With its fifth round of democratic elections slated for next year, South Africa has much to be proud of as it looks back on the achievements of the past 20 years. Thanks to reconciliation efforts, the Rainbow Nation navigated a difficult political and social transition with poise—something many countries have attempted, but rarely with such success.
Its films have won Oscars, its stadiums have hosted World Cups and its leaders have won Nobel prizes. Since 1994, the economy has transformed dramatically, absorbing 3.5 million new jobs and with a quarter of the continent’s GDP, it has successfully held the crown as the largest, and arguably most sophisticated and open, market in Africa.
However, the country still has one of the highest gini coefficients in the world, at above 0.63, indicative of the lack of inclusive growth. Unemployment is high and infrastructure is beginning to grapple with increasing demand. With South Africa’s GDP growth projected at roughly 2% for 2013, it is only a matter of years before Nigeria, expanding at rates of 7%, overtakes it as the continent’s economic heavyweight.
As a result, assessing the current state of the country and its performance requires a nuanced understanding of both the strengths that provide it with such potential and the weaknesses that threaten to undermine its progress.
The country’s fundamentals are in rude health. South Africa has a number of key competitive advantages. With more than $2.5 trillion worth of mineral reserves and the potential for commercial shale gas production, it boasts enormous natural wealth. Its business environment is among the strongest on the continent, with low interest rates, clear investor rights and a comparatively streamlined bureaucracy.
South Africa’s political system is fairly robust, and while the successive victories of the African National Congress (ANC) have caused complications of their own, the levels of voter turnout regularly exceed 75%, which is up to 10 percentage points higher than Britain.
The relative quality of infrastructure also provides an excellent base for expansion—South Africa’s national utility provider Eskom, which does nonetheless grapple with high demand, still accounts for just under half of all the electricity consumed in Africa.
Similarly, the penetration rate for financial services—an indicator of both consumption and potential for leveraged growth—in terms of the percentage of the population that has access to formal credit products is nearly three times the continental average. South Africa’s regulatory frameworks for its banks—which include the four largest in Africa—are among the most robust of any Organization of Economic Co-operation and Development (OECD) countries, and were rated third globally by the World Economic Forum (WEF) in terms of soundness for 2013-2014.
However, in spite of all these attributes, South Africa’s long-held position as the gateway into Africa is increasingly under challenge. The country’s sophistication is in part responsible for this. It is among the most-globally integrated markets in Africa, which has left it highly exposed to the continuingly depressed levels of export demand in key markets like the European Union, as well as to portfolio outflows which have left the rand vulnerable.
While the benchmark interest rate, unchanged at 5% for several consecutive quarters, is being kept at historical lows in an effort to stimulate lending, it still exceeds the average repo rates available in much of Europe, North America, and Japan; in turn attracting yield chasers.
But there are also stubborn challenges. Much of the country’s physical and social infrastructure is aging and in need of revamping. South Africa’s electrification rate—at 75% nationally—is the highest on the continent but a narrowing gap between supply and demand has led to load-shedding, which has constrained output and emphasized the need for new base load capacity. High levels of youth unemployment have led to social unrest. Wealth inequality is still high, but with a debt-to-GDP ratio that rises to 60% with off-budget commitments, the ability of the government to pay for social grants and benefits to the current 16 million recipients is becoming increasingly strained.
These challenges are taking their toll.
South Africa’s overall growth is expected to increase modestly in 2014, but still remain below 3%. The expected changes to poverty and unemployment levels are expected to remain minimal.
In the latest WEF Global Competitiveness Report, South Africa fell one spot from 52nd to 53rd out of 148 nations surveyed. The change in ranking reveals a mixed bag of both positives and negatives. With the overall score bolstered by top-five ratings in areas such as financial market development (3rd); auditing and reporting standards (1st); and accountability of its private institutions (2nd), but dragged down by an educational system (146th); labor market efficiency (116th); and burden of government regulation (116) that are rated poorly and place in the bottom 50.
A glance at the some of the country’s key sectors helps illustrate both the country’s potential and its weaknesses. With minerals accounting for around 60% of exports, the sector serves as a barometer and proxy for how the performance of the wider economy. South Africa is the largest producer of platinum group metals in the world, and in the top five for a host of other minerals and metals, including coal and gold. However, labor unrest, rising costs and slowing demand have contributed to more constrained output and concerns over mine closures.
The automotive sector provides a similar example. Constituting around 6% of GDP and 12% of exports, and hosting manufacturing and assembly plants for major international car makers like BMW, Mercedes, Toyota, General Motors and Volkswagen, automotives is often cited as an industrial success story and referenced as an example of what the country can achieve through targeted and proactive legislation and cooperative engagement between government, business and labor. Yet, the automotives industry is coming off a month-long strike during which exports fell 75%, costing manufacturers $2 billion.
For South Africa to unlock its potential, structural reforms are needed. Key to this will be the effective implementation of the National Development Plan (NDP) which is intended to form the strategic base for policymaking until 2030. The initiative seeks to rein in further rises in recurrent spending, while channelling more funds towards specific capital expenditures.
Alongside the New Growth Path (NGP), an economic policy focused on job creation, and sectoral policies such as the Industrial Policy Action Plan (IPAP), the NDP offers significant scope for mitigating the country’s weaknesses and encouraging a significant increase in secondary and tertiary activity. It will not be easy, but it offers a clear road map to strengthening South Africa’s comparative advantages in a more inclusive and sustainable manner.
Ultimately, assessing South Africa is all about context. Both its potential and accomplishments are vast, and many developed economies in the world would happily swap balance sheets. Over the past two decades, South Africa has seen its share of up and downs, although the pros have outweighed the cons. The outlook for the coming years may be murkier, and the obstacles more intransigent and complex, but the country’s healthy fundamentals and past performance provide reason for optimism.

Is There Still Gold At The End Of The Rainbow?

It is widely accepted that for many countries on the continent gross domestic product (GDP) is understated. The question is by how much.
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Ghana created quite a stir when revisions to its GDP data announced in 2010 showed that the country’s economy was 60% bigger than previously believed. Ghana was thus transformed overnight from a low-income to a middle-income country. This happened as GDP per capita, an important measure of wealth, rocketed from about $550 to $1,100.
The news prompted the World Bank’s chief economist for Africa, Shantayanan Devarajan, to declare Africa a “statistical tragedy”. Granted, it is an overstatement. But his comment emphasizes the implications of this shortcoming – if the data is inaccurate, those governments and development agencies could be making poor decisions.
What happened was that Ghana changed the base year for its data from 1993 to 2006, taking into account the deep structural changes in the economy during that period.
The base year is the reference year in terms of GDP, expressed at constant prices, and it determines the importance which various sectors have for the economy. In Ghana’s case, the country’s registry of business was out of date and the national accounts failed to capture the output of these companies. According to the Ghana Statistical Service, the share of services in the economy rose from 36.1%  to 51.1%, while the contributions of industry and agriculture both fell.
Many economies in the region have base years which are more than a decade old – which compares poorly with the international best practice of revising the base every five years. This is particularly significant in the case of Nigeria, the continent’s second-biggest economy, which has announced it is in the process of changing its base year from 1990 to 2010. The new GDP figures will be announced next year. There is a general perception that after taking telecommunications and entertainment into account, the economy will be about 40% bigger than it is at present.
According to the regional research head for Africa at Standard Chartered, Razia Khan, the revision means that Nigeria’s economy will be just 10% smaller than South Africa’s. With its economy growing at around 7% a year, compared with South Africa’s pace of less than 3%, the Nigerian economy is likely to be the biggest on the continent by 2015. The revision will also affect the whole of sub-Saharan Africa. Nigeria’s economy already accounts for nearly one-fifth of the region’s total output, so an upgrade means that the combined economies of sub-Saharan Africa will be significantly bigger than estimated at present.
This poses the question: how many other economies on the continent are also bigger than the current data suggests? According to Kim Zieschang, the Division Chief of the Statistics Department at the International Monetary Fund (IMF), the Washington-based lender anticipates providing technical assistance to a “large number” of sub-Saharan African countries, and in fact is already doing so. This means that many countries have asked the IMF for help in upgrading their economic statistics, just as Ghana and Nigeria have done.
According to Lyal White, Director of the Centre for Dynamic Markets at the Gordon Institute of Business Science, there are two problems, one is the absence of data and the other is the poor quality of data presently available. Many sub-Saharan African economies have large informal sectors which are notoriously difficult to cover.
It is likely that that there will be upward revisions of GDP data in other countries in the region, but the magnitude of those changes are difficult to assess ahead of the conclusion of their processes, Zieschang says. What is certain is that the revisions will radically alter the ranking of sub-Saharan African countries by size.
So what do the changes mean for countries in the region? Global investors are likely to sit up and take note of bigger economies, which will be more attractive destinations for their capital. There will be more information on which sectors to invest in, and governments will have a better idea of what to do to foster development and growth. Some of the ratios which gauge the quality of a country’s economy will improve – debt to GDP ratios will fall, as will budget deficits, which are also measured as a ratio of the size of the economy.
On the downside this could encourage governments to spend a bit more recklessly. At the same time, the ratios of official revenue to GDP will fall, putting pressure on governments to increase their tax base. A significant drawback is that richer countries may no longer qualify for aid or concessional loans from international agencies. Nonetheless, IMF officials say there would be a good case to revise upwards the thresholds for this type of support.
On the upside the pending upward revisions to GDP data will present sub-Saharan Africa as a more significant player in the global arena.

Can Africa shrug off  the resource curse?

Is Africa a statistical tragedy?

The fallout of the Arab Spring brought its fair share of highs and lows, and while Egypt and Tunisia have had to grapple with some very worrying challenges, perhaps no country has embodied the elation and the trepidation of the new political landscape as Libya.
The political upheaval of the Arab Spring complicated the region’s economy. Economic grievances were a significant factor in the uprisings, but the resulting instability drove away foreign capital, dragged down output and spurred a rise in unemployment. However, Libya, nearly three years into the post-Gaddafi era, has seen some encouraging progress made in terms of restarting the economy and fostering a broader and more inclusive base for growth, but continuing unrest and the stubborn problem of armed militias continues to limit gains. There is no doubt that the country offers significant potential for investors, but the question remains: at what cost?
On the face of things, Libya ought to face the most grueling uphill struggle to restart its economy, given its prolonged conflict and the historical lack of any centralized governance structure. However, with proven oil reserves of 48 billion barrels, making up for around 3.5% of the global total, and a relatively small population of 6.5 million, the country has a wide range of policy options at its disposal to restart long-term sustainable growth—far more so than Tunisia or Egypt.
This is due in large part to the country’s natural largess. In 2012, oil accounted for 78% of GDP, 98% of exports, and 95% of all fiscal revenue. Oil exports also foot the bill for a vast system of regressive subsidies, which for electricity and fuel can be anywhere between 11% and 14% of GDP annually. With production averaging 1.5 million barrels per day (bpd) in the first half of 2013—up from a low of 30,000 bpd in 2011 and just short of the pre-revolution levels—revenues are also funding the country’s large public sector wage bill, which is estimated to cost roughly one-fifth of GDP but is a necessity, given the urgent need to expand employment and reduce the country’s poverty rate of almost 33%.
While the country’s resources give it a comfortable tool to jump-start growth and minimize short-term unrest, Libya’s broader performance over the past 18 months has also been comparatively strong. In July 2012, the country went through relatively peaceful general elections and by early 2013, headline indicators were impressively robust. The country saw real GDP growth of 95.5% in 2012, although this figure was distorted by the economy’s contraction of 60% in 2011. Nonetheless, the IMF is projecting 17% growth for 2013—the highest on the African continent—followed by more stable growth rates of 7% set to take place until 2017.
The strong growth has managed to recoup some of the capital that was withdrawn during the height of the country’s conflict. Outflows in 2011 were unsurprisingly significant. Most companies shut down operations completely and in some cases evacuated staff in a frenetic rush. The drop was all the more noticeable given the country’s star status in the preceding years. The end of United Nations sanctions in 2006 brought about an impressive growth in foreign direct investment into the country, in spite of caps on ownership requirements and the outsized-role of the state in directing activity. While post-Gaddafi Libya still grapples with a cumbersome bureaucracy and a burdensome regulatory framework for new investments, some of the less risk-averse companies have started to move in.
Oil is obviously one of the ripest attractions for foreign investors, particularly since Libya’s government is planning outlays of $10 billion over the next few years to boost overall production to 2.2 million bpd. Firms have been quick to move back in and the government moved quickly following the end of fighting to reaffirm the validity of existing contracts. Some companies—like Italy’s ENI, who holds signifcant stakes in the upstream sector—even resumed activity as early as mid-2011, although given the burdensome requirements of the previous regulatory code and the lacklustre rate of discovery, there are expectations that terms of some exisitng contracts may be renegotiated.
Foreign capital is also coming into the country’s long under-developed tertiary sector. While the state-dominated banking industry has nonetheless been grappling with a post-conflict jump in NPLs and decline in asset quality—and more worryingly, legislation in January 2013 that banned interest on all transactions in the country—there is abundant liquidity and no shortage of possible clients, which has attracted investors like Qatar National Bank, who acquired a 49% stake in Libya’s Bank of Commerce and Development.
Finally, infrastructure—which was a major recipient of foreign investment under the previous regime—is an area that offers enormous potential due to the volume of work needed. There is a need for capital in everything from sanitation to transportation to electrical transmission, and even property—particularly residential and commercial. There is less than 100,000 square meters of gross leasable area for grade A commercial property in Tripoli, a figure expected to grow tenfold over the medium-term. The new investment commitments and strong headline indicators represent the country’s highs but there are still plenty of lows that it must grapple with, both in the short- and long-term. The past 18 months have seen some notable and encouraging advancements, but a rosy outlook is far from assured.
One of the greatest challenges has been maintaning security and overall stability. The country’s loosely-organized militias were central to Gadaffi’s ouster, but controlling them after the revolution has proved to be problematic. Some of the larger militias in both Tripoli and Benghazi have resorted to kidnapping and extortion, in part to help pay wages, while armed groups have also used explicit threats and displays of force to pressure the government into passing favorable legislation, such as a ban on former government employees holding public office. Targeted attacks on diplomatic and government buildings in 2013 have also led to foreign embassies and corporations evacuating their staff again.
Recent months have also seen a troubling eruption of broader civil unrest, including strikes by workers, street protests and militia groups, primarily over insufficient and inadequate political representation or economic exclusion.
In August, a number of refineries, ports and pipelines were forced to shut down as a result of workers downing tools and militia blockades. Offloading and receiving capacity was already hurt by the damages incurred to key ports during the 2011 fighting, and given the heavy reliance on both imports—which account for 75% of food staples—and export earnings, recent port stoppages are weakening the overall economy further.
The lost earnings could amount to $4 billion a month and the damage in terms of output and attracting capital is a concern and could have longer-term implications. Concerns over supply reliability may force the country to discount its oil price in future contract negotiations, and some operators, like the United States-based Marathon Oil recently announced that they are exploring a potential sale of their stake in a local consortium.
Libya currently finds itself at a critical juncture and how things play out over the coming months will have a significant impact on the country’s long-term prospects. Libya has the ability to emerge from the fallout of the Arab Spring in far better shape than either of its neighbors, but with the stubborn problem of militia violence and continuing unrest, it looks like a challenging task.

A New Dawn Of Uncertainty

The picturesque Republic of The Gambia is covered with beach resorts and more than 300 species of birdlife. It’s one of Africa’s smallest countries and is surrounded by Senegal and the North Atlantic Ocean. The former British colony gained independence on February 18, 1965. Incumbent president, Yahya Jammeh, led a successful, bloodless military coup in 1994 and has been in power since winning the elections in 1996. Each term is five years and the constitution has no restriction on the number of terms allowed.
The country has few natural resource deposits and is heavily reliant on foreign aid. A third of the population depends on the agricultural sector, with one sixth of the country’s land being arable, and tourism is big due to its ecosystems, white beaches and close proximity to Europe.
The country wants to become West Africa’s regional center for processing, manufacturing, assembly and distribution. Currently a low income country, it wants to reach middle income status by 2020, using its Vision 2020 master plan.
It’s currently a net importer—exporting peanut products, cotton lint, palm kernels and fish, while importing foodstuffs, fuel, machinery and transport equipment. The majority of the country’s exports consist of re-exports to other African countries.
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While its human rights record is poor, The Gambia’s contractionary monetary and fiscal policies from late 2003 restored macroeconomic stability after inflation rose to a two-decade high of 17% in 2003—following uncontrolled and unbudgeted expenditures, a decline in tax revenue, a rise in domestic debt and a drought.
The general economic growth outlook for 2013 seems to be positive.
The country began to rebound in 2012; real GDP grew from -4.0% in 2011 to 6%. Growth is expected to continue on the back of recovery in the agricultural and tourism sectors. Inflation has remained in the single digits and is projected to climb to the central bank target of 5%.
The country suffered an agricultural harvest failure in 2011 and implemented the Program for Accelerated Growth and Employment (PAGE) 2012-2013, a new poverty reduction strategy. It takes 27 days to start a new business and the country has now dropped four places in the ease of doing business rankings, to sit at 147. It also ranks at 165 on the Human Development Index.
The Gambian financial system has evolved over the last several years, and is now liberalized. The country has moved to an indirect system of monetary controls using open market operations, increasing competition in the domestic financial system.
Treasury Bill yields are between 12.6% and 16.09% per annum.
Earlier this year, The Gambia introduced a 15% VAT. This led to some confusion among the locals and sharp increases in prices. These increases were also seen in non-taxable items such as rice and sugar. The introduction of the VAT is in compliance with ECOWAS’s tax reforms for its member states.
Structural changes have been made in the country and there are a number of projects underway. The government wants to find ways of enhancing domestic participation in mineral exploitation, improving education and improving infrastructure.

From A Coup  To A Rosy View

The French-speaking country, perched on the western tip of the continent, boasts one of the best developed tourist industries in Africa, with six major game parks and reserves. Senegal is home to nearly 13 million people and has remained stable even as neighbors Mali and Guinea and nearby Côte d’Ivoire suffered military coups and political upheavals.
But Senegal had its share of political violence in January 2012. Dakar burnt when the constitutional court allowed incumbent Abdoulaye Wade to seek a third term in office. The 85-year-old’s decision violated the country’s constitution; protestors set fire to large parts of the city. In the end, Wade was defeated by Macky Sall.
In June, on his first official visit to Sub-Saharan Africa, United States President, Barack Obama, visited Senegal to strengthen business relations and encourage investment. Obama’s visit recognized the United States’ commitment to democracy, in a region where dictators and civil strife are common.
A few weeks later, in July, rating agency, Standard and Poor’s (S&amp;P) revised Senegal’s sovereign credit rating outlook to stable from negative. S&amp;P believes the Senegalese government will succeed in cutting its fiscal deficit and carrying out reforms that will lead to faster economic growth. Moody’s Investor Services rated the West African nation B1, before its planned sale of $500 million of Eurobonds in 2011. Moody’s rating is equal to the B+ rating by S&amp;P, along with Nigeria, Kenya, Mozambique and Zimbabwe to name a few.
Senegal earns most of its foreign exchange from fish, groundnuts, phosphates, tourism and services. The phosphate industry has struggled for two years to secure capital and its reduced output has hurt GDP.
In 2007, Senegal signed agreements with foreign companies for new mining concessions for iron, zircon and gold. Various foreign investors have agreed to modernize Dakar’s port and create a new special economic zone.
Its agricultural sector is subject to rainfall and changes in world commodity prices. Following droughts that cut agricultural output in 2011, the West African nation’s economic growth is expected to accelerate this year. According to a Reuters poll, Senegal’s GDP should expand to 4.4%; the International Monetary Fund (IMF) hopes the completion of infrastructure projects, recovery in its agricultural sector and mining projects will boost it further.
The IMF also expects Senegal’s current account deficit to decline, but remains fearful it could go high because of imports associated with investments in the energy and mining sectors. In September, the IMF urged the Senegalese government to maintain its budget deficit target—expected to be reduced to less than 5% of GDP this year—in order to ensure fiscal sustainability.
Senegal relies heavily on donor assistance and foreign direct investment, which in 2000 represented around 32% of overall government spending. Under the IMF’s Heavily Indebted Poor Countries debt relief program, Senegal will benefit from eradication of two-thirds of its bilateral, multilateral and private sector debt.
The country rose from the ashes through an economic reform program following its economy’s contraction by 2.1% in 1993. A year later, with the help of the international donor community, Senegal began a 50% devaluation of the country’s currency; government price controls and subsidies were steadily dismantled. It made for a real turnaround with a real GDP averaging over 5% annually over a decade. Annual inflation was pushed down to low single digits.
Following the country’s 2012 growth at an estimated 3.7%. The African Development Bank (AfDB) believes that growth will accelerate this year and is projected at 5.1% in 2014. AfDB says the growth projections are calculated in the hope that the government’s socio-economic program will be implemented along with the continuation of a toll motorway, the construction of Blaise Diagne International Airport, which is expected to handle around 10 million passengers by 2020, and other infrastructure projects.
Dakar, the melting pot capital city, is one of the busiest cruise ship ports in Africa and is home to around 1.5 million people. It’s impossible to miss the imposing Monument of the African Renaissance statue, when in the capital. As the tallest statue on the continent it stands at 49 meters on one of the twin hills, known as Collines des Mamelles.
Just off of Dakar’s coast is Ile de Gorée—the small island is a big tourist attraction because of its history as a slave trading port.
Dakar also lends its name to the Paris-Dakar rally, which was established after Thierry Sabine got lost on his motorbike in the Tenere Desert during the Abidjan-Nice Rally, in 1977. He came up with a new route starting in Europe through Algiers, in Algeria, crossing Agadez, in Niger, before finishing in Dakar. Most rallies took this route, until security threats in Mauritania forced organizers to cancel the 2008 rally. The following year it moved to South America and has stayed there.
As a member of the West African Economic and Monetary Union, Senegal is working towards greater regional integration with a unified external tariff and a more stable monetary policy.
The economy continues to suffer from an unreliable power supply, with widespread blackouts in 2006, 2007 and 2011, which led to public protests and unemployment. The government is working hard to solve the problem. High unemployment forces many to flee the country in search of jobs.
The country is one of the few on the continent to have issued a Eurobond, that is debt issued in a currency other than the that of the country or market in which it is issued. Eurobonds are attractive to investors because of their small par values and high liquidity. Senegal issued a $500 million 10-year Eurobond in May 2011 at a coupon of 8.75%, to raise funds to improve infrastructure.
In June, Reuters said the country is likely to issue another $500 million 10-year Eurobond this year at an interest rate of around 6%. The IMF said the bond would help the country close its financing gap and reduce its reliance on costly short-term financing from the regional market.

Ashes To Eurobond

Annual meetings of the African Development Bank (AfDB), Africa’s premier financial institution, are no longer what they used to be. While Africa remains the world’s poorest continent, the narrative and attention it receives has changed in the past decade. And nowhere is this more visible than in the conversations at the annual meetings of the AfDB, rated AAA by all the major rating agencies—Standard &amp; Poor’s, Moody’s and Fitch. 
In Marrakesh, Morocco, this year, a record 3,000 delegates showed up, ranging from the owners of the bank—the finance ministers of the 53 African countries—to non-governmental organizations and the ubiquitous consultants from around the world. Africa’s newest country, South Sudan, is not yet a member. 
The mood was buoyant, as befitting a continent that is growing faster than any other. The bank forecasts economic expansion across Africa will average 4.8% this year and climb to 5.3% next year. If you exclude South Africa, the continent’s largest economy, the advance tops 7% at a time when most of Europe is in recession, the United States is battling anemic growth at around 2% and the Chinese locomotive is slowing. 
“Now is the time. After 10 years of improved stability, sound macroeconomic policies and blossoming trade links, growth has made African nations freer than ever to choose their own development paths and implement active policies for economic transformation,” says the bank’s vice president and chief economist Mthuli Ncube. 
This is a far cry from the doom and gloom of the two decades ending in the 1990s, when the London-based Economist published its now infamous `Hopeless Continent’ cover, which to be fair, was recanted years later. 
According to the International Monetary Fund, seven of the 10 fastest-growing economies are African—Mozambique, Zambia, Ethiopia, Nigeria, Ghana, the Democratic Republic of the Congo and Tanzania. Growth has been broad-based, with 27 of the region’s 30 largest economies expanding since 2000. Mckinsey &amp; Co. notes that Africa already has a bigger middle class than India. 
While some suggest this is due to China’s resurgence, there is little doubt that painful economic and political reforms carried out in the 1990s and Africa’s new leaders are responsible. 
The private sector believes in the reforms and sustainability of the continent’s new growth path and is, in many instances, outpacing government initiatives through investments on the ground. Aliko Dangote, Africa’s richest man, is pouring $7.5 billion in his businesses in the next four years. 
Acha Leke, a director at Mckinsey &amp; Co. in Johannesburg, says that Africa has gone from battling to generate growth, to the challenge of how to improve the quality of jobs and ensure that the rising tide carries all boats. 
This was reflected at this year’s meeting, the theme of which was Africa’s Structural Transformation; it aimed to ensure that future growth is equitable and sustainable. While economic expansion has lifted some people out of poverty, the majority of Africans remain desperately poor, according to AfDB. 
“Structural transformation is about improving the quality of African growth by diversifying the sources of that growth, and expanding economic opportunities for all. In many ways it is about turning natural wealth into created wealth,” says AfDB president Donald Kaberuka. 
The governors, economists and other delegates addressed how to use wisely the continent’s vast natural resources; how Africa’s cities of the future might look and strategies to take advantage of the world’s youngest population. 
To ensure the current economic growth is sustained, the AfDB approved a 10-year strategy, built on infrastructure development, regional economic integration, private sector development, skills, technology and improved governance and accountability. 
“The strategy reaffirms the bank’s strategic choices around infrastructure, economic integration and the private sector. It charts the way towards inclusive growth that spans age, gender and geography,” says Kaberuka, who is in his second and final term. 
The 2013 meetings were also notable for the launch of the bank’s Africa50 fund. It will address Africa’s infrastructure funding gap, which is estimated at more than $50 billion annually. 
Africa’s positive economic outlook is set to further improve, especially with new mineral discoveries. But some warn that Africa must guard itself against the Dutch disease, a conflict fuelled by the fight for resources, which would set it back and dash both Kaberuka and Ncube’s dreams of making Africa the new workshop of the world.

hopeless no more

Foreign-owned banks in Zimbabwe are prepared to brave the current wave of uncertainty emanating from the country’s controversial indigenization policy which could lead to “significant changes” in the shareholding structure of the banks as they are also under pressure to raise $100 million in statutory capital.
“The new capitalization requirements and compliance with indigenization will likely result in major changes in the structure of the banking sector as players try to comply with those two requirements,” says Willard Zireva, the chairman of MBCA Bank, the Zimbabwean unit of Nedbank.
The indigenization policy, which was promulgated in 2008, requires that foreign-owned companies cede 51% of their shares into the hands of black Zimbabwean groups. President Robert Mugabe and his Zanu-PF party are apparently pushing for the policy ahead of elections expected in July this year, while Prime Minister Morgan Tsvangirai and his MDC party will try to reverse the policy, saying it is not investor-friendly.
The government has, however, not swiftly moved in on the banks as Reserve Bank of Zimbabwe governor, Dr Gideon Gono, insists that forcing the banks to cede 51% shares will destabilize the already fragile banking sector. More than three locally-owned banks have already collapsed in the past year after succumbing to operational constraints, low liquidity levels and low capital bases.
It is the larger, foreign-owned banks—Barclays, Standard Chartered and the Zimbabwe units of Standard Bank and Nedbank—that have brought stability to the banking sector. Only about three local banks are considered stable and these include CBZ, FBC and ZB banks. Zimbabwe has 22 banks, most of them commercial.
“The smaller, locally-owned banks are less stable than the larger, more established foreign banks. We have… 22 banks functioning in an economy which is much too small for that number of banks,” says Zimbabwean economist John Robertson.
While economists and investment fund managers have warned that the indigenization policy and the placid nature of Zimbabwe’s regulatory framework may push investors out of the country, foreign banks are prepared to brave the current chill in Zimbabwe’s operating environment.
Dennis Mambure, the spokesperson at Barclays Zimbabwe, which has been left out of a deal that saw Barclays Africa operations merge with South Africa’s Absa Bank, says the bank is keen to comply with Zimbabwe’s policies. He insists that the bank had made submissions to the government and that negotiations are ongoing.
“Barclays operates within the confines of the legal and regulatory framework of the country. At no time has the bank disregarded any regulatory directive or obligation. Barclays Bank has made all submissions required by the laws on indigenization to the relevant authorities. Engagement with authorities on these submissions is on-going and Barclays is not at liberty to disclose the content of those confidential discussions,” says Mambure.
Interestingly, Mugabe has called for lower indigenization compliance thresholds for the foreign banks. He said in a televised interview, ahead of his 89th birthday celebrations, that the 51% threshold was not rigid, adding that the banking sector could be considered for lower thresholds, further complicating the placid nature of the regulatory environment in Zimbabwe.
This has been interpreted as a victory for the banks who had earlier argued against the 51% compliance thresholds. But youth development, indigenization and empowerment minister, Saviour Kasukuwere, appears to have the final say as to what thresholds the banks will have to comply with. He told FORBES AFRICA in an interview this month that the banks have to show willingness to comply.
“The minister can use his powers to consider variations. The banks have to come forward and submit their plans and we can even consider different timeframes for compliance,” he says.
Gono called for flexibility in implementation of the empowerment policy in the banking sector. “You need to be flexible when you come to the banking sector… because you cannot indigenize technology. You cannot apply the same rules that you are applying everywhere to the banking sector. I am going to defend that position,” he told a breakfast meeting of industrialists
Despite the earlier softening in the government’s stance regarding indigenization compliance for foreign banks in Zimbabwe, Kasukuwere in March wrote to the foreign banks asking them to be fully compliant with the contentious policy by the end of June.
The new directive by Kasukuwere stokes up the fight between him, the central bank governor and finance minister, Tendai Biti. Gono says that he will defend Mugabe’s reasoning in calling for compliance variations below the mandatory 51%.
However, the Zimbabwean unit of Standard Chartered has welcomed Mugabe’s statement, saying the bank is committed to its employees and clients in Zimbabwe, hence the bank’s willingness to comply with the indigenization policy.
“We remain committed to the long-term interests of our staff and customers in Zimbabwe, and to continuing to facilitate the development and growth of the economy. We welcome President Robert Mugabe’s comments. Standard Chartered has taken the conscious decision to continue to maintain our long-standing commitment to doing business in Zimbabwe,” says the bank’s spokesperson, Lillian Hapanyengwi.
Economists say that Zimbabwe’s regulatory framework is uncertain as regulations change without notice while there are always variations in how the laws are implemented. The Bankers Association of Zimbabwe say the banks are engaging the government on their own while the association’s president, George Guvamatanga, the head of Barclays in Zimbabwe, says he is still weighing the implications of Mugabe’s statement.

BRAVING THE INDIGENIZATION CHILL

If Zimbabwe’s economic problems hang like a cloud, you could argue that mining is the platinum lining. Platinum investment has poured into Zimbabwe—a country where mining contributes 13% to the GDP and accounts for 60% of export earnings.
Zimbabwe may be rich in resources but it is poor in policy. Most Zimbabweans have seen little of the wealth mined from beneath their feet. The irony is the unpredictable policies aimed at tackling this problem are putting off the foreign investors needed to fuel the long-term, capital-intensive business. Zimbabwe has, for the past decade, recorded among the lowest foreign direct investment (FDI) inflows in the sub-Saharan Africa region. In 2011, it didn’t even see $400 million in investment, compared to South Africa, Zambia and Angola, which received more than $1 billion apiece.
Platinum claims by government under the Mines and Minerals Act are a prime example. This year, the government acquired nearly 28,000 hectares of platinum claims held by Zimplats—a subsidiary of South Africa’s Impala Platinum—in the Mhondoro-Ngezi district. Earlier, the state had acquired Anglo American Platinum claims, in Shurugwi, to pave way for Todal Mining—a Russian-linked subsidiary of Central African Mining and Exploration Company. Government heavyweights are linked to the acquisition.
“It’s pointless to grab claims that you can’t make good use of,” says a mining engineer based at neighboring Zimasco chrome mine, which was taken over in 2007 by the Chinese.
There is talk that Chinese investors have been eyeing Anglos Unki Mine in the heart of the mineral-rich Great Dyke. This talk, along with the grabbing of the platinum claims, is enough to cause disquiet among investors.
“It will send a negative signal on security of investments in the country and will likely result in a slowdown in FDI into the sector. Mining is generally a long-term investment and investors want security that they will be able to recoup their investments without fear of repossession of their assets. The impact of this uncertainty has already been seen on the local stock market, where mining firms have struggled to raise funding from both local and foreign investors, while trading in these stocks has been quite subdued as the sector sometimes goes for days without recording a single trade,” says Isaac Isaki, head of sales and trading desk at EFE Securities.
With the benefit of foresight, perhaps none of the companies would have invested in the first place. Instead of taking the claims, Isaki argues that the government should have traded the excess claims in partial fulfillment of the indigenization laws, rather than force companies to comply with indigenization laws and then take away the claims.
Zimbabwe has the second largest platinum reserves, which Anglo, the world’s largest platinum producer, tapped into. While it is divesting in its core operations in Zimbabwe, it will keep its gold and platinum production going. Recently, Anglo ceded around 51% of its stake to black Zimbabweans, in a move that created ructions in the financial sector.
Impala Platinum, Zimplats’ owner, and Mimosa Platinum have also conceded to government’s indigenization demands. Once Anglo American had pumped $300 million into its Unki Mine operation, the government cajoled them into an empowerment deal, which, according to legal experts and analysts, had many holes.
Under the empowerment deal: the Tongogara Community Share Ownership Trust; the Unki Employee Trust; and the ‘strategic indigenous investors’ will receive 10% each of the shares. The government will acquire 21% through an indigenous empowerment board through decade-long loans. The Tongogara Community Share Ownership Trust, launched in 2011, was also given $10 million, with $1.3 million spent so far on schools, mortuaries and irrigation schemes.
Harare-based economist John Robertson, who has been studying mining in Zimbabwe for more than four decades, criticizes the empowerment laws.
“I regret that community share ownership schemes will probably make only modest contributions to rural societies, given the fact that their funds will be derived from dividends that will be paid only if and when the companies whose shares are owned by the schemes make profits big enough to justify dividends. If these dividends can be accumulated for long enough to pay for needed social infrastructure, such as roads, schools, dams, water purification plants and hospitals, the benefits will be important, but the word transform might be too extravagant to use to describe the benefits,” he says.
There is a strong perception in the market that the indigenization demands amount to legalized theft.
“Government has passed a law that states all foreign investors have to hand over 51% of their shares. What is the difference between this and a mugger demanding that you let him take half the money out of your wallet? It is wrong and passing a law to legalize it does not make it right,” says Robertson.
Despite these economic setbacks, the country’s future appears to lie in platinum. According to Anglo general manager, Walter Nemasasi, Unki Mine produced 62,692 equivalent platinum-refined ounces in 2012, with projected annual increases.
So far, Anglo has pumped in nearly $350 million into the operations, with the bulk going into a new raw water supply dam and a 17km-long tar road to the mine. At the very least, this investment is turning remote villages into booming towns.
The question is whether these government-brokered empowerment share ownership deals will bring the much needed development and give Zimbabweans a share of the wealth of their land. That is a question likely to be asked ahead of this year’s elections.
<h4>REFERENDUM</h4>
Hope, fear, optimism and change. These are some of the things that precede the Zimbabwean elections expected to be held later this year following the successful signing of a constitutional referendum that saw the three parties in the country make compromises.
With reportedly 3.3 million Zimbabweans having cast their vote in a referendum on a new constitution that seeks to curb presidential powers and strengthen human rights in their country, the spotlight is on Zimbabwe to see if democracy and change will be attained. 
Leaders in the country are seeing the agreement as a stepping stone to new beginnings but political commentators are not convinced it will yield the desired results. Gabriel Shumba, a human rights lawyer and political analyst from Zimbabwe is not celebrating just yet. 
Shumba believes if the Southern African Development Community (SADC) does not step in to assist leading to the elections, history could repeat itself and violence could erupt. 
“We are going to see violence preceding the next elections if precautionary measures are not taken by SADC to prevent violence that is already evident on the ground. The arrest of the human rights activist [Beatrice Mtetwa] is evidence that the next elections won’t be different from those of the past. We have to keep in mind that it is not a constitution that prevents violence or rigging, it is political will,” he says.

A Fair Share Or Legalized Theft?

Over the last 50 years, Africa has gone from colonialism to a continent on the verge of political and economic transformation. Despite the financial crisis, Africa has been growing at an unprecedented rate—rekindling optimism. Across the continent, there is now a greater sense of seizing the day. What does the next 50 years hold for Africa?
Well, the next half century offers good prospects for realizing a dynamic, diversified and competitive economic zone in Africa in which extreme poverty is eliminated within peaceful, stable and vibrant societies. It will see the transformation of fragile economies into more robust and developed markets, which will create opportunities for the poor.
Recent evidence shows that economic growth in Africa is generally strong: fuelled by business-friendly policy reforms; favorable commodity prices and an improvement in peace and security. African Development Bank (AfDB) estimates suggest that both Gross Domestic Product (GDP) and GDP per capita will increase steadily throughout the period 2010 to 2060. By 2060, most African countries will attain upper-middle income status.
In the most positive of scenarios, the AfDB estimates that Africa’s GDP could increase to more than $15 trillion in 2060, from a base of $1.7 trillion in 2010. Consequently, income per capita should grow from $1,667 in 2010 to more than $5,600 by 2060. The projected breakdown of GDP by sub-region indicates that North Africa will continue to post the highest income per capita. However, East Africa is likely to show the strongest growth performance, reaching 9.3% in 2030. By 2060, the sub-region will have a per capita income 10 times higher than in 2010.
One of the outcomes of Africa’s strong economic growth, in the past two decades, has been a significant increase in the African middle class, defined as earning between $4 and $20 per day. The middle class will continue to grow from 355 million (34% of Africa’s population in 2010) to 1.1 billion (42%) in 2060. Poverty levels are expected to fall, with the proportion of the population living on less than $1.25 a day declining from 44% in 2010 to 33.3% in 2060.
In the decades ahead, Africa’s growth prospects will be heavily influenced by trends in labor availability. The continued rapid growth of the economically active population, that is men and women aged between 15 and 64, at an average of around 3.5% per annum will lead to an increase in Africa’s working-age population to around 1.87 billion; around 74% of Africans will be of working age.
By 2060, life expectancy in Africa is projected to reach 70 years, compared to 56 years in 2010. North and East Africa are projected to have the highest life expectancy with 80 to 83 years, compared to the much lower 55 years in Central Africa. HIV/AIDS remains Africa’s bugbear. HIV prevalence rates are expected to decline from 2.1% in 2010 to 1.4% in 2060.
With respect to literacy rates, the current trend of rising rates is projected to continue, reaching around 96% in 2060 against 67% in 2010.
For Africa, the next 50 years are likely to be shaped by three major global forces: the changing structure of global trade; new trends in technology and the international architecture governing trade, finance and development assistance.
Africa faces three drivers of change related to its physical environment: firstly, climate change; secondly, the continent’s renewable and non-renewable natural resources and lastly, the continent’s land and water will come under increasing pressure.
Three human conditions will impact Africa in the next 50 years: a delayed demographic transition; the burden of AIDS and land access and tenure.
By 2060, several changes will have transformed the opportunities and challenges facing Africa in at least six dimensions: urbanization will accelerate; migration will increase and agriculture may well decline. How economies in Africa respond to these challenges will depend on the choices they make. Countries need to respond by investing in their cities, managing migration, transforming agriculture, managing their natural resources and making concerted efforts to break in at the bottom of the global market in goods and services. Action—by Africans, in the form of deeper regional integration, and by the international community, on trade and aid—must support the efforts of African countries.

We Will Live Longer  And Be Wealthier by 2060

If ever there was a country that could be described as Africa for beginners, Namibia would be a strong contender: a young, but stable, democracy and an open economy in a country blessed with good mineral and natural resources; a robust financial system, good infrastructure and an independent judiciary.
In spite of the relatively small size of the economy, with a Gross Domestic Product of around $12.6 billion, Namibia has been something of a niche destination, especially for mining companies, since achieving independence in 1990. While only the eighth largest producer of diamonds, its production is 90% gem quality and a mainstay of the economy.
The country is also a popular tourism destination and has marketed itself as an up-market holiday for European clients, much like neighboring Botswana. Its fishing industry is considered a world-class resource and is the source of much of Spain’s European whitefish exports.
Over the past two decades, Namibia has recorded respectable economic growth, averaging at 5 to 6% per annum, but it has been slipping of late. According to the latest available figures for the National Accounts for 2011, growth has dropped from 6.6% in 2010 to 4.8% in 2011, largely as result of a slump in the mining sector. Inflation has remained relatively stable, although it is expected to increase from 2011’s 5% to 6.5% this year.
Historically, the mining sector—followed by agriculture, fisheries and tourism—has been the engine of the Namibian economy, with mining’s contribution peaking at 15.9% of GDP in 2008. This was largely due to an unprecedented boom in uranium exploration in 2004-2010, which saw two new uranium mines opening in addition to the 36-year-old RioTinto-owned Rössing Uranium mine.
However, the economic fall-out from the 2008 international financial crises landed in Namibia shortly afterwards as investment flows froze and mining’s share of GDP contracted by a record 45%, as the impact of the February 2011 Fukushima incident pushed uranium prices down to levels where several uranium mining projects had to be shelved. The largest of these, the Chinese-owned Swakop Uranium project, is however still on track to commence production in 2015.
This trend has been offset to some extent by growing interest in the potential for finding off-shore oil and gas deposits along the 1,200 kilometer long Atlantic coastline, which is held to be analogous to the Brazilian geology, that has in recent years yielded impressive oil fields. The Kudu gas field, a modest deposit of 5.7 Tcf, was discovered along the southern coast line in the 1970s, but because of low international prices for this commodity, was never developed due to cost considerations.
A looming, region-wide electricity shortage has however added new impetus to investment in this field, and several oil majors, including Shell and BP, have recently joined forces with Namibian investors to resume the search for the precious commodity. The government announced that it was to push ahead with the development of the Kudu gas field, in order to construct a gas-fired power station that it hopes will renew momentum in the development of other mining projects, as well as take advantage of a regional electricity shortage by selling excess power to neighboring South Africa.
A recovery in zinc and tin prices in the third quarter has seen renewed interest in exploration for these commodities, while continued global insecurity has also seen the revival of several gold-mining projects. There has also been renewed interest from Indian and Chinese investors in hitherto undeveloped iron ore deposits. A planned extension of the local railway network into Botswana to allow it to exploit and export newly discovered coal deposits, via Namibia’s Lüderitz and Walvis Bay harbors, is widely expected to help the mining sector regain its prime position in the local economy.
Namibia, however, is not without its own problems, the most obvious of which is a persistently high unemployment rate, exceeding 51% in 2011, as well as a growing corruption problem in areas of government procurement and related services.
This has brought additional pressures to bear on the ruling South West Africa Peoples Organization (SWAPO), which has been in power since 1990 and is struggling to deal with an internal transition in leadership.
To address the most pressing problem of unemployment, the government has embarked on an expansionary budget over the past three years under the so-called Targeted Intervention Program for Employment and Economic Growth (TIPEEG), a $1.5 billion stimulus program, that the government hopes would create an additional 104,000 new jobs per annum over the next five years.
Results so far have been disappointing in respect of employment creation, largely as a result of government’s insistence on making Black Economic Empowerment (BEE) the key criteria for accessing funding under this program.
This has also impacted on Namibia’s competitiveness: the most recent rankings released by the World Economic Forum’s Global Competitiveness Report showed the country has slipped nine positions to 92nd of 144 countries surveyed.
More worryingly, Namibia slipped 57 points in terms of rankings for the macro-economic environment due to the current high levels of debt—27% of GDP. Ranking of its infrastructure has also slipped by 26 points, which is of major concern to the mining industry.
Some of the concerns are being addressed: harbor facilities are currently being expanded to improve handling of bulk commodities like ore and the expansionary budgetary period is to cease by 2013-14.
As they say, ‘Watch this space’.

Mine Faith

At the Careers in Africa Summit in London this May, the queues alongside recruiting stands wound around the Hilton Canary Wharf within minutes of opening, as 1,500 pre-selected, high-quality African candidates gathered for a matchmaking event with global companies looking to source African talent from the Diaspora.
Over the road, the Wharf itself was unusually busy for a Saturday afternoon, as global banks desperately worked through their scenario planning after the carnage on European markets. Once, the UK financial services industry in Canary Wharf and the Square Mile would have hoovered up many of these candidates. The city has been a magnet for global talent for decades, picking up not only the best from British universities, but those in Asia and Africa as well.
Now, that seems to be changing as resurgent African markets attract global businesses desperate to find new sources of growth, and as entrepreneurial members of the Diaspora look to return to capitalize on opportunities back home.
“The general atmosphere [in Africa] is much more optimistic,” says Wynand Smit who left a risk management job in a UK bank to return to South Africa to work for Rand Merchant Bank earlier this year.
“This is in stark contrast to the gloomy atmosphere in the UK where the focus, in my experience, was much more on the uncertain EU situation and potential future impacts,” he says.
The opportunities on the continent, as well as family considerations, led him to return after a successful few years in London and the Netherlands. However, for others the conditions in developed markets are a compelling reason to head back home. London’s slide—and the slowdowns across the rest of Europe and the United States—has come at a time when African economies have proved their resilience in the face of global economic turmoil.
The UK banking boom in the early part of the new millennium saw the sector expand from just over 5% of the country’s GDPin 2000 to more than 10% in 2009, when the country’s recession began in earnest. A royal flush of new, strict regulations, economic downturns in almost all developed markets and the existential threat to the Eurozone, which makes up the UK’s largest trading bloc, drove many institutions to the wall. The bloodletting that followed has been brutal.
According to figures compiled by Bloomberg, there were 58,000 job cuts in London’s financial services industry in 2011 alone. 2012 has seen that pace maintained, with bank after bank responding to the continuing pressure from regulators to build capital by cutting costs and headcount. Trading firms have seen losses mount as stock indices continue to be battered by the ongoing turmoil in the Eurozone; and corporate finance houses have seen their client base retrench in fear of a second recession. The Royal Bank of Scotland alone has slashed 30,000 jobs since its nationalization in 2008, and more cuts are still to come as the slim hopes of an economic recovery in the near-term fade away.
Hugo Lambrecht, who manages the African finance and banking practice at CA Global Headhunters, says that he has seen both the number and the profile of candidates change over the past few years of recruiting. Whereas before, the company’s focus was on finding expatriates for roles on the continent, the last two years have seen an upsurge in returnees—of the 280 people his team have placed in that period, around half are returnees. With a lack of experts in transaction banking, corporate finance specialists, investment professionals and chartered accountants, it is a good time to be in the executive search space in Africa, Lambrecht says.
It is not just finance that is benefitting. The compelling demographics of the continent continue to underpin growth in the fast-moving consumer goods and the financial services sectors across most economies. One major constraint for these businesses, historically, has been their ability to source executive talent with the financial and management skills required to operate in global companies, and the understanding of the complexities of relatively unstructured African markets.
The economic downturn in the West, combined with a growing understanding amongst multinationals and businesspeople that African markets are now a far cry from their mid-90s gloom, has created what Richard Putley, managing director of Executives in Africa, calls “a perfect storm”.
Putley’s company specializes in sourcing executive talent for international companies operating in Africa, particularly the retail sector, where knowledge of local market conditions is of paramount importance. What most companies are looking for, he says, is somebody that you would call ‘business bilingual’.
“This is a person who has the ability to work for an international company to ensure that the global policies and procedures that are in place for an emerged market are translated into a language that can be understood and delivered on a local level.”
These are individuals like Olu Kolawole. After spending the bulk of his career in the US, Kolawole had risen to become director of construction at Pathmark Stores, a supermarket chain. But just over a year ago he decided to abandon the relative sanity of the West Coast to head back to his native Nigeria and the chaos of Lagos. He admits that he was driven in part by a “nationalist instinct” and a feeling that “it was time to give back”, but equally the strong and visible opportunities in his home country were an attraction.
“You also see the challenges of being back in Nigeria—challenges in terms of constant utilities, challenges in terms of security, both of life and property. But then you decide that at some point, with the growing uncertainties in the economy and job security in the US, you start to really consider the opportunities in Africa,” he told FORBES AFRICA.
“When the opportunity came to come back, I really sat down and thought about it, but you know, you look at my career path over the last 10 years, which was rapid in the States, and you see that you’ve kind of peaked.”
With mergers and acquisitions trimming workforces in the US retail sector and growth in the industry slumping from 7-10% pre-crisis to just 2-3% in recent years, the chance to reboot his career with a move to a fast-moving market was too much to turn down.
“You realize a lot of these global brands see the African continent as the next frontier and you want to take a pioneer role. You know the lay of the land, you know what modern retail is supposed to be like,” he says.
Kolawole is now chief operating officer of CoolWorld Electrical Retail Stores, a subsidiary of international consumer goods giant PZ Cussons. It has not been all plain sailing. Business processes can be frustratingly slow or nonexistent and corruption “is at a level that you’ve never understood before”. The city has its inconveniences including interrupted power and security concerns. But even so, Kolawole has no regrets—yet. His role allows him to make changes to the way things are done and bring in his own best practices, and his remuneration package allows for a good quality of life, despite Lagos’ reputation for exorbitant prices.
“You have to negotiate your terms properly before you take the plunge. Nigeria is an expensive place but there are companies here willing to pay top dollar for talent. When you are negotiating a salary, you have to really negotiate properly and make sure you have everything taken care of. If you miss your utility payments or something, and you miscalculate, it really affects your overall income,” he says.
After three months, he brought his family over, including his two children, aged 10 and 12.
“It’s probably been tougher on the kids because they’ve lived their whole lives in the States. They still ask me when we’re going to go back,” he says.
The answer is: no time soon.
For some returnees, however, the motive is altogether more altruistic. OB Sisay spent 15 years in London working as an analyst in political risk consultancies and investment funds until September last year when he left his job and began the process of moving back to Sierra Leone.
Currently flitting back and forth between the UK and the country of his birth, Sisay is setting up a number of small enterprises, including a farm and a transport business and taking over his family’s holdings. Salaried jobs are hard to come by but once he has established a domestic cash flow he and his wife will up sticks and head to Freetown. Most of his family fled the country during Sierra Leone’s civil war but after years of stability and a new government that has put development top of its agenda, they are beginning to come home.
“We have a country to develop. You can’t all sit in the UK, earn huge wages and come on holiday for three weeks. The country has a huge shortage of human capital and so a few of us kind of think that the pocket has to take second place to the country. One of my cousins has quit his post as a gynaecologist at Aberdeen Royal Infirmary and he’s back here, he’s got a clinic. Another one is back here to work for the procurement department. The attitude is that we want to develop our country.”
The move is proving incredibly rewarding.
“Every morning before I get out to do my running, I’ve made a difference to one to three people’s lives, whether that’s someone who has come to me with a problem with their children’s education, somebody comes in sick, they’re in hospital and they need money. It’s not that much money, but I feel as if I’m making a difference. Whereas in the UK I get up, put my suit on, make big speeches, get congratulated, get paid very well and come back home. Meanwhile, Africa is still where it is. Somebody needs to fix it,” he says.
There is commercial opportunity, he acknowledges, as Sierra Leone builds from scratch during its post-war reconstruction and as international money finds its way into the country. But being a part of that development is far more compelling and exciting.
“Everything means a lot more. The elections mean a lot more; policymakers’ decisions mean a lot more. I don’t want to come back here in 10 years with kids who barely speak the local language, who only claim they’re Sierra Leonean because their parents are and I find myself a stranger in my own country,” says Sisay.

From London To Africa  In The Brain Gain Game

Mauritius has enjoyed robust growth of between 5 and 6% for decades. The country has developed from an agrarian base into a diversified middle income economy through prudent management of the economy.
Mauritius’ economy relies on four sectors: sugar; textiles; tourism and financial services. The authorities are keen to diversify the economy further towards services. One ambition is to transform the economy into an information and communications technology hub.
The Mauritian economy generated $19.28 billion and expanded by 4.1% in 2011. The International Monetary Fund (IMF) attributed this to its tight macroeconomic policies. The Washington-based lender also put the country’s good performance down to its response to the global crisis but expects the economy to drop below 4% owing to the European sovereign debt crisis.
In light of the Eurozone crisis, in January, the Minister of Finance, Xavier-Luc Duval, announced that the government is developing a contingency in case of a partial or full dissolution of the European Union. Mauritius’ economy is tied to Europe. Two-thirds of Mauritian exports go to Europe and thousands of tourists fly the other way. The Eurozone is also a major source of investment for the island.
To buffer against the Eurozone crisis, this year the government announced an expansionary budget. The focus of expenditure is infrastructure development to improve the efficiency of the economy. This is likely to boost investment.
The expansionary fiscal stance will be complemented by an expansionary monetary policy. Following the dip in growth, the Bank of Mauritius (BOM) in December 2011 cut interest rates from 5.5% to 5.4%. The BOM is likely to move towards a loosening bias in 2012 given the downward inflation profile. Consumer inflation in February fell to 4.1% year-on-year; from 4.8% a month earlier. The IMF expects inflation to be 5% year-on-year in 2012.
The European crisis has also led to a dip in tourist arrivals. Tourist arrivals remain below the one million mark. The authorities have turned their attention to Asia, where growth remains robust.
In January, Mauritius won, for the third year running, the title of World’s Leading Island Destination and the World’s Leading Beach Destination.
Despite slowing growth prospects, investors are likely to remain interested in Mauritius in their search for yield. Investors are likely to recognize that slowing growth prospects are due to exogenous factors and not as a result of economic mismanagement
The Wall Street Journal and the Heritage Foundation, a US think tank, ranked Mauritius in the world’s top 10 most economically free countries, making it the only sub-Saharan country to achieve this. The survey ranked Mauritius eighth, with a score of 77. This ranking put Mauritius ahead of G4 (US, UK, Japan and France) countries. The survey ranks 183 countries in 10 freedom categories which are then converted into an index, with 100 being the highest possible score.
In addition, Mauritius was ranked 46th out 183 countries in Transparency International’s Corruption Perceptions Index 2011. Only Botswana (32) is ranked higher in Africa.

Europe Could Dim Africa’s Shining Star

Money sent home by citizens living abroad is a major source of foreign exchange for Rwanda, with an estimated $104.25 million received in 2011, a 42.8% increase compared to the previous year.
With this rise in remittances, Rwanda’s government is now focused on getting Rwandans living abroad to help drive investment to sustain the country’s rapid economic growth.
The government wants to issue a diaspora bond to soak up spare cash from 100,000 Rwandans living overseas through the National Bank of Rwanda. The Bank, according to Governor Claver Gatete, is currently studying the models of other countries that have issued similar diaspora bonds.
“We had to send people on the ground; they are now studying the models of other countries. We want to make sure that this year it is launched. There is no doubt about it. We are targeting diaspora because we want to give them an alternative to invest. This is the best and the easiest way to make an investment without leaving your desk,” says Gatete.
Rwanda joins the growing list of other African countries such as Ghana, Kenya, Nigeria, South Africa, Uganda and Tanzania that have backed the World Bank’s call for issuance of diaspora bonds to woo their citizens abroad to invest in their own countries. The Bank urges African economies to tap into an estimated $40 billion a year.
Countries such as Ghana and Kenya have already launched their bonds while Nigeria will join Rwanda in launching their bonds this year. A caveat is that Kenya’s infrastructure bond, issued last year, failed to attract the required amount because of weak local currency shilling.
The African Development Bank, which also supports the issuance of such bonds, has hinted on helping African nations market their financial instruments.
Raising investment capital through diaspora bonds is not a new idea. Israel and India have thrived on them. Diaspora bonds operate like any other government bonds and are highly secure for investment, especially when the issuers are creditworthy.
Rwanda is rated credit worthy because of its sound economy, sustainable debt and increasing levels of domestic revenue and exports. In 2010, the economy expanded by 7.5% while in 2011, it was expected to rise by 8.8%. This year, the central bank expects growth to slow to 7.6%, owing to uncertainties in the global economy. Inflation, which closed the year at 8.3%, is expected to slow to 7.5% this year—all favorable signals to investors.
Rwanda is one of a few highly attractive African investment destinations because of low corruption, investor-friendly policies and its geographical location in the heart of East and Central Africa—combined local and foreign private investments reached $626 million last year, from $350 million in 2010.
Gatete says that the bond will be issued in the local currency—the Rwandan franc (RwF) to avoid dollarization of the economy. Its proceeds could be used for monetary policy implementation since it will be issued by the National Bank. This means that it could be injected into the money markets.
“It’s not government borrowing, but we could use the bond for different ways to give chances to the diaspora to invest,” says Governor Gatete, adding that the value, maturity period and coupon of the bond will be announced when it is ready for the market.
The current Rwandan government, led by President Paul Kagame, has adopted strong measures to include the diaspora in the nation’s development. This has helped the diaspora come together to form a global network—the Rwanda Diaspora Global Network (RDGN), which has a permanent office in Rwanda and brings together Rwandans across the world.
The network has between 25,000 and 30,000 members in Canada and the United States, more than 40,000 in Belgium, which has the single largest population of Rwandan diaspora, and just over 1,000 members in Australia.
Sending money to Rwanda remains expensive, but with the fund in place the cost would go down, appealing to low-income earners overseas.

Investment Begins At Home

In December, party fever rocked Nairobi—a city already in a festive mood, despite efforts by squabbling politicians to dampen the spirit. From nightclubs to beach parties, the revellers were loaded and speaking with a twang acquired in London or New York. In Nairobi, people call them ‘summer bunnies’, referring to Kenyans living abroad back on holiday in the motherland, flaunting the trappings of success in the West: dollars, the twang and a superiority complex.
And if recent statistics from the Central Bank of Kenya are anything to go by, the economic muscle of the Kenyan diaspora is also growing, with more and more money being sent home by them. In 2011, remittances increased by 39% to $891.1 million. In 2010, they were $642 million, which is the equivalent of 2% of Kenya’s
$31.6 billion GDP. They are the fourth-largest source of foreign currency after tea, horticulture and tourism.
Diaspora Remittances, a new report by Stanbic Investments, a subsidiary of CFC Stanbic Bank, estimated that 14% of Kenya’s 18 million adult population receives money from abroad.
With this flow of money comes opportunity. Firstly, Kenyans are paying a fortune to send home a fortune. The report by Stanbic says the cost of sending money home is 10% of the remittance. At 12.4%, the average cost among banks is higher than the average 8.8% for money transfer operators.
This cost stems the flow of money, a fact that even world leaders acknowledge but look powerless to act. At the L’Aquila 2009 G8 Summit, leaders pledged to halve the cost of remittances by 2014. But according to an analysis by Thorsten Beck, a professor of economics and chairman of the European Banking Center at Tilburg University, and Maria Soledad Martinez Peria, a senior economist in the finance and private sector development team of the Development Economics Research Group at the World Bank, governments have little say on such costs.
Instead, the duo in the analysis titled What Explains the Cost of Remittances recommend that policymakers seeking to reduce remittance costs should focus on improving competition: a private sector-led investment in cheaper ways of remitting money. Some companies are taking up the opportunity. In addition to the traditional money transfer companies like Western Union and Moneygram that dominate the market, Nation Media Group, East Africa’s largest media house, is joining the fray. It is scheduled to launch Nationhela, a visa card that will allow those living abroad to send money directly to relatives in Kenya who will need to acquire the same card.
“More competition will lower the cost of sending money and thus increase remittances,” said the Central Bank of Kenya when releasing its recent report.
Investors need to set up a vehicle that the Kenyan diaspora can use to invest in their homeland. During a Kenya Diaspora Conference in the US, held in October last year in Washington DC, they demanded such avenues. And the government took up the challenge and was rewarded. Infrastructure and savings bonds sold to the diaspora last year raised $383 million.
Investment vehicles would attract even more remittances. The data in the Stanbic report is an indicator that many would want to invest, if only there were good channels to do so. Around 52% of total remittances are used as living wages by recipients, while 44% is invested. Approximately 36% is invested in small businesses, while 8% goes to Kenya’s previously booming, but now faltering, real estate sector, and only 4% to savings. Mama Mikes, a website that allows Kenyans abroad to buy various things for their relatives in Kenya, has recorded phenomenal growth.
Kenya’s dependence on remittances is expected to grow, thus providing more numbers, a fact that drafters of the country’s Vision 2030 economic master plan acknowledged. The plan, which is expected to catapult the country into a middle income nation by 2030, is targeting the diaspora to raise remittances from the current 2% to 5% of GDP by 2030.
The diaspora’s muscle is growing, not just in Kenya but also the continent. More than 3% of Africa’s population has migrated to other countries, including within the continent. Remittances to Africa reached $40 billion in 2010 and are the continent’s second-largest source of money inflows after foreign direct investment. Their impact on the population is also staggering. More than 120 million people receive money from 30 million migrants, with Nigeria, Egypt and Morocco being the top three remittance-receiving countries on the continent.
Summer bunnies are not only changing their voices when they leave their country, but our economies too.

Summer Bunny Money Comes On  In Leaps And Bounds

In Kinyinya, a growing residential area in North East Kigali—the Rwandan capital, entrepreneur Charles Ashimwe, is testing a new construction model for homes.
The model, explains Ashimwe, is one big house divided into two smaller houses by a wall. Each house will have a garden, parking for two cars, two bedrooms, seating room, kitchen, two toilets, running water and prepaid electricity.
Ashimwe’s approach is new because, usually, Rwandans people take pride in big houses, big land and big cars.
This love of big things, Ashimwe says, is dying out and more people are looking for property that suits their needs and pockets. This makes Ashimwe’s model attractive to the new rising middle class.
Rwanda is witnessing a boom in the middle class—the class of salaried elites and owners of small and medium enterprises—a sign of a society on the move, according to a new report by the African Bank of Development (AfDB).
The report, The Middle of the Pyramid: Dynamics of the Middle Class in Africa, shows that the number of middle class Africans has tripled over the last 30 years to 313 million people—that’s more than 34% of the continent’s population. It attributes the increase in size and purchasing power of the African middle class to strong economic growth and a move towards salaried jobs and away from agriculture.
In the 1980s and early 1990s, the report says, recruitment into the middle class resulted in a small percentage of poor households becoming better off and entering the middle class. This trend, it adds, accelerated slightly during the period 2000 to 2010 when more poor households moved into the middle class. At the same time, the 2000s witnessed a recruitment process from the rich class into the middle class, implying a slight improvement in income inequality. However, income inequality in Africa remains very high. About 100,000 Africans had a net worth of $800 billion in 2008 or about 60% of Africa’s GDP or 80% of sub-Saharan Africa’s.
In Rwanda, the rise of the middle class is driven by consistent sound economic growth and a stronger private sector capable of creating jobs and paying good wages. Per capita income increased from $220 in 2000, to nearly $600 in 2011.
Poverty levels have also gone down significantly and foreign direct investment (FDI) has increased at a faster rate. In 2011, Rwanda expected $550 million worth of private investments from $380 million in 2010.
This means a larger middle class in Rwanda—an attraction for banks, insurance companies, housing developers, telecoms, retail stores, hotels, bars and restaurants.
So far, two of Kenya’s largest banks—Kenya Commercial Bank (KCB)—the largest in East Africa in terms of assets and Equity Bank—the largest in terms of bank accounts—have opened subsidiaries in Rwanda to tap into the growing demand for luxury lifestyles. Home-grown banks like Banque Populaire du Rwanda (BPR) and Bank of Kigali have also started designing loan products targeting the middle class.
There is a growing partnership between banks and retail stores to allow bank customers and staff to access goods such as household items on credit. This partnership is equally boosting retail stores and manufacturers.
Kenya’s retail giant, Nakumatt, which opened its first store in Rwanda in 2008, has opened a second outlet in Kigali to take advantage of this growing middle class.
Electronic equipment manufacturers such as Samsung, LG, HP, Nokia and Apple have all opened stores in Kigali and are impressed with sales so far. Visa, the payment-processing giant has also entered into a partnership with the Rwandan government to introduce electronic and mobile payment systems and internationalize Rwanda’s ATM network.
But the growing demand for goods and services is putting strain on housing, roads, water and electricity supply.
In Kigali, which accommodates one million people, demand for housing units is enormous. It is estimated that 10,000 houses are needed each year, but fewer than 2,000 are being built. This has pushed rents up.
Rwanda also faces a shortage of electricity, which is hampering this growth. Power supply is around 100 megawatts, but the government has plans to generate 1,000 megawatts by 2017. It would be wise to hurry up.

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