Merchants and migrants Aliko Dangote: cementing Africa Africa’s future Kenya’s beer queen Madagascar: weaving its way in back in The Journal ofFact Good Governance Africa Risky business Issue 23 | June 2014 | www.gga.org Set the leopards free Entrepreneurs boost economies through innovation that creates jobs and turns a profit. In developing countries, small businesses can contribute 50% and more to a country’s GDP, according to a 2013 report by the Global Entrepreneurship Monitor, a research venture between the London Business School and Babson College in the United States. True entrepreneurs are the leopards of the business ecosystem—rare and pow- erful. They have the unusual ability to think big and the force of will to convince others of their vision. When they succeed, they often shake up an entire industry. African countries that make business easier—such as Côte d’Ivoire, Mauritius and Rwanda—are reaping the benefits. They have removed red tape that acts as a bar- rier to starting and running companies; they have recognised the importance of profit as a motivator for ingenuity and hard work. The goal is not only to encourage start-ups, but also to move businesses out of the informal economy and into the system of officially registered companies. This al- lows governments to tax them, and also permits a more accurate picture of a country’s business activity. Formalisation gives companies the space to grow: they can find more funding, such as bank loans and equity investors. This has a positive impact on political governance, too. Governments that want to boost their state revenues will have to create a favourable environment—with better infrastructure, more reliable government services and less onerous regulation. Small and medium businesses play an important social role. Whereas oil and mining companies tend to make a few people very wealthy, small companies help many more people escape poverty. They reward creativity and permit people to change their lives through hard work instead of relying on state handouts. Such citizens are more likely to demand accountability and better government performance. National economies also benefit from strong small businesses. They produce more diverse products and services than monolithic mining and petroleum companies. Mixed economies are more resilient to shocks and more responsive to consumer needs, and create more jobs requiring a wider range of skills and knowledge. Small businesses cannot be created by government fiat. An example such as South Africa’s attempt to create an electric car industry show that the state’s heavy hand, even when it liberally dispenses subsidies, stifles creativity and growth. Instead, businesses need a stable regulatory environment that promotes competition, strong property rights and reliable infrastructure. Given the right conditions, businesses grow of their own accord, and societies reap the benefits. John Endres CEO of Good Governance Africa 2 | Africa in Fact | Issue 23 | June 2014 | www.gga.org CONTENTS 2 Set the leopards free 21 Working miracles by Richard Poplak 4 About our contributors The telecommunications tycoon triumphs with the law and God on his side 5 Weaving its way back in by Brian Klaas 25 Slings and arrows The island nation may regain membership of by Omondi Oloo an important trade club after internationally- approved elections last December Tabitha Karanja: a classic “David and Goliath” tale 29 Counting beans 9 A matter of interest by Marc-André Boisvert by Adeyeye Joseph The government is focusing on small business to High interest rates are strangling small business diversify the economy development in Africa’s largest economy. Insufficient electricity and broken infrastructure are other hindrances 33 Merchants and migrants by Bruce Whitehouse Being “distinct” is at once their strength and their 13 Cementing Africa’s future greatest vulnerability by Simon Allison He began by marketing salt, then flour, sugar and cement, the big money-spinner. Playing politics 37 Skirting the real issue has helped Aliko Dangote build by Terence Corrigan his business empire Make legislation gender-blind to bring African women into the economy 18 Futile attraction 41 Heart and sole by Ivo Vegter by Matthew Newsome Ambitious bureaucrats think they can replicate Bethlehem Alemu is making great strides in Silicon Valley, but history proves otherwise creating jobs and maintaining artisanal skills Africa in Fact John Endres CEO Constanza Montana Editor Daniel Browde Deputy editor Parshotam, James Stent Kate van Niekerk Researcher Leith Davis Cover design Opinions expressed are those of the individual authors and not necessarily of Good Governance [email protected]. Africa in Fact | Issue 23 | June 2014 | www.gga.org | 3 Simon Allison is the Africa correspondent for the Daily Maverick, based in Johannes- burg. He has previously reported from Egypt, Palestine and Somalia for the Asia Times Online and Agence France Presse. Marc-André Boisvert is a freelance journalist, photographer and researcher who lives in Abidjan, Côte d’Ivoire. He has written for Canadian newspapers La Presse and Le Soleil as well as for the Associated Press and the Inter Press Service news agencies. Terence Corrigan is a political consultant and a research fellow at the South African Institute of International Affairs. He has written widely on South African and African political affairs for a variety of local and international organisations. Adeyeye Joseph is the editor of The Punch, Nigeria’s biggest daily newspaper. He won the Nigerian Media Merit Award for editor of the year in 2011 and 2012 and newspa- per columnist of the year in 2011. Brian Klaas is a Clarendon scholar at Oxford University. His research focuses on improv- ing elections and preventing violent conflict in Africa. His work has been featured in Foreign Policy, the Los Angeles Times and the Minneapolis Star Tribune. Matthew Newsome, a journalist based in Ethiopia, freelances for the BBC World Service and Radio France International. He has also written for the Guardian, the Observer and New Internationalist magazine. Omondi Oloo, a freelance journalist based in Nairobi, has worked for Kenya’s Nation Media Group and the Tallahassee Democrat in Florida, US. He is an alumnus of the Thomson Reuters Foundation and the International Institute for Journalism in Berlin. Richard Poplak is an award-winning freelance journalist and author who has worked extensively in Africa and the Middle East. He is currently writing a book and starring in a documentary series on Africa rising, called “Continental Shift”. Ivo Vegter is a South African columnist writing on economics, politics, law and the en- vironment. He is the author of “Extreme Environment”, a book on how environmental exaggeration harms emerging economies. Bruce Whitehouse teaches anthropology at Lehigh University in Pennsylvania, US. He has conducted field research in Mali, Nigeria and the Republic of Congo. His 2012 book “Migrants and Strangers in an African City” is a study of west African entrepreneurs. 4 | Africa in Fact | Issue 23 | June 2014 | www.gga.org Madagascar: textiles in tatters With internationally-approved elections last December, the island nation may regain membership into an important trade club by Brian Klaas Madagascar’s capital, Antananarivo, is teeming with entrepreneurs. The official market stalls are overcrowded and hand-painted rickety wooden stalls spill into the streets. Even in off-limits areas around government buildings, vendors still hawk their goods aggressively. On a recent trip, a man approached me while I was walking. He was carrying a baby car seat under his arm. “Would you like to buy this car seat?” he asked. “I don’t have a car,” I replied. “That’s okay,” he assured me, “you could use it in your house.” “Well, I’m afraid I don’t have a baby either.” He paused. Then, with a hopeful smile, he asked: “Do you have a small girlfriend?” Such comical persistence is common in Madagascar, where entrepreneurship is a way of carving out a living in a devastatingly impoverished environment. Antana- narivo’s markets are overrun with sellers. But this is not a sign of a booming economy. Instead, it is exactly the opposite. Madagascar’s economy is in shambles, forged partly by the loss of a vital trade programme: the United States’ African Growth and Opportu- nity Act, or AGOA. Vendors who previously exported their goods to the US through this programme have lost access to that market. They are now flooding the domestic market with their wares, driving competition up and prices and profits down. Source: AGOA.info Africa in Fact | Issue 23 | June 2014 | www.gga.org | 5 Weaving its way back in In May 2000 the United States Congress enacted AGOA, which gave preferential trade status to participating countries in sub-Saharan Africa. This legislation completely changed the playing field for African entrepreneurs trying to break into the American market. Suddenly, tariffs (that in some cases approached 40%) completely disappeared for thousands of products. To become AGOA participants, countries “must demonstrate progress towards developing a market-based economy, protection of human and labour rights, and ef- forts to combat corruption and enhance rule of law”, according to the US State De- partment. Almost overnight, it became profitable for even small producers throughout eligible countries in sub-Saharan Africa to sell to the United States. Today, 39 countries on the continent participate in AGOA. The programme has spurred African trade development. Since 2001 total trade between the United States and participating countries has tripled, reaching a peak in 2008 when total trade flows were valued at nearly $100 billion, according to the Trade Law Centre, a South African-based policy group. While critics point out that much of the increase has come from natural resource exports, no one denies that the programme has had a massive impact on other impor- tant industries, notably in textile and apparel production.