All posts by rachel_eaton

Oil? Human Resources? Or land?

May 14, 2013 rachel_eaton

Isabelle Alenus-Crosby

Almost one year ago, I entitled one of my blogs “Food for Thought”.

In it I mention that food shortages might soon cease to be a reality in Africa thanks to ”new crops resistant to heat, droughts, and every bug under the sun”, and that according to Harvard University, the entire continent will easily be able to produce enough to feed its growing population within the next decade. In fact, Africa might start exporting food by 2020!

I would like to elaborate on this today.

Africa is the second largest continent in the world after Asia, and with a total land area of more than 3 million hectares, its landmass is more than 3 x that of the USA.

Agriculture and horticulture are crucial economic activities, providing employment for many, and serving as the basis for many industries. With more than 200 million people (50% of the total labour force) active in agriculture a decade ago (WHO), it is estimated that this percentage will increase to 60 % by the end of this year.

As Africa continues to grow in economic significance, combined with the afore-mentioned new technologies, is it safe to assume that land is therefore the continent’s greatest asset?

Insight

Homestrings wins at Africa Diaspora Awards 2013

May 3, 2013 rachel_eaton

Sarah Caddy

Pride of heritage was the flavour of the evening at the Africa Diaspora awards, held in London’s West End on 2 May 2013.

The continent had much to celebrate, with awards presented to the brightest and best from the worlds of Business, Academia, Entrepreneurship, Media and Community. Her Excellency Ms Thandi Modise, Premier of North – West Province, Republic of South Africa, set the tone for the evening with a moving speech on the role played by the African Diaspora in securing the continent’s successful future. “The spirit of internationalism has sustained humanity” she proclaimed, vocally grateful for the benefits that a global perspective can have not only for the individual Diasporans, but also for the separate countries within the continent. Her vision was for a continent that works with its neighbours and international allegiances to build an ever more promising future.

A prime example of her vision in practice is Eric Vincent Guichard, who secured the Entrepreneur of the Year award for his online initiative, Homestrings – an investment platform that facilitates Diaspora investments into their own communities. It was an award we thoroughly toasted, as well deserved of our client!

Insight

President Mahama’s message at The Times CEO Summit Africa was very clear: Invest in people and infrastructure

April 30, 2013 rachel_eaton

Isabelle Alenus-Crosby

Africa’s future as the world’s economic engine rests on investing in its one billion people, President Mahama of Ghana said in a speech at The Times CEO Summit Africa today. “Investments should focus on people, providing them with jobs”.

Mr Mahama delivered his keynote address at the third CEO Summit Africa, which is held every year in London. The two-day summit which was held on April 29^th and 30^th this year, brought together Chief Executives of Africa’s biggest businesses with International Investors. The President’s address also focussed on Ghana’s readiness for business and the opportunities available for partnership with its private sector to expand the infrastructure base of the country.

Most of the continent is going through an unprecedented period of stability whilst an economic revolution is sweeping across it. With more investors coming in every day, Mr Mahama shouldn’t worry. Africa’s equity markets are hot and a virtuous cycle has already emerged. And the good news doesn’t end there. The Economist reported at the start of 2013 that a rapid increase across the full investment spectrum is expected within the next couple of years. People across Africa therefore have good reason to be optimistic. According to the IMF, 84% believe that they’ll be better off in two years.

Another possibility, of course, is that they’ll be much better off.

Insight

More good news for Africa: Consumer spending and private investment is up

April 26, 2013 rachel_eaton

Sarah Caddy

Consumer spending, which accounts for more than 60 % of Africa’s GDP, remained strong last year according to a World Bank report.

The trend was driven by declining inflation across the continent and improved access to credit in Angola, Ghana, Mozambique, South Africa, Nigeria and Zambia. In addition, interest rates were much lower in 2012 than in 2011 and we witnessed a spectacular rebound in agricultural income thanks to stable weather conditions. Especially Guinea, Mauritania and Niger experienced good rains compared to 2011, but less crops failed in general across the continent compared to the previous years.

We also have to add the steady remittance inflows to the good news coming from Africa, currently estimated at $31 billion.

Not to be sneezed at are the increased investments that are supporting the region’s growth performance. In 2012, for example, net private capital flows into the region increased by 3.3 % to a record $54.5 billion; and foreign direct investment inflows to the region increased by 5.5 % in 2012 to $37.7 billion.

The World Bank report also mentioned that exports are increasingly helping the continent’s growth and that the traditional destination of these goods over the last decade is also changing. Since 2000, the overall growth of sub-Saharan exports to emerging markets and other African countries has surpassed that to developed markets. Africans are increasingly selling to and buying from other Africans, which is the best news of all.

Insight

Finding Alpha in Africa

April 22, 2013 rachel_eaton

Sarah Caddy

Joining the African Venture Capital Association’s Board of Directors’ meeting, I sit awaiting my turn to present on the crucial role communications has played in supporting the Association in recent months.

I am privileged to a sneak preview of some ground breaking research, collated over several months. Given the need – which we hear reiterated over and over again in our work with all our African clients – for independent and well-researched data on the African markets, I think it is worth summarising here.

First, Cambridge Associates, in partnership with AVCA, has developed the first African PE Performance Benchmark, which serves to help investors assess and participate in private investment opportunities in Africa. The findings of the benchmark were wide-ranging, as illustrated by the resulting media coverage, but a key headline was that African private equity funds outperformed US venture capital over last decade. All good news for Africa.

The positive stories didn’t stop there: AVCA and Ernst & Young also announced their joint research on African private equity exits. Private equity is a clear winner; the research shows that African PE firms are not only making excellent headway with generating exits, they are making strong returns in the process – almost double that of the JSE All Share Index.

When the research later broke to the packed hall of 400+ delegates here in Cape Town, Twitter went wild. The appetite for research of this kind is clearly huge from industry and media alike, with most of the afternoon of day two spent facilitating journalist calls and appearances on CNBC. It will be interesting to follow the impact these regularly updated reports have on the industry in months and years to come.

Read more on AVCA’s conference from The Economist’s Boabab correspondent, here.

Insight

Causing a stir: The fifth BRICS Summit

April 9, 2013 rachel_eaton

Isabelle Alenus-Crosby

The BRICS account for 21% of world GDP (IMF), 17% of world trade, and over 40% of the world’s population. This year, BRICS is expected to grow at almost 5%, well above the world average (at 3.6%).

This year’s summit therefore received quite a lot of media attention, and not just due to the attendance of the brand-new Chinese President Xi Jinping, nor because of the above statistics.

For South Africa, which makes up just 2.5% of total GDP in BRICS, the summit was an opportunity to showcase its role as an investment gateway to Africa and President Zuma therefore invited 15 African heads of state to attend. Tensions between South Africa and Nigeria (surrounding Nigeria’s belief that they should also be part of BRICS) means that President Goodluck Jonathan did not attend, but other heads of state including Angola, Cote d’Ivoire, Senegal, Uganda, Ethiopia and Egypt, did. Each country actively showcased its nation, grabbing the momentum of the African continent’s current economic boom.

What caused the greatest stir however, were the talks about the establishment of a development bank, which would rival the World Bank and the IMF, and is meant to fund infrastructure and development projects in member states and developing nations, through a joint foreign reserves fund.

The discussions of where the bank will be, or how much money each nation will contribute, did not reach a conclusion. Several experts and officials have said the bank will start with 50 billion dollars, divided equally. BRICS members are clearly seeking greater sway in global finance to match their rising economic power. Undoubtedly the “New Development Bank” will be top of next year’s agenda. The 2014 Summit will be held in Brazil.

Insight

The “Where and Why” of investing in Africa

March 11, 2013 rachel_eaton

Isabelle Alenus-Crosby

Gong recently hosted a breakfast meeting chaired by The Economist’s Business Editor, Robert Guest.

One of the topics discussed was that too much “ignorant” money is going into Africa simply because there are not enough listed companies outside of Nigeria. The big question is therefore “where to invest?” Where are the various opportunities that tomorrow’s Africa presents, and what makes one country more attractive than another?

With 54 diverse markets offering unique prospects and challenges, most delegates had different opinions. What they didn’t have however, was conflicting opinions. Most agreed that there are still only a handful of good entry point to expand into Africa today.

Here are the top 5.

1. With a population of 170 million people, a growing middle class, and a reputable stock exchange, Nigeria is a notable market for those looking to target a large consumer base in Africa. With reformed petroleum regulations, Nigeria has also become an appealing market for multinational companies.

2. Ghana is doing incredibly well and has proven to be politically stable. The fact that Ghana and Nigeria have space programmes is a measure of how much these two countries are ahead of the game. The difference between Ghana and other countries is that everything (power, institutions, infrastructure) works. With the discovery of offshore oil, the country now really has everything to soon be claiming the number 1 spot.

3. Kenya is more business friendly compared to other regions on the continent. In addition, there is access to good human capital, excellent IT infrastructure, and IT skills.

4. Tanzania has always been politically stable and is therefore emerging as the most effective gateway for trade into Eastern, Southern and Central Africa. It has lucrative investment opportunities in infrastructure, privatization and value-adding facilities, and oil has recently been discovered off-shore.

5. Mozambique is developing at a rapid pace, has much oil and is also politically stable.

I should add that Ethiopia received an honourable mention at the Gong breakfast meeting; It has become Africa’s fastest-growing non-energy economy and Diageo and Heineken recently paid nearly $400m combined to acquire state breweries in the country. Ethiopia is not for the faint-hearted, however. Its population of 85 million people still ranks among the world’s poorest.

The conclusion was to watch what the diaspora is doing – and they are returning first and foremost to our top 3.

Insight

Countdown to Kenyan elections

March 2, 2013 rachel_eaton

Kirsten Smith

It’s Saturday. Having listened all week to local radio stations talk about peace (in 2007 the press were taking sides, so having the media on board is very important this time round), and with all the peace rallies that have been held, (there’s another one happening today I think), and peace concerts, and deliberately-public shows of the two main candidates, Uhuru Kenyatta and Raila Odinga, shaking hands, and President Kibaki appealing for ‘the losers to accept defeat and winner to embrace rivals’, the general feeling here in Nairobi is that everyone is doing all they can for Monday to be a peaceful day.

Not that there aren’t queues at petrol stations today with people stocking up on fuel, and supermarkets full of local residents buying up supplies, but that’s just in case.

There might be skirmishes at polling stations people say, but the real danger comes once the results are announced on Wednesday or Thursday, and then no one knows what will happen. There has already been trouble in other parts of the country, and there are rumours of the intimidation gangs of 2007 regrouping.

Monday is a holiday. Polling stations will open at 6am and close at 5pm, but if you are already in the queue at 5, you will be allowed to vote, so I’m told that people will probably be casting their votes up until about 9pm. I’m relying on taxi drivers for the word on the street – perhaps not the most reliable source of information but then I’ve never claimed to be a journalist and I usually find I learn a lot of interesting things from taxi drivers.

For example, what I hadn’t realised until this week was that everyone will be voting for six different people, from the President as Head of State, to the Governor (there are 47 counties so will be 47 Governors elected on Monday), Senator (47 again), Member of Parliament representing every constituency (eg Nairobi has 17 constituencies), a woman representative (47 women will be elected as part of the new constitution, which says each county gets a woman representative), and then finally a County Ward Representative (initially called councillors) – so everyone is voting for 6 different people! Andrew, my favourite taxi driver with whom I regularly sit in Nairobi traffic having long conversations, is confident that most people understand the new system and know what they have to do. He patiently explained the whole thing to me, including percentages. 98% of the 14 million registered electorate will vote on Monday he says.

I think it’s very positive that Kenya has automated it’s voting system, so it’s all digital this time round and supposedly less likely to be rigged as a result. But this election has also apparently been one of the most expensive in the world to organise, and Kenyan politicians are some of the highest paid, which is not so great to hear.

Last year in August everyone voted for the new Constitution, a simple ‘yes’ or ‘no’ vote, and were given a booklet outlining all of the information they needed on how the new constitution would work. 90% voted yes. DJs on Royal Media radio stations in each of the different tribal languages worked hard to explain the details and make sure everyone knew what was what. 90% of Kenyans now understand what it’s about and how it all works (again, these numbers are from Andrew, and by no means official stats, but a cheering vote of confidence on the new system and your fellow Kenyan).

I tried to register two SIM cards this week and spent ages waiting for someone to do all the paperwork, and then once I’d left found that only one works because it isn’t registered. Admittedly that was Safaricom, but getting six votes accurately inputted into the new digital system, and counted up is going to be quite a feat in and of itself.

And who’s going to win? Uhuru is from the Kikuyu tribe and Raila is Luo, and Kikuyu vastly outnumber the Luo in Kenya (Barak Obama’s father was Luo). Andrew reckons Uhuru will win hands down and that lots of other tribes are voting for him as well, but someone pointed out to me that Andrew’s Kikuyu, so he would say that.

He also assures me it will be peaceful.

Insight

An energy revolution is taking place in East Africa as huge resources of geothermal steam beneath the Great Rift Valley starts to be exploited

February 25, 2013 rachel_eaton

Isabelle Alenus-Crosby

“Without sufficient Energy, it is impossible to change an Economy” – Jeremy Rifkin

As the entire East-African region is about to experience a geothermal energy boom, it will also play an important part in preserving the planet

Experts estimate that the geothermal potential of the East African Rift Valley, a geothermal hot-spot that spans 11 countries, will be essential for the area’s continued GDP growth. Geothermal energy, which is heat from the earth, is cost effective, reliable, sustainable, and environmentally friendly. This new energy therefore has the added bonus of cutting greenhouse gas emissions, and since the earth constantly generates heat, it can also be regarded as renewable.

The East African Rift Valley system is estimated to potentially produce 15,000MW of electricity within the next few years. Recent, enhanced technologies are reducing the unit price of geothermal energy and thus meeting the economic needs of all citizens, including the poor. According to the UN, the geothermal boom could lift millions out of poverty within the next decade.

The good news out of Africa just keeps on coming!

Insight

The 8th of March is International Women’s Day

February 22, 2013 rachel_eaton

Isabelle Alenus-Crosby

The need for this day is due to the unfortunate fact that women are still the most discriminated against group of people. One result of the inequality between men and women is that out of the + 2 billion poor, 75% are women (USAID).

As the world’s 10 poorest countries are found in Africa, I will dedicate this blog to the continent’s rural women, and what they’ve achieved in the past couple of decades.

In the 1990s, microfinance initiatives were introduced to Africa, and they were very often directed towards rural women as they bear a disproportionate burden of poverty (80% according to the World Bank). Microfinance services, especially microcredit, focus on small loans which have been shown to ultimately help with poverty reduction. Since 2001, the WHO has published several reports accentuating the success of these services with women in Africa.

One of the most important conclusions is that women are more likely to spend the money they borrow in ways that are more beneficial to their household in the long run. In addition, they proportionally spend more of their extra income on things that help develop human capital, better sanitation, better nutrition and also better health care and education than men. Whatever these loans are used for, the results are often remarkable, and repayment rates much higher than those of men (92% according to the Hunger Project). These are the Africans that are truly changing the face of the continent, and they certainly merit their day.

Other remarkable women are, of course, found in government. Ghandi wrote “if non-violence is the law of our being, the future is with women”. In a previous blog, “Africa’s Power Shift?”, I mention that the Rwandan parliament is made up of 56% women. According to President Kagame, whom I interviewed in 2007, the main reason for this is because women will do everything in their power to avoid genocide. I can think of many other excellent reasons for more female politicians world-wide, but that’s admittedly a particularly good one.