U.S. to support small businesses in Ghana through EXIM Bank

The U.S. will invest more in Ghana through the EXIM Bank.  The investments will be focused on small businesses and medium scale enterprises.

The Vice Chairman of the bank, Wanda Felton, at a discussion with Ghana’s President John Evans Atta Mills at the Castle, Osu in Accra on Tuesday, said the extension of the bank’s operation was as a result of the West African nation’s freindly business environment. It was also part of the bank’s long term plan for more economic co-operation with Africa announced by US President Barack Obama in 2009, she added. Felton pledged to woo US investors to support the Ghanaian economy by letting them know the enormous potentials that exist in the country. The vice chairperson of the Export and Import Bank further said the bank would support American business interests in the country through which it sought to expand its business co-operation with Ghana. Ghana’s President John Atta-Mills welcomed the move, saying Ghana was ready to partner genuine investors for mutual benefit. Mills stressed the need to take advantage of positive opportunities and cooperation to address the challenges of doing business among the nations The bank supported the construction of the country’s hydro electric power, the Akosombo Dam and had was supporting the energy sector for the last decade, through rural electrification and the Self Help Electrification Programme. About US$575 million has been invested into the energy sector, small and medium enterprises in the last decade. Other areas of target interest are agribusiness, trade and commerce.

U.S.-Ghana relations have really taken off since Barack Obama became President of the U.S. From his first visit to Ghana in 2009, using it as an example of African democracy, good governance and competency, relations continue on an upward positive track.  This has paid off as both nations come closer economically through trade and business as this is shown through this new agreement.

Ghana seeking to increase trade with Sweden

Ghana is looking to increase trade with Sweden.

Swedish Minister for Trade Ewa Björling received a trade delegation from Ghana, headed by Minister for Trade and Industry Hanna Tetteh. Their meeting focused on potential ways of increasing trade between Sweden and Ghana.

Ghana is Sweden’s third largest trading partner in sub-Saharan Africa. In 2010, exports to Ghana were worth over SEK 1.3 billion (1 Swedish krona = 0.14713 U.S. dollars). At present, Swedish business interests are mainly concentrated on ICT and mining, but smaller companies in other industries have also set up operations in the country. One such example is Viasat, which is attempting to break into the Ghanaian television market.

Over 20 Swedish companies currently have offices in the country. There is a great deal of interest in Swedish environmental expertise, as is evident, for example, in the project that the Raw Materials Group is running together with Ghana s Environmental Protection Agency on recycling of electronic waste.

Ghana is Sweden’s third largest trading partner in sub-Saharan Africa. Currently Swedish business interests are mainly concentrated on ICT and mining, but smaller companies in other industries have also set up operations in the country. One such example is Viasat, which is attempting to break into the Ghanaian television market. Over 20 Swedish companies currently have offices in the country. There is a great deal of interest in Swedish environmental expertise, as is evident, for example, in the project that the Raw Materials Group is running together with Ghanas Environmental Protection Agency on recycling of electronic waste.

The business climate in Ghana is good for a developing country, and very good compared with most African countries. Over the past decade, Ghanaian governments have maintained a consistently high level of ambition and pace of reforms with regard to industrial policy. Ghanas political stability is probably the factor that is most appealing, particularly in a region that has been known for its turbulence but where many companies want to set up operations to take advantage of good business opportunities.

Burger King looking to expand presence in Africa

Following the lead of it’s competitors Like McDonalds, KFC, Burger King will try to set up shop in throughout Africa.

South Africans could soon be snacking on a Big Whopper. Burger King said yesterday it was assessing opportunities in SA as sluggish economic growth in its US home market continues to hamper sales, making emerging markets look more attractive.Yum Brands, which owns Taco Bell and Pizza Hut, have also been enthusiastic about SA, New York- based Sanford C Bernstein analyst Sara Senatore said yesterday. “We are currently assessing the opportunity in SA for the Burger King brand,” the Florida- based company said. Burger King said it continuously reviews its “worldwide restaurant portfolio in the course of business. We make strategic decisions based on many factors, including development opportunities, market conditions and restaurant profitability.” Ms Senatore said growth in emerging markets had outpaced growth in developed markets. “There are difficulties when entering developing markets such as infrastructure and regulatory differences, but what any company is looking for is market depth and market growth and SA has that. They are looking for markets which will provide fast growth and are rapidly developing. Any company that can partake in these types of economies will want to, despite these challenges.” Founded in 1954, Burger King is the second-largest fast-food hamburger chain in the world, after McDonald’s, with about 12000 outlets in 73 countries. About 90% of Burger King restaurants are owned and operated by independent franchisees with 665 of these outlets based in the US. How the company licenses its franchisees varies depending on the region, with some regional franchises, known as master franchises, responsible for selling franchise sub-licences on the company’s behalf. Absa Securities analyst Chris Gilmour said the burger market in SA was saturated. “I am very surprised they would consider this, unless they are using SA as a springboard into Africa.” But Vestact fund manager Sasha Naryshkine said there was room for a new competitor in SA. “The fast-food sector has done astonishingly well over the past few years, and there is still potential for growth. Burger King is a well- known international brand and could compete with Famous Brands ’ Steers division. “But its fame would not guarantee its success. Subway is a well- recognised brand and it has not managed to capture the imagination of South Africans.” Famous Brands would be a formidable competitor with its 520 Steers outlets across the country. Steers grew sales 6,5% in the year to February, and said it planned to open a further 20 stores this year. McDonald’s opened its first restaurant in SA in November 1995 and operates 132 restaurants around the country. Justin Divaris, CEO of the Daytona Group that brought the Aston Martin brand to SA, is rumoured to be involved in the deal. He declined to comment.

Investing in Africa and opening up franchises will help drive growth for Burger King. When one looks at the demographics and growing middle class, the opportunity to invest ,establish a customer base would be a worthwhile investment. Pepsi, and KFC have clearly seen the great opportunity of doing business in Africa, it would be wise for Burger King to follow suit.

Malaysia seeks to tap African market

Malaysia following the foot steps of other Asian nations, seeks to increase its economic presence in Africa.

Malaysia is the latest nation seeking to tap into the African continent’s massive economic potential – following the success of countries such as China and India. Speaking prior to the launch of the Langkawi International Dialogue (LID) on 19th June 2011, Malaysian Deputy Prime Minister Tan Sri Muhyiddin Yassin, described Malaysia and Africa as “natural partners” due to their abundance of natural resources and their relatively young population. “It is thus only natural that we work together to build on the opportunities and potential available,” he said. In 2010, trade between Malaysia and Africa stood at US$8.2 billion, a 39 percent increase from the previous year. However, trade and investment levels between the two regions remain relatively “untapped” with further partnerships and bilateral cooperation required. “There are tremendous opportunities for Malaysia. We need to explore the various opportunities” said Malaysia’s Deputy Foreign Minister Kohilan Pillay. Malaysian Deputy Prime Minister Tan Sri Muhyiddin Yassin also expressed his disappointment at the present lack of economic activity between Malaysia and Africa while emphasising the enormous potential that Malaysia could potentially tap into with the African market, “Contrast this with the US$12 billion trade Malaysia had with Germany last year, a country one per cent the size of Africa. These figures speak for themselves. As such I urge you (Malaysian investors) to be proactive.” Former Malaysian Prime Minister Dr. Mahatir Mohamad believes that the LID will open up new avenues for Malaysia in Africa. “After the dialogue, Malaysia would have a higher visibility in the African market and Malaysian businesses could expect to do better there.” The LID was the brainchild of Dr. Mahatir and aims to bring together leaders of developing economies from Africa and the Caribbean in order to discuss and promote economic collaboration. More than 500 delegates from 15 African and Caribbean countries are attending the event that is seen as an important outreach program for Malaysia to Africa. According to Malaysian Deputy Prime Minister Tan Sri Muhyiddin Yassin, the move would help build sustainable economic prosperity by synergising Malaysia-Africa business partnerships. However, the event has also met up with criticism over the attendance of Zimbabwean President Robert Mugabe as well as Malaysia’s invitations to other controversial African leaders such as Sudan’s Omar al-Bashir. Malaysia’s Prime Minister Datuk Seri Najib Tun Razak has deflected the criticism by citing that Malaysia was not yet a member of the Rome Statute of the International Criminal Court (ICC) and therefore did not break any international laws by inviting Omar Al-Bashir.

Africa is prime opportunity for Malaysia to look for growth. South Korea, India, Japan and of course China have made moves to tap the growing and expanding African market.

Asian and African development banks sign trade finance deal

In looking to help and sustain growing trade ties between both continents, the Asian Development Bank and African Development Bank have both agreed to deepen ties.

Under the agreement, the Asian Development Bank will share legal document templates, operation manuals and information technology related to its trade finance programme with the African Development Bank. The Asian Development Bank (ADB) and the African Development Bank (AfDB) have signed a trade finance agreement to help the latter set up a trade finance programme to boost African trade. AfDB is looking to expand its trade finance activities to support companies across Africa, similar to ADB’s trade finance programme in developing countries in Asia. “Partnerships are key to promoting economic growth and using the trade finance programme framework developed by ADB will help AfDB achieve in Africa the success ADB has achieved in Asia, but much faster and at a fraction of the start-up cost,” said Philip Erquiaga, director general of ADB’s private sector operations department. “In time, we would expect the relationships between developing Africa and developing Asia to expand, resulting in much greater South-South trade which could help ease global economic balances.” According to ADB, its trade finance programme provides guarantees and loans in support of trade in developing countries in Asia through more than 200 partner banks. Under the agreement, ADB will share legal document templates, operation manuals and information technology related to its trade finance programme with AfDB. Both banks expect to expand their partnership and share access to both programmes to link banks in both regions. “By scaling up its trade finance activities, the AfDB is supporting an important growth-enabling activity, which has been affected by the recent global financial crisis,” said Tim Turner, director of AfDB’s private sector department. “By leveraging the experience of strategic partners, such as ADB, AfDB will not only be reducing the financial commitment necessary to ramp up its activities but also facilitate the expansion of African trade with Asia.” ADB’s trade finance programme provided $1.9 billion worth of support in 2009 and $2.8 billion in 2010 in developing countries in Asia. According to ADB, the five more active users of the programme in 2010 were banks in Bangladesh, Nepal, Pakistan, Sri Lanka and Vietnam. The programme aims to help small businesses that are unable to access trade finance services and to promote trade between developing countries. More than 34% of deals supported by ADB’s trade finance programme in 2010 involved small and medium-size enterprises and around 50% were between two developing countries.

This will boost trade and investments on both sides since it helps with financing and access to markets.  Common regulation and rules will smoothen trade.  Partnerships are key to promoting economic growth.  By transferring all tools and knowledge of the Trade Finance Program, the two development banks will reduce duplication of effort and cost and will share best practices, as encouraged under the 2005 Paris Declaration on Aid Effectiveness and the framework to achieve the Millennium Development Goals.

Kenya looking to attract Chinese investors

Kenya looking to attract Chinese investors.

Kenya plans to attract more companies from China to set up shop locally to help bridge the balance of trade gap that is in favour of Beijing. Increased investment in infrastructure would be complemented by investors from China, said a Kenya Investment Council director, Mr Derrick M’Mbijjewe. “We want to take stock of Chinese investments in the country. China is ready to fund companies that want to set up base in Kenya,” he said. Mr M’Mbijjewe spoke at a workshop on China’s impact investment at Norfolk Hotel. Bilateral trade between Kenya and China increased from $1.5 billion in 2009 to $1.8 billion in 2010, which is heavily skewed in favour of China. He said the country should use its strategic position to attract investors from the Far Eastern country. With the most developed capital market in the region and trained personnel, Kenya was suited to attract more companies, he said. Have local partner The model preferred by most companies from China is to have a local partner to mitigate “political risks” though some local outfits are unable to raise the required capital. There is therefore a need to encourage more direct foreign investments. Companies investing in Africa from China are partly or entirely owned by the government. Capital Markets Authority chief executive Stella Kilonzo said ways to attract venture capitalists to mobilise resources would be explored between regulators in the two countries. Over concerns of China undertaking nearly all the infrastructure projects, experts said, it was about providing the most competitive technical and cost elements during the tendering. Mr M’Mbijjewe said companies from China mostly provided better prices for implementation of projects compared to those from the West. “Chinese are investing cautiously in Africa knowing they will benefit into the future. Even when there is a problem in Kenya, they do not slow down their projects. They are more flexible to risk than the West,” he said. In 2006, Kenya and China signed six agreements on economic and technical cooperation that included concessional loans and air services that allowed national carrier, Kenya Airways, landing rights in the country. China has also set up a fund to encourage companies to import black tea, coffee, rose seeds and sisal.

While not much can be done to decrease or slow down trade that is in China’s favor (supply and demand economics), Kenya needs to look at reducing barriers for multinationals whether that is taxation and or tariffs. With China, maybe Kenya needs to use some Chinese methods and demand that Chinese firms train and hire local workers just as the China does to any foreign company wanting to enter the Chinese market.

Tanzania and Kenya to build $630m pipeline

In another sign of deepening economic ties, Kenya and Tanzania will jointly build an energy pipeline.

Kenya and Tanzania will build a $630 million natural gas pipeline from Tanzania to Kenya to help meet the region’s rising energy needs.

The project which is said to be in the pipeline when the East African Energy Ministers meet this October will save more than 126 million East Africans upon its completion by supplying electricity and powering industries in Tanzania, Kenya and Uganda.

In a telephone interview from Arusha, Mr Peter Kinuthia, a senior energy Officer at the East African Community told East African Business Week that the Petroleum Committee Ministers will pick the best option on the proposal to build the natural gas within countries because it will help to foster development as the pipeline has the potential to supply 710-720 MW of power.

“The East African Partner States are seeking for ways on how to improve energy infrastructure and ensure reliable electricity supplies to cater for economic expansion and population”, he said.

According to a recently study all four routes proposed in the report envisioned the pipeline running about 500 kilometers (310 miles) from Tanzania’s commercial hub of Dar es Salaam through the northern town of Tanga and ending at Kenya’s port city of Mombasa. It could be operational by 2015, and an offshore alternative would be too expensive.

The study said that the four most feasible options for the pipeline were for it to run across land as opposed to sea, which would be too expensive. The feasibility study comprises four on-shore routing options and one off-shore option. The investment cost of the on-shore options are in the range of $515-630 million.

Tanzania has a proven natural gas reserve of 7.5 trillion cubic feet. Among the factories that will be in the position to benefit from the project will be the Tanga Cement.

So far nine international companies have submitted bids for oil and gas exploration blocks in Tanzania’s Tanganyika rift basin and interest in the country’s hydrocarbon sector continues to rise.

In their statement the Tanzania Petroleum Development Corporation (TPDC) mentioned companies that tabled their bids for evaluation include French’s oil major, Total SA, Canada-based Fort Calgary Resources Ltd., UK’s Orphir Energy PLC, and New Age Exploration Ltd and Swala Energy, both of Australia.

Others are Australia’s Beach Energy Ltd, and U.S based firms Kosmos Energy Ltd and ERHC Energy Inc.

The Lake Tanganyika rift basin is part of the western arm of the East African rift valley, where at least a billion barrels of oil have been discovered in neighboring Uganda. Spurred by oil discoveries in Uganda as well as gas discoveries off the Tanzanian coast, interest in the country’s hydro carbon sector has been on the rise.

Tanzania is expected to hold a separate deep-offshore bidding round for at least 13 blocks off its coastline next year. At present, Tanzania has licensed 12 deepwater blocks and recent exploration works have encountered at least 7.5 trillion cubic feet of natural gas. The country is yet to discover commercial oil reserves.

The building of this pipeline will have side benefits for local communities along the route(s) that it might be built upon especially from infrastructure and service industries that will develop alongside. The big pay off is the integration of both countries economies, which will be mutually beneficial for jobs and economic development .

Japan plans on investing “billions” in Africa

Japan is keen on trying to catch up to China in Africa by being more aggressive in investments and forming new partnerships with the nations of the continent.  Japan will spend billions on investing throughout Africa.

Japan is keen to invest “billions of dollars” in minerals and infrastructure in Africa, trying to catch up to regional rival China for influence on the continent, a Japanese trade official said on Tuesday.Yoshikatsu Nakayama, vice minister of economy, trade and industry, said Japan was scouting for projects in which to invest, either via its state-owned oil and mining company JOGMEC or via joint ventures between local and Japanese companies.

China has spent billions of dollars on projects in Africa, trying to secure the resources it needs to fuel its quickly accelerating economy.

Analysts said the investment has given China an advantage in building trade in the emerging economies of Africa, leaving Japan behind for influence in the continent of one billion consumers whose purchasing power is steadily increasing.

“Whether through JOGMEC directly participating or through JOGMEC providing loans to Japanese companies, the figure would come to a few hundred million dollars per project,” Nakayama told Reuters on the sidelines of a mining conference.

Japan was also looking to develop South Africa’s rare earth metal resources but Nakayama said it would take a long time for projects to bear fruit.

The metals used for making high-tech products and auto parts were used by China as leverage in a political dispute with Tokyo last year, with Beijing restricting exports and alarming Japan’s top manufacturing firms.

Nakayama said Japan wanted to move into Africa gradually, even though the country had already been asked by some African mineral hubs such as Zambia why it was not pushing into Africa as aggressively as China.

Japanese trading firms such as Mitsui & Co, Mitsubishi Corp

and Itochu Corp have been in Africa for years.

Nakayama also said Japan was keen to develop Africa’s infrastructure, including rail lines, power plants and other transport links, along with the mines.

He dismissed fears Japan might miss out on the commodities boom if it waited too long.

“Once Japanese companies make a decision, they invest in the order of billions of dollars and buy an important stake in a minerals project,” he said.

Japan is already participating in a uranium project in Namibia and manganese and platinum projects in South Africa.

Graph of the day: China-Africa Trade

Hat tip to afrographique.

South Korea eyes Africa to increase export led growth

South Korea is seeking to boost its business presence in Africa by establishing three new business centres to support South Korean businesses and African importers following in China’s foot steps.

South Korea’s state-run trade agency said Wednesday it will open a new business center in Ethiopia this week, the first of three business-trade support centers to be set up in Africa this year.

The Korea Business Center (KBC) in Ethiopia will be opened Thursday (local time) in the Ethiopian capital of Addis Ababa, according to the Korea Trade-Investment Promotion Agency (KOTRA).
KOTRA will also open a KBC in Accra, the capital of Ghana, on Friday, followed by one in Douala, the largest city in Cameroon, in September.

The total number of South Korean business support centers in Africa will be brought to seven this year after the opening of the three KBCs.

“Africa had long been regarded as a subject of one-sided assistance and not a business partner due to years of civil wars, famine and diseases, but with a reduction of armed conflicts and strong economic growth that has stayed above an annual average of 5 percent since 2004 the region is now becoming a new trade partner,” KOTRA said.

KOTRA noted the African continent may become one of the world’s largest markets in the future with over 800 million people living in the 48 countries south of the Sahara Desert.

Africa’s imports jumped more than two-fold from US$154 billion in 2004 to $324 billion in 2008, recording annual growth of over 20 percent, it said.

In 2009, South Korea shipped $9.62 billion worth of products to African countries, only about 2 percent of its annual exports.

“Africa is also becoming very important as a future source of energy for our country as the region has the world’s third largest reserves of oil and the world’s fourth largest reserves of natural gas,” KOTRA said.

After seeing the growth and progress that China has made in Africa, South Korea is following in the same footsteps as its Asian neighbor by increasing its economic footprint on the continent.  This is mainly due for a need for new markets as demographically, growth at home and in Asia will slow down as more and more people age faster than anywhere else in the world, except for Europe.  Targeting a region that has economic upside, a growing middle class and young workers is the right recipe for South Korea to maintain stable growth.