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Helios raises $1.1 billion fund for African investments

Posted in Uncategorized

On 12 January, the London-based private equity group Helios Investment Partners announced that it had exceeded the $1 billion target that it had set for Helios Investors III, L.P., or “Helios III”, thus making it the first $1 billion-plus private equity fund for African investments.  Founded in 2007 by Nigerian-born Tope Lawani and Babatunde Soyoye, Helios has already established two funds for the purpose of investing solely in Africa.  (Helios Investors II, L.P. or “Helios II” held the previous record for the largest private equity fund in Africa, which it raised in 2011, of $908m).  Approximately sixty percent of the capital committed to the new fund came from Helios’ existing investors which include sovereign wealth funds, corporate and public pension funds, endowments, foundations and development finance institutions across the US, Europe, Asia and Africa.

Helios III will follow the same investment strategy as Helios’ two other funds, and it will acquire and build market-leading, diversified platform businesses which are operative in the core economic sectors of key African countries.  Helios III so far has been used to acquire an interest in ARM Pensions, which is Nigeria’s largest independent pension fund manager, with over $2.2 billion of pension assets under management.

Commenting on Helios’ approach to investing in Africa, Mr Lawani stated that “much has been made of the rise of the African consumer, and that does, from time to time, give rise to potential investment opportunities.  However, as discretionary incomes remain low and the cost of basic goods and services is high, Helios believes that addressing the supply side of the economy is generally more attractive.  Helios’ strategy focuses on investing in businesses that lead the provision of core economic infrastructure: de-bottlenecking the economy, increasing efficiencies and reducing living costs for households and operating costs for businesses.”

In an interview with the Financial Times, Mr Lawani stated that the size of the capital raising and the participation of pension funds and sovereign wealth funds is a sign that private equity in Africa is maturing and moving out of its infancy.  Indeed, according to data prepared by the African Private Equity and Venture Capital Association (AVCA), the aggregate deal value of African deals that occurred in 2013 was $3.2b.  This figure is a significant increase from the $1.6b recorded in 2012.

The positivity in the African market is evident from the 2014 Global Limited Partners Survey which revealed that Sub-Saharan Africa ranks in the top three of the most attractive emerging markets for general partner investment.  The interest in this region is evident from the PE deals that occurred there in 2014.  For example, KKR announced its first investment there, spending $200m to buy a flower company based in Ethiopia.  The Carlyle Group announced a $591m close on its $500m-target initial African fund.  Blackstone entered a partnership with Africa’s richest man, Aliko Dangote, to invest in the region.  In addition, Africa started to attract state-owned funds, including the Investment Corporation of Dubai, Temasek of Singapore and China Investment Corporation.

According to a joint study of private exits in Africa by the AVCA and EY, trade sales remain the key exit route for investors in Africa.  Additional exit routes have however appeared in recent years, including sales to other PE firms, and this is indicative of the maturing private equity market in Africa.  Exits via public markets are not very common in Africa, largely because of the small size of the exchanges outside South Africa.  Nevertheless, the study provides that stock sales on public markets and IPOs were the best performers of all exit route and this mechanism is expected to become even more important when the public markets in Africa develop further.

Exits were down in 2013 as compared to previous years; the number of PE realizations in Africa declined to 27 in 2013, down from 35 the year before and 29 in 2011.  It has been claimed that the reason for the decline in the number of exits in 2013 was due primarily to two external developments: first, the announcement by the US Federal Reserve that it would taper its program of quantitative easing, and, secondly, the fact that Africa’s two key trading partners, China and India, both saw a slowdown in their growth rates in 2013.  However, on a positive note, the pipeline is filling up as investments made over more recent years become ready for sale.  Also, the total entry enterprise value for exits has been increasing year-on-year since 2009, including in 2013.

A recent report provides that the medium term outlook for raising Africa-specific funds is strong and that large global PE firms are looking at the market to capitalise on the growing investment opportunities available on the continent in the infrastructure and resources sectors and also in the consumer-backed sectors such as financial services, agribusiness, retail, education and healthcare.  The report predicts that sectors such as power, logistics and infrastructure will also attract investment as increasingly wealthier populations will require the development of the continent’s infrastructure.  It also forecasts that there will be opportunities in the power production space as privatisation takes place in Nigeria, and also in the banking and financial services sector, as the government there starts to divest its holdings in financial institutions that it obtained under the Asset Management Corporation of Nigeria (AMCON) program.  This confident outlook on the Nigerian landscape was also alluded to by the head of west Africa at Carlyle who told the Financial Times that Carlyle had a strong pipeline of potential deals in the continent and said that it was particularly bullish about the long-term potential of Nigeria.

Egypt and Blumberg Grain Launch World’s Largest Integrated Food Storage System

Posted in Consumer Products and Goods, Corporate and Investment, Current Events, Food Security and Agriculture

In the coming months, Egypt and the American company Blumberg Grain will create the world’s largest integrated food storage system for grain, constructing 93 sophisticated wheat storage facilities across Egypt that will process 3.7 million tons annually and store 750,000 tons of wheat.  The food storage system will launch this April, and is expected to save Egypt approximately $200 million annually, in addition to creating jobs within Egypt’s agricultural center. 

Egypt is the world’s largest importer of wheat, as well as Africa’s largest wheat producer.  The country is intensely vulnerable to fluctuating international food prices, yet it commonly endures post-harvest grain losses of over 40% due to spoilage occurring in traditional, open-air “shouna” storage facilities.  Blumberg specializes in the development of cost-effective, efficient storage systems that aim to reduce post-harvest losses to 5% or less.  The new storage network will increase profitability and food security by storing, cleaning, and bagging grain products in climate-controlled, secure facilities throughout Egypt.

Following the political unrest that consumed Egypt in 2011, addressing Egypt’s food security concerns through infrastructure development proved especially challenging.  However, under the leadership of President Abdel Fattah Sisi and the Ministry of Supply and Internal Trade, infrastructure investment has become an increasing priority, and the government is open to investment partnerships.  Under Blumberg’s $28 million contract with the Egyptian government, the Egyptian army will build at least 93 wheat storage facilities using Blumberg technology; the contract provides for project expenditures of up to $56 million, and the modernization of up to 164 shounas in total.

In addition to revamping Egypt’s wheat storage system, Blumberg Grain also plans to build logistics centers for perishable produce across Egypt that will leverage cutting-edge technology to maximize the longevity of perishable produce.  Lastly, the company plans to build a $250 million manufacturing plant and export hub that will produce food security technology and equipment for the Middle East and North Africa (MENA) region.  While competition for this contract has yet to conclude, the company has stated that Egypt is well-positioned to gain the manufacturing plant and related processing and packing facilities.  The plant will create approximately 1,000 new jobs; KPMG estimates that the initiative will have a $1 billion economic impact during its first year, and a $7 billion impact over a five year period.

American companies have been comparatively hesitant to invest in Africa, yet Blumberg’s investment in Egypt’s food security represents an ambitious and noteworthy example of how investment-friendly African governments can yield exciting opportunities in the infrastructure sector.  Blumberg Grain estimates that across North Africa and the Middle East, there is a need for approximately 144,000 of its prefabricated food storage units.  In addition to the company’s activities in Egypt, Blumberg storage systems are currently established in Nigeria and the Democratic Republic of Congo. 

 

 

South Africa Pushes Ahead with Proposed Drone Regulations

Posted in Media, Internet, and Technology, Public Policy and Government Affairs

As recently reported in Covington’s GlobalPolicyWatch blog, the US Federal Aviation Administration (“FAA”) has granted CNN permission to use drones under the terms of a research agreement that will study how drones can be used safely and effectively by news organizations.  Drones or  unmanned aircraft systems (“UAS”) have also been used for journalism in Africa; one of several uses discussed in a post published on CovAfrica last year.  That post also discussed the regulatory difficulties surrounding the use of private or commercial UAS in Africa, including the fact that the South African Civil Aviation Authority (“SACAA”) had announced a “clampdown” on civilian UAS.

SACAA subsequently announced that it would have suitable regulations in place by the end of March 2015, a deadline it claims to be on track to meet.  The proposed regulations were initially criticised by the industry, with Hennie Kieser, director and chairman of the Commercial Unmanned Aircraft Association of South Africa, accusing SACAA of proposing “unfeasible possibilities”, such as requiring UAS operators to have commercial pilot licenses.  Kieser also suggested that UAS should be classified by kinetic energy rather than size and weight (as in the US), due to there being hundreds of different types of UAS of all different sizes.  It had also been suggested that the use of UAS should be restricted to the daytime, although this also led to concerns from the industry who argued that certain mining, anti-poaching and crime prevention operations need to be conducted at night.

SACAA published draft regulations (as a proposed amendment of the Civil Aviation Regulations, 2011) in December 2014.  Although stakeholders were still able to comment on the draft up until 5 January 2015, it is clear that SACAA had taken the initial concerns of the industry into account.  Key provisions include:

  • Operators of UAS will need a specialist Remote Pilot License, rather than a commercial pilot license.
  • UAS are classified by kinetic energy, as well as height and weight.
  • Special permission can also be obtained from the SACAA for night operations, operations in the vicinity of people, property, structures and buildings, and public roads.
  • Flights beyond the visual line of sight are also possible in certain circumstances.

If SACAA meets its deadline of having these regulations in place within the next few months, it will be a forerunner among aviation authorities, not just in Africa but around the world.  Although many states have piecemeal rules allowing the use of UAS for certain activities (such as the FAA’s aforementioned grant of permission to CNN) or may allow the unregulated use of UAS, very few appear to have adopted similarly wide-ranging regulations.  In the US, recent reports suggest that the FAA won’t have regulations in place until 2017.  Reports also suggest that the regulations will be strict, requiring a private pilot licence and restricting flights outside the pilot’s line of sight; proposals that have not been positively received.

As noted above, the current draft of SACAA’s proposed regulations appears to be more flexible.  It is clear that the need to balance the opposing forces of safety and over-regulation is something that aviation authorities around the world are struggling to deal with.  Their eyes will be on South Africa as it looks to implement its UAS regulations — time will tell how effective they will be.

Nollywood and Bollywood film industries to collaborate

Posted in Arts, Culture, and Entertainment, Media, Internet, and Technology

On 4 January 2015, India’s Acting High Commissioner in Nigeria, Kaisar Alam, announced that the Indian commission is facilitating a partnership between Nollywood (Nigeria’s movie industry) and Bollywood (India’s movie industry).  Mr Alam noted that the two industries contribute greatly to their respective countries’ gross domestic product and stated that “India can use its more than 100 years of experience in Bollywood to assist Nigeria”.

This announcement must be a very welcome one to Nollywood, which has suffered decline in recent years.  In a 2006 study by UNESCO, Nollywood was once deemed the second-largest producer of movies in the world, ahead of the US and behind only India.  Its success unquestionably contributed to the transformation of Nigeria’s economy; after agriculture, Nollywood is the second-largest sector of employment in Nigeria.  However, in a later 2013 report by UNESCO, Nigeria did not feature in the list of top ten movie producers in the world.

There are a number of reasons for Nollywood’s decline, including the substandard quality of the movies that it produces, an unsatisfactory distribution network and lack of adequate regulation.

The majority of Nigerian films are, due to lack of facilities and resources, informal productions which are recorded on video format instead of being produced for theatrical release.  Piracy plagues the Nigerian film industry as regulations on rights and distribution are deficient and this means that the filmmakers, who are already working on tight budgets, are incurring substantial losses.  As reported in the Wall Street Journal, when the filming and editing of Nollywood movies is completed, the movies are burned onto approximately 15,000 DVDs with no copy protection and are released to marketers and street-side vendors to be sold.  It has been estimated that as much as 70% of producers’ annual revenue is lost to piracy and, as piracy takes a large chunk of the profits, sourcing enough funds to shoot a movie is becoming more of a challenge for producers.

According to the Financial Times, Nigeria has only 0.4 cinema screens per one million people (in contrast, the US has more than 100 screens, and India has about 12 screens, per one million people) and UNESCO’s 2013 report provides that Nigeria is one of the top five countries in the world which has the fewest screens per 100,000 inhabitants.  Box office sales of Nollywood movies are virtually non-existent despite the popularity of Nollywood movies among the Nigerian population (in a 2012 Nigerian survey by NOI Polls, just 2% of respondents said they did not watch Nollywood movies).  This points to the untapped potential for a country with a young population and a rapidly growing middle class.  Clearly, Nigerians are aware of the potential financial benefits that the opening of additional movie theatres can bring to the economy.  This, and the resilience for which Nigerians are known, was demonstrated when a multiplex was opened in December 2014 in Kano just weeks after an attack on that city’s central mosque which resulted in the deaths of more than a hundred people.

It is vital for Nigeria’s film industry that Nigerian filmmakers recoup the money that they incur producing a movie.   Services that stream Nollywood movies, such as iRokoTV (known as “the Netflix of Africa”), are not particularly lucrative for filmmakers.  As observed by the editor-in-chief of Nigeria Entertainment Today, Ayeni Adekunle, “outlets like iRokoTV, Pana TV and Ibaka TV are only offering streaming services…we need to be able to buy these films online because the filmmakers need to make their money back and they are not doing that right now”.  In addition, access to the screening services is difficult as Nigeria has erratic internet connections and the services are not affordable for the majority of Nollywood fans.  In fact, internet penetration in Nigeria is just under 40%.

Nigerian filmmakers are keen to launch their movies in foreign markets in order to recoup the money spent on production.  Nollywood’s highest grossing movie of all time, “30 Days in Atlanta”, which had grossed approximately $693,000 as at 7 January 2015, is set to premiere in Atlanta, Houston and London.  Product placement also serves as a means for Nigerian filmmakers to recover production costs.  Afolayan, whose film “Phone Swap” centres on the two characters accidentally swapping BlackBerrys, has stated that product placement can finance up to 30% of a movie’s budget.

While it remains to be seen what will be the outcome of the collaboration between Nigeria and India, one hopes that it will lead to increased success to both countries’ respective economies and that India, the world’s largest producer of movies, will be able to help Nollywood regain its position as one of the top producers of films in the world.

2015: A Pivotal Year for Obama’s Africa Legacy

Posted in Public Policy and Government Affairs

The Priority 

The legacy of the Obama administration in Africa is very much a work in progress. Several initiatives  address genuine opportunities and concerns, yet other aspects of the U.S. agenda need sustained attention. The next 12 months will determine whether President Obama will fulfill the tremendous promise of his presidency as it concerns U.S. policy toward the continent.

Much to the disappointment of many in the United States and Africa, President Obama paid little attention to Africa during his first four years in office. In June 2012, the administration issued the “U.S. Strategy toward Sub-Saharan Africa,” which developed a clear framework for engaging the region. Since then, the White House has put in place a series of initiatives to implement the strategy, which could provide a very positive legacy in Africa for Obama. Given the high expectations when he entered office, the relevance of President Obama’s legacy will be defined by his ability to raise Africa as a priority on the U.S. foreign policy agenda, deepen commercial ties with the continent and forge effective partnerships with African nations to respond to the most pressing security challenges. 

Why Is It Important?  Continue Reading

Planning Ahead to Arbitration – Important Considerations for Investors

Posted in Corporate and Investment, Dispute Resolution

 

As foreign investment into Sub-Saharan Africa continues to grow, inevitably, so does the risk of disputes arising between commercial parties. The potential benefits of arbitration in settling a commercial dispute, including procedural flexibility and neutrality, are well known (read more from the ICC here). This post provides an introduction to the relevance of arbitration to investors considering entering into commercial contracts in Sub-Saharan African states and/or with Sub-Saharan African counterparties.

International parties and legal practitioners have historically demonstrated a reluctance to commence proceedings before African institutions, or to seat arbitral proceedings in Sub-Saharan jurisdictions. However, statistics published by the ICC Court of Arbitration earlier this year, demonstrate an increase in the commencement of arbitrations in Sub-Saharan Africa in 2013, involving parties of 29 nationalities, arbitrators of 11 nationalities and proceedings seated in 8 different countries in the region. This said, untested national legislation and unfamiliarity with the approach of some national courts to arbitral proceedings and the relative inexperience of some institutions and judiciaries with complex international commercial arbitration, still necessitate a degree of caution approaching arbitrations with an African nexus.

An introduction to strategies for overcoming potential challenges surrounding arbitration

1. Pre-investment stage: drafting a suitable arbitration agreement

Ensuring clear, well drafted arbitration agreements at the investment stage of African-orientated transactions and investments should encourage effective and efficient arbitration proceedings should dispute resolution prove necessary at a later stage.

There is no “one model” for an arbitration agreement, although many international arbitration institutions do provide model clauses that can be utilised. The content of an arbitration agreement will generally require an analysis based on each particular investment or transaction, as well as the requirements of the parties concerning their desired dispute resolution mechanism. When drafting arbitration agreements, investors must carefully consider various factors which could later play into the success of any arbitral proceedings, including whether to opt for an institutional or ad hoc arbitration and the seat and venue for the arbitration.

Arbitral Tribunal

An arbitral institution may be either institutional (formed under the auspices of an arbitration centre) or ad hoc (formed independently from any institution by agreement between the parties). If institutional arbitration is preferred, parties have a plethora of institutions to choose from. Many parties still opt for long standing institutions, such as the ICC. Several regional institutions have been established in recent decades such as Sub Saharan African arbitration centres, including the Arbitration Foundation of Southern Africa (AFSA), the London Court of International Arbitration and Mauritius International Arbitration Centre (LCIA-MIAC), and the Common Court of Justice and Arbitration (CCJA).

The establishment of the LCIA-MIAC Arbitration Centre in 2011, has drawn particular interest. The centre is set up under a similar model to the highly successful DIFC LCIA Arbitration Centre in Dubai and is well-positioned in Mauritius, at the heart of Africa’s offshore financial businesses. The LCIA-MIAC framework is innovative, not least because the Permanent Court of Arbitration (in The Hague), rather than the national courts, is the default appointing authority behind the institution and the PCA has a permanent representative at the LCIA-MIAC. It is early days, but the LCIA-MIAC is anticipated to become a preferred arbitration centre for Africa-related disputes.

Seat of the Arbitration

The law of the seat may be different to the law governing the substance of the dispute and is a key component of the arbitration agreement as it often governs both internal procedural matters relating to the arbitration and the interaction national courts will have in the arbitration proceedings. Where transactions and investments are Africa-related , parties may opt to seat the arbitration within the African state at the centre of the dispute or outside the relevant African jurisdiction.

When selecting the arbitral seat, one must consider a state’s national laws. While some states’ national arbitration laws are based on or incorporate the UNCITRAL “Model Law”, other states have adopted their own arbitration statutes, some of which are virtually silent on the general powers of the arbitral tribunal. Investors should be careful not to seat an arbitration in a state whose arbitration laws are unsettled or vague.

Venue for Proceedings

It is open to the parties to agree on a venue for holding meetings and hearings during any ongoing arbitral proceedings that is mutually convenient for the parties, the arbitrators and legal representatives. As the venue can be an alternative location to the seat of the arbitration, this can potentially provide time and cost savings for those involved in the proceedings, while allowing the parties to agree on a seat of arbitration that provides the most attractive procedural advantages for the parties. 

2. Enforcement Stage

 In the event that an arbitral award is not voluntarily complied with, a party may need to seek to enforce an award before national courts in the region. Enforcement success in Sub-Saharan Africa, as in other regions, hinges on the approach of the particular national courts.

To enforce an arbitral award in a state that has ratified the New York Convention on the Recognition and Enforcement of Arbitral Awards (the New York Convention) should, in theory, be relatively straightforward. The New York Convention is a pro-enforcement mechanism under which contracting states are required to recognise and enforce foreign arbitral awards, except in limited circumstances. In recent years, a number of new Sub-Saharan African states have acceded to the New York Convention. Burundi, for example, became the 34th African state to become signatory to the New York Convention earlier this year.  However, even in contracting states, approaches taken by national courts to the interpretation of provisions of the New York Convention vary.

There are other regional arrangements in place regarding enforcement of awards. For example, the regional Organisation pour l’Harmonisation en Afrique du Droit des Affairs (OHADA) Treaty, entered into by 17 West and Central African states, provide an enforcement mechanism among its signatory states. Under the OHADA Treaty, signatory states are generally required to enforce foreign arbitral awards rendered in other signatory states.

While national courts have, at times demonstrated a pro-arbitration approach to the enforcement of awards, the case law is inconsistent and a complex array of factors play into whether enforcement is effective.  Covington has released a separate guide on the enforcement of arbitral awards in Sub-Saharan Africa (read here).

Author Jeremy Wilson is a partner in Covington’s arbitration team and contact for the London office. Co-author Catherine Karia is an associate in Covington’s arbitration team and Co-author Hannah Edmonds is a trainee.

U.S. Commerce Department Prioritizes Mozambique in 2015

Posted in Corporate and Investment, Public Policy and Government Affairs

One of the most important opportunities to emerge from the U.S.-Africa Leaders Summit was the Obama Administration’s commitment to increasing the counseling and technical assistance provided to U.S. private sector companies who are looking to do business in Africa.  Several recent Commerce Department announcements related to Mozambique indicate that that country is a priority market for the Administration.

Starting in January 2015, newly appointed Senior Commercial Officer for Mozambique Jane Kitson will take up her post in Maputo.  A veteran of the U.S. Commercial Service and former Senior Commercial Officer for Morocco, Algeria and Tunisia, Ms. Kitson will be “responsible for opening the U.S. Commercial Service office in Maputo and for promoting U.S. exports to this new emerging market.”  This development is welcome progress on the Commerce Department’s announcement earlier this year that its International Trade Administration “will more than double its presence in Africa, opening their first-ever offices in Angola, Tanzania, Ethiopia, and Mozambique.”

Mozambique also features in two of the Trade Missions that the Commerce Department is organizing for 2015.  In the first half of 2015, there will be a Trade Mission to Mozambique, Kenya, and South Africa.  Focusing on the energy equipment and services, transportation infrastructure and equipment, agricultural equipment, and medical technologies sectors, the Mission “will include one-on-one business appointments with pre-screened potential buyers, agents, distributors and joint venture partners; meetings with national and regional government officials, chambers of commerce, and business groups; and networking receptions.”

In the second half of 2015, the Trade Winds-Africa Business Development Conference and Trade Mission will include a stop in Mozambique as well as Angola, Ethiopia, Ghana, Kenya, Nigeria, and South Africa.  In addition to the Trade Missions to Mozambique and these other countries, 2015 Trade Winds-Africa “will feature an Africa focused business forum, consisting of regional and industry specific conference sessions as well as pre-arranged consultations with U.S. Senior Government Diplomats representing commercial markets from 19 different countries throughout the region.”

A country whose transition from conflict to frontier economy has been described by the World Bank as “nothing short of impressive,” Mozambique holds considerable promise for investors from a variety of industries.  U.S. companies interested in this market would do well to avail themselves of the assistance being provided by the Commerce Department and other agencies.

Are Chinese Companies Retooling in Africa?

Posted in Corporate and Investment

Chinese companies are adopting new approaches to investing in Africa. These changes, if they become widespread, will boost the positive impact of China on Africa’s development agenda and improve how Chinese companies are perceived on the continent.

Conversations in China last month suggest a growing perception that the country’s model of extending low-interest commercial loans to African governments for large infrastructure projects—loans that are used to finance the purchase of Chinese labor, goods and services and are in turn repaid through the transfer of oil, minerals or other natural resources—is not sustainable.

China Identifies New Opportunities and Approaches in Africa

With government support, state-owned enterprises (SOEs) have begun to look at alternative, market-based financing solutions for their projects, possibly including Western private equity and other sources of funding. An example of Beijing’s new thinking was the announcement earlier this year by the People’s Bank of China and the African Development Bank (AfDB) of the establishment of a $2 billion co-financing fund. The partnership with the African Development Bank has been described, accurately, “as an attempt to rebrand Chinese economic activities in Africa and improve their effectiveness.”

This shift in approach creates new opportunities for trilateral cooperation with other AfDB donors, including the United States. China can also leverage its new participation in the international development institution to resolve commercial disputes.

Chinese officials are also recognizing the need to participate more actively in the communities where they invest in Africa. In fact, while corporate social responsibility is still a new concept for many Chinese companies, it received attention in the 2013 report on China-Africa trade published by the Chinese Academy of International Trade and Economic Cooperation (CAITEC), a think tank of the Ministry of Commerce.[1]

In addition, the CAITEC report states that 82 percent, or 17,600 employees, of the Chinese National Petroleum Corporation staff in Africa are local hires. The Chinese National Minerals Corporation has hired 12,500 workers in Zambia. Despite these positive developments, it seems that company investments in local training, health and education programs, local sourcing initiatives and compliance with international environmental, transparency or labor standards might still be missing, as they are not mentioned in the report.

The decision by the Huajian shoe company to establish a production facility in Ethiopia is also a reflection of China’s new thinking about Africa, and using certain markets as manufacturing platforms to export to global markets. It is projected that rising labor costs could cause China to export 80 million manufacturing jobs, and both Chinese manufacturers and African governments understand the opportunity that exists to relocate many of those jobs to the African continent.[2] The Huajian factory already employs 3,500 Ethiopian workers and last year produced 2 million pairs of shoes, which are eligible for export to the U.S. under the African Growth and Opportunity Act.

China Still Faces Criticism on the Continent

Chinese companies have gained a greater appreciation for the risks and complexities of investing in the African market. Several mega-deals gone wrong has generated an awareness that a singular reliance on government-to-government relations is not sufficient for commercial success in Africa. The recent decision by the China Machine Engineering Corporation to pull out of the Belinga iron ore mine in Gabon, valued at $3.5 billion, is a case in point.

Indeed, the kidnapping of Chinese workers in northern Nigeria, Sudan, Ethiopia and Somalia reflect the reality that Chinese nationals run risks similar to other expatriate employees. The experience of China in Libya in the aftermath of the uprising against Moammar Gadhafi was especially sobering as more than 35,000 Chinese workers from 75 companies had to be evacuated, and Chinese companies lost nearly $20 billion in investments.

Despite the awareness in some quarters of the need for a new business model, problems still persist for Chinese companies in Africa. In May, Chinese Premier Li Keqiang signed a multibillion dollar deal in Nairobi with the leaders of Kenya, Uganda, South Sudan and Rwanda to build a standard gauge railway that is projected to cut freight costs by more than 60 percent and boost regional trade.

Almost immediately however, local communities in Kenya protested reports that China would import 5,000 laborers to work on the project. The Kenya portion of the rail was awarded to the China Road and Bridge Corporation (CRBC) without a competitive bidding process, reportedly a condition of the financing. The CRBC is a subsidiary of the China Communications Construction Company, which has been debarred by the World Bank from bidding on any tenders from 2009 until 2017 due to allegations of fraud and corruption. In Uganda, its parliament has initiated a probe into the procurement process of its portion of the railroad after the government overturned a construction award to the China Civil Engineering Construction Company in favor of China Harbour Engineering Company.

To achieve long-term commercial success in Africa, Chinese companies need to invest in Africans in a more substantial way (while investing on the continent), comply with rule of law and maintain transparent business procedures. These realities have been recognized by some in Beijing and, as a result, have the potential for enhancing the positive impact of China’s engagement in Africa.


[1] “China-Africa Trade and Economic Relationship, Annual Report, 2013, Chinese Academy of International Trade and Economic Cooperation, p. 7.

[2] Turning Ethiopia Into China’s China By Kevin Hamlin, Ilya Gridneff, and William Davison July 24, 2014; http://www.businessweek.com/articles/2014-07-24/ethiopia-vies-for-chinas-vanishing-factory-jobs

 

 

Nigerian President Goodluck Jonathan Signs National Health Bill Into Law

Posted in Public Health

On December 9, 2014, Nigerian President Goodluck Jonathan signed into law the National Health Bill, which was approved by the Nigerian Senate earlier this year.  The new law is intended to provide a framework for the regulation, development, and management of a national health system in Nigeria.

What the Act does

The National Health Act creates a Basic Health Care Provision Fund to provide Nigerians with access to basic health care services.  Fifty percent of this fund will be allocated to the National Health Insurance Scheme to provide health coverage for pregnant women, children under the age of five, the elderly, and persons who are physically challenged.  The other half of the Fund will be used to provide essential vaccines and consumables for eligible primary healthcare centers (“PHC”), maintenance of facilities, equipment, and transport for PHC facilities, and development of human resources for PHCs with a goal of extending primary healthcare to Nigerians living in hard-to-reach rural communities.  The Fund will be subsidized from 1% of Nigeria’s Consolidated Revenue Fund as well as contributions from state and local governments.

The law also requires universal acceptance of accident and other emergency cases by all health facilities (public and private), provides for improved standards and quality of healthcare in health facilities, and prohibits the use of public funds by Nigerian public office holders and civil servants seeking medical treatment abroad.

It is hoped that the bill will help Nigeria reduce mortality rates in the country and move more quickly toward achieving its Millennium Development Goals.

Implementation

Nigerian health care advocates have lauded President Jonathan for signing the bill, noting that it is a significant step towards providing universal health coverage for all Nigerians.  The challenge now will be implementing the various programs outlined in the bill.  Given the past problems in implementing other acts of Parliament, a coalition of non-governmental organizations working on health systems issues — the Health Sector Reform Coalition (“HSRC”) — has called upon Nigerians to join forces with other stakeholders to ensure the full implementation of Act.  In particular, the HSRC has taken it upon itself to compel state governments to provide their counterpart funding for the Basic Health Care Provision Fund.  Other civil society organizations — such as the White Ribbon Alliance for Safe Motherhood — have called for the establishment of an implementation committee to ensure the effective and transparent implementation of the Act.

While it remains to be seen whether the objectives of the National Health Act will be achieved, it is hoped that Nigeria will serve as a good example to other countries in Africa with respect to creating a sound health care sector.

Kenya and the ICC: Reconciling the Past

Posted in Current Events, Public Policy and Government Affairs

Although a certain level of violence has accompanied Kenya’s electoral process since the restoration of multi-party politics in 1991, the 2007 presidential elections saw an unprecedented level of violence that was “by far the most deadly and the most destructive violence ever experienced in Kenya.”  It left over 1,100 Kenyans dead and between 350,000 and 500,000 displaced.  Over seven years later, the question of whether victims will see justice or perpetrators will be held accountable remains unanswered.  Much of the discussion of the decision of the International Criminal Court’s chief prosecutor to drop the case against Kenyan President Uhuru Kenyatta for his alleged role in the violence has been on whether the international court has the ability to end impunity and bring justice.  However, the court is a forum of last resort that was established to be “complementary to national criminal jurisdictions.”  Focusing on the international court incorrectly absolves Kenya of its ongoing failure to shoulder its responsibility for bringing justice and accountability in the aftermath of the elections violence.

The requisite legal framework has been in place for years namely under the Penal Code, the Sexual Offences Act, and the International Crimes Act.  Furthermore, the Commission of Inquiry into Post-Election Violence provided a number of recommendations as to how to strengthen these domestic laws and resolve obstacles to applying them to cases arising under the post-election violence.  As is too often the case, the challenge has been in implementation.  The relevant actors have proven either unable or unwilling to pursue investigations and prosecute alleged offenders.  Indeed, near the beginning of this year, the Kenyan Director of Public Prosecutions (“DPP”) revealed that none of the 5,000 pending post-election violence cases were “prosecutable.”

The government now has stated that it will establish an International and Organized Crimes Division (“IOCD”) within the High Court by the end of the year.  However, whether this body will address the 2007 post-election violence remains under debate.  It is not promising that the DPP has opposed the creation of the IOCD and claimed that it would be unconstitutional for the body to have its own independent prosecutor or investigative division.

It is far past time for Kenya to demonstrate its commitment to the rule of law by confronting and reforming the shortcomings in a legal framework that seems tailored to, but yet has not served, the victims of the 2007 elections.  Regardless of how the ICC proceeds with the cases that are still open, the onus is — and always has been — on Kenya to bring justice and accountability to its citizens.