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by John H. Christy
When the G-8 leaders gather in Hokkaido, Japan, a number of weighty issues, including poverty, climate change and AIDS, will be at the top of the agenda. It’s a fairly safe assumption that U.S. President George Bush and Japanese Prime Minister Yasuo Fukuda won’t be exchanging African stock tips at cocktail hour, but it would be a big mistake to put the subject of Africa’s financial markets on the back burner.
Capital markets are the lifeblood of economic development. Without deep, liquid markets, it’s hard for any country or region—developed or emerging—to reach its full potential. While Africa still has a long way to go, it has made some promising strides in developing its equity markets: In 1989, there were just five sub-Saharan stock exchanges; now there are 16.
Granted, these are still immature markets in many respects. Stock-market capitalization as a percentage of GDP is less than 30% in sub-Saharan Africa. The comparable figure for Brazil is nearly 70%.
Liquidity is a more pressing concern. At the tiny Uganda Securities Exchange in Kampala, just nine companies are listed, and trading took place only 11 days last month. The exchange’s average daily volume: $200,000. Don’t expect a Uganda ETF anytime soon.
That said, investor enthusiasm for so-called "frontier markets" has never been stronger. Last month, Nairobi-based Safaricom, Kenya’s biggest mobile-phone service provider, raised $800 million in an initial public offering that was heavily oversubscribed. Also in June, Celtel Zambia raised $200 million in that country’s largest IPO ever.
Part of the reason for the excitement is that the economies of sub-Saharan Africa are in the best shape in several decades. Africa is on track to deliver economic growth of nearly 7% in 2008. Inflation, which measures below 7%, is high by the standards of the developed world, but nowhere near crisis levels. Record oil prices have certainly helped stabilize African economies, but the International Monetary Fund notes that improvements have also been broad-based, attributable to better macroeconomic policies in recent years.
As it turns out, Kenya has been a much better place to park your money in this year’s market turmoil than the Dow Jones. Stocks in Nairobi are up 5% year-to-date, vs. double-digit plunges in the U.S. and Europe and even sharper declines in last year’s market darlings, China and India.
Overall, Morgan Stanley’s Capital International Africa index, which tracks the performance of Kenya, Mauritius, Nigeria and Tunisia, is off 4% since the start of 2008, vs. a 15% plunge in MSCI’s emerging market index.
While African stocks remain mainly an institutional game, even small investors are able to tap into the region’s growth through the T. Rowe Price Africa and Middle East Fund, launched last September. The SPDR S&P Emerging Middle East & Africa exchange-traded fund is another option.
Investors have good reason to be optimistic about Africa’s long-term prospects, but plenty of work remains to be done. In a briefing last year, the African Partnership Forum outlined a number of specific goals, ranging from simplified labor laws to cracking down on corruption and improving political stability. Africa’s high cost of doing business and low savings rates must also be addressed.
These are not issues that will be easily resolved over sushi at a Japanese resort. And there is clearly a more pressing need to help Africa reach the Millennium Development Goals by 2015. But there’s no reason the G-8 leaders can’t aim even higher.
John H. Christy III, CFA, is editor of the Forbes International Investment Report. Click here for a free trial subscription and access to the model portfolio.
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The International Centre for Science and High Technology of the United Nations Industrial Development Organization (ICS-UNIDO), in collaboration with ATDF Entrepreneurship Hub, University of Zambia, Ministry of Science, Technology and Vocational Training in Zambia will hold a three day training workshop on Management Tools and Strategic Business Models in Lusaka.
Date: 14-16 July in Lusaka, Zambia
Venue: Cresta Golf View Hotel, off Great East Road.
The main objectives of the Workshop are:
1. To provide conditions and structures for the professional promotion of scientists and technicians from African countries.
2. To contribute to the development/use of appropriate technology management tools in order to increase the effectiveness of the technology transfer process in developing countries.
3. To promote a new concept of Technology Transfer Centres as “innovation facilitators” with particular attention to the sustainability of the operation, as well as to the development of a framework to stimulate academia/industry partnerships in developing countries.
4. To encourage the strengthening of technological capabilities through the promotion and training on the use of modern tools for technology strategy, development and transfer.
5. To increase awareness and capacity building at institutional level.
6. To boost awareness building on the new concept of Innovation Centres.
We are expecting approximately 30 East African entrepreneurs/decision makers, coming from Zambia, Kenya, Ethiopia, Malawi, South Africa, Tanzania, and Uganda to be actively participating to present their experiences on innovative business models in the field.
Deadline for sending applications: Friday 19 June, 2008
The June 2008 Food Summit convened by the UN Food and Agriculture Organization (FAO) called for increased investment and support for developing countries most negatively affected by high food prices. A special double issue of the ATDF Journal seeks to address the food crisis from an African perspective - with a focus on national experiences and best and not-so-good practices in agricultural policies, food production and marketing.
The Summit on rising food prices, convened by the UN Food and Agriculture Organization (FAO) in June, has called on the international community to increase assistance for developing countries, in particular the least developed countries and those that are most negatively affected by high food prices.
Papers could present national experiences in addressing the food crisis and case studies on best and not-so-good practices in agricultural policies, food production and marketing systems.
Papers may also address:
1. What is needed to enable Africa contribute to mobilize its agricultural potential
2. How sustainable is agriculture in Africa?
3. How can access to infrastructure, education, technologies and key services be ensured for small- and large-scale farmers in Africa
4. To what extent are international dimensions and institutions contributing to or can be used to avert the food crisis in Africa and
5. The impact of neocolonial patterns in the food supply chains between Europe and Africa.
The Journal is interdisciplinary and focuses on concrete policies and measures of practical relevance. Authors that are interested in contributing to this issue should follow the guidelines of the journal. The papers have to be submitted by July 15th. After a peer-review process and subsequent revisions the double issue will be published by end of August 2008.
Africa can still meet the MDGs only if…
The MDG Africa Steering Group which is made up of the African Union Commission, the African Development Bank Group, the European Commission, the International Monetary Fund, the Islamic Development Bank Group, the Organisation for Economic Co-operation and Development, and the World Bank Group outlined practical steps, strategies and programmes needed to achieve the MDGs in Africa. The Steering Group calls for the following key actions by sector:
Agriculture and food security. The Steering Group estimated that development assistance to improve agricultural productivity alone should must be dramatically increased from the current US$1–2 billion provided annually to some US$8 billion by 2010. In parallel, assistance for feeding and nutrition programmes should be raised by an additional US$4 billion by 2010. This is intended to support African Governments in their efforts to launch a Green Revolution that is expected to double crop yields, especially by smallholder farmers. Some of the funds should be earmarked as temporary subsidies for fertilizer and better seeds.
Education The Steering Group calls on development partners to finance national education strategies endorsed by the Education for All Fast-Track Initiative. Beyond universal primary education, the recommendations also focus on the need to increase expenditure on early-childhood, secondary, tertiary and vocational education, as well as adult literacy programmes.
Health International support should help phase out user fees for primary health care to ensure that the poor can access health services. Investments in healthcare providers, including through community health workers, will also need to be stepped up. The Steering Group is particularly concerned by the slow progress on the MDG aimed at reducing the high rate of maternal deaths in pregnancy and childbirth. The Steering Group therefore calls on governments to increase investments in emergency obstetrical care.
Infrastructure and trade facilitation The Steering Group asks development partners to at least double infrastructure financing to some US$23.7 billion annually by 2010, in order to close growth-inhibiting gaps in transport, power generation and transmission, communication, water and sanitation services. The large number of small and landlocked countries in Africa creates the need to substantially increase investments in regional transport, communication and power networks to support development through growth and trade.
National statistical systems, census, civil registration Progress towards the MDGs can only be measured and accelerated if we have better data. The Steering Group calls for concerted action to support a full census.
Overall, the existing EU and G8 commitments, combined with present aid flows from other sources, are sufficient to finance the estimated US$72 billion a year in external money required to implement the Steering Group’s recommendations. This figure is in line with pledges made in 2005 at the EU and Gleneagles G8 Summits to more than double official development assistance (ODA) to Africa to about US$54 billion a year by 2010.
Scaling up aid Experience shows that even large increases in ODA can be absorbed in the presence of sound policies. The Steering Group is supporting a first set of ten countries in preparing scenarios for how existing ODA commitments can be implemented on the ground through new and expanded projects and programmes. The Steering Group will help mobilize the resources needed to implement these country-owned plans.
Follow-through on needed financing Many African countries have upheld their side of the Monterrey Consensus by implementing economic and political reforms and by focusing budgets on MDG-related social expenditures. But the increase in ODA promised to Africa by the G8 at Gleneagles, which amounted to an additional US$25 billion (in 2004 dollars) per year by 2010, has not yet materialized, nor come close. As of 2007, OECD/DAC data show that annual net ODA to Africa, including one-off debt relief, emergency assistance and scholarships, is estimated to have increased by only US$7 billion since 2004.
Click here for more on Africa and MDGs
Sweet sorghum may be the answer to biofuel proponents’ prayers, according to the International Crops Research Institute for the Semi-Arid Tropics (ICRISAT).
Corn-based ethanol production has come under increasing attack following rising world food prices and recognition of secondary environmental effects (see Bridges Trade BioRes, 18 April 2008).
In a contribution to the international biofuels debate, ICRISAT recently highlighted the many promising traits of sweet sorghum — a carbon-dioxide neutral crop praised for its ecological properties. It can grow in dry climates and can tolerate heat, flooding and salinity. Unlike sugarcane, it does not require irrigation; unlike oil palm, it does not encroach into ecologically sensitive areas (i.e. rainforests).
Perhaps more important, however, is the process used to yield ethanol. Its eight to twelve foot stalk is crushed into a syrupy juice that is then fermented and distilled into ethanol, leaving the grain that grows atop the stalk intact. Since the grain is not destroyed in production, ethanol derived from sweet sorghum need not come at the expense of the food supply. As sorghum is mostly grown and consumed locally, production will have little impact on international food prices.
Poor farmers can benefit, too. By selling the stalks to distilleries, they can accrue profits without compromising their own food security. Using the crop makes sense in terms of its output-to-input ration as well. Sweet sorghum ethanol production generates eight units of energy for every unit of energy invested. Comparatively, corn has a two-to-one output-input energy ratio.
With the many benefits in mind, the US Department of Agriculture will host an International Conference on Sorghum for Biofuel from 19-22 August 2008 in Houston, Texas.
Source: Bridges Trade BioRes, Vol. 8 No. 9, 16 May 2008
"Sweet sorghum: "Smart crop" which can produce food and fuel," AFP, 13 May 2008;
"Sweet sorghum: A new smart biofuel crop that ensures food security," ICRISAT, 12 May 2008;
"Sweet sorghum promoted as "smart" biofuel," REUTERS, 13 May 2008.
The current debate on rising food prices and food security has so far focussed on a few crops (rice, wheat and corn). This debate needs to be placed in the larger context of agricultural productivity and food security, which addresses the diversity of food crops, their availability and access especially in poor countries. Research and technology is an important factor in this debate.
Ugandan scientists with the help of the Association for Strengthening Agricultural Research in Eastern and Central Africa (Asareca), launched its cassava biotech capacity project through its Agro-biodiversity and Biotechnology programme at the National Crops Resources Research Institute (NCCRI) on April 30, 2008.
Cassava’s ability to produce food under marginal conditions has made it a popular crop among Africa’s poor. According to scientists, cassava is the most consumed crop in East and Central Africa with over 30 million tons of it being produced annually. On average, the value of cassava production between 1961 and 1999 in Uganda amounted to$2 billion.
But cassava mosaic, a viral disease and cassava brown streak disease are the most important constraints affecting cassava production in Uganda and most parts of African countries.
Source: The Africa Science News Service (ASNS)
Accra, 21 April 2008
Sana Zaal Burgan, founder of a business that caters to international "medical tourism" clients seeking treatment in Jordan, won the inaugural UNCTAD Women in Business Award at a ceremony Monday at the UNCTAD XII quadrennial conference in Accra, Ghana. Ms. Burgan’s firm, called Med Grant, was begun with US$3,000 and is now worth an estimated $450,000. She received the prize from Tarja Halonen, President of Finland.
Second place went to Sapphira Nyabunwa of Uganda, whose firm, Safi Cleaning Services Ltd., based in the capital of Kampala, provides professional cleaning services, has 800 employees around the country, and realizes a monthly turnover of US$88,000.
Third prize was awarded to Augustine E. Hammond of Ghana, whose business, Jem Afrik Creations Ltd., designs and produces afro-ethnic clothing ranging from casual wear to business apparel to evening dresses. It began with a single employee in 1986 and now has 55 permanent employees and 15 trained and mentored workers who have set up their own businesses and function as subcontractors.
The three were among 10 finalists selected from among women entrepreneurs who have participated in Empretec, an UNCTAD-run programme that trains promising entrepreneurs in developing countries. There are 27 Empretec centres worldwide. The winners were selected by a panel of experts in entrepreneurship.
“These women are pioneers of development, and can be role models for others," said UNCTAD Secretary-General Supachai Panitchpakdi. "I hope that UNCTAD’s new ’Women in Business Award’ will serve to highlight the challenges faced by women in entrepreneurship, and provide an incentive for women in all countries to rise to the challenge and become entrepreneurs.” Ms. Burgan said "The EMPRETEC programme in Jordan offered training that helped me to improve my business in different ways. I realized that I am not crazy and that thousands of entrepreneurs all over the world share my personality traits. Being one of the top three finalists selected … has greatly boosted my morale and self esteem."
Ms. Nyabunwa of Uganda, who received her second-place award from Ghanaian First Lady Thersea Kufuor, said "I would like to see my business, which has won contracts to service most of the leading companies in Kampala, remain the No. 1 cleaning service in the country. It has provided work for many young people, including the disadvantaged and school dropouts."
Ms. Hammond, the third-place winner, said "After attending the maiden edition of the EMPRETEC training workshop in 1990, I became aware of the opportunities that existed in the industry. Through EMPRETEC Ghana, one of the financial institutions with a stake in the Export Development and Investment Fund (EDIF), I was able to get a loan to acquire new tools." She received her prize from Mary Robinson, former President of Ireland, former United Nations High Commissioner for Human Rights, and current Director of the organization Realizing Rights: the Ethical Globalization Initiative.
The awards consist of study tours to selected institutions where innovation is strongest in the domains relevant to the winning businesses. Depending upon the specific needs of the firms involved, the prizes may be used for participation in training, seminars, or networking events.
• First prize is a a study tour worth US$ 6,000. • Second prize is a study tour worth US$ 3,000 • And third prize is a study tour worth US$ 1,500.
The tours will be organized by UNCTAD in collaboration with the African Technology Development Forum (ATDF).
The 2008 Women in Business Awards are intended to be the first of a annual series.
Read more on UNCTADs click here World Investment Forum
Food security has been put on the top of the agenda. And countries are being asked to rethink the impacts on food stocks when producing biofuels as India looks for a share of the African resources.
TRADE: Two-way trade between India and African nations stood at $30 billion in 2007/8, rising from $967 million in 1991.
Agriculture, education and information technology have been identified as the main growth areas.
Nigeria is India’s biggest trading partner in Africa, and accounts for 11 percent of oil imported by Asia’s third-largest economy. Bilateral trade is estimated at $7.9 billion.
The Exim Bank of India and its African counterpart have signed an agreement for a $30 million line of credit, to be provided by New Delhi to finance India’s exports to Africa.
TECHNOLOGY: Ethiopia was selected as the first country to benefit from the pilot phase of the Pan-African E-network Project, a joint initiative between the Indian government and African Union to develop information communication technology infrastructure across the continent.
Under the initiative, India will donate $1 billion to connect 53 African countries through a satellite and fibre-optic networks to promote telemedicine and tele-education programmes.
Sources: Reuters/All-Africa/www.theindian.com/Asia
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