Africa Merchants and migrants Aliko Dangote: cementing · PDF fileMerchants and migrants Aliko Dangote: cementing ... according to a 2013 report by the Global Entrepreneurship

Issue 23 | June 2014 | www.gga.org

Africain Fact

The Journal of Good Governance Africa

Merchants and migrants

Aliko Dangote: cementing Africa’s future

Kenya’s beer queen

Madagascar: weaving its way back in

Risky business

2 | Africa in Fact | 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

Africa in Fact | Issue 23 | June 2014 | www.gga.org | 3

CONTENTS2 Set the leopards free

4 About our contributors

DĂĚĂŐĂƐĐĂƌ�ƚĞǆƟůĞƐ�ŝŶ�ƚĂƩĞƌƐ�5 Weaving its way back in

by Brian Klaas

The island nation may regain membership of an important trade club after internationally-approved elections last December

EŝŐĞƌŝĂ�ďĂŶŬƐ�ĂŶĚ�ŽƚŚĞƌ�ďĂƌƌŝĞƌƐ�9 A matter of interest by Adeyeye Joseph

High interest rates are strangling small business development in Africa’s largest economy. Insufficient electricity and broken infrastructure are other hindrances

EŝŐĞƌŝĂ��ĨƌŝĐĂƐ�ƌŝĐŚĞƐƚ�ŵĂŶ�ďĞƚƐ�ŽŶ�ƚŚĞ�ĐŽŶƟŶĞŶƚƐ�ƉƌŽƐƉĞĐƚƐ

13 Cementing Africa’s futureby Simon Allison

He began by marketing salt, then flour, sugar and cement, the big money-spinner. Playing politics has helped Aliko Dangote build his business empire

'ƌŽǁŝŶŐ�ĞŶƚƌĞƉƌĞŶĞƵƌƐ�ŶŽƚ�ŐŽǀĞƌŶŵĞŶƚƐ�ďƵƐŝŶĞƐƐ

18 Futile attractionby Ivo Vegter

Ambitious bureaucrats think they can replicate Silicon Valley, but history proves otherwise

�ŝŵďĂďǁĞ�^ƚƌŝǀĞ�DĂƐŝǇŝǁĂ�21 Working miracles

by Richard Poplak

The telecommunications tycoon triumphs with the law and God on his side

<ĞŶǇĂƐ�ďĞĞƌ�ƋƵĞĞŶ25 Slings and arrows

by Omondi Oloo

Tabitha Karanja: a classic “David and Goliath” tale

�ƀƚĞ�Ě/ǀŽŝƌĞƐ�ĞŵĞƌŐŝŶŐ�^D�Ɛ29 Counting beans

by Marc-André Boisvert

The government is focusing on small business to diversify the economy

�ĨƌŝĐĂƐ�ŝŵŵŝŐƌĂŶƚ�ĞŶƚƌĞƉƌĞŶĞƵĞƌƐ33 Merchants and migrants

by Bruce Whitehouse

Being “distinct” is at once their strength and their greatest vulnerability

tŽŵĞŶƐ�ĞŶƚƌĞƉƌĞŶĞƵƌƐŚŝƉ�ŝŶ��ĨƌŝĐĂ��37 Skirting the real issue

by Terence Corrigan

Make legislation gender-blind to bring African women into the economy

�ƚŚŝŽƉŝĂ�ĨŽŽƚǁĞĂƌ�ĞŵƉŝƌĞ41 Heart and sole

by Matthew Newsome

Bethlehem Alemu is making great strides in creating jobs and maintaining artisanal skills

Africa in Fact�ŝƐ�ƉƵďůŝƐŚĞĚ�ďǇ�'ŽŽĚ�'ŽǀĞƌŶĂŶĐĞ��ĨƌŝĐĂJohn Endres CEO

Constanza Montana Editor

Daniel Browde Deputy editor

<ĂƌĞŶ�,ĂƐƐĞ�^ŝďƵƐŝƐŽ�EŬŽŵŽ��ƐŵŝƚĂ�� ZĞƐĞĂƌĐŚĞƌƐ�ƚǇƉĞƐĞƩĞƌƐParshotam, James Stent

Kate van Niekerk Researcher

Leith Davis Cover design

Opinions expressed are those of the individual authors and not necessarily of Good Governance

�ĨƌŝĐĂ��ŽŶƚĞŶƚƐ�ŵĂǇ�ďĞ�ƌĞƉƵďůŝƐŚĞĚ�ǁŝƚŚ�ĂƩƌŝďƵƟŽŶ�ƚŽ�''��ŽŶƚĂĐƚ�ƵƐ�Ăƚ�[email protected].


�ďŽƵƚ�ŽƵƌ�ĐŽŶƚƌŝďƵƚŽƌƐ

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.


Madagascar: textiles in tatters

With internationally-approved elections last December, the island nation may regain

membership into an important trade club

tĞĂǀŝŶŐ�ŝƚƐ�ǁĂǇ�ďĂĐŬ�ŝŶby 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.

�� !��

��

��

��

��

��

��

��

��

��

��

��

>ĂƌŐĞƐƚ��ĨƌŝĐĂŶ�ƚĞǆƟ�ůĞ�ĞǆƉŽƌƚĞƌƐ�ƚŽ�h^�ϮϬϭϭͲϮϬϭϯ

Source: AGOA.info


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.

Madagascar had been an exemplar of this effect, with a meteoric ascent in earn-

ings owing to the programme. By 2008, Madagascar’s textile industry was the sec-

ond-largest beneficiary of the AGOA programme, trailing only Lesotho’s. With that

boost, Madagascar became one of the fastest-growing economies in the world, reach-

ing a peak of 7.1% annual GDP growth in 2008, according to the World Bank.

Yet just as a pen stroke in Washington created hundreds of thousands of new

��Į�ŶĞ�ďĂůĂŶĐĞUS-SADC AGOA trade, 2000-2012

Source: AGOA.info

US-SADC AGOA trade, 2000-2012US-SADC AGOA trade, 2000-2012

Source: AGOA.infoSource: AGOA.info

��

��

��

��

��

��

��

��

��

�

��

�

��

�

��

�

��

�

��

�

��

�

��!

�

��"

�

��#

�

��

�

��

�

��

�

��

��



jobs in Madagascar with AGOA’s adoption, strongman politics in Antananarivo elimi-

nated those jobs just as fast.

In early January and February 2009 President Marc Ravalomanana—an entre-

preneur who had risen from selling yogurt from a cart to building a national dairy em-

pire and being elected president twice—was under political fire. Corruption allegations

swirled through the capital, followed by bloody protests that saw tens of thousands

take to the streets and a government-led massacre of about 50 protestors. The military

staged a coup in mid-March and transferred the presidency to Andry Rajoelina, a for-

mer disc jockey who was then mayor of Antananarivo.

The coup brought an immediate and biting backlash to Madagascar. The inter-

national community united against the non-democratic transfer of power and cut off

foreign aid, slashing 40% of Madagascar’s government budget. In December 2009,

the US suspended Madagascar from the AGOA programme, forcing any entrepreneurs

hoping to sell their products in the United States to cope with high tariffs. In effect, this

barred Malagasy textiles from entering American markets.

The suspension was devastating. The island’s textile industry had grown into

a $600m-a-year behemoth by 2008, according to the Integrated Regional Information

Networks, a UN humanitarian news service. Right before the coup, roughly half of all

Malagasy textile production, $278.8m worth, was bound for the United States, accord-

ing to the Madagascar Export Processing Zone Association, a public-private partner-

ship. Annual GDP growth in 2008 before the coup was 7.1% but post-coup it plummet-

ed to -4.1% in 2009 and grew to an anaemic 0.5% in 2010. Today, nine out of ten of

the island’s 22m people subsist on less than $2 per day.

Washington’s decision to suspend Madagascar from AGOA effectively eliminat-

ed 50,000 jobs directly, and prompted a further 100,000 layoffs indirectly, according

�#'�

�!'�

��'�

��'�

�'�

�'�

�'�

!'�

� ��!��! ��"��" ��#��# ��$��$ ��

��#� ��$� ��

��

��

DĂůĂŐĂƐǇ�ĞĂƌŶŝŶŐƐ�ŝŶ�ĚĞĐůŝŶĞ

Source: World Bank



to a January 2013 report by Chatham House, a London-based think-tank. Most of the

island’s factories supplied American stores such as Wal-Mart and Bloomingdale’s, or

sports brands like Puma and Adidas. But by early 2010 those companies needed to

seek new suppliers and Madagascar’s entrepreneurs needed to seek new markets.

Madagascar’s AGOA suspension had knock-on effects in the region, affecting

raw materials providers to Malagasy facto-

ries. In particular, regional suppliers such as

Lesotho, Mauritius, South Africa and Swazi-

land suddenly lost an important market and

saw their profits plunge. This is often the

price of government takeovers in Africa.

The US government and international

community adopted a seemingly admirable

stance: coup governments will not be re-

warded with aid and preferential trade deals.

However, the human cost for those already

struggling to make ends meet in Madagascar was severe.

For five long years, stagnation has dominated Antananarivo’s markets under

the shadow of international isolation. Mr Rajoelina’s transitional regime scheduled,

re-scheduled, and cancelled elections repeatedly between 2009 and December 2013,

when they finally took place.

Today, in the wake of elections that transferred power to a new president,

Hery Rajaonarimampianina, the international community is slowly threading Mada-

gascar back into its fold. Many donors, notably the IMF and World Bank, have an-

nounced that they are once again disbursing aid.

Yet Madagascar’s suspension from AGOA persists. It may continue for some

time, as an annual review of AGOA eligibility typically takes place in December each

year. Its return to AGOA membership will depend on Madagascar’s success with rein-

stating the rule of law and securing post-election national reconciliation, according to

press reports quoting Samantha Power, America’s ambassador to the UN. She reas-

sured Mr Rajaonarimampianina that readmission would be considered this year.

If Madagascar is swiftly reinstated into AGOA, the Malagasy entrepreneurial

spirit will be ready to pick up the pieces; and that persistent baby car seat vendor will

at least have the choice to sell his goods in the aisles of Wal-Mart instead of wandering

the streets of Antananarivo.

Madagascar’s last five years teach a simultaneously uplifting and sobering les-

son about the role of sub-Saharan African entrepreneurs in international markets. On

the one hand, avid entrepreneurs and workers throughout the continent are eager and

ready to work hard, produce quality goods and lift their economies to high levels of

growth. On the other hand, a simple rule change in Washington can collapse an entire

industry a world away, devastating hundreds of thousands of entrepreneurs with just

a signature.

DĂĚĂŐĂƐĐĂƌƐ�ůĂƐƚ�ĮǀĞ�ǇĞĂƌƐ�ƚĞĂĐŚ�Ă�ƐŝŵƵůƚĂŶĞŽƵƐůǇ�ƵƉůŝŌͲŝŶŐ�ĂŶĚ�ƐŽďĞƌŝŶŐ�ůĞƐƐŽŶ�ĂďŽƵƚ�ƚŚĞ�ƌŽůĞ�ŽĨ�ƐƵďͲ^ĂŚĂƌĂŶ��ĨƌŝͲĐĂŶ�ĞŶƚƌĞƉƌĞŶĞƵƌƐ�ŝŶ�ŝŶƚĞƌŶĂͲƟŽŶĂů�ŵĂƌŬĞƚƐ


Nigeria: banks and other barriers to business

High interest rates are strangling small businesses in Africa’s largest economy

��ŵĂƩĞƌ�ŽĨ�ŝŶƚĞƌĞƐƚby Adeyeye Joseph

The elation in Nigeria at the news, released last April, that the country had

overtaken South Africa as the continent’s largest economy, was largely confined to

government circles.

Many Nigerians have refused to get caught up in the excitement. Abiodun Ay-

inde, 69, who owns a small waste management company in Lagos, Nigeria’s largest

city and economic capital, is one.

Mr Ayinde does not care about the rivalry between Nigeria and South Africa.

Topmost in his mind is the quest that has given him sleepless nights in the last five

years: Mr Ayinde’s clientele is growing and his expanding business urgently requires

more staff and one more mobile waste compactor.

“Business is not doing badly at all,” he says. “But the problem I have is that I am

unable to raise funds to further expand the business. I need to buy a compactor and I

also want to employ more hands.”

On paper, there are several funding options available to a Nigerian business

person who wants to set up a new business or expand an existing one. The country

has 21 commercial and two spe-

cialised government banks set

up to fund large-scale industry

projects, as well as 871 microf-

inance firms authorised to lend

to small-scale businesses and en-

trepreneurs.

But in practice it is not

easy for small companies to se-

cure loans. Mr Ayinde’s efforts

to raise a 2m naira ($12,500)

bank loan to buy a used waste

compactor and hire new staff

have been unsuccessful. His is a

typical story.

Most Nigerian entrepre-

neurs and small-scale businessmen do not start companies by borrowing from a bank.

Official numbers on bank borrowing are lacking, but from years of talking to small busi-

ness owners, this writer has learned that most Nigerian entrepreneurs turn to banks

only when they need funds to expand an already successful business.

Commercial banks’ lending rates for businesses

Prime Maximum

Access Bank 14% 30%

Citibank Nigeria 16% 21%

Ecobank Nigeria 15% 33%

Enterprise Bank Ltd 25% 29%

Fidelity Bank 17% 24%

Guaranty Trust Bank 7% 25%

Standard Chartered 13% 16%

Sterling Bank 24% 29%

United Bank for Africa 24% 24%

Unity Bank 24% 32%

Source: Central Bank of Nigeria


A matter of interest

This is because banks and microfinance institutions charge prohibitively high

interest rates and attach onerous requirements to loans.

Funding challenges are spanners in the works of many small businesses in Ni-

geria, according to Femi Egbesola, the president of the Association of Small Business

Owners of Nigeria, a trade group. “Most of the financial institutions are requesting for

conditions that are difficult for small companies to meet, [especially] collateral,” he told

Leadership, a Nigerian daily, last April. “The banks charge about 27% interest rate per

year and everybody is complaining that it is on the high side.”

Some Nigerians question why interest rates have remained high despite a recent

fall in the country’s inflation. A bank “must be a commercially viable enterprise, but

why must they charge 20%?” asked Ngozi Okonjo-Iweala, Nigeria’s finance minister.

Inflation in the first eight months of 2013 diminished from 12% in January to 8.7%

in August, she added, “meaning interest rates can also go down”. As of March 2014,

Nigeria’s inflation rate was 7.8%, according to the national statistics bureau.

Commercial banks borrow from the Central Bank of Nigeria (CBN), which offers

money to banks at a rate called the monetary policy rate (MPR). The CBN considers the

country’s prevalent inflation rate while setting the MPR. The idea is to help banks lend

to businesses at non-prohibitive rates. Figures from www.cbrates.com, a website that

compiles world interest rates, show that Nigeria’s interest rate is one of the highest of

Africa’s large economies. Nigeria’s current MPR of 12% is higher than the prevailing

rates of 3% in Morocco, 4.5% in Tunisia, 5.5% in South Africa, 8.25% in Egypt and

9.25% in Angola.

Trade groups, such as the Lagos-based Manufacturers Association of Nigeria

(MAN), have campaigned for lower rates for decades. The organisation’s 2013 report

claimed that some Nigerian banks are charging borrowers as much as 35% on loans, a

rate so high that businesses cannot survive. “In the last ten years, interest rates charged

MAN members by banks have been at an average of 19.9% for most of the manufac-

turing sub-sectors,” according to the report.

These high rates are just one facet of Nigeria’s crippling commercial environ-

ment. The World Bank’s 2014 “Ease of Doing Business” index places Nigeria at a lowly

��

��

��

��

��

�ĞŶƚƌĂů�ďĂŶŬ�ŝŶƚĞƌĞƐƚ�ƌĂƚĞƐ

Source: www.cbrates.com



147 of 183 countries.

Many of the problems stem from Nigeria’s broken infrastructure. Entrepreneurs

have to generate electricity from private generators, dig industrial boreholes to ensure

a reliable water supply, and must also pay private security companies to secure prem-

ises and assets.

The US-based Omidyar Network, a philanthropic investment firm started by

eBay founder Pierre Omidyar, released a study in 2013 on entrepreneurship in six

African countries: Ethiopia, Ghana, Kenya, Nigeria, South Africa and Tanzania. Nigeri-

an entrepreneurs lament that “inconsistent infrastructure electricity supply across the

country has resulted in backup generators forming a key part of any business’s assets,

albeit at a significant additional operational expense,” the report noted. “Nigerian re-

spondents cited access to finance as a key challenge for starting and growing small

businesses. In particular, the requirements for obtaining capital are prohibitive.”

Collateral of up to 120% is often required for debt financing, according to the

interviews with the Nigerian participants in the Omidyar study. Collateral is high be-

cause banks fear that borrowers may default. As a result, 67% of respondents believe

that bank lending policies for newer companies are more challenging than for well-

established firms.

Bank executives, however, argue that high interest rates are forced on them

by Nigeria’s challenging business environment. “I also want a lower rate,” said Philips

Oduoza, the managing director of one of Nigeria’s biggest lenders, the United Bank for

Africa (UBA), at a meeting with newspaper editors last January. “But when you look at

it, you find that banks are an integral part of the economy. One of the reasons why [the]

interest rate is very high in Nigeria is because of the infrastructure challenge,” he said.

Banks, like other businesses in Nigeria, pay a high price for the country’s infra-

structure deficiencies, he added. For example, UBA has to generate the electricity that

it uses at its headquarters and in its branches, Mr Oduoza explained. “UBA has about

four generators at its head office that run simultaneously. It’s a mini-power station.

Diesel consumption alone is extremely high. This is one of the reasons [the] interest rate

�(� ��(� �(� !�(� "�(� #�(� $�(� %�(�

��

��

��

��

��

��

��

dŽƉ�ŽďƐƚĂĐůĞƐ�ƚŽ�ĚŽŝŶŐ�ďƵƐŝŶĞƐƐ�ŝŶ�EŝŐĞƌŝĂ*

^ŽƵƌĐĞ�tŽƌůĚ��ĂŶŬ� � � � � ΎĐŝƚĞĚ�ďǇ�ϭϴϵϭ�Į�ƌŵƐ



is very high.”

The way forward, according to Mr Oduoza, is for government to fix Nigeria’s

infrastructure problems. “If you compare the financials of the Nigerian banks with those

of other emerging and frontier markets, the cost-to-income ratio [a rough guide to how

good a bank is at reining in costs] of Nigerian banks is in the 60s,” he said. “Some

extreme ones are in the 70s. In all the other emerging markets like Turkey, Malaysia,

India, etc, their cost-to-income ratios are in the 40s. So if we are able to deal with all

these cost elements, I can tell you that the interest rate can come down to a single digit.”

Nigeria’s suspended central bank chief, Lamido Sanusi, agrees that the business

environment and the country’s high interest rate are linked. Mr Sanusi, however, looks

at the same problem from a different angle.

“It is not about moving the interest rate down or up. Most of the small- and

medium-scale enterprises (SMEs) that do not have access to credit do not have access

to credit because the environment does not allow businesses to thrive,” Mr Sanusi said

during a public session with federal legislators in July 2013.

“How low do you have to bring down interest rates for banks to lend to a

manufacturer that does not have power, or for a bank to lend to a company that operates

in an environment that does not have security, or where there is no infrastructure?” he

asked. “At what rate of interest would a bank loan to a tomato farmer who is going to

lose 50% of his output between the farm and the market because there is no investment

in storage facilities or cold rooms? These problems are infrastructure.”

Is there any government plan to fix infrastructure in Nigeria? Yes, a grand plan:

the Nigerian Infrastructure Master Plan, projected to cost $2.9 trillion and last 20 years.

But many Nigerians, such as Mr Ayinde, are not hopeful that it will yield im-

mediate benefits. The country’s infrastructure has fallen into disrepair, he complains,

because successive governments rarely keep promises to overhaul the system.

�� !�� "��

��

��

��

��

��

��

&�

��

��

��#�

��"�

�ĂŶŬ�ĐŽƐƚͲƚŽͲŝŶĐŽŵĞ�ƌĂƟ�Ž

Sources: OECD; central banks


Nigeria: Africa’s richest man bets on the continent’s prospects

Playing politics has helped Aliko Dangote build his business empire

�ĞŵĞŶƟ�ŶŐ��ĨƌŝĐĂƐ�ĨƵƚƵƌĞby Simon Allison

At age 57, Aliko Dangote is Africa’s richest man, and by quite some margin.

Forbes estimates his net worth to be $20.8 billion; the wealth of his nearest competitor,

South Africa’s Johann Rupert, is valued at $7.9 billion. Mr Dangote is known as a soft-

ly-spoken workaholic, with all the trappings of wealth, including the luxury yacht and

the private plane.

But it is not the size of his fortune that matters. More important is how he made

it—not through resource extraction or milking state coffers, but by gambling repeated-

ly on the future of both Nigeria and Africa. The risk has paid off, spectacularly, making

Mr Dangote a living embodiment of the “Africa rising” narrative, and his company one

of the key drivers of Africa’s economic development.

It all started in 1977, when 21-year-old Mr Dangote—fresh from a business de-

gree from Egypt’s Al-Azhar University—begged his uncle for a 500,000 Nigerian naira

loan (then worth about $325,000). Mr Dangote’s family were wealthy Muslims from

northern Nigeria. His father Mohammed was a prosperous commodities trader, but the

real money was made by his maternal grandfather,

Alhaji Sanusi Dantata, whose groundnut empire

made him the wealthiest man in west Africa. Mr

Dantata’s son, Abdulkadir, was the uncle who gave

Mr Dangote his first start in business—and, before

his death in 2012, was also one of the richest men

in Nigeria.

Mr Dangote could have gone into business

with either his father or his uncle. Instead, he chose

to strike out on his own, using the loan to start a

general trading company, importing bulk com-

modities like sugar and rice. Business was good,

but he soon discovered a gap in the market: why

was Nigeria importing sugar when it could be pro-

ducing its own? Why was the country bringing

in expensive cement when it sits atop one of the

world’s largest lime deposits?

The answers to these questions—conflict, corruption, incapacity, uncertainty—

lie at the heart of Africa’s decades of stunted development. Mr Dangote, however, was

undeterred and resolved to move into manufacturing: first salt, then flour and sugar

and then cement, which turned out to be the really big money-spinner.

©WEF 1 1

Africa’s cement czar

Cementing Africa’s future


Mr Dangote’s philosophy is known as “backward integration”. Backward inte-

gration is when a company acquires its own raw materials or component suppliers. In

Nigeria it means import substitution: it encourages Nigerians to make their own ma-

terials instead of using foreign supplies and equipment. This stimulates the economy

through more employment and investment, keeping Nigerian money in Nigeria.

Thanks largely to Mr Dangote’s success in the cement sector, backward

integration has become official government policy, included as a central plank of

President Goodluck Jonathan’s Nigeria Industrial Revolution Plan, which was introduced

last February.

At the same time, Mr Dangote is politically astute: he has carefully navigated his

way through changing governments and regulations, emerging unscathed and with

bigger profits, every time. His political connections proved crucial to the scale of his suc-

cess, especially his relationship with former Nigerian President Olusegun Obasanjo. Mr

Dangote funded Mr Obasanjo’s 1999 and 2003 election campaigns and Mr Obasanjo

returned the favour by introducing restrictions on imported cement in 2001, among

other items.

“Dangote is counted among President Obasanjo’s inner circle of business advi-

sors,” observed Brian Browne, former US consul-general in Lagos, in a 2007 diplomatic

cable released by Wikileaks in 2010. “It is no coincidence that many products on Nige-

ria’s import prohibition lists are items in which Dangote has major interests.” Besides

cement, sugar and rice receive protection from external competition—and the Dangote

business has significant interests in both.

In fact, the Dangote Group has substantial shares in just about every major

sector of the Nigerian economy. It makes salt, sugar, rice, pasta, flour and fruit juices;

it supplies steel, cement and packaging; it buys and sells property, and holds a 3G

telecommunications licence; it manages ports; it operates a 5,000-truck-strong haulage

fleet. If you can think of it, the Dangote Group is probably doing it, and making plenty

of money in the process.

Last year, the Dangote Group claimed that its annual turnover was in excess

of $3 billion, or about 30% of the Nigerian stock exchange. It is, by some distance,

Nigeria’s biggest company, and ambitious expansion plans mean that it is only going

to get bigger. “Dangote is going to go haywire now,” observed Lyal White, director of

the Johannesburg-based Centre for Dynamic Markets, an economics think-tank. The

Dangote Group has almost no debt, giving it the perfect foundation for the planned

expansion, Mr White added.

Another crucial factor in the Dangote Group’s success has been the steady

growth of the Nigerian economy, which has expanded an average 7% every year for

the last decade. This growth is often dismissed as a resource bubble, fuelled by Nige-

ria’s vast oil reserves. But driving these impressive figures are other factors: increased

agricultural output, significant enlargement of the manufacturing sector (7.7% in 2013

according to the World Bank) and booming retail and construction sectors. This growth

has benefited Mr Dangote’s businesses.



“[Mr Dangote] is intimately entwined with the rise of Nigeria,” Mr White said.

“If Nigeria does well, so does he.” Given the size of the Dangote Group and the sheer

breadth of its operations, the reverse is just as true: Nigeria needs Mr Dangote to keep

doing well, to keep creating jobs and to keep re-investing in the country.

In this, Mr Dangote is something of an anomaly. In bestowing him with its 2013

Man of the Year Award, Nigeria’s Daily Independent noted in January 2013 that Mr

Dangote is “one Nigerian who makes his money in Nigeria and also spends it in Nigeria

for the benefit of the country’s economy;

unlike several other Nigerians who spend

their wealth buying houses and other

choice properties abroad, or stacking them

into foreign banks to the detriment of the

growth of their own country’s economy,

Dangote is always at home with his busi-

ness.”

Indeed, Mr Dangote—who appears

just as comfortable in a loose traditional

kaftan as he is in a business suit—spends at

least half his time in Nigeria. He divides the

rest between London, where he is prepping

to list Dangote Group on the London Stock

Exchange, and other countries, mostly in Africa but also abroad, where he is looking for

or exploiting new opportunities. Home is a mansion on Lagos’s Victoria Island, which he

shares with the younger of his 15 children from four different marriages. Mr Dangote is

currently unmarried and still smarting from the public rejection of his advances by the

daughter of the late president, Umaru Yar’Adua, according to press reports.

The list of new projects, for which Dangote plans to invest around $16 billion, is

enormous. Within Africa, five new cement plants will come online this year, in Gabon,

Republic of Congo, South Africa, Tanzania and Zambia. (In South Africa, the Dangote

Group’s acquisition of 64% of local company Sephaku Cement is the largest single

foreign direct investment in South Africa by an African company.) More are planned

in Cameroon, Ethiopia, Ghana, Senegal and Sierra Leone. These will complement the

export terminals already in place in Côte d’Ivoire, Ghana, Liberia and Sierra Leone.

Dangote Sugar, meanwhile, will start exporting to Liberia, Mauritania and Senegal.

Outside of Africa, Mr Dangote has plans to work in Myanmar and Iraq, and

has obtained all-important limestone mining rights in Indonesia and Nepal. He is also

looking across the Atlantic Ocean. In January, Devakumar Edwin, Dangote Cement

CEO, announced that the company had signed a joint venture agreement with an un-

disclosed company to tackle the South American market.

Nigeria has not been overlooked. On the home front, Mr Dangote is planning

to invest in a natural gas power plant to boost the country’s power supply, and to ap-

ply his “backward integration” to rice. “We think Nigeria can be self-sufficient in rice

��

��

��

��

��

��

��

��

��

��

�ĂŶŐŽƚĞ�ƌĞǀĞŶƵĞƐ

Source: Dangote Group



in the next three to four years,” Mr Dangote said in a December 2013 interview with

Bloomberg. His biggest project, however, is a $9 billion investment in a huge new oil

refinery in the Olokola Free Trade Zone, located 45km east of Lagos, which could turn

Nigeria from a net importer of petrol (absurd for Africa’s largest oil producer) into a net

exporter. Accompanying this will be Africa’s largest fertiliser plant and a polypropylene

plant, to take advantage of the chemical by-products of the refining process.

So far, Mr Dangote’s rapid expansion has been relatively smooth. Aware that he

brings jobs and deep pockets with him, African governments in particular have wel-

comed his attention. Presidents clear time in their schedules to meet him. Mr Dangote

knows the importance of these interactions. “He understands the value of commercial

diplomacy more than anyone I’ve ever seen,” Mr White said.

Nonetheless, it has not all been plain sailing. In the Senegalese town of Pout,

40km west of Dakar, the shiny new Dangote Cement plant lies dormant as the group

battles legal action from competitors who say the new plant was built in violation of

safety standards and without a proper environmental impact assessment. This, the

competitors allege, will allow Dangote to undercut the market. And during construc-

tion, a court found that the same plant encroached on a sacred forest owned by the

descendants of a famous Sufi mystic. Construction could only continue once Dangote

had appeased the family with a $12.6m pay-off, AFP reported in March 2014.

Other, potentially more serious obstacles may block Mr Dangote’s path to con-

tinental—and, he hopes, global—dominance. One is simply that the company is ex-

panding too far and too fast. Managing this growth effectively is a major challenge. Can

the group recruit enough skilled managers, especially as it has previously preferred to

recruit from Nigeria, where high-level skills are in short supply? Can it find enough re-

liable power, particularly in other African countries, to run its energy-intensive plants?

Can it set up continent-wide supply chains that successfully negotiate the hazards (and

associated costs) of border crossings and changing regulations?

Another barrier is the man himself. Mr Dangote is a notorious micro-manager,

involved in the smallest decisions. This quality, coupled with an exceptionally strong

work ethic, has underpinned his fortune. As the company gets bigger, however, Mr

Dangote simply cannot maintain the same level of control. How he devolves responsi-

bility, and whether he is able to properly corporatise the company, will determine its

future, Mr White said.

A third potential hurdle is Mr Dangote’s close political connections, which he has

repeatedly parlayed to his advantage. Mr Dangote is very close with Nigeria’s ruling

People’s Democratic Party (PDP), having funded the election campaigns of three presi-

dents: Obasanjo, Yar’Adua and Jonathan.

Going into the 2015 elections, however, the PDP is facing an unprecedented

threat from a new opposition coalition, the All Progressive Congress (APC). Dozens of

high-profile PDP members, including governors, parliamentarians and even former

vice-president Atiku Abubakar, have defected to the new party. The APC is likely to

provide the PDP with its toughest ever electoral challenge. A chance exists, albeit a



slight one, that the APC may even triumph.

If it does, where does this leave Dangote? Will a new government undo some of

the legal protection his business enjoys? Perhaps not. Given the sheer size of the Dan-

gote Group’s contribution to the Nigerian economy, most politicians would probably

conclude that they need Mr Dangote more than he needs them. Still, it is a concern for

a company that is so invested in the prevailing political currents.

For Mr Dangote, however, these are but minor obstacles. He knows that with a

proven track record in Nigeria, a huge cash surplus and almost no debt, his company

is ideally positioned to become a global player. This is particularly true in the cement

sector, which is by far the biggest part of the business.

In terms of market capitalisation, Dangote Cement ($24.5 billion) is behind only

cement behemoth Holcim, despite producing only a tenth of the output generated by

the Swiss-based building materials giant. But Holcim is drowning in debt, forcing it

into an uneasy merger with LaFarge, another struggling cement giant based in France.

Should regulators approve the deal, Holcim-LaFarge would be the world’s largest ce-

ment producer by some distance. The problem with producing so much cement, how-

ever, is finding customers to buy it; and the future of the merged company is hugely

dependent on finding a foothold in developing economies, particularly in Africa.

Unfortunately for Holcim-LaFarge, Dangote is already well on his way to sewing

up the continent. The investments

detailed above give the company a

huge head start in what is certain to

be an exceptionally lucrative race

to provide, quite literally, the build-

ing blocks for African development.

Every house, every office, every

road, every dam and every power

station—everything that Africa must

and will build over the coming dec-

ades to address the infrastructure

deficit—will require cement and

tonnes of it. Supplying much of this

demand will turn the Dangote Group

into one of the world’s biggest companies. “We are targeted now to be one of the 100,

in terms of ranking, global companies by 2017,” Mr Dangote said in an interview with

Bloomberg last January.

Aliko Dangote made his fortune by gambling on Nigeria’s success when others

would not dare. The risk paid off, both for him and Nigeria. Now he is looking to make

another wager, this time with even bigger stakes. For it to stick, he needs Africa to keep

developing. For Africa to keep expanding, it needs people like Mr Dangote to keep

sinking big money into the continent—and then re-investing the profits. So far, it is less

of a long shot and more like a sure bet.

��

��

��

��

��

��

��

��

�ĞŵĞŶƚ�ƌŝǀĂůƐ

Source: Dangote Group


Growing entrepreneurs: not government’s business

Ambitious bureaucrats think they can replicate Silicon Valley, but history proves

otherwise

&ƵƟůĞ�ĂƩƌĂĐƟŽŶby Ivo Vegter

Historians credit Frederick Terman, the former provost of Stanford University

and dean of its engineering department, as one of the major founders of Silicon Valley

in northern California. In the mid-1960s, a consortium of high-tech companies in the

US state of New Jersey hired Mr Terman to replicate this hugely successful strip of

innovation and entrepreneurship. The attempt failed.

The culture of cooperation that Mr Terman had established between the science

and engineering departments at Stanford in California and the industries nearby simply

did not happen in New Jersey. Companies wanted to keep their own research close

to their chests. The only nearby university, Princeton, turned its nose up at applied,

industry-oriented research.

Discouraged, Mr Terman moved to Dallas, Texas, where he tried again. He failed

again. The story is told in an academic paper published in the 1996 winter issue of

Business History Review, written by Stuart Leslie and Robert Kargon, Johns Hopkins

University professors in the history of science and technology. After discussing the

emergence of the Stanford-Silicon Valley effort, their study examines in detail other

disappointing efforts, some of which enlisted the aid of Mr Terman and his protégés.

Most flopped, too.

Last March, Scientific American ran yet another story on why it is so hard

to replicate Silicon Valley. The magazine based its article on a 2012 study by Barry

Jaruzelski, a partner at Booz & Company (which has since been renamed Strategy&),

and Matthew Le Merle, of the same firm.

Silicon Valley succeeds because of the close cooperation between academia

and industry, a rich venture capital ecosystem, a corporate culture that is particularly

receptive to innovation and risk-taking, and high institutional tolerance of failure,

according to their study. What distinguishes it from many international efforts to copy

it, however, is its relative freedom from state interference. This makes any attempt by

governments to replicate it oxymoronic. The very attempt will likely ensure its failure.

If even the godfather of Silicon Valley cannot duplicate this California marvel in a

country that can throw the most money, skill and education in the world at the problem,

what hope do politicians in Africa have?

Instead of actively trying to stimulate particular industries, the true role of

government is non-interference. “That government is best which governs least,” wrote

Henry David Thoreau in “Civil Disobedience”, the 1849 essay that was perhaps his most

influential. “Government never of itself furthered any enterprise, but by the alacrity


Futile attraction

with which it got out of its way.”

According to Elizabeth Charnock, a technology entrepreneur and author writing

for Bloomberg in 2011, many countries have laws that inhibit entrepreneurship.

“Whether it is taxation rules on stock options in Norway, the law in Germany that

bars chief executive officers of companies that have gone bankrupt from ever making

another attempt, or the giant amount of personal liability that founders have in most

European countries, the potential upside is curbed and the downside almost draconian,”

she wrote.

Politicians, like most businesspeople, follow the herd. They wrongly think that

they are visionary thought-leaders when, for example, preaching the virtues of “leap-

frogging”, the ability of developing countries to adopt new technologies that remove

the need for adopting older alternatives. History proves that they cannot foresee

entrepreneurial successes, nor make them happen.

An example can be found in South Africa. Mobile technology can indeed be

used to skip the need to bring wired telephony to every chicken shack in town. But the

government’s policy never predicted this and enabled it unintentionally by getting out

of the way.

When the first mobile licences were contemplated in the early 1990s, neither

politicians nor prospective mobile operators themselves thought of the devices as any-

thing other than toys for the wealthy. Government was happy to leave cell phones to the

profit-seeking private sector, while keeping tight control over landline infrastructure.

Contrary to everyone’s expectation, including that of the mobile operators, handset

sales did not peak at a million or so rich people. They extended to every corner of

society, and prepaid plans made cell phones affordable to almost everyone.

According to the International Telecommunication Union, there are 6.8 billion

mobile subscriptions in the world and 89% of all people in developing nations have

access to a mobile telephone. Fewer people have access to clean drinking water and

sanitation, the most basic of government-provided services.

This technology penetration has led to direct improvements in people’s lives,

without government intervention. One famous case study published in 2007 by the

journal Information Technologies and International Development documented the use

of mobile phones by 187 of the poorest people from the fishing industry in Kerala

state, southern India (see chart on next page). Mobile phones enabled the industry to

better match fishing boats to under-supplied markets, according to the paper written

by Reuben Abraham, at the Indian School of Business in Hyderabad. Consumer prices

declined, but more efficient transport and less wastage of highly perishable fresh fish

led to lower costs, more stable prices and higher profits.

No politician would have said (or indeed did say) they were going to help

make fishers more profitable by making prices go down. No bureaucrat could plan

the innovation that made this happen. It all came from the people who had a specific

domestic need and the entrepreneurs that supplied it. All the government did was get

out of the way and permit it to happen.


Futile attraction

Conversely, South Africa’s government liberally subsidised an effort to develop

an electric vehicle called the Joule. The plan was not only to compete in the global

market for such cars, but also to develop a lithium ion battery industry that would

support it. The concept was sound; after all, battery technology is in dire need of a

breakthrough. But it is not something that will happen just because government throws

barrels of money at the problem. The product was late to market, uncompetitive, and

failed. The putative battery factory never even got to the sod-turning ceremony.

Factors such as a healthy venture capital ecosystem with a high-risk appetite can

stimulate entrepreneurship. An attractive environment for living and raising children is

another. This is why the Silicon Cape initiative, a technology networking group in South

Africa’s Western Cape province, founded by entrepreneurs Vinny Lingham and Justin

Stanford, is showing some success: the region appeals to wealthy investors and aspiring

entrepreneurs alike. But core to its success is that it is not government-led. No politician

can afford to take a high degree of risk with enough public money to replicate Silicon

Valley’s success. They would be hounded out of town after “wasting” money on failures

like the Joule.

The view that entrepreneurship can be controlled, planned and stimulated is

deeply mistaken. It wastes political energy and fiscal resources. Africa cannot afford

grandiose plans by politicians to create the next Silicon Valley in every likely-looking

hot spot. Just as in Silicon Valley, Africa can only rely on its people, their unique needs,

the connections between them and private capital with a high-risk tolerance.

Entrepreneurship is not something that a smart bureaucrat with enough political

will and deep pockets can create. Free people can, but only if bureaucrats get out of the

way and stop punishing them for their business failures.

"*� $"*� %"*� &"*� '"*� #""*�

��

��

��

��

��

��

��

��

��

EĞƚǁŽƌŬĞĚ�ŶĞƚƐ

Source: R. Abraham, 2008


Zimbabwe: Strive Masiyiwa

The telecommunications tycoon wins with the law and God on his side

^ƚƌƵŐŐůŝŶŐ�ĨŽƌ�ƚŚĞ�ŝŵƉŽƐƐŝďůĞby Richard Poplak

“What Can Be Done Should Be Done And What Can’t Be Done...Must Be Done.”

So reads part of the mission statement for the South African-based, Zimbabwean

telecommunications mega-outfit Econet Wireless, a global e-buffet in which subscribers,

along with making phone calls, may consume a “holistic” array of services including,

according to the official website, the “core areas of internet, fixed wireless, fibre cable,

satellite transmission, transaction processing services, mobile assurance and money

transfer”, that make up this telecoms giant.

Zimbabwe is not a rich country. Its GDP barely reached $7.7 billion in 2013, ac-

cording to the World Bank. With a population of 12.9m, it is a small country. But it has

long functioned as a springboard for southern African ingenuity. It is certainly a hard

country, an impossible country—every road leads through the intransigence of ZANU-

PF and its vast patronage network.

Therefore the man responsible for its “holistic” telecommunications services, the

man for whom Econet is not just a vector for earning many hundreds of millions of dol-

lars, but also a statement of ethical and spiritual intent, is admired worldwide. And Strive

Masiyiwa, the 53-year-old at the helm of Econet Wireless, is certainly one of the more

respected businessmen in Africa. As of this writing, his Facebook page has acquired

321,954 likes—not Lindsay Lohan numbers, but virtually unheard of for the founder of

a phone company. (His 19,800 Twitter followers are less impressive.)

Strive—his first name—sums up the man. Since the early 1990s he has been on

the radar of such

luminaries as Bill

Clinton. In 1995,

the then US

president called

Mr Masiyiwa to

the board of the

Southern Afri-

can Enterprise

D e v e l o p m e n t

Fund, an ap-

pointment that

served as his

debut in interna-

tional circles. Mr

© WEF11

dŽ�ƐƚƌŝǀĞ�ƚŽ�ƐĞĞŬ�ƚŽ�Į�ŶĚ


Struggling for the impossible

Masiyiwa’s first global moment was a result of his precocious rise in Zimbabwean busi-

ness circles, back in the days when Zimbabwe was considered an African success story,

and Mr Masiyiwa its favourite, if most litigious, son.

He was born in 1961, in a Rhodesia restive with the first rumbles of the Bush War

that would eventually unseat Ian Smith’s supremacist regime. When publications de-

scribe a businessperson as “self-made”, they are often leaving out an important chunk

of biographical data. In Mr Masiyiwa’s case it is his remarkable mother who forms the

bedrock of his entrepreneurial esprit. After his war-weary family moved to Kitwe, a

town on today’s Zambian copper belt, Mrs Masiyiwa worked on the cusp of that coun-

try’s liberation era building a modest empire from retail sales, transportation services

and small-scale farming. With the proceeds from these businesses, the Masiyiwas were

able to send their son abroad to school in Europe, where he attended a private institu-

tion in Edinburgh, Scotland.

The young Masiyiwa, however, had liberation in Rhodesia on the brain. He

wanted to return to fight following his graduation in 1978, but was urged not to. “One

of the senior officers told me, ‘Look, we’re about to win anyway, and what we really

need is people like you to help rebuild the country,’” he informed Time magazine in

2002. Mr Masiyiwa listened to this advice and earned an electrical and electronic en-

gineering degree from the University of Wales, cum laude, in 1983. A year later, he

returned to a liberated Zimbabwe.

Some context: Zimbabwe in 1984 was a surging African state. While Robert

Mugabe was prosecuting the Gukurahundi campaign that resulted in the deaths of

many thousands of Ndebele in the country’s western regions, a commitment to educa-

tion and a solid infrastructural base made it a hotspot for African entrepreneurialism.

But it was not, by any means, Shangri-La.

In 1986, when Mr Masiyiwa was looking to make good on his own promise, he

found this out the expensive way: in court. He raised $75 from friends and family and

started a small electrical contracting business. But as an entrepreneur in the tech field,

he faced a problem: across Africa, state after state had a stranglehold on the telecom-

munications sector, a hangover from the days of post-independence nationalisation,

and one of the last bastions of state ownership in an era of structural adjustment-

imposed liberalisation.

Mr Masiyiwa went after the Zimbabwean government in court, arguing that

the state monopoly was unconstitutional. This was a vicious battle: the state issued

arrest warrants on charges of illegally holding telecommunications equipment. When

in December 1996 Econet won a ruling ordering the telecoms minister to break up the

state-owned monopoly, the resulting open tender process was considered fraudulent,

and Econet went back to court to protest it. “Masiyiwa’s Dream Crumbles” screamed

a newspaper headline that described the soap-operatic quality of the case and defined

Zimbabwe’s shaky coming-of-age in the 1990s.

It was only after the intervention of the late Joshua Nkomo, then vice-president,

that the legal and political persecution stopped. “This one is not a sell out. He is [a] true



son of Zimbabwe,” Mr Masiyiwa blogged Mr Nkomo as saying of him. And by Decem-

ber 1997, Econet won its licence and Mr Masiyiwa his landmark case. This assured his

legend as an African trailblazer.

Still, the company needed money, and not Zimbabwean money, but foreign

exchange. The idea was to raise capital internationally. A Zimbabwean tech start-up,

however, was not exactly a mermaid song for touchy investors. Besides, Econet was lit-

erally selling air. In 1998, the notion of Africans carrying cell phones was preposterous,

and Mr Masiyiwa was selling the company on an innovation called “prepaid”, which no

one in the US, Europe or Africa could understand. But the Econet team persisted. After

an international roadshow, they returned to Zimbabwe in 1998 oversubscribed. They

raised enough capital to move forward.

Part of what has always made Mr Masiyiwa irresistible to a species of American

and European investor is his devout commitment to born-again Christianity. The way

Mr Masiyiwa tells it, he fully turned to the Lord when several gunmen abducted him

during a trip to Mozambique in 1990. He describes on his blog how he kneeled and

prayed for deliverance. When he was set free, he emerged into the light of Maputo as

born again. His Facebook page and blog, to say nothing of his speeches, are peppered

with references to the scriptures. And while this may seem like a cynical business ploy

when trying to raise cash from evangelical oilmen in Louisiana, Mr Masiyiwa is not

faking it: he is Christian to his very core.

This almost entirely explains the parallel tracks that his career as a tech entrepre-

neur and global philanthropist have taken since he turned Econet into one of the first

African telecoms giants. By 2000, while Zimbabwe was teetering on the brink of land

reform collapse, Mr Masiyiwa made the move to Johannesburg. He set up his flagship,

Econet Wireless International. The company quickly diversified into solar energy and

�ĐŽŶĞƚ�ŚŝƚƐ�ƚŚĞ�ƐŬŝĞƐ

Source: Econet Wireless Zimbabwe

�ĐŽŶĞƚ�ŚŝƚƐ�ƚŚĞ�ƐŬŝĞƐ�ĐŽŶĞƚ�ŚŝƚƐ�ƚŚĞ�ƐŬŝĞƐ

Source: Econet Wireless ZimbabweSource: Econet Wireless Zimbabwe

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��



fibre optic cables (his Liquid Telecom cable network is the largest in Africa). Its services

spread rapidly to 15 countries, including a partnership with South Africa’s MTN in

Botswana. In 2000 he took ownership of the then only independent newspaper in Zim-

babwe, the Daily News, which was shuttered under government pressure in 2003. And

while Forbes claims that Mr Masiyiwa has amassed a personal fortune of $600m, he is

not the spendthrift African mogul we have come to know and love.

Along with his wife Tsitsi, with whom he has four sons, he started the Higher Life

Foundation, which is responsible for the continued welfare of 40,000 Aids orphans. He

sucks up commendations like a vacuum cleaner: in 2003, a Time/CNN poll cited him as

one of the 15 Global Influentials of the Year; in 2011 The Times of London named him

one of the 25 leaders of Africa’s renaissance; Forbes called him one of the 20 most pow-

erful leaders in African business in 2011. US President Barack Obama invited him to the

G8 summit at Camp David in 2012. He has Bill Gates on speed dial and is a Rockefeller

Foundation trustee. He founded the eHealth programme with Desmond Tutu and the

Carbon War Room with Virgin’s Richard Branson. Mr Masiyiwa is as connected as it is

possible to be.

One remarkable episode in Mr Masiyiwa’s journey illustrates how his direct line

to heaven would appear to be an advantage. In 2000, when Zimbabwe’s economy im-

ploded due to the land reform/farm invasion saga, Econet was on the brink of disaster.

There was no money to pay staff, no money to invest in equipment. Inflation hit what

economists estimate was around 500 billion percent, give or take a percentage point or

two. But when Mr Masiyiwa looked at the books closely, he identified one astonishing

trend: “I noticed that the share price of the Zimbabwe company was tracking the hyper

inflation! I ‘knew’ then what to do to save the company!” he wrote on his blog.

Mr Masiyiwa and Econet started to use the share price as an “inflation proof” cur-

rency. They minted coins, using airtime as a denomination and bought up everything

they could—stock, equipment, people, businesses. Then, when Zimbabwe dollarised in

2008 and the economy became stabler, Econet began the process of divestment.

“Between 2008-2014,” he wrote, “we had invested over $1.2 billion in Zimba-

bwe. This is the largest single investment by any organisation in the country’s history.

As a result of this investment, cell phone penetration in the country rose from 14% (the

second lowest in Africa), to one of the highest at 103%.”

This is an astonishing African business tale. An analyst can attribute it to celestial

intervention or pure business nous. But one thing is certain: Mr Masiyiwa is one of the

richest, most powerful and connected businessmen on the continent. While Econet can-

not sustain its growth in Zimbabwe—note that 103% penetration—the global business

is not listed and does not publish revenues. It is therefore not subject to the vicissitudes

of activist shareholders and other meddlers; its future is likewise difficult to predict.

But Mr Masiyiwa strives ever forward, building, innovating and quoting kings.

With a war chest of over half a billion dollars, he is likely to remain a presence on the

continent for some time to come. After all, “what can’t be done…must be done.” And

Mr Masiyiwa appears to be doing it.


Kenya’s beer queen

Tabitha Karanja’s success is a classic “David and Goliath” tale

^ůŝŶŐƐ�ĂŶĚ�ĂƌƌŽǁƐby Omondi Oloo

Tabitha Mukami Karanja chats with her senior managers in her spacious office

in Naivasha, 70km west of Kenya’s capital, Nairobi. Behind her stands a chest of draw-

ers stacked with green and brown bottles bearing the labels of her company’s liquor

brands. Against another wall is a wooden cabinet with files and several trophies.

The soft-spoken Ms Karanja, 49, is the founder and CEO of Keroche Brewer-

ies, Kenya’s first locally owned beer manufacturer. Despite her calm demeanour, Ms

Karanja is unrelenting in her quest to expand Keroche’s share of Kenya’s lucrative

liquor trade beyond its current 5%. Her target is to command a 30% share within a

decade, she says.

Ms Karanja’s story is a classic “David and Goliath” tale. The company, which she

founded in 1989, was the first local firm to challenge East African Breweries Limited

(EABL), the powerful company that has domi-

nated the Kenyan alcohol trade for 92 years.

UK-based Diageo now controls EABL, which

started out as Kenya Breweries, founded by

the British Hurst brothers in 1922. With its

flagship Tusker beer, Johnnie Walker whisky

and Snapp apple-flavoured alcoholic drink,

EABL commands 90% of the liquor market,

but Keroche is making inroads, especially

outside Nairobi, where Ms Karanja markets

her brands aggressively.

Ms Karanja’s story began in 1965,

when she was born to middle-class parents in

Kijabe, 41km west of Naivasha. She was the

first of ten children, a role that prepared Ms

Karanja for her future leadership responsibil-

ities. “I played a key role in bringing up my

siblings,” she boasts. “I walked from one class

to another just to know how they performed.”

After finishing high school, she worked

for three years as an assistant librarian in the

tourism ministry. In 1987, at the age of 22,

she earned a diploma in business manage-

ment at the University of Nairobi. Two years

© WEF1

Taking the bull by the horns


Slings and arrows

later she married Joseph Karanja, who ran a hardware shop in Naivasha. Together they

opened a small alcohol factory in 1992 that specialised in fortified wine—wine with an

added distilled spirit, usually brandy.

When the winery started making profits, Ms Karanja stepped forward to be the

face of the business, trusting her ability and resilience in the high-margin industry. She

named the business Keroche in honour of her father-in-law, Karanja Mwangi, whose

friends call him “Keroche”.

The new business faced a challenge in 1993, when banks refused to advance it

capital to expand, she says. This is relatively typical in Kenya. Formal financial institu-

tions have extended credit to fewer than 20% of small to medium-sized enterprises in

the country, according to FSD Kenya, an independent trust established to support the

development of financial markets.

Like many other small-business owners in her position, Ms Karanja turned to her

family for help. She does not disclose the exact sum, but she speaks of having mobilised

“little family resources”.

Her next challenge was exorbitant taxation. Between 1992 and 2006, Ms Karan-

ja says, taxes on bottled alcohol products in Kenya rose by nearly 300%. This harsh

taxation reduced formal alcohol consumption in Kenya from 400m litres in 1991 to

200m litres by 2006, according to an internal survey by Keroche—a situation that dried

up some of the fledgling brewer’s profit margins.

Then the brewer’s Keroche and Viena fortified wines started gaining popularity

in 1997 and exposed the businesswoman to further headaches: in 2003 the Kenya

Revenue Authority (KRA) accused her of withholding 1 billion shillings ($11m) in taxes.

Ms Karanja denied this. The stand-off dragged on until 2006, when the KRA ordered

Keroche to pay up within two weeks or face closure. Ms Karanja stood firm, sued the

KRA and won.

#� %#� &#� '#� (#� $##�

��

��

��

��

��

��

+�

��

��

�ƵƐŝŶĞƐƐ�ĂĐĐĞƐƐ�ƚŽ�Į�ŶĂŶĐĞ�ϮϬϭϯ

Source: World Bank

#� %#� &#� '#� (#� $##�

��

��

��

��

��

��

+�

��

��


Slings and arrows

Taxes were not only too high, they were unfair, she says. In Kenya’s 2006-2007

budget, the finance minister did not levy a value-added tax on EABL’s Senator beer,

but doubled the tax on fortified wines, which were Keroche’s mainstay. This made the

ground uneven, Ms Karanja says.

But it was harassment by state officials, who demanded bribes of as much as 1

billion Kenyan shillings ($11m) for licences, that almost destroyed her young business,

she says. She refused to pay these kickbacks.

“For more than ten years, I fought tough battles against intimidation from state

officials as well as multinationals,” she says. “At times, they would shut our processing

plant, but we never gave up. This is my country and I had to fight on.”

A major turning point in Keroche’s story came in February 2008, when Ms

Karanja secured a 1 billion shilling ($11m) loan from Barclays Bank. She had proved

her mettle as an innovator and a capable business leader and financial institutions were

responsive to her credit needs. Ms Karanja used the capital injection to boost her fac-

tory’s infrastructure and capacity from three small rooms with five employees to much

larger premises of about 4,000 square metres and more than 100 skilled workers. In

October 2008, Ms Karanja boldly entered the beer market and launched Summit lager.

Kenya is the largest beer market in east Africa, according to a 2012 report by Re-

naissance Capital, a Russian investment bank that tracks emerging markets. With GDP

growth of 4.6% in 2012 (according to the World Bank) and a fast growing population,

its market remains the region’s most robust, according to the report.

Breaking into the beer industry in Kenya has historically been difficult, even for

Nigerian Breweries 6.0%($1.7 billion)

East African Breweries Ltd. 2.5%($680m)

Delta Breweries Zimbabwe 2.3%($631m)

Tanzania Breweries 2.0%($543m)

Guinness Nigeria 1.2%($327m)

Cervejas de Mozambique 1.2%($318m)

Guinness Ghana 0.04%($11m)

SABMiller 85%

($23.3 billion)

�ĨƌŝĐĂŶ�ďĞĞƌ�ďƵĐŬƐTotal company revenues, 2013

Source: Company annual reports


Slings and arrows

SABMiller. The London-listed beer behemoth opened a brewing plant at Thika, about

35km north-east of Nairobi, in 2008. But after EABL mounted an aggressive advertising

campaign and rolled out several cheap products to gain market advantage, SABMiller

sold its facilities to EABL in 2010.

Keroche’s Summit lager, however, suc-

ceeded. The company now sells between 4.2m

and 5m bottles of the lager and malt beer per

week. Its share of the Kenyan alcohol market

moved from 2% in 2008 to the current 5%,

according to Keroche’s own market research.

What has made the Summit beers and

Keroche’s other products thrive? Analyst Paul

Okinyi of Nairobi-based Baseline Consulting

credits the company’s innovation, its frequent

rebranding and repackaging, and its 100%

Kenyan ownership. Keroche’s motto, “Truly Kenyan”, has helped endear the company

to the country’s beer consumers, he says.

Ms Karanja is convinced that her segment of Kenya’s beer market will expand

to reflect the rise of the country’s economy. “As people move up the income ladder, per

capita spending on beer rises significantly,” according to a 2013 report by KPMG, an

advisory firm.

Her story is even more remarkable because of the patriarchal barriers that Ms

Karanja sidestepped. Women hold only 12% of seats on the boards of Kenya’s top

companies, according to a 2013 Kenya Institute of Management report, and only 14

of the 290 seats in Kenya’s National Assembly. Of Kenya’s 47 elected senators in the

upper house, none is a woman.

Besides leading Keroche, Ms Karanja is also a senior board member of the Ken-

ya Association of Manufacturers. In 2013 Ventures magazine rated her as one of the

most powerful women to watch in the continent’s corporate sector.

Last year Keroche announced a 2.5 billion shilling ($28m) expansion plan that

will see its production capacity mushroom to 600,000 bottles a day from the current

60,000 by November 2014. Keroche plans to go regional next year, expanding sales

into Burundi, Rwanda, Tanzania and Uganda.

Ms Karanja, a mother of four, credits her success to determination. “I am what I

am because of hard work,” she says. “To succeed where many failed calls for sacrifice.”

She still finds time to spend with her children and her husband, now the company

chairman. “We share dinners and celebrate birthdays together.”

Ms Karanja wants to make it easier for other entrepreneurs to follow in her foot-

steps. She implores the Kenyan authorities to make the playing field fair. “Biased and

over-taxation will destroy the industry,” she says. “We would like to see the govern-

ment create a conducive business environment that emphasises fairness in word, deed

and spirit. Competition is the key to innovative alternatives.”

tĞ�ǁŽƵůĚ�ůŝŬĞ�ƚŽ�ƐĞĞ�ƚŚĞ�ŐŽǀĞƌŶŵĞŶƚ�ĐƌĞĂƚĞ�Ă�ĐŽŶĚƵͲĐŝǀĞ�ďƵƐŝŶĞƐƐ�ĞŶǀŝƌŽŶŵĞŶƚ�ƚŚĂƚ�ĞŵƉŚĂƐŝƐĞƐ�ĨĂŝƌŶĞƐƐ�ŝŶ�ǁŽƌĚ�ĚĞĞĚ�ĂŶĚ�ƐƉŝƌŝƚ��ŽŵͲƉĞƟƟŽŶ�ŝƐ�ƚŚĞ�ŬĞǇ�ƚŽ�ŝŶŶŽǀĂͲƟǀĞ�ĂůƚĞƌŶĂƟǀĞƐ �


Côte d’Ivoire’s emerging SMEs

The government is focusing on small business to diversify the economy

�ŽƵŶƟ�ŶŐ�ďĞĂŶƐby Marc-André Boisvert

Once the economic powerhouse of Francophone west Africa, Côte d’Ivoire has

suffered decades of crisis. Now the world’s biggest cocoa producer is turning the tide

on more than 30 years of economic hardship caused by conflict, draining structural

adjustments, the devaluation of the regional currency and the tumbling cocoa price.

From independence in 1960 to the 1980s, Côte d’Ivoire’s economy flourished

from its fertile farmlands, which produced cocoa, coffee and palm oil. Those govern-

ment-controlled sectors funded gleaming skyscrapers in the capital, Abidjan, and paid

the salaries of the civil servants who worked inside. Building a diversified economy,

however, was not a government priority during these years.

In the last decade, the country’s land has yielded other natural resources: oil,

gas and gold. But Alassane Ouattara, who took the presidential reins in 2011 after a

six-month post-electoral crisis that left 3,000 dead, is trying to move the country beyond

natural resources and agriculture. He is counting on creating a mixed economy that will

extinguish political tensions.

One of Mr Ouattara’s first moves as president was to apply an emergency stim-

ulus package, mostly funded by foreign donors such as the IMF and France. Since

then, Côte d’Ivoire’s GDP has expanded, growing 9.8% in 2012, 8.7% in 2013 and

an estimated 8.0% in 2014, according to the IMF. This package targeted five priority

areas: water, health, education, electricity and sanitation. It included repairing and

reconstructing infrastructure that was destroyed during the 2010-2011 post-electoral

conflict. It also had a peace-building side that included the education and re-integration

of former combatants.

�! �

�

! �

" �

# �

!('

�

!('"

�

!('$

�

!('&

�

!(''

�

!((

�

!(("

�

!(($

�

!((&

�

!(('

�

"

�

" "

�

" $

�

" &

�

" '

�

" !

�

" !"

�

" !$

�

+�

�� !�"%��

ZŝƐŝŶŐ�ŐƌŽǁƚŚ

Sources: IMF; World Bank


Counting beans

But now, economists foresee that GDP growth may slow down unless these quick

fixes are replaced by a longer-term strategy tackling the Ivorian economy’s structural

flaws. In particular, the country’s dependence on cocoa makes the economy vulnerable

to fluctuations in this commodity’s prices. To curb 30 years of growing poverty, one of

the main goals of the government’s strategy is to strengthen small and medium en-

terprises (SMEs), a unique strategy in a region where economic policies usually favour

large corporations and ignore small businesses.

So far, development and economic wonks, especially those from the Bretton

Woods institutions, have praised the policies of Mr Ouattara, a former IMF director.

The country reached 79th place out of 160 countries on the 2014 World Bank’s logistics

performance index, the highest ranking of any Francophone African country. Although

its business environment still has a long way to go, it is improving. Côte d’Ivoire jumped

six places in a year, reaching the 167th position out of 189 countries in the World Bank’s

2014 “Doing Business” report, but still lags behind countries like Afghanistan and Syria.

Jean-Louis Billon, president of the Ivorian Chamber of Commerce from 2002 to

2011, knows business challenges. He left the private sector in 2012 and since then has

worked as the country’s commerce minister, an expanded portfolio that also includes

supervising small business.

“An economy can be competitive only if it allows its SMEs to innovate, to supply

big companies, to safeguard its exports and to contribute effectively to the GDP,” he

told Africa in Fact. “In Côte d’Ivoire we have emphasised plantations and big enter-

prises. But 90% of Ivorian businesses are SMEs. This should be the cornerstone of our

development,” Mr Billon explained. “Côte d’Ivoire cannot develop and build a solid

economy if it does not maintain a large pool of SMEs.”

Small companies represent about 98% of Côte d’Ivoire’s formal businesses and

#�

$#�

%#�

&#�

'#�

(#�

��

��

��

��

��

��

��

��

��

��

"�� "��

��

��

��

��

+��ƀƚĞ�Ě/ǀŽŝƌĞƐ�ďƵƐŝŶĞƐƐ�ďĂƌƌŝĞƌƐ*

^ŽƵƌĐĞ�tŽƌůĚ��ĂŶŬ� ΎĐŝƚĞĚ�ďǇ�ϱϮϲ�Į�ƌŵƐ


Counting beans

create 23% of the country’s jobs, according to the ministry.

This is not to say that small businesses did not emerge under the unchallenged

rule of President Felix Houphouët-Boigny from 1960 to 1993. “During the Houphouët-

Boigny era, civil servants were encouraged to buy land and, in a way, to start their own

small businesses,” explained Marcel Benie Kouadio,

an economist and dean at Abidjan Private Univer-

sity. “This allowed the rise of a middle class. But it

was not formal and more of a hobby. Above all, it

was not sustainable. One would employ the broth-

er-in-law or the nephew to manage the land. It was

additional revenue, but it was not a true generator

of employment.” It provided the government with

little tax income.

Under Mr Billon’s guidance, the Ivorian gov-

ernment has launched several initiatives to make

SMEs a vital part of the formal economy. It has adopted a law that strengthens SMEs’

legal protections and makes bank loans easier to obtain; updated laws protecting and

regulating investments; created a new commerce court which fast tracks disputes at a

lower cost than the existing judicial system; slashed fees by 50% for importing tools

and production equipment; and introduced several initiatives to connect entrepreneurs

to funders, notably an investment forum held in January 2014 that brought pledges of

$930m of foreign direct investment into Ivorian businesses.

In addition, the government has made massive expenditures in infrastructure,

allocating about $6 billion to roads and a second port terminal in Abidjan. Several pro-

jects also aim at boosting energy production from 1,391 megawatts (MW) in 2011 to

almost 4,000MW by 2020.

The Investment Promotion Centre in Côte d’Ivoire (CEPICI, after its initials in

French) is the government’s main measure to ease business life for entrepreneurs. This

agency, headquartered in Abidjan and with three offices in the economic centres of

Bouaké, San Pedro and Yamoussoukro, is a one-stop shop: in a few hours and in a sin-

gle place, business owners can fill out documents such as business and tax registration,

customs agreements, etc. The government is expected to respond to all applications

within a month.

These procedures took nearly a year under the previous government. More im-

portantly, they provide more transparency to help curb corruption. Last year, 2,535

new businesses, mostly SMEs, were registered, about 18% more than in 2012, accord-

ing to CEPICI figures, which are not always reliable.

The CEPICI “simplifies everything”, said businesswoman Marie Diongoye

Konaté, who has run a grain food-processing company since 1994. Like many busi-

nesses begun before Mr Ouattara became president, Ms Konaté’s company, Protein

Kissé-La, was not registered and therefore did not exist legally. She took advantage of

the new system to register and to raise capital. After spending one hour submitting her

/Ŷ�Ă�ĨĞǁ�ŚŽƵƌƐ�ĂŶĚ�ŝŶ�Ă�ƐŝŶŐůĞ�ƉůĂĐĞ�ďƵƐŝŶĞƐƐ�

ŽǁŶĞƌƐ�ĐĂŶ�Įůů�ŽƵƚ�ĚŽĐƵŵĞŶƚƐ�ƐƵĐŚ�ĂƐ�

ďƵƐŝŶĞƐƐ�ĂŶĚ�ƚĂǆ�ƌĞŐŝƐƚƌĂƟŽŶ�ĐƵƐƚŽŵƐ�

ĂŐƌĞĞŵĞŶƚƐ�ĞƚĐ�


Counting beans

documents to the CEPICI, the government responded in 21 days, approving the regis-

tration of her agro-industrial business.

Her case is similar to that of many of the businesses in Côte d’Ivoire that struggled

under the corruption and intimidation preva-

lent during the previous government. With 71

employees, her firm is an example of how a

good business plan and a strong understand-

ing of local realities can compete with foreign

giants such as Nestlé and Danone. “Business

is picking up,” Ms Konaté said. “We have the

feeling that things are moving forward after a

decade of difficulties. The government has, so

far, adopted several measures that make our

life easier.”

Despite the government’s new policies and the investment forum’s momentum,

SME owners still face several difficulties, particularly in raising capital, explained Joseph

Amissah, the director of a small-business group. Banks and other funding institutions do

not provide enough guidance and are reluctant to take risks, he said.

But alternatives to a wary banking system are emerging. Thierry N’Doufou is the

CEO of Siregex, a 20-month-old high-tech company with ten employees. In May 2014

it launched an educational tablet for Ivorian classrooms that should be available soon

in neighbouring countries. It has succeeded by overcoming major investment obstacles.

Finding the funding was the hardest hurdle. “Ivorian bankers did not understand the

project,” explained Mr N’Doufou. “We succeeded in earning the trust of certain persons

and investment funds to secure the project.” (Mr N’Doufou, however, would not share

the names of his investors.)

In addition to the difficulty of raising capital, the country’s “heavy fiscal burden”

is impeding the development of SMEs, said Jean Kacou Kiagou, president of Côte d’Ivo-

ire’s General Business Council, an association of business owners. The government’s

taxation policies deter investments and encourage companies to relocate to neighbour-

ing countries such as Ghana, with fewer fiscal constraints, he said last March. Businesses

represent 90% of the Ivorian government’s tax revenues, while the African average is

about 40%, according to the OECD, an intergovernmental think-tank.

Fiscal pressure and the absence of funding need to be tackled together, accord-

ing to the commerce minister. This is the goal of an upcoming government programme,

which plans to improve managerial skills and teach companies how to participate in a

competitive environment. “SMEs are crucial to fight against unemployment and pover-

ty,” Mr Billon said. “It is a government priority.”

Investors in Côte d’Ivoire, for the most part, are still holding their breath: political

reconciliation from the bloody post-electoral crisis has yet to become a reality. The next

presidential elections are in 2015. Firm economic growth may only take place once the

troubles are definitively over.

dŚĞ�ŐŽǀĞƌŶŵĞŶƚƐ�ƚĂǆĂƟŽŶ�ƉŽůŝĐŝĞƐ�ĚĞƚĞƌ�ŝŶǀĞƐƚŵĞŶƚƐ�ĂŶĚ�ĞŶĐŽƵƌĂŐĞ�ĐŽŵƉĂŶŝĞƐ�ƚŽ�ƌĞůŽĐĂƚĞ�ƚŽ�ŶĞŝŐŚďŽƵƌŝŶŐ�ĐŽƵŶƚƌŝĞƐ�ƐƵĐŚ�ĂƐ�'ŚĂŶĂ�ǁŝƚŚ�ĨĞǁĞƌ�ĮƐĐĂů�ĐŽŶƐƚƌĂŝŶƚƐ


Africa’s immigrant entrepreneurs

Being “distinct” is at once their greatest strength and their greatest vulnerability

DĞƌĐŚĂŶƚƐ�ĂŶĚ�ŵŝŐƌĂŶƚƐby Bruce Whitehouse

Generations of Africans have debated the merits of foreign-controlled enterprise:

do these businesses and the people who run them strengthen or undermine local eco-

nomic opportunity? Do they benefit or exploit local workers and consumers?

Such debates often overlook that a large portion of these foreign-owned firms

are small or medium enterprises, and that their owners are not European, North Amer-

ican or even Chinese. The commercial success of certain “middleman minority” groups,

such as Indians in east Africa or Lebanese in west Africa, is widely known. Far more

foreign business owners on the continent, however, originate in other African countries.

Their ranks include Somalis in South Africa, Nigerian Hausas in Ghana and

Mauritanian Arabs in Senegal. They run a broad spectrum of businesses, from factories

to dry goods stores to tailor shops. These African immigrant entrepreneurs’ vital role in

host country economies has too often been misunderstood by observers and maligned

by overzealous nationalists and cynical politicians.

Even after having established themselves, started businesses and learned local

languages, immigrants often remain socially and culturally distinct from the host popu-

lation. Their linguistic or religious traditions may set them apart.

These groups frequently maintain and cultivate enduring ties with their country

of origin. Many send their children born in the host country to be raised by relatives

back home, the better to instil in them the culture, language and values of their com-

munity of origin. When these offspring come of age, they rejoin their parents abroad

and eventually take over their businesses and properties, perpetuating their families’

presence in the host country.

So although integrated into the host society in fundamental ways, such immi-

grants do not fully assimilate into it, even after generations. They are like a highly

visible thread woven into, yet discrete from, the social fabric of the host country. The

distinct status of these populations—“étranger” (“foreigner” in French) as some call

them—is at once their greatest strength and their greatest vulnerability.

Immigrants and their descendants can draw important economic benefits from

their foreigner status. At home, the imperatives of successful entrepreneurship, such as

making a profit and accumulating capital, frequently conflict with the imperatives of

dutiful kinship, such as supporting the needy, offering credit, or providing discounts.

Abroad, as nominal outsiders, immigrants are not bound by the same webs of recipro-

cal obligation: they can afford to scale back their social obligations and invest more in

their enterprises than if they had never left home.

Although they still rely heavily on their own kin and co-ethnics abroad,



immigrants stand apart from their clientele. Hence they enjoy more freedom to run

their businesses as they see fit.

The tightly knit, kin-based nature of foreigner communities also fosters a degree

of internal cohesion that the wider host society usually lacks. These migrants’ status

as “strangers in a strange land” heightens their sense of shared identity and mutual

responsibility.

This cohesion gives rise to “enforceable trust”, a mechanism for punishing

malfeasance and rewarding good behaviour. Immigrants can ill afford alienation from

their own community, and thus must abide by the group’s internal norms. Enforceable

trust fills the void left by a dysfunctional formal legal system in settings where state

institutions are weak, courts corrupt and contract enforcement uncertain—as is often

the case in some African countries.

Immigrants also stand to benefit from their transnational connections. This writer

studied traders from 2005 to 2006 in Brazzaville, capital of the Republic of Congo. They

belonged to networks linking them not only with their villages of origin in the western

Sahel—especially Mali, Guinea and Senegal—but with kin and co-ethnics based in

Angola, Côte d’Ivoire, Nigeria, South Africa and as far afield as Thailand, the United

Arab Emirates and China. Many had previously lived in some of these other cities and

countries in their migrant network before coming to Congo. Travel between these nodes

was a regular feature of doing business for the more successful entrepreneurs.

Even family-owned businesses can manage risk by diversifying operations across

multiple countries. A Malian entrepreneur I interviewed operates a metal sheeting plant

in the Republic of Congo, has one relative in charge of his Congolese sawmill, another

running his plastics factory in Mali and a third managing his export office in south-

eastern China. Such transnational networks lower business costs by making it easier to

share information and technologies across borders.

Small-scale, kin-based firms thrive in impoverished African economies where

profit margins are narrow, credit is tight and conditions are risky. Their flexible structure

and ability to self-regulate allow them to enter markets which larger, better-capitalised

multinational firms find either too marginal or too hazardous to enter.

Yet étranger status is a double-edged sword. As members of a distinct and

highly visible minority, immigrants are susceptible to abuse by host country citizens

and governments. Hosts typically harbour negative stereotypes about foreigners,

insulting them as “illegal aliens” and parasites who take advantage of local consumers

and expatriate their profits.

Such perceptions can fuel xenophobic violence, as happened in May 2008,

when mobs attacked immigrants in South African townships, leaving at least 62 dead

and thousands homeless. In 2013, two Somali shopkeepers were hacked to death in

Limpopo province, and a third stoned to death in Port Elizabeth. A video of the stoning

was posted to the internet, a graphic reminder of the perils that accompany foreigners.

More often, hosts’ negative perceptions amplify everyday social tensions and

discrimination. Congolese public officials levy all manner of bogus fees on foreign



African shopkeepers in Brazzaville, knowing that these immigrants are resigned to

such treatment and unlikely to protest. Ordinary Congolese perceived west African

merchants as “free riders” who profited from local communities without giving back.

Merchants canvassed during my fieldwork, however, felt they paid far more than

formal taxation and other legal payments, thanks to routine petty extortion.

At times, tensions have led to the mass expulsion of foreign Africans. Dozens of

such evictions were carried out from the 1950s through the 1990s in countries including

Angola, Côte d’Ivoire, Gabon, Uganda and Zambia. Most of these operations entailed

a few thousand deportations. The largest—in Nigeria in 1983—uprooted 2m people,

mostly from Ghana and other neighbouring countries, according to a 2002 paper by

Marc-Antoine Pérouse de Montclos of the Institute of Policy Studies in Paris. Nigerians

still use this operation’s unofficial moniker, “Ghana must go”, as a nickname for the type

of cheap plastic-fibre bags used by deportees to haul away their belongings.

Expulsion orders tend to be politically popular in the short term, as immigrants

make convenient scapegoats for high unemployment and rising prices. Yet expulsions

never solve host countries’ economic problems. The social factors underlying the for-

eigners’ economic success remain unchanged. Nationalised businesses eventually fail.

Deportees slowly resume their activities and the whole affair is gradually forgotten.

Perhaps African governments have learned from their mistakes, as large-scale

deportations have become less frequent over the past two decades. Extensive expulsion

operations have continued, however, in a few countries. Over the past two decades,

Angola has deported tens of thousands of Congolese and west Africans, according to

a 2012 report from the UN Office for the Coordination of Humanitarian Affairs. South

Africa deported more than 2.5m Zimbabweans between 1988 and 2010, according-

to Department of Home Affairs figures, quoted in “Contemporary Migration to South

(� " (� # (� $ (� % (� ! (�

��

��

� ��

��

��

��

�ŽŶŐŽůĞƐĞ�ƉĞƌĐĞƉƟ�ŽŶƐ�ŽĨ�ǁĞƐƚ��ĨƌŝĐĂŶ�ŝŵŵŝŐƌĂŶƚƐ

Source: B. Whitehouse, 2009



Africa: a Regional Development Issue”, by Aurelia Segatti and Loren Landau.

Despite this sometimes sordid history, the relationship between African immi-

grants and their hosts is often mutually beneficial. By converting their outsider sta-

tus into entrepreneurial success, foreigners provide goods and services for the host

country’s consumers, and formal and informal revenue for its public officials. They

frequently perform labour their hosts are unwilling to do. In Abidjan in Côte d’Ivoire,

for example, locals view driving taxis, pushing hand trucks or any form of manual

labour as degrading, suitable only for outsiders, as described in anthropologist Sasha

Newell’s 2012 book, “The Modernity Bluff: Crime, Consumption, and Citizenship in Côte

d’Ivoire”.

Immigrants, coversely, work in jobs they would have been unwilling to do at

home: many Malian immigrants in Cameroon, for example, manufacture metal cook-

ing pots for local consumption—even though taboos in their villages of origin bar them

from working with metal.

The ability of étrangers to operate in high-risk environments has helped rein-

vigorate stagnant, conflict-ravaged economies, such as in the Republic of Congo or

Mozambique, where traders from several west African countries have operated.

Governments can strengthen the symbiotic nature of host-immigrant relations

by earning foreigners’ confidence. To do this, they must fortify the rule of law: wise

entrepreneurs will not invest where they fear losing their property to greedy officials or

mob violence, or where their official permits do not prevent extortion against them. As

long as migrants feel discriminated against and unable to enjoy equal protection under

the law, they and their hosts will view each other with suspicion and the full potential

benefits of their interaction will not be realised.

©NJR ZA1

��hE,�Z�ƌĞĨƵŐĞĞ�ĐĂŵƉ�ƐĞƚ�ƵƉ�ĂŌ�Ğƌ�^ŽƵƚŚ��ĨƌŝĐĂ Ɛ�ǆĞŶŽƉŚŽďŝĐ�ǀŝŽůĞŶĐĞ�ŝŶ�ϮϬϬϴ


Women’s entrepreneurship in Africa

Is numerical parity natural justice?

^ŬŝƌƟŶŐ�ƚŚĞ�ƌĞĂů�ŝƐƐƵĞby Terence Corrigan

A prosperous future for Africa depends upon a greatly enhanced economic role

for women. Women, half of the adult population, represent vastly underutilised human

potential. As the bedrock of Africa’s families, they can also bring important social values

and insights to the continent’s development.

Intrusive laws that impose a 50:50 gender ratio in the business environment are

not conducive to expanding women’s participation. A social and legislative environ-

ment that supports all entrepreneurs, male and female, would be a more effective path.

South Africa’s government is driving the Women Empowerment and Gender

Equality Bill, aimed at enforcing “gender equality” across all sectors. Under this draft

law, currently winding its way through parliament, the minister for women, children

and people with disabilities will select, according to her own discretion, companies that

will have to fill half their decision-making positions with women. She will publish her

designations in the Government Gazette.

Additionally, the law will require “gender mainstreaming”. In other words, all

policies and programmes in the public and private sectors will need to be measured

against the impact, intentional or not, on women.

But the proposed law’s prevailing presumption—numerical parity as natural jus-

tice—has little empirical basis. Groups, whether defined by gender, ethnicity, religion,

race or any other demographic, seldom distribute themselves proportionally across any

activity, no matter how ideal the environment, as American economist Thomas Sowell

has exhaustively shown. There is no reason to expect this in South Africa.

The bill prescribes crippling penalties for non-compliance: firms may be fined up

to 10% of turnover, which many would not survive. The additional regulatory burden

will make business more difficult for all and discourage aspirant entrepreneurs, both

men and women. By putting obstacles in the way of entrepreneurs, the act could end

up inhibiting women’s economic involvement rather than stimulating it.

Nothing promises “empowerment” like entrepreneurship. It signifies self-eman-

cipation. An entrepreneur consciously takes control of her destiny, relying on her own

smarts for a livelihood. Successful women entrepreneurs can set examples that chal-

lenge social attitudes.

Women represent “a vast untapped source of innovation, job creation and eco-

nomic growth in the developing world”, says Carmen Niethammer, a gender specialist

with the International Finance Corporation, a division of the World Bank.

The entrepreneurial spirit is alive in Africa as nowhere else. Some 27% of sub-

Saharan Africa’s workforce is operating an early-stage business (one less than three-

Skirting the real issue


and-a-half years old) and another 15% an established firm, the Global Entrepreneur-

ship Monitor (GEM) estimates in its 2013 report. This is a higher rate than anywhere

else by a considerable margin.

By comparison, 19% of Latin America’s workforce is operating a young

business and 8% an older one. In Asia and the Pacific 12% are operating both types

of businesses. Developed countries tend to have even lower rates, with 8% in the

European Union operating a fledgling business and 6% a proven business.

Africans are also upbeat about entrepreneurship, holding positive views of the

opportunities available and their abilities to make them succeed, according to the GEM

report. Women entrepreneurs are advancing strongly in Africa: their presence among

early-stage entrepreneurship is virtually on a par with men. Some of the continent’s

most successful entrepreneurs are women, such as Ethiopia’s Bethlehem Tilahun Alemu,

founder of soleRebels footwear (see page 41), and Nigerian clothing manufacturer Ruff

‘n’ Tumble’s Adenike Ogunlesi.

These entrepreneurs are the exceptions, however. Women in Africa are more

likely to be operating in the informal sector. Those in the formal sector tend to have

firms that are smaller than men’s, according to research conducted for the International

Labour Organisation (ILO) between 2002 and 2004.

What is preventing Africa’s women from joining the formal sector? Women’s en-

trepreneurship must be understood on two distinct levels, argues Professor Teresa Cruz

e Silva, a social scientist at the Eduardo Mondlane University in Mozambique.

Africa’s “market women” are the continent’s first and dominant face. These small

traders operate without business licences and are not registered with the tax authori-

ties. They deal in the goods and services familiar to domestic life. They sell consumables,

prepare food and make craftwork. They work to survive rather than to prosper.

At this level in particular, many barriers are gender-determined. Despite sig-

nificant reform over the past three decades, legal equality between men and women

�ĂƌůǇͲƐƚĂŐĞ�ĞŶƚƌĞƉƌĞŶĞƵƌƐŚŝƉ

Source: Global Entrepreneurship Monitor

�ĂƌůǇͲƐƚĂŐĞ�ĞŶƚƌĞƉƌĞŶĞƵƌƐŚŝƉ�ĂƌůǇͲƐƚĂŐĞ�ĞŶƚƌĞƉƌĞŶĞƵƌƐŚŝƉ

$+� (+� %$+� %(+� &$+� &(+� '$+�

�� #��

��#��

��

�� #��

��!�"�

��

��


Africa in Fact | Issue 23| 2014 | www.gga.org | 39

remains incomplete in many countries. Customary law and family codes dating from

times when male dominance was uncontroversial remain in force.

In places, attempts at reform over the past decade have failed in the teeth of soci-

etal objections. Even in countries that have taken economic reform and gender equality

seriously (such as Tanzania and South Africa), these barriers linger. Legal guarantees

for equality and women’s property rights co-exist with discriminatory customary law

and social attitudes. Moreover, social expectations of women’s domestic responsibilities

worldwide, no matter the legal environment, impose an additional burden, according

to a 2004 ILO report. This leaves limited options for women to move beyond survivalist

trade and other employment.

Education is one of the major determining factors for successful entrepreneurs.

Yet across the continent, women’s adult literacy rate is only 75% that of men, accord-

ing to a 2011 UNICEF study. Girls’ enrolment in primary education is near parity with

boys’ at 96%, but falls at secondary level to 87%, according to the study. Progress has

been made, but much remains undone.

The second face of Africa’s women entrepreneurs is the small cadre of women

at the helm of prosperous enterprises in the formal sector. They tend to be educated

and to have work experience, according to 2013 research by SBP, a South Africa-based

research firm.

These successful women engage with the modern world. They buy from and

sell to other enterprises, and understand the possibilities of innovation and of exploring

new markets. They have also moved beyond the sectors in which women have conven-

tionally operated, such as personal services and retailing.

Although men and women entrepreneurs are more similar than different in their

approach to business, women are more concerned with balancing their careers with

family interests, according to Cindy Norcott, a South African businesswoman and phil-

anthropist. This is the case even in societies with long traditions of gender equality. The

^ĐŚŽŽů�ĞŶƌŽůŵĞŶƚ�ĨĞŵĂůĞƐ�ĂƐ�ƐŚĂƌĞ�ŽĨ�ŵĂůĞƐ

Source: UNICEF

^ĐŚŽŽů�ĞŶƌŽůŵĞŶƚ�ĨĞŵĂůĞƐ�ĂƐ�ƐŚĂƌĞ�ŽĨ�ŵĂůĞƐ^ĐŚŽŽů�ĞŶƌŽůŵĞŶƚ�ĨĞŵĂůĞƐ�ĂƐ�ƐŚĂƌĞ�ŽĨ�ŵĂůĞƐ

#� ��

��

��

��

��

��

��

��



outcome is frequently a greater aversion to risk and a restrained approach to growing

firms’ markets, turnover and employee complement.

What can be done to encourage more women into entrepreneurship and to

support those already there?

Legislation is a first step. Rwanda’s prudent reform has eased business bur-

dens and helped to spur growth. It outlawed discrimination against women in property

rights and streamlined the regulatory burdens over the past two decades, according to

the World Bank.

But gender-biased policy options can be counter-productive. In Nordic countries,

for example, women make up a lacklustre proportion of their entrepreneurial commu-

nities, despite gender-sensitive policy environments and a social consensus, according

to the GEM study. Generous provisions for maternity leave and childcare are linked to

salaried employment. Inadvertently, this policy environment has drawn women away

from an entrepreneurial career.

Most importantly, African women need to be recognised in all spheres as full

citizens. Remaining legal inequalities relating to inheritance, property and labour rights

must be reformed. Policymakers need to prioritise girls’ education urgently.

Doing business in Africa is generally not for the faint-hearted. Libraries have

been written about the continent’s developmental challenges: poor infrastructure, weak

governance, onerous regulations and haphazard laws. Perhaps a more pertinent ques-

tion is: what needs to be done to improve the prospects for all entrepreneurs, whether

male or female?

Smaller firms, disproportionately owned by women, are especially vulnerable

to red-tape burdens and governance deficiencies. Prudent policy reform aimed at

smoothing the environment for business, although not specifically gender-focused, will

nevertheless give women greater opportunities to be successful in business.

��

#�

��

�#�

��

#�

!��

!#�

"��

"#�

� ��

� ��

� ��

&�

��

tŽŵĞŶ�ŽŶ�ƚŽƉ

Source: World Bank


Ethiopia’s footwear marches on

Bethlehem Alemu is making great strides in creating employment and developing

artisanal skills

,ĞĂƌƚ�ĂŶĚ�ƐŽůĞďǇ�DĂƩ�ŚĞǁ�EĞǁƐŽŵĞ

The flagship soleRebels store in downtown Addis Ababa, Ethiopia’s capital, is a

hipster shoe haven. A lilting reggae soundtrack pervades the air. The wooden décor

is splashed with Ethiopia’s warm national colours: green, red and yellow. Hundreds

of funky shoe designs, their price tags ranging from $40 to $100, festoon the shelves.

In its midst sits Bethlehem Alemu, 34, the company’s founder and owner, sip-

ping Ethiopian black coffee and boasting breathlessly about the fast rise of her foot-

wear empire. “Our business model centres on eco-sensibility and community empower-

ment,” she explains with self-confidence. “Our model maximises local development by

creating a vibrant local supply chain while creating world-class footwear.”

Ms Bethlehem launched soleRebels with only five employees in 2005. She now

employs more than 200 people who make shoes from Abyssinian hemp, organic cotton

and recycled car tyres. These shoes, a combination of Ethiopian heritage crafts and

modern design, are exported to 55 countries and sold in more than 65 stores. Ethiopia’s

20th century anti-colonial fighters, who wore sandals with rubber-tyre soles, inspired

the shoes’ design and name.

Today, in addition to the flagship store in Ethiopia, 13 stand-alone soleRebels

stores are selling shoes in five countries: Canada, Italy, Japan, Spain and Taiwan. Last

year’s company sales reached $2m. Ms Bethlehem says she is expecting $5m in store

dŚĞ�Ň�ŝƉ�ƐŝĚĞ�ŽĨ�ƐƵĐĐĞƐƐ

Ξ�DĂƩ�ŚĞǁ�EĞǁƐŽŵĞ


Heart and sole

sales this year as well as more than $6m in online sales over the next 18-36 months.

Ms Bethlehem was born and raised in Addis Ababa, the daughter of a cook and

an electrician. After gaining a degree in accounting from Unity University in 2001,

she worked for three years in the apparel and leather sectors, gaining experience in

production, design, marketing and sales. It was during these years, she says, that she

developed a strong desire to focus her business skills on helping people from her com-

munity to escape poverty.

Footwear became her platform to harness the local artisanal workforce. With a

$5,000 loan from her family, she opened a workshop in 2005 with five employees on

her grandmother’s plot of land on the leafy edge of Addis Ababa.

For the first six years soleRebels produced shoes for large online fashion retailers

such as Amazon, Endless, Whole Foods and Urban Outfitters. In 2011 Ms Bethlehem

opened her first store in Addis Ababa. The next year, the company launched an outlet

in Kaohsiung, Taiwan, followed by a shop in Vienna, Austria.

Ethiopia is today one of the fastest-growing economies in the world. Since 2004,

its GDP has grown at an average of more than 10% a year, according to government

figures. Conversely, its per capita income remains one of the world’s lowest and it is

also one of the largest recipients of development aid, according to the OECD, an inter-

national think-tank.

Despite Ethiopia’s impressive economic growth, investors are grappling with a

less impressive business environment. In the World Bank’s 2014 “Doing Business” sur-

vey, Ethiopia slipped one place to a lowly 125 out of 189 countries. In the bank’s “Ease

of Starting a Business” index it fell four places to 166.

Graft, corruption, cronyism and a byzantine regulatory environment explain the

country’s low ranking. Corruption permeates many of Ethiopia’s major institutions, with

energy, tax, financial and transport sectors identified as having the highest levels of

sleaze, according to a draft report released last January by the World Bank.

“Ethiopia suffers from high corruption risks because of the private sector’s de-

��

��

��

��

��

��

��

��

��

��

��

��

��

��

"��

�� "��

ZŝƐŝŶŐ�ĨŽƌƚƵŶĞƐ

Source: World Bank


Heart and sole

pendence on the government,” says Ed Hobey, east Africa analyst for Africa Risk Con-

sulting, a pan-African consultancy based in London and Nairobi. “Under Ethiopia’s

state-led business and fiscal model, close contact with government officials is necessary

for big businesses to operate successfully,” Mr Hobey explains. Local investors complain

that the government continues to offer favourable treatment to certain ethnic groups.

Ms Bethlehem is uncharacteristically silent when asked if the government was a help or

a hindrance in starting and maintaining her business.

Ethiopia’s textile sector is the nation’s third-largest manufacturing industry after

the food and beverage and leather industries, according to Bantihun Gessesse, spokes-

man for the Ethiopian Textile Industry Development Institute. Over the last five years

the government has offered many incentives to promote textile businesses, he adds.

“Ethiopia offers textile investors free factory rent, cheap electricity, duty free im-

port of machinery and goods, favourable rules and regulations and cheap air freight,”

Mr Bantihun says.

By adding value to raw materials and localising production, soleRebels is chal-

lenging the overwhelming propensity of African countries to export raw commodities

that are manufactured into products overseas. This business ethos is in line with the

Ethiopian government’s goal to transform the country to middle-income status by

2025 by boosting private investment, increasing trade and industrialising the agricul-

ture-based economy.

As a successful retail chain from a developing country, soleRebels is an example

of “how grassroots African companies can build successful global powerhouses literally

from the ground up”, Ms Bethlehem boasts. For her efforts, CNN named her one of the

“female entrepreneurs who changed the way we do business” in 2013 and Forbes mag-

azine named her a woman to watch as part of its World’s 100 Most Powerful Women.

The Schwab Foundation for Social Entrepreneurship named her as one of Africa’s five

leading innovators at the 2012 World Economic Forum on Africa.

��

��

��

��

��

��

��

� ��

^ŚĂƌĞ�ŽĨ�'�W�ďǇ�ƐĞĐƚŽƌ

Source: World Bank

Documents

Africa Merchants and migrants Aliko Dangote: cementing · PDF fileMerchants and migrants Aliko Dangote: cementing ... according to a 2013 report by the Global Entrepreneurship