My Beauty Best Teacher

The successful KenGen IPO has strenghthened Kenya's ability to domestically finance projects, Peter Munaita writes about the spillover effects across their fixed income markets:

In April investors put down Ksh26 billion ($361 million) for the initial public offer by the Kenya Electricity Generating Company (KenGen) which was oversubscribed by Ksh18 million ($250,000)..."this"...opened the door for corporations like the Kenya Pipeline Company, Kenya Airports Authority, the Kenya Ports Authority, the Kenya Roads Board and the Kenya Railways Corporation to sell their creditworthiness to investors...The optimism about the success of infrastructure bonds follows the successful flotation of similar instruments by cash-rich corporates, the latest being the second tranche of Shelter Afrique's Ksh500 million ($6.9 million) medium term note arranged by Stanbic Bank. Shelter Afrique raised Ksh200 million ($2.8 million) from the market in January on a floating rate basis to finance housing development in the country. The company finances developers with medium term loans to build housing, creating a vital link between individual borrowers and mortgage lenders.

via The East African

A study(PDF) of Mutual Health Organizations (MHO's) in Nigeria made a number of conclusions, they include interesting features such as the fact "...that they are organised through existing community organisations of all kinds – from local trade unions, to traders and professional associations, church groups including spiritual or charismatic church groups, Muslim groups and traditional birth attendants. Membership..." in some cases is "... gained not directly as an individual but through the local association which offers advantages in terms of social control and prevention of abuse or fraud as well as the chasing up of defaulters. It also means that control is exercised at the lowest possible level...Another feature that is worth noting is the savings nature of the schemes, rather than an insurance mechanism as such. The idea of saving for health is apparently better understood (as an extension of traditional saving concepts such as esusu or ojo), whereas insurance is less well understood, and moreover, requires different and rather scarce skills to manage properly. This particular adaptation not only saves on administrative costs , but also helps avoid fraud, an ever-present danger with insurance schemes everywhere and a big problem in Nigeria.

Adetanwa I. Odebiyi presented a number of alternatives(PDF) for tertiary education financing in Nigeria that remain relevant today, they include that:

• The universities in Nigeria need to be open to innovations in the area of sourcing for nongovernment funds to run the respective universities. In this respect, universities should learn from one another and possibly under-study the success stories in sister universities.

• It is important to enlighten the public about the various modes of financing higher educationThe public includes parents, and guardians, and some of them could even be alumni of these various universities. Some could even be industrialists who may be willing to endow chairs or provide funds for applied research which will benefit the industries and economically enhance the universities. If the public is to provide necessary support in financing the universities, then they should be well informed as to the conditions in the universities and about alternative modes of financing higher education. They should be made to know what obtains in other countries and why some steps are necessary. They should know the types of expertise available in the universities so that these can be explored and utilised in the industries.

Mike Mande writes about the almost complete absence of indigenous Tanzanian multinationals in the countries Mining Industry.

With Tanzania having very few companies with the capacity to undertake large-scale works projects such as drilling, mining activity has not created major opportunities for Tanzanian business.
Tanzanian banks have not participated in the financing of these activities partly because they are risk averse in the sector but mainly because of lack of capacity to fund such capital intensive projects.

The obvious benefits of a much more value added industry apart, the question needs to be asked, How can the country begin the process of building its own Southern multinationals? The IPO route? The Organic method? or the Creation Path? Can Tanzanian and or other African expatriates be coaxed into setting these companies up? Can external investment vehicles be put together?

John Magnay of Uganda Grain Traders Limited makes prescriptions for regional trade within Eastern Africa(read all of SSA) he suggests:

Regional trade that was predicated on a regional market with a modern futures system. This would address two significant problems: the fact that different markets have different timings associated with them and the challenge of effective coordination in the use of regional storage facilities. To achieve this objective, Mr. Magnay believed that two things were necessary: (a) political will on the part of both local and donor governments, and (b) some form of artificial price mechanism. The presence of these two prerequisites will help ensure that proper market signals reach producers. In one case, buyers from a neighboring company showed up seeking 50 thousand tons of beans without prior notice, and the Grain Traders association had nothing to give them. The final element of this equation, according to Mr. Magnay is infrastructure. In his opinion, investment in this area should be driven by market signals and the private sector, not merely donor interest.

Watch France asks?

"... what the devil are African countries are still doing with a currency called the “Franc” which was first issued over 600 years ago to celebrate the freedom of a French King being delivered from captivity, when in fact the Franc CFA is nothing but part of a political arrangement aimed at ensuring that African countries should forever be deprived of the ability to act with any degree of freedom?..."

Writing about remittances De Montclos, M.A.P. states (PDF)

Contemporary migrants are very much in touch with their homeland, to which they often remit money on a regular basis. They have an economic and political role to play in the countries of departure as well as arrival. In the homeland, they can contribute to development and democracy, especially in enclaves, island micro-states and war-torn countries which record disproportionate emigration flows. Yet the governments of developing countries are not fully aware of the opportunities that these migrant communities offer.

Reuben Abraham comments on the Inequality Business:

The fact is that gross inequality is generally bad news for both the wealthy and the poor and everyone in between. The question though is whether you can a perfectly equal society. I would say that's impossible, as witnessed by the failed experiments at doing so within the Soviet spheres of influence. So, if inequality is inevitable in society, especially with increasing economic growth, the question is what are the parameters beyond which it becomes unacceptable? The Economist addresses the issue in its current issue and I could not agree more with their take on it.

the Economist states:

Inequality is not inherently wrong—as long as three conditions are met: first, society as a whole is getting richer; second, there is a safety net for the very poor; and third, everybody, regardless of class, race, creed or sex, has an opportunity to climb up through the system.

"...The Paradigm Initiative Nigeria's Vision is to contribute to the building of a new generation of Information and Communication Technology literate Youth in Nigeria with a personal commitment towards Self-development, National Responsibility, Regional Cooperation and Global Participation..."

Caroline Ashley and Jonathan Mitchell make the argument (PDF) for tourism as a pro-growth tool in Africa they assert that:

• tourism is disproportionately important for Africa, compared to other continents

• the industry is becoming increasingly competitive - free of the kind of price support and trade tariff controls in other sectors

• the long-term benefits are positive - Africa has the comparative advantage in wildlife tourism as such asssets become scarcer globally

• the importance of tourism revenues are relavent to the whole of Africa, albeit to different extents

• some countries have graduated from Least Developed Country status from the platform of a strong tourism sector - such as the Maldives, Mauritius and Botswana.

Efam Dovi reports on the importance of access to credit for micro-entrepreneurs looking to ascend into manufacturing:

About 80 per cent of women-owned businesses are stuck at the “micro” level. They are unable to expand because they lack properly coordinated support, cheap and long-term credit and sufficient access to new technologies. They face poor infrastructure, low capacity and sometimes obstructive government policies

Christy Banya (a UNDP analyst)

notes that the banks appear more willing to give loans to importers of cheap products than to local manufacturers. The importers sell their produce quickly, at higher returns. But home-grown businesses require more time to turn a profit and to repay their loans, so the financial institutions shy away from them.

via African Renewal

In a paper(PDF) Silou Thomas made assertions which include the following:

• in sub-Saharan Africa, the non-formal sector represents the main part of the post harvest activities particularly in food process

• people do not have any sort of conventional technical training because the bulk of the food work process is not formalized

• a gap exists between what the official education system proposes in terms of training (profiled on the modern food large scale industry) and the actual demand of the market
  

To address these challenges he made the following recommendations:

• to avoid very specialized training for engineers, and focus training on basic technology

• due to centrality of research in the delimitation of job requirements, it is essential that it be very innovative in concepts and methods

• the technologist must be aware of what society is waiting to identify, in order to give and create the technical items able to answer the specific "non-formal" and small scale company needs

A report(pdf) on post-conflict financing states:

Private investment in infrastructure in postconflict countries follows a clear sequence of sectors, with mobile telephony the only one likely to attract significant investment immediately after conflict. All the postconflict countries analyzed had at least one private mobile operator investing in the country after it emerged from war. The willingness of mobile operators to invest in high-risk environments reflects the rapid cost recovery allowed by the sector’s economics.Beyond telecommunications, the attractiveness of infrastructure investments in postconflict countries drops precipitously. Power projects remain somewhat attractive, particularly in generation, where projects start to emerge three years after conflict and increase in frequency after five years.

via PSD Blog

via Indian Economy Blog

[C]reative human insights are the driving force of our prosperity. By allowing xenophobia and protectionist rent-seekers to restrict the number of people who contribute their ideas to the market process, we inevitably reduce — and perhaps even reverse — the rate of economic growth. Our prosperity will be lower and lower than it would otherwise be.
And this lower rate of economic growth and the correspondingly lower standard of living might well never be revealed by the data.

Kenneth Wollack writes:

When political parties compete for public support, they become more likely to watch each other’s behavior so that they can report corrupt practices to the public.
In the presence of a free media that can cover incidents of corruption by any political actor, party competition creates tangible negative consequences for political corruption.

The Boston Consulting Group has just released a report (PDF) listing companies that they consider the "New Global Challengers":

Until recently,only a dozen or so RDE(rapidly developing economies)-Based companies could have been described as emerging global challengers. Today these challengers number in the hundreds. Among them, the RDE100 will play important roles in shaping the global marketplace

In a cautionary note to the developed world's incumbents:

These companies are no longer poised on some far horizon;they are globalizing fast and are determined to stay the course. The leaders of today's global companies must be prepared to meet their challenge

The "100 Top Companies from Rapidly Developing Economies that Are Changing the World" includes countries from the usual suspects, China, India, Brazil,Turkey etc.None of these 'Southern Multinationals' are from Sub-Saharan Africa. No SSA country was intepreted as a 'rapidly developing country' enough to have any of their companies on the list. The continents only listed company is Orascom of Egypt.
Who then could be seen as the rising contender/s of the future? Are they:Ocean and Oil, Globacom, Transcorp, Softtribe,Shoprite , ABC Transport and others? Which SSA companies can we perceive as having the right combination of dynamism, innovation, increasing global reach and market share to earn a place on future and other similarly based lists?
see coverage at PSD Blog

P. Kalonga Stambuli wrote in 1997 about challenges that still ring true today:

“African Capitalist States” are facing large difficulties associated with downsizing of government. The end of subsidization of enterprises means that disguised unemployment is manifesting itself into widespread joblessness. The government is continually challenged as political activists and interest groups fiercely oppose many of these measures. The alternative of reversing these measures means that budget deficits re-emerge and government remains in the vicious circle of stabilizing the economy in the face of declining foreign aid resources...
The conditions observed in Africa's past are consistent with “state hegemony” a subtle form of economic tyranny that enables the state to present its own interests as universal while marginalizing those sectors of society that offer competition. Africa's state hegemony was legitimized by subsidies, artificially low product prices, low interest rates, and over-valued exchange rates, but at the cost of large budget deficits, high level of seignorage, high inflation, rapid accumulation of domestic and external debt, weak factor markets, crowding out of credit and macro instabilities that undermine private enterprise.

Sam Ikoku calls for the development of tradable instruments to facilitate the efficiency of remittances:

"...if you want Nigerians(read Africans) to bring their money back home, you have got to give them the instruments which they can use, tradable instruments. You have got to create markets, capital markets..."We need to have instruments to create markets for Nigerians abroad. The Chinese people don't just send the money into the streets. They send the money into banks and institutions that are known to sponsor or support industries, we don't have these structures...."We don't have instruments. Every Nigerian sending money home is doing Western Union, take this to my brother, take this to my sister, give them clothes let them sell, It's such a pitiful way but if Nigerians can have instruments like in other countries, they will send large amounts of money home..."It is time for us to stop begging people to invest in this economy of 150 million people. There are Nigerians here and abroad that can invest in this economy. When we start it by example, then guess what, everyone else will be running after us. That's was what happened in China. So let's start it ourselves, lets not beg,"

Monique Maddy founder of Adesemi Communications and author of 'Learning to Love Africa' pointed out the lack of understanding the Aid Industry had (and still has) for wealth creation and entrepreneurship.In explaining the unsuccess of her then company she stated:

the real reason for Adesemi's failure and Africa's continental mire can be traced to the international development agencies that are designed to help the region. "Africa is worse off today -- in many countries -- than it was at independence, even though billions and billions have been spent," says Maddy, who herself served for five years as a United Nations Development Program officer. "As long as you have these kinds of institutions, you won't have any change."

...she called

for a radical departure from a system based on an international aid bureaucracy. "You basically have bureaucrats trying to develop countries," she says. "How many bureaucrats started Microsoft?"

via GhanaWeb

Yaw Saffu writes "...what is to be done if we are serious about zero tolerance for corruption? We need to provide the law with real, sharp, canine teeth. We have to provide the legal means to help increase the detection of non-compliance with and contravention of the Leadership Code. More importantly, we need to enforce the law and punish severely those who violate the anti-corruption laws. Both of these strategies require strong support from the attentive public..."