Companies - Afrikan Heroes

Building A Sustainable Company: Why Most Companies In Africa Do Not Last Longer Than Expected

December 24, 2019

Over the past months, I have been crunching company data, carrying out extensive reviews, and scheduling series of meetings with executives and officers of companies listed on stock exchanges as well as ordinary going concerns, all in a bid to help them reinforce their board effectiveness.

While profit making remains top on most companies’ priority areas, the final straw that often breaks the camel’s back is the companies’ failure to fulfill the demands of good corporate governance practices. That is, even with the right business strategies, the complex organisational structures of most companies sometimes reach a confusing peak that demands that the company have a rigid wall of governance and culture if it is to still maintain some appreciable level of sanity, survive or continue to make profit or contain losses.

For businesses or people resident in Nigeria, 2019 came with the revelation from Moody’s, the leading credit-rating and financial analysis agency, that the main reason why a foremost commercial bank in the country — Diamond — conceded to a merger with Nigeria’s leading commercial lender — Access Bank — was because of poor corporate governance practices adopted by the former. To quote a portion of Moody’s report, Diamond Bank’s weak governance structure meant:

A highly compromised board

A board with little ability to assess the bank’s risk exposure and;

And a board that failed to rigorously interrogate management over strategy.

Moody’s report is not entirely far from my experience reviewing companies’ board effectiveness. The points made below are meant to serve as a sneak-peek into the damage wreaked by weak corporate governance practices in most companies in Nigeria,and by implication Africa.

Total Absence of Good Succession Strategies and Plans

This is the most obvious emptiness you would find in most Africa n companies. There is often total absence of good succession plans or policies for top executives and senior management of companies. A succession planning policy is a tool that helps a company to be prepared for planned or unplanned absences of a director or other top management, which, among other things, clarifies authority and decision-making, thereby maintaining accountability and ensuring stability within a company.

Furthermore, a good succession planning policy of a company should also be able to predict where the next crop of directors or CEO of the company would come from, in order to avoid a situation where the company is suddenly ambushed by the emergence of little known persons who usually find it difficult gaining grounds within the first few years of takeover from present management.

From Moody’s report on Diamond Bank merger, we were able to glean that sometimes in 2018, there was a letter from Nigeria’s market research and analysis news site Proshare. The content of the letter simply was that a former chairman of Diamond Bank, Seyi Bickerstheth gave some hints on why Diamond Bank’s CEO, Mr. Pascal Dozie, should be replaced. The letter re-echoed the same demand from one of the biggest investors in the bank — Carlyle Group’s Carlyle Sub-Saharan Africa Fund (CSSAF) DBN Holdings — who also wanted Mr. Dozie shown the exit door.

“A key shareholder CSSAF DBN Holdings demanded an immediate removal of management, principally the CEO, but the Board favoured a less drastic approach to minimise disruption and also enable the Board secure new leadership,” Bickerstheth wrote in the letter.
“After several discussions, the CEO of the Bank, who is also a representative of the second largest shareholder Kunoch Ltd agreed to resign effective January 3, 2019, but would not tender his letter to confirm his verbal notification.’’

This is a classic case of a poor succession planning policy in place. With a sound succession planning policy, it would have been easier to find a perfect replacement for the bank’s CEO who, from several reports, had already been compromised.

It is therefore necessary that every company in Africa, whether small or large should draft a detailed succession planning policy and appoint a committee (such as the governance, remuneration or nomination committee) to oversee affairs related to succession planning. Alternatively, the Committee should establish a succession plan that identifies critical executive and management positions, forecasts future vacancies in those positions and identifies potential managers who would fill vacancies. Vacancies will be filled from within or, in the event no viable candidate is available, on an “acting” basis while an external recruitment effort is conducted.

Weak Board Structures and Dynamics

This is unarguably, the strongest force that destroys a company even before it begins to make profit. From my experience, it seems most companies still revolve around powerful, god-like figures, without whom the company would struggle to exist. Truly so, if an individual is the strength of a company, in terms of finance or influence, it would be entirely difficult for the company to look stern when pointing fingers. But this is where the basic definition of a company resurfaces — a company is a person with a separate personality entirely independent of the promoters or the founders. A company with a very strong board structure or dynamics should be able to have these key essential features:

The Chairman of the Board should not double as the MD/CEO of the Board.
The Board shall consist of at least an executive, non-executive and an independent director in such a way that the number of non-executive directors shall be more than that of the executive directors. In fact, there is really no need appointing directors who are out of touch with practices in the relevant sectors the company are competing in. Apart from the fact that persons appointed to the board must be persons of proven integrity, they must also possess acute knowledge required of a person in that industry.
A good succession planning policy should be mindful of the fact that an ideal replacement period for each non-executive director is usually three years, although an executive director could stay on the board for a maximum period of three years of 4 years each, while the maximum period for an independent director should be 3 years of three years each. On their parts, MDs/CEOs’ tenure usually have an ideal maximum period of 10 years, which may be broken into periods, not exceeding five (50 years) after the expiration of his tenure as MD/CEO.
Quite obvious from my experience reviewing a number of companies is the practice of converting an existing non-executive director into an independent non-executive director. This practice is extremely unhealthy if the company is to survive. An independent director, in most cases, does not have any direct material relationship with the company; or in cases where they have some material relationship with the company, their equity interests in the company should not be more than 0.001% of the company.
Another instance of a weak board structure is the practice of filling a substantial portion of the board size with family and friends, who have little or no contribution or experience to bring to the board. A standard practice demands that not more than two members of a family shall be on the board of a company at the same time. The expression ‘family’ includes a director’s spouse, parents, children, siblings, cousins, uncles, aunts, nephews, nieces and in-laws. In the same vein, no two members of a family shall occupy the positions of Chairman and MD/CEO or Executive Director of the company and Chairman or MD/CEO of a company’s subsidiary at the same time.

Moody’s still offers us a classic example from Diamond Bank’s merger with Access Bank in this regard. According to the credit-rating agency, Diamond Bank failed because it did not have enough independent directors (the objective truth tellers) on its board and this resulted in a lack of effective board oversight.

By the end of 2017, only one of Diamond’s 13 board members met the Nigerian SEC’s definition of independent (another had retired in August),” Moody’s noted

“We believe Diamond’s board failed to provide an effective check against the bank’s management team. Board independence is important because it makes it more likely that management strategies are subject to rigorous questioning, reducing the risk of directors ‘rubber stamping’ management decisions.”

The implication of this is not far-fetched. Mr. Dozie, whose family was the second biggest shareholder in the bank, directly controlling 5% and another 9% indirectly through its investment firm, Kunoch Ltd (14% in total) was only 4% off the Bank’s biggest shareholder, Carlyle Fund, which controlled 18%. This meant, of course, a huge overbearing influence of one family over how the business of the bank was run. A striking example was the fact that a member of the founding family held the CEO role between November 2014 and March 2019 when it merged with Access Bank. During this period, profits fell by 78% in 2015 and bank deposits shrank by 22% between year-end 2014 and 2017.

Poor Board Processes And Oversight

From my experience, it appears that most companies do not seem to have a sound grasp of issues surrounding board processes and oversight. To begin with, there are certain committees a company must necessarily form. Chief among them are the risk, audit and corporate governance or remuneration committees. The absence of any of these committees must necessarily lead to a weak governance structure in the company. Consequently, for a company to have effective board processes and adequate oversight, it should be able to have these key essential features:

To make sure that there is some level of independence and checks and balances on the Committees, the Chairman of the Board/company shall not be a member of any of these committees stated above. All the committees must necessarily be headed by a non-executive director. In the same vein, the MD/CEO and other executive directors of the company shall not be members of the audit committee of the board as well as the committees on governance, remuneration or nomination.
Only those knowledgeable in risk management or audit shall be appointed to these committees. And as a matter of good practice, the board shall not replace members of the Board Audit Committees and External Auditors (not internal auditors) of the company at the same time.
The risk and audit committees must necessarily play some oversight functions on the company’s risk officer and internal auditor, and as a matter of good practice, both officers must report directly to the committees on risk management and audit respectively.
Boards of Companies shall ensure that the company’s risk management framework provides for regular and independent reviews of the risk management policies and procedures as well as periodic assessment of the adequacy and effectiveness of the risk management functions.

Moody’s particularly drew out a line here. It said Diamond bank did not attract enough corporate borrowers who are a major moneymaker for banks and that, well, it loaned out more money to the oil and gas sector than the Central Bank of Nigeria thought was prudent (52% versus 20%). So when oil prices fell in 2015 and 2016, the bank came crashing with it. This is purely a case of inadequate oversight over the bank’s risk management department by the bank’s risk committee. This is so because Moody’s noted that Diamond Bank’s weak governance structure necessitated: a highly compromised board; a board with little ability to assess the bank’s risk exposure and; and a board that failed to rigorously interrogate management over strategy.

Little Or No Adherence To Policies on Transparency and Disclosures

Although most companies tout themselves to be pro-transparency and disclosures, this is not often the case in reality. From my experience, a lot of information is still being buried or swept under the carpet by companies’ top management, in connivance, sometimes with the board. This is worsened by occasions of conflict of interests necessitated by the directors’ participation in the equity of the company. A transparent board should be able to disclose information about the each director’s interest or shareholding in the company, as well as his directorship in an another company, if any. It should also be able to disclose the exact cumulative years of service of each director, and that of the external auditor at the end of every financial year.

Again, the most common challenge being faced by most companies on transparency in Nigeria revolves around issues of financial reporting. This is the stage where usually all the books are cooked, especially when the appropriate structures for checks and balances are weak. As a matter of best practices, companies should adopt the following around their financial reporting efforts:

The board committee on audit must necessarily hold a meeting once in every three months of the financial year of the company and deliberations at such meetings must include, at least consideration of the quarterly reports of the internal auditor. The board committee on audit must as a matter of good practice, investigate all audit reports and resolve all issues arising from the reports.
At least once in a financial year, the Board Audit Committee should endeavour to hold a discussion with the head of the internal audit function and the external auditors without the presence of management, to facilitate an exchange of views and concerns that may not be appropriate for open discussion.
As a matter of standard practice, the tenure of an external auditor in a given company shall be for a maximum period of 10 years after which the audit firm shall not be reappointed in the company until after a period of another seven (7) consecutive years.
Recall that it is standard practice that the MD/CEO and all the executive directors of the company should not be members of the Audit Committee. The audit committee of the board should consist only of the Non-executive or independent non-executive director of the company.

A classic example of the effect of a poor governance structure found in a company

One notable abuse of these principles is found in Cadbury Nigeria Plc’s case. In 2006, Cadbury Nigeria filed with Nigeria’s Securities and Exchange Commission its annual report and accounts for years 2002 to 2005 which contained untrue and misleading statements. Investigations revealed that Cadbury Nigeria’s former chief executive officer (CEO), and its former finance executive director, had deliberately made overstatement of the company’s financial position over the course of a few years to the tune of between N13 to N15 billion in connivance with the Company’s heads of accounts, internal audit and sales operation and supported by the company’s board chairman.

Further studies revealed that the Audit Committee of Cadbury Nigeria consisted of 3 executive directors, against the standard practice described above. The head of internal audit and members of Audit Committee also failed in making proper recommendations to the board at meetings. They also failed to examine the auditor’s report to review and make appropriate recommendations on management matters with the external auditors. Luckily enough, the discovery of this fraud has to be the most timely intervention that saved the company from filing for bankruptcy, especially as it had actually made a loss totaling N5 billion during the period.

Failure On Strategy and Planning

Finally, one recurring problem in most companies from my experience is the absence of any formal strategic framework for the companies. In the current era of disruption and innovation, not having any comprehensive policy on strategy is foolhardy. Any company that wishes to survive and adapt must strive to remain relevant through strategies. To this effect, the following best practices must be adopted and reviewed on yearly basis by boards of companies:

The board should adopt a plan detailing the strategic priorities for the company and how it expects this to be actualized.
It must also dedicate enough time to strategy planning and must as a matter of urgency define annually the most significant issues facing the company in order to build extensive regular discussion of these issues into the Board meeting agenda.

When this is done, the company’s performance, relative to the general state of the economy, is bound to improve.

The Bottom Line

Issues around a company’s failure or success is neither here nor there, since there are different economic, social or even political factors that may influence a company’s existence over a period of time, but the principles of building a sustainable company are almost always the same. Some of these principles as discussed above are so important that a company wishing to build a long-lasting legacy cannot do without them.

On the other hand, small companies seem, however, to be having a hard time understanding that a company is a separate legal entity from the owners, an issue which they must quickly address, if the future would be any near brighter for them.

Reviewing the effectiveness of every company’s board is a good way to start towards building a sustainable company in Africa.

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

Charles Udoh has worked with companies in insurance, finance, banking, leasing, investment funds as well as real estate to strengthen their board effectiveness. He could be reached at udohrapulu@gmail.com or charles@teamnominees.com

Ghana Now Has A New Companies Act, 56 Years After The Old Law

August 5, 2019

Businesses in Ghana would now have to face a new legal structure. Ghana’s President Nana Addo Dankwa Akufo-Addo has just given his assent for Ghana ’s new Companies Act to replace the 1963 version. This was after the new Act was brought to him from Parliament on Friday, 2nd August after it was passed by Parliament in May this year.

Here Is All You Need To Know About The New Law

The law, which has 428 pages and 369 clauses, has created a new office to perform functions relating to incorporated partnerships and registered business names.
This new office will be responsible for the appointment of inspectors and will assume the functions of the Official Liquidator under the Bodies Corporate (Official Liquidations) Act 1963.
The office will have financial autonomy and be funded from income sources such as sums of money approved by parliament, fees and charges, proceeds from the sale of the Companies Bulletin, donations, grants, and investment income.
The law also gives room for dissenting minority shareholders to have rights to compel their companies to buy out their shares. Such shareholders will now be entitled to request the company to purchase their share at a fair value.

Ghana’s economic profile; Source: Belt and Road

Under the New Law, The New Age To Legally Own A Business Has Changed

The new law states that an individual can register or start a business at the age of 18, revised downwards from 21 years. One person is enough to form an incorporated company in Ghana as the one or more persons may form an incorporated company by complying with this Act.

No More Ultra Vires Objects

With this new law, the application of ultra vires doctrine to companies in Ghana has been completely abolished. From the provisions of the Companies Act, companies will have the option to state the nature of their businesses or their objects.

The implication is that companies that will state their objects will be restricted to operate within the scope of their objects but those who opt not to state their object will have no restrictions and can do any legitimate business.

Improve Ease of Doing Business?

Ghana ‘s President Akufo-Addo was confident that this new Companies Act will improve significantly the ease of doing business in Ghana, enhance the corporate regulatory and governance framework, and reduce the cost of ensuring compliance for businesses.

“I invite the business community in Ghana, and those from outside our shores, to take advantage of the growing business-friendly environment being created in Ghana, and invest in our country. Let me reiterate that Ghana continues to be a haven of peace, security and stability, indeed, the safest country in West Africa, and legitimate investments are protected,” the President noted.

President Akufo-Addo added that more needs to be done to complete the country’s business reform agenda, and the Corporate Restructuring and Insolvency Bill, which is currently before Parliament, will, amongst others, provide the avenue to help resuscitate distressed, but viable business entities and establishments from liquidation and their ramifications.

To download Ghana’s new Companies’ Act, click here

With the coming into effect of the African Continental Free Trade Area (AfCFTA), and with Ghana playing host to the secretariat, the President indicated that the country is going to be the hub for African trade and investment, bringing in its wake more jobs, expanded conferencing and hospitality services, enhanced aviation and other transportation services, and related allied businesses.

“Consequently, the timing of our business law reforms could not have been more propitious,” he added.

President Akufo-Addo also launched the GARIA Trust Fund, which is designed to be the principal financing vehicle for GARIA and will be managed by an independent Board of Trustees.

“I am going to ask the Ministries of Finance, Trade and Industry, and Business Development to see to what extent they can properly assist the Fund. In the meanwhile, I am personally donating GH¢50,000 as my modest contribution to the Fund,” he added.

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/

Startups In South Africa Which Crowdfund Will Now Be Listed On Stock Exchanges

July 25, 2019

Indeed, this could be ground-breaking. No more waiting for years and centuries for startup IPOs to happen. With this new deal, once startups raise funds through equity crowdfunding in South Africa, the startups’ shares automatically become tradable on the floors of South Africa’s Stock Exchange. Money more here!

Here Is How Everything Is Going To Happen

Today, Africa’s first equity crowdfunding, Uprise.Africa, and South African alternative exchange ZAR X have come to an agreement that will see the mini stock exchange list any up-and-coming entities, which have already successfully raised capital via crowdfunding, and freely trade their shares on the open market.
Not only could the arrangement be the funding gap filler that fledgling South African entrepreneurs desperately seek, but it could bring the local capital market to the people.
The partnership also solves the fundamental flaw of all other pre-IPO models, Nel says, namely that once a company has issued the shares they remain fairly illiquid, with investors having their funds tied up until that company looks at going public.
Tabassum Qadir, co-founder, and CEO of Uprise.Africa says they plan to conclude at least three deals a month.

“We are simplifying venture capital through this mutually beneficial partnership for both entrepreneurs and investors,” says Qadir

“It means, when you have a business idea, you can leverage the Uprise.Africa platform to potentially raise capital quickly and ultimately list on a licensed stock exchange, making the shares tradable,” she says.

Etienne Nel, CEO of ZAR X, agrees that equity crowdfunding democratizes start-up financing by enabling entrepreneurs to raise additional capital, but also allows more people to invest in local businesses and in listed equity.

“Furthermore, it gives crowdfunding investors liquidity in their investments, which ultimately drives financial inclusion and job creation,’ he adds.

He says it gives this new generation of investors the same opportunities as high-net individuals and institutional investors, who can afford the investment costs of larger stock exchanges.
Not only are lower minimum investment amounts possible, but certain transaction fees and regulatory costs also don’t apply.
For example, the alternative exchange community is not subject to the Financial Services Conduct Authority (FSCA) protection levy and doesn’t charge for the custody of funds.

“It is also no secret that the ‘incumbent’ is more focused on institutional money that the interests of retail investors,” Nel says.

Equity crowdfunding is gaining much popularity across the globe, and it doesn’t look like it will slow down soon.

The World Bank, for instance, estimates that the global equity crowdfunding sector will be worth more than $93-billion by 2020.

Upraise.Africa is also putting the funding model on the map. It made headlines recently by facilitating a R34-million capital raising exercise for Intergreatme — a business that describes itself as a “platform that provides users with a secure, simple and effective way to share personal information with anyone”.

Qadir says the platform enables the trust to be built between investors and entrepreneurs and in doing so creates a supportive business ecosystem.

“And now crowdfunding investors can trade their holdings on the ZAR X platform,” she says.

“We have cracked the code. We have now derisked the proposal. We give investors the option to exit by allowing them to sell their shares at will. Usually, and in the current format, investors are tied up in an equity crowdfunding investment for between 6–8 years.

“We also aim to disrupt the country’s traditional funding landscape,” she adds, “which is rather limited and restrictive at that.”

As the IPO model certainly remains very viable for certain businesses of size wishing to launch into the public markets, it is not for everyone.

After these stock exchanges, the next biggest stock market in Africa is Mauritius, followed by Tunisia and Namibia.

Business Maverick had reported recently that it is a capital-raising method on the decline, and Nel says that they “are simply seeing more opportunities for investors and founders looking for methods that better fit their needs than what the traditional incumbents are offering”.

“The compliance costs of being listed on the bigger boards are devastating, and private money and smaller enterprises just find some of the disclosure requirements too cumbersome and restrictive,” he adds.

The Financial Sector Conduct Authority,(FSCA), (the South African market conduct regulator of financial institutions that provide financial products and financial services, financial institutions that are licensed in terms of a financial sector law, including banks, insurers, retirement funds and administrators, and market infrastructures) is still in the process of finalising regulations pertaining to crowdfunding, after releasing its draft proposals in mid-2017. The lack of regulation has been cited by some in the sector as the reason why equity crowdfunding has not taken off in South Africa as it has in more advanced economies.

But ZAR X and Uprise.Africa thinks their deal could be the catalyst needed to kick-start it all.

The World Bank believes the potential market for crowdfunding is significant.

It estimates in its report: Crowdfunding’s Potential for the Developing World that there are up to 344 million households in the developing world able to make small crowdfund investments in community businesses.

“These households have an income of at least $10,000 a year, and at least three months of savings or three months savings in equity holdings. Together, they have the ability to deploy up to $96-billion a year by 2025 in crowdfunding investments,’’ the report noted.

South Africa’s ZAR X Is Not As Small As You Think

ZAR X, one of South Africa’s newest stock exchanges, was granted an operational license in 2016 to operate by the Financial Services Board (FSB). ZAR X commenced operations on Monday, 5 September 2016.

Etienne Nel, ZAR X CEO, says the approval signifies a new era in tech-friendly and user-focused share trading. He said:

“ZAR X creates choice and offers corporate South Africa and the public at large a new opportunity to reduce unnecessary red tape, speed up transaction times and open up equity-based wealth creation to sectors of the South African population that for far too long have been largely excluded from full participation in the financial markets.”

ZAR X listings requirements are largely principles-based, enabling the process of a more flexible and efficient listing. ZAR X will initially offer a primary board for conventional company listings, an investment entities board that will cater for structured products and exchange-traded funds, and a ‘restricted market’ for BBBEE shares, Agri shares and other restricted securities which can only be traded within a clearly defined investor base.

Senwes and Senwesbel were the first companies to list on the Exchange commencing trading on Monday, 3 October 2016.

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/

Equatorial Guinea aims to boost opportunities for African services companies

July 23, 2019

In order to strengthen cooperation amongst African companies, encourage the development of strong African content and promote joint-venture opportunities, Malabo will be hosting the Oil & Gas Meeting Day on October 1-2, 2019. The summit is part of Equatorial Guinea’s Year of Energy and will focus on exploring opportunities and deals amongst services companies, which are central to the development of strong African capabilities across the oil & gas value chain.

The African Energy Chamber (EnergyChamber.org) strongly supports the National Alliance of Hydrocarbons Service Companies (NAHSCO) in the organization of this upcoming Oil & Gas Meeting Day. We invite all our partners, especially national oil companies and public and private services companies, to come to Malabo in October. This will be a key platform for dialogue and deals with international, technology and services companies.

“Equatorial Guinea is rapidly becoming a hub for African service companies, driving a regional approach to local content based on partnerships and oil industry cooperation,” said Nj Ayuk, Executive Chairman at the African Energy Chamber and CEO of the Centurion Law Group.

“The development of a strong African oil services industry is crucial if we want to get value out of our natural resources and create jobs. The way to build African capacities is to work together and create jobs, and we are happy Malabo is bringing everyone together.”

The Oil & Gas Meeting Day will offer opportunities for African services companies to make deals with regional and international partners and drive global transformations within the oil services industry.

More importantly, it will provide a platform to share experiences on local content and advocate for regionalization of local content development within African oil markets. “With this meeting, African services companies and national oil companies have the chance to not only be part of the game but change it to their benefits,” added Nj Ayuk.

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.

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

Namibia Is The Easiest Country In Africa For Small Businesses To Get Bank Loan

July 22, 2019

If you think that it is harder for small and medium-sized businesses to get loans from banks in Namibia, this is a chance to think again. A new report is saying Namibia is the best place in Africa for small scale businesses to get credit facilities from banks.

The 2019 Small and Medium-sized Enterprises (SME) Competitiveness outlook developed by the International Trade Centre (ITC) indicates that banks in Namibia are providing a high degree of investment relative to more than two-fifths of the countries examined in the survey.

A Look At The Report

The report presents what it calls an “SME Competitiveness Grid” which allocates scores to the various sizes of enterprises in Namibia— small, medium and large — for various aspects of business services available to them using key indicators such as a country’s Gross Domestic Products (GDP) per capita, current account surplus, deficit and share of GDP, Tariff preference margin and many others.

Small Businesses

In Namibia, small businesses are scored at 76.6 percent with regards to investment financed by banks which is well above the threshold score of 22.4 percent below which the availability of a business service is assessed as weak. This is the highest in Africa, closely followed by Kenya at 65.2 percent. Botswana is third at 62.5 percent. Following Botswana is Mali which is fourth at 61.9 percent. Africa’s largest economy, Nigeria was scored 15.8%. At this rate, it is hardest for small businesses to get a loan in Congo DR at 4.1% or in Sierra Leone at 4.7%

This figure means that small enterprises have far more access to bank financing in Namibia compared to other African countries and also compared to Namibian medium and large-sized counterparts. The survey regards any score over 67.3 percent as strong and in Namibia, only large-sized firms are assessed to have strong access to finance, although medium-sized enterprises come close.

Central and South American countries scored the highest in this regard with Chile scoring 85.6 percent, Dominican Republic 86.0 percent, Nicaragua 68.7 percent, and Guatemala 61.7 percent as prime examples.

Conversely, sub-Saharan African countries fared poorly. Surprisingly, Liberia scored a relatively high 46.6 percent but neighboring Nigeria recorded a low 15.8 percent.

Read Also: There Are Now Over 41.543 Million Micro, Small & Medium Enterprises In Nigeria

Medium and large

It is easiest for medium scale businesses in Kenya at 70.6% to get bank loans compared to their counterparts in Africa. In this regard, Namibia scored 56.3 percent. It is also easiest for large scale companies in Burundi at 83.5% to get loans compared to their counterparts across Africa.

This indicates that activities in Namibia’s banking sector gravitate heavily towards the financing of small scale businesses making it increasingly possible for small, medium and larger businesses to attract the needed investments from various banks.

It is deemed that SMEs contribute to the Sustainable Development Goals (SDGs) through the jobs and wages they provide to their respective employees; their business practices; the sector in which they operate as well as their contribution to the national economy.

Financial institutions in most cases do not extend substantial credit facility to SMEs, most especially in the developing countries to either expand their business or make direct investment owing to the lack of information on SME creditworthiness which in turn leads to high perceived risks.

This recent outlook is, therefore, making a strong case on the need to encourage continuous investments in the country’s small business sector in order to realize the SDGs.

It is in this regard that the ITC is advocating that local financial institutions namely banks, insurance providers and microcredit agencies playing an effective role by providing information on SMEs such as credit history, that is necessary to accurately assess performance risk.

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/

Equatorial Guinea’s to boost Opportunities for African Services Companies with Upcoming Oil & amp; Gas Meeting Day

July 18, 2019

In order to strengthen cooperation amongst African companies, encourage the development of strong African content and promote joint-venture opportunities, Malabo will be hosting the Oil & Gas Meeting Day on October 1-2, 2019.

The summit is part of Equatorial Guinea’s Year of Energy and will focus on exploring opportunities and deals amongst services companies, which are central to the development of strong African capabilities across the oil & gas value chain.

The African Energy Chamber strongly supports the National Alliance of Hydrocarbons Service Companies (NAHSCO) in the organization of this upcoming Oil & Gas Meeting Day.

We invite all our partners, especially national oil companies and public and private services companies, to come to Malabo in October. This will be a key platform for dialogue and deals with international, technology and services companies.

“Equatorial Guinea is rapidly becoming a hub for African service companies, driving a regional approach to local content based on partnerships and oil industry cooperation,” said Nj Ayuk, Executive Chairman at the African Energy Chamber and CEO of the Centurion Law Group.

“The development of a strong African oil services industry is crucial if we want to get value out of our natural resources and create jobs. The way to build African capacities is to work together and create jobs, and we are happy Malabo is bringing everyone together.”

The Oil & Gas Meeting Day will offer opportunities for African services companies to make deals with regional and international partners and drive global transformations within the oil services industry.

More importantly, it will provide a platform to share experiences on local content and advocate for regionalization of local content development within African oil markets. “With this meeting, African services companies and national oil companies have the chance to not only be part of the game but change it to their benefits,” added Nj Ayuk.

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.

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

African Energy Chamber’s President to Lead Angolan Services Companies’ African Outreach at Upcoming Oil & Gas Meeting Day in Malabo

July 17, 2019

Angolan and Mozambican services companies are answering to Equatorial Guinea’s call to cooperation and will be participating in the Oil & Gas Meeting Day in Malabo on October 1st and 2nd, 2019. The delegation will be led by President of the African Energy Chamber in Angola, Sergio Pugliese.

The growth of Africa’s oil & gas sector presents the continent’s services companies with tremendous opportunities for partnerships and regional expansion. As Africa’s second-largest oil producer and thanks to its strong local content efforts, Angola is now home to countless services companies with the necessary capacities to expand across sub-Saharan Africa.

“Angola is known for having strong local services companies,” said Sergio Pugliese. “The growth of our local content is now accelerating thanks to the reforms made by President João Lourenço and his administration. We now have Angolan companies that developed strong capabilities and are ready to expand beyond Angola.

They are seeking partnerships and deals with other African and international services and technology companies, to serve both their regional expansion plans but also to further support the growth of the Angolan industry at home. The Oil & Gas Meeting Day provides the perfect platform to seal such deals.”

The African Energy Chamber supports the Oil & Gas Meeting Day, a Year of Energy event organized by Equatorial Guinea’s National Alliance of Hydrocarbons Service Companies (NAHSCO). Malabo has positioned itself as the hub for services companies to engage in meaningful conversations on how to build the next generation of African oil & gas leaders and companies.

The services industry is a massive job creator and a strong pillar of the global oil & gas industry. As cooperation amongst African oil markets increases, the need for services companies to step up their game and pursue an aggressive outreach has become a necessity.

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.

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

Facebook, Other Tech Companies May Be Barred Entirely From Offering Financial Services and Digital Currencies

July 15, 2019

The US House of Reps is pushing to ban Facebook and other tech companies from ever having anything to do with financial services or digital currencies.

A bill to prevent big technology companies from functioning as financial institutions or issuing digital currencies is currently being circulated for discussion by the Democratic majority that leads the House Financial Services Committee, according to a copy of the draft legislation.

Here Is What The Bill Is Proposing

In a sign of widening scrutiny after Facebook Inc’s (FB.O) proposed Libra digital coin aroused widespread objection, the bill proposes a fine of $1 million per day for violation of such rules.
Such a sweeping proposal would likely spark opposition from Republican members of the house who are keen on innovation, and would likely struggle to gather enough votes to pass the lower chamber, says Reuters.
Even if it were to pass the full house, it would still have to pass the Senate which would also likely be an uphill struggle.
Nevertheless, the draft proposal sends a strong message to large tech firms increasingly eyeing the financial services space.
The draft legislation, “Keep Big Tech Out Of Finance Act”, describes a large technology firm as a company mainly offering an online platform service with at least $25 billion in annual revenue.

“A large platform utility may not establish, maintain, or operate a digital asset that is intended to be widely used as medium of exchange, unit of account, store of value, or any other similar function, as defined by the Board of Governors of the Federal Reserve System,” it proposes.

Facebook, which would qualify to be such an entity, said last month it would launch its global cryptocurrency in 2020.

Facebook and 28 partners, including Mastercard Inc (MA.N), PayPal Holdings Inc (PYPL.O) and Uber Technologies Inc (UBER.N), would form the Libra Association to govern the new coin. No banks are currently part of the group.
Last week, U.S. President Donald Trump criticized Libra and other cryptocurrencies and demanded that companies seek a banking charter and make themselves subject to the U.S. and global regulations if they wanted to “become a bank.”

His comments came after Federal Reserve Chairman Jerome Powell told lawmakers that Facebook’s plan to build a digital currency called Libra could not move forward unless it addressed concerns over privacy, money laundering, consumer protection, and financial stability.

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/

This Report Lists Reasons The Manufacturing Industry In Kenya Is Backward

July 14, 2019

Startups, whether new or existing going into the manufacturing industry in Kenya have new lessons to learn before embarking on the journey. Besides the fact the manufacturing industry contributed only 8.4% to the GDP in 2017, the manufacturing industry contribution to Kenya’s GDP has never gone beyond 10%. Now, a new report is helping to show the reasons for that bad performance and what can be done to boost Kenya’s manufacturing capacity and enhance industrialization.

Conducted by SYSPRO, a global provider of industry-built Enterprise Resource Planning (ERP) software for manufacturers and distributors in collaboration with Strathmore University, the study on manufacturing in Kenya saw close to 100 companies drawn from 12 sectors of the production and manufacturing industry in Kenya interviewed.

The study explored the productivity and competitiveness of the manufacturing sector in Kenya, the role of new technologies in improving the sector and the state of adoption and use of these new technologies.

The study revealed among other things five factors that affect the manufacturing industry in the country and these include:

Spare Parts

The study found that most of the companies interviewed were still using outdated production units because of the high cost involved in buying newer machines. This is even made worse because there is the scarcity of locally manufactured spare parts. In most cases, manufacturers could not say which products or parts were of great quality and which were fake spare parts until they used them.

This usually leads them to incur higher costs should the spare parts turn out to be fake and there is a need for replacement. This incidence of counterfeits has seen many manufacturers go for the importation of parts instead of buying them locally. Most of the times, this leads to longer periods of non-performance for machines as they await the delivery of the spare parts from overseas.

High software and hardware costs

Kenyan manufacturers also suffered high software and hardware costs. This hindered them from adopting newer technologies that could help improve the efficiency and productivity of the manufacturers. Manufacturers not having access to these simply resort to using outdated technology which they can afford. The end result of this is higher production costs and the inability to compete with those who are able to acquire the latest technology. Many of the manufacturers interviewed proposed tax incentives from the government so that they can acquire these technologies.

Nevertheless, the SYSPRO report showed that manufacturing managers have been able to keep the costs of their solutions down by having their Enterprise resource planning (ERP)solution (a software which integrates all facets of an operation, including product planning, development, manufacturing processes, sales, and marketing)divided in modules unlike their competitors.

Doing so offers its clients choice and flexibility. At the simplest level, a company only needs just 1 or 2 modules of an ERP Solution to begin automating its business which SYSPRO provides. This has proved quite popular with SME manufacturers in Kenya.

Lack of skilled labour

The study found a jarring dearth a dearth of skilled labour in Kenya who can operate such machines needed in manufacturing processes. The study recommended that there should industry-wide support for an apprenticeship, graduate internships and technical courses in universities so that the Kenyan local manufacturing sector would become an attractive business experience.

The implication of the paucity of this skilled workers is that over 50% of the respondents now felt that Kenya’s manufacturing sector would have difficulty competing with counterparts in other developed countries that have advanced education and training systems.

Government Support

The study indicated that the Kenyan government is not doing enough to support the manufacturing sector. A majority of the manufacturers interviewed felt that the government need to do more to support the sector so as to make it competitive and attractive to potential investors. The manufacturers particularly pointed out that support in the areas of development of infrastructure, provision of exemptions, grants, and subsidies as well as purchasing guarantee from the government would have a lasting impact on the sector.

High energy costs

This simply means that the cost of access to electricity for the manufacturing industry in Kenya is just so high. In fact, the cost of electricity was reported as the main external factor that adversely affected business operations in the last 2–3 years. This is despite the government’s efforts to reduce electricity costs for the manufacturers.

Other factors which were noted as having an effect on the manufacturing sector were:

The high cost of capital financing
Political climate
Cheap imports and exchange rates.

Right Now, Manufacturing Companies In Kenya Are Focusing On This Area For Improvement

From the companies interviewed, it appears they are prioritizing product development, advertisement, and marketing, computer systems, hardware and software as potential investment areas to improve business operations in the next financial year.

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/

Business Will No Longer Be As Usual For Foreign Businesses In Mauritius

July 5, 2019

Mauritius is not leaving anything behind as it begins a major clampdown on foreign funds flowing into the country. Here is the latest on the new tax reform initiated by the Mauritian government: The country’s financial services regulator Financial Services Commission (FSC) has said it would process all applications submitted to it for the purposes of determining whether a business is qualified to benefit from any tax treaties entered into between Mauritius and other countries within two months, provided the applicants fulfill all legislative obligations that include meeting know-your-customer (KYC), anti-money laundering, counter-terrorist financing, and substance requirements, among other things.

“FSC is emboldening its commitment to be a progressive and transparent regulator by fixing a shorter time frame for its own internal processes,” said Neha Malviya, director, Wilson Financial Services.

Mauritius has always been faulted for operating a tax haven economy where foreign companies flock to in order to avoid tax in their home countries. But all that is about to stop, at least to a larger percentage. Going forward, Mauritius foreign businesses coming into Mauritius would be required to comply with the new tax reform.

‘‘If the authorities find that it is not in Mauritius, then the entity is not a tax resident at all, and if it’s not a tax resident, then the treaty benefits it gets with other countries will not be available to it,”experts said.

Many of the business structures currently in place for international companies may be reviewed by Mauritius itself following the tax reform. Other existing structures will be forced to increase the substance requirements within Mauritius for them to continue getting the tax benefits.

“It is a significant change and the way they look at it will be different and may have new test to figure out whether these companies are complying with the new norms. It needs to figured out what are the tests they are going to lay out,” Suresh Swamy, Partner, PwC told Asian Age.

This change would hit hundreds of offshore funds operating out of the island nation and investing in their countries to take advantage of the double taxation treaties between their countries and Mauritius.

As An Example

A South African company may have its board of directors in Mauritius while it is managed from South Africa. In this case, the authorities could say the company is not eligible for tax residency. They will now look at the substance on the ground in Mauritius.

In many cases, the board meetings happen in Mauritius, directors are in Mauritius but the control and management are actually not in Mauritius. This would no longer be the case under the new arrangement.

Also See: Inside Mauritius Where A Majority of South Africans Are Migrating To And Their Reasons

The Implication of This

The fallout of this move will be that many of the structures currently set up in Mauritius and claiming treaty benefits on the basis that they have tax residency certificates may now have to take a look at the structures again.

So, many of the Mauritius structures may get challenged in Mauritius itself and several existing structures will be forced to increase the substance requirements within Mauritius for them to continue getting the tax benefits, experts said.

In simple terms, the consequence of not being considered tax resident in Mauritius is that the company would not benefit from the numerous tax advantages that obtainable from running its business in Mauritius. So, it is not a case of claim benefit from Mauritius, but do business in your home country. You have to manage your business in Mauritius before you claim the benefits.

Mauritius is a tax treaty jurisdiction and has so far concluded more than 42 tax treaties which are in force with the countries listed above.

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.