Maiden Nairobi – New york KQ Flight a win for both Kenya and the US, says Robert Godec


There is excitement over the historic direct flight from Kenya to US, what is the economic significance of this milestone?

The flight marks a historic moment in US — Kenya relations. The new flight will strengthen our people-to-people ties by making it easier for Kenyans and Americans to fly between our countries. Tourists, business people, students, academics, officials, and all our citizens will be able to travel more quickly and efficiently.

Economically, we believe the direct flight will open new doors for trade and investment, and in fact we already have a trade delegation from the US coming to Kenya on the flight the week after next.

Today, our trade in goods is about Sh100 billion annually. But there are possibilities to do a lot more, particularly under the African Growth and Opportunity Act (Agoa).

This was a decade-long wait for Kenya. What accelerated the approval of Category 1 and why did it take so long?

The highest priority has always been to ensure the safety and security of travellers. Our two governments, working closely over several years with the Kenya Airports Authority, Kenya Civil Aviation Authority, and Kenya Airways, greatly strengthened safety and security at Jomo Kenyatta International Airport (JKIA).

As a result of that hard work, in early 2017, the airport and airline achieved US Federal Aviation Administration (FAA) Category 1 safety standards. Later in 2017, the US Department of Transportation authorised economic authority for Kenya Airways to start the flights, and in August, the US Department of Homeland Security’s Transportation Security Administration determined that JKIA meets US security standards.

With the direct flights, what do you foresee for this emerging tourist market and what opportunities exist that Kenyans can tap in the American market?

In recent years, more than 100,000 Americans have visited Kenya annually, more than from any other country. With the direct flights, travel time will be as short as 14 hours. Other flight options, which include a stop in Europe or the Middle East, can take twice the time.

So, this flight will offer US tourists an opportunity to maximise their time seeing Kenya’s diverse culture, amazing wildlife and stunning scenery.

Agoa offers a duty-free market to the US. What efforts has US put in place to make the country the export destination for Kenyan goods?

The US is helping Kenya’s entrepreneurs become more competitive in many economic areas, from agriculture to the Silicon Savannah. Our USAID Trade Hub directly supports efforts by Kenyan businesses to improve their products and better market their exports. And, the Trade Hub is working to reduce barriers to regional trade.

Besides being a diplomatic triumph, what should Kenyans look forward to?

US — Kenya relations are on a roll. At the August 27 meeting at the White House, President Trump and President Kenyatta elevated our relationship to a strategic partnership and established a strategic dialogue with working groups on security and on trade and investment.

This is happening under your tenure, does it make you feel good?

When I arrived in 2012, many Kenyans told me how much direct flights between our countries would strengthen bilateral relations. I am proud of the new direct flights and of all that the Embassy team has accomplished over the last six years..

Source – Daily Nation

Why Africa must go slow on Chinese loans

The International Monetary Fund (IMF) now says that Kenya faces a moderate risk of debt distress. The fund has just raised its assessment of the chance of Kenya’s external debt distress to moderate from low, a situation it attributes to increasing refinancing risks and narrower safety margins.

Whichever way you look at it, this a significant pronouncement. First, the IMF has blown up the balloon the National Treasury has been flying by persisting in the belief that our public debt situation is still sustainable. We are hearing from a credible third party- the IMF- that things are headed in the wrong direction in so far as the country’s external debt position is concerned.

You can argue that there is nothing new in what the IMF has said because we have known all along that our debts have mounted to worrying levels. But the pronouncement that the Fund has made about our currency is even more significant. The fund has found that the shilling is over-valued by 17.5 per cent.

The fund now says that Kenya’s currency is ‘managed’- not market-determined- and has been artificially kept where it is by regular interventions by the Central Bank of Kenya(CBK). Kenya’s forex regime is being reclassified by the IMF from a floating regime to a managed regime. When markets, investors and trading partners perceive your currency to be artificially propped, the situation introduces uncertainty in our foreign exchange regime.

Still, me thinks that the recent massive influx of diaspora remittances, mainly driven by immigration policies of the Trump administration have also been a major factor in artificially propping our currency.

If our currency is over-valued by 17.5 per cent as the IMF says, it means what the signal the fund is sending is that it believes that the foreign currency component of our debt is much higher.

The fund believes that the shilling’s value of revenues that National Treasury secretary Henry Rotich needs to pay his dollar loans will also be higher. The implication of what the fund is saying is that we could sooner or later find ourselves tipping into an even worse debt distress situation. What are the broader implications in terms of direction for macroeconomic policy? We urgently need to control our appetite for commercial external loans.

It will require a ruthless pruning of projects that expose us more to commercial debts. And, resorting to the Public Private Partnership (PPP) model will not be an easy alternative as the administration of President Uhuru Kenyatta.

The truth of the matter is that PPP projects directly add contingent liabilities on the public’s balance sheet. We must now rethink the PPP route if we are to avoid tipping into a worse external debt situation.

We must go slow on Chinese loans. If you think I am exaggerating the China factor in our growing indebtedness, take a look at what the government disclosed in the prospectus that it put out for the recent Eurobond, It disclosed that during 2017, various ministries such as the Ministry of Energy and Kenya Power entered into a series of loans with Exim Bank China amounting to a total of $1.2 billion and 3.4 billion Chinese Yuan.”

This means that, in just one year, ministries signed shady commercial contracts worth billions of dollars.

If you are in doubt that we are gradually sinking into the Chinese debt trap, just grab a copy of the of the recent documents that Mr Rotich tabled in Parliament.

We have taken too many Chinese loans. While the huge loans to finance the standard gauge railway are what hits the headlines, we have also borrowed heavily for projects of little economic impact — such as loans to procure equipment for the National Youth Service (NYS) and to purchase drilling materials — from China.

Going through the external debt register, you will be surprised at the sheer number and size of loans we have taken for all manner of projects — such as for buying MRI equipment, procuring of power materials, rehabilitation of technical institutes, modernisation of Kenya Power distribution systems and building Kenyatta University.

It is a reflection of the power and influence that Chinese companies wield. Indeed, Chinese contractors are more adept at putting such deals together and in having financing approved by the Treasury.

SOURCE – Business Daily

Coke to launch sugar-free fanta in Kenya market


Soft drinks Company Coca-Cola Beverages Africa (CCBA) is expanding its sugar free range of beverages targeting increasingly health-conscious consumers.

The company says it will next month introduce Fanta Zero adding to the existing Sprite Zero, Stoney Zero and Coke Zero being sold in Kenya.

“We will be bringing Fanta Zero in two weeks completing the range of Zero sugar soft drinks already available in Kenya,” said CCBA managing director Daryl Wilson.

Coca-Cola has been aggressively diversifying its soft drinks in Kenya including the introduction of its milk-juice blend under the Minute

The water range has also been diversified to include flavoured sparkling water, which according to Mr Wilson, will be expanded in the near future to include flavoured still water.

In July, the soda maker introduced a lemon-flavoured carbonated drink dubbed Schweppes +C geared at reaching the adult consumer not served by its existing soda range.

The company has been forced to look for alternatives for its core business mode to cater for depressed global sales for soda as more and more consumers push for healthier drinks given the changing lifestyles.

Coca-Cola is banking on innovation and diversification of its soft drinks products in the country to grow sales.

In 2016 and 2017, the company invested Sh9.3 billion in its production and packaging lines to cater for the new brands alongside its mainstay soda, juice and water products.

According to the firm, its investments in Kenya have included Sh8.5 billion ($85 million) in infrastructure and Sh4.4 billion ($44 million) in distribution over the past five years.

Maid range.

The milk infused juice was part of the line-up from the new Sh2.7 billion production line that allows for hot fill drinks, hence removing the need for preservatives.

“We are evolving our recipes to offer drinks that provide benefits like nutrition and hydration; and reduction of sugar by reformulating the sugar content in some of our products,” said Coca-Cola.

Source  – Daily Nation


Quest: KQ can be the pride of Africa


Ironically, one of the reasons I came to Nairobi in the first place is the way I will be leaving it: Kenya Airways and its inaugural flight to New York this weekend.

Today, I wanted to pay my first visit to the national airline’s headquarters and get a true sense of what makes this slowly rejuvenating legacy carrier tick.

The cargo hangars at KQ headquarters in Nairobi illustrate the complex challenges any airline chief executive faces.

We got a look inside the perishable goods hangar and an insight into the sheer scale of Kenya’s flower export industry.

You may buy your tulips in Amsterdam, but don’t be surprised if they passed through this building at some point.


Gaining access to the hangar involved three separate security checks. This was reassuring, but also frustrating.

We were searched on our entrance to the car park, walked across to the other side, and then searched again, by the same security guard.

Quite how we were supposed to have picked up anything untoward on our way is anyone’s guess, but it showed how security processes can load inefficiency into an operation.

Regulations are regulations, and such things make life hard for airline CEOs. Inside the hangar is perhaps the ultimate expression of this: A separate pen has been constructed solely for cargo bound for New York. America’s TSA has very specific requirements, and Kenya Airways must now abide by them.

From the cargo hangars we moved on to Kenya Airways’ training facility and maintenance hangar.


Under new CEO Sebastian Mikosz, the airline has been modernising. It has a new cost-efficient fleet and a lower cost of operations, essential to the airline’s future.

We also met a living symbol of the airline’ modern outlook, Captain Irene Mutungi, the first African female airline captain.

She pilots Kenya Airways Boeing 787 Dreamliner and will be among those tasked with the Nairobi-New York route.

At a time when South African Airways is about to get another dollop of government money, it is refreshing to see an African carrier with a mandate to make a profit. Aviation in Africa is littered with the wreckage of airlines born in grandiosity or only flying because of government largesse.

KQ is undergoing root and branch reforms, to make the airline economically fit to fly in the global market.

If government stays out of the way and the reforms take place, then KQ will truly be the Pride of Africa.​​

Source  – Daily Nation


Is China’s tech industry ready to take on Silicon Valley?

Taku Dzimwasha

IAugust 2018, Alibaba’s founder Jack Ma, who founded one of the biggest e-commerce platforms in the world, launched a $10m prize for African information and communication technology (ICT) innovators in Africa. Ma received a rapturous reception in the auditorium at the University of the Witwatersrand in Johannesburg, South Africa. The excitement in the tech community had not been this feverish since Facebook supremo Mark Zuckerberg received a similar welcome during his tour of Lagos, Nigeria. While Zuckerberg’s visit had aspiring tech entrepreneurs swooning, it could be argued that African technologists felt a closer affinity to Ma because of the parallels between Africa and China. China’s richest man – who announced his retirement in September – spoke about the challenges, which many African entrepreneurs could relate to, when he set up Alibaba in 1999, such as slow broadband and unnecessary bureaucratic hurdles.

Since the late nineties, however, China’s tech sector has rapidly transformed itself to a point where some commentators are claiming it could challenge the global leader in the field, Silicon Valley, according to Kai-Fu Lee, CEO of venture capital firm Sinovation Ventures. “The US has always been the singular tech power in the internet, mobile and AI software space, but out of nowhere an equal partner has emerged in China, so the world order is different from that perspective,” says Lee during a webinar on technology.

China’s emergence as a tech superpower has been astonishing. The world’s second-largest economy is home to nine of the 20 biggest tech companies, with the market capitalisations of Alibaba and Tencent doubling in 2017 and now comparable with those of Facebook and Alphabet, Google’s parent company. One of the most significant drivers of China’s tech boom is its large population. At 55.6%, smartphone penetration is below the global average of 66%, but at 775m it already exceeds the total population of Europe.   

Even in the area of hardware, Chinese tech firms are challenging the hegemony of traditional technology giants, especially Apple and Samsung. While the latter is still the market leader, China’s Huawei surpassed Apple to become the second biggest smartphone seller this year.


Many of China’s tech companies started out as copycats of US companies, but have now blossomed into juggernauts. Mobile phone companies such as Huawei and Xiaomi have succeeded in new markets, including many African countries. Chinese firms have produced cheaper smartphones with similar functionality to more expensive counterparts in mature markets. China’s Transsion Holdings is Africa’s biggest seller of smartphones, with sales of 50m sets on the continent in the first six months of 2018 alone.

But the key to the industry’s growth was the fact that many US companies were initially locked out of China, according to Steve Tsang, director of the SOAS China Institute. “The Chinese tech firms have made the most of the domestic market size,” Tsang says. “The blocking of foreign tech companies was vital in allowing the Chinese tech companies to build up capacity at home and then use this platform to improve products. Today they produce a full range of products available globally both at the low- and high-end.”

The boom has led to some commentators predicting that China could reach tech parity with the US in terms of innovation in 10-15 years. Such a statement would have been laughable in Silicon Valley 20 years ago. “Many people in Silicon Valley believed that China’s tech industry would never be innovative,” Lee says. “But that proved to be completely wrong because as China’s market exploded, capital began to flow in and a virtuous cycle was created where smart venture capitalists would help develop entrepreneurs who would in turn create great companies and products which drew in more consumers.”

“The industry in China is really tough and it’s almost like a colosseum where only one winner emerges. Comparatively, in the US, competition is fairly gentlemanly where the firms tend to avoid stepping on each other’s toes,” Lee adds. Despite its rapid rise, China’s industry is still some way off challenging Silicon Valley in terms of investment budgets and the number of mid-sized firms worth $50bn to $400bn. There are also doubts about China’s ability to come up with the next big product, according to Tsang.

“China is catching up very fast in terms of some of the existing products, so you are seeing some impressive high-end products being produced, but there remain questions about their ability to develop the next product that has a revolutionary impact on our lives like the iPhone,” he says.

Rise of AI

One area in which China could develop the next big thing is in artificial intelligence (AI). This year, the Chinese government decreed that the country will lead globally in artificial intelligence by 2030. AI startups in the country have received more than $4.8bn in funding in the last three years, with Beijing-based SenseTime securing $600m funding in April and facial recognition company Megvii receiving $360m last year. The Chinese security services and military have also taken a keen interest in AI, especially in the areas of autonomous biometric identification and weaponry. The Communist Party of China has tasked some of the country’s biggest tech firms – including Baidu, Alibaba and Tencent – with developing the AI industry, and it has also promised financial backing, including constructing a $2.1bn AI industrial park in Beijing.

China may very well succeed in achieving this goal because it can implement policies which would not be possible in Western countries, according to Tsang. “The Chinese are doing very well because they have a different environment in terms of research ethics,” he says. “They have less issues related to privacy and personal rights so they can use facial recognition, for example, as part of their technological development. This would be inconceivable for Western companies because of legislative constraints.”

The effects of China’s AI drive are already being felt in Africa. The Zimbabwean government, which has had a poor human rights record, has already partnered with the Chinese startup CloudWalk Technology to implement a country-wide facial recognition programme, which will be used by security and police services. The agreement is part of China’s Belt and Road initiative. While many Africans are yet to grapple with the effects AI might have on them, it seems that African countries will continue to adopt China’s technological advancements for better or worse.

Taku Dzimwasha

Creating an innovation platform for Africa

Tracey Webster

Innovation from within is the most important prerequisite to drive structural change and tackle those challenges. For this to take place, everyone must shift their mindset and apply an innovative approach to addressing challenges. Taking advantage of a youthful workforce requires investment in education and skills development to future-proof our workforce. The innovators are plentiful and their challenges real.

The Africa Innovation Summit (AIS) is a robust and dynamic platform for multi-stakeholder dialogue and a catalyst for “Made in Africa” innovations that are already addressing the continent’s challenges but need to scale. The AIS brings together people with the power to act, from all parts of the continent, including heads of states, ministers, innovators, investors, policymakers, academics and science and technology experts, to practically navigate these challenges.

The second edition of the AIS, which took place in Kigali in June, spotlighted 50 top African innovators who are solving Africa’s challenges. Take, for example, Clement Mokoenene, a civil engineer who is innovating in the energy sector. While most bemoan the increase in urban traffic, Clement sees the opportunity to generate electricity and create jobs. His energy solution applies a uniquely designed overlay to a road’s surface, harvesting the traffic pressure by driving a turbine to generate electricity. Assembly and installation can be done locally, increasing employment and greater access to electricity.

Temie Giwa-Tubosun, the founder of LifeBank, says, “many people die because essential medical supplies could not be found on time and in the right condition”. LifeBank uses data, smart logistics and a combination of low technology (feature phones and motorcycles) and high technology (AI and blockchain) to deliver essential medical products, saving lives in hospitals. Its blockchain-powered SmartBag records and preserves the integrity of information about the processes involved in blood supply for transfusions.

These young innovators need to be seen and heard, and this is where the AIS stands out. Placing the innovators centre stage allows them to point out where policies are failing, why financing is not accessible and the need to enable the consumer as much as the innovator. If the consumer cannot access the product designed for that market, the intended benefits of the innovation cannot be actioned.

The AIS puts the spotlight on these change agents who are leading the continent forward. It forces leadership at every level to listen and realise that without the innovators at the table our legislation, regulations, policies and risk profiling lack relevance and will continue to hinder the progress of Africa. The development of the AIS marketplace platform will not only match demand and supply, but also serve as a centralised information gathering and dissemination platform for all stakeholders, thus informing policy briefings, and in turn future-proofing our continent.

Source –  African Business Magazine

What is behind Africa’s crypto-phobia?

Cryptocurrencies, also known as virtual currencies, are a digital medium of exchange, which is unlike our normal fiat currency that exists in the form of physical bank notes or coins, or commodity money, backed by gold or other precious stones. The blockchain digital technology is as vital to cryptocurrencies as the central nervous system is to humans. Blockchain uses cryptography to create (mine) and store units, secure transactions, transfer tokens and effect payments. These processes metamorphose a crypto from being a mere digital token into a digitised asset with an economic value. That is to say, users can earn it, store it, trade it, transfer it, and sell it.

African central banks by and large do not recognise cryptocurrencies as money, mediums of exchange or legal tender. But this is not only unique to Africa as similar patterns are being experienced in other parts of the world, especially developing countries. In Europe and the US, central banks have generally cautioned, but not banned, the use of or trading in cryptocurrencies. Although trading in cryptocurrencies in Africa has not spread widely to people at the bottom of the pyramid, their use is spiralling upward like a whirlwind in tandem with ICT technological advancements, high mobile penetration, growth in literacy, and financial inclusion and consumer sophistication.

African central banks link cryptocurrencies to price volatility, fraud, money laundering, tax evasion, exchange control circumventions, terrorism financing and other criminal activities fuelling illicit financial transactions. While some of these concerns are genuine, others tend to be rhetorical and hyperbolic, as traditional financial systems are also fraught with similar risks.

Gripped by crypto-phobia, African central banks have convulsed, issuing a plethora of warnings against the use of cryptocurrencies while others have gone to extremes, outright banning trading in them – an easier way out of what they perceive as the ‘crypto-quagmire’. According to a 31 March 2018 public notice issued by Adikwu Igoche, Manager, Research Development at Nigeria Deposit Insurance Corporation (NDIC), cryptocurrencies are not recognised as currency in Nigeria as they do not belong to the category of currencies or coins issued by the Central Bank of Nigeria (CBN).

Similar notices were issued by the Kenyan Central Bank (KCB) as far back as December, 2015. Other African countries such as Morocco (2017) and Algeria (2018) have promulgated laws banning the usage and ownership of virtual currencies. The Reserve Bank of Zimbabwe (RBZ) on 11 May 2018 issued a notice warning the public against the use of cryptocurrencies and directing all banking institutions in the country not to provide banking services to facilitate any person or entity in dealing with or setting up cryptocurrencies.

RBZ announced in the same notice that Bitfinance (trading as Golix) and Styx24, leading local cryptocurrency exchanges, were not licensed by it and any person buying, selling or otherwise transacting in cryptocurrencies, did so at their own risk and will not have recourse to the central bank. On 15 May 2018, Golix was directed by RBZ to cease all cryptocurrency exchange operations in Zimbabwe. Golix was in the process of rolling out its initial coin offering (ICO) which sought to raise $32m through a token sale. Golix was stopped right in its tracks by the RBZ, but didn’t take this threat lying down.

Golix filed an urgent chamber application with the High Court in Zimbabwe challenging the legality of RBZ’s ban on the basis that the central bank acted illegally, irrationally and unconstitutionally and outside the ambits of administrative law in closing its virtual currency exchange. The High Court, on 24 May 2018 issued a default judgement against RBZ and ruled, inter alia, that “The ban issued by the respondents [RBZ] through letter dated May 15, 2018 against the applicant [Golix], directing it to cease its operations, shut down its cryptocurrencies exchange business and ordering the closure of its bank accounts with its bankers, be and is hereby suspended…”

It seems central bank challenges in dealing with virtual currencies are not only restricted to Africa. India seems to be faced with similar challenges on how to deal with virtual currencies, just as Africa is. The Reserve Bank of India (RBI) on 5 April 2018 issued an official statement banning financial institutions and consumers from the use of virtual currencies. The RBI notice read as follows: “Reserve Bank of India has repeatedly cautioned users, holders and traders of virtual currencies, including Bitcoins, regarding various risks associated in dealing with such virtual currencies. In view of the associated risks, it has been decided that, with immediate effect, entities regulated by RBI shall not deal or provide services to any individual or business entities dealing with or settling virtual currencies… ”

The Internet and Mobile Association of India (IAMAI) filed a petition with the Indian Supreme Court challenging the RBI ban on virtual currencies and seeking court relief to set it aside. The court provisionally upheld the RBI ban on virtual currencies in May 2018 until a date was set for the hearing of the petition. The court heard the petition on 20 July 2018 but could only listen to limited arguments, postponing the matter to 11 September 2018 for a full hearing.

The legal position

The legal challenge for African central banks is that their cases may not hold water in courts as there is limited legal precedence and in many countries there are no laws that address issues of virtual currencies. Legal cases, triggered by central bank prohibitions involving virtual currencies, have only now started to appear before the courts. The banning of trading in cryptocurrencies from mainstream financial systems does not seem to be practical and effective. Such prohibitions force consumers to use black market trading avenues or simply resort to peer-to-peer (P2P) digital trading platforms.

The South African Reserve Bank (SARB) has taken a very pragmatic approach. While the SARB does not officially recognise cryptocurrencies as ‘money’ but as ‘cyber-tokens’, it is considered as one of the pioneers in Africa over the use of cryptocurrencies. SARB has preferred to adopt a more cautious but pragmatic approach to ensure that the use of cryptocurrencies complies with relevant financial surveillance and exchange-control regulations. Already a sizeable number of merchants in South Africa have embraced cryptocurrencies and accept Bitcoin for payments. François Groepe, Deputy Governor of SARB, was quoted by the online Cryptonews on 25 May as saying the central bank has set up a special unit to review the possibility of putting in place crypto-specific policies and regulations.

More stable alternative

Africans are becoming attracted to cryptocurrencies not only as speculative investments, but as alternative and cheaper  payment and settlement methods, conduits for capital investments and options for savings and storing value as most African fiat currencies are very volatile and unstable and do not hold value against major currencies such as the US dollar. Technological innovations underlying cryptocurrencies such as blockchain should be embraced by central banks as they have the potential to improve efficiency in financial services.

Instead of throwing tantrums at technological innovations, African central banks should be pragmatic and set up specialised units dedicated to researching cryptocurrencies and emerging blockchain and other digital and artificial intelligence technologies to enable them to come up with informed and guided practical policy and regulatory interventions that work for Africa.

Source –  African Business Magazine

Closing Africa’s MSME finance gap

by Tom Collins

Africa’s micro, small and medium enterprises (MSMEs) have traditionally found it hard to acquire bank credit, but the fintech revolution is now helping to make lending to them a viable business. Tom Collins reports.

The International Finance Corporation (IFC) recently estimated that Africa’s finance gap for small and medium enterprises (SMEs) stands at $331bn. Micro, small and medium enterprises (MSMEs) form the backbone of most African economies and investment in this sector will significantly enhance job creation and wealth development. The informal sector contributes 38% of sub-Saharan Africa GDP yet 51% of the continent’s 44m formal MSMEs lack the finance necessary to grow. The true scale of the shortfall is almost certainly even greater given the lack of data.

Governments across the continent have identified poor liquidity as a bottleneck in the sector and private enterprise is beginning to plug the gap through innovative financial services. Digital solutions and tech-enabled finance are gaining traction and the MSME sector is no different. Speaking at the recent IFC-backed SME Finance Forum in Kenya, the IFC’s Karin Finkelston said: “We are seeing significant improvements in access to finance in Africa, creating opportunities for small and medium enterprises that create jobs and reduce poverty. We should celebrate the gains while recognising we have much more to do. Digital finance is the future so we must expand and tailor products and services to meet the growing needs of a dynamic continent.”

Finance constraints

Banks are beginning to adopt proactive SME strategies but traditional constraints have stifled the sector. Banks require large amounts of collateral along with stringent credit checks in order to lend and the SME sector, particularly micro enterprise, struggles to fit this bill. A study by the African Centre for Economic Transformation (ACET) found that while 95% of SMEs have bank accounts in Zambia, only 16% had loans or lines of credit.

Banks, therefore, regularly service the SME sector but have not typically financed it. The big multilateral financial institutions (MFIs) and development banks have identified the sector as a key area of growth and begun concessionary lending through commercial banks, but uptake has been slow. Many of the continent’s banks are still figuring out exactly how to lend to the sector.

Micro enterprises, generally defined as employing fewer than 10 people, are even further removed from formal financial structures. Micro enterprises require low amounts of capital and come with very little financial backing or history and therefore fall almost completely outside most banks’ lending habits. In this context the majority of micro enterprises look towards family or friends for working capital.

Fintech plugs the gap

Some promising solutions can be seen in the fintech revolution. Fintech is booming on the continent with African digital payment service provider Cellulant breaking the glass ceiling for the largest amount raised in a single round at $47.5m. Indeed, private investment into financial technology is flourishing as competitive returns combine with quantifiable impact. While fintech can be used to describe a varying range of businesses and ventures, one application is the use of technology to lend in the high risk and more remote MSME space.

4G Capital, a fintech lender, does exactly this and has been lending to the micro and small business space since setting up in Kenya in 2013. Kenya’s MSME finance gap is $19bn, making it the largest in East Africa. Wayne Hennessy-Barrett, 4G Capital’s founder and CEO, sees great opportunity in the market and provides innovative financial services while generating sustainable profit. “We provide unsecured working capital for these business on terms that work for them – almost immediately and without collateral requirements, but ‘right-sized’ for their individual business needs,” he says.

Unsecured capital may come as a shock to some but the company points to a 94% repayment rate. The key, argues Hennessy-Barrett, is being able to offer a complete package – one that blends rigorous Know Your Customer (KYC) checks with customer business training, clear lines of regular communication and prudent incremental disbursements. “Securitisation is not really the key to positive repayment behaviour,” he says. “The name of the game is product alignment – building a financial service that meets the customers’ needs.”

4G Capital lends anything between $20 and $500 to MSMEs through mobile technology. Its core product is UPIA, which stands for “Unsecured Private Immediate Affordable”. The combination of micro-loans and no collateral requirement means the company has had a strong impact on the MSME ecosystems in which it operates. Micro and small businesses are able to quickly access working capital which the company ensures, through its training, is reinvested into growing the business as opposed to reservicing other debt or paying bills.

“Ninety-six to ninety-seven percent of our clients use the capital for business purposes,” says Hennessy-Barrett. “They are not using it to refinance other loans, to pay other debt or to meet their living costs. They use our credit to increase their take home wealth and provide a better future for their families.”

The firm claims that it provides a sustainable model both for the client and the lender, which, as a result, can quantifiably invigorate local markets by increasing liquidity and purchasing power. The average customer is able to grow their business by 82% within one year of accessing the company’s credit services. The company will lend within excess of $40m over the next year, is active in 70 markets across Kenya and recently began operations in Uganda. Core to Hennessy-Barrett’s vision is the role of inclusive fintech in helping informal businesses transition to the formal economy where they can both contribute to national development plans and access services currently out of reach.

Fintech companies like 4G Capital are able to lend where banks cannot due to their ability to meet customers’ needs through innovative approaches and solutions. Hennessy-Barrett argues that the potential in Africa for firms like his is “almost limitless” but cautions businesses must work with regulators to create the right conditions for fintechs to grow. Key to this is the encouragement of a vibrant and useable mobile money ecosystem such as that enjoyed in Kenya. This, together with clear frameworks for customer protection, will allow companies to provide liquidity in markets not serviced by traditional lenders, and better support the micro and small businesses which are the backbone of many African economies.

Source – Africa Business Magazine

VIDEO: Trade, migration bring life to Ethiopia-Eritrea border

For twenty years, only soldiers, refugees or rebels had ventured to the border between the enemy brothers of the Horn of Africa, Ethiopia and Eritrea. But with the normalization of their relations, the former desert no man’s land is now quivering with activity.

Trucks loaded with bricks and wood, fruit and vegetable carts and local buses visiting their families are now crossing the border under the benevolent eye of soldiers who until a few months ago looked at each other as dogs from their trenches dug in the rock.

“We have everything we didn’t have before, from the smallest to the largest,” says Abraham Abadi, a merchant in the Eritrean city of Senafé, whose shop is full of cookies, drinks and other goods from Ethiopia.

We have everything we didn’t have before, from the smallest to the largest

But the dramatic reopening of the border this summer has also brought its share of problems, with an influx of Eritrean refugees in Ethiopia and a chaotic exchange market between the currencies of two countries with very unbalanced economic development.

Once a province of Ethiopia, Eritrea gained its independence in 1993 after several decades of bloody war.

The border demarcation then caused a two-year conflict in 1998 that left tens of thousands dead, before ending with more than 15 years of Cold War, with Ethiopia refusing to comply with UN recommendations on the demarcation of the border.

Until the arrival in Addis Ababa of the reformer Abiy Ahmed, who decided last June to normalize relations between the two neighbours.

Flights between Addis Ababa and Asmara resumed in July, embassies reopened and in September, Ethiopian Prime Minister Abiy Ahmed and Eritrean President Issaias Afeworki reopened the border crossing at Zalambessa, a historic crossing point between the two countries.

This reopening upset the small town, which had been drowsy for twenty years of conflict. Fruit and vegetable stalls, bazaars and small restaurants follow one another along the main street.

“Shidas are sold”, the very classic sandal from the Horn of Africa, a giant pair of which stands in a square in Asmara, the Eritrean capital, says Ruta Zerai, in her father’s shop in Zalambessa.

In Sénafé, a shopping centre about 20 kilometres north of the border, the market is alive again.

Twice a week, organized groups of Ethiopian traders cross the border – just cleared of minefields – to deliver everything they can, from phone cards – the Ethiopian network reaches Senafe – to the precious teff, the gluten-free cereal at the base of the injera, the typical cake from the Horn of Africa.

Some even decide to stay. “I live where I get a job. As long as I have a job, I will stay here,” explains Sanle Gebremariam, an Ethiopian money changer who works at the Sénénafé bus terminal.

And the exchange between the currencies of two countries, the Eritrean Nafka and the Ethiopian Birr, is a major problem for traders.

“We trade, but the exchange rate is too unstable, too variable, it’s illegal,” complains Taeme Lemlem, who runs a café in Zalambessa, echoing many other traders.

According to Getachew Teklemariam, a former adviser to the Ethiopian government, border trade, where customs and immigration controls are virtually non-existent, risks creating a “shadow currency war” between the two countries.

“The exchange rate is governed by speculative perceptions on both sides of the border, when it should be guided by a real business strategy,” says the Ethiopian consultant.

The opening up between the two countries raises hopes of development that clash with the reality of Eritrean underdevelopment, while the Ethiopian economy is recording some of the highest growth rates in Africa.

“I’m very surprised. I didn’t expect such a level of development,” says Simon Kifle, an Eritrean air force soldier who came to Zalambessa for the first time to do some shopping before returning to his country.


Banking In A Cashless Society Will Require African Solutions For African Problems

By Nnamdi Oranye

African economies are well positioned to benefit from rapidly accelerating technological change if they can harness the current open landscape for innovation.

East Africa is already a global leader in mobile payments, while mobile money accounts in sub-Saharan Africa are on an upward charge. Apart from being able to leapfrog the limitations and costs of physical infrastructure, the continent stands to benefit from having the youngest, tech-savvy workforce in the world in the next decade.

Banking In A Cashless Society

Africa’s working age population is expected to grow by 450 million people by 2035, according to the World Bank and the continent is projected to have the largest working population of 1.1 billion by 2034, notes the World Economic Forum on Africa. Recent GSMA data shows that mobile money accounts in sub-Saharan Africa are up 18.4% between 2016-17 to 33.8m registered accounts.

However, we cannot wait 12-15 years before adequate job creating initiatives and policies are unlocked. The answer lies in harnessing the power of the digital economy today to create African solutions for African problems. An important part of this will require promoting and partnering with African innovators to unlock sustainable growth.

We are already witnessing the significant potential of digital innovation in the remittance and mobile wallet space. Penetration of smart phones is expected to hit at least the 50% mark in 2020 from only 2% in 2010, according to the World Economic Forum, offering the continent a clean canvas for tech-based innovation. It is an opportunity we must not miss. These are exciting times and are forcing us to think differently to come up with true Pan African innovation and development.

Banking In A Cashless Society


MFS Africa is a good example of how carefully harnessed and supported technological innovation can have ripple effects through the continent. It now operates the largest digital payments network in Africa and connects over 170m mobile wallets through 100+ partners, including Airtel, Ecobank, MTN, Orange and Vodafone across 55 markets. It has about 15% of the African population connected to a platform.

M-Pesa, launched in Kenya in 2007, is an often-touted example of African technology making waves even outside its own borders. After capturing the local market for cash transfers it has spread to three continents and 10 countries

MicroEnsure, meanwhile continues on the path of developing pioneering insurance solutions for low-income people like micro-health, crop and mobile insurance. These are solutions directly aimed at emerging customers and it is little surprise the company continues new customers by cleverly partnering with telcos.

Banking In A Cashless Society is another major success story, testing and growing its health innovation offerings for seven years in East Africa. The company works with health systems to hone their communications with patients in lower-income but also in growing areas and it hopped the pond in the opposite direction from most smaller startups and landed one of its first American clients. Adventist Health White Memorial Hospital, a Los Angeles facility that works largely with lower-income Hispanics, was looking for ways to use health data to achieve better outcomes within its population.

These are examples of the role models that will inspire our next generation of innovators. We need more and tech-savvy banks need to continue supporting them as they grasp future opportunities.

Just consider that Findex data shows that sub-Saharan Africa is home to all eight economies where 20 percent or more of adults use only a mobile money account: Burkina Faso, Côte d’Ivoire, Gabon, Kenya, Senegal, Tanzania, Uganda, and Zimbabwe. Opportunities therefore abound to increase account ownership: up to 95 million unbanked adults in the region receive cash payments for agricultural products, and roughly 65 million save using semiformal methods.

Standard Bank, as Africa’s largest bank by assets, hopes to support even more start-up and tech initiatives across the continent to ensure these opportunities are not lost. We are therefore innovating ourselves at a rapid pace to harness the benefits of the digital age to drive financial services inclusion. Mobile payment solutions like Snapscan is now available at over 25,000 merchants and a vast user network across South Africa. We are setting a new standard in digital payments with the launch of Africa’s first prepaid virtual cards ecosystem, among many other digital innovations.

The future will be about solving genuine customer problems rather than putting a band aid on them. One area in urgent need of change, for instance, is remittances, where Africa is still one of the costliest places in the world to remit payments – fees as high as 10% to 20% are still endured. We need to harness technology to genuinely solve this problem.

Nnamdi Oranye
Nnamdi Oranye

Sometimes when we talk about banking in cashless society we look too far out – but we don’t have luxury of time. Knowing your customer (KYC) is about understanding what they need today based on their culture and context and then unlocking the already available data to provide the solution.

Technology, for instance, can solve the unbanked problem on the continent. However, this does not mean you can “plug and play” by taking something that works in one country and expecting it to work in another. Success will increasingly be centred on having a Pan African view of the problem, but local implementation.

The future is certainly bright for Africa as exponential innovation continues to drive change across the continent we call home, disrupts industries and replace legacy technology. It is now time to grasp this opportunity with both hands before the innovation wave passes us by.

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