3 Lessons from the 2015 Africa Business Conference at Harvard Business School

As usual there was a palpable spirit of optimism at this year’s Africa Business Conference at Harvard Business School. While the facts on the ground may not be as rosy, I did come away with several observations that will be helpful in current tasks as well as in plotting strategy in the medium and long term.

1. Storage and transportation of both inputs and goods for sale are critical to improving farm performance.

2. Institutional Private equity is well entrenched in Africa and the characteristics of a successful deal are increasingly well known. In the second panel on closing the electricity deficit the parameters for funding power projects were clearly laid out:

  • A quality PPA deal is required. This is the guarantee of cash flow that investors look for. They’re not all created equal. For example, local currency denomination is a deal killer since it adds currency risk to the equation.
  • The PE folks will also need a sovereign guarantee as an indication that the government supports the project.
  • As always a strong management team makes the deal much more attractive.

3. Startup capital especially for non-tech ventures is extremely difficult to find. Angel investors and venture capitalists are slowly finding their way to tech-related, high growth startups. For others, it’s tougher but there are a few possibilities:

  • Impact investors. If one can demonstrate measurable social benefit in addition to financial returns then a new set of potential investors becomes available. Many impact investors use the IRIS standard to assess social benefit. African companies would be wise to seek out experts who can help the make their case using IRIS
  • Multilateral/DFI capital. Organizations such as the African Development Bank and International Finance Corporation sometimes have special programs for ventures with attractive features such as environments sustainability.
  • Trade promotion agencies. Agencies such as the U.S. Export-Import Bank can often provide funding or lean guarantees for capital purchases that meet certain requirements.

As always the Harvard Business School Conference showed us an Africa on the move—not without its issues, but with opportunities for businesspeople to benefit themselves, their organizations and the African continent. Successful entrepreneurs will assemble a skilled team that can execute on their vision and achieve financial and social results.

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Guess Which Caribbean Island Just Went 100% Renewable? Bonaire!

Originally posted on caribbeanclimate:

Like many Caribbean islands, Bonaire originally relied on diesel fuel to generate electricity for residents, with a peak demand of 11 megawatts (MW). This fuel had to be shipped in from other nations, resulting in high electricity prices for Bonaire residents, along with uncertainty about when and how much prices might increase with changing fuel costs.

In 2004, everything changed when a fire destroyed the existing diesel power plant. Although tragic, the situation provided an opportunity for Bonaire to consider what kind of new electricity system to build. Temporary diesel generators were rented to provide power for the short term. Meanwhile, the government and local utility began working together to create a plan that would allow Bonaire to reach a goal of generating 100 percent of its electricity…

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Major Africa Stock Market and Exchange Rate Changes in Q4-2014

Advansa International follows exchange rates and stock market indexes for several emerging and frontier markets. Exchange rates and stock indexes are recorded on the last trading day of the week. The tables below show changes from the last trading day of the last full week of the quarter for several key markets in Africa.

Table 1 

 STOCK MARKET INDEX TRACKER 4TH QUARTER 2014

AFRICA

COUNTRY

4TH QUARTER PCT CHANGE

GHANA-Local Currency

1.42%

GHANA-US$

2.83%

KENYA-Local Currency

-4.70%

KENYA-US$

-6.19%

NIGERIA-Local Currency

-15.66%

NIGERIA-US$

-27.06%

SOUTH AFRICA-Local Currency

-0.37%

SOUTH AFRICA-US$

-3.42%

WEST AFR. BOURSE-Local Currency

-1.91%

WEST AFR. BOURSE-US$

-6.05%

MSCI AFRICA-Local Currency

0.89%

MSCI AFRICA-US$

-2.52%

MSCI EMERGING MARKETS-Local Currency

-2.10%

MSCI EMERGING MARKETS-US$

-6.97%

Sources: Stock exchange websites, Financial Times, Advansa International data

Table 2

4TH QUARTER 2014 EXCHANGE RATE TRACKER

AFRICA

COUNTRY

4TH QTR PCT CHG

YTD

DEC PCT CHANGE

CFA AREA*

-4.14%

-11.66%

GHANA

1.41%

-25.86%

KENYA

-1.49%

-5.08%

NIGERIA

-11.40%

-13.27%

SOUTH AFRICA

-3.05%

-9.56%

TANZANIA

-2.07%

-7.42%

UGANDA

-3.88%

-9.18%

Sources: Financial Times, Advansa International data

*Includes most French speaking countries such as Benin, Cameroon, Cote D’ivoire, Guinea, Senegal, Togo and others

It was a rough year for emerging market stocks with the MSCI Emerging Markets Index losing 2.1% in the fourth quarter and 0.69% the full year 2014. African stock markets did better than emerging markets in Q4, though for the year the MSCI Africa index trailed emerging markets. Nigeria was the worst performer largely due to the fall in the price of oil. Its downward momentum continued into the first week of 2015 with the Global MSCI Nigeria ETF falling another 9%. Ghana was the strongest performer, up 1.42% in the 4th quarter, and 2.83% for the year.

All currencies in our table fell against the dollar in 2014, which diminishes returns (and increases losses) for foreign investors. This is partly a function of dollar strength rather than weakness of African currencies. The US economy finished the year strong and the dollar index was up from 99.1 at the end of 2013 to 102.8 at the end of 2014’s 3rd quarter. The currency depreciation also reflects the challenges to resource based emerging and frontier market economies that has persisted all year. A couple of currencies were especially weak. Ghana for example was down almost 26% in 2014. Aggressive action by the central bank, with the assistance of the IMF reversed the slide and the cedi has recovered, showing a slight gain in the fourth quarter. Nigeria’s naira showed the biggest loss of the quarter again influenced by the drop in the price of oil.

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When Nationalization Works

McKinsey’s interview with YPF CEO provokes interesting questions about the ability of state owned companies to function in a challenging global industry and the significance of nationalization in the relationship between multinational companies and governments of their home countries.

YPF is a large Argentine oil and gas company that was acquired by Repsol in 1999 and nationalized by the government shortly thereafter. Shortly after the nationalization, President Cristina Fernandez de Kirchner tapped Miguel Galuccio to run the company. In hiring Galuccio, President Kirchner went for management capability rather than political allegiance. Galuccio worked for Schlumberger and (then independent) YPF.

In the interview, Galuccio describes how he and his team created a “company DNA” which includes professionalism and integrity, a sense of national purpose, and value for the shareholders.

That McKinsey describes this as a success story and an example of strong corporate leadership suggests that nationalization does not have to mean management by political cronies, and that the public and private sectors can work together to create value for both the nation and investors.

That does not mean the company is immune to the recent drop in oil prices or that they will succeed in developing Argentina’s shale assets. However YPF’s performance stands in contrast to the apparent debacle at PDVSA in Venezuela.

Stakeholders in the new oil industries in Africa should take note.

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Major Latam Stock Index & Exchange Rate Changes in Q3-2014

Advansa International follows exchange rates and stock market indexes for several emerging and frontier markets. Exchange rates and stock indexes are recorded on the last trading day of the week. The tables below show changes from the last trading day of the last full week of the quarter for several key markets in Latin America, and the Caribbean.

Table 1 

 STOCK MARKET INDEX TRACKER 3RD QUARTER 2014

LATIN AMERICA/CARIBBEAN

COUNTRY

3RD QUARTER PCT CHANGE

ARGENTINA MERVAL-Local Currency

62.64%

ARGENTINA MERVAL-US$

59.06%

BRAZIL BOVESPA-Local Currency

7.63%

BRAZIL BOVESPA-US$

-2.07%

COLUMBIA IGBC-Local Currency

-2.76%

COLUMBIA IGBC-US$

-9.96%

JAMAICA MAIN INDEX-Local Currency

3.44%

JAMAICA MAIN INDEX-US$

2.74%

MEXICO-Local Currency

4.71%

MEXICO-US$

1.33%

MSCI LATIN AMERICA-Local Currency

5.29%

MSCI LATIN AMERICA-US$

-2.62%

MSCI EMERGING MARKETS-Local Currency

1.44%

MSCI EMERGING MARKETS-US$

-2.13%

Sources: Stock exchange websites, Financial Times, Advansa International data

Table 2

3RD QUARTER 2014 EXCHANGE RATE CHANGE

LATIN AMERICA/CARIBBEAN

COUNTRY

3RD QTR PCT CHG

YTD

SEP PCT CHANGE

ARGENTINA

-3.57%

-22.99%

BRAZIL

9.70%

-3.27%

CHILE

-8.30%

-12.69%

COLOMBIA

-7.20%

-5.31%

COSTA RICA

1.30%

-6.98%

JAMAICA

-0.69%

-5.82%

MEXICO

-3.38%

-2.95%

PERU

-3.24%

-3.87%

TRINIDAD & TOBAGO

1.19%

-0.81%

Sources: Financial Times, Advansa International data

Emerging and frontier market stocks showed mixed results as the MSCI Emerging Markets Index rose 1.44%, Latin American stocks however mostly outperformed the broader emerging markets. The MSCI Latin America Index was up 5.29%. Argentina is obviously an outlier. One school of thought says that in Argentina investors are shifting to equities and away from fixed income which has driven the stock market to an unusually high level.

On Currency front, the US Dollar index rose from 99.316 in Q2 to 100.342 in Q3. The recent strength of the US dollar makes the region’s currencies appear weaker than they actually are. Still the real rose nearly 10% as Brazilian authorities raised interest rates.

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Major African Stock Market and Exchange Rate Changes in Q3-2014

Advansa International follows exchange rates and stock market indexes for several emerging and frontier markets. Exchange rates and stock indexes are recorded on the last trading day of the week. The tables below show changes from the last trading day of the last full week of the quarter for several key markets in Africa.

Table 1 

 STOCK MARKET INDEX TRACKER 3RD QUARTER 2014

AFRICA

COUNTRY

3RD QUARTER PCT CHANGE

GHANA-Local Currency

-4.18%

GHANA-US$

-3.87%

KENYA-Local Currency

7.92%

KENYA-US$

6.18%

NIGERIA-Local Currency

-3.24%

NIGERIA-US$

-3.86%

SOUTH AFRICA-Local Currency

-1.90%

SOUTH AFRICA-US$

-7.28%

WEST AFR. BOURSE-Local Currency

9.21%

WEST AFR. BOURSE-US$

2.28%

MSCI AFRICA-Local Currency

0.52%

MSCI AFRICA-US$

-4.41%

MSCI EMERGING MARKETS-Local Currency

1.44%

MSCI EMERGING MARKETS-US$

-2.13%

Sources: Stock exchange websites, Financial Times, Advansa International data

Table 2

3RD QUARTER 2014 EXCHANGE RATE TRACKER

AFRICA

COUNTRY

3RD QTR PCT CHG

YTD

SEP PCT CHANGE

CFA AREA*

-6.92%

-7.85%

GHANA

0.31%

-26.89%

KENYA

-1.74%

-3.64%

NIGERIA

-0.62%

-2.10%

SOUTH AFRICA

-5.38%

-6.72%

TANZANIA

-1.16%

-5.46%

UGANDA

-1.89%

-5.51%

Sources: Financial Times, Advansa International data

*Includes most French speaking countries such as Benin, Cameroon, Cote D’ivoire, Guinea, Senegal, Togo and others

Emerging and frontier market stocks showed mixed results as the MSCI Emerging Markets Index rose 1.44%, and the MSCI Africa Index was up 0.52%. Choppy commodities prices, and mixed economic performance lead to losses in some countries like South Africa and gains in others. The Nairobi Exchange in Kenya and the West Africa Bourse were the strong performers in Q3.

Currencies that were weak in the first half of the year—notably Ghana—have largely stabilized. Though most currencies are lower against the dollar, this is due more to a strong dollar than weakness elsewhere. The US Dollar index rose from 99.316 in Q2 to 100.342 in Q3.

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Reflections on the UN Climate Talks (Guest Post)

advansa:

The pledges are a good sign if followed up with action. Meanwhile there is a role for the private sector in promoting and implementing renewable energy, as well as energy saving and monitoring products and services. This is a huge opportunity for impact investors to achieve measurable, tangible results.

Originally posted on caribbeanclimate:

Indi Mclymont-Lafayette (L), Journalist and the Regional Director of Panos Caribbean Indi Mclymont-Lafayette (L), Journalist and the Regional Director of Panos Caribbean

COP 20 wrapped up in Lima, Peru last week and many attendees are reflecting on the negotiations. Today Caribbean Climate features a review by Indi Mclymont-Lafayette, a Journalist and the Regional Director of Panos Caribbean – a non-government organisation that focuses on development communication.

Soo… what has been achieved after two weeks of talks?

That was the question one of my friends whatsapped me – knowing that I was attending the 20th United Nations Climate Talks in Lima, Peru from December 1-12.

I hesitated before answering.

Truth to tell, if you followed the achievements highlighted by the United Nations – then a lot had been done. The achievements included:

  • Country pledges to the Green Climate Fund (GCF) pushing it past a US$10 billion start up target.
  • Germany pledging and giving 55 million Euros (roughly US$68 million) to the Adaptation…

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Climate Policy Initiative

Originally posted on caribbeanclimate:

Here’s a round-up of activities by the Climate Policy Initiative that are useful in the leap up to COP.

Interactive Report & Webinar: Moving to a Low-Carbon Economy Could Free up Trillions

Some worry that a switch away from fossil fuels could have a significant cost to the global economy and undermine the financial system. New research conducted by CPI for the New Climate Economy project demonstrates that with the right policies, a transition to a low-carbon energy system could free up trillions of dollars over the next 20 years to invest in better economic growth.

Read the interactive report HERE.

Join the webinar on November 21st to learn how moving to a low-carbon economy can free up trillions.

New Animated Video: New Models for a Low-Carbon Electricity System

New finance and business models for a low-carbon electricity system in the U.S. and Europe can save consumers, investors, and…

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5 Things to Know About Climate Change in the Caribbean!

Originally posted on caribbeanclimate:

Natural events and human activities contribute to an increase in average temperatures around the world. Increases in greenhouse gases such as Carbon Dioxide (CO2) is the main cause. Our planet and our region are warming. This leads to a change in climate.

  1. The Caribbean is a minute contributor to global greenhouse gas emissions, but will be among the most severely impacted.
  2. We are already experiencing its impacts. More frequent extreme weather events, such as the 2013 rain event in the Eastern Caribbean; the extreme droughts being experienced across the region, with severe consequences in places like Jamaica; the 2005 flooding in Guyana and Belize in 2010. And further Climate Change is inevitable in the coming decades.
  3. Inaction is VERY costly! An economic analysis focused on just three areas - increased hurricane damages, loss of tourism revenue and infrastructure damages - could cost the region US$10.7 billion by 2025. That is…

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How Anti-World Bank Activists Misunderstand Business

I was recently made aware of Interoccupy‘s (link) protest against the World Bank at their fall meeting in Washington. What follows is my reaction to what I feel is Interoccupy’s misunderstanding of the arena in which most businesses operate:

I have followed the history of problems with World Bank lending. Economist Joseph Stiglitz has written extensively about the issue. I find that the World Bank is torn between its role as a bank–it does after all make loans and its business model depends on loans being repaid–and its role as a development institution. When countries fall behind on a loan the World Bank behaves as banks usually to, telling the debtor to cut back on anything not directly related to loan repayment, which sometimes means cutting muscle as well as fat out of public budgets.

Interoccupy’s complaints revolve around the World Bank’s Doing Business rankings and the Bank’s alleged encouragement of large land acquisitions by agribusiness corporations. I take issue with Interoccupy’s charge that the rankings are only about serving the interests of multinationals. The countries that score high on this and similar rankings by the World Economic Forum have been the best performers in recent years not only in GDP growth but in income growth and lifting their people out of poverty. Furthermore the rankings also serve the interests of smaller businesses who do not have the ability to influence governments. The rankings are based on surveys local businesses which in the developing world will be mostly small and mid sized. Among the survey topics are Starting a Business, Getting electricity, Enforcing Contracts, and Getting Credit.

What would really change the game is if a group like Interoccupy developed their own doing Business ranking based on a concept of profitable and responsible business. Organizations like the Global Impact Investor Network (www.theGIIN.org) are developing tools to measure social impact that they would find useful. If they then cited examples of commercially successful companies that followed these principles they would have a strong case for reform.

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