Now is the time to invest in Africa: Japan's Abe

Japanese Prime Minister Shinzo Abe (right) shakes hands with Ethiopia's Prime Minister Hailemariam Desalegn (centre) as chairperson of the African Union Commission, Nkosazana Dlamini-Zuma, looks on during a joint press conference at the end of the Tokyo International Conference on African Development (TICAD) in Yokohama, suburban Tokyo, on June 3, 2013. The three-day conference on development and investment in Africa, during which Tokyo pledged 14 billion USD in aid, was to draw to a close on June 3. AFP PHOTO  

By AFP
 

 

YOKOHAMA, Japan,

Africa will be the engine for growth over coming decades, Japan's premier said Monday, wrapping up a meeting that saw Tokyo pledge huge aid as it looks to match China's growing involvement.

Shinzo Abe said the continent would be at the leading edge of economic expansion and Japan had to make a commitment in a way that would benefit both sides.

"Africa will be a growth centre over the next couple of decades until the middle of this century... Now is the time for us to invest in Africa," Abe told a press conference at the end of the three-day Tokyo International


Conference on African Development (TICAD) in Yokohama, close to the capital.

"Japan will not simply bring natural resources from Africa to Japan. We want to realise industrialisation in


Africa that will generate employment and growth," Abe said.

"The type of growth the TICAD recognises is not just figures... it (aims to) achieve high quality growth by distributing benefits widely and deeply among people in the society," he said.

Despite relatively long-standing connections, Japan's importance to Africa has slipped behind that of China, whose more aggressive approach has given it five times the trading volume and eight times the direct investment.

Beijing is criticised in some corners for what is sometimes seen as prosecuting little more than a resources grab and for not linking investment with demands for improved human rights or more transparent governance in recipient countries.

Japanese officials have stressed the need to transform Japan's relationship with Africa from one of donor-recipient to that of business partnership, as Tokyo's firms seek to tap a burgeoning market.

Even so, Abe opened the TICAD on Saturday with a pledge of 1.4 trillion yen ($14 billion) in aid.

The cash, half of which was to be dedicated to spending on much-needed infrastructure projects, is included in 3.2 trillion yen that Japan's public and private sectors will invest in Africa over the next five years.

The package, which is designed to showcase Tokyo's commitment to the continent, will include $1 billion aid to be spent on helping stabilise the Islamist-infested Sahel region, for which it would also train 2,000 people in counter-terror activities.

Japan is also aiming to double jobs offered by Japanese firms in Africa to 400,000 by the next TICAD in 2018.

Africa's desperate need for roads, rails, ports and power grids dovetails well with Abe's pledge to treble the value of Japanese infrastructure exports to 30 trillion yen a year by 2020.

The continent's growing middle class also makes an attractive target for Japan's firms, whose domestic market is greying and shrinking.
 

Participants in the five-yearly TICAD on Monday issued the Yokohama Declaration, which picked up the theme of developing Africa's business potential and migrating away from aid.

"We will encourage expanded trade, tourism and technology transfer, and assist the development" of small and midsize local companies, it said.

"We will also support regional integration to expand intra-regional trade and create new opportunities for private sector development and employment.

"Affirming that the private sector is a vital engine of growth, we will support and strengthen the private sector, promote greater private investment, and improve the investment climate and legal and regulatory frameworks."

Participants at the conference -- co-hosted by the African Union, the World Bank and the United Nations Development Programme -- said they wanted to improve agricultural production to address food security and improve quality of life for farmers, who constitute a large part of Africa's economy.

An "action plan" adopted Monday set goals of boosting growth in the agriculture sector by six per cent and doubling rice production by 2018 compared against 2008 levels.

Ministry shelves road projects as State fails to allocate Sh7.5 billion

The Voi-Mwatate Road under repair in April. Construction of 12 road projects has been postponed. FILE 

By EDWIN MUTAI
 

 

In Summary

• Cabinet secretary told the Transport, Public Works and Housing Parliament committee that the roads department will not take on board any new projects except nine that have secured development partner financing.

Twelve road projects estimated to cost Sh97.3 billion have been shelved after the Treasury failed to set aside Sh7.5 billion in the Budget.

A detailed brief submitted to Parliament last week listed the Narok-Northern Tanzania (185 km), Mukuyu-Kisii-Ahero (145km), Eldoret-Kapsabet-Chevakali (95km), Kisian-Busia (104km), Kanyoonyo-Embu (82km) and Iten-Nyaru (52km) roads as some of the projects that will not start in the financial year starting July.

“Owing to the colossal amounts required for road construction viz a viz the allocation received and the burden of the ongoing projects, the following projects, among others with ready designs, will not be taken on board,” said Transport and Infrastructure Cabinet secretary Michael Kamau.

He listed the Kisumu Northern bypass (9km), Mbita-Karangu-Masala (102km), Likoni-Shelly Beach-Vanga (128Km), Kapenguria-Kanyao (83Km) and Baricho and Sigiri bridges as the other affected projects.

Mr Kamau told the Transport, Public Works and Housing Parliament committee chaired by Starehe MP Maina Kamanda that the roads department will not take on board any new projects except nine that have secured development partner financing.

They include the National Urban Transport Improvement Project funded by International Development Association (IDA) to the tune of Sh3 billion and a government component of Sh20 million, the Mombasa Port Area Roads Development Project (Dongo Kundu) funded by JICA at Sh1 billion, the Sh2.4 billion EU funded Merrille-Marsabit road, and the Sh1.25 billion Nuno-Modogashe road.

Fully funded

Other projects that the ministry will commence construction which are fully funded by the government are the Kibwezi-Kitui, Thua Bridge, and Magumu-Njambini, each costing Sh100 million, and the Rumuruti-Maralal roadwhich will cost Sh300 million.

(Read: Treasury denies major projects cash)

Mr Kamau said that the Treasury failed to release Sh3.6 billion allocated to the ministry in the current financial year. He said there were 66,000 kilometres of classified roads in Kenya out of which 14,000 kilometres were national and the others county roads.

“We want to increase the national road network from 14,000 to 20,000 kilometres but we may not achieve the goal in the near future because of financing gaps,” he said.

Mr Kamau asked Parliament to fast-track approval of the new Roads Bill which creates a roads authority in charge of national roads and a standards agency which will be in charge of quality.

Committee members proposed changes to the Bill to retain the Kenya Rural Roads Authority (Kerra) as a national agency for road construction in counties.

“We want the money to remain the way it has been under the Fuel Levy Act. We also want Kerra retained as it is in the new Bill,” said Kinangop MP Stephen Kinyanjui.

Mr Kamau said that the devolution of road functions to counties should be delayed for two to three years.

“It is important that adequate funds be availed to the State Department of Roads to enable it complete ongoing awarded contracts on roads earmarked for devolution,” he said in a brief to the committee.

Mr Kamau proposed that fuel levy funds previously handled by constituency roads committees be allocated to counties.

How noisy open-plan office kills productivity

An open-plan office. FOTOSEARCH 

By SUNNY BINDRA

In Summary

• Research shows that these layouts have negative effects, especially for older employees.

“A well-designed office is a happy office. As facilities managers strive to save space and cash, they’re reshuffling desks and fiddling with temperature gauges. 

All of which has an impact on workers’ performance. Open-plan offices may make some kinds of collaboration easier, but are they more conducive to productivity? What’s the most irritating distraction? And are those state-of-the-art workstations actually more comfortable?

ANA CODREA-RADO Quartz (22 May, 2013)

As a young man, my first job was in an open-plan office in London. I loved it. It was laugh-a-minute listening in on people’s conversations, shouting thoughts into the air, listening to the replies, sharing wisecracks... happy days.

Then I was suddenly seconded to the UK’s Monopolies and Mergers Commission (now called the Competition Commission) and I found myself in my own private office, all alone, with plenty of time to work in isolation and think deep thoughts. I hated it, and couldn’t wait to get back to the noisy madhouse that was my home-base office.

Quartz recently reported on various surveys done on the effects of workplace quality. These days, more than 70 per cent of US workers are in open-plan offices. These open setups reported 62 per cent more sick days on average than one-occupant layouts (as germs spread more easily).

Reduced motivation, decreased job satisfaction and lower perceived privacy were identified as factors negatively affecting productivity in open-plan environments. Apparently, overhearing conversations in the office is very intrusive and distracting for many workers.

Workers who were moved from personal offices to open-plan layouts reported more stress, less satisfaction with their environment and less productivity.
What’s going on?

To understand, note what I specified as I opened this column — I loved open-plan when I was young. Then, interaction and exchange was everything. We were all fresh-faced and exuberant, learning our way in the world, developing a social life. Open-plan beat closed-door every time.

Today, wild horses would not drag me into an open environment. Now that my interest in all-day yakking with my peers is long gone, my work space has got to be quiet, serene and private.

That’s the key. The negative effects of open layouts noted in the recent surveys were way more pronounced for older folk (those over 45). Older people are far more sensitive to noise, intrusion and temperature differences than their younger colleagues.

Note also that my experience was in a time that predated mobile computing devices, instant messaging and social media. These days, people socialise and interact electronically all the time, and have less need for constant physical proximity.

The quality of the office environment really matters. Some studies suggest that quality improvements yield between five per cent and 15 per cent increase in productivity. That’s a lot. So those in charge of designing and maintaining office environments should pay attention.

Too many of us try to pack in as many workers per square foot, fit the cheapest furniture and equipment and the most basic washrooms, and expect people to just get on with it.

Don’t do that. Think carefully about the effect of space, temperature, lighting, acoustics and proximity. These things have a pronounced effect.

 

Assess the age groupings of the people you’re trying to house. Offer a variety of spaces and detach them from status. One size and shape does not fit all, even though it would fit your cost containment programme nicely.

If you’re trying to change the culture of a hide-bound government ministry, for example, open-plan would do wonders in promoting transparency. But you would still need many quiet, private spaces. Offices house thinking humans, not battery chickens.

If you want more than meat out of them, you have to provide them with an environment that makes them comfortable and productive.

Why weather is key in economic growth agenda

A motorcycle taxi operator ferries a passenger on a flooded road in Mombasa following heavy rains last month. There is a need to integrate extreme weather in economic planning to mitigate against negative effects. FILE 

By Justin Ecaat
 

 

Recent floods that wreaked havoc across Kenya, coming in the wake of other devastating weather related events such as the long drought of 2009, may be perceived to result from the much talked about climate change and its impacts.

However, for those  familiar with the flood and drought history in Kenya, there is no doubt that the country has experienced recurring cycles of the two calamities in recent years, thus  the most recent floods could well be part of the recurring and regular pattern of annual heavy rains over the decade.

While many could be inclined  to believe that such extreme flood and drought cycles could be normal events resulting from the ever recurring pattern, and could argue that it may be too soon to conclude that these events are a direct consequence of climate change, the recent National Climate Change Response


Strategy for Kenya (2010) concluded that “the evidence of climate change in Kenya is unmistakable”, while the National Climate Change Action Plan asserts there is scientific evidence that the frequency of droughts, floods, and other extreme weather events has increased in recent years.

Devastating drought

Whether linked or not to the effects of global warming, many in East Africa and Kenya in particular can still recall the devastating drought of 2009 that left nearly 80 per cent of the cattle dead in some areas.

The recent floods make one thing certain — that we increasingly need to factor these phenomena into our development planning and decisions.

As we witness many roads, bridges, farmland, crops, and housing washed away, families displaced, lives lost and livelihoods interrupted at such an alarming scale, the aggregate impact on the economy caused by such devastating floods and droughts requires a re-evaluation of how planning can internalise these phenomena so that their impact on the overall economy and livelihoods can be minimised.  

According to recent media reports, the havoc caused by the rains continues, with people losing their lives in landslides, families left homeless after their houses were destroyed, while many more remain vulnerable should heavy rains persist.

Furthermore, besides causing destruction to existing assets, the floods have disrupted productive human activities including transportation and farming in most of the affected areas. For example, farmers have been forced to delay planting.

Education has also been disrupted with several cases reported of how schools have been  submerged, books destroyed, learners displaced and where still intact, school infrastructure is  used as shelter by displaced people. Development planners can draw lessons from these events.

As the country continues on its path to develop and aspires to attain a two digit growth rate, with many infrastructure projects already under design and/or implementation in various parts of the country, the fact that such projects are vulnerable to the devastating impacts of extreme weather events needs to be considered in development planning.

As has been experienced, floods swept away bridges, submerged newly built roads and interrupted transportation  along highways linking commercial hubs and countries.

The floods also carried excessive silt into reservoirs and dams or washed away crops and irrigation systems in which significant  resources were used to establish.

Without argument then, there is a need to increasingly internalise these phenomena and to factor in the possibility of such extreme weather events when designing infrastructure or other projects. 

Interventions that can be employed include designing bridges with larger culvert sizes, promoting catchment area management programmes and strengthening community capacity to undertake adaptation measures to respond to either extreme droughts or floods.

For example, while most areas of the country could be classified as water stressed, we should nevertheless not lose sight of the fact that infrastructure, such as roads, in those areas should be designed with a real possibility of extreme floods occurring.   

For rural communities, it may be essential to re-evaluate settlement in low lying flood prone areas as well as on steep slopes susceptible to landslides during peak rainy periods.

Under the new administrative system, which devolves governance to the county authorities, additional responsibilities may include programmes such as tree planting, besides ensuring infrastructure projects are designed to withstand extreme weather events.

Strengthening of early warning systems and disaster risk management capacity will surely be required to avert the devastating effects of similar events in future.

In Kenya, the government has shown some level of preparedness and considerable commitment to respond to these disasters, but more could be done to strengthen the capacity to respond to similar events and to build community resilience.

There is also a need to allocate additional  resources to monitor  and generate information that will enable better understanding of the current trends in extreme weather events especially as we enter an increasingly climate constrained world.

Mr Ecaat is the principal environmental safeguards specialist at the African Development Bank based in the East Africa Resource Centre, Nairobi.

Actis land case with forest agency set for fresh hearing

Court issues two orders: One, restraining the Kenya Forest Service from interfering in the construction and the second, stopping the construction. 

By GALGALLO FAYO
 

 

In Summary

• Justice Mary Githumbi said two orders issued by the court, one restraining the Kenya Forest Service (KFS) from interfering in the construction and the second stopping the construction; are conflicting.

A High Court judge has directed an application seeking to stop the construction of a Sh2 billion office block on Nairobi’s Ngong Road to be heard afresh, saying that the court erred when it issued conflicting orders.

Justice Mary Githumbi said two orders issued by the court, one restraining the Kenya Forest Service (KFS) from interfering in the construction and the second stopping the construction; are conflicting.

An ownership dispute pitting the Kenya Forest Service and private equity firm Actis has stopped construction of a 15,000 square metres office block that started in October last year and was to end in December this year.

“On the issue of the status quo order being in conflict with pre-existing orders, this court confirms this position. Indeed, the court acknowledges that in extending the interim orders and at the same time issuing the status quo order, this court did in fact issue two conflicting orders,” said Justice Githumbi in her ruling.

Actis moved to court in January saying guards from the Kenya Forest service had invaded stopped the construction claiming it is a gazetted forest. Justice Eric Ogolla heard the case exparte and gave interim orders lasting until the next mention date, restraining KFS from interfering with the construction.

(Read: Actis seeks orders to complete Sh2bn complex)

On January 22, Actis made another contempt application against KFS director David Mbugua claiming that the guards have continued to occupy the land despite the court orders.

When contempt application came up for hearing in February, KFS requested adjournment saying that it will seek an alternative dispute resolution mechanism, which was adjourned until April 4.

Meanwhile on March 13, KFS applied to the court to lift the injunction issued by Justice Ogolla arguing that the order was to last until the next hearing date and that Actis has accelerated the construction, which is damaging the forest.

Justice Mumbi on April 4 when the case came before her for mention extended the orders restraining KFS from interfering with construction and a separate new order stopping the construction decision which was challenged by Actis.

“On the court lacking jurisdiction to make substantive order during a mention, the court agrees with the plaintiff that this is indeed the correct position in law,” Justice Mumbi agreed with Actis.

Actis has said it was losing Sh24 million monthly due to the stalled construction.

Actis, which has raised Sh24 billion from investors for ventures in Africa’s real estate, says it originally acquired the land from the Jockey Club of Kenya — which was offered the disputed land by the colonial government in 1927 in exchange for property that is the present day Kariokor area.

The PE fund was intending to host banking halls, conference centre and retail zone, an expansion of the Nairobi Business Park that Actis launched in 2004, deepening its investment in Kenya’s lucrative real estate market.

The PE fund has also started a Sh12.4 billion housing project along Thika Superhighway, dubbed Garden City, on a 32-acre piece of land that is adjacent to and previously owned by East Africa Breweries Limited.

 

The mall will include a 50,000 square metres retail mall, commercial premises, 500 homes, and a four-acre central park—the biggest in the region. The mall will be bigger than the Sarit Centre (30,000sq metres), Junction (26,000sq metres), and Westgate (30,000sq metres).

Nigerian rating agency targets Kenyan banks

Central Bank of Kenya in Nairobi. CBK wants banks to raise capital buffers by up to 2.5 per cent of deposits. FILE 

By John Gachiri

Newly licensed Nigerian credit rating agency Agusto & Co is targeting Kenyan banks as its major clients, a senior manager of the firm has said.

The Lagos-based firm which in February became the second credit rating agency licensed by the Capital Markets Authority (CMA) says Kenya’s steady economic growth would increase the number of firms seeking to raise money, hence growing demand for its services.

South African company Global Credit Rating (GCR) is the only other firm licensed by CMA to assess creditworthiness of firms seeking to borrow or raise capital in Kenya.

Agusto & Co senior manager Abisodun Soetan said the relatively small asset and capital base of Kenyan firms means they will require a lot of fund raising.

“There are opportunities in the banking sector as Kenyan banks migrate towards full implementation of the Basel II and Basel III capital accords,” said Mr Soetan in an interview.

“We believe there are opportunities in the corporate debt markets, where credit ratings should improve investor confidence, encourage new funding as well as increase liquidity and trading in the secondary market,” he added.

The Basel accords are a set of guidelines meant to strengthen banks’ capital adequacy ratios, quality of assets and risk management.

Kenyan banks are currently implementing some elements of Basel II, which address the quality of assets on a bank’s books in addition to capital adequacy.


Basel II, for example, looks at whether a loan is secured by cash or land.

The former is of a higher quality over the latter due to the ease with which the security can be liquidated in case of default. Chief executive of the industry lobby Kenya Bankers Association, Habil Olaka, said Kenyan lenders are implementing “rules such as buffer capital where a bank is supposed to create and build over time,”

(Read: Credit rating bureaus target EAC expansion)

In June the Central Bank of Kenya (CBK), the industry regulator, required banks to raise their capital buffers by up to 2.5 per cent of their deposits by the end of this year. This is meant to improve their stability in during economic shocks.

Rating agencies will be expected to assess banks’ strength as borrowers and also the quality of the securities they issue such as a bonds. Kenyan banks are increasingly going to foreign markets to source for capital and have also expanded across borders, which require them to be credit rated.

“To elbow your way with other players you need a way to be compared and that is through a rating agency,” said Mr Olaka.

Equity Bank has already received a rating from GCR ahead of its planned borrowing. GCR assigned Equity Bank with an AA- rating or a stable outlook. KCB is also looking for a rating. The higher the rating the lower the borrowing cost for the issuer.

Analysts said that as the economy picks up banks will have to increase their capital, either by going to shareholders to add more money through rights issues or issuing bonds, either locally or internationally.

Tullow’s Sh600m tax to Treasury signals oil windfall

An oil rig in Turkana County. FILE  

By GEORGE NGIGI
 

 

In Summary

• Tullow Oil paid $6.3 million (Sh538 million) for what it classified as “other taxes”, which include value added tax, pay-as-you-earn, withholding tax and other government payments of $950,000 (Sh85 million), which include land rentals and training allowances.

British exploration firm Tullow Oil paid to the government more than half a billion shillings in taxes last year, signalling a cash windfall that could come with discovery of commercial deposits.

In its annual report released last week, Tullow Oil said that it paid $6.3 million (Sh538 million) for what it classified as “other taxes”, which include value added tax, pay-as-you-earn, withholding tax and other government payments of $950,000 (Sh85 million), which include land rentals and training allowances.

The firm spent $28 million (Sh2.4 billion) on local suppliers and it expects the amount to rise to $800 million in the next phase of its investments.

“The challenge for Tullow is to manage this expenditure in terms of transparency, supplier due diligence and standards, while maximising local content,” said the company in the report.

The amount spent in the country is, however, dwarfed by that spent in Uganda and Ghana, which are already involved in commercial production of Oil.

Tullow paid Sh14 billion ($175.4 million) to the Ugandan government in taxes with Sh12 billion being corporate tax and Sh47.4 billion ($557.8 million) to the taxman in Ghana. This underlines the magnitude the commercial viability of the oil find in Kenya could have on the government revenues and local business activity.

Last year, the banking sector contributed Sh35.6 billion to the taxman.

Tullow has a total of 59 employees in Kenya, with 51 being locals compared to 281 in Ghana and 177 in Uganda. In what will further heighten speculation of the commercial viability of the wells in Kenya, Tullow Oil is set to bring its board of directors for a visit in Kenya.

The company raised issue with water availability stating that they have already started assessing sources of water for mining should they reach the commercial development phase.

“We are mapping local water sources through a hydro-geological survey which will establish a baseline of water sources in the region,” said the firm.


Last month, Tullow said it had achieved close to commercial quantities of oil in Twiga South-1 well.

In February this year, the company said it had “successfully completed (tests) with a cumulative flow rate of 2,812 barrels per day…the first potentially commercial flow rates achieved in Kenya.”

(Read: Tullow eyes commercial oil production in Kenya)

At the Ngamia-1 well in Block 10BB in Kenya, the first of six drill stem tests have now been completed but further tests are ongoing to determine commercial viability.

The International Monetary Fund has projected that Kenya is likely to start producing oil in six to seven years. Last year, the company experienced two oil spills in the country, which were, however, classified as insignificant.