Tag Archives: Sub-Saharan Africa

More economic news from Kenya while the campaign season continues to heat up

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And in the key sector of immediate interest to the expat community, “Java House deal wins African investment award” from the Nation:

A multi-million dollar deal that saw Nairobi Java House sell a majority stake to a US private equity fund has won the Africa Investor of the year award in a ceremony that also honoured two Kenyan bank chief executives.

The transaction amount was not made public, but Mr Bryce Fort, the managing director of the equity fund, ECP, said at the time that it fell within the firm’s average deal size of about Sh5.1 billion ($60 million).

“The ECP is a strong believer in Africa’s growing middle class,” said chief executive Hurley Doddy in a video address to the Africa Investor summit after winning the award.

The Java House deal, which saw the Washington DC-based ECP acquire a majority stake in the Kenyan coffee chain, was made public early this year.

Here is the link to the story at Africa Assets.

Meanwhile, the IMF predicted 5.7% GDP growth overall for Sub-Saharan Africa in 2013 after 5% growth for 2012.

The Star reports that one group of analysts project that Kenya could near this average, reaching 5.3% growth in 2013 “but only if there is a smooth political transition with a clear winner in round one.”   The pre-election uncertainty and distraction of the campaign are weighing on the economy at present.

Upsidedown Freightcar

A key example of the progress and the frustrations in the Kenyan, and regional, economy, is found an op/ed column in the Sunday Standard from Polycarp Igathe, Chairman of the Kenya Association of Manufacturers, headlined “Inefficient railway system hurting national growth”:

Last month, I visited the port of Mombasa in the company of board members of Kenya Association of Manufacturers (KAM) and Kenya Shippers Council (KSC).

We witnessed firsthand, that at long last, chronic port congestion and inefficiencies are being tackled, bravely, by Kenya Ports (KPA), but timidly by Rift Valley Railways (RVR).

Gichiri Ndua, KPA’s Managing Director explained the gains, efforts and challenges at Kilindini port. Ship-to-shore gantry capacity has more than doubled, dredging of the port is complete and the new berth 19 is almost finalised allowing Port of Mombasa to handle a 16 per cent growth in cargo throughput. Some of the largest shipping lines are now able to call and enables Kilindini to become a transshipment port.

We confirmed that delays in cargo offtake and high cost of cargo transportation are the result of dismal failure in improving railway infrastructure in tandem with port infrastructure. Citadel Capital and Transcentury the major shareholders in RVR must simply know that they are failing the country in outstanding fashion.

Igathe goes on to write that the railroad bottleneck is a key impediment to regional growth, with Mombasa “the only port known in the world to rely 95 per cent on road freight”.  He hails reports of a new commercial contract between the Kenya Railway Corporation and China Roads and Bridges to start building a standard gauge rail line from Mombasa to Malaba as a “game changer”.  Read the whole piece for a Kenyan manufacturers perspective of what is needed for long term growth.

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Western storytelling, the East African “middle class” and how to account for “politics”

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Here we have an interesting paradigmatic story from Der Spiegel, translated from German for their English version, “Up and Coming in Kampala; Africa’s Growing Middle Class Drives Development” by Horand Knaup and Jan Puhl:

Three good anecdotal stories here of successful start-up African businesses generating local jobs and wealth through import substitution with domestic production. They help to grow a domestic consumer market and ultimately look to export as well. One of the two in Uganda got significant assistance from the national government and the Kenyan business got financing from a German international development arm.

She earned her starting capital by importing clothes from the West, but then she began designing her own collections, and soon “Sylvia Owori” was the most popular label among women in East Africa.

Owori has her collection produced by seamstresses in villages. She has trained 200 women and sponsors the purchase of their sewing machines. “When I receive a big order, I can deliver quickly and flexibly,” she says. On the other hand, she says, the women can stand on their own feet when she doesn’t happen to have any work for them.

Her latest creation is a denim laptop bag shaped like the map of Africa. “This bag was once a pair of jeans,” she says. “You threw it into a container for old clothing and sent it to Africa. We made something new out of it and will sell it back to you.” Swedish fashion giant H&M is interested in the bag, and two other Western fashion chains have asked Owori to meet with them in London.

It’s a question of finding new ways to stimulate economic growth. The corrupt oligarchies in many African countries have made money from the export of commodities, but only a fraction of the population has benefited from the proceeds. The growth being generated by Africa’s middle class is more sustainable, say development experts. Much of it is based on the processing of African fabrics, wood and fruits, and it creates jobs.

Good examples of what is going right and working, from two of Africa’s 50+ plus countries. Well done as such.

“She is the epitome of a success story. And success stories are no longer a rarity in Africa, despite its reputation as a continent of poverty and suffering.” Right and important.

But then we get into the broad assertions and big selective extrapolations. “This growth is producing a middle class that’s growing from year to year. According to the African Development Bank, this middle class already includes 313 million people, or 34 percent of the total population.” To say that “this middle class” includes roughly a third of the population of the entire continent is to me quite misleading in the context of this story,

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New IMF Survey Predicts 5%+ Average Growth in Sub-Saharan Africa

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IMF Regional Economic Outlook: Sub-Saharan Africa

The IMF identifies the biggest risk to a return to record pre-financial crisis growth levels in the region as an overall global slowdown, and also notes risk to the pace of policy reforms from the large number of elections scheduled for 2011.

Sub-Saharan Africa’s trading patterns have shown some dramatic shifts during the last few years toward China and other parts of developing Asia, the report said. These shifts were so marked that, by 2009, China’s share in the sub-Saharan Africa’s total exports and imports exceeded that between China and most other regions in the world.
Exports of goods and services make relatively small contributions to aggregate demand in most sub-Saharan African countries. Europe and other advanced countries remain the region’s dominant trading partners. However, in a minority of countries— including the major natural resource exporters— the impact of developing Asia on global export demand and commodity prices is expected to be significant in both the short and long term.

Overall, trade with Asia is therefore likely to be an increasingly important factor in maintaining growth for the region on its current trajectory. But the key drivers of African growth are likely to remain: political stability; the business climate, including the prudent exploitation of natural resources; and the quality of economic management.