By: Shira Petrack

Estimated reading time: 4 minutes 

The repercussions from the Covid movement restrictions and supply chain disruptions expose the need for food sovereignty in Africa. The region has the agricultural potential to produce enough rice to feed itself and to export abroad. Agribusinesses that collaborate with African farmers to increase yields can cater to the growing demand for foodstuff on the continent and contribute to Africa’s food security while enjoying a market characterized by relatively low competition and steadily growing demand. 

The Need for Rice Sovereignty in Africa

The fallout from Covid-19-related containment measures has highlighted once more the importance of increasing agricultural production in Africa. The region still imports a significant portion of its food, making the continent particularly vulnerable to disruptions in the global food supply chain. Now, it seems the pandemic might be threatening Africa’s rice deliveries. 

Rice imports are critical to food security on the continent. Even Nigeria, the largest rice-producing country in the region, still imports a significant portion of its rice, despite government efforts to curtail imports and boost local rice production. Around 12% of the rice grown locally is lost post-harvest due to inefficient milling and inadequate storage and transportation. West Africa, the largest rice-producing region, also imports a large portion of its rice, although imports decreased from 50% in 2010 to 30% in 2020. East Africa imports on average around a quarter of the rice it consumes, but the specific rate per country varies from 5% in Tanzania to 54% in Rwanda. 

Rice is the second source of calories in Africa (after corn), and over a third of rice consumed on the continent is imported. Due to container shortages, the cost of shipping rice to West Africa from South East Asia tripled in the last quarter of 2020, raising the prices for end consumers. Adverse weather conditions in Vietnam and Thailand further tightened the rice supply, prompting China to import rice from India for the first time in three decades. The events of 2020 have highlighted the dependence of Africa’s food supply on its international suppliers. 

Rice Production in the Region 

The local movement restrictions and the disruptions to the global supply chain have also affected local rice production. Over 90% of Africa’s total cultivated area is exclusively rain-fed, so planting in the right period is critical to ensure that the crops get the water they need to grow. On much of the continent, planting maize and rice begins in February to April, at the peak of the lockdowns. The Covid safety measures blocked many seasonal laborers from reaching rice farms on time and prevented farmers from getting the seeds they needed, which will affect yields. 

For African farmers who are already struggling to adapt to the effects of climate change, and in a region where poverty and malnourishment remain high, any drop in harvest can be dangerous. Covid has exposed the need for African farmers to upgrade and modernize their production methods to better adapt to the changing and erratic climate, make their crops more resilient, and increase their harvest.

Building Business Collaborations to Enhance African Agricultural Production 

To wean itself off food imports, Africa needs to produce a lot more rice. The right investments and collaboration can increase African rice production and raise the incomes of millions of people across the region. According to the World Bank, Africa is well-positioned for a massive expansion of agricultural production. The continent has the highest reserves of untapped natural resources for food production in the world, with around 45% of the global land that is non-protected, non-forested, and with low population density. 

The land that is being cultivated is not worked efficiently. African farm systems are the least mechanized across all continents. The majority of African farmers are small-holder farmers who work the land with no tractor and no irrigation system. Mechanization and irrigation can increase land productivity, and crop monitoring solutions can allow farmers to better care for their crops during their lifecycle. 

Even though many rice-producing African countries have similar climate conditions to rice powerhouses such as Vietnam and Thailand, Africa currently produces only 4.3% of the world’s rice. The International Rice Research Institute points out that rice is a relatively young crop in Africa, which only recently became a priority crop. The potential for rice in Africa is vast, and the market is currently wide open. Enhancing rice research capacity and strengthening the rice value chain is crucial to developing a thriving African rice sector. With proper inputs, irrigation, machinery, technological solutions, and post-harvest processing and storing facilities, Africa can grow enough rice to feed its population and export the surplus globally. 

By: Shira Petrack

Estimated reading time: 4 minutes 

Now more than ever, companies need accurate and up to date market information that can guide them in adapting their strategy to a post-Covid world. While a lot of material can be found online, busy executives do not always have the time to sift through lengthy reports to find the data points relevant to their business. To make it easier for you to get the intelligence you need to enter or expand in the African market, we have put together this short list of highlights from the 2020 Investment Climate Statement on Botswana.*

Information for Investors:

• The Government of Botswana promotes foreign investment in specific sectors, including:
  1. 1. Diamonds
     2. Water and sanitation 
     3. Electricity 
     4. Transportation 
     5. Telecommunication infrastructure 

• Other sectors (not specifically promoted by GoB) with high investment potentials are:
  1. 1. Mining 
     2. Mineral processing 
     3. Cattle 
     4. Tourism 
     5. Financial services 

• Botwana’s Special Economic Zones Authority (SEZA) is currently working on developing eight special economic zones throughout the country to streamline investment in sector-targeted geographic areas.
• The Botswana Investment and Trade Center (BITC) 
  1. Was designed to serve as a one-stop shop for investors or entrepreneurs looking to set up a business or a business partnership in Botswana.
  2. Supports investment projects that will diversify the economy away from dependence on diamond mining and create jobs for, and transfer skills to, Botswana citizens.
  3. Foreigners who wish to operate a business in the country are required to register and obtain the relevant licenses and permits as prescribed by the Trade Act of 2008. 

Information for Traders: 

• Botswana, along with Lesotho, Namibia, South Africa, and eSwatini, is a member of the Southern Africa Customs Union (SACU) which is the world’s oldest customs union. These five states maintain a duty free trading area with a common external tariff.
• As part of its mission to promote trade with the country, the BITC also runs the Botswana Trade Portal, which centralizes all the official information that importers or exporters need to know when setting up their trading business in the country.
• With the exception of certain foodstuff, import permits are not required for goods entering Botswana from other SACU members.
• SACU has a free trade agreement with Iceland, Liechtenstein, Norway, and Switzerland through its agreement with the European Free Trade Association.
• SACU countries have signed reciprocal preferential trade agreements (PTA) with MERCOSUR countries (Argentina, Brazil, Paraguay, and Uruguay) that are in the process of being ratified.
• Botswana is a member of the Southern African Development Community (SADC) and follows its protocol on trade.
   
• Botswana has signed an interim Economic Partnership Agreement (EPA) with the EU, which provides duty and quota free access on Botswanan goods to the EU markets.
   
• Botswana and Zimbabwe have a trade agreement that provides duty-free access for goods within certain parameters.
• Botswana has signed the African Continental Free Trade Agreement (AFCTA), but it has yet to ratify the AfCFTA.

The Legal System: 

• The legal system is based on Roman-Dutch law and influenced by English common law. The legal corpus is made up of legislation, judicial decisions, and local customary law.
• The judiciary is largely regarded as fair and impartial.
• Botswana has a specialized anti-corruption court that handles all corruption cases.
• Some litigants have complained about the turnaround time for civil and commercial cases. To expedite the process and ensure relevant judicial expertise, the Government of Botswana is planning to build a corps of specialized commercial judges within the civil court system that will handle commercial cases.   

Property Rights:

• Botswana’s constitution prohibits the nationalization of property, and the government has never pursued a policy of forced nationalization in the country’s history. The only exceptions are 
  1. 1. Expropriation in exchange for market value within the parameters of the Acquisition of Property Act;
     2. Revocation of an independent power producer’s license and confiscation of the operations in exchange for compensation for public interest purposes within the parameters of the Electricity Supply Act.
• Of the three categories of land in Botswana – freehold, state land, and tribal land – only freehold land (approximately 5% of the land in the country) can be sold to foreigners.
• State land (about 25% of the land in Botswana) can be leased for 50 years for industrial and 99 years for residential use.
• All minerals in Botswana, including those found in private lands, are treated as the property of the state.

Tax Rates:

• Botswana has a 22% corporate tax rate. The Ministry of Investment, Trade, and Industry (MITI) can grant manufacturing companies a reduced rate of 15%. The withholding tax rate on distributed dividends is 7.5%.  

*The United States State Department’s Investment Climate Statements publishes yearly analyses of foreign markets that cover almost all countries in Sub-Saharan Africa. These reports can help companies make informed business decisions regarding their foreign investment and partnership. 

By: Leah Ngari

Estimated reading time: 5 minutes 

In 2011, after 25 years of working in construction and property development in the UK, Simon Dixon wanted a change. He decided to leave England, join a volunteer group operating in a rural part of Kenya called Murang’a, and immerse himself in this new culture. 

A decade later, he is still in the country. In 2015, he took another risk by co-founding Kwangu Kwako, a social enterprise in Kenya that builds affordable urban housing. Aside from empowering people to live in secure, dignified, and affordable homes, Kwangu also creates jobs by hiring construction workers from the communities where it works. Kwangu has already built homes in Kibera, Kawangware and Kangemi, with plans to replicate the model across East Africa and beyond. 

Why Kwangu Kwako

Simon, like many other foreign visitors to Africa, first came to the continent to work in humanitarian aid. Two years into his volunteer work, Simon concluded that the private sector could offer more permanent solutions to the the problems that he was trying to solve as a volunteer. This realization led him to join Sanergy, an existing social enterprise that is building a sustainable sanitation network in underserved urban areas by creating a network of local entrepreneurs who run small-scale sanitation centers.

While Simon appreciates NGOs, he also believes that social enterprises are advantageous in some circumstances. According to Simon, “NGOs are very good for disaster or emergency response. For longer term recovery projects or social improvement, social enterprise can often be more effective and provide longer lasting solutions.” 

How Kwangu Kwako was Started

While working with Sanergy, a fire broke out in Mukuru Settlement, one of the neighborhoods they worked in, and wiped out hundreds of homes. All that remained were two toilets built by Sanergy. “We were getting it wrong,” he realized. The toilets were more durable than the houses! 

According to Kwangu Kwako’s website, an estimated 2 million people live in metal shacks in Nairobi alone. The Kenya Red Cross estimates that 10,000 homes a year are lost to slum fires. Simon, who has a construction background, recognized the social impact as well as the business potential of constructing affordable and durable homes for Kenya’s underserved urban population. He set out to design something that could provide tenants with comfort, security, and pride and truly improve the lives of those at the bottom of the pyramid in Kenya. 

 

Getting Past the Data Problem

To begin designing and building the homes, Kwangu needed market data, as would any other business about to start or expand its operations. Although Simon’s time at Synergy had already introduced him to a lot of people in the communities he wanted to serve, he still needed specific information about his target market’s housing needs and specifications. 

Unfortunately, the lack of pre-existing data is often a major roadblock for companies in Africa. To get around this issue, Simon tried to do as much first-hand research as possible. Both he and his co-founder, Winnie Gitau, spoke to numerous potential customers directly to understand their problems and find out what sort of product would help them most. You can read descriptions of their research on their blog.

Simon is keen to point out that having a co-founder was as critical to success in the company’s early stages as it is today. Winnie is very skilled in community engagement, and she has been essential in enabling Kwangu to get data from potential customers. Simon advises entrepreneurs to find local partners with complementary skills to co-create products and services that will be accepted by the end-user.

 

Getting Started in a New Country

Simon says that he received a lot of help in the initial stages of running his business, including access to office space while his business got on its feet. “There’s a whole network of social enterprises willing to help someone new,” he explains. Building a network early on can greatly ease the way, so Simon recommends co-working spaces and hubs like Nairobi Garage that bring together entrepreneurs from different fields. 

He also advises interested non-Kenyans to take the time to experience Kenya for themselves to create more empathy and understanding. “You are here to enable, facilitate and support,” he adds. Anyone who wants to break into the Kenyan market needs to understand that they can’t import an idea straight from their home market and expect it to work. The environment in every country and every city is different, and what works in one place won’t always work in another.

Registration and Working with the Government

Dealing with regulation is easier now, Simon observes. At the beginning, he spent a lot more time dealing with bureaucracy. Things are faster now, especially with the government’s online systems for registration and tax payment. Simon counsels entrepreneurs to plan ahead and make sure to get the paperwork together well before the deadline. “Don’t leave things for the last minute,” he advises.

Final Words

Simon came to Kenya to try something different for a short while. Ten years later, he is growing his business, making a difference, and fully settled into his adoptive country. “I came with two bags for two years and I’m still here,” he says.

Since he arrived in the country, Simon has seen Kenya develop exponentially. He notes the new highways and increased internet connectivity. Africa is quickly becoming a prime business hub. More and more people who previously considered the continent only as a humanitarian aid recipient are recognizing the value and potential of Africa’s growing private sector. Simon saw a problem that he could fix and built a business to implement the solution. 

He is excited to see where the country and Africa will be in the next five to ten years. “People are beginning to recognize the value that is here.” 

By: Shira Petrack 

Estimated reading time: 4 minutes

The Covid-19 pandemic has caused a recession in Africa for the first time in twenty-five years. The World Bank calculated that the considerable drop in economic activity will cost the region at least $115 billion in output losses in 2020 alone.

Some worry that the restrictions affecting entrepreneurs and small businesses will affect the trajectory of Africa’s middle class for years to come. But the middle class also includes a large share of young people age 15-24 who drive consumer trends in food, entertainment, and connectivity. In the aftermath of Covid-19, this generation will exercise an even greater influence on Africa’s consumer demand trends. 

Covid’s Economic Impact 

In a high-frequency phone survey of Malawi, Nigeria, Uganda, and Ethiopia during May-July 2020, the World Bank found that 77% of households had lost income due to the pandemic. Business income represented the most common source of lost revenue in all four countries, although there were some disparities in the findings: Ethiopians reported significantly less wage income, farm income, and remittances losses than the other three countries. In all four countries, concern about the financial threat of Covid-19 was greater than worry over the virus itself. 

An SMS poll of Kenya, South Africa, Nigeria, Côte D’Ivoire, and Mozambique conducted by GeoPoll during June-July 2020 revealed similar findings: 76% of respondents reported income losses, with almost half (49%) stating that their income decreased “a lot.” In a follow-up survey conducted in November 2020 in the same five countries plus the DRC, the percentage of respondents who told GeoPoll that their income had decreased a lot since June 2020 had increased to 52%. Another 27% stated that their income had decreased a bit. All in all, almost 4 out of every 5 people surveyed experienced a loss of income during this period. Interestingly, although more people reported income losses in the November survey, only 65% of respondents were concerned with paying their expenses, compared to 71% in June. 

Africans are Spending Less 

A majority of respondents, including those who have not experienced a recent loss of income, told GeoPoll that they expect to spend less this holiday season. This thrifty attitude should change by next year’s holidays. A September consumer sentiment survey conducted by McKinsey in South Africa, one of the hardest-hit countries, found that 69% of respondents do not expect the financial impact to last more than a year.  

The younger generation (aged 15-24) is the most optimistic both about the length of the economic impact and their future income prospects. They were also the least likely to report that their income decreased “a lot.” 

Effect on E-Commerce is Varied

The pandemic’s effect on e-commerce has been mixed. The World Bank found that sales decreased for most specialized e-commerce companies, whereas most third-party online marketplaces saw increases in sales. In South Africa, McKinsey found a 90% growth in online purchasing on average across most categories, with online purchases of alcohol, snacks, personal care products, and groceries growing over 100%. GeoPoll, on the other hand, found an overall decrease in online shopping among its respondents, perhaps due to the general decline in spending. 

Small businesses all over the continent are joining digital sales interfaces for the first time. Savvy entrepreneurs are capitalizing on the increased demand by building e-commerce platforms or integrating them into their existing offerings. In March, SafeBoda, a Ugandan rideshare app with an emphasis on safety that matches passengers with motorcycle drivers, launched a food delivery service shortly before the country went into lockdown. Several days later, the company launched a delivery service for food, groceries, and essentials. Flutterwave, a payment platform, set up an e-commerce portal that allows merchants to set up virtual shops and receive payments through Flutterwave. 

Bringing more shoppers to these new online stores depends on improving connectivity on the continent and making it more affordable. Governments can enact regulations to encourage competition in the space. Since young Africans are more likely to use the internet than their older counterparts, their online shopping habits will shape the future of e-commerce in Africa.

The Restrictions’ Collateral Damage  

GeoPoll found that residents of countries that had enacted the most severe restrictions struggled the most financially and experienced the most emotional stress. In hindsight, the lockdowns’ economic cost may outweigh the benefits.

The region has surprised experts in its resilience to the virus. With the exception of South Africa, where over 28,000 people have died from Covid-19 to date, Africa’s average case-fatality ratio (number of deaths per diagnosed cases) is significantly lower than the global average. The continent as a whole has recorded a little under 3 million Covid cases – significantly less than the 250 million that some experts were predicting. While the lockdowns undoubtedly slowed the virus’ spread, many have attributed Africa’s success with the virus to the low median age in the region – the median age in SSA is 18.7 compared to 43.1 in Europe.

The overall public health benefits of the restrictions are also not yet known. For instance, the World Health Organization predicted that the Covid-related disruptions reducing access to treatment will lead to an estimated 20,000-100,000 increase in malaria deaths, depending on the extent of the disturbance, compared with the approximately 40,000 deaths in 2020 caused by Covid-19 in the region.

Looking forward to 2021

It is always hard to predict the future – and it seems downright impossible to do so amid a novel global pandemic. However, one thing is sure: Africa’s youth will play a key role in Africa’s post-Covid economic recovery.