African finance ministers look to pastures newcdi

Côte d’Ivoire

The end of civil hostilities in April 2011 placed Côte d’Ivoire’s economy firmly on the cusp of change. Once known as one of the best-run countries in western Africa, the deterioration of its internal security last year resulted in a sharp economic contraction. The internal political fall-out between the incumbent president at the time, Laurent Gbagbo, and his political opponent, Alassane Ouattara, escalated into a four-month long conflict after Mr Gbagbo refused to step-down following a defeat in the country’s general elections in November 2010.

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Nonetheless, Charles Diby, Côte d’Ivoire’s finance minister, maintains that the military defeat of Mr Gbagbo in April last year not only marked the end of hostilities, but also the economic turnaround of a country that is already regaining lost ground. “When you look at the Ivoirian economy just after the crisis, when the government was placed under the leadership of Mr Ouattara, it was experiencing a recession,” says Mr Diby. “But when looking forward, we foresee a robust growth of about 8.5% this year.”

Côte d’Ivoire’s economy was hard hit by the negative effects of the post-electoral crisis, with its real GDP 'growth' being -5.9% in 2011, according to the African Development Bank (AfDB). Although the country’s security situation continues to cast a shadow over its economic progress, Mr Diby is keen to reassure investors that the government has actively worked to improve internal security.

“The president has worked to renew Côte d’Ivoire’s diplomatic relations with the Bretton Woods institutions, and he has made it clear that our country is open for business” says Mr Diby.

“It is significant to see, for example, that even the new World Bank president [Jim Yong Kim] visited Côte d’Ivoire on his first trip to Africa. Our government has undertaken reforms to guarantee the competitiveness of our economy for foreign businesses. By that I mean we have reviewed thousands of cases related to commerce, in order to improve our status with regards to doing business. We are also creating a taxation framework that is stronger, and we are actively working to fight against fraud.”

According to Mr Diby, FDI will play a key role in the country’s economic revival, and the government’s recent moves to privatise a range of industries illustrates that the country is open to FDI in several sectors.

“We are an economy with a very strong potential across all of our sectors,” says Mr Diby. “We believe investment will be important. For example, with regards to the banking sector, there are several public banks that are privatising, and so this is our way of opening up this sector to FDI. We want broad-based and inclusive growth across all of our sectors. The primary sectors, such as agriculture and mineral mining, hold a lot of opportunity and they will be of great importance going forward. In the secondary sector, I see a lot of opportunities opening up in the textiles and transportation sectors.”  

Lesotho

Little, aside from its scenic and mountainous terrain, is known about the tiny kingdom of Lesotho. Despite being a popular destination among tourists in southern Africa, Lesotho, which is fully bordered by South Africa, has struggled to differentiate itself from its much larger neighbour.

“We are a very small country that is completely surrounded by South Africa,” says Leketekete Ketso, Lesotho’s finance minister. “Nevertheless we are a very distinct nation, because in the southern African context, Lesotho was one of three countries, the other two being Botswana and Swaziland, that were never colonised. We are very different from South Africa, however it is true that a lot of our [citizens leave] to work in South Africa’s mining industry.”

While Mr Ketso admits that the country’s geographic positioning makes Lesotho’s economy highly interlinked with South Africa, he maintains that this conversely gives it a competitive advantage. Although Lesotho has, for decades, been overshadowed by South Africa, which has been a more popular investment destination, Mr Ketso contends that Lesotho’s investment opportunities are becoming increasingly attractive because, unlike its neighbour, its market is relatively unsaturated.

“We are very interlinked with South Africa... and like [South Africa], we have coal in abundance,” says Mr Ketso. Indeed, the AfDB maintains that Lesotho’s GDP is set to increase by 4% in 2012 and 4.5% in 2013, and this is a result of increased demand from the mining sector, which will represent about 7.9% of Lesotho’s GDP output in this time.

However, the country is highly reliant on its exports, and Mr Ketso is frank in admitting that the protracted economic recession in developed markets remains a real concern for Lesotho. “We were growing relatively well in the [2000s], but we were really hit by the financial crisis, as our strategy was one that relied on exports to the US, which is our major market,” says Mr Ketso. “Thus anything that hits the US will likely impact us.”

To counter this reliance on a small pool of countries, Mr Ketso is keen to diversify Lesotho's trade partners eastwards, towards Asia. In addition, the government’s recent investments in rehabilitating Lesotho’s infrastructure, coupled with a new set of investment incentives offered across a broad range of sectors, mean that Lesotho will offer foreign businesses a greater range of market opportunities.

“Lesotho is open to FDI and we are trying to diversify [our economy],” says Mr Ketso. “We have started seeing a lot of FDI flowing into our textile and clothing industry, and this is largely from mainland China and Taiwan. We are currently revising our incentives package, and we have lowered our corporate tax rates and our duties coming from outside the region. We are diversifying into other sectors and there are several opportunities in manufacturing and information and communications technology. Also, Lesotho has a lot of potential in mining and we are looking for firms that can engage in exploration, to find what other minerals we have in our country.”

African finance ministers look to pastures newR

Rwanda

The tiny, landlocked country of Rwanda has performed remarkably well in recent years, despite having a small formal private sector and limited industrial output. According to Rwanda’s Ministry of Trade and Industry, the country's industrial sector accounts for just 14% of GDP, and while the AfDB found that 98% of Rwanda’s private sector is comprised of small and medium-sized enterprises, 88% of them are in the informal sector, therefore their contribution to tax revenues is minimal. In addition, Rwanda operates in an external environment that has been described as “less than ideal” by the UK think tank the Legatum Institute, as the country shares geographic borders with impoverished, unsettled neighbours such as Burundi and the Democratic Republic of Congo.

Despite operating in such an environment, the Rwandan government’s technocratic approach to development has enabled the country to maintain a real GDP growth of 7.6% for 2012, according to the AfDB, which has earned Rwanda the reputation of being 'the Singapore of east Africa'. This is not an accolade that John Rwangombwa, Rwanda’s finance minister, relishes, and he is adamant that the country is seeking to create a unique brand of economic efficiency through learning from, rather than imitating, Singapore’s performance.

“We are the Rwanda of east Africa, which is learning from Singapore,” he says. “We want to create our brand as the Rwanda of Africa, and we are learning from Singapore and other success stories in Asia. We look at their models and pick what we can apply to our situation. [These countries] have much in common with us, and we have seen them develop without any natural resources. So if they can do it, we can do it too. We say that we are the lions, and not the tigers, of Africa.”

Committed to reigniting foreign investor interest in the country’s private sector, the Rwandan government has engaged in several regulatory overhauls, which has led to the country's rise from 150th four years ago to 45th placing in the World Bank’s most recent ‘Ease of Doing Business’ report.

“We have acted to create an enabling environment, where an investor can register their business in just a matter of hours,” says Mr Rwangombwa. “Today it takes just six hours to register a company, and we have removed [registration] fees if you register online. Another important aspect foreign investors can expect to find in Rwanda is a zero tolerance of corruption, so they can receive services from government officials without having to pay fees.”

According to Mr Rwangombwa, Rwanda’s improved business environment means investor interest in the country is high, and he remains confident the country will maintain a strong FDI performance. “We have had FDI coming mainly into tourism and construction, and we expect to see this continue," he says. "We want to continue attracting investments in information and communications technology, and we have invested about $45m into increasing fibre-optic [cables] across the country. Although it is publicly financed, we want to privatise the management of that. We have also started working on a strategy to attract investments into light, high-value commodities for 2013.”

African finance ministers look to pastures newU

Uganda

Uganda’s energy industry has been experiencing something of a renaissance. Tullow Oil’s recent discovery of 1 billion barrels of oil reserves in the western part of the country was seen to mark a new phase in its economic trajectory, and the World Bank expects Uganda’s economy will grow by an average rate of 7% between 2012 and 2014 as a result of increased FDI into the country’s energy sector.

Although Uganda’s finance minister, Maria Kiwanuka, maintains that these recent developments have enabled the country to weather the global economic downturn well, she maintains that the government will work to reinvest expected revenues into diversifying the country’s sectors of growth. “We have recovered well from the macro consequences of the global crisis, and we believe these discoveries will enable us to continue our growth,” says Ms Kiwanuka.

Although the discovery of oil in the country will enable Uganda to grow by 5.7% next year, according to the International Monetary Fund, the country continues to suffer from low foreign investor confidence in its institutions. This was exemplified when the World Bank downgraded the country’s ‘Ease of Doing Business’ ranking this year by four places to 123rd. Uganda’s private sector continues to remain constrained by significant bureaucratic obstacles, which make it a challenging business environment for foreign investors looking to access the country’s industries.

Nonetheless Ms Kiwanuka maintains that the creation of the Doing Business Unit in Uganda’s Finance Ministry illustrates that the government is keen to improve the country’s business climate. “We want to reduce the costs of doing business and we are working to improve the costs of transport, as well as the reliability of electricity,” says Ms Kiwanuka. “We commissioned a review which came up with far-reaching recommendations. As a result, we have started identifying licences that can be done away with, and regulations that can be streamlined.”

Ms Kiwanuka is keen to highlight that FDI from developing countries will play a crucial role in Uganda’s economic growth, and the country will seek to develop its trade relationships with countries across Africa. “Our economy is quite open to FDI and developing countries will play an important role in [its growth],” says Ms Kiwanuka.

“We want to stimulate growth, and we intend to make sure our growth rate picks up again. However, we want it to be sustainable and inclusive. We will continue to look to both our partners from the West, as well as those from developing economies, for FDI into the private sector. We fully recognise that the private sector is the engine of growth and is responsible for the vast majority of our GDP, and we hope to attract FDI into the various productive sectors of our economy. In addition to oil, we wish to promote [FDI into] our areas of strength, particularly in agriculture and agro processing. Furthermore, we wish to reinforce our position as the geographical centre of east Africa and as the major distribution hub of [the region].”