Chinese Box

New African Entrepreneurs: My favorite quotes from Comesa 2009 investment forum

I don't have time to post anything long today.... I'll add sources to some of the when I'm home and have my notes in front of me.

 "If China is too much like Western Investors, it will be the same old drubbery in another guise"

- head of Comesa (will look up name and official title later)

"We know what we need to do, now we need to talk about how"

- Someone from Ghana (will look up later), this was a rather big theme of the conference, as the socialist old-guard was missing from the meeting. Basically they all want to turn Africa into a fast moving intrepid capitalist continent, but they have to do that in a way that doesn't cause massive revolve.

"If you have to bribe someone in order to do business there, its not worth doing business there"

- Boss of Orascom (name and official title later), this was by far the most quoted statement of the conference in the African newspapers. His point was basically that bribery, besides being immoral, leaves you open to further legal issues later on. He also suggested not partnering with local companies because it leaves you open to similar issues, which I think is a difficult idea for a lot of foreign investors.

"Speak to the that man in the back"

- Mahmoud Mohieldin, Minister of Investment to Egypt, when asked by a young entrepreneur what he needed to do to get the proper licenses. He afterwards listed all the things they could do for him right that very moment.

"One shouldn't invest more in energy subsidies than education, this is a problem in Egypt as well."

- Mahmoud Mohieldin, talking about how countries should be able to admit their problems

"Africa is not developing new leaders, we have them because Africans are by nature very enterprising."

- Same guy as first quote, noting that most Africans succeed based on personal will as opposed to social assistance

"There are numerous conflicts over land, but we are using only 10% of the fertile land on the continent"

-Welshman Ncube, Minister (of what?) from Zimbabwe, He's on the anti-Mugabe side, so he's talking around the country's nationalization of white farmers land.

"85% of intra-Comesa investments come from Libya and Sudan"

-person at press conference. The power of oil is impressive.

"In Zimbabwe, companies that invested in nearby countries survived the crisis."

- Zimbabwean financial entrepreneur

"I'm proud to be a Zimbabwean"

- Same Zimbabwean entrepreneur

"Its not socialism or capitalism, its pragmatism that matters"

- Mahmoud Mohieldin

"Its not about land, labor and capital, its about ideas, people, and last is resources"

- Mahmoud Mohieldin

"15 years ago South Africa was a pariah state, now its often mentioned along with the BRICs"

- Panelist

"If you talk about a place with about a billion people, poor infrastructure, high tariffs, and a difficult business environment, are you talking about Africa or India?"

- Martyn Davies, China Africa Network

My last two days in Egypt

My last two days in Egypt involved a series of company visits. First to a German auto factory that is producing Chinese cars, then to the Suez Industrial Zone, which is being partially (about 25%) developed by TEDA - the company that developed the questionable industrial zone in Tianjin.

I was overall impressed by the Industrial zone (the car factory was kind of pointless), though there are some major problems that I should enumerate.

First the good things:

1. The biggest point is, the Suez Canal is a really important place, and is bound to get more important as trade with the East increases, so the zone is perfectly situated in that way. Particularly as its connected to the Eastern side of the canal rather than the Western side where most of the ports currently are.

2. The biggest non-obvious point, is that Egypt has an excess supply of skilled labor. This is considerably different from most other states in the region, and I think is one of the main factors that is going to draw investors to Egypt. Most any arab can tell you that the country suffers from a considerable brain drain, as you can find Egyptians in high levels all around the arab world, but Egypt itself doesn't exude talent in the same way as Egyptians abroad (this is a clumsy wording of the situation, but more about this later).

3. The country is trying really really hard to attract investors, particularly because they suffer from high unemployment and a young population, which is a bad combination. Greenfield investment, as would be happening in the Special Economic Zone, is considerably less controversial than privatizations (which are also happening).

4. The general trend with tariffs and state involvement seem to be going in the right direction (down), and infrastructure construction also seems to be taking off in the past few years.

Now the bad things:

1. Our trip to the economic zone was a disaster. The Chinese writers were having problems all week, which I didn't really take seriously because some of it had to do with them simply not being aggressive enough at asking for what they want, but because of this last day I can totally agree with their general frustration at the organization of the trip. We arrived at the zone near 4 hours late, then after they told us we had to hurry so we could see everything, we spent nearly an hour stopping outside various nondescript factories so a French TV crew who had just showed up could get video footage. When the Chinese writers finally started shouting that they just wanted to meet with the Chinese company, we finally got things done, but we ended up having to skip the visit to the wind farm that was on the end of our itinerary. The PR company bungled it so badly that after a while a boss at the company we were visiting was just telling people to ignore them (in Chinese). The point though wasn't that "hey look we had a bad PR company" (who other than this I found quite lovely), the point was that they completely failed in marketing their investment destination. One German writer who was with us put it "In Dubai the special economic zone is nothing, but after their presentation you leave convinced that its the most important place in the world; here its probably a good investment destination, but you leave convinced that you wouldn't recommend it to anyone." In other words, it doesn't seem 'reliable'

2. Employee turnover is quite high at the local factories. 3-4% a month I hear. Men are said to be unreliable because they are too aggressively looking for opportunities (so said one Chinese guy, this is a perpetual problem in China too though). Women are supposed to be reliable until they get married - the factory we visited said all their Egyptian managers were women. The zone subsidizes training to cut some of the bite of all the hiring, but its supposed to be a large problem.

3. On a related issue, there is supposedly a shortage of decently educated low-skilled workers. Meaning there is a high illiteracy level and such, which is a problem for training factory workers. The Chinese company said that maintaining the legally required 90% ratio of Egyptian workers was difficult for them.

4. The zone is really far away from a major population center. They are currently providing transport for its workers from one of the close nearby population centers (Cairo and Suez), but each is about 2 hrs away. Later they are planning a full blown city with a population of around 500,000, but that doesn't sound like it'll be built until at least 2015.

5. The place is currently a mess, but hopefully that will get better as buildings start springing up.

6. This has less to do with the Economic Zone than with the general investment climate, but I hear that there is some controversy directed towards the state's privatization and foreign investment schemes (as there always is when socialism is dismantled). With the president planning on stepping down soon it remains to be seen how these projects are going to fare in the transition.

In general though I hear its among the better run of the economic zones that China is setting up on the continent, and I was really quite impressed by the Egyptian management. As opposed to being passive recipients of investment, they are building the Chinese investment into a larger plan, as well as being seriously aggressive about national laws (I hear the Zambian special economic zone is bordering on failure).

Its obvious that Egypt is one of the countries in Africa that has extremely high potential, and, despite the mess at the end, this trip convinced me that the country is on the way to achieving it.

But it still has a long way to go.

Africans are impressive.... or drunk

I feel I should caveat my point about the impressive Africans with noting that the people at the conference split between impressive people that were trying to do something to help their countries, and drunk people.

Well drunk is the wrong word, because I don't think they were drinking, they were just kind of... like drunk people except without drinking. Examples:

1. As we were leaving the dinner, we all piled into the journalist van. Though we couldn't all fit, because two people had just walked in with us. 

"sorry sir, this is a private van," said our wrangler.

"A van's a van," said one of the men with impecable logic.

"but there isn't enough room!" the pr girl replied

"They can take the bus then!"

There wasn't much argument after that (and we had another van that people could fit in), but one of the men who was sitting next to me smiled in that drunk way, and gave an uncomfortable hello.

I found out the next day that I was sitting next to the man in charge of Uganda's new found oil wealth.

2. There was one weird Kenyan man, who in every discussion had to stand up and make a long meandering speech that went no where. He was obviously important because he was on a panel (of business men), but when asked a question about benchmarking government transparency he just started talking about how there are no trees left in Kenya, and how the country used to have the most beautiful trees. Which was rather par for the course when his speeches (in every meeting) was concerned. 

At the airport our plane was delayed. He was talking to one of the journalists, and when he found out the situation he insisted that he shout at the person working there for 20 minutes telling them not to steal her baggage or lose her baggage (she explained in Arabic that the baggage handler should just nod and let him blow off steam).

Most of the people there who knew what they were talking about said that they were disappointed that nothing real was announced, and that nothing major COMESA-wise got done. It was just talking. 

I was more optimistic, but partially because I just went there to learn (which I did), and partially because I saw it more as a place to get more people involved in the progress of individual states as opposed to the whole grouping (it should have been directed towards the entire group, but it wasn't, and I think expecting that is a bit much), and I think many individual states are making impressive strides, and that at the conference they were able to publicize this and involve more people in their successes.

Also.... Is there any person in the entire Western world that realizes that Rwanda has managed to turn itself around into one of the most successful countries in Africa? Its one of those rare examples of a country that's doing everything right, but they live so much in the shadow of the genocide that no one knows it outside of professional investors.

Update: The second man was I hear "like the second richest man in Kenya." He was also considerably older than he looked (he looked about 60, he was actually 75), so he might have just been sort of senile.

Africans are impressive

I'm writing this blog post while half listening to someone talk about Ugandan oil policy. Which is surprisingly the most boring event I've been to so far (I missed the beginning of the DRC guy's talk, which seemed much more interesting). Which gives me much needed time to blog.

I want to write much more about this later, and particularly I want to do a profile of my host, the Minister of Investment for Egypt Mahmoud Mohieldin. Who is a very very impressive person. But what I want to write now, is that I've met a lot of very very impressive African people while I've been here. People who know what needs to get done to help their continent, and know they know what to do. The repeated meme of the conference is "We know the what, we should be talking about the how."

The how is of course the tricky part. Some countries have developed enough of a consensus that the infrastructure investment, financial system reforms, and privatizations have come rather easy to them, though as many noted a lot of the progress is dependent on future political developments (Egypt is particularly up in the air in that regard). Others have had it quite hard. All the Zimbabweans at the conference know exactly what needs to be done, and know damn well that its not going to happen.

Though the obstacles to African development are still there, though they are getting better. But talking to people at this conference gives one the impression that working in Africa is not a risk as much as it is an opportunity. Which is a great thing.

Of course a resort town in South Sinai is a long way away from the areas that require development.

Zimbabweans seem sad

There are a lot of Zimbabwean speakers at the conference. They all seem to be speaking around a little piece of news that just came out.

But only last month was the new law actually implemented by the publication of specific regulations. These require companies valued at $500,000 or more to “cede” a 51 percent share to black Zimbabweans.

Some casually reference being proud to be Zimbabwean while unrelated mention how their country divested to its neighbors prior to the crisis. Others speak about the need to be aware of the local situation when talking about agriculture. No one mentions it directly, but they all seem to know that its a dark cloud hanging over them as speakers at an investment forum.

On a related issue though. HOW THE HELL DO CHINESE COMPANIES NOT GET CAUGHT BY THESE LAWS!

I of course know the answer (politics), but its still annoying.

Qadafi is a wierdo

I should have brought my camera with me. All the booths at the COMESA meeting are somewhat restrained except for the Libyan one that has large pictures of Qadafi is reddish tinted sunglasses.

I want to talk to the Zimbabwean booth, but they seem sad.

In the Dubai airport

Just walked by a bunch of workers from China Hydro sitting on the ground and playing cards.

The Dubai airport feels like a bizarre post-apocalyptic underground Utopia. Except for the post-apocalyptic, underground, and Utopia parts... but I hope you know what I mean. Wealthy people from all the cultures of the world brought together to just wander around and wait for permission to leave.