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Thank you for reading our July issue of Unleash Africa. We have published several days into the month due to the long holiday weekend in the U.S.
In This Issue:

A plug for Charleston, South Carolina, from John I. Akhile, Sr.

I had the pleasure of visiting Charleston, South Carolina, recently.  My gracious hosts were Mr. Mark and Mrs. Charlie Andrews. On my first night, Mark introduced me to the former governor of South Carolina and current Congressman, Mark Sanford. They showed me a very special view of Charleston, South Carolina. I had a great time and learned a great deal. You can’t find finer people than the people I met and mingled with during the visit.

While there, I had a chance to learn about a unique wristband safety technology that will be entering the market soon. It is a wrist band safety devise that transmits real time images to first responders in the area of the wearer in the event of an attack. In a potential assault, the wrist band will capture an image of the perpetrator but more than that, there will be an audible broadcast that the perpetrator’s image has been captured. The announcement should stop the perpetrator from further complicating their situation and cause a hasty retreat from the environment. For our African readers take note of the opportunity and stay tuned to Unleash Africa for more news and developments about the product.

Inspirational Journey Through Great Leaders in History

Lee kuan Yew - History Of Singapore

Our video segment is a free flowing segment that features video of issues that are of crucial importance to unleashing the potential of African countries. The video is continuing our feature on Singapore and the stewardship of the late maestro, the Honorable Lee Kuan Yew (LKY). The video is a documentary about Singapore from its founding to the modern era. It is a well-tailored narrative that highlights the rise of one of the most improbable national rags to riches countries in the history of the world. The salient point of the documentary is that if a little fishing village can transform itself to a city and then a country and become one of the most successful economies in the world, what possible excuses have African countries for not striving to make their (own) mark on the world economy?

How the IMF Underdeveloped Africa

by Eron Henry

It goes without saying. African countries carry full responsibility for the underdevelopment of their economies.

That said, there were as many external as internal factors responsible for the malaise of African economies. It is true. African leaders are responsible for managing these externalities, their impact, or avert them entirely, where it lies within their means or powers to do so.

Created in 1945, the IMF is governed by and accountable to the 189 countries that make up its near-global membership.

It could be said that the impositions of the International Monetary Fund (IMF), unlike most natural disasters, were within the management of African leaders. Other persons argue that they weren’t: The system is gamed against Africa and other developing regions of the world such as Latin America, the Caribbean, and parts of Asia.

However one looks at it, whether African leaders bear all, some, or none of the blame, impositions of the IMF, what the IMF prefers to call conditionalities, have done a tremendous disservice to Africa and elsewhere.

Let’s look at the evidence. East Asia, the one region of the developing world that escaped the strictures of the IMF, that refused to follow IMF or World Bank dictates, has thrived. First Japan, followed by South Korea, Taiwan, Singapore, Hong Kong and, of course, China, have cut their own paths, refusing to submit to IMF diktats. Most of these countries and territory (Hong Kong not being a country) have either achieved developed world status or are on the way to doing so.

Let’s look at Africa (one could do the same for Latin America, another region devastated by IMF conditionalities). Regardless of national or cultural peculiarities, the IMF, for years, especially in the 1980s and the 1990s, imposed cookie cutter solutions. Meaning, the same remedies were prescribed regardless of the maladies and the patient. How foolhardy this is, it's seen if one compares what the IMF and its sister agency, the World Bank, did, to the silliness of a lawyer offering the same legal remedy to all legal questions or a doctor prescribing the same regimen of treatment to all patients and all medical problems.

Usually, IMF solutions involved telling countries they needed to diversify and sell off state enterprises, companies and assets, privatize government services and programs, reduce spending on the social sector, especially education and health, and to reduce or eliminate social safety net programs. Countries were also told they needed to eliminate or reduce tariffs and custom duties so as to facilitate free trade and to remove protections from local industries. It was only under such conditions that countries would receive “structural adjustment loans,” aimed, supposedly, at correcting balance of payment difficulties.

A whole host of problems often resulted from these measures. When government companies and enterprises were privatized, too often these companies were sold to government favorites and connections. Other times, they were acquired by people who had little business sense. Problems were exacerbated if the privatized entities were essential services, usually utilities such as electricity, water and telecommunications, and made even worse as these utility companies often held monopoly positions.

Similar problems plagued the privatization of government services. Little or no competitive bidding was done and the contractual process handled with an absence of transparency. Nepotism reigned and government favorites and connections were in pole position to get these plum contracts.

These sins lay squarely at the feet of African leaders. The IMF may impose bad programs, but too many leaders made such bad programs worse by nefarious processes conducted without proper guidelines and policies.

But even if transparency reigned in the privatization process, too often these services – health, water, electricity, etc. – after privatization, the new owners had little incentive to make these services available to poorer citizens. In instances, these services were priced out of the reach of poor citizens or at the high end of what they could afford. A solution would be for the government to put in place regulatory bodies with enough teeth to impose needed restrictions or offer redress when abuses arose. Alas, this was often not the case.

Besides, reduction in investment in education and health was shortsighted as it reduced the capacity of a country to have an educated and healthy workforce, which is essential for a thriving economy.

The removal of safety net programs, usually aimed at the most vulnerable – children, the elderly, and the poor – increased poverty as these persons often fell between the cracks even further as they had little or no other means of support. Such shortsightedness affected businesses indirectly. Because the poor spend a higher percentage of their income on consumption than the middle class or the wealthy, retail outlets such as shops, stores, and malls suffered loss of sales when government safety nets and social assistance programs ended.

The removal of tariffs, custom duties, and fees have devastated local industries, not to mention resulting in the loss of a source of government revenue. When duties are removed, cheaper imports lead to customers purchasing such items and cause local companies and industries to lose market share. This happened in Jamaica in the early 1990s when the local dairy, poultry, garment, furniture, and other industries were devastated by cheap imports, some of which were dumped goods, after the government of the day made Jamaica one of the most open countries in the world for trade. While the nation was being praised by the international agencies for its actions, local producers, large and small, were closing or were transforming themselves into trading entities.

The IMF of the 21st century has recognized some of its mistakes and has changed its approach in some instances. The Washington Consensus and Chicago School formulations did not work. They were counterproductive. Sadly, countries in Africa, Asia, the Caribbean and Latin America are yet to recover from the hangover caused by the poisoned chalice given to them by the IMF in the 1980s and 1990s. They are riven with debt from economic austerity programs that did not work, that failed to bring about growth and development.

All of this combined with weak governance and widespread corruption that beset too many governments of the last half of the 20th century, to create a toxic brew of high indebtedness, poverty and suffering. The IMF, like African leaders of the past and present, has much to atone for.

Eron Henry is a communications specialist who has attained the Accreditation in Public Relations (APR).  He is currently communications director for an international nonprofit where, among other things, he edits a magazine and a newsletter, manages a website, oversees social media, and handles media relations. He has authored or edited more than half a dozen books, including Reverend Mother, a novel, and is in the process of working on two others. Henry is currently a member of the board of the Religion Communicators Council and of Serve Trust, which is based in Andhra Pradesh, India. He blogs at www.oletimesumting.com.


Africa's Ticking Time Bomb: $35 Billion worth of Eurobond Debt
by Trevor Hambayi

 
The 2008 economic crisis is the single largest factor that has driven developing countries to seek alternative sources of financing for social and developmental infrastructure. This was a result of the drying up of bilateral loans and grants from European and American countries.

Some African countries put forward the argument that the funds from capital markets, or sovereign bonds, are a cheaper source of alternative financing. A sovereign bond is a debt security issued by a national government known as a Eurobond. It is denominated in a foreign currency, usually the dollar, rather than what its name (euro) implies.


African countries are facing a huge problem brought on by a sovereign debt crisis. Shutterstock


Seychelles holds the distinction of being the first sub-Saharan African country to issue a sovereign bond – it issued a US$30 million bond in 2006. This was followed by the Democratic Republic of Congo (DRC) issuing $454 million, Gabon $1 billion and Ghana $750 million in 2007.

Between 2010 and 2015 at least a dozen other sub-Saharan African countries, including Côte d’Ivoire, Senegal, Angola, Nigeria, Tanzania, Namibia, Rwanda, Kenya, Ethiopia and Zambia issued sovereign bonds. They raised commercial debt in excess of $19.5 billion.

Many of these Eurobonds will mature between 2021 and 2025. It will require these sub-Saharan African countries to repay an average of just under $4 billion annually in that period. But they are already currently bleeding a rising total of just over $1.5 billion in annual coupon payments on these Eurobonds. This represents a total of an additional $15 billion across the term of the Eurobonds. The total accumulated bonds are in excess of $24 billion. The principle amount of this is $35 billion.

The $750 million Ghana bond, with a ten-year maturity, was issued in October 2007 and was four times oversubscribed. The principle repayment, which kicks in in 2017, will signal the direction of the continent’s economic dynamics in the years to follow. The writing is already on the wall. Ghana has already buckled, requiring an International Monetary Fund (IMF) financial restructuring package.

Ghana’s Story

At the end of 2015 Ghana agreed to an IMF bailout. It is underpinned by austerity measures that include reviewing and streamlining tax exemptions for free-zone companies and state-owned enterprises. A new tax policy is expected to be enacted for small businesses and a raise in value-added tax is planned.

Ghana’s financial problem was brought on by a sovereign debt crisis, rising interest costs, policy slippages and external shocks that have dampened the country’s medium-term prospects. The country carries a total Eurobond debt of $3.53 billion on its external debt of more than $11 billion. Its debt position of $23.38 billion (both local and external) represents more than 55% of gross domestic product (GDP) and is teetering on the edge of being unmanageable. The convergence criteria under the monetary union protocol standard for Africa states that public debt should not exceed 50% of GDP in net present value.

Ghana, whose growth is driven by the exports of gold, oil and cocoa, now faces the daunting task of managing its fiscal deficit, rising inflation, an energy deficit and reduced government revenue due to the slump in global commodity prices. The challenge, as in most African countries, couldn’t come at a worse time. Ghana is scheduled to hold presidential elections in 2016. Fiscal discipline will be a factor of least priority on the political agenda.

The World Before Sovereign Bonds

Prior to these countries issuing the bonds, they carried foreign debt in the form of bilateral and multilateral concessional loans. These loans carried an average interest rate of 1.6% and a maturity of 28.7 years. The financing from sovereign bonds comes at an average floating coupon rate price of 6.2% with an 11.2-year maturity period. In recent times the coupon rates on these bonds have hit record highs. This is a reflection of deteriorating economic indicators among sub-Saharan African countries.

The Achilles heel for these countries, outside the realm of poverty, governance and political will, is their dependence on one major export product to generate foreign exchange. In at least seven of these countries there is direct dependence on one key product to drive the country’s economy. This is evident with Angola (oil), Zambia (copper), Nigeria (oil), Gabon (oil) and the DRC (copper).

Warning Signs

In 2014 IMF Managing Director Christine Lagarde cautioned African countries against endangering their debt ratios by issuing sovereign bonds.

Eurobond issuances by African states.

And in the same year Maria Kiwanuka, former finance minister of Uganda and current economic advisor to the president, alluded to the fact that African governments are under pressure to take on debt at market rates despite the risk of public debt rising to unsustainable levels during currency depreciation and increasing bond yields.

Uganda is the only African country that has spoken of the acquisition of Eurobonds as too risky for countries on the continent. Governor of the Bank of Uganda Emmanuel Mutebile said:

"We should not be complacent about the dangers of big projects built on sovereign debt because it would be unwise for African countries, which will never again get debt relief. From what we are seeing in Ghana, we are not yet ready to issue sovereign bonds."

The Risks Involved

The cost of finance for the Eurobonds is the first key risk factor. Internal analysis of the exchange rate risk must be considered, unless the country truly believes that it has the capacity to raise the resources for repayment of the debt from commodity export revenue.

But future indicators are all very ominous, showing a slowdown in demand for commodities from China, a possible increase in bond yield rates by the US, lowering oil prices and downgrading of global growth indicators. All these factors will put pressure on countries that have issued sovereign bonds.

The second key risk in the procurement of sovereign bonds lies in debt sustainability. This is the risk associated with poor management of the proceeds of the Eurobond. They end up being invested in non-income-generating social infrastructure to the extent that the government is unable to raise the necessary funds to repay the loan. Other than capital infrastructure developments at least three of the countries – Rwanda, Gabon and Ghana – have used part of their Eurobond proceeds to re-finance public debt.

Sub-Saharan African countries seem to carry a vicious circle of problems revolving around underdeveloped economies. They oscillate around single-commodity exports, recurring power deficit issues, lack of fiscal discipline with budget deficits well above the convergence criteria for Africa of 3% of GDP, and unending rising debt positions even in times of good economic growth.

The cyclical events of unsustainable debt of the 1980s, when the continent’s debt position stood at more than $270 billion, was attributed to – depending on which side of the fence you’re on – poor governance, corrupt leadership and protracted civil wars in many African countries.

The continent was also undergoing rapid population growth while lacking any meaningful democratic checks and balances, and implementing ambitious social and public growth strategies. The crossroad again was with the economic downturn and the drop of global commodity prices. These countries have come a full circle.

Sub-Saharan African countries will require strong political will, prudent financial management, sustained fiscal discipline, long-term economic growth strategies, export diversification and sustained creation of employment to achieve economic emancipation. The current global economic slow down will prevail for at least three to four more years. This means that these countries will continue to bear rising inflation, debt repayment crisis, reduction of GDP growth and challenges with managing their fiscal deficits.

Déjà vu, Africa. We are set for troubled times.
 


This is an extract from a working paper titled “Africa Eurobond Financing A Ticking 35 Billion Debt Bust” written by the author. It was originally published on May 19, 2016 on www.theconversation.com.

Trevor Hambayi, has extensive global experience spanning over 20 years, both within the private sector and quasi government organisations, which includes stints with the UN in a conflict zone, investment analysis with a US based financial institution and consultancies with aid organisations and industry specific associations in Zambia.

Mr Hambayi, a Financial Analyst and currently a PhD research Fellow with the University of Bolton, advocates for the African continent's economic emancipation through improved access to finance for SMEs. He consults on matters relating to finance that include funding sources for business enterprises, financing models, economic stimulus, equity investments and private sector interventions to economic growth.


 

Getting the Basics Right: Killing Corruption in African Countries


by John I. Akhile Sr.
 

The key to realizing the potential of African countries is to get the basics right. It means understanding good and poor governance and the role each plays in engendering prosperity or economic failure. It also means understanding the time, place and role of global political agitation and the business and practical realities of economic development. For instance, Zimbabwe turned down the IMF’s Structural Adjustment Program twenty years ago. The basis for rejecting the IMF was to make a political protest against so-called “conditionalities.” The source of IMF’s consternation at the time was that Zimbabwe was using borrowed funds to finance an interventionist war while simultaneously unable to pay its creditors. President Mugabe famously said then that the “IMF should shut up.” It is a classic case of mixing business with politics. In the quarrel with the IMF, President Mugabe's vision was clouded by political ambition while the IMF was focused on the basics of prudent economic management, i.e., getting the basics right.



A Necessary U-Turn Towards the IMF in Zimbabwe

However, after twenty years of economic catastrophe and wasted opportunities, Zimbabwe is reported to be in the final stage of an agreement with the IMF for assistance that will include the terms that the country turned down nearly twenty years ago! It is an example of how mixing business and politics can lead to disastrous results for a country’s people. President Mugabe railed against the IMF twenty years ago but has now changed his attitude and is supporting his country’s effort to gain IMF assistance. In the interim, the institution has changed little, although there have been some structural modification to its general application of remedies in order to achieve more successful results. The point being that on the whole, IMF criteria and lending policy is open knowledge and is not drastically different from when Zimbabwe sought assistance almost two decades ago. Other than coming to its senses there is no other rationale for Zimbabwe to accept today, what it vehemently refused to accept almost twenty years ago.

http://image.slidesharecdn.com/imfppt-140818030830-phpapp02/95/imf-ppt-20-638.jpg?cb=1408331374

Fig 1. IMF Conditionalities

Greek Example of Politicizing the IMF

A poster-child of politician’s penchant for vilifying the IMF for the problems they have caused is Greece, a member of the Western alliance. Greece is instructive for African countries in their dealings and relations with the IMF. For decades, Greece was run like a corrupt political enterprise by irresponsible leaders who eschewed the virtues of good governance. Greek people wanted it that way because they repeatedly voted the type of leaders that perpetuated corruption and bad governance to leadership of Greece. In order to gain entrance into the European Union, Greece “cooked” the books to show debt to GDP ratio, current account deficits, etc., that met European Union requirement because its leaders were looking for successful EU nations like Germany and the U.K., to assume responsibility for their corrupt edifice, also known as the "Greek economy." Almost immediately after admittance to the EU, Greece revealed that its debt to GDP was not 108% but rather 180% and current account deficit was actually 12.6% instead of 6% as had been declared in the audit of its economy. The nation has been negotiating various debt relief programs with the IMF since 2010. In 2012, Greece registered the largest sovereign debt default in history. Greek politicians have tried to vilify the IMF for their problems and Greece elected SYRIZA on a platform to reject IMF conditions and, if necessary, to take Greece out of the European Union.

https://www.hrw.org/sites/default/files/styles/open_graph/public/media/images/photographs/2005_uganda_corruption_presser.jpg?itok=Y3VXQWQg

Fig 2. Corruption is an invisible killer

Alexis Tsipars campaigned on a hardline approach to the IMF and European Union negotiators. After he assumed office and learned of the reality of his country’s financial situation first hand, he was forced to change his position and accept the very conditions that he campaigned against. “The 41-year-old leader went to the polls in January promising to roll back austerity measures imposed by the so-called troika of international lenders – the European commission, International Monetary Fund and European Central Bank – but was instead forced to accept even harsher terms in July after Greece teetered on the brink of bankruptcy and a eurozone exit. As part of the €86bn (£63bn) bailout deal, Tsipras agreed to significant pension reforms, tax rises and a major privatisation programme.” The chief antagonist of the IMF in his government, his Minister of Finance, Yanis Varoufakis, was forced to resign. Greece changed its tone from antagonist to a plaint debtor whose profligacy, in the first place, created the tangled mess from which the banker is trying extricate it.

UK’s Example of a Pragmatic Approach to the IMF

The first and preeminent lesson to take away from the history of dealings with the IMF is: (1) to understand the role of the IMF as a lender of last resort; and (2) to make sure that leaders manage their affairs in such a way that they never require a bankruptcy banker like the IMF. If countries do not invite the IMF into their affairs, they will never experience conditions for doing business with the IMF (aka conditionalities). Inviting the IMF usually means a country’s financial affairs are out of sorts and cannot be managed without a “bankruptcy banking institution,” which is what the IMF is for countries. Dealing with the IMF requires that governments remove politics from the sphere of issues to consider and above all to refrain from demonizing the hand that is trying to feed them. The IMF is a messenger organization and as a banker has very strict operating guidelines as all banks must. Its job is particularly onerous because it is usually, albeit not always, dealing with countries that have recalcitrant leaders who have misspent their nation’s resources and are looking for a scapegoat on whom to pin the blame.

In contrast to Greek experience, the United Kingdom resorted to the IMF in 1976. As usual, the loan had conditions similar to what every African country and, in fact, every country that invites the IMF receives. The IMF as a banker of last resort is intent on making room within existing revenue flows to enable the government to begin to pay arrears of debt so that the country can access financial markets. It’s very much like an individual or a business going before a Bankruptcy Judge. There was vigorous debate during and after the loan about whether Britain needed the loan and there have been numerous forensic analysis of monetary policy during and after the IMF loan. It was a humiliating experience for the country but its leaders were pragmatic and took the loan even though it portended a change in government for the party in office. The aftermath of the IMF loan and other challenges led to U.K. electing the first woman Prime Minister in its history in Baroness Margaret Thatcher. Not too many people know of the experience of Britain with the IMF because it was handled with dispatch and efficiency once it had established that the loan was inevitable.

Zimbabwe and Greece’s experience has dragged on for years with each country fighting it every step of the way. For these countries, IMF conditions for a loan facility, has become political fodder with which to stoke the passions of their people, which is shortsighted and wrong-headed as Zimbabwe and Greece have discovered. In confusing the business of borrowing with politics, the leaders of the countries have failed their people and region. Getting it right for countries who find they are facing financial conditions requiring IMF intervention means, separating the business of restructuring their economy with the politics of managing the country.

Getting it Right in the Fight to Kill Corruption

Getting it right in governance also means solving problems. Good politics is the art of solving society’s problems. Most African leaders misunderstand their mandate. There are signs afoot that economic storms are gathering on the African continent due to low commodity prices, high unemployment and poverty. In order to avoid another lost two decades, African leaders have to exhibit a level of governance competence commensurate with the times. It means getting the basics right at every level of governance required to run properly functioning societies.

To Alexis Tsipars’ credit he has taken on the mandate of delivering good governance to the Greek people. “Tsipras told supporters that he would tackle endemic corruption in the country. ‘The mandate that the Greek people have given is a crystal clear mandate to get rid of the regime of corruption and vested issues,’ he said. ‘We will show how effective we will be. We will make Greece a stronger place for the weak and vulnerable, a fairer place.’”

https://qzprod.files.wordpress.com/2015/12/a-woman-protesting-corruption.jpg?quality=80&strip=all&w=1600

Fig 3. Poverty is one of the fruits of corruption

In African countries, corruption has become a monstrosity that feeds on the aspirations and potential of people and countries. To grow economically, African leaders, whether they like it or not, have to get the basics right by first committing, without equivocation, to killing corruption. It means setting a zero tolerance regime and agenda for corrupt practices and acts. It is prevalence of lack of accountability in financial affairs and corruption that precipitates the invitation to the IMF in the first place. Through kickbacks on contracts, countries pay more than necessary for services and corrupt officials pocket the difference. Open and transparent bidding will put paid to that instantaneously. Officials establish illegal tolls in administrative processes that allow them to extort funds from citizens who come to their area of responsibility for vital services.

To get the basics right in the context of eradicating illegal tolls from the process of administering public services means creating a system of oversight through electronic monitoring and accountability. Electronic surveillance will catch scoundrels in the act of extortion. To establish failsafe accountability requires a forensic investigation of the entire civil service to determine all the critical control points. These are areas that are susceptible to abuse. Following the results, a process flow that identifies each duty and the duration required for processing activities should be displayed in full view of the public.  A process for redressing undue delays should be posted so that the public knows where to turn when things are not proceeding in good order. Anchoring the process is an oversight regime that holds each department accountable by reviewing each activity to determine how it was executed and holding the responsible parties accountable when activities are not processed according to set timeline.

In the last Nigerian government, South Africa detained two planes that came into the country toting millions of dollars in cash to pay for weapons for the army. Everyone, except Nigerians of course, know that that is not the proper way for a nation to purchase armaments. Every African country is hamstrung by the scourge of corruption.

Getting it right on killing corruption means. (1) Creating process flow systems in administering civil service tasks that thwart corrupt activities. (2) Establishing electronic monitoring devices that catch perpetrators in the act of perpetuating corrupt acts. (3) Having an open and transparent financial administration that informs the public of public revenues and expenditures. (4) Open and transparent bidding for public contracts at all levels of government. (5) Ensuring that every public official declares their assets before, during and after leaving office. (6) Guiding public accounts and revenue flows to ensure that funds due to the public are collected in timely fashion but also that outflows are managed according to proper accounting procedure. (7) Making sure that no public official can treat public funds like their personal fund. (8) Putting real teeth into institutions that manage law enforcement in society. In the process of Killing corruption, getting it right means creating an environment that rebuffs corruption because perpetrators will be caught and punished.


1 http://www.irinnews.org/report/10117/zimbabwe-imf-should-%E2%80%9Cshut-%E2%80%9D-mugabe
2 http://www.imf.org/external/np/loi/2015/zwe/093015.pdf
3 http://www.imf.org/external/np/exr/facts/howlend.htm

 

John I. Akhile Sr. is the author of two books: Compensatory Trade Strategy: How to Fund Import-Export Trade and Industrial Projects When Hard Currency is in Short Supply and now Unleashed: A New Paradigm of African Trade with the World. He is also the President of African Trade Group LLC., a U.S. based trading company.


Innovation and Export Will Drive African Economic Growth

by Omono Okonkwo


Many stories trail the origin and sustenance of innovation in the world, one of which is claims that Africans may not be entirely equipped enough to invent what they need and build on such creations to make a better life for themselves. This is because many African countries are too reliant on the creations of other countries for what they need.


While this may paint a somewhat bleak picture of the future of the dark continent, there is hope for us all, due to the fact that in recent years, Africa has managed to present the world with geniuses of various ages and dispositions, who create something out of nothing, thereby placing the continent on the fore against other countries who have been known as masters of innovative thinking.

The Anzisha Prize fellowship is one example of how Africa has emerged as a master of innovation. The youngest African entrepreneurs given a chance and honoured for what they have been able to make with the resources they have access to.

According to the Anzisha Prize website, the initiative seeks to award young entrepreneurs who have developed and implemented innovative solutions to social challenges or started successful businesses within their communities.

The problem however is that even if Africa ends up producing great minds which produce several goods, these creations will die a natural death if no support is given to them so as to sustain the rise in innovation.

Without a doubt, poor financing and complete neglect of innovators and their creations are a great hindrance to the thriving nature of innovation. Every day, several innovators are left no choice but to roam the streets of their countries with no choice but to search for regular jobs in an over-saturated labour market. They end up under employed, stuck in a rut, with no way of realizing their dreams of flourishing financially while providing solutions to their country’s economic problems.

During the last week of May 2016, the National Bureau of Statistics (NBS) in Nigeria recorded a dead end in the country’s unemployment rate. According to the NBS’ Unemployment Watch report, between December 2015 and March 2016, the population of unemployed Nigerians increased by 518,000 to over 1.45 million.

Also, the country’s economically active or working age population increased from 105.02 million in the fourth quarter of 2015 to 106 million by the end of March 2016 but the actual population of people willing, able and actively looking for work increased by 1.99 per cent, from 76.9 million in fourth quarter of 2015 to 78.4 million in the first quarter of 2016.

Africa has a choice – ignore the viability of the innovation sector (an industry all its own) or decide to invest in young and bright innovators who have the capacity to create their way into transforming their countries into economic powerhouses.

Africa needs to step up her game in the areas of response of the government, the private sector and individuals to the emergence of innovators in their countries. Being that we are living in a social media sensitive era, some of these innovators hit social media circles, start trending and gather praises for their creations for days or weeks, after which, they are forgotten and life returns to normal. If support can be granted to those who encourage importation of goods, why hold support from those who can turn the tables around and develop exportation behaviour for African countries?


For instance, a 15-year-old Nigerian inventor, Babatimilehin Gabriel Daomi who has invented items such as a mini digital microscope, speedboat and powerbike toys, drilling machine, water fountain, vacuum cleaner, cell phone charger and even a small drone from homemade materials may likely be found following a different path in a few years if government or private sector individuals do not support and polish his raw talent so the country can benefit from his inventions on a more improved and large scale.   

But how exactly can Africa make its economy stronger through innovation?

Ifediora Amobi, a Nigerian economist says any country that decides to focus more on exports as opposed to imports can slowly but surely develop its economy to the extent that it will be a worthy rival to any country that has been focused on exporting for longer than it has. This is undoubtedly the way Singapore and other Asian countries have been able to build their way to economic sustenance.

“It is time for Africa to stop being the stooge of other countries who want to test their products on the region’s countries. Why can’t we export our own goods, produced by our very brilliant innovators? Innovation is one way to encourage and sustain exporting power in a country.

“If the private sector can invest in entertainment as well as reality shows where entertainers win substantial sums of money, isn’t innovation a solid investment as well? At least in the case of the latter, the country benefits twofold because these innovators go on to become producers of goods which make way for exports,” he said.

Omono Okonkwo is a Nigerian avid reader and writer. She has written for several platforms including Ventures Africa and Edufrica. She currently writes for Premium Times. Her interests are Business, Innovation, and Policy on the continent. You can follow her on Twitter @omonowrites.

Five Successful African Export-driven Entrepreneurs


by Gayle Cottrill
 
 
Every month we feature an African-based entrepreneur that has been successful in their endeavours to unleash their potential and that of their country’s resources. This month we are highlighting five businesses that have developed into some of the top and more creative exporters in their respective country.


 

titre_5049128.pngFeatured on Forbes, CNBC Africa, The Guardian, and Bloomberg as a success story, Madlyn Cazalis is a Cameroon business founded by Christian Ngan and is a leading supplier of organic beauty products in Cameroon, Central Africa, and has even broken into the European market.

 

Feed Green Ethiopia Exports Company is an Ethiopian business founded by Senai Wolderfael. According to their website, “Feed Green Ethiopia Exports plc is one of the leading food export company based in Addis Ababa, Ethiopia. It was established in 2012 and it is registered and licensed company by the Ministry of Trade and Industry.” Their unique product line includes, “fresh injera and traditional special blend ethiopian spices...which are used in different cuisines all over the world.” They export to the USA, Europe, Middle East, India, and China.

 

“In 2009, [Vava Angwenyi] started Vava Coffee, a social enterprise whose main aim was to contribute to better future prospects for local communities and the coffee industry as a whole. The company ensures sustainable livelihoods for the people and communities in which it works.” Now Kenya’s Vava Coffee is expanding to European and US markets and, according to an interview with thefounder.co.ke, Vava Coffee “aims to have 80/90% of [its] business come from the export side.”

 

Tsonga Shoes wanted to be the first international “footwear and accessory business out of South Africa.” Founded in 1983, the business has become a booming success. They export their handmade products to the US, Germany, Switzerland, France, Australia, and New Zealand. According to an interview with the BBC, Adrian Maree, current managing director and son of the company’s founder, said the success of exporting is figuring out what each market needs.

 

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According to Interveg’s website, “A simple idea that was spurred by the desire to open up Africa's purest horticultural produce to the world started with an experimental client, and now bloomed to a fully-fledged company, Interveg, that now exports to vast markets across Europe and United Kingdom, with a monthly product supply in excess to 150 tonnes.” Interveg is based in Kenya.

Gayle Cottrill graduated from the University of Wisconsin-Madison with a degree in Journalism and Strategic Communication. She is the Editor of the Unleash Africa newsletter and is also the Marketing Coordinator for the promotion of Unleashed: A New Paradigm of African Trade with the World. 

Furniture Production Plant with Payment in Furniture

 


Creativity is the hallmark of change and progress. China’s adoption of capitalist methods is a great example of sequential creativity. In the formational process of the transition to capitalist economy, the late Deng Xiaoping is quoted as telling Chinese entrepreneurs to “go and make money.” The rise of China as an economic powerhouse is based on Deng Xiaoping unleashing the entrepreneurial capacity of Chinese people and engendering a culture of competition between private and state enterprises for business and profitability. Many Chinese public companies that were once unprofitable have had to learn how to scramble for business with their private counterparts or fail.
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Unleashing the Potential of African People in Every Country

The leap for African countries involves setting the right stage for the creative impulses inherent in every human species to come to fore. None of what needs to take place in any country in order to create economic prosperity is new. It can be copied from existing experience and tailored to known successful patterns. Although China did not invent capitalism, the political leaders of China had to invent a process for integrating capitalism into a command political apparatus. There is far too much talk and very little action in African countries. It doesn’t take years to learn how China developed capitalism or how South Korea’s Export Oriented Industrialization (EOI) strategy was implemented.

One of the crucial elements of economic development is a society’s willingness to unleash the potential of its people. In virtually every African country, there are inherent impediments to unleashing the potential of their people. One of such impediments is laws governing commercial activities. Rules governing commercial activity in African countries were designed by colonial-era administrators and almost half a century (longer for some countries) after independence for most countries, the core tenets of the rules are still governing commercial activity. Examples are processes for establishing new businesses, processes for gaining access to information, import licenses for importing goods and export licenses for exporting commodities. All such rules and regulations have to be reviewed and where necessary they should be scrapped. Because colonial governments were more interested in preserving territories for their own interests, the rules governing commercial activities during the colonial era were designed to achieve it. It led to a vast expansion of the informal sector in African countries because Africans were largely excluded from the formal sector in their countries.

Continuing to maintain the rules is a damming effect on entrepreneurial activity and creativity. For instance, African countries need as many new businesses as people are willing to start. Countries should, therefore, make the process of starting businesses so easy that anyone can do it. African countries should have annual (friendly) competition for which country has the easiest environment for starting new businesses; the most welcoming environment for business and the easiest place to do business. There is absolutely nothing to lose and everything to gain for countries to make it very easy for people to register and start a new business. One of the immediate impacts it will have is to reverse the tendency for people to join the informal sector. Everything related to starting a new business should be fast-tracked and stripped of red tape.

Deploying Outside the Box Creative Financial Strategies

Because African countries lack a strong capital base, creative application of financing techniques as well as techniques that help governments to stretch available hard currency is very important. In the beginning of the road to prosperity, China depended on oversea Chinese for ideas. They did not disappoint. Early techniques for starting industries included the use of Buy-Back technique of compensatory. It’s no longer in use but in the beginning was very instrumental in turning China into the world’s factory. Direct compensation is also available to African countries but it won’t work unless African countries decide to work it.

Direct Compensation in the Private Sector

There are multiple useful patterns under direct compensation technique. Like the Chinese version of “Lailiajiagong” and “Laiyanjiagong,” which is based on availability of abundant labor and raw material resources, the development of private direct compensation in African countries should revolve around the strength of African societies and the solutions to its problems. Direct compensation technique, involves the transfer of production technology and implements to a receiving facility. Upon establishment, the new production facility created as a result of the technology and implements supplied, pays the supplier in derivative products. For example, if a furniture manufacturer receives machines, design, and production assistance from a furniture distributor/manufacturer based in the same or in another country and in payment it ships furniture to the supplier, it is a direct compensation transaction.

There are two main variations of direct compensation technique that are prime prospects for business link-ups between African private sector operatives and foreign suppliers:

Sub-contract: The foreign supplier, in this case, would provide raw materials and specifications only, and the local company would manufacture and produce to the specifications. This technique is feasible only if the local participant already has an established production capability. As payment, the foreign partner will receive finished goods. A slight variation is where the foreign counterpart supplies only specifications and receives finished goods. Both of these variations are identical twins of the Chinese pattern of sub-contracting. The primary benefit of this example is that it provides job opportunities for local workers and it gives the plant an opportunity to improve production and processing standards to the level that will enable it to become export capable.

Turnkey Industrial Supply: This is the classic pattern of direct compensation. In the case of its use by African companies, several possibilities exist. For instance a furniture manufacturer/distributor may supply machinery, technical help and sundry services to a local company, which may also be a manufacturer of furniture, and, in payment, it will receive furniture.

Figure 16

As we can see in the illustration, direct compensation technique will work for many types of industrial applications. African countries need to speed up the learning curve so that they can apply such techniques to economic development and reap the benefit of jobs for their citizens and export revenues for their economy.

Unleashed: A New Paradigm of African Trade with the World is now available to buy at any of the sites listed below. 

Unleashed Site | Bookmasters | Amazon.com
Our Mandate
To deliver Africa to the world and the world to Africa.
 
Our main focus is on African trade. We specialize in helping clients in African countries to develop industrial projects. We will broker commodities and manufactured goods to and from the global market to African countries. In the area of industrial exports, we will help our clients to develop export oriented industries and market the goods produced in hard currency markets.
 
Our Vision
Our goal is to be a key component of the transition of African countries from raw materials exports to industrial goods export. In addition to contributing to the rise of export industries in every African country, AFRICAN TRADE GROUP aspires to become the premier company in the trading of commodities and manufactured goods of African origin.
                                      Contact Us
President
John I. Akhile Sr.
jakhile@unleashafricantrade.com

Marketing Coordinator
Gayle Cottrill

g.cottrill@unleashafricantrade.com

PR Coordinator
Eron Henry
Assistant Media Managers
Michelle Daniel
mdaniel@unleashafricantrade.com


Deonsha Carroll
dcarroll@unleashafricantrade.com

Benita Alexander
balexander@unleashafricantrade.com


 
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