The latest bid to become the economic hub of Southern Africa has come from KwaZulu-Natal (KZN), on the east coast of South Africa.
The Dube TradePort (DTP) in Durban is earmarked to be the catalyst of this transformation and is under consideration to be classified as a Special Economic Zone (SEZ), owned by the provincial government and managed by a corporation. The DTP aims to expand trade, encourage economic development, create jobs and increase foreign direct investment (FDI) by linking transport to connect the province to international economies. It is part of the province’s 20-year plan with R560 billion ($56 billion) worth of projects in the pipeline. It’ll employ up to 35,000 people.
The KZN MEC for economic development and tourism, Mike Mabuyakhulu, says that India and China’s large populations make them attractive destinations for South Africa’s exports. The province is looking for opportunities to increase trade with other southern African countries as well as increase tourism.
The DTP is home to the R7.8 billion ($ 780 million) King Shaka International Airport and lies between the Richards Bay and Durban ports. It is situated on the N2 development corridor that connects the Eastern Cape with Mozambique.
According to Mabuyakhulu, seaborne trade accounts for almost 80% of South Africa’s imports and exports. The port of Durban handles most of the trade in southern Africa, handling around 2.7 million TEUs.
The DTP zones are separate projects that interlink. Dube iConnect is a 24 hour telecommunications and IT service provider that will be using 36 km of fiber optics and a 10 gig pipe to service all the DTP zones.
The Dube Cargo Terminal is a three-year-old state-of-the-art terminal with the capacity to handle 1,000 tons per annum, with plans to increase it to 2 million tons by 2060. The terminal houses Customs, the departments of Agriculture as well as Health, the South African Revenue Services and South African Border Police—200 meters from the Dube TradeZone.
The TradeZone houses logistics, warehousing, light manufacturing, assembly, processing and high value cargo. It also includes the R28 million ($2.8 million) state-of-the-art flight kitchen facility. There has been a recent buzz among investors who are expected to sign contracts soon.
Dube Agrizone is 20 hectares that include a greenhouse hydroponics facility. Sixteen hectares of greenhouse produce 40 tons of fresh produce—including cucumbers and tomatoes—for large retailers, while a separate greenhouse is being developed for cut flowers and pot plants. The next question is what this will mean for the small farmers in the province?
The MEC says efforts will be made to integrate them into the new project. The idea for the zone dates back to 1994, when new ideas were sought to increase agricultural output and stimulate exports.
At the center of the R5 billion ($500 million) Dube City, three minutes from the airport, is Dube Square. The city will have accommodation, conference facilities, restaurants, retail and offices.
A memorandum of understanding (MoU) with Indian conglomerate, Action Group, has been signed for $217 million to build a mini city nearby that is expected to attract close to $2.2 billion in FDI.
The provincial government will retain ownership of the DTP and investors will be given long-term leases.
According to senior managers at Deloitte and Touché some of the challenges facing the DTP are the uncertainty around the SEZ regulations and the inaccessibility to rail. They feel that “government can play a significant role in helping the DTP realize its potential of becoming an economic hub”, through training of workers and offering greater flexibility with government incentive packages for specific projects. Deloitte and Touché warns that final SEZ legislation must meet the needs, of not only the zones for which it is being created, but also the expectations of foreign investors.
This could be a thin tightrope to walk on the way to the promise of prosperity.

Africa’s next hot spot

Nothing signifies the unbridled optimism in this East African nation more than the well-known Swahili phrase Kenya hakuna matata: there are no troubles in Kenya, which is bandied around in tourism circles; printed on T-shirts and repeated in blockbuster movies like Out of Africa and The Constant Gardener. But its economy has known more trouble than relief.
When inflation reached 100%, in 1993, President Daniel Moi printed money to fund his re-election campaign for the country’s first multi-party elections.
<img loading="lazy" decoding="async" class="alignleft size-medium wp-image-1440" src="/wp-content/uploads/2017/04/dreamstime_m_6306839-245x300.jpg" alt="" width="245" height="300" />
Before President Mwai Kibaki was elected in late 2002, Kenya’s economy was in bad shape. Its growth averaged 1.1% for two consecutive years and shrank to minus 0.2% in 2000. Key sectors were stagnant; agriculture and tourism recorded marginal growth of 0.7% and 0.8% respectively.
To resuscitate the economy, government formulated the Economic Recovery for Wealth and Employment Creation Strategy in 2003, which hinged growth on the overhaul of infrastructure as well as political and economic reforms that would unshackle the economy. The most notable result was the investment of billions of dollars on infrastructure—from roads and railways to electricity. Since 2004 growth has averaged 5% and peaked at 7% in 2007.
Kenya’s economy is dominated by agriculture; the sector employs more than 70% of the population and accounts for 24% of the GDP. More than a third of Kenya’s agricultural produce is exported, which accounts for around 60% of the country’s exports. This, despite the fact that its arable land is a paltry 15%, the rest is either too dry or infertile
Irrigation systems could double this percentage. The country’s cash crops—tea, coffee and horticulture—have led to an increase in earnings due to high commodity prices.
Last year, the country exported 48% of its goods to African countries, mostly in the East African Community (EAC) trading bloc, which is not severely affected by the Eurozone debt crisis. During the last decade, however, Kenya’s imports have surpassed its exports. Despite a surge due to high global crop prices, earnings from its top four exports have been insufficient to pay for oil imports.
The services sector follows closely behind, with tourism leading the pack. Tourism earnings rose by 32.8% in 2011, bringing more than $1 billion to the country. Other sectors like wholesale and retail, transport, communications and education are following suit.
Kenya is a hub for the ICT sector with the largest fiber optic network in the region. M-Pesa—the mobile money transfer service operated by Vodafone’s subsidiary Safaricom—transfers $27 million a day and has more than 25 million mobile subscribers.
By the end of the year, the economy is expected to have grown between 3.5 and 4.5%, according to government projections; while World Bank estimates stand at  5%. Inflation, driven by high oil prices and inadequate rainfall which lead to high food prices, has fallen from 14% last year to around 5% this year.
The 2008 post-election violence saw more than 1,000 fatalities and led to a decline in economic growth from 7% in 2007 to 1.5% in 2008. Kenya’s new constitution, enacted in 2010, is expected to herald good governance and reforms. Yet the economy still faces structural challenges. According to the World Bank, its economy has become even more vulnerable as the country’s current account deficit could reach 15% of GDP this year. This is among the worst external balances in the world and poses a significant risk to Kenya’s economic stability. A sharp rise in oil prices could trigger severe inflation and economic downturn. Its debt levels of 45% are in decline from 65% at the turn of the century and are below the global benchmark of 60%.
Like many other African countries, Kenya  faces an energy shortage, which allows for investment from the private sector. The peak power demand, estimated at 1,191MW, is projected to grow at 7% annually over the next decade. To meet this  demand, the generating capacity will have to be raised from 1,534 MW to 2,263 MW by 2018.
State-owned Kenya Electricity Generating Company (KenGen) is set on providing geothermal power in the future. Investors are establishing wind farms in Northern Kenya as part of the Lake Turkana Wind Power Project. The government is looking to partner with the private sector to generate coal power, after deposits were discovered in the eastern region. Hydro and thermal power accounts for 80% of the country’s total generation, making its energy price susceptible to high oil prices and power rationing when rains fail.
On the social and political end, half of the population is younger than 35 and unemployment is at around 40% of the country’s 42 million. Experts says that job creation, especially among the youth, is necessary for long-term stability. Two of the leading candidates in the upcoming March elections—Uhuru Kenyatta and William Ruto—face crimes against humanity charges at the International Criminal Court at The Hague over their role in the 2008 post-election violence.
Vision 2030—which aims to make Kenya a medium income country by 2030—is hinged on economic growth of 10% per annum through governance reforms and a focus on infrastructure, energy and science. By that time, the population is expected to reach 60 million.
The recent discovery of commercially viable oil will welcome new investments and save the country on its huge monthly oil bill. Tullow, a London-based oil and gas company, discovered 143 meters of net pay oil deposits in northern Kenya. More than 23 companies have exploration licenses.
Mining—which contributes 1% to the economy and is confined to the extraction of soda ash—may receive a boost after Tiomin Resources, of Canada, was allowed to mine titanium deposits along Kenya’s southern coastline.
Infrastructure, needed to foster more trade, is also set to improve. The $23 billion Lamu Port-South Sudan-Ethiopia Transport Corridor (LAPPSET) project is being touted as one of the biggest in Africa. It will entail the construction of a port, standard gauge railway, pipeline and highways connecting Kenya, South Sudan and Ethiopia. Throw in a resort city at Isiolo, in Northern Kenya, and they are betting it will be a winner.
As the World Bank aptly put it in 2010, if Kenya is an airplane, it’s flying on one engine. If the second is turned on, the  economy will ascend at supersonic speed, like a fighter jet.

‘Flying On One Engine’

At the end of April on a typically blustery Western Cape autumn day, a sleek private airplane glided into an airfield near the capital of South Africa’s fruit industry. Ceres doesn’t often play host to such finery and at the airfield’s perimeter fence, a huddle of children watched excitedly as the aircraft came to a halt and its door opened.
A small group of men emerged and the children seemed slightly disappointed.
They looked quite ordinary—and outwardly that was certainly the case—just a few friends on a weekend junket.
At their head was a man who shuns such attention; someone who has thrown off the shackles of a life in auditing; a man responsible for one-in-four of the private prescriptions being written at corner pharmacies and one-in-five in the public sector.
Stephen Saad is the chief executive and founder of a South African phenomenon—a pharmaceutical company that is the biggest in the southern hemisphere. It has found favor with American presidents. It has also defied the odds and based its manufacturing in a country dogged by the negative influence of a persistently strong currency; a lack of investment in infrastructure; poor skills and an attitude that has generally embraced these problems.
Saad is a multi-billionaire in rand terms and worth at least $650 million, according to Forbes, but his appearance in a private airplane, in a relatively remote rural region, is a world away from the allure and shimmer of wealth. He flew in for several hours of sweat and hard graft; a 240km cycle race to raise awareness of a condition that killed the 28-year-old son of his chairwoman and friend. The reason for the private jet? Saad assures us it is merely to save time so that he spends as little time away from what he calls his ‘big five’; his wife and four daughters.
I first met Saad in Monaco in 2004. Despite his modesty, I look back at that meeting and realize that he could easily have slotted into the glitz and glamor of the French Riviera. He was youthful in appearance and had a drive and ambition that laced every conversation.
We were at the World Entrepreneur Of The Year Awards. Saad represented South Africa having beaten off stiff opposition from stalwarts of the old guard of South African business. When the final votes were counted, an American pipped Saad at the post. The word on the night was that tactical voting had denied him the title that many believed was his.
Saad was visibly rattled. Being second in a global competition of such prestige would, for most entrepreneurs, be an accolade of which to be enormously proud.
Not he on that night.
Whether it was the nature of the defeat, with the whispers of voting to appease sponsors, or the disappointment of being second best that irked him, I’ve never quite worked out.
The disappointment in Monaco was merely one leg of a long journey. Saad graduated from the University of KwaZulu-Natal in South Africa as a chartered accountant in 1986. He joined Coopers and Lybrand as an article clerk.
“My father wanted me to extend the 30 years of family tradition by joining his practice but I knew, I absolutely knew, that there was no way that was going to happen. I couldn’t do it. One of the partners at the time recognized this and privately told me that in this industry he could see I was like a bird with its wings clipped.”
During this time, Saad was seconded to a small company that specialized in pharmaceutical wholesaling. The owner was impressed enough to offer Saad a job, which he accepted. Little did either of them know that this offer from an underperforming small business would launch the career of one of Africa’s great entrepreneurs and spawn a global pharmaceutical giant.
“We sold to markets and to people that other companies ignored. It was an eye-opener. Not many whites had ever been to a township let alone done business there. But this was where the huge potential was. I was a rep in the townships and I learnt a lot of life lessons in those days. My future thinking was modeled in those early days.”
Saad’s experiences at the grassroots of the pharmaceutical industry proved invaluable. It forged within him a philosophy that holds true in the doctors’ rooms of a remote township, as well as in the boardrooms; people don’t want to compromise when it comes to their health, but at the same time the price of medicine is crucial.
When interviewing Saad, the first few minutes are uncomfortable. He is clearly suspicious of a stranger probing his thoughts, but as the conversation progresses and the line of questioning moves to subjects that are of interest to him, with which he is comfortable, there is very little that can stop him from extolling the world according to Saad.
“When I was a rep I’ll never forget being in the surgery [rooms] of a township doctor and presenting him with two products; one was in fancy packaging and the other in a rather plain brown box. I suggested that he could give the first to his medical aid patient and the other to his cash customer, after all they were essentially the same and were based on the same active ingredient. He looked me in the eye and told me that a patient is sick no matter what his or her status, and that he wouldn’t treat them differently. He’d made his point, and I wouldn’t forget that.”
Saad became a 50% shareholder of his employer, QuickMed, and convinced the owners that the ownership of intellectual property was the only way to, not only grow the business, but to save it. He then set about employing the spirit of entrepreneurship that was to become a hallmark of everything he’s done since.
One of the early moves was to persuade Covan, a small, family-run business that manufactured eye drops, to merge with QuickMed to form a new entity named Zurich.
Zurich flourished in the early 1990s, as Saad threw himself into the business. Turnover doubled and suddenly the company was the focus of the attention of larger companies. Prempharm (today Adcock Ingram) couldn’t resist dominating the upstart and bought Zurich for R75 million ($9.1 million) in 1993.
With the purchase price came a restraint of trade on Saad. He wasn’t too worried at the time, with R20 million ($2.4 million) in his back pocket at the age of 29 and thoughts of early retirement, this technicality was a small price to pay. It was a time for reflection and planning.
Saad’s passion for the pharmaceutical industry was apparent, but education was also close to his heart. Varsity College was a private tertiary education institution that was managed poorly and under threat of closure. The idea of the college as a business opportunity was offered to Saad and his partner from QuickMed, Gus Attridge.
For a nominal sum they acquired the business. They set about restructuring the top-heavy overhead base, removing the founders and offering incentives to learners through aggressive advertising campaigns, not normally associated with the business of education. Potential students were offered a money-back guarantee should they not pass their exams, provided they attended a full program of lectures. The business began to thrive.
The business had cost just R1.5 million ($182,500), Saad sold it to LeisureNet for around R100 million ($12.1 million) at a time when education stocks on the Johannesburg Stock Exchange (JSE) were attracting significant premiums to the overall market. He had again turned a company riddled with inefficiencies into a success.
In 1997, as a wealthy young man, Saad teamed up with Attridge and Steve Sturlese to form Aspen Healthcare (Pty) Ltd.
“When I look back at the early days of Aspen my philosophy was based on the experiences gained during my days as a rep and partner at QuickMed. In those days, I’d asked whether the business was about moving boxes or owning intellectual property. It was so obvious that there was a market out there that was hungry for high quality but affordable products and that needed representation. Although this knowledge had been acquired through the little sphere of doctors that I serviced, I was convinced it could be applied on a bigger platform—even globally.”
During its first year of trading, Aspen recorded revenue of R105 million ($12.8 million). The philosophy was clear from the start: buy licenses from large multi-nationals for their non-core brands. These products were important in the life of the new company selling to a new market. It was a two-way street, the people were ready to buy pills they had never been offered before, the big players were happy to off-load them.
Aspen began to own intellectual property, such as patents, trademarks and pharmaceutical dossiers, without having the expensive overhead of manufacturing and its complications.
The management realized very quickly that they had a winning formula, but their ambitions were such that there was a real danger of being restricted by insufficient capital.
To rectify this, and make way for the grand plan, Aspen targeted Medhold Medical Ltd, a small company on the Johannesburg Stock Exchange. Aspen concluded a reverse takeover of the business and thus became a public company. Records show that at the end of June 1998, Aspen’s annual turnover was just under R119 million ($14.4 million).
A year later, it was more than R522 million ($63.5 million) and the investment community was taking notice. The company’s stock was moving.
Then the audacious deal, that defined the Aspen approach to business, was unveiled. SA Druggists (SAD) had been the object of desire of Adcock Ingram but the deal had fallen through. Despite the mismatch in terms of size, Saad went to his financiers with his plan to purchase SAD for the princely sum of R2.4 billion ($292.2 million). Fedsure was SAD’s largest shareholder at the time and would keep the insurance and manage the healthcare part of the business. Aspen kept the pharmaceutical business once all the transactions were rubber stamped, Aspen realized approximately R1 billion ($121.8 million) from the divestments.
The financiers had backed the upstart Aspen, but there was institutional investor reticence to the deal which seemed to defy conventional business logic. Aspen’s bank asked that shares in Aspen be discounted, but this was not an option for Saad and so the company was saddled with R1 billion of debt with an operating profit of around R123 million ($14.9 million).
Since the SAD deal, the story of Aspen has been one of extraordinary growth. Strategic agreements have been a key part of the growth story, not least the link with GlaxoSmithKline (GSK) in 2003, that allowed Aspen to market and distribute 40 branded products into the South African private sector.
Although the company’s phenomenal success has been based on its South African business, its ability to penetrate further afield, often a graveyard for others, has distinguished Aspen as a global pharmaceutical concern with which to be reckoned.
The Clinton Foundation chose Aspen as the first southern hemisphere-based company to provide generic anti-retrovirals (ARVs) for the United States’ government, while that country’s Federal Drug Administration pre-qualified the company for the provision of generic ARVs, funded by President Bush’s emergency plan for AIDS relief.
In 2005, Aspen secured the majority of the South African government’s ARV tender with an allocation of close to 60% of volume. At the same time, results showed that Saad’s company had generated an annual turnover of more than R2.8 billion ($336.5 million).
As the relationship with GSK became closer, and with an aggressive acquisition policy Aspen became truly global by expanding its footprint into the Asia Pacific region and into Latin America through an investment with Strides Arcolab Limited. In 2010, Australia was conquered with the massive R6.1 billion ($738.2 million) acquisition of Sigma Ltd pharmaceutical business.
I put it to Saad that perhaps the rapid expansion into so many new territories and jurisdictions would stretch the resources of a still relatively new player with a CEO who prefers not to travel too far from his home in Durban.
“I have a video conferencing facility,” he replied rather drily.
But there is clearly more to international success than the ability to talk to Rio de Janeiro and Sydney without leaving the boardroom.
“Most of my guys, the ones I’m in business with, have had start-ups and they understand my philosophy, the Aspen way of doing things. There’s no universal strategy, but on certain points there is no negotiation.”
This is where the media-shy CEO billionaire starts to become animated and I realized that to work under him is not for the faint of heart.
“I decided to bring all our people together from all our offices, from all over the world. So of course I chose Umhlanga Rocks for our conference! I stood in front of this group and told them that certain things were not negotiable. They must have passion for the business, and then people will follow them. At the same time, I told them it was essential to have humility and compassion, and that there was absolutely no negotiation when it comes to delivery. In business, you get leaders and you get managers, and there’s a very subtle distinction between the two. I want leaders, leaders are inspirational.”
Saad demands a lot of his people and clearly recognizes that as head of the company, as its inspirational leader, his behavior and his standards can never drop if his demands are to be adopted. When asked about his ability to maintain such a punishing pace, his stock response is “to rest is to rust”.
The choice of Umhlanga speaks volumes of the company’s grounding and of its CEO’s recognition of the importance of the South African part of the business. Again, the animation, even over the telephone, is palpable.
“We were told that we were mad to manufacture in South Africa. Some analyst asked me if I was doing this for my own ego. I pointed out as politely as I could that I was a shareholder and that it was the right thing to do. Today, I’m so proud to be able to have proved the doomsayers wrong. Today the billions [of rands] we invested in the Eastern Cape have produced one of the most competitive facilities in the world that sends products of incredible quality to over 100 countries. It’s up there with the very best.”
Saad is indeed a remarkable character.
On the one hand, there is a man that is driven by the old-fashioned values of integrity, hard work, passion, and one that has learned the traditional way of doing business. On the other, is a new-age thinker, one that recognizes that big business is built on layers of bureaucracy and structures but will not allow those structures to be an excuse for any of his team shirking a decision.
“At Aspen I will not tolerate a ‘cover-your-arse’ mentality,” he says with a hint of steely menace.
On the one hand there’s a CEO who is bursting with optimism for Africa and South Africa—who compares the high suicide rates of northern Europeans, who seemingly have everything, to those of the naturally optimistic African people who, in relative terms, have little; on the other, he is a sad South African who shakes his head and whose voice drops to a whisper when he tells of the union which has been enriched by Aspen shares at R6 ($0.7) (they are now R120—$14) and yet forgets the past when it comes to the negotiating table.
I wonder, when I hear him say he’d rather back a good leader in a bad industry than a bad one in an industry that’s thriving, if he might be in his own diplomatic way (and in the presence of a journalist) having a dig at South Africa’s government. I decide not to ask.
In March, Aspen’s interim results included the following highlights:
<ul>
<li>Revenue from continuing operations R7.5 billion ($903 million)</li>
<li>Operating profit R2 billion ($24 million)</li>
<li>Market capitalization R50 billion ($6 billion)</li>
</ul>
When I talk of money the enthusiasm for the interview starts to wane and there’s mutterings of most entrepreneurs that he knows not being in it for the money alone, which I believe, up to a point.
When I talk of personal goals and the future, his interest is revived.
“I still have lots of achievements that I need to focus on. It’s so frustrating living in a country where there’s great thought and great theory, great principles, but so little action. Maybe it’s my personality type but I just want people to stop thinking about it and just do it. If I was like that I’d never have gone into Brazil.”
At the end of April, Stephen Saad and the health minister, Dr Aaron Motsoaledi, started the gruelling 240km Aspen Trans Karoo mountain bike challenge to raise funds for paediatric healthcare facilities through the Sifiso Nxasana Paediatric Trust.
“The children of Africa need the support of large organizations” were his simple words.
Saad completed the race, and when he arrived at the finish line in Sutherland his airplane was  waiting to take him home to his own children.

The Golden Wings That Couldn’t Be Clipped

On a small street off Tubman Boulevard, the main thoroughfare in Monrovia, five red and white umbrellas shade stalls tended by five young men, all of them university students. In between classes, they sell mobile phone scratch cards and exchange grubby Liberian and US dollars. One of the students, 27-year-old Lorenzo Garmonyou, wakes up at 6am every morning and retires at around 1am in a cramped room he shares with his five brothers who also toil on the same corner.
Garmonyou is an economics student at the African Methodist Episcopal University. Like many young Liberians whose education was delayed during Liberia’s long and brutal civil war that ended eight years ago, he is struggling to put himself through school. From his small earnings he puts aside $2 a day to pay for his tuition and keeps a dollar to live on. Garmonyou is uncertain about the future in a nation whose economy is yet to create jobs for the few Liberians who are trained and educated.
Many unemployed graduates like Emmett Chea, a 24-year-old with an economics degree, complain that a culture of “nepotism” makes it difficult for qualified graduates to attain experience and jobs. He says they are yet to really feel the benefits of the billions of dollars of investment that came into Liberia during President Ellen Johnson Sirleaf’s first term. Analysts and government officials say that while there is a lot of work ahead to make Liberia’s economy one that benefits ordinary Liberians, the future still looks positive for Africa’s first republic.
Since Sirleaf’s election victory in 2006, Liberia has been relieved of its $4.6 billion debt by the International Monetary Fund (IMF) under the debt waiver of the Heavily Indebted Poor Countries Initiative (HIPCI). The country has drawn close to $19 billion in investment mainly in the form of mining, agricultural and oil concession agreements, from major companies such as ArcelorMittal, BHP Billiton, Union Sime Darby and oil majors like Total and Chevron.
With single digit inflation, a projected economic growth rate of 9.4% for 2012, up from last year’s 6.9%, there is an upward trend. All the more remarkable, so soon after a war that saw Liberia suffer one of the severest economic collapses recorded by any nation.
Despite this significant economic growth, Liberia remains among the poorest countries in the world, according to the United Nations Human Development Index. This is underscored by the extremely low rate of employment: only 15% of workers are employed formally and 79% of those employed are without a steady income, according to the Ministry of Labor. With 70% of the population below the age of 30, youth unemployment is regarded as one of the biggest threats to Liberia’s future.
In the wake of last year’s tense election, Sirleaf, now into her second term, acknowledged the need to create jobs and development.
In her annual address to the 53rd Legislature, she asked:
“How, then, do we transform our old economy from a plantation or concessionaire economy perceived to run for the benefit of a few, to a modern, inclusive economy?”
This big question is one that alludes to the difficulties of the past. Liberia’s 14-year civil war killed 250,000 and left the nation’s infrastructure in ruins. It drew into sharp focus the role economic disparities play in fomenting conflict.
Critics of Sirleaf’s government emphasize that income distribution has remained virtually the same since Liberia’s Poverty Reduction Strategy was introduced in 2008, with recent World Bank figures showing three out of four Liberians are still living below the poverty line. While there have been reports of a growing middle class in Africa—a recent report by the African Development Bank estimated that 4.8% of Liberia’s population can be considered middle class—this is the lowest percentage on the continent. The government is currently undertaking a project called Liberia Rising 2030, to replace the Poverty Reduction Strategy, with the goal of making Liberia a middle-income country over the next 18 years.
Liberia’s economy has been plagued by inequality since the nation was founded by freed American slaves in 1822, known as Americo-Liberians, who returned to Africa to create a new land of Liberty. Instead they ended up subjugating the native population and subjecting them to forced labor on plantations. Under the leadership of President Winston V.S. Tubman during the 1950s, Liberia had the highest economic growth rate in the world through its exports of iron ore, rubber, coffee and cocoa; yet it also had an extremely high poverty rate.
Liberia’s rapid economic growth and lack of national development led Robert Clower to publish an economic study on Liberia titled Growth Without Development that is now a seminal text in the study of post-colonial third world economies. During this time, growth merely benefited the few Americo-Liberians living in major cities such as Monrovia and excluded the rest. Yet even today, Liberia’s recent infrastructural restoration and development—electricity, paved roads, hospitals and running water—can be seen mostly in the seaside capital, Monrovia.
“Liberia traditionally has been a concession-based economy,” says Chairman of the Liberian National Investment Commission (NIC) Natty B. Davis.
“It’s an economy that produces what it doesn’t consume and consumes what it doesn’t produce to a certain extent.”
Davis says that granting major concessions to multinationals is to fuel economic growth to help reconstruct the country’s shattered infrastructure.
The civil war destroyed an estimated 75% of Liberia’s infrastructure, and left behind a generation of lost youths with little education. The war saw the end of the Mount Coffee Hydroelectric Dam, Liberia’s only source of electricity, which looters later stripped. The Liberian Electricity Commission started running again in 2010, but uses costly giant diesel-powered generators and charges 54 cents per kWh: the highest rate in Africa and among the highest in the world. Next month, with the backing of European partners the government will begin a four-year project to restore the dam to pre-war status that will cost an estimated $180 million.
Matt Jones is the director of a USAID-sponsored project called the Sustainable Marketplace Initiative. It works alongside the NIC and focuses on creating entrepreneurs in post-conflict countries. Jones says that energy is key to diversifying Liberia’s economy and creating opportunities for local businesses.
<div id="attachment_873" style="width: 484px" class="wp-caption alignleft"><img loading="lazy" decoding="async" aria-describedby="caption-attachment-873" class="size-large wp-image-873" src="/wp-content/uploads/2017/04/9-1024x683.jpg" alt="" width="474" height="316" />Ebeneezer T. Williams, 34, a university graduate and young entrepreneur who owns a profitable small printing business in downtown Monrovia, faces problems because of lack of electricity</div>
“It would be so much easier and cheaper to start a business here if you had access to electricity. People often rarely break even because their fuel bills are so extraordinary,” he says.
Jones argues that the major concessionaries will not necessarily create the jobs needed to cure Liberia’s unemployment problem, but will yield opportunity.
“Right now is a golden opportunity for Liberia. All of these big multinational companies are coming in and these local businesses have the biggest opportunity they have probably ever had to get contracts. These international organizations are actually very willing to talk to these businesses, work with them, try and get contracts with them, but they are still not going to bend on their standards,” says Jones.
Vaanii Baker, Program Officer for Investment Climate with the International Finance Corporation (IFC), says it is essential that Liberian businesses find a way to link up.
“If the country cannot figure out how to plug those small and medium enterprises (SMEs) into the growth that’s happening with the large concessions, they’re not going to realize the job growth that’s desperately needed in Liberia. The job growth is more than an economic issue in this country. With our recent history, I think it is more of a security issue as well,” says Baker.
Jones and those in government hope that increased levels of foreign investment will help fuel the rise of an entrepreneurial culture in Liberia, and in turn, economic growth. He sees signs of a more stable business climate emerging.
“The post-conflict situation has also played a role in this [lack of an entrepreneurial culture],” says Jones. “I think that people didn’t really have the opportunity to be an entrepreneur even if they wanted to and I think that people here are starting off on a basic level. But I believe that every single month and year after the conflict is just that much more positive for entrepreneurs and the commercial sector.”
<div id="attachment_875" style="width: 484px" class="wp-caption alignleft"><img loading="lazy" decoding="async" aria-describedby="caption-attachment-875" class="size-large wp-image-875" src="/wp-content/uploads/2017/04/3-1024x698.jpg" alt="" width="474" height="323" />Students gather on the University of Liberia campus. University graduates are faced with a high rate of unemployment in Liberia</div>
Chid Liberty is a successful Liberian entrepreneur who co-founded a garment business called Liberty and Justice that exports its products to the States. He argues that entrepreneurship has a fundamentally important role to play in addressing poverty and rebuilding Liberia’s economy. Liberty’s father was the former ambassador to Germany under Samuel Doe, remembered by many as a brutal dictator. During the 1980s, Liberty and his family went into exile, but he returned to set up a business. The business employs 250 women in Liberia and Ghana, and is looking to expand. He says in order to meet his current demand, he would need to employ 2,500 workers.
“One of the core reasons we started our company is because we thought that what every developed economy has done so well is started really large industries that employ masses of people with low skills and education. There is no way that we are going to send all of these people back to university to get degrees to become journalists—give that up; the farm and the factory are the two places I think we need to place this lost generation of people,” he says.
Liberty says that Liberia needs to create an entrepreneurial class to generate jobs and bridge the deep economic divide in Liberia.
“Income inequality and people not having jobs are the biggest threats to Liberia’s security and all of our livelihoods.”
Building this class has become a focus for the Ministry of Commerce and Industry. Last year, the ministry officially launched its first micro, small and medium enterprises (MSMEs) policy called “Poverty Alleviation and Wealth Creation through Small Enterprise and Development” and is working with the NIC and its NGO partners to help entrepreneurs get their businesses off the ground.
Yuri Sobolev, the resident representative of the IMF, says that creating value-adding industries is the way forward for Liberia.
“Only the formal sector can create gainful employment opportunities, and value addition is the only way employment is going to be generated. For that you need better infrastructure,” says Sobolev.
“The government needs to create and enable environment [for the growth of businesses], physical infrastructure such as roads and electricity, to strengthen the rule of law with regard to business, contract enforcement and property rights.”
The government has made efforts to improve the business climate. With the help of the IFC it has set up a Business Reform Committee, with five committees focused on areas of the business environment that need to be reformed: electricity, finance, tax rates and procedures, customs and corruption. Liberia is also expected to connect to the Africa Coast to Europe (ACE) undersea cable system in October, which will bring its slow internet speeds up.
“While Liberia has many challenges ahead of it,” Baker says, “there is no reason it cannot become a middle-income country by 2030 and rival the booming economies of its West African neighbors.
“There is awesome potential for Liberia—it’s limitless. We’ve seen the development Ghana has had over the last few years… Within the next 10 years, if the government does the right things and puts in the right infrastructure, both soft and hard, in place, there is no reason why this country cannot surpass Ghana in terms of economic development and growth.”
Clair MacDougall is a journalist currently based in Monrovia, Liberia.
<div id="attachment_874" style="width: 484px" class="wp-caption alignleft"><img loading="lazy" decoding="async" aria-describedby="caption-attachment-874" class="size-large wp-image-874" src="/wp-content/uploads/2017/04/Monrovia_1-1024x683.jpg" alt="" width="474" height="316" />Monrovia, Liberia</div>
<h3>Liberia’s Gold Rush</h3>
In Sinoe County, in south-eastern Liberia, a handful of companies are
exploring land which is known to have large gold deposits; but which, due to the 14-year civil war, has remained untouched except by artisanal miners. The exploration area falls within the Biriman Craton, which holds gold and diamond deposits and extends through Ghana, Côte d’Ivoire, Guinea, Liberia, Mali and Burkina Faso. While exploration is in its early stages, companies believe they could strike upon larger deposits in coming years. 
“We believe the gold potential here is enormous—just look at other countries that fall in the Biriman Craton. Our target is to be mining by the end of 2015,” says Tim Illingworth, manager of Hummingbird Resources, a company operating in the region. 
Hummingbird Resources was founded in November 2005 and was listed on AIM in December 2010, raising $40 million. Hummingbird has a land package of 7,000km2 in Liberia and has currently only explored around 1% of that. The company reported finding 1.765m oz gold in September 2011, which they say dramatically increased on February 1 after a find of 2.052m oz, bringing the current total up to 3.817m oz. The company, founded by Dan Betts, claims it has made the largest gold discovery in Western Africa in the last year. Hummingbird currently holds a three-year exploration license and is in the process of negotiating a 25-year mineral development agreement with the government.

Liberia:  It Could Be Awesome But…

Tanzania’s political landscape is dominated by the ruling Chama Cha Mapinduzi (CCM) party, which was re-elected into power in 2010. CCM may remain in power despite whispers of infighting and corruption and a rising challenge from the opposition.
President Jakaya Kikwete fired the ministers of finance, energy and minerals over allegations of corruption and mismanagement. Since November, President Kikwete has faced increasing political and public pressure over corruption allegations on members of his cabinet. Over the last two years Tanzania has plunged 32 places in Transparency International’s Corruption Perception Index. In the 2010 survey, Tanzania ranks 116 out of 178 countries.
Nevertheless, Tanzania’s economic prospects look bright, especially in contrast to subdued growth in the Eurozone. Over the past decade, economic growth has averaged above 6%. Both the International Monetary Fund (IMF) and the World Bank expect growth to reach 7% in 2012, higher than the 6% for the continent overall. The Economist magazine has identified Tanzania as one of seven economies that it predicts could grow 7.2% on average annually.
Prudent macroeconomic policies, anchored by the country’s engagement with the IMF, will support growth. Macroeconomic policy will be focused primarily on poverty reduction to uplift the lives of millions of marginalized people. Growth will likely be driven by reforms in the agricultural sector to encourage commercial investment which will likely buoy the country’s biggest employer.
Infrastructure development aimed to address bottlenecks, particularly in the energy sector, will boost the construction sector. The services sector—transport, telecommunications and finance—is also expected to be a key growth contributor, as investors continue to show a keen interest in these sectors.
Mining, one of the economy’s mainstays, will also favorably contribute to growth. Tanzania is the continent’s fourth largest gold producer and foreign investment in the sector is high. Oil and gas discoveries will further buoy the extractive sector as investors flock in. Tanzania’s gas reserves are estimated at over 10 trillion cubic feet. The World Bank expects gas revenues to boost domestic growth over the next decade.
There are several risks to the country’s positive outlook. The main risk to growth lies within the country’s energy sector. Tanzania faces a chronic energy crisis following a drought in 2011 which led to the authorities instituting the emergency power plan (EPP) to help alleviate the crisis. Tanzania has one of the cheapest power tariffs in the region yet only 13.5% of the population have access to electricity. In January the authorities increased tariffs by 40% to cater for the higher cost of energy production. Energy tariff increases will in turn drive inflation higher to the detriment of the economy at large.
Inflation has been another bugbear for the economy. Inflation increased in 2011 on the back of higher food and energy prices as well as weaker shilling. In 2012 prices have remained stubbornly high—year-on-year inflation was recorded at 19.0% in March, down from 19.4% in February. In the face of elevated inflation coupled with uncertainty surrounding the stability of the shilling, the Bank of Tanzania (BOT) is likely to be reluctant to loosen monetary policy. The IMF expects inflation to decline to single digits by year-end. However this view is heavily dependent on this year’s harvest.
Lastly, uncertainty surrounding global growth also poses a risk to Tanzania’s growth outlook. The European sovereign debt crisis is probably the country’s biggest risk factor. With the European Union a key export destination, a deeper and prolonged contraction in growth, is likely to dent demand for Tanzanian exports.
At a regional level, the authorities are likely to be focused on the further integration of the East African Community (EAC). The BOT governor, Benno Ndulu, in February this year pledged that the government will improve the investment climate in order to attract regional and global investment. With the Europeans’ woes the world will be closely watching when the monetary union of the EAC will come into effect. Given the lessons from the European Union this may well be put on the back burner for some time to come.

Tag: Infrastructure

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