Tuesday, September 28, 2010

McKinsey report - 'Lions on the move: The progress and potential of African economies'

Africa presents myriad opportunities for growth and investment in the near future and beyond. So says The McKinsey Global Institute, a think tank focusing on business and economics research worldwide. McKinsey partners presented the findings of their June 2010 report Lions on the Move: The progress and potential of African economies at the Gordon Institute of Business Science (GIBS) on 14 September. Their conclusions were both surprising and encouraging.

Mutsa Chironga, Engagement Manager in McKinsey’s Sub-Saharan Office, observed that in the global political economy most growth has come from emerging markets, and that Africa forms part of this new dynamic fold. “Growth has headed South, while debt has headed North”, he said.


Mutsa Chironga

This growth is about far more than simply resources, Chironga observed. Referring to the report, he noted that although the boom in commodity prices had certainly helped Africa, this growth was also the result of government actions to improve the political and macroeconomic environments and to create a healthier overall business climate.

“Africa’s business opportunities are potentially very large, particularly for companies in consumer-facing industries, resources, agriculture, and infrastructure,” the report noted. The question to ask from here is whether this growth will be sustained if the oil price drops?

The answer is: most likely. Africa is seen as the final frontier of growth, Chironga said, and the last opportunity for many companies to significantly grow their market share, especially in strategic industries such as telecommunications, banking and retail.

Chironga pointed to some key factors that could lead to potential long-term and sustained success. For instance, investment in Africa has increased seven-fold in the last decade. In addition, GDP growth has reached levels of USD 1,5 trillion, making the combined value of the continent’s economy the tenth largest in the world.

With approximately a billion people within its borders, Africa comprises about 14% of the global population. Half of these people are under the age of 35 years, representing a huge untapped reserve of potential skilled and unskilled labour. In this light, the report notes that, “[by] 2040, the continent will be home to one in five of the planet’s young people, and the size of its labour force will top China’s.” (p.50.)



However, Chironga cautioned that the downside to this remarkable story is political risk and uncertainties surrounding stability and security. Perceptions of these risks are still high, and are the number one factor hindering investment. Another challenge is in education, where improvements have been made, but not at the desired rate.

Arend van Wamelen, a Principal in McKinsey & Company’s Johannesburg office, developed these concepts further.

He referred to a key element of the report: “Long-term growth also will be lifted by internal social and demographic trends, particularly Africa’s growing labor force, urbanisation, and the related rise of middle-class consumers.” (p.1.). Although urbanisation is not uniformly good, and comes with many challenges (e.g. slums and strains on services), urban dwellers tend to be more productive and add positively to consumer spending, he said.

Another topic van Wamelen addressed was the role of China on the continent and the growing infrastructure investment that the world’s second largest economy has provided for many African countries (levels that are now higher than that of the World Bank’s).

Arend van Wamelen

Van Wamelen took note of, but ultimately dismissed, fears that this represents a neo-colonial push that will benefit only one partner. African governments, he said, were becoming far shrewder in their dealings with China, and the demand for commodities which has bolstered growth has come largely from the East.

Rates of credit provided by the Chinese were also far lower than those offered by other Development Finance Institutions (DFIs) such as the IDC and DBSA, which aided development.

Both speakers were particularly excited about the potential for an “African Green Revolution” on the level of those experienced, for example, in India and Bangladesh. According to the report, Africa contains 60% of the world’s unused arable land.

If, and only if, improvements in policy and technology can be applied to the agricultural sector then this too could potentially contribute to Africa’s economic growth. The McKinsey report underscored that this is by no means a certainty, and that a lot of work will have to be done to realize this potential.

Generally speaking, this is exciting news for a continent long mired in low rates of growth, hyperinflation and political instability. With the cessation of several major conflicts and the liberalization of many core economies, Africa is now set to lift off, but the right buttons will have to be pushed before that can happen.

-

Photo: David Ansara
Graph: McKinsey Global Institute & International Monetary Fund

-

This article was originally written for MBAnetwork, an information portal and networking site for prospective and current MBA students in South Africa.

Friday, September 17, 2010

Right 2 Know campaign launches in Gauteng

.
William Bird of Media Monitoring Africa

The state is seeking to undermine media freedom and restrict access to information according to the Right 2 Know campaign. The umbrella body, comprising NGOs, media and civil rights groups has gathered over 9000 signatures of individuals and organisations to protest against the Protection of Information Bill currently before parliament (as well as the proposed Media Appeals Tribunal or ‘MAT’).

The movement launched its Gauteng chapter on Wednesday 15 September at the Wits University School of Law to an audience of academics, students and interested citizens. Campaign organisers argued that these plans represent a threat to constitutional rights such as freedom of speech and access to information, and conflict with existing legislation, such as the Promotion of Access to Information Act.

William Bird of Media Monitoring Africa, one of the principal NGOs behind the Right 2 Know campaign, spoke in no uncertain terms about the potential dangers. “Let the truth be told, stop the Secrecy Bill!” he proclaimed. “It affects all of us … anybody within SA’s borders will be affected by this Bill if it were to go through in its current form; meaning that we wouldn’t have half the access to information that we currently do."

One of the problems of the “Secrecy Bill” is the appeal mechanism. If a citizen wishes to oppose classification of a document, he or she needs to lodge a complaint to have it overturned – to the very minister who classified the information in the first place. Said minister could easily deny this request by citing state security concerns defined under a broad ‘national interest’ clause in the act.

This, according to Freedom of Expression Institute Executive Director Ayesha Kajee, will create “super-ministers” who will lack accountability. Kajee warned that when writing legislation the effect can be lasting. The present government needs to consider how its worst enemies would misuse these laws were they to get into power, she said.

In addition, no ‘public interest’ clause was present in the Bill, which effectively forbids leaks of classified information being made under any circumstances. It would make revealing, or being in possession of, such information a criminal offence, potentially having a chilling effect on citizens or journalists seeking to investigate corruption or of whistle-blowers revealing malfeasance.

The Freedom of Expression Network, a grassroots organisation seeking to promote transparency and accountability, was adamant that the message be carried to ordinary citizens. “This Bill will turn South Africa into a society of secrets, impeding the free flow of information,” said Siphiwe Segodi, a coordinator of the FXN. Segodi called for forums such as Nedlac to be used to pressurize the government to revise its stance. The campaign needed to work closely with Cosatu, as the Bill will affect the right to protest and to strike, he said.

The Secrecy Bill would also have a negative affect on the ability of academics to pursue their research effectively, according Anthony Butler, Professor of Political Studies at Wits. Butler noted that the ANC had a long history of antagonism towards academic institutions and other civic groups that have sought to influence the public policy agenda, and that the Bill was a continuation of this. But he also added that “Universities have not perhaps reflected hard enough on their own limitations and weaknesses,” in terms of their historic place in a divided society.

Gabriella Razzano, of the South African History Archive, insisted that “if this Bill is passed in anything that looks like its current form there will definitely be a challenge in court run by this campaign.” However, there were also calls to let the legislature consider the Bill in full and to report back with adjustments. A judicial challenge could be left open as a secondary means of resistance, following civic action and public participation into the drafting process.

Photo: David Ansara

Thursday, September 16, 2010

South African Business School Expo hits Sandton



Why embark on an MBA? Does it add to your professional development or is it an expensive way of multiplying your stress levels? Crucially, how do you choose the institution that best fits your interests, your career objectives, and your budget? On September 9th prospective MBA students were able to ask these questions themselves and sample the offerings of some of the best business education institutions at the SABSA MBA Open Day at the Sandton Convention Centre.

A range of business schools put together displays manned with friendly and informative personnel eager to hand out their brochures, free pens and wrapped sweets. There was also a long programme of presentations and workshops running throughout the day focusing on a range of subjects such as the best companies to work for, and the challenges of transformation, corporate wellness, and strategic leadership.

Zimasa Koyana, right, answering questions about the Wits Business School’s offerings.

Many feel the MBA is worth the long hours, diminished family time and the added pressure and certainly its advantages are more multifaceted than simply boosting your CV. “The learning doesn’t end in the classroom; it is a much broader learning environment,” said Zimasa Koyana, of Wits Business School. With extensive use of case studies and integrated learning, not to mention the huge potential for networking, the MBA has benefits that extend beyond the curriculum, she said.

Koyana noted that most graduates leave their initial degrees having specialized in a particular academic discipline - whether it is accounting, history, or IT - that taught them specialised skills. “The MBA moves them from that specialised space to the general management space so that they can better understand how their skills fit together in the working world,” she said.

UCT GSB's Segran Nair, right, took a holistic view of the MBA.

Segran Nair a Director of the University of Cape Town’s Graduate School of Business emphasised that the degree was not a shortcut to a fat pay check. “You come to a business school not purely to achieve success, but to be transformed,” he said. Apart from the academic rigour of the programme, UCT GSB also integrates personal and leadership development, and even yoga and meditation classes into its programme to help maintain the balance between learning and improving one’s state of mind.

In addition to the MBA, many schools offer a postgraduate diploma in management, which is aimed at recent graduates or those with one-to-three years of work experience. These are typically individuals who are looking to fast-track their way into the world of business, but who are unwilling or unable to pursue the full MBA.

At schools such as Wits or the Gordon Institute of Business Science (GIBS) for instance, the graduate diploma can form the foundation for an MBA further down the line, sometimes contributing credit towards the higher degree. Should students excel academically in the diploma they can potentially be accepted for the MBA if they wish to further their studies (conditional upon a 65% aggregate in the case of GIBS). If students are unsure about whether an MBA is right for them, they can always leave with the more basic qualification and still benefit immensely.

GIBS staff members were kept busy by a multitude of interested perspective students.

Shaun Rozyn, Director of the Company Specific Programmes at GIBS, drew attention to the fantastic opportunities that being part of an MBA alumni network can bring. “It gives you the chance to benchmark and to ask yourself ‘How good am I?’” he beamed, referring to the dynamism that comes with brainstorming and problem-solving with some of the brightest up-and-comers in various industries. Rozyn says that the University of Pretoria, the school’s umbrella body, gives GIBS the freedom to respond to market needs by giving it a measure of autonomy.

Letisha Greyling, left, and Owen Skae, right, of Rhodes Investec Business School emphasised sustainability: even encouraging visitors to recycle their sweet wrappers.

Prof. Owen Skae of the Rhodes Investec Business School emphasised his institution’s focus on environmental sustainability, which he said is integrated into all facets of the course. I asked him why somebody based in the metropolitan centres would want to journey all the way to Grahamstown to complete an MBA. He replied that many residents of Johannesburg and Cape Town make their way down to the Eastern Cape, and that the modular block release format of the degree allows them to spend as little time away from home as possible. The beauty of the campus and the youthful atmosphere of the town were big drawcards, he said, as well as the backing of a major financial service provider.

Whether you are a fresh graduate, a mid-level manager or a director, there is always potential to learn, interact and create within the business school environment. You have to be ready for it financially and intellectually – and also ensure that you time your studies to coincide with a strategic point in your career.

-

Photos: David Ansara

-

This report first appeared on MBAnetwork, an information portal and networking site for potential and current MBA students in South Africa.

Tuesday, September 7, 2010

GIBS Forum: A leadership and vision beyond 2010

This report appeared on MBAnetwork, an information portal and networking site for potential and current MBA students in South Africa (link).

-

African markets are the new frontier of growth in the global economy, and South Africa requires a coherent long-term strategy for its engagement with the continent. This was the message from three of the World Economic Forum’s Young Global Leaders at the Gordon Institute of Business Science (GIBS) on Monday 6th September. The strengthening of South-South trade relationships and the emergence of China has the potential to dramatically transform Africa’s economies in the coming years.


Left to Right, Abdullah Verachia (MC) and Dr. Martyn Davies of Frontier Advisory; Leslie Maasdorp of Absa Capital; Dr. Acha Leke of McKinsey & Company.


Leslie Maasdorp, Managing Principal and Vice Chairman at Absa Capital and Barclays Capital, observed that SA’s self-perception as a nation “vacillated between excessive optimism and needless pessimism.” It was important, he noted, to have an open discussion about what we can learn from successful economies.

Pointing to middle-income countries such as Indonesia and Malaysia, Maasdorp observed that, “the notion of an economic miracle is a misnomer. There were very specific targeted interventions that these countries took that lead them on a path to economic growth. There is no formula for success, but they did have a very specific vision,” he argued, “In South Africa there is no such single coherent vision, nor is there a growth strategy that can take us to that.”

Maasdorp called for far-sighted leadership, noting that “people and countries are responsible for their own destinies.” He speculated that the National Planning Commission, the cabinet portfolio headed by former Finance Minister Trevor Manuel, “could emerge as the single most important initiative of this government, provided that it challenges current paradigms and takes note of global forces shaping the 21st century.”

Dr. Acha Leke, a Director in McKinsey & Company’s Sub-Saharan African office, took a sweeping view of Africa’s remarkable upward trajectory over the last decade. Fundamental changes had occurred throughout the continent: political and macroeconomic stability, combined with microeconomic reforms had effectively loosened the fetters to growth, he said.

Leke added that many markets had liberalized and diversified into key areas, especially user-facing industries such as retail, banking, and telecommunications, thus bolstering growth during a time of recession in the industrialised world. He cited the little-known fact that Africa’s commodities exports only accounted for 24% of GDP (from 2002-07), illustrating the plural nature of its economies.

Considering Africa’s combined Real GDP growth of 4,9% from 2000-08, Leke believed the continent now offered the highest return on investment on capital in the world. He gave the example of Nigeria, which suffered from an image of being a high investment liability. In fact, the scale of profits generated by international companies such as MTN showed the extent of the potential in the Nigerian market and the gulf between perceived and actual risk.

Added to the mix is the fact that South-South trade flows were growing significantly. “We need to expand our networks beyond our traditional links,” Leke said. He also insisted that African countries have to exchange goods and services more readily, “We need to work more and better together.”

Leke also warned that newly diversified African economies face challenges and “must increase their global competitiveness. Unit labour costs are much higher in Africa than they are in China or India and this needs to change.”

Dr. Martyn Davies, CEO of Frontier Advisory and a faculty member at GIBS, looked at the forces behind the rise of the major emerging markets, and most importantly, The People’s Republic of China. Having recently eclipsed Japan as the world’s second largest economy, China’s appetite for raw materials and its willingness to invest in Africa to fuel this demand should be embraced, he said.

President Jacob Zuma recently concluded a trip to China along with a large delegation of cabinet ministers and leaders from business and civil society, including Davies himself. It was the last in a series of diplomatic missions the President made to all four of the BRIC emerging economies this year – having earlier visited Brazil, Russia and India. Davies argued that these overtures are indicative of the realignment of SA’s interests with a changing global order.

Africa’s growth over the last ten years paralleled China’s with a differential of 0.919972, the smallest of margins, he said. This was no coincidence, considering China is the single largest foreign investor and deployer of capital to African economies. Both are inextricably linked.

However, he added that despite these moves, SA needed a more coordinated response to changing global realities. “We need to show the ‘vision thing’ and some leadership,” he said. “How do we as a country, as organisations, and as individuals rethink our worlds?”

Davies argued that the rise of the emerging economies had been unleashed, not caused by, the ‘Western Financial Crisis’, and stressed that power is changing hands. “Europe is something of an old-age-home,” he said wryly. “In the next five years the Eurozone may unravel. This is not a banking crisis; it is a discrediting of an entire model….There will be profound implications. This crisis is not going anywhere soon so sell your euros!”

Photo: David Ansara

Wits Debate: How should the media be regulated?

.


On Monday 24 August I attended a public debate at the Wits Great Hall. The discussion concerned the Media Appeals Tribunal that the ANC has proposed as an alternative to the current self-regulatory system.

Speakers included:

  • Jackson Mthembu - ANC spokesperson and Chairman of the ANC National Executive Committee sub-committee on Communications
  • Lumko Mtimde - CEO of the Media Development and Diversity Agency
  • Thabo Leshilo - Chairperson SANEF Media Freedom Committee)
  • Jeremy Cronin - SACP Deputy General Secretary (absent due to illness)
  • Joe Thloloe - Press Ombudsman
  • Prof. Anton Harber - Head of Wits Journalism

Jackson Mthembu argued that although the instruments of media self-regulation were in place, such as the Press Ombudsman and the Press Council, there had never been any influencing of these instruments by "ordinary" South Africans. He criticised the fact that these organs were products of, and accountable to, the media industry itself. He instisted that the public could only have its say via "an independent body created through a transparent and public platform." Following the Polokwane resolutions, the ANC would consider the possibility of a statutory tribunal to which wronged citizens could lodge their complaints. In the past, he said, the only recourse available to those who had been maligned or defamed in the press was to have the Ombud order the paper to issue a retraction or an apology. However, Mthembu said that the Ombudsman or "Bra Joe" had no ability to issue a fine, thus limiting his effectiveness. "Can he himself be exonerated from the influence of the meedia when he himself is being paid by the media, when his offices are next to the editor's forum when the he depends on the whole structure and edifice of the media itself." Mthembu stated that such controls were designed to promote media freedom and not to muzzle it, but he failed to elaborate on what this actually meant.

Lumko Mtimde echoed the call for a public enquiry into an "independent" statutory appeals tribunal. He called for the "modalities to be debated," while also adding that media indignation at the proposal was disproportionate and needless. He pointed to other similar investigations in the UK and New Zealand, which he said revealed that self-regulation was not sacrosanct. Maybe South Africa could show the world the way in terms of such a statutory body, he argued.

Joe Thloloe pointed out that the UK report that Mr Mtimde had referenced actually said that self-regulation, while imperfect, was a far preferable system to statutory regulation. The principal of self-regulation was also maintained in New Zealand. The UK parliamentary sub-committee in question suggested improvements to self-regulation, but did not demandthat the system be replaced, as the ANC was now doing. "You are trying to reinvent the wheel - at what cost?" he asked rhetorically, "The constitution says that everyone has the right to freedom of expression. You can't tinker with that right unless you amend the constitution. If you tinker with freedom of expression you tinker with the very foundation of our democracy."

He concluded on a defiant note, taking issue with the threatening manner in which the ANC had initiated the debate, as if the MAT were a fait accompli: "We are prepared to review what we do, but for heaven's sake don't put a gun to our temple and ask us to cooperate in our own... I nearly used the word 'rape'."

Thabo Leshilo crticised the proposals, saying that the MAT has been in the works since the Polokwane conference in 2007. "That's two years and 9 months; that is an awful lot of time. By now we should have some idea of what this animal should look like." Leshilo also said that the choice of advocates for the MAT had been awful, as they had revealed that the real reason the ruling party desired tighter regulation lay in the fact that the media was sewing disunity in the ANC.

Anton Harber agreed that newspapers must be accountable, but he insisted that holding the press to account was the duty of peers, readers, the public itself, the courts, the law, and the Constitution, and not politicians. He also made a plea for the public to recognise good journalism, instead of merely trashing it. The press was one of the principal areas where government can be held to account, especially for exposing corruption. He called for the role and funding of the media to be debated, but stressed that this should not mean an increase in regulation. In this regard, he also noted that there is little evidence to suggest that regulation and journalistic quality are linked.

Illustration: John Dyson