Reasons to be cheerful (Part 3)

What is it about the music we listen to during our late teens? I heard the late great Ian Dury's Reasons to be Cheerful on the radio yesterday, for the first time in the last 20 years. It was like meeting an old friend after a long absence - Dury's harsh smoker's faux-cockney voice rhyming the good things in life.

For me, it was good to visit Malawi again earlier this month. It was my first proper visit since 2001. Back then, Malawi was visibly the poorest country I had experienced. Buildings were old and dilapidated; there were few vehicles on the roads; people appeared poor: tattered clothes, small, often barefoot. Economic statistics confirmed the evidence of my own eyes. GDP per capital was the lowest in Southern Africa; wages were, in dollar terms, far lower than in Kenya and Tanzania; secondary school enrolment rates were low; and life expectancy at birth was well below 50 (partly due to high HIV infection rates). It was hard to think up any reasons to be cheerful. Malawi is small and landlocked. It is relatively densely populated. It lacks mineral resources. With the exception of Lake Malawi itself, still a favoured stop-over point for backpackers and overlander tourists on their journeys through East and Southern Africa, it lacks obvious tourist attractions by comparison with its neighbours. All in all, prospects seemed bleak.

But, while it is still rated one of the poorest countries in the world, Malawi has achieved something big in recent years. It has doubled its agricultural output. From requiring food aid a few years ago, it is now an exporter of food in the region. Its increase in agricultural production has been driven by the adoption of the Agricultural Inputs Subsidy Programme. It is a simple scheme. Vouchers for seeds and fertilizer are issued to named individuals, identified at community level. The vouchers are exchanged for the appropriate product at participating agro-dealers throughout the country. Dealers return them to seed producers and fertilizer importers, who then redeem them with the Government for cash. The results from the programme have been impressive, even after taking into account good rainfall in the past three years. Malawi’s grain silos are overflowing and poor harvests in Zimbabwe, in particular, have resulted in a ready market for the surplus. It has also created an opportunity for seed companies, large and small alike, to increase seed production, bring new varieties to market and invest in expansion. Reasons to be cheerful (Part 1).

This simple, top-down approach initially failed to win the approval and support of donor organizations. However, after its initial success, donors have scrambled aboard the programme, eager to nail their colours to its mast, though they continue to express concern over how long it will be required. It would seem that the development specialists that populate most donor organizations have not yet understood that their home economies almost all provide subsidies – in one form or another – in support of their agricultural sectors, and have no plans to stop. Food security (not to mention the votes of rural communities) are generally considered too important to leave to market forces alone. Why should Africa be an exception?

Has life in Malawi changed? Statistics suggest that its economy is growing and that GDP per capita is increasing, but these statistics tell us little about the multi-dimensional elements of poverty. Poverty alleviation is not something that can be measured using economic indicators alone, nor even by the logframes so beloved by central planners, economists, and development specialists, but by simpler things, like the ownership of bicycles, footwear, cell phones and iron sheets for roofing – the things that provide evidence of real disposable income.

During my visit, I was lucky enough to pay a brief visit to Namitembo village in Southern Malawi. This Catholic parish is supported by St Bridgets Church in Seattle. It has a simple furrow irrigation scheme which enables crops to be grown in the dry season, a rarity in Malawi where little or nothing grows during for the 6-month long dry southern African winter. It has a small health centre, a primary school and an Agriculture and Trade vocational education college. The two men pictured above, Felix Chigwanda and Johann Chisambo, are leading the gradual adoption of new ways of doing things in an environment that is resistant to change. This year, Namitembo is growing seed maize, taking advantage of the dry season to maintain the necessary crop isolation required in order to achieve the requisite genetic purity. This visit served as a reminder of how real change is gradual and generational, and driven as much, if not more, by community initiatives as by central policy. Reasons to be cheerful (Part 2).

One thing that hasn’t changed is street food, Malawi-style. In many parts of Africa, hawkers stand by the roadside, offering food for sale to passing buses and other traffic. In Uganda, grilled chicken, served on a stick, is the most popular offering, along with bananas and other fruit. In Malawi, the main roadside delicacy on offer is field mice, roasted and served fresh, 100 Malawi Kwachas for four, served head, tail and fur intact. It would be fair to say that it’s an acquired taste, but at least it makes a virtue out of pest control. Reasons to be cheerful (Part 3).

Reject the binary

In the month of Ramadan, what better than to read a book by the controversial academic Tariq Ramadan?

I have just finished reading his latest work: the Quest for Meaning. Professor of Islamic studies at Oxford, Tariq attracts, some might say courts, controversy, presumably because of his willingness to challenge existing orthodoxies. From start to finish, I found The Quest for Meaning exhilarating; refreshing in the clarity of its language in dealing with complex issues, in particular the ways in which different societies interact in the globalised world.

I was therefore very surprised to find several highly critical reviews of the book – one in particular describing it as “philosophy as candyfloss” and comparing it unfavourably to Alain de Botton’s work, among others. I can only assume that the New Statesman reviewer believes that complex ideas and concepts require traditionally impenetrable academic discourse. He ignores the fact that many great philosophers have expressed their arguments and propositions using simple and accessible language. Furthermore, the reference to Alain de Botton betrays an unpleasant form of academic snobbery, most likely driven by envy of Botton’s success in appealing to a popular market.

Tariq’s book opens with an unusual dedication, to the semi-colon, “which in a world of simplified communication and binary judgements reconciles us with the plurality of propositions and with the welcome nuances…. of complex realities”. And this dedication sets the tone for the book, especially in relation to Tariq’s appeal to his readers to respect diversity and accept that there are different histories, different cultures and different truths. He argues that we now live in an age of the instant, where groupthink on a continental, even global, scale governs our attitudes; where people are no longer interested in ideas, beliefs, principles and ethics, but bow to their fears and anxieties, seeking comfort in the search for safety and security. He asserts that governments everywhere understand this, and politicians exploit these fears, to the extent that ignoring human rights in the name of security has become acceptable, even desirable, in the minds of their electorate. To counter these unfortunate trends, Tariq encourages us to accept uncertainty, the grey areas of possibility, and to try to understand and respect the diverse worlds where truths and value systems intersect. Sadly, however, he notes that we are no longer interested. Rather, our attitude seems to be (my words) “Let someone else do the thinking – I’m too busy updating my facebook profile.”

This lamentable tendency towards binary judgements extends to my own efforts to raise capital from investors to invest in the East African agriculture sector. The AAC investment proposition is to identify good quality agriculture-related businesses and provide them with affordably-priced and patient capital for expansion and growth. We define our success according to two measures: in financial terms, from the amount of capital we will ultimately return to investors; and in social and developmental terms, through the achievements of our investees as they grow and increase the supply of goods, services and employment in their markets. This is a fairly simple proposition, yet it causes surprising confusion among potential investors. I regularly encounter comments such as "ah, so you're sub-commercial" or “what is impact investing, anyway. Just another word for cheap money? You guys are distorting the market.” or “No, we don’t understand that sort of thing. Maximising financial returns is what matters. The social returns will follow”. Regrettably, the concept of responsible long term investment for economic growth no longer seems to matter in the eyes of most owners of capital.

Antony Bugg-Levine, of the Rockefeller Foundation and one of the founders of the Global Impact Investing Network, urges investors to “reject the binary”, the either/or simplistic judgement that underpins the arguments against the double bottom-line investment approach. It is probably true that in a well-functioning efficient capital market the concept of providing affordable and patient capital would be irrelevant, but events of the past few years have served as reminders that even in the most developed of economies, capital markets require a strong regulatory environment alongside the forces of industry competition.

And what happens when capital markets aren’t working efficiently? Well, in East Africa, the supply of capital is short. Mealy-mouthed bankers argue that the cost of credit is not the issue, but the availability of and access to credit. They use this argument to justify massive spreads between deposit and lending interest rates. Under these circumstances, is short term oligopolistic pricing the best proxy for defining long term commercially sustainable rates of return? Where there is market failure, the market alone is not enough. In the world of finance, of commercial lending, of private equity and venture capital, of differing investor and investee needs, surely there is room for the acceptance of a plurality of approaches.

A little piece of paradise

I had the great pleasure one night last week of staying at the Norman Carr Cottage on the shores of Lake Malawi. The late Norman Carr’s name lives on, not just as a result of his devotion to conservation in the Luangwa Valley in Eastern Zambia, but also at his lakeside cottage in Monkey Bay on the shores of Lake Malawi, now transformed into a delightful eight bedroom lodge.

“A little piece of paradise” is the marketing pitch. On approaching the entrance to the lodge, off a dusty marram road through the yellow and grey of a Southern African winter, there is little to suggest the green oasis paradise ahead, dominated by its great sycamore fig tree.

But then, a warm welcome from Taffy and Jenny, the South African proprietors, always on hand to entertain their guests.

A sundowner boatride on the clear and bottomless waters of the lake; the western sky on fire; the only sounds of children playing by the beach and of two hippos wallowing in the reedy shallows.

More drinks by the lake while Taffy regales his guests with the story of Bentley Palmer, who went for an afternoon’s boat trip on Lake Malawi with his wife and mother-in-law, suffered engine failure and miraculously washed up, unharmed, over two weeks later some one hundred miles further north on the Tanzanian shore.

A superb dinner on a raised platform; the lights of fishing boats out on the lake dwarfed by the Van Gogh-bright starry sky.

An uninterrupted and dreamless sleep followed by a warm morning shower in the roofless bathroom.

A magnificent breakfast: strong tea and fresh fruit followed by brown toast buttered with fresh avocado and topped with thick slices of back bacon. The breakfast would be excellent anywhere, but in the bright light of a Lake Malawi morning, it is close to perfection.

The Norman Carr Cottage is a great big piece of paradise.

What's happened to the Pride of Africa?

Earlier this year I became a Flying Blue Platinum card holder, courtesy of having flown at least 60 separate flights on Kenya Airways during 2009. This might give the appearance that I am satisfied with the service provided by Kenya Airways. This, however, is wrong. I am, in fact, extremely dissatisfied. It simply serves to demonstrate the virtual monopoly that Kenya Airways enjoys in the East African market.

A few years ago, Kenya Airways was quite a good airline. Now, its idea of inflight refreshment is a hot greasy cellophane-encased, cholesterol-packed meat pie accompanied by a stale slab of cake wrapped in a plastic bag. Worse, the tea and coffee on offer bear little relation to Kenya’s matchless provenance and, to compound the fault, they are accompanied by something called Cremora. This non-dairy creamer is, in fact, made by Nestle from hydrogenated palm oil and glucose syrup. “Would you like some sweetened margarine with your tea, sir” is a fairly revolting proposition, but that’s what non dairy creamer is, more or less. (For anyone who doubts the truth of this statement, just search YouTube for "Non-Dairy creamer explosion"). I mean, what’s wrong with a milk jug? Or, indeed, scrapping the free refreshment service altogether in favour of a pay-as-you-go snack bar, as many low-cost international airlines have done?

But the poverty of inflight service pales into insignificance against Kenya Airways persistent flight delays, which, at least on certain routes based on my own direct experience, have become the rule, not the exception. That these delays are generally on routes where Kenya Airways enjoys a virtual monopoly fans the flames of passenger suspicion. Is it coincidence, or does Kenya Airways take better care of passengers on contested, rather than uncontested routes? Today, for example, I left Entebbe at 5.10 am in order to make the connection to Lilongwe. On arrival in Nairobi at about 6.30 am, my colleague and I were informed that our flight to Lilongwe (not a well-contested route), scheduled for departure at 8.25 am was delayed by about 30 minutes……. 9.00 am became 9.40 am, 9.40 am became 11.00 am and then, ultimately 1,00 pm. No apology was made, except for a passive statement that I have become all-too-familiar with.

“The flight delay was caused by operational problems. Any inconvenience is highly regretted”

Astonishingly, Kenya Airways regularly features high on the charts of the Pricewaterhouse Coopers annual survey, in association with the East African newspaper, of the most respected companies in East Africa. I am not sure quite how to explain this, except to speculate that the survey respondents don’t actually travel on Kenya Airways very often.

Come on Kenya Airways. Surely the self-styled Pride of Africa can do better than this.

So true to life

Over the course of the last year, NTV Uganda has screened three South American telenovelas, La Tormenta, El Cuerpo del Deseo (translated, oddly, as Second Chance), and Sabor a Ti. The three promotional pictures are a fairly clear indication of the fare on offer. Impossibly beautiful heroes and heroines battling against scheming villains whose objective is to keep them apart...... Throw in some magic and comedy and the recipe is complete. Like soap operas everywhere, the directors have perfected Scheherezade's strategy from the Arabian Nights and end each episode with a cliffhanger, keeping their audiences in keen anticipation for the following evening's events.

As a keen follower of La Tormenta, and the trials and tribulations of the heroine, Maria Teresa Montilla, and hero, Santos Torrealba, I had regarded it as nothing more than an entertaining and harmless fantasy romance. But in Uganda, where the belief in magic remains powerful, where family feuds and disputes over land holdings are common, the story is more believable. Yesterday, at a small clinic in Kampala with La Tormenta screening on the waiting room TV, I overheard one lady say to another "It's so true to life". And in a way, it is. You can certainly see why Eastenders and Coronation Street don't pack in Ugandan viewers with this sort of competition.

I recently re-read a novel by Mario Vargas Llosa, entitled Aunt Julia and the Scriptwriter. The scriptwriter of the title refers to Pedro Camacho, a diminutive Bolivian writer with a gift for writing radio novelas for the Peruvian public. Sadly, the stresses and strains on Pedro Camacho to keep churning out new episodes for three or four separate novelas running simultaneously become too much for him, and his novelas collapse in chaos and confusion. No risk of that with La Tormenta, now rapidly approaching its 216th and final episode, when Maria Teresa and Santos will no doubt be reunited in marital bliss having vanquished all their enemies. So true to life!

East Africa United

This most colourful of flags is not yet, to the best of my knowledge, widely recognised. It is the flag of the East African Community, comprising Burundi, Kenya, Rwanda, Tanzania and Uganda.

For most of the last year, the best newspaper in the region, the East African, has been running weekly updates on East African Community integration, culminating in the launch of the East African Common Market Protocol on 1st July 2010. This protocol will, we are assured,eliminate the vast amounts of restrictions and regulations often required to do business in the region. In addition to the elimination of trade barriers and border taxes, citizens of East Africa will be able to freely relocate within the community, bringing education and expertise where they are needed most.

However, these changes have not taken place overnight. Even the most optimistic among us recognize that it will take some time before the notoriously tight borders are opened and the pointless red tape eliminated. Conservative expectations are that the necessary legal and regulatory changes will not be implemented in full before 2015 (though given the funereal pace of change in public sectors everywhere this would be quite some achievement). Certainly, not much has yet happened on the ground, if my recent experience of the Malaba border crossing between Uganda and Kenya was anything to go by. Regional studies often highlight the high transaction costs of doing business in East Africa. What better example than a 5 km tailback of trucks on the Kenyan side of the border. Imagine the hidden costs of these delays! With the exception of a few thousand customs service and immigration employees, it is hard to see anyone opposing a borderless East Africa.

It will be particularly interesting to see how the agriculture sector as a whole – and in particular the seed sector – responds to a borderless environment. Regulations (and the effectiveness of regulators) in the seed sector vary widely among the members of the East African Community. In Kenya, regulations are tightly enforced by the Kenyan plant health inspectorate service (KEPHIS), to the extent that most imported seed, especially from other African countries, requires KEPHIS approval. Uganda, by contrast, has a weaker quality control environment for the production and importation of seed , and little or no organizational capacity to implement its rules and regulations. An efficient market would substantially remove the need for Kenyan-style regulation but at least for the time being small-scale farmers with little or no access to market information need the protection provided by a robust regulator. As a general point, harmonisation of standards is fine, as long as it is upwards.

Back to the excellent East African. This week's edition includes some articles on regional private equity, including a piece on African Agricultural Capital on the following link
http://www.theeastafrican.co.ke/news/EA%20agrobusinesses%20next%20stop%20for%20private%20equity/-/2558/964378/-/13pu1g5/-/index.html

In my (entirely disinterested) opinion, well worth a read!

Kampala after 7/11

A great deal has been written about the hows, whys and wherefores of the July 11th terrorist attack on Kampala. That the attack was planned and executed by the Somalia-based extremist group Al Shabaab, bent on extracting revenge for the deployment of Ugandan peacekeeping troops in Somalia, appears in little doubt. It is further evidence of the danger that the chaos in Somalia presents to the region and beyond, if any were needed.

The response to the attacks has been swift. Government has promised to hunt down the perpetrators, and to continue the "fight for freedom" in Somalia (whatever that means). A range of security measures have been taken in Kampala, including an order by Kampala City Council that all bars and clubs should close by 10 pm, which has, predictably, been completely ignored. Worse, however, are the lengthy delays in entering shopping malls and other public places. It now takes a minimum of about 30 minutes to drive into the Garden City mall, for example, as all vehicles are searched and pedestrians scanned for terrorist devices. Entebbe Airport, once a shining light of efficiency and briskness among international airports, now requires a three-hour passenger check-in time for security access control, adding yet more disincentive to endure travel by air within the region.

When I was growing up in 1970s Britain, the IRA was a real and persistent threat. In 1972, the Aldershot army barracks - where my father worked as a lecturer to the Paratroop Regiment - were bombed in what was one of the first terrorist attacks in England. Only nine at the time, I had little understanding or appreciation of what had happened. Many other fatal attacks were made throughout the 1970s and 1980s, including audacious attacks on the House of Commons (when war hero and Conservative MP Airey Neave was killed) and, most memorably, on the Grand Hotel in Brighton during the Conservative party conference, when five people were killed and Margaret Thatcher herself narrowly avoided the explosion. It was a different era, of course, and the instruments of control and surveillance that exist now were in their infancy, but I have no recollection of changes in behaviour. Quite the opposite, in fact. Defiance, a refusal to make any concessions to the threat, to allow the threat of terrorism to interrupt day-to-day life, became a matter of pride. One of the more memorable quotes from JRR Tolkein's Lord of the Rings is "It's a dangerous business, Frodo, going out your [front] door." No doubt, but an accurate calibration of risk and return underpins more than just economic wellbeing.

Stubbornness, of course, is not necessarily a virtue, but in this case at least I think the UK had the right approach. To allow daily life to become interrupted by what remains an extremely low risk is, in some respects, a victory for terrorism, an acknowledgment of the irrational fear it provokes.

This is especially true in Uganda, where other high risk areas of daily life go ignored. The casual loss of life in Uganda from preventable accidents is staggering, far exceeding the threat from terrorism. In the last two weeks alone, there have been two cases of boats capsizing (on Lake Albert and Lake Victoria). The death toll from these entirely avoidable tragedies is similar to that of the terrorist attacks. In both boat accidents, for example, no life jackets or other flotation aids were on board. I wonder what action is being taken to reduce this risk in future.

Ugandan roads are even more deadly. There were more than 2,000 reported fatalities on Ugandan roads last year. Road accidents are too frequent to mention. The issuing of Ugandan drivers' licences is poorly regulated. Vehicles are not subject to annual roadworthiness tests. Buses are not fitted with seatbelts or speed regulators and hurtle through villages and towns at breakneck speed. Road surfaces are poor...... The list of causes is endless.

This morning, a traffic policeman, his overfed belly pushing at the seams of his spotlessly white uniform, waved me over and asked to see my driver’s licence. I duly produced it. He then walked slowly round my car and inspected my insurance certificate, before being interrupted by a personal call on his cellphone. After a short conversation, he wordlessly returned my licence to me and jerked his hand in what I took to be an invitation to drive on. During this pointless little charade, a large, overloaded truck shook, rattled and rolled its way past, its exhaust belching out black fumes, its tyres bald and its rear indicators and brake lights apparently not functioning.

Ugandan roads and waterways present a far greater risk to life and limb than terrorists, even after 7/11.