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Global Trade Partners in the 21st Century

Posted on 15 May 2013 by Africa Business

WASHINGTON, May 15, 2013/African Press Organization (APO)/ — Remarks

Robert D. Hormats

Under Secretary for Economic Growth, Energy, and the Environment

World Economic Forum

Pretoria, South Africa

May 14, 2013

 

 

As Prepared

 

Thank you Lyal for the kind introduction.

I am delighted to be in South Africa again. I visited last fall with Secretary of State Hillary Clinton.

What was most striking then, and continues to be the case today, is the extent to which the image of Africa has changed. According to the IMF, growth in sub-Saharan Africa will surge to 6.1% next year, well ahead of the global average of 4%.

Africa is booming in nearly every sector, ranging from massive energy developments in Mozambique, Tanzania, Ghana, and other countries; to the growth of Rwanda and Kenya’s information and communications technology sectors; to South Africa’s thriving auto industry. And, though far from declaring victory, Africa is reaching a turning point in its hard-fought battles against poverty and corruption.

Today’s Africa looks nothing like what, in 2000, The Economist referred to as the “Hopeless Continent.” It is critical that we concentrate the world’s eyes on the new image of Africa, that of progress and promise. Perspectives are evolving—in 2011, The Economist referred to Africa as the “Rising Continent” and, last March, as the “Hopeful Continent.”

Trade is at the heart of Africa’s economic resurgence. So, in this context, I will speak first about America’s vision for global trade in the 21st century and then, focus on implications and, indeed, opportunities for Africa. America’s global trade agenda in the 21st century is shaped by a foundation laid, in large part, in the mid-20th century. After World War II, American and European policymakers worked together to build a set of international institutions that embodied democratic and free market principles.

The GATT—which led to the WTO—World Bank, IMF, and the OECD were designed to foster international economic cooperation. These institutions were vital to the economic prosperity of the United States, and to the success of America’s foreign policy and national security for the next three generations.

As we move into the 21st century, a new multi-polar global economy has surfaced. The emergence of a new group of economic powerhouses—Brazil, Russia, India, and China, of course, but also countries in Africa—has created momentum (if not necessity) for greater inclusiveness in the global trading system.

At the same time, these new players must assume responsibilities for the international economic system commensurate with the increasing benefits they derive from the global economy. In addition to the geography of international trade, the nature of trade and investment has evolved to include previously unimaginable issues such as e-commerce and sustainability.

So, part of our vision for trade in the 21st century is to build a system that is more inclusive, recognizes the new realities of economic interdependence, and matches increased participation in the global trading system with increased responsibility for the global trading system.

We are making progress with bringing new players into the global trading system as equal partners. Free Trade Agreements with Korea, Colombia, and Panama entered into force last year.

And, we are continuing negotiations on the Trans-Pacific Partnership—or TPP as it is more widely known. With Japan’s anticipated entry into the negotiations, TPP will grow to include 12 countries of different size, background, and levels of development. The agreement, when finalized, will encompass nearly 40% of global GDP and one-third of global trade.

In addition to TPP, we are embarking on a Transatlantic Trade and Investment Partnership with the European Union. TTIP—as it is being called—will strengthen economic ties between the United States and Europe, and enhance our ability to build stronger relationships with emerging economies in Asia, Africa, and other parts of the world.

TPP and TTIP are truly historic undertakings. Our objective is not only to strengthen economic ties with the Asia-Pacific and Europe, but also to pioneer approaches to trade and investment issues that have grown in importance in recent years.

These agreements will seek to break new ground by addressing a multitude of heretofore unaddressed non-tariff barriers, setting the stage for convergence on key standards and regulations, and establishing high quality norms and practices that can spread to other markets. TPP, for example, will raise standards on investment and electronic commerce, and afford protections for labor and the environment.

Our agenda also includes strengthening the multilateral trading system through the World Trade Organization. For example, the United States would like to see a multilateral Trade Facilitation Agreement, which would commit WTO Members to expedite the movement, release, and clearance of goods, and improve cooperation on customs matters. A Trade Facilitation Agreement would be a win-win for all parties—Africa especially.

Cross-border trade in Africa is hindered by what the World Bank calls “Thick Borders.” According to the latest Doing Business Report, it takes up to 35 days to clear exports and 44 days to clear imports in Africa. Clearing goods in OECD countries, in contrast, takes only 10 days on average and costs nearly half as much. Countries like Ghana and Rwanda have benefited tremendously from the introduction of trade facilitation tools and policies.

Ghana, for instance, introduced reforms in 2003 that decreased the cost and time of trading across borders by 60%, and increased customs revenue by 50%. A multilateral Trade Facilitation Agreement will create a glide path for increased trade with and within Africa.

Our views for 21st century global trade partnerships go beyond Europe and the Asia-Pacific, and efforts at the WTO. We are committed to supporting Africa’s integration into the global trading system. The cornerstone of our trade relationship with sub-Saharan Africa is the African Growth and Opportunity Act—known as AGOA. Of all of our trade preference programs, AGOA provides the most liberal trade access to the U.S. market.

Exports from Africa to the United States under the AGOA have grown to $34.9 billion in 2012. While oil and gas still represent a large portion of Africa’s exports, it is important to recognize that non-petroleum exports under AGOA have tripled to nearly $5 billion since 2001, when AGOA went into effect. And, compared to a decade ago, more than twice the number of eligible countries are exporting non-petroleum goods under AGOA.

South Africa, in particular, has made great strides in diversifying its exports to the United States. Thanks to AGOA, the United States is now South Africa’s main export market for passenger cars, representing more than 50% of exported value in 2012. Because AGOA is such an important mechanism for African countries to gain access to the U.S. market, the Administration is committed to working with Congress on an early, seamless renewal of AGOA. Our trade relationship with Africa goes beyond AGOA. For instance, AGOA represents only one-quarter of South African exports to the United States. The composition of South Africa’s exports to the United States, moreover, reflects complex interdependencies and industrial goods.

And, our trade relationship with Africa is not just about one-way trade. There is an immense opportunity for U.S. companies to do business on the continent.

We recently launched the “Doing Business in Africa Campaign” to help American businesses identify and seize upon trade and investment opportunities in Africa. The campaign was announced in Johannesburg, in part, because South Africa can play a prominent role in directing U.S. investment into other parts of the continent.

Although progress has been made on diversifying exports beyond energy, there is much more to be done. African ingenuity and entrepreneurship must be unleashed to drive innovation and growth throughout the continent. This requires closer integration to share ideas, transfer knowledge, and partner on solutions. Through AGOA and the “Doing Business in Africa Campaign”, we are promoting a business climate in Africa that enables and encourages trade and investment. However, realizing these goals is goes beyond trade preferences and commercial linkages.

Africa is also featured in America’s vision for global trade in the 21st century.

For example, we recently launched the U.S.-East African Community Trade and Investment Partnership—the first of its kind—to expand two-way trade and investment. The Partnership is designed to build confidence among the private sector by building a more open and predictable business climate in East Africa. We are considering a variety of mechanisms to accomplish this, including a regional investment treaty and trade facilitation agreement. The Partnership highlights our desire to help Africa integrate and compete in today’s global economy.

I will conclude with one final point. I began by saying that trade is at the heart of Africa’s economic resurgence. Trade is also at the heart of America’s economic recovery. We have a common interest and a common goal.

When it comes to enhanced trade, what is good for Africa is good for America. And what is good for America is good for Africa.

Thank you.


SOURCE

US Department of State

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Hope for financing Africa’s Development through private equity

Posted on 09 May 2013 by Africa Business

CAPE-TOWN, South-Africa, May 9, 2013/African Press Organization (APO)/ A high-level roundtable on Building Private Equity and Private Capital Markets in Africa, met on 8 May, to explore the promise and obstacles facing private capital investments in Africa. The roundtable of investors and policy makers met under the auspices of the Economic Commission for Africa (ECA) and the World Economic Forum on Africa to navigate the complex world of private equity, which in recent years has shown increased interest. According to the participants, this could be Africa’s next development financing frontier and could mark an end to an aid dependency.

However, the bane of negative perceptions, which portray Africa as “a risky continent in which to do business”, must be tackled. According to Mr. Carlos Lopes, Executive Secretary of the ECA, these perceptions hinder the growth of the sector.

“No one mentions the Saba insurgency in Malaysia or the Mindanao problem in the Philippines, which affect the investment climate for these countries; investors must understand that the Continent is not any riskier than other regions. There are far more people affected by conflict and insecurity in Asia than in Africa,” he stresses.

Issues that concern many industry players here at the World Economic Forum on Africa include working with the high cost of raising capital in Africa; the mix of regulatory systems; and low levels of skills in the area of private equity.

There are positive indications, however. The investors and policy makers here underscore that harmonizing regulatory systems and deepening regional integration as a means to develop capital markets across boundaries, could bring about long-term investments that could bolster the Continent’s development aspirations.

This view is backed by some good news sprouting across the landscape. After a decade of macro-economic reform, the financial sector in a country like Rwanda for instance, has grown at 20 per cent, which is more than double the average of 8 per cent growth rate in the overall economy over the last decade. Thus, African countries have the basis for developing capital markets that can finance the Continent’s development.

But entrenched views on doing development are being unhinged; and according to ECA officials, Vision 2063, currently under preparation in partnership with the African Union and the African Development Bank, will help to change mindsets.

“In this visionary document, we contend that the discourse on financing Africa’s development must shift; it must move out of the aid syndrome,” says Lopes. Furthermore, the ECA forthcoming study on domestic resource mobilization for Africa aims to demonstrate that the Continent can harness enough resources to finance development by tapping into reserves held by African Central Banks and in remittances.

A number of proposals are being mooted for further analysis, such as establishing minimum standards that governments could sign on to for attracting more private capital, particularly in areas where governments may not be able to invest.

With opportunities presented in many developments, such as Africa’s rapid urbanization and a growing middle-class, investors agree that entrepreneurship and growth is encouraging; the need for infrastructure is enormous and there is a need for pooled funds that could also help attract additional capital. In addition, these opportunities mean that the growth of Africa’s private equity ought to be based on a model that benefits local people.

More studies, however, are needed on private equity scalability and getting African markets to work together as a means of building liquidity. Industry players and policy makers here think that the regional integration experience can offer useful lessons in this regard. For instance, the expansion of the banking sector across the continent shows that it is possible to overcome national sovereignty concerns.

Given that Africa is in the early stages of developing its financial sector, there may be a need to create frameworks and institutions that will allow for leveraging existing capital. In addition, policymakers warn that leveraged buyouts are not in the interest of developing countries due to tax erosion. Countries may also need to balance short-term returns with long-term sustainability and promote related financing options, such as venture capital.

The message from policy makers and development finance experts is that while private equity investors have seen tremendous returns in Africa, thus fueling the idea of Africa as the new El Dorado, new investment may need to contend with Africa’s emerging priorities and tap into sectors that can use and develop local skills as well as benefit the Continent.

ECA intends to sponsor the establishment of a high-level task force that will analyze these issues in depth and present a proposal, as well as recommendations, for follow-up at the next World Economic Forum on Africa.

 

SOURCE

Economic Commission for Africa (UNECA)

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Towards a New Economic Model for Tunisia: Identifying Tunisia’s Binding Constraints to Broad-Based Growth –

Posted on 30 April 2013 by Africa Business

The Government of Tunisia, the African Development Bank and the United States Government have released a report

 

TUNIS, Tunisia, April 30, 2013/African Press Organization (APO)/ The Government of Tunisia, the African Development Bank (http://www.afdb.org) and the United States Government have released the report entitled “Towards a New Economic Model for Tunisia: Identifying Tunisia’s Binding Constraints to Broad-Based Growth”. The report, aims at identifying the most binding constraints to growth in Tunisia in order to identify areas where policy reforms are most needed. The study attempts to identify these constraints, both as they were manifested in the years leading up to the revolution and today. The methodology starts from the widely accepted proposition that private sector investment and entrepreneurship are ultimately the keys to sustained economic growth and follows the Growth Diagnostics approach proposed by Ricardo Hausmann, Dani Rodrik and Andrès Velasco.

The application of the methodological framework has revealed two broad categories of binding constraints to economic growth in Tunisia:

First, a lack of effective institutions to ensure public sector accountability, the rule of law, and checks and balances on power in Tunisia results in weak protection of property rights and barriers to entry. Property rights and investment freedoms are fundamental to the development of entrepreneurship and to investment, innovation and risk-taking, and therefore to achieving growth in productivity and the higher wages and living standards that accompany it.

Establishing a sound framework of economic governance including institutions that provide investors with a clear and transparent set of rules and assurance that they will be able to reap the fruits of their investments will require a sustained effort.

Second, although social security programs and labour protections are intended to enhance the pay, benefits and economic security of workers, many measures currently in place in Tunisia have been counterproductive in achieving these aims for all but the most fortunate Tunisian workers. Rather than enhancing the provision of acceptable jobs, they result in reduced investment, greater informality, lower worker pay, higher unemployment, and increased economic insecurity. Firms remain small and use a variety of means to circumvent the formal requirements of employing workers, including informality or under-declaration of employees.

Their inability to adjust employment according to market conditions discourages them from growing to attain economies of scale and from investing in worker training. These responses in turn reduce innovation and productivity growth and make Tunisian firms less competitive internationally. Tunisia’s slow growth in labour productivity relative to other middle-income countries reinforces the pressure to reduce private sector wages. Alternatives for designing social security systems and labour market protections should be considered with the aim of protecting people rather than specific jobs.

These binding constraints operate on a national level and therefore have negative consequences both in faster growing and lagging regions. While a lack of investment in infrastructure and poor school quality are widely believed to reduce investment and employment opportunities in lagging regions, the lack of demand for the products and workers emanating from those regions is primarily driven by national and international markets. Indeed, the constraints identified in this diagnostic may be even more binding on the growth of lagging regions.

The identified constraints affect exporting firms and foreign-owned firms to a somewhat lesser extent than firms primarily serving domestic markets. Exporters enjoy exoneration of social charges and other taxes for several years and, given their larger scale and higher productivity, are better able to adhere to formal labor requirements. They also appear to have been less subject to infringement of property rights under the prior regime. However, the identified constraints are still likely to dampen investment and employment creation by exporting firms as well. Meanwhile, the constraints present a tremendous barrier for Tunisian firms serving the domestic market – some of which would otherwise supply exporting firms or export directly but under current circumstances cannot expand or innovate to the degree needed to compete internationally. Although Tunisia has relied upon an industrial policy and various tax breaks to promote innovation and competitiveness, without removing these fundamental obstacles further government efforts to directly subsidize or promote innovation are not likely to succeed in transforming the economy.

In addition to the two binding constraints identified above, risks have emerged since the revolution that could become binding constraints if not effectively addressed. First is the risk that social unrest becomes persistent and pervasive, in which case it would deter investment in the coming years. Related to this is the risk of macroeconomic instability that could emerge if internal social and economic pressures override the government’s commitment to fiscal sustainability. In addition to this risk, the analysis highlights the problematic nature of the financial sector; the low quality of primary and secondary education, particularly in lagging regions; the need for improved water resource management; and the limits of Tunisia’s current seaport capacity and management. Although not currently binding constraints, these problems could become more important constraints in the future.

Based on the outcomes of this analysis, the African Development Bank and its partners will support Tunisia in overcoming these constraints to achieve a stronger and sustainable broad-based growth.

 

SOURCE

African Development Bank (AfDB)

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Year of the Artisan: Artisans needed to help grow the economy

Posted on 30 April 2013 by Africa Business

African Education Week to gather experts in Johannesburg in June

South Africa has a shortfall of about 40 000 skilled artisans and industries often have to import migrant workers at exorbitant costs.

In a recent speech, the South African Minister of Higher Education, Mr Blade Nzimande, quoted this figure when he opened a technical training academy in Cape Town.  Those involved in training artisans therefore rejoiced when Nzimande in March declared 2013 the Year of the Artisan.

“The Year of the Artisan is good news for the industry because we need to seriously focus on training people for the trades,” says Mr Sam Zungu, principal of the Umfolozi College, an institution for further education and training (FET) with five campuses in KwaZulu-Natal.

“Young people need to be made aware of the great need for skilled people. This country needs artisans across the board in fields such as electricity, plumbing, fitting and turning and mechanisation. The biggest need is in the energy sector where we need skilled people to maintain and build infrastructure.”

He continues:  “Eskom is battling and new power plants are being erected.  But we do not have a big enough pool of skilled people to draw from locally for these projects. We are moving towards the same situation as before 2010 when the country had to import artisans to work on the stadiums and infrastructure needed for the Soccer World Cup.”

The Year of the Artisan dovetails neatly with the South African government’s National Development Plan (NDP). This plan focuses on reducing poverty and inequality by 2013 and crucial to attaining to these goals is the stated aim of training at least 30 000 qualified artisans annually.

African Education Week
Sam Zungu is chairing a panel discussion on the future of FET Colleges during the upcoming African Education Week at the Sandton Convention Centre in Johannesburg from 19-22 June.

He explains that while artisans can earn quite high salaries, there is still a stigma attached to the trades which also impacts negatively on how the Further Education and Training (FET) colleges are viewed.

“We need to change perceptions and we need to create an awareness of the opportunities for artisans.  There are many opportunities for skilled people to become entrepreneurs thus creating work opportunities for others.”

South Africa needs specialist artisans
Another speaker at African Education Week, Wilson Nzimande, head of Imithente, an education and business consultancy, cautions that South Africa needs specialist artisans – amongst others in the maritime fields. Over 90% of South African trade takes place via the oceans.

“Many people want to train as, for example, general electricians or mechanics. But we need specialists – we need divers who can do specialist welding and painting underwater and we need ship building specialists.  In many fields South Africa relies on foreigners and this is not an acceptable strategy.  We need to develop artisans because they are incredibly important in helping to grow developing countries economically.”

He emphasises that strategic partnerships need to be formed between training institutions, government and the private sector.

“In this Year of the Artisan we need more than just words and rallies. We need a particular programme of action. This means that government should do more to structure incentive mechanisms to the benefit of all parties.”

Too much emphasis on university degree
Horst Weinert, managing director of Festo Didactics, says there is concern that the average age of South African artisans is 50.

“These people will soon be retiring and there will be few to take their place if we do not train enough people to fill their shoes.”

University educated Weinert believes there is too much emphasis on a university degree:  “there are about 800 000 university students and 600 000 students at universities of technology and only between 100 000 and 200 000 at FET colleges. This pyramid is the wrong way around. We need more enrolments at FET colleges.”

According to Weinert, artisans can demand monthly salaries of up to R50 000 and more.

“Highly skilled artisans are in short supply and those who can deliver the goods can basically determine their own salaries.”

His advice to people who are set on obtaining a university degree in fields such as engineering is to enrol at an FET college for at least one year.

“This practical training obtained at a FET college will enable the student to fly through university.”

Although the trades are dominated by men, Weinert says there are many opportunities for women in field such as fitting and turning, instrumentation mechanisation and mechatronics – a multidisciplinary field of engineering which combines mechanical, control, electrical and computer engineering.

“I am a huge supporter of competitions like WorldSkills International (previously known as the Skills Olympics). There top artisans from different countries compete against each other. These competitions set benchmarks. The winners are highly regarded and others look up to them as leaders and innovators in their field.  This can act as inspiration for young people to train as artisans. When magic is created productivity is boosted and this in turn boosts the economy,” says Weinert.

Highlights from African Education Week
The African Education Week Convention and Learning Expo is the meeting and trading platform for everyone who is passionate about improving the standard of education in Africa.  Now in its 7th year, it remains the continent’s leading educational resources and training event, attracting more education professionals than any other event.  The co-located Career Indaba attracted m
ore than 4000 learners last year.  The expo aims to bridge the gap for students between studying and entering the world of work.

Highlights of the African Education Week programme on Further and Higher Education:

· Panel discussion:  The turnaround strategy for FET Colleges:  Creating institutions of choice

o Chairperson and panelist:  Sam Zungu, CEO, Umfolozi College, South Africa

o Panelist:  Dan Nkosi, CEO, South West College, South Africa

o Panelist:  Wilson Nzimande, CEO, Imethente, South Africa

· Panel discussion:  Strategies to equip learners with the skills to build their own future in tomorrow’s world

o Chairperson:  Amanda van der Vyver, Centre for Prospective Students, University of Stellenbosch, South Africa

o Do we equip learners for the workplace? The solution to take education to the next level
Elaine van Rensburg, MD, Compass Academy of Learning, South Africa

o Developing an extended curicula for NCV L2
Gert Hanekom, Manager, Centre for Teaching and Learning, University of the Free State, South Africa

o Aligning courses with the needs of the workplace
Mziwakhe Ramos Sibuqashe, Centre for Curriculum Development, Central University of Technology, Free State, South Africa

o Entrepreneurship Education in Secondary Schools in Mauritius
Dr Sheik Abbass, Lecturer, Business Education Department, Mauritius Institute of Education, Mauritius

Event dates:
Wednesday, 19 June 2013: Preconference workshops
Thursday, 20 June 2013:  Opening keynote session, Learning Expo opens
Friday, 21 June 2013: Conference sessions, Learning Expo open
Saturday, 22 June 2013: Learning Expo open, Post conference workshops

Location: Sandton Convention Centre, South Africa
Websites: www.educationweek.co.za ; www.careerindaba.co.za

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AfDB’s COMPELLING CASE FOR AFRICA’S STRUCTURAL TRANSFORMATION

Posted on 27 April 2013 by Amat JENG

For the African Development Bank (AfDB), transforming Africa’s economies entails diversifying and expanding the sources of economic growth and opportunity in a manner that promotes greater productivity for sustained and inclusive economic development.

“A major policy challenge for Africa today is how to broaden access to economic opportunities for its expanding population, including the most vulnerable groups,” the Bank says in its 2012 Annual Report, which will be presented to the institution’s Governors at the Marrakech meetings.

“Africa requires structural transformation to propel it towards inclusive growth,” the report says, citing high unemployment and underemployment especially among young people and women, as one of the main problems facing the continent today.

AfDB's headquarters in Abidjan, Cote D'ivoire

Structural transformation will not materialize unless there is a concomitant investment in skills development in areas that have kept the continent behind other developing regions. In this regard, Africa needs to harness its natural resources to build skills for its youthful population in order to leapfrog development and secure a place in the global value chain. Developing skills will unleash the dynamism of Africa’s untapped entrepreneurship potential, creating opportunities for increased job and wealth creation. An enlightened population is also important in Africa’s global engagement in trade and commerce.

“The key message is that Africa should accelerate its structural transformation by boosting the potential of its youthful population, investing in science and technology and innovation, speeding up its rate of economic integration, greening the economy and supporting private sector enterprise,” the report emphasized.

The report identifies leadership, degree of economic integration at the national, regional and global levels, as well as inclusive growth as the key factors that can influence transformation. Regional political events, weather, and price shocks must also be taken into consideration.

Mr. Donald Kaberuka

According to the report, Africa’s transformation can be realized by leveraging the huge potentials in some of the following areas:

– Infrastructure – Africa’s infrastructure financing needs — about USD 390 billion in the medium term, mostly for power and energy — are in the USD trillions in the longer term.

– Natural resources – It is estimated that Africa’s natural resource extractive industries will contribute over USD 30 billion per annum in government revenues in the next 20 years.

– Revenues from natural resources could finance a substantial part of Africa’s infrastructure development. Some countries have already issued Eurobonds for infrastructure, on the basis of natural-resource revenues.

– Demographics – Young people comprise the bulk of Africa’s one billion population. To convert this “youth bulge” into a “demographic dividend” will require investing in skills and the creation of job opportunities on a large and unprecedented scale.

– Promoting agriculture – the agriculture sector employs the vast majority of Africa’s population, and provides direct inputs to the agro-processing value chain, supplies food to urban areas, and is a source of household savings for investment.

– The Private Sector – As Africa’s economies expand, the private sector, which accounts for 90 per cent of informal employment, will become even more important, especially in industry.

– Urbanization –- Africa’s cities, with 40 per cent of the population in 2010 — projected to be 50 per cent in a generation, and 65 per cent by 2060 — are increasingly becoming the drivers of consumer demand and hence economic growth.

– Governance/Investment climate – improved governance and better macroeconomic policies – lower debt, low inflation and stable exchange rates are essential in fostering economic competitiveness.

– Technological innovation – Investment in technology, and particularly ICT, have greatly improved public access to information, spurring a knowledge economy and innovative approaches to micro-finance and the mobilization of rural producers, e.g. Kenya’s M-PESA, Kenya’s innovative mobile banking.

The strategies to unlock Africa’s potential reside in elimination of the causes of national and regional conflict to bring peace; visionary leadership and strong and effective government institutions, while empowering women and youth; strengthening human capital development through education and training, especially in science and technology, and improvements in basic services; fostering diversification, especially in agriculture and rural areas, including sustainable greening of the economy and promotion of manufacturing; and promoting intra-Africa trade through increased domestic and regional investment, and forging strong trade links with emerging partners.

The Bank will continue to support and monitor the transformation efforts of the Regional Member Countries. Accordingly, the Bank has adopted a 10-year strategy whose overarching goal is to promote socially inclusive and environmentally sustainable economic growth. The core operational priorities of this strategy include infrastructure development; regional integration; private sector development; governance and accountability; as well as skills and technology development.

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MENTORING AFRICA’S ENTREPRENEURS

Posted on 25 April 2013 by Africa Business

By Charles Kofi Fekpe

Charles Kofi Fekpe – entrepreneur, Chartered Accountant, Published Author and Speaker (www.charlesfekpe.com) (www.cfekpeconsulting.com)


Experience, we have been told, is the best teacher. Sadly, experience really is the teacher of fools. I have often asked the question, “why go through an experience in order to learn something that somebody else has already been through, learnt from, and is willing to share?” And until I find a convincing answer, I will hold on to the conclusion that mentorship is the best teacher, not mere experience. I believe in simplicity and on that basis, I define mentorship simply as “an enterprise journey in which a mentor, who has previously travelled on such a journey, leads the mentored on his.” There are a few inherent assumptions that underlie the validity of this definition and without which a mentor-mentored relationship will not work – and most of these I have grasped from my own very personal experiences in setting up my first consultancy “CFEKPE Consulting Ltd and in becoming a Published Author:

Mentors are usually chosen by protégés and not vice versa. This is the only basis upon which mentorship can be beneficial to the protégé. More often than not, when a mentor chooses a protégé, it is for the purpose of succession planning – in other words, the mentor is merely grooming someone to take after him. Even though the protégé will learn a lot, he is doing so in order to satisfy the continuity plan of the mentor. So why does the protégé have to select their mentor? Well, primarily because only the protégé knows best, where his journey is taking him, what enterprise path he wants to walk and therefore only he knows who has the matching skills, experiences, abilities etc to mentor him on such a path. Simply put, it is the only way a chosen mentor can mentor a protégé through the protégé’s eyes.

The protégé must give full access to all parts of his enterprise to be effectively led by his mentor. You see, by the time a protégé locates a successful individual to be his mentor, that individual would have already earned a track record of successes – and NO successful person likes to be associated with failures, especially if it can be avoided. As a result of this winning mind-set of mentors, it is close to impossible to find a mentor who will be happy to accept mentorship access to certain aspects of your enterprise and not others.

Mentors understand that it is the sum of the whole that creates success and that NO successes can be created with individual parts of any enterprise – if you limit their access and freedom to impact you, they would have smelt failure in the future and refused to mentor you. I have personally had experiences of people coming to me and saying “I need you to mentor me in only this aspect or this aspect but not that aspect”. And I have bluntly but politely said, “I am sorry I can’t”. Truth is, I was being asked to help them sit in a car and drive, but at the same time, being restricted from looking at the dashboard, viewing the engine, checking the tire pressure etc. They just wanted me to sit in the car and help them drive(figuratively speaking).

Now Africans, especially young Africans are realising that, (i) they do have potential and (ii) they can’t keep relying on their governments to make life work for them. As a result of these realisations, an era is unfolding in which many are diving into the energy of entrepreneurship, albeit blindly. Sadly however, most of these newbies, irrespective of how brilliant their entrepreneur ideas are, will crash along the way because, they have no idea how business works or they simply have too little time to master the dynamics of Business – these are crucial reasons for mentoring to start taking grounds in Africa. For the already successful mentor, it is an opportunity for him to do right, what he may have done wrong and to point out the holes he previously tripped into by ignorance.

Finally, the mentor must have either walked the same enterprise road before or plied other very similar enterprise routes. Let’s face it. If a mentor is leading you in a path he has never experienced before himself, then he is leading you in theory – and that, is what classrooms are for. So why exactly is mentoring even needed in the context of Africa? Well, quite simply, mentorship in the past, has taken different forms in the African context, from receiving several pieces of advice to working under someone and learning the ropes. However, mentoring, especially in the context of enterprise has never been an actual formalized activity. In the past also (and still is in several African countries), entrepreneurship has never been formally encouraged. It was never taught in schools, it was never taught at the work place and as such, it was the few restless and daring ones in society that engaged in the preserve of starting their own businesses etc. For these few, I am certain, they will truthfully say it was a very tough road to walk – it doesn’t mean it necessarily has to be repeated for the new generation of African entrepreneurs.

So what are the approaches to Mentorship – 3 ways actually: either the protégé is mentored from behind, from the front, from the side or a mixture of all three:

1. Simply put, being mentored from the front refers to the mentor carrying out his own business, in his own enterprise, leading the way as he usually would and the protégé following behind to watch and learn how it is done. It is effective when the protégé has not yet started anything on their own and are willing to learn as much as they can before plunging into the process of enterprise.

2. Being mentored from the back requires that the protégé has already started his enterprise and is leading the way in it. The mentor, in this approach figuratively only stands behind the protégé and watches him run his own enterprise, guiding him as he goes along. With this, the protégé is more or less in control and is allowed to learn as much by feeling his way forward. The Mentor watches keenly but only comes in if and only if the protégé is veering drastically off a right course.

3. Mentoring from the side, means the mentor allows the protégé to operate an enterprise with him side by side as equals perhaps in say a joint venture enterprise or similar. It is the quickest way for the protégé to learn maturity and it will normally involve a project that doesn’t involve too high a risk associated with its failure.

In conclusion, mentorship and its associated need to be mentored, is really a mind-set of those who passionately want to succeed – it really is about knowing that you do not have it all in you to be successful; it’s about knowing that you have a greater chance of success learning to avoid the pitfalls on a journey that others before you have travelled – that’s mentorship in action.

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The African Development Bank’s Compelling Case for Africa’s Structural Transformation

Posted on 23 April 2013 by Africa Business

AfDB Annual Meetings take place from 27-31 May in Marrakech, Morocco

MARRAKECH, Morocco, April 23, 2013/African Press Organization (APO)/ The African Development Bank (AfDB) Group’s 2013 Annual Meetings (http://www.afdb.org) take place from 27-31 May in Marrakech, Morocco. The 48th meetings of the AfDB and the 39th meetings of the African Development Fund (ADF) will be held under the central theme of “Structural Transformation in Africa.”

For the AfDB, transforming Africa’s economies entails diversifying and expanding the sources of economic growth and opportunity in a manner that promotes greater productivity for sustained and inclusive economic development.

“A major policy challenge for Africa today is how to broaden access to economic opportunities for its expanding population, including the most vulnerable groups,” the Bank says in its 2012 Annual Report, which will be presented to the institution’s Governors at the Marrakech meetings.

“Africa requires structural transformation to propel it towards inclusive growth,” the report says, citing high unemployment and underemployment especially among young people and women, as one of the main problems facing the continent today.

Structural transformation will not materialize unless there is a concomitant investment in skills development in areas that have kept the continent behind other developing regions. In this regard, Africa needs to harness its natural resources to build skills for its youthful population in order to leapfrog development and secure a place in the global value chain. Developing skills will unleash the dynamism of Africa’s untapped entrepreneurship potential, creating opportunities for increased job and wealth creation. An enlightened population is also important in Africa’s global engagement in trade and commerce.

“The key message is that Africa should accelerate its structural transformation by boosting the potential of its youthful population, investing in science and technology and innovation, speeding up its rate of economic integration, greening the economy and supporting private sector enterprise,” the report emphasized.

The report identifies leadership, degree of economic integration at the national, regional and global levels, as well as inclusive growth as the key factors that can influence transformation. Regional political events, weather, and price shocks must also be taken into consideration.

According to the report, Africa’s transformation can be realized by leveraging the huge potentials in some of the following areas:

–    Infrastructure – Africa’s infrastructure financing needs — about USD 390 billion in the medium term, mostly for power and energy — are in the USD trillions in the longer term.

 

–    Natural resources – It is estimated that Africa’s natural resource extractive industries will contribute over USD 30 billion per annum in government revenues in the next 20 years.

 

–    Revenues from natural resources could finance a substantial part of Africa’s infrastructure development. Some countries have already issued Eurobonds for infrastructure, on the basis of natural-resource revenues.

 

–    Demographics – Young people comprise the bulk of Africa’s one billion population. To convert this “youth bulge” into a “demographic dividend” will require investing in skills and the creation of job opportunities on a large and unprecedented scale.

 

–    Promoting agriculture – the agriculture sector employs the vast majority of Africa’s population, and provides direct inputs to the agro-processing value chain, supplies food to urban areas, and is a source of household savings for investment.

 

–    The Private Sector – As Africa’s economies expand, the private sector, which accounts for 90 per cent of informal employment, will become even more important, especially in industry.

 

–    Urbanization –- Africa’s cities, with 40 per cent of the population in 2010 — projected to be 50 per cent in a generation, and 65 per cent by 2060 — are increasingly becoming the drivers of consumer demand and hence economic growth.

 

–    Governance/Investment climate – improved governance and better macroeconomic policies – lower debt, low inflation and stable exchange rates are essential in fostering economic competitiveness.

 

–    Technological innovation – Investment in technology, and particularly ICT, have greatly improved public access to information, spurring a knowledge economy and innovative approaches to micro-finance and the mobilization of rural producers, e.g. Kenya’s M-PESA, Kenya’s innovative mobile banking.

The strategies to unlock Africa’s potential reside in elimination of the causes of national and regional conflict to bring peace; visionary leadership and strong and effective government institutions, while empowering women and youth; strengthening human capital development through education and training, especially in science and technology, and improvements in basic services; fostering diversification, especially in agriculture and rural areas, including sustainable greening of the economy and promotion of manufacturing; and promoting intra-Africa trade through increased domestic and regional investment, and forging strong trade links with emerging partners.

The Bank will continue to support and monitor the transformation efforts of the Regional Member Countries. Accordingly, the Bank has adopted a 10-year strategy whose overarching goal is to promote socially inclusive and environmentally sustainable economic growth. The core operational priorities of this strategy include infrastructure development; regional integration; private sector development; governance and accountability; as well as skills and technology development.

Distributed by the African Press Organization on behalf of the African Development Bank.

SOURCE

African Development Bank (AfDB)

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Wanted: Young African Entrepreneurs

Posted on 13 March 2013 by Africa Business

Enter or Nominate Young Businesspeople for Africa’s Richest Youth Entrepreneur Awards – the Anzisha Prize

JOHANNESBURG, South-Africa, March 12, 2013/African Press Organization (APO)/ With more than $75 000 USD in prizes it’s one of Africa’s richest youth entrepreneurial competitions and young businesspeople from around the continent are encouraged to enter.

The prestigious Anzisha Prize (http://www.anzishaprize.org) rewards young African entrepreneurs who are making a difference by transforming their communities. It celebrates initiative and innovation and identifies those who are leading by example and underscores their ability to significantly shape the future of Africa.

With $75 000 USD in cash prizes, the Anzisha Prize is hosted by the African Leadership Academy in partnership with The MasterCard Foundation. There is also a $10 000 USD Energy Prize which will be awarded to the applicant who demonstrates ingenuity in developing sustainable renewable energy sources.

The Anzisha Prize is open to entrepreneurs from around the African continent aged between 15 and 22. Entries can be completed online at http://www.anzishaprize.org – in either English or French – with the closing deadline on April 1, 2013. Individuals, teachers and organisations are also being called on to nominate young entrepreneurs in their communities.

Finalists will win an all-expense paid trip to the African Leadership Academy (ALA) in Johannesburg, South Africa, to attend a weeklong entrepreneurship conference and awards gala. While there, they will be taught by the ALA’s renowned Entrepreneurial Leadership faculty as well as experienced business mentors. Winners will share $75,000 USD, courtesy of The MasterCard Foundation, and be given networking and learning opportunities to take their projects to the next level.

Twenty-one- year-old Andrew Mupuya of Uganda was announced as the grand prize winner of last year’s Anzisha Prize thanks to his paper bag production company, Youth Entrepreneurial Link Investments (YELI). Past winners have included Kenya’s Diana Mong’are who founded recycling company Planet Green and became an evangelist for environmental conservation in her community; Ghana’s Yaw Duffour-Awuah who at the age of 16 launched a micro-lending company which has now grown to a financial services company; and Antoinette Furaha from the Democratic Republic of Congo who began a small micro-credit services company that invests in and empowers young refugee women in Uganda.

For more information visit:

•    http://www.anzishaprize.org

•    http://www.facebook.com/anzishaprize

 

SOURCE

The Anzisha Prize

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Africa’s Agriculture and Agribusiness Markets Set to Top US$ One Trillion in 2030

Posted on 06 March 2013 by Africa Business

STORY HIGHLIGHTS
  • Africa has the potential to create a trillion-dollar food market
  • But farmers need better access to help them grow and trade their products
  • A new report outlines challenges and solutions to Africa’s Agriculture and Agribusiness sectors

WASHINGTON –A new World Bank report “Growing Africa: Unlocking the Potential of Agribusiness,” says that Africa’s farmers and agribusinesses could create a trillion-dollar food market by 2030 if they can expand their access to more capital, electricity, better technology and irrigated land to grow high-value nutritious foods.  The report calls on governments to work side-by-side with agribusinesses, to link farmers with consumers in an increasingly urbanized Africa.

“The time has come for making African agriculture and agribusiness a catalyst for ending poverty,” says Makhtar Diop, World Bank Vice President for Africa Region. “We cannot overstate the importance of agriculture to Africa’s determination to maintain and boost its high growth rates, create more jobs, significantly reduce poverty, and grow enough cheap, nutritious food to feed its families, export its surplus crops, while safeguarding the continent’s environment.”

New Findings

Good prospects: Africa’s food and beverage markets are projected to reach $1 trillion by 2030. By way of comparison, the current size of the market is $313 billion, offering the prospect of a three-fold increase, bringing more jobs, greater prosperity, less hunger, and significantly more opportunity enabling African farmers to compete globally.

Performance boost needed: Africa’s agriculture and agribusinesses are underperforming.  Many developing countries such as Brazil, Indonesia, and Thailand now export more food products than all of Sub-Saharan Africa combined.  Even as export shares are falling, import of food products is rising.  The report argues that these adverse trends can be reversed through good policies, sustained public-private investment, and strong public-private partnerships backed by open, transparent procedures and processes along the entire value chain.

Untapped land and water: Africa has more than half of the world’s fertile yet unused land.  Africa uses only two percent of its renewable water resources compared to the global average of five percent.  Post-harvest losses run 15 to 20 percent for cereals and are higher for perishable products due to poor storage and other farm infrastructure.

While pointing to the need for significant investment in infrastructure the report carries an unequivocal warning: in the rush to allocate land for agribusiness, care needs to be taken so that acquisitions do not threaten people’s livelihoods and land purchases or leases are conducted according to ethical and socially responsible standards, including recognizing local users’ rights, holding consultations with local communities, and paying fair market-rate compensation for land acquired.

Adding Value

The report took an in-depth look at entire value chains – the process for taking products from farms to markets – for five commodities, rice, maize, cocoa, dairy and green beans.  Africa is the world’s leading importer and consumer of rice, paying US$3.5 billion for import bills. By increasing rice production, Senegal can help meet local demand but more capital is needed together with greater investment in irrigation and easing restrictions on access to land. Ghana, another top importer, produces more varieties of rice but at significantly higher cost.

“Improving Africa’s agriculture and agribusiness sectors means higher incomes and more jobs. It also allows Africa to compete globally. Today, Brazil, Indonesia and Thailand each export more food products than all of sub-Saharan Africa combined.  This must change,” says Jamal Saghir, World Bank Director for Sustainable Development in the Africa Region.

Success Story

Although much of Eastern and Southern Africa is well suited to dairy production, only Kenya has established a competitive dairy industry. Kenya’s industry is based partly on a formal sector for processed milk and other dairy products, but its dynamic informal sector (based mostly on raw milk) is even more important, supplying over 80 percent of the market. Kenya’s success largely comes from the entrepreneurship of smallholders’ who choose high milk-yielding cross-bred cattle, improved feeds and paid better attention to animal health.  Also, Kenya success points to the importance of improving linkages to the formal sector through cooperative milk collection and milk cooling centers. Even though challenges remain government policy, especially flexibility in setting quality and safety standards for the informal chain were vital.

Looking Ahead

The report says agriculture and agribusiness should be at the top of the development and business agenda in Sub-Saharan Africa. Strong leadership and commitment from both public and private sectors is needed.  For success, engaging with strategic “good practice” investors is critical, as is the need for strengthening of safeguards, land administration systems, and screening investments for sustainable growth.  Concluding on an upbeat note, the report says Africa can draw on many local successes to guide governments and investors toward positive economic, social and environmental outcomes.

“African farmers and businesses must be empowered through good policies, increased public and private investments and strong public-private partnerships,” says Gaiv Tata, World Bank Director for Financial and Private Sector Development in Africa.  “A strong agribusiness sector is vital for Africa’s economic future.”

 

Source: WorldBank.org

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Entrepreneurship education and training key for empowerment

Posted on 01 March 2013 by Thandisizwe Mgudlwa

ENTREPRENEURSHIP is increasingly generating more awareness in South Africa, official research confirms.

And while the industry should be a desirable employment option for most, there are various challenges that entrepreneurs entering the market should bear in mind when starting their new venture – a leading business group attests.

According to Christo Botes, executive director at Cape Town-based Business Partners, many think that becoming an entrepreneur will equate to decreased levels of stress and leaving the constant rat race of the corporate world behind, when in fact newly established entrepreneurs often find themselves in a different kind of race, with a different set of challenges.

He says that the first three to five years is a real test of survival for new businesses as there are various challenges that entrepreneurs are likely to face when starting their own business.

“Common external challenges can include competitors and financial institutions that refuse to fund your business, while internal
challenges are brought about by factors within a business, such as cash flow, management skills and industry knowledge.”

The study further shows that an entrepreneur who has experienced some of these challenges and ultimately overcame them is Warren Graver, founder and director of Envirodeck, and winner of the 2012 Small Business Entrepreneur of the Year title, who says that Envirodeck, an industry leader in environmentally conscious and sustainable decking products, has not always been a successful business and that he had to overcome a significant number of challenges in the early years of the business.

“I could not have made worse business decisions than in the first two years of opening the business, which was doomed by me not focusing sufficiently on market, product or supplier research.

“The first challenge that I faced was that although I noticed a considerable gap in the market, I was unsure on how to present the
product to an existing market that I had no experience in. It was also a market that was very reluctant to change to new products, as timber was traditionally the only way that decking had ever been done, and it proved extremely tough to penetrate a market when no one had ever seen or heard of such innovative products.”

Botes says that a business challenge for some entrepreneurs can be the ability to forge their idea and opportunity into a business idea. “Entrepreneurs usually identify a problem or gap in the market where they are able to offer an alternate solution, but struggle to integrate their solution into a business plan that ultimately promotes the company effectively and efficiently to the correct market. It is therefore vital that entrepreneurs seek guidance and advice when in the initial stages of the planning process.”

Graver says that another challenge he encountered was establishing a supplier network. “I did not do sufficient supplier research and subsequently after landing the first shipment, the supplier closed its doors. This error in judgment on my behalf meant that the initial start-up capital was quickly absorbed into obsolete inventory that would never be sold even at discounted rates.”

He also touches on the importance of managing cash flow. “The most critical element of a start-up business is managing cash flow versus inventory management, a concept that I failed to understand and subsequently a year later I had no start-up capital left.”

Botes says that most entrepreneurs face capital challenges a few months into operation as many hope to secure more capital once the business starts to grow.

He adds that entrepreneurs should not be discouraged by these challenges.

“Overcoming these challenges doesn’t have to be complicated. If problems are solved as they come up, rather than letting them escalate to a point of no return, an entrepreneur will be able to grow and move his or her business forward.” In the case of Envirodeck, Graver says the business was saved through continual focus on the gap in the market.

“Through intense global product sourcing, supplier canvassing and a life-saving loan, I managed to slowly recover and turn the business around so that by 2009 it had broken even.”

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