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

Onwards and upwards

In the weeks since Muhammadu Buhari was elected president several lists have emerged purporting to show his ministerial nominees; the frenzied list-making an expected outcome of Nigeria’s speculation mills tilting into overdrive during periods of political transition.
That federal cabinet, when finally constituted sometime in June, will, like all others before it, comprise a blend of technocrats and politicians. What is yet unclear is which of these groups will dominate, and if there will be a critical mass of reformers, similar to the group that dominated the second term of President Olusegun Obasanjo and helped him achieve landmark reforms in pensions, electricity legislation and Nigeria’s foreign debt position.
Buhari has said he will work to downplay the involvement of the cabinet in the award of contracts, and instead remake it as a “policymaking” body. He has also said he will not be depending on the governors to constitute his cabinet. If he follows through on this vow, it will be a break from a tradition set by the People’s Democratic Party, which has ruled Nigeria since 1999.
Nigeria’s constitution stipulates that all of the country’s 36 states must be represented in the federal cabinet. This means that there will have to be at least 36 ministers, regardless of whatever cost-cutting ambitions a president might have. During his first spell as president, Buhari’s preference for a relatively smaller government was backed by the near-absolute authority he held as military ruler.
The finance minister role gained unprecedented power under the Goodluck Jonathan presidency, when its occupant, Ngozi Okonjo-Iweala, was concurrently designated the coordinating minister of the economy’ – likened by observers to an unofficial prime minister role. Considering the dire state of Nigeria’s finances, and also of its prospects in the short to medium-term, the choice of finance minister will be one of the most important decisions Buhari has to make.
The three people who represented the incoming government at the spring meetings of the World Bank in Washington DC in April – Ifueko Omoigui-Okauru, a former head of the Federal Inland Revenue Service; Wale Edun, who ran the Finance Ministry in Lagos State between 1999 and 2004, and is also a co-founder of Stanbic-IBTC Bank; and Abba Kyari, a former CEO of UBA – have all been tipped to get the job. All three previous Finance Ministers have come directly to the office from the executive ranks of multinational banks – Mansur Muhtar from the African Development Bank, Olusegun Aganga from Goldman Sachs, and Ngozi Okonjo-Iweala from the World Bank.
The Petroleum Ministry will also be keenly watched, as it is oversees the lifeblood of the government and the economy. Buhari has previously served as Chairman of the Nigerian National Petroleum Corporation (NNPC), the national oil company, and Minister of Petroleum, and may be tempted, like President Obasanjo did for all of his eight years in office, to retain direct control of the all-important sector.
Anyone looking for possible insight into the nature of the Buhari cabinet might have to look at the Transition Committee he assembled in April, to liaise with the outgoing government and help lay a policy foundation for the new one. The membership of the committee drew from various blocs: the old guard (like Tam David-West, Buhari’s Petroleum Minister 30 years ago; and Committee Chairman Ahmed Joda, already a powerful federal bureaucrat in the 1970s when Buhari was taking on his first government role), and a crop of younger technocrats like Doyin Salami, a professor at the Lagos Business School, Wale Edun, and Bola Adesola, CEO of the Nigeria office of Standard Chartered Bank.
Some ministries have traditionally been regarded as A-list because of the relatively larger capital spending budgets they wield, and will therefore see a lot of intense lobbying from interested people and interest groups. They include health, federal capital territory, education, defence, works and water resources. Sources say Buhari’s plans to focus on diversifying Nigeria’s natural resource base beyond oil and gas will elevate the Ministry of Solid Minerals into this elite club.
Beyond the cabinet there will be hundreds, perhaps thousands, of appointments to be made over the next four years. Primary ones will include the cabinet secretary (secretary to the government of the federation), chief of staff, principal private secretary, a spokesman (‘special adviser on media’), a chief economic adviser, and, possibly – in keeping with recent presidential tradition – a quietly influential special assistant on domestic matters.

Who Will Run Nigeria?

There is a Swahili saying that goes; ‘a good day is known in the morning’. Is 2015 a good year for the Kenyan investment environment? All indications suggest it is.
The World Bank has reviewed its prediction about Kenya, predicting GDP growth at 6%. While I am happy that the New York-based economists think so highly of the country, I highly doubt if this will be the case.
The World Bank has missed its growth predictions for Kenya for three consecutive years, being forced to adjust mid-year from 2012. Beyond that, the country’s economy is still not out of the woods and growth will remain slow.
For this year, I would trust their adjusted statement given in June 2014, stating that the economy would grow at around 4.7% both in 2014 and 2015. I would place the figure at between 4.9% and 5.2%, two to four percentage points above Mckinsey’s growth figures for Africa.
To make accurate predictions, you need to look at the past.
The Nairobi Securities Exchange (NSE) performed averagely in 2014. The NSE 20 Share Index delivered price gains of 4.9% compared to 19.2% the previous year. On the flipside, the NSE All Share Index (NSEASI) delivered a price gain value of 19.9% compared to 44.1% in the previous year.
It’s worth noting that the NSEASI is driven by speculative trading on the smaller counters, mostly in the agricultural sector. The large caps in the NSE 20 are mostly attractive to large investors who prefer long term to short term benefits, hence minimal price gains.
While the price gains were average, most of the companies registered the anticipated major profits. Safaricom reported a net profit of $256 million, a 31% increase, while Equity Bank reported a profit of $211 million for the year ended December 31, 2013. Better news arrived when the bank announced its third quarter results in October to stand at 124 million, a 26% rise from the previous year.
It was not all rosy though. Kenya Airways reported a loss of $87.9 million, which coincided with the rising insecurity in the country, the Ebola pandemic in West Africa and poor tourism numbers driven by travel advisories in the west. The other companies that reported losses were Mumias Sugar, suffering the after effects of dishonest management, and Transcentury which posted a half year loss of $17.8 million.
The country’s economy grew 2.7% in the first quarter, 5.8% in the second and 5.5% in the third. While better performance is expected for the fourth, I believe Kenya’s growth figure for 2014 is still within the region of 4.7%.
With this information, one can authoritatively talk of a better performance in 2015.
I expect continued activity from the traditional movers like Safaricom, Equity Bank, KCB, EABL and Kenol Kobil. I also expect Mumias Sugar to make a comeback after shedding off 33% last year. There will also be significant activity from the growth counters; Centum Investment, Britam, and Car and General.
In essence, the sectors to watch will be agriculture, insurance, banking and oil which will benefit from the lower crude prices. We may even see a breach of the 6,000 mark for the NSE 20 Share Index, with the risks being poor implementation of the capital gains tax and insecurity.
The decision by the ICC to drop charges against President Uhuru Kenyatta is good news for the country, but terror attacks are derailing progress in Kenya, having eroded the robust tourist industry last year. While there is confidence in the government efforts to curtail the attacks, the risk still lingers in 2015 and might affect business significantly.
I expect government economists to take a conservative approach in setting both the fiscal and monetary policy. The Vision 2030 flagship projects will offer liquidity to the economy and spur growth, thus there will be no need to induce additional government spending in the next budget. In addition, the spending will send interest rates downward and the Monetary Policy Committee is likely to lower the Central Bank Rate when the economy has responded positively to the aggressive fiscal spending.
With this in mind, I can say it’s a good year to invest.

Expect Better Things

The accidental economist: Dr. NGOZI OKONJO-IWEALA

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

Can Africa shrug off  the resource curse?

Is Africa a statistical tragedy?

The Democratic Republic of Congo (DRC) is immensely rich in resources but past conflict has held back the realization of this wealth, leaving its people amongst the poorest in Africa. The country is expected to be home to the world’s eleventh largest populationa by 2050. Raw mineral deposits are estimated to be worth in excess of $24 trillion but lay idle as fighting plagues the country.
It has seen at least four million people killed and another three million displaced.
Government forces continue to fight the rebel group M23 in the east, and recent peace talks have been suspended. Rene Abandi, leader of the M23 delegation, was quoted saying that negotiations are meaningless.
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This could jeopardize the economic foundations that have already been laid. Eustache Ouayoro, country director at the World Bank, says that over the past few years, the DRC has been able to make significant progress to restore security across most of the territory, political reconciliation and economic recovery with the support of international partners, including the World Bank. So the world waits with bated breath.
Experts look to the country’s vast untapped wealth to pave the way to economic freedom, but say the road to this is likely to be a long one. Ouayoro says that positive signs are there, albeit tentative. The DRC may be emerging from instability and taking its first steps towards a new development era.
The country’s citizens suffer from poor healthcare, limited education and poverty. According to the World Bank, the DRC ranks last among the 187 countries in the Human Development Index. Poverty is widespread, with 71% of the population living on $1.25 a day.
The DRC, however, has been making steady strides in economic growth. Inflation was under control and in single figures in 2012, compared to 500% in 2001, and the World Bank says that with economic growth of 7.2% in 2012, and 8.2% expected in 2013, the DRC is among the countries experiencing some of the fastest levels of growth in the world at a time when it is non-existent in Europe.
Debt relief has helped. DRC was granted an estimated $16 billion debt relief under the World Bank and IMF’s Heavily Indebted Poor Countries (HIPC) Initiative. The write down has helped improve the country’s fiscal position and has allowed it to invest its debt savings in to development opportunities.
The World Bank reports that only a mere 10% of the DRC’s huge tracts of arable land are farmed, and only 13,000 hectares are irrigated. The country has four million hectares, but is currently importing at least 30% of its food. The World Bank believes its land could feed a billion people.
Ouayoro says that for the country to realize its full potential, there needs to be: improvement to the business climate; progress on anti-corruption measures; economic governance and stronger government institutions. It will also have to address the large infrastructure gap and prioritize food production and agriculture.
“We must promote inclusive growth in the DRC by making its economy more irresistibly competitive and helping to spur the creation of new, well-paying jobs, especially for the country’s growing ranks of young people,” Ouayoro says.

The Poor Rich Country

They stretch for hundreds of kilometers. When it’s good, you feel like you are gliding over jet-black silk. But, when it’s bad, it’s like you’re juddering through dust and potholes. Driving an economy without roads is never easy. Especially when it comes to African roads, where transport costs remain among the highest in the world, according to independent analyst Andrew Maggs. The question is­: who pays for it?
The World Bank reports that only six countries in Sub-Saharan Africa have more than a fifth of their roads paved. Those with the most tar roads may surprise many: Ghana; Botswana; Mauritania; Morroco; Niger and Ethiopia, far from the economic giants of the African continent.
This is a sign that Africa is crying out for investment in roads.
“At present, Africa’s road network is falling short of its function as a means to bring about greater regional integration and boost trade. For landlocked countries in Africa, transport costs, including road transport, can reach up to 75% of the value of exports. The cost of building road networks, and thereafter their maintenance, is costly,” says Maggs.
A key to investment is the Trans-African Highways System, he says. It comprises of nine main corridors on the continent, totaling over 59,000km, linking Cape Town to Cairo.
You could argue that Rome wasn’t built in a day, but the Romans did build roads that helped build an empire; roads which, to this day, still exist. On the other hand, they didn’t have to handle heavy low-load coal trucks or 16-ton wheelers carrying groceries from Durban harbor to Johannesburg along congested roads.
This kind of heavy traffic is the reason why the South African government built a wider, faster freeway through Gauteng. Now, it wants its money back. Whether they like it or not, drivers in Johannesburg are going to have to pay for the R18 billion ($1.8 billion) road the government built, stretching more than 185km around Johannesburg and Pretoria; a road that has undoubtedly eased traffic.
This has been fought through court and on the streets. The government wants people to pay R8.5 billion ($842 million) alone for a hated tolling system. On the front line is Wayne Duvenage, former Avis car rental agency owner and leader of the Opposition to Urban Tolling Alliance (OUTA).
“At this stage I want to set the record straight. We know we have to pay for the roads. Society ultimately pays for all upgrading and infrastructure development. The problem here is how we pay for the roads. As several companies started to engage with South African National Roads Agency Limited (SANRAL) we realized how onerous and cumbersome and how inefficient the system is,” says Duvenage.
There are 3.5 million people on the road in Johannesburg. In October 2007, all it took was an advert in six newspapers, which drew a mere 28 responses, to legitimize the road agency SANRAL’s project, the Gauteng Freeway Improvement Project (GFIP), he says.
No one complained when development began, before the 2010 FIFA World Cup, until the first tariff prices for e-tolls emerged, explains Duvenage. The public’s gripe is the annual R1.5 billion administrative cost, omitted by SANRAL, when the tender was gazetted. When people started adding this to the road cost of R1.9 billion ($190 million), to be paid back over 20 years, opinions started to change.
Gauteng drivers are not happy that they will pay on average R300 ($30) a month for a road for which they already pay a fuel levy and extra taxes.
Over three years, there have been numerous protests against e-tolls. Bikers have revved their anger on the highways. The South African labor union, COSATU, has blocked the traffic with slow driving, vowing to cripple the system. OUTA managed to win a court interdict banning e-tolls in April 2012. The court ruling was overturned by the South African Constitutional Court a few months later. SANRAL argued that if e-tolls were not implemented immediately the debt would be too great for the country to recover.
In mid-June, more controversy, Kapsch TrafficCom AG, the overseas company awarded the billing tender, told Bloomberg that it would get an additional annual revenue boost of R670 million ($67 million) through South Africa’s e-tolls. The announcement inflamed opinion yet again.
“Who could believe SANRAL’s claims that e-tolling is beneficial to South Africans when the only proven financial benefit to date is to Kapsch? Kapsch’s bold trumpeting of their revenue figures has unmasked e-tolling as a government-assisted [program to create] profits for a foreign-based entity,” says Duvenage.
According to Vusi Mona, SANRAL spokesperson, money will not be going overseas. All toll fees collected will go to SANRAL, except for the service costs of e-toll, which will go to Kapsch, as specified in their tender contract, he says.
Kapsch have posted an 18% drop in stock, since the delay. SANRAL has also had its fair share of knocks, their average monthly expenditure to pay for GFIP will amount to R601 million ($60 million). Credit rating agency Moody’s has announced a two notch downgrade of SANRAL’s rating. The company says it has had to suspend its marketing activities and limit the sale of its bonds to depress borrowing costs. Another cost to the public, SANRAL says, is that future road plans have been put on hold, despite a government bail-out of R2 billion ($200 million).
Had the interim interdict remained in place, parliament may have had to appropriate more money from the national revenue fund at the expense of tax payers, even those who do not live in Gauteng, says Mona.
The final appeal is to be held at the Supreme Court, on September 25 and 26. If successful, OUTA’s last roll of the dice against e-tolls could see it scrapped, leaving SANRAL to find another way of collecting the debt.
“We just don’t want to be ripped off. I think they planned this very sketchily; they didn’t do enough research. They didn’t engage properly. Now the chickens are coming home to roost,” says Duvenage.
The campaign against e-tolls is not as strong as they would have liked. Duvenage says people have had  problems digging into their pockets to win the fight. In legal fees alone, OUTA has raised R8.4 million ($840,000) but needs another R3 million ($300,000) to tackle the government in court. They need to raise R1 million ($100,000) by July 21, which the official opposition party, the Democratic Alliance, has decided to fund. Duvenage estimates the government’s legal costs run more than R25 million ($2.5 million), enough to pay for 1.8km more road on the highway.
“We are fighting a case that government has free reign over our taxes to spend our tax money in the courts and society has to go out with a begging bowl,” he says.
In response to OUTA’s call for more private money, Mona says OUTA is wasting public money by going against past court rulings.
In the meantime, SANRAL’s e-toll system was awarded first place in the 2013 Toll Excellence Award for Technology by the International Bridge, Tunnel and Turnpike Association (IBTTA). It did not win a prize in the other three categories: customer service; operations; and social responsibility.
As the debate continues, more and more anger is being generated by rises in fuel levies, food prices and the general cost of living in the city. For many of Johannesburg’s citizens, the roadways provide the only reasonable means of travel to and from work.
There is no doubt the N1 is the envy of Africa, the question is will anyone pay for it? It is likely that they will have no choice.

Swallow The Black Brick Road

Ganiyu “Tarzan” Balogun, managing director of Tarzan Marine Enterprises in Lagos, Nigeria, is not a poker player and he’s never taken big business risks. His success story is riddled with serendipity so that he now owns one of the oldest boat companies in Lagos. Tarzan was born in 1943 and spent most of his early childhood in Tarkwa Bay, close to Victoria Island. As a boy, he took a 15-minute boat trip to and from school. After completing his studies, he worked for the African Insurance Brokers Company (AIBC) as a driver. His father, then an engineer for the Nigerian army, was unhappy with Tarzan’s career choice and forbade him to continue working as a driver. It took an AIBC senior management official to convince the old man that it was in his son’s interests to work for them. Nine months later, AIBC bought Tarzan a boat.
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Soon after acquiring the boat, Tarzan began ferrying passengers. He soon realized there was good money to be made from the waterways. A cargo ship about to dock, gave him an idea: the crew would make excellent tourists. Captains and crew rented his boat to go ashore and his bus to tour Lagos. “I used to take them to night clubs and wherever they wanted to go to have fun and take them back to their ship of around 11,” says Tarzan. He expanded his business. By 1990, he had opened his first boat yard in Eleke Crescent, home to 65% of Nigeria’s foreign embassies. Tarzan ferried diplomats visiting the country.
He later moved to Lekki Expressway where he still conducts his business. The old building on Ozumba Mbadiwe-Lekki Expressway waterfront is deceptive. It hides Tarzan’s success story. He carries 4,000 passengers a week. In a good month, this company could generate more than $50,000.
Tarzan has now been operating for 30 years. Many times, he could have given up. He tells an anecdote of the impact of government policies on his business. “I have been beaten so many times by the Nigerian army and police because I used to buy fuel with the 20-liter jerry can for my boat,” says Tarzan. The government had banned the sale of fuel in jerry cans to curb the practice of hording petrol and later selling it at a higher price. This, however, had unintended consequences for boat operators who relied on these cans to refuel their boats. Today, fuel stations have been built in Cross River State and Rivers State but they are still to be built in Lagos. Rather than close shop in the face of the challenges, Tarzan persevered.
A tourism industry, which could help companies such as Tarzan’s expand, is still in its infancy. The industry suffered during the recent military and civilian governments. Despite the government’s declaration in 2002 that it intended to make tourism one of the six key areas for economic development, Nigeria is not a popular tourist destination. Countries such as Kenya, with its vast game reserve, have invested heavily in tourism making it one of the most popular tourist destinations in Africa. The West Africa sub-region has lagged behind attracting only 770,000 tourists representing 10% of the 2,6 million international tourist arrivals in 2009. Six of the 14 countries in the region recorded 100,000 international tourists. Paradoxically, Nigeria was ahead of the pack attracting 30% of the sub-regional market.
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If waterways business in Lagos was a game of luck and timing for Tarzan, then for Soji Adeola, CEO of Salmon Multiservices, it was about risking it all. Despite the challenges in the industry, Adeola believes there is potential in Nigeria’s waterways. “A city the size of Lagos cannot survive on a single mode of transportation,” says Adeola. The population of Lagos is estimated to be 18 million and it’s growing at about 8%, which means that the city is growing faster than Los Angeles and New York. The World Bank predicts that Lagos will be the third largest city in the world after Tokyo and Mumbai by 2015.
This is why Adeola is betting on the waterways. While working as a banker, he bought a boat. After completing his MBA studies in 2009, he resigned and focused his efforts on his new company. He operates two boats that ferry corporate officials in the Marina-Apapa Channel. He believes there is potential for his “emerging company”. “As of today, we had 1,4 million Lagos residents using the waterways each month. This is projected to increase to 4 million and perhaps, a lot more than that,” says the optimistic Adeola.
Adeola sees his company as being strategically positioned to provide water transport solutions and meet leisure challenges in Nigeria’s coastal areas. He is proposing a $100 million plan to the Lagos State government to build jetties around Lagos. There are about 60 jetties in the city so far, but these would be insufficient should the market reach the projected 4 million.
Currently, the world’s biggest hotel operators are the only serious investors in Lagos’ waterfronts. The Oriental, Four Points, Peninsula Resort and Radisson Blu hotels got in early to line the picturesque Ozumba Mbadiwe-Lekki Expressway waterfront.
For investors looking for returns, your next trip should be to Lagos–there is plenty of opportunity in the waterways.

Tarzan: King of the Water

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.

Choked By An  Energy Crunch

With six months to go before South Africa’s governing party, the African National Congress (ANC), goes to its elective conference, incumbent president Jacob Zuma looks set to get another term. And with that, a renewed focus on continental politics, for which his critics have chided him.
Zuma’s opponent, Julius Malema, the party’s rebellious youth league president, is not contesting the ANC presidency but is the spokesperson of a disparate group united in wanting the 70-year-old former political prisoner and intelligence operative removed from power. Their campaign though, has been dealt a huge blow.
Malema is facing several disciplinary charges and the party’s internal disciplinary committee has found him guilty on some, meaning that whatever the outcome, the young man looks set for the political rubbish dump. Unless a worthy challenger emerges between now and the December conference and goes on to defeat Zuma, he is set to remain at the helm of the 100-year-old political party and the head of Africa’s most powerful economy.
Among Malema’s most stinging criticisms of Zuma’s reign was that he had failed spectacularly where his predecessor Thabo Mbeki had done extremely well—in pursuing the African agenda. It was a criticism, and a comparison, that hurt Zuma and one that he has since looked eager to correct.
So, on March 20, when Zuma walked into the Sandton studios of pan-African television channel CNBC Africa for a live hour-long interview, with some of the continent’s CEOs and board chairpersons in the audience, he knew he had a mission to accomplish, or as his aides would have probably preferred to put it, he had a myth or two to debunk.
Sitting opposite CNBC Africa’s chief editor Godfrey Mutizwa, and occasionally fielding questions during crossings to CEOs in countries like Nigeria and Kenya, Zuma showed composure for someone who has countenanced perhaps harsher criticism than any post-apartheid president.
While some of the condemnation prior to his election had a lot to do with his indiscretions, which in turn led to sexual assault charges against him, others were in subtle ways questioning whether a man with only a primary-school education, would be able to fill the shoes of his Sussex-educated predecessor and intellectual, Mbeki. Was he best suited to preside over an ambitious country that not only likes to punch above its weight, and which likes to be loved, but is also the most sophisticated African economy?
The more Zuma sold his optimistic disposition of the continent to the CNBC viewers and the studio audience, the more friends he seemed to be making among the attendant captains of industry, many of whom wasted no time in praising him for his “insightful comments” and for “answering questions”.
One of the continent’s biggest “strides”, he said, was the formation of the African Union. “For the first time, we could define ourselves as one, as Africans and not as former British, Belgian, French colonies.”
The AU has been credited with bringing about continental political stability through promoting the culture of democratic elections as well as the principle of non-recognition of people who grab political power through coups d’état.
Zuma shared with his audience how the AU had advanced in getting member states to commit to investor friendliness, infrastructure development, better and responsible management of natural resources, environmental sustainability, education, and had now started talks about the integration of the continent’s five regional economic blocks. Asked to give timelines for the “practical implication” of the integration process, he replied: “It took two world wars before Europe could come together. Africa should be given a chance.”
A welcome sign of confidence in Africa’s future, Zuma added, was the inclusion of South Africa in BRICS, the increasingly influential group of emerging economies: Brazil, Russia, India and China. “Africa is now part of countries that are going to determine (the world’s economic) direction,” he said.
“I don’t see a crisis. I see prosperity in Africa,” he told the audience, and with a great deal of satisfaction, not to mention his trademark coy chuckle that usually signals cynicism. “Other people speak positively about Africa. Sometimes it’s Africans themselves who are negative; who feel Africa is in trouble.”

David Attacks Goliath

As a multitude of the wealthy and powerful of the mining world rubbed shoulders in Cape Town, the picture emerged of what this year holds for the industry in Africa.
<div id="attachment_434" style="width: 484px" class="wp-caption alignleft"><img loading="lazy" decoding="async" aria-describedby="caption-attachment-434" class="size-large wp-image-434" src="/wp-content/uploads/2017/04/6830715115_459e9c16cd_o-1024x683.jpg" alt="" width="474" height="316" />Jonathan Moore, MD of Mining Indaba; Michael Katz, the chairman of ENS (Edward Nathan Sonnenbergs); Martin Kingston, executive deputy chairman of NM Rothschild’s local bank franchise and Trevor Manuel, Minister in the Presidency for the National Planning Commission at the Mining Indaba on Monday, February 6, 2012</div>
Mining represents 50% of total merchant exports in Africa south of the Sahara, says the World Bank.
From the scores of presentations, briefings and conversations it is clear that investors are still jumpy about the world economy and Eurozone contagion; they are nervous about resource nationalism—that is, people wanting a greater share of their country’s mineral wealth—and are wary of new mining regulations. The ruling African National Congress in South Africa proposes new taxes on mineral rights in South Africa, plus a windfall tax for returns over 22%.
Although South Africa’s former Finance Minister and now National Planning Minister, Trevor Manuel, conceded during the Indaba that “in the main the government has failed”, saying “we haven’t managed this process well”, he thinks the new tax proposals that were now being considered were a “sensible taxation” whose proceeds will be invested into broader development as the commodities boom was not poised to last forever.
As for beneficiation, which a lot of people thought would help create and sustain jobs, the minister thought it was a double-edged sword. Often beneficiation needed energy and capital that locals did not have.
“Nationalization is not a smart strategy,” Manual concluded.
<img loading="lazy" decoding="async" class="alignleft size-large wp-image-433" src="/wp-content/uploads/2017/04/6830713659_56e40368fb_o-1024x683.jpg" alt="" width="474" height="316" />
Zambia Chamber of Mines head, Frederick Bantubonse, thought there were lessons other African countries could learn from his country, which nationalized mining for 30 years.
Before nationalization in 1973, Zambia produced over 700,000 tons of copper, says Bantubonse. When it rolled back the nationalization program about 10 years ago, the country was producing a mere 257,000 tons. It has now gone back to the pre-nationalization production levels.
But now indigenous business people are finding it difficult to enter the industry because of the big capital investment needed.
It was small comfort that the investors’ nightmares of nationalization appeared to be put to bed by public utterances by the powerful at the conference.
“This whole nationalization story is going to be difficult to wash off. Investors won’t put another dollar into South Africa, they would sooner invest in gold in Eritrea,” says one disgruntled delegate.
Robert Besseling, senior Africa forecaster for Exclusive Analysis, said: “Gold in SA is over. It is too deep and expensive to get out of the ground and there are higher taxes on the way. Power is also a problem and the national power generator, Eskom, is warning that from April there could be new power cuts.”
“The growth of South African mining is going to be in platinum, coal and manganese, but when you bring up the idea of nationalization… the mid-level investors from Australia and Canada I have spoken to here have extreme worries.”
Rajat Kohli, the global head of mining and metals for Standard Bank, believes the Chinese will be among the main actors in resources in Africa and these worries may pass them by.
“I think they have a long-term view; the Chinese plan 10 to 20 years ahead so they do not share the same sort of short-term fears as western investors,” says Kohli.
Africa will continue to be vulnerable to market volatility, but the continent is poised to ride the storm, says World Bank operations officer, Miria Pigato. Favorable commodity prices were only one reason she felt that way.
“This confidence also comes from governments’ more sensible fiscal policies, more accountability, new ways of doing business, a new breed of younger and energetic leaders,” says Pigato.
Another cause for optimism at this mining gathering was the numbers.  In the dark days of the 2009 recession, a mere 3,200 delegates turned up in Cape Town. In 2010, the numbers improved slightly to 4,400 and this year, there were 7,000 delegates.
The organizers are encouraged enough to take the risk of expanding the Mining Indaba to Asia to take advantage of the growing interest in mining in the region.
Jonathan Moore, the managing director of the Mining Indaba, said around 500 delegates were expected to arrive at the first Asian gathering at Marina Bay Sands in Singapore on October 29.
Asked whether the name Indaba—which is an African word for gathering—will be understood in Asia, Moore says: “People there may not know what the word means, but they will know what the

The Trouble With  Mining In Africa

According to the World Bank’s Doing Business Survey, Rwanda is the 45th (out of 183) easiest country in the world to do business in. It takes only two procedures and three days to open a business in Rwanda, compared to an average of eight procedures and 37 days on the rest of the continent.
<div id="attachment_329" style="width: 484px" class="wp-caption alignleft"><img loading="lazy" decoding="async" aria-describedby="caption-attachment-329" class="size-large wp-image-329" src="/wp-content/uploads/2017/04/iStock_000016937094Medium-1024x685.jpg" alt="" width="474" height="317" />Early morning view from a hill into the tropical cloud forest in Nyungwe</div>
Rwanda by far offers the most business friendly environment in the East African Community (EAC). Truly remarkable for a country scarred by a genocide, less than two decades ago, that saw 800,000 people die in 100 days.
Rwanda’s strong performance is thanks to the government’s drive for regulatory reforms. In 2011 alone, the government has: lowered registration fees for businesses; introduced a credit bureau to provide credit rating data and reduced the frequency of value-added tax filings, from monthly, to quarterly. Reforms have also been underway in the banking sector. The International Monetary Fund (IMF) noted government’s restructuring and modernizing in oiling the wheels of the financial sector and concluded that although the financial sector has a few vulnerable banks, overall the sector can withstand a major shock.
Reforms are likely to continue in years to come given the ruling, Rwanda Patriotic Front’s political dominance. President Paul Kagame secured a landslide victory in 2010, which not only ensured his presidency until 2017, but also ensures policy continuity. Political stability, coupled with policy certainty, will go a long way to attract investors.
A central policy focus for the government will be an East African Community initiative in pursuit of a powerful and sustainable economic and political bloc. The European debt crisis could slow the EAC’s pace of establishing monetary and fiscal union. Member states will avoid rushing matters to ensure that they do not wind up in the same mess as the Europeans.
The economy grew 7.5% in 2010. The government expected growth to decline to 7.0% in 2011, but given the performance of the economy as of the second quarter of this year the government revised its forecasts. Government expects growth to average 7.2% per annum between 2011 and 2015. Growth will be supported by investment expenditure to improve the infrastructural base.
The recently signed Bilateral Investment Treaty (BIT) with the United States is likely to boost trade and investment between the two countries. This was the first new BIT with an African country and signals Washington’s seal of approval on Rwanda’s macroeconomic outlook and reform agenda.
Inflation in Rwanda remains benign in comparison to its neighboring countries. Inflation increased to 7.8% year-on-year in October, from 6.6% in September. Rising inflation pressures prompted the central bank into action in October. The National Bank of Rwanda increased benchmark interest rates to 6.5% from 6.0% in a bid to stem these rising inflation pressures. Rising inflation poses a risk to growth and the central bank has to strike a delicate balance. With inflationary pressures being external—food and oil—the impact of monetary tightening is likely to be limited.

Steady As She Rises

Catherine Masinde had a front row seat—or rather, a front row tent—for the difficult birth of South Sudan. It was tough in Juba in the years leading up to statehood; there were three cars on the road, it was muddy and uncomfortable.
In the last year, both Masinde and South Sudan have moved onwards and upwards. South Sudan has secured statehood and Masinde has moved up to what she calls a “half star” hotel. It may be tiny, but at least it has air-conditioning. This Kenyan is the World Bank’s investment climate specialist in South Sudan.
The eyes of the world were on the birth of South Sudan when it became the world’s newest state in July 2011, a moment the people had longed for and voted for.
<img loading="lazy" decoding="async" class="alignleft size-medium wp-image-246" src="/wp-content/uploads/2017/04/C29R8E-300x200.jpg" alt="" width="300" height="200" />
So what does 2012 and beyond hold for a country with the odds stacked against it? It has suffered two civil wars and the economy is precariously dependent on oil. More than half a century of war has left the country frozen in time; building it up will take a lot of time, hard work and investment.
South Sudan is covered in dirt roads that turn to mud when it rains. Electricity is for the lucky 1% and comes from expensive diesel generators. Despite a combined GDP with the North of $30 billion, an estimated four billion barrels in oil reserves and a rich mineral base, 90% of the population lives below the poverty line.
Masinde, who is helping the government of South Sudan rebuild and reform to win investment, is seeing signs of economic recovery.
The three private cars rolling along the dirt roads of Juba in 2005 are now competing in traffic with more than 1,000 vehicles.
“It’s a huge task but as they say: surely surely, slowly slowly,” says Masinde.
Business registries have risen from 136 in 2005 to more than 12,000. About 65% of these are in the service industry, with half of those in construction. The country is a blank slate for the builder.
Excel Construction Ltd carried out the World Bank-funded construction of two education centers in Juba. South Sudan Logistics has been building lodges and clinics since 2005.
The government of the United States is paving a 200km road from Juba to the Ugandan border. Uganda is one of South Sudan’s major trade partners. Hotels have sprung up and Juba International Airport is buzzing. Investment is also going into regional airports.
“Any hand trying to lend to us cannot be denied,” says Peter Bior, South Sudan’s information officer.
Masinde agrees: “Government needs partnerships with private industry to builda country.”
Masinde’s team has helped establish a new Ministry of Commerce, Industry and Investment. The former Ministry of Investment has turned into an investment promotion agency. The Ministry of Justice is being used to strengthen the Business Registry.  The government has also instituted numerous Acts ranging from the Investment Promotion Act to the Personal Income Act.
“The business environment is catching up with the other East African countries. Registering a company takes 15 days and this will improve with time,” says Masinde.
<div id="attachment_245" style="width: 310px" class="wp-caption alignleft"><img loading="lazy" decoding="async" aria-describedby="caption-attachment-245" class="size-medium wp-image-245" src="/wp-content/uploads/2017/04/A80N9T-300x200.jpg" alt="" width="300" height="200" />Nile River in Juba, South Sudan</div>
South Sudan is also pushing to diversify its economy away from oil.
Agriculture is one industry that the country is looking to build. South Sudan is 644,000 sq.km, with at least 30 million hectares of arable land. Only 4.5% of this land is working.
South Sudan has formed bad habits—more than 50 years of war has created dependency on food imports and the World Food Programme.
South Sudan imports its fruit, vegetables and poultry from Kenya and Uganda. This raises questions about food security. Refugees flooding back into the country are putting pressure on an already delicate food balance. The country is prone to floods and drought, but with effective planning, maize, millet, cassava, rice and sesame seeds can be grown. There is also potential for sugar.
“We continue to encourage the civil population to utilize their minor skills [in subsistence farming] but we are looking towards larger operators for commercial farming,” says Bior.
Land grabbing has been a problem in South Sudan. This has prompted the government to create a progressive Land Act (2009). With plans to get the primary sector underway and the infrastructure up and running, there is a call for more manufacturing. There is already an increase in light manufacturing like brick making and the construction of doors, gates and frames.
A leading international company that has seen the immense manufacturing potential in South Sudan is SABMiller. It invested $37 million in its Juba operation, Southern Sudan Beverages Ltd. The brewery manufactures beer called White Bull, soft drinks and bottled water. South Sudanese took royalties from the deal. SABMiller received $1 million from the African Enterprise Challenge Fund, a $120 million private sector fund. This, along with
$2 million from the company will be used by FARM-Africa to work with local small-scale farmers who will grow the cassava SABMiller buys to make beer.
“This project will convert what is currently a subsistence crop into a cash crop, creating valuable and sustainable economic opportunities in a fragile region,” says Mark Bowman, managing director of SABMiller Africa.
<div id="attachment_244" style="width: 310px" class="wp-caption alignleft"><img loading="lazy" decoding="async" aria-describedby="caption-attachment-244" class="size-medium wp-image-244" src="/wp-content/uploads/2017/04/White-Bull-Lager-Pack-Shot-300x256.jpg" alt="" width="300" height="256" />White Bull Lager</div>
From land mines, to beer, to the second Garden of Eden—in the words of the marketing men. Tourism is a market that has yet to be tapped. The South Sudanese government took charge and deployed delegations to countries like Zimbabwe, which profit from tourism in adversity.
The country sits alongside the Nile and is rich in wildlife with a history of a large antelope migration. Al Ain Wildlife, an Emirati company, will be constructing, as per its lease agreement, luxury hotels and tented camp resorts within Boma National Park.
With all the possibilities in business, training and skills development, infrastructure, agriculture and tourism, all eyes are on the blank page that is South Sudan.
The country is counting on its acceptance into the Common Market for Eastern and Southern Africa (COMESA); the East African Community (EAC); the African Growth and Opportunities Act (AGOA); and the European Union to help it gain access to key markets. But most importantly, it is counting on the return of its people and their skills.
The people of South Sudan must band together to shape their country into a formidable one. It truly is a new beginning. Happy New Year, South Sudan and good luck—you are going to need it.
<h3>The Oil Question</h3>
The former Sudan’s oil lies in the South, with the distribution network and refineries in the North. This has always meant that the two nations at war with each other shared the oil revenue. With its dependence it would be ideal for the South to take charge of all its resources, but this is a delicate situation as the North also depends on the oil revenue and would not easily allow revenues to dry up.  Soon after its independence, South Sudan was in talks with Kenya to build a new pipeline between the two countries. This could take years to achieve.

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