Kenya Airways prepares for major expansion

Kenya Airways has appointed two financial firms to join its transaction team that will steer its planned rights issue later in 2012, Xinhua reports.

A number of appointed brokers will lead the rights issue in Kenya and several neighboring countries.

Company officials said the funds raised would be used to finance fleet expansion, including buying 10 new Embraer E-190 aircraft, which will mainly serve African routes.


Under its ten-year growth plan, Kenya Airways plans to increase the number of aircraft from the current 34 to 107 by 2020 while raising the number of destinations to 115 from the current 56. It also plans to have 12 cargo freighters by 2022.

Trade Africa

Nigeria trade figures summary, 2011: high import of finished goods hurting economy

Writing in the Vanguard newspaper, Omoh Gabriel, Business Editor, says “Nigerians have continued to spend the nation’s foreign reserves in the importation of finished consumer products that could be sourced locally if efforts are made to patronize made in Nigeria products.”

He quotes from a Bureau of Statistics report showing that Nigeria’s import of finished goods it could produce locally have remained high, though there have been declines in some categories. Also, 95% of exports are of crude oil. Ironically, because of low refining capacity, the oil-rich country imports of its needs in processed petroleum products.

According to the trading pattern report, most food and food-related import categories witnessed sharp declines during the period (2010-2011).Imports of live animals and animal products; vegetable products; animal and vegetable fats and oils, all declined year-on-year by 69.03 per cent, 48.655 per cent and 55.62 per cent respectively. Imports of wood and articles of wood declined by 58.74 per cent on a year-on-year basis.

However, imports of prepared foodstuff, beverages etc. grew by 36.7 per cent on a year-on-year basis.

According to the trade statistics, while the United States of America, China, Italy, Germany and France in that order, were Nigeria’s largest trading partners in terms of imports during the period with N740.3 billion, N375.85 billion, N189.04 billion, N186.52 billion and N186.42 billion respectively, the trade between Nigeria and other African countries remained very low. Total imports year-to-date to African countries stood at N882.8 billion by the end of the quarter.

The U.S. has been Nigeria’s largest import destination at N2.94 trillion (USA-N1.81tn) closely followed by Asia (especially China) at N2.78 trillion and Europe at N2.76 trillion. Total imports year-to-date to African countries stood at N882.8 billion by the end of third quarter of 2011.

China’s Deputy Minister for Commerce, Mr. Chen Jian, disclosed late last year that the trade volume between Nigeria and China will hit $10 billion by the end of 2011.

But African countries need to boost regional trade and investment to keep pace with growth in other emerging economies that have large consumer bases, such as India and China.

South African Trade and Industry Minister Rob Davies has said, “The fact of the matter is we don’t, as single countries, begin to touch the sizes of the domestic market of China and India, but as a grouping from Cape to Cairo, we do start to hit that league.”

Africa boasts of some 30 regional trade arrangements, but the continent receives less than 4 per cent of global foreign direct investment, in part because small markets often cannot attract big money and because onerous bureaucratic requirements tend to discourage foreign business.

Nigerian exports to other African countries stood at N509.03 billion or 17 per cent of total Nigerian exports, with the ECOWAS region representing N81.83 billion or 16 per cent of total exports to African countries and 2 per cent of total Nigerian exports.

Exports to Nigeria’s largest destination for its (African) exports, Algeria, represented 58 per cent of total exports to Africa. On a year-to-date basis, the Americas’ N5.70t rillion especially USA’s N1.33 trillion remains Nigeria’s largest export destination, followed by Europe with N2.6 trillion and Asia with N2.01 trillion.

According to the Nigeria Bureau of Statistics report, Nigeria’s total exports in the nine months starting from January 2011 to October stood at N10.66 trillion, while total imports stood at N9.31 trillion resulting in a balance of trade of N1.34 trillion year-to- date compared to the N6.36 trillion for full year 2010.

Nigeria’s export of non-oil products is still very low.

According to figures released by Bureau of statistics, total imports in the third quarter of 2011 stood at N2.88 trillion as against N3.32 trillion in the second quarter of 2011, a decrease of N440.6 billion or 13.3 per cent. This development when compared with the third quarter of 2010 showed Nigerians’ propensity to consume foreign products rose as imports increased by N721.1 billion, or 33.0 per cent.

Further analysis of the nation’s trade data revealed that imports of boiler, machinery and appliances parts thereof, represented the highest contribution of N882.26 billion or 22.8 per cent. This was followed by vehicles, aircraft etc. with N800.4 billion or 20.4 per cent;

plastic/rubber imports with N357.3 billion or 6.6 per cent; and base metal and articles of base metal with N208.3 billion or 5.4 per cent.

Continuing, the report said: “The total value of merchandise trade in the third quarter of 2011 stood at N6.75 trillion compared to N6.89 trillion in the second quarter of 2011. This represents a decrease of N140.7 billion or -2.04 per cent in the third quarter of 2011 over the previous quarter.

The drop in trade volume during the period over the second quarter of 2011 was due to a larger drop in the value of imports in the third quarter of 2011 relative to the rise in exports experienced over the same period.

“The rise in exports was actually due to increase in crude oil and mineral products exports as most non-mineral products/crude oil exports declined both between the second quarter of 2011 and third quarter and on a year-on-year basis. At the same time, the value of imports declined largely due to significant decreases in imports of food-related items as well as wood and articles of wood imports.”

Further analysis revealed that on a year-on-year basis, “total trade grew by 32.09 per cent in third quarter of 2011, relative to the corresponding period in 2010 (N5.11 trillion in third quarter of 2010). The Balance of Trade, however, grew strongly at N989.1 billion in the third quarter of 2011.

This showed an increase of N740.6 billion or 298.1 per cent over the previous quarter. Based on year-on-year comparison, the total trade balance rose to N199.5 billion or 25.3 per cent. On a year-to-date basis, total merchandise trade stood at N19.98 trillion at the end of third quarter of 2011 compared to N19.65 trillion for full year in 2010.

“Total exports during the period were valued at N3.87 trillion .This showed an increase of N300 billion or 8.4 per cent over that of the second quarter of 2011. On a year-on-year basis, exports in the third quarter of 2011 increased by N920.7 billion or 31.2 per cent over the figure in third quarter of 2010.

The value of crude oil exports was N3.69 trillion, a difference of N698.6 billion or 23.3 per cent over figures of second quarter in 2011. The value of non-oil exports on the other hand, declined sharply to N181.3 billion from N579.8 billion recorded in the second quarter representing a decrease of N398.5 billion or 68.73 per cent.

Further analysis reveals that mineral exports continue to be Nigeria’s largest export component under SITC at N3.69 trillion in third quarter of 2011 out of which crude oil exports contributed 95.3 per cent of total exports.

Other exports from Nigeria during the period under review included plastic/rubber and articles, footwear, head gear, umbrellas etc, prepared foodstuff, beverages, spirits and vinegar and raw hides and skin, leather, fur skins etc., with N48.4 billion or 1.2 per cent, N29.5 billion or 0.8 per cent, N22.6 billion or 0.6 per cent and N14.9 billion or 0.4 per cent respectively.


Showing 2 comments


* The author is giving Nigerian leaeders too much credit. The country IMPORTS PETROLEUM products from other African countries and you are talking about finished goods. For starters, we do not have the basis for INDUSTRIAL REVOLUTION, that is ELECTRICITY. And most of all we do not have leaders who have foresight to lay the foundation for industrial growth. Bill Gates has visited Nigeria at least once. I suspect that it was for business partnership. But look at the whole country. There are no roads, electricity and basic amenities and of course, political stability to encourage foreigners to INVEST in the country. So banning these products will only create unnecessary hardship on the average Nigerian.



* Nigeria has become the dumping ground for finished goods and used

goods and obviously this is killing the home based industries. Anyone that travells around the World will know that traveling Nigerians usually carry more bags than average European travellers. A check on Nigerianas' loads will show clothes, used or unused,

electronics, chocolates, buiscuits, gifts of different kinds. Such travellers are from different cadre in the society including government functionaries, they all want to use imported goods. There are many private schools in Nigeria that source or buy their school

uniforms from abroad even though such uniforms were sown in third world countries like Bangladesh, India, Pakistan, China, Kenya etc, before being shipped to the West, Nigerians still fall for them, to Nigerians, they are still imported goods from abroad. Local businesses are dieing, unemployment is in multiple of millions and yet, all Nigerians want imported biscuits and sweets despite that they have green grass land to plant sugar canes that will be imported and converted to sugar and resent back to Nigeria as finished products, even crude petroleum products are shipped abroad for refining and leading before they are brought back to Nigeria as a finished products that will qualify for subsidy and rebate therefore killing the local refineries, It will take ages before the

mentality of Nigerians is changed. May God save Nigeria from ENEMIES

WITHIN.

The Vanguard

* 1US$ = 158 Nairas

Six months into a new government, Zambia reminded the problems are complex, long term

Michael Sata was elected president of Zambia in 2011 on strong expectations of political and economic reform.

As in many other African countries, corruption and cronyism amongst long-ruling elite was a sore point for citizens. Similarly, many Zambians look to government to do something about chronic unemployment. Chinese companies are major stakeholders in the country’s dominant copper mining industry, and increasingly in other economic sectors. But there is also much public resentment against the Chinese on allegations of poor worker treatment and their out-competing small scale traders. Sata the candidate made many populist declarations about the issue, winning the support of many on partly that basis.

Sata started his term with a bang. He immediately made sweeping personnel changes in government and government-owned companies. This won the accolades of many Zambians, although there have also been grumbling that the scale, speed and style of the changes suggested a worrying witch hunt against members of the previous government.

Some high profile, controversial business deals were reversed or are being ‘investigated’ for their legality and propriety. The sale of a small Zambian bank to a South African one was deemed to have been irregular and the bank returned to its previous owners. Another deal involving a foreign bank’s uptake of equity in a local bank is under investigation.

There have been indictments of senior former government officials over the sale of telecommunications company to a Libyan concern.

Sata the new president immediately set about to make peace with worried Chinese investors worried about his presidency. However, he has continued to express a desire for more economic ties with Western nations and companies.

Like all populists, Sata is finding that particularly on economic matters, the reality of being in the driver’s seat is rather different from that of being on the outside criticizing (he had held senior Cabinet positions in previous governments.)

A Reuters report does a good job of summarizing some of the challenges Zambia is likely faced with in 2012: widening strikes for more pay, increased state spending, investor fright at populist rhetoric and measures, worsening power shortages, a poor harvest of staple crop of maize because of late and erratic rains.

Inflation is 6.4% and Sata has asked wage demands to not exceed that, to avoid creating a vicious cycle. That will be a tall order politically. The government has also sent out mixed signals by doubling the pay of public health sector workers, which will inevitably create a crisis of expectations amongst other civil servants.

A fertilizer and other inputs subsidy for farmers has helped produce good maize and other crop yields for some years. It is to be increased, funded by higher expected revenue from increased royalties on copper mining.

The expected lower harvest at the April/May end of the rain season may become political problems if it causes maize shortages. There has already been some grumbling about the amount of surplus maize that was exported in previous years, to which the government replies that it did not have enough silo storage space for it. It has assured that there is enough reserve maize to deal with a lower harvest. This remains to be seen.

There are no concrete initiatives to address unemployment, a difficult problem to deal with for all African governments, but also a pressing, politically fraught one.

There is little diversification of the economy, with copper mining continuing to disproportionately be the biggest private sector formal employer and foreign currency earner. Despite reasonably good harvests in recent years, agricultural still performs far below the country’s potential. Zambia has good soils and abundant but underutilized ground water. It has a small commercial farming sector, although it has recently also attracted the attention of foreign land investors. Most of its farmers are small scale.

Sata has made a loud, dramatic start as president, but the considerable economic challenges are of a long term nature.

Trade Africa

South Africa, Britain trade up in 2011

South African Minister of International Relations and Co-operation Maite Nkoana-Mashabane said with Britain trade had improved in 2011 after declining 37% from 2008 to 2009, amid the global financial crisis.

In the first 10 months of 2011, South African exports to the UK had increased 10.7% while UK imports were up 30.6%.

In 2011, the two countries agreed to double trade between them by 2015.

The UK remains South Africa's top source of overseas tourist arrivals, with 453 000 arrivals in 2010.

Trade between the two countries increased 77% between 2001 and 2008, growing from R42 billion to R74.5 billion.

Nkoana-Mashabane said there were more than 300 UK companies operating in South Africa and several South African companies in the UK. She said the South African government wanted to encourage UK companies to invest in beneficiation and the agro-processing sector in South Africa.

http://www.buanews.gov.za

*1 U.S. dollar = 7.70030416 South African rands

Cameroonian youth ‘insulted’ by government job offers: how much is a university degree worth?

This time this refers to Cameroon, but it could be anywhere in Africa.

The government of President Paul Biya has, unlike those of most African countries, oil money to play with to pacify the population. The sector may be a fraction of that of neighboring oil giant, Nigeria, but Cameroon is also a much smaller country with a much lower population.

Last year was an election year in Cameroon. Several months before the election, long-serving incumbent Biya, decreed that his government would hire 25,000 young people. That is pretty significant ‘instant’ job creation, never mind whether the government needs or can really afford that many more people on its payroll.

Biya duly ‘won’ the election and the government has now embarked on carrying out its jobs promise. But according to an article by Bisong Etahoben on the Africa Review website (Keep your jobs, we are graduates, Cameroon youth to govt), some of the better educated sign-ups are not impressed with the pay offered.

Said one, “Why should I with a master’s degree be offered $276? They are just insulting education in this country.. There are policemen and soldiers with the First School Leaving Certificate who earn $500 a month.. "

Another: “Even those who in the euphoria of having got employment signed the contracts would eventually discover that the salaries they have been offered cannot meet their daily needs. And when they do so, they would desert their places of work.” He thought the offer of the equivalent of $300 as monthly salary to an individual with a doctorate degree amounted to ‘mockery.’

Quite natural reactions. After spending many years on higher education, it is anybody’s desire and hope that they will get a secure job with a comfortable salary.

But there are some relevant questions on this issue that are occasionally asked all over Africa, though not enough.

What is a degree ‘worth,’ not so much to the degree holder; but to a nation, an economy, a company, government or other prospective employer? Is it rude to ask a Masters or PhD holder who feels ‘mocked’ by a salary lower than someone of more modest academic attainment what exact relevance their high qualification is to the functioning of their prospective employer? What field is the Masters or PhD in? If the holder of the prestigious qualification has little work experience, is it obvious that s/he is necessarily ‘worth’ more in earning power than the policeman they may look down upon?

Many African countries now have tens of thousands of people with higher academic qualifications in all sorts of exotic subjects. And yet their practical benefit to Africa in many cases is far from clear, looking at the state of the continent. At Africa’s average stage of development, it needs not just educated people, but educated people who can solve practical problems, who can make things happen, rather than just be well-paid functionaries in one organization or another.

The one person whose objection to the salary accompanying the new job scheme made perfect sense said, “Since graduating from the university, I have been farming in the village and what I earn from the farm is triple what they are offering me so I cannot accept that.”

Now that’s using one’s education wisely and practically for a particular situation! If only Africa had more graduates who thought like that, the continent might make much faster progress.

Trade Africa

Asia buys record Africa oil volumes after Iran cuts

Asia's imports of crude from West Africa are at record highs as sanctions on Iran cut supplies from the Islamic Republic to China, a Reuters survey of West African oil flows suggests, Christopher Johnson reports.

North American, Asia and European refiners compete to buy West Africa's high quality, low sulphur crude oil. Increasingly it is a favorite source of fuel for Chinese, Indian and other Asian refiners.

The Reuters survey shows West African oil imports by Asian countries will average 1.81 million barrels per day (bpd) in March 2012, 1.8 million in February and 1.84 million in January.

This brings the average for the first quarter of 2012 to around 1.82 million bpd, up from a previous record of 1.79 million in the first quarter of 2011 and 2011's average 1.57 million.

Not all the crude oil cargoes due to load in March from Nigeria, Angola and other West African exporters are placed yet, and the totals could rise over the next few weeks, traders say.

Sources close to Chinese state-owned oil trading companies say imports of Angolan crude oil are up by as much as 20 percent in March from December and the increase largely reflects a decline in purchases of Iranian crude.

more…Reuters

Some simple reasons the Chinese have fit so easily into Africa

                  

Despite all the worry and hand-wringing about their suddenly much higher economic profile in Africa, the Chinese continue to power ahead. There is grumbling about them, but they have competitive advantages and offer benefits that Africa simply cannot ignore.

A fascinating aspect of the China-in-Africa phenomenon is how a good part of the worrying is being done by Westerners on Africans’ behalf (and on the Westerners’ own behalf, of course.)

‘The West has no right to criticize the China-Africa relationship’ is from its heading obviously not quite the standard article found in a Western paper like Britain’s Guardian about this hot topic.   

Jonathan Glennie mentions the obligatory (and quite reasonable) caution that Africa must be alert in its dealings with China. However, he goes on to point out some of the ironies of the West, with its mixed history in Africa, being the one to pose as Africa’s watchdog against the Chinese.

US Secretary of State Hillary Clinton, at a November 2011 ‘aid effectiveness’ conference in South Korea, said countries receiving aid should "be wary of donors who are more interested in extracting your resources than in building your capacity.” Glennie quips how ‘the fairly clumsy dig at China’ was “made all the more amusing by a brief survey of the US's heinous history of ripping up the ethical rule book when national interests and preservation of wealth are in the balance”

This of course has been part of the repertoire of Africa’s responses to the West’s ‘warnings’ to it about China. It is basically to say, ‘Western world, look at your own record in Africa before you throw stones at China.’

Glennie also gives several examples of Chinese projects of various kinds that he argues belie the notion of a rising power only out to exploit Africa.

But as is often the case in the internet age, a reader’s comment in response to Glennie’s article was as interesting and thought-provoking as the article itself.

A reader signing himself as Nwachi wrote:

“Many Westerners underestimate the appeal of the Chinese to Africans. They live frugally, are on a similar socio-economic level, are more likely to interact with the locals (I live in Lagos, so my views on this are not read up on the Internet, I've seen the person-to-person interactions), shop in the same markets and live in the same areas (I have several Chinese neighbors).”

“Because of the lack of social distance, more business is being done and more technology transfer is being accomplished, with less fuss. True, my Chinese boss may work me harder and pay me less than my Western boss, but he lives exactly as I do and he doesn't pay himself forty times what I earn!”

“Westerners, for all their good intentions, interact less with the locals (security concerns mean that Westerners are more likely to retreat to the luxury of their gated communities and publicized field trips are does not make for meaningful interaction).”

“The debate is no longer about who is "better intentioned," it is about who understands Africa better and who is better placed to make a positive impact on Africa, the answer is increasingly, the Chinese.” 

Nwachi writes from his personal experiences and empirical observations, but almost all of what he says is hard to refute.

When he writes about the ‘appeal’ of the Chinese, no doubt some will jump to point out the many complaints in many countries about various aspects of their presence: they don’t higher local technicians and artisans; they overwork and underpay their workers; they compete in sectors only locals should be allowed to; their goods are poor quality, etc, etc. 

But the ‘appeal’ of the Chinese to Africa transcends these complaints. The Chinese are not forcing themselves on Africa, but are a net positive appeal because they very effectively fill many of the continent’s needs, regardless of the teething problems of the relationship.

The general lack of social distance and ‘airs’ from the Chinese towards Africans, compared to Westerners, is easily observable in any African capital city today, and quite a few remote outposts as well. The Chinese are in places and in occupations very few Westerners would venture into. While this new competition is precisely what upsets some Africans, there is no denying that the physical and social closeness that is developing will be nothing like the relationship that Africans have generally had with Westerners.

Then there is the other significant point mentioned by Nwachi, of how in terms of their modest lifestyles, Africans can relate to the Chinese far more than they could/can to Westerners. Even today, 50 years after the first waves of African independence, almost every Western-origin settlement of people in Africa on average lives a life of privilege far beyond that of the average African. They are usually also spatially separate from ‘average’ African people, life and culture. The Chinese stick together like immigrants anywhere, but it is right amongst the Africans in a way very rare with Westerners.

The analysis of and worry about what the burgeoning Africa-China relation means for the world is usually at lofty, intellectual levels. Far removed from those high-powered, distant discussions, there are also fascinating but very basic and simple social dynamics at play to help explain how despite all the obstacles, differences, suspicions and fears, the Chinese have found an almost surprisingly welcome place for them in most of Africa.

Trade Africa

Different work cultures as a source of African - Chinese misunderstanding

     

Along with exploding trade and business relations between Africa and China have come increasing reports of friction between Chinese and their African hosts.

This may take many forms, but one of the most often reported is conflict between Chinese bosses/companies and their African workers. Some of the most often mentioned reasons for clashes are poor pay and work conditions which flout local labor laws.

In Zambia an explosion at a Chinese company that killed many Zambians was blamed on shoddy on careless storage and handling of inflammables and a casual approach to safety. That incident may have contributed to a very strong undercurrent of Zambian resentment to the Chinese, even as their investment was welcome. The issue was compounded by what many felt was a lack of remorse and sympathy for the dead and injured workers and their families.

Newly elected Zambian president Michael Sata partially campaigned on the basis of what some saw as exploiting the element of xenophobia that may exist among some of his countrymen. He talked very tough about Chinese ill-treatment of Zambians, and there were fears that if he won trade between the two countries would be affected.

Economic reality has set in on Sata after his win. Some of his senior aides continue to talk tough about Chinese attitudes and behavior, but Sata has been conciliatory to the Chinese who now are such a critical part of the Zambian economy. It is more or less business as usual.

Insensitive, exploitative foreign investors are not unheard of anywhere. How much of a problem this is often depends on how strongly a host government sanctions such behavior. It clearly is dangerous to leave the issue to the ‘goodwill’ of the investor. There will always be some who put maximizing profit above all else if they can get away with it.

Language and social, cultural differences are probably another reason for tensions. In theory, these will become less often reason for such tensions as Africans and Chinese get more used to and learn to accommodate each others’ differences, and how to bridge them.

Yet another poorly explored possible reason for conflict may be very different approaches to work and productivity.

Whatever else is said about them by locals in the many African countries in which they are involved in infrastructure projects and trade, they are known to get things done, mostly very efficiently. Huge projects are often completed in a fraction of the time it would take local or other non-Chinese competitors, and also at prices those competitors can’t beat, both of which are probably additional sources of resentment against them by some.

Part of the reason they are so hard to beat in cost and meeting targets is an indefatigable work ethic that few others can match. The Chinese generally show work discipline and seriousness of purpose that are higher than average. At national or company level, they are in a hurry to get things done. Their far higher overall productivity is just one key reason that many manufacturers across the world find themselves unable to compete with them.

Part of that higher productivity may very well be lower wages, longer work hours and weaker adherence to safety standards than competitors, as is often alleged. These may be grudgingly accepted in China as part of the country’s headlong rush to ‘development,’ but become scandalous when applied in foreign countries.  

In countries that have been mainly exposed to a Western business culture, the Chinese business culture takes some getting used to. A ‘prestigious’ job in many African countries is to work for a ‘multinational,’ which is pretty much always a big European or American company. Working for a Western-funded NGO is also highly sought after.

At least for middle management and higher positions in these sort of organizations, some of the perks that might be expected are the use of a company car, for example. The Chinese have no such frills for themselves, let alone for others. So for Africans who have come to think of working for a Western company as the standard against which to compare all else, the Chinese seem like stingy, inferior employers.

You will find Chinese workers of all grades coming to work in a hired or company bus, or packed together in a car. There is none or very little of the rigid hierarchical stratification of Western organizations, at least those in Africa, where the boss drives or is driven in a luxury car, and those at the bottom may walk or have to depend on public transport. ‘Prestige’ is not a highly sought after value in the work culture of the Chinese in Africa, but it may be for the locals. What good is being a ‘manager’ if one does not have the social accoutrements to show off that status?!

Yet the no-frills work culture of the Chinese is an integral part of their competitive advantage. We have a situation where generally low-productivity work forces in most African countries nevertheless aspire to the work conditions and perks of much more productive and dynamic economies. This is at least partly left over colonial baggage.

In pre-independence days it was always the Europeans who occupied the upper employment strata, along with the associated perks. But those perks were not just meant to reflect seniority and competence (when they did so) but it was simply part of the racial stratification of the day. Whether it made sense for a company or not, the Europeans simply got paid far more and had better work conditions than the Africans. After independence the Africans simply continued this stratification amongst themselves.  There are a few very well remunerated at the top, and the majority of workers have to contend with much less desirable work conditions.

For an African ‘manager’ who got used to a Western work culture, the Chinese idea of the middle or senior level executive who does not necessarily earn many times more than his subordinates and have a company car may seem strange and unsatisfactory.

As for complaints about long days, work hours sometimes far exceeding the ‘standard’ eight-hour day of Western-based companies is another way the Chinese are able to beat their competitors. Local workers would naturally expect overtime pay beyond the eight hour day, but some may resent the expectation or pressure, subtle or otherwise, to work beyond the standard shift at all. If overtime pay isn’t standard in China, or if the normal work day is, say, 10 hours instead of eight, one can see more reasons for some of the African-Chinese work conflicts. For the Chinese, aiming for a tight target and far from home and family, there may be little else to focus on apart from work.

Like immigrants everywhere, the Chinese in Africa are more motivated to work than locals, or at least have different motivations that focus them more. It is a lament heard all over the world, sometimes resentfully, that immigrants work ‘more’ and harder for ‘less’

pay. Immigrants in general indeed have very different priorities than locals. That is why, for instance, the African  ‘manager’ who at home would be insulted by a job offer that did not include a company car, may in Europe or the US be quite prepared to depend on public transport to get to the two or three jobs that s/he must do to make ends meet there!

A frequently heard complaint is that Chinese companies involved in big infrastructure projects bring their own workers, rather than hiring from among qualified locals. Those complaints are quite natural. But part of the reason for the trend is that for the Chinese companies, there is then no long work culture learning curve required between employer and employees. The imported Chinese workers, who are well familiar with the work rules of their Chinese employer, can get to immediately and efficiently. It is far more than an issue of strict technical ‘qualification’ for the job.

The African complaints about this are going to continue, but so is likely the practice, for the reasons explained.

Some governments are reported to have taken to requiring a certain percentage of locals to be hired for projects awarded to Chinese companies, but it is far from clear that the nature of the work culture differences can be entirely addressed this way. What may happen is that with time, there will simply gradually grow a pool of locals who understand the ‘Chinese work culture’ and are able/willing to meet its requirements. After all, the same sort of cultural clash/learning curve characterized the first coming of Westerners to Africa.

Trade Africa

The multiple barriers that hamper trade within Africa

by Otto Bakano

Multiple restrictions have stifled free trade between African countries, which exchange more with the West and China than with their neighbors, curtailing growth in a resource-rich region, experts say.

At an African Union summit in Addis Ababa at the weekend, leaders will discuss ways of more than doubling intra-African trade, from the current 10 percent to 25 percent or more in the next 10 years.

In comparison, 40 percent of North America's trade is with regional partners and the rate soars to 63 percent in western Europe.

Poor infrastructure, especially roads and railways, tariff barriers, reliance on export of unprocessed goods and lack of product diversification are some of the bottlenecks to trade within the continent.

"It takes about 10 days for a ship to leave Asia to come to the (Kenyan) port of Mombasa... it takes two weeks before they are cleared. It takes another three weeks from Mombasa to Kampala," said Kwame Owino, the director of a Kenyan policy group, the Institute of Economic Affairs.

"So long as we do not coordinate infrastructure development ... the volumes of trade, or the potential to exploit cross-country trade within Africa, will still be limited," he added.

Transport cost in Africa is 63 percent higher than the average in developed countries owing to the poor infrastructure.

Regional nations often produce similar goods, forcing long distance exports. For instance, the East African countries of Kenya, Rwanda and Uganda all produce coffee, forcing them to export beans to markets outside the continent.

"Africa needs to take expeditious action in diversifying its export base," said the AU report. "Concentration on a few exports, mainly raw materials and primary commodities, cannot ensure long-term growth," it added.

Africa's major imports are from outside the continent and are mostly finished products, thus limiting regional trade. Lack of skilled labor and technological advancements also impair its competitiveness.

Removal of non-tariff barriers, simplification of customs procedures and documentation as well as the easy movement of goods is fundamental to Africa's internal trade, the AU report noted.

Despite the existence of regional trading blocs, exchange between members is still hampered by high tariffs, while negotiations are complicated by some countries being members of overlapping trade groupings.

"Free movement of goods and people remains theoretical," said a trade expert who spoke on condition of anonymity. "There is a surplus of managers in Kenya, but a Tanzanian company would not hire them due to strict legislation."

Different levels of development among African countries also contribute to the reticence to open up domestic markets, with smaller economies fearing domination by the more developed ones.

"Domestic pressures for governments to continue to hold trade barriers in Africa are still very strong," said Owino. "Africa, like many places, has very strong domestic constituencies that are very fearful of increased opening (of their economies). Barriers may be useful to our small industries, but harm the welfare of the people in general."

A long history of reliance on raw material export to the West dates back to many countries' colonial past, when Europeans extracted minerals, timber and other resources for their industries. Not much has changed since.

However, African leaders hope that increased trade within regional blocs will lead to a continent-wide free trade area, boosting growth.

"The stark reality is that Africa is endowed with a wealth of natural and mineral resources, which if properly harnessed, could serve as an engine of economic growth and prosperity," the AU report said.

AFP

Zambia, Zimbabwe seek more revenues from their mines

Zimbabwe has raised its fees for minerals exploration and mining by up to 5000%.

To register a diamond mining claim will now be $5 million, up from $1 million. A license to mine platinum goes up from a mere $200 to $500,000. The fee to actually operate a platinum mine is now $2.5 million, versus $500 before.

Given the value of the resources, the old fees were clearly outdated, although there has been consternation at the new fees.

Issues of economic ‘empowerment’ of locals have been hot in Zimbabwe in recent years. The country’s controversial land reform effort ‘to correct colonial imbalances’ can be understood as part of the broader empowerment drive.

Now attention has focused on the mines, which are almost all foreign-owned and/or run. The finance and other barriers to entry in mining are even higher than those of commercial farming. Rather than push for mine takeovers (except as an occasional threat), the government of President Robert Mugabe has been looking for other ways to benefit both the treasury in particular, and Zimbabweans in general.

Its methods are almost as controversial as those employed in land reform. There is a relatively new ‘indigenization’ law requiring companies to have at least 51% local shareholding. There was an initial outcry and overwhelming resistance to it, but the government has stuck to its guns.

Even for those companies willing to go along, there has been the big question about how locals can acquire 51% shareholding in multi-billion dollar companies, such as those in mining. Various innovative solutions are being found, such as engineering employee trusts to take up the 51%.

Mining companies in particular have been leaned on heavily to ‘donate’ 10% shareholding (and millions of dollars) to various quickly constituted ‘community ownership trusts,’ an idea apparently borrowed from neighboring South Africa.

Cynics say the empowerment measures directed at the mines are little more than extortion by a government with few ideas on how to grow the economy. It is thought by some that these are populist measures by Mugabe’s ZANU-PF party to curry favor with the electorate in the run up to upcoming elections against their coalition government partner and electoral opponents, the MDC. 

Apart from the Mugabe government’s overall ‘empowerment’ thrust, there is a particular feeling that the mining industry has for long taken out far more out of mineral-rich Zimbabwe than it puts back into the country. The industry’s close historical links to the colonization project and its spotty general political, economic and environmental record means that it is in a particularly weak position to argue unfair treatment.

Ironically, those who will be most prejudiced by the massive new mining fees are Zimbabweans. There may not be many who are able to invest the money to start a platinum mine. But new discoveries of mostly ‘alluvial,’ close-to-the-surface diamonds have had many small scale miners try their luck, generally without any sort of authorization. While they wouldn’t have been able to pay even the old fee of $1 million, raising it five-fold generally shuts out locals more than foreigners.

It is almost inevitable that some cynical Zimbabweans will see the new fees as measures to keep lucrative resources accessible to a politically-connected elite, charges that have dogged every stage of the Mugabe government’ various ‘empowerment’ efforts.

But the militant minerals nationalism is not confined to Zimbabwe. Northern neighbor Zambia also suspects that it is benefiting less from its mines than it should. It recently doubled royalties on copper, the country’s main export, to 6%. Zambia now plans to audit all the country’s mines, on suspicion that it may have received from $500 to $1 billion less in taxes from them than it should.

Africa has come a long way from the days when nationalizing mines was the war cry of many early post-independence nationalists, who suspected that the mining industry was an important but essentially cheating, exploitative sector. The suspicions don’t seem to have lifted, but the attempts to seek a fairer deal have become more sophisticated. 

Clearly, mining in Africa is going to be under more government scrutiny than ever before.

Trade Africa     

Intra-Africa trade accounts for only 11% of world total

The January 2012 African Union summit in Addis Ababa, Ethiopia received more attention than previous such meetings. There were at least three reasons for this.

One, AU Chairman Jean Ping from Gabon was being challenged in his bid for a second term by South African foreign affairs minister Nkosasana Zuma. An incumbent chairman is usually a shoo-in for a second term. The closely fought contest, which resulted in a hung result to be resolved at the next summit meeting in a few months, added an unusual bit of drama and intrigue to what are usually dull, predicable meetings.

Two, the AU received a brand new, $200 million headquarters building as a ‘gift’ from China. Needless to say, it grabbed a lot of attention, positive as well as worried or derisive.

Thirdly, increasing intra-Africa trade was the much publicized theme of the meeting. The AU is infamous as a talk shop that does relatively little, but even by that low standard, there seemed a new and welcome appreciation by Africa’s leaders of the need to address the issue. Whether the expressed commitment to redouble efforts for African countries to trade more with each other translates into reality in coming years remains to be seen.

A January 30 2011 Bloomberg report says that according to the AU, trade between African countries accounts for 11 percent of the global total, compared with 47 percent in Asia and 70 percent in the European Union. Increasing that percentage may help offset the impact of a slowdown in the euro region and other OECD countries, the Economic Commission for Africa said on Jan. 26. Growth on the continent slowed to 2.7 percent last year from 5 percent in 2011, the AU said.

A doubling in intra-African trade would add 2 percent to the continent’s gross domestic product, Obiageli Ezekwesili, vice president for Africa at the World Bank, said in Addis Ababa before the summit

China’s economic involvement in Africa is valued at $150 billion, with more than 2,000 companies working throughout the continent, Jia Qinglin, chairman of the National Committee of the Chinese People’s Political Consultative Conference, said at the official opening of the building. China will provide 600 million renminbi ($95 million) of free assistance to the African Union over the next three years, Jia said.

Trade Africa

Entrepreneur, are you doing business with the wrong bank?

This is not about a businessperson seeking a loan from the bank he or she transacts with. That perennially sore subject for a lot of businesspeople is for another day.

This is instead about how your bank could be the wrong type for day to day business transactions. Many people, businesspeople who should be more demanding included, stick with banks offering bad servics for their needs surprisingly often and long.

Part of the reason is that we are all creatures of habit. You get into a routine and it takes a lot of energy to get out of if it and try something new. Even if you are not particularly impressed with the quality of service of the bank, you get to know the staff and they get to know you. Especially when you are making deposits or your account has a healthy balance, they may even smile at you.

“Oh what nice people they are,” you think to yourself as they happily take your money. Somehow it makes the rest of the poor service the bank may offer seem not so bad.

In many emerging markets, and in small towns and other such locations of even developed countries, banking choices may be limited. This could be another reason for a business people putting up with shoddy service.

Some real life examples:

I opened an account at a certain bank I use when I was briefly a salaried employee. My monthly salary was quite good by the standards of the locale, and better yet for the bank, it was paid in hard currency. They eagerly retained the hard currency of course, denominating my deposits in local currency, which was fair enough.

My banking needs were ‘low’ compared to those of a businessperson. As long as they renewed my check book on time and the ATM worked, that was about all I needed. My blood pressure would rise the relatively few times I had to actually go into the banking hall for anything because of the constant long queues and puzzlingly slow service, but that’s where the ATM card usually came in handy.

Then I quit my job to go into business. One of the biggest mistakes I made was to retain an account with the bank that had served me in an okay fashion as a private salaried customer. It was totally ill-suited to serve me as a small businessperson, and as said at the beginning, I’m not talking about asking for a loan. Somehow it always seemed clear they wouldn’t be interested, and I never asked, getting finance from elsewhere.

But my business required a lot of coins and small denominations of cash on a regular basis. The ATM was obviously no help at this. The long banking hall queues that had merely been irritating before when I only had to endure them once in a while became excruciating when they had to be experienced more often. Hours instead of minutes on a simple transaction is serious downtime for a small business.

All of a sudden the slow, casual service could no longer be compensated for by the pretty teller’s smile. Even giving advance notice of the cash needs a day before did not seem to significantly improve the bank’s ability to provide this service. It took some months for it to sink in that this was simply something the bank was not well set up for, especially when just providing ordinary retail service was often a struggle for them.

I often wondered why it did not occur to the bank to have separate queues for cash deposits from those for withdrawals. Why should people bringing in money, the lifeblood of a bank, have to queue for an hour to make a deposit? Why should anybody have to routinely queue for an hour in a bank, whether making a deposit or a withdrawal?

One would often see the manager or other senior official wandering around, smiling and greeting customers they recognized. Why were they not embarrassed to keep their customers waiting around for such long periods to do banking business? Was it a prestige thing for them to see their banking hall crowded with frustrated people?

Invariably in these situations, at most only half the teller booths would be occupied. Surely banks know to the day of the month, or hour of the day, when they are going to be inundated with customers? They know the pay days of different economic sectors, for example. What is so difficult about being prepared for these relatively few ultra-busy times?

All these things that frustrate everybody become much more obvious as basic service failings of a bank when you are businessperson under time and performance pressure.

Part of the answer of course is to use different banks for different services, although this has its own frustrations. And the banking ‘culture’ in a town can quite surprisingly cut across many banks that are independent of each other; perhaps because they all recruit from the same pool.

Long after I had moved my business to another mostly, slightly better bank for my needs, I retained my personal account at Bank A, primarily because of its more extensive ATM network compared to most of the other banks. That continued to provide a convenience that on several occasions proved invaluable for personal as well as business purposes.

Then the bank won a government contract to disburse university students’ bursaries. All of a sudden they had thousands more customers who they encouraged to check for and withdraw their government student stipends on the ATM machines. The queues at the ATM machines became as long as those inside the bank. The daily withdrawal limits were lowered. The amount of time the once super-reliable ATM network was up and running fell dramatically.

The day I went to an ATM machine and was asked to write a number next to my name in the queue, because of its length, is the day it became obvious that my bank had become ‘too big’ to provide me even minimally acceptable service. In hindsight, the service had been deteriorating steadily for quite some time. I can’t remember now why I put up with it so long, despite fairly regularly having to go in and complain about something or other.

I kept the account and the ATM card, but don’t use that bank much anymore. Fortunately their monthly service fees are low.

Although I now also have accounts with more business-focused banks, I wish I could report that the service is much better. Better in some respects, but not ‘much better,’ especially for the fees they charge, and for being ‘commerce’ banks.

Are you keeping your account with a certain bank out of habit, or because you are really happy with the service? Do you quietly suffer atrocious service (‘I might need to ask for a loan in future, I don’t want to be seen as a troublemaker’) or are you one of the few bank customers who speak up for themselves when faced with slow, inefficient or rude service? In some markets it seems to almost be the norm.

Fortunately it is now increasingly possible to shop around for reasonable banking service, or to multi-bank when necessary.

I laugh when I see an advertisement where a bank claims to be the businessperson’s ‘partner.’ They certainly seem to fall all over each other chasing government or big business accounts, but I wonder how often they ‘partner’ the small to medium business in merely offering good day to day service.

Trade Africa

When the market leader gets complacent

Econet Wireless is one of Zimbabwe’s biggest corporate success stories. It is the country’s leading telecommunications company. In a few years, it has also made significant inroads in being a big mobile communications/internet companies in several other countries. It can proudly claim many ‘firsts’ to its name.

What for many Zimbabweans makes it a particularly iconic brand, far beyond the services it offers, is how it came into being. Company founder Strive Masiyiwa had to fight a bruising, expensive battle with regulatory authorities to get his company licensed to operate. A government-owned company was then the monopoly player in the sector, but Masiyiwa was also a straight-up person who refused to kow-tow to the powerful political interests that often have to be accommodated for big projects to get off the ground.

It is not often that a ‘little guy’ gets to win against determined, powerful political forces. Many lesser men would have been intimidated and given up the fight. But Masiyiwa fought through the courts of law and of public opinion, and won his argument in both. There was widespread public feeling that he was being treated unfairly.

When Masiyiwa won his fight to launch his company, it was far more symbolically significant than just a private company winning a legal fight. The (then) little guy had won against the big bad authorities trying to keep him down. Therefore, Econet Wireless began its operations with massive, unusual public good will.

Econet in short order overtook the lumbering State-owned company to become the market leader in Zimbabwe telecommunications by far. It has consistently set the pace in introducing new products, infrastructure development and in being innovative. “Inspired to change your world” is its catchy corporate tagline, and indeed, it has done that for many people by the way it has introduced new ways of communicating and doing business.

But as it has become a billion dollar company, it has also always been dogged by charges of over-reaching, over-promising; generally not leading up to its considerable marketing hype. Still, it continued to be unique enough in many ways to remain the market leader. Customer complaints of poor service have generally been countered with how fast the network’s service was growing, and that the company was continually investing in improving service. During Zimbabwe’s several ‘lost years’ of economic recession up to 2008, the country’s considerable economic difficulties were another reason given for less than stellar service, as maintenance and new investment became very difficult for all companies.

Many smaller new players have joined the sector in recent years, but Econet’s lead is not in any immediate danger. However, even as the company continues to grow from strength to strength, there are now increasingly frequent complaints of an arrogant complacency creeping in.

At one time Net One, the government-owned telecommunications company toppled from its leading perch by Econet was the entity of reference in the sector. It was once difficult to imagine any competitor overtaking it, but Econet did just that. All over the world in recent years, many once titanic corporate entities have crumbled to dust, or become a mere shadow of their once leading selves.


TechZim, a very good website tracking the telecommunications industry in Zimbabwe, has an interesting article chronicling what it feels is an example of Econet’s very sloppy introduction of a Voice Over Internet Protocol (VoIP) service.

The reader comments are as interesting as the TechZim article itself (A “How not to launch an internet based product” lesson from Econet), and would seem to suggest a fair amount of cynicism and disgruntlement amongst tech-savvy Zimbabweans about the sector’s market leader.

It is instructive for any businessperson to keep in mind that no matter what heights of success one reaches, what goes up must come down. Success seems to almost inevitably breed arrogance and then complacency. There are abundant lessons in there for every aspiring or rising business empire.


Trade Africa

DHL Freight prepares for the coming great African trade boom

Whether Africa is a massive business/trade ‘problem’ or a massive opportunity depends on who and where you are.

The business/trade problems are well known, and talked about endlessly. Intra-continental trade is the lowest in the world at only about 10%, hampered by tariff and non-tariff barriers; slow, bureaucratic ports; and trade-related corruption is rife. African trade is still a tiny proportion of world trade. Most African countries have large imbalances of trade, importing far more than they export. Most exports are still of raw materials. Poor infrastructure is a significant barrier to trade, competitiveness and overall development. And so on and so forth.

It is not surprising that many outside the continent who read or hear about these huge challenges decide that Africa is too much of a risk and headache, and resolve to give it wide berth.

Depending on what economic sector you are in, however, it is becoming increasing difficult to ignore or write off doing business with Africa. There is a new African land rush by international global agro-investors because of a developing global food crisis. China’s rise and huge demand for various raw materials has created vast new opportunities for resource-rich Africa. African leaders seem to be taking the imperative of economic integration and intra-continental trade much more seriously than before. The explosion in mobile telephony has made many millions more Africans instant entrepreneurs, making them see and be able to exploit many more opportunities than they could before.

In short, even as many of the continent’s serious endemic problems remain, Africa is inexorably economically on the march. For those brave and tough enough, the new Africa presents vast opportunities amidst the challenges.

Rising Asian powers China and India, like the Western world, still primarily value Africa as a source of raw materials. But unlike the West, China and India were quick to also see the vast potential of Africa as a market.

DHL is fairly unique in being a major European company that has seen the rapidly business opportunities in Africa, and is taking steps to benefit from them.

It’s new Chief Executive Officer for DHL Freight, Amadou Diallo, says that by 2015 around 220 million African consumers who are now only able to meet basic needs will be middle-income consumers. That presents a vast new market, only three years away, for companies trading in Africa.

DHL’s CEO for Europe, Middle East and Africa, Thomas Nieszner, says freight volumes in sub-Saharan Africa were expected to grow 6.1% next year and ocean freight by 6.7%. He said in the global forwarding division of DHL Africa was expected to make a double-digit percentage contribution to business in his region.

Where some see the glass as half empty, others see it as half full. Where some see only problems, others see vast opportunity.

Africa, problems and all, is on the move.

Trade Africa