Expo 2020 marks an opportunity for Middle East, African and South Asian communities on the world stage 

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In 2013, Dubai was awarded the honor of hosting the World Expo 2020 by the Bureau International des Expositions (BIE), an intergovernmental organization in charge of overseeing and regulating World Expos. His Highness, Sheikh Mohamed bin Rashid Al Maktoum, Ruler of Dubai, Vice President of the UAE, has long touted this Expo as one that belongs to the MEASA (Middle East, Africa, and South Asia) region, affirming that the region is a “world of possibilities”, a mantra that  captures the spirit of this part of the world, its people and its economic opportunities. As the MEASA region will drive the majority of future global population growth, the theme of “Connecting Minds, Creating the Future” marks a critical shift as the Global South gains heightened prominence on the world stage. 

Opportunities abound for Africa at Expo 2020 Dubai 

Her Excellency, Reem Al Hashemi, Director General of Expo 2020 has confirmed that this Expo will host the largest number of African countries to ever participate in a World Expo. Participating African nations include countries, such as Rwanda, Uganda, and Zambia. The Expo team will work closely with each delegation in order to curate a narrative and experience true to each respective nation, and enable each country to reflect its unique identity to the international community. 

The Expo 2020 is expected to host over 25 million visitors during its six-month run. With 70 percent of visitors projected to come from outside the UAE—the largest proportion of international visitors in the history of the event. Its location, Dubai, is expected to attract more citizens of African and Southeast Asian nations, many of whom were previously unable to participate in past editions due to high costs and visa requirements of the previous World Expo exhibitions held in Europe and North America. 

This Expo will also host cultural exhibitions and attractions, wellness exercises, and “virtual retreats.” Additionally, it will offer networking opportunities for international businesses, and fun academic edutainment workshops for children and adults.

Even in the age of the Internet, the offline experience still holds a special role 

Critics might argue that an Expo is hardly relevant in the age of the Internet when learning about other cultures, both remote and near, is nothing more than a click away. However, World Expos have always been an inspirational platform to convene global communities; they are a key gathering place for governments, innovators, and businesses to share innovation, opportunities, progress, and perspectives on critical global issues. World Expos are uniquely inclusive as they also welcome and invite dialogue and commentary from the general public —something few global events of this size and caliber prioritize as central to their success. 

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Emerging markets are moving to the center

The global economy, the environment, sustainable development, and improving the quality of life for our planet’s growing population are some of the big ideas up for discussion on this huge global stage. 

India is one of Dubai’s largest trading partners, and despite the negative market outlook, trade in gold, jewelry, precious stones, and electronics has thrived, leading Dubai to record a 7% jump in foreign trade this year alone. Africa’s non-oil trade with Dubai has been growing steadily over the last decade, accounting for 10.5% of the emirate’s total non-oil foreign trade in 2018, and the recent signing of the African Continent Free Trade Agreement will serve to spur further growth and trade between the respective regions.

Conclusion 

In 2021, the United Arab Emirates will celebrate its Golden Jubilee. Expo 2020 will showcase the UAE as it positions itself as a pioneer in the new knowledge economy, a key contribution as the country scales its investment in its education given that it now holds one of the world’s youngest populations.

The long term ripple effect of Expo 2020 into the city of Dubai — and the UAE, by extension — cannot be predicted, while the success of the event can only be assumed. What is assured, however, is a winning story: that this Expo will give emerging markets an opportunity to showcase their technology, art, and culture and an opportunity to pivot a narrative that for too long has been written by others. Now is the time to tell our story.

Questions about how you can prepare for Expo 2020 and build your connections within the MEASA region?
Contact Ameera Tameem, Gulf Regional Lead at Botho Emerging Markets Group, at ameera@botholtd.com 

Brief: Regulation of Healthcare Technology in Kenya (Installment I: Tech Regulation in Kenya Series)

This brief is the first part of a 3-part series examining the role of regulation in technology advancement in healthcare, education, and finance. It focuses on technology regulation in the healthcare sector in Kenya and puts forward recommendations for the improvement of regulation in this sector. Read the full introduction to the broader series here, and follow Botho’s website and social media for installments of the series in September and October 2019.

While Kenya’s Big 4 Agenda and Vision 2030 both highlight the improvement of healthcare coverage and quality as a priority area for national development, there must be a standardization of policies and procedures between the county and national levels. The Big 4 agenda aims to increase access to private insurance options, as well as substantially subsidize the cost of care. Vision 2030 aims to provide equitable, affordable and quality healthcare for a high  quality of life for all citizens. From the digitization of patient records to the improvement of diagnostics, technology can help accelerate progress towards achieving these goals. The transformative potential of digital health, however, depends on a conducive environment for innovation. Technology regulation is a complex process necessitating the participation of diverse stakeholders

Despite the fact that Africa makes up 16% of the global population and carries 23% of the global disease burden, the region accounts for a mere 1% of total global health expenditures and contributes to its $66 billion annual health financing gap. Given these stark figures, disruptive opportunities for healthcare technology across Africa have enormous transformative potential. In Rwanda, for example, American medical care company Zipline now delivers blood and medical supplies to rural doctors by drone. Following its success in Rwanda, the company recently expanded to Ghana, where 30 drones are currently in operation and distributing vaccines, blood and life-saving medication across the country. As more countries adopt an open attitude towards innovations in healthcare delivery, other nations may soon be able to tap into Zipline’s transformative approach. Kenya, for example, also recently permitted drone use for public health subject to compliance with the Kenya Drone Laws and approval from the Kenya Civil Aviation Authority.  

The first section provides an overview of Kenya’s healthcare system, including the roles of the national and county governments in healthcare delivery, as well as the relevant regulatory and policymaking bodies. The second part highlights healthcare regulation under  Kenya’s Vision 2030 along with the goal of Universal Health Coverage. This section further analyzes the role of the regulation of technology in healthcare. The third section explores challenges in regulating technology in Kenyan healthcare, the brief concludes with a final section putting forward recommendations for improvement of technology regulation in the healthcare sector. 

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Brief: Regulation of Education Technology in Kenya (Installment II: Tech Regulation in Kenya Series)

This brief is the second of a three-part series examining the role of regulation in technology advancement in education, finance, and healthcare. This brief specifically focuses on technology regulation in the education sector in Kenya and puts forward recommendations for the improvement of regulation in this sector. This first installment of the series provides an overview of the education system in Kenya and the bodies involved in education regulation.

Read the full introduction to the broader series here, and follow Botho’s website and social media for installments of the series in September and October 2019.

Technology has significantly revolutionized education by expanding access to millions of children and adults worldwide. From online degree programs to podcasts, and free Massive Open Online Courses (MOOCs), new opportunities for learning are constantly emerging for students of different backgrounds across the globe. 

While “tech” is a popular modern-day buzzword, technology has played a critical role in education for centuries. Braille, for example, has transformed the day-to-day lives of the visually impaired since its invention in the 1800s. What has changed recently, however, is the rapid pace of innovation in technology. Today, technology is accelerating improvements in the facilitation of teaching and learning. Across Africa, technology’s disruption has the potential of bridging the gap in education exclusion; sub-Saharan Africa has the highest rates of education exclusion in the world. According to UNESCO, one-fifth of children between the ages of  6 and 11 are out of school while one-third of youth between the ages of 12 and 14  lack access to education.

Despite Kenya’s impressive progress towards achieving universal primary education, significant gaps remain in its implementation. Innovative technologies in the form of platforms and mobile applications have emerged to help improve the access to and quality of education.

The first section of this brief provides an overview of the education system in Kenya and the bodies involved in education regulation. The second section highlights the importance of education in the context of Kenya’s national strategic goals. The third section explores the reasons for education technology regulation, as well as the challenges in the regulatory process, as a prelude to the fourth which puts forward recommendations for improvement of technology regulation in education. The paper finally concludes with a summary and anticipated outcomes should policymakers implement the recommendations herein.

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Introducing Tech Regulation in Kenya Series

Government regulations can positively and negatively impact innovation. In this 3-part series on technology regulation in Kenya, Botho examines how regulation can promote the use of technology by companies operating in the healthcare, education, and financial services industries. The cross-cutting importance of these industries in the general social and economic prosperity of the country informs Botho’s focus in this series. The healthcare sector has direct implications on the social and economic welfare of Kenya, through providing a high quality of life to its citizens as well as a robust labour force. The education sector is critical to equip people to respond to market needs, while financial services underpin all economic activity. In this paper, we analyse and evaluate sector-specific technology regulation in Kenya to identify new opportunities to make regulations fully responsive to rapid changes in technology as well as related economic, social, and technical conditions. 

Botho’s analysis is situated within the broader frameworks of Kenya’s long-term strategic plans such as the Big 4 Initiative and Vision 2030, given their importance to national development. This analysis is intended to highlight how Kenyan policymakers may be able to improve the interface between regulation and innovation in order to accelerate the achievement of the country’s development goals.

Read the full introduction here, and follow Botho’s website and social media for instalments of the series in September and October 2019.



Botho Director quoted by The Statesman (India) on India-Africa Investment Opportunities

While in Kolkata on 20 August 2019, Botho Director Aparupa Chakravarti spoke at an event hosted by the Bharat Chamber of Commerce about Investment opportunities for India in Africa, noting that Indians have significant investment opportunities in key sectors such as agriculture, infrastructure, and healthcare. Given the success of India’s Bollywood film industry, opportunities abound for collaboration in the creative and culture industries from film to fashion. Read the full article in The Statesman, one of India’s largest English-language daily newspapers here.

Are you an Indian investor interested in investment opportunities in Africa? Reach out to Aparupa.

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Is Less More? Prospects for Demonetization in Kenya

In an effort to tackle corruption and money laundering, Kenya will soon embark on a path of demonetization. As of 1st October 2019, over 200 million 1,000 shillings notes – the largest denomination of the country’s currency — in circulation will be discontinued after a four-month phase out. Kenyan activists such as Okiya Omtata and East African Legislative Assembly MP, Simon Mbugua, have been outspoken in their opposition to the plan in court and parliament. 

This announcement follows India’s well-documented demonetization in November 2016 which sparked an acute shortage of cash and had negative effects on economic growth, resulting in a loss of over 1.5 million jobs. Given the failures of India’s demonetization drive, will similar efforts in Kenya be successful?  With a weaker economy than that of India, critics have raised concern that the country is less equipped to weather the initial shock of demonetization.

Through a comparative analysis of demonetization drives in Ghana, India, the Philippines and Pakistan, this brief seeks to assess the potential economic effects of demonetization for Kenya. It indicates that a demonetization policy can considerably reduce illicit financial transactions and counterfeit notes through prudent policy choices. The brief also provides recommendations for policymakers regarding how to mitigate these risks. 

To learn more, download the latest Botho Brief.

Authors: Faith Nyabuto, Analytics Lead, and Shengwei Luo, Intern at Botho Emerging Markets Group

Botho Highlights Africa’s Start-Up Generation with the Rwandan Consulate of Dubai

Botho Emerging Markets Group, in partnership with the General Consulate of the Republic of Rwanda of Dubai, hosted “Africa’s Start Up Generation” at the Capital Club located in Dubai’s International Finance City (DIFC) on 17 July, 2019. 

Inspired by the Rwandan government’s drive to establish the country as Africa’s premier hub for innovation and technology, the event welcomed investors, entrepreneurs, and dignitaries from the UAE and the African Union to catalyse investment in Africa’s ICT sector. 

The dynamic panel featured the Honorable Claudette Irere, Rwanda’s Permanent Secretary of the Ministry of ICT and Innovation; Isaac Kwaku Fokuo, Botho Founder and Principal; Sanuj Kohli, Co-founder and CEO of the Leme Group, an electronics development firm with business interests throughout Africa and the UAE; and Aaron Munga, Co-Founder of Jump the Q, a high-growth tech company with a base in Abu Dhabi Global Markets (ADGM).

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Honorable Claudette Irere stressed Rwanda’s ambitions and sincerity in providing an ecosystem that was both supportive of, and beneficial for African startups, stating that “Rwanda has set up the ICT infrastructure needed to drive sustainable growth in technology. The highway has been laid out—now is the time to bring in the traffic.” The Permanent Secretary’s statement was echoed by Dr. Levi Uche Madueke, the African Union’s Head of Strategic Partnerships, who affirmed these sentiments noting, “The leaders of Africa are listening to our youth. We have heard you, and we are supporting you.” Both comments were met with great enthusiasm by panelists and guests. 

Africa’s Sub Saharan region is expected to spend over $90 billion on ICT by 2021, while countries such as Ghana, Egypt, and South Africa continue to experience double-digit growth in their ICT sectors. For example, Ghana’s Eastern Corridor fibre optic project was completed in 2015 at a cost of $38 million and now spans almost 800 km and connects over 120 communities. Rwanda, where nearly 97% of the population has access to the 4G/LTE network buildout, is similarly supporting the digital economy by investing in new infrastructure and value-added mobile services. The government has also invested in technology and innovation hubs, in addition to successfully encouraging world class institutions to establish a local presence. 

Rwanda’s “one laptop per child policy,” as well as its investment in the Kigali Innovation Fund and Kigali Innovation Center, has earned the country a global first ranking for its efforts to leverage ICT to accelerate social and economic transformation.

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Over the past decade, the private sector has invested over $50 billion in Africa’s ICT. Meanwhile, governments have expanded access to broadband by installing undersea cables, tripling bandwidth, and helping to democratize access to the internet throughout their respective countries by adopting policy and regulatory frameworks that lower the cost of internet access, subsequently increasing the number of Africans with online access.


These efforts are bearing fruit: Kenya is now home to more than 300 start ups while firms such as Dell pledged over $20 million to invest in South Africa’s ICT sector. Panelist Sanuj Kohli believes that “The next billion dollar company will be from Africa, and it will be sooner than we think” while Aaron Munga added, “Africa is an opportunity, not a risk - and anything that succeeds globally, can succeed on the continent, as well.”

Botho’s Founder and Principal Isaac Kwaku Fokuo summed up the panelists’ sentiments by stating, “Technology and innovation are Africa’s future. They are what will propel us forward and level the playing field - beyond commodities and agriculture. The UAE is a global leader in knowledge and innovation - together let us learn, let us share, and let us excel.”


For more information on Rwanda’s tech sector or to explore partnership opportunities in the Gulf Region, please contact Ameera Tameem, Regional Lead, at ameera@botholtd.com 



Botho research quoted by RFI

Botho’s recent African Arguments op-ed on “The AfCFTA is laudable, but its imminent benefits are overstated” was recently quoted by Radio France Internationale (RFI), France’s international broadcaster. Read more here.

The African Union has unveiled the first steps of a nearly continent-wide trade accord, outlining how tariffs within Africa will be phased out to provide a boost to continental economies.

"It's a remarkable achievement, and one that can even be described as historic," said AU Commission chief Moussa Faki Mahamat at a summit in Niamey, Niger, on Thursday.

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The agreement is hailed as a way to promote intra-African growth by encouraging trade within the continent. It is touted as creating a previously a non-existent space for jobs for youth that cut across borders.

This pact has been a long time coming. Talks began back in 2002 in an effort to find African solutions to African problems.

Phase 1, tariffs

The AfCTA zone will eliminate customs duties on 90 percent of goods. Seven per cent of goods are considered “sensitive”, and not part of the deal, though their tariffs will be eventually phased out. The remaining three percent of tariffs will remain.

Backers of the deal are estimate that it will lead to a 52.3 per cent increase in trade by 2022, an calculation that is not set in stone, according to Archie Matheson, head of policy for the Botho Emerging Markets Group.

“Continent-wide trade facilitation measures have not been introduced; there is not a common external tariff; and full liberalisation – the removal of tariffs on all goods – will not take place under current plans,” he writes in African Arguments.

“The allocation of goods to these different categories has yet to be negotiated; countries and customs unions are currently preparing offers for their continental counterparts to consider."

Botho research quoted by Business Daily Africa

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All has not been with Africa’s trade fabric amid standoffs over market access.

For example, Kenya’s milk has had difficulties over time in accessing the Zambian market, while the actual sell-by date of the Kenyan tea has been a subject of controversy in Sudan because of different standards.

And as the heads of state meet this Friday in Niger for the first extraordinary meeting of the African Continental Free Trade Area (AfCFTA), the standard differences will remain to be the elephant in the room on implementation of the pact.

Zambia rejected Kenya’s milk more than a decade ago, saying it has a level of bacteria that’s beyond the country’s required maximum.

Zambia allows total bacteria count (TBC) of 200,000 while Kenya follows the international benchmark of one million TBC.

These differences in standards applied by member states can dampen a noble idea on the free movement of goods and services in the continent.

Harmonising standards

In light of this, World Trade Organisation (WTO) and Common Market for Eastern and Southern Africa (Comesa) have started harmonising standards to break the bottlenecks that might hinder free trade of goods among member states.

Kenya is the second country after Uganda, to start implementing the project with the inception meeting and high-level stakeholder dialogue that took place last week in Nairobi.

The project, titled ‘Mainstreaming Sanitary and Phytosanitary Standards (SPS) Capacity Building into the Comprehensive Africa Agriculture Development Programme and other National Policy Frameworks to Enhance Market Access,’ (P-IMA) aims at harmonising different standards in the continent.

Standards and Trade Development Facility, an agency of the WTO, supports the programme.

The P-IMA framework is an evidence-based approach to inform and improve SPS planning and decision-making processes. It helps to link SPS investments to public policy goals including export growth, agricultural productivity, and poverty reduction.

According to a joint study the East African Business Council and Botho Emerging Markets Group, AfCFTA and Tripartite Free Trade Area (TFTA) conducted, each has the potential to transform the operating and commercial environments for East African businesses.

Read more here.

The Eritrea-Ethiopia Peace One Year On: Prospects for Business

Notwithstanding increased political and diplomatic cooperation between the two countries, on the ground implementation of key economic and security provisions of the agreement is lagging. 

Rapprochement between Eritrea and Ethiopia is key for much needed regional economic cooperation, but more is required to translate peace into investment and business opportunities. 

There remains critical opposition to the agreement within Ethiopia, particularly from the Tigray region, while growing ethno-nationalism in Ethiopia can seriously complicate matters. 

On 9th July, 2018, Eritrea and Ethiopia signed the Joint Declaration of Peace and Friendship, ending a 20-year dispute. This milestone was soon followed by the ‘Jeddah Agreement’ on 18th September, which resulted in the reopening of trade and diplomatic relations, leading to official visits by respective leaders, the re-establishment of embassies, the resumption of international flights, and the re-connection of telephone lines, allowing families divided by a heavily militarised border to communicate with and visit each other for the first time in decades. 

Peace between Eritrea and Ethiopia is a key element to launch much needed regional economic and investment cooperation in the Horn of Africa. Landlocked Ethiopia is currently relying on the port of Djibouti for approximately 95% of its exports and 90% of its imports. There is growing concern over the ability of the port of Djibouti to handle the economic needs of Ethiopia, a country of more than one hundred million inhabitants. Access to Eritrean ports (as well as Somaliland) is thus a key element to enhance Ethiopian economic development. A feasibility study for the construction of a joint Ethiopia-Eritrea railways has been launched in June, with the support of the Italian government and the World Bank. 

However, one year after the peace agreement, key provisions remain to be implemented. The Ethiopian army has not yet withdrawn from the contested Eritrean town of Badme, despite Ethiopian Prime Minister Abiy Ahmed’s commitment to do so. The two countries have not yet agreed on the exchange rate of their national currencies, a key requirement for any meaningful economic cooperation. Furthermore, in April, Eritrea closed all its border crossing roads with Ethiopia, without providing an explanation.

More importantly, there remains resistance to the implementation of the agreement from the leadership of the Tigray region, which was once dominant in Ethiopia but now ousted by key government positions in Addis, following the arrival of Prime Minister Abiy in power. Since the region of Tigray borders with Eritrea, its buy-in remains key for the smooth implementation of cross-border trade and economic activities. Although it accounts for only six per cent of Ethiopia population, the Tigray region is the most military-prepared and politically-disciplined federal state of Ethiopia. 

Concerns of growing ethnonationalism in Ethiopia and opposition from powerful regional leaders may hamper Abiy’s broader reform programme and have a serious impact on Ethiopia’s stability, as the late June coup attempt from the Amhara constituency illustrated. Abiy will be now totally focused on navigating domestic politics, with little time – and political capital – to spend on implementing peace with Eritrea. At the same time, many are sceptical about the real interest of Eritrean President Afwerki in implementing the agreement, as it would open Eritrea to all kinds of democratic pressures from Ethiopia. Eritrea remains a closed security system and Afwerki is one of the longest sitting African presidents.  

In the short-medium term, our base case scenario (representing a 50% probability of occurrence) is a continuation of the status quo. The two countries continue political relations, but fail to make significant progress on economic and trade cooperation. Ethiopia’s economic liberalisation agenda survives, but at a slow pace. Eritrea continues to be an attractive market for large multinationals in the extractive sector, but remains a highly difficult (and risky) landscape for foreign companies. 

However, the possibility of a deadlock in Ethiopia is not negligible (a 25% probability), particularly if Abiy starts losing legitimacy and 2020 elections are postponed. Ethno-nationalism and intercommunal violence – at the highest level of intensity in twenty-five years – can lead to demands for self-determination from increasingly autonomous regions and, most worryingly, the country’s fragmentation along ethnic lines (as in the case of former Yugoslavia).

An improvement of the situation is equally unlikely but possible (a 25% probability). Confronted by reality, Abiy could engage seriously with different constituencies in the country, including the Tigray region leadership. The Ethiopian economy recovers thanks to foreign acquisitions of key Ethiopian telecommunication and aviation companies. Ethiopia returns as a strong and stable regional actor. The military withdraws from remaining Eritrean territory. Lastly, Eritrea has no option other than to start meaningful economic cooperation with Ethiopia and gradually open up as a destination for foreign businesses. 

For enquiries, please contact info@botholtd.com or call +254 724 965 905.

Download the full brief here.


Op-Ed: The AfCFTA is laudable, but its imminent benefits are overstated (African Arguments)

By Archie Matheson, Head of Policy and Analytics, Botho Emerging Markets Group

The African Continental Free Trade Area’s (AfCFTA) entering into force is a laudable development, building on existing initiatives for regional integration and laying the groundwork for more. The immense support from countries and leaders across the continent is merited.

At the same time, however, AfCFTA’s strong political backing and the excitement surrounding its rapid progress has led to some claims of its potential benefits going unchallenged, particularly surrounding intra-African trade gains. Most commentators appear reluctant to interrogate publicly a popular pan-African project, even when this analysis might be constructive.

This is a problem because a misleading impression has been created that signatory countries should soon enjoy the benefits of improved trade levels. Specifically, following repeated citations by international organisations and the media, the estimate that AfCFTA will lead to a 52.3% increase in intra-African trade by 2022 is now widely taken as a given. The African Union quotes this figure as if it were fact, while the UN Economic Commission for Africa (UNECA) and the United Nations Conference on Trade and Development (UNCTAD) suggest such an eventuality is “likely”. The statistic has been repeated frequently by dozens of news outlets, from Al Jazeera to Fortune.

Though seldom cited, this number comes from a paper presented in 2012 by two UNECA specialists to the 7th African Economic Conference. And, importantly, the report’s authors make clear that their projection of a 52.3% increase by 2022 – compared to a 2010 baseline – is based on several assumptions: a fully-liberalised and continent-wide trade area by 2017; harmonisation of external tariffs across the continent by 2019; and a series of practical trade facilitation measures.

However, here in 2019 none of these assumptions are reflective of the current situation: free trade under AfCFTA has not yet begun; not all countries have signed up to AfCFTA; continent-wide trade facilitation measures have not been introduced; there is not a common external tariff; and full liberalisation – the removal of tariffs on all goods – will not take place under current plans.

Instead, 90% of goods will be liberalised over the course of 5-8 years; 7% of goods will be classed as sensitive and liberalised over 10-13 years; and 3% of goods will be exempt from free trade entirely. The allocation of goods to these different categories has yet to be negotiated; countries and customs unions are currently preparing offers for their continental counterparts to consider.

Therefore, it is unclear what the impact of AfCFTA will be, and when it will start to be felt. Even so, it is highly likely that the inclusion of exempt goods will limit intra-African trade gains. Given the narrow range of industries and produce in many African countries, a few exemptions could easily end up covering a high proportion of a country’s exports, so restricting potential new regional trade.

An anti-concentration clause is intended to ensure no more than 10% of the value of recent imports from AfCFTA countries is designated as exempt, but higher tariffs may still persevere. The East African Community’s (EAC) draft offer, for example, calls for all products with current tariffs of 35% or more to qualify for exemption.

All this suggests that the intra-African trade benefits of AfCFTA will neither be as imminent nor as large as suggested by the widely-cited 52.3% figure. With this in mind, it is imperative that the project does not detract energy and resources from initiatives that are having more immediate impacts on intra-African trade and economic growth.

For instance, already-existing trade areas such as the EAC and the Common Market for Eastern and Southern Africa (COMESA) have already introduced regional free trade, but still contend with several practical challenges around non-tariff barriers. Arguably, these issues should be addressed before dedicating too much attention to more ambitious continental initiatives, especially as regional challenges will be the same as those with which the AfCFTA will eventually have to contend to be successful. Indeed, the preamble to the agreement establishing AfCFTA acknowledges existing Regional Economic Communities “as building blocs towards the establishment of AfCFTA”.

Highlighting these uncertainties is not a criticism of the admirable goals of AfCFTA, which in the long-term is still likely to have a markedly positive impact on the intra-African trade of goods and services. Rather, it is recognition that in the next few years, and perhaps further into the 2020s, its impact will likely not be as pronounced as suggested by some of its proponents. It is vital that expectations of governments and businesses are managed, and that signatories have the patience to deliver a project over what will be a long time period.

African Continental Free Trade Area & Tripartite Free Trade Area: Differences, progress, potential impact, and why East African businesses need to engage

DOWNLOAD THE LATEST BRIEF HERE

The planned African Continental Free Trade Area (AfCFTA) and Tripartite Free Trade Area (TFTA) each have the potential to transform the operating and commercial environments for East African businesses. Beyond geographical coverage, the potential agreements are set to have markedly different ramifications. However, political and especially media commentary has failed to interrogate and present what each trade agreement might entail in practice, and when.

With the admirable aspiration to incorporate the entire African continent, the younger AfCFTA agreement has received consistently high media attention, primarily due to the strong political backing which has led to the 22 country ratifications needed for enforcement within only 13 months. However, analysis has tended to overlook AfCFTA’s upcoming negotiation challenges, its potentially lengthy transition periods, and its relatively limited level of ambition regarding liberalisation. By passing over these critical details, existing commentary can be misleading: the impression is often given that a continent-wide comprehensive free trade area, with a markedly positive impact on intra-African trade, will be felt imminently. 

By contrast, the more gradual ratification progress for TFTA has resulted in significantly less media attention and analysis, meaning numerous East African companies which would be directly affected by TFTA are unaware even of its existence, let alone its progress and possible impact.

The result is a widespread lack of awareness across the East African private sector – and beyond – of the current state of negotiations and the potential consequences of AfCFTA and TFTA. This knowledge gap represents a critical problem, since businesses should have advance understanding of likely changes, both to engage with their governments for ongoing trade negotiations, and to prepare for the opportunities and risks these agreements might bring.

This brief seeks to address the evident need for sensitisation on the most fundamental AfCFTA and TFTA issues, giving clarity on what each agreement might entail, when, and a snapshot of progress as of the end of May 2019. While drawing attention to a level of uncertainty surrounding AfCFTA which is not currently being acknowledged by its political proponents and the media, it also points to the need for both increased engagement by the East African private sector in ongoing negotiations and industry-by-country analyses following final tariff agreements; importantly, these studies should address not only the more eminent AfCFTA, but also TFTA.

To read the latest brief in partnership with the East African Business Council, download here.

Botho co-hosts Rwanda Investment Showcase in Sharjah, UAE

Botho Emerging Markets Group, in partnership with the Sharjah Chamber of Commerce and Industry and the Consulate of the Republic of Rwanda hosted the Rwanda Investment Showcase on 23rd April 2019. This event introduced the GCC investors and private sector to exciting investment opportunities and prospects in Rwanda, one of the top 10 fastest growing economies in the world. The event was covered by Gulf News — read more here.

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Yasmin Dalila Amri, Chargé d'affaires of the Rwandan Consulate, commented: “Rwanda is constantly expanding incentives for GCC businesses to invest across all economic sectors, including the recent introduction of a double taxation agreement.” Recent major investments in Rwanda include a $50 million commitment by UAE-based Sheikh Rakadh Group in the Rwanda Smart City Master Plan, a vision for tech-centred development that mirrors the values of the UAE’s own Vision 2030.

During the event, Botho Founder and Principal Isaac Kwaku Fokuo Jr. also highlighted the longstanding ties between East Africa and the UAE across cultural, historic, and economic lines.  This legacy holds particular resonance for the Emirate of Sharjah, which first hosted the Arab-African symposium in 1976 in Africa Hall, known today as the Africa Institute.

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Panellists, including Sanjeev Gupta from the Africa Finance Corporation, Stuart Fleming from Enviroserve UAE, and Uday Bhasin from Tradeways Investment, each spoke of their positive experiences working in Rwanda. Gupta noted, “Rwanda’s strategic position allows investors to manoeuvre throughout the African continent with ease. Rwanda’s landlockedness is not an impediment — if anything, it’s a big advantage.” The country is uniquely positioned as a member of two major regional economic blocs, the East African Community (EAC) and the Common Market for Eastern and Southern Africa (COMESA), which make Rwanda a gateway to a collective market of over 560 million people.

H.E. Abdallah Sultan Al Owais, Chairman of the Sharjah Chamber of Commerce and Industry, echoed these sentiments during his opening remarks when he lauded the UAE's efforts to establish strong and fruitful trade relations with African countries. “The volume of non-oil trade between the UAE and Africa hit AED 140.5 billion ($38.3 billion),” he said. “The UAE is the second largest Middle Eastern investor in Africa with a 12% share of total foreign direct investment, which is on the rise. Rwanda is carving a niche for itself in the COMESA community, and has repeated that it is open for business time and time again - it's time we listen.”

Today, Rwanda has attractive investment opportunities extending beyond agriculture, the country’s largest sector. The nation now has a thriving infrastructure and construction sector, with promising new opportunities in other dynamic sectors such as technology and education with considerable support from its government. Over 95% of the country is now covered by 4G, making it home to one of the fastest Internet speeds in Africa.  

Learn more about these and other promising investment opportunities in Rwanda here and also follow Botho’s news and research for more insights on trade and investment between the Gulf region and Africa.  

Study: Competing in the Digital Age - The Development of IT Skills and Jobs in Kenya and Uganda

Botho is proud to have supported on Mercy Corps and Moringa School’s latest study, Competing in the Digital Age: The Development of IT Skills and Jobs in Kenya and Uganda,” which was recently debuted as a part of Nairobi Tech Week.

The report relies on the inputs of a broad range of stakeholders in the ICT and adjacent ecosystems in Kenya and Uganda, who shared their views and advice for the preparation of the document. We thank the survey respondents from both countries and interview participants from the Kenyan and Ugandan government, technology hubs and start-ups, academic institutions, private sector firms, ICT services providers, and members of the international donor community who generously contributed their time to this study.

Download the full study here.

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Rethinking Tax Incentives In Kenya’s Investment Promotion Efforts

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A recent court ruling declaring the Kenya-Mauritius Double Taxation Avoidance Agreement (DTAA) void has sent Kenya back to the negotiating table with Mauritius. The court’s judgment is based on the fact that the DTAA was not properly ratified under Kenyan law. Kenya’s government argues that the treaty promotes investment and jobs; however, critics such as the Tax Justice Network Africa (TJNA), which filed this suit, argue that DTAAs rarely lead to any benefits for developing countries. TJNA argues that instead, they result in massive revenue leakage for African countries which outweighs incoming foreign direct investment (FDI).  

Should countries therefore abandon the use of DTAAs? The answer more likely lies in the middle: to bring real benefits to the economy and promote local market potential, countries should balance between the use DTAAs and other tax incentives such as special economic zones (SEZs).

Kenya’s DTAA with Mauritius was signed in 2014 with the hope of boosting foreign direct investment, but the benefits of the agreement were poorly defined from the outset. Similar to any policy, DTAAs must be rooted in clear and measurable objectives supported by equally clear policy levers to ensure that revenue generated from the resident country is not leaked through tax avoidance schemes like profit-shifting. Studies show that DTAAs signed between countries with asymmetric investment positions are less likely to lead to any benefits for developing countries. In the Netherlands, for example, DTAAs led to forgone revenue of at least USD 863 million for developing countries in 2011.

Given Kenya's current budget deficit of USD 3.75 billion, it is critical that efforts to attract FDI such as DTAAs do not cannibalise local efforts to improve tax revenue. Numerous studies show that countries rarely achieve substantive FDI levels to make up for the revenue losses these DTAAs cause. The failed Kenya-Mauritius DTAA is not the first time a tax agreement with the island nation has been subject to controversy: in 2017, India reviewed its DTAA with Mauritius after reports showed that it had opened room for tax avoidance resulting in revenue leakage of about USD 600 million annually. In 2016 alone, Mauritian firms injected more than USD 50 million into the Kenyan economy, a 72 percent increase from 5 years prior. If the Dutch and Indian examples are any indication, Kenya could be losing far more. Lost corporate revenue is income that Kenya urgently needs to meet its development objectives. A shift to other tax incentives whose impact is more ascertainable may be more effective for many developing countries.

If the goal of DTAAs is to increase foreign investment in Kenya, they must be considered in conjunction with the broader ecosystem of policy instruments that can be used to increase tax revenues to achieve Kenya’s four priority pillars for economic growth. The government hopes to raise the manufacturing sector’s share of the GDP from 9% to 15%, and create 1.3 million jobs in this sector by 2022. To achieve this, governments should explore specific tax incentives that can provide direct benefits to these areas, such as special economic zones, which aim to maximise the “cluster effects” of activities through knowledge and supply chain integration, centralised access to critical infrastructure like roads and electricity, as well as enhanced support from local government.

Kenya in making strides to use other tax incentives such as Special Economic Zones should borrow lessons from its neighbours on reaping full benefits from SEZs. Rwanda, for example , has successfully leveraged SEZs to promote growth.  In 2016, the Kigali Special Economic Zone (KSEZ)  employed 2% of the country's permanent employees, and accounted for 2.5% of all VAT reported sales. In Kenya, the government has already designated Mombasa, Kisumu, and Lamu as the future SEZs but to maximise their impact and avoid the development of enclaves, it is essential that firms in these SEZs interact with firms outside the zones and that the government ensures knowledge and best practices developed are shared across the economy.


Tax incentives alone will never be the sole factor attracting investors -- to increase FDI, Kenya must continue to demonstrate strong market potential by providing business support and trade facilitation services. KPMG finds that Kenyan products are among the top four countries in Africa that score above the global average in terms of competitiveness on the international market; however, it still takes an average of 22 days to start a business -- compared to 6.5 in Egypt and 14 in Ghana -- and poor availability of market data can complicate efforts at local expansion. To improve the country’s competitiveness, the Kenya Investment Authority should improve the availability of data for investors by working more closely with the Kenya Bureau of Statistics. Reducing business costs, for example, by bringing down the cost of imports for required goods or improving data quality to support manufacturing and value-added services will always outweigh lowering taxes.


The DTAA ruling prompts a careful re-examination of how to increase FDI without incurring unintended knock-on effects like tax avoidance. To do this, Kenya must enhance its capacity when negotiating bilateral agreements, and enact policies to support proper implementation of these agreements. In its use of tax incentives, it is critical that the scales are always tipped in Kenya’s favour. The impact of each incentive employed must be clear and measurable to ascertain that its benefits outweigh any associated costs.

Bathsheba Asati is a Research Analyst at Botho Emerging Markets Group

Faith Nyabuto is the Analytics Lead at Botho Emerging Markets Group

Evolving Insolvency Law: A Lifeline to Debt Laden Companies in Kenya

The 2008 financial crisis sparked a widespread assessment of global insolvency laws and identification of effective instruments available for financially distressed companies. The financial services industry’s self-examination has generated one practice that has now become increasingly popular: the introduction of restructuring options within existing insolvency laws to give failing companies a pathway to solvency. Studies have shown a positive correlation between insolvency law reform and the survival rates of distressed companies; these laws have also been found to promote job preservation.

In 2016, Kenya enacted the Insolvency Act, which now allows for insolvent companies to be rehabilitated. The Act introduced two new procedures, administration and company voluntary arrangements (CVA), commonly referred to as out-of-court restructuring. With liquidation of insolvent companies bearing potential losses to creditors of up to 85%, restructuring emerged as a preferred alternative. However, recent high-profile cases of insolvency highlight the need to further develop this restructuring framework. Some of the recent high-profile insolvency cases include:  ARM Cement, Nakumatt, Uchumi, Deacons, and Kenya Airways - who have a collective debt of over $2bn.

A successful restructuring is not only one that restores the company back to solvency, but also ensures high returns to creditors.This brief examines the emerging practices in resolving insolvency in Kenya, highlighting its shortcomings, and makes recommendations on how the process can be more balanced and efficient. The first two sections will give an overview of the benefits of restructuring, and the approach Kenya has taken to resolve insolvency. The last two parts highlight areas of intervention identified through our analysis.

To learn more, download the latest Botho Brief.

Author: Bathsheba Asati, Research Associate, Botho Emerging Markets Group

Kenya in a Globalised World -- Where is the Balance Shifting?

By Aparupa Chakravarti, Director, Botho Emerging Markets Group

In a world of shifting alliances and spheres of influence, countries must think strategically about their bilateral and multilateral relationships in order to better anticipate evolving challenges and opportunities. This is particularly necessary to hedge against fluctuating sources of global turbulence and uncertainty. As Kenya contends with volatility among some of its most influential external partners, notably the United States, the United Kingdom, and China, the country will soon chart new waters with these long-term partners while deepening those with promising new and  unconventional partners amongst its African and emerging market peers.

Ambiguity in US-Kenya Trade Due to Protectionist Administration and Slowing Economy  

With $572 million in Kenyan imports in 2017, the US is one of Kenya’s top 3 trading partners. Notably, 70% of Kenya’s exports to the US, which are largely agriculture and apparel, fall under provisions of the African Growth and Opportunity Act (AGOA). AGOA aims to stimulate economic growth, encourage economic integration, and facilitate sub-Saharan Africa's integration into the global economy through duty-free imports of African goods. Although AGOA was recently extended to 2025, its status as a United States Trade Act -- rather than a trade agreement -- means that it can, at any time, be “amended, extended or repealed for example through an Act of Congress.” Given the Trump Administration’s threats to undermine core principles of multilateral trade and skepticism of long-standing pillars of US commercial diplomacy such as NAFTA, no trade agreement is safe -- AGOA included. Considering the central role that AGOA plays in US-Kenya trade, volatility in US trade relations would have a disproportionate effect on Kenyan exports.

Furthermore, with the US economy projected to lose momentum this year due to the risk of a recession in 2020, Kenya is likely to feel the impact through a knock-on reduction in remittances, the country’s largest source of foreign-currency. While it is too early to ascertain the exact impact of the US slowdown on the Kenyan economy as some analysts argue that the forecasts are overstated, the shadow of a sluggish US economy undoubtedly adds an additional layer of ambiguity to the future of US-Kenya trade.

Brexit Brings Mixed Benefits for Kenya
Like the US, the UK’s foreign policy future remains uncertain, as Whitehall prepares to exit the EU this year. While Brexit propels the UK to build new trading partnerships, Theresa May and her government have signalled their intention to leverage the Commonwealth to plug the trade gap. However, African countries might not benefit as much as anticipated: developing countries stand to lose trade preference to the UK that allow them to export their goods with low or no customs. The EU has existing trade deals with more than 70 countries including Kenya, which the UK would lose in the event of leaving without a deal. While the UK has pledged to replicate these existing deals, as of February 2019, it had only signed continuity deals with members countries of the Eastern and Southern Africa (ESA) region, which includes Madagascar, Mauritius, Seychelles and Zimbabwe. Without a trade deal between the UK and Kenya, tariffs will be set in accordance with World Trade Organization (WTO) rules.

This shift in status would substantially affect Kenya as the UK is its third largest trading partner.  One of the clear effects is a potential hike in tariffs. In the case of Kenya, this could be to the tune of over 5% of the value of Kenya’s exports to the UK. Kenya’s rapidly growing flower industry alone faces an additional £3.6m annually.

New Chapter for China-Kenya
China represents another uncertain area for Kenyan trade diplomacy due to a slowing economy, which has dropped to its lowest annual rate in three decades, partially fuelled by China-US trade friction. Kenya has another pressing cause for concern: its loan repayments to China for the Standard Gauge Railway are set to triple this July, as the five-year grace period extended by Beijing in May 2014 draws to a close. A depressed economy is likely to dampen Beijing’s willingness to extend this grace period further or to negotiate repayment terms. Furthermore, there are other developments in China that also merit attention: recently, for example, the Chinese government introduced a tax cut for Small and Medium Enterprises (SMEs) in China in an effort to boost local manufacturing. For Kenya, this is likely to result in cheaper imports competing with domestic producers. In 2017, China was Kenya’s top import origin, with trade topping $3.91B.  To reduce over-reliance on Chinese goods and ease competitive pressure on Kenyan manufacturers, Kenya might consider sourcing products from neighbours as well as other emerging global manufacturing behemoths such Vietnam, Indonesia, or Bangladesh, in tandem with bolstering domestic manufacturing capabilities.

Promising Horizons Across The Red Sea
Given uncertainties of trade relations with the US, UK, and China, Botho Emerging Markets Group recommends that the Kenyan government and private sector should explore high-potential partnerships with Gulf state allies, particularly the UAE and Saudi Arabia.

The UAE and Saudi Arabia are the second ($11 billion) and fifth ($3.8 billion) largest investing countries in Africa by capital investment. Both countries also rank among Kenya’s top 5 import origins. Saudi Arabia and the UAE have positive, if modest, growth projections for 2019 - 2.4% and 3.7% respectively, according to the IMF - driven in part by a bid to diversify their economies into non-oil sectors.

The Red Sea region, in which Kenya is often included, has the potential to be far more than a mere geographical demarcation. Comprising 28 countries with a collective GDP of close to USD 2 trillion,  the Red Sea accounts for an estimated 10% of all global maritime trade. Yet, intra-regional trade is relatively low - 16% as of 2015 compared to 69% for the EU - despite the existence of compelling asymmetrical opportunities. For example, even though roughly 30% of Sub-Saharan Africa’s non-oil exports are food products and GCC countries are net food importers, the majority of the GCC’s food imports is sourced from non-Red Sea countries.

Looking at the Horn of Africa, specifically, Gulf countries have increasingly solidified their presence in the region, fuelled by geopolitical and economic interests. Ethiopia is progressively asserting itself as both a political and economic powerhouse within the region, re-establishing old ties, such as with Eritrea - that too, under the aegis of Saudi Arabia - and positioning itself as a regional manufacturing hub. In order to effectively tap into the Gulf investment community and growing interest in commercial partnerships, Kenya must bolster its commercial diplomatic efforts and leverage its status as East Africa’s largest economy to attract more Gulf capital to fuel its developmental ambitions.

For Kenya to maintain and reinforce its position as a regional leader, the country must diversify its risk in a turbulent global economy. Central to this is building new relationships with non-traditional trading partners, such as the UAE and Saudi Arabia, as well as bolstering relationships with neighbours in the region.

Botho Op-Ed for The East African on Regional Free Trade Opportunities

The op-ed below, written by Archie Matheson, Head of Policy and Analytics at Botho Emerging Markets Group, was originally published by The East African on 4 March 2019, and highlights the challenges of implementing the proliferating web of trade agreements in the region.

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Amidst the hope and enthusiasm surrounding the potential Continental Free Trade Area, we are neglecting one of the most important offices behind practical regional economic integration.

Though discussions of African trade during 2018 were dominated by the agreement to establish a Continental Free Trade Area (CFTA), even if ratified during 2019 its practical outcomes will not be realised for many years; substantive discussions on rules of origin and tariff lines have not yet taken place. By contrast, should the Tripartite Free Trade Area (TFTA) by ratified by the requisite number of countries – as seems possible during the coming months – over 90% of tariff lines have already been agreed, meaning actual implementation would take place in the shorter term. Indeed, by combining COMESA, EAC, and SADC – thus including over half the continent’s countries – TFTA will undoubtedly be, and to an extent already is, the primary building block of any CFTA.

In turn, the creation of TFTA is depending heavily on existing procedures and ideas from COMESA. Thus, it would be fair to say that COMESA is a driving force of regional economic integration. Within COMESA, below the ultimate decision-makers – the COMESA Authority and Council of Ministers – are the brains and engine of progress, the COMESA Secretariat. For trade matters, it is the Secretariat’s duty to support the drive for higher intra-COMESA trade in line with established protocols.

And within the Secretariat there is a department which puts this responsibility into practice, an office small in size but large in mandate: the Directorate of Trade and Customs. Given the role of COMESA on the continental stage, it is perhaps the most important office related to African trade, active in three main areas.

The Directorate helps to resolve trade disputes, relating to both rules of origin and non-tariff barriers (NTBs), covering both trade in goods and trade in services. It is called upon to give official opinion, share recommendations, arrange dialogue between disputing parties, lead on-the-spot verifications, and, if necessary, refer cases to the Council of Ministers. In January 2019 alone, three full interventions were needed and successfully completed.

It develops ideas and policies which are then presented to the Council for approval, seeking greater harmonisation and introducing trade facilitation measures. As an example, it was the Directorate which developed the NTB Reporting System which was implemented by COMESA, subsequently adopted by TFTA, and due to be discussed for incorporation into CFTA at this month’s UNCTAD meeting.

Furthermore, it leads trade negotiations on behalf of COMESA with multiple trade partners. These include talks on TFTA, CFTA, EPAs with the EU, AGOA with the US, and bilateral agreements with numerous countries. By providing extensive support for COMESA’s Council of Ministers, the Directorate is the engine room which facilitates the effective functioning of free trade across COMESA, and beneficial trade beyond.

For an office with such far-reaching responsibilities, it would be reasonable to expect an array of specialists, sufficient in number to cover the rules of origin, NTB, and small-scale trade issues which arise under Trade in Goods, or the challenges posed within the 12 separate sectors which sit under Trade in Services; experts to drive improvement in trade facilitation; and negotiation specialists for the multitude of international trade agreements.

Yet, staggeringly, the Directorate has only four full-time staff: a Director, Senior Trade Officer, Senior Customs Officer, and a Senior Research Fellow. They are assisted by no more than a handful of shorter-term contract staff. Although through its Trade Facilitation Regional Programme the EU will shortly fund two new project staff to deal with small-scale trade, total numbers are chronically insufficient. The consequences for COMESA members, importers, and exporters are costly – not through a lack of will or ability, but a lack of funding and corresponding capacity.

When trucks or containers are held at land borders or ports, they incur charges daily; resolutions are required within days, rather than weeks or even months. Often these charges are easily avoidable, but instead result in needless costs for exporters and importers – and ultimately producers and consumers. As an example, each time an on-the-spot verification is needed, one senior staff member must travel, leaving the Directorate severely short-handed. If two verifications are needed at once, one dispute must wait – one of several instances was in May 2017, when Kenyan food and beverage importers incurred huge expenses as their containers of Mauritian industrial sugar were held waiting in Mombasa, since the relevant official was tending to an Egypt-Sudan dispute over ceramics. These manufacturing businesses lost money, and had a greater inclination to look for non-COMESA sugar thereafter.

The team is not large enough to manage intra-COMESA issues, let alone negotiations relating to regional integration and global trade. Can member states be sure that they will be getting the best possible trade deals? Further, there simply isn’t the bandwidth to dedicate time to additional innovative trade facilitation development, or to encourage and secure member endorsement of harmonisation procedures.

Having been elected as COMESA’s new Secretary General, Chileshe Kapwepwe suggested that the opportunities offered by COMESA and further regional integration are seized, but also highlighted that this requires a well-managed, well-resourced COMESA that is appreciated by its member states. Together with development partners, members states need to respond to this call to action, for while they extol the virtues of the more distant CFTA, they can realise more immediate benefits by investing in an overworked office which is central to functional African trade.

The Essential Oils Industry in Rwanda

The essential oils industry in Rwanda offers investors a niche and high-value opportunity in an underdeveloped and high growth market.

Essential oils are concentrated plant chemical extracts obtained by distillation or mechanical methods that have the characteristic fragrance and flavour of the plant or other source from which they were extracted. Once the chemicals have been extracted, they are either sold as pure oils or combined with a carrier liquid to create a product that is ready to use. There are over 90 commonly used essential oils, with widely-used oils including orange, lavender, peppermint, eucalyptus, patchouli, geranium, and avocado.

The global essential oils industry is currently valued at approximately USD 6 billion, with this number expected to grow to around USD 13 billion by 2023. Essential oils are increasingly being used in a number of high value industries, including: Flavour and Fragrance, Beauty and Cosmetics, Food and Beverage, and Pharmaceuticals.

The rapid increase in demand for essential oils is being driven by several factors, most notably:

  1. Rise in disposable consumer income, particularly in Asia, Latin America and Africa, and

  2. Changing customer habits, with a growing interest in naturally-sourced products.  

Rwanda is well-placed to take advantage of the increasing demand for essential oils. The country has the climate and soil to produce high-quality and high-volume plants, particularly patchouli and geranium, from which two of the most popular essential oils are produced. Rwandan farmers can produce three or four harvests a year, a clear advantage compared to many other essential oil producing countries (e.g.  South Africa has only two harvests a year).  

The Rwandan government has identified the modernisation of its agricultural sector as an important aspect of its Economic Development and Poverty Reduction Strategy (“EDPRS”), currently transitioning from its second phase (EDPRS-2, which ran from 2013 to 2018) to its third phase (EDPRS-3, running from 2018 to 2023). Central to the government’s strategy is the move to producing high-value crops, with the plants used in manufacturing essential oils (e.g. patchouli and geranium) recognised as one such opportunity for farmers in the country.

A central tenet of the government’s EDPRS-2 and EDPRS-3 strategy is the move to the private sector as being the driver in enhancing economic growth and reducing poverty. With this being the case, the government has offered a number of incentives to encourage both foreign and domestic investors, including tax exemptions and low-interest loans. The government has also invested in key infrastructure and R&D across a number of sectors, with the aim of improving Rwanda as an investor destination. In 2016, for example, the government built the first essential oils testing and certification laboratory in East Africa, meaning that products can now be tested to international standards locally.

The essential oils industry in Rwanda is underdeveloped, with one company – Ikirezi Natural Products (“Ikirezi”) – currently active and exporting essential oil products, featured in this brief as a case study.

To learn more, download the latest Botho Brief.

Botho Op-ed for ZAWYA/Thomson Reuters: "Golden Green"

Originally published 6 January 2019:

https://www.zawya.com/uae/en/business/story/Golden_green-ZAWYA20190106121024/?platform=hootsuite

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Africa's renewable sector offers opportunities for Gulf investors

As the UAE prepares for a future where green is the new gold, Africa’s energy gap presents an opportunity for the UAE to position itself as a global leader in green investments. The UAE has traditionally been reliant on oil to buoy its economy but it;s time to leverage one of its other big assets - its financial services industry - to catalyse more investments in energy infrastructure in Africa.

As the largest investor by capital investment in Africa (second only to China as of 2016) the UAE must leverage its existing relationships in the world’s highest potential energy market.

Over two-thirds of Africa’s vast population, an estimated 600 million people, lack access to energy. But Africa’s energy poverty masks the wealth of natural resources that can be used to light up the continent. With significant geothermal, hydro, wind and solar resources, investments in green energy could yield significant returns. Morocco, Kenya, and Rwanda are three countries with particularly compelling prospects for UAE green investments.

Sun shines on Morocco

Morocco is a natural candidate for expanding renewable investments. Despite its abundance of sunlight, 90 percent of its energy resources are imported — costing Morocco approximately $8-$10 billion annually from 2011 to 2013. With this high import bill and rapidly rising electricity demand driven by economic growth, Morocco has set a target of 42 percent renewables by 2020, and 52 percent by 2030 – one of the most ambitious clean energy targets globally. Furthermore, the kingdom has been at the forefront of developing the independent power producer (IPP) model for large-scale utilities plants in North Africa.

Established in 2010, the Moroccan Agency for Sustainable Energy (Masen) drives solar projects and is already yielding results – the first phase of the Moroccan Solar Plan NOOR was switched on in 2016. Upon completion, the 580 MW complex will be one of the biggest facilities of its kind in the world, reducing Morocco’s fossil fuel dependence by about 2.5 million tons of oil per year, and providing export opportunities to neighbouring countries.

Even so, despite these strides, Morocco still has a $24 billion green investment gap, offering the UAE ample opportunity to partake in Morocco’s solar revolution, a country with which it already enjoys cordial relations.

Renewables already light up Kenya

While renewable energy currently makes up 70 percent of Kenya’s installed electric power capacity - compared to the world average of 24 percent - the country is targeting a 100 percent transition to green energy by 2020. The renewable energy sector in Kenya is among the most active on the continent; investment across renewable energy technologies grew from virtually zero in 2009 to $1.3 billion in 2010. While flagship projects as Lake Turkana Wind Farm and Menengai Geothermal Power Station attract headlines, significant opportunities are emerging for renewable energy startups.

One significant startup is Pawame, a UAE off-grid solar company that has connected 4,000 homes to solar in Kenya, having a positive impact on 20,000 lives. It recently raised $2 million in seed funding to help grow its business in Kenya. In the long run, it aims to electrify the 150 million households (70 percent of the population) in sub-Saharan Africa that don’t have access to grid power through micro-credit.

Kenya’s renewable energy potential remains largely untapped, having harnessed only about 30 percent of its hydropower sources, approximately 4 percent of the potential geothermal resources and much smaller proportions of proven wind and solar power potentials. There is, therefore, more opportunity for smaller scale renewable energy projects and innovative startups like Pawame.

Rwanda becoming a renewables force

With a strong, progressive government and an expanding renewables sector, Rwanda is a small country punching above its weight. Rwanda’s investment in clean energy has increased from zero in 2015 to $350 million in 2017, ranking fifth globally among countries that have created opportunities for investments in clean energy, according to Bloomberg New Energy Finance’s annual ClimateScope index. Most future investment in Rwanda’s energy market is expected to go toward expansion of the grid and to off-grid companies working with communities in peri-urban and rural areas.

As a commitment to being a leader in green growth, Rwanda inaugurated an Electronic Waste Plant in 2017 – the first of its kind in East Africa. The Rwandan government leased the Plant to Enviroserve Rwanda Green Park, a subsidiary of the Emirati company Enviroserve Services LLC Dubai, to run and manage. This partnership reflects the potential for more collaboration between the Rwandan government and the UAE’s private sector.

From e-waste recycling to delivery of medical supplies by drone, from renewable energy to car sharing schemes, Rwanda aims to be Africa’s leader in green innovation. Importantly, the UAE has the right technology and know-how to ensure that Rwanda achieves this.

Power to the people

Power shortages are stalling Africa’s development. Investment in renewable energy is set to close the current energy gap - positioning Africa as a global leader in the green clean energy revolution. From investments to technical expertise, the UAE can tap into this revolution and strengthen its competitive position in global markets in green investment and exporting green technologies.