Reality television often tries to portray the behind the scenes activities of well-established TV personalities, showing their good and bad days. Sometimes there’s more drama when the lights go off. It was a resignation from two shareholders that dimmed the lights on Damien Brown’s diversified media company, New Vision.
Before graduating from high school in 2000, Brown found his entrepreneurial feet selling watches and cologne to his classmates. With this experience, he started his first registered business, The Grounds Communications which was a vending machine business distributing prepaid airtime. A friend’s father gave Brown an opportunity to start securing sites for these vending machines.
“I ran that business for about two and a half years successfully and after that the [mobile] networks decided that they needed to invest in the new technology at the time, which is now called 3G,” says Brown.
This would become his first major setback on his entrepreneurial journey.
“The vendor’s cash got sliced quite a bit and it forced me and my business out of the market,”  he says.
So, in 2003, Brown started New Vision, a company that sold advertising space on the vending machines from his first business. Through the years, the business diversified into a media group housing a production business, an advertising agency and a gear rental business.
But seven years later, New Vision changed their focus completely. A change caused by his worst day in business.
In 2010, Brown was sitting in his office when the chairman walked in with surprising news.
“I think I was 27 at the time. He came in and handed in his resignation. His son had emigrated abroad and was also a shareholder in the business… [he] had also taken money out of the business,” says Brown.
“The business had slowed down quite a bit and he thought ‘this was my exit strategy time and now it’s time to move on’. The shareholders had milked the business and pulled out when it slowed down. At that point I was very young and naïve. I didn’t understand what it all meant, resigning as a director and the other as a non-executive director and me being left in the books as the only director.”
A tough time for a young entrepreneur without any formal business training nor a university qualification. He knew no other way to deal with the drama but to shed tears.
“I was very emotional. I lost everything. I think when I was pinned up against the wall, I had nowhere else to turn. So it was either flight or fight. You really only got those two options and I don’t think I have it in me to run so I had to deal with it,” says Brown.
This was one of the reasons that Brown changed New Vision’s focus. There were too many facets to the business and it was too much for one person to focus on. Brown was worried he would become a “jack of all trades” and never really achieve anything. The second reason was passion.
“It’s one thing just making money but it’s another thing also being happy. Money doesn’t buy you happiness. And I’ve always had a passion for television. I love how you put everything together; the entire method is such an intricate process which I’m really attracted to,” says Brown.
The 30-year-old had to do things differently with the next season in his life.
“This time we watched every cent. We vet everyone we get into business with. We have a committee that makes decisions on everything. Basically, we cross our Ts and dot our Is seven times over before making decisions,” he says.
Today, New Vision is predominantly a production company specializing in producing content they own and content produced on behalf of their clients. They’ve produced reality television shows like Being Mandela, a show that chronicled the lives of the late Nelson Mandela’ws granddaughters, which aired on NBC, and The Blueprint Travel Show for Fox TV in the United States.
“We’zve just returned from a four-month stint in Los Angeles where we produced the next season, I suppose it’s called The Real Plastic Surgeons of Beverly Hills, but ideally it’s what Dr 90210 used to be on E! with Dr Robert Rey,” says Brown.
In Africa, New Vision currently has four projects in production, including Kelly-Ann Cooks in Africa, which is being shot in Mozambique.
The reality television bubble is big at the moment, Brown says, so there’s a lot of content viewers can choose from. He hopes that the bubble doesn’t burst like his dreams of a younger day.

No Flight  Just Fight

Last month, Glasgow bid farewell to the Commonwealth Games, but the debate about the importance of the organization will continue long after the athletes have left.
The relevance of the Commonwealth has been widely questioned in recent times. Some claim that the majority of its states are not very interested in the association and it has become virtually unknown among their people.
Others believe that the Commonwealth is needed more today than it was in its heyday of fighting for an end to racism in Southern Africa, the independence of Zimbabwe under majority rule, the freeing of Nelson Mandela and the ending of apartheid.
The Commonwealth, made up of 2.2 billion citizens from 53 independent nations spanning six continents, has divided opinion for most of its existence. But after celebrating its 65th anniversary this year, how relevant is the organization that is often described as an extension of colonialism?
At the moment there is disinterest and discontent within the organization itself. Formerly known as the British Commonwealth, it was originally seen as a way of uniting former British Empire colonies.
The Commonwealth is a network of networks; decisions made within it have the scope to resonate globally. That is the considerable soft power that the Commonwealth has when used purposefully. But is that the case today?
It should be noted that its present member states, including Britain, chose to be part of the Commonwealth, and to remain part of it. Two of these member states &#8211; South Africa and Pakistan &#8211; were withdrawn from the association by their governments at the time, but were subsequently brought back.
Two other countries have since been withdrawn &#8211; Zimbabwe and The Gambia. In the case of Zimbabwe, President Robert Mugabe’s government violated Commonwealth values regarding democracy. When the Commonwealth sought to suspend Zimbabwe from membership, Mugabe withdrew his country from the association.
Last year, The Gambian President Yahya Jammeh withdrew his country because he no longer wished to associate with Britain. He also claims the Commonwealth represents an extension of colonialism.
Many African commentators believe that the sole purpose of the body was to promote white interests and that continues to be the case today.
They also argue that the exits of countries were more likely in response to criticism faced from other member states on their human rights record. The Commonwealth is often criticized for being too lenient.
In 2011, a group made up of prominent figures from across the Commonwealth suggested that widespread homophobia needed to be tackled, particularly in countries where it interferes with HIV/Aids programs. But current statistics suggest little has changed. Of the 53 Commonwealth nations, 42 have anti-homosexuality legislation, with punishment varying from fines to the death penalty.
Controversies and politics aside, some argue that there is a human aspect to the Commonwealth.
A section of the organization commonly referred to as the people’s Commonwealth, which comprises of independent, professional, philanthropic and sporting bodies, works to help improve the lives of people in the organization’s countries.
Every two years, leaders meet at the Commonwealth Heads of Government Meeting (CHOGM) to discuss issues affecting each country and the organization as a whole.
It is believed that by allowing equal representation for all states, the Commonwealth gives smaller nations an international platform they wouldn’t otherwise have and creates a forum for ideas that often do not get onto the mainstream agenda.
Only time will tell how long it lasts.

The Commonwealth, Why?

In the English countryside, Jody Scheckter is an entrepreneur, organic farmer and a millionaire. No matter how many chickens he raises, his name will always be known for Formula One (F1) motor racing. The African racing legend won 10 Grand Prix.
Scheckter is a direct, likeable, deeply understated man with a dry wit. Life has taken the 64-year-old on a long journey from South Africa and motor racing. But racing forged his personality and battles on the track steeled him for building two businesses from scratch.
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For most, winning the F1 world championship with Ferrari in 1979 would be a highlight of their lives. Not for Scheckter.
“It was really an anti-climax,” he says.
“You have spent eight years dedicated completely to winning and then nothing seemed to change much. I think it has changed more in the latter years of my life, where being World Champion means something to some people.”
He does look back at his achievements with satisfaction however. As he puts it, he earned good bucks for the time and is the only South African to win a Grand Prix and remains the only South African to win the F1 World Championship.
So, what does he make of the sale of Kyalami, where he won a grand prix on home soil?
“Kyalami is not what it was. It was a wonderful circuit and has already had the heart taken out of it, which is a great shame. Kyalami means racing and was an icon in Formula One.”
Scheckter rode his luck at Kyalami.
“I crashed my car in practice and it was written off. We rebuilt the car, had a warm up in the morning and the engine blew up after one lap. I was on the front row, I got into the lead after the second lap and then won the race,” he says.
Several drivers died at Kyalami and Scheckter says he is grateful to be alive. Racing in the 1970s could hardly have been more dangerous.
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“Each year, one or two drivers from the starting 25 were killed.”
By drivers, he means his contemporaries. Scheckter raced against legendary racers of the 1970s; Niki Lauda, James Hunt, Emerson Fittipaldi, Nelson Piquet and Alain Prost.
Glamour a million miles from where Scheckter grew up in East London in the Eastern Cape, repairing motorbikes and cars.
“It’s a little coastal town, my dad had several garages there and I wasn’t very good at school.”
East London had a famous racing track, the Prince George Circuit, where Scheckter’s uncle raced and his father invited the racing drivers to his garage.
“Racing was all around me growing up. Racing drivers even used to stay over at our house.”
Life after motor racing meant a move away from the sport. Scheckter went to the United States and became a successful entrepreneur, setting up a business called FATS, Inc. in 1984.
“We sold simulators and trained police and then military on how to use guns safely.”
“In 12 years, we went from the kitchen table to sales in 35 countries and 95% of the world market. We turned over $100 million in sales the year we sold,” he says.
Then his life took a handbrake turn. Thirteen years ago, Scheckter put some of his earnings from selling FATS, Inc. into starting an organic farm in Hampshire.
He bought 500 acres at Laverstoke Park Farm, 40 miles west of London. It started as a hobby, to make the healthiest and tastiest food for himself and his six children. His racing driver son, Tomas, has recently joined the business.
Today, Scheckter owns 2,500 acres and farms a further 2,000. He says it has all got out of hand.
“It’s a monster, but a lovely monster.”
Now, Scheckter is championing biodiversity as he competes to make the finest organic products in the world.
“I don’t mind not winning, but I hate to lose,” he says.
With two of Britain’s most upmarket food suppliers, Ocado and Waitrose, as their biggest customers, the Laverstoke Park Farm brand is on the way up.
The farm has seven small factories clustered around a farm house from which the operation is run from. It employs 166 people and turns over $23.7 million a year.
Despite winning countless awards and being run as a model of organic farming techniques, Laverstoke Park Farm doesn’t yet make money. Scheckter has given himself a year to make the business profitable. For a born winner, this feels like losing.
Scheckter is refreshingly honest and feels like a man who knows he has reached his limitations.
“Meat is fiendishly complicated and I’ve just hired an expert from one of the top meat companies to run that side of the business for me. Profitability is all in the cut, and although we’re getting better we haven’t quite got there yet. I’ve learned the hard way. ”
It’s a long way from the track.
“With a car factory, you bring in a thousand pieces, you make one and you sell it. We bring in one, cut it into a thousand pieces and you have got to sell them all. And remember, some of it goes bad within three days.”
“We have too many products and we have to rationalize.”
He sells 120 items to Ocado and produces a range of products from organic beef, lamb and chicken to champagne grapes and cooked pies. One of the stranger animals on his farm is water buffalo, from which come mozzarella cheese and ice cream. Almost everything that comes from the farm is award winning. It just doesn’t all make money.
Scheckter follows traditional biodynamic farming techniques and sows according to the moon cycles.
“It’s very, very powerful. It makes seas go up and down and it makes the liquids in plants go up and down. We use modern versions of those techniques,” he says.
“After all my research, we follow nature very strictly and we have two main keys. One is slow growing animals and plants are generally healthy and taste better, and secondly, biodiversity is key to a natural, healthy environment.”
He believes that to produce great food you have got to have great soil, which comes from farming naturally and means no chemicals are used. To study the soil, Laverstoke has its own laboratory run by a doctor in microbiology and a doctor in chemistry.
Scheckter is a bit of a soil expert himself, with a library of over 500 books on soil types going back through the centuries.
“The animals at Laverstock don’t eat grass but a mix of 31 herbs, clovers and grasses in the fields. Our animals are eating salad!”
As he gives us a tour of the farm, it’s hard not to smile at his enthusiasm.
“My ice-cream is made from buffalo milk and I genuinely believe it’s the best in the world and my mozzarella tastes better than Italian mozzarella because it’s fresher.”
From fast cars to slow food, with an emphasis on the best farming techniques, Scheckter may not yet have found a successful business model for his enterprise, but you know he wants to win.

From Racing Car To A Tractor

Waking up to the roar of engines around the Kyalami racetrack, in the chilly Johannesburg autumn, was a part of growing up for Christine Bingham’s family. They waited for months to sleep in the back of their green Toyota Cressida station wagon in Kyalami’s parking lot. On this Saturday, in 1977, there were 90,000 waiting to see the best of Formula One (F1): Jody Scheckter; Niki Lauda; and James Hunt.
Drivers from across the world dreamed of competing under the African sun at Kyalami in the 1970s. The South African track was considered one of the fastest in the world. It suffered a slow death after ceasing F1 racing in 1993.
In July, the four-kilometer asphalt surface went under the hammer.
The auction, at an opulent venue in Sandton, was packed with expensive suits and dresses. The room fell silent as Lead Auctioneer Joff Van Reenen, of High Street Auctions, opened the bidding at $18.8 million. A bid came from the front row in seconds. A second bid, for $19.3 million, came in over the phone. The bidding ceased when the first bidder shook his head. Van Reenen slammed the gavel down once, twice and sold. In the space of minutes, the iconic racetrack had a new owner. The question on everyone’s lips – who was the bidder on the phone?
“We can reveal that the bidder on the phone was a representative of Porsche South Africa. If the property had gone for development, we estimated that it could have been worth R300 to R400 million ($28 to $37 million). I am glad that the racetrack will stay in the industry. We had seven registered bids for the track, but in the end it went to the right person,” says Lance Chalwin-Milton, MD of High Street Auctions.
According to Chalwin-Milton, it is the highest price paid for a South African property under the lot. The previous record price was for development land in Knysna, a gem on the south coast of South Africa, which was sold for $11.3 million.
Kyalami may yet see racing. Porsche South Africa has indicated that by December the site might be upgraded for endurance circuit racing, but almost certainly not the F1 racing that left fans like Bingham with warm memories.
“I think it was the atmosphere that made you want to go to the races. I remember the tickets being very expensive. It was always John’s job to make breakfast, a gas-cooked breakfast of bacon and eggs. We would spend the day on the stands with the crowds watching the cars go by. In those days, there were no TVs so you would only see what happened in front of you. I also remember losing our voices by the end of the weekend screaming to talk over the noise of the engines,” she says.
Bingham, a widow living in the quiet northern suburbs of Johannesburg, has been a racing fan all her life. She grew up around the tracks of Silverstone and Mallory Park, in England. Bingham would hide in the boot of a car to get into the races and avoid the entrance fees. It was also here that she met her husband, John. After they were married, they took their daughter to a race once, it stopped after they realized the engines were too loud for the baby.
When her family came to South Africa, in 1971, they gravitated toward Kyalami. It was a long drive to get there from their home in Krugersdorp, a time when Sandton was only a farm, says Bingham. Tickets for Kyalami were bought months in advance.
“The crowds were huge.  But the kids got rather bored and it was too noisy for them,” recalls Bingham.
Motor racing was a lot more dangerous in those days, says Bingham. The last time rubber was burnt on Kyalami’s track was in 2010 for a MotoGP motorbike race.
“I remember in 1977 when a track marshal was killed, Tom Price the driver also died in the accident. We didn’t see him crash, all I remember is watching people running around the stands to go see it,” she says.
It was during lap 21 of the South Africa Grand Prix. Italian Renzo Zorzi’s engine caught fire. Two marshals ran to help. One of them was 19-year-old Fredrik Jansen van Vuuren. He never made it to Zorzi’s car. As Van Vuuren crossed the track, with fire hydrant in hand, Pryce hit him. Both died in the collision. Zorzi was cut from the team after finishing one of five races, having scored no championship points.
Bingham also remembers an African motor racing legend in the same race, who finished second. His name is Jody Scheckter and in 1979 became the only African to win an F1 title.
“Scheckter was a very reckless driver. He was the kind of driver who would take risks without thinking about safety, especially when he started; being English we all supported the British racers,” she says.
These days, you won’t find Bingham near a racetrack. At the age of 71, she watches F1 from the comfort of her couch.
“I watch the racing religiously on Sundays. It’s much easier now, following it on TV, and if I miss it I watch the recording later that evening. When you were at the stands you could only see if the cars had shifted positions. It’s actually much more exciting on TV,” she says.
Over time, Bingham has seen drivers come and go. She proudly admits to having supported only a handful; Nigel Mansell, Mark Webber, Lewis Hamilton &#8211; until he became arrogant, according to Bingham &#8211; and Sebastian Vettel. Racing has changed a lot, she says.
“I think the big thing that has changed is the issue of safety. But the technology is more advanced now. I remember it taking 12 seconds for a pit stop in those days, these days they can do it in four.”
At the auction, in the time it takes for a pit stop, 43 years of racing may have been lost forever.
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Speedy End To The Glamour Of Speed

The end of a World Cup also signals the start of a new cycle for football associations around the globe, who tend to do their planning in four-year blocks.
It usually heralds a time of change for many sides, both on the playing field as some veteran stars choose to hang up their boots having had one last shot at glory, and in the dugout.
Some exits are inevitable &#8211; there was simply no way that Luiz Felipe Scolari could stay on as Brazil coach after the manner in which the host nation ended their tournament &#8211; while others may come as more of a surprise.
Football associations want to give themselves as long as possible to plan for the next World Cup, first for the qualifiers and then hopefully the finals, so it is sensible to make changes immediately after a tournament.
But, it is not only the men in suits that make the decisions. Sometimes the coach decides to step down, either because he feels he has taken the side as far as he can, or is after a different challenge having achieved the pinnacle of leading a side at the World Cup.
It also depends at which point the squad is in its development. A team can have many aging stars and the current coach, maybe more used to working with experienced players, might not be the best person to rejuvenate it.
At the other end of the scale, you have a side like England. The country’s first round exit in Brazil would normally be considered a disaster for the proud footballing nation who expects to be vying for ultimate footballing glory.
But, the current England team is very young and is building towards the 2018 tournament in Russia. With this in mind, the coach, Roy Hodgson, has been allowed to continue his work despite their embarrassing early flight home.
The English FA believe, despite the insipid performances in Brazil, that Hodgson is the best person to help nurture and develop this team into what they hope will be a force in Russia and perhaps Qatar in 2022 as well.
Football associations do sometimes bow to public pressure. When a coach has lost the faith of the fans, they will act.
But they should also understand that football teams are often a work in progress and a coach should be given the opportunity to finish what he has started, unless results are so bad that it is clear he is taking the team along the wrong path.
There are many factors to consider and they involve the players at his disposal, such as how the coach interacts with his players, do they respond to him and do his ideas suit the players in his squad.
National associations don’t sack coaches because they didn’t win the World Cup, I think they do it because they feel something is not working within the team.
Football can be cruel and a team’s failure to win can sometimes be out of the coach’s hands. This happened to Louis van Gaal when Netherlands were ousted on penalties in the semifinals.
He was always destined to leave his post after this tournament; that was already decided by the Dutch FA last year. I doubt there is anybody who blames Van Gaal for the team’s failure to lift the trophy.
So as things change around the world, in Africa it is no different. It is remarkable how swiftly the landscape changes in just a matter of weeks. Of the five African teams that participated at the World Cup, two already have new coaches.
Christian Gourcuff had been waiting in the wings at Algeria, even before Brazil. It was obvious that Vahid Halilhodzic wanted out and would not be persuaded to stay on.
Not even a presidential appeal for him to stay could sway Halilhodzic, who rapidly progressed from being the object of media scorn to a national hero by taking Algeria past the first round for the first time, and ensuring a honorable World Cup exit as they took eventual champions Germany to extra time.
Gourcuff’s appointment will further strengthen French ties with the Algerians.
Herve Renard, another Frenchman and a man I know well, is the new coach of Ivory Coast. He was swiftly chosen from a five-man shortlist after the Ivorian Football Federation had made the unusual step of publicly calling for candidates to replace Sabri Lamouchi.
Lamouchi’s tenure with the Ivorian team was always going to be in doubt after the World Cup, even if they had not been so unlucky and gone on to play in the second round. His relationship with influential players like Didier Drogba was fractured.
Renard was the coach of Zambia when they edged the Ivorians to the 2012 Africa Cup of Nations title in Gabon, a tournament in which the Mighty Elephants did not concede a single goal and yet did not pick up the trophy. There lies the problem for any coach. You can have the best plans, but you still rely on the players to execute.
While I am delighted for Renard, his appointment did come at a cost to Zambia. The country’s coach, Patrice Beaumelle, who was Renard’s assistant when he was in charge of Chipolopolo, left to join his old boss in West Africa. It is disappointing, but it offers an opportunity for someone else to step in and make their mark.
In the month since the World Cup final, there have also been coaching changes for Gabon, Niger, South Africa, Kenya and Togo.
Despite their very disappointing showing in Brazil, Cameroon have stuck with German coach Volker Finke, although he has been under fire in the country. He is insisting he sees out his contract, which still has nine months to run.
It means there will be little time for the new men in charge to prepare, as the qualification matches for the 2015 African Cup of Nations begin on September 5.
When you are a coach, the pressure never lets up.

The Sacking Cycle

At the beginning of August, Africa’s richest man according to FORBES, Aliko Dangote, signed an energy infrastructure partnership with the world’s two largest private equity firms, American-based Blackstone Group and Carlyle Group.
Dangote made a commitment to invest a combined $5 billion by 2019 with New York-based Blackstone in power projects in sub-Saharan Africa and formed a joint venture with Carlyle to invest an unspecified amount in Nigerian oil and gas ventures and other African projects.
This is one of many examples from the continent, showing a step in the right direction in the private equity space for companies hoping to implement projects that require copious amounts of capital.
Private equity refers to shareholder capital invested in private companies. Firms seeking private equity funding often want to finance business expansions, develop new technologies, and complete acquisitions of other businesses among other reasons. The size of the private equity market has grown steadily since the 1970s. Africa accounts for around 1% of private equity investment worldwide, says the Chief Executive of the Carlyle Group, David Rubenstein.
Patrycja Kula, a Business Development Manager at the Johannesburg Stock Exchange, says private equity is also good for the stock exchange. She gives Alexander Forbes, the pension fund giant that delisted in an R8.2 billion buyout in 2007, as an example. It was a R9.7 billion-company when it relisted, showing that private equity helps a lot.
Although the South African private equity industry is small in comparison to those of the United States and Britain, it is well established and locally significant. It may be argued, according to the Southern African Venture Capital and Private Equity Association (SAVCA) Industry Performance Survey in 2013, that the country has one of the most sophisticated private equity industries among emerging and developed markets, with different funds at all stages of business development, from start-up venture capital funds through to late-stage and buy-out funds.
According to the World Bank, African nations need an extra $50 billion a year to ease energy shortages and transportation bottlenecks. Since the mid-1990s, financing for African power projects has averaged around $1.2 billion a year. This is split between public and private money.
In South Africa, the report on the Economic Impact of Venture Capital and Private Equity in South Africa in 2013 emphasized the benefits of private equity and venture capital transactions to the development of the country’s economy. It stressed that they are not confined to investee companies. Besides providing access to capital, Aubrey Shabane, the Manager of the Development Bank of South Africa’s Private Equity &amp; Direct Equities unit, says these investors bring dynamism, a depth of operational experience, huge financial acumen, strategic partners and foresight.
“As we face several economic challenges, including exceptionally high and persistent unemployment, it is rewarding to note the effect of this type of investment on job creation,” says Shabane.
“Companies with private equity and venture capital investors clearly do create employment and those in our survey indicated they have grown their staff by around 40 percent in the two-year period covered by this research.”
According to the KPMG and the SAVCA survey on the industry’s performance in the country over 2013, the private equity industry has R162.2 billion in funds under management, an increase of 16.9% from 2012. It adds that R58.6 billion of the funds under management are in undrawn commitments at the end of 2013, meaning that R46.1 billion is available for future investments in South Africa and R12.5 billion for the entire African continent.
This report also notes that private equity is an important source of Foreign Direct Investment, both indirectly via the raising of offshore money by local fund managers and by direct co-investment by foreign investors.
Speaking at the SAVCA Gordon Institute of Business Science for Private Equity in Illovo, Johannesburg, Stuart Bradley, a Senior Partner at Phatisa, a private equity fund manager investing in Africa, says that private equity is the most expensive way of getting funding or capital and should be a last resort for any business. Bradley adds that it is advisable for businesses to try other avenues first, like internal cash generation, family and friends, banks, mezzanine finance or even defer projects.

An Expensive Necessity  For Africa

The world’s second largest exporter of cocoa is currently experiencing serious economic pain.
Proceeds from Ghana’s cocoa, timber and gold exports have not been enough to cater for its national lifestyle. Add liquid gold to the mix and suddenly this regional champion is showing symptoms of the proverbial Dutch disease so early in its crude oil career.
Ghana’s financial system is now frequently constipated, coping with low savings and high borrowing rates. Its also is characterized by unsustainable appetite for foreign goods, resulting in missed spending targets, inflation and dollar-denominated thinking. Sustaining real economic growth has therefore been difficult. In a nutshell, West Africa’s second largest economy is engulfed in a failing currency crisis.
The Ghanaian cedi is suffering its worst humiliation against major trading currencies in decades. Consumer price inflation peaked at 14.5% in April. Public sector spending has remained way above the regional sub-Saharan average for many years, even as the country continues to record fairly strong growth.
By contrast, the cedi has depreciated in recent years. As a result, equities on the Ghana Stock Exchange (GSE) have also been losing weight, shedding about 16% of their value in US dollar terms this year alone.
The business community and ordinary Ghanaians feel helpless. Their view is that politics now threaten to transform their currency into ordinary tissue paper.
“Notwithstanding the fact that Ghanaians are resourceful and resilient people, local businesses have been hit hard by this currency crisis… the authorities need to cultivate public empathy, they need to involve the business community in their fiscal planning process,” says Albert Ngumba, general manager of e-commerce firm Cellulant Ghana.
The crisis has induced a total slowdown of the once stable polity and left politicians and economists puzzled on how to stop this once bubbling economy from drifting away.
How is it that Ghana now finds it difficult to pay its bills after years of sustained economic growth and after commercial production of crude oil began in 2010? How can a nation be growing into poverty?
For those interested in the fortunes and foibles of African nations over the last five centuries, this is an old tale. The logic of the international marketplace is a simple linear equation: if weaker economies have weak currencies then stronger currencies will produce stronger, more robust economies. This is the turf of the world’s central banks.
Of course, beyond the currency conundrum, one of the reasons why economies fail is fiscal indiscipline. This has been the bane of Ghana’s current economic woes. Its current account deficit, according to the Bank of Ghana (BoG), the banking industry regulator, was a whopping 12.30% of its GDP, as at December, 2013. Debt-to-GDP ratio is forecast to reach 51.2% by the end of 2014. If this figure ever gets to the 60% mark, Ghana might lose its status as a lower middle-income country, according to the IMF.
Government’s quest to increase teachers and civil servants pay blew up in its face: public sector salaries now gulp 70% of internally generated revenue. These civil servants represent less than 1% of the population. With falling commodity prices, and energy supply hiccups, the fiscal deficit is expected to persist for at least another five years.
To stem the negative currency tide, the BoG outlawed companies from maintaining domiciliary accounts and engaging in foreign currency denominated transactions in February. It also limited withdrawals to approximately $10,000. The plan did not work. The cedi has depreciated by more than 6.4% since then. The BoG promptly unfastened the guidelines in July. The effect of this policy flip-flop on the psychology of the markets has been mixed: macro- and micro-level economic pains, heightened currency and sovereign risk ratings, faith in the ability of the economy to turn around in the long term, and erosion of confidence in government’s economic management capabilities.
The matter is threatening Ghana’s hard won reputation as a magnet for foreign investment. Ghana’s share of Africa-bound FDI ($3.3 billion per annum) needs to grow. The value of exports also needs to grow. Ghana’s business and political elite need to be stimulated to increase their appetite local products.
For most Ghanaians, whose outlook on life has been defined by decades of mass penury and perseverance, this is proving to be a bitter pill to swallow, especially after President John Mahama made promises of steady and sustained economic progress.

Growing Into Poverty

The tradition of 40 years of arts brought an economic boost to the Eastern Cape, the poorest province of South Africa.
The National Arts Festival in Grahamstown saw its best ever ticket sales of more than $650,000. The local economy received nearly $31.6 million.
“The biggest growth this year came from sales on the main program, attributable largely to an expanded program aimed to commemorate the festival’s 40th birthday, and from attendance at a greatly increased number of free performances and activities aimed at the broader Grahamstown community,” says Tony Lankester, the festival’s CEO.
The two-week event in July saw artists from 40 countries stage over 2,500 performances.
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The festival created short-term jobs for local people. In 2011, Grahamstown was among the poorest places in South Africa, with an unemployment rate of more than 70%.
Lankester says organizers received nearly 1,500 job applications for the 470 posts at the festival. Most jobs were for technicians, cashiers, cleaners and theater ushers. A majority of those that were employed survive with casual jobs for the rest of the year.
“Other festivals around the world have strong volunteer pools. We have taken a position that we don’t want volunteers. It would be immoral in Grahamstown to ask people to work for free. This is their livelihood. This is the important part of our budget and what we do. That’s the direct employment and the biggest beneficiaries of an event like this are the hospitality industry, petrol stations and restaurants.”
Lankester says organizers feel pressure to create more jobs.
“Because we appear to be this massive rich entity, we punch above our weight in many respects. People expect us to do more,” he says.
In February, festival organizers launched a Creative City project that ran all year round, to stimulate grassroots art projects around Grahamstown.
“One can always argue we should do more, but as an NGO ourselves, there’s a limit to what we can achieve in just two weeks,” he says.
“Planning for 2015 is already underway with the proposals currently open. Between now and then, we have the inaugural Cape Town Fringe in September 25 to October 5, which will give us another opportunity to showcase some of the best performances South Africa has to offer,” says Lankester.
Anyone who saw the dance performance Cargo: Precious and Nile and the theater production Ubu and the Truth Commission will agree with this.
<h4>From Nasty Kingdom To The Welcome Mat</h4>
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The Grahamstown National Arts Festival has transformed itself from being a Rhodes University’s small Shakespeare festival to Africa’s largest, and arguably the world’s second largest, celebration of the arts.
“In the early stages of the festival, Grahamstown people resented outsiders, they were really nasty and they didn’t want their kingdom to be invaded. It didn’t matter what color you were. But the festival organizers said to artists, ‘even if you are banned in Cape Town, wherever, you can come to Grahamstown,’” says Adrienne Sichel, a veteran arts critic.
This year the 11-day festival had 225,538 attendees.
Nomhle Nkonyeni, a legendary Eastern Cape performing artist, was one of the first black actors to be invited to the festival in 1985. The festival honored her with the Standing Ovation award in 2013.
Nkonyeni has retired as a performer and returned home to Port Elizabeth to lend a hand in community theater.
“I am grateful for the growth of the Grahamstown festival. We are coming a long way. But we are still struggling as the community-based theater and the R20,000 government grant cannot take you anywhere. How do you stage a production on that?” she says.
Nkonyeni urged grassroots artists not to give up, citing her experience with director Athol Fugard in the 1960s. While she was humbled at being recognized last year, she is proud that her career started in community theater.
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Ladies And Gentlemen…  A $31-Million Festival

Success stories in South Africa’s clothing industry are few. They are about as rare as finding a standard white T-shirt in your local mass market retailer without the ubiquitous ‘Made in China’ label attached.
The clothing industry has lost around 150,000 jobs since 1996 as it valiantly fought, and lost, the tornado of imports of fast, cheap and disposable fashion from the Far East. It’s estimated that 90% of the clothes hanging on rails in South Africa today have made their way to local shores in vast container-loaded cargo ships chugging across the Indian Ocean.
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It’s the eulogy of a globally uncompetitive economy. And yet, the patient shows signs of life.
Keedo Clothing, a children’s clothing company, is thriving 21 years after its inception. All items are manufactured by a team of 100 seamstresses in Cape Town’s industrial belt and sold in company-owned stores around South Africa as well as exported to 16 countries worldwide.
“Keedo has weathered the 2008 global recession, a flood of cheap Chinese and other clothing imports, a disastrous cotton harvest in 2010 and the collapse of the local textile industry,” says Nelia Annandale, Keedo’s founder.
Keedo began to take form in 1991, shortly after the birth of Annandale’s twins.
“After they were born, I realized that there was not much available in South Africa in terms of children’s clothes which was fun and one hundred percent cotton and good enough for my beautiful offspring.”
Necessity is the mother of invention, as they say, and Annandale created clothing patterns, dyed fabric and stitched up tiny t-shirts, shorts and dresses – all on her kitchen table. But it wasn’t until two years later, in 1993, that inspiration to sell the garments commercially struck.
“I was involved in a near fatal skiing accident which left me in a hospital bed for weeks. During one of my sleepless nights, I realized I had to do something to combine my passion for children, my passion for clothing, for nature all in one and create a brand,” she says.
Annandale had no funds, no formal business training and no experience to speak of but she did have clothing samples; which she took in a brown paper packet to her bank manager’s office and asked for a loan.
“Luckily, my bank manager was a woman so when she touched the clothing she knew it was special. I was granted a little loan and that was what I used to start my business.”
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The first Keedo store opened in 1994 but the company was still very much a one-woman show with Annandale making patterns, cutting, sewing and hand-drawing pictures of animals on the fabric which are core to the company’s nature conservation identity. The shop was tucked away in Cape Town’s sleepy northern suburbs – a good 30-minute drive from the city’s flashy tourist attractions and coastline. This is why it came as a surprise when a Swiss tourist wandered into the store with her small child and bought up a good portion of the merchandise on offer. She returned a little later with a proposition to take Keedo to Europe.
“She called me the day before she was due to fly home and asked if she could take my clothing to Switzerland. She bought a box full of samples and tried it out at an informal market. Three months later, we opened the first international Keedo store in Baden, Switzerland.”
Annandale has spent the two decades since then completely immersed in her company; although these days, she spends less time cutting and sewing and more on conceptualizing new product lines and driving strategic decisions. She is still inspired by children and nature.
Annandale won an award at the International Women’s Entrepreneurial Challenge; the 9th Annual Award for Top Women Successfully Leading Business: Top Gender Empowered Company: SMME; the Cape Chamber of Commerce Exporter of the Year Award in the design category and was named the Business Woman of the Year at the Black Business Quarterly Awards in recognition for her role in transformation.
Woman make up 85% of Keedo’s workforce and the majority of them are single mothers. Annandale says the defining moments in her career are those in which she has had the opportunity to witness women grow from being shy and uneducated to confident individuals in charge of their own lives and jobs.
Her dream for Keedo is that it remains a South African-manufactured product and continues to create jobs in her homeland.

What To Do When You Cheat Death

Laduma Ngxokolo found business where many saw tragic headlines. Circumcision has long been a controversial business in South Africa where young initiates sometimes may never return from the rigorous stay in the hills and return alive.
Ngxokolo saw business in the celebration of the return of the young men. Having been to the hills himself, he knew that boys gave away their clothes before the mountains and were given new clothes on their return.
Hailing from the small kingdom of Pondoland, in South Africa’s Eastern Cape Province, Ngxokolo conceptualized MaXhosa – a business weaving the designs of the Xhosa culture into knitwear, using locally sourced textiles like mohair.
The Xhosa initiates are given new clothes, usually formal wear bought by their parents, which they have to wear for six months after their return from the mountains. Ngxokolo says many of these initiates do not like the clothes their parents buy for them finding them too westernized.
The cardigans are thickly knit with various patterns of triangles, stripes and zig-zags using dusty reds, oranges, yellows and blues, woven into brown wool. His inspiration stems from Xhosa beadwork patterns and the delicate tones of the Xhosa color palette. He started by only making jerseys and cardigans for men, but has now ventured into women’s wear, knitting skirts and dresses.
“This is why I decided to focus on knitwear, because the parents often go buy premium products for their sons,” says Ngxokolo.
By designing Xhosa-inspired knitwear, he would capture it in a way to preserve this heritage.
But his journey of becoming an entrepreneur was learned at his mother’s knees.
In his teenage years, it was inevitable that Ngxokolo’s mother Lindelwa, a knitwear designer in Port Elizabeth, would teach him how to knit using a hand-machine. Ngxokolo enjoyed doing craftwork and beadwork with his mother which influenced his designs. When he was 17 years old, his mother died, leaving Ngxokolo and three siblings to fend for themselves. It was a sad moment in his life, but his mother’s influence inspired him to turn a hobby into a business.
After finishing high school, Ngxokolo studied textile design and technology at the Nelson Mandela Metropolitan University in the Eastern Cape. This was the turning point in his life. His flair for knitwear earned him a bursary from the Port Elizabeth-based Cape Wools SA as well as Mohair South Africa.
In 2010, Ngxokolo established his brand – MaXhosa. He also found inspiration exploring astonishing traditional beadwork, craft, patterns, symbolism and colors he found at the Nelson Mandela Metropolitan Art Museum in Port Elizabeth. This inspiration was incorporated into his modern knitwear range.
He entered his thesis, ‘Finding Innovative Designs For Xhosa Initiates To Wear’ into the South African leg of The Society of Dyers and Colourists competition which he won and went on to win the international leg of the competition. This prize resulted in Ngxokolo speaking at Design Indaba, one of the biggest conferences of its kind in Cape Town which is attended by many people from across the continent. The media coverage from the Indaba helped publicize MaXhosa.
“At the time, I wasn’t exposed to business and I didn’t have many customers,” he says.
A promoter forwarded Ngxokolo’s contact details to a magazine where he was given the opportunity to showcase at the Vauxhall Emerging Designers Scout which coincided with London Fashion Week in September the same year.
From here, he was given $14,000 seed capital to learn about business and which helped his business to hire five women from his community to work for him. Because his products were produced in Cape Town, Ngxokolo made the move to Vuya Fashions, a factory just outside the city, where his garments are made. The raw materials are sourced from Port Elizabeth.
Since then, Ngxokolo has showcased at numerous fashion weeks, including his first stand-alone show at Mercedes Benz Fashion Week Joburg, and even had his own pop-up store in London.
This has propelled his brand to be known all over the world, from the streets of Cape Town to Paris.
“When I see people wearing my designs I feel overwhelmed,” he says.
Today, Ngxokolo says he focuses his time on creating custom-made designs ranging from cardigans, jerseys, dresses, skirts and throws that can sell at prices up to $500. Although he doesn’t have his own store, numerous retailers like Merchants on Long in Cape Town, and some from Namibia, England, France and Holland loved his products so much that they decided to stock the items in their shops.
In the future, he hopes to establish his own studio where his entire team would sit in one room and also keep his relationship with the manufacturers. Ngxokolo also wants to open up MaXhosa stores in fashion capitals across the world and also move into lifestyle designing like couches, and using mohair for rugs.
When he launched a collection in Paris called ‘My Heritage, My Inheritance’ in 2013, he says it was blessed because he dedicated it to his mother.
“My late mother’s dream as a knitwear designer in the eighties was to travel to Paris to see high-end fashion. Unfortunately circumstances denied her the opportunity to make her dream a reality. Twelve years after her passing, I had the privilege of being invited by the Labo Ethnik Fashion Week in Paris to showcase my knitwear collection,” he says.
One challenge that gives him pins and needles is that the demand in South Africa is quite small because the thick woolly mohair garments are not suitable for Africa’s warm weather.
“But for Europe and overseas it makes business sense,” he says.
“In future, I hope to sell more in Europe as the weather dictates, summer designs would be much thinner.”
For now, he sets his eyes on a master’s degree in textiles at Central Saint Martins in London. And this is how Ngxokolo will knit his way to the bank.

The Jersey That Says You Are A Man

Last November Apollo Global Management, the powerful buyout shop run by billionaires Leon Black, Marc Rowan and Joshua Harris, finished cashing out of arguably the greatest private equity deal of all time.
As they furiously sold billions of dollars of shares in LyondellBasell, a chemical maker, in several batches, they had every reason to think they were doing the right thing. By any metric it was a monstrous score. Since 2008 the firm had turned a $2 billion investment in the company, a plastics manufacturer and petroleum refiner based in Rotterdam with its main executive offices in Houston, into $12 billion, a sixfold return on investment that juiced the results of its biggest fund to a net internal rate of return of 30%. It was an astonishing result, especially in postcrash Wall Street, landing Apollo atop the lucrative private equity world and helping to launch an initial public offering of the firm, which is now valued at $10.5 billion. Harris earned $397 million from his work at Apollo last year alone; Black made $546 million.
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But even as Apollo’s billionaires were exiting from LyondellBasell, another billionaire investor was continuing to double down. In 2013 Len Blavatnik spent $575 million purchasing 8.5 million of Apollo’s LyondellBasell shares, an unparalleled bet on an investment that had already helped make him one of the richest men in the world, and one that had many scratching their heads at the time.
“It’s an easy argument against it: If Apollo is selling, why are you buying?” Blavatnik tells FORBES in a rare interview. “Before every one of my additional purchases of stock in LyondellBasell, some people around me told me it was a mistake and that I should sell instead of buying more.”
But so far Blavatnik has been right—seriously right. Shares of LyondellBasell have soared by more than 50% since he bought his last block of stock from Apollo.
In the history of Wall Street there haven’t been too many moneymaking machines quite like LyondellBasell, which has seen its shares return 500% since it emerged from bankruptcy four years ago. And that’s been especially lucrative for Blavatnik, 57, who cobbled the company together, saw it fail and plunge into bankruptcy court, and then doubled down on the same assets, personally investing another $2.37 billion in LyondellBasell the second time around.
His investment is now worth more than $10 billion, generating $8 billion in mostly unrealized personal profits. As it stands, FORBES believes it’s the biggest individual score from a single deal, ever. While Blavatnik usually makes headlines these days for his media holdings, like Warner Music or his stake in Beats Electronics, those parts of his portfolio are a sideshow compared to the LyondellBasell redemption that has pushed his net worth above $20 billion—making him the world’s 33rd-richest man.
“It is an historic transaction,” says Mark Epley, managing director in Nomura’s private equity banking unit. Says Stuart Gilson, a Harvard Business School finance professor who has studied LyondellBasell’s restructuring: “It’s outstanding given the return, but recalling what we were all feeling in 2008—it was the end of the world—makes the outcome even more remarkable given the enormous risk.”
Blavatnik, who owns 16% of LyondellBasell through his Access Industries, thinks there’s still more room to run, wagering that LyondellBasell’s stock will continue to rise. “So far I feel vindicated and proud of my investment decisions,” he says. “The question is whether the luck will continue.”
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When Len Blavatnik was first handed an investor memorandum for Dutch chemicals company Basell, it had the number 64 on the cover, prompting one of Blavatnik’s associates to caution him about jumping in. Why bid for a company that 63 other players were already considering? Blavatnik waved him off—he wanted to create a global chemicals empire, and this was his way in. A Ukrainian-born American citizen who grew up in Russia and immigrated to the U.S. in 1978 at the age of 21, he later got his M.B.A. at Harvard. Blavatnik made his first fortune with a former classmate in Russia, Viktor Vekselberg, in oil and aluminum deals during the anything-goes post-Soviet days.
Blavatnik’s biggest scores in Russia were oil company TNK-BP, a joint venture with British Petroleum that was eventually bought by Rosneft for $55 billion, and Sual, an aluminum producer that merged with the larger Rusal. Chemical companies that had nothing to do with Russia would be his next big thing. He paid full price, putting down $1.1 billion to purchase Basell in a $5 billion leveraged buyout in 2005. Then he tried, and failed, to buy other chemical companies, including Huntsman International.
In 2007 Blavatnik decided to buy Lyondell, a Houston-based company—not particularly well run—that produced commodity chemicals used in making plastics and that also had refining assets. Blavatnik had been stalking Lyondell, buying up the right to purchase 8%. When he decided in July 2007 to use Basell to buy up a controlling stake in the company at $48 a share, a 45% premium to the market price, Blavatnik’s associates got nervous. Alan Bigman, a trusted lieutenant who’d been working for Blavatnik for a decade, woke up at 4:30 one July morning, unsettled by the deal.
“I know you’ve already made up your mind,” Bigman wrote to Blavatnik, according to a court document. “But I am uncomfortable with the valuation.” Blavatnik waved him off and did the same when Philip Kassin, another colleague who also sat on Basell’s board, expressed his own worries. Ultimately, Blavatnik has told FORBES, employees can voice their opinions, but he is “risking my money, not their money.”
Basell bought Lyondell in a $20 billion leveraged buyout in December 2007 to create LyondellBasell, the world’s third-biggest independent chemicals company. The timing couldn’t have been worse. Within months the financial crisis hit and the deal looked like a debacle. Weighed down by more than $20 billion in debt, LyondellBasell hit the wall as the economy crumbled. Chemical orders stopped, a huge crane collapsed in an accident at its Houston refinery that killed four employees, and Hurricane Ike shut down its plants in Texas. Some 2,500 employees, 15% of its workforce, were laid off at the end of 2008. In early 2009 Blavatnik pushed LyondellBasell into bankruptcy. It was a humiliating moment for Blavatnik. “Filing for Chapter 11 is an experience I would never want to repeat; it was really a dark moment,” he has said of that time.
It was also his biggest-ever financial loss. How much he lost has been a subject of fierce litigation by LyondellBasell creditors, who went after Blavatnik in a lawsuit that continues to this day. At minimum, Blavatnik was out $1.2 billion. But despite the reversals, Blavatnik believed in the assets and potential earnings power of a company he felt had simply been hit by a perfect storm.
He wasn’t the only billionaire with an appetite for chemicals. Apollo had also been trolling the industry, buying and owning chemical assets like Hexion Specialty Chemicals and Momentive Performance Materials that had been similarly battered by the financial crisis, sinking Apollo’s performance. Yet, like Blavatnik, Harris, Black and Rowan knew the industry and decided to keep investing. Before LyondellBasell headed to bankruptcy court, Harris bought ­LyondellBasell term loans from a reeling Citigroup at a discount and kept buying bank debt for as low as 20 cents on the dollar, as the financial crisis raged and those loans plunged in value. Harris knew some people on Wall Street thought he had lost it, but Apollo’s analysis determined that the most secured LyondellBasell debt would perform well absent a complete global economic collapse.
“Every day we would buy Lyondell as prices fell. We had conviction, and we were buying supercheaply,” Harris tells FORBES. “We were able to pair our deep industry expertise in chemicals with a highly complex distressed process so it highlighted what we are good at in terms of distress for control.”
It was a daring $2 billion investment that gave Harris an opportunity to convert his debt into a big equity stake in LyondellBasell in bankruptcy court. That meant working with Blavatnik. Harris and Blavatnik are friends who still get together socially and whose wives know each other. Still, a minor skirmish broke out between them over who would run the “debtor-in-possession” bankruptcy financing—and in turn have more control over the company. In the end Harris won out, leading an $8 billion bankruptcy financing that included an innovative roll-up feature that allowed Apollo to move some of its debt higher in the capital structure. Harris and two other Apollo representatives jumped on LyondellBasell’s board, and they worked closely with Blavatnik and his team on the restructuring. “Overall, we had a very good working relationship with Apollo,” says Blavatnik. “Sometimes it was tense because we had somewhat different interests in the beginning.”
The bankruptcy wiped out Blavatnik’s stake in the company, but he found ways to rebuild equity in LyondellBasell, mostly through private transactions with creditors and buying stock on the Pink Sheets, where LyondellBasell’s shares traded. He also kept his new key advisor, Stephen Cooper, who guided Enron through bankruptcy as CEO, on the board. (He’s now CEO of Blavatnik’s Warner Music.)
In bankruptcy court LyondellBasell shed the weight that brought it down, including bad contracts and high-cost assets, shutting expensive plants in Texas and Germany. It reduced its debt load to $2.5 billion, slashing annual interest expenses by $1.7 billion. The company added as its CEO Jim Gallogly, who had headed Chevron Phillips Chemical Co. Gallogly got 1.8 million restricted shares and options to purchase 5.6 million shares for $17.61 apiece to run the floundering company. “It was hard to convince Jim, and it took us some time,” says Blavatnik. “We offered a very attractive package.”
In 2010 LyondellBasell emerged from bankruptcy court valued at $15 billion. That number was about to soar.
The revolution that changed everything for Blavatnik, Apollo and LyondellBasell originated in the thin fissures of shale rock filled with oil and natural gas reserves throughout the United States. Throughout the last decade drillers pioneered new techniques of exploiting rock formations with hydraulic fracturing and horizontal drilling to draw out the petrochemicals trapped within. As a result, the U.S. became one of the world’s largest sources of cheap natural gas almost overnight, with prices falling from highs of $13 per million British thermal units to a $3 to $4 range today. This dramatic drop in prices proved a huge boon to dozens of industries, none more so than the chemical business—and few more than LyondellBasell.
LyondellBasell is a top producer of ethylene, which it upgrades into the plastic known as polyethylene, used in everything from food packaging to trash bags and hard hats. The company operates six facilities (known as “crackers”) to produce ethylene in the U.S. and four in Europe. Profits from ethylene and its derivative chemicals and coproducts are the core of LyondellBasell’s earnings.
Ethane, refined from natural gas, and naphtha, a crude oil derivative, are the prime raw materials used to produce ethylene. Starting in 2007, U.S. drillers were finding natural gas everywhere. By 2012 the price of ethane had fallen from 90 cents per gallon to 30 cents, giving U.S. chemical producers a huge advantage over foreign competitors in Europe and Asia that are dependent on pricey oil-based naphtha as a feedstock. The gap between the two supercharged LyondellBasell’s profitability.
LyondellBasell’s decades-old crackers in Clinton, Iowa and Morris, Ill., for example, are the only ones in the Midwest—and are situated near natural gas liquid pipelines and a hub in Kansas, home of some of the cheapest ethane in America. Almost overnight they were transformed, churning out profit margins of 32 cents per pound compared to European naphtha-based ethylene, which is barely even profitable. “It’s improbable that anyone could have foreseen the full impact of the shale revolution,” says Blavatnik. “But Jim had some experience and insight through his work at ConocoPhillips that I think helped.”
Gallogly, 61, a lawyer by training who was born on Canada’s Newfoundland island, quickly cut $1 billion of annual fixed costs and guided the company to swiftly take advantage of the shale gas boom, converting the company’s U.S. processing facilities so that 90% of the time they can run on cheap natural gas-based feedstock.
Gallogly’s strategy has been straightforward. Instead of spending huge amounts of money and time building new crackers like other chemical companies, he incrementally expanded capacity at his existing U.S. plants. That shortened construction time and allowed the company to quickly benefit from the ethane advantage, adding capacity while others waited for new permits. Instead of it taking six years for new plants to come online, it has taken just two years to add capacity. “Perhaps you have heard the expression,” Gallogly likes to say, “ ‘The early bird gets the worm’?”
In all, Gallogly has spent just $3.7 billion over the last three years on capital expenditures. He spent $510 million to expand capacity of a steam cracker in La Porte, Tex., to be able to process 800 million more pounds of ethylene from ethane, a project that will finish this year. He spent another $200 million to increase the ethane-processing capability at the company’s cracker in Channelview, Tex. Those crackers in the Midwest? For just $30 million Gallogly added 100 million pounds of ethylene and polyethylene capacity, worth an estimated $30 million in operating profits to the company. LyondellBasell has gone from posting losses in 2009 to profits of $3.9 billion on revenues of $44 billion last year. (Gallogly’s shares of LyondellBasell are now worth $380 million.)
Just as importantly for Blavatnik, Apollo and other shareholders, LyondellBasell has been a cash machine. In the past three years the company returned $8.4 billion to shareholders via share repurchases and dividends. It’s “a beast,” says Deutsche Bank analyst David Begleiter. “They are the poster child for the renaissance of the U.S. chemical industry.”
Other big shots on Wall Street have taken notice. Billionaire hedge fund manager Dan Loeb used more than half of his first-quarter letter to his investors wondering why Dow ­Chemical Co.—where returns have trailed ­LyondellBasell significantly over the last three years—wasn’t more like its rival. Loeb’s Third Point hedge fund has taken a ­position in Dow, and the activist investor made it clear that he would push Dow to follow LyondellBasell’s lead. “Underearning is clear when one compares Dow to its North American petchem peer, LyondellBasell,” Loeb wrote in May.
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Not everyone has been convinced the party will last, of course, but so far Blavatnik continues to have made the best bet. The investment firms of some billionaire investors—including Antony Ressler, David Einhorn and James Dinan—held stakes in LyondellBasell after it emerged from bankruptcy and sold them in the early innings of its rally. Harris and Apollo held on much longer, selling their LyondellBasell shares at an average price of $62.65 a share. Still, in July LyondellBasell started trading above $100. The feeling at Apollo was that the investment was unlikely to continue providing the kind of high returns private equity investors expect. Apollo, mindful of the cyclical nature of the chemical industry, also simply thought it was time to monetize one of the greatest deals ever. “As an institutional fund we have to make private equity returns,” says Harris. “So in our view it was time to monetize.”
Of course, unlike Blavatnik, who invests on his own dime, Harris’ Apollo needs to return money to outside investors, preferably in the kind of large amounts that will help Apollo raise more money. In fact, as Apollo was selling its LyondellBasell stake, it was raising $18.4 billion for Apollo Fund VIII, the most ever for the firm—and the biggest new private equity fund raised by far since the financial crisis. LyondellBasell certainly helped, making up 15% of the profits of the wildly successful Apollo Fund VII.
Now Harris and Apollo are making bets that natural gas prices will increase, essentially going against Blavatnik’s take on the market. In June Apollo announced it was buying natural gas properties from Encana for $2 billion in a straight-up play on rising natural gas prices. Apollo has also been wagering on Energy Future Holdings, a leveraged buyout bankruptcy that is actually bigger than LyondellBasell, working to take control of Energy Future Holdings’ unregulated unit, which would benefit if natural gas prices rise because the company produces electricity using coal and uranium while most electricity in Texas is generated using natural gas.
Blavatnik shrugs off worries about rising gas prices and continues to believe fervently that changes to the energy and chemical markets are near permanent, and abundant low-cost ethane will continue to fuel LyondellBasell. “The shale revolution is continuing,” he says. “And we see the competitive advantage staying for some time.” On July 25 LyondellBasell reported record second-quarter earnings of $1.17 billion. The stock closed at an alltime high of $107.49.

The  Greatest  Deal  of All Time

It is better to own 10% of a billion dollars than 100% of ten dollars. Kenyan entrepreneur Ndiritu Muriithi lives by this philosophy. Twelve years ago, he saw an opportunity when he visited his childhood friend, Bernard Macharia, who was working as a rancher in Rumuruti, Laikipia County.
“It seemed odd to me that cattle destined for slaughter were being transported alive to Nairobi and other markets. I wondered why they were not being slaughtered at the source. After all, a pick-up truck can only ferry four to five live animals, but three times that number when they are slaughtered,” says Muriithi.
A year later, Muriithi and Macharia started Ngare Narok Meat Industries. With $34,775 as seed capital, they set up a modest abattoir that served livestock traders in the region.
“We saw a big opportunity. Every Thursday, we have a market day in Rumuruti and livestock from Samburu, Baringo and Isiolo are sold,” says Muriithi.
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According to statistics from the Laikipia sub-county veterinary office, around $347,000 is exchanged at the Rumuruti livestock auction every week. The market is the second largest in Kenya after the one in Garissa in northern Kenya that is valued at more than $695,000.
Laikipia County is the Kenyan capital of ranching and the ideal place for Ngare Narok. The region has 43 registered ranches sitting on between 10,000 to 110,000 acres of land. The ranches occupy more than 50% of the total land area. The county had 189,685 heads of cattle and 623,648 sheep and goats, according to the Kenya Population and Housing Census. Macharia estimates the entire Kenyan livestock business to be valued at $23 million.
Of the 43 ranches in Laikipia, 30 are privately owned. Laikipia is home to Ol Pejeta Conservancy, East Africa’s largest black rhino sanctuary. Private ranches are used for wildlife conservancy as well as cattle rearing.
“Most ranches are owned by white Kenyans and they account for 15 to 20 percent of the cattle in Laikipia,” says Macharia.
Livestock infrastructure is supported by 50 holding grounds, stock routes and outspans, two public and three private abattoirs, five auction yards and 33 slaughter slabs.
When FORBES AFRICA visits Ngare Narok, the staff is preparing to slaughter a group of animals. The plant has a daily capacity of 50 cows and 100 smaller animals.
“When the animals are brought to us from the auction market, we have to give them about five hours to graze and rest. This allows them to relax, otherwise the meat will be hard because of their tension,” says Rajab Hassan, the General Manager of Production at Ngare Narok.
The company has also broadened its services. Instead of only being an abattoir, Ngare Narok now collects hides and skins, and produces prime beef products, organic compound fertilizer, and organically tanned leather and leather products. Initially, the business didn’t make much money but its fortunes have since improved. By 2007, it was making $31,000 and by the end of last year it had revenue of $1.8 million. Projections for the end of this year are $11.5 million.
“Essentially, we were a toll slaughter house. You brought your animals and we slaughtered for a fee. This led to a trade in hides and skins, as some butchers and meat mongers would pay for the slaughter service using the resultant hide or skin. Ninety percent of the revenue is from hides and skin,” says Muriithi.
Abattoir operations generate large amounts of offal waste. Ngare Narok had to innovate or continue spending money on its disposal. The solution was to produce organic compound fertilizer. They also started experimenting with naturally occurring herbs to tan hides and skins.
“In this business, you make money by adding value to everything. You have to utilize all the by-products to make a good return,” says Macharia.
Muriithi and Macharia were fortunate enough to have friends that believed in their business. One of them was the resident judge of the High Court of Kenya, Justice Isaac Lenaola.
“Lenaola invited his friend in 2005. In the same year, my colleague at the International Finance Corporation, Mary-Jean Ndlovu, intrigued by the story, visited the abattoir. Shortly after, she invested,” says Muriithi.
In 2009, two other potential investors showed an interest in the business. They, however, were not impressed. Their recommendation was drastic: overhaul the top management. The board and management were not taking the business seriously enough. Whereas Ngare Narok had a professional looking business plan, it lacked execution.
Muriithi decided to heed this advice.
“In mid-2011, I had a conversation with my business partner Ken Mbwaya. We were looking at how we could transform our small businesses we had invested in. These SMEs were draining our income instead of growing it.”
Mbwaya, a former HP regional boss, decided to take charge of Ngare Narok in August, 2012, and things started changing.
The renewed shareholder enthusiasm led to two successful issues of rights. They have since welcomed four new shareholders.
“In total, we raised [$460,000] in equity in 2013, most of it from YCEO Holdings Ltd, a young venture capital firm,” says Muriithi.
This year, Fanisi Capital, a private equity fund invested $2.5 million for a 40% shareholding.
Although Muriithi had the option of getting money from a bank, he says private equity offers much more.
“It comes with professional investment and expertise which allows an entrepreneur to get additional ideas that will take the business further than what a sole entrepreneur could have done.”
The downside of private equity is that investors expect high return is short spaces of time. This doesn’t worry Muriithi.
“All aspects of life involve an element of risk. The only question is how well we manage that risk.”
His vision is to make Ngare Narok a multi-billion-dollar establishment. All he wants, is to own just 10% of it.

Beefing Up

When Maybin Madiba Mudenda was 15 years old, he sold CDs and blank cassette tapes across the back of threadbare seats on the train on his way to school from Livingstone to Lusaka.  It is a heck of a long train ride to where Mudenda sits and sells now, in a leather backed chair with a polished table in his offices at African Grey Insurance, in the heart of Lusaka. In his pocket he has over $9.5 million, enough to buy a pile of CDs that could derail a train or match his mountain of ambition.
“Give me five years and I’ll be on the cover of FORBES AFRICA magazine, there with Adrian Gore and Patrice Motsepe,” he says with a smile.
It may take longer. On the FORBES AFRICA 50 Richest List, Motsepe is ranked 11th with $2.7 billion and Gore 45th with $460 million.
It’s not a worry for Mudenda, who makes his money carrying risk. He is of a new generation of confident, cool and savvy Zambians. He started out in logistics for Oxfam and the United Nations High Commission for Refugees (UNHCR) in the drought ridden bush around Nangweshi, in the Western Province of Zambia. The contracts dried up, so did Mudenda’s job. Out of the blue stepped the appropriately named Saviour Konie, known as the father of Zambian insurance. Konie gave him a chance as a salesperson for ZIGI Insurance in 2000.
Money proved the spur. Mudenda’s first commission was $2,000.
“Now that’s when life started to get interesting,” says Mudenda.
A year later, he was confident enough to make a bold move to sell in Zambia’s Copperbelt, the lifeblood of the Zambian economy. The mines needed insurance badly, but few took the trouble to sell it. Mudenda didn’t need an invitation and made $50,000 in his first year.
No sooner had the dust settled on the copper mines, along came another piece of luck. Sandra Valenzo, an Italian working in Zambia and owner of VS Cargos, wanted to move large amounts of copper. Again Mudenda stepped in and oversaw the movement of 10,000 tons of copper from the Democratic Republic of Congo to South Africa in a deal worth $250,000 that earned him 20% commission.
Twelve years later, Mudenda is a multimillionaire. He’s never looked back. He holds 50% of African Grey Insurance which is valued at $6 million and 20% of Genesis Finance Limited which is valued at $3 million. He also owns the $1-million Insizwe Consult , a $2-million 2,000-hectare farm, Muccabella Farms, in Chisamba as well as the Kabanana House and Halen Kaunda House, in Lusaka, valued at $650,000 each.
Through a string of canny deals, Mudenda has also garnered shares with H&amp;F Hydraulics, a company based in South Africa worth $125,000, and 25% stakes in Burton Karya Resources and Kurema Resources.
“The new generation now wants to come out. The older generation still lives in the fear that if you talk about your wealth, the politicians will still come and haunt you. You will find guys that will call you and say ‘no you mustn’t tell people about your wealth. People will put some sort of juju on you. You are attracting commissions to you’. I have got nothing to hide,” says Mudenda.
Among his assets are cars that are the envy of most people he passes in the street. A Mercedes Benz SL500, ML500, E300, the new S Class and a Land Cruiser are parked in his garage. It is a long drive from the tiny apartment he shared 15 years ago.
“We used to have nothing. We used to live in a little two bedroom flat in Northmead, Buchi Road. My mom gave us a Toyota Camry 1998/99 model. We were comfortable, but we didn’t have all these luxuries,” he says.
Mudenda says Zambians must not be afraid to start their own businesses.
“The next generation must go for what you think is right for you. Most young Zambians believe in being workers. They are so scared of being entrepreneurs. But you need to go out and fight to get the business. I’ve got files of people who I’ve been to school with that could do it. You know what I’ve started doing now? I’ve started employing them as agents. That’s what Konie did for me,” says Mudenda.
Mudenda might not be on the cover of FORBES AFRICA anytime soon, but with more deals on the way he could put himself in the fast lane. At the very least he plans on shaking hands with the men he looked up to when he had nothing.

Meet Our  Cover Story  For 2019

Pulling together the United Nations Environment Programme’s (UNEP) many threads is extraordinarily difficult. Each UNEP thread connects to others, they intersect; touching one affects all.
If looking after the environment is your mandate, what can possibly be off limits?
In Nairobi, UNEP Executive Director Achim Steiner tried in June to stitch the threads together to form a cohesive whole.
Bursting with justifiable pride, he opened the first UNEA, the A for Assembly, and also an ‘A’ for his tenacity and energy in getting 1,200 very important people to go to Nairobi to move environmental matters up the global agenda ladder.
For Steiner, it’s a no-brainer.
“Everything is connected.”
Whether it is deforestation, illegal trade in reptiles, microplastics in the ocean, developing green energy alternatives, climate change, food waste, sustainable palm oil, rhino and elephant poaching, environment and the rule of law or global investment strategies, all is connected.
“We may have been at the periphery of the global agenda in 1970 when UNEP started. We are no longer there, we are at the center.”
He’s right, of course. Getting governments, business, investors and vested interests to see this is a different matter. So this is the task he has set his staff.
What constitutes success for this first assembly?
Softly-spoken, a dual citizen of Brazil and Germany, Steiner smiles at the question, then answers softly but directly.
“The minute your child is born you claim success. A newborn does not start running like Usain Bolt.”
“So, success? First, did people come? Are we seeing other sectors involved? Has UNEA attracted a bigger constituency? Can we conduct our business?”
UNEP’s business is predicting or pinpointing disasters then doing something to prevent them. Climate change, deforestation, illegal wildlife trade and the oceans’ decline are among the issues on its radar.
The assembly child born in Nairobi is quite an achievement: 1,200 people, from around 150 of the potential 190 countries, and about 100 ministers.
Getting this bunch together in a country many see as a security risk shows how the United Nations (UN) and the world sees the environment moving center stage socially, economically, politically.
The UN does not easily give permission for an assembly outside of the General Assembly. Even if you do have one, nobody might arrive. But they arrived in droves, from Prince Albert of Monaco to Secretary-General Ban Ki-moon.
This first meeting had more goals than all those scored in Brazil. Setting goals, and targets towards goals, is UNEP’s speciality.
When it comes to money, numbers bandied about in Nairobi were eye watering: sums saved, used, needed, pledged, spent.
Green bonds have attracted billions; the cost of illegal wildlife crime is estimated at $213 billion a year; even a tiny program like reducing short-lived climate pollutants has $50 million in its trust fund.
These numbers are chicken feed for Steiner.
“How will 10 billion people live together on the planet? Entire economies are rethinking how they provide power, food, transport. The world wants an authoritative body on environment.”
“We are rediscovering nature, not as a romantic thing, but as a harsh reality. Seven million people die every year from pollution. Why?”
He says the public knows more, expects more and demands more. A trillion dollars a year is needed to finance a green economy, Nick Robins, director of UNEP’s Inquiry into Design of a Sustainable Financial System, says.
“The global stock of assets is $225 trillion, so the money is there. The rules of the game are just not driving it towards a green economy, although returns are huge,” he says with a shrug.
There is an irrefutable logic to everything proposed at the assembly, yet often a concomitant lack of implementation.
Like climate change. We all know it is coming, why is so little done? Another shrug. Vested interests, greed and global corruption.
Yet there are literally countless success stories told in Nairobi, from saving the ozone layer to stopping lead in petrol and sulfur in diesel.
The assembly has meetings aplenty. High-level meetings, country specific, illegal fishing group, green economy specialists, wood scientists, donors, funders, oceans, climate, water, the energy group. Whew! Each has a report, a book, a foundation, and everyone is desperate for publicity.
UNEP strives for a minimum standard of living, it not being just a dollar thing. It is sanitation, education, clean air, food, security, transport and insurance.
UNEP also seeks out the bad guys and tries to discipline them. Overfishing, pollution, illegal charcoal, logging and poaching.
Governments are convinced by UNEP to stop subsidies to fish faster, or subsidies to burn coal for energy. Enemies are legion and include plastic in the ocean, carbon in the air and loggers on the ground.
Despite the environment’s dark outlook, optimists people the assembly. Reports fall on journalist’s desks like confetti. Saving the forests, towards a green economy, stopping pollution, reversing coral reef decline. Much is being done.
Take oceans. The report shows drivers of decline – rising demand, technological advances, fish stocks plummeting, habitat loss, weak governance, climate change – but matches them with eight drivers of recovery: development goals for oceans; governance; stopping overfishing; closing seas, ports and markets; keeping plastics away; establishing oil and gas standards, a global oceans board, creating regeneration zones.
Was this first assembly successful? People came. It made news. Other sectors were sucked in. Yep, pretty successful for a first try.

Billions To Save Millions

Stars are still out as Dirk Schlebusch starts work at 4AM. It is the busiest time of day for him as truckloads of potatoes arrive at the Joburg Market. In the next few hours, they will be traded as commodities worth millions.
The market’s 10 halls, that span 64 hectares, are piled high with pallets of every kind of fruit and vegetable. This is the primary fresh produce exchange of South Africa as well as destinations across Africa. It is also the largest of its kind in the world.
Before noon, the dynamics of supply and demand, of middlemen’s mark-up and the whims of what nature offers up on the day, merge to determine the first price tag on fresh produce as it exits the market. Food price inflation and food security issues are becoming more and more important as population numbers explode and demand soars. It puts the links in the chain, like the passage of food through the market, under increasing scrutiny.
Schlebusch is a buyer with Wenpro, one of the most established agents at the market. They serve as middlemen between producers and buyers. He specializes in potatoes, like his father has done for 40 years.
Potatoes and onions are big sellers at the Joburg Market and together fill out their own hall. An average day sees around 1.4 million kilograms of potatoes traded.
Schlebusch has standard daily orders from big retail chains, wholesalers and the companies that process vegetables for frozen food products. He also sells to restaurants, hawkers and walk-in buyers.
“We have potatoes for everything and potatoes with every kind of price tag to suit whatever buyers are looking for.”
When determining a daily price, Schlebusch checks the quality of physical stock that arrived on the day, examining stats from previous days and pulling up stock sheets that detail the availability of potatoes throughout the market.
With fresh produce you don’t have the luxury of stockpiling for extended periods to influence the market in the hope of fetching a higher price. It’s too much of a gamble &#8211; fresh food perishes or loses quality and there’s no saying what hand nature will play.
Schlebusch says it’s ultimately down to supply and demand, the best produce still fetches the best prices and the highest bidder still wins. It’s how the market has functioned for 120 years, from the days of its origins in Newtown. The market is just a few years younger than when the city of Johannesburg itself was founded.
Schlebusch’s ear is glued to a phone, communicating with buyers and farmers throughout the day.
“It is about relationships. If you don’t give your farmers the service they expect they’ll go to another agent and if your buyers don’t get the produce at the prices they want they will also go somewhere else,” he says.
As he chats, a call comes through from an anxious farmer. A lorry has been delayed; it never made it to market on time to join the sample displays. It means an instant drop in price for the farmer as his potatoes become day-old stock.
It’s the middle of July, and at the market the bulk purchase price of Grade 1 bananas is worked out at around R4.45 a kilogram (R1=$0.10). They will end up in the mid-range supermarket upwards of R8.99 a kilo. The top-grade potatoes are selling at R46 for 10 kilograms. The price almost doubles at retailers.
The price gap from market to retail comes with everyone along the value chain taking their cut. Tracy Davids, an analyst at the Bureau for Food and Agricultural Policy (BFAP), says day to day market prices are more volatile than what end consumers see at retail level. The price hikes come from transport and labor costs, repackaging, labeling and operational and distribution overheads that retailers incur. Added to this is the rising fuel and electricity costs in South Africa.
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Davids says managing food inflation ultimately comes down to having a more robust economy.
“Food security will always be a critical issue and at the end of the day it’s the consumer who pays more and more as costs in the value chain increase, which is why we need effective value chains,” she says.
Piet van Zyl, who runs Wenpro’s fruit section, outlines some of the unique challenges of handling fresh produce. Although the value chain comes with mark-ups, disruptions can cause even more hikes. Wenpro has seven cold rooms, each runs at around $470 to $560 a month. It makes load shedding and power cuts his biggest nightmares. Agents are responsible for the upkeep of their own pallets and fleets of forklift trucks that criss-cross the halls in urgent beeps. Agents are also responsible for the health, safety and general cleanliness of their halls. It adds up to operating costs that run into the millions.
“Agents must perform and grow or the market will start taking away your floor space,” he says, waving his gloved hand, protected against the early morning chill, across the expanse of the hall that is Wenpro’s terrain.
Agents must be able to offload produce fast enough, retain the integrity of the product on the warehouse floor and sell as quickly as possible at the best price possible.
“Sometimes the agent’s buyers resort to salvage sale, it means they will make up the loss from their profits to make sure that the farmer still gets his base asking price. It keeps the farmer loyal to the agent and opens up floor space. Good buyers know where they can afford to take a loss and where they can make a profit,” says Van Zyl.
Agents take up to 7% on any deal, 4% goes directly to the agent’s buyers. The market takes a 5% cut.
It’s something that’s top of mind for Gugu Hadebe. She is the director of Egoly, the newest of the market’s three Black Economic Empowerment agents.
Hadebe says breaking into the market as a black woman was not easy. Her advantage is that she was previously employed by the Joburg Market. She understands the role of agents as well as the cultural, political and historical nuances attached to farming in South Africa. Another significant insight she had was to team up with old hands in the business, which plainly put, meant white males.
“I knew I had to have the right partners, people who have been in the game longer than I have been, people who have built relationships with farmers and buyers,” she says.
Egoly currently has eight sales staff. They concentrate on selling to hawkers rather than competing at this stage, with the likes of Wenpro, with its 350 staffers, who target bigger fish like retail giants.
“There is a big hawkers market out there that’s still growing in South Africa. People still buy from the [old lady] on the street where they pay less, where they may know the seller and they pick and choose as they like,” says Hadebe.
Each of the market’s 14 agents has to find its niche to deliver a value-add. Some do specialty items like sourcing exotic dragon fruit from South East Asia, or making sure there’s enough ginger for the explosion of sushi bars across the country. Others offer pre-packaged produce or some, like Egoly, target specific sectors within the pool of buyers.
“We don’t sell anything as a market. It is a free market system, we are just a platform where anyone can come here to sell through an agent or to buy from whomever they choose,” says Simangele Sekgobela, CEO of the Joburg Market.
Sekgobela adds that the market has had to respond to changing demands, like the key issues of traceability of produce and minimizing human handling of food.
“We’ve also had to adapt to meet international standards, which includes things like maintaining an unbroken cold chain and following standards for pesticide limits,” she says.
The adapt or die principle applies to the market, like it does to almost everything else.
“We have seen a decline in the stock that comes through the market in the past few years. Retailers are doing more direct sales from farmers and developing their own storage facilities. In the future, there will also be more virtual sales that will mean produce will not physically come through the market. It’s the reality of a free market, but you’ll never replace the market completely. You will still need the market for its facilities, its quality control and convenience of having everything under one roof,” says Sekgobela.

Tag: September 2014

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