Pascal Lamy Building Capacity Is Central to Boosting African Trade

MAY 2010 THIS IS

COMMITTED TO IMPROV ING THE STAT E OF THE WO RLD AAfrica global perspective SPECIAL REPORT

Pascal Lamy Building capacity is central to boosting African trade

INTERVIEW Investment COMMENT Broadband India’s green Risks and in Africa revolutionaries opportunities Tata Comms sees market potential Agribusiness pioneers look west Kofi Annan on Asian investment This is Africa

Contents 10 THIS IS africa THANK YOU TO OUR SPONSORS Associate sponsors Published by the Financial Times Limited Premier sponsor Number One Southwark Bridge London SE1 9HL, United Kingdom Tel: +44 (0)207 873 3000 Editorial fax: +44 (0)20 775 6421 www.thisisafricaonline.com

Editor Peter Guest +44 (0)20 7775 6373 [email protected] Reporter Lanre Akinola Interview: +44 (0)20 7775 6861 10 [email protected] Pascal Lamy Contributors Katherine Tweedie, Kofi Annan, Sylvia Africa needs to improve its Mathews Burwell regional integration and build trade capacity, the director Publisher Simon Blackmore general of the WTO says +44 (0)20 7775 6332 [email protected] Associate Publisher Allan Kamau +44 (0)207 775 6346 Agriculture [email protected] 16 Indian agribusiness and biotech Representative Michelle Smith 16 companies are eyeing up +44 (0)208 863 8427 opportunities in Africa [email protected] Representative Mark Leven-Marcon +27 82 850 7050 Interview: [email protected] 22 Head of Design Leo Cooper Srinath Senior Designer Shannon Gibson Foreword: Narasimhan Head of Production Denise Macklin 03 The CEO of Tata +44 (0)20 7775 6557 Katherine [email protected] Communications says that Tweedie broadband in Africa presents The head of Africa at the World an enormous opportunity Publishing Director Angus Cushley Economic Forum says 2010 marks a +44 (0)20 7775 6354 significant year for the continent [email protected] MAY 2010 THIS IS Marketing Manager Catherine Jackson

COMMITTED TO IMPROV ING THE ST AT E +44 (0)20 775 6352 OF THE WO RLD AAfrica g l o b Al perspective s p e c i Al r e p o r t [email protected] Perspectives: Printer St. Ives 05 Kofi Annan Subscriptions +44 (0)20 7775 6340 The chairman of the Africa Progress [email protected] Panel says that Asian interest in ISSN 1759-7978 Africa presents both opportunities and challenges © Financial Times Business 2008. Pascal Lamy ‘Financial Times’ and ‘FT’ are registered trademarks Building capacity is central to boosting African trade and service marks of The Financial Times Ltd.

All rights reserved. No part of this publication INTERVIEW INVESTMENT COMMENT Sylvia Mathews Broadband India’s green Risks and or information contained within it in Africa revolutionaries opportunities Tata Comms sees market potential Agribusiness pioneers look west Kofi Annan on Asian investment may be commercially exploited in any way 09 Burwell without prior permission in writing from the editor. The president of the Bill and Melinda Gates Foundation’s Global This is africa SPECIAL REPORT Development Programme says that empowering smallholder farmers is To order additional copies email us at key to poverty reduction [email protected] PHOTOS: TIA PHOTOS:

This is Africa Special Report 1 Foreword

Katherine Tweedie Rethinking Africa’s growth strategy

frica has not been left un- developments and challenges that remain the likes of China and India contribute to scathed by the effects of the over this period, we contemplate the next sustainable economic growth? How can global economic crisis but its half century and what it will bring. Will a innovations in ICT infrastructure, mobile resilience has surprised many. new generation of leaders rise to the chal- applications and finance serve as both an Emerging markets, including lenge of strengthening the continent’s economic driver and mechanism for social those from Africa, are among competitive position and foster a mindset empowerment? Can Africa’s capital mar- Athe first to show signs of a recovery and of empowerment? kets better cater to the needs of emerging are forecasted to increasingly contribute As 2010 sees Africa join India and businesses? How are business leaders help- to global growth over the next decade. China in crossing the billion person ing to shape regional trade agendas? This presents an important opportunity mark, its population size, valuable re- for African leaders to reassess the posi- source base and market potential pro- • Managing Risk into Opportunity. tion of Africa in the new global econo- vide the ingredients for future growth The economic crisis has lead to a re- my. The continent’s growth and subse- and prosperity. How can a billion people assessment of the traditional notion quent geopolitical role will be a product be viewed as an opportunity for the con- of “risk and return”. We challenge of its nations’ competitive economic tinent instead of a risk and burden? Do this same thinking by repositioning development, as well as a commitment Africa’s significant resources warrant the “risks” that Africa faces, such as a “The World to fostering strong social structures and greater representation of its interests at growing population, food security and Economic stable political institutions. the G20 and on critical discussions relat- climate change, as potential “opportuni- At this important juncture, the ing to trade and climate change? ties”. What gains can come from rethink- Forum on World Economic Forum on Africa will The 2010 FIFA World Cup presents a ing demographic challenges of youth unite African and global leaders to dis- unique opportunity to change historic employment, migration and urbanisa- Africa will cuss critical elements underpinning misconceptions about the continent. As tion? What green innovations can lead focus on Africa’s future growth strategy. Over the world focuses on South Africa, what to new sources of energy and convert the 850 leaders representing more than will Africa’s message be? challenges of food security and climate the critical 80 countries, including seven heads of The World Economic Forum on Af- change into economic drivers? Has the elements state and government, will gather in rica will focus on the critical elements global economic crisis highlighted the Dar es Salaam the first week in May, required to translate Africa’s current importance of diversification to prevent required to alongside over 275 Young Global Lead- potential into long-term, sustain- dependence on one primary export and ers representing some of the world’s top able economic development. The pro- opened the door to alternative methods translate leaders under the age of 40. Over 30 pri- gramme will be structured under the of business development? Africa’s current vate events and initiatives will also take following sub-pillars: place on topics ranging from agricul- • Fostering an “Empowerment Mind- potential into ture to trade, infrastructure investment • Building Effective Institutions and set”. How can innovative partnerships long-term, and climate change. Governance Structures. What is the provide solutions for critical education 2010 marks the 40th anniversary of state of Africa’s democracies amidst a and health services? How can African sustainable the World Economic Forum’s Annual growing prevalence of military coups countries attract, train and retain young Meeting in Davos, Switzerland as well as and negotiated unity governments? minds to foster the next generation of economic the 20th anniversary of the Africa Sum- What role should international institu- responsible, public sector leaders? How development” mit. It is fitting to celebrate this by hosting tions play alongside national govern- is a new generation of Africans re-writ- the Africa Summit in East Africa for the ments in ensuring peace and stability? ing the rules for leadership models? first time, with the strong support of His What is the role of Africa’s regional bod- Excellency President Kikwete and the gov- ies in fostering greater regional integra- The ability to unlock Africa’s resource ernment and business community of Tan- tion? How can an established rule of law and human capital will depend on the zania. The meeting will continue a long- serve to attract foreign investment and boldness, creativity and alignment of standing tradition of convening African curb corruption? Can Africa find “one the continent’s leaders. The World Eco- and global leaders together to shape the voice” for stronger representation in in- nomic Forum on Africa is a unique op- agenda for the continent under the theme ternational negotiations? portunity to bring together members of “Rethinking Africa’s Growth Strategy”. government, business and civil society 2010 is also a significant year for Af- • Driving Sustainable Growth and Devel- as they rethink the drivers behind Af- rica as it marks 50 years since the start of opment. How can stronger regional coop- rica’s economic and social growth. the independence movement that trans- eration facilitate intra-African trade and formed the continent’s geopolitical land- infrastructure investment? How will large- Katherine Tweedie is the head of Africa at the scape. As we reflect back on the positive scale investment and cooperation with World Economic Forum

This is Africa Special Report 3 Perspectives

Koﬁ Annan Africa can learn from Asia’s success

he growing commercial involvement political commitment to national development. Gov- of Asian countries in Africa has been a ernments across Asia have based their legitimacy on truly remarkable phenomenon in recent their record of economic growth and unrelenting years. Stronger links between Africa and focus on social welfare and poverty reduction. Asia create economic growth opportu- In contrast, too many governments in Africa nities for both. Fresh investment helps – no matter by what means they came to power – economiesT to diversify, to upgrade essential infra- behave as if their citizens’ welfare is peripheral to structure, and to generate jobs, including in the their purpose, and certainly not the basis of their construction, manufacturing and mining sectors. legitimacy. Not uncommon is the spectacle of gov- Consumers, including the poor, can access cheaper ernment by and for ruling elites, rather than for goods and services. society as a whole, let alone for those most in need. But alongside these benefits, there are many Consequences include the privatization of national areas of concern. Increased trade and investment wealth, siphoning off of revenues by a few, corrup- does not necessarily result in poverty reduction; tion, abuse of power and growing inequality. too often, it only benefits elites. Revenues, in par- African policy-makers can emulate the way ticular from the extraction of natural resources, their Asian counterparts have implemented com- are not being translated into better prehensive but also practical state-led “Too many public goods and services, social learning the lessons plans to address their countries’ chal- governments in protection or stronger systems of lenges, to manage foreign direct invest- accountability. The lack of transpar- n Stronger links between ment in line with national objectives Africa behave ency of many deals has helped un- Asia and Africa create and to harness human and natural dermine political accountability and opportunities for both. resource potential. Many Asian govern- as if their can fuel corruption and instability. n Governments in Asia have ments, for example, have invested in a citizens’ welfare These problems pre-existed the based their legitimacy on green revolution that has enabled them surge in Asian interest in Africa, but economic growth. to feed their citizens and achieve food is peripheral to might be exacerbated by them, not n African policymakers security. least as many Asian investors adver- can emulate their Asian But their new partners in Asia can their purpose, tise their policies of “non interfer- counterparts example. do more to help. They can respond to and certainly not ence” in domestic African politics. requests for support for technical and Asia’s growing interest in African agricultural po- management capacity building in government in- the basis of their tential has led to concerns about the phenomenon stitutions; by sharing best practice and experiences legitimacy” of “land-grabbing”, pushing the FAO, the World in areas central to Africa’s social development, Bank, Unctad and African governments to formu- including agriculture, health, low carbon energy late a new code of conduct for land purchases. generation and communication; and by modelling The challenge for African countries is to ad- or encouraging greater transparency. dress these concerns at the same time as deepen- There can be a fresh look at the barriers against ing their relationship with Asia. Africa can learn African exports. Asia has been reaping benefits from some of Asia’s successes over the last few from its relationship with Africa, including greater decades. While there are still hundreds of millions market access, for years. It now has a responsibility of very poor people in Asia, economic growth has to help Africa along the path of development it has helped lift many more hundreds of millions out of cleared. Given its own recent history in promoting poverty, enhanced Asia’s global economic status growth, reducing poverty and advancing the Mil- and also its leadership on critical global issues. lennium Development Goals, Asia can champion The contrast with Africa could not be starker. the needs of the world’s least developed countries. Four decades ago, the per capita income of South There is no doubt that Asia’s growing economic Korea was roughly the same as Sudan’s. Today and political power can help Africa overcome many South Korea is one of the richest countries in the of the blockages that have constrained its develop- world, Sudan one of the poorest. This particular ment for decades. A prosperous and stable Africa comparison, alas, is by no means unique. will provide new opportunities that will enrich There is no single model for Asian development and benefit the people of both continents. – or Africa’s, for that matter. But there are broad lessons that African countries might learn from Asia’s success. One is the crucial importance of a high level Kofi Annan is the chairman of the Africa Progress Panel

This is Africa Special Report 5 sponsored feature sponsored feature

Replenishing Africa Through its Replenish Africa Initiative (RAIN), The Coca-Cola Company has committed to make a difference to the lives of two million Africans by 2015

art of the seventh Millennium Development Goal – ‘ensure envi- “Coca-Cola’s global ronmental sustainability’ seeks to goal is to safely return P“halve the proportion of the popu- to communities an lation without sustainable access to safe drinking water and basic sanitation by amount of water 2015.” As a business with more than equivalent to what 160 plants, 65,000 employees and a well- established presence on the continent we use in all of our since 1928, The Coca-Cola Company is and their production” striving to make a difference in the lives of the millions of Africans who face life William Asiko Creating entrepreneurial with little or no water. In 2009 The Coca-Cola Africa Foundation (TCCAF) launched its Replenish Africa Initiative (RAIN). Over the next six years babwe, Angola, Burundi, Mozambique, opportunity RAIN aims to provide more than two Uganda, Morocco and Tunisia. million people in Africa with access to clean water, sanitation and hygiene edu- A LASTING LEGACY Coca-Cola’s rethinking of traditional business models has led to an cation, and to launch over 100 healthy COMMITTED PARTNERS RAIN also forms part of inclusive approach to distribution challenges in Africa that provides watershed and sustainable community RAIN has been made possible by a The Coca-Cola Company’s 2010 FIFA water access, sanitation and hygiene six year $30m commitment from World Cup water legacy programme opportunity for local entrepreneurs programmes across the continent. The Coca-Cola Company and dollar- for Africa. Through the ‘RAIN Water for William Asiko, President of for-dollar match funding. RAIN secured Schools’ initiative it will provide 200 n Ethiopia 10 years ago, Coca-Cola’s WORKING IN PARTNERSHIP The Coca-Cola Africa Foundation and 100 percent match funding for 2009 and schools across Africa with water access, local bottler was finding it difficult To further enhance the development Public Affairs and Communications Di- 2010 from the United States Agency for sanitation and hygiene education by to distribute its products effectively benefits of this model, Coca-Cola and rector, says, “Helping African communi- International Development (USAID) and 2012. This effort will be supported by a Ito small shops in densely populated partners Harvard University and In- ties tackle their water challenges is an continues to seek additional co-finance cause-marketing campaign championed parts of Addis Ababa. Traditional meth- ternational Finance Corporation have important priority for our company and partners for subsequent years. Thus far by the company globally and includes ods using large trucks were proving in- studied the barriers to expanding and bottling partners. Water is not only a key RAIN has partnered with 30 funding contributions by company associates. effective – the small shops could only improving the model and are taking ingredient in our beverages but it is also and implementing partners. One hundred of these schools will handle small drop sizes, and the roads action as a result. critical for human health and economic In 2010, TCCAF, in partnership with be in South Africa – the 2010 FIFA World were not suitable for large trucks. Coca-Cola is also working in part- development. And this is vital for us too USAID and other partners, have commit- Cup host country, leaving a lasting lega- To address this, a model was de- nership with local organisations to – we believe in doing business in a way ted $16m to launch 12 new water proj- cy by RAIN. signed that made use of local entrepre- increase access to credit, enhance that benefits the long term interests of ects in Cameroon, Democratic Republic neurs acting as distribution ‘hub points’, the business skills of distribution the communities in which we operate.” of Congo, Ghana, Liberia, Senegal, Zim- This article was sponsored by The Coca-Cola Company while allowing Coca-Cola to focus its ef- centre owners, and to increase op- forts on growing the market. After an portunities for women as owners initial pilot, this challenge became an of these small businesses. As part To date* The Coca-Cola Company opportunity – both for the company and of its commitments to the United has implemented 34 water for the community as a new, innovative Nations Business Call to Action projects in 19 countries benefiting distribution approach spread quickly and the Clinton Global Initiative, “Inclusive business models 250,000 people with 20 litres of across East Africa. Coca-Cola aims to dramatically in- are among the best ways A network of over 3,000 independent- crease the number of these businesses water per person, per day. (*Up ly-owned micro-distribution centres can and has earmarked for 50 percent of that we can contribute to now be found across 15 (and growing) new centres to be owned by women. to the end of 2009.) African countries. These in turn provide “These types of inclusive busi- sustainable development. direct employment to over 13,500 people, ness models are among the best ways Small independent together generate in excess of $550m in that we can contribute to sustain- distributors remain core revenue for local economies, and provide able development,” says Alex Cum- a close proximity service to over 400,000 mings, Chief Administrative Officer of to our business growth small retail outlets. In some countries, this The Coca-Cola Company. “Small inde- in Africa” SPONSORED BY model accounts for the majority of sales pendent distributors remain core to volumes. Similar models are now being our business growth in Africa.” Alex Cummings replicated in other markets in Coca-Cola’s

business worldwide. This article was sponsored by The Coca-Cola Company LIVE POSITIVELY COCA-COLA BRENT STIRTON/ PHOTO: sponsored feature Perspectives

Partnering for a Sylvia Mathews Burwell better future for all Addressing the needs Coca-Cola in Africa is pioneering a sustainable, locally-focused business model that aims to increase the productivity and of smallholder farmers double the incomes of small-scale fruit farmers in East Africa

s a major economic contributor to viders and government agencies. t the World Economic Forum on Africa For smallholder farmers like Rashid Said Mp- the African continent with more This inclusive business project will in Dar es Salaam this week, participants inga, who grows maize in the Mogoro district of than 160 plants and 65,000 em- be implemented in close collaboration will be generating new ideas to unlock Tanzania, this new seed has provided some protec- Aployees, The Coca-Cola Company with the governments of Kenya and Africa’s economic potential – from in- tion against hunger and crop failure. Despite the recognises that to grow, it needs com- Uganda, as part of their poverty reduc- vesting in new technologies; to opening hot, dry conditions of recent years, his maize yield munities that are healthy, vibrant, and tion strategies. It is also intended to pro- new markets for African-made goods and increased from 1 tonnes per hectare to 3.9 tonnes. growing economically and socially. duce lasting advantages for participat- Aservices; to tapping the continent’s rich natural re- Unfortunately, millions of farmers in Africa ing farm communities, enabling them sources in ways that benefit all Africans. lose food and income because they don’t have ac- SUPPLY CHAIN INNOVATION to benefit from improved livelihoods for But one of the continent’s potential economic cess to improved seed. That’s why the Alliance for One practical example of this commit- many years to come. powers shouldn’t be overlooked: its smallholder a Green Revolution in Africa is focused on finding ment is the East Africa Juice Project. Coca-Cola has already replicated farmers. Helping Africa’s poorest smallholder the best ways to get quality seed to farmers. Since This $11.5m initiative, launched this innovative model through the Haiti farmers grow more crops and get them to market its launch in 2006, the program has released 68 in January 2010, is a four-year partner- Hope Project launched on March 31, is one of the most important levers for lifting the new varieties of improved seed – bred for traits ship between Coca-Cola and the Bill & 2010 with the Inter-American Develop- continent out of hunger and poverty. such as resistance to insects, disease, and drought; Melinda Gates Foundation, TechnoServe ment Bank and TechnoServe. The $7.5m, This is not a new idea. History has shown that educated thousands of local agro-dealers to share and bottling partner Coca-Cola Sabco. It five-year project seeks to double the in- “Success in almost no country has managed a rapid rise from agricultural knowledge with small farmers; and will enable over 50,000 mango and pas- comes of 25,000 mango farmers and poverty without increasing its agri- reaping the benefits held training for 280,000 farmers. sion fruit farmers in Uganda and Kenya their families and raise their standard agricultural cultural productivity. In sub-Saharan Success for small farmers, of course, to participate in the Coca-Cola supply of living, while contributing to the long- Africa, agriculture represents two- n History proves that is more than just access to quality seeds chain for the first time. term development and revitalisation of “By working with a large development thirds of all employment and about increasing agricultural output and training. They also need a place The project, implemented by Tech- the island nation. number of local farmers, a third of GDP. If prosperity is to is key to reducing poverty. to sell their surplus. Our partners are noServe, will train farmers in improving Prof Maggie Kigozi, the Executive Di- in Africa is not grow on the continent, agricultural n Sub-Saharan Africa has working with businesses, government quality, increasing production, getting rector of the Uganda Investment Author- we can help increase their only possible, it’s productivity must grow with it. seen agricutural produtivity and other players to help connect farm- organised into farmer supply groups ity believes that this endeavour can only incomes while meeting our Yet during the last three de- stagnate. ers to local, regional and international and will also facilitate access to credit. succeed as a public-private partnership. happening” cades, as agricultural productivity n African nations have agreed markets. In Tanzania, Ethiopia, Kenya, This will be achieved through partner- “The government of Uganda is 100 per- needs for locally sourced has soared around the world, it has to boost public spending on and Rwanda, one such effort has helped ship with local civil society organisa- cent behind the project. We are looking fruit, benefiting both the stagnated in sub-Saharan Africa. The agriculture. 64,000 farmers produce high-quality tions, national agricultural research forward to this being a success,” she said. average African farmer produces just coffee beans for export. This effort is institutes, banks, processors, fresh pro- community and our business” over half a ton of cereal per acre. An Indian farmer on track to double the incomes of 1m smallholder duce wholesalers, extension service pro- This article was sponsored by The Coca-Cola Company Nathan Kalumbu gets twice that; a Chinese farmer, four times that; farmers in East Africa within the next 12 years. an American farmer, five times. Success in agricultural development in Africa Now it’s Africa’s turn to reap the benefits of ag- is not only possible, it’s happening. But building ricultural development. lasting change requires strong commitments by Af- The East Africa Juice Project aims to: At the Bill & Melinda Gates Foundation, we be- rican governments, businesses, donors, and NGOs nEnable farmers to double their daily lieve that’s possible. That’s why we have committed to come together around smallholder farmers so average income more than $1.4bn to address the needs of small- Africa can seed a better future. African nations, nEnsure an increased local supply of holder farmers – from developing new seeds that through their participation in the Comprehen- juice and improved local processing resist drought, pests and floods; to linking farmers sive Africa Agricultural Development Programme, infrastructure to markets; to making sure they have access to the have agreed to boost their public spending on ag- nCreate related jobs in transportation, most up-to-date agricultural information and are riculture and increase productivity, and last year, supplies, packaging and microfinance supported by policies that contribute to their suc- the members of the G8 and G20 pledged $22bn to nIncrease availability of locally-grown cess. For example, more than 300m Africans rely tackle food security and agricultural development. juice for local consumers on maize as their main food source. As sub-Saharan Our shared challenge is to mobilise these re- Africa begins to feel the effects of climate change, sources, spend them effectively, and keep a long- we are working with CIMMYT – the International term perspective even amid the financial storms Maize and Wheat Improvement Centre – and agri- and political challenges that may arise. I am opti- cultural research institutions across the continent mistic that by working together, Africa and its mil- to develop maize seed that can survive drought. lions of smallholder farmers will prosper. SPONSORED BY Farmers are already benefiting from this partnership. During the severe drought that hit east- From left: Richard Rogers, Senior Programme Officer, Bill and Melinda Gates Foundation; Nathan Kalumbu, Business Unit President East and Central Africa; Bruce McNamer, CEO and President, ern Africa last year, farmers using the new maize Sylvia Mathews Burwell is the president of the Global TechnoServe, and Prof Maggie Kigozi, Executive Director, Uganda Investment Authority during varieties produced up to 30 percent more maize Development Program at the Bill and Melinda Gates the media announcement and signing ceremony in Kampala, Uganda in January 2010 than those without the improved seeds. Foundation

This is Africa Special Report 9 Cover interview

Pascal Lamy Exclusive Interview

“We know what has to be done, it is just a question of getting it done by a proper connection between governance, nationally and regionally. The regional dimension is absolutely crucial. There is no way an African economy of 20m people will succeed in benefiting from world trade on its own”

interview by Lanre Akinola

completion of the long running Doha This was combined with a sharp decline in Round of international trade negotia- trade finance, he adds. “Ninety percent of world tions is “technically doable” in 2010, ac- trade is financed through letters of credit or cording to Pascal Lamy, the director gen- short-term credit, and at the peak of the finan- eral of the World Trade Organisation. If cial crisis financial operators retreated from and when it is successfully concluded, it trade finance. This means that at that time Acould be a significant boost to ongoing efforts to transactions that could have taken place because build trade capacity in Africa and increase the con- demand and supply was there, did not take place tinent’s share of global trade as the international because the traditional credit bridge which you trade system recovers from its worst year since the need was not there.” Second World War. Those economies with high levels of integra- World trade contracted by 12 percent in 2009, tion into global capital markets, such as Japan according to WTO figures, as the international eco- and Germany, were severely hit as a result of this nomic downturn unfolded, triggered by the finan- decline. Countries such as China, which also faced cial crisis in late 2008. exposure to international trade, have weathered “It’s a number which was to be expected given the crisis relatively well, says Mr Lamy. that global growth last year shrank by 2 percent,” Initial hopes that sub-Saharan African says Mr Lamy, arguing that “the main factor be- economies would be spared the impact of the hind this is demand shrinking and supply shrink- financial crisis on account of their limited inte- ing, and trade shrinking as the transmission bed gration into international markets have proven between them. That explains 80 percent of this fruitless. Average growth rates for the region number, macroeconomic shrinkage.” slowed to 1.6 percent in 2009, down from

10 This is Africa Special Report This is Africa Special Report 11 Cover interview

between 5-6 percent before the crisis. Trade between governance, nationally and regionally – Mean for Africa? actual benefit to low income Af- flows, already a miniscule amount of global the regional dimension is absolutely crucial. There rican economies is contingent on a very specific trade volumes, were also strongly hit. According is no way an African economy of 20m people will set of outcomes. Using its own estimates, as well to recent research by the Overseas Development succeed in benefiting from world trade on its own. as models from the Centre d’Etudes Prospectives Institute, a UK-based think tank, import levels It doesn’t make sense at all,” says Mr Lamy. et d’Informations Internationales, a French think from the EU, the US and Japan from the region “My sense is that there is much more aware- tank, the World Bank, and the International Food in the quarter leading up to August 2009 were ness among African leaders and donors that this Policy Research Institute, it finds that a positive down $25bn, accounting for an annualised esti- is where they have to connect their own supply impact for sub-Saharan Africa, excluding South Af- mated shortfall of $100bn. and demand. This is where the WTO, not as the rica, is far from certain. By sector, the impact has varied according to place where you negotiate world trade rules, but According to Carnegie’s calculations, trade Mr Lamy. Trade volumes for commodities – particu- as a place which can convene the major actors can volumes would drop by $197m, or 0.1 percent of larly hydrocarbons and minerals – which account be useful.” Mr Lamy is clearly pleased with the GDP in the region. The highest losses are under for most of sub-Saharan African trade, remained success of the mandate to date, estimating that the World Bank model at $400m or 0.27 percent strong he says, but sharp declines in commodity the WTO has increased aid for trade by 10 percent of GDP. Under CEPPII’s and IFRPI’s basic models, prices in late 2008 and early 2009 hit values. “This transparency exercise has been quite annually since 2005, “which is not bad in terms of the region faces trade volume losses of $370m and “Where African exports have been hurt is instrumental in keeping people fending off these development assistance.” $140m respectively. In all cases, the only net benefi- mostly in textiles and clothing; there were bad pressures,” he says, but is quick to caution that Attention in 2010 will also be focused on the ciary would be South Africa. results from the EU and the US,” he says, adding there is little room for complacency. long running Doha Round of trade negotiations, that “agriculture, as far as I know, has been do- “The risk is there, remains there, and will re- initiated in the Qatari capital in 2001. Aimed at ing reasonably well. main there as long as the job market does not im- facilitating trade liberalization, the talks have ef- “So it is a mixed bag, and the African economy prove,” he says, echoing the WTO report. This states fectively been stalled since 2008 over deep divisions is not something which is homogenous. It depends that: “Past experience shows that prolonged peri- on a series of issues, such as agricultural subsidies, 12% on a per country basis.” ods of job losses and unemployment are one of the industrial tariffs and non-tariff barriers and special According to WTO figures, world main catalysts for more restrictive policymaking.” and differential treatment for developing nations trade contracted by 12 percent Protectionist measures According to the International Labour Organisa- in international trade. The most significant differ- The overall slump in trade volumes has heightened tion, 27m people around the world lost their jobs ences have been between the EU, the US and Japan, in 2009, as the international concerns that countries might adopt protectionist in 2009, taking the global unemployment rate to and major developing economies such as India, economic downturn unfolded measures in response to the crisis; a prospect that over 200m people, its highest level ever. Unemploy- Brazil, China and South Africa. could undermine long term trade development. ment rates are expected to remain high in 2010. Last July there were signs that the deadlock “[Protectionism] is probably the worst way to There are signs that the emphasis on main- might be broken when the Group of Eight and the Only under an expanded IFRPI scenario, as- protect – but sometimes is a political temptation,” taining an open global economy may be vindicat- Group of Five developing countries — India, Brazil, suming full duty-free quota-free access to devel- says Mr Lamy. “Crises create social and economic ed, as latest figures from the WTO forecast that China, Mexico and South Africa — declared a joint oped markets for LDCs, would low income African tension, which result in a sort of demand for pro- international trade will expand by 9.5 percent commitment to bring the talks to an end in 2010. economies benefit from the Doha Round. The esti- tection. The risk is there that this demand for pro- this year, coming close to balancing out the 12 Given the number of missed deadlines to date, mate sees the region gaining $1.2bn or 0.63 percent tection translates into protectionism.” percent drop in 2009. observers are understandably cautious about such of GDP, clearly highlighting the importance of this

So deep were concerns on a global level, that This bodes well for sub-Saharan Africa, which is PHOTOS: Afp/getty, TIA proclamations. Even high profile participants, such particular metric. leaders of the Group of 20 countries assembled in expected to see increased investment as commod- PASCAL LAMY: The director general of the World Trade as Ron Kirk, the US trade representative, have since Such an outcome will have to be fiercely ne- Pittsburgh, USA, in September 2009, where they is- ity prices continue to strengthen and investor ap- Organisation believes that 80 percent of the Doha softened their stance on this commitment. In a re- gotiated, and raises an important question. Just Round of trade negotiations is now in place sued a declaration stating that “it is imperative we petite for the region returns. It will, however, do cent briefing with journalists he said that “consid- how much weight can a region which constitutes stand together to fight against protectionism.” little to change the fact that even before the crisis ering that we have tried and failed three successive just 3 percent of global trade realistically have in So far these words have been backed up by ac- Africa’s share of global trade was just 3 percent. A years, if past is prologue I don’t know if I would put the negotiating process and the final outcome of tion, says Mr Lamy. “Overall, for the moment, the large proportion of this is trade which is likely to “[Protectionism] is probably too much stock in it.” the Doha Round? world economy is as open as it was before the crisis. persist regardless of macroeconomic conditions, the worst way to protect – “Technically it is doable,” in 2010, says WTO’s “True, Africa does not have a big weight in Not exactly the same way by each and every coun- primarily in commodities such as hydrocarbons but sometimes is a political Mr Lamy, who estimates that 80 percent of a final world trade, but Africa has a big weight in the try – some have erred on the wrong side and some and minerals. It is also noteworthy that this figure agreement is already on the table. Actual success World Trade Organisation. We have 153 members have erred on the right side. But overall the world has actually fallen from 6 percent in 1980. temptation. Crises create “is a question of political will,” he adds. “If it is and are member-driven,” says Mr Lamy. economy hasn’t closed.” It is an issue with a clear solution, argues Mr social and economic tension, there I can help [member states] mobilise it, but I “When I meet with a small group of mem- Mr Lamy believes that regularly published Lamy. “The answer is pretty obvious to everybody can’t create it.” bers to try and move the negotiations forward WTO reports on the activities of its member coun- now, it is raising trade capacity.” One way the which result in a sort of “What is on the table for Africa is huge,” he I will have somebody speaking for the Afri- tries in their response to the crisis have helped to WTO is addressing the problem is through what demand for protection. The says, referring to issues such as the possibility of can Union, somebody speaking for the LDC mitigate the risk of protectionism. An example of it calls coaching “aid for trade”, a mandate it was duty free-quota free access to developed markets group, and somebody speaking for the African, this is the recently published Report on G20 Trade given in 2005. risk is there that this demand for Least Developed Countries, many of which are Caribbean and Pacific Group of States group. and Investment Measures, tracking the actions of The aim of this is to help developing coun- for protection translates into in sub-Saharan Africa. They will have coordinated their position before G20 economies since their Pittsburgh meeting in tries, particularly least-developed countries, to The reduction of export subsidies by the EU, the meeting.” September. The report finds that: “The trade and build the trade-related skills and infrastructure protectionism” US, Japan and other developed economies, as well The three blocs constitute 90 of the WTO’s 153 investment policy response to the global recession that is needed to expand their trade. This is to be Pascal Lamy as reducing tariff escalation, both of which are member countries, theoretically giving them a has so far been relatively muted. There has been no achieved through creating closer cooperation often seen to stifle low income countries’ ability significant voice in the negotiation process. It is indication of a significant intensification of trade between trade, finance and development of- to compete on the export of manufactured goods, something they will have to leverage in order to or investment restriction since the last report to ficials of WTO member governments ona can also have a potentially significant impact on ensure that any Doha agreement is not a net loss the G20 in September 2009.” national and international level. As Africa African trade. for them. Mr Lamy believes that the increased co- In Africa, the picture has also been encourag- constitutes a sizable part of the WTO’s Exactly what the impact of a Doha Round ordination between these blocs is already having ing, according to Mr Lamy. “We haven’t had major membership, much of this effort is agreement would mean for Africa is, however, a an impact. developments,” he says. “Some countries have used geared towards the continent. contentious issue, with varying estimates of what “There is a big weight for Africa, and this has a bit of their margin of manoeuvre. South Africa, “We know what has to be done, the fiscal outcome would be for the continent. Ac- resulted in what’s on the table. This is one of the for instance, has increased tariffs on textiles and it is just a question of getting it cording to a report by the Carnegie Endowment reasons why this group of 90 countries is now clothing a bit, but this is nothing dramatic. done by a proper connection for International Peace, What Could the Doha Round pushing for the conclusion of the round.”

12 This is Africa Special Report This is Africa Special Report 13 sponsored feature

ture and remains unnecessarily poor. The tangible work currently underway to develop an investment blueprint for Innovative approaches both corridors shows that there is an opportunity to establish these regions as major agricultural producing and processing regions over the next 20 years. This can be done in such a way that to agricultural financing large numbers of small holder farmers can benefit significantly from a more commercial approach to farming.

Cultivating Africa’s huge agricultural potential will need substantial investment THE BEIRA AGRICULTURAL and commitment from both businesses and governments GROWTH CORRIDOR The Beira Corridor investment blueprint presented at the World Economic Forum in Davos this year provides an excellent his year promises to be important sectors and at an inter-regional level, if farmers. In addition small-scale farm- example of a public-private partnership in defining new investment mod- Africa is to realise, even partially, its vast ers need to be actively linked into com- that offers benefits to all stakeholders, els for agricultural development agricultural potential. modity value chains, regional markets while unlocking the region’s tremen- Tin Africa. The United Nations Mil- must be developed to create the neces- dous agricultural potential. If over the lennium Review Summit is going to be CHANGING INVESTMENT AND sary demand and scalability and rural next 20 years, governments and donors a much needed reality check. It is impor- BUSINESS CLIMATES financing needs to become much more were to invest $250m of catalytic finance, Developing infrastructure requires a supporting network tant that we harness this opportunity to Businesses have not traditionally in- accessible to individual farmers and along the Beira Agricultural Growth discuss the concrete progress we can vested heavily into African agriculture agricultural entrepreneurs to indepen- Corridor in Eastern Africa to help the type of development assistance – patient The concept note is to be presented at the make together. During the last year we for several reasons including the per- dently finance their farms. region increase agricultural production capital – is needed from governments African World Economic Forum meeting have seen a raft of global initiatives to ceived challenges of doing business in The Agricultural Growth Corridors and reduce the need for food imports. and donors to fund essential infrastruc- in Dar es Salaam, May 5–7, 2010. reduce food insecurity and fight poverty. Africa. The factors seen to create invest- Project is a tangible response to this At the same time, the private sec- ture. This is what will kick start sustain- The aim of the project is to acceler- An important shift was the admirable ment barriers include inadequate infra- combined need. It consolidates invest- tor will have the right environment in able private sector growth in agriculture ate agricultural growth in The Southern commitment from the G8 countries in structure, unclear regulations, complex ment into agricultural clusters along which to invest an additional $1.8bn and generate major benefits for commu- Corridor of Tanzania by combining: July 2009 to mobilise $20m over three value chains and small market size. specific regional transport routes, aim- by helping to provide support, while nities. Mozambique and Tanzania have (i) the undisputed but underdeveloped nat- years for sustainable agriculture devel- There is also a perceived need to bridge ing to maximise growth potential in also realising new business opportuni- long had tremendous agricultural po- ural potential of the agricultural sector opment. This counteracts a trend that the expectation gap between businesses those regions. “Seeking to develop pub- ties, helping this part of Eastern Africa tential. Now is the time to deliver that (ii) the government’s need to kick-start for too long has seen investment in agri- and governments as to what it is re- lic-private partnerships (PPPs) has been increase agricultural production and potential.” modern commercial agriculture through culture decrease, making farmers more quired from both sides to bring about our approach for some time now,” says reduce the need for food imports. In Mo- This Agricultural Growth Corridor Kilimo Kwanza and more vulnerable to crises, particu- effective growth. Therefore, part of the Yara’s President and CEO, Ole Jørgen zambique alone this will directly ben- initiative is the result of an innovative (iii) established national policies to en- larly in Africa. solution is creating an environment in Haslestad. “Our aim has been to catalyse efit 200,000 smallholder farmers by im- partnership spanning both Africa and courage private-sector led growth in ag- For this level of investment to have a which governments, the international partnerships between both the public proving yields and increasing incomes, Europe, including the governments of riculture and sustainable impact in Africa, it needs to community and businesses work more and private sectors to help make African creating 350,000 new jobs and helping Mozambique and Norway, Alliance for a (iv) medium-term projections for rela- actively leverage a much wider private closely together to find innovative agriculture more profitable.” move up to one million people out of Green Revolution in Africa (AGRA), Trans- tively high commodity prices. sector investment that is mutually ben- growth-orientated solutions. Both the Beira Agricultural Growth extreme poverty. Farm Africa, Cepagri, ACIS, ProRustica, Establishing an effective partnership, eficial to the investor and the small and This requires a combined level of Corridor and Southern Agricultural “East Africa has enormous untapped AgDevCo, InfraCo and Yara International. creating a critical mass of commercial large farmer. activity that goes beyond individual Growth Corridor of Tanzania are seen as agricultural potential”, explains Trygve activities, which actively includes small- There is a growing acknowledgement players. Farmers need access to land, having significant available arable soils, Magnusson, Head of Yara’s business in SOUTHERN AGRICULTURAL GROWTH holder farmers, and establishing econo- that one sector cannot achieve these levels seeds and fertiliser as well as to trans- good climate and access to water. But Africa. “In the Mozambique section of CORRIDOR OF TANZANIA mies of scale will be central to the cor- of growth by working in isolation. Robust port, power and water, and perhaps their potential has not been realised. At the Beira Corridor alone there are 10 Development of the Southern Agricul- ridor strategy. public-private partnerships are needed to most importantly to micro-financing. present there is little commercial agri- million hectares of arable land with tural Growth Corridor of Tanzania is “We know that by working with do- structure long-term investments into dif- At the same time, all stakeholders need culture in either of the respective corri- good soil, an excellent growing climate underway at a time when Tanzania is nors, governments and private investors ferent commodity value chains, harmo- efficient ports to import inputs and ex- dors where the rural population is still and access to water. By partnering with looking for viable and practical means we can transform African agriculture. nising actions both across the different port goods, and new roads to reach the heavily reliant on subsistence agricul- donors and other businesses to create of implementing the Kilimo Kwanza, This type of partnership will reduce an investment-orientated blueprint for a government led set of proposals that food insecurity and fuel lasting and sus- growth, we can now help start to build sets out a vision of achieving a Green tainable economic growth,” says Yara “Developing public- a strong and sustainable agriculture sec- Revolution in Tanzania. Building on International’s CEO, Jørgen Haslestad. tor that will benefit people across the this vision, in October 2009, a round- private partnerships whole region.” table meeting was held to conceptualise For further information contact has been our approach the corridor strategy involving a senior Sean de Cleene INNOVATIVE FINANCE group of potential partners, including Vice President for some time now. In essence, this investment blueprint the Government of Tanzania, as well as Global Business Development and Public Affairs Our aim has been to shows how clustering public-private sec- representatives from Norwegian Embas- Yara International tor investments along the Beira corridor sy, Norfund, African Development Bank, [email protected] catalyse partnerships can overcome barriers to agricultural World Bank, Tanzanian Investment Cen- between both the public development in the region. It spells out tre, Tanzanian Agricultural Partnership SPONSORED BY what financing is needed, how decision- and Yara. and private sectors making can be coordinated among part- Outcomes included an agreement to help make African ners and how “patient capital” can be to form a working group for the project, used to unlock infrastructure potential consisting of all parties at the roundtable agriculture more that would benefit smallholder farmers. as well as AgDevCo and ProRustica, and profitable” Keith Palmer, Chairman of InfraCo, preparing a concept note outlining a po- one of the main partners of the Agri- tential public-private partnership to de- Ole Jørgen Haslestad cultural Growth Corridors, says: “A new velop an Agricultural Growth Corridor. Business

Children of the Green Revolution Indian expertise in commercialising innovations in agribusiness and biotechnology may provide an opportunity for significant mutual benefit, as the country’s entrepreneurs look to Africa for growth markets

by PETER GUEST

wo hours drive outside of Hyderabad, an agrarian, with many smallholder farmers working tion was partly based on the development and makeup of Indian and East African agriculture, ends of the development-business spectrum in In- at Patancheru is fully aware of it, and six years industrial looking complex – rather hope- at or just above subsistence levels, complementing dissemination of high-yield seed varieties. Accord- he believes, offer companies such as his – which dian agriculture. Icrisat has built up considerable ago established the Agriscience Park, which func- fully refitted with flashing neon hearts and a large and growing commercial farming sector. ingly, one component of its legacy is the focus on have profited heavily from their ability to sell to expertise in water management in semi-arid, low tions as an incubation hub for biotech entrepre- renamed Lovers’ Romantic Retreat – marks However, unlike many of Africa’s agrarian biotech by both the Indian government and In- farmers of all sizes – significant competitive ad- income areas. neurs, giving them access to research facilities T 2 the approach to Genome Valley, a 600km sprawl of economies, India is self-sufficient in food. Follow- dian enterprises. vantages. Down the road, Vibha’s competitor, US The village of Kothapally, near to Patancheru, and assistance in commercialising their technol- research and development centres and incubators ing the green revolution in the 1960s and 70s, the Alongside the big global companies, such as Agriseeds, has begun similar exploratory work on plays host to one of its projects. Surrounded by ogy. The centre’s seed research is open for use by for the life sciences and agricultural technology. country emerged from famine to become, today, Monsanto and Syngenta, the seed industry in India joint ventures in Mozambique. budding cotton fields and vegetable patches are a member enterprises, mainly large domestic and Superficially, there are many similarities be- an exporter of food and cash crops. That revolu- has grown its own big players. There are few bet- In March, the European Marketing Research series of small dams and water collection points international players – currently 48 seed compa- tween Hyderabad, the state capital of the south- ter illustrations of the scale of the domestic Council, a Brussels-based non-profit, and the In- that have drastically altered the yields in the sur- nies are members. ern Indian state of Andhra Pradesh, and many of industry than Vibha Seeds’ new facility in ternational Crops Research Institute for the Semi- rounding area. At the other end of the spectrum The number and sophistication of the compa- Africa’s metropolises. There is the same feverish Janampet, Andhra Pradesh, which is now Arid Tropics, a major agricultural centre based in is Jain Irrigation Systems, which grew from a nies that exist in orbit of Icrisat and other public or construction in the suburbs, the same swarms of Vibha Seeds’ close to completion. The 106-acre complex Patancheru, Andhra Pradesh, partnered to take a small trading business in the 1960s into one of quasi-public institutes demonstrates the power of buzzing motorcycles and the same disregard for chairman includes six 100,000 square foot hangar-like delegation of African businesspeople to the state to the world’s largest irrigation and agricultural ser- the Indian blend of public and private investments the most basic road safety procedures. Even the ty- sheds, cold storage, a biotech laboratory explore potential partnerships in agro-processing, vices businesses. In the yard outside the company’s into agricultural technology. While these products pography and styling on the shop fronts is vaguely hopes to and processing and packing infrastructure. biotech, infrastructure and primary agriculture. facility in Nalgonda, Andhra Pradesh, plastic pip- have obvious – and possibly easily executable – ap- reminiscent of East Africa. The differences are evi- replicate Indian When fully operational, it will be capable of Icrisat conducts research into drought-toler- ing is piled high on trucks. Jain manufactures its plications in Africa, and the companies have a clear dent, however, in the city centre, which is home to processing 1,000 tonnes of seed per day. ant food crops – chickpea, pigeonpea, pearl mil- equipment, installs it, services it and trains local desire to exploit opportunities overseas, many also the glass-fronted headquarters of global technol- distribution Vibha is already exporting to its own let, sorghum and groundnut. The huge campus communities in its usage. In the early years it, like owe a lot of their domestic success to government ogy and pharmaceutical companies. models in region, and is eyeing markets in Africa, par- in Patancheru is a test bed for new varieties and others, piggybacked on government extension pro- support – either through subsidy or through poli- Despite its ferociously competitive interna- Africa ticularly Ethiopia and Tanzania, according techniques, but as well as being an academic insti- grammes, but its operations are now global, and it cy. Biofuel is one such emerging sector. tional businesses and its growing economic to Vidyasagar Parchuri, the company’s chair- tution, Icrisat is at the nexus of a large and com- is eyeing fresh opportunities in sub-Saharan Africa Jatropha has come some way since being pre- potency, India still shares many characteris- man. Mr Parchuri hopes that Vibha will be mercial industry centred on agricultural develop- after a successful first foray into South Africa. maturely hailed as the miracle crop that would tics of developing world economies. Its able to replicate its Indian business model in ment and extension. The expertise being built at Icrisat and the lo- revolutionise world energy. The plant, whose oil population is urbanising, but still re- Africa – particularly its distribution mecha- EMRC’s delegates were able to see both the cal private sector is both a valuable export and can be used to make biodiesel, thrives on marginal mains for the timebeing principally nisms. The structural similarities in the highly commercial and the purely developmental a powerful development tool. The management soils with little water. This, in theory, means

16 This is Africa Special Report This is Africa Special Report 17 Business

RIGHT: A worker sews sacks at Vibha Seed’s Janampet processing facility FAR RIGHT: An EMRC delegate from Lesotho visits a vineyard in Andhra Pradesh, India

that it is less likely to lead to competition over land India Eximbank – Major borrowers ($) and water between food and fuel crops – a major criticism of traditional biofuels. However, research into the plant, which is still essentially an undomesticated wild crop, is still at an early stage. Often discussed as part of the solu- MALI SUDAN tion to Africa’s energy requirements, jatropha ventures have failed, in the most part, to go to scale. On 167m 567m a long, parched segment of Andhra Pradesh soil, some two hours from the capital, two competing companies – Nandan Biomatrix and Tree Oils India SENEGAL ETHIOPIA – are keen to demonstrate that scale is possible. Bhaskar Rao, managing director of Nandan, en- 120m thuses about the technological breakthroughs his 353m company has made in increasing the oil yields in jatropha crops. It is hard to verify his various claims to “world’s first” achievements in breeding, and his counterpart at Tree Oils India, Sreenivas Ghatty, responds with a wry “no comment” when asked BURKINA FASO about the extraordinary yields per hectare that Mr Rao claims to have made possible. Even so, research 56m RWANDA into the crop and methods of processing has taken 80m off in Andhra Pradesh, principally due to the gov- GHANA ernment’s “National Biodiesel Mission,” which set COTE D’IVOIRE 127m the ambitious target of making all domestically 83m MOZAMBIQUE consumed diesel a blend of 20 percent biofuel by 2012. This equates to more than 13m tonnes per 95m year, according to figures from the United Nations DRC Conference on Trade and Development. 59m Although Mr Rao and Mr Ghatty insist that jatropha is a viable business proposition with or without the new regulations, there is little doubt ANGOLA that by guaranteeing a domestic market for biodie- 68m sel the government has altered the crop’s economics in favour of these emerging producers. It is this kind of mechanism that African governments may ZAMBIA need to replicate in order to allow this kind of re- 60m search to take off. It does, however, provide an opportunity for African exporters, a fact not lost on either company. Both are interested in partnering with commercial farmers in countries with Source: India Eximbank

18 This is Africa Special Report Business

similar ecologies to Andhra Pradesh. India’s domestic producers are unlikely to be able to meet the demand created by the NBM, despite their technical advances, and ramping up production using relatively cheap land and labour in Africa would make sense. If host countries are able to replicate India’s blending rules, there would also be scope for the construction of local processing capacity in Africa. While the government’s role has been so significant in the creation of domestic markets, its role in the promotion of its companies overseas, at least in Africa, has been limited, analysts say. Manmohan Singh’s government has a rhetori- cal commitment to “South-South” cooperation and has made overtures to a number of African countries. However, as Sheila Sudhakaran, assistant sec- retary general of the Federation of Indian Cham- bers of Commerce and Industry notes, New Delhi is some way behind private enterprise, despite the expansion of its lending programmes. Lines of credit through the Ministry of Finance and the India Eximbank are increasingly being directed to Africa for use in growth sectors which touch upon the areas of expertise of Indian companies, notably healthcare, transport infrastructure and agricultural equipment. According to the organisation’s own statistics, Eximbank currently has close to $2.7bn in operational lines of credit towards African countries or organisations via 80 separate agreements. Discounting those for unspecified “general purpose” programmes, 30 of these agreements are exclusively or in part for supporting agriculture, either through the purchase of tractors or other farm equipment, irrigation or broader-based sectoral initiatives. Notable amongst these agreements are two large lines of credit for the development of the sugar industry in Ethiopia – $122m and $166m, respectively. In total, Ethiopia has more than $350m in operational lines of credit from the In- TOP LEFT: Pipes wait for shipping at Jain Irrigation, Nalgonda TOP RIGHT: Jatropha seedlings at Nandan Biomatrix, dia Eximbank, with the balance being directed to- Andhra Pradesh ABOVE: Workers on a maize processing line, Andhra Pradesh wards power projects. Sudan also received $25m for the development of its sugar sector. It is not coincidental that the African sugar industry is Saudi Arabia or South Korea which have long-term hectare yields, double cropping and irrigation, its now – and has been for more than a century – a concerns over their food security and have been population growth and its per capita consumption major source of interest for Indian farmers. making or facilitating large investments in African could eventually outpace agricultural production. As Renu Modi, director of the Centre for Africa land, India seems to be currently unburdened with Returns to the days of famine are a very slight pros- Studies at the University of Mumbai, points out, the such concerns, although on closer inspection this pect, but curtailing the growth of the export indus- Madhvani Group, one of Uganda’s largest conglom- may not be entirely true. try would damage India’s economic growth and, erates, began with the acquisition of 20,000 acres Ms Sudhakaran, explains that – after the hy- consequently, its own poverty reduction dynamics. in East Africa for sugar cultivation. Likewise, Nanji drocarbon sector – agriculture will be one of the Whether this is part of Indian government Kelidas Mehta, the founder of the multinational main priorities for Indian government interven- thinking is unclear, but to attempt, as several ob- Mehta Group and an Indian emigrant to Uganda, tion. “Why? Because we have a shortfall, especially servers have, to view this trend as competitive with began with sugar and tea operations in the region. in pulses and even in rice. We have a growing gap the concurrent rush of Chinese money to Africa is Although such investments slowed post-indepen- between consumption and supply,” she says. Ficci perhaps to stretch the imagination. While China’s dence as industries and lands were nationalised, is advising its members to look into contract farm- moves have been, in many cases, state backed and the current phase of economic liberalisation pro- ing to take advantage of this led by the giant national play- vides the environment for the resumption of the discrepancy. ers such as the Industrial and old trend. It is only now, with widespread discus- Ms Sudhakaran is not Commercial Bank of China, sions of food security, that people have begun to alone in voicing concerns “We have a shortfall, many Indian companies have view Indian investments through the filter of geo- that the Green Revolution approached international ex- politics, Ms Modi notes. might only have deferred especially in pulses pansion without state support While the politics of hydrocarbons are likely to the Malthusian model that and even in rice. We and, according to Ms Modi, with- be involved in the large credit lines extended to Su- governed India’s original out the state even being aware of dan – in excess of $540m, including the $350m line slide towards food insecu- have a growing gap their presence. The current wave for the Kosti Combined Cycle Power Plant – there rity. India does not have between consumption is, in the most part, composed of is very little at play in agricultural promotion, inexhaustible supplies and supply” small, entrepreneurial businesses aside from a purely commercial imperative, Ms of land or water and de- which, lacking a grand strategy, Modi says. Unlike, for example, the governments of spite its advances in per- Sheila Sudhakaran prefer to just make money.

20 This is Africa Special Report Interview

Srinath Narasimhan Exclusive Interview

“Emerging markets is where the customers we have in the US, Europe and parts of Asia really want to go into. Africa clearly plays into that strategy very well because the market for the type of services that we want to provide is still nascent. There is still massive opportunity for growth in Africa, as well as the introduction of new generation services”

interview by Lanre Akinola

ncreasing global connectivity is propelling Afri- try’s second largest telecommunications network the region. In addition to the roll out of fibreoptic lenges. It is one of a number of big Indian com- The likes of Tata and Bharti have matured peting on a global basis are able to bring together ca up the priority list of international commu- operator. This built on an existing investment from submarine cables such as Seacom and Eassy, there panies in the information and communication into fully-fledged multinationals in recent years, the experience, expertise and knowledge from nication companies, says Srinath Narasimhan, Tata Africa into Neotel, amounting to a 56 percent is a strong focus by governments in the region to technologies sector that are establishing major and also bring with them a depth of operational working with customers in different markets.” the chief executive of India’s Tata Communi- majority shareholding in the company. develop the necessary infrastructure to extend footprints in Africa on the back of increasing trade and managerial capacity that few companies on It is a factor that has had a clear impact cations. Combined with substantial growth “We have been in the market for a little over 18 connectivity beyond coastal urban centres. Such volumes between the two regions. the continent can match. Bharti’s investment in on Neotel. “Instead of being a one country op- potential in emerging markets such as Africa, months, and already Neotel is beginning to make trends, argues Mr Narasimhan, will inevitably cre- Earlier in the year Bharti Airtel, India’s larg- Zain, for example, is widely eration, it is now part of a AsiaI and the Middle East, this is driving companies an important impact on our overall revenue and ate a suitable environment for further investment. est mobile operator, made international headlines expected to reshape the com- global system. Neotel can such as Tata to establish a presence in the region. profitability numbers, and I think that is something “I would expect that as overall international with its acquisition of the African assets of Ku- petitive landscape in the re- offer its customers not just “Emerging markets is where the customers we which will only grow,” says Mr Narasimhan. Neotel connectivity and use of the net for applications, wait’s Zain group; giving it a major presence in 15 gion, drive down costs and “We come with a South African story, but a have in the US, Europe and parts of Asia really want remains Tata’s largest investment in the region, but both by retailers and enterprise customers increas- sub-Saharan African countries. Comviva, formerly accelerate the technological the expertise and global one.” to go into” says Mr Narasimhan. “Africa clearly the company is also actively looking to gain a foot- es, the demand for internet-based services is only known as Bharti Telesoft, one of India’s largest pro- evolution of the market. This reach, he adds, ex- plays into that strategy very well because the mar- hold in other sub-Saharan African countries. going to grow… this is going to happen in South viders of value-added services to mobile operators, Mr Narasimhan adds understanding of tends well beyond simple con- ket for the type of services that we want to provide In 2009 the company began providing services Africa and other parts of Africa as well,” he says. also has a substantial footprint in the region, with that the global reach that operating in an nectivity to European and Asian is still nascent. There is still massive opportunity on the Seacom Cable System, enabling it to provide Meeting such demand will have to contend operations in most of sub-Saharan Africa. many Indian firms have es- markets. “Neotel can now offer for growth in Africa, as well as the introduction of services from South Africa, Mozambique, Tanzania with considerable challenges. According to the With a background in an emerging market tablished in recent years emerging market; access to 120 points of business new generation services.” and Kenya to its networks in Europe and Asia. Tata United Nations Conference on Trade and Develop- environment, Mr Narasimhan suggests that Indian can act as a game changer very high competition globally and can connect you Tata Communications, part of India’s Tata Communications is also an investor in the Eastern ment, other developing regions have broadband companies are well positioned to operate in a mar- for the African companies to practically any commercial Group, is the country’s largest telecommunication Africa Submarine Cable System, which is due to be- penetration rates ten times higher than Africa, ket such as Africa. “We come with the expertise they invest in. “This is an and the need to centre around the world.” Tata’s company in international long distance, enterprise come operation in mid 2010, and has plans to pro- and 90 percent of users on the continent are in the and understanding of operating in an emerging important value add that provide services in investment has also fuelled Neo- data and internet services. It entered the African vide services on the West Africa Cable System. North African region and South Africa. market with its own characteristics; very high com- we bring into a market like tel’s growth, with its number of market in June 2008 with the acquisition of a 30 These investments are reflective of the high Companies such as Tata Communications may petition and the need to provide services in a very South Africa. Companies a very cost effective employees more than doubling percent stake in South Africa’s Neotel, the coun- level of interest in building broadband capacity in play an instrumental role in addressing these chal- cost effective manner.” like us who have been com- manner” since 2008.

22 This is Africa Special Report This is Africa Special Report 23 SRINATH NARASIMHAN: The chief executive of India’s Tata Communications believes there are massive opportunities for growth in Africa LEFT: South Africa’s Neotel is Tata Communication’s first major investment in Africa

There is no doubting the growth potential for broadband service? I need a CPU of some kind, and everything from education, primary healthcare broadband in a region such as Africa, but exactly the typical CPU for broadband services has been and banking services using mobile technology is how the market will develop remains to be seen. PCs, and the affordability of these is not uniform being actively developed across Africa. Given the historical reliance on fixed network in- across the world. In many markets a PC represents a Vodafone’s partnership with M-Pesa in Kenya, frastructure for broadband access, this presents significant investment,” says Mr Narasimhan. for example, provides subscribers with access to companies such as Tata with a clear challenge. He contrasts this with mobile devices, the pro- various types of financial transactions via their Even in the voice communication market, which liferation of which has increased significantly in re- mobile phone. The service has been highly suc- has enjoyed unprecedented success in recent years, cent years, and leads him to speculate that “there cessful in Kenya, and has recently been exported connectivity beyond major urban centres is still a are probably more mobile devices available today to South Africa. Such applications have universal challenge for governments and operators. than laptops or PCs.” appeal, argues Mr Narasimhan, and provide a “In a market like Africa or India, providing ac- These devices provide a more viable platform to critical component of the required mix of services cess to customers and being able to create viable deliver broadband services to customers in develop- to extend broadband connectivity to geographies networks is going to take a lot of time and will be ing regions, he believes, particularly as technology that lack fixed infrastructure. “The differentia- very expensive,” observes Mr Narasimhan. Despite continues to evolve. “As people come up with more tion to me is not just one of capacity,” he says, this, he is optimistic about the prospects for broad- efficient ways to use spectrum, and as more spec- pointing to the lower bandwidth of mobile de- band in the region, arguing that wireless technol- trum becomes available in some geographies, there vices compared to fixed line networks, “but what ogy has an important role to play in a region such is no reason why a wireless play cannot meet many services you provide on it.” as sub-Saharan Africa. of the requirements of the broadband deployment He uses the example of assisting smallholder “Wireless provides the ability to get into the we are looking for around the world,” he says. farmers with information on crops, prices or market a lot faster; it allows you to get better eco- Mr Narasimhan also believes that social appli- weather conditions over mobile phones, which has nomics in the short run to be able to provide a cer- cations will drive the development of broadband been used to great effect in India. Such services do tain level of connectivity.” This, he adds, is not just services in regions such as sub-Saharan Africa. The not require the bandwidth of a fixed broadband a short term solution while fixed infrastructure is potential of providing network, he observes, and rolled out. “To my mind [fixed and mobile broad- concludes that “the real band] are not mutually exclusive. If you look at the challenge is to figure out way the market is moving today, what you want to “Wireless provides the what services to take to be able to do is get a very high level of connectivity ability to get into the market what consumer, and for at home, but you also need connectivity on a mo- what purpose. I think that bile level as well. With the development of wireless a lot faster; it allows you is really what you have to technologies, I think there is a huge story in terms to get better economics in get right. of wireless being a key driver for enabling broad- “Broadband should band to proliferate in different markets; both for the short run to be able to be seen as value addition fixed and mobile applications.” provide a certain level of or a service to the cus- Recent estimates by Ericsson, the Swedish tele- connectivity” tomer, rather than just a communications equipment and service provider, technology device. You predict that there will be an additional 3bn could put the most sophisti- mobile broadband users worldwide by cated mobile phone in front 2015. Many of these will be in emerging of someone, but if it has no markets such as India or Africa. applications, what do you do “What does it take to provide a with it?”

24 This is Africa Special Report