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African Youth Want to do Business in Fast-growing Economy

By David South, Development Challenges, South-South Solutions

SOUTH-SOUTH CASE STUDY

Africa’s growing economy is meeting head-on an optimistic young population keen to start businesses. At least that is what a new poll of African youth says, finding that one in five Africans between the ages of 15 and 24 without a current business wants to start one in the next 12 months.

The Gallup surveys (www.gallup.com) of 27 African countries and areas also found young women were just as keen as young men to start a business.

Throughout the decade of the 2000s, Africa experienced an average economic growth rate of 5.4 percent (World Bank) – a big gain from the poor growth rates of the 1980s and early 1990s.

The turnaround in Africa’s economic growth prospects was the product of a number of trends and factors. One has been better policies and easier trade. Other factors include rising tourism, a growing service sector, rising commodity prices, greater demand for African exports in emerging economies and rapidly improving communications: the surge in mobile phone usage during the last five years has surprised many. Africans are also avid spenders on goods and services, spending US $860 billion on them in 2008, more than India’s US $635 billion or Russia’s US $821 billion (Economic Report on Africa 2011).

The African Development Bank predicts Africa’s growth rate for 2011 will decline to 3.7 percent from 2010’s 4.9 percent, largely as a result of turmoil in North Africa. East Africa is projected to grow the fastest this year at 6.7 percent, with West Africa close behind at 5.9 percent.

Africa as a continent collectively had a gross domestic product in 2009 of US $1.6 trillion: equal to Brazil’s or Russia’s. The continent is considered among the fastest-expanding economic regions in the world (McKinsey & Company).

In fact, while economic prospects are grim in many developed countries, Africa joined Asia as the only continents to grow during this recession.

But major problems still confront the continent, among them youth unemployment. Those between 15 and 24 make up more than 60 percent of the continent’s population and are 45 percent of the total labor force (African Economic Outlook). Sub-Saharan Africa is experiencing a youth explosion, with the proportion of youth there to rise to 75 percent of the population by 2015. Demographers forecast this rising youth trend will not stop for the next 20 years.

Getting these youth actively engaged in the economy and society is a major challenge for the continent. Already, 133 million African youth are illiterate. They have few skills and are marginalised from more productive sectors of the economy.

Even those with an education find their skills often don’t match the needs of the labor market. In sub-Saharan Africa, youth unemployment is believed to be 20 percent.

So even with better economic prospects and growing economies and incomes, youth unemployment looms large.

The Economic Report on Africa 2011 (www.uneca.org/era2011/) finds the “persistent high youth unemployment rate is a cause of concern and a potential source of political instability.” Job creation is still not adequate: “The growth rates are still below the levels needed to make a significant impact on unemployment and poverty reduction.”

While Africa will experience higher growth in 2011, for youth it is looking like a “jobless recovery,” according to the report. Overseas investors are mostly throwing their money at the resource sector, which doesn’t create many jobs in the economy.

But for young Africans looking to start a business, the opportunities are there in sectors such as retailing, telecommunications, banking, infrastructure-related industries, resource-related businesses, and all along the agricultural value chain.

The booming communications industry has added 316 million new subscribers since 2000, for example. And all those people now connected need new services.

And once a business is up and running, it is possible to make higher profits in Africa than on other continents, according to the UN. Africa leads the emerging market economies for returns for businesses. This is because competition isn’t as intense and there is still plenty of built-up consumer demand that needs to be met.

All of this means young people willing to start a business and put in the hard work, will have a better chance of reaping the rewards.

Resources

1) iHub Nairobi: iHub Nairobi’s Innovation Hub for the technology community is an open space for the technologists, investors, tech companies and hackers in the area. This space is a tech community facility with a focus on young entrepreneurs, web and mobile phone programmers, designers and researchers. It is part open community workspace (co-working), part vector for investors and VCs and part incubator. Website: http://ihub.co.ke/pages/home.php

2) The Other Side of Innovation: Solving the Execution Challenge by Vijay Govindarajan, Chris Trimble: On how businesses need to follow through with execution if they really want to innovate. Website: http://hbr.org/product/baynote/an/13219-HBK-ENG?referral=00505&cm_sp=baynote-_-featured_products-_-13219-HBK-ENG

3) “The Globe: Cracking the Next Growth Market: Africa” by Mutsa Chironga et al, Harvard Business Review. Website: http://hbr.org/2011/05/the-globe-cracking-the-next-growth-market-africa/ar/1

4) 2011 Global Youth Economic Opportunities Conference: This 5th anniversary conference will provide a learning platform for the world’s leading funders, practitioners, technical assistance providers, policy makers, and academics working to increase and improve economic opportunities for young people. Join 400 professionals from over 60 countries to share lessons learned, promising practices, and innovative ideas through technical workshops, engaging plenary sessions, and interactive networking. The result? Higher-impact programming, breakthrough solutions, and proven approaches. This year’s theme, Breakthroughs, reflects the focus on the innovative ideas, proven practices, and visionary insights that are taking this emerging field to new heights. Website: http://www.youtheconomicopportunities.org/

5) Dutch Design in Development: DDiD is the agency for fair design, sustainable production and fair trade. They work with Dutch importers and designers and connect them to local producers in developing countries and emerging markets. Together products are made that are both profitable and socially and environmentally sustainable. Website: http://www.ddid.nl/english/index.html

6) Francophone Africa Hackathon: Taking place on 24 September 2011, a ‘hackathon’ to develop mobile phone applications will take place for Francophone Africans. Website: http://www.mobilehackaf.com/

By 2012, Southern Innovator had completed its global reader impact study.

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Prisons With Green Solutions

An ingenious solution is helping Rwanda reduce the cost of running its bursting prisons, while improving conditions for the prisoners and helping protect the environment.

The country’s prison population soared to a peak of 120,000 suspects awaiting trial for their role in the 1994 genocide, in which 800,000 Tutsis and moderate Hutus were killed. The traditional court system, gacaca, is being used for national reconciliation, but the process is slow and costly for a country where 90 per cent of the population exist on subsistence agriculture, and where food production has dropped below 70 per cent of the levels needed for self-sufficiency (USAID).

But thanks to enormous, bee-hive shaped human manure digesters, a steady supply of biogas is on tap for cooking and lighting at prisons – the first country in Africa to do this. Five of the country’s largest prisons – two at Gitarama and one each in Butare, Kigali and Cyangugu – now have biogas plants producing 50 per cent of the gas needed to cook for prisoners. It has also saved half of each prison’s US $44,000 a year firewood costs. The money saved is being ploughed back into renovations to the prisons to improve conditions, and to provide more services like healthcare.

Biogas is produced from the fermentation of household or agricultural waste or animal or human feces, and has become a viable alternative when traditional gas sources become more expensive. The waste is placed in a 150 cubic meter beehive-shaped digester and fermented until a gas is produced. According to lead engineer on the project, Ainea Kimaro, 100 cubic meters of waste is turned into 50 cubic meters of fuel by bacteria devouring the manure in just four weeks.

The digesters are a project of the Kigali Institute of Sciences, Technology and Management ‘s Center for Innovations and Technology Transfer.

“Biogas kills two birds with one stone,” Kimaro told the BBC. It gets rid of all the human waste and helps cover the enormous costs of feeding so many prisoners. Prior to the digesters, the quantity of human waste was a real problem: it was flooding down hillsides and leaking into rivers and lakes.

A school, the Lycee de Kigali , also has a digester. “The methane gas is used to cook for 400 students and for operating Bunsen burners in the school laboratories”, Kimaro said.

Many would think this a smelly affair, but in fact the whole process isn’t that pungent. Most of the digester is underground and the gas produced burns a clean, blue smokeless flame. It is much cleaner than the smoke from firewood. The remaining sludgy residue is used as an odourless compost for soil. This is used in the prison gardens to grow maize, mangos, bananas and tomatoes – all of which ends up back on the prisoner’s plates, improving the quality of their nutrition.

“The firewood savings are excellent – they really make a difference for us,” a Cyangugu prison warden said, adding that the odour-free compost had done wonders for the prison gardens. “Look at all these bananas! This fertiliser really is the best,” he said to the BBC.

In Uganda, human urine and feces are being mixed with banana peels, algae, water hyacinth and poultry droppings to make biogas. In Uganda’s rural Mukono district, biogas is used for cooking, lighting pressure lamps and to power engines. The slurry left over is then used to fertilise the soil. For Ugandans, most of whom are rural dwellers, electricity is rare and petrol to run generators and refrigeration units is expensive.

“It keeps the environment free of organic wastes, is convenient, time-saving and reduces smoke-related illnesses often associated with the use of firewood,” said Patrick Nalere, country director of the Heifer Project International, an American NGO which shares livestock and knowledge to reduce poverty. “If the majority of Ugandans adopted biogas, we would preserve our biodiversity. People should exploit decomposing raw materials, which are free. Therefore, no monthly power tariffs.”

By David South, Development Challenges, South-South Solutions

Published: February 2008

Development Challenges, South-South Solutions was launched as an e-newsletter in 2006 by UNDP’s South-South Cooperation Unit (now the United Nations Office for South-South Cooperation) based in New York, USA. It led on profiling the rise of the global South as an economic powerhouse and was one of the first regular publications to champion the global South’s innovators, entrepreneurs, and pioneers. It tracked the key trends that are now so profoundly reshaping how development is seen and done. This includes the rapid take-up of mobile phones and information technology in the global South (as profiled in the first issue of magazine Southern Innovator), the move to becoming a majority urban world, a growing global innovator culture, and the plethora of solutions being developed in the global South to tackle its problems and improve living conditions and boost human development. The success of the e-newsletter led to the launch of the magazine Southern Innovator.  

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African Trade Hub in China Brings Mutual Profits

By David South, Development Challenges, South-South Solutions

SOUTH-SOUTH CASE STUDY

South-South trade is the great economic success story of the past decade. World Trade Organization (WTO) (www.wto.org) figures show South-South trade accounted for 16.4 percent of the US $14 trillion in total world exports in 2007, up from 11.5 percent of the total in 2000. While the global economic crisis has slowed things down, the overall trend is firmly established.

Trade between China and Africa has surged over the past decade since China joined the WTO in 2001, from around US $10 billion in 2000 to US $73.3 billion in 2007, registering a year-on-year increase of 32.2 percent. In 2008, it soared by 44.1 percent to reach a record high of US $106.84 billion, registering a year-on-year increase of 45.1 percent, according to Zhang Yongpeng of the Institute for West Asian and African Studies (IWAAS).

In the southern Chinese city of Guangzhou (http://en.wikipedia.org/wiki/Guangzhou) , a trading hub nicknamed “Africa Town” has emerged since 1998. A conglomeration of buildings around the Xiaobei road in Yuexiu district of the city, it has been equated to the famous Chungking Mansions of Hong Kong (http://en.wikipedia.org/wiki/Chungking_Mansions) . There are officially 20,000 African traders and entrepreneurs in the city of 18 million, but unofficial estimates put the number at more than 100,000. This African trading hub has emerged to the benefit of both the Chinese and Africans. It is a coming together of small traders matching Africa’s strong demand for consumer goods with China’s manufacturing powerhouse.

The traders export generators, toys, mopeds, construction equipment and other products back to Africa. The traders act as go-betweens, bringing their local knowledge of African market demands to the Chinese manufacturers.

Citizens from over 19 African countries are represented, the majority from Nigeria.

“Almost 90 per cent of goods in African markets come from China, Thailand and Indonesia,” Sultane Barry, president of Guangzhou’s Guinean community, told the Globe and Mail newspaper.

Barry has an entire floor for business in a 35-storey building packed with shops, offices, freight-forwarding companies, African restaurants, hairdressers and furnished apartments for rent by the week.

“We’re not here for fun,” said Ibrahim Kader Traore, an entrepreneur from Ivory Coast. “We work hard and do well. In Abidjan, people still swear by France, where you might be able to save US $13,000 over 25 years; in China, you can have US $130,000 in just five years.”

A trading success story, the hub has run into problems over visas and the upcoming November Asian Games in Guangzhou, which is increasing identity checks.

“I sell more than 50 per cent of the output of my brother-in-law’s TV factory to Africans,” one saleswoman told the Globe and Mail. “We need them and I’m worried there are going to be fewer of them.”

Brought together by trade and mutual interest, both communities still have much to learn about each other. Relations have had their ups and downs and Africans can face discrimination.

But the trading relationship is teaching both sides important lessons. “The arrival of the Africans taught the Chinese how to look for business opportunities,” said Barry. “The secretaries we had here didn’t speak a word of English. Our presence started a craze for learning languages: English and French. The Chinese didn’t know the basic rules of international trade. They knew nothing about documentary credit. They paid for everything cash in hand.

“The Chinese people will soon realize that it’s better for business to deal directly with ordinary Africans.”

And the pressure is on to see who will keep trading relations with Africa positive. “The door to the Chinese market has only opened a crack, mostly because visa requirements are so tough,” said Zango, a trader from Mali.

Resources

1) A Financial Times report on Africa-China trade in 2010. Website: http://www.ft.com/reports/africa-china-trade-2010

2) An article about “Africa Town” from the official Guangzhou website. Website: http://www.lifeofguangzhou.com

3) Trade Winds: Guangzhou’s African Community by Graeme Nicol is a photo book about the community. Website: http://graemenicol.com/?page_id=115

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This work is licensed under a
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ORCID iD: https://orcid.org/0000-0001-5311-1052.

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Djibouti Re-shapes Itself as African Trade Hub

By David South, Development Challenges, South-South Solutions

SOUTH-SOUTH CASE STUDY

Trade hubs can prove to be decisive in boosting regional growth. Trade hubs are places where commerce congregates, for a mix of geographical, cultural and economic reasons. Like a bicycle wheel, a trade hub sits at the centre as the spokes of trade routes travel towards it. Throughout history, trade hubs have emerged, from the outposts of the Silk Route running through Asia and Central Asia to the Hanseatic League cities of Northern Europe in the Middle Ages.

Trade is critical to increasing prosperity, and the more efficient trade becomes – and the greater the variety of goods and affordable prices – the higher the standard of living for the nations doing the trading.

With South-South trade the great economic success story of the past decade, new trade hubs are emerging. World Trade Organization (WTO) (www.wto.org) figures show South-South trade accounted for 16.4 percent of the US $14 trillion in total world exports in 2007, up from 11.5 percent in 2000. While the global economic crisis has slowed things down, the overall trend is firmly established.

One country hoping to become a key 21st century trade hub is the tiny African nation of Djibouti, which sits strategically between the Red Sea and the Gulf of Aden. It is surrounded by the nations of Eritrea, Ethiopia and Somalia and is across the Bab al Mandab Strait from Yemen.

It is at the nexus of Africa and Asia. Some of the busiest shipping lanes in the world float by the country’s coastline. Much of the oil shipped to Europe and the United States passes by.

“Djibouti is perfectly positioned to become a services and logistics hub,” said Jerome Martins Oliveira, chief executive officer of Djibouti port, operated by a subsidiary of Dubai World.

PwC (PriceWaterhouseCoopers) (http://www.pwc.co.uk), which recently published its third Transportation & Logistics 2030 Report, predicts that global trade hubs and routes will shift to emerging markets within the next 20 years.

“Trade volumes will move towards emerging markets such as Africa or Asia and competition for future large transport contracts will be determined within the next few years,” said Akhter Moosa, PwC’s South African Transport and Logistics Leader.

This underscores the growing importance of emerging markets. The majority of global trade is forecast to shift to emerging markets by 2030. As the trade shifts, so new trade routes emerge. PwC sees strong links between Asia and Africa and Asia and South America, as well as trade within Asia, transforming global supply chains.

Hot spots for trade are showing impressive growth. Trade between Asia and the former Soviet states grows at 42 percent a year. The volume of trade between South America and Africa is growing by double digits.

“China already owns seven of the world’s twenty largest ports,” said Christopher Siewierski, associate director in Corporate Finance at PwC. “India, Russia and South Africa are also expected to play a significant role as logistics giants.”

Respondents to the Transportation & Logistics 2030 Report
(http://www.pwc.com/gx/en/transportation-logistics/tl2030/tl2030-pub.jhtml ) believe it is unlikely that companies from emerging countries will seek further growth in the developed European and North American markets. Instead, they will concentrate on domestic markets and the strong growing neighbouring countries.

All of this is good news for Djibouti. At present, the population of Djibouti
(http://en.wikipedia.org/wiki/Djibouti) is small at around 864,202 people (2009 World Bank).

Ancient Djibouti traded hides and skins for the perfumes of Egypt, India and China: a classic South-South trade heritage. Djibouti became a French colony and gained its independence from France in 1977.

The geography is harsh: a rocky semi desert of plateaus and highlands. Djibouti has few resources, apart from its large salt reserves – the country has a long history of salt mining. Djibouti must depend on foreign assistance – or innovative trade.

Djibouti has to be clever in increasing income opportunities: the country has an estimated unemployment rate of between 40 and 50 percent. The country is heavily dependent on imports for food and fuel, and over the past decade has experienced recession – in the wake of a 1991 to 1994 civil war – and a growing population.

For years, the tiny state was overlooked and development had proceeded at a slow pace. But now investment from Dubai is pouring in to upgrade the port to make it a regional gateway.

The Djibouti Free Zone (http://www.djiboutifz.com/) was set up in the wake of the country being designated a free-export processing zone in 1995. In practice, this means a company or business working to export products can be designated as an Export Processing Company (EPC).

It was created to re-shape the landscape in Africa when it comes to trade. Push out the red tape, and bring efficiency and plenty of services: the prime habitat for business to flourish free of restrictions. Prospective businesses can find modern offices, distribution, storage and light manufacturing facilities.

Djibouti provides services as both a transit port for the region and an international trans shipment and refuelling center.

And even more ambitious plans are afoot: a multi-billion dollar, 29-kilometre bridge across the Red Sea has been proposed. The Bridge of the Horns (http://en.wikipedia.org/wiki/Bridge_of_the_Horns) will link Djibouti with Yemen and two new cities will be built on either side of the bridge. The new Noor City on the Djibouti side will become the “financial, educational, and medical hub of Africa” according to its developers.

Elsewhere, the United States is funding and operating four regional trade and competiveness hubs in sub-Saharan Africa. They aim to assist, enhance and broaden the flow of trade between the United States and the region, both inside and outside the terms of the historic African Growth and Opportunity Act (AGOA) (http://www.agoa.gov/). The four trade hubs — located in Ghana, Senegal, Botswana and Kenya — provide information and technical expertise to enhance and expand bilateral trade between the United States and Africa.

Resources

  • Port Management Association of Eastern and Southern Africa: Is a regional organisation for the ports and maritime sector in Eastern and Southern Africa. It seeks to promote and nurture best practices among member ports by creating an enabling environment for exchange of information and capacity building to contribute to the economic development of the region. Website: http://www.pmaesa.org/welcome.htm
  • Dubai World: Global holding company Dubai World “focuses on the strategic growth areas of Transport & Logistics, Drydocks & Maritime, Urban Development, Investment & Financial Services. Our portfolio contains some of the world’s leading companies in their industries, including Drydocks World, Economic Zones World, Istithmar World, Nakheel and majority ownership of DP World.” Website: http://www.dubaiworld.ae/
  • A Financial Times report on Africa-China trade in 2010. Website: http://www.ft.com/reports/africa-china-trade-2010
  • West Africa Trade Hub: The USAID West Africa Trade Hub uses a market-driven approach to increase exports from the region – making West Africa competitive in world markets. The Trade Hub provides direct assistance to hundreds of companies in six value chains. That work is complemented by teams tackling problems in transportation, telecommunications, access to finance and business environment that make it difficult for West African companies to compete. Website: http://www.watradehub.com/
  • Biz Community.com: Africa’s Leading Daily Retail News: Where the action is on Africa’s fast-growing retail markets. Website: http://www.bizcommunity.com/196/160.html

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ORCID iD: https://orcid.org/0000-0001-5311-1052.

© David South Consulting 2022