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Competing smarter: Assessing the report from the President’s Advisory Council on Doing Business in Africa

Posted in Corporate and Investment, Current Events

One positive outcome of last year’s U.S.-African Leaders Summit was the creation of the President’s Advisory Council on Doing Business in Africa (DBIA), whose purpose is to make recommendations on how to strengthen U.S. commercial engagement on the continent. The council, a group of 15 seasoned business leaders with a genuine understanding of Africa’s business environment, recently issued its first report and set of recommendations.

Important proposals are put forward, such as strengthening healthcare infrastructure as well as the perishable supply chain in order to reduce post-harvest food losses. Another critical recommendation is for strong advocacy for African governments to seize global leadership in bringing the World Trade Organization’s (WTO) Trade Facilitation Agreement into force prior to the December 2015 WTO ministerial in Kenya, the first such session to be held in Africa.

The entire report deserves careful consideration and is a welcome addition to the increasingly useful policy debate on how to increase economic ties between the U.S. and Africa. However, several key aspects of the U.S.-African commercial equation were neglected within the report and should be essential parts of any conversation about how to make American companies more competitive across the continent.

Lingering questions and important omissions

Notably, there is only one reference to the African Growth and Opportunity Act (AGOA), the cornerstone of the U.S. commercial relationship with Africa, and it is an easily missed expression of “trust” that Congress will renew the legislation this year.

A full-throated endorsement by the council of AGOA’s renewal for 15 years, as the Obama administration has called for, would have been important not only as a strong signal of support from these respected business leaders and companies, but also in setting a clear context for the group’s recommendations. In fact, this omission, as well as the report’s equally passive call for Congress to fund the Export-Import Bank, reflects a more fundamental dilemma of the document: Is this a Commerce Department report or a document whose recommendations aim to strengthen a “whole of government” approach to doing business in Africa, inclusive of the nearly 12 federal agencies involved in the DBIA campaign? On this, the lines are blurry.

A key recommendation of the council is the creation of a “forward-deployed” and “business-driven” U.S.-Africa Infrastructure Center. The purpose of the center would be to “align business resources with government resources to identify, vet, prioritize, and develop a unified approach to compete for critical projects.” This is a timely and creative proposal. Given the caution of U.S. companies, the complexity of Africa’s investment environment, and China’s dominance in this sector, there is a compelling need for coordinated support from all relevant U.S. agencies to help American companies win African infrastructure projects.

What is not clear is who would “own” the U.S.-Africa Infrastructure Center. Would it be State, Commerce, USAID, the private sector, or a hybrid of agencies? Moreover, how would this center align with the efforts of the administration’s new Trade and Investment Hubs whose mission was also recast at last year’s summit to help U.S. companies capture market share on the continent?

The report addresses the critical issue of access to “reliable” capital and makes the important recommendation that the Commerce Department develop a public-private partnership with institutional investors in an effort to reduce risk and increase investor confidence. It would have been helpful to have mentioned the Overseas Private Investment Corporation (OPIC) in this context given the influential role the agency plays in risk-mitigation across the continent. Despite its successes and indeed the net revenue it generates for the U.S. Treasury, OPIC remains understaffed and subject to key regulatory constraints.

There is also useful discussion of an “Investor Toolkit” in the report, building on the knowledge of the U.S. Foreign Commercial Service (FCS), to help U.S. companies identify and vet local partners and gain local market intelligence. The FCS, under Secretary Prizker’s leadership, has only recently increased its presence in Africa after more than a decade of downsizing. Partnerships with dynamic local organizations such as the Kenya Private Sector Alliance in Nairobi, the American Chamber of Commerce in Johannesburg, and LCF Advogados in Luanda would add significant value to the development and maintenance of these FCS-led toolkits.

Going further to reinforce U.S. government coordination

Perhaps the most salient recommendation that the council makes is to encourage the administration to establish an interagency committee to coordinate U.S. trade facilitation and to engage recommendations from private sector organizations. This is consistent with bipartisan legislation, first introduced in 2013 and again in February 2015, that calls for a special coordinator in the White House to “ensure government agencies are working in tandem,” maximize support for U.S. businesses entering African markets, and increase U.S. exports to Africa.

A special coordinator could also help to guide the “Steering Group on Africa Trade and Investment Capacity Building,” which was established at last year’s summit and tasked with making recommendations on a “comprehensive approach” to expanding the region’s capacity for trade and investment. The Steering Group was supposed to have issued its report to the president through National Security Advisor Susan Rice in January; however, the group has yet to impact the dialogue on these issues.

With the administration preparing for President Obama’s participation in the Global Entrepreneurship Summit in Kenya in July, it is essential for the White House to clarify who in the administration is in charge of the U.S. commercial engagement in Africa. Clearly, there is growing recognition that the White House needs to enhance its leadership in this area.

Finally, the report acknowledges the Commerce Department’s role in leading the U.S.-East African Community (EAC) Commercial Dialogue, which is the “central platform” for public-private sector engagement under the Trade Africa initiative.

This is true.

What is not mentioned is that the U.S. also has a U.S.-EAC Trade and Investment Framework Agreement (TIFA) led by the U.S. Trade Representative that has as the goal, “to strengthen the United States-EAC trade and investment relationship.” The optimal recommendation would be to integrate the Commercial Dialogue and the TIFA, to be co-chaired by the Secretary of Commerce and the U.S. Trade Representative, and joined by a robust private sector delegation. In short, there is a compelling need for a genuine Team USA approach that lessens the time and resource demands on all sides while enhancing the priority and urgency of deepening trade relations with Africa.

As far as advisory council reports on Africa are concerned, it is one of the most relevant and thoughtful reports ever released—and in a relatively short period of time. However, the report is also notable for what it omits, and significant work remains to be done to fully realize the potential of a robust U.S.-African commercial relationship.


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

European Parliament Divided on Conflict Minerals Regime

Posted in Current Events, Energy and Natural Resources, Public Policy and Government Affairs


On April 14, 2015, the Committee on International Trade (INTA) of the European Parliament adopted amendments (by 22 votes to 16, and 2 abstentions) on the European Commission’s proposal for an EU conflict minerals regime published in March 2014. The INTA vote followed a compromise reached among three of the main political groups of the Parliament, namely the center-right (EPP), the Liberals (ALDE) and the ECR led by the UK Conservatives. See our previous blog post for further information on the context and on the Commission’s proposal.

Outcome of the vote

The main highlights of the INTA vote are as follows (as the consolidated report is not yet available, the information provided below could be subject to change):

  • The INTA Committee decided to beef up the Commission’s proposal by making it compulsory for EU-based smelters and refiners to be EU-certified as responsible importers. However, the INTA members decided to keep a voluntary approach for the rest of the supply chain. At the same time, members adopted a proposal for a “European Responsible Supply Chain Label” for companies willing to exercise due diligence.
  • In addition, INTA members maintained the focus on tin, tungsten, tantalum, and gold as proposed by the European Commission by rejecting amendments that aimed to include additional minerals.
  • They also agreed on the geographic scope of “conflict-affected and high-risk areas” as in the Commission’s proposal although MEPs reportedly did not provide guidance on how to determine which countries/regions will fall under the scope of the EU regime.
  • The INTA Committee excluded recycled/reclaimed materials.
  • Finally, the amendments adopted by the INTA Committee also include a two-year review clause.

Next steps

However, the Socialists and the Greens vehemently criticized the outcome of the INTA vote as they are determined to make the EU’s due diligence self-certification system compulsory for the whole supply chain including all downstream operators, rather than only for smelters and refiners. Left-wing MEPs are expected to mobilize forces in favor of a mandatory approach ahead of the adoption of the European Parliament’s position in the next plenary (i.e., by the full Assembly) on May 18-21. No doubt that a number of NGOs will join forces with the same aim in mind. The EP’s “first-reading” position will then serve as the basis for discussions with the Council, which is likely to favor a voluntary approach as proposed by the Commission.

At this stage, the discussion in the Council only took place at the expert level in several sub working groups; one to address the customs issue, the other to try to find a definition for “conflict affected high-risk area”. At a higher level, the working group for trade matters prefers to wait for the result of the debate in the EP before addressing the mandatory/voluntary issue.

Member States are, as the EP, under strong pressure from NGOs asking for mandatory reporting obligations from the end-users but they are also sensitive to the Commission’s arguments about the negative effects that an “EU Dodd Frank regime” would have on the local population, i.e., to completely stop the legitimate mining in Eastern Congo.

This Year’s IPA Award Showcases Capital Innovations

Posted in Corporate and Investment

This week, the African Innovation Foundation (“AIF”), an organization whose purpose is to “to increase the prosperity of Africans by catalyzing the innovation spirit in Africa,” announced the finalists for its annual Innovation Prize for Africa (“IPA”) award.  Started in 2011, the IPA award serves to “honour[] and encourage[] innovative achievements that contribute toward developing new products, increasing efficiency or saving cost in Africa.”  Two of this year’s finalists have developed innovations that take on the issue of access to capital, the lack of which continues to be one of the most significant challenges to sustainable development on the continent.

Developed by Alex Mwaura Muriu, Farm Capital Africa is a crowdfunding investment platform that “identifies, screens and shortlists full-time farmers with small holdings and helps them devise farming plans to attract potential investors who earn profits over time.”  Smallholder farmers are responsible for the vast majority of farming activity on the continent but private commercial banks and other lenders have proven reluctant to extend financing to these potential borrowers.  The reasons for this reticence include geographic inaccessibility, a dearth of financial as well as vital records for establishing a credit history, and a lack of collateral.  Expanding the financing options for smallholder farmers is critical to the African agricultural sector which, in the coming decades, will play a pivotal role in the region’s socioeconomic development and global food security.

Leveraging the explosive growth of mobile technology on the continent, Kyai Mullei has developed M-changa.  Also a crowdsourcing platform, this mobile application  “allows users to solicit support for a cause, track contributions, and withdraw funds using their mobile phones without relying on internet connectivity.”  The app allows people to source funding for business enterprises but also medical treatment, educational services and other causes that span the range from personal to small-scale to broad-based impact.  This model addresses what The Bill and Melinda Gates Foundation, Kenya Financial Sector Deepening, and other experts have observed about the financial lives of the poor which is that “access to the right financial tools at critical moments can determine whether a poor household is able to capture an opportunity to move out of poverty or absorb a shock without being pushed deeper into debt.”  This app has the potential to make the difference between managing poverty versus creating wealth.  It also is no coincidence that the app is known as E-harambee.  The official motto of Kenya, harambee is a Swahili word that translates to “All pull together.”

Muriu, Mullei and the other finalists have done impressively well to be selected from a record pool of over 900 applications from 41 countries.  The award ceremony will be held on 12-13 May in Morocco, which is a partner, host, and patron to this year’s IPA award and itself is quickly becoming one of the region’s innovation hubs.  Regardless of who ultimately receives the three cash prizes, the IPA award is an important platform for showcasing the indigenous innovation capabilities across the continent.

President’s Advisory Council Focuses On Capital, Supply Chains and Infrastructure

Posted in Corporate and Investment, Food Security and Agriculture, Public Policy and Government Affairs, Trade Controls and Policy

One of the major initiatives announced during last summer’s U.S.-Africa Leaders Summit was the establishment of the President’s Advisory Council on Doing Business in Africa, a private sector-led body tasked with assisting the President in the development and dissemination of U.S. private sector strategies for taking advantage of trade and investment opportunities on the continent.  This week, the Advisory Council, which consists of 15 private sector corporate members representing a range of industries, met with Commerce Secretary Pritzker and other government officials to present its recommendations report.  The recommendations focus on three key areas: capital; supply chain efficiency; and infrastructure.

  • Increase support for capacity building activities for “African financial regulators, exchanges, and financial market participants.” By drawing investment and increasing access to capital, strong capital markets will play a critical role in ensuring robust and sustainable development on the continent.  Africa’s capital markets have undergone “slow but steady” progress over the past few years and performed particularly well in 2014.  African sovereigns “went to market with around $15 [billion] worth of bonds.”  Equity capital market activity “increased by 40%” in terms of transactions volume and doubled in terms of raised capital.  Initial public offerings by African domiciled companies accounted for approximately 20% of the equity capital raised.  The Advisory Council has proposed that support of these efforts “could be enhanced through funding of the existing [Technical Assistance Program of the U.S. Securities and Exchange Commission].”
  • Equip institutional investors with tools to overcome real and perceived barriers to investment.  2014 was an active year for private investment in Africa. “Driven by several large deals with ties to U.S. investors,” the $8.1 billion in private equity investments was the second highest total ever.  However, the Advisory Council has expressed concern that “perceptions and knowledge gaps,” governance risks, insufficient capital to fund large-scale infrastructure projects, and inadequate infrastructure to support economic activity continue to exert an adverse impact on access to capital.  The Advisory Council has called for toolkits, outreach events and other assistance in identifying opportunities and navigating challenges.
  • Improve regional integration.  The Advisory Council is joining a chorus of key stakeholders — the U.S. government, the African Development Bank and the United Nations Economic Commission for Africa — who recognize that improving regional integration in Africa is a high priority.  The Council commended the Obama Administration for the U.S.-EAC Cooperation Agreement and has identified the World Trade Organization Trade Facilitation Agreement (“TFA”) as another key instrument for advancing this issue.  Although only four WTO members have secured domestic acceptance of the TFA, one of those countries is Mauritius.  Furthermore, at the end of this year, Kenya will host the WTO Ministerial Conference, marking the first time that the event is being held on the continent.  Believing that these developments present a chance for Africa “to show global leadership on trade facilitation,” the Advisory Council has recommended that the U.S. government “foster support and adoption” for the TFA across the region.
  • Focus on obstacles to trade in the agricultural, manufacturing and services sectors. The Advisory Council also has expressed specific concern about the significant post-harvest losses experienced by the African agricultural sector.  It has called on the Department of Commerce’s Commercial Law and Development Program, the Department of Agriculture, the Trade and Development Agency, and other agencies to remove supply chain inefficiencies and introduce cold chain best practices and standards.  In addition, the Advisory Council has recommended “government-to-government dialogues, including with Regional Economic Communities to address localization barriers” that inhibit market access in the manufacturing and service sectors and industrialization more generally.
  • Seize the “enormous opportunity” that Africa’s infrastructure gap presents for partnership between U.S. and African public and private sectors.  Although “closing the infrastructure gap is vital for Africa’s economic prosperity and sustainable development,” the costs of achieving this goal are estimated to be in the trillions.  Recognizing the opportunity for the U.S. private and public sectors to work with their African counterparts to address this sizeable deficit, the Advisory Council believes that it is “critical” that the government support “a focused mechanism for driving action and ensuring broad U.S. company participation.”  Chief amongst its recommendations in this regard is the creation of a U.S.-Africa Infrastructure Center that brings together public and private sector resources “to identify, vet, prioritize, and develop a unified approach to compete for critical projects.”  Such a body has the potential to vastly increase the competitiveness of U.S. companies pursuing infrastructure project opportunities in the region.  The Advisory Council has identified healthcare infrastructure as “a key area with significant opportunities.”

Throughout the report, the Advisory Council stresses that increasing U.S. commercial engagement with Africa will require not only interagency coordination but also ongoing collaboration with the private sector.  From Secretary Pritzker’s highly positive reaction to the recommendations, it is clear that U.S. companies will play a central role in what President Obama has called “a new chapter in U.S.-African relations.”

World Investors Eye Egypt’s Future

Posted in Corporate and Investment, Current Events, Dispute Resolution, Energy and Natural Resources, Public Policy and Government Affairs

Is the world ready to invest in Egypt? After years of a stagnating economy and political uncertainty, the results from last month’s Egypt Economic Development Conference (EEDC) suggest that investors are taking a fresh look at what could be a new landscape for economic prosperity in the country.  To better understand the results and impact of the EEDC, it is important to examine some of Egypt’s economic and legal reform measures over the past year, as well as some recent developments in its regional and global economic relations.

I.  Egypt Economic Development Conference (March 13-15, 2015)


On March 13, 2015, Egypt commenced its three-day EEDC in resort town Sharm El-Sheikh.  The turnout was impressive:  Over 20 heads of states, numerous senior government officials, and 2,000 investors and business leaders.  The list of attendees included U.S. Secretary of State John Kerry, Managing Director of the International Monetary Fund Christine Lagarde, senior officials from the World Bank, and CEOs of some of the world’s leading corporations.  One of the organizers of the EEDC, Richard Attias, who also arranged the annual World Economic Forum in Davos in January 2015, noted that during his 25 years of experience, he had not witnessed “such a strong mobilization and enthusiasm.”

Investment Pledges and Projects

As the conferenced kicked off, the Kingdom of Saudi Arabia, the United Arab Emirates, and Kuwait announced a collective pledge of $12 billion to Egypt. In addition, Oman promised $500 million; the World Bank allocated $5 billion over the next four years; and the Islamic Development Bank signed loan agreements for approximately $3.8 billion.

By the end of the conference, Egypt had signed investment deals worth over $33 billion and MOUs for potential deals worth $92 billion.  Energy deals dominated the EEDC, with British Petroleum (BP) signing a $12 billion agreement to invest in exploration and operation projects in the Nile Delta and Gulf Suez, and Siemens International inking MOUs worth $10.5 billion to raise the country’s energy production capacity by one-third.  In addition to energy deals, the list of signed deals spans a range of sectors, including housing, transportation, logistics, food, and retail.

Egypt’s New Capital

Investors at the EEDC also got a glimpse of Egypt’s plans to build a new capital city, which itself may generate many infrastructure projects in the coming years.  Aimed to alleviate congestion and overpopulation in Cairo, the as-yet-unnamed “smart city” will lie east of Cairo, closer to the Red Sea, and span over 250 square miles (roughly the size of Singapore).  The new capital is expected to be home to approximately five million people and generate close to 1.75 million job opportunities.  Egypt’s ministries, agencies, and Parliament,  as well as embassies in Egypt, would all move to this new administrative capital.  The new capital will also include an airport larger than London’s Heathrow, a park twice as big as New York’s Central Park, and a theme park four times the size of California’s Disney Land.  The project’s first phase is scheduled to be completed within seven years and will cost an estimated $45 billion.

Suez Canal Zone

Also unveiled during the EEDC was the master plan for a development project centered around the excavation for the new Suez Canal lane.  First announced in August 2014, the project is designed to turn the area around the Suez Canal into an international logistical and commercial hub.  The master plan includes several seaports, an industrial zone, as well as a “technology valley.”  The plans for the Suez Canal project and the new capital were showcased at the EEDC as part of a new national vision for Egypt.

II.  Economic and Legal Reforms

The investment pledges and projects announced for Egypt arrive against the backdrop of several key economic and legal reforms taken by the government over the past year. In a February report on Egypt, the IMF welcomed the reform measures taken over the previous months and noted that “Egypt has chosen a path of adjustment and reform which, if followed resolutely, will lead to economic stability and growth.”

Tax System

During the second half of 2014, Egypt overhauled its tax system through a series of reform measures which included introducing dividend and capital gains taxes, increasing taxes on higher income brackets, implementing excises on certain products (e.g., tobacco), and revamping the country’s property tax framework.  Plans are also underway to convert Egypt’s current sales tax into a modern value-added tax (VAT) and to implement a simplified tax regime for small and medium-sized enterprises (SMEs).

Energy Subsidies

In July 2014, Egypt also slashed spending on energy subsidies by nearly a quarter in its 2014-15 budget, raising prices for fuel products and electricity.  The government plans to continue increasing fuel and electricity prices over the next five years to completely eliminate energy subsidies. This may be achieved even sooner given the current global oil prices.

Historically, energy subsidies have imposed a heavy burden on Egypt’s budget, swallowing over 6 percent of GDP in the last fiscal year. In addition, in recent years when international oil and natural gas prices exceeded budget projections and domestic demand surged, the government diverted more than its contracted share of production to satisfy the domestic market, resulting in over $5 billion in arrears to foreign energy companies.  In turn, these companies significantly reduced their exploration activities and investments.  The implementation of the subsidy reforms and the settlements of more than half of the arrears, however, have led to a resurgence in oil and gas exploration investments both prior to and during the EEDC.

Investment Law

After months of re-working its investment law, Egypt finally ratified on March 12 key amendments to the law which aim to reduce government inefficiencies, enhance investor protection, and provide targeted incentives. The new law also provides a one-stop shop that allows investors to obtain approvals and permits in certain sectors from a single window operated by the General Authority for Investment, cutting out dozens of governmental agencies from the process.

Additionally, under the amended law, power is vested in two existing committees to resolve disputes between investors and the Egyptian government.  The first committee focuses on resolving disputes that involve licensing and implementation issues.  The second committee, headed by the Prime Minister, resolves disputes concerning investment contracts between the government and investors.  As of last month, more than half of the complaints brought before both committees have already been resolved.  The amended law permits only those parties to a contract with the state to challenge such a contract, eliminating third-party suits. Since 2011, Egypt has encountered third-party challenges and several investment treaty arbitrations.  While some have claimed this new amendment to the investment law will reassure investors, others have made the point that it may stifle legitimate challenges.

III.  Regional and Global Economic Cooperation

In addition to the domestic reforms and enhanced stability, recent developments in Egypt’s regional and global economic relations seem encouraging.

On a global level, Egypt’s government has expanded cooperation with several key partners and revamped economic relationships that were impacted in the wake of political unrest.  In December 2014, Egypt and China signed a “comprehensive strategic partnership” agreement boosting economic and other kinds of cooperation;  trade levels between both countries have been steadily increasing.  Egypt’s trade volume with Russia also soared in 2014, exceeding $4.5 billion (over 80 percent more than the previous year).  Egypt’s economic trade with the EU is also rebounding, following the participation of eight European countries – including Germany, France and the United Kingdom – in the EEDC.  As for the United States, last November it organized the largest ever American trade mission – comprised of executives from about 70 companies – to visit Egypt.  And earlier this month, the U.S. formally ended the freeze on military aid to Egypt.

On a regional level, Egypt’s new government has been receiving overwhelming economic support, in the form of aid and long-term investments, from many of the Gulf Cooperation Council states.  And just as Egypt has engaged its neighbors in the Arab Gulf, so too has it been engaging key African states.  On March 23, setting aside its fears that the multi-billion dollar Grand Ethiopian Renaissance Dam project would diminish its water share of the Nile River, Egypt, along with Sudan, signed a Declaration of Principles with Ethiopia concerning the project.  The Declaration paves the way for a binding agreement between the three nations and defuses the tension that sparked four years ago when Ethiopia initially announced its plans for the dam.  The past several months have witnessed a breakthrough improvement in Egyptian-Ethiopian relations, with leaders of both states expressing their desire to increase economic cooperation.  Egyptian Prime Minister Ibrahim Mehleb recently suggested establishing an Egyptian-Ethiopian committee headed by the states’ respective Ministers of Foreign Trade and Industry.  South Africa also has agreed to “accelerate trade and investment” with Egypt, as announced by President Zuma following his visit to Egypt earlier this month.

IV.  Looking Ahead

Egypt still faces a whole host of challenges when it comes to its investment climate, as illustrated in part by the World Bank’s 2015 Doing Business report ranking Egypt at 112 out of 189 for ease of doing business.  Nevertheless, it appears that the measures taken by the government to restore the economy and revive investor appetite are working.  These measures are part of a comprehensive policy approach and an ambitious economic vision, both of which have been lacking in Egypt’s recent history.

During the coming months, it will be crucial for Egypt to prove that its economy has finally turned around and that its recently announced mega projects are successfully implemented and actually producing positive economic results.  The government must also follow through on its reform promises to continue to instill the confidence of investors worldwide.

As more investors eye Egypt in the years and decades to come, so too will Egypt need to continue enhancing its legal and economic frameworks in order to maximize returns both for global stakeholders and all Egyptians.  In the meantime, the world will be watching.

Which Way Nigeria?

Posted in Current Events, Public Policy and Government Affairs

The historic electoral victory by Muhammadu Buhari, the first time an opposition candidate has defeated an incumbent president in Nigeria, opens a new and unprecedented chapter in the history of Africa’s most populous nation and the continent’s largest economy.

As president-elect, Buhari faces significant challenges. Stemming the insurgency in the north waged by Boko Haram, maintaining relative calm in the restive Delta region and fighting corruption and cronyism are at the top of the list. Also on the list is the need for Buhari to quickly establish himself as a genuine leader of all Nigerians, north and south, Muslim and Christian. The fact that his election was as decisive as it was, with Buhari gaining 55 percent of the vote to Jonathan’s 45 percent, will be helpful in this respect, and demonstrates that Buhari’s two campaign pillars of reestablishing security and eliminating corruption resonated with voters throughout the country.   Maintaining many of the reforms that were launched by the Goodluck Jonathan government will also be important for maintaining investor confidence, especially as it relates to the agriculture, power and banking sectors.

Job creation and reducing poverty are also at the top of the list.  In spite of the impressive growth that Nigeria has experienced, it still ranks second globally in the number of people living in extreme poverty.  And to combat Boko Haram and other extremist groups, the new government will need to address root causes that go beyond the battlegrounds.  When one examines the development indicators of the north alone (e.g. education, poverty, health), the disparity between north and south is enormous.  An initiative that brings development and jobs to the north is desperately needed.

Goodluck Jonathan, who has been in power since 2010, has been a divisive figure in Nigeria.  On the one hand, he is credited for appointing a strong team of non-political economic ministers (e.g. finance, trade, power, agriculture) who have introduced sound reforms.  On the other, the government seemed to be mired in corruption scandals and weak in its response to Boko Haram.

As president-elect, Buhari is both known and unknown. He took power in a New Year’s eve coup in 1983, and was deposed in a coup in 1985. He publicly executed young drug dealers on the beach while president, but professes to be a democrat today. According to the Nigeria scholar, Richard Joseph, Buhari, who once chaired the Petroleum Trust Fund, used the resources of the Fund for development purposes and projects in Nigeria.  His campaign platform lacked specifics.

An early test  of Buhari’s pledge to tackle corruption  will be reflected in whether his government releases the promised audit of  missing oil funds, estimated as high as  $21 billion.  Imposing respect for human rights in the Nigerian military as it pursues the fight against Boko Haram will also be an important indicator of his government’s ability to deliver on campaign promises.   Appointing talented technocrats to his cabinet instead of political backers will signal his commitment to further economic liberalization.  Clarity on the long-stalled Petroleum Industry Bill would also be welcomed by investors.

President-elect Buhari will be sworn in on May 29. As a 72-year old former military dictator and avowed supporter of Shari’a law, who won a relatively peaceful, free and fair election in the continent’s largest constitutional democracy, Buhari’s early actions will be scrutinized closely to see if the foundations of a “new Nigeria” are in fact being put in place.

Ethiopian Airlines Is Bringing Africa Together and to the World

Posted in Corporate and Investment

The ongoing expansion activities of Ethiopian Airlines has the potential to make a significant impact on intra-African trade and in deepening the region’s integration into the global economy.

At between 10% and 12%, intra-African trade lags far behind that of other regions.  A key reason for this trade deficit is the dearth of transportation options within the continent.  Africa’s airline carriers are working steadily to remove this roadblock.  Ethiopian Airlines is in discussions to assist in setting up national airlines in Nigeria, Uganda, South Sudan, the Democratic Republic of Congo and Rwanda.  Establishing a flag-carrier for Nigeria is particularly critical in light of the country’s status as the largest economy and population on the continent.  As a stakeholder in Malawian Airlines and ASKY Airlines of Togo, Ethiopian Airlines already has experience in providing technical assistance to, and investing in, other airlines.  In fact, last year even one of Ethiopian Airlines’ biggest competitors, South African Airways, was considering reaching out to the airline for assistance on establishing a hub in Ghana.

The airline also is making considerable strides forward in increasing air connectivity between Africa and the rest of the world, particularly the continent’s most strategic trading partners.  Earlier this month, Ethiopian Airlines announced that it would be doubling daily operations from Mumbai, adding a second flight from New Delhi, and increasing its code-share agreement with Air India from five to seven countries in Africa.  By expanding its route offerings between India and Africa, Ethiopian Airlines will be well-positioned to benefit considerably should India realize its  potential to quadruple its Africa-based revenue to $160 billion in the next decade.  In addition, Ethiopian Airlines plans to begin flights to Los Angeles and Tokyo in the next few months.  With Japan continuing to deepen its engagement on the continent, introducing flights to Japan is another example of strategic positioning by Ethiopian Airlines.  More broadly, the airline aspires to increase the number of its international destinations from 84 to 120 over the next decade.

Improving regional integration and the region’s connectivity to the global community are key trade and investment priorities for Africa and Ethiopian Airlines is poised to be one of the leading stakeholder in these efforts.

India’s ICT Companies Lead the Way to Further Indian Investment in Africa

Posted in Consumer Products and Goods, Corporate and Investment, Current Events, Media, Internet, and Technology, Uncategorized

This week, numerous companies from emerging economies will gather in New Delhi, India to participate in the third annual Growth Net conference, a unique platform focused on promoting business, trade and financial partnerships amongst the countries represented.  South-South cooperation will be the focus of much of Growth Net’s agenda, and a principal topic of interest will be the opportunities that exist for Indian companies in some of Africa’s most promising industries.  These discussions will almost inevitably involve significant attention to Africa’s Information, Communications and Technology (ICT) sector.  The African ICT sector is expected to triple by 2025, growing in value to $80-95 billion, and Indian companies’ engineering capabilities, experience with frugal innovation, and ability to train employees at scale makes them uniquely well-positioned to prosper in this booming African industry.

India-Africa Synergies

Indian companies have a first-mover advantage within Africa’s ICT sector, and their comparatively long history in Africa has resulted in an expansive Indian ICT footprint throughout the continent.  Indian ICT companies like Bharti Airtel, Essar, Tata and Wipro have a significant presence in Africa, yet much room exists for mid-sized enterprises to enter the industry, normally by partnering with local service providers.  Recently, Indian software companies Tata Consultancy Services, Infosys and Wipro all expanded their operations and delivery centers in Africa, implementing low-cost models in strategically situated delivery centers to serve outsourcing customers in Europe and West Asia.  While the bulk of Africa’s ICT spending emanates from South Africa, Nigeria, Egypt, Kenya, and Ghana, many Indian ICT companies are expanding  to countries like Ethiopia, Uganda, and Malawi.  These investments are prompted by Africa’s accelerated ICT needs, the continent’s growing urban middle class, and the increase of Western and Asian multinational corporations into sectors like manufacturing, telecom and natural resources, which demand IT support systems and infrastructure.  Overall, Indian companies low-cost, innovative business models have been particularly successful in attaining business from enterprises focused on mobile technologies, e-governance, skill development and social media.

An increase in ICT infrastructure stimulates growth in all African industries and facilitates enterprise innovation, efficiency, and job creation.  Indeed, Kenya’s Communications Authority estimates that since 2013, the country’s increase in internet access–which is substantially driven by public-private partnerships–is estimated to have created at least 1,000 jobs a month in the business process outsourcing subsector.  One of the main challenges posed by Africa’s ICT sector is the retention and training of skilled workers, yet Indian companies including Tech Mahindra, Infosys, and Wipro have addressed this obstacle by collaborating with universities and offering internship programs that expand their talent base.  If Indian companies can leverage their engineering talent and experience to train African employees at scale, these companies may possess a substantial long-term advantage over Chinese companies that oftentimes rely on skilled labor originating from outside of Africa.

Mobile Phones and Mobile Banking 

As urban centers experience further connectivity with 3G and 4G networks, the demand for newer forms of ICT services and consumer technology will rise alongside Africa’s fast-growing middle class.  However, opportunities within the ICT sector are not exclusively driven by this subset of the population.  Africa is unique in that a larger percentage of its population executes activities on relatively inexpensive mobile phones that people in other nations typically perform on computers.  Indian companies like Bharti Airtel–which acquired Zain Telecommunications’ Africa operations in 2010 and currently boasts 70 million subscribers in 17 African countries–have capitalized on Africa’s mobile phone industry, recognizing this subsector as the backbone of Africa’s ICT landscape.

Africa’s mobile phone sector encompasses Africans of all economic strata, and the continent’s mobile internet usage is predicted to increase twenty-fold in the next five years, at a growth rate that is twice as fast as that of the rest of the world.  Approximately 700 million of Africa’s 1 billion people are unbanked, and many people rely on their mobile phones’ ability to conduct low value, real-time person-to-person payments as their sole means of transferring funds, paying bills, and making everyday purchases.  While telecom companies currently dominate Africa’s mobile banking subsector, the recent increase in Indian banks operating in Africa such as the Export Import Bank of India (EXIM Bank), State Bank of India, Bank of Barod and ICICI Bank creates opportunities for cooperation between Indian ICT enterprises and Indian financial entities within Africa’s mobile banking space.


Indian ICT companies were amongst the first Indian companies to invest in Africa’s emerging markets, and their investments are beginning to reap significant returns.  Today, Indian ICT companies in Africa are well-poised to continue their trail blazing innovations, expanding into new African markets and exploring innovative means of meeting Africa’s dynamic ICT needs.



Why AGOA should be extended for 15 years: An Ethiopian case study

Posted in Corporate and Investment

It is frequently said that investing in Africa is not for the faint-hearted.

It is less well appreciated that entering the U.S. market is not for the faint-hearted either, especially by those small and medium businesses in Africa that AGOA was designed to benefit.

For the last 24 months, the African Union and African diplomatic corps in Washington have been advocating a 15-year extension of the African Growth and Opportunity Act (AGOA). The Obama administration has also called for a 15-year extension.

Recently, I spent a week in Ethiopia last month meeting with many businesses working to take advantage of AGOA.[i] I gained the clear impression that a 15-year extension is needed for Ethiopia and that most other African countries would benefit in the same way.

Ethiopia’s trade priorities and business environment

In many respects, Ethiopia works well as a representative AGOA country. It is an agriculture-based economy and, with 94 million people, the second-most populous nation in Africa. The country has experienced impressive economic growth of 10.7 percent from 2003 to 2012 and actually has no oil and few minerals to export. It is one of the poorest countries in the world, ranking 173 out of 187 countries in the 2013 UNDP Human Development Index.

Since 2001 when AGOA went into effect, Ethiopia’s AGOA exports—principally apparel and textiles, leather products, and horticulture—increased by 150 percent. While this might sound encouraging as a percentage, Ethiopia’s AGOA exports were a mere $35 million in 2013. In fact, as the World Bank recently noted, Ethiopia is underperforming not so much in the current utilization rates of trade preferences, but rather in the volume of exports it could be sending to the U.S. and other countries. For example, though Ethiopia and Vietnam have roughly the same population, Ethiopia exports less than $3 billion to the EU and U.S., while Vietnam exports $120 billion, even though it faces higher tariffs.

Competing national priorities are one reason why the number of Ethiopian AGOA exports is so small. Working with local companies to navigate the complexities of the U.S. market under AGOA has taken a back seat to the government’s more immediate need to increase productivity in the agricultural sector, launch major infrastructure projects, and negotiate entry to the World Trade Organization and the emerging tripartite free market of the Common Market for Eastern and Southern Africa, the East African Community, and the Southern African Development Community in an effort to increase regional exports. The conflicts in neighboring Sudan, South Sudan, and Somalia also require significant government attention and resources.

Ethiopia’s business environment is also a major obstacle. The country ranks 125th out of 189 economies in the 2014 World Bank Doing Business report and 166th for “Starting a Business.” In addition, lack of access to credit and reliable internet considerably hinder business development and innovation.

U.S. non-tariff barriers also constrain Ethiopia’s exports to the U.S. under AGOA. Last year, a group of Ethiopian horticulture companies sent a consignment of roses to the U.S. for sale for Valentine’s Day in an effort to break into the U.S. market. Unfortunately, the U.S. Department of Agriculture has not delivered on its commitment to establish a fumigation center at Dulles airport in Washington, D.C. (the port of entry for Ethiopian Airlines), and the roses were destroyed. With Ethiopian Airlines set to expand service to Los Angeles in June, this bottleneck needs to be removed quickly, especially given the potential for Ethiopian horticulture to be competitive in the U.S.

In fact, the expansion of Ethiopia’s horticulture is a “spectacular export success” of the past decade,  apart from its inability to access the U.S. market. The sector now consists of 100 firms, generates $200 million of export earnings, and employs 300,000, directly and indirectly. 

Ethiopia and AGOA: Great success and immense potential

At the same time, Ethiopia is at the forefront of utilizing AGOA: It is among the first countries to develop an AGOA strategy, a draft of which was completed in October 2013. More recently, an AGOA Center was established in the Ministry of Trade with a mandate to help Ethiopian companies take advantage of the legislation.

Ethiopia is creating opportunities around AGOA outside of the government as well: Three years ago, as a result of significant government investments, the Ethiopian Institute of Textile and Fashion Technology opened at Bahir Dar University. Last year’s graduating class of 45 were all employed by Ethiopian apparel companies. While this number might seem small, it is actually impressive and suggests that the institute has the potential to become a center of excellence on the continent for apparel design and the backbone of a robust national apparel industry.

Ethiopian companies are just beginning to find American buyers interested to source from the country. Bahir Dar Tannery, an 18-year-old company that has been exporting gloves to Italy, Japan, and Sweden is in the final stages of completing an agreement to supply Wal-Mart. Once finalized, the agreement would lead to increased production from 10,000 to 50,000 pairs of gloves a month, which could lead employment to increase from about 200 workers to two shifts of 350. Bahir Dar Tannery is just one of numerous companies in Ethiopia working to utilize AGOA.

International apparel companies are also looking to locate in Ethiopia in order to access the U.S. market under AGOA. Phillips-Van Heusen (PVH) Corporation, which owns the Tommy Hilfiger and Calvin Klein labels, is considering a major investment that would include integrated cotton and apparel production. A privately owned Chinese company, Huajian shoes, has already established a production facility, and, last year, the company’s 3,500 workers produced 2 million pairs of shoes. Huajian will soon expand to 10,000 employees and develop apparel and leather products for export.

Ethiopia and AGOA are both are at key transition points. Ethiopia is about to issue its second Growth and Transformation Plan (2016-2020), which is expected to place an emphasis on the promotion of light manufacturing in an effort to shift labor from low to high productivity. In fact, Ethiopia’s potential in light manufacturing is significant: Ethiopian manufacturing firms have grown at 9.8 percent over the last decade, and they can help absorb the 2.5 million young and semi-skilled people who enter the country’s job market each year. This is precisely what AGOA was intended to achieve.

There are concerns that sub-Saharan Africa’s rapid economic growth has not led to an economic transformation toward higher productivity and economic diversification. Across the continent, fewer than 10 percent of workers find manufacturing jobs and in Ethiopia only 3 percent of workers do. Clearly, the principal sector that can accelerate this economic transformation is manufacturing.

A short-term renewal of AGOA would compound the complexities and uncertainties of accessing the U.S. market. As a result, a short-term renewal would deny Ethiopia and the majority of African countries a vital policy instrument with which to transition to more inclusive and higher-value economic growth. Given that the apparel and other industries place orders month or even years in advance, a long-term extension would be particularly helpful. Some African countries, such as Mauritius, Lesotho, and Kenya have relatively robust light-manufacturing sectors and, as a result, benefit from AGOA. The vast majority of the 41 African countries that participate in AGOA, however, need significantly more time for the legislation to achieve its intended results. When Congress does vote to renew AGOA, it needs ensure that the legislation will be in place for the next 15 years.

[i] The visit was sponsored by the U.S. State Department’s International Visitor’s program.

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

India in Africa: Expanding Opportunities in the Consumer Goods Sector

Posted in Consumer Products and Goods, Corporate and Investment

With more than half of Africa’s 54 countries expected to grow at faster than 5 percent annually in the next ten years, and its GDP projected to increase to $5 to 6 billion by 2025, Africa presents lucrative investment opportunities for foreign companies looking to expand into new markets. For years the focus has been on China’s investments on the continent, but India, which benefits from its long history of cultural ties to Africa, including vibrant diaspora communities in east and southern Africa, and has emerged as one of the fastest growing economies in the world, edging China out at 7.5% GDP growth in 2014, is uniquely poised to corner quickly expanding African markets. As economists predict that India could quadruple its revenues in Africa to $160 billion by 2025, Indian companies are taking note, particularly in the consumer goods sector where the demand for appliances, electronics, and personal care products is increasing.

Indeed, Indian companies including Tata Motors, Karuturi Global, and Godrej Group have sought to capitalize on the purchasing power of Africa’s growing middle class. Last month, Godrej purchased South Africa’s Frika Hair Care company through its personal care arm, significantly increasing its investment in the $1.5 billion dollar African hair extensions market. Gondrej has pursued a successful expansion strategy, acquiring African hair care companies in larger, more integrated markets such as South Africa and Nigeria and expanding regionally. Following this incremental approach, the company acquired Darling Group Holdings, a well-established Nigerian hair care company, over several years, purchasing 51% of Darling’s stock in 2011 and the remaining 49% in 2014. Darling, which sells its products in 14 African countries, generated $80 million in sales in 2012.

In large part, Godrej’s success can be attributed to its measured, localized approach. While it imports synthetic fibers and henna leaf powder from India and Asia, the company uses those materials to mix its colorants and weave its extensions in Africa and markets its products under African brand names that cater to specifically to African consumers. Similarities between the Indian and African business climates have helped as well. Godrej’s experiences in fragmented markets and with middle-income consumers have no doubt proved critical to the company’s impressive performance on the African continent.

From producing cut flowers to cars, Indian companies are expanding their businesses and raising their collective profile in Africa. India ranked sixth in Foreign Direct Investment in Africa in 2012 and shows no signs of slowing down. With the rupee solid, China’s growth slowing, and India’s relative economic stability in the wake of falling commodity prices, the stars are aligned for Indian companies seeking to do business in Africa. While investment in Africa will surely require patience, the future is bright for Indian companies willing to bet on long-term growth.