‘Post-Crisis Africa: Old Challenges, New Opportunities', a talk by Dr Ngozi Okonjo-Iweala, MD of the World Bank

The charismatic Dr Ngozi Okonjo-Iweala gave a presentation at my alumni university, the London School of Economics, last Tuesday, 13th September 2009. Her presentation was on ‘Looking beyond the Crisis: Challenges and Opportunities for Africa’ - a rather typical presentation title, but quite refreshing ideas from her side.

Her presentation gave a brief overview of the economic developments taking place across the continent since 1995, citing remarkable growth rates, reductions in armed conflicts, increased regulatory reforms and more transparent elections.

However, over the last three to four years, the continent has been struck with what Dr Ngozi referred to as the crises of the four ‘F’s’ – Fuel, Food, Financial which has led to a new crisis - the Fertiliser crisis.

During the presentation, she kept stressing the importance of stimulating growth by creating jobs. The World Bank are predicting a rise in average real GDP growth rates to 4.5% across the continent in 2010, however, jobs will lag behind.

Dr Ngozi then proceeded to talk through what she saw as the eight main challenges facing the continent in the years ahead, many of which have been cited before. These are:

· The role of government and its accountability

· The sustainability of public debt

· Economic volatility

· Corruption

· Political stability

· Climate change

· Augmenting Energy resources

· Accelerating ‘job-creating’ growth

The opportunities that she laid out however, were more unique. These included:

1. Promoting labour intensive manufacturing to spark technological innovation and competition. China will be driving this manufacturing growth and Africa should be looking to partner with China and India to service their industries rather than be undercut by Chinese and Indian goods.

2. Investing in the full agricultural value chain, from raw products to processed goods. Only 40% of Africa’s productive land is currently being cultivated. She cited the need to bring more female entrepreneurs into this sector as women largely comprise the agricultural workforce.

3. Climate change is a challenge, but also an opportunity. Currently, Africa uses only 8% of its renewable energy resources compared to 30% in Latin America. Investing in sustainable agriculture and clean technology can supply Africa with a new revenue source. The World Bank has just launched the World Development Report 2010 on Tuesday (22 September), which focuses on Development and Climate Change.

4. Repatriate embezzled resources and stem the outflow of financial and natural resources from Africa. This opportunity is off the back of the G20 financial summit pledging to put an end of tax havens and the OECD anti-corruption programme and convention.

The question and answer session raised a few interesting ideas as well, such as the need to implement strong tax reforms so that a government’s revenue doesn’t rely solely on exploiting natural resources. However, the main obstacles to this, and obstacles that Dr Ngozi faced when she was the Nigerian Minister of Finance, was the difficulty of tax administration and the narrow tax base, with many people still in the informal sector. She recommended that government should incentivise the set up of small and medium sized enterprises by placing a 0% or subsidised tax regime on these businesses for the first few years, and then slowly introducing a taxation system which provides them with resources and assistance.

The issue of regional integration also cropped up. Dr Ngozi was an advocate of regional bodies like COMESA and SADC but stressed that they could still do more. She was supportive of common currencies but stated that national currencies and economies need to have the correct systems to manage exogenous shocks first.

She summed up by stating that to prevent another financial crisis like the one we have just experienced, the world must establish multiple poles of growth. America was once the main growth centre and China and India are emerging. But more are needed. Dr Ngozi is confident that Africa can be the source of successful and strong growth centres.

Meeting for Africa in New York

Near the end of September, New York will be a flush with Heads of state, CEOs and executives. They will be flocking to the city not just for the annual UN General Assembly, but also the annual Clinton Global Initiative, a CEO’s working lunch on the Millennium Development Goals (MDGs), the African-American Institute Awards Gala Dinner and the Africa Investor Index Awards.

Increasingly, businesses are being welcomed to governmental and multilateral events. It is a sign that all parties are recognising the need for collaboration and mutual understanding. And the growth of Africa-focused events is also a promising sign given the impact of the financial crisis on aid flows to the continent.

At the CEO’s working lunch on the MDGs, the main topic of discussion will be how Africa can make substantial headway to attaining at least some of the MDGs. The theme of this year’s African-American Institute Awards Gala Dinner is “Nurturing Democracy and Hope for Development in Africa.”. Interestingly, most of the sponsors are from the corporate world, including Constant Capital Partners, Chevron, DeBeers and Exxon Mobil. Corporates are being recognised for their contribution to Africa’s development and many businesses are doing a good job of it at that, as highlighted by Africa Investor’s Index Awards, which awards and recognises Africa’s institutional investors, stock exchanges, best performing listed companies, stockbrokers and capital market regulators. These awards demonstrate the burgeoning financial industry in Africa which is driving economic growth.

As for the Clinton Global Initiative Annual Meeting which brings together business, government, and civil-sector leaders to plan and launch specific projects, ‘Commitments to Action’, to address global economic, environmental, and social challenges, it probably comes as no surprise that most of these 391 commitments are projects based in Africa. Many of these commitments are from large corporations such as Diageo, Standard Chartered, Coca-Cola, Nestle, Guaranty Trust Bank, Equity Bank Ltd, and Philips. Again, it is a demonstration of the private sector driving social, environmental and economic development in Africa.

More obviously can be done - we are still along way away from attaining all the MDGs in all African countries. As it stands, corporate contributions to Africa’s social and environmental development mostly takes the form of philanthropic giving. However, there are signs that companies are beginning to view their role in Africa’s sustainable development slightly differently.

Over the next five to ten years, I believe we will see a shift from ‘Corporate Social Responsibility (CSR)’ thinking and a philanthropic giving mentality, to a more strategic approach to sustainability. I believe we will see the following trends:

· Business management strategies and the ways of doing business will increasingly start to embed ecological, social and ethical viewpoints and measurement tools and standards. Many MBA courses in the US and the UK are looking at the development of strategies which create business as well as social and environmental value.

· More companies will begin to tie their marketing strategies with green initiatives, as we have seen with electric and hybrid cars.

· Larger companies, through their public affairs department, will increasingly engage governments on environmental and social policies to deepen their understanding of public opinion and public policies especially in the themes of climate change, energy and water.

· Companies will move away from providing grants to non-governmental organisations to investing in stimulating small to medium sized social enterprises such as ‘clinical social enterprises’.

· All companies, large and small, will begin to use social media and online tools more frequently to improve their stakeholder engagement methods and transparency.

My hope is that businesses who are beginning to implement some of these initiatives are showcased at events like those taking place in New York, so that they can be replicated and adapted into other business models.

Doing Business 2010

The International Finance Corporation (IFC), a World Bank institution, released its annual “Doing Business 2010” report yesterday. The audit looks at how countries around the world have improved the environment for small to medium businesses (including sole traders and entrepreneurs) to set up and do business.

Singapore remains at the top for overall “ease of doing business” but some interesting results for Africa – and opportunities for sharing best practices.

287 reforms were recorded in 131 economies (June 2008 to May 2009) – a record – but more significant was the fact that low- and lower-middle-income economies accounted for two-thirds of reforms in 2008/09. Is the economic crisis hitting developing nations harder than we thought, kick-starting reformers into action to attract more inward investment?

Rwanda – the top reformer - introduced reforms in 7 out of the 10 categories (such as registering property, enforcing contracts, getting credit, protecting investors), rising from 143rd to 67th place on the ease of doing business rankings – and the first time a Sub-Saharan African country has led the world in reforms. Liberia entered the top ten, while Mauritius and Sierra Leone were also recognised for leading in certain areas.

So post-conflict countries have a reason to reform as well it seems – again with the driver of attracting Foreign Direct Investment. While business reforms are only one part of economic development / recovery, it is one area that the government can manage, monitor and measure. The question is how much the private sector can influence the government – but big business has to realise the advantages of a thriving SME sector in that case.

Rankings are one thing – the World Economic Forum also released its 2009 / 10 global competitiveness index yesterday, to give countries even more numbers to compete on, but surely what counts is the experience in each country. As Penelope Brook, Acting Vice President for Financial and Private Sector Development for the World Bank Group said – absolute scores are what matter. A women trying to set up a retail business in South Africa is not going to care what others are going through in Ghana or Guinea; what matters is the speed and ease of processes for her. All the top rankings in the world count for nothing if people on the ground don’t experience change.

So where to from here? Is it the case, as Thierry Tanoh, IFC Vice President for Sub Saharan Africa, states, that we are seeing a sea change in the way Africa views investment, or is it a short-term shift in rankings due to circumstance? There are remarkable signs of progress in Africa, with the likes of Rwanda providing a roadmap for others, but the ability to maintain that momentum, and weather the storms of political, economic or social changes is crucial – for domestic and international audiences and investors.

African Approval of Obama

In the week that Hillary Clinton arrives for her seven-country tour of Africa, how is Obama seen throughout the continent since taking office?

Much has been made of Obama’s Kenyan heritage in his popularity rankings, but the reality is that he is following a path set by his predecessor in the White House. For all the criticism and complaints about the Bush administration (which we won’t get in to here), George W did set a strong US policy for Africa, including the Millennium Challenge Corporation and the U.S. President's Emergency Plan for AIDS Relief, the largest commitment by any country to combat HIV/AIDS in history.

While Obama’s trip to Ghana, followed so quickly by Hillary’s tour, make for a very public show of the US prioritisation of Africa, the US already enjoyed 73% approval from 33 Sub-Saharan African nations in 2008 – compared to just 34% across the world on average (Gallup).

Gallup has released further stats from March / April of this year that show that six of the seven countries surveyed (Kenya, Cameroon, South Africa, Uganda, Senegal and Mauritania) have seen an increase in approval of the US leadership since 2008. From an increase of 25% in Cameroon to an 11% drop in the final country – Djibouti – media approval across the seven went from 80% in 2008 to 87% in 2009. Substantial – but I’m not sure it points to more than any global media frenzy around the first Black American President would produce.

More interesting would be to compare approval of the US with sentiment towards the Chinese across Africa, for example. Why do we continue to hold the US up as the most important benchmark? However, despite the increasing influence and involvement of the BRIC countries in Africa, the suggestion that the US is trying to counter China’s rise in Africa with Clinton’s tour is “is a Cold War paradigm, not a reflection of where we are”, as the assistant secretary of State for African Affairs told Bloomberg.

While we read, write and blog about the impact of the Obama administration on Africa, are we obsessing about the topic by force of habit, by virtue of the media profile the topic enjoys, or because it actually counts?

Indeed, what difference will the trip make to the average African questioned by Gallup? To the major oil and mineral exporters in the countries that Mrs. Clinton is visiting – a few tax breaks or trade agreements, perhaps. But looking back to the statistics, Gallup states that at least 3/10 respondents in each country in their survey said the U.S. president makes a difference to their country. Even given the variation from country to country, that still leaves an awful lot of people in Africa that feel the US president makes little or no difference to their country – a far more pertinent statistic in my opinion.

East Africa wired!

East Africa suddenly finds itself inundated with optical fibre cable: the SEACOM cable went live just last week and hot on its heels is the Kenya Government sponsored TEAMS cable which is expected to be switched on in August – both cables battling to claim first-mover advantage and sell as much capacity as possible, as quickly as possible. The next attractions will be the EASSy cable and the France Telecom-owned Lion cable, which should both be connected within the next 8-12 months.

And so the region which has been inhibited by poor telecommunications infrastructure will literally have cable coming out of its ears by the end of 2010!

The first (and most anticipated) area of positive impact is cost. Even though the SEACOM consortium was quick to warn the public that they will have to wait a little longer for cheaper internet as industry players first want to recoup their investments, for countries which have largely been dependent on exorbitantly priced satellite connectivity, the region should still enjoy a noticeable drop in costs. This is because where satellite communication providers were charging as high as USD 7000 per megabyte, the SEACOM consortium will offer wholesale prices in the range of USD 100 per megabyte, with even more subsidised costs of between USD 10-25 to schools, research and health institutions. This is great news for businesses, learning institutions and individuals whose operating expenses will experience some relief in the medium to long term.

In addition to cost benefits, the region’s residents will finally be plugged into the world through reliable telecommunications infrastructure. What a dearth of opportunities this offers east Africa! The increased capacity via broadband internet will enable us to get more done faster - including, for instance, the ability to work collaboratively and securely across great distances, reliable video conferencing, even live streaming of audio visual content in a heartbeat and crystal clear VoIP calls. ‘Regular’ voice calls, international calls in particular, will also now be cheaper and more stable.

Governments in the region should quickly realise progress towards their anticipated socio-economic transformations as universal internet access draws even closer to becoming a reality. They have spent the last few years trying to understand and prepare for post-fibre East Africa - putting in place boards to manage and implement their ICT strategies and building policy and regulatory capacity in preparation for the changes that fibre will bring to their countries that cover critical areas such as identity theft, online transactions, the legality of e-communication and so on. They also expect to see business booming in the Business Process Outsourcing & Offshoring sector and countries like Kenya have already invested in marketing themselves as BPO destinations in Europe and North America.

This level of commitment is great for the region. It should inspire the confidence to stimulate the investments required to get more people and businesses online, moving transactions to cyber space in a region that has been reluctant to do so primarily for internet security reasons.

The push for the 24 hour economy just got a boost with fibre being able to support the communication requirements of companies that would seek to eliminate the traditional working environment altogether, enabling employees to work flexibly in terms of time and location.

The real value of optical fibre is in what the mwananchi (a.k.a. the guy on the street) does with it... the innovative African spirit has been waiting for infrastructure that is robust enough to support its ingenuity and now it’s finally here.

I can hardly wait to see what we do with it!

Barrack Obama in Ghana

When it was announced that Barrack Obama was going to be in here in Ghana for an overnight visit the first reaction from journalists was to confirm the news from the US State Department website. Alas! the confirmation was given by the US president’s itinery that showed clearly that from the G8 meeting in Europe, he would make the journey to Ghana.

So the preparations began, as usual the effort to make things look better than they actually are for the visitor’s sake, at least for 2 days, 10th and 11th July 2009.

The US embassy staff were not particularly amused as this kind of visit means a lot of work for them, they had not completely rested from the 3 day long visit of President Bush jr, just 7 months earlier. That was closely followed by an election that they had to monitor until that last ballot was counted, so they were tired, very tired and now Obama was coming in, the gigantic plane had to find landing space and on top of that the famous President and his gorgeous wife wanted a visit to the slave castle, at least a two hour drive from the capital. The embassy staff had to worry about the “monster” (his car) traveling for two hours, passing through 17 Ghanaian villages, 4 major towns, and 2 major roundabouts, all the time along the ocean.

When the advance team arrived, they decided that the torture of preparation maybe too much to bear and so the helicopter might be useful, that way, the president gets to the slave castle in 15 minutes instead of 2 hours, and can stay for as long as he likes.

After the advance team departed to the US, the information about where and what the president would be doing was still very scanty, no one knew, several calls to the embassy received the same answer, “we don’t know yet, can you call in a couple of days please”.

The local information ministry did not know either until a week before the arrival when the schedule gradually began to form like a baby in the mothers’ womb.

Then the tussle over where to make that policy statement began. Ghanaians were feeling the nostalgia of the Clinton visit in 1998, he had spoken to 10,000 enthusiastic hosts at Independence Square in the company of his wife Hilary, and president JJ Rawlings the former “strongman” president of Ghana. That event was a performance to behold and many Ghanaians relished a repetition of such pomp, pageantry and ecstasy with a dose of Obamamania and the grace of Michelle to complete the menu. Well, it appeared the Americans were not similarly enthused nor so inclined, they wanted the address to be delivered before the legislative assembly, the body of lawmakers where the Harvard graduate come super-star President could intellectualize about stuff, audacity, dreams… and anything else.

As the discussion came down to the wire, compromise was the winner, yes the address would happen, yes it would happen before parliament, no it would not happened at the Independence Square but it would also not happen in parliament!

What then was the compromise, the address happened at the international conference centre, built in 1991 for the hosting of the summit of the non-aligned movement in Accra? It is a very modern building standing directly opposite the parliament house in Accra.

I got in late that morning but was treated very nicely by security, of course, I could not drive within 300 meters of the venue, security was all over, in this event you had the US president, the Ghanaian president, his vice president, 2 former presidents, one former vice president, (of course the political musical chairs would have it that the other former vice president was now president ) 230 members of parliament,78 ministers of state and representatives from important organization such as africapractice.

And, the speech was intellectual indeed, he called for strong institutions instead of strong men, the parliament cheered, then he called for new structures for aid delivery and the cheers continued, he said Africans owe their destiny to themselves, not many cheered, then he talked about Zimbabwe and nobody cheered.

He praised Ghana for sound constitutional practice and said the minority must be allowed to take as much credit as the majority and the now opposition NPP shouted hear hear, (after the Westminster tradition of cheering the PM whether he is making sense or not). He said minority voices must be heard in a democracy.

Earlier, he had had breakfast with the president and some invited guest at the castle. The invite list for both events was about the same.

One significant bystander’s observation about this visit is that the photographs never ceased to be taken and this time the photographs were the state officials themselves. That was discussed on radio, time and again. People felt that it was embarrassing; some people felt that it was ok to photograph the famous President even when he was standing in front of the photographer and waiting for the welcoming or goodbye handshake.

Any way, the visitor then left to Cape Coast where he spent a bit of time going through the slave castle and through the door of no return (after going through slaves were shipped off to the new world)

After the Cape Coast trip the president prepared and departed the shores of Ghana.

So, he came, he spoke well, he stayed at the Holiday Inn, he saw the hospital at Labadie and he went to Cape Coast castle.

That was a big stuff, now Ghana is on the map once again, what we do with it, is our challenge, let’s start the conversation.

Seacom has landed

The much vaunted Seacom undersea cable, linking Africa to Europe, landed this week and many of us waited expectantly for our internet speeds to move into the 21st century. If you have been following developments on Twitter, you will know already that for some people the dream is reality and for others like “MwendaRiungu: The #Seacom undersea fibre optic cable has landed in Kenyan coast, 5 ISPs hooked up, then......nothing! Still waiting....... “ it has completely failed to deliver.

If truth be told, most criticism does seem to be coming from the East African community, both in terms of bandwidth speeds, non-disclosure of which ISPs have signed with Seacom and with the fact that pricing remains largely unchanged. Perhaps the very effective Seacom PR machine should have added an element of expectation management to its strategy?

The reality is that many of Kenya’s ISPs are still tied into satellite contracts and will need to wait until these conclude before investing capital in buying space on Seacom. Also, less Kenyans have internet access than South Africans - which means that less people are sharing the bandwidth and infrastructure costs. Over time, as more people ‘go online’ this should hopefully help to drive down costs.

In South Africa, the promised massive reduction in bandwidth costs (up to 40%) making Internet access much cheaper for South African users is also not likely to be felt any time soon. In fact, analysts reckon that only corporations are likely to see a drastic drop in their Internet bill and consumers will continue to pay high tariffs for voice and data services. The launch of the Seacom cable does, however, mean that there is now some competition in a market that has been monopolistic for years.

At the launch yesterday, Cyril Ramaphosa said that Seacom would serve as “a catalyst for the east and south of Africa to speed up its economic development”. In South Africa, rumour has it that Telkom is buying space on Seacom and in Kenya it is unofficially official that Safaricom is one of the ISPs hooking up. Students in South Africa will be among the first people to directly benefit as TENET, the university network, was connected to Seacom yesterday.

While the Seacom landing is going to continue to fuel debate over the next few weeks, some positive, some cynical and much disillusioned, the one sure thing is that it is a significant step forward for bandwidth creation in East and southern Africa. Seacom will soon be joined by two further cables. The East African Marine System (Teams), scheduled for completion later in 2009, will link Kenya and the United Arab Emirates, and the Eastern African Submarine Cable System (Eassy), which lands in many of the same countries as Seacom, is expected to start service in mid-2010.