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INSIDE AFRICA

Investing in Africa

Aired June 16, 2007 - 12:30:00   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

FEMI OKE, CNN ANCHOR: Hello, I'm Femi Oke. This is INSIDE AFRICA, your weekly look at life and issues on the continent. Today, our focus is on business and investment. Did you know that compared to the rest of the world, Africa offers some of the highest return on investment anywhere? It shouldn't really come as a surprise. The continent is rich in natural resources and opportunities. Take Angola, for example, rich in oil and diamonds. The country is not short of investments, but although the economy is booming, half the population still live in poverty. The challenge is to get the country's wealth to the people.
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OKE: Producing over a million barrels of oil a day, Angola is seriously wealthy. Now, that's a phrase you rarely hear when talking about Africa. Check out the busy port at Luanda Bay and the construction sites, and you're looking at an economy on the way up. You don't have to search hard to find oil workers in Angola.

Wayne works for an oil field service company. I found him and his team relaxing on the beach.

WAYNE, OIL CONTRACTOR: You have a lot of big business moving in, big companies from Europe, big companies from the U.S. They're all dedicated to, you know, developing business here and developing an economy here. So I would say in the next five years, this place is going to blossom.

OKE: With development going on all around, it's hard to believe that Angola's infamous civil war ended just five years ago. Shunning the typical aid root for developing countries, like the International Monetary Fund programs, the country has looked east to China for investors.

LUIZ RIBEIRO, ANGOLA CHAMBER OF COMMERCE AND INDUSTRY: China needs commodity, and one of the commodities that Angola can supply right now is oil. Angola needs credit to rebuild its infrastructure. So, it has been a kind of pragmatic approach from both sides. You want oil, you want credit to rebuild the infrastructure. Let's make a deal. So, they have been putting $4 billion plus $4 billion. And yes, you see a lot of Chinese around.

OKE: But billions of dollars from China hasn't made a dent in the lifestyle of many ordinary Angolans. The biggest criticism of the country's economic boom is that the newfound wealth isn't getting to the people who really need it.

DR. JUSTINO PINDO DE ANDRADE, ECONOMIST: Sixty percent of the Angolan people are very poor; 40 percent are extremely poor. But there are now a small number of people who are getting rich.

OKE: A trip around Angola's largest market is a good barometer for seeing how many people are struggling to make ends meet.

UNIDENTIFIED MALE: Because there is not a lot of employment for people, this is one way we find to survive. You can see the number of people selling here. Look at me, I'm over 40 years old, how am I going to find a job? I have no other way to live here.

OKE: Angola's tourism minister is enthusiastic about his country's financial potential.

EDUARDO CHINGUNJI, MINISTER OF HOTELS AND TOURISM: Put anything here, the returns in Angola when you put your investment here. (inaudible). Three years, four years, you'll have your money back.

OKE: Diamonds mined by some of the country's poorest citizens rival oil as a source of income for Angola.

CHINGUNJI: Everywhere you go in Angola, you're able to find diamonds. Angola is full of diamonds everywhere.

(CROSSTALK)

OKE (voice over): Unfortunately, diamonds eluded me on my visit, but what I did see firsthand was the country determined to fast-track its development, whatever the cost.

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OKE: From Angola to Nigeria and another of Africa's thriving economies, whether it's banking, stock or foreign investment. Nigeria is booming, but there is always room for more. And so, the country has recently put hundreds of millions of dollars into a project it hopes will attract foreign investors. Isha Sesay has that story.

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ISHA SESAY, CNN CORRESPONDNET: A world-class combination business and leisure resort, located within a free trade zone much like Hong Kong and Dubai, only this one is set in, believe it or not, Nigeria. Considered the first of its kind in the West and Central African region, the Tinapa free trade zone and resort comprises some 80,000 square meters of retail space across an area the size of 10 football fields. The man behind the project is the first to admit few believed he could pull it off.

DONALD DUKE, FMR. GOV. CROSS RIVER STATE: I'm an incurable optimist. There have been difficult times in the course of the journey, but somehow we never lost site of where we're going, and we - somehow we felt we'll pull it through.

SESAY: Two and a half years later, Tinapa's dream became Tinapa's reality. More than 60 retail outlets, casinos, restaurants, cinema complex, a 300- room four star hotel, all officially inaugurated by Nigeria's former President Olusegun Obasanjo. But there's also much at stake:

DUKE: It's a $400 million project. The sustainability will depend on us.

SESAY: Most of the funding comes from within Nigeria, but the aim is to attract foreign investors with the host of tax breaks and exemptions.

DOMINIC HALL, SOUTH AFRICA INVESTOR: It's an excellent project with a lot of potential.

SESAY: But critics say Tinapa could end up as yet another white elephant for Nigeria, where there is a history of project begun and then abandoned due to mismanagement. Isha Sesay, CNN, Atlanta.

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OKE: When we come back, escaping poverty one loan at a time. Microfinance is changing lives and economies. Stay with us.

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UNIDENTIFIED FEMALE: Mineral-rich South Africa says its under-developed mining sector has cost the country close to 12 billion rand in potential investment since 2004. The government says inadequate infrastructure and the lack of skilled workers are to blame.

The Oyo state government is the latest in a string of Nigerian states to file a lawsuit against tobacco farms. They want to restrict tobacco companies from selling or distributing their products near schools. The suit targets six companies, including British American Tobacco Company, Phillip Morris International, and International Tobacco Limited.

And finally, search engine Google is opening its first-ever offices in sub- Saharan Africa. The Kenyan operation is expected to lead Google's expansion into the wider region.

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OKE: Excellent to see you again. You're watching INSIDE AFRICA. Small loans, big differences. Micro-credit is said to have lifted tens of thousands families out of poverty, and the loans are primarily focused on women because they have been found to be good creditors, wise spenders and focus on improving the conditions for the entire family. Sorry, guys, it's just we are good at that money stuff. Maria Lora has this look at how micro-credit can make a difference.

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MARIA LORA, CNN CORRESPONDENT: Judging by Salame Ramadhan's neat and spacious compound, it's hard to believe that (inaudible) 12 years ago, she struggled just to send her children to school. With no income or property, she wasn't eligible to get a loan from a traditional commercial bank to help her start a business, but then she heard of the Kenya Women Finance Trust, or KWFT, the largest micro-credit institution in Kenya, exclusively for women, where people like Ramadhan can get small loans.

SALAME RAMADHAN, MICROCREDIT INTREPRENEUR: I've taken three loans in total. With the first one of about $300, I bought a tank and started selling water. With the second loan of $600, I bought another tank and started a fashion accessories business. And then I finally borrowed $900, which I used to build guest rooms to rent.

LORA: Micro-credit was first introduced to Africa some 20 years ago, inspired by the work of Muhammad Yunus and his Grameen Bank in Bangladesh. But it was in the '90s that the sector really took off here. Today, about 16 million people are micro-credit customers in Africa, 4 million in Kenya alone, and many like Ramadhan are women.

JENNIFIER RIRIA, KWFT CHIEF EXECUTIVE: I've stood in international firms and I've said women are credit worthy. Women repay their loans. Kenya women finance (inaudible) 80 percent plus repayment rate.

LORA: Indeed, women are now target clients of many micro-credit institutions worldwide, who say women are more serious about repayments than their male counterparts. In Africa, giving women responsibility for small loans also raises their socioeconomic status, a positive step in Africa's traditionally male-dominated societies.

JACKSON WANJAU, KWFT REGIONAL MANAGER: In the African culture, everything belongs to the man. And so, when we - we give credit or we give those finances to women, we boost their confidence.

LORA: In Kenya, women tend to open modest businesses like selling water or groceries. But that's enough to dramatically improve their family standard of living.

Today, Ramadhan is financially independent. That also benefits her husband, who has been able to retire.

RAMADHAN (through interpreter): Before I had to wait for my husband's salary to pay for the daily needs of the family, and that was never enough. Now, my businesses are making profits, and I can take care of the family myself.

ADAM HUSSEIN, SALAME'S HUSBAND: I'm happy because where she sees that she can help, she helps, and I'm very proud of that.

LORA: The lending scheme does have its critics; their main point being that high interest rates of KWFT -- up to 18 percent a year -- are too much for the poor. Micro-credit companies say their loans are not a handout, but an investment on people's creativity and resourcefulness.

WANJAU: It all depends on your planning skills, on your strategies, on your focus on what you're doing.

LORA: There are currently about 200 micro-credit institutions operating in Kenya, and awareness and demand are growing. The challenge that such organizations are facing is how to make their services accessible to more and more people across Africa, a continent that, as Ramadhan will tell you, is brewing with potential entrepreneurs.

Marie Lora for CNN, Nairobi, Kenya.

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OKE: For more on the issue of micro-credit, we spoke earlier to Eric Thurman, co-author of "The Book of Billion Bootstraps: Micro-credit, Barefoot Banking, and the Business Solution for Ending Poverty." We asked him why he believes micro-credit can make a real difference in Africa.

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ERIC THURMAN: The fact is that in Africa, most of the people have to make their own living. There aren't jobs, per se. There aren't people that you can go to work for and get a paycheck. Instead, it's self-employment; it's income generation. It could be subsistence farming. It could be doing something that's a craft that you know how to do. It could be a service industry, like fixing bicycles or repairing shoes on the street, or selling food on the street.

The problem is that many of these people who have skills and who have the motivation to work simply don't have enough working capital to turn this income into a way to adequately support their families. And if we can provide a little bit of working capital, sometimes as little as $50 or $100, people are able to multiply their income, two or three times as much income, and that really makes a colossal difference in their standard of living.

OKE: Why do you write about it with such enthusiasm and passion?

THURMAN: Well, because I think it hasn't reached its adequate size yet. Worldwide, there is about 100 million families that are participating in micro-credit, and it's now well documented that it works. It works extremely well.

But what the problem is, is that it's not reaching nearly enough people. It should probably reach 10 to 20 times as many people.

So, when there are people that are just one $50 or $100 loan away from being able to reach self-sufficiency and to provide for their families, it seems like a crime almost that we don't do that.

OKE: You've got quite a radical approach, because at the same time as you're promoting micro-credit, you're saying traditional methods of beating poverty, they're not working. That's quite a big criticism, isn't it?

THURMAN: Well, I'm of both ends (ph). I'm for anything that does work. I'm not trying to criticize the things that are working. The unfortunate reality is, though, that there's been a lot of research done that shows that despite all of the foreign aid that's being poured onto the continent, the issues of -- like hunger in the continent are worse today than they were a couple of decades ago. So, there is something fundamentally wrong about some of the approach that's been done.

I'm not trying to dismantle anything. I'm simply trying to say, we do have a mechanism that works. In "A Billion Bootstraps", the book, I've explained in detail how it works and documented it.

OKE: One of the things in the book, which I really like is that even if you're donating money to Africa, as a charity or as an individual, you should get a good return for your money.

THURMAN: Yes.

OKE Can you explain what you mean by that?

THURMAN: Well, if at the end of the day, nothing has changed, then your money's been wasted. And the thing that I like about micro-credit is not only does it increase income, it also has ripple effects. So one of the first things that I've discovered all over the continent is when a woman starts making more money, more of her kids start going to school.

Remember, a woman in Congo (AUDIO GAP). Her husband had died, she had several children to support, and she did the logical thing that she could do - she cooked food at her home, and then went and sold it on the street during the day. But it was just enough to survive. It wasn't enough to pay the small school fees that existed. And when she got a loan, the big change was that now all of her children could go to school. That's one of the first things that happened.

So, it might seem like a disconnect, but micro-credit may be one of the best ways to increase education levels on the continent.

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OKE: And that was Eric Thurman speaking to us earlier. You can find out much more about micro-credit in his book: "A Billion Bootstraps: Micro- credit, Barefoot Banking and the Business Solutions for Ending Poverty." Nice long title, all right, thanks for that.

There's more to come on INSIDE AFRICA. Just ahead: The pros and cons of investing in Africa. We'll hear form an expert. See you soon.

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OKE: Here's a look at some of the headlines on the continent this week. The African Union says Sudan has accepted a proposal for a joint African Union and United Nations peacekeeping force in Darfur. According to the plan, between 17,000 and 19,000 troops will be deployed to the region. The A.U. says Sudan stipulated all troops must come from Africa.

Also in Sudan, the U.N. says a faction within the Sudanese Liberation Movement has agreed to demobilize nearly 2,000 children associated with armed groups in Darfur. The agreement follows several months of talks with UNICEF. It was to come a few days ahead of the Day of the African Child, an annual commemoration honoring children on the continent.

And the Organization for Economic Cooperation and Development says Africa's economic growth will reach 5.9 percent this year. But it also warned that Africa is unlikely to meet millennium development goals for improving access to water and sanitation in poor counties by 2015.

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OKE: Hello again. You're watching INSIDE AFRICA.

High risk, but also high return -- that's how most experts classify investment in Africa. Among investors' main concerns are fluctuating currencies, war, corruption, and a lack of infrastructure. But things are getting better, and for many years, the profitability of foreign companies have been higher here than in most other regions of the world. And if you're a bit of a philanthropist, you might want to consider that the payoff is felt not only by investors; with money comes jobs and opportunities. Foreign investment is seen by many as the best way to alleviate poverty on the continent.

Earlier, we spoke to Allan Kamau, executive editor of "Africa Investor" magazine in London, about investing in Africa.

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ALLAN KAMAU, EXEC. EDITOR, AFRICA INVESTOR MAGAZINE: I think Africa is slowly getting on to the radar screen of international investors. If you look at certainly countries in sub-Saharan Africa over the last 10 years, they are enjoying, you know, a period of unprecedented growth, you know, 5 percent growth in many sub-Saharan African countries.

A lot of it is certainly driven by, you know, high prices of commodities like oil and gas, and minerals. China, for example, has really turned its eye on - on Africa and has been investing in a really, really, really big way into those African countries. And that's really helping to - to really boost those economies and to - and to provide growth.

Africa actually has some of the fastest growing stock exchanges in the world. It also has about 2,000 listed companies. If you look at a country like Nigeria, for example, they have one of the best returns in the last period of stock exchanges in the world. In the last year alone, the Nigerian stock exchange is up to 55 percent in terms of returns.

OKE: You talk about serious amounts of money going into Africa, money being made from Africa. But yet the continent has this poor Africa image. Where is the disconnect?

KAMAU: The disconnect is that the - for the longest time, you know, where you've got an emerging market like Africa, that had suffered, you know, from years -- to be fair, of bad governance, you know, and failed states -- you know, it has impacted on its image and obviously on investment. No one is going to invest in a place where they do not feel safe in terms of their investment and their assets.

What that has meant, though, is that for those investors who are looking for return, they can - and are able to go into the ground, and are able to figure out how to operate in that fairly hostile environment can do very, very well. So you've got high risks, OK, but you also have high return.

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OKE: And here's a look at what some editorials around the world had to say about investing in Africa.

Paris' "International Herald Tribune" writes: "Good governance and the rule of law are the keys to reducing investment risk and attracting capital flow. Partnerships between governments and responsible long-term investors will lift Africa out of poverty."

London's "Financial Times" had this to say about one of Africa's most avid investors: "China has the right to invest in Africa. Its willingness to take risks means that it has much to offer, but it should not undermine the basic social and environmental protections it is just beginning to introduce at home."

A commentary in "The Washington Post" reads: "While Africa offers the highest return in the world on direct foreign investment, it attracts the least. But unless investors see the Africa that's worthy of investment, they won't put their money into it."

And that's our program for this week. Thanks for joining us. And next week, we'll be showing you stories in honor of World Refugee Day. So we hope that you will let INSIDE AFRICA be your window to the continent.

I'm Femi Oke. Until the next time, take care.

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