A look into Business in Africa

Business and Investing in Africa

More on EASSy cable and the private sector players involved

Posted by stb0327 on April 4, 2007

This business day article highlights the difficulty theat lies in a partnership between public and private actors, each with their own agenda and objectives, in providing low-cost and efficient access to a broadband connection originating from a cable to be installed around the Eastern rim of Africa and coming inland to reach landlocked countries.  Reliance and Alcatel-Lucent both seem to be willing to lay the ground work for actually providing the infrastructural needs but other private players will not tap into the network unless it is a profitable venture.  Meanwhile, the governments of those countries that stand to benefit from the cable are demanding cheap access be provided to drive growth in the IT and Communications sectors, generating exponential growth in these service industries, more FDI and SME development.  This is an interesting story that is playing out and a valuable lesson in Public-Private Partnerships P3s.

Lesley Stones
Johannesburg

ARGUMENTS about the cost of bandwidth on a telecommunications cable to be laid around Africa’s east coast could see more money pumped into a duplicate cable laid in direct competition to the original R300m project.

A second multimillion-dollar cable to replicate the planned East Africa Submarine System (EASSy) may be laid because of a clash between private investors wanting to profiteer and governments demanding cheaper bandwidth to reduce the cost of doing business and stimulate economic growth. Read the rest of this entry »

Posted in Investing, My Take | 1 Comment »

Some positive light thrown on corporate ‘survivors’ in Zimbabwe

Posted by stb0327 on April 3, 2007

I get the feeling more and more as of late that there are hordes of investors standing eagerly by as the Zim crisis appears to be reaching some sort of climax.  A recent rise in the ZSE is partly “underpinned by weak money market interest rates, higher exchange rate movements coupled with negative inflation projections”.  How sustainable is this with the tightening of liquidity due to treasury bill deficits and approaching maturities couple with the printing of more and more Zim dollars? Talk about a bubble being blown (and burst) again from the same old balloon that continues to wreak havoc on the Zim economy. But how much do past infrastructure developments and the sound economic and business principles that made Zim the ‘breadbasket’ of Southern Africa keep wary eyed investors anxious in the wake of a potential overturn of a dictator who seems to be getting more and more desperate in finding support locally, regionally and internationally? Expected returns could be what puts Zim back on the fast track to finding its way back to the ‘breadbasket’ label it once adorned. Also see discussion on Ryan Shen-Hoover’s site.

Zim corporate survivors in strong position – Imara

Published: 03-APR-07

Harare – Zimbabwe’s listed companies are proven survivors that are well placed for the long haul. That’s the positive message drawn from Zimbabwe’s corporate reporting season by the investment professionals at Harare-based Imara Asset Management Zimbabwe, part of the Imara financial services group. Read the rest of this entry »

Posted in Investing, Macro Fundamentals, My Take | 1 Comment »

ICT environment in sub-Saharan Africa

Posted by stb0327 on April 1, 2007

A couple of recent articles from www.mybroadband.co.za highlight some of the key issues surrounding the ICT curve in SSA. 

SA’s broadband and ICT environment worsen

By Hilton Tarrant, Moneyweb, 31 March 2007

A report released yesterday by the World Economic Forum shows that South Africa has fallen ten positions in the Networked Readiness Index.
 

While many will be tempted to say that our broadband access has increased, costs have come down, and regulation is improving, this definitive study shows that SA is simply not keeping up with the rest of the world.

The report, officially titled “The Global Information Technology Report 2006-2007″ (GITR) compares 122 economies worldwide in the following areas:

  • The regulatory/infrastructure environment for ICT;
  • The readiness of individuals, businesses and governments to use and benefit from ICT;
  • The actual usage of the last technology available. Read the rest of this entry »

Posted in Macro Fundamentals | Leave a Comment »

African Finance Corporation set to begin operations by mid-April 2007

Posted by stb0327 on March 27, 2007

Notice IT services is not mentioned as one of the key sectors where it seems that if the public and private sector were aligned in individual countries, this sector would also deserve much attention as it has in Rwanda.

“The key sectors have been identified as: Agriculture, Power, Energy, Telecommunications, Financial Services, Mining and Fast Moving Consumer Goods, with Tourism mentioned as an additional area of investment”.
  

Nigerian team in South Africa to sell African Finance Corporation

27 March 2007
Central Bank of Nigeria

The Central Bank of Nigeria today visited South Africa as part of an international road show to interest business in investing in the African Finance Corporation, a private sector-driven African investment bank that will commence operations in mid-April 2007.

At an investor forum held in Sandton, Central Bank of Nigeria (CBN) Governor Prof Charles Soludo outlined the background to the institution, the business case for its existence and future prospects. The AFC, modelled on the lines of the International Finance Corporation, the private sector arm of the World Bank, is an initiative of the Federal Government of Nigeria, driven by the CBN. Read the rest of this entry »

Posted in Investing | 2 Comments »

Macro Accounts show solid performance and stability for Ghana

Posted by stb0327 on March 23, 2007

Buoyed by private remittances, Ghana saw an increase in its BOP surplus while the cedi depreciated against the major currencies. 

Private Remittances Rake In $5.78bn (www.ghanaweb.com

Private inward transfers through the banks and finance companies from January to December 2006 amounted to $5.78 billion, which represents a 21.5 per cent increase over those for 2005, Dr Paul Acquah, Governor of the Bank of Ghana, has announced.He said the foreign exchange market remained buoyant in 2006 with purchases and sales of foreign exchange by the banks and forex bureaux increasing by 16.6 per cent over the 2005 level to $6.8 billion. Read the rest of this entry »

Posted in Macro Fundamentals | 1 Comment »

Fitch Ratings upgrades Malawi’s long-term foreign currency issuer default rating

Posted by stb0327 on March 22, 2007

One of the ironies of debt relief is that it allows countries better terms on the issuance of more debt. It is vitally important for Goodall Gondwe, the Ministry of Finance and the Malawian government to continue on this path of fiscal discipline and diligent policy-making in order to be taken seriously by outside investors and perhaps more importantly, the plethora of Malawi nationals living outside their homeland waiting for the opportunity to remit serious cash flows back to the motherland.  Health, education, irrigation and infrastuctrual developments together with a mixed inflow of capital from investors and donors need to be key objectives in reaching private and public sector development on an altogether different scale than Malawi’s neighbors who at the moment, need more incentives to particpate in development projects with the small landlocked country.

Reuters South Africa – Johannesburg,South Africa
LILONGWE (Reuters) – The latest Fitch rating upgrade for Malawi will boost donor confidence and foreign investment, Finance Minister Goodall Gondwe said on Friday. “This is a signal to the rest of the world that Malawi is ready to participate in the global economy and that it has the ability and is willing to repay debt,” Gondwe told a conference. Fitch Ratings last week announced that it had upgraded the long-term foreign currency Issuer Default rating of Malawi to ‘B-‘ (B minus) with a stable outlook, from ‘CCC’. “This upgrade of B- is nothing to write home about but considering our circumstances and where we are coming from this is very important because it will help build more donor confidence, increase investment and it signals our road to economic recovery,” Gondwe said. The World Bank and the International Monetary Fund cancelled $2.9 billion of Malawi debt in September last year. But Malawi remains one of the world’s poorest nations with annual per capita income of about $160, and continues to rely heavily on foreign aid despite the debt relief. External debt slid to 23 percent of GDP at the end of last year compared with 142 percent at the end of 2005. Charles Seville, associate director of Fitch’s Africa and Middle East sovereign team, told delegates to the conference that other positive developments in Malawi include a cut in the fiscal deficit and tighter controls on public spending … 

Posted in Macro Fundamentals, My Take | 3 Comments »

Alcatel-Lucent wins $240 million African cable deal

Posted by stb0327 on March 13, 2007

In January, Flag Telecom, a unit of Indian firm Reliance Communications, said it planned to build a submarine cable around the east of Africa.  On March 9, 2007, Reuters Africa reported that the French company, Alcatel-Lucent  has been awarded a $240 million contract to build a telecoms cable around East Africa. Flag Telecom had stated in January that it was willing to invest $1.5 billion in their own project while an advisor to the East African Submarine Cable System (EASSy) (now in Alcatel-Lucent’s hands), was quoted as saying that the Flag project would need to get approval from the same African governments who have just completed the EASSy agreement.  For more information on the EASSy project, go to NEPAD’s e-Africa Commission website.

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Ghana looks to raise $500 million via the bond market

Posted by stb0327 on March 6, 2007

Just as Ghana is reaching its 50 year mark since independence and the subsequent socialist leadership of the ‘pan-Africanist’ Kwame Nkrumah, the prospects for new and continued growth remain positive.   The World Bank Group reports,”In a major new state-of-the-art move on March 1, practically all donors (covering 95% of flows to Ghana) signed an innovative commitment, the Ghana Joint Assistance Strategy – G-JAS.  Covering a four-year program, with as much as US$5.3 billion, the G-JAS partners commit to back Ghana’s national development strategy at the highest best-practice levels, harmonizing work and backing results with efficient resource utilization.”

“For 2007 the Bank is committing to more than $400 million in new finance.  The World Bank Group is also seeking to combine the tools of the whole World Bank Group, including IFC and MIGA, for innovative financing solutions to expensive infrastructure investment.”

AllAfrica.com pulled a recent article from the Public Agenda in Accra that describes Ghana’s plans for its first international sale of of bonds “to help spur a market for corporate debt” (http://allafrica.com/stories/200703050502.html).

Ghanaweb.com (http://www.Ghanaweb.com) reported today on Paul Wolfowitz and the World Bank’s engagment in Ghana as well as specific projects in cocoa processing, horticulture product storage facilities, internet service provision and municipal governance (as well as one project near and dear to my heart – mushroom farming (http://www.ghanaweb.com/GhanaHomePage/economy/artikel.php?ID=120242)) that are helping to diversify the economy that is still largely commodity/natural resource-based.

Ghana has been the recent beneficiary of increased commodity prices (i.e. gold) and debt relief that is allowing the country more favorable credit ratings (see article at allAfrica.com that mentions recent Fitch ratings) and to become a more attractive destination for investors looking for higher returns but more importantly, a much safer asset class in African countries less burdened by debt overhang and showing signs of sustained growth and sound governance.

Regionally, Cote D’Ivoire has signed a peace accord that if held by all parties involved, could see the re-emergence of the world’s largest cocoa producer and West African success story of the 1990s (http://news.bbc.co.uk/2/hi/africa/6417349.stm). 

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Surveys suggest little worry among Africa’s business leaders about Chinese competition

Posted by stb0327 on March 4, 2007

Despite all of the rhetoric coming out of Western media outlets about the ‘colonialist’ aspirations of Chinese investments in Africa, recent surveys suggests business leaders in Kenya, Uganda and Tanzania do not feel threatened by Chinese business coming into their countries.  Of course, these countries are not overflowing with oil where China’s interests in Africa are receiving the most political attention, but the article suggests business people in sectors like agriculture and tourism see the Chinese presence as a chance to mold solid partnerships with the Asian nation that will mutually benefit both countries overall.

Another recent article found online states:(http://www.greenleft.org.au/2007/701/36384)

According to the most recent UN figures, toyal FDI holdings in Africa in 2005 were worth $96 billion, of which European firms accounted for 61%, US firms 20%, Asian firms 8% and South African firms 2%. Of the $29 billion of FDI that went into Africa in 2005, only $1.2 billion (4.1%) came from China.

Flows of Chinese capital into China will always seem threatening to those foreign policy-makers still tossing and turning at night remembering the Cold War and the ongoing fight for influence throughout the world. For the new generation of African business people that are active and thinking on their feet, these capital flows that aren’t necessarily going only into natural resources or that might now have a better chance of trickling down with more sound governance, Chinese dollars are valued the same as U.S. dollars. And as the above UN figures show, these Chinese dollars are still miniscule in comparison with U.S. and European capital stocks and flows. 

Kenya and Uganda businesspersons say their businesses are least likely to be affected by Chinese presence in Africa and have therefore embraced them in some of their businesses.

According to Tanzania Business Leaders Confidence Index surveys done by Steadman Group and presented by its Managing Director George Waititu yesterday, 20 per cent of businesspersons in the two East African countries showed that Chinese ventures in Africa were of little or no effect on their businesses. Read the rest of this entry »

Posted in China's Investments in Africa | Leave a Comment »

Entrepreneurial Activity in Africa

Posted by stb0327 on February 25, 2007

Here’s a recent link to an article picked up by the Nyasa Times about my experiences working with entrepreneurs in Malawi and South Africa. http://www.nyasatimes.com/Business/265.html

Another link here from the Center for Global Development  http://www.cgdev.org/content/publications/detail/12095/ provides some insight into the research question “Why are there so few black-owned firms in Africa?”.

I am currently writing my Master’s thesis on Broad-Based Black Economic Empowerment (BBBEE) in South Africa and its impact on entrepreneurship in the informal and formal sectors. One of my fellow peers at the Whitman School of Management here at Syracuse has told me its a bit of poetry but I am really trying to make the paper as empirical as possible to get an idea of how government policy can either lift constraints or create new contraints for the micro- small- and medium-sized enterprise (SMME).  I am looking at separate industries’ codes to meet empowerment criteria, the level of government vs. private sector spending on empowerment deals, training and procurement and I am trying to find data that might suggest more informal business entry into the formal sector and see whether or not empowerment transactions or transfers might be correlated to entrance of black buisness owners into the formal sector and/or growth in firm size of black owned businesses.

It is an interesting time in South Africa with the World Cup around the corner in 2010 and there will be a huge window of opportunity for small and medium sized business owners to capitalize on the increasing number of tourists and business partners now looking towards South Africa’s markets for investment.  Who are the entrepreneurs who will or perhaps who can, really make the most of this opportunity given the distribution of business/capital ownership and constraints across different demographics in modern-day South Africa remains to be seen (and predicted)?

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