Three African presidents stood on a river bank recently, waiting for their boat to come in. It never arrived.This is no metaphor.
The leaders of Malawi, Zambia and Zimbabwe were gathered at Nsanje on the Shire River in Malawi for the anticipated arrival of a barge, which would have symbolically inaugurated a new inland port at the town. But neighbouring Mozambique spoilt the ceremony by seizing the vessel before it could cross the border on its journey inland from the Indian Ocean.
This disappointment might have hampered an ambitious plan to utilise an inland waterway, but it is unlikely to have torpedoed it. Indeed, it has stimulated renewed debate over the pressing need to improve commercial transportation links in southern Africa – and greater use of the region’s rivers in particular.
For the past five years, regional bodies have spoken about the possibility of rivers such as the Zambezi being used to convey goods and provide new options for countries that are uncompetitive in global trade because of high transport costs.
However, proper feasibility and environmental impact studies have yet to be done.
Malawi’s President Bingu wa Mutharika decided to take matters into his own hands when he commissioned a Portuguese company to develop port infrastructure at Nsanje in southern Malawi.
The test run for the waterway between the Indian Ocean and Nsanje, first along the Zambezi River in Mozambique and then the Shire into Malawi, was undertaken to prove that the route was navigable.
But Mozambican officials impounded the barge shortly after it had set off, saying no permission had been granted for the passage.
Needless to say, Mozambique’s President Armando Guebuza was not at the ceremony in Nsanje. Some say he was not invited; others that he turned down an invitation to join his neighbouring leaders.
Mozambique, in which most of the waterway is located, has insisted an environmental impact study is necessary before any consideration can be given to commercial barging. It maintained that Malawi’s planned inauguration of Nsanje port was tantamount to announcing the Shire-Zambezi waterway was already an international trade route.There are hitches along the waterway. These include a 20km stretch of marshland on the Shire section and shifting seasonal sandbanks in the Zambezi, which would necessitate constant dredging. Also, the port at Chinde, near the mouth of the Zambezi, cannot dock large vessels, so goods would have to be transported to Beira further down the coast.
Mutharika’s intentions are good, even though some critics dismiss this as a “vanity project”. Transport costs make exports uncompetitive and imports expensive. The Shire-Zambezi route is less than 300kms from Malawi’s commercial capital, Blantyre, compared with the 900km to Beira port, or the 1 200km to Nacala port in northern Mozambique, or the 2 000km to Dar es Salaam port.
Durban, currently the preferred port for southern Africa, is even further, while border delays further increase transit costs.
Some studies reckon companies in Malawi could reduce export costs by up to 60% by using the waterway.
The Zambezi is also an option for the large-scale coal mining operations being developed in Mozambique’s Tete province, upriver from the confluence of the Shire and Zambezi rivers. Inadequate transport infrastructure in that region is a problem for mines that plan to produce 10 million tonnes of coal in the next two years – and need to get it out of Africa.
Australia’s Riversdale Mininghas completed early studies on the viability of the 560km of river from Tete to the Indian Ocean to analyse the viability of large-scale barging to an offshore trans-loading vessel. These studies suggest the route is navigable, although dredging of the Zambezi will be necessary.
There is much talk of the commodities boom enriching Africa but little is said about how these rapidly increasing volumes of goods are going to get off the continent.
Road networks are already taking a pounding by heavy trucks, rail networks are being rehabilitated but most are not competitive, while ports around Africa are congested and inefficient.
Mutharika’s impatience to find a solution is understandable – too many African infrastructure projects are still gathering dust despite the urgent need for new and improved transport routes. But it is foolish to fall out with your neighbours in a quest for glory.
WHEN Mark Lamberti first took over the reins of a handful of Makro stores back in the late 1980s, one of the first things he did was fly to the US with a colleague in search of inspiration among that country’s major retailers. One of the merchants visited was Wal-Mart. So it must be satisfying for Lamberti to see the US giant sniffing around the South African empire he helped to create.
The proposed $4,2bn buyout of reflects not just confidence in the group and in SA. It reflects confidence in Africa, where a consumer boom is starting, as a whole.
Although the often-cited figure of a billion potential consumers is somewhat misleading as it does not reflect the difficulties of operating in a market of 53 states, nor of large impoverished rural populations, household incomes are increasing rapidly. A McKinsey report on Africa released this year says that between 2005 and 2008, consumer spending across the continent increased at a compound annual rate of 16% — more than twice Africa’s gross domestic product (GDP) growth rate in that period. In its extrapolation of various growth figures — population, urbanisation and per capita incomes — the company estimates that 221-million new consumers will enter the market by 2015. Clearly, Wal-Mart bosses have been reading this and other reports that reflect a buoyant market in the making. And you don’t have to work at McKinsey to have witnessed Africa’s cellphone revolution — a major contributor to GDP growth and rising incomes.
News of the Wal-Mart safari followed a much smaller deal, but one that also reflects rising interest in the African retail market. In August, the international group announced it was moving into Nigeria, Africa’s largest market, in a deal with a small local chain.
SA’s Shoprite battled its way into the Nigerian market five years ago with one store that quickly traded above expectations. Massmart’s Game store joined the grocery chain in an upmarket mall in Lagos that has been changing the way people shop in the commercial capital.
Shoprite has plans for dozens more stores across Nigeria. Its major constraint is not consumer demand but rather the shortage of investment in retail property. Massmart also counts Nigeria as its biggest growth market.
Notwithstanding the growth of Africa’s middle class and rising incomes, African consumers remain at the bottom of the pyramid. That may be a perfect fit for Wal-Mart, which failed in Germany, where the well- heeled market failed to respond to its lowest-common-denominator branding and goods. But it has done well in China, a country more closely aligned to typical African markets.
The key to success in Africa lies in the supply chain and ability to adapt to local conditions and challenges. South Africans have spent years fine-tuning the models.
Wal-Mart is no slouch in that department and has a super-efficient global supply chain. But it will be interesting to see how it will deal with the challenges of Africa — for example, congested ports in key markets. It is already facing its first challenge — SA’s infamous labour unions. The default position of the Congress of South African Trade Unions (Cosatu) with regard to foreign investment is to take the low road, a road which its own unreasonable demands and inflexibility have helped to create.
The challenge for SA in having a global company getting a foothold in this market is to develop a more efficient supply industry, thereby increasing jobs and reducing imports.
In China, Wal-Mart has about 20000 local suppliers and more than 95% of its merchandise in Chinese stores is sourced locally. But, as South African retailers have found, local sourcing is not just about reducing imports and improving turnaround times. It is also about getting buy-in from local consumers.
The challenge in the face of the Wal- Mart advance is for business to become more efficient. The trouble is, SA’s competitiveness is being eroded by inflexible labour legislation and low productivity. Wal-Mart’s reputation with suppliers is fearsome but its arrival is a wake-up call for SA, and the continent. It is obvious that Africa is the new centre of international investor interest. Not even Cosatu can change that. We just have to up our game.
A GREEN revolution, like any other revolution, takes real leadership; it requires an acknowledgement that food production is a life-and-death matter, a Vietnamese academic told an agricultural conference I attended in Hanoi last week. Feeding a nation was not possible without a clear and decisive strategy, he said. Vietnam has proved that it knows a thing or two about producing food, for not only its people but a good chunk of the globe. Its own green revolution allowed it to move from being a net food importer to one of the world’s biggest exporters in certain crops.
Good leadership, high investment in the sector and constant policy innovation have been the hallmarks of many Asian agricultural revolutions. The story is well known but the lesson remains instructive. In Africa, one could interpret the invitation by at least 11 African governments to South African farmers to come to their countries to produce food as at least an acknowledgement that there is a problem in agriculture — and an opportunity. But it also suggests our continental leaders are not looking for a revolution but rather a quick fix. The latest such deal — the offer of 10-million hectares to South African farmers to produce food in the Republic of Congo, a fertile country that continues to import 95% of its needs — highlights the huge needs of such countries. And it is just one of many. Fertile land is one of Africa’s greatest resources. And yet 35 African countries are net food importers. The reasons for this are as complex as they are simple.
The approach by many foreign governments (and several African states such as Libya, Egypt and Mauritius) to rent land on the continent to grow food for their own people suggests it is possible to turn this around, and to do it quickly with the right elements in place.
This new resources grab is controversial — as most issues related to land in Africa are. Detractors say renting to foreigners will rob Africans, particularly peasant farmers, of their land. Concerns have also been raised about limited linkages to local development and sustainable development because of a lack of transparency in negotiating such deals.
The debate on these issues, raging for years in the resources sector, has hardly begun in agriculture. It took foreign interest in this unused resource to get us thinking about it.
Regardless of the merits of such deals, the increasing interest in producing food in African land raises the question: if the land presents such a big global opportunity, why are we doing so little with it?
Why is the continent still mired in the decades-old situation of begging for food from international donors, as Ethiopia did last week? Why can African countries not feed themselves when more than half of all economically active people are on the land? The Zambian example shows what can be done with a few good skills and technical support. The country moved from being a maize importer to an exporter in just a few years on the back of the efforts of little more than a dozen skilled commercial farmers. African farming skills are a sought-after resource and white farmers in southern Africa seem ready to fill the gap. But these ad hoc interventions will not be a substitute for building agriculture from the bottom up through dramatically increased investment in people and agriculture, predictable and innovative policies, and, importantly, leadership.
Despite the heightened international interest in the sector, agriculture remains the poor cousin of African development. It bears the brunt of poor operating environments and weak macroeconomic policy. It is the victim of political exploitation and urban drift. People want to be in the cities. The elites who make policy are focused on the urban opportunities. Rural populations are generally left to fend for themselves, becoming voting fodder every few years when elections come around, as the recipients of politically expedient policies that do little more than further undermine the sector.
The new land grab in Africa, estimated at nearly 3-million hectares to date and gaining ground, is a wake- up call to do something with one of the biggest resources the continent has. We are running out of excuses for why Africans continue to starve.
Games is CE of Africa @ Work, a research and consulting company.
Most people would not be able to find Guinea on a map – until the recent slaughter and rape of dozens of people in the streets of the capital, that is.
As the horror was splashed across the world’s media, the rulers of this West African nation tried to distance themselves, and the army they command, from the massacre.
The regime, which seized power in a coup d’etat last year after the death of dictator Lansana Conte,, is trying to sell the army as the saviour of this blighted nation.
The African Union, confronted by these unfortunate events, has been in discussions with coup leader, Moussa Dadis Camara, in an attempt to force an early election. The organisation has extracted a promise that no coup leaders will stand for election in return for keeping international sanctions from the door.
MEDIA reform has been slow in coming to the “new” Zimbabwe. Daily newspaper The Herald, which has acted as President Robert Mugabe’s propaganda mouthpiece over the years, has shown scant sign of support for the unity government and it is sowing the seeds of dissent.
Articles in the past fortnight have lambasted the Movement for Democratic Change (MDC) for trying to get Zimbabwe onto the agenda of last week’s Southern African Development Community (Sadc) summit in the Democratic Republic of Congo. It then praised Mugabe’s “diplomatic victory” in keeping the issue off the agenda. It also thanked SADC leaders for “standing by” Zimbabwe — but failed to mention how not raising issues affecting Zimbabwe’s reconstruction would help the country.
Articles have also praised Mugabe appointee, central bank governor Gideon Gono, for getting 500m from the International Monetary Fund (IMF) — despite the fact it is part of a general disbursement to countries in the wake of the global crisis. It denounced Finance Minister Tendai Biti, from the MDC, for being reluctant to spend the money because Zimbabwe cannot repay even its current debt, on which the release of some of the money is dependent.
It is easy to dismiss this rag but it is the only daily newspaper allowed to print in Zimbabwe. Also, The Herald is the best place to find out what Zanu (PF) is thinking. And the extent of the disunity in the unity government is plain for all to see on its pages.
The IMF money is the latest issue to pit the parties against each other. There are differences in opinion on how this , and other, money could be best spent. Zanu (PF), despite being largely responsible for the decline of the parastatals — the biggest revenue drain in the past decade — wants funding to revitalise them. The MDC is focused on the public sector salary bill while business wants funding to activate economic drivers and regularise the operating environment.
The reaction to the IMF funds raises the question of whether large financial inflows would further divide the fragile government or unite it. Zimbabwe is relying heavily on tax collection as an income stream and despite some success the informalisation of the economy has severely undermined this revenue base.
Capacity utilisation in the private sector has risen to about 60%, up from last year’s 10% to 20%, and regional trade is picking up. But a lack of affordable finance, limited recapitalisation opportunities, power problems and high operating costs are still constraining economic revival.
Political uncertainty is having an effect on the economy — reflected in the slump in the Zimbabwe Stock Exchange in July and August.
The performance at the Sadc summit is not likely to have allayed fears of increased political risk. The old-style rhetoric of Zanu (PF) is not helping either. Justice Minister and Zanu (PF) hardliner Patrick Chinamasa, commenting on Zimbabwe’s reluctance to sign the SA-Zimbabwe investment agreement, said the country would not sign anything that “impinged on the sanctity of land reform” . Another concern for investors is legislation providing for all new investments to have a local majority shareholding.
Sadc is focused on the lifting of sanctions as the answer to Zimbabwe’s problems despite the fact this is unlikely to unlock significant funding. Donors are not lending to Zimbabwe because the parties have failed to live up to the Global Political Agreement, not because of sanctions. In fact most countries are not opening the purse strings. Sadc members themselves, barring SA, have failed to make good on the promise to assist Zimbabwe with a financial package.
With SA handing the chairmanship of Sadc to Joseph Kabila, a longstanding Mugabe supporter, Zanu (PF)’s hand in its standoff with the MDC has undoubtedly been strengthened.
It is a real shame then that President Jacob Zuma could not have done more while SA was still leading Sadc. It is a missed opportunity.
CHIBUIKE Rotimi Amaechi is a man in a hurry. The governor of one of Africa’s richest natural resource areas, Rivers State in Nigeria’s oil-rich Niger Delta, Amaechi aims to make his four years in power count.
“We have a lot to do in Rivers State. Our leaders have abandoned the area for a very long time,” says the outspoken leader, whose bold statements and fearless approach to change have occupied many column inches in Nigeria’s media.
Governors in Nigeria are extremely powerful politicians and Amaechi’s importance to the polity is further highlighted by the fact that Rivers State is the richest of Nigeria’s six oil states, producing 60% of the country’s massive gas reserves and 40% of its oil.
I caught up with Amaechi on his recent visit to Johannesburg to participate in the SA-Niger Delta Investment Conference in Sandton. He is no stranger to the country and there are a number of South African companies already doing business in Rivers State, including Protea Hotels and SAB Miller.
He was accompanied by a team from the Port Harcourt City Development Authority, an agency established to drive the governor’s ambitious 50-year plan to transform the city, which has become the capital of Nigeria’s oil producing area. The plan involves upgrading the existing metropole and building a new city adjoining it.
When he came to power, Amaechi warned that an illegal economy was growing in the Niger Delta, long known for breathtaking corruption by politicians running these mini petro-states. He faced a rising tide of criminality, not just in the establishment but also as a by-product of rebel activity by armed militants in the area fighting for a greater share of Nigeria’s oil wealth. This has taken the form of kidnappings for ransom, theft of oil from pipelines and armed robbery.
One of his first tasks on assuming office was to declare war on crime. “In 2006 and 2007 even children were carrying weapons on the streets. People were too scared to go out at night while the government was cocooned in State House.” Criminals were hiding behind ideology, he said. “When I began to enforce law and order people looked at me like I was mad. But I chose to be a madman .”
The criminals fled to the creeks of the delta, he said, and a measure of stability returned to the streets of Port Harcourt.
Trying to turn around years of underdevelopment, political neglect, massive corruption, rising criminality and economic mismanagement is a tough job and Amaechi admits it is not easy. “I live on Red Bull and Panado.”
Although Amaechi keeps a keen eye on the oil price, his vision is to use resource revenues to drive economic diversification. The oil industry is well established, with most of the oil majors having a presence in the state and it is the rest of the economy that needs tackling, he maintains.
But Amaechi is encouraging investment in both value addition to the oil sector — such as the conversion and transport of gas for residential and industrial energy — and also to other sectors of the economy. The governor’s current budget of 432-billion naira (2,7bn) may sound like a lot but there is a large development backlog. The former governor, Peter Odili, spent eight years in power feathering his nest and doing little for his people.
In his address to South African business people, Amaechi outlined opportunities in agriculture such as the development of large palm oil and rubber estates. The government has already invested in three gas turbine projects to provide nearly 300MW of power by the year-end.
There are plans to grow the maritime industry and develop Port Harcourt, which has two ports and two airports, into the transport hub of the Niger Delta. Water supply and reticulation and waste management are also on the list.
Amaechi is aware that investment and security are closely linked outside the resources sector. As part of the law and order project, Amaechi is tackling youth development. Education and training are high on the list of priorities with hundreds of youngsters going overseas for training. More than 100 new schools and 150 health centres are being built. Amaechi says that the government must provide the basic infrastructure to allow a society to run smoothly and leave the rest to the private sector. “I believe if you develop the economy, people don’t depend on you so much. If nothing else is working, people tend to rely heavily on government.”
He has also introduced a raft of legislation to rid the state of corruption, such as the Public Procurement Law, the State Responsibility Law and the Public Private Partnership Bill. “These remove the discretionary power of the governor, which is important in reducing corruption,” he says. It puts the power into the hands of institutions such as the tenders board . He concedes bureaucracy might be slowing things down but says the sacrifice is necessary.
On the other hand, he is impatient to get projects up and running, saying the financing pipeline is too long, with public- private partnerships (PPPs) taking three to four years to put into place. “We have four years in power. When it ends I don’t want people to say that all I did was wait for a PPP to get under way. If you don’t bring your money, we will pay for projects ourselves,” he told business people in Johannesburg.
Amaechi has had a long career in the state government, holding the position of speaker in the Rivers State House of Assembly for eight years.
His ascent to the post of governor was not without its problems. Although he won the governorship primaries of the ruling People’s Democratic Party ahead of the 2007 poll, political interference, allegedly by former president Olusegun Obasanjo, led to the imposition of another candidate.
Amaechi went to the Supreme Court for redress, and won.
He has frequently said he will not stand for a second term in 2011 because of the stress of the job. “People say all this work will be undone if I do not see it through. But I am really tired.”
His performance at the Johannesburg event showed scant signs of tiredness. He energetically took issue with several speakers and was at pains to drive home his point that it is not business as usual in Rivers State. He offers potential investors his cellphone number and private e-mail address, even his jet for hire when it is not in use — for a small fee.
“Every investor has the right to deal with me directly,” he says.
His critics say that although Amaechi’s plans are worthy, he cannot operate in a vacuum in a difficult neighbourhood where security problems and corruption are still big issues and where the federal government still seems to be paying lip service to funding development.
But Amaechi’s thesis is that if you clean up your own back yard, others are likely to follow.
NIGERIAN society is reeling from the unprecedented corporate drama playing out before it, watching as the country’s blue-chip business elite is hauled before anticorruption officials in the media spotlight. The banking crisis, which has seen the Central Bank of Nigeria firing the CEOs of five banks — Oceanic, Union Bank, Intercontinental, Afribank and Finbank — has rocked the business world.
Central bank governor Sanusi Lamido Sanusi, in office for just two months, acted on the basis that large loan portfolios and poor governance had left the banks so poorly capitalised they posed a systemic risk. By Friday, 16 bank executives had been arrested and nearly 70 debtors, who collectively owe 5bn to the banks, were being questioned by the Economic and Financial Crimes Commission (EFCC) after failing to meet a deadline to pay up.
The names that have emerged are a who’s who of the business world; people many thought to be protected by their status and wealth.
Cecilia Ibru, former CEO of Oceanic Bank, is part of a family business dynasty in Nigeria; Barth Ebong, CEO of one of the country’s oldest institutions, Union Bank of Nigeria, is a household name. Erastus Akingbola of Intercontinental Bank is a celebrated banker . He , along with Ibru, is wanted by the EFCC for alleged abuses of credit process, insider trading, capital market manipulation and large-scale money laundering, and is challenging his dismissal in court.
No less powerful are those business luminaries being strong-armed into paying back their loans. Included on this list is Femi Otedola, head of two oil companies and estimated by Forbes magazine to be worth 1,2bn. He is also a member of the SA-Nigeria Joint Presidential Advisory Council on Investment established last year. Tycoon Aliko Dangote, who Forbes values at 3,3bn, is also on the list, as is Nigerian Stock Exchange head Ndi Okereke- Onyuike in her role as a shareholder in Transcorp, a company established by former president Olusegun Obasanjo and corporate heavyweights.
The crisis in the banking sector has not come as a huge surprise. When former governor Charles Soludo forced the consolidation of banks in 2005 by hiking the capitalisation requirement, many criticised him for the radical nature of his reforms. His boldness was vindicated — Nigeria’s banking sector became an acclaimed success story with banks soaring to international prominence, expanding regionally and introducing a myriad new products.
But there were concerns that regulation could be sacrificed on the altar of this success. Bad habits die hard, some warned, pointing to the fact that many banks in Nigeria had historically survived on opaque government contracts, money laundering, unsecured loans and currency trading . The reduction in the number of banks from more than 70 to 28 also meant heightened competition.
Late last year, the bubble burst. Although sparked by the global downturn, the problem was primarily fallout from over exuberant speculation and share manipulation in the market.
Sanusi is in for a tough time. The establishment will not take this lying down. One needs to be mindful of how powerful people in Nigeria dealt with Obasanjo’s anticorruption chief, Nuhu Ribadu. He was removed from his job as head of the EFCC, fired from the police and is now in exile.
Inevitably, the spectre of geography that haunts Nigeria looms large. Some suggest that Sanusi, from northern Nigeria, has an agenda to open up opportunities in the banking sector for wealthy northerners. In the past military era, political power was concentrated in the north and political and business activities continue to be viewed through this geographical lens.
Although powerful business and political interests continue to undermine Nigeria’s huge potential, the shock of seeing business “untouchables” being publicly hauled before the authorities will have a sobering effect on the economy. This can only be good for the corporate governance initiatives in Nigeria, allowing further strengthening of a key growth sector, and it will go a long way in supporting the improved business environment that many Nigerians are trying to foster.
When President Mwai Kibaki first came to power in Kenya in 2003 he put out an arrest warrant for the chief justice, among many other public officials, in a bid to stamp out a cancer that had taken hold of the country.
One of his first legislative acts was to publish three anti-corruption bills.
Just two years later, the media reported that corruption under Kibaki’s rule had cost the country about $1bn, nearly a fifth of the state budget. His anti corruption chief John Githonga left Kenya after receiving death threats.
In Nigeria, the fight against corruption has been patchy and dogged by political interference and entrenched patterns of behaviour. Former crime-fighting boss Nuhu RIbadu was drummed out of his job after taking on many high-ranking people including the former minister of police. He lived a life characterised by death threats.
Nigeria’s former minister of finance Ngozi Okonjo-Iweala tried to shine some light on public accounts by pushing for greater transparency in government expenditure. For example, she established a database that compared prices internationally with what had been earmarked in her own country for the same goods and services. The disparities were huge.
The government began publishing revenues paid to the states from oil revenues and the newspapers flew off the shelves. But the fight took its toll. The minister, too received death threats and eventually resigned from the government. ”When you fight corruption, corruption fights you back,” she once said.
Zimbabwe, always a law abiding country, has seen corruption and crime mushroom as the fabric of the society has been worn down by poor governance. These countries are high profile but not unusual in Africa, or indeed in the world. And they did not become that way overnight. The process is slow – a moving line. It is driven by scarcity, as in the case of Zimbabwe, or plenty as in Democratic Republic of Congo, Angola and other resource rich countries.
But mostly it is driven by poor governance. Kenya is not a resource rich country but it has a surfeit of skilled professionals, well-educated people and a sophisticated private sector. It should be a thriving state but it has been hollowed out by official graft.
When politicians turn a blind eye to corruption among their own, or give in to people asking for bribes, it lets the rest of the population know that it is OK to behave the same way. This is what the next generation are taking on board.
When corruption reaches the levers of law and order – the police and judiciary – the dye is really cast.
Promises by new administrations to tackle corruption are now commonplace. However, the window of opportunity to do so opens and closes, often at great speed. In most countries, politics is an expensive business and on assuming power, new elites have to pay back the favours and funding that got them there in the first place. Patronage quickly rears its ugly head and old patterns reassert themselves.
And then there are the bribe payers – businesses wanting access to politicians, companies looking for short cuts, illegal enrichment through contract fraud and so on. In some places, society is so badly eroded that bribes are the only way to get simple things done. The public service procurement scandal in SA rings alarm bells. Although small in terms of some of the corruption this continent has seen, it is the thin end of the wedge.
Making an exception because of party or personal loyalty over principle is where it starts. It does not take long for this to become a precedent in the broader society. Reining in corruption is a slippery business and, as many have found, it can be life threatening. Far better to stop it taking hold in the first instance.
Already the ruling party has saved its own from justice in the “travelgate” scandal. The small matter of the commissioner of police was never satisfactorily resolved. And there is much more. The cancer of corruption has spread quickly in this country. It seems we have learned nothing from the experience of other countries on the continent. We seem doomed to repeat their mistakes.
It is not too late for SA to stop the rot but the window of opportunity is rapidly closing.
ZIMBABWE is currently swamped by investor conferences. The perception of rich pickings at rock-bottom prices and the search for new capital by the public and private sectors have raised the business profile of a country no one wanted to visit a year ago. And despite the flaws of the unity government, the economy is starting to turn around.
The introduction of hard currency has been the biggest factor in restoring a sense of normality and is allowing companies to gear up for a new era. International companies that were forced to ring- fence their Zimbabwe operations as a result of hyperinflation are now bringing them back into the fold. Tongaat Hulett reports that it will include its Zimbabwe sugar operations in its financial statements this year as many of the distortions of macroeconomic fundamentals had been removed
There is also new capital being injected into Zimbabwe business. SABMiller injected working capital of 16m into beverages group, Delta Corporation, in which it is a shareholder, earlier this year and more multinationals are likely to shore up the capital base of firms in which they have an interest as the market opens up.
Regional expansion, a necessary hedge for companies to survive in the past, is continuing. Hotel group African Sun is expanding into Nigeria. Diversified conglomerate TA Holdings is to ply its insurance business in Uganda . Manufacturers are increasing production now they are able to source inputs in foreign exchange and activity on the stock market is growing.
But the corporate sector, under severe pressure for most of the past “lost decade” (as Zimbabweans refer to it) is not out of the woods yet.
The banking sector, which has had a rough ride in trying to survive the economic meltdown, faces more hard times. With the government’s September deadline for financial companies to meet new capitalisation requirements, a shake-out of the 28 companies operating in this overtraded sector is likely. Local banks will be targets for hungry investors. SA’s First National Bank and Nedbank are interested in the market and Nigerian banks are also sniffing out opportunities.
A period of local merger and acquisition (M&A) activity is possible in other sectors as companies align themselves in a new economy. M&A activity was a survival strategy for companies over the past few years, as they sought to build critical mass as a way of countering difficult times. Not all of these worked out well. The 2007 merger between Meikles Africa, Zimbabwe’s oldest company, with Kingdom Financial Holdings, has just been through a messy “divorce” after months of ugly wrangling.
Corporate Zimbabwe has suffered scandals, business failures, corruption, political patronage, extreme government interference and threats of nationalisation. Transparency and the application of corporate governance principles, once standard in the country, were affected in the quest for survival in the country’s corrupt political environment. The new foreign interest in companies has forced these issues back on the table.
The lack of transparency in deals related to government contracts and the large numbers of corrupt politicians in the business sector are other factors that coloured the corporate landscape in the recent past. From murky deals in the Congo up to mainstream companies hiding dubious activities under the cloak of hyperinflation and black market deals, a lot of dodgy things have been happening in Robert Mugabe’s Zimbabwe.
A fund manager with Zimbabwe investments says the combination of a bull market for cheap stocks and economic distortions meant investors had not always policed their assets or the underlying governance of the companies themselves in the past. In the relative euphoria of the new economy, it would be easy to sweep away the past, but the many dubious deals done under Zanu (PF) rule and the compromises in corporate governance are realities that will be unearthed in an era of greater scrutiny.
Zimbabwe remains a risky investment destination and the public and private sectors need to put their houses in order to build trust in the integrity of the country — and with it, credibility.