Category Archives: Insight

Mandela – Hero of Africa’s booming economy

December 11, 2013 rachel_eaton Leave a comment

Isabelle Alenus-Crosby

At Nelson Mandela’s memorial yesterday, President Obama hailed the former South African President as “the last great liberator of the 20th century”.

He is also being remembered for the formidable role he played in building up Africa’s largest economy. Mandela famously believed in the link between economic and political progress, and as a result, South Africa’s gross domestic product grew from less than 1.5 % from 1980 to 1994 to almost 3 % from 1995 to 2003. South Africa is now proudly the “S” in BRICS, and its economy is still going strong 20 years after Mandela first came to power.

Aside from all this, Mandela ensured that South Africa became an important source of economic opportunity for its neighbouring countries too. It can be argued that their successes, in turn, influenced the rest of the continent. Mandela was certainly therefore the great liberator of Africa. According to the latest statistics by the IMF, the continent’s economy is projected to have grown by 4.8% in 2013 and accelerate further to 5.3% in 2014. He didn’t merely bring South Africa into the global economy, but was key in making sure the rest of Africa would also thrive one day.

Last but certainly not least, it is important to note the effect that Mandela had on successive generations of investors, who in order to support him in his struggle against apartheid, came to recognize the power of investment to change things for the better, as well as the impact sustainable and responsible investments could have on anything from fighting injustice to empowering women and combating climate change.

Nelson Mandela has therefore left us with resounding legacies and the world is undoubtedly a much better place thanks to him.

Insight

An important Power Switch

November 19, 2013 rachel_eaton Leave a comment

Isabelle Alenus-Crosby

Africa’s wind and solar power potential have been much in the news since President Obama’s “Power Africa” speech on June 29^th in Cape Town. Investment into renewable energies has always been rather limited on the continent, but this is now changing rapidly. One example is the African Development Bank’s (AfDB) recent approval of a €115m loan to help fund the construction of the 300 MW Lake Turkana Wind Power Project in Kenya. The project is being developed by a conglomerate of investors, while the government of Spain has agreed to lend Kenya $178m in order to fund the construction of a transmission line which will connect the project to the country’s national grid. All electricity will be sold to the Kenya Power and Lighting Company under a 20-year power-purchase agreement.

Strong economies are highly dependent on good energy supplies and in order to achieve global competitiveness, Africa’s economic activity (and thus electricity use) must increase exponentially. It is no surprise therefore that in recent years the continent has seen an increasing number of young entrepreneurs keen to try out their much needed innovation. Many of these concentrate heavily on Solar Energy since Photovoltaic (PV) production costs have fallen dramatically worldwide. According to the U.N., the African renewable energy sector was valued at $750 million in 2004. By the time Obama was making his speech, it had reached more than $5 billion. The latest projection is that by 2020 the value of the African renewable energy sector will reach more than $55 billion (U.N.). While Africa’s wind resources are concentrated in just a few areas, the continent’s solar resources are spread across all of the continent and, for obvious reasons, rank among the world’s most successful.

There are of course many other forms of energy that could contribute in filling Africa’s massive power gap.

Think you have an alternative idea for ensuring energy access in developing countries? With 1.5 billion people currently lacking electricity, Statoil and the Economist Intelligence Unit have joined forces to create The Energy Realities Competition. Enter before December 23^rd for your chance to win: https://event.wavecastpro.com/energyrealities/ or follow #EnergyRealities

Insight

A new era in retail banking?

November 11, 2013 rachel_eaton Leave a comment

Isabelle Alenus-Crosby

More than half a decade after the financial crisis began in the summer of 2007, regulatory reforms, intended to make financial institutions more transparent, are still in the stages of being implemented. As a result, banks are being pulled in many directions at once; the regulators want banks to be prudent, customers want lower banking costs (yet more innovation) and shareholders want them to be profitable.

The number one issue facing retail banks today, however, seems to be the uncertainty that the new regulatory reforms will create once fully established due to loss of revenue. Numerous regulatory changes are already apparent in Europe, with the aim that a single, competitive market for financial services can emerge, with strengthened financial stability and improved efficiency. Governments want to make sure that when banks fail, or make losses, “retail customers aren’t excessively affected and taxpayers’ money isn’t used to bail banks out” (gov.uk).

However, these reforms, which put pressure on profits, are naturally expected to create more competition, at the same time as the 21st century customer is becoming more demanding. Banks therefore need to be continuously on the ball regarding new technologies and trends shaping the industry. In a nutshell, Europe’s retail banks are entering a period of regulatory reform that looks certain to put pressure on revenues, profits and margins. They may even alter banks’ core business models.

This wide range of views is being pursued at The Economist Events’ European Retail Banking Summit, for which Gong Communications is handling the PR. The Summit will bring together over 150 leaders of the retail banking industry, with policymakers, regulators, investors and customers. Together they will explore how European retail banking is on the edge of revolutionary change and how organisations must adapt in order to survive.

You can follow @GongComms and #EUretailbanking for updates from the event.

Insight

SMEs in Ghana: Take it to the bank

November 7, 2013 rachel_eaton Leave a comment

The World Bank Group recently published a 2014 Doing Business Report titled Understanding Regulations for Small and Medium-Size Enterprises in which Ghana topped the ECOWAS region. Overall the report compares the rate of reform among 189 countries as an indicator of how easy it is to start a business from a regulatory perspective.

Last week at The Economist Conferences’ Ghana Summit there was much discussion of the kinds of business Ghana needs to cultivate in order not to fall foul of Dutch Disease* – a term coined by economists to describe negative impacts of natural resource discoveries. More agricultural processing, manufacturing in general and services were highlighted as being of key focus for job creation.

As a services company entering the Ghana market from the UK, our experience is that once you have made your choice about whether to joint venture with a local Director, or create a wholly owned subsidiary, it’s fairly straightforward. The next step is to get yourself a business bank account. But where to start?

According to Wikipedia there are 1,800 banks in Africa. Very few of them are making a play for international business outside of Africa – Ecobank and GT Trust being the two exceptions that spring immediately to mind for their ad campaigns. It would be great if there was a resource that made it possible to compare banks and get recommendations from customers – happy or otherwise.

African banks have a reputation for being conservative and charging high interest rates for business loans (if they give them at all). Here’s hoping that someone will build a website that compares rates and functionality in key areas such as online banking as well as customer service. That’s a great way to give a boost to the ‘missing middle’ of SMEs in Africa and to tip the balance of power back in their direction, enabling them to partner with banks who are the most competitive and who try hardest.

*The Financial Times Lexicon definition of Dutch disease is the negative impact on an economy of anything that gives rise to a sharp inflow of foreign currency, such as the discovery of large oil reserves. The currency inflows lead to currency appreciation, making the country’s other products less price competitive on the export market. It also leads to higher levels of cheap imports and can lead to deindustrialisation as industries apart from resource exploitation are moved to cheaper locations. The origin of the phrase is the Dutch economic crisis of the 1960s following the discovery of North Sea natural gas.

Insight

Powering Nigeria

October 29, 2013 rachel_eaton Leave a comment

Sarah Caddy

“By 2050, there will be more Nigerians than Americans”. The wake-up call to the country’s capacity for prominence came from the BBC’s Komla Dumor (@BBCkomladumor), chair of a morning panel at EMPEA and This Is Africa’s most recent African private equity conference in London.

Komla was speaking to a converted audience; his panel on ‘Realising Africa’s economic promise’ focused almost entirely on the opportunities for investment in that country. The sector of preference was also clear, with Jan Rielaender, Economist at The Organisation for Economic Co-operation and Development (OECD) citing access to power as the leading concern for small companies – and drivers of growth – in Nigeria. With investors vying for the opportunity to provide capital, infrastructure and expertise to rehabilitate the Nigerian power sector following its privatisation process, it awaits to be seen how long it will take for a steady power supply to run. Predictions in the coffee breaks centred around the 4-5 year mark.

Speaking in a keynote session, Arunma Oteh, Director General, at the Securities and Exchange Commission, Nigeria also highlighted technology as a particular focus for fundraising. Well she might: Nigeria’s internet subscriber base grew from 200,000 in 2000 to over 44 million by 2010, and the country’s internet business is estimated to be worth $250 million. The fact that the future of the technology sector’s success also depends upon power infrastructure investment merely highlights that for now, the focus must be on powering up Nigeria.

Insight

What do journalists want?

October 9, 2013 rachel_eaton Leave a comment

Sally Maier

Last week I attended a Gorkana media briefing with Jonathan Grun, Editor at The Press Association. In his view, “interesting stories” and “speed of response” are the secret to building long-lasting relationship with journalists.

Having worked in the PR industry in various cities for almost a decade, I wondered if other journalists shared the same view. With this in mind, I asked a few media industry friends what they thought made a good PR. Here are their responses:

TV producer, Channel NewsAsia TV news station, Singapore: “Journalists want to tell the best story within deadline, outshine rival media outlets, and be first with the news. PR folk who understand this and help provide the stories they need (with good multimedia elements) earn lots of goodwill and become good friends”

Reporter, Oriental Daily News, Hong Kong: “Regular catch-ups help and casual chats can build up friendships. If possible, say lunch every few months. For those who are in a different country, call or send a Christmas card”

Freelance writer, The Guardian, UK: “I generally contact PRs when I need information or a quote, often at short notice. The PRs that I go back to time and again are those who are quick to respond to inquiries, who are competent in their subject area and who have the ear of their clients so they can get the ball rolling”

Reporter, China Daily Europe: “I think it’s personal interest and friendship as opposed to work. My PR friends don’t talk about their clients when we meet for lunch, coffee or other things. We just become friends.”

UK-based freelance writer, Billionaire.com, Singapore: “Keep supplying relevant information that can be used going forward – or that builds a clear picture of the fields in which your key strengths/contacts lie”

So, my unscientific poll suggests Jonathan Grun is right – interesting news stories and speed of response are key to cultivating long-lasting relationships between PRs-Journalists. But so are regular, informal face-to-face catch-ups. Lunch anyone?

Insight

Women rule in Rwanda

September 25, 2013 rachel_eaton Leave a comment

Isabelle Alenus-Crosby

Last week, the ruling party in Rwanda won a resounding victory in their parliamentary elections. This surprised no one. What surprised everyone was that during the last election Rwandan women won a 56% representation in the Lower House and that this number has now leapt to a staggering 64%.

Female politicians are consistently beating their male counterparts in openly-contested seats making Rwanda the world’s only parliament where women form a majority. Women are very much underrepresented in almost every national parliament around the world, so what makes Rwanda different?

1) By law, women in Rwanda must have at least 30% of the seats in government, including local government. This is President Kagame’s brainchild, seeking to end the blatant inequality between the sexes still typical across the whole of Africa.

2) The Rwandan population is 60% female. If you compare this to China, where there will be approximately 30 million more men than women by 2020, it makes sense that the Chinese parliament has less women and that the Rwandan parliament has more.

3) Since 1994, Rwandan women have been at the forefront of rebuilding the nation and are now being rewarded for it.

In a vote of confidence, the US government agreed recently to ratify a new trade pact with Rwanda, without questions asked. Rwandan women are obviously doing something very right.

Insight

Currency in Africa

September 19, 2013 rachel_eaton Leave a comment

With investors increasingly bullish on Africa, the time should be ripe for African central banks to come up with a long-term view on exchange rate policies.

Stable exchange rate regimes are essential to ensure competitiveness and to continuously attract foreign capital. This is precisely why African countries began liberalising their foreign exchange regimes in the 1990s and that the difference between the official and parallel exchange rates became minimal relatively quickly.

Another direct result is that two decades on we are witnessing improved growth rates as well as per capita income across most of Africa. With more investors looking at the continent every day, a long-term view on exchange rate policies might become crucial to entice the more reluctant among them and reduce the lingering anti-export bias. Many structural reforms are already in place clearing the way for exchange rate liberalization.

A stronger foreign exchange regime should additionally encourage increased domestic investment. Domestic investment is necessary to create employment, which is not growing quickly enough in Africa according to the IMF (2012) . This is one of the reasons that African leaders all agreed on the establishment of a continental free trade area during the last African Union Summit. Intra-African trade definitely needs to be boosted in order to maintain the continent’s current (and stellar) growth. The reason that exchange rate policies are top of the African Union’s list for next year’s summit is a clear sign that everything is coming together quite nicely.

Africa is after all “on the brink of an economic take-off, much like China was 30 years ago” (World Bank 2011).

Insight

What has the G20 in St. Petersburg (Sept 5-6, 2013) meant for Africa?

September 9, 2013 rachel_eaton Leave a comment

Isabelle Alenus-Crosby

Africa may have only one seat at the G20 table (South Africa), but the continent accounts for 14% of the global population.

And not only does it represent the largest untapped source of oil, gas and minerals, but also the world’s most rapidly growing consumer market. These are all rather significant statistics. It therefore came as quite a shock when Oxfam announced that Africa had lost more in tax revenue over the last 30 years than it gained in development aid.

Such an issue can only be dealt with on a global scale and such a perspective is precisely what the G20 provides. Although initially much attention was on Syria, a global tax reform seems to have been discussed at length on day 2. Various media outlets have reported that G20 leaders endorsed the idea that countries should exchange information in order to catch tax evaders.

If transparent beneficial ownership is enforced, then the use of tax havens, shell companies, and multi-layered company structures will become illegal. Properly designed and effectively implemented these global reforms will benefit Africa in particular by making available a fairer share of revenues which could have enormous consequences (such as an end to development aid). In addition, companies doing business in Africa will benefit from predictable business environments, with much clearer regulation.

Let’s hope that the implementation process will be done swiftly.