Talk Africa 05/08/2016 Rwanda's Economic Miracle

Hold, buy or sell – forget oil. One of Africa’s foremost resources is its new media industry, merging technology with the continent’s formidable population, to attain a current worth north of $10bn.

At the centre of this remarkable growth in the budding sector is marketing communications: a discipline that encompasses advertising, public relations, and consumer marketing.

The Africa Report estimates that as of 2018, the Nigerian market contributes $4bn to the African marketing communications industry. Two key players in this market are BHM and X3M Ideas.

The former is a 13-year old agency managing some of the biggest PR accounts in-country and continent wide, including companies quoted in bourses on the South and West coast such as Multichoice, MTN and Nigerian Breweries.

X3M Ideas, on the other hand, is one of the biggest advertising agencies in Africa, renowned for a consistent stream of award winning works for household brands Globacom, Etisalat and Diamond Bank (now merged with Access Bank).

The two companies have defied expectations and continued to scale new heights in balance sheet and locational terms. With year-on-year revenue growth averaging 86% for BHM and 25% for X3M Ideas, the pair are steadily becoming integral to the continual growth of the marketing communications sector.

“At the helm of these companies are two veterans in Marketing Communications. Ayeni Adekunle, as CEO of BHM is one of the pioneers who led Nigeria into the digital-first strategy era of Marketing Communications,” says Kunle Bakare, Publisher of Encomium Magazine where Ayeni first had his stint as Journalist.

Named Nigeria’s PR practitioner of the year in 2017, Ayeni is a member of the Nigerian Institute of Public Relations (NIPR) and the Chartered Institute of Public Relations UK (CIPR). His contributions to the marketing communication industry are strategically avant-garde, particularly his introduction of the Nigerian PR report – an annual, empirical analysis of the Public Relations sector, as well as BHM’s launch of the first PR app in Nigeria.

BHM itself was awarded PR agency of the year in 2017 and 2018 by the Lagos chapter of Nigerian Institute of Public Relations. Just as formidable is Steve Babaeko: the founder of X3M Ideas has over 20 years experience in advertising, and is currently the only Nigerian named in Adweek’s elite list of 13 Global Creative leaders in 2019.

Back home, he is the Vice President of the Association of Advertising Agencies of Nigeria, AAAN, and for three years running, has served on the Grand Jury of the New York Advertising Festival, as well as being a keynote speaker at the just concluded 2018 International

Advertising Association conference. Within six years of its launch, X3M Ideas has become one of the most profitable companies in Nigeria, recording a profit margin of 973% in 2015. In 2019, Babaeko announced “the South Central Africa project,” essentially the birth of X3M Ideas SA (PTY) Limited in Johannesburg, South Africa.

This audacious venture is consolidating X3M Ideas’ presence in the SADC region, primarily South Africa, Mozambique, Zambia, Zimbabwe, and Botswana.

“Between these men, we’re talking clientele that cuts across not just Africa but increasingly through brands domiciled in Europe and the Americas, as well as a combined earnings profile in billions,” said Moliehi Molekoa, Managing Director, Magna Carta South Africa.

By 2019, Africa’s entertainment and media market should double in value to estimated total revenue of US$8.1bn. Self-made creatives, Ayeni and Babaeko are indisputable proof that with the right skillset and a progressive team, Nigeria’s marketing communications industry has the potential to attain, and corner a multi-billion dollar piece of the pie.

This content was originally published on forbesafrica.com

Forbes is a global media company, focusing on business, investing, technology, entrepreneurship, leadership, and lifestyle.

Africans remain consumers of technologies invented elsewhere, not their creators.

A textile factory in Lesotho. Credit: John Hogg.

Investment in infrastructure can have a uniquely transformative power for Africa. Addressing the huge funding gap – estimated at almost $100 billion per year – by building roads, power, water, sanitation and the like will drive industrial development and create much-needed jobs.

Industrial development is still a critical step in Africa’s socioeconomic development. In a recent paper for The Breakthrough journal, Harvard Kennedy School’s Calestous Juma makes the case that “leapfrogging industrial development is not an option”. We agree. Indeed, many of the innovations we celebrate in Africa today reveal not just the continent’s entrepreneurial drive, but governments’ failures to get some basics right.

Mobile phone usage, for example, has soared faster in Africa than anywhere in the world. According to the Pew Research Centre, mobile phone penetration in Ghana rose from just 8% in 2002 to 128% today. Over the same period in the US, penetrations levels rose from 64% to 103%. But this increased rate of adoption stems in no small part from governments’ failures to build landline networks; people had to take matters into their own hands.

Mobile telephony isn’t the only example of this. Rooftop solar power is taking off less for environmental concerns and more for the lack of robust electricity grids. Citizens dig boreholes or install water tanks at home because they can’t depend on pipe-borne water. Drones may be the future of medical supply delivery because road networks are poor.

However, as corporate and private solutions fill gaps left by the government, the continent may be missing out on the bigger picture of economic transformation. The “leapfrogging” of landlines in favour of mobile phones is hailed as a great success in Africa. But it’s crucial to note that mobile telephony’s growth in Africa has less to do with innovation on the continent and more to do with inventions and innovations elsewhere.

The same is true of many consumer goods such as fridges, flat screen TVs, computers and a host of other electricals and electronics, mostly from China. Africans remain consumers of technology, even if the way in which new technologies are used sometimes gives an inaccurate impression that Africans are creating them.

Furthermore, as Africa’s economies become service-heavy, the continent may be missing out on the grit and organisational skills that come from making things. To build a Boeing 747 and all its six million parts or a smartphone from scratch tasks a country in ways that developing six million smartphone apps from existing code never can.

In his paper, Juma argues that despite its adoption of new technologies, Africa still lags behind in manufacturing and has not made major steps to move to the production of technologies. With a view to economic history, he says that Africa should invest in core infrastructure and engineering capabilities that would enable it to meet the needs of other sectors such as health, education, and agriculture.

Additionally, the ability to manufacture smartphones would ensure that the money spent on them remains within the continent. The role of infrastructure as the foundation for innovation and economic transformation has been overlooked, Juma laments.

Infrastructure and capacity development projects can have a transformative impact on the continent. But a critical step in the process on ensuring long-term value is to optimise local content in such investments – from inception to operation.

One such example is the Bridge Power project in Ghana. This billion-dollar, 400-megawatt power plant is a joint venture between Endeavor Energy and GE Power, both from the United States, and Sage Petroleum from Ghana. Sage is part of the Quantum Group, which has developed its capacity in part through international partnerships and is the technical lead in some aspects of Bridge Power. The Ghanaian company will no doubt absorb new skills and technologies from its foreign partners through the project.

Local content policies must be bold in their vision, but also progressive in their implementation. It takes time to build companies to the standards expected by serious multinationals. CDC, the UK Government’s development finance institution, runs a training programme to inform emerging market fund managers and indigenous companies on what good international outcomes look like from an environmental and social perspective. By equipping companies and investors with tools and an understanding of what success might entail, they can then find locally-appropriate solutions that work to these objectives. It also behooves governments to set clear, realistic milestones that allow projects to be completed on schedule while increasing local participation.

Africa’s dream of industrialisation is alive, well, and achievable. New technologies are a stepping stone but not the destination. To get to the destination, governments must create attractive environments, schools have to impart the right knowledge and skills, and businesses need to orient themselves to long-term value creation.

This article was first published in africanarguments.org.

Rosalind Kainyah MBE is an advisor to global companies on responsible business investment and partnerships in Africa. She is a former environmental lawyer, corporate lawyer at Linklaters, and corporate/commercial lawyer at De Beers. She was VP of External Affairs and CSR at Tullow Oil. She started Kina Advisory in 2014.

Kenya accounts for just 0.4% of the US$80.3bn American apparel import market

Apparel and textiles already account for the lion's share of Kenya's exports to the US, making up 86% of the total in 2016.

And the second Kenya National AGOA Strategy and Action Plan still envisages it will be the main export category over the five years from 2018-2023 – setting out plans to grow shipments to the US from US$340.7m in 2016 to US$651.4m in 2023: an average annual growth rate of 9.70%.

Key to this expansion potential is the 10-year extension of the African Growth Opportunity Act (AGOA) to 2025, which provides duty-free access to the US market for 6,421 product tariff lines – most significantly textiles and apparel – from eligible sub-Saharan African countries including Kenya. Indeed, according to re:source, the new strategic sourcing tool from the team behind just-style, in 2017 US apparel imports from the AGOA region totalled US$1,024m, of which around US$1,001m (or 97%) claimed AGOA benefits.

In its assessment of future growth opportunities, the Ministry of Industry, Trade and Cooperatives also sees a greater export role for other sectors, including home décor and personal accessories, processed and specialty foods including nuts, flowers, coffee, tea and fresh fruits and vegetables.

But it also identifies products with short-term potential such as knitted shirts and sweaters in manmade fibres; and T-shirts, woven pants and shorts, woven shirts, and dresses in cotton and manmade fibres. Looking further ahead, fashion garment and high-end brands are seen as products with most promise.

"There is a recurring trend of growing market share for countries with trade preferences to the US such as those under AGOA," the report notes, adding: "Sourcing and importing apparel to the US from East Africa has been steadily growing since AGOA was extended for ten years in 2015."

However, almost 80% of US apparel imports originated from the ten top countries which account for 78% of the total: China (30%), Vietnam, Bangladesh, Indonesia, Honduras, India, Cambodia, Mexico, El Salvador and Nicaragua.

Apparel exports from Kenya to the US grew from US$254m in 2012 to US$338m in 2017. Yet Kenya accounts for only 0.4% of the US$80.3bn American apparel import market. In contrast, Bangladesh, a low-cost favourite, is approximately 9% more expensive than Kenya, but commands 6% of the US import market.

For Kenya to grow its AGOA exports, the focus must shift to products that are most in demand by US importers, and already being produced in Kenya. This includes apparel with synthetic fibre content, which has a better duty advantage under AGOA than those with 100% cotton fibre content.

Target Apparel Export Categories for Kenya

Kenya's current focus on assembly and cut-make-trim (CMT) also requires improved process efficiency, workforce development and adequate policies.

And due to the rise of low-cost centres of production such as Ethiopia and Myanmar, Kenya must shift from contract manufacturing to start providing fully integrated services including input sourcing, product development and design.

These scenarios require workforce development, skills acquisition, foreign direct investment (FDI), a strong business association and an enhanced policy and business environment.

Other constraints identified as limiting Kenya's export growth include low capacity of export companies and inadequately resourced support institutions. For many companies there is also a lack of AGOA awareness, limited knowledge of the US market and commercial practices, limited export supply and capacities within small and medium enterprises (SMEs), high cargo freight costs and extended delivery time to the US.

Textile and apparel sector overview

The textile and apparel sector is one of the drivers of industrialisation in Kenya. In 2017, it comprised a total of 22 large and foreign-owned companies, 170 medium and large companies, eight ginneries, eight spinners, 15 weaving and knitting companies, nine accessories manufacturers and over 74,000 micro and small companies, including fashion designers and tailoring units.

Investments in the Export Processing Zones (EPZs) have driven growth in the sector. The value chain from fibre to fashion involves cotton cultivation, ginning, spinning, weaving, knitting, dyeing and finishing, garment and accessories manufacturing.

However, the fashion sub-sector is nascent and cotton production has decreased in the last decade with deficits covered by imports from nearby countries such as Tanzania, Uganda and others.

In 2017, only 15 of Kenya's 52 textile mills were operational, and running at only 45% capacity with mainly old machines and obsolete technology. Production costs – especially energy and overheads – are high.

Limited investments downstream have led to capacity imbalances, weak productivity and poor quality in the spinning, weaving and fabric finishing segments. While apparel is a more advanced subsector, due to limited local capacity, about 93% of inputs are imported.

The apparel industry mainly uses imported fabric from South Korea, China, Indonesia, Singapore and others and the country relies more on cut, make and trim (CMT) activities. This is in contrast with other countries, which are moving up the value chain, integrating and providing a wider range of services to buyers.

Despite the challenges, Kenya is helped by internal factors such as competitive wages, supply of skilled workers in garment-making, high worker retention, available water supplies, port efficiency, proximity to Europe, investments in the EPZs and growing concerns about CSR that have led many multinational apparel firms to seek new suppliers outside low-cost Asia.

While the report notes that an improved multi-modal (sea-rail-road) transport infrastructure has boosted the sector's competitiveness, it also notes Kenya has to improve labour productivity through more training, investment in managerial and technical skills, better technology and more incentives for workers.

Benchmarked against five African and Asian competitors, Kenya has the highest cost of power at 16-18 cents per kilowatt-hour. Power/electricity is an important input in the production processes along the cotton and textile value chain.

The industry in Kenya also experiences the highest frequency in power outages, which interfere with production and export schedules – and leads to a loss of sales of 5.6% compared to China with 0.1% and Vietnam at 1.1%.

In terms of labour costs, Kenya is within the middle range at between US$110 to US$150 compared to Ethiopia in the lower range of US$50 to US$60 and the highest range in China at US$550.

Comparisons between Kenya and Major Textile and Clothing Competitors

Source: Economic Survey 2017, Kenya Textile and Clothing Value Chain Roadmap 2016 - 2020.

Note that some of Kenya's indicators have improved since 2013 – reduced time to clear customs, and improved bank interest rates (below 14%).

Key Recommendations

Increase AGOA awareness and knowledge in the private and public sectors;
Deepen the understanding of the US market and key competitors in targeted sectors;
Improve supply capacity and productivity of SMEs in the target sectors;
Support exporters' compliance with US market requirements and standards;
Achieve competitive ocean and air freight costs and delivery time to the US;
Provide timely and competitive trade and investment financing to exporters, particularly the SMEs;
Remove non-tariff barriers to trade and improving the climate for investment;
Enhance institutional capacity to help exporters utilise AGOA;
Improve exporting sectors' competitiveness, productivity and resilience against negative impacts of climate change.

This article was originally published on just-style.com

The Canadian mining executive talks to The Africa Report about the region's potential and the synergies underpinning Teranga's long-term bets on rising demand for gold.

Teranga is part of a growing number of mining companies, many of them from Canada, exploring for gold in West Africa. “West Africa has more potential than probably any other region in the world today. The geology is similar to the geology in northern Ontario and Quebec, as well as Western Australia. Both belts have been so prolific for a century and continue to be,” says Teranga Gold Corporation chief executive, Richard Young. “It’s early days in West Africa – exploration just got started.”

Gold output in West Africa is around 8m-9m ounces a year, compared to 12m ounces annually for North America. “Annual production is now approaching that of North America, which, when I first started in the industry, I never thought was possible,” adds Young.

Ghana is the region’s biggest producer, and output is growing fast in francophone West Africa. With nine active mines, Mali expects its gold production to increase by 21% to 60tn (2.1m ounces) this year, while output in Burkina Faso may reach 55tn. Even in Côte d’Ivoire, gold production has doubled in the past five years to 25tn. Senegal mined 7tn of gold last year and opened a second mine in May.

Young says: “Ideally we want to go to countries where governments welcome foreign investment, and we find French West Africa to be mining-friendly.” Getting permits for a project can be done in about a year, while it can take five years or more in North America.

There are challenges, too. The region is facing growing security concerns, particularly in Mali and Burkina Faso. There is a lack of infrastructure and training, and electricity costs are high.

Francophone Gold-mining Friends

That said, Canadian mining companies see the long-term attractiveness in the region. In addition to Teranga Gold, other Canadian miners include B2Gold (Mali), Iamgold (Burkina Faso, Mali), Endeavour Mining (Burkina Faso, Mali, Côte d’Ivoire) and Semafo (Côte d’Ivoire).

“In French West Africa, there’s an affinity towards Canada. A lot of politicians, bureaucrats and business leaders have gone to school here. And the Canadian government has made French West Africa a priority,” says Young.

Canadian mining companies’ assets in Africa amounted to C$28.6bn ($21.7bn) in 2016, and the Toronto Stock Exchange – the world’s largest mining bourse – is a leading hub to raise money for mining projects in Africa.

Teranga Gold targets production of 240,000oz at its mine in Senegal this year and hopes to pour its first gold at its Wahgnion mine in Burkina Faso by the end of next year. With both mines, the company’s annual production would reach 350,000oz. Teranga also expects to complete a feasibility study at its Golden Hill project in Burkina Faso by 2020 and join the ranks of mid-tier gold producers in the next five years.

Teranga is investing “for the future”, Young says, despite low gold prices. An ounce sold for around $1,220 in early November, down from about $1,350 about six months ago. The Sabodala mine in Senegal, in operation since 2009, now generates free cash flow that Teranga is using to move its project pipeline forward.

“At current gold prices […] the industry isn’t sustainable. There’s not enough free cash flow to be able to explore, make new discoveries and grow the business,” Young concludes. “[But] mine supply is declining and we expect demand to continue to rise as more and more Asians move into the middle class. So we think increasing demand coupled with falling supply will have a positive effect on gold prices in the longer term.”

This article was originally published on theafricareport.com.

Of all the regions across the globe Africa was arguably the hardest hit by the oil price crash in 2014/15. Tough operating and economic conditions, coupled with regulatory uncertainty, political instability and a lack of infrastructure meant that many large-scale oil and gas projects were either halted or cancelled. The view in 2019 is very different however…

Thanks to international oil companies and African national oil companies alike adapting to a lower price environment, as well as a partial recovery in oil prices, means that the situation across Africa today looks much more positive.

“Africa’s oil and gas companies have weathered the downturns and capitalised on the upswings focusing their efforts on new ways of working, reducing costs and utilising new ways of working, reducing costs and utilising new technology”, says Chris Bredenhann, PwC’s Africa Oil & Gas Advisory Leader.

And we agree.

Africa’s oil and gas industry holds huge potential. At the end of 2017, Africa was estimated to have 487.7 tcf of proven gas reserves (7.1% of global proven reserves), whilst Africa’s proven reserves of oil are in the region of 125 billion bbl. Africa’s downstream sector has been fairly static in recent years with total refinery throughput hovering around 2.1 million bbl/d, however as we’ll see a wealth of new refinery upgrades or new builds is set to change this.

So, what are the key countries, projects and trends to watch in Africa in 2019? Read on to find out!

(Image via Sonatrach).

Algeria
Although Algeria has experienced political turmoil in recent years, with popular uprisings threatening to topple long-term leader Abdelaziz Bouteflika, it has managed to avoid the revolutions that have affected other nations across the Maghreb. From an energy perspective, Algeria holds much promise. It currently supplies large volumes of natural gas to Europe, with energy exports forming the foundation of the national economy. According to OPEC, Algeria has the 16th largest oil reserves in the world and the second largest in Africa. Algeria’s national oil company, Sonatrach, is the largest company in Africa- although business reforms are clearly needed as the past eight years have seen six different CEOs at the helm.

Making the most of its substantial hydrocarbon deposits is a priority for Algeria, and as a result there are several large-scale projects on the near horizon. Below are some projects to note across the Upstream, Midstream and Downstream sectors of the value chain:

Upstream
The Touat Gas Field is a 15,392 square-kilometre block situated in the south west of the country which is estimated to hold gas reserves between 60 billion and 120 billion cubic metres. Once running, the project hopes to reach a peak production of 4.5 billion cubic metres of gas a year. Anticipated to start-up in the first half of this year, the Touat Gas Field project will initially see the construction of a gas-processing plant with a capacity of 500 million cubic feet a day and will also include a link into Sonatrach’s central gas transport grid, via a 100km gas pipeline. A total of 25 gas wells will be drilled in the first phase of development.

Midstream
Energy exports are an absolutely integral part of Algeria’s economy so it’s no surprise to see several midstream projects being sanctioned. Perhaps the most notable being the Skikda Export Terminal Upgrade. This project will see the Skikda port upgraded with a new LNG jetty to almost double its current capacity of 130,000 cm to allow vessels of up to 220,000 cm to dock at the 4.5 mtpa LNG terminal. Other elements of the upgrade include expansion of the oil export terminal port, to handle tankers ranging between 50,000 and 250,000 tonnes as well as the conversion of the existing Skikda LNG terminal to handle liquid petroleum gas (LPG) and methyl tert-butyl ether (MTBE) exports. The Skikda Export Terminal Upgrade project is expected to start-up in the third quarter of 2020.

Downstream
Although Algeria launched a refinery modernisation drive more than a decade ago, its downstream industry continues to struggle to meet domestic demand. The Eastern Algeria Phosphate Integrated Complex mega project should change this. The project will see the construction of a phosphate and natural gas integrated complex which will include a concentrating mill, acid plant, fertiliser factory, container terminal operating system and corresponding supporting infrastructure. With a total investment of $10 billion the Eastern Algeria Phosphate Integrated Complex should make a big contribution to Algeria’s downstream sector when it starts-up in 2022.

(Image via Total).

Angola
Angola is Sub-Saharan Africa’s second largest oil producer behind Nigeria and has a well-established oil and gas industry- particularly its upstream sector which is underpinned by prolific deepwater acreage which was first explored in the 1990s. The national oil company Sonangol has undergone considerable restructures and reforms since the oil price crash and is now in a better position to thrive in a lower price environment. A signal of Angola’s growing importance as a global oil producing nation was marked in December 2006 when it was admitted to OPEC.

With oil making up the largest chunk of Angola’s export commodities, the country continues to pursue new projects to exploit its substantial reserves which at the time of writing were the 17th largest oil reserves in the world.

Upstream
Angola’s upstream oil sector is dominated by offshore, deepwater fields. Bengo, Longa, Omal, Zenza, Zenza South, Caporolo, Cubal and Chissonga are examples of these fields that are currently in the process of being developed. Situated within Block 16 these fields cover an area of some 4,900 square kilometres and are situated in depths of 200-1,500 metres, around 100 kilometres from the coast. The development of these fields is being led by Total in collaboration with Sonangol and Ocyan and will involve the use of a tension-leg wellhead platform (TLWP) linked to an FPSO with extensive subsea infrastructure also likely to be deployed.

Downstream
Despite being Africa’s second largest oil producer Angola current imports around 80% of its fuel due to a lack of domestic refineries. In late 2018 Sonangol announced its ambition to change this situation by pursuing new refinery projects. One of which is the Lobito Refinery (also referred to as ‘Sonaref’). The refinery is planned to have a capacity of 200,000 b/d and will process heavy crude from the Kuito and Delta fields. Once operations commence in 2022 the refinery will process an array of products including premium gasoline, diesel, jet fuel, kerosene and liquefied petroleum gas (LPG).

(Image via BP).

Egypt
Egypt is the largest non-OPEC oil producer in Africa and the third-largest natural gas producer on the continent. Despite recent political unrest, it remains a strategically important global energy player- a situation enhanced by its position as a major transit route for oil shipped from the Persian Gulf to Europe and the United States. Whilst Egypt has its own national oil company in the form of the Egyptian General Petroleum Corporation (EGPC) international oil companies such as Shell, BP and Eni play a major role in the country’s upstream sector.

Upstream
Egypt’s offshore oil fields have attracted international attention, with perhaps the most high-profile projects of late being BP’s West Nile Delta Development. Located around 40km from the coast of Egypt the West Nile Delta development has estimated reserves of around 5 Tcf of gas and 55 million barrels of condensates. The first part of the project focused on the development of the Taurus and Libra fields. The second part of the project was the development of the Giza and Fayoum fields (which have just achieved first gas at the time of writing). The third phase of the project will see the development of the Raven field, with production expected in late 2019.

Midstream
Like many other African nations energy exports play an important role in Egypt’s economy. As such, Egypt’s Ministry of Petroleum is keen to sanction and progress midstream projects that will help transport oil and gas. One such project is the Tina to New Capital Gas Pipeline which will support the export of natural gas produced at the Zohr gas field. The pipeline will be a 50km, 42-inch gas line with 35 MMcm/d capacity. The Egyptian Natural Gas Company (GASCO) is currently overseeing the project which is expected to be completed in mid-2019.

Downstream
Egypt’s has the largest refining sector in Africa, however the majority of its refineries are operating at levels lower than capacity due to aging and maintenance issues. The expansion and modernisation of this refining capacity is a priority for Egypt’s leadership and several new large-scale projects are planned. One of which is the Mostorod Refinery project situated in an industrial area 10km north of Cairo. Co-located next to an existing refinery at Mostorod, project will see the construction of a 81,500 b/d vacuum distillation unit, a 39,600 b/d hydrocracker, a 16,700 b/d delayed coker, a 23,600 b/d Diesel hydrotreating unit and a 13,000 b/d catalyst reforming unit. It’s expected that the refinery will be able to produce 2.3 million tonnes of diesel, 600,000 tonnes of jet fuel and 522,000 tonnes of gasoline, in addition to butane gas and naphtha.

Ghana
Although Ghana has traditionally been a smaller oil and gas producer, production is expected to accelerate over the next five years with the start of new offshore projects. Crude exports form an important part of Ghana’s economy, whilst natural gas is predominantly used to fuel the country’s domestic power plants. Ghana’s national oil company is the Ghana National Petroleum Corporation (GNPC) which is responsible for the exploration, development, and distribution of petroleum and which is a partner in all oil and natural gas developments across Ghana.

Upstream
Ghana’s upstream sector should have a positive 2019 as production continues to grow from offshore fields such as Twenboa-Enyenra-Ntomme (TEN) and Offshore Cape Three Points (OCTP). Average production for the TEN field in 2017 was 56,000 b/d whilst production for the OCTP field is expected to peak this year at 45,000 b/d. Other Ghanaian upstream developments to watch this year are the Teak, Akasa and Mahogany East discoveries where test wells have indicated sizeable reserves. Tullow Ghana in collaboration with Anadarko, GNPC and PetroSA will develop the fields using four production wells which are expected to start-up in 2020.

Midstream
In order to support the Ghana 1000 Project- a major gas-to-power project which will provide approximately 1,300 MW of combined cycle power generation to Ghana’s western regions- Shell and Endeavor Energy are developing a FSRU, which will have a capacity of 3.5 mtpa. A subsea pipeline will link the FSRU to onshore facilities which will then supply the Ghana 1000 project. It’s expected that the FSRU will start-up sometime in 2020.

Downstream
Ghana has a relatively small downstream sector with only one refinery- the Tema Oil Refinery (TOR), which has a design capacity of 45,000 b/d. In order to boost the country’s refinery throughput, plans have been made to construct a new refinery at Takoradi. The Takoradi New Oil Refinery will process 150,000 barrels of crude oil a day with an annual capacity of 7.5 mtpa. Although the project is at planning stage, the Ghanaian government is aiming for a start-up date in 2022.

(Image via Mozambique LNG).

Mozambique
Ever since substantial natural gas reserves were discovered in Mozambique’s Rovuma basin (upwards of 100 trillion cubic feet of proven reserves), the country has been the darling of the international oil and gas industry with many analysts suggesting that it could become a key LNG exporter. Although the country’s current domestic oil and gas industry is limited, expect this to develop rapidly.

Upstream
With the Rovuma basin offering such huge natural gas reserves, Mozambique is expected to experience intense upstream production activity over the coming decade. One of the most notable upstream projects is the Offshore Area 4 Coral Field Upstream Development which will develop the block’s estimated 7 to 10 Tcf of gas. The development plan will involve the use of a FLNG vessel to exploit the gas reserves at the block, as well as extensive subsea infrastructure.

Midstream
With so much natural gas soon to be available, it’s no surprise to see Mozambique exploring a plethora of midstream LNG projects. The Mozambique LNG Project is one of the biggest and will involve the construction of an LNG plant fed by the offshore Golfinho field and Mamba-Prosperidade complex. Facilities to be constructed include two trains, each with a capacity of 6 mtpa for a total of 12.8 mtpa, two LNG storage tanks, each with a capacity of 180,000 cubic metres, condensate storage, a multi-berth marine jetty and associated utilities and infrastructure. Start-up of the project is expected to take place in 2024.

Downstream
At present Mozambique’s downstream sector is effectively non-existent. Currently Mozambique does not produce any crude oil or have any refining capacity and relies on imports to satisfy all of its oil product demand. This should change with the construction of Mozambique’s first refinery. Although very much in the feasibility study stage the Mozambique New Refinery will process crude supplies from the Rovuma basin, Mozambique basin, and imported feedstock from the international market. Although details of the refinery are scant at this stage, it is predicted that the refinery could be up and running by 2024.

(Image via Shell).

Nigeria
The oil producing giant of Africa, Nigeria continues to lead the way as the continent’s biggest producer despite sporadic supply disruptions, aging and insufficiently maintained infrastructure and unplanned economic fluctuations. Nevertheless, oil remains the backbone of Nigeria’s economy with oil and natural gas export revenues accounting for as much as 60% of government income in some years. In 2019, as in previous years, expect to see oil production and new projects centred around Nigeria’s southern Niger Delta area.

Upstream
Perhaps one of the most significant of Africa’s oil projects to watch in 2019 is the Bonga Southwest project. Estimated to contain recoverable reserves of nearly one billion barrels of oil and expected to deliver 350,000 b/d the Bonga Southwest and Aparo Oil Fields will be exploited by a spread-moored FPSO with the capacity to handle 225,000 b/d of oil, 270 MMcf/d of gas and have a storage capacity of 2.5 million barrels. Upwards of 44 wells are planned with a 98 kilometre 16-inch gas export pipeline.

Midstream
With oil and gas exports being the backbone of Nigeria’s economy, the country continues to explore new projects to facilitate this. One major midstream project to watch over the next few years is the Trans-Saharan Gas Pipeline which will provide an outlet for Nigerian gas, allowing it to join export routes from Algeria to Europe exporting between 20bcm and 30 bcm per year. The 4,300-km pipeline will begin in Brass in south Nigeria and pass through Niger to Beni Saf on the Algeria coast, from where gas will be piped to Almeria in Spain and is intended to reduce gas flaring in Nigeria by the equivalent of 250,000 bpd of gas and to contribute to Algeria’s plans to increase gas exports to Europe. Although in the early stages of development, the pipeline is expected to start-up in 2022.

Downstream
Nigeria has a sizeable nameplate refining capacity of 445,000 b/d that exceeds domestic demand, however despite this the country continues to import petroleum. Why? Because Nigerian refineries typically operate below full capacity due to operational failures, fires and sabotage. To combat this the Nigerian government is planning a series of new refineries. One of the largest of these planned refineries is the Dangote Refinery and Polypropylene Plant situated in the Lekki Free Trade Zone. Once completed in early 2020, the refinery will produce 153,000 b/d of gasoline, 104,000 b/d of diesel, 73,000 b/d of jet fuel, 4,109 b/d of LPG and 12,300 b/d of fuel oil.

(Image via BP).

Senegal
Hotly tipped as the ‘next big thing’ following significant deepwater finds, Senegal is seen by many industry analysts as being a ripe location for relatively low-cost LNG clusters. With the Yakkar field containing 15 trillion cubic feet of natural gas, and the Greater Tortue Complex containing massive amounts of natural gas Senegal’s aspirations to become a major hydrocarbon producer could come to fruition in the very near future.

Upstream
Senegal’s Greater Tortue Complex is arguably what started the firing pistol on the country’s upstream development. With a mean gross resource estimate for the Greater Tortue Complex of more than 15 trillion cubic feet of gas, the field has attracted the attention of BP which will be exploiting the complex with a spread-moored FPSO. It’s expected that start-up of the project will be achieved in 2022.

Midstream
Linked to the Greater Tortue Complex project above, the Greater Tortue-Ahmeyim FLNG project will consist of two near-shore FLNG vessels that will be located 8km offshore straddling the Mauritania/Senegal maritime border. The FLNGs will be fed solely by the Greater Tortue Complex. Whilst capacity for the two FLNGs has yet to be confirmed it is understood that they will have a combined capacity of at least 2.5 mtpa. We expect to see this project start-up during the first half of 2022.

Downstream
Senegal’s downstream sector is currently sparse and unsophisticated with the only refinery being the 25 kbpd Mbao refinery built in 1963. With demand for diesel and petroleum expected to more than double in the next 20 years Senegal will need to increase its refining capacity. It is understood that Petrosen (Senegal’s national oil company) has commissioned a study to look into the option of repairing and modernising the existing refinery, and a decision on a new refinery will be based on the outcome of this study.

South Africa
South Africa has a highly-industrialised, energy intensive economy, however limited proved reserves of oil and natural gas mean it is reliant on imports from Middle Eastern and West African producers. As a result of this, South Africa makes extensive use of its large coal deposits to meet the majority of its energy needs. It is also home to a sophisticated synthetic fuels industry which accounts for nearly all of the country’s domestically produced petroleum. The country’s recent deepwater discovery however, raises the spectre of increased upstream activity for South Africa.

Upstream
South Africa has small amounts of proved crude oil reserves, and its production levels are very small. According to the Oil & Gas Journal, South Africa’s proved crude oil reserves are about 15 million barrels. However, the deepwater Orange Basin near Namibia is believed to hold substantial oil and natural gas resources. The most pertinent upstream development to note in 2019 however is the discovery at the Brulpadda prospect around 175 kilometres off the southern coast of South Africa. The Brulpadda find is estimated at around 1 billion barrels and is currently being developed by French oil major Total.

Midstream
With such a large reliance on imports for oil and natural gas, South Africa has a well-developed midstream sector consisting of import and storage terminals. The government is proposing to develop this sector of the country’s energy industry further with construction of a new LPG import and storage terminal at Richards Bay. The terminal will have a storage capacity of 22,600 tonnes and will feature four mounded tanks, each capable of storing more than 5,500 tonnes. The terminal will also be capable of sea-borne re-exports to neighbouring countries.

Downstream
With South Africa consuming the second-largest amount of petroleum in Africa (behind Egypt), the country has a well-developed downstream sector. Petroleum products are largely derived from South Africa’s domestic refineries and its CTL and GTL plants. As of January 2017, South Africa has a crude oil distillation capacity of 493,000 b/d. Yet, due to ever increasing domestic demand South Africa needs to expand its downstream capacity further still. One such expansion is the Sasol Synfuels Secunda Upgrade. The project will involve several upgrade contracts, including a five-year term agreement, providing the management support, coordination and supply of hot-work resources to undertake off-site prefabrication and on-site welding maintenance work on the existing gas, Tar Phenosolven & Sulphur (TPS) and oxygen plants. The upgrade work is expected to be completed in 2020.

Africa: a Growing Source of Oil & Gas Jobs in 2019

So, there you have our picks of the African countries, projects and operators to watch in 2019.

We’re sure you’ll agree that it all adds up to a really positive picture. We’re only two months into 2019 and here at Fircroft we’re already seeing hundreds of new job opportunities become available.

This article was originally published on fircroft.com

Mike Graham is a Regional Manager - Africa at Fircroft

African nations are at an inflection point in their post-independence existence. There was a euphoric exhalation after the end of colonial rule and the start of self-governance. The euphoria was, unfortunately, truncated by a reality check of bad governance, missed opportunities, and universal disappointment in the electorate. It was followed by a period of anarchically chaotic self-destruction through endless coups and civil wars, culminating in a veritable lineup of debt-laden nations.

This was the era of the Algerian Revolution; Biafran War; Assassination of Patrice Lumumba, the rise of Mobutu and socio-political devolution of the Congo now DR Congo; the failure of the first Ghanaian republic under Kwame Nkrumah; Gamal Nassar’s War with Britain, Arabia and Israel; Ethiopian Revolution and famine; The Rhodesian regime of Ian Smith; Robert Mugabe’s ZANUPF’s bush war with Ian Smith and his South African backers; to mention a few of the hundreds of flashpoints that washed the continent and the countries during a period that is describable as “Africa’s lost years of opportunity.” It is a tough way for countries to start their journey as nations and African countries had some of the roughest journeys experienced by newly birth post-World War II nations.

The challenges of African countries became exacerbated by legendarily bad governance and leadership. “Our time to chop,” became the motivational fuel and imperative of people aspiring to high office. Consider that the journey was unfolding during the rise of South Korea from one of the poorest nations in the world to its present status as a 2+trillion US dollar economy ranked in the top 20 economies in the world. Hong and Singapore, city-states also became major global economic powers during the period. China had a later start in the late 1970s and early 1980s.

Both African and non-African prognosticators have opined that African countries cannot study the example of Asians for inspiration for their economic development path. The primary reason posited is that the homogeneity of Asians gives them a natural advantage in fostering common ground. What people fail to realize is that Asians, aside from physical characteristics, also have varying language and cultural divergence within their nations. Asians, like Africans, have faced similar challenges in inspiring cohesion within their countries.

The Asian examples point to the impact of leadership in determining the outcome of the economic development of nations. In the then-Ivory Coast, the late-President Félix Houphouët-Boigny constructed a cathedral at a cost estimated between $175 to 600 million. Pope John Paul II dedicated the cathedral at its opening. Meantime, during the same period, millions of Ivorians were subsisting on less than $50 per year. Cote D’ Ivoire gained independence in 1960. The cathedral referenced was constructed between 1985 and 1989. Let us compare the economic development trajectory of Côte D’ Ivoire, with that of South Korea and Singapore to buttress the point that the person in charge of the country, not a colonial rule or even the nefarious role of externalities, makes a great difference in what happens to African countries. See figure 1 for the GDP of Cote D’ Ivoire from 1960 to 2017. Per Capita GDP for Cote D’ Ivoire fluctuated between $200 in 1960 and a high of $1500 in 2017.

Fig 1 Per Capita GDP of Cote D’ Ivoire 1960 to 2017

During the same period, roughly speaking, per capita GDP for South Korea fluctuated between $100 and about $34,000 in 2018. The difference in the two scenarios, Cote D’ Ivoire and South Korea is one person, in this case, two men, each running the affairs of their country. In South Korea, the late Park Chung Hee did the responsible thing. He fought for the right economic priorities and policies. Turning the country from Import Substitution Industrialization economic development to Export Oriented Industrialization economic development strategy. He also focused the society on the right priorities by making it very expensive to import luxury items to discourage conspicuous consumption. A cornerstone of his policy was to raise interest rates for savings accounts to double digits, thereby encouraging people to save. Savings culture mushroomed and allowed the government to facilitate funding for industrial export promotion.

Fig 2 Per Capita GDP of South Korea, 1960 to 2017

Singapore is a miracle in the annals of the economic development of nations. The country is very small island-nation with a population of about five million people smaller than many African metropolitan centers, like Johannesburg, South Africa; Lagos, Nigeria; Cairo, Egypt; and Kinshasa, D.R Congo, to list a few. Notwithstanding the handicaps it had, not the least of which was a dearth of raw material resources, the late maestro of Singapore, Lee Kuan Yew, took the country from third world status to first world from 1960 to 1990, when he left office as Prime Minister. Per capita GDP went from about $200 in 1960 to about $64,000 in 2018. There were specific initiatives and policies behind the transformation and at the heart of it was one man who REFUSED to allow his country to fail.

Fig 3 Per Capita GDP of Singapore, 1960 to 2017

In the juxtaposition of Côte D’ Ivoire, Singapore, and South Korea, it is easy to see the difference in the trajectory of their economies. In Singapore and South Korea, Lee Kuan Yew and Park Chung Hee did the responsible thing. Whereas in Cote D’ Ivoire, the late Félix Houphouët-Boigny lined his pockets and the pockets of his cronies and to top it off decided to spend hundreds of millions of dollars of poor Ivorians in a vain attempt to buy his way into heaven. In his wake, the country has had two major internal conflicts and remains very unstable, which is a testament to the failed leadership of Houphouët-Boigny.

In African countries, leaders who make up their minds to do the responsible thing will transform their nations. It is a change in mindset that is all-encompassing. Most of what African countries face are matters related to the subconscious. It has nothing to do with resources because most Africans truly believe that their countries have abundant resources. Evidence suggests that African countries have a broad swath of educated and labor-oriented human resources in abundance. And based on population growth projections, more is on the way. If you have brains and resources, to what then can the ascribed the reason for non-performance of African countries? The reason is the substance between the ears. Africans have all they require; however, Africa has lacked the conductor. Rwanda has found one in the person of President Paul Kagame. His policies have not only turned the economic fortunes of the country around but increasingly is lifting Rwanda to a rarified place in African lore—as the country that pulled itself up from political and economic abyss to the mountain-top of economic prosperity. The journey is unfolding, but the die seems cast that that is Rwanda’s destination…

to be continued in next Month’s Unleash Africa Newsletter

1 https://en.wikipedia.org/wiki/Deng_Xiaoping

Gorilla Summit Coffee
A Feature of Unleash Africa Editorial Team

Gorilla Summit Coffee has an ambitious objective to affect African-led transformative production and marketing of organic coffee, which benefits small landholding farmers at the source of production. The coffee industry is enormous. “Revenue in the Coffee segment amounts to US$429,478m in 2019. The market is expected to grow annually by 5.8% (CAGR 2019-2023). The market's largest segment is the segment Roast Coffee with a market volume of US$303,524m in 2019. In global comparison, most revenue is generated in the United States (US$80,916m in 2019). In relation to total population figures, per person revenues of US$58.28 are generated in 2019. The average per capita consumption stands at 1.0 kg in 2019.”

The challenge for all African countries is how to play a more important role in the global distribution and marketing of both agricultural and mineral resources that they produce directly to consumers worldwide. Gorilla Summit Coffee is taking a significant first step in this journey and process.
Gorilla Summit Coffee was founded to provide small-scale coffee farmers in Uganda access to global coffee markets, top-grade coffee plants, and modern coffee farming practices. The company is proud to support over 100 Ugandan farmers, helping them sell their coffee to the United States and Europe.

Gorilla Summit Coffee was established in 2012. Its purpose intended to add value to existing coffee production.

Gorilla Summit Coffee Timeline
Sustainability Impact at Origin

The Temple Coffee Roasters sustainability guidelines require efforts from both our local Sacramento community and our producing partners (for more on Temple Coffee’s view of “local” click here). For May, we would like to focus on an on-going project we have been involved in for 4 years: developing Gorilla Summit Coffee in Kanungu, Uganda.

One may mention Kanungu when speaking of the tree-climbing lions in Queen Elizabeth National Park, or tracking mountain gorillas in the Ugandan side of the Biwindi National Forest. Kanungu sits in a magical place, nestled right between both. This area has been largely unexplored by the Specialty Coffee sector until now.

Four years ago, Gerald Mbabazi contacted me for assistance and guidance in bringing his project to life: Specialty Coffee from his village. The area of Kanungu and its surrounding districts has been producing coffee for generations. Historically, all of the coffee has been sold to middlemen for $0.03 – $0.05 per pound and due to its low quality was labeled as “non-exportable: local consumption only”.

Our involvement with Gorilla Summit’s work over the past four years resulted in a drastic increase in cherry quality. Farmers are now paid $0.23 – $0.34 per pound and we are looking to export our first coffees to the United States this year.

Gorilla Summit’s work is in producing coffee, however increasing quality (and therefore the price they fetch) goes far beyond coffee itself. Through the process of increasing the quality of coffee we have also addressed education, agricultural practices, social (family) dynamics, quality of living, and working infrastructure. By addressing these issues, we are able to pay a more livable wage to farmers and offer indirect support of Mbabazi’s other projects such as clean well water, and higher education (building schools, even one accredited university) for his community.

Here is a brief outline of events over the past four years:

• 2012/2013 – Opened Gorilla Summit Coffee
• Purchased land for factory and began building
• Purchased a disk pulper from India
• Designed the wet mill
• Purchased a coffee huller
• Coffees cupped at • Eton visited in February 2013
• Met with local coffee farmers, cupped together, gave feedback
• Farmers knew how to produce quality, but needed money and did not receive much of a premium for quality
• Created infrastructure to keep all lots of coffee/cherries separate
• 2013/2014 – Gorilla Summit Coffee factory complete
• Began training for farmers to pick only red cherries
• Created collection points throughout the area.
• Floating and hand picking cherries before processing.
• Paying premium for red cherries (800 – 1000 UGX or $0.50-$0.75 /kilo)
• Began test runs for processing October/November 2013.
• First coffees cupping 79-82
• 2014/2015 – Eton visit in February
• Processed one small batch of cherries
• Wet and Dry fermentation tests
• Demonstrated how to wash the coffees after fermentation
• Demonstrated how to density separate after fermentation
• Demonstrated how to tend to drying beds
• Instructed in how to produce natural coffees
• 2015/2016 – Implemented processing techniques from 2014
• Hired Peter from Kenya to help manage the mill
• Processed 13.5 bags of parchment (about four 60kg export bags) cupping 85-87 from the October – November harvest
• Processed two bags of natural coffee (about 50-75Lbs export) cupping 87-88”

Gerald Mbabazi, founder of The Gorilla Summit Coffee is a member of a family that has long played a strong role in the educational aspiration of Ugandans in the area of their origin, Kanungu district of Western Uganda. Gorilla Summit Coffee is following in the same tradition and is also playing a strong role in the community. The coffee company is working with the schools and with all the farmers. The organization has several community health outreach programs from malaria to HIV to STD testing. The company also offers school programs for children, and aims to be a leader in producing high-quality coffee as they support, work, and live with a vision for the community.

1https://www.statista.com/outlook/30010000/100/coffee/worldwide
2 https://templecoffee.com/a-sustainable-may-community-projects-in-uganda-sacramento/

Unleash Africa Editorial Team

In this feature, we focus attention on the pros and cons of industrialization in a multi-insert piece.

By Mr. Choen Krainara

ED.77.04 Industrial Development Planning Regional and Rural Development Planning Field of Study
School of Environment, Resources and Development Asian Institute of Technology

Problems/Constraints for Increasing Exports from Developing Countries

Limited exports opportunities due to overvalued exchange rates, as exports would be costly
In spite of export subsidies, due to dominance of import substituting protectionist regimes, which were more attractive, export promotion did not achieve much impetus-thus Home Market Bias
Export risky and involve fixed costs due to investment in packaging, Research and Development, advertising, tedious relation building with prospective importers, higher technological standards and quality control
Early reversal of export promoting policies discourages exporters to promote exports
High tariffs in Developed Countries against Least Developed Countries
High cost of export incentives including subsidies and tax concessions
Capital goods and equipments are selling with higher price in Africa Region causing low industrial investment
The manufacturing value added (MVA) performance of Sub-Saharan Africa (SSA) in the last two decades has shown an uneven growth trend, largely driven by small export-platform countries.

Guiding Policies / Government Intervention Measures to Promote Exports in Developing Countries

Devaluation and depreciation of LDCs currencies
Provision of foreign exchange risk protection
Cut protective duties in the range of protective rates for different industries
Remission of tariffs on imports of inputs and capitals equipment if used for boosting exports
Reduction/exemption in indirect taxes for exports
Import replenishment and priority allocation of foreign exchange for exporters
Income taxes concessions for exporters on their export earnings
Preferential credit to exporters
Export subsidies, as South Korea gave 12 % export subsidy on the value added in exports of manufactures; Brazil gave 6-38 % subsidy of value of exports and Argentina gave 20 % of value of exports.
Dilution/elimination of quantitative restrictions and tariff reduction as under WTO
Diversification of LDCs exports
Quality consciousness and product specification
Create a niche based on competitive advantage usually “competitive spatial economic advantage” in the case of Sub-Saharan countries.
Formulate pro-poor industrialization with labor-intensive industrialization strategy in low income countries in order to raise their income levels.
Using financial instruments (taxation, interest rate, etc.) to discourage the production aiming at local market demand. This measure requires the Governments to remove protectionist tariffs and quota on imports in order to encourage competition in the domestic market and force companies to concentrate their efforts on export.
Giving tax reduction or exemption to products that are exported for the first time with a view to making them more competitive. This measure can encourage local companies to try their best to produce exports by innovating technology, improving labor productivity and product quality as well as reducing production cost.
Making business information and advisory services available to all companies. Looking for new foreign markets must be central to the Government's foreign trade policy.
Developing industrial and agricultural zones specializing in production of exports (or raw materials for producing exports) and making them pace-setters for export business.
Allowing market prices (of consumer goods and factor inputs as well) to fluctuate according to changes on the world market in order to force local companies to enhance their competitiveness.
Creating a cooperation relation between the Ministry of Trade, Ministry of Industry, customs authority and local companies and removing all regulations and rules unfavorable for the export- oriented strategy.
Keeping foreign exchange reserves big enough to deal with sudden fluctuations and protect the international competitiveness of the economy.
Active search for markets, including conclusion of trade and aid agreements, organization of overseas trade exhibitions, and market intelligence
State intervention in the labor market to ensure the supply of dutiful, nonunionized, cheap labor for export production
Provision of export processing zones, which cover a package of financial benefits and streamlined bureaucracy
Relaxation of laws regarding ownership and local borrowing Relaxation of laws regarding ownership and local borrowing
Privatization of state activities to reduce the role of the state in direct
Production and generally to increase the role of the market in the economy

Challenges/Opportunities for Enhancing Export Promoting Industrialization

Spreading the equitable benefits of globalization by building capacities on information, skill, technology, etc.
How to promote industrial growth and at the same time directed toward poverty alleviation
Building productive capacities for industrial growth is crucial for alleviating poverty. Industry is a driver of economic growth in the development process and is essential for enhancing the kind of productivity that stimulates growth throughout the economy, especially through industries linked to agriculture including food security.
Productivity enhancing measures–skills, knowledge, information, technology and infrastructure–can facilitate a strengthening of domestic manufacturing capacities for upgrading technology, developing comparative cost advantages and introducing new management and organizational structures needed to ensure effective integration in the global industrial economy.

Experiences/Impact/Achievements of Export Promoting Industrialization Strategies in Developing Countries

Experiences of Export-Oriented Industrialization

It has been mostly successful, although it can be sensitive to the market. The suspected failure of the ISI strategy has led to renewed interest in the EOI strategy in adopting exported- oriented industrialization policies. A number of experiences in developing countries have been acknowledged as follows:
- In East Asian Countries, export-oriented industrialization functioned as one of the main vehicle for long-term growth.
- The export success achieved by a limited group of newly industrializing countries (NICs) may not be possible for a large number of additional LDCs. (Kirkpatrick, Lee and Nixon, 1984, pp.199) thus causing concentrations of exports among few industries.
- During 1970s almost 50% exports from LDCs were due to TNCs which do not promote linkages for general industrialization of domestic economy.
- Almost 15 out of 26 exporting industries, used unskilled cheap labor- thus labor intensive exports will have no externality for rapid development of the LDCs economy.
- Public-owned enterprises were more active in exports from LDCs
- Export of light manufactures including textiles suffered as private exporters could not modernize production due to capital shortage
- Limited group of developing countries including Korea, Hong Kong and Singapore could expand exports
- Only public enterprises could expand exports by blocking TNCs and private industry-so less efficient
- At the end of the day, only restrictive ISI has been fundamentally responsible for EOI
- In Africa, African firms seem to have faster productivity growth as a result of exporting (Harding and Soderbom, 2004 cited in UNIDO, 2004)
- African firm‟s inability to move up market into export of medium- to high- technology manufactures due to relatively low levels of technological capa-bility-building and existing pool of skills as exemplified by the lack of R&D activity and minimal employment of engineers and technicians by the private sector.
- The trend of the change in the composition of the exports of SSA toward manufactured goods occurred much slower than in East Asia. The inability of the least developed SSA countries to increase the value added was probably due more to other factors than to market access, of which were the domestic exchange rate policy. (Nziramasang, 1995)
- In Kenya, Air freight and logistics costs both domestic and international transportation to export related products e.g. fresh fruits, nuts, vegetables and cut flowers are costly preventing them to earn from international trade (Nziramasang, 1995).

Impacts of Export-Oriented Industrialization

Impacts were also perceived particularly during the 1998 Asian economic crisis that hurt the economies of countries which used export-oriented industrialization. It is criticized for its lack of product diversity, which makes the economies potentially unstable.

The East Asian Miracle

From the mid-1960s onward, exports of manufactured goods, primarily to advanced nations, was another possible path to industrialization for the developing countries. These were led by the High performance Asian economies (HPAEs), a group of countries that achieved spectacular economic growth.

In some cases, they achieved economic growth of more than 10% per year. Relating to the facts of Asian Growths,

Japan (after World War II)
The four “tigers”: Hong Kong, Taiwan, South Korea, and Singapore (in the 1960s)
Malaysia, Thailand, Indonesia, and China (in the late 1970s and the 1980s)

The HPAEs are very open to international trade. For example, in 1999, exports as a share of gross domestic product in the case of both Hong Kong and Singapore exceeded 100% of GDP (132 and 202 respectively).

Some economists argue that the “East Asian miracle” is the inducement to the relatively open trade regime. The World Bank suggests that the HPAEs have been fewer protectionists than other less developing countries.

Average rate of protection in 1985 in percentage were as follows:

High Performance Asian Economies at 24 %
Other Asia at 42 %
South America at 46 %
Sub-Saharan Africa at 34 %

Conclusion

Trade policy in developing countries is concerned with two objectives: promoting industrialization and coping with the uneven development of the domestic economy.
Government policy to promote industrialization has often been justified by the infant industry argument.
Most developing countries are characterized by economic dualism.
Export-oriented industrialization of the sort that has occurred in the successful countries of East Asia is unlikely to be replicated in other developing countries – particularly in Africa and Latin America - which have much lower ratios of skill to land (or of human to natural resources).
Developing countries may set up its own industrialization direction based on strength and relative factor endowment through primary processing into consideration.
A country with extensive natural resources can produce and export processed primary products depends on the skills of its workforce. If the level of skill per worker is high, the country will have a comparative advantage in primary processing; if the level of skill is low, its exports will be concentrated on narrowly defined (unprocessed or less processed) primary products.
For countries with low skill/land ratios, but moderate levels of skill per worker, characterized by much of Latin America, is thus a positive one. These countries can, through primary processing, produce and export other sorts of manufactures.
For countries which have both low skill/land ratios and low levels of skill per worker, characterized by much of sub-Saharan Africa. Countries in this situation have no stronger a comparative advantage in primary processing. They thus have little chance of exporting large amounts of any sort of manufactures, unless or until they can raise the skill level of their workers which will require large increases in the coverage and quality of basic education, and is bound to be a slow process.
In the meantime, countries with a lot of land and low levels of education should concentrate on opportunities for progress within the narrow primary category. In Africa, there has recently been diversification into new crops - fruit, flowers and vegetables which can create many jobs, as well as raising export revenues. Other than agriculture sector, there have also been potential in diversifying industries in developing countries to include clothing, textile, etc.
Lastly, reducing international inequality and marginalization could be an explicit objective. ODA levels will need to be significantly increased and restructured to stimulate productivity growth in developing countries. Technical assistance for capacity building in developing countries particularly for LDCs should also be increased significantly.

This article was originally published on academia.edu

Mr. Choen Krainara is a Senior Economic, Social and Environmental Development Planner at Office of the National Economic and Social Development Council (NESDC), a central national planning agency of Thailand.He does a broad range of researches on cross-border trade, special border economic zones, climate change adaptation and mitigation, tourism, agricultural development, policy analysis, and sustainable community, urban, rural and regional development planning.

Democracy and Governance in Africa
by Sahr John Kpundeh

Decentralization and Devolution of Power

Political autonomy and policy participation for local communities and ethnic groups in society are significant factors of government legitimacy. Participants noted that, in politically fragmented countries, decentralization might allow the various political, religious, ethnic, or tribal groups greater representation in development decision making, thereby increasing their stake in maintaining political stability. One participant convincingly argued, "With reference to decentralization, I would simply like to say that we have to look at things from the point of view of democratic society. . . . Are we going to tolerate diversity? . . . If it's a dialogue among peers, then we can't concentrate the political and economic power in the hands of just a few people. . . . I think we have to tolerate this diversity, and political and economic decentralization should be admitted as having the right to exist. . . . We do not have to try to achieve uniformity because it is perhaps not the best thing. I think that decentralization of power is not bad. . . . It will, of course mean that there is a limitation on the centralization of power in both the political and economic fields."

There was clear agreement that centralization and personalization of power by rulers has been a major obstacle to democracy in African countries: "Africa's problem is unequivocally and fundamentally political. . . . Political centralization has led to economic centralization, which has led to economic crisis. . . . Institutionally, because most African countries are overly centralized, there needs to be both horizontal and vertical decentralization of power."

One specific suggestion was to decentralize politics first so that the legislative and judicial branches of power could become independent and their powers strengthened, in order to act as a check on the powers of the executive. Participants further pointed out that the power and authority of most African heads of state blatantly override the powers of the legislature and the judiciary. In other words, because of the personalization of power by the rulers, an enormous gap exists between the rulers and the people. In some African countries, constitutions and other laws have been revised to give rulers the right to exercise exceptional powers. For example, in Sierra Leone and Kenya, constitutional amendments and statutory provisions have allowed the presidents to exercise emergency powers anywhere in the country at any time. Most participants believed that, in the future, it would be necessary to limit the excessive concentration of power in the hands of the executive in order to ensure some level of accountability through the other branches of government.

There was a clear sense that the role of the centralized state must be limited. As one person suggested: "Local government must be allowed to work. . . . The state's monopoly control must be broken down. . . . The formal structures in the state are highly centralized, whatever way you look at it. This is the problem as far as the issue of centralization is concerned." Another suggestion was for a reexamination of state-societal relations in the context of decentralization as it relates to democratization. One participant advocated that the state communicate with societal elements, such as clans and tribes, and not just with one ethnic group in society: "Decentralization can absorb ethnic issues at the middle level; groups have something they can control at their level. . . . Decentralization will be territorial and ethnic based." "But minorities will have to be protected, if they live, for example, in the 'wrong' area," argued one participant. Another participant, however, cautioned that decentralization should not be allowed to result in the replacement of authentic, grass roots leaders with party members. In short, the participants agreed that decentralization could be useful in encouraging local autonomy, strengthening civil society at the grass roots level in both rural and urban areas, and providing ways for women to participate in issues of immediate local concern to them.

The discussions on decentralization also focused on the devolution of power. One participant argued that "decentralization has been cloaked in rhetoric without devolution, resulting in the further illegitimacy of the state and the weakness of civil society. As African states became increasingly incapable of delivering [on their economic and political promises], associational life emerged at the local level. This often took the form of a shadow state, where people organized themselves to provide basic services that, in their communities, had been ignored by the state. In this bubbling up process, these groups would then try to extract necessities from the state in order to provide services. Civil society, therefore, emerges in this form to meet basic human needs at the local level, not resulting from macro-level concerns. If there is to be an efficient link between state and society, with effective articulation by associations, then local government, in the form of devolution, would be most appropriate. In this way, devolution could provide the missing link between the center and periphery in rural areas. Yet autonomous local governments hold out important prospects, not only in rural areas, but also in urbanized areas, such as those in South Africa."

Some participants, however, expressed caveats in the discussions about decentralization: "As far as decentralization is concerned, it can be a little dangerous, because the more we try to decentralize, the more we come up against certain community realities that may dismantle or destroy the greater community. . . . In such situations, there is an inordinate amount of stress on certain ethnic communities or characteristics. This may not always be optimal, as far as the Africa of tomorrow is concerned. . . . But, if we are aware of these dangers, I think we can overcome them."

Another participant suggested that societies with diverse ethnic groups centralize power primarily because that has been the easy and cheapest way out of anticipated problems. He maintained, "When we talk of decentralization, I can tell you that I participated in a number of discussions in my country in which the people of certain regions said they were opposed to decentralization because they were the rich sections of the community and they had the mineral resources. Therefore, they argued, they should have more money and their incomes should be bigger than the other areas, as they supply the resources. Consequently, if centralization were developed in some areas, it was because it was the cheapest way out. . . . Democracy, of course, calls for money and for financing."

Modes of Representation

The issue of modes of representation in African countries also was a topic of discussion in the three workshops. Many participants argued that federalism might be the best known mechanism, although not the only method, of giving autonomy to different societal groups, thereby accommodating what participants termed the "ethnic variable." There was some support for regionalism, in the form of a unitary state with some federal character. Yet the difficulty in coming to any clear agreement concerning representation was illustrated by one participant, who asked, "On what does one base federalism? If one resorts to ethnic groups, which primarily are territorially based, then people worry about ethnicity. They see that disputes can lead to intergroup conflicts when groups live in proximity, such as is the case in Lebanon. If groups live in the periphery, it can lead to separatism. . . . If groups are interspersed, then violent conflict can emerge, as it has in the Balkans and in Nagorno-Karabakh. There are no simple solutions."

Another participant further argued, "Regarding the devolution of authority in the form of a federal or regional state, I see a problem with the concept of a federal state dividing the country into local governments that have absolute sovereignty over their units. Can a country, like Ethiopia, staff about 15 different governments? Moreover, I fear that tribal and ethnic problems could emerge, perhaps leading to disintegration, as in Yugoslavia. Therefore, maybe a regional state organized along economic units might make more sense."

Another participant from South Africa expressed similar cynicism: "In talking about regionalism and federalism, is one trying to weaken the central government in order to recognize ethnicity, or in order to ensure that a future, majority-controlled government won't be able to function?" Yet another participant who is engaged in the negotiation process of the Convention for a Democratic South Africa expressed further reservations with the "federal option as it is being used by white South Africans to divide and concentrate power without question. For us, the redistribution of power and resources is essential. Blacks have had to stand up as South Africans who have been victims of apartheid. Is it necessary to recognize ethnicity in order to move to democracy, as in Ethiopia, or should we not keep our South African unity? Whereas the South African government is pushing for the constitutional entrenchment of ethnicity, the African National Congress believes that to be the Soviet model, which it cannot accept. I agree that regional concerns should exist, as should regional governments, but the state should be given central powers to allow it to function effectively and to redistribute resources where needed. To this end, I doubt that the efforts under way in Nigeria would be an option for South Africa."

The question of what kind of future constituencies might be more productive for African countries produced various reactions from participants. Some argued that smaller units might be more manageable, as more people would be involved and ethnic divisions would be minimized, because, in the latter case, the larger ethnic groups would be broken down into smaller states. Others argued that regional representation with bigger followings offers enormous possibilities to help smaller states.

A few participants, however, advocated representation based on something more than territorial constituencies. This view was well argued by one participant: "Initially, representation was territorially based, which is the basic system almost everywhere. But, in Eastern Europe, as in Africa, it has been argued that territorial representation isn't enough. One also needs functional representation, perhaps through an electoral college, where individuals would represent functional groups. In the French Fourth Republic, for example, this took the form of an economic and social council." Another participant pointed out that Namibia was undertaking to "capture with representation the influence of traditional rulers in rural areas," by incorporating functional representation into government through the establishment of a second House. The crucial point to be made is that, democracy must always be prepared to recognize differences among groups of people, but whether these should be institutionalized within a federal system is something that may legitimately vary from state to state. A nonfederal Nigeria, for example, is barely conceivable, but federal systems in other states may carry different implications. If federalism is to work, there must be a real commitment to the center, as well as to the individual units. As the former Soviet Union and Yugoslavia demonstrate, federalism does not provide a means of keeping together peoples who don't want to stay together anyhow.

Despite the overwhelming acknowledgment that effective systems of governance are needed in African countries, participants were unsure of how African countries could proceed to create new models of governance in a climate of decline and economic stagnation. To this end, there was a strong sense among participants that donors need to address the linkages between the economic and political reforms they suggest to African countries, particularly in relation to their compatibility and sequencing. Participants noted how economic reforms have caused deep despair, unemployment, and malnutrition and have not been as successful as was originally hoped. In this context, it also was noted that many African governments have become more, not less, authoritarian since they accepted such conditionalities on economic assistance. The government of Ghana, for example, ''was able to carry out its reforms because it used force.'' In the future, participants thought that, before imposing conditions, donors should encourage discussions and seek consensus through dialogue with African countries.

This article was originally published on nap.edu.

Sahr Kpundeh is the Country Manager of the South Sudan office of the World Bank in Juba. Previously, he was Lead Regional Strategy Specialist in the Governance Global Practice. He was also Regional Adviser for Governance and Anti-Corruption (GAC) in the Africa Region’s Core Operational Services Unit, where he provided high quality and timely GAC advice and technical support to AFR project teams. Kpundeh has authored more than 20 articles on governance and anti-corruption as well as edited several books. Prior to joining the Bank, Kpundeh was Senior Research Associate at the National Academy of Sciences in Washington D.C., where he led work on democratization, including editing a book entitled; Democratization in Africa: African Views, African Voices (National Academy Press, 1992). Kpundeh received his Ph.D. and Master’s degrees from Howard University in Washington, D.C., with concentration in African Political Systems, Political Economy, and International Relations.

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