Category Archives: Donor AID

Britain Exits the EU: What Does this mean for Kenya?

Britain’s decision to exit the European Union (EU), as announced from the results of Thursday’s landmark “Brexit” referendum has been a hot topic around the world. 33.6 Million Britons flocked to the polling booths on Thursday with the ‘leave’ campaign marginally taking the victory with a 52%-48% vote. There is however a general consensus of uncertainty with what the UK’s (United Kingdom) decision holds for the future, with particular relevance to what it means for Kenya. Britain bus

Britain is a key ally, as well as Kenya’s third largest export market with the value of exports at Sh40 Billion in 2015. The Central Bank of Kenya has already stated that it is ready to intervene and minimize disruption in money markets. Kunal Ajmera, COO of Grant Thornton Kenya provides an insight into how Britain’s decision to leave affects trade decisions and tourism in Kenya:

  1. Britain was not just any member of the EU but also one of the largest contributors and it’s most prosperous. Depending on how things unfold in the coming years other members may also demand for a referendum and this would ultimately weaken the EU substantially.
  2. The EU spends about 100 million euros per year on development co-operation in Kenya. With uncertainties over Europe due to Brexit we may see a reduced funding in coming years. We could see funding in key projects start to be cut.
  3. Investors anywhere in the world hate uncertainty and anxiety. Brexit leaves many questions unanswered and it will can take more than a year to get some clarity. Until that happens global economy, money markets and stock exchange may go through volatility and general negativity as we are currently seeing happen.Britain sign
  4. It is highly likely that US Dollar($) will gain strength against major currencies in the world and GBP(£) will lose its value, the initial figures show that on the day of the results alone, the GBP slumped to a thirty year low, falling as much as 11% in the hours after the result. This therefore means that the Kenyan Shilling will be under increased pressure. It would be wise for businesses in Kenya to hedge against a future raise in dollar value.
  5. The UK is Kenya’s largest tourist source market. At its peak Kenya received 198,000 tourists from UK in 2013. The tourist arrival numbers from the UK have only just started to increase in last few months after years of travel advisory and terror threats. However with GBP weakening due to Brexit, it will cost the British tourists more to travel to Kenya and we may see reduced number of arrivals from UK in near future.
  6. Kenya exports a substantial number of products to the UK every year. The UK is the second largest export market for Kenya after Uganda. So far these exports were governed by EU trade laws. With UK exiting the EU, Kenya may need to re-negotiate the terms for export and this may take even a year resulting in to disruption and uncertainty.
  7. In the immediate short term, the UK is bound to have slower economic growth or even recession due to the Brexit referendum. This will also affect how it trades with other countries in the world. Since the UK is one of Kenya’s biggest trading partner, businesses in Kenya that export to the UK are bound to be nervous and must prepare for slump in business.

Britain look rightHowever, Kunal offers consolation by highlighting the potential in this decision. He states, “It’s not all doom and gloom. Brexit also presents new set of opportunities. EU laws on import and export are some of the most stringent in the world especially with agriculture, dairy, and meat items. The UK can now decide its own rules for import and export, new products may become eligible. It is worth noting that Kenya’s largest export to UK is agriculture/horticulture products.”

For further insight into the Brexit developments and its implications keep following Grant Thornton Kenya on twitter and Facebook.

YALI 2014

The Young African Leaders Initiative 2014 – #YALI2014 kicked off this week in Washington DC. Speaking at a meeting with 500 of the first class of YALI fellows, President Obama said that it will be renamed the Mandela Washington Fellowship (& doubled to have 1,000 fellows by 2016) and that four regional leadership centers would set up in Africa.

The regional leadership centers will be established in Senegal, Ghana, South Africa and Kenya and will offer courses on leadership, support for entrepreneurs through mentoring and access to capital and a networking forum. 

The Center in Kenya will have a robust training curriculum with direction from a partnership that brings together Deloitte’s global management and strategy skills, the established curriculum and capacity of Kenyatta University, the public administration training of the Kenya School of Government, and Africa Nazarene University’s youth engagement and outreach.

USAID is investing $38 million in the new YALI centers with support from the MasterCard Foundation ($10 million), Microsoft ($12.5 million), Intel ($5million) and Dow Chemical ($4 million). Others are McKinsey, IBM, General Electric, Procter​ & ​​G​amble and the Mara Foundation. (More at the YALI site). 

In a Q&A session, Obama also spoke about AGOA and the on-going  for renewal of the trade partnership between the US & Africa; He said, they have learnt lessons from the previous phase of the partnership and will work to lower other export barriers (such as transport & trade finance), and, starting with Uganda, Kenya and Tanzania, take steps to see how AGOA can work with effective trading bloc for intra-Africa trade.​​

The YALI Summit events will lead up to the first US-Africa Leaders Summit, which, with over 50 presidents & prime ministers expected, is the largest gathering of African Leaders ever hosted by a US president.

Kenya’s President Kenyatta is to participate in two events next week – a doing business in East Africa session and a presidential dinner, both organized by the Corporate Council on Africa (CCA) who have events for several other African leaders and nations like Ethiopia, South Africa, Ghana Liberia Congo  Mozambique and Tanzania among others.

Possible Economic Bubble In Ethiopia?

A guest post by @Kahenya

Ethiopia has a very positive economic outlook and yes, it has a lot of development going on, but is this sustainable, now that the linchpin (Meles Zenawi) is gone? The one thing that is universal about the entire continent is that the poverty line seems to grow every year, sometimes it shrinks, but only for a moment. The cliché remains, that the rich are getting richer and the poor are getting poorer and there is no true middle class –  and if there is, it’s only based on people who don’t want to imagine that they are less than middle-class.
Africa is the kingdom of billion {insert any local currency here} projects. Ethiopia also finds itself in the same quagmire, except for one thing. They are actually making it work for their benefit. In Ethiopia, construction and infrastructure development are at an all-time high. It was necessary for this to happen until Meles Zenawi and his beloved Ethiopian People’s Revolutionary Democratic Front (EPRDF) went their separate ways, much to the disadvantage of EPRDF. Zenawi’s rule transited between dictatorship and benevolence and it was working for him and Ethiopia. Love him or hate him, from being out in the rebel trenches to donning a suit, Meles was every bit a tactical genius. He grew Ethiopia from a war-torn country to one of Africa’s fastest growing economies. Only Meles could-conjure up infinite possibilities. – sometimes by sheer cunning and sometimes by sheer fear.
Hotel cautions on using skype
EPRDF needed Meles to live long enough to get to his end game which would have allowed EPRDF to focus on less ambitious but more people driven development. That did not happen. With him gone, and an open democracy in the horizon (since every linchpin’s death or retirement is followed by internal crisis and eventual dissolution, with less political tolerance by the citizens), with a lot of projects still incomplete, and with Ethiopia still facing many financial challenges, the positive economic outlook has quickly shifted from “going to happen” to “may happen”.
EPRDF has moved from the strong offensive, to a sullen offensive-defensive. Push-Pull. Addis, like Luanda, Angola, defies Economic Science. If you buy a vehicle in Ethiopia, when you sell it, even years later, the value generally appreciates. Rents and property rates are astronomically high, coming close to rivaling Luanda – a huge developmental Achilles heel.
Lunch at the  Sheraton in Addis
The key driver of such high rates is the presence of Diplomats and NGOs who have an unending well of money – and this is where the very living ghost of Isaias Afewerki (President of neighbouring Eritrea) comes to haunt Ethiopia. Eritrea, despite being poor, is not dependent on Foreign Aid or NGOs. They have that to pride. For Eritrea, there are no illusions. Poor is poor so the only way is to go upwards – on their own. Ethiopia lacks that. Instead, they have to endure a very faint cushion, one that is rarely successful except in dire times. Unless Ethiopia starts equal distribution of development in the small business sector and begins to really crack the whip on poverty alleviation and shakes off its dependency on NGOs, EPRDF could find itself in a lot of trouble – just like the ANC is, despite them trying to conjure all sorts of ghosts, from Jacob Zuma’s incarnation of Umshini Wami to the very living ghost of Nelson Mandela. Nonetheless, Ethiopia’s economy is about to get a very shocking reality check.

ALN 2011 Day 2

Day 2 of ALN brought out the importance of observing trends & change, understanding markets, engaging with partners, appreciating the arts and making tough decisions as leaders

Imagining the Future: Dr. Chris Luebkeman of Over Arup, spoke of trends that will drive the future which were;

1. Change is constant – no matter where you go, the context, or the duration it takes, and it is important to stop and look up every once in a while, and not do things forever without thinking. Think STEEP (social, technological, economic, environmental political) most make decisions based on three of the five

It also matters where you’re standing, as an exercise he concluded showed; While most ALN attendees believed that the driver of the future in Africa were education infrastructure and the influence of China, outsiders views on Africa were that the main issued would be corruption, education infrastructure, and water.

Tools he advocated for assessing future trends & decisions are STEEP modeling (social, technological, economic, environmental political), as well as population pyramids which all thinkers should analyze for their countries and your cities.

2. The future is fiction; no one knows what will happen tomorrow. It is a story each one writes, the outline, characters. Visions can become reality. E.g. A former MIT professor had a vision those 15 years ago that you’d grow organs, and this year at the TED conference, a kidney was printed, on the stage.

3. Participation is what shapes the world – so stay active.

Avoiding the Resource Curse: Oxford Economics Prof. Paul Collier, spoke about the opportunities Africa faced in terms of resources and how to avoid resource curse pitfalls.

As much as the continent is known for mineral & resource wealth, it has still been barely searched, and there could be much more to find. However the history of such resources in Africa is sad in that rather than transforming economies, they have been plundered, not saved or reinvested,

He listed five decisions & steps for resources to be handled right

1. In terms of discovery of natural assets (already been done wrong), geological information has to be made public before government’s call in the private companies (manage discovery)
2. Have a good taxation system to benefit the society – the history is one of missed revenue, and misaligned contracts so it is important to get the right contracts
3. Involve & manage the locals – avoid Niger Delta problem
4. A substantial portion of income should be saved rather than consumed
5. save in what? Africa needs sovereign development funds, not sovereign wealth funds. However Africa does not have much of this capability, and there is a need to build capacity, i.e invest in investing to manage the resource depletion and erratic commodity prices.

There is a natural resource charter document that is a guide for these steps.

China in Africa: China expert Buddy Buruku and journalist Adama Gaye shared their views on the state of China–Africa relations

Buddy talked of the difficulty finding consistent data on China’s investments in Africa, but that about 3% of global investments were coming to Africa, with the largest recipients being South Africa, Sudan, Nigeria, Zambia, Algeria, Tanzania, Mauritius, Egypt, Madagascar (no Kenya in the top 10)

China’s trade with Africa has been growing exponentially, and their main imports from Africa mineral were fuel and ores. The top importer from China is South Africa (19%), while Angola is the top exporter to China (41%) as well as the largest trade partner in terms of combined exports & imports.

It is also difficult to quantify the type of Chinese aid, as a lot of it is bundled. However it mainly takes the form of concessional loans with China issuing $31 billion worldwide – and Africa getting 22 billion of that. Other (smaller) forms of aid are debt cancellation in-kind aid and grants.

It is also tough to track what is pledged versus delivered in terms of Aid & trade, but that contrary to expectation trade is not just about oil, e.g. Their main focus Zambia is on manufacturing, in SA there was the large finance deal via an investment of $5.5 billion in Stanbic Bank, in Nigeria it is manufacturing and EPZ, while in Mauritius, Tanzania and Ethiopia the investments have been for manufacturing capacity.

She added that Africa should look at China as a resource, and the onus is on Africans to engage with China in a mutually beneficial way – use access to capital, and access to markets. In terms of capital: no other country is providing debt & equity to Africa as much as China, and the $5 billion China Africa Development Fund is the continent’s largest, seeking out infrastructure and renewable energy projects for which they have extensive capabilities and history.

Adama said that China’s interest in Africa is a transformative force, that may give Africa the chance it may never have for centuries. However this is not a new engagement, and they have prepared for this for decades, and they will engage with Africa as long as there is some gain or disappear (he cited DRC crisis in 2009 when mines were closed)

Adama said African countries can come up with the same (joint venture) demands that western companies got faced when they wanted to go to China, insist on waived tariffs and access to the 1.4 billion population China market, require transfer of know-how and technology, but that instead of negotiating as 54 small countries, regional blocks should step forward for that. He also said countries should appreciate & utilize African who were trained in the 195’0s on engagement with China, and their diplomats who worked there.

Making Phones for Africa: Alpesh Patel, the founder & CEO of Mi-Fone, spoke of his company which is making a luxury brand of mass market phone for Africans who earn less than $200 a month.

With 800 million people in Africa, and only 5% have internet access, the phone screen is the most potent real estate in Africa – capable of delivering banking, music, sports, entertainment, email web loyalty, mobile advertising, social media etc.

In just over 3 years, they have revenue of $15 million, have partnerships with 9 GSM carriers in 12 countries, and they have done branded phone like the Mi-Obama phone which sold 10,000 handsets in Kenya and Uganda the day he was inaugurated. They have also done Western Union handsets, formed partnerships with local musical artists (like Kenya’s Liz Ogumbo) and will soon launch the first Facebook phone in Africa and an application store for mass market consumers

Leadership in Africa: The keynote speech was given by Dr. Donald Kaberuka, President of the African Development Bank (ADB). He talked about the failure of leadership in rich countries to address the financial problems they are facing now which constitute the worst crisis since World War II – with some potential impact on Africa – but having to undertake harsh structural reforms that African countries undertook a few years ago

He said leadership was about making tough decisions – like Helmut Kohl accepting to exchange East Germany’s currency at ten times its value in the interest of reunification, Gorbachev ending communism and Mandela ending apartheid and reconcile SA, and not the kind of leadership that watches the next elections.

In Q&A:
Leaders he admires? He believes in Institutions! So they should be built & strengthened even as leaders go bad; but he admires Ellen Johnson Sirleaf

What will it take for ADB to go back to Cote d’Ivoire? He lamented that Kenya, Cote d’Ivoire, Zimbabwe, and Madagascar were all on their way to middle income, but were re-railed by political setbacks. He said they may go back to their CIV headquarters soon, and when the Bank governors decide

Integration for Africa? Economic integration is not new – East Africa had one currency, central bank, airline etc. China is one, Brazil is one, and India which is very diverse in terms of people & religion is one. But many African countries have too small GDP’s, while others have some resources. African countries combined have 400 billion dollars in reserves, which more than India, where many countries go to borrow.

Helping Countries Avoid the Oil Curse?. He said Diamond-rich Botswana has shown that it is possible to do this. Oil exporting countries have made mistakes but recently when an African country (he did not name) discovered oil, ADB went to see the President and if they could advise. The ADB is helping countries through a legal support facility to help countries negotiate good contracts, as the bad deals they previously signed became difficult to wiggle out without damaging investor confidence.

Advice for countries?: When he worked in post-conflict Rwanda, he knew they would be aid dependent for a while as tax base was low; still they insisted on some budgetary support for domestic resource (tax) mobilization and it worked. Also, it is important to fight corruption to the core, which is not just a moral issue, but a is a break on development. Rwanda did not even create an anti-corruption authority, as they emphasized that the existing institutions be functional, and he also said that leaders should show that they are sacrificing.

Employment in Africa: Chinezi Chijioke of Mckinsey said that while there are more school, more jobs, unemployment has dropped, and discretionary income is up across Africa, 2011 has been one of the most tumultuous years in African history.

So is economic growth lifting all boats? how inclusive has it been? There are frustrations due to:

– Unmet expectations, with more schooling there are higher unemployment (North Africa tertiary education graduates have the highest unemployment)
– The excluded: consumer class has grown, number of households that are excluded, not participating, has grown
– The vulnerable & the unemployed. While there is 9% unemployment, another 63% are considered vulnerably-employed and the combined figure of 70% is scarily high (Latin America is 30%)

It is therefore important to address:

1. Accelerate creation of jobs: Countries should move from mere economic growth targets to economic growth & job creation strategy; they should try and understand which sectors will catalyze jobs promote entrepreneurship in those sectors. mining and finance sectors don’t create jobs unlike those in retail, hospitality, agriculture, government social services that do.

2. Improve labour supply – Ensure there are people who are job ready (Many companies have trouble filling jobs as candidates are not job ready – have no technical, soft , experience or schooling).

3. Match those two. E.g. a study found that in Nigeria small enterprise will create job, while in Kenya middle and large enterprises are the engines for jobs

Solar for Africa: Asif Ansari of Suntrough Energy spoke about power generation which is crucial as a world bank study found that a 1% increase in power generation, 3% on GDP. However, power infrastructure was a very complex process, combining servicing debt vs. fuel. E.g. a 100MW power plant may cost $100 million to put up and one can get a bank to finance, that but it will cost $1 billion of fuel during the life on the plant. He advocated that sustainability requires the use of some indigenous fuel – anything available locally – biogas, solar water etc. and we cannot be held back by climate change advocates, since Africa did not cause that, and needs energy now.

Africa is one of the wealthiest regions in the world – but the tremendous resource is underutilized so far, noting that 5% of Sahara desert can power the world for 24 hours a day – and solar is half the cost of natural gas (diesel costs 25c, wind 9c, gas 9c, coal 6c, hydro 6c, and Morgan solar 5c)

In terms of funding, multi-lateral banks are there, but it takes time to get a loan going, so you should structure something can be financed by private equity such as middle east investors or local sovereign equity.

They use Morgan solar technology and there are also employment opportunities in developing standardized solar hybrid plant 10 – 20mw. you can actually bring them here early and fabricate them in Africa. power plans expectancy of 50 years

Invest in the Arts: Cobhams Asuquo a music producer and the CEO of CAMP (Cobhams Asuquo Music Productions), spoke of challenges in the indigenous arts including the low premium placed in the arts, high infrastructure costs, piracy, pressure to adapt to westernize styles, and little regulatory assistance from bodies to market & sell African arts. he urged more people to invest in the arts in sectors like film distribution, and this was followed by one of the artistes on the CAMP label, Bez Idakula who gave some great, Stevie Wonder-ish, performances.

Deputy PM Wows ALN: Few people outside Ethiopia can name another leader besides their Prime Minister, Meles Zenawi. But at a dinner at the historic palace of Emperor, Ato Hailemariam Desalegn, the Deputy Prime Minister and Minister of Foreign Affairs engaged in a Q&A session on various topics put by ALN members. His fast answers included;

Plans to open up communications sector They are focusing on completing inland national fibre backbone first, and when complete they will now talk to private sector players (who are biased toward urban rather than rural consumers)

Advice Kenya on Somalia? Kenya tolerated Al Shabab for too long and now has disturbed tourism sector. The movement must be defeated at all costs to help Somalia find some stability after 20 years and Kenya is right by international law of self-defense.

Gibe dam impact on Lake Turkana communities: All infrastructure has some impact but this was assessed by international standards and found to be minimal. The dam has the support of Kenya and Uganda governments, and the noise about the dam is caused by NGO’s who have politicized the debate. Ethiopia may later sell power to Uganda, Sudan, Kenya, and Djibouti.

Do Funders impose conditions? Domestic saving not enough for all the loans they have sourced funds loans unconditionally from China, South Korea, Turkey, Brazil, and India.

Lessons for other Africa countries? The western model of development for Africa from Bretton woods is dead, so they got examples from Asian tigers and are pursuing development state model where the government intervenes in some sectors cannot. They focus on agricultural and manufacturing and this ensures that Ethiopia has a low gini coefficient (equivalent to Scandinavia) through growing high-value crops like Denmark and New Zealand, building capacity n textiles, and the deployment of 62,000 agricultural extension worker to advise farmers, show them kaizen bench-marking and seek out export markets.

He also said that African leaders should be drawn from productive private sectors (not rent seekers interested only in wealth accumulation from land taxes government contracts and corruption who are disruptive elements)

Plan to join the East Africa community? He hinted that another country was not comfortable with an 80 million population country joining, but will start as observer member before going for full membership. Regional integration is the way to go – under Nepad, South Africa pioneered transport integration and Ethiopia will do power integration as a start with Gibe.

Rockefeller helps Farmers cope with Climate Change

The Rockefeller Foundation involvement in Africa goes as far back as 1914 and one of their goals is to strengthen food security in sub-Saharan Africa.

Climate change is affecting food security and the current floods in Pakistan attest and African farmers are seeing wild swings in weather, coping with higher temperatures, less dependable rainfall, and experiencing longer droughts. In Kenya, the Rockefeller Foundation estimates that maize production could decline by 30% in the next 20 years.

Africa countries need to recognize their vulnerability to climate change as ½ billion people depend on agriculture for their livelihoods, yet some governments are instead selling off buying tracts of productive land to other countries who are themselves investing to enhance their own food security through geographic diversification

The Foundation has thus made agricultural investments improve their productivity of farmers by reducing the risks they face through key innovations including

– Developing new affordable insurance products for small farmers & pastoralists that are indexed to weather; this encourages farmers to increase land & agricultural investment with the knowledge that they may be compensated if weather conditions adverse affect their harvest

pastoralists & their cattle camp in Nairobi’s kileleshwa suburb during 2009 drought

– Funded the World Food Program to develop a software platform to predict most destructive elements; Known as RiskView, it can be customized or every district in every country in Africa and allows governments and aid agencies to when and where a drought will occur.
– Funded Kencall to implement a national helpline for farmers, staffed by a team of experts to answer farmer question on climate change, seeds, fertilizer, agro-dealer location etc – this will help overcome a challenge many famers don’t try new techniques or seeds because they don’t have enough information to take a risk. The information collected will become a research resource even outside Kenya.
– Partnered with Kenya-based Alliance for Green Revolution in Africa (AGRA), in a $50 million loan program through Equity Bank’s ‘kilimo biashara’ program in which the Foundation undertook some risk guarantee enabling the Bank lend to small farmers at below market risks who take up other products like fertilizer weather insurance, and use the help line.

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