Stewart Henderson has travelled across Africa many times as the chairman of the Eastern Africa Association, a non-lobbying group of 400-plus investors based in Nairobi, Kenya who share information about politics and economics.

Over the course of his extensive travels, he learned that the best way for entrepreneurs are enter the East African market is to begin in Kenya and then fan outward with their offering to other states. More significantly, he says, they need to identify a niche market.

The latter point may seem obvious. Yet in daunting sub-Saharan Africa where, quite bluntly, it’s a “hell of a big challenge” to do business, it’s sometimes overlooked amid the market entry excitement.  The product or service being promoted must be “wanted and needed.”

“People will come to Kenya and say, ‘Wow, there’s a big market for shoes here,’ because they see all the children without shoes,” he said in a phone interview. “The reason they don’t have shoes is because they can’t afford shoes; it’s not because there aren’t any shoes.”

In another scenario, he said, foreign companies surveying the East African region for viable business prospects may venture to Ethiopia and see a massive banking opportunity to resolve time-consuming letters of credit. “But the point is, Ethiopians don’t want foreign banks. Full stop,” Henderson noted.

A tricky market with huge promise

Many countries are forecasting little to no population growth for decades to come. In contrast, according to Leland Clegg, president of the Africa Business Portal:

Sub-Saharan Africa is the new Asia of this century.

He says that the region represents a “huge opportunity in growth in markets and labour supply.” Africa is predicted to boost its portion of the international workforce from 10 percent to 37 percent by 2100, according to an IMF report issued this year.

Moreover, the major East African economies have strong GDP projections which are “much higher than the rest of Africa and much higher than in the developed world,” Clegg said. East Africa has not been as negatively impacted as neighbouring countries by the decline of commodity prices, he pointed out. And overall, Africa’s exchange rates have made it appealing for North Americans to import African goods.

For Canadian companies, the region is certainly worth exploring. In 2015, Canadian two-way merchandise trade with East Africa was $401.9 million according to Ryan Ward, a senior trade commissioner (Eastern Africa) based at the High Commission of Canada in Kenya. He noted that the IMF declared three markets in East Africa are among the 10 fastest-growing economies in the world: Tanzania (fifth, 7.2 percent growth); Ethiopia (sixth, 7%); and Djibouti (ninth, 6.7%).

East Africa’s prospects are greatest in the energy, construction, IT and agricultural sectors, with opportunities varying by country, Clegg added. Although oil is not as abundant in East African states as in other resource-rich areas of the continent, current investments in renewable energy sources such as solar, hydro and clean energy variations such as natural gas are likely to grow dramatically.

On the technology side, Clegg said Kenya has led the way in a continent that basically skipped telecom lines and moved directly to mobile, adding that the country is “much more advanced in mobile banking than the U.S.”

East Africa also offers possibilities for food manufacturers – but not for all players in the agricultural industry, cautioned Henderson. He said maize and other types of big farming are impeded by the lack of suitable land, especially in Kenya which is comprised mainly of desert.

Henderson is also involved with an organization that makes high-end cooking oil from avocado pears and sells it to Europe. He said food companies linked to specialist, niche markets requiring the high-altitude weather of Kenya to grow their crops are best positioned. He further noted that macadamia nuts are a promising product in the country, which are often grown by contract farmers with high literacy rates, no tolerance of pesticides, and the ability to satisfy European standards.

Kenya is a hub for all of Eastern Africa

 Without a doubt, Henderson argued Kenya must be the starting point for companies formulating a market entry strategy to East Africa. He adds that “if it’s going to work, it will work here.” He suggested setting up operations in Mauritius for tax reasons, creating a head office in the Kenyan capital of Nairobi for administrative purposes, and from there assessing whether the product or service may be exported to nearby Tanzania, Uganda or Rwanda.

The allure of Kenya is based on high growth, first-world infrastructure, banking and auditing systems, and the capitalist leanings of its largest ethnic group.

The country’s physical infrastructure has improved dramatically, with new highways and road improvements, a planned railway line, better internet connectivity and rising power generation capacity, he explained.

He also noted that the cost of power is declining as wind generation and other renewable sources come online, and these developments have created big opportunities for foreign firms involved in geothermal energy – from “consulting engineering all the way to on-the-ground operating.”

In other East African countries, opinion is mixed on the possibilities versus the roadblocks. Although gold projects in Tanzania, for instance, are established and faring well, “gas is very much in its infancy, with speculation in oil as well,” said Henderson. In his view, the major challenge is that socialist Tanzania is struggling with how to exploit its gas reserves and “make proper money out of it.”

Uganda, too, has its share of problems, he said. President Yoweri Museveni, at the helm since 1986, has been in power for too long and he and his family are interfering in the oil and gas industry. The country is considering building a pipeline to Tanzania, but that will take years.

Yet Ward said he spends much of his time attending trade shows in East Africa and offering Canadian companies a sense of how countries like Rwanda and Ethiopia have grown over the past decades, and deserve more attention.

How to compete without falling into the corruption trap

Global firms navigating Sub-Saharan Africa also “must decide what level of corruption they’re prepared to tolerate,” Henderson suggests. If local players believe a new entrant will pay, “they then have ways of delaying things.”

Companies embarking on a new venture in East Africa should dispatch expats on the ground to manage operations in a way that reflects their corporate culture.

Further, he dismissed the “half-hearted idea” of using a facilitator to move goods: “People say, ‘I can get a container out of the port; I can get a facilitator to get it out for me. I don’t bribe anybody.’ Rubbish. The facilitator bribed somebody in the port.”

There are some new channels available to help manage the local uncertainty, though. The aim of the Africa Business Portal is to connect North American small and medium-sized businesses wishing to enter the African market.

The organization has 100 advisers on both continents “who are committed to play by the rules,” and provide them with “large-company resources,” said Clegg, whose initiative was launched in October 2015 after seven years in development. The experts include multinational executives, former ambassadors, NGO executives and educators, as well as service providers such as attorneys, accountants, logistics people, and specialists in energy and agriculture.

Moreover, Canadian companies may turn to the country’s Trade Commissioner Service for free access to expertise and networks, added Ward. “At the most basic level, our trade commissioners help clients understand their potential in a given market, connect them with qualified contacts in the right organizations, and provide support if clients run into problems,” he noted, adding that his team also organizes business missions and trade shows.

Once set up in East Africa, Henderson said North American firms will vie with the region’s traditional trading partners of India, Europe and the U.K. Yet “China is the one you’ve got to watch,” he warned, as the Asian country is investing in large infrastructure projects such as railway lines and bringing in their own people. “You’ll often find your competition will have no scruples on bribery and paying people better deals.”

Canada, however, has a different take on China. “Rather than looking at Chinese companies as competition, we are increasingly seeing them as potential partners,” said Ward. The bulk of Canadian companies are SMEs and lack the capacity to take on major infrastructure projects.

This is why they should seek out subcontracting opportunities with “select Chinese companies already active in the region,” he advised. On the energy infrastructure side, for example, a number of East African states are interested in building major pipelines to facilitate the movement of crude oil – an opportunity for Canadian companies impacted by the downturn of the domestic oil and gas industry, Ward noted.

In Ward’s experience, the greatest impediments to Canada’s trade with the region are an outdated perception of Africa and a reliance on traditional markets. “The growth numbers speak for themselves,” he said. “If Canadian companies don’t take advantage of the opportunities presented by these expanding economies, other countries will.”

The post Navigating on-the-ground complexity to benefit from East Africa’s greatest potential appeared first on Trade Ready.

Whether the expansion of a middle class population is at its nascent stage or reaching maturity in a developing country, infrastructure projects are a key determinant for sustainable growth.

Federal, regional and municipal governments are increasingly implementing power, transport, irrigation, water and sanitation, and information and communication technology projects through PPP arrangements.

Through these arrangements, the risks, rights and responsibilities are shared with the private sector.

PPPs are helping Africa

Nowhere is the development of infrastructure as critical and potentially transformational than in Sub-Saharan Africa.

Infrastructure not only spurs economic growth, but is a contributing factor in reducing poverty and achieving the Millennium Development Goals.

The cost of addressing Africa’s infrastructure needs is estimated to be around $93 billion a year, about one-third of which is allocated to maintenance.

Under the right circumstances, PPPs can mobilize additional sources of funding and financing for infrastructure.

PPPs in countries with long histories working with the partnerships have been shown to manage construction better, with projects being completed on time and on budget more often.

They also ensure adequate maintenance, which can be attributed to the longer-term investment perspective under PPP contracts.

Making much-needed connections

Last year, I embarked on a five-week journey in East Africa to engage with clients on two separate PPP transactions.

I stayed in London, UK for the first few days of my trip, attending the 7th Annual Africa PPP Conference and meeting with our partner lawyers on the Kafue Gorge Lower Hydropower Project in Zambia.

The next two weeks were spent in gorgeous Kigali, Rwanda, advising on contractual matters concerning the Dar es Salaam-Isaka-Kigali/Keza-Musongati Railway PPP Project.

The construction and operations of a new 1661km railway line connecting the east coast of Tanzania to Rwanda and Burundi is anticipated to unlock the vast mineral resources in the hinterland and promote lower transport costs throughout the region.

The last segment of my business trip involved drafting documentation and managing the legal due diligence for the Nairobi Southern Bypass PPP Project in energetic Nairobi.

The new road slated for completion later this year will help reduce downtown traffic and improve cargo movement throughout Kenya by diverting vehicles away from Nairobi’s city center.

Major projects are helping to facilitate trade

Infrastructure PPPs may not be the first specialty that comes to mind when brainstorming career options in international trade; however, the nexus between these two sectors is two-fold.

First, infrastructure projects depend on the import and export of capital (investments), products (raw materials, assembled parts, and manufactured goods) and services (banking, project management, and consulting).

Second, the quality of infrastructure is an important determinant of a country’s trade performance, efficiency of transport services, and transport costs.

If improvements in the quality of infrastructure lag behind in the least developed countries, their share of world trade will likely continue to decline.

It is extremely important for Certified International Trade Professionals (CITP®|FIBP®s) and students to embrace the notion that international trade is more than just mere product swaps of food, clothes, jewelry, wine, etc. across an international border.

An entire spectrum of goods, services and capital act as inputs along the supply chain in the development of a product or project.

Changing the way how we think about international trade can have profound impacts on careers, client success, investments, and a company’s competitive advantage.

What will your contribution to international trade be?

The post Why global trade professionals should get involved in public-private partnerships appeared first on Trade Ready.

It’s true, Africa is ripe with opportunities, but they go largely untapped by North American firms, which have been hesitant to enter markets where their European and Asian competitors are already doing business – and profiting from it.

The World Bank estimates that real GDP in Sub-Saharan Africa (SSA) will grow by 4.5%, whereas the U.S. economy is forecast to grow 2.7% this year, and the Euro area is expected to expand at around 1.5%.

Granted, it is easier for developing countries to deliver larger growth rates, since they’re starting from a lower economic base, but SSA is simultaneously experiencing:

• rapid economic growth,
• unprecedented political stability,
• regulatory and legal reforms; and
• a rising middle-class population.

All of these factors are leading to greater levels of transparency and accountability. And investors are taking notice.

In 2013, the OECD reported that foreign direct investment (FDI) into SSA increased by 4.7%. Private equity firms are scanning the continent for opportunities. In fact, Helios Investment Partners, a London-based firm, boasts the first ever billion dollar fund for Africa.

Yet only 1% of global private equity goes to SSA and .3% of the average investment portfolio in the United States – that’s just $3 out of every $1,000 – is invested in Africa.

In terms of trade, the potential for growth is enormous. In particular, Africa offers tremendous opportunities for companies that provide goods or services related to consumer products, infrastructure development and public services.

Meet the growing demand for consumer products

Historically, investors have focused on the extraction industries in Africa, so economies rich in natural resources (Angola, Nigeria and Mozambique) received the bulk of FDI.

However, there has been a shift away from extractive industries towards consumer-related sectors as demand and purchasing power increase alongside a growing middle-class.

As a matter of fact, in 2014, mining and minerals exited the top 10 sectors for investment in SSA.

The top three – technology, retail and financial services – demonstrate the changing nature of investment in Africa.

Consumer demand for new products and services across a wide range of sectors is the leading cause of economic diversification. Rising demand for products – from laundry detergent to champagne to mobile phones – presents significant opportunities for manufacturers of consumer goods.

Look at Kenya, where nearly three quarters of the population own cell phones, and almost 60% of Kenyans use cell phones for mobile payment and banking, making it the mobile-payment capital of the world.

Look to partners for the best opportunities in infrastructure development

The World Bank estimates that SSA needs $90 billion in infrastructure investment alone. That’s not $90 billion to add or repair things either; it’s the amount needed to build greenfield projects each year.

Infrastructure is critical to the effective functioning of an economy, from ports that bring cargo in and out to electricity grids that power manufacturing, and financial markets that keep the entire system moving.

African markets are investing heavily in capital improvement projects to meet the forecasted growth in electricity demand, water supply, transportation networks, and telecommunications services.

Many of these projects are funded by multilateral development institutions such as the World Bank, United Nations, and African Development Bank, as well as the U.S. Agency for International Development, U.S. Trade and Development Agency and the Canadian Department of Foreign Affairs, Trade and Development.

Tenders are posted on their websites, so firms can directly respond to opportunities to support the development of infrastructure projects throughout Africa.

International trade can involve public services too

There is also a huge need for public services, particularly healthcare and education, throughout Africa.

With its high population growth, SSA is much more open to private investment in these areas, whereas most industrialized economies consider them to be public goods that should be provided by the state, and tend to be suspicious of private sector involvement in them.

According to a recent report by the International Finance Corporation (the private sector arm of the World Bank Group), spending on health in SSA is expected to double over the next 10 years.

Investments of $25-30 billion will be needed to meet the demand, with the private sector playing a key role.

Interestingly, companies and investors that are already in Africa have a much more favorable view of the opportunities there and the ease of doing business, while firms that aren’t there are far more skeptical.

To build your business in Africa, there are three things to consider.

1. Think global, act local

Africa is big. However, Africa is not a single, monolithic place. It’s composed of 54 different countries (48 below the Sahara) that have their own unique economies, governments, cultures and every other independent system you would expect a sovereign nation to have.

They are also distinct from a geographic and economic perspective, so each county requires an independent approach.

To be successful in SSA, you have to know your Mali from Malawi and Mauritania from Mauritius.

You need to explore each individual market and develop an appropriate strategy. That requires a local presence.

Although distributors and agents can help you enter a market, developing a sustainable strategy requires feet on the ground in your priority countries.

Companies with representatives in country can gather local market intelligence, cultivate and maintain key relationships with government officials, oversee distributors and agents and quickly respond to changing market dynamics.

2. Play the long game

Building business in Africa is not a short-term proposition. It is a long-term strategy based on relationship building, technology transfer, skills training and a demonstrated dedication to the markets where you want to work.

Having a local representative will help position you for success, but patience is key.

Despite the high-growth rates in the region, African economies are still small, so big returns and volumes are often not feasible at the beginning.  Firms that are hoping to weather the slowdown in the EU and China by making quick returns in Africa will need to revise their expectations.

Additionally, navigating the complex regulatory and legal environments will take time and access to trusted advisors who can shepherd you through the process.

3. Manage risks

Like most emerging markets, SSA presents a complex operating environment that is prone to risks.  Companies need to navigate volatility and develop appropriate mitigation strategies, but oftentimes, firms overprice the risk exposure in SSA and abandon operations altogether.

Companies need to thoughtfully evaluate situations to determine if a change in strategy is required, or if a short-term contingency plan will suffice, such as selling products on-line rather than in-store during security threats so customers can avoid public places.

Doing business in Africa isn’t going to be easy, but it will be rewarding if you dedicate the time and resources necessary to develop and implement a thoughtful approach.

But act fast! European and Asian firms are actively engaged in Africa – and thriving- so don’t be the last one to arrive at the party.

As they say, if you’re not at the table, you’re on the menu.

What steps does your business take to identify and take advantage of business opportunities in Africa?

The post Africa is open for business, but is your business open in Africa? appeared first on Trade Ready.

I first became interested in trade during my time at business school in the Netherlands. The experience opened my eyes to many of the non-tariff barriers that enterprises face in reaching export markets and how businesses from a “small country” can actively participate in international trade.

My time in the Netherlands inspired me to dedicate my career to promoting international trade.

The road to working in the UN system, and for the International Trade Centre specifically, was the result of a move from the private sector to employment with two national governments.

Although I enjoyed my employment experiences with both SMEs and larger enterprises, I have always been interested in what makes for a strong, domestic, “enabling environment” for businesses and how to effectively promote trade.

I therefore began my career in trade promotion with the Australian Trade Commission in 2007, and subsequently worked for the Canadian government in 2010.

The motivation to assist enterprises in developing economies

During my early work in trade promotion I witnessed the important connection between business success and the level of international trading activity of SMEs in developed countries (particularly in Canada, given its small domestic population and the likelihood of market saturation).

I realized that, in many cases, these   enterprises have significant advantages, including highly developed infrastructure, less ambiguous regulatory requirements, and established trade support institutions.

This realization motivated me to work on behalf of developing country sectors to increase their competitiveness, especially producers in WTO member states that are highly exposed to the exports of developed countries.

Trade promotion organizations play a vital part in trade development

Some developed countries are fortunate to have highly successful trade promotion organizations.

I believe Canada’s federal trade-bodies, Export Development Canada (EDC) and the Trade Commissioner Service (TCS), have benefited significantly from FITT’s role as a training partner.

Unlike purely academic programs, the FITT program gives students practical information on the different aspects of exporting (e.g. trade finance, marketing, etc.). Although trade theory is important, and forms most of the legal bases for the rules of trade, being able to navigate and comply with export requirements is an essential skill.

On the multilateral level, United Nations agencies like ITC are important to improving the capacity of developing country exporters to trade internationally. This led me to ITC.

The team at ITC responsible for value chain development, in both product and services sectors, has been actively compiling the needs expressed by project beneficiaries for over a decade.

A number of colleagues and I have been analysing this large body of qualitative information to gain better insight into what the most common needs are in different sectors and regions.

Using a content analysis methodology, we were able to quantify these needs, and we intend to publish our initial results on the ITC website in the coming months.

Understanding a complex development challenge

Throughout my career, I’ve realized that with both general and specific education comes another challenge: engaging with audiences that expect simple answers to complex problems. My thesis represents an extension of my work at ITC. I’ve always been interested in the role of technology and innovation for development.

In my thesis, I am examining the impact of donor programs for “appropriate technology” transfer. In particular, I am looking at the transfer of small-scale peanut processing technology to communities in Sub-Saharan Africa (SSA).

In the 1970’s, SSA had approximately 90% of the global market share for peanuts. Today, this market share has fallen to about 5%. The fall in peanut exports can be partially attributed to developed country import bans on food contaminated with aflatoxin, a carcinogenic chemical produced by mould growth as a result of moisture and humidity. Some of the moisture related issues have to due with manual shelling activities.

Improved processing may enable these producer countries to reclaim some of their world market share, and also improve national public health.

I believe my thesis topic addresses an important area at the apex of technology, trade and development.

I intend to continue to work in my thesis area, agri-food sector development within the UN/WTO system, but also to expand my consulting business further. I’m also pursuing more “entrepreneurial activities” in the IT, clean tech, and agricultural technology spaces.

International trade is a field of continuous learning

One of the biggest challenges in my career has been the continuous learning required to understand the multifaceted nature of international trade. After completing the course-based Master of International Trade from the Johnson-Shoyama Graduate School of Public Policy at the University of Saskatchewan, I continued to work.

Even after completing a Master’s, I wanted to explore a specific area in greater depth. This led me to pursue a second, thesis-based, master’s degree with a specialization in international development. Given the strength of the University of Saskatchewan in all disciplines related to agriculture, I applied to a thesis-based Master of Arts program.

Upon acceptance, I was offered a graduate fellowship with the faculty of Political Studies. The fellowship entailed completing research for the faculty, grading the work of undergraduates, and other responsibilities. I also won several graduate awards that will contribute toward funding my fieldwork.

Completing my first master’s degree, earning my CITP designation in 2013, and, more recently, receiving a graduate fellowship have been among my proudest achievements in my educational career.

The ‘VALUE’ of a designation

Being a CITP has given me practical knowledge and skills related to trade. I’ve heard people mention certifications in any field as “not adding any value” in helping them “sell themselves”.

In my opinion, the value of a professional designation lies not in the paper received as a means to “get a job”, but as a way that your knowledge can be recognized by fellow professionals.

That being said, it has been good to see the designation included in position advertisements with federal government agencies involved in trade and export development.

I have also had the opportunity to connect with other international trade professionals through the FITT community by being featured in an article on TradeReady.ca and participating as a panellist in #TradeElite Twitter chats.

I am excited to continue to be active in the FITT community, participating in Twitter chats, as either a host or panelist, and look forward to networking with my fellow professionals in the future.

The post How I am leveraging my education and experience for trade impact appeared first on Trade Ready.

South Africa’s inclusion in the U.S. African Growth and Opportunity Act (AGOA) trade agreement is less than certain after a protracted battle between South African and American poultry associations over South Africa’s imposition of duties on U.S. chicken.

The squabble over chicken has led some U.S. lawmakers to suggest that South Africa be placed on a three-year probationary period, with reviews every six months, once the AGOA is renewed for a 10-year term.

Why the AGOA is important for the South African economy

The U.S. is due to re-authorize the AGOA, which opens export opportunities to the US for a host of Sub-Saharan African nations, before Sept. 30, 2015. The program was first authorized in 2000 for a fifteen-year term.

Though the amount of imports from AGOA countries totals around 1% of U.S. exports, manufactured goods from South Africa have accounted for the bulk of these goods. The U.S. is South Africa’s third-largest trading partner, after China and the European Union, accounting for 6.8% of its total trade.

South African exports to the States have been particularly focused on vehicles, but also include minerals – such as diamonds, chemical products, and machinery. In 2014, South Africa exported US$8.3 million in goods to the U.S.

Though U.S. economic benefits from the program are minimal, it has served to improve relations with Sub-Saharan countries across the board.

What has chicken got to do with it?

The poultry standoff began when the U.S. expressed outrage over the South African government imposing anti-dumping penalties on U.S. frozen chicken part imports in 2000. ‘Dumping’ refers to foreign companies or countries exporting goods at a price lower than locally-produced goods.

The poultry industry is critically important to the South African economy, one South African trade official said, as it has the “propensity to create jobs” and creates “empowerment” in the workforce, as part of an effort to reverse decades of apartheid-enforced segregation and inequality.

The South African Poultry Association (SAPA) has been adamant about the need to protect South African poultry producers in any trade deal with the U.S.

The U.S. refutes the charge that is undercutting local industries by exporting chicken to South Africa, pointing to a vast increase in demand for poultry.

An April 1 statement from the U.S. Department of Agriculture claims that South African consumption of chicken products has increased substantially; according to this document, South Africa imported 70,000 tons of chicken in 2000, yet imported more than 400,000 tons in 2014. The report states,

The reality is that the South African domestic industry hasn’t been able to keep up with increases in consumer demand, and foreign imports are already an integral part of the market

Could there be a resolution on the horizon?

After several weeks of both sides trading barbs, the SAPA stated on April 21 that it is willing to make concessions to ensure South Africa is included in the renewed AGOA treaty.

SAPA is drafting a letter with “realistic, rational and reasonable proposals,” SAPA CEO Keith Lovell told South African newspaper Independent Online.

“I am confident that what we propose is fair and rational,” he said.

For the Americans, the sweet spot is to get sufficient access to not find it worthwhile to pursue the matter.

The country’s Department of Trade and Industry said the proposed compromise will see U.S. chicken exports restored to 2000 levels, while accounting for an increase in the market since that year.

However, trade negotiators will still have to work out what the tonnages of chicken parts and whole chickens will be. Lovell is understood to be unhappy with proposed volume amounts suggested by the U.S..

It remains unclear when a final decision will be reached, but South African negotiators will have to keep in mind that the current AGOA framework expires at the end of September.

Do you think the parties will reach an agreement in time for the September deadline? Do you think South African sensitivities on the poultry issue are justified?

The post How ‘chicken’ is stalling the South Africa-U.S. trade agreement appeared first on Trade Ready.