MTN Group Ltd. is planning to sell part or all of its $243 million (R4.1 billion) interest in Jumia Technologies AG as Africa’s biggest wireless carrier looks to pay down debt and enter new markets, according to people familiar with the matter.
Jumia founders founders, Sacha Poignonnec and Jeremy Hodara
MTN, which had previously marked the online retailer as a non-core business, is reviving plans for a sale after Jumia’s shares surged 142% this year, recovering from a dip in 2019, one of the people said.
No final decisions about the sale have been made, the people said, asking not to be identified because the plans are private.
Called Africa’s Amazon, Jumia operates in 14 African countries including Nigeria and Ivory Coast where the U.S. giant still lacks distribution infrastructure.
The company — headquartered in Germany and run by its two French founders, Sacha Poignonnec and Jeremy Hodara — had dropped below its initial public offering price in 2019 after improper transactions in its Nigeria business were uncovered.
Johannesburg-based MTN has been disposing of non-core assets as part of the company’s strategy to reduce debt and drive future growth.
The company also has a 29% stake in IHS Towers, which it may sell in the future, one of the people said. Africa’s largest wireless carrier by footprint has generated R14 billion ($812 million) in asset sales that included selling its towers holdings in Ghana and Uganda to American Towers Inc.
The company plans include bidding for a license to enter Ethiopia, one of the largest markets that have not yet privatized its telecommunications industry.
A spokeswoman for MTN declined to comment because the company is in a closed period ahead of financial results. A representative for Jumia declined to comment. IHS didn’t immediately respond to a request for comment.
Source: Bloomberg
Charles Rapulu Udoh
Charles Rapulu Udoh is a Lagos-based lawyer who has advised startups across Africa on issues such as startup funding (Venture Capital, Debt financing, private equity, angel investing etc), taxation, strategies, etc. He also has special focus on the protection of business or brands’ intellectual property rights ( such as trademark, patent or design) across Africa and other foreign jurisdictions. He is well versed on issues of ESG (sustainability), media and entertainment law, corporate finance and governance. He is also an award-winning writer
The Moroccan economy is gradually shifting towards embracing virtual transactions with the increased intake in electronic payment activities within the first half of the year 2020 which hits $15.9 Billion, about MAD 148.4 billion. According to the Interbank Electronic Banking Center (CMI) of Morocco, the above figure came from a total of 171.5 million transactions which took place within the period under review. The activities includes cash withdrawal operations on automatic banking machines, payment operations with merchants and e-merchants, ATM payments with bank cards, as well as cash advance operations through Moroccan and foreign bank cards. However, the activities declined by 13.4% in number of operations and 9.6% in amount of funds compared to the first half of last year, a signal of the impact of the Covid-19 pandemic on business transactions.
Moroccan cards recorded 165.5 million transactions in payments and withdrawals. The activity is worth MAD 140.8 billion ($15 billion), representing a decline of 12.2% in number and a decrease of 6.8% in amount. The activities are distributed between withdrawals, payments with merchants and e-merchants, and ATM payments.
Withdrawals from ATMs using Moroccan cards totaled 130.1 million transactions for MAD 126.8 billion ($13.5 billion) during the first half of the year. The number represents a decline of 15.0% in number of operations and of 7.2% in amount of funds compared to last year. Moroccan card payment transactions with merchants and e-merchants affiliated to the CMI reached 34.2 million transactions for MAD 13.7 billion ($1.5 billion). The number represents a slight increase of 0.9% in number and a decline of 3% in amount.
Payments by Moroccan bank cards include transactions at clothing retailers, gas stations, in the health sector, at appliance stores, and in other sectors. The CTM notice shows that ATM transactions with Moroccan cards for the payment of bills, taxes, and the purchase of communication recharges amounted to 1.1 million operations worth MAD 216.9 million ($23 million). The number represents a 23% decline in number and 14.3% in amount compared to the first half in 2019.
For Moroccan cards with international validity, about five million operations have been carried out abroad. The activities include withdrawals and payments worth MAD 2.2 billion ($235 million), representing an increase of 16.7% in number and a decrease of 15.7% in amount. Activities of foreign cards in Morocco recorded six million transactions for MAD 7.6 billion ($812 million), representing a decrease of 37.2% in number and 42.1% in amount.
Kelechi Deca
Kelechi Deca has over two decades of media experience, he has traveled to over 77 countries reporting on multilateral development institutions, international business, trade, travels, culture, and diplomacy. He is also a petrol head with in-depth knowledge of automobiles and the auto industry
As part of efforts aimed at expanding its operations across the Sahel countries of Burkina Faso, Mali, and also in Cote d’Ivoire, the Malian based solar company SolarX has raised an undisclosed Series A funding round to help it achieve this objective. SolarX which provides a one-stop shop solution for clean energy services, providing reliable and affordable energy which allows end-users to operate more efficiently in challenging environments is a leading solar energy firm in Bamako, Mali.
Karim Ghammache, founder and chief executive officer (CEO) of SolarX
The funding round was led by Energy Access Ventures (EAV), an early-stage fund investing in decentralised energy companies across Sub-Saharan Africa, and the UK’s CDC Group, and will be used to help SolarX develop and operate projects in Mali, Burkina Faso and Ivory Coast.
“As energy generation in our target market comes from costly, difficult-to-get and volatile fossil fuels, most C&I clients are looking for cheaper, more reliable and cleaner energy. Despite the market demand, attracting financial partners had been a challenge before engaging with EAV,” said Karim Ghammache, founder and chief executive officer (CEO) of SolarX.
“The EAV team has been instrumental in supporting us to set up the company, define the right business model, put together operational structures and develop connections with relevant partners prior to their investment. We are eager to lead the way in growing the renewable energy sector in West Africa.”
EAV principal Vladimir Dugin said his company was proud to continue to foster the development of C&I solar, investing in experienced local teams and innovative business models across under-served, frontier markets in Sub-Saharan Africa.
“With decades of combined operating experience in Mali, the SolarX team has the right expertise and execution capabilities to create a leading regional franchise with an appropriate and comprehensive C&I offering,” he said.
Kelechi Deca
Kelechi Deca has over two decades of media experience, he has traveled to over 77 countries reporting on multilateral development institutions, international business, trade, travels, culture, and diplomacy. He is also a petrol head with in-depth knowledge of automobiles and the auto industry
Africa’s biggest telecoms firm, Mobile Telecommunications Network (MTN) Group has announced the opening of an application programming interface (API) marketplace for software developers across the continent. The API named Chenosis will give developers and businesses the opportunity to discover and subscribe to open application programming interfaces. According to sources from the telco giant, Chenosis will be open for the public from the 10th of August and will among other things enable developers to tap into a broad spectrum of API products and services from across the continent, ranging from telecommunications, e-health, e-government, Internet of things, fintech, e-commerce, identity and authentication, payments and collections, location and more, from a single marketplace.
MTN Group’s Chief Technology and Information Officer Charles Molapisi
To avoid conflict of interest, Chenosis will run as a separate brand and entity, and will have an arm’s-length relationship with MTN so that it remains open to all mobile network operators, fintech start-ups, payment service providers, mobile wallet operators and financial service providers, so says MTN Group’s Chief Technology and Information Officer Charles Molapisi.
Chenosis has dashboards for publishers and consumers to track revenue and credit balances, and view consumption analytics and API performance and the marketplace allows businesses and developers to publish their APIs so that other developers can discover and consume them. The marketplace also provides the tools for publishers to monetise and promotes their APIs, by creating subscription plans and product bundles that developers and businesses can purchase. The marketplace portal has dashboards for publishers and consumers to track revenue and credit balances, and view consumption analytics and API performance.
“The power of the platform will be in the creation of ‘mashup APIs’, which will connect cross-industry APIs and facilitate innovation and the ability to build new services and new business models. Mashups are new product and service orchestrations created by developers from two or more existing APIs,” said Molapisi. He further pointed out that the MTN Group has an exciting pan-African and international partnerships lined up to publish and monetise their APIs in the marketplace over the coming months. These partnerships will enable Chenosis to become the largest and most diverse developer ecosystem on the African continent.”
Kelechi Deca
Kelechi Deca has over two decades of media experience, he has traveled to over 77 countries reporting on multilateral development institutions, international business, trade, travels, culture, and diplomacy. He is also a petrol head with in-depth knowledge of automobiles and the auto industry
The Covid-19 pandemic has accelerated the adoption of e-commerce in a way no company could have imagined. In fact, in many instances, it has brought three- to five-year sales projections forward in just a matter of months. Many businesses are already living in the future. A good example is Amazon.com, which has experienced record levels of demand, comparable to a usual Christmas period. Not only has its online retail operation thrived, but its video and Web services have also flourished during the lockdown periods around the world.
Gerrit Smit, head of equity management UK at Stonehage Fleming
Then there are digital payment companies such as PayPal, which has recorded a remarkable increase in transactions across its network. It took on 7.4m new customers in April alone — a 135% increase. Those new customers are doing more transactions than ever and the business is experiencing retention rates to match.
This must be one of the biggest economic shifts in the world for a long time, if not ever. Nor is this trend likely to reverse materially…
Visa, too, is benefitting. Quite apart from an increase in online purchases, hygiene-conscious consumers’ reluctance to touch cash has further boosted business. This is a game-changer for all payment companies whose biggest competitor is cash.
E-commerce is perhaps the most striking example of structural shifts in the economy. Since the beginning of Covid-19 alone, e-commerce penetration as a percentage of retail sales in the US has increased in a matter of three months as much as it previously took a decade to achieve. This must be one of the biggest economic shifts in the world for a long time, if not ever. Nor is this trend likely to reverse materially once economies have fully opened and the virus has receded.
With millions of people working and learning from home, consumers have been forced to rely on e-commerce, and have come to understand the benefits of obtaining goods and services through the Internet. These include variety, safety, convenience and certain cost savings.
From an investor’s perspective, the economic shift to online is revitalising important investment opportunities. In addition to large retailers like Amazon and payment systems like PayPal and Visa, technology companies that enable working from home have also benefited. Consider 5G network providers, data and voice providers, cloud services, data handling and office automation services.
More time at home has also meant more home cooking, to the benefit of many food and spices companies, as well as an increase in home design and décor products and services as people adapt their homes for new requirements.
Entertainment and streaming services have also benefited from people spending more time at home, as have online exercise offerings. And of course, this has translated into an increased interest in leisure and sports clothing lines.
Investors will find no shortage of newly energised investment opportunities. High uncertainty and market volatility, however, will remain a challenge. Good stock selection is as critical as it has ever been. Investors should be very selective with their investments – buying only quality businesses with strong balance sheets.
Gerrit Smit is head of equity management UK at Stonehage Fleming. He manages the Stonehage Fleming Global Best Ideas Equity Fund.
Kelechi Deca
Kelechi Deca has over two decades of media experience, he has traveled to over 77 countries reporting on multilateral development institutions, international business, trade, travels, culture, and diplomacy. He is also a petrol head with in-depth knowledge of automobiles and the auto industry
The ongoing deployment of 5G network infrastructure across major cities in South Africa has led to protests from people who are protesting the erection of the mobile telephone towers within their homes. This got to the head as tens of thousands of people have written complaints to the government over a new policy that would let mobile networks build cellphone infrastructure like 5G towers on private land, which they say could devalue their property. The clamour against the towers started as soon as the Communications Minister Stella Ndabeni-Abrahams gazetted the policy leading to series of dissent through the website Dear South Africa, which collects online submissions to challenge or co-form policies before they become law.
Communications Minister Stella Ndabeni-Abrahams
“There are concerns about radiation, about the resale value of properties and about this being used as an excuse to expropriate land without compensation,” the group’s founder, Rob Hutchinson, was quoted as saying.
The government’s proposal says network operators “have the right to enter upon and use public and private land”, citing the need for “high speed, high quality networks” to ensure that “rural areas do not lag behind”. But critics worry this is a ruse to exploit private property owners. “This policy proposes that network operators can erect infrastructure on private land, and property owners cannot charge an access fee and are liable for any damage to the infrastructure,” said Hutchinson.
According to the draft policy, owners can charge a “reasonable” access fee if the network operator makes any intrusive changes to their land but are liable for any damage they cause to communications facilities.Damage to property caused by the network provider must be repaired by the company and the property owner is entitled to reasonable compensation, the policy said.
MTN Group, Africa’s largest mobile network operator by subscribers, welcomed the rapid rollout of cellphone infrastructure. “This lag in providing services does little to enable a digital environment for all,” said Jacqui O’Sullivan, the company’s executive for corporate affairs in South Africa, stressing that the policy is still in the draft phase adding that the “the draft document is open to comment by all interested parties, including MTN, ensuring that the final document is a robust and balanced document that addresses the concerns of all parties.” “While there are allegations that 5G is already causing health problems, including the novel coronavirus, there is absolutely no scientific evidence to support this,” she said.
More than 42,000 submissions were collated through the Dear South Africa site from across all nine provinces in the country, detailing concerns over the public’s right to privacy, property ownership and a healthy and safe environment. “Private property is owned by us private individuals, therefore I refuse to be bullied by the government to erect infrastructure at no cost on my property,” wrote a resident whose name was anonymised by the platform.
Hutchinson said giving residents the chance to air their complaints now could help them avoid the “expensive and lengthy process” or protecting their property rights later. “Raising your concerns through an official channel provides a legal opportunity to shape policy before implementation,” he said.
South Africa is the most unequal country in the world, according to the World Bank, and these divides are seen along digital lines, too, with a study by the Research ICT Africa think tank showing only 11% of households have broadband internet access – hampering access to online education, among other services.
Kelechi Deca
Kelechi Deca has over two decades of media experience, he has traveled to over 77 countries reporting on multilateral development institutions, international business, trade, travels, culture, and diplomacy. He is also a petrol head with in-depth knowledge of automobiles and the auto industry
The composition of our total output seems to suggest a diversified and well-balanced economy. The size of our economy in 2019 was N146 Trillion (about US$448 billion). Oil and gas accounted for only 10 percent and non-oil contributed 90 percent. If we further disaggregate the non-oil output, agriculture had a share of 20 percent, industry-21 percent; and Services-49 percent. On the face of it, this looks like a well-diversified economy.
Olusegun Aganga, Former Minister of Finance and also Minister of Trade and Industry
But the picture is very different when we actually look at other metrics. I will focus on the composition of revenue and exports, size and quality of revenue, and other dimensions of economic development that tend to align with a more-diversified economy.
A) Sources of revenue for Government and foreign exchange:
We rely mainly on one source – oil and gas! Revenue from oil accounts for over 70 percent of our total revenue and over 85 percent of exports. Meanwhile, for other resource rich countries like Indonesia, oil and gas only accounts for less than 35 percent of their export earnings while the remaining 65 percent is from a wide range of products and commodities.
B) Size and quality of revenue:
The size of the revenue is relatively small as already identified by the IMF (reported at about 8 percent of GDP in 2019 but expected to decline to around 5 percent in 2020), and the quality is poor because of the volatility of oil prices. The fiscal deficit in the recently revised 2020 budget stood at N4.97 trillion, reflecting largely the sharp decline in oil prices due to reduced global activities associated with COVID-19.
C) Size of economy: Indeed, our country is the largest economy in Africa. Indonesia, which in many ways is similar to Nigeria in terms of population and natural resources, has more than twice the size of our economy, with a nominal GDP of $1.12 billion. Nigeria’s per capita GDP of $2,386.90 constitutes about 32 percent of that of South Africa. It is clear to me that we have considerable scope to grow our economy and at the same time ensure that greater segments of the population participate in the growth process.
D) Delivers Inclusive Economic Growth?
The high level of poverty and unemployment is a pointer to the fact that there are fundamental issues to be addressed. According to the 2019 poverty and inequality report, released by the National Bureau of Statistics recently, 82.9 million (40.1 percent) Nigerians are poor. That is the entire size of the population of South Africa and Ghana put together. The poverty world clock actually claims that the number of the absolute poor in Nigeria is closer to 102.million, the highest in the world. Nigeria’s unemployment rate of over 23.1 per cent deserves policy attention. The unemployment situation is expected to worsen as a result of the COVID-19 pandemic.
THE ECONOMY WE NEED
So, what do we need? We need a much bigger economy that is diversified in terms of domestic revenue generation and export earnings. Such an economy is better equipped to withstand internal and external shocks and compete in the global arena. The key message here is that being a resource rich country does not make you a rich nation, but it is what you do with the resources that makes you rich, very rich or remain poor.
WHY HAS IT ELUDED US?
Despite the talk of economic diversification over the decades, we have not been able to diversify our economy due to a combination of factors. But I will highlight 4 critical factors:
Lack of Continuity: in policies, plans and commitment to economic diversification and quality of governance. Poor Implementation: we are long on plans but short on implementation/execution as the hedge fund manager would say.- Breakdown of our national values system and lack of adequate investment and development of our greatest asset – our people. I will explain later.
Of course, there are a number of things we need to do to address these issues, but I will limit myself to 4 critical points:
i)We need an integrated national economic long and medium-term plan and an effective framework for delivery, monitoring and reporting. A plan that will be implemented overtime. The norm is to have a 20-25- year plan that is reviewed every 5 years. Remember Singapore’s economy was transformed over a 30-year period and the Auto policy in South Africa was first developed in 1960 and the same plan has been developed and reviewed every 5 years. What is more important is to have in place an effective monitoring and evaluation process to periodically review this framework. The ERGP is a good start.
ii. Build a strong industrial and services sector based on areas of competitive and comparative advantage. The plan to do this is already there. It is called the Nigeria Industrial Revolution Plan (NIRP), and was launched in 2014.
History shows that no country has ever become rich by exporting raw materials without also having an industrial sector, and in modern terms, an advanced services sector. The more a country specializes in the production of raw materials only, the poorer it becomes… Industry multiplies National wealth!
Nigeria has all that is required to become the China of Africa “Africa’s factory” and even more. In 1980, China was the 7th largest economy with a GDP of only $305.45bn, less than Nigeria’s GDP today, while the US then was $2.86 trillion. Chinaaveraged10%annual growth for many years and now has the largest economy in the world with a GDP, in PPP terms, of $ 25.27 trillion.
In today’s world, you can only be a great nation, if you have a great economy. And you can only have a great economy, if you have a great Industrial sector to diversify the economy and sources of revenue… and if you also have a vibrant MSME sector to create jobs and provide linkages.
iii. MSME. MSMEs are the bedrock for Nigeria’s industrialization and inclusive economic development. All over the world, MSMEs are the primary drivers of employment. In China and Brazil, MSMEs employ 75% and 70% of the workforce respectfully. The last survey, conducted by NBS and SMEDAN in 2017, identified 41.6m MSMEs employing 86.3% of our workforce, accounting for 49.78% of our GDP and 7.64% of our exports.
Again, we already have a comprehensive plan called NEDEP (National Enterprise Development Plan), which can be updated and implemented as part of the long-term plan. It covers the entire ecosystem of the sector nationwide, working closely with SMEDAN, ITF, BOI, the State and local Governments and the private sector, under the supervision of the National MSME Council. There should also be state MSME Councils.
iv. Critical Enablers
The drivers of competitiveness, viz; The needed investment, a friendly business environment, infrastructure and standards are already addressed in the NIRP. But I want to talk about other critical enablers for economic diversification and National development, which are often not properly identified and linked to economic diversification and development.
National Values System – History has shown that the most successful companies and countries in the world have some core values, which have become part of their culture. It is the foundation on which their success is built. It is PEOPLE who make the laws, develop the diversification plan and policies; it is the people who enforce and monitor the law and implement the policies and plans. So, if the values of integrity, hard work, patriotism, industry, spirituality, compassion, fight against greed, corruption and lust for power are not embedded in our culture and do not form the foundation on which our economic diversification program is built, we are bound to fail woefully, as a people and as a nation. We must seek unity, based on our shared values.
They were part and parcel of our culture in the 60s, 70s, and early 80s, when we had a stronger economy and currency. In fact, building a values-based society is not new to us. In the days of our Fathers, Grand Fathers and our Founding Fathers, our families and communities, were based on strong values. Those values reflected on the quality of leadership, teachers and teaching, religious leaders, schools/educational system etc. Those were the days when individuals were recognized, based on their values and contributions to the community, and not on their wealth; the days when your wealth meant nothing unless the community knew the source and considered it credible; the days when children were taught that all that glitters is notgold and thou shall not bring shame to the name of the family and community; the days when exchange rate was N1 to £1 or even less; the days when it was almost a crime to tell lies in school and our Universities ranked as some of the best in the world. And yes, there was a time when farmers left their produce like yam, plantain, by the roadside with the price tag, and travellers stopped by the roadside, took what they wanted and left the exact amount on a piece of cloth or newspaper by the yam or plantain, without anyone looking or watching! The only unfortunate thing is that anyone under the age of 45 years today may not have experienced this era or would have very little recollection of this era.
I am not just talking about a campaign but I am talking about a deliberate, well thought out strategy that is rigorously implemented over a number of years and that will involve everyone, starting from primary schools. It may need an amendment to the constitution as it was done in Singapore, where an act was enacted, plans and policies were developed and implemented.
If we get this right, we will create a new disciplined society of Nigerians who are ready to serve and put the country first (not personal interest first), ready to implement the economic diversification plan to the best of their ability and for the general good of the society.
II. Civil Service Reform – The civil service is the backbone of any government. It was not by accident that the civil service was one of the first institutions Lee Kuan Yew focused on in Singapore. He forged a system of meritocratic, highly effective and non-corrupt government and civil service. The reward system recognised hard work, performance and integrity. We need to make our civil service smaller, invest in their training and pay them more to attract and retain the best talent. Today, it is bloated, civil servants are paid less than a living wage and they are ill equipped.
III. Economic Institutions and Agencies – Government agencies are the implementing arm of government and are therefore critical to any diversification plan. Some have drifted from their mandate and others are just ineffective. At a minimum, we should aim to:
a) Appoint technocrats who are competent and have a reputation to defend to the Boards and management of these Agencies. The dividend of democracy is good governance for all, not appointments of politicians or friends to jobs that will compromise the quality of governance.
b) Agree on KPIs and review their performance every 4 years. Federal Character is also a good policy, which is poorly implemented. It should mean appointing the most competent and suitable person from that state or geopolitical zone for that particular job, not just anybody from the zone.
IV. Drastically Improve Quality of Spending and Investment– This is about getting value for taxpayers’ monies spent or invested. Always remember that it is your money and therefore you should have a say on how it is spent and hold the person spending your money on your behalf accountable. We need to eliminate all manner of waste, misappropriation and leakages, including uncompleted projects. We all appear to agree that there is a need to reduce the size of Government and cut the cost of Governance. We just cannot afford the type and size of Government we have today. Our economy cannot support it. It is time to cut our cloth to our size. Unfortunately, we will remain a poor nation if we do nothing about it. We need strong political will, boldness, wisdom and courage to get this done.
V. Investing in Our Most Important Asset – We need to Invest in our most important and biggest asset – our people, starting with the Reform of the Health and Educational System to make our education more relevant to the economy. We need schools with particular focus on character formation, technical skills acquisition, educational excellence and spiritual insight.
Germany and Brazil have implemented this successfully. Other countries, including Pakistan, also produce annual or bi-annual skills gap surveys/reports to support their training requirements. We have too many young people, including graduates, who are unemployable.
VI. Population Control – Our demography and quantity advantage are completely useless and become a threat (social problem) when productivity is low. Most (in particular the youth) are unemployed and do not have enough disposable income to become important consumers of goods produced locally. In fact, many nations with rapid population growth have low standards of living.
Do you know that every year, we add roughly 6 million people to our population? This is about the size of countries like Congo, Namibia, Liberia, Mauritania and the Gambia. In 1960, the population of the UK was 52 million while that of Nigeria was 46 million. By 2015, the UK’s population was 62 million while Nigeria’s was 185 million and by 2070, Nigeria will be 550 million while the UK will be only 80 million.
Our population is growing faster than the economy and that only means one thing. Poverty, more poverty and more poverty; with social unrest as a possible end result. We can do something about it now. Let’s start with mass education campaigns highlighting the dangers of uncontrolled population growth and then back that up with policies at the right time. We must prioritise strategies to turn our quantity advantage to productive advantage.
VII. RESTRUCTURING
There has been so much said about the need to restructure. So, I will be very brief here. I will only say that there is definitely a need for restructuring to achieve our accelerated economic diversification and developmental goals.
History will be favourable to any government that addresses these CRITICAL enablers well. In fact, that government would have written its name in gold and future generations will forever cherish their actions.
NOW TO THE ROLE OF SOVEREIGN FUND IN ECONOMIC DIVERSIFICATION – CASE STUDY
Now, let us examine the role of SWF in economic diversification. Sovereign wealth funds have a prominent role in the global financial system. Their number has swelled over three decades, with sovereign investors in more than 50 countries, and combined assets under management (AUM) exceeding $8 trillion. The largest funds are held by resource rich countries and East Asian economies. Sovereign wealth funds in several countries have economic diversification as a primary mandate in addition to providing an additional buffer against commodity risk.
Contrary to what most people say or think, the NSIA is not just a savings and stabilization vehicle but it was also meant to be a tool for economic diversification and development. As part of the effort to develop and diversify the economy, it was expected to serve as a catalyst for attracting additional local and foreign investments. The NSIA has the ability to invest in developmental projects; its subsidiaries or affiliates can issue bonds, or other debt instruments, borrow or raise finance from outside sources.
I will use some examples to illustrate the role the NSIA can play in diversifying the Nigerian economy:
• Mubadala Development Company is a highly successful global telecom company and a subsidiary of the UAE SWF. Its primary objective is to generate strong returns by investing in areas that will benefit the community, develop and diversify the economy of the UAE.
•Through its investments, Mubadala supports the UAE’s economic-diversification plan in different sectors. To promote tourism, Mubadala invested in hotels and museums, and in Formula One racing with the Abu Dhabi Grand Prix. To advance its healthcare, Mubadala partnered with and brought the Cleveland Clinic to Abu Dhabi. In education, the company has attracted prestigious international universities such as New York University to UAE.
The Fund also invests in the energy sector, healthcare, telecom, utilities, and in education, to produce the best minds and skills to drive the economy.
SABIC, was set up in Saudi Arabia and is recognised as the World’s 2nd largest diversified chemical company. A market leader in the production of methanol, polycarbonate, polyethylene, polypropylene, glycols, fertilisers and it exports granular urea.
SABIC has a slightly different structure in that it is owned and funded directly by the Saudi Arabia Oil Company from oil revenues but the concept/goals are very similar to those of the SWF or a subsidiary of SWF. The mandate is simple – pioneer and drive gas industrialisation in Saudi Arabia, adding value to gas produced. I visited SABIC in 2013 and here is what I found out:
SABIC was started in 1976 with a $1.8 billion investment, and at the time I met them in 2014, they had a total asset base of $90 billion, employed about 35,000 people and generated $50 billion in revenue. They had 60 plants worldwide, 18 innovation centers, which at the time developed 150 new products annually and owned 8,000 global patents. It also had SABIC academy, which trained all SABIC staff as well as hosted classes for university students.
In this case, Saudi Arabia had a long-term industrialisation plan and used SABIC, funded from oil revenues to pioneer and drive gas industrialisation. After a number of successful years, SABIC expanded their activities to steel manufacturing, focusing on export market as local demand was not enough.
The SWFs in Saudi Arabia and their partners are invested in some of the Industrial zones in 35 industrial cities and in the technology zones. In total, investments in these cities exceed $133 billion and they employ about 528,000 people.
Nigeria tried implementing this model many years ago with Eleme Petroleum but failed and then sold it to Indorama. Do you know what happened when Indorama bought it? They turned it around and Sales and profit increased over 30 times. It has remained a highly successful company.
• However, we tried a different model with the NLNG, which has worked very well so far, but NLNG is only mandated to produce and sell gas at the moment. A well supported NSIA can achieve the same remarkable success as SABIC in Ogindigbe oil and gas FTZ if given the opportunity.
• Kazanah fund in Malaysia. Khazanah Nasional Berhad is the sovereign wealth fund of the Government of Malaysia. Khazanah’s commercial objective is to grow financial assets and diversify revenue sources for the Nation. In the first 10 years from the time they began operations in 1994, Khazanah managed the Government’s commercial assets as well as invested in strategic economic diversification projects like Economic zones, FTZs, industrial parks and local industries, Infrastructure and high-technology sectors, healthcare and airlines. It was only in 2004 that it was allowed to seek opportunities in new economic sectors and geographies. When I met the CEO for the first time in 2012 in Abuja, he told me that the Treasury had received multiples of the initial $1bn capital invested.
TEMASEK Holdings Limited Temasek is one of Singapore’s two SWFs, along with the Government Investment Corporation (GIC). It was founded in 1974, and today, it has assets of about $375bn. Remember the population of Singapore is only about 5.8m, compared to Nigeria with a population of over 200m, endowed with natural resources and with it’s SWF that has assets of only $1.7bn. After independence in 1965, Singapore lacked capital, infrastructure and job opportunities (almost like where we are today). They then decided to embark on an aggressive industrialisation and economic development program since they had no natural resources. Temasek was one of the vehicles set up to help achieve their industrialisation plan. They have now transformed into a global investor.
RAINY DAYS
I recall when we were setting up the NSIA in 2011, some of the Governors who opposed it then said there was no need to save for the rainy day because their state was already flooded. This was when oil prices were around $100 pb and there was no Coronavirus. I wonder what they would say today? Well, I would say, the rainy days we talked about in 2011 are now here with us and many fully funded SWFs have been helping their economies to recover from the effects of COVID-19.
Sovereign Wealth Funds are investing more at home, a trend set to accelerate in the wake of the economic carnage wrought by COVID-19. Turkey’s fund has injected 21 billion lira ($3.1 billion) into three state banks and Temasek supported a $1.5 billion rights issue by SembCorp Marine and are also facilitating the accelerated production of a vaccine to curtail the spread of the virus.
On 23 June 2020, a consortium of the world’s leading infrastructure and sovereign wealth funds signed an agreement worth $20.7 billion (Dh76bn) to invest in Abu Dhabi’s natural gas pipelines infrastructure. The NSIA can be a catalyst for such critical and strategic investment in Nigeria.
There have been withdrawals from the Nigerian and Norwegian funds to help their governments deal with the economic impact of the virus. If only the Government had implemented the law strictly and fully invested in the SWF, they would have had more to withdraw at this critical time.
Final word on the SWF: There are a few trends I would like to highlight from the above examples:
• SWFs are generally funded from oil revenues or excess foreign reserves and do have a mandate to play a role in the diversification of the economy.
• Well supported and funded SWFs overtime return multiples of capital invested and are self sustaining.
• They are generally more successful in developing and delivering economic infrastructure projects because there is no bureaucracy, they apply private sector skills and discipline to implementation and project management and are able to attract some of the best partners and investors.
• They tend to invest and transform local economies first before emerging as global investors.
• It is easier for SWFs to attract local and foreign investment and partners if the fund has a strong governance structure, is transparent, and if appointments of management and board members are based on merit and competence. Luckily, the NSIA ranks highly as one of the best in terms of transparency and governance structure. In fact, it won an award in its second year.
• They tend to manage existing assets of the Government. We do have so many assets held by different MDAs that are not actively managed. I am not even sure we have a comprehensive list. This is a role that can be delegated to the SWF.
The NSIA has the structure, mandate and legal instrument to play the same role as these SWFs. It only needs a stronger political will from the Government and the full implementation of the law to deliver fully on its mandate.
WHY IS IT URGENT TODAY?
The combined impact of COVID-19, imminent commencement of AFCTA, high level of unemployment and poverty, pre-pandemic; fall in oil price, high level of debt and uncontrolled population growth means that, more than ever, the time to be bold and take decisive action to diversify the economy and empower the NSIA to play its critical role is NOW.
6. YOU ALSO HAVE A ROLE TO PLAY
I cannot end this without a word or two for this uniquely talented group. You are all leaders with brilliant minds, diverse backgrounds in a profession that is not only noble but that is also described as the passport or gateway to success in the private and public sectors. I am sure you understand why accountancy is described in that way. The courses and exams you take prepare you to excel and be whatever you want to be in the private and public sectors. You are well positioned to play a number of roles as leaders e.g. become a Think Tank and issue thought leadership papers, review our budgeting process and allocation of resources annually to help improve the quality of spending. You can apply the principles of sources and application of funds to the loans to help educate Nigerians and advise Governments on debt management, help strengthen our institutions, including the implementing agencies. You can help embed our core values in the society, look into how the office of the Accountant General and Auditor General can be more effective and play a vital role in transforming our nation. You are all leaders individually, and collectively, you form a formidable group of leaders. Remember you can play a role as a non-political, unbiased group and make a difference, whether or not you are in Government, for the sake of your children, grandchildren and our great country.
7. CONCLUSION: THE FUTURE REMAINS BRIGHT
The good news is that, as a country, we are not starting from the scratch. We did it in the 70s and early 80s and we can do it again and do it even better this time. We have made tremendous progress in some areas. I will give you some examples:
• There was a time when we spent a large proportion of our foreign earnings on the importation of cement but today, more than US$9 billion has been invested In the Cement sector and they support more than 1.6 million jobs. In 2013, Nigeria became a net exporter of cement for the first time in our history. Thanks to companies like BUA, Dangote, Lafarge, Flour Mills and others
• Dangote Petrochemical and refineries is a game changer. I was a big advocate for it when I was in Government and I remain an advocate because I know the impact it would have on our economy. When completed next year, it will have the largest single-train refinery in the world. It will not only help to produce what we consume, but it will also export its products as well.
• Yes, we no longer have Bata but we have Lee in Kano producing some of the best shoes for export and local markets.
• By Q2 next year, Thor through its Segilola project, will be producing and exporting gold in commercial quantity in Osun State.
• Flourmills is leading the sugarcane to sugar production in Sunti, Niger State. If/when the policy is fully implemented, four other Northern states (Kwara, Nasarawa, Jigawa and Adamawa) will benefit from this.
• Proforce in Ode Remo is producing and exporting armoured vehicles for the military, whilst the likes of Innoson in Nnewi, PAN in Kaduna, and others are championing local assembly of cars.
• Coleman Cables based in Arepo, Ogun State, has grown to become Africa’s second largest Electrical and Telecommunications wire and cables manufacturing company.
• CAM and Wempco PLC are leading the efforts in Steel manufacturing locally.
• Nigeria was one of, if not the largest importer of rice, but today, we are the 13th largest producer of rice in the world and the largest in Africa. We should be able to export rice soon.
• And only last month, Cross Rivers State Commissioned the first cocoa integrated processing factory in Nigeria.
• The Nigeria Economic Sustainability Plan 2020 is a good start and will yield tangible results if well implemented.
This is just to mention a few.
We are a blessed nation. Nigeria is a country with so much promise, blessed with abundant human and natural resources. A country with about 84m hectares of land, where almost everything can be grown; a nation with more than 44 solid minerals in commercial quantity, a top 10 oil and gas producer in the world, has a demography that is the envy of the world and more. The fundamentals are strong. We have everything to become a great nation and to have a strong and well-diversified economy. The time to take that bold step and put Nigeria on the path of economic diversification is now. But we cannot leave it to the Government alone. As EY Alumni and leaders, you are uniquely placed to play a role in national development. Be part of that force that will transform our country and make the Nigerian dream come true. It may be delayed but Nigeria will fulfill its divine plan.
The future is bright!!
God bless you and God bless our great country Nigeria.
Olusegun Aganga is Former Minister of Finance and also Minister of Trade and Industry.
Kelechi Deca
Kelechi Deca has over two decades of media experience, he has traveled to over 77 countries reporting on multilateral development institutions, international business, trade, travels, culture, and diplomacy. He is also a petrol head with in-depth knowledge of automobiles and the auto industry
A Cameroonian Information and Communication Technology (ICT) company, Evo-Solutions has partnered the Cameroonian Ministry of Secondary Education to boost online learning and support an online initiative that was launched in June. The Memorandum of Understanding (MoU) signed in Yaounde, Cameroon with the goal to provide the Ministry not only with technical expertise but also ICT gadgets which will be made available to students for use.
Secondary Education Minister Professor Pauline Nalova Lyonga
As part of the first phase of the project, the IT firm has made available 10, 000 computer tablets and 1,000 video projectors to enable the production and dissemination of lessons to students online. Students of 60 secondary schools selected from Cameroon’s three administrative Regions – the Center, Littoral and South West – will benefit from the pilot phase of the project, according to Secondary Education Minister Professor Pauline Nalova Lyonga.
According to the MoU, the ICT firm will also provide training to teachers on how to upload lessons onto the tablets and provide internet connectivity to all the schools involved in the first phase of the program. The 1,000 video projectors will be installed in libraries of the pilot schools.
“Evo-solutions have come at the right time when we have started distance education and we need a lot of ICT equipment to make education reach every Cameroonian child at this time,” Professor Nalova Lyonga said at the ceremony to sign the MoU. “We know that it is COVID-19 but we want to assure that the pandemic will not take us back so long as we have Cameroonians who are ready to support our efforts of taking education to our children by every means possible,” she added. René Bikim, Chief Executive Officer of the ICT Company expressed delight after sealing the deal and said it is part of their mission to accompany institutions in ICT-related initiatives.
Cameroon’s Secondary Education Minister (right) symbolically receives one of the tablets from Evo Solutions CEO after signing the MoU. How the tablets will be used. “These tablets will be used in the way that you use books. Lessons that the students need will be uploaded on all the tablets. Students in the pilot schools concerned will alternatively take turns to make use of the tablets – say for one week before returning them to allow an opportunity for other students to use them,” Professor Nalova Lyonga explained.
The MoU, according to the parties, will go into effect in October 2020 when schools will resume in Cameroon for the 2020/2021 academic year. Online or distance learning within Cameroon’s Secondary Education sector was not taken very seriously until the outbreak of the coronavirus disease 2019 (COVID-19) in the country in March.
The situation forced the closure of schools in the country for nearly three months, a thing that triggered government authorities to devise ways and means of enabling students to catch up with their lessons. As such, an online learning platform was launched on 2 June with the support of Orange Cameroun, the Cameroon office of the United Nations Educational, Scientific and Cultural Organization (UNESCO), and other partners.
Last month, UNESCO also donated a number of ICT equipment to the Ministry’s Multimedia production center to help in the preparation and uploading of lessons on the website dedicated to the purpose.
Kelechi Deca
Kelechi Deca has over two decades of media experience, he has traveled to over 77 countries reporting on multilateral development institutions, international business, trade, travels, culture, and diplomacy. He is also a petrol head with in-depth knowledge of automobiles and the auto industry
The impact of the Covid-19 Lockdown on Moroccan businesses cannot be underestimated as over 80% of businesses suspended their activities but the latest report shows that more than half are expected to recover by the end of the year says the Moroccan High Commission for Planning (HCP). According to the HCP, more than half of Moroccan businesses will reach their normal activity level before the end of 2020. In a survey carried out by the Commission, 56% of Moroccan businesses believe they can reach their pre-COVID-19 level of activity in less than six months while 44% estimate that they need at least one year to recover. The rate ranges from 50% for businesses in the field of trade to 66% for companies operating in industry.
The HCP’s report examines the resumption of economic activity in Morocco after the lockdown. HCP conducted interviews with approximately 4,400 Moroccan businesses from various sectors from July 3th to 15th. It also revealed that more than four businesses out of five (83.4%) suspended their activity during the COVID-19 lockdown. Approximately 52.4% partially suspended their activity, 29.6% suspended it completely but temporarily, and 1.3% suspended it indefinitely.
The COVID-19 crisis hit micro-sized businesses the hardest. Around 86.3% of Moroccan micro-sized enterprises halted their activity. The figure includes 59.7% that suspended it completely but temporarily and 1.8% that were not able to resume after the lockdown. By activity sectors, restaurants and accommodations were the hardest hit, with 99.7% suspending their activity. The textile and leather industry came second, with 99.4% of businesses suspending activity, followed by construction (92.7%), real estate (91.9%), and metallic and mechanical industries (91.4%). Meanwhile, the least affected sectors are fishing (33.8%), energy (69.7%), and information and communication (72%).
Approximately 84.6% of Moroccan businesses that suspended their activity during the lockdown have resumed. One-third (32.4%) have already returned their normal level, while 52.2% are still recovering their rhythm. Meanwhile, 15.4% businesses have not yet resumed activities. Again, micro-sized businesses are the least concerned by recovery, with 18.5% not able to resume their activity, and only 30.9% recovering their normal level. In contrast, 39.7% of Morocco’s large businesses have gone back to their normal activity level. Only 8.1% have not yet resumed activities.
In terms of investments, two-thirds of Moroccan businesses (67%) declared not being able to invest the previously planned budgets for the year 2020. Approximately 29% of the businesses delayed the investments, 21% reduced them, and 17% cancelled them altogether. However, 28% of Moroccan businesses predict that their investments will go as planned and 5% declared increasing their investment budgets. And over 83% of companies operating in the electronics industry said their investment plans will not go ahead. Hospitality companies’ investments also significantly changed, with 75% of the businesses modifying their plans. Nearly half of Moroccan businesses (49%) declared that their funds are insufficient for proper activity resumption. The rate peaked among micro-sized businesses (50%), followed by small and mid-sized companies (48%) and large businesses (33%). By activity sector, the figure was highest for construction (55%), followed by industry (51%), services (50%), and trade (40%).
In terms of bank loans, 45% of Moroccan companies declared being in debt, including 13% with “heavy debts” and 32% with “light” ones. The most indebted companies in Morocco are large businesses, with 54% of them in debt, including 19% with “heavy debts.” Debt concerns companies in the industry sector the most, with 59% of them in debt, followed by trade (47%), services (43%), and construction (40%). More than half of the indebted businesses (51.3%) said they will not be able to pay back their loans until one year at the earliest. The rate is relatively similar among all types of businesses. It ranges from 45.8% for small and mid-sized businesses to 54.9% among micro-sized enterprises.
To avoid bankruptcy, 45% of Moroccan businesses plan to apply for external financing. Approximately 39.2% will apply for loans from their partner banks. Meanwhile, the rest will look for financing from other institutions such as participation banks and stock markets. A decrease in demand and fear from a new lockdown are the main reasons why many Moroccan businesses are lagging in terms of activity resumption.
According to the report, 76.6% of Moroccan companies witnessed a decrease in local demand. Moreover, 71.3% of the businesses fear a new lockdown and 62.3% said they suffer from financial difficulties. Other challenges include the pandemic-linked administrative restrictions (48.4%), perturbation in logistic chains (37.2%), and high production costs (26.4%).
To adapt to the COVID-19 crisis, Moroccan businesses adopted new strategies and ways of work. Approximately 28% of companies adopted remote work, 26% developed new products and services, and 24% began selling their services online. Other solutions that Moroccan companies adopted include digitizing internal and external services (20%), diversifying supply chains (17%), and recruiting information technology experts (13%).
Kelechi Deca
Kelechi Deca has over two decades of media experience, he has traveled to over 77 countries reporting on multilateral development institutions, international business, trade, travels, culture, and diplomacy. He is also a petrol head with in-depth knowledge of automobiles and the auto industry
At one time or another, nations and individuals confront crisis points – moments of existential challenge that also open up new possibilities. African countries, at just such a crisis point as a result of the novel coronavirus, face three possible outcomes post-pandemic: play catch-up, stand still or fall even further behind the industrialized world.
Professor Banji Oyelaran-Oyeyinka, Senior Special Adviser on Industrialization to the President, AfDB
With this crisis comes an economic disruption of unprecedented proportion. To avoid falling further behind, Africans must narrow the scientific and technology gap and leverage our comparative advantages. It is time for Africa to adopt radical technological and policy innovations. The global economy is increasingly driven by science-based and patent-intensive systems. Through investments in molecular technology, AI and other technologies the 4th industrial Revolution is ushering in, they can overcome existing barriers to entry.
Catching Up
India offers an example of how to catch up. There, two key developments in the sixties and seventies sharply altered the country’s trajectory. In 1965, following past famines crises, India imported 250 tons of high-yielding Mexican dwarf wheat seed varieties for wide-scale testing on farms. Early positive results led to the importation of a further 18,000 tons. Along with the use of irrigation and other innovations adopted by farmers, Indian agriculture was transformed.
Within five years, India produced enough grains to support its population and, even following a drought in 1979, had no need to import grain. Overall, the country’s wheat and rice production tripled between 1961 and 1980. Radical policy response to famine-induced crisis birthed the Green Revolution.
India’s pharmaceutical sector also experienced a crisis-inflection point in 1972, when the government passed the Patents Act, which enabled domestic firms to replicate drugs that had been patented by multinational corporations. Local companies have since dominated the global market through reverse-engineering leading to generic medicines that are far more affordable than patented ones. Radical policy response to crisis-induced shortage of medicines transformed Indian Pharma.
Falling Behind
Africa processes a very small proportion of its agricultural produce. We continue to export raw commodities like cocoa, timber and cotton that others process and re-sell to Africa at a much higher valuation. Our continent also has sufficient sunlight, wind and hydropower, technologies that can power Africa sustainably, and other regions besides.
Critically, Africa also has a median age of 19, far younger than that of any continent, a potential demographic dividend of young innovation-driven workers and a relatively small proportion of elderly workers. This human capital will foster Africa’s forging ahead.
If we fail to harness new technologies and leverage our strengths to create abundant high paying manufacturing and service jobs to compete within global supply chains, then we risk falling even farther behind on socioeconomic terms.
Forging ahead
To forge ahead, Africa will first have to return swiftly to economic growth. Beyond that, diversifying our economies will be critical, particularly for those countries that are dependent on one or two mineral resources or commodities. Above all, African companies must deepen capacities for competitive advantage to master new technologies in emerging sectors.
African innovators need a robust innovation framework and a better enabling environment to master the so-called industrial biology embedded in the 4th Industrial Revolution. For instance, firms in Morocco, Senegal, Nigeria and some other African countries have developed COVID-19 test kits but face a difficult path to commercialization.
China’s response to the COVID-19 pandemic is once more illustrative of a dynamic industrial policy. It is targeting ambitious increases in domestic firms’ share of the global medical supplies market. The government has provided cheap land for factories subsidized loans, helps them to secure a supply chain of raw materials, and to stimulate domestic demand by incentivizing hospitals and companies to use their products.
And there are powerful examples right here on the continent. South Africa successfully financed the production of The National Ventilator Project to address COVID-19, developing prototypes, securing component supply chains, and a manufacturing facility. The project owes its success in part to strong government support and broad coordination among economic and technological agencies. As with South Africa, the rest of the continent would benefit from strong innovation systems that are part of national budgeting and planning frameworks.
African businesses have a critical role to play, but so do African leaders, who must strike a delicate balance between state intervention and open markets. African governments are best placed to identify market failures and opportunities, and devise policies and regulations that benefit Africa’s private sector and its people.
Professor Banji Oyelaran-Oyeyinka is the Senior Special Adviser on Industrialization to the President, AfDB, he is a fellow of the Nigerian Academy of Engineering and Professorial Fellow, United Nations University.
Kelechi Deca
Kelechi Deca has over two decades of media experience, he has traveled to over 77 countries reporting on multilateral development institutions, international business, trade, travels, culture, and diplomacy. He is also a petrol head with in-depth knowledge of automobiles and the auto industry
