NIGERIAN billionaire Aliko Dangote complained recently about his passport sitting in an embassy for 10 days to get a visa that would allow him to travel to one African country when he needed to travel to seven countries during those 10 days.
He raised the issue at a business forum during the Nigerian state visit earlier this month, during which it was announced that the governments of South Africa and Nigeria would sign a memorandum of understanding to allow the issuing of three-year multiple entry visas to businesspeople.
Dangote asked how it was that the UK issued 10-year visas to travellers while Africa’s two economic giants were celebrating a three-year visa, up from one year. Even Ethiopia, despite being host to the African Union, requires many Africans to have visas, and yet there is probably more discussion about the need for regional integration there than anywhere else on the continent.
Africans need visas to visit more than two-thirds of countries on their own continent. Visas on arrival are possible only in a handful of places.
Air travel is another headache. Dangote, along with many other wealthy African businesspeople, has his own jet. The complications of getting between countries, and the expense of convoluted air schedules involving multiple airlines to more out-of-the-way destinations, means private jets have become a must-have accessory for busy people in Africa.
Road travel is a logistical nightmare that is barely possible across swathes of the continent. The increasingly pan-African nature of companies doing business on the continent means a continuous juggling of passports and travel plans simply to run a business. The lack of connectivity in Africa was the subject of much debate at the World Economic Forum (WEF) on Africa in Cape Town in the same week as the Nigerian state visit.
New Kenyan President Uhuru Kenyatta said it was sad that, 50 years after the wave of independence swept across Africa, 70-million Ethiopians remained cut off from trading effectively with the rest of the East African Community simply by the lack of a decent road of a few hundred kilometres that links this rising economy to its powerful neighbour, Kenya.
A businessman lamented the fact that it took four hours of travelling to get to an airport an hour’s flying time away; another asked why it was cheaper to import goods from China than to take them to the country next door. The lack of connectivity in Africa remains a key challenge, despite billions of dollars having been spent on infrastructure and trade facilitation over the years.
Regional integration has been made a priority by multiple stakeholders — funders, development agencies, governments and the private sector. And yet links between us are poor and sometimes nonexistent, a situation that feeds ignorance and acts as a brake on development and the creation of wealth.
It is common cause that the existence of 54, mostly small, national markets is not a formula for success in Africa. Creating bigger regional markets to attract investment has become something of a mantra. But delivery remains slow. Infrastructure is just part of the problem. The gaps are significant and there are many projects on the table. In order to get some movement on delivery, the WEF has joined forces with governments, business and professional organisations to identify a list of priority projects that have a realistic chance of seeing the light of day in the near term.
But an oft-cited lack of political will to act regionally, rather than nationally, has been a missing link and this is not likely to change soon. Politicians have been largely ineffective to date in solving the soft infrastructure problems — visas, harmonisation of requirements in cross-border trade, free movement of skills and people, and other sticking points that impede real integration even where hard infrastructure exists.
The most effective integration of Africa is happening in the space where the politicians have little or no sway — social media. This weekend, it will have been 50 years since then Ghanaian president Kwame Nkrumah marked the founding of the Organisation of African Unity with the words: “Africa must unite or perish.” Let’s hope it doesn’t take another 50 years for his vision to be realised.
• Games is CE of Africa @ Work, a consultancy that focuses on African business
ON A trip to Port Harcourt in Nigeria last week, I spent half of my time in traffic jams. This gave me plenty of opportunity to survey the teeming streets and consider the virtues of the urbanisation a new crop of Africa experts extols.
Port Harcourt, the centre of Nigeria’s oil industry, is the fastest-growing city in one of the most rapidly urbanising countries. In the mid-1970s — the beginning of the oil boom in Nigeria — the built-up area of Port Harcourt covered less than 18km², but 20 years later, the urban area sprawled over nearly 90km².
According to the United Nations (UN) Human Settlements Programme, in 1953 just 10% of Nigeria’s population lived in urban areas — just more than 3-million people then. By 2015, it predicts, more than 50% of Nigerians will be in cities — more than 80-million people by present population estimates.
Port Harcourt, along with other Nigerian cities, has experienced unchecked urban growth that has left it bursting at the seams. Founded in 1913 as a port to export coal, the city was built by the British colonial administration to accommodate 5,000 people. It is now home to at least 2-million, with more arriving daily in search of opportunities.
The authorities say that only 10% to 20% of the city is actually planned.
Once known as the Garden City, Port Harcourt is overrun by traffic, informal housing, makeshift markets, illegal structures and potholed roads, which snake through the hordes of traders that line its edges. In a bid to deal with this urbanisation crisis, neglected over decades, Rivers State governor Rotimi Amaechi is driving the building of a new city, adjoining the old one, with the aim of the two becoming one unified urban area in time.
The first phase of the 50-year, multibillion-dollar project, drawn up by South African company Arcus Gibb and the state government, has already kicked off. Access roads are being built or rehabilitated, new primary schools have mushroomed and housing estates are emerging. The erratic power supply is being improved, water infrastructure is being built and storm drains are going in. An ambitious monorail project is in its early stages and information and communications technology infrastructure is being installed.
The old city is so crowded that it is difficult to do much more than patch it up at present. There were riots after hundreds of illegal structures in slums lining the waterways of the city were demolished to root out criminals and pave the way for infrastructure improvements. The governor, who says he lives on energy drinks and headache pills, stared down angry residents, saying the action was necessary to prepare the city for the future.
Similarly, in Lagos, slums are being eradicated to tackle the urbanisation problem in poorer areas. But congestion everywhere makes it difficult to relocate people. New development is, by necessity, moving further and further away from the congested mainland, where most Lagosians live. Land is even being reclaimed from the sea for a new, upmarket, multi-use development removed from existing urban areas.
The picture is similar in many African towns and cities. New investment tends to go into outlying areas because of the congestion of inner cities, further separating informal settlements from development. Local authorities in urban areas often lack the capacity and resources to tackle problems arising from poor town planning and much of such work falls to multilateral agencies and nongovernment organisations, which tend to move slowly.
Many analysts argue that Africa’s rapid pace of urbanisation is one of the factors driving economic growth, investment and the advancement of people.
While this might be true on one level, the other side of the coin is that one in three people in developing countries lives in a slum, the UN says. This represents as much a risk for Africa’s future as it does an opportunity.
The cost and scale of addressing the crisis of unchecked urbanisation is enormous. If people living in Africa’s urban areas are to have a decent future, politicians need to be mobilised sooner than later to plan ahead for the surge of humanity into areas they control rather than waiting for a crisis to force their hand.
• Games is CE of Africa @ Work, an African consulting company.
IN DAYS gone by, knowing the president of an African country, or having a business contact who did, was generally regarded as being the key that would unlock lucrative business deals. The next best thing was being close to a minister who could allow you to bypass competitors in landing contracts. This meant entering the rather opaque world of favours and political patronage.
Nowadays, making your company reliant on close political connections is a practice that tends to be frowned on as business becomes more transparent and ethical and anticorruption initiatives in key markets prevent the cosy relationships of the past.
But the grey area between state and business continues to work in favour of those who are still able to exploit it and have the connections to do so. Take Khulubuse Zuma, for example.
A few years back, our president’s nephew managed to whip a few oil blocks from under the noses of existing claimants in that bastion of business transparency, the Democratic Republic of Congo, despite his lack of experience in the oil industry.
The rights to exploit the same blocks were originally given to international company Tullow Oil. Two years later, they were given to a little known, but also politically connected, South African company, Divine Inspiration Group Oil. But Zuma’s political connections clearly trumped its, and his companies, Capricat and Foxwhelp, were not only awarded the rights to the oil blocks but the rights were backed by a presidential decree, something neither of the previous claimants had been given.
Now there are allegations that South Africa’s military misadventure in the Central African Republic (CAR) may have been more about African National Congress-linked business interests in the mineral-rich country than about national interest. The new “president” of the CAR, Michel Djotodia, has said he will review all contracts signed by his deposed predecessor, Francois Bozize. But this is likely to mean new money for old deals or new money for new deals rather than a clean-up of the system. And South Africans are unlikely to be the only ones in the queue for political favours.
It is not unusual for new political leaders to reverse deals, even when they are democratically elected. Large contracts secured near election time, when there is likely to be a change of key political figures, are always risky.
In Nigeria, for example, several large deals involving Asian companies done near the end of Olusegun Obasanjo’s term were cancelled by his successor, Umaru Yar’Adua, when he assumed power in 2007, on the basis that they were allegedly corrupt or not seen to be in the national interest.
Reading the political wind is as important as following due process, as FirstRand found out in Zambia. The company failed to anticipate a political victory by veteran opposition leader Michael Sata in the 2011 election against incumbent Rupiah Banda — despite the fact that Sata had narrowly lost the previous election and was well placed to win.
Its acquisition of local commercial institution Finance Bank was reversed by a victorious Sata shortly after the poll. He fired the central bank governor who had facilitated the deal and handed the bank back to its original owners, who were widely known to be his key political backers. Africa’s business landscape is littered with examples of how political interests scuppered deals. It is difficult terrain to negotiate successfully and international arbitration clauses in contracts and political risk insurance remain must-have accessories for companies.
Although the number of conflicts in Africa may have been significantly reduced, political risk has become more nuanced and insidious and therefore harder to anticipate and manage. Investors entering African markets need to understand this in order to give them the best chance possible to avoid any nasty surprises.
TALES of intrigue and political skulduggery are unravelling fast and furiously in the streets of Harare, focused on the country’s indigenisation programme. The saga has been dubbed “Nieebgate”, a reference to the acronym for the National Indigenisation Economic Empowerment Board (Nieeb) driving the programme under the direction of President Robert Mugabe’s handpicked Zanu (PF) minister, Saviour Kasukuwere.
The arrests of a prominent human rights lawyer and officials in the office of Prime Minister Morgan Tsvangirai have highlighted the spy-versus-spy scandal surrounding the government’s handling of the indigenisation programme. Tsvangirai’s office is believed to have been collecting information about the deals to date, which include those with mining companies Zimplats, Mimosa, Anglo American and Caledonia and Pretoria Portland Cement totalling a hefty $1.7bn. This appears to be the result of a power battle in Mugabe’s Zanu (PF) party between Kasukuwere and Reserve Bank governor Gideon Gono, according to reports. The Zimbabwe Anticorruption Commission has been frustrated in its attempts to search the premises of Nieeb and the Zimbabwe Mining Development Corporation.
Political patronage continues to undermine the moribund economy. Many people point to the once empty but now groaning shelves of supermarkets to highlight the positive economic trajectory of the past few years. However, this also highlights what is wrong with the local economy. Imported consumer goods have largely replaced domestic products as many industries battle to raise capacity utilisation and reduce operating costs. Trade statistics released this month show a growing trade deficit, with exports of $524m versus imports of $1.3bn since January, the bulk of which were manufactured goods for distribution and the retail sectors.
Mugabe and his ministers have criticised retailers for stocking stores with imported goods flooding into the country from other African countries and Asia since the end of hyperinflation.
Despite reports of millions of dollars generated unofficially from diamonds, there is little liquidity in the economy, making it difficult for companies to replace old equipment. Instead, factories are rationalising operations and relocating to Harare from smaller centres to take advantage of economies of scale.
Paper manufacturing giant Hunyani Holdings closed its operations in Bulawayo last year, while Dunlop, one of the city’s biggest employers, has reduced its production lines.
Food and beverages producer Dairibord is closing its Bulawayo factory, citing viability and liquidity challenges. A government study showed that 87 Bulawayo companies had closed since 2009, mostly in manufactured clothing and textiles and the motor industry, leaving more than 20,000 people unemployed. Many of those people now work in South Africa.
A similar situation exists in Mutare, a city near the multibillion-dollar diamond fields of Chiadzwa. The building that once housed Mutare Board and Paper Mills, a regional player with about 6,000 employees, is now being used as a school after the company folded. Afri-Safety Glass is operating at 5% of installed capacity.
David Whitehead, a textile manufacturer that once employed thousands in Zimbabwe’s smaller towns, is to be liquidated after collapsing under huge debts. There are many other examples.
The government has formed a Distressed Industries and Marginalised Areas Fund to rescue companies in Bulawayo. But of the $40m fund, less than $4m had been disbursed by the middle of last year. The Confederation of Zimbabwe Industries says reviving failed industries is a waste of funds as uncompetitive factories cannot compete with cheap imports. There is a new industrial plan on the table to double export earnings by 2016, but without the political will to prioritise business, this is unlikely to bear fruit.
Indigenisation, say its champions, is designed to empower Zimbabweans. But the grabbing of foreign assets in its name appears to be mostly enriching political elites. While the politicians argue over the spoils, the widespread disempowerment of Zimbabweans continues as thousands lose their jobs in a rapidly informalising economy.
FOR all the talk of Africa as the last frontier for global food production, its share of exports in one of its key potential growth areas — agriculture — has fallen, despite strong economic growth in many countries. According to a report released by the World Bank last week, many emerging markets elsewhere export more farm products than the whole of sub-Saharan Africa. For example, about 30 years ago, the biggest suppliers of pineapples to the European Union were in West Africa. Now they are Thailand, the Philippines and Costa Rica.
Africa has more than half of the world’s viable farmland and sizeable but almost unused water resources — only about 7% of farms are irrigated, compared with 40% in Asia. Importantly, farming provides the most employment in Africa and is a significant contributor to gross domestic product (GDP). The report maintains it could become a trillion-dollar industry by 2030, but says this will require a radical overhaul of thinking by governments and the private sector on policies and support for farmers.
There has been progress. Agricultural GDP growth in sub-Saharan Africa has been about 4% a year but crop yields remain among the lowest in the world and food security is a problem. Africa’s food market, presently valued at $313bn a year, could triple if farmers modernised their practices and had better access to credit, new technology, irrigation and fertilisers. There is a dizzying array of new developments in African agriculture. More than 30 agribusiness investment funds with target capitalisation ranging from $8m to $2.7bn are focusing on Africa. Banks are starting to step up and many other initiatives are giving technical and other support.
Despite this multifaceted focus on agriculture, much of it from outside the continent, there are still many obstacles to the “green revolution” Africa so badly needs. There is insufficient state spending on agriculture. Most countries have not stuck to the African Union’s threshold of public investment in agriculture of 10% of annual budgets and raising agricultural productivity by at least 6%. Many have reduced agriculture spending.
Trade barriers continue to frustrate progress and shortages of storage, warehousing and other basic infrastructure still dog the livelihoods of rural farmers. And there are more insidious problems of bureaucracy. Take the seed industry. The failure by states to harmonise registration requirements across national borders for new seed varieties has slowed down food production at source.
It takes 10 years to develop a seed variety and another two to three years testing it before it is registered. But to take the seed registered in one African country to another, the entire testing and registration process has to begin from scratch, even if the countries are close together and share ecological conditions. The same applies to agricultural chemicals. Rwanda, for example, demands that new trials are held for a chemical already registered in SA to treat the same pests. There is no business case for this in such a small market. But Zambia, for example, accepts registration in SA and farmers have quick access to top products.
Other important issues include infrastructure deficits, land title and poor institutions.
High growth rates mask the shaky foundations of African economies, not just health and education, but, crucially, agriculture, the continent’s biggest natural asset. The private sector seems to have woken up to the opportunity. Now a sea change in government thinking and commitment to the sector is required. That may be a bridge too far.
• Games is CEO of Africa @ Work, an African business consultancy.
THE waters of the Gulf of Guinea lap at the shores of some of the most resource-rich countries on Earth. Coffee, iron ore, gold and, importantly, oil are regularly shipped to the rest of the world from the countries that line this body of water, stretching from Guinea in the west to Angola in the south.
But the risks of shifting goods by sea around this large and unsecured area are growing every year as heavily armed pirates move across the water with impunity, stealing oil, taking hostages for ransom and robbing oil workers and installations on behalf of shadowy syndicates.
The capture of six foreign sailors from an oil servicing vessel off the Nigerian coast a week ago is the latest in a growing number of attacks. According to the International Maritime Bureau, 58 criminal incidents were recorded off the West African coast last year, compared with 49 in 2011. More than 200 crew members were taken hostage. This month alone, there have been five attacks and almost a dozen this year.
This is still much lower than the number of piracy-related incidents reported in East Africa — 75 last year— but there, the number has dropped from 237 in 2011 and security has been significantly stepped up.
The actual figures for West Africa are probably much higher, as the owners of about 60% of vessels that are attacked do not report it, to avoid higher insurance premiums.
There are many differences between the regions in the modus operandi of the pirates. In East Africa, lawless Somalia provides a handy coast to anchor ships while ransoms are negotiated. There is also less use of violence. In West Africa, pirates are more concerned with rapid turnaround, given the lack of onshore facilities and a reluctance to get involved in protracted ransom negotiations. Their big prize is oil tankers, which move mostly from Nigeria heading for international markets. The pirates drain the oil into smaller vessels and sell it on to clients, who reward their suppliers well. Questioning of captured pirates has identified these clients as not only international traders but also highly placed government officials and oil industry insiders, mostly within Nigeria, who pass on advance information about the routes and cargoes of targeted vessels.
It’s generally believed that the pirates include large numbers of former rebels from Nigeria’s main oil producing region, who were given amnesty by the state in 2009 — by which time they had accumulated vast experience of how to steal oil.
Nigeria alone loses about $5bn a year from oil theft, both onshore and offshore, a statistic that highlights the lucrative nature of this enterprise.
Although there have been some limited regional initiatives, the international community has been pressed to get involved. The US has taken the lead, unsurprisingly given that many of its oil companies are active in West Africa, but also because it sources much oil from the region and needs to secure supply lines.
It is working with regional economic communities to improve security and capacity.
Earlier this year, the European Union, which sources about 13% of oil and 6% of gas imports from Gulf of Guinea countries, announced a project to build local capacity in maritime security in seven countries.
With new oil-producing nations coming onstream and resource exploration and production increasing across the region, a resolution to the problem is becoming urgent. It is not just a problem of lack of capacity, training and co-operation, but also a question of political will to smash the syndicates that provide a market for the stolen goods.
The longer it takes to put proper security in place, the more sophisticated and daring the pirates will become and the more intractable the problem will be.
• Games is CEO of Africa @ Work, an African consulting company.
ARE African countries really doing so badly out of the mining boom? Surveys have shown them to be major beneficiaries of mining taking place in their countries. Although they take no risk and don’t participate in any of the high-cost upfront costs, they are quick to hover over the companies when money starts rolling in. Most are unprepared for the boom times and there is often a lag between high prices and increased resource nationalism, as is currently happening. Predictably, resource nationalism was a hot topic at last week’s Mining Indaba, which was attended by many African governments.
David Humphreys of DaiEcon Advisors said that while producers and consumers were once both located within a country, providing clear self-interest for mine development, this was no longer the case. Now producers tended to be in one country and consumers in another, which has empowered the producers. As a result they have become more assertive in their demands. The list of requirements with which mining companies have to comply is not only growing, it is a moving feast, creating uncertainties for long-term players. Mining investors still have an array of choices about where to put their money and they will shy away from countries that are perceived to be too demanding, too difficult or unpredictable.
SA is one of those at present. In Guinea, two of the world’s biggest miners — Vale and BHP Billiton — are reviewing their involvement in the iron -ore mine at Simandou, citing concerns about unclear regulations, shifting goalposts and political uncertainty in an era of cooling iron-ore prices.
Despite their resource wealth, African states are still competing for shrinking investment with countries elsewhere that have more attractive conditions for that investment.
In most African countries, companies have to factor enormous infrastructure projects into their plans. In West Africa alone, about 5,000km of railway lines and at least six new ports will be built in the next decade to move resources out of the continent.
In Southern Africa there is significant infrastructure development in Zambia, Angola and Mozambique driven by resources companies that do not have the time to wait for governments, donors and others.
Nearly a dozen African governments were at the Mining Indaba, but they failed to speak about the issues raised by mining companies. Presentations by mining ministers showed impressive mineral deposits, details of mining operations, infrastructure plans and other information designed to lure investors to their shores.
They did highlight the important role mining plays in their economies. Sierra Leone’s mining minister said the country’s gross domestic product would increase by 35% in 2012-13, with mining’s contributing up to 40% of this growth. In Ghana, mining contributes nearly 30% of government revenue.
This highlights the need for a realistic partnership between miners and governments. The principle is well accepted, but companies need governments first to recognise that they are already major beneficiaries of mining activities in their countries. This should not just be measured in direct payments to governments but also in the long tail of benefits through the economy, which often go unnoticed. The question is not just about what companies should give but how governments can leverage these revenues better. The ad hoc, short-term and consumption-driven spending of most African countries is not an investment in the future. Politicians tend to forget they are the custodians (and not the owners) of their country’s resources and they need to use mineral wealth as a catalyst for growth, not a fund to plug fiscal gaps. But one thing is clear: miners are going to have to get used to operating in a much more politicised environment that requires them to not just extract minerals but to become collaborators in development.
ONE of South Africa’s early pioneers on the continent, MultiChoice, found a major challenge to be a shortage of skills in markets where few had experience of working for large corporations. And as quickly as they built up skills, other multinationals entering these markets snapped them up.
In the book Business in Africa: Corporate Insights, company executives talk about these early challenges. Being a first-to-market mover in many countries meant MultiChoice not only pioneered business development but also the development of talent. Nearly 20 years on, the company’s management is almost entirely local. The benefit is that these managers understand what is happening on the ground, enabling the company to respond to problems much faster.
For multinational companies with operations in emerging markets, getting top talent from developed countries to locate to Africa, for example, can be difficult. Outside South Africa, most countries are regarded as hardship postings. Having a strong core of expatriates was necessary in the past because education was not geared to skills development, there was not a critical mass of large corporations in which well-educated people could hone their skills and many of the most ambitious and educated people sought employment elsewhere.
Although the availability of skills and top talent is still well below the demand, things are changing. As more opportunities open up, it is getting easier to lure skills back from the diaspora. And as the corporate pie grows, so more local skills are being developed and nurtured. Money is also being ploughed into incentives to keep the head hunters away.
A new trend is emerging. Companies, including African firms, are building teams of management professionals and moving them around different country operations. Thus you will find a Nigerian managing a South African company in Ghana or Kenya.
Being an African from another country does not obviate the need for expatriate quotas for such executives but, as Africans, they are nevertheless usually more conversant with the peculiarities and diverse challenges of operating in Africa than their overseas counterparts might be. For this group of people, being relocated to another emerging market is a challenge to be embraced rather than a hardship.
South Africa is well positioned to capture “regional talent” from the diaspora as many returning skilled Africans have found the country to be a soft landing as they look for opportunities.
The movement of African talent around the continent also offers advancement for executives that is not restricted to a person’s country of origin and thus makes it easier to attract top African talent and retain it.
As more emerging market companies spread out across Africa, the hunt for talent is growing, putting further pressure on existing assets.
Another book that was launched recently, Talent Management in Emerging Markets, looks at the way multinationals have had to change their human resources practices and policies as they have moved from being local companies to global players.
Case studies of SABMiller, Standard Bank and others highlight the importance in these multinationals’ global expansion. Starting with small teams of dedicated managers who took the company culture across borders, these companies are now dealing with a complex web of employees and shareholders across many cultures.
While great store is still placed on good instincts, more independent measures of talent spotting are required. Psychometric testing has become the norm for determining who works best where, for example.
It is a difficult balancing act to be both global and local, but getting that balance right is what is increasingly differentiating some multinationals from their competitors.
• Games is CEO of Africa At Work, an African consulting company.
A FORMER trade union leader in Nigeria (now a politician) once said Nigeria would never realise its potential of becoming a world-class economy if it had to rely on candles and generators to get there. The hum of generators is as much a feature of life in Nigeria as powdered yam, Fela Kuti and pepper soup. The brief interregnum between state power and generators springing into action, and back again, occurs throughout every day.
Successive administrations have spent billions of dollars, supposedly on fixing the power problem, but the money has disappeared in corrupt schemes. If anything, power supply has gone backwards. Nigeria relies on a mere 4000MW to serve 160-million people — a 10th of SA’s supply. But this looks set to change as the government of Goodluck Jonathan seems to be making good on its promise to privatise its power utilities in an attempt to get the lights on. Last week, the government announced the preferred bidders for 11 power distribution firms and it recently approved bids for five power plants.
Inevitably, in Nigeria, there is talk of corruption in the process. The successful bidders are the usual suspects in the country’s political and business elite, who have little experience in the power sector.
But most have partnered with international companies from China, Russia, the US, Israel and others.
Before the bidders were announced, Power Minister Bert Nnaji stepped down after it was revealed he had an interest in one of the bidding consortiums. In Nigeria, the line between politics and business is rather grey and it is unusual for a public servant to step down over a conflict of interest. Nnaji said he was pushed out by vested interests, believed to refer to those affected by his attempts to rid the sector of corruption.
One of the chosen bidders is a company chaired by former military ruler Abdulsalami Abubakar, who was mentioned in a 2008 government probe into the expenditure of $16bn on the power sector over an eight-year period with no result. His then company, Enego Nigeria, collected millions of dollars for a transmission line project but did only a fraction of the work.
Another preferred bidder is oil magnate Femi Otedola, who was the subject of corruption allegations relating to the fuel subsidy, which was partially removed in January. Yet another is Transnational Corporation, set up by former president Olusegun Obasanjo to invest in choice projects. It has many business heavyweights as shareholders, including former UBA boss Tony Elumelu.
The chair of the power reform team’s technical committee, respected businessman and Stanbic IBTC chairman Atedo Peterside, stands by the process, saying it was fair and transparent. However, there are concerns about whether all the bidders will be able to meet the six-month payment terms. Nigeria’s privatisation process has been dogged by issues of companies not being able to raise funding to meet payment deadlines. Several of the bidders were among more than 100 companies that the central bank recently prevented from taking loans because of their failure to pay previous debts.
Notwithstanding some of the niggling issues around the process, the fact that it has got this far is a big step forward for a nation that has seen and heard it all before. The president seems to be serious about meeting his ambitious power targets.
This could be a game-changer for Nigeria’s economy if it is successfully executed. As Nigerians often point out, look how far they have come with almost no power. Imagine what they could do when they have it.
• Games is CEO of Africa At Work, an African consulting company.
DRIVING through Lubumbashi, the Democratic Republic of Congo’s mining capital, it is difficult to believe more than $10bn of investment has flowed into the area recently.
The Congo’s fastest-growing city has become the victim of rampant urbanisation, with its population nearly doubling in a decade. It is now home to nearly 2-million people. But, on the face of it, the city is more faded colonial elegance than mining boom town — the result of years of unchecked urban degradation.
Heavy trucks laden with precious minerals destroy the roads as they head through the city to the border. There is little sign of new development in this boom/bust town, where occupancies in the city’s only five-star hotel provide a barometer of its fortunes.
The bulk of mining taxes flow to Kinshasa and little returns to Lubumbashi — in defiance of a revenue-sharing formula with the provinces.
But the governor of Katanga Province, flamboyant business tycoon Moise Katumbi Chapwe, has big plans to change the face of this city. On the table is a plan for Luano City, a 15-year, $4bn, 300ha mixed-use development on the outskirts of the existing city that he hopes will become a new city centre. The catalyst for realising this dream is US property magnate and international developer Preston Haskell, who immediately saw the opportunity and invested in it, signalling his confidence not only in the governor but in the juxtaposition of mineral riches and underdevelopment as a model for opportunity, and in the future of this region of the Congo.
Haskell was at the launch of the first phase of Luano City on Friday, an event also attended by mining bosses, executives from other local and international companies and the governor himself, who exhorted mining companies in particular to put down proper roots in the Congo by buying offices in the development. He has already committed the provincial government to relocating there in time.
The biggest mining operator in the country — Tenke Fungurume — has already snapped up the first office block. A Chinese company has signed up for the second and there are buyers for offices that are yet to be built.
Haskell is no stranger to complex and high-risk environments, coming to Africa after years of developing property in Russia. Now in his mid-40s, he says the opportunity he sees in Africa makes it likely that he will see out his career on the continent.
His first African investment was in South Africa — Cradle City, next to Lanseria Airport. He bought it in 2007, but was forced to put it on hold after the global downturn hit. Undeterred, he moved on to invest in a country most regard as one of Africa’s riskiest business environments, the Congo, and is planning to invest in development in Kumasi, Ghana’s mining hub.
He is sanguine about the cyclical nature of commodities. The combination of Katanga’s rich mineral deposits and good prospects of economic growth in emerging markets will make Luano City viable in the long term, he believes.
Situated next to Lubumbashi’s airport and a highway linking Lubumbashi to Zambia and rapidly growing mining nodes such as Kolwezi and Likasi, Luano includes more than 3,000 residential units, 300,000m² of commercial and light industrial space and 200,000m² for retail. Katumbi’s political support is important to the development’s success. His popularity suggests he has a long future in politics. But there are other factors that support the new city’s viability. The mines are generating employment and growth in supplementary businesses, while China is building new roads that will make movement easier between Lubumbashi and outlying mines.
There are many potential risks to long-term projects whose viability relies on the shifting sands of politics and commodity cycles, and it is easy to be cynical. But the Luano City project does show the potential for broad economic development on mineral riches, which has been largely dismissed by critics over the years.
• Games is CE of Africa At Work, an African business consultancy, and compiled the book Business in Africa: Corporate Insights.