Month: June 2018

ICT Investment and Partnership Key to Fuelling Africa’s Digital Growth

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Rapid advancements in information communications technologies (ICT) over the past 20 years has substantially altered the ways in which people live, work, play and interact with one another.

The World Bank’s World Development Report shows that ICT has a positive effect on a country’s economy, with a 10% increase in broadband penetration being associated with a 1.4% increase in gross domestic product (GDP) growth in emerging markets.

Driving growth and job creation

Digitisation also has the greatest employment effect. According to the World Bank statistics, every 10% increase in broadband penetration will lead to 2% to 3% increase of employment rate. In 2016, China’s digital economy created 2.8 million jobs, accounting for 21% of the total new jobs. Japans 2015 White Paper on Information and Communications indicates; if small businesses can fully adopt ICT technologies such as cloud services, they will be able to create about 200,000 jobs.

Similarly, research shows a 90% correlation can be seen between investments in ICT and a country’s’ success in meeting several key United Nations Sustainable Development Goals. The African Union Agenda 2063 has acknowledged the importance of Digital Inclusivity for African countries to bring the continent on par with the rest of the world as an information society.

However, there are still some challenges in availability, accessibility and affordability including geographic challenges of reaching small, remote communities, poverty and lack of basic knowledge and skills. Statistics from GSMA shows that, approximately 53 percent of the world’s population is still unconnected, and 80 percent of the unconnected population is located in Asia-Pacific and in Africa. On average, 69 percent of the African population do not have access to internet, with many of those unconnected living in rural areas.

Multiple approach to beat challenges

Challenges always come with opportunities. To solve these challenges, we need to take a cross-sector approach and we need to think differently about how to address the business model challenge. To tackle this issue, some of the solutions available include:

First of all, it is important to have a master plan to direct investment and attract the best talent. For instance, Germany’s Industry 4.0 and the Made in China 2025 initiatives have been designed to make the manufacturing industries in these countries intelligent by using ICT. Under the Smart Community strategy of the Malaysian government, the digital economy has grown to make up 17% of total GDP within just 3 years, which makes it one of the world’s highest ranking countries in this regard. In this information age, development of ICT should be prioritized on a par with other forms of infrastructure and basic services crucial to society such as electricity, water, roads and bridges.

Second, we need new innovations that enable lower cost but similar performance solutions that can shorten the time needed to recover investment costs and hence provide the private sector with an incentive to invest. For example, given the significant investment costs and inability of the revenues to cover both the set-up and operation costs, telecom operators do not have an incentive to invest in building rural networks. Innovative technologies can help make it viable for operators to invest in rural areas.

Third, it is necessary to provide policies that can lower the barriers of digital transformation. For example, Thailand provides subsidies to encourage ICT infrastructure construction in rural areas; Italy encourages carriers and electric companies to work together in laying out optical fiber; Saudi Arabia allows carriers to mount sites on streetlamps and regulations in Germany requiring the installation of fiber-optic cables in all new houses and roads. Allocating more resources and providing supportive policies including streamlining approvals, usage of Universal Service Funds, reducing taxation, and using ICT to deliver public services more efficiently, effectively and equitably will allow for more sustainable and inclusive development.

Fourth, we need innovative business models that can generate more benefits for users and to provide users with the skills to use and benefit from smartphones. This will enable telecom operators to generate more revenue. Mobile money is one of the best examples. With the right skills and content, users can also access educational content, learn how to improve yields on their farms, and get better prices for their cattle or crops. This will directly enable them to increase their incomes and both drive and enable greater spend on communications, hence improve the investment rationale.

Embracing these solutions requires cross-sector partnerships and new thinking. These can directly translate into higher availability, accessibility and affordability of ICT services. This will lead to a future where everyone can is able to access the Internet to unleash their own potential to create value and create economic and social gains for themselves and to exercise and enjoy their rights to a better quality of life, dignity and equality.

Article by Li Peng, President: Huawei Southern Africa Region

Africa towards Green Finance

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“In Africa, we are beginning to see an emerging trend whereby central banks, financial institutions and insurance companies are starting to respond to risks posed by climate change and putting in place financial models and risk management frameworks that take into account environmental risk factors.”

Out of the trending issues, the greening of the financial system, driven by global climatic changes, and how to deal with cryptocurrencies, also known as virtual or digital currencies, are presenting African central banks with major challenges. On face value, climate change looks alien to central banking. It’s an issue associated with governments that have a primary role in creating green economies and ensuring adherence to international climatic protocols, such as the 2015 Paris Agreement.

Climatic change is however a concern, not only for governments, but for all regulatory arms of governments and ordinary citizens as it impacts on livelihoods, financial systems and economies. The greening of financial systems is a concept that has recently emerged and is becoming part of the extended mandate for central banks.

Environmental financial risk – the risk arising from climate change – poses significant systemic risks to economies and financial systems which central banks cannot afford to ignore. According to a Bloomberg opinion piece by Ferdinando Giugliano, ‘Global warming is a Central Bank issue’, “Monetary authorities are right to be mindful of the way in which climate risk affects their mandate to ensure price stability.”

In Africa, we are beginning to see an emerging trend whereby central banks, financial institutions and insurance companies are starting to respond to risks posed by climate change and putting in place financial models and risk management frameworks that take into account environmental risk factors. As part of managing risks caused by climate change – environmental financial risks – there is an emerging trend wherein financial institutions, as part of their credit rating system, now require more disclosures from customers on their ‘green credentials’, such as in respect of greenhouse gas emissions.

Climate change has made extreme weather events such as heatwaves, severe winters, floods and droughts more frequent.  Agriculture is Africa’s largest economic sector, contributing 15% of the continent’s GDP annually, or more than $100bn in 2016.

If farmers fail to produce good harvests due to climatic changes, the financial risks to national financial systems and economies can be devastating. African countries export agricultural commodities to the global markets in Europe, USA, China and other places, where manufacturing industries depend on them. The effects of climate change not only affect African financial systems and economies but by extension, global financial systems and economies. When local banks fail to service their obligations due to the effects of climate change, the international financial lenders also take a knock.

Real effects of climate change

The effects of climate change on African economies and financial systems in particular, are more real than hypothetical. African central banks need to manage systemic risks – the risks to entire financial systems – posed by the effects of climate change. Risk-based bank supervision models and guidelines need to be tweaked to ensure that the financial industry adjusts its financial models, capital adequacy ratios and risk frameworks to deal with climate change related risks.

The debate that has often arisen in credit risk management is:  should banks give a lower credit risk weight to ‘green investments and assets’ or ‘green projects’?  Should companies which produce renewable energy products or companies that have switched to ‘green systems’ be given lower risk weights when assessing their capital requirements simply because they have gone green? Conversely, should ‘brown assets’ or greenhouse gas emitting investments, be given higher risk weights?

As the world moves towards green economies, in essence this would mean that ‘green assets’ would be cheaper to hold than ‘brown assets’ and that it would be cheaper to invest in green assets than it would in brown assets. 

Would it mean, for example, that financing arrangements for combustion-driven machinery or equipment, which burn carbon fossil fuels, would attract higher interest rates than green – solar or lithium battery – powered ones?

If these financial models are adopted in literal terms, greening financial systems could create some socioeconomic challenges, which may be in conflict with established financial lending models. This could produce some backlash for central banks.

“In promoting ‘green investment’, a central bank would risk overstepping its mandate. By choosing to treat bank loans differently depending on their green credentials, a central bank could also be accused of distorting competition in the economy”, concludes Giugliano.

African central banks face challenges in affecting monetary policies that advance greening of financial systems, unlike central banks in the developed world which have already stood up to the challenge of climate change by introducing comprehensive green banking guidelines that cover issues such as carbon pricing, green credit, risk weighting of green and brown assets. However, the new challenges facing African central banks do not end with the greening of financial systems.

Cryptocurrency headaches

The popping up of cryptocurrencies, also known as digital, alternative or virtual currencies, is causing headaches to African central bank governors as their use is increasing, especially with the risk-taking and speculative younger generation.

According to Wikipedia, Bitcoin, created in 2009, was the first cryptocurrency. Bitcoins are created by a process called Bitcoin mining and so far 17m bitcoins have been mined and are in circulation. Other cryptocurrencies have come up, such as Litecoin, Ripple, Dogecoin and Monero.

Cryptocurrency is a virtual medium of exchange that uses cryptography to secure its transactions, create units and verify transfer of assets. Cryptocurrencies do not have a single administrator as they work on a decentralised digital platform that holds or exchanges the virtual currency. Cryptocurrencies offer anonymous transactions by obfuscating the IP address and geo-location of users so that they are untraceable.

Most, if not all, African central banks do not recognize cryptocurrencies as currency, a medium of exchange or legal tender. Algeria’s new finance law of 2018 prohibits trading in virtual currency. Although the global status of cryptocurrencies remains largely undefined, in Western Europe, USA Japan and Dubai, for example, it’s legal to trade in Bitcoin.

On 31 March 2018, the Nigerian Deposit Insurance Corporation (NDIC) clarified that cryptocurrencies are not deposits or financial instruments authorised by the Central Bank of Nigeria:  “These forms of currencies are not backed by any physical commodity, such as gold or other precious stones. They do not belong to the category of currencies or coins issued by CBN or the central bank of any country”, according to Adikwu Igoche, Manager in charge of research development at NDIC.

The Kenyan Central Bank, as far back as 2015, issued a public notice warning against use of virtual currencies as no entity in Kenya is currently licensed to offer services using virtual currencies such as Bitcoin, which are not legal tender.

The nature of the virtual currencies has presented African central banks with huge challenges. The scary thing is that, while central banks have no control or monitoring capacity over virtual currencies, virtual currencies have the potential to cause distortions in financial systems and create social problems. Should the platforms that hold or exchange virtual currencies collapse, there is no recourse or protection that governments can offer to their citizens.

The headaches presented to African central banks are that transactions in cryptocurrencies are susceptible to abuse by money launderers, tax evaders, criminals and terrorist organizations. Virtual currencies, therefore, thwart, to an extent, efforts by central banks in combating illicit financial transactions. 

source: African Business Magazine

2019 Young Professional Program (The World Bank Group) – Call for Application

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The African Chamber of Commerce (AFCHAM) was built with youth dynamism being its centerpiece.  AFCHAM Youth Empowerment Program was launched with the aim to give youths the skills they need in order to reveal their full potentials in all walks of life and with particular emphasis on business related skills. Through the program, talented youths are detected, nurtured, placed strategically to run AFCHAM missions or simply let go in case they want to stand on their own feet.

We are partners of The World Bank Group (WBG) with which on the 2nd June, 2017 we organized a conference on Global Job Opportunities for International Students in China where over 40 postgraduate students attended.

Today, we are glad to inform you that the application for the 2019 Selection Process for the Young Professionals Program is open from June 14 to July 31, 2018 (midnight EST).

Do you have a passion for international development and the leadership potential to grow in fascinating top technical and managerial roles in the World Bank Group (WBG)?

So then, don’t miss this unique opportunity allowing you to start an exciting career at the World Bank Group.

To be competitive for this highly selective program, candidates need to demonstrate a commitment to development, proven academic success, professional achievement, and leadership capability. For the eligibility, program features, selection cycle, and application process visit the link below:

http://www.worldbank.org/en/about/careers/programs-and-internships/young-professionals-program#a

Today is time to create your Future!

 

 

 

 

 

 

 

Casablanca Finance City spreads it wings

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Casablanca Finance City (CFC) was officially launched in December 2010 as a financial and economic hub from which to drive investment into Africa.

Today there are 150 companies operating from the centre and it is estimated that 74% of Moroccan FDI and investment flows into Africa originate from CFC. There has been a flurry of activity around Africa-bound investments in London in recent times.

DLA Piper, a member of the CFC, organised an investor day to make the case for African opportunities to its clients while the Casablanca Stock Exchange hosted a Morocco investment day at the London Stock Exchange. Although the events were not related, they illustrate the continued appetite for emerging and frontier markets.

Attending the DLA Piper event, Manal Bernoussi, CFC’s Strategy and Marketing Director, said that although it was encouraging to see considerable investment interest in the UK, this has not been translated sufficiently into actual deals. Investments so far, Bernoussi says, are small by global standards.

Of the 150 companies operating in CFC, 40% are European groups but of those, only five companies are British. “If we are to drive capital to our economies,” she says, “one way of stimulating the flow of capital is to get international partners to be closer to the market, which is the appeal of CFC.”

Like the DIFC in Dubai, the CFC is providing modern infrastructure and facilities in a 100ha site, of which 50% is devoted to green spaces. The first tower is about to be completed and will start receiving its first tenants before the end of the year.

But it is much more than that and the CFC has a clear focus. To be granted CFC certification and to become a member, companies have to show a clear African orientation, she says. “Not any company can just come and set up in the CFC. You have to produce a business plan to prove that part of your business and investments are geared towards Africa.”

Companies targeted by CFC are typically involved in: financial services (except retail banking); professional services (law firms, accountants etc); African holdings; or are regional headquarters of multinationals. CFC members include a number of international institutions such as BNP Paribas, Boston Consulting Group, AIG and a number of fund managers, law firms and banking institutions.

CFC also hosts the Africa 50 Fund, a fund launched by the African Development Bank to accelerate investments in infrastructure by mobilising public and private sector capital. It is an ecosystem that she believes will help create movement to drive investment into Africa.

Clustering in expertise

When asked if companies within the CFC would be able to tap into the larger balance sheets of Moroccan banks for project and trade finance, Bernoussi says that’s not the objective. Instead she contends that the CFC will become a truly successful platform if it can help channel more capital from the North (Europe and the Americas), from Asia and from other markets into Africa. Right now, she says, Africa represents less than 5% of global FDI flows.

She is confident that clustering in organisations that have a clear African mandate and focus will help accelerate and increase investment flows to Africa and also create a critical mass of expertise and partners to work more closely together. “We are creating a cluster of skills and knowledge, an ecosystem of bankers and professional services, who are setting base camp in the CFC. If you are serious about investing in Africa you need to be in Africa,” she adds.

The CFC offers some clear advantages to investors. Members benefit from streamlined administrative processes, the accompanying physical infrastructure (currently in the final stages of completion) and also fiscal benefits, but the real added value will be in gathering African investors to share ideas and information.

To this end, the CFC is organising workshops and commissioning papers on sectors and countries, to be compiled by experts through their partners. These will be made available to the members.

Leader in green finance

The CFC wants to position itself as a leader in sustainable and green finance. Africa, says Bernoussi, is the most vulnerable continent when it comes to climate change but it also has the biggest potential in green finance. “We’ve managed to bring in funds focusing on green investments, companies such as Global Nexus or Finance in Motion. Expertise will come from members of the community, and raising awareness through events.”

The organisation also wants to become a regional hub for Islamic finance (Bahrain leads in the Middle East and Malaysia in
Asia). The way to do it, Bernoussi says, is by crowding in other partners in this sector and again creating expertise and know-how clusters.

Casablanca Finance City has been ranked the number one African financial centre since 2015 by the Global Financial Centres Index, a UK-based think-tank. This is a major achievement for the CFC because the rating not only considers the ease of doing business and other international and well-known indicators but also because it seeks feedback and viewpoints from international players in financial services.

Bernoussi does not see the CFC in terms of competing with African financial centres but rather as responding to the need to strengthen and create stronger financial centres across the continent. “Africa will need multiple financial centres to serve the continent,” she says. In an interconnected world, these will have to work together in the same way that CFC has already partnered with others, such as the financial centre in Astana (for Islamic Banking), the City of London (on derivatives, insurance and real estate) or Paris (on financial innovation).

She says that Morocco’s re-entry into the AU and also more recently, the ECOWAS regional economic community, has helped the cause. This is critical because, without greater regional integration, the scale demanded by investors is simply not there.

This is why the CFC is partnering with African investment promotion agencies. For example, Yewande Sadiku from the Nigerian Investment Promotion Commission was in Morocco in March to help establish stronger ties between CFC members and Nigerian partners and share information and data on opportunities and the projects seeking investments.

“We’re a truly African financial center. Our members cover 46 countries in Africa,” Bernoussi says. She adds that without the continent coming together and creating these clusters of know-how and expertise where different stakeholders pool together, investment flows will remain insufficient to transform the continent.

source: Africa Business Magazine

Ethiopia to allow privatisation of Ethiopian Airlines, telecoms

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Ethiopia will open its national carrier Ethiopian Airlines and state-owned telecom company to investors for the first time by selling minority stakes in the two firms.

The move is part of a wider effort by Ethiopia’s new Prime Minister Abiy Ahmed to reform East Africa’s fastest growing economy, which is dominated by the state. Ahmed, in power since March 2018, has already reduced the role of Ethiopia’s powerful military in construction and similar projects, and lifted a state of emergency introduced after anti-government protests threatened to engulf the nation.

The news will excite private domestic and foreign investors who have long targeted the East African country of more than 100m people for major investment. Ethiopian Airlines is Africa’s largest and most profitable large-scale airline serving almost 70 cities worldwide from the capital, Addis Ababa, and it recently reached a fleet of 100 aircraft.

The government will also dispose of equity in the carrier, along with Ethio Telecom, Ethiopian Electric Power, and the Ethiopian Shipping & Logistics Services Enterprise.

Political Reform

The ruling Ethiopian People’s Revolutionary Democratic Front (EPRDF) coalition, in power since 1991, has long supported deep state involvement in the economy, but the EPRDF said that Ethiopia needed economic reforms to sustain rapid growth and boost its exports. The changes in the East African country have come following nearly four years of political unrest triggered by government plans to expand the boundaries of Addis Ababa into the Oromia region, which is home to the Oromo, Ethiopia’s largest ethno-national group.

The Oromo protesters expanded into calls for greater political reforms including the release of political prisoners and socioeconomic rights for the Oromo, who make up more than 34% of the population, and the Amhara, Ethiopia’s second-largest ethnic group. Both ethnic groups have long complained that they have been marginalised by the Tigrayans who, despite only accounting for 6% of the population, hold most influential positions in the government, economy and security.

The protests eventually led to the resignation of former Prime Minister Hailemariam Desalegn. Ahmed, who belongs to the Oromo ethnic group, has vowed to enact reforms to make the economy more inclusive and he has also released some political prisoners. The opening up of the airline and telecoms industry is another step towards achieving his stated goals.

source: Africa Business Magazine

Kenya launches oil exportation plan

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Kenya’s plans to join the league of oil exporters finally became reality, after president Uhuru Kenyatta flagged off trucks loaded with oil from Lokichar basin in Turkana northwestern Kenya, destined for the port city of Mombasa, 1000 km away.

Over 100 trucks will haul some 2,000 barrels of oil per day, under the Early Oil Export Scheme (EOPS). The trucked oil will be stored at an oil refinery until the stockpile reaches at least 400,000 barrels.

The transportation was delayed for almost a year due to a row between the national government and the county government of Turkana over revenue sharing. However, a deal was reached last month.

According to the agreement, 75 percent of revenues will go to the national government, 20 percent to Turkana county government and 5 percent to the host community in Lokichar.

British firm Tullow discovered commercial oil reserves estimated at 750 million barrels in Turkana in 2012.

A $1.1 billion pipeline will be constructed between Lokichar to the ongoing Lamu port as the east African nation ramps up production to full capacity by 2022.

source: africanews.com

“African Scholars: Made in China” research project

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African Scholars: Made in China, is a research project conducted by Brandy Darling, a student from Connecticut College in the northeastern portion of the United States.

The research came about due to the fact that there has been an exponential growth in the amount of African students studying in China since the 1980s. This is due to the increase of scholarships given to students as well as the new economic opportunities that China has presented to the world due to its rapid economic growth. Unfortunately, there has been a very limited amount of research to target the economic effects that African students have on the Chinese economy by choosing to study in China.

Through opinion polls and interviews, Brandy will gather evidence to help bridge this information gap and develop conclusions about African students’ contributions to the Chinese economy. To participate in polling, interviewing or to share useful information that will contribute to her research, she can be contacted through WeChat by the username: brandiexp.