Botho Founder Quoted by African Business Magazine on Chinese influence in Africa

Originally published on September 24, 2017
https://africanbusinessmagazine.com/sectors/development/chinese-influence-grows-as-us-flounders-in-africa/

As the unfolding tariff war between the US and China looms ever larger, Africa finds itself in a bind as the world’s greatest superpowers vie for trade supremacy. While some say that Africa will be forced to pick sides, Africa wisely shows signs of wanting to maximise both partnerships. Yet recent events show Africa moving ever closer to Beijing while Washington undergoes an apparent crisis of confidence in its approach.

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Isaac Kwaku Fokuo Jr., founder and principal at Botho Emerging Markets Group, commented: “Since China replaced the United States as Africa’s largest trading partner in 2009, its trade with the continent has soared by 83% from 2009 to 2011 and surpassed $200bn in 2013,” he says. “By contrast, US trade with the continent reached an all-time high of $105bn in 2008 and has fallen ever since. China has woken up to the promise of African economies while the US appears sluggish.”

Africa: The Next Frontier in Saudi Arabia’s Expanding Sphere of Influence

by Ameera Tameem (Gulf Regional Lead, Botho Emerging Markets Group) and Akinyi Ochieng (Esther Ocloo Fellow, Botho Emerging Markets Group)

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Crown Prince Mohammed bin Salman first announced Saudi Vision 2030 in 2016 to position Saudi Arabia as the leader of the Arab and Muslim world. Leveraging its strategic location near key waterways such as the Red Sea and Gulf of Aden, Vision 2030 intends to transform Saudi Arabia into a global gateway and trade hub for emerging markets. As Saudi Arabia aims to become a global investment powerhouse, the ambitious plan is likely to drive more Saudi investment towards Africa.

The Kingdom of Saudi Arabia is now the fifth largest investor in Africa, with nearly $4 billion dollars in investments across the continent. In the last three years, over 20 African heads of state have visited the nation to meet King Salman bin Abdulaziz of Saudi Arabia to enhance bilateral cooperation in key areas including the economy, security and intelligence.

Today, the Kingdom approaches African countries as viable, profitable trade partners — territories where capital may be invested for sizeable returns. Following South African President Cyril Ramaphosa’s visit to Saudi Arabia, the Kingdom and the UAE jointly pledged $20 billion towards South Africa’s infrastructure, stressing the introduction of alternative energy such as solar panels and wind turbines. This was a landmark moment for the GCC-Africa relationship.

Recent Saudi investments in Africa have focused primarily on energy, housing, agriculture and water. According to Islamic Development Bank (IDB) President Dr.Bandar Hajjar,  "these infrastructure projects will go a long way in addressing the development challenges of our member countries. They will greatly contribute in creating employment and providing an enabling environment for the growth of the public and private sector.” Headquartered in Jeddah, IDB has pledged to fund the expansion of electricity infrastructure in Gabon, and facilitated $805 million in investment in countries such as Burkina Faso, Senegal, Mali, and Tunisia.

There are already signs of progress that Saudi’s expanding interest in Africa will soon bear fruit: the Republic of Congo is poised to join the Organization of Petroleum Exporting Countries (OPEC) soon. Plans to improve healthcare standards in Nigeria in partnership with Saudi German Hospital in an initiative led by the country’s former Vice President, Atiku Abubakar, has demonstrated both Saudi Arabia’s leadership in medical research and their ability to foster successful Public-Private Partnerships (PPPs).

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Preparing for a Post-Oil Future

Established in 1971, Saudi Arabia’s Public Investment Fund is one of the largest sovereign wealth funds in the world, rising to 11th place in sovereign rankings in 2017. In the past year, the Fund’s expansion plans have been the subject of considerable interest in the financial services sector. Saudi Arabian Oil Company’s (ARAMCO) now-scrapped initial public offering, Elon Musk’s statement that Saudi Arabia's sovereign wealth fund might back a deal to take Tesla private, and the backing of the landmark $100 billion Saudi-backed Vision Fund managed by SoftBank, are all tell-tale signs that the Kingdom is doubling down on its strategy for a post-oil future.

Despite the falling production of wheat, Saudi Arabia continues to supply its demand from domestic capacity. However, climate change, water scarcity, and a booming young population mean that the Kingdom will soon be unable to meet growing demand, and will need to import additional supplies. The solution has been to invest in foreign agricultural production as a “means to ensure a long-term, reliable supply of stable commodities”; Saudi Arabian investors have looked outward to secure their food security. They reportedly own over 800,000 hectares of farming land abroad, and recognising the urgent need to promote food security, the Saudi government established the King Abdullah Initiative for Saudi Agricultural Investment Abroad in 2009, which provides large Saudi agribusiness firms with access to credit, as well as strategic and logistical support to invest abroad.

Saudi Arabia’s military presence has recently expanded to nearby Djibouti. Sources report that a planned military base expansion is meant to  safeguard the strategic Bab Al Mandeb strait, as well as the Kingdom’s interests in key waterways and proximity to agricultural investments.

Saudi Arabia increasingly views Africa as a key partner in its reformation agenda to evolve, modernise and reinvigorate its economy. The Kingdom’s increasing investment in the region not only diversifies the Saudi investment portfolio, but also secures opportunities to collaborate with key countries across Africa embarking on similarly ambitious plans for economic development.

Inside The Growth of UAE Investments in Africa

by Ameera Tameem, Gulf Regional Lead, Botho Emerging Markets Group

For the past decade, the UAE has been the leader in African investment within the Gulf Cooperation Council (GCC).  With investments in all four corners of the continent, the UAE is the largest  investor in Africa, second only to China as of 2016.

Nearly 140 Fortune 500 companies including AIG and Lockheed Martin, have established their MEA (Middle East and Africa) headquarters in Dubai as the city cements its reputation as an entry hub for Africa.

Numerous South African companies have also established offices in Dubai in an effort to enhance their international presence and be in closer proximity to attractive  North African markets. According to the Dubai Chamber of Commerce (DCC), over 12,000 African companies were registered in Dubai as of 2017.

Recognizing the plethora of opportunities for investment in multiple African sectors such as infrastructure, technology and energy, Dubai has increased  non-oil trade with the continent by 700% over the past fifteen years, according to the DCC.

Abu Dhabi, meanwhile, has focused heavily on investing in infrastructure. The emirate has lent considerable capital to the construction of large-scale projects such as the newly announced oil pipeline between Eritrea and Ethiopia, renewable energy projects in the Seychelles that include a solar farm, and an electric power grid on the island of Mahé, as well as the expansion of rural infrastructure in  Uganda and Tanzania, jointly funded by the Abu Dhabi Fund for Development (ADFD).

The ADFD, the emirate’s foreign aid agency, has invested over $50 million to encourage UAE companies to invest in Chad in alignment with the country’s National Development Plan 2021. The fund has also funded over 66 projects in 28 African nations including Benin, Comoros,Cape Verde among others.

In recent months, the UAE has also made inroads as a political actor in the Horn of Africa region. Abu Dhabi’s Crown Prince, H.H Sheikh Mohammed Bin Zayed, played an instrumental role in brokering the Ethiopian-Eritrean peace accord while Dubai Ports (DP) World has invested over $440 million to build and manage a world class port in Berbera, Somaliland over a 30 year concession period. The UAE has also pledged  to fund and train the breakaway state’s security forces, in response to mounting disagreements with Djibouti over the disputed concession of the Doraleh port.

Moreover, alongside Saudi Arabia, the UAE has also committed  funds and military expertise to help curb the rising wave of extremism in the Sahel by constructing a military school in Mauritania opened in early 2018.

The rapid investment in political, economic, and military capital in Africa sends a clear message: the UAE is poised to become a major player in Africa’s geopolitical future.


 

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Brief No. 2 China in the UAE (China in Middle East & Africa Series)

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In 2015, the Chinese embassy reported nearly 300,000 Chinese nationals living and working in the United Arab Emirates (UAE). These figures include traders who arrived in Dubai in the 1980s from Fujian and Zhejiang provinces, young professionals working in tourism, retail and finance, as well as employees

in state-owned enterprises involved in energy, construction, telecommunications and finance projects.

China is the UAE’s biggest import origin country and ranks third among export destinations... Dubai is home to Dragon Mart, the world’s biggest Chinese trading hub outside China, which welcomed 120,000 daily visitors and housed 1,700 Chinese retailers as of 2015. According to Dubai Chamber

of Commerce and Industry, Chinese investment in the UAE amounted to USD $2.33 billion in 2016.

Chinese investments in Dubai, however, have declined in recent years as a result of falling oil prices, which have dealt a serious blow to the UAE’s economy. The country’s capital, Abu Dhabi,
is largely dependent on oil and gas exports, and declines in commodity prices have led to a drop in revenue. While Dubai is not as reliant on oil incomes as the other emirates, it has not escaped the effects of falling oil prices due to its role as the primary investment and trade destination for oil-rich countries in the region.

Increased levels of political engagement from Beijing in Saudi Arabia have also affected Chinese investments in the UAE. Since 2016, Chinese president Xi Jinping has met with King Salman of Saudi Arabia twice. In January 206, Jinping visited Egypt, Iran and Saudi Arabia while in March 2017 King Salman of Saudi Arabia visited Beijing. In contrast, no such meetings have taken place between China and UAE leadership since 2016. Moreover, the UAE has not been identified as one of the 63 Belt and Road target countries.

In light of weak economic growth and shifts in the Middle East’s political economy, this report explains current trends in Chinese trade and investment in the UAE, and identifies emerging opportunities for China in the Emirates and the Gulf region.

The content of the following report draws upon data and insights from more than 30 business owners, professionals and officials. Names, titles and company information mentioned in the report are considered sensitive information and may not be re-published without express permission of the Sino-Africa Centre for Excellence at Botho Emerging Markets Group.

These briefs are informal notes for stakeholders on the implications of shifts in development and trade between China and various countries across the Middle East and Africa. They highlight emerging trends or topical issues, and are issued every quarter. Contributions are welcome.

Brief No. 1 China in Egypt (China in Middle East & Africa Series)

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This report examines the state of Chinese trade and investment in Egypt in various sectors including stone material processing, textiles, manufacturing, infrastructure, and energy. The report draws on data collected from interviews with 20+ Chinese business leaders in the country in June 2017.

Egypt is a difficult business environment for Chinese enterprises. Top challenges reported by Chinese companies include business registration and licenses, access to finance, customs and trade control as well as access to land. However, despite currency shocks and political risk challenges that have driven away other investments, Egypt remains a promising new market for Chinese companies attempting to establish a foothold in the MENA/Sub-Saharan Africa region.

Chinese activity in the Egyptian economy first emerged through investments in the stone-processing sector during the 1990s. Today, the sector remains dominated by Chinese firms, which produce 70% of Egypt’s stone material exports and employ over 3,000 Egyptian workers. The China in Egypt Stone Material Association, launched by the Chinese embassy, now plays an instrumental role in unifying the business community, facilitating dispute resolution, and establishing industrial codes. Chinese companies in the stone material sector are well-integrated in the local labor market and procurement system, and work closely with the Bedouin community to ensure security.

Between 2000 and 2010, the number of Chinese companies investing in the Egyptian textile sector increased as demand for textile products from socks to shoes and clothes increased. However, due to the political turmoil of the Arab Spring in 2011, textile exports shrank and many Chinese-owned textile shuttered their operations. As the Egyptian state stabilizes today, several Chinese businesses have returned to the area or entered the market due to the reduction in competition.

Manufacturing companies such as Jushi, a leading supplier of fibreglass and reinforcements, and New Hope, an animal feed producer occupying a vast area of 29,000 square meters in Beheira province north of the Egyptian capital Cairo, have achieved remarkable growth in Egypt and introduced the “Made in Egypt” brand internationally.

The manufacturing industry has witnessed a flurry of interest from Chinese multinationals. China’s SAIC Motor Corporation Limited, a Chinese state-owned automotive design and manufacturing company headquartered in Shanghai, is now planning to construct a factory in Egypt in order to supply the Egyptian market as well as markets in the Middle East and Africa with active free trade agreements with Egypt.

Similarly, China’s Guangzhou Goodsense Decorative Building Materials Co. Ltd. is constructing a new factory in a 16,000 square-metre area located in the Suez Governorate Ataqa industrial zone under a USD $100 million Egyptian-Saudi- Chinese joint venture.

While Egypt urgently needs more infrastructure projects, poor availability of foreign exchange renders such initiatives difficult. Several projects have been announced, but have experienced delays in negotiation and implementation. Nevertheless, some notable successes do exist. Sinopec, China’s second-largest oil group by market capitalisation, for example, has joined American company Apache as a junior partner in an oil and gas exploration project located in Egypt’s Western Desert. By spending $3.1bn on a 33 per cent stake in the project, Sinopec is deepening its commitments in Egypt having previously embarked on another joint venture there in concert with Tharwa Petroleum, an Egyptian company, in 2005.

China is now the largest investor in the Suez Canal Economic Zone with a Tianjin-based state-owned company as the major developer of the Teda Industrial Zone in Ain Sokhna, which lies on the western shore of the Gulf of Suez. Teda currently hosts several successful companies in Egypt and is ready to launch its second phase of development.

As Egypt emerges as a promising production center, investments by Chinese companies are likely to continue to grow.

These briefs are informal notes for stakeholders on the implications of shifts in development and trade between China and various countries across the Middle East and Africa. They highlight emerging trends or topical issues, and are issued every quarter. Contributions are welcome.

Botho Op-Ed for World Economic Forum: "Move over G7. The future belongs to a more inclusive G20"

As the titans of Western democracy are slowly eclipsed by emerging markets, the G20 appears a better equipped forum than the G7 to navigate the challenges of the global economy. But to succeed where the G7 has failed, the G20 must redefine its membership and broaden its mandate.

Botho Op-Ed for African Business Magazine: “Harnessing the China-Africa ICT opportunity”

Industrialisation and urbanisation in Africa are following a trajectory that is somewhat distinct from the continent’s Western and Asian counterparts.

Benefiting from globalisation and tectonic shifts in science and technology, African countries have been able to “leapfrog” some of the stages of development that other nations had to plod their way throug

Botho Op-Ed for African Business Magazine: “China’s role as catalyst of African industry"

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As China continues to flex its muscles globally, its relationship with African states remains a point of fascination in the international arena.

The speculation around Sino-Africa relations oscillates between two extremes: is China a new imperial power, or a partner with which African countries can advance their developmental ambitions to mutual benefit?

The dominant narrative remains that China’s interest in Africa is confined to natural resources. While there is some merit to this viewpoint, African governments need to respond with actionable policies that leverage on economic development. In other words, can China serve as a catalytic force in a nation’s industrialisation journey?

The impact of isolated successes could be turned into a multiplier effect if African nations were to follow the Ethiopian example. With the change in its economic policies in 2008, allowing more Chinese investment into the manufacturing sector, its capacity has expanded, allowing the country’s unemployment rates to decrease significantly, and it has become one of the fastest growing economies in the Horn of Africa.

For example, Ethiopia is home to the region’s largest cattle population and it has used this as an opportunity to process leather products, attracting Chinese investment firms to make it a fully fledged industry, exporting the finished products to countries all over the world. The PHISS Company of China, an international leather trading and production giant, invested US$8.3m in 2015 in Ethiopia in its Friendship Tannery 83km from Addis Ababa.

Tecno, a Chinese mobile manufacturing company focused on Africa, sold 20m smartphones and 60 million feature phones in Africa in 2016. Tecno established a handset production plant in Ethiopia in 2013, employing local Ethiopians, thus decreasing the number of unemployed.

The Chinese have built most of the roads in Ethiopia, including the Addis Ababa–Djibouti railway project, telecommunications infrastructure, and the light rail system in Addis Ababa, all of which allow a landlocked Ethiopia to export its products to the rest of the world. African nations may consider adopting a model within their own macroeconomic strategic frameworks to initiate a chain reaction that could create millions of productive jobs. Ethiopia, like most African countries, had a relatively small or negligible manufacturing sector before engaging with China.

Industrialisation and securing investment for sectors that boost economic growth for African nations will not be a straightforward process. However, the potential of market entrants to serve as catalysts for the growth of new, competitive industries is undeniable, as demonstrated by China’s relationship with Ethiopia. The Ethiopian model can serve as a lesson for countries that are willing to take the risk of opening their markets to Chinese investment.

Botho Op-Ed for African Business Magazine: "Fresh opportunities for Africa in a multipolar world"

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There have been major shifts towards globalisation over the past two decades, largely fuelled by the advancement of information technology, which has increased the speed and reach of information and opened up new opportunities and markets for corporations.

The most palpable effect of this shift has been its influence in driving a new multipolar world order led by the rise of countries like China and India that are determined to challenge the global power status quo. Fuelled by their extensive resource bases and increasing political stability, most African countries have embraced globalisation. It is within this reality that Africa seeks to advance its agency.

Elsewhere, globalisation has caused angst. In the West, as companies have relocated abroad in search of cheaper labour, the wages of low-skilled workers have come under pressure.

This has led to a growing populism that is fuelling more protectionist policy agendas. Such insularity in the medium to long term is in fact good for Africa. Less intervention by Western powers could mean more opportunities for self-determination and consequently accelerated economic growth for the continent.

The trials of post-independence
In the post-independence period the great majority of African nations experienced violence and instability. As economic development waned they found themselves forced to turn to multinational institutions for assistance.

The World Bank and the International Monetary Fund (IMF) were set up as a result of the Bretton Woods conference in 1944 to promote economic development and international cooperation in the aftermath of the Second World War. The US holds approximately 17% of votes in the World Bank, while the rich nations of the G7 control more than 45%.

In contrast, the 48 countries that make up sub-Saharan Africa have less than 9% of the voting share between them. Voting parity, however, has been a minor problem where the Bretton Woods institutions are concerned.

Criticisms have generally centred around the very restrictive approaches they have adopted towards policy formation, resulting in detrimental economic effects on the countries seeking financial assistance. In the African case, the conditions attached to structural adjustment programmes (SAPs) have been a major source of controversy.

SAPs were imposed to ensure debt repayment amid economic restructuring. But their requirements that poorer countries reduce spending on core areas like education and health while concurrently prioritising debt repayment have been cited as factors that have undermined Africa’s growth.

However, Africa is now on a continent-wide growth trajectory. The number of armed conflicts in Africa has gradually declined from at least 30 at the end of the Cold War to below a dozen today; the number of successful coups fell by two-thirds in the same period. The result is a continent more secure and ripe for investment.

Until the late 90s Africa was the only region in the world where inflows of official development assistance (ODA) outstripped private capital inflows. In 1990 the makeup of external flows to sub-Saharan Africa was about 62% ODA, 31% foreign direct investment (FDI), and approximately 7% remittances. By 2012, ODA accounted for barely 22% of external flows to Africa.

The role of China
Though still powerful financial forces, the World Bank and the IMF are losing their influence. Developing nations, who saw little alternative in seeking financial refuge in these institutions, have started to go elsewhere, China being a primary location. Chinese investments in Africa have risen sharply in recent years, from $7bn in 2008 to $26bn in 2013.

By July 2016 Chinese investments had increased by 515% from full-year 2015 figures. Chinese investments come largely unencumbered with conditions. These seemingly open-ended arrangements have been controversial because some claim the relationships are emboldening corrupt and despotic leaders, and that Chinese investors are indifferent to the rule of law, in contrast with the way Western investors tend to steer clear of poor-governance environments.

However, a recent study by the Brookings Institution found that Chinese investment was spread across different the governance environments, with investments in countries with poor governance balanced out by those in ones with relatively good governance. China has opened opportunities for Africa in ways of massive infrastructural spend. Its increased footprint in Africa has shifted the emphasis from the development of political and social institutional spending to infrastructure development for economic facilitation.

Africa in a multipolar world
Africa is becoming the next frontier of economic opportunity for investors. In natural resources, Western corporations are no longer able to acquire large tracts of land for exploratory activities for little to no royalties.

Fiscal regimes have become sophisticated in capturing more rents for host governments and local regulations are making it more difficult for corporations to repatriate revenues, increasing local impact. Local content agendas across the continent are transforming the erstwhile resource curse. Governments are drafting legislation with the goal of increasing local skills, and participating in the provision of goods and services.

Increasing global insularity is having little impact in curbing Africa’s development agenda. Africa is in fact emerging as a relevant economic bloc in what is shaping up to be a diverse multipolar global environment. Although the overall status of the BRICS countries (Brazil, Russia, India, China and South Africa) remains questionable, individually they still represent some of the fastest-growing emerging economies, and the MINT countries, comprising Malaysia, Indonesia, Nigeria and Turkey, are also making their mark.

Paul Kagame, whose own transformation of Rwanda has provided a blueprint for many countries, has been tasked with overseeing institutional reform of the African Union. The transformations are designed to take advantage of the new opportunities, and drive unity and development across the continent.

Africa will not, however, exist in a vacuum. Its nations must be willing and able to transform with the changing tides. Such transformation should be grounded in a shrewd and effective leadership devoid of traditional ways of thinking.

Botho Op-Ed for African Business Magazine: "How can China help improve higher education in Africa?”

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China’s relationship with Africa is usually viewed through the relatively narrow lens of infrastructure, construction, energy, and mining. However, Sino-African relations have the potential to be multifaceted. Higher education is one sector that would benefit significantly from greater cross-fertilisation between China and Africa.

In sub-Saharan Africa, the enrolment rate in 2013 was 77% for primary, 34% for secondary, but only 9% for higher education. This, coupled with the fact that by 2030, the number of youth in Africa will have increased by 42%, points to an urgent need to address higher education on the continent.

However, higher education in Africa is fraught with challenges, including limited financial and human resources and a lack of industrial linkages causing education to be out of sync with the needs of the economy. Africa could benefit from China’s involvement at multiple levels.

Technical education
Technical and vocational education and training (TVET) in African countries is limited by a lack of industrial support. According to research conducted by the Sino-Africa Centre of Excellence, many TVET institutes possess equipment, trainers, and curricula that are not up to industrial and international standards. Consequently, TVET graduates struggle to gain recognition by employers.

To bridge these gaps, African TVET institutions could partner with Chinese companies in Africa. For instance, Chinese firms could be incentivised to invest equipment, technology and human resources in technical training institutes.

Alternatively, they could be invited to jointly develop curricula and provide internships to TVET institutes. Africa’s technical education could thus benefit from industrial linkages with and technology transfers from Africa’s Chinese private sector.

University education
In the case of tertiary education, Chinese students could be a major contributor to Africa’s international student base. China is the largest exporter of students globally.

At the end of 2014, there were 1.7m Chinese students studying overseas. Chinese students abroad have a substantial economic impact on their host institutions.

For example, in 2012–13, Chinese students in New Zealand accounted for nearly one-third of tuition fee income, of which 50% was attributed to university students. Currently, African countries remain unexplored as higher education destinations.

With over 2,000 Chinese companies operating in Africa, China has the scope to be an important source of corporate partnerships for African universities. In this context, seeking partnerships with Chinese companies could be a great way for African universities to expand their private sector ties.

A pioneer in this approach is the African Leadership University (ALU), which has pan-African ambitions to provide world-class, low-cost tertiary education through a network of 25 campuses. ALU has been engaging Chinese students and corporates since 2015 to forge long-term relationships.

In conclusion, China could play an important role in the development of Africa’s higher education sector, as an investor, an industrial partner, or a market for students. African governments and institutes should think strategically about how to engage Chinese stakeholders and leverage these relationships to their fullest potential.

Botho Op-Ed for How We Made it in Africa: "FDI inflows in the face of socio-political risks: The cases of Nigeria and Egypt"

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The relationship between foreign direct investment (FDI) and political stability should be intuitively obvious. Conventional wisdom suggests that FDI will flow towards stable, democratic nations with strong institutions and rule of law.

Yet, for some African nations, conditions of socio-political risk may not be as uniformly anathema to international private investments as one would imagine. For instance, in 2003-2009, the Central African Republic, Chad, Burundi, and Eritrea exhibited a positive correlation between FDI and insecurity.

For Africa, it seems that it is possible to decouple socio-political and economic conditions when following FDI around the continent. Governments can, in order to attract FDI, use policies and incentives to compensate for systemic problems they may be either unwilling or unable to address.

Egypt and Nigeria are compelling points of comparison. As two of the largest FDI recipients in Africa, they suffer from different sources of instability. Moreover, their political systems are disparate. Nigeria underwent elections in 2015 where incumbent President Goodluck Jonathan conceded defeat to Muhammadu Buhari. Egypt, on the other hand, experienced a coup d’état in 2013, where the democratically elected Mohamed Morsi was toppled and later succeeded by current President, Abdel Fattah el-Sisi.

However, these socio-political circumstances do not have obvious implications for FDI.

 

Egypt

FDI in Egypt has been on the upswing. In 2014-15, net FDI inflowsamounted to USD2.7bn , largely due to greenfield and oil sector investments, the latter comprising 70.1% of total FDI inflows. The country has also recently been lauded for a series of economic and regulatory reforms to encourage private investments. The Presidential Decree 17 of 2015, for example, offers several amendments to Investment Law 8 of 1997, as well as other laws pertaining to Egypt’s investment climate.

FDI is arriving in the midst of both social and political tumult. Egypt scores high on both political and social risk on Control Risks’ 2016 Risk Map. Counter-insurgency operations against the IS-affiliated Sinai Province combined with protests against the crackdown on Islamists is fuelling a charged security situation. The status of human rights and civil liberties is also questionable, as the recent tragedy concerning the murder of Italian student, Giulio Regeni, suggests.

Egypt today exhibits a significant degree of socio-political risk, but continues to attract FDI with the promise of reforms, incentives, and profits. The current government may be considered stable, but stability through repression can result in new sources of volatility. Although the state has so far proved to be capable of affecting economic change to entice international investors, the limits of its control are manifesting in other, more dangerous forms.

Nigeria

Nigeria’s case is equally contradictory. Although the oil crisis has hit Nigeria, and Nigeria witnessed a 16% decline in FDI in 2014, this can partially be explained by a bid to diversify into non-oil sectors. In 2007-13, 23.9% of FDI projects targeted the telecommunications sector, with other major recipients including financial services, consumer goods, tourism, and business services. FDI inflows into Nigeria may have slowed, with its stock index down by 14%, but this current slump may be transitional.

In 2016 alone, the Nigerian Investment Promotion Commission (NIPC) has engaged China, Indonesia, Japan, Finland, the UK, the USA, UAE, etc. to facilitate investments into agriculture, energy, manufacturing, and infrastructure. Despite structural problems, the Nigerian state remains an active actor in FDI engagements.

The 2016 Risk Map labels Nigeria as a high risk zone. Although Nigeria experienced a peaceful democratic transition in 2015, Nigeria is still considered politically unstable, as Buhari’s government remains a relatively uncertain entity. Meanwhile, Boko Haram was active even when FDI inflows were at their peak. The insurgency is, as in the case of Egypt, a test of the government’s sphere of influence. However, it has not deterred FDI significantly due to being relatively contained geographically and also given the region’s low contribution to overall GDP.  In fact, policy issues, such as currency restrictions, appear to be a stronger determinant for FDI.

Nigeria exemplifies the difficulty in tracing correlations between regime type, socio-political risk, and FDI. A successful democratic election does not translate into (perceived) political stability. A terrorist threat to a portion of the country can have a limited impact on the economy. Lagging oil prices resulting in sluggish FDI may obfuscate a simultaneous diversification into other sectors. This multifaceted and sometimes contradictory relationship between socio-political and economic systems makes it tough to predict FDI flows to African nations. Furthermore, systemic deficiencies may not always be an accurate or sufficient gauge of a state’s (in)ability to solicit FDI.

Rethinking FDI in Africa

The African continent confounds dichotomous and linear understandings of the determinants of FDI flows. As the cases of Nigeria and Egypt reveal, countries can continue to attract FDI even in the midst of political and social risk. While these issues may be manifestations of the limits of state control – although, it remains to be determined if this stems from an unwillingness or an inability to rectify problems – such perceived shortcomings do not necessarily constitute an accurate barometer of a government’s ability to attract FDI. Further, it may be worthwhile to ask how purveyors of FDI influence the internal dynamics of various regimes in Africa by rewarding some characteristics and punishing others. And how, in turn, does this interact with the state’s own motivations for soliciting FDI, perhaps in lieu, or even to the detriment of other national concerns?

Botho Op-Ed for CNN: China's Slowdown is good for Africa

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Nairobi, Kenya (CNN)China's economic influence across Africa is as controversial as it is irrefutable. On Friday 4 December, president Xi Jinping announced a three-year plan to boost cooperation with the African continent. The $60bn package includes 10 major projects that extend from poverty reduction to trade facilitation.

It is investments of this size that have enabled China to become, in 2013, sub-Saharan Africa's largest export and development partner in 2013. But its engagement has not been free from criticism, with international and African voices alike citing instances of exploitation, environmental damage and a disproportionate focus on extractive activities. The row over the Chinese-owned Collum Coal Mining Industries in Zambia being a case in point.

    It is interesting to reflect on the motivations for this new partnership deal. In his own words, Xi says: "China strongly believes that Africa belongs to the African people and that African affairs should be handled by the African people." Yet, in the wake of China's recent economic slowdown, there were concerns that China will reorient itself away from Africa, as Chinese investments declined by a whopping 84%.

    Rather than see that fall in investments as a threat to Africa's development as it first appears, research and conversations with businesses in China and Africa reveal that the recent decline in Chinese investments could actually completely transform the economic relationship for the better. Xi's statement and this new plan, announced at the second annual Forum on China-Africa Cooperation, could actually be the first signs of this change.

    China's involvement in Africa to date has been dominated by the former's demand for commodities. However, emerging trends in Sino-African relations point towards activities that are more diversified, more localized, more environmentally-friendly and more beneficial to small and medium-sized African businesses.

    Through our business networks across the continent and China, the organization I co-founded, the Sino-African Center of Excellence Foundation (SACE), has noticed four developments in particular that merit attention: a focus on quality and not just price, the push to employ more local talent, a greater interest in building local capacities, and the need for diversifying risk.

    Quality and not just affordability: No product exemplifies this better than mobile phones. Chinese companies are keen to shed the stereotype of fake labels and poor durability that accompany their low prices. In recent years, over six reputable Chinese mobile phone brands, including Huawei, Xiaomi, Tecno and Oppo, are competing all over the continent not just for better prices, but also improved quality.

    Local employment opportunities: Maintaining a majority-Chinese workforce in Africa is simply unsustainable for both small and large companies. SACE has found that in Kenya, employing a Chinese worker costs about 4 to 6 times more than hiring a local equivalent. In order to build local teams, Chinese companies are learning to localize their sales, operations and government relations. Meanwhile, African service providers will find that Chinese companies have started to hire local legal counsellors, human resource consultancies and marketing companies in order to better integrate their brands into local markets.

    Capacity building and knowledge transfers: A greater push towards hiring local talent by Chinese firms has been accompanied by increased investments in capacity building. SACE found that a majority of Chinese managers have started to or are considering partnering with local training institutes or programs in order obtain local workers, who can excel in the required positions.

    Mitigating risks and diversifying portfolios: Chinese investments in Africa are undoubtedly still skewed towards the extractive industries. Nevertheless, the composition of Chinese foreign direct investment (FDI) is undergoing significant transformation. For example, in 2013, extractive industries accounted for 30% of Chinese FDI in Africa, while finance, construction and manufacturing collectively constituted 50% of total FDI.

    There's no denying that a drop in demand for commodities in China has led to a drop in investments in Africa. Nevertheless, there are signs that the country may be taking a fresh approach towards its economic engagement with Africa (the boldest one came last Friday), and this could result in greater interdependence and mutual benefit for both regions. But all the impetus to change can't lie just with China. If Africa is to benefit from its biggest partner long term, African governments, firms and professionals have to think strategically about what they want from this relationship.

    Botho Founder Named by Forbes as "Young African Leader To Watch"

    Isaac-Kwaku-Fokuo_photo-240x240.jpg

    Isaac Kwaku Fokuo is the founder of Botho Limited, a Nairobi-based investment advisory company, and the Sino Africa Center of Excellence Foundation (SACE), a research hub and exchange program that aims to create an influential cohort of Chinese decision makers who are knowledgeable and sensitive to Africa's needs and can be lobbyists in favor of African interests.

    Ghanaian-born Fokuo, 39, is also the CEO of the African Leadership Network (ALN), a vibrant membership community of Africa’s most dynamic and influential new-generation leaders. ALN which was founded in 2010 by Acha Leke, a Senior Partner at McKinsey & Company and Fred Swaniker, founder of African Leadership Group, creates and strengthens relationships between these leaders to encourage intra-African trade, investment, and collaboration.

    In the coming weeks, I will be interviewing some of the members of this community under the Young African Leader; learning about their work in Africa, what makes them tick and the legacies they hope to leave for Africa and its future. There’s no better person to kick off this series of profiles than Fokuo.

    I caught up with him recently in Nairobi where we had a chat about his work in increasing cooperation between China and Africa in trade and investments, and on how ALN is leveraging the collective influence of its members to drive prosperity in Africa.

    You were asked to be CEO of the African Leadership Network in 2013. What milestones have you achieved so far and what future projects are you working on?

    I'm not sure that I alone have achieved anything but the ALN team, since its inception in 2010, has achieved a lot. We've run five successful annual gatherings hosting 1500 people in four countries. In addition, we have a two-tier fully functioning board and we continue to build our governance structure. We launched ALN Ventures, an accelerator program and platform dedicated to growing the next generation of amazing entrepreneurs in Africa. Our partnerships are something to be proud of. I'd like to highlight ALN's recent collaboration with the Africa Wildlife Foundation (AWF) and the Aspen Institute as part of the China-Africa Dialogue Series specifically. The purpose of this series is to develop best practices in trade and conservation to ensure the protection of Africa's wildlife and lands. Together with our Chinese counterparts, we hope to lobby our respective governments, businesses and civil societies to create awareness and ensure implementation. Lastly, ALN sees a lot of cross network investments between member companies. For instance, one conversation between two members a one gathering resulted in an $87 million dollar poultry project. Another spurred the beginnings of a $350 million dollar resort project.

    These are just a few examples of what we have achieved. In the future we hope to increase our membership to include all 54 states and non-African alliances; become a world leader in providing educational opportunities through our sister organizations African Leadership Academy and ALU and become a premier platform for talent and human capital advisory in Africa through our other affiliate, the Africa Advisory Group. (AAG)

    Tell me about your company, Botho. You say founding Botho was a 'happy accident.' How did it come about?

    It was in a Chicago, in Chinatown around a table with more food on it than my friends and I could eat. I'd just quit my job, my well-paid 8am-4 pm stability that I actually enjoyed. Regardless it was time to do something else. The problem was what? As I wasn't entrepreneurial, my natural instinct was to join a company with international focus. I tried and tried but the job gods weren't smiling upon me. I took this as a sign to create my own opportunity! After some initial brainstorming, my friends and I at the table decided to focus on serving as a bridge between financial capital and projects. We also reasoned that because the space was crowded, we needed to focus on a niche and impactful sector.So we chose Islamic Finance because of the impact it could potentially have on the development for lower income individuals without access to credit. We started almost exclusively in the Islamic Financing space, which included raising capital from Middle Eastern countries for projects in Southeast Asia and Africa. This niche was truly a happy accident as Africa has a large Muslim population. I believed that with the effective deployment of capital, lives on the continent would be changed. My hope was for some African countries to emulate Malaysia's model, where Islamic Banking thrives alongside mainstream banks, which provides consumers with more choices and better value.

    Over the last few years, Botho has shifted from Islamic Finance to working with brown field African companies in three ways, mainly through assisting companies on investment strategies;Working with entrepreneurs to fundraise for their projects, and advising local governments on international political and economical issues.

    Describe how the Sino Africa Centre of Excellence Foundation was born and why it's proven to be a vital initiative.

    In 2012 I went on an ALN learning journey to see firsthand what the fuss was about. I became fascinated by the inner workings of a dynamic component of their culture and foundation for China's success, known as guanxi – or “strategic relations”in English. I pondered 'What can guanxi do for Africa?' I had just witnessed what it did for an unassuming small town in the United States. During my trip to China, then Chinese Vice President and current President Xi Jinping was visiting his former host family in Iowa. Twenty seven years earlier, President Xi visited Muscantine, Iowa on an agricultural research trip. During his time he befriended the governor and was still close to him nearly thirty years later. I wanted to apply these same principles of guanxi to the China-Africa context.

    So, I together with Tebogo Lefifi, a fellow ALN member whom I met during the China trip, brainstormed and founded the Sino Africa Center of Excellence Foundation (SACE). SACE is a research hub and exchange program that bets on a selective group of young Chinese, in the hopes that they'll become high net worth power brokers, and places them in African companies, to gain firsthand experience and insight into Africa. SACE's aim is to create an influential cohort of Chinese decision makers who are knowledgeable and sensitive to Africa's needs and can be lobbyists in favor of African interests. SACE debuted in Kenya and has so far-placed 15 Chinese interns in 7 companies; published the first ever Business Perception Index in January 2015 that surveyed Chinese's companies perceptions of doing business in Kenya, and helped local businesses set up 'China desks' to attend to the highly under-served market of Chinese consumers in Kenya.

    What do you believe is your purpose through Botho, ALN, & SACE?

    These initiatives are my way of ensuring ownership of the African narrative and supporting local entrepreneurship to achieve the goal of African prosperity. Ultimately, my purpose is to do my part to make this continent, and the world, a better place for my kids and generations to come. I also hope that my endeavors will allow future Africans to be revered for being African; because being African will be a perception associated with competence, competitiveness and merit.

    How did your parents’ professions/careers and family values impact your life choices?

    My father was a pastor and my mother was an entrepreneur. I believe my dad's influence rendered me an idealist, striving to be a servant leader; and my mom’s work ethic is why I am entrepreneurial, competitive, bottom-line focused and always looking for a different angle.

    I was also exposed to a world of cultures from a young age. Born in Ghana and raised in Tamale, I was immersed in a predominately Muslim culture; my neighbors were Muslim and my best friend was Dutch; I'd breakfast during Ramadan with my Muslim friends and celebrate Christmas with my Christian ones.

    My dad also traveled a lot and would come back with fascinating stories about his trips. In addition, listening to the BBC and having many international guests pass through our house helped expand my curiosity of the world and my desire to work internationally. My three sisters and I were tight and would talk about everything. So no topic was off limits; from gay rights to macroeconomics, all was acceptable dinner conversation. I believe these experiences helped me forge a career path where interacting and working with people, very different from me, is seamless.

    Who do you have a career crush on and why?

    John L. Thornton. I admire what he has done in improving China/U.S relations. I admire his efforts to build great, personal relationships between the two countries.I think the John L. Thornton Center at the Brookings Institute speaks volumes about his commitment to creating and building productive relationships that positively impact U.S/China foreign policy. I believe Africa needs a similar focus – hopefully some day SACE can be that institution.

    You do a lot of business around the continent, and you've witnessed a lot of the changing landscape. Which countries or cities have surprised you the most and why?

    First of all, it's my ignorance about the continent that has caught me off guard. I traveled to Morocco recently and was ashamed that I'd expected it to be all desert. I was amazed by Dakar's architecture and the beauty of its people and impressed with Luanda and the efforts made by the government to rebuild a country that was mired in civil war for over 20 years. Rwanda’s post-genocide narrative has humbled me and Kenya's incredibly diverse population and industries have awed me

    How do you like to work?

    Despite being told that early birds are more active and goal oriented, I can’t help but be a night owl.

    My penchant for working late was born of necessity, when I was in boarding school in Accra. Because I preferred spending the bulk of my daytime talking to people, rather than studying, the only way I could study was late at night, when everyone was sleeping.

    Staying up late has become a habit now – I do my best thinking for my work during the wee hours. Since most of my day now is spent in meetings and traveling, I tend to concentrate better is when the rest of the household is asleep.You’ll find me working from home, a hotel room or the office after hours. I need the right music or background TV; I cant’ work in a quiet environment.

    On top of all that, I travel extensively, so my body is in multiple time zones at any given moment. Traveling, plus communicating with my various clients around the world, forces to me to stay up at all odd hours. But, the truth is, I love working like this. I couldn't hack a typical 9 to 5.

    Talk about your leadership style. What expectations do you have for the team that works around you? Are your organizations run from the top down or bottom up?

    From the back actually. I lead from the back and am a stickler for details. The more details I have, the more comfortable I am making decisions. As for my team, I expect them to know more than I do in their areas of expertise. I am not the expert – my job is to bring out theirs and steer the team's ship towards success. I expect my team to be passionate about their work, to care about it and to execute their tasks well.

    Botho Featured in How We Made It In Africa: "Doing business in Kenya”

    A new report by the Sino Africa Centre of Excellence Foundation (SACEF) now provides insight into the challenges and perceptions of Chinese companies operating in Kenya. SACEF will this year conduct similar surveys in Angola, Ghana, Nigeria, South Africa and Tanzania.

    Botho Featured in How We Made it in Africa: "China’s investment in Africa is positive"

    Originally published on December 2nd, 2013
    https://www.howwemadeitinafrica.com/chinas-investment-in-africa-is-positive-says-investment-advisor/

    “I have a special thing for China because I feel like the future of Africa’s prosperity is tied somewhat to China’s prosperity,” says Ghanaian entrepreneur Isaac Kwaku Fokuo.

    Isaac Kwaku Fokuo, founder and board chairman of the Sino-Africa Centre of Excellence


    From cheap electronics to multi-million dollar infrastructure projects, China’s presence in Africa has become hard to miss. Some analysts praise the Asian giant for bringing much needed infrastructural development to Africa while others claim China is Africa’s modern day colonial master.
    Fokuo, founder and board chairman of the Sino-Africa Centre of Excellence (SACE) Foundation, a programme geared towards improving China-African relations, argues that, overall, China’s growing investment, especially in the area of infrastructure development has had positive effects in Africa and should be encouraged.

    “If you look at the effect of Chinese foreign direct investment in Africa over the last 20 years, even the most sceptical of critics will agree, the effect on the ground has been quite profound. Look at countries like Kenya, Angola, Ghana, Sudan and Nigeria. The infrastructure that Africa has lacked for many years is being built by the Chinese and that is a good thing.”

    The SACE runs the China-Africa Internship Programme, which “brings very smart Chinese students to Africa to intern with African companies”, says Fokuo. The programme hopes to build relationships that “will translate into physical investments in the future”, particularly in the private sector.

    “The African private sector should start engaging with the Chinese private sector,” says Fokuo, who is also CEO of the African Leadership Network, a community of new-generation leaders which seeks to create prosperity in the continent.

    “The relationships we build with these students goes a long way to the investment down the line. When these kids go back and now work in companies like Huawei… [they] understand how Africa works. These kids are going to influence China-Africa policy in the future and their perspective will be very different from that of someone who has never experienced Africa before.”


    Investment advice

    An international business development and finance expert, Fokuo stumbled into entrepreneurship eight years ago while living in the US.

    “I wasn’t one of those kids who grew up thinking they are going to start their own company someday,” he says.

    Fokuo says he worked on a project about Islamic finance and then decided to start Botho, an investment advisory firm which at the time worked with investors in Southeast Asia and the Gulf region.

    When Fokuo moved back to Africa in 2010, Botho took a different turn.

    “When I moved to Kenya those projects were no longer viable because the scope was different, the amount of money needed here was just too small and investors were not willing to put US$50m in the businesses we were exploring here.”

    Today Botho offers foreign investors advice on investment opportunities in emerging markets. The firm holds over $250m worth of Africa-based private equity and debt transaction projects ranging from commercial real estate, healthcare, cosmetics, hospitality and agro-processing.

    “In the investment space in Africa everyone complains about the lack of data and my philosophy is it’s not lack of data, its lack of creativity in finding good data sets,” says Fokuo. “What we do at Botho is to find the data that investors need to make intelligent business decisions, then we communicate this to investors in a language they understand. We use this as a platform to also link entrepreneurs and investors. We see a strong appetite among investors all over the world for projects to finance in Africa.”

    Perception and skills training

    One of the major hurdles Botho faces in working with foreign investors is the perception that Africans “are not good enough”.

    “If I go and sit across [from] an investor and I put a document in front of him and I say to him this is a good product and my colleague from Brazil puts a similar document in front of him, the investor is likely to go with my Brazilian colleague.”


    Access to human resources, Fokuo says, is also a major challenge.

    “I passionately believe that whatever we need to do, we can do as Africans. I have met and worked with very intelligent, highly educated and entrepreneurial Africans who work really hard. My frustration is that at a macro-level, we have good education systems, but we are yet to translate good education into hard, market-ready skills. We need to do that, and we need to nurture a worker bee work ethic in our youth, so that the intern that walks through the door is prepared for work, both in terms of skills and attitude.”

    Some of the lessons Fokuo has learnt in entrepreneurship include accepting and overcoming failure and ensuring proper execution of strategy.

    “Everyone tells you failure is an important lesson in entrepreneurship and while that is cute to say, the reality feels like having the wind knocked out of you by a huge gorilla. If you are an entrepreneur and you fail or things don’t go your way, you need to be able to get up the next day and give it another shot no matter how tough or painful it is,” says Fokuo. “Don’t always expect the obvious and don’t be stuck in your ways and your mission statements. But you should also allow people to safely fail. Otherwise you stifle enterprise.”