Dangote Cement ,Africa’s largest cement producer, has announced its unaudited results for the six months ended 30th June 2017, posting a 12.6 percent increase in sales volume across Africa.
In the financials released on the floor of the Nigerian Stock Exchange indicated that the increase in sales volume showed a growing capture of Pan-African market as Dangote Cement continues to gain grounds.
Revenues from operations in Nigeria increased by 34.5 percent to ?291.4 billion while Pan-Africa revenue increased by 63.7 percent to ?124.4B from ?76.0B mainly as a result of increased volumes and foreign exchange gains when converting the sales from country local currency into Naira.
Analysis of the half year result revealed that sales volumes of African operations increased by 12.6 percent to 4.7 million metric tons with Sierra Leone making a 53 kt maiden contribution.
Record of sales from its operations scattered around the African continent revealed that a total of 1.1million ‘metric tons of cement was sold in Ethiopia, almost 0.7 million metric tons sold in Senegal, 0.6 million metric tons sold in Cameroon, and 0.5 million tons in Ghana.
Also, 0.4 million metric tons of cement was sold in Tanzania and 0.3 million tons in Zambia. Sales volumes from Nigerian operations fell from 8.8Mt to 6.9Mt, occasioned by the onset of rains which stalled many construction projects.
Reflecting on the half year results, Dangote Cement’s Chief Executive Officer, Onne van der Weijde expressed satisfaction that the company’s revenues have continued to grow despite low sales from the Nigerian operations noting that the revenues grew on the strength of sales from other African operations
Said he: “Our revenues have continued to grow despite the lower volumes seen in Nigeria, especially because of the recent heavy rains. Our margins have improved significantly, helped by improved efficiencies and a much better fuel mix in Nigeria.
“We are using much more gas and increasing our use of coal mined in Nigeria, thus reducing our need for foreign currency and supporting Nigerian jobs.
”Our Pan-African operations are growing well and increasing market share. We saw our the first sales from Sierra Leone in the first quarter and our new plant in the Republic of Congo will be in production at the end of July, further increasing our footprint across Africa and strengthening our position as its leading manufacturer of cement.”
The Company reports that it estimated that Nigeria’s total market for cement was 10.2 million tonnes (Mt), 23.2% lower than the estimated 13.3Mt sold in Nigeria in the first half of 2016. Of total market sales in the first half of 2017, just 0.1Mt was imported.
“As a result of the slower market, our Nigeria operation sold nearly 6.9Mt of cement, down 21.8% on the 8.8Mt sold in the first half of 2016. We estimate our market share to have been about 64.5% during the first six months of 2017.
Dangote Cement is a high-growth, low-debt, internationally diversified company that has just paid a dividend amounting to nearly 75% of 2016 net profits to shareholders. “The recent publication of our credit ratings highlights the financial strength we have achieved through our unwavering focus on the profitable expansion of the business, underpinned by our belief that we must remain prudent in our financial management.”, Mr. Weijde stated.
Cities in sub-Saharan Africa are growing fast. Nigeria alone is projected to add 212 million urban dwellers by 2050, equivalent to the current population of Germany, France and the UK.
But focusing on population growth leads many to overlook the other unusual features of African cities. Urban economies across the region are markedly different from those of other cities around the world: they are more expensive to live in, more informal and less industrial.
In a recently published paper, we explore how these distinctive traits are increasing vulnerability.
Environmental risks range from everyday hazards such as waterborne diseases (cholera, diarrhoea, dysentery) to larger, less frequent disasters (tropical storms, flooding, fires). Their impact is much greater where people and governments can’t afford to invest in basic infrastructure.
In our research we demonstrate that African cities are too often developing in ways that perpetuate poverty and marginalisation. The amount of money that people have to spend on basic necessities, the precarious nature of their employment and their exclusion from the formal economy mean that they have limited resources to cope with environmental risk.
There are ways around these problems, but they need governments to work much more collaboratively with people living in informal settlements and working in the informal economy.
African cities are expensive
For many, African cities are inextricably linked with poverty. It therefore seems counter-intuitive that the cost of living is higher in urban Africa than in other cities in the global South.
One estimate suggests that food and drink cost 35% more in real terms in sub-Saharan African cities than in other countries, while housing is 55% more expensive.
This means that urban dwellers have to spend more of their income to enjoy the same quality of life. The average urban household in sub-Saharan Africa spends 39% to 59% of its budget on food alone.
Of course, there is considerable variation across the continent. Cities in The Gambia, Mauritania, Madagascar and Tanzania remain relatively affordable. Those in Angola, the Democratic Republic of Congo, Malawi and Mozambique are the most expensive.
The high price of basic goods and services means that people living in African cities have little money to spend on reducing risk, such as upgrading their homes, preventative health care or buying insurance.
African cities are not industrialising
Urbanisation has historically been closely linked to industrialisation. From Detroit to Manchester to Shenzhen, the rise of a vibrant manufacturing sector fuelled rapid population and economic growth in cities.
In sub-Saharan Africa, urbanisation is taking place without industrialisation.
One explanation for this unusual trend is that higher living costs mean that the labour force requires higher wages than competing cities in Asia. This makes it difficult for African cities to attract international capital.
In other cases, the export of commodities such as oil and diamonds have generated high income for a small share of people in countries such as Angola, Nigeria and Libya. The wealthy beneficiaries then create urban employment through demand for non-tradeable services such as retail, transport and construction.
Whatever the driver, urbanisation without industrialisation means that jobs and livelihoods too often remain low-skilled and poorly paid. Without the opportunity to develop skills and organise collectively, workers exert little influence over working conditions.
Instead, urban residents continue to depend on precarious livelihoods in the agricultural and services sectors. This means that they are susceptible to environmental shocks, such as extreme weather that can make it impossible for street vendors, waste pickers and other informal workers to ply their trade.
By comparison, manufacturing jobs have a number of spin offs. They offer income security and skill development. Local employers in the public and private sector benefit from new knowledge and skills, while workers can accumulate capital. This offers a path out of poverty. Few African cities are enjoying these positive spillovers.
The lack of industrialisation also means that there’s little political incentive for governments to invest in risk reducing infrastructure like sewers, drains and all weather roads.
African cities have a large informal economy
In many cities in sub-Saharan Africa, the informal economy is larger and more dynamic than the formal economy. The informal economy responds to demand when commercial banks are not willing to offer loans or when there isn’t enough housing. When formal jobs in industry or services are scarce, the informal economy absorbs much of the labour force. In Cotonou (Benin), Lomé (Togo) and Ouagadougou (Burkina Faso), for example, the informal sector accounts for over 80% of non-agricultural employment.
Yet, in many African cities, government policies discriminate against these workers. For example, street vendors and waste collectors are often banned from using public spaces. They may even suffer harassment from government officials.
Yet they play a central role in increasing the resilience of the city. Waste pickers recycle large amount of material, reducing pollution and maintain city cleanliness. This helps prevent diseases, particularly those spread by bacteria, insects and vermin that might otherwise feed or breed on garbage.
Street vendors play a critical role in providing and producing food, particularly to poor people living in urban areas.
The informal economy is not perfect. Informality creates risks for consumers and workers. A lack of state oversight makes it difficult to enforce regulation, such as water treatment standards or minimum wages. Waste pickers in particular face severe health risks due to their work. Informal housing is often in hazard prone parts of the city.
But there can be little doubt that informal service provision or informal livelihoods are better than none at all.
Successful strategies to reduce risk therefore need to be developed in collaboration with informal workers in sectors such as food, water, housing and solid waste management. Similarly, partnerships with communities living in informal settlements can ensure that the voices of vulnerable urban residents are heard, and their needs are addressed.
Only through a more flexible and inclusive approach will African cities be able to manage the risks associated with their unique economic development path.
At a bare floored restaurant on the edge of the Dja Faunal Reserve in Cameroon, I asked the owner what there was to eat. She gestured to a poster on the wall. It was an illustrated guide of 44 animal species under threat from poaching and over-hunting, but for the restaurant it served as a menu. Each animal she pointed to was available to order.
The Dja, and other forests in Central Africa’s Congo Basin, are a breadbasket for millions of people living in the region. At nearly 2 million square kilometres, the area of tropical forest in the Congo Basin is the second largest in the world after the Amazon. Besides supplying bushmeat, these forests provide building materials, medicine, wild fruits, vegetables and spices. They also regulate the local climate and flow of water, play an important role in soil conservation by retaining soil fertility and preventing erosion and cycling nutrients for crops grown under their shaded canopy. These forests are also home to thousands of endemic plant and animal species, including the okapi.
While these forests have long been threatened by logging, over-hunting, and small-scale subsistence farming, they remain mostly intact relative to other parts of the tropics like the Brazilian Amazon or Indonesia.
But there are rising concerns that trends in rapid deforestation across the Amazon and Southeast Asia could spread to Africa.
In particular, some worry that continued demand for commodity crops will lead to large-scale agricultural expansion in Africa where it’s estimated, that 50%-67% of the land suitable for agriculture is still forest.
To date, agricultural expansion in sub-Saharan Africa has mainly been driven by small-scale subsistence farmers. Yet since 2005, 22.7 million hectares of land in sub-Saharan Africa has been acquired by large-scale landholders.
We examined recent trends in domestic and export-oriented agricultural expansion in sub-Saharan Africa. Our aim was to establish whether patterns are changing and to identify countries at risk of expansion into tropical forests.
Our results indicate that although cropland expansion in sub-Saharan Africa is still dominated by production for domestic markets, there’s evidence of a growing influence of global markets on change in land use across the region. We believe it’s not too late to introduce policies that take this into account, and protect Africa’s rainforests from the same levels of destruction seen in Asia and Latin America.
Globalisation has transformed the way markets operate. Low-cost and more efficient modes of production far from consumers have supported a steady increase in international investments. As part of this trend, the availability of cheaper land and labour in the tropics is attracting investors interested in food, fibre and bio-fuel production. This pattern of land use change has resulted in tropical forests becoming frontiers of conversion for commodity crop agriculture.
By 2004, Brazil’s deforestation rate surged to over 27 thousand square kilometres of forest loss per year as a result of expanding soy fields and cattle pastures driven by global beef demands. That equates to losing a portion of the Amazon every year comparable to the size of Rwanda. As rapid policy responses led to the reduction of deforestation in Brazil, Indonesia became the country with the highest rate of deforestation in 2011. The main culprit was rapid oil palm expansion driven by global vegetable oil demands.
Africa has not yet seen these levels of agricultural expansion associated with foreign demands. But recent trends suggest it could be on the way. For example, cocoa, the fastest expanding export-oriented crop, increased at a rate of 132 thousand hectares per year across the whole continent. This amounted to 57% of the global cocoa expansion in 2000–2013.
Of particular concern is the potential threat to the Congo Basin. We found four Congo Basin countries, as well as Sierra Leone, Liberia, and Côte d’Ivoire to be most at risk in terms of deforestation from agricultural expansion. These countries average 58% forest cover with only 1% of available cropland outside forest areas. Over 80% of foreign investment in these countries was concentrated in oil palm production, with a median investment area of 41 thousand hectares.
But unlike recent trends in South America and Southeast Asia commodity crop expansion in sub-Saharan Africa does not appear to be driven by large-scale, industrial plantations – at the moment. For example, since 2000 oil palm expansion has accelerated in Cameroon, Côte d’Ivoire and the Republic of Congo. Yet our analysis on Cameroon suggests that expansion is largely driven by small- and medium-scale farmers. Over 83% of monoculture commodity crop expansion occurred outside industrial plantations.
Where this leaves the tropical forests of Africa is difficult to say. The landscape is largely intact with relatively low rates of deforestation. There is an opportunity to conserve this vital ecosystem before economic pressures push conservation out of reach.
The use of an endangered species poster as a menu illustrates the complications and trade-offs between conserving a forest for its ecosystem services and prioritising the urgent development needs of nearby communities. Additional agricultural pressures from global food demands could further complicate these trade-offs.
The report, commissioned by ICAEW and produced by partner and forecaster Oxford Economics, provides a snapshot of the region's economic performance. The report focusses specifically on Kenya, Tanzania, Ethiopia, Nigeria, Ghana, Ivory Coast, South Africa and Angola.
According to the report, the African continent accounted for 41% of Kenya's exports in 2016 while Europe and Asia each accounted for approximately a quarter of total exports. Uganda held the position of Kenya's largest
single export destination accounting for 11% of total exports during 2016.
Agricultural products such as tea and flowers made up the bulk of exports. However, whilst the country has an advantage in terms of value-added compared to regional African peers, this story is not replicated beyond Africa. Receipts from these commodities are largely determined by factors such as global commodity prices and domestic weather conditions (affecting production), and not necessarily the state of world trade.
Michael Armstrong, ICAEW Regional Director, Middle East, Africa and South Asia said: "Kenya stands to benefit from stronger growth in the East Africa region as it is well positioned to take advantage of rising demand for manufactured goods. Furthermore, its location and relatively developed transport infrastructure will allow the country to act as the gateway into the East Africa region."
The EAC is considered the most progressive trade bloc in Africa. Collaboration on regional infrastructure has reached a level rarely seen on the continent with construction of the $26bn Lamu Port - Southern Sudan - Ethiopia Transport (LAPSSET) corridor underway. Furthermore, a Single Customs Territory (SCT) system will take effect across the EAC from July 31, facilitating trade between member states by electronically connecting countries' custom clearance systems. A pilot programme involving certain goods and entry points has generated positive results, and if implemented successfully, the SCT could significantly stimulate trade in the region by reducing the cost of doing business.
However, the bloc is not without its challenges as the United Nations Economic Commission for Africa (UNECA) recently cautioned against the signing of the Economic Partnership Agreement (EPA) between the EAC and the European Union (EU) in its current form, which does not bode well for the EPA's implementation. Kenya stands to lose the most without the agreement as it is not classified as a least-developed country, it would not receive duty-free and quota-free access under the EU's Everything-But-Arms initiative.
Non-tariff barriers are another major concern for EAC member states. A monitoring tool identified 19 non-tariff barriers that remain unresolved, ranging from restrictions on Kenyan beef exports to Uganda, to the requirement that companies exporting to Tanzania should register, re-label and retest goods already certified by other partner states.
More than 70% of Africa’s population depends on subsistence agriculture for food, jobs and income. The continent has immense potential to feed itself and the world – it’s home to over 60% of the world’s uncultivated arable land. But this potential isn’t being realised.
Africa is a net food importer. Imports are expected to increase from USD$39 billion in 2016 to over USD$110 billion by 2025.
Food production is desperately low in the region. This is largely because of poorly developed farming technologies which drive rain fed farming practices. On top of this is the fact that there are poorly developed climate and weather alert systems to help farmers plan for crop seasons and adopt better ways of farming.
Farmers can’t access reliable and usable weather data. Information is often unavailable and even if it does exist, the quality is poor or it’s inaccessible to those who need it most. Farmers don’t get efficient information on drought forecasts, rainfall distribution and pest outbreaks.
This is because African governments and development agencies don’t understand and prioritise the value of climate and weather data. This has stifled investment in infrastructure and proper functioning of state institutions charged with collecting and serving climate and weather data.
There are funds that African governments can tap into. One example is the Green Climate Fund adopted in 2011 as the funding arm of the United Nations Framework Convention on Climate Change. It has raised USD$10.2 billion to finance adaptation and mitigation projects and programmes in developing countries.
For the fund to deliver on its potential, it must finance infrastructure on basic meteorological observations, for example, to generate climate and weather data fit for agricultural purposes. This will provide a boost for farmers’ ability to withstand dry and rainy seasons and to adopt the correct farming practice.
Africa needs to acknowledge and welcome the role of the private sector too. Without its investment Africa won’t be able to bridge the massive gap in infrastructure needed to collect reliable data, and to make it easily available. But that would mean sharing what data there is. A major rethink of how this is viewed is long overdue.
A lack of data
In the horn of Africa farmers in Somalia are grappling with droughts and poor rainy seasons. This has affected food production, making more than 5 million people food insecure. These farmers have no knowledge of how long and how intense the droughts will be. Information like this would help them decide when to plant and harvest.
In Cote d’Ivoire, cocoa farmers live in fear of heavy downpours in the rainy season which can lead to their farms flooding. This is a major threat to cocoa which accounts for 20% of the country’s gross domestic product. Around 5 million people depend on the cocoa industry.
If farmers were warned about intense rainfall they could take action to try and mitigate the risks. For example, those in low-lying areas could enhance soil structure to improve water filtration in times of flooding.
The National Meteorological and Hydrological Services is mandated by national laws and recognised in the Convention of the World Meteorological Organization.. Its aim is to collect and serve meteorological and hydrological forecasting and warning systems at country level. But it operates well below capacity in several African countries because of under funding and low visibility.
In Africa, about 80% of the data from the meteorological service is unable to provide proper climate information and early warnings. This is as a result of decades of neglect by governments. It is worse in Africa than anywhere else in the world because massive investment and modernisation is needed.
Some African countries have a small number of operational meteorological stations to make important data available. In the Omo-Gibe region of Ethiopia, for example, hydrological equipment was installed three years ago by the government and the UN Economic Commission for Africa.
But the World Metrological Organization estimates that an additional 4000 to 5000 basic meteorological observations are needed across the continent. The World Bank estimates that about USD$1 billion is needed to modernise Africa’s meteorological services. It also estimates that a minimum of USD$400 million to USD$500 million per year will be needed to support modernised systems, including staff costs and operating and maintenance costs.
The private sector could play a role
Governments don’t have the capacity and expertise to provide complete solutions, particularly when it comes to the investment needed. They will require partnerships in the agriculture, insurance and telecommunication sectors. These partnerships are necessary for the collection and the delivery of data and for critical services including risk analysis, commodity prices, insurance and secure payment schemes.
There are good examples of innovative solutions being put in place. ECONET, a local mobile phone operator in Zimbabwe, recently started a large scale weather-indexed insurance for farmers in Zimbabwe, known as Ecofarmer. The service has benefited 900,000 farmers so far.
Strong political support is needed to increase smart systems through partnerships – between national authorities, technical agencies, non-governmental organisations and the private sector.
But, most importantly, African governments must invest in modernising their weather and climate data. And they must forge strong partnerships with private companies and businesses.
Recent years have seen the international business community look to the promise of growth through doing business in Africa, the world’s last frontier for the development of new business opportunities. The previous focus on China as the place to be is now waning, and the new concentration on Africa is evident.
However, there are major risks for businesses in an emerging market environment such as the countries in sub-Saharan Africa. Two of the most significant are the fluctuations in the value of local currencies against international currencies like the US Dollar, and the dependency many states in Africa have traditionally had on commodities.
When commodity prices fall, currency volatility often also hits the country; this explains the instability of recent years in the currencies of countries like South Africa, Zambia, Ghana, Angola and Nigeria. But, when a country pegs its currency to an international currency, as is the case in some Francophone states in West Africa, which are pegged against the Euro, currency instability is less likely to arise.
Countries like Angola – worldwide, the state with the second least-diversified economy - and Nigeria have in recent years experienced the risk associated with a single focus in the economy, and their economies have not shown the growth experienced in earlier times. The International Monetary Fund (IMF), for instance, reported in early 2016 that oil-producing economies in Africa were likely to experience just 2¼% growth, a significant drop from the 6% growth experienced in 2014.
This comes as a result of the dramatic drop in the international oil price and slowing demand for oil – in fact, last year saw the lowest oil price in 20 years.
Many states in Africa are beginning to realise the value of moving away from a single focus in their economies. So, although it’s the region’s biggest oil exporter, Nigeria has significantly diversified its economy, with construction, film, services, transport and retail playing a big role in the country’s GDP.
As the IMF indicated in 2016, ‘medium-term growth prospects remain favourable’ in many parts of the continent, largely because the factors that facilitate growth, like the improved business environment, remain in place. Those more open to private sector involvement – such as in Rwanda, Kenya and Nigeria – have seen the growth of a wealthier middle class, and these are people with the means and the need to travel.
The value of local businesses partnering with global corporations must also be highlighted: the local partner’s understanding of the business environment and legal issues in the country will certainly assist the corporation to establish itself in the country. A significant issue for the hospitality sector is the huge size of the population on the continent, as well as in the growth of a middle class in some states.
So, while both currency fluctuations and a sustained low oil price are factors of concern, there are other signs that suggest economic growth potential, and consequently make countries attractive to international hospitality groups. The Harvard Business Review has highlighted the resilience of an economy as a gauge for international business investors. A range of factors point to a resilient economy: strong human capital; stable democratic systems; low dependence on commodities, as is the case in East Africa; and the strength of regional currencies that are pegged to an international currency. In addition, the huge size of the population on the continent suggests great potential for future business.
Marriott International takes a range of factors into account when planning its expansion on the continent – not low commodity prices or currency fluctuations only. It aims to have a presence in 18 sub-Saharan states by 2025, and these locations are mostly those identified as having resilient economies with GDP growth of over 3% per annum, and offering good potential for business going forward. Over the next five years, 65 new hotels will be built across countries like Nigeria, Ghana, South Africa, Uganda, Kenya, Madagascar, Mauritius, Senegal, Gabon and Rwanda.
So, despite some challenges for the business environment in Africa, the future remains positive, and the hotel industry is certainly poised for growth on the continent.
- By Danny Bryer, Area Director of Sales, Marketing and Revenue Management at Protea Hotels by Marriott®.
The questions that I get asked most often by students, policy makers and political leaders are: “can democracy work in Africa?” and “is Africa becoming more democratic?”.
As we celebrate Africa Day and reflect on how far the continent has come since the Organisation of African Unity was founded in 1963, it seems like a good time to share my response.
Some people who ask these questions assume that the answer will be “no”, because they are thinking of the rise of authoritarian abuses in places like Burundi and Zambia. Others assume that the answer is “yes” because they remember recent transfers of power in Gambia, Ghana and Nigeria.
Overall trends on the continent can be read in a way that supports both conclusions. On the one hand, the average quality of civil liberties has declined every year for the last decade. On the other, the number of African states in which the government has been defeated at the ballot box has increased from a handful in the mid 1990s to 19.
To explain this discrepancy, I suggest that we need to approach the issue a little differently. Instead of focusing on the last two or three elections, or Africa-wide averages, we need to look at whether democratic institutions such as term-limits and elections are starting to work as intended. This tells us much more about whether democratic procedures are starting to become entrenched, and hence how contemporary struggles for power are likely to play out.
When we approach the issue in this way it becomes clear that democracy can work in Africa – but that this does not mean that it always will.
The rules of the game
Democracies are governed by many different sets of regulations, but two of the most important are presidential term-limits and the need to hold free and fair elections. Because these rules have the capacity to remove presidents and governments from power, they represent a litmus test of the strength of democratic institutions and the commitment of political leaders to democratic principles.
So how are these institutions faring? Let us start with elections. Back in the late 1980s only Botswana, Gambia and Mauritius held relatively open multiparty elections. Today, almost every state bar Eritrea holds elections of some form. However, while this represents a remarkable turn of events, the average quality of these elections is low. According to the National Elections Across Democracy and Autocracy dataset, on a 1-10 scale in which 10 is the best score possible, African elections average just over 5.
As a result, opposition parties have to compete for power with one hand tied behind their backs. This helps to explain why African presidents win 88% of the elections that they contest. On this basis, it doesn’t look like democracy is working very well at all.
Colonialism brought large-scale farming to Africa, promising modernisation and jobs – but often dispossessing people and exploiting workers. Now, after several decades of independence, and with investor interest growing, African governments are once again promoting large plantations and estates. But the new corporate interest in African agriculture has been criticised as a “land grab”.
Small-scale farmers, on family land, are still the mainstay of African farming, producing 90% of its food. Their future is increasingly uncertain as the large-scale colonial model returns.
To make way for big farms, local people have lost their land. Promises of jobs and other benefits have been slow to materialise, if at all. The search is on for alternatives to big plantations and estates that can bring in private investment without dispossessing local people – and preferably also support people’s livelihoods by creating jobs and strengthening local economies.
Two possible models stand out.
Contract farming is often touted as an “inclusive business model” that links smallholders into commercial value chains. In these arrangements, smallholder farmers produce cash crops on their own land, as ‘outgrowers’, on contract to agroprocessing companies.
Then there is growth in a new class of “middle farmers”. These are often educated business people and civil servants who are investing money earned elsewhere into medium-scale commercial farms which they own and operate themselves.
So what are the real choices and trade-offs between large plantations or estates; contract farming by outgrowers; or individual medium-scale commercial farmers?
These different models formed the focus of our three-year study in Ghana, Kenya and Zambia. Evidence suggests that each model has different strengths. For policy makers, deciding which kind of farming to promote depends on what they want to achieve.
Plantations are ‘enclaves’
Our cases confirm the characterisation of large plantations as being “enclaves” with few linkages into local economies. They buy farming inputs from far afield, usually from overseas, and in turn send their produce into global markets, bypassing local intermediaries.
Plantations are large, self-contained agribusinesses that rely on hired labour and are vertically-integrated into processing chains (often with on-farm processing). They’re usually associated with one major crop. In Africa, these started with colonial concessions, especially in major cash crops such as coffee, tea, rubber, cotton and sugarcane. Some of these later became state farms after independence while others were dismantled and land returned to local farmers.
Many plantations do create jobs, especially if they have on-site processing. Plantations may also support local farmers if they process crops that local smallholders are already growing. For example, we found an oil palm plantation in Ghana that buys from local smallholders, giving them access to processing facilities and international value chains they would otherwise not reach.
But, typically, plantations have limited connections into the local economy beyond the wages they pay. Where production is mechanised, they create few jobs, as we found in Zambia: the Zambeef grain estate employs few people, and most of these are migrants whose wages don’t go into the local economy. And the jobs that are created are invariably of poor quality.
The main story is that plantations take up land and yet often don’t give back to the local economy. In the cases we researched, all the plantations led to local people losing their land. For instance, the establishment and later expansion of the 10,000-hectare Zambeef estate led to forced removals of people from their cropping fields and grazing lands.
There are some benefits from plantations and estates. But, given more than a century of bad experience, it may be time to concede they seldom – if ever – live up to their promises.
Contract farming brings benefits for some
Contract farming has a long history in Africa, dating back to colonial times. As with plantations, these arrangements were largely for the major cash crops, including cocoa, cotton, tobacco and sugarcane.
Contract farmers are smallholders who enter into contracts with companies that buy and process their crops. Sometimes members of outgrowers’ households might also get jobs on larger “nucleus” estates run by the companies. Whether or not they benefit, or get mired in debt and dependence, depends entirely on the terms of these contracts. Our study looked at contract farming in Ghana’s tropical fruit export sector, in French bean production in Kenya and in sugarcane farming in Zambia.
Contract farming has been hailed by some as the “win-win” solution, enabling commercial investment for global markets without dispossessing local farmers. Farmers farm on their own land, using their own family labour, while also accessing commercial value chains – rather than being displaced by large farms. But we found that this is not necessarily the case. Crucially, there are different kinds of arrangements that determine who benefits.
In Kenya, contract farmers are poorer than most farmers around them. For them, farming on contract provides a crucial livelihood, especially for poor women, who cultivate French beans for the European market and combine this with seasonal jobs on big farms.
In one Zambian block scheme all outgrowers gave up their land to Illovo, a South African company that grows sugarcane. The company pays them dividends. Here, the landowners, typically the old patriarchs, benefit from cash incomes. Young people lose out: they neither inherit the land nor control the cash incomes.
Contract farming clearly provides one effective avenue for smallholders to commercialise. It means, though, that smallholders take on both the risks and the benefits of connecting to commercial value chains.
Medium-scale farming: a promising option
Between the large plantations and the small contract farmers is another model: medium-scale commercial farms owned by individuals or small companies. We studied areas where medium-scale farms were dominating: mango farmers in Ghana, coffee farmers in Kenya and grains farmers in Zambia. While this kind of medium-scale farming also has colonial origins, the past two decades have seen massive growth in new “middle farmers”. Many of them are male, wealthy, middle-aged or retired, often from professional positions.
The medium -scale commercial farming model has a lot to offer. We found that they create more jobs and stimulate rural economies more than either big plantations or smallholder contract farmers. Yet cumulatively, such farms may threaten to dispossess smallholders, just as the big colonial and more recent plantations and estates have done.
The push behind the explosion of the “middle farmers” in the countries we studied has been investment by the educated and (relatively) wealthy. In Ghana in particular, we found, their expansion has displaced smallholders. Cumulatively, even modest-sized farms have led to substantial dispossession and reduced access to land.
Their informal employment patterns mean poor working conditions and few permanent jobs. But, unlike the plantations, these farms are well connected with the local economy. Building on social networks, these “middle farmers” often buy inputs and services from local businesses. At least some of their produce is sold into local markets.
Winners and losers
While policy choices are of course political, they can and should be informed by research about the implications of these different pathways of agricultural commercialisation. What is clear from our research is that different kinds of commercial farming will have different effects on the economy. It’s not just about efficiency. Ultimately, it’s about who wins and who loses.
Ruth Hall, Associate Professor, Institute for Poverty, Land and Agrarian Studies, University of the Western Cape; Dzodzi Tsikata, Associate Professor, University of Ghana, and Ian Scoones, Professorial Fellow, Institute of Development Studies, University of Sussex
In Kenya, it’s estimated that 30% of newspaper revenue comes from government advertising. In 2013, the government spent Ksh40 million in two weeks just to publish congratulatory messages for the new President Uhuru Kenyatta.
But with a general election coming up this year in August, the Kenyan government has decided to stop advertising in local commercial media. In a memo, reportedly sent to all government accounting officers, the directive was given that state departments and agencies would only advertise in My.Gov - a government newspaper and online portal.
Electronic advertising would only be aired on the state broadcaster – the Kenya Broadcasting Corporation. It’s difficult not to characterise the withdrawal of state advertising from commercial media as punitive. Without this revenue stream newspapers are likely to fold.
Worse still, efforts to withdraw government advertising from commercial media can be interpreted as a worrying way to undermine the freedom of expression. Starving news media of revenue is a means of indirect state control. This has been the case in countries such as Serbia, Hungary, Namibia, Lesotho and Swaziland. But to fully understand the link between government spend on advertising and media freedom it’s important to take a historical perspective.
How did we get here?
The 1990s saw the adoption of multi-party politics in many African countries. This led to relatively liberal constitutions in South Africa, Kenya, Nigeria and Ghana among others.
Since then, most African governments have grown anxious about their inability to control the local news agenda, much less articulate government policy. For governments in countries such as Ethiopia, Uganda, Zimbabwe and more recently Tanzania, controlling the news agenda is seen as a means to stay in power. Views that compete with the state position are often cast as legitimising the opposition agenda.
This is part of a much broader strategy for political control which Africanist historians and political scientists have called the “ideology of order”. This is based on the premise that dissent is a threat to nationbuilding and must therefore be diminished.
The narrative was popularised by most post-independence African governments and emphasized through incessant calls for what they liked to call “unity”.
In Kenya, former president Daniel Moi even coined his own political philosophy of “peace, love and unity”. Citizens were expected to accept this narrative unequivocally. Dissenting views were undermined through state-controlled media such as Kenya Broadcasting Corporation and newspapers such as the Kenya Times.
From the 1960s - 1980s, African governments conveniently used the nation-building argument to suppress legitimate dissent. Opposition was punished by imprisonment, forced exile and even death. This was common practice in Kenya, the Democratic Republic of Congo, Uganda, and in West Africa more generally. The current political climate on the continent is premised on constitutional safeguards including the protection of free speech which make these kinds of punishments unlikely in the present day.
Many countries now have institutional safeguards including fairly robust judicial systems capable of withstanding the tyranny of naked state repression. As a result, the media is controlled in subtler ways and its violence is softer. It’s against this background that I interpret the withdrawal of government adverts from the commercial media in Kenya.
Controlling media budgets
In Kenya, the decision followed a special cabinet meeting which agreed that a new newspaper would be launched to articulate the government agenda more accurately. The government also argued that the move was part of an initiative to curb runaway spending by lowering advert spend in Kenya’s mainstream media and directing all the money to the new title.
A similar move was made in South Africa last year when the government’s communications arm announced that it would scale down government advertising in local commercial media. Instead, advertisements would be carried in the government newspaper Vuk’uzenzele. The decision withdrew an estimated $30 million from the country’s commercial newspaper industry.
The South African government also claimed that the move was made to reduce government spending. But critics have argued that the decision was made to punish a media outlet that’s been particularly critical of President Jacob Zuma’s presidency.
In both countries the decisions have hit at a particularly hard time for the media industry, providing governments with the perfect tool with which to control the press.
Will a free press survive
Commercial news media is going through a period of unprecedented crisis. The old business models are unable to sustain media operations as audiences adopt new ways of consuming news. More than that, mass audiences are growing ever smaller. Newspapers particularly haven’t been able to adapt to the changing profile of the old versus the new newspaper reader.
The effect has been that newspapers are no longer as attractive to advertisers. As such, they have to rely a lot more on state money and patronage for survival. To sidestep state control commercial media in Africa must rethink their business models and diversify their revenue streams.
It won’t be an easy road but non-state media must also work hard to disrupt this re-emerging narrative of “order”. Nation states cannot revert to the dark days when government policy was singular and alternative viewpoints were silenced or delegitimised.
When G20 leaders meet later this year in Hamburg, investment in Africa’s future will be high on their agenda. German Chancellor Angela Merkel has already committed to using her presidency of the forum to promote “sustainable growth and jobs” on the continent, with a focus on “investments in infrastructure and renewable energies.”
Energy is not a new need for many Africans. While parts of Africa are energy-rich, supply remains frustratingly poor for most of the continent. Indeed, the African Development Bank calculates that some 620 million Africans live without access to reliable electricity.
But with advanced economies now expressing support for efforts to broaden the availability of this basic human need, perhaps the time has come to flip the switch on one of Africa’s biggest developmental – and societal – challenges.
According to the International Energy Agency, Africa accounts for 13% of the world’s population but only 4% of its energy demand. While residents of London or New York might complain of slow broadband or shoddy mobile phone reception, many people in African cities, towns, and villages still struggle with access to basic electricity to light their homes and power their businesses. As I have noted elsewhere, in 36 African countries, just two in five people have electricity throughout the day. In some countries, fewer than one in ten do.
Given this, it is not surprising that so many of Africa’s young people believe their best hope lies in traveling to Europe and beyond. Reliable electricity is about more than powering schools, hospitals, and homes. A reliable supply of power can allow young people to develop skills, find employment, and start a business – and can enable existing businesses to compete on a level playing field in regional and international markets. Because electricity is fundamental for economic development, providing communities and businesses with access to reliable, clean, and affordable energy will be my top priority during my stewardship of the African Union.
As the G20’s Hamburg agenda suggests, African and Western countries now have a shared incentive to work together to solve Africa’s developmental shortcomings. Africa cannot afford to lose generations of its young talent to places like Germany, France, and Italy, and European countries cannot afford to continue struggling with an influx of migrants. Among the best ways to reverse these trends is cooperation between developing and developed economics – particularly in the energy sector.
Opportunities for partnership abound. According to a February 2015 report by McKinsey & Company, Africa has an extraordinary reserve of untapped energy potential, including an estimated 10 terawatts of potential solar energy, 350 gigawatts of hydroelectric power, 110 gigawatts of wind power, and an additional 15 gigawatts of geothermal energy. Whereas it was once too expensive to exploit Africa’s vast renewable assets, technology is providing solutions that promote new enterprises and new opportunities. With sufficient international investment, Africa will have a chance to harness and use these resources.
We have already seen the impact new sources of power can have on African cities. Two years ago, residents of Conakry, Guinea’s capital, could not light their homes for more than six hours a day, and businesses went without the power they needed to operate. Now, thanks to the construction of the Kaleta hydroelectric dam by the China International Water & Electric Corporation, businesses have reliable power for up to 24 hours a day.
And it’s not just Guinea. From the huge pan-African Lekela wind and solar projects, to wind farms in Kenya and solar projects in Rwanda and Tanzania, large and small African countries alike are harnessing their natural resources to create jobs and produce clean, affordable energy.
What’s even more exciting is that these projects are not happening in isolation. They are being planned alongside a wider push to create a network of industrial-scale generating capacity across the continent.
International collaboration and investment are essential to these efforts. Working with international partners in West Africa, a groundbreaking electricity interconnector will allow power exports from Côte d’Ivoire to Liberia, Sierra Leone, and Guinea. And this will be the first of several new public-private initiatives aimed at transforming how African countries deliver power.
If we get this right, we will not only strengthen African economies’ capacity to provide jobs and a future for our young people. We will open up new trading opportunities for both Africa and the West.
Having spent the last year coordinating energy policy within the African Union, I have sensed a growing mood of impatience from Africa’s political leaders on the topic, a sentiment that is shared by many of our people. But African leaders are demonstrating a new determination to improve younger generations’ prospects, not least by electrifying our economies.
Never in my lifetime have I seen Africa’s political leaders so focused on overcoming some of the challenges that have held back our continent for so long. Working with international partners in the public and private sector, we can chart a new and prosperous path for Africa and a hopeful future for our youth. And if African leaders pair their determination with the G20’s pledge to invest in infrastructure partnerships, the future for Africa’s people will be bright in more ways than one.
- By Alpha Condé is President of Guinea and Chairperson of the African Union.
Copyright: Project Syndicate, 2017.