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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.

China Sneezes: Could Africans benefit from a devalued yuan?

Posted in Corporate and Investment, Current Events

When China sneezes, does all of Africa catch a cold? Slower Chinese growth and a recently devalued currency will certainly impact Africa, whose largest trading partner is China. However, the impact of China’s recent currency devaluation will largely depend on country-specific factors.

The Chinese government likely devalued its currency in August in part to combat a perceived downward trend in economic growth. This trend was recently reflected in the August data for the Caixin China Manufacturing Purchasing Managers’ Index (“Caixin PMI”). The Caixin PMI, which indicates overall trends in Chinese manufacturing activity, fell to a 77 month low in August. The recent drop in the Shanghai Composite Index is believed to reflect fears that these Caixin PMI numbers indicate a faster than expected decline in China’s economic output. The Shanghai Composite dropped 42 percent in value since June 12, 2015, eliminating all gains made this year.

An initial devaluation of 2 percent occurred on August 11, followed by a subsequent 1.5 percent devaluation on August 12, 2015. In addition to these devaluation activities, Beijing has recently attempted other methods to prevent further losses to the stock market. These additional measures include permitting pension funds to invest in the Chinese stock market. In addition, on Tuesday August 25, 2015, The People’s Bank of China injected 150 billion yuan (23.4 billion dollars) into the financial system through a reverse repo agreement.

For investors with a stake in Africa, this economic data cannot be ignored. Indeed, Africa has developed strong economic ties to China in recent years. When Africa is treated as a single country, China is its largest trading partner. In 2014, trade between Africa and China exceeded 220 billion. This is almost three times the value of trade between the United States and Africa for the same year. China is also a major investor in African infrastructure. As recently as 2014, when Chinese Premier Le Keqiang visited the African Union headquarters, Beijing indicated a desire to increase direct investment to 100 billion by 2020. Naturally, a weakened yuan will require an even greater increase in Chinese investment to achieve the originally intended effect. Further, a weakened yuan could result in decreased exports of African goods to China and increased imports of Chinese goods in Africa.

Despite this potential downside, some African countries, particularly those that import Chinese capital goods, may benefit from a weakened yuan. In recent years, a number of East-African countries, including Ethiopia, Kenya, and Mozambique all experienced large trade deficits, due at least in part to the relatively high cost of Chinese capital goods such as Chinese-made bulldozers and electrical lines. In Kenya, the trade deficit widened at the beginning of the year due at least in part to the construction industry’s demand for construction goods. The recent devaluation of the yuan may help to reverse this trend. At least for the construction industry, a cheaper yuan will likely result in reduced input costs. The same might be true for the construction industries in other African countries that also rely on Chinese imports. These same countries may also benefit from lower-cost Chinese consumer goods.

Complicating matters further, most African countries use U.S. dollars instead of yuan when trading with China. This makes it more difficult to determine the impact of a devaluation on Africa-China trade. As a result of recent market turmoil, the value of some African currencies have also decreased. For example, during the same period of August that China’s yuan dropped 3 percent in value compared to the U.S. dollar, the South African rand dropped nearly 2 percent relative to the dollar, largely blunting the impact of the yuan’s devaluation. Recent data indicates that the rand fell even lower on August 24, which may have altogether eliminated any impact of the yuan’s devaluation on South African consumers. The value of other African currencies also dropped in August; Zambia’s currency shed more than 3.4 percent of its value and the value of the Nigerian and Angolan currencies are also expected to decrease. In short, whether the yuan actually devalues relative to other African countries will depend on a country-by-country analysis because the U.S. dollar is the currency used when trading.

Thus, the actual impact a devalued yuan will have on Africa’s economy remains unclear. A devalued yuan could benefit some African countries while concurrently damaging others:  the result will largely depend on the circumstances of each individual country.  A web of other factors, including the global price of oil and a potential rise in the United States interest rate could further complicate matters.

Although China might have sneezed, it remains too early to determine whether the illness is contagious. Of greater concern for African investors should be the overall economic health of Africa’s largest trading partner. Some worry that China’s growth may have dropped below Beijing’s seven percent target for 2015. If China’s economy is indeed shrinking at a faster rate than previously expected, Africa and the entire global economy will undoubtedly catch a cold.

James Damon is a summer associate in Covington’s Beijing office and a student at William & Mary Law School.

Gabon To Host Back-to-Back African Investment Forums

Posted in Corporate and Investment

Later this month, Gabon will host two major African investment forums: the AGOA Forum and the New York Forum AFRICA.

Established by the African Growth and Opportunity Act, the AGOA Forum is an annual gathering that brings together high-level African and U.S. government officials to discuss strengthening economic ties between the U.S. and the continent. Following on the recent reauthorization of AGOA, this year’s forum is titled “AGOA at 15: Charting a Course for a Sustainable U.S.-Africa Trade and Investment Partnership.” The draft programme indicates a wide range of topics to be covered including inclusive growth, economic diversification, promotion of public-private partnerships, value chain development and market linkages, and regional integration.

Now in its fourth year, the New York Forum AFRICA is a pan-African business summit that convenes both policymakers and business leaders. The theme for this year is “Invest in the Energy Continent” but, in this case, “energy” is not just natural resources but more so the energy of Africa’s youth, women, entrepreneurs and innovators. It is estimated that this year’s summit will be at least as large as last year’s summit where over one billion dollars in deals were concluded.

Gabonese President Ali Bongo Ondimba has stated that “running the two events together was the natural conclusion” and in line with the country’s broader efforts to diversify its economy and increase trade and investment.

Nigeria (Again) Contemplates Mandatory Stock Exchange Listing Legislation

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

Nigerian government officials are once again contemplating legislation that would require certain private companies to list on the Nigerian Stock Exchange (“NSE”).  According to Speaker of the Nigerian House of Representatives Yakubu Dogara, the listing requirement would apply to companies in the oil, gas and telecommunication sectors and is necessary “in order to deepen the market and make capital available for investors and create employment.”

It is not the first time that the Nigerian government has sought to pass a mandatory listing measure.  Indeed, there already is a measure before the National Assembly: the Private Companies Conversion and Listing (“PCCL”) Bill (2013) which seeks to compel all private companies that meet certain financial thresholds to convert to public liability companies and list on the NSE.  Late last year, there were some who predicted that the PCCL Bill would become law in a matter of months.  Those predictions have not come to pass.  It is unclear if Speaker Dogara is signaling a shift away from the PCCL Bill or if the sector-specific measure would be pursued in parallel with the PCCL Bill.

The Organized Private Sector, the Lagos Chamber of Commerce and Industry and other stakeholders remain staunch opponents of the PCCL Bill.  Similarly, a joint report by the Nigerian Capital Markets Solicitors Association and the Law Society of England and Wales cautioned that the PCCL Bill “could have a negative effect on the development of not only the capital markets in Nigeria, but also the development of certain sectors of the economy.”

A key concern about mandatory listing laws is their compatibility with the protections against expropriation guaranteed under the Constitution of Nigeria, domestic law and the various bilateral investment treaties that Nigeria has entered into with other countries.  Importantly, a measure does not necessarily need to benefit the State in order to constitute an expropriatory measure.  International investment law generally focuses on the impact of the measure on the investor — in this case, depriving investors of their private property interests in their companies — rather than the accrual of a benefit to the State.

Recent months have seen a “largely negative topsy-turvy situation at the capital market [due] to pre-election concerns and existing concerns over the macroeconomic and monetary policy direction of the new government.”  And a longer standing issue is the ongoing imbalance in the NSE.  Although there are over 250 listed companies, the market capitalization value of four of those companies represents approximately half of the NSE’s total market capitalization value.  The fact that President Buhari included the Central Bank Governor and the Acting Director General of the NSE in his delegation for his recent trip to Washington, D.C. (during which they joined him for a meeting with the U.S. Treasury Secretary) is a sign that economic reforms in this area are a priority to the new President.  Yet to be seen is whether mandatory listing measures — a “solution” that could introduce a whole new set of problems — will be one of those reforms.

Francophone and Technophile: French-Speaking Africa’s Budding Tech Scenes

Posted in Media, Internet, and Technology

The past few years have been replete with media stories of an unfolding “African digital renaissance” and the wonders of the “Silicon Savannah” and other Sub-Saharan African tech hubs, with coverage reaching a fever pitch in the wake of the recent Global Entrepreneurship Summit in Nairobi. Yet francophone Africa has been noticeably absent from tech reporting and events in the subcontinent, with the world’s attention largely focused on anglophone countries—most prominently Nigeria, Kenya, South Africa, and Ghana—and disproportionately so, even when accounting for their larger populations. For instance, of the 30 top startups competing in the upcoming DEMO Africa pitch competition, only three are from francophone countries: two from Cameroon (which has a combined francophone and anglophone heritage) and one from Côte d’Ivoire. Generally, there is a consensus that the tech sectors in francophone Sub-Saharan Africa have significantly lagged behind their anglophone counterparts. However, recent initiatives in the nascent tech hubs of these francophone countries suggest that times may be changing.

There is no single overarching explanation for the low levels of tech (or at least digitally-oriented) entrepreneurship in francophone Sub-Saharan Africa, but there are indications that the problem is a supply-side one. Would-be francophone entrepreneurs are even more constrained by lack of funding than their anglophone cousins, as most purveyors of financial capital in tech are English-speaking investors, who are said to be more reluctant to invest in francophone Africa—and less likely to learn about francophone African startups in the first place due to the language barrier. Indeed, francophone Africa is virtually devoid of the venture capital (or angel investors) required to truly kickstart the startup scenes, which anglophone countries have relatively greater access to. There is also a human capital issue, with the dearth of developers and designers in francophone Africa exacerbated by the fact that most resources for startups (e.g. regional incubators and accelerators, labs, conferences) are in English. More broadly, it might not just be the tech sector: the economies of English-speaking African countries are growing faster and tend to have better World Bank Doing Business indicators than their francophone equivalents.

Despite these obstacles, things are starting to change, and Senegal—the African base for many major IT companies—is leading the way. Jokkolabs, the first startup incubator in Sub-Saharan francophone Africa, first opened its doors in Dakar in 2010. They have since organized a series of hackathons, trainings (#Codecamp), and conferences (such as last month’s #Failcon #Dakar). Jokkolabs is now seeding its model across West Africa, with sites opening in Côte d’Ivoire, Burkina Faso, Mali, Benin, soon in Morocco, and even in anglophone The Gambia. Another significant player in the market is CTIC Dakar. A public-private partnership between the government of Senegal and the World Bank’s infoDev, CTIC Dakar is the first incubator in West Africa dedicated to ICT and mobile technologies. In 2012, Senegal became the first francophone African country to host a startup weekend, and more have followed since.

Côte d’Ivoire’s tech scene is hot on the heels of Senegal’s. The country’s first tech hub, Akendewa, was launched in 2009 and stayed active throughout the 2010-2011 crisis. The country also has generated promising startups that respond to specific problems faced by Ivoirians, such as Qelasy (an educational tablet for children) and TaxiTracker (a geolocation app to address security concerns with taxis). Neighboring Togo has also has had its chance to shine in the African “Maker” movement, with its increasingly well-known “fab lab,” Woelab, and the launch earlier this year of a new fab lab in northern Togo. Graduates of the TEKXL accelerator in nearby Benin have had some traction in Europe and the US. And Niger’s first incubator, CIPMEN, was created with funding from French telecom giant Orange.

The action isn’t just in West Africa. The tech scene in the Republic of the Congo has in recent days snapped into focus thanks to a company named VMK, which had launched the first African tablet and smartphone a few years ago (sold in the Congo and in Côte d’Ivoire), and which just inaugurated its first factory to manufacture these devices on July 22 in Brazzaville. VMK’s founder and CEO, Verone Mankou, also founded BantuHub, a non-profit tech hub and startup incubator in Brazzaville. Nearby Cameroon also features the bilingual not-for-profit ActivSpaces, the country’s first startup accelerator, which will graduate its first class of startups next month.

All of these nascent tech hubs in francophone Sub-Saharan Africa are promising, but there have been no runaway success stories—yet—and these countries’ startup ecosystems are still tiny. Moreover, many of the region’s startups are being funded by non-profits and governments, not hard-nosed investors. (Here, too, Senegal may once again be a leader, with the recent formation of Teranga Capital, a privately-funded social venture capital firm, to provide seed funding to small growing companies). However, with the right timing, skill, and luck, a francophone African “unicorn” may yet emerge, triggering a virtuous cycle of private investment and entrepreneurship into these countries’ innovation sectors. And while tech entrepreneurship might not, as a sector, contribute significantly to francophone Africa’s economic growth or poverty reduction, it has the potential to yield indigenous innovations that could improve the quality of life of many in the subcontinent, and beyond.

Obama in Kenya: A report from the field and a recap of the Global Entrepreneurship Summit

Posted in Corporate and Investment, Current Events

The nation of Kenya was gripped by a palpable sense of excitement and outsized expectations prior to President Obama’s arrival on Friday, July 24. On the day the president arrived, offices in Nairobi were closed, banks shut down early, and the city’s emptied streets were adorned with American flags and ubiquitous posters conveying the message, “Welcome Home Obama.” One television station devoted full-time coverage to the visit.

The tenor of expectation was captured by Macharia Gaitho, a columnist for the Daily Nation, who wrote that Obama’s trip to Kenya was “the most important visit by a foreign leader since independence.” While seemingly excessive, several well-regarded business leaders strongly agreed with the sentiment.

There was no question that Obama’s visit would be a boost to Kenya’s confidence, shaken by al-Shabab’s horrific attacks on the Westgate Mall and Garissa University, and the uncertainty of the nation’s relationship with the U.S. given the International Criminal Court indictments of President Uhuru Kenyatta (since dropped due to a lack of evidence) and Vice President William Ruto. Many Kenyans have also questioned why it took Obama six years since coming into office to visit his father’s homeland.

However, all doubts about Kenya’s standing with the U.S. seemed to evaporate when President Obama bound down the steps of Air Force One and embraced a waiting President Kenyatta at the foot of the stairs. The president then received a bouquet of flowers from a nine-year-old girl and proceeded to greet the dignitaries aligned on the red carpet.

Most emotive was the president’s warm embrace of his older half-sister, Auma Obama, last in the greeting line. Auma then got into the president’s limousine and the two took off, embedded in a large train of security vehicles, for the hotel and a family reunion.

Twenty-seven years earlier, in a story that was repeated often in the press over the weekend, Auma had picked up a 25-year-old Barack Obama at Jomo Kenyatta International Airport on his first visit to Kenya. Shortly after leaving the airport, her aged VW Beetle broke down. The story added poignancy to the sight of the two leaving the airport in the presidential limousine as well as a sense that a definitive new chapter in U.S.-Kenyan relations was beginning. And, as Auma quipped two days later while introducing her half-brother for his speech to the nation, she appreciated the returned favor of a ride from the airport.

President Obama uses the energy around his visit to promote entrepreneurship 

At the core of Obama’s visit was a debate over Kenya’s identity. Was the nation a “hotbed of terror” as CNN reported on the eve of Obama’s arrival, or, as President Kenyatta rebutted in his opening to the Global Entrepreneurship Summit, a “hotbed of vibrant culture, spectacular natural beauty, and infinite possibility”? 

The president’s participation in the Global Entrepreneurship Summit (GES) in Nairobi underscored his belief that entrepreneurship is the “spark of prosperity,” and that people around the world, especially young people, want to start businesses to improve their lives and communities. He similarly expressed his belief in a rising continent during the trip, declaring on several occasions that “Kenya’s on the move, Africa’s on the move,” and emphasizing the country’s strong middle class, high economic growth, and entrepreneurial spirit. He also noted that, in 2006 when he visited South Korea, the Asian nation’s economy was 40 times larger than Kenya’s, and, since then, that gap has been cut in half. The president, though, was not overly optimistic: In his frank, even personal, speech to the nation, Obama still identified corruption, tribalism, and ethnicity, and a lack of investment in women and girls’ education as the country’s most significant challenges, specifically pointing out that corruption costs the nation 250,000 jobs a year.

Western and African entrepreneurs face different challenges 

Against this backdrop, the Global Entrepreneurship Summit provided the rationale for Obama’s visit to Kenya. The GES, launched in 2009 in Cairo, is especially relevant in Africa where 10-12 million youth enter the labor market every year, and youth remain almost twice as likely to be unemployed as their elders. Over the course of two days at the sprawling United Nations campus on the outskirts of Nairobi, entrepreneurs from Kenya, Africa, and more than 100 countries had the opportunity to network with each other, interact with leading start-up executives from the U.S., and hear from venture capitalists from Silicon Valley.

A principal theme that emerged from numerous conversations and panels was the difference in scale and experience between entrepreneurs in the U.S. and Africa. Entrepreneurs in the U.S. want to “disrupt” existing platforms to enhance their impact and value. Entrepreneurs in Africa share the desire to impact their communities and generate income, but they largely have to create systems and platforms that do not exist.

One venture capitalist from Silicon Valley commented that capital is usually invested in start-ups that already have products and have identified employees for key functions. Start-ups in Africa, however, are frequently self-funded and dependent on finding a commercial niche that enables them to be sustainable. Most will never attract venture capital, and finding skilled employees is a major problem. As one entrepreneur from Ethiopia remarked, her business is “me, myself, and I,” even though she has hired 10-20 employees to fill orders as they come in. Western entrepreneurs think about their businesses as being part of an eco-system. In Africa, it seems that entrepreneurs are more focused on being part of a value chain and finding a market for their products. As one conference participant put it, entrepreneurship in Africa is about turning challenge into opportunity.

Compelling start-ups abound around the African continent

Many African entrepreneurs at GES presented compelling stories. As Dr. Shadi Sabeh, the founder of the Brilliant Footsteps Academy in Sokoto, Nigeria, put it, “My goals are to make money, positively impact my community, and do what I love to do, which is to teach.” Sabeh’s school, which has grown to a staff of 120 and 500 students in three years, is dedicated to integrating formal and informal Islamic instruction in an effort combat extremism and promote peace in northern Nigeria. 

Hello Tractor, founded by Jehiel Oliver, is a startup in Abuja, Nigeria that uses mobile phone technology and GPS to make tractors available to farmers on a rental basis to lower the cost of the machines, enhance their use, and ensure they have proper maintenance. The start-up has received $180,000 in funding and aims to service 110,000 farmers and create 1000 jobs.

Eco-pads is a start-up in Kampala, Uganda founded by Lucy Athieno with a $25,000 grant from the U.S. African Development Foundation that makes re-useable sanitary napkins available to 800 girls to enable them to stay in school. Sales have more than doubled in size over the last year.

Tamarind Nott started a company in 2012 that relies on the traditional knowledge of the Himba women in Namibia to produce a skin cream called Namibian Myrrh that is available in Namibia and, via web sales, in South Africa.

U.S. companies provide mentoring for African and global entrepreneurs 

Several American companies clearly had relevance for African entrepreneurs. A representative from a leading ride-sharing service noted that companies need to be clear about what is negotiable and what is non-negotiable. For example, given that some developing market legal systems are not ready for a shared economy, it is possible to pay for an ride in Nairobi by cash whereas the company requires electronic payments in most other markets.

A former representative from a leading social media platform noted that its service was developed by engineers in California for smartphone high-speed connectivity. In Lagos, however, as the company’s engineers have come to understand, most smartphones did not have enough memory and only 2G networks are available, so they have had to rework the platform for the Nigerian market. The lesson imparted here: New products should be adaptable to different environments.

Perhaps most interesting to me for African entrepreneurs was Ross Baird of the successful Village Capital who emphasized that it is essential to know where the market will be in 20-30 years and discussed how to position a company to grow into that market. As a result, Village Capital has focused on early phase investments in African start-ups at a range between $50,000 and $500,000. The firm has made 114 venture deals of less than $1 million over the last year. Village Capital has also pioneered (and recommended) peer-to-peer due diligence—in which 10-12 entrepreneurs collectively determine where their investments will have the largest impact—which has now become a key part of investment decisions. In addition, Baird noted that a focus on women entrepreneurs has also been a priority, as women-owned businesses generally have a track record of success, and last year 30 percent of Village Capital’s investments went to women-owned businesses.

Obama and Kenya 

In the course of his visit, Obama signed a number of agreements related to fighting terrorism, obstructing corruption, and promoting trade and investment. Yet perhaps his most significant “deliverable” was the candor with which he spoke to the Kenyan people and his example of overcoming tremendous odds to assume the most powerful position on earth. This message also resonated with the approximately 1500 entrepreneurs who participated in GES and frequently face significant challenges in ensuring the success of their businesses. 

When President Obama began his speech to the nation, he noted that he was the first U.S. president to visit Kenya. He also noted that he was the first Kenyan-American to be elected president of the United States, an observation he has rarely, if ever, publicly made before. In doing so, Obama emphasized his connection to the Kenyan people in a way that only he could and, as one Kenyan put it, redefined the Kenyan dream.

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

Ghana Set to Ban Non-Degradable Plastics

Posted in Consumer Products and Goods, Current Events, Public Policy and Government Affairs

According to news reports, the Ghanaian Ministry of Environment, Science, Technology and Innovations will “sanction a directive in two weeks” banning the production and importation of non-degradable plastic products.

Like many countries, Ghana’s rapid development has put significant pressure on sanitation management systems in the country’s urban centers.  However, the issue became a national priority when waste-clogged drains and gutters contributed to last month’s tragic floods in the capital city of Accra.  The proposed ban follows weeks of comments from President John Mahama, Vice-President Kwesi Amissah-Arthur and the general public about the role that plastic waste in particular played in the disaster.

Ghana will be joining a host of other African countries that have instituted similar measures to curb or outright ban the import, manufacture and/or use of plastics especially very thin plastics.  The list of countries that have instituted similar measures includes  Botswana, Burundi, Kenya, Mauritania, Tanzania, Rwanda, Senegal, South Africa, and Uganda.