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Kenzibox: Thinking Outside The Box

21 January 2016 Comments (0) Featured, Leaders, Middle East

KenziBox is a Dubai-based company that makes shoe-box sized treasure troves of children’s activities, delivered to parent’s doors to promote creative and constructive play. UAE-based co-founders Leyla Lahsini and Shirin Benamadi started the business after facing the problems parenthood poses in the digital age.

Both women have Masters Degrees in Business Administration and impressive careers in finance. Lahsini holds an MBA from London Business School as well as a Masters in Strategy and Marketing and has experience in hedge funds in London, while Benamadi holds an MBA from the University of Maryland and has worked in private wealth management at Morgan Stanley.

21st Century Parenting

In the digital age, pulling children away from televisions and iPads and towards activities that promote healthy brain development can be a challenge for parents- especially those who work full time.

For many, after school programs are expensive or unrealistic to take advantage of on a daily basis. “Kids finish school early and you feel this need to keep them busy in the afternoon,” said Lahsini. “We don’t want to put them in activity classes every single afternoon, but you want to keep them busy in a nice way in the house.”

Like many parents of the 21th Century, Lahsini turned to the internet for solutions, downloading craft projects from Pinterest to take up with her four-year-old son. But it was more difficult than it seemed- having to go to many stores to find the right materials, complicated instructions, and the chaos that young children inevitably introduce to situations that involve glitter glue and dexterous finesse.

Taking Play Seriously

Despite the frustrations, Lahsini was determined to continue because she saw the value of exposing her son to such products. Not only do they take up the afternoon in creative play, but craft projects have been shown to develop higher thinking skills, enhance multicultural understandings, build self-esteem as well as positive emotional responses to learning- all benefits every parent would want for their child.

Lashini turned to her friend, now-business partner Benamadi, who always seemed to make the arts and crafts projects look simple and easy. This simple request for help and the master’s degrees they both carried in business administration paved the way for KenziBox.

Kenzibox

When Moms have MBAs

“Can we bring that simplicity to everyone?” thought Lahsini. Together they researched themes and developed activities around those ideas. In November 2014, their first themed box, Circus in Town, was launched.

Little more than a year later and KenziBox stays true to their successful original fashion. Every month a new theme debuts in shoe-box form, where children can open the box and find everything they need, from materials to illustrated instructions, on how to craft everything from make-your-own clown outfits to volcanoes that actually erupt.

KenziBox: a Dubai’s Business (Role) Model

By creating a product that re-invents itself every week, KenziBox continuously provides opportunities for growth for both children and parents, with creative projects designed by early-age education professionals. Boasting stellar customer service for the busiest of parents, KenziBoxes are conveniently sold online, delivered to the door with all the necessary materials. The simplicity in meeting 21st century parenting problems makes KenziBox a role model in the UAE’s emerging e-commerce market, and is a learning lesson in itself for other businesses that aspire to create a positive impact in their client’s lives.

Their superb business model has won them several recognitions in their first year alone- Dubai Women’s Business Council awarded them First Place as well as the People’s Choice award, and KenziBox was a finalist for SME’s Start Up of the Year.

Emma Fisher, a Dubai-based schoolteacher who was one of KenziBox’s intial clients, can attest to the benefits the projects offer, both as a mother and an education professional.

One month of KenziBox starts at AED 185, with lower rates for long term subscriptions. The company also offers party favor sets and KenziBox travel bags.

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The political stalemate in Zanzibar

20 January 2016 Comments (0) Africa, Featured, Politics

zanzibar elections

As talks fail to produce a peaceful solution, the standoff between rival parties has disrupted trade and brought international concern about potential violence.

The government of Zanzibar has announced plans for new elections in February but the opposition, which claims it won a previous vote that the government annulled, is calling for a boycott.

The announcement is the latest development in a nearly three-month political standoff that has disrupted trade in the east African archipelago and prompted international concerns about potential violence.

At the center of the controversy are long-running tensions over the balance of power between Tanzania on the mainland and tiny Zanzibar, which is a semi-autonomous state within the larger nation.

The leading players are Zanzibar President Mohammed Shein of the Chama Cha Mapinduzi political party, which holds power in both Tanzania and Zanzibar, and Maalim Seif Sharif Hamad, secretary general of the Civic United Front, the main opposition party in Zanzibar.

Opposition declared election victory

Hamad, who is also first vice president of Zanzibar, ran against the incumbent Shein in an October 25 election. The day after the vote, the opposition leader claimed victory before the results were officially announced.

Despite strong objections from the opposition and international observers who said the election was valid, the government annulled the election after the Zanzibar Electoral Commission determined there were electoral law violations.

While incumbent Shein and the Chama Cha Mapinduzi party support a new election, Hamad and the opposition party favor completing talks that began after the opposition questioned the legality of Shein staying in office after his term expired in early November.

Despite eight closed-door meetings since the election, negotiators have not come up with an agreement. Those taking part in the former Tanzania mainland president Jakaya Kikwete, former Zanzibar president Abeid Karume, and former Tanzanian president Ali Hassan Mwinyi in addition to Shein and Hamad.

Zanzibar economy suffers

The announcement of a new election comes in the face of international and domestic pressure to end the political impasse, which is hurting Zanzibar’s economy.

Beans, potatoes and tomatoes, which are from mainland Tanzania, have become scarce and increasingly expensive in Zanzibar. Tanzania’s government said mismanagement by traders, poor infrastructure and red tape are to blame, but Zanzibaris fear traders are responding to the political uncertainty.

According to the Bank of Tanzania (pdf), Zanzibar’s imports dropped by nearly half between October and November 2015, from nearly $40 million to $21 million.

At the same time, fears that the stalemate would affect tourism to the islands may have been unfounded. The bank reported that tourist arrivals increased in 2015, with earnings of $73.6 million, up from $55.2 million in 2014, a gain of more than 30 percent.

Maalim Seif Sharif Hamad

Maalim Seif Sharif Hamad, secretary general of the Civic United Front

Stalemate raises fears of radicalization

International observers declared the October election valid and called on the government to announce the results. They cited fears that the political stalemate could contribute to the radicalization of youths in Zanzibar, which is predominantly Muslim.

International observers also questioned the decision to annul the election, saying it appeared the election commission did not have a quorum when it made the findings of election violations. Nicodemus Minde, an election observer and adviser for Norwegian-based policy group International Law and Policy Institute, called the decision to annul “unilateral.”

The Chama Cha Mapinduzi party has long maintained power in Tanzania, while Zanzibar has chafed at what it considers mainland meddling. The opposition Civic United Front has called for full autonomy for Zanzibar.

After gaining independence from the British in 1961, Tanzania was formed in 1964, uniting the mainland Tanganyika state with the Zanzibar (also called Unguja) and Pemba islands.

Long history of political violence

Elections have been marked by clashes between the two parties since the 1990s, and hundreds have died in past elections. A unity government with the Civic United Front as the junior partner was formed in 2010, when Shein was first elected president, to diffuse tensions.

However, there were reports of police intimidation prior to the October election and two homemade bombs exploded in Zanzibar after the election was annulled. A third device was found and safely detonated in Stone Town, a popular tourist area.

In spite of the annulment, the ballots of 500,000 Zanzibar voters were counted in the election for Tanzania’s president. John Magufuli, the candidate of the Chama Cha Mapinduzi, received 58 percent of the total vote of 15 million and has been sworn into office along with Samia Suluhu Hassan, a Zanzibari who became Tanzania’s first female vice president.

New election “inevitable”

Meanwhile, the Zanzibar government said it had budgeted $3.4 million for a new election. Seif Ali Idd, Zanzibar’s second vice president, called a new election “inevitable.”

Idd said the ongoing talks with the opposition were aimed at keeping the peace but did not preclude an election.

Opposition spokesperson Ismail Jussa told supporters to ignore the government announcement, saying the talks should be completed before an election was scheduled.

It was not immediately clear when mediation talks would continue. Before the election announcement, former Nigerian president Goodluck Jonathan had been tapped to lead new talks and he was expected to visit the country early this year.

Renewed violence feared

The talks began after the opposition party raised questions about whether Shein could stay in office as president after his term expired in November. However, the government maintains that the Constitution allows him to remain in office until a successor is sworn in.

Hubertus von Welck, an election observer from the German Friedrich Naumann Foundation, said negotiations must continue to maintain the peace.

“If they cannot come to a diplomatic solution, we might once again see violence and deaths,” von Welck said.

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Why Would Saudi Aramco Consider an IPO?

18 January 2016 Comments (0) Business, Featured, Middle East

Saudi Aramco

Saudi Arabia, the world’s biggest producer of crude oil, is considering a public offering of shares in its state-owned oil company Aramco

Saudi Arabia, the world’s biggest producer of crude oil, is considering a public offering of shares in its state-owned Saudi Arabian Oil Company (Saudi Aramco) and / or some of its downstream assets. The news was announced by the influential Saudi deputy crown prince and the country’s defense minister, 30-year-old Mohammed bin Salman, in an interview with The Economist. He framed it as a step toward transparent governance of state-owned oil and the Saudi market: “I believe it is in the interest of the Saudi market, and it is in the interest of Aramco, and it is for the interest of more transparency, and to counter corruption, if any, that may be circling around Aramco.”

His announcement was reaffirmed in an official statement released by Aramco: “Saudi Aramco confirms that it has been studying various options to allow broad public participation in its equity through the listing in the capital markets of an appropriate percentage of the Company’s shares and / or the listing of a bundle of its downstream subsidiaries.”

Saudi Arabia facing significant political and economic challenges

Many are asking why the royal family would consider selling shares in its largest asset, especially when it’s at its lowest point since 2004. The complete control of Saudi Arabia’s oil is in large part the source of the government’s power and success. Some have suggested that Aramco has predicted the end of the age of oil, and that the Saudi’s are looking to cash out while they can. But, on the other hand, it could be more linked to the Kingdom’s politically and economically challenging time.

Oil income makes up about 90% of government revenue, but with crude oil prices at their lowest levels in over a decade, the Kingdom is losing billions of dollars in revenue. And while it is sitting on around $630 billion in reserves, Saudi Arabia’s 2015 budget deficit was 15% of GDP, and a record budget deficit of $98 billion is expected in 2016. Also, instead of slowing production to increase oil scarcity, as has so often been Saudi Arabia’s tactic, last year, Aramco pumped a record 10 million plus barrels a day to compete with the US and Russia. The strategy cost Saudi Arabia around $120 billion of its foreign currency reserves. And the Kingdom is starting to struggle to maintain its expensive military campaigns in Yemen and Syria, and to manage the resulting clashes with Iran.

The country is also facing high unemployment, currently at 12%, and a demographic bulge, which counts more than two thirds of the population under the age of 30. The bulge will require almost three times as many jobs in the coming decade than were created between 2003 and 2013 during the oil boom if the country is to avoid soaring unemployment and increasing the volatility of the political environment.

So as its most valuable asset shrinks, the Kingdom needs to find a way to diversify its economy in order to improve its long term economic capabilities. Working with McKinsey, Saudi Arabia has developed long term path that involves pushing $4 trillion into eight new sectors (finance, construction, healthcare, tourism and hospitality, retail and wholesale trade, petrochemicals, manufacturing, and mining and metals) to contribute 60% of growth. However, it seems likely that adding value across all of its oil related actions and managing its hydrocarbon resources, both conventional and unconventional, would also be part of the plan to prepare Saudi Arabia for financial and economic stability. It would also signal to Iran, the US, and Russia that Saudi Arabia is in the oil-game for the long-haul.

Saudi Aramco gas facility

Saudi Aramco gas facility

Saudi Aramco IPO

The details of the potential IPO are not yet clear. Aramco’s statement confirmed that: “Once the study of these various options is complete, the findings will be presented to the Company’s Board of Directors which will make its recommendations to the Saudi Aramco Supreme Council.” Aramco Chairman Khalid Al-Falih adds: “There is no plan that is concrete at this stage to do the listing. There are studies ongoing. Serious consideration. It will take time.” Falih also clarified that an IPO could be “shares in Aramco and/or some downstream assets. We are considering a listing at the top. So a listing of the main company, and obviously the main company will include upstream.”

But, it does seem more likely that Aramco will offer a small portion of downstream assets – a bundle of refineries or other assets such as petrochemical units – in order to allow the state to retain full control of its oil fields which produce more than 10 million barrels a day. Although significantly less valuable than a full IPO, downstream assets would still offer buyers a piece of a huge global business which processes more than 3.1 million barrels a day, with plants across the world in Saudi Arabia, the US, South Korea, Japan, and China.

$10 trillion valuation

Looking at a full IPO, the valuations are simply enormous. Based on claims that the company’s reserves are 265 billion barrels of crude oil and 50 billion barrels of natural gas, its market capitalization is estimated to be $10 trillion. This would make it significantly bigger than the world’s current most valuable company, Apple, worth $741.8 billion. It would also make Aramco significantly more valuable than ExxonMobil, the world’s current most valuable publicly traded energy company at $357.1 billion.

Even a listing that included just 5% of Saudi Aramco shares could raise around $500 billion, a figure far larger than Alibaba’s history topping $170 billion IPO of 2014. It would also make it too big to be included in Saudi Arabia’s stock market, the Tadawul.

The listing fees for the bank taking a company of this size public would also be huge, and there are already reports of strong competition for the role. HSBC, Citi, Barclays, Bank of America Merrill Lynch, and Deutsche Bank hold the biggest market share in the Middle East and Africa, making them likely contenders. Citi and Deutsche Bank have also already worked on deals with Saudi Aramco. But we’ll have to be patient until we can find out which bank is set to make a figure of around $17.5 billion working on the deal.

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Africa’s air transport industry eyes expansion, upgrades

16 January 2016 Comments (1) Africa, Business, Featured

africa airlines

With a growing population that now surpasses one billion and an expanding middle class, Africa can expect to see air travel increase significantly in the next two decades.

The International Air Transport Association projects that the African air passenger rate will more than double from 119 million passengers in 2014 to 280 million in 2034. (source)

However, the African airline industry lags behind the rest of the global air industry and it faces significant obstacles to future growth, including lack of capital for expansion, high taxes and tariffs and a fragmented system that lowers efficiency and raises costs.

“Africa is a growing market with enormous opportunities for air transport. With an almost 1.1 billion population, it is a huge market for air transport,” said Elijah Chingosho, secretary general of the African Airlines Association (AFRAA). “However, the existing players are confronted with many challenges that are impeding their ability to take advantage of the opportunities.”

Aviation accounts for $80 billion in GDP

Aviation is already playing a role in the African economy, supporting nearly 7 million jobs and accounting for $80 billion in GDP. The sector, in which many airlines are government owned, grew by 5 percent in 2014, outpacing growth in Europe and America.

Currently, non-African carriers dominate intercontinental traffic to and from Africa, accounting for 80 percent of that traffic. Meanwhile, African airlines carry only 2.85 percent of all global traffic.

Intra-continental system is ripe for expansion

Chingosho said African airlines should focus on expanding intra-African and domestic travel. Currently, about 41 percent of traffic is inter-continental, 32 percent intra-Africa, and the rest domestic.

“The best opportunities for growth and expansion lie in the under-served African regional and domestic markets,” Chingosho said. He and others point to Africa’s fast-growing middle class, now about a third of the population, according to the African Development Bank, as an emerging group of potential customers.

Connections between African countries are difficult

Developing an efficient routing system within the continent is a priority.

Ethiopian airlinesIn many cases it is easier for a traveler from an African country to first fly to Paris or Dubai and then to another African country, according to Fatima Beyina-Moussa, director general of Equatorial Congo Airlines and president of the African Airlines Association.

The African Airline Association has 33 airline members that account for 85 percent of traffic by African carriers, including the largest African airlines – Ethiopia Airlines and South African Airways.

Liberalization could open regional markets

Chingosho and other experts say the primary obstacle to expansion is lack of liberalization, or deregulation, that would open regional markets on the continent to trans-national competition.

Forty-four African nations signed the 1999 Yamoussoukro Decision designed to liberalize air travel on the continent, but implementation has been slow, according to the International Air Traffic Association. However, Chingosho offered some optimism: He said African heads of state had agreed to liberalization by January 2017.

Report documents economic benefits

The international association cited one 2014 study that examined the potential financial benefits of implementing the agreement and demonstrated “beyond doubt the tremendous potential for African aviation if the shackles are taken off,” said Tony Tyler, the association’s director general and CEO.

The report said liberalization in just 12 key markets studied would potentially serve 5 million more travelers and provide an additional 155,000 jobs and $1.3 billion in annual GDP.

Financing needed to expand fleets, improve airports

Another obstacle to growth is lack of capital.

Only 19 African countries have ratified the Cape Town Convention, a 2006 treaty designed to make asset-based financing and leasing of aviation equipment more available by reducing creditor risk, Chingosho said.

African air carriers are small compared to international counterparts. Among the largest are: Ethiopian Airlines with 76 aircraft, South African Airways with 65, Royal Air Morocco with 53 and Kenya Airways with 45.

By contrast, Emirates has a fleet of 245 aircraft and Qatar Airways has 167. The world’s largest airline, American, has nearly 950 aircraft.

Chingosho estimated the African fleet would need 800 new aircraft to accommodate growth projected through 2030. Sixty percent of those would expand the fleet and the remaining 40 percent would replace aging aircraft. He said the bulk would be single-aisle, mid-range aircraft.

In addition, airports must be expanded and upgraded, he said.

Airlines report high costs for fuel, tariffs

High operating costs and inefficiencies are other factors holding the African aircraft industry back.

Jet fuel continues to be relatively expensive in Africa, about 30 percent higher than the global average. It cost nearly $120 per barrel in 2014, down from a peak of about $130 a barrel in 2012. Unpaved runways result in higher fuel consumption and maintenance costs.

Elijah Chingosho

Elijah Chingosho, frica Airlines Association (AFRAA) Secretary General

Adding to their costs, Chingosho said, many African airlines are using high capacity aircraft in small or mid-sized markets, which has pushed average load factors below 70 percent. This compares with an average of 80 percent globally.

At the same time, high tariffs and cumbersome customs regulations limit development of airfreight. For example, The National Association of Government Freight Forwarders recently complained that high tariffs have forced Nigerian importers out of that country and many others will leave.

Airport charges are high, with some airports adding as much as $150 per passenger to the cost of a ticket.

African airline fares are high in cost

The result is high fares and low profit margins.

One study found that fares on typical intra-African routes are as much as two times higher than comparable routes in Europe and as much as three times higher than similar routes in India.

Meanwhile, the African airlines operate on a profit margin of less than 1 percent, compared to 4 percent globally.

Safety record improving

Lack of safety and concerns about terrorism and civil strife further depress demand for air travel.

Chingosho said many airlines are still below global standards but he noted that 41 African airlines have adopted international safety standards.

He said the airlines need better training personnel in all areas, including safety. He has encouraged aircraft manufacturers to provide that training.

Air transport will help unify Africa

Chingosho and others assign some of the blame for high costs to high taxes assessed by governments that see air travel as a service for the rich, who can afford to pay, rather than a means of mass transportation that is particularly suitable for Africa with its challenging topography.

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Report finds high business risk in 27 African and Mid-Eastern nations

15 January 2016 Comments (0) Africa, Business, Featured, Middle East

syrian war

Amidst unrest and war across Africa and the Middle East, a new report on risks to business in different nations paints a sobering picture.

Only 10 African and Middle Eastern countries are considered low risk for businesses, according to the report by Control Risks, a global risk management consultancy. Nearly three times as many countries – 27 – pose an extreme or high risk to companies operating within their borders.

Globally, insurgency is reshaping political and business affairs, according the report. In both business and politics, the established order is being disrupted by forces that appear suddenly, the report said.

Nowhere is that more clear than in Africa and the Middle East, according to Control Risks’ evaluation of political risk in 68 countries in the region. The rating is based on the likelihood that instability or interference or other factors such as corruption or infrastructure could negatively affect business operations.

Extreme risk in Burundi, CAR and Somalia

In sub-Saharan Africa, only three countries were given a rating of “extreme” risk: Burundi, Central African Republic, and Somalia.

Burundi has experienced widespread violence and the report predicts that the political and security environment will worsen in 2016, especially in Bujumbura, the capital. With the government unwilling the make concessions to its opposition, the report asserts that the risk of a coup will increase.

Meanwhile, Somalia and the Central African Republic are attempting to emerge from years of violence but remain unstable, the report said.

Violence in Burundi

Violence in Burundi

Piracy off East Africa coast declines sharply

It said a return to high levels of piracy off the coast of Somalia is unlikely in 2016.

The report said anti-piracy measures off the coast of Somalia have been effective, reducing the amount of activity to just one percent of its peak in 2011. But that might not last.

“Governments and shipping companies face the challenge of responding to the diminished threat without unraveling the work that helped to curtail the problem,” the report said, noting the paradox that the success of anti-piracy efforts could well lead to their being diminished.

However, the report cautioned about continuing offshore kidnappings and high jacking off the coast of Western Africa.

U.S. may increase anti-terror efforts in sub-Saharan Africa

On the terrorism front, the report predicts that U.S. president Barack Obama, in the final year of his term, will be more assertive internationally, including lending more support to counter-terrorism efforts in sub-Saharan Africa.

Boko Haram, the Nigerian militant group, is coming under more pressure from multiple governments and is likely to be forced to relinquish territory and instead rely on hit-and-run attacks, according to the report.

Nigeria was one of 16 countries that received a “high” risk rating. The report said the pending end of a program of amnesty for militants, and falling oil prices could worsen tensions.

Other countries with a high risk rating include: Chad, Comoros, Congo, Democratic Republic of Congo, Cote d’Ivoire, Equatorial Guinea, Eritrea, Gambia, Guinea, Guinea-Bissau, Lesotho, Niger, South Sudan, Sudan, and Zimbabwe.

Twenty-three nations pose medium risk

These 23 countries were given a medium risk rating: Angola, Benin, Burkina Faso, Cameroon, Djibouti, Ethiopia, Gabon, Ghana, Kenya, Liberia, Madagascar, Malawi, Mali, Mozambique, Rwanda, Sao Tome, Sierra Leone, South Africa, Swaziland, Tanzania, Togo, Uganda, and Zambia.

Only six countries – Botswana, Cape Verde, Mauritius, Namibia, Senegal, and Seychelles – received a low risk rating.

Middle East turmoil evident in ratings

The report also reflects political unrest and war in Northern Africa and the Middle East, where only four countries were rated low risk.

Three war-torn countries – Iraq, Syria, and Yemen – were rated extreme risk.

High-risk countries were Algeria, Egypt, Iran, Libya, and the Palestinian Territories.

Medium risk countries were Bahrain, Jordan, Kuwait, Lebanon, Mauritania, Oman, Saudi Arabia, and Tunisia.

Israel, Morocco, Qatar, and the United Arab Emirates were rated low risk.

By comparison, the United States is ranked low risk while China and Russia are ranked medium risk.

Globally, Control Risks said, the risk outlook is the worst it has been in the past decade. It cited, terrorism, instability in the Middle East, cyber-risk and Chinese economic problems as factors creating a “potentially more volatile world in 2016.”

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Islamic Finance Opens up Business and Trade Opportunities with Muslim Nations

13 January 2016 Comments (0) Business, Featured, Middle East

islamic-business

The $2 trillion Islamic finance market is growing rapidly and is becoming a crucial mechanism for the rest of the world to trade with Muslim nations

In recent years, Islamic finance has grown rapidly across the world, and Islamic banks and associated products now make up a $2 trillion market (World Bank). It is also becoming a crucial mechanism for the rest of the world to develop business and trade opportunities with Muslim nations.

Islamic Finance: An Overview

In brief, Islamic finance is an economic and commerce system which abides by the laws laid out in the Qur’an. Its primary motivation is the prohibition of riba, earning interest, which can be loosely translated as Usury or making money from money. It also responds to the fact that money itself is considered to have no intrinsic value, being simply a medium of exchange. There are a number of ways that Islamic finance is structured to comply with these factors.

A sukuk is a sharia-compliant bond. It removes the payment of interest, and instead sees the parties own the debt: “securities of equal denomination representing individual ownership interests in a portfolio of eligible existing or future assets”. A sukuk is also used in Islamic mortgages, whereby the bank buys a property and the customer then either buys it back at an agreed above market value paid in instalments (murabahah), makes monthly payments comprising both a portion of the purchase price and a rental fee until outright ownership (ijara), or shares the returns from the asset with the bank in proportions agreed in advance (musharaka).

In terms of investments, individuals can enter into a Wakala, which sees the bank act as an individual’s manager, using the individual’s money to invest in sharia-compliant trading activities in order to generate an agreed target profit for them. Financial trading of, and investments in things that are forbidden by the Qur’an are also forbidden (e.g. alcohol, tobacco, pornography, gambling, armaments companies, or non-halal products).

In regards to bank accounts, instead of being offered an interest rate, as with investments, target profit figures are agreed. The targets offered will be along the lines of those elsewhere in the savings market.

Finally, risk is also a central area of Islamic finance: speculation (maysir) and uncertainty (gharar) are considered haram (forbidden). This rules out derivatives, options, futures, and conventional insurance. Instead, Islamic insurance (takaful) works whereby the insured individual contributes to a fund which is overseen by a manager and the individual receives any profits made from the fund’s investments.

Islamic Finance Growing Around the World

The first experiments in Islamic finance took place in the early 1960s in Egypt, but it really took hold in the 1970s as oil wealth boomed. A demand-driven niche that is growing fast, over the past decade Islamic finance has grown between 10% and 12% annually. Between 2009 and 2013, Islamic finance assets of commercial banks rose 17% (according to Ernst and Young). By mid-2014, global Islamic finance assets reached $1.9 trillion, and these assets are estimated to have surpassed the $2 trillion mark at the end of that year.

About 75% of the industry is concentrated in the Middle East North America (MENA) region, although rather unequally distributed. Figures show that in 2015, Saudi Arabia held 31.7% of the world’s Islamic finance assets, followed by Malaysia (16.7%), UAE (14.6%), Kuwait (10.5%), and Qatar (7.7%).

But it is not restricted to Muslim nations. And in recent years it has started gaining significance worldwide. Islamic banks are in operation in countries including Denmark, France, Luxembourg, Nigeria, South Africa, Switzerland, and the UK. Luxembourg is considered the hub of Islamic finance in Europe: it has 111 Islamic funds, behind only Malaysia and Saudi Arabia; it was the first European country to join the International Islamic Liquidity Management; and Luxembourg’s Central Bank was the first European central bank to become a member of the Islamic Financial Services Board. Elsewhere, in 2014, Britain became the first non-Muslim country to issue an Islamic bond: its £200 million sale attracted orders of £2.3 billion. And last year, the Islamic Bank of Britain reported a 55% increase in applications for its savings accounts by non-Muslims.

Hong Kong has since raised $1 billion from its first sukuk; in 2015, Goldman Sachs became the first US bank to issue a sukuk, raising $500 million with its debut sale; and the Bank of Tokyo-Mitsubishi UFJ, France’s Société Générale, and a number of other European and American banks, including Citibank and HSBC, are expected to launch Islamic finance operations in the next year. The World Bank and the General Council for Islamic Banks and Financial Institutions (the global umbrella of Islamic financial institutions) are looking to continue driving the development of Islamic finance globally, signing a Memorandum of Understanding (MoU) in 2015.

Islamic banks must improve performance

Although in its early stages of development, one of the draws of Islamic finance is that it appears to be more resilient to shock. During the 2008 crash, Islamic banks remained stable. This could be because excessively risky strategies, speculation, and uncertainty are banned, and risk-sharing is promoted. And as worldwide interest in ethical finance increases, many think that Islamic finance may be more able to prevent financial bubbles.

However, if Islamic banking is to effectively compete with its conventional counterparts, performance must improve. 2006-2011 data shows that conventional banks averaged a ROE of 14.6% where Islamic banks averaged 7.1%. Similarly, conventional banks averaged a 5-year cost to income of 33%, where Islamic banks averaged 51%.

Increasing interest from conventional institutions signals that Islamic finance is set to become a highly competitive market. And if embryonic challenges can be overcome, it will present a new route for business between the Middle East and the rest of the world.

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New African Development Bank leader puts energy at the forefront

12 January 2016 Comments (1) Africa, Featured, Leaders

Akinwumi Adesina

The new head of the African Development Bank says his top priority is to develop the continent’s energy infrastructure to spur economic growth.

Akinwumi Adesina, known for his reforms and anti-corruption efforts as Minister of Agriculture and Rural Development of Nigeria, became president of the bank on September 1, 2015. The bank is one of Africa’s largest lending institutions and finances projects to improve electricity, water and transportation.

“My top priority will be to focus the Bank to deliver on “power-for-all” – a universal access to electricity for Africa. Nothing is more important to Africa than access to power,” Adesina said in his vision statement for his candidacy for president.

Lack of energy slows development

Adesina said lack of energy is the greatest obstacle to the development of the continent.

“The development of the energy infrastructure for Africa will drive more rapid economic and social development of the continent, by reducing the cost of doing business, powering industrial growth, unlocking entrepreneurship of millions of small and medium size enterprises, improving educational and health systems and deepening financial services, driving agro processing to create jobs,” he said.

He noted that Africa’s total energy capacity is only 147 GW – similar to that of Belgium. He wants to expand that to 700 GW by 2040 with development of renewable resources.

“Africa has 50% of the world’s renewable energy (wind, hydropower and solar) but they remain largely untapped,” he said.

Plans to fund large and small projects

He proposes a mix of large, regional projects and smaller local ones that can be developed quickly.

“The Bank cannot afford to put all its focus on large regional power projects alone, as they are very complex, have high capital exposure and risk profiles, will take time to achieve, even though they are critical,” he said.

“Under my leadership, the Bank will pursue a twin track approach: build success in the short term, deliver successful investments in power and then scale up based on success. To show quick successes, build momentum on execution and delivery for countries, the Bank will also focus on providing support for the piloting of decentralized integrated power systems within countries.”

Corruption is an obstacle

Another obstacle, he said, is corruption.

“The cost of corruption is massive; it turns the whole continent into darkness,” he said, estimating that corruption costs Africa $148 billion a year.

Africa looks to reduce carbon emissions

Adesina was a prominent voice for a unified African agenda at the recent Climate Conference in Paris and that agenda also stressed development of renewable energy sources in order to reduce greenhouse emissions.

At the time, he said Africa needs an international investment of $55 billion a year through 2030 to create an efficient energy sector that uses more renewable resources. He said the bank would contribute $5 billion in financing, 40 percent of its total investments.

Increased investment in private sector

In addition to pledging to make investments in the energy infrastructure, Adesina said the bank would increase its investments in the private sector.

He said private sector lending by the bank was $2.1 billion in 2013.

“Given that the private sector accounts for 70% of all investments in Africa, 70% of all output and 90% of all employment, there is need for the Bank to be more expansive in its private sector operations,” he said.

Adesina also said the bank will embrace an “activist” posture in support of infrastructure developments.

“The Bank will increasingly take on a transactional approach by helping countries and the private sector to resolve legal and regulatory environments that will unlock bottlenecks to project development and execution. The role of the Bank will be more of an “activist financier” that will be more engaged in driving the execution of infrastructure projects, not just ideas and master plans,” he said.

Known for agricultural reform in Nigeria

Adesina is a respected economist and agricultural expert.

Before joining the bank, he had been Minister of Agriculture and Rural Development in Nigeria since 2011. He was known for implementing bold reforms in the country’s agricultural sector, including anti-corruption efforts and infrastructure improvements. Agriculture had been long neglected as the West African country’s reliance on oil revenues grew.

During his tenure, domestic food production increased by 22 million tons while food imports decreased significantly.

In 2013, Adesina won the Forbes Africa Person of the Year award for his reforms in Nigeria’s agriculture sector. In 2014, he was selected as Anti-corruption Man of the Year and Most Transparent and Accountable Minister of the Federal Republic of Nigeria by the Foundation for Transparency and Accountability.

He holds a master’s degree and a PhD in agricultural economics from Purdue University.

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Ivory Coast’s Guillaume Soro: From rebel leader to high government post

11 January 2016 Comments (0) Africa, Featured, Politics

Guillaume Soro

A passion for freedom has led Guillaume Soro from command of rebel forces in Ivory Coast’s brutal civil wars to the highest echelons of government in the West African nation. But Soro also faces accusations of inhumane treatment during the country’s civil war in 2011.

Soro, now President of the National Assembly, was briefly subject to an arrest warrant in Paris in December. His accuser is Michel Gbagbo, the son of Soro’s archrival, the former Ivory Coast president Laurent Gbagbo.

Michel Gbagbo has filed claims in a Paris court accusing Soro and other senior leaders in the rebellion of “kidnapping, false imprisonment, and inhumane and degrading treatment” before he was released in 2013. Soro denies the charges, saying Michel Gbagbo was arrested legally along with his father in 2011.

Michel Gbagbo

Michel Gbagbo

Former president faces charges in international court

Gbagbo’s father, the former president, meanwhile, stands accused of crimes against humanity by the International Criminal Court, charges Laurent Gbagbo has denied.

The younger Gbagbo sought to have Soro arrested and compelled to testify in December when Soro was in France attending the Paris Climate Conference. Gbagbo has dual French-Ivorian citizenship, which enabled him to bring the case to the French court in 2012. But a judge lifted the warrant after the government of Ivory Coast protested that Soro was in Paris on official business and thus had diplomatic immunity.

Soro, Gbagbo are key figures in civil war

The enmity between Soro and Laurent Gbagbo is woven into a tapestry of civil unrest in Ivory Coast that dates back nearly 15 years.

Soro, now 43, was a leader of student uprisings against Gbagbo’s predecessor from 1995 to 1998 and did six stints in prison. After studying law in France for a time, he lived in exile in neighboring Burkina Faso before civil war erupted at home in 2002.

Soro led the Patriotic Movement of Ivory Coast, an opposition group that rebelled against Gbagbo, who became president in 2000. The movement combined with two other rebel groups to form New Forces, which seized northern Ivory Coast and accused Gbagbo of discriminating against northerners and Muslims.

“I have taken up arms to (help) my country to find its true face: peace, freedom and prosperity,” Soro wrote of his decision in his 2005 book, “Why I Became a Rebel.” He said he feared the country was on the brink of genocide.

Peace agreement brings rebel leader to power

As part of a 2003 peace deal, Soro joined the Gbagbo government as Minister of Communications. But fighting continued until a 2007 power-sharing deal elevated Soro to the post of prime minister. Gbagbo and Soro participated in a disarmament ceremony, burning their weapons to symbolize the end of the conflict.

In a speech, Soro apologized “to everybody and on behalf of everybody” for the harm done by the war.

That didn’t end the violence. Rockets were fired at a plane carrying Soro in June 2007, just two months after he was named prime minister. Soro was not hurt but three other passengers were killed in the attack on the plane as it landed in Bouake. Several arrests were made and there was speculation at the time that the attackers might have been members of Soro’s own New Forces, unhappy that he had joined the government. Soro also survived five previous assassination attempts.

Dispute over 2010 election

Long-delayed elections in 2010 sparked further violence after Gbagbo refused to concede the election to Alassane Ouattara, who ultimately became president with the backing of the French and the United Nations. Soro resigned from the government and joined opposition forces in support of Ouattara, who won 54 percent of the vote.

The post-election conflict left about 3,000 people dead, displaced tens of thousands, and gave rise to accusations of war crimes on both sides.

Soro with President Alassane Ouattara

Soro with President Alassane Ouattara

Soro gains high post

Soro rejoined the Ouattara government as prime minister and then was elected in 2012 to his current post as President of the National Assembly, the second highest post in the government. Soro is also Ouattara’s designated successor.

While Soro had many supporters in Ivory Coast as well as in West Africa and Europe, some questioned how national reconciliation could go forward with a divisive figure in a top post.

“This cannot bring things forward because there are people who are still aggrieved. Moreover there are people who have complaints against him, they are talking about reconciliation. We end up having this reconciliation and they put someone at the head of state, the number two, whilst people are aggrieved by him,” says Omer Blet, a student.

Soro is one of only a few on the Ouattara side of the conflict who have been accused of crimes during the war while hundreds on the Gbagbo side have been investigated, prompting complaints of imbalance by human rights groups.

Meanwhile, Ouattara was re-elected by a landslide to a second five-year term as president in 2015, spurring hopes that the country has reached political stability. But echoes of the long conflict continue to reverberate in French and international courts.

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Ashish J. Thakkar, from refugee to millionaire

9 January 2016 Comments (0) Africa, Featured, Leaders

Ashish Thakkar

Uganda’s Ashish J. Thakkar, 34, founder and executive chairman of the Mara Group parlays a small computer business into a multinational conglomerate.

His life story reads like a sweeping epic of tragedy, adventure and success.

He was born to parents expelled from their native Uganda by Idi Amin. He became a refugee from the genocide of Rwanda. He left school at age 15 to start a computer business. Nineteen years later, that tiny business has mushroomed into a conglomerate that employs 11,000 people in 25 countries.

Meet Ashish J. Thakkar, founder and executive chairman of the Mara Group. At only 34 years of age, Thakkar’s net worth is estimated at $260 million.

Real estate, shipping, manufacturing among holdings

Mara Group, now headquartered in Dubai, operates in telecommunications, manufacturing, real estate, shipping financial services, communications technology, renewable energy and manufacturing with revenues of $100 million.

His latest venture is agriculture, large-scale maize cultivation in Africa.

The secret to his success? “It’s difficult to identify one specific reason or catalyst, but above all other things, I believe a strong sense of perseverance, always thinking big and aiming high, and of course positivity, has allowed me to realize my vision,” he said.

“Always be down to earth and approachable,” he added. “The day your arrogance or ego kicks in, it’s all over. Always remember, no matter how big you become you will still always be a drop in the ocean in the grand scheme of things.”

Foundation supports entrepreneurship

He also founded the Mara Foundation, which mentors budding entrepreneurs.

In his book, “The Lion Awakes: Adventures in Africa’s Economic Miracle,” (Palgrave: August 2015), he chronicles the economic awakening of Africa that he has seen and benefitted from first-hand.

“The West is definitely investing more in Africa — or wanting to invest more in Africa — but they’re still investing a lot in Asia as well, specifically India and China. [The] nice thing is that India and China’s investing in Africa, so the ultimate destination is us,” he says. “People do want to come to Africa; people realize that we’re the next big thing — India and China have had their time, it’s now ours.”

He also wants to be the first East African in space through Virgin Galactic, the Richard Branson-backed space tourism project. “I’m taking quite a few of flags into space, as a way to kind of send a strong message that ‘look, we as Africa have the vision and the ability as well’,” he said.

Expelled from Uganda, fled Rwanda

His super star status belies difficult beginnings.

Thakkar’s family is of Indian descent but had lived in Uganda since the 1800s until 1972, when Idi Amin expelled Asians from the country. The family lived in England for more than a decade; Ashish Thakkar was born in Leicester. The family returned to Africa and lived in Rwanda until they were forced to flee the genocide and return to England in 1994.

“From being top entrepreneurs, my parents were reduced to waking up at the crack of dawn to sell women’s clothes and drive vans to markets all around England,” he said.

From England, the family moved to Burundi before returning to Uganda when he was 14.

Started computer business with a $5,000 loan

Thakkar dropped out of school at age 15 and borrowed $5,000 to start a small computer business, traveling to Dubai regularly to bring back equipment including keyboards and mice.

“Education is good. However, informal education is much more important and valuable in life than formal education. Mentorship and vocational skills training build up an individual,” Ashish said.

Growing the business

He said he focused on growing his business rather than on taking profit.

“I reinvested everything in my business. The only way you are going to grow is if you keep on planting.”(source)

He is sometimes referred to as Africa’s “youngest billionaire” because his estimated $260 million net worth translates into more than one billion South African rand. Thakkar resists that label.

“Money should never be a measurement for anything,” he said. “I like to see myself as an entrepreneur that’s being disruptive — I like to be the underdog in a lot of cases.”

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Dubai’s Sheikh Mohammed connects on social media

4 January 2016 Comments (0) Featured, Middle East, Politics

sheikh mohammed twitter

The pioneering ruler of Dubai is conquering a new frontier – social media.

Sheikh Mohammed bin Rashid Al Maktoum has built a global social media following of millions of people and he is using social channels to connect with his citizenry and beyond.

He has 5.2 million Twitter followers and 3 million Facebook “likes” plus thousands of additional followers on LinkedIn, Instagram and other social media platforms. (By way of comparison, U.S. President Barak Obama has 5.5 million Twitter followers on his official POTUS account and 46 million “likes” on his Facebook page.)

Mohammed is @HHShkMohd on Twitter, HHSheikhMohammed on Facebook and HH Sheikh Mohammed Bin Rashid Al Maktoum on LinkedIn.

Known for being the force behind Dubai’s rapid development as a major global business and air transport hub as well as for his love of horse racing, Mohammed, 66, has been Emir of Dubai and Vice President and Prime Minister of the United Arab Emirates since 2006.

Connecting with young people

In recent years, the ruler has encouraged his countrymen to embrace social media as means to connect with young people and encourage innovation.

sheikh mohammed arab influencer summit“The significance of these (social media) channels lies in their ability to reach out easily to all members of the society through personal devices,” he said at a Social Media Influencer Summit, which he convened in 2015 to discuss legislation to insure the “best use of social media platforms.”

“It is our duty to help our young people and future generations by building a knowledge platform to protect them from any destructive and negative thoughts that affect their full potential and create constructive paths for Arab societies,” he said.

Discussing national and global issues

Mohammed has initiated a number of discussions on social media about issues facing the country and the world.

“We want every man, woman and child to join us in the biggest ever national brainstorming session to find new ideas for health and education,” he tweeted in 2013. “Education and health concern all of us, so I invite all of UAE society to think collectively of creative solutions.”

In 2015, during Ramadan, he used social media to launch a UAE Water Aid campaign to provide clean drinking water to people in poor countries. “Statistics show that 3.4 million people die every year because they lack clean drinking water,” Sheikh Mohammed said on Twitter. The campaign raised nearly $50 million in a month.

Emphasis on youth, Dubai development

Mohammed also posts frequent updates on both Twitter and Facebook describing his activities, which often focus on the need to develop the country and its young people.

One recent Tweet showed a photo of him meeting with students. “I had the pleasure today of meeting a group of students of the Mohammed bin Rashid school for communication. Positive and ambitious and persevering,” he tweeted.

“I told them constant communication with the people and listen to them … and the removal of barriers with them is the most important characteristic of a successful leader and media also successful,” he said in a follow up tweet.

Another has a photo of Mohammed in the cockpit of an airplane with the tweet: “UAE carriers have 530 aircraft worth $160 bn on their order books. UAE is a major growth driver for global aviation.”

Dubai transformation began in the 1970s

Air transport was a first major step in Dubai’s rapid development and transformation into a major global city starting in the 1970’s.

Mohammad as a young man oversaw expansion of the state-owned Dubai International Airport beginning in 1974. A decade later, he would oversee the launch of Emirates airline, which has become the largest airline in the Middle East and a strong competitor in the global airline industry.

Under Mohammed’s leadership, Dubai has become the air and financial hub of the Gulf. After he lifted a ban on foreign land ownership in 2002 and allowed the creation of special economic development zones, Dubai was able to attract significant development and multinational companies flocked to state.

Touting government efficiency

According to his LinkedIn profile, Mohammed’s “vision for the UAE has been proven successful through achieving unprecedented rankings on global indexes and has lately achieved number one worldwide for government efficiency, according to IMD data.”

More recently, it says, Dubai has developed as a humanitarian center.

“The UAE is not just a financial and economic nucleus, neither is it just a tourism hub: we are also a nerve centre of a global humanitarian work.” These words of Sheikh Mohammed physically manifest in the many charity and humanitarian foundations established by HH (Mohammed), which are major local and international players providing assistance and opportunities to the less fortunate around the globe.

Horse racing and poetry

Mohammed’s passion for horseracing is widely known. In 1992, he founded Godolphin, a family-owned enterprise that has become the largest thoroughbred racing stable in the world. The family-owned enterprise has farms in the United States, Ireland, England and Australia.

With an estimated net worth of $4 billion, he is also a well-regarded poet and has published books on leadership.

Social media for governance

On social media, however, his focus is on governance and using new technologies to improve Dubai and its people.

“The world is moving at a very fast pace and technology is evolving dramatically. We all remember how the traditional media emerged modestly but it quickly gained momentum driven by technology to become a force that impacted governments, changing the course of their work. It transformed the world into a small village.”

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