countries received inflows of US$ 1 billion or more.
North Africa attracted 42 per cent and sub-Saharan Africa 58 per cent of FDI to the region.
Investment in African Least Developed Countries (LDCs) also grew for the second consecutive year.
"As a result of the commodity price boom, income on inward FDI grew by 31 per cent in 2007, and the rate of return on investment in Africa was the highest among developing regions in 2006 and 2007," UNCTAD said in the report.
It explained that a large proportion of FDI in 2007 concentrated on expanding projects related to natural-resource exploitation, partly through reinvested earnings.
"Consequently, the share of reinvested earnings in total FDI inflows increased to 28 per cent," said the report, observing that FDI in natural-resource exploitation contributed to accelerated export growth.
Foreign exchange reserves in Africa grew by some 36 per cent in 2007 and by even more in some major oil-exporting countries such as Nigeria and Libya.
Despite higher inflows, Africa's share of global FDI remained at about 3 per cent, with transnational corporations (TNCs) from the United States and Europe being the main investors in the continent, followed by African investors, particularly from South Africa.
According to the report, TNCs from Asia concentrated mainly on oil and gas extra ction and on infrastructure.
"Prospects for increased FDI inflows in 2008 are promising in light of continued high prices for commodities, large projects already announced for the year and forthcoming payments from previously concluded cross-border mergers and acquisitions (M&As).
"This could result in a fourth consecutive year of FDI growth on the continent," the report forecast.
UNCTAD's World Investment Prospects Survey 2008-2010 showed that almost all TNCs plan to maintain or even increase their current levels of investment in Africa.
Afriquenligne
According to the report, subtitled "Transnational Corporations and the Infrastructure Challenge", the surge in FDI to the region and its profitability, were driven by the boom in global commodity prices and by Africa's changing policy environment.
In terms of policy measures, African governments and their partners adopted various new laws and took other steps to attract more FDI, which continues to gain in importance as a form of international economic transactions and as an instrument of international economic integration.
Africa's FDI inflows in 2007 continued to be geographically concentrated, with the top 10 host countries accounting for over 82 per cent of total inflows, while nine countries received inflows of US$ 1 billion or more.
North Africa attracted 42 per cent and sub-Saharan Africa 58 per cent of FDI to the region.
Investment in African Least Developed Countries (LDCs) also grew for the second consecutive year.
"As a result of the commodity price boom, income on inward FDI grew by 31 per cent in 2007, and the rate of return on investment in Africa was the highest among developing regions in 2006 and 2007," UNCTAD said in the report.
It explained that a large proportion of FDI in 2007 concentrated on expanding projects related to natural-resource exploitation, partly through reinvested earnings.
"Consequently, the share of reinvested earnings in total FDI inflows increased to 28 per cent," said the report, observing that FDI in natural-resource exploitation contributed to accelerated export growth.
Foreign exchange reserves in Africa grew by some 36 per cent in 2007 and by even more in some major oil-exporting countries such as Nigeria and Libya.
Despite higher inflows, Africa's share of global FDI remained at about 3 per cent, with transnational corporations (TNCs) from the United States and Europe being the main investors in the continent, followed by African investors, particularly from South Africa.
According to the report, TNCs from Asia concentrated mainly on oil and gas extra ction and on infrastructure.
"Prospects for increased FDI inflows in 2008 are promising in light of continued high prices for commodities, large projects already announced for the year and forthcoming payments from previously concluded cross-border mergers and acquisitions (M&As).
"This could result in a fourth consecutive year of FDI growth on the continent," the report forecast.
UNCTAD's World Investment Prospects Survey 2008-2010 showed that almost all TNCs plan to maintain or even increase their current levels of investment in Africa.
Afriquenligne
Nigeria is China's third-largest African trading partner
China's current investment in Nigeria stands at $3 billion while bilateral trade as at the end of 2007 amounted to $4.3 billion, making Nigeria the third largest trading partner of China in Africa.
This was disclosed in a statement issued by the Ministry of Foreign Affairs entitled "Brief on Nigera-China Relations", which was released after the visit of a Chinese delegation to the Ministry.
The statement said:"Nigeria and China are committed to engaging each other meaningfully in mutually beneficial economic cooperation by boosting trade and investment. China's current investment in Nigeria stands at $3 billion while bilateral trade as at 2007 was $4.3 billion, making Nigeria the third largest trading partner of China in Africa."
This Day
This was disclosed in a statement issued by the Ministry of Foreign Affairs entitled "Brief on Nigera-China Relations", which was released after the visit of a Chinese delegation to the Ministry.
The statement said:"Nigeria and China are committed to engaging each other meaningfully in mutually beneficial economic cooperation by boosting trade and investment. China's current investment in Nigeria stands at $3 billion while bilateral trade as at 2007 was $4.3 billion, making Nigeria the third largest trading partner of China in Africa."
This Day
British exports to Nigeria worth £2 billion between 20006, 2007
The British High Commission in Nigeria said in a recent statement in Abuja that exports from Britain to Nigeria was nearly 2 billion pounds between 2006 and 2007, reported the News Agency of Nigeria.
Peter Stephenson, director of British Trade and Investment (UKTI) Department in Nigeria said Nigeria is Britain's second largest market in Africa, with exports of goods worth 1,013 million pounds in 2007, and exports of services valued at 913 million pounds in 2006.
According to him, Nigerians first looked to Britain for goods and services because of the strong historical, language and constitutional ties between the two countries. He said the UKTI is keen to build on the established relationship between the two countries and to help companies take advantage of the opportunities for trade in Nigeria. The business areas identified include oil and gas, agriculture, mining and mineral processing, power and communications.
"Nigeria is the most lucrative telecommunications market in Africa, growing at twice the African average, and a wide range of products and services are being promoted," he said. Stephenson said in order to build on the strong business ties between the two countries representatives of 18 companies will be participating in the annual trade mission to Lagos, holding between Sept. 15 and Sept. 18.
Xinhua
Peter Stephenson, director of British Trade and Investment (UKTI) Department in Nigeria said Nigeria is Britain's second largest market in Africa, with exports of goods worth 1,013 million pounds in 2007, and exports of services valued at 913 million pounds in 2006.
According to him, Nigerians first looked to Britain for goods and services because of the strong historical, language and constitutional ties between the two countries. He said the UKTI is keen to build on the established relationship between the two countries and to help companies take advantage of the opportunities for trade in Nigeria. The business areas identified include oil and gas, agriculture, mining and mineral processing, power and communications.
"Nigeria is the most lucrative telecommunications market in Africa, growing at twice the African average, and a wide range of products and services are being promoted," he said. Stephenson said in order to build on the strong business ties between the two countries representatives of 18 companies will be participating in the annual trade mission to Lagos, holding between Sept. 15 and Sept. 18.
Xinhua
Common West African external customs tariff would boost development
By Joe Lamport
Developing a common external tariff in West Africa will fuel economic development, benefiting traders and governments alike. But implementing the tariff requires careful consideration of a variety of variables. A common external tariff would simplify the use of tariffs, boosting trade.
The Trade Hub’s trade economics experts facilitated a discussion of variables in a proposed tariff scheme and presented a tool to look at possible tariff scenarios at a meeting with ECOWAS officials in Nigeria in August.
“It was a very good discussion,” said Lori Brock, the Trade Hub’s trade advisor. “We were able to look at different options regarding the common external tariff and we ended up with discussions on a way forward so that the people we presented to can present this information to ECOWAS member states at the next committee meeting.”
West African governments have been pursuing a common external tariff for more than a decade. The reason is simple: A common external tariff would apply tariff rates to goods in four categories instead of the thousands of categories currently used and that vary from country to country.
“One of the major problems for local and regional traders is the rent-seeking behavior of customs officials and border controls,” Brock explained. “If you just have four categories of tariff rates that are fairly low and more affordable to the traders you are going to have more likelihood of traders complying and not smuggling and less discretion on the border agents’ side to elicit rent payments. Both of those things together then create a system where more people are complying and less money is being funneled to the rent seeking behavior thereby allowing more money for the government’s fiscal budget.”
Currently, the common export tariff proposal includes four tariff levels of 0, 5, 10 and 20 percent. The meeting inNigeria also looked at an idea to add a fifth band with a higher tariff level. It is a delicate issue, reflecting the complexities of trade economics.
“Some countries have requested a higher rate of tariff rates, called the fifth band,” Brock said. “We addressed a number of questions about this, including, is the fifth band necessary? Or can other protective measures be used other than a permanent or temporary fifth band on sensitive products? If it’s deemed necessary, which products really should be in the higher band? The safeguard and fifth band discussions were important. And we did this bearing in mind obligations to the WTO and conformity with global trading rules.”
Tariffs on rice are one measure governments use to encourage local farmers, but they must balance a tariff against the need for affordable food. For about 400 products, the question of tariffs is delicate because imposing the tariff often means higher prices for consumers while not imposing the tariff means locally produced goods lose market share to lower priced imported goods.
Rice is an example of one of these sensitive products. The United States and the European Union subsidize rice farmers, and in Europe rice has a high 200 percent tariff. “Rice is a special issue,” Brock said. “Even though many of the West African countries did have a high tariff on rice because of the food crisis, many have put a temporary zero tariff on it to mitigate the outcries of their populations."
“The problem with agriculture currently is food shortages globally,” she continued. “There is a desire to want to protect farmers but it has to be counter-balanced with the need for affordable food for consumers, enhancing the efficiency of locally produced goods and dealing with the food shortages that exist today.”
The meeting also involved a discussion of nascent industries versus dying industries and the steps policymakers can go through to help decide what protective measures and for which industries best meet the needs of everyone in the country – and not just the most vocal lobbies.
The Trade Hub’s trade experts also presented a computer tool to ECOWAS officials that allows them to create scenarios in order to look at likely trends if certain tariff levels were imposed. The tool, called a partial equilibrium model, allows them to see trends in the consumer price index, tariff revenue and regional trade.
WATH
Developing a common external tariff in West Africa will fuel economic development, benefiting traders and governments alike. But implementing the tariff requires careful consideration of a variety of variables. A common external tariff would simplify the use of tariffs, boosting trade.
The Trade Hub’s trade economics experts facilitated a discussion of variables in a proposed tariff scheme and presented a tool to look at possible tariff scenarios at a meeting with ECOWAS officials in Nigeria in August.
“It was a very good discussion,” said Lori Brock, the Trade Hub’s trade advisor. “We were able to look at different options regarding the common external tariff and we ended up with discussions on a way forward so that the people we presented to can present this information to ECOWAS member states at the next committee meeting.”
West African governments have been pursuing a common external tariff for more than a decade. The reason is simple: A common external tariff would apply tariff rates to goods in four categories instead of the thousands of categories currently used and that vary from country to country.
“One of the major problems for local and regional traders is the rent-seeking behavior of customs officials and border controls,” Brock explained. “If you just have four categories of tariff rates that are fairly low and more affordable to the traders you are going to have more likelihood of traders complying and not smuggling and less discretion on the border agents’ side to elicit rent payments. Both of those things together then create a system where more people are complying and less money is being funneled to the rent seeking behavior thereby allowing more money for the government’s fiscal budget.”
Currently, the common export tariff proposal includes four tariff levels of 0, 5, 10 and 20 percent. The meeting inNigeria also looked at an idea to add a fifth band with a higher tariff level. It is a delicate issue, reflecting the complexities of trade economics.
“Some countries have requested a higher rate of tariff rates, called the fifth band,” Brock said. “We addressed a number of questions about this, including, is the fifth band necessary? Or can other protective measures be used other than a permanent or temporary fifth band on sensitive products? If it’s deemed necessary, which products really should be in the higher band? The safeguard and fifth band discussions were important. And we did this bearing in mind obligations to the WTO and conformity with global trading rules.”
Tariffs on rice are one measure governments use to encourage local farmers, but they must balance a tariff against the need for affordable food. For about 400 products, the question of tariffs is delicate because imposing the tariff often means higher prices for consumers while not imposing the tariff means locally produced goods lose market share to lower priced imported goods.
Rice is an example of one of these sensitive products. The United States and the European Union subsidize rice farmers, and in Europe rice has a high 200 percent tariff. “Rice is a special issue,” Brock said. “Even though many of the West African countries did have a high tariff on rice because of the food crisis, many have put a temporary zero tariff on it to mitigate the outcries of their populations."
“The problem with agriculture currently is food shortages globally,” she continued. “There is a desire to want to protect farmers but it has to be counter-balanced with the need for affordable food for consumers, enhancing the efficiency of locally produced goods and dealing with the food shortages that exist today.”
The meeting also involved a discussion of nascent industries versus dying industries and the steps policymakers can go through to help decide what protective measures and for which industries best meet the needs of everyone in the country – and not just the most vocal lobbies.
The Trade Hub’s trade experts also presented a computer tool to ECOWAS officials that allows them to create scenarios in order to look at likely trends if certain tariff levels were imposed. The tool, called a partial equilibrium model, allows them to see trends in the consumer price index, tariff revenue and regional trade.
WATH
Ghana, Senegal good places to do business
Ghana remains the easiest place to do business in West Africa and one of the top 10 economies in Africa by overall aggregate for doing business.
It is also the best place to register property and the best in protecting investors in the Economic Community of West African Sates (ECOWAS), the World Bank said in a report in Accra on Wednesday.
It said Ghana, which over the past three successive years was among the world’s best reformers, only recorded an improvement in the area of starting a business, by abolishing the requirements to register employment vacancies and to obtain a company seal.
This, according to the report, led to the reduction in the number of procedures to start a business.
“Overall, Ghana ranks 87th out of the 181 countries ranked in Doing Business 2009, as compared to 82 out of 178 countries for Doing Business 2008.”
The statement said Senegal made it easier to start a business, register property, and trade across borders.
Burkina Faso, for its part, introduced a new labour code and reforms for registering property, dealing with construction permits, and paying taxes.
Botswana cut the time to start a business, facilitated trade, and strengthened investor protections while post-conflict countries, Liberia and Sierra Leone, along with Rwanda, were among “the regions’ most active reformers of business regulations”.
The report said Mauritius moved up to 24 in the global rankings on the regulatory ease of doing business and continues to provide inspiration for reform and good practices to other economies across Africa. The runner-up in these overall rankings is South Africa at 32, followed by Botswana at 38.
“With more reforms of business regulations in Africa than in any previous year, we are seeing many countries get inspiration from their neighbours about how to reform,” said Sabine Hertveldt, a co-author of the report.
“Increasingly, countries in the region are committing to reform agendas that make it easier to do business,” she added.
Doing Business ranks economies based on 10 indicators of business regulation that track the time and cost to meet government requirements in starting and operating a business, trading across borders, paying taxes, and closing a business.
The rankings do not reflect such areas as macroeconomic policy, quality of infrastructure, currency volatility, investor perceptions, or crime rates.
Singapore leads the global rankings on the overall regulatory ease of doing business for a third consecutive year. New Zealand is runner-up, and the United States third. Bahrain and Mauritius join the ranks of the top 25 this year.
“Economies need rules that are efficient, easy to use, and accessible to all who have to use them. Otherwise, businesses get trapped in the unregulated, informal economy, where they have less access to finance and hire fewer workers, and where workers lack the protection of labour law,” said Michael Klein, World Bank/IFC Vice President for Financial and Private Sector Development. “Doing Business encourages good rules, and good rules are a better basis for healthy business than ‘who you know,’” he added.
My Joy
It is also the best place to register property and the best in protecting investors in the Economic Community of West African Sates (ECOWAS), the World Bank said in a report in Accra on Wednesday.
It said Ghana, which over the past three successive years was among the world’s best reformers, only recorded an improvement in the area of starting a business, by abolishing the requirements to register employment vacancies and to obtain a company seal.
This, according to the report, led to the reduction in the number of procedures to start a business.
“Overall, Ghana ranks 87th out of the 181 countries ranked in Doing Business 2009, as compared to 82 out of 178 countries for Doing Business 2008.”
The statement said Senegal made it easier to start a business, register property, and trade across borders.
Burkina Faso, for its part, introduced a new labour code and reforms for registering property, dealing with construction permits, and paying taxes.
Botswana cut the time to start a business, facilitated trade, and strengthened investor protections while post-conflict countries, Liberia and Sierra Leone, along with Rwanda, were among “the regions’ most active reformers of business regulations”.
The report said Mauritius moved up to 24 in the global rankings on the regulatory ease of doing business and continues to provide inspiration for reform and good practices to other economies across Africa. The runner-up in these overall rankings is South Africa at 32, followed by Botswana at 38.
“With more reforms of business regulations in Africa than in any previous year, we are seeing many countries get inspiration from their neighbours about how to reform,” said Sabine Hertveldt, a co-author of the report.
“Increasingly, countries in the region are committing to reform agendas that make it easier to do business,” she added.
Doing Business ranks economies based on 10 indicators of business regulation that track the time and cost to meet government requirements in starting and operating a business, trading across borders, paying taxes, and closing a business.
The rankings do not reflect such areas as macroeconomic policy, quality of infrastructure, currency volatility, investor perceptions, or crime rates.
Singapore leads the global rankings on the overall regulatory ease of doing business for a third consecutive year. New Zealand is runner-up, and the United States third. Bahrain and Mauritius join the ranks of the top 25 this year.
“Economies need rules that are efficient, easy to use, and accessible to all who have to use them. Otherwise, businesses get trapped in the unregulated, informal economy, where they have less access to finance and hire fewer workers, and where workers lack the protection of labour law,” said Michael Klein, World Bank/IFC Vice President for Financial and Private Sector Development. “Doing Business encourages good rules, and good rules are a better basis for healthy business than ‘who you know,’” he added.
My Joy
Aid can be given, received effectively
by Jo Walker
Aid to Africa often gets bad press. Many think it is wasted by corrupt governments or spent on projects that fail. It is undeniable that over the years much foreign aid has not been used as effectively as it could have been. But when aid is given well it can make a huge difference to the lives of women and men living in poverty.
The recent international conference in Accra looking at the reform of aid is part of a process that began three years ago in Paris, where donors committed to making aid more effective and giving developing countries more control. What is emerging is a battle over the future direction of aid and, significantly, development.
For too long the onus for the effectiveness of aid has rested on the shoulders of those at the receiving end, rather than looking at the role aidgivers play. But how donor governments give aid matters.
Over the years aid has been used as both a political pawn on the Cold War chessboard and to peddle particular economic models. Through what is commonly known as the "Washington Consensus", donors and the World Bank and International Monetary Fund have prescribed cuts in public spending, while at the same time encouraging governments to liberalise trade and reduce the role of the state in economic affairs, primarily through privatisation of state-owned enterprises.
The results? The imposed "privatisation" of agriculture marketing boards and food reserves by the World Bank, pushed through during international trade negotiations, has left many developing countries struggling to address the current global food and agriculture challenges.
Meanwhile, the enforced privatisation of basic services has left health, education and water across the developing world in disarray: what is available is often dauntingly expensive for the poor, and is kept afloat by an overworked, underpaid skeleton staff.
There is increasing evidence thatthese solutions rarely work in the interests of the poor and over the past five years there has been a growing international consensus that economic policy conditionality does not work. "Policy conditionality … is both an infringement of sovereignty and ineffective," noted the Africa Commission in 2005.
So can aid really work?
When aid is given well, it can make a significant difference. Aid given through the Global Fund to Fight HIV/Aids, TB and Malaria has paid for HIV and Aids treatment for 1,75-million people and cured 3,9-million TB patients, while aid for education has helped get more than 40-million children into schools in recent years.
Aid can be provided in a way that helps strengthen developing country governments and helps their citizens to fight poverty and inequality, promote gender equality and realise their human rights. But this will involve a radical shift in the way that much aid is delivered now.
Currently aid is inefficient, uncoordinated, bypasses government systems or simply doesn't reach the people it is meant to. Much aid is unpredictable, often arriving late or not at all. Less than half of the aid donors promised poor countries is recorded as having been received by recipient countries. Zambia, for instance, received nearly a third less aid than donors said they would deliver last year.
Meanwhile "technical assistance" accounts for one-fifth of all aid: a huge proportion of this is spent on high-priced consultants, chosen by donors and generally from donor countries. In Mozambique, for example, donors spend $350-million a year on 3 500 technical consultants -- almost five times the total annual salaries of 100 000 Mozambican public-sector workers.
Only a fifth of aid is delivered directly to developing country governments to support their own plans. This creates huge administration costs, making it harder to plan, and failing to reinforce developing country states and their ability to deliver much-needed public services. This also means governments spend large amounts of time hosting different donor missions to look at programmes and projects and not enough of their scarce resources on delivering and planning their development policies. Vietnam alone had 752 donor "missions" last year -- more than three missions per working day.
Donors need to move towards providing more of their aid on a long-term basis and should stop the current practice of attaching economic policy conditions to their aid.
The Paris Declaration on Aid Effectiveness, signed by donors and aid recipients in 2005, set 12 targets to be reached by 2010 and was a step in the right direction. It has at its heart the need to provide more aid on a long-term basis through recipient government systems, in line with these governments' development priorities. But it does not go far enough. And three years on an Organisation for Economic Cooperation and Development survey on progress in reforming aid, to be released this week, shows that most rich countries are not even on track to meet many of the agreed targets.
Many donors do want changes that will hand a lot more power, a lot more quickly, to effective developing country governments. European donors have made greater progress towards realising the principles of the Paris Declaration than non-European donors. Some, such as many Nordic donor governments, have come a long way in giving untied aid in support of developing countries. But others are resisting -- with the United States and Japanese particularly resistant to these reforms.
The outcomes of the international aid effectiveness meeting this week in Accra could have profound effects on the capacity of African governments to shape their own development agenda and to have national sovereignty over policy decisions.
Of course aid alone is not enough for development, but it is needed -- and until you solve the political question of who should shape development, you cannot solve the problems of poverty and inequality. Donor governments should promise to make long-term commitments to support poor country governments and democratic, locally owned development plans. It is crucial that, they rise to this challenge, in Accra, and set an ambitious agenda for action.
Snags and broken promises
Tied aid
In some countries, one day of a consultant's time costs as much as employing a teacher for a year or keeping 50 children in school. The Organisation for Economic Cooperation and Development estimates that an extra $750-million a year could be released if rich countries gave food aid as cash rather than in kind.
Uncoordinated aid
More than 40 donors deliver aid in Uganda. Government figures show that it had to deal with 684 different aid instruments and associated agreements between 2004 and 2007, just for aid coming into the central budget.
Conditional aid
Both the World Bank and the International Monetary Fund have made their budget aid to Mali conditional on liberalisation and privatisation of the cotton sector: cotton sector privatisation is still a condition of their lending today. Liberalisation of the cotton sector, which happened in 2005, has exposed Malian cotton farmers to the heavily distorted world cotton market price. Prices have been in severe decline as a result of huge rich country subsidies to their farmers. As a result, three million Malian farmers saw a 20% drop in the price they received for their cotton in 2005. According to an unpublished study by the World Bank, seen by Oxfam, this is likely to increase poverty by 4,6% across the country.
Undelivered aid
Donors have delivered only $15-billion of the $25-billion promised to Afghanistan in 2001. According to the Afghan government, the United States has delivered half of its commitment and the World Bank just over half, while the European Union and Germany have distributed less than two-thirds of their pledges.
Good aid
In 1990 Mozambique was the poorest country in the world. Since then the economy has grown and progress in development has been achieved. Aid has been vital in fighting poverty and making gains in health and education. In Mozambique 19 donors are committed to supporting the government's poverty reduction strategy, through budget support. With the help of donors, the Partnership General Budget Support had grown from $30-million (3% of official aid) in 2000 to $240-million (19% of official aid) by 2004.
What has been the impact? Child (under five) mortality has reduced by 18% between 1997 and 2003. Mozambique's target is to accelerate this reduction further, reducing rates from 178 deaths per 1 000 live births to 130.
This would put Mozambique on track to meet the 2015 Millennium Development Goal target for reducing child mortality, and mean that more than 30 000 fewer children under five would die each year.
Source: Oxfam
The Paris declaration
In 2005 donors, recipient countries and multilateral agencies signed the Paris Declaration on Aid Effectiveness. It set 12 targets, with measurable indicators, to improve the effectiveness of aid, to be met by 2010.
The targets fall into five areas:
country ownership of policies;
better donor alignment with recipient government priorities and processes;
improved harmonisation between donors;
managing aid for better results;
mutual accountability between donors and recipients.
Aid to Africa often gets bad press. Many think it is wasted by corrupt governments or spent on projects that fail. It is undeniable that over the years much foreign aid has not been used as effectively as it could have been. But when aid is given well it can make a huge difference to the lives of women and men living in poverty.
The recent international conference in Accra looking at the reform of aid is part of a process that began three years ago in Paris, where donors committed to making aid more effective and giving developing countries more control. What is emerging is a battle over the future direction of aid and, significantly, development.
For too long the onus for the effectiveness of aid has rested on the shoulders of those at the receiving end, rather than looking at the role aidgivers play. But how donor governments give aid matters.
Over the years aid has been used as both a political pawn on the Cold War chessboard and to peddle particular economic models. Through what is commonly known as the "Washington Consensus", donors and the World Bank and International Monetary Fund have prescribed cuts in public spending, while at the same time encouraging governments to liberalise trade and reduce the role of the state in economic affairs, primarily through privatisation of state-owned enterprises.
The results? The imposed "privatisation" of agriculture marketing boards and food reserves by the World Bank, pushed through during international trade negotiations, has left many developing countries struggling to address the current global food and agriculture challenges.
Meanwhile, the enforced privatisation of basic services has left health, education and water across the developing world in disarray: what is available is often dauntingly expensive for the poor, and is kept afloat by an overworked, underpaid skeleton staff.
There is increasing evidence thatthese solutions rarely work in the interests of the poor and over the past five years there has been a growing international consensus that economic policy conditionality does not work. "Policy conditionality … is both an infringement of sovereignty and ineffective," noted the Africa Commission in 2005.
So can aid really work?
When aid is given well, it can make a significant difference. Aid given through the Global Fund to Fight HIV/Aids, TB and Malaria has paid for HIV and Aids treatment for 1,75-million people and cured 3,9-million TB patients, while aid for education has helped get more than 40-million children into schools in recent years.
Aid can be provided in a way that helps strengthen developing country governments and helps their citizens to fight poverty and inequality, promote gender equality and realise their human rights. But this will involve a radical shift in the way that much aid is delivered now.
Currently aid is inefficient, uncoordinated, bypasses government systems or simply doesn't reach the people it is meant to. Much aid is unpredictable, often arriving late or not at all. Less than half of the aid donors promised poor countries is recorded as having been received by recipient countries. Zambia, for instance, received nearly a third less aid than donors said they would deliver last year.
Meanwhile "technical assistance" accounts for one-fifth of all aid: a huge proportion of this is spent on high-priced consultants, chosen by donors and generally from donor countries. In Mozambique, for example, donors spend $350-million a year on 3 500 technical consultants -- almost five times the total annual salaries of 100 000 Mozambican public-sector workers.
Only a fifth of aid is delivered directly to developing country governments to support their own plans. This creates huge administration costs, making it harder to plan, and failing to reinforce developing country states and their ability to deliver much-needed public services. This also means governments spend large amounts of time hosting different donor missions to look at programmes and projects and not enough of their scarce resources on delivering and planning their development policies. Vietnam alone had 752 donor "missions" last year -- more than three missions per working day.
Donors need to move towards providing more of their aid on a long-term basis and should stop the current practice of attaching economic policy conditions to their aid.
The Paris Declaration on Aid Effectiveness, signed by donors and aid recipients in 2005, set 12 targets to be reached by 2010 and was a step in the right direction. It has at its heart the need to provide more aid on a long-term basis through recipient government systems, in line with these governments' development priorities. But it does not go far enough. And three years on an Organisation for Economic Cooperation and Development survey on progress in reforming aid, to be released this week, shows that most rich countries are not even on track to meet many of the agreed targets.
Many donors do want changes that will hand a lot more power, a lot more quickly, to effective developing country governments. European donors have made greater progress towards realising the principles of the Paris Declaration than non-European donors. Some, such as many Nordic donor governments, have come a long way in giving untied aid in support of developing countries. But others are resisting -- with the United States and Japanese particularly resistant to these reforms.
The outcomes of the international aid effectiveness meeting this week in Accra could have profound effects on the capacity of African governments to shape their own development agenda and to have national sovereignty over policy decisions.
Of course aid alone is not enough for development, but it is needed -- and until you solve the political question of who should shape development, you cannot solve the problems of poverty and inequality. Donor governments should promise to make long-term commitments to support poor country governments and democratic, locally owned development plans. It is crucial that, they rise to this challenge, in Accra, and set an ambitious agenda for action.
Snags and broken promises
Tied aid
In some countries, one day of a consultant's time costs as much as employing a teacher for a year or keeping 50 children in school. The Organisation for Economic Cooperation and Development estimates that an extra $750-million a year could be released if rich countries gave food aid as cash rather than in kind.
Uncoordinated aid
More than 40 donors deliver aid in Uganda. Government figures show that it had to deal with 684 different aid instruments and associated agreements between 2004 and 2007, just for aid coming into the central budget.
Conditional aid
Both the World Bank and the International Monetary Fund have made their budget aid to Mali conditional on liberalisation and privatisation of the cotton sector: cotton sector privatisation is still a condition of their lending today. Liberalisation of the cotton sector, which happened in 2005, has exposed Malian cotton farmers to the heavily distorted world cotton market price. Prices have been in severe decline as a result of huge rich country subsidies to their farmers. As a result, three million Malian farmers saw a 20% drop in the price they received for their cotton in 2005. According to an unpublished study by the World Bank, seen by Oxfam, this is likely to increase poverty by 4,6% across the country.
Undelivered aid
Donors have delivered only $15-billion of the $25-billion promised to Afghanistan in 2001. According to the Afghan government, the United States has delivered half of its commitment and the World Bank just over half, while the European Union and Germany have distributed less than two-thirds of their pledges.
Good aid
In 1990 Mozambique was the poorest country in the world. Since then the economy has grown and progress in development has been achieved. Aid has been vital in fighting poverty and making gains in health and education. In Mozambique 19 donors are committed to supporting the government's poverty reduction strategy, through budget support. With the help of donors, the Partnership General Budget Support had grown from $30-million (3% of official aid) in 2000 to $240-million (19% of official aid) by 2004.
What has been the impact? Child (under five) mortality has reduced by 18% between 1997 and 2003. Mozambique's target is to accelerate this reduction further, reducing rates from 178 deaths per 1 000 live births to 130.
This would put Mozambique on track to meet the 2015 Millennium Development Goal target for reducing child mortality, and mean that more than 30 000 fewer children under five would die each year.
Source: Oxfam
The Paris declaration
In 2005 donors, recipient countries and multilateral agencies signed the Paris Declaration on Aid Effectiveness. It set 12 targets, with measurable indicators, to improve the effectiveness of aid, to be met by 2010.
The targets fall into five areas:
country ownership of policies;
better donor alignment with recipient government priorities and processes;
improved harmonisation between donors;
managing aid for better results;
mutual accountability between donors and recipients.
Africa-China trade to top $100 billion in 2008
Bilateral trade between China and Africa will exceed $100 billion in 2008, two years earlier than expected thanks to burgeoning shipments of natural resources to China, the Xinhua news agency said on September 8.
China’s imports from Africa rose 92 percent to $30 billion in the first half of the year, while exports to the continent rose 40 percent to $23 billion, the agency said, citing the customs administration.
Rapid growth in trade was largely due to an economic upturn in Africa and mounting Chinese demand for resources, the General Administration of Customs said. Africa is increasingly a source of crude oil, copper and cobalt for China, as well as other minerals, while Chinese manufactured goods are increasingly popular with African consumers.
The number of African countries recording more than $500 million in trade with China in the first half rose by five, to nineteen.
Despite its increasing importance to Africa, Sino-African trade is only a drop in the bucket for China. It accounted for 4.3 percent of China’s first-half foreign trade, Xinhua said.
China’s imports from Africa rose 92 percent to $30 billion in the first half of the year, while exports to the continent rose 40 percent to $23 billion, the agency said, citing the customs administration.
Rapid growth in trade was largely due to an economic upturn in Africa and mounting Chinese demand for resources, the General Administration of Customs said. Africa is increasingly a source of crude oil, copper and cobalt for China, as well as other minerals, while Chinese manufactured goods are increasingly popular with African consumers.
The number of African countries recording more than $500 million in trade with China in the first half rose by five, to nineteen.
Despite its increasing importance to Africa, Sino-African trade is only a drop in the bucket for China. It accounted for 4.3 percent of China’s first-half foreign trade, Xinhua said.
Uganda attracts $368m in investment in 2007
by Fortunate Ahimbisibwe
A total of $368m was invested in Uganda in 2007, according to the World Investment Report released in Geneva recently.
The deputy director of the Uganda Investment Authority, Tom Buringuriza, said the investment excludes the last quarter of the year.
The report was compiled by the UN Conference on Trade and Development. It indicated that Uganda had been recording an upward trend over the last 18 years. Buringuriza explained that in 2006, the FDI inflows were $308, excluding the last quarter of the year.
"When the last quarter was included, the inflows hit $400m. The exploration of petroleum products is also expected to increase the inflows significantly," he stated. He explained that 10 sites across the country had been demarcated for oil exploration, which would attract more foreign direct investments.
Most of the inflows were recorded from petroleum extraction, telecommunication, manufacturing industries and information communication technology.
Early this month, the Uganda Investment Authority released a report which showed that FDI inflows had risen from $258m in 2005 to $307m in 2006. The report also showed that Uganda held the 10th position among the least developed countries in attracting investment. In Africa, Uganda was ranked number 22.
The leading recipients of FDI, the report said, are Sudan, Equatoria Guinea, Madagascar, Zambia, DR Congo, Chad, Burkina Faso, Tanzania, Mozambique and Uganda.
Buringuriza said most of the investments came from the US and Europe. Others came from South Africa, Egypt and Morocco.
New Vision
A total of $368m was invested in Uganda in 2007, according to the World Investment Report released in Geneva recently.
The deputy director of the Uganda Investment Authority, Tom Buringuriza, said the investment excludes the last quarter of the year.
The report was compiled by the UN Conference on Trade and Development. It indicated that Uganda had been recording an upward trend over the last 18 years. Buringuriza explained that in 2006, the FDI inflows were $308, excluding the last quarter of the year.
"When the last quarter was included, the inflows hit $400m. The exploration of petroleum products is also expected to increase the inflows significantly," he stated. He explained that 10 sites across the country had been demarcated for oil exploration, which would attract more foreign direct investments.
Most of the inflows were recorded from petroleum extraction, telecommunication, manufacturing industries and information communication technology.
Early this month, the Uganda Investment Authority released a report which showed that FDI inflows had risen from $258m in 2005 to $307m in 2006. The report also showed that Uganda held the 10th position among the least developed countries in attracting investment. In Africa, Uganda was ranked number 22.
The leading recipients of FDI, the report said, are Sudan, Equatoria Guinea, Madagascar, Zambia, DR Congo, Chad, Burkina Faso, Tanzania, Mozambique and Uganda.
Buringuriza said most of the investments came from the US and Europe. Others came from South Africa, Egypt and Morocco.
New Vision
Tanzania's Foreign Direct Investment inflow up by 15 per cent.
Tanzanian`s Foreign Direct Investment (FDI) has increased by nearly 15 percent from last year`s performance, mainly due to investments in natural resources exploration projects already in operation.
FDI increased from US$ 522 million attracted in 2006 to US$ 600 million attained last year, according to the 2008 World Investment Report.
Launching the report, the Executive Director of the Tanzania Investment Centre (TIC), Emmanuel Naiko, said last year`s performance was a record.
Tanzania has ranked number 12 among the major FDI receiver African countries after Nigeria, Egypt, Morocco, Sudan, Equatorial Guinea, Algeria, and Tunisia. Other countries ahead of Tanzania are Madagascar, Zambia, Ghana, the Democratic Republic of Congo and Kenya.
However, Naiko said, "There is no reason why on earth countries like Zambia and Madagascar should surpass Tanzania, particularly when one looks at the natural resources endowments the country enjoys. He said Tanzania's problem had been engagement in too many debates, which inhibited some the making of quick and timely decisions.
Naiko gave the example of the newly settled countries such as Mozambique, which he said although it was devastated by war, had managed to successfully develop its coal mines, leaving Tanzanians to debate on who should develop Mchuchuma coal or Liganga iron ore deposits.
Some of the natural resources that Tanzania has in abundance include nickel, cobalt, iron ore, gold/silver, and industrial mineral like soda ash, and petrochemical minerals like coal.
He said although Tanzania had been ranked number 65 out of 178 economies accessed in the report, deliberate measures were needed to address issues that had affected the country`s quick improvements in attracting FDI.
The factors that Tanzania should address for increased foreign investment inflow include laxity and slow implementation of investment policy reform. The policy reforms was echoed during 2002 government-private sector dialogue which resulted into development of an action plan for identifying and removing investment impediments by different government departments as well as other stakeholders.
As a result of government and other stakeholders' laxity to address the identified obstacles, both 2007 and 2008 business reports ranked Tanzania negatively in the areas of doing business, starting business, employing workers, and paying taxes. "In my opinion, there is too much debate when it comes to removing investment impediments as we talk without taking actions," he said.
Naiko said in order to increase their shares in the global FDI, countries such as Rwanda and Mauritius had started taking drastic reforms which have resulted in great increment of their FDI attraction.
Rwanda, a country which in 1983 witnessed genocide which wiped out about 800,000 people, managed to attract investment worth USD 16 million in 2007. However, as a result of aggressive reforms and timely decision making undertaken by the country, last year`s figures shot up to USD 67 million.
Asked why despite intensive dialogues and agreements between the government and private sector on methods and timeframe for removing barriers to foreign investments, Tanzania was still viewed as an expensive country to do business, Naiko said that quick and timely decision making was still a major problem.
The World Investment Report is prepared by the United Nations Conference on Trade and Development (UNCTAD) to access the world pattern of investment flow as well as recipients in different sectors and the role they play in countries' development.
This year`s report focused on investment in infrastructure and among the East African states, Uganda had its share of investment inflow reduced from US$ 400 million attained in 2006 to US$ 368 million last year.
According to UNCTAD Secretary General Dr Supachai Panitchpakdi, world wide stock of FDI had increased by 30 percent from US$ 1.8 trillion recorded in 2006 to US$ 15 trillion last year.
Developing countries enjoy a 21 percent increase in FDI inflow to US 50 billion, reflecting booming commodity prices and an improving policy investment environment.
September 07, 2008
1. Australian traders, investors flock to Africa in search of deals
2. African Leather Fair to be held in Addis Ababa, January 2009
3. Chinese construction company clashes with workers in Botswana
4. UK firms losing business in Kenya to China, India
5. Rwandan textile factory starts producing silk fabrics
6. High input costs, low competitiveness take a toll on Nigerian manufacturing sector
7. Pepsi owners to invest $30 million in Zambia
8. Virgin Nigeria's row with government may tarnish country's investment image
9. Cumbersome customs procedures in East Africa leads to un-recorded trade
10. The case for investing in sub-Saharan Africa
11. Many obstacles as US firms look forward to renewed business with Libya
12. Ghana, EU join to fight illegal timber exports
13. China to build free trade zone in Uganda
14. Sub-Saharan Africa represents dazzling opportunities for investors
2. African Leather Fair to be held in Addis Ababa, January 2009
3. Chinese construction company clashes with workers in Botswana
4. UK firms losing business in Kenya to China, India
5. Rwandan textile factory starts producing silk fabrics
6. High input costs, low competitiveness take a toll on Nigerian manufacturing sector
7. Pepsi owners to invest $30 million in Zambia
8. Virgin Nigeria's row with government may tarnish country's investment image
9. Cumbersome customs procedures in East Africa leads to un-recorded trade
10. The case for investing in sub-Saharan Africa
11. Many obstacles as US firms look forward to renewed business with Libya
12. Ghana, EU join to fight illegal timber exports
13. China to build free trade zone in Uganda
14. Sub-Saharan Africa represents dazzling opportunities for investors
Australian traders, investors flock to Africa in search of deals
Department of Foreign Affairs and Trade high commissioner to South Africa Philip Green said actual and prospective investment by Australian mining companies in Africa's sub-Saharan resources sector had climbed to $US20 billion ($A23.9 billion) from almost nothing almost 10 years ago. This was up from "very little at the turn of the decade", he said, citing research by foreign policy think-tank The Lowy Institute.
"That investment flow (now) is massive," Mr Green said at the Paydirt Africa Down Under Conference in Perth recently. "Australia's trade and investment relationship with Africa is growing fast ... and has outpaced its growth with just about every other region in the world," he said. "Since 2003, our trade with Africa has grown by an average of more than 10 per cent each year. Only with Asia has our trade grown faster - that has grown by nearly 12 per cent (each year)."
Australian and Canadian mining companies had increased their footprint in Africa in recent years. They had been drawn by its rich resources such as uranium in Namibia and copper in the Democratic Republic of Congo. "Mining investment is bringing new vigour to the commercial relationship between the two continents, opening up new strands in bilateral relationships and delivering benefits to the Australian economy," Mr Green said.
He said Australia's exports to Africa had grown by 53 per cent since 2003. "It's hard to track how much of that is attributable to mining, but I am confident that a substantial share of that 50 plus per cent increase in exports is a result of the increasing investment by Australians in the African mining sector. "Trade typically follows investment," he said. "Australian investors tend to contract the services of Australian providers, purchase Australian-made or sourced equipment and hire Australian labour. That's clearly happening in the resource sector in Africa."
Mr Green said Australia had a deservedly high reputation in African mining circles and consistently scored well in international surveys of business integrity. "The respected NGO (non government organisation) Transparency International rates Australia the 11th least corrupt - out of some 180 nations - in its corruption perception index. "But we are not complacent ... and are keen to maintain and enhance our reputation. We are also committed to promoting better governance and transparency in resource-rich developing countries. The way that continent (Africa) manages its resource endowment in this phase in its history will be one of the key determinants of its success in generating economic growth and rolling back poverty."
Mr Green said the government had increased its engagement with Africa, including offering more aid, which would have a positive effect on Australian companies doing business there.
African Leather Fair to be held in Addis Ababa, January 2009
The Ethiopian Leather, Shoes and Leather Products Manufacturing Association was reportedly preparing to hold the second all African Leather Fair January 20-22, 2009 in Addis Ababa City.Association secretary general, Abdissa Adugna said that the event is to take place at Addis Ababa millennium hall.
Some 3,000 people are expected to visit the trade fair in which some 250 local and international participants from 30 different countries take part.
The Fair will bring together tanners, footwear and other leather goods manufacturers, equipment and technology suppliers, chemical and inputs suppliers, manpower training institutions, trade promotion organizations from all over the world.
The first all African leather trade fair '2008) was a success, with 63 overseas companies and 107 local companies participating. It was visited by 1525 international and 2400 local visitors.
In a related story, a source disclosed that Ethiopian Leather, Textile & Garment Exhibition & Symposium (ELTGES) is scheduled to be held in Addis Ababa Ethiopia from 12th November 2008 to 16th November 2008.
Designed to promote the sector, it will be organized in collaboration with the Ethiopian government. Producers and fashion companies such as Nike and Adidas have already confirmed their attendance.
"We have assembled a team of experts in the Textile and Garment field to help Ethiopian Manufacturers to move to the goal of excellence in Productivity, Design, Quality and Customer Service," the source quoted organizers.
"We also act for International Companies wanting to find a new source of manufacturing that can compete with the other more established sources in Asia."
The Africa Monitor
UK firms losing business in Kenya to China, India
by Charles Wachira
When Kenya purchased Toyota vehicles for its military forces, instead of the all-pervasive Land Rover, it signalled a seismic change — in effect ending the most favoured status enjoyed by imports sourced from its erstwhile colonial master the UK.
Another example is De la Rue, a UK-based printing and security firm that has uninterruptedly printed Kenyan currency since independence. It is fighting to retain its contract. The administration of Mwai Kibaki broke with tradition, inviting other internationally recognised firms to bid for the job.
The London-based firm J&S Franklin Ltd served as a single-source supplier of uniforms and combat kits for the armed forces since Kenya “unshackled” itself from British colonial rule in 1963. Kenya’s Department of Defence terminated its contract to the benefit of a Chinese firm.
Similarly, Brooke Marine and Vosper Thornycroft, two British companies that have exclusively supplied ships to Kenya’s navy since independence, have had to contend with the phenomenon of open tendering.
This change of fortune for British firms is captured in the official annual economic survey cobbled together by the country’s Ministry of Finance. In 2007, imports from the UK were worth Ksh29,414 million ($4.9 million) — compared to China’s Ksh45,668 million ($7.6 million) or India’s Ksh56,815 million ($9.5 million). Compare this with 2001 during the peremptory reign of Daniel arap Moi. UK imports then totalled Ksh21,989 million ($3.7 million) while China was at a much lower Ksh6,792 million ($1.1 million) and Indian imports amounted to a relatively puny Ksh12,830 million ($2.1 million).
Since the replacement of Moi’s government in 2003, it has taken China and India only three years for their imports to Kenya to overtake those from the UK, formerly a premier source of imports. “It is as a result of prudent decision-making that the Kenyan government opened up the country to the Far East, including Asian countries. As a result, Kenya has been able to access countries that provide better deals,” says Dr Gerrishon Ikiara, a former permanent secretary in the Kibaki administration and currently a senior lecturer at the Institute of Development Studies at the University of Nairobi.
“In the past, procurement of government goods was shrouded in mystery. Then political considerations mattered more than economic sense,” he said. According to the economist, Asian countries offer competitively priced goods and services compared with the UK.“Right now most of Kenya’s roads are either being refurbished or built anew by Chinese firms. And all our international airports are also being upgraded by Chinese owned firms. This is after going through the process of open tendering,” Dr Ikiara said.
Kwame Otieno, a senior researcher with the local think-tank, the Institute of Economic Affairs (IEA), blames “the rigidity of the British system” for the dip in British imports. The IEA promotes debate on policy issues. “If a Kenyan, for example, wants to visit the UK, they face a lot of stringent requirements that act as a hindrance. But if they wish to travel to the Far East, China or India, the process is enabling and travel-friendly.”
Sources said the change in bilateral trade relations between the UK and Kenya is as a result of poor relations between the political leaders of the two countries in the recent past. It is argued that Moi had very cordial relationships with occupants of 10 Downing Street in London. Successive British governments deliberately turned a blind eye to the excesses of his government. As a result, firms with British ties continued to receive lucrative contracts at the expense of other countries.
The Kibaki regime has been upbraided harshly, particularly by local British envoys, for failing to tame corruption in high places. Confirming the bad blood between the two countries, Sir Edward Clay, British envoy from 2001 to 2005, was in early 2008 officially declared persona non grata by the Kenyan government.
When Kenya purchased Toyota vehicles for its military forces, instead of the all-pervasive Land Rover, it signalled a seismic change — in effect ending the most favoured status enjoyed by imports sourced from its erstwhile colonial master the UK.
Another example is De la Rue, a UK-based printing and security firm that has uninterruptedly printed Kenyan currency since independence. It is fighting to retain its contract. The administration of Mwai Kibaki broke with tradition, inviting other internationally recognised firms to bid for the job.
The London-based firm J&S Franklin Ltd served as a single-source supplier of uniforms and combat kits for the armed forces since Kenya “unshackled” itself from British colonial rule in 1963. Kenya’s Department of Defence terminated its contract to the benefit of a Chinese firm.
Similarly, Brooke Marine and Vosper Thornycroft, two British companies that have exclusively supplied ships to Kenya’s navy since independence, have had to contend with the phenomenon of open tendering.
This change of fortune for British firms is captured in the official annual economic survey cobbled together by the country’s Ministry of Finance. In 2007, imports from the UK were worth Ksh29,414 million ($4.9 million) — compared to China’s Ksh45,668 million ($7.6 million) or India’s Ksh56,815 million ($9.5 million). Compare this with 2001 during the peremptory reign of Daniel arap Moi. UK imports then totalled Ksh21,989 million ($3.7 million) while China was at a much lower Ksh6,792 million ($1.1 million) and Indian imports amounted to a relatively puny Ksh12,830 million ($2.1 million).
Since the replacement of Moi’s government in 2003, it has taken China and India only three years for their imports to Kenya to overtake those from the UK, formerly a premier source of imports. “It is as a result of prudent decision-making that the Kenyan government opened up the country to the Far East, including Asian countries. As a result, Kenya has been able to access countries that provide better deals,” says Dr Gerrishon Ikiara, a former permanent secretary in the Kibaki administration and currently a senior lecturer at the Institute of Development Studies at the University of Nairobi.
“In the past, procurement of government goods was shrouded in mystery. Then political considerations mattered more than economic sense,” he said. According to the economist, Asian countries offer competitively priced goods and services compared with the UK.“Right now most of Kenya’s roads are either being refurbished or built anew by Chinese firms. And all our international airports are also being upgraded by Chinese owned firms. This is after going through the process of open tendering,” Dr Ikiara said.
Kwame Otieno, a senior researcher with the local think-tank, the Institute of Economic Affairs (IEA), blames “the rigidity of the British system” for the dip in British imports. The IEA promotes debate on policy issues. “If a Kenyan, for example, wants to visit the UK, they face a lot of stringent requirements that act as a hindrance. But if they wish to travel to the Far East, China or India, the process is enabling and travel-friendly.”
Sources said the change in bilateral trade relations between the UK and Kenya is as a result of poor relations between the political leaders of the two countries in the recent past. It is argued that Moi had very cordial relationships with occupants of 10 Downing Street in London. Successive British governments deliberately turned a blind eye to the excesses of his government. As a result, firms with British ties continued to receive lucrative contracts at the expense of other countries.
The Kibaki regime has been upbraided harshly, particularly by local British envoys, for failing to tame corruption in high places. Confirming the bad blood between the two countries, Sir Edward Clay, British envoy from 2001 to 2005, was in early 2008 officially declared persona non grata by the Kenyan government.
Rwandan textile factory starts producing silk fabrics
by Eddie Mukaaya and Gertrude Majyambere
With an investment of $5 million, Usine Textile du Rwanda (Utexrwa), the only textile company in the country, will begin producing its first commercial silk fabrics by mid 2009.
Already, machines have been imported, manpower trained and samples of silk fabrics made. Once all constraints are addressed and full capacity begins, Utexrwa management targets an export sales turnover of about $15-20 million per annum in the next four to five years. With this capacity, industrial players say Rwanda will become a leading silk products producer in the region.
The silk manufacturing follows the company’s importation of semi-automatic yarning machines at the end of last year, having begun mulberry cultivation on 25 hectares earlier at the Nyandungu site.
Utexrwa Managing Director Raj Rajendran is optimistic that in the next four to five years the mill will be the sole supplier of processed silk in the Great Lakes region. The company is currently converting its capacity from a cotton textile mill to silk production. He is however concerned that the cocoons produced by farmers are still below capacity and the skilled labour in the country is not enough.
Currently there are 1,000 cocoons and yet 60,000 are needed. So far 85 people have been trained and 50 more will be trained before they commence full silk production. To bridge the gap, Rajendran explained that people need to be trained about mulberry cultivation and silk worm rearing as well as seek for more funding before the company can begin fully producing silk fibre.
Utexrwa has now embarked on producing silkworm eggs to provide ample supply to all its associates in the industry around the world. Imports of silkworm eggs from South Korea and India have proved to be unaffordable, as it cost $2 each. The company also invented a hatching machine which has therefore made local production of eggs become imperative to boost expansion plans.
A sericulture consultant at Utexrwa, M. I. Gulshath, explained that the fabric is produced when silk moths lay eggs on specially prepared paper. The eggs then hatch and the caterpillars (silkworms) are fed on fresh mulberry leaves. Approximately 35 days later and four moltings (or sheddings) the caterpillars are 10,000 times heavier than when hatched, and are ready to begin spinning a cocoon.
A straw frame is then placed over the tray of caterpillars, and each caterpillar begins spinning a cocoon by moving its head in a ‘figure 8’ pattern, Gulshath said. He said that two glands produce liquid silk and force it through openings in the head. Liquid silk is coated in sericin, a water-soluble protective gum, and solidifies on contact with the air. Within two to three days, the caterpillar spins about one mile of filament and is completely encased in a cocoon. Gulshath said most caterpillars are then killed by heat and some are allowed to morph into moths to breed the next generation of caterpillars.
In a long term plan, government also aims to have 600,000 hectares of mulberry trees planted in the next three years to benefit 60,000 poor families. Rwanda Investment Group has planted 20 hectares of mulberry in Rusizi, Western Province. The government also pledged about Frw154 million particularly for training about 60 people to handle production, training in various sericulture activities including mulberry farming activities, silkworm rearing and weaving to ensure that they produce quality silk products.
Utexrwa with the joint support of Rural Sector Support (RSSP) has established Gasabo Sericulture Cooperative to handle production and marketing of silk. Under the cooperatives farmers would be supplied with mulberry cuttings for free since the project would recover egg costs. Ecole Technique Officielle, (ETO) a local technical institute is also providing technical knowledge and skills to cooperative about silk production.
The managing director said that it is expected that 6,000 jobs in farm and rural sectors and about 500 additional jobs within the industry will be created. The factory now employs about 740 (both skilled and unskilled) people. The mulberry seed cuttings that were imported from Uganda usually take 10-12 months before harvest.
According to Rajendran, the factory also plans to produce Insecticide Treated Nets (ITNs). The company is targeting production of two million ITNs per year.
New Times
With an investment of $5 million, Usine Textile du Rwanda (Utexrwa), the only textile company in the country, will begin producing its first commercial silk fabrics by mid 2009.
Already, machines have been imported, manpower trained and samples of silk fabrics made. Once all constraints are addressed and full capacity begins, Utexrwa management targets an export sales turnover of about $15-20 million per annum in the next four to five years. With this capacity, industrial players say Rwanda will become a leading silk products producer in the region.
The silk manufacturing follows the company’s importation of semi-automatic yarning machines at the end of last year, having begun mulberry cultivation on 25 hectares earlier at the Nyandungu site.
Utexrwa Managing Director Raj Rajendran is optimistic that in the next four to five years the mill will be the sole supplier of processed silk in the Great Lakes region. The company is currently converting its capacity from a cotton textile mill to silk production. He is however concerned that the cocoons produced by farmers are still below capacity and the skilled labour in the country is not enough.
Currently there are 1,000 cocoons and yet 60,000 are needed. So far 85 people have been trained and 50 more will be trained before they commence full silk production. To bridge the gap, Rajendran explained that people need to be trained about mulberry cultivation and silk worm rearing as well as seek for more funding before the company can begin fully producing silk fibre.
Utexrwa has now embarked on producing silkworm eggs to provide ample supply to all its associates in the industry around the world. Imports of silkworm eggs from South Korea and India have proved to be unaffordable, as it cost $2 each. The company also invented a hatching machine which has therefore made local production of eggs become imperative to boost expansion plans.
A sericulture consultant at Utexrwa, M. I. Gulshath, explained that the fabric is produced when silk moths lay eggs on specially prepared paper. The eggs then hatch and the caterpillars (silkworms) are fed on fresh mulberry leaves. Approximately 35 days later and four moltings (or sheddings) the caterpillars are 10,000 times heavier than when hatched, and are ready to begin spinning a cocoon.
A straw frame is then placed over the tray of caterpillars, and each caterpillar begins spinning a cocoon by moving its head in a ‘figure 8’ pattern, Gulshath said. He said that two glands produce liquid silk and force it through openings in the head. Liquid silk is coated in sericin, a water-soluble protective gum, and solidifies on contact with the air. Within two to three days, the caterpillar spins about one mile of filament and is completely encased in a cocoon. Gulshath said most caterpillars are then killed by heat and some are allowed to morph into moths to breed the next generation of caterpillars.
In a long term plan, government also aims to have 600,000 hectares of mulberry trees planted in the next three years to benefit 60,000 poor families. Rwanda Investment Group has planted 20 hectares of mulberry in Rusizi, Western Province. The government also pledged about Frw154 million particularly for training about 60 people to handle production, training in various sericulture activities including mulberry farming activities, silkworm rearing and weaving to ensure that they produce quality silk products.
Utexrwa with the joint support of Rural Sector Support (RSSP) has established Gasabo Sericulture Cooperative to handle production and marketing of silk. Under the cooperatives farmers would be supplied with mulberry cuttings for free since the project would recover egg costs. Ecole Technique Officielle, (ETO) a local technical institute is also providing technical knowledge and skills to cooperative about silk production.
The managing director said that it is expected that 6,000 jobs in farm and rural sectors and about 500 additional jobs within the industry will be created. The factory now employs about 740 (both skilled and unskilled) people. The mulberry seed cuttings that were imported from Uganda usually take 10-12 months before harvest.
According to Rajendran, the factory also plans to produce Insecticide Treated Nets (ITNs). The company is targeting production of two million ITNs per year.
New Times
High input costs, low competitiveness take a toll on Nigerian manufacturing sector
Crippling power crisis, failed basic infrastructure and rising cost of refined petroleum products are taking toll in Nigeria, as manufacturers’ capacity utilisation has dropped from 42 percent to 38 percent in the past eight months.
Recent reports had shown that manufacturing contributes between six to seven percent to the country’s Gross Domestic Product (GDP) when it should be contributing 23 percent. Global uncompetitiveness, high cost of energy, high cost of doing business, infrastructure deficit among other factors are being blamed, with the contribution to GDP expected to drop further.
Sam Ohuabunwa, chairman of the Nigerian Economic Summit Group and managing director/CEO Neimeth Pharmaceutical, blamed the situation squarely on the country’s failed infrastructure which has profoundly increased the cost of production. According to him, energy costs are driving the cost of production. As costs rise, demand falls, followed by lowered capacity.
"The rising cost of diesel...reduces the ability to compete at the international market, he said.
Ohuabunwa, who is also chairman of the Ikeja branch of the Manufacturers Association of Nigeria (MAN) called on government to work harder to ensure that it deals with the problem of energy, transportation and other infrastructure to enable operators in the sector favourably compete with the international community. Otherwise "we might just end up being a de-industrialised country.
"The textile industry has experienced more closures than other sectors. This is why the Nigerian Textile Manufacturers Association (NTMA) recently raised alarm over the continuous smuggling and faking of made-in-Nigeria textile products, saying it has caused the collapse of more textile companies in the country.
Highlighting the problems faced in the sector in Lagos recently, Paul Olanrewaju, director general of the association, said though there had been a general distress in the country’s manufacturing sector, that of the textile industry is more pronounced because it had always been a major player in the country’s economy. The industry currently faces the problems of infrastructural decay, inconsistent government policies, multiple taxation, and high cost of doing business among others.
According to him, the textile industry suffers an unfair share of Nigerians’ penchant for foreign goods, smuggling and counterfeiting of Nigerian-made fabrics. "In order to beat customs checks at the borders, most smugglers import made-in-China textile materials with the inscription of a Nigerian brand name. Although these problems had been presented to appropriate government agencies but there has been no action. The N70 billion revival fund for textile industry set up two years ago is yet to materialise, Olanrewaju said.
Stakeholders had in the past suggested that government should consolidate its commendable policy of a ban on importation of textile materials by setting up a task force consisting of stakeholders to assist the Nigeria Customs Service in ensuring its effective implementation.
Specifically, stakeholders want government to address urgently and on a sustainable basis the energy problem; and to take immediate steps to halt the unabating rise in diesel prices, as most industries are generator-driven.
Issa Aremu, general secretary, National Union of Textile, Garment and Tailoring Workers of Nigeria (NUTGTWN), said since the assumption of office of President Umaru Yar‘Adua, about 35,000 textile workers have lost their jobs as a result of the closure of about 12 textile mills in the country.
A recent survey showed that local textile has a market share of about 20 percent, with the balance of 80 percent being controlled by assorted imported fabrics. The recent spate of closures in the industry was driven largely by smuggling, high operating costs arising from prohibitive raw materials and energy costs, as was the case in United Nigeria Textile Mill in Kaduna and Atlantic Textile Mill in Lagos, and sheer lack of political commitment to industrialisation by Nigerian politicians.
Business Day Online
Recent reports had shown that manufacturing contributes between six to seven percent to the country’s Gross Domestic Product (GDP) when it should be contributing 23 percent. Global uncompetitiveness, high cost of energy, high cost of doing business, infrastructure deficit among other factors are being blamed, with the contribution to GDP expected to drop further.
Sam Ohuabunwa, chairman of the Nigerian Economic Summit Group and managing director/CEO Neimeth Pharmaceutical, blamed the situation squarely on the country’s failed infrastructure which has profoundly increased the cost of production. According to him, energy costs are driving the cost of production. As costs rise, demand falls, followed by lowered capacity.
"The rising cost of diesel...reduces the ability to compete at the international market, he said.
Ohuabunwa, who is also chairman of the Ikeja branch of the Manufacturers Association of Nigeria (MAN) called on government to work harder to ensure that it deals with the problem of energy, transportation and other infrastructure to enable operators in the sector favourably compete with the international community. Otherwise "we might just end up being a de-industrialised country.
"The textile industry has experienced more closures than other sectors. This is why the Nigerian Textile Manufacturers Association (NTMA) recently raised alarm over the continuous smuggling and faking of made-in-Nigeria textile products, saying it has caused the collapse of more textile companies in the country.
Highlighting the problems faced in the sector in Lagos recently, Paul Olanrewaju, director general of the association, said though there had been a general distress in the country’s manufacturing sector, that of the textile industry is more pronounced because it had always been a major player in the country’s economy. The industry currently faces the problems of infrastructural decay, inconsistent government policies, multiple taxation, and high cost of doing business among others.
According to him, the textile industry suffers an unfair share of Nigerians’ penchant for foreign goods, smuggling and counterfeiting of Nigerian-made fabrics. "In order to beat customs checks at the borders, most smugglers import made-in-China textile materials with the inscription of a Nigerian brand name. Although these problems had been presented to appropriate government agencies but there has been no action. The N70 billion revival fund for textile industry set up two years ago is yet to materialise, Olanrewaju said.
Stakeholders had in the past suggested that government should consolidate its commendable policy of a ban on importation of textile materials by setting up a task force consisting of stakeholders to assist the Nigeria Customs Service in ensuring its effective implementation.
Specifically, stakeholders want government to address urgently and on a sustainable basis the energy problem; and to take immediate steps to halt the unabating rise in diesel prices, as most industries are generator-driven.
Issa Aremu, general secretary, National Union of Textile, Garment and Tailoring Workers of Nigeria (NUTGTWN), said since the assumption of office of President Umaru Yar‘Adua, about 35,000 textile workers have lost their jobs as a result of the closure of about 12 textile mills in the country.
A recent survey showed that local textile has a market share of about 20 percent, with the balance of 80 percent being controlled by assorted imported fabrics. The recent spate of closures in the industry was driven largely by smuggling, high operating costs arising from prohibitive raw materials and energy costs, as was the case in United Nigeria Textile Mill in Kaduna and Atlantic Textile Mill in Lagos, and sheer lack of political commitment to industrialisation by Nigerian politicians.
Business Day Online
Pepsi owners to invest $30 million in Zambia
by Kangwa Mulenga
RJ Corporation, an international company which owns the Pepsi soft drink manufacturing firm, has pledged to invest US$30 million in Zambia.
The firm has pledged to set up two manufacturing plants for soft drinks and fruit juice in Lusaka and another town respectively.
Acting Zambian president Mr Rupiah Banda said having investors such as RJ Corporation, which also owns KFC and Disney, was an indication that Zambia had favourable policies for foreign investors.“We are in a hurry to grow the economy of our country, and when we have such big names coming, then we are sending a right message to other ‘big guys’ that Zambia is a best place for foreign investment. Government is pleased that you have come to Zambia,” he said.
RJ Corporation chairman Ravi Jaipuria said his company decided to come and invest in Zambia because of the good policies government had put in place. He said his company would spend US$15 million on phase one of the project, a manufacturing plant for Pepsi. In phase two the firm would construct another plant for manufacturing of fruit drinks at a cost of another US$15 million.
“We are very committed to this project. Immediately we finish documentation with relevant authorities, we are ready to commence the putting up of these plants. We want by next year for Zambia to have Pepsi,” Mr Jaipuria said. He said his company had similar manufacturing plants in three other African countries, namely, Mauritius, Mozambique and Uganda. Mr Jaipuria said more than 1,200 jobs would be created directly and indirectly.
Minister of Commerce Trade and Industry, Felix Mutati said government was happy that Zambia had started benefiting from the achievements of the India/Africa summit. “We hope RJ Corporation will soon come up with an action plan so that they can quickly set up the plants. Government is in a hurry to increase foreign direct investments for the benefit of the Zambian people,” Mr Mutati said. Apart from owning Pepsi, a soft drink manufacturing company, KFC and Disney, RJ Corporation also owns Pizza Hut.
Zambia Daily Mail
RJ Corporation, an international company which owns the Pepsi soft drink manufacturing firm, has pledged to invest US$30 million in Zambia.
The firm has pledged to set up two manufacturing plants for soft drinks and fruit juice in Lusaka and another town respectively.
Acting Zambian president Mr Rupiah Banda said having investors such as RJ Corporation, which also owns KFC and Disney, was an indication that Zambia had favourable policies for foreign investors.“We are in a hurry to grow the economy of our country, and when we have such big names coming, then we are sending a right message to other ‘big guys’ that Zambia is a best place for foreign investment. Government is pleased that you have come to Zambia,” he said.
RJ Corporation chairman Ravi Jaipuria said his company decided to come and invest in Zambia because of the good policies government had put in place. He said his company would spend US$15 million on phase one of the project, a manufacturing plant for Pepsi. In phase two the firm would construct another plant for manufacturing of fruit drinks at a cost of another US$15 million.
“We are very committed to this project. Immediately we finish documentation with relevant authorities, we are ready to commence the putting up of these plants. We want by next year for Zambia to have Pepsi,” Mr Jaipuria said. He said his company had similar manufacturing plants in three other African countries, namely, Mauritius, Mozambique and Uganda. Mr Jaipuria said more than 1,200 jobs would be created directly and indirectly.
Minister of Commerce Trade and Industry, Felix Mutati said government was happy that Zambia had started benefiting from the achievements of the India/Africa summit. “We hope RJ Corporation will soon come up with an action plan so that they can quickly set up the plants. Government is in a hurry to increase foreign direct investments for the benefit of the Zambian people,” Mr Mutati said. Apart from owning Pepsi, a soft drink manufacturing company, KFC and Disney, RJ Corporation also owns Pizza Hut.
Zambia Daily Mail
Virgin Nigeria's row with government may tarnish country's investment image
by Nick Tattersall
When British billionaire Richard Branson launched Virgin Nigeria three years ago he was lauded by the then government for bringing a credible national airline to a country with an appalling air safety record. Little could he have imagined that three years later, with a new Nigerian president in power, an acrimonious row with the authorities would break out on whether the terms of the agreement he struck were still valid.
Virgin Nigeria, in which Branson’s Virgin Atlantic has a 49 per cent stake, was launched to great fanfare in 2005 under then-President Olusegun Obasanjo, an economic reformer with whom the British tycoon enjoyed close relations. But Umaru Yar’Adua took office in Africa’s top oil producer more than a year ago and his administration has been busy scrutinising contracts struck under his predecessor.
From oil giants Royal Dutch Shell and Exxon Mobil to China’s Civil Engineering Construction Corp (CCECC), the terms of deals with major foreign investors are coming under the spotlight. Relations with Virgin have soured considerably.
"Over the years, public officials hardly bothered about the interest of our people when entering into contracts and agreements on behalf of the government," presidential spokesman Olusegun Adeniyi told a local newspaper recently. "But with Yar’Adua many things are going to change ... under his watch, while we want foreign investment and would respect the sanctity of legally-binding contracts, he will not allow a situation in which our country continues to be short-changed."
Foreign direct investment soared to over $5 billion in 2007 from barely a fifth that in 2000, according to World Bank data. Nigeria has also been central to the portfolios of investors seeking to profit from Africa’s fastest growth in decades.
Virgin’s row is ostensibly over whether Virgin Nigeria can continue to use the international terminal at Lagos airport for internal flights rather than the domestic one, built by businessman and presidential adviser Wale Babalakin. Virgin wants an easy connection for passengers in transit from its lucrative London-Lagos flights to Virgin Nigeria’s routes within the country. The government says Virgin Nigeria must use the same domestic terminal as other internal carriers.
Branson argues that when Virgin was approached to set up a flag carrier for Nigeria, it agreed to do so under strict criteria which included the ability to operate domestic and international flights from the same terminal. "To my utter dismay, certain authorities in Nigeria have chosen to ignore our contract, sending in heavies a few months ago to smash up our lounge with sledgehammers," the British billionaire said in a statement earlier this month. The behaviour of the authorities was similar to the way the Mafioso behaved in the US in the 1930s ... If Virgin Nigeria can be treated in this way, can any company in the world seriously consider investing in Nigeria in the future?"
When British billionaire Richard Branson launched Virgin Nigeria three years ago he was lauded by the then government for bringing a credible national airline to a country with an appalling air safety record. Little could he have imagined that three years later, with a new Nigerian president in power, an acrimonious row with the authorities would break out on whether the terms of the agreement he struck were still valid.
Virgin Nigeria, in which Branson’s Virgin Atlantic has a 49 per cent stake, was launched to great fanfare in 2005 under then-President Olusegun Obasanjo, an economic reformer with whom the British tycoon enjoyed close relations. But Umaru Yar’Adua took office in Africa’s top oil producer more than a year ago and his administration has been busy scrutinising contracts struck under his predecessor.
From oil giants Royal Dutch Shell and Exxon Mobil to China’s Civil Engineering Construction Corp (CCECC), the terms of deals with major foreign investors are coming under the spotlight. Relations with Virgin have soured considerably.
"Over the years, public officials hardly bothered about the interest of our people when entering into contracts and agreements on behalf of the government," presidential spokesman Olusegun Adeniyi told a local newspaper recently. "But with Yar’Adua many things are going to change ... under his watch, while we want foreign investment and would respect the sanctity of legally-binding contracts, he will not allow a situation in which our country continues to be short-changed."
Foreign direct investment soared to over $5 billion in 2007 from barely a fifth that in 2000, according to World Bank data. Nigeria has also been central to the portfolios of investors seeking to profit from Africa’s fastest growth in decades.
Virgin’s row is ostensibly over whether Virgin Nigeria can continue to use the international terminal at Lagos airport for internal flights rather than the domestic one, built by businessman and presidential adviser Wale Babalakin. Virgin wants an easy connection for passengers in transit from its lucrative London-Lagos flights to Virgin Nigeria’s routes within the country. The government says Virgin Nigeria must use the same domestic terminal as other internal carriers.
Branson argues that when Virgin was approached to set up a flag carrier for Nigeria, it agreed to do so under strict criteria which included the ability to operate domestic and international flights from the same terminal. "To my utter dismay, certain authorities in Nigeria have chosen to ignore our contract, sending in heavies a few months ago to smash up our lounge with sledgehammers," the British billionaire said in a statement earlier this month. The behaviour of the authorities was similar to the way the Mafioso behaved in the US in the 1930s ... If Virgin Nigeria can be treated in this way, can any company in the world seriously consider investing in Nigeria in the future?"
Reuters
The case for investing in sub-Saharan Africa
by Jonathan Garner and Michael Wang*
SUB-Saharan Africa — the continent excluding Algeria, Egypt, Libya, Morocco, and Tunisia, and, for this purpose, SA — is showing similar investment opportunities to the former Soviet states and the east Asian economies at a similar stage of their development, in the 1990s and 1980s respectively.
The investment case for sub-Saharan Africa is simple. It is one of the fastest growing regions in the world, with 6% real gross domestic product (GDP) growth a year since 2001 and projected GDP growth of 6%-7% a year from 2008 to 2010, behind only Asia and the Gulf countries within the emerging-market universe.
It is also is one of the areas with the lowest investment flows from foreign institutions. The total free-float market capitalisation of sub-Saharan African stock markets excluding SA is just $75b n compared with $3 200b n for emerging markets overall. Though the region still lags emerging market peers in human capital development and gross fixed capital formation, the trend towards increasing economic liberalisation and integration into the global economy, and particularly the Chinese growth dynamic, is a positive.
There are signs that the growth is due to more than just improving terms of trade and is more likely attributable to economic reforms and improved fundamentals . As part of structural adjustment programmes, many African countries have taken reforms to liberalise capital account and exchange rates, reduce trade tariffs, privatise state-owned enterprises and ease restrictions on private investment. These reforms have generated smaller public and private deficits, more prudent use of commodity windfalls, lower inflation, and higher international reserves, making the region less vulnerable to a cyclical downturn.
Fiscal discipline is now much more entrenched as a result of two decades of stabilisation programmes, which tightened public sector wage policies, lowered central government expenditure targets and improved tax collection. Fiscal restraint has in turn helped to bring inflation in the region to its lowest level in nearly two decades.
The headline consumer price index has fallen from a peak of 50% in 1994 to 7,2% last year. Increasing forex reserves are another indicator of more prudent macroeconomic policies this cycle, resulting in a decline in currency risk in the region, helped also by lower current account deficits. Coupled with improved macroeconomic fundamentals, these reforms have begun to stimulate a revival in capital flows to the region, which have increased fivefold since 2000. The pace of increase has been among the fastest of any region.
But capital inflows into sub-Saharan Africa are still small because of the high costs of doing business in the region relative to other regions, though improvements, such as licensing and tax payments, have been made. In addition, the institutional environment in sub-Saharan Africa (rule of law, freedom of press, independent judiciary, and business environment) remains one of the weakest globally.
The overall political climate in sub-Saharan Africa has also improved dramatically since the end of the Cold War. The number of African countries holding multiparty elections has also increased from three in 1973 to 40 in 2005. So given the recent economic improvements, an obvious question is how far the region is from marking the transition from “frontier” to “emerging market” status.
Compared with the Association of Southeast Asian Nations region in 1980, just prior to its “take-off” phase of growth, sub-Saharan Africa has lower inflation, higher reserves and stronger foreign direct investment flows, though GDP growth is slightly lower and debt higher.
Undoubtedly this comparison is superficial, but it does suggest some of the historical prerequisites for transitioning to more mature “emerging market” status do exist in sub-Saharan Africa, though, notably, the concerns over weaker political institutions and the spectre of internal conflict are still more prevalent.
For a transition to the high, steady state growth rates found in east Asia, sub-Saharan Africa will require a higher rate of savings and investment. However, sub-Saharan Africa’s rising working-age population should help savings and investment ratios going forward. In terms of potential returns from sub-Saharan African equity markets over the next year, the record-high valuations that stocks are trading on suggest that much of the region’s expected growth and structural improvements are already priced in.
However, as growth in corporate earnings exceeds that of emerging markets, and the region’s economic fundamentals improve further, investing in sub-Saharan Africa stocks on a three- to five-year basis is an appealing investment proposition. Botswana, Ghana and Mauritius have the most favourable combinations of market valuations and strong macro fundamentals.
*Garner and Wang are, respectively, head of global emerging market strategy and global emerging market strategist at Morgan Stanley.
Business Day
SUB-Saharan Africa — the continent excluding Algeria, Egypt, Libya, Morocco, and Tunisia, and, for this purpose, SA — is showing similar investment opportunities to the former Soviet states and the east Asian economies at a similar stage of their development, in the 1990s and 1980s respectively.
The investment case for sub-Saharan Africa is simple. It is one of the fastest growing regions in the world, with 6% real gross domestic product (GDP) growth a year since 2001 and projected GDP growth of 6%-7% a year from 2008 to 2010, behind only Asia and the Gulf countries within the emerging-market universe.
It is also is one of the areas with the lowest investment flows from foreign institutions. The total free-float market capitalisation of sub-Saharan African stock markets excluding SA is just $75b n compared with $3 200b n for emerging markets overall. Though the region still lags emerging market peers in human capital development and gross fixed capital formation, the trend towards increasing economic liberalisation and integration into the global economy, and particularly the Chinese growth dynamic, is a positive.
There are signs that the growth is due to more than just improving terms of trade and is more likely attributable to economic reforms and improved fundamentals . As part of structural adjustment programmes, many African countries have taken reforms to liberalise capital account and exchange rates, reduce trade tariffs, privatise state-owned enterprises and ease restrictions on private investment. These reforms have generated smaller public and private deficits, more prudent use of commodity windfalls, lower inflation, and higher international reserves, making the region less vulnerable to a cyclical downturn.
Fiscal discipline is now much more entrenched as a result of two decades of stabilisation programmes, which tightened public sector wage policies, lowered central government expenditure targets and improved tax collection. Fiscal restraint has in turn helped to bring inflation in the region to its lowest level in nearly two decades.
The headline consumer price index has fallen from a peak of 50% in 1994 to 7,2% last year. Increasing forex reserves are another indicator of more prudent macroeconomic policies this cycle, resulting in a decline in currency risk in the region, helped also by lower current account deficits. Coupled with improved macroeconomic fundamentals, these reforms have begun to stimulate a revival in capital flows to the region, which have increased fivefold since 2000. The pace of increase has been among the fastest of any region.
But capital inflows into sub-Saharan Africa are still small because of the high costs of doing business in the region relative to other regions, though improvements, such as licensing and tax payments, have been made. In addition, the institutional environment in sub-Saharan Africa (rule of law, freedom of press, independent judiciary, and business environment) remains one of the weakest globally.
The overall political climate in sub-Saharan Africa has also improved dramatically since the end of the Cold War. The number of African countries holding multiparty elections has also increased from three in 1973 to 40 in 2005. So given the recent economic improvements, an obvious question is how far the region is from marking the transition from “frontier” to “emerging market” status.
Compared with the Association of Southeast Asian Nations region in 1980, just prior to its “take-off” phase of growth, sub-Saharan Africa has lower inflation, higher reserves and stronger foreign direct investment flows, though GDP growth is slightly lower and debt higher.
Undoubtedly this comparison is superficial, but it does suggest some of the historical prerequisites for transitioning to more mature “emerging market” status do exist in sub-Saharan Africa, though, notably, the concerns over weaker political institutions and the spectre of internal conflict are still more prevalent.
For a transition to the high, steady state growth rates found in east Asia, sub-Saharan Africa will require a higher rate of savings and investment. However, sub-Saharan Africa’s rising working-age population should help savings and investment ratios going forward. In terms of potential returns from sub-Saharan African equity markets over the next year, the record-high valuations that stocks are trading on suggest that much of the region’s expected growth and structural improvements are already priced in.
However, as growth in corporate earnings exceeds that of emerging markets, and the region’s economic fundamentals improve further, investing in sub-Saharan Africa stocks on a three- to five-year basis is an appealing investment proposition. Botswana, Ghana and Mauritius have the most favourable combinations of market valuations and strong macro fundamentals.
*Garner and Wang are, respectively, head of global emerging market strategy and global emerging market strategist at Morgan Stanley.
Business Day
Cumbersome customs procedures in East Africa leads to un-recorded trade
Trade worth $31.6 million (Sh2.1 billion) goes unrecorded each year within East African Community member states due to cumbersome customs procedures.
The trend has also been fuelled by export/import restrictions on foodstuff, tariffs on non-EAC originating products.A recent survey commissioned by the East African Business Council found out that many cross-border traders are not familiar with customs procedures.
The survey conducted in April this year covered 12 border posts and two inland ports in Kenya, Tanzania, Uganda, Burundi and Rwanda. It found out that formal trade across the 12 stations was quite substantial. In 2007, the value of exports declared was $2,011,943,898 (Sh136.8 billion) while the value of imports declared was $13,389,733,691 (Sh910.5 billion).
But a report presented at a meeting of private sector stakeholders in the five EAC partner states says some business people are still having difficulties using the customs declaration forms. The traders cited the complexity of the forms. The survey recommended that EAC member states launch the use of the simplified certificate of origin and customs declaration forms.
Only 57 per cent of truck drivers and 75 per cent of cross-border traders interviewed had customs declaration forms at the start of their journey. Cross-border trade among countries within the regional bloc has also been hampered by delays in clearance at the borders. For instance, it takes 115 minutes for customs to clear trucks across the borders while it takes an average of 44 minutes for customs to clear traders.
Despite increased use of clearing agents – 93 per cent by truck drivers and 59 per cent by cross-border traders – trade facilitation at the borders of East African states is still considered poor. Many complaints were received from truck drivers over delays in clearing of goods often done intentionally by customs officials, especially in the case of containers.
Other complaints raised in the EABC survey under its Regional Trade Facilitation Programme are loss of clients’ documents and high charges of clearing services. The highest charges were recorded at the Tanzanian side of the Mutukula border post (with Uganda) and the lowest at the Ugandan area of Malaba border post.The cost of clearing a cargo consignment was as high as $126.9 (Sh8,629.20) at Mutukula whereas in Malaba it was a mere $3 (Sh204), according to the survey.
Clearing of sanitary and phytosanitary goods and inspections associated with them was found to last up to two hours at times.The survey report recommends that sanitary and phytosanitary officials be posted to all strategic border stations to cover animal and health inspections to enhance intra-regional trade in agricultural produce.
Police barriers were found to be the most notorious among several non-tariff barriers which business people, notably truck drivers, normally encounter when travelling across the region.
About 75 per cent of those interviewed reported having encountered up to 10 barriers on the transit routes.
Others problems cited are extortion, understaffed customs offices, delays at weighbridges, lack of banking facilities and poor roads. The border posts covered were Mutukula Uganda, Mutukula Tanzania, Gatuna Rwanda, Katuna Uganda, Kanyaru Burundi, Kanyaru Rwanda, Malaba Uganda, Malaba Kenya, Namanga Kenya and Namanga Tanzania. The six-day survey also covered the ports of Bujumbura and Kigoma.
The report recommends improvement of infrastructure at border stations, especially the parking bays, 58 per cent of which are in a sorry state or non-existent.It also recommends that standards officials be posted in all border stations to ensure the passage of high quality products.
Many obstacles as US firms look forward to renewed business with Libya
For U.S. companies long excluded from Libya, Secretary of State Condoleezza Rice's visit to Tripoli last week was a green light for business.
But getting a toehold in Muammar Gaddafi's energy-rich north African country may prove the easy part. An opaque bureaucracy, erratic decision making and suspicion built up over decades of isolation means foreign firms may struggle to benefit fully from a wealth of money-making opportunities in Libya, analysts say.
U.S.-Libyan ties have improved dramatically since 2003 when Libya gave up banned weapons programmes, and both countries saw the benefits of lifting hurdles to trade and investment. American companies got involved in Libyan oil and gas after the end of sanctions, but many have held back for fear U.S. courts might freeze their assets for doing business with Libya before terrorism compensation claims are settled.
Those fears receded this month after the two countries agreed to set up a fund to cover the claims. "Once the fund is funded I think there will be a big impact on the expansion of U.S. business in Libya and Libyan business in the United States," said David Goldwyn, executive director of the U.S.-Libya Business Association in Washington. Libya's investment authority, looking for new destinations for growing oil profits, will be able to invest in the United States or join U.S. companies to enter other markets, he said.
Washington raised the status of its Tripoli liaison office to an embassy in 2006 but its diplomatic presence remains small. Rice's visit, the first by a U.S. secretary of state in over half a century, should smooth the way for an exchange of ambassadors, ease visa procedures and make it easier for U.S. firms to compete in trade and investment. A succession of European leaders have visited Libya to drum up business. Italy recently agreed to pay $5 billion in compensation for misdeeds during its colonial rule of Libya and was promised energy deals and other business in return.
"American companies will be in fierce competition with Europeans, Asians and others, so we need to get on the plane and go to Libya and build relationships face to face," said David Hamod, head of the National U.S.-Arab Chamber of Commerce. U.S. government figures show trade with Libya grew from zero in 2003 to $3.9 billion last year, more than four times the figure for Libya's neighbour Tunisia which has a bigger population but far less oil.
Libya's energy industries earned over $40 billion in 2007 and the government wants to nearby double oil output capacity to 3 million barrels per day by 2012. Part of the profits will be used to upgrade and rebuild roads, ports, schools and factories in the country of 6 million that fell into disrepair during the years of sanctions.
Top U.S. construction companies, drinks makers and software firms have made forays into Libya but had mixed results, said Rajeev Singh-Morales, a senior partner at Boston-based Monitor Group, which produced an economic strategy report for Libya. "Foreign companies need to find local partners and people who understand the environment," he said. "Libya still requires dedication and perseverance but it's certainly well worth it."
The lure of lucrative contracts must be set against the risks of doing business in Libya, where powerful interest groups wage a nebulous battle for influence and patronage. Many ministries and tribal groups have a say in policy, which could aid political stability but slows decision making.
Gaddafi has watered down his socialist system in recent years to allow more private sector activity but a culture of business transparency is absent, analysts say. Policy confusion at the top echelons of power has also clouded the business outlook. Gaddafi has said repeatedly that much of Libya's state bureaucracy, including key ministries, must be abolished, with decision making and oil wealth handed directly to the people. His influential son Saif al-Islam has called for administrative reforms and a constitution but defended his father's unique system of rule by popular committee, which critics say is a fig leaf for authoritarianism.
"These statements lend an air of unpredictability to the entire scene there," said James Ketterer, an international relations expert at the State University of New York. Some U.S. energy firms already decided the potential rewards outweigh the risks. ExxonMobil, Occidental, Chevron and Amerada Hess won acreage in bidding rounds for Libyan energy exploration leases in 2005.
Since then, Libya has toughened terms for its main foreign oil partners. Analysts say the decision seemed to be motivated by a desire to allow Libya to benefit from higher world prices rather than discourage foreign players.
Until new fields start pumping oil, foreign firms see quicker profits in enhanced oil recovery -- raising output from existing wells that lacked equipment and care. "U.S. companies have tremendous technical advantages over others in this area," said Goldwyn. "But the biggest risk will be decision making until we know whether and how Libya will pursue enhanced oil recovery."
Reuters
Ghana, EU join to fight illegal timber exports
The European Union has inked a landmark deal with Ghana to fight illegal timber exports from the west African country, the EU said. The agreement signed in the Ghanaian capital Accra, on the sidelines of an international forum on the effectiveness of aid, would stop timber illegally logged in Ghana from entering the European Union market.
Around 60 percent of logging across Ghana in recent years has been illegal, according to the World Bank."Illegal logging has been responsible for rampant deforestation in the west African nation," said the EU. The deal is the first of a series the EU is planning with various African countries, among them Cameroon, Gabon and Liberia.
Ghana has undertaken to ensure that all timber exported from the country is fully certified as clean. For its part, Europe, which consumes more than half of Ghana's timber exports, will ban entry to any shipment of Ghana timber that is not verified, audited and licensed.
"For many years, Europe has talked the talk of saving the world's forests, but demanded increasing volumes of cheap wood imports, providing profitable markets for illegal wood from very poor countries," Ralph Ridder of the European Forest Institute (EFI) said. "Now European consumers are increasingly sensitive to global deforestation," he said.
Jade Saunders, another expert with EFI, said that although the system might take a couple of years to be fully operational, it was promising. "The system is quite credible and the EU will ensure that our customs will stop any shipment of timber that is not audited," she said.
Timber, Ghana's fourth export earner -- after gold, tourism and cocoa -- rakes in around 400 million dollars (275 million euros) per year for the country.Ghanaian experts say logging and poaching, among other human activities, have shrunk the country's tropical forest cover from 63,400 square kilometres (24,500 square miles) in 1960 down to about 13,500 square kilometres, or 25 percent of their original size.
The pace of forest depletion gave the authorities a wake-up call and the country is now recording success regulating logging through a four-way revenue sharing system, from which communities benefit with five percent of the proceeds.
The deal reached commits Ghana to coming up with transparent timber tax collection systems and making sure that all its laws in the industry are respected and implemented. The agreement is expected to provide Ghana with an edge in the EU market.
"Consumers, companies and governments should become aware of the relationship between price and the impact on the environment and developing economies of what they buy," warned Ridder. "If you look for the cheapest product, you may well be getting illegal wood, with all the environmental and social damage that that entails."
Around 60 percent of logging across Ghana in recent years has been illegal, according to the World Bank."Illegal logging has been responsible for rampant deforestation in the west African nation," said the EU. The deal is the first of a series the EU is planning with various African countries, among them Cameroon, Gabon and Liberia.
Ghana has undertaken to ensure that all timber exported from the country is fully certified as clean. For its part, Europe, which consumes more than half of Ghana's timber exports, will ban entry to any shipment of Ghana timber that is not verified, audited and licensed.
"For many years, Europe has talked the talk of saving the world's forests, but demanded increasing volumes of cheap wood imports, providing profitable markets for illegal wood from very poor countries," Ralph Ridder of the European Forest Institute (EFI) said. "Now European consumers are increasingly sensitive to global deforestation," he said.
Jade Saunders, another expert with EFI, said that although the system might take a couple of years to be fully operational, it was promising. "The system is quite credible and the EU will ensure that our customs will stop any shipment of timber that is not audited," she said.
Timber, Ghana's fourth export earner -- after gold, tourism and cocoa -- rakes in around 400 million dollars (275 million euros) per year for the country.Ghanaian experts say logging and poaching, among other human activities, have shrunk the country's tropical forest cover from 63,400 square kilometres (24,500 square miles) in 1960 down to about 13,500 square kilometres, or 25 percent of their original size.
The pace of forest depletion gave the authorities a wake-up call and the country is now recording success regulating logging through a four-way revenue sharing system, from which communities benefit with five percent of the proceeds.
The deal reached commits Ghana to coming up with transparent timber tax collection systems and making sure that all its laws in the industry are respected and implemented. The agreement is expected to provide Ghana with an edge in the EU market.
"Consumers, companies and governments should become aware of the relationship between price and the impact on the environment and developing economies of what they buy," warned Ridder. "If you look for the cheapest product, you may well be getting illegal wood, with all the environmental and social damage that that entails."
China to build free trade zone in Uganda
by Mikaili Sseppuya
Paradise International Investment Ltd (China) is to invest $1.5b in Lake Victoria Free Trade Zone to be known as Ssesamirembe Eco-City in Uganda's Rakai district.
The deal signed between Paradise and the Kagera Eco-Cities last month, will be the single largest private investment in East Africa, according to a statement released last week. Companies operating in this zone will be exempt from paying income custom, corporate income and value added taxes.
The release said the government authorised Kagera Eco-Cities Limited to construct the city, which was also granted municipality powers and a governance charter ensuring a red tape and corruption free administration. Eco-City has the power to enact ordinances that are in harmony with the Constitution to ensure that development is controlled and occurs in an ecologically-friendly and orderly manner, it said.
Key projects include International Airport, Airport City, Lake Port City and Barges/Container Ships, Lake Victoria Casino Hotels, International China-Africa Friendship University and an international finance centre.
New Vision
Paradise International Investment Ltd (China) is to invest $1.5b in Lake Victoria Free Trade Zone to be known as Ssesamirembe Eco-City in Uganda's Rakai district.
The deal signed between Paradise and the Kagera Eco-Cities last month, will be the single largest private investment in East Africa, according to a statement released last week. Companies operating in this zone will be exempt from paying income custom, corporate income and value added taxes.
The release said the government authorised Kagera Eco-Cities Limited to construct the city, which was also granted municipality powers and a governance charter ensuring a red tape and corruption free administration. Eco-City has the power to enact ordinances that are in harmony with the Constitution to ensure that development is controlled and occurs in an ecologically-friendly and orderly manner, it said.
Key projects include International Airport, Airport City, Lake Port City and Barges/Container Ships, Lake Victoria Casino Hotels, International China-Africa Friendship University and an international finance centre.
New Vision
Sub-Saharan Africa represents dazzling opportunities for investors
by Stephanie McCrummen
To a growing number of foreign investors, sub-Saharan Africa represents much more than the ethnic clashes, coups, targeted genocide and natural disasters that have scarred many countries in the region. It represents dazzling opportunities to make money.
"If you look at sub-Saharan African markets, they've given annual returns that are substantially better than most around the world," said Ayo Salami, a chief investment officer for Duet, a London-based financial group that inaugurated its first Africa fund in December. "Even this year, most of the economies around the world are not seeing very much growth — 2 percent would look optimistic. Whereas in Africa, it's been around 6 percent for years. One of the fastest-growing economies in the world is actually Angola, yet the perception is that it's still in a state of war.You don't usually hear these stories," Salami added, "but there are signs that Africa is moving on."
Foreign investment is pouring into the continent, doubling in recent years to around $39 billion, according to U.N. figures. In recent months, some investors have even appeared convinced that Africa might be a safer spot to sink their money than the shakier U.S. and European markets.
"People are looking for diversification," said Hurley Doddy, chief operating officer of Emerging Capital Partners, a private equity group in Washington, D.C., whose investments in Africa have jumped from $400 million in 2000 to $1.5 billion this year. "A lot of the problems the U.S. economy is having, you simply do not have that in Africa," Doddy said.
Middle Eastern firms flush with oil money are increasingly looking to neighboring Africa, as are investors searching for the next India. While the largest chunk of money is flowing to the continent's most developed countries, such as South Africa and Tunisia, a growing percentage is heading to sub-Saharan nations, including Ghana, Nigeria, Rwanda, Uganda, Botswana and Cameroon.
Tourism and mining have benefited, but so have cellphone companies, soap manufacturers, coffee growers, banks, construction firms and other businesses more often funded by donor money. Stock exchanges have also prospered. Where once there were five, there are now 18 across Africa — tiny markets in such relatively stable, out-of-the-news countries as Namibia, Mozambique and Zambia, where annual returns have averaged nearly 15 percent since 2000 and have at times been as high as 144 percent in a given year, according to a report by the International Monetary Fund.
Rwanda, infamous for the 1994 genocide that killed nearly 1 million people, is gaining a reputation as one of the most business-friendly countries in the region, with smoothly paved roads and wireless Internet access. The Mideast company Dubai World recently said it planned to invest $230 million in Rwanda's tourism sector.
"People are starting to see Africa much more as the land of opportunity than in the traditional paradigm of starvation and famine and war," said Alan McCormick, managing director of the Dubai-based investment group Legatum. "There are opportunities in a number of countries — it's not universal, but it's there."
While the region has monumental deterrents to business — including horrendous roads, spotty power supplies and entrenched corruption — analysts say the surge in foreign investment reflects fundamental economic changes.
Chinese investment across the continent — in oil, agriculture, mines, roads, power and other areas — has to some degree caused private investors to sit up and take notice, Salami said. But so have government reforms. Inefficient state-owned companies, especially phone companies, are being privatized. Many countries have adopted policies to shrink their deficits and control inflation. And banking reforms in Kenya, Uganda and Nigeria have spurred massive growth and investment in that sector, which is now able to offer mortgages, car loans and other services once unavailable to middle-income Africans.
James Shikwati, a Kenyan economist, said there are several factors driving governments to embrace the private sector: The Cold War is over and capitalism won. Globalization is a reality. And with investors from India and oil-rich Mideast countries looking for places to put their money, African governments do not want to be left out. "We've moved from a stage where, at independence, there was a feeling that the government must deliver everything," Shikwati said. "Now, governments are quietly realizing that private enterprise can deliver more, and they're giving more space."
Since it was colonized, sub-Saharan Africa has often suffered from a striking dichotomy of perception, seen as the heart of darkness on one hand and a treasure trove of natural resources and fast money on the other. Ruthless exploiters have always had their hands on Congo's rubber or Sierra Leone's diamonds, extracting resources with little benefit to local people and enjoying the profits overseas.
Shikwati and others cautiously suggest the current situation is different. Enormous gaps between rich and poor persist, but there has been a slow trickle-down effect from the growing private sector, as jobs have been created in the cellphone industry, for instance, or tourism or banking. Maggie Kigozi, executive director of the Uganda Investment Authority, attributes about 63,000 new jobs created in that country this year to the private sector.
To a growing number of foreign investors, sub-Saharan Africa represents much more than the ethnic clashes, coups, targeted genocide and natural disasters that have scarred many countries in the region. It represents dazzling opportunities to make money.
"If you look at sub-Saharan African markets, they've given annual returns that are substantially better than most around the world," said Ayo Salami, a chief investment officer for Duet, a London-based financial group that inaugurated its first Africa fund in December. "Even this year, most of the economies around the world are not seeing very much growth — 2 percent would look optimistic. Whereas in Africa, it's been around 6 percent for years. One of the fastest-growing economies in the world is actually Angola, yet the perception is that it's still in a state of war.You don't usually hear these stories," Salami added, "but there are signs that Africa is moving on."
Foreign investment is pouring into the continent, doubling in recent years to around $39 billion, according to U.N. figures. In recent months, some investors have even appeared convinced that Africa might be a safer spot to sink their money than the shakier U.S. and European markets.
"People are looking for diversification," said Hurley Doddy, chief operating officer of Emerging Capital Partners, a private equity group in Washington, D.C., whose investments in Africa have jumped from $400 million in 2000 to $1.5 billion this year. "A lot of the problems the U.S. economy is having, you simply do not have that in Africa," Doddy said.
Middle Eastern firms flush with oil money are increasingly looking to neighboring Africa, as are investors searching for the next India. While the largest chunk of money is flowing to the continent's most developed countries, such as South Africa and Tunisia, a growing percentage is heading to sub-Saharan nations, including Ghana, Nigeria, Rwanda, Uganda, Botswana and Cameroon.
Tourism and mining have benefited, but so have cellphone companies, soap manufacturers, coffee growers, banks, construction firms and other businesses more often funded by donor money. Stock exchanges have also prospered. Where once there were five, there are now 18 across Africa — tiny markets in such relatively stable, out-of-the-news countries as Namibia, Mozambique and Zambia, where annual returns have averaged nearly 15 percent since 2000 and have at times been as high as 144 percent in a given year, according to a report by the International Monetary Fund.
Rwanda, infamous for the 1994 genocide that killed nearly 1 million people, is gaining a reputation as one of the most business-friendly countries in the region, with smoothly paved roads and wireless Internet access. The Mideast company Dubai World recently said it planned to invest $230 million in Rwanda's tourism sector.
"People are starting to see Africa much more as the land of opportunity than in the traditional paradigm of starvation and famine and war," said Alan McCormick, managing director of the Dubai-based investment group Legatum. "There are opportunities in a number of countries — it's not universal, but it's there."
While the region has monumental deterrents to business — including horrendous roads, spotty power supplies and entrenched corruption — analysts say the surge in foreign investment reflects fundamental economic changes.
Chinese investment across the continent — in oil, agriculture, mines, roads, power and other areas — has to some degree caused private investors to sit up and take notice, Salami said. But so have government reforms. Inefficient state-owned companies, especially phone companies, are being privatized. Many countries have adopted policies to shrink their deficits and control inflation. And banking reforms in Kenya, Uganda and Nigeria have spurred massive growth and investment in that sector, which is now able to offer mortgages, car loans and other services once unavailable to middle-income Africans.
James Shikwati, a Kenyan economist, said there are several factors driving governments to embrace the private sector: The Cold War is over and capitalism won. Globalization is a reality. And with investors from India and oil-rich Mideast countries looking for places to put their money, African governments do not want to be left out. "We've moved from a stage where, at independence, there was a feeling that the government must deliver everything," Shikwati said. "Now, governments are quietly realizing that private enterprise can deliver more, and they're giving more space."
Since it was colonized, sub-Saharan Africa has often suffered from a striking dichotomy of perception, seen as the heart of darkness on one hand and a treasure trove of natural resources and fast money on the other. Ruthless exploiters have always had their hands on Congo's rubber or Sierra Leone's diamonds, extracting resources with little benefit to local people and enjoying the profits overseas.
Shikwati and others cautiously suggest the current situation is different. Enormous gaps between rich and poor persist, but there has been a slow trickle-down effect from the growing private sector, as jobs have been created in the cellphone industry, for instance, or tourism or banking. Maggie Kigozi, executive director of the Uganda Investment Authority, attributes about 63,000 new jobs created in that country this year to the private sector.
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