Welcome to My Taxi - Let´s Do Business With My Cell Phone
AllAfrica.com | Aug 31, 2010In cities acr
oss Africa, being an entrepreneur requires no office, business card or investors. All it takes is a cell phone, according to Adele Botha, a researcher at the Council for Scientific and Industrial Research (CSIR) in South Africa.
More than a convenience, cell phones have become a means of livelihood and information for people in rural communities across Africa. NGOs and researchers are studying their effects on rural communities.
Mobile phones have made deep strides into the African market in recent years, and are becoming important tools for helping rural and urban populations stay connected and promote business.
Presenting her research at the CSIR´s Third Biennial Conference on Aug. 31, Botha detailed how phone access can be used as a money-making tool.
In Lusaka, Zambia, Botha said she encountered a taxi driver who would make money by researching and diagnosing people´s diseases using his phone´s internet browser. And in rural Kenya, Botha said she interviewed an orphanage worker who used to make money by hiring out her phone for use, until other people in town got their own mobiles.
"Now she makes money by charging other people´s phone batteries," Botha said.
Between 2003 and 2008, the number of cell phone subscriptions grew from 11 million to 246 million, faster in Africa than anywhere else in the world, according to the International Telecommunications Union. And while less than three percent of rural areas in Africa have landline telephone connection, the ITU estimated that over 40 percent of these areas have phone access via cell phone.
While Europe´s technology infrastructure was centered on the personal computer, Botha said Africa, and much of the developing world, is basing its infrastructure around the mobile phone.
"The developing world is coming into the information era with a development-centric point of view," Botha said, with communities embracing the mobile phone for its ease of use and ability to proliferate among communities.
While there is a trend among wealthy mobile phone users to buy expensive phones with internet or Bluetooth capability, Botha said most phone users need only three capabilities to be connected with each other: text and voice messaging, and Unstructured Supplementary Service Data, which allows phones to communicate with their service provider.
"If you want to connect to everyone, this is what you need to have," Botha said.
Recognising the proliferation of mobile phones in South Africa, CSIR´s Meraka Institute, with funding from the Department of Arts and Culture, worked to develop Lwazi, a cell phone-based system to disseminate government information.
Lwazi has been tested over the past two years in six municipalities across the country, ranging from rural to urban, according to Aditi Sharma, a CSIR researcher who helped develop the system.
"In rural areas with no (landline) service, you can still get information," Sharma said.
Using the system, people without the internet can call a hotline for access to government information, Sharma said. Additionally, the automated system is available in all 11 of South Africa´s official languages, according to information provided by CSIR.
According to Sharma the system is locally customisable and organisers at community centres can post messages to the system via the internet. Locals can listen to the messages through their mobile phone and in turn can leave voicemail messages for the community centre.
"Through the piloting of project, we have shown that automated telephone is an effective means for facilitating dissemination of information," Sharma said.
Link to Online Article: AllAfrica.com
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South Africa Bonds´ `Perfect Storm´ Lures Record Foreign Buying
Bloomberg | Sept 1, 2010
International investors are buying more South African bonds than at any time in the past 15 years, lured by slowing inflation, a stronger rand and higher interest rates than in developed markets.
Net foreign purchases of local-currency government debt swelled to almost 67 billion rand ($9.2 billion) so far in 2010, more than in any full year since the so-called financial rand was abolished in 1995, according to data from JSE Ltd., the company that runs the country’s stock and bond exchanges.
The purchases sent yields on the government’s bond due in 2026 down as much as 119 basis points, or 1.19 percentage points, this year to 7.86 percent, the lowest level since January 2009. Even after cutting the benchmark interest rate 550 basis points since December 2008 to 6.5 percent, the central bank will probably reduce by a further half percentage point on Sept. 9 as inflation slows, according to Johannesburg-based Nedbank Group Ltd., Vunani Securities and Stanlib Asset Management.
“South African bonds are in a perfect storm -- yields are high, inflation is low and the Reserve Bank is one of the only central banks in the world that can still realistically contemplate cutting rates,” said Kieran Curtis, who helps manage $2 billion in emerging-market debt at Aviva Investors in London. “You can feel the market looking for places to pick up yield and that’s feeding returns in emerging market bonds.”
Seeking Yield:Near-zero interest rates in industrialized nations are encouraging investors to borrow at lower costs and invest in markets offering higher returns, prompting rallies in local- currency debt from Indonesia to Brazil. The transactions, known as carry trades, have propelled South Africa’s local-currency bonds to the second-best performers in Europe, the Middle East and Africa after Russia in dollar terms, according available index data compiled by Bank of America-Merrill Lynch.
South Africa’s benchmark interest rate compares with deposit returns of 0.25 percent in the U.S., 0.5 percent in the U.K. and 0.1 percent in Japan.
“The record-low rate we’re seeing globally means there’s a hunt for yield going on at the moment and South Africa offers good returns,” said Vivienne Taberer, a portfolio manager who helps oversee about $70 billion at Investec Asset Management in Cape Town. “The market is realizing that local currency emerging-market debt is a good place to be and that’s helping high-yield markets like South Africa.”
Apartheid Currency:Foreign investors bought more South African bonds this year than in the previous 15 years combined, according to JSE Ltd. data. Offshore investors purchased a net 6.89 billion rand of South African bonds between June 1995, when the country scrapped the financial rand, and the end of last year.
The finrand, as it was known, was a parallel currency instituted by the government in 1985 to limit outflows from the country at a time when the apartheid-era regime faced economic sanctions. Non-residents wanting to sell their South African investments had to do so using the financial rand, which traded at a discount to the spot exchange rate, while limitations were placed on the convertibility of financial rand into foreign currency.
UBS AG, Switzerland’s biggest bank, is recommending investors sell South African bonds as inflows in the nation’s fixed-income assets have been “too excessive,” said Di Luo, an emerging-markets strategist at UBS AG in London. Zurich-based UBS also predicts the rand will give up gains by year-end, reducing investor returns, she said.
Slowing Inflation:The brokerage estimates the rand will depreciate almost 3 percent to 7.60 per dollar by December. The forecast compares with an end-2010 median estimate of 7.68 based on a Bloomberg survey of 18 analysts.
South Africa’s benchmark 13.5 percent bond due September 2015 surged as much as 3.55 rand this year, reducing the yield by 122 basis points to 7.18 percent, the lowest since December 2008.
Inflows into the bond market have helped the rand extend its surge against the dollar since the start of last year to almost 29 percent, making it the second best-performing emerging-market currency after Brazil’s real over the period, according to data compiled by Bloomberg.
The rand traded little changed from its previous close at 7.3816 per dollar as of 10:44 a.m. in Johannesburg today.
As inflation slows, traders are increasing bets for further interest rate cuts. Inflation eased to an annual 3.7 percent in June, the slowest in more than four years and below the central bank’s 6 percent target limit.
Abandoning Bets:Slowing price growth data prompted Nedbank, Vunani Securities and Stanlib Asset Management to abandon earlier estimates that the central bank would leave its benchmark rate unchanged at its next meeting.
“The central bank has plenty of room to cut rates thanks to the strong rand, which has reduced imported inflation,” said Ian Cruickshanks, head of research at Nedbank Treasury in Johannesburg. “Inflation is likely to stay below 4.5 percent until the end of the year.”
Money-market futures used by analysts to gauge interest- rate expectations show traders are pricing in an almost 70 percent probability that the central bank will reduce its main rate by 50 basis points when it meets next week, according to Johannesburg-based Econometrix Treasury Management, which advises South African banks on foreign exchange transactions.
FRAs, or forward-rate agreements, for three-month cash contracts due in one month have slumped as much as 1.135 percentage points this year to 6.17 percent, the lowest since the central bank first introduced its repurchase rate in 1999.
“The market is pricing in rate cuts going forward but that’s unlikely to significantly dent foreign portfolio inflows into the local bond market,” said Cruickshanks. “The rate differential between South Africa and the developed world is so high that they’re likely to continue for some time.”
Net Foreign Purchases of South African Bonds (in rand)
2010: 66.99 billion (year-to-date)
2009: 26.54 billion
2008: -15.98 billion
2007: 2.15 billion
2006: 20.50 billion
2005: - 5.00 billion
2004: 3.00 billion
2003: - 5.40 billion
2002: 0.20 billion
2001: -26.51 billion
2000: -20.53 billion
1999: 14.34 billion
1998: -9.77 billion
1997: 14.78 billion
1996: 3.81 billion
following the March 1995 abolition of the financial rand, the currencypreviously used for foreign capital transactions.
Link to Online Article: Bloomberg
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Adcock, Merck & Co Expand African Distribution Deal
Reuters Africa | Sept 1, 2010
U.S
. drugmaker Merck & Co and South African peer Adcock Ingram have expanded their cross-distribution deal to sub-Saharan Africa, raising both companies´ presence on the fast-growing continent.
In June, Adcock and Merck signed a similar five-year deal for the South African market.
The tie-up marks the latest push by big pharmaceutical companies into emerging markets where they see much of their future revenue growth as sales stall in developed markets.
"We expect sales from emerging markets to be a key contributor to our future performance," said Marc Princen, head of Merck´s Eastern Europe, Middle East and Africa regions.
The deal also helps Adcock´s expansion drive into the rest of Africa where it has small operations in Ghana and Kenya, and gives it access to a wider product range.
Merck´s products to be co-promoted in countries such as Botswana, Kenya and Ghana include medicines for asthma, dermatology, hypertension and migraines.
Link to Online Article: Reuters Africa
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HSBC in Talks to Buy Control of Old Mutual´s Nedbank
Bloomberg | Aug 23, 2010
HSBC Holdings Plc, Europe’s largest bank, is in talks to buy a controlling stake in Old Mutual Plc’s Nedbank Group Ltd. that’s valued at about $7 billion to benefit from growing business ties between Asia and Africa.
HSBC may acquire as much as 70 percent of the Johannesburg- based bank, London-based Old Mutual said today. HSBC and Old Mutual are in exclusive talks and have eight weeks to reach an agreement for Nedbank, which has a market value of 71.5 billion rand ($9.8 billion).
HSBC said last month it was looking to expand in Africa as more companies in Asia, where the bank gets more than half of its profit, trade with the continent. The International Monetary Fund forecast 5 percent economic growth for Africa this year, five times the pace of the European Union, amid demand for the continent’s natural resources and an expansion of infrastructure. Old Mutual, Africa’s biggest insurer, wants to build its South African business while concentrating on insurance and paying down debt of as much as 1.5 billion pounds ($2.33 billion).
“Over time, the value of this deal would lie in leveraging off HSBC’s strengths in Asia and the growing Asia-Africa trade links,” said JPMorgan Chase & Co. analysts, including Carla Antunes da Silva, in a note today.
Nedbank jumped as much as 7.4 percent in Johannesburg trading, the most since March, and ended the day 6 percent higher at 139.01 rand. Old Mutual gained 3.3 percent to 125 pence in London, while HSBC rose 0.7 percent to 638.9 pence.
HSBC ‘Pedigree’
Under the proposed transaction, HSBC may offer all Nedbank shareholders the opportunity to sell 70 of every 100 shares in the lender, according to Mike Brown, Nedbank’s chief executive officer. Nedbank would remain listed in South Africa and follow disclosure rules, Brown said.
“We believe a strong international banking partner” could accelerate Nedbank’s growth ambitions, Brown said. HSBC came through the global financial crisis with “a pedigree that speaks for itself,” and its possible acquisition of Nedbank may carry less risk than Old Mutual remaining the parent, Brown said. There haven’t been discussions about whether he would keep his job if the deal goes ahead, Brown said.
Old Mutual owns about 52 percent of Nedbank.
Africa, China
HSBC emerged ahead of Standard Chartered Plc as the favorite to purchase the controlling stake. London-based Standard Chartered, which gets three-quarters of its profit from Asia, was also considering a bid for Nedbank, a person familiar with the situation said in May. Tim Baxter, a London-based spokesman for Standard Chartered, declined to comment.
Nedbank, South Africa’s No. 4 bank by market value, would be HSBC’s first major takeover since the start of the global financial crisis. Nedbank, which traces its origins to the 1830s, provides banking services primarily to companies. Through an alliance with Ecobank Transnational Inc., which is listed in Nigeria and Ghana, Nedbank has a presence in 33 African countries.
“With 30 percent of exports destined for Asia, and China now its largest trading partner, South Africa’s prospects are brighter than ever,” Paul Harris, a spokesman for HSBC, said from Johannesburg today. HSBC, which entered South Africa in 1995, has five branches in the country.
‘Power Their Way’
Africa’s economy has a population that has just surpassed 1 billion. While the World Economic Forum on Africa in Tanzania this year dubbed corruption on the continent the “elephant in the room,” a McKinsey Global Institute report, published in June, said the region’s collective gross domestic product may reach $2.6 trillion by 2020, with consumer spending likely to reach $1.4 trillion in the next decade.
Nedbank accounted for 12 percent of Old Mutual’s revenue in 2009 and was the second-biggest earner for the group after the insurance business. Old Mutual would use some of the sale proceeds to boost operations in South Africa, said CEO Julian Roberts, adding that he hopes Nedbank and the insurer will keep close ties.
“This is great for the local banking industry,” Chris Gilmour, a Johannesburg-based analyst at Absa Investments, said in an e-mailed response to questions. “HSBC and Nedbank will be able to power their way into the rest of Africa, mainly concentrating on Chinese development deals involving multinational banks and companies.”
‘Vote of Confidence’
An acquisition would be “a vote of confidence” in South Africa, the National Treasury said in an e-mailed statement. While the transaction will need approval from the country’s Finance Minister, Pravin Gordhan, it is already foreign controlled as Nedbank is majority owned by London-based Old Mutual Plc, the Treasury said.
Nedbank should retain its listing in Johannesburg and a local chief executive officer, Errol Kruger, South Africa’s registrar of banks, said in an interview on Talk Radio 702, which is based in the South African city. The Nedbank brand is “not sacrosanct,” he said.
Africa’s largest bank, Standard Bank Group Ltd., sold a 20 percent stake to Industrial & Commercial Bank of China in 2008 as both lenders sought to capture financing opportunities between the two continents. FirstRand Ltd., South Africa’s second-largest banking group, signed a cooperation agreement with China Construction Bank Corp. last year. The shares advanced 3.2 percent today.
If HSBC succeeds in acquiring control of Nedbank, it “will surely make a massive, concerted effort to flex its muscles on the continent,” Gilmour said. “The HSBC brand will probably prevail over the Nedbank brand.”
HSBC, which has African operations in Egypt, Mauritius and Nigeria, was advised by Lazard Ltd. Old Mutual was advised by Lexicon Partners, Rothschild and Bank of America Corp., while Nedbank was advised by Credit Suisse Group AG.
On Aug. 6, Old Mutual said it has agreed to sell its U.S. life operations to Harbinger Capital Partners for $350 million to pay off debt and reduce assets in the U.S.
Link to Online Article: Bloomberg
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The Final Frontier
Barron´s Cover | August 2, 2010
Investors will lose a huge opportunity if they avoid vibrant and changing Africa. Fast growth in a continent of misconceptions.
What images does Africa conjure in the mind of the average Westerner? Probably skinny children in dire poverty, corrupt dictators and, thanks to Hollywood, blood diamonds. Africa doesn´t get much attention in the West beyond that. During South Africa´s successful World Cup this summer, for example, many news reports focused on vuvuzelas and few on the capable management of the event itself
China Raising the Stakes in Africa: China´s trade with sub-Saharan Africa has expanded by a factor of about 10 in the past decade. China is importing mostly commodities and exporting infrastructure and machinery, among other thingsLikewise, the noisy financial crises in the developed financial markets appear to have drowned out a decade of impressive and sustained economic and institutional progress in sub-Saharan Africa. (See table: A Decade of Improvement.) To many Western investors who don´t look past the stereotypes, Africa is terra incognita. Their ignorance could cost them plenty in lost opportunity.
Take the U.S. Chamber of Commerce, which in a survey last summer revealed that "over all, U.S. businesses do not view Africa as an attractive place to invest. The image of lawlessness, corruption, unstable governments, an inadequate infrastructure, uneducated or untrained people and an unwelcoming government attitude toward business serve as major deterrents."
Africa suffers from misconceptions more than any other area in the world," argues Miles Morland, whom many consider the father of fund investment in Africa. He founded Blakeney Management in the early 1990s, and now is chairman of Development Partners International, a London-based private-equity firm that invests in Africa.
Perceptions based on the way Africa once was linger in the minds of many investors, he says. The U.S. and U.K. effectively have nationalized more companies during the financial crisis (think GM, Chrysler, AIG, Citigroup, Royal Bank of Scotland, Northern Rock) than African nations have in the past nine years, he quips, and national debts are far less worrisome there than in America or Europe.
"Funnily enough," Morland continues, "people wearied by bankruptcies, meltdowns, restructuring and bank bailouts are amazed to learn about a continent that has transformed itself into one of the fastest- growing regions in the world, where banks haven´t needed bailing out, no large companies have folded, with no accounting scandals and where the biggest problem businessmen have is getting capital to finance growth."
He is seconded by another investor with decades of experience, Donald Elefson, portfolio manager of the Harding Loevner Frontier Emerging Markets Fund (ticker: HLFMX). Among frontier regions, Africa is the most interesting, he asserts, because it offers strong markets with huge potential, liberalizing policies, good capital flows and undiscovered high-quality companies. And Nigeria is one of his favorite frontier countries. He contends that the giant nation of about 150 million people eventually can fill the same leading role for Africa that Brazil has played for emerging markets.
Like Brazil, Nigeria hasn´t liberalized its petroleum and telecom industries yet, and its stocks in those sectors will benefit whenever that happens. Again like Brazil, Nigeria has grown strongly, even though its banks curbed lending last year. Whenever the banks ratchet up lending, that will further fuel growth. (Nigerian regulators recently forced some banks to take bigger-than-expected write-downs on loan losses. That hurt reported earnings, but has removed a nagging issue and will help future profits.)
Indeed, after a big drop from boom highs in early 2008, African stock markets—despite their problems—now offer the long-term investor a number of fast-growing companies with stocks that sell for about 11 to 12 times trailing 12-month earnings per share as of June 30, according to S&P Indices. They look inexpensive compared with price/earnings ratios in most developed markets or even in the broad world of emerging markets, where the average stock fetches 15 times trailing profits
With many economies on the continent growing 5% to 8% annually, according to the International Monetary Fund, investors can find banks, brewers, supermarket outfits and mobile-phone companies with good prospects, decent balance sheets and relatively low P/Es (especially compared with their growth potential). Some have few rivals, provide important consumer services and boast profits that are growing faster than their homelands´ economy.
If the West hasn´t noticed this big change, China has. With relatively little fanfare, it has made a huge foray into Africa. China´s rapidly rising middle class isn´t just pulling itself up by the bootstraps, but also is creating demand for resources from Africa. That´s helping to raise income levels on the vast continent, as well.
Africa´s bounty of natural resources, such as oil, iron ore, gold, copper and numerous others, have brought in strong trade flows from the Asian giant, with $88 billion in 2008 in exports and imports between the two, up 10 times from 2000 (see table, China Raising the Stakes in Africa). In return for those commodities, China is building seaports, power plants, roads and other infrastructure projects, which should help sustain the growth in gross domestic product expected in many parts of the sub-Sahara. Africa´s economy is growing at a tiger-like 5% to 8% pace, versus 4% for countries like Russia and Brazil. And the IMF has been nudging up its forecasts for Africa.
There are compelling long-term trends on the continent, says Razia Khan, the London-based head of research on Africa at Standard Chartered, a U.K. bank with businesses in many emerging and frontier markets. Political stability and economic policy has improved. Consumption is rising, with the working-age population expected to hit 65% of the total population in 2050, versus about 50% now. And new capital, some from investment funds, is coming in. Africa´s debt and foreign-exchange markets are opening up, too, Khan adds, another encouraging sign. Over all, "Africa is becoming more accessible" to Western investment.
Some Ways to Play AfricaThere are few African pure plays available to individual investors in the U.S., but there are a few stocks, as well as frontier funds and an ETF, that are significantly exposed to sub-Saharan Africa. There are also locally traded stocks that are investable by institutions, though liquidity is a problem.
| Company/Ticker | Where Traded | Industry | Market Value (bil) | P/E * 2010E 2011E | |
| MTN Group / MTNOY | Pink Sheets | Mobile Phones | $29.7 | 12.1 | 10.2 |
| Shoprite Holdings / SRHGY | Pink Sheets | Supermarkets | 6.9 | 21.1 | 18.3 |
| Tullow Oil / TUWOY | Pink Sheets | Energy Exploration | 17.5 | 131.1 | 33.7 |
| African Bank Inv / AFRVY | Pink Sheets | Banking | 3.6 | 12.6 | 9.9 |
| Mutual Fund or ETF/Ticker | Assets (mil) | Return Since Inception | Comment |
| Morgan Stanley Frontier Emerg / FFD | $85.9 | -15.9% | Overweight Africa |
| T. Rowe Price Africa & Middle East / TRAMX | 200.8 | -8.6 | Doubled Africa weight recently |
| Harding Loevner Frontier Emerg Mkt / HLFMX | 21.5 | -15.1 | Invests in Nigeria and Kenya |
| Templeton Frontier Mkts / TFMAX | 44.3 | 25.0 | 28% of fund in sub-Sahara |
| iShares MSCI South Africa ETF / EZA | 441.0 | 19.4 | Mimics MSCI S. Africa Index |
A key sector is banking, a necessary engine for consumer and corporate growth. Credit to the private sector in East African nations, for example, is growing at a healthy yearly clip of 15% to 20%, notes Simon Migangala, the Dar es Salaam-based treasury director for CRDB Bank in Tanzania, which operates in East Africa. The global recession has hurt, but regional economies are recovering, with banking, construction, energy and telecommunications showing gains. "It will be much higher than expectation," he predicts of banking growth.
With net-interest margins significantly higher than in the rest of the world, Morland views bank stocks as one of the best investments in the early stages of a frontier market´s growth. If an economy is expanding by 7% a year, for example, banking assets can grow 30% to even 100%. "Businesses we like to invest in are the same ones others are buying in China: banks, brewers and telcos," he says.
The consumer-growth potential is huge. Africa, the second most populous continent, has close to 900 million people. While many are very poor, incomes generally are rising, thanks to globalization and China´s hefty appetite for commodities.
Alan Dowokpor, 44 years old, who grew up in Ghana, departed and then returned to Accra to head Tullow Oil´s drilling program, says that when he was a child, visitors from the U.K. used to bring a suitcase full of necessities like soap. Now people are earning enough to afford consumer items like that. Making a phone call used to be a "real big deal," but mobile phones have changed that. Perhaps most important, former economic emigrants, "qualified, educated Ghanaians, are coming back and that in itself says something about improving opportunity.
"These days, investors artificially distinguish between emerging and frontier markets, contends Lawrence Speidell, chief investment officer for Frontier Market Asset Management. Africa is the most neglected frontier market, he avers, because its countries are "a little bit poorer and their stage of development a little behind" that of emerging markets in general. But, he adds, "from the standpoint of the people living in those nations and their everyday lives, the differences between them are slighter than many believe."Speidell´s firm has investments in Ghana, where the banking industry has a net-interest margin of 8% and banking shares have relatively low price/earnings ratios. Ghana Commercial Bank (GCB.Ghana), for example, is the largest in that country, with the longest reach, 157 branches and a stock price around six times expected 2010 earnings.
His other African investments, Standard Chartered Bank Ghana (SCB.Ghana), which is focused on high-end clientele, has a 48% return on equity and trades at a multiple around 10. Cal Bank (CAL. Ghana) is another of Speidell´s favorites. Small and nimble, it´s the only independent bank in his top 10. It focuses on the high-end market, targeting recent university graduates. And it has a P/E of 6.6. (It must be noted that frontier-market P/Es often are based on only a handful of profit estimates. The 10 multiple listed for Cal Bank in the table at left, for example, is based on an analysis from only one broker, Securities Africa in Johannesburg.)
After the frontier stock-market boom ended in early 2008, African shares fell hard along with the major global markets. They remain far below their highs, despite a nascent recovery that began late last year. Nigerian stocks, for example, are more than two-thirds below the highs of 2007-08, when hedge-fund money was pouring in, creating a bubble in which too much cash was chasing too few companies.
A lot of that hot money was among the first to leave during the global crisis, observes Jenni Chamberlain, a portfolio manager at Finch Asset Management. Still, she´s seeing "more interest from long-term investors" in Africa lately. One of her favorite stocks is Sonatel (SNTS.Senegal), a fixed- and mobile-phone outfit that trades in Senegal and is 42% owned by France Telecom (FTE) and 27% by the government. It´s the most attractively valued sub-Saharan telecom operator, as well as the dominant player in both Senegal and Mali, with a growing share in Guinea Bissau and Guinea. The company has a strong balance sheet and a 10% dividend yield, Chamberlain notes.
The share-price drop across markets in Africa should entice new investors willing to look five years down the road as an opportunity to pick up stocks at some of the lowest prices since 2006, when Barron´s last wrote at length about frontier markets ("Finding Riches on the New Frontier," Nov. 6, 2006)
Profit growth has been much higher in Africa than in the rest of the world, mitigating some of the higher risk there. For example, from 1995 through 2009, earnings per share advanced at a compound annual rate of 17% for the companies in the Blakeney Africa portfolio, which also includes Middle Eastern stocks. That return far outpaced the 4% to 5% average for companies in the Standard & Poor´s 500 index and the MSCI Emerging Markets index in the same span.
What would you pay for 4% to 5% annual growth? Morland says maybe nine or 10 times earnings, but adds that he would "pay 25 times for 17% growth." Yet the P/E for Blakeney´s African portfolio is about 10 times 2010 earnings.A Decade of Improvement:Many investors in developed markets don´t know the extent of the dramatic economic improvements that have occurred in sub-Saharan Africa over the past decade. While the region remains among the world´s poorest, it is growing swiftly. That should boost profits at many of the companies that operate there.
| Locally Traded Company/Ticker | Industry (bil) | Market Val(bil) | P/E 2010 E 2011E | ||
| Cal Bank / CAL.Ghana | Banking | $0.43 | 10.0 | 8.0 | |
| CRDB Bank / CRDB.Tanzania | Banking | 0.17 | 5.0 | NA | |
| East African Breweries / EABL.Kenya | Brewer | 1.70 | 16.2 | 14.8 | |
| Equity Bank / EQBNK.Kenya | Banking | 1.10 | 12.2 | 10.0 | |
| Ghana Commercial Bank / GCB.Ghana | Banking | 0.28 | 5.8 | 5.1 | |
| Guaranty Trust Bank / GUARANTY.Nigeri a | Banking | 2.70 | 7.9 | 6.0 | |
| Safaricom / SAFCOM.Kenya | Cellphone & Internet Provider | 2.80 | 14.1 | 12.2 | |
| Sonatel / SNTS.Senegal | Telecom Provider | 2.70 | 7.1 | 6.7 | |
| Standard Bank Group / SBK.South Africa | Banking/Insurance | 24.30 | 12.1 | 9.2 | |
| Standard Chartered Bank / SCB.Ghana | Banking | 0.57 | 10.5 | 7.2 | |
| E=Estimate *Based on estimates of home traded stock.Sources: Securities Africa, Bloomberg; Lipper | |||||
| Sub-Saharan Africa | 2000 | 2008 |
| Population (mil) | 672 | 819 |
| Gross national income per capita* | 1,272 | 1,950 |
| GDP ($US bil) | 342.4 | 978.1 |
| GDP growth (annual%) | 3.6 | 5.1 |
| Days required to start a business | 61** | 46 |
| Mobile-Phone subscriptions (per 100) | 2 | 33 |
| Internet users (per 100) | 0.5 | 6.5 |
| *Measured by purchasing-power parity in U.S. dollars. **2005Source: World Bank | ||
African equities—not including stocks issued by companies in South Africa, which is classified an emerging market—represent roughly 15% of the frontier indexes.
In recent months, the flow of money into frontier markets has accelerated. About a $1 billion has been added this year, 14.5% of total frontier-fund total assets, according to EPFR Global, which tracks institutional flows. With frontier- and emerging-market money managers growing more enthusiastic about the continent, more of their cash is going into African stocks.
Many institutional investors argue that Africa is now where emerging markets were 20 years ago—a place investors are deathly afraid of, but one that is rapidly changing and in which returns can be high.
Says John Niepold, managing partner at SQM Frontier Management and a 20-year veteran of emerging and frontier markets: "If you go around on the ground in Africa, as I do, you´ll find companies are doing well. Information isn´t readily available, but that also means there are market inefficiencies and the possibility for a good return. It´s probably the place that investors should consider."
Joseph Rohm, who runs the T. Rowe Price Africa & Middle East Fund (TRAMX), says South African stocks are among his most preferred and that he´s doubled his weighting in African stocks to 35% of the fund since April 2009. Frontier stocks were laggards last year, so they might contain more bargains than emerging-market stocks, which were on fire in 2009.
Nigerian banks, for example, were trading at four to even six times book at the top, Rohm adds, but now have forward price-to-book-value ratios of about one times. Although Nigeria has 150 million people, only eight million have bank accounts, he says, so there´s huge growth potential.
AMONG BIG STOCKS, Rohm likes Africa-related play Tullow Oil (TUWLY), a growing U.K.-based energy-exploration company with significant assets in Uganda, Ghana and other parts of the continent. Among local stocks, Rohm´s fund holds Safaricom (SAFCOM.Kenya), an innovative Kenyan mobile-phone outfit with one of the most successful mobile- banking applications; Guaranty Trust Bank (GUARANTY.Nigeria) and (SBK.South Africa).
Another fan is Timothy Drinkall, whose Morgan Stanley Frontier Emerging Markets Fund (FFD) is overweight Africa. He notes that frontier-market valuations are trading at a big discount to emerging markets´, instead of the premium seen during the boom. And he adds that frontier markets show lower correlations with developed-market moves.
Emerging markets rallied 75% in 2009, but the stock market in Nigeria, one of his favorite investment areas, fell 33% in dollar terms, and Kenya rose only 5%. In Kenya, he says, the underlying profit growth potential is more than 15%. There he holds East African Breweries (EABL.Kenya) and Equity Bank (EQBNK.Kenya). The latter has the most accounts in Kenya and is expanding in Uganda.
Another stock worth a look is Letshego (LETSHEGO.Botswana). It´s a growing payday lender, with relatively low credit risk, a P/E multiple around 10 and a return on equity of 27%, says Nick Padgett, whose Frontaura Global Frontier fund has been increasing its weighting in African stocks. Another of his holdings, CRDB Bank (CRDB.Tanzania) is one of the largest banking institutions in its home country. It sports a P/E of five, a price-to-book ratio of 1.1 and a potential for a double-digit net interest margin.
Sub-Saharan Africa is far more attractive than its media stereotype would lead one to believe. Yes, poverty and violence are still huge problems in some parts of the continent. But, increasingly, the miseries of lands like Zimbabwe are more the exception than the rule. Africa isn´t an easy place to invest in. But the patient are likely to be rewarded for venturing into what for many is the last overlooked investment frontier
Link to Online Article: Barrons
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The dragon in Africa: An overview of China´s presence on the continent
International Business Times | July 31, 2010
China, an emerging global superpower which will likely become the world's biggest economy within fifteen years, has planted itself deeply into the vast continent of Africa -- a land of huge untapped natural resources and incredible growth potential.
It would seem to be an ideal marriage -- China possesses immense intellectual capital and an inexhaustible appetite for commodities to keep its economic engines running, while much of Africa remains poor and in dire need of external assistance.
“Africa has an abundance of resources and is regarded by many as a frontier market that has strong growth prospects,” said Avior Research (Pty) Ltd., an equity research firm based in Johannesburg, South Africa.
“China is well aware of their need for resources as their own economy grows and, therefore, it is in China’s interest to gain a strong foothold on the African continent if it wants have access to those resources. China’s biggest investments into Africa have been in infrastructure, mining and banks.”
The two-way trade between China and Africa is expected to exceed $100-billion this year -- but that is only a pittance of what the future holds.
China's interests in Africa is nothing new, of course, but only in the past two decades have these giant entities established a firm and burgeoning economic cooperative.
Africa is the source of at least one-third of the world’s commodities, Avior Research estimates, and from the perspective that China needs raw materials “it is understandable that they are determined to build roads, ports, and railroads all over Africa.”
It could be argued that China moved into Africa only after the U.S. and Russia began to scale back their presence on the continent after decades of using it as a 'Cold War' chessboard.
Avior Research explains that as an emerging economy, China is arguably ideologically more aligned to Africa, than what the U.S. or Russia currently is.
“Much of the US/Russian interests arose out of the Cold War crisis between these countries,” Avior stated. “However, once hostilities ceased, a lot of the U.S and Russia’s political drive to economically re-colonize Africa lost momentum.”
In its recent approach to Africa, China could not be more different from the West, Avior Research added.
“It has focused on trade and commercially justified investment, rather than aid grants and heavily subsidized loans. It has declined to tell African governments how they should run their countries, or to make its investments contingent on government reform. China has moved quickly and decisively, especially in comparison to many Western aid establishments.”
In October 2000, Beijing created the Forum on China-Africa Cooperation, which regularly holds summits between Chinese leaders and various African rulers to discuss and formalize deeper relations. China has become one of the continent's leading investors and creditors.
From constructing a housing project in Algeria, to running a huge mining and infrastructure complex in Guinea, to an iron ore project in Liberia, to a massive dam enterprise in Ghana, to a highway construction endeavor in Rwanda, China has its fingerprints all over Africa. Indeed, China has established joint committees in at least 43 African nations to discuss and deepen economic and trade relations.
Of course, China's incursions into Africa has drawn much criticism, particularly from the West which fears that China is simply using Africa to feed her own economy at the expense of indigent Africans (which, of course, was the same charge leveled at the European colonialists for centuries).
Chinese officials have also come under attack for their lack of transparency and accountability regarding its numerous activities in Africa and its apparent unwillingness to reduce political corruption on the continent.
In response to such criticism, Fu Ziying, the senior trade official in charge of China's Africa portfolio, was recently quoted as saying: "China's presence in Africa is becoming more and more market-driven, the actors operating there are diverse, there are many models, and the areas they are in are broad.
The Chinese government is more and more aware that as the economic and trade cooperation between China and Africa evolves, there need to be some laws and protections in place."
In fact, China herself developed and modernized its own economy back in the 1970s and 1980s by talking loans from wealthier powers (in this case, Japan, among others) in exchange for mineral resources and oil. Within a few decades, China became an economic heavyweight and correspondingly became a net importer of commodities, rather than an exporter.
It would appear that the Chinese are now doing something similar with resource-backed lending in Africa (with China now as the dominant benefactor).
In "The Dragon's Gift: The Real Story of China in Africa" a book by Deborah Brautigam, a professor at American University and an expert on China-Africa relations, she points out that while the Chinese presence in Africa is largely benevolent, there are many problems associated with this complex relationship. For one thing, working conditions in many China-funded projects in Africa are very poor; and the Chinese do not seem to view the destruction of the ecosystem and environment with much concern.
However, she also indicates that China has made tremendous infrastructure investments in countries like Rwanda, Kenya and Senegal, which lack significant commodities -- thereby refuting the notion that China seeks only to 'exploit' Africa.
Moreover, China's financial investments remains far below the capital that flows to the continent from Western sources.
Brautigam estimates that in 2007, Chinese investment in Africa totaled about $1.4 billion, far smaller than the outlays by the U.S., European Union and World Bank of $7.6 billion, $5.4 billion, and $6.9 billion, respectively, for that year.
Nonetheless, China will surely deepen its involvement in Africa in the years to come. Only time will tell how much the Africans benefit from this relationship.
Link to Online Article: International Business Times
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How It Could Do Even Better: A Rare Report By The OECD Makes Some Trenchant Observations
The Economist | July 22, 2010
AFRICA’S bigges
t economy is being held back by one of the world’s lowest labour-participation rates and one of its highest unemployment rates. Barely 40% of South Africa’s working-age population have jobs, compared with around 60-75% in other middle-income emerging markets, according to a report out this week by the OECD. One in three South Africans in the labour force, including half of young black people aged 15-24, is unemployed. This, more than anything, most constrains South Africa’s economic growth, says the Paris-based outfit.To create jobs for so many people would require “many years of 6% or even 7% growth”, says Ángel Gurriá, the OECD’s secretary-general. Pravin Gordhan, South Africa’s finance minister, puts the bar even higher, saying that average growth of 7% would be needed for 20 years “to make a significant impact”. In the past four decades South Africa has never achieved such speedy growth. Its best performance was in 2004-07, when GDP rose by an average of 5% a year.
Long regarded as a rich-countries’ club, the OECD has recently been helping middle-income developing countries share and compare best economic practice. Mexico, Chile, the Czech Republic and Slovenia are already among its 32 members. Estonia, Israel and Russia are expected to join soon, whereas Brazil, China, India, Indonesia and South Africa have been granted “enhanced engagement” status while they decide whether they want to apply for membership. This is the OECD’s first “economic survey” of South Africa.
Although largely complimentary about the country’s prudent macroeconomic policies since the ruling African National Congress came to power in 1994, the report says a lot more could be done on the microeconomic front to raise growth potential and enable living standards to catch up with those in OECD countries. Despite abundant physical and human resources, South Africa is one of the rare emerging markets to have failed to converge towards the club’s average GDP per person over the past 16 years, the OECD notes.
In its 2006 development strategy, the government set a target of 4.5% growth a year up to 2009, rising to 6% over the next five years, with the aim of cutting poverty and unemployment by half by 2014. The global slump has made those targets unrealistic. But South Africa’s economy was already slowing down before the crisis hit, the report says, falling from a peak of 5.5% in 2007 to 3.7% in 2008. Although South Africa proved more resilient than most OECD countries, output shrank by 1.8% last year, the country’s first recession in 17 years.
The OECD expects a return to growth of 3.3% this year, accelerating to 5% next year. That is higher than most other forecasts and well above the government’s own estimates of 2.3% this year and 3.2% next, but still too slow to reduce poverty and unemployment at anywhere near the government’s proposed rates. Over 1m formal jobs were lost in the five quarters up to March this year. Officially, unemployment is 25%, but it tops 35% if you count those too discouraged to go on looking for a job. And, unlike most of the world’s poor countries, South Africa, with its widespread welfare system, does not have a thriving informal economy where the jobless can take refuge. According to OECD estimates, only 15% of South African jobs are in the shadow economy, compared with around half in Brazil and India and nearly three-quarters in Indonesia.
Among other recommendations, the OECD says that South Africa’s government should encourage more saving and investment; a liberalisation of product-market regulation; easier access to credit for small businesses; greater co-ordination in wage bargaining; and a raft of measures to tackle the wretched level of youth unemployment. This could include wage subsidies for people being trained, a minimum wage differentiated by age, and extended periods of probation for young workers. The government would find it easier to do such things were it not for the power of South Africa’s trade unions, which tend to look after their own employed members at the expense of the millions who cannot find jobs at all.
Link to Online Article: The Economist
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World Cup Lends South Africa Confidence to Unite Continent
July 18th 2010 | The Wall Street Journal Online
When it comes to trading partners, African countries have long looked beyond their neighbors. And when inadequate infrastructure makes transporting a car across the continent about triple the cost of importing it from Japan, it´s not hard to understand why.
But the paltry level of trade among African countries—now only about 12% of total African trade—could be in for a big boost. The catalyst isn´t a new sea port or a highway system. It´s a soccer tournament.
Hosting the World Cup has given the continent´s largest economy a huge shot of confidence, which the government and South African companies are expected to parlay into a bigger role reshaping trade and investment across the continent.
"It´s not so much the new infrastructure, the tourist and credit-card spending. The World Cup offers the intangible effect of giving South Africa the benefit of the doubt," says Razia Khan, regional head of research at Standard Chartered in London. "South Africa, like the rest of Africa, has really suffered from perceptions."
South Africa now could be in a position to help change those views by helping to pull African countries and markets into a stronger, more cohesive continental market.
South Africa´s trade ministry is now promoting an Africa trade zone that will stretch from Cape Town to Cairo, with the goal of knitting together three different regional trade groups over the next year. The Johannesburg Stock Exchange, by far the largest on the continent, is targeting company listings from other African countries rather than those from Europe and the U.S. And South African companies have ramped up investment in other African countries as an alternative to the traditional expansion route outside the continent.
"We have had insufficient cooperation," Rob Davies, South Africa´s trade minister, said in an interview. "There needs to be a bigger agenda."
Since it began to dismantle its white-minority regime in the early 1990s, South Africa´s socialist-leaning government has struggled to win the trust of investors. Debates over nationalization of local and foreign-owned mines haven´t helped. Nor have race tensions, corruption scandals and high rates of violent crime.
But South African officials believe it has changed a lot of minds during the World Cup, including those of its own people. The month-long tournament was free of significant security lapses or major organizational mishaps. South Africans are now aglow with that achievement."All those prophets of doom have seen the light," says Russell Loubser, chief executive of the Johannesburg Stock Exchange.
South Africa´s new optimism is important for Africa. It has long had the continent´s most liquid markets, among its richest resources and superior infrastructure. What it has lacked is the chutzpah to take a more active leadership role on the continent, and to push plans for economic integration.
Lots of obstacles stand in the way of tighter trade ties among African countries. High transport costs in Africa add about 25% to the price of goods, according to the World Bank, making it often cheaper to import from Asia and Europe than sell to nearby countries.
Indeed, most of Africa´s roads and rail systems are along the coast, but even those are overburdened. Last year, AngloGold Ashanti Ltd.´s mine in Tanzania lost close to 50,000 liters of fuel after dozens of people raided storage tanks and fled on bicycles. The fuel had to be trucked in from Kenya because Tanzania´s port at Dar es Salaam was too congested.
Much of what Africa exports are mineral resources and much of what it imports are finished goods. That also explains why Africa´s interregional trade is such a small portion of the total, according to Standard Chartered´s Ms. Khan. From 1999 to 2008, she says, the volume of Africa´s trade with China multiplied by 10. Over the same period, South Africa´s trade with the rest of the Africa only multiplied by four.
But beyond South Africa´s ambitions, there are other reasons why African-to-African trade is poised to take off. Unlike Europe and the U.S., Africa has largely shaken off the global economic turmoil. The International Monetary Fund recently raised its growth forecast for sub-Saharan Africa to 4.5% from an earlier projection of 4%, a pace that trails only China and India for major economies.
At the same time, the economic and business climate in African countries are generally improving. Many African governments have improved transparency, reduced trade tariffs and simplified tax regimes.
The challenge for these governments—as well as African and foreign companies—is how to tap this potential. South African officials and executives would like to position the country as a gateway for investors.
Other African countries won´t necessarily follow South Africa´s blueprint. Earlier this month, neighboring Namibia blocked a bid by South Africa´s Absa Group Ltd. to acquire the country´s biggest bank. The central bank expressed concern about foreign control of its financial industry.
The move is unlikely to deter Absa. Absa has operations in Tanzania, Mozambique and, like South Africa´s other big banking groups, it has been eager to expand on the continent. Its top executive, Maria Ramos, says the World Cup has only underscored why investors want to be in Africa.
Now it may be a matter of South Africans persuading other African economies how much there is to gain from doing business together.
Link to Online Article: The Wall Street Journal Online
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40 Top Companies Highlight Africa´s Economic Awakening
July 13th 2010 | AllAfrica.com
40 fast-growing African companies highlight the continent´s economic awakening, according to a recent report by the Boston Consulting Group (BCG).
Titled the ´African challengers´ the report says the 40 African companies range in size from $350- million to $80-billion in annual sales and represent most of the major industry sectors. They all display strong growth, an international footprint, and ambitious plans to further expand overseas.
Most of the companies are based in South Africa (with 18 companies), Egypt (with 7), and Morocco (with 6). The nine remaining firms are based in Algeria, Angola, Nigeria, Togo, and Tunisia. These eight countries represent 70% of Africa´s Gross Domestic Product (GDP).
International expansion has helped the African companies grow more swiftly than established players in developed markets. They are also more profitable, with an average operating margin of 20%.
´The African economy is much more vibrant and entrepreneurial than most casual observers understand,´ says Patrick Dupoux, a partner and managing director in BCG´s Casablanca office.
Keys to success
The African challengers share some characteristics that have allowed them to prosper:
1. They benefit from doing business in a place with many native advantages such as natural resources, cheap labour and fast growing consumer markets.
2. They enjoy a beneficial business environment that includes market de-regulation, national economic-development policies and rising commodity prices.
3. They recognise that a challenging economic environment is an opportunity to be creative and expand globally.
´Few people recognize that a new breed of African companies is poised to make a big splash on the global stage. These companies are following the same path as the global challengers from the BRIC nations,´ says Dupoux.
Some Western companies have used their relationship with African companies to gain a better understanding of the African consumers and markets as French conglomerate Vivendi has done. French cement maker Larfarge acquired Egypt´s Orascom Construction Industries in order to gain access to the Middle East and North Africa region.
BCG notes that some of these companies are, or will become major competitors against foreign companies, as displayed by South Africa´s mobile operator MTN and paper maker Sappi.
South African companies expanding into Africa
South African companies have increasingly expanded operations into the rest of Africa. Some recent activity undertaken by South African firms include:
Zimbabwe
Engineering company TWP will build a gold plant at Pickstone. The plant will treat 20,000 tonnes of gold dump material per month.
Specialist investment manager Investec has bought a 7.47 % stake in OK Zimbabwe after underwriting the retail group´s $15-million rights issue and providing a convertible loan of $5-million.
Uganda
Beverage maker SABMiller acquired water business Rwenzori Beverages Ltd, Uganda´s leading bottled mineral water producer for $18-million, according to local newspaper New Vision. Rwenzori owns 70% of Uganda´s bottled water market and exports to the DRC, Sudan and Rwanda.
Tanzania
A division of Law firm Deneys Reitz, Africa Legal, is now operating in Tanzania. Africa Legal established a joint venture with Tanzanian commercial law firm CRB Attorneys and will focus on the East African region.
Kenya
ICT firm Altech increased its stake in Kenya Data Networks (KDN) to 60.8% by investing $39.5-million. The investment will be used to roll-out KDN´s fibre optic network in the country for the provision of broadband services. The company is also building a US$10m data centre in Kenya, which will be operational in September 2010.
Lesotho
Ster-Kinekor Theatres opened a new cinema complex in Maseru. The company also operates in Namibia, Zimbabwe and Zambia.
Mozambique
MCC Contracts, a subsidiary of Eqstra Holdings, has signed an open pit mining agreement with Australian coal-miner Riversdale Mining to mine at Benga coal mine in Mozambique in the first stage of development. The investment is worth $250 million.
The Boston Consulting Group selected the lions based on the basis of socio-economic factors including GDP per capita, standard of living, ease of doing business, political stability and public investment in a safety net.
Source: Frontier Advisory, Boston Consulting Group
Link to Online Article: AllAfrica.com
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World Cup ´rebrands´ South African economy
July 12th 2010 | BBC News
The slogan Ke Nako, or "it is time", has been the catchy theme phrase of the recent World Cup, promoting the idea of a South Africa ready and able to host huge global events.
And generally the country was ready, leaving aside some transport glitches and issues around Fifa's ticketing, as fans from 32 nations enjoyed the first World Cup on the African continent.
But is South Africa now ready for the post-World Cup economic challenges that face the nation, and can it carry forward the momentum created by hosting the event?
'Reputational boost'
"South Africans are very proud of what we have done here, it has been a fantastic event, from an economic and a unity perspective," says Lee-Anne Bac, director at Grant Thornton Strategic Solutions in Johannesburg.
"Hosting the 2010 World Cup will radically alter the landscape for tourism in southern Africa.
"There has also been a reputational boost for South Africa that can help bring inward investment and visitors.
"South Africa has been rebranding as a tourist destination and as one based around the development of a global sports event business model."
Experts believe the country will directly recoup only about a third of the 40bn rand ($5.3bn; Ł3.55bn) South Africa has spent on stadiums, transport infrastructure and upgrading airports.
And while the initial estimate was for 450,000 foreign visitors, new figures from the home affairs ministry suggest that 200,000 extra foreign World Cup fans arrived in the first three weeks of the tournament.
'Tourist momentum'
But Grant Thornton is predicting that thanks to the World Cup there will be an extra 1.5 million overseas visitors between now and 2015.
They also envisage an extra 500,000 tourists from within Africa visiting by air, and an extra 200,000 overland tourists from within the continent, taking the overall additional visitors to 2.2 million.
"So we really believe there will be a tourist momentum moving forward," says Ms Bac.
"The tourism structures we developed for 2010 will stay in place, and the aim is now to attract further events, conferences and conventions to the country.
"There has been media talk of attracting the 2020 Olympics, but events do not necessarily have to be of that size."
For example, last week the inaugural International Sports Tourism Conference was held in Johannesburg, and later this month the BMX World Championship will be held in KwaZulu-Natal Province.
'Good returns'
And many, including President Jacob Zuma, also envisage a lasting positive effect on the economy through the recent development of national infrastructure.
And Ms Bac says she has already noticed one potential economic benefit from the investment in infrastructure.
"As a citizen of South Africa it has made commercial life so much easier with the new roads and transport links, with less time wasted travelling and getting around," she says.
The infrastructure legacy of the World Cup also includes stadiums, airports, and information technology.
"We can safely say that we have good returns on our investment, which includes 33bn rand spent on transport infrastructure, telecommunications and stadiums," said President Zuma recently.
He said investment in stadiums had created some 6,000 new construction jobs, and the security demands of the tournament now meant the country had an additional 40,000 police officers.
Meanwhile there have also been increased hotel bookings, car rentals and sales of World Cup memorabilia (including the ubiquitous vuvuzelas) and sports items during the tournament. Advertising is also set to benefit from increased spending.
The South African Treasury had previously forecast the one-month tournament would add 0.4% to GDP this year, while Grant Thornton is predicting additional growth of 0.5%.
The actual economic figures about the effect the World Cup has had will not be announced for another few months yet, nor indeed will Fifa's or those of the local organising committee.
'Training'
"But construction companies now have the World Cup work on their CVs and will be looking to win more projects, and there is a new pool of construction talent.
"There are not going to be any more stadia built but there are other projects. For example the Gautrain rail project still has to be built all the way to Pretoria."
And she said that the large infrastructure projects had provided training that workers might not otherwise have had, which could only help the country with regard to future construction developments.
She also said that many of those employed at stadiums worked for agencies providing hospitality and other staff, and that these would now hopefully be contracted to other events.
'Problems'
However, unemployment in South Africa remains high, while many in the country still live in poverty 16 years after apartheid ended.
South Africa, a country of 49 million people, has only five million taxpayers but 13 million people who receive a social grant of some sort, says Ms Bac.
"We have big problems in the country but not as bad as in some others," she adds.
"Yes there is still a large unemployment rate, and housing and other issues, but the World Cup cannot solve all these problems.
"However by providing employment it has hopefully increased the taxpayer base, providing more taxes which can then be spent on social needs."
And she says the World Cup has shown that in some areas - such as management of major stadiums - South Africa still needs a "skills transfer" from international experts.
But while all ethnic sectors of the country can benefit from such international expertise, Ms Bac acknowledges that post-World Cup "we need to equalise the skills factor of some sections of our community".
In this regard she believes that the Black Economic Empowerment (BEE) programmes could continue to play a useful role.
'Eye-opener'
Meanwhile, she says, the World Cup has been a "fantastic experience for South Africa" which the country hopes to build on with advertising around the globe to attract more visitors to the country.
"We have internationally-renowned cities - Cape Town, Durban, Johannesburg - and we have got the infrastructure to carry the country forward," she says.
Meanwhile there has been an unexpected benefit for football.
"The World Cup has brought more support across the communities for football too, where there has historically been a racial divide," she says.
"The tournament has been a real eye-opener for so many people in this country."
Link to Online Article: BBC News
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A New Kind of Inequality: Black Economic Empowerment has had Unintended Consequences
June 3rd 2010 | The Economist
Under BEE laws white-owned companies with more than 50 employees and revenues of at least 5m rand a year are given a rating based on criteria such as how much of their equity is owned by blacks, how many of the top posts they hold, what training opportunities are open to them and so on. BEE targets are laid down by the government for each sector. The better a company’s level of compliance, the higher its overall rating and thus its chances of winning lucrative public contracts.
Mr Zuma has called for big changes to the “willing seller, willing buyer” model to enable the state to acquire land more quickly and cheaply. At one point it looked as if full-blown nationalisation might be on the cards, but the government now insists that this is not an option. However, there is talk of making white farmers transfer 40% of their farms by value to black shareholders, and possibly capping the amount of land an individual farmer can own. The minister for land reform recently warned white farmers that they should “co-operate” if they wanted to avoid creating a situation “worse than Zimbabwe”. Mr Zuma has since promised that there will be no violent land invasions, but fears remain, stifling new farm investment.
Link to Online Article: The Economist
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Jobless Growth: The Economy is Doing Nicely - But at Least One Person in Three is Out of Work
June 3rd 2010 | The Economist
When the ANC took over in 1994, it inherited an economy that was virtually bankrupt, following decades of mismanagement, international sanctions and violent protests. Since then exports have doubled in real terms to reach $91 billion in 2008, accounting for 33% of GDP; output per person has risen by more than a quarter, having fallen throughout the previous two decades; public debt has halved, to 23% of GDP in 2008; inflation, in double digits throughout the 1980s, has shrunk to 5.1%, well within the government’s target range of 3-6%; and interest rates charged on bank loans are at their lowest level in nearly three decades. The economy as a whole, which had been growing by less than 1% a year in the decade up to 1994, expanded by nearly 5% a year in the five years to 2008.
Agriculture makes up 5.1% of formal jobs and a mere 2.2% of GDP. Manufacturing is relatively small, providing just 13.3% of jobs and 15% of GDP. Labour costs are low, but not nearly as low as in most other emerging markets, and the cost of transport, communications and general living is much higher. Services are much the biggest part of the economy, accounting for around two-thirds of GDP. The government is keen to promote tourism, another potential source of unskilled jobs. The number of foreigners visiting the country has leapt from 3.7m in 1994 to nearly 10m last year. The World Cup should help boost numbers further.
Link to Online Article: The Economist
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Forty Fast-Growing and Globalizing Companies Highlight Africa’s Economic Awakening, According to a Report by The Boston Consulting Group
June 2nd 2010 | The Boston Consulting Group
Forty African companies, the “African challengers,” have been rapidly expanding, competing in the global economy, and highlighting the vitality of a continent whose economic accomplishments rarely receive attention, according to a report published today by The Boston Consulting Group (BCG).
The 40 African challengers range in size from $350 million to $80 billion in annual sales and represent most of the major industry sectors. They all display strong growth, an international footprint,and ambitious plans to further expand overseas. Most of the companies are based in South Africa (with 18 companies), Egypt (with 7), and Morocco (with 6). The nine remaining players come from Algeria, Angola, Nigeria, Togo, and Tunisia. These eight countries represent 70 percent of Africa’s GDP, according to The African Challengers: Global Competitors Emerge from the Overlooked Continent.
There are, of course, many more than 40 noteworthy African companies. The list focuses on those with global ambitions.Since 2003, export growth has expanded by 24 percent annually among these 40 companies. These companies have also significantly increased their level of cross-border mergers and acquisitions. International expansion has helped the African challengers grow more swiftly than established players in developed markets. Between 2003 and 2008, the annual revenues of the group rose by 24 percent, compared with 11 percent for S&P 500 companies, 9 percent for Nikkei 225 companies, and 10 percent for DAX 30 companies.
The African challengers are also more profitable, with an average operating margin of 20 percent, compared with 15 percent for the S&P 500 and 10 percent for both the Nikkei 225 and the DAX30. A $100 investment in November 2000 in a hypothetical African challengers index would have grown by 25 percent per year and have been worth more than $900 in November 2009, compared with $303 for a similar investment in the MSCI Emerging Market index and $92 for an S&P 500 investment.
While the challenges of Africa are well known, the strength of the African economy is frequently under estimated. The African Challengers aims to set the record straight. “The African economy is much more vibrant and entrepreneurial than most casual observers understand,”says Patrick Dupoux, a partner and managing director in BCG’s Casablanca office.
Several countries— the African Lions—are out performing and growing at similar rates to the so-called BRIC nations of Brazil, Russia, India, and China. The African Lions consist of Algeria, Botswana, Egypt, Libya, Mauritius, Morocco, South Africa, and Tunisia. Their GDP per capita in 2008 was $10,000 compared with $8,800 for the BRIC nations.All but five of the African challengers come from these nations. “Few peoplerecognize that a new breed of African companies is poised to make a big splash on the global stage,” Dupoux observes. “These companies are following the samepath as the global challengers from the BRIC nations.”
While the Great Recession shrank most economies, Africa was able to grow. In 2009, the continent’s GDP expanded by 2 percent, while GDP dropped 4 percent in the United States, 2.8 percent in the European Union, and 1.5 percent in Latin America.
“While the 40 African challengers have grownvery fast in recent years, only a few of them can already be considered truly global. We are confident that they can reach this next frontier if they achieve excellence in operations, broaden their footprint through selected cross-border acquisitions, build a global workforce, and acquire global brands,” saysDupoux.
Methodology for Selecting the 2010 African Challengers
To compile the list of 40 African challengers, BCG examined almost 600 companies covering all economic sectors.As a first cut, companies had to meet the following minimum threshold: $300million in annual revenues for banks and $500 million in annual revenues forall other companies. In addition, companies with less than $1 billion in sales had to show double-digit revenue growth over the past five years. Subsidiaries that had never been freestanding indigenous companies were excluded.Link to Online Article: The African Challengers: Global Competitors Emerge from the Overlooked Continent
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Africa´s Local Champions Begin to Spread Out
May 26th 2010 | The Wall Street JournalForeign consumer-goods companies including Coca-Cola, Nestlé, Unilever PLC have been in Africa for decades without much competition from local players. Now, home-grown companies are expanding aggressively across the continent, eager to accommodate a growing middle-class among the billion-person population.
Among the most prominent of these consumer upstarts: African retailers such as Nakumatt Holdings Ltd. of Kenya, the top supermarket chain in East Africa, MTN Group Ltd., Africa´s largest cellphone provider, and South African restaurant chain Spur Corp. Nakumatt has expanded into three neighboring countries while 348-restaurant chain Spur has opened in seven other African countries.
South Africa´s Middle Class
Nakumatt chose to emulate an American icon: Kmart. On a visit to Florida in the 1980s, founder Atul Shah, a former mattress salesman, wandered into a Kmart and marveled at its cleanliness. He was so impressed at how the store sold food, household goods and furniture under one roof that he hung out there for hours a day for eight months. He became such a fixture that customers asked him for assistance. "Everybody was happy to be assisted by me," said Mr. Shah.Aiding Nakumatt and others´ cross-border expansion is an African gross domestic product expected to grow 4.3% this year from just under $1.5 trillion in 2009, according to the International Monetary Fund, a clip that trails only China and India among the world´s massive emerging markets. The growing investment and trade, from African companies in African countries, has helped cushion the continent from the shocks of the global economic crisis.
"There is a sense of solidarity within Africa," said Kola Masha, chief executive of Notore, which had about $35 million in revenue in 2009 and after a ramp-up in production expects 2010 revenue of $200 million. "Governments would like to provide patronage to other African companies."
MTN Group, Africa´s largest cell phone-network provider, has become a regional powerhouse, with a presence in 17 African countries, in large part because it is based on the continent and was able to recognize and take advantage of fast cell phone growth. It has 116 million subscribers in 21 countries.
Link to Online Article: The Wall Street Journal
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Aspen Offers $1.24 Billion for Sigma Pharmaceuticals
May 21st 2010 | Bloomberg
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A Door to Africa: Standard Bank Reaps the Benefit of Bold Thinking
May 13th 2010 | The Economist
To understand where Standard Bank is today, says its boss, Jacko Maree, you have to go back to South Africa in early 1987, when Standard Chartered, its original parent, sold out completely.
Most South African firms were not welcome in the rest of Africa, he says, and “it wasn’t entirely obvious” that Standard Bank’s priority should be there or indeed in emerging markets at all. When South Africa moved to majority rule in the 1990s, plenty of South African firms shifted their domicile to London and tried to diversify into developed markets, but Standard Bank stuck to its guns. Something of this determination is reflected in its choice to keep its headquarters in downtown Johannesburg even though most financial firms moved to Sandton, a safe but dull suburb where adventure is a bar named the Bull Run.
Mr Maree, at the cuddly end of the spectrum of South African bankers, has been pretty astute. He became chief executive in 1999 after a failed takeover bid for his bank, which he says “was a big kick up the backside”. That meant making more of its main activities abroad: an African presence built from branches bought from Australia’s ANZ in 1992; an investment-banking unit in London (originally put there because of foreign-exchange controls in South Africa); and small operations elsewhere, including Russia, where natural-resources banking, an obvious specialism for African firms, is important.
The result has been solid, with compound annual growth in profits per share of 8% since 2003 and only a small dent in earnings from the financial crisis. In 2009 almost a quarter of profits came from abroad, either the rest of Africa or indirectly linked to the continent—for example, currency trades executed in London.
South Africa has had two lending booms since the end of apartheid. The first was driven by the opening of the economy to foreign capital, the second by lending to the rising black elite over the past decade. As a market it is fairly mature. But Africa as a whole is set for a “tectonic shift”, says Goolam Ballim, Standard Bank’s chief economist. The proportion of Africa’s trade with China, Brazil, India and Russia rose from 5% in 1993 to 19% in 2008. Much of this, inevitably, is in resources, but governments are getting better at saving the proceeds of the good times for the less good ones, reckons Mr Ballim.
Old Africa hands who used to roll their eyes at this kind of analysis got a surprise in 2007 when ICBC, now the world’s largest bank, spent $5.5 billion on a 20% stake in Standard Bank in what was then China’s largest ever corporate foreign investment. Mr Maree and Mr Jiang, ICBC’s chairman, stitched the deal together after spending a day in Cape Town together. There is still a wow factor about it, says Mr Maree. Although the revenues generated from working with ICBC are modest—some $78m in 2009—co-operation is being stepped up. Standard Bank has 30 bankers in Beijing now, as well as a main board director in an office close to ICBC’s, who help clients of the Chinese bank interested in expanding in Africa.
For China’s banks the deal is a test case of whether “treading softly” overseas will work. The combination ticks every box, bringing a presence in key markets for Chinese clients and exposure to a sophisticated foreign firm with skills in areas like investment banking and foreign-currency funding. Yet ICBC has limited influence with Standard Bank, with only a couple of directors on its board. A full takeover looks unlikely. ICBC would need permission from Standard Bank’s board to buy more shares, and South Africa’s government would probably not approve.
For Standard Bank the merits of the deal are clear: more capital, and kudos, to build a bigger presence in Africa and elsewhere. It is mulling buying a bank in Nigeria (where the government is opening up more to foreigners). And it is eyeing India, which Mr Maree says is “the missing link”, given that Standard Bank already has an operation in Brazil and a stake in a Russian investment bank, Troika Dialog. With Standard Bank’s complex history and relatively isolated position, explains Mr Maree, “we’ve had to think in a much more out-of-the-box way.”
Link to Online Article: The Economist
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Who Profits Most?: The Money Flows, But Not Only into South African Pockets
May 13th 2010 | The Economist
The football World Cup may give South Africa’s economy an astonishing extra 0.5% of growth, according to a recent report by Grant Thornton, a firm of accountants. That is quite a chunk of the country’s forecast 3% rate for the year. Some 373,000 foreigners are now expected during the tournament, which kicks off on June 11th. On average they will stay for 18 days, go to five matches and spend 30,200 rand (nearly $4,000) each.
Compelling figures for statistic mad football fans. But South Africa’s government is also taking them seriously because the same firm wrote a similar report on the cup’s impact on South Africa just before the world financial crash two years ago.
There were fears that the recession might shrink the economic benefits of the tournament to South Africa. In fact, if Grant Thornton is right, the country has little to worry about. In 2007 the firm expected 483,000 foreign visitors, so that number is sharply down. Moreover, only about 11,300 ticket-holders are from African countries outside South Africa, surely a disappointment to the organisers. But each visitor is now expected to make more of his (or less often her) trip, staying a bit longer and shelling out a third more cash.
So the total effect on South Africa’s economy should be roughly the same, with about 93 billion rand ($12.4 billion) injected, most of that having been generated before this year. Tourism should account for 16% of the final total. Much of the rest will come from the central government’s spending on infrastructure.
Very nice for South Africa, perhaps. But South Africans themselves are grumbling about the eye-wateringly large amounts of money that FIFA, the world football body that is the monopoly organiser, is poised to make, even though South Africa is bearing most of the cost. FIFA is responsible only for the prize money paid to the teams along with the cost of their travel and preparation, which amounted to just $279m in Germany, where the tournament last took place, in 2006. This week FIFA said it would contribute an extra $100m to the South Africans to ensure that all the facilities are ready in time.
Yet the event’s main direct benefits, from television and marketing rights, all go to FIFA. According to Citi, the research arm of Citibank, FIFA’s profit in Germany came to $1.8 billion, equivalent to 0.7% of South Africa’s GDP. FIFA will recycle much of that money into football development worldwide. Nonetheless, even a bit of it would help clear up some of the country’s festering shanty towns.
Link to Article: The Economist
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Life Healthcare Said to Plan Biggest Sub-Saharan IPO
April 28th, 2010 | Bloomberg | By Zijing Wu & Janice Kew
Life Healthcare Group Holdings Ltd., the South African hospital owner, will seek about $900 million in an initial public offering that would be sub-Saharan Africa’s biggest ever IPO, two people familiar with the situation said.
The range of the amount to be raised may be between $800 million and $1 billion, one of the people said today, while the other said it would be around $900 million. They declined to be identified because the amount that the Johannesburg-based company is seeking isn’t yet public.
“Assuming the shares are attractively priced, the company should have no problem placing this amount now,” Rudi van der Merwe, the chief investment officer at Standard Bank Group Ltd.’s private equity-advisory unit, said in a telephone Interview from Johannesburg.
Adam Pyle, general manager of marketing of Life Healthcare, declined to comment. New York-based Morgan Stanley, Rand Merchant Bank in Johannesburg and Credit Suisse Group AG of Zurich are managing the offering.
Life Healthcare, which said on April 23 it plans to list its stock by the end of June, will join the Johannesburg bourse along with Netcare Ltd. and Medi-Clinic Corp. Ltd., the two largest private hospital companies in Africa. Should Life Healthcare succeed in raising $900 million the IPO will eclipse the $491 million raised by Telkom South Africa Ltd. in 2003 and Safaricom Ltd.’s about $800 million in 2008.
Healthcare Shares Rise
Netcare has a market value of about 19.5 billion rand ($2.61 billion) while Medi-Clinic has a value of 14.6 billion rand. Netcare shares have gained 52 percent over the last year while Medi-Clinic has advanced 27 percent.Pricing for the Life shares is expected to be released the South African work-day week beginning May 24, Morgan Stanley Investor Services said in a note on April 26. Life Healthcare, which owns and operates 62 intensive care facilities with about 8,100 beds, plans to list 30 percent of its shares, the company said in its statement last week.
Shareholders in Life Healthcare, including Brimstone Investment Corp. Ltd. and Mvelaphanda Group Ltd., will sell some or all of their existing holdings to ensure the company has enough free shares to trade when it lists, the two companies said in separate statements on April 23. RMB is also a shareholder of Life Healthcare.
Link to Article: Bloomberg
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Africa to Enjoy Strong Rebound: IMF
Apr 21st, 2010 | AFP
Sub-Saharan African will enjoy a strong recovery this year and next after the region fared much better than most developed countries during the global economic crisis, the IMF said on Wednesday.
The International Monetary Fund estimated that economic growth in the region would reach 4.7 percent this year and 5.9 percent in forecasts from its latest World Economic Outlook.
That would mark a sharp rebound from the 2.1-percent growth the region achieved in 2009 when impoverished sub-Saharan African countries escaped the dire recession that ravaged rich-world economies.
"The region´s quick recovery reflects the relatively limited integration of most low-income economies into the global economy," the IMF said.
Sub-Saharan economies were also benefiting from rebounding trade, higher commodity prices and government spending to smooth out the impact of the financial and economic crisis, it added.
While commodity dependent and wealthier international trade-based economies in Africa suffered the most during crisis, economic activity in the region´s poorest countries held up much better thanks to their isolation from the rest the world.
"Growth in a number of the more fragile economies even accelerated last year, reflecting mainly stronger policies and reconstruction assistance following periods of civil conflict, economic instability, and previous external shock," the IMF said.
It projected that Africa´s low-income economies as a group would see growth speed up from 4.3 percent in 2009 to 4.7 percent this year and 6.7 percent next year.
In sharp contrast past downturns, government spending to offset the impact of weaker economic activity was a positive development during the recent crisis.
"In most cases, the sustainability of public debt trajectories has not been adversely affected, a testament to improved fiscal positions in a number of sub-Saharan African economies in the run-up to the downturn," the IMF said.
"As growth becomes stronger, governments should turn their attention from trying to stabilize their economies to focusing "increasing spending on growth-enhancing priorities, including infrastructure, health, and education," the IMF said.
Such countries also needed return their attention to longer term reforms to encourage investment such as encouraging domestic savings, improving governance and strengthening institutions in order to attract private capital.
However, Africa´s more advanced economies needed to be wary of resurgent inflows of foreign capital "to avoid overheating, unwarranted appreciation, and asset price booms," the IMF said.
Link to Article: AFP
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Nigeria Holds Key to Bharti´s $10.7 Billion African Gamble
April 12, 2010 | MarketWatch | By Aude Lacgorce
The majority of Nigerians don´t own a mobile. Yet it is in that country that the fate of Indian mobile giant Bharti Airtel´s $10.7 billion African adventure will play out.
Bharti, an Indian conglomerate with interests ranging from telecommunications to insurance, last month bought the African operations of Zain, a Middle East-based cell phone company that is the second-largest player in Africa. The deal gives Bharti, an operator with no meaningful assets and little operational experience outside of India, 42 million new subscribers in 15 countries and catapults it to the fifth position worldwide right from the start. It also gives them entrée into markets with nearly half a billion potential customers.
The purchase is the Indian company´s ticket to one of the telecoms world´s last unconquered territories, as only a third of Africans own a mobile phone and large swathes of the continent remain without network coverage. The timing is right, too. Just as Bharti is struggling with increased competition and weakening margins at home, access to Africa is a chance to ride another wave of exploding subscriber growth.
At least that´s the optimistic view. The Zain deal is also a gamble fraught with regulatory, political, financial and operational risk. Each of the 15 markets Bharti is entering will present its own particular challenges. Having to handle them all at once will make managing the acquisition even more difficult.
These markets are not, however, all equal. Industry observers said Bharti´s success or failure in Nigeria, the continent´s most populous country, would likely be the make or break of its African adventure.
"Nigeria is clearly the most valuable asset they´re acquiring because of the size of the population and the low penetration rate. It´s the only market where Bharti can start to imagine the kind of growth they´re used to in their home market," said Nick Jotischky, principal analyst at Informa Telecoms.
"So it is crucial they succeed there."
Nigeria: A Test for Bhartis Business Model
In Nigeria, however, Bharti won´t enjoy the leading position it´s used to back home.
In fact, with a market share of 20%, according to Informa, it will be the country´s third-largest player, behind South Africa´s MTN Group (JOHANNESBURG:ZA:MTN) and West African specialist Globacom. It will also need to fend off a bevy of smaller players, for Nigeria has a total of 11 operators currently battling it out for the 55% of the population -- roughly 68 million people -- who still don´t own a mobile phone.
Not only is Nigeria a crowded market, but it is also already causing regulatory headaches for Bharti because of a dispute over the minority ownership of the Zain assets it´s acquired there.
Once regulatory issues have been ironed out, however, Bharti has several key cards to play in Nigeria, analysts said.
Its most powerful, they explained, is a business model -- honed over years of operations in India -- that allows it to make a profit from customers spending as little as $5 a month, and based on two main principles: outsourcing of all activities except sales and marketing and network sharing.
"Bharti´s business model in India is high volume low cost," explained Gartner´s Mumbai-based Kamlesh Bhatia. "They have outsourced most operations, including IT and network management and they share infrastructure, like towers, with other operators. They will seek similar economies of scale with vendors in Africa"
Infrastructure sharing, widespread in India, could quickly take off in Africa, too, where the cost of expanding cellular coverage through an often rough and sparsely-populated landscape has left many rural areas isolated.
Overall Bharti´s business model will likely need only minor tweaks in Africa, said Bhavya Khanna, a Singapore-based analyst with ABI Research, noting that it shares many features with India, including a similar income profile, a largely rural population with concentrations around some urban megacities and an overwhelming preference for prepaid mobile access.
And where the tweaks are needed, it´s likely they will be identified quickly. Bharti is used to operating in a complex environment thanks to its experience dealing with India´s 22 different telecom circles, or regions, with very different characteristics.
"Bharti comes with 10 years of experience of delivering a single service across fragmented cultural and geographic boundaries; an experience that many other single nation operators may not possess," Khanna said.
At the end of the third quarter, Bharti, headed by Indian billionaire Sunil Bharti Mittal, had a total of 122 million subscribers in India, spending, on average, $4.90 a month. Bharti also operates in Sri Lanka and has recently acquired operations in Bangladesh.
Lower Prices, New Services
Perhaps the biggest advantage of Bharti´s low-cost model is that it allows it to wage a price war on its competitors, should it decide to.
"I would suspect that Bharti will think there´s room to lower prices. Prices are generally higher in Africa than they are in India. I would expect them to be aggressive there," said Informa´s Jotischky.
Network reliability, branding and customer service, the three key attributes of Bharti in India, are likely to constitute the other branches of its strategy to gain market share.
One of the services it will likely highlight in Nigeria is a mobile banking product that allows subscribers to transfer money by text message.
Zain´s service, which is called Zap and has built up a following in Kenya, will likely be advertised more heavily and introduced in new markets once Bharti takes over, said Howard Wilcox, a senior analyst at Juniper Research.
And with a number of new subsea cables connecting the continent soon, Bharti may also decide to expand from running a mobile operation into data and broadband services, since it has experience in that business back home, said Said Irfan, analyst at IDC.
Consolidation Likely Across Africa
Although Nigeria is likely to capture the bulk of Bharti´s energies at first, the operator will quickly need to make decisions about its strategy in its other markets, especially considering seven out of 15 reported losses in the third quarter.
In some, such as the Democratic Republic of Congo, Zambia, Malawi, Niger, Congo, Chad and Gabon, it is the market leader. In Kenya, Tanzania, Madagascar and Burkina Faso it´s no. 2, in Sierra Leone it ranks third and in Ghana fourth, according to data provided by Informa.
Bharti´s position in each market, the profitability of its operations and the number of rivals, will determine its strategy. But it is likely that in the consolidation game just starting across the continent, it will try to acquire, but also divest assets.
"I wouldn´t expect those 15 mar
kets to look nearly the same come two to three years´ time," said Jotischky, who predicted that the Sierra Leone business could be sold, as well as Gabon, if regulatory issues there persist.
Finding an acquirer for some of its assets shouldn´t be too hard, as many telecom operators, particularly from India and China, are eager for a piece of the action in Africa. In February, a consortium involving China Unicom (NYSE:CHU) bid $2.5 billion for the former state telecoms monopoly in Nigeria.
Overall, analysts said Bharti probably has two years to sort out the African business, with some operations, such as Kenya and Uganda, where it´s been loss-making for years, requiring urgent attention.
"I think the focus will be on improving competitive position and operational efficiency in the five markets, Nigeria, Uganda, Kenya, Ghana and Madagascar, which together account for 60% of the population of the 15 countries in which it operates but only 39% of earnings before interest taxes depreciation and amortization," said Piyush Choudhary, analyst at Indiabulls Securities.
But at least after years of trying to gain access to Africa, Bharti has more than a toe in, though Zain wasn´t its first choice.
The Indian group tried twice to tie up with MTN, the continent´s biggest player, but the merger failed over regulatory issues. It preferred MTN because it´s much larger, with operations in 21 countries, and is a leader in five of the meatier markets.
While it was criticized after closing the Zain deal for perhaps paying too much for the assets, industry experts said it was too early to tell.
"We don´t know yet. We will know in three years. It´s a number´s game. And knowing Bharti, they´ve certainly done the math," said Jotischky.
Link to Article: Marketwatch.com
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Heineken Expands in South Africa
31 March 2010 | SouthAfrica.info
A R3.5-billion state-of-the-art brewery, owned 75% by Heineken and 25% by Diageo, officially opened in Sedibeng, south of Johannesburg last week, with expansion already under way to exploit the growth opportunities in South Africa´s premium alcohol beverage market.
The Sediben Brewery brews and bottles a range of premium beers - including Amstel, Heineken and Windhoek Lager - for the local market. It will also supply ready-to-drink brands Smirnoff Spin and Smirnoff Storm.
´World-class brewery´
Heineken Africa MD Tom de Man described the new brewery - built on an 83-hectare site and including a brewery, production plant and warehouse - as one of the most advanced in the world, built with due care for the environment.
"Heineken is the number two brewer in Africa and the Middle East, and the significant investment that we made in the Sedibeng Brewery with Diageo, one of the largest private investments in South Africa in the past year, shows our commitment in South Africa," De Man said in a statement last week.
With an initial capacity of 3-million hectoliters, the brewery is already being expanded to increase its capacity by a further 1-million hectolitres by September 2010, in anticipation of growing demand for the premium brands.
Three months ahead of schedule
Sedibeng Brewery MD Johan Doyer said the brewery had been built three months ahead of schedule, enabling the brewing of Amstel to begin in September 2009, while the brewing of Windhoek began in October and Heineken started in December.
"Each of our premium beers are brewed under the watchful eye of Heineken, Amstel and Windhoek brewmasters, in accordance with the original recipes and the highest international brewing standards," Doyer said.
Jobs, skills
"All of the South African staff has received training locally, with a large number also being trained overseas."
Sedibeng employed around 3,500 people on site at the height of the construction, and more than 225 permanent jobs will have been created at the brewery by the end of 2010.
It is estimated that the brewery will generate an additional R1-billion for the local economy through the indirect employment of 100 support service workers and through the local purchasing of packaging and raw materials.
Growth opportunities
Together with Namibia Breweries, Heineken and Diageo are shareholders in Brandhouse Beverages - a cost-sharing joint venture in South Africa, and one of the country´s leading marketing, sales, and distribution companies for premium alcohol beverages - which will be responsible for managing the brewery´s warehouse.
The Sedibeng Brewery has also allowed Brandhouse to re-introduce Amstel Lager in a returnable bottle format, to replace the existing non-returnable bottles.
"The returnable quart segment comprises the overwhelming share of the local beer market, and our ability to offer our customers our premium product in this format will enhance our capacity to meet consumer demand," said Brandhouse MD Gerald Mahinda.
Diageo Africa MD Nick Blazquez said the new brewery would help support the strength of the Brandhouse. "South Africa continues to present significant opportunities for growth in premium alcohol beverage categories," he said.
"Against this backdrop, we believe that Brandhouse is extremely well poised to continue to grow its share and further extend its position as the leading supplier of top quality beers and spirits in the country.
"Sedibeng represents the next step in what has already proved to be a very successful and mutually beneficial association between our companies."
SAinfo reporter
Link to web article: Heineken Expands in South Africawww.southafrica.info
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Marcus Says S. African Growth No Threat to Inflation; Cuts Rate
March 26 | Bloomberg
South Africa’s central bank unexpectedly cut its benchmark interest rate to the lowest in at least 12 years yesterday, saying that “subdued” economic growth posed little threat to an improved inflation outlook.
The repurchase rate was lowered by half a percentage point to 6.5 percent, Governor Gill Marcus said in Pretoria. The decision was forecast by two of the 24 economists surveyed by Bloomberg, with the rest expecting the rate to stay unchanged.
The rand has rallied 27 percent against the dollar in the past 12 months, cutting import costs and helping to bring inflation within the 3 percent to 6 percent target rate “a bit earlier than expected,” Marcus said. With growth remaining fragile, the decision raised speculation that the bank wants a weaker rand to encourage economic expansion and job creation.
“The strong currency seems to have been the key, given its impact not only on inflation but also on growth,” Peter Montalto, an economist at Nomura International Plc in London, said in an e-mailed note. The decision was “in part a form of currency intervention.”
The rand fell to as low as 7.4598 per dollar, from 7.4152 before the rates decision was announced. It traded at 7.4823 in late trading yesterday.
The inflation rate slid to a three-year low of 5.7 percent in February from 6.2 percent the month before and may reach a low of 4.9 percent in the third quarter, Marcus said.
“Inflation expectations have moderated,” she said. “The risk to the inflation outlook has improved.”
‘New Mandate’
Labor unions have called for lower interest rates to spur growth and weaken the rand, prompting Finance Minister Pravin Gordhan to write a letter to Marcus last month, giving the central bank more flexibility to take growth and employment into account. Gordhan called it a “new mandate.”“It was a risky decision to cut straight after a new mandate letter and to link policy so closely to the currency,” Montalto said. “That said, we continue to believe in the MPC’s independence and its zeal with regard to inflation targeting.”
Most economists had expected the Reserve Bank to keep rates unchanged as an economic recovery gathered pace. Consumer spending, which accounts for two-thirds of expenditure in the economy, rose an annualized 1.4 percent in the final three months of 2009, the first increase in six quarters.
Massmart Holdings Ltd., South Africa’s biggest wholesaler, said on Feb. 25 that sales rose almost 7 percent in the 34 weeks to Feb. 21, reflecting a turnaround that started in mid- December.
“We obviously take the mandate into account,” Marcus said yesterday. “But that would not be something new. It is not the reason for the decision. The demand side of the economy poses no upside risk to the inflation outlook.”
‘Big Influence’
“The economic recovery we’re seeing is weak, it’s mild and I’m very hesitant to say this is the last rate cut,” said Colen Garrow, an economist at Brait SA, who forecast the rate cut. “The rand had a big influence on today’s decision. This may be the Reserve Bank’s contribution to weakening the rand.”Africa’s biggest economy expanded an annualized 3.2 percent in the fourth quarter, the fastest pace in more than a year, while employment in the formal, non-agricultural industry rose by 0.2 percent, or 18,000 jobs, in the same period, according to the statistics office.
While the growth outlook had improved, “the recovery is expected to remain relatively subdued,” Marcus said.
The central bank expects the economy to expand 2.6 percent this year, while the National Treasury has forecast 2.3 percent growth.
“It’s a fair decision,” said Johann Els, an economist at Old Mutual Investment Group, South Africa’s largest private money manager. “The reasoning is sound. It means interest rates will remain low for an extended period of time.”
To contact the reporters on this story: Mike Cohen in Cape Town at mcohen21@bloomberg.net; Vernon Wessels in Johannesburg at vwessels@bloomberg.net
Link to web article: Marcus Says S. African Growth No Threat to Inflation; Cuts Rate
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Africa: From Crisis to Opportunity Through Clean Technology
8 March 2010 | AllAfrica.comInterview by Cindy Shiner
Calestous Juma is professor of the Practice of International Development and director of the Science, Technology and Globalization Project at the Harvard Kennedy School. He also directs the Agricultural Innovation in Africa Project funded by the Bill and Melinda Gates Foundation. Juma currently is writing a book, tentatively titled, "Going for Green Growth: Low-Carbon Innovation Strategies for Africa."
How have Africans responded to the threat of climate change?
Developing countries are taking climate change very seriously. This is mainly because they regularly experience the impacts of natural disasters such as droughts, hurricanes, floods and earthquakes. Many of them experience persistent famines. They are therefore quite aware of how vulnerable their societies are and the challenges associated with responding to natural calamities. They know that their economic systems are not robust enough to cope with many of the predicted impacts of climate change. This knowledge informs their perception of the risks associated with climate change. African countries have been particularly sensitized to climate change from their experience with drought. They pushed for a UN treaty of drought and desertification. Their concerns about drought and climate are now conflated.
Climate change has been called a crosscutting issue, one that should be treated like Aids, for example. How do you see climate change as being a crosscutting issue in Africa and how should this influence the way it is handled?
The term "crosscutting" does not adequately capture the projected impact of climate change. This is a global phenomenon of Biblical proportions. It is the stuff that legends are made of - but our children will experience it. Climate change will have far-reaching implications for Africa's ability to foster human welfare. The most dramatic impacts will be felt in areas such as the availability of freshwater, food production and tourism (due to impacts on wildlife whose habitats are fragile ecosystems).
One way to respond to the challenge is to build resilient economic systems based on decentralized energy sources, distributed populations and modern agriculture which involves the diversification of crops. In some areas African countries might have to switch from growing cereals to growing more climate-resilient tree-crops such as breadfruit (Artocarpus altilis).
What are some workable solutions coming out of Africa to deal with the consequences of climate change?
African countries have the least capacity to respond to climate change because of their weak economic systems and low levels of technological competence. Because of this they have also contributed the least to aggregate greenhouse emissions. Yet they are likely to be disproportionately affected by the impacts of climate change. They are already experiencing some of the impacts.
Africa is starting to respond to the challenge by forging common political positions through the Africa Union. Some of the solutions will come from creating more robust economic systems. The second response is coming from institutions that are working on low-carbon growth strategies. The African Development Bank, for example, is exploring new ways to promote low-carbon growth strategies as well clean energy sources for rural development.
The way forward will entail intensified identification of existing and emerging technologies that can be used to design more resilient economic systems. Experience from adaptation to drought, especially in the Sahel region, will be another important source of ideas. On the whole, Africa will need its next generations to be smarter than the current ones, especially on technical matters. Training in ecology and engineering will be essential investments.
What are your perceptions of carbon trading and how this might benefit Africa?
Carbon trading must be accompanied by serious mitigation and adaptation measures. Otherwise it could create a dangerous level of complacency. It is not in the interest of those who benefit from carbon emissions to want to reduce them. Many of the schemes, such as paying other people to plant trees in lieu of reducing emissions, are like paying others to go to jail on your behalf. They will keep some individuals out of prison but they will not reduce crime. In fact, they may increase it.
What must African governments do?
African governments have a unique opportunity to turn the climate crisis into an opportunity. The starting point is for them to start creating domestic markets in clean technologies, many of which are now widely available. They need to define themselves as leaders in "green innovation" since they have not committed themselves too excessively to polluting technologies. They should be vigilant against import of polluting technologies. It is a chance for them to build a new image around their moral standing of being the lowest polluters.
Africa is also the home of the United Nations Environment Programme and the UN Centre for Human Settlements. They should use these institutions to brand themselves as custodians of the living planet and start to define their relations with the rest of the world in those terms. They can do it because most of the technologies needed to get started are already available.
But … they will need to build strong intellectual property protection institutions. This will help to position them as future innovators themselves. There is a lot more they can do and I would strongly recommend that they build on the Copenhagen Accord. Most of the elements needed to transition toward a more sustainable world are contained in that seemingly modest document. To start from scratch would set the clock even further back and slow down the prospects of technological leapfrogging.
Is there anything else that you would like to tell us?
We are now facing a new phenomenon in the climate debate: the attack on science. We would not have come this far in our understanding of the threat without the concerted effects of the scientific community to grapple with one of the most complex issues that humanity has ever faced. But it may also be a time to shift our attention from "climate science" to "climate technology". Engineers and business people around the world are coming up with a wide range of solutions to address the problem. Some of these are regularly featured by the World Economic Forum's Technology Pioneers programme (of which I serve on the selection committee).
Climate science has helped us to understand better the character and scale of the problem; the emerging field of "climate technology" offers us the tools needed to start solving the problem. It is also human nature to deny the existence of a problem unless a solution is available. We have asked science to provide answers to some fundamental questions. Science has delivered on this. We now need to complement this by turning to engineers and the business community with different questions: What solutions are available that can be used to solve the problem? How can we leverage all fields of knowledge (especially the social sciences) to ensure that emerging technologies can be fully deployed to solve climate change challenges? How do we reduce the risks associated with the use of new technologies?
Link to web article: Africa: From Crisis to Opportunity Through Clean Technologywww.allafrica.com
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Portucel, Mota to Invest $2.4 Billion in Mozambique
March 5 | BloombergBy Fred Katerere
Portucel-Empresa Produtora de Pasta e Papel SA, Portugal’s biggest paper maker, and Mota-Engil SGPS SA, its biggest construction company, will invest a combined $2.4 billion in Mozambique, the companies said.
Portucel will invest $2.3 billion in a paper manufacturing plant in the south-east African nation, senior executive Pedro Moura told reporters in the capital, Maputo today. “The initiative will create 7,500 direct and indirect jobs and this could triple after operations begin,” he said.
Mota will build a bridge over the Zambezi River linking the country’s port city of Beira to landlocked nations like Democratic Republic of Congo, Malawi, Tanzania and Zambia. The bridge, which will be an alternative to the existing structure that can’t support current cargo, is valued at 100 million euros ($135,87 million), Mota Chairman Antonio Manuel da Mota said.
The companies formed part of a 55-member delegation that joined Portuguese Prime Minister Jose Socrates on a visit to the European country’s former colony of 22 million people.
The two countries will set up a bank, to be known as the Luso-Mocambicano Banco de Investimentos, and will have $500 million of start-up capital, STV reported. The nations will each own half of the lender, according to the Maputo-based independent broadcaster.
The bank wil finance the construction of the more than 2,000 kilometers (1,243 miles) of rail links between Maputo and Tete province, where the country’s largest approved coal deposits lie. Riversdale Mining Ltd., an Australian company, and Vale SA, the world’s biggest iron-ore miner, have acquired mining concessions and are expected to start production by 2011.
The investment bank is also expected to finance a $700 million expansion project on the Cahora Bassa hydropower plant on the Zambezi River and the construction of a $100 million bridge project linking Maputo city with the satellite town of Catembe over the Indian Ocean.
To contact the reporter on this story: Fred Katerere in Maputo via Johannesburg on pmrichardson@bloomberg.net.
Link to web article: Portucel, Mota to Invest $2.4 Billion in Mozambiquewww.bloomberg.com
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How Africa is Becoming the New Asia
By Jerry Guo | NEWSWEEK
From the magazine issue dated Mar 1, 2010
China and India get all the headlines for their economic prowess, but there´s another global growth story that is easily overlooked: Africa. In 2007 and 2008, southern Africa, the Great Lakes region of Kenya, Tanzania, and Uganda, and even the drought-stricken Horn of Africa had GDP growth rates on par with Asia´s two powerhouses. Last year, in the depths of global recession, the continent clocked almost 2 percent growth, roughly equal to the rates in the Middle East, and outperforming everywhere else but India and China. This year and in 2011, Africa will grow by 4.8 percent—the highest rate of growth outside Asia, and higher than even the oft-buzzed-about economies of Brazil, Russia, Mexico, and Eastern Europe, according to newly revised IMF estimates. In fact, on a per capita basis, Africans are already richer than Indians, and a dozen African states have higher gross national income per capita than China.
More surprising is that much of this growth is driven not by the sale of raw materials, like oil or diamonds, but by a burgeoning domestic market, the largest outside India and China. In the last four years, the surge in private consumption of goods and services has accounted for two thirds of Africa´s GDP growth. The rapidly emerging African middle class could number as many as 300 million, out of a total population of 1 billion, according to development expert Vijay Majahan, author of the 2009 book Africa Rising. While few of them have the kind of disposable income found in Asia and the West, these accountants, teachers, maids, taxi drivers, even roadside street vendors, are driving up demand for goods and services like cell phones, bank accounts, upmarket foodstuffs, and real estate. In fact, in Africa´s 10 largest economies, the service sector makes up 40 percent of GDP, not too far from India´s 53 percent. "The new Africa story is consumption," says Graham Thomas, head of principal investment at Standard Bank Group, which operates in 17 African countries.
Much of the boom in this new consumer class can be attributed to outside forces: evolving trade patterns, particularly from increased demand coming out of China, and technological innovation abroad that spurs local productivity and growth like the multibillion-dollar fiber-optic lines that are being laid out between Africa and the developed world. Other changes are domestic and deliberate. Despite Africa´s well-founded reputation for corruption and poor governance, a substantial chunk of the continent has quietly experienced this economic renaissance by dint of its virtually unprecedented political stability. Spurred by eager investors, governments have steadily deregulated industries and developed infrastructure. As a result, countries such as Kenya and Botswana now boast privately owned world-class hospitals, charter schools, and toll roads that are actually safe to drive on. A study by a World Bank program, the Africa Infrastructure Country Diagnostic, found that improvements in Africa´s telecom infrastructure have contributed as much as 1 percent to per capita GDP growth, a bigger role than changes in monetary or fiscal policies. Shares of stocks in recently privatized local airlines, freight companies, and telecoms have skyrocketed.
Entrepreneurship has increased at the same time, powered in part by the influx of returning skilled workers. Just as waves of expats returned to China and India in the 1990s to start businesses that in turn attracted more outside talent and capital, there are now signs that an entrepreneurial African diaspora will help transform the continent. While brain drain is still a chronic problem in countries such as Burundi and Malawi—some of the poorest in the world on a per capita basis—Africa´s most robust economies, such as those in Ghana, Botswana, and South Africa, are beginning to see an unprecedented brain gain. According to some reports, roughly 10,000 skilled professionals have returned to Nigeria in the last year, and the number of educated Angolans seeking jobs back home has spiked 10-fold, to 1,000, in the last five years. Bart Nnaji gave up a tenured professorship at the University of Pittsburgh to move back to Nigeria in 2005 and run Geometric Power, the first private power company in sub-Saharan Africa. Its $400 million, 188-megawatt power plant will come online this fall as the sole provider of electricity for Aba, a city of 2 million in southeast Nigeria. Afam Onyema, a 30-year-old graduate of Harvard and Stanford Law, turned down six-figure offers in corporate law to build and run a $50 million state-of-the-art private hospital with a charitable component for the poor in southeast Nigeria.
Many experts believe Africa, with its expansive base of newly minted consumers, may very well be on the verge of becoming the next India, thanks to frenetic urbanization and the sort of big push in services and infrastructure that transformed the Asian subcontinent 15 years ago. Just as India once harnessed its booming population of cheap labor, Africa stands to gain by the rapid growth of its big cities. Already the continent boasts the world´s highest rate of urbanization, which jump-starts growth through industrialization and economies of scale. Today only a third of Africa´s population lives in cities, but that segment accounts for 80 percent of total GDP, according to the U.N. Centre for Human Settlements. In the next 30 years, half the continent´s population will be living in cities.
Nowhere is this relationship between the consumer class and urbanization more apparent than in Lagos, Nigeria, a megalopolis of 18 million that has the anything-goes pace of a Chongqing or Mumbai. On Victoria Island, the city´s commercial center, real estate is as expensive as in Manhattan. Everywhere you look, there is construction: luxury condos, office buildings, roads, even a brand-new city nearby being dredged from the sea that will hold half a million people. "Everything is in short supply, so everything´s a high-growth area," explains Adedotun Sulaiman, a venture capitalist and chairman of Accenture in Nigeria. "In terms of opportunities, it´s just mind-blowing." Aliko Dangote, Africa´s richest black entrepreneur, has also cashed in on this consumer culture, with a net worth of $2.5 billion, according to Forbes. His empire, which began in 1978 as a trading business that imported, among other things, baby food, cement, and frozen fish, is focused on Nigeria´s burgeoning domestic growth, producing cement for shopping and office complexes; renting luxury condos; making noodles, flour, and sugar; and now expanding into services such as 3G mobile networks and transportation. "There´s nowhere you can make money like in Nigeria," says the 53-year-old Dangote. "It´s the world´s best-kept secret."
Not anymore. A recent study by Oxford economist Paul Collier of all 954 publicly traded African companies operating between 2000 and 2007 found that their annual return on capital was on average 65 percent higher than those of similar firms in China, India, Vietnam, or Indonesia because labor costs are skyrocketing in Asia. Their median profit margin, 11 percent, was also higher than in Asia or South America. African mobile operators, for instance, showed the highest profit margins in the industry worldwide. As a result, foreign multinationals like Unilever, Nestlé, and Swissport International report some of their highest growth in Africa. So even as foreign direct investment fell by 20 percent worldwide in 2008, capital in-flows to Africa actually jumped 16 percent, to $61.9 billion, its highest level ever, according to a report by the Organization for Economic Cooperation and Development. Even Chinese companies are thinking of outsourcing basic manufacturing to Africa. The World Bank is now helping China set up an industrial zone in Ethiopia, the first of perhaps several offshore centers akin to the sprawling free-trade zones that opened up China´s economy in the 1980s.
Still, Africa remains at the very frontier of emerging markets. Despite its gains, the difficulty and cost of running a business there are the highest in the world, according to data from the International Monetary Fund. Couple that with pervasive corruption—Transparency International calls the problem "rampant" in 36 of 53 African states—and it´s no wonder Africa is often regarded as a toxic place to operate. But World Bank president Robert Zoellick says that in the aftermath of the economic crisis, long-term investors have recognized that "developed markets have big risks too." Like China and India, Africa is exploiting that fact, and perhaps more than any other region it is illustrative of a new world order in which the poorest nations will still find ways to steam ahead.
Source: Newsweek.com
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India´s Biggest Mobile-phone Operator Makes a Move on Africa
Feb 15, 2010 | The Economist online
AS THE orchestra of chirrups and pings in any public place in the rich world attests, the market for mobile phones in developed countries is saturated—and even in some developing ones opportunities for growth are running short. So big mobile operators, including those from emerging economies, are looking for growth wherever it can be found. Bharti Airtel, the biggest Indian operator when measured by subscribers, said on Monday February 15th that it is hoping to expand beyond one of the world’s fastest growing markets and into another. It is in talks with Zain, a Kuwaiti telecoms company, to buy its sub-Saharan assets for $10.7 billion and bring together African and Indian mobile-phone expertise.
Bharti has tried to move into Africa before. Two previous efforts to merge with South Africa’s MTN fell through, the latest in September last year. The deal was blocked by South Africa’s government, which was unwilling to let go of a national champion. If the new deal proceeds Bharti should find a warmer welcome in the 15 countries, including Nigeria, Uganda and Tanzania, where Zain provides mobile phones to some 42m customers.
Although the mobile-phone business is still booming in India, growth there is slowing. Competition, not least from operators based in the rich world, has brought the number of mobile operators in the country to 12 and a brutal price war is under way. Recent new arrivals include Norway’s Telenor and Japan’s NTTDoCoMo. Penetration rates in India are at around 50% compared with 40% in much of Africa. Bharti sees a chance to stake a claim in the fastest growing region in the world and to do so profitably.
Zain has fared badly in Africa along with other Middle Eastern operators perhaps because their home turf has been heavily regulated. Most acted as comfortable monopolists until only recently. Bharti on the other hand has a good deal of experience in wringing out profits in a poor country where competition is growing. Africa merely adds more diversity and the potential for political instability to the challenge. It helps, too, that Bharti brings expertise of running low-cost operations in markets where consumers have very low incomes. It does this by sharing infrastructure and outsourcing most operations such as IT and running networks, leaving the risk of expanding to meet the needs of subscribers to others while it concentrates on marketing and strategy. And Bharti’s size and clout should allow it to pay much less than Zain for network towers and the like in Africa.
Bharti’s ability to concentrate on its customers should yield rewards in Africa, where innovations to bring down costs to customers have already helped to boost profits of other firms. MTN, for example, pioneered dynamic tariffs that charge users to make calls according to how many other callers are using a network at a given time. And Zain’s own scheme of “borderless roaming” lets customers move between Kenya, Tanzania and Uganda and make calls without incurring disproportionate charges.
Africans are also in the vanguard of providing mobile money. M-PESA, a successful service available in Kenya through Safaricom, lets mobile users transfer cash using their phones. Zain has a mobile-money service, Zap, that operates in several African markets that should give Bharti useful experience and a head start if it is taken up as enthusiastically elsewhere.
Creating a transcontinental wireless operator seems to make sense. But critics of the proposed deal worry that Bharti may have over-bid for Zain’s African businesses. Bharti’s investors seem to agree: the firm’s shares fell sharply on Monday when news of discussions with Zain emerged. The growing confidence of India’s corporate bosses in the past decade has resulted in a shopping spree for foreign assets that has not always been governed by sound business logic, such as Tata’s purchase of Jaguar Land Rover in 2008. And Vivendi, the French media and telecoms giant, broke off talks in July with Zain about acquiring these assets for around the same price, citing fears about “profitability and financial discipline”. But if Bharti applies the same techniques to Africa that made it so successful in India it seems destined to bring mobile phones to ever more of the world’s poorest people.
Source: Economist.com
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Silicon Cape creates real ´buzz´
The initiative is about more than building a local version of Silicon Valley, say its founders.
In a move that could signal the beginning of a ´15-year dream´, the Silicon Cape Initiative was unveiled this week. It aims to promote the Western Cape as a hub for IT innovation and entrepreneurship.
It has grown into a launch event that secured speakers like Helen Zille, premier of the Western Cape; Dr Mamphela Ramphele, chairperson of the Technology Innovation Agency; and Johann Rupert, chairman of luxury goods company Richemont.
A crowd of 500 entrepreneurs, venture capitalists and potential angel funders were at the Bay Hotel, in Camps Bay, to hear them.
A steering committee, nominated and elected by the attendees and the online community that formed around the project on www.siliconcape.com, will take Silicon Cape forward. It aims to capitalise on the initial enthusiasm, and follow through with action and liaison among national and provincial government, academia, investors, entrepreneurs and corporate SA.
It isn´t copy-and-paste
Said Lingham: “It´s not about building a local version of Silicon Valley. The market won´t support that.”
Stanford agrees: “It´s an ecosystem, consisting of a few core elements.”
Those elements, both concluded independently, exist in and around Cape Town. A key realisation, they say, is that it´s about people, not buildings. “You don´t construct it. The question is who are the right people, and how do you get them to move here?” asked Stanford, quoting Paul Graham, who has written about the factors that made Silicon Valley the iconic start-up haven it has become.
They are convinced it is possible to build companies that aim at the global market in SA, and take them global successfully. The usual barriers that are cited, like expensive and scarce bandwidth, they say, are not impossible obstacles to overcome.
“Silicon Cape is a five-, 10-, 20-year dream,” said Stanford. “But we´ll see the makings of it in the next five years. It won´t happen overnight, but it can happen, if all of us here work together to make it happen. We´ve seen it happen.”
Lingham added that intellectual property can, and should, be the future of SA´s export revenue one day.
Cold water
A dose of realism followed, in the form of Andrea Bohmert, of Hasso Plattner Ventures, a venture capital firm. “It´s not as easy as they make it sound,” said Bohmert, a foreigner herself. “You cannot ignore the international perception of SA. You cannot ignore your distance from other hotspots, where you can´t just quickly fly to. You cannot ignore that Cape Town, unlike Johannesburg, is cliquey. Nobody has ever mentioned a South African university to me as a top global research university. They may be wrong, but if they are, universities are SA´s best-kept secret.”
A lot needs to happen, in terms of people, marketing and regulation, she said. “Lack of skills, lack of large anchor corporates that provide management training, lack of professional services firms available and affordable for the start-up market, lack of angel funding networks, all these are critical for the ecosystem,” Bohmert added.
“Can you take your money back out of SA? Can you move intellectual property around globally? These are critical barriers, and they suggest to investors that they´d rather place their money somewhere else,” she said.
The crux of the problem is the legal and regulatory environment, and that is the one factor that no entrepreneur, and no investor, can change, she noted.
That´s why in 2008, SA registered only 10 766 patents, of which 7 166 were filed by foreigners, she added. “How many success stories do we have? And how easy were they to find? We either need people to come forward and talk about them, or we need to generate more, because there simply are not enough of them. Silicon Valley has 500 active VC funds. SA has six or seven.”
The chocolate in the middle
Laurence Olivier, a venture capitalist who left SA Africa for the US, as a partner in Veritas, a major fund with a solid track record, described entrepreneurs as the chocolate in the biscuit, between the product or technology, and the venture capital.
Dozens of other attempts to replicate Silicon Valley exist, he said, some successful. But he added that unlike anywhere else, the key thing Silicon Valley had that nobody else had was a sense of local networking and community. “And this is the first thing Silicon Cape has,” he declared. “Surely, technology and money are not enough."
Rupert struck an ominous tone, warning that he expected taxes to rise dramatically in the English-speaking world. He noted why some countries have grown successfully in the past, and others have not. In some cases, such as East and West Germany, or North and South Korea, the starting points and social stock were identical.
“The reasons some countries have succeeded, while others have not, has everything to do with the rules by which we organise our lives. Respect for and free transfer of property, flexible labour markets, valued entrepreneurship, democracy, free speech, honesty and transparency in government, the rule of law,” he enumerated. “These are the countries that went from agriculture through industrial to the information or knowledge economy.”
He noted the shift from raw materials, to manufactured goods, to services and intellectual capital. “The magic ingredient is brain power. Societies that do not protect and encourage the creation of intellectual property will become poorer.
“Because people who own the intellectual property are mobile, they get to choose where they live, and they´ll choose to live where their intellectual property is most highly valued. That´s where they will create economic growth. In the Western Cape, if we create the proper economic incentivisation, there will be money.
“I´m glad to see the premier here, Premier Zille. I´ve already discussed this notion with senior ANC people: Let´s create a tax-free zone in the Western Cape,” he concluded.
Proudly South African
She said: “The most important thing is that government must create an enabling environment, and tackle the regulatory barriers.” Citing the difficulty of trading globally from a South African base, due to exchange control and tax regulations, she exclaimed: "I can´t believe that we can´t sell to people who pay in dollars. How stupid is that? How can we grow our economy?”
Ramphele explained there´s a misalignment between what government wants to do and what it does do, and where it can take the lead, it should do so. “For example, our school system is not delivering, and neither is our higher education system.”
Another factor was the unintended consequences of black empowerment. “It appears that patronage has been an inhibitor to innovation. We need to get people back to SA by recognising and celebrating their contribution. We must do that.”
This is the role, she believes, that the Technology Innovation Agency should be playing, as an enabler, and an agent in removing the barriers that are highlighted by initiatives like Silicon Cape.
Zille said: "When we look back in 10 years time, this will have been an historical gathering. It´s not often that I get the real buzz that I had today.
“We heard a lot about the geeks, and the VCs, but very little about the politicians. And that is because we´re usually regarded as a necessary evil. We heard about constraints and problems in the ecosystem. And every one of them are problems and constraints that can be changed through policy and positive action. We have the capacity to change the rules, change the policies, to enable an environment where people feel attracted to put their capital at risk and innovate.
“This event gives us an opportunity to have an intelligent conversation about how we can change the rules, and take it out of the political domain of party politics. You heard Johann Rupert´s concern about party politics. It doesn´t have to be that way, and it shouldn´t be that way.
“If we want to take our people out of poverty, then we´d better treat our intellectual capital very well. You have to keep and develop your skills, and your people. Especially in the knowledge economy, this is crucial. We have tried to do that, mostly in the Western Cape, and I´d like to think that is a part of the reason why you´re having this conversation here, today.”
It is government´s role to change policy and remove barriers, both economic and political, she noted. “When Andrea Bohmert poured cold water on Vinny [Lingham] and Justin [Stanford]´s enthusiasm, I thought: ´Good. Problems enthuse me. Obstacles get me going.´
“I see my job as removing barriers to access. Not only for entrepreneurs, but also for the most important factor of all, education. Justin and Vinny said we´re at the start of a 15-year dream, and they´re right. That´s what it takes. I´ll keep on this. I´ll get more involved. I´ll tweet more than I do. I´ll help build this. Afri-can.”
Web article: Silicon Cape Creates Real ´Buzz´
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Standard Bank Receives "Best Investment Bank from Africa" Award
NAIROBI, Kenya, Oct 10 - Standard Bank bagged the prestigious ´Best Investment Bank from Africa´, award in The Banker´s Investment Banking Awards 2009 reinforcing its credentials as a leading emerging market bank.
The Banker magazine editor Brian Caplen said the institution had been in a strong position to take advantage of international opportunities such as purchasing a stake in Troika Dialog in Russia.
He added the successful formula adopted by the bank would generate increased interest in the future.
"We are very pleased to recognize Standard Bank´s achievements in building up an investment banking presence across Africa and especially in some of the frontier markets," he said.
Rupert Boyd Standard Bank Managing Director for Corporate and Investment Banking said the bank has had unparalleled depth of personnel and expertise in Africa and had been actively involved in the continent´s economic fortunes for over 145 years.
"While this award recognizes this fact, it is a reflection of some of the innovative and unique deals that the team have been involved in over the past twelve months, whether that be acting as Joint Issuing House/Arranger and Primary Dealer to the N275 billion Lagos State Debt Issue or as the Lead Mandated Arranger of the USD240 million Tanesco Limited loan," he said.
The Awards, held at London´s Waldorf Hilton Hotel last night, recognizes excellence in investment banking around the world.
Standard Bank is the largest African banking group, by assets and earnings with operations in 17 countries in Africa, employing over 50,000 people.
Standard Bank is 20 percent owned by Industrial & Commercial Bank of China, the biggest bank in the world.
Web article: Standard Bank bags award
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Ted Kennedy, May the "Lion of the US Senate" Rest in Peace
As we reflect on the countless accomplishments of a great man throughout this day of mourning, we want to take the time to contribute what we, in the South African business community, remember of this man. It is doubtful that many of us forget Senator Kennedy and his engagement on the issue of business with South Africa during a difficult period in our history. During this time, his voice was a strong reminder for businesses to always be aware of their actions. From a business perspective, he was one of the pioneers impressing upon companies the benefit of taking the higher ground. He was on the foreground of the many movements today: responsible investment, sustainable business and a belief in the power of markets to affect the progress of countries on all dimensions.
SACCA salutes a great leader whose vision was not just political but delivered with an acute perspective on the value and role of business and political economies in shaping global affairs. May the "Lion of the US Senate" rest in peace and we are proud that one of Africa´s great symbols of power, the lion, is aptly associated with this leader.
Ted Kennedy, anti-apartheid crusader
Senator led demonstrations, legislation against apartheid before it was popular to do so
By Andrew Meldrum Senior EditorPublished: August 26, 2009 10:23 ET
Updated: August 26, 2009 10:28 ET
BOSTON — Many Africans will mourn the passing of Ted Kennedy, remembering his fiery opposition to apartheid which was instrumental in getting public opinion and then the U.S. government to support the release of Nelson Mandela and majority rule in South Africa.
Kennedy helped to make opposition to apartheid one of the great moral crusades of our time, not just with impassioned speeches and by spearheading sanctions but also by going to South Africa and organizing an illegal protest at the gates of Pollsmoor prison, where Nelson Mandela was jailed.
Anti-apartheid crusader Archbishop Desmond Tutu convinced Kennedy to travel to South Africa in order to bring international attention to the repression and human rights abuses of the white minority rule government of South African President P.W. Botha. At that time the Pretoria government had considerable military and police might, backed by the most sophisticated weapons. Because it claimed to be a bulwark against communism, the South African regime also received considerable implied support from Western powers, including the United States and Britain, which refused to impose economic sanctions against South Africa.
Ted Kennedy would have none of this. He embraced the anti-apartheid struggle and gloried in stating why the system of racial segregation and oppression was wrong and should be strongly opposed by the U.S. government.
In eight days in January 1985, Kennedy swept through South Africa, visiting Johannesburg townships and squatter camps in Cape Town. He met with anti-apartheid leaders including Winnie Mandela, the wife of the jailed Nelson Mandela, who was under draconian banning orders which confined her to her home and prevented her from meeting more than one person at a time. Kennedy championed Winnie Mandela as a fighter for democracy.
Kennedy´s inspired campaign against apartheid culminated when he organized an illegal protest calling for the release of Nelson Mandela at Pollsmoor Prison. Defying orders of the South African police, Kennedy strode up to the gates of the prison and urged Mandela´s release and the end of apartheid.
At that time Mandela was portrayed by many, including the mainstream media, as a controversial figure who espoused terrorism and communism. Kennedy helped to promote Nelson Mandela as a great democrat and freedom fighter."Behind these walls are men that are deeply committed to freedom in this land," said Kennedy, captured by international reporters, photographers and television cameras.
Kennedy´s savvy and inspiring crusade in South Africa brought the expected denunciation from the South African government. It even brought a condemnation from the U.S. ambassador to South Africa, Herman Nickel, who was implementing President Ronald Reagan´s policy of "constructive engagement" with the apartheid regime.
Kennedy´s battle against apartheid continued when he returned to Washington. He introduced the Anti-Apartheid Act of 1985 which imposed economic sanctions against the South African regime. In 1986 Congress overrode President Reagan´s veto and enacted the law which banned all new investments by Americans in South African businesses and the importation of key South African products such as steel, coal, ammunition and food. It was a strategic attack on apartheid.
"The time for procrastination and delay is over. Now is the time to keep the faith with Martin Luther King and Desmond Tutu and all those who believe in a free South Africa," said Kennedy.
I was in Zimbabwe at this time and remember that the fortress of apartheid looked impregnable. I saw how Kennedy´s activism helped to get the Western world to join the brave fighters against apartheid. The hardscrabble campaign in South Africa became a worldwide movement that forced Western governments to change their policies and put forceful pressure on the South African government to end apartheid.
Years later, Nelson Mandela — freed and president of South Africa, Nobel Peace prize winner and acclaimed around the world — paid tribute to Kennedy´s 1985 visit. He said that while in Pollsmoor Prison he and other anti-apartheid fighters were aware that Kennedy was standing outside the gates. He said that "gave us a lot of strength and hope and the feeling that we had millions behind us, both in our struggle against apartheid and in our special situation in prison."
Nelson Mandela today is 92 and in failing health but he still remembers the key support he received from Ted Kennedy. "He made his voice heard in the struggle against apartheid at a time when the freedom struggle was not widely supported in the West," said the Nelson Mandela foundation director Achmat Dangor, on behalf of Mandela. "We remain grateful for his role."
Article Source: http://www.globalpost.com/print/3194330
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Partnership, Not Patronage
Partnership, Not Patronage
By Ellen Johnson-Sirleaf, Paul Kagame, Seretse Khama Ian Khama and Abdoulaye Wade AfricaWed, 05 Aug 2009
Just three weeks after President Barack Obama´s triumphant return from Africa, the real challenge to achieving strategic change lies in Secretary of State Hillary Clinton´s own upcoming visit. Left unsaid as the president boarded Air Force One is the fact that Africa seeks not patrons but collaborators who will work "with" rather than "for" the continent. If the Obama administration wishes to truly make a difference, it must do so as an equal partner, addressing several low-cost, high-impact priorities.
To start, developed partner countries must curb corruption abroad. Efforts by African governments to strengthen democracy and governance are weakened if money stolen from the continent can find safe havens in secret accounts in the West. Chillingly, major OECD countries have yet to prosecute a single defendant for fraudulent and corrupt practices overseas. Poorly enforced international covenants won´t deter collusion and bid-rigging in large African infrastructure contracts.
Economic equations need to change as well. Since 1970, Africa´s share of global exports has declined from 3.5% to 1.5%. To reduce poverty and sustain growth, Africa must reverse this decline. Secretary Clinton has an opportunity to secure a quick win while in Nairobi, Kenya, for the Africa Growth and Opportunities Act forum this month. Expanding AGOA--the showpiece of America´s trading relationship with Africa--to include a larger number of agricultural and processed commodities will help. But if Clinton does not address U.S. agricultural trade subsidies that distort the forces of the marketplace AGOA will never realize its potential--nor will Africa be able to trade its way out of poverty.
The global recession has hurt Africa. The surge in private capital flows to the continent, driven by efficiency gains from policy improvements, has helped fund badly needed infrastructure development. Since the economic crisis, however, these private flows--which topped $53 billion in 2007, exceeding foreign assistance for the first time--have fallen by 40%. There remains an annual $40 billion infrastructure financing shortfall.
The deficit can be quickly addressed by catalyzing private partnerships to raise equity finance and by increasing funding to companies that want to invest. In addition, only a quarter of Africa´s population has access to electricity. Public-private investments in hydropower would offer a carbon-neutral solution.
Loan guarantees by the U.S. Export-Import Bank for American firms wishing to invest in Africa amounted to $400 million in 2007. That year, China´s Export-Import Bank guaranteed loans of $13 billion to Chinese firms investing in Africa. Closing this gap would do much to project Africa as an investment-grade destination.
In extractive industries, U.S. companies should be encouraged to change the practice of building extensive private rail, power and port assets that remain detached from the host country´s often sparse infrastructure network.
Ultimately, Africa´s quality of life will depend on the health of its citizens. The centerpiece of U.S. support for HIV/AIDS in Africa--the President´s Emergency Plan for AIDS Relief--has helped expand life-saving treatment. President Obama has an opportunity to make PEPFAR more effective by moving from emergency to long-term support--as in the Millennium Challenge Corporation´s five-year partnership model, with each country taking ownership of the design of its programs.
Finally, we need more effective and predictable development lending. The U.S. remains the main exception to the common donor practice of channeling development assistance through financial systems of recipient countries. Done with sufficient safeguards, this strengthens country ownership, responsibility and accountability. The U.S.´s reluctance to embrace shared multilateral approaches limits the impact of its foreign assistance.
President Obama´s charisma, oratory and heritage have excited Africa as never before. Now substantive action that realizes the promise of his visit needs to be on Secretary Clinton´s agenda during her visit to seven African countries.
* Ellen Johnson-Sirleaf is president of Liberia; Paul Kagame is president of Rwanda; Seretse Khama Ian Khama is president of Botswana; and Abdoulaye Wade is president of Senegal
Web article: Modern Ghana
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All About Ubuntu: Business Etiquette & Travel in South Africa
The South African notion of humanity has strong ties to the work place, and Liz Kraft explains how this translates for the savvy business traveler.Here is a link to a great article on business etiquette and travel in South Africa. All About Ubuntu.
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In 2009, 15 of the 20 Fastest Growing Economies will be in Africa
Published: 20-Apr-2009
Emerging from the Storm
By Stefanie Eschenbacher Who would have thought that the fastest-growing economies would one day be African? Yet the Economist Intelligence Unit forecasts that 15 out of the 20 fastest growing countries in 2009 will be in that region. Indeed, while most of the developed world has slipped into recession and growth has slowed in developing countries, Africa has bucked the global trend.
Ayo Salami, the manager of Duet’s newly launched African Opportunities fund, sees enormous potential on the continent, despite pressure on Africa’s small stockmarkets, falling commodity and oil prices, and diminishing foreign investment. Duet, an alternative asset manager, has just bought up the assets in New Star’s high-profile Heart of Africa fund, intended to invest in the boom of the region’s frontier markets. Troubled New Star said it had to wind up the fund because of reduced liquidity in the sub-Saharan markets.
Salami, who is also the chief investment officer on the Duet Victoire Africa index fund, says that as African countries grow, income per head grows and a new middle class emerges.
He says the political environment has improved and there have also been in-depth institutional reforms. For example, more African countries now have an independent monetary policy committee that sets interest rates and sound money policies.
Michael Power, a South Africa-based global strategist at Investec Asset Management, says: “In 2008, the capital tide flowed out of Africa’s financial markets and given the events of last year, this is hardly surprising.” He adds that the declines reflect a rise in risk aversion globally and “echo the idea that stockmarkets are forward-looking, discounting mechanisms that pay particular attention to growth prospects as they materialise in the profit outlook for companies”.
He says Africa’s share prices have fallen more than subsequent operational performance would tend to warrant. But there is also a correlation between GDP growth and stockmarket performance, although not an absolute one.The stockmarket capitalisation of sub-Saharan Africa may still be less than that of a single giant such as Shell, Power admits. But he says one should also ask if Shell is going to grow faster than Africa.
Those African countries that depend on their commodities have been particularly hit by the crisis as the global demand for their goods declined, says Christopher Hartland-Peel, an African equity researcher at Exotix. But he stresses that “the bottom has been seen”.
While prices for commodities and oil have plummeted, he adds, soft commodity prices have been more resistant in the first place. “Demand for tea, cocoa and agriculture produce has been stable; prices for metals and oil will recover as the world economy recovers.”
Hartland-Peel also observes that many African economies, which used to rely on their commodities exports, are switching to a more domestically-orientated economic model. “These countries are growing from a very low level – there are considerable opportunities.”
“The continent’s demographics are the key implications,” Salami argues. “Half of the African population is under 35 years old. Europe and Japan, for example, have ageing populations.”
“We don’t like export companies and we don’t like mining companies because the demand for their products depends on Western economies. We’ve also got a negative view on banks and financials because we expect rising loan loss levels,” Salami says.
“But this [approach] changes as the economy changes. I can see a time when the demand for mining and natural resources will rise again.” When China’s economy takes off, he will “restructure the portfolio and take advantage of these conditions”.
“Investing in larger markets like Egypt is relatively simple, but we invest in esoteric markets like Botswana, Namibia and Uganda that others consider as too small. However, this is where we see the opportunity to add value for our investors.”
He says Duet’s philosophy is to “enable investors access to products and regions of the world where efficient models are not yet in place”.
For now, the newly appointed fund manager is looking for companies that are investing in infrastructure projects and those that meet domestic consumer demand: breweries, food companies, telecoms and cement.
Despite the financial crisis, domestically oriented sectors have tended to continue “business as usual.”
Power says Africa’s middle class “is on the move, although not as impressive as in China.” The global strategist likes what he calls “the BBC”: brewing, banking and cement. “These three sectors, and perhaps the telecoms sector, tend to grow more than the economy itself because of demographic changes.”
Nick Price, the manager of the Fidelity Emerging Europe, Middle East and Africa Fund, says that the African consumer is “under-served”.
In terms of geographical asset allocation, he favours South Africa. But he also points to Nigeria and Zimbabwe as possible investment opportunities. Yes, Zimbabwe. “Things look like they are improving. Zimbabwe is getting rid of its [hyper-inflationary] currency and everything is paid in US dollar and South African rand.
“Nigeria has grown by 7% over the past couple of years. One would think that this was driven by oil but it was actually telecommunications and the financial sector – domestic-related segments.” He says that the largest manufacturer of soap, PZ Cussons, has grown by 20% per year. Nigeria, like other African countries, is coming from a very low level. “The Nigerian demand for foam mattresses is up by 20% to 30%.” As per head income rises, people are replacing their straw mattresses. Beer consumption is growing at 10%. For example, Heineken has a large stake in Nigerian breweries, a stock that trades at 10 times earnings and pays an 11% dividend. He says such businesses grow at exorbitant rates because “African consumers have not been serviced properly”.
Mark Mobius, the manager of the Templeton Frontier Markets fund, says he is still interested in raw material and mining. “However,” he adds, “ the African consumer is becoming more interesting to us. For example, we are interested in anything with retail sales or telephone services.”
Like most investors, Mobius’s biggest investments are also allocated in South Africa. “This is mainly because the choice of well-run companies is greater than in other countries. Liquidity is greater and valuation is better." He also has holdings in Kenya, Nigeria, Egypt and Tunisia but says that “South Africa has the greatest potential”.Mobius says South Africa has a stable society, good infrastructure and a developed legal system, factors he considers when making decisions.
Emad Mostaque, who co-manages Pictet’s Middle East and North Africa fund, warns that “the sub-Saharan African equity markets are very illiquid”. Last year it seemed there was too much liquidity in too few stocks, he says. “Now a lot of money has been taken out.”
“Middle Eastern markets have only been accessible to investors for two to three years,” he says. Governments in the region have “liberalised the market and encouraged foreign direct investment”. In an effort to attract foreign investors they have created tax benefits and other incentives. “Some companies receive free land and resources are available at a reduced rate so that local companies can grow and create jobs.”
He continues that the region took advantage of high oil prices and paid off all debts when oil prices were high. “They can now invest in infrastructure.”
Sanjeev Gupta, the CEO of South Africa-based Sanlam Investments, is responsible for business in Africa and other emerging markets. “We do have a pan-Africa strategy, excluding South Africa. But investment opportunities vary from country to country.”
Gupta says there is now more optimism towards Africa from large corporations. Domestic flows are increasing, discretionary savings are increasing and governments are beginning to form pension schemes. “Funding is no longer a challenge but creating opportunities is,” he says.
“There are not enough companies listed on the stockmarket. [However,] there are very early signs of companies coming into equity markets as opposed to just raising debts.”He says there is a shortage of readily available local investments in listed funds because to a large extent the main commercial activities – power, water, electricity, housing and telecoms – are controlled by governments.
“The public sector or government-owned companies are not listed [on the stockmarket]. Other companies, such as those operating in the financial or mining sector, don’t necessarily come into the local stock exchange markets to raise equity debt. Or they are owned by foreign multinationals.”
Mobius says: “There are well-run companies [in the region] that are just as good as companies in other countries, or even better.” He continues that “now we can find a lot of bargains, not only in Africa but also in lots of other emerging markets”.
Andrew Brown, a manager of the Aberdeen Emerging Markets fund, holds two companies listed in South Africa. The fund gains indirect exposure to other African countries through these companies, which have operations in sub-Saharan Africa. "For example, Massmart not only operates in South Africa where it is listed, but also in other countries like Nigeria, a country of 140m people – which makes it the largest consumer market in sub-Saharan Africa. The second company, Truworths, has operations in Botswana.” Brown says both companies have adopted a conservative expansion strategy. “Their cautious approach gives us confidence of longer-term source of growth.”
“I would like to get higher exposure to the sub-Saharan Africa but the problem is liquidity,” Brown says. “We found decent companies but haven’t found any that are good enough to include in the GEM fund.” Searching for investment opportunities, he has travelled repeatedly to Ghana, Kenya and Nigeria. “We meet companies several times before making a decision.”
Dirk Kubisch, a product specialist at Julius Baer Asset Management, says the Northern Africa fund invests in Egypt, Morocco, Tunisia and sub-Saharan Africa. It has smaller asset allocations in Kenya, Nigeria and Zambia
“We don’t use a defined sector approach but a combination of bottom- up stock selection and top-down macro analysis. Companies have to be strong as a stand-alone position.”
He focuses on market leadership, earnings growth and strong balance sheets. “On a stock level, we identify stocks that are placed with different themes.” He is now keen on the financial and telecommunication sectors. “Most people first think about commodities when they hear Africa, but there are a lot of other opportunities.”
Kubisch says some of the risks include currency risks and inflation. “I don’t hedge currencies because the cost is very high. Financial markets are not so developed, and one needs to have instruments. Interest rates are also generally high in developing countries.
“When investing in frontier markets, it is always a challenge to get stocks that are liquid enough. And there are not a lot of large caps in the region.”
“Investors traditionally regard high liquidity as a good thing,” says Power. “But Africa has shown this need not be so; its relatively illiquid frontier markets, although still mostly recording negative returns, significantly outperformed both developed and emerging markets in 2008.” He says those investors who have employed this approach alone have, when faced with the need for liquidity, often been forced to liquidate their deep-value yet illiquid stocks at “fire-sale prices”.
Power says that high liquidity often encourages investors with short-term horizons to trade the market. And taking short term positions makes the market more volatile.“In less liquid markets, investors patiently buy positions for long-term investment,” he says. “Long-term investors don’t need to trade today.”
The global strategist says investors face issues such as availability of information and stocks and tradability of stocks. “Long-term investors are not afraid of investment heights and that profits that are not necessarily materialised tomorrow.
“One has to have a private equity mindset when investing in Africa, although this is not so much true for South Africa, Nigeria and Egypt.”
Power says: “The real art of investing in Africa’s emerging and frontier markets – an art only available to institutional investors with a longer-term time horizon – is to balance the more cyclical, shorter-term advantages that accrue to liquid emerging markets against the more structural, longer- term advantages that accrue to deep- value frontier markets.”
“Africa is full of Hotel Califonias,” Power says, referring to a 1976 song by the Eagles. “You can check out any time you like, but you can never leave!”
Article Source: Fund Strategy
Other Useful Links:
World Growth League Table, 2009
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Aid: Solution or Problem? How is the model changing with the global financial crisis?
In a HARDtalk interview originally broadcast on 5th March 2009, Zeinab Badawi speaks to economists Dambisa Moyo and Alison Evans.
Click here to watch the full interview
(Requires RealPlayer: Download Free Player)
The global financial crisis has made many donor nations think twice about giving development aid to Africa.
One young African economist thinks that doesn´t matter.
She´s opposed to aid because she believes it has perpetuated the cycle of poverty and hindered economic growth.
What is the best way for poorer nations to weather the current turmoil?
Zeinab Badawi talks to Zambian economist Dambisa Moyo and the incoming director of the Overseas Development Institute, Alison Evans.
This interview will be shown on BBC World News at 0430, 0930, 1430, 1830 (except Middle East and South Asia), 2130 and 2330 GMT
HARDtalk is also broadcast on the BBC News channel at 04:30 & 23:30 GMT
Article Soure: BBC News - HARDtalk
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President Obama & US-Africa Policy
SACCA VP J. Skyler Fernandes compiled articles on Obama and Africa. Please send through any articles you may find to: info@sacca.biz
US foreign policy towards Africa won´t change much
28 January 2009
Cape Times, Page 6
Christina Taylor
While US President Barack Obama is unlikely to dramatically change the substance of his country´s foreign policy, one expert says Africa can still expect to benefit from increased diplomacy and a continuation of assistance launched by the previous administration.
The keyword for the Obama administration would be "smart power", a mix of the "soft" powers of diplomacy and cultural influence and the"hard" powers of military and economic intervention, according to Steven Ekovich, an associate professor of international and comparative politics at the American University in Paris.
Ekovich was addressing members of the public via a video conference at the Central Library, part of the US consulate´s public affairs programming.
He said the most important change following the change of leadership would be Obama´s emphasis on "soft" power, "a new style using all the instruments of diplomacy".
But the policies would probably not differ much from those of former president George Bush and those before him.
"In general terms, the interests of a country is to not change drastically,"he said. Rather, values "evolve" slowly.
Therefore, he said, Africans could expect more of the same efforts to bring the continent into the global economy and promote peace, including fewer barriers to US markets, possible advantages to African exports, and encouragement of democratisation.
Web article: Cape Times
Other relevant articles:
South Africa Wishes Obama WellWeb article
Tues, Jan 20th, 2009
South African President Kgalema Motlanthe sent a congratulatory message to United States President-elect Barack Obama ahead of his inauguration on Tuesday.
Hilary Clinton Outlines Obama´s Africa Policy
Web article
Jan 15th, 2009
The foreign policy objectives of the Obama administration in Africa are rooted in security, political, economic and humanitarian interests, Secretary of State–designate Hillary Clinton told a U.S. Senate committee.
Africa: Would President Obama be Good for Africa?
Web article
June 12th, 2008
If Barack Obama is elected President of the United States, becoming theworld’s most powerful leader, what difference would it make toAmerica’s engagement with Africa? Will the son of a Kenyan do thingsdifferently from his predecessors, and will Africa benefit?
What Barack Obama Can Do For Africa - and Vice Versa
Web article
Mon Aug. 28, 2006
Obama addressed a gathered crowd and recalled his first trip. "Eventhough I had grown up on the other side of the world and even though Idid not have a day-to-day connection, when I came here I felt thespirit among the people who told me that I belonged." Obama clearlyfeels that same sense of belonging to this small Kenyan village, evenif so many more people, both in Africa and back home in the U.S.,consider him one of their own.
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Energy Solutions in Africa
SACCA VP Avril David points out several articles and websites related to African energy solutions. Please send through additional articles and postings to: info@sacca.biz.
Much of sub-Saharan Africa suffers from a lack of the traditional energy infrastructure that is crucial to sustained economic growth and development. In recent years, however, energy innovators have begun to tap into the region’s vast renewable energy potential, offering a way to simultaneously improve operating reliability, create jobs and address climate change.
Guide to Renewable Energy Businesses in South AfricaOther relevant articles:
South African Solar Panels Can Solve Power Dilemma
Web article
December 2008
A baseline study on solar energy in South Africa produced by the DME reveals that South Africa receives between 6,000MJ./[m.sup.2] to 9,500MJ/[m.sub.2] (direct plus diffuse) solar radiation annually. As South Africa plunges deeper into darkness induced by power cuts, and loses economic productivity, the search is on for alternative, yet clean and affordable, sources of energy. New developments in solar panel technology pioneered in South Africa look very promising, Khadija Sharife reports.
ICP Solar Wins Business in Africa
December 1, 2008
Web article
ICP Solar Technologies Inc. (OTCBB: ICPR.OB, FRANKFURT: K1U.F), a developer, manufacturer and marketer of proprietary solar panels and products, today announced that the Company has signed an agreement worth $500,000 for off-grid modules in Africa. Deliveries are expected to begin in January, 2009.
Africa proposes its own solution to global warming
December 10, 2008
Web article
A coalition of 26 African countries is calling for the inclusion of carbon credits generated through afforestation, reforestation, agroforestry, reduced soil tillage, and sustainable agricultural practices in future climate agreements. These agriculture and forestry based credits could provide an important source of alternative revenue for rural areas.
Renewable energy target will be ´feasible but tricky´
November 7, 2008
Web article
A report examining South Africa’s ability to meet a 15% renewable energy target by 2020 finds the industry´s potential to be worth between R50 billion and R65 billion annually.
Cape Town Best City - UK Poll
Dec. 1, 2008
Cape Town - Readers of the Daily Telegraph in London have voted Cape Town the Best World City in its 2008 travel awards. South Africa itself also secured a place in the top three best non-European country category.
The Telegraph, one of the UK´s leading daily newspapers, polled 40 000 of its readers in the 10th awards of its kind. Cape Town beat both San Francisco and Sydney to be named as the world´s best city.
The SA government´s internet news service, BuaNews, on Monday quoted Cape Town Tourism chief executive, Mariëtte du-Toit Helmbold saying: "We are thrilled with the news. Cape Town is well placed to receive visitors looking for value for money and an authentic experience. Cape Town has so much to offer that visitors generally end up coming back to see and do more."
UK country manager at South African Tourism Lebohang Mokhesi also congratulated Cape Town on its award. She said: "Cape Town is one of the world´s most beautiful cities and to receive such an accolade from consumers themselves is great recognition of the wonderful tourism offering it has developed. Value for money and the strength of the pound compared with other world currencies appears to have been a deciding factor for readers when voting.
Cape Town was also recently voted one of ten cities in the world that are most likely to become a global sustainability centre by 2020. It has already won a long list of other awards including Africa´s Best City (US Travel and Leisure Best in the World Awards, July); Best Travel Destination in Africa and Middle East (US Travel & Leisure magazine, 2004 through 2007); and one of the world´s five Bluest Sky Destinations (expedia.co.uk).
Cape Town Mayor Helen Zille was also honoured earlier this year as the world´s number one mayor by City Mayors, a global local government think-tank. She led a group of 820 mayors from around the world in the competition, which spanned 18 months.
Source: Fin 24
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Sweetness 67 week(s) ago
There's no better place than Cape Town..... Wish you were here :)
Munda Kudi (Guest)
30 week(s) ago
I am a South African living in England and I used to Live in Athelone - Cape Town long time ago and even today I still have the memories of Cape Town, it is such a nice place I have ever seen, especially the weather in Cape Town is so nice and warm also beaches to name a few Hout Bay, Miuzenberg, Vish Hoek and I had time of my life at Sea Point - Cape Town. I would love to go back one day and experience the warmth and enjoy being on the soil of South Africa.
Munda Kudi (Guest)
30 week(s) ago
I am a South African living in England and I used to Live in Athelone - Cape Town long time ago and even today I still have the memories of Cape Town, it is such a nice place I have ever seen, especially the weather in Cape Town is so nice and warm also beaches to name a few Hout Bay, Miuzenberg, Vish Hoek and I had time of my life at Sea Point - Cape Town. I would love to go back one day and experience the warmth and enjoy being on the soil of South Africa.
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Concerns raised about US, African trade
Business Day31 October 2008
Hopewell Radebe
Johannesburg
AS ELECTION fever spreads in the US, the future of the African Growth and Opportunity Act (Agoa) has come under scrutiny.
Conceived under former president Bill Clinton, and signed into law by President George Bush, Agoa has enabled sub-Saharan African countries to export more than 1,800 tariff line items duty-free to the US - over and above the 4,600 tariff-free items listed under the Generalised System of Preferences.
At a forum in Johannesburg this week to discuss the upcoming US election, a panel debated whether the two presidential candidates - Democrat Barack Obama and Republican John McCain - would continue supporting the initiative despite the global economic crisis.
Questions raised included whether a Obama win would be a threat to tariff-free access to the US market, particularly as some of his supporters were from manufacturing industries such as the textile sector, which was affected by Agoa.
The US consul-general in Johannesburg, Andrew Passen, said Agoa was a basic US foreign policy that was unlikely to be changed. Under Bush, billions of dollars had been approved for African imports and were still committed for the next three years .
Fulbright scholar Donald Goodson predicted much closer relations between the US and Africa if Obama won. He said there was no way it would be business as usual for the US with a man at the helm with such close African ties. Obama would surely influence US foreign policy to be more favourable to countries in Africa and South America.
A senior researcher at the Centre for Policy Studies Francis Kornegay said even under McCain Agoa would remain a road map for the US that would enable sub-Saharan Africa to stimulate their economic growth and trade, enhance democracy and good governance, and combat HIV/AIDS.
There has been excitement at the US embassy in Pretoria about recent figures that show the US has become SA´s major trading partner after reaching $9.1bn last year. Britain used to be SA´s major trading partner. Figures also show that this may be a growing trend throughout the African countries that benefit from Agoa.
Craig Allen, a senior officer for the commercial section of the US embassy in Johannesburg, said although SA accounted for a mere 0.46% of the US´s total trade, the billions worth of trade between the two countries was significant in light of SA´s objective to grow its economy beyond 6%.
Allen said although US exports to SA grew 23.75%, amounting to $5.5bn last year compared with $4.46bn in 2006, the deficit was still in SA´s favour, with about $3.5bn last year and $3bn in 2006. Allen said 98.1% of SA´s exports to the US were now duty-free.
"Of course, there are those who wanted the US to open more opportunities for the industries that have been excluded from the Agoa programme," he said.
Sub-Saharan Africa accounts for slightly more than 1% of US merchandise exports and for slightly more than 3% of US merchandise imports, of which about 81% are petroleum products. Similarly, sub-Saharan Africa accounts for a little more than 1% of merchandise exports and imports with the European Union (EU).
According to the International Monetary Fund´s Direction of Trade Statistics Yearbook 2007 figures, the US became Africa´s largest single country market, purchasing 29.5% of the region´s exports in 2006. China came in second at 12.6% and Britain third at 6.2%. However, the EU collectively purchased 32.0% of sub-Saharan Africa´s exports in 2006, down from 34.6% in 2005. China, however, had increased its share of African exports almost 2% to a 12.6% share in the same period.
Allen said the US was also satisfied there were growing opportunities for its companies to venture into southern African markets, particularly SA. These companies were taking advantage of SA´s infrastructural development projects and preparations for the 2010 Soccer World Cup.
Allen further attributed this growth in trade to work done by the US trade hub office in Gaborone, Botswana, which had been promoting the export of products from the Southern African Development Community to the US.
This was being done in various ways, including by inviting South African companies to various trade shows across the US to showcase their products.
The trade office also helped by linking potential US counterparts to become agents for southern African products in the US market.
"The US government has not done this for other countries, but in the case of Africa this macro-level active promotion and exposure of some countries to our market has been a growing trend," Allen said.
According to the latest US/African Trade Profile, the US´s total trade with sub-Saharan Africa increased 15% in 2007, as both exports and imports grew.
The US merchandise trade deficit with sub-Saharan Africa continued to widen last year to $53bn, from $47bn in 2006. Nigeria, Angola, SA and the Republic of Congo accounted for 90% of the US trade deficit with sub-Saharan Africa last year.
Source: http://allafrica.com/stories/200810310333.html
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Mandela: His 8 Lessons of Leadership
Wed, July 9th, 2008
By Richard Stengel
Though Mandela has retreated from the public stage, the 90-year-old still speaks out, as he did in condemning Zimbabwe´s Mugabe.
Nelson Mandela has always felt most at ease around children,and in some ways his greatest deprivation was that he spent 27 years without hearing a baby cry or holding a child´s hand. Last month, when I visited Mandela in Johannesburg — a frailer, foggier Mandela than the one I used to know — his first instinct was to spread his arms to my two boys. Within seconds they were hugging the friendly old man who asked them what sports they liked to play and what they´d had for breakfast. While we talked, he held my son Gabriel, whose complicated middle name is Rolihlahla, Nelson Mandela´s real first name. He told Gabriel the story of that name, how in Xhosa it translates as "pulling down the branch of a tree" but that its real meaning is"troublemaker."
As he celebrates his 90th birthday next week, Nelson Mandela has made enough trouble for several lifetimes. He liberated a country from a system of violent prejudice and helped unite white and black, oppressor and oppressed, in a way that had never been done before. In the 1990s I worked with Mandela for almost two years on his autobiography, Long Walk to Freedom.After all that time spent in his company, I felt a terrible sense of withdrawal when the book was done; it was like the sun going out of one´s life. We have seen each other occasionally over the years, but I wanted to make what might be a final visit and have my sons meet him one more time.
I also wanted to talk to him about leadership. Mandela is the closest thing the world has to a secular saint, but he would be the first to admit that he is something far more pedestrian: a politician. He overthrew apartheid and created a nonracial democratic South Africa by knowing precisely when and how to transition between his roles as warrior, martyr, diplomat and statesman. Uncomfortable with abstract philosophical concepts, he would often say to me that an issue "was not a question of principle; it was a question of tactics." He is a master tactician.
Mandela is no longer comfortable with inquiries or favors.He´s fearful that he may not be able to summon what people expect when they visit a living deity, and vain enough to care that they not think him diminished. But the world has never needed Mandela´s gifts — as a tactician, as an activist and, yes, as a politician — more, as he showed again in London on June 25, when he rose to condemn the savagery of Zimbabwe´s Robert Mugabe. As we enter the main stretch of a historic presidential campaign in America, there is much that he can teach the two candidates. I´ve always thought of what you are about to read as Madiba´s Rules (Madiba, his clan name, is what everyone close to him calls him), and they are cobbled together from our conversation sold and new and from observing him up close and from afar. They are mostly practical. Many of them stem directly from his personal experience. All of them are calibrated to cause the best kind of trouble: the trouble that forces us to ask how we can make the world a better place.
No. 1
Courage is not the absence of fear — it´s inspiring others to move beyond it
In 1994, during the presidential-election campaign, Mandela got on a tiny propeller plane to fly down to the killing fields of Natal and give a speech to his Zulu supporters. I agreed to meet him at the airport, where we would continue our work after his speech. When the plane was 20 minutes from landing,one of its engines failed. Some on the plane began to panic. The only thing that calmed them was looking at Mandela, who quietly read his newspaper as if he were a commuter on his morning train to the office. The airport prepared for an emergency landing, and the pilot managed to land the plane safely. When Mandela and I got in the backseat of his bulletproof BMW that would take us to the rally, he turned to me and said, "Man, I was terrified up there!"
Mandela was often afraid during his time underground, during the Rivonia trial that led to his imprisonment, during his time on Robben Island. "Of course I was afraid!" he would tell me later. It would have been irrational, he suggested, not to be. "I can´t pretend that I´m brave and that I can be at the whole world." But as a leader, you cannot let people know. "You must put up a front."
And that´s precisely what he learned to do: pretend and, through the act of appearing fearless, inspire others. It was a pantomime Mandela perfected on Robben Island, where there was much to fear. Prisoners who were with him said watching Mandela walk across the courtyard, upright and proud,was enough to keep them going for days. He knew that he was a model for others,and that gave him the strength to triumph over his own fear.
No. 2
Lead from the front — but don´t leave your base behind
Mandela is cagey. in 1985 he was operated on for an enlarged prostate. When he was returned to prison, he was separated from his colleagues and friends for the first time in 21 years. They protested. But as his longtime friend Ahmed Kathrada recalls, he said to them, "Wait a minute, chaps. Some good may come of this."
The good that came of it was that Mandela on his own launched negotiations with the apartheid government. This was anathema to the African National Congress (ANC).After decades of saying "prisoners cannot negotiate" and after advocating an armed struggle that would bring the government to its knees, he decided that the time was right to begin to talk to his oppressors.
When he initiated his negotiations with the government in1985, there were many who thought he had lost it. "We thought he was selling out," says Cyril Ramaphosa, then the powerful and fiery leader of the National Union of Mineworkers. "I went to see him to tell him, What are you doing? It was an unbelievable initiative. He took a massive risk."
Mandela launched a campaign to persuade the ANC that his was the correct course. His reputation was on the line. He went to each of his comrades in prison, Kathrada remembers, and explained what he was doing. Slowly and deliberately, he brought them along. "You take your support base along with you," says Ramaphosa, who was secretary-general of the ANC and is now a business mogul. "Once you arrive at the beachhead, then you allow the people to move on. He´s not a bubble-gum leader — chew it now and throw it away."
For Mandela,refusing to negotiate was about tactics, not principles. Throughout his life,he has always made that distinction. His unwavering principle — the over throw of apartheid and the achievement of one man, one vote — was immutable, but almost anything that helped him get to that goal he regarded as a tactic. He is the most pragmatic of idealists.
"He´s a historical man," says Ramaphosa. "He was thinking way ahead of us. He has posterity in mind: How will they view what we´ve done?" Prison gave him the ability to take the long view. It had to;there was no other view possible. He was thinking in terms of not days and weeks but decades. He knew history was on his side, that the result was inevitable; it was just a question of how soon and how it would be achieved."Things will be better in the long run," he sometimes said. He always played for the long run.
No. 3
Lead from the back — and let others believe they are in front
Mandela loved to reminisce about his boyhood and his lazy afternoons herding cattle. "You know," he would say, "you can only lead them from behind." He would then raise his eyebrows to make sure I got the analogy.
As a boy, Mandela was greatly influenced by Jongintaba, the tribal king who raised him.When Jongintaba had meetings of his court, the men gathered in a circle, and only after all had spoken did the king begin to speak. The chief´s job, Mandela said, was not to tell people what to do but to form a consensus. "Don´t enter the debate too early," he used to say.
During the time I worked with Mandela, he often called meetings of his kitchen cabinet at his home in Houghton, a lovely old suburb of Johannesburg. He would gather half a dozen men, Ramaphosa, Thabo Mbeki (who is now the South African President) and others around the dining-room table or sometimes in a circle in his driveway. Some of his colleagues would shout at him — to move faster, to be more radical — and Mandela would simply listen.When he finally did speak at those meetings, he slowly and methodically summarized everyone´s points of view and then unfurled his own thoughts, subtly steering the decision in the direction he wanted without imposing it. The trick of leadership is allowing yourself to be led too. "It is wise," he said, "to persuade people to do things and make them think it was their own idea."
No. 4
Know your enemy — and learn about his favorite sport
As far back as the 1960s, Mandela began studying Afrikaans, the language of the white South Africans who created apartheid. His comrades in the ANC teased him about it, but he wanted to understand the Afrikaner´s world view; he knew that one day he would be fighting them or negotiating with them, and either way, his destiny was tied to theirs.
This was strategic in two senses: by speaking his opponents´language, he might understand their strengths and weaknesses and formulate tactics accordingly. But he would also be ingratiating himself with his enemy.Everyone from ordinary jailers to P.W. Botha was impressed by Mandela´s willingness to speak Afrikaans and his knowledge of Afrikaner history. He even brushed up on his knowledge of rugby, the Afrikaners´ beloved sport, so he would be able to compare notes on teams and players.
Mandela understood that blacks and Afrikaners had something fundamental in common: Afrikaners believed themselves to be Africans as deeply as blacks did. He knew,too, that Afrikaners had been the victims of prejudice themselves: the British government and the white English settlers looked down on them. Afrikaners suffered from a cultural inferiority complex almost as much as blacks did.
Mandela was a lawyer, and in prison he helped the warders with their legal problems. They were far less educated and worldly than he, and it was extraordinary to them that a black man was willing and able to help them. These were "the most ruthless and brutal of the apartheid regime´s characters," says Allister Sparks, the great South African historian, and he "realized that even the worst and crudest could be negotiated with."
No. 5
Keep your friends close — and your rivals even closer
Many of the guests Mandela invited to the house he built in Qunu were people whom, he intimated to me, he did not wholly trust. He had them to dinner; he called to consult with them; he flattered them and gave them gifts. Mandela is a man of invincible charm — and he has often used that charm to even greater effect on his rivals than on his allies.
On Robben Island, Mandela would always include in his brain trust men he neither liked nor relied on. One person he became close to was Chris Hani, the fiery chief of staff of the ANC´s military wing. There were some who thought Hani was conspiring against Mandela, but Mandela cozied up to him. "It wasn´t just Hani," says Ramaphosa. "It was also the big industrialists, the mining families, the opposition. He would pick up the phone and call them on their birthdays. He would go to family funerals. He saw it as an opportunity." When Mandela emerged from prison, he famously included his jailers among his friends and put leaders who had kept him in prison in his first Cabinet. Yet I well knew that he despised some of these men.
There were times he washed his hands of people — and times when, like so many people of great charm, he allowed himself to be charmed.Mandela initially developed a quick rapport with South African President F.W.de Klerk, which is why he later felt so betrayed when De Klerk attacked him in public.
Mandela believed that embracing his rivals was a way of controlling them: they were more dangerous on their own than within his circle of influence. He cherished loyalty, but he was never obsessed by it. After all,he used to say,"people act in their own interest." It was simply a fact of human nature, not a flaw or a defect. The flip side of being an optimist — and he is one — is trusting people too much. But Mandela recognized that the way to deal with those he didn´t trust was to neutralize them with charm.
No. 6
Appearances matter — and remember to smile
When Mandela was a poor law student in Johannesburg wearing his one thread bare suit, he was taken to see Walter Sisulu. Sisulu was a real estate agent and a young leader of the ANC. Mandela saw a sophisticated and successful black man whom he could emulate. Sisulu saw the future.
Sisulu once told me that his great quest in the 1950s was to turn the ANC into a mass movement; and then one day, he recalled with a smile,"a mass leader walked into my office." Mandela was tall and handsome,an amateur boxer who carried himself with the regal air of a chief´s son. And he had a smile that was like the sun coming out on a cloudy day.
We sometimes forget the historical correlation between leadership and physicality. George Washington was the tallest and probably the strongest man in every room he entered. Size and strength have more to do with DNA than with leadership manuals, but Mandela understood how his appearance could advance his cause. As leader of the ANC´s underground military wing, he insisted that he be photographed in the proper fatigues and with a beard, and throughout his career he has been concerned about dressing appropriately for his position. George Bizos, his lawyer, remembers that he first met Mandela at an Indian tailor´s shop in the 1950s and that Mandela was the first black South African he had ever seen being fitted for a suit. Now Mandela´s uniform is a series of exuberant-print shirts that declare him the joyous grandfather of modern Africa.
When Mandela was running for the presidency in 1994, he knew that symbols mattered as much as substance. He was never a great public speaker, and people often tuned out what he was saying after the first few minutes. But it was the iconography that people understood. When he was on a platform, he would always do the toyi-toyi, the township dance that was an emblem of the struggle. But more important was that dazzling, beatific,all-inclusive smile. For white South Africans, the smile symbolized Mandela´slack of bitterness and suggested that he was sympathetic to them. To black voters, it said, I am the happy warrior, and we will triumph. The ubiquitous ANC election poster was simply his smiling face."The smile," says Ramaphosa, "was the message."
After he emerged from prison, people would say, over and over, It is amazing that he is not bitter. There are a thousand things Nelson Mandela was bitter about, but he knew that more than anything else, he had to project the exact opposite emotion. He always said, "Forget the past"— but I knew he never did.
No. 7
Nothing is black or white
When we began our series of interviews, I would often ask Mandela questions like this one: When you decided to suspend the armed struggle, was it because you realized you did not have the strength to overthrow the government or because you knew you could win over international opinion by choosing nonviolence? He would then give me a curious glance and say, "Why not both?"
I did start asking smarter questions, but the message was clear: Life is never either/or.Decisions are complex, and there are always competing factors. To look for simple explanations is the bias of the human brain, but it doesn´t correspond to reality. Nothing is ever as straight forward as it appears.
Mandela is comfortable with contradiction. As a politician,he was a pragmatist who saw the world as infinitely nuanced. Much of this, I believe, came from living as a black man under an apartheid system that offered a daily regimen of excruciating and debilitating moral choices: Do I defer to the white boss to get the job I want and avoid a punishment? Do I carry my pass?
As a statesman, Mandela was uncommonly loyal to Muammar Gaddafi and Fidel Castro.They had helped the ANC when the U.S. still branded Mandela as a terrorist.When I asked him about Gaddafi and Castro, he suggested that Americans tend to see things in black and white, and he would upbraid me for my lack of nuance. Every problem has many causes. While he was indisputably and clearly against apartheid, the causes of apartheid were complex. They were historical,sociological and psychological. Mandela´s calculus was always, What is the end that I seek, and what is the most practical way to get there?
No. 8
Quitting is leading too
In 1993, Mandela asked me if I knew of any countries where the minimum voting age was under 18. I did some research and presented him with a rather undistinguished list: Indonesia, Cuba, Nicaragua, North Korea and Iran. He nodded and uttered his highest praise: "Very good, very good." Two weeks later, Mandela went on South African television and proposed that the voting age be lowered to 14. "He tried to sell us the idea," recalls Ramaphosa, "but he was the only [supporter]. And he had to face the reality that it would not win the day. He accepted it with great humility. He doesn´t sulk. That was also a lesson in leadership."
Knowing how to abandon a failed idea, task or relationship is often the most difficult kind of decision a leader has to make. In many ways, Mandela´s greatest legacy as President of South Africa is the way he chose to leave it. When he was elected in 1994, Mandela probably could have pressed to be President for life — and there were many who felt that in return for his years in prison, that was the least South Africa could do.
In the history of Africa, there have been only a handful of democratically elected leaders who willingly stood down from office. Mandela was determined to set a precedent for all who followed him — not only in South Africa but across the rest of the continent. He would be the anti-Mugabe, the man who gave birth to his country and refused to hold it hostage. "His job was to set the course," says Ramaphosa, "not to steer the ship."He knows that leaders lead as much by what they choose not to do as what they do.
Ultimately,the key to understanding Mandela is those 27years in prison. The man who walked onto Robben Island in 1964 was emotional,headstrong, easily stung. The man who emerged was balanced and disciplined. He is not and never has been introspective. I often asked him how the man who emerged from prison differed from the willful young man who had entered it. He hated this question. Finally,in exasperation one day, he said, "I came out mature." There is nothing so rare — or so valuable — as a mature man. Happy birthday, Madiba.
Source: http://www.time.com/time/world/article/0,8599,1821467,00.html
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The African Alpha: SACCA´s Blog
SACCA´s new blog...insightful articles, open to your responses...
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Africa working to shape its own destiny….
African solutions to African problems
01 August 2008
In a bid to develop domestic,regional and continental institutions to mobilise resources for the economic development, the African Union (AU) will establish a financial institution under the name of African Monetary Fund (AMF). Along with the African Investment Bank and African Central Bank, the AMF will function as a lender of last resort before the African countries go to the IMF.
Since its inception, the African Union has advocated for institutional and policy options which come from within the continent and respond to the needs of the African people. In that sense, it is argued by the international experts that the strict neoliberal conditionality of the IMF and WB will not apply in the context of the regional monetary union.
In an interview, the Commissioner for Economic Affairs, Maxwell Mkwazelamba, stated that the continent was increasingly growing frustrated over wealthy countries’ failure to live up to pledges to double aid for Africa by 2010. He then continued: “It is frustrating to note that our partners have not lived up to what they have committed themselves to do, that’s why we are going to develop some mechanisms to try and look for our own funding.”
The issue of development has been largely, if not totally, designed,managed and controlled by the Northern institutions or political authorities. Among the others, the continent’s macro-economic development agenda has been shaped by the International Monetary Fund(IMF) and World Bank (WB) which have been consistently promoting neoliberal policy objectives as the solution to the African problems.
The AMF will be one of the three pillars designed to provide African solutions to African problems in the field of socio-economic development and will have its headquarters in Yaoundé (Cameroon). The other two institutions are African Central Bank (ACB) and African Investment Bank (AIB).
Key links:
African Union: http://www.africa-union.org/root/au/index/index.htm
AllAfrica, 9 July: http://allafrica.com/stories/200807090650.html
Source: http://www.eurodad.org/whatsnew/articles.aspx?id=2632
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Experts Call for Expanded U.S. - Africa Agricultural Trade
By Charles W. Corey
Published: July 16, 2008
Washington - There is no better time than now - in the face of record-high food and commodity prices - to expand the African Growth and Opportunity Act (AGOA) to further open and enhance U.S. - Africa agricultural trade.
Three specialists on AGOA, a preferential tariff program originally passed by Congress in 2000, made that point July 14 at the AGOA Civil Society Forum held on Capitol Hill in Washington. The annual three-day forum runs July 14-16. The theme this year is "Mobilizing Private Investment for Trade and Growth."
The three specialists are: Daniel Karanja, a senior fellow at the Partnership to Cut Hunger and Poverty in Africa; Jayme White, legislative director in the office of Washington state Representative Jim McDermott; and Likando Mukumbuta, the chief executive officer of Zambia Agribusiness Technical Assistance Centre (ZATAC Ltd.) in Zambia.
Karanja argued for the agricultural sector in Africa to be more integrated into AGOA.
"If the purpose is to cut hunger and poverty in Africa and to promote economic growth and trade, then AGOA definitely needs to consider how its benefits can reach the rural poor, the small holder who are the foundation of African economies," Karanja said.
Heralding the trade legislation, Karanja said AGOA has resulted in tremendous growth of U.S.-Africa trade, which now exceeds some $80 billion annually.
"Our concern," he said, is that "only a few countries have benefited from AGOA and only a few sectors" of their economies have benefited, with oil and gas exports in the lead at about 90 percent of total U.S.-Africa trade, followed by textiles at less than 5 percent and agriculture less than 1 percent in 2005.
"This is a big concern for those people who understand the genesis of AGOA. This bill was introduced to promote trade and economic growth in Africa, but as many ... know, agriculture is the major sector of most of the economies in Africa and accounts for the largest share f gross domestic product, largest share of export earnings for African economies, largest share of population with three out of every four Africans living in rural areas and depending entirely on agriculture, and the largest share of employment."
With ever-higher prices for food and fuel, the issue of broadening AGOA is of "the utmost importance," he said.
Reinforcing that point, Jayme White, who has worked on the AGOA legislation since its inception on Capitol Hill, said AGOA is a trade program that spells out the U.S. tariff regime for goods imported from sub-Saharan Africa.
Speaking of the original AGOA legislation or AGOA I, which was passed in 2000, he said, "There were a lot of compromises that were made, but in effect, AGOA eliminated tariffs on over 95 percent of imports that come from sub-Saharan Africa," including some on apparel. "Where we fell short was on full tariff elimination on what we call sensitive agricultural goods - sugar, corn, peanuts, some value-added agricultural products like chocolate and some syrups."
Since that time, he said, AGOA II in 2002 and AGOA IV in 2006 mainly focused on apparel. AGOA III, he said, did address the need for trade-capacity building in Africa and stipulated that 20 specialists be put in sub-Saharan Africa to help African farmers comply with U.S. laws on importing agricultural goods into the U.S. market.
"We have seen some improvements as a result," White said, but "we have fallen far short on agriculture because of our focus on apparel."
He cautioned against making the assumption that only the oil and gas sector is benefiting. The upside of AGOA, he said, is that "we are seeing some diversification" and an "explosion of apparel imports" under AGOA "which has created tens of thousands of jobs in countries like Lesotho, Swaziland, Kenya, Madagascar and Mauritius.
"That is terrific," he said, while acknowledging that "the downside is that most of the benefits have been in southern Africa in the apparel sector."
Overall, "we have not seen the explosion of imports and trade and investment that I think the proponents of AGOA would have first liked to see," White said.
What has been learned over the years, he said, is the importance of both trade and aid and the transfer of agricultural skills and technology.
What is still needed, he said, is coordinated, long-term trade-capacity building, especially as much of AGOA is slated to expire in 2015. Also needed are public - and private - sector investment in Africa and the coverage under AGOA of all African agricultural products.
For all of this to happen, he said, those who work with Africa must "speak with one voice" on Capitol Hill to lobby Congress."AGOA would not have happened without the African diplomatic corps because they were organized behind the bill and they asked for it," and that same energy is needed today, he said.
Likando Mukumbuta - who has more than 16 years of agricultural development experience in Africa - reiterated that Africa needs both trade and aid, but what is more important is the active engagement and participation of U.S. business.
"The transactions and exports that are needed are not going to happen in meetings such as this one," he told his audience."They are not going to happen at conferences and in legislation. It is actually businesses being able to actually transact, negotiate and to export to each other with facilitative legislation" that will create meaningful economic growth and development.
He praised the United States for doing so much in Zambia to help streamline the Zambian economy and stimulate private-sector growth and development. He said that while the United States has helped improve the investment environment in Africa, it has not always been a participant in the actual investment.
"When it comes to taking advantage of that very environment that has been created," he said, "you tend to find that it is other players who are there who take advantage." He called for more American investment, and said he would like to see Americans "at the table when the deals are being done."
The AGOA Civil Society Forum began earlier in the day with digital video conferences linking American and African civil society groups in the United States with their counterparts in Kenya, Malawi, Tanzania, Cameron,Mauritania and Togo.
The forum also features a ministerial session, which will be addressed by Secretary of State Condoleezza Rice, and a private-sector forum.The event alternates its venue annually between the United States and Africa.
Source: U.S. Department of State
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Dow Jones Launches Africa Titans 50 Index
Thurs, July 10th 2008
Dow Jones Indexes has launched the Dow Jones Africa Titans 50 Index, a pan-African index that measures the stock performance of 50 companies headquartered in or generating the majority of revenues in Africa.
Market participants have direct or indirect exposure to the11 markets in Africa through the index. Countries included are Angola, Democratic Republic of the Congo (DR Congo), Egypt, Equatorial Guinea, Ghana,Kenya, Mali, Morocco, Nigeria, South Africa and Zambia.
The index has been licensed to Van Eck Global, a provider of global investment products, to serve as the basis for an exchange-traded fund. This is the first time a pan-African index will serve as underlying for an ETF.
The Market Vectors Africa Index ETF will become available on July 14 at the New York Stock Exchange.
The Africa Titans 50 Index is weighted by float-adjusted market capitalisation. Each country’s weight is capped at 25% and weights of individual components are capped at 8% with a maximum of 15 companies for a country to be included in the index, companies must have a minimum market capitalisation of $200 million and a minimum three-month average daily trading volume of $1 million.
Five countries - South Africa, Egypt, Kenya, Nigeria and Morocco - are included in the index and currently represent the investable universe. Other African countries are represented where the offshore companies generate the majority of revenues. Among these are: Angola, DR Congo, Equatorial Guinea, Ghana, Mali and Zambia.
The three biggest sectors represented in the index are basic resources, banking, and oil & gas, according to the super sector classification breakdown.
The index is calculated in US dollars and reviewed annually in June with quarterly updates.
Source: Hedge Fund Review
View website article: http://www.hedgefundsreview.com/public/showPage.html?page=803992
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Herbalife (Guest)
7 week(s) ago
Herbalife International (NYSE: HLF) is a global nutrition, weight-loss and skin-care company. The company was founded in 1980 and it employs around 4,000 people worldwide. Herbalife reported global sales of USD 2.3 billion in 2009 and its corporate headquarters are in Los Angeles, USA.
The company distributes its products in 73 countries through a network of approximately 2.1 million independent distributors, some of whom earn profit on product sales and additional commission from a multi-level marketing (MLM) compensation structure.
Herbalife has faced occasional legal challenges over the safety of its products. As of 2009, none of these has been upheld
Herbalife - The Herbalife Family Foundation (HFF) is dedicated to improving children's lives by helping organizations provide healthy nutrition to children at risk. Additionally, HFF often supports relief efforts in response to natural disasters.
Herbalife - Information regarding the science behind the success of Herbalife
Herbalife - Learn about the different ways in which Herbalife represents an exciting opportunity for those who choose to become Independent Distributors
Herbalife (Guest)
7 week(s) ago
Herbalife International (NYSE: HLF) is a global nutrition, weight-loss and skin-care company. The company was founded in 1980 and it employs around 4,000 people worldwide. Herbalife reported global sales of USD 2.3 billion in 2009 and its corporate headquarters are in Los Angeles, USA.
The company distributes its products in 73 countries through a network of approximately 2.1 million independent distributors, some of whom earn profit on product sales and additional commission from a multi-level marketing (MLM) compensation structure.
Herbalife has faced occasional legal challenges over the safety of its products. As of 2009, none of these has been upheld
Herbalife - The Herbalife Family Foundation (HFF) is dedicated to improving children's lives by helping organizations provide healthy nutrition to children at risk. Additionally, HFF often supports relief efforts in response to natural disasters.
Herbalife - Information regarding the science behind the success of Herbalife
Herbalife - Learn about the different ways in which Herbalife represents an exciting opportunity for those who choose to become Independent Distributors
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If only south africa had enough money, we could build the greatest solar farms in the world... We have the engineers, we have the expertise, we have the technology. We need the money