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Russia Businessmen Return to Africa, Seeks Business Collaborations

October 19, 2019

With the impact and influence China’s incursion into Africa has made, other countries such as Japan, India followed suit by upping their engagements with African businesses. This left Russia out, but not for long. With the upcoming Russia- Africa Summit in Sochi later this year, Russia is making a return to the continent. This is coming against the backdrop of Russia’s historic relationship with Africa especially during the cold war era.

Paul Stronski of the Carnegie’s Russia and Eurasia Program

That aspect of history is responsible for the wide media coverage, governmental concerns and civil society reactions in recent weeks, especially as Sochi gears up to host the first ever Russia-Africa Summit next week.

Most commentators have come from Europe and North America to voice concerns over Russia’s dodgy arm deals in Africa, political meddling with unstable African regimes, and its overall challenging of the status quo on the continent. The problem is, when these comments are not outright hypocritical, they are missing a key point: competition is good for business, which is just what Africa needs right now.

First, Russia’s presence in the continent cannot be summarized into sensationalism. It is complex and needs to be put back into context. Its modern relations with African governments and institutions started building up in post-independence Africa, time when the Soviet Union offered key diplomatic and military support to young African nations in need of it. This assistance was multi-form and much needed for countries seeking fast development following harsh independence wars and conflicts. “The Soviet Union provided significant economic assistance, including infrastructure, agricultural development, security cooperation, and health sector cooperation,” wrote Paul Stronski of the Carnegie’s Russia and Eurasia Program this week. Consequently, Putin’s vision for Africa is resuming and building up on a cooperation that started in the second half of the 20th century and was only put on hold by the collapse of the Soviet Union in 1991.

In short, while arriving late to the party, Russia is no stranger to the African playground. Beyond military cooperation, its state-owned natural resources companies have already made inroads into the continent, and could be a game changer for many African countries in need of investment and electricity. Key Russia energy companies such as Gazprom, Lukoil, Rostec and Rosatom are already present in Algeria, Angola, Egypt, Nigeria, Cameroon, Equatorial Guinea or Uganda, while mining and minerals ones such as Nordgold or Rusal are developing world-class mines in Guinea and Zimbabwe. On a global stage, Russia’s involvement in OPEC has also sent strong signals that it is committed to market stability and global energy cooperation, which ultimately benefit African producers.

“Russia’s influence is increasing through strategic investments in natural resources, and such investments are welcomed by African governments and companies. They bring in key Russian capital and know-how to the continent which is seeking to diversify its investors basket and attract much needed investment into its energy industry,” said Nj Ayuk, Executive Chairman at the African Energy Chamber (EnergyChamber.org) and CEO of the Centurion Law Group. “The African Energy Chamber is supporting such efforts and has seen a definite uptick in Russian companies’ interests for the continent. We predict a lot of deals to be signed during and after the Sochi Summit for Russian energy companies to develop African resources and do business in Africa. This will be especially beneficial as Africa develops gas-based economies,” he added.

Amongst the most recent agreements are for instance the MoU between Atlas Oranto Petroleum and Rosneft in 2018, under which the pan-African E&P company agreed to explore the joint-development of its assets across Africa with the Russian state-owned giant. Another one is the signing of several agreements between Russia and Mozambique this summer, involving again state-owned Rosneft but also Nordgold. In Central Africa, Gazprom is also lifting gas from Cameroon’s the FLNG Hilli Episeyo, the world’s first converted FLNG vessel.

As such investments and activity picks up, the real game changer will be Africa’s ability to make deals that work for its people and its economies. Deal-making is what will shape the future of Russia-Africa relations and will tell whether Russia’s renewed influence in the continent is good or bad for its people. Rightly so, the ability and capacity of African governments to make better deals with investors is becoming central to the global business narrative on Africa.

In his much anticipated book coming up this month and already best-seller on Amazon, “Billions At Play: The Future of African Energy and Doing Deals”, Nj Ayuk dedicates an entire chapter to the critical art of deal-making. “For Africa to truly realize all of the benefits oil and gas operations have to offer, we need to see good deal-making across the board,” he writes. “Clearly, good deal-making has far-reaching implications for African people, communities and business.”

Contracts negotiations is in fact the key element missing from the current debate on Russia’s increasing influence in Africa. There is no doubt Africa is welcoming Russia’s interest for doing business on the continent, not only because it comes without the conditionality of actors such as the IMF and the World Bank, but also because Africa needs critical energy investment and a giant oil producer like Russia has good technology and know-how to export. The only thing is, sub-Saharan Africa has seen several regulatory developments in the near future, with a particular focus on local content regulations across energy markets. Jobs creation, domestic capacity building and the growth of a strong base of local energy companies is high up on the African agenda. If African governments are able to negotiate contracts that deliver on these expectations and Russian companies are committed to see the continent grow, then the future is bright for Russia in Africa.

At the end of the day, it is all about how African governments and institutions will negotiate future contracts with Russian companies. As Nj Ayuk writes in Billions At Play, “governments must give investors a chance to generate income from the resources they are interested in and recoup their investments. At the same time, governments need to look at creating value for their country and its people. It’s a balancing act. It’s challenging, but it’s doable.”

Whether Sochi will result in that balancing act remains to be seen, but the challenge is given and Africa is up for it

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.

Don’t Waste Time On A Startup Business Plan — Do These 5 Things Instead

August 12, 2019

Traditionally, startup businesses draft a business plan for three specific reasons: to articulate their vision for the business, to document how they plan to solve key challenges, and to pitch their business idea to potential investors.

But what if I told you that business plans for startup companies are usually not worth the effort?

My many years of experience working with startups, entrepreneurs, and venture capitalists has led me to conclude that business plans are largely a waste of time for the following reasons:

They are time consuming. Thorough business plans take a long time to prepare, even if you use business planning software.
They get outdated quickly. Your business plan quickly becomes obsolete as you encounter operational and marketing issues.
Nobody has time to read them. Prospective investors and venture capitalists don’t usually have the time or interest to slog through such a document. They review hundreds if not thousands of startup opportunities, so you have to grab their attention with something much shorter.

So instead of wasting your valuable time preparing a business plan, I suggest that you do these five things instead when launching your startup:

Business plans for startup companies are usually not worth the effort. Learn what you should be focusing on instead.

1. Prepare a Great Investor Pitch Deck for Prospective Investors

Developing an engaging “pitch deck” to present your company to prospective investors instead of a business plan is the new norm. The pitch deck typically consists of 15–20 PowerPoint slides and is intended to showcase the company’s products, technology, and team to the investors.

Raising capital from investors is difficult and time consuming. Therefore, it’s crucial that a startup seeking funding absolutely nails its investor pitch deck and articulates a compelling and interesting story in the short time it has during the presentation.

You want your investor pitch deck to cover the following topics, roughly in the order set forth here and with titles along the lines of the following:

Company Overview (give a summary overview of the company)
Mission/Vision of the Company (what is the mission and vision?)
The Team (who are key team players? what is their relevant background?)
The Problem (what big problem are you trying to solve?)
The Solution (what is your proposed solution? why is it better than other solutions or products?)
The Market Opportunity (how big is the addressable market?)
The Product (give specifics on the product)
The Customers (who are the target customers? why will there be a big demand from these customers?)
The Technology (what is the underlying technology? how is it differentiated?)
The Competition (who are the key competitors?)
Traction (early customers, early adopters, partnerships)
Business Model (what is the business model?)
The Marketing Plan (how do you plan to market? what do you anticipate for customer acquisition costs vs. the lifetime value of the customer?)
Financials (actual and projected profit & loss and cash flow)
The Ask (how much capital you are trying to raise?)

Too many startups make a number of avoidable mistakes when creating their investor pitch decks. Here is a list of preliminary do’s and don’ts to keep in mind:

Pitch Deck Do’s

Do include this wording at the bottom left of the pitch deck cover page: “Confidential and Proprietary. Copyright by [Name of Company]. [Year]. All Rights Reserved.”
Do convince the viewer of why the market opportunity is large.
Do include visually interesting graphics and images.
Do send the pitch deck in a PDF format to prospective investors in advance of a meeting. Don’t force the investor to get it from Google Docs, Dropbox, or some other online service, as you are just putting up a barrier to the investor actually reading it.
Do plan to have a demo of your product as part of the in-person presentation.
Do tell a compelling, memorable, and interesting story that shows your passion for the business.
Do show that you have more than just an idea, and that you have gotten early traction on developing the product, getting customers, or signing up partners.
Do have a sound bite for investors to remember you by.
Do use a consistent font size, color, and header title style throughout the slides.

Pitch Deck Don’ts

Don’t make the pitch deck more than 15–20 slides long (investors have limited attention spans).
Don’t have too many wordy slides.
Don’t provide excessive financial details, as that can be provided in a follow-up.
Don’t try to cover everything in the pitch deck. Your in-person presentation will give you an opportunity to add and highlight key information.
Don’t use a lot of jargon or acronyms that the investor may not immediately understand.
Don’t underestimate or belittle the competition.
Don’t have your pitch deck look out of date. You don’t want a date on the cover page that is several months old (that is why I avoid putting a date on the cover page at all). And you don’t want information or metrics in the deck about your business that look stale or outdated.
Don’t have a poor layout, bad graphics, or a low-quality “look and feel.” Think about hiring a graphic designer to give your pitch desk a more professional look.

2. Focus on Building a Good Prototype Product

Build version 1 of your product. Having a prototype of your product makes it easier to sell your vision to investors. It also gives you some momentum and traction and helps you recruit partners and employees. Undoubtedly, version 1 of your product will not be as good as version 2 or version 3, but you need to start somewhere.

When starting out, your product has to be at least good if not great. It must be differentiated in some meaningful and important way from the offerings of your competition‎. Everything else follows from this key principle. Don’t drag your feet on getting your product out to market, since early customer feedback is one of the best ways to help improve your product.

Of course, you want a “minimum viable product” (MVP) to begin with, but even that product should be good and differentiated from the competition. Having a “beta” test product works for many startups as they work the bugs out from user reactions. As Sheryl Sandberg, COO of Facebook has said, “Done is better than perfect.”

3. Thoroughly Research the Market Opportunity and Your Competition

Make sure you are thoroughly researching the market opportunity and competitive products or services, and keep on top of new developments and announcements from your competitors. One way to do this is to set up a Google alert to notify you when any new information about those companies appears online.

Expect that prospective investors in your company will ask questions about the market opportunity and your competitors. Any entrepreneurs who say that “we don’t have competitors” will have credibility problems. So anticipate these questions from investors:

How big is the addressable market? How much of it can the company realistically capture?
Who are the company’s principal competitors?
What traction have those competitors obtained?
What gives your company the competitive advantage?
Compared to these other companies, how do you compete with respect to price, features, and performance?
What are the barriers to entry in your market?

4. Prepare Detailed Financial Projections

It can be important to prepare detailed financial projections for the business, for the following reasons:

To determine whether the business will ultimately be profitable
To determine your cash “burn” before you get cash flow profitable, showing how much startup capital you will need
To lay out your key financial assumptions (price per product, cost of developing the product, marketing expenses, employee expenses, rent and overhead, gross margins, and much more) so that you and others can test the reasonableness of the assumptions
To have those projections ready and credible when investors inevitably ask for them

Financial projections will typically be for a 3–5 year period and will include:

Profit and loss statement
Cash flow statement
Detailed categories of income and expenses
Balance sheet
Underlying assumptions

Of course, your financial projections will not be perfectly matched with your actual results, but your financial projections can be revised as you move through the stages of your business.

5. Make Sure You Have Thought Through the Reasons Why Startups Don’t Get Funded By Investors

There are a variety of reasons why investors turn down startups and entrepreneurs. So understand these reasons and make sure they don’t apply to you:

The business idea is too small
Your executive summary or pitch deck is underwhelming
You haven’t thought through the questions that investors will likely ask
You just have an idea and you haven’t gotten any traction yet
You don’t have the right management team
You don’t understand the competition
There are already strong competitors who are well capitalized
Your financial projections are unrealistic
You aren’t convincing about the need for your product or service
You don’t articulate how you plan to cost-effectively market to and obtain customers
You don’t have a good prototype of your product

Remember, you don’t need a long business plan for your startup. There are more important things you can do to build a successful business.

Richard Harroch is the Managing Director and Global Head of M&A for VantagePoint Capital P… He writes about startups, venture capital, mergers and acquisitions and Internet companies.

Charles Rapulu Udoh

Charles Rapulu Udoh is a Lagos-based Lawyer with special focus on Business Law, Intellectual Property Rights, Entertainment and Technology Law. He is also an award-winning writer. Working for notable organizations so far has exposed him to some of industry best practices in business, finance strategies, law, dispute resolution, and data analytics both in Nigeria and across the world.

Facebook: https://web.facebook.com/Afrikanheroes/

What West African New Currency Means For West African Businesses

July 1, 2019

West African businesses can now benefit from seamless trading across West African borders. This is because the Heads of State and Government of countries in the region have finally adopted ECO as the name of the single currency to be issued in January 2020.

Here Are Things To Know About The New Currency

The currency would fully be in use from January 2020.
The currency would be used for trade across West African countries.
The ECO will work this way: shops, hotels, and restaurants, particularly in the larger cities in Ghana, for instance, may now display prices in both the Ghanaian Cedi and ECO currency and many are likely to accept payment in ECO. However, as the official currency is Ghanaian Cedi, no establishment is under no obligation to accept payment in any other currency apart from Cedi.
Consequently, the introduction of ECO may serve as an alternative to the legal tenders in the countries of West Africa who have met all the requirement to start using ECO.
In simple terms, for people living in Nigeria, this means that you can now carry, in addition to Naira, ECO, and ECO can be used to buy or sell anywhere in Nigeria as long as the other party is willing to accept so.
The West African Monetary Agency, the body of ECOWAS in charge of money and finance across the region has said the currency would be based on a flexible exchange rate regime, coupled with a monetary policy framework focused on checking inflation.

In Which Countries Can You Use The Currency?

The currency can be used across the whole of West African countries from January 2020. However, ECO would be used only in the countries that have met the requirement for its use. That is, for any country in the West African sub-region to start using ECO, it must first meet the following requirements:

It must have a single-digit inflation rate at the end of each year
It must have a fiscal deficit (liabilities) of no more than 4% of the GDP
Its central bank must have deficit-financing of no more than 10% of the previous year’s tax revenues
The country’s gross external reserves must give import cover for a minimum of three months.

Additionally, each country must:

Prohibit new domestic default payments and liquidate existing ones. (That is, all domestic debts must be paid off first)
Have a tax revenue base which should be equal to or greater than 20 percent of the GDP.
Have its wage bill to tax revenue equal to or less than 35 percent.
Have its public investment to tax revenue equal to or greater than 20 percent.
Have a stable real exchange rate.
Have a positive real interest rate.

Right now, it appears Ghana is the only country in West Africa that has met all of the above requirements.

“The single currency for 2020 vision is: let’s find two, three or four countries that are ready. Once they meet up, we follow through with the others cascading in,” said Ken Ofori-Atta, Ghana’s finance minister, at a meeting of West African ministers in Accra recently.

The seriousness of the ECOWAS leaders on ECO is buried in this communique issued after the 55th Ordinary Session in Abuja:

‘‘The single currency would be issued in Jan. 2020.’’ the communique reads. “We have not changed that but we will continue with assessment between now and then. We are of the view that countries that are ready will launch the single currency and countries that are not yet ready will join the programme as they comply with all six convergence criteria.”

The leaders also instructed the commission to work with West African Monetary Institute and the central banks to accelerate the implementation of the revised roadmap with regard to the symbol of the single currency.

“It [the communique]further directs the commission to ensure implementation of the recommendations of the meeting of the ministerial committee held in Abidjan on June 17 and June 18 as well as preparation and implementation of the Communication Strategy for the single currency programme. The Authority takes note of the 2018 macroeconomic convergence report. It noted the worsening of the macroeconomic convergence and urges member states to do more to improve on their performance in view of the imminent deadline.”

The Benefit of Using The New Currency

Most of the eight currencies used in the 15 countries of the West Africa region are not convertible. Convertibility is defined as the possibility to freely exchange a country’s currency for foreign currencies. Where they are convertible, their rates are highly volatile ($2 in the morning, $5 dollars in the afternoon) Hence, ECO will help to address the issue of multiple currencies and exchange rate fluctuations that affect intra-regional trade.
West African countries have the least developed financial sectors in the world. The ratio of bank credit to GDP there is very low. There is no much money in their financial markets, through which money can easily flow across the region. Unlike the Eurozone where payment can be made and settled by banks using Euros and cheques. Payment and settlement systems in several West African economies are still marked by the predominance of cheques in noncash payments. In 2013, for instance, the whole money available in the West African regional market only represented 13% of GDP of the whole of the West African countries put together — this is like 8.5% of GDP for Ghana and 21% for Nigeria, against an average of about 65% for Sub-Saharan Africa. Hence, ECO will open up the market a bit.