Africa Emerging via Business-to-Business meetings - Les rencontres Africa 2016

Introduction

Earlier this year the Groupe Jeune Afrique in collaboration with Rainbow Limited and the African Development Bank(AfDB) had organized its 4th annual Africa CEO Forum held in Africa (Abidjan) for the first time ever under the theme “New realities. New Priorities”. This was followed by the WEF organized annual WEF on Africa held in Kigali in May under the theme "Connecting Africa’s Resources through Digital Transformation." With the outcomes of these two major African Business Fora in mind I embarked on Thursday 22nd of September with the first TGV train from Geneva to Paris to attend in the Headquarters of the so-called “Conseil national économique, social et environnemental (Cese)”, which had contributed to Général de Gaulle’s downfall, at the Iéna square [coincidentally named after the place where Napoleon achieved one of his greatest military victories 210 years earlier], Les rencontres Africa 2016. I was eager to attend this event because it had been marketed as “The most important economic event about Africa, organized in France” under the auspices and patronage of the Ministry of Foreign Affairs and International Development, in joint collaboration with AfricaFrance and the Economic, Social and Environmental Council (ESEC)”. The Africa 2016 meeting aims to actively promote “economic and human ties between Africa and France for a shared future, challenged by increasing competition from South-South cooperation from southern powerhouses such as Chindia; BRIC; and more recently from the MINTs as well as from Japan. In this blog I will share my observations from the various sessions which I attended and express my take on whether this important objective of contributing to reversing France’s declining market share in Africa from 10.1% in 2000 to only 4.7% in 2011, actually was achieved in light of the other major annual Pan-African meetings.

My first impression was positive, although mitigated somewhat by various CSOs vocal protest outside the old ESEC building against particularly Bolloré Africa Logistics’ adventure primarily but not exclusively in Western Africa. Having spent the lionshare of my previous professional career since 2000 working for various international organizations (IOs) it was the Forum’s focus on “Doing”, rather than the typical IO focus on “Decisions” based on lowest common denominator of the IO’s member states, that caught my immediate attention. Every morning I start the day by reading the on-line version of Jeune Afrique, which leaves me with a mixed feeling of cautious optimism when reading the Business Section and Pessimism when reading about many African’s countries domestic policy. At this “Les Rencontres Africa 2016” event, the large majority of the participants were from the private sector, of which at least 400 represented African businesses out of the official 2347 registered paying participants. This composition of participants could only leave most observers feeling that the current bear market eventually again will be replaced by a more bullish African market. In other words, Africa’s (re)-emergence [i.e. when Africa was the net creditor to the rest of the World] as one of the future driver of global growth is inescapable and irreversible, especially given the following growth determinants: Demography, arable land, natural resources, including fresh water, ICT revolution e.g. providing access to technological progress e.g. via MOOCs offered by the Best Universities online for everyone, (planned megacity) urbanisation, etc., or in the words of the French Primeminister Mr. Manuel Valls “This century will be that of Africans.”

Besides the fact as with the two other above mentioned events WEF Africa and AfricaCEOForum regrettably the Africa 2016 meeting in Paris was likewise almost exclusively, focused on the large French and African groups such as Bolloré, BNP Paribas, Royal Air Morocco, Axa etc., especially when it came to having a booth at the exhibition stands. But this large-scale enterprise focus, was thankfully somehow rectified by the placement of 80 tables in the same exhibition area, which enabled the organization of around 3700 BtoB meetings, according to the organizers, to facilitate business partnerships between French and African Companies, on many different sectors, as well as facilitating networking between Company managers, communities and professional organizations. Perhaps more African SMEs would have been present had the meeting like the AfricaCEOForum and WEF Africa been organized on the African continent rather than in the posh 16 Arrandissement of the French capital, to lower the costs of participation, including travel and hotel. Although the official website was made in both French and English, it was only one female replacement of Mr. Stefan Nalletamby from the AfDB who spoke English throughout the entire two day event. I am not sure any African companies from the English speaking countries were present, since I didn't pay for the expensive EUR200 Who-is-Who guidebook intended to facilitate the B2B meetings? So, if the event aimed to overcome the former colonial division of Africa into different language zones, then I must say that the organizers utterly failed compared to WEF Africa and AfricaCEOForum, and this despite the fact that large French companies like Orange, Bolloré and Total already have ventured into Anglophone Africa. Similarly, the number of women business leaders invited as panellists was abysmally and unacceptably small. This needs to be rectified for the next event. Finally, I found it regrettably that the Who-is-Who guide with all the contact persons was sold for more more than EUR200 before the meeting and for EUR100 during the meeting. Both versions were excessively expensive, albeit the hardcopy guide, as well as the Cutting-edge technological tools used to facilitate meetings, were both very well done, and probably very useful for setting up the business-to-business meetings before, during and after the event.

Since, I attended the Africa2016 event in my sole capacity as a recently turned independent consultant/advisor on (regional) trade, (private equity impact) investing and finance (PPPs), my account of the “Les Rencontres” event will exclusively focus on the 3rd objective namely the “Production and distribution of information with a strong added value and an innovative content through high-end conferences and lectures,” especially since these contents will be developed during the forthcoming 2017 Africa-France summit in Bamako.

Six main central topics vital for the Africa development lied at the core of the event and were included within the organisation of plenary conferences held in the 1937 Palace of Jena’s hemicycle shaped conference room of three hundred seats covered with a double dome, of which I attended on day one the following events: “Digitalization, lever for Africa’s economy”; “What financing for business”; and “Corporate Partnership and shared Growth”, and on the second day: “Conditions for the success of SMEs in Africa”; “Energy and renewable energies, Africa’s future”; and “Africa’s emergence.” In addition to those plenary sessions a number of simultaneous more practical and/or technical workshops were run, of which I attended: “Public Private Partnerships (PPPs) in Africa: best practices (to be addressed in my next blog); and the last day “Business Environments in Africa”; “Enterprises financing tools” and “Diaspora human capital and investment” amongst many other interesting parallel side events. These workshops were very often much more pedagocial in nature than what you would experience attending IOs fora like the on-going WTO Public Forum in Geneva, where experts exchange the latest ideas/findings/practices amongst themselves. In what follows I will discuss some of the main takeaways from the sessions that I attended.

Digitalization, lever for Africa’s Economy

The Togolese Minister of Post and Digital Economy, Ms. China Lawson talked about how my former employer the AfDB is supporting a digital payment project “AGRIPME” (Agri Porte Monnaie Electronique), which is a joint project of the Ministry of Agriculture and the Ministry of Digital Economy in Togo aiming to provide subsidies to farmers through electronic wallets provided by mobile network operators. To date, 76,522 out of the 150,000 small-scale farmers have been identified and registered, allowing them to benefit from a US $1.3 million subsidy to buy inputs. The Government is essentially aiming to establish a secure database of small-holder farmers, the digitalization of input acquisition and the selection of input suppliers for fertilizers distribution. This innovative input distribution mechanism is based on the fact that Togo is among of the lowest users of fertilizers in the world. The long-term impact of this digital payment innovation resides in an opportunity for more than half the population to be recognized in the financial system and aspire to additional financial services and improved well-being. The Togo e-registration of small-scale farmers is encouraging as it demonstrates the role and potential of the private sector in catalyzing the agricultural production by digitally empowering a traditionally excluded portion of the population, making them more attractive to financial institutions

Michel Reveyrand-de Menthon, Advisor to the President in charge of Orange’s international relations talked about Orange’s strategic objective to be the partner of the digital transformation of the African continent through its global approach – currently present in 20 countries with 20,000 staff, and US$1 Bn investment p.a. and its long-term engagement on the African continent. He also mentioned that Orange works with ad hoc structures – incubators supporting African start-ups which is a crucial aspects of the ICT revolution. Especially the growth in the number of mobilephones has been spectacular with 1:2 Africans possessing a mobile phone. However, the iPhone is currently owned by only around 20%, which is not enough to further develop all the business and life-changing applications. He mentioned the importance of the training of African citizens in this regards. He also emitted a warning about the existing challenges to the business environment, which still are great, and which he believed had deteriorated in recent years. He warned African governments’ that it is not necessary to increase the taxation on foreign telecoms (that is, ICT supply affects government revenues through income taxes on companies), which already constitute an important share of certain governments’ annual budget, to address the short-term public finance crisis related to the lower commodity prices, in order to avoid that this quick fix will have long-term negative consequences on the host developing countries (HDCs). Another issue is the lack of predictability of the tax regime. The commodity crisis has brought about an increasing conflict between short-term and long-term interests, because the host governments’ seem to have taken a short-term perspective. This has led to tension between foreign investors and HDCs, which complicates business development in those countries. One solution to this public-private cooperation issue has been the establishment of a Working Group on ICT within the France-Africa framework – to reinforce the partnership between ICT companies and the public sector – aimed at addressing the problem that not enough exchange of information/knowledge between key actors takes place, in order to get out of the current deadlock.

Tony Smith – the president director general of Limitless Holdings highlighted that access to equipment is still a major challenge in Africa. It is either very expensive or completely inaccessible. Consequently, we have witnessed an increasing digitalization of the content of the curriculum in the educational system, because a lot of schools are either not well-equipped and/or don’t even have necessary school teachers. The uploaded curriculum, in turn, becomes accessible via the internet / the iPhone. This strategy will surely contribute to the development of a solid knowledge economy e.g. via the development of the new (electronics) industry. McKinsey predicts that by 2025 Africans could be buying seventy-five billion dollars worth of goods and services online annually. As Tony Smith emphasized the Amazon.com experience and concept can and is being applied in Africa. There are millions of people with growing discretionary income, but few formal retail stores per capita. You also see it at global airports, where Africans are lined up with heavy luggage, full of products they cannot easily find back home. Limited Holdings came up with an interesting local logistic innovation – ICT dependent containers – where the customers only need to possess an electronic address rather than physical address and have permanent access to internet in order to receive the products bought via on-line purchases. However, it is widely believed that Amazon and its Chinese counterpart, Alibaba, are planning to enter Africa in earnest probably to take advantage of the fact that this demand of the rising African middle class is higher than the existing supply due to lack of physical shops. It was underlined that there are more Africans accessing internet than US citizens and more Nigerians accessing the internet than French consumers most frequently via the mobile network. It was suggested by Tony Smith that the first delivery is absolutely crucial for gaining the necessary confidence in “modern” e-commerce transactions – and to achieve that the customers pay upon delivery of product.

It was generally agreed that Africa’s total digital transformation to a large extent will be due to the digitalization of the 54 economies. Development of websites and applications could be done by developers, which have received just a few months of training instead of undergoing long expensive higher education in classical class rooms as in the 20th Century. By 2050 Africa will have around 2 billion inhabitants and there will be a need to train at least 1 million youth per year in ICT related skills, which is more than 10 times what France currently educates. At the same time it is important that at least 15% of value added (VA) from the ICT industries are retained on the African continent via innovation. The case of South Africa, where ¾ of VA remains, was highlighted. In other words, creating an ICT Ecosystem in Africa will contribute tremendously to the development of Africa.

Benoit Thieulin, Director General of La Netscouade and member of CESE predicts that the ICT will distribute powers further away from those who hitherto monopolized it and thereby empower the citizens. Where there are less physical infrastructure – a new form of infrastructure will appear, e.g. distribution connectivity, financing (e.g. mobile banking/money), services (e.g. diffusion of the media), access to information (e.g. sellers of fishfarming products). What I found particular interesting is the prediction that ICT will have creator impact on the education sector- currently not sufficiently developed in Africa. It will not be possible to educate enough trainers to teach the growing student body. One solution is found in a Senegalese Incubator – one amongst 300 technology hubs that already exists across the continent – where a Start-up has digitalized all the classes from 6ieme to Terminal. This has allowed the pupils to access knowledge through the online courses. Even allowing 10% of the population to have access to these ICT applications will have wide transformational ramification on African societies' way of life and all its sectors. Currently, there is already an over-representation from Africa on the MOOC platforms like Coursera & EdX which signals African citizens quest for knowledge.

Quel Financement pour les entreprises? / What financing for Business?

The next plenary session, moderated by Jean-Michel Severino, addressed a topic that was at least as important as the ICT revolution. One of the panellist was Alexandre Maymat, Société Générale’s (SG) director for Africa – who told the assembly that the banking sector is far from providing the financial resources needed to contribute to growth, despite the number of banks increasing substantially in the recent years. In the case of SG the number of clients and agencies have undergone a spectacular growth of 5-7% p.a. with the number of agencies jumping from 200 to 1000 agencies on the continent at a higher rate than the GDP growth. SG’s clientele has been expanded by changing the business model from one that previously only accompanied the development of the large-scale enterprises, to one that now increasingly support the SMEs. Moreover, the financial services of SG to African clients such as E-banking, mobile banking and trade finance are now similar to the world standard. But he also warned that since the SMEs are smaller and less capitalized the financial sector in Africa is more risky than in the OECD countries. Consequently, SG is the first partner of AFD and other IFIs in providing credit to smallholder farmers operating in value chains. The audience was informed that SG is pursuing more partnerships with more players to support the SMEs and to be closer to the field, e.g. in Senegal through the Alternative Bank.

Unlike SG, Amaury Mulliez, Assistant Director General of Proparco informed the assembly that this French DFI is more focused on the long-term interventions in Africa and how the financial system can be developed as in the OECD. He talked about how the DFIs can move from the role of a direct or indirect financier of the economies, towards the next stage of the development of a more developed and diversified financial market financing the real economy. He pointed out that domestic credit has been increasing, but it still stagnates at around 50%. Consequently, the banks are confronted with issue that all the financing of the economy doesn’t necessarily go through the banking sector. He further pointed out that due to continued demographic growth; increased pension and insurance contributions (still less than 10%); increased banking, and insurance contribution (less than 10%) more liquidity will arrive on the market place. However, the liquidity is still too underemployed because it doesn’t sufficiently transform savings into credit. Proparco is working towards providing a guarantee if more of that savings is invested in the real economy. He brought up a very telling statistics, namely that it is estimated that 40% of Africa’s population actually is able to save, but at the moment it is only 17% of the savings which is being collected. In sum, currently there is a big difference between potential and actual savings in Africa that need to be addressed through the emergence of the intermediary financiers, so that local savings can finance local investment.

As I am personally and professionally in the process of moving from the DFI industry towards Venture Capital & Social Impact Investing Private Equity industry, I was with great interest looking forward to the intervention by Herve Schricke, President du Club Afrique, Association Française des Investisseurs pour la Croissance (AFIC) representing 1/3 of France’s private equity investment (PEI). He started by saying that Venture Capital for start-ups in Africa is almost none-existing and that long-term financing is rare in Africa. It is important to mobilize the necessary competency to support enterprise development.

While he mentioned that around 10 Bn in private equity had been invested in Africa in 2014/2015 he also warned that PEI Statistics are not reliable and that it is better to talk about PEI trends rather than statistics. He quickly laid to rest the myth about there being too much money chasing too few bankable projects in Africa. Instead, it is a question of timing and raising the capital to be invested. He explained that the focus is on SMEs with different maturity, however, start-ups is almost non-existing although he optimistically believed that this was about to arrive since the first significant projects are being put in place coupled with a huge youth population with great expectation of the future. Regarding Private Equity for the SMEs and Large-scale enterprises (LSEs), there are currently 250 VC&PE investors in Africa, however,  what is missing is the necessary experience and expertise as well as a conducive juridical framework. Furthermore, he rightly pointed out that growth oriented enterprise do not develop only locally but given the smallness of the local markets tend to develop at the regional level. Therefore, there is a great need to pull down the regional trade and financing integration barriers. He recommended that it would be necessary to quickly train people who are able to exercise this VC&PE profession. To address this skills gap, he advertised that in January 2017 there will be VC&PE training in Dakar as well as a University course within the next 18 months. Jean-Michel Severino added that while there is a big appetite from African savers to invest in PE, there are few instruments to enable this to happen, which will be addressed further below.

Isabelle Bébéar, International Director at Bpifrance mentioned that like with SG and Proparco, BPIFrance also do co-financing of projects. Regarding Investment funds in Africa she mentioned that there are  many foreign institutions/investors but too few African investors. The capital investment sector is the easiest to address, but other sectors are simply not sufficiently developed. It is therefore imperative that Africans themselves take the lead to give the foreign investors the incentive to enter. There is a lot of capital in SSA, which is not sufficiently mobilized. With the increasing wealth creation in Africa there is therefore a need to mobilize the private local savings in order to support the local SMEs while developing the VC&PE industry in Africa.

Société Générale’s representative also mentioned the need for a proper title deed legislation in order to develop Africa’s housing market. Mortgage loans have two components. One is the promissory note, wherein the signors promise to repay the amount borrowed. The second part is the mortgage, which legally pledges the home as collateral, or security, for the loan. Therefore, all mortgage lenders prefer -- some will mandate -- that every borrower appears on the title deed. In other words, no development of mortgage lending in Africa without Cadastre reform. Africa needs a lot of long-term credit investments given the current great gap, but also needs more confidence in economy to encourage depositing the money. The lack of commercial tribunals was also raised as a binding constraint. A key statistics was flagged by SG, namely that 97% of financial flows taking place in cash in sub-Saharan Africa (SSA). It was emphasized that the costs of risk is higher in Africa because of the smallness of SMEs; the lack of capitalization, the vulnerability because of a market condition where there is a concentration on few clients or suppliers. However, Alexandre Maymat added that SG’s profitability is sufficiently high to absorb the crisis in fragile countries, which affects its interest rate level. In fact, he stated that the interest rates has been falling by 100 basis points every two years! Another important binding constraint was raised by Lucovic Subran, chief economiest of Euler Hermes who stated that while 60% of people in France don’t have financial literacy it is only 5-6% who have access to higher education e.g. in Senegal. Consequently, given the very little training on basic concepts such as entrepreneurship there is a need for pedagogical work to reach financial literacy in Africa. This is hugely important given the partnership between Private Equity Investors and local entrepreneurs. Hervé Schricke rightly suggested that the creation of mutualisation (i.e. pooling arrangement for easy access) would enable more access to long-term financing for SMEs in Africa.

Corporate Partnership and Shared Growth

After having attended a parallel side-event on the PPPs in Africa best practices e.g. featuring my former AfDB colleague and acting CEO of Africa50, Mr Alasane Ba, which I will discuss in my next blog, the last event that I attended on day 1 was again a plenary session in the hemicycle this time on Corporate Partnership and Shared Growth

The moderator Frédéric Maury, Chief economic editor of Jeune Afrique, started by asking a specific question to Mr. Lionel Zinsou, co-President of AfricaFrance, why AfricaFrance (for a shared growth) has been established? This shouldn’t be confused with Françafrique a portmonteau of France and Afrique used to denote France's special relationship with its former African colonies, which today has a pejorative connotation since the term is often used in a negative sense to criticize the allegedly neocolonial relationship France has with its African former colonies.

Decided at the Elysée Summit on 6 and 7 December 2013 bringing together French and African Heads of State, "AfricaFrance for Shared Growth" aims to strengthen relations between companies in France and across the African continent on a partnership basis for sustainable and inclusive growth. Lionel Zinsou in his very long answer e.g. explained that enterprises also have their word of saying in development and they could lobby to move the governments towards the strengthening of entrepreneurship. In other words, AfricaFrance aims to assemble French and African enterprises in order to jointly move Africa’s agenda forward and to give a social content to the African growth story. To this the Advisor to the President of the AfDB in the panel talked in English as mentioned above about how the AfDB is trying to address the issue of structural transformation considered a major obstacle to inclusive growth through the so-called high five approach. Another key takeaway point was raised by Jérémie Pellet, assistant director general at AFD, who stressed that ODA no longer can be carried out as it was 20 years ago. The Development Agencies need to work more closely with the private sector, both enterprises in the North and in the South, as Proparco already is doing. It is important to accompany the SMEs and the start-ups in Africa. It is also important to make sure that the LSEs take into account the needs of the South. This implies a new partnership and more sensitive approach. Emmanuel Chain – President HEC Alumni summarized the plenary session and ended by marketing the Made in Africa magazine established in collaboration with a Magazine in Côte d’Ivoire, which aims to show-case success stories thereby contributing to enrich the enterprise culture in Africa. These were my main take away messages and observations from day one of the Africa 2016 business event.

Environnement des Affaires en Afrique / Africa's business environment

Most of the morning on the second day I spent in room full of lawyers to learn more about OHADA, which was installed 23 years ago as a legal jurisdiction in 17 french speaking African States, with the exclusion of Guinea Bissau and Equatorial Guinea, considered to be superior to what is found in Europe in the last 20 years and other regional legal systems due to harmonization of business law and standardization in the laws in the member states. It was underlined by Mr. Louis Degos, member of the National Bar Council, that the continued evolution (lately revised in 2008) and modernization of the OHADA Treaty with its Implementing rules and Uniform Acts permits to secure business and accompany business creation and development within the OHADA jurisdiction. A positive side-effect from the falling oil prices is that it has led the oil exporting African countries to strive more seriously than in the past towards diversifying their economies and improving their business environment. This has led to better judicial visibility when it comes to OHADA business law, e.g. with simplified procedures, more flexible rules etc. It was also highlighted that OHADA is the only system that combines a uniform arbitration act and an arbitration center. In other words, OHADA is both a cassation court for the overall judicial systems and an arbitration center with a settlement. It was interesting to note that 45 African States actually have signed the investment arbitration, which thereby makes it more widespread than even the human rights of trade arbitration. When it comes to the International System’s Applicable law it was repeatedly stressed that the foreign companies don't want to apply the law of the host country. Conversely, the local player don’t want to be subject to international law.

From the very technical and long morning session, what I found most interesting seen from a Social Impact Investment / Social Responsible Investment perspective was the very good presentation by Véronique Tuffal-Nerson, Avocat Associé chez SCP Tuffal - Nerson Douarre & Associés, on the topic of the link between economics and law with a focus on the organization of globalization based on the rule of law. She mentioned that the application of the rule of law at times had been questionned, but since 1976 when the OECD provided its first series of recommendations for the Norms of good practices for Multinational Enterprises (MNEs), there has been an increasing recognition of human rights in international business affairs. MNEs have increasingly been hold to account regarding the respect for fundamental rights throughout the value chain and been subjected to pressure to take the necessary steps to bring an end to abuses. The subject has also been dealt with within the UN’s Human Right Council on the convergence of universal principles: Such as the obligation to protect people whose rights are being violated; that enterprises avoid negative social and environmental impacts of their activities. She mentioned that this year the French National Bar Association had published a Practical Guidebook for lawyers on how to respect the principles of human rights in business, which unanimously was adopted by all the members. She also talked about how the European Council uses soft law (i.e. recommendations) to encourage each Member State to transpose its recommendations into national acts to put a constraint on enterprises operations in violation of ESG standards. The African Union Commission (AUC) has also followed suit when it comes to Enterprises and Human Rights in order to support respectable practices and encourage the enterprises to integrate human rights into the company’s strategy. She e.g. referred to the Kofi Annan Fondation’s work on sustainable development and illicit financial flows.

Stratégies et opportunités d’affaires des diasporas Africaines : l’exemple de la région de l’orientale au Maroc

The second morning session before the lunch cocktail was a very professional investment promotion of Morocco’s Oriental (North Eastern) Region, based upon a 18th of March 2003 Initiative launch via a speech by the King of Morocco the objectives of which all have been accomplished. The provincial authorities provide support to enterprises willing to invest in this region adjacent to Algeria. An investment fund oriented towards SMEs have been created too. The investment promotion event focused on the regions’s more than 1 million strong diaspora constituting almost 30% of the region’s total population of 2.3 Million inhabitants. The Moroccan promoters mentioned the EU-Morocco Mobility Partnership signed June 7, 2013 between the European Commission, the Moroccan Ministry of Foreign Affairs and Cooperation (MAEC), and nine Member States of the European Union (EU) including France. One of its initiatives is the Sharaka project (2014-17). This project aims more specifically e.g. to:

·      Provide the Moroccan authorities with a better understanding of the characteristics of the main communities of Moroccans in Europe and support the design and implementation of programmes to mobilize their human, social and financial development for Morocco (component 2);

·      Strengthen the capacity of the Moroccan authorities, both at national and local level, to support the socio-economic reintegration of returning migrants in Morocco (Component 4).

It was very clear from the series of promotional presentations that this Moroccan region, considered a gateway between Europe and Africa, needs the skills and investments of its diaspora and that it is willing and ready to receive them back home despite an unemployment rate of 17%. What was useful from attending this event was the presence of a team of local government leaders fully aware of the role of diaspora investment as a major priority issue, a topic that I will further elaborate in my blog that will follow the next blog on PPPs in Emerging markets. Here it suffice to remark that for the realization of (local) public policies its crucial to facilitate the reception of the foreign diaspora investor. This should be done by fully coordinating the work of all relevant public departments for the implementation of the public projects. Another question which the local government needs to ask itself is how to fully benefit from the diaspora knowledge base beyond its savings. In my view what I witnessed was clearly a case of good practice when it comes to promoting and encouraging the development of Morocco’s Oriental region based on meetings to highlight the peculiarity and attractiveness of this region hitherto overshadowed by the regions facing the Atlantic coast. This is done by reaching out to the diaspora to encourage them to invest in their home province through enthusiastic facilitators as those promoters we heard on this occasion. One way to embed the diaspora in Morocco’s regionalization is to apply a single window approach and local contacts. Another aspect I found very important for Morocco’s overall structural transformation is the focus on sectoral diversification of the regional economy encompassing industrialization e.g. via technopolis; agribusiness development; logistics; tourism; renewable energy; and mining considered the 7 support engines of the regional territorial development strategy within an incentive framework e.g. with respect to land laid out and ready for investment (see discussion above on the importance of legal title deeds); Financing (e.g. Credit Guarantee and Investment Fund); tax exemptions etc.

To summarize attending this session I was witness to the adoption of a regional/local investment strategy specifically targeting diaspora investors, which in my view could be considered best practice to be replicated by other SSA regions. Especially, the Development of the Lagoon Marchica as an integrated socio-economic and environmental development model caught the imagination of most observers, in addition to being considered a best practice of South-South cooperation through MarchicaMed investment in Abidjan’s Cocody Bay as the outcome of 4 cooperation agreements signed between Morocco and Ivory Coast in June 2015, which aims to preserve and value of the Bay of Cocody in Abidjan where I used to live, estimated at 137 billion CFA Francs.[1]

Atelier sur les outils de financement des entreprises

After the lunch break I attended a workshop on business financing tools. After the lengthy marketing of Société Générale in Africa's activities in 17 African countries, which included co-financing with DFIs such as Proparco and AFD, I found the presentation of the VC&PE company AfricInvest particularly interesting and useful for my own professional endeavours, although a lot of time was spent by Khaled Benjennet, Senior Investment Officer at TunInvest-AfricInvest Group, explaining what VC&PE is all about. Regarding the three phases of interventions, in phase 3 we were told that the leading private equity firm measures its impact on the local society and various economies in Africa with regards to local cash injections; creation of value; opening of borders; diminishing foreign exchange risks; access to finance because its involvement reassures the bankers and accelerate the development of the beneficiary enterprise; SME job creation; know-how transfer; stimulation of exports; increased tax collection; exiting the informal sector; etc. It was mentioned that its also a funds-of-funds managing the investment of others, since e.g. Proparco invests in AfricInvest to further invest in SMEs and assist them developed further.

Diaspora Capital Humain et Investissements Économiques

Given my on-going preparation of a Diaspora Finance Programme it was an obvious choice for me to attend CLUB EFFICIENCE’s (that is an elite French African Diaspora Association based in Paris, France) launch of a new Diaspora Investment fund aimed at encouraging the economic development of the African continent. According to Lionel Zinsou to enable real development in Africa this requires a long-term financing capital. He also emphasized that the African Diaspora already contribute more external resources than ODA with some countries the remittances constituting more than 20% of GDP as in the case of Cape Verde and with Nigeria and Sudan receiving the biggest inflow of remittances. While, savings for investment can be made directly into productive (SDG) sectors, investing is not a profession for none professionals. Moreover, he warned that it is the simplest form of savings to a 5-10 year commitment for people with sufficient assets, this category of illiquid investment with a strong remuneration means more return on investment, however, he did not advise that risk adverse people to engage in diaspora investment in frontier and emerging markets. In all sectors there is a great need for savings resources ready to invest, especially long-term capital, due to enterprises lack of access to credits, and similarly when it comes to the households (especially real-estate). In short, long-term capital investment is still a new approach in Africa. Moreover, as mentioned by Jean-Michel Severino, the corporate mortality rate is important because of serious underfunding. He also mentioned that while there has been a liberalization of the African economies “thanks to” the Structural Adjustment Programmes imposed by the Washington Consensus, the Business environment is still mediocre in most African countries e.g. due to lack of infrastructure. As an example he explained that e.g. Douala, Cameroun, during 2 months of the year the roads in certain neighbourhoods are inaccessible during the rainy season. Moreover, as in most African cities electricity only works a few hours per day, which means that enterprises have to recur to expensive generators. This in addition to numerous trade and non-tariff barriers, road blocks etc. Moreover, most SMEs are run by only 1-2 persons, which means that a lot of enterprises go bust. Given these structural fragilities the SMEs, as mentioned above, are more fragile than elsewhere. This makes it difficult to find a way out or even to grow the enterprise, coupled with issues such as lack of title deeds, which further constrain enterprise financing.

According to Elie Nkamgueu, President of Club Efficience and Initiator of the Gotha Noir de France(that is the Who is Who of the African Elite in France) told the audience that The Club's Investment fund should be for the general public and domiciled in France for total transparency purposes. He further said that if each member of the Diaspora invests 50 EURO per month – that would give the fund a huge potential. Together he believes that the diaspora can significantly contribute to changing the destiny of the African continent. That is the vision of the fund and the Efficiency Club. The major financial innovation of the fund is that this new vehicle is going to be available to the public (i.e. diaspora) instead of relying as usual on High Networth Individuals, family offices, institutional investors etc. The fund will start my mobilizing the African diaspora executives working in large French enterprises to take the lead in the hope that their leadership will make the rest of the diaspora follow. The fund will benefit from the expertise of the fund managers in  Investisseur & Partenaires’s (I&P) led by Jean-Michel Severino who has put a team in place to support with the legal structure of the investment fund as well as other world finance experts to create a structure to collect the savings from the diaspora in Europe and beyond.

Pierre-Yves Denez from Orrick Rambaud Martel highlighted that the preconditions of the fund were very different from other investment vehicles of African SMEs, which exist in France since a certain number of years through the access to investment capital (i.e. VC/PE). He told the audience that they had approached the IMF in November last year to propose an ad hoc structure - forcing them to innovate since this type of structure/vehicle had never existed before.

Jean-Luc Vovor, Director of Kusuntu another VC&PE entity in France complemented by stating that since the project was breaking new grounds, they had to be imaginative. During 1 year the approach was purely cooperative and social. They were thinking about how to seduce the diaspora into investing their savings into such a vehicle, which would invest directly into African enterprises. The concept was subsequently transformed into an investment programme aiming at reaching a fund size of 50 Million EURO over the next few years. This goal to reach a EUR50 Million fund size will be attained, they hope, by creating a virtuous movement through the icons of the African diaspora in particular. To create additional incentives beyond the moral imperatives, the Tax authorities are also being consulted.

The investment programme will be a succession of funds: The first African Efficiency Fond will target EUR 10 Mn, once this target is reached it will be replaced by other another fund and so on. They still need to find a proper mechanisms to collect the diaspora savings, e.g. starting by EUR 50 per month. Then after 10 months the total amount is injected into the fund. He argued that its important to get the ball rolling so that within 3 years the club can reach the fundraising objective.

The club decided to go for the option - Funds-of Funds - according to the acquired size, but in time there is also the option of pursuing direct investments. The Business model is temporary Efficiency Africa Fund No.1. With more savings collection it is believed that the Club can move towards direct investment through Efficiency Africa Fund No. 2 or No. 3.

During the Q&A it was mentioned that only 17% of companies in Africa on average have access to formal banks, the rest remains are informal sector depending on non-bank financial institutions such as microfinance. In response Jean-Michel Severino informed the audience that I&P had carried out 70 investments in SSA since 1994 and that it was a miracle that I&P had even survived! As a social impact investor it is difficult to go to combine both social impact and sufficient yield given the above mentioned operating risks. On average the large international enterprises achieve a yield of 15-20% whereas the local Start-ups on average only achieve a 0% yield to investors because of onerous costs related to employee costs, political crisis, legal fees, foreign exchange risks, and the fact that I&P investors spends a long time to identify and support the enterprises they invest in e.g. by spending several days in the company etc., given the fixed overhead costs of around EUR100,000 per investment. Hence his simple, but hard earned advice, was the more the investment portfolio is oriented towards larger companies the more likely it is that the investors are going to make money. In his words, Africa is a dessert of enterprises, which only just are in the making. There is a sort of urgency to pull the future African Bill Gates out of their garages. Given the high risk of supporting the risky start-ups it is important to complement with more stable vehicles (that is a mix will be done between a number of startups; dynamic SMEs with yields on liquidity but other sectors will also be included in the portfolio). In sum, this Investment Fund are for those who want to contribute to Africa’s growth story and be useful to those enterprises that are not already being financially supported by other actors, while aiming for a positive social impact. To his objective statement, Pierre-Yves Denez, Counsel at Orrick - Africa Group, added that an additional objective also was to prove that such a fund can work and yield return through the 2nd or 3rd fund.

I join Lionel Zinsou and other observers in the room in welcoming this initiative. It is fully aligned and complementary with my own East African LDCs Diaspora Finance Programme, which aims to facilitate the adoption of measures to transform remittances into investment in productive sectors:

·      through support to enhanced public-private cooperation and

·      from the additional resources derived from the on-going trend of falling average transaction cost of migrant remittances by 2030.

The programme will enhance the awareness of migrant workers settled in a number of OECD countries about making productive investments of remittances in the countries of origin via (crowdfunding; venture capital and private equity) (social impact) investment platforms for provision of local loan financing / seed capital to local SMEs.

The expected outputs are:

(i) Diaspora Investment stimulation programme in Investment Promotion Agencies;

(ii) Strengthened Institutional Capacity of Investment Promotion Agencies (IPA) & Ministry in charge of Diaspora Issues;

(iii) Handbook on Diaspora investment promotion tools and Dissemination of Knowledge Products;

(iv) Diagnostic Diaspora Investment Integration Strategy.

But as with the Efficience Africa Fund, the take-off depends on whether we will succeed in persuading the ITC to host the programme, having already failed to persuade UNCTAD to do so.

After having heard Jean-Marc Ayrault pre-recorded message as part of the official closing ceremony of “Les Rencontre Africa 2016” back in the hemicycle, I had to abruptly leave before the end to catch the last TGV back to Geneva. But unlike the above reported plenary events and parallel workshops, which all had a clear pragmatic focus on business/investment results, the last plenary event entitled “Africa’s emergence” like the opening ceremony “What French economic strategy in Africa?”, which I missed for the same reasons, they both had some resemblance with the old-fashioned public-private Françafrique approach. Admittedly, this set-up also have some positive similarities with the structure of the Africa Forum 2016 starting tomorrow at the OECD Headquarters in Paris jointly organized by my former employer The OECD Development Centre, the African Union Commission and the OECD Sahel and West Africa Club. Unfortunately, both these events are still too oriented towards exclusively serving France's commercial interests in comparison with the Africa CEO Forum which had 63 countries represented including 43 African (that is not only French speaking countries) with more than 75% of the participants identifying or concluding business deals as well as a more international media coverage of the event. It was a good start, and I hope that the organizers will build on the success, and that it will become a recurrent event in the years to come, since its business-to-business approach adds a lot of value and complementarity to both the Africa Forum and the World Economic Forum on Africa 2016.

[1] The objective of the sustainable development pilot project is the ecological rehabilitation of the said bay, the establishment of a hydroelectric system, creating a marina, de-pollution of the lagoon Ebrié and renewal of its waters.