Building the grid of the future, today.

SOURCE: Gabriel Davies,

The Brookings Institution

Every evening, the sun drops behind the horizon and darkness falls. And, every evening, although 6 billion people reach out and switch on the lights, over 1.2 billion remain off-grid. 

For over 100 years, since Thomas Edison’s coal-fired power station first lit up homes and offices in downtown Manhattan, the power for that light has—for the vast majority—been delivered by the electricity grid. 

But the grid as it is today cannot meet the challenge of delivering power to the 1 billion people who remain without it. 

Delivering power to the final billion will require the grid of the future—combining governments, the private sector, and the technological innovations that are revolutionizing the energy industry as we know it.

The challenge is best illustrated by the 650 million Africans who don’t have access to electricity, and living mainly in remote, rural areas. At the moment, the economics of electrifying those communities are non-viable for three main reasons.

READ MORE HERE

Can Africa Be a Manufacturing Destination? Labor Costs in Comparative Perspective.

SOURCE: Center for Global Development – Alan Gelb , Christian Meyer , Vijaya Ramachandran and Divyanshi Wadhwa

Stable, coastal countries like Senegal, Kenya, and Tanzania seem like strong candidates for a role in global manufacturing, yet they’re still too expensive when labor and capital costs are considered.

Our central question is whether African countries can break into global manufacturing in a substantial way. Using a newly-constructed panel of firm-level data from the World Bank’s Enterprise Surveys, we look at labor costs in a range of low and middle income countries in Africa and elsewhere. Using fixed effects and random effects models, we estimate a set of labor costs, both actual and hypothetical—what would labor costs for Sub-Saharan African firms look like if they were located outside of Africa? What would Bangladesh’s labor costs be if it was located on the African continent?

Our results suggest that for any given level of GDP, labor is more costly for firms that are located in Sub-Saharan Africa. However, we also find that there are a few countries in Africa that, on a labor cost basis, may be potential candidates for manufacturing—Ethiopia in particular stands out. We conclude with thoughts on the future of manufacturing in Africa.

READ MORE HERE

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The future of farming in Africa is not agriculture but agribusiness.

Africa is a farm lover’s dream: abundant uncultivated arable land, roughly over half the global total; tropical climates that permit long growing seasons; a young labor force; and an expanding population that provides a readily available market for produce consumption.

Yet, African countries are yet to harness these opportunities to ensure sustainable food security and food production. The average age of farmers is about 60 years—in a continent where 60% of the population is under 24 years of age. Farmers are also less educated, with younger, more educated Africans are leaving rural areas, where farms are located, and moving to cities.

Some of these youngsters are also discouraged by the difficulties of accessing funds or land, the reliance on manual technology in smallholder agriculture, all compounded by the low and volatile profits.

But to remedy these issues, a new report suggests governments should change their outlook on agriculture from a subsistence, daily activity into a commercial enterprise. The African Center for Economic Transformation (ACET) says focusing on the entire value chain of the process—land tenure, farming technology, markets, and pricing—would help transform food systems around the continent. Positioning farming “as a business and entrepreneurial endeavor” would also help draw younger people into the practice, and make them see it as less of a “cool” idea and more as a “career option.”

Former Nigerian president Olusegun Obasanjo, a commercial farmer himself, told Quartz in an interview last month that he sees agribusiness as one of the few sectors that can “create the quantum of jobs needed for Africa’s youth.”

Technology and mobile phones should also be increasingly adopted as a way to not only to reach farmers, but also as a mechanism for data collection and analysis on soil conditions, fertilizer application, and climate change. Mechanization should also be expanded in order to ease the back-breaking manual labor and increase yields.

And just like in the modern workplace, the report notes that women should be put on an equal footing with men in order to drive agricultural transformation in Africa. Many countries still have laws governing marriage, divorce, and inheritance, which still put a barrier against women land ownership—and hinder them from using their plots as collateral for loans.

Original Post: QUARTZ AFRICA

October Newsletter

Letter from the Chairman

Thanksgiving is upon us, but for many, 2017 has been a year of difficult economic news.  AmCham doesn’t want to shy away from tough conversations about the business environment, but we believe that Thanksgiving is an opportunity to look on the bright side and celebrate this beautiful country that we all call home.

On 19 November at 5pm, AmCham will be holding its annual Thanksgiving dinner at Best Western Coral Beach Hotel in Masaki.  This will be a celebration with members, key stakeholders, and guests.  As always, all are welcome.

There will be some great Tanzanian music from the 1970s and 80s by the DDC Mlimani Park Orchestra, new ideas from around the region, and of course, plenty of good food.  If you can attend or would like to sponsor the event, please book now at info@amcham-tz.com.

Please read on for more information about other upcoming initiatives. And let me know if there are other ways we can assist you and your company.  I always appreciate your feedback.

Regards,

Dan Holodnik

Managing Partner, Ametan Contractors

 

AMCHAM OCT NEWSLETTER

September Newsletter

Letter from the Chairman:

AmCham is proud to support the many talented and influential women who are leaders in their businesses and organizations.  This month, AmCham announces the launch of a new initiative: Women’s Leadership Organization (WLO). WLO will be led and organized by women and aimed at providing female leaders in business, government, and civil society with a forum for discussion and collaboration on vital issues.  If you’d like to get involved in this initiative—and we encourage you to do so—please let us know at info@amcham-tz.com.

AmCham is also a strong supporter of policy that promotes a more even playing field, enables business growth, and contributes to long-term competitiveness for Tanzania and all its people.  This requires close coordination and collaboration between the government and the private sector.  But despite strong leadership from capable women and men, many businesses in Tanzania are currently facing challenging times.  Some of these challenges make the headlines—but many do not.  This month, the Chamber has launched a series of industry-specific roundtable discussions, starting with agriculture.  These engagements provide an opportunity for members to offer feedback on policy and business environment changes specific to their sectors.  Individual feedback is always kept confidential.  But the Chamber will be meeting in the coming months with a number of ministers and permanent secretaries, and the trends identified in these roundtables will be highlighted in our meetings.  If you would like to attend or contribute to AmCham’s high-level dialogues, please inquire about gold and platinum membership at info@amcham-tz.com.

Please let me know if there are other ways we can assist you and your company.  I always appreciate your feedback.

Regards,

Dan Holodnik, Chairman

DOWNLOAD THE FULL VERSION OF THE NEWSLETTER HERE: AMCHAM SEP NEWSLETTER

Overview of the Used Clothing Market in East Africa: Analysis of Determinants and Implications

EXECUTIVE SUMMARY

In March 2016, the East African Community (EAC) Heads of State issued a Joint Communiqué from the 17th Ordinary Summit, expressing their intent to progressively phase out importation of used clothing as a means to support the region’s textile and apparel industry.* A U.S. trade association reacted to these measures by requesting an out-of-cycle review (OCR) of the eligibility of the EAC Partner States for the African Growth and Opportunity Act (AGOA) privileges, citing both loss of American jobs as well as introduction of new trade barriers in contravention of AGOA provisions.

While Kenya took active steps to be exempted from the OCR, the remaining AGOA eligible countries – Rwanda, Tanzania and Uganda – were left standing for review. The Of ce of the U.S. Trade Representative (USTR) granted the OCR request and held a public hearing in Washington, DC on July 13, 2017. Under the OCR process, Rwanda, Uganda and Tanzania stand to lose some or all of their duty-free trading privileges under AGOA.

Given an apparent lack of data on the economic signi cance of the used clothing market in the EAC, or its relative impact on the EAC’s domestic textile and apparel industry, USAID’s East Africa Trade and Investment Hub conducted this rapid assessment.

The following is a top level examination of some of the determinants and implications of the used clothing market in East Africa, including an analysis of used clothing import trends in the EAC; an assessment of the economic signi cance of used clothing to both the U.S. and EAC; a review of EAC import substitution assumptions; and some modeling of long-term outcomes if EAC Partner States maintain their current used clothing import policies. The results provided are intended to aid data-driven policy decisions and negotiations going forward.

The analysis focused on three main questions:

  1. What is the economic signi cance of the used clothing trade in the EAC countries?
  2. What is the relative impact of used clothing imports on EAC Partner States’ domestic industry?
  3. What are some likely outcomes if EAC Partner States phase out used clothing imports, and as a result, lose their AGOA privileges?

Download the full report here: EATIH Used Clothing in East Africa-27.07.17-Final-2

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Excise Duty Alert: Introduction of Excise Duty Act 2017 in Zanzibar

In brief

The Government of Zanzibar has introduced the Excise Duty Act 2017 that will administer excise duty on various goods and services in Zanzibar. The new legislation will replace the application of the Excise (Management and Tariff) Act (which has been until recently applicable to both Tanzania Mainland and Zanzibar) on supplies made in Zanzibar.

Download the full copy here: tax-alert-zanzibar-excise-duty-act-2017

Tanzania requires NGOs to verify their registration status

Executive summary

Tanzania’s Registrar of Non-Governmental Organizations (NGOs) has issued a public notice requesting all NGOs operating in Tanzania to verify their registration during the period of 21 August 2017 and 4 September 2017. Non-compliant NGOs will be removed and de-registered from the registry.

Download the full PDF here: 2017G_04713-171Gbl_Tanzania requires NGOs to verify their registration status

Tanzania shows the appeal and the pitfalls of frontier markets

Source: Financial Times

For the past decade or so, investors have used the term “frontier markets” (FMs) to describe a group of up-and-coming equity and bond markets that are smaller and less liquid than the emerging markets (EMs), but with the potential to grow rapidly.

Proponents of FM investing argue that such markets should outperform EMs as they play catch-up with the rest of the world. Indeed, the world’s 10 fastest-growing economies in 2016 disproportionately hailed from the frontier, including Iraq, Côte d’Ivoire, Laos, Tanzania, Cambodia, Bangladesh and Senegal.

However, there is a problem: the universe of investible frontier markets and stocks is shrinking, at least as defined by index providers such as MSCI. Such providers, who classify markets as frontier, emerging and developed, have been moving countries out of FM into EM.

Three years ago, MSCI elevated UAE and Qatar; Pakistan was next to depart for EM, in May this year. Although, in its annual review that followed, MSCI decided not to promote Argentina to EM, it is probably a matter of time before it does so.

This would not be such a problem for FM if there were a “bench” of up-and-coming new markets ready to replenish the depleted ranks. Alas, such fresh blood is in short supply. As a result, MSCI FM’s market capitalisation has declined from 5 per cent of EM a decade ago to 2.3 per cent, and from 50 basis points of the AC World index to 24 bps, with the removal of Pakistan.

This also makes the index less liquid; combined average daily value traded for the index members is down by half over the decade, to just $200m, ex-Pakistan.

All is not lost for frontier markets as an asset class, however. In places, there is evidence that equity market development is still under way.

One such place is Tanzania, where South Africa’s Vodacom Group is in the process of a $220m initial public offering, expected to close in mid-August.

This is the outcome of a longstanding government mandate for all Tanzanian telecoms operators to list a 25 per cent stake on the local stock exchange. Although this requirement has been on the books for some time, it was only after the election of President John Magifuli in 2015 that pressure to comply increased.

Now other telecoms operators are expected to follow Vodacom’s lead, while Tanzania’s mining companies are subject to a similar requirement. In theory, this could see companies such as Acacia Mining, the London-listed gold miner with three mines in the country, pursue a similar path. However, the prospects for this now look highly uncertain following the government’s issuance of a multibillion tax bill to Acacia, alongside new legislation that raises the spectre of renegotiation of mining contracts.

Until now, Tanzania has been too small to qualify for the MSCI FM index: both market capitalisation ($4.6bn before the Vodacom listing) and trading volume (less than $1m a day) are very low, with trading mostly limited to a couple of banks and a brewery. MSCI has never maintained an index for Tanzania, not even one of the “stand alone” indices that it has set up for small or illiquid markets.

In addition to the small size of its market, there are other hurdles that international investors face in Tanzania, including a lack of custodians and limited research.

However, the Vodacom IPO, possibly followed by other telecoms operators and some of the mining companies, could see the Tanzanian equity market grow to more than twice its previous size, with a commensurate increase in trading volumes and foreign interest.

That would position it well as a candidate for the MSCI FM index. And while Tanzania’s entry alone would not offset the loss of Pakistan to EM, similar progress in other markets, from Ghana to Iraq to Ukraine, could set the frontier asset class growing again.

As far as Tanzania is concerned, investors face a mix of positive and negative trends. Encouraging factors include solid growth dynamics, reasonable macroeconomic fundamentals and a strong pipeline of infrastructure spending. Against this must be set Mr Magifuli’s interventionist approach to economic development, with a particularly aggressive stance towards foreign-owned mining companies.

And while Mr Magifuli’s support for domestic equity offerings is encouraging, it is not guaranteed to succeed. The list of companies being asked to float their shares is ambitious — over 80 firms in the telecoms sector alone — and it is not clear where the funds will come from to finance the sales, given a limited pool of domestic investible savings.

The Vodacom IPO, initially expected to close in April, has been delayed significantly, for the very reason that the offering’s size was so large relative to the domestic investor base. This problem could be even more acute for subsequent offerings. While foreign participation in the Vodacom IPO was not initially allowed, this position was reversed last month. But the belated way in which this was done — and the lack of an international roadshow for the offering — suggests a reluctance to allow foreign investment to play a major role in Tanzania’s new equity offerings.

For now, we’ll await news of the completion of the Vodacom IPO and the share’s subsequent performance on the exchange. The ultimate success of this offering and subsequent ones in Tanzania — and elsewhere in frontier markets — could be a useful signal for the future course of equity development on the frontier.

Andrew Howell is the frontier markets equity strategist for Citi Research

Bridges Africa -The Development Potential of Cross-Border Infrastructure in Africa: A Job Creation Perspective

SOURCE: East Africa Trade & Investment Hub

Bridges Africa- The Development Potential of Cross-Border Infrastructure in Africa: A Job Creation Perspective

is a publication by the International Center for Trade and Sustainable Development. It provides insight on the various development strategies being applied all around Africa. The publication contains a segment on how Africa can leverage the potential of cross-border infrastructure to address critical economic bottlenecks, boost regional integration and intra-African trade and create employment for the continent’s growing population.

It points out that cross-border infrastructure is an effective solution to address some of the most critical bottlenecks to regional integration and economic transformation in Africa.

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