05 Oct

Comic Relief and Fairtrade back ethical gold mining in east Africa

Comic Relief and Fairtrade have joined forces with the Dutch government to back a $15m (£11m) scheme to support ethical gold mining in east Africa after a successful pilot project in Uganda.

About a fifth of the world’s gold produced every year comes from small-scale mines where millions of people work in hazardous conditions without access to modern technology. They resort to extracting and crushing ore by hand before using water and then highly toxic mercury or cyanide to separate the gold. The ad hoc process is not only harmful for the individuals involved, some of whom are children, but pollutes their local environment. It is also highly inefficient, on average extracting only 40% of the available gold.

US interest rate rise to deepen debt crisis in developing world
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Fairtrade is working with specialist mining consultancy the Dragonfly Initiative in trying to raise up to $4m in investment by 2020 from specialist environmental and social investors, government bodies and big business to help small-scale artisanal mines. Half of the funds will be loans to support investment in better technology and the other half grants to support building the organisational change necessary.

“We are trying to generate a proof of concept which has the possibility to bring economic benefits to thousands of families. We also hope over time to increase supply of Fairtrade gold,” said David Finlay of Fairtrade. At present only about 400kg of the ethical precious metal is produced ever year.

“Miners want to improve standards but it is a real struggle. They want access to finance to acquire equipment and reduce reliance on mercury and enhance the recovery of gold. There will be both an economic and environmental benefit,” Finlay said.

Using a centrifuge device, which costs about $5,000, increased the extraction rate for gold to 70% in the Uganda trial. But introducing the machinery is only part of the answer alongside supporting miners to work in a more organised and safe way.

 

Read more: Comic Relief and Fairtrade back ethical gold mining in east Africa

05 Oct

For many African Businesses There Is a Brexit Upside

African economists and bankers expect more advantageous trade terms, possibly with both the UK and the European Union, after last year’s shock decision to leave.

“For the ordinary African, Brexit is pretty much irrelevant,” says Diane Karusisi, chief executive of Bank of Kigali in an interview with Euromoney Africa.

Diane Karusisi, Bank of Kigali But bankers and people in business across the continent have been thinking hard about Brexit in the year or so since the referendum and while they may disagree over what form Brexit is likely to take, many expect the UK’s split from the European Union to create business opportunities. Once Britain leaves the union, it will have no trade agreements either with individual African countries or with regional African blocs, as British trade had been governed by EU law. That gives Africa an opportunity to renegotiate the terms of its partnership with the UK.

Brexit may also, some say, embolden Africa to negotiate fairer trade terms with what remains of the EU. Criticism Trade terms struck between Africa and foreign parties, including Europe, have come in for criticism. Hippolyte Fofack, chief economist at Afreximbank, says he is no fan of the Economic Partnership Agreements (EPAs) that the EU wants to sign with regional groups in Africa. “The moment Brexit happened, I felt that actually it would provide an entry point to renegotiate the EPAs,” he says.

The EPAs require both parties to open their markets: while this may benefit African economies to some extent, European exporters are likely to be the biggest winners as they could stifle or crush young industries on the continent. The EU has already signed such a deal with six countries of the Southern African Development Community; another, with the East African Community, is in the doldrums. Many in Africa hope that countries in the region will be able to strike new, more advantageous deals after the clean slate for trade terms with the UK and an EU weakened by the loss of one of its largest economies.

Read more: African Businesses See Brexit Upside 

 

27 Sep

The challenges facing West Africa’s chocolate industry

West Africa, the world’s leading cocoa industry, is grappling with the aftermath of a disastrous 2016/17 cocoa season. Over the last year, international cocoa prices have collapsed by one third to ₤1,529 (US$2,077) by end-August 2017.

The drastic drop in prices reflects softening chocolate demand and a historically large cocoa crop from West Africa. The region is on track to produce an estimated crop of 3.44 million metric tonnes (MT), up 20% from the 2015/16 season. The impact of the cocoa price slump has been devastating. Cocoa farmers’ incomes were slashed, leading to panic in cocoa growing communities; government budgets were gutted with billions of dollars in losses from cocoa export earnings; and, child labour resurged on cocoa farms.

The price crash revealed, yet again, the inherent weakness of the region’s cocoa sector. Despite controlling over three fourths of the world’s supply, West Africa is a price taker, making it vulnerable to the volatility of commodity markets. Moreover, the region’s cocoa producers capture a tiny share of value in the cocoa value chain, estimated at 3% to 6%. Processors of semi-finished products (cocoa liquor, butter and powder) hardly fare better, capturing only 8% of the value. The lion’s share of value, 80%, is unlocked at the chocolate manufacturing and retail levels. In an effort to climb the cocoa value chain, and reduce exposure to volatile cocoa prices, the region’s cocoa producers – led by Côte d’Ivoire and Ghana, which together hold over two thirds of global supply – have focused their discourse on producing chocolate and confectionery for export.

However, West Africa, as the world’s dominant cocoa producer, is not ipso facto well-positioned to produce and export chocolate. While local chocolate producers have attracted attention in the press, they are unable to absorb even a tiny share of the region’s behemoth cocoa crop, owing to their niche production levels in the face of weak demand. Given that West Africa faces significant barriers to entry in making chocolate, the region should instead refocus its energies on further expansion in cocoa processing capacity.

Read more: The challenges facing West Africa’s chocolate industry

21 Sep

Africa: Overcoming the challenges for manufacturing

During the period of relative stability since the start of this century, Africa has experienced rapid growth and has indeed outperformed global growth trends. As a result, its gross domestic product (GDP) has significantly increased and has brought wealth to many countries. However, most African countries that have enjoyed high growth recently, are mainly mono economies. Blessed with many natural resources, their economies have greatly improved, but they still remain at a subsistence level and have not moved beyond.

Despite the high growth rate, industrialisation in Africa has barely taken root. Besides South Africa, the most industrialised African country, and barely a few others, large-scale industrial manufacturing is practically nonexistent. Thus, for Africa to grow to the next level, it is critical to examine the reasons why the continent does not seem able to gather momentum for high value-added manufacturing activities.

Political stability and relevant economic strategy

The main reason cited by foreign and domestic investors for putting off or even avoiding major investments in the manufacturing sector, is the perceived lack of political stability in Africa. While the development of the capital-intensive manufacturing sector requires a long investment cycle, the political lifecycle may be very short-term. As a result, it is very difficult for the government of the day to implement a coherent long-term economic strategy with all the relevant economic frameworks and policies that will only bear fruit long after their term in office has expired.

Although Africa has great potential to develop its manufacturing sector, the political leaders need to have a clear economic vision to develop sectors in which their respective countries have sources of competitive advantage. Without a conducive environment supported by the relevant economic framework, there are no significant incentives for potential investors to commit themselves.

Most of the time, political factors trump economic factors. African political leaders conduct their own type of populism, where they need to satisfy their majority supporters to win elections and remain in power.

Read more: Overcoming the challenges for manufacturing in Africa

19 Sep

African fintech startups are becoming even more attractive for investors

If you follow the right accounts for young African tech entrepreneurs and their startups on Twitter, it can feel like there’s a never ending debate about who gets funding or not in Africa. Like many Twitter debates the 140 characters and even the endless threads don’t capture all nuance of the issue, but while many of those debates have grown, founders from one sector of the startup space have been more positive than most: fintech.

Take Flutterwave, a payments company which builds infrastructure to ease processing payments across Africa, it’s just raised $10 million in its Series A round. It’s one of the largest Series A rounds by an African startup. Significantly, the round was led by leading Silicon Valley venture capital funds Greycroft and Green Visor Capital, with participation from Y Combinator and Glynn Capital. It helps that Flutterwave was co-founded by Iyin ‘E’ Aboyeji, who has a track record, and star power, as a co-founder of developer training company, Andela. But it’s also true that Flutterwave’s raise is the latest in a string of African fintech startups that have raised money over the past three years.

Fintech startups are the “most attractive,” for tech investors looking towards Africa, according to a recent report by Disrupt Africa. Nearly 20% of fintech startups tracked raised money in the last two years and in 2016, there was a 84% increase in the number of fintech startups secured investment compared to the previous year. In total, since 2015, fintech startups in Africa had raised $93 million in investment as of June 2017. Flutterwave’s raise takes that total past the $100 million mark.

Some of that activity is simply down to a larger pool of startups which investors can pick from. Following a recent surge in launches, over 300 fintech startups—more than half of which set up shop in 2015 or 2016—are currently operational in Africa. But it’s not just down to having more choices, investor interest in fintech startups is also linked to just how important they are for the future of business in Africa.

Read more: Why African fintech startups are becoming even more attractive for investors

18 Sep

New Opportunities: The rise of artificial intelligence in Africa

Artificial intelligence (AI) was first coined in 1956 by the scientist John McCarthy at Dartmouth College. Nearly 60 years later, it is now enjoying a major resurgence thanks to the exponential increases in computing power, the development of more sophisticated algorithms and the vast availability of data. The convergence of these technological developments has fueled AI’s rapid progress, making it the centre of attention for technology investment.

Today the hype around the AI is at its peak and many believe that we stand at the edge of a technological revolution. It is argued that today’s transformations are not merely a continuity of the third industrial revolution but rather the start of a fourth industrial revolution which is characterised by a fusion of technologies that blur the lines between the physical, digital and biological worlds.

AI’s unprecedented growth and impressive advancements are not limited to specific geographies but rather have an impact on all continents, Africa included. However, many African countries are still battling with issues related to the first, second and third industrial revolutions such as electricity, mechanisation of production and automation. Therefore, questions about Africa’s preparedness for the fourth industrial revolution are being raised: Is Africa catching up with the continual advancement in technology?

From cheap abundant labour to natural resources, Africa’s current strengths seem not to match with the fundamental needs of the fourth industrial revolution that consist mainly of colossal investment capital, research and development (R&D) and highly-skilled talent. However, the ongoing industrial revolution represents an opportunity, if used well, that will enable Africa to become a main player in the world economy.

Africa is embracing technology in a way that sets it apart from other continents, according to a report by PwC. Across the continent, many sectors have been empowered by an early adoption of technology. Instances include the agriculture and healthcare sectors.

Read more: The rise of artificial intelligence in Africa

15 Sep

Supply chain management: How SMEs can succeed in Africa

Small and medium enterprises (SMEs) have great potential for expansion in Africa, because they are agile and flexible enough to exploit the opportunities in the continent’s growing economies. This according to John Lucas, country manager of DHL Express South Africa, speaking at the China Homelife & China Machinex Fair in Johannesburg this month.

Lucas adds that SMEs however need to make supply chain management part of their business plan if they want to succeed. “According to DHL’s own research, conducted by HIS Global Insight, SMEs that engage in international markets are twice as likely to be successful than those that only operate domestically.”

Lucas states that DHL considers SMEs to be the engines for growth in sub-Saharan Africa. “The International Monetary Fund has estimated that the number of Africans joining the working age population by 2035, will exceed that of the rest of the world combined. SMEs make up a large portion of the employment for these individuals, and indeed, around 92% of DHL’s business globally comes from the SME market.”

Finding the right partner to help build and manage a company’s supply chain is vital in an SME’s growth process, according to Lucas. He explains that SMEs have a need to achieve certain important outcomes, which is why the capacity of one’s logistics service provider matters.

“In order to succeed, an SME needs to be able to increase inventory velocity, achieve the shortest possible cycle times, continually improve their supplier performance and drive their sales and market share. Supply chain management is central to this.”

Additionally, utilising opportunities to take part in the global economy will speed up SMEs’ growth, says Lucas. “According to the World Trade Organisation, studies on African firms show that participation of SMEs in international markets can result in higher growth and employment through economies of scale and in enhanced productivity and innovation through learning effects.”

Read more: Supply chain management: How SMEs can succeed in Africa

29 Aug

Automotive outlook for Africa: Bumpy roads ahead?

Automotive

The author, Richard Li, is a Singapore-based partner with Steel Advisory Partners, a management consulting firm that serves clients across industries. This article was produced for the NTU-SBF Centre for African Studies, a trilateral platform for government, business and academia to promote knowledge and expertise on Africa, established by Nanyang Technological University and the Singapore Business Federation.

In 2000, the overall African gross domestic product (GDP) was US$616bn. Since then, the continent has enjoyed a period of high economic growth and its GDP has risen massively by 245% to reach $2.1tn in 2016. Moreover, the World Bank recently started classifying countries according to their gross national income (GNI) and there are in fact 25 African countries that are in the middle income category in 2016.

To further sustain economic growth in Africa, there is a significant need for the transportation of goods and people. This means that there will be an accelerating demand for automotive vehicles in Africa, particularly in those middle-income countries that have a huge population mass, as well as a relatively high growth rate.

Africa, the last frontier market for automotive

According to the International Organisation of Motor Vehicle Manufacturers, there are only 44.8 million vehicles in Africa, representing only 3.5% of the global market. For Africa, with its population of about 1.2 billion, there were only 42 vehicles per 1,000 inhabitants in 2015. Compared to the global average, Africa is about 4.3 times less. This signals that there is an immense upside for market penetration in the automotive sector. Moreover, between 2014 and 2015, the automotive market in Africa grew at a relatively fast pace of 5.8%, compared to 1.9% and 2.4% for Europe and the United States respectively.

In terms of sales, in 2016, there were about 1.3 million vehicles sold in Africa, representing only 1.4% of the global market. The market is mainly dominated by two regions – Northern Africa and South Africa – with an 85% market share. South Africa sold about 547,000 vehicles, whereas for the Maghreb countries – AlgeriaMorocco and Tunisia – together with Egypt, 575,000 vehicles were sold.

As for manufacturing capabilities,there is a lot of room for improvement, since Africa produces slightly less than 1% of all the vehicles in the world. Although South Africa has the biggest production capability with nearly 600,000 vehicles produced in 2016, manufacturing is stalling and is on a decline. Morocco is next with a capacity for 345,000 vehicles. These two countries represent about 91% of all vehicles manufactured in Africa. With increasing demand in other parts of Africa and with only small assembly facilities elsewhere, there are indeed many potential opportunities for automotive companies to further tap.

Challenges faced by the automotive sector

Africa is definitely not an easy market to deal with. The continent is not only geographically vast, but it is also a very fragmented market with 54 independent countries, each with their own market characteristics. In addition, since many African countries are still in the process of development, there is a dire lack of clarity in terms of soft infrastructure, such as proper regulatory frameworks, as well as economic policies for the development of industries.

The automotive sector is a capital-intensive industry that requires a long cycle for its development and for returns on its initial investments. On top of that, the captive market within specific countries may be too small to justify large-scale production facilities. Besides the lack of clear guidelines to attract investors in the automotive sector, the political instability in many African countries increases risk, thereby stifling and eventually halting the development of automotive manufacturing.

South Africa was the only African country that had been able to realise all the conditions needed for manufacturing automotive vehicles. With its population of nearly 56 million and a GNI per capita of $5,480, South Africa is the biggest automotive market in Africa – in terms of both production and sales of new vehicles. However, the recent political instability in South Africa is making global automotive companies think twice about whether they should invest further in the country. As a result of this inertia to reform and stimulate this sector, automotive companies may decelerate their future development plans there.

The Maghreb countries leading the way

The three Maghreb countries – Algeria, Morocco and Tunisia – are progressively focusing on boosting their automotive sector. Morocco has been the most successful, attracting French car manufacturers with the development of special industrial and economic zones. Renault and PSA Peugeot Citroën have committed €1.6bn ($1.9bn) and €600m ($705.7m) for their own production facilities respectively.

The Moroccan government is definitely steering the automotive industry in the right direction with the necessary framework and conducive environment needed for its development within the country. Morocco is pushing hard for the industry to rally further, aiming to produce one million vehicles by 2020. By then, its automotive exports will represent $10bn worth of vehicles to Europe and other parts of Africa. This sector will eventually represent 20% of the Moroccan GDP and create 160,000 jobs locally.

Algeria and Tunisia are also locations where French car manufacturers are setting up assembly plants. Germany’s Volkswagen is opening its plant in Algeria as well. With their close proximity to Europe, coupled with the right incentives and regulatory framework, European car manufacturers are finding it very appealing to be in these countries. Moreover, with a captive market of more than 87 million people among these three countries, selling locally helps to justify the necessary investments as well.

Potential opportunities in Africa

Africa can offer great opportunities to automotive companies, since more countries are slowly but steadily becoming more affluent. According to data from the World Bank, there were 12 countries in 2000 that might be considered as middle-income countries. Nowadays there are 25 middle-income countries across the continent. This represents a potential market size of approximately 656 million people. From 2006 until 2016, some of the countries that have significantly raised their GNI per capita are EthiopiaNigeria, Egypt, Kenya and Ghana, with an increase of 267%, 188%, 166%, 134% and 130% respectively.

Besides South Africa, the other top five most-attractive middle-income countries that have big populations, are Algeria, Egypt, Kenya, Morocco and Nigeria. These are probably the most promising markets since they have a combined population size of about 462 million, with a significant percentage being able to afford their own vehicles. The automotive industry can potentially crank and rev the growth engine of these countries further.

The African marketplace is gradually looking more attractive with the continent potentially being able to absorb many more vehicles than what it does currently. However, there are many obstacles that first need to be overcome. And African governments have to be committed to provide the right conditions for the automotive sector to flourish within their countries. With the right framework, this industry can not only be lucrative for the automotive companies, but at the same time, it can turbocharge the economic growth of African countries.

Richard Li is a Singapore-based Partner with Steel Advisory Partners, a management consulting firm that serves clients across industries. Having spent his working career in strategy consulting, he worked with various global clients and covers themes such as Corporate Strategy, Transformation, Digital Innovation and Risk Management. He can be contacted via the Steel Advisory Partners site. This article was specifically written for the NTU-SBF Centre for African Studies.

source from how we made it in Africa

29 Aug

How to realistically start a business in Africa with little or no capital

business

The last decade has seen a tremendous rise in the number of young Africans venturing into business. Although that can be attributed to several factors, advancements in areas such as information and technology have certainly played a major role.

The internet has helped facilitate for an easier execution of tasks which were highly complicated not too long ago. For instance, anyone today can start an online business without any coding expertise or having to hire expensive developers; such a task can be easily accomplished using platforms like WordPress and Shopify.

Marketing campaigns of all magnitudes can be carried out by a non-marketer through social media. Accounting tasks can be performed by a non-accountant through Quickbooks. Information regarding anything can be quickly pulled up using a smartphone and some connectivity.

The challenges that many entrepreneurs are struggling to cope with are often money-related.

Starting a business may actually be the easy part, but how do you scale it? Let us look at a few strategies that you can adopt when starting a business in Africa with little or no capital.

Form strategic alliances

“Every mind needs friendly contact with other minds, for food of expansion and growth.” – Napoleon Hill, The Master Key to Riches.

A strategic alliance is a fundamental element that must be in place before any business can experience exponential growth. There’s only so far that one can go single-handedly. Strategic alliances may comprise of partners, mentors, advisors, skilled employees – essentially anyone whose association can potentially help the business achieve its objectives.

When starting a business in Africa with little or no money, you absolutely need the association of other people to help you grow. Strategic alliances create pools which are comprised of skills, knowledge and the experience of all the minds in the team. With such in place, you may have little reason to outsource work or seek external capital.

A mentor can serve the purpose of a paid consultant. A business partner can help with the internal operations. Another partner can help with marketing. And as the business scales, so do their perks and benefits.

Focus on bootstrapping

The idea of bootstrapping has always been a hot topic in the start-up world, but the concept is applicable to most businesses. What it means is essentially growing a company by only using its internal team and resources.

That means leveraging the skills of each team member instead of hiring, using personal savings as capital instead of seeking a loan, working from home instead of renting an office, etc.

Bootstrapping calls for entrepreneurs to make sacrifices until the company is stable and can afford to stand on its own feet. For instance, they may have to sell their personal belongings to raise money, do the door-to-door sales themselves, endure sleepless nights working, etc.

The idea is to do whatever it takes to get the venture up and running at a budget. Entrepreneurs that use this strategy to scale their operations may in the long run avoid having liabilities such as bank loans or investors that dictate every move.

If bootstrapping is no longer practical

The people closest to us in many cases would like to see us prosper. Some of them would not even mind chipping in if they know that it’s for a good cause. Asking friends and family for money is a daunting prospect for most people, but they are nonetheless a viable source of capital.

Many people fail at raising money from friends and family due to failure from their part in presenting well-defined proposals and business plans, including how they intend to repay their money. They usually present in a casual and informal manner – but that hardly does justice reflecting the seriousness of the matter.

You are more likely to win over the confidence and trust of your friends and family by presenting to them as you would to an actual investor.

Take advantage of free advertising and marketing

Many start-ups in Africa have failed to gain traction due to inadequate marketing budgets. Although marketing expenses are usually one of the highest, there are a number of ways to generate a buzz for without having to break bank.

Platforms like Google and Yahoo often give free ‘trial’ credit to new businesses. And what’s the catch? You just have to sign up to their marketing programmes. For instance, LinkedIn gives users US$50 advertising credit for signing up to ‘LinkedIn Marketing Solutions’.

Google Adwords gives $100 credit after signing up and spending $25, and so does Bing Ads and Yahoo Gemini. Perfect Audience gives $100 dollars just for signing up. That is almost $500 dollars in free advertising credit to help get you up and running.

Another avenue that can be used to advertise inexpensively is social media. From a marketing perspective, social media can represent a gathering of a company’s prospective customers in one convenient location. It really couldn’t get better than that.

Entrepreneurs can leverage social media to get their word out by building highly-targeted followings on platforms such as Facebook and Twitter, and then inducing their marketing messages directly to them.

Even paid social media campaigns often provide a better ROI than campaigns through other mediums. With a budget of $5 per day, Facebook can show an advertisement to an audience of up to 1,000 highly-targeted people.

We are fortunate to be living in an era that is so fertile for nurturing a small business in Africa. But here’s the thing; the easier it gets, the easier it will be for more people to board the bandwagon. That means competition can only get tighter every day. You are better of focusing on working things out using what you have and gaining an early advantage, rather than sitting back and making excuses for your shortcomings.

Emmanuel Soroba is the founder and CEO of FiveSok, editor-in-chief of GrowthStrategies101 and a growth hacker for start-ups and SMEs.

 

via how we made it in Africa

21 Aug

A.P Moller Raises $550m for Africa Infrastructure Fund and Targets $1bn in 12 months

A.P. Moller Holding

A.P. Moller Holding, a privately held investments company with approximately $20bn under management has launched a new infrastructure fund with a focus on Africa. The fund has received commitments of $550m from large Danish pension fund anchor investors including PKA, PensionDanmark and Lægernes Pension. Following first commitments, the fund will be open for additional institutional investors for the next 12 months with the goal of raising $1bn. It will focus on investments in infrastructure in Africa to support sustainable economic growth in the region while delivering an attractive return to its investors. The fund will be managed by A.P. Moller Capital, and will have a duration of 10 years with an initial target of 10 to 15 investments in total. According to AfCD typical investments are expected to range between $50 million and $200 million in size, with priority being given for opportunities in ten African countries, Nigeria, South Africa, Ghana, Egypt, Kenya, Cote d’Ivoire, Tanzania, Morocco, Ethiopia and Senegal.

Commenting on the capital raised so far, Kim Fejfer, Managing Partner and CEO of A.P. Moller Capital explained:

“We are very pleased with the significant support from the Danish pension funds and A.P. Moller Holding. Together, we will build and operate infrastructure business in Africa to support sustainable development and improvements in living standards across the continent. We will combine the best from industry in terms of project management and operational capabilities with the best from private equity in terms of agility and focus…”

Peter Damgaard Jensen, CEO at PKA:

“PKA has for many years invested in infrastructure both in Denmark and abroad. We have positive experiences investing in Africa and we have for a long time wanted to invest more on the continent. With this new fund we will be making infrastructure investments in Africa and get the opportunity to provide a good return to the pension savers and at the same time make a positive difference in line with the UN Sustainable Development Goals.”

Source from estateintel