3 Things I Learned Today in Ghana

1. It’s great to have friends in country

Not only fornthe hospitality, or the insights and view from inside, the ability to trust people to do what they say they’ll do is invaluable.

2. Projects are not always what they seem to be

A simple capital raise can reveal a need for a variety of consulting services

3. There’s nothing like on the ground presence.

I spent most of today with the management team of a Nigerian construction firm setting up in Ghana. Today they were looking for office space. Tomorrow they meet key decision makers whose influence can determine who wins contracts. American companies need to show this level of commitment or else be beaten to the punch by bold competitors from Africa, Asia, and Europe.

I was also reminded why I made this trip. I’m grateful for the opportunity to see first hand the changes that say much than the macroeconomic statistics. Now I’m  better prepared to explain this exciting and growing market.

 

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Ghana Today–a Story of Growth and Struggle

I arrived in Accra yesterday morning for my first visit in several years. While I’m here to meet with partners, colleagues,  and prospective clients, I’m also anxious to see see up closely of the changes I’ve been reading about.

A different Accra greeted me immediately. The airport arrival area was cleaner and much more orderly than before. On the way to my hotel I saw several new office buildings including the brand new Octagon. There’s also the fabulous new Movenpick. This enormous building is clearly designed for big event and caters to an international clientele.I’m  right around the corner at the Accra City Hotel, which has replaced the old Novotel on Barnes Rd. The arrived of these new premium properties are recognition of Accra as one of the premier meetings destinations in West Africa.

Later that day, during my ritual stroll around the neighborhood, I could see that much of the old Ghana remains. There’s the chaotic bustle of Makola market. The tro-tros still offer dirt cheap transportation along with new City buses tant world ont besoin ont of place in DC or Mexico City.

During the next two I will explore the current state of Ghana’s development,  focusing on energy, infrastructure, and the country’s efforts to lessen its dependence on raw commodities and become a more industrialized, higher value economy. Along the way I will highlight potential investment opportunities and suggest ways Ghana’s companies and governments can become more investor friendly. Stay tuned!

AccraCityHotel

Movenpick

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Caribbean communities on the front lines of climate change adaptation

A key step is to understand how private for-profit initiatives can align with current thinking regarding resilience to maximize pro-climate impact and lead to healthy sustainable returns to investors.

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Photo Credit: Stuart Claggett

Newly-released analysis from CDKN has identified a series of approaches to help community-level organisations to increase climate resilience. The analysis focusses on the Caribbean, but has widely applicable lessons for community-based adaptation in other parts of the world. Will Bugler and Olivia Palin explain further:

The research acknowledges that the success of adaptation measures is highly dependent on local context, and shows how multi-level governance approaches can deliver locally-appropriate adaptation actions. By using approaches and methods such as network analysis, community-based vulnerability assessments and a ‘local adaptive capacity framework’, the research suggests that communities can improve the efficacy of climate action at the local level. What’s more the analysis also finds that more co-ordinated action at the local level can lead to increased influence on regional and national decision making.

The new analysis draws on outputs from three CDKN-funded projects spanning a decade’s worth of applied research…

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DEVELOPMENT OF AN IMPACT INVESTING INDUSTRY

These are issues that I believe impact investment professionals will grapple with for the foreseeable future:

Impact Measurement. There is still no clear consensus on how to measure the social impact of impact investments. A number of methodologies have been developed, each seeking to create a standard that can be used across a wide range of investments.

  • IRIS is a catalog of impact metrics managed by the Global Impact Investor Network. IRIS is intended to provide a common language for measuring social, environmental and finance performance.
  • GIIRS ratings, developed by B Analytics uses the B Impact Assessment to rate the impact of a given investment or portfolio. The GIIRS rating includes an Overall Impact Business Model Rating, Overall Operations Rating and a Fund Manager Assessment.
  • The UN Global Compact measures companies’ performance in meeting universally recognized standards of human rights, labor, the environment, and anti-corruption. The Global Compact also encourages alignment with the UN Sustainable Development Goals.

In addition, several organizations have their own impact measurement methods tailored to suit their specific circumstances. Impact investors and social enterprises will need people who can sort through these methodologies, and understand how to apply them to their organizations.

Mainstreaming” of Impact Investments. When will impact investing become the norm? Will companies ever report social results alongside financial results as a matter of course?

Based on my experience at the IBL workshop, much of impact investing mirrors the startup world, involving relatively young and small companies whose value proposition includes some form of groundbreaking innovation. One sign of mainstreaming will be when we see larger, institution-sized impact investments. In addition, one wonders if we will see established, Fortune 500 companies reporting social impact results. These are companies that have tremendous influence on the global economy, the global workforce, and on communities and municipalities. They usually discuss their interactions with stakeholders in their annual reports, but that is not the same as an objective measurement of impact. How will impact influence executive compensation? Firm value? Corporate governance? Professional recruitment? These questions are being asked and discussed but the answers are still some distance away.

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IMPACT INVESTING IN EMERGING MARKETS

Recently, I along with a group of mid career professionals participated in a 3 day workshop entitled “Break into Impact Investing.”

The workshop consisted of seminars from leading practitioners in the field. They represented organizations such as Village Capital, Accion Venture Lab, Infodev (World Bank), and the Calvert Foundation.

Impact investing is a broad category that addresses many topics of concern around the globe. This workshop devoted much attention go early stage ventures in the developing world.

  • The Village Capital seminar for example focused on a case study featuring an a successful entrepreneur turned investor who need to allocate investment dollars between two mission driven startups, and Village capital’s own investment fund and a donation to Village Capital’s non-profit entity.
  • Infodev provides funding and support to entrepreneurs in the developing world. The seminar featured a startup in Kenya and dealt with several issues faced by impact investment funds such as how to define success, fund structure, and governance.
  • The Accion Venture Lab presentation offered insights on assessing a social venture at its earliest stage.
  • The Calvert Foundation discussed fixed income investments in the impact investment context, using vehicles such as the Community Investment Note to fund several kinds of loans to social enterprises, and the Ours to Own campaign to raise capital to revitalize urban centers including Denver, Baltimore, and the Gateway Cities of Massachusetts. The Calvert Foundation is a bit of a departure in that it uses debt instruments for impact investing.

All the presenters gave us frameworks to guide the process of impact investing. They had in common the identification of a value proposition or unmet need, development of a business model, and building a strong management team. It seem the elements of a promising startup are the same regardless of whether or not social impact is a factor.

It is also interesting to note that most of the cases and enterprises discussed were in Asia and East Africa. It was pointed out that Kenya is considered one of the more attractive countries for impact investing. East Africa’s popularity among the impact investment community is largely due to the advanced startup ecosystem in East Africa compared to other parts of the continent. The concerted effort to make Nairobi an African technology hub, plus the impressive regional integration efforts of the East African Community have attracted investment of all kinds including impact investment.

Careers in Impact Investing

In addition to learning about the industry, the workshop included insights on career options in impact investing.

The workshop organizer, Impact Business Leaders is in the talent development business, so the workshop was very much about career development and creating the talent pool for the impact investment industry.

Throughout the weekend career paths were revealed both implicitly and explicitly. Some of them include:

  • Portfolio manager – working with financial statements, managing relationships with portfolio companies.
  • Analyst/CFO – Overseeing accounting and financial analysis, being a resource to management for understanding financial issues.
  • Adviser/Consultant – working directly with entrepreneurs providing advice and technical assistance.
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B2B Waste to Energy and Renewable Energy Fair

caribbeanclimate

b2b-w2e-re-fair

The Caribbean Community Climate Change Centre (CCCCC) in Partnership with GIZ and United Nations Development Program (UNDP)’s Japan Caribbean Climate Change Partnership (J-CCCP) project hosted Belize’s First B2B Waste to Energy and Renewable Energy Fair at the Belize Biltmore Plaza, in Belize City on the 9th November, 2016.

The presentation of the Potential Study on Producible biogas and renewable energy from biomass and organic waste in Belize by TNO Consultants Johan van Groenestijn, Robert de Kler and Marco Linders for GIZ / J-CCCP concluded that:

  • Large amounts of biomass resources are available in Belize that have a significant potential to produce biogas
  • All reported biomass resources have biogas production potential, but every case is different and has to be judged amongst others on its scale (amounts available), easiness of digestibility, alternative uses of the waste, location, etc.
  • For bananas, a best practice system comprises of a hammer mill and two…

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Emerging Markets on the Sell Side -Entrepreneurs, Exporters, and their Governments

Policymakers executives and entrepreneurs in emerging and frontier markets generally want to attract capital from abroad. They want long term, job creating capital invested in sustainable enterprises.

There are four areas in which management decisions and sound policy at the government level can increase the likelihood of such an outcome.

I. TRAINING & CAPACITY BUILDING

The best investors are attracted to strong management teams and staff with the skills to maximize productivity. Emerging market companies should focus their skill building efforts in three key areas:

  1. Quality management including, for example TQM and 6 Sigma practices
  2. Innovation to help orient the company toward growth and competitiveness.
  3. Compliance with international laws and regulations against corruption as well as customers’ regulations, in financial services and other sectors.

Training organizations:

Funders:

II. INVESTORS’ DUE DILIGENCE

Prior to any investment or contracting arrangement, companies will conduct the usual financial & operational due diligence to get an understanding of the nature of their investment. In doing so they should be mindful of several concerns:

  • Have suppliers and other 3rd parties had online compliance training?
  • Banks must comply with US financial regulations and so do their suppliers. Banks and other US companies must prepare suppliers to be audited by US bank examiners.
  • US & Western companies must maintain their “social license” to operate. This requires a deliberate demonstration of corporate social responsibility and should do all they can to purge human trafficking, child labor and other human rights issues from the supply chain.

III. DEMONSTRATE VALUE OF A LOCAL PARTNER

  • Provide guidance on local procedures protocol, cultural norms and customs
  • Commitment to excellence in performance and execution
  • Commitment to strong business ethics re corruption, human rights, CSR

IV. GOVERNMENTS MUST BALANCE INVESTOR FRIENDLINESS WITH NATIONAL AND CULTURAL PRIORITIES

  • Establish clear, well documented rules of the game
  • Active participation in multilateral bodies governing global trade
  • Maintain ongoing dialogue with major trading partners
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Raising Productivity& Prosperity in Six African Economies

There is a set of African countries whose economies have grown faster than the rest of the continent in recent years and show potential for above average growth into the future. Six of these countries have been dubbed African Lions by Haroon Bhorat and Finn Tarp in there recent book “Africa’s Lions: Growth Traps and Opportunities for Six African Economies.” The book was the subject of a panel discussion held recently at the Brookings Institution.

WHO ARE THE AFRICAN LIONS AND WHY?

The six African Lion economies are Ethiopia, Ghana, Kenya, Mozambique, Nigeria, and South Africa. The list includes Africa’s two largest economies—Nigeria and South Africa. These two along with Kenya and Ghana are also four of the five KINGS countries, so named by Ghanaian tech entrepreneur Eric Osiakwan for their leadership in Africa’s technology sector. Ethiopia, Africa’s second most populous nation has dipped a toe into light manufacturing. Mozambique is a potential agricultural powerhouse.

WHY HAVE THE LIONS NOT PERFORMED BETTER?

Poverty is down but not enough and poverty reduction has been uneven across the continent. Much of the poverty reduction has been due to strong commodity prices and natural resource imports by China. This type of economic growth does not reduce poverty by as much as in other emerging economies where more of the growth is driven by industrial activity and higher value exports.

In other words, as we all know African economies, including the African Lions suffer from excessive dependence on natural resources. They have been slow to industrialize, and slow to move up the value chain into higher productivity sectors which create more and higher paying jobs. While there may be inequities in the global trading system that work against them, the biggest obstacles blocking African productivity are more internal than external—they include business governance, quality of institutions, and strength of human capital.

HOW WILL THE LIONS TAKE AFRICA TO THE NEXT LEVEL ECONOMICALLY?

The issues of productivity and natural resource dependence are well known and have been hanging out there for decades. It was evident by the mood in the audience at Brookings that Africans are increasingly dissatisfied and are looking for new solutions!

Today’s challenges cry out for innovative new approaches and Africans must lead the way. The West—and the East can help. The challenge is big enough that the combined efforts of business, non-profits & foundations, academia & think tanks are needed. The West, and for the US in particular should beef up their efforts in 3 ways:

1. Engagement

American industry and American goods and services are generally well liked in Africa. But American business has been very much on the sidelines of African growth and development. Americans need to be present on the ground, even when there is not a deal immediately on the table. There have been a few good examples:

  • Mark Zuckerberg’s recent visit to Nigeria and Kenya. There to explore the technology and innovation sector in Africa, he wound up investing in a Nigerian software developer.
  • General Electric is making significant investments in the power sector in several countries, making use of the US government’s Power Africa initiative.
  • The Case Foundation, lead by Steve and Jean Case was a major supporter of this year’s Global Entrepreneurship Summit in Nairobi

There are resources that can help such as Corporate Council on Africa , certain accounting, legal and consulting firms, and a cadre of US trained professionals with deep experience and relationships in African business. Time to put them to work!

2. Training & Capacity Building

  • Management Training. In addition to making traditional business education available to more students, business and academia should make available advanced disciplines such as project management, quality management, and supply chain logistics as applied in an African context.
  • Innovation. Many western companies are using training programs that instill a culture of innovation. African business can use similar training to build on recent successes like M-Pesa and gain a competitive edge in the global marketplace.
  • Compliance. In order to become a productive member in a global supply chain, African companies like others around the world must be compliant with global standards designed to prevent corruption, maintain labor and environmental standards, and regulations specific to certain industries like financial services.

3. Financial Investment

With significant engagement and capacity building, comfort levels rise on all sides and perceptions of risk can change. Investments specifically linked to these efforts become attractive to private capital.

Deals designed to benefit from growth in consumption and from inclusion in global supply chains will provide significant, reliable returns to investors. So far there has been a lot of interest and a lot of dancing around. It’s time to pull the trigger!

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EMERGING MARKET SUPPLY CHAINS–LESSONS FOR INVESTORS

In my last post I gave an overview of the issues raised at a conference on supply chain risks and opportunities. Let’s now drill down a bit to consider how US and other western companies should address these issues as they being emerging and frontier market firms into their supply chains.

DUE DILIGENCE

Prior to any investment or contracting arrangement, companies will conduct the usual financial & operational due diligence to get an understanding of the nature of their investment. In doing so they should be mindful of several concerns:

  • Have suppliers and other 3rd parties had online compliance training?
  • Banks must comply with US financial regulations and so do their suppliers. Banks and other US companies must prepare suppliers to be audited by US bank examiners.
  • US & Western companies must maintain their “social license” to operate. This requires a deliberate demonstration of corporate social responsibility and should do all they can to purge human trafficking, child labor and other human rights issues from the supply chain.

SUPPLY CHAIN RISK

  • The current approach of international insurers to risk management is to understand the interconnectivity of risk. Experts recommend managing risks holistically rather than in silos. This holistic approach recognizes how operational risks impact legal risks and financial risks.

CORRUPTION

Western executives often complain of corruption and having to pay bribes in order to do business in emerging markets. (Of course for many westerners the answers is to pay bribes—it takes two to tango!) For US companies the Foreign Corrupt Practices Act means a jail sentence if caught making inappropriate payments. Cultivate long term relationship The strategies recommended by the experts at the EFMA conference and elsewhere boil down to the following:

  • Cultivate a long term relationship with suppliers to form a basis for trust. Building trust requires playing the long game so companies should budget for the time and resources required to form a long term relationship with suppliers and other stakeholders. It takes spending time in country. The desired outcome is a local partner for the long haul.
  • Get the incentives right. This includes not only sharing financial benefits, but also providing knowledge transfer via training and collaboration.

SUPPLY CHAIN DISPUTES

  • Implement controls that encourage performance and foster a long term relationship with suppliers.
  • Choose the right jurisdiction in which to set up the business entity and to contest disputes.
  • If necessary, seek advice on how to exit a market while retaining as much value as possible, and minimizing the loss of goodwill.

INTERNATIONAL TAX PLANNING

  • The natural and quite understandable inclination of most multinationals large and small is to locate profit centers in low tax jurisdictions. Some of these low tax states are disparagingly labeled tax havens. It is also not surprising that governments around the world have pushed back against the practice now known as “Base Erosion and Profit Shifting” or BEPS. The Organization for Economic Cooperation and Development has been a leader in understanding the use of tax havens. Companies would be advised to consult the OECD’s guidelines on BEPS and transfer pricing and to heed the advice of tax consultants and attorneys when setting up supply chain relationships in emerging economies.
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Making Supply Chains Work in Emerging Markets

I recently attended the Emerging and Frontier Markets Association’s conference on Supply Chain Risks and Rewards in Emerging Markets. I have long stressed the need for developing countries to move away from the model of natural resource dependence and reorient their economies toward value added industry and join the global supply chains that are the backbone of many key industries. This was the right forum at the right time.

The stage was set with a discussion of key risk areas companies face when emerging market companies become part of their supply chain. They are:

  1. Various forms of corruption—particularly the risk of violation of the Foreign Corrupt Practices Act and
  2. Working with companies that may be involved in human trafficking and other human rights violations.

Other important topics included due diligence, taxes and cyber security. These topics and others will help us understand what companies and governments in emerging markets can do to attract investment capital and join a global supply chain. The discussions also gave us some ideas on how Western companies can succeed in these markets where the opportunities are tantalizing and the risks are readily apparent. I’m looking forward to exploring the path to supply chain readiness in the blogosphere and in the real world marketplace.

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