A look into Business in Africa

More on EASSy cable and the private sector players involved

stb0327 — Wed, 04 Apr 2007 14:06:04 +0000

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.

Partners in the long-awaited EASSy cable include Telkom, which is 38% government owned. But yesterday the communications department’s director-general, Lyndall Shope-Mafole, confirmed that SA might lead a rival cable-building project because of the EASSy consortium’s intransigence.

Ideally, the EASSy cable will be a key component in a project to increase Africa’s bandwidth launched by the New Partnership for Africa’s Development (Nepad). But private investors in the EASSy consortium were more interested in profits than in providing affordable bandwidth, Shope-Mafole said.

Telkom CEO Papi Molotsane has repeatedly said Telkom will only invest in EASSy if it can make a decent return on its investment. The EASSy consortium members have complained that African governments are trying to hijack the project, with its finance committee chairman, Donald Nyakairu, recently telling the Ugandan newspaper The Monitor that the politicians are making unreasonable demands.

If a compromise is not reached, Nepad will lay a rival undersea connection. “We hope it will be the same cable. There is no cable right now but we could absolutely build another one,” he said.

Twelve African governments have signed an agreement pledging that access to a cable linking SA to Sudan must not be monopolised by a private cabal. International bandwidth is so crucial that Africa can no longer be held to ransom by private companies looking to profiteer, the governments believe.

Their policy for international connectivity is dubbed the Nepad Network, based on a submarine cable and a terrestrial network covering landlocked countries. The policy insists that all telecoms operators, internet service providers and other bandwidth-hungry businesses will be able to use the cable for the same price as the companies that invested in the infrastructure.

That is a direct attempt to prevent companies from capitalising on Africa’s lack of bandwidth by charging exorbitant fees, much as Telkom charges punishing fees for access to bandwidth on the Sat-3 cable around Africa’s west coast.

In an interview with the Financial Times this week, President Thabo Mbeki blasted Telkom for charging “absolutely phenomenal” rates for access to Sat-3 and said the government was applying pressure on Telkom to cut its fees.

About 10 companies in SA will be invited to invest up to $2m each to fund the Nepad Network, whether it is based on the EASSy cable or on a rival venture.

Technology and telecommunications companies, internet service providers and bandwidth-intensive banks and other businesses would be asked to invest, Shope-Mafole said.

Another investor could be InfraCo, a new state-owned entity created with a budget of R647m to supply wholesale bandwidth.

Shope-Mafole also said the department would give Mbeki the telecoms price cuts he was demanding when Communications Minister Ivy Matsepe-Casaburri made some policy announcements on May 24.

Some positive light thrown on corporate ‘survivors’ in Zimbabwe

stb0327 — Tue, 03 Apr 2007 21:35:12 +0000

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.

Grant Flanagan, Senior Investment Officer of Imara Asset Management Zimbabwe, believes corporate trends are “extremely positive” and that firms that have coped so far with hyperinflation are well placed to survive “for the duration”.

Two key trends were identified in Imara’s study of earnings reports: growth in volumes and a growing number of dividend distributions.

Export volumes remain healthy while some ‘domestic’ growth is driven by local traders pursuing cross-border opportunities.

Flanagan notes: “Firms actively pursuing an export strategy are doing so as a means of generating sufficient foreign currency to secure inputs for products that are to be manufactured and then sold into both the export and local markets.

“As the inflation spiral continues, it will become more difficult if not impossible to borrow at sub-inflationary rates to support cash flow and working capital needs. Having a local market is crucial as it allows sufficient cash flow to be generated to cover those overheads that are not foreign currency denominated.

“Companies that have done well so far have exported in sufficient volume to secure most if not all of their inputs.”

Imara company-watchers think the new burst of dividend payments could be a sign that corporate consolidation over the last seven years has run its course and enlarged entities are now in a position to return cash to investors.

Flanagan comments: “As consolidation has slowed, acquisition opportunities have decreased and organic growth has stagnated. The remaining players have found themselves with large volumes of cash not required for the day-to-day running of the business.”

In this situation, companies can either engage in share buy-back programmes or distribute dividends. Many companies were opting for dividend payments.

“This positive move signals a situation whereby management has not been able to find suitable investment opportunities that generate a sufficient return on capital and they are generating sufficient cash to cover their growth requirements”, says Flanagan.

“Either way, it is good news as they are intimating to the shareholder that the cash ultimately belongs to them and they need to make an informed decision as to what to do with their dividend.”

Imara believes volume growth and dividends are indicators of success by companies determined to control their own destiny.

Flanagan concludes: “The trends illustrate that management has remained focused on what it does best, whether it be banking or bolt manufacturing. It has not been prepared to acquire businesses just for the sake of growing earnings and would prefer to return excess cash to the shareholders.

“The results prove that given sufficient scope to manoeuvre, flexible and innovative management is able to adapt to the current environment and benefit from it.”

ICT environment in sub-Saharan Africa

stb0327 — Sun, 01 Apr 2007 16:47:00 +0000

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.

Soumitra Dutta, one of the co-editors, explained that the report basically “provides a snapshot of countries’ weaknesses and strengths with regard to ICT development”.

The CEO of Cisco, John Chambers, is quoted as saying “its no longer debatable whether… the global economy will become networked… the discussion now focuses not on if but how we get connected”.

While the use of complicated terminology and measurement categories would be expected in this type of report, the overall prognosis for the ICT landscape in SA is not a good one.

Africa a particular focus

The report itself highlights developments – or lack thereof – in sub-Saharan Africa as “less positive” than the rest of the world: “traditional ICT champions in the region are all losing ground”.

It says that while “this region has increased its ICT penetration rates” of late, “it has not moved fast enough compared with the rest of the world”.

This year’s report highlights four case studies, most importantly sub-Saharan Africa (the others are: Estonia, Japan and China).

The report acknowledges that “there is a perception that sub-Saharan Africa may have missed the boat” when compared to other regions (especially Asia).

Yet, IMF economist Markus Haacker emphasises that ICT is making a real contribution to this region. The unique strength of this area is the penetration of cellphones.

In conclusion, Haacker says that while it is true that sub-Saharan Africa has “not benefited to the same extent as some countries”, from a “microeconomic standpoint” Africa “disproportionally” benefits for advances in ICT. He argues that advances have made doing business “substantially”easier.

South Africa compared

South Africa is positioned at number 47 now (out of 122 measured), but how do we compare?

Although we scored a mark of four, compared to Denmark’s 5,71 rating, we rank behind many other countries we should be ahead of. The hotbed of ICT action that is Barbados is a new entry at position 40! Jamaica also beats us (at 45), with Mediterranean island nations Malta and Cyprus both one-upping SA.

Conversely, countries you’d hope are way ahead of us, are only marginally better than SA. India, for example, scores a 4,06, only three positions higher than ours!

Key measurements for South Africa:

Internet users per 100 inhabitants: 10,8
Internet bandwidth: 0,2 Mbps/10 000 inhabitants

One could argue that our internet users figure compares quite favourably with first-ranked Denmark (52,6 per 100 people). However, South Africa’s bandwidth situation is dismal. Denmark has 348,3 Mbps per 10 000 people, a 1 700% difference!

Ethopia’s success story

The report, however, does highlight one glowing success in Africa – on the first page of the executive summary no less! The co-authors state that “despite being one of the [African] continent’s poorest countries, [Ethopia] is spending nearly one tenth of its GDP on information technology every year”.

The country provides examples of how hundreds of government offices and schools now have broadband, “with more to come”.

Ethiopia has “committed huge resources to seeing that by 2007 all of its 74m people live no more than a few kilometres from a broadband connection”. At the same time, the authors also draw attention to the progress made in Mozambique.

Some would say while nations like Latvia and Croatia have leapfrogged us in the global rating, our position is not that bad. We have seen renewed emphasis on ICT growth and development from both Thabo Mbeki and his deputy. Regulatory hurdles remain, but the new ECA act offers some major pluses.

Any bets on where we’ll be ranked next year?

Broadband prices set to plummet
By J Oker, 1 April 2007

News broken by a Sunday newspaper says that Government will declare the SAT3 landing station an essential facility and further regulate the price of bandwidth on the system. This is set to take place when Telkom’s SAT3 exclusivity expires later this year.

Outbound bandwidth on SAT3 is currently many times more expensive than inbound traffic, mainly due to competition on the inbound portion and Telkom’s monopoly on outbound traffic.

“The leg from SA to London is priced at a certain level and that is an agreement Telkom has because of its exclusivity rights. However, if the London to SA circuit is priced at ‘x’, then Telkom charges five times that for the half circuit from SA to London,” said Ajay Pandey, MD of Neotel.

This will change with Government’s new policy directives where Telkom and other possible SAT3 bandwidth sellers will be forced to meet the current inbound SAT3 pricing where competition dictates per Mbps rates.

Government will further declare the SAT3 landing station an essential facility in terms of Section 43 of the new Electronic Communications Act, which includes the undersea cable.

“The days when companies literally held others hostage, because they owned the underlying infrastructure, are slowly becoming history. Like in the gas or oil industries, we are working towards a common open and non-discriminatory access infrastructure framework that is used at cost also in the ICT sector,” said Ivy Matsepe-Casaburri, Minister of Communications.

Through VSNL, which is a shareholder in SAT3, Neotel will directly benefit from Government’s move to declare the SAT3 landing station an essential facility. This move by Government will allow them to directly supply bandwidth on SAT 3 to their customers.

Neotel said that this is a vital move to level the playing field in the current fixed line telecoms space and further said that they will now be able to offer clients full international SAT3 circuits at a reasonable price.

With drastic price drops in international bandwidth, local broadband providers are sure to pass these savings on to consumers in the form of either price cuts or increased usage allowances.

Government was quoted as saying that these new policies are a clear indication that they are serious about brining down the price of telecoms services and increase broadband penetration in South Africa.

“We are making open and non-discriminatory access to all ICT backbone infrastructure an important aspect of the terms of reference of the Broadband Advisory Council. We are confident that this way, with little cost on the backbone part, operators and other service providers will be able to compete in the provision of services which they can then provide at affordable prices,” Matsepe-Casaburri concluded.

More details about the new legislation and the proposed pricing on SAT3 can be found here .

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

stb0327 — Tue, 27 Mar 2007 19:42:27 +0000

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.

The institution will be a private sector-led, profit-oriented African investment bank. A minimum of 51% of the start-up capital will be from the private sector. All central banks in Africa have been invited to invest in the bank, although the aim is to push private sector funding to 100% of the total, in time, in line with its objective of being a private sector institution.

AFC has an authorised share capital of two billion ordinary shares of US$1.00 each out of which one billion ordinary shares is expected to be paid up at the commencement of business.

More than $800 million has already been raised internationally towards the AFC’s start-up equity. The minimum investment is $50,000.

The institution, which is envisaged as being a pan-African organisation in time, will have its headquarters in Lagos, Nigeria, with branches in several other African countries, based on business development opportunities.

The road show has already taken the CBN team to London, New York, The Gambia and Ghana. Following the South African investor forum, the team will travel to Kenya, Ethiopia (headquarters of the African Union and Economic Commission for Africa), Tunisia (headquarters of the African Development Bank), Algeria, Libya and Egypt.

Prof Soludo said he expected that the AFC would easily meet its start-up funding objectives. However, the CBN has proposed making available an amount of up to $490 million to bolster the fund, in the event of a shortfall.

The deadline for private placements, at $1 a share, ends in mid-April, just ahead of the launch of the AFC. The aim is to have the AFC listed on international stock exchanges, including those in London and New York, within five years. It will also be listed on African exchanges, including the JSE Securities Exchange.

The intention is that the AFC will harness the opportunities created by the massive funding gap for the development of key economic sectors in Africa and especially the development of infrastructure. This regional investment bank will help to mobilise and distribute capital to priorities identified by Africans. It will also provide technical assistance and advisory services.

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.

Africa was at a great point in its history and efforts needed to be made to realise the many opportunities this presented, Prof Soludo said. It was in this spirit that the AFC was conceived; to enable Africa to manage and direct its own resources. “Unless we have institutions ready, the money will not flow to Africa,” he told potential investors in Johannesburg.

Although large companies were emerging in Africa, they still needed to go offshore to raise significant funding, Prof Soludo said, because of a shortage of sources in Africa. This, he said, could take several years to organise. However, the demands of African development required that this process needed to be speeded up.

The AFC is to be incorporated as a legal entity through an international charter to be executed by Nigeria and other African countries. This charter will be ratified and gazetted in accordance with the laws of the respective countries. This approach confers the following advantages: International Status, in line with other international organisations such as the IFC and ADB; Diplomatic privileges and legal immunities, conferred on the AFC in signatory countries to the charter; Tax exemptions for the operations of the AFC, dividend income and capital gains tax of investors; and smooth market entry formalities and regulatory requirements.

The institution will have a world-class corporate governance structure and operate according to international best practice in terms of accounting standards.

Macro Accounts show solid performance and stability for Ghana

stb0327 — Fri, 23 Mar 2007 05:36:35 +0000

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.

Dr Acquah, who is also Chairman of the Monetary Policy Committee (MPC) of the Bank of Ghana, said cumulative purchases and sales for the first two months of this year amounted to $1,140.87 million, compared with $1,086.43 million recorded for the same period in 2006.

Briefing the media at the end of the MPC meeting held last week, the Governor stated that the overall balance of payment recorded a surplus on the strength of debt cancellation, private capital flows and unrequited transfers, raising gross international reserves to $2.05 billion at the end of February, 2007.

On the external accounts, the Governor said the provisional balance of payments data showed a strengthened external payments position and that the overall balance of payments position improved from a surplus of $84.34 million in 2005 to $415.12 million in 2006.

He added that total exports recorded an increase of 33.0 per cent during the year 2006 over the 2005 level to $3,726.67 million while growth in exports during the third quarter of 2006 was sustained into the fourth quarter with a marginal (1.1 per cent) increase to $932.10 million.

He said the fourth quarter export growth was driven by growth in non-traditional exports (34.5 per cent) and gold exports (1.2 per cent).

He said total imports in 2006 rose by 22.0 per cent to $6,753.68 million, and that capital and intermediate goods accounted for 73 per cent of total imports.

The Governor mentioned that the relatively high import growth in the third quarter of 2006 slowed down by 2.2 per cent in the fourth quarter, driven mainly by a relatively smaller oil imports in the fourth quarter of 2006.

He said total oil imports for 2006 increased by 45.7 per cent to $1,646.1 million, significantly above the $1,129.4 million recorded in 2005, reflecting an increase in realised unit price and 2.3 per cent increase in volume over 2005, and said the trade balance increased from a deficit of $2,543.14 million in 2005 to $2,788.51 million in 2006.

He said developments in the nominal bilateral exchange rates of the cedi against the three major currencies â€“ the dollar, the pound sterling and the euro â€” showed that for January to February 2007, the cedi depreciated cumulatively against all the three currencies by 0.2, 0.5 and 0.6 per cent respectively.

That, he said, compared with an appreciation of 0.01 per cent against the dollar and depreciation of 0.9 and 0.7 per cent against the pound sterling and the euro respectively over the same period in 2006.

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

stb0327 — Thu, 22 Mar 2007 01:35:03 +0000

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 …

Alcatel-Lucent wins $240 million African cable deal

stb0327 — Tue, 13 Mar 2007 23:38:50 +0000

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.

Ghana looks to raise $500 million via the bond market

stb0327 — Tue, 06 Mar 2007 00:27:30 +0000

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).

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

stb0327 — Sun, 04 Mar 2007 17:48:59 +0000

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.

It said only a third of the businesspeople interviewed said China`s strategy would have a negative impact on their ventures.

In Kenya, telecommunications, ICT and services sectors were the most apprehensive about China, while agriculture, hotels and tourism sectors expected to reap the most from partnerships with the oriental country.

Zambian business leaders, on the other hand, were found to be the most apprehensive about China, according to Waititu.

This situation was attributed to the fact that the main opposition candidate in the last election was seeking electoral support partly on the basis of reducing Chinese economic activities in the central African country, said Waititu.

The surveys were conducted in five African countries of Tanzania, Kenya, Uganda, Zambia and Ghana in Dec 2005, May 2006 and December 2006.

On the controversial issue of corruption, he said four out of every ten interviewed Tanzania and Zambia business persons said corruption did not have any effect at all on their businesses.

On the other hand about 30 per cent Kenyans, 26 per cent Ghanaians and 37 per cent Ugandans said corruption in their countries greatly affected their businesses.

Waititu said Kenya led in terms of business leaders confidence during the three surveys conducted by the group, while Uganda recorded the lowest.

`Amongst the five countries surveyed, Kenya recorded the highest, while Uganda recorded the lowest?even though its performance was the best since before December 2005,` he said.

Tanzania`s business leaders` confidence has on the other hand been on a steady downward trend from 66 points to 59 within the past year, Waititu said.

He attributed the reasons partly to the power crisis experienced last year and the GDP and inflation.

He said Zambia, with the general elections out of the way recorded an increase in business confidence of 9 points, adding that the average index for the five countries was 64.

He added that only Tanzania and Uganda experienced performances that were below the average.

All nevertheless recorded growth rates ranging between 59 per cent and 69, he said.

Speaking on profit expectations, he said although Uganda recorded one of the highest changes in business confidence, optimism on profit was not as high as it is in the other countries.

He said business leaders were least optimistic about profits because of the increase in overhead costs, attributing this primarily to power crisis.

The other issue which the surveys undertook was the effects of climatic change in relation to business.

According to Waititu, the business leaders expressed considerable concern about the negative global climatic changes and the likely impact on their businesses.

The highest level of concern came from leaders in the agricultural sector, while those in telecommunications, ICT and services sectors expressed slightly lower levels of concern.

Concluding, he said the highest degree of concern was shown in Uganda, whose economy is largely agricultural and the lowest was in Tanzania.

Steadman is the largest information surveying group in sub Saharan Africa, also with offices in South Africa.

SOURCE: Nipashe

Entrepreneurial Activity in Africa

stb0327 — Sun, 25 Feb 2007 15:52:51 +0000

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)?