THE tourist town of Sharm el-Sheikh in Egypt is battling to keep the doors of its hotels and restaurants open. The millions of tourists who normally patronise this picturesque town, which sits between the Red Sea and the Sinai Desert, have dwindled to a trickle after the crash of a Russian airliner with 224 people on board shortly after take-off from this popular holiday resort in October, WRITES DIANNA GAMES.
Not only are jobs and businesses at stake, the plunge in tourist dollars has exacerbated a serious foreign currency crisis.
Tourism contributes about 13% to Egypt’s gross domestic product, and at its peak in 2010, the industry hosted nearly 15-million visitors.
The ailing town was given a boost earlier this month by the arrival of up to a thousand visitors for the Africa 2016 conference, an Egyptian government event designed to revitalise ties with the rest of Africa. Its secondary role was presumably to show the world, or Africans at least, that it is safe to travel there, with Egypt’s President Abdel Fattah el-Sisi hosting four African presidents (from Nigeria, Equatorial Guinea, Gabon and Sudan) and Ethiopia’s prime minister. The event was incident free but security was tight.
Sisi, battling with the economic legacy of political upheaval, wants to increase trade and investment with African countries. This month’s event follows the launch of the Tripartite Free Trade Area, linking three major regional economic trade blocs, at the same venue last year, signalling a real determination to exploit the African market.
While Sisi spoke of the close ties between Egypt and Africa, the age-old question was raised about whether Egypt, along with other countries in North Africa, considers itself to be African, given its closer alignment with the Maghreb region and Europe. However, Egypt has been a member of the Common Market for Eastern and Southern Africa (Comesa) since 1998.
Its companies have invested $8bn in African countries to date in sectors including construction, transport, telecommunications, agribusiness and mining.
Egypt, as one of the most sophisticated economies in Africa alongside SA, has a trade balance with the rest of Africa in its favour. In 2014, exports to Comesa states were $2bn and imports only $700m.
SA is not among Egypt’s top five trading partners in Africa, but this may change with the launch of the Tripartite Free Trade Area, which will provide a critical Cape to Cairo trade link.
ONE of the most significant changes in the business landscape over the past decade has been the growth of African companies north of the Limpopo, WRITES DIANNA GAMES.
Although the growth of South African companies and their activities in other African markets get a lot of attention, they are increasingly competing with home-grown companies in their chosen markets.
These companies are developing regional and continental strategies in competition with South African, Asian and Western multinationals.
The rapid growth of the private sector in key African economies is the cumulative result of an era of market-driven economies and business reform but also an increasing trend for locals to support, rather than eschew, their own companies.
Opportunity is luring back experienced African business people from Western multinationals to grow local companies as part of a new corporate nationalism not seen in Africa before. These local companies are taking on global multinationals in their home markets and, in many cases, winning.
Research by the Boston Consulting Group conducted last year on the impact of growing African companies on the operations of global multinationals was discussed at an event hosted by the Gordon Institute of Business Science in Johannesburg last week.
Even though many multinationals are seeing growth in their African businesses, they are losing market share to local competitors.
The consulting group says 73% of developed country multinationals surveyed considered local companies to be a threat to their business compared with 50% for companies from emerging markets and 40% from traditional multinationals.
This is a marked change from even a decade ago when global multinationals did not see local companies as competition in Africa.
There are many advantages enjoyed by competitive local companies. They include a looser corporate structure that allows agility in decision-making and innovation; the ability to focus investment and resource allocation on the home base; a deep understanding of the local market in terms of products, services and processes; and embedded market intelligence and longstanding local networks.
Global multinationals are constrained by boards and shareholders based in other countries that do not always understand or appreciate the challenges and opportunities in Africa. Foreign managers tend to be on short-term contracts, a situation that prevents them from becoming properly embedded in country markets. There are also often challenges raised by the need to adhere to onerous safety and corporate governance standards and regulations formulated in developed markets and, increasingly, the limitation of being foreign in a continent that is rapidly "going local".
However, multinationals have advantages local companies do not, including a global backbone that can support local operations in tough times; deep pockets to build brands and products; the ability to leverage experience from other emerging market operations; ownership of prestigious and recognised brands; and access to world-class data and information platforms.
THE inaugural flight by South African Airways (SAA) last week from Johannesburg to Abuja, the capital of Nigeria, was a milestone in the relationship between the two powerhouses of Africa, WRITES DIANNA GAMES.
The launch of the route is not just about moving people between two strategic cities; it is symbolic of a greater connectedness between Africa’s two biggest economies that is long overdue.
The launch of the route between Johannesburg and Abuja came 19 years after SAA began flights to the commercial hub of Nigeria, Lagos, in 1998 — a route that became one of the fastest growing in SAA’s history and is still among the top three busiest for the airline in Africa.
In 2011, the SA-Nigeria Binational Commission increased the number of flights from seven to 10 each for both countries.
SAA flies seven times a week to Lagos and the three remaining slots are being used for the Abuja flights. The new route forms part of SAA’s turnaround strategy, and there are early signs of success.
The first return flight from Abuja to Johannesburg last week had a load factor of 67%.
Airline executives believe the route will be profitable in a reasonably short time.
There are many reasons why. First, many people who do not live in Lagos prefer to avoid the city if they can. The airport experience can be trying, with antiquated infrastructure and systems struggling to keep up with growing passenger volumes. Travelling from Abuja is easier and may attract more people to SA.
Second, the Abuja flights will provide a link for trading centres in northern Nigeria, allowing flights not just to SA, but to Southern Africa and to other regions such as Brazil, which has strong commercial ties with Nigeria.
The route will also make it easier for South African investors to connect to Nigeria’s administrative and political centre. What is more, it will facilitate interaction between the two governments.
The political dimension is significant. The choice of Abuja as SAA’s newest destination signals the fact that Nigeria is still an important partner for SA.
This will be cemented by the state visit to Nigeria by President Jacob Zuma in a few weeks.
An airline is an important diplomatic tool and the timing of the new SAA flight is good, coming at a time when there is a real willingness to build stronger ties between two countries that have had a complicated past relationship.
A SOBERING snippet of information for Africa watchers appeared last week: the continent’s exports to China fell 38% to $67bn last year, and foreign direct investment into Africa fell 40% in the first six months. It was also reported that Africa’s imports from China rose 3.6% to $102bn — bad news for African producers, WRITES DIANNA GAMES.
African leaders who clustered around President Xi Jinping and his team in Johannesburg at the China-Africa summit with outstretched hands late last year were not disappointed, with promises of $60bn in aid and loans. But this sizeable, although not altruistic, promise is not going to change Africa’s fortunes in the near term. That task lies with Africans themselves.
In the past week, as the year grinds into action, there has been some speculation over how Africa might fare this year. Most of the talk has focused on the external factors driving down growth rates and prospects for African economies, including, but not limited to, China’s slowdown.
There has been the usual proliferation of lists of countries investors should target this year, mostly the result of glib analysis based on random economic or political considerations. Each year, the lists change, showing the rapid change in fortunes of African countries — often, but not only, because of the effect of external factors such as economic problems in large trading partners, commodity prices and the lack of African countries’ economic engagement with each other.
Climate change, listed by the World Economic Forum as the biggest risk this year, is another.
"EBOLA was like a war in our countries," Guinea’s President Alpha Condé told the World Bank last year as he outlined the havoc that had been wrought by the rapid spread of the virus in the West African country.
At a meeting last April to seek funds for reconstruction, he was joined by the presidents of the other two worst-affected nations — Liberia and Sierra Leone. The leaders, who had been battling the spread of the virus for more than a year by then, outlined the devastating effect the health crisis had on their countries, WRITES DIANNA GAMES.
Published in Business Day SA, 4 January 2016
In addition to more than 11,000 deaths, health systems collapsed, expatriate managers and contractors fled, agriculture almost collapsed, trade dried up, international travel connections were cut and revenues shrunk. Fear and superstition pervaded communities.
Dire predictions of the spread of the virus across the region were made by experts, with the World Bank suggesting the financial impact on the region by the end of last year might be a huge $32.6bn. But last week, there was some good news — Guinea was declared Ebola-free by the World Health Organisation, the last of the three countries at the epicentre of the disaster to be cleared. The last known case there was on November 16. The announcement was made 42 days later — twice the virus’s maximum incubation period. Sierra Leone was declared virus-free earlier in November.
Although the first case of Ebola emerged in Guinea, fewer people died there, with 2,500 casualties compared to 9,000 in neighbouring Liberia and Sierra Leone. Dozens of health workers also lost their lives elsewhere in Africa and on other continents. Guinea is now undergoing a 90-day period of "heightened surveillance" to ensure vigilance is maintained after the hard-won battle. Liberia, for example, found new cases after the country was twice declared Ebola-free. But, critically, Guinea and the other two nations can now start implementing Ebola-recovery programmes.
The effect on growth has been catastrophic. According to the International Monetary Fund, Liberia’s economic growth in 2014 was 0.7%, significantly less than 2013’s 8.9%. Growth in Guinea has stagnated at about 0.4%, while Sierra Leone is facing severe recession.
Hold on to your hats – next year will be a rocky ride for Africa WRITES DIANNA GAMES
CHINA’S promise last week to deepen partnerships with African countries and provide $60bn over three years to address constraints to development, was good news for a continent facing many headwinds as it rushes headlong into 2016.
Ironically, China’s slowdown is one of those headwinds. But there are many other issues that will make next year a difficult one for sub-Saharan Africa.
The continent’s petro-states have slashed budgets and put infrastructure projects on hold as budgets dry up, but they continue to reel from the effect of low oil prices.
Any hopes that this was just a brief cyclical blip have been dashed by the fact that 18 months since the oil price plunged, there is no sign of an upturn.
Oil industry executives speaking at the Africa Oil Week conference earlier this year confirmed the view that the "world of $50 oil" isn’t going to change anytime soon.
At the same event last year, oil majors flagged ambitious exploration projects and mentioned the billions of dollars lined up for Africa’s oil and gas assets. This year, the broad narrative focused on project pullbacks and how to negotiate this long, rocky road.
THE continent’s stock exchanges are a hard sell to African companies. Of more than 1.5-million businesses registered in Africa, only 1,600 are listed on the stock exchanges of the 23 states that make up the African Securities Exchanges Association (Asea), WRITES DIANNA GAMES.
At last week’s Asea conference in Johannesburg, delegates took a hard look at what Africa’s exchanges need to do differently to boost performance and relevance to attract investors and build assets.
Asea president and head of the Nigerian Stock Exchange Oscar Onyema suggested that new ways of engaging business leaders were needed, not just to talk about the benefits offered by Africa’s bourses, but for economies more broadly.
Poor corporate governance, he said, was responsible for most company failures in Africa.
The challenges of building up an asset base on a continent in which only about 2% of assets are traded are considerable. The weakness of the many stock exchanges across the continent is that most remain illiquid with little trade and few listed companies — and yet more and more countries want one. But many companies in Africa just don’t see the benefits of stock exchanges. There are multiple reasons for this. Read more ...
REFLECTIONS on the history of Africa’s two biggest economies dominated the SA-Nigeria Chamber of Commerce’s (SA-NCC) 10th-anniversary dinner in Johannesburg last week, BY DIANNA GAMES.
George Nene, a former South African ambassador to Nigeria, told guests of how his six-year sojourn in exile during apartheid was transformed into an ambassadorship when he was asked by former president Nelson Mandela to open SA’s first embassy in Nigeria in 1994.
Nene facilitated the long corporate trek to Lagos by companies such as South African Airways, MultiChoice and MTN.
The early relationship was dynamic. In 1999, the SA-Nigeria Binational Commission was formed and deputy president at the time Jacob Zuma was the lead representative in its early meetings.
In 2005, when the chamber was formed, MTN was already the market leader in Nigeria.
Its success in the market had attracted many other big household names, such as Protea Hotels.
That year, Nigerian oil company Oando listed shares on the JSE to great fanfare; Virgin Nigeria, the national airline for a time, started flights to Johannesburg.
Ten years later, investment and trade has escalated significantly. Nigeria is probably SA’s biggest trading partner in Africa and one of its biggest crude oil suppliers.
However, speakers at last week’s chamber dinner rued the fact that, at many levels, the relationship has not realised its full promise.
THE strains of former president Thabo Mbeki’s "I am an African" speech introduced the Brand Africa awards ceremony in Sandton last week, writes DIANNA GAMES.
The event was a celebration of Africa’s own initiatives, culture and excellence, but the results of a cellphone survey of 6,000 African consumers across the continent released that very night showed that consumers still prefer foreign brands by a wide margin.
Of the top 100 brands chosen by respondents as being either their most admired or most valued, just 23 were African. Admittedly, MTN did top the 2015 Top 100 list, toppling Coca-Cola from last year’s top place to third, after Samsung. But most of the top-ranked companies were from the US, the UK, Japan, France and other places.
In the "most admired" stakes, top choices were global brands Guinness, Dolce & Gabbana, Toyota, Nestle, L’Oreal and Samsung. The most valuable brands included Heineken, Zara, Toyota, Nestle, L’Oreal, Apple, Cadbury, Google, Coca-Cola, Nike and Vodafone.
The weighting of local to foreign brands has not grown significantly since Brand Africa introduced the awards in 2011, even though the number of countries covered has grown from eight to 22. Read more ...
- Published in Business Day SA, 26 October 2015. Picture: Thinkstock.
A QUESTION Nigerians often raise in discussions about SA and its West African counterpart is why there are not more Nigerian companies investing here, writes DIANNA GAMES.
Where are the Nigerian banks, the food franchises, the supermarkets and IT companies? they ask. The diplomats are particularly exercised by the trade and investment imbalance. This, they say, reflects badly on the bilateral relationship.
It is true that there are few Nigerian investments here more than 20 years after SA opened its doors to the rest of the continent. Dangote Cement has acquired a cement operation, and oil and gas company Oando has a few, largely inactive, shares listed on the JSE. But there is little else if you don’t count the many small businesses owned by Nigerians resident in this country.
Compare this with the fact that the majority of SA’s top listed companies have a presence in Nigeria. Read more ...