BRIC or BRAC?

If you have attended any meetings or read any publications about emerging markets, you will have seen the term BRIC quite often. The acronym stands for Brazil Russia India China, and sometimes an 'S' is added for South Africa. These are the markets that the 'developed' world sees as having the most potential for growth - and, therefore, trade - in the future.

I would argue that we need to add an 'A' to the acronym, which may require a new order of initials, CARIB perhaps, or would that be a little confusing, particularly to those who like to holiday in the islands? However we want to arrange the letters, Africa, with a capital 'A', deserves to be mentioned in the same breath as the others. Why? Because we need to wake up and see the potential that we have ignored until now, although, significantly, some of the BRICs have not.

I have already catalogued China's increasing activity and influence on the continent.

According to an article in the Times of India on October 1, India's trade with Africa rose from less than $5 billion ten years ago to $70 billion in 2012 and is on course to reach $100 billion in 2015.

Brazil's trade with Africa rose from $4.3 billion in 2002 to $26.7 billion in 2011 (New York Times).

Russia trade with Africa has also increased significantly in percentage terms but lags well behind the other 3 BRIC countries in terms of dollar value of trade, at less than $10 billion.

In 2002, US trade with Africa amounted to $32.7 billion and had risen to $99.5 billion in 2012 (US Census Bureau). So we can see that the BRIC countries are outstripping the US in terms of trade with Africa, a continent that they clearly view as having a major impact on their future trade growth.

Catching up will take some real effort because India and China have already built up quite a head of steam and Brazil is also moving forward at a faster pace than the United States.

Perhaps a simple acknowledgement of the importance of African countries as developing trading partners will be a good first step? CARIB anyone?

TW

This blog represents the opinions of the author and should not be interpreted as representing the opinions, or recommendations of Mobilitas or AGS Worldwide Movers. All data and information provided on this site is for informational purposes only. The author makes no representations as to accuracy, completeness, timeliness, or validity of any information on this site and will not be liable for any errors, omissions, or delays in this information or any losses, injuries, or damages arising from its display or use. The blog is the property of the author and should not be re-posted without express, written consent.

ECOWAS

The Economic Community of West African States was founded in 1975 and has a current membership of 15 countries:

The Republic of BENIN  BURKINA FASO  The Republic of CABO VERDE  The Republic of COTE D'IVOIRE  The Republic of GAMBIA  The Republic of GHANA  The Republic of GUINEE  The Republic of GUINEE BISSAU

The Republic of LIBERIA  The Republic of MALI  The Republic of NIGER  The Federal Republic of NIGERIA  The Republic of SENEGAL  The Republic of SIERRA LEONE  TOGOLESE Republic

While the organization has well developed goals and has achieved some notable successes, it has some fundamental challenges, even after 30 plus years of existence.

The first is that it is made up of Francophone (French leaning) and Anglophone (British leaning) countries, based on the history of colonization. This difference is most easily recognized in the proposed, and yet undelivered,  monetary unions.

The West African Economic and Monetary Union, founded in 1994, was 100% Francophone until Guinea-Bissau (A former Portuguese colony) joined in 1997. It is also known as UEMOA from its name in French (Union économique et monétaire ouest-africaine) Its common currency known as the CFA Franc, whose exchange rate is tied to the Euro and guaranteed by the French Treasury. Its current members are:

•  Benin (Founding Member)
•  Burkina Faso (Founding Member)
•  Ivory Coast (Founding Member)
•  Guinea-Bissau (Joined on 2 May 1997)
•  Mali (Founding Member)
•  Niger (Founding Member)
•  Senegal (Founding Member)
•  Togo (Founding Member)

On the other hand, the West African Monetary Zone is made up of Anglophone countries, with the exception of Guinea, which is Francophone. It is working toward a common currency, known as the ECO, by 2015. Its members are:

•  Gambia (Founding Member)
•  Ghana (Founding Member)
•  Guinea (Founding Member)
•  Liberia (Joined on 16 February 2010)^[13][14]
•  Nigeria (Founding Member)
•  Sierra Leone (Founding Member)

Although the ultimate goal is to combine the two currencies, it is clear that immediate policies are strongly influenced by language and colonial history of the member states.
Another difficulty for the group is that state borders were established by the colonial powers with little or no regard for tribal and cultural considerations, not to mention local language. This presents an on-going challenge to security in the region, although there have been significant improvements in this regard over the past 15 years.
The other major challenge for the region is that Nigeria is the largest player by far in the group (almost 70% of the total group GNP) and fears of domination by Nigeria affect decision making.
Then there are the economic and trade realities that impact the potential for intra-regional growth. All members states primarily export natural resources and not manufactured goods. Thus the potential for intra-regional trade is limited until such time as manufacturing capacity is built within the region.
The tendency of developed countries to maintain this disparity so as to favor their own exports serves only to delay the building of manufacturing in ECOWAS. As I mentioned in an earlier post, China is creating manufacturing capability in Africa for competitive as well as strategic purposes. US and EU policy could benefit in the long term from a similar approach.
However, the biggest obstacle to growth for ECOWAS and other Africa regional economic groups is infrastructure. While addressing the opening of the Regional Ministerial Meeting on the Programme for Infrastructure Development in Africa (PIDA), in Yamoussoukro, Cote d’Ivoire, on Friday, 9th November 2012, Vice-President of the ECOWAS Commission, Dr. Toga Gayewea McIntosh said that, given the role infrastructure can play in the effective transformation of the region’s vast natural resources into value resources: “to do nothing or little, about infrastructural development within our sub-region is equivalent to self-strangulation.”
In 1970, the world’s rich countries agreed to give 0.7% of their GNI (Gross National Income) as official international development aid, annually. Since then, all rich nations have constantly failed to reach their agreed obligations of the 0.7% target. Instead of 0.7%, the amount of aid has been around 0.2 to 0.4%, some $150 billion short each year.The US, while being the largest contributor in dollar terms, is consistently the lowest in terms of meeting the 0.7% target. (For more detail see: http://www.globalissues.org/article/35/foreign-aid-development-assistance).
Given the needs in Africa and the potential for rapid trade growth, one would hope that the US will find a way to push some of its billions in foreign aid toward developing the infrastructures that will help Africa become the global trade partner that it deserves to be.

Sources: 

ECOWAS web site; Economic Paper by:Dr. Donatus Chukwuemeka Ojide (July 2010); UN Statistics

TW

This blog represents the opinions of the author and should not be interpreted as representing the opinions, or recommendations of Mobilitas or AGS Worldwide Movers. All data and information provided on this site is for informational purposes only. The author makes no representations as to accuracy, completeness, timeliness, or validity of any information on this site and will not be liable for any errors, omissions, or delays in this information or any losses, injuries, or damages arising from its display or use. The blog is the property of the author and should not be re-posted without express, written consent.

Much progress...and much still to be done.

According to the Africa Progress Report - 2013, produced by a committee headed by Kofi Annan, economic growth in sub-Saharan Africa is far outpacing progress in Human Development.

To quote from the summary:

"The past decade has been a period of sustained growth in Africa. Despite a weaker global economy, regional growth has averaged over 5 per cent a year. Twenty resource-rich countries have been at the forefront of the economic recovery. These countries, accounting for 56 per cent of Africa’s population, have grown on average more rapidly than other countries – and they include some of the world’s fastest-growing economies. Half of the resource-rich group has seen average income rise by one-third or more. In 2012, Angola and Sierra Leone outperformed China; Ghana and Mozambique grew more rapidly than India. 

Many resource-rich countries are moving up the international wealth rankings. Over the past decade, Cameroon, Ghana, Nigeria and Zambia have crossed the threshold from low-income to lower middle-income status. Another five countries – Angola, Botswana, Gabon, Namibia and South Africa – are in the upper middle-income group. Equatorial Guinea, with an average income of US$27,478 in 2011, is classed as a high-income country. 

Progress on reducing poverty and improving human development has been less impressive. Resource-rich countries have some of the world’s largest gaps between their global ranking on wealth, as measured by average income, and their performance on wider indicators for wellbeing, as captured by the Human Development Index (HDI). Equatorial Guinea’s HDI ranking is 91 places below its average income rank, and Angola’s is 38 places below. Moreover, resource-rich countries are heavily concentrated in the lower reaches of the HDI ranking. They account for 9 of the 12 last places, with the Democratic Republic of the Congo, bottom. "

Based on World Bank research, Equatorial Guinea has a per capita GNI that is almost 25% higher than that of Poland, yet life expectancy is 25 years less, under 5 mortality rate is 20 times higher and maternal mortality per 100,000 live births is almost 50 times higher.

The reasons for the disparity, which is similar in most of the high growth African countries, are complex. They range from corruption at the highest government levels, through inefficient tax systems that make it easy for multinationals to evade taxes, the fact that a large amount of GNI is down to gross export revenue, and on to the nature of African trade. 

The latter has changed little in the past several centuries; raw materials are grown, mined, drilled for and exported. There is little or no local processing, which would add significantly to local economies in the form of employment rather than revenue from sale of material sale.

Tax on raw materials is almost non-existant in some countries. For example, Zambia's tax revenue on mining activities is less that one quarter of one percent!

The map below shows how natural resources are found throughout sub-Saharan Africa. It does not account for yet unconfirmed but realistic expectations of enormous oil and gas fields in East Africa, but it clearly shows the potential for many countries in the region.

The answers are not simple or easy to implement. However better management of resources will be a start. Quoting again from the report:

"Concession trading arrangements are often associated with undervaluation of assets. No country has lost more from this practice than the Democratic Republic of the Congo. This report includes a detailed analysis of five privatization deals conducted through the sale of state-owned assets to foreign investors operating through offshore companies registered in the British Virgin Islands and other jurisdictions. We estimate the total losses sustained in these deals as a result of undervaluation of the assets at US$1.3 billion - –more than double total budget spending on health and education. In a country with 7 million children out of school, the sixth highest child mortality rate in the world, and endemic malnutrition, losses of this order carry high human costs.

The underpricing of concessions generates large returns for offshore companies. In the case of the Democratic Republic of the Congo, we estimate that underpricing generated returns of around 500 per cent for the offshore companies involved. "

Additionally, the Organization for Economic Co-operation and Development (OECD) says that losses from trade mispricing are greater than total Foreign Direct Investment.

The second major step is to add value to raw materials before they are exported by, for example, refining oil or processing ore. The Africa Mining Vision, prepared jointly by the African Union and The Economic Commission for Africa, sets out, according to the report: 

"a compelling agenda for using resource wealth to boost inclusive growth, expand opportunities and reduce poverty faster."

However, the report also concludes that, without direct efforts by the G8 and G20 countries, progress will be slow and efforts to raise revenue through taxes will be particularly difficult because of the use offshore accounts, shell companies and the weak disclosure standards applied in many 'developed' countries. This may be the biggest hurdle of all given that, again quoting the report:

"The Canadian government has opposed the introduction of mandatory disclosure standards. This matters because companies listed on the Toronto stock exchanges control global mining assets in excess of US$109 billion and in 2011 were involved in over 330 projects in Africa."

Canada? Who would have guessed?

The full report, or a summary, can be found at: http://africaprogresspanel.org/en/publications/africa-progress-report-2013/apr-documents/ . 

It is compelling reading.

TW

This blog represents the opinions of the author and should not be interpreted as representing the opinions, or recommendations of Mobilitas or AGS Worldwide Movers. All data and information provided on this site is for informational purposes only. The author makes no representations as to accuracy, completeness, timeliness, or validity of any information on this site and will not be liable for any errors, omissions, or delays in this information or any losses, injuries, or damages arising from its display or use. The blog is the property of the author and should not be re-posted without express, written consent.

The Time it Takes

Today's blog is for those who import or export to Africa, especially West Africa and should be of specific interest to companies in the relocation and international moving business.

Time and again we come upon situations where an assignee expresses dismay at the time it takes to get a shipment through customs. This dismay then translates into a poor service evaluation and a perception that we are not doing our job.

My company is undertaking a complete review of local conditions, as they impact import and export, in an effort to help our clients set their customers expectations realistically when shipping to or from Africa. This is a large undertaking and will take some time to complete.

In the meantime, the statistics below are taken from a paper published by the World Bank (WB) and the International Finance Corporation (IFC) on the topic of doing business with the Economic Community of West African States (ECOWAS).

(http://www.doingbusiness.org/~/media/FPDKM/Doing%20Business/Documents/Profiles/Regional/DB2012/DB12-Economic-Community-West-African-States.pdf )

ECOWAS has annual exports of almost $146 billion and exports of $115 billion (2011).
Annual growth from 2010 was 35.6% for exports and 34.3% for Imports.
The ten year average growth was 17.2% for exports and 16.6% for imports.

Obviously, this is a growing economic group and is focused on facilitating growth. The Transport and Telecommunication Directorate defines its programs as:

• 
  Develop Common Transport and Telecommunications policies, laws and regulations;

• Develop an extensive network of all weather highways within the Community;

• Formulate programmes for the improvement and integration of railway networks;

• Formulate programmes for the improvement of coastal shipping services and inter state inland waterways and for the harmonization of maritime transport policies and services;

• Promote the development of regional air transport services and implement air transport safety and security programmes;

• Encourage the establishment and promotion of joint ventures and the participation of the private sector in the areas of Transport and Telecommunications.
• 
  

(From the ECOWAS web site at www.comm.ecowas.int/dept/stand.php?id=f_f1_brief&lang=en)

Therefore, the following statistics, also from the WB/IFC paper, make for somewhat depressing reading.

Documents needed to export (number) 

Worst = 10 (Burkina Faso)*  Best = 5 (Cape Verde) Region Average is 7   World best = 2 (France)

Time to export (days) 

Worst = 59 (Niger) Best = 11 (Senegal) Region average is 27  World best = 5 (Hong Kong)

Cost to export (US$ per Container)

Worst = 3545 (Niger) Best = 831 (Gambia, The) Region Average is 1508 world best = 450 (Malaysia)


NOTE: This is NOT the shipping cost but simply the cost to process the export.


Documents needed to import (number) 

Worst = 10 (Burkina Faso)* Best = 5 (Cape Verde)* Region Average is 8 World best = 2 (France)

Time to import (days)

Worst = 64 (Niger) Best = 14 (Senegal)* Region Average is 30 World best = 4 (Singapore)

Cost to import (US$ per container) 

Worst = 4030 (Burkina Faso) Best = 885 (Gambia, The) Region Average is 1896  World best = 435 (Malaysia)


In some areas there is certainly improvement but there is yet a long way to go. Below is a sample listing, from the WB/IFC paper, of steps taken by some member countries to improve the import and export processes.


DB Year
DB2010 Liberia

The trade process was expedited by creating a one-stop shop
bringing together various ministries and agencies, and
streamlining the inspection regime.

DB2010 Mali

Implementation of an electronic data interchange (EDI)
system, improvements in the terminals used by Malian
traders, and streamlining of required documentation have
reduced trade times.

DB2010 Senegal

Processes at the container terminal were improved,
shortening the time required to move containers from the
port of Dakar. Trade has also been facilitated by
improvements to the computerized customs system (GAINDE)
and the expansion of the number of agencies included in the
network.

DB2010 Sierra Leone

Despite successful efforts to reduce the time to trade in Sierra
Leone, some fees were increased, making trading across
borders more costly.

DB2009 Benin

The export process was sped up by two days by improving
port infrastructure.

DB2009 Liberia

Trade was reformed by reducing fees for customs clearance
and port and terminal handling.

DB2009 Mali

Trade was sped up by implementing an electronic data
interchange system and risk-based inspections and improving
border cooperation.

DB2009 Nigeria

Upgrades to the facilities at Apapa port in Lagos sped the
import and export process.

DB2009 Senegal

The top reformer globally in easing trade, Senegal introduced
a single window for customs clearance, cutting document
requirements in half. It also set up an electronic data
interchange system, implemented risk-based inspections,
extended the operating hours of customs, and improved port
and road infrastructure.



DB2008 Ghana

Operational changes at the Port Authority permitted to
reduce importation time.




You can see that Ghana, a country I have already referenced as 'ahead of the curve', was the first to implement changes. Senegal, if not listed as 'best' in the lists above, is second or third best in days to import or export. Of course, there is a cost for this, so they rank just below the Region Average in both categories.

As we await further improvements, perhaps this piece will assist you to set your clients' expectations at levels appropriate to their destination.

TW

This blog represents the opinions of the author and should not be interpreted as representing the opinions, or recommendations of Mobilitas or AGS Worldwide Movers. All data and information provided on this site is for informational purposes only. The author makes no representations as to accuracy, completeness, timeliness, or validity of any information on this site and will not be liable for any errors, omissions, or delays in this information or any losses, injuries, or damages arising from its display or use. The blog is the property of the author and should not be re-posted without express, written consent.

Africa's Economic Prospects

The map below comes courtesy of Business Insider
http://www.businessinsider.com/map-chinese-investments-in-africa-2012-8
by way of The Big Picture - http://www.ritholtz.com/blog/

It shows the scope of Chinese investment, both territorial and sectorial, across the sub-Saharan portion of the continent. Now consider that it shows projects underway since 2010, and you will get a sense of how large a footprint China is leaving on the continent.


(As an aside, you will also see that infrastructure in the form of road, rail and hydroelectric projects are well represented. Airport construction and modernization is less well funded but the one that surprises me most is that port construction is well down the list. As a first hand observer, I believe lack of adequate port facilities will be the single largest barrier to the fulfillment of Africa's potential and I will examine what other projects are underway in future blogs.)

Comments like the one below, from a news item on the web site of the Chinese Embassy in Ghana, and relating to a road project completed a few years ago, mirrors many others that show investment by the Chinese Government being used to pay Chinese companies to undertake projects.

"The Chinese government granted Ghana 180 million yuan (22.5 million U.S. dollars) interest-free loan for the highway rehabilitation and expansion project, undertaken by China Railway Wuju Group Corporation."

Projects funded by the government and contracted to Chinese firms expand Chinese employment, open new markets for materials and product and boost the GDP.

So, is it already too late to invest in Africa, both to provide much needed infrastructure and, by doing so, also boost the US economy?

In October of last year, Alain Taieb, Chairman of Mobilitas and the AGS Group, addressed the International Association of Movers and stated that the group currently has significant operations on three continents but, if he could only be in one of them, he would choose Africa. He said that he would make this choice because Africa is the future. He is not alone in this regard.

According to an article in the New York Times of August 9, 2012.

 "The growth rate for the continent has crept up, rivaling Asia’s overall growth at the height of the “tiger economy” era of the 1990s, and it could reach 7 percent by 2015, according to the United Nations Development Program. And it is not just oil. Some of the top performers, like Rwanda, Ethiopia and Zambia, have not a drop of the stuff.

As the World Bank concluded in a recent report, “Africa could be on the brink of an economic takeoff, much like China was 30 years ago, and India 20 years ago.”

China is the biggest, but by no means the only, country making big bets in Africa, and not simply on extracting mineral resources. Indian telecom companies, Brazilian construction firms and other players in the developing world’s rising economies are betting on Africa.

“There is this newfangled, unprecedented interest in Africa,” said Chris Landsberg, a foreign affairs analyst at the University of Johannesburg. “Every single important country — whether China, France, Britain, India, Brazil, Turkey, you name it — they are all queuing up.”

American officials are quick to say that there is no fundamental competition between the United States and China in Africa: the continent has a nearly bottomless need for investment that no one country could fill."

An article by Professor Calestous Juma, published by the Belfer Center of Harvard University on Feb 15, of this year, quotes "Deepening Regional Integration" and "Shifting Trade Relations" as two of the three key forces driving African economic growth. I will expand on both in future blogs.

In the meantime, Professor Juma's full article may be read at:
http://www.technologyandpolicy.org/2013/02/15/africas-economic-growth-prospects/

It is well worth reading.

TW

This blog represents the opinions of the author and should not be interpreted as representing the opinions, or recommendations of Mobilitas or AGS Worldwide Movers. All data and information provided on this site is for informational purposes only. The author makes no representations as to accuracy, completeness, timeliness, or validity of any information on this site and will not be liable for any errors, omissions, or delays in this information or any losses, injuries, or damages arising from its display or use. The blog is the property of the author and should not be re-posted without express, written consent.

Infrastructure Challenges

I want to take a break from writing of China's activities in Africa in order to give some indications of the infrastructure challenges that are the basis for much of China's involvement on the continent.

Congestion at the port of Mombasa in Kenya is the result of a number of these challenges coming together to create the worst of bottlenecks, as I observed first hand during a recent visit.

Mombasa has long been the poster child for port congestion, with vessels sitting for weeks waiting for a berth. The Kenya Port Authority (KPA) developed a plan to ease congestion by establishing Container Freight Stations (CFSs) within a 10 km perimeter of the port itself. The idea was (and is) to move containers quickly from the berths to the CFSs, where they would await clearance and transport to inland destinations. The photo below shows one of the CFSs (the blue and orange area in the right center)  and the transports hauling containers in and out. One can see that the traffic volume is quite heavy.

The establishment of the CFSs has reduced the waiting time for a berth dramatically - from up to 2 weeks to a few days. However, all that has really occurred is that the containers now wait in the CFSs instead of at the port. There has been no improvement in clearance and delivery efficiency. There are three reasons for this.

1. The CFSs are privately operated and a primary source of income is storage fees. So there is no incentive to get containers on the road quickly.

2. The road from Mombasa to Nairobi (the primary inland destination) and on to Uganda is in poor shape. Much of it is two lane mountain highway where truck traffic makes driving a private car quite an adventure, causing one of my companions to remark "I have not come here to die!". Repairs and new construction are underway but, as with most highway projects, are causing more problems while in progress. There is also a shortage of available transports, which will remain a challenge even after the new road is completed.

3. There is another option for moving containers inland. A rail line exists between Mombasa and an Inland Container Depot outside Nairobi. However, the depot sits almost empty because the rail line is woefully inadequate. It is narrow gauge, (built in 1902), has only a single line and the engines are only capable of hauling up to 30 containers. Parts for such old equipment is also difficult to come by so breakdowns are frequent. The end result is that less than 7% of container traffic travels by rail.

According to some sources, there is little momentum toward upgrading the railway. Most funding would come from transport taxes, and trucking companies are unwilling to pay for something that will erode their business. (The fact that there are not enough trucks to handle the current volume anyway seems to be academic to the discussion.)

Economic development in the region (the countries of Kenya, Uganda, Tanzania, Rwanda and Burundi are cooperating as the East African Community) may be the spur that drives infrastructure development forward. Vast reserves of natural resources in the region and a growing domestic market will attract additional outside investment, including more from China. The road improvement project will facilitate development of recent oil and natural gas finds in the Kenya/Uganda border region. Then, perhaps, we can look forward to replacement of the current rail line with a standard gauge model.

Another project, named LAPSSET (Lamu Port and Southern Sudan-Ethiopia Transport), aims to develop Lamu as a sister port to Mombasa, with rail, road and pipeline links to South Sudan and Ethiopia. It is an ambitious plan and has just been implemented after many years on the drawing board. It is an encouraging sign that change is coming.

More information can be found on the Kenya Vision 2030 website at http://www.vision2030.go.ke/index.php/pillars/project/macro_enablers/181

TW

This blog represents the opinions of the author and should not be interpreted as representing the opinions, or recommendations of Mobilitas or AGS Worldwide Movers. All data and information provided on this site is for informational purposes only. The author makes no representations as to accuracy, completeness, timeliness, or validity of any information on this site and will not be liable for any errors, omissions, or delays in this information or any losses, injuries, or damages arising from its display or use. The blog is the property of the author and should not be re-posted without express, written consent.

China in Africa #2

I have had a lot of response to the last blog about China in Africa. It seems that many are somewhat surprised at how much China is involved in infrastructure development across the continent. 

In the next series, be prepared to be even more astonished.

For a start, the graph below, courtesy of the US Government Accountability Office,  shows imports and exports to/from Africa by the US and China. On the import side, China has marched from importing less than 20% of the US volume in 2001 to almost matching us in 2011. They now import far more ore, minerals and metals from Africa than does the US.



Exports to Africa show an even more staggering trend. China sends to Africa more machinery and transportation equipment than our total exports. From barely over a billion dollars in 2001, their volume has risen to over 20 billion in the course of ten years.

If this is not impressive enough, consider that, according to World Bank, China accounts for about 3% of equipment supply in Africa but 31% of the total value of civil works on the continent. So it is reasonable to suppose that the bulk of the above 'machinery and transportation equipment' portion of the chart is geared toward infrastructure projects managed by Chinese companies.

Should your boat remain un-rocked by that statistic, mull over this one. The same World Bank report shows that France is the next biggest winner in civil works projects in Africa with 12% and no other nation, including the USA, has more than 5%.

Is the glass half empty or half full? Are we so far behind that we cannot catch up or is there so much potential that we will wake up and start to view Africa in a different light, thus opening up the opportunities that China has already seen and enjoyed? More on that topic later. In the meantime, in coming blogs, I will provide more insight into China's activities in Africa.

TW

This blog represents the opinions of the author and should not be interpreted as representing the opinions, or recommendations of Mobilitas or AGS Worldwide Movers. All data and information provided on this site is for informational purposes only. The author makes no representations as to accuracy, completeness, timeliness, or validity of any information on this site and will not be liable for any errors, omissions, or delays in this information or any losses, injuries, or damages arising from its display or use. The blog is the property of the author and should not be re-posted without express, written consent.

China in Africa

During a trip that took me to East, Central and West Africa, the single most visible construction effort was road building. Kenya and DRC are badly in need of new and/or improved road infrastructure. Ghana, while ahead of the others in terms of existing road systems, still has a lot to do. So it was no surprise to see massive on-going projects everywhere across the continent.  What was surprising was that every project was managed by 'the Chinese', as my local guides proclaimed.

Regardless of location, the comments were the same. 'The Chinese' are building roads, railways, bridges and, yes, buildings throughout Africa. A quick review of recent activity shows that China's investment in africa is growing at a rapid pace, as the chart below, from the Economist (April 22, 2011) shows.

While the figures are impressive, it is the fact that almost all Chinese investment is in the form of tangible projects that makes the above graph so compelling. In contrast to those who provide cash investment or aid, China sends crews, materials and even labor (as one local said, 'they even send the chap who makes the tea'). In doing so, they stimulate their own economy, develop a very physical presence and leave a visible and lasting legacy of their investment. Thus they become more entrenched in the local markets.

Add to this the fact that western involvement in Africa is still  remembered as colonial in many places, and exploitive in many more (most investment being provided by energy and/or mining companies) and one can see that China stands to gain both economically and politically over the long term.

Not only that, but a recent report in the Financial Times BeyondBrics blog of Decemebr 13, 2012 notes that Chinese companies are using Africa to bypass import restrictions and duties.

http://blogs.ft.com/beyond-brics/2012/12/13/china-in-africa-taking-advantage/#ixzz2M1XV3H5l

In doing so, China is displaying a commercial acumen that belies the old notion of a rigid, communist and unimaginative entity. They are taking advantage of immediate financial benefits while planning for the long term.

Africa is the continent of the 21st century and beyond. After centuries of exploitation, the countries of Africa are on the cusp of tangible economic development that benefits the population at large and not just the select few.  The question is, will the west be an active partner in this development, as China is becoming, or leave the opportunities in the hands of conglomerates?

TW

This blog represents the opinions of the author and should not be interpreted as representing the opinions, or recommendations of Mobilitas or AGS Worldwide Movers. All data and information provided on this site is for informational purposes only. The author makes no representations as to accuracy, completeness, timeliness, or validity of any information on this site and will not be liable for any errors, omissions, or delays in this information or any losses, injuries, or damages arising from its display or use. The blog is the property of the author and should not be re-posted without express, written consent.

Why we go with the flow.

Last time, I spoke about facilitation payments and the fact that such payments are a normal part of doing business in Africa. Today I want to share a cautionary tale about how trying to work around the system can cause no end of trouble.

During a visit to Kinshasa airport, I visited a warehouse operated by a customs agent. I was there to witness the process whereby one needs six or more stamps on an AWB in order to clear a shipment. This, in itself, was remarkable to see and brought home the reality of the day to day routines of importers in the country. I heard stories of 'routine' inspections, where anyone visiting the warehouse to pick up packages was 'fined' for no reason other than literally being in the wrong place at the wrong time. I must have raised an inquiring eyebrow because I was taken into the warehouse and shown what looked like about 40-50 pallets of malaria medication labeled "President's Malaria Initiative" with the logos of USAID and CDC clearly stamped above and below that title.

I pretended to take a photo of our guide but managed to get the pallets in picture. (See photo). The one in the foreground is on the top of two tiers of pallets and there were more stacks to the right and left for about 10 rows.

I was informed that these medications had been sitting in place for TWO YEARS and were now out of date. Someone had tried to push for rapid clearance without the usual accommodations and a relatively low level official had blocked the import, presumably thinking that the leverage (see my last blog) on this shipment was high. No one relented, on either side, and the shipment will now be destroyed. Of course whether it is actually destroyed or finds its way onto the street is another story.

While we are adamantly against bribery in any form to gain business, we have no choice but to go with the flow in order to operate at any level of efficiency.

Attempts to curtail this sort of activity are in process and the newly appointed Director is attempting to work toward a system whereby one gets a single stamp in order to clear a shipment. He is also rotating staff to prevent individuals from getting too entrenched and thereby creating the sort of small fiefdom that has led to the current situation. I, for one, wish him all the very best in this endeavor. His country will greatly benefit if he gets it right.

TW

This blog represents the opinions of the author and should not be interpreted as representing the opinions, or recommendations of Mobilitas or AGS Worldwide Movers. All data and information provided on this site is for informational purposes only. The author makes no representations as to accuracy, completeness, timeliness, or validity of any information on this site and will not be liable for any errors, omissions, or delays in this information or any losses, injuries, or damages arising from its display or use. The blog is the property of the author and should not be re-posted without express, written consent.

Fines and Facilitations

From Bloomberg.com - reporting on stricter driving laws in Kenya:

"Under the new law, any motorist found driving on the sidewalk or using gas stations as a detour faces a year in prison and/or a fine of as much 300,000 shillings. The rules also stipulate vehicle operators who drink and drive may be fined at least 500,000 shillings and/or serve a minimum of 10 years in jail. A conviction for dangerous driving causing death can lead to life imprisonment, Midiwo said.

Drivers are concerned that creating tougher penalties for traffic offenses will enable corrupt police officers to demand bigger bribes, Simon Kimutai, head of the Matatu Owners Association, said by phone from Nairobi. Most matatus are privately owned.

“We don’t have properly trained officers who can enforce the law,” he said. “The fear is mostly that corruption is going to go triple-high.”"

That last sentence was the cause of a large scale strike by Matatu drivers who fear that police will simply want larger bribes to turn a blind eye on traffic offenses. Most Matatus, which are 14 person vans that regularly accomodate 20 or more people, simply ignore traffic laws; driving on sidewalks, the wrong side of the street etc. Apparently drivers also regularly have a few beers to keep their edge and police will accept small amounts of cash to let them off with a warning.

The drivers fear that larger fines equal larger cash contributions and their fears are probably well justified. Leverage plays a huge role in the African tradition of 'facilitation'.

In Kinshasa, DRC, police regularly stop drivers and find a reason to collect a 'fine'. During a recent visit I was twice involved with this practice, which usually means a 20-30 minute discussion at the roadside, followed by payment of the 'fine'. I was warned to 'never get out of the car' and 'never hand over your license or passport'. The reason for this is simple; once the police can get you to the station, whether you follow them to retrieve your ID or are taken there in their vehicle, they have more leverage and your 'fine' will be a lot more than the $5-10 it takes to settle matters on the roadside.

In the world of household goods moving, leverage has the opposite effect. Because HHG shipments are exempt from duty, there is little leverage for the customs officials to extract more than a few dollars per stamp or signature (as many as six stamps required in DRC). So HHG shipments endure much longer delays than commercial shipments, where high duty charges can be negotiated downward, subject, of course, to a facilitation fee to customs officials.

This practice is so rampant that even the US Foreign Corrupt Practices Act, which prohibits US companies or their agents from bribing anyone in order to get business, has a clause exempting the facilitation of minor officials in order to conduct business.

More on this subject in a later blog.

TW

This blog represents the opinions of the author and should not be interpreted as representing the opinions, or recommendations of Mobilitas or AGS Worldwide Movers. All data and information provided on this site is for informational purposes only. The author makes no representations as to accuracy, completeness, timeliness, or validity of any information on this site and will not be liable for any errors, omissions, or delays in this information or any losses, injuries, or damages arising from its display or use. The blog is the property of the author and should not be re-posted without express, written consent.

Most expensive place to do business

As the US representative of a relocations services group covering Africa, one of the most consistent questions I am asked is, "why are your prices so high in Angola?". After explaining a little, I normally cut a paste a few links to web sites that consistently rate Luanda, Angola as the most expensive place in the world to do business. It may slip to second depending on currency fluctuations and what is included in the 'basket of goods and services' used to make comparisons, but, by and large, Luanda is right up there, which tends to surprise many people.

There are many reasons for this situation, some purely capitalist and some communist.

Angola is rich in oil deposits and has attracted major exploration and exploitation efforts over the years. With an estimated 9.5 billion barrels in oil reserves, the country depends largely on oil company investment. In the rush to gain control of exploration rights, money was no object and accommodations, of all types, were standard practice.

Then, in 1975, Cuba sent armed forces to support a leftist movement and counteract South African support of their rightist opponents on the eve of Angolan independence. The force numbered over 25,000 troops at the height of Cuban intervention, which lasted until the peace agreement of 1991. Cuban influence on the Angolan government was intense; doctors, engineers and teachers came from Cuba in droves and many Angolan's were sent to Cuba to study. (This short period in Angolan history is worth examining in more detail and several good publications on the topic, including Edward George's "The Cuban Intervention in Angola".)

The combination of oil company largesse and communist influence has created a cost structure and culture that has driven rental costs per month into five figures for a modest house.  The cost of importing and exporting, even duty exempt household effects, is pushed upward by the 'facilitations' required to process necessary paperwork. (I will cover this topic, which is a challenge in many African countries,  in more detail in a future post.)

The end result is a country where ex-patriate costs are among the highest in the world.

TW

This blog represents the opinions of the author and should not be interpreted as representing the opinions, or recommendations of Mobilitas or AGS Worldwide Movers. All data and information provided on this site is for informational purposes only. The author makes no representations as to accuracy, completeness, timeliness, or validity of any information on this site and will not be liable for any errors, omissions, or delays in this information or any losses, injuries, or damages arising from its display or use. The blog is the property of the author and should not be re-posted without express, written consent.