Archive | September, 2015

African Investor Summit Promotes Integration & Infrastructure Investment

24 Sep

David O. Kuranga, Ph.D.

The author is the Managing Director and Principal of Kuranga and Associates, a full-service investment, political and economic risk consultancy, and asset management firm that specializes in Africa. He is also the author of The Power of Interdependence with Palgrave Macmillan Press.

Alongside the 70th Session of the General Assembly of the United Nations, African Investor Magazine teamed up with Reuters to hosts its annual African investment summit. The major theme for the event was to promote African integration and to attract investment to Africa in the area of infrastructure and energy. While China’s economy has slowed considerably in the last quarter, delegates to the African Investor summit were not concerned. Most of the delegates were fully aware that Africa is its own largest trading partner, outstripping China and any other international trading partner. Accordingly, removing barriers to regional investment, trade, and integration is the most effective way for Africa make-up for the loss of investment from China and from other parts of the world. Africa has begun to look inward for much of its development needs, and to harmonize strategies throughout the region.

Ai2015The presidents of Uganda, Malawi, and Liberia, as well as the Prime Minister of Ethiopia, Vice President of South Sudan, and the Foreign Minister of the Democratic Republic of the Congo were all in attendance on the first day. All made their case for the investors present to come to their countries while their staffers passed out investment manuals and fielded inquiries from the private sector investors that were present. Ambassadors from several other countries were also present touting the investment potential of their respective countries. Institutional investors from all over the world, entrepreneurs, and investment advisors, CEO’s of some of the largest African banks, and regulators and officials were all in attendance. Investors representing billions in assets under-management were keen on identifying bankable projects and developing relationships in the countries that they would pursue investments in the coming year. Noticeably absent from the summit was officials from the Nigerian government. The Nigerian president is yet to arrive in New York and no substantial official attended the major development meetings on Africa scheduled for the day.

International investors have begun to develop an appetite for African public-private initiatives and long-term infrastructure investment projects. In order to attract international capital, governments at all levels will need the capacity of project-develop and design internationally respected bankable projects. Project-development capacity is the key hindrance preventing global investment from reaching African projects. Once governments develop bankable project plans, there is more than enough global capital to fund them. The summit was very useful in aiding public and private sector decision-makers to enhance the project-development capacity. The major take-away decision-makers who ignore the importance of project development will miss-out on the wave of global investors eagerly looking for African projects to invest in.

Kuranga and Associates Limited is an investment management advisory firm and an asset manager with a principle practice area of Africa. To learn more about Kuranga and Associates go to www.kaglobal.net. © Copyright 2015 David Kuranga. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

Dr.Kuranga

David O. Kuranga; Ph.D.
Managing Director
Kuranga & Associates Limited
Phone: 212.363.0936
david.kuranga@kaglobal.net
https://kurangaandassociates.wordpress.com
http://us.macmillan.com/thepowerofinterdependence/DavidOladipupoKuranga

After De-listing: Nigeria’s Way Forward

9 Sep

David O. Kuranga, Ph.D.

The author is the Managing Director and Principal of Kuranga and Associates, a full-service investment, political and economic risk consultancy, and asset management firm that specializes in Africa. He is also the author of The Power of Interdependence with Palgrave Macmillan Press.

As was previously announced, JP Morgan has followed through on its threat to remove Nigeria from its emerging market bond index. While much of Nigeria’s borrowing is domestic, the move will undoubtedly but pressure on the Naira and will result in more capital flight from Nigeria in the face of investor uncertainty. While Nigerian President Buhari is yet to put forth an economic team, the CBN has had full sway of handling the issue of liquidity and maintaining the benchmark value for the Naira. While the CBN has been successful, they alone cannot address the fiscal problems that Nigeria faces. Because President Buhari has chosen to ignore this for so long the problem has only become worse. As the 2016 budget negotiations come to fruition he has a long list of problems and no money to resolve them.

Despite this, all is not lost, and Nigeria has the capacity and the ability to pull out of this current predicament if its priorities are put in order for the first time ever. FIRST, since JP Morgan has decided to remove Nigeria from its emerging market bond index, the Nigerian Sovereign Wealth Fund should remove JP Morgan as its custodian of Nigeria’s money. The CBN has raised Nigeria’s reserves  through its actions so the decision for JP Morgan to remove Nigeria at this time is still a bit premature given that the government is yet to weigh in on what it plans to do to improve Nigeria’s revenue profile and offset debts on its balance sheet. The newly elected government did have 100 days, and President Buhari did wrongly choose to waste time and ignore the urgent need to put forth a new economic policy during this period, but the decision could have still been held off till the end of the year. The company does not need to be rewarded with anymore Nigerian business and should never have been selected as the custodian for the Nigerian Sovereign Wealth Fund in the first place.

SECOND, Nigeria needs to raise revenue immediately, and the best way to do this is to raise taxes on Nigeria’s rich who pay practically nothing in taxes despite the fax that the nations economy is now in a free fall. Nigeria’s rich should be pouring billions of dollars into the nation’s coffers every year and there are a serious of measures that Nigeria is yet to do to change this dynamic. In addition to Nigeria’s rich, the telecommunications industry, the telecom tower operators, large commercial farmers, government contractors, all should face a wave of taxes and fees to operate in Nigeria alongside regulations on what they can charge consumers. Nigeria’s market is gem for telecom companies and they are not going anywhere. Yet they rake in profits and do not pay what they would pay to operate if they were based in any other country, all-the-while their services are sub-par and rates are sky-high when compared even to other African countries. In addition government contractors like Julius Berger have also been ripping-off Nigeria for decades, often with sub-par outcomes at premium prices. They along with other long-standing government contractors should be required to pay higher-taxes to the country that has made them rich and successful. Large commercial farmers in Nigeria have also flown under the radar despite their massive wealth. A series of fees and taxes should also target them as well. Needless to say there is a lot of money that the Nigerian government is leaving on the table. Now that government is recovering from its lazy drunken hangover from binging on oil, they can put these measures into action. It is alarming that this was not part of President Buhari’s campaign and neither he nor his party have come forward to suggest any of this. Had this been done by now, or at least in the process of being done, JP Morgan would likely have held off on its decision.

THIRD, Nigeria’s economic diversification beyond oil must rightfully be led by Nigeria’s financial service industry. The capital flight that Nigeria is now seeing, and the lack of investment in mining, manufacturing, SMEs, agriculture, and infrastructure will only be resolved with domestic and international capital investment. There are not enough Nigerian-based and run financial service providers on the ground to do the job. It is a shame that the Lagos Chamber of Commerce awarded a foreign company that is not a registered Nigerian fund as the top private equity investment group. For the most part, the Ministry of Trade along with the Nigerian Export Promotion Council (NEPC), have completely ignored this dynamic. NEPC and the Ministry of Trade did not even recognize that financial services is a tangible export product. This is one of the primary ways developing countries in a modern global economy direct global capital and attract investment. The vast majority of global investors interested in investing capital in Africa are not big enough to charter a jet and meet the Nigerian president like the CEO of Blackstone did recently. They have small amounts of capital, ($10,000 USD – $500,000 USD) that they seek to invest. The only way these kinds of investors can access Nigeria is with the assistance of a financial service provider. Since Nigeria has so few operating, global capital flows to where they have assistance. In Africa, Mauritius and South Africa are the leading destinations, as they are the leading providers of financial services. Given that Nigeria is now Africa’s largest economy, it should be one of President Buhari’s top priorities to reverse this condition before the end of his term. Nigerian’s in diaspora send capital to Nigeria at a higher rate than any other African country. So naturally if for no other reason, Nigerains in diaspora need more vehicles to contribute to the development of Nigeria, its not that complex.

While we wait on President Buhari’s economic policies, these three key steps need to be put in motion immediately. Over 100 days have gone by, and what the world is clearly telling the president, the APC, is that trying to fight corruption and chasing down stolen funds is not a substitute for an economic agenda. Nigerians need to realize that the corruption battles are not going to yield fruit fast enough to make an economic impact given the situation that Nigeria finds itself in today. Sound economic policy that raises money outside of selling crude oil and attracts investment capital from a wider set of international capital investors particularly the smaller ones that form the overwhelming majority of global capital. If the president and his staff do not understand these concepts, then they need to appoint and delegate to an economic team that does.

Kuranga and Associates Limited is an investment management advisory firm and an asset manager with a principle practice area of Africa. To learn more about Kuranga and Associates go to www.kaglobal.net. © Copyright 2015 David Kuranga. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

Dr.Kuranga

David O. Kuranga; Ph.D.
Managing Director
Kuranga & Associates Limited
Phone: 212.363.0936
david.kuranga@kaglobal.net
https://kurangaandassociates.wordpress.com
http://us.macmillan.com/thepowerofinterdependence/DavidOladipupoKuranga