24 August 2010

Why foreign aid and Africa don't mix

By Robert Calderisi, Special to CNN
August 18, 2010 -- Updated 1016 GMT (1816 HKT)

story.calderisi.rc.jpgEditor's note: Robert Calderisi has 30 years of professional experience in international development, including senior positions at the World Bank. He is the author of "The Trouble with Africa: Why Foreign Aid Isn't Working." He writes for CNN as part of Africa 50, a special coverage looking at 17 African nations marking 50 years of independence this year. 
Friday, Charles Abugre of the UN Millennium Campaign writes for CNN about why aid is important for Africa and how it can be made more effective. (CNN) -- I once asked a president of the Central African Republic, Ange-Félix Patassé, to give up a personal monopoly he held on the distribution of refined oil products in his country.

He was unapologetic. "Do you expect me to lose money in the service of my people?" he replied.
That, in a nutshell, has been the problem of Africa. Very few African governments have been on the same wavelength as Western providers of aid.
Aid, by itself, has never developed anything, but where it has been allied to good public policy, sound economic management, and a strong determination to battle poverty, it has made an enormous difference in countries like India, Indonesia, and even China.
Those examples illustrate another lesson of aid. Where it works, it represents only a very small share of the total resources devoted to improving roads, schools, heath services, and other things essential for raising incomes.
Aid must not overwhelm or displace local efforts; instead, it must settle with being the junior partner.
Opinion: Why foreign aid is important for Africa
Because of Africa's needs, and the stubborn nature of its poverty, the continent has attracted far too much aid and far too much interfering by outsiders.
From the start, Western governments tried hard to work with public agencies, but fairly soon ran up against the obvious limitations of capacity and seriousness of African states.
Early solutions were to pour in "technical assistance," i.e. foreign advisers who stayed on for years, or to try "enclave" or turn-key projects that would be independent of government action.
More recently, Western agencies have worked with non-government organizations or the private sector. Or, making a virtue of necessity, they have poured large amounts of their assistance directly into government budgets, citing the need for "simplicity" and respect for local "sovereignty."
Through all of this, the development challenge was always on somebody else's shoulders and governments have been eager receivers, rather than clear-headed managers of Western generosity.
In the last 20 years, some states -- like Ghana, Uganda, Tanzania, Mozambique, and Mali -- have broken the mould, recognized the importance of taking charge, and tried to use aid more strategically and efficiently. Some commentators would add Benin, Zambia, and Rwanda to that list.
But most African governments remain stuck in a culture of dependence or indifference. There are still too many dictators in Africa (six have been in office for more than 25 years) and many elected leaders behave no differently.

20 August 2010

Capturing Africa’s business opportunity

In the aftermath of the global crisis, Africa no longer seems uniquely risky. The opportunities are huge.

Donald Kaberuka.

Africa was among the fastest-growing parts of the world between 2001 and 2008, with average growth of 5.6 percent a year. While the commodity boom played a role, stable macroeconomic conditions coupled with structural reforms—including the privatization of state-owned enterprises and lowered barriers to competition—underpinned the impressive growth. It was accompanied by large amounts of foreign direct investment (which more than tripled during these years), including inflows from the Gulf countries and from emerging Asia (China and India).
Resource-rich countries such as Nigeria and South Africa received most of the foreign direct investment during the decade, but new patterns have emerged in the last three to four years. In eastern and northern Africa, for example, new investment has arrived in nonresource sectors such as tourism, manufacturing, financial services, telecommunications, and construction. Also, a second tier of smaller but high-performing countries, including Ghana, Namibia, and Zambia, has caught investors’ attention.
In sum, foreign investment has diversified in recent years as a number of African governments undertook structural reforms to make their economies more attractive. But to sustain foreign investment inflows, governments must pursue measures for strengthening governance and legal frameworks, building financial markets, investing in human capital, developing infrastructure, and deepening regional integration.
Overcoming the global recession
Even though Africa was hit by the global financial and economic crisis, and growth slowed sharply in 2009, to 2.5 percent, the continent avoided the recession. The impact of the crisis varied across regions and countries, though on the whole the decline in growth was less severe than expected, allowing for a faster recovery. In sharp contrast to other parts of the continent, southern Africa has been directly affected by the global crisis because its resource-rich countries are dependent on exports and subject to the “neighborhood effect” emanating from South Africa. But many of these countries should recover quickly as commodity and financial markets rebound. The group of middle-income countries in North Africa, despite their close integration with the European Union, fared much better, partly because of their less open capital accounts and more diversified economies.
Countries with built-up reserves implemented stimulus packages and measures aimed mostly at easing supply-side bottlenecks. African policy makers have resisted the protectionist tendencies that often accompany a crisis of this magnitude. Instead, most countries maintained a prudent macroeconomic stance during the crisis, steered clear of protectionist measures, and in several cases accelerated reforms to create a favorable investment climate. Some countries, such as Botswana, Ghana, and Seychelles, took advantage of financial-aid packages that helped them adjust their economies significantly.
Having weathered the downturn, the continent faces the challenge of returning quickly to high and sustainable growth. In March 2010, the African Development Bank forecast 4.5 percent real GDP growth for Africa in 2010 and 5.2 percent in 2011, in line with the global recovery. While these growth rates are below pre-crisis levels, the recovery is broad-based, with more than 15 countries projected to grow by upward of 5 percent in 2010.
It remains to be seen if the recovery in the advanced economies, a key factor in Africa’s own recovery, will be robust and if adequate financial aid to low-income countries follows in a timely manner. So it is even more important that African countries create an economic and business climate to attract stable private capital flows.
Challenges and opportunities ahead
While Africa’s growth from 2001 to 2008 marked a turnaround relative to the previous three decades, it was more subdued when measured in terms of per capita GDP growth. In this respect, Africa still lagged behind most parts of the world, and the income gap between Africa and developing countries in other areas closed only slightly. The key question is when Africa’s low-income countries will reach a high, sustainable growth path that would allow them to narrow the income and productivity gaps with the more advanced economies.
Poor infrastructure is a major impediment to growth. A recent study1 of 24 countries, conducted by the African Development Bank and its Africa Infrastructure Country Diagnostic (AICD) partners, estimated that the total cost of bridging Africa’s infrastructure gap over the next decade will be about $93 billion a year, with about 40 percent in the power sector. Furthermore, it found that the continent has the weakest infrastructure on the planet, with Africans in some countries paying twice as much for basic services as people do elsewhere. The study argues that a well-functioning infrastructure is essential to Africa’s economic performance and that reducing inefficiencies and waste could result in major improvements in African lives.
Despite the significant progress in creating an environment for private-sector development, more can be done to achieve high and broad-based growth in Africa. Differences across African countries notwithstanding, the African Development Bank’s experience suggests that critical reforms would enhance Africa’s competitiveness:
  • Governance and legal frameworks should be strengthened, including property rights, which facilitate transparency and accountability in the management of public resources.
  • Encouragement should be given to the development of financial markets and the creation of access to credit for private-sector projects, which require funding from sound banking sectors, well-regulated stock exchanges, and venture capital.
  • The quality of human capital should be enhanced—in particular, by improving the quality of tertiary education and stemming the loss of talented citizens to emigration. The gender gap in education could be closed further.
  • The infrastructure gap should be narrowed through the development of energy and transportation, which are the main obstacles to competitiveness in Africa and put African entrepreneurs at a disadvantage to the major competitors in Asia. Challenges in the energy sector are particularly complex, requiring the harmonization of the activities of donors and countries, as well as the creation of proper institutional and legal frameworks.
  • Regional integration to create economies of scale and to leverage the strengths of individual countries should increase. Power pools, transport corridors, and cross-border climate change problems are among the areas to be addressed.

5 top tips for doing business in Africa

Vladimir Kokorev (PhD), author and former CEO of companies dedicated to public transportation, fishing and shipbuilding in Africa, offers up tips for doing business in Africa

5 top tips for doing business in Africa
1. Do not forget that Africa is not one country – there is no ‘one size fits all’ approach
The first point to make is that obviously Africa is not one country – but the second largest continent in the world, comprising of 54 states. There are huge differences between these countries and you simply cannot approach Africa with a 'one size fits all' attitude. For instance, South Africa is a modern industrial regional power, while countries like Angola, Sudan and Equatorial Guinea are experiencing spectacular economic growth stimulated by the expansion of their oil extraction capacity.
Meanwhile other countries live off agriculture, self-subsistence and international aid, with Mediterranean Africa being heavily influenced by Arab and Islamic culture. The key thing is to make sure you are familiar with the cultural, economic and political specifics of each African state that you plan to bring your business to.
2. Always start by contacting the official channels
Before starting your business, you should always contact the official representatives of the country in which it is located, in order to present your business plan and anticipate any legal or administrative obstacles for its development.
You have a big advantage if you have had some experience of working for diplomatic service or for a large company with local branches in Africa. This will make it easier for you to assess the situation and obtain the necessary contacts. Moreover, the administrative officials will generally have a more favourable opinion of you, as opposed to if you were a newcomer or a freelancer. For example, many Americans and Europeans have started their own businesses in Africa, after working for many years as NGO volunteers.
In the end though, you will be judged not by your words or promises, but by what you actually do. As a friend of mine used to say, unlike Europeans, African people are not won over by advertising and marketing techniques, but by results.
3. If you want to do business in Africa, be prepared to spend a lot of your time in Africa
If you are thinking about trying to run your African business from the comfort of your own country – checking in every now and then with a timely Skype or video conference – forget about it. Just like in any country, if you want your business to be a success, you have to be around – especially in the early days. By directing your business from a distance there is a real danger you will lose touch and lose sense of what is really happening on the ground. Modern communication tools are a real danger, because although they give you the illusion that you are physically there, it is just that - an illusion.

Creating a favourable climate for investors

Rwanda has set itself an ambitious goal. By 2020 it aspires to be a 'middle-income' country. To achieve this aim local and foreign investments will be indispensable, as well as flourishing small and medium-sized businesses. Rwanda's government is lending a helping hand by creating a favourable climate for investors.

Various new laws have been introduced to encourage investors. A new investment law, customs law, and a tax law in which the rate for taxable profits has been reduced from 35% to 30%, are just a few examples. All this has earned Rwanda accolades from "Doing business 2006" and an honourable eleventh position on the list of best reformers worldwide. Take a closer look at Rwanda's achievements at:
Investments are protected in various ways by the new investment law. Dividends may be repatriated free of tax, and risks can be insured with international insurance companies. A court of arbitration has been set up to resolve conflicts and a legal time limit has been set for dealing with investors' complaints. In 2004 Rwanda joined the COMESA (Common Market for East and Southern Africa), gaining access to a huge new market. In 2007 it became a member of the EAC (East African Community). 

13 August 2010

Cameroon/Italy - Palpable Fruits of Economic Ties!

 Conventions have been signed and promises made on how the two countries can partner for their mutual benefits.
As dust settles on a two-day economic prospection visit to Cameroon of an Italian delegation led by the country's Vice Minister of Economic Development, Adolfo Urso, Cameroon is already counting blessings. Not only did the visit give the over 40 Italian business people an opportunity to share ideas with their peers in Cameroon and get abreast with evolutions in their sectors of concern, it also served as a forum for partnership agreements to be signed and promises made on how the two countries could work in synergy for the good of all.
 The visiting delegation during a working session with the Minister of Forestry and Wildlife, Elvis Ngolle Ngolle and his close collaborators, signed an accord to boost wood processing in the country. Speaking during the ceremony, the president of the Italian firm (CATAS) in charge of materialising the accord, Roberto Snavolero, said Italy occupies the first position among wood processing countries worldwide and partnering with Cameroon will boost activities in the sector, create employment and contribute to the socio-economic development here. CATAS, he said, will work towards building the capacities of Cameroonians and ensuring technology transfer. The ceremony also served as an opportunity for Prof. Elvis Ngolle Ngolle to present what the ministry is doing and their aspirations.

In the Ministry of Industries, Mines and Technological Development, Mr Adolfo Urso and his delegation promised investments in the areas of energy and steel. They are planning to build a power plant based on biomasses and a steel plant in Cameroon which will be able to sell its products in the whole region. "These two projects are key to the development of a local industry. Besides supplying electricity, the projects will also supply iron and other commodities which are necessary to the development of a local industry".
P.S. Picture1:Italian Delegation with Mr.Aboubakary Sarki,Minister of livestock,fisheries and animal industries.
Picture2:Mr.Ntube Felix with Mr.Snaidero;President and CEO of CATAS Italia.