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Kenya, Senegal join effort to fight tax evasion

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Kenya signs the Convention on Mutual Administrative Assistance in Tax Matters

Twelve African countries sign multilateral agreement to counter tax abuse, which costs the continent an estimated $50 billion annually.

Kenya and Senegal have joined 10 other African countries in signing an international agreement designed to reduce tax evasion.

The multilateral convention enables cooperation among nations, including exchange of information about tax evaders and assistance in collecting taxes from them.

African nations lose an estimated $50 billion per year to illegal financial transfers, including tax avoidance, according to a 2015 report by the African Union and UN Economic Commission for Africa. In comparison, Africa received about $29 billion in foreign aid in 2013.

The tax evasion problem is particularly acute for poorer countries that do not have tools to fight sophisticated schemes by large multinational companies. The report and aid groups have noted that these billions of dollars might otherwise be used to develop services and infrastructure on the continent.

Multinational companies blamed

“Africa is hemorrhaging billions of dollars because multinational companies are cheating African governments out of vital revenues by not paying their fair share in taxes. If this tax revenue were invested in education and health care, societies and economies would further flourish,” said Winnie Byanyima, executive director of Oxfam International.

The Multilateral Convention on Mutual Administrative Assistance in Tax Matters is one tool to fight large-scale tax evasions. It was developed by the Council of Europe and the Organization for Economic Cooperation and Development in 1988 and updated in 2010.

Parties to the agreement cooperate by providing financial information to other party countries on request, performing tax examinations and assisting with recovery of tax dollars.

Twelve African nations sign agreement

Kenya and Senegal signed the agreement in February. Other African parties to the convention are Morocco, Gabon, Cameroon, Mauritius, Uganda, Ghana, Nigeria, South Africa, Tunisia and Seychelles. Globally, a total of 94 countries have signed the convention.

Kenya also recently passed a law that prevents companies from using a common tax-avoidance practice called “transfer pricing” or “trade mispricing.”

Using this practice, companies allocate their costs to subsidiaries in high-tax jurisdictions in order to pay most of their taxes at the lower rate while moving their profits to jurisdictions where they pay little or no tax.

For example, the African Union study described a South African case in which a multinational corporation claimed that a large part of its business was located in the United Kingdom and Switzerland, with relatively low tax rates.

On investigation, South African officials found the European branches had only a few staff while the company conducted most of its business in South Africa. The scheme had enabled the company to avoid $2 billion in taxes, which the South African government reclaimed.

Invoices misstate value

Other practices are “under-invoicing” or declaring a low value on exports to minimize profits on paper and “over-invoicing” by declaring a high cost on imports.

For example, Mozambique records showed an export of 260,385 cubic meters of timber was exported to China in 2012 while records in China show 450,000 cubic meters were imported from Mozambique that year, according to the report.

Another study, by Global Financial Integrity (GFI), found high rates of over and under-invoicing in Kenya, Ghana, Mozambique, Tanzania and Uganda in the decade leading up to 2011.

Kenya, Tanzania see high losses

GFI said Kenya had an estimated $10 billion and Uganda $813 million in under-invoicing. At the same time, Tanzania had $10 billion to over-invoicing. Ghana had more than $14 million for the decade in misstated invoices and Mozambique more than $5 million.

The African Union report said illicit financial outflows from Africa have more than doubled since 2001, from $20 billion to the current $50 billion. The report said African nations lost about $850 billion to illegal transfers between 1970 and 2008, including $218 billion from Nigeria, $105 billion from Egypt and $82 billion from South Africa.

The report said mispricing occurs in a number of sectors, including mineral production in the Democratic Republic of the Congo and South Africa, crude oil exports from Nigeria, and timber sales from Mozambique and Liberia.

Corporations, organized crime cited

Thabo Mbeki, the former president of South Africa who chaired that panel that produced the report said large corporations were the main tax abusers aided by corrupt officials and weak governance.

“The information available to us has convinced our panel that large commercial corporations are the biggest culprits of illicit outflows, followed by organized crime,” Mbeki said.

African and non-African governments as well as oil, mining, banking, legal and accounting firms were involved in tax avoidance schemes, according to the study.

It found that 38 percent of the outflows from the continent originated in West African and 28 percent in North Africa. Southern, Central and East Africa each accounted for about 10 percent.

While significant to the continent, Africa’s losses are a small share of the illicit outflows globally, about six percent of an estimated $1 trillion between 2007 and 2009.

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Tunisia seeks to improve appeal to foreign investors

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tunis

A proposed investment code offers incentives to investment as the country aims to double investment to $2.5 billion by 2020.

Tunisian government officials hope to speed up implementation of a code that the North African nation hopes will make it more attractive to desperately needed foreign investment.

As its economy struggles in the aftermath of the 2011 revolution, Tunisia hopes to double foreign investment to $2.5 billion by 2020.

The Tunisian cabinet recommended hastening adoption of an investment code in February following protests a month earlier over high unemployment that included clashes with police in several towns and the capital of Tunis.

The protests were a grim reminder to the government that poor economic conditions, including high unemployment, prompted demonstrations that ended the 23-year presidency of Zine El Abidine Ben Ali during the 2011 revolution in Tunisia.

Incentives, smooth path for investment

The proposed investment code, which must be approved by the Tunisian parliament, is designed to clear administrative obstacles by creating an agency to smooth the way for companies to invest within the country, according to Yassine Brahim, Tunisian minister of development, investment and international cooperation.

The code will include financial incentives for investors, especially companies that intend to export from Tunisia and those that invest in poorer interior sections of the country.

It also will give international investors more flexibility to transfer funds out of the country, Brahim said.

Tax exemptions offered

Yassine Brahim

Yassine Brahim, Tunisian minister of development, investment and international cooperation.

Tunisia already offers significant incentives to potential investors, including a 10-year tax exemption, and, in some locations, state subsidies. The government also created industrial zones and promised significant investments in improving roads and other infrastructure.

The investment is sorely needed as the country struggles with an overall unemployment rate of 15 percent and a rate of 32 percent among college graduates. The country’s economy in 2015 grew by less than 0.3 percent.

Tunisia is generally seen as the one success story from Arab Spring, which also saw violent revolts in nearby Egypt and Libya.

However, Tunisia has struggled to form a government and improve its economy.

Civil unrest returns amid high unemployment

In January, economic conditions and regional inequalities prompted the worst civil unrest in the country since the 2011 revolution.

Protest that began in Kasserine in the central part of the country spread to several other towns and to Tunis, where shops were looted and burned. Frustrations ran highest in marginalized rural areas and in poor urban districts of the capital.

Tunisia also lost about a third of its tourism revenues in 2015 after two Islamic State attacks killed 59 foreign tourists.

Government proposes bond issue

In February, the government announced that it was preparing a bond issue of up to one billion euros to cover a budget deficit stemming from losses from January’s unrest.

Violence and unrest has kept investors away. An estimated 300 investors have left the country since 2011.

For example, one Bahraini official recently told Tunisian President Béji Caied Essebsi that Bahraini business leaders are interested in investing in the country and a delegation would visit from Bahrain.

However, Khaled Abderrahmen Al Moyed, president of the Bahraini Chamber of Industry and Commerce, also said the business leaders would require “sufficient guarantees” of success to launch projects in Tunisia.

Location, workforce are positives

The primary investment sectors in Tunisia are textiles, energy, computer science, corporate services and energy. The largest sources of investment are France, Austria, Canada and the United Kingdom.

An analysis by Santander Bank cited positives about investing in Tunisia, including its strategic location on the Mediterranean, proximity to major European capitals, a well developed social system, qualified workforce, competitive salary levels, and the increasing diversification of it economy. The main negative, Santander said, is a cumbersome Tunisian bureaucracy.

Brahim, the investment minister said Tunisia hopes to attract $1.4 billion in investment this year, an increase of 12 percent from $1.25 billion invested in 2015, with a goal of $2.5 billion by 2020.

That compares with investment of $2.2 billion in 2010, the year before the revolution.

Joblessness sparks unrest, support for IS

Despite Tunisia’s difficulties, foreign investment has been increasing in recent years.

In 2015, investment increased by 21 percent compared to 2014, which saw a 19 percent increase over 2014.

That growth hasn’t translated into enough jobs.

The economic conditions are believed to be driving many Tunisians into the ranks of Islamic State and other militant groups. An estimated 3,000 Tunisians are fighting in militant Islamic groups in Iraq, Syria and Libya.

Aymen Abderrahman, 28, a Tunis-based activist, said that “frustration and total despair” drove the January protests.

The unemployed who are living in the same conditions as before 2011 “are seeing a spark to bring back to life the revolutionary past,” he said.

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6 African, Middle East startups in global competition

Comments (0) Africa, Business, Featured, Middle East

New ventures from South Africa, Morocco, Sudan, Saudi Arabia and Egypt will compete in the Get in the Ring final in March.

Six startups from Africa and the Middle East will compete in the world finals of Get in the Ring, a global competition that helps raise the visibility of new ventures and connects them with potential investors.

The six startups representing South Africa, Morocco, Sudan, Saudi Arabia and Egypt include delivery services, mobile applications and energy developers. They will compete in the Get in the Ring world final in Medellin, Columbia in March.

Get in the Ring is one of the world’s largest competitions for startups.

Contestants face off in a boxing ring to deliver 30-second pitches for their product or service and they are judged by investors and other experts. They are scored based on their business model and potential market, their team, their achievements and their financials.

Two South African startups win regional

Winners for the sub-Saharan region are two South African startups, Newtech Rail and iMORPH3D.

Newtech Rail has developed technology for railway overhead infrastructure. Jan Jooste, a South African industrial engineer and director of innovation at Vaal University of Technology, launched the startup in 2015.

iMORPH3D is a mobile application that enables users to create anamorphic 3D illusions. Android and Apple versions are available for download. It is a product of Adfire Creative M3dia.

Morocco, Sudan among winners

In the North African regional competition, held in Casablanca, Moroccan startup LIK and a Sudanese startup SmartDelivery emerged as the winners.

LIK from Morocco is a mobile application that gives users free phone credits in exchange for agreeing to display advertising on their smart phones when they receive calls. The ads are location-based and contextual based on age, gender, and language. Launched late last year, the app already has more than 100,000 users.

LIK at Level Up Competition

LIK at Level Up Competition

LIK found that its users were seeing advertising everywhere but were not realizing any benefit from viewing the ads. “With LIK, they can finally benefit,” Ismail Bargach said. He co-founded LIK with Omar Kadiri, and Yassine Faddani. The startup also won the Level Up Morocco competition last year in Casablanca.

The Sudanese startup SmartDelivery lets customers order fresh vegetables, fruit and meat via an app and it provides free delivery. It is able to charge lower prices because it buys directly from farmers and eliminates the middlemen. According to the company, the app enables efficient communication on customer orders.

Middle East winners

Vanoman from Saudi Arabia and SolarizEgypt won the Middle East regional competition.

Vanoman is a platform to connect truck drivers in Saudi Arabia with customers who want furniture transported. Fadi Almaghrabi, its CEO, represented the company.

SolarizEgypt designs and installs grid-connected PV solar power plants as a supplement for conventional types of power for industrial, commercial and residential customers. The company was launched by a group of graduates of the American University in Cairo.

Participants pitch their ventures

Get in the Ring brings entrepreneurs together to compete in local, national and regional competitions that winnow the field for the world finals, where they compete for funding of up to one million euros and investment dollars.

Along the way, participants received expert advice, coaching on their pitches and the opportunity to meet investors and develop a fan base.

“This event is not just about pitching for funding. It is also about pitching for attention’’ according to Brian Walsh, founder and chief executive officer of The REAL Success Network, one of the partners for the event. Walsh said the multiple rounds of competition expose them to thousands of potential funders and supporters.

Steven Cohen, head of event co-sponsor Sage One International, said Get in the Ring “is helping to encourage excellence and innovation among local businesses, and to provide role models and inspiration for the entrepreneurs of the future.”

In 2014, the South African startup GoMetro was a runner-up in the global finals.

Get in the Ring began in 2012 in the Netherlands and has grown rapidly into a major global event. Get in the Ring competitions are now held in more than 60 countries. Between 2012 and 2014, more than 3,000 startups participated.

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African tourism declines by 3 percent in 2015

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The number of tourist visits to North Africa drops eight percent while sub-Saharan Africa sees a one percent decline.

International tourist arrivals in Africa declined by three percent in 2015 but experts predict a revival this year.

The overall decline of arrivals on the continent was fueled by a drop of eight percent in North Africa, which accounts for about one third of all arrivals, according to the United Nations World Tourism Organization (WTO).

In sub-Saharan Africa, the decline for the year was only one percent and travel began to increase in the second half of the year.

The tourism organization said there were a total of 53 million tourist arrivals on the continent in 2015.

Global travel increased

The decline contrasts with other regions of the world that saw increases in international arrivals, including Europe, Asia and the Americas, which each rose by five percent, and the Middle East, which saw a gain of three percent after experiencing declines for years prior to 2014.

The drop in travel to Africa ended more than a decade of increases in tourist travel to the continent.

WTO Secretary-General Taleb Rifai predicted the number of arrivals this year will increase by two to five percent, driven by a rise in tourism. He said experts expect tourism to more than double to about 130 million arrivals per year by 2030.

One reason for optimism is that more visitors are coming from emerging economies in Asia and in Central and Eastern Europe. At the same time, fewer travelers are coming from China as its economy struggles.

Continent offers diverse attractions

Popular African attractions include the wildlife of Masai Mara in Kenya, Victoria Falls in Zimbabwe and Zambia, the pyramids of Egypt, Cape Town in South Africa, Marrakech in Morocco, the Omo River region of Ethiopia, the gorillas of the Virunga Mountains in Uganda, Rwanda and the Democtratic Republic of Congo, and Mount Kilimanjaro in Tanzania.

According to the African Development Bank, Morocco, Egypt, South Africa, Tunisia and Zimbabwe were the African countries with the most international visitors in 2014. It predicted that Algeria, Mozambique and Kenya soon would join the ranks of the most visited nations.

The report (pdf) estimated that there were a total of 65 million international arrivals in 2014. About half came from Europe, a total of 582 million travelers. Another 24 percent come from the Asia-Pacific region (263 million); 11 percent from North America (120 million). Smaller percentages come from Latin America, Africa and the Middle East.

In Egypt, 1.3 million tourism jobs

Egypt has the most direct employment in tourism at 1.3 million jobs, followed by Ethiopia with 980 million, Nigeria with 884 million, Morocco with 775 million and South Africa with 680 million.

The countries with the largest share of employment devoted directly to tourism are: Seychelles (24 percent), Cabo Verde (14 percent), Mauritius (11 percent), and Morocco and Tunisia (7 percent each).

The World Travel and Tourism Council estimates that travel and tourism and travel represents more than 8 percent of the gross domestic product of Africa and contributed about three percent of employment in hotels, airlines and other passenger transportation, as well as travel agents, restaurants and leisure industries.

Tiny share of global market

Africa holds a small share of the global market. Africa had 65.3 million arrivals in 2014, just fewer than 6 percent of the 1.1 billion tourist arrivals reported worldwide, the tourism monitor report said. Africa received a total of $43.6 billion in tourism revenue, about 3.5 percent of the global total.

While tourism in Africa was rising steadily until 2015, myriad challenges including lack of high airline prices, convenient transport, security concerns, threats to wildlife and lack of cooperation between nations, may be holding it back from even greater growth.

In North Africa, terror and civil strife sharply reduced the flow of tourists, while violence and the Ebola crisis scared many tourists away from the southern continent.

Security fears undermine tourism

Among major destinations, Kenya, Nigeria, Tunisia and Egypt have seen their tourism industries battered by security fears.

South Africa, Nigeria, Ghana and Uganda also saw significant drops in travel, according to one estimate.

The tiny West African country Mali has seen its tourist business collapse amid ongoing terrorist attacks and anti-government unrest.

From a peak of 200,000 visitors a year in 2011, Mali’s tourist trade has slowed to a trickle of a few thousands as numerous governments, including the United States, Britain, France and Australia, have issued travel warnings.

High number of travel warnings

Travel warnings can be a deterrent to tourism and Africa has seen a large share issued by the U.S. State Department. A 2015 analysis by Skift of 261 travel alerts issued or updated since 1996, found that 30 of 82 countries that had notifications were in Africa.

Algeria, Burundi and Congo, along with Afghanistan, had the most frequent updates.

Meanwhile, the African Union’s commissioner for transport and infrastructure recently urged representatives of African nations to adopt a more collaborative approach to increasing tourism to the continent.

“We can complement each other as African countries. We should work together to develop our institutional capacity and human resources to take it on the international level. So this is one of the areas we need to work on,” Elham Mahmoud Ahmed Ibrahim said.

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Sugar Refining in the Middle East Faces a Squeeze

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Al Khaleej Sugar

Middle Eastern sugar refining faces a squeeze as global demand and prices drop, and production capacity across the region rises

The UAE’s Al Khaleej sugar refinery sells to ICE Futures Europe

The expansion of Middle Eastern sugar refining has pushed one of the region’s leading producers to sell through the London Investment exchange, the first time a company from the region has done so in a decade. In a deal worth around $200 million, UAE-based Al Khaleej Sugar Company delivered just over 200,000 metric tons of white sweetener to ICE Futures Europe, which was bought in full by ED&F Man Holdings. But the move signals a difficult time for sugar refining in the Middle East.

Al Khaleej, which refines, produces, and distributes refined and raw sugar and sugar syrup, was founded in 1992, and was one of the first home-grown sugar refineries to see success in the Middle East. Importing raw sugar from Brazil and India, it has an annual output of around 1.8 million tons, and is one of the world’s largest sugar refiners. Although it may seem odd that one of the world’s leading sugar refineries is based in a region without the correct weather to produce its own sugar, the World Trade Organization’s decision to cap exports from the European Union in 2006, formerly the largest exporter of white sugar to the MENA region, left a huge gap in the market.

However, a decade later sugar prices have dropped, and there is a global sugar surplus, while consumer demand is weak. Al Khaleej’s rare move to sell through the ICE – at a time when it is operating at 70% capacity, well below its production capacity of around 2.5 million tons per year – has only underscored these concerns. As analysts comment, the London exchange is seen as a last resort buyer, signaling that there is not much of a market. Al Khaleej has said that where last year’s weak demand was compensated by high sugar premiums, the company is looking to 2016 with some trepidation.

Sugar refining capacity expands in Middle East

The choice to sell outside of the MENA physical market also highlights the excess refining capacity of the region itself. Inspired in part by the success of Al Khaleej during the 2000s, a significant number of new refineries have come onstream in recent years, notably in Saudi Arabia, Iraq, Sudan, Yemen, and Bahrain (which has the $150 million Arabian Sugar Company which produces 600,000 metric tons per year). The MENA region’s refining production is around 8.5 million tons, although its total capacity stands at around 13.5 million tons, and consumption is around 12-15 million tons.

Between 2016 and 2018, that capacity is expected to increase by around 4.7 million tons thanks to a stream of projects which were planned and approved before demand dropped. A new Al Reef Sugar Refinery is due to start operations in Jizan, Saudi Arabia by the end of 2017, with a planned refining capacity of 1 million tons annually. It also has plans to acquire land in East Africa to grow its own cane sugar crop in the long term. A second refinery in Saudi Arabia, the Durrah refinery, is also under construction, with a planned refining capacity of 750,000 tons.

Further refineries are also in development across the Middle East, including in Oman, where work on the Sultanate’s first ever sugar refinery, the $250 million Oman Sugar Refinery Company, has commenced, and in Algeria, where production has just started at a new refinery with a capacity of 350,000 tons per year. That figure will increase to 700,000 tons annually over this year to serve the domestic Algerian market which consumes 1.2 million tons a year. Bahrain, Yemen, and Iraq have also expanded their sugar refining capabilities in recent years.

Production outstripping demand

However, it is feared that this significant expansion will create a production capacity far in excess of forecast consumption. Indeed, it is estimated that processing capacity in the region will be producing a 6.1 million ton surplus by 2018.

In Saudi Arabia white sugar consumption is around 1.2 million tons annually, a figure already matched by the Saudi refinery, United Sugar Company (a subsidiary of the Savola Group). The two further refineries currently under development in the Kingdom will push production capacity to saturation, especially considering that United is already operating at a loss and has plans to expand its annual capacity by 500,000 tons by 2017. Similarly in Oman, a new refinery with a planned annual capacity of 700,000 tons seems unnecessary in a country that consumes only 100,000 tons a year. Like Iraq, many countries across the Middle East are now self-sufficient. So as raw sugar futures drop to a three and a half year low, Middle Eastern sugar refining should be expecting a squeeze.

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Bank Turned Think Tank: Attijariwafa’s Newest Foray

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Attijariwafa-Bank

The African Development Club, launched in February by banking giant Attijariwafa, promises to be an exclusive club providing members with access to a platform connecting developers and investors.

Morocco’s largest bank, Attijariwafa, has recently announced a new development forum called the African Development Club. This club was created by the Casablanca-based institution to provide developers and investors with a platform for meetings and exchanges across the continent. Since January 25th, representatives from Africa’s biggest banks have crisscrossed the continent, presenting this new initiative to the leaders of Africa’s most substantial companies. Attijariwafa Bank is the largest bank on the continent in terms of branches: 3,400 outlets across the continent. The bank is often recognized for its ability to connect Morocco with greater Sub-Saharan Africa through trade relations. It is for this reason that Attijariwafa was able to create its own think tank.

Going Their Own Way

Attijariwafa Bank is more than 100 years old, has more than 6.8 million customers and employs more than 16,000 Africans across the continent. As part of the King of Morocco’s holding company, Attijariwafa has unprecedented access to Moroccan business opportunities–which is why Attijariwafa was so well equipped to launch this exclusive development group.

At the 2015 African Development Forum, hosted by Attijariwara Bank, Mohamed Kettani said that “South-South cooperation is vital. So we must create larger, cross-frontier trading spaces. We have to make the most of the mutualization and the complementarity of our resources and our economies. But we can’t do it without the North, because today in Morocco we are meeting international investors, from Europe, the US, and Asia, who are making Morocco a platform where part of the value is created in Morocco, another part in the North, and a third part in the countries south of Morocco.” Instead of waiting for change to happen, Kettani took matters into Attijariwara’s capable hands.

In December of 2015, the African Development Club was launched: Kettani promoted it as “an open African community whose purpose is to build an inter-priority network of decision makers and economic operators, development opportunities generator and reflections on trade and investment on the continent.” By creating a network of businesses, Attijariwafa is doing what many believe African governments have failed to do in the past: inspire real development through cross-continental economic ties, unhindered by the weight of political relationships. Perhaps unsurprisingly for a club developed by a financial institution, this club will only be open to those willing to pay.

Getting Down to Business

Attijariwafa Presences

Attijariwafa Presences

Mounir Oudghiri, director and general manager of Attijariwafa’s Senegalese subsidiary, explained the African Development Club as “a kind of Bluetooth, a private network open to those who want to be a part. This is an accelerator and integrator of mastering the best information possible to speed up the business.” The club gives access to more than 30,000 of Africa’s most influential business people. Not only will this group make use of its existing strengths, but it aims to provide vocational training for emerging business experts. Attijariwafa Bank prides itself upon its educational opportunities for its thousands of employees. As a self-designated pan-African bank, ensuring that all employees, from all backgrounds and regions, are up to par with their international counterparts is of the utmost importance. It stands to reason that Attijariwafa would similarly emphasize the importance of capacity building between and amongst club members.

The club will also provide its members with a database of potential connections in more than 180 countries and is primarily aimed at business leaders, the influential and the wealthy both inside and outside of Africa. Attijariwafa has strategic partnerships with several Chinese banks, and as China’s investment in Africa grows, this can only be a promising region of investment for the business savvy. By working across state borders to forge economic ties, members of the African Development Group will be able to draw upon the experience and various fields of expertise of their peers, thus giving way to a rich business environment.

Will it Work?

There are, of course, a variety of potential flaws to this plan: by requiring members to pay a fee to belong, budding entrepreneurs without the capital to cover the costs will be excluded. This threatens to widen the income gap between the wealthy elite, who will be members and thus have access to an enormous number of important individuals and businesses, and small businesses that have thus far been excluded from development. If the members of the African Development Club choose to invest in their communities–be it through a micro-lending program, infrastructure development or encouraging young people to stay in school with vocational training incentives–then this club could very well change the face of development in Africa.

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Will Djibouti become the Singapore of Africa?

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Ismail Omar Guelleh

The tiny country on the Horn of Africa hopes to use its strategic location to boost trade and diversify its economy.

The tiny nation of Djibouti has set its sights on becoming the Singapore of Africa, a trade hub that takes advantage of its location on one of the world’s busiest shipping routes.

China’s recently announced plans to build a naval base in the Horn of Africa country gave a boost to Djibouti’s ambitions. Other plans, with a price tag of $12.4 billion, include expansion of port facilities, two new airports, as well as a $4 billion rail link with Ethiopia, Djibouti’s land-locked neighbor.

“We want to follow the path of Singapore,” Dijbouti president Ismail Omar Guelleh said.

China provides significant assistance

China is playing a significant role in Djibouti’s development as the Asian nation seeks to expand its influence in the region and secure trade routes with its “One Belt, One Road” initiative. Chian is financing most of the $12.4 billion in improvements as well as the $4 billion rail link with Ethiopia.

Work is expected to start soon on the Chinese naval base, which will be located at the new multi-purpose port of Doraleh.

The two countries have agreed to a 10-year lease for the base with China paying rent of $100 million per year. The base will house about 10,000 Chinese troops and is expected to boost local employment and businesses.

The United States and France already maintain naval bases in Djibouti.

Djibouti’s plans call for development of a second port, also at Doraleh, designed to handle container shipments.

Two new airports will be built

China is also providing support for two new airports Djibouti is building at a cost of nearly $600 million. With these projects, Djibouti hopes to increase both cargo shipping and tourism, which makes up a small part of its economy.

One airport at Ali-Sabieh, south of the capital will be capable of serving 1.5 million passengers and moving 100,000 tons of air cargo annually. It is expected to begin operating in 2018.

A second, smaller airport will be built in northern Djibouti. Designed to handle more than 750,000 passengers a year, it is expecting to start operating in 2016.

Rail line to link Djibouti, Ethiopia

China also is building a $4 billion railway line that will link Djibouti with Ethiopia, one of the fastest growing economies globally, which gets about 90 percent of its imports through Djibouti. The rail line will give land-locked Ethiopia a link to the sea while Djibouti will gain access to a market of 95 million people.

Djibouti, one of the poorest countries on the continent, envisions becoming a middle-class country in two decades in its “Djibouti Vision 2035” blueprint drafted with the help of the World Bank.

Ports and trade are already at the center of Djibouti’s economy but the nation hopes to diversify.

More than two thirds of Djibouti’s gross domestic product comes from the services, primarily port and trade-related operations. The remainder is from manufacturing and agriculture. Poverty is prevalent and unemployment is 60 percent in urban areas. The literacy rate is 70 percent.

Seeking economic diversification

Djibouti seeks to further diversify its economy by becoming a regional financial hub for foreign investment, including Islamic banks. China and Djibouti also signed deals for banking and free trade zones.

“Nowadays we are shifting to a much more integrated development plan. We’re trying to diversify our economy,” Djibouti finance minister Ilyas Dawaleh said.

Dawaleh noted that his country has enjoyed strong economic growth in recent years – 6.5 percent of gross domestic product in 2015 and 5.7 percent in 2014.

He predicted Djibouti will achieve double-digit annual growth in the next three years. “This is our target with our diversification strategy we are undertaking now,” he said.

Dijbouti is one of four countries that make up the Horn of Africa and the only one that has been largely peaceful for the past two decades while its neighbors across the Gulf of Aden – Somalia, Eritrea, and Yemen, have endured conflicts. This has enabled Djibouti to emerge as the main military and maritime hub in the troubled region even though the country is largely undeveloped.

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Morocco’s first solar power plant opened by King Mohammed VI

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Ouarzazate solar

King Mohammed VI switches on Morocco’s first solar power plant that is set to provide over a million homes with power.

The edge of the Sahara desert, just 12 miles outside of the city Ouarzazate is now home to a glittering spectacle that is set to be the world’s largest solar power plant.

After beginning construction on May 10th, 2013 the project has succeeded in completing stage one of its epic operations. Covering a spans the size of 35 football fields, the 800 rows of 500,000 crescent-shaped solar mirrors make up Noor I. This is the first of a complex of four linked solar power plants that once completed in 2018, will finally occupy a site larger than the country’s capital, Rabat, which is home to 1.4 million people.

Instead of utilizing the more familiar photovoltaic panels that are now a common sight on rooftops around the world, ‘the door of the desert’ site uses mirror technology which despite being less common and more expensive, has the advantage of continuously producing power even after the sun has gone down.

As NASA’s Kathryn Hansen explained, “The system at Ouarzazate uses 12 meter-tall (39 foot-tall) parabolic mirrors to focus energy onto a fluid-filled pipeline. The pipeline’s hot fluid is the heat source used to warm the water and make steam. The plant doesn’t stop delivering energy at night time or when clouds obscure the sun; heat from the fluid can be stored in a tank of molten salts.”

Royal inauguration

ouarzazateOn Thursday 4th February, 2016 the plant welcomed royal guest King Mohammed VI to inaugurate the countries first ever solar power plant. The ceremony was attended by the head of government, members of the government and foreign officials, including French Environment Minister Ségolène Royal who said it inspired, “great hope to all countries with a lot of sun and desert” to produce solar energy.

As the opening took place construction works commenced on the plants Noor II and Noor III sites, while for Noor IV, a call for tenders was opened. Once completed the full complex is expected to provide 1.1 million homes with power.

The king is said to be confident in the immense capacity his country has to offer renewable energies, from the Atlantic wind to the Saharan sun.

Solar superpower

It is hoped that for a country who has no claim to fossil fuel, this will be its opportunity to become self-sufficient. Additionally it plans to enter onto an international platform, providing fuel for countries worldwide. No small fry for a country that has been the biggest importer of fuel in North Africa, the venture will bring both economic and geopolitical value.

As Morocco’s Minister of the Environment Hakima el-Haite recently highlighted, “We are not an oil producing country. We import 94% of our energy, which has serious consequences for our state budget. We also have the weight of fossil fuel subsidies, so when we heard about the potential of solar power, we thought, why not?”

The country has pledged that 42% of its electricity will come from renewable energy by 2020. By 2030 they vow to have decreased their CO2 emissions by 32%, a commitment made as part of the climate conference in Paris (COP 21) that Morocco is determined to honor.

Raising the bar

As the official hosts of this year’s COP 22, Morocco is setting a precedent with the huge investment into renewable energy. However, they are by no means new to the fight against climate change. In fact since the 1960’s Morocco has shown a firm dedication to protecting the planet with a dams, agriculture and water strategy, followed more recently in 2008 by the energy strategy.

By investing in what it has, Morocco is investing in the future of its people and more far reaching, in the future of the planet. The added bonus being that by extricating itself from major financial outgoings it allows money to remain within the country and the possibility of exporting becomes very real, as more and more countries look for alternatives to fossil fuels. Could Morocco become one of the world’s biggest suppliers? Only time will tell but one thing is for certain, as Thierry Lepercq, CEO of the Paris-based Solaire Direct, acknowledged, “Solar is a true revolution,” and Morocco is at the forefront of that revolution.

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Growth in African wealth brings more philanthropy

Comments (0) Africa, Featured, Leaders

Mo Ibhrahim Foundation

As the number of millionaires and billionaires on the continent grow, many give back to programs promoting health, education and entrepreneurship.

As the wealth of the continent increases, African philanthropy is on the rise.

For example, Aliko Dangote of Nigeria, the richest person in Africa recently joined with the Bill and Melinda Gates Foundation to pledge $100 million to fight malnutrition in Nigeria.

Dangote has supported programs in education, youth empowerment and health as well as a program that offers micro grants to rural women and young people to help them start businesses.

Now he will help in the battle against malnutrition in his home country, where one in five children are malnourished and one in three suffers from stunted growth – the highest number in Africa.

With a fortune of $17 billion built in cement and sugar manufacturing, Dangote is considered the richest person in Africa.

Philanthropy increasing across Africa

Dangote is not alone in using some of his considerable wealth to help others.

A recent report by UBS and Trust Africa said philanthropy on the continent is on the increase, building on longstanding African traditions of giving back to family and community.

“Over the past ten to fifteen years, there has been phenomenal growth in philanthropic institutions across Africa,” according to the study, “Africa’s Wealthy Give Back” (pdf). “We have begun to see the emergence of more strategic philanthropy,” along with more formal infrastructure for giving, the report said.

The USB-Trust Africa study cited projections by McKinsey Global Institute that gross domestic product in sub-Saharan Africa will grow to $2.6 trillion by 2020. With that will come corresponding increases in the number of wealthy individuals.

Dangote with Bill Clinton

Dangote with Bill Clinton

Growing wealth fuels giving

It said there were nearly 150,000 wealthy people in African in 2013, and the number had increased 3.7 percent over the previous year. At the same time, the total wealth of this group increased by 7.3% to $1.3 trillion.

There are about 25 major foundations on the continent.

Patrice Motsepe, a South African mining tycoon, in 2010 was the first African to sign the Giving Pledge that was started by Bill Gates and Warren Buffet. In 2013, Motsepe donated half his fortune to his own foundation to help those in need. His net worth is estimated at $1.4 billion.

Sudanese billionaire Mohamed Ibrahim’s foundation produces an index of African governance and Ibrahim is known for fighting government corruption on the continent. His Mo Ibrahim foundation also offers scholarship aid to young African leaders. A pioneer of telecoms in Africa with Celtel International, his fortune is estimated at $1.1 billion.

Tony Elumelu, a Nigerian banker, whose foundation is funding 10,000 African startups at a cost of $100 million. The program provides entrepreneurs with $10,000 each, half for training and half to start the business. Elumelu’s goal is to create one million jobs and add up to $10 billion to Africa’s gross domestic product. Elumelu’s net worth is estimated at $700 million

Jim Ovia, the founder of Zenith Bank, one of the largest banks in Nigeria, and of the telecom Visafone, which has three million subscribers, supports technology startups. His wealth is estimated at $550 million.

With a fortune estimated at $450 million, Cyril Ramaphosa, vice president of South Africa, supports South African entrepreneurs through his Shanduka Foundation. His Adopt-a-School Foundation has already built 454 schools.

Philanthropy builds on African tradition

Halima Mahomed, a philanthropy advisor to Trust Africa, said the wealthy Africans are following deeply ingrained traditions of African culture. “Rich or poor, everyone gives in Africa” and the newly wealthy are following that trend, Mahomed said.

Gregorie Muhr, a philanthropy analyst at UBS, said the approach is changing, as the new philanthropists take a more business-like approach to their giving, having seen that millions of dollars previously donated in Africa have not always reached the intended objectives.

The advent of billionaire philanthropists is not unique to Africa. “The trend is global’’ in developing markets where a new class of super rich emerges, according to Jenny Hodgson, executive director of the Global Fund for Community Foundations.

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Egypt will launch the Middle East’s first commodities exchange

Comments (0) Business, Featured, Middle East

egypt exchange

As the nation seeks to become a global trade center for grain, it will open an exchange focused on agricultural products this year.

Egypt plans to launch a commodities exchange focused on agricultural products, the first of its kind in the Middle East as part of the nation’s goal of developing a major trade and processing hub for grain on the Mediterranean coast.

According to Egyptian Minister of Supply Khaled Hanafy, the government plans to begin operating the commodities exchange by the end of this year.

Meanwhile, Hanafy has also been courting international investors for a $2 billion initiative to turn Egypt into a global grain-trading hub.

The Egyptian government wants to make the country a major center for processing and re-exporting wheat, maize, soy, and other commodities. Grain is a significant crop in Egypt but it is also the world’s largest wheat importer.

Development of Damietta as major port

The government is proposing a mega-development in the port of Damietta on the Mediterranean coast, including new piers that could receive giant tankers and ships.

The plan was approved by President Fattah al-Sisi in October and the project is to be finished in two years.

Hanafy cited Egypt’s strategic location with access to markets in Europe, Africa and the Middle East, with 1.6 billion consumers as well as its access to the Suez Canal, as key advantages of the initiative.

Currently, major trade routes for grain are across the Pacific and Atlantic oceans and the western Mediterranean. Major exporters, including Russia and the United States, have direct access to markets in Asia, Latin America and Europe.

Egypt’s proposed hub could also find competition in plans to develop nearby Suez Canal ports such as Djibouti into global trade hubs.

Damietta

Damietta

Egypt seeks investors

Hanafy has met with officials and investors from Russia, the United States of America, the United Arab Emirates, Sudan and Slovenia.

He said the Egyptian government is working in cooperation with the Egyptian Exchange market and the Egyptian Financial Supervisory Authority, the government regulating agency, to launch the commodities exchange.

The commodity exchange will include commodity producers, a spot market for buying and selling securities, and storage and grading hubs.

Farmers can use mobile application

Egyptian farmers will be offered a mobile application that will enable the market to track their output, electronically linking their crops to the exchange, according to Iman al Mutlaq, chief executive of Sigma Investments, which is working on the project.

Mutlaq said it would begin with six agricultural commodities plus oil and gold. She said a small number of commodities would help promote high volumes.

The government is working on guidelines for pricing and products, which will need to be in place before the exchange opens. It also will begin issuing certificates of origin.

Agricultural production needs to increase

The government believes the commodities exchange will boost development of Egypt’s highly fragmented agricultural lands, Hanafy said.

Egypt wants to reduce grain imports while improving domestic production that is approaching $100 million to supply a rapidly growing population.

Egypt increased agricultural production by 20 percent between 2004 and 2014. Sisi recently called for  increased production by 2030 through modernization and support for small farmers.

Lack of silos results in waste

The nation has struggled to make agricultural operations efficient. Lack of modern storage facilities is part of the problem. The country stores much of its wheat in open lots, causing an estimated loss of 30 percent. The United Arab Emirates recently agreed to provide funding to Egypt for two dozen silos.

Limited land available for agriculture is another challenge. Only about three percent of the land in the country is suitable for agriculture.

Agriculture experts say in the future, production in the Euphrates and Tigris river basins could increase enough to support a regional grain market in the Middle East. For now, however, war in Iraq and Syria has disrupted grain production.

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