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The Port of Mombasa must do better

June 14, 2013 in News

The Kenya Ports Authority (http://www.kpa.co.ke) claims that it has a vision to provide ‘World class seaports of choice’, a noble and seemingly lofty ambition. On the strength of recent feedback from HABA clients using the Port of Mombasa it would appear that in the case of Kenya’s premier port it is evident that the KPA has a lot more work to do. Complaints are legion, with the three most common words used to describe the response to poor service and delays being; “arrogance”, “complacency” and “indifference”. Makhtar Diop, the World Bank Vice-President for Africa on a recent visit to Mombasa has also voiced his concerns over inefficiencies, so it is clear that the problem is a serious one. The parlous situation at the Port of Mombasa mirrors that of its great rival the Port of Dar es Salaam, with both of these Kenyan and Tanzanian strategic gateway ports have become synonymous with poor management, inexplicable delays, high port charges, theft and corruption. Landlocked countries such as Burundi, Rwanda and Uganda are also beginning to express their dissatisfaction, with Ugandan MPs claiming that the port’s inefficiencies are forcing their country’s business costs. Matters have not been helped by the fact that the National Government has viewed the Port of Mombasa as little more than a milch cow. Years of underinvestment and the sticky fingers of politicians have meant that a port with enormous potential has consistently fallen short of expectations. Growing international interest in East Africa and adjacent regions has begun to encourage serious exploration of alternatives and this has acted as something of a wake-up call. It would be churlish to deny that there has been some attempt to address matters. A new cargo berth is being constructed by the China Roads and Bridge Corporation, whilst a Dutch company, Van Oord Dredging and Marine Contractors have carried out vital dredging work at the Kalindini channel. The Japanese funded Mombasa Port Area Roads Development Project otherwise known as the Dongo Kundu Bypass will also go some way to alleviating the traffic bottlenecks that have blighted Mombasa and its environs. Many would like to see the port privatised, but there are legitimate concerns locally that this could have an adverse impact on employment prospects. The dynamic local Governor, Hon. Hassan Ali Joho (http://www.hassanjoho.com) is well aware that maintaining the status quo is not an option. In this regard he has recently been in Malaysia meeting potential investors with a view to the development of a free port project that could see Mombasa emulating Port Klang, the largest port in Malaysia. By all accounts interest has been considerable and a sizeable delegation is due to visit Kenya in a few weeks time.

Mombasa is eager to ensure that the port works effectively, and to ensure that a reasonable share of income generated stays in the region. Kenya’s second city has its own traditions and in many ways a quite different outlook and feel to Nairobi. Rather less frenetic and seemingly more ethnically diverse than the Kenyan capital, Mombasa takes a degree of pride in being different. The Swahili language predominates, as does a more relaxed coastal manner. Business visitors and tourists alike soon sense that here is a place that enjoys its languor and feels that it has little need to prove itself. Upon arrival one soon discovers that the traffic management system (if one exists) is chaotic and many of the buildings appear shabby and neglected. As in many cities in East Africa appearances can be deceptive, a spirit of commerce abounds and there is ample evidence of some substantial investments being made across a variety of sectors, a good example being English Point Marina (http://www.englishpointmarina.com). Mombasa is increasingly becoming an industrial city, one that is eager to capitalise on East Africa’s projected oil boom. Mombasans seem at ease and genial as befits their tropical coastal climate. They are proud to live in a city relatively free of the periodic violence and the sprawling shanty towns that blight Nairobi. That said, the city has its own challenges, street crime does exist, often fuelled by the scourge of youth unemployment, in addition it has its own secessionist movement in its midst in the form of the Mombasa Republican Council. Kenya’s distinctly patchy record when it comes to serious and sustained investment in the regions does not exactly inspire confidence. That said, Mombasa knows that if it is to continue to prosper and enjoy a degree of local autonomy it needs a thriving and efficient port, something that will go a significant way to helping stimulate and drive local as well as national economic development.

For further information visit:

http://blogs.worldbank.org/africacan/why-kenya-needs-a-world-class-port-in-mombasa

http://www.vanoord.com/activities/port-mombasa

http://www.marinetraffic.com/ais/portdetails.aspx?port_id=1628

http://sahanjournal.com/kenya-must-engage-with-mrc

 

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Ugandan Opportunities

June 11, 2013 in News

It invariably comes as a surprise to many people to discover that approximately 17% of Uganda’s territory is made up of lakes. Lakes Victoria, Albert, Edward, Kyoga etc. support thriving fishing communities which in common with other sectors are under various pressures caused by the demands of a rapidly expanding population. Whilst there is considerable scope for aquaculture, fish processing and the supply of dried/smoked fish for local and regional markets the issue of the diminution of fish stocks is causing concern. In Lake Victoria the three countries that border the Lake (Kenya, Tanzania and Uganda) are endeavouring to co-ordinate efforts to address the problem of illegal nets (net size is a serious issue) catching of immature tilapia and other species. Over the last decade alone the number of Nile Perch in Lake Victoria is believed to have declined by two-thirds from 750,000 tons to 250,000 tons. It has been estimated that 1,800 fishermen operate around the Lake and so the need for sustainable fishing initiatives is paramount.

Whilst urbanisation is growing apace still some 85% of Ugandans live in rural areas, with agriculture employing 68% of the population (in the case of women that figure is nearer 83%). The principal cash-crops produced are: coffee, cotton, sugar cane, tea and tobacco. Coffee and tea production primarily takes place in the environs of Fort Portal and to the west of Mt Elgon. The Uganda Coffee Development Authority (http://www.ugandacoffee.org) has been relatively successful in helping developing the Ugandan coffee brand, but tea from Uganda has been less effectively marketed, with the vast majority of it being transported to the Mombassa Tea Auctions where it is invariably sold off as ‘Kenyan tea’. The cotton-belt is largely situated above Lake Kyoga and stretches diagonally from Gulu to Soroti. Sadly, much of the cotton production that once took place in the vicinity of Kampala and Lugazi has disappeared due to the urban and peri-urban expansion. Some cotton and tobacco growing still takes place in the region of Arua and the Albert Nile.

Generally Uganda offers considerable potential for farming with 60-70% of agricultural land being suitable for a wide range of crops including: bananas, various beans, cassava, maize and sorghum. Meat and meat products are seen as a profitable sector, even in the arid region of Karamoja in the north-east cattle grazing is commonplace, along with the production of groundnuts, sesame and some millet. Beef and dairy cattle, goats, pigs and poultry are all areas for possible investment, as are related sectors such as animal feed, abattoirs and skins and hides. Dairy and dairy products are another area that looks set for expansion in the coming years with opportunities for those engaged in the production of UHT milk, powdered milk, butter, cheese, cream, ghee and ice-cream. Companies operating in Uganda are well placed to access the EAC, COMESA, as well as the EU and AGOA. Whilst much of the country’s agriculture remains subsistence in nature, it is interesting to see crops as diverse as lablab beans and the Irish potato being grown even in the more remote regions such as Kabale District. The Kachwekano Zonal Agricultural Research and Development Institute (http://www.kazardi.go.ug) and similar centres of excellent and innovation are eager to help Uganda meet its food needs as well as be in a position to export to countries such as D.R. Congo and Rwanda.

For all the optimism and potential, there remain serious challenges that cannot be ignored. Already Uganda’s forests are coming under increasing pressure, as is an infrastructure that has suffered from years of neglect. Issues around skill shortages, packaging, warehousing and general supply chain and transportation costs remain a headache for small and large scale investors alike. Yet for all the reservations, HABA feels confident that Uganda will continue to be a location worthy of serious investment for the foreseeable future.

For further information visit:

http://www.agra.org

http://www.agriculture.go.ug

http://www.bbc.co.uk/news/world-africa-21051226

http://www.naro.go.ug

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Challenges facing foreign and local investors

June 5, 2013 in News

To seasoned observers of business activity across Africa’s 54 countries the latest ‘Scramble for Africa’ has been viewed with a degree of scepticism. Some rather jaundiced commentators claim that it is yet another false dawn, whilst other Jeremiahs seem intent on highlighting a litany of past failings to anyone who will listen. As in most things, the picture is invariably far more complex than scribblers and 40 second pundits are prepared to acknowledge. English speaking correspondents and journalists tend to demonstrate a bias towards Anglophone countries with a disproportionate number of articles and features covering the likes of Ghana, Kenya, Nigeria and South Africa. Areas such as the Maghreb, as well as much of Francophone and Lusophone Africa are often overlooked, whilst some countries can go months and even years without being written about. To those who are frequent visitors to the continent, there is a palpable sense that things are changing, but there still remains considerable uncertainty and thus many investors remain rightly cautious.

The HABA region, with a population fast nudging 300 million is in many ways typical of the confusing picture. An area that has been bedevilled by negative headlines for years, it is slowly beginning to emerge as a strategic gateway into Central and Sub-Saharan Africa. To both the foreign and local investor alike there are a number of challenges that impede and frustrate commercial activity and these are ignored at your peril. It is worth exploring some of the most commonly cited difficulties:

1) Ministerial Absenteeism – This is a perennial complaint, one that looks set to increase in the coming years. Government ministers and their ‘advisors’ seem to delight in more and more overseas trips and this is resulting in a paralysis in key ministries. The fact that many countries lack an efficient Civil Service exacerbates the problem still further. Matters are made worse by the fact that many ministers view a ministry as their own personal fiefdom and seem intent on filling them with relatives and their cronies.

2) Working hours – Government offices are often closed or appear to operate timetables designed to frustrate those they are meant to serve. A considerable amount of time is wasted in the quest to speak with the right officials or to submit and collect relevant paperwork. E-mails (if they exist) often go unanswered and calls go unreturned. In the words of one HABA client; “at times it appears as if the entire government and commercial sector is on a permanent siesta”.

3) Corruption – Whilst there are wide regional variations, there is no escaping the fact that bribery, inducements, sweeteners and tokens of appreciation are an issue that cannot be ignored. Whether it be the prompt clearance of goods at port, or ensuring documentation is correctly processed and stamped by the umpteenth official greasing the palm is a daily phenomenon that for some is just part of everyday living. British Citizens need to be doubly aware of the dangers of succumbing to such activity as the Bribery Act (2010) has a global reach.

4) Inadequate Infrastructure – Dire roads, the lack of modern railways, inefficient ports and woeful traffic management systems are a headache for locals and foreigners alike. Delays are frequent and the cost of the transportation of goods is often prohibitively expensive. There is precious little evidence of any concerted attempt to ensure efficient connectivity with the regions and as a consequence capital cities become ever more congested. Electricity supply is often fitful and this hampers both the establishment and development of light and heavy industry. When new infrastructure is put in place, it is often done on the cheap and with scant regard to local demographic and climatic conditions and as a consequence is soon little better than what if anything was there previously.

5) Weak numeracy levels – Whilst access to primary education has expanded considerably in recent decades, those that have access to some form of secondary education often leave without the relevant knowledge and skill sets required by the world of work. The teaching of mathematics is particularly poor and this results in many students not pursuing the maths and sciences if they enter tertiary education. Both local and foreign businesses require a highly literate and numerate workforce, but there is a growing body of evidence to suggest that sectors such as the hydrocarbon industry and financial services are having real problems recruiting employees that match their requirements.

6) Absence of accurate data – Making an investment of any sought entails an element of risk and yet the risk factor is likely to be considerably higher when there is a lack of accurate data on which to make calculations, plans and projections. Regional governments have barely begun to grasp the importance of data collection and the importance of independent verification mechanisms that help foster trust. What is supplied, often done so reluctantly, is invariably out of date, incomplete and inaccurate.

For all the challenges economic growth is taking place and there are signs of new start-up activity as well as a marked increase in the willingness of foreign companies to take the plunge. The arrival of fibre optic cables has proved a considerable spur and greater access to the internet is enabling the HABA region to become exposed to the opportunities and commercial practices of others. The leaden hand of bureaucracy and state protectionism continues to stifle enterprise, but some of the more enlightened governments have woken up to the need to throw open the windows and welcome in the winds of change. Those ministries that have for so long been trapped in a particular ideological mindset are beginning to be liberated and this gives cause for hope. It is equally true that foreign investors have to free themselves from the Band-Aid time-warp that still views that Horn of Africa and adjacent regions as if it were 1985. Opportunity and potential abounds. It is certainly time to explore and see the situation for ourselves. We at HABA know that it will at times be maddeningly frustrating, but one thing is for certain, and that is that many investors will end up asking why on earth they had not engaged in the region earlier.

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Could cotton be king in the HABA region?

May 29, 2013 in News

Whilst hydrocarbons continue to generate column inches in the business pages, other sectors are beginning to attract attention from foreign investors. Cotton growing and its attendant industries looks set to undergo a quiet renaissance, one that means that that region looks set to increase its global market share. Climatic conditions are such that cotton has long been a feature of the economies of Ethiopia, Kenya, Somalia and Eritrea. Cotton was said to be Somalia’s first ever export crop during the Colonial era, whilst in Ethiopia, shema ( a traditional hand spun and woven cotton) is ubiquitous throughout much of the country (http://ethiopiancotton.org). With a burgeoning African middle class there is increased demand for apparel and with wage costs generally low across the HABA region, cotton offers considerable potential and the promise of both local and international sales. The cotton trade internationally is demonstrating a healthy demand for organic cotton (cotton that is grown without synthetic pesticides) and there is no reason why parts of East Africa could not fulfill some of this demand.

So what are the challenges faced for those considering embracing King Cotton in the HABA region? Well in common with other sectors there is a real need for greater co-ordination, pest control is an issue hence the dilemma surrounding the use of pesticides, historic under investment in machinery especially ginneries (cotton mills) and in training and capacity building are also factors. Factory structures such as they exist have often been built with inadequate ventilation and little of no thought of international health and safety standards with regards to minimising the risk of byssinosis (an occupational lung disease caused by exposure to and inhalation of cotton dust and fibres). Inadequate infrastrure and bureacracy are also common complaints regardless of one’s area of endeavour. That said, there is real potential and with the likes of the United States African Growth and Opportunity Act (AGOA) affording duty-free and quota-free treatment for eligible apparel articles and sundry products (See: http://www.competeafrica.org) market access is often better than many people might think. Currently Turkish, Indian and Chinese investors appear to be in the vanguard when it comes to exploring possibilities. Who knows, maybe in the near future we will see Balcaad (Bal’ad) in the Lower Shabelle, Somalia (some 22 miles north of Mogadishu) returning to its former glory as a regional centre for the production of cotton cloth. One thing HABA is certain of,and that is that it will be the private sector that will be cotton’s champion. Much to remains to be done, but for those prepared to see them, the signs of development and expansion are there.

 

For further information visit:

http://ciad.org.uk

http://www.cottonafrica.com/textileeastafrica.php

http://www.delmas.com/products-and-services/african-export.asp

http://www.panna.org/resources/cotton

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There is more to roads than merely construction

May 21, 2013 in News

‘The lack of infrastucture’ is a familiar refrain for many of those unwilling to invest and engage in the HABA region. To those who take the trouble to visit, this story is beginning to change, but the picture remains a complex one. Years of regional conflict and neglect have ensured that the Horn of Africa and adjacent regions has some of the poorest roads in Africa. Now there is a realisation in national governments that if potential is to be unlocked the infrastructure challenge has to be met head on and this means serious investment. To many China has arrived with a seemingly tailor made solution, not only offering the technical knowhow, but also the finance to initiate such capital projects, a powerful combination that few governments find able to resist. Whilst in theory the building of new roads or the patching up existing ones is good for local connectivity and thus development, there are a multiplicity of factors that need to be examined and scrutinised with care if problems are not going to be stored up for the future. Already there are signs of recent projects demonstrating poor design and friability within months of being constructed.

To date no government has had the courage or foresight to establish an online cadastral survey, one that makes clear who owns what land and has the added potential to also feature valuable data concerning mineral and hydrocarbon assets and licences. Central governments the world over have a habit of commissioning road building projects with scant consultation with local communities and then are surprised and indignant when plans rather than being welcomed are greeted with hostility. Already urban centres across the HABA region are fast losing what little green space that exists and peri-urban areas are being blighted by constant encroachment and despoilation. Compensation schemes and judicial protection are inadequate, with the legal process all too often weighted in favour of the goverment. Anyone familiar with the Lamu Port and Lamu-Southern Sudan-Ethiopia Transport Corridor (LAPSSET) project will be aware of how little effort is made to carry out genuine environmental impact surveys. National interest, such as it is invariably trumps local concerns every time. There are of course other matters to be considered, such as the effect of the extremes of temperature and the managing of water runoff. Sadly, a number of the new roads being constructed have inadequate substructures to deal with rain water and those being built in urban areas rarely are built with sewage management systems in mind. HABA has anecdotal evidence that poor quality gravel and inferior bitumen is often being used and this further increases the likelihood of increased wear and tear. Traffic usage on new roads is extremely heavy and set to grow enormously and yet on-going maintenance is rarely factored into the costs, nor are proper safety proceedures with a view to minimising the number of accidents and fatalities on the roads. For a region so well suited to solar lighting, it is regrettable that solar solutions rarely if ever feature. The region desperately needs improved connectivity, especially to regional centres, but it also requires a greater degree of joined up planning and thinking that has long term solutions in mind.

For further information visit:

http://www.infrastructureafrica.org

http://transport-links.org/transport_links/filearea/documentstore/Draft%20Gravel%20Guidelines.pdf

http://www.savelamu.org