Are investors missing out on sub-Saharan Africa?

by Alonzo Fulgham*

Africa's improvements have created thriving markets. US firms should enter this last great investment frontier.

Here's some good, if counter-intuitive, news for American investors. Normally, by the time an investment tip makes its way into a newspaper, conventional wisdom says the money is already off the table.

Not so in the case of sub-Saharan Africa. American investors and companies are overlooking an investment opportunity in plain sight. And the smart money will climb aboard before the economic tide rises. The rest will miss a fast-moving boat. Market-friendly reforms in Africa are happening at a faster pace in this decade than at any time since most African nations achieved independence in the latter half of the 20th century. They reflect a serious and sustained commitment by African governments to meet the needs of local entrepreneurs as well as foreign investors – because they recognize that the fastest path to prosperity for their people is through investment and self-sustaining economic growth.

Western media typically cast sub-Saharan Africa in terms of conflict, corruption, AIDS, and poverty – and the present food and energy picture understandably dominates the news. But read behind the headlines and you can see some of the most attractive investment environments in the world.

Foreign direct investment from all countries into sub-Saharan Africa grew by 60 percent in 2007, to nearly $27 billion. Total private capital flows have grown eight-fold since 2002. Investment-led growth in Africa will enable that continent to contribute to the recovery from the global recession affecting individual Americans as well as improving the lives of Africans.

The opportunity isn't going unnoticed by investors in other parts of the world. China is poised to overtake the US in pace of investment in Africa. Kuwaiti interests purchased Africa's Celtel for $3.4 billion. Moscow investment bank Renaissance Capital announced plans to double its investments in Africa to at least $1 billion. French firm SoSuMar is building a sugar-processing factory in Mali, where they expect an internal rate of return of nearly 58 percent.

The territory in most business sectors is wide-open. Prime areas include agriculture, healthcare, infrastructure, information technology, tourism, telecommunications, and textiles. Are US investors aware of striking changes in Africa? Sweeping reforms have been launched in 40 African nations since the 1990s: pro-business policies, strong judicial systems, better standards, respect for intellectual property rights. Debt relief has markedly improved Africa's credit worthiness. Monetary policies have pushed inflation down from the 19 percent average of the 1980s, to 7 to 8 percent today. Fiscal policies have turned country budget deficits into an average budget surplus of 2 percent of Africa's gross domestic product.

Despite the headlines in Sudan, Zimbabwe, and Congo, the great majority of African countries enjoy thriving democracies and stability, with governments that have earned public confidence through audited elections. Last year more than 54 million Africans voted in 19 peaceful presidential and parliamentary contests. The result? Real economic growth in 2 out of 5 sub-Saharan countries was triple that of the US economy last year, on a pace that rivals that of Southeast Asia in 1980. African economies from Senegal to Benin to the Democratic Republic of Congo are more diversified. Growth in the region is expected to hit 6.5 percent this year.

To be sure, there are still serious risks, challenges, and constraints for smart money to navigate: shortages of electricity and skilled talent; countries where reforms are fragile and post-conflict governments less secure. Successful investors and entrepreneurs enter these markets aware that differences in culture and shortages of investor-ready information and institutional capacity put a premium on patience and collaboration. There is no substitute for due diligence.

But help is available. By working with USAID, American firms can help shape programs that serve both the aspirations of Africa's citizens and the interests of investors. Most African governments have streamlined business registrations and launched one-stop shops to help potential investors.

The Overseas Private Investment Corporation makes loans of up to $250 million for projects in emerging markets. The Millennium Challenge Corporation provides powerful incentives to countries promoting good governance. And for US exporters, the Trade Information Center offers targeted country and market research as well as counseling and export assistance centers.

This growth story is in its first chapter, much as Asia's was three decades ago, with all of the attendant risks and potential rewards. Investors worldwide are aggressively entering and operating in sub-Saharan Africa as the last great investment frontier. American firms should take a much closer look.

*Alonzo Fulgham is serving as acting administrator for the US Agency for International Development (USAID).

Christian Science Monitor

1. Africa ripe for investment opportunities, say Shanghai experts

2. African Union endorses controversial EPAs

3. Ethiopian exports rise in August on gold, khat

4. China is now South Africa’s top trading partner

5. EU-Zimbabwe pact is a recipe for economic disaster, say activists

6. Adoption of Common External Tariff by ECOWAS defended

7. Angola becomes China's largest trade partner in Africa

8. West African nations trade less with each other than they do with EU, US

9. Tanzania Investment Centre defends Chinese entrepreneurs amidst growing local resentment

10. Tanzania's exports to EU down in 2008

11. East African Community to have a common currency by 2012

12. Tanzania to upgrade ports

13. Uganda exports up by 29% in 2008

14. Scrap Agoa’s 3rd country clause

15. Angola offers great opportunities 
to prudent investors and traders

Africa ripe for investment opportunities, say Shanghai experts

by Wang Ying

Inspired by China's economic growth despite the global financial recession, African countries have reached a consensus to learn and benefit more from the robust economy.

A delegation with representatives from nearly 40 African countries, and two international organizations - the Africa Development Bank and the League of Arab States - attended the Touchroad China-Africa Invest Forum in Shanghai in August. The forum focused on opportunities and challenges of investing in Africa.

Many people stereotype Africa as a piece of underdeveloped land, plagued by poverty, disease and violence, but He Liehui, founder of the forum, objected to such labelings.

"It is far from being the truth if you know enough of the continent. There are lots of misunderstandings there. Not all countries in Africa are poor, and some nations' GDP per capita is higher than that of China," he said.

Actually, many Chinese companies have noticed the opportunities in the resource-rich continent and invested extensively there. Chen Jian, vice-minister of commerce, said China has invested in 49 African countries.

"Since bilateral trade volume exceeded $10 billion in 2000, the annual growth rate averaged 32 percent, and last year reached a record high of $106.8 billion," Chen said.

As one of the most economically active cities in China, Shanghai has apparently sensed its opportunities. Zhao Kangmei, deputy director with Shanghai Municipal Commission of Commerce, said in the first eight months this year, 28 percent of the new overseas projects Shanghai signed came from Africa.

During the forum, several African officials served as spokespeople for their homeland. General Pape Khalilou Fall, ambassador of Senegal, said their country has a healthy and competitive economy.

"Senegal provides good human resources, complete banking service, Internet and telephone service, as well as a good legal framework," he told China Daily.

"We welcome investment in all sectors, telecommunication, infrastructure, fishing and agriculture, etc. But more importantly, as the Chinese saying goes, 'Don't give me a fish, but teach me how to fish,'" he said.

"In addition, Senegal is a gateway to 15 countries in West Africa, so investment there means great opportunities in the other 53 African countries," he added.

The nonprofit forum of Touchroad China-Africa Invest was first held in March 2008 with 18 nations participating. Many delegation groups had reached deals on site, He said.

"Sure we will continue the forum next year and build it into a highly efficient Sino-African trade platform, and through the platform we try to boost the friendship and economic ties of the two sides to a new high," he said.

China Daily

African Union endorses controversial EPAs

by Macharia Kamau

The African Union supports the proposed new trade agreement between Africa and Europe, saying it would improve the investment climate and significantly increase the amount of foreign direct investment on the continent.

Erastus Mwencha, deputy chairperson African Union Commission, said the arrangement being negotiated under the European Union (EU) sponsored Economic Partnership Agreements (EPAs) could radically change the investment and business climate that has been viewed as hostile by both domestic and foreign investors.

The EU is negotiating with 77 African, Caribbean and Pacific (ACP) countries clustered into six economic blocs in a move to boost regional integration and trade with Europe.

"Businesses need predictability, stability and an efficient regulatory infrastructure to thrive. To this end, the Economic Partnership Agreements being negotiated between the EU and our regional economic communities should create a stable and predictable trade and investment climate," he said.

Mwencha, who spoke at the opening of the third EU-Africa Business Forum, urged private sector players to support the initiative. "I ask the private sector to take keen interest in the EPA process as the same will have far reaching consequences on their business."

The AU’s position is in spite of sustained campaigns by civil society organisations across the continent opposing the EPAs. Civil Society has argued that EPAs are not fundamentally concerned about Africa’s development, but rather designed to further the geo-economic interests of European corporations and capital.

Mwencha said it was necessary to increase the level of public-private partnerships because it is among the best tools available to accelerate reforms. "Experience has shown that partnerships offer the best way to make progress. In fact, given the scale of challenges, the need for collective action through public private-partnership approaches is critical... they demonstrate that it is increasingly possible to deliver successful economic and development outcomes.

The Standard

Ethiopian exports rise in August on gold, khat

by Jason McLure

Ethiopian exports rose 3.2 percent in August as higher sales of gold and the narcotic leaf khat offset falling shipments of coffee and oilseeds, the trade ministry said. Exports were $133.4 million in the 30 days ending Sept. 5, up from $129.3 million during the same period last year, the Ministry of Trade and Industry said in a report.

Coffee shipments declined to 13,645 metric tons worth $40.7 million from 14,859 tons valued at $45.7 million a year earlier. Oilseed exports, mainly sesame, fell 17 percent to $13.5 million. Exports of khat, a narcotic leaf popular in the Horn of Africa and Arabian peninsula, climbed 19 percent to $16.6 million. Gold exports, mainly from the Midroc Legadembi Gold Mine owned by Saudi billionaire Sheikh Mohammed Al Amoudi, rose to $19.3 million from $239,000.

Ethiopia’s trade deficit widened to $6.1 billion in the year through July 7 from $5.3 billion a year earlier, according to an International Monetary Fund report published this month.

Bloomberg

China is now South Africa’s top trading partner

Hopewell Radebe

Just 10 years after establishing diplomatic and trade relations, China has overtaken the US, Japan, Germany and the UK to become SA’s biggest trading partner, according to the latest figures from the Department of Trade and Industry.

Trade volumes with China between January and July have reached R32,4bn, followed by the US with R21,7bn, Japan’s R19,7bn, Germany’s R17,5bn and the UK’s R15,2bn. This indicated an increase in SA-China trade of 11,95% from 8,45% in the same period last year.

The US was SA’s major trading partner only briefly, in the 2006- 07 financial year, after taking over from the UK, which had held the number one spot for a long time.

The increase in trade between the US and SA had been largely due to the African Growth and Opportunity Act (Agoa). Agoa had enabled sub-Saharan African countries to export more than 1800 tariff line items duty- free to the US — on top of the 4600 tariff-free items listed under the Generalised System of Preferences.

According to Chinese ambassador Zhong Jianhua, the warm diplomatic ties between China and SA since 1998 had been matched by growing economic engagement, putting this country among China’s top three African trading partners. Bilateral trade volumes have risen from 800m in 1998 to 17,8bn last year.

Since 2000, China-Africa trade has grown 10 times, reaching 106,8bn last year , according to the Chinese commerce ministry. Chinese exports to Africa have hit 50,8bn, while China’s imports from Africa have reached 56bn.

Other than imports of Africa’s raw materials, at least 500 of the continent’s products from 31 countries such as wines, tobacco, coffee and olive oil have received a zero-tariff treatment from the Chinese government and exposure to the country’s markets.

Zhong said SA had for the first time enjoyed a trade surplus with China and that this could increase. He attributed the increase in South African exports to China to the international financial crisis, which saw most developed countries reduce their orders, especially from emerging economies.

China imports iron ore, gold, copper, chrome, wine, timber and paper pulp from SA, while China mostly exports value-added products, such as appliances and clothing. Angola — accounting for 24% of China-Africa trade — is China’s major African partner as it is the biggest source of China’s oil imports.

SA follows on 17%, then Sudan (8%), Nigeria (7%) and Egypt (6%). Angola and SA are ranked 29 and 31 respectively among China’s trading partners worldwide. These countries collectively account for 62% of total China- Africa trade.

Economists have been critical of the skewed nature of China- Africa trade, saying China supplies value-added manufactured goods to Africa while the latter supplies mainly primary products. The top exports to China last year have been mineral products (82%); precious stones and metals (3%); parts for motor vehicles (3%); wood products (2%); and base metals (1%). The top impport products from China last year to Africa in general have been machinery, transport equipment, footwear and plastic products.

Business Day

EU-Zimbabwe pact is a recipe for economic disaster, say activists

by Caiphas Chimhete

Before the ink dries on the interim economic partnership agreement Zimbabwe signed with the European Union, analysts warn that the pact will further impoverish the country. They say the agreement is a threat to regional integration which the Southern African Development Community (Sadc) has been pushing over the past two decades.

The warning comes soon after Zimbabwe together with other 39 countries early in September signed the interim economic partnership agreement (EPA) with the EU that is expected to run until December 2101.

EPA is a trade arrangement the EU is currently negotiating with 79 African Caribbean and Pacific (ACP) countries. It will result in total trade liberalisation or opening up of trade between Zimbabwe, other ACP countries and the EU.

The Economic Justice Network (EJN), a regional organisation that advocates sound economic policies, said it was “unfortunate” that Zimbabwe had signed a flawed pact which other countries in the region refused to endorse. EJN programmes manager Percy Makombe said the agreement promotes the growth of multinational companies at the expense of local industry.

“It is unfortunate that Zimbabwe has decided to sign the interim economic partnership agreement,” said Makombe. “. . .instead of promoting local companies that will help grow our economies, international companies have to be treated at par with local companies never mind the fact that they then spirit their capital out of our countries to the detriment of industrial development.”

Experts said challenges for the local industry include increased competition from EU products, undermining of regional integration and significant loss of revenue for the government through removal of tax on imports.

The interim agreement would see signatories to the trade pact with Europe gradually opening up their markets to European goods until 2023. Under the EPA, Zimbabwe would have opened up to 45% of her market to Europe by 2012 and 80 percent by 2022, while 20 percent of the local market would remain closed to EU products.

The Catholic Commission for Justice and Peace in Zimbabwe (CCJP) said the government should have fully analysed the impact of the interim agreement before rushing to sign it. Commission national director Alouis Chaumba said a “cautious approach” was necessary to enable the country to make informed policy positions.
“It is better for the country to delay the signing of EPAs given the new political dispensation,” said Chaumba. “A cautious approach should enable Zimbabwe to carry out impact assessment studies which will inform policy positions to be taken on EPAs.”

Makombe said the EU “smuggled” back contentious issues that the African Union (AU) Conference of Trade Ministers in their Declaration in Kenya in 2006 insisted that they should be kept out of economic partnership agreements. The AU had said issues of investment policy, competition and government procurement should be kept outside the EPAs.

EJN said the same issues were removed from the World Trade Organisation (WTO) Doha Work Programme after they were seen as unfair to less developed countries.
“So these issues are still contentious at WTO level why smuggle them into EPA deals?” asked Makombe.

The EU, said the EJN, seeks to push through EPAs an agreement “that forces government to treat international companies just like local ones when it is buying goods and services.”

Zambia, whose Minister of Commerce Felix Mutati is the chief negotiator in the Eastern and Southern Africa (ESA) grouping, where Zimbabwe falls, did not sign the agreement.

“Does it not raise concern that the chief negotiator has refused to sign?” questioned Makombe. “What is this source of obsession in Zimbabwe about signing an agreement that will condemn us to further poverty?”

Namibia, South Africa and Senegal are among the countries that have refused to sign the agreement. Zimbabwe is among 12 countries negotiating the EPA within ESA. Madagascar, Seychelles and Mauritius have also initialed the pact.

Chaumba said the existence of other regional groupings such as Sadc, Southern African Customs Union (Sacu) and ESA also posed challenges to the “sustainability” of a final EU-ESA EPA.

“It remains guess work whether the remaining 12 countries will sign the Interim EPAs given the diversity in ideas, policies and politics within ESA,” said Chaumba.

Zimbabwe Coalition for Debt and Development (Zimcodd) programmes officer, Richard Mambeva said the fact that the pact was negotiated by individual countries has caused divisions among ACP countries to the extent of jeopardisaing regional integration in developing countries.

“Sadc and Comesa have been divided since some countries in the Sadc region such as Zimbabwe and Malawi negotiated the EPAs under the East and Southern Africa (ESA) bloc,” Mambeva said. The negotiations, he said, were shrouded in secrecy as they excluded other relevant stakeholders and beneficiaries.

The Standard

Adoption of Common External Tariff by ECOWAS defended

by Sylvester Enoghase

Nigerian Minister for Commerce and Industry, Achike Udenwa, has stated that the Federal Government championed the adoption of 35 percent Common External Tariff (CET) in the Economic Community of West Africa States (ECOWAS) as a way for the sub-region to minimise dumping of goods through other member countries' borders.

Udenwa made this declaration at the stakeholders' forum on business integration in ECOWAS sub-region held at the Lagos Chambers of Commerce and Industry Conference Centre, Ikeja.

The Minister, who was represented by the Permanent Secretary, Federal Ministry of Commerce and Industry, Abubakar Mohammed, said government has already started working on the categorisation of products under the fifth band. He said with the CET in place, the fear of dumping of goods through other member countries' borders would be allayed, and smuggling would be reduced at the borders.

Noting that a committee on trade facilitation would be set up and be responsible for monitoring the proliferation of illegal checkpoints and other non-technical, non tariff barriers to trade in the ECOWAS sub-region, Udenwa maintained that joint checkpoints would facilitate easy movement of goods.

"As regards the removal of non-tariff barriers, Nigeria has officially directed that joint checkpoints of relevant border agencies be established from the entry border posts and reduced to a maximum of three in the ECOWAS sub-region in order to facilitate the movement of goods and services," he said.

Udenwa, however, said that by integrating and collaborating more with its neighbours, Nigeria stands to gain from efficient resource allocation, stemming from economies of scale and sharper competition in the larger market of about 317 million consumers in the region in addition to improved transit procedures for goods and services to and beyond the region.

Earlier, the LCCI's President, Solomon Onafowokan, had said: "It is a paradox that ECOWAS has done much more in the area of regional peacekeeping, security and conflict management than in promoting economic integration, which is its core mandate, saying after over 30 years of its existence, ECOWAS cannot claim to have achieved a free trade area."

The LCCI boss added: "We have a collective challenge at both public and private sector levels to accelerate the progress of the integration of our economies." He however said with a robust market of over 250 million people, significant benefits of economies of scale would be enjoyed by businesses in the sub region in the event of full market integration, saying this would lower unit costs and enhance competitiveness.

Daily Indepdendent

Angola becomes China's largest trade partner in Africa

Angola had become China's largest trading partner in Africa, with bilateral trade rising to $25.3 billion in 2008, Chinese Ambassador to Angola Zhang Bolun said in Luanda on September 27.

Although the two countries are facing tough challenges arising from the current global financial crisis, trade between China and Angola had registered a significant increase in the past few years, he said.

According to Zhang, more private Chinese investors will come to Angola next year. "An increasing number of Chinese contractors in the fields of agriculture, food industry, timber processing and information technology, among others, will come to Angola next year," he said.

Apart from infrastructure projects such as railways, roads, hospitals and schools, China and Angola could also cooperate with each other in other sectors, Zhang said.

China Daily

West African nations trade less with each other than they do with EU, US

Intra- regional trade among West African countries is lower compared to the volume of trade they have with Europe or America. Africans depend more on imports from other continents than what they exchange among themselves.

While emphasis on cross-border trade is promoted in the continent at every fora, practicalization of such an idea is still at its lowest stage. While regional organization such as the Economic Community of West African States (ECOWAS) is striving very hard to come up with a common currency for the region, the real issue of intra-regional trading is mostly champion by donor agencies.

The United States Agency for International Development (USAID) is funding a four-year regional project to be implemented between April, 2008 and September 2012 through the Agribusiness and Trade Promotion (ATP). The objective of the ATP/ USAID was to increase the value and volume of intra-regional agricultural trade in West Africa.

The focus is on selected major agricultural value chains which are important staple food commodities for intraregional commerce. The selected commodities include grains (particularly maize), ruminant livestock (cattle, sheep, goats), onions/shallots, rice, poultry and millet/sorghum. Already, seven countries have been selected to grow these products which are aimed at fostering intra-regional trade and commodity exchange. The intervening countries are: Benin, Burkina Faso, Cote d'Ivoire, Ghana, Mali, Niger, and Togo.

When successfully implemented, the ATP/USAID project will contribute to achieving the 6 percent agricultural growth target under the Comprehensive Africa Agriculture Development Program (CAADP) of NEPAD. The project was designed to play a catalytic role, against the background that trade potentials in West Africa have not been fully tapped due to several constraints. To achieve the objectives, ATP is working in collaboration with regional institutions and organizations to stimulate intra-regional agricultural trade.

Looking at the current low level of trade relationship between African countries, the project will play a significant role in the reduction of physical and policy-related barriers to trade in the region. It will also enhanced linkages among actors in the selected value chain, as well as creating more effective advocacy for regional and national policies in support of a conducive environment for increased regional agricultural trade. The project will also improve trade transactions and market access through improved regional market information systems in Africa.

In Nigeria for example, through the ATP's assistance, Fada N'gourma's Association of Fatteners and Exporters of Livestock, in Burkina Faso, found new livestock buyers. The Association is currently selling 200 cattle a week to Nigerian livestock buyers. The ongoing contract, which ATP helped to facilitate, is boosting the volume of export from Fada N'gourma and increasing the members' profits by more than $1 million FCFA - approximately $21,700 - per week.

Another milestone achievement towards the realization of intra-trade in West Africa is the ATP's Value Chain Assessment Validation workshop where business linkages was created between Elorm Goh, a Sociology graduate, and SITRAC, a maize processing company in Burkina Faso. Elorm has already supplied more than 750MT of maize to the company and has also acquired a warehouse at Abissi, a town located in the maize producing zone of Ghana, in anticipation to expand her maize trade and export more maize.

allafrica.com

Tanzania Investment Centre defends Chinese entrepreneurs amidst growing local resentment

The Tanzania Investment Centre (TIC) has strongly defended Chinese entrepreneurs, saying they were genuine partners in development despite increasing public resentment against them.

Apart from China being a major source of fake and low quality products in the market, Chinese investors are accused of engaging in hawking and small businesses instead of making capital investments in productive activities.

TIC executive director Emmanuel Ole Naiko said it is wrong to perceive the Chinese negatively since they were currently among the top investors in Africa, including Tanzania.

He said in 2007 alone, China invested $3 billion in 10 African economies, of which $111 million was invested in Tanzania. "By investing over $3 billion in one year and in just ten countries, the Chinese have shown they are genuine investors and Africa's true friends," he noted in a statement.

African countries that received substantial investments from China during the same year included South Africa, where Chinese investments were valued at $702 million, Nigeria with $630 million and Sudan with $575 million. Others were Zambia ($429 million), Algeria ($393 million), Niger ($135 million), Egypt ($132 million), Mauritius ($116 million) and Ethiopia ($109 million).

A recent survey conducted by Dar es Salaam regional authorities established that most Chinese entrepreneurs were engaged in businesses other than what their TIC certificates show.

There are many Chinese traders rubbing shoulders with locals in Kariakoo, Sinza and Manzese, selling shoes, sandals and cheap clothes. Most of these goods are said to be produced locally in backyard factories

The Citizen

Tanzania's exports to EU down in 2008

by Samuel Kamndaya

Tanzania's exports to the European Union (EU) dropped by 56.471 million euros (Sh104 billion) last year to widen the trade gap between the country and the 27-nation European bloc.

Total exports to the EU were valued at 382.76 million euros in 2007 (Sh708 billion), but dropped to 326.29 million euros (Sh604 billion) last year, according to statistics from the EU Delegation office in Dar es Salaam.

While exports decreased, imports from the region went up by a significant 74 million euros (about Sh137 billion) in 2008 to widen the trade gap between Tanzania and the EU to 478.246 million euros (Sh885 billion).

The trade deficit was 347.769 million euros (Sh643 billion) in 2007.

Tanzania's imports from the EU reached 730.53 million euros (Sh1.4 trillion) in 2007 before increasing to 804.536 million euros (Sh1.5 trillion) last year.

Tanzania and other East African Community (EAC) member states mainly export agricultural products to Europe. Their major imports are machinery and technical equipment.

Mr Marcos Sampablo, the EU delegation�s trade attach� in Tanzania, says the EAC has failed to exploit the EU market opportunities due to the region�s limited production capacity.

Another major trade barrier are the stringent market regulation rules in the EU, especially on food.

"EAC countries suffer from supply constraints," he told The Citizen by email.

He said finalisation of the Economic Partnership Agreements (EPAs) would help the EAC to export more to the EU market by addressing the region's supply constraints.

"It is out of this that the EU proposed to include in the EPA negotiations issues of trade in services, investment, competition, customs and trade facilitation and government procurement," Mr Sampablo said.

The issue of customs and trade facilitation for example will help EAC to simplify customs procedures and reduce unnecessary costs and delays, he added.

Unloading cargo in an African port needs an average of 18 signatures but the same requires only three signatures in the Organisation for Economic Co-operation and Development (OECD) countries.

It is estimated that it is more expensive to transport a container from Mombasa to Uganda than it is to transport the same container from Singapore to Mombasa.

The Citizen

East African Community to have a common currency by 2012

by Mark Kapchanga

The East African Community projects to have a common currency by 2012. According to the Community Secretariat, a joint study on the proposed harmonised Monetary Union has already kicked off and is expected to end soon.

The team spearheading the study team led by European central bank consultants recently visited Bujumbura, where it held a consultative meeting on the proposed unified currency. Similar meetings have been held in Nairobi, Dar es Salaam, Kigali and Kampala. The last one will be conducted in Arusha.

Targeted in the study are the central banks of the EAC partner states and their, ministries of finance, planning, EAC Affairs and trade. Others are capital markets, bureaus of statistics and the banking fraternity.

“The purpose of these visits is to meet with the various stakeholders in the process towards Monetary Union and to make them acquainted to those matters which are likely to arise in this process,” said Kenya’s EAC Minister, Amason Kingi.

Critical to the study is the preparedness of the region to for a common Monetary Union. Also featuring prominently are the legal implications of the proposed currency shift. The findings of the study are expected to be released in January 2010.

The EAC Secretariat says the region will begin setting up the necessary legal and institutional framework. Leading economists say it is time the region formed a common central bank and currency to be competitive in the global market and attract foreign investment.

African Union Commissioner for Economic Affairs Maxwell Mkwezalamba says that a common monetary system will enhance intra-East Africa trade, initiate competition and put the region in the global picture as a business hub.

“The creation of a Monetary Union can be seen as a fundamentally political issue, though with important economic implications. Currency unions are generally formed as part of a larger strategic push to integrate the countries entering such unions,” Mr Mkwezalamba said, adding, “The decision to embark on a currency union is a major policy decision.”

But is the region ready for the proposed union?

Though a desirable move, analysts say the region should approach it cautiously. A unanimous argument is that the merger will create a more stabilised currency that will be less prone to inflationary pressures. While a Monetary Union may improve the region’s economic policies, stimulate growth and foster good governance, observers say questions remain unanswered on the feasibility of the proposed union.

“The objective of regional integration seems well founded, but it is unclear whether forming a monetary union will contribute greatly to it. A currency that is ill-managed and subject to continual depreciation is unlikely to stimulate pride or give member countries any clout on the world stage,” says a report by the World Bank. Today, the region’s currencies are weakening “asymmetrically” against the international ones. Although the three currencies of Uganda, Kenya and Tanzania have been falling against the dollar, the Ugandan currency has been hardest hit.“

"In order to be strong and stable, EAC governments will have to institute measures to ensure they abide by strict fiscal and economic criteria. However, we must remember that the region once had a common currency. What will be required now is to check on the gaps that existed and improve on it,” Mr Kingi said.

To function smoothly and bring about economic benefits for all EAC partner States, experts say the Monetary Union should start with a high degree of sustainable monetary and economic convergence among partner states.

“The partner states should experience synchronous economic cycles, similar external shocks as well as similar inflation and growth rates. Income levels may also be important,” said Mr Kingi. According to the minister, the talks on Monetary Union are progressing well among the member states. “Our target is to ensure that once we have a harmonised market by November this year, we will immediately engage on striking an agreement on a merged currency from early next year. I am certain we will get there,” he said.

Analysts say if the pace at which the integration process has been taking place is maintained, then the region is “almost there” in achieving the preconditions, known as the optimum currency area, for the Monetary Union. However, despite a positive outlook for the realisation of the union, debate still lingers on whether the region should instead sit back and wait for the proposed African Monetary Union which has been predicted to be in place by 2021. The argument is that once the continent establishes a united currency system, regional and individual country currencies will be rendered redundant.

“One of the key pillars to the realisation of African Union is the successful integration of regional blocs. I don’t think our quest for a unified currency will conflict with what the continent is seeking,” Mr Kingi said.

The establishment of a common currency in East Africa comes a few months after East African central banks proposed a radical monetary policy regime that responds to the dynamics of the global economy. In a meeting of central bank governors held in Nairobi in March to discuss the choice of monetary regime for the EAC economies, experts said the region should adopt a sound monetary policy that will accelerate capital flows.

“As East African economies are becoming sophisticated, central banks are running out of traditional monetary policy ammunition to fight the slowdown in growth and inflation. This has compelled us to re-look at the transmission mechanism of monetary policy. The region is becoming more integrated and capital movement across countries is increasing in volume,” Central Bank of Kenya Governor Prof Njuguna Ndung’u said. He said the increasing influence of external factors on global inflation dynamics was also a driving force in policy choices.

“The spike in oil and commodity prices last year, for example, which initially appeared as a supply shock at the individual country level, represented economic overheating at the global scale, and domestic monetary policy tightening may not have been the most effective way to deal with this situation in our context,” Ndung’u said.

The East African

Tanzania to upgrade ports

by James Mwakisyala

Movement of goods to landlocked East African countries is set to improve if plans to upgrade Tanzania’s ports succeed. The Tanzania Ports Authority (TPA) will renovate and expand five ports on the Indian Ocean coast and inland water ways as well as inland customs depots this financial year.

The TPA has set aside funds for various improvements on Dar es Salaam Port, Mtwara, Tanga, Bagamoyo and Mwambani on the Indian Ocean coast and Kigoma Port. The developments are intended to cater for the current and future volumes of goods to and through Tanzania.

A recent tender announcement invited firms to conduct feasibility studies on the development of lorry parks outside Dar es Salaam Port, development of a ship breaking facility at Mtwara Port in southern Tanzania, and a study for the creation of additional yards at Tanga Port on the north eastern coast. Also planned is a study on traffic flow at the Mtwara Port to accommodate Tanzania’s southern corridor import/export traffic to Malawi, Zambia and northern Mozambique.

The successful tenderer for the Mtwara Port development study will determine the type and size of the ship-breaking facility to be constructed initially and for future expansion. It will also carry out a market survey on vessels to be scrapped over 10 years, among other works. The Mtwara study will also require consultants to study truck intensity and truck turn around times during peak operations, and propose improvements and expansion if needed.Tanzania ports serve landlocked Malawi, Zambia, Burundi, DR Congo and Uganda.

Uganda’s President Yoweri Museveni specifically asked Tanzania to upgrade Tanga Port and dedicate it to Uganda’s imports and exports, to provide an alternative route to the sea to that of Kampala-Mombasa.

Other feasibility studies to be conducted include development for the proposed port at Mwambani area in Tanga, and a feasibility study for development of a dry port at Katosho in Kigoma on Lake Tanganyika.

As for Tanga Port improvements, the successful consultant will review ship and cargo traffic forecast contained in the port’s Master Plan 2016, and determine the optimum size of the yard requirement for the port to cater for demand in 2016. It will also identify areas for construction of the proposed yards, and prepare their layout plans and preliminary engineering designs.

The feasibility study on Katosho area in Kigoma will involve reviewing cargo traffic forecasts for the period up to 2018 and forecast cargo that could be handled on the 16- hectare area of the port terminals. The study will also involve the verification of 25-ha dry port area requirement and prepare preliminary dry port layout to be linked to the Tanzania Railway line from Dar.

The Dar es Salaam port improvements will include determining the vehicular traffic pattern to match existing and future traffic, propose physical improvement and traffic management measures on the Bandari Road which is currently heavily cluttered by heavy duty container carrying trucks, and propose parking for lorries that await to deliver cargo to match port operations up to 2013.

For the Mwambani and Bagamoyo studies, the TPA seeks consultants to review ship and cargo traffic forecast for the period up to 2018, assess national annual port capacity demand up to 2018, and prepare preliminary port layout plan, engineering designs and entrance channel layout.The ports plan is also linked to another master plan mooted by the East African Community to network the region with railway connectivity.

East African Business Week

Uganda exports up by 29% in 2008

by David Muwanga

Uganda's formal merchandise exports grew from $1.3 billion in 2007 to $1.7 billion in 2008, the Uganda Exports Promotion Board (UEPB) has said. This represents a 29% increase.

"Informal exports stood at $1.38 billion, service exports fetched $722 million and Uganda's top nine export destinations were Sudan, Kenya, Switzerland, Rwanda, United Arab Emirates, Democratic Republic of Congo, United Kingdom, Netherlands and Germany," the Executive Director of UEPB, Ms Florence Kata said.

The increase in exports is largely attributed to peace in Southern Sudan and DR Congo especially after Khartoum signed the Comprehensive Peace Agreement with the SPLA rebels in January 2005 ending 27 years of a bitter conflict. Since then Ugandans and a few Kenyans have seized business opportunities in the region and were further rewarded when world food prices increased.

"Exports to the region were mainly food stuffs, manufactured products including soap, plastics, cement and edible oil and re-exports. Approximately 2000 companies exported to various destinations in 2008," Kata said in September at the launching of the Uganda Enterprises Business Foundation in Kampala. The foundation brings together small and medium enterprises dealing in exports.

Kata said there are an estimated 1,069,848 small and medium scale firms in urban and rural areas that account for 90% of the private sector. "They contribute 75% of Uganda's Gross Domestic Product (GDP) and employ 2.5 million people," she said. "However, most of these firms fail because they are typically small and largely family-centred. The owner is the operations manager, accountant, marketer among others, probably servicing two loans hoping to grow. They get several orders but lack capacity to handle them."

The foundation's Director, Mr. Robert Tumwesigye, criticised Uganda's small and medium firms for becoming copycats. "Better be creative, think out of the box and start your own business instead of copying what your neighbour has done," he said. "When you are creative you meet a lot of challenges but you need to get advice or keep on consulting."

East African Business Week

Scrap Agoa’s 3rd country clause

The 8th African Growth and Opportunity Act (Agoa) is still falling short of what millions of African farmers are yearning for - removing farm subsidies in the US and Europe. While it’s true that there has been a $5 billion increment in African quotas and tariff-free exports to the US under the Act, it is important that the US scraps the Third country provision.

This clause allows textile firms to import fabric from other countries and use it to make apparel for export to the US without paying duty to US Customs. It was originally meant to expire in 2007, but was extended to 2012. Removing this provision would make governments invest more in local farm and industrial productivity to create jobs. It can also attract foreign direct investment to African countries in large scale farming, irrigation and value addition.

The Agoa framework should help African countries better their farming and increase productivity at home. It would suffice that both subsidies and this provision should be withdrawn at its expiry. Some leaders at the summit are calling for the extension of this provision, but it’s a fact that agricultural productivity on the continent is dwindling. More capital investments and government spending is needed. Already, some 435 million sub Saharan Africans go to bed hungry.

African countries should develop their own capacity to produce locally. Out of the 6,400 eligible products for export to the US under the Agoa framework, Uganda has only made minimal gains in textiles. Other countries have benefited from oil exports. By 2012, Uganda needs to have developed the capacity to grow enough cotton to meet the Agoa and other markets’ demands.

Currently, Uganda produces less than 60,000 bales a far cry from the 467,000 bales in 1969. The tractor hire services which helped open up land for cotton growing, ox-plough and agricultural mechanisation infrastructure have all collapsed.

The agricultural mechanisation policy, which also looked at developing simple and cost effective appropriate irrigation technologies in Namalere, Wakiso was phased out by the government.

Uganda also needs to develop quantity and quality assurances standards among local manufacturers so that they consistently produce the bulk needed for exports.

The Monitor

Angola offers great opportunities to prudent investors and traders

by Keith Campbell

Angola offers great trade and investment 
 opportunities for South African com-
 panies, with the former Portuguese colony increasingly freeing its market and 
encouraging more competition. The country has been at peace for seven years now, is politically stable, reasonably democratic, generally safe and secure, and is now displaying sustained growth (although this has been slowed by the current global recession, it has not stopped), points out South Africa- Angola Chamber of Commerce honorary CEO Ambassador Roger Ballard-Tremeer.

But extreme prudence is required. “Our suggestion is that, before they take any decision regarding Angola, South African companies should become extremely well informed about the country,” Ballard-Tremeer advises. “They will, in this process, identify potential partners and do due diligence. This research exercise has to be very thorough indeed. They must be quite sure what they are committing themselves to.”

Angola has a different history, culture, and legal system as well as different languages to South Africa’s. “Angola’s legal system is based on different principles to South Africa’s,” he cites. “Thus, in Angola, the legal presumption is guilt rather than innocence – this has poten
tially profound implications for the level of care with which business is conducted. This is 
because Angolan law is based on civil law principles that derive from the Napoleonic Code, which was inherited from the Portuguese.”

One practical consequence is that expatriates living in, and visitors to, Angola should avoid driving themselves, but rather be 
driven by local chauffeurs. Still, businesses from South Africa and elsewhere have been and are enjoying great success in Angola. The Chinese are currently getting the most publicity, but there are many others, including the Portuguese, other European 
nations, Brazilians, Russians, other African nations, and a widening range of Asian 
peoples.

“For example, in certain projects, the South Koreans are making a real impact in Angola,” cites Ballard-Tremeer. They have constructed the Talatona Conference Centre – the first after 2002 to be designed and equipped to handle major international conferences – in Luanda, and did it in eight months.

Another major South Korean project in Angola is the construction of the Luanda Intercontinental Hotel, and there are others as well. Perhaps, paradoxically, a lot of the work, such as infrastructure rehabilitation, being done by companies from outside Africa, is making it ever easier for South African business to enter Angola.

“Thus, thanks to the Chinese, Angola now has better international and interprovincal roads, some railways that function, and many more operational airports, although not yet everywhere. However, it is increasingly possible to travel throughout Angola and to its neighbouring countries by [land] transport, which had not been possible for decades,” he points out.

South African consulting engineers have been involved in supervising a number of the Chinese projects, on behalf of the Angolan government. They report that, in general, the Chinese contractors can be very efficient and a pleasure to work with.

The Chinese have also changed the pattern of joint venture (JV) deals in Angola, which will benefit every other foreign investor in the country. Previously, JVs in Angola saw the local partner taking, perhaps, a share of at least 49%, and even 51%. The deals done in Angola by Chinese investors have created JVs that are 70% Chinese and 30% Angolan, and have created a more realistic attitude in the Angolan business community.

“There is huge space in Angola for more foreign investors and there will continue to be space for them for a long time to come,” assures Ballard-Tremeer. “Everything outside oil, gas and diamonds fell into disrepair during the civil war. So the focus of national 
reconstruction is now right across the 
economy.”

To cite one example, foreign farmers are now investing in commercial-scale farming operations on the Angolan planalto (highveld), and South African farmers are already taking 
advantage of this. 
Thus, there is a 17 000-ha South African-owned farming operation in Bihé province, and a 6 000-ha South African-owned 
arable farm in Huambo province.

Tourism is 
another sector that is rapidly expanding.

“The landmine problem has been brought under control,” he reports. “Vast areas have ben cleared of both landmines and unexploded 
ordnance (UXO – such as shells and bombs). The remaining minefields are mostly now clearly demarcated. This risk is reducing dramatically through, for example, the efforts of the Mines Action Group and South Africa’s Mechem. 
But, after the enactment of the new mining code, senior mining houses seeking to 
exploit resources in remoter areas will have to take care that there are no mines or UXO in their concession areas, and have them cleared if there are.”

Engineering News