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Good News November 2012

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African Economic Growth Impacts Franchising on the Continent

Recent research has revealed that African nations make up seven of the world’s ten fastest-growing economies. The industries seeing the largest growth on the continent are wholesale and retail commerce, transportation, telecommunications, and manufacturing. According to this research, much of Africa will have attained "lower-middle" to middle-class majorities by the year 2030 and consumer spending will expand from US$680 billion in 2008 to US$2.2 trillion. Today, Africa has more middle class consumers than India despite the fact that India has a larger population.

This economic growth parallels developments in the franchise sector. According to the U.S. Commercial Service, the trade promotion agency for the U.S. Department of Commerce, more than 200 international franchises currently operate in Africa. The market for food franchises alone exceeds US$300 million. Major U.S. brands, covering a broad range of services and products, have debuted on the African continent this year and others have indicated plans for further development throughout the continent. This growth is likely to continue so long as legislative and economic reforms continue to take hold on the African continent and Western franchisors and others look to new markets to expand after years of declining growth in their own domestic markets. African governments have even taken their own initiatives to promote franchising as a tool to promote the growth and stability of home-grown business enterprises.

The increasing popularity of franchising is due, in part, to legislative reforms in countries that had previously hindered the repatriation of royalties and franchise fees. In addition, some countries have also enacted franchise-specific legislation. For example, South Africa enacted franchise legislation in 2008. Tunisia drafted a legislative framework for franchising that took effect in 2010, and Angola has had franchise laws in place since 2003. Other countries on the continent are likely to follow their lead.

Franchising in Africa is not without its challenges, however. A basic understanding of any franchise arrangement is that the intellectual property of the franchisor is licensed to franchisees for a limited time and under certain terms and conditions. The "rule of law" is critical to maintaining and protecting the franchisor’s intellectual property. Concerns over the relatively weak protection of intellectual property have been expressed by several brands.

Access to capital is another concern. Franchisors generally request franchisees commit over 50% of the total investment, but African banks are cautious lenders to small and medium enterprises and start-ups. However, reforms in the African banking industry are changing the lending landscaping. Local banks in certain countries now have franchise departments and are starting to view franchising not as a business start-up, but as a support system for business enterprises that may merit a closer inspection.

Despite these challenges, the developments in the franchising sector in Africa may merit consideration for companies expanding their presence worldwide.

By Kendal Tyre and Diana Vilmenay-Hammond, editors of Franchising in Africa: Legal and Business Considerations, a publication of LexNoir Foundation

Lower insurance premiums for African farmers on the way

In 2009, EARS Earth Environment Monitoring, a remote sensing company in the Netherlands, started FESA Micro-insurance with the aim to develop low cost, satellite based micro-insurance, reaching every farmer in Africa.

Increased food production requires African farmers to invest in better seeds, fertilizer and pesticides. In this way production and income may grow two or threefold. But most farmers don’t have the cash and need a loan for this purpose. Microfinance institutions (MFI’s) are reluctant to provide such loans, as crop failure due to drought or excessive precipitation would make redemption impossible. Micro-insurance is recognized as the key to this problem. It would enable African farmer to climb out of their poverty trap and start an upward spiral of increased income, savings and further investments.

As the cost of traditional insurance is high, weather index insurance has been advocated as a solution. However, the number of weather stations in Africa is too low. Adding stations entails high costs and would not provide the historical time series needed for proper risk analysis.

In 2009, EARS Earth Environment Monitoring, a remote sensing company in the Netherlands, started FESA Micro-insurance with the aim to develop low cost, satellite based micro-insurance, reaching every farmer in Africa. To this end 30 years of Meteosat hourly images were processed to 10 daily Relative Evapotranspiration (RE) and Cold Cloud Duration (CCD) data fields. These data serve as insurance index of agricultural drought and excessive precipitation, respectively. They cover the entire African continent at a resolution of 3 km.

Since 2011 EARS is supporting insurance projects of PlaNet Guarantee, MicroEnsure, Syngenta Foundation and Cardano. Insurances have been developed for maize, wheat, rice, beans and cotton in Mali, Burkina Faso, Benin, Kenya, Tanzania and Rwanda. EARS is providing for the data collection, risk analysis, technical insurance development, index monitoring and pay-out reporting. These services are readily implemented by the insurer.

Today this new approach to crop insurance has reached considerable scale. This is important so for keeping overhead costs low - which will potentially help hundreds of thousands of farmers to access affordable insurance. This in turn should assist farmers to invest in better seed and fertilizer, and in this way realise higher crop production and income.

The project with partner PlaNet Guarantee in West Africa, involves more than 800 locations. Each location may cover a farming community. In this way several hundred thousands of farmers can be insured. Yearly costs of data collection, index development and index monitoring would remain below 0.5 euro/farmer, a very small part of the insurance premium. Therefore, FESA micro-insurance represents a major breakthrough towards affordable crop insurance. Everywhere in Africa!

Tourism in Africa is slowly coming of age

Africa has been one of the fastest-growing tourism regions of the last decade. The right infrastructure, safety and security, and effective communication of the continent’s attractions will help the continent to reach its full tourism potential.

Jet-lagged, 500 delegates from around the world arrived in Victoria Falls, Zimbabwe, in May to deliberate on the path to Africa’s tourism future. To unwind, Zimbabwe’s Tourism Authority, host of the congress of the Africa Travel Association (ATA), had organized a fun-filled welcome. The delegates toured Victoria Falls — one of the world’s seven natural wonders — where they participated in bungee jumping, gorge swinging and zip-lining over the Zambezi River. They then went on safari, encountering lions and elephants. Later they savoured local cuisine and danced enthusiastically to traditional music.

The host’s intention was clear: see, feel and believe. Zimbabwe’s showcasing spoke louder than routine speeches. It spurred tourism ministers from Ghana, Namibia, Uganda and other African countries to become bullish about the continent’s potential. Said US Ambassador Charles A. Ray, "Zimbabwe, even with its political uncertainty, is a potentially huge market."

Tourism watchers are upbeat. In 2004, the New Partnership for Africa’s Development (NEPAD) approved an action plan to make Africa the "21st century destination." Taleb Rifai, secretary-general of the UN World Tourism Organization (UNWTO), recently stated that "Africa has been one of the fastest-growing tourism regions of the last decade." The sector already employs about 7.7 million people in Africa. Mr. Rifai cited data showing steady increases in Africa’s tourist arrivals, from 37 million in 2003 to 58 million in 2009.

Tourism revenues are the lifeline of many economies. About 50 per cent of Seychelles’ gross domestic product (GDP) comes from tourism. The rates are 30 per cent in Cape Verde, 25 per cent in Mauritius and 16 per cent in Gambia. The World Bank reports that tourism accounts for 8.9 per cent of East Africa’s GDP, 7.2 per cent of North Africa’s, 5.6 of West Africa’s and 3.9 per cent of Southern Africa’s. In Central Africa, tourism contributes just 1 per cent.

Despite the chest-thumping, Africa’s share of global tourist arrivals is relatively small. There were 980 million international tourist arrivals in 2011, of which only 50 million traveled to Africa. North Africa suffered a 12 per cent loss in 2011 from the previous year due to that region’s political unrest, denting the continent’s share of international arrivals. But that loss was partially offset by a 7 per cent uptick in sub- Saharan Africa, which gained 2 million arrivals. Overall, the 2011 data shows that Africa performed better than the Middle East, which lost 5 million arrivals. Generally, the continent’s top earners are Egypt, South Africa, Morocco, Tunisia and Mauritius, according to UNWTO.

The East African Community (EAC), a regional bloc, hopes to attract tourists from other parts of the world — not just the West — to go to different parts of East Africa — not just Kenya and Tanzania. The EAC strategy, developed in 2006, includes using DVDs, brochures and other materials to promote the region as a bloc. At international tourism conferences, East Africa now speaks with one voice.

What draws tourists to a country, region or continent? "I wanted to see something different from Europe and I decided to visit Kenya and Tanzania. It is a different feel I got, and I like that," Sven Brun, from Norway, tells Africa Renewal. The McKinsey Global Institute, a think tank, maintains that tourists are attracted to countries with good infrastructure, safety and security, and sanitation. Janet Kiwia, the managing director of World Jet Travel and Tours in Tanzania, adds that bad roads, poorly maintained airports, power outages and other shortcomings keep tourists away.

There are concerns over the safety of Africa’s aircraft and airspace. In just two days in June, two planes crashed in Nigeria and Ghana, killing more than 160 people. In 2009 the World Bank found that 60 per cent of runways in North Africa were in excellent condition, but only 17 per cent in sub-Saharan Africa were. In addition, many sub-Saharan airports are small and have trouble dealing with huge arrivals. Most depend on a single airline and some have no connections to major carriers.

A report by New York University, the World Bank and the ATA calls on industry operators to apply innovative approaches to managing the different types of African tourism, which it categorizes as "safari," "nature" and "culture." The report recommends "going beyond traditional safari to include new adventures" by tapping tour operators’ creativity.

Nature tourism, including gorilla tracking, presents opportunities. More than 700 mountain gorillas live in the Virunga Mountains that span Uganda, Rwanda and the Democratic Republic of the Congo (DRC). Faced with political instability, the DRC is trying to attract tourists by charging lower rates than Rwanda and Uganda. In 2011 the three countries raked in a total of $225 million from gorilla tourism. Through the website www.friendagorilla.org, tourists pay to track gorillas using webcams. It is also possible to "friend" a gorilla on the social network Facebook. Raising awareness of gorilla tourism through social media may attract more tourists from different parts of the world. More tourists mean more money spent on hotels, restaurants, tour guides and souvenirs.

Culture tourism requires aggressive promotion. Like food festivals in Mexico and music and cultural festivals in Jamaica and Trinidad, African festivals can draw visitors. Film festivals in Zanzibar and Burkina Faso attract culture tourists. Africa needs to "develop flagship tourist attractions and communicate brand effectively," advises a McKinsey report.

Africa’s domestic tourism (by resident visitors) has been flagging. Not more than half of Kenyan chief executives have seen an elephant, notes Victoria Safari, a Kenyan tourism company. "Africans should know Africa better than the white person from outside," it adds, recommending cheaper transportation rates and ease of travel to encourage African tourists. Currently it costs about $1,500 to travel 1,800 miles from Luanda, Angola, to Dar es Salaam, Tanzania, but only $1,100 to go from London to Dar es Salaam, a distance of 4,600 miles.

Some countries are moving in the right direction. Frommer’s, a US travel guide series, named Ethiopia one of the world’s top 12 destinations in 2007. The 2010 World Cup in South Africa attracted more than 300,000 foreign visitors. Only recently, renowned international singer Youssou N’Dour became Senegal’s minister of culture and tourism, which may help boost tourism in his country.

It may take some time before Africa catches up with Europe, which received 480 million tourists last year. But as international arrivals hit the milestone of 1 billion worldwide in 2012, Africa should aim for a bigger slice of the pie. The right infrastructure, safety and security, and effective communication of the continent’s attractions can be starting points.

Source: Africa Renewal www.un.org/africarenewal

Bamboo Bikes Hit the Pavement in Ghana

In Ghana, a country burgeoning with traffic congestion, increasing economic growth, and a stark urban-rural divide, making frames of bicycles out of bamboo could be the key to promoting sustainable development. It also makes stronger, longer-lasting bikes.

This is according to Bernice Dapaah, the executive director of Bamboo Bikes Initiative, which trains young Ghanaians to build, fix, and market bamboo-framed bicycles.

"We are into women, children, and youth’s empowerment. And the project reduces carbon emissions and contributes to traffic decongestion, so using it is also a form of reducing climate change," she said in an interview with IPS.

Bamboo Bikes works in partnership with Ibrahim Djan Nyampong, the owner of Africa Items Co Ltd in Accra, and the frames are sold abroad for 350 dollars each. They cost nearly 200 dollars to build, and Nyampong — also Bamboo Bikes’ technical advisor — pays the young apprentices an additional 30 dollars per frame for their labour.

Nyampong described some of the technical advantages that bamboo frames hold over their carbon fibre or metal counterparts.

"It lasts longer than the metal frame," he said. "You know a bamboo bike doesn’t break – it’s very durable."

He said a control test run in Germany proved bamboo frames to be 10 times lighter than metal frames, and noted their heavy load-bearing capacity. Indeed bamboo’s tensile strength — meaning the maximum stress it can withstand while being stretched — is much higher than that of steel.

Bamboo is fibrous, and therefore shock-absorbent. It naturally dampens vibrations, so the frames do not require steel or titanium springs.

"The bamboo has also been treated against splitting and termites, so it’s very strong," Nyampong explained.

He said the bamboo is treated for three to six months before being used for production. It is then coated in a clear lacquer to protect it against rain and other damage.

These elements have enhanced the frames’ international marketability, and BambooRide, an Austrian company, has begun importing them for sale in Europe.

"At first, we were developing the frames together with (Nyampong), because they were good, but they had to fit a certain European standard," said Matthias Schmidt, BambooRide’s sales manager.

"So it was like a partnership, a knowledge transfer in both directions," he told IPS.

The Austrian importers also provided Nyampong’s team with new equipment, including their first jig, to improve precision and reduce the margin of error.

Now, the Austrian company imports up to 10 frames per month, and Schmidt said he looks forward to the initiative’s continued expansion.

"Their capacity is limited… and in the case that we need more frames… we’ll need other sources. So we’re supporting Dapaah’s efforts to improve the equipment and technology," he said.

Using bamboo rather than metal to build bicycle frames also holds several advantages for producers – and for the environment.

According to Dapaah, bamboo’s availability as a local material not only enables producers to avoid expensive import costs, but also eliminates the carbon emissions that would arise from the transport of imported materials into the country.

Bamboo is also organic and recyclable, and, unlike metal materials, does not require high levels of energy during extraction and manufacturing.

"The bamboo bicycle is environmentally friendly… because we are also fighting against climate change," explained Dapaah.

She said the initiative also commits to ecological sustainability by working with bamboo farmers in rural communities to harvest new bamboo crops, and conserve already existent ones.

"If we cut one bamboo, we make sure to plant at least three or five more," she said.

In addition, bamboo bicycle frames promote sustainable transportation as an alternative to motor vehicles and fossil fuels.

According to Isaac Osei, the regional director for Ghana’s Environmental Protection Agency, this is important.

"The traffic situation in the country in general is increasing, and when traffic increases it has its associated environmental issues," he told IPS.

There are 30 motor vehicles for every 1,000 people in Ghana, and the Driver and Vehicle Licensing Authority registers hundreds more each day. Data suggests that vehicle ownership will continue to rise, as the country hits record levels of GDP growth per capita. Ghana has the largest GDP per capita in West Africa at 402.3 dollars in 2011.

Osei noted some of the harmful impacts of increased vehicle use, including carbon dioxide emissions and pollution from dust particles on dirt roads.

"To actually educate people to use bicycles rather than vehicles, I think it is good for the country and the world as a whole," he said.

By employing and providing young people with technical skills, the initiative is designed to reduce unemployment and, consequently, rural poverty.

"So far I’ve trained about 10 boys," Nyampong said. "They can build the bikes, but it’s not up to the quality control level, so we are still training them."

In addition, Bamboo Bikes will help graduated trainees establish their own workshops, and begin to train more young people.

In 2009, Bamboo Bikes won the Clinton Global Initiative Award, and in 2010, the United Nations Environment Programme Seed Initiative award. It also garnered international attention in June when it received a World Business and Development Award at the 2012 Earth Summit in Rio de Janeiro.

By Portia Crowe

Source: IPS News


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