The Savannah Protocols offers a helicopter view of the investment opportunities available across subSaharan Africa. The risks and potential obstacles are clearly articulated, and the business strategies suitable for subSaharan Africa frontier markets are explored through the use of metaphors that are grounded in the context of the subregion. "What a wonderful book. Imaginative. Practical. Inspirational. Important for anyone involved with business leadership, not just in Africa. It takes us right into the heart of so many key leadership and management issues in these challenging times." -Professor Gareth Morgan, author of Images of Organizations
Savannah Protocols
Strategy Playbook for Leading in Sub-Saharan Africa Frontier Markets
By Joe MutizwaPartridge Africa
Copyright © 2015 Joe Mutizwa
All rights reserved.
ISBN: 978-1-4828-2493-3Contents
Acknowledgements, v,
Introduction, ix,
Part One: The Opportunities, 1,
1. Lions Follow Buffalo Herds, 5,
2. Crocodiles of the Rift Valley Are Always Present at the Migrations, 18,
3. Vultures Know Where the Opportunities Lie, 31,
Part Two: The Business Risks in Sub-Saharan Africa, 37,
4. Laughing Hyenas Are Not Your Friends, 39,
5. When Two Elephants Fight, the Grass Gets Hurt, 46,
6. The Jungle Is Stronger Than the Elephant, 53,
Part Three: The Need for Due Diligence, 57,
7. Beehives Can Be Home to Both the Honeybee and the Snake at the Same Time, 58,
8. The Leopard Does Not Change Its Spots, 63,
Part Four: Risk Mitigation Strategies, 69,
9. A Colony of Mice Has No Granary, 71,
10. The African Fish Eagle Is an Efficient Predator Because Fishing Is Its Core Competence, 73,
11. Pythons Swallow Porcupines at Great Risk, 80,
12. Impalas Are Not Fat for a Reason, 83,
13. It Is Speed and Agility That Give the Cheetah a Deadly Advantage, 88,
14. Shrewd Birds Build Their Nests with the Feathers of Other Birds, 92,
15. When Spiderwebs Unite, They Can Tie Up a Lion, 97,
16. The Camel and the Cockroach Have a Common Trait—Resilience, 102,
17. The Best Time to Fold a Bull's Hide Is When It Is Fresh, 107,
18. When You Are in a Tough Neighbourhood, Learn from the Honey Badger, 113,
19. Go to the Ant, Thou Sluggard, 117,
Conclusion, 123,
Index, 127,
About the Author, 131,
CHAPTER 1
Lions Follow Buffalo Herds
In order to distinguish the traditional type of investment opportunities from the newer opportunities emerging as part of the growth and transformation story of sub-Saharan Africa, I refer to large buffalo herds as those large and scalable traditional potential profit pools that tend to coalesce around the following primary sectors:
• resource exploitation
• agriculture
• infrastructure development
• tourism.
In sub-Saharan Africa, prides of lions follow buffalo herds — the abundant gifts of nature — as they provide a sustainable source of food. Formidable prides of capitalists are taking after the lions of the savannah, scouring for buffalo herds that remain across sub-Saharan Africa in the form of investment opportunities in the traditional opportunity areas. These investors, as we shall see, are as much from outside Africa as they are from within the continent of Africa itself. Let me look at each of these economic 'buffalo herds' briefly.
Resource Exploitation
It is true that with the end of the commodities super cycle, there has been a cooling effect on investors' appetite for this type of investment opportunity. A few mining majors have, in fact, exited from their investments in parts of sub-Saharan Africa due to collapsing commodity prices among other headwinds. The recent woes experienced by the resources giants — such as Glencore, Anglo American Corporation, and Rio Tinto to name but a few — have had the effect of spooking investors away from emerging markets in general and the resources sector in particular.
While this may be the near- to medium-term outlook for mining opportunities in Africa, the fundamental reality is that sub-Saharan Africa is endowed with a significant proportion of the world's key mineral resources which will be exploited as global economic fundamentals change.
The investment case for sub-Saharan Africa in the resources sector is supported by the following compelling statistics cataloguing sub-Saharan Africa's share of key mineral resources:
• The World Bank estimates that Africa has 30 per cent of the world's extractive resources, encompassing more than sixty different minerals.
• It has 88 per cent of global platinum reserves, 84 per cent of chromium resources, 60 per cent of diamonds, 49 per cent of cobalt, 40 per cent of gold and bauxite, and 17 per cent of uranium reserves!
• Africa's reserves of oil, gas, and minerals have barely been exploited, and with further exploration work, dramatic upward revision of estimates is likely.
• Chinese imports from Africa have risen from US$1 billion in 1990 to over US$200 billion today — a 200-fold increase in less than twenty-five years. A large chunk of these are resource-based commodities.
• The resources sector in Africa has grown at a compound annual growth rate of 7.1 per cent between 2002 and 2007.
• Chinese share of the world trade in fuels and mining jumped by 216 per cent, from 6 per cent in 2005 to 13 per cent in 2013, attaining a value of US$544 billion — ahead of US's US$440 billion.
Always watch out against the resource curse
This is a phenomenon where abundance of natural resources has produced perverse economic consequences. The so-called Dutch disease (which can be traced to the Netherlands's experience after discovery of gas in 1959) arises when an economy experiences sudden and massive increases in foreign currency inflows resulting from exploitation of newly found resources such as oil and gas or special metals such as diamonds, gold and others. As the hard currency inflows surge from exports of the new resource, the local currency appreciates thus making imports cheaper while, at the same time making the country `s non resource exports uncompetitive.
This can result in the decimation of sectors such as agriculture and manufacturing whose contribution to national GDP may decline sharply thereby undermining the economy's diversification and making it increasingly vulnerable to the volatility of globally determined commodity prices. In some sub-Saharan African countries such as oil dependant Nigeria and Angola, receipts from oil exports account for as much as 90% of exports and more than 75% of government revenues resulting in severe fiscal and currency convulsions when commodity prices collapse.
It may not always remain like that. A strong case has been advanced to the effect that in twenty years, close to half of the world's countries could depend on their resource endowments for growth. This is premised on the expectation that the commodity cycle reversals seen in recent years will be reversed as the demand for resources surges, driven by rising affluence in key countries, such as India and China. Dobbs, Manyika, and Woetzel estimate that the global steel production rose 82 per cent between 2000 and 2012, and they expect demand for steel to increase by another 80 per cent in the next twenty years. 7 Even with prospects of technology-driven improved productivity in resource utilization, the inevitable reality is that with an expected addition of 2–3 billion people to the global urban middle class over the next twenty years, the demand for sub-Saharan Africa's natural resources in the mining, oil, and gas sectors will rise sharply, lifting African economies in the process. The expected 'resource revolution' will lift all boats, not just productivity, as the demand for energy- and mineral-based raw materials to power the resultant infrastructure upsurge will skyrocket.
Significant opportunities exist in the resource sector in most sub-Saharan African countries. Tanzania, Mozambique, Angola, and Uganda are poised to be the next hydrocarbon...
