International Enterprise (IE) Singapore is the government agency driving Singapore’s external trade, promoting the overseas growth of Singapore-based companies. African Business spoke to G. Jayakrishnan, Group Director for the Middle East and Africa, about Singapore’s relationship with Africa. Here are excerpts.
African Business: We talked with the Africa Business Group’s Shabbir Hassanbhai and he described the start of the engagement between Singapore and Africa as being very much corporate-driven. There were four or five big companies that went in early and started the relationship.
Yes, I think he was talking probably about the Olams and Wilmars, because they [both multinational conglomerates] had a comparative advantage in African agriculture as they are global players. After the big corporate players you had the SMEs going in, taking advantage of African opportunities.
The Singapore SMEs tend to move quicker than the corporates, they are more nimble and they can deal with the risk of emerging markets, Africa included. They don’t have investment committees, it’s just the boss, he is the owner. They go on a visit and spend a week or two. They meet potential partners and clients, and within a couple of months they are making investment propositions.
And what is the situation today?
Now you have corporates going in again, a second wave of them, a lot of the larger, sometimes government linked corporates. For example, the massive investments in Tanzania made by Temasek’s energy subsidiary Pavilion Energy - in offshore Tanzanian gas fields with BG [now being taken over by Shell] and Ophir. Temasek, the country’s sovereign wealth fund, has done a couple of deals in the hydrocarbon sector. They bought into Seven Energy, Nigeria, for example.
I would also point to Sembcorp, who have bought assets in South Africa, and Tolaram, which has a strong presence in Nigeria, especially Lagos State. Sembcorp is a major utilities, marine and urban development company, while Tolaram is engaged in manufacturing, food, paper, packaging and textiles, as well as energy, logistics and infrastructure businesses.
Indorama is another Singaporean corporate, and it has invested heavily in Senegal - it was around $8oom late last year, last quarter. And they are looking at East Africa too. So, again these are the slightly later wave, but these are very large corporates with a very entrepreneurial spirit.
Indorama manufactures a multitude of industrial products including polyethylene, polypropylene, spun yarns, fabrics, medical gloves and fertilisers. It is the second largest producer of polyolefins in Africa and the largest in West Africa. It is also the largest producer of phosphate fertiliser in sub-Saharan Africa.
What has been your strategy in building this second wave of corporate investments in Africa?
We’re doing a number of things at a number of levels. We are obviously not working in any kind of vacuum. Given how small we are as a country, Singapore has to be quite smart in how we try to leverage our partners, and other people’s resources as well, within our own little base.
We work extremely closely with the Ministry of Trade and Industry and the Ministry of Foreign Affairs. The whole idea is to work with this group on some of the higher-level superstructures, or trading investment highways, as I call them!
We’ve done a lot of work on investment guarantee agreements and securing the avoidance of double taxation agreements putting those in place so that the corporates will get that added level of assurance to make bigger investments.
So we’ve been trying to sign these up quickly as we go along. Just last year we signed investment guarantee agreements with Cote d’Ivoire and Burkina Faso; and we have a double taxation agreement with Rwanda, and we have both investment guarantee agreements and double taxation agreements in the pipeline with Nigeria and Mozambique. We are really trying to roll this out quickly.
But I understand you also do a lot of work at the grassroots level.
Yes, we are working with the business community here. At one level this involves just raising awareness and a balanced mindset. We’re not going to be one sided about the realities of operating in Africa. That doesn’t do anyone any favours. We try to be as factual and insightful as possible, and the materials and information that we disseminate to the companies that are working with us is as objective as it can be.
And then again, down to the next level it’s really about working in certain territories - it’s a huge continent, right, 54 countries now – so we decided to be focused, to take a phased approach, focus on a few countries at first and try to push those and try to develop and build relationships with those. In the Southern region, it’s South Africa, Botswana, Namibia, Angola and Mozambique. In the West, Nigeria and Ghana. To the East, Tanzania, Ethiopia.
Obviously, with other countries, we still look at opportunities, but proactively, I think we’ve spent more time in these markets and also in trying to bring opportunities in those markets to the investors and to the companies here in Singapore. So that’s the geography.
But beyond the geography, what are the sectors you believe make a good fit?
In terms of the sectors, again, we think it makes good sense to play on the strengths that Singapore and companies have. So things that you’d expect: infrastructure - and areas like power, water, desalination.
Similarly, oil and gas. It sometimes surprises people that Singapore hasn’t a drop of oil and gas but we have a very significant cluster of oil and gas players, especially in the offshore business, not just the rig builders, but all of those companies that provide the services and support to the offshore business.
We build all kinds of offshore supply vessels, the communication systems, so that’s in itself a huge opportunity in both West Africa and increasingly East Africa. So, in short we’re taking certain positions in the growth sectors across infrastructure, utilities, ports, transport and logistics, oil and gas and, of course, agriculture and fast- moving consumer goods industries.
I should also mention the ICT sector too, and the particular emphasis that Singapore has placed on e-government. Many African countries are looking at the World Bank’s Ease of Doing Business rankings and asking how they can move up them.
A big part of that is not just software and hardware that enables e-government but using that as a catalyst to re-engineer a lot of the processes within government, for example, the customs clearance systems etc, that are an important component of the transport, logistics, ports and airports that underpin trade flows.
Singapore is an exemplar for many African countries - we think of the development models and the master plans. It is very much admired across Africa. How much does that help you when you talk to these countries?
I think the mindset of Singapore in those aspects like governance, and a very long-term view on development and planning, is that those things are quite well recognised by a number of the African governments, especially the ones that share the colonial British legacy.
We are in the Commonwealth, and within that institution there is a lot of sharing. So in those countries, I think we’ve had relatively easy access. They know us, they have heard of us. And they are watching what we are doing. It is slightly less easy, access in the Francophone or in the Lusophone countries, as you don’t have that common heritage, but even so, these days the reputation does precede us, which we are very thankful for.
It works for us also because we’re a small country and we’re not big into the resource play. We’re not really into the mining and extraction sectors. So, I think we’re looked at in quite a positive light in Africa - and we try to share our experience in Singapore. We do spend a lot of time on technical cooperation. We host dozens of government delegations from African countries. The World Bank has a regional hub here, and we are working closely with them on these issues.
We often think about the sheer size of the resources required to develop infrastructure. If you are a contractor from China, you don’t need the financial resources, you can get them quite easily through state institutions. Singapore doesn’t have that financial firepower, so how do you get into the deals? How do you complete the deals?
It is a combination of things. You’re right, we don’t have anything similar to an Exim Bank, but I think because we’re a financial centre it makes it easier for our corporates to access finance.
Our corporates have good track records in many other parts of the world, and the bankers are aware of that track record. And the corporates have a good reputation for delivering under cost and on time. So these are all important things for the guys who work on project finance.
Our companies are in fact very open to working with financial institutions who put consortiums together, the Chinese state funds or Japanese trading houses. So it’s an array of partners that they’ve been working with.
I would add about infrastructure that, the thing we have as an advantage and what I think we’ve been gaining traction with in the host countries is that we may not always be the builders of these assets, the power plants and so on, but we want to be long-term operators, managers and investors and this way I believe Singapore can make a positive difference. We run assets very well, very efficiently, and make a return from those assets, achieving a lot of turnaround cases.
That’s a good opportunity, where you might have state assets that are now looking for privatisation, looking for refurbishment and then running them very, very efficiently. And that’s where our systems and management practices and expertise come in.
And you don’t need an army of people to do that. You need good systems and processes and that’s what Singapore can do quite well.
Are Singapore banks taking an interest in Africa’s investment propositions?
We are having quite a number of conversations with the Singaporean banks. The three big ones are beginning to do more with their clients who have business interests in Africa. I think it’s natural. As you see more companies go into Africa, they are asking their banks for support.
So what we have been doing is meeting with the banks, holding knowledge sessions and sharing our experience of the continent with them. We see opportunities where some of their clients may be in the key sectors. We have talked about oil and gas. It’s very clear that that is one sector where our banks are supporting transactions.
It is still early days. But it’s definitely a growth trend. I’m talking now about DBS Bank Limited; OCBC (Bank of Singapore); and United Overseas Bank, all banks that originated here in Singapore.
Does the Singaporean media cover African business stories?
Not as much as we would like them to. We do try very hard to pitch stories through the media here in Singapore, the local media. Again, just to provide a balanced view, and on the business side, which doesn’t get covered as much as disasters or terrorism, but we do try to push out business-oriented stories.
Would you agree that Singapore has been very effective in developing as a hub between Asian countries?
Yes. A lot of Asian companies - there are thousands of Chinese and Indian corporates that now have regional headquarters in Singapore - are running ex-China, ex-India businesses from here, including financing businesses. So, that’s a great opportunity for us from the financial structure perspective, as there is job creation with these companies from China, India and Indonesia.
Have you noticed any particular changes in the way Singaporean investors view the continent?
What I have observed in the last couple of years is the increasing understanding displayed by the investor community here in Singapore. As recently as 2013, a lot of companies looking at sub-Saharan Africa, said, ‘Oh, it’s Africa you know, okay, it’s one big bloc,’ but very quickly that has changed. Now they are much more equipped to say ‘okay, this is West Africa and Nigeria is here, and this is South Africa, this is Kenya. They are different markets with different attributes’. And companies going into these markets tend to do so in partnership with local companies. That is one area that we are looking at - building private sector networks.
This article was first published in African Business magazine, June 2015 issue. Copyright IC Publications 2015. Published under permission by IC Publications www.africanbusinessmagazine.com.