<h2> Migrant businesses have become an integral part of the economic ecosystem.</h2>
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In the bustling heart of Johannesburg’s Central Business District (CBD) lie a stretch of migrant economies. Microcosms of China, India, Egypt, Turkey, Somalia and Ethiopia have popped up with the smell, sound and feel of home.
As you walk down Commissioner Street, under the highway and past columns of graffiti, The Oriental Plaza comes into view. Designed like a souq, the traditional meandering Arabic market, the plaza sells everything from saris and suits to curtains, pots and incense. The aroma of piping hot samosas hits you as you walk through the gates, the sizzle of hot oil permeates the walkways and there are stains of bright red chilli sauce on the al fresco tables. The savouries are the best in town and the perfect start before you bargain your way through the stalls.
Out of the gates and a street away, Mint Road is an informal extension of the plaza. Stalls selling hot chilli bites and fresh juice border the market. Bollywood heartthrob Shah Rukh Khan and his latest swooning heroine play on small television sets. It’s like stepping into a market in Mumbai or Delhi where Hindi, Urdu and Bengali converge.
The last census conducted in 2011 put the number of immigrants, both documented and undocumented, in South Africa, at just over two million. While some acquired citizenship on arrival, over one million were not citizens in 2011. Immigrants made up 4.2% of the entire population, which stood at roughly 51 million at the time. Of the 4.2%, 71% of the immigrants were from other African countries. Immigrants have created economic hubs across the country.
In a study conducted by the African Centre for Cities (ACC) at the University of Cape Town in 2015, migrants and refugees in Cape Town and Johannesburg have pinpointed the gap in the informal market. By providing cheaper goods and services for the poorer segments of the population and monopolizing niche demands, migrants have made a significant contribution to the population. Most of these migrant businesses also support South African factories, wholesalers and supermarkets and are subject to value added tax. They have become an integral part of the economic ecosystem.
From Shanghai to Mogadishu via Mumbai, it’s an economy built on the search for the African dream in the City of Gold, but it may soon become a nightmare.
Early 2016, Home Affairs Minister Malusi Gigaba proposed a host of new policies to clamp down on economic migrants. The proposed policy would see those like the Somali traders in Mayfair or the Pakistani shop owners in Fordsburg lose the right to work, trade and study in the country. If it all goes through, asylum-seekers could be confined to processing centers near the border, where “their basic needs will be catered for” while they are kept from “integrating into communities”.
For the traders along Johannesburg’s migrant mile, the future is somewhat dim and uncertain. In the pages that follow, FORBES WOMAN AFRICA focuses on the migrants who became entrepreneurs despite all the odds they faced.
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<h2>The Chaudry Women</h2>
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The once lively market on Mint Road in Johannesburg now houses stalls selling DVDs and sunglasses stacked next to each other like clones. The smell of fried corn in butter wafts through the streets even as competing Bollywood beats drown each other out. In a small corner of the market, the Chaudry family are an unusual sight. Aisha Chaudry and her sisters Asimah and Amina own one of the only stalls run by women.
Kaniz-Fatima and her husband Yawar-Abbas Chaudry came to South Africa in 1991 on their honeymoon and decided to stay for good. The couple from Karachi, Pakistan, started their business in Fordsburg 15 years ago as one of the first stalls in the square.
“My parents would come here at five after work. It was full and crowded, it was just like a playground for us,” recalls Aisha.
With rows of Basmati rice, snacks from India and Pakistan and spicy corn, the Chaudry family set themselves apart from the rest. After starting as an informal market, the City of Johannesburg decided to build a structure around the market in the late 2000s. For a year, business was impossible. The stress of trying to make ends meet took its toll and Yawar-Abbas died before the business could bounce back.
“Before, we didn’t have to work hard, business just came. Now we work twice as hard for half the money. Things changed and all the stall owners weren’t a family anymore,” says Aisha.
For the daughters on Mint Road, things are changing and everyday life has become a struggle.
“We’re here every day and every evening. My sisters are still in school and I want to be a teacher. Who knows how long we’ll be here,” says Aisha.
It’s not uncommon in migrant economies for children to man stalls.
For these families, it’s all about survival and making it to the end of each month.
They maintain a cheery disposition but business has certainly taken a dive in the last decade. What once were great economic hubs are now plagued by crime and urban decay. On either side of the square, people are closing up shop.
“Business is okay,” says Aisha, unconvincingly.
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<h2>The Last Brothers On Commissioner Street</h2>
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Commissioner Street is the former China Town. As you walk down the deserted street with locked doors and bright red signs, there are two shops at the end. The Pon family has run a supermarket for 73 years and a firework shop for 20. The brothers, Walter and King, work across the road from each other. For a fleeting moment, until a taxi blasting the latest Cassper Nyovest song zooms by, you’re transported out of Johannesburg.
You’re in Mainland China adorned with Chinese lanterns, families chatting in fast-paced Mandarin, aisles lined with noodles and dried oyster mushrooms, and shelves stacked with fireworks and laughing Buddhas.
Steel bars cover the windows and security guards man the doors.
One ring of the bell gets you past the first gate, another ring gets you past the second. But the business’ longevity is a big question mark.
“I’m the oldest man to live and work here,” says Walter Pon with a cheeky smile. In its peak days, Chinatown was bustling. Births, deaths and everything in between would be discussed over jasmine tea and prawn crackers. Shops would stay open long into the evening before the men would retreat upstairs to play poker into the wee hours.
“We were the biggest gamblers. We would start these gambling joints every night and play until we were called to bed. Everything was here with some Chinese muti [medicine] for luck,” says Walter.
In the throes of apartheid, the Chinese were in no man’s land.
“Not black enough, not white enough, we were in limbo,” says Walter.
The Group Areas Act passed by the apartheid government in 1950 placed different racial groups in certain residential and business areas. With a tiny population of 10,000, the act didn’t account for the Chinese.
“The Chinese were in small numbers so they didn’t know where to send us. Landlords wouldn’t rent to us so we would get white nominees to rent the shops and we would work for them,” says Walter.
During the 1980s and 1990s, the economy opened up for the Chinese and they were allowed to buy property.
“Apartheid did a lot of damage to the country but what it did was hold the Chinese together,” says Walter.
At the helm of the brothers’ stores is their 103-year-old mother, Shue Chee Pon, who rules with an iron fist and keeps a watchful eye on Walter, 76, and King, 66. Her picture lies above their desks and she checks in with her sons every morning.
They’re the last of their family on Commissioner Street but they have an impressive track record. They boast big names like Winnie Mandela and Jessie Duarte as regulars.
“My kids left. Getting degrees, going overseas – that’s how you make your money now. My mother phones me and asks me ‘who’s going to take over’ and the truth is that there is nobody,” says Walter.
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<h2>The Little Coffee Shop In Little Mogadishu</h2>
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Further up from Johannesburg’s CBD towards Mayfair, a once predominantly Indian area, a new economy is just beginning to take shape.
The women man the stalls, taking time out to chat amongst themselves or to kneel on mats and recite from the Holy Quran. Questions are met with cold stares unless you’re asking for the price of their goods. Rows of shawls and handicrafts are stacked alongside traditional garments in every color with bejeweled scarves to match.
Just past the Shoprite supermarket is Little Mogadishu, three roads of Somali-owned shops and flats. It’s late on a Saturday afternoon and the azan, the call to mosque, fills the air as people hastily finish the rest of their coffee before rushing to pray.
The men convene daily over coffee at Ebrahim Ali’s Qaxwo Coffee Shop. His shop is named after the Somali word for coffee. Heated discussions about sport are conducted in Arabic and Somali over steaming cups of the dark and bitter qaxwo and sickly-sweet coconut biscuits.
In 1991, the Somali central government collapsed when the capital Mogadishu was captured by the rival militia. A power battle began, plunging the country into a 20-year civil war. More than half a million Somalis were forced to leave their country and live as refugees in others.
The Ali brothers ran a panel-beating business in Kismaayo in Somalia. When the civil war hit, they fled to Tanzania.
“I came through the border 16 years ago. My brother and I left Tanzania for a better life when Somalis were being attacked,” says Ali.
With a large local Muslim population and a human rights-based constitution, South Africa seemed like the best option.
“Somalis came here three times. First there was a small community of 400, then more came in 1992 and the rest of us came in 2000,” says Ali.
There are now around 80,000 Somalis in South Africa. It took the brothers four years to get their panel-beating business off the ground again. Although they had made Johannesburg their home, the spate of xenophobic attacks in 2008 hit hard.
Early on a Monday morning that year, Ali returned to his workshop and found everything still locked up.
Frantically, he banged on his brother’s door. There was no reply. When he eventually broke through, he found his brother’s body. He had been strangled and the business looted. With a loss of $57,500 and a heavy heart, he walked away and laid charges against a homeless community who lived near the building.
“Eight years later, the case is still pending. I’m still waiting,” says Ali.
Ali decided to start over but opening another panel-beating shop proved too expensive on his own. Instead, he started small, selling one flask of coffee every morning on the side of the road.
“People were coming here just for my coffee. One flask turned into a big shop,” says Ali. His shop is an ode to Somalia. The walls are covered in traditional artefacts and Somali shillings. Business is a struggle but Ali keeps reminders of home close.
“You must never forget the path you’ve walked,” he says.

Refugee-economy-077

The  Migrant Mile

On a bright summer morning in the leafy Johannesburg suburbs, investigators from the Hawks – South Africa’s FBI – knocked on the door with a summons for the country’s Finance Minister Pravin Gordhan. He wasn’t there and his family rang him to say there was a brigadier on the doorstep. This just two weeks before the crucial medium-term budget statement. A delicate budget that the ratings agencies will scrutinize as they ponder whether to downgrade South Africa’s economy to the dreaded junk status; a move that could mean higher interest rates, inflations, and more economic misery for an economy that’s already been 12 rounds with Mike Tyson in his prime.
“Not having found me at home, they proceed to go to the Treasury and I am not sure what happened there. Given the fiscal austerity, they might not have been given a cup of tea,” says Gordhan wryly.
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“A date has been set to collect my fingerprints, they have been in the system for a long time, I suppose they need to freshen it up in some way. But this is a moment when South Africans should really ask themselves who are the Hawks, or these few people in the Hawks, really serving, where do they get their political instructions from and for what purpose? All we are trying to do within the Treasury is represent South Africa, make sure we manage its finances properly, present the best foot forward we can on behalf of the country and do that which is right whether it is in respect of university fees or more housing to be built or more money to be made available for the right kind of procurement purposes or anything that a treasury does in a normal country. It looks like we are in for a bit of excitement going forward.”
This was the avuncular Gordhan at his dry best at a Gauteng Province event, in Johannesburg, a few hours after the summons landed. The former Communist Party member is used to blows in a lifetime in politics. He became active in politics in the late 1960s and spent four years in the political underground operating around his birthplace of Durban, on the coast of KwaZulu-Natal.
Gordhan was an unlikely revolutionary; he trained as a pharmacist, but lost his only job in the trade through his political activities. He spent the rest of the struggle in politics and was detained by police a number of times.
“I have known him through the liberation struggle for many years and I have never heard anything critical of him in all that time,” says Denis Goldberg, one of the men who faced the death penalty with Nelson Mandela in 1964.
Between 1999 and 2009, Gordhan was the Commissioner for the South African Revenue Service in the healthy years when the government used to take out advertisements to trumpet how the increasingly efficient system was gathering ever more revenue. It is from this abundant time that the fraud charge emanates.
On November 2, Gordhan will be charged, along with former colleague Oupa Magashula, with the misuse of public funds, said to be around R1 million ($71,000), in granting his former deputy, Ivan Pillay, early retirement, in August 2010. Lawyers say the case is wafer thin, but the very fact that a finance minister will stand in the dock will be enough to cause disquiet among foreign investors watching from afar.
The markets plunged on the day. The rand fell more than 3% within minutes of the announcement by the NPA.
Shaun Abrahams, the head of the NPA, has given Gordhan, Pillay and Magashula an opportunity to make representations to review the decision to prosecute or not. Magashula and Pillay have done so.
“I am currently considering the aforementioned representations… I have learned, through media reports, that [Gordhan] does not intend seeking me to review the aforementioned decision, I nevertheless invite [him]to make representations… by no later than 17h00 on 18 October 2016,” says Abrahams in a letter to Gordhan’s lawyers.
Gordhan refused. He says he has no confidence in the NPA’s willingness to give him a fair hearing.
“We have seen the letter by Freedom Under Law and the Helen Suzman Foundation dated 14 October 2016 in which we were copied. We invite you to withdraw the charges against our client in the light of the grounds set out therein. Our client does not intend to make representations to you for the considerations previously articulated,” his lawyer, Tebogo Malatji, of Gildenhuys Malatji Inc, said in a letter to Abrahams.
Political analyst Aubrey Matshiqi believes November 2 is merely the beginning.
“I think there will be additional charges. I think this case is far from over,” he says.
Matshiqi believes the rule of law is important and scoffs at the picture portrayed in the press of this being a case of good and evil; fiscal discipline versus the removal of a minister to ease access to  state funds.
“I think the only thing we can quibble about is who, of the two, is the less evil. As far as I am concerned these are two wolves in sheep’s clothing. The only difference is one has better quality sheepskin.”
CEOs took out full page advertisements in newspapers in support of Gordhan; everyone from the Chamber of Mines, to Gauteng Premier David Makhura, to the short-term insurance industry, made statements backing the man.
Marches are also planned and hopes fanned that one of Africa’s biggest economies can paper over the cracks in time to avoid the dreaded downgrade at the end of the year. The reality is the damage has already been done.

Protect Yourselves At All Times And  Come Out Fighting

What is Nigeria’s current biggest headache? Is it Nigeria’s caustic politics? Is it the faltering economy? Or, perhaps, could it be the average Nigerian’s inertia to, and apprehension of, change?
While Nigeria’s economic fortunes have dwindled drastically over the last 18 months, its political culture has remained largely unchanged, at least subliminally. Social habits have also struggled to keep up with the emerging harsh realities of the day. Consumer Price Inflation peaked at 17.6% in August, 0.5% higher than the July rate, as the naira continued its downward slide against the United States greenback.
For the first time in living memory, Nigerians are travelling less; airlines are struggling to fill their seats. The traditional summer holiday frenzy has sizzled down considerably. Multinational firms now struggle to repatriate their earnings and profits out of the country. The squeeze on the local currency and foreign exchange transactions is hurting businesses, big and small. Demand for foreign currency remains high, even as the consumption of not-made-in-Nigeria goods and services remains at an all-time high.
The capacity to make substitute products locally remains weak as manufacturing continues to suffer against the wave of cheaper Asian products and banks who struggle to gauge and hedge against small business risks in the non-oil industries. Despite the obvious need to expand the productive base of the economy, Nigerian banks still prefer to lend big to established sectors, like telecoms, oil and gas, and real estate.
As people of wealth and influence feel the economic crunch, their capacity to spend crumbles, even as they struggle to curb their appetite for lavish living. Today’s extravagance was yesterday’s normal. With thousands already withdrawing their wards from schools and boarding houses in Europe and North America, the era of ‘big men’ flying their families abroad in business or first class is over.
“My brother, money don finish, the era of government people and big men stealing our money is over… we used to see them here every day traveling; even their babies and maids were traveling in business class… ahh, yet they will not pay us our salary on time… we civil servants are suffering. I have been working for the past 22 years, my entire pension, when I eventually retire, cannot buy a first-class ticket,” an immigrations officer lamented to me at the Murtala Muhammed International Airport in Lagos in September.
If Nigeria’s big men are feeling the economic pinch, it is safe to say ordinary folks have been wounded; their pocket power decimated by spiraling prices of household consumables. Nigerians are, however, a resilient lot. They would be much happier if only their pains were shared by their political leaders. This disconnect is the real pain for many. This is where the ethos of the structure and culture of governance is cooked. This lack of an ethical ecosystem in the Nigerian polity makes nonsense of Adam Smith’s “invisible hand” metaphor, used in describing the way in which free markets spontaneously satisfy society’s needs. Nigeria’s labor and financial markets are anything but free. Or fair.
‘Budget padding’ is the latest addition to the lexicon of Nigerian politics. Governance and the economy stalled for the first half of 2016 as the Presidency and the Legislature quibbled over ostensibly illegitimate amendments to the fiscal plan. Meanwhile, a new breed of thugs, the Nigeria Delta Avengers (old militants in new uniforms more like) sprang out of the creeks, wreaking havoc to the production schedules of multinational oil companies and curtailing gas supplies to the national gas grid. So with Brent crude selling below $60 per barrel for most, the country now struggles to produce 1.3 million barrels per day (bpd), as against its OPEC-mandated quota of 1.67 million bpd that came into effect in January.
Africa’s wealthiest man, Aliko Dangote, believes political will is needed to steer Nigeria out of its first recession in 20 years. Dangote should know. He is closer to the corridors of power than perhaps any other Nigerian businessman alive. I think this is Dangote’s veiled way of saying the extant shenanigans currently associated with the managers of the state need to stop. But this is old news.
Patience is an old and scarce commodity these days in Nigeria. Until someone goes to jail for stealing public funds, only then will Nigerians agree that President Muhammadu Buhari’s vision is not a mirage.

A Nation’s Anxiety Paralysis

In 1966, if you drove through Gaborone and blinked you would have missed it. It was little more than a barren railway stop, in the middle of nowhere, on the way from Cape Town to Cairo. Those living here would have said there was nothing more to it than termite mounds and elephants.
At the time, this land-locked country was considered to be the poorest in Africa, with a per capita of $70. It had nine secondary schools, 50 university graduates, a railway line built by Cecil John Rhodes, and five kilometers of tarred road that stretched between Lobatse Station and the High Court.
From this backwater beginning Botswana has emerged as one of the fastest growing economies in the world and moved into the ranks of upper-middle income countries. Real GDP shows an average growth of 5% per annum over the past decade, at a time when the most advanced economies have been falling apart. In 2015, GDP stood at $14.39 billion. This remarkable growth, according to the World Bank, is because of diamonds hidden deep in Orapa, 521 kilometers north of Gaborone. The discovery was made in 1967, months after Botswana’s independence was declared on September 30, 1966, and the proceeds went to the state rather than colonial coffers.
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But, if you look closely at the white walls and fresh cement of Gaborone, cracks appear. In the week FORBES AFRICA arrived in Gaborone, unemployed youth clashed with police outside Parliament; four of them spent the night in jail.
It is called #UnemploymentMovement and uses social media to fuel support, much like South Africa’s #FeesMustFall student protests a year ago. It comes at a time when citizens question the government’s P100 million ($9.76 million) budget for its golden jubilee.
It is a big problem. One third of Botswana’s two million people are youth. The World Bank says poverty in Botswana is 17.8%, among youth aged between 15 and 24 its 34.10%. This is despite government spending 9% of its $14.39 billion GDP on free education.
One of those that spent the night in jail is Jones Banda, a committee leader behind #UnemploymentMovement. Speaking to FORBES AFRICA while on a march on August 13, he says the movement started with just one student, Tlamelo Tsurupe, standing outside Parliament with a poster. Within a week dozens more, including Banda, joined him.
“The youth of Botswana have realized our government can no longer place jobs for the youth&#8230; Most of our emphasis now is on the graduates. Why? Because it is [graduates] that are very frustrated. They have been educated by the government to take control of the economy and now the government is not absorbing them. Mind you, the students have loans to pay,” says Banda.
At the time of going to print, the BDP had not released an official statement concerning police assault at the protest on August 8. A permit was granted for the march held on August 13.
Banda believes unemployed youth make up more than 17.8%. This is because unemployed graduates have to register with the government, meaning that thousands of other students who are not graduates are not considered.
Banda’s stint behind bars hardened his resolve.
“Being in jail is almost as if I was home, not that I have ever been in jail. But for the movement it was a good thing. We felt the brunt of system and so we know now who is on our side. It was what we expected,” says Banda.
While students called for better employment, there are others who have managed to eke out a living.
A 32-year-old electrical engineering graduate, Kagiso Monkgatusi, makes his living from flying a P45,000 ($4,400) drone, one of the few owned and licensed in the country.
Monkgatusi, a photographer by trade, got the idea for his business after seeing footage on the internet. It led to him starting his small business, Africa Killer Bee Media, named because of the sound the drone makes in flight. The drone was given to him as a grant by the government-run Local Enterprise Authority. Monkgatusi’s success is an indication of Botswana’s potential.
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In Gaborone, there are small signs of burgeoning wealth; tarred roads glisten, as bright as the country’s diamonds, next to dusty sidewalks; malls, polished and pristine, are packed to the rafters with food, shoes and cell phone stores. The city center is a hive of activity as scaffolding rises on the skyline.
Botswana’s success is largely due to a stable government with strong fiscal management, reports the World Bank. President Ian Khama, whose photo hangs on the wall of every store you visit, has held office since 2008. He is the head of the Botswana Democratic Party (BDP) that has been in power since the first elections in 1965. Every president has been democratically elected and all stood down after their two-term limit.
At the very least, Botswana is trying hard to improve investment and growth in their small economy.
For the hungry investor, Special Economic Zones (SEZ) have been built in Lobatse, Gaborone, Palapye, Selibe Phikwe, Tuli Block, Francistown and Pandamatenga.
“In April, P1.6 billion, of P3.5 billion over three years, in tenders have been awarded and the focus is mainly on the construction of roads, health and education facilities. Other sectors that have been allocated package proceeds are manufacturing, tourism and agriculture,” says Moatlhodi Sebabole, Research Manager at First National Bank Botswana.
Sebabole says Botswana also has a five-year national development plan (NDP) which will focus on coal mining, base metals and diamonds. However, according to Sebabole, investors need to keep a careful eye on low agriculture and food security, stability of water and electricity, and low investment growth.
“The production side of the economy still remains under turbulence with the closure of some abattoirs as well as base metal mines like African Copper,” says Sebabole.
Regardless, Sebabole believes Botswana’s outlook over the next 10 years is promising. Focus will remain on infrastructure projects in water, rail and electricity, which will need financing of P100 billion (around $10 billion) by 2019.
Botswana is a far cry from the country that started with $70 per person a year and five kilometers of tarred road. Fifty years on, it faces new challenges that show how far the country has come – some might even go as far as calling it first world problems, including an educated and militant youth.

Young,  Jobless And ANGRY

Economic gurus say Africa needs to industrialize, but Africa seems two jumps into the future and most of the initial public offerings (IPOs) for 2016-2017 will be technology, healthcare, telecoms and even securities exchanges.
Word on the streets of Tanzania’s coastal city is that the IPO of the Dar es Salaam Stock Exchange is oversubscribed. The bourse aimed to raise TZS7.5 billion ($3.49 million) in the IPO which closed on June 3 and results were not available as we went to press. It is Africa’s third securities exchange to go through demutualization and self-listing – target date is July 12 for the listing. The stock exchanges in Nigeria and Ghana are among others in the process.
Ben Nice, editor of TMT Finance, says the high-tech rush continues: “Despite global volatility, regional macroeconomic uncertainty, and a rout on commodity prices, recent forecasts are predicting that the next 12 months could see a rebound with IPOs set to reach their highest levels in Africa since 2010, and several TMT (technology, media and telecommunications) companies looking likely to float in 2016 and 2017.”
Africa Internet Group (AIG) is said to be planning an IPO by 2017. It is parent of the Jumia e-commerce brand, present in 11 countries and linked to online and mobile consumer services such as Kaymu (shopping), hellofood (food delivery), Jovago (hotel booking), Vendito (classified ads), Lamudi (real estate), Everjobs (jobs) and Carmudi (vehicles). In April, AIG announced $85.4million equity investment from phone company Orange and in March $341.5 million from Goldman Sachs, MTN, AXA and Rocket Internet.
IHS Towers, based in Lagos and owner of over 23,300 mobile phone towers in Nigeria, Cameroon, Côte d’Ivoire, Zambia and Rwanda, is expected to float shares within 12 to 24 months. In December, Chief Executive and Founder, Issam Darwish,  a FORBES AFRICA cover in March 2014, said it would be “the biggest IPO ever in Africa”.
Orange Egypt, rebranded from Mobinil in March, is preparing an IPO for the Egyptian Exchange, with an offering of up to 20% of the shares. It has 33.4 million customers and is Egypt’s second biggest operator after Vodafone. In March, it announced Orange intended to invest $281.5 million into upgrading networks and services.
In May, private equity giant The Abraaj Group exited Tunisian pharmaceutical company Unité de fabrication de médicaments (UNIMED) via an IPO on the Bourse de Tunis, the first this year. The IPO valued UNIMED at $150 million and was 32.6 times over-subscribed, a bourse record. Since 2010, Abraaj has helped the group expand and in 2015 exports to more than 17 countries contributed 35% of sales.
“We recognized the healthcare opportunity in North Africa early on, in a market with a growing middle class, rising healthcare expenditure and expanding life expectancy,” says The Abraaj Group’s Managing Director Adel Goucha.
Shares in Cleopatra Hospital Company started trading on the Egyptian Exchange on June 2 after raising $40.5 million through an IPO which closed on May 30. The group, which owns four hospitals, had offered 40 million shares or 25% of the capital. The public offer was 28.6 times oversubscribed and the institutional offer 6.7 times, after roadshows programmed for Dubai, South Africa, Britain and the United States. It remains majority-owned by Care Healthcare, which includes Abraaj, European Bank for Reconstruction and Development, Germany’s DEG and France’s Proparco as shareholders. Abraaj, which invested in 2014, said the IPO would fund more growth.
Things were not going so well in Ghana, where Agricultural Development Bank (previously owned 52% by government and 48% by the Bank of Ghana) held an IPO between December and March and raised $115.5 million. Four unnamed investors snapped up 72% of the 75.5 million shares in the new offer but the bank’s board rejected all bids at GHS2 per share and the bank failed to raise the GHS100 million ($26 million) required. It was due to return money to applicants and ask Ghana’s Securities and Exchange Commission for permission to reopen the IPO.
In May, Barclays raised $876 million from selling a 12.2% stake in Barclays Africa Group (103 million shares at R126 each, a 6.5% discount to the market) in an oversubscribed offer with the Public Investment Corporation said to be a big buyer. Barclays is considering selling its remaining 50.1% stake to a strategic investor. Former Barclays CEO Bob Diamond and his Atlas Mara group may be a buyer.

Industrialization  Ditched For Tech

It was a warm day for winter in Pretoria when I arrived to interview South Africa’s Finance Minister Pravin Gordhan, the man with one of the toughest jobs in African finance. He has to make cuts, balance the books, to stop the mighty South African economy falling over the cliff. This, following the crazy days of uncertainty in December when South Africa sacked Nhlanlha Nene; installed unknown Des van Rooyen; before retreating to the safe hands of Gordhan – finance minister between 2009 and 2014 – to steady the markets and resuscitate the currency. You could argue that a finger of one of those safe hands is in the dyke.
As the shafts of mid-morning light shone through the tall windows in the finance minister’s office, in the granite Treasury headquarters, it was getting warmer, but not as warm as the seat where Gordhan now sits.
In June, Gordhan helped South Africa stave off a downgrade, by the rating agencies, to junk status. If South Africa can show growth, prudence and greater fiscal discipline, it may escape a downgrade yet again at the end of the year.
The week of the interview was not a good one for growth in South Africa; it had just shown negative growth of -1.2%. Yet Gordhan, who chose his words very carefully, appeared more bullish than the economy.
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<h4>Forbes Africa: It’s been a rollercoaster six months, how are you holding up?</h4>
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Gordhan: I am used to rollercoasters in my life, so this is one more. This one has been very rewarding because the efforts that government has put in to join forces with business and labor have paid off as far as the first phase of our battle to remain outside of sub investment grade has been won. And largely through the joint efforts of all of us; and now we start the journey into the next five months which is a period where we must deliver on some of the things we have committed ourselves to. I am confident that as a country we will begin to do that because some of that momentum has already been building up.
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<h4>Forbes Africa: You avoided the downgrade to junk status; a lot of people are still saying the country has merely postponed it for another six months. How likely is that?</h4>
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Gordhan: It’s true that we have postponed it but you can’t call it mere postponement when you were about to fall over. Not falling over is a major and important victory for all of us; so it’s a question of  who is the narrative being created by; people who believe in a half full glass or a half empty glass… We still have investments coming in, we have kept to our fiscal targets and we will continue to actually do so. We will unite the key role players in this country behind the common program and we have got a few months to demonstrate we are capable of doing it. We have a clear program in terms of reforming key parts of this economy and making sure some of the key constraints are now taken out of the way.
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<h4>Forbes Africa: Look at the latest data and the economy contracted for the first quarter by 1.2%. Does that make your target that much harder to achieve? How much reform are we going to have to go through for the next five months to ultimately head for that 2% target?</h4>
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Gordhan: I set the 2% mark largely by saying we are going to get moving in the right direction. We all know that in terms of the National Development Plan, we ultimately want to move into the 5% terrain.
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<h4>Forbes Africa: Another question people are asking, as you know, civil service is about 50% of your budget, maybe less than that but it’s still a lot, I was with a lot of financial journalists last night and they were saying why doesn’t the minister cut civil service and save?</h4>
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Gordhan: How many more unemployed people do you want? Firstly, the cost of compensation is about R460 billion ($30 billion), currently that is about 37%, which is high. In the budget, we have said that we are now going to certain measures to start cutting that expenditure. Vacancies not being filled and the most recent report, that we have received from provinces, where a bulk of teachers and health staff are employed is very encouraging.
<h4>Forbes Africa: The ratings agencies have also stated that the risk of political instability, especially on the lead up to the August 3 municipal elections, could affect the economy.</h4>
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Gordhan: Elections happen as part of a democratic society in South African and elsewhere… We are nowhere near disruption but what we do require is for political leaders to recognize that there is a relationship between the way we conduct ourselves politically and the confidence in our economy that we create and today we live in a world where politics and the economy are closely related whether it’s here, Brazil or anywhere else in the world. The prospect of a particular candidate winning the elections in the Unites States is also giving people a wake-up call.
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<h4>Forbes Africa: You definitely can’t forecast the rand and I think that’s the problem right now; small businesses out there are saying they just need to know that there is some stability in the currency.</h4>
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Gordhan: Currency volatility is something that nobody has control over. There are mega forces and dynamics in the globe that influence what happens to a currency as much as there are domestic factors as well, so, look at what’s happening to the pound, so every day that something happens to the dollar, something happens to the rand which are not necessarily related to domestic considerations as well.
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<h4>Forbes Africa: In your efforts to reduce debt and cut expenditure, what kind of painful cuts do you think this country may be looking at in the next six months?</h4>
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Gordhan: We have made the cuts for this year and we have to look hard to find money for a zero increase for student fees, finding money for our subscription to the BRICS New Development Bank, and a few other items that need to be financed both as a result of expenditure cuts and managing the tax side. We have indicated, very transparently, that in the coming two years, we have to find R15 billion (around $1 billion) each year, either from the expenditure or the tax side.

The Finance Minister In The Trenches

Nigerians are currently hard at work. What sort of work, you might ask? Economic reconstruction and the quest for social and political rebirth. The new sheriff in town seeks to sweep the dregs of a shattered polity into the cesspit of history. Clearing the skeletons and cobwebs of the past is, however, proving to be a delicate dilemma for the good people and managers of the Nigerian nation.
Grappling with sluggish growth, dwindling external revenues, double-digit inflation and a prolonged currency constipation, Nigerians must now wrestle with the seen and unseen forces of corruption and ineptitude, the gods of inertia and impunity, and the innumerable anti-development demons in its social democratic space.
A nation which was once embroiled in a two-and-a-half-year civil war in the 1960s, without borrowing a dime and without experiencing a run on its national currency, now finds it difficult to maintain a healthy balance sheet in peace time. No doubt, Nigeria has earned its spot in global economics by virtue of its position as Africa’s largest economy. This status will, however, not produce social harmony, wealth and economic growth for Nigerians.
Nigeria’s one-year-old government continues its search for the Chibok girls (#BringBackOurGirls), abducted two years ago from their school in the north east of the country. President Muhammadu Buhari has embarked on a global search for the country’s missing money, embezzled by past leaders and cronies of previous governments. Currently struggling to wean itself off crude oil addiction and diversify its productive base, it’s taken almost a year for the president and his All Progressives Congress (APC) party to begin to translate their social and economic agenda into a “SMART Framework”.
In what seems to be a blueprint and agenda-setting address to selected private and public sector leaders during a National Economic Council (NEC) retreat in March, the president listed agriculture, solid minerals and infrastructure investments as the fulcrum of his agenda, with national targets for self-sufficiency in tomato paste production by 2016; rice production and milling by 2018; and wheat by 2019. He also introduced a new phrase into the lexicon of governance: “import competition”, where states focus on growing selected crops in which they have natural comparative advantage.
These confidence boosting steps notwithstanding, Nigerians are increasingly wary of the future. They have come to terms with that fact that the path to the future is riddled with dead promises.
On the political rostrum, campaigning for votes between 2014 and February 2015, APC big wigs made numerous promises to Nigerians. Granted this was all done in the heat of politicking, Nigerians now want the current Lords of Aso Villa to quit blaming previous administrations and simply execute their well-intentioned strategies.
The president has been blamed for not ‘radicalizing governance’ fast enough, which was one of the reasons Nigerians voted for his party. He has also been blamed for reneging on a campaign promise to provide a monthly allowance for unemployed youths. The APC’s manifesto also promises to: “create additional middle-class of at least two million new homeowners in our first year in government and one million annually thereafter; by enacting a national mortgage system that will lend at single digit interest rates for purchase of owner occupier houses.”
Good idea. But have two million new homes been built in the last year?
In just one year, the national mood has swung from politically-induced hope to a calm and unnerving anxiety about “personal survival in a regressive system” as it becomes increasingly clear that things will get worse – for much longer – before they become better. Thankfully, Buhari has also said this much, as he pleads for patience against the growing wave of disappointment and despondency.
So, El Nino has finally caught up with the nation’s 2016 fiscal budget, as GDP growth for the 2016-2017 period is likely to remain below 3%, according to the IMF, unless of course global crude oil prices shoot up to $100 per barrel.
This is very unlikely, observes Bismarck Rewane, renowned economist and CEO of Financial Derivatives Ltd.
“That era is gone for good. The chickens (of decades of economic profligacy) have come home to roost. We are now going into a likely prolonged phase of belt tightening,” he told members of the Harvard Business School Association of Nigeria recently.
The smart, hard, work must go on.

Recalibrating Expectations

Its 7:30AM in Victoria Island, Lagos, and across the road from Oniru, a suburb in the city, cars are piled up in front of the Total petrol station. There is also a separate line of about 100 people with empty yellow containers waiting to be filled. Toke Ogunlesi, founder of GQ Shoes, a shoe manufacturing business is number 30 in the queue of irritated car drivers – some of whom slept in their cars.
“This is really terrible, I have been queuing for the past three hours even though I arrived very early this morning. Yesterday, I couldn’t get any fuel and so I decided I would leave the house early today but unfortunately that plan did not work,” says Ogunlesi.
Business has slowed down significantly for his fledgling business, which, like many businesses in Africa’s largest economy, is hampered by severe power cuts. Nigeria has a diversified economy, however, the country’s monetary policy is heavily dependent on oil. The finance minister, Kemi Adeosun, in an interview with Reuters, said the country is expected to post budget deficits for the next two to three years. Reuters puts the 2016 deficit at 2.2 trillion naira (around $11 billion).
“Firstly, Nigeria has a revenue challenge, oil prices are low and this is leading to production challenges. We lost Forcados which is a major terminal for exporting crude oil, that means about 250,000 barrels have been shut down and cannot leave the country at the moment, so we are not pushing as much production as we used to. This means the little revenue we are making right now has to be dispersed to finance imports for various things, like foreign exchange (FX) for imports and refineries, normal FX for fuel imports and other production costs,” says Dolapo Oni, an analyst with Ecobank.
“On the other side, the industry also has a regulated pricing structure so marketers are not able to sell at whatever prices they need to sell to recoup whatever costs they incur in the process of buying and selling the petroleum products. So, as a result, most of them are either not ready to sell and keep that loss or, if they had the opportunity, they will sell at a much higher price so that they can recoup the costs that they are facing. They are also faced with higher cost of FX because most of them have to buy their FX from the parallel markets among the various other charges that they face when they also try and load at the depot.”
The restriction of foreign currency in the country has also had a negative impact on the oil market, which is a dollar-denominated business. According to the Shippers Association of Lagos State, the forex restriction has led to 50% of Nigerian bound cargos being diverted to Cotonou, Benin. But there may be help on the horizon.
“I think the situation is gradually easing because we now have FX supply coming from oil and gas companies. The upstream guys, like Shell, Total and ENI, have been tasked to provide about $200 million to some of the fuel marketers to assist them to import more products into the country. This is not a sustainable solution because you are asking these guys to also part with FX, which they also need to invest in other parts of the world where they have operations. They cannot continue to always give us $200 million every month or every year and also I do not know what we have given up as a country to be able to receive that help because there has been a trade-off somewhere,” says Oni.
The current dilemma has however presented an unlikely opportunity for one entrepreneur. Fueledup is an app that has been created by 24-year-old Nigerian developer, Subomi Owo-Odusi. The app is an on demand delivery service, where customers sign up to request fuel.
“It is more of creating a convenience that is necessary. It picks your location naturally with Google location services. There is a request for how much you want and the delivery time. We have three delivery times; there is priority, expectant and flexible. Flexible is within three hours, expectant is within 30 minutes and two hours, and priority is within 30 minutes and an hour. So, take for instance a situation where you wake up and you go to take a shower, by the time you finish getting ready in an hour you realize that your car is already filled up,” says Odusi.
The app is scheduled to be launched in May and has already received a positive response.
“We are speaking to private depots that we can get our supply from. Eventually we want this to become a lifestyle where people ask ‘have you got fueled up today?’”
The company is looking to expand rapidly outside Lagos to other major cities in the country.
A critical success factor for start-ups like Odusi’s in this climate is the cost of goods and services.
“Inflationary measures are rising. Prices have been increasing steadily. It got to 11.3 percent last year and the figure is due to come out this week and I am already hearing that it will be around 12.8 percent, which is significantly higher than the last inflation figure… It is the lesson of the crisis, when you don’t save or put money aside for a rainy day, when the rainy day comes you will be wet,” says Oni.
He believes the government should push for deregulation of the industry to prevent this crisis from repeating itself.
“In a market that is regulated, it is very easy for these conditions to happen because once we have that common pricing structure people tend to come strongly under unions. Once we deregulate this, there is no tendency that the union will tell someone to shut down their station because they know that once others are all not selling, they will make more money if they sell. So, unions go weaker in markets that are competitive.”
The influx of foreign currency is expected to ease the current fuel crisis gripping the Nigerian economy, however, the economic hardships are far from over. The decline in oil prices and corresponding decline in revenues, has had a knock-on effect on the oil sector and other ancillary markets.
“The only way out is that we should allow the market to decide where the naira should be priced at and, as a result, where the products within the economy should also be priced to allow for a competitive business environment,” says Oni.

Fuel Shortage  In The   Land Of Oil

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

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

For citizens of Africa’s largest economy, 2015 was defined by hope, politics and economic stagnation. They will remember the year for its toxic politics, power games, political propaganda, public discourse on socio-political reengineering and economic inertia.
Nigerians were effectively waiting for their new leader to flag off widespread reforms, which was a crucial step towards fixing their damaged economy. For people with the dubious distinction of being one of the most corrupt nations in the world, they also needed to restore national pride.
Luckily, Nigeria’s brand of politics produced a democratically elected president through predominantly peaceful polls in March.
Considered to be a gentleman and excellent soldier, Muhammadu Buhari once reigned over this complex and fast growing nation as supreme military leader between December 1983 and April 1985. Booted out of office by another soldier for being too autocratic – stern, frugal and draconian – Nigerians now wanted him back for those same reasons they welcomed his ejection 30 years ago, albeit with a democratic flavor. Historians will do well to credit him with this ironic twist of national déjà vu.
They will also record his evolution from perennial presidential candidate to President as unique. Like him or not, he has emerged as a national emblem of persistence. Prior to this year’s elections, Buhari had ran unsuccessfully for the presidency in 2003, 2007 and 2011, ending his quest on each occasion in protracted legal battles.
In a world where perceptions become instant reality, Nigeria’s political trajectory to 2015 restored hope in Africa’s political culture and set the tone for other elections across the continent. The emergence of a winner with seemingly squeaky clean credentials – in a nation where graft has become a culture – rekindled investor confidence in the Nigerian economy and once again placed Africa’s most populous nation on the radar of the global community – this time for a positive reason.
“Once uncertainty was removed over the fate of Nigeria, risk levels dropped and all previous analysis has to be recalibrated,” Olufemi Awoyemi, the CEO of Proshare, said days after the elections.
Buhari’s brief was obvious: fix the faltering economy, restore peace and security, and revamp the social and political ethos of the land. The man, however, doesn’t seem to be in a hurry. His unrushed style confounded, and still confuses, friends and critics alike, and has left many Nigerians wondering if perhaps the change they voted for was a mirage. His performance to date offers a mixed ray of hope.
Battling corruption was always going to be Buhari’s forte. He has overhauled the leadership of the Nigerian National Petroleum Corporation (NNPC), and has been exhuming contractual anomalies and crude oil theft cases identified during the previous administration.
Pleading for patience, his search for incorruptible men and women to fill cabinet roles took almost five months.
He has secured the support of the United States and other G7 nations. This renewed interest in Nigeria will be useful when he goes after ill-gotten funds of indicted citizens and ex-government officials stashed away in foreign banks. The man himself has no foreign bank account.
The war against Boko Haram has also benefited from better regional cooperation. Nigeria, Chad, Cameroon and Niger now have a multi-national task force fighting the insurgency.
The Buhari administration is however yet to rescue the Chibok girls, abducted by Boko Haram in April 2014. The world also continues to watch how he will fulfil another campaign promise to cut down the size of government.
The economy meanwhile seems to lack a definite course. Without ministers and without a clear modus operandi for implementing economic reforms, financial markets and investors continue to stall, waiting for direction on key policy issues such as trade and investment, currency and interest rate management.
The president’s 2016 fiscal plan might yet provide some clues to his chosen path in to the future.

Patient And Purposeful

Kenya’s economy is set to grow at a faster pace than previous years. The World Bank’s Kenya Economic Update (KEU) estimates that Kenya’s economy is poised to grow by 6% this year, 6.6% in 2016 and 7% in 2017, making it one of the fastest growing economies in sub-Saharan Africa. Similarly, in a review of Kenya’s economic performance, the International Monetary Finance (IMF) forecasts real GDP growth of around 6.5% this year, supported by rising infrastructure investments, lower energy prices and a dynamic private investment environment.
The country’s past growth has also had a strong showing, especially after rebasing its economy. Average annual growth for 2007 to 2013 was 5% in the new GDP series, up from 4.3% in the old series. This single event also increased its economic size by 25% to an estimated $55.2 billion making it the ninth largest in Africa (up from 12th, surpassing Ghana, Tunisia and Ethiopia) and fifth largest in sub-Saharan Africa (after Nigeria, South Africa, Angola and Sudan).
Relative growth comparisons also show an above average performance. Average growth between 2010 and 2013 stands at 6.2% compared to a 5.3% average for sub-Saharan Africa. The IMF’s latest Regional Economic Outlook: Sub-Saharan Africa projects regional growth at 4.5% this year, which is two percentage points lower than its Kenyan forecast. The World Banks’s Country Director for Kenya, Diarietou Gaye, cited the country’s expansive fiscal and monetary policies as having played a huge role in making Kenya the growth center of East Africa.
To add to the momentum, the recent renewal of the African Growth and Opportunity Act (AGOA) by United States President Barack Obama for a further 10 years further supports the growth story. Kenya, which is already a leading exporter of garments to the United States, expects to earn about $10 billion before the 10 years are over. With the new deal, Kenya also expects to offset sluggish demand from its traditional European export markets which have struggled in recent years. Through AGOA, Kenya can also hope to generate the much needed foreign exchange revenues to help narrow its widening current account deficit currently standing at about 10% of GDP.
However, risks exist. Security concerns have seriously affected the tourism sector, a key foreign exchange earner. Contraction in the sector is partly blamed for the slowed GDP growth. Data from the Economic Survey 2015 indicates that earnings from tourism were down 7.3% to 918 million. Agriculture, which accounts for around 25% of the economy, is another sector that has had mixed performance. Often vulnerable to bad weather and volatile world commodity prices, the sector frequently suffers from fluctuating production and revenue levels.
The manufacturing sector also had a less than optimal performance. Commenting on the KEU report, the World Bank’s Finance and Private Sector Development Specialist, and a co-author of the report, Maria Paulina Mogollon, cautioned Kenya on the need to increase competitiveness of its manufacturing sector so that the country can grow, export, and create much-needed jobs. In recent years, manufacturing’s contribution to Kenyan exports and growth has lagged.
Despite the challenges, Kenya still has a good chance to become Africa’s great success story. From its growing and youthful population, stable macro-economic environment, a dynamic private sector, a new constitution and its pivotal role in East Africa, Kenya is undoubtedly the new regional growth center.

Onwards and upwards

Will the announced nuclear program energize South Africa’s manufacturing and construction?
My background is power engineering. Building power plants across Africa generates as many stories as they do electricity. It is ironic that, in Africa’s most electrified economy, there are tales of powerless people and an economy running out of juice.
Eskom, South Africa’s national power generator, is cooking with gas (turbines) – at the cost of around $78 million a month – while grinding away at the late completion of the new 9,000MW Kusile and Medupi coal power plants. Medupi’s first 800MW unit is generating power and will be on commercial load in September, with up to 1,600MW coming onto the grid each year for the next five years.
Keep your gas cylinders full and your camping lights charged – there’s more to this story!
South Africa has a 40GW-headache to cure in the next 20 years. The first 10GW is merely to match current demand. Generation capacity is 40GW with only about 30GW available due to the UCLF (unplanned capacity loss factor) being high. The national demand is over 40GW as mines and smelters have shut down to help Eskom. Medupi and Kusile will merely tick this box.
The second 10GW is needed to replace the old coal plants before 2025. They have been run hard well beyond their time. The third 10GW is needed to attract investment for growth and the fourth 10GW is for reserve capacity to allow for maintenance.
Coal may be easier and cheaper, but it’s dirty stuff and our economy has to be environmentally attractive to foreign investment. Few investors will stump up if it will worsen their carbon footprint.
So, 40GW in the next 20 years! Simply put, double Eskom. It has to be greener than ever before too – no dirty coal. That means nuclear topped up with clean coal IPPs. Wind and solar may be very sexy but they don’t deliver the big base load power that we need.
Like it or not, nuclear is the leading renewable energy source and South Africa is in play on the global nuclear stage to procure 9,600MW of nuclear power.
Contrary to the naysayers, nuclear energy’s lifetime cost is lower than most technologies, it’s expensive at the start, but cheaper to run.
South Africa’s nuclear regulatory body has defined that only the safest technology will meet the environmental and safety specifications for any new build program.
Russia, France and China are likely frontrunners, but who has the better and safest kit and who can offer a compelling financial deal? That’s where technology, money, politics and common sense meet in a witches brew.
The International Atomic Energy Authority (IAEA) Integrated Nuclear Infrastructure Review (INIR) sets the readiness criteria for building nuclear plants. A nuclear power plant is split into three main sections: The Nuclear Island, The Conventional Island (Turbine) and the Balance of Plant. South Africa is ready to manufacture and construct on the last two sections, which are similar to the local content on Medupi and Kusile, with some nuclear safety alignment.
The nuclear codes and quality standards take a quantum leap in the Nuclear Island and that is where the nuclear certified contractors like Group Five, Lesedi Nuclear Services and the South African Nuclear Energy Corporation (NECSA) are qualified. The country’s industry will have to partner with the successful vendors to hone those skills, train a workforce and learn from the build program in Europe, China and Russia.
There’s a buzz again. Nuclear vendors expected a request for proposals in August with a preferred Nuclear Vendor Country announced by March. Next year will see tendering for the local manufacturing and construction sector, with contracts signed in 2017 and construction starting in 2018.
The capital expenditure for 9,600MW will be approximately $40 to $50 billion, plus government costs and interest on capital. All this leads to trillions being spent over 15 years. That’s a big number that will reignite local industry and a knowledge economy after the last seven years of misery.
Perhaps it will be “boom” again?
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Additional reporting from Des Muller, head of Group Five Nuclear Construction Services.

Double or quit?

In the last two years, a steady decline in the price of gold has brought the operations of many mining companies in Ghana to an abrupt halt. As a result, job losses and a reduction in royalties and tax revenues have been felt. Ghana is Africa’s biggest gold producer after South Africa, and with the mining sector contributing to 5% of Ghana’s economic output, the downturn in the sector has served a serious blow to the nation’s coffers.
Chinese investors, often depicted as parasitic investors, are keen to tap into this opportunity. The Chinese owner of the Akroma Gold project recently completed the purchase of Viking Mines in Ghana for $10 million. There are other new discoveries taking place and, while the sector might not be buoyant now, requisite preliminary studies should be done to mechanize deposits there.
Despite the tough economic climate, gold mining companies are able to meet their obligations, with Goldfields recently paying a $4.5-million dividend to the Ghanaian government and a total of $25.3 million since 2010. The fiscal framework that governs the mining sector in Ghana is a shining example to mineral-rich countries with a porous system due to a lack of transparency and regulation.
The Chinese have pumped billions into the Ghanaian economy. Mining in Ghana is integral to the development of communities; it brings jobs and economic vibrancy. But, for all the synergistic Sino-African trade partnerships being developed, an ability on the part of the Chinese to disregard the honesty and statutes that govern Ghana, especially in the mining sector, raises concerns over whether these agreements are lopsided.
Also, the Ghanaian government’s clampdown on illegal mining has only been marginally successful. Chinese companies use locals to front their mining activity, thus appearing to be credible operations. The lack of rehabilitation done by these companies also further exacerbates the problem. Many sites are left abandoned with no consideration for the environment.
Many large firms neglect their duties to rehabilitate the areas they have worked in, making them inhabitable. Companies, surveyed between 2009 and 2012, failed dismally to keep in line with the environmental protection agency requirements – a damning indictment of the attitude adopted by many foreign firms.
The inability of most locals to get finance to start their own enterprise ensures that development remains at an artisanal level.
Other areas in West Africa are showing promise though. Both Liberia and Sierra Leone are showing signs of reviving their mining sectors. Sierra Rutile is a company that was able to withstand the pressures brought by the Ebola epidemic. They recently raised $44 million to construct a dry mine at Gangama in Sierra Leone. The funds will be used to expand the existing mine. Rutile is used for the production of metal, specifically titanium. The investment will increase production and will provide more jobs.
Another mining company, Aureus Mining, has also signaled its intent to bring a new mine in Liberia into production. With the relative successes emerging in the region, there is confidence being shown by investors to reignite their interests in the mining sector and with it the hope that the sentiment spreads to other countries across West Africa.
The next step for the region is to engage stakeholders to develop concessions and form strategic partnerships. With industry being the buzzword for Africa to reach its full economic potential, the fact remains that infrastructural challenges are still an obstacle. Poor roads affect the transportation of materials. A lack or railways reduces the amount of goods that can be transported. The lack of power is another thorn in the side. The Economic Community of West African States (Ecowas) must integrate by encouraging free trade between the regional countries. By identifying the above issues, governments can make a concerted effort to tackle them.

Tag: Economy

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