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Archive for the ‘perspectives’ Category

Don’t shoot that foreign correspondent, he’s dying

30 Aug

If there is one group of people quite a few Kenyans would like to shoot right now if they could, it is foreign journalists.

It all has to do with their coverage of the August 4 constitution referendum vote.

It was an African referendum, and in Kenya where, after the December 2007 election dispute, the country plunged into murderous violence.

The charge is that the foreign press waited for the machetes to come out, and when they didn’t, they didn’t treat the “historic” vote with the respect it deserved.

It is true that the majority of international observers and foreign journalists who were in Kenya congregated in the Rift Valley, where some could have expected, as one European newspaper put it in 2008, “Kalenjin natives of the area [to] murder the local Kikuyu tribesmen.”

In the event, the real story was happening in Nairobi at the tallying centre of the Interim Independent Electoral Commission.

Kenya’s IIEC easily pulled off one of the most efficient voting operations in the world.

Thanks to smart deployment of new technologies, the first result, according to a good source, was received in Nairobi exactly minutes after polling closed at 5pm.

By 8pm, exactly three hours after polls closed, the IIEC had received a record 87 per cent of the results.

Then it faced a pleasantly strange problem; it had been too efficient, and now it had more data than it could process!

We stayed up through to 7am, and I had dozens of “international” news sites open on my computer. It was amazing.

Even a British outlet with a strong African presence went nearly 10 hours after the polls closed before it did an update — it was waiting for the bloodletting that never came.

I am a big fan of the foreign press. In the bad days, they were the only source of information on the nasty things happening in Africa.

They reported the carnage of wars, ravages of famines, and the brutalities of military and one-party African regimes when there were hardly any independent newspapers and broadcasters to tell these stories.

However the spread of democracy, free markets, the Internet, mobile phones and other vehicles of globalisation have changed the game.

Those who want “negative” images of Africa – the alleged cannibalism, African porn, witchcraft, corruption, mob lynchings, squalor, and tribal rage gone amok — no longer have to look for it in the Western media.

The African media do it better than anyone else. If you want the good stuff, there’s is no shortage of African sources for that too.

Every nation needs an external eye to draw its attention to flaws that it cannot see.

Africa can collectively use a lot of that right now, because the continent is changing and throwing up a lot of complexities.

This requires financial resources and the type of clever correspondents most struggling Western media can no longer afford.

However, part of it doesn’t require money.

Just a shrewd editor to wake up, smell the coffee, and realise that while most votes in Africa are stolen, occasionally some get away clean.

However, even with more sophisticated coverage, my sense is that traditional-style Western foreign correspondent is mostly irrelevant today, and will soon be dead altogether.

Source:
East African

 
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The 5 most common mistakes startups make with VCs

28 Aug

A reader asks:  My co-founder and I are about to approach VCs for funding for the first time.  We’re both first-time entrepreneurs and don’t want to make any rookie mistakes.  What are some of the common missteps you’ve seen guys like us make dealing with financiers?

Answer: You’re always at a disadvantage when dealing with the venture capital community, since their experience almost certainly outweighs yours. But there are ways to can go into the negotiations prepared. Here are five quick things that startup owners often get wrong:

Cold Calls.  One of the classic rookie mistakes is cold-calling or emailing a VC you don’t know personally. In short, you’re wasting your time.  The best way to get a meeting with a VC is through a “warm” introduction – that is, an introductory phone call or email from a middleman (or woman) whom the VC respects and trusts.

The ideal middleman is a successful entrepreneur whom the VC has backed; other investors can be good middlemen – and lawyers or accountants may also be helpful.

Homework.  Startups often make the mistake of not doing their homework when talking with VC firms.  Even before you get an introduction, do some research and figure-out which VC firms are a good fit for your startup. This can be based on a number of different factors, including their space/industry focus, their investment criteria, their fund size, their geographic focus, their “sweet spot” and their track record.

It’s also wise to learn as much as you can about the particular partners with whom you are interested in working, including determining their reputation, character, domain expertise and capacity to take-on a new deal.

NDAs.  Rookies often ask a VC to sign a Non-Disclosure Agreement (“NDA”). It ain’t gonna happen.

VC’s are inundated with business plans and executive summaries and are constantly talking to entrepreneurs whose ideas may be similar to yours.  There is no way a VC is going to risk getting sued as a result of funding a startup with a similar idea or business plan to yours.   Moreover, they would need to hire a lawyer to review and negotiate NDA’s – which from their perspective is a waste of time and money.  To the extent you have any “secret sauce” or proprietary technology that you’re concerned about disclosing, you should just not share it with the VC.

Valuation.  Startups often focus too much on valuation.  Obviously, the pre-money valuation (or “pre” as it is commonly referred to) of the company is an important deal term. However, inexperienced startups make the mistake of obsessing over pre – and will often a sign a term sheet with the VC firm that gives them the highest pre.

This is the wrong approach for two significant reasons. First, there are other important terms that affect the economics of a financing, including the size of the option pool and the liquidation preference. Also, a top-notch VC firm (like a Sequoia) can add extraordinary value to a venture.  Thus, even if those firms come in with a lower pre than another VC, a smaller piece of a huge pie is better than a bigger piece of a little pie.

Negotiations.  Rookies often make the mistake of trying to negotiate VC term sheets (or some of the key investment terms) without having spent the time to fully understand them and/or retaining strong, experienced counsel. Term sheets are complex and a potential minefield for first-time entrepreneurs. Moreover, VCs spend their careers negotiating term sheets and know every term (including every nuance) inside out.

Accordingly, startups need to be smart (and demonstrate a certain level of credibility with the VCs) by getting a good corporate lawyer involved early on, among other things, to coach and prepare them for their preliminary negotiations with the VCs.

Source:
Venture Beat

 
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Africa prospects lure investors, but is it ready?

26 Aug

Africa offers among the world’s best investment prospects as emerging markets grow ever more important, although its economies risk being destabilized by the slew of capital they stand to attract in coming years.

Energy-producing continental giant Nigeria was identified as a top pick by some of the most influential figures in emerging markets finance who spoke to the Reuters Emerging Markets Summit in Sao Paulo last week.

Africa withstood the financial crisis better than many predicted, and the region’s economic growth is forecast at 4.75 percent in 2010. Next year, half of the world’s 10 fastest growing economies are expected to be in Africa, and it is now attracting more than just the most intrepid investors.

“The latent interest in Africa is enormous,” said Stephen Jennings, chief executive of Russian investment bank Renaissance Capital, speaking to the Reuters meeting by video link from Moscow.

“Before the crisis there were probably 40 people or groups establishing Africa funds. In 3-4 years you’ll have 100 Africa funds and the biggest one won’t be $2 billion, it’ll be $20 billion.”

Fund tracker EPFR reports 43 consecutive weeks of net inflows to Africa equities funds, reaching $484 million in the first half of 2010 — nearly double those to India over the same period.

Africa’s advocates say the inflows stand to accelerate rapidly as a dearth of attractive returns in the developed world pulls investors in while a more stable political and economic environment indicates diminishing risks.

MSCI’s index of Africa countries outside South Africa .dMI8600000P, though well off its year highs, is still up nearly 8 percent in 2010. The S&P 500 .SPX is more than 8 percent down.

BRIC LINKS

A shift of global economic power to emerging giants such as Brazil, Russia, India and China — known collectively as the BRICs — benefits Africa as surging economies seek its resources and push up commodity prices and investment.

Brazil, Russia and India still trail China, which last year became Africa’s biggest trade partner, but they have been rapidly expanding trade and putting more money into Africa.

“What’s absolutely striking is how much change there’s been between the BRIC countries and Africa,” said Jacko Maree, chief executive of South Africa’s Standard Bank, which is Africa’s biggest. “We like to think that the whole story has only just begun.”

Brazilian firms with a large African presence may soon issue bonds in South African rand to seize on growing interest, said Standard Bank’s chief executive in the Americas, Eduardo Centola.

NIGERIA TOP PICK

Nigeria’s market of about 140 million people — nearly three times bigger than South Africa’s — as well as its energy resources and bigger, more liquid markets, makes it the top choice for many eyeing Africa.

On the Goldman Sachs’ growth-environment index, which measures a mixture of economic and social development indicators, Nigeria’s score has nearly doubled over the past decade.

“If it were to show the same increase in its growth-environment score over the next decade, many investors will look back and say why the hell didn’t I invest in Nigeria,” said Goldman Sachs’ global head of economic research Jim O’Neill, who coined the term BRICs.

Ethiopia and Rwanda are among the smaller African economies seen as promising. They show how previously ignored countries scarred by war are emerging as possible investment magnets alongside those such as Ghana, a relatively stable democracy which is soon to become an oil producer.

There are risks, though, with concerns over political stability even in bigger economies such as Nigeria and Kenya.

Africa experts underline the fact that new mineral riches have rarely been shared widely, and suggest reliance on such income for national coffers could discourage establishing tax bases that would put states on a sounder footing.

“Where I think the real caution has to come in is the quality of the growth,” said Patrick Smith of the Africa Confidential newsletter. “It would be pretty silly to say success is certain.”

A big influx of investment funds could in itself pose a problem for African countries less prepared to cope than those in other rapidly growing regions that have felt the pain of such flows in the past.

“Africa has no experience of huge capital inflows,” said Renaissance’s Jennings. “Under the scenario I’m painting, the capital inflows will be way above and beyond the ability of those countries to absorb them.”

Most African countries have small, illiquid markets and little financial infrastructure, raising the chances of economic distortions and asset bubbles that could lead to currency crises and long-term damage.

“People look at how certain African economies have been getting their act together and there is a risk you will get significant capital inflows,” said Mohamed El-Erian, chief executive of PIMCO, the world’s largest bond investor.

“That will provide quite a challenge to policy makers.”

Source:
Reuters

 
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Failure to hedge hurts Kenyan shareholders

25 Aug

Shareholders in Kenyan firms are losing billions of shillings each year due to directors’ failure to shop for appropriate hedging instruments.

Hedging against foreign currency exposure is increasingly becoming important because of volatile exchange rates that in one swing turn profit into loss and vice versa as companies settle financing and purchase obligations incurred in various hard currencies.

The AccessKenya Group is the latest firm to report a Sh50 million knock on its profit, which left only Sh40 million at the disposal of shareholders.

Without the knock, shareholders would have earned a higher dividend and, critically, lowered the price-to earnings ratio that is used as a price guide in the share market.

The losses stem from some of the firm’s liabilities denominated in US dollars.

AccessKenya group borrowed $3.5 million from two local banks to finance the importation and installation of the fibre optic cable equipment.

With the shilling losing ground against the dollar, AccessKenya had to use more shillings to purchase dollars to pay its dollar denominated loans.

AccessKenya’s executive director David Somen said that while the group’s management took some steps to minimise exposure, it did not foresee the depreciation of the shilling to the current levels.

“The group was not expecting the large swings in the shilling and apart from some natural hedging as some of our billings are in dollars, was not fully hedged,” said Mr Somen.

Since January, the shilling has dropped from Sh75.75 against the dollar to Sh81.20/50.

Sutra Investment Bank research analyst Johnson Nderi said failure to hedge, minimising risk through products such as swaps and forward contracts, is hurting shareholders.

“Inaction against hedging is causing shareholders to lose money,” said Johnson Nderi, a research analyst from Sutra Investment Bank.

Gains ground

The only reprieve for shareholders would be if the shilling gains ground against the dollar.

Mr Nderi said that since dividends come from earnings, lower earnings mean less dividends.

Earning also affect the price-to earnings ratio which measures the value of stock price, lower earning means share prices should go down.

AccessKenya management said it was investigating various hedging instruments to ensure that there is no recurrence of the forex loss.

More firms are dedicating departments to deal with forex trading as they try to reduce their foreign risk exposure.

Source:
BD Africa

 
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Kigali transits from sleepy town to Africa’s Singapore

25 Aug
Kigali is trying to develop on the high-tech front. Photo/MORGAN MBABAZI

Kigali is trying to develop on the high-tech front.

Rwanda’s capital is changing from a sleepy backwater where most things closed at 9pm to a future Singapore with gleaming office blocks and all-night shopping.

Ten years ago, ordering a coffee got you an imported tin of the worst kind of Nescafe accompanied by a pot of powdered milk.

Now you can choose from expresso, macchiato or mocha from home-grown beans and the milk comes frothing out of a steamer.

Rwanda’s ambitious “Vision 2020” plan seeks to transform the central African state into a middle-income country and acknowledges: “this will not be achieved unless we transform from a subsistence agriculture economy to a knowledge-based society”.

The country has already successfully promoted top-end eco-tourism around the endangered mountain gorillas that live on the mist-clad slopes of the Virunga volcanoes.

It has also positioned its coffee output at the speciality end of the market.

“Kigali is one of the fastest-growing cities in Africa and we are committed to ensuring future growth is based on very good planning,” city Mayor Aisa Kirabo Kacyira told AFP.

The Colorado-based OZ Architecture firm has developed a 50-year master plan for Kigali, incorporating a new international airport, and with entire districts of town given over respectively to shopping, offices, technology and medical facilities.

“They are trying to make Rwanda the most sustainable, high-tech, wired country in Africa, a little bit like what Singapore became,” to Southeast Asia, OZ senior architect Carl Worthington told Metropolis magazine. “They are trying to re-invent the whole country.”

“Before 1994 Kigali wasn’t a planned city,” explained Vivian Kayitesi, who manages the division of the Rwanda Development Board (RDB) charged notably with investment promotion.
Kirabo Kacyira wants the future city to be “as beautiful and as sustainable” as the current one, even if its population of one million is poised to double.

Giant yellow cranes are busy on the construction of a convention centre that will include 300 top-end hotel rooms and conference facilities for more than 2,000 delegates, with conference tourism something that the RDB is pushing.

An additional 200 top-end rooms are under construction at a hotel in town, also Chinese-built.

“The target is to go from 700 to 4,800 rooms by the end of 2010,” Kayitesi said, referring to the small highland country as a whole.

To reduce sprawl, the authorities are encouraging investors to go in for 10-plus storey buildings.

Patrick Sebatigita, the managing director of Ujenge, an engineering company, started up two years ago in a room in his house “with a PC and a pickup” and has expanded quickly.

A lot of progress

“We’ve made a lot of progress,” he said, referring to Rwanda’s economy. “If we keep this trend we might not reach Singapore in the next 10 years but in the sub-region definitely we’ll improve,” he told AFP while overseeing work on a residential construction site.

“Rwanda is still at a disadvantage in terms of human capacity and education,” and small companies still find it hard to access credit, he said.

The country has registered 7.1 percent average GDP growth since 2004 and was chosen “fastest global reformer of business regulations” by the World Bank Doing Business Survey.

Administrative changes and four major commercial laws in 2009 have made it easier to start a business, employ workers, register property and access credit, the RDB says.

Modern housing is in short supply, so the time to obtain a construction permit has been sharply reduced.

Skyline aside, Kigali is trying to develop on the high-tech front.

For Leon Orsmond, who runs Osmosis, a viral marketing company with offices in Dubai, Lagos and …Kigali, Rwanda’s recent history, rather than being a handicap, has proved almost a catalyst.

“Because of 1994 they’ve had to play fast catch up. They’ve had to leapfrog. They’ve had to accept that from an agrarian economy they’ve got to move to a knowledge-based one,” he said.

Sixteen years ago Kigali was yet to emerge from the trauma of the genocide of the Tutsi, in which an estimated 800,000 people were killed in three months.

Among the rare physical reminders today are the memorial museum, and the bullet-pocked walls of the parliament building, kept that way on purpose.

Kigali is already famous for having banned plastic bags and the environment remains a major redevelopment consideration.

The current industrial zone, Gikondo, will be returned to wetlands and a new industrial park on the outskirts is scheduled for completion by year end.

Officials say those on modest wages will not be forgotten.

Source:
BD Africa

 
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Ways entrepreneurs waste their hard-earned money

24 Aug

If entrepreneurs could recover all the time and money they waste, our GNP would soar.

I can’t prove that scientifically—researching the topic would be, well, a waste of time and money—but I’ve seen it often enough, in business plans, on income statements (including my own), during bankruptcy proceedings and just looking around.

To win the startup game, you need to be a miser with your money. You need to spend it on things that will make you a success, not on what will simply make you feel or look like one.

You need to pander to what your customers need, not to what you need. So before you sign that cheque, swipe that credit card or sign that contract, ask yourself, “Will this bring me business?”

If the answer is no, consider it one less dollar you need to beg, borrow or spend.

Based on my experience, here are 10 of the most common ways entrepreneurs waste money:

Custom logos, fancy letterheads and other icons of success. They may make you feel like an entrepreneur, but they don’t bring home the bacon. Instead, design your own with one of the many templates that come packaged with your word processing software. They include matching business cards, letterhead, envelopes and invoices. You can find templates in the Project Gallery of Microsoft Word or the Template Chooser in Apple’s Pages. If you need more choices, HP.com and Avery.com offer free templates for use with their specialty forms and paper.

Fancy offices. Speaking of bacon, maybe the dining room isn’t the ideal office, but working there beats not eating. If you don’t need a formal office, don’t pay for one.

A company car. The latest luxury car doesn’t make you a better businessperson, it makes you a poorer one. If the wheels you have already get you back and forth to the grocery store, new ones are a waste of money. Just be sure to log your business travel so you can deduct the usage.

A slicker-than-you-can-afford website, brochure, sign, ad, etc. In the beginning, good enough is often good enough.

Consultants. Sorry to say, many of them will borrow your watch to tell you what time it is. If it’s not rocket science, figure it out for yourself.

Falling for the pitch “You’ll be getting in on the ground floor.” You’re not in a position to be someone else’s venture capital. If a rep for a new advertising outlet gives you the hard sell about how wonderful it’s going to be, invite them to call you back when they can prove it. Leave the experimenting to others.

Starting a business because your friends love your idea.

It’s one thing to like or even love an idea—it’s an altogether different thing to be willing to plunk down money for it. There’s no substitute for test marketing where real money changes hands.

Basing your marketing strategy on what you think is wonderful. Good chance your customers are nothing like you (or them you). Instead, research your market thoroughly. What do they read? What do they eat? What do they watch on TV? Then craft your message based on what appeals to them, not you.

Underestimating the competition. Or worse, thinking you don’t have any. Any business plan that proudly states it has no competition earns itself an immediate place in my round file. If you don’t understand your direct and indirect competition, you don’t understand your market. And if you don’t understand your market, you may be trying harder and harder to get better and better at something you shouldn’t be doing at all.

Thinking that your product or service is what sells. Here’s the sad truth: A great marketing strategy beats a great product every time. Business owners can (and will) go on and on about their wonderful products or services. The successful ones spend their time scheming about who’s going to buy it and how they’re going to reach them. Products don’t sell, marketing does.
Lister is a former banker, and a small-business investor and veteran entrepreneur.

Source:
BD Africa

 
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African Monetary Policies

19 Aug

Until fairly recently, most African monetary policies focused on targeting monetary aggregates along with holding real effective exchange rates reasonably constant. As the shortcomings of the system have become more apparent, many of the more reformist African central banks have started a journey towards formal inflation targeting frameworks following the example of South Africa. we speak to Ridle Markus Africa Strategist from ABSA Capital.

Source:
CNBC Africa

 
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16 Aug
Kenya is already experiencing a market bubble in the property market — where demand exceeds supply and suppliers become greedy. Photo/FREDRICK ONYANGO

Kenya is already experiencing a market bubble in the property market — where demand exceeds supply and suppliers become greedy.

Property investors in Nairobi and other cities are blowing large bubbles but the burst won’t be long.

Having learnt from the recent real estate market crash in the US where I lost millions of shillings in equity, I am now investing in emerging markets.

My advice is, buyer beware.

In Nairobi’s commercial real estate, if your capitalisation rate is less than 12 per cent, you are losing.

If for example, your Net Operating Income on a rental property cannot add up to Ksh300 million ($3.726 million) in 15 years on say an apartment complex that cost say Ksh180 million ($2.23 million) to build, you are in the wrong business.

If your Debt Service Coverage Ratio is less than 1.5, you are slowly strangling your financial prowess.

And if your equity build up is more than 15 per cent annually in an economy with a 40 per cent unemployment rate, the bubble is about to burst.

A market bubble is created when demand exceeds supply and suppliers become greedy.

This is already happening in Kenya.

Real estate goes through four cycles— buyers’ market phase one, buyers’ market phase two, sellers’ market phase one and sellers’ market phase two.

The buyers’ market phase one is when property is so cheap that anybody with a little saved up can afford one.

There is a huge supply while demand is sluggish.

Rent becomes higher than the mortgage hence properties have tremendous cash flow.

However, it is expensive to borrow as lenders follow stringent rules.

In buyers’ market phase two, rents shoot as demand for rentals rises. These two phases are the best to invest in real estate.

Source:
The East African

 
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Sustainable-Investment in the African context compared to developed markets

11 Aug

 
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Great Entrepreneurs Have Vision, Not Just Ideas

11 Aug

A popular approach for aspiring entrepreneurs these days seems to be to corner anyone who will listen with a dialogue on their current hot “idea.” The initial outburst usually ends with the question “How much money do you think this is worth?” In my humble opinion, ideas are a commodity, and are really not worth anything, outside the context of a vision and plan.

Over the past couple of decades, experts have perfected the art of brainstorming and other idea-generation techniques. Executives and investors are now increasingly exposed to a wealth of ideas. The result is that ideas are no longer in short supply, and no longer a differentiator in competition.

Visionary leaders, on the other hand, are not so common. A visionary is someone who can make sense out of the wealth of ideas, and weave together a plan for implementation that will make a difference in the world. Steve Jobs, for example, probably gets millions of ideas from his friends, but he seems able to focus a few of these into initiatives that show real innovation.

What separates an idea person from a visionary leader? Most experts agree that a visionary leader not only has ideas, but also has a vision of where these ideas can lead, with strong core values, key relationships, and demonstrates innovative actions, as follows:

* Commitment to core values. Visionary leaders radiate a sense of energy, strong will, and personal integrity. This usually results in a focus on multiple related ideas, leading to real innovation, rather than bouncing from one idea to the next, looking for the “holy grail.”

* Positive inspirational communication. People with vision usually start by communicating an inspirational picture of the future, and then integrating individual innovative ideas into this fabric, and show how to get there. The best ones can make the impossible look easy, so everyone, including investors, line up to commit.

* Build strong relationships with strong people. Great relationships are key to every leader. They see people as their greatest asset, and listen as well as talk. Theirs is not the autocratic style of leadership, which tells people what to do and dominates them, but a style which treats partners, investors, and customers as family.

* Willing to take bold actions. These actions somehow always seem to embody a balance of rational (right brain) and intuitive (left brain) functions. Visionaries are often “outside the box” of conventional approaches and move toward long-term change and innovation. They are proactive and anticipate business change, rather than reactive to events.

* Radiate charisma. People with a real vision can communicate ideas with almost a spiritual charisma that energizes people around them to go a step beyond normal boundaries, to solve a technical problem, sign on as a team member, or invest resources, when conventional wisdom would suggest otherwise.

Every investor wants to fund the true visionary leader, but the truth is that these people often don’t need funding, or don’t ask for it. The best investor pitch, then, is to sell the vision with such conviction that people want to be a part of it, with their money, their skills, or whatever they can bring to the table.

But not every entrepreneur has to be a visionary. There is still plenty of room for incremental improvements, and creativity in providing solutions to short-term problems. This is really the realm of bootstrapped startups, and a small segment of the angel investor community that is looking for a “quick hit” with a quick return.

So my message to entrepreneurs is to tune your approach and your expectations accordingly. I’m always impressed with entrepreneurs who pitch how they plan to bootstrap an idea, but if you need a million dollars, you better have a vision.

Source:
Huffington Post

 
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