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Kenyan Government Disavows Controversial Local Ownership Requirement

Posted in Corporate and Investment

The Kenyan government has suspended a controversial local ownership requirement in the new Companies Act 2015.  The confusion regarding how the provision made its way into the law is unsettling for foreign companies that are interested in one of the region’s top investment destinations.

Regarded as an overdue modernization of Kenya’s company and insolvency laws, the Companies Act is a sizeable piece of legislation.  Indeed, the main provisions pertaining to foreign companies do not appear until over 680 pages into the law.  Pursuant to section 974, a foreign company cannot carry on business in Kenya unless it is registered.  Pursuant to section 975(2)(b), registration involves submitting an application that, inter alia, “demonstrates that at least thirty percent of the company’s shareholding is held by Kenyan citizens by birth.”

When President Kenyatta signed the Companies Act into law in September 2015, one of Kenya’s leading newspapers highlighted the provision as a “significant change” that was introduced “at the third reading” of the bill and whose consequences “may not have been fully appreciated.”  Notably, the Ministry of Industrialization and Enterprise Development republished this news article on its blog thus putting at least that Ministry on notice about the provision.

Yet, now over three months later, senior government officials are disavowing the provision and claiming that it never should have been in the law in the first place.  According to Attorney General Githu Muigai, the provision was not in the original draft of the legislation: “‘From all indications it was inserted at the committee stage.  It does not represent the current government policy on foreign investments.’”  Similarly, and notwithstanding his Ministry’s blog entry, Minister of Industrialization and Enterprise Development Adan Mohamed has stated that the provision “‘may have been overlooked during the legislation process but is obviously unrealistic’” and is “‘an error.’”  Deputy President William Ruto has called the provision “‘toxic’” and has promised to “‘look for a way of correcting the situation so as to create a favourable climate for investments.’”

In the past few years, the Kenyan government has tried and failed to impose local ownership requirements in the construction sector (proposed then removed), the mining sector (passed then repealed) and the telecommunications sector (required by regulations but waived for several major operators).  Did a local ownership requirement somehow make its way into the Companies Act and it took over three months for anyone to notice? Or was this actually another attempt to introduce local ownership requirements in Kenya?  Neither scenario is particularly reassuring.

Meet Four of the Key Ministers in President Buhari’s Cabinet

Posted in Current Events

Five months after his inauguration, Nigerian President Muhammadu Buhari has sworn thirty-six ministers into his cabinet.  Set out below is an overview of the four appointments that will be of particular interest to foreign investors: Babatunde Fashola (Minister of Power, Works and Housing), Kemi Adeosun (Minister of Finance), Okechukwu Enelamah, (Minister of Industry, Trade and Investment) and President Muhammadu Buhari (Minister of Petroleum).

Babatunde Fashola, Minister of Power, Works and Housing

The former governor of Lagos State, Fashola is well-known and well-regarded in Nigeria as well as abroad.  It is a significant sign of President Buhari’s confidence in Fashola that he has assigned him responsibility for the power sector.  Although Nigeria is Africa’s largest economy and most populous nation, the “scarcity of sufficient and reliable electricity is severely constraining economic growth and development.”

As the Nigerian government continues to privatize its energy sector, it is worth noting that Fashola is a strong proponent of private-public partnership.  When once asked why he staffed his administration with so many individuals from the private sector, Fashola responded, “The public sector as a government exists only for one reason, for the private sector […].  From the unemployed chap to the biggest corporation.  Who better to write the manual of operation, to write the process of implementation for the public sector, than the private sector on whose behalf they exist. If they continue to speak different languages, they won’t function.”

Kemi Adeosun, Minister of Finance

When President Buhari released his list of cabinet nominees last month, analysts correctly presumed that Adeosun would receive the finance portfolio.  Although not as high-profile or experienced at the multilateral level as her predecessor Dr. Ngozi Okonjo-Iweala, Adeosun has private sector experience in accounting and investment banking as well as international degrees in economics and public financial management.  She most recently served as finance commissioner of Ogun and some credit her with turning around the state’s financial situation.  Adeosun’s focus on increased tax enforcement as a revenue enhancing initiative during her tenure suggests that she will readily continue the recent efforts, at the federal level, to step up tax enforcement.

During her Senate confirmation hearing last month, Adeosun supported the foreign exchange restrictions that have been put in place by the Central Bank of Nigeria.  In addition, she does not think that devaluing the naira can be done in isolation: “The exchange rate is not the silver bullet, it’s not the wonder drug. It has to be accompanied with fiscal policies and monetary policies and industrial policies.”

Adeosun supports reduced government spending, particularly on overhead and salaries.  In addition, with respect to infrastructure investment and other development projects, she believes that “each time we spend, more revenue come[s] in.”  These positions fit in perfectly with President Buhari’s plan to reduce current expenditure and prioritize capital projects in his 2016 budget.

Okechukwu Enelamah, Minister of Industry, Trade and Investment

Co-founder and Chief Executive Officer of African Capital Alliance, Enelamah is a luminary in the African private equity landscape.  His education and professional experience spans three continents and includes an MBA with high distinction from Harvard Business School and stints at Goldman Sachs, Zephyr Capital and South Africa Capital Growth Fund.  His investment and private equity experience will prove instrumental to leading a ministry whose mandate includes attracting investment, boosting industrialization, diversifying the economy, and increasing trade and exports.

In his Senate confirmation hearing, Enelamah identified a number of factors necessary to creating an enabling environment.  These factors include macroeconomic stability, a clear and stable policy vision, signaling investor friendliness, and creating both soft (e.g., security and rule of law) and hard (e.g., power, roads and railways) infrastructure.

President Muhammadu Buhari, Minister of Petroleum 

As has been reported for the past few months, President Buhari will serve as the Minister of Petroleum.  Prior to Nigeria’s return to democratic rule in 1999, President Buhari served in various key positions in the oil sector including Minister for Petroleum and Natural Resources, Chairman of the Nigerian National Petroleum Corporation (NNPC) and chairman of the Petroleum Trust Fund.  Some analysts believe that President Buhari’s decision to retain the petroleum  portfolio is an indication that he does not trust anyone else with the most important source of government revenue.  Whether or not this is the case, the move is not without precedent.  Former President Olusegun Obasanjo also ran the oil ministry through his two terms in office.

President Buhari has made clear that his priorities will be rooting out corruption as well as tracking down and recovering the “mind-boggling’ sums of money stolen over the years from the oil sector.”  It also is expected that President Buhari will revive the longtime languishing Petroleum Industry Bill.  Newly appointed NNPC Chairman Emmanuel Kachikwu will serve as the junior minister but it is yet unclear how duties will be divided between the two men.

Finally, it is important to note an appointment that has received far less attention than the long-awaited ministerial announcement.  President Buhari has appointed Assistant Commissioner of Police Ibrahim Mustafu Magu to serve as the new acting chief of the Economic and Financial Crimes Commission (EFCC), the country’s anti-corruption agency.  In light of the recent corruption allegations surrounding the EFCC, rumors abound as to what motivated the change but the administration insists that the outgoing chief left voluntarily.  As head of the Economic Governance Unit in the early days of EFCC, Magu developed a reputation for integrity and no-nonsense.  However, he was redeployed to the police force in the midst of accusations that ultimately turned up no evidence against him.

Zimbabwe (Re-)Opens to the West

Posted in Corporate and Investment

Zimbabwe has begun to implement economic reforms that, if continued, could help the struggling nation improve the quality of life for the vast majority of its citizens. The nascent reform movement also suggests that government leaders have realized that reliance on China alone will not solve the country’s economic ills.

The efforts by Finance Minister, Patrick Chinamasa, to restructure the country’s debt with the World Bank, the IMF and other creditors is a recognition by the government that food dependency, low growth and virtually no foreign investment is not sustainable as economic policy. Zimbabwe owes official creditors $10.4 billion with nearly half that amount arrears not paid over 20 years. Between 2011 and 2014 alone, 4,610 companies closed in the manufacturing sector and 55,443 jobs were lost, according to UN and African Development Bank figures.

Zimbabwe’s reform effort began in 2009 when Zimbabwe moved from hyperinflation, which saw poverty rates rise to 72 percent and the sharpest drop in gross domestic product of any economy since the end of World War II, to a dollar based economy. With no options, the country entered into a stabilization program with IMF. At the recent annual World Bank/IMF meetings in Lima, Peru, Finance Minister Patrick Chinamasa presented a plan to restructure the country’s debt and restore relations with Western financial institutions and the African Development Bank. The plan still needs to be fleshed out but, if successful, it would be a first step in creating an environment to attract desperately needed external financing and investment.

Related to the economic reforms is discussion in parliament over legislation that would enable farmers, black and white, to lease land for 99 years and have the capability to transfer land title prior to the end of the lease. For this legislation to have impact, it needs to have the support of the country’s commercial banks. Long-term leases need to serve as collateral so that domestic banks can extend badly needed credit and financing for farmers. It is estimated that $2 billion is required to restore a semblance of productivity in the once-robust agricultural sector.

Transferable long-term leases that can be used as collateral are the only hope for Zimbabwe to recover the viability of its agricultural sector. Long-term leases would also help to restore the rule of law in a sector characterized by arbitrary land seizures and signal foreign investors that commercial contracts may in fact be respected.

Even with progress on debt restructuring and land reform, the country’s indigenization policy, which requires Zimbabweans to own 51 percent of any foreign investment and foreign companies to pay a 10 percent tax on turnover, continues to be a deterrent to revitalizing the economy. No one argues with empowering black Zimbabweans, and local content laws are part of the investment landscape across the continent. The country’s indigenization requirements and their arbitrary application, however, are more onerous than any other country in the region and prevent foreign investment on any significant scale.

Zimbabwe has entered a political and economic transition whose outcome is far from clear. Nevertheless, the reformers have gained a certain momentum with the tacit support of the country’s 91 year old president, Robert Mugabe. The increasingly bitter succession struggle, that pits the president’s wife, Grace Mugabe, against the veteran ZANU-PF leader and vice president, Emmerson Mnangagwa, as well as the former party stalwart, Joyce Mujuru, among others, will impact the pace and direction of the reform process.

Zimbabwe’s former friends should work to encourage these fledgling reforms. Particular attention should be given to engaging Zimbabwe’s battered but determined private sector. After all, the private sector has contributed significantly to political progress across the continent, including in Kenya, South Africa and Nigeria.

The European Union made the right move in 2013 when it lifted most of its sanctions on Zimbabwe, imposed in 2002 in response to electoral fraud and human rights abuses, in an effort to encourage economic and political reform. The EU also extended more than $200 million in financial support. The EU travel ban and asset freeze on President Mugabe and his wife remain in place as does an arms embargo.

The Obama administration should follow the EU lead and sharply reduce its targeted sanctions on Zimbabwe. The U.S. should also work to strengthen the country’s private sector. This could be achieved by working with Congress to allow certain sectors of Zimbabwe’s economy, such as apparel and agricultural producers and women-owned businesses, to participate in the African Growth and Opportunity Act (AGOA).

The recently extended trade legislation allows the president to “withdraw, suspend or limit” the application of benefits to countries who have violated the conditions of the legislation. Zimbabwe does not participate in AGOA but it should have limited access to the program in an effort to support job creation, innovation and, hopefully, economic and political reform. After all, the real drivers of reform in Zimbabwe, as elsewhere, are likely to come from business and the private sector. This is where the U.S. should be placing its support.

Witney Schneidman is a nonresident fellow at the Africa Growth Initiative in the Global Economy and Development program of the Brookings Institution. This piece was first posted on Brookings’ Africa in Focus blog.

Cote d’Ivoire and Tanzania: Same Results, Different Reactions

Posted in Current Events

Two of the world’s fastest-growing economies — Cote d’Ivoire and Tanzania — held presidential elections this week.  Both countries have re-elected the governing party but the difference between their two experiences was as far apart as the countries themselves.

In Cote d’Ivoire, incumbent president Alassane Ouattara has won a second five-year term by a landslide.  It is notable that the election is the nation’s first peaceful presidential election in more than two decades but Ouattara’s re-election was not a surprise.  Under his leadership, the country “has made a remarkable economic recovery since the end of the post-electoral crisis in 2011” and has enjoyed an average annual GDP growth of over 8 percent.  Cote d’Ivoire is regarded as a “fertile soil for U.S. investment” and has attracted the attention of investors who are from a wide range of countries and interested in an equally wide range of sectors such as agribusiness, construction, infrastructure, manufacturing, mining, and oil and gas exploration and production.  Impressive economic growth was a hallmark of Ouattara’s first term but, in his second term, he will need to work harder to ensure that the growth is inclusive and that real progress is made on national reconciliation.

On the other side of the continent, Tanzania saw its most tightly contested elections since Tanganyika gained independence in 1961.  John Magufuli, the candidate of the long-time governing CCM party, has been declared the winner but his mandate already is under question.  Although external election observer groups generally found the electoral process to be fair and credible, the observers from the European Union did express some reservations about the transparency of the process.  The opposition party has rejected the results outright.  And election results in the semiautonomous archipelago Zanzibar have been annulled on grounds of irregularities and violations.  Notwithstanding that CCM appears to have retained power at the presidential level in Tanzania, several key ministers lost their parliamentary seats to the opposition.  The shock defeats felled the ministers for agriculture and investment as well as the deputy ministers for education and health.  Failing to secure a decisive victory in these elections means CCM may face domestic challenges in its ongoing negotiations with international oil and gas companies regarding the development of Tanzania’s recently discovered reserves.

Four Ways To Improve Existing U.S. Resources for Doing Business in Africa

Posted in Corporate and Investment

During the recent meeting of the President’s Advisory Council on Doing Business in Africa (PAC-DBIA), Commerce Secretary Pritzker candidly admitted that the Obama Administration has been “grappling” with how to move forward on the proposed U.S.-Africa Infrastructure Center because the U.S. Commercial Service does not have the necessary resources and training to effect a proposal that is “still too broad and unrealistic to achieve.”  A critical first step — and one that would be of assistance beyond the infrastructure sector — would be to better centralize, coordinate and leverage existing U.S. government resources on doing business in Africa.  Here are four specific ways to accomplish that goal:

  • Centralize all investment and trade-related research on each country. Various U.S. government agencies issue reports on the trade and investment climates in foreign countries.  The State Department has its Investment Climate Statements.  The U.S. Department of Commerce has its Country Commercial Guides and other market research reports.  The Office of the United States Trade Representative (“USTR”) has its annual Special 301 Reports which focus on the “adequacy and effectiveness of U.S. trading partners’ protection and enforcement of intellectual property rights.”  The USTR also maintains a website containing current information on trade agreements and statistics.  All of this research should be reconciled and centralized in one location in order to better ensure that potential investors have as full a picture as available of the countries of interest.
  • Leverage the work done by foreign trade and investment commissions. A significant number of African countries — including Cote d’Ivoire, Ethiopia, Ghana, Kenya, Nigeria, and Rwanda — have created some form of a trade and investment commission. These commissions seek to be a one-stop shop for foreign investors to learn about the incentives to doing business in the country, in which sectors to do business in the country, and how to get started doing business in the country.  The U.S. government should avail itself of the considerable wealth of information that these countries have compiled and centralized on doing business in their respective jurisdictions.
  • Get the Trade Leads Database up and running. The Export.gov Trade Leads Database is meant to contain “pre-screened, time-sensitive leads and Government Tenders gathered through U.S. Commercial Service offices around the world.” However, for the past two days, the database on the new version of the Export.gov website has listed only one trade lead … and it is in Russia. Perhaps that is why both internet search engines and a wide range of U.S. government websites still link to the old version of the Export.gov website. However, the database on the old version of the website has not been updated since April 2009.  Meanwhile, the UKTI Business Opportunities Portal, which is a comparable website maintained by the UK government, tells a completely different story about the numerous and current business opportunities in the African region.
  • Create an industry-by-industry matrix of relevant government agencies and programs. Through the Doing Business in Africa Campaign, the U.S. government is investing billions of dollars in the African region. However, it remains difficult to keep track of which agencies are relevant to which industries.  For example, the U.S. Agency for International Development, U.S. Department of Agriculture, and the U.S. Trade and Development Agency all have initiatives and programming focused on the African agribusiness sector.  A simple industry-by-industry matrix of agencies and their Africa-focused initiatives, programs and activities would help U.S. companies know which agencies they might want to approach regarding their interests in doing business in Africa.

Kenya and Nigeria bank on their citizens to help finance ongoing development

Posted in Uncategorized

In the face of low commodity prices and concerns about China’s economic health, Kenya and Nigeria are turning to their own citizens — both home and abroad — as an alternative source of financing.

In Kenya, the Treasury has launched the M-Akiba Bond, “the first-ever government bond offered exclusively via mobile phone.”  A high rate of public participation is a clear goal of this new bond program.  In addition to leveraging the deep mobile penetration and widespread popularity of mobile money, the M-Akiba Bond allows a significantly lower minimum investment — 3,000 Kenya shillings rather than 50,000 Kenya shillings — than other government bonds. Other goals for the program are to improve financial inclusion and encourage increased investment and savings by Kenyans.

In Nigeria, President Buhari is moving forward with his predecessor’s plan to issue a bond aimed at the country’s diaspora.  Late last month, President Buhari sought approval from the Nigerian legislature to increase the amount proposed to be raised from $100 million to a maximum of $300 million due to the “‘huge amount of capital’ required to bridge the infrastructure gap in the country.”  With inflows in 2014 estimated to be around $21 billion, Nigeria already is Africa’s top recipient of foreign remittance. However, foreign remittances traditionally are sent to relatives in order to address their household needs or, more recently, to start new businesses or support existing ones in climates where “capital constraints are severe.”  In order to persuade the diaspora to send remittances into government coffers as well, the Nigerian government must instill confidence that it is a deserved recipient and that received funds will be used responsibly.

Both countries are regarded as trendsetters on the continent. Thus, it is likely that other governments also will seek to get creative about how they finance their ongoing development.

Breaking up is hard to do: the DRC’s risky decentralization drive

Posted in Public Policy and Government Affairs

The government of the Democratic Republic of Congo (DRC) is in the midst of implementing a big decentralization project. The so-called “découpage”—literally, “cutting up”—has been a long time coming: the decision to subdivide is enshrined in the Constitution of 2006, but over the last decade, virtually nothing had happened to prepare for this large-scale administrative and political shift. Finally, this past July 16th, the number of provinces in the DRC officially grew from 11 to 26. While this may not be the DRC’s first experience with decentralization—the country has undergone similar divisions three times since its independence—this split comes at a particularly critical time in the country’s development and poses particular economic and political risks.

In theory, decentralization is supposed to improve the quality of provincial governance, bringing administrations closer to their citizens. In a gigantic country like the DRC, with some provinces nearly the size of California, many remote areas are functionally disconnected from their governments; diminishing the distance between the provincial capital and communities could help. Decentralization is also seen as a way to boost under-performing regions that have been overshadowed by wealthier regions within the same province.

In practice, however, the process has been chaotic. It has been over two months since the official decentralization, but the new provinces do not yet have their own governors or many of the structures required to function independently. In fact, the lack of preparation to carry out the decentralization has been one of the most significant criticisms against it, not to mention the lack of funds (the national government’s 2015 budget did not dedicate any money to the decentralization process). Moreover, the national government has only ever remitted a small fraction of the 40% of revenue it is supposed by law to provide to the provinces (less than 6%, by some measures), and there are no indications that this will change post-découpage. As a result, many fear that the poorest of the new provinces will not be economically viable—unless they take undertake some serious reform.

Take the example of Katanga province, which was split into four “mini” provinces (Tanganyika and Haut-Lomami in the north, and Lualaba and Haut-Katanga in the south). The two new northern provinces are significantly poorer than their southern counterparts, which, due to a better-developed mining industry, have boasted impressive growth rates over the last seven years. To be viable as provinces on their own, Tanganyika and Haut-Lomami would need significant investments in their agricultural sectors and, relatedly, their crumbling road infrastructure. Yet the two new provinces have dismally low tax revenue—for instance, Haut-Lomami is said to collect a total amount of roughly $10,000 per month. To address the funding shortfall, the new Katangan provinces may begin to impose additional taxes, such as province-level taxes on mining companies, which would be imposed on top of the royalties already levied by the national government. Transportation taxes—which are already very high in Katanga—are also expected to become more expensive: where mining trucks used to only cross one provincial border on their way to Zambia, they will now cross two.

Another significant criticism (and risk) of the decentralization has to do with its timing. To its numerous detractors, at least, the whole project appears politically motivated. The ex-governor of Katanga province, Moïse Katumbi, was once a close ally of President Kabila’s, but their relationship has deteriorated rapidly over the course of the last year, and many believe that the decentralization drive was hastily implemented this year so as to remove Katumbi—a charismatic millionaire businessman with alleged presidential aspirations—from power ahead of the November 2016 presidential election. Katumbi has publicly criticized President Kabila’s alleged attempts to modify the Congolese constitution to allow for a third presidential term, and, most recently, on September 29, quit Kabila’s party, the PPRD.

Whether coincidental or political, decentralization is already having some negative effects on the elections timetable in DRC. Roughly ten elections at all levels—national, provincial, communal, and local—are supposed to occur over the next fifteen months or so, culminating with the national and legislative elections scheduled for late November 2016, if all goes according to plan. However, earlier this month, the Constitutional Court ordered that, in the face of the “anarchy” taking place in the new provinces, the gubernatorial elections for the new provinces (scheduled for January 31, 2016) should occur before the provincial elections (first tentatively scheduled for October 6, now pushed back indefinitely)—a move that risks derailing the later elections across the DRC. Reacting to the Court’s call for the government to take “exceptional transitional measures,” the executive controversially announced two weeks ago that it would appoint special commissioners to govern the new provinces pending the gubernatorial elections. The opposition sees this as unconstitutional maneuvering by the government to delay the end of President Kabila’s second term.

The political paralysis resulting from the muddled decentralization process and the potential electoral slippage is something the country can hardly afford just a year out from the national elections. It is also undermining the very purpose (the stated purpose, at least) of the reconfiguration, which is to improve government services and accountability. It would be particularly ironic if the ultimate effect of decentralization were to actually delay the country’s first democratic transition of power.

The SDGs, business, and the development challenge

Posted in Corporate and Investment, Current Events

The most intriguing characterization of the new Sustainable Developments Goals (SDGs), endorsed by world leaders at the United Nations General Assembly on September 25, came from Amina Mohammed, assistant secretary-general of the United Nations and special advisor on Post-2015 Development Planning. During a panel discussion at the African Leadership Forum on September 24, Ms. Mohammed described the SDGs in a novel way, as “17 opportunities for investment.”  

Ms. Mohammed’s comment is a recognition that the private sector will play an important role in achieving the 17 SDGs, especially those related to food security, climate change, education, health, sanitation and water, gender equality, and reliable sources of energy.

The SDGs bring in a new player: the private sector

Why is the role of business in the SDGs important?

For the first time, the private sector has a recognized role in achieving the global development agenda. Indeed, in the Millennium Development Goals (MDGs), published in 2000, there was only a passing reference to the private sector, and that was to call on technology companies to enhance cell phone availability and internet penetration.

The new global development agenda is significantly different: Within the SDGs, there is an appreciation of the private sector’s role in the complex process of social and economic development. For example, Goal 8 (“decent work and economic growth”) emphasizes job creation, entrepreneurship, innovation, and small-and medium-sized enterprises. Goal 9 focuses on building resilient infrastructure, promoting inclusive and sustainable industrialization, and fostering innovation—all tasks in which business and entrepreneurs are essential. Goal 17 (“partnerships for the goals”) encourages and promotes “effective public, public-private and civil society partnerships,” which are critical to commercial success and economic development in emerging markets, especially in sub-Saharan Africa.

Importantly, given that the cost of implementing the SDGs is estimated to be $4.5 trillion per year, there is a need for new collaboration models and financing instruments. Corporates and investment funds will be critical to mobilizing the needed funds.

The intertwining of business and development in the SDGs

The SDGs, unlike the MDGs, reflect a common language that increasingly is understood by government, civil society, and business. While distrust may remain in certain quarters, trust clearly is improving. As Horst Köhler, the former International Monetary Fund chief and one of the architects of the SDGs, said, these goals are “our declaration of inter-dependence for the 21st century.”

In the MDGs, full and productive employment and decent work for all was merely a target of the first goal. In the SDGs this target has been elevated to a goal in itself (Goal 8), which is to “promote sustained, inclusive and sustainable economic growth, full and productive employment and decent work for all.” Obviously “productive employment” and “decent work” cannot occur without a robust private sector and a conducive investment environment.

Similarly, investors are waking up to the opportunity in Africa, and civil society increasingly is acknowledging the role of business in accelerating economic development. For example, the  African Growth and Opportunity Act (AGOA) Civil Society Network issued a communiqué following the 2015 U.S.-Africa AGOA Forum in Gabon that called on member governments “to create the investment and business environment, including protection for intellectual property rights, that will attract foreign direct investment to the textile and apparel sector with a view of increasing production capacity and vertical integration.”

Notably, the Post-2015 Development Agenda actually overlooks some goals in which the private sector can play an important role in promoting economic development. For example, when we consider Goal 16 (“peace, justice, and strong institutions”), we should remember that businesses and entrepreneurs can assist in the development of post-conflict states and contribute to the peace-building process. This suggestion is not new: There have been instances where companies have entered conflict zones. For example, U.S. oil companies navigated the Angolan civil war in the 1970s and helped stabilize the fledgling government in Luanda in the face of intense uncertainty and pressure, especially from the U.S. government. More recently, Nespresso has been working with Technoserve in the Yei region of South Sudan. Over the last two years, Nespresso has worked with more than 300 small-holder farmers to purchase and export 12 metric tons of fully washed green coffee. Several hundred farmers have received agronomy training while the civil war has raged.

Including the private sector in the development agenda comes with an important requirement: corporate accountability. The SDGs try to capture this priority by encouraging companies “especially large and transnational companies” to adopt sustainable practices and integrate sustainability information into their reporting cycles and annual reports (Goal 12.6). Companies will continue to be challenged to synchronize the outcomes of their investments, social and otherwise, with global development goals.

Relatedly, drawing the private sector more directly into the social and economic development process reflects the needs for a clear alignment between a company’s commercial objectives and a country’s social and economic development targets. While this places an emphasis on the importance of national development strategies, global goals such as the SDGs help clarify vital global objectives and create a common approach for achieving those goals. As Jane Nelson, director of the CSR Initiative at the Harvard Kennedy School and Brookings nonresident senior fellow, commented during a September 24 forum on “Business and the SDGs-Building Blocks for Success at Scale,” the Sustainable Development Goals are best seen as a “lighthouse” for all stakeholders engaged in the development process, both as a guide to decision-making and a measurement of progress.

Thus, the global development agenda remains large, the progress of the last 15 years notwithstanding. Fulfilling that agenda cannot be achieved without bringing business more directly into the development process and the development policy dialogue with government and civil society.

Note: This piece originally appeared on the Brookings Africa Growth Initiative’s blog Africa in Focus.

From the AGOA Forum in Gabon to the WTO Ministerial in Nairobi

Posted in Corporate and Investment, Current Events, Public Policy and Government Affairs, Trade Controls and Policy

For years, many observers treated Africa’s plans for regional integration with a healthy dose of skepticism. Though the skepticism remains, what has changed is the wide-spread acknowledgement and elevated importance of regional economic integration to grow Africa’s economies, create jobs for its rapidly growing youth population, and improve lives. Last month’s AGOA Forum, hosted by Gabon, was an opportunity not only to celebrate the accomplishments over the last fifteen years in increasing African exports to the U.S., but also to discuss in earnest how to remove some of the major impediments to greater utilization of AGOA duty-free privileges.

At AGOA, discussants and panelists explained how “supply-side” constraints are limiting growth in trade and economic expansion. For example, much has been reported on Africa’s crisis in infrastructure: few paved roads and highways, port congestion, and lack of power, are among chief concerns. Yet nearly equally costly is the fragmentation of Africa’s markets. African countries remain dependent on the actions of their neighbors in order for their products to be competitive regionally and globally. An export-oriented company in Ethiopia depends on an efficient border, customs service, and port in Djibouti, for example, in order to thrive. Developing sets of common standards and procedures, limiting idle time spent at border crossings, and speeding up cargo delivery at ports – all supply-side constraints – form a major part of the agenda for regional integration. This trade facilitation and capacity building is critically needed in Africa, as all stakeholders at the AGOA Forum acknowledged.

Soon, in December, Nairobi will host the biennial WTO Ministerial (MC 10) – the first time on the African continent – where trade ministers will discuss, among other topics, how to effect the WTO Trade Facilitation Agreement (TFA), which the WTO General Council approved in November 2014. The TFA, which calls on countries to streamline and simplify trade and customs rules and procedures, allows for a transition period for developing economies and least-developed countries. (Most African countries fall into these two categories.) During this transitional period, countries may avail themselves of technical assistance and other support for building trade capacity within their countries in order to conform to articles in the Agreement.

President Obama’s Trade Africa Initiative is expanding its reach to support more countries in trade capacity building and is being somewhat re-oriented to align with the commitments under the TFA. This is a very welcome outcome. However, as this presidential initiative grows, one might question whether it – and U.S. government support for trade facilitation and trade capacity building – is structured in a way to achieve optimal outcomes and results. The Office of the U.S. Trade Representative leads trade policy and negotiations for the U.S. government, but it lacks authority to oversee or coordinate the technical assistance that the U.S. government allocates through multiple agencies to African governments. Moreover, the U.S. government treats each of the five regional economic communities in Sub-Saharan Africa (ECOWAS, EAC, SADC, COMESA, and CEEAC) differently: There is little coherence in policy, part of which can be attributed to structural deficiencies. A U.S. ambassador who represents the U.S. to an African country that hosts a Regional Economic Community, also serves as the U.S. representative to that REC. So, for example, the U.S. Ambassador to Nigeria, where ECOWAS resides, must find it challenging at best to find any time for regional issues, given myriad bilateral policy priorities for the U.S. in Nigeria.

In time for the WTO Ministerial, the Department of State should consider the appointment of a special envoy or ambassador who can work alongside USTR to lead US diplomacy with the RECs and better align trade capacity building assistance with policy, and elevate the importance of regional integration to those who control the assistance budget. Big numbers — often the product of an accounting exercise – are recited in discussions on “aid for trade”, but the numbers belie the fact that trade assistance takes a back seat to many other foreign assistance spending priorities.

With the 10th ministerial just a few months away, Kenya’s Foreign Affairs Cabinet Secretary Amina Mohamed has publicly stated that she would like to see the TFA enter into force by the time of the Ministerial. If it does, will the USG be in a position to support its implementation in Africa?

China, India and Japan Set to Host Major Summits To Further Strengthen Ties with Africa

Posted in Corporate and Investment, Current Events

In the midst of questions about how China’s economic health will impact Africa, the foreign ministers of China and South Africa have announced that the sixth Ministerial Meeting of the Forum on China-Africa Cooperation will be upgraded to a summit. Nearly a decade after the first China-Africa Leaders summit which was held in Beijing, this summit will be held on the continent in Johannesburg on December 4-5 of this year. Notably, this news comes as India gears up for its own summit with African leaders. Scheduled for October 26-29 in New Delhi, the India-Africa Forum Summit is believed by some to be the “most significant diplomatic engagement” that the Modi government will hold at home this year. Although this marks the third such India-Africa summit, this year’s event not only will be significantly larger than its predecessors (in which only 15 or so African leaders participated ) but is also “the largest gathering of leaders at [this] level ever in the country.” To date, 35 of the 54 invited heads of state have confirmed their attendance.

Keeping pace with its counterparts, Japan will host the sixth Tokyo International Conference on Development (TICAD) in Kenya in 2016. An “open, multilateral and international forum to discuss the future development of Africa,” TICAD began in 1993 as an initiative of the Japanese government and now is co-organized by the World Bank, UNDP, the African Union Commission and the United Nations. Next year’s meeting will mark the first time that the event is being held in Africa.