Category Archives: China

Black Panther vs. Wolf Warrior

How do you write about a movie without giving away parts of it to anyone who has not seen it? I was spurred to see the movie “The Black Panther” after attending a networking dinner where half the guests had seen it and eagerly wanted to talk about it across the table while some of us pleaded that there not be any discussion until the rest of us had seen it.  

As I write this, the Black Panther has crossed the $1 billion revenue mark. When I saw a preview of the movie sometime in December it looked like another mindless action movie set in an American city. But the film with a predominantly black cast is set in Los Angeles, Seoul, and primarily in a fictional African country called Wakanda. 

The movie has been well received in many markets due to its positive portrayal of Wakanda which has massive mineral wealth reserves that the residents have harnessed to develop an advanced technological economy while remaining hidden and portraying themselves to the world, as another poor African country.

It has a mix of new and-well established stars, as familiar faces like award-winning Angela Bassett, Forest Whitaker, and Lupita Nyongo have meshed well with several upcoming stars who have worked hard in their careers to get to their big break in the Black Panther. Fred Swaniker, the co-founder of the Africa Leadership Academy, recently wrote about Danai Gurira, a Zimbabwean college-friend of his, who he advised not to study theatre, as it was a waste of time; but she ignored his advice and now portrayed the scene-stealing female general in the Black Panther. 

Black Panther is directed by young black director Ryan Coogler who has a knack for turning movie budgets into large paybacks. And Black Panther is now the 20th highest-grossing movie of all time on a list dominated by comic and children themed movies. Films get on this list when audiences enjoy, re-watch, and tell others to see them. And local entrepreneurs and celebrities have offered to pay for whole groups and classrooms in cities like Atlanta and Kisumu to watch the Black Panther. 

For Kenyans, the film has been well received, and one report that it is probably one of the largest-grossing local films due to Lupita’s appearance.  I got in touch with my friend Chris Foot, Chairman of the Kenya Film Commission to ask about if Black Panther could have been shot in Nairobi and he mentioned that Coogler had actually visited Kenya for research but ultimately the producers decided that the movie would be primarily filmed in the US. 

What’s remarkable about the Black Panthers’ billion-dollar haul is that it was achieved before the movie was shown in the large China movie market. In reading about expectations ahead of Black Panther’s opening in China I came across this article which looks at if the Black Panther movie would change the views of Chinese citizens about Africa.

The article mentions a movie, called the Wolf Warrior II, which was released in July 2017 and became best-selling Chinese movie in history, grossing $874 million. Wu Jing directed and stars in it as an indestructible Chinese soldier who foils rebels in a fictional African country where senseless wars break out that have soldiers shooting at each other and killing civilians even as an Ebola-like disease decimates communities. In it, Chinese are revered as do-gooders in medicine and industry who are not to be harmed in Africa, except by the white mercenaries who are orchestrating the wars. 

Finally, the imagery of Africa in Wolf Warrior II, which was filmed in present-day South Africa, is more realistic than Black Panther’s futuristic utopia of Wakanda. And the global success of the Black Panther movie will not change American or Chinese views about Africa but it may inspire more interest in African countries, stories, and projects.

This was written in March 2018 but not approved for publication as my regular column on financial issues.

Edit: Reading “The Ride of a Lifetime”, Robert Iger’s autobiography of his time as Disney CEO, in which he made three huge acquisition – of Pixar, the Star Wars franchise and Marvel comics into the Disney empire, he writes that one of the proudest creations of his tenure was the Black Panther movie. 

It defied the notion that a black-led superhero movie could perform at the box office, on top of challenging a prevailing view in Hollywood that movies with predominantly black casts and black leads struggled in international markets. This had resulted in fewer black-led films being produced, with fewer actors, and smaller budgets to mitigate box-office risks. 

KPMG on Geopolitical Risks and Opportunities

KPMG’s Audit Committee Institute series organized a breakfast session in Nairobi today that assessed the risks posed by global events & trends and the potential opportunities that could emerge. The session took place at a time when countries and industries around the world are gripped by concerns and efforts to contain the spread and impact of the Coronavirus.

Sophie Heading, KPMG Global’s Head of Geopolitics, who is on a tour to speak in different capitals around East Africa mentioned that geopolitics now affects the developed world as much as it does for developing countries. She said that US domestic governance is the number one political risk across the world, and that while there has been a shift in leadership away from the US & Europe (G-7 nation) towards China, currently we are in a G-Zero world in which there is no clear leader.

She referenced three distinct areas of technology, trade and trust in which geopolitics could be traced along, and the opportunities they presented for different African countries.

Excerpts

  • Technology: Advances bring geopolitical power and this is likely to spread to other markets – as seen in the battle between the US and China over spectrum (5G), data, and platforms. China is looking to reshape the Sub-Saharan Africa technological space while the US wants to protect its security interests and intellectual property.
  • Trade: The US and China have decided to decouple and go separate ways and other countries will have to choose who to align with. Both are seeking new alliances, investors, partners, suppliers, staff etc. but this is also at a time that other key markets are increasing their regulations in terms of capital, policies, taxes and data, etc. Foreign aid used to be a tool that Western states used to influence economic events in Africa, but with the Chinese model of financing infrastructure being so successful, she expected that there will be a drop in aid from the West as it is no longer seen as being effective.
  • Trust: There is social discontent across the world as young populations feel that government systems are not meeting their needs. This is different in developed nations versus it is in developing ones. But because of their debt levels, most nations now have less policy flexibility to address their internal issues. Also with global growth having slowed down to about 3%, and which may reduce further to as low as 1.5% with the Coronavirus outbreak, any such interventions may widen the social wealth divides within countries.

She said that there is more need to pay more attention to environmental, social, and governance (ESG) issues. This is something that Europe, and the private sector, have championed, but which other governments have not, while the US, China and India have all stepped back on the environmental front.

She cautioned that Nairobi, which is the second-biggest hub in the region for impact investing, but without the Kenya government signalling its interest in championing of ESG issues, may lose out on future investment and client opportunities.

Stanbic economic briefing for Kenya 2020

Standard Bank (Stanbic) Group Kenya released their Macroeconomic update in which they are cautiously optimistic about Kenya’s growth through the private sector. The presentation in Nairobi was done by Jibran Qureishi, the Regional Economist – Africa at Stanbic.

Highlights:

  • Stanbic economists believe that global growth will fall in 2020 and 2021 as central banks in advanced economies are tapped out and their ability to stimulate economies is limited. Chinese growth will slow to sub 6% in 2020 and be about 5.5% in 2021. Meanwhile, the US cut its rates three times last year but investments are still falling as the trade war with China has hurt growth.  
  • For Kenya, Stanbic expects 5.9% GDP growth in 2020, up from 5.6% in 2019. Three things that held back private sector over the last two years were interest rate caps, delayed payments by government and congestion at the Inland Container Depot (ICD) Nairobi.
  • Government policies should focus on private-sector driven economic growth.
    There is growth but where are jobs? Growth in the wrong place.  90% of new jobs are the informal sector and also in the service sector but these will not create a middle-income economy.
  • Tourism was resilient, earning $1.5 billion last year, but the potential is much larger and this depends on how much private investment the sector can attract. Kenya gets 2 million arrivals but Mauritius, Morocco, Egypt and South Africa get about 10 million in bad years.
  • Ambitious tax revenue targets embolden the government to spend more and tax revenue targets are still much larger than average collections.
  • If the government does not fix fiscal issues, this will lead to unpredictable tax rules which could hamper productive sectors
  • A move back to concessionary loans and away from commercial loans for the first time since the (President) Kibaki years is a welcome step.
  • The Standard Gauge Railway (SGR) may still get extended to Uganda but the government will have to build new ICD. It is not that China does not have money, but they are asking questions they should have asked 7-8 years ago.
  • Kenya traditional manufacturing has been an import-substitution model which has not really worked around the world. Better to shift from being protectionist and instead work towards growing exports which (excluding tea and remittances) have been stagnant – at $6 billion a year
  • Don’t focus on manufacturing too much and neglect agriculture, as a big part of that will come from agro-processing and adding value to agricultural produce.

Charles Mudiwa the CEO of Stanbic Kenya spoke of how the bank has aligned to the government’s agenda. They are a shareholder in the Kenya Mortgage Refinance Company, and 20% of their lending goes to manufacturing with another 9% going to agriculture & food security.

Stanbic was the lead arranger for the Acorn green bond that was listed on London’s LSE today. The bank also has a DADA program to promote women financially (with a goal to lend Kshs 20 billion) and is also supporting financial literacy training to musicians and Uber drivers.

Double 11 (Singles’ Day) Festival in China

November 11 marks a huge shopping festival by Alibaba in China. Known as “Singles’ Day” or “11.11”, it is now acknowledged as the largest e-commerce day in the world. It is mainly on Alibaba platforms like Tmall and Taobao. Rival commerce sites such as JD.com and Lazada also run their own festival days during China’s long shopping season.

Singles’ Day 2019 saw another record year of sales reaching $23 billion (158 billion yuan) in nine hours. Sales hit $1 billion in the first minute and 500 million shoppers were expected to participate. This was achieved despite a slowdown in China’s economy and the ongoing trade spat with the US. Singles’ Day is three times bigger than the largest US largest shopping day – Cyber Monday which had $8 billion of sales in 2018.

Some numbers about Singles’ Day from Jing Daily.

  • On 11.11, Alibaba sells more on one day than many countries do in a year.
  • Alibaba founder Jack Ma has a plan for the company to attain $1 trillion of gross merchandise volumes in 2020 and create 100 million jobs, and serve 2 billion customers. As such the company is expanding in other countries. In 2017, Russia, Hong Kong and the US were the main markets.
  • International brands are signing on with discounts and specials, and in 2018, 237 brands, including Apple, Estée Lauder, L’Oréal, Nestlé, Gap, Nike, and Adidas has sales of 100 million Yuan ($14 million) on Singles’ Day.
  • The holiday was originally aimed at young men (bachelors), but has now evolved such that key targets for brands include China’s 400 million millennials, the “aspirational class” and women, the “she economy.” 
  • Over 80% of the Singles’ Day sales are made on a mobile device .. so retailers need to enhance the whole shopping experience by employing unique mobile features like live streaming, interactive games, virtual reality, video marketing, and digital storytelling.
  • On Singles’ Day in 2017, 1.5 billion transactions were processed by Alibaba’s Alipay.

Other Notes:

Kenya’s Safaricom, which has a partnership with AliExpress, also had some Singles’ Day promotions. They signed a deal in March this year enabling Kenyans to shop on ALiExpress and pay with M-Pesa.

The Jack MA Foundation runs an annual Africa Netpreneur Prize Initiative (ANPI) that awards a total of $1 million in prize money to ten African entrepreneurs each year.

Read more about 11.11 from Jing Daily here.

EDIT: Alibaba reported that Singles’ Day 2019 generated US $38.4 billion of gross merchandise volumes. It featured 200,000 brands and resulted in 1.3 billion delivery orders.

UNCTAD report shows an unequal digital global economy

The increased use of digital platforms in everyday lives across the world is leading to a divide between under-connected nations from hyper-digitalized societies

The Digital Economy Report released by the United Nations Conference on Trade and Development (UNCTAD) shows that China and the USA have done the most to harvest the digital economy and now dominate the rest of the world and leading to an unequal state of e-commerce. The two countries host seven global “super-platform” companies – Microsoft, Apple, Amazon, Google, Facebook, Tencent and Alibaba that account for two-thirds of the total market value of the seventy largest digital platforms with Naspers as the only African company in the group.

Google and Facebook collected 65% of the $135 billion spent on internet advertising in 2017, while, in Australia, Google took 95% of the “search advertising” revenue while Facebook took 46% of the “display advertising” revenue.

Europe’s share of the digital economy is only 4% while Africa and Latin America combine for 1%.  In Africa, progress has also been uneven with four countries – Egypt, Kenya, Nigeria and South Africa accounting for 60% of digital entrepreneurship activity. They are followed by a second tier of Ghana, Morocco, Senegal, Tanzania, Tunisia and Uganda (with a combined 20%)

The Report showed that the evolving digital economy has a major impact on achieving sustainable development goals (SDG’s) and calls for governments in developing nations to focus efforts on things like:

  • Skills development & re-education e.g. consider that in the Western world, you can do a whole university degree online.
  • Revising policies on data privacy & sharing e.g. have restricted local data sharing pools and have tariffs on cross-border data.
  • Revising competition regulations e.g. curb the tendency where platform companies tend to capture/acquire young promising companies in the developing world.
  • Taxation e.g. developing country governments should seek to tax digital platform companies.
  • Employment e.g. by setting minimum wages & work conditions for gig-economy workers.
  • Break down silos: no longer think of government as being separate from academia, private sector, civil society and tech communities.
  • Also, while the US and Europe have divergent views on data protection, it cites a survey which found that Kenyans had the least concerns about data privacy (at 44%).

Speaking at an unveiling of the Report in Nairobi, Dr. Monica Kerretts-Makau said that the world is trending towards a captive society where you have to be on a platform to transact in an economy and that presents problems and opportunities in the African context.

The 2019 issue of the Report, that was previously focused on the “information economy”, can be downloaded here.

EDIT June 2020: The Kenya Revenue Authority announced the introduction of Value-Added Tax (VAT) on digital marketplace suppliers in the Finance Act 2019. Member of the public can send their views on the draft proposal  by June 15 to stakeholder.engagement@kra.go.ke.