More on EASSy cable and the private sector players involved

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.

Some positive light thrown on corporate ’survivors’ in Zimbabwe

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.

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

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 … 

Ghana looks to raise $500 million via the bond market

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). 

Entrepreneurial Activity in Africa

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)?

Some food for thought on Africa and Business

Without diving into a list of academic articles written by academics who specialize in African economies and the like, let me pose a few questions for anyone remotely interested in Africa and business. 

Instead of the ‘brain drain’ that we hear so much about, how much economic gain results (in the form of remittances and/or investments) from people in Africa moving to Europe, North America, South Africa or even the city to become more educated, to find employment or both?

Is there a networking effect where, once opportunities pop their beautiful head up at home, educated Africans will seize these opporunities by starting-up SMEs and find increasing ways to finance these ventures?

How heavily invested are South African companies in the rest of Africa and how much insurance does this provide other potential investors? or vice versa do these larger scale (South African) companies crowd out other potential investors?

Finally, one that is being hotly debated and maybe cannot be answered at this point in history, Is China only concerned about securing natural resources that will help to fuel its growing economy or are there more benign interests and mutually beneficial gains to be realized by becoming partners with an emerging China?

Tanzania looking solid?

There has been a lot of recent happenings in Tanzania that has undoubtedly led to increased optimism for investors and the Tanzanian economy.  Most recently, Japan has cacelled outstanding debt amounting to $580 million while Petrobas has concluded an agreement with the Tanzanian government to start deep water exploration for oil within two years.

However, the government still faces massive debt, the value of the Tanzanian shilling continues to fall raising the cost of much needed imported (oil) supplies, and power shortages since August plague the overall business environment.  The government’s privatization of the railway industry has made little progress leaving an air of uncertainty among those businesses that stand to benefit from a more efficient railway system.

 2007, according to the EIU, could see a substanital increase in gold production as new projects come on stream and continued donor-funded infrastructure development in the road and power sectors will keep construction strong. Pending the outcome of more reliable energy supplies, progress on privatization, Petrobas’ exploration results and more favorable weather for the agricultural sector, 2007-2008 could be a strong 24 months for Tanzania’s business environment.

Entrepreneur Scott Griffin talks about spending two years in the Flying Doctors Service in Africa

Note: (1:13) ”The inter-relationship between people is so much more important than the transaction, whereas here sometimes the transaction is equal to or perhaps more important than the participants. And its that, that comes through again and again in Africa”.

http://feedroom.businessweek.com/index.jsp?fr_story=24e5f1a2747985722a98a824a4e2fb9c2ca832e6&rf=fr_std

Understanding culture and most of all, respecting the power of culture in Africa, will not only lead to mutually beneficial gains from trade and investment, but will perhaps teach us something more valuable about our humanity.

Africa Business Environment

I have been to more than one presentation at Syracuse University that have highlighted the racism, intended or not, inherent in the Western media’s coverage of Africa.  While there are plenty of arguments to be made on this topic, I want to devote this site to a new type of coverage via the blogosphere on some of the uncovered treasures that lie within the African business world and try to get as much feedback and commentary along the way.

What this site will focus on are signs and signals of entrepreneurship in Africa and what many people are missing when the picture is predominantly in tune with the unfortunate events coming out of Africa.