Investment

Africa needs investment. Lots of it, for the long term. Whether it's public investment in infrastructure, private investment in commerce and trade, or personal investment in education and skills, long term investment is in desperately short supply.


There are numerous reasons for this, many of which are related to investor perception of risk, but a major contributory factor is also excessive recurrent expenditure in the public sector. which indirectly acts as a brake on domestic investment. Africa is home to about one billion people, divided among a remarkable 53 separate countries, governed by 53 separate administrations, most of them burdened with overblown and inefficient post-colonial structures sucking in domestic savings to finance short term budget deficits.


This situation is good for bank shareholders and managers. Accept deposits at 0-2% and lend to Government at 12-15% (or more), but is otherwise disastrous for domestic investment and economic growth. Rates for the private sector, with the exception of the largest corporate borrowers, are in the high teens or worse, and loans are seldom made for periods exceeding three years. In this case, it is, for once, impossible to point an accusing finger at bankers - whose job has always been first and foremost to safeguard customer deposits and, consequently, take as little risk as possible. There is an old banking maxim “You are never wrong not to invest” which encapsulates the banking industry's traditional aversion to risk, best illustrated at the beginning of Monty Python’s satirical sketch of the banker who has forgotten his own name but remembers that he is “very, very, very…. rich”.

I quote: "I'm glad to say that I've got the go-ahead to lend you the money you require. Yes, of course we will want as security the deeds of your house, of your aunt's house, of your second cousin's house, of your wife's parents' house, and of your granny's bungalow, and we will in addition need a controlling interest in your new company, unrestricted access to your private bank account, the deposit in our vaults of your three children as hostages and a full legal indemnity against any acts of embezzlement carried out against you by any members of our staff during the normal course of their duties... "

While my friends and colleagues in African banking will refute this comparison, at least from my perspective the caricature is alarmingly close to the truth. 150% asset collateral plus personal guarantees are the norm - not the exception. And of course the derisory returns to depositors lead to inequitably high returns to bank shareholders and managers.

A secondary but additional problem is that it is extremely difficult to invest in long term assets (infrastructure, agriculture, plant and machinery) using short term finance. By definition, long term assets take time to construct, instal and commission. Short term finance needs regular servicing and repayment - which can seldom be met from cash flows generated by new assets. As a result, expanding businesses which already carry high business risk become saddled with high financial risk - often a fatal combination. There is a dire shortage of affordable long term capital - both debt and equity - which matches high business risk with low financial risk..

In practice, therefore, in the absence of a banking industry willing and able to invest at rates of interest which permit long term private sector investment, or the ready availability of equity capital carrying realistic return expectations, most African countries are still reliant on foreign direct investment and aid flows to finance development expenditure. This dependency on foreign investment and assistance creates a subtle form of re-colonisation which, due to the protean nature of money, is both far more insidious than its precursor and infinitely more difficult to resist.

Hair

Wherever I’ve been in Africa, hair is important, very important. Hair comes in a bewildering array of shapes and sizes: wigs, weaves, braids, locks or – occasionally – natural. With the exception of subsistence agriculture and childcare, I would not be surprised if the hairdressing sector is the largest informal employer of women on the continent, such is the frequency with which many women visit their preferred salon. Allied to frequency, the labour-intensive nature of African hairdressing, where it is not unusual to find three stylists simultaneously braiding one head of hair in a process which can take the best part of a whole day, necessitates high numbers of low-paid workers.

The sheer size of the hairdressing industry, and associated beauty care products and services, provides evidence for one of the great mysteries in life: the female budget. Exactly how women can afford the level of investment in personal appearance is baffling, but the results are, more often than not, spectacular. The premium price for human hair (as opposed to synthetic hair) has also led to another business opportunity. Most human hair is apparently sourced from China and India, where many poor women annually “harvest” their hair and sell it for processing, packaging and export to Africa and elsewhere.

Nor is hair by any means a feminine issue. African men, too, pay considerable attention to their hair, the general rule being the less the better. Certainly, most city-slickers sport perfectly shaven heads, requiring weekly attention, though a few free spirits wear braided locks or carefully-sculpted afros.

That’s not to say, of course, that this emphasis on appearance is in any way uniquely African. Hair, for instance, is so important in the USA that Time magazine’s August 2009 edition screamed the headline Why Michelle Obama’s hair matters. For many African-Americans, hair styles have become a subject for debate. Does wearing straight European-style hair compromise Black identity? Given America’s history, this is a sensitive subject, but one I think that does not reward excessive deconstruction. It is universally acknowledged that human beings have a strong desire to look different, to stand out from their peers, and that for many women this desire is most easily satisfied through hair colour, cut and style. I would therefore prefer to think of hair styles as a celebration of diversity, in which the issue is not really about loss of identity, but an emphasis of the importance we attach to the care and decoration we render to our bodies.

Regrettably, this desire can often cross the line into self-harm, either through obsession or physical damage. For white people, this is most clearly seen in the growth of tanning studios, where large amounts of money are spent on the privilege of exposing skin to damaging UV light for the elusive golden-brown colour redolent of tropical beaches and high incomes. Africans face different threats. First is the damage to hair caused by using hair-straighteners – either chemical “relaxants” or super-heated combs. Second, and much worse, is the use of lotions to lighten skin colour. Many of these vile lotions contain not much more than bleach and can cause permanent damage to facial skin with serious long term health consequences, all in pursuit of that same golden-brown skin of the tanning studio.

Liverpool Football Club’s most famous manager, Bill Shankly, once famously said “Football isn't a matter of life or death, it's much more important than that”. He could easily have been talking about hair.

Gold

African gold first came to mainstream European attention when Arab chronicles of journeys through the Sahel became known. Among others, Al-Umari described the vast amounts of gold transported by Mansa Musa (pictured), king of Mali, on his pilgrimage to Mecca in the fourteenth century.

Since then, lust for the metal (and other minerals) has been the driving force for plunderers of African natural resources. It lay behind Cecil Rhodes's klepto-corporations in Southern Africa where, to this day, de Beers still controls a substantial portion of the world's diamond market. It has despoiled the Congo in ways that King Leopold could only have dreamt of when he shamefully referred to the division of the “magnificent African cake” in the 19th century. Today's plunderers come, by and large, in business suits and negotiate mining concessions from host Governments - though where the rule of law breaks down - as in Sierra Leone in the 1990s - the ugly side is still very visible.

In East Africa, Tanzania is best endowed with valuable mineral resources, but to what extent do these resources translate into economic benefit? Not much, at least according to a report commissioned by Tanzanian religious organisations entitled "A golden opportunity: How Tanzania is failing to benefit from gold mining" which can be found at http://www.africafiles.org/article.asp?ID=19218. I quote:

"Gold mining is the fastest growing sector of Tanzania’s economy. Minerals now account for nearly half the country’s exports and Tanzania is Africa’s third largest gold producer. Yet ordinary Tanzanians are not benefiting from this boom both because the government has implemented tax laws that are overly favourable to multinational mining companies and because of the practices of these companies. Tanzania is being plundered of its natural resources and wealth. Between 1997 and 2005, Tanzania exported gold worth more than US$2.54 billion (bn). The government has received around $28m a year in royalties and taxes on these exports, amounting to just 10 per cent over the nine year period. The 3 per cent royalty has brought the government only an average of US$17.4m a year in recent years.......

.....We calculate that Tanzania has lost at least $265.5m in recent years as a result of an excessively low royalty rate, [and] government tax concessions that allow companies’to avoid paying corporation tax...... This is a very conservative estimate, in that it does not cover all the gold mining companies or all figures for recent years (which are not publicly available). Neither does it cover the financial costs of other tax incentives such as VAT exemption, which are extremely difficult to estimate. These extra revenues could of course provide a huge boost to tackling poverty in Tanzania. We also estimate that the prioritisation of large-scale gold mining in the country has come at the expense of small-scale artisan miners, around 400,000 of whom have been put out of work.

This report identifies three severe problems with gold mining in Tanzania, namely:

• It provides the government with very low tax revenues

• It is subject to minimal governmental and popular democratic scrutiny and is associated with the problem of corruption

• People in the gold mining areas are barely benefiting and many are being made poorer. "

Plus ca change. It seems extraordinary that there is no internationally recognised best practice for both Governments and Mining Companies to follow.

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As all photographers know, gold has also given its name to the Golden Hour - the hour before sunset - when daylight is softer and warmer in colour, and shadows lengthen. This phenomenon is particularly pronounced close to the equator, when the sun's rays travel through more of the atmosphere and blue light is diffused. Across East and Southern Africa, with its low humidity and high percentage of dust in the air, this effect is further enhanced, and results in spectacular sunsets of gold and red and violet and the horizons disappear in purple haze. The brevity of sunset makes it all the more beautiful.