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A weekly electronic news briefing on African issues for the Southeast Asian community

Editor: Johan Burger

Issue 120 20 October 2017

African Union

  • Africa: The application of tech as an element to fashion businesses creates an opportunity for more efficient and effective business to consumer relations, where the consumers are able to, in real time, communicate with the designers and make necessary alterations to their garments if need be.

    The African tech accelerator space and the continent’s fashion industry might seem far apart. Kenyan entrepreneurship hub Mettā, looking to change this, recently announced the names of 8 fashion designers in Africa that will take part in the 2nd cycle of its Fashion Product Lab. The aim of the lab is to connect designers with fashion-focused technology companies, and help them use information and communication technology to sell more of their products while gaining better visibility. The Fashion Product Lab was intentionally pan-African to bring a cohort of the next big designers to come together, build linkages across markets and alliances to scale their companies. They will be helped to build a retail network, partnerships and ultimately raise funding. Mettā will help these designers tell their brand stories and piece together their financial models, product pricing and costings. It helps them build and manage their teams, and prepares them to pitch their businesses to investors. The application of tech as an element to fashion businesses creates an opportunity for more efficient and effective business to consumer relations, where the consumers are able to, in real time, communicate with the designers and make necessary alterations to their garments if need be. For more information, read here.

  • CAS View: Technology is at times held up as something that Africa needs to be afraid of as it will destroy employment opportunities. The Fourth Industrial Revolution is seen by some as an enabler, and as the “boogeyman” by others. However, various stakeholders have tapped into technology to empower people and communities. The stories of M-Pesa, M-Kopa, etc. are well known. The need for entrepreneurs have also been emphasized by various countries and other stakeholders. Mettā’s Fashion Product Lab is an initiative that combines these 2 trends, by bringing together both technology and entrepreneurs. Encouraging entrepreneurs must be backed up with managerial support – the dreary side of developing business models with sound revenue models, positioning in the market, and pitching to potential investors. This is maybe not such a sexy side of business in Africa (or elsewhere for that matter), but it is a crucial aspect that frequently does not get the requisite attention. Here’s to Mettā’s success, and ultimately that of Africa!
  • Africa: Authoritarian leadership is viewed as a leadership style conducive to economic prosperity in East Africa. This does create a dangerous situation.

    The focus on regular elections may be misguided. What matters is what happens between elections — and what happens is cause for concern. East African democracy is not in the best of health. As unrest and crackdowns plague some of the region’s largest economies, home to various levels of political freedom, the situation is adding to uncertainty in a region already rocked by Burundi’s two-year crisis over presidential term limits and conflict in South Sudan and the DRC. Rising authoritarianism conflicts with the official attitude of the six-nation EAC. Such a shift would be most striking in Kenya, where political expression has been freest and whose Supreme Court’s annulment of August’s mismanaged presidential vote was hailed as a sign of institutional maturity. President Kenyatta’s party has criticised the nation’s tolerance for dissent. Its vice-chairman has stated that Kenya now needs a benevolent dictator. Rwanda has become a beacon for some East African politicians craving order. Autocracy is punted as the economic solution to African problems — their case is strengthening if you look at Rwanda and Ethiopia, which have authoritarian systems and the broader region’s fastest-growing economies. Tanzanian President John Magufuli is cutting perceived government waste and challenging foreign mining companies for greater revenue. However, detentions of opposition politicians and temporary closures of newspapers accused of inaccuracies are stoking fears that room for dissent is narrowing. For more information, read here.

  • CAS View: Focusing on the authoritarian side of leadership of African countries as a driver of economic success, is a dangerous conclusion. Yes, we do see “strong leadership” in Rwanda, Ethiopia, Uganda and Tanzania. However, to conclude that this is the ultimate model of required leadership does not take all the factors in regard. There is no doubt that where we do find authoritarian leaders, that decisions can be easier. On the global scene, many contrast the speed of decision-making between China and India as an example of authoritarian countries (fast decisions) versus democratic countries (slow decisions). We must take the local conditions into consideration as well, such as the levels of development in the respective countries. Daniel Goleman identified 6 leadership styles, indicating there was a time and place for each. There is no one right style. Therefore, while certain conditions could indicate a need for a specific style, adopting that as the panacea for all Africa’s ills would be wrong. In a country such as South Africa or Kenya, adopting an authoritarian leadership style could boomerang. In other countries, it could work. The prevailing conditions would determine the ideal style for that country.
  • Africa: The consumer-facing sector has been pivotal to Africa’s growth story, accounting for almost 50% of Africa’s GDP expansion between 2010 and 2014. Four trends impacting the consumer goods industry have been identified.

    The consumer-facing sector has been pivotal to Africa’s growth story, accounting for almost 50% of Africa’s GDP expansion between 2010 and 2014. Four trends impacting the consumer goods industry have been identified. 1. Products are becoming more sophisticated, especially when it comes to packaging. While this trend is partly driven by the growth of modern retailers, it is also encouraged by the younger members of established family-owned businesses. 2. Modern and informal retail to continue existing side by side. Informal retail channels dominate sales in sub-Saharan Africa. The past decade has seen the development of numerous western-style shopping centres and the entry of international food and clothing chains. 3. The local manufacturing sector is growing. While Africa is likely to be a significant importer for the foreseeable future, there is a growing momentum towards local production. For instance, both Zambia and Zimbabwe are large dairy producers, Ghana is becoming a significant fruit-juice maker, and Côte d’Ivoire is focusing on cocoa-based products and nuts. 4. Don’t write off Zimbabwe. Asked to identify the countries with the greatest opportunities, Dilkes highlighted Zimbabwe as having high potential. Other countries include Zambia, Uganda, Angola, Malawi and Ethiopia. For more information, read here.

  • CAS View: These trends identified by this article speak for themselves. Another trend confirming these 4 trends, includes the growth of the middle class, or a consumer class, if the concept or definition of a middle class is not acceptable to all. Together with the urbanisation of the population, and the growth of a luxury class, this increases the level of attraction of entering Africa as a market. While Africa by no means equals Asia as a consumer destination, it is possible, even likely, that over time a number of the consumer trends currently prevalent in Asia could spill over into Africa. This would include the trend of healthy living, a propensity towards adopting technology and connectedness, etc. The latter is already visible in Africa, albeit at a lower level of intensity relative to Asia. What is also interesting is that in East Africa, formal retailers are finding it difficult to survive. Nakumatt and Uchumi are two local formal retailers that are currently struggling. Two other foreign retailers seem to be courageous enough to enter Kenya, namely Carrefour (from France) and Choppies (from Botswana). Time will tell whether their decisions were well-informed.

 

East Africa

  • Ethiopia: Ethiopia launched a 15 years National Cotton Development Strategy aimed at positioning Ethiopia as the top cotton producer in Africa through boosting the production and productivity of cotton. The strategy would enable Ethiopia to become the top lint cotton producer in Africa from the current 10th place.

    Ethiopia launched a 15 years National Cotton Development Strategy aimed at positioning Ethiopia as the top cotton producer in Africa through boosting the production and productivity of cotton. The strategy would enable Ethiopia to become the top lint cotton producer in Africa from the current 10th place. The strategy will increase the size of land cultivated with cotton to 250,000 hectares and 1 million hectares after 5 years and in 2032 respectively from the current 80,000 hectares. The volume of cotton production is projected to reach 502,000 and 2,596,000 tons after 5 years and in 2032 respectively. It also proposed improving the policy and institutional framework. It would also help to promote sustainable production practices through awareness raising campaigns about soil erosion, efficient use of irrigation water and inputs and integrated pest management, protection of biodiversity, forests and limitation of waste. The strategy would help to enhance the development of the country’s textile and garment sector, as it is one of the sectors given priority in the industrial development strategy of the country. The strategy is targeted at improving the textile and garment products, earning better foreign currency, creating jobs, and utilizing the full potential of the industry, thereby increasing the contribution of the industry to GDP. For more information, read here.

  • CAS View: The development of the National Cotton Development Strategy to position Ethiopia as the top cotton producer in Africa is a laudable strategy. One has come to expect this kind of stretch goal from Ethiopia. They have grown their economy to become the largest economy in East Africa. Their attempts to industrialise various industries and grow the manufacturing sector have made them the poster boy for economic growth in Africa. While it is good to increase the cultivated land in order to boost the volume of cotton produced, it is also important to increase the productivity of the cotton sector, namely producing more with the same inputs. Increasing the degree of sustainability is also laudable. Given that the country is positioning itself as a manufacturing hub for textile products, attracting Chinese companies to manufacture in Ethiopia, increasing the production of cotton makes a lot of sense. This is another brick in the wall of excellence Ethiopia is building!
  • Ethiopia: As global demand for Ethiopia’s gluten-free indigenous staple crop grows, officials and businesses are looking to tap the global market by modernizing the ancient crop.

    As global demand for Ethiopia’s gluten-free indigenous staple crop grows, officials and businesses are looking to tap the global market by modernizing the ancient crop. Teff is a staple crop in Ethiopia. Ethiopian consumers buy the seed from farmers or traders and ground it into flour to make a bread called injera, which can be consumed 2 or 3 times a day. Due to the introduction of better seeds and farming technologies, production has risen more than 40% over the last 5 years. Teff is farmed and consumed in Eritrea and South Africa, as well as the USA, Australia, Canada, the Netherlands, Spain, and India. However, more than 90% percent of the world’s teff is grown in Ethiopia. Teff is blessed with unique characteristics that make it a healthy food. Despite the growing demand, in 2006 Ethiopia banned exports of raw teff and flour, after the price of the crop skyrocketed, panicking consumers. The ban does not include injera. More than 30,000 pieces of injera is exported to Washington and New York daily. Demand keeps growing 10-15% every month, but supply is way below the demand. Commentators say the government should incentivise large-scale farming, and ease the ban. For more information, read here.

  • CAS View: Here we find another product with the potential to generate revenue for Ethiopia. Looking up and down the value chain of the industry creates opportunities for value add. These products can be exported to the benefit of the Ethiopians. We also find the same phenomenon in the cassava sector, to name but one other example. In addition to the basic foodstuff that is produced from cassava, we also find products such as flour, starch and maltose.
  • Kenya: Two foreign-owned international supermarket chains, i.e. Carrefour and Choppies, have been thrust into a rapid expansion mode to fill the void left by struggling local retailers that have dominated the market for decades.

    Two foreign-owned international supermarket chains have been thrust into a rapid expansion to fill the void left by struggling local retailers that have dominated the market for decades. Carrefour is said to have received multiple invitations in recent weeks to move in as anchor tenant in Nairobi malls that are struggling to deal with the vacuum left by troubled Nakumatt. Carrefour has accepted some of the invitations and is later this month expected to open its third shop in Kenya. Botswana retailer Choppies, which entered the Kenyan market last year by taking over 9 Ukwala Supermarket stores, has since opened 2 new outlets, increasing its branch count to 11. Choppies said it plans to open 7 new outlets by end of the year. The surge by foreign retailers is happening as Uchumi, Tuskys, Naivas and Nakumatt have limited their market presence, with the closure of several branches after years of seemingly unconstrained growth, marking a shift in the local retail sector. For more information, read here.

  • CAS View: The decision by Carrefour and Choppies to enter Kenya to take up the slack created by the “slowdown” of Nakumatt and Uchumi is a brave one. South African retailers Shoprite and Pick n Pay have struggled in East Africa and eventually withdrew from the region. Shoprite chose not to enter Kenya at all. I referred to this phenomenon last week. Amongst others, it seems that the middle class, while they do visit malls for the purpose of entertainment, etc., do not necessarily buy there. They have become cost conscious. Also, the experience in Asia shows that cultural and structural factors prevent deep local penetration by so-called global brands. It would be interesting to see whether a brand such as Carrefour now in Africa would face the same challenge a Kellogg faced in India. Unfilled local needs also give rise to competition from local and regional brands. What is somewhat confusing, however, is the inability of Nakumatt and Uchumi to achieve success in their home country. An answer could be the prominence of informal traders that serve the needs of the upcoming middle class to a greater extent than was thought possible. It would require a more in-depth study to ascertain the reasons for this phenomenon.

 

West Africa

  • Ghana: Ghana and Cote d'Ivoire are collaborating to address the unfavourable global cocoa pricing regime to reduce the vulnerability of both nations to the volatility of the markets.

    Ghana and Cote d'Ivoire are collaborating to address the unfavourable global cocoa pricing regime to reduce the vulnerability of both nations to the volatility of the markets. President Akufo-Addo described as "manifest injustice" the situation where, for the 2015 crop season, both countries earned for their output, which accounted for 65% of the world’s cocoa production, only $5.75 million at a time when the global market was worth ~$100 billion. Ghana and Cote d’Ivoire have decided to provide the necessary leadership for technical and political cooperation that would effectively address the international cocoa price decline in the short-to-medium term. Both were fashioning far-reaching policies towards achieving a shared vision of an industrialised and prosperous cocoa economy. This would reduce their vulnerability to the volatility of the market and help deliver prosperity to their farmers and people. He called for stronger collaboration between Ghana and the Ivory Coast to ensure the full engagement of their other sister countries in the process of West African integration to make the bloc a strong regional economic player. President Ouattara, on his part, stressed the need to accelerate actions to intensify and strengthen the new type of partnership that both countries strived to establish for their people. For more information, read here.

  • CAS View: The phenomenon of these 2 countries producing about 65% of the world’s cocoa, but only receiving about 6% of the revenues, has been referred to in earlier newsletters. Ghana and Cote d’Ivoire are attempting in this article to control the global price, which will be a difficult exercise. Other commentators have suggested moving into other elements of the industry value chain, such as producing chocolate. Some have indicated that this would be difficult for various reasons, such as the low levels of chocolate consumption in Africa, and the difficulty of moving chocolate from Africa to other parts of the world, given the need to move chocolate at low temperature levels. This would increase the cost of such logistics. Victoria Crandall is of the opinion that West Africa can extract more value from its cocoa production by continuing to invest in grinding lines, especially in cocoa butter and powder, which command a higher price than block cocoa liquor. An expansion in cocoa processing capacity, coupled with a control of its cocoa crop so that output stays in tandem with global demand, are critical in helping Ghana and Cote d’Ivoire extract more value from its abundant cocoa production.

 

 

 

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