Transcript Full Document

Presentation
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Introduction
Africa Today
Contemporary Views on Africa
Zimbabwe now
Zimbabwe Reloaded
Key Challenges for Zimbabwe
Inconvenient Truths
Forecasted GDP
Lessons
What industry leaders should
do on indigenization
Multi-lateral support and funding
Agriculture and Manufacturing
Restoration of manufacturing
Thanks
Africa today
• Total population: 1 billion
• Population under 15: 41%
• Adult literacy: 62%
• GDP income per capita is 10th of world average
• Around 45% living on US$1 a day
• Mobile phone subscribers: 37%
• Population living in urban areas: 40%
• Collective GDP (2008): US$1.6t
• Combined consumer spending (2008): US$860b
Africa tomorrow
• Total population: 1.4 billion by mid 2025
• Total population: 2.1 billion by mid 2050
• 128 million households with discretionary income
by 2020
• Consumer spending will be US$1.4t by 2020
• Collective GDP will be US$2.6t by 2020
• Around 47% of Africans will be living in cities
by 2025
Contemporary Views on Africa
“Africa could be on the brink of an economic takeoff, much like
China was 30 years ago, and India 20 years ago.”The World Bank
Source: Africa’s Future and the World Bank’s Support to It,
The World Bank, March 2011
“
Big misperceptions about Africa still exist, especially in the mainstream
media where Africa is still considered as a place of civil unrest and war.”
Olaf Meier, African Development Corporation
"KFC intends to double its restaurants in Africa", The Wall Street Journal
Asia, 9 December 2010.
“So the point really [...] is not whether you should be doing business in
Africa, but rather how.” Leslie Rance, British American Tobacco
Introduction
Stability and political unity since 2009 but
downward spiral evident amidst elections
Resource rich country with arable land PLUS
agric/industry link
 Education – unquestionably Mugabe legacy
 GDP growth averaging 7% in last 2 years but
going down
 US$ STORY
Constraints – I refuse
Zimbabwe Reloaded
Gold reserves estimated at $billions but currently producing
12mt per year but capacity to do 50mt/year exists
Abundant Nickel under care but can produce 10 000 tonnes
Second largest PGM in Zimbabwe worth $400billion. 4 projects
on feasibility stage.
Abundant coal reserves at 2.7 million tonnes production/year
Chrome production rose 167% in 2010 to 517 000t.
Zimbabwe Kimberlitic diamonds at 4 million carats and alluvial
reserves can account for at least ¼ of world production
Manufacturing recovery nascent and threatened
Key Challenges for Zimbabwe
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ABSENCE OF LINES OF CREDIT
WESTERN SCEPTICISM: SANCTIONS & DIVIDE AND EXPLOIT CF
DBSA, INHERITED DEBT, PTA AND AFREXIM ASSISTANCE
DIFFICULTIES IN ACHIEVING NATIONAL CONSENSUS ON
PRIORITIES: DEBT, PRIORITIES IN GNU AND FOCUS ON SANCTIONS
LACK OF NATIONAL INTEREST – TOO MUCH FOREIGN MEDDLING
RESTORATION OF COMPETITITIVENESS – BUSINESS REMODELLING
DANGER OF A SUPERMARKET ECONOMY : RSA VERSUS
ZIMBABWE BALANCE OF TRADE
INNOVATION: RESOURCE LEVERAGING FOR NDIAMONDS, COAL
TO PLATINUM
ATTRACTING TIMID INVESTMENT ESPECIALLY INFRASTRUCTURE
PARTICULARLY POWER
COMMUNICATION GAP BETWEEN GOVT/NGOs AND PRIVATE
SECTOR ON ON CONCEPTS AND SPEED OF IMPLIMENTATION
INCONVINIENT TRUTHS
1. SINGAPORE WORKS NOT BECAUSE OF
DEMOCRACY
2.CHINA IS THE BEST ALLY FOR INFRASTRUCTURE
DEVELOPMENTS
3.BEST MINING PARTNERS FOR ZIMBABWE ARE
CANADIANS AND AUSTRALIANS (WE DO NOT
PRODUCE PLATINUM)
3.DIPLOMACY AND SCHOLARSHIP IS BEST HELPED
BY THE BRITISH
4.POLITICAL GOVERNANCE USING RSA IS NOT
BACKED BY RSA EFFICACY OR ANY AFRICAN
COUNTRY AS A ROLE MODEL
5.RSA IS NOT OUR TRADING PARTNER BUT FIERCE
ADVERSARY
ZIMBABWE ‘FORECASTS’
% p.a.
GDP Growth
Inflation – end
year
Interest Rates (USD)
Source: Hawkins 2010
2011 2012
9,3
7
6
6
13
10
Jan-08
Feb-08
Mar-08
Apr-08
May-08
Jun-08
Jul-08
Aug-08
Sep-08
Oct-08
Nov-08
Dec-08
Jan-09
Feb-09
Mar-09
Apr-09
May-09
Jun-09
Jul-09
Aug-09
Sep-09
Oct-09
Nov-09
Dec-09
Jan-10
Feb-10
Mar-10
Apr-10
May-10
Jun-10
Jul-10
Aug-10
Sep-10
Oct-10
Nov-10
Dec-10
Jan-11
Feb-11
Mar-11
Apr-11
May-11
Jun-11
Jul-11
Aug-11
Sep-11
Volume of Manufacturing Index, 1990 = 100
60
50
40
30
20
10
0
What Industry leaders must do
on indigenisation?
SUPPORTING INDIGENISATION
ENHANCING INDEGENISATION
DEVELOPING SECTORIAL NATIONAL
ANNUAL AGENDA
IMPROVING EFFICACY BY CUTTING
INTELLECTUAL “NOISE”
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ACTION 1:Supporting indigenisation
It is a global phenomenon found everywhere and that there is
no causal relationship between indigenisation and economic
decline
Case 1: Kenya booming under Sino Persian Investment that
exceed British investments now
51% local voting right in aviation, 1/3 minimum ownership
60% insurance brokers as agents or companies from East African
community only
100% ownership East Africa Community citizens for insurance agents
20% minimum ownership in telecoms within 3 years of registration
Land Control Act (Capt302)-All agric land sold to Kenyans only with
foreigners getting at best a 99 year lease. No mortgage or sale of shares of
firms can be done where there is agric. Land without land board approval
Capital markets Regulations of 2002 insist on 25% of listed company
shares to be for Kenyans
Supporting indigenisation Implications
Scope to deal with agro-industries: sugar cane,
forestry, tea, coffee via Kenyan model for agric
land based private companies.
Scope to preclude deposit mobilisation from
locals for foreign managed firms as this amounts
to externalisation of savings. Kuwait prevents
100% foreign owned banks from taking local
deposits
ACTION 2: Enhancing Indigenisation
Protection of property rights
Predictable enforcement of contracts
Free and open exchange
Avoid NGO curse of focussing on the weak; Create champions
who have experience and skills in the sector
Get business leaders to lead sectors
Colour code firms; Green compliant, Yellow partially compliant
and Red non-compliant. Integrate with tax credits, preferential
treatment at tenders with exclusion for red and yellow in some
cases
Broad based component always: Norway , the richest country in
the world with $84 290 per capita versus poorest Burundi at $170.
Zim at $372
AN ALTERNATIVE PICTURE OF INDIGENISATION
ACTION 3: Leading National Annual Agenda
Used extensively in Australia in the Aviation industry
Government makes a policy framework
Business sets up sectorial committees to run Sectorial NAA coordinated by government: allows fewer errors like in land reform
and uses experts in the field who also need to be empowered
Sectorial NAA committees become drivers and allow government
to deal with complexities by having the final say
Priority areas and focus will be set up
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Clothing and textile industry
Agro-Processing
Chemicals & Tourism
Manufacturing - Food
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Pharmaceuticals
Metals and Minerals
Technology
Wood and furniture
ACTION 4: dealing with Intellectual “noise”
 Monthly workshops
Comprehensive PR campaign involving business. government
and civil society on merits
BBBEE
Debug the myth this is corporate social responsibility and/or
“hesitant philanthropy” by saying indigenisation is a right not a
favour
Indigenise parastatals to avoid double standards that this is
targeting white settlers
Schemes must have anchor shareholders with skills in the sector
Publicise nominated firms and individuals cleared for
indigenisation in a particular sector to debunk myth this for one
party only
ACTION 5:Deepening indigenisation
 Technology transfer
Procurement and franchising
Ownership
Board composition
Red flagging for lucrative local SPB tenders
New ventures must not have exceptions
Using tax holidays for new ventures to fund indigenisation
Colour coding and acceptable levels of foreign workers
Use of state enterprises to consolidate clusters like sugar
industry vis-a-vis Tokwe Mukusi dam. Saudi Arabia experience
with oil cf IFC rates Saudi Arabia no 13 most competitive in the
world
Securitise land leases for equity in agro based industries but use
anchor shareholders senior executives in there
ACTION 6:
Financial
Mobilisation
Leveraging
Multi-lateral agencies
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AfDB OPSD Sectoral breakdown by Active portfolio
Source: Nginya Mungai Lenneye 2012
AFRICA IN IFC’S STRATEGY
Regional Hubs
Dakar
Johannesburg
Nairobi
Local offices
Abidjan
Dakar
Accra
Addis Ababa
Antanarivo
Bamako
Bangui
Dar Es Salaam
Douala
Freetown
Kigali
Lagos
Lusaka
Maputo
Monrovia
Ougadougou
Nairobi
Johannesburg
IFC Investment Evolution in Africa FY03-10
Africa represents unparalleled growth opportunity:
Fastest growing population (young, eager to improve
their living standards) and fastest pace of
urbanization
Emergence of a middle class that will consume from
services, basic services, fast consumer goods…
Striving to put its act together:
Via macroeconomic stabilization + prudent fiscal
policy
More political stability. Reforms are taking place
rapidly – better and safer environment to do
business in
Increasing trade and improving relationships with
their neighbors (?)
“Last Frontier” left ?
Small amount of investments bring high return and
impact for people’s lives
Economic success will reinforce political and
economic stability
Significant under-investment in infrastructure
Next geo-political battle ground ?
Source: Nginya Mungai Lenneye 2012
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Agriculture Challenges in restoring manufacturing
1 93% of Zimbabwe’s exports are commodities
2 Euro zone debt crisis- Global slowdown on commodity demand and
prices
3 Agriculture – plantings down 35% for maize, over 60% for cotton and
soya and 10% for tobacco
4 Exports now contribute 50% of GDP – up from 28% – while share of
primary exports is up 95% from 82%.
5 This reflects the de-industrialization of economy
6 Difficult for industry to regain 20%+ share in GDP.
7 Zimbabwe set on resource-driven growth path.
8 ZIMBABWE A SOUTH AFRICAN SUPERMARKET : FIRST QUARTER
2013 IMPORTS AT $1.7b VERSUS EXPORTS AT $814 M & 60% GOODS
IN SUPERMARKETS ARE IMPORTED MOSTLY FROM RSA
9 REGAIN THE VALUE CHAIN FROM FARM TO SUPERMARKET
Source Rukuni 2012
Opportunities
Zimbabwe to focus on priority industries to focus
on. – incubation strategy, modernization, capital
injection, technology transfer
 The products must come from sectors where the
country has competitive advantage and can
therefore be pushed into the region – focus on
quick fix e.g. in Argentina and Hungary
[SADC&COMESA]
 Consideration must also be given to tourism
 Resource leveraging on minerals: coal, gold,
platinum, diamonds
 Value addition especially on cotton and tobacco
which have recovered – Land reform cannot be
seen as a disaster even by the most pessimistic
critic
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Opportunities continued
 Government
should come up with a
comprehensive National Industrial Strategy
 Use of the EPA benefits as this may yield
increase and progress in market liberisation
 Industry must innovate or die
 Allowing more players and ensuring that
market rules apply
 Seek incubation period via derogation non
WTO obligations
Opportunities Continued.
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Foreign enterprises and other players that seek to
partner local industries urgently needed
Endeavour to export value added products
Line of credit of US$2 billion or same value revolving
fund urgently needed at rates of 10% per annum an
a tenor of at least 1 year
Industries need to modernise
Need to dump high mark-up low productivity
business models
Use Total Quality Measurement Strategies (TQM)
and ISO standards to improve the quality of goods
and services and sustainable environmental
practices thereby increasing customer satisfaction.
Opportunities - continued
Institutional and structural reforms – stop fighting
private sector, commercialise or privatise state
enterprises immediately
 Make the nation attractive to investment – Political
stability
 Policies that spawn new firms so as to keep ourselves at
the top – e.g. micro-finance for value adding like in fruit
drying
 Boost Research and development through tax credits ,
lower corporate tax, Capital equipment credits and NO
VAT FOR CAPEX.
 Pace of work ….governments slow and on three
speeds eg leveraging of minerals & resolution of
sanctions
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Opportunities continued
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Assistance in form of incentives, tax holidays
Supporting of low interest rate loans which businesses
can borrow
Providing affordable industrial finance which enables
industry to recapitalize, retool and increase capacity
utilisation
Going back to the social contract & a investor - friendly
Labour Relations Act
Continuing to groom entrepreneurs – Government must
privatise now airlines, phone, power, commercial
investment to experience the Chinese “miracle”
CONCLUSION
Building
blocks for policies must be market based
principles:
Focus on incentives rather than punitive measures
Look East and Learn – Kenya case: Sino-Indian
Persian triumvirate has upstaged UK 3 billion pound
investment, Oversubscribed Bond Programme,
Growth
Governments have the mandate to rule but they
must ideally lead by consensus.
‘I am not smart, I spend more time on
the problem than other people" Albert Einstein
THANK YOU