2012 Business in Africa Conference

Unlocking Value in Frontier Africa

Cambridge Judge Business School, University of Cambridge

Saturday 28th April 2012

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Unlocking Value in Frontier Africa: Lessons from the Inaugural Cambridge Africa Business

Network Business in Africa Conference

Dear Friends,

The Cambridge Africa Business Network would like to thank you all for attending the Business in Africa Conference on Saturday 28th

April 2012 and making our inaugural event such a success. The Network was founded with the intention of providing a platform for the leading

voices on African business from the commercial, financial, political and academic spheres to share knowledge and foster partnerships that contribute

towards driving Africa’s economic growth. To that end, and based on your very welcome feedback, we feel we have put down an impressive first

marker from which to build on in the years to come.

We would like to thank our panelists, moderators and sponsors - especially the Leventis Foundation, the Cambridge Political Economy

Society Trust and Google - and all of you for your support. To commemorate the event and to provide you with a source of inspiration and recall

of the day's events, we have developed this post-conference report. Feel free to look over the summaries of the panels you enjoyed and to forward the

report on to those in your network who you feel would benefit from it.

We look forward to seeing you back in Cambridge for future events.

Best wishes,

The CABN Team

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“It is important to acknowledge

challenges and use positive stories to

engage foreign investors”

Olusegun Obasanjo, Former President of the

Federal Republic of Nigeria

Opening Keynote Remarks His Excellency, Olusegun Obasanjo (GCFR), Former President of the Federal Republic of Nigeria

Moderator: Lanre Akinola, Editor, This is Africa magazine a publication of the Financial

Times.

President Obasanjo, in conversation with Lanre Akinola, gave the conference his thoughts

on a wide range of contemporary African issues, including politics, macroeconomics and

business.

Mr Obasanjo provided an assessment of the perception gap that exists between outside investors

and the situation on the ground. While acknowledging that Africans, and Nigerians in particular

cannot pretend that there are no challenges focusing on positive stories related to education and

awareness can be an effective means of engagement over the short term.

Taking a historical perspective on economic growth in Africa, Mr Obasanjo noted that post-war

growth rates were in many cases as spectacular as they are today. The problem was that such

growth did not trickle down to the populations. Today there is reason to be much more

optimistic in part because the actors – both within Africa and from abroad – have a clearer

commitment to sustainable growth and have a better appreciation of what works best across the

continent.

Mr Obsanajo also addressed the issue of the resource curse, stressing that the proper use of

resources depends on institutional strength and stability. He pointed to the example of the

Democratic Republic of Congo, a nation plagued by wars often fuelled by access to resources,

where over one billion dollars was spent on free and fair elections but institutional development

has been largely ignored.

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Unlocking Value in Frontier Africa

Panel managers: Stephen Hamm, 2012 MBA candidate and CABN founding

member; Queen Chinyere Nworisara Quinn, 2014 PhD candidate and CABN

founding member

Panelists:

Razia Khan, Head of Research, Standard Chartered

Zain Latif, Founder and Principal, TLG Capital

Gavin McGillivray, Head of Private Sector Department, DFID

Karima Ola, Managing Director, African Development Corporation

Moderator:

Lanre Akinola, Editor, This is Africa magazine a publication of the Financial

Times.

The opening panel set the tone for the day by exploring a range of macro issues

confronting the continent and putting African investment and business within a

wider context. There were many reasons to be optimistic: as Razia Khan, Head of

Research at Standard Chartered pointed out, intermediary credit lending had

doubled across Africa in the past decade. The continent escaped significant damage

from the financial crisis and new trading partnerships have pumped new money into

African businesses with the latest figures showing $166 billion in trade between

China and Africa. Karima Ola, Managing Director of the African Development

Corporation pointed to growing consumer demand and Zain Latif, founder of TLG

Capital outlined some recent investments in the healthcare sector, investments that

have delivered significant social and commercial returns by addressing growing

African needs.

However, while the optimism around the continent is well-founded, there were

words of caution as well. DFID’s Head of Private Sector Development, Gavin

McGillivray, highlighted the continuing shortfall in energy production which

continues to serve as a drag on the growth of small and medium sized businesses.

Karima Ola and Razia Khan also pointed to the necessity of providing more reliable

and secure financial institutions capable of lending more to SMEs in unleashing

further growth.

“Trade between China and Africa

has reached $166 billion”

- Razia Khan, Head of Research, Standard Chartered

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“There is a generation that is coming where,

how they will connect on the internet, will be

on a mobile phone”

- Ken Oyolla, Global Head of Marketing Activations

Nokia

Capturing Value: Innovation, ICT and the Rise of the Consumer Class

Panel Managers: CABN Steering Committee Members Mara-Tafadzwa Makoni, 2012 MPhil

Candidate in Engineering for Sustainable Development and Imoh Ilevbare, 2012

PhD Candidate in Strategic Technology Management

Panelists:

Linet Kwamboka, Project Lead, Kenya Open Data Initiative

Greg Marchand, Founder & Managing Director, Gizmos Solutions Zambia Ltd

Ken Oyolla, Global Head of Marketing Activations Nokia

Moderator:

Wadzanai Madziva, Business Development, Google Africa

In 2010, McKinsey estimated that the number of African households earning

US$5,000 will have grown by 80 percent between 2000 and 2014. The consumer

market, currently at US$160 billion, will grow to about US$1.8 trillion by 2020;

while the labour force is expected to surpass China’s by 2040. Given the rapid growth

of mobile penetration and ICT, the panellists discussed how businesses operating on

the continent can capture this value and innovate for the growing consumer demand

driven by a young and vibrant population of one billion.

The panellists noted how ICT in Africa is now becoming a rapidly growing sector

and is increasingly being used as a platform to leapfrog on to other services and

innovations. Presently, 60 percent of Africans have access to internet services. Given

that ICT can serve as a way of overcoming some of the continent’s physical and

institutional infrastructure limitations, many companies and governments have taken

note. Kenya marks a good example - Linet Kwamboka of the Kenya Open Data

Initiative outlined how the Kenyan Government has established a number of

technology related development grants of $50,000 each and how the Government of

Kenya is working with the private sector to help ease the cost of doing business in the

country. The technology in Kenya is largely mobile based, indicating how progress is

being made in improving the capability of individuals to freely communicate with

each other. To sustain this growth and overcome the barriers to ICT development on

the continent, Greg Marchand, Founder of Gizmos Solutions Ltd, stressed the need

for greater competition in the sector. In his view, if more companies were to come

into Africa and innovate then investment, alongside the increased technical

sophistication and quality of African technology, would improve for the betterment of

the people.

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““Africa today is where China was

ten or eleven years ago.”

– Charles Robertson, Chief Economist, Renaissance

Capital

Alastair Newton of Nomura offered a contrasting opinion on

the influence of Chinese investment in Africa. He argued that

the relationship between China and Africa is increasingly

complex given that much of the investment is coming from

Chinese state-owned companies who espouse both business

and national objectives. Alastair reasoned that not only are

BRIC countries such as China helping to reshape business and

value in the region; over time they may shape the cultural and

ethnic composition of Africa as well. Alastair quoted for the

audience a staggering statistic, stating that by 2030 over 100

million ethnic Chinese will be staying in Africa. If anything

close to this figure were to be realised then it could have an

undeniable impact on the business and cultural environment of

the continent. He also commented on how other BRIC nations

such as India seem to invest in diverse sectors and countries,

while most of Brazil’s investment is restricted to Lusophone

countries like Angola and Mozambique. To conclude, Alastair

underscored that “it was up to individual African countries to

make themselves the most attractive investment destinations in

what remains a beauty contest for FDI and portfolio

investments.”

Stephen Murphy of Citadel Capital kicked

off the discussion, addressing the

controversial topic of Chinese investment in

Africa. He acknowledged the influence of the

Chinese Investment Corporation (CIC), which

is armed with over $2 trillion worth of reserve

funds to disperse into investment

opportunities all over the world. With a

minimum investment target of $200 million;

the CIC plans to fully take advantage of their

vast resources and cash flow to identify viable

investments in Africa. He also noted the role

of the China-Africa Development Fund which

recently earmarked $4 billion for the purposes

of providing African entrepreneurs with

support to capitalise on the investment and

growth opportunity on the continent. Drawing

on Citadel’s experience on the ground,

Stephen highlighted how most of the Chinese

investment in Africa seems to be coming in

the form of various infrastructure projects

with fewer complications and constraints

relative to western counterparts.

Charles Robertson, Global Chief

Economist of Renaissance Capital,

underscored the progress African

governments had made over the last 10

years and how this has resulted in low

levels of public debt relative to other

regions. He emphasised how these low

levels of public debt will help to drive

down borrowing costs which will ensure

that African countries can borrow at the

competitive rates needed to invest in

infrastructure. Charles stressed that “if

things were to go wrong in China, the

government finances in Africa are in an

extremely good place”. In his view,

“Africa today is where China was 10 or 11

years ago.” The continent is in a unique

position as one of the fastest growing

economic regions in the world and a

competitive investment destination for

global firms.

The New Captains of Industry? How BRICs are Reshaping Business and Value on the Continent

Panel Managers: CABN Steering Committee Members Nkiruka Chiemelu, 2012 MPhil Candidate in

Development Studies and Bobak Tavangar, 2012 MPhil Management Candidate

Panelists:

Stephen Murphy, Managing Director, Citadel Capital

Alastair Newton, Managing Director & Senior Political Analyst, Nomura international

Charles Robertson, Chief Economist and Head of Macro-Strategy, Renaissance Capital

Moderator:

Professor Jaideep Prabhu, Jawaharlal Nehru Professor of Indian Business & Enterprise,

Cambridge Judge Business School

Undoubtedly, the BRICs are reshaping the dynamics of business on the continent. The panellists

discussed the FDI flow into Africa from the BRIC countries; namely Brazil, India and China,

while noting the minimal influence of Russia on the continent.

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Frontier Finance: Confronting Challenges and Discovering the Value of Investment in Africa

Panel Managers: CABN Steering Committee Members Yakhara Sembene, 2012 Master in

Finance Candidate and Kwaku Osei, 2012 MPhil Candidate in

International Relations

Panelists:

Dzika Danha, Managing Director, IH Securities

Jubril Enakele, Director, Deutsche Bank AG

Eric-Vincent Guichard, CEO, Homestrings

Jean-Paul Melaga, Head of Africa, Bank of Tokyo-Mitsubishi

Martyn Schouten, Managing Director, Zambia National Commercial

Bank

Moderator:

Mark Florman, CEO, British Venture Capital Association

While the last decade has been economically positive for African

economies and the world has been slow to catch up; the continent still

attracts less than five per cent of global foreign direct investment (FDI).

The panellists discussed a range of topics with respect to investment in

Africa. They examined how managers are confronting barriers to

investment on the continent and discussed how western investors could be

convinced about the value of frontier markets.

The panellists discussed investor perceptions and how political risk could

be approached and actively managed by businesses and investors operating

within the continent. Political risk in itself is currently an issue that is not

restricted to Africa, as the future of the global economic environment is

still very uncertain. Dzika Danha, Managing Director of IH Securities,

mentioned that when investing in Africa it’s less of a matter of risk and

more of a matter of knowledge. Indeed, intimate knowledge of African

markets seems to be a scarce resource to many companies around the

world and is valued highly on the continent; knowledge of the situation at

hand can go a long way to diminishing the risk associated with an

investment. Eric-Vincent Guichard, CEO of Homestrings, believes that

signs such as the region’s increasingly liberal media and the growth of a

middle class are acting as the necessary forces to help minimise political

risk levels in Africa.

Martyn Schouten, Managing Director of the Zambia National Commercial

Bank, elaborated on what Africa can do to help turn around its public image.

He highlighted how within the top 25 fastest growing economies in the world,

12 of those countries belonged to the African continent. Everything, from the

way Africa is depicted on the media to the language people use when

speaking about it needs to be changed – “don’t focus on the fact that you’re

less developed; focus on how you’re faster growing” – a message that

reverberated across the audience, reflecting the need for changing attitudes,

globally and within the continent.

A popular point of agreement for many of the panellists was on the value of

the African Diaspora. Eric-Vincent called on the diaspora to return to Africa

given their critical importance for economic growth in the region. He

emphasised that the knowledge, experience, business networks and financial

resources of the African Diaspora is far too great to ignore and more needs to

be done to encourage the globe-trotters of Africa to return home.

“Africa is so young and we (the West) are so old,

Africa has no debt and we have too much, Africa

has plenty of land and we have none.”

- Mark Florman, CEO, British Venture Capital Association

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A Conversation about Jugaad Innovation

Panel manager: Mobolaji Adewumi, 2012 MBA candidate and

CABN founding member

Interview with Jaideep Prabhu, Co-author of the book Jugaad

Innovation and Jawaharlal Nehru Professor of Indian Business &

Enterprise, Cambridge Judge Business School by Adam Green,

Senior Reporter, This is Africa, a publication of the Financial

Times.

Jugaad is a Hindi word which means an innovative fix; an

improvised solution born from ingenuity and resourcefulness.

This session explored how the tenets of jugaad apply to business

and innovation in Africa.

Jugaad originated in the farms of Punjab where farmers would

make hybrid vehicles (Jugaads) using cobbled together parts from

carts and tractor engines, attaching ploughs to them. The word

now applies to tangible products and services and intangible ones

like business models in India. There are similar terms in other

parts of the world such as “Jua kali” in Kenya and “Gambiarra” in

Brazil.

“Innovation in the west is

diametrically opposite to the way

it is done in emerging

markets....... ”

- Jaideep Prabhu, Co-author of the book

Jugaad Innovation and Jawaharlal Nehru

Professor of Indian Business & Enterprise,

Cambridge Judge Business School

Jean-Paul Melaga, Head of Africa for

Bank of Tokyo-Mitsubishi, provided his

support for this view but expressed caution,

stating that the return of the African

Diaspora to Africa does presents the danger

of creating a local oligarch, a mere

extension of the elitism already present in

some parts of the continent. So, when taking

the value of the African Diaspora into

consideration, one certainly needs to bear in

mind the potential risks that can be

associated with the movement of a

significant number of people from one

region to another.

On foreign direct investment (FDI) in the

continent, the panellists broadly agreed that

many African heads of state needed to

improve the continent’s marketability as an

investment destination. Jubril Enakele,

Director of Deutsche Bank AG, also

suggested that intra-regional trade in Africa

needed to be further developed, indicating

how a more integrated Africa would help to

serve the continent for the long term.

According to Professor Prabhu, innovation in the west is typically highly structured, top-down and insular,

with R&D in large corporations having long-term horizons. Innovation in emerging markets on the other

hand is not as structured; it tends to be more frugal, more improvised, more inclusive and democratic as

consumers and non-R&D employees are engaged in the innovation process.

While Jugaad does not have the scale that the structured approach has, this is not an impossible challenge to

overcome. There are examples, such as Bharti Airtel, in which Jugaad entrepreneurs manage to scale on

their own or with large companies. Furthermore it is noteworthy that these successful firms are meeting

fundamental needs in these countries that the government would normally provide in the west such as health

and education coordination services.

Demography and governments have an important role to play in the phenomenon of Jugaad. Younger people

in emerging economies, including African frontier markets, will be much more willing to come up with

ideas and take risks with relatively fewer resources and great ingenuity. Governments can play an important

role in fostering innovation by developing the institutions that are necessary to help enable citizens to

innovate as well as investing in ideas themselves.

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Closing Keynote Address

His Honour, Dr Guy Scott, Vice President, Republic of Zambia

Moderator: Namukale Chintu, 2013 PhD Candidate and CABN founding member

His Honour, Dr Guy Scott, in conversation with Namukale Chintu, highlighted the main

challenges facing investment in Zambia today as the lack of a suitable measurement of risk that

results in high financing costs, low productivity and therefore low employment. This challenge

is not unique to Zambia and is faced by many other African countries.

Dr Scott was accompanied by Zambia’s High Commissioner to the UK H.E Col Bizwayo

Nkunika and a delegation from Zambia’s Ministry of Commerce Trade and Industry that

included Deputy Minister, Honourable Keith Mukata MP; Permanent Secretary, Mr Stephen Mwansa and Zambia Development Agency Director General, Mr Andrew

Chipwende.

His Honour stressed that finance costs are exceptionally high to effectively do business in

Zambia. The country’s financial institutions work with short payback periods to return loans at

high interest rates - an unworkable situation for fostering innovation and a competitive

environment.

Misperceiving risk in a fundamental way is what has led to these quick return periods and high

interest rates. To demonstrate this, the example of Zambia’s Dutch disease was presented. Given

high copper prices, the country accumulated foreign exchange and this was associated with

carry trades in which funds in the west invested in short term treasury bills. It would be

expected that that Zambia’s interest rates and price levels would come down due to the excess

capital flowing in. However businesses did not flood into the country to undercut prices as

economics would predict. According to Dr Scott, this attests to some misperceived risk which is

an unfortunate result of Africa’s negative image in the global economy that needs to be

changed. The change starts with projecting all aspects about the continent in forums such as the

Cambridge Business in Africa Conference.

His Honour is an alumnus of The University of Cambridge, where he read Economics at Trinity

Hall College.

“Zambia’s GDP has been growing at 6

to 7 percent in the last decade and with

single digit inflation. The international

community has hailed us for getting

the fundamentals right.... but

unemployment persists – that’s not

fundamentally right”

-His Honour, Dr Guy Scott, Vice President of the

Republic of Zambia

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“Cultivating partnerships is

critical to realising our goals and

vision...”

Closing remarks from the Cambridge Africa Business Network

Queen Chinyere Nworisara Quinn, 2014 PhD candidate and CABN founding

member

Namukale Chintu, 2013 PhD candidate and CABN founding member

We would like to thank all the speakers for their generosity and time to share their

views and perspectives. We thank our sponsors - the Leventis Foundation and the

Cambridge Political Economy Society Trust - without whom our dreams

would not be transformed to reality.

We would also like to thank our individual benefactors and Circle of Patrons; Jean Paul Melaga of Bank of Tokyo Mitsubishi and Lanre Oloniniyi, Ron Bauer,

William Hunnam and Tom Sawyer, all from the Excalibur Africa Mining

Group for their generosity and support for the Network.

Apart from the tremendous financial support we are also grateful to our partners;

This is Africa magazine, Professionals for Africa, the Cambridge Centre

for African Studies, the United Nations Economic Commission for Africa

and Trinity Hall college for providing their valuable contributions to the

conference.

We would like to thank Cambridge Judge Business School for providing the

institutional support to make this conference possible. This includes the teams from

external affairs, online communications, information technology, facilities, finance

and catering.

Finally, we would like to thank all of you, our delegates, for your interest in our

conference and for coming to join us in starting this journey of dialogue and action

towards unlocking value on the continent. Thank you!

Cambridge Judge Business

SchoolUniversity of Cambridge

Trumpington Street

Cambridge CB2 1AG

United Kingdom

Website:

www.africanetwork.jbs.cam.ac.uk

Email: cambridge.abn@jbs.cam.ac.uk