Small factories take root in Africa

by Peter Wonacott

Across Africa, scores of tiny manufacturers have been going where most multinationals fear to tread. They not only make chocolate in Madagascar, but also leather shoes in Nigeria and hot sauce in South Africa. They're testing whether a continent with the highest share of unexploited resources in the world, and the lowest per-capita income, can be fertile terrain for industry.

Why Africa doesn't make more stuff has been an enduring mystery of the global economy. As wages rose in manufacturing powerhouses such as China, many economists predicted that factories would flock to cheaper pools of labor in Africa, helping to spur the same sort of rapid industrial growth that lifted living standards across Asia.

It hasn't happened.

Africa's economy has averaged solid 5% annual growth over the past decade, thanks to rising commodity prices and new consumer demand. The continent, however, accounts for just 1% of global manufacturing, compared with Asia's 25%. Africa's share of labor-intensive manufacturing—a vital source of jobs for underemployed farmers—is actually shrinking, according to a July United Nations report.

The situation so alarmed the World Bank that it began talks with Chinese trade officials on how to move more factories to Africa from China, according to World Bank President Robert Zoellick. The bank estimates there are now 85 million manufacturing jobs suited for unskilled workers in China, out of a population of 1.3 billion, but only 10 million in all of Africa, population 1 billion.



Western multinational manufacturers mostly have shied from the continent even as they have plunged into other developing countries. A report by UBS Investment Research concluded that China's share of low-end manufacturing exports—including toys, clothes and shoes—has peaked, but production was moving to other low-cost countries in Asia, such as Vietnam and Bangladesh.

Africa is regarded as a riskier destination. Many countries are plagued by corruption. There have been repeated clashes between ethnic groups. And this year's civil conflict in the Ivory Coast demonstrated once again how power struggles can damage promising economies.

And yet, executives on the ground note improvements in local governance and say Africa is becoming more conducive to private investment. Rwanda lost nearly a million lives in a 1994 genocidal conflict, but it is now among east Africa's fastest-growing economies.

"The dysfunction of Africa has become part of business folk memory that keeps Western multinationals from doing anything," says Paul Collier, director at the Center for the Study of African Economies at Oxford University. "But Africa of the 1980's and '90s is not the same Africa of today."

Those Western multinationals that are expanding in Africa are doing so mainly to reach an emerging class of consumers.

The South African unit of Nestle SA is spending about $56 million to expand production of instant noodles and cereals such as Cheerios. The Swiss conglomerate is also opening an instant noodle factory in the Democratic Republic of the Congo, one of Africa's poorest countries. Before Nestle invests in a new African country, it sizes up access to water and electricity.

The company will also walk away at the first hint of corruption, according to executive vice president Frits van Dijk. "We have lost opportunities where we had to say no because of that," he says. Nestle aims to have 33 factories on the continent by 2015, up from 28 now.


Rival Kraft Foods Inc., the U.S. snacks giant, earns about $1 billion in annual sales from Africa, where it also manufactures. But it must contend with the continent's constraints. Chief among them: an acute shortage of skilled labor that forces Kraft to rely on expatriates. "If you want to pull off large-scale manufacturing projects you bring in expats, which drives up costs," says Johan van Zyl, manufacturing director in
Johannesburg for Sub-Saharan Africa.

Smaller manufacturers can't match the production muscle of a multinational. But they are usually quicker to spot opportunities and gutsier in pursuit of them, according to Mark Paper, chief operating officer of Business Partners International, a South African financial institution specializing in lending and investing in smaller companies.




Not many African manufacturers are so ready for the global economy. Mthuli Ncube, chief economist at the African Development Bank Group, estimates that one-quarter of Africa's gross domestic product—about $450 billion—comes from 65 million small and medium-sized enterprises. But the contribution from manufacturers is tougher to measure; many are tiny cottage factories that sell goods in open-air bazaars to avoid paying tax.


Africa's industry isn't so different from the modest roots of China's own industrial revolution. In the 1980s, Chinese farmers invested in factories to make goods for rural consumers. Multinationals arrived later to fuel an export boom, according to Zhang Chunlin, an economist at the World Bank in Pretoria who specializes on private-sector development.


China's challenge was "to develop in an imperfect environment," says Mr. Zhang, who once worked at a village brick kiln in the northern China. "That is also Africa's challenge."


Many small manufacturers in Africa not only survive but thrive in imperfect environments. To maintain shoe production, Fut Conceptus Manufacturing Nigeria Ltd. runs four electric generators, at a cost of $500 in fuel a day. The chronic power outages have scared off bigger Chinese shoemakers and allowed Fut Conceptus to build up a brand in west Africa, according to Olumide Wole-Madariola, the factory's 44-year-old Nigerian founder. It makes men's moccasins and ladies' sandals out of Nigerian leather that used to be sold only abroad.


"Nobody was ready for what we were doing," says Mr. Wole-Madariola. "Nobody was ready for "Made in Nigeria."


Tim McCollum's company, Madécasse Chocolate, sought to exploit a paradox. Africa produces 60% to 70% of the world's cacao, but most of the chocolate is made outside the continent. Mr. McCollum and his partner Brett Beach, who had served together as Peace Corps volunteers in Madagascar, thought they could create jobs and alleviate poverty by making chocolate there.


"If Africa could sell the world chocolate…it wouldn't solve all the continent's problems, but it could make a big dent," said Mr. McCollum.


Messrs. McCollum and Beach ran up $97,000 in credit-card debt and borrowed heavily from friends and got a substantial investment from Prosperity Equity Partners, a Cape Town, South Africa, venture capital fund, to get the company off the ground. Mr. Beach bought a nonrefundable ticket to Madagascar in March 2009 to search for a factory that could make chocolate.


He arrived in the capital, Antananarivo, just in time for Madagascar's military to overthrow the democratically elected president. Back home in Brooklyn, would-be investors weren't impressed. Nobody dared commit capital to a plan that seemed more an altruistic adventure than a business.


"First red flag was that we were in Africa. Second was when we told people there had just been a coup," recalls Mr. McCollum of his meetings with potential investors. But during his trip to Madagascar, Mr. Beach engineered a coup of his own. He found a local contract manufacturer, chocolatier Shahin Cassam Chenai, who understood the company's direction.


The new partners developed odd but evocative combinations of chocolate bars: pink pepper and citrus, among others. In the U.S, the bars retailed for about $6 each.


As production took off, Madécasse convinced big retailers, such as Whole Foods Markets, to peddle its bars. Last year, the company's sales more than doubled to $480,000 from $200,000 in 2009.


more...Wall Street Journal

Frontier funds look to Africa

by Hadeel al Sayegh

Fund managers in the Emirates are building up positions in sub-Saharan Africa to counter a rapid decline in Gulf markets where share prices have tumbled this year.

"We are definitely bullish on Africa," said Mark Mobius, the executive chairman based in Singapore of Templeton Asset Management's emerging-markets group. Nigeria now has the largest country weighting in the Templeton Frontier Markets Fund, accounting for 11 per cent of its investments. The UAE accounts for 8 per cent of the same fund.

Gulf investors and fund managers are banking on growth in the continent's economies to perform strongly in light of a weakened global economic outlook.

The economy of sub-Saharan Africa is expected to grow by more than 5 per cent this year and next, compared with 2.8 per cent in 2009, according to a report published by the IMF last week. That compares with a projected growth of 4 per cent this year for the Middle East, 1.5 per cent for the US and 1.7 per cent for the EU.

Africa accounts for 13 per cent of the MSCI Frontier Markets Index, while the Middle East accounts for 60 per cent. That split could shift as more funds are drawn to the continent and banks move operations. Barclays and Standard Chartered have relocated employees serving the continent from Dubai to South Africa.

"These markets have a lot in common with the Gulf, although they have different economies and GDP per capita. Middle East and sub-Saharan markets both have underdeveloped capital markets," said Rami Sidani, the regional head of investments at the asset management company Schroders in Dubai.

Mr Sidani manages US$50 million of assets for the company's frontier fund, launched in January, domiciled in Luxembourg and heavily invested in the Middle East and Africa.

"For us, it was a natural expansion to move into sub-Saharan markets as a diversification play, particularly Nigeria and Kenya, given that we are already looking at Egypt, Morocco and Tunisia," he said.

One of the selling points for the sub-Saharan market is that it indirectly benefits from the Chinese growth story, said Mr Sidani. Africa is home to 30 per cent of the known mineral deposits in the world, and China is the largest user of minerals, especially copper and zinc.

Invest AD, based in Abu Dhabi, is a major investor in Nigeria's banks, aiming to benefit from the country's economic growth, expected to reach 7 to 8 per cent this year.

"Some banks are trading below book value, indicative of the attractive valuations on offer in a Nigerian stock market that is only starting to perk up for the first time since the global financial crisis," said Mohammed Al Hashemi, the head of asset management at Invest AD. "With non-performing loans at single digits, loan growth is forecast at around 15 per cent this year, with some banks probably reaching 25 per cent."

The Nigerian Stock Exchange, one of the most liquid bourses in Africa, has a $50.9 billion market size that is equivalent to 18.1 per cent of the country's GDP.

In contrast with other frontier markets, African economies fared comparatively well during the global financial crisis in 2008 as a result of weaker linkages to the rest of the world. Changes in ownership structure and integration of African banks into the global financial market have been slow, which helped avert a crash in the continent's financial services sector.

"There is a wider trend of frontier-market funds being launched with asset managers building positions or placing bets on sub-Saharan Africa," said Fadi Al Said, a senior fund manager at ING Investment Management in Dubai. "The appeal is that they have shown over a long period of time a low correlation with global markets, so from a risk perspective it makes sense."

The National

Myths about China and India's Africa race

by Anil K. Gupta and Haiyan Wang


Over the last decade, Africa’s GDP expanded at an average annual rate of 5.1 percent, low compared with emerging giants like China and India but still well above the global growth rate of 2.9 percent. During this period, Africa also became far more globally integrated and saw its merchandise trade grow at an annual rate of 12.9 percent, vs. a global growth rate of 8.9 percent.

Africa’s economic ties with China and India have grown at a particularly rapid pace. This development—when put in the context of Asia’s ongoing march toward becoming the world’s economic center—has led many to believe that China and India have taken over from the West as the new economic powers in Africa. That conclusion, however, hinges on some common misconceptions about China and India’s engagement with Africa.

Myth No. 1: China and India dominate the race for Africa.

During 2000-2010, Africa’s merchandise trade with China grew at an annual rate of 29 percent (from $9 billion to $119 billion) and with India at an annual rate of 18 percent (from $7 billion to $35 billion). While these growth rates are very robust, they are building on a very low base. So far, Africa’s economic partnership with Europe dominates that with China or India. In 2010, Europe received 36 percent of Africa’s exports, compared with 13 percent for China and 4 percent for India. Over 37 percent of Africa’s total imports came from Europe, vs. 12 percent from China and 3 percent from India. In 2010, even the U.S. was ahead of China in terms of total merchandise trade with Africa.

To date, China and India also have played only a small, albeit growing, role in terms of capital investment in Africa. Each accounts for less than 5 percent of the total inbound foreign direct investment (FDI) stock in Africa, a tiny fraction of that from Europe and the U.S.

In short, as newly active players, China and India are making rapid headway in Africa. However, appearances notwithstanding, they are still far behind the developed economies—especially Europe—in terms of economic engagement with Africa.

Myth No. 2: China and India’s engagement with Africa is all about natural resources.

Many Indian companies are looking at opportunities to sell in African markets. In 2010, Indian mobile operator Bharti Airtel paid $9 billion for the African telecom operations of Kuwait-headquartered Zain. Tata Motors , India’s largest automaker, has opened an assembly operation in South Africa. Mumbai-based Essar Group is investing in the African steel sector and Godrej, another Indian conglomerate from Mumbai, is very active in Africa’s consumer goods market. Karuturi Global, the Bangalore company that is the world’s largest rose producer, has become one of Africa’s largest players in commercial agriculture and leases 1,200 square miles of land in Ethiopia. Indian companies are also very active in Africa’s emerging IT services market.

Chinese companies are also not just focused on Africa’s natural resources. China has taken a growing interest in helping build Africa’s infrastructure such as roads, railways, bridges, ports, and power stations. At the 2009 China-Africa Summit, China pledged to build 100 clean energy projects in Africa covering solar, biogas, and hydropower. It also announced the phasing in of zero import tariffs for 95 percent of products from the least developed African countries.

Both China and India are beginning to see Africa not just as a resource supplier but also as a market and as a target for capital investment in many sectors of the economy.

Myth No. 3: China and India are the new neocolonialists in Africa.

In recent months, British Prime Minister David Cameron and U.S. Secretary of State Hillary Clinton have warned Africa to be cautious of “new colonialism,” especially from China. On this dimension, however, the West doesn’t have much of a moral leg to stand on. Self-serving rhetoric aside, look at the historical reality. In the colonial days, the West’s relationship with Africa was basically one of taking resources from the continent without giving anything back. When the colonial era ended, the West’s relationship changed from “resources for nothing” to “resources for cash.” Whether this helped African economies remains debatable, since much of the cash ended up in the Swiss bank accounts of corrupt African leaders.

China’s relationship—based on “resources for infrastructure”—has been radically different. While such deals are unlikely to be corruption-free, the scope for corruption is clearly lower. More important, in a continent like Africa, better infrastructure is massively critical for spurring growth in productivity.

India’s relationship, driven largely by the private sector and focused heavily on investing and creating jobs in Africa, has the potential to be even more beneficial for Africa. Aside from the above-noted moves by private-sector companies, the Indian government has launched a Pan-African e-Network project aimed at connecting all 53 nations in Africa by a satellite and fiber-optic network. The government has also launched a $700 million program for the development of educational institutions and training programs in Africa.

In short, China and India’s involvement in Africa is structurally different from that of the U.S. and Europe and is likely to have a bigger long-term impact on the creation of human and institutional capacities in African countries.

Myth No. 4: China’s investment in Africa’s natural resources threatens other resource-dependent economies such as Europe, the U.S., Japan, and India.

Even though Africa is resource-rich, it is not the only resource-rich region on earth. Other extremely resource-rich regions include Russia, Mongolia, the Middle East, Latin America, Australia, Canada, and the U.S. It is impossible for Chinese investments in Africa to give China any type of monopoly position in any commodity. In fact, what Chinese investment does is to boost the world’s supply of various commodities and thus prevent commodity prices from rising even faster than they otherwise would.

Take crude oil as an example. For a country such as India, it does not matter whether a barrel of oil was extracted from a well in Angola, Nigeria, Canada, or Russia. The only thing that matters is the positive impact of China’s investments in Africa’s oil resources on the world’s total supply of oil. Thus, China’s investments in Africa’s natural resources should be treated as a case of “win-win-win”—a win for China, a win for Africa, and a win for other resource-importing countries.

Myth No. 5: India cannot compete with China in Africa.

The only Africa-focused issue where India cannot compete with China is in bidding for concessionary rights to natural resources. China simply has more capital than India. Also, most Chinese investors in Africa are state-owned enterprises with access to extremely low-cost capital from state-owned banks. In contrast, it is the private sector from India that plays the leading role in Africa.

However, the last thing India should fret about is Chinese investments in Africa’s natural resources. In sectors other than natural resources, Indian companies have overwhelming advantages over their Chinese peers. In socioeconomic terms (such as low income levels, vast internal diversity, widespread use of English), Africa is much closer to India than China. Also, Indian private-sector companies are far more experienced at managing globally dispersed operations than Chinese state-owned enterprises.

Bharti Airtel is a striking example of India’s strengths over China. Bharti Airtel found it easy to become the second-largest mobile operator in Africa and has successfully transferred its frugal innovation model from India to Africa. Meanwhile, China Mobile has had great difficulty figuring out how it could create any value by acquiring an operator in Africa. The Bharti Airtel story is being repeated in other sectors of Africa’s economy such as autos, steel, agriculture, and education.


Anil K. Gupta is a professor of strategy at the Smith School of Business at the University of Maryland and a visiting professor in strategy at INSEAD. Haiyan Wang is managing partner of the China India Institute. They are the co-authors of Getting China and India Right (Wiley, 2009) and The Quest for Global Dominance (Wiley, 2008). 

Business Week

Chronic transport challenges impede African development

by Tobias Heinemann

Conservative estimates indicate that by 2040, Africa will be home to one billion people. By then, China’s population will be shrinking and India’s will only be growing at three million people annually to add to the current 1.6 billion.

As well, political reforms in many African countries have led to an improving environment that has become conducive to doing business, and the continent continues to attract domestic and foreign investment. But most importantly, Africa’s intra regional trade is on the increase and in recent years, the continent has experienced robust business and trade with the constant movement of goods within its borders. Trading with regional partners provides easier access to markets, reduces the cost of transporting products and it mitigates the risk of external factors (e.g. global financial system crisis) which lie beyond the control of producers.

Intra-regional trade is also aided by roads, bridges, rail lines, ports, and airports which are vital to delivering economic and social benefits by connecting producers to markets and enables populations access to basic necessities such as water, health care, education, fuel and livelihoods.

In order to meet rising demand for regional trade, some urgent work has to be done to alleviate the challenges facing the region’s transport infrastructure. In its current state, the infrastructure network is not able meet existing demands and at the same time, new challenges with different characteristics from the present are emerging.

Today, it costs about $5,000 to ship a car from Abidjan to Addis Ababa – but just $1,500 to ship the same car from Japan to Abidjan. These prohibitively high costs are a barrier to trade and investment which form the cornerstone for economic growth and regional prosperity.

 It is an open secret that transport inefficiencies are the biggest impediment to Africa’s realization of its economic and poverty alleviation goals.

However, as we know, transport infrastructure is not cheap. Government budgets are constantly stretched and donor funding — particularly in times of global economic crisis — may not be forthcoming. For Africa’s economic growth to soar, with its booming population, the continent needs investments of some $100 billion  a year in infrastructure alone. The International Finance Corporation (IFC) has estimated that Africa invests $10 billion each year in power energy but actually needs investments of $40 billion annually in this sector alone.

Notable recent developments have been made with the Kenya-Uganda railway which received a significant finance package from global lenders demonstrating the important role that transport infrastructure is expected to play in boosting regional development. Infact, traffic on the existing network (Rift Valley Railways; Tanzania Railways Ltd; and Tanzania Zambia Railway Authority) has the potential to increase from 3.7 million tonnes in 2007 to over 15 million tonnes by 2030, an annual rate of growth of 6.7 per cent. This would greatly boost intra-regional trade which presently accounts for almost 9 per cent of total African commerce, compared to nearly 50 per cent for emerging Asia.

An Africa with efficient transport services will ultimately be a better global partner and a better place to do business.

Dr Heinemann is the Chief Commercial Marketing Officer of S-Bahn Berlin GmbH, which operates a rapid transit system in and around Berlin, the capital city of Germany

The Citizen

Is Africa neglecting security in its expansion of sea shipping capacity?

There is increasing investment in Africa's long-neglected shipping infrastructure, driven by the recent strong growth of many of the continent's economies, as well as the explosive growth of trade with Asia, especially China and India.

But Ronald J. Thomason asks whether this welcome infrastructure growth is lacking in an the development of an important support sector: security. He is president of a transportation and supply chain security consulting firm.

Among the questions he poses:


Who  is responsible for what regulations applying to a specific African port, maritime facility or vessel, and their operations within each country?


What is the best way to integrate changing security requirements into existing operations?


He partially answers his own questions with, ''The importance of security as a critical element of efficient, effective, and competitive trade activities is often ignored. Security must be included in the design, engineering, construction, and operation of Africa’s maritime and supporting supply chain infrastructure and operations. Solutions to address the challenges and risks of compliance with trade and transportation security requirements are called for.
''

More...Africa Report

Africa, China trade ties diversifying, says AfDB

Relations between Africa and China are starting to mature, says a recent report by the African Development Bank (AfDB).

Trade relations between Ethiopia and China have expanded considerably in just a few years, from $100 million in 2002 to $860 million in 2008. As a result, some local producers, in the shoe and textile industry for example, were driven to closure, as they could no longer compete with cheaper Chinese products.

The latest AfDB report also highlights, with much significance, the diversification of economic relations between China and Africa: Beijing is no longer the sole decision-maker.

Last year, Sino-African trade amounted to $100 billion, an eightfold increase in ten years. Chinese investments in Africa amount to approximately $11 billion every year, a sevenfold increase in six years.

According to the African Development Bank, the perception that China is only after Africa’s raw materials does not sit well with the facts.

The Citizen

Senegal's Money Express to sell a third of share capitalts shares

Senegal-based money transfer company Money Express is aiming to offer 27 percent of its share capital to investors, including through an upcoming flotation on the Paris bourse, Reuters reports.

Meissa Deguene Ngom said the company was aiming to place 200,000 shares at 14 euros each with strategic investors and then float a further 100,000 shares on the stock market. He said the company handled a total 245 billion CFA francs ($511 million) worth of transfers last year and was looking to expand.


Established in Dakar in 2002, it began mainly serving francophone African countries, but has since expanded its services throughout the continent, as well as abroad, keeping up with the international growth and spread of the African diaspora.

Trade Africa

Shippers respond to boomimg Africa-Asia trade

The expanding trade between African and Asian economies has begun to affect the long term plans of the world's shipping companies.

Large-scale trading of commodities and manufactured goods that have formed the back bone of shipping trade between the two continents are increasing significantly, particularly between Africa and China. Additionally, various kinds of smaller trading in both directions have in recent years grown explosively as ties are cemented.

As Bloomberg reports, ''Maersk, Denmark’s biggest company, said it’s spending more than $2 billion to create a fleet of the 22 largest container ships to connect West Africa and Asia. The so-called West Africa MAX vessels are each about 249 meters (817 feet) long, more than three Airbus A380 superjumbo jets. Maersk predicts about 15 percent annual cargo volume growth on Asia-Africa sea routes during the next five years.''

Maersk predicts about 15 percent annual cargo volume growth on Asia-Africa sea routes during the next five years.

An analyst is quoted as saying rising demand from China and India for various African commodities, such as coal and minerals is pushing the increased trade volumes, as well as more African purchase of Asian manufactured goods and commodities like rice.

Trade between Asia and Africa, which together account for three-quarters of the world’s 7 billion people, rose more than 400 percent from 2001 through 2010, data from the United Nations and the Population Reference Bureau show.

An British academic points out that Asia in cautious of but less fearful than western countries of the risk of doing business with Africa, partly because ''it’s more used to it, and because it’s not basing its views on Africa of 20 years ago,” said Paul Collier. “Africa has improved its business climate, so Asia is seeing the new Africa, whereas the West is remembering the old Africa.”

Trade Africa

Will intra-Africa free trade promote integration, or deepen inequality between countries?

by Servaas van den Bosch

 It is not certain that an African free trade area will further regional integration or deepen the existing inequality between countries.

For the past year and a half the African tripartite free trade area (FTA) has dominated the economic agenda in South and East Africa.

The tripartite area, which will connect the Regional Economic Communities (RECs) of the Southern African Development Community (SADC), the Common Market for Eastern and Southern Africa (COMESA) and the East African Community (EAC), will span 26 African countries with over 578 million consumers and a combined gross domestic product of 853 billion dollars.

Negotiations were launched this year in June in South Africa and leaders want the first phase of the Cape to Cairo free market to be a reality within 36 months. This phase deals with trade in goods and focuses on tariff liberalisation, infrastructure development, non-tariff barriers, movement of business people and rules of origin.

"The timeline is probably a bit unrealistic, seeing that the negotiating mandate is driven by member states of the different RECs," says Ndiitah Robiati from the Agricultural Trade Forum in Windhoek. She refers to the slow progress made on economic integration in SADC and COMESA, where member states have not implemented agreements on tariff liberalisation.

Officially the tripartite FTA is the panacea for overlapping membership of different RECs and an important step in the implementation of the 1991 Abuja Treaty that calls for an African Monetary Union by 2023. But a single currency bloc, or even a customs union, could be the last thing on the mind of South Africa, which is dead set on making the tripartite FTA a reality.

"South Africa has the industrial base, but they face the problem of getting their goods and people into the continent, especially into the large markets of East Africa, where its footprint is limited," comments Paul Kruger, researcher at the Trade Law Centre of Southern Africa (TRALAC).

Economists point out that big countries like South Africa and Egypt stand to benefit most from the tripartite FTA. "In the short term the bulk of the countries will not benefit in terms of increased trade between member states, our research has shown. The dominant role players will benefit because they are better positioned," says TRALAC researcher Taku Fundira.

"In Southern Africa only South Africa and Mozambique will benefit. In the case of South Africa, this is because of the advanced state of its economy and its existing industrial base, which gives it an edge over other countries. Mozambique is still growing and is putting the right policies in place to attract investments. Both countries will benefit from liberalisation in the agricultural sectors as they are large sugar producers."

But trade experts warn that the cumbersome economic integration process in SADC, with an envisaged customs union being pushed back and countries failing to implement the provisions of a 2008 FTA, raises doubts about the tripartite area.

"No doubt there are challenges," says Fundira. "The smaller problems manifesting themselves in the RECs could be multiplied in the tripartite FTA. But states have also learned from experience. Rules of origin, for instance, should not be an obstacle but a facilitator of trade."

Rules of origin are a way to protect products and industry sectors. Countries use them to exclude third parties from preferential trade agreements. An example would be preventing a Chinese product, repackaged in South Africa, finding its way into the European Union (EU) under South Africa and the EU’s Trade and Development Cooperation agreement (TDCA).

Similarly countries listing products as sensitive should not hinder the process, says Fundira. "The definition of ‘sensitive’ currently is quite broad. As most countries in the region produce the same things, listing a few tariff lines as sensitive immediately restricts trade. Then the process becomes meaningless. We can see that this issue is approached more cautiously in the FTA negotiations."

It is still unclear how the ambitions of the tripartite FTA will be reconciled with those of the RECs. EAC and COMESA are customs unions, while SADC announced two weeks ago it still intends to establish a customs and monetary union.

"It will be interesting to see how a SADC customs union will converge into the tripartite FTA," notes Kruger. "The current situation in COMESA, which has a customs union without a common external tariff, indicates it will be impossible for SADC to realise its ambition of a customs union."

This might be fine with South Africa, which already has a headache from its membership of the Southern African Customs Union (SACU). Through the SACU South Africa pays revenue to the union’s four other members. It is money that disappears in the budgets of these countries, instead on being spent on infrastructural development that would enable South Africa to widen its markets.

"South Africa is shifting its efforts from deeper economic integration to liberalising markets. Technically speaking it probably could do without entities like SACU," notes Robiati.

What some commentators describe as a new South African imperialism, others deem a more realistic alternative to the haughty ideals of economic unity so far pursued.

"South Africa has not allowed itself to be held back by trade barriers. When you are in Dar es Salaam you can eat in the same Spur restaurant as you would in Johannesburg," says Robiati. "You can phone with MTN and take your money out of a Standard Bank ATM. South African companies have taken the risks and it has paid off."

In short, South Africa has an economic vision. "Outside South Africa there are no industrial policies in place. How can countries sign up to trade agreements when they essentially do not know what they want?" Robiati asks.

IPS

Islamic finance baffling Nigeria

by Rushdi Siddiqu


Nigeria has become a battleground for Islamic finance, further dividing Africa's most populated country.
Behind the headlines are the usual myths about Islamic finance: It's only for Muslims; it is a backdoor conversion of secular Nigeria into an Islamic state and that it is used to finance terrorism, among other misconceptions.

In Nigeria, Islamic finance cannot be positioned as a "choose or lose" proposition. The country, at one level, is an acid test in the cross-selling of Islamic finance to places like the US and South Korea, and other places where there is an anti-Sharia movement.

There were two early warning signs in Nigeria of the inevitable resistance to Islamic finance, first that many non-Muslim Nigerians did not want to be part of the Organisation of Islamic Conference and opposition to Boko Haram, an offshoot of Al Qaida.

Going by the newspaper headlines, many non-Muslim Nigerians are not convinced Islamic finance is about business, but rather about religion.

Even if slick presentations with eloquent oratory were made about its "peaceful" presence in UK or Hong Kong, Singapore, Luxembourg, Paris, and other non-Muslim countries, those opposed were not going to be convinced because of religion, history and landscape of Nigeria.

The same anti-Islamic finance people are not interested in tapping Gulf Cooperation Council money, because they believe it will not reach them as Islamic finance is only for Muslims. They believe this money will give Muslims more power and influence, resulting in the mass conversion of Christians and a caliphate established in Nigeria.

Furthermore, these people do not consider the successes of Islamic finance in sub-Saharan African countries including Kenya, Uganda, South Africa and Ghana, among others.

The political dynamics are different in a country as large and as diverse as Nigeria.

Notwithstanding the highly-charged situation in Nigeria, is there a way to reset the Islamic financing offering in the country?

Financial inclusion is the essence of Islamic finance, hence, all the important stakeholders need to be involved in not only educating people and eradicating fears, but more importantly, to solicit their opinion.

The Nigerian media carries the message to the masses, but what they need to be briefed on is first what Islamic finance is and, more importantly, what it is not. This would entail presentations and question and answer sessions by the Governor of the Nigerian reserve bank, Mallam Sanusi Lamido Sanusi, and his supporters, who are in favour of the introduction of Islamic finance to Nigeria.

Furthermore, these briefings should be part of an ongoing dialogue. The same approach must be utilised to brief members of parliament, with the emphasis on interactive questions and answers.

Perceptions can be corrected by explaining the selection process of Sharia compliant stocks. If we apply the present Islamic stock screening, similar to negative screening of social-ethical investing, to the Nigerian stock exchange, it will show local compliant companies.

Typically one third of companies listed on an exchange are Sharia-compliant, hence, some of these companies may already be in investors portfolios. This will make it clear that Islamic equity investing is not about investing in shady companies that have hidden Islamic agenda.

As part of inter-faith dialogue, finance should also be discussed among religious people, including imams, priests and bishops.

Financial education is needed for the imams on Fiqh-ul-Maumalat, but it's better to do it right rather than fast.

One of the most often raised allegations about Islamic finance is that it is used to finance terrorism, be it via zakat or the donation of impermissible income. Obviously, perceptions are stronger than reality, and need to be addressed by imams and scholars as the first line of education outreach.

Non-Muslim chief executives and other senior executives from Islamic banks must be brought to Nigeria to explain the proposition as they have more credibility when speaking to local non-Muslims and clergy. It will also show that Islamic finance is not only for non-Muslims as customers, but also as employees.

Nigeria should look at the track record of a strong Muslim secular state like Turkey, which has Islamic banking. Turkey calls it Participation Banking, the essence of Islamic finance, and such branding will resonate in Nigeria.

Finally, it might have been easier if Governor Sanusi included the halal food industry with Islamic finance. Everyone loves food and its foundation of meaningful dialogue.

It is not too late to reset the discussion about Islamic finance in Nigeria.


Gulf News

How Zimbabwe's new property sales-related currency controls might be read

The Reserve Bank of Zimbabwe has directed that only the first US$50,000 of a property sale can be immediately remitted outside the country, with the rest drawable from local banks in four installments over the course of a year.

The move is to help stem the outward flow of hard currency from an economy struggling to recover from a decade of contraction.

Although there are reports that the banking sector was told of the requirement as far back as early August, full details are yet to come to light. Some reports say the sale amount above $50,000 must be deposited with the central bank, while others say the money can be kept in a local bank of the seller's choosing at a reported 10% P/A rate of return. Inflation is officially at about 3%.

Reportedly the rule does not affect property investors who can show they brought a property's full purchase price from abroad. With economic activity still low and revenues far below levels needed for expenditure and debts payments, this is one effort to reduce the loss of what little money is generated locally. 

The ruling is a tacit admission of the economy's failure to significantly pick up economic activity since stabilization began in 2008 with the formation of a coalition government and the adoption of several foreign currencies as official tender, in place of a Zim dollar whose value was wiped out by hyperinflation.

There are concerns in the economy over the new ruling because of the RBZ's previous reputation for hijacking depositors' hard currency accounts at the height of the hyperinflationary period, to pay for desperately needed exports. Those commandeered funds are yet to be repaid. Trust and confidence in the central bank plummeted. The new ruling may therefore be met with more panic than similar currency controls in other economies.

There will also be concern about a return to arbitrary 'directives' in the running of the economy. At the worst of the economic crisis RBZ governor was had unprecedented latitude and power to interfere in various parts of the economy as part of what were referred to as the bank's 'quasi-fiscal' activities. They were justified on the basis of the need for unusual measures to deal with the many pressures which brought the economy to its knees. Although the RBZ has largely reverted to a much smaller, largely traditional role, the announcement is for many Zimbabweans a jarring reminder of what is regarded as the central bank's excesses. 

The surprise announcement will be taken as a sign that the economy is performing much poorer than officials may be letting on.   

Confidence in the banking system that was eroded when depositors could not draw their funds during the era of hyperinflation and over several bank viability scares will again be shaken. The banks may only be implementers of the RBZ ruling, but any hint that depositors can not have full access to their money will bring back memories of some of the reasons that they previously lost client trust, which they have been struggling to regain.

The government has been battling to assure foreign investors that Zimbabwe is open and safe for business. A controversial law requiring black Zimbabweans to be majority shareholders of businesses has caused widespread concern that it will discourage foreign investors. General concern over the government's willingness to resort to sudden, unpredictable diktats at short notice may be renewed by the RBZ ruling.

During the crisis years many 'normal' economic activities were criminalized in efforts to stop the multi-pronged slide of the economy. Zimbabweans learned to find innovative ways to skirt the many new regulations prohibiting one activity or another. Many of those innovative 'skills' may be brought into play again by property sellers looking to avoid having their money tied up in banks for up to a year after a sale.

Trade Africa

Kenya to switch off counterfeit cellphones

In many African cellphone markets Chinese knock-offs of major brands have long been popular because of how cheap they are compared to the genuine article. There are now growing efforts to stamp out the widespread trade in counterfeit cellphones.

While often of lower quality, they are usually capable of serving the basic function of communication, even if they may not have all the features of the genuine article, and if the workmanship is lower. The substantially lower prices are enough of an incentive for consumers to ignore any deficiencies. Sometimes these deficiencies would be offset by extra features the original does not have, such as dual-SIM card capability, an attractive feature in many African markets.

There are several drivers of the growing efforts to crack down on imports of counterfeit phones into Africa.

Most of these phones are smuggled, so cash-strapped countries are seeking to rein in the avoidance of paying of duty by importers.

China has been stung by accusations of dumping junk products onto African markets. In recent months there have been delegations and statements by Chinese officials to assure various African markets of their intent to crack down on this trend, which they are concerned has dented the 'China brand' in Africa. While Chinese goods are widely bought in Africa for their affordability, they are also usually derisively described by various names indicating the perception that they are of low quality. Chinese authorities are therefore increasingly eager to cooperate with their African counterparts to stamp out or at least reduce the trade in counterfeits of all types, including cell phones..


As African cellphone markets slowly mature, there is also increasing consumer demand for better quality products.

Cellphone prices are trending down, reducing the differential between the counterfeits and the genuine products, especially at the lower end of the market. The incentive for importers to bring in counterfeits is decreasing, as it is for consumers to settle for them.

The Communications Commission of Kenya has taken aggressive moves against the counterfeit cell phones. The telecommunications regulator agreed with players in the industry for them to disconnect the services of users whose phones did not have an identifying IMEI by the end of the year. In doing so, it has postponed a threat to require this by the end of September. It was feared that this would affect as many as 2.3 million users, cutting into the revenue of cell phone companies.

The extension will give users more time to purchase genuine phones.

Francafrique corruption allegations: a mirror to the leakage of Africa's wealth

It has long been implied that corruption in Africa is a basic moral failing of the natives, and that foreigners who pay bribes to facilitate trade with the continent in Africa are intrinsically clean, but forced by circumstances to pay the backhanders.

Another part of the stereotype is that trans-continental always involves Africans receiving bribes from foreigners.

Explosive new allegations by a senior long time French 'Africa hand' is throwing some of the stereotypes into the air. It turns out that it is actually possible for the European partner to be the bribe taker and the African partner to be the briber!

''The French are torn between revulsion and disbelief over claims that ex-President Jacques Chirac and his ally Dominique de Villepin received tens of millions of dollars in bundles of banknotes from several African leaders,'' a BBC report says.

The report does not specify what the disbelief is about exactly; whether that their politicians could be bribed by Africans who are the usual presumed bribe takers, or that the rulers of desperately poor Africans nations would offer rich French politicians the bribes and have them be accepted. Perhaps they are shocked at both, as both represent an upset of what has always been considered the established moral order between Africans and Europeans, which is that Africans almost can't help being corrupt, while Europeans are honest by default, by nature.

Robert Bourgi is the French lawyer who for many years has served as a free lance fixer between the French establishment and the governments of its former African colonies, over which France continues to exercise waning but still considerable influence.

Bourgi has sensationally charged that in Chirac's 2002 re-election campaign he personally passed on cash contributions worth millions of dollars from the leaders of five African countries, all former French colonies: Senegal, Burkina Faso, Ivory Coast, Congo-Brazzaville and Gabon. Later, the president of former Spanish colony Equitorial Guinea allegedly chipped in as well.

''In some bizarre touches of apparent detail, he relates how on one occasion the money arrived at the Elysee palace hidden in African bongo drums. On another occasion, the notes were wrapped up in a poster for a Mini Cooper car.''

Quite un-necessarily, the BBC report tells us ''the allegations are explosive.'' Clearly they are dynamite, with the potential to upturn long-rumored corrupt relations for which there has previously been very little inside information to go on.
Under the original arrangement of post independence relations between France and its colonies, the African leaders guaranteed French access to mineral resources and arms contracts, and helped France maintain its standing on the continent. In return a French military presence more or less ensured their survival in power.

Major state enterprises in France like the oil giant Total paid out millions in bribes. The quid pro quo was often that African leaders syphon part of their gains back to France to fund political parties.

Here is part of the explanation for why so many African countries rich in natural resources still wallow in poverty. The concessions to mine those resources are sold for a song, taxes can easily be bypassed by well-connected foreign companies, what revenue accrues to the state is poorly accounted and ends up in private hands, and on and on. African wealth that was stolen blatantly in the colonial days is now stolen more surreptitiously, and with the full, eager cooperation of its political elites.

It is intersting that these long established practices of French companies in Africa in particular are what the Chinese are accused of in their push to do business with the continent. The Chinese are accused of a new neo-colonialism, lack of transparency and of cozying up to unpleasant regimes. Guess what, if true, that rogue behavior is neither new nor unique to the Chinese!    


Will anything change as a result of the exposition of the extent of the levels of 'Francafrique' corruption? After the dust settles it will likely be back to business as usual, at the usual expense Africa.

Trade Africa

Was Africa ever the West's to lose to China?

Africans have longed chaffed at the West's attitude that their vast continent is 'the back yard of or 'belongs' to Europe and the U.S. Before the rise of China, India and the many other countries that are offering alternative opportunities for partnership, there was little that they could do about western attitudes they consider patronizing. 

In turn, the attitude of the West often seemed to be, ''Let them resent how we relate to them, after all what can the poor, helpless Africans do about it?"

Simplistic and incomplete as that is, that in a nutshell sums up a lot of the reason why China has made such astonishing recent economic inroads into places in Africa that previously have been considered exclusively the spheres of economic influence of the West.

Teo Kermeliotis has a fascinating article on CNN headed Is the West losing out to China in Africa?

"China's growing influence in Africa is creating nervousness in the West," says the CNN report. "Western powers are worried that they are losing influence in the resource-rich continent, according to analysts. Driven by their appetite for natural resources, trade opportunities and political alliances, emerging powers such as China and India are moving from the sidelines to the center stage in Africa -- a region the West has long considered to be its own trading partner."

Why is this happening?


David Shinn, former U.S. ambassador to Burkina Faso and Ethiopia, says a big part of this is because Chinese companies have government backing and/or involvement, whereas the nature of the western business model means all the governments can do is help to point their investors to where there are opportunities.


"If the Chinese government wants to encourage an engagement in the Democratic Republic of the Congo, they can make it happen," says Shinn. "If the United States wants its companies to get involved in the DRC all they can do is say 'look, there's an opportunity there, why don't you go explore it' and if they want to explore it, they do and if they don't they don't."

Africa's imports and exports

According to Shinn, this different system of government "does create anxieties" because "the United States and the West see China filling all kinds of voids that it thought it would eventually fill."


In other words, Africa was seen as a basically a large resource/opportunity store that would always just be sitting there to be available when the West was ready to come calling. When there was no one else Africa could readily go to for the exploitation of those resources/opportunities, it is not difficult to see how the attitudes of the West, and that the Africans so resented but could do nothing about, then developed.

What are those 'attitudes?' A certain taking for granted, a certain hectoring tone in interactions, a 'take it or leave it' attitude in negotiations and trade, etc. At the elite level, African despots additionally resented the linking of trade and business to 'democracy and human rights' concerns. That they were so inconsistently applied (there were/are good/our dictators and bad/not our dictators, for example) only deepened the sense of being manipulated, of being used because of one's perceived weakness and helplessness.

While the terms of engagement with new economic partners India and China are a work in progress for Africa, for the above reasons and many more, they came into an African environment that was particularly welcoming, happy to have alternatives to the West. Whether those alternatives will be uniformly, necessarily more beneficial for Africa remains to be seen.

But, yes, there is a sense in which it can be said the West is 'losing' Africa.  

As Kermeliotispoints out: China overtook the United States as Africa's biggest trade partner in 2009, according to OECD figures, whereas in 2000 the United States' trade with Africa was three times that of China's. India's bilateral trade with Africa jumped from around $1 billion in 2001 to about $50 billion last year.

The European Union still accounts for more than 40% of Africa's trade but the share of Africa's trade with the EU and U.S. fell from 77% to 62% over the last decade. At the same time, the share for new economic forces -- China and India but also countries like Brazil, Turkey and South Korea -- rose from about 23% to 39%.

So while the West is losing ground in many areas, this does not mean it will be shut out of opportunities in Africa. And with China's very different-from-the-West ways of doing business, there is a steep learning curve for both Chinese and Africans in the new relationship. But in general for Africa, the greater mix of partners is good in many ways, including new sources of capital, investment in areas and ways westerners may have little interest in, the greater bargain power from having more suitors, etc.

Richard Downie, deputy director of the Africa program at the Center for Strategic and International Studies, ''gets it'' in a way many others don't.

He says, "There's still a narrative in our minds in the West that Africa is backward and Africans have got to become like us -- 'we have got to change them' -- I think that Africans feel that and the young African generation that's coming through are now very resentful of that."

If just that was more widely and better understood, the West, with its once (still?) huge and many advantages in Africa, might not be ''losing out to China'' the way it is doing.

Trade Africa

Mauritius, Turkey sign free trade agreement

Turkey on September 9 signed a Free Trade Agreement (FTA) with the tiny island state of Mauritius, hoping to triple trade in the short term.

The agreement became the 15th of its kind Turkey signed with other countries.

The volume of trade between the two states increased from $25 million in 2009 to $29 million in 2010 but last year's figure remained way below the pre-global financial crisis level of $42 million recorded in 2008.

Discussion for a FTA between the two countries took a step forward in January.

Mauritian imports from Turkey currently represent about 1% of total imports of the Island. Among the goods imported are cereals, flour , machinery, base metals and pharmaceutical produc ts. Mauritian exports to Turkey are mainly fabrics, which amounted to an estimate US$ 2.5 million in 2008.Trade volume for 2011 is estimated at US31 million.

Under the FTA, Turkey will charge preferential duty on Mauritian products to include textiles, clothing and agricultural products. Industrial products will have unlimited access to the Turkish economy.

Mauritius will also allow preferential access to all Turkish manufactured goods, except those like meat, soap and paints, which have been classified as 'sensitive' products.

Trade Africa

Kenya's new Nairobi airport terminal offers contractors tender opportunities

There is a scramble by various contractors to purchase tenders for a new $500 million terminal at Nairobi's Jomo Kenyatta International Airport, Kenya's Standard newspaper reports.

The Kenya Airport Authority is reported as saying more than 100 firms from around the world had so far bought tender documents.International banks interested in supporting bid winners are also said to be showing keen interest.

An official said the brand new terminal would be able to handle 20 million passengers annually. A separate, on-going upgrade of the existing airport complex will enable the old terminals to handle an estimated 9 million passengers each year.

The physically separate new facility terminal will be connected to the existing complex by bus service, and will offer up to 50 check in counters, eight air bridges, reportedly including the capacity to serve the Airbus A380, the world’s largest aeroplane. It will be able to park up to 45 aircraft.

The current airport terminal was opened in 1978 with capacity to process a maximum of 2.5 million passengers every year.

The Kenya Airport Authority says the new complex will be 'the largest single terminal in Africa' It is expected to open to air traffic in 2014.

Trade Africa

Frustration mounts over Kenya power cuts

by Duncan Miriri

Chronic power blackouts and higher electricity bills in Kenya are fuelling anger ahead of next year's presidential election as they push up living costs and cast doubts on the government's ability to fully implement its long-term economic vision.

Kenyans say their electricity bills have nearly doubled in the last two years. A prolonged drought creating food supply problems has also pushed inflation to above 16 percent in August, from under 5 percent in December.

Distribution company Kenya Power announced scheduled three-hour daily cuts for some industrial customers in late July, further evidence of the inability of an ageing power grid reliant on hydro-generation -- affected when rain levels fall -- to cope with extra demand.

"If you look at the cost, we are not competitive anywhere in the world. We have the highest cost of power," said Vimal Shah, Managing Director of Bidco, a soap and edible oils manufacturer.

Parliament has responded by forming a select committee on costs of living to look into the problem by, among other things, grilling top executives of power firms.

Kenya Power and the generation company KenGen are controlled by the government although they do have private shareholders. Both utilities have been ridiculed by Kenyans angry at persistent power cuts. Kenya Power, which rebranded earlier this year from Kenya Power and Lighting Company, used to be known as 'Kenyans Please Light Candles'.

"Everybody has standby generator which is a waste of time. If you calculate all the diesel generators in the country, you might probably have five to seven megawatt of capacity or more than that," Shah said.

Officials have set a target of 30,000 megawatt (MW) generation by 2030, the year in which it hopes to become a middle-income country. Kenya currently has capacity of 1,400 MW and is slated to install another 2,000-3,000MW within the next five years.

In the interim, an additional supply of 140MW worth of emergency power is being installed to cut the blackouts and prevent factory production line stoppages.

Officials blame delays in processing security guarantees worth $209 million, demanded by independent power producers, for the precarious energy supply situation.

Four independent power-generation projects had been lined up but the government declined to offer investment guarantees because of worries it would put too much strain on the country's fiscal position.

Reuters

Libya plans shake-up of oil sector

Libya's interim government is drafting a proposal that would shrink the responsibilities of the National Oil Corp (NOC) to make it a purely commercial organisation, a member of the interim government said.

The North African country is trying to restore oil production after more than six months of fighting between rebels and forces loyal to Muammar Gaddafi which have caused foreign oil companies to flee and led to infrastructure damage to oilfields and export terminals.

Mustafa el-Huni, a member of the National Transitional Council (NTC) with responsibility for oil, "The ministry should make policy. The NOC is a commercial entity, while the ministry is a political (one) and should be involved in international participation and putting policies in place."

This would be a change from the system under Gaddafi where the NOC handled both the daily operations of the oil sector and represented Libya on the world stage at OPEC meetings.

There are also plans to split the NOC into three parts to separate oil production and exploration, or upstream, from oil refining or downstream activities.

A third branch would handle renewable energy projects like solar power to help Libya to catch up with other North African countries such as Algeria and Morocco.

Libya has long been reliant on imports of refined products to meet domestic use because of insufficient refining capacity.

Oil was Libya's main industry before the revolt and is responsible for the lion's share of the country's income, so running the sector efficiently will be one of the biggest challenges for the country's new leaders.

One hurdle to reform is likely to be relations with subsidiaries which may push for further financial independence. The eastern Libyan oil firm Agoco has gained increasing independence this year and has acted like a defacto oil company as international sanctions have prevented dealings with the NOC.

Some see no need for an NOC.

"I don't want an NOC. It is the biggest error that they control everything. They should leave more flexibility for national companies to compete with international companies," said Agoco spokesman Abdeljalil Mauf, who worked in the company's exploration department before the revolt.

Reuters

More investment and competition, lower cell phone tariffs expected as Bharti enters Rwanda

Rwanda has awarded Indian telcom Bharti Airtel a mobile phone operating license, the East African country's third. The license is for 2G and 3G GSM services.

Bharti has announced that it will invest $100 million in Rwanda over the next three years, including the $30 million price for the license.


Rwanda is one of Africa's fastest growing telecommunications markets, with the sector deliberately focused on for development by the government of president Paul Kagame. Mobile phone penetration as of July 2011 is at 38.4%, leaving vast room for growth.

Bharti Airtel offers mobile voice, data, fixed line and high speed broadband services. It has over 230 million subscribers across Africa and Asia.

Bharti made its entry into African by acquiring Kuwait-based Zain Telecom's African operation for about US$ 10.7 billion in 2010. Rwanda is the 17th African country in which it will have a presence. The company said it had 46.3 million mobile customers on its networks in Africa in the first quarter which ended on June 30, 2011. During the quarter, the company added 2.1 million customers. The company reported to have earned average revenue per user of USD 7.3 per month during the quarter.

It is expected that Bharti's entry into the Rwandan telco market will increase competition and benefit users in lowered tariffs.The other players are South Africa's MTN and Tigo, the brand name of Belgium-based Millicom International Cellular. MTN Rwanda remains the dominant player in the industry, with 2.7 million subscribers, while Tigo had 966,065 subscribers by May.

Trade Africa

1 Ivory Coast plans more value addditon to boost economy



2 World Bank, China may cooperate on transferring manufacturing jobs to Africa



3 Foreign investor denies bribing Tanzania's political establishment



4 Vietnam exports rice to Sierra Leone



5 Top bank in Africa boosting business in yuan



6 Africa-Indonesia trade grows

Ivory Coast plans more value addditon to boost economy

Ivory Coast plans to adopt a new investment code by year-end to encourage the creation of finished-products industries, particularly in the cocoa and coffee sector, industry minister Moussa Dosso has said.

The world's top cocoa producer is recovering from decade-long strife that culminated with a violent four-month post-election standoff which brought the economy of the once regional powerhouse to its knees.

Dosso said a revised code would offer incentives including tax breaks to private sector investments in industries that process goods locally for exports.

 "Only 25 percent of cocoa is processed into semi-finished products for export and less than 1.5 percent of the total cocoa output is processed into finished products locally," Dosso said.

Barry Callebaut, the world's largest maker of chocolate products, said in August that it plans to upgrade grinding capacity at its cocoa processing plant in Ivory Coast to 175,000 tonnes a year from 105,000 tonnes.

Ivory Coast has recorded its highest cocoa crop ever and some exporters said the tally may hit 1.5 million tonnes.

Apart from cocoa, Ivory Coast is also a top regional coffee, rubber, banana and cotton producer. It plans to strengthen its mining sector and has said it will almost double gold production by 2013 to about 13 tonnes a year.

Dosso said the plan is to make it possible for investors to go though the administrative process of creating a company within 24 to 48 hours. Currently the process takes about a month or two.

Reuters

World Bank, China may cooperate on transferring manufacturing jobs to Africa

The World Bank is in “very early stage” talks on cooperating with China to promote the transfer of low-value manufacturing jobs from the nation to Africa, said Robert Zoellick, head of the Washington-based lender.

An expected end to the expansion of China’s labor force and the government’s push for domestic companies to move up the value chain could help shift jobs that would boost employment in sub-Saharan Africa and North Africa, Zoellick said at a briefing in Beijing today at the end of a five-day visit.

China’s three-decade-old, one-child policy may accelerate declines in the workforce, forcing companies to upgrade to higher-value products. The pool of 15 to 24-year-olds, a mainstay for factories making cheap clothes, toys and electronics, will fall by almost 62 million people in the 15 years through 2025, according to United Nations projections.

There are about 85 million low-value manufacturing jobs in China compared with about 8 million to 10 million in sub-Saharan and North Africa, Zoellick said. Transferring 5 million of those 85 million jobs would boost employment opportunities in the African regions by 50 percent, he said.

Zoellick said he held discussions with Chinese vice premiers, officials at the commerce ministry and provincial leaders on how to convince Chinese companies to shift jobs to Africa through methods such as the creation of industrial zones.

Issues including energy supplies, training, logistics and political stability still need to be resolved to pave the way for these job transfers, Zoellick said.

The World Bank also sees potential for China to help in its attempts to improve food production in African and sub-Saharan regions in areas such as irrigation, fertilizer, storage and research into seed varieties, Zoellick said.

Business Week

Foreign investor denies bribing Tanzania's political establishment

by Fumbuka Ng'wanakilala

A UAE businessman has denied allegations in a U.S. cable that he offered gifts to Tanzanian President Jakaya Kikwete as well as donating $1 million to the ruling party in exchange for investment deals in the east African country.

The managing director of Albwardy Investment, which is owned by Dubai-based investor Ali Albwardy, described the accusations published by WikiLeaks from a February 2006 U.S. cable as "monstrous and totally untrue."

"At no time has a bribe been either requested or given to President Kikwete by Mr. Ali Albwardy, the UAE owner of the Kilimanjaro hotel," Philip d'Abo said in a statement issued via the president's office in Tanzania on September 7.

A spokesman for the Tanzanian president's office on September 5 also denied Kikwete had accepted gifts from Albwardy.

The U.S. cable said Albwardy, who owns a hotel chain in Tanzania, flew the African leader to London on a shopping trip and bought designer suits for the president.

The U.S. cable comes at a sensitive time for the ruling Chama Cha Mapinduzi (CCM) party as it faces potential political fallout from graft allegations against some other senior members, including a former prime minister.

Kikwete came to power in 2005 on a strong anti-corruption platform, but his government has since been criticised for failing to tackle large-scale graft.

In May, donor countries slashed funding pledges for Tanzania's 2011/12 budget, citing concerns about corruption and the slow pace of reforms.

Albwardy owns three hotels in Tanzania -- the Kilimanjaro Hotel in the commercial capital Dar es Salaam, a beach hotel in Zanzibar and a lodge in the Serengeti national park -- through the company Albwardy Investment.

The Kilimanjaro Hotel was the country's flagship state-owned hotel until it was sold to Albwardy in 2002, under the previous CCM administration.

The leaked files show the allegation about the presidential gifts was made to the former U.S. ambassador to Tanzania, Michael Retzer, by an Australian national who was a former director of the Kilimanjaro Hotel.

"Kikwete probably believes there is no harm in taking these 'little gifts' to do what he would have been inclined to do anyway. That said, they are what they are: bribes," the U.S. cable stated.

Presidential spokesman Salva Rweyemamu has said the former director quoted in the U.S. embassy cable as the source of the information had sent an email to the Tanzanian government dismissing the reports as untrue.

Reuters

Vietnam exports rice to Sierra Leone

Vietnam will trade 50,000 tonnes of rice to Sierra Leone following a memorandum of bargain sealed in Hanoi on Jun 21.

The export would be partial of Vietnam ’s sum volume of 100,000 tonnes of rice to be shipped to a African republic in a 2011-2015 period.

Sierra Leone imported 14,000 tonnes of rice value 8.04 million USD in 2010, accounting for 40 percent of a sum imports from Vietnam .

Vietnam News

Top bank in Africa boosting business in yuan

Standard Bank Group, Africa's largest bank by assets, is boosting its yuan business in a move to capitalize on the growing trade between China and Africa and the rising influence of the Chinese currency on the continent, the bank's senior executive said on Thursday.

Standard Bank has launched services for trade settlement in yuan in 16 African countries, including South Africa, Nigeria, and Angola, and the business turnover reached 500 million yuan ($78 million) over the past six months, according to the bank.

"We are exploring ways to introduce yuan to African companies as a trade settlement currency and how we can persuade African governments to use yuan as a reserve currency," said Craig Bond, chief executive officer of Standard Bank China.

The bank estimated that at least 40 percent, or $100 billion, of China's trade with Africa will be settled in yuan by 2015, which equals the total trade volume between the two in 2010.

In addition, the bank said, at least $10 billion of Chinese investment in Africa will be denominated in yuan over the same period.

Bond said the main benefits of trade settlement in yuan will be the cheaper funding and lower transaction cost for both African and Chinese firms, as the Chinese government continues to ramp up efforts to raise the global profile of the yuan.

The bank is in talks with some African governments that plan to diversify their foreign exchange reserves away from the US dollar.

It is likely that rich African governments, such as South Africa and Nigeria, that have large dollar reserves, will hold yuan as part of their foreign exchange reserves by the end of the year, he said.

Although the internationalization of the yuan is a long-term endeavor, the process will be much quicker in Africa because China's commercial leverage there has risen sharply, said Jeremy Stevens, an economist at Standard Bank.

The bank estimated that about 1,500 Chinese firms are operating in the 17 African countries where it has branches. "There are as many as one million Chinese people in Africa. Firms will want to grow their business in Africa, open yuan accounts and use yuan products," Stevens said.

In July, the bank began to provide yuan notes to clients in South Africa, Ghana and Zimbabwe. It also launched yuan-denominated financial products through the offshore yuan market in Hong Kong in August to meet the clients' increasing need for hedging, funding, and wealth management purposes.

The bank said it plans to hire more Chinese employees and will continue to deepen the strategic cooperation with Industrial and Commercial Bank of China, the largest shareholder of the African bank, with a 20.1 percent stake, to gain more clients.

China Daily

Africa-Indonesia trade grows

Indonesian exports to African countries surged by 53 percent to US$2.58 billion during the first half of this year, up from $1.68 billion over the same period last year.

Exports to Tanzania, Mozambique and South Africa, for example, rose by 435.21 percent, 332.14 percent and 110.12 percent, respectively to $177.6 million, $44.6 million and $658.4 million in the first semester of this year, up from the corresponding period last year.

Indonesia exports a wide range of industrial products including food and beverages, garments, footwear, electronics, medical tools, rubbers ,tires, cars and automotive components.

Mintardjo Halim, the executive for the Africa region at the Indonesia Chamber of Commerce and Industry (Kadin), said that Indonesian products were well-suited to African market demands...

However, “Almost all of our goods go to Africa through third parties, which also applies to products imported from the region,” he said, citing Singapore and the United Arab Emirates as hubs for exports, and European countries for imports.

Mintardjo added that limited financial services linking Indonesia to the African countries also hindered the countries’ trade activities from their potential growth.

Trade Minister Mari Elka Pangestu will lead a trade delegation to explore business opportunities in southern Africa from Dec. 6 to 14.

Separately, Coordinating Economic Minister Hatta Rajasa will lead a trade delegation to West African countries such as Ghana and Nigeria later this month.

Jakarta Post