Displaying items by tag: Business Day
The more SA’s position as the gateway to Africa for foreign investors is eroded by a changing global order that includes changes in Africa itself, the more the debate in support of it seems to be aired in public forums locally.
The issue has come back onto the agenda as the BRICS (Brazil, Russia, India, China and SA) summit in India approaches. SA’s membership of the group has lent credence to the country’s perception of itself as not just the gateway to Africa but also the representative of Africa. Critics would argue that it qualifies on neither count in any definitive way.
Officially, SA has been slow off the mark to capitalise on its natural advantages as the traditional Africa gateway that has been exploited by western multinationals for years.
Only in the past few years has the government has started to discuss ways to formalise this historical advantage and ensure that SA remains the gateway of choice.
Since 2008, the Treasury has been discussing how to position SA as a financial gateway. This has led to some exchange control concessions for Africa-specific investments, for example. Since 2009, the Department of Trade and Industry has also been discussing ways to better position SA as a gateway but nearly three years later, this is still a work in progress.
While the bureaucrats mull over the issues, Africa is already moving on. The continent is awash with international investors flying directly into Lagos, Nairobi, Kigali, Maputo and Luanda in search of deals, opportunities and partners. Global hotel brands are popping up across the continent and new shiny office blocks housing myriad foreign companies are changing the skylines of African cities.
These developments undermine the notion of a single gateway to Africa as the debate in SA presupposes.
SA will undoubtedly remain a destination of choice – it is still continent’s biggest and most diverse economy and its infrastructure and services industries are still well above its gateway “competitors” in Africa. It is also attractive to new emerging market investors looking for companies and managers with pan-African experience and footprint.
But the notion of a single gateway is losing ground. As the global order changes, so business models and investor considerations of Africa are also changing.
Logistics and geography are playing a greater role in international business. Improving transport links between African countries and international markets is obviating the need for SA to be a key part of the supply chain for goods that do not originate there.
Business decisions are increasingly based on regional and sector-specific considerations, which is influencing the choice of location for companies. South African companies are benefiting from this given their strong presence in many key African markets that are becoming gateway economies.
The potential scale of operations and increasing competition for business opportunities in Africa means multinationals need a presence in multiple markets rather than trying to run far-flung and difficult markets from Johannesburg.
Hundreds of companies operating in the biggest areas of new investment and growth – mining, oil and gas – view strategic conferences such as the annual Mining Indaba and Africa Oil Week as their “gateway” to Africa’s opportunities.
Transport corridors, the rehabilitation of transport infrastructure and improving performance of ports such as Beira, Maputo and Walvis Bay are providing alternatives to Durban and changing trade patterns in southern Africa.
While China’s diplomats constantly refer to SA as the economic giant’s gateway to Africa, its companies – and politicians – tend to deal with Africa directly from Beijing.
The premise in international forums that SA speaks on behalf of all Africans and has significant influence over continental debates and agendas is not unanimously embraced within Africa. The assumption that one country would speak for the whole continent is in any case flawed and diminishes the diversity of the continent and capabilities of other players.
Nevertheless, SA’s role in Africa is vital and it needs to maintain its relevance as a pivotal economy. It needs to do this by focusing on its competitive advantages – doing better what it does best.
It also needs develop a compelling “SA Inc” investment case and strategically link its interests to other African gateways to realise greater benefits for SA in the new scramble for Africa.
Unseemly diplomatic spat could easily have been avoided
THE icy wind blowing down to SA from hot and humid Nigeria over mass yellow-fever certificate deportations this past fortnight has highlighted the tensions that lie close to the surface in this uneasy relationship between Africa’s two pivotal states.
This issue highlights not the problem of health requirements as much as the negative perceptions about each other’s nationals. The yellow-fever certificate issue is not new. It has been a thorny issue between the countries for years.
The question is why it has not yet been resolved by authorities on both sides of the fence. Notwithstanding SA’s apology to Nigeria for the poor treatment of Nigerian nationals, the issue at the heart of the matter has not been clarified. Are many Nigerians travelling on fake or problematic yellow-fever certificates or not?
It is clear this is not being policed properly at key points, despite the fact that SA’s authorities require the certificate in order to issue visas and immigration and airline authorities in Lagos are also supposed to do checks. And yet touts freely sell yellow-fever certificates outside Lagos’s airport.
Nigeria’s health minister says there has been no case of yellow fever since 1995 and there is no need for the certificate. But that misses the point. It is currently a legal requirement and should be respected by everyone.
But it is also not clear if there were real problems with the yellow-fever certificates of 123 people sent back off two flights 10 days ago, sparking the diplomatic incident, or if it was simply the result of bad attitude by a bureaucrat. The bilateral political dialogue that has taken place as a result of the diplomatic fracas has been positive. Officials have examined longstanding problems that have been raising tensions and perhaps they can finally be resolved. But it may take longer to tackle the deep-seated issues that lie at the heart of the problem.
Many analysts talk about the geopolitical aspect of the relationship — the competition between the two economic powers for prominence on the global stage. But it is actually the “soft” issues that have the most effect on relations between the countries.
Nigerians actively campaigned against apartheid for years and expected a warm welcome in SA in 1994. Instead they were greeted with hostility and suspicion.
The image of Nigerians being criminals was created by a tiny minority, but few South Africans bothered to look beyond the stereotype — although increasing business ties have markedly improved the situation.
The difficulty Nigerians experienced in getting visas to come to SA, and their poor treatment by officials at our diplomatic missions, fuelled tension and led Nigeria’s immigration authorities to tighten visa requirements for South Africans.
Unfortunately, when the political relationship hits a bad patch, South African companies bear the brunt of it as they are the face of the bilateral relationship in Nigeria. Business people suffered most from Nigeria’s retaliation on the visa issue and they formed the bulk of those turned back at the airport recently. The foreign minister had already threatened to “clamp down” on SA’s companies if SA did not apologise for its immigration officials’ actions.
Nigeria’s politicians also believe that the trade and investment relationship between the countries should be more equal.
This view negates economic and market realities but unfortunately it informs political sentiment.
Leaders on both sides have neglected the broader political relationship recently. The binational commission has become moribund and we have yet to see a state visit in either direction under the Zuma and Jonathan administrations.
No side came off very well in this unseemly diplomatic spat. For two countries that are seen as Africa’s key problem-solvers, there was no reason it should have come to this. Hopefully there is no lasting damage. The reality is that SA needs Nigeria more than Nigeria needs SA. The country is one of our biggest trade and investment destinations and a major source of crude oil.
Keeping the relationship on track does not mean compromising our regulations but it does mean applying them with respect.
• Games is CE of Africa @ Work and honorary CEO of the SA-Nigeria Chamber of Commerce.
Business as usual in Nigeria, in face of Boko Haram havoc
LONG queues of cars formed along a number of main roads in Abuja, Nigeria’s capital, last week. It was not just a petrol shortage after the recent withdrawal of Nigeria’s longstanding fuel subsidy that seemed to be causing the problem.
The relentless search by security officials for explosives and other instruments of death and mutilation favoured by Islamic fundamentalist sect Boko Haram is another reason traffic queues are forming across the otherwise orderly city.
The site of the first significant bombing in Abuja — a brazen attack inside the compound of police headquarters in June last year — was visible from my hotel window. The street outside the compound is lined with armed security men. But their guns may not be enough to protect them from the brazen violence perpetrated by the group, which includes drive-by shootings from cars and motorbikes, as well as suicide bomber attacks.
While we went about our business in the capital during the week, battles between Boko Haram members and security forces were raging in Maiduguri, several hours’ drive to the north, which is the headquarters of the group and the epicentre of the violence.
Boko Haram’s stated goal is to impose Sharia across a country that is made up, almost equally, of Christians and Muslims.
But it seems to have lost its way. Although many of its attacks have been on state facilities, it has also targeted Christian churches and worshippers in Muslim-dominated northern regions in the hope of unleashing religious violence. It has also not spared its Muslim brothers in whose name the so-called battle is being undertaken.
The Nigerian security establishment is struggling to get on top of the problem. Although violent religious clashes have been part of life in some parts of Nigeria for many years, terrorism is something new. Used to tackling uprisings with firepower, the security forces have had to develop greater capability in terms of strategy and intelligence to fight their elusive enemy. They have been assisted in this by some of the best around, including advisers from the US and Israel.
There has been some concern about the complicity of senior government and security officials in Boko Haram’s activities. The prime suspect in the bombing of a Catholic Church near Abuja on Christmas Day, which left dozens of worshippers dead, managed to flee while being transported between detention facilities. The chief of police was immediately suspended and later fired.
Boko Haram is not a new organisation although it has only recently captured the headlines outside Nigeria. It has been a thorn in the side of the government since it was formed in 2002.
The issue came to a head in 2009, when the group stormed police stations in Maiduguri and hundreds were killed. The army captured Boko Haram leader Mohammed Yusuf, who died in detention. Since then, the quest for revenge has overtaken its religious agenda, making the state it loathes the focus of its attacks.
Many Nigerians reject the view that poverty is a driver of this extreme behaviour, saying poor people are everywhere in Nigeria and do not vent their anger by killing people.
The attacks have escalated sharply in recent months but have been focused on local targets. Concern that western targets will start to occupy centre stage, given the group’s supposed links to al-Qaeda, has not been realised, although Boko Haram has threatened to attack telecommunications companies (including MTN) for alleged complicity with security agents in having phone calls traced. The group’s reign of terror, at this stage, is far from the commercial interests of most South African companies.
Life in Nigeria last week looked as it always does — energetic, vibrant, noisy and busy. But despite assurances by key ministers that the problem is not affecting investment, international investors are concerned about how this might play itself out.
Alarmist predictions by outside observers range from civil war to the outright meltdown of the state. Nigerians are more sanguine, despite their anger at and anxiety about the senseless violence. They have been to the brink many times before.
• Games is the CEO of Africa @ Work, a research and consulting company.
Mining reality is far more nuanced than predators and victims
THERE is nothing quite like a mining road show to get emotions stirred up. This year’s Mining Indaba did not disappoint. Not only were Congolese mining officials beaten up by protesters for being part of an allegedly rigged election last year, but civil society was out in force with its own event, a platform from which to give the capitalists a drubbing.
The civil society debate was, as always, about predators and victims, with the mining companies on one side, the communities on the other and governments somewhere in between.
Political expedience — and history — tend to allow such narrow characterisations of the actors, but the current reality is far more nuanced.
Mining companies have built roads, railway lines, power stations, airports, houses, clinics and schools. New towns are emerging in Zambia, Mozambique and other parts of Africa on the back of mining, creating demand for local goods and services.
While the driver of infrastructure building may be self-interest, it provides associated benefits, often giving an economic lifeline to communities in remote regions.
Dazzled by the apparent profits being made by mining companies, governments and communities expect a lot, ignoring high and rising production costs and the long-term nature of an industry that has to consider all the commodity cycles, not just the boom times. The focus is usually on how to extract more of those profits rather than how they could best benefit future economic development.
The problem is made worse by a lack of transparency on revenues and spending priorities. Mostly, royalties and taxes do not directly benefit the affected areas.
Even as governments put pressure on mines to beneficiate, often they cannot supply sufficient power for the mine, let alone a smelter or refinery. Local content and procurement demands are not accompanied by supply-side measures to address the lack of capacity and skills that forced companies to source goods from SA or overseas in the first place.
Debates about resources in Africa appear to assume that the state is best placed to improve the lot of people in underdeveloped countries. But the evidence suggests that Africans will improve their own lot if there is a proper framework and catalyst for economic activity.
Mining companies are now focusing on how they can be that catalyst rather than the sole source of opportunity. They are also seeking new models that will enable them to add more value to their non mining investments and reduce dependence on the mine.
Talk to any leading mining boss and you will find local development is no longer about pacifying the locals with whom mines co-exist, but about the long-term security of investments.
In the past, community issues tended to be added on to the job of a busy manager. It tended to be a hit-and-miss affair. Now companies such as American are putting in dedicated teams with the time to talk to communities and local governments to build relationships and improve the effectiveness of their interventions.
Politicians, too, are starting to look at mining as a catalyst for development rather than just as a cash cow.
At a conference in December, African mining ministers joined United Nations agencies, the African Union and others to debate how to build better economies with resource revenues. The discussions were based on the Africa Mining Vision, drawn up by the parties in 2009.
Suggested options include establishing sovereign wealth funds, setting up development corridors along mining routes and developing sideways linkages to the services industry rather than focusing only on industrialisation. They also suggested mining be treated as a cross-cutting sector, rather than as a standalone industry.
Unfortunately, African Union-linked processes seldom survive contact with the ground. But what is important is that the two sides seem to be getting closer in their thinking.
Resources-driven development has become more critical than ever given the high levels of interest internationally (about 240 listed companies on the Australian Stock Exchange alone have projects in Africa) coupled with high commodity prices. Hanging on to knee-jerk stereotypes will be a drag on this thinking.
• Games is CEO of Africa At Work, a research and consulting company.
Rich rewards and myriad problems await investors in Africa
NIGERIA’s president, who has spent the year so far fighting fires, must have been relieved to see the country top the list of investment destinations unveiled in a survey of investment institutions and fund managers last week. The Economist Intelligence Unit’s survey of 158 international institutions, including pension funds, hedge funds and private banks, showed fund managers rating Nigeria (51% of respondents) along with Kenya (48%) as being the countries most likely to yield the best investment returns over the next three years.
Zimbabwe, still a risky destination for investment while Robert Mugabe is in charge, is placed third on the list, with 35% of investors voting for its future growth potential, followed closely by Egypt and even Libya, both yet to emerge from a period of political destabilisation and radical change.
States with much lower risk ratings are further down the list of selected countries. They include Ghana (25%), set to experience the highest growth rate in sub-Saharan Africa this year; Zambia (18%), Botswana (13%), Tanzania (12%), Uganda (11%), Mozambique (7%) and Rwanda (6%).
The rankings suggest that those interviewed have a large appetite for risk, although, curiously, most appear to have avoided African markets to date, with one in five of investors that were interviewed having no exposure to this region.
High growth rates and growing consumer markets seem to be the main attractions to these frontier markets in Africa.
Size seems to matter. Respondents in the survey said they found growing consumerism and a growing middle class to be the most attractive reasons to invest in Africa. An example was given of Unilever, which has seen 10% revenue growth in the region in the past year, compared with 4% across the group as a whole.
Nigeria, Africa’s biggest market by far, certainly ticks that box, as does Kenya. Although it has a considerably smaller population, it is the dominant player in the East African Community trade bloc, which expands its immediate reach to four other countries as well as another chunk of the continent through its membership of the Common Market for Eastern and Southern Africa .
Curiously, Ethiopia, with a population of 80-million and 8% growth predicted over the next few years, does not feature on the list.
SA, despite its large consumer market and considerable mineral resources, also does not feature. It does not offer the high returns of most other African markets that are developing rapidly off a low base, and even its own companies are looking for high growth opportunities in many of the same markets to the north.
Resources, once the main reason for investors to come to Africa, are still a drawcard but are expected to diminish in importance for this category of investors over the three- year period, making way for private equity as the dominant asset class.
Nigeria’s position as one of the top 10 global producers should place it well but its poor handling of legislation designed to reform this vital sector has damp ed investor appetite over the past four years. However, many other oil and gas markets are set to come on stream over the next few years across east and west Africa and mining investment continues apace, despite rising tax and royalty rates as governments seek increasing benefits from high commodity prices. The global financial crisis has not only got investors looking at Africa differently, it has also encouraged them to look at long- term investment strategies in frontier markets rather than the short-term speculative strategies that have caused volatility in Africa’s small and illiquid markets in the past.
The challenges of investing in Africa were not ignored in the Economist Intelligence Unit report. Respondents cited corruption as a major concern but illiquid markets and weak legal and government institutions seemed to be a bigger worry, particularly for long-term investments.
There is no doubt investors are bullish about Africa as their options for high growth narrow, but they are advised to have strong nerves when approaching some of the markets they are interested in, such as Nigeria, which, though reforming, is still a difficult and volatile place in which to do business.
All the indicators on Africa are positive but they fail to mention myriad problems and challenges that await unwary investors once they are there and up to their necks in crocodiles.
Hype about Africa as next big thing ignores harsh realities
A CLEAR signal of the change taking place in Africa is the appeal by ailing Portugal to its former colony, Angola, for investment. While Portugal’s economy is con tracting, Angola is looking at growth rates of double digits next year on a booming oil economy. According to news articles, Angolan President Eduardo dos Santos has graciously said the country is ready to assist its former ruler.Angola is not the only African country looking forward to high growth rates next year. Others include Ghana, Mozambique, Uganda, Nigeria, Ethiopia and Zambia. South Sudan, which did a pitch to US oil investors last week after the US Treasury partially lifted sanctions to allow foreign investment, will join them if it can contain tensions with Sudan and localised fighting in the country.
Everywhere you turn these days, an economist, analyst or journalist is punting Africa as the next big investment destination. In fact, investment has been growing rapidly for a decade and the continent has shown a steady growth rate, averaging about 5%. This is predicted to rise to 6% next year.
It could have been an even rosier picture if the continent had not been plagued by the perception of being a high-risk investment destination. But the scale of resources investment, particularly in mining and in new oil and gas finds around the continent, is now persuading investors sitting on the fence to take another look.
The interest by China and India, in particular, has focused attention on African markets. predict s that Chinese investment could rise 70% to $50bn by 2015, with bilateral trade between the two regions reaching $300bn by 2015 — double last year’s figure. Brazilian investment is mounting and starting to diversify out of resources, while nontraditional investors in regions such as the Middle East have also had their interest piqued.
The US and UK are looking for new ways to stay relevant in Africa even as they grapple with problems at home. British multinationals are investing in new capacity in longstanding commercial enterprises in countries such as Nigeria, while US firms remain engaged with the oil industry.
Private equity looks set to grow next year as new Africa-focused funds emerge both on the continent and internationally and join the hunt for acquisitions. Last year, the value of mergers and acquisitions reached a record $44bn, double the value of 2009, and is set to rise again next year. This boost to the African private sector is being complemented by the return of professionals wanting to make a difference.
There are any number of positive indicators and trade and investment figures one can draw on to support the new growth story. With all the hype, it is easy to be seduced into thinking that all is well in Africa. But there are still many harsh realities that may yet make a dent in ambitious growth assumptions. One of these is the fact that sovereign political risk is still high — as the recent election in the Democratic Republic of Congo showed.
Kenya goes to the polls next year and although it is putting in place measures to prevent the violence that followed the 2007 poll, another bout of instability in one of Africa’s biggest economies could again undermine the growth trajectory of the region.
Elections in Angola set down for next year include the long-awaited presidential election, which will be contested by long-time ruler Dos Santos, quashing recent speculation he would nominate a successor to take over from him after 23 years in power. This is another potential flashpoint.
Zimbabwe is still a wild card. Tension is rising as Zanu (PF)’s cries for an election next year become more shrill with the decline of President Robert Mugabe’s health while its partner in the unity government, the Movement for Democratic Change, insists on keeping to the negotiated road map, which appears to have drifted off course.
A key factor in Africa’s performance next year will be the effect of events in developed economies, particularly the euro zone. Although trade with nontraditional partners now accounts for about 50% of sub-Saharan Africa’s exports, 37% of nonoil exports still go to European markets and the US is still a major recipient of African oil.
Significantly lower demand for goods and services from developed countries may have a negative effect on growth projections, particularly on SA, given its much wider exposure to globalisation than other African countries.
North African states, most of them either in the midst of political upheaval or recovering from it, face political uncertainty as they grapple with new realities. Their situation is not helped by the fact that 60% of North Africa’s export revenues come from the troubled euro zone. Francophone countries also have considerable exposure to Europe, with 37% of exports going to the region, according to the African Development Bank. While there may be advantages in that the common currency for the region, the CFA franc, is linked to the euro, this is likely to be undermined by falling demand.
There is another consideration for countries that are generally ill-prepared to deal with exogenous shocks, and that is the performance of China, which, too, may be affected by a significant slump in demand from developed countries and a possible credit crunch at home.
The euro-zone crisis also has sector- specific implications, for example for tourism demand in eastern and southern Africa, horticulture in Kenya, and wine and car exports from S A .
A big challenge for next year is rising inflation, driven partly by rising food prices. Drought has pushed up the price of staples in many countries, with maize in eastern and central Africa rising by more than 30%, even as producers in SA experienced low prices as a result of good harvests.
Rising food prices present a clear opportunity for Africa but the constraints hampering the development of agriculture are as much about government policy as they are about climate.
This underlines another issue that needs to be tackled — trade in agricultural commodities across the continent to prevent food deficits , part of the broader problem of low levels of intra-African trade in general. The slow moves towards regional integration are a concern for many investors looking at pan-African strategies rather than localised investments.
The pressure to develop green economies is another looming challenge for countries that have not yet found a way out of persistent energy crises. In coming years, African governments will have to deal with a growing global network of international bureaucrats, consultants, nongovernmental organisations and other stakeholders all giving advice on how to refocus their economies in the quest to address climate change.
This may have the unintended consequence of diverting policy makers from reforming the costly and dysfunctional operating environments that exist in many states and add considerably to the costs and difficulties of doing business. At present, there are not many countries that have adequate capacity to absorb the type of investments being earmarked for Africa, nor to leverage them for broad-based growth and economic diversification.
A recent issue of African Business magazine highlighted the continent’s malaise with two simple statistics: “Man-made products as a percentage of China’s exports to Africa — 90%; raw materials as a percentage of Africa’s exports to China — 87%.”
That will remain the African story if African countries do not move quickly to exploit this tide of investor interest by embarking on strategic and long-term policy reform, not only to ensure quality growth but also to build the future.
Nigeria’s history catches up with president over fuel subsidy
THE issue of the fuel subsidy in Nigeria exemplifies everything that is wrong with this giant economy operating well below its potential. It reflects years of neglect of state refineries; it underlines the irony of being Africa’s biggest oil producer but also a major importer of refined fuel; it highlights the undermining of the economy by cartels; and it shows the lip service paid by the state to development.President Goodluck Jonathan created pandemonium with his recent announcement that the historical subsidy, currently worth $7bn a year, would be removed in January next year as part of the government’s deregulation of the downstream oil sector. There was an immediate surge of hostility to the announcement right from the grassroots to the lower house of the legislature, which voted against the scheme at a sitting last week, saying it would lead to more financial hardship for Nigerians.
Economists have predicted a rapid rise in inflation and a ripple effect throughout the economy, while the unions are threatening mass action. The fuel price at the pump is about 65 naira a litre (R3,25/l ) against the current real cost of R6,95. But Jonathan has so far stood firm, to the extent of producing a four-year medium-term budget that does not include an allocation for the subsidy, which amounts to 30% of total expenditure. Supported by the head of his economic team, Finance Minister Ngozi Okonjo- Iweala, he maintains the subsidy is swallowing up funds in recurrent expenditure that could be used to build a future for the country.
The subsidy issue has been around for decades, with successive leaders trying to raise the cost of fuel but retreating in the face of widespread resistance. Nigerians maintain cheap fuel is the only benefit they get from being an oil-producing country, given that little oil money filters down into the broader economy because of years of government corruption.
The scale of Nigeria’s economic dysfunction is shown by the fact that despite it producing more than two- million barrels of oil a day, it imports almost its entire refined fuel requirement. Some of this is being siphoned off into neighbouring countries whose own unsubsidised fuel is almost three times the price of that in Nigeria.
Three of the country’s four refineries are defunct, with a fourth operating at about half of its capacity. Most point to corruption as the basis of the problem — billions of dollars earmarked for rehabilitation of the refineries have disappeared over the years.
But there is a more sinister reason — the entrenched interests of a host of unnamed people, who make huge profits from exploiting the subsidy.
In an attempt to prove good faith in its attempts to clean up the downstream sector, the government last week released details of the scheme’s beneficiaries. It listed more than 100 companies, many of which are owned by Nigeria’s richest people. They include , which owns fuel stations across Nigeria and is headed by local heavyweight Wale Tinubu; Conoil, owned by Glo mobile phone billionaire Mike Adenuga; Forte Oil, owned by magnate Femi Otedola; and Integrated Oil & Gas, owned by a retired m inister. Some on the list were not fuel distributors at all, exposing fraud in the scheme.
Jonathan has outlined projects that the money will be invested in, such as infrastructure (including the refineries), urban mass-transit schemes and vocational training. But Nigerians, whose default setting is to suspect corruption in anything linked to the government, have heard all this before, from the hated military dictators and the democrats that followed them.
Newspaper reports last week said the president may overrule the legislature’s objections to the subsidy removal by executive fiat.
There are good reasons to believe Jonathan is trying to make a break from the past. He has surrounded himself with internationally renowned economists and bankers whose reputations rest on their performance.
But he has inherited a poisoned chalice. The tough decisions that should have been taken by his predecessors have coalesced in his presidency and now the impatience for change makes it difficult to implement long-term plans.
Jonathan is at a turning point. His future may rest on how he handles this thorny issue.
SA mimicking the rest of Africa in allowing corruption to flourish
ZAMBIAN President Michael Sata probably had the right idea when he decided to embark on a widespread firing spree in order to rid his country of corruption, given how entrenched the malaise has become in Zambia. Victims to date have included 73 district commissioners, the central bank governor, the heads of various branches of the armed forces, and the national police commissioner. Sata has dissolved the boards of the revenue and pensions authorities, fired ambassadors, parastatal chiefs and the head of the anti corruption body itself.It is too soon to say if these actions are politically motivated or if his own administration will, in the long term, perpetuate, rather than fight, corruption. But the size of the “clean sweep” shows the scale of the problem.
A study released by Transparency International last week highlighted the fact that corruption has got worse in Southern Africa over the past year. The organisation surveyed bribery in six countries — the Democratic Republic of Congo, Malawi, Mozambique, SA, Zambia and Zimbabwe — over 12 months last year and this year and found that 62% of respondents believed corruption had got worse over the period. More than half who had come into contact with service providers had been asked to pay a bribe. The worst offender was the police. The implicit threat posed by a corrupt policeman makes this nothing less than a protection racket on a regional scale.
After the police, the most bribes were solicited by registry and permit services, customs officials and the judiciary. In all countries but Mozambique, political parties came a close second to police in corruption. The sectors in which most bribes were paid were, unsurprisingly, public works contracts and tenders as well as utilities, both with links to government.
An alarming finding was the fact that SA had the third-highest number of bribe-payers among the respondents — 56% of respondents, higher than Zambia and Zimbabwe. The main reason for paying bribes in SA was to avoid problems with the authorities, while in other African countries it was related more to getting services.
I have attended many discussions on doing business in Africa in which South Africans relate stories about their brushes with corruption in other African countries with a mixture of awe and derision. But one does not have to cross the border any more to have the experience.
While corruption in SA may not yet be as colourful or as brazen as it is in many other African countries, it may just be a matter of time before foreigners coming to SA to conduct business relate the same type of stories back home.
The moral laxity at the top of the political pile coupled with a lack of consequences for being found to be corrupt is worming its way through the system. Corruption is not something that happens overnight. It is a slow- moving line. Countries that have become legend for corruption, such as Nigeria, the Congo and Kenya, became that way for a variety of reasons, mostly poor governance. They are finding it difficult to tackle the problem because it is not just a matter of underpaid state officials soliciting bribes; it has become embedded in the entire political process. The very people who can change things are themselves benefiting from the system.
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.
Zambia has an opportunity to tackle a scourge that has undermined its progress if it does not retreat into the more familiar pattern of political expedience and patronage.
But in SA, we seem doomed to repeat the mistakes made by other countries in allowing corruption to flourish. It is not too late for SA to stop the rot, but the passing of legislation that effectively promises more censorship and political protection to corrupt officials does not send a signal that the state is concerned about where it is taking us.
Is Angola’s president also feeling the African winds of change?
HAVE the winds of change blowing across Africa’s undemocratic states unsettled another despot?
In what came as a surprise to the nation, Angola’s president of 32 years, Jose Eduardo dos Santos, is said to have named a potential candidate to take over from him after next year’s elections. The president had seemed to be in no hurry to leave power and was instrumental in pushing through a change to the country’s constitution that abolishes presidential elections in favour of the winning party in legislative polls electing their own leader, in the same way SA does.
Although the new constitution, passed in February last year, sets a two-term limit for presidents, this becomes effective only from next year, wiping the slate clean for Dos SSantos. He could rule for another 10 years.
Dos Santos is, in effect, acting president as he has never been elected to the position. He was chosen by the ruling MPLA to lead the party after its founder died in 1979 and although he won the first round of elections in the 1992 poll, a return to war precluded a second round.
Since the end of the war in 2002, Dos Santos has repeatedly delayed a promised presidential poll, hiding behind the constitutional review process, set in motion by the MPLA government after its decisive legislative victory in 2008. He said a presidential election would take place once the constitution had been finalised. But, behind the scenes, he ensured this would not happen.
Although the government promised the review would be a public consultation process with a referendum, the MPLA used its parliamentary majority to push through the election proposal. As a result, Dos Santos will be spared any personal election scrutiny should he stand, even though he would be likely to win the vote in a system skewed in favour of incumbency and patronage. He will also not have to shine any light on his family’s extensive business empire, allegedly built on a foundation of corruption and abuse of political influence.
The question is why he would talk about succession. He has previously sidelined anyone showing rival political ambitions. A popular theory is that he plans to consolidate his political power behind the scenes as leader of the MPLA while still controlling the government through his inner circle led by a man he trusts.
That man seems to be Manuel Vicente, CEO of national oil company Sonangol, according to an Angolan newspaper. Vicente has already indicated he is planning to step down from his lucrative job for a role in politics or the private sector. Believed to be one of Angola’s richest people, Vicente is not likely to leave a lucrative job in the country’s key oil industry without the promise of a fitting alternative.
Vicente has built business credibility through his successful leadership of Sonangol’s international investment programme but he has also been linked to high-level corruption at home.
While this may not make him the ideal man to carve out a new future for Angola, his close ties to the presidency and party hierarchy would make him a solid front man for Dos Santos.
There are rumours of the president’s ill health, which may be another reason for considering a successor. But he may also be driven by fear that an unwelcome wind of change may still blow into Angola.
Dos Santos has seen the troubles experienced by his three key allies in Africa — Libya’s Muammar Gaddaf i, Cote D’Ivoire’s Laurent Gbabgo and Zimbabwe’s Robert Mugabe. There have also been several protests by disaffected youths in the past year. A n election may be a rallying point for rising tensions in Luanda.
Dos Santos’s departure from the presidential stage is not likely to be anything more than symbolic. But it may leave Mugabe feeling a little lonely in the old-dictators club
Retail bandwagon in Nigeria may help to change perceptions
MORE than 500 Nigerians fly to Dubai every day to shop. This translates into more than $1bn being shipped from Africa’s biggest market to the tiny emirate. That is a retailing market gap by anyone’s standards. These statistics do not include the world’s other shopping meccas so favoured by wealthy Nigerian shoppers, such as London, New York and even Johannesburg. Despite the size of this obvious opportunity, international companies in the retail sector have been slow to go into Nigeria. Most of the hesitation has been based on perceptions that it is too difficult to do business there.
For those who have been interested, the opportunity was blocked by a prohibition on importing a large array of goods, including clothing, shoes, selected foodstuffs, plastic goods and so on, imposed in 2003. It was intended to stimulate local production and has been successful in some instances, such as food production and furniture. But it simply increased the smuggling of cheap clothing from Asia and the local textile industry collapsed under the weight of illegal imports and high manufacturing costs.
Clothing was removed from the list late last year and Nigeria has seen a flood of interest as a result.
South African retailers that have expanded into other African countries have been champing at the bit. This is unsurprising given the growing demand due to a large population, rapidly expanding middle class, returning diaspora and high growth rates.
A representative of Broll Nigeria, which leases space in offices and malls in the country, told the Nigeria Economic Forum in Sandton last week that about 200000m² of new retail space is scheduled to come on stream over the next few years.
Malls are being built in the Nigerian cities of Lagos, Enugu, Port Harcourt, Abuja, Ilorin and Kano. Shoprite, with plans for 16 more stores in Nigeria by next year, is a key anchor tenant in these, alongside Game and other South African retail brands.
The Palms in Lagos was the first western-style mall in Nigeria and the entry point for Shoprite and Game. Despite being small by SA’s standards, it has changed how Nigerians shop.
The availability of new shopping nodes is a boon for and the Pepkor group, which are hoping to trade in Nigeria before year-end in centres alongside Nigerian-owned retailers, service providers and cinemas, and international franchises.
Pepkor Holdings chairman Christo Wiese said last week that the group planned to invest R100m in the first phase of its Nigerian expansion and was looking at 50 stores in time.
Woolworths CEO Ian Moir says the chain is looking at re-entering Nigeria, along with Angola and Mauritius, to boost its African income stream. Woolworths was a casualty of the import prohibition, imposed without warning — it had just entered the market at the time and had to pull out.
Large companies already in fast- moving consumer goods are getting on the growing consumer bandwagon. Last week global brewing giant had the earth-turning ceremony for its new R700m brewery . South African packaging multinational will be spending R30m this year to boost capacity in Nigeria as well.
Competition is rife in the brewing sector in particular, with Heineken and Guinness dominating the market, but it is also starting to emerge in the retail sector. International entered the market last year in partnership with a local retail group, while Walmart is eyeing Nigeria as a key driver of its African expansion.
There are significant upsides for Nigeria apart from retail benefits for consumers. They include upfront benefits such as employment, training, more taxes as well as greater demand for agricultural products.
There is no doubt there are still major challenges. Millions must be spent on generators and diesel — the ailing state power utility is a standby option only. Other challenges include currency volatility, congested ports, difficulty of securing land, and high costs of finance and construction.
But the performance of the retailers could be the catalyst in changing negative perceptions about doing business in Nigeria.