Here’s your Daily Brief for December 8th through December 9th:

Conspicuous Correlation: Coltan and Crisis Reports (via Appfrica) – One of the major factors feeding genocide and violent crimes against humanity is that ruling regimes have established business relations with foreign companies, earning them an political ally and a source of revenue to fuel local conflict. The foreign companies often get exclusive access to local resources in exchange for their unwavering political support and usually a cut off the top. We have seen this in South Sudan with Chinese oil companies, and also in DRC with Coltan mining. This excellent report by Appfrica takes Ushahidi (conflict mapping) data and mashes it with mining data to illustrate the “conspicuous correlation” between the two. Coltan can be found in the capacitors used in your hearing aids, pacemakers, airbags, GPS units, laptops, mobile phones, video games, and the list goes on. 60% of it can be found in the DRC, where conflicts since 1998 have killed an estimated 5.4 million people.

A business plan competition for entrepreneurs that deliver access to clean energy Africa – If you’re an entreprneur working on clean energy solutions for Africa (in particular Ethiopia, Ghana, Kenya, Mali, Morocco, Mozambique, Rwanda, Senegal, South Africa, Tanzania, Gambia, Uganda, or Zambia), there is a business plan competition for you! Awards include mentorship, expert advice, consideration for up to $100k in financing, and access to over 100 prospective investors!

The Dragon in Africa: How Chinese Investment Changes The Game (via Triple Pundit) – Interesting question posed: Does China’s appetite for risky investments in some of the most unstable parts of the world (and the investment benefits that come along with it) outweigh its questionable tactics of investment?

Al Jazeera Looks At Investment in Equatorial Guinea

Image Credit: Appfrica Labs

Just a few months ago, Starbucks announced a $20 million Small Farmer Sustainability Initiative (SFSI) to grow the amount of “Fair Trade Certified” coffee that they purchase and invest more in the social and economic development of small-scale coffee farmers. The press release announcing the program reads:

The SFSI will allow Starbucks and the Fairtrade organizations to have an even greater impact than before, benefitting both coffee farmers and the coffee industry worldwide. Small-scale farms will have greater access to capacity-building resources in the areas of agronomy, technical support, and capital investment. Offering cooperatives increased access to credit and quality improving resources will enable farmers to increase income, improve family livelihoods, and promote sustainable community development. The partnership directly impacts the social, environmental and economic wellbeing of farmers and will help increase their participation in the global specialty coffee market.

The SFSI provides a new global standard for collaboration in the coffee industry to improve ethical sourcing and responsible business practices. The three-year pilot, launching in September 2009, will leverage on-the-ground expertise and resources each group has available in coffee growing regions. “

Currently, 10% of Starbucks coffee is certified “Fair Trade”, making it the world’s largest purchaser – buying over 40 million pounds a year. The company has been criticized in the past for not investing more in “fair-trade” farmers, but has responded that it upholds what it calls CAFE Practices — a set of standards developed with Conservation International, farmers and other NGOs and verified by SCS. But recently, Starbucks has been forging a closer relationship with the Fairtrade Labeling Organizations — in fact, representatives joined Starbucks CEO George Shultz on his trip to Rwanda this past June.

An article from the UK Guardian shares some very interesting insights gathered while traveling on the trip to Rwanda. The author asks,

Where exactly should the responsibility of a company like Starbucks begin, with its 17,000 stores and its 50m cups of coffee sold every week, and where should it end?

For Fair Trade evangelists, it’s about worker’s rights, wages, and working conditions. But for Starbucks, it’s more — it’s about empowering and lifting small coffee farmers out of poverty. This is a philosophy that has led to a very close relationship between Starbucks, George Shultz, and Rwandan President Paul Kagame. From the Guardian article:

“What we look for is to see that the farmers are getting more out of their crop,” he (Kagami) says. In the recent past farmers have been abandoning coffee because there was no income in it – in real terms coffee farmers are paid far less than they were 30 years ago. He believes that Starbucks, which has opened a $250,000 farmer-support centre in Kigali to share best practice, can help to reverse that trend. He wishes they could do more – “We’d love to see more of the value chain over here,” he says, meaning roasting plants and packaging facilities, “but we don’t want to make too many demands. You have to move at their pace, really.”

Kagame is a soft-spoken and serious man, but he becomes animated when he lays out his vision for his country. “Trade has always been the single most important thing to enable transformation to take place here in Rwanda; it creates entrepreneurship, self-reliance, rather than people always waiting for someone to help them out.” After the genocide, Kagame suggests, trade not aid was really their only hope – “If you have to work with your neighbour, have to sell him something, then it builds a community.” There is, he says, no other way to achieve it.

The growing relationship between Starbucks and Fairtrade organizations is what caught many people’s attention on the Rwanda trip:

In the past few years, the positives for Starbucks have been a little hard to come by. Its ethical standards and anti-union practices were widely debated – particularly in the damning documentary about Ethiopian coffee, Black Gold. After two decades of unprecedented growth, profits also fell last year by more than 50%. The firm announced more than 10,000 job losses and 1,000 store closures. Schultz, who had stepped back from the day-to-day running of the company in the millennium year to spend more time with his family, returned as chief executive in January 2008.

He came back, he says, “principally to try to fix some things. I just felt we had achieved 15 years of astounding success as a public company, and I think success sometimes breeds entitlement. We reached the point where I thought maybe the company was drifting. I didn’t want to come back to point blame; I just wanted to get back to the culture that formed the company.”

It seems that the fair-trade commitment in the UK and the involvement in Rwanda is a key part of that attempt to reaffirm values, join up the various parts of the Starbucks story. Is that why he is here?

“I think it is emblematic of what we are trying to be about. I remember my early conversations with President Kagame, where he was outlining his vision for Rwanda. It took me a while to understand that in fact Starbucks could come here and really make a difference. We do not have the resources to do it all. The line is so long of people who have needs.” Is it, I wonder, in part a kind of penitence? Starbucks became in some minds synonymous with the excesses of multinationals, wedded to growth at all costs …

“I think that association has been blown out of proportion,” Schultz says. “In some way we were labelled as one of the poster children of the prevailing culture, but that was never fair.” Would he like to see all the coffee they sell across the world be Fairtrade? He would, he says, and that is the way they are heading, though there are questions of quality and supply to deal with.

Note: All the above excerpts come from “Starbucks Founder Spreads Gospel of Hope in Rwanda” by Tim Adams.

Here’s your Daily Brief for September 9th:

African Entrepreneurs – (via Freakonomics Blog / NYT) – A cool write-up featuring Appfrica’s John Gosier and Magatte Wade of “Adina for Life” beverage company (which is AWESOME!). This blog post profiles three innovators in Africa introducing new solutions to their countries’ and continent’s unique challenges. They all seek to depart from the traditional foreign assistance paradigm and move towards a new approach to development.

John Gosier, Appfrica

John is well known on the Internet and in ICT4dev circles, as he does awesome work incubating tech. ventures through his company Appfrica Labs and his blog posts add a very interesting African perspective on the tech. industry. Appfrica allows budding tech. entrepreneurs a steady salary, an inspiring environment, and the mentorship that is needed to follow their passions and get projects out the door. Gosier has positioned Appfrica to be a leader in African tech. innovation.

Magatte Wade, Adina for Life

“Adina for Life” is an awesome beverage company that was featured at SOCAP09 this year. It’s a seriously tasty lineup of drinks! The story behind the company is equally as awesome. Adina was started by a Senegalese entrepreneur who was, “disdainful for foreign aid, skeptical of the viability of the technology industry in Africa in the near term, and placing no faith in the ability of microfinance to transform lives on a large scale.” Magatte Wade focused on the labor-intensive manufacturing sector (with a social conscience) to bring about societal change in her country.

“Wade acknowledges that African manufacturers will be unable to compete with countries like China and India on cost, but she believes the continent can transform itself into the producer of the world’s high-end, organic, socially responsible brands.”

Bicycles For All Occasions (via Beyond Profit) – I posted an article a while back on the Bambulance, here’s a similar article by Beyond Profit magazine featuring a company called Zambikes which is working in Zambia. What I like about this article is that it features the “business model” approach that I was looking for in Bambulance.

“Zambikes not only supplies new bikes to communities, but also has spawned a local industry by training workers to fabricate parts locally, assemble bikes, and provide maintenance.”

Here’s some more cool information on their business model.

Government Accountability Office (GAO) Report Recommends Extending AGOA Trade Preferences to Boost African Apparel (via The Whitaker Group) – I love the content that comes through Whitaker Group – Here’s an interesting report on AGOA released by the GAO. Also, check out Rosa Whitaker’s piece on“Debunking Myths About AGOA”.

I came across this video on Hulu in a series called Vanguard, and thought it worth sharing. About a month ago I dedicated a post to the Role of China in Africa, which I highly suggest you check out! I wrote about many of the issues and concerns raised here, but the video delivers some great imagery to the concepts and realities of China’s growing foothold in Africa.

We are taken to the country of Angola, a country scarred by almost 30 years of civil war. After the war, Angola sought financial assistance from the West, but was unable to secure investment due to the many conditionalities attached. The Chinese, however, were quick to court the Angolans – particularly given the wealth of natural resources (diamonds, minerals, and oil) and the country’s strategic coastal location. Five years after the end of Angola’s civil war, with the help of China, the country had become Africa’s fastest growing economy.

Angola has seen rapid growth in the local Chinese population. At the time of filming this video, China had an estimated US $6-11 billion extended to the Angolan government in loans. Under the loan agreements, 70% of all projects were to be built by Chinese companies – importing their own labor and materials ranging from light bulbs to heavy machinery.

For Chinese expats living in Angola, life is less glamorous than what they imagined – notably the level of poverty that they witness. Creating an incentive to stay, though, the average Chinese worker in Angola makes about three times (3x) what they would make in China.

The negative arguments remain, however:

• The Chinese “Mutual Respect for Sovereignty” policy gives Angolan politicians a blank check for bad behavior (Rise in Corruption)
• Chinese investment does little for Angolan employment
  • Angolans at bottom of the totem pole in their own country
  • Continued reliance on the informal sector
• No utilization of local resources (everything is imported from China) means that Angolan businesses hardly benefit
• Once the natural resources have been depleted, the Chinese will leave and what will Angola be left with? Is it worth it?

What do you think?

Also, don’t forget to take a look at my first post on China in Africa.

Here’s your Daily Brief for August 20th:

AGOA Nations Frustrated By Administration’s Adherence To Status Quo (via The Whitaker Group) – I wrote a post a few weeks ago about the African Growth and Opportunity Act that was being promoted at the AGOA Forum by several high ranking US officials including Secretary Clinton. This excellent post from Whitaker Group outlines the disappointment of the private sector and African governments in the Obama Administration’s lack AGOA reform, despite its very public “commitment” to promote trade and investment in Africa.

In my previous post, I wrote about some of these concerns — a major one being the number of products covered under AGOA. Another being the US possible extending AGOA benefits to non-African countries like Cambodia or Bangladesh (two countries that would easily out-compete and drown out African markets).

Despite African countries being quite vocal in local media outlets about what THEY wanted from AGOA, it appears that the Obama Administration intends to maintain the “status quo”

Nuclear Power for Energy Security in Africa (via The Whitaker Group) – Another gem from the Whitaker Group, this time on Energy Security in Africa. Reliable electricity throughout Africa has always been a problem – and a serious one when you consider the income lost by businesses during blackout. It is an all to common occurrence, and that combined with the high costs of electricity have been a major impediment to investment.

With SEACOM and TEAMS coming online in the months to come — dramatically decreasing the costs on internet and connectivity — African governments need to focus on the next big infrastructure challenge: electricity.

African countries are looking to nuclear power as the solution. The coolest part about this is detailed at the end of the post and includes seriously import research benefits that could come about and help across multiple sectors. Also nuclear power creates and maintains high-paying and high-skilled jobs that cannot be offshored.

Patient capital, markets that work and ending the endless emergency of poverty (via Seth Godin) – Here’s a nice post from Seth Godin explaining in very concise terms the importance of “patient capital”.

The Microfinance Debate:

As Muhammad Yunus, founder of microfinance and Grameen Bank, was awarded the Presidential Medal of Freedom, critics assailed the very institution he was being awarded for. Microfinance has revolutionized development and blazed the path for social entrepreneurship. But the model has its flaws — including high overhead costs barely covered by interest payments, that it’s largely subsidized credit, and the lack of a long-term financing option. Here are a few articles to help you follow the debate:

• The backlash against microfinance (via Duncan Green) – A good breakdown of the arguments at hand over microfinance
• A $9 Trillion Question: Did the World Get Muhammad Yunus Wrong? (via Foreign Policy) – Peter Schaefer argues in this Foreign Policy article that the work of de Soto (integrating the poor into formal markets) and Yunnus (delivering micro-loans to the poor) must be built upon and combined “in order to develop a more viable way to realize their [the poor's] inherent promise.”
• Economics focus: A partial marvel (via The Economist) – The Economist weighs-in to the discussion

And here are posts I’ve already included in previous briefs:

• A Global Surge in Tiny Loans Spurs Credit Bubble in a Slum (via WSJ Subscription Req.)
• A Response to the WSJ Micro-Credit Crisis Article
• Is There a Mortgage Boom in Sub-Saharan Africa?

Here’s your Daily Brief for August 7th:

An article in todays Business Daily newspaper caught my eye and has inspired me to begin my discussion on the role of China in Africa. This is a wildly important discussion and I promise there is more to come on this topic.

Anyways, this article suggests that the rise in US trade-related engagement with Africa is in direct response to China’s threatening stake-hold on the continent. I don’t entirely agree with the suggestion, but it raises a critical point: the US needs to take a serious look at the role of China in Africa and throughout the developing world, and then reevaluate our approach to these undervalued and underestimated developing regions of the world. Historically, the United States has taken a very ethnocentric and paternalistic stance when dealing with Africa — an approach that, from the receiving end, tends to be condescending and demoralizing. America’s long tradition of attaching conditionalities to all forms of foreign assistance (for better or for worse) further exacerbated nationalistic sentiments and resentment towards the US within the aid-receiving countries. So it was no surprise that when China invited 35 African Heads of State to Beijing in 2006, providing celebrations and red carpet treatment, to discuss China-Africa relations, Africans were thrilled to have a new partner in the world — one that treated them as equals.

Now there is a stark contrast between US and Chinese engagement with Africa. While the US does come off as paternalistic and restrictive (particularly with the large number of conditionalities attached to aid), it is trying to uphold certain standards of human rights and morality. Additionally, many conditions (particularly economic) on aid are intended to protect the investment and maximize its impact. But the US has, for the most part, dismissed Africa as a mutually beneficial trading partner. US engagement with Africa is out of a “moral imperative”.

China, on the other hand, has approached Africa as an “equal” and as an alternative to the US and the West. China’s investment in Africa has been less humanitarian and more economic. When an African country want to get a certain project complete an they are looking at two bids: one from the US government and one from the Chinese government, the Chinese offer a blank check with no political or economic conditions whatsoever. However the Chinese have a high propensity of making unfulfilled promises at the outset of a deal, importing their own labor to carry out a project, and mostly extracting natural resources. And the Chinese are ruthless business people, doing business with countries under the backdrop of genocide and dictatorship. They are adept to protecting corrupt leaders in exchange for access to local resources.

That being said, I don’t believe that America’s increase in trade-related engagement with Africa is a direct response to China’s growing stake over the continent — otherwise we would see a decline in conditions and political stipulations attached to trade policy like AGOA. Rather, I believe that this shift is a direct response to a rapidly changing global landscape whereby African markets are becoming more stable both politically and economically. Additionally, I see a dramatic shift coming in the future toward increased investment in Africa driven both by a moral imperative and an economic understanding. This, I believe, will grow as the younger generations begin to assume control of US policy and business.

For now, I’ll leave you with some video for the weekend! This is Riz Khan’s “China in Africa” series:
Part 1/2:

Part 2/2:

In Other News:

Standard Charter shocks rivals with 43 per cent profit growth (via Business Daily) – The banking sector in Kenya is one of the largest recipients of FDI, despite the fact that only about 10% of Kenyans potentially eligible for a bank account actually hold one. Despite the post-election violence in 2008, three out of four of Kenya’s major banks still experienced growth. It seems that still today the banking sector in Kenya continues to surprise!

Chinese and Indian Growth in Latin America: New Business Opportunities (via NextBillion.net) – This is a nice piece on the current and possibly future role of China in the Latin America / Caribbean (LAC) region. I disagree with the zero-sum suggestion in the second paragraph, but the rest of the article is great!

Here’s your Daily Brief for August 6th:

There has been a lot of buzz surrounding AGOA for the last week or so, and I’ve included a few articles in my daily briefs the last couple of days. I figured today I would dedicate the entire DB to AGOA and flush out some of the concerns and issues on all sides.

First of all, I’m very disappointed in the US Media for completely ignoring this story all together. I was watching NBC Nightly News the other night and Brian Williams cut to a reporter traveling with Hillary Clinton, they were in Nairobi, and all they talked about was North Korea! A cursory Google News query for “AGOA” yields nominal US reports. But some wildly important issues are being raised!

So, I hereby take it upon myself to be your guide through AGOA 2009:

Brief Background on AGOA

The African Growth and Opportunity Act (AGOA) was initially passed by Congress and signed into law by President Clinton in May 2000. Four years later, President Bush signed the AGOA Acceleration Act of 2004. AGOA expands on the Generalized System of Preferences (GSP) and gives eligible African Countries trade preferences for quota and duty-free entry into the US on certain goods.

But what would US Trade Policy be without political stipulations? AGOA allows the President to determine a country’s annual eligibility (of course, this responsibility lies more in the hands of the USTR). To date, there are about 41 countries eligible for AGOA preferences.

While AGOA acknowledged the need for eased integration of African economies into the core global economy, it has had some significant shortcomings. It is these shortcomings that have dominated the discussion among scholars and the African media the last couple of weeks.

The theme of this year’s AGOA Forum was “Realizing the Full Potential of AGOA Through Expansion of Trade and Investment”. It’s interesting this comes a year after the original legislation was set to expire (the 2004 Acceleration Act extended it through 2015). But given this theme, it makes these shortcomings essential to address and discuss.

AGOA Shortcomings

The first of the major shortcomings is the political stipulations mentioned above, whereby the US reserves the right to pick and choose eligible recipients. Bill Easterly wrote a great post yesterday on this (linked below), so I’ll keep my remarks short here. Whenever politics and economics come together, the outcome is rarely/never good. And when we’re speaking about developing nations, sometimes the stick/carrot game really hurts us more politically. (This could lead into an entire discussion on the role of China in Africa!)

The second major shortcoming is the US’ still-burdensome import standards, regulations, and policies. From Kenyan exporters to the US that I’ve spoken with, this is a big non-tariff barrier in itself. If we want AGOA to succeed we need to work on assisting African exporters in meeting US-Import Standards.

A third shortcoming is that of little capacity building and technical assistance. While a provision for this was written into the original legislation, it remains a significant issue. This is discussed further below in the “African Countries Call on US Reform” section.

The final shortcoming, and probably most important, is the disproportionate consistency of US-Africa trade under AGOA. While last year’s trade numbers reached $67.5 billion, about a 30% increase year-on-year, 97.2% of that went to oil producers in only six countries. This means that all other countries only brought in $1.9 billion total. And that number is predominantly textile and apparel exports. (Download US-African Trade Profile 2009)

US Calls on African Reform

Aside from calls for political reform throughout Africa (notably in Madagascar, Liberia, and Kenya), the US Trade Representative to Kenya Ron Kirk offered his suggestions for economic reform in an Op/Ed piece for the Business Daily newspaper.

He called for a diversification of trade in order to generate and sustain economic growth. Furthermore, he suggested African Countries improve their local business environments and foster entrepreneurial initiative.

Secretary Hillary Clinton notably announced, “Today, Africa counts for two percent of global trade. If Sub-Saharan Africa were to increase that share by only one percent, it would generate additional export revenues each year greater than the total amount of annual assistance that African currently receives.” Hopefully this signals a shift is State Department / USAID thinking away from the traditional aid model and more toward a business/trade approach to Africa. (Her full remarks are embedded below)

African Countries Look Inwards

African ministers have acknowledged the role they play internally in making AGOA work. They have called on regional economic blocs like the EAC, SADC, ECOWAS to lead the way in increasing global competitiveness.

African Countries Call on US Reform

President Kibaki called on the US to assist in removing obstacles to trade such as those mentioned above. “The US should help Africa build trade capacity because some of the set quality standards demand that we import specialized equipment, materials and parts from the developed world,” he said.

Other African ministers called on the US to enhance the goals of AGOA through the transfer of skills and technology to improve the quality of exports.

One request include the establishment of a low-cost credit facility for start-up businesses in Africa willing to participate in AGOA, coupled with US-provided technical training and assistance.

African entrepreneurs have requested that product inspection be done in the country of origin, helping lower costs and other technical barriers to trade.

Concluding Remarks

Overall, the discussion is an important one. Integrating Africa into the global economic core is an essential task, but a task of which responsibility does not solely lie on the shoulders of the United States. There is a lot to be done in African Countries with respect to capacity building that does not require US assistance. Additionally, there needs to be a discussion among business leaders, both American and African, to lead toward greater cooperation and increased access to mutually beneficial opportunities.

Here’s Secretary Clinton’s Keynote Remarks at the AGOA Forum in Kenya:

And Here is a Joint Press Conference with Kenya’s Foreign Minister:

And As a Little Treat, Here’s a Sneak Peak Into The Night’s Activities @ Carnivore:

Note: It’s not like the nights at Carnivore I remember!

Here’s the Bill Easterly article I mentioned above:

Hilary offers trade opportunities to Africa – except when we don’t feel like it (via Bill Easterly) – Bill Easterly expresses concern in this blog post over the USTR’s ability to revoke AGOA status from any country for “political” reasons like poor governance. He points to Madagascar, an exemplar country for the success AGOA has had in promoting its textile industry; but political unease in the country has led to the USTR threatening to revoke AGOA eligibility (effectively destroying the local textile industry comprising 6.5-8% of GDP and 50,000 jobs).

Updated:

Here’s some good articles on AGOA:

The New Global Reality: Africans Lead the Way at the AGOA Forum

Will Global Recession Damage US-Africa Trade Ties? (via Paul Collier and Rosa Whitaker)