Category: Family and Musings

Kenya vs SA – Resilience

The FM Global Resilience Index is an effort to show resilience at a national level (although it sometimes splits a country up into regions such as USA – coasts are vulnerable to flooding compared to mainland USA).

The results from 2019 are interesting – Kenya ranks 99th (just dropping into the 4th quartile) vs South Africa’s 47th (hitting the middle of the world rankings after some poor performance leading up to the rankings themselves).

From my experience this difference makes sense. Infrastructure is one of the most obvious difference in the two countries for me (SA scores 59 vs Kenya’s 39) – a factor with direct impacts on resilience. For 30 years or so, Kenyan governments almost refused to invest in infrastructure. For a variety of reasons, roads went to pot(holes) and electricity became a punchline. This can’t be good for a country’s resilience and as a boy arriving in SA I would be astounded at the smooth highways, the lack of power cuts. It bears mentioning that SA is heading down the same path. Watch this space.

In 2019, South Africa fell eight places in the overall Index (from 39th to 47th), in part due to its 20-place drop in the corporate governance ranking (from 14th to 34th). Those state capture cases are biting the country hard. Kenya is hardly able to gloat on this though – fraud and corruption has blighted the East African country for decades.

So the obvious test of these rankings is now upon us. Which country can respond better to the COVID 19 pandemic? There’s a positive spin on things – let’s see this damned virus as a “test of resilience”. I hope both these beloved countries can make it through relatively unscathed. I fear for the worst though.

To all in SA and Kenya – Keep healthy and well – then let’s rise up the ranks.

Smell the bilateral roses.

The post-war push for integration and globalisation led to the creation of many (MANY!) supranational organisations. Chief among them the UN (1945), World Bank (1944), the IMF (1945), and the WTO (which in 1995 replaced the General Agreement on Tariffs and Trade from 1948).

These organisations have set out to integrate the global economy like never before. We are all, in a sense, still recovering from horror scenes in places like Nagasaki, Hiroshima, Normandy and Stalingrad. From the awful promise mutually assured destruction.

Mostly and until recently, these supranational organisations have been successful. Conflict is down, wealth and health are up. Trade has trumped conflict and the globe has become a lot smaller. For example, the WTO touts statistics that in the post-war era as a whole, trade grew at one-and-a-half times the rate of expansion in global GDP; in the two decades running up to the financial crisis of 2008, it expanded at fully double the rate of world growth.

However, cracks have started to appear. What seems to be an inability of organisations such as the WTO to keep up with the times has led to parties like America becoming disenfranchised with new powers (China) being treated as a ‘developing’ country, and Britain feeling stuck in its ties to the sluggish economies of the EU.

Today’s more skeptical attitude can also be felt in developing cities like Nairobi. Kenya is a centre for the UN in Africa, and anecdotally I have witnessed the ridicule of vehicles baring UN number plates. The story goes that these UN minions are out of touch, keeping to themselves in barricaded communities, spending enormous amounts on foreign goods and high salaries for foreign workers who don’t actually do very much to help Africa or the world.

At a macro economic level, the new attitude towards these supra-nationals means that when trade is liberalised, it is through bespoke arrangements between willing partners—not by across-the-board multilateral negotiations. In this new world, it could soon become hard to remember what the point of the WTO is. As stated in this excellent article:

“Even with the best will in the world, a technocratic body like the WTO is always going to struggle to deal with brute political power play. And right now, it is operating in anything but a good-will environment. The many useful things that this inherently feeble body can usefully achieve are slipping beyond its reach—because it is as strong or as frail as its most powerful members, above all America, want it to be.”

https://www.prospectmagazine.co.uk/magazine/worryingly-troubled-organisation-why-the-wto-is-in-serious-peril

With this global backdrop, Kenya and South Africa are commonly involved in their own fair share of supra-national organisations:

South Africa and Kenya are both members of the World Trade Organisation (WTO); African Union (AU) which is in the process of negotiating a continental free trade area (CFTA) as well as members of the tripartite free trade agreement (TFTA) comprising of members of the Common Market for East and Southern Africa (COMESA), the East African Community (EAC) and the Southern Africa Development Community (SADC), … but there has been no bilateral trade agreement between the two countries….

https://www.tralac.org/resources/our-resources/12248-south-africa-s-trade-with-kenya.html

Trump would probably argue that these supranational organisations are getting in the way of a fruitful bilateral agreement.

I would probably agree.

Tusker vs. Castle. Remembering a beer war.

In 1998 I was a 16 year old just starting to drink alcohol in Nairobi. I remember clearly the arrival of South African beers (Castle lager) in the bars as an alternative to Tusker, the king of Kenyan beer. Castle came in cans, and until then it had all been glass Tusker bottles. Tusker soon started to can their beer to keep up, which I always nostalgically thought was a pity.

What I didn’t understand was the turbulent backdrop to these shiny cans and bottles sitting on the shelves in all the pubs. A corporate war was started when SA Breweries landed in Nairobi and invested in a plant in Thika. SAB entered East Africa’s largest economy through a business partnership with local brewer East Africa Breweries Ltd, maker of Tusker.

Lucrative markets and very similar products meant that it was a race to the bottom for both parties to keep or gain market share. After much drama (accusations of sabotage, protectionism, underhanded tactics by both parties), a price war benefiting consumers and a huge influx of different brands of beer into the market, the deal soon fell apart, forcing SABMiller to shut down its Thika plant and exit Kenya in 2002.

So what? Why does this matter? To me this is an important example of the SA vs Kenya dynamic. Synergies and opportunities are spotted, but what could have been an opportunity for strengthened bonds and cultures turned into a one-on-one brawl. Perhaps this is due to the nature of the product itself. Highly commoditized, all that was left was grabbing market share by any means. Prices dropped, tactics by all accounts got dirtier.

If South Africa and Kenya are to trade successfully, then perhaps the product traded needs to contain a little more differentiation, a little more art. It must demonstrate clearly its addition and novelty to the local market. Ideally there is no local equivalent to protect, because neither country wants to let the other one in if they feel the market already exists. Both are proud of their status as African giants. As an example, South Africa won’t allow Tusker to be sold in SA. A trademark technicality has kept it out for decades.

Recently SABMiller is back in the Kenya market but is only importing beers into the market. A more cautious approach is probably wise considering the first foray.

If I was going to trade goods into Kenya, I would try to find something that is just not available yet, and introduce it carefully with local partners. This was done with cell phones, pay tv and many other goods which didn’t trigger a price war. I’m sure there will be more to come.

Anyways. Happy Sunday chimps!

Timing

I just received an email from my bank. It was an investment piece describing various scenarios they had researched for the effect of Coronavirus on the markets. Lots of volatility, mixed with under priced companies which will be good bets when the timing is right. (That’s a ridiculously simplistic summary by me, but you get the picture).

So when will the timing be right? When there are no more cases recorded? When the death rate slows? (For the best stats check out worldometer.info/coronavirus).

I just got off the phone from my folks in Nairobi and I think we’re in for a long haul in Kenya and in South Africa. I don’t have the spare cash or the inclination to be making any bets at this stage.

I’d like to thank my bank for thinking of my cash investment at such a time as this though. Its comforting to know some things don’t change.

SA v Kenya: Ease of doing business and GDP

Kenya has a positive story to tell potential investors: In the past 5 years Kenya has risen 80 places in the World Bank’s Ease of Doing Business Index, from 136th to 56th. 80 places??!!! That is a large chunk of the table right there. I would liken it to Usain Bolt taking the baton in the final leg of the school relay, blitzing the field from last place.

This is a clear demonstration of the Kenyan government’s commitment to attract and retain local and foreign investments in the country. It is also just a statistic which is a simplification of a far more complex reality.

Regular visits to the country in this period have shown me what this change means in real life – populations have boomed, infrastructure projects are going up all over the place, demographics are changing (Chinese takeaway anyone?) and general busy-ness (as opposed to business) and traffic in hubs such as Nairobi and Mombasa have become anything from manic to unbearable.

Contrast this to South Africa’s fortunes on the index – slipping from 43rd to 84th in the last five years. These years have been blighted by massive corruption scandals, theft, crime, strong and irrational unions, and macro economic factors conspiring against the growth in SA. Labelling as junk status was inevitable. Check the below charts for GDP per capita growth over the years in the 2 countries:

SA GDP / Capita

And here is Kenya’s:

https://www.statista.com/statistics/451113/gross-domestic-product-gdp-per-capita-in-kenya/

You can see from the charts that South Africa is still a far richer place. In practice this means that life here is closer to a western standard of living. It is far less chaotic and ‘Jua Kali’ as it is in Kenya. Roads are smooth, phones and power lines are (largely) unbroken. Shops have everything you could desire. You could argue strongly that life is easier here.

Probably the biggest factor working against ease of doing business here in SA is government policy and the legacy of apartheid. It still looms so heavily over every government decision. Contrast this to Kenya where independence and colonial legacy is becoming less and less of an issue. Power lies with the local elites. Tribal politics trumps racial issues.

Chips and Cool Drinks. SA & Kenya.

I have lived in Africa for most of my life (9 / 38 years in Australia and Italy – the rest in Kenya and South Africa (SA)). In reading up on trade agreements, I have only just discovered there is a country on the continent called “Saharawi Arab Democratic Republic”. But I digress.

I remember as a kid we would visit my grandmother in SA from Kenya. These trips were really exciting. South African ‘Simba Chips’ and ‘Appletiser’ cool drinks were always the very first thing we bought at the airport as we landed in Johannesburg. In the 80’s and 90’s Kenya was a far more insular country than it is today. Trade was limited and the shops had little in the way of imported goods. In an effort to grow domestic capability, President Moi made my childhood bereft of things like Kelloggs cereals, Mars ice creams, or cool drinks in a can. SA had so much more in the shops. Being oblivious of all the drama related to Apartheid, I always thought SA was the golden land of plenty. To an extent I still feel that way.

Skipping ahead many years, after I finished studying in Australia the first job that became truly available to me was in Johannesburg. I took the consulting gig and found myself in the land of plenty having to work for money. This prospect was daunting, but at least they still made Simba Chips and Appletiser – This was a comfort for me on days when I realised just how little university had prepared me for real life.

Although I found it tough to move to Johannesburg for work and to start a new life, I had a strong belief in the potential and compatibility of Kenyans and South Africans. This was largely down to three things:

  • 1. My South African mother and Kenyan father were, and are, happily married. A model of regional diplomacy and trade in action.
  • 2. My father had successfully worked for a big South African company in Kenya. During this time all I saw were Kenyans and South Africans collaborating all over the place. Positive role models.
  • 3. Simba Chips and Appletisers were by now available in Kenyan shops. Successive presidents in Kenya had loosened the trade and imports into Kenya. The old products still retained their magic charm for me. They had come to Nairobi, just as I had come to Jozi.

That was 13 years ago. As I have understood SA and Kenya a little better over the years, it strikes me that the trade between the two countries could be improved upon. This is an understatement. We are talking about 2 of the most dynamic, important economies in Africa. Two landing pads for international businesses to arrive and work on the continent. There should be Kenyans all over SA and vice versa. We should be the USA and Canada of Africa. The UK and France of Sub-Sahara. Why then is trade so limited? The stats back up my gut feeling on the relationship:

Trade between South Africa and Kenya has been minimal when considering South Africa’s global trade. From a global perspective, Kenya is ranked 27th amongst South Africa’s export destinations accounting for just about 1% of South Africa’s total exports. In terms of imports, Kenya, does not feature even in the top 30 import suppliers to the South African market. However, when considering the African market, the Kenya is ranked 10th export destination for South Africa’s goods and is ranked 22nd most important import source from Africa.

https://www.tralac.org/resources/our-resources/12248-south-africa-s-trade-with-kenya.html

1% of total exports?? 22nd most important source from Africa??

This is bonkers to me. So bonkers that it might become my life’s mission to chart this relationship and develop it where I can. Knowing Kenya and knowing South Africa, they each have SO much to offer each other.

I am off to a good start, having married a South African woman myself. Trade and Diplomacy in action 🙂

Struggle on day 10

My note from yesterday refers. After ten days of writing every day, and with the family responsibilities dominating life on the virus lockdown – I am a little short on ideas for writing. The thrill is gone (as BB said) and the seven year itch has itched me good. I’m tempted by Netflix, video games, the day job, ANYTHING other than writing a blog post.

And yet – here is another post.

It is always the way – a post comes from the sheer act of writing. You need to start with writing to get the idea, not the other way around. Well…rarely the other way around. Stream of consciousness writing can be whittled away. We are lucky to live in the digital age where drafting is so very cheap.

When in doubt, do something. At least if your doubt is related to writing – if so, then just write.

Onwards to the next post tomorrow – hopefully more inspired and thought through than today.

okaythanksbye.

Going for thirty

In my long quest for productivity, I have downloaded an app called coach.me.

It lets you set goals and then track progress day by day. I set myself the goal of thirty days consecutive writing on this blog.

So far I am on day 9. I have started writing streaks before, and around about day 10 it feels like that Marilyn Monroe movie “The 7 year itch”. The excitement is gone and the grind is real. This app certainly helps, though.

This is nine, tomorrow is ten. And on we go.

For the dogs

I write this with a dog at my feet. After a great walk in the park yesterday during which the usual sniffing of other dog butts, running after birds, more sniffing……actually a whole load of sniffing and running occurred – anyways, after that walk my dogs now have to stay confined to the garden for 3 weeks. Thank God we have a garden. It’s not big but at least there are things to….well, to sniff!

This lockdown will take its toll in some ways, and it will help us to grow in other ways. I plan to teach the girls about training a dog. My dogs are not the most well-trained animals but I do understand the behaviour / reward thing….they come when I whistle if that counts?

For now the spaniel is happy at my feet – he scratches the door to come in whenever I am at the computer. I am really disappointed we are not allowed to walk the dogs. But I am glad we have the dogs, they will help us get through this. With any luck, they will be better trained pooches on the other side of the lockdown.