Investment

G20 endorses initiative to connect people, projects, and capital in Africa

Nov 4th, 2011 5:16 PM UTC
By Tom Wallace

Africa suffers from an infrastructure deficit that greatly limits growth and poverty reduction on the continent.  70% of the population do not have access to electricity and many rural communities lack road to access to markets or health facilities.  In some areas a lack of infrastructure reduces economic output by as much as 40%.

However both government and private investors often find it difficult to find African infrastructure projects to invest in.  This isn’t because of a lack of projects, but rather a lack of information being made available to investors.  As a result potential investors find it very hard, time consuming, and at times, expensive to find information on projects and other potential investors.  This impedes investment even though new projects often yield attractive rates of return.  The result of this is that African people continue to suffer from this lack of infrastructure.

Today however at the G20 summit in France world leads took steps to address this problem by endorsing the establishment of the Sokoni African Infrastructure Marketplace.   This African Development Bank and the Zanbato Group Sokoni proposal (‘Sokoni’ is Swahili for ‘marketplace’) should help overcome many of the challenges investors face by creating a single platform for information on a large number of African infrastructure initiatives. Governments and investors will be able to come to find transparent information and link up efficiently with each other.  Using ICT and technology Sokoni will help enhance efficiency, transparency, and connectivity in the market and help to mobilize increased resources from Africa and abroad for badly needed infrastructure projects.

ONE welcomes this initiative and the support of the G20 world leaders for it.  You can find out more about Sonoki from its website http://www.sokoni.com/

Opening Government to Accelerate Poverty Reduction

Sep 20th, 2011 2:52 PM UTC
By Alan Hudson

By shining a light on the ways in which governments in developing countries invest aid, natural resource revenues and other public resources, transparency can turbo-charge accountability, helping ordinary citizens to hold their governments to account. This can play an important role in reducing corruption, improving the delivery of essential public services such as health and education, enhancing the climate for growth and investment, and accelerating countries’ progress along the road out of poverty, towards prosperity and beyond aid dependence.

Transparency and accountability provide, in effect, a boost to the quantity and quality of resources available for development. To maximise this “resource dividend” it is essential that there is transparency and accountability for the use of all public resources, including aid, climate finance, taxes, and natural resource revenues, and that budget processes are open, with room for citizen engagement. The Open Government Partnership (OGP) – to be launched today (Tuesday 20^th September) by President Obama of the United States and President Dilma Rousseff of Brazil – provides an important opportunity for governments to take a real step forward in enhancing transparency and accountability for the use of all public resources.

(OGP logo)

OGP is a new international initiative which aims to encourage and enable governments, in partnership with civil society, to promote transparency, increase civic participation, fight corruption, and harness new technologies to strengthen governance. By taking advantage of this moment of opportunity, governments can empower citizens with the information that they need to take greater control of their own development and make an important contribution to accelerating progress on poverty reduction.

At the OGP launch, the founding governments – Brazil, Indonesia, Mexico, Norway, Philippines, South Africa, United Kingdom, and the United States – will endorse an Open Government Declaration and announce national action plans. The founding governments will also be joined by another 38 governments, including Ghana, Kenya and Tanzania, who will commit to developing and delivering their action plans at a follow up meeting in March 2012 in Brazil. The official launch of OGP event will be live streamed at www.whitehouse.gov/live

As well as participating in the launch, we will be analysing countries’ action plans to assess whether governments’ commitments – on aid, on budgets and on natural resource revenues – will empower people in developing countries with the information they need to hold governments to account. See our recent policy pitch for more information about the commitments that we believe governments should make to promote the transparent and accountable use of public resources. Over the coming months and years we will be working closely with a number of partner organisations to build a global movement on transparency and accountability, to keep transparency and accountability high on the agenda at the G20, the Fourth High Level Forum on Aid Effectiveness in 2011, and in meetings of the G8 (US), G20 (Mexico) and the International Anti-Corruption Conference (Brazil) in 2012, and to make sure that governments meet their commitments to become more open.

Transparency alone will not deliver the accountability that is needed to ensure that resources are invested effectively in poverty reduction. Politics is key. But without transparency, political choices are poorly informed and there can be no accountability. With the demands of people across the Arab world for better governance fresh in our minds, now is the time to open government in order to accelerate progress on poverty reduction.

Infrastructure – It’s not boring it’s essential!

Sep 14th, 2011 5:30 PM UTC
By Tom Wallace

Is ‘infrastructure’ a boring word to you? Because sometimes when I first mention it in conversations people don’t seem that interested.  Building a concrete road or putting up an electricity pylon doesn’t seem quite as exciting as giving a small child a lifesaving vaccine, does it?  However, in reality building that road could be just as lifesaving and transformative for the village at the end of it – it can allow villagers to reach hospital in lifesaving times, it can open the village up to new markets and opportunities to trade, and it can ensure the delivery of lifesaving healthcare and food in times of need.

In Sub-Saharan Africa (SSA) a lack of physical infrastructure is not an inconvenience, it is a daily hardship stunting economic growth and poverty reduction.  Many regions of Sub-Saharan Africa are still missing the essential physical required for human development, market generation and poverty alleviation.  70% of the population has no access to electricity, 95% of agriculture is without irrigation and the majority of the rural population is not served by roads to market.  Rural women walk an average of 6miles a day to get firewood and water – water that may not even be safe to drink.  A lack of infrastructure in Africa means poor people too often pay heavily in time and money to access vital services such as sanitation, healthcare and education – binding achievement of the Millennium Development Goals closely to infrastructure access.

It is not all gloom though – more recently there have been huge infrastructure success stories in the region. Telecoms have boomed largely without state support and companies have made considerable profits in this and other sectors.  In addition there has been significant progress on infrastructure projects in some major cities, coastal regions and around natural resource extraction sites.  However, further infrastructure development in Sub-Saharan Africa is essential for human development, poverty reduction and for Africa to realise its economic potential.

The good news is the G20 countries, a collection of the most powerful economic countries and the European Union, have realised this fact!

Last year, as part of the G20 Seoul Development Consensus, these countries recognised the important role infrastructure plays in poverty alleviation and economic growth.  A High Level Panel was set up to look at infrastructure funding and how best to mobilise and scale up financing for this important underfunded sector.

Next month this panel will report back to the G20 with recommendations.  However it is important when this happens that they appreciate that some infrastructure is more effective at alleviating poverty than others.  To take an extreme example – a clean water delivery pipeline to isolated village where there is currently no safe freshwater will be much more beneficial than a broadband internet cable to the same village who don’t even own a computer.  Both are types of infrastructure but one is obviously more beneficial to the village people’s essential needs.  To be most effective at tackling poverty reduction the High Level Panel should be aware of how best infrastructure can help alleviate poverty and the ways to ensure infrastructure benefits for the poorest.  ONE has tried to ensure the panel considers this and recently sent a submission to them explaining the ways their recommendations and the G20 can ensure this.  You can find our submission online here.

ONE will be pushing to make sure governments appreciate these points and keep a strong focus on Africa’s infrastructure need in the coming years, because – frankly – infrastructure isn’t boring it’s essential.

European Parliament pushes for extractives transparency

Sep 14th, 2011 4:40 PM UTC
By Joseph Powell

Political momentum increased yesterday for a new transparency law in Europe that would help citizens in poor, but resource-rich, countries. The European Parliament endorsed plans for an EU-wide transparency law to shed light on the payments oil, gas and mining companies make to the governments where they operate. This would empower citizens with the information they need to hold their leaders accountable for money received, and would help governments negotiate fairer deals with extractive industry companies. In both these ways efficiency of public finance would improve, and more resources could be allocated to vital development projects.

(photo from PublishWhatYouPay.org)

ONE is a strong supporter of this type of transparency, and is part of the Publish What You Pay coalition which includes over 600 civil society organisations from around the world. For example we worked with Ugandan activists earlier in the year to deliver the message that the UK can help them make sure their new-found oil wealth is not wasted. Over the last few days Publish What You Pay has been asking people on Twitter what they would do with greater control of their #oilmoney. Education, healthcare and environmental projects were listed as priorities.

Moves towards legally binding measure in the EU will help with this. Jean Claude Katende of Publish What You Pay in the Democratic Republic of Congo argues: “We want to see the European Union adopt rules which are as ambitious as possible. Payment information will help us hold our leaders to account, but other information on profits, sales, production levels and reserves would enable us to judge whether DRC is getting a fair deal for the exploitation of its mineral resources.”

Last July the US passed a law that will soon mean all oil, gas and mining companies listed in America will have to publish their payments at the level of individual projects on an annual basis. Europe will soon propose a similar law. We need both jurisdictions to move swiftly to implementing these laws so that activists in Africa get the revenue information they need as soon as possible.

The end goal of better accountability in this area of public finances is to ensure resources are invested well, including in health and education, so that poor countries’ reduce poverty and progress towards middle-income status.

China’s investments in African minerals can be “win-win”

Nov 23rd, 2010 4:44 PM UTC
By Joseph Powell

Chinese demand for African minerals has grown hugely in recent years, and now represents a critical trading relationship both for the continent’s economic development and China’s growth plans. However, natural resources have a mixed history in driving development, too often succumbing to the ‘resource curse’ spiral of corruption, environmental degradation and in the worst cases conflict.

Last week in China Dr Ngozi Okonjo-Iweala – World Bank Managing Director and ONE board member – made an important speech explaining how to consign this ‘resource curse’ to the history books. In her eyes Chinese investments can be made mutually beneficial by following 5 key principles: Align Investments with Countries’ Development Priorities; Practice Transparency; Add Value to the Country and its People; Pay What is Due and Do What is Right; and Engage with Local Communities.

The speech as a whole is well worth reading – and commands attention coming from one of the foremost advocates for transparency and accountability in Africa. While Finance Minister of Nigeria Dr Ngozi published each state’s monthly financial allocation from the federal government in the newspapers. This allowed Nigerian civil society to hold their leaders to account and cut down on wasted funds.

ONE is campaigning for these principles to be applied to the oil, gas and mining industries. In the US this has already paid dividends with the passing of legislation in July that ensures companies have to publish what they pay governments in countries where they operate – once again empowering civil society. We are now seeking to replicate that legislation in other countries, particularly in Europe.

The importance of getting this right should not be understated. In total exports of all natural resources in Africa were worth roughly $393.9 billion in 2008, nearly 9 times the value of international aid to the continent ($44 billion), and over 10 times the value of exports of agricultural produce ($37.9 billion).

Central to success in this area will be the China-Africa relationship, of which the last word should go to Dr Ngozi:

“If China and Africa could work together in a transparent and mutually beneficial way, I am convinced that when history is written, this collaboration will be a strong part of the economic recovery story post financial crises.”

Indian Investment in Africa

Jul 6th, 2010 8:59 PM UTC
By Matthew Eldridge

In a speech last week at the London School of Economics, Dr. Amit Mitra, the Secretary General of the Federation of Indian Chambers of Commerce and Industry  discussed the growing role of Indian investment in Africa.

Despite the relatively neglected role of India in Africa compared with that of China, India’s trade with the continent has grown ten-fold over 4 years to $39.5 billion in 2008-09 (over half of the US’s $77 billion).  The turning point, he noted, came in 2008 with the India-Africa summit in Delhi, which led to a doubling of credit to Africa (to $5.4 billion over 5 years), a focus on African human capital development programs, and a duty free preferential tariff scheme for the 34 least developed countries in Africa (with 94% of all tariff lines opened).

Mitra cited the young population, the second fastest growth rate of any continent, and the possession of nearly a third of the world’s natural resource value as the main motivations for India’s interest in Africa.

However, Mitra also took the opportunity to highlight the unique approach taken by India compared to China.  He suggested that while Chinese investments were merely extractive in purpose, India’s were more transformative, focusing on small and medium businesses, agricultural productivity, information technology, and investments in health care.

Mitra also criticized Western governments for failing to develop strategic plans and not taking Africa seriously as the future.  He further suggested that “India understands the needs of Africa” and has supported African efforts to eliminate developed world agriculture subsidies.  The Indian economist concluded by suggesting that foreign direct investment was surpassing aid in importance, and that the transparency of aid needs to be improved. But he did suggest that aid still has an important role in addressing areas where the market fails such as health and education.

Investing in Africa

Mar 15th, 2010 1:11 PM UTC
By Papa Ndiaye

ONE is embarking on a listening and learning trip to Senegal, Ghana, Mozambique and Kenya with members of our board and other supporters. Check out this guest post from Papa Madiaw Ndiaye, CEO and founding partner of Advanced Finance & Investment Group (AFIG). In 2004, he was selected as a “Young Global Leader” by the World Economic Forum of Davos and then as one of the ‘’Frontier 100 CEOs’’ of the Initiative for Global Development in 2009. Be sure to scroll to the bottom for a short video of Papa discussing foreign investment in Africa:

There are great companies across Africa with huge potential for growth and expansion. With the right capital investment and strategic support they will prosper not only in their national and regional markets, but globally. It is not unreasonable for people who invest their money in Africa today to aspire to substantial returns of as much as 30% per annum over a few years.

This was the message my partners and I shared with a delegation of ONE board members who yesterday visited the Dakar offices of the private equity firm I founded in 2005 – AFIG which stands for Advanced Finance & Investment Group. Our maiden fund – the Atlantic Coast Regional Fund – focuses primarily on West and Central Africa and has a target capitalization of $100M, of which three-quarters has already been raised. Our aim is simple – to pick winning companies and help them grow. To execute our plan, I brought together a team of African professionals with broad financial and operational experience as well as deep knowledge of the markets we cover.

So why should an advocacy organization like ONE be interested in a private equity firm like ourselves? I think there are two main reasons. The first is that the most tried and tested route out of poverty is employment. The successful home-grown African companies we invest in provide good jobs and contribute to wealth creation in the economy more generally. If these companies are helped to grow further, then the developmental benefits are clear.

The second reason is that the sectors we focus on are strategically critical for any country to cut poverty and promote economic development. Agribusiness, the energy sector, infrastructure, light manufacturing, and financial services are all areas where Africa lags behind much of the world and where the upside is huge. Investment in those sectors not only has the promise of good returns for our investors but also for the local economy.

There are of course challenges to running a company like AFIG. I spent many years working on Wall Street and I know the perception of many institutional investors has been that Africa is too risky, too dangerous and too alien a business environment for them to put their money in. This is a misconception that needs to be challenged, not simply for the sake of our business, but for the success of the African private sector as a whole. Good investment and development go hand in hand. We hope ONE can play its role in spreading the word.