African leaders have highlighted the need to mobilize domestic savings to support investment that will drive economic growth. However, as is often the case in Africa, progress in realizing many government initiatives has been slow. The increasing development and penetration of financial services provides hope that a few lofty ambitions can be accomplished. After several rounds of recapitalizing and consolidating the banking sector, the central bank reports that Nigeria now has almost 29 million bank accounts.
The regulator last April introduced a policy that effectively raised the minimum savings rate to 3.6% to increase savings in the country. It’s a move that hurt banks because it raises their funding cost. But are savers really winners?
From an early age, my parents communicated the value of saving for a rainy day but I think every African should question the wisdom of that statement. A savings culture certainly provided small opportunities to improve the quality of my life but in the school of wealth-making, the impact can be compared to drizzle and not rain on a cloudy day. The discipline of setting money aside gave me the opportunity to spoil myself with little things such as a special pair of shoes or an ice cream treat. The rewards were not life changing.
Apart from cases of inherited wealth, the richest people in the world got wealthy by either investing their savings in assets or in a business idea.
Savings do not make people rich because the returns on savings are almost always lower than the inflation rate. In most African countries, this gap is very significant. In Nigeria, where the bank savings rate is around 3.6% but the 3-year average for inflation is in double digits, many will argue that it makes more sense to spend savings as quickly as possible because the purchasing power of a saver is stronger today than in the future.
Investments offer a different wisdom. Over the last decade, Nigeria has generated mouth-watering returns to investors. From telcos to consumer goods companies, Africa’s second largest economy has made many rich. The financial markets have also provided some joy. Over the last decade, Nigeria’s stock market has provided an annual average return of 17.2%. Those that used debt wisely as leverage over this period, made even more returns.
However, many of these investments are out of reach for the typical middle class saver. This reflects the level of sophistication of the Nigerian financial market. Financial institutions must improve the product offering for investors because despite the level of poverty in the country, the potential to attract savers is huge.
The stock market only has around 5 million investors but according to a 2012 report by Enhancing Financial Innovation and Access, an independent financial sector development organization, 56.3 million people, representing 64% of Nigeria’s adult population, do not even have a bank account.
Financial institutions that create a model to encourage and mobilize savings from small scale farmers, who represent the largest group of working people in the country, and others in the informal sector will be big winners. It is estimated that over $7.6 billion is currently outside Nigeria’s banking sector. That is a figure that should capture the imagination of bankers, asset managers and financial planners.
The tough task will be finding a way to rake in the funds for investments.

Invest for a rainy day

Sighting a Moseme Road Construction yellow truck on the Johannesburg freeways during the 2010 FIFA World Cup preparations was a given. Travelling along the N1, the N3 or near O.R. Tambo International Airport, you were bound to bump into one—or a big board bearing the company’s grey triangular logo. The company is only one of a handful still standing after the near collapse of South Africa’s construction industry after the 2010 World Cup infrastructure boom.
“We were one of the few wholly black-owned civil engineering companies at the time that got the biggest contracts,” marvels Ernest Moloi, who is the sole owner of the company.
His business is now picking up after having to retrench staff and close down other business units. “I had to reduce the business and refinance it with R48 million ($5.8 million) of my personal funds,” says the maverick who explored at least 10 business ideas before settling on civil engineering.
Moseme currently employs 250 staff, with business units that include asset holding, property development and Roadfix, which develops asphalt that can remain in potholes for up to 20 years. The company is based in Brakpan on the East Rand of Johannesburg.
<div id="attachment_889" style="width: 484px" class="wp-caption alignleft"><img loading="lazy" decoding="async" aria-describedby="caption-attachment-889" class="size-large wp-image-889" src="/wp-content/uploads/2017/04/CTP4567-680x1024.jpg" alt="" width="474" height="714" />Enerst Moloi</div>
Since the economic meltdown and drastic slowing down of infrastructure development after the 2010 World Cup, Moloi has been travelling throughout Africa in search of business opportunities. He has managed to convince the Ugandan government to build a toll road from Kampala to the corridor of Kenya, and preparations are underway.
“First the government had to come up with legislation for that and then a feasibility study,” he says about an original idea that he pitched to the government. In property development, Moseme is planning to build shopping malls outside South Africa. They are holding discussions in Botswana and Uganda about the ventures.
Moloi founded his business from humble beginnings, through bold moves and determination.
“I asked a neighbor if I could build her two back rooms to use for generating extra income and she agreed,” he says.
He then gathered a few guys from the neighborhood who were  unemployed, bought building material and had them do the work while he managed the project.
“They did such a great job that the client was very pleased, and that was the beginning of my entry into the world of construction.”
This was in 1994, at the advent of Black Economic Empowerment (BEE) when the South African government was making efforts to empower historically disadvantaged individuals. Moloi took advantage of the socio-economic climate and used his
limited experience to seek government tenders.
“My first tender was for R25,000 ($3,000) to build a clinic in the informal settlement of Orange Farm, in the Vaal vicinity. I did not even own a car and therefore travelled by taxi every day from Soweto to the site,”
he says.
For someone who had been unemployed, this was big money. “Instead of paying myself a salary, I opted to pay only the workers as I had already figured, because I was the big boss, at the end of the job the balance of the money would all be mine.”
As it turned out, he had miscalculated the budget and ended up not getting a cent. That was his first and biggest mistake which he will not forget for the rest of his life.
“Since then I always engage an accountant in all my business dealings prior to signing any contract,” he declares.
The one lesson learnt from the experience was to treat himself as an employee and pay himself a regular fee. He said that this is a common error by most emerging entrepreneurs. They see the price value of a contract and then think that it will make them rich overnight.
Moloi’s next contract was valued at R45,000 ($5,400). It paid him enough to buy an old Honda Ballade. Life was better as he could get to work quicker.
Several contracts down the line, Moloi made his first million. Instead of getting excited by rewarding himself with a flashy car and a home, he resisted the temptation to show off with expensive material possessions. He continued his modest lifestyle as a tenant in his mother’s back yard in Soweto.
“I had to plough the money back into the business by purchasing the necessary equipment to operate it properly and efficiently,” he explains.
Today, Moseme is one of South Africa’s four biggest, wholly black-owned civil engineering companies. Its growth strategy was for a long time bolstered through joint ventures with some of the large construction companies, among them Murray &amp; Roberts and Group Five. At the height of the 2010 FIFA World Cup preparations,
the company’s order book was over R500 million
($60.1 million).
Moloi appreciates the good intentions that underpin the BEE legislation, especially since he has benefited from it. However, he feels that in civil engineering, not enough is being done to ensure that the intended beneficiaries garner the big contracts.
“The updated BBBEE (Broad-Based Black Economic Empowerment) scorecard removed the HDI clause which gave black contractors an advantage with the 10% black-ownership rating. That killed a majority of black-owned companies because that was the only advantage they had to help them grow,” he says.
The new level rating is virtually color blind and therefore gives white-owned businesses the advantage because they are far more established and resourced. “This is throwing us outside of the market as white businesses can also source business in the private sector, which is predominantly white-owned anyway,” he says.
Moloi’s suggestion to government is that it strategically award contracts to black-owned companies that have made it in the industry on the basis of joint ventures with emerging contractors. This, he believes, could be the solution to combat fronting and therefore, gradually eliminate domination of the industry by white males.
His other concern is that fronting denies true black-owned companies the opportunity to develop, adding that already established black-owned companies should be supported.
“We are hopeful that the recent announcement of R800 billion ($96 billion) infrastructure development by Pravin Gordhan, Minister of Finance, will bring more work and we will be able to rehire.”
For Moloi to succeed as an entrepreneur, he credits his personal philosophy of patience and being thick-skinned. “Don’t be afraid to fail, and before pursuing a business idea set goals and do your homework.”

Following The Yellow Brick Road

Rwanda’s post-genocide recovery has gone through many hands, but there is one big hand to reckon with—that of entrepreneur Said Sekoko Hatari.
Hatari may not be the richest man in Rwanda, but he is among Kigali’s cash kings. Born to a poor family, he grew up in Uganda as a refugee. One of the bitter legacies of Rwanda’s troubled past is that many of its people grew up sheltering outside the country.
Exile was where Hatari started in business, at the tender age of 20, as a truck driver working for Somalis. He was transporting construction materials from Kisumu in Kenya to missionaries living nearby. He quit the job to trade spare parts and coffee. He made mistakes along the way, including losing $1 million in the coffee business.
More than 30 years on, Hatari, who also served in the Rwandan army, is the king of hospitality and construction in Kigali with a number of business partnerships at his elbow.
“In partnerships, people come with their own money and borrowing connections. When you are alone, you get exhausted,” he says.
Hatari is the executive director of Doyelcy Ltd, founded in 2006, one of the largest firms in Rwanda and under valuation by Ernst &amp; Young. The company may list on the Rwanda Stock Exchange or issue a corporate bond to raise capital for investment in its core businesses of hospitality, property, insurance, renewable energy and agriculture.
Doyelcy is co-investing in hospitality and construction projects in Rwanda along with Dubai World, Chinese investors and Sudhir Ruparelia, one of the richest men in Uganda.
The prime project is the Kigali City Tower, which will be the tallest building in Rwanda and a potent symbol of reconstruction less than two decades after dead bodies littered the streets.
The 1994 genocide took more than 800,000 lives in 100 days. It shattered the country’s infrastructure, as well as its soul. From roads to government offices, private businesses and homes, to water pipes and electric poles—the country needed huge investment to build afresh; money that the government did not have.
Seventeen years later, Rwanda is one of the world’s success stories, with an annual average growth rate of about 8%. It was ranked the top global business reformer in the World Bank’s Doing Business Report in 2010. This was the first time a country from sub-Saharan Africa—the region with the highest poverty levels in the world—won such an accolade.
The tower of Kigali is a bold manifestation of this surge of confidence. It will bring scarce high-end office and retail space to Rwanda as the country plans to position itself as the business-friendly Switzerland of East Africa. Tenants are signing up for 20 floors; they include Rwanda’s plush coffee shop, Bourbon Street; Apple; Kenya’s Nakumatt; and South Africa’s Mr Price.
Ernst &amp; Young valued the tower at $33 million, which also makes it the most expensive landmark in Rwanda.
In another project, costing at least $200 million, Doyelcy is also co-investing with Ruparelia in a modern tax park and commercial buildings in Kigali. Then there is a $60 million five-star hotel with Chinese investors. The 254-room Kigali Marriot will be the largest hotel in Rwanda.
This year, the Central Bank says the economy may grow by more than 7.5%,  with strong recovery in the agriculture and service sectors, in a land where it takes one day to register a business. Inflation is easing and the financial sector grows stronger as more regional banks set up shop in Kigali.
This year, Rwanda expects investments to grow to $550 million, from more than $300 million last year.
Construction and hospitality are the fastest growing sectors in the country. In the first six months of 2011, construction rose by 54.6% compared to 28.7% for the same period last year.
“I believe that the future of this economy is mainly its expansion, going beyond borders as it reduces trade obstacles and introduces new markets,” says Hatari.
Although the construction sector is growing, Hatari says it faces setbacks from a lack of skilled labour and construction materials like cement. There is also a question over long-term finance from the banks.
“Finance is still a challenge and I think it will remain a challenge,” he says.
The good news is that Rwanda relishes a challenge.

Tag: Development

FORBES AFRICA SOCIAL MEDIA

Invest for a rainy day

Following The Yellow Brick Road

From A Truck Driver To A King Of Kigali