Can Rwanda deliver on its economic promises?

That's not yet clear. What is clear is that many commentators are enthusiastic about the country.

This New York Times article offers some potentially useful insights for companies and their investors.

As ever journalists can get excited about growth rates that out perform other markets, even from a low base.

The International Monetary Fund believes that economic growth in sub-Saharan Africa will average 6.1 percent this year. That's compared with 3.7 percent worldwide.

Rwanda's commodity exchange, with NASDAQ supplied terminals has held an initial six auctions over the past year. This is all part of an attempt by Rwanda to innovate given the country's lack of natural resources when compared with mineral rich neighbours.

Perhaps this is a blessing in disguise. In any case Rwanda wants to become a high tech trading and financial hub in central/East Africa.

So how are they doing? Pretty well, at least according to the NY times.

Paul Kukubo chief executive of the commodity East Africa Exchange hopes that his commodity exchange "...could serve the region and perhaps be a springboard for the rest of Africa”.

He's not alone in being enthusiastic about Rwanda. The NY times suggests that:

"Rwanda offers an alternative model, analysts say, a country where the economy has grown an average of nearly 8 percent over the last four years because of increased agricultural productivity, tourism and government spending on infrastructure and housing. Despite having a population of just around 12 million, the consulting firm A.T. Kearney last week named Rwanda the most attractive African market for retailers in its first ever African Retail Development Index."

The NY Times piece also notes that:

"So now, more than ever, Rwanda is on the hunt for investors rather than donors. Last April, it sold $400 million in bonds to investors from around the globe, part of a record year for African bonds that underscored how a continent once known for debt relief found a world eager to take a stake in it...

...Rwanda hopes to turn itself into an information-technology hub for the roughly 135 million people in the East African Community, a regional common market. The nation has wired itself with well over 1,000 miles of fiber optic cables, and last year the government signed a deal to build a 4G network that would cover 95 percent of the country...

...Meanwhile, nongovernmental organizations focused on development have praised the country’s economic reforms, with the World Bank giving it high marks for the ease of doing business here, ranking Rwanda 32 out of 189 worldwide. It also put Rwanda above the United States for the simplicity of starting a new business."

It apparently now only takes a day to set up the company, for less than $40, and officials even help via social media channels.

This all makes Rwanda look like an attractive place for the right kind of companies and investors. There are well documented concerns about the authoritarian nature of the Kagame Government, but given the chaos that often surrounds the country, this is unlikely to put companies off.

The key question is whether the current grow rate can be sustained, and whether the country can sustainably attract other big investors than currently. SMEs are all very well, and vitally important, but large companies help create much bigger supply chains and can help prevent future governments making catatrophically bad decisions, something no country seems immune from.

All in all, the picture for Rwanda seems fairly rosy. In the longer term, the constructive lessons can be learned for other African nations from Rwanda's progress will be vital. Will the country just be an island of excellence, or a catalyst for innovation? We'll find out. Kenya was Rwanda's largest investor in 2011 and companies such as Heineken have been working there for years.

For a more detailed analysis of some current trends, take a look here.

Tullow's transparency activities demonstrate the business case for openness in Africa

The Financial Times reports today that:

"Tullow Oil is to become the first oil company to disclose its payments to foreign governments with the level of detail demanded by anti-corruption campaigners, advancing a transparency drive that has met fierce resistance in parts of the industry."

Tullow clearly sees the links between their license to operate, transparency and government and civil society relationships. They must be congratulated for this move. 

Whilst oil industry associations such as the American Petroleum Institute are attempting to kill the idea of project-by-project financial reporting in the industry, Tullow has taken a leadership position that should go down well in the markets where they operate. This may be particularly true in Ghana, long a regional leader in West Africa with regard to governance and transparency. 

Tullow have seen the writing on the wall with regard to transparency. The questions are, how long before the other oil companies follow, and when will investors begin to recognise the value of improved relationships with the societies in which companies like Tullow operate? 

Latest agenda and speakers for the Ghana Investment Forum 2014

Here's the latest agenda and speakers for the June 19 conference in London about Ghana.

Contact Oliver.Bamford@innovation-forum.co.uk for more information.

Business corruption is becoming an ever bigger investor risk, particularly in frontier/lean markets

ADB: Cracking down and cranking up the anti-corruption
pressure on companies and governments world-wide

Australia Network News reports that "The Asian Development Bank has banned 30 individuals and 31 companies from its projects following the institution's annual check for fraud and corruption."

This is all part of rising global trend and increasing public outrage about the extent and depth of corruption. Of course it is often worse in lean/frontier markets where institutions and legal enforcement is much weaker.

One might argue otherwise perhaps: Australia Network News does go on to say that:

"The number is slightly less than in 2012, when the ADB banned 42 companies and 38 individuals.

The ADB investigated a record 250 cases last year, ten more than in 2012 and says it is experiencing some success in curtailing fraud and corruption."

But the fact that in total the ADB has banned "almost 500 companies and 474 individuals for corruption, collusion or fraud" shows that anti-corruption is being take a little more seriously than in the past.

Seriously enough? No, not a chance. But investors are beginning to price in corruption risk nowadays.

Look at China, where Bloomberg Businessweek reports that "President Xi Leads Biggest Anti-Corruption Push Since Mao"

Hubristic? Maybe a little. But there is no doubt anti-corruption is being taken much more seriously in China, just look at the sales of Rolexes.

Of course in the US, anti-corruption enforcement has been on the rise since the 1977 FCPA came into force.

More importantly we've seen anti-corruption riots in India and the creation of a new 'clean' political party in recent years which is set to challenge the status quo.

And many might argue that a big part of the situation in Ukraine was caused by the naked and vast corruption of the country's former leader and his cronies.

All of this means that monitoring corruption risk is now more important than ever. The Transparency International website and daily newsletter is a helpful guide to some of the trends out there. 

What are the factors in play with regard to Ghana's 2013 20% drop in FDI?

Haruna Iddrisu: Minister of Trade & Industry: One of the speakers at the
Innovation Forum conference in London on June 19

There's lots in the lean markets news about Ghana's 20% FDI drop in 2013 versus 2015. 

According to GhanaWeb:

"Foreign Direct Investments (FDIs)...declined to $3.946 billion representing about (a) 19.5 percent drop from $4.904 billion recorded in 2012."

There appear to be quite a few factors in play here from what I read:

1) Commodity price fluctuations.

(Gold is down, whilst Palm Oil and Cocoa is now up again) 

2) Macroeconomic policy hangovers from the previous administration's time in power.

3) Global volatility generally in investment flows in 2013 (note how the Ukraine situation is pushing money around other unrelated markets very quickly, and may continue to do so if Russia becomes an international investment pariah)

4) The Ghana Government's budget account deficit. (The Financial Times reports that "the government ran a budget deficit of 10.2 per cent of GDP in 2013, and may miss its pledge to reduce this to 8.5 per cent this year"

This blog will be looking into the investment prognosis in Ghana for 2014 and beyond in further posts. We know some big foreign investors are keen that more focus is given to agriculture, and the value chain within it and how it can be developed. Aquaculture also seems to offer some interesting opportunities alongside tourism (the national football team's appearance at the World Cup later in the year may give tourism a boost) and real estate. Of course the recently introduced foreign exchange controls will be a key issue for many. It remains to be seen how that issue will play out over the rest of 2014.

We're bringing together some of the key players in the Ghana Government together with companies and investors on June 19 in London. Check out the event here and let us know if you'd like to come. 

Jim O'Neill's tips on undervalued growth markets

There's a useful interview with Jim O'Neill on the Grant Thornton website here.

Here's a few choice quotes:

"At current prices at the time of writing, most BRIC markets are quite cheap, both relative to the rest of the emerging world and the developed world. So for me, China, Brazil and Russia look interesting.

Elsewhere, I find continental Europe attractive. For the same reasons – except that people have written off the eurozone so much I think it is probably a mistake – some of the peripheral markets, especially Greece, Portugal, Spain and Italy, are attractive."

"Part of China’s problem is that everyone became addicted to 10% growth and that’s not going to happen anymore. There is a new era, which is all about the quality and not the quantity of growth."

"I don’t think there will be another workshop on the scale of China, but a number of places benefit from China’s wage increases. Perhaps Mexico and a number of southeast Asia countries are the biggest winners as they now appear cheap, but even parts of the US will feel the benefit, especially given the importance of design and value added for manufacturing as we progress."

"In a broader context, I am among those that believe this could be sub-Saharan Africa’s ‘moment’, so to speak, as with the benefits of modern technology, the better governance, and with improving infrastructure, it looks quite promising."

"In 2011 alone, the four BRIC countries saw their GDP grow by $2.3 trillion, more than the size of Italy. Adding in the other four growth markets, Korea, Mexico, Indonesia and Turkey, the aggregate was around $2.8 trillion, and in 2011-12 together, it is nearly $4 trillion – the same size as Germany! This is not what we traditionally think of in terms of so-called emerging economies."

Here's the full interview. (I think it was published a while ago as the Radio series he refers to is now available here)

Here's a video interview with some further commentary.

Standard Chartered in Africa - new report shows economic impact and influence

Seeing companies producing socio-economic impact reports is not a new phenomena.

Quite a few companies now do this. From Heineken to Imperial Tobacco to Nestle, to SAB Miller to Standard Chartered, I believe these kinds of reports represent a growing trend.

Looking at the news on tax and disclosure over the last few days (here's a sample), companies are going to have to spend more time demonstrating where and how they add value given perceptions on how they extract value.

CSR reports have not delivered on that.

They represent a demonstration of useful management processes and overall performance (to a degree) but lack credibility for much else, as things stand.

So reports such as this new one from Standard Chartered represent, I believe, a significant future trend of reporting on country, region, or sector impacts.

There's also a more niche trend, beyond country or region, to look at areas such as m-health. I can see more and more of these coming out in the next few years too.

Methodologies, whilst differing, are evolving, and the WBCSD offers a guide.

Ethical Corporation also published a report looking at methodologies and strategy.

Here's a couple of the stats from the Standard Chartered report on what their report writers feel they the company has achieved for social/economic good:

• Supporting 1.9 million jobs in Sub-Saharan Africa through direct and indirect impact - that's around 0.6% of the region's total workforce
• Contributing 1.2% of the region's GDP - USD10.7 billion of value added to the economy
• Providing financing support to African trade, to help connect the region with world markets: in 2013 we supported trade worth USD7.2 billion

These reports represent a good start. They are an evolving combination of science and art, and we'll soon be seeing a lots more of them, particularly where emerging markets are concerned. 

If interested in emerging markets, one of my new ventures, Innovation Forum, may be worth taking a look at. We are hosting a Ghana investment and sustainability event on June 19 in London.

(some related blog posts are here)