IN MY early days of trawling Africa for information many years ago, I spoke to a wise old hand — an international bureaucrat who had travelled Africa while working for the World Bank — about why it was proving to be so difficult to improve the business environment.
It took only political will, not money, I argued, to change regulations to make it much easier to do business. He laughed at my naivety and said political will was a much bigger problem than money would ever be. Any change to business regulations, or the removal of other impediments to business, usually meant someone had to give up some power, thereby reducing their relevance in the system.
Change in a bureaucracy, he said, was viewed as a zero-sum game. To make it happen, someone would win and someone would lose. Those who thought they might be the losers did everything in their power to ensure the change did not happen. For example, however busy and unavailable they might be, senior officials are unlikely to delegate their signing powers to a lower level, which means nothing can move forward until the relevant official has time to sign things off.
A lack of vision by political leaders meant the status quo remained.
Looking at changes to the African rankings in the World Bank’s Doing Business index over the years, it is remarkable how few changes have actually been made in Africa, with regard to the 10 indicators the index tracks. This is especially noticeable in the poorest countries, which most need to improve their regulatory and operating environments.
The bank’s press releases hail nations for making even one regulatory reform in the period under review. But given the scale of the problem, in so many African countries making just one reform a year is better than none, but it is a feeble and inadequate response to significant challenges.
The index tracks 10 indicator sets: starting a business; dealing with construction permits; getting electricity; registering property; paying taxes; trading across borders; getting credit; protecting investors; enforcing contracts; and resolving insolvency.
The 11th Doing Business report, which came out last week, said 66% of African countries enacted at least one reform last year with regard to the indicator sets — double the number that did so in 2005 (33%). This does show a definite trend of reform.
It is easy to be cynical about the proliferation of indices that have emerged in recent years. Those at the bottom of such lists do not seem to care about their shameful rankings.
But these indices do nevertheless provide some indicator of performance against benchmarks and countries can use them to assess their relative performance and to guide them in making reforms.
This is the route chosen by Rwanda. It has been the best performer on the index in Africa since 2005. Last year, it implemented the most reforms in the region — in eight of the 10 areas tracked. It is no coincidence that it is also one of the top emerging market destinations for investor interest today, despite its small economy and landlocked position.
Nine other African countries are among the top 20 most improved in terms of business regulations since 2009: Benin, Burundi, Côte d’Ivoire, Ghana, Guinea-Bissau, Liberia, Sierra Leone and Togo. Most are postconflict states. But the countries that linger at the bottom of the index — Chad, the Central African Republic, Republic of Congo, Eritrea and the Democratic Republic of Congo — are among the least-developed countries in the world and they do not seem to mind being there, if their minor attempts at reform are an indicator.
Bureaucrats and officials in these and many other countries ensure that getting things done is more difficult than it needs to be, not easier. Their need to keep control of their official patch is ultimately much more important than improving the lives of their citizens.
• Games is CEO of Africa @ Work, an advisory and consulting company.
ANY move to improve air connections in Africa is to be welcomed. But it might be wise for South African Airways (SAA) to revisit the history books before it makes a decision about a proposed West African hub and engagement with the Nigerian government to build capacity for a yet-to-be-launched national carrier.
In the case of Nigeria, our national carrier has entered into one joint venture, which ended badly, and nearly entered a second partnership that was scuppered at the last minute.
In 2001, a one-year code-share arrangement was concluded between SAA and Nigeria Airways to operate the ailing Nigerian flag carrier’s routes from Lagos to New York, which it no longer had the capacity to service. Nigeria Airways received a block of seats on each flight, with SAA providing the aircraft and sharing passenger loads and marketing.
But just a few months into the deal, SAA pulled out, saying the arrangement was not working.
This not only meant the collapse of flights between Nigeria and the US, but one less flight between Lagos and Johannesburg. This reduced SAA’s weekly flights between Johannesburg and Lagos from three to two (the Nigerian carrier was unable to operate its South African slots but would not let SAA use them).
At the time of the New York deal, SAA, then headed by Coleman Andrews, an American, had an eye on a stake in Nigeria Airways. The Nigerian carrier was in intensive care with just two functional aircraft. But he believed SAA could capitalise on Nigeria’s lucrative — and mostly dormant — international routes.
However, just two years later, Nigeria Airways was liquidated.
Despite the acrimony around its premature withdrawal from the New York deal, in 2004, SAA was named the only bidder to become the technical partner for and 30% stakeholder in a new Nigerian national airline, Nigeria Eagle.
Nigerians strongly objected to the proposal, citing SAA’s inability to manage its own operation profitably and the fact it was government-owned.
They said it was tantamount to Nigeria ceding its aviation sovereignty to another nation — with particular unease about the fact that the other government involved was South Africa’s, given the perception that South African companies were trying to colonise the Nigerian economy.
The negotiations deadlocked over SAA’s refusal to guarantee Nigeria an option to buy a 10% stake in SAA if it was privatised. SAA was accused of being arrogant and exploitative.
The issue was divisive in an already difficult relationship.
At the 11th hour, Virgin Atlantic stepped in and won the bid to become a 49% partner in the new airline, renamed Virgin Nigeria.
Virgin exited the deal a few years later, accusing the Nigerian government of violating its contract.
Until a few months ago, there was no more talk of another Nigerian national airline. Arik Air, a privately owned Nigerian airline that bought Nigeria Airways’s assets for a song, took up the bilateral slots on the Johannesburg route, which it flies to this day.
Now, Nigeria’s aviation minister is said to be considering floating another national carrier — Nigeria One. The government has a dismal record, not just of running airlines but of even regulating the country’s private airlines. SAA’s involvement in a new state-run venture in the West African country may be a big success — but given the history, it would be wise to be cautious.
SAA has also had difficulties in other African initiatives. In 1995, it became the majority stakeholder in a new regional airline, Alliance Air, with the governments of Uganda and Tanzania. The two East African countries cited multiple disagreements with SAA and pulled out. By 2000, the airline no longer existed.
In the same year, SAA failed in its bid for a 49% stake in Uganda Airlines but was successful in its later bid for a similar stake in Air Tanzania, in 2002. The South Africans hoped to position Dar es Salaam as a regional hub. But the privatised airline lost money and there were disagreements about strategy. In 2006, Tanzania bought back SAA’s stake.
SAA needs to think carefully about its African strategy.
West Africa, in particular, is a tough operating environment. It is littered with failed airlines, most of them state-owned. Naivety in this regard could be costly for an airline with a lot to lose.
• Games is CEO of Africa @ Work, an advisory and consulting company.
THE deaths of more than 300 Africans in a boat packed with illegal immigrants heading for Italy last week must surely signal that all is not well on this continent.
Despite pockets of significant improvement in people’s fortunes in parts of the continent, the fact that illegal migration from Africa to Europe continues apace is a stark reminder that the aspirations of people on this continent are a long way from being realised.
The journey of illegal immigrants might end near the tantalising shores of Italy but it usually begins in poverty-stricken villages and towns in Africa, mostly across West and Central Africa. Families save for years to raise the often extortionate fares for trucks to take a chosen family member thousands of kilometres across some of the harshest landscapes the continent has to offer and onto boats, where they may perish or be arrested and turned back.
Occasionally they make it.
The estimate is that about 15% of all migrants may end up in a European country and even be given asylum.
That small percentage is enough to spur thousands more on. According to the United Nations, about 15,000 illegal immigrants, most of them from Africa, reached Italy and Malta last year. That suggests that many thousands more did not make it.
Those ill-fated Africans who died in the boat that sank last week just off Lampedusa, a small island off the Italian coast, were mostly from Somalia and Eritrea on the east coast, both countries dominated by poverty and conflict. But "boat people" also come from relatively prosperous and sought-after investment destinations, such as Nigeria.
Italy is not the only point of entry. Tamanrasset, a remote town in southern Algeria, is a favoured stopping point for Africans from Niger, Côte d’Ivoire, Chad, Nigeria and Mali on their way to a new life in Europe.
Tamanrasset is becoming a boom town on increased trade and its population is growing rapidly. Residents say numbers have grown from a few dozen migrants passing through some years ago to hundreds of people a month and now thousands, most of them believed to be headed for Europe. They use the town to recover from illness or to earn money to proceed on their journeys.
The town lies on the 4,500km Trans-Sahara Highway, which runs from Lagos in Nigeria to Algiers in the north. The road is mostly tarred but it is a long, lonely stretch with little fuel and water available along it.
And theft is rampant. Travellers say that if the bandits don’t get you, the police will. People carrying their life savings on them are easy prey.
Yet more people make their way along the West African coast via Senegal to Spain, where the narrow Strait of Gibraltar seems like a quick hop to a new life.
But last month alone, Moroccan and Spanish coastal patrols picked up 300 Africans trying to make the sea crossing illegally. Last year, more than 3,000 tried to make the sea journey from Africa to Spain. The authorities say the numbers are rising.
An article in German online publication Spiegel summed it up: "For these refugees, Europe is a secret cipher that stands for their dreams of a better life, for work and education and wealth. Europe is the promised continent they know from TV, where African soccer players can make it big, where supposedly there are jobs for everyone and always enough food, hospitals and good schools."
These desperate attempts to escape from Africa are nothing new. It has been happening for decades.
But the reality of thousands of Africans so desperate to lead better lives that they are literally dying to leave the continent does not really square with the much-touted "Africa rising" story we keep hearing these days.
Some of what the desperate migrants are looking for abroad is slowly starting to happen in Africa, as cities develop, incomes rise on high levels of foreign and domestic investment and services and opportunities begin to improve in urban areas.
But lifestyle improvements are happening far too slowly for millions of Africans. It is important that we see our achievements to date in the proper perspective.
• Games is CE of Africa @ Work, an African business advisory and consulting company.
AN EXECUTIVE of a South African construction company told me recently that the company no longer bothered to put in bids for projects in African countries if it was competing with Chinese companies, because it could not beat the “China price”.
It was, the executive said, a waste of time and money putting together a bid where the winner would be selected on the basis of the lowest cost rather than on quality of work and delivery. The Chinese invariably got the business, as their bids were always significantly lower than those of their competitors from other regions.
We’ve heard a lot about China and its increasing involvement in Africa. Recent statistics raised in a presentation on Chinese contractors in Africa raised a new and interesting point about just how big a share of African projects the Chinese actually have.
The presenter, Dirk Kotze from China-focused advisory firm The Beijing Axis, speaking at a breakfast at the Gordon Institute of Business Science, said the real story of China in Africa was less one of foreign direct investment in growth enterprises, as often portrayed, and was more one of earning fees on contracts.
In 2001, Chinese companies captured more than 40% of Africa’s projects put out to tender both by the private and public sector, up from just 7% in 2001. Last year, six countries — Algeria, Angola, Nigeria, Zambia, Sudan and Democratic Republic of Congo — accounted for 48% of the $41bn paid to Chinese contractors.
South Africa is low on the list of countries in which such projects are undertaken by Chinese companies — 22nd out of 30 countries measured. Labour regulations make it very difficult for foreign companies to import their own workers here. In other African countries, the laws are more flexible.
A notable exception is Sephaku Cement, the local partner of Nigeria’s Dangote Cement, which was able to hire more than 600 employees of China’s Sinoma International Engineering to construct the Aganang cement production facility in North West. The rationale for bringing in Sinoma was that Sephaku could save as much as 25% of total development costs. According to Sephaku, conditions for this arrangement included skills transfer — one South African labourer for every three Chinese — and the withdrawal of all Chinese workers on completion of the construction phase.
China’s ability to arrange low-cost financing is a key competitive advantage in the bidding process, along with lower costs of labour than can be obtained locally, which sidelines competitors from other regions — including Africa. A significant downside for African economies is the fact that the debt financing is generally tied to the procurement of Chinese labour and/or Chinese equipment.
Questions whether China is exploiting Africa are often raised in an examination of that country’s activities on the continent. There is nothing inherently wrong with Chinese companies getting paid for work done in Africa — it is just a pity that a bigger chunk of the procurement and fees are not staying on the continent, nor is there is any significant spin-off into broader economic growth through skills, development and job creation.
Despite the benefits of cheap infrastructure, there is growing discontent in Africa with the low safety standards of many Chinese companies, the failure to deliver projects always on time, and quality issues.
Ironically, many of the problems attributed to Chinese companies are a matter of African governments making exceptions for China and failing to enforce regulations on issues such as environmental protection.
But this might change as African governments, buoyed by the continent’s increasing attractiveness as an investment destination for global capital, gain greater leverage to negotiate deals that are more favourable for their countries’ long-term growth. Many leaders are gradually becoming more assertive about tackling corruption, enforcing standards on health and safety and looking to secure a better deal for African labour in projects involving foreign investors.
China is also starting to change. Developments at home such as rising wage costs and demand for more profitable investment may mean a rising “China price”.
But it should not be a zero-sum game. For African engineering, construction and procurement companies, the real benefit of having well resourced and well priced Chinese firms active in Africa may be in establishing strategic partnerships to develop the continent, leveraging their different strengths.
• Games is CE of Africa@Work, an African business consulting company
HOW many times have you heard that many of the fastest-growing economies in the world at the moment are in Africa? At almost every African conference these days, this is trotted out as a way of highlighting the fact that Africa is the “go-to” place for investment.
A new list of the fastest-growing economies in Africa — and by extension, the world — put out last week by the African Development Bank in its Africa Economic Outlook 2013 includes some of the poorest countries in Africa, some of which are developing off an extremely low base. At the top are Libya (11.6%), Sierra Leone (9.6%), Chad (9.5%), Cote d’Ivoire (9.3%), Republic of Congo (8.8%) and Ghana (8.4%). Growth rates are used by fund managers, investment bankers and others to portray Africa as the new frontier for growth, in essence to talk up their book.
But high levels of poverty are pervasive across these same economies. Not only is underdevelopment a potential security threat, not fully understanding the nature and spread of that growth presents investment risks.
Take development indicators of these economies. Sierra Leone, last year, sat at 177 out of 187 countries ranked by the United Nations on its Human Development Index on education, life expectancy, health, per-capita incomes, poverty and inequality, among other things. Per-capita gross national income (GNI) was $881 last year. Its high growth rates are based on a few large deals in the resources sector — mostly in iron ore and diamonds — yet about 70% of people live below the poverty line. Chad ranks at 184 on the list, with a life expectancy of 49.9 years, mean years of schooling an extremely low 1.5 and national income per capita at $1,258. Cote d’Ivoire, finally stabilising after a long-running civil conflict, is ranked at 168.
Republic of Congo is ranked at 142, while Mozambique, at number seven on the African Development Bank list and a top destination for investment, sits at 185. Its per-capita GNI is just $906. In Chad, the government reneged on a deal with the World Bank to spend a portion of oil profits on alleviating poverty in return for bank funding of a pipeline to take oil from the landlocked country to the sea. Chad remains one of the poorest countries in the world.
Chad, Congo and Cote d’Ivoire are in the bottom 10 of the World Bank’s ease-of-doing-business rankings.
Angola, eighth on the African Development Bank list, saw its growth rate plummet to 2.4% in 2009 after the oil price crashed in 2008, from more than 20% in 2007, highlighting the undiversified nature of its economy.
Despite the sorry state of the human development statistics in most of these rapidly growing countries, there is no shortage of investment in resources. But lifestyle improvements tend to be reflected almost entirely in the big cities, with limited trickle-down of new wealth and opportunity beyond these “city states” unless it is in towns close to resources.
There is no doubt much has changed and there is starting to be a “rising tide” effect of growing, and increasingly diversified, investment in Africa. But the growth is resting on shaky pillars.
Governments, on the whole, are not investing their increasing “take” from resources and corporate tax in providing quality education and health facilities, despite the evidence in successful nations everywhere that these are key underpinnings of development. Political and business elites tend to get their medical treatment abroad and educate their children in private schools, often outside Africa.
It’s fine to celebrate high growth rates in Africa, but to look at them in isolation is to distort the real picture. Assessing the statistics from five-star hotels in African capitals or glossy office blocks in foreign cities can be misleading. Even in improving African cities, ordinary people still struggle to get power, potable water, financial support and other services.
Inclusive growth (the buzz words that have crept into the debate lately) is not happening at the same pace. This raises issues of governance and the commitment of leaders to invest in a sustainable future.
• Games is CE of Africa @ Work, an African consulting company.
YOU might say there are three players in this week’s Zimbabwean election: the leaders of the two main political parties pontificating about how they will improve lives; and the online rabble-rouser, Baba Jukwa.
It is to the website of the locally based Scarlet Pimpernel that Zimbabweans turn for information on the poll. He tells his fans he not only sits in Harare, but opposite State House. He claims to be a Zanu (PF) mole, and, frankly, no conspiracy is too bizarre in Zimbabwe. But it is more likely he and his network are Movement for Democratic Change (MDC) members.
His “revelations” of Zanu (PF)’s dirty tricks come complete with phone numbers to empower his followers to harass police officers, politicians and sycophants who support the party that, after 33 years in power, has left the country in tatters.
Jukwa’s Facebook page details the goings-on among the party’s elite. For example, he revealed the fact that the police’s printing unit had been called in by the Zimbabwe Electoral Commission to print ballot papers after the companies contracted to print papers for the chaotic special votes for security forces failed to deliver enough. Both the commission, as it is constituted, and the police remain aligned to Zanu (PF). Jukwa suggests the move means police can now ensure there are sufficient ballot papers for the rural areas, President Robert Mugabe’s stronghold, and shortages in the cities, which are dominated by MDC voters.
Jukwa also takes issue with African Union (AU) Commission chairwoman Nkosazana Dlamini-Zuma, who he has called a “Trojan horse” for Zanu (PF). He claimed her long-time sympathies for Zanu (PF), from her days as foreign minister, meant she was a “threat” to a free and fair vote, being likely to turn a blind eye to evidence of Mugabe’s electoral manipulation.
Dlamini-Zuma flew into Harare last week to assess the situation ahead of the election and expressed her satisfaction with preparations for the poll. She was quick to endorse Zanu (PF) victories in successive elections over the past decade, despite widespread evidence of rigging and violations of human rights.
Jukwa’s Facebook page revives the rumour from a decade ago of an alleged romance between Dlamini-Zuma and her Zimbabwean counterpart at the time, Stan Mudenge, which was fuelled by her giving him a lift in her chartered aircraft from an AU meeting in Chad in 2003.
Jukwa’s Facebook page is just one of many online information sources in this election, albeit one of the more entertaining ones. If you take away the online information, Zimbabweans are left mostly at the mercy of Zanu (PF)’s propaganda arms in print, radio and TV, which relentlessly undermine the party’s opponents.
The party has almost unparalleled access to the rural areas and it has accused the recently launched independent TV station, 1st TV, which is run from South Africa, of “hurting Zimbabwe’s interests”.
The internet and social media have allowed people to see, hear and read information and different opinions about the state of their nation, which they did not readily have access to in previous elections. Cellphone penetration is 97% and internet subscriptions have doubled in the past two years. A quick glance at a few random Facebook statistics shows the increasing cynicism about politicians and their promises that is in evidence in many parts of the world today.
Zanu (PF)’s Facebook page has 2,375 people who “like” it. Mugabe has several Facebook pages but their “likes” range from a few thousand to about 30,000. Tsvangirai’s page has more than 93,000 “likes”. Jukwa, meanwhile, has more than 286,000 Facebook “likes”.
Technology will force greater transparency in governance over time. Whoever wins what promises to be a tightly contested election would do well to remember that.
• Games is CEO of Africa @ Work, an African consulting company.
THE reality check on all the good news about Africa’s new development trajectory is surely the report released last week by the United Nations showing that trade among African countries is declining as a share of the continent’s total trade.
From 2007 to 2011, the average share of intra-African exports in total merchandise exports was 11%, less than half of the 1997 peak of 22.4% and not even close to the 50% in Asia and 70% in Europe.
Just a few weeks ago, Kenyan President Uhuru Kenyatta said at a conference on Africa’s need to industrialise that Africa was still largely a trading continent. And yet it accounts for just 3% of global trade and a mere 11% of trade among its own countries.
The reasons intra-African trade is so low are barely changed from a decade ago. They include cumbersome import and export procedures, tariff and nontariff barriers, a lack of harmonisation of operating requirements across borders and unsupportive policy frameworks for exports.
It still takes a truck up to five days to clear one border post in Southern Africa — pricey, given the average cost of $400 a day for a stationary truck. Beitbridge, one of Africa’s busiest crossings, remains a blockage to trade, with truckers plagued by long queues, touts, inefficient systems, corruption and unpredictable service.
Corruption also undermines trade. For example, in Côte d’Ivoire, illegal roadblocks set up by police and soldiers netted more than $19m in bribes last year and the year before.
Lack of infrastructure is a key constraint to improving trade. Goods are forced onto the roads because of neglected rail infrastructure. It can cost up to $6,000 to transport a container from Durban to Lusaka, which is borne by consumers and import-reliant businesses inland.
A further problem is the lack of industrialisation. African firms are mostly small and uncompetitive, partly as a result of the challenging, expensive and unsupportive business environment. This makes it difficult to build export businesses.
There has been a lot of talk lately among African ministers, officials and bureaucrats about how to industrialise. They have finally woken up to the idea that industrial development is important for development.
Earlier this year, for example, African Union officials joined finance, planning and economic development ministers and central bank governors at a six-day jamboree in Abidjan for the “Industrialisation for an Emerging Africa” conference. But critics said the discussions lacked detail about how to drive industrialisation. It did not help that many officials banged the old drum about colonialisation and imperialism being to blame for Africa’s lack of economic diversification.
These are the people who have the power to remove many of the constraints to industrial development and to draw up policies for its advancement. But if they are not prepared to assume some blame, they are unlikely to have creative ideas about how to improve the situation.
An innate suspicion of the private sector, and particularly of foreign multinationals, continues to dog attempts to build industry in Africa. The private sector, which is expected to drive industrialisation, is mostly precluded from making inputs into these lofty discussions.
Simply making it easier and cheaper for business to operate in African countries would have a knock-on effect on the ability of Africans to invest in their own economies, produce goods and trade them with their neighbours. As businesspeople always say, give them the tools and they will get on with the job.
It is easier to fly to conferences inside and outside Africa to make speeches that focus on identifying, rather than fixing, trade in Africa than to take a ride to the nearest border post to experience first-hand what the problems are.
It is also easier to pontificate among fellow bureaucrats and politicians about the need for action than to face companies and ask them directly what would help them to be more competitive.
• Games is CE of Africa @ Work, a consulting company.
THREE of the best-performing companies on the Zimbabwe Stock Exchange have, between them, invested more than R10bn to expand and revitalise their businesses since the end of hyperinflation in 2008.
The best performer, SABMiller subsidiary Delta Corporation, whose share price has risen by 130%, is now capitalised at $1.8bn. By the end of last year, it was operating at 88% of capacity utilisation — higher than most companies in Zimbabwe.
Cellphone company Econet has seen strong growth, driven in large part by its move into mobile money transfers, while conglomerate Innscor has invested in strategic acquisitions and expansion, taking advantage of an improved operating environment and the “dollarisation” of the economy.
Although many companies have been beaten down by new competition and a lack of funding to recapitalise since the political accommodation of 2008, those that were able to invest and diversify have thrived.
Information about regional economies, stock exchanges and companies was presented at a forum in Johannesburg last week arranged by New Zanj, publisher of the Central African Stock Exchanges handbook, which carries details of 140 listed companies from Zimbabwe, Botswana, Malawi and Zambia. Zimbabwe’s stock exchange was highlighted as a star performer among its counterparts in the region, with an increase in value traded of more than 40% this year, driven by aggressive buying from South African investors. Ranked against the Botswana, Zambia and Malawi exchanges, it has the largest capitalisation — $5.5bn last year.
Zimbabwe does have the highest number of companies trading (64), compared with 21 in Botswana and Zambia and 14 in Malawi, but it still faces high political risk and the mining companies listed on the exchange were among the worst performers last year. Zimbabwean companies started a fairly aggressive push into East and Southern Africa during hyperinflation as a hedge against political risk and to gain access to foreign currency. Innscor went further, pushing its fast-food franchises into Nigeria, Ghana and even Senegal.
Speakers included executives from successful regional companies — BancABC, with banking operations in five countries in Southern Africa; Innscor, with a retail presence across southern, East and West Africa; Zimplow, the only producer of ploughs in sub-Saharan Africa; and Copperbelt Energy Corporation (CEC), which listed on the Lusaka Stock Exchange in 2008 and now accounts for 50% of Zambia’s power sales and is pursuing pan-African power projects.
Innscor has diversified its operations from fast-food outlets to bakeries, supermarkets, poultry and meat businesses, white-goods manufacture and regional distribution of brands, all through a network of subsidiaries such as Capri, National Foods, Colcom, Irvines and Spar.
Zimplow manufactures more than 70,000 ploughs a year in its factory in Bulawayo, an area where deindustrialisation has killed off many less innovative companies, and it exports more than half of its production to countries as far away as South Sudan.
There are many examples of growing companies around south-central Africa. First Merchant Bank in Malawi, which owns a stake in Botswana’s Capital Bank, recently extended its footprint with acquisitions in Mozambique and Zambia. Botswana supermarket group Choppies now has 79 stores, of which 22 are in South Africa’s border towns. It ended last year with the best share-price performance on the Botswana exchange. And the list goes on.
These are companies that don’t talk about going into Africa as many people still do in South Africa. They are already there, expanding at home and finding new markets in the region. Many businesses in South Africa are still sitting on the fence when it comes to doing business in Africa. There is a lot of “wait and see” as political risk in these markets causes ripples of concern. But all the while, the competition out there is growing.
• Games is CE of Africa @ Work, a consultancy focusing on African business.
AND so it begins. The build-up to the election in Zimbabwe has many worrying hallmarks of previous flawed elections. President Robert Mugabe is still ruling by decree when it suits him, as the unilateral declaration of the July 31 election date shows; Zanu (PF) is still using its state-owned propaganda machine to distort information and undermine its partners in the unity government; it is still using the courts to support favoured outcomes; election registration is encountering delays in urban areas, traditionally a stronghold for the opposition parties; and non-African countries offering observer missions are being told to “go to hell”.
Nongovernmental organisation Crisis in Zimbabwe Coalition’s report released last week predicted there will be less violence than in the previous election because Zanu (PF) can “leverage” the fear it instilled in the run-up to the 2008 poll, in which more than 200 people died and thousands were tortured. Thugs no longer have to burn down villages in rural Zimbabwe housing suspected Movement of Democratic Change (MDC) supporters in order to get people to vote for Mugabe as they did in 2008; they simply have to wave a box of matches in the faces of victims of previous election violence.
A key outstanding issue ahead of the election is reform of the security sector. Army generals continue to openly state their allegiance to Zanu (PF), rather than the state.
A new report by Human Rights Watch on Zimbabwe’s security sector says the army has deployed hundreds of soldiers across the country since February, ostensibly to undertake community projects but in practice to intimidate villagers into voting for Zanu (PF).
The issue of election observers is still not settled. Mugabe says only Africans may observe the poll. African Union (AU) observers have already landed in Harare.
The AU says the team is being “briefed” ahead. It’s hard to believe Mugabe’s security men will not have a direct hand in the briefings.
There have been many changes in Zimbabwe over the term of the unity government. The successful vote on a new constitution gave many hope of a similarly conducted election.
However, the election stakes are much higher and many of the factors that have undermined previous polls are still in place. It is almost impossible for sufficient reforms to ensure a free and fair election to be implemented in two months or less.
The state media, controlled by Zanu (PF), has already said the Constitutional Court is unlikely to agree to the two-week extension of the election to August that regional leaders have asked Mugabe to secure. One newspaper reported “Sadc upholds July 31 election date” in clear contradiction of the facts.
An early election has been on Mugabe’s agenda for some time. The slow pace of implementing reforms agreed to by the main political parties at the formation of the unity government has been largely a consequence of Zanu (PF)’s passive resistance. Thus, the electoral process remains in favour of Zanu (PF).
Prime Minister Morgan Tsvangirai has said he will veto any election date that comes before media, security and electoral reforms are made. But the horse has already bolted. Once again, the MDC parties are on the back foot. Tsvangirai was not consulted on the date — another sign that this is Zanu (PF)’s party.
A legitimate election result is crucial if Zimbabwe is to move forward. The processes leading up to the event will form part of that legitimacy. Whether the election goes ahead in six weeks, as favoured by Mugabe, or eight weeks as suggested by the region, there are already many question marks hanging over it and the fear is that we might just end up with more of the same.
• Games is CE of Africa @ Work, a consultancy focusing on African business.
AT THE airport the other day, I bumped into a banker employed by one of the world’s best-known financial institutions who told me he had been asked by a rapidly growing African company to join it and was on his way to sign the deal. The conglomerate needed someone with international credentials to help it “corporatise” its operations, he said.
The growth of African companies and multinationals north of the Limpopo is one of the most notable features of Africa’s changing fortunes. These new players are starting to shake things up with their successful exploitation of their home markets and growing regional footprint. The foundation of success is their local and continental knowledge, strong networks and high tolerance for risky operating environments.
Typically, these firms start out as small, family-owned concerns, seeing opportunity in the many market gaps around them. A number of them have taken their successful model across borders, developing regional and continental strategies to become household names in Africa — cellphone companies Safaricom, Glo and Econet, banking groups such as Ecobank and United Bank for Africa, and conglomerates such as the Dangote Group, which has interests in cement, sugar, telecommunications, oil and gas, property other industries.
Many others are almost unknown outside their immediate networks, despite sizeable assets and presence across multiple sectors. They include enterprises owned by well-connected, wealthy families that tend to operate below the radar, exploiting the thin grey line between business and politics. Presidential family businesses are not unusual. Take the Kenyattas of Kenya, for example, whose empire includes sizeable assets in agriculture, hotels, timber, property and finance. The Dos Santos family in Angola is another. There are many more, including one notable family much closer to home.
The rapid growth of the private sector in key African economies is the cumulative result of an era of market-driven reforms and economic freedom. The drivers of expansion partly mirror those of South Africa’s corporate expansion across the continent: a search for new markets as a result of pent-up capacity, increasing competition in local markets and natural ties with the region in an era of deepening regional integration. But they also highlight the existence of significant opportunities that locals can easily exploit by having a home-grown understanding of their potential markets and customers.
The growth of African economies is providing new opportunities, incomes are rising, new elites are becoming more demanding in their needs and economic reform is allowing companies to mushroom and become more competitive.
Opportunity is luring back experienced African businesspeople from western multinationals to build local companies as part of a new corporate nationalism not seen in Africa before. Expatriates are well placed to sell the African story from senior positions in international funds, investment banks and global companies. Their job has been made easier by a rising number of success stories.
Locally grown companies have become a target for private-equity companies looking for promising assets. The tendency for companies to be family-owned, often being run by a patriarch such as Aliko Dangote or Mike Adenuga of Glo, means that, as interest grows in competitive African assets, companies need outside help to move to the next level.
To be able to compete internationally, they are increasingly seeking assistance to attract professional managers from the international community and introduce international standards of corporate governance as they move into a world of global competitors and suppliers.
The number of mergers and acquisitions in Africa has risen sharply over the past few years, reflecting the increased desire for local assets from investors outside the region but also the improving number and quality of acquisition targets.
South African companies have picked up on this growing trend, picking up good assets in Nigeria, Kenya and other countries.
This trend is a key building block for “brand Africa”.
• Games is CE of Africa @ Work, a consulting company focusing on African business.