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First International Business Forum in the Democratic Republic of the Congo

25 January 2016 Comments (0) Africa, Business, Featured

Kinshasa International Forum

The first Kinshasa International Forum, #KINFOR16, at the Hotel Beatrice in Kinshasa on the 26 and 27th of January, 2016, is bringing together seven hundred entrepreneurs from Africa, America, Asia and Europe to meet with Congolese innovators and the large companies which operate within the country, aiming to foster new relationships and opportunities through business to business meetings, informal sessions and thematic workshops. The forum is organized jointly by a Belgian organization called Africa Rise and the Democratic Republic of Congo Conseil Economique et Social – C.E.S.

Africa Rise is dedicated to the social and economic development of the Democratic Republic of the Congo, and they are already known for their ABBW, Africa Belgium Business Week. They firmly believe that the emergence of a stronger, more capable nation is to be reached through business networking and the sharing of ideas and expertise.

The Conseil Economique et Social is a think tank. They are built up from players within the Congolese society such as employers, workers, NGOs, religious leaders, scientists and bankers. Their role is to advise upon issues chosen for them by the presidency and the state.

The spirit of African Business

Africa in general, and the Democratic Republic of Congo in particular, is no stranger to entrepreneurial spirit and business innovation. The country however has had many years of struggle and while things are improving there are still significant challenges to be met.

Here the entrepreneurial spirit is not something reserved for business people or the creative industries; here the basics of business innovation and entrepreneurship are the very stuff of survival. From Benedict Mundele, the twenty one year old woman from Kinshasa who is aiming to provide a healthy and sustainable lifestyle through Surprise Tropical which she founded at the tender age of sixteen, to Abraham Kazadi, who sells fermented tea in Goma in the troubled east of the country to people in his local community, the spirit of business innovation runs high.

A helping hand where most needed

A forum for these innovators may help to enable the Democratic Republic of Congo to emerge both economically and socially from the troubled haze which has for so long hampered the development of the country. A chance to meet and exchange ideas and experiences with business people from all over the world will be an invaluable asset to the youth of the DRC, where seventy percent of the population is under twenty five.

“It is our strong commitment and a will to contribute to the emergence of a dynamic entrepreneurial scene in Democratic Republic of Congo” said Binta Sagna, Communication Director of Africa Rise.

An interesting idea aimed at just these young innovators is a project called #Kinpitch. As the name suggests this project allows entrepreneurs to pitch their idea, dragon’s den style, to a worldwide panel of business leaders and idea shapers. The seven finalists will be invited to the international forum and be given a year-long mentorship to realize the potential of their ideas.

The First International Forum is a platform for enablement for a troubled but resource-rich nation and hopefully the first of many.

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Rwanda tops the UN Human Development Index

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

rwanda

The Human Development Index, or HDI, celebrates its 25th anniversary since its induction into economic thought with its report published last month by the United Nations. And notably, this year’s report included a section that evaluated the progress economies have made since 1990- reporting that Rwanda has made the most progress out of all countries in the last 25 years.

This fact is all the more impressive given that its level of development fell during the genocide of 1994. Rwandans can now expect to live almost 32 years longer than in 1990, and spend twice as long at school.

China, the frequently lauded growth powerhouse of the world, comes in at number two.

Kagame’s Rwanda

Rwanda’s ability to move from the recovery of genocide towards a service-dominated economy in one generation highlights the impact proper governance can achieve in lower income economies. Rwanda has one of the lowest corruption rates in the region, and is currently still led by Paul Kagame, the man who led the Rwandan Patriotic Front when the armed wing of the party ended the Rwandan genocide in 1994.

Currently, Kagame’s presidency is attracting local and international debate as the Parliament recently passed a nation-wide referendum concerning limits on Presidential terms. With the new constitutional amendment and overwhelming popularity Kagame holds, it seems that the President is set to lead the country through at least 7 more years of economic development.

Despite his popularity and demonstrated effectiveness as President, the referendum has attracted global criticism from other world powers. Both the U.S. State Department and the European Union have condemned the results of the referendum, calling Kagame to step down and “foster a new generation of leaders in Rwanda.”

The international community largely fears another life-long leader in central Africa, a region that has witnessed many saviors-turned-tyrants in the post-colonial era. Many neighboring nations are still ruled by dictators such as Angola’s José Eduardo dos Santos, Zimbabwe’s Robert Mugabe, or Cameroon’s Paul Biya, men who have held power over these territories for decades.

However, Kagame has expressed disinterest towards becoming a life-long president. At 58 years old, he said, “I don’t think that what we need is an eternal leader.” The results of the referendum coincide with other leaders in the region seeking constitutional term extensions as well (in the Republic of Congo and the Democratic Republic of Congo), and foreign critics’ fears may be largely attributed to what precedent Rwanda’s referendum may set in the region. In neighboring Burundi, President Pierre Nkurunziza’s decision to seek a third term sparked violent protests resulting in over 100 deaths since the announcement.

How does one measure progress?

Most markers of economic progression deal with money: such as gross domestic product or national debt. The HDI paradigm acknowledges something we all know: it’s not all about money. The health of an economy is also expressed in the welfare of its people and how able they are to contribute to this economy.

The index takes into account measures for household income, life expectancy and education into a single development score, which gives a holistic sense of how an economy is doing on a human basis. The report’s philosophy on progress is explained in its introduction, “development is about enlarging people’s choices—focusing broadly on the richness of human lives rather than narrowly on the richness of economies.”

And for once, it’s mostly good news: the fastest progress was seen among low human development countries. Progress on the HDI has been considerable at the country level. For example, Ethiopia increased its HDI value by more than half; Rwanda by nearly half; five countries, including Angola and Zambia, by more than a third; and 23 countries, including Bangladesh, the Democratic Republic of the Congo and Nepal, by more than a fifth.

The five fastest developing countries in the world are Rwanda, China, Iran, Singapore, and Mozambique.

Rwanda’s reforms serve the bottom 50%

Rwanda’s success can be attributed to conscious economic reform geared towards strengthening the ability of the bottom 50% to engage with business and finance. Last year’s reforms boast an astounding reduction in the number of days required to transfer property from 370 to a mere 32, and jumping from a score of 2 to 19 out of 20 on an index that rates the ease and efficiency of obtaining credit according to a World Bank report published in 2015.

In Africa, Asia and Latin America over 30% of surveyed firms reported access to credit as a major constraint to growth. Rwanda’s new credit guarantee scheme enabled the country to become a major exporter of specialty coffee in one year alone. By creating a financial system inclusive to lower-income households, policy makers have allowed for structural transformation and the creation of work among the bottom 50%.

Rwanda sets the bar for highly developed countries

And Rwanda’s structural transformations that allow for creation does not limit itself to expressions of finance. Their Gender Development Index score is almost perfect at 0.957 out of a maximum score of 1. Rwanda, despite being #163 on the HDI Index, in terms of gender equality scores higher than even highly developed countries such as the Republic of Korea, Greece, and the Netherlands.

Even Switzerland, considered as one of the most developed and egalitarian countries in the world, comes in at only 0.950 in comparison to Rwanda’s 0.957. Rwanda is one of only two countries in the world with a female majority in the national parliament.

And put in perspective, Rwanda’s ability to surpass China is more incredible than it seems. As one of the smallest countries in Africa’s mainland, the country is mired by a lack of natural resources. The growth witnessed over the last 25 years is mostly attributed to a surge in the service industry.

Rather that fear the impacts Kagame’s track record may set in Africa, the foreign community would be amiss to ignore the major successes and beneficial precedents he has set as well, demonstrated in the hard numbers published by the UN’s HDI report in December 2015.

In the same month, an overwhelming 98% of Rwandan voters lifted constitutional bans that would allow Kagame to preside over another 3 mandates, meaning that Kagame could be president until 2034. “What is happening is people’s choice,” said Kagame, adding that Rwandans are a people that “have their future in their own hands. Ask people why they want me.” Given the progress highlighted by the UN Report, the answer seems pretty clear.

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South African entrepreneur is first black woman to launch an airline

23 January 2016 Comments (0) Africa, Business, Featured

Siza Mzimela

Siza Mzimela, a longtime aviation executive, is CEO of Fly Blue Crane, which operates flights to several locations in South Africa.

South African entrepreneur Siza Mzimela is making an important mark on aviation as the first black woman in the world to start an airline.

Mzimela is founder and CEO of Fly Blue Crane, a fledgling airline that flies to several destinations within the country and hopes to expand to regional cities.

Mzimela said she is tapping her years of experience leading other airlines, including South African Airways, the country’s largest airline, to shape Fly Blue Crane to meet customer expectations for consistent, on-time travel. The CEO promised convenient, problem-free booking and travel with competitive fares.

New airline is based in Johannesburg

Blue Crane, based at O.R. Tambo International Airport in Johannesburg, launched in August offering several flights daily to Bloemfontein, Kimberley and Nelspruit.

Blue Crane later added flights between Kimberley and Cape Town and between Bloemfontein and Cape Town, but announced that flights to Nelspruit would be discontinued in January because of lack of capacity.

The airline hopes to find success serving provincial and regional capitals in southern Africa.

Mzimela said that airports in Johannesburg, Durban and Cape Town had more than enough air service. But Fly Blue Crane wants to fill gaps in the market in smaller cities such as Kimberley within South Africa and then expand to regional centers.

She wants to use the airline to open new routes that will help improve the economies of smaller markets, she said.

fly blue crane

Regional expansion is a goal

While service within South Africa is the immediate priority, the new airline wants to expand beyond those borders. Mzimela hopes to add destinations in Botswana, Namibia, Zimbabwe and the Democratic Republic of Congo.

Fly Blue Crane operates a fleet of four fuel-efficient 50-seater Embraer Regional Jet 145 aircraft, which enables quick turnaround and efficient crews.

The new company is taking off at a time when the airline industry in Africa is poised to expand. According to the African Airlines Association, there is opportunity for African carriers to expand intra-African and domestic travel for a growing middle class while global carriers dominate intercontinental travel. More than 20 carriers are based in South Africa, the largest being South African Airways with a fleet of 65 planes.

Founder has headed two other airlines

Launching an airline isn’t the first “first” for Mzimela.

She was the first female CEO at both South African Express Airways and South African Airways. At South African Airways, she introduced non-stop flights to New York and Beijing  – a first in the history of the airline.

Mzimela also was the first woman in 67 years named to the board of directors of the International Air Transport Association. She serves on the South African Tourism Board and is a member of the board of the Oprah Winfrey Leadership Academy for Girls.

In 2012, she was named one of the 10 Greatest Female Leaders in Africa Today by Ventures Africa.

Mzimela also founded Blue Crane Aviation, an aviation services company providing African airlines with consulting, and legal and aircraft management services. She serves as the company’s executive chairperson.

She graduated with a degree in economics and statistics and began her career in banking before moving into the airline industry as a researcher.

Few women rise to the top in the airline industry

Mzimela said being a woman executive in the aviation industry has posed challenges. Globally, only 12 of 248 airline CEOs are women, fewer than 5 percent. Sexism and lack of female mentors are cited as factors that hold women back from executive posts.

“I don’t know how many times I walked into meetings and people just assumed I probably was the one who was going to be taking notes,” she said.

Mzimela said her success managing established companies motivated her to want to “build something better from the ground up.”

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Nigerian Billionaire Aliko Dangote Takes On a New Industry: Tomatoes

22 January 2016 Comments (0) Africa, Business, Featured

nigeria tomatoes

Africa’s richest man Aliko Dangote has built a giant tomato processing factory which aims to boost Nigeria’s tomato production, domestic output, and jobs.

Nigeria grows around 1.5 million metric tons of tomatoes each year, making it Africa’s second largest producer and the world’s 13th. And yet Nigeria is not on the list of official exporting countries of tomatoes or tomato products. In fact, to meet local demand of more than 2 million metric tons of tomatoes, the country imports large quantities of both fresh and processed tomatoes, mostly from China. It is the world’s largest importer of tomato paste, seeing over 300,000 metric tons ($360 million) of tomato paste imported annually.

It’s a situation comparable to Nigeria’s oil industry. While it is the largest oil producer in Africa, gasoline shortages are a regular occurrence as a lack of infrastructure, poor maintenance, and mismanagement have left refineries working below capacity and forced a reliance on imports. Oil makes up just 14% of GDP, while 38% of the country’s imports are petroleum products.

In explanation of the tomato statistics, the Central Bank of Nigeria reports that the approximately 200,000 Nigerian farmers growing tomatoes lose about half of their harvest each year, due to poor food supply chain management and inadequate infrastructure of water, storage, and power supply facilities. The remaining half of the harvest is then subject to price depression, caused by the perishable nature of crops, pests and disease, high rains at peak season, poor marketing, multiple levies by state and local government agents, corrupt practices by officials at air and sea ports, and the costs of processing, packaging, and storage machinery and equipment. Farmers are unable to consistently make a profit, and as a result, many have stopped cultivation.

Dangote Tomato Processing Factory

Aliko Dangote

Aliko Dangote

But Africa’s richest man, Aliko Dangote, is looking to change the future of Nigerian tomatoes. Aiming to create jobs and boost Nigeria’s tomato production and domestic output, he has spent the last five years building a $20 million tomato processing plant outside the country’s second largest city, Kano (a city which has been blighted by poverty and unemployment, and the Islamist group, Boko Haram).

Set to open next month, the Dangote Tomato Processing factory will be Africa’s largest: the size of 10 football pitches set within 17,000 hectares of irrigated fields. It is expected to produce 430,000 tons of tomato paste per year. And it will directly employ 120 people, buying tomatoes from 50,000 farmers. The factory will employ modern farming techniques and improved seed varieties and chemicals (funded by the Central Bank of Nigeria) which are expected to increase yields and encourage farmers back into growing tomatoes.

The factory’s general manager, Abdulkarim Kaita, said: “Nigeria is such a huge market for tomato paste that we will find quite challenging to satisfy. Already local tomato paste packaging companies have placed orders with us which we will have to work hard to satisfy. We are set to begin operations. We are only waiting for the tomatoes which are ripening in the fields.”

Aliko Dangote

Aliko Dangote is the founder of the Dangote Group, one of Africa’s leading conglomerates. He comes from Kano, now home to his tomato factory, where, in 1977, he started the Dangote Group as a small food-trading company. Helped with a $3,000 loan from an uncle, he went on to transform this small business into an import and trading company with interests in flour, sugar, and salt. And almost four decades later, the Group is active in 15 African countries, and has expanded to cement, steel, real estate, telecommunications, haulage, port operations, polypropylene packaging, and oil and gas.

Dangote Cement is Africa’s largest cement producer, and counts plants in Cameroon, Ethiopia, Zambia, and Tanzania, producing more than 30 million metric tons annually. And, dominating the sugar market in Nigeria, the Dangote Group sugar refinery in Lagos is the second-largest in the world.

Despite a weak Nigerian currency and domestic difficulties which saw his net worth plunge $5 billion over the past year, Dangote is still Africa’s richest man. With an estimated net worth of $14.3 billion dollars (Jan 2016), Forbes ranks him as the 67th richest person in the world.

The Dangote Group

But while undoubtedly Dangote has seen huge success in Nigeria, there are also concerns that his actions are not entirely positive for the country.

Dangote Cement Factory

Dangote Cement Factory

For example, thanks to Nigeria’s characteristic power cuts, the Kano factory is to rely on diesel generators for electricity, something which will significantly add to production costs and therefore reduce the factory’s ability to compete with imported products. This status quo has so far led to the closing of numerous factories in the state of Kano, including two of Dangote’s own factories. As a solution, the Nigerian government plans to put restrictions on tomato imports in place this year, giving Dangote a forced competitive edge. The vice-president of Nigeria’s manufacturers union, Ali Madugu, comments: “Once the government can place restrictions on the import of Chinese tomato pastes… the sky’s the limit for the Dangote tomato paste because the market is there for them to exploit”.

Some fear that this policy of government assistance – whether higher tariffs, restrictions on imported products or outright bans – is creating damaging monopolies in Nigeria, which push up the local prices that everyday Nigerians must pay. For example, Dangote Cement makes a profit margin of 60% per bag of cement in Nigeria, but a margin of between 6% and 13% across the rest of Africa. Nigerians pay, as a general rule, twice or three times more than any other African country for cement. Restrictions on imported paste (which could be sold at prices that undercut the Dangote Group) could have the same effect, placing Dangote Tomato Processing in a position of monopoly, able to control pricing, production, and jobs.

Again aligning his own interests with those of the nation, as his businesses often seem to have done, Dangote has also announced a move into Nigeria’s precarious oil industry. The 650,000 barrel-per-day Dangote Petroleum Refinery and Petrochemical Company, located in the Lekki Free Trade Zone in Lagos, is scheduled for completion by early 2018. Promising to reform the Nigerian oil industry, increase productivity, and create more jobs, the facility will produce gasoline, diesel, aviation fuel / household kerosene, polypropylene, and fertilizer, and will be the fifth-biggest in the world.

Senior General Manager, Madhav Kelkar, said Dangote’s plant would not just supply the domestic market, but could lead to a self-sufficient Nigeria that could export to other parts of the world. And perhaps this is so. But for now, only the longer-term local price of tomato paste will reveal whether this tomato processing factory has been a positive development for the people of Nigeria.

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Kenzibox: Thinking Outside The Box

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

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

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

21st Century Parenting

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

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

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

Taking Play Seriously

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

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

Kenzibox

When Moms have MBAs

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

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

KenziBox: a Dubai’s Business (Role) Model

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

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

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

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

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The political stalemate in Zanzibar

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

zanzibar elections

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

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

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

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

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

Opposition declared election victory

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

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

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

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

Zanzibar economy suffers

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

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

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

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

Maalim Seif Sharif Hamad

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

Stalemate raises fears of radicalization

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

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

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

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

Long history of political violence

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

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

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

New election “inevitable”

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

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

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

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

Renewed violence feared

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

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

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

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Magreb Bank launches to drive regional economic integration

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

Maghreb

The new Maghreb Bank for Investment and Foreign Trade is a significant step in efforts to create a regional economy.

The economic integration of five countries of the Maghreb region of Northern Africa took a step forward with the launch of the Maghreb Bank for Investment and Foreign Trade.

The bank will finance joint projects of the five member nations of the Arab Maghreb Union – Algeria, Libya, Mauritania, Morocco and Tunisia. It launched with $150 million in capital contributed by the member countries.

The bank will invest in projects including infrastructure, transportation, telecommunications and electrical power. It will also work to strengthen intra-Maghreb trade.

The bank, based in Tunis, was launched December 21. Nouerddine Zekri, former Tunisian Secretary of State for Development and International Cooperation, was named Senior General Manager of the bank.

A step towards integrating regional economies

The launch marks a significant step in the long-delayed effort to boost trade within the region by integrating the economies of the five countries, which together represent a market of about 100 million consumers.

Despite decades of regional political tensions, the economic appeal of the integration effort has remained strong.

Exports from and to countries within the region are extremely low and the integration promises to increase those. At the same time, most of the countries are highly dependent on trade with the European Union and more intra-region trade will reduce that vulnerability.

Integration promises to grow GDP

Economic integration would increase growth in GDP by an estimated 2-3 percent and increase job creation, according to one study, which called it a potential “game changer’’ for a region that is the least integrated in the world. On average, trade between the five countries represents only three percent of their global trade.

“The benefits would be significant. It could increase intra-regional commerce by 5-12% and stimulate job growth and help anchor stability,” the report from the Tunis Conference on Regional Economic Integration said.

Nouerddine Zekri

Nouerddine Zekri, the first General Manager of the new Maghreb Bank

Boosting trade within the region

The report said trade within the region could grow by 5 to 12 percent with integration.

“This growth could in turn translate to significant job creation particularly if enhanced trade encompasses both goods and services,” the report said, noting that a consumer market of about 100 million would attract greater foreign and local investment and offer smaller businesses opportunities to expand.

National economies struggle

The growth would help economies that have struggled.

Since 2011, growth of GDP in the region has averaged only 2 percent, compared to 5 percent during the six years prior to the financial crisis of 2008. Economic growth has failed to keep pace with population growth. Unemployment is high, averaging 12 percent in Algeria, Morocco and Tunisia, according to the European Commission.

At the same time, the Maghreb countries are highly dependent on trade with the European Union, which proved to be vulnerability during the euro crisis.

Algeria, Libya, Morocco and Tunisia export as much as 70 percent of their products to the EU and those exports represent 20 to 30 percent of their GDP. Morocco and Tunisia also depend heavily on European tourists, which make up about 40 percent of their arrivals.

While one goal is to reduce dependence on exports to Europe, an integrated regional economy might create a more effective bargaining bloc to negotiate in with the European Union.

Political tensions, unrest stall progress

The five countries first signed the Treaty of Marrakesh agreeing to integrate in 1989. The framework for forming a bank was signed in 1991 but the actual bank was not approved until 2006.

Political tensions stalled the economic integration effort for more than two decades. Initially, disagreements between Morocco and Algeria over territory in the Western Sahara contributed to delays. More recently, political disruption and war created uncertainty about economic stability in the region.

The differing economic structures of the countries have also posed a challenge to integration. Morocco and Tunisia have relatively liberal market economies while Algeria and Libya economies were more tightly controlled. Mauritania’s economy is largely based on subsistence agriculture.

Among the five countries, Algeria and Morocco have the largest economies with $552 billion and $250 billion GDP respectively. The GDP of Mauritania, totals an estimated $8 billion.

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Why Would Saudi Aramco Consider an IPO?

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

Saudi Aramco

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

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

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

Saudi Arabia facing significant political and economic challenges

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

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

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

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

Saudi Aramco gas facility

Saudi Aramco gas facility

Saudi Aramco IPO

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

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

$10 trillion valuation

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

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

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

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Africa’s air transport industry eyes expansion, upgrades

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

africa airlines

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

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

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

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

Aviation accounts for $80 billion in GDP

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

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

Intra-continental system is ripe for expansion

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

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

Connections between African countries are difficult

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

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

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

Liberalization could open regional markets

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

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

Report documents economic benefits

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

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

Financing needed to expand fleets, improve airports

Another obstacle to growth is lack of capital.

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

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

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

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

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

Airlines report high costs for fuel, tariffs

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

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

Elijah Chingosho

Elijah Chingosho, frica Airlines Association (AFRAA) Secretary General

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

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

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

African airline fares are high in cost

The result is high fares and low profit margins.

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

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

Safety record improving

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

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

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

Air transport will help unify Africa

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

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

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

syrian war

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

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

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

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

Extreme risk in Burundi, CAR and Somalia

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

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

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

Violence in Burundi

Violence in Burundi

Piracy off East Africa coast declines sharply

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

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

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

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

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

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

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

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

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

Twenty-three nations pose medium risk

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

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

Middle East turmoil evident in ratings

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

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

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

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

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

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

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

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