On the carpet.
The pace of transnational activity in Africa is gathering momentum--witness the phenomenal growth in mobile telecommunications--as business interaction on a global scale accelerates.
The relationship between Africa and transnationals is also undergoing a major revolution with the continent's contribution gaining greater importance in the overall performance and results of companies.
Africa may still be a small player on the world trade stage but it is becoming an increasingly important actor in the fortunes of transnational corporations. There is little doubt that in the near future, this will translate into a far more significant presence for Africa in world trade.
In view of this, we decided to devote this month's Cover Story to several interviews with the CEOs, or their equivalents, of some of the most influential transnational organisations operating in Africa. The exception to the rule is Linah Mohoholo, the brilliant banker who is currently the governor of the Bank of Bostwana and who was a key member of the Commission for Africa. Her interview (page 19) makes the reason for her inclusion in this collection of interviews abundantly clear.
Our On The Carpet guests for this issue are: Celtel's co-founder, Terry Rhodes; BHP Billiton's Chip Goodyear; Addax and Oryx chairman and CEO, Jean Claude Gandur; Standard Chartered's Africa head, Sherazam Mazari, General Motor's regional director Steven Koch and managing director GM South Africa, Robert Socia; and governor of the Bank of Bostwana, Linah Mohohlo. Anver Versi, Editor.
We can cut the cost of calls by half
Co-founder and chief strategic officer, Celtel International
On March 31, Celtel International announced that it had accepted a takeover offer from MTC, one of the Middle East's leading telecom companies with operations in Kuwait, Jordan, Lebanon, Iraq, and Bahrain.
Celtel will retain its existing management structure and continue to operate under its brand name. With six million subscribers across 13 countries, Celtel has the largest geographical footprint of any telecoms operator in Africa. Stephen Williams talked to Terry Rhodes, a co-founder and the company's chief strategic officer, about Celtel's remarkable history leading up to the takeover.
Afican Business: The $3.4bn takeover of Celtel International by Kuwait's MTC telecoms group took many industry watchers by surprise--most thought you intended to float on the Johannesburg or London stock exchanges. What do you think made Celtel so attractive to the Kuwaiti company?
Terry Rhodes: I think I can best refer you to the MTC's vice-chairman and managing director, Dr Saad Al Barrak. When we signed the takeover agreement in London last March he said that together, MTC and Celtel will leverage the strong synergies, shared cultural values and heritage which exist between the Arab world and sub-Saharan Africa. We at Celtel look forward to working with MTC to drive this vision forward.
AB: One of Celtel's most innovative strategies in recent years has been in working towards interconnectivity across African national borders. What kind of progress have you made?
TR: In the past it has been very difficult to call from one African country to another African country because call routes went through Europe and back to Africa again following the old colonial administrative pattern. That does not seem to make any sense to us because surely Africa wants to keep its own telecom revenues.
So part of what we are trying to do is establish gateways to allow us to carry call traffic in and out of the countries where we operate. We have established these gateways in most of the countries where we operate.
Beyond that, if we happen to have cell phone networks in adjoining countries that we can connect directly, then we can say this is a neighbouring country call, why should it be subject to international call charges?
AB: Have you started this neighbouring country service?
TR: Yes, it took some two years of negotiations, but we now have a direct link across the River Congo, between the DR Congo and Congo Brazzaville. And what happened when we made the connection? The volume of calls increased substantially as the charges tumbled. And we want to do the same in East Africa where we are the only operator to have a presence in all three EAC countries.
We want to make it much easier for our customers to move between Celtel networks, for example allowing a visiting subscriber to be able to buy a pre-paid top-up scratch card in a neighbouring country to top up their credit.
That's not all. We hope to introduce a service so that you can transfer top-up credit to another phone within the network. Say you live in the city, and there's someone you want to call in your village, but there's no money in the village or the top-up scratch card distributor has run out of cards. Well, you can buy credit on your phone in the city and send that to the phone in the village. Now there is no excuse for not phoning your Mum on a Sunday!
AB: Just to return to this cross border neighbouring country roaming service. What are the constraints to introducing this service. Are you getting this message across?
TR: We do not have regional harmonisation yet, to put it briefly, and there are still examples of protectionism around and consequently higher costs and poorer reliability for calls that may just be a few tens of kilometres in distance but that just happen to cross national borders. But increasingly people are seeing that this is what customers want.
For example, we advised President Levy Mwanawasa of Zambia that if he allows us cross-border roaming, the price of international calls will halve and the quality of the service will double. Of course it is up to the authorities to decide how long they wish to delay cross-border roaming services, but they know as well as we do that potential investors in Zambia are concerned over the country's high cost of international telecommunications.
AB: How did Celtel get started?
Terry Rhodes: The original company, called MSI, was founded in 1989, as a software consultancy house in Europe. We acquired a number of small stakes--in India, China and Hong Kong, and then the one that became the most relevant, in Uganda, where we invited a big operator to be the major partner. The one that chose to come and join us was Vodafone.
AB: What led you to decide that Africa had sufficient potential, and has Africa met or exceeded your original expectations?
TR: We saw real potential if we could raise some money and develop some opportunities. Of course, ever since our initial minority investment into Uganda we had been looking at other opportunities. Did this match the original vision of what we saw as Africa's potential? Yes! This was exactly what we had decided to do.
AB: What have been the key factors that have allowed you to grow at such a rapid pace?
TR: One key factor was timing. In 1998, with an industry track record and a business plan, you could get backers. But after the internet bust and the telecom industry problems of financing and so on in 2000/2001, nobody would have given you the time of day. So 1998 was a good time to start from the industry perspective, and it was a good time to do it from the African perspective because Africa was starting to liberalise and wanted competitive patrons, wanted FDI.
Another key factor was the development of pre-paid technology--pre-paid matches Africa's cash economy. Pre-paid says 'I don't need to know anything about you, all I need to know is that you want to be a customer. Welcome to the network!' More than 98% of Celtel's customers are pre-paid including corporate customers, and that's typical for all telecom operators working in Africa.
AB: Is there anything that distinguishes mobile telephony from any other business operating in Africa?
TR: This is a capital-intensive business, a long term business--with 10, 15, 20 and 25 year licences, and we are cementing our assets into the ground. This is long term infrastructure that means we have to be part of the local community, part of the local economy, part of the local society.
AB: How did you first raise capital to grow Celtel's business?
TR: One of the first shareholders to back us were what was then the Commonwealth Development Corporation (now Actis-CDC Capital Partners), the British government owned development finance arm. Then we won the backing of the Dutch and German equivalents--plus the IFC, the investment arm of the World Bank.
Celtel proved that the twin aspects of a profitable business and a development agenda can work and later we attracted private sector shareholders--such as venture capital groups out of the US like Bessemer Venture Partners and General Atlantic Partners, plus major private funds like Citigroup and Capital Group.
AB: In October of 2004, Celtel won the International Finance Corporation's (IFC's) inaugural Client Leadership Award for sustainable development. Out of the many hundreds of companies considered for the prize, why do you think Celtel was so honoured?
TR: The IFC was looking to award a successful company that not only made a profit but also made a positive impact on the economies and the development of the countries they worked in.
I think they recognised the positive impact the expansion of telephony makes on enabling other businesses to develop.
Let me give you the specific example of one of our customers, a banana trader who grows his fruit on the slopes of Mt Kilimanjaro and trades them out of Dar es Salaam, some 250km away.
Before our network covered his plantation he had no way of knowing what quantity of produce he had ready on what day and how long it would take to get it to Dar es Salaam.
He was obliged to travel back and forth to check the price of bananas in Dar es Salaam. Now he can do it all with a phone call. You have to see the individual examples to realise the effect that becoming part of the connective world in the market economy can make on trading and exporting.
This is not just about the 6,000 or so jobs that we have directly created in Africa, or about the possible 60,000 jobs through the distribution of cards and phones and so on, it is about what those six million Celtel subscribers can do with a phone that they could not do before. It is the developmental impact on the communities we serve that the IFC recognised.
We want to be a flagship company not only in terms of the technology but also in the social standing we have in all the countries we operate in.
About 1% of our revenues are spent on community projects, primarily on education and health, and often at really low-level integration--for example providing supplies to maternity hospitals in Zambia or building a new school in rural Sierra Leone. Telephones are important, but we recognise they are not everything!
Gas is cleaner, safer and cheaper
Jean Claude Gandur
Chairman and CEO, Addax & Oryx Group
The Addax & Oryx Group's (AOG) logo has become one of the most recognisable commercial icons in at least 15 countries in Africa. The company is deeply involved in both upstream and downstream oil and gas activities. It is the biggest independent oil producer in Nigeria and has now established itself as the market leader in the supply and distribution of gas canisters and hobs for domestic use.
Jean Claude Gandur, Chairman and CEO of AOG worked for a number of commodity trading houses before founding the Addax and Oryx Group Ltd in 1987. He was the honorary consul for the Republic of Congo in Geneva from 1990 to 2001 and has been presented with the Order of the Grand Officer of the Lion of Senegal and the National Order of Benin. He has also been granted the status of ambassador by Senegal.
Jean Claude Gandur talks to African Business Editor, Anver Versi.
African Business: Addax & Oryx has become a household name in many parts of Africa over a relatively short period of time. Your presence will undoubtedly deepen with your latest acquisition in Cote d'Ivoire. Would you please give us more details about your very recent deal?
JCG: We have been operating in Africa for over 17 years now. The history of the group is the story of a steady and continuous investment from the west to the east of the continent because we strongly believe in its potential. In my opinion, gas is a key resource for economic and social development. The future of Africa lies in its capacity to extend significantly the industrial and domestic use of gas.
Our latest investment reflects this belief. In February, the Group took over Shell LPG activities in Cote D'Ivoire. This involved the transfer to us of Shell's gas business, its storage capacity, its filling stations in Vridi and Bouake as well as all other LPG assets such as the stock of gas bottles.
We are not new in Cote d'Ivoire. We have trading operations and a service-station network there since 2001. But this latest investment takes us one step further. It deserved the creation of a completely new subsidiary called Oryx Gaz.
AB: You are clearly convinced that gas should be the fuel of choice for most African households. What advantages does gas hold over traditional sources of energy such as wood or charcoal?
JCG: The key words are: it is clean, safe, more powerful and cheaper than some alternative sources of energy. Unfortunately, this reality is still very much underestimated. Why? Simply because it is not part of the culture and traditional lifestyle of the African middle or lower classes.
Wood is familiar to people and changing habits is not an easy thing to do. It is a real challenge--but the results are worth the effort. Using gas prevents children from inhaling dust from combusting wood, it helps in the fight against deforestation (a serious threat to the environmental balance of Africa), it ensures safe use of domestic energy and it gives people on low incomes access to a valuable and cheaper source of energy.
AB: You have raised the most crucial issues of the day--the state of the environment, global warming and deforestation, especially in Africa. How will the increasing use of gas, particularly for domestic purposes, help to reverse some of the damage already done?
JCG: Unfortunately you cannot undo what has already been done. You can only stop damaging the environment and hope to improve things in the future.
Planting new trees is necessary but you need to ensure that the same thing is not going to happen again--that the new trees will not be cut and used as firewood.
It is best to propose a suitable--and even better--source of energy to replace the existing one. Let's take an average family in Benin which uses two bundles of firewood per month. You can easily replace this firewood with a single canister of LPG. This, in turn would save 120kg of wood per year!
If you apply this nationwide, it makes a real difference. We are talking here of saving forests. Supporting the development of gas is a necessity nowdays. It is an economic and a social duty for African governments.
AB: How do you persuade people to switch to gas when they say it is much more expensive compared to wood or charcoal?
JCG: It is not only a question of price. What has to be looked at is the calorific value of a kilogram of gas compared to the calorific value of a kilogram of charcoal.
For the same amount of product, gas may cost more than wood but it also lasts longer, which means that a mother will cook more meals using one canister of gas than using two or three bundles of wood. So which is the cheaper?
The real challenge is to help consumers make the first investment. Since middle-class people usually have a limited cashflow, the initial cost has to be reduced as much as possible. Our 6kg MiniGas Oryx is a fine product, very well balanced in terms of cost and calorific power.
I am convinced that African governments have a role to play. Five years of tax reductions on LPG would definitely support the development of domestic gas. Last but not least, preventing shortage of gas is essential. When a mother has experienced gas, she never goes back to wood provided the supply is reliable.
AB: Many gas canisters available in the market today are too big, too heavy and too cumbersome for people with small households. Have you found a way out of this predicament?
JCG: As I said earlier, the 6kg MiniGas Oryx is the answer. The price for the 3kg canister is too high compared with the quantity of gas that it provides. The cost of the maintenance would be higher than the cost of the gas itself!
The MiniGas Oryx was first launched in Benin in 2001. It is a complete package: a 6kg bottle of gas with a burner and hob for CFA 22,500. The goal was to provide more modest homes with a practical and less expensive alternative to coal and kerosene. The idea was extremely successful: consumption in Benin jumped from 1,500 MT/year in 2000 to more than 7,600MT in 2004 and is expected to reach 9,000MT by the end of 2005.
AB: Another objection often is that cooking by gas is limited since you can only use one appliance at a time. Is there a solution to this problem?
JCG: This is a real concern and we are constantly working on adapting our products to local needs. This year, we launched--in Benin again--the MaxiGas Oryx: a 12.5kg bottle of gas with a three-ring gas range, complete with a pressure regulator and a flexible pipe for CFA30,000.
This package is aimed at the middle classes and their young families--those who are financially stable but do not yet have the means to buy a cooker complete with oven, a "luxury" item costing a minimum of CFA 150,000.
AB: In many African countries, people who depend on gas cookers complain that supply is erratic and often completely dries out. What is your approach to this perennial problem?
JCG: This is an extremely important question. We do not want to commit the company to supply gas if we have not first made the initial investment in storage and distribution facilities. A private company cannot afford to upset its clients.
In Benin, we built a terminal in 1997. We have never experienced any disruption because we had the capacity to handle the work from A to Z: from the supply of bulk to the bottling process--without forgetting the cleaning and control of the bottles.
AB: In which African countries do you operate and what is the scale of your operations?
JCG: The Addax & Oryx Group was created in 1987 and started trading mostly in West Africa. Today, we export crude oil world-wide and import gasoline, jet fuel and heating oil to supply the needs of most West and East African countries, whether inland or coastal.
The group started the diversification of its activities as soon as 1989 with the acquisition and renovation of Esso's petroleum depot in Dakar.
It is now a fully integrated oil & gas company operating in over 15 African countries--from the western to the eastern coast of the continent--not to mention South Africa.
Storage and distribution are conducted under the brand name Oryx. The Group offers storage capacity in excess of 300,000 cubic meters with four terminals in Cotonou, Dakar, Dar es Salaam and Freetown. It runs a hundred-odd service stations and an ISO 9002 certified lubricant blending plant (in Dar es Salaam).
On the upstream side, our activities are conducted by Addax Petroleum, which was created in 1994 and has become the largest independent and the 6th largest oil producer in Nigeria. More than 85% of our production is from offshore shallow water fields.
On March 23rd we announced the first oil production at our new Okwori field. Oil at this complex project is flowing only eight months after spudding the first development well!
Our total production is now expected to reach 75,000 bpd before the end of the year. This is a fantastic achievement for our company and our partners, NNPC and subcontractors. You can imagine how happy we were to celebrate it together.
AB: In the last issue of African Business, we reported that you had commissioned the FPSO Okwori Sendje Berge, which is now on site in Nigerian waters. Please explain the other divisions in your organisation.
JCG: We are over 900 professionals using our skills in four different areas: international trading, upstream, downstream and mining. The early diversification of our trading activities into world-wide bunkering and commodities trading has allowed us to broaden our positions both in high-growth countries and new markets.
Our trading in rice and petrochemical products in Asia is a good example of our capacity to adapt and apply our expertise to new markets.
As mentioned previously, Addax Petroleum is AOG's branch in the upstream sector. We operate in Nigeria but also in Cameroon and Gabon. Beyond the traditional exploration and production activities, work is ongoing to build gas into the mainstream core of the company's business--especially to meet the Nigerian government's flare out target of 2008.
We have already talked about Oryx as the 'strategic umbrella' for AOG's downstream activities. Our fourth major area of concern is the mining industry. The original impulse came in 1989 when the Group founded Samax Resources, a London based company which held exploration licenses in West and East Africa. It was then bought by Ashanti Goldfields in 1998. Drawing on this success, we created a new mining company called Axmin Inc which is very active in Mali, Senegal and CAR among others.
AB: To return to gas distribution. Where do you get your supply of gas from?
JCG: We have several fills in West Africa, Angola and in Congo (Brazzaville). We also have LPG coming out of refineries (from Port Harcourt or Abidjan, for instance).
AB: Do you think Africa can produce sufficient gas to meet all its domestic and commercial demands?
JCG: For sure. Africa has sufficient gas not only for itself but also for the Western market as well.
AB: Do you think a time will come when it will be possible to pipe gas directly into people's homes, as in the West?
JCG: If you allow me, I would like to answer indirectly. Before having this hope for gas, let's hope first that everyone can easily have access to water and electricity!
AB: Changing people's cultural and traditional habits is perhaps the biggest challenge facing progressive enterprises. What are you doing to help speed up this process?
JCG: Well, first of all, we work constantly on understanding the needs of African people and on providing the most cost-effective and practical solution. Then, we bet on advertising campaigns that clearly 'talk to people' from a cultural and pedagogical standpoint.
If you want a message to be understood, especially when it is about something new with an impact on people's habits, it is important to refer to local cultural background to express it: language, music, colours, the environment, top names in local social life, common history and so on.
We have run several TV advertising campaigns to promote domestic gas in Benin, Burkina Faso and Tanzania. All of them have been produced with local communications partners and all synopses appealed to traditional legends or typical local life styles.
AB: Finally, what are your organisation's plans over the next five years?
JCG: The market is too competitive to allow me to reveal all my plans! I might under-mine my ability to rival my competitors.
But let me tell you this: Five years ago, we started with one ton of gas. Today, we sell 45,000 tons of LPG. Within five years we expect to sell above 100,000 tons.
Africa's voice must be heard
Linah K Mohohlo
Governor, Bank of Botswana
Linah K Mohohlo has been the governor of Bank of Botswana since 1999. Widely considered one of Africa's most capable central bank governors she was appointed an Eminent Person by the UN Secretary-General Kofi Annan and charged with the responsibility of overseeing the evaluation of the UN's New Agenda for the Development of Africa.
She served as only Central Bank governor on the Commission for Africa initiative. Interview by Stephen Williams.
African Business: You have been discussing strategy for building international support for the Commission for Africa's recommendations ahead of the G8 summit at Gleneagles in July. What are those 'decisive actions' you are seeking?
Linah Mohohlo: I think first and foremost we would like to see support for an appropriate representation for the economies of the African continent. I am going to lump together with the WTO the international lending institutions, the International Monetary Fund and the World Bank because I do not see how we can talk about the WTO without considering the Bretton Wood institutions.
Now, if you do not have appropriate representation, an effective voice, you can yell and scream but you will never be part and parcel of the decision-making mechanism. I think that is the first thing that needs to be put in place.
Then we can begin to talk about capacity to trade. The WTO requires that we remove barriers to trade, but in order to discuss the capacity to trade we must first address those impediments that still exist in the continent. We have to begin to trade among ourselves if we want to trade with the outside world. It will be very difficult for us to convince those who we want to engage in a bilateral trade relationships without us first trading among ourselves.
AB: But voice is the initial priority?
LM: Yes. Let me give you an example of what it is I am talking about when I address the issue of 'voice'. In the IMF, as it is in the World Bank, you have many African countries that make these institutions tick. These Highly Indebted Poor Countries intiatives or Structural Adjustment Programmes, they are happening mainly on the African continent. They occupy many of the professionals working in these institutions and that fact really argues for greater African representation at a decision-making level. I am talking about the boards of these institutions.
As we speak now, the composition of these boards are based on quota and under the quota system the US will have the loudest voice. The EU, as a coordinated entity, will also have a strong voice, but the developing world does not have the voice that we would like to see in place.
I have experience with sub-Saharan Africa's representation at the IMF. There are about 21 or 22 African countries represented by just one executive director. Countries like France and the UKeach have one executive director and in the case of the US--not only do they have one executive director but it also appears to be crafted within the World Bank and IMF's legislation that they will have the most powerful position within the two institutions.
Now really, the playing field is not level. How can one executive director represent the interests of over 20 struggling sub-Saharan countries when in fact those countries themselves have very little in relative terms? So that is really the big push for Africa--it is to gain a more effective voice. Once you have a voice you can then represent not only your country but your continent.
AB: Can you outline your views on good governance, and how we can tackle corruption?
LM: If we do not have an appropriate infrastructure at the apex, in our political systems, you can do everything else you want to do to promote good governance as far as the economic arena and corporate sector are concerned, but ultimately you will not succeed in achieving these goals.
So we would like to not only pay regard to the other elements of good governance but to ensure that there are desirable political frameworks. We need to ensure that there is an element of democracy that does not throw away the cultural perspective of African countries but takes the good out of the cultural background of those countries and complements it with democratic principals.
By democracy I am talking about regular elections because what is inherent about elections is renewal of leadership and renewal of leadership will ultimately bring to the fore those people that have the best interest of the African continent in mind. In addition we have to make sure that the legislature and central government are separate and the independence of the judiciary, respect for the rule of law, property rights, and the freedom of a responsible press are all in place. We must also be sure that people know their political rights and that people can air their political opinions.
There is good governance, better governance and best governance! Wherever in Africa there is an element of good governance we must build upon it. Let me comment about Moody's (investment credit rating agency) and what they have said about my own country, Botswana--they have given the country a high ranking, but it is all in relative terms. We cannot sit on our laurels.
Transparency International's perception of corruption index, if my memory serves me well, placed Botswana at number 26 in the world in 2003 and 31 in the 2004 table recently published. They are not a very impressive scores. We want all African countries to compete with the Finlands. New Zealands and Denmarks of this world, right at the top of the rankings.
Africa is the fastest growing vehicle market in the world
Regional director, General Motors, Africa and Middle East
President and managing director, General Motors, South Africa
General Motors is the world's largest automaker. Nearly 20 years ago, the company withdrew their investments in South Africa over the apartheid issue. Last year it returned to direct involvement in manufacturing in the country.
Stephen Williams asks Stevan Koch, regional director, General Motors (GM) Africa and Middle East, and Robert Socia, president and managing director GM South Africa, for an assessment of GM's African operations and what the future might hold.
African Business: Mr Koch, how important is Africa within General Motors Corporation's (GM) global operations?
Stevan Koch: Africa is one of the fastest growing vehicle markets in the world. While still relatively small in terms of GM's global volume of almost nine million units, our volume in Africa was 83,300 units. However, GM's global growth was 4.3% in 2004, while in Africa our volume was up by fully 31%.
AB: Can you give a further breakdown of the sales of your various brands? And does Daewoo come under the GM umbrella in Africa, or is it treated as a stand-alone operation?
Stevan Koch: The Opel-badged product sold 38,000 units, primarily in South Africa, the markets surrounding South Africa and in Egypt. Chevrolet volume was 26,000, while Isuzu sold 19,000. In addition we sold a small number of Suzuki SUVs and Saabs.
As for Daewoo, in fact GM purchased selected assets from the Daewoo Corporation in bankruptcy proceedings. In Africa, we sell cars produced in Korea by General Motors Daewoo Automotive Technology Corporation (GM-DAT Corporation) a new company under the Chevrolet badge. Daewoo continues to sell vehicles in various countries with the Daewoo brand.
AB: Which of your vehicles have been the most sucessful in Africa over recent years?
SK: In markets that are growing as quickly as Africa you have strong growth in several segments. But for us, with the availability of new small Chevrolet cars from GM-DAT, the small and lower medium segments have grown most rapidly.
AB: Mr Socia, does the proposed entry to the South Africa market of the Indian carmakers TATA and Mahindra & Mahindra mean that you may change the focus of your product range?
Robert Socia: There are no foreseeable changes at this stage, however as with all competitors, we are keeping track of their performance.
AB: Your competitors have been investing heavily in Africa. Will GM match this scale of investment for its South African subsidiary?
RS: Exports, together with a complete product portfolio are a necessary requirement in order to compete effectively in the South African market. The ability to grow one's market share and profitability is directly linked to export performance. GM South Africa will continually look to explore export opportunities for both its vehicles and components to meet this challenge.
AB: Is South Africa's domestic market itself the key to your African growth strategy?
RS: South Africa represents about two-thirds of the total African industry, so it is certainly the driving force. We also see plenty of room for additional growth in South Africa, which is why we have re-established our presence here.
In the latter months of last year, we managed to move up into the third spot ending the year on a solid footing, with an overall market share increase from 10.7% in 2003 to 12.2% in 2004.
As GM's largest market in Africa, we will play a key role in increasing GM's footprint on the continent. However, I think it is worth pointing out that GM's volume overall outside of South Africa grew by 5,800 thousand units in 2004 versus 2003.
AB: To what extent is the Rand's current strength creating problems for exports?
RS: Rand appreciation has impacted on price competitiveness and as the rand is likely to remain strong, it poses a challenge. We are looking at a number of possibilities to meet the challenge of rand volatility.
AB: Your South African head office and two manufacturing plants are located in Port Elizabeth and you are the largest private sector employer in that city. Might you consider other manufacturing locations?
RS: There is sufficient production capacity at the two Port Elizabeth assembly plants to accommodate integration plans. Further investment in additional sub-Saharan locations is not foreseeable at this stage.
AB: How would you summarise GM's relationship with African markets?
Stevan Koch: General Motors has enjoyed a long and mutually beneficial relationship with Africa. We have been in the continent for 80 years. Besides our operations in South Africa, we assemble vehicles in joint venture operations in Egypt, Kenya, Nigeria and Tunisia. Additionally, we sell in around another 20 countries on the continent.
There is no other manufacturer as committed to the development of the local economy as GM though our investments and utilisation of local suppliers.
As a result of our significant role in the community we believe it is appropriate that our various operations promote a number of outreach programmes to assist the local community.
Africa's main investment problem is that of scale
CEO, Standard Chartered, Africa
Now based in London, Sherazam Mazari became the CEO of Standard Chartered Bank for the African region barely six months ago. He joined Standard Chartered Bank in 1999 as regional head of its consumer bank, based in Dubai, for the Middle East and South Asian Region. He later moved to Singapore as the group's regional head of consumer banking for China, Korea, Indonesia, Thailand, Philippines and Brunei.
Stephen Williams talked to him about his new post.
African Business: Could you give us an idea of Standard Chartered's Africa operations?
Sherazam Mazari: We have had a footprint in Africa for over 140 years. In many countries in Africa we are the oldest bank in the country. Many people may not realise that we were part of Standard Bank based in South Africa. In fact, this is how the word 'Standard' came to be attached to our brand name.
In 1969, two banks--Chartered Bank and Standard Bank--were merged, hence the birth of the name. We currently have a network of 144 branches spread over 13 countries in Africa, namely Botswana, Cameroon, Cote d'Ivoire, Sierra Leone, The Gambia, Ghana, Nigeria, Zambia, Zimbabwe, South Africa, Kenya, Uganda and Tanzania.
Our business in Africa is currently more focussed on wholesale banking. However, this will change as we are currently working hard to reach a good balance of both wholesale and retail banking.
AB: Can you outline the services that you offer to your customers?
SM: We offer a full range of products and services for both wholesale and consumer banking. We offer a wide range of wholesale banking products such as trade, cash management and treasury products.
From April we will be reinforcing our commitment towards the small and medium-sized business sector through a fresh approach. Initially we will be rolling out our new support for these businesses in eight of our markets in Africa--Botswana, Kenya, Ghana, Nigeria, Tanzania, Uganda, Zimbabwe, and Zambia.
We are very excited about this initiative. From 2002 to 2004, our SME banking business grew at a compound annual growth rate of 34% which is substantially higher than the natural growth rate of the market.
AB: You told a recent conference that you believed that Africa, of all the world's emerging regions, provides the highest average return on investment. If that is the case, why does the continent have so much trouble attracting FDI?
SM: There are several factors that investors, especially new entrants, will be looking at before they decide on the destination of their FDIs.
These are political stability, profitability, the cost of doing business in a particular country, the ability to remit earnings to shareholders, the government's policies on governance issues and promoting the private sector, as well as a strong infra-structure and regional integration framework being in place.
Africa, unfortunately, suffers from too many negative perceptions. Through organisations like the Commission for Africa and Nepad it is hoped that such perceptions will be quickly rectified. Standard Chartered has been very active in mobilising efforts to raise awareness of growth opportunities in Africa through our participation at international-level conferences within and outside Africa such as the Southern Africa Business and Investment Roundtable last January, the Nigeria Investment Forum in Abuja last February, and of course the Commission for Africa's Business Action for Africa conference last month.
AB: With your background in the Asian banking sector you are well placed to comment on the difference between the way that Asian economies have successfully attracted FDI in recent years and Africa's poor record in seeking external investment. How can African countries better deal with this issue?
SM: The main problem Africa faces is one of scale. It has fragmented countries and small markets. I believe regionalisation is imperative for smaller economies such as many African countries if they are to attract external investments.
Through regionalisation efforts such as those promoted by Ecowas, Comesa and SADC, viable western, eastern and southern regional markets are forming. This helps to create the economic scale necessary for larger FDI flows.
The other issue is that Africa lacks the right legal structures and interest rates are generally too high for people to afford loans. This is where strong credit bureaus, like those currently used in Asia, would bring great benefits to the African banking sector.
With strong credit bureaus in place, it will enable banks to lend. Currently customers and businesses find it hard to raise loans as they have little access to credit ratings. Banks will not lend if they don't know who they are lending to. With such high risks, it means banks must also levy high interest rates. This would not be necessary if there were efficient credit bureaus in place. We have been advocating the advantages of establishing credit bureaus for quite some-time now.
AB: You have spoken passionately about Nepad. It would be interesting to hear your opinion regarding the private sector's role within this initiative, and indeed the role of such an important banking group as Standard Chartered.
SM: I am pretty clear on the areas that Standard Chartered can play and these are:
1. Continue advocating the introduction of a strong credit bureau infrastructure within the region to promote a healthy growth in lending
2. Provide opportunities for African talent to grow within our global network to develop their leadership capabilities.
3. Promote the growth of SMEs. SMEs provide maximum employment and this is where we can nurture their growth.
AB: Last year the bank made a decision to greatly expand its presence in Nigeria. Has that strategy proved successful?
SM: The core of Standard Chartered's growth strategy is organic growth. The same strategy goes for Africa. We now have five branches in Nigeria and our business there is doing well.
AB: Given the uncertainty in Nigeria's banking sector at present, do you have any concerns that the Nigerian authorities might impose constraints on the activities of foreign banking groups?
SM: As in other countries around the world, local governments see the value that international banks play in developing their economies. I am sure the Nigerian authorities are no different and I am sure they are as concerned as anybody else to develop their national economy.
AB: Turning to South Africa, it is widely rumoured that Standard Chartered were interested in taking over ABSA before Barclays' apparently successful bid. Can you comment?
SM: You know that we cannot respond to market speculation. As I mentioned before, the core of our strategy remains organic growth within our chosen markets. If opportunities arise for an inorganic growth, an acquisition, and if the fit and price is right for us, we will definitely consider such opportunities.
AB: Can you describe what are the key elements of Standard Chartered's Community Partnership for Africa programme?
SM: We are quite proud of our community projects within our Community Partnership for Africa programme. These projects are life-changing as they provide basic needs for communities. We have identified two central themes that are of general concern across Africa. These are eradication of malaria and the provision of clean water. We have adopted these two themes for our Community Partnership for Africa programmes going forward.
In Botswana, for example, we provide funding for groups of local women to sew mosquito nets to supply the local market. The end result is not just contributing towards the prevention and eventual eradication of malaria but this funding has also equipped these women with entrepreneurial skills to make a living for themselves that can further benefit their families.
Malaria remains the primary cause of infant mortality in Africa--an African child dies every 30 seconds from malaria. It makes sense for us to make the eradication of malaria one of our regional themes. The provision of a clean water supply is another community project that is crucial for Africa. For the past few years we have undertaken the construction of wells and boreholes for several villages in Kenya, Zimbabwe and Ghana. Before these wells were dug and the boreholes were sunk, villagers had to walk several kilometres to find a source of water--and even if the water was available, it might have been contaminated by water-borne diseases. With the construction of these community wells, we are able to not only provide a basic need of these communities but also to reduce the spread of water-borne diseases.
We believe that we will be able to contribute towards the development of the countries where we have a presence, not just in community projects that I have described but also in terms of developing the economies of these countries. We do this through activities at all levels, from community projects that touch the ordinary people on the street to boardrooms and international conferences.
We had long been an advocate for the eradication of poverty in Africa. We have a deep historical attachment to Africa. We will continue to build our reputation as an influential player in Africa's economic development.
Africa provides fresh opportunities
CEO, BHP Billiton
BHP Billiton is the world's largest diversified resource company. It was the lead investor in the Mozal aluminium smelting plant located outside Maputo Mozambique--one of the largest, most successful and progressive industrial projects ever built in Africa.
On February 16 the company declared attributable profits of $2.63bn for the first half of 2004. Stephen Williams talked to BHP Billiton's CEO, Chip Goodyear, about his company's African operations.
African Business: What proportion of BHP Billiton's profits are generated by African operations?
Chip Goodyear: Well, looking at South Africa itself, profits related to mining were about 7% in H2 2004. If you include all the businesses such as the aluminium smelter at Richard's Bay, then they were around 11%. Add in Mozal in Mozambique--and I'm just going to speculate here--I would imagine Mozal would contribute another 5%. So, around 16% in all.
AB: Apart from your South Africa, Mozambique and Algeria investments, there are no major BHP Billiton projects in the rest of Africa. Why so much caution? Is it a risk issue?
CG: It is a combination of issues. In fact we do have significant exploration activities that are taking place throughout the region you describe.
But the proposition, the economic return, comes from the resource and the ability to develop it and ultimately the ability to operate and control it--and historically there is a risk issue that comes with that in Africa.
Times have moved on and at least it seems things are getting better in the continent. Our name has been in the papers as being involved in Angola and Botswana and we continue our activities in Mozambique. I am sure we'll be involved with developments in other places in sub-Saharan Africa.
Just to comment on Mozambique. We went to Mozambique about three or four years after the end of the civil war. Now you can look at that and say 'BHP Billiton has done a great job at developing a world-class aluminium smelter in Mozambique'.
The other way you can look at it is to say 'these guys have developed a world-class project in an environment that has provided plenty of challenges'.
Well, sub-Saharan Africa provides the next opportunity--if you define your opportunities broadly enough. You obviously have to have the technical capability, the market knowledge and the ability to manage the country risk that comes with that.
But in my view we have all that but we have to find the right resource and the right pieces and put them together.
AB: What sort of long-term effect will Kyoto have on your oil and coal businesses?
CG: We have targetted the reduction of greenhouse gas emissions for a number of years. The most recent target was established in 2002. It called for a 5% reduction over a five-year period, and we are well on our way to achieving that.
We are also working closely with our customers to determine how we can assist them to become more sensitive to the greenhouse gas issue. We purchase emissions credits that have begun to be traded on European markets.
We 'staple' those to our energy goals to allow our customers to buy a reduced greenhouse gas product from us. We also invest in technology.
Invariably you see air-conditioner units on the sides of many residential and office buildings in Africa. Now that's great for us because air-conditioner manufacturers use steel, they use aluminium, and they use copper. Yet, although customers only buy air conditioners every few years, they turn them on every day!
Energy use and economic prosperity go hand-in-hand and in the years ahead energy is not just going to come from carbon fuels and it is not just going to come from renewable energy.
The nuclear power issue is clearly on the agenda all over the world, including South Africa, and I think governments are going to have to figure out how to balance the issues of greenhouse gases against the nuclear power question.
Obviously that is for them to decide. These are important issues for us, we are going to have to work on them and that is what we are doing.
AB: How do you respond to criticism that your company's black empowerment policy is focused on outsourcing to BEE companies rather than dealing directly with the composition of your company's human resources?
CG: Certainly outsourcing to BEE companies is an important element of BHP Billiton's strategy but it is also about creating opportunities in our own management ranks for historically disadvantaged South Africans.
That involves, essentially, equity ownership and lines of credit for transactions that have taken place. They vary from business to business--such as our chrome, manganese or coal divisions.
The coal business is probably the furthest along--we feel pretty good about where we are there. The manganese business probably requires the most work but we are making very good progress.
It is not just about buying from BEE businesses but meeting all the requirements of South Africa's Minerals Bill.
NB: On March 8, BHP Billiton announced a $7.2bn takeover offer for WMC Resources. WMC Resources control 38% of the world's known uranium at its Olympic Dam mine in southern Australia.
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|Title Annotation:||interview special; multinational corporations driving Africa's economy forward|
|Article Type:||Cover Story|
|Date:||May 1, 2005|
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