2012 Business in Africa Conference
Unlocking Value in Frontier Africa
Cambridge Judge Business School, University of Cambridge
Saturday 28th April 2012
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Unlocking Value in Frontier Africa: Lessons from the Inaugural Cambridge Africa Business
Network Business in Africa Conference
Dear Friends,
The Cambridge Africa Business Network would like to thank you all for attending the Business in Africa Conference on Saturday 28th
April 2012 and making our inaugural event such a success. The Network was founded with the intention of providing a platform for the leading
voices on African business from the commercial, financial, political and academic spheres to share knowledge and foster partnerships that contribute
towards driving Africa’s economic growth. To that end, and based on your very welcome feedback, we feel we have put down an impressive first
marker from which to build on in the years to come.
We would like to thank our panelists, moderators and sponsors - especially the Leventis Foundation, the Cambridge Political Economy
Society Trust and Google - and all of you for your support. To commemorate the event and to provide you with a source of inspiration and recall
of the day's events, we have developed this post-conference report. Feel free to look over the summaries of the panels you enjoyed and to forward the
report on to those in your network who you feel would benefit from it.
We look forward to seeing you back in Cambridge for future events.
Best wishes,
The CABN Team
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“It is important to acknowledge
challenges and use positive stories to
engage foreign investors”
Olusegun Obasanjo, Former President of the
Federal Republic of Nigeria
Opening Keynote Remarks His Excellency, Olusegun Obasanjo (GCFR), Former President of the Federal Republic of Nigeria
Moderator: Lanre Akinola, Editor, This is Africa magazine a publication of the Financial
Times.
President Obasanjo, in conversation with Lanre Akinola, gave the conference his thoughts
on a wide range of contemporary African issues, including politics, macroeconomics and
business.
Mr Obasanjo provided an assessment of the perception gap that exists between outside investors
and the situation on the ground. While acknowledging that Africans, and Nigerians in particular
cannot pretend that there are no challenges focusing on positive stories related to education and
awareness can be an effective means of engagement over the short term.
Taking a historical perspective on economic growth in Africa, Mr Obasanjo noted that post-war
growth rates were in many cases as spectacular as they are today. The problem was that such
growth did not trickle down to the populations. Today there is reason to be much more
optimistic in part because the actors – both within Africa and from abroad – have a clearer
commitment to sustainable growth and have a better appreciation of what works best across the
continent.
Mr Obsanajo also addressed the issue of the resource curse, stressing that the proper use of
resources depends on institutional strength and stability. He pointed to the example of the
Democratic Republic of Congo, a nation plagued by wars often fuelled by access to resources,
where over one billion dollars was spent on free and fair elections but institutional development
has been largely ignored.
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Unlocking Value in Frontier Africa
Panel managers: Stephen Hamm, 2012 MBA candidate and CABN founding
member; Queen Chinyere Nworisara Quinn, 2014 PhD candidate and CABN
founding member
Panelists:
Razia Khan, Head of Research, Standard Chartered
Zain Latif, Founder and Principal, TLG Capital
Gavin McGillivray, Head of Private Sector Department, DFID
Karima Ola, Managing Director, African Development Corporation
Moderator:
Lanre Akinola, Editor, This is Africa magazine a publication of the Financial
Times.
The opening panel set the tone for the day by exploring a range of macro issues
confronting the continent and putting African investment and business within a
wider context. There were many reasons to be optimistic: as Razia Khan, Head of
Research at Standard Chartered pointed out, intermediary credit lending had
doubled across Africa in the past decade. The continent escaped significant damage
from the financial crisis and new trading partnerships have pumped new money into
African businesses with the latest figures showing $166 billion in trade between
China and Africa. Karima Ola, Managing Director of the African Development
Corporation pointed to growing consumer demand and Zain Latif, founder of TLG
Capital outlined some recent investments in the healthcare sector, investments that
have delivered significant social and commercial returns by addressing growing
African needs.
However, while the optimism around the continent is well-founded, there were
words of caution as well. DFID’s Head of Private Sector Development, Gavin
McGillivray, highlighted the continuing shortfall in energy production which
continues to serve as a drag on the growth of small and medium sized businesses.
Karima Ola and Razia Khan also pointed to the necessity of providing more reliable
and secure financial institutions capable of lending more to SMEs in unleashing
further growth.
“Trade between China and Africa
has reached $166 billion”
- Razia Khan, Head of Research, Standard Chartered
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“There is a generation that is coming where,
how they will connect on the internet, will be
on a mobile phone”
- Ken Oyolla, Global Head of Marketing Activations
Nokia
Capturing Value: Innovation, ICT and the Rise of the Consumer Class
Panel Managers: CABN Steering Committee Members Mara-Tafadzwa Makoni, 2012 MPhil
Candidate in Engineering for Sustainable Development and Imoh Ilevbare, 2012
PhD Candidate in Strategic Technology Management
Panelists:
Linet Kwamboka, Project Lead, Kenya Open Data Initiative
Greg Marchand, Founder & Managing Director, Gizmos Solutions Zambia Ltd
Ken Oyolla, Global Head of Marketing Activations Nokia
Moderator:
Wadzanai Madziva, Business Development, Google Africa
In 2010, McKinsey estimated that the number of African households earning
US$5,000 will have grown by 80 percent between 2000 and 2014. The consumer
market, currently at US$160 billion, will grow to about US$1.8 trillion by 2020;
while the labour force is expected to surpass China’s by 2040. Given the rapid growth
of mobile penetration and ICT, the panellists discussed how businesses operating on
the continent can capture this value and innovate for the growing consumer demand
driven by a young and vibrant population of one billion.
The panellists noted how ICT in Africa is now becoming a rapidly growing sector
and is increasingly being used as a platform to leapfrog on to other services and
innovations. Presently, 60 percent of Africans have access to internet services. Given
that ICT can serve as a way of overcoming some of the continent’s physical and
institutional infrastructure limitations, many companies and governments have taken
note. Kenya marks a good example - Linet Kwamboka of the Kenya Open Data
Initiative outlined how the Kenyan Government has established a number of
technology related development grants of $50,000 each and how the Government of
Kenya is working with the private sector to help ease the cost of doing business in the
country. The technology in Kenya is largely mobile based, indicating how progress is
being made in improving the capability of individuals to freely communicate with
each other. To sustain this growth and overcome the barriers to ICT development on
the continent, Greg Marchand, Founder of Gizmos Solutions Ltd, stressed the need
for greater competition in the sector. In his view, if more companies were to come
into Africa and innovate then investment, alongside the increased technical
sophistication and quality of African technology, would improve for the betterment of
the people.
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““Africa today is where China was
ten or eleven years ago.”
– Charles Robertson, Chief Economist, Renaissance
Capital
Alastair Newton of Nomura offered a contrasting opinion on
the influence of Chinese investment in Africa. He argued that
the relationship between China and Africa is increasingly
complex given that much of the investment is coming from
Chinese state-owned companies who espouse both business
and national objectives. Alastair reasoned that not only are
BRIC countries such as China helping to reshape business and
value in the region; over time they may shape the cultural and
ethnic composition of Africa as well. Alastair quoted for the
audience a staggering statistic, stating that by 2030 over 100
million ethnic Chinese will be staying in Africa. If anything
close to this figure were to be realised then it could have an
undeniable impact on the business and cultural environment of
the continent. He also commented on how other BRIC nations
such as India seem to invest in diverse sectors and countries,
while most of Brazil’s investment is restricted to Lusophone
countries like Angola and Mozambique. To conclude, Alastair
underscored that “it was up to individual African countries to
make themselves the most attractive investment destinations in
what remains a beauty contest for FDI and portfolio
investments.”
Stephen Murphy of Citadel Capital kicked
off the discussion, addressing the
controversial topic of Chinese investment in
Africa. He acknowledged the influence of the
Chinese Investment Corporation (CIC), which
is armed with over $2 trillion worth of reserve
funds to disperse into investment
opportunities all over the world. With a
minimum investment target of $200 million;
the CIC plans to fully take advantage of their
vast resources and cash flow to identify viable
investments in Africa. He also noted the role
of the China-Africa Development Fund which
recently earmarked $4 billion for the purposes
of providing African entrepreneurs with
support to capitalise on the investment and
growth opportunity on the continent. Drawing
on Citadel’s experience on the ground,
Stephen highlighted how most of the Chinese
investment in Africa seems to be coming in
the form of various infrastructure projects
with fewer complications and constraints
relative to western counterparts.
Charles Robertson, Global Chief
Economist of Renaissance Capital,
underscored the progress African
governments had made over the last 10
years and how this has resulted in low
levels of public debt relative to other
regions. He emphasised how these low
levels of public debt will help to drive
down borrowing costs which will ensure
that African countries can borrow at the
competitive rates needed to invest in
infrastructure. Charles stressed that “if
things were to go wrong in China, the
government finances in Africa are in an
extremely good place”. In his view,
“Africa today is where China was 10 or 11
years ago.” The continent is in a unique
position as one of the fastest growing
economic regions in the world and a
competitive investment destination for
global firms.
The New Captains of Industry? How BRICs are Reshaping Business and Value on the Continent
Panel Managers: CABN Steering Committee Members Nkiruka Chiemelu, 2012 MPhil Candidate in
Development Studies and Bobak Tavangar, 2012 MPhil Management Candidate
Panelists:
Stephen Murphy, Managing Director, Citadel Capital
Alastair Newton, Managing Director & Senior Political Analyst, Nomura international
Charles Robertson, Chief Economist and Head of Macro-Strategy, Renaissance Capital
Moderator:
Professor Jaideep Prabhu, Jawaharlal Nehru Professor of Indian Business & Enterprise,
Cambridge Judge Business School
Undoubtedly, the BRICs are reshaping the dynamics of business on the continent. The panellists
discussed the FDI flow into Africa from the BRIC countries; namely Brazil, India and China,
while noting the minimal influence of Russia on the continent.
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Frontier Finance: Confronting Challenges and Discovering the Value of Investment in Africa
Panel Managers: CABN Steering Committee Members Yakhara Sembene, 2012 Master in
Finance Candidate and Kwaku Osei, 2012 MPhil Candidate in
International Relations
Panelists:
Dzika Danha, Managing Director, IH Securities
Jubril Enakele, Director, Deutsche Bank AG
Eric-Vincent Guichard, CEO, Homestrings
Jean-Paul Melaga, Head of Africa, Bank of Tokyo-Mitsubishi
Martyn Schouten, Managing Director, Zambia National Commercial
Bank
Moderator:
Mark Florman, CEO, British Venture Capital Association
While the last decade has been economically positive for African
economies and the world has been slow to catch up; the continent still
attracts less than five per cent of global foreign direct investment (FDI).
The panellists discussed a range of topics with respect to investment in
Africa. They examined how managers are confronting barriers to
investment on the continent and discussed how western investors could be
convinced about the value of frontier markets.
The panellists discussed investor perceptions and how political risk could
be approached and actively managed by businesses and investors operating
within the continent. Political risk in itself is currently an issue that is not
restricted to Africa, as the future of the global economic environment is
still very uncertain. Dzika Danha, Managing Director of IH Securities,
mentioned that when investing in Africa it’s less of a matter of risk and
more of a matter of knowledge. Indeed, intimate knowledge of African
markets seems to be a scarce resource to many companies around the
world and is valued highly on the continent; knowledge of the situation at
hand can go a long way to diminishing the risk associated with an
investment. Eric-Vincent Guichard, CEO of Homestrings, believes that
signs such as the region’s increasingly liberal media and the growth of a
middle class are acting as the necessary forces to help minimise political
risk levels in Africa.
Martyn Schouten, Managing Director of the Zambia National Commercial
Bank, elaborated on what Africa can do to help turn around its public image.
He highlighted how within the top 25 fastest growing economies in the world,
12 of those countries belonged to the African continent. Everything, from the
way Africa is depicted on the media to the language people use when
speaking about it needs to be changed – “don’t focus on the fact that you’re
less developed; focus on how you’re faster growing” – a message that
reverberated across the audience, reflecting the need for changing attitudes,
globally and within the continent.
A popular point of agreement for many of the panellists was on the value of
the African Diaspora. Eric-Vincent called on the diaspora to return to Africa
given their critical importance for economic growth in the region. He
emphasised that the knowledge, experience, business networks and financial
resources of the African Diaspora is far too great to ignore and more needs to
be done to encourage the globe-trotters of Africa to return home.
“Africa is so young and we (the West) are so old,
Africa has no debt and we have too much, Africa
has plenty of land and we have none.”
- Mark Florman, CEO, British Venture Capital Association
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A Conversation about Jugaad Innovation
Panel manager: Mobolaji Adewumi, 2012 MBA candidate and
CABN founding member
Interview with Jaideep Prabhu, Co-author of the book Jugaad
Innovation and Jawaharlal Nehru Professor of Indian Business &
Enterprise, Cambridge Judge Business School by Adam Green,
Senior Reporter, This is Africa, a publication of the Financial
Times.
Jugaad is a Hindi word which means an innovative fix; an
improvised solution born from ingenuity and resourcefulness.
This session explored how the tenets of jugaad apply to business
and innovation in Africa.
Jugaad originated in the farms of Punjab where farmers would
make hybrid vehicles (Jugaads) using cobbled together parts from
carts and tractor engines, attaching ploughs to them. The word
now applies to tangible products and services and intangible ones
like business models in India. There are similar terms in other
parts of the world such as “Jua kali” in Kenya and “Gambiarra” in
Brazil.
“Innovation in the west is
diametrically opposite to the way
it is done in emerging
markets....... ”
- Jaideep Prabhu, Co-author of the book
Jugaad Innovation and Jawaharlal Nehru
Professor of Indian Business & Enterprise,
Cambridge Judge Business School
Jean-Paul Melaga, Head of Africa for
Bank of Tokyo-Mitsubishi, provided his
support for this view but expressed caution,
stating that the return of the African
Diaspora to Africa does presents the danger
of creating a local oligarch, a mere
extension of the elitism already present in
some parts of the continent. So, when taking
the value of the African Diaspora into
consideration, one certainly needs to bear in
mind the potential risks that can be
associated with the movement of a
significant number of people from one
region to another.
On foreign direct investment (FDI) in the
continent, the panellists broadly agreed that
many African heads of state needed to
improve the continent’s marketability as an
investment destination. Jubril Enakele,
Director of Deutsche Bank AG, also
suggested that intra-regional trade in Africa
needed to be further developed, indicating
how a more integrated Africa would help to
serve the continent for the long term.
According to Professor Prabhu, innovation in the west is typically highly structured, top-down and insular,
with R&D in large corporations having long-term horizons. Innovation in emerging markets on the other
hand is not as structured; it tends to be more frugal, more improvised, more inclusive and democratic as
consumers and non-R&D employees are engaged in the innovation process.
While Jugaad does not have the scale that the structured approach has, this is not an impossible challenge to
overcome. There are examples, such as Bharti Airtel, in which Jugaad entrepreneurs manage to scale on
their own or with large companies. Furthermore it is noteworthy that these successful firms are meeting
fundamental needs in these countries that the government would normally provide in the west such as health
and education coordination services.
Demography and governments have an important role to play in the phenomenon of Jugaad. Younger people
in emerging economies, including African frontier markets, will be much more willing to come up with
ideas and take risks with relatively fewer resources and great ingenuity. Governments can play an important
role in fostering innovation by developing the institutions that are necessary to help enable citizens to
innovate as well as investing in ideas themselves.
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Closing Keynote Address
His Honour, Dr Guy Scott, Vice President, Republic of Zambia
Moderator: Namukale Chintu, 2013 PhD Candidate and CABN founding member
His Honour, Dr Guy Scott, in conversation with Namukale Chintu, highlighted the main
challenges facing investment in Zambia today as the lack of a suitable measurement of risk that
results in high financing costs, low productivity and therefore low employment. This challenge
is not unique to Zambia and is faced by many other African countries.
Dr Scott was accompanied by Zambia’s High Commissioner to the UK H.E Col Bizwayo
Nkunika and a delegation from Zambia’s Ministry of Commerce Trade and Industry that
included Deputy Minister, Honourable Keith Mukata MP; Permanent Secretary, Mr Stephen Mwansa and Zambia Development Agency Director General, Mr Andrew
Chipwende.
His Honour stressed that finance costs are exceptionally high to effectively do business in
Zambia. The country’s financial institutions work with short payback periods to return loans at
high interest rates - an unworkable situation for fostering innovation and a competitive
environment.
Misperceiving risk in a fundamental way is what has led to these quick return periods and high
interest rates. To demonstrate this, the example of Zambia’s Dutch disease was presented. Given
high copper prices, the country accumulated foreign exchange and this was associated with
carry trades in which funds in the west invested in short term treasury bills. It would be
expected that that Zambia’s interest rates and price levels would come down due to the excess
capital flowing in. However businesses did not flood into the country to undercut prices as
economics would predict. According to Dr Scott, this attests to some misperceived risk which is
an unfortunate result of Africa’s negative image in the global economy that needs to be
changed. The change starts with projecting all aspects about the continent in forums such as the
Cambridge Business in Africa Conference.
His Honour is an alumnus of The University of Cambridge, where he read Economics at Trinity
Hall College.
“Zambia’s GDP has been growing at 6
to 7 percent in the last decade and with
single digit inflation. The international
community has hailed us for getting
the fundamentals right.... but
unemployment persists – that’s not
fundamentally right”
-His Honour, Dr Guy Scott, Vice President of the
Republic of Zambia
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“Cultivating partnerships is
critical to realising our goals and
vision...”
Closing remarks from the Cambridge Africa Business Network
Queen Chinyere Nworisara Quinn, 2014 PhD candidate and CABN founding
member
Namukale Chintu, 2013 PhD candidate and CABN founding member
We would like to thank all the speakers for their generosity and time to share their
views and perspectives. We thank our sponsors - the Leventis Foundation and the
Cambridge Political Economy Society Trust - without whom our dreams
would not be transformed to reality.
We would also like to thank our individual benefactors and Circle of Patrons; Jean Paul Melaga of Bank of Tokyo Mitsubishi and Lanre Oloniniyi, Ron Bauer,
William Hunnam and Tom Sawyer, all from the Excalibur Africa Mining
Group for their generosity and support for the Network.
Apart from the tremendous financial support we are also grateful to our partners;
This is Africa magazine, Professionals for Africa, the Cambridge Centre
for African Studies, the United Nations Economic Commission for Africa
and Trinity Hall college for providing their valuable contributions to the
conference.
We would like to thank Cambridge Judge Business School for providing the
institutional support to make this conference possible. This includes the teams from
external affairs, online communications, information technology, facilities, finance
and catering.
Finally, we would like to thank all of you, our delegates, for your interest in our
conference and for coming to join us in starting this journey of dialogue and action
towards unlocking value on the continent. Thank you!
Cambridge Judge Business
SchoolUniversity of Cambridge
Trumpington Street
Cambridge CB2 1AG
United Kingdom
Website:
www.africanetwork.jbs.cam.ac.uk
Email: [email protected]