Investing in the African Opportunity

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Investing in the African opportunity

Featuring exclusive interviews and articles on: Kenya I Rwanda I Egypt I sierra leone I cote d’Ivoire I ethiopia www.theworlDfolio.com The Worldfolio 2 3 The Worldfolio The Worldfolio 4

STAFF

ÁLVARO LLARYORA Chairman, The Worldfolio Jonathan Meaney Chief Editor

Art Direction & Graphic Design: EDUARDO BERTONE & IGNACIO PLASENCIA

Project Coordinator: gemma gutierrez

Contributing Writers: Eleanor wragg & jonathan Meaney

TABLE OF CONTENTS

9 Can Africa’s 23 Regulatory changes inspire confidence 49 Rwanda: Transforming lives and the rising continue? in Kenyan capital markets economy through ICT

78 Africa financial services: 94 Private equity in Africa: 102 Interview with Prime Minister of No place for copy-paste Opportunities abound for the right investor Ethiopia, Hailemariam Desalegn 5 The Worldfolio The Worldfolio 6

The Africa Financial Services Investment Conference 2017

May 3rd to 5th 2017, Park Plaza Riverbank, London, UK

The Africa Financial Services Investment Conference (AFSIC) is the leading investment event focused on Africa’s financial services sector. The annual AFSIC, now in its 5th year, attracts financial services companies, predominantly leading Banks, Insurance Companies, Microfinance, Leasing and other regulated financial services companies from almost all parts of the African continent. The wide spread of companies from across Africa attracts a highly significant proportion of major institutional investors focused on investment into Africa, and those considering the increasing merits of doing so. These investors include sovereign wealth funds, supranational investors, listed equity and private equity investors, African regulated asset managers, alongside impact investors such as DFIs and microfinance-focused investors. In addition to major Financial Services companies and investors, AFSIC is well represented by major Deal- makers focused on Africa, such as Investment Bankers, Stockbrokers, Corporate Finance experts, Fixed Income and Debt specialists, M&A bankers, many of whom attend the Meet African Dealmaker event which takes place the night prior to AFSIC. AFSIC has shown continued strong annual growth in delegate numbers with 500 delegates expected to attend in 2017, and welcomed over 100 speakers in solo and moderated panel sessions in 2016. With companies from over 30 African countries expected to attend in 2017 and 150+ speakers, this is your chance to develop and nurture a robust, extremely high-quality network of friends, colleagues, investors and business contacts across the continent in preparation for Africa’s continued emergence as the most exciting investment destination in the world.

History

The first Africa Financial Services Investment Conference took place in Brighton in May 2013. The objective was, and remains, to bring together African financial services companies with a wide range of Africa’s most important investors, both debt and equity. In consideration of the difficulty of traveling within and across different African countries, the event provides an important forum where a large number of high impact meetings can be held in one place at one time. AFSIC 2014 saw considerable growth with over 125 companies. The event grew considerably again in 2015 with over 220 companies attending representing 25 different African countries. The number of investors attending grew yet again, and the number of African financial services companies attending grew particularly strongly. Following the move to London, AFSIC 2016 saw further strong growth in delegate numbers with significant attendance from Africa’s leading debt and equity investors of note. As news of AFSIC spreads throughout the continent it is likely that the event will continue to develop as Africa’s largest financial services investment event attracting banks, insurance companies, consumer lending companies, microfinance companies, leasing companies, investment banks and brokerages and similar companies. 7 The Worldfolio

AFSIC: The Gateway to Africa's Financial Sector

Rupert McCammon, Founder and Managing Director of the Africa Financial Services Investment Conference (AFSIC), sat down with The Worldfolio to discuss key elements of AFSIC and what to expect from this year’s event

also present themselves at AFSIC allowing attendees to understand better which investor is most suited to their own requirements.

Who attended last year’s AFSIC? Over 200 companies including banks, insurance companies, microfinance and leasing companies, etc. attended the 2016 event. Investors attending AFSIC 2016 included a wide range of major Africa-focused funds that made presentations such as Actis, African Development Bank, Amethis Finance, CDC, Development Partners International, the European Investment Bank, FMO, Frontier Markets Fund Manag- ers, Helios, Leapfrog Investments, TLG Capital and The World Bank, among many others. Apart from investors and delegates from African focused financial services companies, you can expect to meet a wide range of delegates with an interest in Africa’s financial services sector, including research analysts from leading investment banks, financial Rupert McCammon, Founder and Managing Director of the institutions group teams, sell side analysts, corporate finance advisors, Africa Financial Services Investment Conference (AFSIC) members of the Africa Press Corps, private investors, and attendees from companies looking for business opportunities in Africa. What is the objective of AFSIC? AFSIC is the leading investment event focused on Africa’s financial What is the Meet African Dealmaker event? sector. African Banks, Insurance Companies and Microfinance In- This event, which is focused on Dealmakers, such as stockbrokers, stitutions from across the continent attend in order to meet global investment bankers, M&A experts, etc. takes place the first night debt and equity investors who are looking to invest in equity or se- of AFSIC within the Houses of Parliament on the banks of the River nior or subordinated debt capital. The large number of investors Thames. The event is highly recommended for delegates wanting to attending makes the event highly attractive as delegates are able expand their network further across the African continent. to hold a wide range of high-impact, business-focused meetings in one place at one go. What is new for AFSIC 2017? As AFSIC has grown the event team has strived to introduce new op- What types of African financial services companies attend? portunities to make the interaction between investors and Financial Banks, Insurance Companies and Microfinance companies, both Services companies from Africa even stronger. The biggest change at those listed on African or other stock exchanges, and private com- AFSIC 2017 has been the addition of an extra half day in the program, this panies attend AFSIC from all parts of Africa. reflects the growth in AFSIC, and its strong appeal to investors as a highly convenient venue to explore a wide range of investment opportunities. What types of investors attend? AFSIC 2017 sees the addition of four exciting panels focusing on Investors focused on both Equity and Senior or Subordinated debt the investment opportunities in North, South, West and East Africa. attend AFSIC. The strong range of investors attending results in a These panels have some excellent local companies participating who focus on a range of investment sizes. For instance, organisations such will provide real insight into these investment areas. as the IFC, EIB, AFDB, and some of the largest Private Equity funds We are also delighted that FSD (Financial Sector Deepening) may be looking for investment sizes of $50 million-plus. While other Africa which will be concentrating on highlighting opportunities in investors including Listed Equity funds, Impact Investors, Develop- investing in Africa’s Financial Sector Frontier, specifically focusing ment Finance Institutions, smaller Private Equity funds may invest in on opportunities in Zimbabwe, Sierra Leone and the DRC as well a range of sizes from as small as $100,000 to much greater amounts. as a dynamic session looking at Diaspora finance, remittances and long-term displaced people and the associated growth and invest- How do I meet these investors? ment opportunities offered by this unique situation. Multiple opportunities to meet investors are built into the program, Finally, we are offering smaller companies the opportunity to including an online meeting system which specifically highlights record videos of themselves presenting the merits of their own com- investors allowing delegates to arrange their own one-on-one meet- panies. These videos will then be made available to investors and ings, to networking lunches and panel discussions. Many investors other delegates after AFSIC.

9 The Worldfolio Can Africa’s rising continue?

With external shocks putting the brakes on Africa’s dramatic economic growth, do its economies have what it takes to continue to rise?

Africa, once synonymous with war, famine and poverty, has 3.7 percent in 2017 and 4.2 percent in 2018. Meanwhile, in undergone a dramatic change in fortunes since the turn of its most recent Regional Economic Outlook, the IMF said in the century. Today, six of the world’s ten fastest-growing reference to the recent slowdown that, “although this overall economies are African, and the “Africa Rising” narrative, markedly weaker picture begs the question as to whether popularised by The Economist, has seen the continent’s eco- the region’s recent growth momentum has stalled, our view nomic dreams begin slowly to come true. Since the turn of the is that medium-term growth prospects remain favourable.” century, a commodities boom coupled with improvements in Nonetheless, foreign direct investment into the continent governance and new poles of economic growth have driven has slowed down, with the OECD estimating flows fell by 46 impressive advances in GDP and development. Headline- percent in the second quarter of 2016. In a recent release, grabbing achievements in the reduction of maternal and in- Michael Lalor, Africa Business Centre Leader at EY said, “In- fant mortality, greater access to clean water and education, vestor sentiment towards Africa as an attractive investment and an upswing in life expectancy have all come about as the destination is likely to remain somewhat softer over the next Africa of the 2000s has begun to take shape. few years,” however he pointed out that this has far less to In the decade between 2005 and 2015, the economy of do with Africa’s fundamentals than it does with a world char- Africa as a whole increased by 50 percent, versus the world acterised by heightened geopolitical uncertainty and greater average of just 23 percent. But behind those figures is a slightly risk aversion. “Companies already doing business in Africa less-than-rosy picture. A slowdown in China – the top export will continue to invest, but will probably exercise a greater partner for the majority of African countries – coupled with degree of caution and be more discerning. Some will invest security and political shocks and a fall in commodity prices at a slower pace, looking to consolidate operations and drive pulled the continent’s overall average annual GDP growth profitability; while others are likely to double down on their down to 3.3 percent in the latter half of that decade, only just investments, using this period of economic slowdown to fur- keeping step with population growth. This is a sharp decline ther strengthen their positioning in key markets,” he added. from the average of 4.9 percent recorded from 2000 to 2008. Flows of finance into Africa are still mainly directed at As the continent’s vulnerability to challenging external con- resource-rich countries, but non-resource-rich countries are ditions threatens sustained growth, can Africa continue rising? becoming more attractive, with consumer-facing industries The African Development Bank believes so. It predicts now attracting a much more substantial portion of foreign an upswing in economic growth for Sub-Saharan Africa of investments. Nearly half of FDI projects are now in sectors

Massive investment by Chinese and other investors is leading to major upgrades and expansion at African ports and airports, with spending on infrastructure now at 3.5 percent of GDP, double what it was a decade ago The Worldfolio 10

such as consumer products and retail, financial services, could allow manufacturers to set up supply and value chains and technology, media and telecommunications, with areas which span multiple African countries, with electronics, ma- such as business services and automotive, clean technology chinery, chemicals, textiles and food production all sectors and life sciences also rising in significance. New investors which stand to benefit. These labour-intensive industries are are also eyeing the continent, albeit cautiously, with flows of perfectly suited for the continent, which is expected by 2034 increasing size coming in from countries such as India and to have the world’s largest working-age population of 1.1 bil- the United Arab Emirates. lion, surpassing that of India and China. What’s more, Africa’s It’s easy to see why. Despite external wobbles, Africa pres- rapidly-growing population will provide an important potential ents a multitude of pent-up opportunities for growth, some market. Africa is still urbanizing, and the UN predicts that springing from the very frustrations that have held it back for over the next decade, an additional 187 million Africans will so long. Its creaking colonial-era infrastructure, for example, live in cities. As they move, they will require more and more has long hobbled intra- and inter-regional trade, with an es- goods and services. Africa’s middle class has already begun timated 50 percent of produce rotting before it can reach its to emerge, with household consumption seen growing at 3.8 intended market. Power outages lose businesses almost 700 percent a year to total $2.1 trillion by 2025. African businesses hours of productive time a year on average. Poor air, rail and are an even larger spender, with spending expected to climb road links and sluggish customs procedures mean it is some- from $2.6 trillion in 2015 to $3.5 trillion by 2025. times quicker to send goods to neighbouring countries via trade It’s not all good news. Because of falling oil prices and a hubs such as Dubai rather than directly over the border. But slump in commodities, Africa’s finances have deteriorated, change is coming. Massive investment by Chinese and other with worrying budget deficits opening up in many of its re- investors is leading to major upgrades and expansion at African sources exporters, leading some of them to seek outside fi- ports and airports, with spending on infrastructure now at 3.5 nancial assistance. However, some governments are working percent of GDP, double what it was a decade ago. While the proactively to diversify exports and national revenue sources, African infrastructure gap is still a headache for exporters, as well as open up their economies to new investors and it presents an all but untapped opportunity for transport and new business sectors. Countries like Mauritius, Senegal and logistics (T&L) companies willing to take a leap of faith. In Tanzania are progressing steadily with economic reforms Africa gearing up, a report by PwC, analysts highlighted the and increasing their competitiveness, while diversifying their role T&L companies have to play in putting Africa in motion. economies and working to attract investment. “By helping Africa grow, T&L operators can also secure future According to the World Economic Forum, Africa could growth for their own companies... For companies willing to nearly double its manufacturing output to $930 billion in make long-term investments and work together with local 2025 from $500 billion today. The vast majority of that growth governments, the long-term pay-off may be huge.” will come from local companies meeting domestic demand: Getting in position for the expected upswing in intra- despite its enormous agricultural capacity, Africa still imports African trade is a key draw for many investors. The Conti- one-third of the food, beverages, and other similar processed nental Free Trade Area, which is currently under negotiation, goods it consumes. But this cannot be achieved unless coun-

Africa is still urbanizing, and the UN predicts that over the next decade, an additional 187 million Africans will live in cities. As they move, they will require more and more goods and services. Africa’s middle class has already begun to emerge, with household consumption growing at 3.8 percent a year to total $2.1 trillion by 2025 11 The Worldfolio

tries take decisive action to create an improved environment ent economies. And a closer look at the numbers provides an for manufacturers. interesting insight into the current reality. While oil-exporting Indications are promising. Virtually every country across countries and North African economies still reeling from the the continent now has an investment promotion agency. These political turmoil of the Arab Spring have seen growth stut- one-stop shops help smooth the way for investors, providing ter, pulling down the regional average, there are pockets of assistance with registration, taxes, setting up local partner- tremendous growth elsewhere. Indeed, the IMF pegs growth ships and establishing companies locally. While foreign direct in Kenya, Senegal, and Côte d’Ivoire at above six percent this investors in the past have congregated around more obvious year. Growth paths among Africa’s economies have diverged, industries, such as diamonds, gold and oil, there is an increas- and the focus today for investors and financial institutions ing focus on new industries including technology, health care, alike is to look beyond the continent’s challenges as a whole and fast-moving consumer goods, driven in some part by the and assess economic prospects in individual economies. returning diaspora who bring with them skills learnt overseas. According to the World Economic Forum, the Africa of For many businesspeople, Africa is a perfect test-bed today can loosely be divided into three groups of econo- for new ideas, because in many cases there is so much to mies. The first group, which represent about one-fifth of be done that the field is wide open for innovation. Necessity the continent’s GDP, are a set of stable, growing countries is the mother of invention, and nowhere is this truer than the WEF calls growth stars. These include Rwanda, Côte in Africa. The mobile payments industry in East Africa is a d’Ivoire, Ethiopia, Kenya and Morocco. Their economies particularly inspiring example. A vast unbanked population are not dependent on resources, they have carried out suc- coupled with widespread mobile phone penetration allowed cessful economic reform programmes, and score highly for the region to leapfrog developed markets and unlock phe- competitiveness. The second group, dubbed “unstable grow- nomenal growth. Since Safaricom rolled out its pioneering ers”, account for about two-fifths of Africa’s GDP. These are mobile money system M-Pesa in Kenya, its parent company countries such as Angola, the Democratic Republic of Congo, Vodafone has been able to replicate its success in Albania, Nigeria and Zambia, which have experienced high growth the Democratic Republic of Congo, Egypt, Ghana, India, rates over the past five years but lower scores on stability Lesotho, Mozambique, Romania and Tanzania, disrupting as a result of an over-reliance on resources, or security traditional financial models across the globe. M-Pesa is far problems. The final group, the “slow growers”, which also from an isolated case. Ushahidi, a crowd-sourced informa- account for roughly two-fifths of the continent’s GDP, in- tion collection platform, which sprang into being during the cludes the three major North African countries involved in aftermath of Kenya’s disputed 2007 presidential election, has the Arab Spring – Egypt, Libya and Tunisia, as well as South since been used in Washington, D.C. to map blocked roads, Africa and Madagascar. Each of these groups presents its in Christchurch, New Zealand during an earthquake, and in own set of challenges and opportunities. But, with favourable the Middle East during the 2011 Arab Spring protests. demographics, enormous potential within the local market, Africa, as its bankers and businesspeople tire of emphasis- and ever-more open and diversified economies, Africa will ing, is not a country but a complex continent of 54 very differ- rise for some time yet.

According to the World Economic Forum, Africa could nearly double its manufacturing output to $930 billion in 2025 from $500 billion today. The vast majority of that growth will come from local companies meeting domestic demand The Worldfolio - Kenya 12

Growth trajectorY AND increasing foreign investment drive nation towards realisation of Vision 2030

The World Bank has called Kenya ‘one of the bright spots in sub-Saharan Africa’. Sustained economic growth, increasing foreign investment and the execution of infrastructure mega projects are amongst the factors that will help transform Kenya into a newly industrializing, middle- income country by 2030

While Nigeria, Angola and South Africa struggle with low commodity prices, Kenya can currently boast one of Africa’s most robust economies. Kenya’s GDP is estimated to have grown by close to 6 percent in 2016, up from 5.6 percent in 2015, and well above the forecasted 1.7 per cent for the sub-Saharan region. The IMF predicts growth to slow in 2017, yet still remain robust at 5.3 percent. “With economic growth rates sustained at above 5 percent, Ke- nya has outperformed the regional average, for eight consecutive years. Robust domestic demand emanating from private consumption and government investment are the key drivers of growth, underpinned by a stable macroeconomic environment, lower oil prices, diversification, improved security perceptions, and ongoing structural reforms,” a World Bank report states, citing agriculture, construction, increased foreign investment and a rebound in tourism as the main drivers of growth in 2016. In recent years, the tourism industry was hit hard by security threats – most notably the Westgate Mall attack in 2013. But with the security situation much improved, tourist numbers in 2016 are estimated to have increased by 20 per cent on 2015, reaching almost 1.7 million by year end, while tourism earnings jumped to KES 100 billion (approx. £790 million), up from KES 84.6 billion in 2015. Meanwhile, the agriculture sector, which makes up a quarter Uhuru Kenyatta, President of Kenya of GDP, experienced gains of around 5 percent in the first half of 2016, thanks to favourable weather conditions that led to increased cord $1.437 billion (approx. £1.2 billion), which was used to fund production of key crops such as tea. more than 80 large-scale projects in real estate, renewable and Since 2011, foreign direct investment (FDI) in Kenya has grown geothermal energy, as well as roads and railways. A recent report significantly year-on-year. In 2015, net FDI inflows reached a re- by investment monitoring platform FDI Markets ranked Nairobi as Africa’s top foreign direct investment destination as it saw inflows surging by 37 per cent in 2015. “The trends in FDI have increased significantly over the last few years, namely in oil exploration, geothermal energy, and infrastructure,” says Henry Rotich, Cabinet Secretary at the National Treasury. 13 The Worldfolio - Kenya

Growth trajectorY AND increasing foreign investment drive nation towards realisation of Vision 2030 The Worldfolio - Kenya 14

You can register your company in Kenya, manufacture your goods and access both the local and foreign markets unlike before when you had to choose one,” said President Uhuru Kenyatta at the UN General Assembly in New York in September. “I am here to tell you that Kenya is ready for business and we have taken necessary measures to make it easier for you to invest in Kenya.” Since Mr Kenyatta came to power in 2013, Kenya has quadrupled its spending on infrastructure, with the government borrowing hundreds of billions of shillings for large-scale energy, transport and ICT projects. Some highlight mega projects include: the $3.8-billion Standard Gauge Railway Project, its biggest investment in infrastructure since it gained independence from Britain in 1963; a $2.2 billion investment in solar energy developments that will add 1 gigawatt to the grid; $3.2 billion for 10,000 kilometres of new roads; and the $2.9 billion National Broadband Strategy to increase access to high speed internet across the country. “Infrastructure is a necessity if our economy is to grow and “Corruption is a sickness that if we are to achieve the prosperity we desire as a people and as a nation. We cannot run away from it,” Mr Kenyatta said at a Nai- cannot be cured overnight. We robi infrastructure summit in August, in response to critics of his are making milestones every government’s massive borrowing for infrastructure development. year. In the next 15 years, we can “The challenge we have is to ensure that we invest appropriately, to ensure that we invest without corruption, to ensure comfortably reflect back and that we utilize the resources in that sector in the best possible see how different our country manner.” will be from the country that we But the government cannot cover all the investment costs, and wants to avail of financing options such as public-private inherited before Vision 2030” partnership (PPP) initiatives to ensure the bulk of infrastructure megaprojects are completed. Dr James Mwangi, Chairman of Vision “Tapping into PPP financing is particularly advantageous 2030 and Managing Director and CEO, for Kenya, in light of increased confidence from foreign private Equity Bank investors and its position as one of the largest economic pow- erhouses in sub-Saharan Africa,” said infrastructure investment expert Akshai Fofaria of law firm Pinsent Masons. “We have seen a growing interest in investing in Kenya, how- “Substantial investment in infrastructure is critical to achieving ever the challenge has been to materialise those enquiries into the ‘Kenya Vision 2030’ to become a globally competitive country.” actual and real investments. We are working closely with the national government to follow on the recent momentum.” Vision 2030: A blueprint for a prosperous future The UK remains the country’s largest investor, with British The national Vision 2030 development plan aims to transform companies active across the services, manufacturing, energy and Kenya into a newly industrialising, middle-income country pro- agriculture sectors. Remittances from the Kenyan diaspora in the viding a high quality of life to all its citizens by 2030 in a clean UK have nearly doubled from $275 million in 2010 to $520 mil- and secure environment. lion in 2015, and is the single largest source of foreign exchange “Vision 2030 is an ultimate set of guidelines that aims to (representing about 2.6 per cent of GDP in 2015). eradicate poverty, create a thriving economy, fight graft, build However, Kenya’s dependence on cash and investment inflows infrastructure, provide better-quality education to our citizens from the UK makes its quite vulnerable to the consequences of and make Kenya a hub for the rest of sub-Saharan Africa,” says the fall-out from Brexit, and the World Bank warns that the East Dr James Mwangi, Chairman of Vision 2030. African nation is “likely to be hit from both direct and indirect “It is anchored on three key pillars: economic, social, and channels as a result of the UK’s vote to leave the EU.” political governance. The objective is to achieve an economic The increase in FDI to Kenya can be, in part, attributed growth rate of 10 percent per annum and sustaining the same to the continuously improving business climate. While many until 2030.” obstacles remain, Kenya jumped 16 places to 92nd in the World Prioritised under the economic pillar are infrastructure de- Bank’s Doing Business Index 2017 – that followed a jump of velopment and the aforementioned mainstays of the economy, 28 places in the 2016 Index, from 136th to 108th – and is now agriculture and tourism, as well as trade, manufacturing and among the top five economies in sub-Saharan Africa where it is business process outsourcing. Financial services will play a crucial easiest to do business. role in the realisation of Vision 2030, which aims to deepen the “What we have done is simplify the business environment by capital markets and turn Nairobi into an international financial removing the red tapes which hampered business establishment. centre – initiatives overseen by the National Treasury. 15 The Worldfolio - Kenya

“In Kenya, the financial services sector is critical to achieving the Vision 2030 target of 10 per cent annual average economic “Kenya is ready for business and growth,” explains Treasury Cabinet Secretary, Mr Rotich. “The we have taken necessary measures sector is expected to stimulate a significant increase in investments and savings through mobilising both domestic and inter- to make it easier for you to invest national resources.” in Kenya” The political pillar focuses on public sector reform, constitutional changes, judicial and legal reform, improving policing Uhuru Kenyatta, President of Kenya and security, and tackling corruption, a thorn in the side of many African nations. “The government is aligned with the private sector to eradicate the menace of corruption,” says Dr Mwangi. “Corruption is a sickness that cannot be cured overnight. We are making recognised: under the plan, women entrepreneurs will have in- milestones every year. In the next 15 years, we can comfortably creased access to funding, while initiatives will be put in place to reflect back and see how different our country will be from the increase female representation at executive level in all branches country that we inherited before Vision 2030.” of the government and the private sector. The third and final social pillar of Vision 2030 aims to in- Like long-term development plans in many other African crease the affordable housing stock across the country, improve nations, the goals of Kenya’s Vision 2030 are, indeed, lofty, and a and expand vital social services like health, education, water and great number of challenges must be overcome to achieve them. sanitation, and develop human resources. Dr Mwangi says there “As the saying goes: Rome wasn’t built in a day,” says Dr has already been great progress made in education, with “27 per Mwangi. “It has only been three years since the introduction of cent of Kenyans now accessing high-quality third-level education.” Vision 2030 and of course we are facing certain challenges and The need to strengthen the role of women in business and bottlenecks, but in another 15 years I believe most of the initia- government in order to support economic growth has also been tives will take roots and mature.”

Kenya’s financial services sector is critical to achieving the country’s Vision 2030 target of 10 percent annual economic growth The Worldfolio - Kenya 16 17 The Worldfolio - Kenya

Nairobi plans to become Africa’s financial epicentre

As part of the Vision 2030 plan, the government sees Nairobi becoming the continent’s financial hub – an aspiration which will be supported by an already robust and expanding financial sector, a strong and diversified economy, and evolving regulatory framework

With Kenya consolidating its domestic fi- from five years to two years and introduces sub-Saharan Africa, but has cautioned that nancial sector through ambitious govern- tax reductions and tax rebate schemes for further reforms are needed for the country ment and private initiatives, the country is a number of industries. to reach its full potential. In a gesture of also working to establish itself as a regional Like other Kenyan financial institu- support, the international lender approved financial hub. tions, the CMA has garnered praise for in May a $37 million credit line for the Kenyan financial authorities and lead- its performance and was voted the most country’s financial sector to strengthen the ing private banking executives argue that innovative capital markets regulator in institutional, regulatory and legal environ- the country is the logical choice for this Africa. Mandated with both regulating ment. task as it is already the most important fi- and developing orderly, fair and efficient Meanwhile the government is adopt- nancial center for the six-member East capital markets in Kenya with the view to ing fresh measures to further boost the African Community (EAC) which groups promoting market integrity and investor business community as the economies of Kenya, Burundi, Rwanda, South Sudan, confidence, the CMA has been lauded by the country and its neighbors grow, says Tanzania and Uganda. Africa Investor, an investment and com- Capital Markets Authority chief executive “Within the EAC, the finance sector munication group. Paul Muthaura. has been growing at a rapid rate, with Ke- According to the World Bank, Kenya “First and foremost, we have intro- nya playing a leading role as an important has the third-largest financial sector in duced the new Companies Act that revo- financial hub for our neighbors,” explains lutionizes and modernizes the framework Cabinet Secretary of the National Treasury for company operations, public listing pro- Henry Rotich. “You will find most Kenyan cedures and directors’ responsibilities. It banks are present in the neighboring coun- also establishes much more explicit liabil- tries and some have even extended their ity and responsibility for corporate gover- wings beyond the EAC region.” nance and risk management for the board Analysts point out that in Kenya the fi- of directors,” he explains. nancial services sector is critical to achiev- Complimenting the act is the new Cor- ing the country’s Vision 2030 target of 10 porate Governance Code for Public Listed per cent annual economic growth while Companies that was benchmarked against its EAC partners see it as vital to their own similar codes in the United Kingdom, South poverty reduction goals. Africa and India. “A dynamic and efficient financial in- “We are very confident that the frame- dustry provides key pillars to spur econom- work will put us on par with any other ic growth by mobilizing and pooling sav- financial centers, whether regionally or ings; monitoring investments and exerting “Within the EAC, internationally, when it comes to transpar- corporate governance; easing trading, ency, accountability and clear allocation of diversification and risk management; and the finance sector responsibility at board level,” Mr. Muth- making possible the exchange of goods has been growing aura says. and services,” Mr. Rotich says. at a rapid rate Exciting changes are also underway In a major step towards these lofty at the Nairobi Securities Exchange (NSE) aspirations, the government passed the Fi- with Kenya playing which currently has 66 listed securities with nance Act 2015, which introduces a broad a leading role, a market capitalization of close to around range of modifications, such as the ex- as an important KES 2 trillion (approx. £15.5 billion). emption of capital gains arising from the “For any market to work effectively transfer of shares traded on an exchange financial hub for and have enhanced liquidity, it must have licensed by the Capital Markets Author- our neighbours” mechanisms to execute short sales,” notes ity (CMA). Among many other changes, it NSE chief executive Geoffrey Odundo. also establishes a new regime for rental in- Henry Rotich, Cabinet “And the NSE is working with various come, overhauls the VAT agent system, ex- Secretary of the National stakeholders to develop a comprehensive tends the period to carry forward tax losses Treasury framework and requisite regulations to The Worldfolio - Kenya 18

enable market makers, short sellers and of those key investors coming back. In fact, “Whereas customers would take up to stock lenders to operate in the domestic if you look at the US investment flows, we 45 minutes to be served in our branches, capital market.” are the second largest in the continent after they are now getting their business done in In 2016, the exchange launched the Egypt.” just five minutes,” Dr. Muriuki says. “We Derivatives Market and Exchange Traded Kenya’s banking sector will, of course, have enabled our customer interaction at Funds and a mobile-based retail bond be a major player in channeling invest- alternative channels, notably mobile bank- dubbed the “M-Akiba Bond”, a unique in- ments and the KCB chief is excited about ing and agency banking, and today only 25 novation that will facilitate the rapid mobi- a wide range of big-ticket infrastructure per cent of our customer transactions are lization of domestic savings, placing Kenya schemes over the next several years which done at branches. on the fast track to achieve the United Na- will aid the country in achieving its vast po- “At our bank, we believe in empow- tions’ Sustainable Development Goals. tential. ering the millions of people in rural areas As an active member of the Sustain- “We are seeing big projects taking which is a very similar ethos to what the able Stock Exchanges Initiative, the NES is place such as geothermal, solar and wind IFC stands for,” Dr. Muriuki explains. also working closely with multilateral part- energy, along with new roads, energy pipe- “We are an institution for creating ners and others to launch alternative green lines and transportation links. Banks in wealth for our shareholders but also for products such as green bonds and a carbon Kenya are very proactive and are the nerve empowering the common man by provid- trading segment. center for investment to enable all of this,” ing cheap financing and capacity building “We expect listings to occur on our he says. with the co-operative societies to enhance traditional equity and bond segments,” Mr. On a small scale, Mr. Oigara empha- their competitiveness in handling and in- Odundo adds. “We have begun the upgrade sizes that the Kenyan banking system en- vesting money.” of our automated trading system, which joys a sterling reputation as being the most “The long and short of all of this,” he will enhance our capability to support the sophisticated on the continent after South concludes, “is that as a business we had trading of these products.” Africa and is number one in leveraging very humble beginnings started by small- This flurry of measures seals the au- technology and mobile solutions within the holder farmers and so we remain steadfast thorities’ commitment to ensuring Kenya’s financial sector. to our founding principles of supporting future role as a major financial center One local bank which has racked up the interest of the majority.” while the banking industry is also playing an impressive record in introducing mo- Change is also the driving mantra at its part through domestic and regional ex- bile technology to ease transactions and Equity Bank whose managing director pansion, offering new products such as Is- other key services for its customer base is and CEO, Dr. James Mwangi, says that lamic banking and introducing innovative Co-operative Bank of Kenya, founded 40 the institution pioneered new paths which methods to streamline operations and of- years ago and now one of the five largest proved successful for the local sector. fer new banking opportunities to potential financial institutions in the country. “In fact, Equity is a creation of inno- depositors. “We are also the largest co-operative vation as our first step was to move to a These moves are attracting the atten- bank in Africa supported by the largest co- high-volume, low-cost business model,” he tion of the world’s major financial play- operative sector in the continent,” explains recalls. “This really disrupted the Kenyan ers, which are already impressed with the Group Managing Director and CEO, Dr. banking industry, which prior to our entry performance and the future of the Kenyan Gideon Muriuki. “Kenya has 12,000 co-op- into the market, was high-margin, low- economy, notes Joshua Oigara, the Chair- erative societies with 5,000 of those savings volume. Suddenly, the unbanked became man and Chair of the Governing Council and credit cooperatives, so that makes vir- bankable and that led us to become home of the Kenya Bankers Association and CEO tually every member of society a member to more than 50 per cent of all of the bank and Managing Director of Kenya Commer- of one of these financial co-operatives.” accounts in the country to this day.” cial Bank (KCB) Group. Since its beginning serving the co-op- But it is not just the Kenyan market “Kenya’s economy is very resilient in erative sector, the bank has become a truly where Equity is breaking new ground. Its comparison to other African economies universal bank offering the entire range of operations have spread beyond the coun- because we are not dependent on a single financial services and products including try’s borders and now the bank is active in sector like so many others,” he says. “Our insurance, stock brokering and corporate South Sudan, Uganda, Rwanda, Tanzania economy has long been one of the most di- banking. and DR Congo, which bodes well for the versified in Africa, based on traditional sec- “We have also prioritized our big out- bank playing a role in Kenya’s aspirations tors like agriculture, ICT, finance, tourism reach effort,” Dr. Muriuki says, “and now to become a financial powerhouse as part and the skills and services industries.” we have 150 branches serving 5.9 million of the Vision 2030 plan, of which Dr. Mwan- Mr. Oigara recalls the recent down- customers who have accounts with us.” gi is the chairman. turn in foreign investment due to security Around half that number have signed “One of the deliverables of Vision concerns, which especially hit Kenya’s lu- up for the bank’s mobile banking platform 2030 is to make Nairobi a financial hub crative tourism industry, but he claims that called MCo-op Cash, allowing depositors to for Africa,” he argues, “and we have the the good times are coming back. access a variety of banking, money transfer necessary ingredients to make that hap- “Kenya went through some turbulent and payment services. The mobile service pen, such as strong financial inclusion, times when European and US investors cut is part and parcel of Co-Operative Bank’s well-educated human resources in the back, there were travel advisories for the investment in customer delivery platforms sector, an evolving regulatory frame- country, etc.,” he says. “However, the table aimed at becoming more responsive to de- work and the political will needed for the is turning and we are already seeing some positor needs. transformation.” 19 The Worldfolio - Kenya The Worldfolio - Kenya 20 ICT innovations support development of smart economy and efforts to improve security From policing and government services to banking and farming, information and communication technologies are Following the establishment of Kenya’s Ministry of Informa- transforming lives and the economy, while tion, Communication and Technology (MoICT) in 2004, the country’s ICT sector has blossomed into a key pillar of the also enhancing Kenya’s attractiveness as an economy. investment destination During the first decade of the 21st century alone, ICT was responsible for the growth of approximately one-quarter of “National security is a priority not only for the govern- Kenya’s GDP, and today, Kenya has been ranked among the ment but also for the private sector,” says Safaricom CEO, Bob top five African countries with the fastest growth in telecom- Collymore, who was named the 2016 International Business munication, infrastructure and mobile money innovations. At Leader of the Year at the 9th annual Africa Investors CEO In- the core of this growth has been the mobile revolution which vestment Summit in New York in September 2016. the country has seen, and which has led it to reach 82.6 per In exchange for free use of the infrastructure during the cent mobile penetration. first year, the Kenyan government has an arrangement with Platforms such as M-pesa – a mobile phone-based money Safaricom, which has provided a KES 14.9 billion (approx. transfer, financing and microfinancing service – are trans- £115 million) national surveillance, communication and con- forming lives and different sectors of the economy, from fi- trol system that links all security agencies, making it easy to nance to health, education, and agriculture. Well aware of the share information and direct operations. Broad in scope, the project involved connecting 195 police stations in Nairobi and Mombasa to high-speed (4G) Internet to ease communication. Already, companies such as Nokia and Mr Collymore explains that the system enables security IBM are active in the Kenyan ICT mar- personnel to monitor areas under surveillance, detect any security incidents, and help direct police response and monitor ket. They’ve established regional de- the flow of people and traffic, especially in town centres. “The velopment centres in Nairobi, which technology will help the public gain trust for police to fight has been gaining fame as a hotbed of crime,” he says. Safaricom has trained more than 10,000 officers in main- ICT innovation thanks to Konza Techno taining and operating the system and equipped them with City, a £10 billion project also known walkie-talkies with cameras to take pictures at crime scenes as ‘Silicon Savannah’ for assessment and evidence. The pictures can be sent in real- time to the command and control centre, which has greatly improved accuracy and response times. “Corruption and crime undermines fair competition, distorts development pri- importance of mobile, the Kenyan government is also leverag- orities and impedes long-term foreign and domestic investing ICT technology to distribute information and boost secu- ment,” says Mr Collymore. “A thriving economy is clearly im- rity efforts following terrorist threats and attacks. portant to a company like ours, and it’s not going to thrive if “The application of Information and Communications you have security threats every week.” Technology will definitely enhance command and control,” Safaricom has been at the helm of Kenya’s ICT push. Ac- says Joe Mucheru, Cabinet Secretary of the MoICT. “It will cording to Mr Collymore, mobile has created new possibilities allow us to play a very important role in tackling some of the for the country by transforming entire societies and reshaping contemporary challenges we face in Kenya.” the economy in more ways than any other technology since in- Following a spate of terrorist threats, the general safety dependence. “Innovation is part of Safaricom’s DNA,” he says. of cities such as Nairobi and Mombasa was compromised, “We have a long-standing commitment and passion to help though an ambitious CCTV project between leading Kenyan nurture a vibrant ICT-powered economy.” telecoms company Safaricom and the Kenyan police force Following suit with Kenya’s National ICT Master Plan, the launched in 2015 is making a difference. government has established three main pillars for guiding the 21 The Worldfolio - Kenya

“We have a long-standing commitment and passion to help nurture a vibrant ICT-powered economy”

Bob Collymore, CEO, Safaricom

An ambitious CCTV project led by Safaricom and the Kenyan police is aimed at increasing security in Nairobi development of the ICT sector. They include: using ICT to en- platforms like M-pesa, the business models of most of Kenya’s hance public value, develop ICT businesses, and strengthen financial institutions have shifted, and mobile money agents ICT as a driver of industry. now represent three-quarters of the total financial access As part of the first pillar, the government is aiming to points in Kenya. They have been a major driver in bringing make public services more accessible by using e-government financial access points closer to the population. initiatives such as online business licensing, tax return sub- Likewise, in the health sector, ICT has been used to grant missions and applications. This objective is being pushed in greater health-related information to the public and improve tandem with the goal of getting 90 per cent of Kenyans to ac- its access to quality healthcare. The procurement and dis- cess at least some public services via the internet. In order to tribution of medicine and supplies has also been improved, facilitate its projects, the Kenyan government has also made as has the attention and care given to pre- and post-partum an effort to standardise e-government communication servic- mothers. es and to market Kenya as a hub for ICT investment. From an agricultural perspective, the use of mobile tech- Already, companies such as Nokia and IBM are active in nology has also been fruitful. Better informed as to how to the Kenyan ICT market. They’ve established regional devel- increase yields and access new markets, farmers are using opment centres in Nairobi, which has been gaining fame as a new technologies such as iCow, a mobile-phone app invented hotbed of ICT innovation thanks to Konza Techno City, a £10 in Kenya and developed in partnership with Safaricom, which billion project also known as ‘Silicon Savannah’. Spread over gives farmers access to agricultural information services 20 square kilometres, just 70 kilometres south-east of Nairobi, aimed to help them learn about better farming methods and the area will house science and technology parks, educational increase productivity. facilities, hotels and residences – creating 20,000 jobs during Still, for as much promise as it shows, ICT development the first phase of construction. faces many challenges and insufficient infrastructure has Kenya’s education sector has also seen increased ICT been the biggest constraint to continued expansion and to traction. The government has spent around £190 million to help boost financing for new infrastructure, increase the provide more than 1.2 million laptops and roughly 20,000 number of trained employees with the skills needed to serve printers and projectors to the approximately 24,000 primary in the ICT-related workforce and manage the ever-present schools across Kenya. Furthermore, ICT has allowed school- challenge of IT security, the Kenyan government launched age children access to a more affordable, expansive range of the $2.9 billion National Broadband Strategy (NBS); a joint content, not to mention the potential of expanding access to product of the MoICT and the Communications Commis- online education for children who live far from schools. sion of Kenya, the sector’s regulator. More than half of the In terms of financial inclusion, the help of ICT has made a NBS’s budget is allocated to building infrastructure, with significant impact on bringing two out of three adult Kenyans the balance directed towards capacity building and content into the formal financial system. Through the rapid growth of development. The Worldfolio - Kenya 22 23 The Worldfolio - Kenya

Regulatory changes inspire confidence in Kenyan capital markets

Paul Muthaura, CEO of Kenya’s Capital Markets Authority, explains how Kenya’s new investment framework puts it on a level pegging with the world’s major investment centres, its capital markets’ competitive advantages, and how it will become the market of choice for many to raise large amounts of capital

To what extent do capital markets in East Africa transactions to central bank money, the in- play a pivotal role in the continent’s growth? troduction of more stringent corporate gover- When you look at the wider continental story, nance and conduct of business standards for the majority of the countries are thriving, with market intermediaries, the implementation of financial entities that started 20 years ago, risk-based supervision, the introduction of in- with as little as several thousand US dollars- ternational certification standards for market worth of loans that are now worth over several players in conjunction with the CISI out of the hundred million dollars. This transformation City of London, and the demutualization and has been led by growth in the manufactur- self-listing of the Nairobi Securities Exchange. ing of consumer goods, a burgeoning middle class, and sprouting infrastructure. The rate How is the CMA set to compete with more of growth and demand is significantly out- sophisticated markets in the region such stripping the ability of the traditional bank as South Africa? structures to finance further expansion; that’s South Africa (SA) is quite a significant mar- where ultimately, we see the capital markets ket, but when you look at its impact beyond playing such a critical role in the transforma- its borders, other than the jurisdictions that Paul Muthaura, CEO of Kenya’s Capital Markets Authority tion of the continent as a whole. directly have borders with it, it has not been The Companies Act is complimented able to play an effective role as a funding cen- How is the Capital Markets Authority (CMA) in by the new Corporate Governance Code for tre into the rest of the continent. SA is a great Kenya creating a friendly and convenient trad- Public Listed Companies, which was devel- destination for capital, however it is not as ing environment while increasing the nation’s oped by the Authority in collaboration with effective a conduit for capital. That’s where competitiveness in the region? industry stakeholders and is currently await- Kenya really has a very strong competitive In the East African story, the number of IPOs ing publication into law by Kenya’s National advantage. When you look at the scope of during the last few years has not been as high Treasury. It was benchmarked against South countries we’re looking to target, we’re con- as expected, which has led us to establish sev- Africa’s King III, the new code in the UK, scious that the continent is ultimately going to eral critical initiatives in order to accelerate the Malaysian and Indian codes, as well as be divided into four. You have Nairobi, Lagos, the number of companies that are going to a number of others. We are very confident Johannesburg, and Egypt/Morocco. come forward. First and foremost, we have that the framework will put us at par with any introduced a new Companies Act in Kenya other financial centres, whether regionally or How is the CMA strategizing to become the that revolutionises and modernises the frame- internationally, when it comes to transpar- conduit for the rest of Africa’s financial sector? work for companies’ operations, public listing ency, accountability, and clear allocation of Kenya already stands out as financial centre procedures, directors’ responsibilities, and es- responsibility at board level. for the East African Community, but it is true tablishing much more explicit liability and In Kenya, we have taken much further that we are more ambitious and are aiming to responsibility for corporate governance and strides that will complement the new Cor- become a competitive financial centre able to risk management for the board of directors. porate Governance Code with a new Stew- cater to the whole of Africa, and in particular ardship Code for institutional investors. The Middle Africa is our current target. Looking at primary intent of the code is to encourage the continent, the Master Plan has identified “If you look at comparative responsible management and oversight of approximately 18 countries in sub-Saharan assets by institutional investors through en- Africa that are ultimately not being adequately markets that have stewardship gagement with listed companies in order to catered for in terms of market-based financ- codes, closest to us is South ensure a more sustainable growth. If you look ing. There is a significant growth occurring; Africa, which is significantly at comparative markets that have stewardship corporate growth, infrastructure develop- larger and more mature. This codes, closest to us is South Africa, which is ment, but no jurisdiction has emerged that is the progressive direction we significantly larger and more mature. This is can channel funds into all these countries in are committed towards. We the progressive direction we are committed an effective and scalable manner. towards. We believe very strongly the new The CMA and the wider Kenyan industry believe very strongly the new regulatory changes are going to create the is conscious as these markets in the continent regulatory changes are going necessary space for confidence in issuance grow and with less traditional financing from to create the necessary space and in the growth opportunity. banks in the context of Basel III convergence, for confidence in issuance and We also note that there have been signifi- Kenya’s Capital Markets through its 10-year in the growth opportunity” cant developments in strengthening market Capital Market Master Plan will become the infrastructure and operations with the move market of choice for many of these jurisdic- to settlement of equity and corporate debt tions to raise large amounts of capital. The Worldfolio - Kenya 24

We are looking at the bigger picture, and ted blueprint for growth and development. We “A 10-year master plan was this is where our 10-year master plan comes have already exceeded the targets for year one. launched in November 2014. in to inform the innovation and reform of We expect at some stage to be reclassified Within such a short time, the Kenya’s capital markets. Through the imple- into an MSCI emerging market, as opposed to mentation of this blueprint we will not only be a frontier market. Which means underlying CMA was recognized as the developing Kenya, but creating mechanisms work around growing market capitalization, most innovative regulator. for funding mining in Congo, funding dams and creating greater flexibility for foreign in- We have a global benchmark in Ethiopia and funding new railways across vestors. To this end, in July 2015 we amended corporate governance Tanzania all through this single market. the law to remove the 75 percent cap for foreign framework in place, a new investors to come into our listed companies. Companies Act, and new Bearing in mind you were recently voted the All of these are very conscious and se- most innovative capital markets regulator quential actions to make sure that we’re going products coming in such as in Africa, how close is the CMA to achiev- to achieve our goal of becoming an interna- Real Estate Investment Trusts, ing your vision of becoming “The Heart of tional financial centre and the heart of African Exchange Traded Funds and African Capital Markets”? capital markets. Derivatives” A 10-year master plan was launched in No- We further note that implementation vember 2014. Within such a short time, the of the Master Plan has been embraced at CMA was recognized as the most innova- the highest levels of Government with the of our local capital markets is not going to tive regulator. We have a global benchmark Steering Committee including four Cabinet be adequate to raise the kind of capital they corporate governance framework in place, a level representatives including the Chairman need. They have an opportunity to dual- new Companies Act, and new products com- who is the Cabinet Secretary to the National list so capital can be raised both in Nairobi ing in such as Real Estate Investment Trusts, Treasury. and in London. By the same token, we see Exchange Traded Funds and Derivatives. Our dual-listing as an opportunity for companies ambition is targeted to be achieved over the 10 How would Nairobi-London dual listing play looking to enter into Kenya. As with many years; we have no delusions. You don’t wake an increasing role for foreign investment, and countries, there is a local content expecta- up today and become the best. It is a very clear also domestic reinvestment into the Kenyan tion for companies coming into Kenya, be and sequential growth pattern, but when you capital markets? it a 30 percent or a 20 percent local owner- look at the plan, what was critical to us was When we look at dual-listing, we see it ship, and we want to make it very clear that that we identified absolute clear milestones, from two different perspectives. At one if they use dual-listing, they can effectively so that even from an external perspective, you level where you have domestic Kenyan raise their local participation through the can assess whether the master plan was just companies that realize with some of their markets as opposed to identifying and ne- a piece of paper, or if it’s actually a commit- growth parameters and aspirations, the size gotiating with a particular investor.

“Kenya already stands out as financial centre for the East African Community, but it is true that we are more ambitious and are aiming to become a competitive financial centre able to cater to the whole of Africa, and in particular Middle Africa is our current target” 25 The Worldfolio - Sierra Leone

Sierra Leone A resilient nation

This year Sierra Leone celebrates the 15th anniversary of the end of the civil war as a unified nation and beacon of democracy and social progress in Africa. After a major setback with the Ebola crisis in 2014 and 2015, which led to economic contraction of over 20 percent, the nation was officially declared Ebola-free in March 2016, and has resumed on a path to building sustainable and inclusive economic growth

If the essence of this West African nation were to be distilled into a single word, that word would be resilience. After the devastating civil war, which tore through the country between 1991 and 2002, Sierra Leoneans quickly set about rebuilding their communities, repairing infrastructure, constructing new schools and clinics, and even restarting mining operations. These efforts, coupled with nationwide reconciliation ceremonies and the successful restoration of multiparty democracy at both the local and national level, set the country firmly back on its feet. Economic output doubled in the decade following the war, driven by commodity exports and agricultural production. GDP growth took off in 2012 with the commencement of large-scale iron ore mining, reaching over 20 percent in 2013, with a further 11 percent forecasted in 2014. However, in 2014 came the West Af- “We must once again demonstrate our resilience rican Ebola virus epidemic, which killed more than 3,580 of the country’s people and ability to adapt and work as one; to overcome in 18 months, wiping out the farming the challenges thrust upon us by Ebola and to sector as quarantine restrictions meant create the nation we know our children deserve” that produce could not be taken around the country for sale. As if that weren’t Ernest Bai Koroma, enough, on its heels came a slump in the President of the Republic of Sierra Leone global price of iron ore, which crippled the mining sector.

27 The Worldfolio - Sierra Leone

As a result, growth for the year came revenue and streamline agencies such for an entire academic year during the in at just 4 per cent, followed by a con- as the National Revenue Authority, while Ebola outbreak, the country’s education traction of over 20 per cent in 2015. For a major industries such as mining have ministry has implemented two shortened time, it looked as though all of Sierra Le- been injected with a modern outlook to academic years with an accelerated syl- one’s post-war progress would be undone. bring them in line with international best labus focused on core subjects, boosting But today, since being declared officially practices based on the principles of sus- school enrolment rates and thus ensur- free of Ebola in March 2016, the country tainable development. ing the younger generation are equipped is demonstrating once again its drive for These reforms were applauded by with the necessary knowledge to con- development. In its latest forecast, the the International Monetary Fund (IMF), tinue the country’s development in the IMF projected medium-term growth to representatives of which carried out a future. gradually pick up to around 6.5 percent review mission to the country in Septem- And it is not only in welfare where by 2020; while the government expects ber 2016 under its Extended Credit Fa- the government is placing its efforts. In expansion of around 5.4 percent in 2017. cility. The IMF found that “since the last the past decade, the country has made Through the National Ebola Recov- quarter of 2015, economic growth has the third-largest improvement in gover- ery Strategy, Sierra Leone is picking up resumed, and it remains on an upward nance of any country in Africa, accord- its Agenda for Prosperity – a document trend, supported by new investments in ing to the Mo Ibrahim Index of African put together by President Ernest Bai Ko- mining, agriculture and fisheries. The Governance. roma at the start of his second term in recovery underway is projected to re- “My government remains committed 2013 – where it left off, and the aim is main sustainable over the medium term.” to good governance, and will continue for the economy to be ranked as middle- Few countries have escaped the im- to build upon our post conflict peace- income by 2035. plementation of austerity measures in rebuilding and democratic gains by further “We must once again demonstrate cent years, as governments grapple with strengthening our democratic institu- our resilience and ability to adapt and outsized expenditure and tougher regu- tions and access to justice,” says Presi- work as one; to overcome the challenges lation, but President Koroma is keen to dent Koroma. thrust upon us by Ebola and to create the show that Sierra Leone’s belt-tightening Over a million Sierra Leoneans live nation we know our children deserve,” programme, in place until the first half of outside the country after fleeing during says President Koroma. 2017, covers the whole country, includ- the country’s long civil war, and their Now, as they look back on 15 years ing the governing elite. Not only did he recent history is one of close involve- of peacetime accomplishments, includ- implement the suspension of all foreign ment in relief efforts. The diaspora was ing free democratic elections endorsed travel for public officials, except essen- key in mobilising support for peace and by the international community, and the tial and statutory trips; he also slashed justice post-conflict, and organisations peaceful transfer of power from one po- overtime payments and fuel allowances such as the UK Sierra Leone Diaspora litical party to another, Sierra Leoneans for civil servants. Ebola Task Force played a vital role in are rightly proud of their country’s The Sierra Leone of today is building tackling the spread of Ebola. But it is also achievements. on strong foundations in the relentless this diaspora who has been among the The 2015 United Nations Develop- pursuit of economic development in or- first movers in helping their home coun- ment Programme (UNDP) Global Human der to reduce its reliance on foreign aid. try on the road to economic recovery. Development Report, published in March However, the president’s vision for the “Harnessing the African Diaspora in 2016, demonstrates that Sierra Leone is country puts the welfare of its people building capacity in Africa is the only way making significant progress in its Human firmly at the forefront, as it is only by we can give practical relevance to the Development Index (HDI) value, having creating inclusive growth that Sierra Le- narrative of our common ancestry, our risen from 0.268 in 1980 to 0.413 in 2014, one can dismantle the cycle of poverty historic resilience, and our aspirations a growth of 50 percent, putting its 0.625 once and for all. for a better world through a better Afri- HDI target by 2035 within reach. “We are introducing nationwide ca,” said President Koroma at an address “We are now better prepared to face school feeding, providing additional to the World Bank in Washington, D.C. new challenges. We are pursuing a stron- subsidised public transportation, cash A World Bank survey of 600 foreign ger and more sustainable and inclusive transfers to the vulnerable and continued resident Sierra Leoneans found that growth for Sierra Leone, with different support to the free health care initiatives almost half had already invested back development activities across the coun- as well as free primary schooling and home, with areas of interest ranging try,” says Dr Samura M.W. Kamara, Min- the payment of fees for public examina- from real estate to education. Today, as ister of Foreign Affairs and International tions,” says Momodu L. Kargbo, Minister Sierra Leone consolidates its spectacular Co-operation. of Finance and Economic Development. progress in nation-building and sustain- These development activities in- One key focus is on making up for able development, they are fast being clude the president’s far-reaching eco- lost time in the classroom for Sierra Le- joined by businesspeople from all over nomic reforms to increase government one’s children. Since schools were closed the world. The Worldfolio - Sierra Leone 28

Creating an enabling environment for the private sector

With a need to diversify the economy and create jobs to reduce poverty, the government is committed to revamping the private sector and attracting foreign direct investment

Despite the fact that the Ebola crisis has cre- formers, moving from 176th to 140th within to draw investors to other areas of the econo- ated a significant set of new challenges for Si- a five-year period. my, for instance, to encourage investment in erra Leone, the basics for the country remain In face of the country’s most serious obsta- rice and timber, a 10-year corporate tax holi- the same – the country’s rich natural resources cles to investment, like the shortage of skilled day is granted. and its deep natural port mean there is large labor, the lack of infrastructure and the slow “Beyond mining, the main sectors that scope for development, but there is ultimately legal system, the government is committed to have the biggest potential for foreign investors a need to diversify the economy and create jobs revamping the private sector in a very targeted are agriculture, fisheries, tourism and hous- to reduce poverty. and strategic approach. Assisted by the African ing,” says finance minister Momodu L. Kargbo. President Ernest Bai Koroma has ac- Governance Initiative, the government has de- “Sierra Leone could also undeniably aim knowledged these challenges, firstly in his veloped a plan that will create a unified vision to capture the top of the tourism market and Agenda for Change (2007-12) and more re- for the country. eco-tourism. To do so, we need to further de- cently the Agenda for Prosperity (2013-17), Sierra Leone’s plan aims to ensure that velop different infrastructures including hotels which aim primarily to create a positive en- the government’s ministries along with coun- and eco-tourism facilities. Finally, there is a abling environment for the private sector. try’s central bank work to push private sector large unmet demand for housing for all in- Indeed, the government of Sierra Leone development and have a coherent vision to come levels, and so there is a need for more is convinced that the future of the country is align their various initiatives. real estate developers to enter the market. based on a vibrant private economy. One of the “A strong private sector is the best a “Sierra Leone is open to investments from main objectives of the Agenda for Prosperity country can have,” states Dr. Kaifala Marah, all parts of the world – Asia, Europe, America is to attract and diversify foreign direct invest- Governor of the Bank of Sierra Leone, whose and Africa. We have a generous package of in- ment, now estimated at only 10 per cent of GDP own projects geared towards improving the vestment incentives for all sectors.” and mainly concentrated on just a few sectors, business climate include the introduction of namely mining. the National Switch and the Single Window The foremost way in which the govern- Initiatives. “In our role as central bank, we ment is doing this is through its National Com- are working in collaboration with the Ministry mission for Privatization (NCP). In addition to of Finance to ensure that we create a business legal reforms targeted to boost private sector environment that attracts as many FDIs as pos- dynamism and cut red tape, the NCP is com- sible,” he adds. mitted to the implementation of procedures “Even if our first step is to attract as many and policies that address corporate account- companies and individuals as possible to have ability, integrity, and transparency to improve investments in our country, the second step investor confidence. will be to entice these investors that are al- Apart from building government capac- ready in Sierra Leone to construct, for exam- ity to enter into sustainable and beneficial ple, processing plants, that add value to their public-private partnerships, such as putting primary crops and boost our exports. This has into process the disinvestment of state-owned multiplying effects as it will generate new jobs commercial assets, a big part of this effort has and allow the creation of new small businesses “In our role as central been focused on boosting Sierra Leone’s Doing around the factories.” bank, we are working Business ranking in order to attract greater in- Some of the major incentives that Sierra in collaboration with vestment. Leone offers foreign investors include acceler- For instance, through measures such ated depreciation of 40 percent for plants and the Ministry of Finance as improving access to credit information equipment in a business’s first year and 10 to to ensure that we create by establishing a public credit registry and 15 percent for most other items. It also offers a a business environment making it easier to register property by in- loss carry-forward of 50 percent of the previous troducing a fast-track procedure, Sierra Le- tax year’s taxable income. that attracts as many one’s ranking in the Doing Business Index While the government still heavily incen- FDIs as possible” has improved by 36 places in recent times. tivizes development of the mining sector (100 While Sierra Leone’s formal business sector percent deduction for prospecting and explo- Dr. Kaifala Marah, remains relatively small, the country is now ration and a 40 percent deduction for the first Governor of the Central rated one of the world’s top ten business re- year of production costs), there is a huge push Bank of Sierra Leone 29 The Worldfolio - Sierra Leone The Worldfolio - Sierra Leone 30

Transport and energy projects unveiled

The construction of new infrastructure is one of the pillars of the Agenda for Prosperity

Last October, Bolloré started the $120 million expansion works at the Port of Freetown, one of the biggest investments in Sierra Leone’s history

Sierra Leone is pushing ahead with a se- 2014-15,” the IMF said in a September a lack of reliable power was a major ob- ries of big transport and energy projects 2016 report, when it released another stacle to its ability to cope with the crisis. to improve the African country’s infra- $33 million in financing. The government’s long-term plans structure, and provide firm foundations The IMF also called for faster prog- include a huge increase in Sierra Le- for economic growth and development. ress on structural reforms and said that one’s installed generating capacity to Key objectives are boosting power “diversifying growth, making it more 1,000 megawatts (MW), energy minister generation and transmission networks, inclusive and distributing its benefits Henry O. Macauley said, partly through expanding the mining sector, improving more widely should be the overriding a ramping up of hydro and renewable port facilities and extending trunk roads. focus of economic policy.” energy and by encouraging private in- The government’s market-open- A significant proportion of Sierra vestment, with the objective of stable ing policies have won IMF backing, Leone households don’t have electric- power links for all by 2025. although some worry about China’s ity and it is worse in rural areas where Sierra Leone has as much as 12 bil- growing dominance, questioning proj- most public buildings, like health clin- lion tons of iron-ore reserves, but the ect priorities and argue more should ics and schools, lack connectivity, so “cost of extraction is higher than the be allocated to health and education there is a lack of lighting for medical average precisely because of the lack of in a country where life expectancy is care and problems maintaining cold a reliable and affordable source of en- just 51 years. storage for essential medicines. ergy…once we fix that, we will be able The reform programme “has Unreliable generator-based sup- to attract new foreign investors and, achieved its key objectives despite the plies used in many rural areas cost far maybe, they would also install smelt- exogenous shocks of the Ebola epidem- more than power in urban areas, which ing plants locally that will improve the ic and the collapse of iron-ore prices benefit from grid connection and subsi- quality of the product before shipment,” and associated loss of production in dised tariffs. During the Ebola outbreak, Minister Macauley adds. 31 The Worldfolio - Sierra Leone

Its main power source, the 50 MW crease handling capacity from 90,000 steel demand is expected to hit 300 mil- Bumbuna hydro-electric plant, has been twenty-foot-equivalent containers now lion tonnes per year by 2050, according running at some two-thirds of capacity due to 750,000 at its completion, expected to Mysteel.net, a Shanghai-based trade to technical problems, although, private in September 2018. publication,” The Economist magazine power company Joule Africa is hoping to “The Port of Freetown is one of the commented. complete a 202 MW expansion of capacity gateways of international trade for West President Ernest Bai Koroma was in by end 2017, with its Bumbuna II project. Africa and the countries of the hinter- China in December to discuss this and Other work underway involves land,” says Capt Fabjanko Kokan, Coun- other Chinese financing and investment, Finnish company Wärtsilä building a 57 try Manager in Sierra Leone for Bolloré. including a China Exim Bank-financed MW heavy fuel oil generation plant and In the past five years, the company has international airport to be sited at Ma- the construction of transmissions lines invested heavily to rehabilitate existing mamah, about 100 kilometres’ northeast funded by an India Exim Bank $78 mil- yards and buy modern equipment, allow- of Freetown. lion loan. ing port traffic to rise by over 30 percent. The President has long been a sup- A May 2016 UK aid deal will install Sierra Leona sits on some of Af- porter of the planned airport, for which 250,000 solar-power units in households rica’s largest iron-ore deposits, whose China earmarked around $315 million in by end-2017. Over the next four years, exploitation is a major component of 2011 only to be put off by the worldwide half a million people are due to benefit the country’s GDP, along with exports slump in commodity prices and Ebola. from at least 90 mini-grids powered with of diamonds, bauxite and rutile, a tita- The only international airport now is a renewable and hydro energy and oper- nium oxide ore. former British air force base sited a haz- ated by local entrepreneurs. The slump in iron-ore prices and ardous one hour-estuary crossing away The first of three 2.2 MW mini hydro- the 2014-15 Ebola outbreak prompted from the capital, or three hours by road. electric dams, each able to supply 10,000 the shutting of the massive Tonkolili “Sierra Leone needs this airport for households with power, was signed over mine, but owner Shandong Iron and Steel economic growth, job creation and easier to the energy ministry in December 2016 Group restarted production in February access,” China’s ambassador was quoted by the constructor, China’s Hunan Group. 2016. It recently said it would spend $700 by Sierra Leone media as saying, adding One of the biggest infrastructure million to expand output and build a that a start to work is imminent and will projects underway now is for more port plant to process ore which up to now it take around three years to complete. facilities at the Freetown Queen Eliza- had been exporting to Qingdao in China The road network is being expanded beth II Quay by French operator Bolloré in an unprocessed state. and upgraded with government money, Ports, which has run its container facility “To some, it looks as if China simply foreign aid and loans, including a 103-ki- since 2011. It is funding the $120 mil- wants to export its domestic pollution lometre road financed by the European lion project to build a 270-metre quay abroad. Officials are desperately trying Union. Other road financing is coming, extension and a power plant dedicated to close dirty domestic steel plants. There among others, from The Kuwait Fund for to the facility. is a more favourable interpretation, how- Development, the Islamic Development This will allow vessels carrying ever: that Chinese firms are taking a Bank and the Arab Bank for Economic up to 6,000 containers to berth and in- longer view of Africa’s potential. African Development in Africa.

“The cost of extraction is higher than the average precisely because of the lack of a reliable and affordable source of energy… once we fix that, we will be able to attract new foreign investors”

Henry O. Macauley, Minister of Energy

Bumbuma II is the expansion of the 50 MW Bumbuna plant, on the Seli River The Worldfolio - Sierra Leone 32

Where’s best to invest in Sierra Leone?

Eager to attract foreign investors and ensure their projects are a success, Sierra Leone has been strengthening the macroeconomic situation, investment environment and foreign relations, particularly with China and the UK, to open up the wide scope of opportunities it holds beyond its mining sector to partners overseas. Minister of Finance and Economic Development Momodu L. Kargbo takes a look at the best areas for investment, the 2017 Budget’s target areas for accelerated growth, and the country’s ability to honor its credit obligations

The head of the IMF Mission to Sierra Leone, Wakeman-Linn, highlighted last September how successful your government reforms have been in increasing Sierra Leone’s economic resilience in the face of two major exogenous shocks. What are the next reforms that you are planning to apply to boost Sierra Leone economic growth? Since the moment that Ebola was waning, our government started to plan the recovery and developed the National Ebola Recovery Strategy. The first phase focused on the immediate recovery priorities in agriculture, health, education, private sector recovery and water and sanitation. To allow farmers to return to their farms, this administration, supported by our development partners, provided them with agricultural inputs such as seeds, fer- tilizers and tools. We re-opened schools Momodu L. Kargbo, Minister of Finance and Economic Development and restored general health services. This government also expanded its social safety Beyond mining, the main sectors that Together with President Koroma, you made net programs, including cash transfers to have the biggest potential for foreign in- an important visit to China, where you signed the hardest hit to avoid longer-term eco- vestors are agriculture, fisheries, tourism different agreements. One of them was a debt nomic hardship. We encouraged the swift and housing. relief of 20 million RMB (of previous interest- resumption of infrastructure projects that In agriculture, there is potential in free loans), signed by you. What were the were halted due to Ebola, providing jobs and increasing production crops such as rice main successes of this trip? How would you income together with investment activities as well poultry and livestock together evaluate the current economic relationship that resulted in the resumption of export of with cash-crops production such as co- between the two countries? iron ore from the largest mine. coa, coffee, cashew and oil palm and Our relationship with China is based in The second set of efforts focused on value-added products in agro-processing strong roots. Sierra Leone was one of energy and water supply. Our government such as fruits, cassava or sugarcane. In the countries that decided to be bold and provided fiscal support to the energy sector fisheries, there are opportunities in the nominate the Popular Republic of China to complement the Bumbuna hydro dam, construction of the fish harbor, in fish to the United Nations Security Council which increased the available energy and processing for export as well as in the against Taiwan in 1971. We have always facilitated the growth of manufacturing and development of aquaculture. had a special relationship with the Chi- commerce. We also continued the imple- Sierra Leone could undeniably aim to nese. Here in Sierra Leone, we enjoy mentation of sound economic policies and capture the top of the tourism market and the presence of Chinese companies at public financial management reforms un- eco-tourism. To do it, we need to further different levels, some as contractors and der the Extended Credit Facility supported develop different infrastructures including some as investors. by the IMF. hotels and eco-tourism facilities. Finally, One of the main objectives of this there is a large unmet demand for hous- trip was to accelerate the plans to con- One of the main objectives of the Agenda For ing for all income levels, and so there is struct our new international airport in Prosperity (A4P) is to attract and diversify a need for more real estate developers to Mamamah. We want to finish with the FDI in the country and boost private sector enter the market. uncomfortable experience of landing in investment, now estimated at only 10 percent Sierra Leone is open to investments Lungi and having to take a boat to reach of GDP and mainly concentrated on a few sec- from all parts of the world – Asia, Europe, your final destination in Freetown. What tors, such as mining. Beyond mining, what America and Africa. We have a generous we would like is to have our new inter- sectors do you consider that have the biggest package of investment incentives for all national airport easily reachable from potential for foreign investors? sectors. our capital by road. 33 The Worldfolio - Sierra Leone

We are going to construct this airport with off-budget arrange- The 2017 budget was presented at the beginning of December on the ments. In fact, one of the key discussions during our visit to China theme: “Recovery through Economic Diversification and Fostering was to explore these different financial arrangements. We have been Entrepreneurship”, dedicated to accelerating economic recovery discussing his project for several years and during this visit we made and strengthening the resilience of the economy to withstand future substantial advances. In fact, the Chinese government has already global shocks. The discontinuation of the subsidization of petroleum put aside the required budget to make this new airport a reality. products remains as one of the major concerns for Sierra Leonean From our side, the government of Sierra Leone has secured public opinion. What are the main budgetary decisions that will ac- the fulfillment of our debt obligations, ensuring that we can sustain celerate your economic recovery? How is your government planning our macroeconomic stability before moving forward and start the to limit the impact on the masses of the increase in the fuel price? construction of this infrastructure. We expect to start the works of The main measures approved in the 2017 budget to accelerate it at the end of this January. the economic recovery of Sierra Leone are the following: 1. We are allocating more resources to the growth sectors From the point of view of Sierra Leone, what are the opportunities including agriculture, fisheries and tourism in order to and challenges that will appear in the post-Brexit scenario? How is diversify the economy and reduce our reliance on mining. Sierra Leone positioning itself to remain as one of the UK key partners? 2. We are going to continue to scale up our spending on infra- First of all, it is important to remember our existing special rela- structure: roads, energy, water supply or ICT among others. tionship, rooted in our colonial history. The British are behind the 3. We are supporting domestic industries to produce goods origins of our country and of our population. Most of Sierra Leoneans where we have a competitive advantage to reduce imports. still consider the UK as our second home. They remain as one of 4. We are supporting our SMEs through capacity building and our largest ODA (official development assistance) donors, deeply improving their access to finance. involved in our reforms, development and investment programs. All of this will be done through budget discipline and a pru- Brexit opens a new opportunity for Sierra Leone to negotiate dent expenditure management with enhanced efforts to increase a new trade deal with the UK beyond the EU. I am convinced that domestic revenue collection. With stronger public finances, we we can enhance our relationship. There is eagerness to do it by will stabilize the economy and encourage foreign direct invest- the UK too. The British are looking forward to reviving the Com- ment. monwealth in order to increase their access to commodities, raw Regarding the fuel price increase, I must say it was a neces- materials and new markets. All this factors will contribute to make sary measure, as the budget could no longer afford to subsidize us closer partners. consumers, especially the richest. To cushion the impact on the Finally, I would like to highlight that the UK is our one-stop population with lower levels of income, we are introducing na- shop for a majority of Sierra Leone international efforts: all our tionwide school feeding, providing additional subsidized public commercial meetings and economic and investment forums have transportation, cash transfers to the vulnerable and continued been held in large part in the UK. support to the free health care initiatives, as well as free primary schooling and the payment of fees for public examinations. Beyond ODA, your government is exploring to access funds from international capital markets, working with partners to conduct credit You are part of an administration that is driving a rapid transforma- sovereign ratings providing relevant assessment of Sierra Leone’s tion of the country. Taking into account your previous experience ability to honor its external obligations as and when they fall due. serving as Minister of State, Deputy Minister of Finance, Governor What are the main partners you are working with on this regard? of the Sierra Leone Central Bank and now, in your current capacity We are closely working with Standard Chartered, a bank that is as Minister of Finance and Economic Development, where would assessing our ability to honor our external obligations in terms of you like to see your country in 10 years? modalities and procedures. We still have to conduct a last arrange- Foremost, I would like to see a country that is food self-sufficient ment meeting together for a final discussion before they release and food secure, a country with high-quality infrastructure, espe- the indicators. The outcome of this last meeting will determine cially with a good road network and increased access to reliable the publication of the results. All these efforts have been very im- electricity and water supply. I would like to see Sierra Leone with portant for our government to assess our situation and identify the improved education and health systems delivering outcomes aspects where we should improve to have the best possible credit such as higher literacy rates, longer life expectancy and lower sovereign rating. infant and maternal mortality rates. Finally, I would like to see Once Sierra Leone has its first credit sovereign rating, whatever a strong and stable private sector-led economy with reduced its results, we will be in a position to define our goals to improve it reliance on ODA that has successfully increased its domestic and understand the required tasks to move forward and improve revenue collection to 20-25 percent of the GDP. our ratings. We have already been improving our macroeconomic situation thanks to our enhanced partnership with the IMF: they What is the final message you would like to address to our audience? have evaluated us, given us some specific advice, and finally backed Sierra Leone is more than ready to welcome investors. We will our government macroeconomic policies. Currently we are tak- protect them and we will make sure their investments are a suc- ing new decisions to go beyond IMF recommendations in order to cess in order to attract additional investors once they experience boost our growth. the positive results of the previous ones. The Worldfolio - Sierra Leone 34 35 The Worldfolio - Sierra Leone

Sierra Leone and China continue strengthening their partnership, while Brexit opens new opportunities for historical ties with the UK

“The relationship between the two countries has always been based on mutual trust, respect and win-win,” said Mr Xi.

A Brexit opportunity Meanwhile, as the Brexit vote causes uncertainty among Britain’s global trading partners, Sierra Leone is taking a pragmatic approach to its relationship with the former colonial power. The UK is currently the biggest bilateral donor in Sierra Leone, with a projected £428 million in overseas development aid destined for the country for the period between 2014 and 2019. Projects include the £4 million construction of 225 new clas- srooms across the country, improving school conditions for a targeted 63,000 children by June 2017. Sierra Leone will also be the first country participating in the UK’s Energy Africa campaign, which will launch a President Koroma with China’s president Xi Jinping. China is Sierra Leone’s leading trading partner series of renewable energy initiatives to eradicate energy poverty in the country via solar solutions and off-grid technologies. But the African na- In a fast-changing global political environment, Sierra Leone’s strong tion now seeks more of a relationship of equals. relationships with both East and West set it in good stead for the future. “We are pursuing a stronger and more sustainable and green With membership of the Commonwealth and friendly ties with China growth for Sierra Leone and different developments are ongoing across both to its advantage, the country’s government now seeks to open new the country. In all these efforts, the UK must remain our strategic interna- avenues of collaboration and investment. tional partner, not only regarding official development aid, but beyond,” As China seeks to widen its sphere of influence within Africa, its says Dr Samura M.W. Kamara, Minister of Foreign Affairs and Interna- relationship with Sierra Leone, which counts the Asian powerhouse as its tional Cooperation. “Sierra Leone is ready for business and we still rely largest trading partner, has been elevated to a Comprehensive Strategic on our British friends to come, invest and trade with us. We are looking Partnership of Co-operation. forward to strengthening our partnership with the UK in this post-Brexit “Our relationship with China is based on strong roots,” says Momo- era,” he adds. du L. Kargbo, Minister of Finance and Economic Development. “Sierra Some UK companies, such as Standard Chartered Bank, are already Leone was one of the countries that decided to be bold and nominate the there, while British law firm Herbert Smith Freehills has provided over People’s Republic of China to the United Nations Security Council against £1.5 million worth of free legal advice to the country’s government in Taiwan in 1971. We have always had a special relationship with the Chi- support of its development goals. AMR Gold, another British-run firm, is nese. Here in Sierra Leone, we enjoy the presence of Chinese companies playing an active role in the post-Ebola rehabilitation of the Sierra Leo- at different levels, some as contractors and some as investors.” nean mining sector. Many more are exploring options in the West Afri- The upgrading of the relationship comes at an important time for can country, as demonstrated by the reception of its most significant post- the West African country as it shakes off past economic woes to work Ebola investment outreach, the UK-Sierra Leone Trade and Investment toward both the Global 2030 Agenda for Sustainable Development and Forum. Held at London’s Sheraton Park Lane Hotel in February 2016, the the national Agenda for Prosperity. In a December 2016 meeting in Bei- event welcomed over 200 delegates interested in investing in areas such jing, Chinese President Xi Jinping and Sierra Leonean President Ernest as extractives, agriculture and infrastructure. Bai Koroma witnessed the signing of co-operation documents after talks Speaking at the event, British Minister for Africa James Duddridge which covered areas including diplomacy, economy, infrastructure de- highlighted Sierra Leone’s rich mineral deposits, huge potential in re- velopment and health, while the Chinese president urged domestic en- newable energy, strategic shipping location and millions of hectares of terprises and financial institutions to “actively engage” in infrastructure fertile agricultural land and abundant fish stocks as plus points for Bri- building and mining in Sierra Leone for mutually beneficial co-operation. tish investors. “This country’s strong historic ties with Sierra Leone, our Thus far, China has invested about $1 billion in Sierra Leone’s mi- long-term friendship, together with the familiarity with English, present ning and timber industries, but the relationship between the two coun- UK companies with a unique advantage. I urge you to seize it with both tries goes beyond purely economic interests. Indeed, Sierra Leonean hands,” he said. And hopes are also high for the possibility of increased officials are keen to point out that when Ebola struck their people, the trade flows between the two countries as the UK leaves the European Chinese government wasted no time in putting together a chartered Union (EU). flight full of medical supplies that was the first to arrive in the country. “Brexit opens a new opportunity for Sierra Leone to negotiate a new Furthermore, the Confucius Institute, set up at Fourah Bay College, trade deal with the UK beyond the EU,” says Minister Kargbo, who adds Sierra Leone in 2012, teaches Mandarin to around 1,000 Sierra Leonean that he is convinced that the two nations can enhance their commercial students each year, and the success of the cross-cultural exchanges led relationship, particularly as the UK looks to the Commonwealth in order by the institute saw Sierra Leone become the home country of the West to increase its access to commodities, raw materials and new markets as Africa Regional Office of Confucius Institutes in 2014. it moves forward with its post-Brexit strategy. The Worldfolio - Sierra Leone 36

Ready for business & new challenges

Sierra Leone has drawn on the strength and resolve of its people to overcome major setbacks to its social and economic development, and now it is better prepared to face new challenges and is pursuing a stronger, more sustainable and greener path for growth. Minister of Foreign Affairs and International Co-operation Dr Samura M.W. Kamara discusses some of the lessons learned over the years, the proposed reform of the UN Security Council, and the efforts pushing ahead the country’s ongoing transformation

After the IMF mission, last September, the in- General Assembly. Even if there are so many stitution backed Sierra Leone’s last three years groups, the P-5 remains as the most important of economic reforms, stating that its economy one. This is the group of the five original Secu- proved resilient in the face of the two major exog- rity Council members with veto. They are the enous shocks: the Ebola outbreak and the drop in ones that will take the final decision regard- iron ore prices. What have been the main reasons ing whether this reform goes through or not, behind this successful economic recovery? thanks to their veto power. First and foremost, I would like to mention One of the alternative reform propos- Sierra Leoneans’ resilience as the main rea- als that have been circulating is the one that son behind our recovery. The optimism and proposes enlarging the number of permanent strength of our people have been critical. We, members of the UN Security Council without as a country, have learnt very bitter lessons. giving these newcomers the veto right. From We suffered a terrible civil war for years and the common African position point of view, even now, 15 years after, we are still recovering this is creating a third category of members from that. From 2002 to 2013, we undertook a inside the Council, which is unacceptable. This successful process to rebuild our country and will ultimately break the idea that all countries reunite our society, achieving one of the largest Dr Samura M.W. Kamara , Minister of Foreign Affairs and are equal. GDP growths in the world in 2013. Then, in International Co-operation In any case, we understand that the UN March 2014, Ebola came, an unseen enemy we reform is neither a fast nor an easy process. could not stop. You cannot negotiate with an Beyond the fight against Ebola, President Ko- Reforming a multilateral organization still re- enemy you cannot see. Ebola took more than roma’s leadership has been also experienced mains as a great challenge. We have already 30,000 of our people that we lost. in Africa in his capacity as Coordinator of the been 10 years discussing it. After all, the UN Despite all these struggles and suffering, African Union (AU) Committee of Ten Heads of Security Council has only been reformed once, we did not have any other option than moving State and Government. This group is canvassing when it was enlarged and started to have 15 forward. In fighting the Ebola crisis, we learnt the African Common Position on the reform of the members instead of 10. two valuable lessons: the first one is that to UN Security Council that requests two permanent overcome a crisis a country needs strong lead- seats for African countries. In his speech last With the theme “Sierra Leone Foreign Service ership that guides the different communities. September to the UN General Assembly, President Renaissance in the 21st Century”, President Ko- The second lesson we learnt is how Koroma stated, on behalf of the AU 54-members, roma officially unveiled the 2014-2018 Foreign important strong and engaged communi- that Africa deserves such positions as a matter Service Transformation Strategy to profes- ties remain for Sierra Leone. Our different of justice and right to equal participation in sionalize your foreign service and increase the communities fought together against Ebola. decision-making on peace and security issues country’s voice and representation. How are you They took this fight as their own responsibil- worldwide. With which international partners, achieving this transformation strategy? ity. Even musicians put all their efforts those beyond your African Union fellows, is Sierra Le- It takes time to reform a ministry internally. I days to create hopeful music and encourage one working to achieve this desired reform? learnt that when I was the Minister of Finance, the brave volunteers in our national fight The African Committee of Ten, or the C-10, is where I had to undertake different reforms too. against Ebola. Even if wearing the anti-con- the group of African countries responsible for There, the biggest challenge was to change tagion uniform and becoming an Ebola burial advocating the request of the entire African the mindset of my team. Working in a foreign person was not a pleasant activity, we had community to reform the UN Security Coun- service is not just about going to receptions. hundreds of them. I was especially touched cil. The problem is that several countries are You must also be an economic agent of the to see how engaged was our youth. Of course, also requesting a permanent seat. The main country. We are also ensuring the coordination we remain extremely grateful to our interna- challenge for the Sierra Leone Foreign Service of the foreign actions of the other ministries. tional partners too, who helped Sierra Leone’s has been to bring and keep all of Africa together We want to remain the ankle of Sierra Leone’s efforts in fighting Ebola in very different but and to deliver unified declarations and maintain international relations. useful ways. a solid and common position. Our President’s We are focused on making ourselves Currently we are in the middle of the post- main priority is to keep this common African known in the world. The dimensions of in- Ebola country rebuilding. In 2015 our economy position strong and ensure that we all remain ternational relations change. We should be a contracted 20.5 percent. All we had gained on the same page, which is already a hard task. dynamic and adaptable organization ready to was wiped out. This is why our government The second priority is how to advocate tackle them together with the international launched the Ebola Recovery Program, whose this common African position towards the in- community. We are working to empower our goals are aligned to our previous Agenda for ternational community. For that, it is important Ministry of Foreign Affairs and making it a Prosperity and its eight pillars. to be part of one of the groups present in the UN central piece of the Sierra Leone government. 37 The Worldfolio - Sierra Leone The Worldfolio - Equatorial Guinea 38

CCEI BANK: Reinventing the financial system of Equatorial Guinea

CCEI Bank is a strong financial institution that keeps betting on Equatorial Guinea in order to facilitate bureaucracy for investors. The Worldfolio speaks with General Manager of CCEI Bank, Alberto Doria Lajay

There is no doubt that Africa is the continent tors, while at the same time it modifies some of the future for several reasons. What’s the instruments in order to be able to make it role of Equatorial Guinea in the region from easier to invest in these sectors, one of which your perspective? is the lowering of rates of interest. Also, we Equatorial Guinea has played and contin- are extending a bit more the amortization ues to play an important role in the region, period. given its ability to manage and solve difficult situations without causing further conflicts. CCEI Bank has been betting on Equatorial Guinea Proof of this is that in 2012 the African Na- since before the oil boom. How has CCEI Bank tions Cup was about to be cancelled. In the supported the industrialization of the country? record time of one month, with no hesita- CCEI Bank is keeping an eye out on the tion, this tournament was held in Equatorial projects that are being carried out in the Guinea, something that normally takes two country, financing them so this process can years to plan. be successful. On several occasions, the President has held the Presidency of the Central Af- What are the competitive advantages that have rican Economic and Monetary Community, Alberto Doria Lajay, General Manager of CCEI Bank contributed to the bank’s expansion during all CEMAC, which Equatorial Guinea is part these years and made it possible to collaborate of. And during his mandates he has solved ports, airports, among others. There is also with the country this way? many problems that had been going on for a high per-capita income and a considerable One of the most important advantages has years. An example is the reforms in the op- middle-class with great purchasing power. been always keeping an eye on the client’s eration of the Community and the rotation needs and adapting according to the evolu- of member countries in its management More than 1,500 representatives from private tion of the Equato-Guinean society. bodies. financial sectors, experts and political leaders Here in Equatorial Guinea, we’ve heard decided in 2015, in Egypt, to attract investment on several occasions from His Excellency What message would you send to investors in order to launch the largest trade exchange the President, the following sentence: “An that have intentions of establishing busi- bloc in Africa. 26 countries account for 620 mil- educated population is worth more than a nesses in Equatorial Guinea? lion consumers and a gross domestic product rich one.” There have been great invest- Equatorial Guinea is a country with all the of 1.2 trillion dollars. From your point of view, ments in education, and the training in hu- necessary conditions for investing. Among what would be the impact of this agreement man resources is one of the main goals of them there’s an investment law – which is for the continent and particularly for Equato- the second phase of the Horizon 2020 plan. one of the most attractive in the world – rial Guinea? and we can highlight the repatriation of We know that investment in the country is How does CCEI work, promote and contribute profits and invested capital with no issues, important because it creates jobs, which at to the training plan of human resources in the important basic infrastructures including the same time increases the material well- country? the road network throughout the country, being of society and reduces the number of In our annual budget, there is an expendi- people without a salary or a low salary. ture item dedicated to social works, and one part of that item is reserved for donations to “Equatorial Guinea is a Equatorial Guinea’s Horizon 2020 development some schools and we participate in that way country with all the necessary plan has begun its second phase, in which the by financing some of these schools’ needs. conditions for investing. private sector has an important role. How Among them there’s an does CCEI Bank fit into the national strategy In what way does the latest technology con- investment law – which is one and vision? tribute to this great challenge and how is CCEI CCEI Bank is looking at the implementation Bank making use of this technology? of the most attractive in the of the second stage of the Horizon 2020 Plan, It’s true that nowadays cutting-edge technol- world – and we can highlight so we can support – like we always have – ogy influences every sector of society. CCEI the repatriation of profits and the different economic actors in the country. Bank, like other banks, takes the necessary invested capital with no issues, measures every day to be up to date with important basic infrastructures What is the role of CCEI Bank in the develop- these technologies. including the road network ment of the country’s financial system and in the collaboration with the private and public Where would you like to see CCEI Bank in 2020? throughout the country, ports, sectors for their development? Continuing to be, like up until now, the main airports, among others” Our bank is creating different financial prod- bank in the country, always with the financial ucts to satisfy the needs of the economic ac- products that solve our clients’ needs. 39 The Worldfolio - Equatorial Guinea

‘GEpetrol's mandate is to be involved in the economic fabric of the country’

GEPetrol was established as the National Oil Company of the Republic of Equatorial Guinea by Presidential Decree in February 2001, and became operational in 2002. General Manager Antonio Oburu Ondo sits down with The Worldfolio to talk about GEPetrol’s contribution to the nation’s economic development, as well as how the company aims to diversify beyond the oil industry through the establishment of its business incubator

The re-election of President Teodoro Obiang of petroleum costs, but after the onset of the Nguema Mbasogo last year will allow the current crisis, it is becoming clear that Equa- continuation of the Horizon 2020 develop- torial Guinea is actually handling the man- ment plan with the same strength and course agement better. Of the petroleum-producing of action. What does the re-election of Presi- countries in Africa, Equatorial Guinea is best dent Obiang say to the world about the con- positioned because of how the petroleum fidence of the people, as well as about the funds have been invested. This has been very continuation of the government’s projects responsibly done; we have very little debt in and plans for the future of Equatorial Guinea? this regard when compared to other coun- Evidently, GEPetrol is included within that tries, which are really much larger producers continuity that our party, the Democratic than Equatorial Guinea. Party of Equatorial Guinea, preaches. This, for GEPetrol, means the possibility of con- Since its founding GEPetrol has been key in tinuing our diversification plans, most of all the articulation of resources for develop- to maintain those plans for the globalization ment, supporting the country during oil of GEPetrol, and for the participation of GE- booms, as well as in more complicated Petrol in the industrialization of the country. moments. What is your opinion as to GEPet- This might sound very easy, but GEPet- rol’s greatest contribution to the country, rol has not been involved before in these types and what role will the company play in the of projects outside the world of petroleum. overall future development of the country? So, we’re initiating a series of programs, and One of GEPetrol’s mandates is to be involved the re-election of the President of the Repub- in the economic fabric of the country, con- lic means, for GEPetrol, the continuation of trary to what a lot of people think, which is those programs and the integration of GE- that it must solely be relegated to the petro- Petrol into the international world. leum arena. We absolutely have to be involved in The President has been a long-standing pro- everything. In this sense GEPetrol has component of connecting Equatorial Guinea with mitted itself to being the leading company in the world. In the context of CEMAC (Economic the provision of oil services. And that is very Community of Central African States), what important because, right now, the economy is the regional and continental role that and money are in petroleum services. “GEPetrol’s biggest Equatorial Guinea plays in the emergence In fact, the entirety of the petroleum contribution to the country’s of the African continent? industry moves through petroleum services. economy, first of all, has I want to make it clear that this is the national And GEPetrol has committed to taking firm obviously been the creation of petroleum company of Equatorial Guinea. steps in that direction. We’re not just talking This is not the Democratic Party of Equatorial about future projects. In a very short time, GEPetrol and the training of Guinea. This is not a ministry. Therefore, I we have even been able to implement its Guineans. GEPetrol is the only prefer to leave the purely political issues to operation, a series of companies, with the institution in the country with the ministries. participation of businesses from the sector a scholarship programme; the But speaking as a citizen of Equatorial who have knowledge of the subject matter, largest group of scholarship Guinea, for us, the reputation that the Presi- such as, for example, GEprom, as well as a recipients in the country, who dent has in the CEMAC zone and in Africa is number of other companies on the list. clear. In fact, the image of Equatorial Guinea In that sense, GEPetrol has managed are studying both in Equatorial in CEMAC and in Africa for decades is abso- to avoid something that is a very important Guinea and abroad” lutely different from that of today. Such that issue, which is the flight of capital; and Equatorial Guinea is seen as a model in many we’re talking about serious capital that Antonio Oburu Ondo, regional forums. is fleeing the country. GEPetrol is also General Manager GEPetrol It is even the case that, in the recent promoting the transfer of technology. All moments of crisis, there were countries that those businesses mean employment for were put forth as models of the management Equatorial Guinea.

41 The Worldfolio - Equatorial Guinea

be the first time that a business incubator has activities, and what plans are there to con- “We absolutely have to be been discussed in our area, an incubator not tinue expanding that integration in the future? just of petroleum companies that will involve You’ve already talked about the incubator, but involved in everything. In this Guineans and foreign residents in Equatorial could you give us specific examples of this sense GEPetrol has committed Guinea – an incubator now associated with in- diversification of the incubator? itself to being the leading ternational incubators, and an incubator that is The incubator, before it was launched interna- company in the provision of already talking with banks. In fact, right now we tionally, began to operate and function, and one oil services. And that is very are having meetings with local banks to allow of the results of the incubator is the creation of important because, right now, them to be part of this portfolio of funders of the a company created by GEPetrol and a Guinean incubator’s different projects. That is the cor- entrepreneur, which is a business that offers the economy and money are in nerstone of GEPetrol: the business incubator. services like a travel agency, offering money- petroleum services” changing services, hotel rental services and car In order to withstand the fuel price crisis, rental services. This is a result of GEPetrol’s Antonio Oburu Ondo, one of the measures that a lot of companies business incubator. General Manager GEPetrol are taking is the integration of their activities Another result of GEPetrol’s business into the entire value chain, from extraction incubator is a company named GEPROC, to derivatives production and distribution. which is the result of an endeavour between GEPetrol has been long been present at each GEPetrol, Guinean entrepreneurs, Nigerian GEPetrol’s biggest contribution to the step of the sector and increasing its product entrepreneurs and American entrepreneurs. country’s economy, first of all has obviously and service portfolio. What has been your In fact, we have a GEPROC office in Houston. been the creation of GEPetrol and the training company’s experience in integrating those This is the other result of GEPetrol’s incubator. of Guineans. GEPetrol is the only institution in the country with a scholarship programme; the largest group of scholarship recipients in the country, who are studying both in Equato- rial Guinea and abroad. For example, there are students in Spain, and in Argentina. In fact, our most famous attorneys here studied in Argentina. The management of the cost of petroleum has also been a contribution, and the involvement of GEPetrol in the gas arena, which is currently one of the largest sources of income for the country.

The fall in the price of crude, since the middle of 2014, has affected investors in global exploration and extraction, obliging producers to make adjustments in order to maintain market share, even with much less income. What is GEPetrol doing to adapt to those global trends, and what is your strategy in the long and short term? Firstly, I want to make clear that the problem that Equatorial Guinea has seen is merely the fact that it’s the first time that Equatorial Guin- ea is in a cycle of declining crude prices. That’s never been encountered before. That’s absolutely normal. The prices of crude have risen and fallen throughout the history of petroleum. GEPetrol, in the face of this situation, like any other company, has first undertaken a consistent policy to make significant adjustments, greater cost efficiency, both with regard to the functioning of GEPetrol and greater efficiency in the creation of new business ventures. Another very important strategy that is the foundation and cornerstone of GEPetrol’s future is GEPetrol’s business incubator. GE- Petrol wants to diversify beyond the world of petroleum, and it wants to globalize. It will The Worldfolio - Rwanda 42

A joint vision for regional infrastructure development Regional allies show there is power in numbers as they combine forces to carry out vital energy and transport projects

Rwanda may now be a progressive Af- rican leader, but it is not alone on its journey. Mechanisms for greater cooperation across African borders are at last a real possibility. Ironically, in a region of the world where foreign aid has long represented the driving force, this progress is African-generated and inward-focused. Countries on the continent are now looking to each other for growth, and it is working. “Rwanda belongs to a number of regional bodies such as the East Afri- can Community (EAC), the Common Market for Eastern and Southern Africa (COMESA), which is a bigger market by itself, and the Economic Community of the Great Lakes Countries (CEPGL). All these bodies have presented opportunities for member countries to enhance their social, economic and political relations to attain economic growth,” says Rwandan Minister of Infrastruc- ture, James Musoni. “To date, member countries have responded instinctively to the regional initiatives by allowing free movement of James Musoni, Minister of Infrastructure of Rwanda labor, goods, services and capital. It has further created ease of access to market through the creation of customs unions Agency (CCTTFA) to expedite the im- and cooperation. The power potential to promote production and consumption plementation of the East Africa Standard of Lake Kivu, for example, is jointly of locally manufactured products.” Gauge Railway Project. With the north- shared between Rwanda and the DRC, Mr Musoni adds that road infra- ern corridor, preliminary market-studies with each country managing half of the structure has been developed to facili- were conducted and construction started lake’s 700-megawatt capacity. Sharing tate transport, from Mombasa in Kenya in Kenya. It’s expected that the com- resources, as this region of Africa is dis- and Dar es Salaam in Tanzania to Kigali, pletion of this project will significantly covering, makes everyone stronger. and to open a transit path to the neigh- reduce the cost of transport for both ex- As Jean Bosco Mugiraneza, CEO of bouring countries of Burundi and the ports and imports to facilitate regional Rwanda Energy Group, explains: “In Democratic Republic of Congo (DRC). and international trade,” he explains. Africa, we have many energy sources “The Central Corridor member In power, regional alliances are but we are poor in energy supply. The states have established the Central constructing substations and transmis- solution to this problem is to share en- Corridor Transit Transport Facilitation sion lines that will facilitate power trade ergy resources between countries.” Discover The WorlD’s mosT Dynamic economies www.theworlDfolio.com

TGAIS-The WF-Worldfolio_com_p.indd 2 10/10/14 11:09 AM To make this happen, he says, the energy. To develop our industries, we logistics and human capital, as well as region must put in place basic infra- must invest in energy sources and we in infrastructure investment. structure and common networking must share our production. Power trade “Several joint initiatives that have standards. There are five power plants is also key for security and stability. If already been successfully rolled out, in Africa that belong to the East African we have common interests, we will be such as the East Africa Tourist Visa, market, and there are other shared en- keener to help each other. These proj- unified immigration and administra- ergy projects between Rwanda, Kenya ects are key to developing diplomatic tive procedures and online govern- and Uganda for the construction of ties and uniting populations,” adds Mr ment solutions. Major infrastructural transmission lines and power plants. Mugiraneza. investments made as a region rather Transmission lines have been com- The private sector has also been than as individual nations such as the pleted from the Ugandan border to Ki- quick to support regional integration oil pipelines and railway, and the cre- gali, and lines are being constructed and to applaud efforts by government ation of one-stop border posts are all to link Rwanda, the DRC, Burundi and to improve the connectivity that sup- aimed at making our economic integra- Tanzania. Within the next two years, ports business growth. Liliane Uwan- tion easier,” she comments, remarking Rwanda expects to be trading 30 mega- ziga Mupende, CEO of Ultimate Devel- on improvements in the elimination of watts with Kenya. opers Ltd. (UDL), the company behind double costs and in creating simplified “African leaders understand that Kigali’s Vision City, Rwanda’s largest business environments. there is no way of industrializing the residential housing project to date, “Many companies that are estab- region without common sources of points to recent EAC achievements in lishing in Rwanda are looking at the

“We started Vision City in Kigali as one of our pioneer projects, but our interest is to start investing in these secondary cities as well. The next step will be to invest within the commercial area of the Muhanga district, as it is strategically placed as a city that helps us to extend out to neighboring countries too”

Liliane Uwanziga Mupende, CEO, Ultimate Developers Ltd. 45 The Worldfolio - Rwanda

entire region as an investment opportunity. At UDL, we are convinced that being successful in the Rwandan market will help us to expand within the entire region. We want to increase our economy’s potential. We want Africa to be perceived as a strong cluster, with Rwanda being one of this initiative’s drivers.” Derek Claassen, Director of Roko Construction is counting on regional infrastructure cooperation to alleviate his business’ importation challenges. “We are hoping these pipelines and the rail system that is now being worked on will be game changers. In East Africa at the moment, in Uganda or Rwanda, you don’t have a lot of transport options. There are still constraints in terms of road traffic. Vehicular traffic from South Africa works a lot quicker. We have found, for instance, that certain materials can be trucked from South National carrier RwandAir continues to expand its fleet Africa, which is about four or five days, covering five or six thousand kilometres. Depending on weight and size, we which will intially be able to handle housing is being made, and power grids can fly certain items in, but it is hugely 1 million passengers and 150 million and sanitation infrastructure are being expensive as you pay per kilogram. The tons of cargo. extended. Information and commu- COMESA initiative to open the borders “RwandAir is an integral compo- nications technologies are also being more freely for trade will help with a nent of the government’s Vision 2020,” extended into rural areas to connect lot of those issues,” he explains. states Jean Paul Nyirubutama, deputy the country’s population electronically. Mr Claassen also believes that in- CEO of the airline. Perhaps a singular sign of the coun- frastructure improvements will lead to “By 2020, we want to become a try’s progress is the fact that Kigali now the emergence of regional industries to mid-sized airline with a strong global boasts an international-class conven- support his business. “Cement suppli- footprint. We want to connect Rwanda tion centre, along with hotels including ers and concrete suppliers are moving with long-haul destinations in Asia, Eu- a Radisson Blu and a Marriott. into East Africa, with large companies rope and the U.S. All of that is based on “Rwanda is a country that is devel- like Lafarge, who are now the biggest a strong African network.” oping at steady pace. We have made concrete suppliers in the world, mov- Infrastructure minister Mr Musoni some good achievements in infrastruc- ing in to Uganda and Rwanda. That can reiterates RwandAir’s important role ture development,” says Mr Musoni. and will make life a lot easier,” he says. leading up to 2020, and points out that The fact that regional integration while Rwanda may be landlocked, it is is now on the agenda highlights just not “air-locked”. how far Rwanda has come over the past “To transform our country into an “Member countries have two decades. Major advances and in- aviation hub, we must first develop responded instinctively to the vestment have been made domestically strong and sustainable aviation infra- regional initiatives by allowing in the development of the country’s structure,” he says. free movement of labor, goods, transport, energy and social infrastruc- “RwandAir’s fleet is growing and services and capital. It has ture. The country now boasts one of the growth will continue up to 2020 with densest road networks in Africa with the addition of more planes. This will further created ease of access over 12,000 kilometres. Paved road- allow us to serve the entire region and to market through the creation ways in the country have more than to connect Rwanda to the rest of the of customs union to promote doubled in the last 20 years, with hun- world. The construction of the new air- production and consumption dreds of new kilometres being covered port in Bugesera will commence in the of locally manufactured each new year. More than 350 kilome- next few months and will have other products” tres were paved in 2016 alone. auxiliary services to make it an airport The Rwandan government is also city.” working to boost air transport links, Beyond Bugesera, secondary cit- James Musoni, Minister of with the expansion of national carrier ies are also being constructed to act Infrastructure of Rwanda RwandAir and the construction of a as hubs for non-agricultural industry new international airport in Bugesera, development, investment in affordable The Worldfolio - Rwanda 46

“However, the government is making The two largest independent power phases. There are also 80 megawatts to more efforts in constructing and com- producers in Rwanda are Symbion be added from the Rusumo HPP Proj- pleting projects in the pipeline and im- Power and ContourGlobal, both Amer- ect, a regional collaboration between proving the existing ones to reach the ican. The companies were attracted Rwanda, Tanzania and Burundi. Ru- desired levels. For example, efforts are to Africa by former President Barack sizi III, a shared 147 megawatts power being made to ensure universal access Obama’s ‘Power Africa’ initiative, says plant project between Rwanda, the to electricity and 100% water distribu- Mr Mugiraneza. “Investors know that DRC and Burundi is in the pipeline, and tion coverage, among others, by the there is no place for trade if there is the Rwandan government is also work- year 2020.” no infrastructure. If the US, China and ing on a power sharing agreement with To meet its electrification goals, other countries are investing in our Ethiopia and Kenya. “We are commit- Rwanda is looking to a variety of solu- continent it is because they see an im- ted to enhancing regional power trade tions including sustainable energy mense trading opportunity,” he adds. to meet the demand, and our projec- sources, particularly solar. tions are showing that we will be suc- “We recognise that as we are yet cessful,” says Mr Mugiraneza. to explore and produce the natural resources that are beneath the surface, Moving forward Rwandans can benefit from the energy Growth of this sort has a domino effect above the surface of the earth,” says on a country’s construction industry Serge Kajeguhakwa, the Chairman and and Rwanda is no exception. The gov- CEO of Energy Resources Petroleum. ernment’s secondary cities program is “We have made significant strides aimed at providing a balance between in developing our solar and renewable the rural and urban poles, and meeting energy strategy in tandem with the a demand for new housing in the capital government’s objectives and will focus that has reached 3,000 units per year. initially on solar power through basic UDL’s Ms Mupende comments, “We household solar systems, followed by started Vision City in Kigali as one of development of mini-grid solutions and our pioneer projects, but our interest then large-scale solar projects. We ex- is to start investing in these secondary pect to be able to produce around 50 cities as well. The next step will be to megawatts from solar energy alone, “African leaders understand invest within the commercial area of and have entered into joint-venture that there is no way of the Muhanga district, as it is strategi- partnerships to achieve this target.” industrializing the region cally placed as a city that helps us to Electrification coverage jumped extend out to neighbouring countries without common sources 34% between 2014 and 2015 to a total too. People crossing in through the installed capacity of 170 megawatts, and of energy. To develop our southern border have to go through in 2016, goals included increasing this industries, we must invest in Muhanga, which has already started to by an additional 70 megawatts, while energy sources and we must attract regional investments in addition constructing 835 kilometres of new share our production. Power to national ones.” transmission lines and adding 60,000 trade is also key for security She adds that this project, along new households to the grid. Off-grid with subsequent phases of Vision City, and stability” solutions supplied electricity to 11,000 offer potential areas for investors to additional families in 2016. These partner with UDL. moves support the government’s bid to Jean Bosco Mugiraneza, Roko Construction’s Mr Claassen expand electricity coverage to 75% of CEO, Rwanda Energy says his company is also actively seek- all Rwandan households by 2018. Group ing new partners as projects across “In our strategy to accelerate elec- the region ramp up: “Construction has tricity access, we have targeted 48% grown over the years in East Africa, from on-grid solutions and 22% from and the company has grown to the ex- off-grid solutions, with an emphasis on ContourGlobal currently produces tent where we are turning over about solar power. Using solar home systems 26 megawatts at the KivuWatt plant in 80, 90, or 100 million dollars at the mo- allows us to serve even the most remote Lake Kivu. A second phase of this proj- ment, which allows us to tender only to places. To this end, the Mobisol project ect will add 75 megawatts. A power specific projects. If a project comes out currently under implementation has purchasing agreement has been signed tomorrow worth 820 million dollars, a target of serving 49,000 households. with Symbion Power, to develop meth- we may not be financially able to get Combining on- and off-grid strategies ane gas production in Lake Kivu and involved in building it, which is why will drive electrification like never Turkey’s Hakan has been contracted we are looking at joint ventures and before,” comments Mr Mugiraneza of to construct a peat power plant with at partnerships, and even equity at the Rwanda Energy Group. a production of 120 megawatts in two end of the day.” 47 The Worldfolio - Rwanda The Worldfolio - Rwanda 48 49 The Worldfolio - Rwanda

Transforming lives and the economy through ICT Rwanda is quickly expanding its 4G LTE network to reach some of the remotest areas, while Kigali, with its startup incubators and Innovation City, is becoming the tech hub of East Africa. The rapidly developing ICT landscape is vital to the Vision 2020 goal of becoming a middle-income, knowledge-based economy

Cashless payment systems on buses, start-up incubators, an Innova- with more than 5,000 kilometres so far and continuing. In 2017, Rwan- tion City, a laptop manufacturing facility, and super-fast 4G LTE inter- da will have a 4G LTE network covering our target of 95 percent of the net access: these are just a few of the things you may encounter on a population,” explains Mr Nsengimana. tour around the Rwandan capital Kigali, now a thriving African hub “A number of countries have taken interest in what has been for innovation and technology. done until now in Rwanda. The private-public partnership strategy Rwanda’s steadfast economic growth has enabled it to build one used, combined with building one single wholesale network was the of the most exciting ICT landscapes in Africa. The ICT sector contrib- only way to ensure both nationwide rollout and affordability for our utes 3 percent to GDP and, according to Jean Philbert Nsengimana, people.” the Minister of Youth and ICT, has enjoyed 25 percent average annual In July, ORN announced it would slash 4G prices by 30 percent, growth over the past three years, making it one of the most attrac- which would help to make the service accessible to a greater portion tive segments for foreign direct investment (FDI). A report released of the population. Meanwhile, U.S. company Vanu Inc. is working with in 2016 by the central bank estimates that, of the $458.7 million of the government to “extend coverage to the most remote areas of the FDI injected into the country in 2014, $116.1 million – or around 25 country, usually seen as not commercially viable,” according to the percent – was directed towards ICT. minister. One of the largest foreign investors is Korea Telecom (KT), which Tigo is also bringing 4G to rural areas where there is limited to no in 2013 signed a deal with the government to invest $140 million in es- coverage and wants to support the creation of “smart villages”. tablishing a 4G LTE broadband network that would eventually reach “The government promotes ICT, a sector in which we are a key 95 percent of the population. player. We will continue to invest in this market to improve our net- Mobile 4G LTE was launched in October 2015 by operator Tigo work,” says Mr Amoateng. “Today people are now connected to the Rwanda. In partnership with the banks and the government, Tigo has world in the most remote places.” used its 4G network as a springboard to launch new online payment “We recently partnered with various organizations and the gov- systems, supporting the migration to a cashless society. ernment to create a smart village in Ruhunda, Rwamagana District by “We are expanding in areas that are not part of our core business, providing affordable WiFi for the entire village. The vast majority of such as banking. We also partnered with the government in order to Rwanda’s population lives outside big cities, mainly in villages. That is make it possible for inhabitants to pay their taxes through mobile de- why we wish to develop not only the concept of smart cities, but also vices,” says CEO, Philip Amoateng. smart villages.” “Our company is also steering towards Extending access to high-speed inter- the agriculture sector through, for example, “We have invested in net is vital to the Vision 2020 development the Tigo Payment Solution for Agriculture. plan’s goal to become a middle-income, the densest fiber-optic Tea farmers in two districts are now paid their knowledge-based economy. So too is fos- salaries in 48 hours, compared to the 20 days national backbone tering innovation and startups; and already previous. In the long run, we want people to on the continent, there are a number of facilities doing just stop using physical money, as this costs the that. with more than 5,000 government a lot and is not as transparent as kLab was set up in 2012 as the country’s digital solutions. We want to achieve a cash- kilometers so far and first tech incubator. Situated on the top floor less society.” continuing. In 2017, of an office complex in Kigali, with its cof- Tigo’s competitor MTN Rwanda was fee shop and ‘foosball’ table, one could think Rwanda will have a 4G quick to follow suit, rolling out its 4G mobile they had stumbled into the office of any Sili- broadband services in March, 2016. ORN, the LTE network covering con Valley startup. Here, Rwanda’s budding wholesale distributor established by KT, pro- our target of 95% of pool of young tech entrepreneurs are work- vides access to the network to both Tigo and ing on turning their ideas into viable prod- the population” MTN, as well as other operators. ucts and services. “We have invested in the densest fibre- Jean Philbert Nsengimana, kLab also host events, workshops and optic national backbone on the continent, Minister of Youth and ICT networking sessions to promote collabora- The Worldfolio - Rwanda 50

business incubation, financing, etc. – towards the growth of a selected number of ICT clusters that have promise to transform lives in Africa. They include fintech, biotech, smart energy, big data, Internet of Things, cyberse- curity, creative industries, amongst others.” With an estimated cost of $1.9 billion, KIC will be built on the grounds of the Kigali Special Economic Zone, located 10 kilometres east of Kigali City’s business district. The project plans reveal the Innovation City will comprise all elements of a typical urban centre including corporate buildings, retail, leisure and sports facilities, accommodation, health care centres and other amenities. “Initiatives such as kLAB and the Ki- gali Innovation City will definitely benefit the whole country,” says Mario Safari Rugamb- wa, a young entrepreneur who is founder and CEO of Touch Media Design. “Rwanda has limited natural resources, but what we have is our people and our knowledge. We Rwandan President Paul Kagame at the Transform Africa Summit have to use our knowledge in ICT to develop our people and our country.” tion, partnerships, investment and financing. produce the devices. The Rwandan plant is Mr Rugambwa, a programmer and IT Some projects to be developed at the centre the company’s first venture outside of South graduate of the Adventist University of Cen- include an Android application for watching America as it bids to go global. tral Africa, set up Touch Media five years ago, Rwanda TV and online inventory system soft- Aside from supplying the Rwandan after having spotted a gap in the market. ware, which was sold to a number of Rwan- government with 150,000 laptops each year, “Five years ago, while I was in univer- dan organizations. mainly for the education sector, Juan Ignition sity studying information technology, I saw Staff from M.I.T. helped to launch Rwan- Ponelli, Positivo-BGH President in Africa, has the printing business was very poor, both in da’s first Digital Fabrication Lab (Fab Lab) said he wants to help increase the country’s quality and quantity. So, when people wanted in 2016. The Kigali Digital Fabrication Labo- exports by selling the ‘Made in Rwanda’ lap- to print they would go to Kenya, Uganda, ratory is part of a global community of over tops to neighbouring countries in the East Dubai and so on. I saw there was an oppor- 1,000 fab labs in around 80 cities across the African region and beyond. tunity and I decided to venture into it and I world, and gives members access to three- started Touch Media Design. At the begin- dimensional modelling software and 3D Kigali Innovation City ning, it was though, but here we are today.” printers. “Just like kLab helped to transform Positivo-BGH could eventually be joined in Since its inception, Touch Media has the ideas of emerging entrepreneurs into Kigali by more high-tech manufacturers. grown to offers its clients – the largest of enterprises, Fab Lab will turn the ideas into Last year, Rwanda Development Board an- which is the Rwandan government – a range usable products which can be produced in nounced its flagship project, Kigali Innova- of design, printing, advertising and ICT ser- mass,” Dr Marie-Christine Gasingirwa, Di- tion City (KIC) – which aims to develop a vices, and is now looking to expand its suc- rector General for Science, Technology and dynamic ecosystem of technology clusters, cessful business model throughout Africa. Research at the Ministry of Education, told where companies will innovate and deliver “We are now thinking of opening dif- Rwandan daily newspaper, The New Times. products and services for global markets. ferent branches in Angola, Burundi, Kenya, Fab Lab could eventually support the The plan has been hailed as one of the key DRC and Uganda,” adds Mr. Rugambwa. “I ‘Made in Rwanda’ initiative to manufacture enablers to transform Rwanda into an econo- have travelled through the region and saw I more products and reduce the dependence my driven by technology and innovation. can replicate what we do in Rwanda in other on imports. This includes next-generation “KIC is inviting global technology mul- markets. Right now, we are focused in An- hi-tech products. tinationals that want to feel the pulse and in- gola; there, I saw, are a lot of opportunities. “The Internet of Things is coming, and novate for the African continent, emerging By 2020, I would like to have a presence in at billions of these devices will be needed here. markets and beyond,” says Mr Nsengimana. least 10 African countries.” We either have to accept that these products “There is a limit to how much one can The young CEO names Rwandan Presi- will all be imported from out of Africa, or built innovate for Africa based in Silicon Valley for dent Paul Kagame as his role model. But here on African soil. We believe in that second instance. Most of the existing problems in Af- there is no doubt that President Kagame option,” says ICT minister, Mr Nsengimana. rica and corresponding solutions are usually himself would hope that ambitious and suc- The ‘Made in Rwanda’ tag can already not what the Western world think. KIC offers cessful entrepreneurs like Mr Rugambwa be found on the first domestically made different platforms – talent development, will serve as strong role models for the laptops, thanks to Argentinian-Brazilian bright young Rwandans developing their company Positivo BGH, which set up its ideas in places like kLab, Fab Lab and 3,000-square-foot factory in Kigali in 2015 to across the nation. Proudly51 The Worldfolio - Rwanda Servicing rwanda and the region

Established in 2012, Energy Resources Some of its products are retailed through ERP’s tank farm, located near Kigali, has a Petroleum (ERP) Limited is a Rwanda-registered its wholly owned subsidiary Excel Energy combined capacity of 10 million liters and it oil trading company and a major supplier of Resources Trading Limited. Its other subsidiary, operates a total of 80 operational trucks, of white and black products, such as Premium Energy Resources Power Limited, is a Rwandan which 10 trucks are ERP-owned. ERP currently Motor Spirit (PMS), Automotive Gas Oil (AGO), indigenous power utility company with a target operates four retail service stations in Kigali, Heavy Fuel Oil (HFO) and Light Fuel Oil (LFO), to of becoming the country’s premier provider of Rusizi, Rwagitima, Nyamata and Kayove, with the Rwandan market and across Central Africa. electricity solutions. plans to open more.

www.erpetroleum.com

RWANDA-USAT-ENERGY-RESOURCES-PETROLEUM-ERP-FP-TWF-cp2.indd 1 03/08/16 10:31 The Worldfolio - Rwanda 52 53 The Worldfolio - Rwanda

growth through RWANDA resilience, commitment and innovation Rwanda’s current investment climate comes under the scrutiny of Bank of Kigali’s CEO, Dr Diane Ngendo Karusisi, who points out that foreign investors coming in is the fastest way for the country to grow its economy and realise its development ambitions. The head of the largest commercial bank in Rwanda also highlights the importance of supporting the nation’s SMEs, its relations with the US, and how the international community should view the country today

We are experiencing rising momentum in Africa as many investors are looking at opportunities on the continent. What would you say is attracting the attention of global investors? I think the demographics of Africa, with such a large and young population, makes it attractive to investors, as Africa is potentially a very big consumer market. We have young people who are more educated, more connected to the world, and more technology savvy; this provides a significant workforce that is ready to produce and add value, hence an extra incentive for investors.

It is the youngest continent in the world and it is projected to boast the largest labor force globally. What are the challenges and how should Bank of Kigali’s CEO, Dr Diane Ngendo Karusisi they be addressed? The main challenge might be education; we want to make these How would you describe Rwanda’s current investment climate? young people productive so we need to invest in an education sys- In the financial sector, doing business has been significantly facili- tem that actually empowers them. The traditional education model tated. For example, the land information system in Rwanda is fully is very expensive, but today with these IT solutions we can have automated with a unique identifier for every parcel of land in the schools and universities connected and people getting knowledge in country. As a result, land registration and transfer is done online in a a very effective and efficient way. simple and efficient way. This has significantly facilitated the mortgage market as banks can easily mortgage properties and provide A crucial priority for the continent is regional integration. The largest long-term financing for owners. Also, commercial courts introduced untapped market for Africa and its biggest opportunity is right on its in 2008 have hugely supported businesses in reducing uncertainty doorstep. What are Rwanda’s efforts in order to increase the much- and improving predictability. Commercial cases and disputes are needed regional integration? now settled efficiently and fairly quickly, and the business commu- For investors, considering Africa as one single market is more at- nity appreciates this. tractive than looking at individual countries. Africans today understand that opportunities are first with our neighbours. We know that How would you describe Rwanda’s finance sector? intra-Africa trade is the lowest when compared to other regional Financial services are indeed crucial to any economy. Growth and blocks – it averages 16 percent, while it stands at 70 percent in Eu- development happen when entrepreneurs and private companies rope and 50 percent in Asia. innovate, produce and add value, and create jobs. The government’s We need to reduce barriers. This is what we are doing in the role is to facilitate by establishing an enabling environment for busi- East African Community; we are developing an integrated market of ness. Financial services can be considered as the lifeblood for busi- more than 150 million people. Investors that setup shop in Rwanda ness, as entrepreneurs need financing to develop projects, produce, gain access to the Tanzanian market or the Ugandan market and process food, create jobs, etc. A well-functioning financial industry more. Also, Rwanda recently re-joined ECCAS, the Economic Com- is always required to efficiently channel savings to investments and munity of Central African States. We want to be the hub for people hence fuel development. coming from the East to the West of Africa. We want to connect these In Rwanda, the financial industry is still fairly small, with a na- two parts of the world, the Anglophone Africa and the Francophone scent capital market, and the banking industry well capitalized but Africa. Being bilingual and being in the centre of Africa, we believe unable to provide sufficient financing for development. Rwanda we can achieve that mission to connect both parts of Africa and trade wants to have a big airport, and a railway connecting the country to more amongst those African countries. the region’s major ports, but we cannot rely only on Rwandans’ sav-

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ings. This is where foreign investors come in because this is the fastest comes climate resilient, especially as agriculture remains the back- way for us to grow our economy and to reach our ambitions. As such, bone of our economy. For instance, we have recently partnered with the local private sector is willing to partner with foreign investors to a local conservation association to plant over 150,000 trees over the leverage our local business knowledge and further support growth. next three years in one of the districts of Rwanda.

Bank of Kigali is the first Rwandan company and bank to be rated by a Human resource development is also a focal point of your strategy, and credit rating agency, but it exceeds the Rwandan market as it has been as you recently said you will continue investing in your people. Having named best East African Bank for several years, amongst other awards. well over 1,000 employees, how are you helping them to develop their What are the strategic pillars on which your approach is based to excel capabilities? at the regional level? Banking is a people-to-people service, so getting and retaining talent Bank of Kigali is the largest commercial bank in Rwanda, and one is key. We have a number of training programs that our members of of the few local companies that are listed on the Rwandan Stock Ex- staff undergo because we want them to grow as people, profession- change. Obtaining a rating is helpful mainly for our international als and future leaders. We make them work in different areas to give investors, who require this kind of information to make their invest- them greater knowledge of the bank. We put a lot of emphasis on ment decisions. customer service, responsiveness and professionalism. Today, the bank’s market remains Rwanda, financing businesses and people in Rwanda. We believe that excelling in our home What is your assessment of the relations between Rwanda and the US market is a prerequisite to doing well in the region and beyond. Our and how could they be enhanced also? strategy is simple; it is to remain open and flexible, because this is From where I sit, I believe commercial relations between Rwanda what business people want. We want to be at the forefront of innova- and the US are good. We have seen American investors in Rwanda tion and always provide the best banking products in the market. involved in projects that are critical to its development, including We are constantly improving our IT systems to make sure we serve power generation and others. Rwanda offers a very good investment our customers in a safe and efficient manner. We are committed to environment with zero tolerance towards corruption as well as a this country and to Rwandans, which is why the bank is investing very good quality of life in Rwanda with security and safety. One way in systems and expanding its branch network to support financial to enhance Rwanda-US relationships is to enhance the information inclusion efforts. flow between the two countries.

You just mentioned another important topic, financial inclusion. How is Bank of Kigali working to enhance financial inclusion? “Resilience, commitment and innovation; Technology is a key ingredient for banks and other service providers some 22 years ago, Rwanda was a as it allows us to reach people in areas that are otherwise physically hard to reach. In addition, we have partnerships in the pipeline with shattered country known for death, various telecommunication companies to enable people to open a extreme poverty and despair. Today, bank account with their mobile phone and access a number of mon- Rwanda is a thriving nation, and this is ey services from their mobile phones. We are investing in technology to stay close to our people. a testimony to what people can achieve together, with commitment” Speaking about commitment to the country, SMEs account for almost 20 percent of your key segments. What are the services you offer Rwanda’s SMEs? We have a wide range of products and services that we offer them, Prior to joining Bank of Kigali, you were the Head of Strategy and Policy including investment loans, working capital, stock loans and trade and Chief Economist at the Office of the President. What has been the big- finance. We also provide support with professional advice and finan- gest challenge you had to face? cial literacy, in particular in the micro and SME sector. We want to As anyone would expect, serving a Head of State is very demanding walk our customers through from being micro enterprises to larger as it requires you to remain well informed and focused to be able companies. It gives us a lot of pride when we see small businessmen to continuously provide critical analysis almost in real time to sup- and women grow and support their communities. It shows us that port the President’s decision making. Our President is a visionary we are doing the right thing, transforming people’s lives financially. and forward-looking leader who always thinks of what’s next, and what can be done better to improve the livelihoods of Rwandans. We know you support many social projects in different sectors such as The team supporting him is always required to be educated on new education and environmental conservation. What would you say is the trends, and get reliable information to assess the implementation of responsibility of big companies, big brands such as Bank of Kigali, to- government programs and policies – this was very challenging but wards its communities? also instructive and fulfilling. We want to show our communities that we are not only in business; we are also working to promote the communities in which we work. Which concepts would you like people in the international community to We know that when communities are not doing well, the bank can- associate Rwanda with? not strive. We have a number of projects in education, support for Resilience, commitment and innovation; some 22 years ago, Rwanda vulnerable households, and environmental conservation. was a shattered country known for death, extreme poverty and de- Regarding climate change, we believe that every person and spair. Today, Rwanda is a thriving nation, and this is a testimony to business has a role to play. We want to make sure our country be- what people can achieve together, with commitment. The Worldfolio - Rwanda 56 57 The Worldfolio - Rwanda Transparency, good governance, ICT and infrastructure drawing in FDI

Rwanda’s big push for regional integration and its investment in infrastructure to facilitate doing business both domestically and with its close neighbours is increasingly attracting the attentions of international investors. Minister of Trade and Industry François Kanimba discusses the country’s aims to become the regional centre of choice for conferences, communications, industry and trade through its physical infrastructure and ease of doing business

Africa is becoming a growing investment a game changer, for example developing destination for both advanced and emerging railways, which we think are key. That is economies. Would you please discuss this the reason why Rwanda has been actually prominence the continent is gaining in the in- pushing some of our partners in the North- ternational arena, especially attracting those ern Corridor to establish this Northern Cor- investments? ridor project, which brings together Kenya, During the last 10-15 years, there have been Uganda, Rwanda and later on South Sudan. a lot of reforms on the continent to stream- The whole focus so far has been to line the economic management framework. develop infrastructure. We will develop This is recognized and I think there has been the railway from Mombasa up to Kigali via a kind of global coalition to support reforms Kampala. We are also working on the Cen- in Africa. Global financial institutions like tral Corridor with Tanzania, to develop the the International Monetary Fund, the World railway from Dar Es Salaam to Kigali. For Bank, big regional development financial in- Rwanda, these are very high priority proj- stitutions like ADB, and the key bilateral de- ects. They are very costly, but when you look velopment partners, really came together to François Kanimba, Minister of Trade and Industry at how this infrastructure is going to affect influence economic reforms and sector poli- the competitiveness of the Rwandan econ- cies. I think in most African countries a num- down due to the fact that wages have sig- omy, there is no doubt Rwanda is ready to ber of macro-economic policy management nificantly increased and global investment, invest, as long as our partners in the region frameworks are good and this has signifi- which has been converging in China in the are also ready to take part of this regional cantly impacted on the perception of Africa last two decades, doesn’t see China as that investment. as far as foreign direct investment (FDI) is attractive and is now looking to alternatives. concerned. That is the reason why now you Today Africa is seen as a very strong The Government of Rwanda is well aware that start to hear that Africa is the next frontier. alternative to attract potential FDI, which is the private sector is the engine of growth. At the same time, there are some re- looking for opportunities. I think from that What are the tangible efforts in order to en- alities we have to recognize too. Africa has perspective, Africa is now really in a position hance the ease of doing business and how a very young population that is growing fast, to receive increasing FDI. would you describe the business environment while developed countries have an ageing in Rwanda? population. People talk about the potential Regional integration and industrialization are Rwanda is recognized as a very strong per- of the demographic dividend in Africa. Sec- among Africa’s key priorities, and Rwanda is former as far as the doing business reform ondly, when you look at what has been driv- no stranger to it. Africa’s largest untapped is concerned. Our main focus has been on ing global economic growth in the last two market and its biggest opportunities are right governance structures. Since the end of the decades, it was in part the Chinese economy on its doorstep. Please discuss Rwanda’s 1995 genocide when the new government with other emerging countries in South regional integration efforts regarding infra- came to power, it has clarified its economic Asia. Now there is a change, particularly in structure. policy management framework. The first China where the economic growth has sig- As we are a landlocked country, we are thing that was really done and has signifi- nificantly slowed down. Even the competi- working with our regional partners to de- cantly impacted on the economic trend we tiveness of the Chinese economy is coming velop regional infrastructure that will be have seen in this country is a recognition of

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the important role of the private sector to drive the growth, while and some improvements in agricultural productivity. The growth at the same time building a capable State that can regulate the of the manufacturing sector is still very low: it only contributes economy without creating any bottlenecks in the private sector around 14 percent to our GDP. Our second Economic Develop- and developing values for partnerships between the private sec- ment and Poverty Reduction Strategy – EDPRS 2 – and the Vision tor and the government. 2020 have been targeting a 20 percent contribution to the GDP, That is why the Government of Rwanda has disengaged but it has been a challenge to grow the share of the industrial from all the big public enterprises that were established after sector in the total GDP. This means something more needs to be the country got independence in ‘62. Now these companies are done to attract more investment into the industrial sector. in the hands of the private sector: sectors like the tea or cof- One of the key strategies is to make sure we facilitate man- fee industries, big infrastructure, telecommunications and even ufacturers’ easy access to fully serviced land at an affordable the financial sector. The government has privatized most of the cost. That is why we are developing a very ambitious industrial banks where it used to be the main shareholder, attracting for- parks program, which supplements the on-going Kigali Special eign direct investment into the banking system, but at the same Economic Zone. With these industrial parks, we are looking to time the government has established a very strong regulator. enable investors to access land at very affordable costs, about When you see how the Central Bank has been strengthened in $10 per square meter. the last 15 years, it has significantly contributed to stabilizing Apart from the Kigali Special Economic Zone, we have start- the financial sector in the country and has attracted investment. ed to develop the second biggest industrial park in Bugesera. On the corruption front, the Government of Rwanda has Bugesera is just a 40-minute drive from Kigali and is closer to stated zero tolerance towards corruption since the year 2000, where the new international airport will be developed. This new and this is not only a statement. Many Rwandans can confirm international airport is also part of our vision to make Rwanda a that Rwanda walked the talk when it comes to fighting corrup- regional conference centre and a regional communications hub. tion. This goes from high-level officials, to middle posts all the It is a big project in the pipeline; after the Kigali Convention way down to the lower levels of public service. When you speak Centre, it’s going to be the next big investment by the govern- to foreign direct investors who came to Rwanda, one of the ment. It will mobilise private investors to develop it in public- things that attracted them is the low level of corruption com- private partnership (PPP). So, close to this international airport pared to other countries in the region. That is something that I we will develop the second biggest industrial park, 330 hectares. think is part of the strength of Rwanda. We see more and more private investors approaching us to de- I want to mention two other things apart from establish- velop this PPP; they see a lot of potential to attract investors in ing a robust governance system that has created a friendly the manufacturing sector. We hope this will contribute to our environment for private people to operate. There are some industrialization. key enabling sectors in which the government has invested In terms of specific areas, we are focusing on the textile and heavily. The first one is ICT. Rwanda is among the few coun- garment industry. It has huge potential to create employment tries in Africa that have deployed broadband infrastructure and to diversify our export base. But, like in any other develop- covering the whole country, where all the administrative sec- ing country, the textile industry has been hampered by the large tors are connected by fibre optics. We are among the few Af- dominance of second-hand clothes imported from developed rican countries that have high-speed internet. I think this has countries. That is why the heads of states in the East African significantly contributed to shaping this very nice business Community have decided to ban imports of second-hand clothes environment for the private sector. in the next three years, and Rwanda’s government has decided There are other sectors in which we have been investing to speed up the implementation of this policy. significantly to achieve our Vision 2020, our long-term vision to We have started already to increase taxes on second-hand transform Rwanda into a regional trade and communications clothes to create room for the domestic industry to kick off, and hub. We are landlocked but we would like in the long run to be we are providing special incentives for investors who are invest- land-linked. This ICT strategy is part of it. ing in the garment and textile industry. This is going to be critical in terms of how the industrial sector will grow in Rwanda in Since we are in the ICT capital of Africa I would like to ask you a the next five years. We see a lot of interest; we have already seen question regarding innovation. Steve Jobs once said that innova- some Chinese companies coming to Rwanda to invest in textile tion is what distinguishes a leader from the followers. What is the and garment factories, and not only for the domestic market but key innovation that you are proudest of? also for exports as they can take advantage of some market pref- My key innovation in this ministry has been to set up a program erences to export to the US through the renewed AGOA or to Eu- to support small and medium enterprises (SMEs). That is re- rope through the ‘Everything but Arms’ initiative. We have also ally my key priority and focus. Another innovation I am proud recently concluded negotiations of the economic partnership be- of is our clear Trade Logistics Development Strategy, which was tween the EAC and Europe, which will also enhance our quota- developed in the last three years. As we want to develop Kigali free, duty-free market access, etc. to a big region like this one. as a regional trade hub, we have to work on cutting down the cost of trading across borders. We have a clear strategy, a clear What would you say are the competitive advantages of Rwanda? vision. That is how I can define my own contribution since I was Competitiveness is a complex thing; it depends on a lot of factors. appointed as Minister of Trade and Industry. Every country may have its competitive advantages and its competitive disadvantages. In Rwanda, some of the investors tell us How is Rwanda planning to enhance industry’s contribution to GDP? “we prefer to come to Rwanda due to your good governance, your Economic growth in Rwanda has been mainly driven by services openness and your flexibility in economic policy management.” The Worldfolio - Egypt 60

produces UK-standard graduates BUE to enter key sectors of the Egyptian economy

Aside from offering its students a top-class UK-accredited education, the British University in Egypt fosters a culture of innovation and entrepreneurship and encourages freedom of thought across its nine faculties, producing highly skilled graduates that will play a key role in Egypt’s economic development

As Egypt looks to produce high-calibre BUE has almost 5,000 students graduates to take up the skilled jobs spread out across its nine faculties – En- The key to BUE’s that will be needed to drive its economy gineering, Informatics and Computer forward, the UK is offering its support to success has been Science; Business Administration; Eco- Egyptian universities, both private and its alliances with nomics and Political Science; Pharmacy; public, to develop the highest standards Dentistry; Law; Arts and Humanities; UK institutions, of research, innovation and education. Communication and Mass Media; and Last year marked the beginning of this which have Nursing – and has strong partnerships new comprehensive partnership between enabled it to with three prestigious UK universities, the UK and Egyptian higher education Loughborough University, London South institutions. In February 2016, ten British offer the highest Bank University and Queen Mary Uni- universities signed partnership agree- educational versity. ments which aim to create dual degrees, standards to its “We are the sole Egyptian university research collaboration, student and staff which bestows two certificates to gradua- exchanges and curriculum development. students tes: one from the Egyptian authorities, Some of the UK institutions involved in and the second by our British partner, for this program include: University College both undergraduate and post-graduate London, which will partner with Giza Uni- degrees,” says Prof Ahmed Hamad, Pre- versity; King’s College London, which will national higher education system that sident of BUE. collaborate with the faculty of medicine at serves the three million young Egyptians The key to BUE’s success has been Cairo University; and Cardiff Metropolitan studying now and will serve many gene- its alliances with UK institutions, which University, which formed a partnership rations to come. have enabled it to offer the highest edu- with the Arab Academy for Science, Tech- A British-style education is a very cational standards to its students. nology and Maritime Transport. attractive option for young Egyptians “We started with Loughborough The UK’s work on higher educa- that hold the UK system in high esteem, University. We learned much from them tion reform in Egypt is just part of its which is why the British University in on how to arrange the classes in the right wide-ranging effort to support young Egypt (BUE) in Cairo is a popular choice way. It was not an easy task, but together Egyptians with education and skills. for those seeking UK-accredited degrees. we surmounted many obstacles. It has Since 2010, the British Council has hel- Following the signing of a Memo- required much work and devotion from ped more than 75,000 Egyptians learn randum of Cooperation between the UK our team here,” explains Prof Hamad. English or gain internationally-renow- and the Egyptian governments in 1998, “Early on, we modelled our profes- ned UK qualifications. BUE was established as a private insti- sional excellence on the standards for British Ambassador to Egypt John tution in 2006 with the aim to produce the British Quality Assurance Agency Casson has said that the UK is uniquely graduates of UK standards to enter key for Higher Education. We achieved this placed to provide experience and exper- sectors of the Egyptian economy, parti- certification from the QAA, which was tise as Egyptian partners seek to build a cularly in the areas of engineering, com- a meticulous task to meet all criteria, more modern, independent, and inter- puter science and business studies. however I am happy to say that we did 61 The Worldfolio - Egypt

Prof Ahmed Hamad, President of BUE it. The QAA was later used nationwide are just not enough jobs to accommoda- creativity across campus, which is per- here in Egypt for educational standards te all of the graduates currently entering haps something not traditionally encou- of excellence, so I am very proud that the Egyptian workplace. raged in this part of the world. we were the pioneers in adopting these This is why it is also important to “Freedom of thinking is also a criti- standards.” not only equip students with employable cal theme of my leadership here. Free- Prof Hamad sees BUE as playing skills, but also to foster a culture of in- dom of thinking not belonging to any a key role in Egypt’s economic deve- novation and entrepreneurship in third- particular ideology; but prioritizing crea- lopment over the coming years; and level institutions like BUE. Doing so tivity. I got my PhD in France, and I see admits that its graduates’ professional means that some graduates will have the how I was able to benefit from having performance will be reflective of the capacity to set up their own businesses, been exposed to the world and learning university’s academic performance. becoming job creators themselves and in a different society.” “What we are keen to build on is supporting the development of a thriving Going forward, BUE will continue the reputation not only of the university SME sector, the backbone of any suc- to invest in improving standards across itself, but on the profile of the gradua- cessful economy. its nine faculties. Prof. Hamad says that te,” he adds. “BUE is a new player in “I myself believe in the power of the in its 10-year history, no dividends have this feel, but yes, this process will take student. We try to disseminate the philo- been paid to shareholders. But these years. However, I will say that I am very sophy of entrepreneurship and innova- patient investors have bought into the proud that many banks here in Egypt tion,” says Prof Hamad. “This is the key BUE’s quest for excellence and are ha- have told me already that BUE gradua- issue for developing Egypt. It will not de- ppy to see all profits made invested back tes are some of their most promising pend on the government; it will depend into the university. new employees.” on our young people. We have very po- “The money we’ve made has all Tackling youth unemployment is sitive stories from our young graduates been invested to produce excellence,” he one of the greatest challenges for the going into business, and some of them says. “Despite having yet to receive any Egyptian government. And while institu- even starting their own. Across all disci- returns on their investments, sharehol- tions like the BUE will continue to churn plines in our university, we seek to instil ders are satisfied with the progress and out top-class students for the country’s these values.” reputation of BUE, and we have maintai- banks, as well as construction, IT and Under his tenure, Prof Hamad also ned a positive relationship because they engineering firms, the truth is that there encourages freedom of thought and understand our drive to grow.” The Worldfolio - Egypt 62 63 The Worldfolio - Egypt Tough decisions get Egypt back on track

The new reform program seeks to revive Egypt’s growth prospects by restoring stability and confidence in the economy, and implementing structural reforms that will create jobs

In spite of the many great challenges that Egypt continues to face as a nation following an extremely tumultuous recent period in terms of security and economic issues, 2016 turned out be another breakthrough year on certain fronts. If 2015 was marked by the momentous Egypt Econo- mic Development Conference – a bold statement to the world that the country was back on its feet again and open to business (investment deals worth a total of $130 billion were signed at the landmark event), 2016 was characterized by the implementation of the boldest reform plan seen in Egypt since the 1980s; reforms that persuaded the IMF to agree to a long-delayed $12 billion loan program over three years, intended to restore public finances and refresh the interest of foreign investors. The new reform program seeks to revive Egypt’s growth prospects by restoring stability and confidence in the economy, and implementing structural reforms that will create jobs. As noted by IMF Ma- naging Director Christine Lagarde on announcing the measures that successive loan, “the program is by the governments had postpo- Egyptian government, for “God will also judge and so will ned, such as imposing a the Egyptian people, and history. All the difficult deci- value-added tax, capping to help the Egyptian eco- public sector salary increa- nomy.” sions that many hesitated to ses, cutting fuel subsidies, Egyptian President Ab- take over many years, that they and allowing the Egyptian del Fattah el-Sisi has en- pound to float so its value sured that he is committed were afraid to take, I will not halved against the dollar. to pushing through the re- hesitate to take for one second” While the immediate impact forms necessary to turn the of these actions has been a economy around, seemingly Abdel Fattah el-Sisi, President of Egypt spike in inflation, Mr. el-Sisi undeterred that one of major has sought to help the poo- facets of the plan is the slas- rest segments of society with hing of subsidies, a potentia- cash handouts and a govern- lly politically troublesome is- ment-funded food program. sue that previous administrations have thought best to avoid. As a positive consequence of the measures in the short- “It is not only you who will judge me,” said President el- term, the Egyptian finance ministry is aiming for an econo- Sisi addressing the nation on the reforms. “God will also judge mic growth rate of 5% in the next financial year, according and so will history. All the difficult decisions that many hesi- to its 2017/18 budget (up from 4.3% in 2016). The ministry tated to take over many years, that they were afraid to take, I also hopes to reduce the budget deficit to 9.5% of GDP, and will not hesitate to take for one second.” the total public debt to 94%, while targeting an unemploy- And President el-Sisi hasn’t gone back on his word. Just ment rate of 11%, down from the current 12.6%. With fur- since October 2016 the government has implemented tough ther sound implementation of the reform program, growth The Worldfolio - Egypt 64

could rebound to 6% by 2021 – similar to the levels in 2005- 2010 – according to the IMF. In terms of long-term economic strategy, then there is Egypt’s Vision 2030 too, of which the final draft was also outli- ned during 2016 by President el-Sisi. The government’s sustainable development plan for the next decade and a half aims to raise GDP growth to 12% by 2030 and expand the contribution of the private sector to 75% of GDP up from 60%. Additionally, the unemployment rate is targeted at 5% in 2030 (down from 12.8% in 2015), while the population poverty rate should fall to 15% (down from 26.3%). On unveiling these ambitious plans, President el-Sisi pointed to the developmental progress already made by his government over the previous 24 months, including the 5,000-kilometer national road network currently under construction, the state’s success in addressing its power shortage problem (new power added to Egypt’s national grid by the end of 2017 will amount to half of the country’s total generating capacity), as well as the fulfilment of the New Suez Canal project. The Vision 2030 program, which aims to revive Egypt’s leading role in the Arab world, is not just a purely economic strategy however. Aside from sustainable economic development, the program aims to turn Egypt into a fairer, more interdependent so- the nature of the Egyptian people.” ciety, characterized by equal economic, Mohamed S. Younes, Chairman of one social, and political rights. “We are a nation of the leading fund managers of Egyptian Whether Egypt can achieve such securities, Concord International Inves- lofty ambitions remains to be seen over that has devel- tments, agrees. “We are a nation that has the coming decade or so. But one thing oped a survivor developed a survivor culture,” he says. that is for certain is the immense poten- “We’re the only country that has nowadays tial the country holds. It has a dynamic culture. We’re almost the same borders we used to have and young population, a large market the only country 5,000 years ago. That’s got to tell you so- size, a favorable geographic location, mething.” as well as access to important foreign that has nowadays Mr. Younes particularly believes that markets, while the opening of the pa- almost the same the key to the nation’s future success lies rallel Suez Canal, large investments in with its large youth population. “We’re a the energy sector, and the discovery of borders we used country with 90 million people; and this a major gas fields also bode well for to have 5,000 years is growing at a fantastic rate,” he stresses. Egypt’s development. “Twenty-seven percent of the population Despite the many internal and ex- ago. That’s got to is under the age of 30, which is such a ternal challenges affecting the country, tell you some- tremendous resource. Embracing this the you can always count on Egyptians to right way and taking advantage of it is the show remarkable grit and determi- thing” greatest challenge.” nation too, affirms Osama Bishai, the The New York-based Con has seen Mohamed S. Younes, Chief Executive Officer of one of the Chairman, Concord first-hand the interest of U.S. investors in Middle East’s leading construction and International the Egyptian market. engineering firms, Orascom Construc- Investments “In the last year, Concord generated tion. two billion dollars by selling [Egyptian “Egypt has always been a country companies] Amon and Bisco Misr, which where growth expansion and achieve- were both sold to U.S. investors. It’s a ments are made by real hard work,” he matter of timing, investors are prepared says. “We never had sudden influxes of wealthy oil discove- to come to the market. ries. It’s all done through hard work, focusing on markets and “We will keep buying the companies and offering them, creating value. that’s what we do. We are interested in managing money. We “Egypt also represents a huge consuming market of cu- want to be the best at what we do, which is investment ma- rrently 90 million people. And you can see that over the years, nagement, and we want to do this by being completely focu- when its people and organizations went through tough times, sed. So, we’re not jumping and venturing into buying banks or they’ve weathered through and sustained their existence. It is brokers, we’re not interested in the headlines.” 65 The Worldfolio - Egypt Egyptian construction industry ‘most prosperous’ in MENA region HSBC has named Egypt’s construction industry, which is predicted to grow by more than 8 percent annually, the most prosperous the Middle East and North Africa

Egypt’s development aspirations in the In January, U.S. investors traveled to experience average annual growth of 8.24% run up to 2030 will depend heavily on the Egypt to look at opportunities at another between 2016 and 2020. “The growing nation’s builders. Building a sustainable and grand venture of the el-Sisi administration – number of public-private partnership (PPP) diversified economy and a better future for the New Suez Canal Economic Zone (SEZ), projects and the increasing pace of foreign the Egyptian people, as envisaged in the Vi- an enormous project which aims to trans- investment will also drive industry growth sion 2030 plan, requires building new roads, form the land around the newly expanded over the forecast period,” the report stated. power plants, schools, affordable housing Suez Canal – an important global shipping Also driving growth is Orascom Cons- and even entire new cities. waterway connecting the Red Sea and Medi- truction. The largest construction company Since President Abdel Fattah el-Sisi terranean Sea – into a transport, logistics and in Egypt, Orascom has a diversified pro- came to power in 2014, a large number of manufacturing hub. ject portfolio, and is heavily invested in the construction mega projects have been laun- Megadevelopments such as the SEZ power sector, supporting the nation’s rapidly ched, attracting billions of dollars of inves- and the new capital city, as well as a number growing demand for electricity. In January, tment from abroad. One of the country’s of other large-scale housing, transport and it was announced that Orascom will form flagship projects entails building a brand- power projects, are why Egypt’s construction part of a consortium to develop the Assiut new capital city 28 miles east of Cairo. In Oc- industry has been named the “most prospe- and West Damietta combined-cycle power tober, the Chinese state-owned China For- rous” in the Middle East and North Africa plants, costing a combined $650 million. tune Land Development Company signed (MENA) by HSBC in a regional construction Orascom is also involved in the $8 billion a deal to provide $20 billion of the total $45 report released in January. Another report New Capital power plant project, which billion needed for phase one of the project, by Timetric released last August predicts will have a generation capacity of 4,800 me- which commenced in February 2016. that the Egyptian construction sector will gawatts once completed. The Worldfolio - Kenya 66 67 The Worldfolio - Egypt

‘We have to change this mindset as private sector investment is key for Egypt’s growth’ Orascom Construction is a leading Egyptian developer, whose project portfolio spans the globe. In this interview with The Worldfolio, CEO Osama Bishai discusses Egypt’s fast-growing construction sector, changing the mindset towards private investment in the country, and developing human resources for the nation’s sustainable growth

Regarding Egypt’s capacity to get back on its feet despite both internal and external challenges affecting the country, its people are seen as key here. Where do the Egyptian people get this re- siliency from? First of all, Egypt has always been a country where growth expansion and achievements are done by real hard work. We never had sudden influxes of wealthy oil discoveries. It’s all done through hard work, focusing on markets, creating value. Egypt also represents a huge consuming market of currently 90 million people. And you can realize that over the years its people and organizations went through tough times, but weathered through and sustained their existence. It is the nature of the Egyptian people.

The construction sector in Egypt is growing now at a rate of 8 percent, which is in line with the Osama Bishai, CEO of Orascom Construction big infrastructure needs that the country has. Nevertheless, there has been some problems that in order to drive the growth in power issue about convertibility, about being able to with implementation of some infrastructure availability and resolve the power problem repatriate your dollars, so let’s say there’s a projects in the past year. Could you describe in Egypt, they needed to be able to promote cloud there. We are also unfortunately being what the current challenges are in Egypt’s in- Egypt as the center of attraction for the major limited by the perception of the construction frastructure development? manufacturers. They closed one deal after business, because there has been a lot of bad There are many. Number one is availabil- another to generate this climate that attracted results generated by some of our peers in the ity of funds. There are not enough funds for investors and manufacturers. So, I think the region. Basically, what we would like to do all projects. Second is how to prioritize the challenge here is on how to replicate this and our plan is that hopefully this year we needs of infrastructure projects. The third in all the other segments of infrastructure will not have any surprises like what we had challenge is how to create attraction for development. in Iowa last year. That I think is our first step the segments of infrastructure. If I take for Finally, one important challenge for us to regain confidence because they need to be instance power generation, which is doing is the mindset. We need to erase the notion confident in our business. successfully, the government understood that the government will do everything on its The second is that we would like to own, because they can’t. They must acknowl- push very hard on several local opportuni- edge that private sector investment, whether ties as we start to invest in certain equities “The positive impact of our it’s local or international, or a combination of like our business model. Whether they’re projects makes us proud. both, is the best way to complement the gov- infrastructure opportunities or something Nobody remembers that ernment plans. We have to change this mindset else, the idea is to drive the confidence that we’ve done that but for us it as private sector investment is key for Egypt’s our model is exactly what we’re trying to growth. This is probably the core issue to solve. do. For us, this year I think the best thing to is extremely satisfactory to do is focus on making sure we deliver high realize that we’ve improved the In the big context of you having the credibility quality and it should be done. Investment in quality of life of people in the and track record to attract, for example, $1 bil- equities are long term, not short. We would places we’ve worked. Leaving lion of investment from an investment group actually like to see steady firm growth as you a print wherever we go and led by Bill Gates, or Goldman Sachs, what are grow the share value. contributing to community you doing to improve investor’s confidence in your stock? In the context of iconic buildings and of all these development while doing good That’s a very difficult question because un- projects that you are involved in, we have to business is great for us” fortunately we are bound by the number one, talk about the Grand Egyptian Museum, which the market sentiment for Egypt. There’s a big will open in 2018. The Worldfolio - Kenya 68

Egyptian history is the only one with its We need to realize that Egypt is beyond our own science: Egyptology. There is a huge borders. And by this, I mean the number of “There is a huge number of number of people that will look at the Egyptians abroad that are top professionals museum as a new target. The museum in their sectors that we’re missing here. people that will look at the will just simply unleash a demand that Successful and well prepared Egyp- museum as a new target. was not there. This is one thing. The tians are finding their ways elsewhere in The museum will just simply second is that even tourists who have the world, but not in their own country. unleash a demand that was already come to Egypt, who have been to We need to develop our human capital. not there. This is one thing. the other Egyptian museums, will come Think about it, we are 90 million people. The second is that even tourists again as they’ll be thrilled to explore this If we manage to create a top-notch 10 whole set up under a completely new and million, we could achieve major things who have already come to different atmosphere. The best tourists in less time… become more competitive. Egypt, who have been to the are the people who repeat the visit be- It’s common sense. There’s all the poten- other Egyptian museums, cause they find more reasons to. There tial. We just have to invest more in them. will come again as they’ll be is a lot of potential around the opening The game of sustainability is people. And thrilled to explore this whole of the Museum. We could announce that let me tell you, the reason why we are set up under a completely new 2018 is the year of the museum and there successful as a company is because we will be a big promotion campaign around have top quality professionals. and different atmosphere” it. Egyptians need to make a great deal from it by generating attraction. It’s a Finally, what is your opinion on the role major opportunity. Orascom has played in Egypt’s development? capital is being done through the plant We’re extremely proud of what we have that we built. So, the positive impact of What do you believe is needed to make done here and what we can still do. Actu- our projects makes us proud. Nobody Egypt’s growth sustainable? ally, we feel better because we’ve done remembers that we’ve done that but for First of all, the change of mindset that we things also that are not just showy. We’ve us it is extremely satisfactory to realize discussed before. The other key factor is done things of real value to the to the that we’ve improved the quality of life of investing in people. Because I believe the society. Not only in Egypt. In fact, we’ve people in the places we’ve worked. Leav- only way we can sustain value creation and built the desalination plant for Algeria, ing a print wherever we go and contrib- growth is through having the best human for the capital. Basically, since 2008 or uting to community development while capital. We have a major challenge here. 2009, every drop of water in the Algerian doing good business is great for us.

The new Grand Egyptian Museum, which will open in 2018 69 The Worldfolio - Egypt The Worldfolio - Sierra Leone 70 ‘Electricity is everybody’s business’ Henry O. Macauley, Sierra Leone’s Minister of Energy, sits down with The Worldfolio to discuss plans to increase power supply in the West African nation in order to achieve sustainable economic growth

What should be the role of the energy sector Conventionally, we see that demand creates in Sierra Leone’s plan to reach middle-income supply. However, with electricity we have status by 2030? experienced the opposite seeing that supply Energy as a significant enabler has a key role creates more demand. to play in both our current economic recovery In order to guarantee electricity provi- and in our vision to reach the middle-income sion, a holistic approach must be taken, in- status. Energy is also critical for the develop- cluding regulatory reform, a powerful and ment of a country and the stimulation of its diversified generation system and good trans- economy to grow. In Sierra Leone, we need mission and distribution networks. The area to provide the foundations of an environment in which we are lagging at the moment is in where businesses can operate and thrive. The generation. It is unfortunate that we have not post-Ebola Recovery Strategy and the Agenda made as much progress as we should, given for Prosperity as initiatives launched by our the amount of effort, creativity and energy President, are directed towards enabling Si- we have put into developing our generation erra Leoneans to make the necessary leap capacity. forward. However, entrepreneurs still face We have experienced several constraints extra difficulties as they do not have sufficient that delayed our plans. Nevertheless, we have access to electricity. also seen several achievements starting with In 2014, when I took office, the President “Also in education energy an increase in the customer awareness and gave me the mandate to increase the country’s customer service of the energy sector. One of plays a fundamental role. power generated capacity from the existing my mantras is “Light is a Right” as we con- 100MW to 1000MW. We elaborated a very We have been observing that sider that to have electricity is a right. Another clear Energy Strategy Plan to achieve it. Our students coming from areas of my mantras is “Electricity is Everybody’s vision was that this electricity would not be Business”. Now, in Sierra Leone, we do not without a reliable electricity only directed to supply individual customers have electricity consumers anymore; we have that want to use their appliances, but would supply are not consistent customers. also extend to industrial customers which performers at school due to Until 2014, the national utility company are a key support pillar for our economic was government owned. On its privatization, lack of continuous electricity. recovery. With available electricity, we can it was unbundled by separating the genera- stimulate investment; energy is a major factor Energy is thus fundamental tion and transmission operations from the when decision-makers study future options. for a brighter future for our distribution and supply operations; a model With a reliable supply of energy, operational which has proved successful in other African country” costs will decrease. Presently, the industries countries like Nigeria and Ghana. in Sierra Leone, such as the breweries and The newly established utility companies manufacturing factories, have to rely on their the quality of the product before shipment. It have therefore had to look for their own in- own generating plants. Implicit in this are is a good business for everybody and at the come and become self-sustained. A regulator costs and labor associated with the purchas- same time, jobs will be created. was also established for the sector. Guiding ing of the plants, their maintenance and es- Also in education energy plays a funda- the mindset of the new utilities into a busi- pecially, buying fuel oil or diesel on a daily mental role. We have been observing that ness driven one was a major challenge I faced basis. This increases the final cost of the out- students coming from areas without a reli- when I arrived at the Ministry. Now, faults are put. Aside from the big industries, our larger able electricity supply are not consistent per- repaired faster: the loss of income is better pool of smaller entrepreneurs need energy formers at school due to lack of continuous appreciated as it is directly linked to the sala- too, from the women that sell cold beverages electricity. Energy is thus fundamental for a ries of the employees. Government subsidies to the man doing carpentry work. brighter future for our country. are also being eased out because our current We must not forget our mining sector, system has become performance based. This which also requires substantial amounts of With your government being aware that reli- is an important achievement. The appetite for energy. It is not a secret that Sierra Leone has able, affordable and accessible power is the electricity is also growing as we have seen a large amounts of iron ore and other mineral cornerstone of your economic development, multiplication by ten in the figures of people resources. However, the cost of extraction your Ministry launched a five-year roadmap requesting new connections. This is a result today here is greater in part due to the lack to increase the generation capacity. This plan of the increasing expectations created by our of a reliable and affordable source of energy. requires a structured approach to private in- new model. When this is resolved, we will be able to at- vestments in the sector. What have been the tract new foreign investors that will consider policies of greatest success and where do you Over 650,000 tons of crop wastes are produced installing smelting plants locally, improving see the greatest need for improvement? annually having a high annual energy potential “Foreign investors will be project. With the support of JICA (Japan In- agreement. How would you like Sierra Leone ternational Cooperation Agency) we are also to be perceived by UK investors? interested to learn that the presently rehabilitating the network in the The UK has staunchly supported Sierra Le- government is reviewing the west (11kv and 33kV lines). In the provincial one through every step from crisis to recov- national Electricity Act. It is towns, much needed rehabilitation and ex- ery and forwards to development. I believe pansion work is planned for the Bo-Kenema it is because the UK recognizes that the Si- expected that one of the key Axis (DFID and AFDB funded). erra Leone Government is serious about aspects in the review process Foreign investors will be interested to changing the trajectory of its progress. For will be the consideration learn that the government is reviewing the energy in particular, this has been shown national Electricity Act. It is expected that by us being the first country to sign an en- given to private investors that one of the key aspects in the review process ergy compact agreement and do so with will open new opportunities will be the consideration given to private in- the UK. UK investors should therefore see to invest in the development of vestors that will open new opportunities to this as evidence that Sierra Leone is open invest in the development of our transmis- to developing clean and renewable energy our transmission network” sion network. and that we welcome businesses looking to enter the market to provide energy supply Beyond interconnection, off-grid technology and support services. of more than 2,500 GWh that can be exploited will also play a vital role to the rural Sierra for cooking, lighting and motive power ap- Leone population, where currently less than What is the final message you would like to plications. What are the recent developments 1% have access to power. What are the in- give to our audience? of your Ministry regarding biomass? vestment opportunities arising in this needed We must not underestimate a nation’s appe- The Addax Bioenergy Project is one such off-grid technology? tite for electricity. It cannot be said that the project the Government has welcomed. It The majority of our population uses solid fuels manner in which one country increases its produced sugarcane ethanol and offered re- and coal to meet their basic needs, yet causing demand for power will be mirrored by an- newable electricity from the biomass to power detrimental effects to their health. To provide other. The telecoms sector in Sierra Leone is its operations and provide the excess energy access to clean and renewable energy, the En- a case in point that proved wrong all expert to the national grid. ergy Africa Campaign was launched in Sierra assumptions and growth forecasts. As with many other businesses at the Leone in collaboration with the Government Today technology has not bypassed time, the project was affected by a number of the United Kingdom, at the Energy Revolu- Sierra Leone and our young are as hungry of unexpected problems including the Ebola tion Expo held in May 2016. for more gadgets as any other. Even in the outbreak in May 2014. Presently the project The Compact outlines bold energy ac- most rural of communities, charging sales has been transferred to a group of investors cess targets: Power for all citizens by 2025 (5 kiosks for mobile phones are prevalent and led by Sunbird Bioenergy Africa. We hope the years ahead of SDG7 and Energy Africa Access notwithstanding the high cost per charge to project can now realize its objectives and posi- Campaign target of 2030) and modern power the consumer. tively contribute to our clean energy goals. to 1 million people in Sierra Leone by 2020. It is therefore important that any support The Rural Renewable Energy Project to be given by a third party or donor agency Of course, generation is just one part of the sponsored by the DFID and implemented by looking to assist our development plans must chain to achieve a reliable supply of energy. UNOPS is an example of a project meeting the support us not according to their assumptions Transmission is critical too. Access to the Compact objectives. This year, the project will and past experiences elsewhere but based West Africa Power Pool (WAPP) has proven provide more than 50,000 homes with solar on a model tailored and sensitive to us. The critical in ensuring the required energy sup- units and increase access to public services model has to capture our unique character- ply for Sierra Leone’s demand for power. The through the electrification of priority insti- istics and variances as well as our aspirations interconnection with Côte d’Ivoire, Liberia tutions such as Community Health Clinics, and dreams. In short, any support must be to and Guinea was due to be completed this year. schools and agricultural business centers help achieve our agenda and not theirs or any What is the current status of this intercon- through 6kWp PV installations. At least 5,000 other. Do not starve Africa of energy. nection? Looking to Sierra Leone, what are solar lamps will also be provided to potential the main improvements that you have imple- customers on a pay-as-you-go basis to further mented in the transmission network? What increase the interest in solar products. are the biggest opportunities for foreign Additionally, through private investors “The UK has staunchly investors in this regard? including the Renewable Energy Associa- supported Sierra Leone At present, the WAPP Project Agreement has tion of Sierra Leone (REASL), various models through every step from crisis been signed by the Ministers of the CLSG have been developed to provide nationwide countries (Côte d’Ivoire, Liberia, Sierra Leone access to energy through solar home systems. to recovery and forwards to and Guinea) and it is expected that construc- A number of opportunities remain for other development. I believe it is tion for the lines will commence by the second investors, as we are still a long way from because the UK recognizes quarter of 2017 and be completed by the end achieving our rollout target for 2017. of September 2018. that the Sierra Leone For the transmission network, last year The UK is not only Sierra Leone’s largest donor Government is serious about we concluded an upgrade on a key network in but also one of your key trade and investment changing the trajectory of its the east of Freetown providing much needed partners. In the energy sector, Sierra Leone access to over 20,000 homes. This was an IDB was the first country participating in the UK’s progress” (International Development Bank) funded Energy Africa campaign to sign an energy The Worldfolio - Sierra Leone 72 73 The Worldfolio - Japan JAPAN LOOKS to grow its presence across Africa Between 2016 and 2018, Japan has pledged to invest $30 billion in Africa’s development, as it bids to join the likes of China and the US in the battle for influence on the continent

Competition in Africa is heating up, with it by 2023. He explicitly endorsed Africa’s Japan aiming to increase its presence and ambition for a permanent presence on the influence on the continent as it looks to Council. make up ground lost to China since the turn of the century. Energy and Mining Japan launched the Tokyo Interna- Expanding electricity access is key to Af- tional Conference on African Develop- rica’s development aspirations, and thus ment (TICAD) back in 1993, and since is a major pillar of Mr. Abe’s plan, which then has invested around $50 billion in aims to increase Africa’s power generation Africa, a meagre sum when compared to capacity by 2,000 megawatts and bring China and the US. electricity to 3 million homes by 2022, But that figure is set to increase by 60 through investments in a range of hydro, percent in the space of just three years. solar, coal, gas and geothermal projects At the sixth TICAD summit in the Kenyan throughout the continent. capital of Nairobi last August, Japanese Some Japanese-backed power proj- prime minister Shinzo Abe pledged to in- ects include hydropower plants in Uganda vest $30 billion in Africa’s development by and Madagascar, the Takoradi II gas-fired 2018, with $10 billion being earmarked plant in Ghana and a coal-fired power for infrastructure projects in education, plant in Safi, Morocco, which will pro- energy, urban transport (roads and ports), duce 1,386 megawatts, or 25 percent of the health and agriculture. This was the first country’s needs. time the event took place in Africa, which “We need to move Koyo Corporation announced last is symbolic of Japan’s newfound interest in ahead with investing year it plans to build a 1,000-megawatt deeper engagement with African nations. for the future of gas-fired power plant in Tanzania and is “We need to move ahead with invest- also looking to invest in solar power plants ing for the future of Africa. Africa and Ja- Africa. Africa and in the country. In January, a Tokyo-based pan will work together. Japan will launch Japan will work to- solar company signed a memorandum of various initiatives that will support Africa gether. Japan will understanding with Kitui County, Kenya in different sectors including infrastruc- to develop the first Japanese solar project ture,” Mr. Abe said at the summit. launch various initia- there. Aside from growing trade and invest- tives that will sup- Meanwhile, general trader Marubeni ment ties, Africa and Japan share political port Africa in differ- will a build fossil-fuel plant in Nigeria’s alignment particularly in relation to UN Lagos state. The plant, estimated to cost Security Council reform. “Reform of the ent sectors including around $1.9 billion, will be Nigeria’s larg- United Nations Security Council is truly infrastructure” est when fully built, with a capacity equal a goal that Japan and Africa hold in com- to 15 percent of the national total. Con- mon,” said Mr. Abe, who called on all Af- Shinzo Abe, struction will begin in 2018, with power rican states to work with Japan to achieve Prime Minister of Japan production to start in 2021.

75 The Worldfolio - Japan

Japan aims to increase Africa’s power generation capacity by 2,000 megawatts and bring electricity to 3 million homes by 2022, through investments in a range of hydro, solar, coal, gas and geothermal projects throughout the continent

Japanese players in the geothermal sector are seeking to boost geother- “Japan aims to expand opportunities to bring mal capacity in East Africa from 600,000 kilowatts to more than 1 million about a mid-to-long term stable supply of mineral kilowatts, as part of the Power Africa programme, an initiative launched by resources from Africa,” read a statement released by former US president Barack Obama in 2013. Japan joined Power Africa last the Japan’s Ministry of Economy, Trade and Industry year, following the signing of a partnership agreement between the Japanese last year. Ministry of Foreign Affairs and the U.S. Agency for International Development In February, Japan signed a cooperation agree- (USAID). Other partners of Power Africa, which has leveraged nearly $43 bil- ment with mineral-rich South Africa, which allows lion in commitments from the public and private sectors, include the African the two nations to collaborate in a number of areas Development Bank (AfDB), The World Bank, Sweden, Canada, Norway, the across the mining value chain. United Kingdom and the European Union. “With the agreement, the two countries ac- With almost no oil or gas resources of its own, energy security is a top knowledge that Japan, as an important consumer and priority for Japan, particularly after the closure of all of the country’s nuclear investor, and South Africa, as a supplier of minerals reactors following the 2011 Fukushima nuclear disaster. This is why Japan is and most importantly, a key participant in the min- making several big investments in oil and gas projects across Africa. eral beneficiation value chain, have complementary One of Japan’s largest trading companies, Mitsui Group holds a 20 per- interests in mining,” said South Africa’s Minster of cent stake in the Mozambique liquefied natural gas project (LNG) project that Mineral Resources Minis Mosebenzi Zwane. will eventually produce 50 million tons of LNG a year. Much of this produc- “Our country cannot grow exclusively on the tion is expected to be exported to Japan. In Tanzania, the Japan International back of supplying raw minerals to other nations. It is Cooperation Agency (JICA) and the AfDB are making a joint investment of $75 million in the country’s gas distribution network. Japanese companies tapping oil and gas opportunities are supported by Increasing Japan-Africa the Japan Oil, Gas and Metals National Corporation (JOGMEC), which pro- trade, which totalled al- vides financial and technical assistance, as well as offering up to 75 percent equity and taking on up to 75 percent of the liability in oil and gas projects most $20.2 billion in 2015, is during the development phase. JOGMEC provides financial backing of $5.2 an important priority for billion yearly for oil and gas M&As. It now has a particular focus on Africa, Japan. This will require where it is supporting Japanese companies investing in oil and gas projects in countries such as Mozambique, Tanzania, Kenya and Gabon. the expansion of shipping The Japanese government and JOGMEC also aim to step up financial sup- connections and invest- port to promote investment by Japanese companies in African mining, by ac- ment in Africa’s port and celerating bilateral meetings with each African country to bring more mining projects forward. This will help Japan to secure supplies of resources like logistics infrastructure coal, copper and rare earths needed to make electronic components.

77 The Worldfolio - Japan

Japan and Rwanda are fostering particularly strong ties in ICT. Last year, the Rwandan capital, Kigali signed an agreement with the Japanese city of Kobe to recruit over 1,000 ICT engineers from Rwanda. Under the deal, the two cities also agreed to collaboration and will exchange innovations in industries and research findings from their academic institutions. Kobe City also partly funded the establishment of k-Lab, an ICT incubation hub in Kigali, where a number of young Rwandan tech entrepreneurs have successfully managed to develop and sell ICT products. Health is another important factor of the Japan- Africa plan, and part of the $30 billion pledged by Prime Minster Abe will be used to develop robust health systems, through investment in hospitals, clinics and the training of healthcare professionals. The Japan Centre for International Exchange (JCIE) seeks to leverage on Amref Health Africa’s six decades of experience in Kenya to gain insights into An increasing number of Japanese companies are venturing into Africa the Kenyan health sector. “The corporate sector has unique resources that in this context that we wish to invite Japanese companies to invest in South can be applied to addressing health challenges, re- Africa’s downstream mineral development industries, effectively manufactur- sources that are different from those of the governing and beneficiation as well as production of goods and supply of requisite mental and non-profit sectors. Japanese companies services.” have increasingly been applying those resources while recognizing that investing in health is also a Ports good investment in their bottom line,” said JCIE. Increasing Japan-Africa trade, which totalled almost $20.2 billion in 2015, is an One Japanese company that has so far made an important priority for Japan. This will require the expansion of shipping con- investment in the Kenyan health sector is Toyota Tsu- nections and investment in Africa’s port and logistics infrastructure. sho Corporation (TTC). Last November, through its The Japanese government is investing $255 million in the second develop- subsidiary Tsusho CSV Africa Pte. Ltd. (CSV Africa), ment phase of Port of Nacala in northern Mozambique. The project will ex- a social contribution-oriented venture development pand the capacity of the port to more than 250,000 twenty-foot-equivalent units fund for Africa, TTC signed a capital investment con- (TEUs) and 5 million tons of cargo per year by 2020. Japan also financed the first tract with Kenyan ICT company Seven Seas Technol- phase of the project, which included the construction a new railway terminal, ogies Limited (SST). a project that was awarded to Japanese company Penta-Ocean Construction. SST will use the money to invest in medical in- In Kenya, JICA has provided financing for a new container terminal at the frastructure, healthcare programs and solutions for Port of Mombasa. The $297-million facility can handle 550,000 TEUs and ramps enhanced management of healthcare institutions and up Mombasa’s existing annual cargo handling capacity to 1.6 million TEUs. resources. Over the next five years, V CS Africa will In February, a trade mission made up of eight major Japanese companies share in SST’s formative vision to enhance the quality, travelled to Namibia in southwest Africa, where they are interested in investing cost and accessibility of health services in contribu- in the Wallis Bay International Logistics Hub project. tion to Kenya’s development.

Education and Health Aware of the need to develop strong human resources, Japan is supporting Af- Health is another impor- rica in the field of education and training, mainly through the African Business Education Initiative for Youth (ABE), which, based on the Japanese principle tant factor of the Japan- of kaizen (continuous learning), will provide education and training to African Africa plan, and part of foremen, plant managers, worksite leaders and 30,000 student engineers, while the $30 billion pledged by 1,500 business executives will receive training in Japan. This programme offers opportunities for young and eligible African men Prime Minster Abe will be and women to study at Master’s courses in Japanese universities as interna- used to develop robust tional students and to experience internships at Japanese enterprises in order health systems, through to develop effective skills and knowledge in various fields for contributing to the development of industries in Africa. investment in hospitals, One country currently benefitting from the ABE initiative is Rwanda. Sever- clinics and the training of al Rwandan ICT experts have gone on scholarships to Japan, in order to acquire healthcare professionals hands-on skills in information and communication technology as part of efforts to strengthen economic ties between the private sectors in the two countries. The Worldfolio 78

Africa financial services: No place for copy-paste

With around 80 percent of Africa’s adult population lacking access to formal financial services, the financial services landscape in Africa is unique in both its challenges and the opportunities it presents. What works elsewhere won’t work here

American banks since the crisis. They have supported the growth of individual countries with better products and services. They have advanced economic integration and helped foster financial inclusion, they have leveraged technologies, including disruptive ones—witness the great gains of mobile banking in Kenya.” But with the positive changes these banks have brought about have come regulatory headaches, in particular the need to strengthen supervisory oversight on a consolidated and cross border basis and improve internal controls and transparency. Recent years have seen African financial sector regulators step up to address these new challenges, cooperating with their counterparts across the continent as they upgrade supervisory procedures and practices. Nonetheless the overall reach of commercial banks, mea- sured by ATMs and physical branches versus population, remains well below global averages. With low household incomes and often scattered rural populations, the traditional operating model of a bank just doesn’t make finan- The benefits of financial inclu- cial sense in Africa. sion for pro-poor and inclusive “Since the global financial crisis, pan- But with rosy prospects growth in Africa are well known, African banks and other institutions for economic growth over the but there are still 330 million coming years, the financial have become important features of adults – the majority of the Af- sector is considered to be one rican adult population –without the continent’s financial landscape. of the continent’s brightest access to the financial system, They are one more piece of evidence prospects, which is why many which signifies tremendous op- players seek to explore alterna- of the region’s dynamic changes” portunities for financial services tive operating models to bridge providers that are ready to em- the financial inclusion gap in brace them. Christine Lagarde, IMF Managing Director Africa. As Africa grows and devel- Governments, too, cogni- ops, its rising middle class have zant of the potential of broad- become a driving force in its ening and deepening the sec- growing financial services industry. To meet their needs, African tor, have thrown open the doors to investors. Policy reforms over banks, such as Togo-headquartered Ecobank and Nigeria-based the past decade have contributed to an environment more condu- United Bank for Africa, have expanded their footprints into new cive to financial sector development, with many countries putting countries, in many cases picking up where American and Euro- in place regulatory frameworks and information systems aimed at pean banks, which pulled back from the continent post-financial enabling and facilitating further development. crisis, left off. As a result, new initiatives have popped up, each addressing Speaking in February at the IMF Conference on Cross-Border a particular pain point. The most obvious of these is the M-Pesa Banking and Regulatory Reforms in Mauritius, Christine Lagarde, system. Springing up in Kenya in 2007 thanks to a loose regulatory IMF Managing Director, said, “Since the global financial crisis, structure which enabled mobile telephony providers to act as fi- pan-African banks and other institutions have become important nancial institutions, this mobile money service now counts almost features of the continent’s financial landscape. They are one more 20 million active users in the country, out of a total population of piece of evidence of the region’s dynamic changes. These institu- 47 million. The service, which allows users to deposit money into tions have filled the gap left by the retrenchment of European and an account stored on their cell phones, to send balances using text

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tor looking to enter an African market, an understanding of the system they are looking to disrupt, the cultural nuances of the country and how potential customers interact with money is vital. To this end, many banks, who have the advantage of knowing their local market well, are linking up with fintech providers who can provide the last-mile reach into underserved markets. Initia- Today, the entire African mobile tives such as the annual Barclays Africa Accelerator, which first money market is forecast to reach took place in Cape Town, South Africa last year, give fintech start- $14.3 billion by 2020, up from $2.7 bil- ups the opportunity to participate in a 13-week program to scale up their ideas and tap previously untapped customer segments. lion in 2015, with more than 100 mo- The difference between African fintech and fintech in the bile operators in Africa launching rest of the world is that African fintech isn’t disrupting the finan- mobile money services, according to cial industry; it is building it, since in many areas of the continent there is nothing there to disrupt in the first place. The opportunity, The Advanced Payments Report 2016 therefore, is to construct a whole new infrastructure, tailored to the unique needs of African customers. The race is now on for financial services companies to find new and innovative ways to get customers on board. As a result, investment is flooding into startups providing messages, and redeem deposits, has enabled even the most far- clever ways of offering financial services. According to Disrupt flung of Kenyans to access the formal financial system. Africa, a portal for start-ups and accelerators across the region, Today, the entire African mobile money market is forecast to fintech start-ups raised a combined total of more than $31 million reach $14.3 billion by 2020, up from $2.7 billion in 2015, with more in 2016, or 24 percent of all the fundraising recorded in the course than 100 mobile operators in Africa launching mobile money ser- of the year, coming in ahead of both the health and the agricul- vices, according to The Advanced Payments Report 2016. ture sector. Successes are happening with growing frequency: for The services, which reduce transaction costs and facilitate example, Nigeria’s Interswitch, a digital payments and commerce personal transactions in the absence of traditional financial in- firm, is now valued at around $1 billion, a good way ahead of most frastructure, have also enabled the reach of microfinance, micro- banks in the country. It’s not just homegrown fintech firms which credit and microinsurance products, with mobile wallets function- are doing well: American firm Paypal saw $610 million of pay- ing to all intents and purposes as bank accounts. The service has ments made by Nigerians on international shopping in 2015. bloomed to the extent that Africa has become almost a mobile- That is not to say that traditional banks in Africa have had only environment: fully 60 percent of all payments come from mo- their day. Foreign investors are increasingly looking to invest in bile devices on the continent, versus just 30 percent in the West. bricks-and-mortar financial institutions. Bob Diamond, former Because these mobile wallets offer better services at lower head of Barclays Bank, set up Atlas Mara, an investment vehicle, cost and at greater proximity to customers – gone are the days of with the specific objective of buying up African banks to create a a two-day walk into the nearest town to an ATM – there is likely pan-African conglomerate. It first bought BancABC, which oper- to never be a need for most Africans to adopt traditional banking ates in markets such as Botswana and Zimbabwe, for $265 million, services. Simply put, traditional banking products are not relevant and then followed up with stakes in Union Bank of Nigeria and to these customers. the Development Bank of Rwanda. Meanwhile, Norwegian de- However, in the same way that traditional banking products velopment body Norfund, Dutch bank Rabobank and private sec- cannot be copied and pasted into Africa from elsewhere, what tor development bank FMO have formed a $660 million financial works in one African country may not work in another. When services investment company, Arise, by combining investments in South African mobile operator Vodacom attempted to replicate M- financial service providers across more than 20 countries, includ- Pesa’s roaring success in East Africa in its home market, it was ing Kenya, Tanzania and Zambia. Starting this year, the company met with failure. Launched in 2010, it had only managed to garner plans to allocate new capital for investment in banks that serve 76,000 active users by 2016, and was scrapped. “Vodacom’s deci- retail and SME clients in eastern and southern Africa. Portuguese sion is based on the fact that the business sustainability of M-Pesa financial group Banco Montepio is tipped to join Arise shortly. It is predicated on achieving a critical mass of users. Based on our plans to expand into West Africa, investing $1 billion into domestic revised projections and high levels of financial inclusion in South financial companies. Africa there is little prospect of the M-Pesa product achieving this In both traditional and non-traditional areas, Africa’s finan- in its current format in the mid-term,” the company said in a state- cial services sector is on the cusp of an enormous transformation, ment. Many reasons have been posited for M-Pesa’s lack of suc- and the gaping void between potential customers and the reach cess. Firstly, in South Africa, Vodacom was forced by regulatory of banks and institutions is ripe to be bridged. African countries constraints to partner with a bank to provide the financial service still lag far behind the rest of the world in the adoption of banking on its platform. What’s more, customers in South Africa already products, offering profitable opportunities for those who are able have an array of banking services and platforms through which to create solutions that suit the particular and unique needs of the to conduct their business, with the reported existence of a bank, huge unbanked population across the continent. branch or ATM within a 20-kilometer radius of any urban or rural settlement. The lesson learnt, somewhat painfully by Vodacom, is that in Africa, financial services are very market-specific. For any inves- The Worldfolio - Côte d’Ivoire 82 83 The Worldfolio - Côte d’Ivoire

CÔTE D’IVOIRE Africa’s fastest growing economy

Almost six years after the end of the Second Ivorian Civil War, Côte d’Ivoire has witnessed a successful and peaceful transition to economic growth, bucking regional trends with 8.5 percent GDP expansion in 2016

Côte d’Ivoire can comfortably be described as booming. Its near-unstoppable economic growth – 8.5 percent in 2016 – places it as one of West Africa’s largest economies. And this achievement is all the more notable given that it comes following over a decade of stagnation and conflict. Two successive civil wars marred the start of the 2000s, and divided the country into a rebel-held Muslim north and a government-held Christian south. The economic destruction the conflict brought with it is best illustrated by the fact that it even drove out the African Development Bank (AfDB) in 2004 from its headquarters in the economic capital Abidjan, where it had operated since the 1960s. The Second Ivorian Civil War came to an end in 2011, and under the watchful “We have started a new eye of the post-war President Alassane Ouattara, the country mandate that must mark began to flourish once more. The return to Abidjan in 2014 of a new departure in the the premier African financial institution was a “symbol of the renaissance of the Ivorian economy after a decade of reces- direction of state affairs. sion and a symbol of the reconstruction of Ivorian society,” The establishment of a according to former AfDB head, Donald Kaberuka, but it was new government will have the 2015 landslide re-election of President Ouattara which truly cemented the West African country’s bid to put the past better coherence as a goal behind it and revive its war-scarred economy. so the government can be “Indeed, the 2015 elections were a major challenge for more efficient.” Côte d’Ivoire,” says Hamed Bakayoko, Minister of the Interior and Security. “The country had to show that it has turned the page of the crisis, that it has turned the page of violent elec- Alassane Ouattara, President, Côte d’Ivoire tions and that it is projecting itself towards a more peaceful and brighter future. What do we intend to do to maintain this climate? Maintain dialogue…There is collaboration and increased investor confidence, while a focus on infrastructure exchange on all issues with the opposition. There is no dog- development – with power distribution and transportation at matic or fixed position. There is really the idea of creating a the forefront – lay the groundwork for the government’s stated calm environment so that the country can develop.” aim to transform the West African nation into an emerging With the peaceful vote seen as a big step in consolidating country by 2020. Early indicators are promising – according peace and economic confidence in the country, Côte d’Ivoire to IMF data, Côte d’Ivoire was the fastest growing economy of has proven itself capable of an astounding political transfor- the African continent and the third-fastest in the world in 2016, mation. Today, the country, the world’s largest cocoa producer, and the AfDB projects GDP growth of 8.3 percent for 2017. is a rare African bright spot, and while poverty rates remain “Côte d’Ivoire has experienced an impressive turnaround high despite surging export rates, President Ouattara has since 2011, with economic growth averaging about 9 percent pledged to create more inclusive growth by smoothing the per year. The economic outlook remains strong. The authori- way to greater investment. Tax breaks, customs duties cuts ties’ 2016-20 National Development Plan (NDP) appropriately and even compensation in the event of social unrest have prioritizes inclusive and sustainable growth, focusing on The Worldfolio - Côte d’Ivoire 84 85 The Worldfolio - Côte d’Ivoire The Worldfolio - Côte d’Ivoire 86 87 The Worldfolio - Côte d’Ivoire

Tax breaks, customs structural transformation and improv- duties cuts and the country in 2014, a 14 percent increase ing living standards,” said Dan Ghura, from 2013. And while the most fruitful the IMF’s mission chief for the country even compensation areas of investment for U.S. businesses following a recent mission. in the event of are in oil and gas exploration and pro- “We have started a new mandate that social unrest have duction, agricultural commodities and must mark a new departure in the direc- the mining industry. The country’s ex- tion of state affairs,” President Ouattara, increased investor panding middle class also presents an a former IMF official himself, said to confidence, opportunity for American retailers. When gathered media following his re-election. while a focus on a new shopping mall, West Africa’s big- “The establishment of a new government gest, opened to much fanfare in Abidjan will have better coherence as a goal so infrastructure in January last year, among the shopping the government can be more efficient.” development – with center’s tenants was American fast-food Confidence is growing among power distribution giant Burger King, which selected the the business community around Côte country as the location for its first res- d’Ivoire’s prospects. The country knocked and transportation taurant in the region. Nigeria from the top spot of Nielsen’s Af- at the forefront Today, political progress keeps on rica Prospects indicator (APi) overall re- – lay the coming. In May last year, President Ouat- sults in Q2 of 2016, and has since held on tara set up a committee of experts to pro- to its top ranking, making it a more stable groundwork for the pose a new constitution. Its key aims, African investment destination than the government’s stated which included setting up the position of larger economies of South Africa and An- aim to transform the a vice-president, establishing a senate, gola. Nielsen analysts pointed to its fa- and incorporating traditional leaders, vorable economic growth, stable inflation West African nation was seen by many as a solid move to- climate and recent elections as providing into an emerging ward the consolidation of constitutional a fertile investment environment. principles. While the November 2016 country by 2020 What’s more, for international in- vote was not without incident – opposi- vestors, opportunities also abound to tion party members boycotted the polls – develop partnerships with increasingly over 93 percent of voters elected in favor strong homegrown entrepreneurs. At the catalyst for growth and value creation of the new charter, which the president 2016 edition of the Africa CEO Forum, in the country, President Ouattara high- said would “help end years of instability”. held in Abidjan in March, and marking lighted that “the time has come for us to With the peace and stability that are the first time that the event has taken industrialize, which will see more jobs pre-requisites for economic growth now place on the African continent, Sébastien being created, and to accelerate the firmly in place, the government can get Kadio-Morokro, Chief Executive of local growth of the agro-industrial, textile and to work on returning the country to its oil firm Petro Ivoire, was named Africa’s mining sectors.” former status as West Africa’s regional Young CEO of the Year, recognizing the The Ivorian Government is keen to economic and financial powerhouse, potential both of Ivorian firms and their deepen economic cooperation with the by spurring on the private sector with leaders. As participants from the Ivorian United States, which accounted for $134 heavy investments in long-neglected in- private sector discussed their role as a million of foreign direct investment in frastructure. The Worldfolio - Côte d’Ivoire 88

Foreign investments in mining, oil and gas to drive future growth Amara Mining will invest around $430 million to build one of the continent’s largest gold mines at Yaoure, while Exxon Mobil returns to the country after a 32-year absence, with a planned $400 million investment in exploring the nation’s vast potential oil wealth

Located between Liberia and Ghana in the northwest corner of The Chamber of Commerce’s role, meanwhile, is seen by Africa, the predominantly agricultural Côte d’Ivoire, with its pop- Mr. Brou as a partnership between the state and operators, ulation of 24 million, is now also emerging as one of the conti- aimed at strengthening relationships with all investors. “This nent’s leading players in mining and in oil and gas production. department serves as a crucible for the promotion and devel- Together, these two industries represent 25 percent of the coun- opment of the sector,” he observes.” It also plays a role in job try’s GDP though they are still in their infancy, relatively speaking, creation and is especially beneficial for agriculture because it and production levels are modest – more on a par with Mali and engages in added-value transformation. Agribusiness is very Burkina Faso than with big guns like South Africa and Zambia. important. The Chamber of Commerce acts as a support to Recent events have not made it easy for Côte d’Ivoire to ex- other sectors as well.” pand in this sector. But after a decade-long Civil War that ended The country boasts a rich and lucrative abundance of in 2011 and had all but crippled the economy – further burdened minerals that include iron, nickel and gold – “more gold, in by embargoes placed on the country in 2005 by the UN which fact, than neighboring Ghana and Mali,” Mr. Brou is quick have only recently been lifted – things are finally beginning to to point out. look brighter. In 2014, 140 exploration permits and 11 produc- “Our iron reserves total 4 billion tons,” he adds, “and we tion licenses were issued. Gold, a major mining product, rose have nearly 260 million of laterite nickel and 60 million tons from 14 tons in 2012 to 25 tons in late 2015. of copper nickel.” Diamond mining is also a major industry in Côte d’Ivoire and a recently successful audit into this sphere of operations ensured integration into the Kimberley Process “From a modest production of around 36,600 which has greatly benefited progress in extracting the much- barrels a day we now expect to increase this treasured mineral. to 100,000 and then double that figure by Overall, it is gold that is proving one of the most poten- the end of 2020, thanks mainly to resources tially progressive areas, and over the next two years, one of several interested international companies, Amara Mining, is that have been discovered in our territorial scheduled to invest around $430 million in building one of the waters” continent’s largest gold mines at Yaoure, where they expect to extract over 325,000 ounces a year (spot gold is currently trad- Ibrahima Diaby, ing at around $1,200 an ounce). Managing Director, Petroci Mr. Brou hopes that U.S.-Ivorian business relations, in particular, will continue to expand as the country handles its international dealings with a new dynamism and strengthens Jean-Claude Brou, the country’s Minister of Industry and its bonds with all its investors. At the same time the country is Mining, has evaluated the current situation in this area. He carefully monitoring the standard of all its industrial and agri- acknowledges that for many decades the real force behind the cultural products in line with a 2013 quality control ruling. economy has been agriculture, with Côte d’Ivoire holding its position as the world’s largest cocoa producer and coffee and palm Oil and gas investments oil exports continuing to flourish. The mining industry, in turn, In spite of a series of recent severe problems, Côte d’Ivoire’s was given a real boost with the appearance of the revised 2014 oil and gas industry is also now tentatively moving ahead. Its Mining Code. “In order to create the conditions for increased in- guiding hand is the Petroci company, founded in 1972 and vestment in the sector it was absolutely necessary to review this re-structured 23 years later into Petroci Holding, with three code,” Mr. Brou explains. “The operators require a good return subsidiaries: Petroci Exploration-Production which handles that provides an adequate fiscal income for mining activity. It upstream gas and oil activities; Petroci Gaz, which is respon- has to be an economic activity, and the revised code allows the sible for the natural gas sector; and Petroci Industries-Services communities to benefit from the output from this, providing a which manages all other related services. Currently Petroci of- compass for investors, giving clear and specific references to en- fers up to 49% interest to private sector investors. It also covers vironmental constraints, the dimensions related to community the development and maintenance of the main data base for the development and governance framework.” country’s oil assets. 89 The Worldfolio - Côte d’Ivoire The Worldfolio - Côte d’Ivoire 90

The greatest of Petroci’s setbacks was a 75% loss of rev- explain, “but from the recommendations of a variety of differ- enues in 2015 when global oil prices plunged in just two years ent official audits carried out in 2013 and 2014.” (2014-2015) from around $110 a barrel to just $30 a barrel. Mr. Diaby also aims to relaunch natural gas projects with To ward off total financial disaster and safeguard its future a view to continuing the supply of thermic centers some of the company accordingly agreed to sell its petrol distribution which – such as those of Contourglobal and Starenergie – are network to Puma Energy, a Swiss-based private firm. As a pre- either already in operation or about to be set up. Other compa- lude to this, and following the recommendations of a thorough nies, including RAK and Foxtrot, are also currently involved in audit, 50 of Petroci’s 600 employees were made redundant marketing Côte d’Ivoire petroleum products, and, most signif- and a further 150 are expected to follow. Indignant workers icantly, two U.S. giants, Anadarko and Exxon Mobil are about recently launched a three-day strike protest at these radical to invest $30 million and $400 million, respectively, in key oil steps, but from the management’s viewpoint their tactics have projects for which productive partnership contracts (CPPs) paid off: projected earnings have now reached $30 million, a have already been signed. Anadarko will operate in an area figure that’s expected to put Petroci back on the right track of 1,028 kilometers in deep waters south of Abidjan. Exxon, economically. making a welcome return to the Côte d’Ivoire after a 32-year The newly streamlined industry has further ambitions absence, is providing an investment to cover initial explor- to boost its output, says managing director, Ibrahima Diaby. atory periods in various areas. These ambitious new projects “From a modest production of around 36,600 barrels a day we all augur well for Petroci and the country’s future. now expect to increase this to 100,000 and then double that figure by the end of 2020, thanks mainly to resources that have been discovered in our territorial waters.” “In order to create the conditions for increased Such an achievement would make Côte d’Ivoire a viable investment in the sector it was absolutely competitor to neighboring Ghana who are aiming at an output of 250,00 barrels by 2021. He’s optimistic about the company’s necessary to review the mining code. The future despite the recent withdrawal of their powerful Rus- operators require a good return that provides sian partner Lukoil, and feels the government’s decision to an adequate fiscal income for mining activity. privatize Petroci will help it regain its former stature thanks to It has to be an economic activity, and the the Puma Energy intervention which has helped the company revised code allows the communities to acquire several service stations. benefit from the output from this, providing a Mr. Diaby sees Petroci as performing an important social and economic role for the country during the next half decade. compass for investors, giving clear and specific “One of our key projects is the future acquisition of an offshore references to environmental constraints, the gas field, which will provide a significant supply of electricity to dimensions related to community development the country’s business centers.” His strategy is to concentrate and governance framework” on the exploration and production of petroleum and maintain the presence of petroleum oriented companies in off shore ac- Jean-Claude Brou, tivities. “These measures don’t stem from me,” he’s careful to Minister of Industry and Mining 91 The Worldfolio - Côte d’Ivoire The Worldfolio - Côte d’Ivoire 92 Co coa production to lead agricultural sector

Côte d’Ivoire‘s agricultural sector is key to its economy and following recent growth, international investment is now being sought to power further development

Agriculture has become a mainstay of Côte d’Ivoire’s economy contributing nearly a quarter to its GDP, but a revamped strategy looks set to ramp that up further over the coming years. The agricultural sector, which is dominated by products such as cocoa, coffee, cashew nuts and cotton, accounts for at least 50 percent of the West African nation’s exports and is estimated to support between 60-70 percent of jobs in the country. Reforms have already been made in order to make the market sustainable and ensure revenues are more stable through the introduction of a forward auction market. The system was introduced in 2011 by the Conseil Café Cacao (CCC), which manages the regulation and development of the coffee and cocoa sector and replaced the previous system of spot sales, and sees grinders and exporters bidding for export licenses for 70-80 percent of the country’s output. “When the current president came into office, he asked for the coffee and cocoa sectors to be reformed. And, amongst other objectives, he guaranteed to secure revenue for the producers, so that they would get at least 60 percent of the market price,” explains Massand- jé Touré-Litsé, the CCC’s Managing Director. The remaining output is sold on spot, ensuring the vast majority of sales prices are largely fixed and providing a modicum of predictability for state revenues. Mamadou Sangafowa Coulibaly, Côte d’Ivoire’s Minister of Agriculture and Rural Development, says that “Today, three years or so after such reforms are helping to revitalize the sector and power wider economic growth. the reforms, it is the exporters “Everyone knows that agriculture plays an important role in our who congratulate Côte d’Ivoire country,” he explains. “To revive this sector, we have had two main focuses. The first is to make reforms that improve the governance of because our bet on quality the sector, and the second is to develop a national investment pro- has been achieved. As far as gram that allows for the return of investments back into the sector.” The national investment scheme began in 2012 and Mr. Cou- securing their income, they are libaly says results to date have been impressive, with a surge in job more than satisfied” creation across the country. Food security has also improved and revenues from crops such as cashew nuts as well as cocoa are up. “We have enjoyed sustained agricultural growth and have been Massandjé Touré-Litsé, Managing able to increase our food crop output by 28 percent in three years,” Director, Conseil Café Cacao explains Mr. Coulibaly. “We have not only seen our quantities grow, but quality has improved as well. And more importantly, income ear- ned by our producers has increased fourfold.” Mr. Coulibaly adds that cashews have risen in price to 650 congratulate Côte d’Ivoire because our bet on quality has been achie- francs per kilo (approx. $1.05) against 75 francs before the reforms, ved. As far as securing their income, they are more than satisfied.” while cocoa has more than doubled in price to 850 francs per kilo. There is little doubt that the country’s agricultural sector has “Everyone needs the cocoa from Côte d’Ivoire,” says Ms. Touré- faced considerable challenges over recent years but Mr. Coulibaly, Litsé, who adds that the improvement in quality has helped the coun- whose team has remained in place following a reshuffling of the go- try to fight off competition from fellow cocoa producers such as Gha- vernment in January, says the sector has now regained its place in na. “Today, three years or so after the reforms, it is the exporters who the economy. 93 The Worldfolio - Côte d’Ivoire

The next focus is on private investment, he says, and by 2023 Mr. Coulibaly also highlights the success of the Agriculture the government wants 50 percent of its cocoa output to be processed and Animal Resources Salon (SARA), an international trade fair that locally to ensure further domestic growth. was rebooted after 16 years in 2015 to attract global investors to the It is an ambitious target, but certainly at present, the figures are country and provide information on opportunities. moving in the right direction. Cocoa production jumped to a record “We want to put the accent on private investment, this is why 1.7 million tons in 2014, up from 1.47 million tons in the 2012/13 sea- we renewed the SARA platform,” Coulibaly adds. son and international companies are moving into the space. While much of the focus at trade fairs such as SARA has France’s Cémoi is investing in a chocolate factory with an an- been on cocoa, it is by no means the only product powering Côte nual production capacity of 5,000 tons, but the key will be to use the d’Ivoire’s agricultural reawakening. Côte d’Ivoire is Africa’s biggest country’s agricultural growth to deliver structural reforms, which exporter of palm oil, a sector that is also attracting investment, whi- should ensure domestic producers can take a stake further down le the country’s famous coffee industry is also being revived and the production line and move into finished products, thus securing a Ms. Touré-Litsé says rising prices are helping to entice producers greater share of the profits. back. “It’s important – and not only for cocoa, but in all agricultural “Today, coffee prices are rising, so naturally our production is sectors. What we have achieved by putting this sector on a growth increasing,” Touré-Litsé explains, adding that the sector has a vital trajectory is nothing new. Côte d’Ivoire has known agricultural role to play as the country looks to improve life for its citizens. growth in the past. It has never been able to achieve structural trans- Indeed, the improving cocoa and coffee sectors are beginning formation of this agricultural economy. This makes it turn from pri- to deliver real change to workers, while a recent tie up between the mary/raw to value-added production,” adds Mr. Coulibaly. CCC and Cargill has seen them working with local farmers to deli- “We need finished products produced locally because we have ver improved education and healthcare across the country. a local market and a sub-regional market,” continues the CCC’s Ms. A key aspect to delivering widespread social improvement Touré-Litsé, who adds that other international partners are also in however partly lies in the price of products, according to Malamine demand to invest in the sector, following the lead of Cémoi. Sanogo, former Director General at the Cotton and Cashew Council “We want Americans to come and work in partnership with (CCA). us to come and set up transformation units such as that of Cémoi. “The price of products has an impact on the quality of life in U.S. investors have their part to play,” Touré-Litsé adds. “They are rural areas. That is very important and that is why these reforms already here. But they should go a bit further down the value chain have taken place. The objective of these reforms is to ensure that and transform.” there is an impact,” Mr. Sanogo says. Mr. Coulibaly adds that despite some apprehension when the “If you take the cashew, before the reform, prices were set at reforms were first introduced, Côte d’Ivoire-based operators have 100-200 francs. They were set by the big operators who dictated the been largely satisfied by the positive impact it has had on the market. market. But with the reforms, prices have doubled or trebled and The CCC chief is also clear that foreign investors should have this has had a direct impact on rural areas. We are now working on confidence in the territory, and its government, as they attempt to capacity building for producers and we are urging that they group become an emerging country by 2020. together to better sell and organize.” “You have to be courageous and get going. Africa is not at the Mr. Sanogo adds that by grouping cashew growers together other end of the world. Africa is not that continent of catastrophes, it and working together with them throughout the production chain, is the continent of beautiful things. In Africa, there is development, it the entire sector can see an uptick in revenues as best practices is the continent on which the rate of growth is greater. It takes bold are passed down. Bundling sales is also having an impact while businessmen to come and invest now.” educating producers about good agricultural practices is helping The government is also supporting extensive investment into the to ensure the quality of the cashew, and providing a better bottom agricultural sector to both entice foreign direct investors but also to line for producers. assist domestic producers. The Programme National d’Investissement “We are also developing other services for local producers,” Agricole (National Program for Agricultural Investment, PNIA) has Mr. Sanogo explains. “We are in the process of creating a sector pledged more than $3 billion to support the growth of cash crops such development fund and we will improve the living conditions by di- as cocoa, rubber and palm oil, with the injection already having hel- gging wells, building schools and health centers, while also provi- ped create around one million new jobs for Côte d’Ivoire’s population. ding loans and supporting diversification, which is very important.” “The PNIA should generate over 2.4 million jobs,” says Mr. Cou- It is another example of how Côte d’Ivoire’s burgeoning agro- libaly. “Today we are already at one million, and the PNIA should industry and the opportunities it affords both domestically and in- contribute to the food security of six to seven million Ivoirians.” ternationally are so pivotal to the country’s future prospects. The Worldfolio 94

Private equity in Africa: Opportunities abound for the right investor

Despite the recent economic slowdown, Africa remains one of the world’s greatest growth opportunities for private equity

With the exception of South Africa, which as Actis, Helios and the Abraaj Group; and seen a shift toward investments focused saw the emergence of home-grown funds major global players such as KKR and The more on Africa’s growing consumer base. in the 1980s, the history of private equity Carlyle Group. Since 2007, 57 percent of private equity in- investment in Africa is a relatively short The “Africa Rising” narrative coupled vestments were in companies selling goods one. Private equity investment was pio- with the 2008 global economic crisis which and services, with around a quarter being neered by development finance institu- dampened opportunities in developed invested into telecommunications-related tions (DFIs) such as the International Fi- markets pushed PE funds to emerging businesses. Fifteen percent went into con- nance Corporation (IFC) in the early 1990s, markets in the continent to seek levels of sumer discretionary business, such as elec- in line with their mandates of promoting growth that were unattainable elsewhere. tronics, cars and apparel, with just nine economic and industrial development. In The region’s rapidly expanding companies percent going into energy. the years that followed, a few local funds offer high returns for investors with the Investors are diversifying geographi- sprang up, generated by western-educated right appetite. With the arrival of global cally, too. While a majority of deals used African general partners which started to funds, the development finance institu- to be done in South Africa, the country’s invest more widely across the continent. tions gradually gave way to more tradi- share of African deals dropped to 15 per- By 1997, there were 12 private equity funds tional, large institutional investors, such cent on average from 2010 to 2015, ac- that had collectively raised $1 billion to as pension funds, insurance companies, cording to AVCA, while East, Central, and invest in Africa. and endowments. West Africa captured 33 percent of total Today, private equity funds operating In the period between 2013 and 2015 investment. on the continent number more than 200, alone, private equity funds mobilized $10 And there is a lot to invest in. An extra managing upward of $30 billion, according billion to invest in Africa and completed $90 billion a year is needed for infrastruc- to the African Private Equity and Venture $14.8 billion in deals, more than double ture alone, and the rewards are tremen- Capital Association (AVCA). These range the level of the previous three years. While dous. Shareholders in Uganda’s privatized from predominantly local funds that have funds have in the past tended to target the and now publicly listed electricity grid, for operated in Africa for decades, includ- same sectors that were supported by the example, get an annual, state-guaranteed ing Nigeria’s African Capital Alliance and development institutions – energy, bank- return of 20 percent on all capital invested South Africa’s Ethos; regional funds such ing, and commodities – recent years have in the network.

In the period between 2013 and 2015 alone, private equity funds mobilized $10 billion to invest in Africa and completed $14.8 billion in deals, more than double the level of the previous three years 95 The Worldfolio - Africa The Worldfolio - Africa 96 97 The Worldfolio

But for Africa-focused PE funds, it isn’t This gap is gradually being addressed. always plain sailing. With limited data to Approximately three-quarters of deals in For many work with and a multitude of business cul- the first half of 2016 were below $250 mil- tures and customs, transactions in Africa lion, with most below $100 million. This is countries in Africa, often take 18 to 24 months to complete, something of a shift from 2014, when 70 the presence of far longer than in developed economies. percent of funds went on buyouts of more private equity Building local capabilities in order to oper- than $250 million. Typical of recent deals is ate successfully means that these funds are the $54 million investment by Actis in Food funds can have forced to employ more staff than similarly Lover’s Market (FLM), a South African in- an impact beyond sized funds elsewhere, with a median of just dependent food retailer with operations in the bottom line. $45 million in assets under management for 11 countries. This followed investments into each staff member, versus $112 million at home furnishings retailer Coricraft, sports Growing currently international private equity funds. shoe retailer Tekkie Town, and credit bu- smaller African What’s more, exits have to be planned reau and information services business CSH. companies into with near-military precision. With options For many countries in Africa, the pres- for divesting a holding limited, funds need to ence of private equity funds can have an larger companies identify potential buyers for African corpo- impact beyond the bottom line. Growing is not only good rate assets before they even make the invest- currently smaller African companies into for private equity ment. Traditional private equity funds also larger companies is not only good for pri- face the constraint of having to cash out of vate equity firms at all points in the financial firms at all points investments at specified times and at attrac- value chain; it is also good for economic in the financial tive return levels, no mean feat in Africa. development. What’s more, private equity value chain; it In general, private equity funds have can bring about job creation and improve- tended to target big, profitable companies ments in corporate governance and health is also good that dominate their chosen markets. But un- and safety. As Runa Alam, Chair of the AVCA for economic like Latin America with its multilatinas, Af- Sustainability Committee, said in a state- development rica as an emerging market offers far less in ment: “As the African private equity industry the way of regional superstars to attract PE was started with significant help from the firms. There are currently only 400 compa- DFIs, sustainability and impact have always robyov, a partner in Bain & Company’s Jo- nies in Africa with annual revenues greater been in the lexicon of private equity dis- hannesburg office, speaking to Bloomberg. than $1 billion. Consolidation is key here, cussions and go hand-in-hand with doing Nonetheless, for many investors, Africa re- which likely goes some way to explaining business in Africa.” In a study of 200 African mains a strong growth opportunity. Indeed, the growth in the share of deals involving companies backed by PE between 2009 and AVCA identified $3.8 billion in planned but private equity in M&A activity on the con- 2015, AVCA found that companies generated not completed PE deals last year, up from tinent to 22 percent of total activity in 2014 a net increase of 10,990 jobs. Thanks to en- $2.5 billion in 2015. Ninety-one percent of from less than six percent in 2012. vironmental, social and governance (ESG) global limited partners surveyed by AVCA Africa’s economy is still dominated by requirements that PE firms embed into their also said that they plan to either hold or SMEs, many of them dynamic, vibrant firms investment terms, companies receiving in- increase their private equity allocations in operating in high-growth segments such as vestment are upping their standards. For Africa over the next few years. education, healthcare and consumer-facing example, when Phatisa, an Africa PE fund fo- There is still plenty of room for growth: industries. According to McKinsey and Bos- cused on housing and agriculture, invested while African countries account for three ton Consulting Group, there are more than in an egg producer in Zambia in 2012 called percent of global GDP, they make up less 10,000 African companies with revenues of Goldenlay, it catalyzed the installation of a than 0.1 percent of institutional investor $10 million to $100 million, which would be full-service onsite incinerator resulting in portfolios. Speaking at a panel discussion, well served by the expertise and discipline the reduction of toxic emissions. David Marchick, global head of external private equity can bring to the table. Indeed, However, the volume of PE invest- affairs at Carlyle, said: “We’re not even in a recent survey by PwC found that almost a ment has dropped sharply of late. In 2016, Chapter One of private equity in Africa. It’s quarter of Kenyan family-owned SMEs prefer the amount of funds committed was just more like the Prelude. We hope all the major to raise capital from private equity, and that 37 $2.3 billion, down 47 percent versus 2015’s firms will be there in five to 10 years.” percent plan to sell or float their companies, $4.3 billion. This is largely attributed to a Despite a more subdued economic compared with a global average of 20 percent. downturn in the continental economy as a backdrop of late, the African growth story is However, of new money raised in 2015, almost result of a fall in commodity prices, but some still underway, driven by surging demand for 70 percent is accounted for by three of the are choosing to cut their losses and exit the infrastructure, goods and services. Private largest funds: Abraaj, DPI, and Helios, which market. Standard Chartered, for example, equity penetration on the continent remains need to make large-cap investments in order has slashed its private equity team in Africa low, but Africa continues to draw increas- to efficiently put their capital to work. A gap in half as it looks to divest assets following ing amounts of interest from international therefore exists for “missing middle” funds to a number of disappointing deals. “You need investors with steady hands and the right cater to the smaller investment targets. to be a bold investor today,” said Andrei Vo- amount of risk appetite. The Worldfolio 98 For insurers, Africa is a land of opportunities With much of the continent virtually virgin territory for the insurance market, new initiatives to reach the bottom of the pyramid and tap untapped customer segments are starting to pay dividends for insurers

With 13 percent of the world’s population placed African country, Kenya, has a pen- on the horizon in many countries offer but just 1.5 percent of its insurance mar- etration rate of just three percent. Nigeria, promise for large-scale insurers. ket, Africa is woefully under-insured. With the largest economy on the continent, only Life insurance in particular has the the exception of South Africa, on average, has an insurance penetration of 0.3 per- potential to drive economic growth and Africans spend just $70 per year on insur- cent. development through mobilizing domestic ance, compared to $2,700 in Europe. The gap is staggering. But all this savings and investment, creating employ- It’s a mixed picture. Fully two-fifths of could be set to change. Africa’s young ment and enhancing household welfare, all premiums in Africa are sold in South population, its growing middle class and and insurance in general can act as a sta- Africa, which has an insurance penetra- an ever-larger returning diaspora, have bilizer for local economies, but barriers tion rate of about 13 percent, ahead of the increasing disposable income and are need to be overcome in order to boost pen- developed world average and far ahead of buying more and more insurable goods. etration and acceptance by the market. the rest of the continent. But the second- What’s more, big infrastructure projects The people of Africa need cover and protection in the same way the rest of the world’s population does. But low average individual incomes mean insurance premiums are seen as an extravagant luxury for many who can ill afford to pay for ex- tras. Indeed, the typical premium from a traditional insurer can be as much as 10 percent of the average income. Mean- while, a lack of government-mandated auto insurance or medical insurance means insurers have struggled to make inroads into the market. Firms have been actively lobbying through trade associa- tions to make insurance mandatory for a number of assets from cars to houses, but thus far little progress has been made in signing these regulations into law. In many cases, traditional solidar- ity networks take the place of insurance policies, with villages grouping together Africa’s young population, its growing money to pay for unforeseen eventuali- middle class and an ever-larger re- ties. A trust deficit is also present, in that people won’t buy insurance because they turning diaspora, have increasing dis- don’t believe that their claims will be paid, posable income and are buying more and in many cases, are unable to success- and more insurable goods. What’s fully make a claim due to challenges such as literacy levels or difficult access to in- more, big infrastructure projects on surance company branches. Add to all that the horizon in many countries offer the lack of formal bank account access by promise for large-scale insurers most African adults, and the challenges for insurance growth are clear. However, the development potential of insurance is too For insurers, Africa is a land of opportunities The Worldfolio - Africa 100 101 The Worldfolio

big to be ignored, and governments are increasingly looking at ways to build an insurance culture. In a report on insurance regulation in the continent, EY noted that, “Most countries in the region are improving, or intending to improve, their governance and risk management regulations, with some countries opting for requirements resembling a simplified form of Solvency II.” For EY, the outlook for regulatory reform in Africa is positive, “fostered by the need for a healthier insurance market that can grow and prosper”. The firm believes that risk-based capital principles will help insurers to strengthen technical capabilities, improve their capacity to retain more risk and increase the availability of funds for reinvestment. Recent transactions by international insurers are a clear sign that global companies are keen to tap the potential of the African insurance market. Last year, Prudential Financial, Inc. (PFI) invested $350 million into Africa-focused investment firm LeapFrog Investments to seek out investments in life insurance companies in leading economies on the continent, including Ghana, Kenya and Nigeria, to be made over a three- to five-year period. Charles Lowrey, chief operating officer of PFI’s international business, By reducing these administration costs, agricultural insurance now makes sense for African said to the Financial Times that LeapFrog’s expertise would help smallholders, with technology opening up a new, profitable market for insurers. it access an “African presence we couldn’t build ourselves.” Meanwhile, global insurance firm AXA paid $84 million to Bima, a mobile insurance startup which has gone into 15 devel- take a stake in e-commerce firm Africa Internet Group (AIG), to oping countries, counts 40 percent of its customers in Africa, 60 provide insurance products and services through AIG’s Jumia unit percent of whom live on less than $2.50 per day. The company and other AIG online and mobile phone-based businesses across offers life insurance for premiums as low as $0.50 a month for a Africa. Speaking to Bloomberg, AIG Chief Executive Officer Jer- potential payout of $500, and has managed to achieve successful emy Hodara said, “The offline world, or real world infrastructure market penetration due to a strategy of setting up a network of in Africa, is simply moving too slowly. You cannot find a real es- hundreds of sales agents spread across the countries in which it tate company or travel agency or insurance company on every operates, which help to educate people about insurance and sell second corner and our online businesses aim to fill that gap.” the product. Homegrown firms are also gearing up to expand, with South Harnessing technology to reach new customers is vital to the Africa’s largest five insurers all embarking on a pan-African strat- success of insurers. In a continent where over half of the popula- egy. The country’s largest player, Old Mutual, estimates it will in- tion is employed in agriculture, farming insurance is a huge op- vest $500 million in the region before 2020. portunity. But with the sums to be covered too low in the face Human resources development will need to be a priority for of administration costs, most African farmers have until recently any insurer moving into a new African market. The EY report been regarded as uninsurable. But of index-based insurance, quotes Matt Lilley, CEO of Prudential Africa, as saying that when which draws on big data to calculate claims, has been a game- entering a rapidly growing market, “human resources are almost changer. Unlike traditional products, which need a claim assessor always the major constraint, because your business grows faster to go out and work out economic loss for an insured party, in- than your ability to recruit and train people.” Unless more focus is dex-based insurance uses satellite imagery to check agricultural given to training up new actuaries, insurance firms will struggle claims and average yield data to model losses from, for example, to meet consumers’ needs. insufficient rainfall. Insurers no longer have to send out staff to In order to realize the full potential of insurance in Africa, a field; satellites can do the job for them. By reducing these ad- insurers are having to think quickly in order to create products ministration costs, agricultural insurance now makes sense for that both suit the specific features of local markets and that will African smallholders, with technology opening up a new, profit- be accepted by the populace. able market for insurers. Thus far, most insurers in the continent target the group Although South Africa already has the continent’s most devel- insurance market and the top economic strata of the population. oped insurance market, insurers aren’t resting on their laurels. But new initiatives which enable insurers to target the bottom Fintech innovation in the insurance space is gaining momentum of the pyramid are seeing high uptake and good returns. Mo- there, too. One insurer, Discovery, has introduced tech solutions bile microinsurance, which allows insurers to reach low-in- which track behavior such as gym visits and driving habits, which come, unbanked customers, has seen tremendous take-up, with it then uses to assess risks and reward customers that make sen- 54 percent of the world’s microinsurance products now being sible choices and thus reduce its outlays. launched in Africa, compared to 23 percent in South Asia and 20 Despite the challenges involved in getting their products out percent in East Asia and the Pacific. Whereas most early mobile to Africans in the right way at the right price, insurers are setting microinsurance projects were driven by insurers seeking new their sights in growing numbers on the continent’s potentially channels to expand their customer base, the latest offerings are lucrative markets. Dynamic demographics, fast-growing econo- driven by mobile network operators, who are taking the next mies and rising incomes mean Africa is the next frontier, and a logical step from mobile money into mobile financial services. land of opportunities, for the insurance sector. The Worldfolio - Ethiopia 102

Eco-friendly industrialization holds huge private sector potential

Prime Minister Hailemariam Desalegn discusses Ethiopia’s plans to shift from an agrarian-based to an industrial- based economy and outlines the opportunities for investors as the government looks to the private sector to maximize the potential of market gaps opening up throughout the entire value chain, from agriculture and infrastructure to energy and tourism. Mr. Desalegn also highlights how Ethiopia is leading by example with its sustainable emphasis on development, as well as its regional integration efforts and foundations of peace and stability

“I think the first bottleneck the private sector finds when trying to be competitive in Africa is the infrastructure gap. We have to fill this infrastructure gap as quickly as possible, because if you want to industrialize you need to have reliable power and electricity and you need to generate electricity from a renewable source. My country has chosen a path of development that we call the ‘Climate-Resilient Green Economy Strategy’, which is our comparative advantage”

In the 2015 UN General Assembly you mentioned the Herculean challenges we have to come together and use the opportunities these tools bring for we face today: peace, terrorism, climate change. Could you please dis- the betterment and positive growth and engagement of our people. We cuss Ethiopia’s efforts in this regard, such as being the second largest have to champion – and many countries have to champion – this regard. contributor to UN peacekeeping operations, or your Climate-Resilient When it comes to global warming and climate change, we have to Green Economy Strategy, and what example are you sending to the in- understand this is not about theorists talking; it has become a reality and ternational community? if we continue with this pace, it means we are going to disappear from the First of all, thank you very much for this opportunity. You can see that without globe within the coming years. peace, development of any kind is not possible. Peace is a pre-requisite for Ethiopia wants to be a responsible global citizen in this regard, even any kind of engagement and as far as developing countries are concerned, though our contribution is minimal to the global greenhouse emissions and we need our people to mobilize around the development agenda and the the impact of our contribution is very small. We have to showcase that if a democratization of the country. To do so, they need peace and stability. country like Ethiopia, which is a less developed country, can contribute this Peace is, I believe, the most important issue that has to be addressed. If much, then how much can big countries, like the United States, Europe, you take a look at the whole African continent, you can see that in places China, Mexico, India and Brazil contribute. So we are urging the global where there is no peace, the economies are dwindling and people are community to see the reality on the ground and that if global warming suffering. Ultimately, we all live in the hope of having an enjoyable life, if goes up 1.5 degrees centigrade, Africa is going to suffer. peace doesn’t exist, it reduces your existence. That is why we feel peace is Recently, we were drought stricken in Ethiopia because of El Niño the most important pillar necessary for our country’s development. and it is plain to see that even though governments are trying their best to Coupled with any kind of conflict or clashes in countries, nowadays we improve these things, there is a limit, because this is a global impact that have the issue of extremism, which uses religion as a shield when, actually, individual governments can’t face by themselves. We need to take climate religion has nothing to do with extremism. I think this religious-based or change seriously. I am glad some countries – like the United States, China camouflaged kind of terrorism –which affects the whole globe and is killing and Brazil – are now showing they are willing to improve their commit- innocent people and focusing on soft targets – is something that we have ment, but still, the commitment is not up to the expectation of the global to address very quickly, otherwise, the human existence is at threat. The community. recent incidents in Paris, Nigeria, Mali and in Cameroon, all at the same This issue is no joke: the ice is melting in the Arctic, the ocean levels period of time, show that this is a global problem and we have to address are rising, the droughts are visible in Australia and California; people are this global problem with a strong global partnership and coordination. suffering. This has to be taken care of. Climate change has become an My country is championing to bring peace and tranquility to Africa existential issue for all of us and every one of us should feel responsible. In and beyond. We have a limited capacity, but we are trying our best, look- Ethiopia we will continue to champion and to speak in one voice with our ing into the fact that peace is a pre-requisite for any kind of development African brothers and sisters to showcase that Africa is the most vulnerable and democratization. continent as far as climate change is concerned and that the global com- So, peace is a pillar issue and fighting terrorism is an existential issue munity has a responsibility to act and act quickly. for us. These are the things we have to work on together with the global community and I hope the global community has now understood this Regional integration is one of Africa’s key priorities, and Ethiopia is no properly: I hope they can set aside their differences and come together to stranger to it. As Ethiopia is Africa’s political capital, please discuss fight terrorism and to make our world a peaceful place to live in. Ethiopia’s regional integration efforts. Thanks to the advance in communications and information technolo- If you see the global order, the larger the size of a community, the better gies and the social media network, so much information is available now their economy performs. Look at China or India, or Russia and Brazil. They and even the terrorists are using this opportunity to destabilize us. I believe all have large populations and their continental size is so big, they can com- 103 The Worldfolio - Ethiopia The Worldfolio - Ethiopia 104 105 The Worldfolio - Ethiopia

pete globally. So, competition now is not within Africa, it is with the global community, which means Africa has to integrate very quickly in terms of “I believe what investors seek is macroeconomic trade, investment and infrastructure integration, which is essential for the stability, and ours is perfect: we have a mobility of people as well as that of goods and services, and fast movement stable macroeconomic system and a prudent in terms of logistics. All these are necessary for Africa’s integration. We hope to expedite people-to-people relations, because Africa is an management of the macro economy. This is very important region for Ethiopia. Of course, all regions are important to us, important both in the fiscal and monetary levels. but we need to integrate Africa first so we can then integrate the global Besides that, this country is peaceful and friendly community. African integration is high on our agenda for the next 50 years to our entire neighborhood; we support peace and, also, in our short-term 10-year plan. We have used that plan as a road- beyond our borders, including in South Sudan and map to integrate Africa very quickly, while we are doing so, first we need Somalia. We want to pacify our region” to integrate all the regional blocks or regional economic communities. We have five regional economic communities and one of them is COMESA, which I currently chair. I think it is a very important issue to integrate Africa to move forward with global competition. petitive in Africa is the infrastructure gap. We have to fill this infrastructure gap as quickly as possible, because if you want to industrialize you need Ethiopia is one of the fastest growing economies in the world and the to have reliable power and electricity and you need to generate electricity Growth and Transformation Plan is transforming Ethiopia’s economy. from a renewable source. My country has chosen a path of development On which strategic pillars will the GTP II be based? that we call the ‘Climate-Resilient Green Economy Strategy’, which is our First of all, as a country, we have to focus on our comparative advantages comparative advantage. We have huge potential from hydro sources, wind, and the Growth and Transformation Agenda I was our roadmap for the thermal, biomass and from solar energy. These are important sectors we last five years: we have focused on boosting agriculture production and have to focus on while generating more power for industrialization. Ethiopia productivity, and taking agriculture as an agent of growth, because we is a hub for the Eastern Africa Power Pool; we can even export electricity have huge potential in that sector. to our neighboring countries. We are modernizing agriculture, moving from subsistence agricul- The second area is trade facilitation and logistics issues, which are ture to commercial agriculture, and that means a large number of small essential. In order to reduce the cost of transportation, we have established farmers are beginning to commercialize. Around half of our smallholder railway infrastructure from Addis Ababa to Djibouti, which is the main cor- farmers have become commercial, but we still have the remaining half, ridor for our exports to the seaport. I believe this infrastructure can help so in GTP II we have to complete this phase of commercializing the whole us reduce the costs of transportation, but it will also provide other facilita- farming community. tions like customs clearing, foreign currency availability, credit provision, Aside from that, we have to go for private sector investment in agri- investment licensing, and incentives provision, all those things that help culture. Our young people, graduates from universities and technical and the private sector move forward faster. educational colleges have to go into agriculture investment with the support Aside from that, and in order to reduce these bottlenecks, we have of the government and the respective facilitations we can offer them, so chosen to learn from the Asian Tigers, that industrial park development is they may move into modern, intensified agriculture. essential for fast development, giving one-stop service to our investors. In So, we have two tracks: one, to continue modernizing our smaller this regard, we are now in the process of establishing eight large industrial farming and two, enhancing private involvement in agriculture production, parks, which are federal parks, but regional states also have their own especially for agro-processing. industrial parks of smaller size. Bigger industrial parks are on the process We have to work on all the value chain, from production to process- of development in the country’s major cities. I think this can also help us ing, and then value marketing. These are essential areas that we have to move forward. One example is the pilot industrial park we are building see to in GTP II. We have to move from an agrarian-based economy into in Hawassa, which has 300 hectares of land. We have developed it very an industrial-based economy, and that transformation has to slowly take quickly; the investment attraction rate has become 100 percent and they place in GTP II. have asked us to move into phase two. I believe this helps us in FDI attrac- In GTP I we achieved some transformation, but it is not enough; we tion so we can reach that 24 percent of GDP growth in the industrial sector. have to see a visible transformation in GTP II. The manufacturing sector has to grow very quickly and therefore the manufacturing share of our GDP Minister of Transport Wokneh Gebreyehu told us that the state-owned has to increase from 5-8 percent by the end of GTP II. This means we need enterprises (SOEs) are the strategic tools to carry out the developments our manufacturing sector to grow at least an average of 24 percent, which the country needs. What is your assessment on the responsibility and means a very dramatic, fast industrialization has to take place. performance of Ethiopia’s SOEs? By doing so, we shouldn’t ignore small and medium-sized enterprises, In most developing markets, especially in Africa, there is a huge market which are the basis for equitable development. One of the pillars is rapid failure, a market gap, where the private sector is not going to respond accelerated growth, but it should be shared equitably as well; that is why quickly. If the private sector is not ready or willing to respond quickly, we are focusing on smallholder farms and their modernization, as well as then the government has to intervene. All our state-owned enterprises on small and medium enterprises, because these are the ones that employ are meant for this purpose. The state has the responsibility of filling the most of our people. But, of course, we also have to focus on large-scale infrastructure gap very quickly. manufacturing and especially our comparative advantage, which is leather- We have tried to attract many investors to the railway sector; it has intensive large-scale manufacturing. been 10 years since we started and none have shown up. So it means the government had to intervene in infrastructure development. We did it and How are you creating the necessary conditions for industry to play a key we are successful in this regard. role in the country’s economy? So, I think the government has a huge responsibility to fill the gap I think the first bottleneck the private sector finds when trying to be com- where the private sector is not ready or willing to come in. That is the The Worldfolio - Ethiopia 106

principle we are following. Some say this is a state-led economic growth. we feel that we have reached a very low rate of corruption. The govern- We say: it is a private-led economic growth, but the private sector was not ment is zero tolerant towards corruption and, if we find anything, we take able to go there so we had to intervene and fill the gap. But we are not the actions quickly against corrupt practices. So, this is another fact that can engine of growth, that role belongs to the private sector. help attract more direct foreign investment into my country.

Ethiopia and the UK have had long and fruitful relations. What is your Bearing in mind we are read by top investors and key decision makers, assessment on the current diplomatic and commercial relations of both what message would you like to send them so that they take Ethiopia countries and where would you wish to see more cooperation? into consideration when they think about investing in Africa? I believe Ethiopia and the UK’s cooperation is excellent in many ways. First, The private sector is an engine of growth and it has to be very active and the UK is our largest donor and supporter in our development cooperation. revolutionize the African context. In this regard, I feel that these days, in- We are direct recipients of the development cooperation fund from the UK, frastructure investment is where the private sector has to come forward, and this shows that we are a priority country for the United Kingdom, simply especially in energy, which is very necessary for African industrialization. because Ethiopia utilizes every penny that is channeled into development. They can get involved in the generation of power in Africa and the Ethiopian Our wastage rate is almost zero and that effectiveness in utilizing this fund government is ready. If the private sector gets into power generation we will is essential. But our future strategy is to move from aid to trade; we want buy back; the utility company can buy and purchase the power generated more trading investment attraction from UK. I recently inaugurated two at a reasonable price so that it is competitive for the private sector. Now, if big beer factories in which UK investors are involved; one is Diageo and they want to get into any kind of infrastructure, especially in railways, we the other is Duet. These two big companies support our farmers, because will go for BOT (build, operate and transfer) mechanisms they can engage, the raw material they use is malt barley, which is produced by our farming because it is another investment potential they can harness. community and smallholder farmers, so it boosts their productivity and it Apart from Africa’s need for industrialization, they could benefit from increases our manufacturing capacity. There are big UK firms now engaged coming and investing in Africa in the industrial sector, and I don’t only mean in Ethiopia and we also have big companies in leather and leather product manufacturing industries, but also in construction, mining and tourism. manufacturing. So we have a number of UK investors in Ethiopia today and These are all very important sectors they can come and invest in. others who are interested in investing here, but we need more of them to Ethiopia has become an attractive tourism destination, for example, come and invest in my country. and you know how important tourism is for the economy. My country is Another aspect of this cooperation, if you take a look at our economic the cradle of mankind, and many people want to see their ancestors’ land; cooperation, you’ll find the UK has supported us in reforming our tax system I believe that is worth visiting. to mobilize more domestic finances for our development. That is a remark- Ethiopia is also the original producer of coffee. When anyone sips a able achievement: we have quadrupled the growth of tax collection. The cup of coffee they should know that it came originally from Ethiopia, even result of this reform is that it has become fourfold. When we started GTP though it is grown now in different parts of the globe; originally it was I in 2012 we were able to mobilize something like 60 billion birr, but now discovered in Ethiopia. we have reached 197 billion birr within five years. This was achieved be- We are the origin of many things and diverse animals and species. cause of the reform and thanks to increasing the tax base and diversifying Our biodiversity is immense. We have 24 national parks and safaris and the and modernizing the tax system with the support of the United Kingdom. renowned first century Obelisks. We are also the first place the Muslims The economic cooperation also goes into education, which also helps came to when they were persecuted and the prophet told them to come to boost the manpower necessary for the private sector. We have to use our Ethiopia and find sanctuary here. So we have a diversity of both Christians demographic dividend: 70 percent of our population is below the age of and Muslims coexisting together peacefully. All extremists can learn that 30, which is very young and is also a comparative advantage to compete Muslims and Christians coexist in Ethiopia and are very friendly; in one globally and attract more investment. family you may find half Christians and half Muslims. This coexistence is We also have cooperation in terms of providing basic services like a global example; religion cannot be something that divides us. health services and even agriculture services. The UK is our major supporter So, I believe this is a country that is worth visiting, and we also have in the provision of basic services to our community, and that also boosts a great airline, the best in Africa; Ethiopian Airlines can help boost the healthy people who can engage in production, apart from enjoying a good tourism sector. We have potential in many areas and investors can come life. So I can say we have an effective and excellent relationship with the UK. and evolve them, apart from manufacturing, which is one of the pillars we have taken into consideration in our strategy to develop the country. How important is the rapport you build up with potential investors that come into Ethiopia and find a country where they can do business easily? Peter Ferdinand Drucker said, “The best way to predict the future is to I believe what investors seek is macroeconomic stability, and ours is perfect: create it”. What is the future you would like to create for your country? we have a stable macroeconomic system and a prudent management of We see that the 21st century is a century for Africa and for Ethiopia, and the macro economy. This is very important both in the fiscal and monetary we have to harness this opportunity. It means that because the global com- levels. Besides that, this country is peaceful and friendly to our entire neigh- munity is maturing in many ways, Africa, as an emerging continent, has borhood; we support peace beyond our borders, including in South Sudan huge comparative advantages. The future that I want to see is one where and Somalia. We want to pacify our region. people live in peaceful coexistence, where they have a decent job. And this Ethiopia ranks 14 globally with the lowest crime rate, even better than can be created through transformation in many ways. But in this regard, many European countries. This is one of the comparative advantages we we feel that, in my country, we need to go for renaissance that helps us to have. If you walk around the city alone at night, nobody will bother you. reach a middle-income level by 2025. There is very little crime in the country; it is a peaceful country. This is one This is the short-term future I see, but in 50 years’ time, I want to see of the things the investors need to work and invest. my country become an advanced economy, I want to see everybody living Another thing that is very important is that we are zero tolerant to here in peace and prosperity and leading decent lives. So, we need to fol- corruption; Ethiopia is the least corrupt nation compared with the African low a democratic development that helps us move forward and reach that standard. We know there are still some areas where we have to fight, but prosperous stage within 50 years’ time. 107 The Worldfolio - Ethiopia The Worldfolio - Ethiopia 108 109 The Worldfolio - Ethiopia

Nascent financial sector opens up to foreign investors Ethiopia has one of the least developed financial industries in the world. But that is changing, thanks to a new openness to foreign investment and local banks investing in technology and improving services that are reaching an ever-growing number of Ethiopians

Ethiopia’s central bank is overseeing the unprecedented development of the banking sector, while building an attractive regulatory environment for investors

Ethiopia’s financial sector has seen significant opening up since following the November). “We take it very seriously and have the government’s plan to come up with a series of policies that been working on it for the past 10 years.” will open the market to international players. This move towards Indeed, under both the first (2010-2015) and second phase a more inclusive financial sector began three years ago, when (2016-2020) of the GTP, the Ethiopian government has articu- the government amended a capital goods leasing business law lated development policies and strategies for all major sectors that granted greater access to the local financial sector. Although of the economy. According to Mr. Ahmed, the government will there are still limitations as to where foreign firms can invest retain an active role in investing in infrastructure, institution and local banks continue to have relatively limited financing ca- building and human skill formation. The ultimate goal is to gen- pacity, things are changing. erate wealth for the private sector and allow Ethiopians and in- Despite Ethiopia still being considered one of the least devel- ternational investors to benefit. oped financial markets in the world, a key component of the coun- “We have to modernize the banking sector in general; their try’s Growth and Transformation Plan (GTP) involves stimulating ability to mobilize resources, their capacity to effectively give and maintaining economic growth around at least 11 percent per credit to the private sector has to be enhanced and the payment year. In order to do so, significant changes are required to im- system has to be modernized. Our ability to regulate the banking prove the country’s financial sector, promote financial inclusion, sector must also increase,” says Mr. Ahmed. modernize banking, and open up Ethiopia to foreign investment. To this end, the Development Bank of Ethiopia is being sup- “The development of the financial sector is a key priority ported by the government so that it can extend larger credit lines for the government,” says Ahmed Shide, former State Minister of to the development of the private sector, and agriculture and in- Finance and Economic Cooperation (now Minister of Transport, dustrialization activities. Ultimately, it is expected that this will not only benefit the local economy, but also provide Ethiopian businesses with a greater opportunity to shine in the COMESA “Banking in Ethiopia is driven by high rates (Common Market for Eastern and Southern Africa) market and of economic growth, huge unmet needs for the African market. In complement to its advancements in the financial sector, basic financial services and a steady inroad of Mr. Ahmed further explains that Ethiopia is also establishing in- technology” dustrial zones to use as a platform for catalyzing investment and job creation, with a focus on export-led manufacturing. By offer- Taye Dibekulu, President, United Bank ing cheap labor and power supply in these parks and improving transport, he adds that Ethiopia wants to be a hub for textiles and The Worldfolio - Ethiopia 110 other industries by attracting investors who are moving some less time. Ultimately, these new multi-channel banking services manufacturing plants from China and other Asian markets, contribute to financial inclusion, which is a significant improve- where costs are rising. ment in a cash society like Ethiopia, where cash could formerly Taye Dibekulu, President of United Bank, explains that only be accessed from ATMs or bank branches. opening branches all over the country is key to his bank’s strat- In addition to being the first bank in Ethiopia to develop and egy in a bid to boost deposits and increase opportunities for the offer agent and mobile banking, United Bank has also recruited mobilization of financial resources. “The importance of banking agents in remote areas in order to allow customers in these ar- in the Ethiopian economy is undeniable,” he says. “It is driven eas to access cash through their mobiles. by high rates of economic growth, huge unmet needs for ba- Still, Ethiopia’s state of financial inclusion needs improve- sic financial services and a steady inroad of technology that is ment. According to a study published by Getnet Alemu Zwedu currently shaping the way banking is done in the country.” He for the UK Overseas Development Institute (ODI) in November adds that United Bank, via the provision of financial resources 2014, the country’s banking penetration is less than 10 per cent to enterprises operating across the various economic sectors, is of all households. Yet another study by the African Development pioneering a number of IT-backed modern banking services and Bank in 2013 asserted that the percentage of adults who have using innovative approaches to reach out to a growing number bank accounts is 23 per cent in the whole of Africa, and 22 per of customers. By boosting its financial assets and mobilizing recent in East Africa. sources, Mr. Taye argues that the bank is also contributing to the In addition to improving on these percentages, Mr. Taye also success of the various long-term investment projects carried out stresses the importance of ensuring strong compliance in line by the government. with international standards. “Nowadays, compliance is a criti- Another key pillar of United Bank’s expansion strategy is a cal requirement for global banks, and fulfilment demands a lot strong emphasis on investing in human talent. “Apart from proof investment,” he explains, adding that the bank decentralized curing the hardware and software, we invest a lot in our staff its trade finance function. As a result, transactions are instead in terms of acquiring the knowledge,” he explains. “We send initiated at the branch level and core banking is interfaced with some of our staff abroad for training and capacity building. This Swift so that transactions can be handled with greater ease. knowledge transfer allowed us to introduce SMS banking and “We believe the influx of investment and business op- Internet banking.” portunities that is bursting forth in Ethiopia is likely to cre- As a result of these efforts, United Bank is now in a position ate chances,” concludes Mr. Taye. “These will help us enjoy to offer fully fledged internet banking services for transactional a leap in growth and put us in a position to reap the benefits purposes. The hope is that this will allow them to attract new that will accrue as a result of the financial deepening taking customers and to make their transactions at lower cost and in place in due course.” 111 The Worldfolio - Ethiopia The Worldfolio - Ethiopia 112