FT SPECIAL REPORT

The New Africawww.ft.com/reports | @ftreportsMonday October 6 2014

Inside

Political failure isthe biggest threatCitizens are increasinglydisillusioned withdemocracyPage 2

Civil rights andliberties declineA gay rights clampdownhas extended to mediaand oppositionPage 4

African real GDP per capita

Source: Angus Maddison, Conference Board FT Graphic: Kripa Pancholi * Geary–Khamis Purchasing Power Parity adjusted dollar

1990 GK PPP $*

800

1000

1200

1400

1600

1800

2000

2200

1950 55 60 65 70 75 80 85 90 95 2000 05 10 13

1950Algeria

Morocco

Ghana

Nigeria

Angolia South Africa

Ethiopia

Sudan

Egypt

Tunisia

3,676

1,365

6,525

1,115

5,612

2,535

4,509

910

1,523 8212,3471,122

4.414

1,455

1,697

1,052

2,100

753

1,134

390

Real GDP per capita1990 GK PPP $*

2013

1957Ghana’s independence launches wave of decolonisation southof the Sahara

1967Start of three-yearcivil war in Nigeriaover Biafra secession

1975End of Portuguese African empire leaves decolonisation almost complete

2001African Union replaces discredited Organisation of African Unity

1994First all-race elections in South Africa. Massacres in Rwanda

2005G8 agrees to cancel African debt, promises doubling of aid

Growth accelerates

Continental shiftDespite a history punctuatedby many setbacks, Africais experiencing a periodof sustained growth

Lower cost handsetsboost internet useMobile phones open upopportunities in health,finance and educationPage 5

Banking expansionExpanding sector drawsinterest from investorsPage 7

Legend never had it that there would bediapers, foam mattresses, tampons andbottled water at the end of the rainbow.But private equity firms investing inAfricahavebeenusing thespecial finan-cial alchemy at their disposal to turnjust this kind of humble householdgoods intopotsofgold.

Over the past decade and more, spe-cialist private equity funds have playeda significant role in dispelling the popu-lar myth among investors that the onlyreal money to be made in Africa is fromthe continent’s natural resources: its oil,diamonds,goldandotherminerals.

Thecommodityplayisonlypartofthestory for an asset class that has provedwell placed to tap into poorly servedAfrican markets at a time of rapid eco-nomic growth and strong demand for allmanner of products and services amonganexpandingmiddleclass.

“This whole idea that you can investin anything other than resource compa-nies and big Nigerian banks has beenvery much private-equity led,” saysRuna Alam, chief executive of Develop-ment Partners International, a London-based private equity firm that special-ises inAfrica.

The African Private Equity & VentureCapital Association (AVCA), which MsAlam chairs, estimates that after a dec-ade and a half of growth in the industry,private equity firms now have assetsunder management in Africa worth$25bn.

New fundraising was up 136 per centyear on year in 2013 to $3.3bn, repre-senting a steady recovery in the after-math of the global financial crisis. Thiscompares with $4.7bn in 2007, when theindustry achieved its first peak on thecontinent.

The specialist funds that havedominated so far are being joinedby some of the big global private equityoperators, for which until recentlythe continent was scarcely betterdefined than a 16th-century map – a

vague outline with lots of blank space inbetween.

The Carlyle Group of the USannounced a $700m close this year onits $500m-target maiden African fund.Other big groups have also been eyeingnew African deals, including KohlbergKravis Roberts, Warburg Pincus andBlackstone, which in August announceda $5bn partnership with Aliko Dangote,Africa’s richest man, to invest in power,transmissionandpipelineprojects.

Their enthusiasm is predicated on

fast-growing economic output, whichcontinentally has risen almost fourfoldsince 2000 to more than $2tn. It is alsounderpinned by the kind of returns thatthespecialistprivateequitygroupshavebeenmakingonthecontinent.

According to analysts from consul-tancyEYwhopreparedarecentstudyofthe sector, private equity funds invest-ing in fast-growing African economiesare significantly outperforming estab-

lishedmarketsandachievingreturnsonexit comparable to China and LatinAmerica.

“If you have a good and profitablecompany in Africa, you can sell it. Thatwasn’t clear in 2000 when we started,”Hurley Doddy, co-chief executive ofEmerging Capital Partners, another pio-neering firm, said at a recent conferenceon private equity in Lagos, Nigeria’scommercialcapital.

Mr Doddy’s firm has made 56 invest-ments on the continent in a broad rangeof sectors, including rubber and sugarcompanies, restaurant chains, utilities,financialservicesandtelecomtowers.

Recently, the group achieved a recordlisting in Tunisia for personal care com-pany Société d’Articles Hygiéniques.Thefundearnedreturnsworth2.4timesof its investment in local currency termsand1.6 indollars,MrDoddysays.

At the heart of many of such deals areAfrican professionals with an ability,born of local and global experience, totriangulate between western and Asiancapital and local opportunity, sniffingout themost lucrativedeals.

“This is no different from Asia andLatinAmericaatatimewhenyouhaveagood cadre coming out of top businessschools with the skill sets to do globalstandardwork,”saysMsAlam.

She refutes the idea there is too muchmoney chasing too few deals. Rather,she says, there is a huge supply of com-panies, many of them family-owned,that are looking for outside capital toexpand to the next stage. The key tofindingthemistobuildupnetworksandlocalknowledgearoundthecontinent.

Ms Alam says: “The reality is that inthe first fund [DPI raised], we looked at510 deals to do nine investments. Sincethesummerof2013,wehave invested intwo deals, another three are in the pipe-lineandwe[have]workedonmorethan250.”

To date, the most common means ofexiting is through a sale to corporates.According to research by AVCA, 44 percent of exits were achieved this way, ofwhich three-quarters were throughsales tostrategicbuyers intheregion.

There is also a growing number of sec-ondary buyouts taking place betweensmaller African funds and larger pan-African vehicles, according to analysts.This trend that is strengthening, as thebigglobalprivateequityfirmsstepin.MsAlam expects this to be complementedby more listings, which in turn will helpdeepenAfricancapitalmarkets.

Investors discover routes toriches beyond commoditiesPrivate equity

The success of specialistfunds investing in consumerproducts companies isencouraging global groups tomake their own deals,reportsWilliam Wallis

Local knowledge is key: Runa Alam

F rom Senegal to Kenya andfrom Morocco to Mozam-bique,Africa isenjoyinganeraof economic promise that hassurvived war and famine, dic-

tatorshipandcorruption.Afterstagnating for twodecades,Afri-

can gross domestic product per capitahas surged almost 40 per cent since2002 as the continent enjoys a period ofrobust economic growth unparalleledsince the decolonisation cycle of the1960s and 1970s. A virtuous circle ofhealthygrowth inthecontinent’secono-mies – supported by high commodityprices and cheap Chinese loans – andimproved governance have led to a newchapter thatmanycall“AfricaRising”.

By and large, the military remain intheir barracks: democracy, even ifimperfect,hasspreadthroughtheconti-nent and has seen the rise of an increas-inglypowerful independentmedia.

The new dawn has lifted Africa’s pro-file, attracting billions of dollars in for-eign investment. With a pool of youngtalent, fertile land and abundant com-modities, many hope that Africa could,at the very least, play a larger role inglobalbusiness.

Still, the journey to fulfil those hopesremains tortuous: corruption remainsrampant and governments are doing

very little to build institutions for thelong term. The media are under attackin many countries and some politiciansare trying every trick in the book toextend their mandate beyond the legalterm.

Economic growth, even if robust,

remains unequal, with poverty andunemploymentontherise.

Meanwhile, the demands of an impa-tient young population – which hasalready reached 1bn and could expandto a worrisome 4bn by the end of thecentury – are growing by the day, in part

spurred by the increased use of mobilephonesandsocialmedia.

Christine Lagarde, managing directorof the International Monetary Fund,captured the dichotomy at a recentmeeting of African officials. She saidthat it was undeniable that Africa was

Inequalities mar continent’s riseForeign investment inthe regionmay behitting record highs butsocial disparity andcorruption remain rife,writes Javier Blas

High hopes: cranes help to erect buildings in Luanda’s business district. Economic growth in Africa, however, remains unequal and poverty is on the rise — Bloomberg

enjoying one of its best periods. But sheadded that there were many challengesto resolve. “Africa Rising is the ‘goodnews’partof themessage;AfricaWatch-ing is thesecondpart,”shesaid.

Africa, therefore, appears to be at acontinuedonpage4

‘If you have a profitablecompany in Africa, you cansell it. That wasn’t clear in2000 when we started’

Growth accelerates onthe continentResearch shows percapita GDP has soaredsince the mid-1990sPage 3

2 ★ FINANCIAL TIMES Monday 6 October 2014

The New Africa

Kohlberg Kravis Roberts’ first Africainvestment served to highlight ananomaly.

One of the world’s leading privateequity firms, with $98bn in assets undermanagement, KKR made a $200minvestment in an Ethiopian companythat grows roses for the global market.The June move saw it joining otherglobal funds in putting the west’spension money to work in fast-growingAfrica.

Yet, outside South Africa, most Afri-can pension cash continues to shun pri-vate equity opportunities on the conti-nent.

Kenneth Kaniu, chief investmentofficer at Stanlib, says: “Pension assets[inAfrica]are increasingatarapidpace,but in terms of finding investmentopportunities they are not keeping upand regulation is not as supportive as wewould like.” His company managesassets for 60 Kenyan pension funds andis keen to place money with privateequityfunds.

Insiders say African pension fundsmiss out not because the continent isfailing to save for its future – sub-Saha-ran pension funds total more than$350bn – but because of a nightmarecombination of regulatory hurdles, hes-itant trusteesandpoor incentives.

In Nigeria the situation is stark: itinvests just 0.22 per cent of the $26bn ofpension assets in private equity, accord-ing to the National Pension Commis-sion,Nigeria’spensionsauthority.

Back in Kenya, Mr Kaniu says: “Mostpension fund trustees tend to be veryrisk averse. They just stick the money ingovernmentbonds.”

Some investors argue that, as a result,pensioncash iswastingawayinsolidbutshort-term, low-growth investments.Like their counterparts across the conti-nent, Kenya’s 16 pension fund managershave historically put their share of thecountry’s growing pensions pot intosafe, traditionalassets.

Kenya’s pension investments stand at$7.8bn, up 10-fold in the past decade

and27percentyearonyearat theendof2013, according to the country’s Retire-mentBenefitsAuthority(RBA).

More than one-third of Kenya’s pen-sion assets are invested in governmentdebt, a quarter in equities listed on itsdomestic stock market and a smallamount in property, the odd sizeablecorporatebondandcash.

The last time a Kenyan pension fundmade a private equity investment was inthe 1990s. Kenya revamped its rules in1997,butunlikeSouthAfrica–whosecol-lective pension pot is among the 10 larg-est in the world, according to OECD data– it had not, until recently, allocated anypensionmoneyforprivateequityfunds.

This year, however, the Kenya PowerPension Fund received regulatoryapproval to invest$4mwithAscentCapi-

tal, a new regional private equity fundthat will back companies in Ethiopia,Uganda and Kenya. Henry Kyanda,Kenya Power Pension Fund trustsecretary, acknowledges it is a smallsum,butsays it isasignificant first step.

“Investing in private equity funds is anew concept in our market,” says MrKyanda, who hopes allocations to pri-vate equity will soon grow to 10 per centof thefund, themaximumallowed.

At the moment, private equity fallsunder an umbrella asset class named“other”, which attracts the 10 per centcap (though take-up is near zero) andrequires specific regulatory approvals.

But the RBA wants to approve privateequity allocations under a separateasset class that can comprise a maxi-mum15percentofapensionfund.

Pension fund investors hoping to tapprivate equity with its promise of highreturns are keen to see the proposedchange.

Private equity investors committed toinvest $3.58bn in Africa last year. Thereis strong potential for more growth asfamily businesses seek capital toexpand. Development finance institu-tions want to back job-creating compa-nies and canny fund managers are find-ing ways to ride the region’s middle classexpansion via equity stakes in retail andotherservicecompanies.

But it will not be easy. Pension fundswork to long time scales, but board trus-tees tend to see things differently, saysRick Ashley, investment adviser andformer chief executive of Old MutualAsset Management in east Africa. “Partof it is short-termism from trustees.They want to see returns on their watchandtobere-elected,”hesays.

Mr Kaniu adds that many trustees arereluctant to seek regulatory approval toinvest inprivateequity.

Some pension funds hope regulatoryoverhaul and training workshops willdo the trick, while others believe theycan spare trustees the time, expertiseand responsibility in choosing a singleprivate equity fund by setting up a pan-continental fund of funds to target pen-sioncash.

“[Most fund managers] don’t want toput their necks on the line at the risk ofunderperforming, in case it ruins theirrelationship with trustees,” says MrAshley. “But it’s a new asset class, soobviously itwill takeawhile.”

Private equity remains ararity in pension portfoliosInvestment

Growth is hampered byregulatory hurdles andtrustee reluctance, writesKatrina Manson

After work: pension experts say scheme members need higher returns — AFP

T he last time there was thislevel of sustained optimismabout Africa was when thecontinent’s many partsbegan breaking free from

colonial rule. The economic revival hasunleashed a wave of creative energy,inspiringhope.

A deadly epidemic of the Ebola virushas provided a reminder of how unfore-seen crises can stall the momentum. Butarguably now, as in the 1960s, it is thefailure of political systems that repre-sent the greatest threat to the renais-sancecurrentlyunderway.

On paper it does not look that way.Statistically, the coups, wars and dicta-torships once symptomatic of a politicalmalaise in many corners of sub-SaharanAfrica, occurred largely in the 40 yearsprecedingthemillennium.

With some exceptions, the past dec-ade and a half has been relatively peace-ful. Constitutional rule – or somethingapproximating it – isnowderigueur inallbut a handful of African states. A coup isincreasingly difficult to pull off in theface of international and regional meas-ures to isolaterogueregimes.

Even the stubborn survivors of thecold war era, such as the nonagenarianZimbabwean president Robert Mugabe,feel obliged to go through electoralmotions. It is tempting to think thateven the most entrenched autocracieshave been cajoled into more liberalbehaviour. Undoubtedly, in the age ofmobile phones and the internet, it ishardertosilencecritics.

Yet, there is a sense of disenchant-ment creeping across the continent atthe evolution of multi-party politics andthe performance of the governments itthrowsup.

In a good number of states, voting hassimplyaddedtrappings toamodernisedform of one-party rule, where incum-bent regimes use patronage, the controlof electoral machinery and oppressiontomaintainpower.

In others, there is the onset of a “dem-ocratic recession”, where recent gains,including the imposition of two-termlimits for presidents, have been rolledbackorsooncouldbe.

Even in some trailblazers, suchas Ghana, where democratic institu-tions have been entrenched, there is

disappointment at the inability of suc-cessive administrations to foster moreegalitariandevelopment.

“There is deep distrust of politiciansbut equally there is a feeling thatdemocracyhasnotdeliveredbettercon-ditions and opportunities for many peo-ple,” says Samia Nkrumah, daughter ofGhana’s late independence leaderKwame Nkrumah and a political leaderinherownright.

“Wearenotat theArabspring.Wecan

cast our votes freely when it is time forelections,” she says, alluding toadvances that helped prevent contagionsouth of the Sahara in the wake of northAfrica’s popular revolts. “But the dis-content is there and it is simmering,”shesays.

According to Afrobarometer, theindependentpollster,nearly threequar-ters of Africans polled for a 2014 surveyexpressedcommitmenttodemocracy.

The discontent of which Ms Nkrumah

speaks is explained partly by a “deficitofdemocracy”notedbyAfrobarometer,in which popular demand for demo-cratic rule greatly exceeds the amountthatelitesarewillingtoprovide.

Nigeria, the continent’s leading econ-omy and most populous nation, whichfaces a tense electoral contest nextyear against the backdrop of a brutalIslamist insurgency, provides one suchexample.

In a recent speech to a cross-partygathering, Patrick Dele Cole, a former diplomat and founding member of theruling People’s Democratic Party,warned that Nigeria is facing its greatestthreat to national security since the1960s. “The failures of our political sys-tem and the social instability it has cre-atedare thecause,”hesaid.“Thethreatscome from within. They are driven byour own internal divisions. By ethnicityand by religion. By corruption and bygreed. The politics that overlay theseissues . . . must also be the solution,” hesaid.

It is unclear, however, where the

momentum might come from. Com-pared with a decade ago, there are farfewerstandoutreformers inoffice.

“The ability of these political beasts tochew us up and spit us out is impres-sive,” says John Githongo, the formeranti-corruption tsar in Kenya, who wasdriven into exile before returning as acivil societyactivist.

“We have world-class artists, comics,writers, but then we have a Stone Agepolitical class. Our model of politics isn’tproducing the leadership that can bringdevelopment beyond GDP growth,” hesays.

As the average age of Africans getsyounger, the pressure for change isgrowing. In the worst instances, this hasled to renewed conflict as young menunrepresented by the system and withfew opportunities are driven into thehandsof Islamistextremists.

In a more optimistic scenario it is thisgeneration that will restore momentumtowards more accountable rule. “Thereare a lot more young people who will bevoting. And they have more energy andvimandwillbe lesswillingtotakethingsas theyare,”saysMsNkrumah.

The failure ofpolitical systemsis biggest threatto renaissance

Government Citizens are increasing disillusionedwithwhat democracy delivers, saysWilliamWallis

Ghana: seen as a democratictrailblazer on the continent – Getty

Popular demand fordemocratic rule greatlyexceeds the amount thatelites are willing to provide

‘Pension fund trustees tendto be very conservative interms of risk appetite’

Monday 6 October 2014 ★ FINANCIAL TIMES 3

The New Africa

African real GDP per capita

Source: Angus Maddison, Conference Board FT Graphic: Kripa Pancholi * Geary–Khamis Purchasing Power Parity adjusted dollar

1990 GK PPP $*

800

1000

1200

1400

1600

1800

2000

2200

1950 55 60 65 70 75 80 85 90 95 2000 05 10 13

1950Algeria

Morocco

Ghana

Nigeria

Angolia South Africa

Ethiopia

Sudan

Egypt

Tunisia

3,676

1,365

6,525

1,115

5,612

2,535

4,509

910

1,523 8212,3471,122

4.414

1,455

1,697

1,052

2,100

753

1,134

390

Real GDP per capita1990 GK PPP $*

2013

1957Ghana’s independence launches wave of decolonisation southof the Sahara

1967Start of three-yearcivil war in Nigeriaover Biafra secession

1975End of Portuguese African empire leaves decolonisation almost complete

2001African Union replaces discredited Organisation of African Unity

1994First all-race elections in South Africa. Massacres in Rwanda

2005G8 agrees to cancel African debt, promises doubling of aid

Growth accelerates

Continental shiftDespite a history punctuatedby many setbacks, Africais experiencing a periodof sustained growth

“Where are the jobs?”The question wasraised by a PhD stu-dent during a meet-ing this year of Afri-

can finance ministers and central bankgovernors.

The officials were busy praising them-selves for the virtuous circle of growthand better governance that becameknown as “Africa Rising”. But thestudent, echoing the views of manyothers of his generation, was anxiousto know when – or even, if – thegrowth would eventually translate intoemployment.

Sub-Saharan Africa is growing fasterthan at any time since the decolonisa-tion period of the 1960s and 1970s, withthe support of relatively high commodi-ties prices, cheap finance from Chinaandtheemergenceofamiddleclass.Butthegrowthhasbeen,andstill is,unequaland has been accompanied by few newjobs.

Take Nigeria, the largest economy onthe continent. According to the Interna-tional Monetary Fund, the unemploy-ment rate has risen steadily from 14.8per cent in 2003 to about 24 per cent in2011 inspiteofstronggrowth.

The figure masks a more worryingstatistic for youth unemployment,which is running at 56 per cent. Anec-dotal evidence suggests the picture issimilar in other large African econo-mies.

Amadou Sy, a fel low at theBrookings Institution and formerofficial at the IMF, explains that over thepast 10 years, sub-Saharan Africa hasgrown by 5 per cent a year. “Sadly,this rapid rate of growth has notbenefited the largest share of thepopulation,” he wrote this year in aresearchnote.

When people in sub-Saharan Africando find a job, it is often in the informalsector. Africa has the highest propor-tion of so-called vulnerable employ-ment (defined as either self-employ-ment or work by contributing familymembers) of any region in theworld accounting for 77.4 per cent ofthe total labour force, according to theInternational Labour Organisation(ILO).

Persons in vulnerable employmentare more likely than salaried workers

to have limited or no access to socialsecurity.

Jobs matter, especially in Africa,because many businessmen are bettingon the phenomenon known as the“demographic dividend” – the idea thateconomic growth in a country is relatedto an increase in the relative size of itsworking-age population, as was the caseinAsia from1960-2010.

In Africa, the working-age population

is set to increase rapidly over the nextfew years. But if jobs are not created,socialunrestcouldfollow.

Over the past two years, other coun-tries with high unemployment, includ-ing Brazil and Turkey, have seen peopletake to the streets in protest againsttheirgovernments.

Rising unemployment in Africa hasits roots in several factors: slower-than-needed growth; unequal economicexpansion; lack of industrialisation; andinadequateeducation.

Unless the region resolves these prob-lems, analysts and officials believe that

unemployment could wreak havoc onthecontinent,bringingsocialunrest.

While Africa has enjoyed a renais-sance, growth has fallen short of the“economic miracle” of Asia. As a whole,the region has missed the 7 per cent ayear target that guarantees that the sizeof theeconomydoubleseverydecade.

According to the IMF, sub-SaharanAfrica has grown faster than 7 per centonly on two occasions since 1980 – in2002and2007.

By contrast, the developing region ofAsia managed to maintain a minimumof 7 per cent growth a year on 18 occa-sions, while China was able to grow atthat rate, or even faster, in 32 out of thepast34years.

Worse, analysts say that rising ine-quality is playing a significant role inkeeping large chunks of the nascentmiddle class vulnerable to slipping backinto poverty while, at the same time,feathering thenestsof those thatare thewealthiest.

In Africa, inequality is holding backthe number of poor people who enterthe ranks of the middle class. While eco-nomicgrowthonthecontinenthasaver-aged 5-6 per cent over the past decade,the size of the upper middle class – thoseearning$10-$20perday–hasgrownatarateof less than2percent.

A key source of salaried jobs – themanufacturing sector – has been indecline even while Africa has enjoyedrobust, ifnotstrong,growth.

Over the past two decades, the shareof manufacturing in sub-Saharan Africahas fallen, according to the BrookingsInstitution, in sharp contrast to Asia,which has become the world’s work-shop, thanks to a combination of skilledlabourandlowsalaries.

Industry executives and officials offerdifferent reasons for the lack of manu-facturing, including electricity short-ages, red tape and poor infrastructure.But there is agreement that the low levelofeducation isplayingabigrole inkeep-ingAfricaatadisadvantagetoAsia.

The ILO says “widespread under-qualification” is making Africa’s unem-ployment problem worse. Take theexample of Malawi, one of the poorestcountries in the region. The ILO saysthat data from school-to-work transi-tion surveys show that 82 per cent ofstudentswereunderqualified.

Job creation critical toprevent social unrestEconomics Growth is not translating into employment, writes Javier Blas

Youth joblessness: cause for concern

Low level of education isplaying a significant role inkeeping Africa at adisadvantage to Asia

4 ★ FINANCIAL TIMES Monday 6 October 2014

ContributorsJavier BlasAfrica editor

Shawn DonnanWorld trade editor

Andrew EnglandSouthern Africa bureau chief

Katrina MansonEast Africa correspondent

William WallisAfrican affairs writer

David WhiteFT contributor

Michela WrongFT contributor

Emma BoydeCommissioning editor

Steven BirdDesigner

Chris LawsonPicture editor

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All FT reports are available on FT.com atft.com/reports

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The New Africa

crossroads – it has enjoyed a good run,but the future looks less certain as eco-nomic headwinds blow stronger. A signof the changing landscape is the annualIbrahim Index of African Governance,published by the foundation of Sudan-born businessman turned philanthro-pist Mo Ibrahim. The index, publishedlastmonth, showsadecline instandardsof governance in 2013, breaking years ofimprovement.

Mr Ibrahim says the result is a call forwhat he calls an Afro-realist approachthat “tempers historical Afro-pessi-mism and current Afro-optimism”.Many share his view, warning of thedangers of taking a “one-size-fits-all”approach in a continent as diverse asAfrica.

So far, the positive narrative of “AfricaRising” has prevailed, led by investorswho have seen in the continent a newfrontier forcapitalism.

The African Development Bank(AfDB) estimates that this year the con-tinent will attract a record of nearly$85bn in foreign inflows, surpassing the2013 peak. Portfolio inflows, whichinclude equity and bond investments,are expected to rise to a record $24bn.As recently as in 2001-03, Africa wasregistering negative portfolio flows, asinvestors withdrew money from whatmanythenstill calledthe“hopelesscon-tinent”.

State-owned funds such as Temasekof Singapore and China Investment Cor-poration, large banks such as Citigroupand Barclays, and multinationals suchas Nestlé and Unilever are pouringmoneyintothecontinent.

The Carlyle Group recently closed itsmaiden private equity fund for Africa at$700m, 40 per cent above target. Mean-while, its rival Kohlberg Kravis Robertsmade its debut in the region with aninvestment in Ethiopia. Institutionalinvestors are following, allowing Afri-can governments and companies toraise equity and debt at prices that onlya decade ago would have been unthink-able.

The billions of dollars in investmentmask a more important shift: foreigninvestors, who long considered Africaonly as a source for natural resourcessuch as coffee, crude oil, copper andcocoa, now also see it as an emergingsource of demand for manufacturersandservices.

Slowly, a middle class is emerging andsupermarkets are beginning to replacethe ubiquitous informal shops and mar-ket places. True, the new middle class isfragile, with many barely above the pov-

erty level, but it is growing. The AfDBestimates that Africa’s middle class,which numbered just 115m in 1980, hasgrown to more than 325m in the pastthreeandahalfdecades.

But it is precisely in the same middleclass that the sense of “Africa Watching”emerges. Jobs are lacking for a moreeducated generation, restless for oppor-tunity. Fast economic growth is nottranslating into improved livelihoodsfor the majority. As Donald Kaberuka,president of the AfDB, puts it when hewants to temper the optimism of manyAfrican leaders, “you can’t eat GDP”. In-stead,rapideconomicgrowthis inmanycountriessimplyfatteningtherich.

The new middle class, more educatedand with easy access to social media, isalso a source of political disillusion-ment. Two decades after pro-democ-racy activists won an important battleto include term limits in many coun-tries, there are signs of constitutionaltinkering to allow a host of Africanheads of state to prolong their rule. Andsome countries remain, de facto, one-partydemocracies.

At the same time, religious and ethnicfaultlines are deepening in such placesas Nigeria, Kenya and South Africa. Anddomestic unrest is on the rise, withSouth Sudan and the Central AfricanRepublic facing low-intensity wars, andKenya and Nigeria battling the rise ofIslamist terrorism. Minorities, includ-ing homosexuals, are under attack fromdraconianlaws.

Observers of emerging countries mayhave a sense of déjà vu: after all, bothLatinAmericaandAsiasufferednotablesetbacks in their rise – including theTequila crisis in Mexico in 1994 and thesoutheast Asia crisis of 1997 – that weremere bumps is an upward trajectory.They also recovered from political andsocialsetbacks.

ButAfricaseemsalotmorefragileandsuccess will depend largely on politicalleadership that many observers say istodaysorely lacking.Without it, thepast10 years of economic and politicalprogresscouldbeindanger.

continued frompage1

Inequalitiesmar therise of acontinent

The government of President Paul Kag-ame, who has for years maintained afirm grip on Rwanda’s politics, has builta remarkable record for economicreforms.

As a result, two decades after the gen-ocide that left almost 1m dead, theWorld Bank expects Rwanda’s grossdomestic product to expand by morethan7percent thisyear.

Now the country is embarking on thenext step in its economic development,onethat, if all goes toplan,will completeits transition from a small, poor, land-locked country with a tragic past andfragile neighbours into a regional trad-ingandserviceshub.

In betting on trade as a way forwardRwanda is looking to overcome thedifficult odds presented by its geogra-phy.

“We are known for being landlockedbut we want to become land-linked,”says François Kanimba, Mr Kagame’stradeandindustryminister.

It is also, says Valentine Rugwabiza,Rwanda’s minister for the East AfricanCommunity,playinganumbersgame.

The country may have a population ofless than 12m people, but it sits at theheart of a potential market of 143m con-sumers, shepointsout.

That offers a much more promisingeconomicfuture.

By positioning itself as a regional hubfor everything from financial services toeducationandhealthcare,Rwandahasafar better hope of becoming a middle-income country such as Malaysia oreven Singapore than if it relied on theorganic development of its largelyagrarianeconomy.

“The push here for regional integra-tion is very pragmatic,” says Ms Rugwa-biza, who until September last year wasbased in Geneva where she served as thedeputy director-general of the WorldTradeOrganisation.

One of the first steps has been a pushto ease the movement of goods and peo-ple with two fellow members of the EastAfrican Community, Kenya andUganda.

The presidents of the three countrieslast year agreed to do everything in theirpower to reduce the bureaucratic andother delays at borders that have longplagued overland trade in Africa andoften driven up the cost of simple con-sumergoods.

That effort has delivered results. Itnow takes an average of six days for acontainer to make the overland tripbetween Kigali and the Kenyan port ofMombasa, the route taken by most ofRwanda’sexportsandimports.

In a 2012 study, USAID researchersfound that it took almost 18 days on

average for exports to make the tripfrom Kigali to Mombasa and on to shipsboundfor internationalmarkets.

“In the past year, we have seen moreprogress than in the previous 10 years,”says Frank Matsaert of TradeMark EastAfrica, a body funded by westerndonors including the US and UK thatfocuses on reducing trade barriersbetweenAfricanstates.

“There’s a quiet revolution going onand it will have a profound effect on[eastAfrica’s]competitiveness.”

The gains have come largely by sim-plifying procedures at borders and byfinally implementing regulationsagreed to almost a decade ago by the

Working with the neighbours pays offRwanda

The landlocked nation wantsto make it easier for peopleand goods to cross borders,writes Shawn Donnan

Long haul: it takes six days for goods to reach the port of Mombasa — Bloomberg

S tephen, who used to work foran international develop-ment organisation in Abuja,always knew that as a gayAfrican he was vulnerable.

Nigerian law, drafted on colonial lines,outlawed same-sex relations and thegovernment’s anti-gay rhetoric wasgrowing ever more strident. Nonethe-less, he and his partner drew up long-term plans, approaching investors forloanstobuildaboutiquehotel.

Then, after a tiff with a neighbourover a parking space, one morning hefound himself confronting a Nigerianpoliceman on his doorstep. “Our neigh-bour was standing next to the officer,shouting so everyone in the compoundcouldhear: ‘He’sgay!he’sgay!”

Luckily, the policeman proved moreinterested in the parking dispute thanStephen’s sexual orientation. But at thatmoment, everything changed. “I’dalways known Nigeria wasn’t gay-friendly, but I hadn’t felt directly tar-geted.NowIrealisedIwasatrisk.”

The couple scrapped the hotelproject, applied for consultancy workabroad and left three months later. InJanuary, President Goodluck Jonathansigned a bill introducing prison terms ofup to 14 years for same-sex relations.“We’re so glad, now, we didn’t invest inNigeria,” says Stephen. “In retrospect,that incidentwasastrokeof luck.”

Nigeria is not an exception in theregion. Uganda has also passed a draco-nian anti-gay law (although a court rul-ing has halted implementation). Gam-bia is debating anti-gay legislation andparliamentarians in Tanzania andKenya have called for laws to be mademuchstricter.

Unsurprisingly, a Gallup poll carriedout in August, surveying 100,000 peo-ple in 123 countries, found nearly all thecountries deemed “not a good place” forlesbianorgaysto livewere inAfrica.

Analysts speak of a worrying discon-nect between the optimistic “Africa

Rising”narrativeofrecentyearsandthecontinent’s performance on freedom ofexpressionandhumanrights.

Once seen as a minority concern, theLesbian, Gay, Bisexual and Transgender(LGBT) issue is now regarded by civilsociety and human rights groups as a lit-mus test of the overall relationshipbetweengovernmentanditscitizens.

Governments whose executive griphas been weakened by the devolution ofpowers and multi-party democracy findthe LGBT agenda provides them withone area in where they can demonstratestrong, popular leadership. They aregrabbingthatopportunitywithrelish.

That same impulse is finding expres-sion in legislation aimed at controllingthe media, silencing opposition and cur-tailing the activities of civil society.Reports compiled by internationalwatchdogs track a bevy of Africanadministrations attempting, with vary-ingdegreesofsuccess, tobottle thegenieofpoliticalandpublicdissent.

The independent watchdog FreedomHouse publishes an annual “Map ofFreedom”. Areas judged “free” areshaded green, “partly free” yellow, and“not free” purple. The 2014 reportshows an overwhelmingly purple andyellow patchwork, with only SouthAfrica, Ghana, Benin and Senegalshadedingreen.

The details make uneasy reading. InUganda, on top of the LGBT legislation,Freedom House logs the passage of aPublic Order Management Bill aimed atrestricting opposition, media and civilsocietyactivity.

In Kenya, where the ruling Jubileecoalition has not forgiven civil societyfor backing the International CriminalCourt prosecution of President UhuruKenyatta, a law is being debated thatwould limit the media’s ability to com-mentonparliamentaryproceedings.

Gambia, for its part, amendedits Information and CommunicationsAct and Criminal Code Act to enable

crackdowns on public discussion, whileintroducing a ban on Skype use in inter-net cafés. Zambia’s government uses itsPublic Order Act to harass the opposi-tion, while Tanzania saw a rise in extra-judicialviolencebysecurity forces.

The watchdog concludes: “For sub-Saharan Africa as a whole, all seven cat-egories of political rights and civil liber-ties have declined over the past fiveyears, with the largest decreases infreedoms of expression and associa-tion.”

ReportersWithoutBorders, theParis-based media watchdog, gave a grimoverview of press freedom in Africa inits 2014 report released in February.Predictably, journalists faced the big-gest threats in areas of conflict. Somalia,where 18 reporters have been killed interrorist attacks since 2012, North Kivu

in the Democratic Republic of Congo,and Central African Republic are alllistedasareasofparticularconcern.

But the organisation also singles outforcriticismseveralmulti-partydemoc-racies that traditionally enjoy cordialrelations with western donors. Fivejournalists remain in jail in Ethiopia. InDjibouti, seen as a key ally in the fightagainst Islamic fundamentalism, jour-nalist Daher Ahmed Farah has beenjailed five times and arrested on a dozenoccasionssince2013.

In Burundi, legislation has beenpassed that makes it easier to jail jour-nalists. “The law is all the more disturb-ing forbeingpartofa legislativepackagethat would also restrict freedom of asso-ciation and political expression. West-ern governments do not, however, seemvery bothered by Burundi’s growingauthoritarianism,”saysthewatchdog.

Some analysts see an implicit quid-pro-quo being offered by African lead-ers who feel improving GDP figures per-mit more hard-fisted stances in otherareas. Any such unstated deal isunlikely to wash, given the uneven wayin which the benefits of higher growtharebeingdistributed,withAfricanelites

seen as shoring up their positions as theslums expand. Even if the outcomes ofthe various revolutions to the northseem less-than-happy, the Arab Springdelivered a massive jolt to Africa, dem-onstrating how vulnerable even appar-ently indomitable regimes are whenconfrontedwithconcertedaction.

Jakkie Cilliers, of the Pretoria office ofthe Institute for Security Studies (ISS)warns, though, against imposing west-ern standards on countries at differentstages of their development. “It’s ulti-mately self-defeating. Greater account-ability and eventually democracy iscoming to Africa, though perhaps not atthe speed to satisfy domestic constitu-encies inwesterndonorcountries.”

An ingredient likely to ensure Africangovernments struggle to impose theirauthority, no matter how many lawsthey pass, is technology. The spread ofthe internet and growing popularity ofsocial media make central control farhardertoassert thaninthepast.

Closing a newspaper, which boastslarge offices and a complex distributionnetwork, is one thing. Closing a host ofweb-based political gossip rags that canberunfromlaptopsquiteanother.

Conservatismincreases ascivil libertiesare stifledFreedom to dissent MichelaWrong says gay rightsclampdown has extended tomedia and opposition

Contentious: Uganda has passed a draconian anti-gay law, although a court ruling has halted implementation — AFP

‘We are known for beinglandlocked but we want tobecome land-linked’François Kanimba

Christine Lagarde‘Africa rising is the“good news” part ofthe message–Africa watching isthe second part’

members of the East African Commu-nity that allow customs inspectionsto be carried out wherever goods land.

One-stop border posts have beenestablished and the country’s threepresidents have also declared war onunnecessary weigh stations and checkpointsalongtheway.

The improvements on the Kigali-Mombasa trade corridor have spurredTanzania, another member of the EastAfrican Community, to react. Its gov-ernment has vowed to do what it can toimprove the competitiveness of the cor-ridor fromtheportofDaresSalaamintoKigali, another vital link for Rwanda, asmost of its fuel imports come by thatroute.

But Rwanda’s ambitions do not endwithmakingoverlandtradeeasier.

The 12-year-old state-owned nationalairline, RwandAir, is expanding itsnetwork of flights to other Africancapitals. The carrier may be lossmak-ing, but the goal is to make Kigali a hubfor travel within the continent andamplify its role as a services centre, saysMrKanimba.

“As a country, you can be landlocked.Butyoucannotbe ‘air-locked’,”hesays.

The country is also working withKenyaandUgandatoremovebarriers tothemovementofpeople.

Their citizens can now travel withinthe three countries without passports.Students from all three are treated asnationalsatanyuniversity in theregion.

The government in Kigali has alsosought to ease the conditions for workpermits for professionals in an effort toattract talent from neighbouring coun-tries.

By the end of 2014, the goal is to elimi-nate mobile phone roaming charges.Also under way is a push to reduce non-tariff barriers and establish commonstandards for things such as food andpharmaceuticalproducts.

Rwanda may have had an ugly pastbut these days it is betting that its neigh-bours hold the key to a prosperousfuture.

‘For sub-Saharan Africa as awhole, all seven categoriesof political rights and civilliberties have declined’

Monday 6 October 2014 ★ FINANCIAL TIMES 5

Alongside the traffic-jammed road toNairobi’s airport lies a fast-expandingfactory.ButwhileOrbitChemical Indus-tries’ production of soap, detergents,make-up and packaging are all up inrecent months, there is a twist to thisclassic tale of consumer-fuelled Africangrowth.

The factory produces goods not forone multinational, but several. In aseries of warehouses, products fromColgate-Palmolive, L’Oréal and Unileverareall liningup.

Sachen Chandaria at Orbit says indi-vidual companies find it hard to buildscale, which is why global corporateswould rather contract out their Africamanufacturing than set up their ownfactories. “But having a site like this,where everybody’s volume is in oneplace – everybody benefits from thescale.”

There’s no doubt the model works forOrbit, the contract manufacturer whoseturnover has increased more than five-fold in the past six years, to $100m ayear. “Every one of our customers ismuch larger than they were five yearsago, sixyearsago,”saysMrChandaria.

Some of Orbit’s produce is sold as faraway as Angola and South Africa, andeven in Afghanistan. Its model is anunusual one, but it is one that appears tobe worth emulating. It plans to expandinto brownfield sites in South Africa,NigeriaandEthiopianextyear.

But their very success reveals the lim-its to the African growth story. A seniorexecutive at a global corporate based ineast Africa says of disappointment overthe extent of the hoped-for consumerboom: “We over-anticipatedAfrica – the myth of thisregion is that it’s doing whatChinadid.

“The middle class iscoming quite quickly,but it remains rela-tively small and hasn’t

really grown yet to the level that peopletalk about. A lot of companies thatfocused on this idea of Africa as the nextAsia have burnt their fingers and pulledback.”

They can perhaps be forgiven theirearly enthusiasm. Economic liberalisa-tion and relative political stability wasachieved across much of the continentin the 1990s, unleashing economicgrowth – and with it, consumer spend-ing–asneverbefore.

Sub-Saharan African economiesattracted global corporates after grow-ing at average annual rates of above5 per cent over the past several years,accordingtoIMFfigures.Multinationalssaw the chance to supply an under-served consumer class with everythingfromphonestobeer.

In 2011, the African DevelopmentBank said in a landmark report that313m Africans could be classified as“middle class”. However, they definedthat as people spending as little as $2 aday and repeatedly offered the caveatthat many were vulnerable to slidingbackintopoverty.

But only three years later, after multi-nationals such as Nestlé and Unileverhave pumped millions into expandingtheir Africa operations, more soberingassessmentsarestartingtocomeout.

In August, Standard Bank estimatedthat the subcontinent’s middle classin its 11 most significant economies

outside South Africa runs to only 15m of110m households (13 per cent), basedon a more realistic consumption level ofat least $15 a day. Standard Bankexpects the figure to reach 40m by2030.

Although growth in some areas hasbeen high – at 600 per cent in the past 14years in Nigeria, for example – eastAfrica, in particular, has not met expec-tations. The so-called “demographicdividend” – delivering 1m new Kenyansayear–maynotpayoffeither.

“East African countries may beexpecting the most rapid populationgrowth rates in the world, but are strug-gling to keep pace with the incomeadvance needed,” says the bank, whichconsiders that only 4 per cent of Kenyanhouseholds can be considered middleclass.

In thiscontext, reachingtheverypoorbecomes increasingly important forconsumer goods companies. “We’re notgetting to the bottom of the pyramidbecause people still can’t afford it,” saysthe corporate executive, who notes peo-ple tend to switch to packaged goodsonly once income per capita reaches“the hot zone” of $1,000-$1,500 a year,morethaninanycountry ineastAfrica.

Orbit begs to differ. By suggestingreductions of its customers’ packagingto almost unthinkably small propor-tions, it has boosted sales of detergentpowderby300percent.

“We said [to our client]: ‘There are alot of people who want your product butare not able to buy it because they can’tafford it, because you’re asking them tolay out too much cash at once’,” says MrChandaria. Orbit advised the client torepackage its wares in packs one-20ththeir usual shelf size and charge twice asmuch per kilo because of the extra costin production and distribution. As aresult, it reached a new set of rural con-sumers. “It’s about access, it’s not aboutpricing,”hesays.

The most appealing sales segment fornow, however, remains the food sector,since it consumes 80 per cent of aver-

age household spending, which iswhy Orbit has just acquired Ma

Cuisine, a small, high-endKenyan jam and condi-ments brand. Now, allanyonehastodoiswait.

“It might not be for10, 12 years, but themarket will get toinflection point,” saysMrChandaria.

Companies find that nice thingscome in smaller packagesConsumer goods

Many overseas companiesthought the African middleclass would grow faster thanit has, says Katrina Manson

Not about price:SachenChandaria

The New Africa

T he battle among the world’slargest tech and telecomsgroups to connect Africanshas intensified in the pastyear, with drones and

blimps brought in to provide the firstsight of the internet for many in theregion.

The vast scale of the continent makesgeneralisation difficult. The more tech-savvy smartphone users in southernAfrica are a very different propositionfrom those in areas in central Africawhere infrastructure remains rudimen-tary.

In such areas, technology takes on dif-ferent roles as companies navigate chal-lenges from political revolution to Ebolascares – from educator and healthcareprovider to bank and business partner.But the opportunities are still clear formany of the world’s biggest companiesinAfrica.

The key attraction remains the rap-idly growing population, according toMarcRennard,executivevice-presidentof Orange and head of African opera-tions across more than 20 countries and106mcustomers.

“ThepopulationwasathirdofEuropeafter the second world war. But 70 yearslater, Africa will be three times the sizeof Europe,” says Mr Rennard. “Africa isabout new use, whereas Europe is aboutrenewal.”

And each new user will need a smart-phone and a mobile network, and willthen in turn will want to use mobilebanking and education, search enginesand social media, video on demand andahostofother internetservices.

Technology groups such as Googleand Facebook want to connect withtheseconsumers.

Mark Zuckerberg took to the stage atMobile World Congress this year to pushInternet.org, an attempt to bring afford-able internet to emerging markets. AsMr Zuckerberg said at the conference, itwill be good for the companies as well astheworld.

Similarly philanthropic-sounding ini-tiatives are being worked on by Google –whichhasbeenlinkedwiththeefforts to

bring the internet to remote areasthroughdrones,hotairballoonsandloworbit satellites.

However, telecoms executives agreethat cellular mobile coverage – andmobile devices – will be the main meansby which people will access the internet.

A report into the region’s technologysector by Sweden’s Ericsson forecaststhat thenumberofmobilesubscriptionsin sub-Saharan Africa will rise from635m at the end of 2014 to about 930mbytheendof2019.

Mobile data traffic is expected to rise20-fold between 2013 and 2019 – twicethe rate expected in the rest of theworld.

“The digital concept has entered thelower-to-middle class consumer seg-ment,” Ericsson found, “as well as thosebusinesses operating outside of thecity.”

Handsets subsidy is rare and the priceofdeviceshasbeenthemainbarrier,butthis is rapidlychanging.

Google is tackling the delivery end of

the internet by aiming to provide low-cost handsets to people in emergingmarkets, including Africa, under itsAndroidOneproject.

Operators also want to be the first toputphones inthehandsofpeople. Milli-comsells smartphonesat less than$50.

Orange now sells smartphones pricedbelow €40. Such devices cost more than$200 two years ago – far beyond thereach of many Africans – but the sharpfall in price has caused a tipping point insmartphone usage on the continent.

Mobile is now the easiest way to accessthe internet,accordingtoMrRennard.

Serpil Timuray, regional chief execu-tive for Vodafone in Africa, says: “Withmore than 115m customers in Africa,Vodafone is witnessing an explosion indatausage.”

The opportunity is not just to providethebasic technologyornetworks tocon-sumers,butalsotogivethemthetools tomakethebestuseof the internet. Inpar-ticular, companies have identified thepotential in the provision of education,banking and healthcare services usingtheirnetworks.

Vodafone has, for example, created aquasi-currency through the M-Pesamobile money transfer system. Theoperator is also working with mobile-based medical education programmesincountriessuchasSouthAfrica.

Orange, similarly, is using services inhealth, education and finance to lurecustomers to its networks. These serv-ices do not make the group much profit,Mr Rennard admits, but win customersinpoorercountries.

Mr Rennard points to Orange Emer-gency Credit, which offers a small loanto customers to use their phones in anemergency once they have run out ofprepaid credit. The service has so farmade loan transactions to 20m activeusers.

In an attempt to match the popularityof Vodafone’s M-Pesa, Orange has alsoagreed partnerships with African banksto expand its mobile money services,which are already used by 11.5m cus-tomers, who made €2.2bn worth oftransactions in2013.

The gold rush is over, according toEnda Hardiman, managing partner atHardiman Telecommunications, a bou-tique strategy consultancy, with compa-nies now focused on consolidation andsustainedgrowth.

Even so, the opportunities to becomethe gateway to the internet remainattractive. “Last week, I was in IvoryCoast. The next week in Senegal andthen afterwards Egypt,” says Mr Ren-nard. “Everybody wants to be in theinternetworld.”

Lower-cost handsets help drive internet revolutionTelecoms Rapidly increasing penetration ofmobile phones is opening upmany other opportunities in health, finance and education, writesDaniel Thomas

New technology:M-Pesa enablesmoney transfersvia cellphone– Bloomberg

‘Africa isabout newuse,whereasEurope isaboutrenewal’

6 ★ FINANCIAL TIMES Monday 6 October 2014

The New Africa

There was a telling moment, early inBola Adesola’s high-flying bankingcareer,whenthevalueofawoman’sper-spectivebecameabundantlyclear.

At an executive committee meeting ofthe bank where she worked, colleagueswere discussing the company funding ofemployees’medical treatments.

“They were willing to pay for prostatetreatment but had automatically ruledout antenatal care or fibroid treatment.So I said: ‘You may not get fibroids, but Idon’t suffer fromprostate trouble.’”

Until her appointment, the board hadbeenall-male.“Theysimplyhadn’t real-ised the policy was unfair. It took thepresenceofawomantopoint thatout.”

Ms Adesola, who is today chief execu-tive officer of Standard Chartered BankNigeria, has spent much of her careermakingsimilar interventions.

Twelve years ago she was part of agroup that set up Wimbiz (Women inManagement, Business and Public Serv-ice), a non-profit organisation aimed atraising women’s profiles and influenceinNigeria.

In 2012, she was appointed to chair asubcommittee on women’s economicempowerment by the Central Bank ofNigeria, key backer for a $1.2bn microfi-nance development fund, 60 per cent ofwhich is earmarked for women-runbusinesses. African women, she says,needsuchtargetedactions.

While naturally entrepreneurial –“there’s barely a Nigerian woman whoisn’t running a business of one sort oranother” – they are far more finan-cially cautious than their malecounterparts.

Ms Adesola is convincedsuch efforts are paying off.“Progress may not be asrapid as we would like, but acontinental consciousnessis spreading about theneed for female repre-sentation and greaterdiversity at all levels ofsociety.”

Yet sub-SaharanAfrica’s corporate sectorappears to be movingonly slowly towards gender

parity, lagging behind a faster-movingpoliticalworld.

A few decades ago, an African femalehead of state might have seemed a fluke.Today, Ellen Johnson Sirleaf has beenpresident of Liberia for more than eightyears, few doubt the competence ofNigerian Finance Minister NgoziOkonjo-Iweala, South Africa’s Nkosa-zana Dlamini Zuma chairs the AddisAbaba-headquartered African Union,and Graça Machel is probably asrespected for her role as human rightscampaignerandAfrican“elder”asshe isforbeingwidowtotwoheadsofstate.

Less visible, but indicative of change,the introduction of gender quotas inelections is transforming the profile ofAfrican parliaments too. On average,women now account for 22.6 per cent ofnational legislatures across sub-Saharan Africa, putting the region onlyslightly behind the Americas andEurope and ahead of Asia, the PacificandArabstates.

The gender balance in the board-room, in contrast, is more skewed. AWimbiz census in Nigeria found only 16per cent of board members at commer-cial banks, insurance companies and

government banks were women in2013, barely changed on the previousyear.

While 27 per cent of top managementpositions at the commercial banks wereheld by women in 2013, insurance com-panies and government banks recordeda disappointing 20 and 14 per centrespectively.

In South Africa, the continent’s othereconomic powerhouse, the share ofworking women in senior managementpositions has been static for the pastsevenyears.

AsurveybyGrantThorntonBusiness,the professional services company,shows only 26 per cent of top jobs arefilled by women and 21 per cent of localbusinesses have no women at all in sen-iormanagement.

The World Bank’s DevelopmentReport for 2012 recorded that 79 percentof jobsheldbyAfricanwomenwerein “vulnerable” employment – eitherself-employed or working as unpaidfamilymembers–comparedwith63percent formen.

Since female labour-force participa-tion is also much lower in northernAfrica and swaths of west Africa,according to the Food and AgricultureOrganisation, growth prospects areblighted by the fact that nearly half theworkforce isunused.

It is a picture that exasperates StellaNkomo, professor of Human ResourceManagement at the University of Preto-ria, who says when asked aboutwomen’s representation in Africa:“There’s no doubt that things are betterforwomenoverall inAfrica; there’sbeenprogress. But the question remains: is itfastenough?”

She sees targeted actions such asNigeria’s earmarked fund, as necessaryto correct ingrained imbalances. Butthere is a frustrating gap, she says,

between the expanded presence ofwomen in African parliaments,

senates and cabinets, andthe policies coming fromthosevery institutions.“All African nations pay

alotof lipservicetothe issueof gender equality, but moredeliberate interventionsare needed if there’s to be

any real change when itcomes to the things thatmatter to women,” says

ProfNkomo.

Targeted actions to improve positionof women are paying off – but slowlyGender equality

Many nations just paylip-service to the issue,blighting growth prospects,writes Michela Wrong

A frican leaders have seenrather a lot of each other inwestern capitals in the past12 months. They wereinvited to Paris for a

France-Africasummit lastDecember, toBrussels for an EU-Africa summit inApril and then to Washington for a first-everUS-Africasummit inAugust.

The US has been a late convert to thiskind of Africa-wide exercise, seeking toreaffirm its standing in a region where itandEuropefaceever-increasingcompe-tition. Evidence of this fresh determina-tion is the scaling-up of US resourcessent to Liberia to help contain westAfrica’s Ebola outbreak, following criti-cismofthewesternresponse.

Rapid expansion of other interestsacross the continent – Chinese above all,but also Indian, Brazilian and others –has done much to make Africa’s tradi-tionalpartnersrefocustheirapproach.

“It has forced Europe and the US notto take Africa for granted,” says NickWestcott, theEU’s topAfricadiplomat.

China emphasised its rise as an eco-nomic power and financier in Africawith a landmark Beijing summit eightyears ago, since when it has almostquadrupled its African trade, overtak-ingfirstFrance, thentheUS.

Longstanding spheres of influencehave eroded. Tanzania, for example,still relies on US, British and other Euro-pean aid but has turned to China forroads, power plants, a gas pipeline and ahuge new port. India and China havebecome leading investors and the coun-try’s top trading partners, selling every-thingfrommedicines tomotorcycles.

Have Europe and the US lost Africa?Mzukisi Qobo, who teaches interna-tional political economy at the Univer-sity of Pretoria, says they still carryweight. “It is just that they have not paidas much attention as was the casebefore,” he says. “The vacuum has beenfilledbyChina.”

While attracting their own portionof resentment, the Chinese are widelyregarded as being more attuned to

poor-country needs and are lessinclined to interfere in countries’domestic arrangements. African gov-ernments, chafing at the perceivedhigh-handedness of western donors andinternational institutions, are oftenadept at playing partners off againsteachother.

Mr Qobo notes a shift in emphasis byboth the US and Europe “from politicalrhetoric tocommercialdiplomacy”.

For Europe, Africa continues to mat-ter because of its proximity, migration,the impact of instability and, of course,the chance to cash in on African growth.And Africa still looks largely to Europefor aid and markets. While China hassurged ahead as Africa’s largest singlecommercial partner, registering $210bnin two-way trade last year, that was onlyhalfasmuchasEUcountries.

After growing unevenly over the pastdecade, however, EU members’ tradewith Africa still represented less than4 per cent of their worldwide trade lastyear, Eurostat figures show. For the US,

the share is even smaller, barely 2 percent in 2013 and declining, according totheUSCensusBureau.

The US shale oil boom has sharplyreduced its requirements for oil. Totalfirst quarter US imports from sub-Saha-ran Africa were down by a third com-paredtoayearearlier,andfromNigeria,a long-time US supplier and customer,bytwo-thirds.

Two main themes – economic poten-tial and security – have taken prece-dence in both the US and EuropeanapproachtoengagingwithAfrica.

Security is one of the areas in whichChina’s involvement – other than asarms provider to client regimes – is lowkey, although it has joined UN peace-keeping missions and deployed war-shipsonanti-piracypatrols.

The US, which maintains an opera-tional hub at a former French ForeignLegion base in Djibouti along with ascattering of drone bases, has been gen-erally content to let France play the mil-itary lead role, concentrating more on

counter-terrorismsupportandtraining.After years of questioning about its

military role, France undertook inter-ventions last year in Mali and the Cen-tral African Republic. With forces sta-tioned in eight former African colonies,it recently launched a wider operationto combat Islamist extremists across theSahel zone. The EU has taken responsi-bility forafollow-upmissionintheCAR,its seventh African military operationsince2003.

On the economic front, the US – with abig private-sector input – and the EUhave each trumpeted figures in tens ofbillions of dollars for funding andinvestment. No less importantly, theyoffer Africa prospective markets formorethanjustrawmaterials.

A key issue is the renewal of the Afri-can Growth and Opportunity Act, whichgives qualifying countries access to theUS for many goods without duties orquotasandisduetoexpirenextSeptem-ber. A long-term extension will be criti-cal toUSleverageonthecontinent.

US and Europefight backas China’sinfluence grows

Traditional partners Engagement is focused oneconomic potential and security, saysDavidWhite

Higher profile:the EU-Africasummit aimed toreinforce linksbetween the twocontinents– Getty Images

India andChina havebecomeleadinginvestorsand toptradepartners

Ellen JohnsonSirleaf, presidentof Liberia

Monday 6 October 2014 ★ FINANCIAL TIMES 7

The New Africa

Africa’seconomyhasgrownfourfoldsincetheturnofthemillennium,withsub-SaharanAfricaoutperformingtherestof theworld intermsofeconomicgrowthandat long lastbanishingany

doubtsaboutthecontinent’supwardtrajectory.Apart fromthe10Africancountries thatstillhavean

AfricanUnionoraUNpeacekeepingpresence,85percentofAfricans live incountries thatareatpeaceandrelativelystable,andaregenerating95percentof thecontinent’sgrossdomesticproduct. Indeed,of theworld’s10fastest-growingeconomies, sevenarefromAfrica.

That isnot theonlypositive fact.Average incomeshaverisenby30percent inthepast10years,havingdeclinedby20percentbetween1980and2000.Strongcommoditypriceshavebeencentral to theturnround,butother factorshaveplayedapart.RwandaandEthiopia, forexample,althoughnotblessedwithoilormineralwealth,areamongthestrongperformers.Nonetheless,across thecontinentsignificantchallengesremain.Poverty is fallingbut inmostplacesnot fastenough.Social indicatorshavebeenimprovingbutinequalitiesremain.And,althoughforeigndirect investmenthas increasedsignificantly, jobcreationremainsastruggle.

Thereasons for thosenegativesarenotdifficult to fathom.Therehasbeenlimitedstructuralchangeordiversification.Agriculture’s shareofGDPhasdeclined.Atthesametime,manufacturinggrowthhasbeenhamperedbyfragmentedmarkets,whilepoor infrastructure,particularlyashortageofenergyandportcapacity, remainsacute.

Thatsaid,eliminatingpoverty inthenext twodecadesremainsanachievablegoal. If therightpolicy frameworkis inplaceandbottlenecksareeliminated,wecanlookforwardtoanewAfrica.

It is important torememberthat theso-called“NewAfrica”ismadeupof54countries infiveregions.Africa isnotasinglemonolithicwhole.ThecurrentEbolacrisishasagainrevealedthetendencyofthoseoutsidethecontinenttoclassify itasoneentity.Thenotionof the21st-century“scramble forAfrica” iseverybitasperniciousaswasthefirst“scramble”at theendofthe19thcentury.Theonlysafegeneralisation is thatAfrica isplanning,managingandstartingto finance itsowndestiny.

Thecontinent isbeing influencedbythefourbig trends.First, theemergenceofamultipolareconomicworld,bringingnewinvestmentsourcesandexportdestinations,developmentexperienceandknowhow.Second, thedemographicpotential, the“humancapital”,ofayoungandincreasinglyurbanisedcontinentof1bnpeople,which isexpectedtodoubleto2bnby2050,withtwo-thirds living incities.Third, thecontinuingdiscoveriesof largeamountsofnatural resourcewealth,andthechallengesofmanagingandsharingthatwealth.Fourth, thecontinuingopportunitytoleapfrogmoredevelopedregions inmanysectors throughtheuseof technologiessuchasthemobilephone.

SohowcanAfricaturneconomicgrowthintotrueeconomictransformation?First, thecontinentneedstoachieverealregionaleconomic integrationthroughthebuildingofroad,railandair linkages,openingupbordersandeliminatingneedless“soft”regulatorystandardshinderingtrade.

Second,Africaneedsbettermanagementof itsnaturalresources toensurethat it takesadvantageof thecurrentstrongcycleofcommodityprices.Commoditiesshouldnotbesoldonthecheap. Instead, theyshouldbeprocessed invaluechainsandexportedonfairer tradingterms.

Third,weneedtoaddress thechallenges facedbythoseAfricanstates thatarestill experiencingthefragility that isinherent inthedevelopmentprocess.Thisyear, I setupahigh-levelpanelunderLiberianPresidentEllenJohnsonSirleaf toaddress this issue.

At therootofall thesechallenges is thegapinAfricaninfrastructure,which isboththemeanstotradeandtheroutetoeconomicandsocialdevelopment.Thecontinent’sprimarytask is toclosethe$50bnannual infrastructure fundingdeficitwhichcosts itat least2percent inannualGDPgrowth.Privatecapital isa largepartof theanswer, intheformof foreignprivateequity,debtandtheuntappedresourcesofAfricanpensionfundsandcapitalmarkets.

Thekeyis totaketheriskoutof theequation.Today, theprerequisitesare inplace: inthepolicyandregulatoryareas,thepublic-privatepartnershipframeworks,andindependentregulators.Thetoolsofriskmitigation–suchascreditguarantees–arealso inplace,givingcomfort to investors,especially in“high-risk”andlow-incomecountries.

Africa isno longertheplace for“businessasusual”.Today,itoffersadifferentvalueproposition,as itmovestowardseconomictransformation.

DonaldKaberuka ispresidentof theAfricanDevelopmentBank

POINT OF VIEW

INFRASTRUCTURE

DonaldKaberuka

Continent startsto becomemasterof its own destiny

The continent’sprimary task is toclose the $50bnannualinfrastructurefunding deficit,which costs 2% inannualGDPgrowth

Mining: Africa needs to move up the value chain — Getty Images

W hen Bob Diamond, thecontroversial formerchief executive of Bar-clays bank, announcedthat his new investment

vehicle was making its first foray intoAfrica, it triggered a flurry of attentiononthecontinent’sbankingsector.

He hopes to revive his career by bet-ting on the future of the world’s leastbanked continent. His investment vehi-cle, Atlas Mara, splashed out $265m onBancABC, a low-profile midsized south-ern African bank with operationsstretching from Botswana to Zimbabwe.He rapidly followed that deal withstakes in Union Bank of Nigeria and theDevelopmentBankofRwanda.

Diana Layfield, chief executive forAfrica at Standard Chartered, speaks ofa“prettydynamicmarket”.

“We’ve seen competition for people,we’veseena lotofhiring . . . andnowweare seeing new investors in the financialservices sector, an obvious one beingAtlasMara,”MsLayfieldsays.

Thisyear,StandardCharteredopeneda bank in Angola, Africa’s second-big-gest oil exporter and its third-largesteconomy, while Citigroup opened abranch in Lubumbashi, the DemocraticRepublic of Congo’s mining centre, in2013. Barclays, meanwhile, completed adeal that saw it combine its Africa oper-ations with Absa, its subsidiary and oneof South Africa’s top four banks, nowrebrandedBarclaysAfrica.

For now, much of the activity is aboutbuilding footprints and positioning forgrowth as the deal flow across the conti-nent remains relatively small. With theexception of South Africa, which boastsa $1tn stock market, capital markets aresmallandoften illiquid.

One investment banker comments:“There are far too many banks chasingthe opportunities that are there today.Everybody thinks they have to havesome kind of presence in Africa and dosomething.

On the retail side, just a quarter ofadults insub-SaharanAfricareporthav-ing an account at a formal financialinstitution, which is less than half of theglobal average of 51 per cent, accordingtotheWorldBank.

Yet bankers are bullish about Africa’strajectory, as the continent’s mineralwealth helps drive some of the world’sfastest expanding economies, mush-rooming middle classes are drivinggrowth in sectors such as services andconsumergoods.

On the back of this, African banks arealso flexing their muscles and movingfurtherbeyondtheirborders.

South Africa’s big four – StandardBank, FirstRand, Absa/Barclays Africaand Nedbank – have been pursuing suchstrategies forseveralyears.

Standard Bank, for example, has beendisposing of international assets, whilerefocusing on Africa where it has a pres-ence across 19 nations. In the first six months of this year, Africa, excludingSouth Africa, contributed about 30 percent of the group’s revenue, nearly three

times what it was five years ago.FirstRand, meanwhile, said last monththat it had set aside R10bn ($900m) toexpand in Africa, with an eye on settingup operations in Ghana, Kenya andAngola. Ambitious west and east Afri-can lenders are also taking a more pan-Africanapproach.

Two of Kenya’s biggest banks, EquityBank and Kenya Commercial Bank,both of which have operations acrosseast Africa, this year announced plansto expand into new countries, with thelatter considering southern Africannations including gas-rich Mozambiqueandcopper-producingZambia.

In the west, Nigerian banks have longbeen spreading their wings. UnitedBank for Africa boasts a presence across19Africanstates,whileAccessBankis insevenAfricancountries.

Bismark Rewane, a Lagos-basedfinancial analyst, says Nigerian banksare now being more selective in theirexpansion plans, “cherry picking andlooking at countries were they can sup-portNigerianbusinesses”.

“They are not just opening in coun-tries for thesakeof it,”hesays.

Still, Samuel Maimbo, a financeexpert at the World Bank, says theincreasingly competitive terrain shouldbenefit the consumer, and could helpease the challenges smaller businessesfaceaccessingcapital.

“There has been an increase in thequality of basic banking services forretail customers, and for small andmedium enterprises. It’s going to be anincreasingly importantniche,”hesays.

There have been some serious bumpsalong the way. Ecobank, one of the

pioneers of the pan-African bankingmodel and which boasts a 35-countrynetwork, was plagued for months by agovernance crisis that eventually led totheoustingof itschiefexecutive.

In South Africa, the largest providerof unsecured lending, African Bank,requireda$1.6bnrescuepackagetosaveit fromcollapse.

The latter caused Moody’s to down-grade South Africa’s top four banks andput a spotlight on the rapid growth ofunsecured lending. But African Bankhas been characterised as an isolatedcase and banks’ appetite for Africanexposureshowsfewsignsofdimming.

“It does require a diversified bankingsector with not everybody doing thesame thing and that’s what you areincreasingly seeing, which is a goodthing,”saysMsLayfield.

When I first started talking about thepotential for investment and businessopportunities in Africa some 20 yearsago, I found myself an isolated voice.That turned out to be good for me –and the few others who saw, invested,and reaped wonderful rewards fromthat potential – but not so good for thecontinent.

A narrative that branded Africa aslittle more than an economic, politicaland social basket case was not likely toprovide the investment needed to drivedevelopment.

After a startling transformation,Africa is now seen as a rare source ofoptimism. The continent’s recentrecord of GDP growth looks set tocontinue.

At the recent US-Africa LeadersSummit, it was striking to see the verystrong representation from theAmerican private sector. The businessforum co-hosted by MichaelBloomberg brought leaders such asJeffrey Immelt and David Rubensteintogether to discuss Africa’s investmentpotential. This was an unprecedented

and powerful advertisement for doingbusiness on the continent.

However, just at the moment that theAfrican narrative was finally shiftingaway from poverty, disease andcorruption to one of dynamism andopportunity, the twin challenges ofrising extremism – in particular BokoHaram – and the Ebola virus came todominate the news headlines. Theseevents seemed to contradict the “AfricaRising” narrative.

There is, however, a common threadof governance connecting thecontinent’s successes and itschallenges. Increasing extremism –across Africa and the world – must beunderstood in the context of the failureof our leaders properly to managediversity within their borders. As BanKi-moon, the UN secretary-general,powerfully articulated during therecent UN general assembly, “missilesmight kill terrorists, but goodgovernance kills terrorism”.

Insufficient care was taken to ensurethat Africa’s economic growth wasinclusive, equitable and job-creating,particularly for young people. We arenow seeing the consequences of that.Better governance is the onlysustainable solution to our peace andsecurity challenges.

With regard to the Ebola virus, it isclear that the Mano River region facesan unprecedented public health crisis.The political will and resources to meetthis threat need to be mobilised. But it

is important both to understand whyEbola is taking such a toll and to put itin broader context.

Guinea, Liberia and Sierra Leone arein a post-conflict region, so theyconfront Ebola with fragile governancestructures. Their presidents haveshown strong leadership in tackling thevirus but lack the resources to respond.Mortality rates among the infected arehigh, not only because of the virusitself, but because of the state of thehealthcare systems in the affectedcountries.

This is highlighted by the success ofSenegal and Nigeria, both with morerobust healthcare infrastructures, incontaining the disease.

We must do everything we can tohelp the affected countries with thishealth issue, but we should be verycareful not to make matters worse bytaking measures to hurt theireconomies. Already, the closing ofborders and cessation of flights to theaffected countries is having a hugelydamaging effect. Projected foodshortages are creating the possibility ofa humanitarian crisis.

In a subregion emerging fromconflict, the danger of backslidingtowards social unrest and evenviolence is ever-present.

While observing all the World HealthOrganisation-mandated protocols forcontainment of this outbreak, we mustattempt as far as possible to normalisetrade and travel to those countries. We

must target the disease, not the citizensof Guinea, Liberia and Sierra Leone.

Africa is and remains open forbusiness. The fight against Ebolacannot undermine the fight againstpoverty. There are 50 African countrieswith no incidence of Ebola. Africashould not again face isolation orstigmatisation based on ignorance andunrepresentative imagery.

The understandable fear that thisdisease generates must be confrontedby logic and humanity.

When we view the continent throughthe prism of good governance, ratherthan fear and crude stereotypes, wecan reconcile these seeminglyconflicting views of Africa – on the onehand full of potential, on the otherfacing serious problems.

As Africa rises, our ability to face ourgreatest challenges will be determinedby how strong, inclusive and equitableare our institutions.

The lesson to take from recent eventsis that good governance underlies oursuccesses and bad governance explainsour problems. Therefore it is this goodgovernance agenda that should bringus all into alignment – citizens, civilsociety, government and business, bothlocal and international – to ensure thatAfrica continues to rise and takes us allalong with it.

Mo Ibrahim is a Sudanese-British mobilecommunications entrepreneur and chair oftheMo Ibrahim Foundation

POINT OF VIEW

TRANSFORMATION

MoIbrahim

Better governance is the only sustainable solution

Africa isopen forbusiness.The fightagainstEbolacannotunderminethe fightagainstpoverty

Expanding financial sector drawsincreasing interest from investorsJust a quarter of adults in sub-SaharanAfrica have formal bank accounts, but bankers are bullish, saysAndrew England

Branching out:Standard Bank isdisposing ofinternationalassets andrefocusing onAfrica where ithas a presence in19 nations— Bloomberg

8 ★ FINANCIAL TIMES Monday 6 October 2014