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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.

Africa and the Global Entrepreneurship Summit: A Natural Fit

Posted in Uncategorized

In remarks delivered over six years ago in Cairo, Egypt, President Obama elevated entrepreneurship on the U.S. engagement agenda and the global agenda more generally.  One of the most significant announcements was the creation of a Summit on Entrepreneurship.  Each year, the Global Entrepreneurship Summit (“GES”) serves as “a global platform connecting emerging entrepreneurs with leaders from business, international organizations, and governments looking to support them.”  It is part of a larger network of U.S. government programs that are advancing global entrepreneurship in Sub-Saharan Africa under the President’s Spark initiative.

Co-hosted by the Government of Kenya, the 2015 GES will mark the first time that the event will take place in Sub-Saharan Africa.  It will be one of the highlights of President Obama’s trip to the region later this week.

The objectives of the GES align with the unique socioeconomic demographics in Sub-Saharan Africa in light of the role of small and medium-sized enterprises (“SMEs”),  the sizeable youth population, and the ongoing gender gap.  Representing up to 90% of all businesses in the region, SMEs are critical economic drivers that spur innovation, job creation, employment and poverty alleviation.  Sub-Saharan Africa is home to the youngest population in the world and this population of nearly 200 million people aged between 15 and 24 is projected to double by 2045.  Finally, although there has been impressive progress in political empowerment (Rwanda has the highest percentage of female parliamentarians in the world), there still is considerable work to be done to close the gender gap with respect to economic participation, income, education and health.  In recognition of these issues, both financing and also generating opportunities for women and youth are at the top of the agenda for this year’s GES.

In addition, holding the GES in Sub-Saharan Africa recognizes the role that innovation has played in surmounting the development challenges in the region.  Mobile money systems and alternative data are promoting financial inclusion.  More generally, mobile telephony is revolutionizing service delivery in the agricultural, healthcare, and other sectors.  And the home battery and other decentralized energy storage options are positioned to increase vastly the accessibility and affordability of electricity and power across the continent.

Innovation and entrepreneurship has been — and continues to be — a pillar of the ongoing socioeconomic development in Sub-Saharan Africa.  Hosting the GES in the region is a natural fit.

President Buhari Comes to Washington

Posted in Current Events, Public Policy and Government Affairs

Next week, Nigeria’s President Muhammadu Buhari travels to Washington for a two-day visit, which culminates in an Oval Office meeting with President Obama on July 20.  Buhari is expected to travel light — not on luggage, but advisors.  Since he has appointed no ministers as of yet, only a handful or two of advisors is expected to make the trip.  Dubbed an “official working visit,” the meeting of the two presidents comes at an important time for Nigeria with its faltering economy and a renewed Boko Haram now teaming up with ISIS.  These two important issues promise to be front and center in the discussions.

What else will be on the agenda?  A lot of the spade work was done last week in Nigeria.  Deputy Secretary of State Tony Blinken, along with senior officials from the Departments of State, Defense, and Treasury spent a few days in Nigeria with their Nigerian counterparts hammering out an agenda for the Obama meeting.  Blinken explained to the Nigerian press that the U.S. wanted to hear from the new government what assistance needs it has and its ideas on future engagement, rather than the U.S. offering up expanded programs, especially in the North.  Insecurity and underdevelopment in the Northeast states need careful thought as a winning strategy against Boko Haram has to encompass more than a military campaign.  Rather, local governments need to govern better, health care and education need to be significantly expanded and improved, and the youth need jobs.  Finding funds for these priorities will prove difficult, however, given Nigeria’s financial crisis.

Corruption in the public sector will no doubt be discussed.  President Buhari campaigned on a promise of rooting out corruption, and the energy sector seems to be his first target.  Approximately, 200,000 barrels per day are lost through “bunkering” and subsequent illegal sales.  Some have even speculated that the president will retain control of the Petroleum Ministry and the oil portfolio, as he did when he was head of state in the early 1980s.

A fourth topic on the agenda will be transparency and accountability of government.  In a highly decentralized federal system, such as Nigeria’s, state governments and local government authorities control substantial budgets, yet oversight of local spending remains weak.  A strong vibrant civil society can often serve as a check on government, and so the two sides may use the visit to explore ideas on cooperation in that area.  As for the downturn in the economy, the parties will seek ways of accelerating the diversification of the economy.  Oil revenue accounts for 70 percent of overall government revenue, and with oil prices still in the $50 a barrel range, Nigeria is experiencing a fiscal crisis that affects not just the federal government, but also state governments, which rely on national pass-downs to pay salaries and other expenses.  Former Nigerian Ministers Adesina and Aganga pursued smart policies and good programs to grow the agricultural and industrial sectors, but more is needed to diversify further.

The power sector is on the brink of crisis, as new deals have stalled.  Private developers are anxiously sitting on the sidelines watching what happens with the $900 million, 450 MW, Azura-Nedo project.  The project was about to close at the end of 2014, but the former Attorney General decided not to authorize a sovereign guarantee to back the project.  Five Power Africa private sector partners have invested millions of dollars to date to develop a project whose fate is unclear.  This issue may rise to the level of the two presidents, both of whom are committed to expanding access to power for the tens of millions who lack reliable power in Nigeria.

It is a rich and full agenda, and the hope is that the visit will pave the way for improved cooperation on many fronts.

Welcome to Washington, President Buhari.

A Reauthorized U.S. Export-Import Bank is Central to U.S. Commercial Success in Africa

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

If the U.S. Export-Import Bank (Ex-Im) is not reauthorized, U.S. efforts to deepen commercial ties to Africa will be significantly impeded. Not only would this put U.S. companies at a commercial disadvantage to companies from the European Union, China, Russia, India and elsewhere, it would impact negatively on the contribution that many American companies make to economic development on the continent through job creation, technology transfers and skills development.

Last month’s extension of the African Growth and Opportunity Act (AGOA) for ten years ushers in a new era of stability and predictability in U.S.-African commercial relations. Without Ex-Im’s renewal, however, AGOA’s impact will not be fully realized.

According to the Commerce Department, the U.S. exports about $22.5 billion worth of manufactured goods to Sub-Saharan Africa. This translates into support for about 120,000 jobs in the U.S. According to Ex-Im’s annual report, the agency approved more than $6.3 billion in financing for U.S. exports to Africa over the last five years, including a record of $2.1 billion of authorizations in FY 2014.

The loan guarantees financed the sale of nearly 300 GE electric-diesel locomotives from its plant in Erie and Grove City, PA., to South Africa, supporting nearly 2,500 jobs in Pennsylvania and other states. The guarantees also supported the sale of Boeing aircraft to Ethiopian Airlines, Kenya Airways and the Angolan national airlines, making Boeing the market leader on the continent and supporting more than 5,400 jobs in the U.S. In fact, in 2013, Ex-Im financed 188 transactions in Africa from small, medium and large U.S. companies to 35 of the 49 countries in Sub-Saharan Africa.

Critics charge that Exim is a “corporate welfare slush fund,” or a “bridge to nowhere,” in the words of Representative Jim Jordan (R-OH). Such criticisms are hard to sustain, however, given that Ex-Im generated a surplus of $674.7 million for U.S. taxpayers in 2014 and, since1992, a surplus of $7 billion for the U.S. Treasury. In short, for every dollar that Ex-Im invests in a transaction, taxpayers receive $1.71 in return.

The reality is that Ex-Im supports U.S. exports to markets that few other U.S. financial institutions will finance. The agency is extremely important to U.S. competitiveness globally, and, especially, in the emerging markets.

Hopefully, there is a light at the end of the tunnel. Press reports indicate that there are now enough votes in the Senate to reauthorize Ex-Im. Majority Leader, Senator Mitch McConnell, said that he will permit the vote to take place. The expectation is that supporters in the Senate will try to attach Ex-Im reauthorization to the “must-pass” bill replenishing the Highway Trust fund.

Africa’s Middle Class: Not Hype But Challenging To Get Right

Posted in Consumer Products and Goods, Corporate and Investment

The expanding middle class has been one of the cornerstones of the “Africa rising” narrative.  Discussion of that topic has been particularly lively over the past few weeks.  From a private sector perspective, this debate presents an interesting lesson about doing business in Africa’s consumer goods sector.

As an initial matter, it is important to keep in mind that there is no universally-used definition of middle class.  Although the phrase often is defined by an individual’s income, it also can be defined by other factors such as an individual’s wealth (i.e., savings or investments) or consumption (i.e., how much one spends).  For this reason, the African Development Bank’s use of income and purchasing power parities results in a prediction that the African middle class will reach half a billion people by 2030.  Yet, at the same time, Standard Bank’s use of South Africa’s Living Standard Measure results in a prediction that the African middle class in the eleven countries that combined account for half of sub-Saharan Africa’s total GDP (as well as over half of the total population) will reach 22 million people by 2030.  Despite the seemingly wide chasm between these two estimates, both the African Development Bank and Standard Bank are bullish on Africa’s burgeoning consumer market.

However, if a company is going to pursue opportunities in this market, then it first must appreciate just how diverse the African consumer market is.  Accenture has partitioned the market into five consumer segments: basic survivors, working families, rising strivers, cosmopolitan professionals, and the affluent.  Nielsen has partitioned the market into seven consumer segments: female conservatives, wannabe bachelors, evolving juniors, struggling traditionals, balanced seniors, trendy aspirants, and progressive affluents.  Whichever way a company chooses to splice the market, it is essential to identify the consumer segment(s) to which it wishes to sell and then tailor the products to suit the buying behaviors, needs and preferences of the chosen segment(s).  As with any other consumer market, price, brand loyalty, quality (and sometimes other factors) are all relevant considerations but each segment weighs these factors differently.  Equally as important is determining the supply chain and distribution network that best serves the chosen segment while still keeping transaction costs down.  In addition, advertising should be strategic with respect to both its content and its placement.  For example, recognizing that affordable and reliable Internet access is not a given across the continent, companies have begun to tailor their online advertising to pique consumers’ interests but also be compatible with potential access barriers.

So, no, there is no reason to give up on the African middle class nor the consumer class more generally.  However, in order to succeed in the market, it is essential to appreciate the diversity in the African consumer market, understand the African consumer segments which one wishes to engage, and then select and tailor the products and routes to market accordingly.

Africa’s Tripartite Agreement: Another Step toward Integration?

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

Considerable attention has been paid to the recent signing of the Tripartite Free Trade Agreement (TFTA) which will bind three of Africa’s regional economic communities (RECs) together into one large free trade market of 26 countries, accounting for nearly 60 percent of the continent’s GDP.  How significant the Agreement will prove to be lies in the (implementation) details.  The parties to the Agreement chose a path toward integration that involves a gradual phased approach whereby each REC develops its own framework and blueprint.  However, the three RECs — the East Africa Community (EAC), the Common Market for Eastern and Southern Africa (COMESA ) and the Southern African Development Community (SADC ) — are at very different levels of progress in this regard.

Although the EAC was (re-)formed only in 2000, this community of five nations has accomplished far more than its REC peers.  A few of the many accomplishments include the adoption of an external tariff, an expansion and improvement of the port infrastructure in Kenya and Tanzania, prioritization of regional transport systems, and the adoption of common sanitary and phytosanitary measures.

Moreover, the EAC also has focused on important, but less flashy, process and systems improvements, such as harmonization of customs procedures, one-stop border crossings, and a system that allows sharing of customs clearance information.  It is far from perfect, but the metrics show significant improvements, reducing the number of days of transit time from Mombasa to Kigali from twenty-one days to just six, for example.

In contrast, neither COMESA nor SADC has advanced its respective customs and trade agenda.  COMESA, for example, has to build consensus among nineteen African member states — from Egypt to Swaziland — while doing so in three major languages (i.e. Arabic, English, and French).  COMESA itself has recognized a “lagging behind” in meeting its regional commitments and is placing greater emphasis on monitoring implementation of policies on the part of member states.  For the EAC, which comprises five member states, implementation and monitoring of agreements is much more manageable.  SADC has made remarkable strides in regional integration through a competitive, interconnected power market, known as the South African Power Pool.  However, it too has run into many barriers in establishing a functional customs union.

Some trade experts have commented that African countries should spend less time on “unachievable” agreements and more resources on regional infrastructure.  Well, actually they need to do both: good roads and ports are meaningless if efficient clearance systems are not in place.  At a minimum, implementation of the TFTA should focus on harmonizing the three member RECs’ external tariffs, customs procedures and standards.  Introducing commonality and removing contradictions will be particularly important for Kenya and other countries that belong to two or more RECs.

The AU still has its sights set on signing a continent-wide free trade agreement (CFTA) by 2017.  EAC Secretary General Richard Sezibera, usually cautious and careful, was enthusiastic about its prospects saying, “all that’s left is bringing in [the Economic Community of West African States], which shouldn’t be difficult.” In the end it all comes down to implementation, and that implementation for the TFTA will fall upon the “Tripartite Task Force of the Secretariats.”  Whoever fills their ranks, they have an enormous task.