Saturday, July 26, 2008
The Drop in the Dollar’s Value has brought sudden and unforeseen problems for many government and NGO-supported programs that rely to some extent on American money. For example, I am working with a local NGO on a shea butter project which receives much of its financing from an American fund. Since the project was launched a year ago, however, the Dollar has weakened, effectively lowering the purchasing power of our funds, which most be converted to the Beninese currency to be used. As a result, we can now only afford to buy two of the three shea-butter processing machines we had planned for and ordered (one for each of the three womens groups we are working with). This shortage of machines, in turn, has threatened to cause stresses in the project: progress was halted as we ran around looking for other options, project donors became impatient, the local government was put in a tight spot as we petitioned it for supplemental funds, and discord among the 3 women’s groups/project beneficiaries was foreseeable as one group (at leasty for the time being) will be evidently be short-changed a machine that was promised to them.
The High Price in Gas also causes problems in and around Nikki. While Nikki is less than 20 miles from the border of Nigeria, Africa’s leading producer of crude, there is a chronic shortage in the supply of [legally-sold] gasoline in the town, as in Benin in general. As result, our town’s power—supplied by generators—has been cut regularly from 8 in the morning till sundown. And everyone feels the effects of this and right where it hurts. NGOs and government offices cannot write their reports and artisans and businessmen of all kinds must either invest in a gas generators or else (in the more likely case) put off their work until sundown. This is neither profitable nor necessarily safe for most folks: one Sodeur I have been working with complained to me that working welding after dark is not at all good for his eyes, even with the safety goggles he wears.
The Cost of Living is driven up also by the high price of gas as transportation costs augment the price of goods. Production costs go up as well, for items such as locally produces flours, which rely on gas powered mills for their processing. The global food shortage, itself partially spurred by the cost of oil (and fertilizer) has also reared its head in Nikki. My comfortable stipend here cushions and desensitizes me a bit to the effects I feel by such a shortage (you’d do better asking your average farmer here how he is coping). I'm not convinced yet of what many locals are telling me: that the recent increase in the price of local foods are just a seasonal thing (for things like rice, yams, peanut butter, or soy cheese). When the harvest arrives they may be surprised that prices don't drop back down in historic manner. Prices of imported goods such as dried milk and canned and packaged goods have certainly risen over the last months.
To ease the effects of the high cost of living I’ve heard that the World Bank has given some financial assistance to Bénin, along with other African nations, and that the national government has tried to ease the burden of the poor by subsidizing what it deems as “basic” consumer goods. I’m told also that fertilizer is to be distributed to farmers to improve this year’s crop yields. However, slow decision making, profiteering commerçants and food traders, and inefficient distribution systems slow or effectively blocks the impact of these state interventions at the rural level.
Sunday, July 6, 2008
In the news world, financial-business world, and the development world, there is lately a renewed and strong interest in the idea of “Investing in Africa,” whether through venture capitalism, private equity, or through public market exchanges. Indicators I have seen of this trend include magazine articles, books, blogs, websites, SRI material and other investment prospectives, business and development conferences, and even a documentary that honing in on the subject.
Why the sudden and new interest? Some claim the disillusioning recession in the U.S. and elsewhere and the ostensible saturation of other markets is turning the attention of investors on Africa as an investment target. Certain shining examples of companies in such growth industries as precious minerals, banking, and cellular service across sub-Saharan Africa helps to turn these gazes. I think also that African markets are becoming more accessible, or at least feel closer and more important, to investors: African exports are feeding the “emerging economies,” new stock exchanges are slowly opening across Africa, and—as I read recently in the Financial Times—several African countries are trying to get a number of Africa-owned companies listed on the Chicago Stock Exchange. As a final possible factor to the recent attention, though“Socially Responsible Investing” rightly has plenty of critics, no one can deny also that the very idea of “Investment in Africa” is an admittedly more sexy one that buying stocks in your typical Dow-Jones company.
A Good Thing?
My very cursory understanding of developmental growth theory economics tells me that this buzz of investment interest, if materialized, could be very good, because the “I” variable (Investment) is one of the most—if not the most—necessary variable for macroeconomic growth. Big financial investments are also necessary (though not sufficient) for long-term poverty alleviation, as jobs, assets, productivity, and government revenue for social programs (through taxes) are all generated. When the end-consumer is the poor person himself, he or she can also be empowered by being offered a newer or cheaper product to improve his or her quality of life (This argument is advanced in Profit from the Bottom of the Pyramid). Sometimes these suddenly accessible “consumer products” are as essential as small loans or reliable ambulance services.
On the investor side of things, prospects are also good…very good in fact with potential returns marketed at twenty-some percent. Africa represents to many investors an environment perhaps poor in material assets rich in land and natural resources, labor, entrepreneurship, and a potential consumer base, and so primed for explosive growth so long as one can identify those good targets to inject the funds.
And “so long as…” remains the biggest potential barrier to this kind of profitable and sustainable investing. Africa is a rich and varied continent…investors cannot afford to categorize it as one place; rather, they must specify their research and understanding of a country’s realities and economy. Certain crucial factors of investment climate must be well analyzed such as trends related to infrastructure developments, corruption, rule of and respect for private property and commercial laws, taxation, and political and social stability. If not, one may be likely either to see the whole region of Sub-Saharan Africa as a continent of genocide, civil war, and election fraud. Or else, one is likely to commit the opposite error by actually investing in a Darfur, a Northeastern Congo, a Zimbabwe, or some other place more likely to erupt in some mass social disruption than in economic growth. This error happens by forgoing deference to the complex histories and varied difficulties that characterize many African countries.
America is suffering at this moment the fallout from the bursting of a particular financial market bubble that was based on irresponsible and unregulated risk. The last thing the world—and especially Africans— needs now is another mass financial venture that is a powder keg in disguise.
Is Bénin a Ripe and Risk-Minimal Market for Investment?
Given the potential benefits, along with the appropriate risk assessment that must happen, could Benin make a good target should the region see a financial investment windfall? I think so.
On the risk side of things, Benin is about as stable as you could get in the region: There has not been severe civil disruption for almost 20 years (see the Onion article satirical affirmation of this fact) and has enjoyed free and fair elections since then. There are also no outstanding ethnic, political, or resource-driven issues that have driven other African countries to war and unrest. Benin has no extremely lucrative resources that might attract corrupt leadership or render other exports too expensive to develop. The itinerant president, Yayi Boni is widely supported and has made it one of his primary goals to stem corruption. Evidence of this includes Benin’s election by the U.S. as a beneficiary of the much-prized (but hard-to-get) aid from the Bush’s Millinium Challenge Corporation. Among other things the MCC project is expanding and cleaning up Cotonou’s international port, once infamous for its corruption. Such are some of the indicators and evidendences that Benin may be a healthy environment for a large investment, especially when compared to other countries of the region.
If Benin were indeed poised for explosive growth, here is my estimation of the potential profitable sectors into which investors could inject their confidence, ideas, and inflow of private capital:
Transportation. There is the need and market here for car-taxis to service city populations, bus lines to serve the cross-country travelers, and possibly also a rail service to run over Benin’s largely unused railway line.
Tourism. Benin’s beaches, wildlife parks, and varied cultural landscapes are beautiful, but remain unknown to tourists…what’s needed is marketing and a more developed tourism infrastructure of hotels, touring agencies, etc. to exploit this possibility. Holding company Dubai World entered into negotiations earlier this year to develop beachfront, hotels, and game parks in the South.
Communications. Perhaps telecommunication but most especially internet, especially with the virtually untapped fiber optic line that runs through the country from the south to the north.
Banking Services. Perhaps in mortgages and micro-loans, as is taking place …across much of Africa.
Certain Agri-based products. Shea butter, cashews, and pineapples immediately come to mind, for which large and unsatisfied markets exist abroad.
Electrical Power. Most of Benin, derives its power from gas generators and is therefore electrically reliant on Nigeria. This source of energy is expensive and non-sustainable and will only become more so as oil prices increase with the demand for power. Alternative sources of energy could find an eager consumer base.
Saturday, July 5, 2008
I can’t pinpoint exactly why the popular people’s pose is this way, but I recently read something by an Art Historian named Kathy Curnow ("Prestige and the Gentleman: Benin’s Ideal Man") that makes me wonder if some of what encourages such stern and stolid expressions before the immortalizing powers of a camera is some effort to prove and portray the “Ideal Man.”