As revenue dwindles from Nigeria’s foreign exchange reserves, calls for the government to find alternative export revenue sources have never been as loud. A return to agriculture, once the biggest industry before the oil boom of the seventies, has been touted as the most viable solution. Mining has come to the fore as another potential revenue earner, though the drop in global commodity prices will have a bearing on investor appetite.
These alternatives can generate significant revenue for the nation but, as seen with oil, a robust and watertight system will be required to ensure that all revenue from mining is redeployed into states where there is mining activity.
There are many factors that have prevented mining in Nigeria being considered a real growth earner. Whereas Nigeria’s oil is internationally recognized, the grade and quality of the country’s minerals are not recognized as meeting international standards. This has led to questionable practices being carried out by miners and traders to ensure that they make a profit on their substandard material. Furthermore, testing centers and labs are few and far between, diluting the viability of finding a buyer.
The recently installed Minister of Solid Minerals and Mining, Kayode Fayemi, has already begun to develop strategies to ensure the development of the sector is maintained from federal to artisanal level. The fragmented nature of the mining sector in Nigeria allows for local cartels to take advantage of what is seen by many as a hostile business. Due to the lack of legislation, locals prefer to sell ores for quick gains to foreign buyers, rather than dealing with the bans and restrictions that come with the legal channels. Foreign buyers are able to get more for their money by capitalizing on the porous laws. The government in Congo is aware that the trace minerals, associated with the ores, amount to something valuable and have made it illegal to export them.
Confidence precedes investment and, with the global mining sector experiencing a downturn, the lack of protection given to mining in Nigeria risks deterring potential investors. Abundant natural resources should be a gift, not a curse. The lack of policy presents an opportunity for the ministry to develop the legislation that governs the sector. This will give confidence to mining companies who want to invest in a robust system. As with the Local Content Act in the oil and gas sector, there are policies that can protect the mining sector to keep the wealth in Nigeria. A ban on importing raw materials that could be mined in Nigeria is a start.
Today, a lot of Nigeria’s mining is at artisanal level. A workforce is usually made up of locals from surrounding villages. Armed with a spade, they get to work using crude techniques to extract the ore. This exposes toxins, leading to poor health and damage to the environment.
When visiting a mine, it is not uncommon to see the landscape punctuated by parcels of land ransacked for their minerals. In countries where mining is prominent, there is a synergistic approach with environmental and mining ministries working together to ensure that the environment and surrounding communities are not negatively affected by the excavation.
Unofficial tax collectors are also known to plague the routes on which the mined material is transported. While  companies have come to expect this in Africa, business will increase if this practice is eradicated in Nigeria. The mining ministry must engage with states and local governments to ensure that royalties and taxes reach federal accounts. With idiosyncratic systems catering to minorities, the fact that no major international mining companies are established in Nigeria is indicative of the lack of confidence they have in the country’s mining sector.
The general perception among Nigerians is that Minister Fayemi has the skills and intellect to successfully navigate his challenging post. During his term as Governor of Ekiti State, he attracted international finance. He is now expected to be just as bullish in Nigeria’s potentially lucrative mining sector.

Natural Resources A Gift Not A Curse

Accra’s central business district, located at Ring Road, is popular with start-ups because everyone walks past it, from tourists to townsfolk. This doesn’t count for much if Ghana’s economy continues to stumble.
Felix Oppong runs a small printing business in this bustling area. He has a staff of five who serve around 10 companies, mainly from the telecommunications and financial sectors.
The company prints posters, fliers, banners and office documents. In the past year, Oppong has lost two of his biggest clients, telecoms giant, MTN, and Fidelity Bank, due to power cuts, known here as dumsor. He has also had to increase his prices to break even.
“Our business has really taken a hit, the dumsor situation right now means we cannot service a lot of the orders we get from clients. We are relying on the generator every day to make sure we can meet demands and the cost of petrol is very high as well,” says Oppong.
“We cannot continue running the business like this. Our clients are complaining about the increase in prices and I had to sack three staff, there have been at least two petrol shortages last year which meant we had to close our business for a week and that is when we lost MTN.”
Ahead of elections on November 7, the Ghanaian economy is facing several challenges. Once a shining light of economic prosperity, the country, according to the International Monetary Fund (IMF), is now experiencing a decline in growth from 8% in 2012 to 3.5% in 2015. The current woes are largely due to the protracted energy dilemma and what many industry experts believe to be poor macro-economic management.
With elections coming, a restrictive IMF program has been implemented to prevent previous bouts of excessive spending. The organization has disbursed a third installment of $116 million, which amount to a total of $900 million over three years, to aid economic recovery in the West African country. Consequently, Consumer Price Index (CPI) inflation is forecast to rise to 8.7% in 2016, up from 8.3% in 2015.
Franklin Cudjoe, the Founder and CEO of IMANI Center for Policy and Education, a leading think-tank in Ghana, says the plight of the Ghanaian economy is not specific to one sector.
“I would say all the industries in the country are having some challenges, all emanating from production costs that have gone high over the last couple of years. One of the sources of the high production cost for almost all the industries is because of the energy challenge that we have,” he says.
“If you take it on a per capita basis, the cost of energy, for instance, has tripled over the past few years alone and that significantly affects the budget for food. The disposable income for the household has significantly been reduced. The Ghanaian economy has also suffered from the global shocks because most of our products depend on them and there has been plummeting oil prices. Cocoa production also hasn’t quite matched this, not to mention a decline in gold as well.”
Cudjoe says the country’s woes are also self-inflicted. Ghana is borrowing more money but, according to some experts, these funds are not utilized well. The currency, according to Reuters estimates, has plummeted by around 20%, with a corresponding total external debt of $24.3 billion in 2015.
“Austerity measures being used at the moment are all fiscal and based on levying tax on everything. The government has incurred so much debt and the only way it can service those debts is to increase taxes. There is no sensible government that will be seen introducing taxes in an election year, but it seems the only way the economy can sustain itself… because, quite frankly, the coffers are empty,” says Cudjoe.
Nigeria’s fiscal challenges have also led to the country banning some imports, which significantly affected Ghana’s agricultural sector. Farming contributes around 19.9% to the economy, according to the Ghana Statistical Service (GSS).
“This also has a way of affecting our balances. It is similar to 2005 where Nigeria banned close to 93 products from Ghana and I think we are seeing echoes of that sentiment again. I don’t think it is right to erect barriers, especially with both countries belonging to the Economic Community of West African States (ECOWAS) which is supposed to lead to deeper economic integration,” says Cudjoe.
He, however, believes that the services sector, together with technology, will drive growth in Ghana. According to GSS figures, the sector contributes a whopping 50.2% to the economy.
“Ghana at the moment is doing $900 million a month, that is 24 million transactions, in mobile money. Ninety nine percent of these transactions are peer to peer, which simply means one takes and transfers money to the other. We are so far away from creating a cash-lite economy in Ghana, which is what mobile money is supposed to do. So we sat down and looked at how to create a platform that enables us to use the mobile money for retail payments. Zeepay’s idea is to be able to move from predominantly peer-to-peer transactions into retail payments as well,” says Andrew Takyi-Appiah, Co-founder of Zeepay, a mobile payments company.
He has, so far, invested just over $500,000 in his new venture and is hoping the growth in the Ghanaian services sector will help boost his mobile app service. Takyi-Appiah’s major challenge in scaling his business is the lack of funds. Financial institutions, who are traditionally apprehensive about lending to start-ups, have taken an even tougher approach to mitigate risk against bad debts. The government, however, has set up the Ghana Infrastructure Investment Fund (GIIF), to provide resources and attract investment. But Cudjoe says the approach of the government in implementing this leaves little to be desired.
“I know for a fact that the Ghana infrastructure fund that is being set up is being funded by the country’s oil money as seed capital, instead of using private funding from abroad. You ask yourself if this is the most prudent way of utilizing resources in an austere economy. I don’t really believe that austerity measures are the [solution] but I think the way we are going about it is to use the tax to solve it, and I think taxation is the last measure you want to resort to in a time like this,” he says.
As voters prepare to make their mark, the Ghanaian economy is on shaky ground. Business in the country is still firmly in the grips of the energy crisis, which has reduced output from the manufacturing and agricultural sectors, while increasing production costs.
The recent growth in the economy has achieved certain goals – such as reducing poverty – but ballooning costs and debt has left many wondering if Ghana’s progress is about to be stunted.

The Coffers Are Empty

Banks and investors are reluctant to risk money in untested projects. Start-ups are left penniless and broken across Africa. Nairobi-based entrepreneur Erik Hersman struggled for capital from banks unwilling to take a risk. Crowdfunding was the answer.
“We had to make sure that we made this innovation come alive and crowdfunding made it easier. Although the process of marketing the idea while being funded is hard, it is worth it,” he says.
Through online crowdfunding platforms, people pledge small amounts of money to projects for 90 days, for a reward.
Hersman turned to crowdfunding and met people that gave his new business a lifeline.
“It wasn’t just about raising money for the project but we also wanted to test out if anyone else wanted this product. Sometimes something sounds great in our heads but no one else would be interested,” he says.
Using Kickstarter, one of the many crowdfunding sites in Africa, he raised over $160,000 for BRCK – a device that helps people go online where electricity is scarce. It can hop between Ethernet, Wi-Fi and 3G and 4G.
“We looked at the market and we were asking ourselves, why are we trying to connect to the internet using devices that are made in Europe and the US when we have a different infrastructure in Kenya; so we started designing and developing a new way to connect to the internet.”
BRCK began shipping units in July 2014. Thousands had been sold to 54 countries by February 2015. The company employs 40 people.
Hersman is grateful for crowdfunding and says entrepreneurs should use it.
“It is not currently well used and understood in the continent but I wish more people could make use of it,” he says.
Entrepreneur Patrick Schofield, co-founder of Thundafund, a crowdfunding site based in Cape Town, says many businesses fail in their first year and good ideas rarely see the light of day.
“Crowdfunding is the most powerful mechanism we have in Africa. If you have a really good idea and people like it, they will support it. People can put $100 for a good idea, for example, but they are sceptical to put down $5,000 for something that hasn’t been tested,” says Schofield.
“Through the process of the campaign, we test if the idea is viable and if there is a market for it. The entrepreneurs say how much they need to execute their plan. If the target is not reached, the donated funds are returned to the funders.”
Thundafund claims it has funded 170 projects worth R6,123,843 ($550,000).
“There are a lot of ideas around how you can thank or reward backers. This is a very important part of crowdfunding because it will determine how well your campaign will do. For example, you can offer the product you want funding to create as reward, early access to the product or service for example when looking for funding for an album, you will offer signed CDs, VIP access to shows; you can make your backers part of the project and much more,” says Schofield.
Crowdfunding platforms like Malaik, AngelList, EarlyShares, and Seedrs offer equity.
Malaik spokesperson, Vias Lustig, says equity crowdfunding is great, but has drawbacks if not well managed.
“An early-stage company that has raised financing from a hundred different investors through an equity crowdfunding platform will have more trouble getting follow-on investment from venture capitalists,” says Lustig.
Malaik, based in West Africa, acts as a nominee. All the crowdfunded money is channelled through a special purpose vehicle (company formed for investing in equity) that appears on the entrepreneur’s books as a sole investor.
“Smaller investors that participate in equity-crowdfunding are also less likely to contribute and help the entrepreneurs with their business plan, since they have smaller incentives. Malaik also thought about curbing this when developing its model by adopting a lead investor format, this way the lead investor takes at least 25% of the equity round, thus ensuring the company has a larger, more invested individual that can possibly act as an advisor,” says Lustig.
Lustig claims equity crowdfunding could take advantage of the $140 billion to $160 billion gap in finance for African SMEs, because they enable many investors to commit small amounts of capital that would usually be out of the question.
The founder of London-based The Crowdfunding Centre, Barry James, says crowdfunding has not had a massive impact in Africa because of a lack of awareness.
“The UK lagged far behind the US four or five years ago until we started to tackle this. Even now, only a small percentage of people in either country are getting the help and funding they could from crowdfunding, so it has a long way to go,” he says.
“If you’re writing a book, the best advice is to write about what you know. The same is true with crowdfunding and entrepreneurship. That said, campaigns in the tech category tend to raise the most money, while games and comics have the highest rate of success – around 50 percent.”
In South Africa, Schofield says consumer products, arts and entertainment projects are the most supported.
The future could be brighter for struggling entrepreneurs, if you have a dream that draws a crowd.

If you want to get Ahead Draw A Crowd – But Be Careful

It had been a long hot Friday afternoon. As I drove home, towards the shacks of Zandspruit in Johannesburg, I could see black smoke. The voice on the radio warned of a service delivery protest as I drove into it. Women and men chanted and blocked the road. Words flew; then rocks, then bricks. A rock smashed into the face of one of the police officers, blood poured.
This is one of the many faces of discontent across Africa. Poor and rich alike feel short-changed in these tough economic times. The poor fight with rocks; the middle class with their bank accounts. People no longer want to pay. Their hard-earned cash, they complain, is wasted by politicians.
A tax revolt is rising. It may be in its infancy, but in South Africa, the threat is being taken seriously enough for Judge Dennis Davis to issue a warning.
In many ways, Davis is Mr Tax. He is head of the Davis Tax Committee, appointed by the Finance Minister to examine how revenue generated by the South African Revenue Service (SARS) can be used to improve the economy. He was a Technical Advisor to the Constitutional Assembly where the negotiations for South Africa’s interim and final constitutions were formulated and concluded.
“It’s a question of where government spends the money. People want to see results with their taxes. If they are not satisfied, they may choose to just stop paying. The greater the level of corruption, the less we will have tax integrity and the greater the possibility of a tax revolt,” says Davis.
Expenditure is through the roof in South Africa. According to Auditor-General Kimi Makwetu in his report for the 2014/2015 financial year, irregular expenditure amounted to R5.68 billion ($355 million). The report says 45% of this was spent by the Education, Health and Public Works departments. Irregular expenditure more than doubled from the previous year in Mpumalanga, a province in eastern South Africa, bordering Swaziland and Mozambique.
“Of the R936 million ($58.5 million) in fruitless and wasteful expenditure incurred in the year under review, R32 million ($2 million) was incurred to prevent further fruitless and irregular expenditure or losses. This normally relates to the cost of cancelling irregular contracts or contracts of non-performers,” says Makwetu in the report.
Due to overspending the budget, unauthorised expenditure amounted to R1.64 billion ($100 million). This is money emptied from the already lean pockets of people in a country where 12 million live in extreme poverty and top earners pay up to 41% in tax. On top of that, over the past decade, residents have been burdened with increases in property, electricity, toll and vehicle licencing fees; yet, potholes and power cuts persist. This is laced with accusations of corruption, an issue which has drawn the ire of veteran champion of the people Wayne Duvenage. He made his name standing up against Gauteng’s infamous e-toll tariffs. He is chairman of the Organisation Undoing Tax Abuse (OUTA), which says its aim is to challenge unfit taxation or the squandering of money.
“The public have become justifiably angry over the squandering and waste of their taxes. [A tax revolt is likely] but is however not a situation I would want or wish for our country and we should do everything possible to prevent such a situation from developing. This is why the Minister of Finance is calling for a positive and participative approach to resolving our problems. The issue, however, is that while a corrupt leadership remains prevalent and connected to the head of state, and other key positions within government and its state owned entities, very little can be done to mobilize a positive approach to addressing the key issues of corruption, cronyism and service delivery. This is what is driving the negative sentiment,” he says.
It appears many other people have also had enough. A survey by  NGO, AfriForum, says  none of the respondents say they are getting their tax money’s worth; 24% say they only pay tax because they are compelled to and 42% question why they should pay tax at all. AfriForum runs a viral #whatarewepayingfor campaign to hold government responsible for the misappropriation of money.
Monique Taute, National Campaign Coordinator at AfriForum, says the government promised to improve education, yet the national pass rate for Grade 12 students declined from 75.8% in 2014 to 70.7% in 2015. It promised to improve security, public order and safety, yet the crime rate increased by 0.09% from 2014 to 2015. It promised to decrease unemployment, yet the International Labour Organisation (ILO) announced in January 2015 that South Africa has the 8th highest unemployment rate in the world. The unemployment rate stood at 25.5% in the third quarter of 2015, an increase of 1.2% from 2014.
“It is clear that the government failed in all three objectives. Taxpayers should have the right to know what they are paying for. From what we see, in the consolidated general report on national and provincial audit outcomes as well as from 2015 statistics, it is clear that government once again failed to fulfil its responsibilities in the 2015/2016 fiscal year. Government is abusing taxpayers’ money. Even though taxes are increased, government does not fulfil its primary responsibilities,” says Taute.
CEO of the SA Institute of Tax Professionals, Keith Engel says people are at a breaking point.
“It is more about expenditure than anything else. People are saying, ‘yes we are paying tax but what are we getting for it?’” he says.
According to Engel, if entrepreneurs reach breaking point, they could play hide and seek with the revenue services.
“[You] won’t do that with the attorneys or accountants, because you will [lie] to your accountants and give them a different set of books to work from. So people can keep two sets of books. In small businesses, the employer might make a deal with you were he says ‘I am going to give you R300,000 but I will give you another R200,000 that we will not tell the revenue services about,” he says.
Alex Poole* (not his real name) who runs a tax revolt Facebook page, followed by 21,000 people, says: “Most people can sense that they’re being [robbed]… I believe all forms of mandatory income taxation are theft. The things its being spent on is so obviously not in the best interest of the country’s needs, people feel more and more ripped off. It now feels like the theft that it is. And the people are rightfully angry about it.”
Engel, however, commended Minister of Finance Pravin Gordhan for his 2016 budget.
“The budget was more about expenditure than it was tax. You can see very clearly they didn’t want to break the backs of the taxpayer. He spoke about cutting wages and a lot of government expense which made people a bit at ease,” he says.
SARS doesn’t think a tax revolt is likely. It says its compliance model is designed to foster voluntary compliance and says there is high tax integrity in the country.
“SARS has found the vast majority of taxpayers are fully tax compliant. This is testament to the patriotic and compliant culture of South Africans. In the very odd cases of intentional non-compliance, SARS recoups the taxes, as per the provisions of tax and customs legislation,” says an employee at SARS who asked to remain anonymous.
If Gordhan’s budget cuts don’t show in the numbers, South Africans may think the best form of defence is no tax.

Nothing For Nothing

It’s a question that had to be answered sooner or later, the silent question in most entrepreneurs’ minds. It’s a topic I have  discussed privately, but now it’s something I think should be explored publicly.
If you look at the tech capitals of the world – Silicon Valley, Seoul and Tel Aviv – you won’t find any globally renowned black technology entrepreneurs.
It concerns me that a black entrepreneur has not come up with a major breakthrough in technology and gained a personal net worth of over a billion dollars as a result. Bear in mind, I did not say millions as there are many around today who are worth that.
Money is not the defining criteria though. To get to the bottom of this question we need to look at innovation, an idea that took the world by storm like WhatsApp.
Being African is also not in question, the continent has entrepreneurs such as Mark Shuttleworth and Elon Musk who have delivered powerful tech innovations and have billions in their pocket to prove it.
In order to answer the question, we need to confront three issues, cronyism, racism and nepotism. Firstly, they exist; we can’t run away from them.
Nepotism is a global issue. Everyone supports who they know, even people of color. This means that the success of a previous generation cascades to the generation that follows. This continues any race’s probability of success.
Many believe that racism is preventing black Africans from rising to the top. This belief is wrong. Asians and Jews at one point suffered tremendous discrimination, but they succeeded despite that challenge. Today, those two ethnicities are leading the business world.
Another challenge faced by many tech companies started by black entrepreneurs is the moment they come up with an idea, they are immediately thinking of ways to monetize it. You have to make money because you have bills to pay and there is the pressure of friends and family members wanting to see the fruit of what you have been working on.
At the main goal of the most successful tech companies, like Google, Quora and LinkedIn, their main goal was to get  as many people to use their technology as possible. Once that was achieved, they started to figure out how to make money from them. WhatsApp and Quora are still trying to figure this out, but they have millions of users to work with.
Investors in the United States encourage that. You need to attract interest first, monetization will be figured out afterwards and together. The message is that they will give you money if you can show your users have an active interest. Unfortunately, this is not the case in all countries around the world.
I believe Africans are brilliant. We, however, need an ecosystem that can be supportive for all ethnicities on the continent, not just black people. Nairobi and Cape Town are beacons in Africa for the vibrant tech ecosystem they have enabled in their cities. These ecosystems were largely built by the entrepreneurs themselves.
There are two black entrepreneurs who started major technology companies that should be mentioned, David Steward from the United States and Mike Adenuga from Nigeria. Steward runs World Wide Technology, the largest black-owned company in America, with revenue of $7.4 billion in 2015. World Wide Technology is tech service based.
Adenuga, with a personal worth of $3.8 billion, runs telecommunication company Globacom, with over 30 million subscribers. It is not a global brand and it doesn’t have to be.
My point is Africans are created equally and have conquered almost every industry. Competing with the rest of the world should be a challenge, not a competition. Let’s collaborate, with each other and counterparts of all backgrounds, to advance this world technologically.

Where Is The Black Mark Zuckerberg?

Last month I suggested that the South African government is unsure of which route to follow to find a shared strategy with the private sector to deal with the infrastructure backlog preventing the region’s progress.
Has the ruthless march towards recession, higher unemployment, coupled with the prospect of credit ratings downgrades and potential changes in voter sentiment, finally struck home?
Finance Minister Pravin Gordhan’s recent bellwether meeting with 60 CEOs reminds me of the Union Buildings meeting I attended after South Africa successfully hosted the 2010 World Cup. The President and most of the Cabinet met with business in high spirits to reinforce the need to harness the collaborative momentum that had delivered so well.
Will the economic crisis that has followed the inaction and ineptitude after that euphoric session finally galvanize government and business into action?
Economic revival will not be achieved without massive investment in infrastructure and it cannot be delivered effectively without collaboration between the public and private sectors at the highest level.
In many countries there is a close relationship between the government, the national agenda and the construction industry. Many have transparent cross shareholding and collective arrangements that make for quicker infrastructure expansion.
The key is harnessing private sector funding for public infrastructure through commercially viable PPPs and concessionary projects, where each party takes a share in the risk for reward. This relieves the fiscus of having to fund everything and can then direct scarce public funds towards infrastructure that will attract industrial investment and drive long-term economic growth.
My previous company has decades of experience with this in Africa and Eastern Europe, but political ideology in South Africa has bedeviled this opportunity.
After 2010, we had numerous discussions with Brazilian groups and learned of this collective mindset in Brazil ahead of their 2014 World Cup and 2016 Olympics programs.
France has a deep collaboration between government and construction. The United States infrastructure is now undergoing massive rebuilding, with a strong private sector participation in both funding and implementation.
Likewise for overseas work, our competitors come into our region with robust political and financial backing from their governments.
The French approach to business is founded upon national interest and long-term foreign relationships, which was evident in recent years with the prospects for a fleet of nuclear power plants for South Africa. For several years, I participated in the developing French strategy for this work that encompassed major technology groups, their suppliers looking to localize in South Africa, the French national power utility and their government representatives.
Likewise, the Russians and South Koreans have strongly developed public/private trade institutions and strategies and have engaged with targeted partnerships with local companies. The success of South Korean business in our market is remarkable. The Russians are now firm contenders for nuclear power.
In stark contrast, in my experience in working across Africa and the Middle East, South African business generally feels alone and has to fend for itself internationally.
South Africa’s tax-payer funded development finance institutions have been known to fund projects in other African countries without involving any South African content. Most competitor nations would have contractual requirements that their funding has a high content from the lending nation.
This further diminishes South Africa’ growth prospects, the tax base and the desired employment and regional cooperation. The lack of support, and the time lost, is eroding the commitment to South Africa as the bigger companies shed local jobs and continue to shift to new international markets.
The construction industry has been through hell but it’s ready to make a difference. To do this it needs a champion in government, that has until now been absent.
The industry has tabled robust investments and long-term plans that include significant additional training and skills program. It has also offered to assist distressed municipalities and undertake social projects.
There is also a suite of execution strategies that will deliver on the commitment to collaborate with, mentor and jointly execute large projects with black-owned business to ensure the next generation of large construction companies are created from a solid experience base.
Perhaps out of adversity, the need for radical change in ideology and policy from government and for business to deliver more jobs, demographic and economic transformation and black industrialization, Gordhan’s new approach will find traction.
The engineering and construction industry in this country cannot wait much longer.

Collaborate Or Else

11r the past few years, Kenya has witnessed considerable growth in Shariah-compliant products, a sign of the vast potential of Islamic finance in Kenya. The country now boasts two fully fledged Islamic banks, one fully fledged insurance provider (Takaful), one Islamic fund manager and one approved Collective Investment Scheme (CIS). For all this, as at December 2014, the Global Islamic Finance Report (GIFR), the developers and publishers of the Islamic Finance Country Index (IFCI), an indicator of developments in Islamic financial services, ranked Kenya 22nd globally and third in Africa behind Sudan and Egypt, but ahead of South Africa, Tunisia, Algeria, Nigeria, Senegal and the Gambia.
According to the IMF’s Islamic Finance: Opportunities, Challenges and Policy Options, Kenya is poised to see further contributions in at least three dimensions: greater financial inclusion, especially of large underserved Muslim populations; greater support for small and medium-sized enterprises (SME), due to its risk-sharing features; and the lowering of systemic risk, owing to its prohibition of speculation – a major risk for conventional finance. Clearly, the decision to amend the Central Bank Act, allowing the monetary authority to recognize the payment of profits based on income from underlying assets rather than interest on government securities, thereby opening up the spectrum of Sharia-compliant investments, was a sound one.
Kenya is now gearing up to issue its eagerly-awaited Sukuk (Islamic bond) in the 2016/2017 fiscal year, hoping to limit domestic borrowing and increase funding for mega infrastructure projects. The government appears to be following in the footsteps of Senegal and South Africa, both of which managed to raise $200 million and $500 million respectively through Sukuks. Countries and companies raise $100 billion globally every year through Sukuks, with African countries accounting for just 1% of the issues. The planned sovereign issue is also set to pave the way for the private sector and further development of Kenya’s capital markets.
From a sovereign perspective, through Islamic bonds, the Kenyan government will able to access a new investor base. According to a report by Standard &amp; Poor’s (S&amp;P), the Islamic Sukuk investor base is estimated to be over $500 billion, excluding sovereign wealth funds, official investors (central banks and multilateral organizations), and other conventional investors. Essentially, the move will tap into a vast pool of Persian wealth.
Sukuk bonds are known to offer more favorable repayment terms than conventional bonds and therefore attract infrastructure financing. It’s also worth noting that investors from the Middle East accounted for only 2% of Kenya’s debut Eurobond. The planned Shariah-compliant bond should see a ramp up in participation.
Individual investors in the country are also set to benefit immensely as Shariah-compliant products are not restricted to Muslims. What is also vital, perhaps due to its unique qualities, is that Islamic finance has become a good vehicle to diversify risk away from traditional asset classes. It is noted that Sukuk bonds and other financial instruments avoided many of the most severe consequences of the recent financial crisis because they were underpinned by equity, as opposed to debt. For instance, while the S&amp;P 500 dropped 64%, Shariah-compliant indices lost no more than 53% and showed lower volatility, according to KPMG’s report, Islamic finance: From niche to mainstream.
Although Islamic finance has already taken off, there are some challenges facing the niche market. In January, the first International Islamic Finance Conference of Africa was held in Nairobi. It highlighted issues around regulations, investor education, compliance, and the limited range of available products and services. Kenya needs to deal with these challenges to see a smooth increase in Islamic financial products in its financial markets.
As the country positions itself as a financial and investment hub to tap into the growing capital inflows into Africa, it is important to celebrate the milestones achieved so far while working to improve further. With Islamic finance set to grow to $3 trillion within the next decade, according to S&amp;P’s report: Islamic Finance To Still Grow In 2016 But With A Sag, rising popularity of Shariah-compliant products in Kenya will surely contribute to the country’s growth story.

Islamic Finance On  The Rise In Africa

Rwanda’s President Paul Kagame has often urged Africa’s business and political leaders to “stop thinking about development as something we do with external resources.”
The current managers of the Nigerian economy will do well to heed this advice. They will spend 2016 struggling to rebalance their economy and its tax system. They must save their nation from the spasms of the Dutch disease.
Nigeria entered 2016 with its lowest external reserve levels in 10 years.
Nigeria’s foreign reserves peaked at $63 billion in September 2008. By January 2016, it had dipped to around $29.3 billion, barely enough to cover four months of imports.
The price of Nigeria’s Bonny Light crude was trading at $34 a barrel as this edition of FORBES AFRICA went to press. It has been dropping since September 2008 after attaining a record high of $147 in July that year. Prices for cocoa and iron ore have also been falling over the last two years.
Economists believe that the full effects of the resource curse may have finally caught up with Africa’s largest economy. For the third time in three decades, Nigeria’s economy is in serious wahala (Nigerian speak for trouble). Dwindling government revenue, foreign exchange pressure, institutionalized corruption and a massive infrastructure deficit confront the nation.
Like many resource-rich, mono-product economies, Nigeria faces the daunting challenge of curbing its appetite according to the size of its wallet. Embedded in Nigeria’s 2016 budget is a ginormous N6 trillion ($30 billion) revenue shortfall. The deficit financing will come from the domestic and international debts markets. But domestic resource-mobilization might be the key to fiscal and monetary efficiency.
Crude oil has defined Nigeria’s political economy for decades. It will continue to play a significant role, alongside commodities and Nigeria’s abundant natural gas reserves. Earnings from non-oil sectors, such as services, agriculture and entertainment, will continue to grow.
As Finance Minister, Kemi Adeosun, began talks with international finance institutions for external loans worth $3.5 billion to augment the 2016 budget, the local media was awash with two news reports – both revealing Nigeria’s scandalous administration of its tax regimes and import earnings under previous governments.
The first expose was a report published by ActionAid, an international NGO, which revealed how Nigeria had forfeited a staggering $3.3 billion in revenues through a three-part tax break granted to three of the world’s biggest oil and gas companies, over a 10-year period. Apparently, and obviously unknown to many Nigerians outside the infamously opaque petroleum sector, the tax breaks for Shell, Total and Eni started in 1999.
In a country where millions live in extreme poverty, the social cost of the tax giveaways is huge. The amount is double Nigeria’s education budget for 2014; and the money could very well have given 70 million young Nigerians access to quality education, rebuild the university system and tackle entrenched problems in the health system, according to ActionAid.
“It is a striking example of how a global race to the bottom on tax is harming resource-rich countries,” the NGO’s report says.
Previous ActionAid research shows that tax breaks cost developing countries at least $138 billion every year.
The second matter was the revocation of all import waivers granted to several “favored” firms and politically-connected entrepreneurs by previous governments between 1999 and 2015. Excise duty revenues from the Nigeria Customs Service for 2016 is consequently expected to be significantly higher than previous years. Finance ministry sources say Nigeria lost N797.8 billion (around $4 billion), between 2011 and May 2014, to import waivers and tax holiday concessions.
Nigeria’s lax tax system is just one of several public sector development issues awaiting resolution by President Muhammadu Buhari’s cabinet. Figures from the Debt Management Office show that in one year, Nigeria’s debt burden grew by N1.31 trillion ($6.57 billion) to N12.6 trillion ($63.2 billion) as at the end of 2015.
Also during the 2015 financial period, the state-owned Nigerian National Petroleum Corporation posted an operating loss of N267 billion ($1.34 billion). Its four refineries, with a combined installed capacity of 445,000bpd, continue to underperform.
Value Added Tax (VAT) and Company Income Tax (CIT) will account for 80% of the Federal Inland Revenue Service’s (FIRS) projected revenue haul in 2016.
Comparatively, Nigeria’s tax revenue performance is 7.4% of GDP compared with 27.4% in South Africa, 18.7% in Malawi and 19.5%, Kenya.

SERIOUS WAHALA AS THE RESOURCE CURSE BITES

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I recall from my first venture to the World Economic Forum in Davos, in 2014, the brightly colored scarves hanging from the necks of political leaders and captains of industry as they spoke on television. These scarves were in the colors of the national flags of two of Africa’s powerhouse economies – Nigeria and South Africa.
They performed two functions – much needed warmth and a sign that Africa was firmly on the international stage.  Africa was open for business; that was the message that rang clearly and loudly from the peaks of the snow-capped mountains.
Fast forward to January 2016; where the beautiful ski resort, nestled in the Alps, once more played host to more than 2,500 delegates from around the world as global markets saw a rickety start to the year.
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China was changing its growth model and posted a slowdown in GDP. The United States increased interest rates in December 2015, despite its marginal economic growth. Then there was the slump in commodity prices, with oil reaching 12 year lows. Gold, platinum, iron ore and copper were also weaker. Emerging and frontier markets bore the brunt with no end in sight.
How was Africa going to see increased investment in its economies when it was in the eye of a perfect storm? Well that’s where charity begins at home. This seen in the launch of a new deal on energy, focused on power, potential and partnership to secure universal access to electricity on the continent by 2025.
“More than a century after Edison invented the light bulb, half of Africa is still in the dark,” said Akinwumi Ayodeji Adesina, President of the African Development Bank and FORBES AFRICA Person of the Year in 2013.
This new move to power up the continent was in line with the theme for this year’s gathering &#8211; the fourth  industrial revolution, which focused on robotics, artificial intelligence and how electricity can grow economies.
“We talk about the fourth industrial revolution, but it all starts with the need for electricity, which is like blood in the system. If we don’t have it, we can’t live,” says Adesina.
To help keep Africa on the world economic map, strong delegations came from a number of states. Several African leaders were in Davos:  Paul Kagame, President of Rwanda, Hailemariam Dessalegn, Prime Minister of Ethiopia, Nigeria’s  Vice President Yemi Osinbajo and South Africa’s President Jacob Zuma &#8211; despite several questions about his low profile at the Forum.
Members of the private sector too were there to allay fears that Africa may no longer be rising.
Oscar Onyema, CEO of the Nigerian Stock Exchange, remains confident that Africa plays home to equity markets which continue to see interest from investors, regardless of the global market conditions.
“We just have to ride the cycles,” he says.
Feeling the same was Nicky Newton-King, CEO of the Johannesburg Stock Exchange, the largest bourse on the continent that has won awards for the way it runs.
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“We have got to understand that there is a new normal out there, low growth in an uncertain global world, good investment opportunities will come, but we still have a chance to compete with our global peers,” said Newton-King.
Fellow members of the private sector with a strong focus on the continent, add that they too are concerned, but not shaken, by the headlines.
“I think it depends really on your time profile for your investments, I think there’s a growing interest from people who have a five to ten year view of what they want to be investing in to actually go to Africa,” said Geoffrey White, CEO of Agility Africa.
Ralph Mupita, CEO of Old Mutual Emerging Markets says: “We are long term investors, with our roots in Africa – South Africa to be exact. Despite the challenges at a macro level, we see the needs of the consumer and we are providing them with the service, we will roll out capital prudently.”
While the challenges are clear. Africa is still on the agenda for many &#8211; albeit with reservations. Power, partnerships, and certain regulatory frameworks are the sturdy lifeboats we need to ride out the economic storm.
And whilst many do agree that the short to medium term will be worrisome our future is not dim… perhaps we need to cast our eyes slightly further out on the horizon. After all Rome wasn’t built in day; neither will Africa be.

Brrr…its cold for African optimists in the Alps this year

It must be one of the smallest airports in the world. It’s about 100 square meters with one entry and one exit. This is the gateway to Walvis Bay, Namibia, a place where the desert meets the ocean.
Its noon, the city is as quiet as the grave. It is the beginning of the year and most executives in the fishing industry are on holiday, far from their workers who risk their lives for a catch. The Walvis Bay dock tells the story of two fishermen and with it, the economy.
On this day, one fisherman is angry and feels cheated. Immanuel Petros, a charismatic union man in his forties, is leading chanting workers with clenched fists. They want more money and better working conditions.
“If you see a shack in Walvis Bay, you know it belongs to a fisherman. Workers doing the hard work earn less than $100 a month, while working for more than 16 hours a day. The city lives and breathes poverty,” says Petros.
The country’s failure to create jobs for the poor was also confirmed in a World Bank report in 2015.
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“Namibia’s economic growth, prudent macroeconomic policies, and generous social programs have not generated the jobs needed to overcome the inequitable distributions of income and assets or raise living standards in rural areas and among the urban poor,” says the report.
According to the Central Bureau of Statistics, the unemployment rate in Namibia decreased to 28.10% in 2014 from 29.60% in 2013. Although the economy shows some signs of improvement, Petros and many others feel it’s not enough.
On the other side of the dock, fishing has thrown up an entrepreneur. The Namibian economy gave Rojo van Wyk the chance to catch a better future.
Van Wyk is the director of Mack Fishing. Ten years ago, he was selling a handful of fish but now sells more than 40 truckloads per month.
“Getting into the fishing business was my big chance, 10 years ago I was doing nothing and literally down and out and along the way I got this opportunity and now I own a fishing quarter.”
By owning a fishing quarter, Van Wyk can allocate fishing rights to beginners who pay him a small amount to fish their way out of poverty. For him, more fish is more money on his balance sheet.
According to the World Bank, political stability and sound economic management have helped anchor economic growth and poverty reduction in Namibia, leading to opportunities like the one taken by Van Wyk.
“Low interest rates, fiscal stimulus, and unusually high foreign direct investment (FDI) in mining have resulted in a construction boom, fast household consumption growth, and solid growth in tradable services,” says the bank.
The African Development Bank (AfDB) believes the country can do more in addressing the challenges faced by many of Petros’ peers.
“Namibia must deepen reforms to get better value from agriculture and extend nonmineral diversification to create jobs and reinforce spatial inclusion,” says one of the AfDB’s Economic Outlook reports.
Hanns Spangenberg, an analyst at NKC Independent Economists, says Namibia continues to be rated at an investment grade BBB- with a stable outlook.
“While the country’s fiscal and current account balances have deteriorated in recent years, and this report reflects weaker than before projections over the medium term, there is no reason to panic. The government is able to cover its borrowing needs on the domestic and international capital market while the current account deficit has increased external debt to a similar level recorded by Namibia’s ‘BB+’ and ‘BBB-’ peers,” he says.
“Namibia’s positive long-term prospects for mining exports are one of our key sovereign debt rating strengths. However, the sector has struggled during the last year due to lacklustre external demand for the country’s extractive exports. A decrease in diamond extraction led directly to the sector’s weak growth last year, while uranium output continued to record a contraction.”
He also added that, on a nominal basis, Namibia’s GDP is estimated to have contracted from around $14.6 billion in 2014 to around $13.2 billion in 2015 due to the depreciation of the South African rand (and subsequently the Namibian dollar).
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“On real terms, however, economic expansion is estimated at 4.9 percent in 2015, and is projected to accelerate slightly to 5 percent this year. Factors driving real GDP growth include strong wholesale and retail numbers, government activity, and a healthy financial services sector.”
Gary van Staden, a political expert, says there has been renewed impetus to tackle issues surrounding poverty and unemployment.
“The newly elected administration included some new people with vast experience in this field that are sure to make a meaningful impact over the long term,” says Van Staden.
He also added that political stability was crucial to Namibia’s future prospects.
“While one-party systems tend to be relatively unstable, given enough time, there is no indication of that in Namibia at the moment. On the contrary, the stability of the political environment has been a key factor in attracting foreign investment. While this may change over the extreme long term (i.e. in the next 10 to 20 years), this is not considered to be an issue currently.”

“IF you see a shack in walvis bay you know it belongs  to a fisherman”

The year was 1980. Ramachandran ‘Ram’ Ottapathu and his classmates would frequently boycott college and take to the streets holding ‘Free Nelson Mandela’ placards, appealing for the release of the jailed anti-apartheid hero. Mandela’s fight was their fight too, and his freedom, their freedom.
Except that this street protest was not in South Africa, in fact not anywhere in Africa, but in Kerala, 4,200 miles from Johannesburg.
Kerala, that leafy green state in the south of India, famously known in tourism brochures and puff travel pieces as ‘God’s own country’, was where Ottapathu, the man who would one day become a retail king in Africa, grew up. His home is in Ollur in Kerala’s Thrissur district.
Ollur, a small town with quaint little churches, is known for its entrepreneurial energy and commercial bustle. It boasts ubiquitous saw mills, side shops selling rolled gold ornaments, and factories making endless wooden packing cases.
It is said that during the First World War, it was here in Ollur that the wooden packing cases were crafted, for military use. The locals are so enterprising and the town, so filled with entrepreneurs that if a young man left Ollur for a job overseas, he was brushed off as useless, never to return.
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But not Ottapathu, the now famous ‘O’ of Ollur, who changed this narrative for good. Known to his neighbors as ‘Kannan’, an endearing name in Malayalam (language spoken in Kerala), even now, when he left Ollur for Botswana in 1992, in time, he also took Ollur with him.
It would seem that Ottapathu, the CEO of Choppies, Botswana’s biggest retailer, has employed almost half of Ollur.
More than 500 qualified men and women in his hometown have made the crossover to Gaborone, he says.
“Earlier, they didn’t know what I was doing in Africa,” says Ottapathu. “It was a distant place.”
Even before he arrived on African shores, Africa was on his mind.
In 1980, when Zimbabwe gained independence, a young Ottapathu featured the country on the cover of his college magazine. He wrote the words: “You must be loyal to your past, otherwise, you will go back to your past again and again.”
The Africa affinity was in his destiny, somehow, by default.
“My friends and I used to closely observe what was going on in Africa, because of the struggles in those days,” Ottapathu tells me, a fellow Keralite, in chaste Malayalam, when we meet at his plush duplex apartment at The Regent in Johannesburg on one of his many visits to the city from Gaborone.
While in college, studying for a commerce degree, he admits he was unabashedly leftist, and with his friends, always searching for a cause célèbre. For the uninitiated, communism features heavily in Kerala’s political history.
“At the age of 20, if you are not a communist, you are not a human being,” chuckles Ottapathu. “There are a lot of qualities you possess when you are an ideologist. It’s always helpful going forward.”
Evenings in Thrissur as a student were spent with friends by the busy town square, ironically called ‘The Round’, near the Vadakkumnathan Kshetram (a famous Shiva temple in Kerala), devouring the left-leaning Kerala Kaumudi and Deshabhimani publications and discussing the politics of the day. They also played cricket.
“We would always be on the look-out for a theme [to espouse]… We used to have a sort of defiance to everything, we had totally rebellious thinking at the time,” says Ottapathu.
“I tell South Africans the number of days I have spent on the streets in Kerala demanding the release of Nelson Mandela is much more than what an average South African would have done. I must have boycotted more than 100 academic days [to the cause] in the five years of my college life.”
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However, that life, and his thinking, changed when Ottapathu enrolled for his articleship training as part of his chartered accountancy course.
For one, the hours were very demanding. Whilst in college he enjoyed the freedom of bunking classes, he found it difficult to sit for hours hunched over accounting books. He quit in a week. A close friend forced him to return, saying “you don’t have a choice, if you don’t become a professional, your life will be doomed”. Ottapathu is grateful he took his advice and returned to focus on his career. In three years, he passed his chartered accountancy exams in the very first attempt, and “there was no looking back”.
The first son of five children, Ottapathu was born to “a working class family”. His father was a handloom weaver and his mother a housewife who did odd part-time jobs at a construction company. The family was deplorably poor, and from a young age, there was pressure on Ottapathu to make money, so he undertook various part-time accounting jobs.
“We suffered a lot. We were never able to make ends meet. The family had three full meals only about once a year,” says Ottapathu.
“My aim was to get a job, it didn’t matter what job, to earn any income, and take care of the family. For me, everything revolves around family. There is nothing beyond giving a decent living to one’s parents and siblings.”
Ottapathu toiled to lift the family out of poverty, marrying off his sisters, finding jobs for his brother and cousins in the years that followed. His first decent job was in Kochi, a metropolis in Kerala, as a chartered accountant with Apollo Tyres. Soon, he got promoted and transferred to Baroda in the Indian state of Gujarat, further north. It was around this time that the first chapter of his Africa story was written.
While on holiday in Kerala, it was a chance meeting with the managing director of a medical company he visited that launched his career in a completely different geography.
“I had gone there to meet my cousin, and the managing director, seeing me, asked what I was doing and said he had a brother who owned an accounting firm in Botswana and was looking for qualified accountants and if I would like to go. He asked me to send him my CV, which I did and I promptly forgot all about it.”
Ottapathu returned to his regular nine-to-five job in Baroda. The envelope that arrived soon after containing a visa and work permit to Botswana completely took him by surprise. At the time, all he knew about Botswana was it was an African country, and that it had “a lot of diamonds and elephants”.
“I knew it was one elephant for every 50 people,” he says.
On December 18, 1992, Ottapathu left his wife Jalaja and boarded the plane from Mumbai to Gaborone via Nairobi and Harare. On the Air Zimbabwe flight to Gaborone from Harare, his co-passenger was the son of the then Indian High Commissioner of Botswana. His prophetic words still ring in Ottapathu’s ears.
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“I was feeling very gloomy leaving my family. But he told me ‘don’t be sad, you are an accountant, and you are going to paradise, you will be a multi-millionaire one day, because that is the opportunity Botswana offers’,” recalls Ottapathu, who arrived in Gaborone with $20 in his pocket, all that was left after giving away $20 to the immigration officer in Nairobi.
Ottapathu joined the Mazars accounting firm on a dour December day. His first assignment was handling the ailing finances of Choppies’ fledgling predecessor, the Wayside supermarket, in Lobatse, in southeastern Botswana, roughly 70 kilometers from the capital Gaborone and close to the South African border.
To Ottapathu, it was the middle of nowhere, far from the bustling temple precincts of his hometown in Kerala.
The company had huge financial issues. Founded by Farouk Ismail of the Chopdat family (of Gujarati origin) in 1986, the Wayside supermarket was largely a shopping destination for Zambians and Zimbabweans not allowed access to South Africa during apartheid. There were regular train services that terminated in Lobatse, where they would buy goods such as watches, radios and sewing machines, and return.
“When apartheid ended, the train services stopped and the business just collapsed,” says Ottapathu. “But the one good thing about it all was that I could experiment. Anything we attempted was an improvement. The business slowly started turning around.”
By 1997, things were looking better, much better. Ottapathu had managed to steer the company out of its financial quagmire. In 1999, the company opened its first superstore in Gaborone West, which still exists. Ottapathu was appointed CEO in 2000.
“It opened our eyes to the potential of the business,” he says.
But the real turnaround was yet to come, in 2002, when Choppies’ first hyperstore opened in Gaborone.
“That store was the biggest success. It gave us an address and identity. It is still one of the biggest trading stores turnover-wise, in Botswana, doing almost BWP200 million (about $18 million) a year,” says Ottapathu.
The Choppies model was providing high-quality retail products at good value to the lower and middle LSM in smaller towns, through acquisitions of smaller franchises, but also effecting Botswana’s switch from informal to formal retail.
In Botswana, 20% of Choppies’ revenue is from its own branded products, about 50 of them, including sugar, flour, rice, juice, maize and cooking oil.
“In 2004, when the first devaluation of the pula came, all the [informal] Indian traders got a shock. So that gave us an opportunity to buy out a lot of stores from them at very good prices. They were running franchises. In 2003, we were operating Friendly Grocers, OK Foods and Spar. In 2003, we started doing well, so they wanted us to buy more from them, and started putting pressure, so we said ‘we are going alone, you can take your franchise’. That’s when the turnaround happened. That’s when we changed the name to Choppies [after the Chopdat founders].”
That’s not all. Between 2002 and 2007, the company “grew seven times”.
“We have never since had any financial issues. When we started talking to the banks for finance, and projected our financials in 2003, that we were going to have a BWP1 billion ($89 million) turnover, the bank manager would tease me saying ‘you are not normal’. He said ‘even bigger South African companies won’t get half of that, so where will you get it’? And we achieved it in 2004-2005.”
Festus Mogae, the former president of Botswana, was appointed Choppies’ chairman in 2008.
The company’s turnover in 2015 was BWP6 billion ($533 million).
Today, Choppies runs 170 stores across Botswana, South Africa and Zimbabwe. West Africa is not being considered for the moment, but Choppies is entering new and underserved markets in Kenya, Tanzania and Zambia; even Rwanda is on the cards. It is on course to roll out 200 stores by the end of 2016. The company is growing at 25% every year, and Ottapathu says Choppies is cash-plus.
“We need to grow at 50% to get to 200 stores, and we can see it,” he says.
Listed on the Botswana Stock Exchange in 2012, Choppies’ secondary listing on the Johannesburg Stock Exchange, Africa’s biggest stock exchange, from May 2015, is doing well. Choppies is expecting to eventually get “$700 million that will be put into the Africa expansion”.
Choppies entered South Africa in 2008 with a distribution center in Rustenburg, located strategically on the transport route to Botswana. It currently operates more than 60 stores in the country, and that number is growing every month. In an intensely competitive retail environment, with majors such as Shoprite and Pick n Pay, Choppies targets Tier 2 and Tier 3 towns, and says it’s doing extremely well in Limpopo, North West province, northern Free State and Mpumalanga.
“We have been competing with South Africa for a long time. Our market share is over 36 percent. There is no other African retailer with that kind of market share in any market,” says Ottapathu, who became a shareholder in 1999, and currently owns 20% of the company.
And his personal net worth, considering he came to Africa with $20 in his pocket?
“I haven’t counted,” he laughs. “I normally don’t.”
Prod him further, and he reluctantly says it could be $300 million.
At heart, he is a simple man who has not forgotten the poverty, pain and hunger that defined his youth.
He says he wears suits only when he meets Botswana president Ian Khama, and displays few trappings of wealth, although he owns two private planes, a Beechcraft and Embraer, parked at Lanseria airport when in Johannesburg.
“It’s quicker connecting to Africa that way,” he says.
It may seem that Ottapathu’s destiny was a foregone conclusion to many. Misty-eyed, he recalls the words of his mother’s sister, an aunt he truly loved, who had no children and passed away before he made that first trip to Africa. His greatest regret to this day is she didn’t live to see him successful.
“She used to like me very much, and often told me, the way you are growing up, you will even one day own a plane, and I would laugh. My regret is I couldn’t look after her.”
Ottapathu lost his father in 2002, but is grateful both his parents saw his success, visiting him several times in Botswana. His 80-year-old mother lives in his family home in Kerala.
He says the true value of wealth is beyond money, it’s enjoying what you do, and never losing focus. After he first arrived in Africa, it took him four years to visit Kerala &#8211; he was that involved in his work. From 1992 to 2003, he says he may have visited India only for 30 days in all.
“I don’t have any aim to achieve so much wealth. I would rather have ambitions relating to the business. My immediate aim for Choppies is to get a billion-dollar turnover. And increase the number of employees from 11,000 to 25,000,” says Ottapathu.
He is known to be a shrewd businessman, never mincing words, but his enterprise and clean reputation have won him admirers on the continent.
“The most remarkable thing about him is the sort of speed and ease with which he moved from working for this accounting agency to taking the opportunity to turn entrepreneurial; the ease with which he saw how parochial we tend to be in big businesses in South Africa and by extension in Botswana, that the approach is local, and he saw that was the niche, in the process explaining how he managed to quickly move into new markets. That sort of global outlook makes him a true citizen of the world,” says Luke Spiropoulos, who met Ottapathu three times as part of his master’s degree research on the migration and mobility of Indian communities in Southern Africa, with the Centre for Indian Studies in Africa and University of the Witwatersrand.
“When he came here, he didn’t have a lot of options at the time but his professional advantage over the others seems to be a particularly sharp knowledge of tertiary education in India, by bringing people in with high-end qualifications. He has a good feel for the human resources market in India,” says Spiropoulos.
Ottapathu says his humble upbringing shaped his belief-systems.
“I am a strong believer in karma. I always say my two hands are my God. Whatever I do the right way, I always get it back. Being a knowledge worker, you use your brain and your hands.”
And not for him ephemeral success.
“Have a long-term view. Don’t look at fortune created overnight. It’s a long-term process rather than an accident,” says Ottapathu.
This is the advice he constantly gives his 23-year-old son Balram, a finance and economics graduate from Wharton, currently studying in Princeton in the United States. His daughter, Bhagyasree, is only 10.
Will his son take to retail like him?
“My father didn’t give me anything,” says Ottapathu. “So he must decide what he wants to be. Sachin Tendulkar [Indian cricketer] said about his son, ‘I can put cricket into his brain, but not into his heart’. Likewise, it has to come from his heart. Eventually, he may take to retail consultancy.”
And the future of Africa?
The future of retail, he says, is smaller stores, given that “hypermarkets are shrinking around the world”.
“The politics is what is putting Africa behind. At Choppies, we try to be neutral, and not align with anything, and work with official channels. Africa is certainly open for business. The growth opportunities here are much better. One day, companies like Walmart will do much better; it will start flexing its muscles. But it will be good for retail in general.”
Will he ever take Choppies to India, just like M.A. Yousuf Ali, the Dubai-based billionaire from his hometown in Kerala, did? Ali opened the gargantuan LuLu Mall in Kerala after a slew of hypermarket-successes across the Middle East.
No, says Ottapathu.
“Currently, we have better returns for our capital here in Africa. We don’t want to lose focus on what we are doing here, if we start doing things in many places.”
But he just might forge the Africa-Kerala connection on celluloid though.
“I have been approached to produce films. I just may. If it happens, the movie will be shot in Kerala and Botswana, linking both countries.”
You just cannot take Africa out of him.
“Africa is an addiction,” concludes Ottapathu. “I don’t even want my dead body to go out.”

“Africa Is  An Addiction  I Don’t Even Want My Dead Body To Go Out”

Cold. Expensive. Concerning. These words have been the top three words I have used to describe our most recent visit to the 47th edition of the World Economic Forum in Davos, Switzerland.
The beautiful snow laden ski-town, nestled in the Alps, played host to over 2,500 delegates from across the globe. Present were heads of state, political leaders, business executives, members of civil society and the like, who braved sub-zero temperatures to explore the theme for this year – the 4th Industrial Revolution and its impact on economies.
But this year, the conversation on robotics and artificial intelligence was over-shadowed by a myriad of concerns – the global market environment and its negative impact on the “Africa rising narrative” and of course the minimal attendance of women at the meeting.
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Where are the women?
Over the last few decades, the participation of women at the forum has improved, albeit at a slow pace. This year, only 18% of contributors were women, a slight improvement from the 17% attendees in 2015. But are our voices being heard? Yes. Several panel discussions and side events were held at the meeting to truly understand the economic impact of empowering the fairer sex.
Bea Perez, Global Chief Sustainability officer at Coca-Cola, reminded us why corporates like the soft drink manufacturer continue their focus and investment in women.
“We know women drive the economy. When they participate, they also give 96 cents of the dollar they earn back to strengthen their communities,” said Perez.
Also in attendance at the forum was a woman who holds the purse strings to Africa’s largest economy – Kemi Adeosun, Nigeria’s Finance Minister. So too, was Mary Barra, the CEO of General Motors.
They join Davos veterans Sheryl Sandberg, Facebook’s Chief Operating Officer, and Christine Lagarde, IMF head, among over 500 outstanding female leaders from every part of public life.
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Global market concerns
The global market environment got off to a rickety start in 2016. The world’s attention remains fixed on the change in growth models in China – away from infrastructure to a consumption-led economy, the United States, which has managed to show signs of marginal strength in its economy and begun to raise interest rates in December 2015, and the commodity price cycle. With the price of oil at 12-year lows and the prices of base metal commodities like gold, platinum, iron ore and copper significantly weaker, emerging markets are bearing the brunt of these pressures.
Such pressure was evidently felt in our exchange rate. With one Swiss Franc (CHF) at R16.74 at the time of our visit, a simple meal of a burger and coke set me back CHF21.50 or around R370 – enough money to provide a meal for a family of four back home.
Despite the market volatility, Oscar Onyema, CEO of the Nigerian Stock Exchange, remains confident that Africa plays home to equity markets which continue to see interest from investors, regardless of the global market conditions. “We just have to ride the cycles,” he said.
These sentiments were echoed by Nicky Newton-King, CEO of the Johannesburg Stock Exchange.
“We have got to understand that there is a new normal out there, low growth in an uncertain global world, good investment opportunities will come, but we still have a chance to compete with our global peers,” said Newton-King.
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Give us hope!
With all the negative sentiment, one would think this would deter investors. While the leaders of these global companies continue to monitor the headlines, they are concerned but not discouraged by the current economic cycle.
“I think it depends really on your time profile for your investments, I think there’s a growing interest from people who have a five to ten year view of what they want to be investing in to actually go to Africa,” said Geoffrey White, CEO of Agility Africa.
“We are long-term investors, with our roots in Africa – South Africa to be exact. Despite the challenges at a macro level, we see the needs of the consumer and we are providing them with the service, we will roll out capital prudently,” added Ralph Mupita, CEO of Old Mutual Emerging Markets.
While the challenges are clear, Africa is still on the agenda.
And, perhaps, as the conversation continues to evolve and the participation of women increases, the message about our continent from Davos will be warm, inclusive and exciting.
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– The writer is a financial journalist and senior anchor with CNBC Africa.

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Is The Africa Rising Story In Jeopardy?

When you come home after a long day at work, wouldn’t it be nice to just relax in the living room and savor your Friends reruns on Netflix, or just listen to your favorite playlists, saved on your smartphone over wireless speakers? And if you feel like continuing Friends in your bedroom, just take your tablet and pick up where you left off.
Now that Netflix has expanded globally, including Africa, you can do just that when you get home from work. Video-on-demand services have become mainstream with ShowMax leading the way with its popular R99 ($6) a month offering since 2015. And most recently, we’ve seen the bigger players launch their own music streaming services, like Apple Music and Google Play Music.
The first thing you need to do is make sure you have a decent net connection. A minimum 4Mbps ADSL line is recommended to stream content properly, with a big enough data cap to get through the month; uncapped is recommended for larger households or heavy users. If you have fiber in your area, sign up immediately. A good tip would be not to stream over 3G/LTE as it is very expensive; to prevent this from happening, enable streaming over WiFi only.
Next, you should trial the services that interest you. If you’re looking for TV series and movies, you can take a look at the following VOD services: Netflix, ShowMax or MTN-owned VU.
A basic Netflix account in South Africa costs R129 ($8), and catalogues differ vastly across regions. Another option is ShowMax, which offers offline play, handy if you find yourself traveling and need to catch up on TV. If you’re an MTN customer, the advantage of signing up with VU is that the data for streaming over 3G is zero-rated, meaning it’s free. You can subscribe for a weekend pass for R39 ($2); a month-to-month for R99 or just rent movies from R15 ($1) upwards. Make use of free trial periods to gauge how much data you use, or how long it takes to buffer.
If you’re undecided about which service to choose, check with your partner or family on what shows interest them and who offers a wider selection to cater to everyone’s needs.
If music helps you unwind in the evenings, you should consider subscribing to a music streaming service, because nobody actually buys music anymore. You can subscribe to Apple Music, Google Play Music or Deezer. All three music streaming services will cost a monthly fee of R59 ($3.7), for an individual, and let you stream as much music as you want.
If you’re already an iPhone user, it makes the most sense to subscribe to Apple Music, which has a three-month free trial and a family sharing option. Similarly, if you are on Android, Google Play Music would be the best option.
A unique feature is the ability to upload your own music to Google’s cloud and listen to what’s available in the existing catalogue, plus your own music seamlessly. If neither of these options appeal, Deezer is an excellent alternate, with over 40 million tracks in its library and a 30-day free trial. You can listen to music ad-free on your mobile, laptop or tablet. Choosing the ‘right’ music streaming service all boils down to a matter of preference.
Now that you’ve subscribed to various services, you want to be able to watch TV conveniently in your living room. A great way to start is with a smart TV. Samsung has excellent offerings, as well as LG. Make sure you purchase newer models (2015 and upwards) as they do support apps like ShowMax; and have plenty of ports (USB; HDMI). If you’re splashing out this year, opt for a 4K-resolution TV because you want it to be relevant years down the line.
The best media-streaming device currently is the new Apple TV (2015). You can download apps such as Netflix, YouTube, and even games; and play content wirelessly from an iDevice using AirPlay. You can also play a two-player game of Crossy Road with your child in the evenings. Google’s Chromecast or a Roku streaming device (various models available) are other options if you’re not tied to one ecosystem. All these devices plug into your existing TV, either through HDMI or USB and add another, more user-friendly layer.
Now that you’ve subscribed to various services, having good sound helps you enjoy it a little more. A wireless soundbar is a great addition to your living room. There are various options available from Samsung, JBL, or LG. You can even opt to go with something premium from Bang &amp; Olufsen. There are many options available but the key feature to look out for is Bluetooth or some sort of wireless connectivity to your existing devices, and preferably USB ports; to plug in an MP3 player if the need arises.
A few final touches to your smart living room would be energy-efficient ambient light bulbs that you can control via an app, and air-conditioning. The Elgato Avea bulbs work on iOS and Android and let you choose from different moods (cherry blossom, mountain breeze, magic hour, etc) for different times of the day. Samsung air-conditioners with inverter technology means it consumes less energy while keeping costs down, and you can set timers.
Clearly, it’s time to scrap the morass of wires concealed under duct tape in your living room.

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Inside The House Of The Future

Failure is a word that apparently means different things to different people. Most entrepreneurs have experienced failure at some point in their lives; it is the successful ones that have the resilience required to bounce back.
There are two amazing stories of resilience that come to my mind. The first is a story of Tim Westergren, the founder of Pandora Radio in California. Pandora was started with an initial cash injection of $2 million in 2000, but it went bankrupt in 2001.
Incredibly, the 50 employees at Pandora stayed with the radio station, after Westergren asked them to continue without a salary. For two years, Westergren met 347 prospective investors who did not support him.
A ray of light eventually shone on Westergren as he presented his business to the 348th potential investor who gave him $4 million. It was not the business model that caught the interest of the funder, but resilience and ability to convince people to commit to an idea without financial rewards. Today, Pandora is prosperous and listed on the New York Stock Exchange with a hefty market capitalization.
The next resilient entrepreneur is someone most would be familiar with: Walt Disney. He was fired by the Kansas City Star newspaper editor because “he lacked imagination and had no good ideas”.
Disney formed his first animation company, Laugh-O-Gram Films, which did not succeed after an important distribution partner had to shut down.
He went bankrupt several times before he built Disneyland. Actually, the proposed park was rejected by the city of Anaheim on the grounds that it would only attract riffraff. The movies and the theme park in the United States are now hugely popular and profitable.
Failure can be either humiliating or a catalyst to set you on a path of improvement. It is well known that Silicon Valley embraces failure. In what is probably the most innovative part of the world, it is thought that in order to succeed quickly, you need to double your failure rate.
It couldn’t be further than the attitudes you can encounter in Africa. On our continent, when you fail, it is as if you are cursed and business associates desert you. This is the reason many African entrepreneurs go back to being employees instead of trying again. If failure is not embraced by those around you, simply change your outlook. Only your view of failure can determine your approach to it.
Africa needs to embrace those who tried and failed. They need to be given a second, third and fourth chance until they get it right. If they know they won’t be punished for trying, Africa’s pool of successful entrepreneurs will start to overflow.
Nelson Mandela once said, ‘It always seems impossible until it’s done’. We know that it can be done, because entrepreneurs have been bankrupt, only to return smarter and stronger.
There is one point, however, that is important to note. We need to be committed to building successful companies rather than being committed to an idea. Entrepreneurs can be blinded by their love of an idea, even if the market says otherwise.
If your goal is to succeed and change the world, you will move on to a business that works. It might mean that you have to change your business model, like American Express did when it switched from freight delivery to finance.
The failure of a company is not necessarily the failure of its founder, as they may succeed in something else. We need to stop confusing an experience with identity.
There is something about people who have repeatedly experienced failure. Once they get things right, their drive and vigilance make them remarkable. Steve Jobs, Arianna Huffington and Donald Trump are all examples of this.
An attitude of doing whatever it takes to be successful is crucial. Remember, barriers are only things you see when you take your eyes off your goal.

conquer the fear  of failure

South Africa needs a solid plan to deal with the more than $245 billion of backlogged infrastructure that is curbing industrial growth and social development.
A toxic cocktail of events and cruel circumstances continues to damage a hitherto world class industry that is vital for any planned economic revival.
The construction industry is suffering like never before. It is still shrinking from its 2008/9 peak, shedding several hundred thousand jobs, margins plunging to around 2% and little sign of relief.
The reality is that, despite political hot air, very little of the backlog of crucial infrastructure, needed to attract foreign and domestic industrial development, is being dealt with. As inaction continues, the capacity to deliver this crucial infrastructure is being destroyed, potentially leaving South Africa at the mercy of foreign influence.
The political influence that black business has in demanding an end to perceived white dominance of the sector, as well as the ratcheting of transformation demands and targets for black empowerment and black industrialization, drives a relentless, but necessary, agenda at a difficult time of negative growth.
In addition, many of the local construction groups have suffered reputational damage and have been heavily financially penalized by government for reported competition infringements.
The industry has suffered massive losses on major projects in South Africa, Africa and Australia, many of which are public sector projects which were poorly engineered and badly managed by both government and contractor.
Share prices have plummeted in recent years and skilled people have been eagerly sucked up by banks, consulting firms, mining and industrial companies.
The public view is negative, and notwithstanding the understandable loss of trust, the government has paid little attention to the damage to the South African economic revival that we all hope for.
The localization of the nuclear program and the infrastructure embedded in the National Development Plan are wishful thinking.
There is a new group of transformational CEOs appointed into many of the large construction groups. We realized a massive wake-up was required. The old guard had gone and we had to deal with the fallout and culture change required to root out historic anti-competitive behaviors and racist tendencies. We found we were not close enough to government and black business and we were not listening to the messages nor understood the outrage directed at the industry.
A few of us traveled a lonely journey trying to facilitate a new beginning and open dialogue between a diverse and relatively untransformed industry peer group leadership and the fragmented approach from four ministries that purported to have control or influence over the industry.
It was not until the chasm between traditional business and government claimed its first victims, through the heavy fines imposed by the Competition Commission and the threat of further action, that the attitudes of some of the diehard leadership among the peer group changed.
They had finally realized it could not be business as usual. Their anger was misplaced. Government and black business action was not about a perceived vendetta, it was fueled by the perceived exclusion of black business and broken trust in the construction leadership’s apparent lack of commitment to transformation and clean business.
After five years, the unproven remnants of the competition matter remains disputed. The Construction Industry Development Board (CIDB), the industry’s regulatory body, continues to threaten to impose blacklisting sanctions and state-owned corporations charged with implementing the major infrastructure works remain short of capacity and technical skills to be able to manage the projected infrastructure projects worth R4 trillion ($245 billion).
Yet the economy is screaming for the infrastructure to be built to attract regional and international trade and investment.
Construction leaders have fast tracked the inclusion of black business interests, cleaned house and retained capacity at great cost to support the national infrastructure agenda. Yet government remains distant and unengaged, while some black business structures continue to bark demands with self interest in mind.
It is suspected that tenders for much needed infrastructure are being withheld pending a resolution of the trust and empowerment issues. It also appears that cabinet is unsure of which politically acceptable route to follow. This is very worrying and is preventing the country’s progress.

Category: Investment Guide

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