Month: May 2012

Brazil seeking to increase arms exports to Africa

Brazil is expanding its arms sales and presence in the African arms market.

Brazilian manufacturer Embraer is having more success in Africa than in the United States with its winning light aircraft Super Tucano, which is challenging rivals’ market share in the category.

Embraer’s only deal for the turboprop in the United States collapsed last month after the U.S. Air Force unexpectedly canceled an order for 20 planes to support operations in Afghanistan.

It also dashed hopes of a resulting manufacturing plant creating U.S. jobs in an Embraer partnership with independent defense manufacturer Sierra Nevada Corp.

The cancellation created a diplomatic furor that cast a shadow on Boeing’s bid to win a multibillion fighter jet contract in Brazil.

While the Air Force Super Tucano goes through the motions of diplomacy and commercial rivalry, amid U.S. official assurances the aircraft may still win the deal, Embraer is using its substantial marketing resources and financial incentives to secure customers elsewhere.

The EMB 314 Super Tucano, also known as ALX or A-29, is a machine made for financially strapped armed forces, defense analysts said, citing its competitive upfront outlay and running costs.

A turboprop aircraft designed for light attack, counterinsurgency, close air support and aerial reconnaissance missions in low threat environments, the Super Tucano is also good at providing pilot training.

Embraer’s success so far lies in the plane’s low cost of $9 million-14 million apiece and operational costs of $430-$500 an hour — factors that drew the Air Force to the aircraft before the deal got snarled up in controversy with rival U.S. manufacturers.

Embraer said it booked $180 million in orders for the Super Tucano to be deployed in counterinsurgency and border missions in Angola, Burkina Faso and Mauritania.

The aircraft is used by the Brazilian air force in similar roles in the Amazonian border region, where Brazil faces drug trafficking and illegal immigration.

Burkina Faso already has received three aircraft for border patrol missions, Embraer said. Another six will be supplied to Angola’s air force, three of them this year.

Details of the Mauritanian order, due for delivery next year, weren’t immediately available. It was also not clear if the three African countries paid the same price. With the total number of aircraft unknown, defense analysts said they remained unclear about the price paid by each of the countries for their aircraft.

The Super Tucano was a star exhibit at the just ended FIDAE defense and air show in Santiago, Chile.

Embraer Defense and Security President Luiz Carlos Aguiar said, “The Super Tucano is highly efficient and presents low operating costs.

“Its capability for surveillance and counter-insurgency missions makes it ideal for service on the continent of Africa.”

Brazilian government support has helped Embraer score successes in markets that would be inaccessible to U.S. rivals because of congressional constraints and administration policies on qualifying recipient countries for U.S.-made military equipment.

The African arms market is gradually expanding every year. With weapons buyers like Algeria, Egypt, Morocco, to name a few, the sector looks attractive to foreign sellers whether they’re from Russia, Europe, the U.S. and now Latin America in the case with Brazil.

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Atlas Accord Relationships


From Mali, West Africa, features a story on the strength of military relationships, with COL Reggie Sanders, co-director of Exercise Atlas Accord. The Atlas Accord is an annual exercise that brings together more than 300 U.S Army personnel, Military members and seven nations. Atlas Accord 2012 focused on enhancing air drop capabilities and ensures effective delivery of military resupply materials and humanitarian aid. African troops learned how to secure a drop zone in adverse conditions.

U.S. clothing chain the Gap to open stores in South Africa

Famous U.S. clothing chain and brand the Gap to open first stores in South Africa.

Gap Inc. is opening its doors to Africa. On Tuesday, the U.S. clothing chain unveils its first store in South Africa, in a swanky mall here. Another store will open in Cape Town this month, followed by Pretoria, the country’s political capital, later in the year.

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Executives see the openings as a steppingstone onto a continent where the average economic growth is faster than 5% and the average age is 19—a nice fit for a chain catering to the young and hip at subluxury prices.

At a launch party Monday night, guests sipped from champagne flutes next to a “Hello South Africa” banner. Models clad in Gap denim worked the crowd while a DJ played techno music. Personal shoppers were on hand to assist consumers.

“The next big market for us is Africa,” Stefan Laban, the head of Gap’s franchise business, said at a rack of pink kids’ leggings at the Sandton-district store. “There is an emerging middle class and more and more tourism here.”

Gap’s expansion in Africa comes as the company is opening outlets in other emerging markets and closing stores in North America. The San Francisco company has struggled in the U.S. and Canada, where the company’s sales fell a combined 5% for the year ended in January. Elsewhere, sales rose 11%. The company opened its first store in Panama in February and plans to expand in Colombia, Uruguay and Peru over the next two years. A Lebanon shop is slated for this year.

Gap is entering South Africa following research that began around when the country hosted the World Cup in 2010. The company opened its first stores in Morocco and Egypt last year. Gap’s shares rose 69 cents, or 2.7%, to $26.08 at 4 p.m. Monday on the New York Stock Exchange, just off their 52-week high.

Gap in South Africa has a partnership with Stuttafords department stores, which have been selling Gap items since 2007. Stuttafords will be Gap’s franchise operator in South Africa.

Mr. Laban said Gap has received inquiries from other prospective operators in Africa but that it will be at least a couple of years before the clothier ventures beyond South Africa, the continent’s largest economy. Nigeria, for example, has a large pool of consumers and a faster-growing economy but lacks South Africa’s mall culture.

Gap isn’t the only clothing retailer moving into South Africa. Spain’s Zara, owned byInditex SA, opened its first South Africa store at the end of last year in the same mall where Gap is making its debut. Luxury retailers Gucci and Cartier also have boutiques in the mall.

Other consumer-goods companies also are seeking to tap a growing middle class, the highest-profile deal being Wal-Mart Stores Inc.’s acquisition last year of a majority stake in South African retailer Massmart Holdings Ltd.

For Monday evening’s party, Gap invited about 200 South Africa trendsetters. Guests sorting through pink skinny jeans and Gap-emblazoned T-shirts were served trays of sushi and, in a country where whiskey is popular among the aspiring middle class, Johnny Walker Black Label.

Gap research indicates that Joburgers favor a relaxed look, company executives said. “Our brand of casual American lifestyle is a good match,” Mr. Laban said.

The trick was finding the right blend of apparel in a reverse climate to that of the Northern Hemisphere. In the Sandton store, shoppers can buy the same spring line that’s on the racks in London or New York but also find pieces from last’s fall’s selection. That pattern will continue, Mr. Laban said.

Gap owns and operates its own stores in several markets, including North America and China. For other regions, including South Africa, it runs a franchises with local partners.

One of South Africa’s disadvantages is high import duties, Mr. Laban said. Since all clothing must be imported, a pair of jeans can be less expensive in the U.S. than in South Africa.

“We will do Gap here first and then think about the next phase,” he said, alluding to the possibility of bringing the company’s other brands, such as Banana Republic.

The investment comes after the Virgin Brand owned by British billionaire Richard Branson intends to open new clubs throughout South Africa. With a growing middle class throughout the continent, the retail sector will gradually expand to meet the growing demand by African consumers. The return on investment is too high to pass up for any company looking to expand, and increase revenue.  Looking to Africa simply makes business sense.

Standard Bank intends to take advantage of China-Africa trade-economics ties

With growing trade between Africa and China, Standard Banks aims to take advantage of the growing economic links between both sides.

Standard Bank Group Ltd. is seeking to benefit more from the growing trade and investment between China and Africa, expanding its Africa business and looking for ways to cut spending outside the continent, it said Thursday.

“The biggest opportunity, the fastest growing opportunity, is the burgeoning Sino-Africa trade and investment relationship,” Deputy Chief Executive Sim Tshabalala said in an interview.

Standard Bank, Africa’s largest lender by assets, said earlier this year that it would realign the bank to put more resources in Africa while reducing businesses outside the continent that don’t feed into the Africa growth goal.

In 2009, China passed the U.S. to become Africa’s biggest trading partner. In 2011, Standard Bank estimates merger-and-acquisition activity from China on the continent totaled $5 billion, of which the bank said it advised on about 30%. Mr. Tshabalala said he expects investment from China to grow further in 2012 with a number of deals already in the pipeline that should be announced this year.

The Industrial & Commercial Bank of China Ltd. is a 20% shareholder in Standard Bank, with the latter aiming said to benefit more from that relationship.

Reducing balance sheets outside the continent will be “gradual,” said Jacko Maree, the bank’s group chief executive. In 2011 Standard Bank sold a majority stake in its Argentina operations to Industrial & Commercial Bank of China for $600 million. The sale is still in progress and subject to some regulatory approvals. The bank also completed a stake sale in Troika Dialog Group in Russia, for which it received an upfront consideration of $372 million.

“Where we get opportunities to shed investment bank or universal opportunities outside Africa, we will,” Mr. Tshabalala said.

As part of the bank’s aim to grow business with Chinese companies doing deals in Africa, it said it would increase its presence in Beijing and downsize in Hong Kong.

Recent Africa-China deals that Standard Bank advised on include the $1.3 billion Africa-focused miner Metorex Ltd. sale to Chinese nickel company Jinchuan Group Co. The bank also advised on the 25% stake sale of South Africa’s Shanduka Group to China’s sovereign-wealth fund China Investment Corp. for 2 billion South African Rand ($263.4 million), completed in December.

On Thursday, Standard Bank reported that net profit for 2011 rose 23% to 13.27 billion rand from 10.77 billion rand.

With the emergence of China as the worlds economic growth engine, there many opportunities to take advantage of. This is another sign of the growing importance that Africa will have economically.

White House Honors Africans in the Diaspora


3  recently honored African leaders at the White House as Champions of Change honorees. The honorees are Teddy Ruge, co-founder of Project Diaspora, Tsehaye Teferra, founder and CEO of the Ethiopian Community Development Council, and Semhar Aria, is founder and Executive Director of DAWN, the Diaspora African Women’s Network.