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African banks want share of growing e-money market

24 May 2016 Comments (1) Africa, Business, Featured

mpesa

A top East African bank competes with a major telecom in Kenya as mobile banking booms.

A top East African bank hopes to challenge a telecommunication company’s dominance in electronic mobile-payments service and gain a larger share of Kenya’s electronic banking trade.

Banks in Nigeria, Cameroon and Mali are making similar moves to tap into the continent’s mushrooming market in electronic payments.

In 2014, mobile money transactions generated $656 million in revenue in sub-Saharan Africa and that amount expected to double to $1.3 billion by 2019, according to the research firm Frost and Sullivan ICT.

In much of the world, banks are the leading providers of electronic payment services. But in Africa, where more people have mobile phones than have bank accounts, telecommunications companies have been able to dominate the market.

According to the World Bank, fewer than 25 percent of Africa’s 1.4 billion people have a bank account while 40 percent have a mobile phone.

Equity offers SIM card overlay

Now, Equity Bank, Kenya’s largest in the number of customers, and other banks want to tap into a growing market.

Equity, which also operates in Tanzania and Uganda, seeks to compete with M-Pesa, Safaricom’s popular mobile payments service.

Equity has begun providing its clients with a super thin SIM card overlay that enables them to access their accounts on their mobile phones.

The service, called Equitel, is powered by Safaricom’s rival telecom, Airtel Kenya.

Equity Bank contends that market should belong to the banking sector, not the telecoms.

“We have a major problem with the mobile provider also providing financial services,” John Staley, the bank’s chief of finance, innovation and technology said. “You cannot have the freight company controlling the tracks.”

M-Pesa enjoys popularity Kenya

Safaricom is the Kenya subsidiary of the global telecom colossus Vodafone Group, based in the United Kingdom.

Launched in 2007, M-Pesa has more than 12 million active users and processes more than $18 billion in transactions yearly.

The launch of Equitel follows a yearlong legal battle in which Safaricom raised questions about the security and privacy of Equity Bank’s SIM card plan. A Kenyan court ruled in favor of Equity, enabling the project to move forward.

Bank, telecom partner in Nigeria

Meanwhile, in Nigeria, GT Bank is partnering with Etisalat Nigeria, the nation’s third largest mobile operator to create GTEasySavers, a savings account that can be opened on a mobile phone.

Mobile banking is not as large a market in Nigeria as it is in Kenya. But with mobile penetration of 80 percent and only 57 percent of adults lacking bank accounts, it may be poised to take off.

The mobile market in West Africa is growing. It was valued at $17 billion in 2014 by the market research company Ovum. Mobile data revenue totaled $3 billion, up 30 percent from the year before.

Pan-African Ecobank is partnering with the telecom Orange Cameroon to enable Orange customers with Ecobank accounts to transfer money between the two services. The companies have launched the service in Cameroon and Mali and plan to extend it to Ivory Coast, Guinea Conakry and Niger.

Orange Money is currently available in more than a dozen countries in the Middle East and Africa. With over 16 million customers, the service transferred about $9 billion in 2015.

M-Pesa fails in South Africa

South Africa, where 75 percent of the adult population has banking services, provides a contrasting example of poor demand for a telecomm payment platform.

In May, Vodacom, a Vodafone subsidiary and the country’s largest mobile network, announced it was terminating its effort to attract South Africans to M-Pesa after the service failed to catch on in the continent’s most economically advanced nation.

The company had hoped to sign up 10 million South African users when it launched M-Pesa in 2010. However, by 2015, only one million people had signed up and only 76,000 were active on the platform.

“The success factors for M-Pesa in Kenya were not present in South Africa,” said Arthur Goldstuck, managing director of the technology research firm World Wide Worx.

Usage grows in other countries

Vodacom CEO Shameel Joosub said the company saw “little prospect” of M-Pesa being successful in the near term. The service will end June 30.

Vodacom said it would continue to offer M-Pesa in markets where banking access is more limited and M-Pesa usage is growing, including Mozambique, Tanzania, Lesotho, and the Democratic Republic of the Congo.

In Kenya and other countries where mobile transactions are popular, consumers likely will benefit from new competition in the e-money marketplace, according to a consultant with the World Bank.

“As long as pricing is low enough, mobile money services and healthy competition will benefit consumers and increase financial inclusion, tech consultant Martin Warioba said.

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Smartphone opens up new possibilities for Morocco

23 May 2016 Comments (0) Business, Featured, Middle East

morocco smartphone

Mobile and internet penetration in Morocco continues to grow and crossover, as the country embraces technology.

Technology, and in particular smartphone technology, is changing the way Moroccans live their daily lives. More significantly, the nation’s nascent love affair with smartphones and web apps offers great opportunities for economic growth.

The National Authority of Morocco’s telecoms regulator (ANRT) released a report, earlier this year, that assessed the growth of the telecoms market from 2010-2015. The report found huge growth in mobile phone use, both in terms of penetration and the average time spent using a phone per customer. At the forefront of this expansion, the report highlighted falling costs, especially in areas such as 4G, which has helped bring the use of mobile phones and the Internet more inline. This expansion has seen a 146% increase in the average monthly usage of mobile owners in the past 5 years.

Embracing new ways of living

It would be foolish to dismiss the impact that smartphone technology can have within a country. The Arab Spring movement was, in part, driven forward by the use of social media platforms such as Twitter, which allowed on the spot reports and information from everyday people. While Morocco is a stable country, without much of the political unrest found elsewhere in North Africa, the impact of smartphones and online activity has the potential to bring about an economic revolution.

Online shopping has exploded in Morocco, and the use of mobile phones for web purchases has grown at an astonishing rate. This not only benefits online giants, but encourages local companies and outlets to take advantage of the new trend. Research carried out by MasterCard illustrates just how rapidly the use of smartphones for shopping has increased. In 2013, MasterCard reported that only 9% of users had made an online purchase via their phone in the previous few months. When this survey of 4,000 people was repeated in 2014, the figure had soared to 66%!

Aaron Oliver, head of emerging payments for MasterCard Middle East & Africa, said, “With rapidly increasing internet penetration rates and availability of secure online payment options, the country’s e-commerce industry is well placed to achieve significant growth.”

E-commerce could provide Morocco with a source of revenue that shows no sign of diminishing on a global level, never mind in an emerging market – where the scope for increasing penetration is even larger.

Are social media and apps the second wave of growth?

The ANRT report on mobile expansion showed that in 2012, only 16% of mobile phone owners in Morocco owned a smart phone. By 2014, this figure had risen to 38.2%, which indicates just how quickly the mobile landscape has changed. However, social media has not yet reached anything like the ubiquitous nature of its standing in Europe and North America. This is, like most areas involving the Internet, changing and it is changing at pace.

The Arab Social Media Report found that by 2014, Facebook penetration in Morocco was at 16% of the population, and had a growth rate of 13%, which was the second highest in North Africa.

With social media come apps, social media games and the proliferation of advertising. All of these things open up doors for startup companies, and a wider customer base for existing businesses.

It is therefore no surprise that Moroccan game designers and entrepreneurs have already begun to drive the second wave of Moroccan internet and mobile growth. The private telecom group Inwi now hosts an event called Inwi Days, in which game designers have 24 hours to create a new web game, and pitch it to a panel of judges in order to win a $12,000 prize.

Méditel Telecoms have launched a similar competition for app designers, and while this development of technology is fairly new, the majority of winners have maintained clear roots to Moroccan culture and traditions.

Inwi Days gave two games, Trombia and Runner Roul, the shared first prize, and both games were inspired by Moroccan culture.

Méditel’s app challenge was won by the app Maroc Culture, which is a trivia game that tests the player’s knowledge of Moroccan culture and traditions.

As mobile phones become even more popular, and the Internet plays a greater role in the lives of people across Morocco, such markets will continue to grow. A young generation of innovators is now taking advantage of these openings to create new businesses and trends, but ones that remain quintessentially Moroccan.

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Takunda Chingonzo: Zimbabwe’s Youngest Entrepreneur

22 May 2016 Comments (0) Africa, Featured, Leaders

Takunda Chingonzo

Takunda Chingonzo is one of Africa’s youngest entrepreneurs. Can his technology company and his growing international exposure help to pull Zimbabwe out of the shadow of its government and penalizing trade sanctions?

Takunda Chingonzo is a remarkable person, achieving more in his 22 years than many in their entire lives. He is best known as a start-up entrepreneur, creating three innovative businesses since graduating from high school, but his talents have social enterprise at their core, working to better the future of Zimbabwe through the freedom of technology and information.

After completing his degree in quantity surveying in 2014, he went on to obtain a CISCO certification in network security. Although he does not have a traditional background in business or technical design, it is his entrepreneurial spirit that has been the driving force in his companies and in instigating social change. He has been recognized for his efforts with the Swell Award for Innovation at DEMO Africa, and was one of 100 young people selected to take part in an 8-week internship in the USA following the Mandela-Washington Fellowship program in 2014.

Trouble in Zimbabwe

Zimbabwe suffers from a series of trade sanctions and embargoes, designed to restrict governmental trade after a long history of violations of democratic processes and human rights abuses. Everything within the financial trade industry is restricted, from imports and exports to export insurance and credit. Because much of the equipment, services and finances necessary for young African entrepreneurs come from outside the continent, this only works to restrict growth in this sector.

In 2015, Chingonzo was selected to hold an exclusive on-stage Q&A with President Obama at the US-Africa leaders’ summit, which aims to increase the US’s engagement with Africa. He spoke candidly about how trade sanctions are detrimentally affecting businesses and entrepreneurs in Zimbabwe, as well as the political leaders they were supposed to be targeting. He discussed the interest that he received for his projects for importing goods and investment from American companies, which were withdrawn after they found out he was from Zimbabwe. This effectively means the people of Zimbabwe are oppressed twice, once from their government, and again from the punishment designed to penalize the leadership of the country.

Tech Start-ups

Despite this opposition, he has successfully set up Neolab Technology, a multi award-winning startup. Its biggest achievement to date is Saisai, a public Wi-Fi network, designed to bring free internet access to all by installing wireless mesh networks in public spaces and public transportation in Zimbabwe. Chingonzo has described this task as “liberating the internet.” He understands that the internet is the key to progression in Zimbabwe, with free access to information and communication being central factors for people to free themselves from oppression. From a business perspective, he believes that “the internet is the one tool that lowers the cost of doing any form of business,” also showing his commitment to business progress within the country. He went on to say “It provides access to information that people and communities can use to improve and magnify the work that they are already doing. An informed community engages more, innovates more, and, from a business perspective, makes more and spends more.”

Alongside Neolab, he is also the co-founder of NeoEffect, a social start-up working towards empowering underprivileged youths through IT literacy, and is involved with both the MX project and BOOT Africa which promote student start-ups in tertiary institutions.

The Future

Chingonzo’s business acumen and commitment to social change seem to be a winning combination. He was featured in the Huffington Post as one of four African innovators you should know about. Last year, he graced the cover of Forbes Africa after making it on to the Forbes “30 under 30” list as part of the continent’s “next generation of billionaires.” The exposure he has received from his interview with President Obama has generated a buzz around his projects, and the burgeoning tech industry in Zimbabwe, while exposing the inequalities in the international relationship with Zimbabwe and its people. Chingonzo doesn’t just represent technology and innovation, but the will of the people of Zimbabwe and their indomitable spirit.

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Liberia will turn schools over to private operator

21 May 2016 Comments (2) Africa, Business, Featured

bridge international academy school

Bridge International Academies, which runs schools in Kenya and Uganda, will pilot a program in Liberia’s troubled school system.

The government of Liberia plans to turn its troubled school system over to a private company, drawing objections from representatives of the United Nations and threats of a strike from the country’s teachers.

Education Minister George Werner said the country would launch a pilot project in September, when 50 of the nation’s 5,000 schools will be taken over by Bridge International Academies, a private company based in Kenya, which also operates schools in Kenya and Uganda.

Werner noted that the Liberian school system has been “in a state of decay for the last three decades.” He said he decided to turn to Bridge after realizing that incremental change by the government would not happen quickly enough for the system to benefit Liberia’s children.

Werner said education would still be free to Liberian students.

High rate of failure on exams

Disrupted by years of war and then the recent Ebola crisis, the school system was labeled “a mess” by Liberia’s president, Ellen Johnson Sirleaf in 2013 after 25,000 of country’s high school graduates failed their university entrance examination.

After Werner announced the pilot program, Liberian school teachers approved a resolution threatening to strike if the government goes ahead with the plan.

One Monrovia teacher said schools are underperforming in part because of the low teacher salaries the government pays, forcing teacher to take two jobs. Joseph Komoreah said Liberians should be in charge of their education, not an outside company.

Meanwhile, a United Nations official said the plan amounts to a “gross violation” of the Liberian government’s obligation to provide a right to education.

State should run schools, official says

Kinshore Singh, the U.N. special rapporteur on education, call the plan an “attack” on teachers and public schools.

Calling the scale of the plan “unprecedented,” Singh said a public education system is “a core function of the state and abandoning this to the commercial benefit of a private company constitutes a gross violation of the right to education.”

Singh argues Liberia would do better to invest in improving its own education system and could approach the United Nations for assistance.

A Bridge International Academy school

A Bridge International Academy school

Schools lack resources

About 1.5 million are enrolled in Liberia’s primary schools but only about 20 percent of them complete 12th grade. Classrooms are often overcrowded and under supplied, even lacking enough chairs for all the students.

Bridge operates more than 350 schools in Kenya and seven in Uganda, charging each student $6 per month. The World Bank invested $10 million in Bridge International in 2014 and social investors including Bill Gates and Mark Zuckerberg have also provided funding.

But the company has also been criticized for its teaching methods.

The company calls its approach the “Academy in a box.” Bridge develops teaching materials and delivers lessons to teachers on a tablet they can use in the classroom. Bridge also uses computers to monitor how the students are progressing so educators can intervene if there are issues.

More than 100 organizations object

After it received World Bank funding, more than 100 organizations supported a statement critical of Bridge and the privatization of education in Kenya and Uganda.

A Bridge International spokeswoman said the system enables teachers to give well prepared lessons and uses technology to streamline administrative processes.

She said Bridge pupils had a 22 percent higher pass rate on national exams in 2015 than other students.

In the pilot program, the Liberian government will continue to pay the teachers but Bridge International will vet and supervise them. The company said it is looking for outside funding for the pilot.

If the 2016-17 pilot goes well, Liberia may look for other private education providers to help run its schools.

Bridge International Academies said it is the world’s largest education innovation company with more than 100,000 students in more than 400 nursery and primary schools in Africa. The first Bridge school opened in Nairobi, Kenya in 2009. In addition to its African programs, Bridge is planning to expand into Asia.

Founded in 2007, the company hopes to operate more than 3,000 schools in Kenya, with more than two million students, by 2018. The company wants to reach 10 million students in a dozen countries by 2025 with its own schools or using its model in partner schools.

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Cyber threat looms over Africa

20 May 2016 Comments (0) Africa, Business, Featured

africa cyber crime

As more people transact banking and business online, experts raise questions about security from hackers targeting the continent.

Amid global alarm about cyber theft, authorities warn that banks and other businesses and institutions in Africa are increasingly vulnerable to online fraud and theft.

African and international cyber security experts, including representatives of government and the United Nations, will gather in Nairobi in June to discuss online threats and how to fight them.

As more Africans use the internet, businesses and governments are providing more transactions and services online. But experts are raising questions about whether those sites are secure from cyber criminals.

Many small and mid-sized businesses cannot afford expensive security measures such as firewalls and malware protection while governments also use templates to build their websites, which cost less but may also be more vulnerable to attack.

Kenya, Nigeria, South Africa see attacks

Kenya, Nigeria and South Africa are among African countries that have already suffered millions of dollars in losses to cyber crime.

Nigerian officials estimated the country’s institutions lost $630 million annually to cyber attacks, theft and software piracy, nearly one percent of the country’s gross domestic product while online bank fraud more than doubled.

“Global tracking of cyber-attacks indicate that Nigeria is among the countries with high numbers of software piracy, intellectual property theft, and malware attacks,” Babagana Monguno, Nigerian national security advisor, said at the recent inauguration of a 31-member Cybercrime Advisory Council.

Monguno called the threat “a serious challenge to our resolve to take advantage of the enormous opportunities the internet brings.”

Nigeria’s new Cybercrime Advisory Council, established through 2015 legislation, is charged with promoting information sharing and making recommendations designed to improve cyber security. The country’s National Cybersecurity Policy and Strategy outlines the legal, technical and institutional systems that will be required to fight cyber-attacks in Nigeria.

Kenya loss put at $150 million

In Kenya, authorities said online thieves took about $150 million in 2014, as cyber crime in that nation tripled over 2013.

A 2015 report noted that 25 percent of Kenya’s internet users are unsupervised teens that may be exposed to cyber crime.

One expert said many businesses in Kenya lack the resources and access to IT expertise they need to protect their online platforms.

Rutendo Hwindingwi, division director for Sage East and West Africa, said businesses need to implement firewalls and use anti-malware tools and have access to IT specialists who can quickly respond when applications or operating systems are attacked.

The Communication Authority of Kenya in April put out a call for tenders a study of e-commerce and cyber crime detection and prevention in the country as the government attempts to develop a strategy to fight cyber crime.

The authority said it had set up a team to monitory cyber attacks, especially those that target government systems.

South African bank customers warned

South Africa has seen cyber crime losses totaling about $65 million, according to one estimate.

The South African Bank Risk Information Center recently warned bank customers to pay more attention to security, especially on mobile phones.

The center’s chief executive, Kalayani Pillay said protecting electronic devices is critical to reducing the risk of being victimized by cyber crime.

Phillay said malware and phishing attacks were on the increase in South Africa, including efforts to target accounts of corporate executives to move large sums of money.

The country’s wealth and particularly its relatively high gross domestic product per capita made it attractive to cyber criminals, she said.

Risk grows with mobile usage

Banks continuously update cyber security measures, but criminals come up with new ways to steal from customers, she said. The risk will grow as more bank customers migrate online, especially banking on their smart phones.

The warnings come against a backdrop of global concern following two large heists this year at Asian banks.

In February, hackers sent more than 30 fund transfer orders totaling $950 million from Bangladesh Bank using Swift, a global money transfer system. The thieves successfully transferred $81 million to accounts in the Philippines.

In May, Swift revealed another heist had taken place prior to the Bangladesh theft but had only been revealed by the second bank, which one researcher said was in Vietnam. The amount of the theft was not released.

Hackers breach bank security

Swift, with 11,000 member banks, processes 25 million messages each day to process billions of dollars in transfers.

In each case, Swift said the cyber thieves bypassed security controls at the local banks to request the transfers.

As concern grows on the continent, the African Expert Convention on Cyber Security, June 22-23 in Nairobi, will bring together experts from government agencies, the United Nations, corporations and investors to discuss strategies for fighting cyber crime.

Organizers hope the event will enable participants to share expertise from different sectors and create partnership frameworks for enhancing cyber security. Participants will also learn the latest technical tools available to protect against cyber threats.

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African governments seek bailouts as commodity prices fall

19 May 2016 Comments (0) Africa, Featured, Politics

angola imf

Angola is the latest nation to seek an aid package from the International Monetary Fund as its oil-dominated economy falters.

As its economy buckles under the weight of falling oil prices, Angola is turning to the International Monetary Fund (IMF) for a bailout.

By one estimate, the West African nation faces a shortfall of $8 billion, or 9 percent of its gross domestic product, this year. Angola last borrowed from the IMF in 2009.

Angola is one of several cash-strapped African countries that are turning to the IMF for financial help as prices drop for commodities such as oil and minerals.

Ghana agreed to an aid package in 2015, it’s first from the IMF in six years. Zambia is also in talks for IMF aid, which would be its first since 2008. Zimbabwe has also asked the IMF for its first loan in nearly two decades.

Meanwhile, the IMF stopped a $55 million loan to Mozambique – part of a bailout approved last year – after discovering the country had failed to report $1 billion in unreported loans it owes.

South Africa and Nigeria may also be forced to turn to the IMF as their economies struggle.

Angola faces shortfall

Angola’s request was an about-face after the nation repeatedly said it would not turn to the IMF for help in the current crisis because the aid would come with too many conditions.

But the country’s reserves have fallen as oil prices stayed below $45 a barrel and the government is reluctant to cut services in advance of elections in 2017.

Oil accounts for 95 percent of Angola’s exports and about half of the government’s revenue. In addition to slumping oil revenues, the country has suffered a retrenchment by China, which has its own economic problems.

Monetary agency requires transparency

In exchange for IMF aid, the Angolan government is likely to be forced to be more transparent about its financial dealings as the international agency typically scrutinizes the finances of countries it assists.

One criticism of Angola’s economy is the extent to which it is controlled by President José Eduardo dos Santos, who has ruled the country for more than three decades. While nearly half of the country’s population subsists on just over $1 per day, dos Santos’ daughter, Isabel dos Santos, is the richest woman in Africa, raising questions about the source of her wealth. Isabel dos Santos has denied using state money to enrich herself.

“The IMF stands ready to help Angola address the economic challenges it is currently facing by supporting a comprehensive policy package to accelerate the diversification of the economy, while safeguarding macroeconomic and financial stability,” Min Zhu, IMF deputy managing director, said in a statement.

One expert urged caution. Ricardo Soares de Oliveira, an Angola expert at Oxford University, noted that a study in 2011 by IMF staff found that the government could not account for $32 billion between 2007 and 2010.

“The IMF should use the leverage it has to extract serious concessions and tangible reforms from the government,” de Oliveira said.

Ghana receives bailout

Angola is the not the only country turning the IMF.

Ghana, an oil and gold producer, received a three-year, $918 million bailout in 2015. The country saw the value of its crude exports cut in half between 2014 and 2015, falling to $1.5 million in the first three quarters of last year as both prices and demand fell. Gold exports fell by nearly one third to $2.4 million.

In December, the IMF also agreed to a $283 bailout loan package for Mozambique that required the southern African nation to disclose all of its borrowing. In April, the IMF said it stopped a disbursement of $55 million after learning the country had not reported millions in loans by Credit Suisse Group and the Russian VTB Group.

Mozambique, a natural gas producer, saw exports fall by 14 percent in 2015.

Zambia, Africa’s second largest copper producer, saw a shortfall of 8 percent of gross domestic product in 2015 and is also seeking IMF assistance in 2016. Zimbabwe also expects an IMF loan in the third quarter of this year.

In addition to the IMF aid, the World Bank said it expects to lend up to $25 billion this year to countries reeling from falling commodity prices.

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Starbucks arrives in South Africa

18 May 2016 Comments (0) Africa, Business, Featured

starbucks south africa

Hundreds in Johannesburg line up on opening day of the coffee giant’s first store in sub-Saharan Africa.

The U.S. coffee giant Starbucks opened its first cafe in sub-Saharan Africa – a store in an affluent Johannesburg suburb – and the company plans to open at least a dozen more stores South Africa in the next two years.

Many people waited overnight and hundreds of people lined up before the opening to get their first taste of Starbucks while #StarbucksSA trended on Twitter on opening day.

Previously, Starbuck’s only African locations were in Morocco and Egypt. The global corporation has about 23,000 stores in the Americas, Europe and Asia.

Starbucks founder Howard Schultz said the company might eventually open as many as 150 stores in South Africa.

Second store opens soon

A second location is set to open soon at another Johannesburg shopping mall, but there are no plans to expand to other countries in the region.

The new stores are being launched through a licensing partnership between Starbucks Coffee Company and Taste Holdings, a South African management group and leading licensor of international brands.

“We are proud to be bringing Starbucks to South Africa,” said Kris Engskov, president of Starbucks for Europe, Africa and the Middle East. “We’re going to deliver a great Starbucks experience. The coffee market here (in South Africa) is vibrant and growing fast – we want to be part of that growth.”

Taste Holdings operates stores

Under the agreement, Taste Holdings gains exclusive rights to open Starbucks outlets in South Africa. It will own and operate the stores.

Carl Gonzaga, chief executive officer of Taste Holdings, said the partnership is committed to development of local suppliers and Taste Holdings has a program to increase employment among unemployed South Africans, who will benefit from new opportunities at Starbucks.

Engskov said young people have been the key to Starbucks’ success. With most of its workers aged 17 to 25 years old, “talented youth has always been a priority,” he said.

Taste Holding’s also holds a licensing agreement for Domino’s Pizza in South Africa and the company owns and operates Zebro’s Chicken, the Fish & Chip Co., Maxi’s Restaurants and St. Elmo’s Woodfired Pizza.

Hundreds line up for coffee

A line at the new Starbucks location in Johannesburg

A line at the new Starbucks location in Johannesburg

At the April 21 Starbucks opening in Johannesburg’s Rosebank district, a long line of customers was waiting when the store opened at 7:30 a.m.

Mohamed Mala, a 19-year-old student, said he waited for 12 hours to be the first customer. ” We wanted to be the first customers at Starbucks, and we were,” he said.

“Starbucks has been one of the things missing from the South African scene,” said Norma Cooper, a bank employee.

Starbucks will compete with many established locally owned coffee brands and independent coffee shops.

Gonzaga said the menu was designed to reflect local customer tastes including local products such as Rooibos tea.

Some of the coffee beans are sourced from nine African countries, including Kenya and Burundi, he said.

South Africa attracts U.S. food chains

With the most developed economy on the continent, South Africa has seen recent openings of several U.S. food chains, including Krispy Kreme Doughnut and Burger King.

Starbucks’ Engskov noted that significant quantities of Starbucks coffee products from Africa, Ethiopia, Rwanda and Tanzania, where the company has established farmer support networks.

The support centers opened after Ethiopia and the company settled a dispute in which that nation and Oxfam accused Starbucks of trying to block Ethiopia from obtaining trademarks for two of the country’s best-known coffee beans – Harrar and Sidamo. A third coffee, Yirgacheffe, was trademarked in the U.S. in 2006.

Under the agreement, Starbucks was allowed to promote and sell the three brands in markets where they are trademarked as well as where they are not while recognizing the integrity of the Ethiopian coffee brands.

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A second-hand clothing ban in East Africa?

17 May 2016 Comments (5) Africa, Business, Featured

africa second hand clothes

Burundi, Kenya, Rwanda, Tanzania, and Uganda consider ending imports of used garments by 2019 in order to increase domestic production.

Five East African countries may ban sales of second-hand clothing from abroad – a staple of many residents’ wardrobes – in order to bolster domestic garment making.

Burundi, Kenya, Rwanda, Tanzania, and Uganda make up the East Africa Community (EAC), which directed its member countries to phase out textile and shoe imports by 2019. The heads of state of all five countries must agree before the limits could take effect.

The proposal comes as many African countries seek to increase manufacturing and other industries to fuel economic growth.

Charitable donations resold

Second-hand clothing, mostly from Europe and North America, are a mainstay of local clothing markets in Africa, according to Dr. Andrew Brooks, author of Clothing Poverty: The Hidden World of Fast Fashion and Second-hand Clothes.

In Uganda, for example, second-hand garments account for 81 percent of all clothing purchases, Brooks said.

East Africa imported more than $150 million worth of second-hand clothing in 2015. Brooks noted that the used clothing is less expensive than locally produced garments or even inexpensive new imports.

U.S., U.K. are largest exporters

Most of the second-hand clothing sold around the world comes from charitable donations by European and North American residents who are unaware the clothing will be sold, Brooks said.

The United States and the United Kingdom are by far the largest exporters of used clothing.

The United States exported used garments worth more than $685 million in 2013, according to United Nations data. Much of it went to Central and South America, Canada and Mexico but Tanzania and Angola also received major shares.

Uganda imports 1,500 tons of used clothing each year from the U.S. alone, according to the U.S. International Trade Commission.

The United Kingdom’s exports totaled more than $620 million with major shares going to Ghana, Benin, Kenya, and Togo.

Germany was the third largest exporter at more than $500 million, with large shares going to Cameroon and Angola.

Other major exporters are South Korea, The Netherlands, Belgium, Canada, Poland, Italy and Japan.

South Korea and Canada together exported $59 million worth of used clothes to Tanzania while the UK exported $42 million worth of used clothes to Kenya.

Regional industry declines

Garment manufacturing in Ghana

Garment manufacturing in Ghana

Brooks, a lecturer at King’s College in London, said local garment makers employed hundreds of thousands of people in East Africa before the debt crisis hit in the 1980s and 1990s when domestic producers struggled to compete and many factories closed.

In Kenya alone, a garment industry that employed 500,000 people was reduced to only about 20,000 garment workers today.

The East Africa Community pointed to the need to rebuild domestic production as it proposed the ban on second-hand imports.

“The region, like the other developing countries, is ready to transition into an industrial bloc with a higher level of production quality and manufacturing practices,” said Betty Maina, Kenya’s Principal Secretary at the EAC Ministry. “It will benefit industry and increase access to locally manufactured products in the region and create more employment opportunities.”

No ban on new clothing imports

Brooks noted that the ban does not include imports of new clothing, which could also undercut the domestic garment makers. While rebuilding the local garment industry may be beneficial in the long-term, higher prices could hurt local consumers.

In the near term, government would also suffer losses of tariffs collected from clothing importers. For example, Kenya collected $54 million in tariffs on 100,000 tons of imported used clothing in 2013.

Rwanda earlier this year nearly tripled its import duty on imported clothing from 35 percent to 100 percent in order to encourage purchases from the country’s lone textile mill. Two years ago, the factory was producing at 40 percent of capacity but that has dropped to 20 percent.

Comprehensive approach urged

To revive the garment industry, Brooks said, more comprehensive action than the ban must be taken.

These include improvements in transportation and power supplies to stabilize the distribution system as well as tax relief for factories and support for the sustainability of east Africa’s cotton sector.

“A revitalized local market would ultimately boost the (regional) economy by providing more jobs than the second-hand sector while retaining money that currently goes to Europe and the U.S. to pay for second-hand imports,” Brooks said.

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Why Tunisia Believes Exports May Ignite Recovery

16 May 2016 Comments (0) Business, Featured, Middle East

tunis

Due to political instability and terrorism, Tunisia has been struggling economically. Could exports be the solution?

Tunisia’s economy had been in a fragile condition for many years. Still reeling from the global financial crisis, the Arab Spring uprisings left Tunisia and many other North African economies stagnant as a result of the regional instability. The problem was further compounded by risk adverse foreign investors, who came to view countries in the region as unattractive prospects.

Then came the terrible terrorist incidents of 2015. The attacks were designed to undermine the Tunisian economy, and they were successful in doing so. The portents were dire for a country in which tourism accounted for 14.9% of GDP in 2014, whilst employing approximately 12% of the working population.

Exports as the answer

A full-on financial crisis was fortuitously averted by the slump in global oil prices, combined with a good year for Tunisian exports of olive oil. Olive oil production on the European continent was hampered by a historically poor harvest in 2015. Yet Tunisia enjoyed record harvests, which enabled the beleaguered nation to quadruple its export revenues of olive oil from US$ 250 million in 2014 to in excess of US$ 1 billion in 2015. These factors have helped Tunisia narrowly avoid the fiscal brink; additionally they have illuminated a potential escape route from the economic wilderness.

The boom of last year’s olive oil season has set events into motion, as Tunisia can ill afford to let such a success become a one-off. Fortunately the EU has realized this, and in an effort to assist Tunisia they doubled the country’s olive oil export quota back in September 2015. If high production can be maintained, Tunisia can become a perennial player in this area. However, in a microcosm that reflects the overall Tunisian economy, Tunisian olive oil products are exported in their most basic and least valuable form. Value and jobs can be added by exporting refined, branded bottles as opposed to the current situation: exporting raw olive oil that is refined and branded by Spanish or Italian firms.

Transitioning to the exportation of more diversified and sophisticated products is something that would benefit other sectors within Tunisia. As an example Tunisia currently exports crude oil. However efforts are being made to finance and build the necessary facilities that will allow for the exportation of refined oil products. As with olive oil, this will create jobs and generate more revenue from the countries resources.

What needs to be done

At a recent conference to discuss the promotion of Tunisian exports, the President of the Tunisian Confederation of Industry Trade and Handicrafts, Wided Bouchamaoui, highlighted the value that an increased focus on exportation would bring to the economy: “Tunisia could raise the value of its annual exports to 100 billion dinars in the next decade.”

However, if such targets are to be achieved, continued oversight will be needed. Due to government intervention, the Tunisian dinar has been overvalued for many years, subsequently hampering exportation as Tunisian goods have been comparatively expensive. In an attempt to remedy the situation the Tunisian Central Bank has allowed the Dinar to depreciate in a controlled fashion. Despite this, the currency is still overvalued by as much as 15% according to some analysts. Further controlled depreciation is an ugly necessity, should Tunisia want its goods priced properly on the international market. This would serve as the catalyst to stimulate Tunisian exports and help reduce the trade deficit (US$ 6.6 billion).

The painful fallout from this policy is that for ordinary citizens their savings have lost value and their buying power has been reduced. The government finds itself in a precarious, high stakes situation: risk social unrest by allowing the currency to slide further, or hamstring the export-led recovery by giving in to public pressure.

Additionally, Tunisia has a major problem with illegal cross border imports and exports, a legacy from the Zine El Abidine Ben Ali regime. These activities undermine the country’s legitimate export enterprises, discourage foreign investors and deprive the state of taxable revenues. Whilst the current government has taken some steps to eradicate these practices, more must be done to legitimize all cross border trade.

If managed correctly, the export industry can be used as a major weapon in the Tunisian economic recovery. The benefits are numerous: exports can generate much needed revenue for the nation, tackle high unemployment, rebalance the trade deficit, generate new industries and encourage long-absent foreign investment in the country.

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Mauritania, Senegal seek to become oil, gas exporters

16 May 2016 Comments (0) Africa, Business, Featured

senegal gas

The two West African countries bet on a long-term recovery as global fuel prices slump.

In spite of the slumping price of oil in the past year, two West African countries are betting on a long term recovery as they race to produce enough oil and gas to become exporters by 2020.

Mauritania and Senegal both report promising off shore oil discoveries and each nation plans to proceed with multi-billion dollar extraction projects.

However, David Thomson, an analyst with Wood Mackenzie cautioned that securing financing for the projects could be challenging and take time. “These projects are massive and they’re very capital intensive,” Thomson said.

Offshore wells promising

In Senegalese waters, Cairn Energy reported that it had drilled three wells that revealed significant amounts of oil off Africa’s western extremity. Drilling was planned at a fourth, according to the Scottish energy company’s chief executive, Simon Thomson.

The United States company Kosmos Energy said it had confirmed a large pool of natural gas that straddled the Mauritanian-Senegalese border at sea and it planned to drill in the area.

The projected yield is 20 trillion cubic feet of natural gas, an encouraging threshold for further drilling, Kosmos spokesman Thomas Golembeski said.

Other African nations wait

The Senegalese and Mauritanian plans contrast with other nations such as Tanzania and Kenya, which are delaying tapping similar resources until the economic climate improves.

Nadine Kone of Oxfam International questioned the wisdom of Senegal’s and Mauritania’s plans. “Why rush with oil given where prices are now?” Kone asked.

After increasing by 20 percent in April, global oil prices fell in early May to below $45 a barrel and experts predicted weakened demand.

Senegal oil

Producers see increase in demand

Golembeski said the Kosmos thinks demand will have increased by the time the gas site is ready to deliver. He cited the ease of shipping to Europe as an advantage for exports from the region.

“Demand for oil and gas will continue to increase over time as more and more people around the world move from rural areas into the cities and want the conveniences of modern life,” he said.

Both countries have enjoyed steady economic growth in the past five years.

With a population of 3.6 million and a gross domestic product of $15.5 billion, Mauritania has seen sustained economic growth, primarily as a result of growth of the mining industry. The country is Africa’s second leading exporter of iron ore and also exports gold and copper.

According to the Heritage Foundation, the nation’s gross domestic product saw a growth rate of more than 5 percent on average during the past five years.

Senegal’s economy has grown at an average annual rate of 3.5 percent in the past five years, the foundation said, but volatility of economic growth has undermined progress in social development and fighting poverty. The nation has a population of 14.5 million and a gross domestic product totaling $33.6 billion. Senegal is primarily rural and has historically had few natural resources, relying instead on agricultural exports.

In 2015, with a growth rate of 6.5 percent, Senegal was the continent’s second fastest growing economy. Services, chemical production and construction drove growth.

Questions about oil proceeds

Kone of Oxfam questioned whether the five-year window the energy companies are projecting from exploration to sale is enough time to create a legal framework to regulate the governments’ use of proceeds from their 10 percent shares in projects within their boundaries.

Despite economic growth, both countries suffer from youth unemployment and chronic poverty and many residents do not have access to housing, health services, education or even clean water.

Kone cited Ghana, which discovered oil in 2007, as a model in the region that Mauritania and Senegal might emulate. Ghana created a dedicated fund from the proceeds that it used to invest in priority areas such as education and agriculture.

A contrasting example is Nigeria, where the state-run oil agency withheld billions of dollars funds that were designated for government services. Nigeria derives about 70 percent of its revenue and is Africa’s top producer of crude oil.

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