Friday, 29 August 2014

Kenya drills the biggest steam well in Africa

KENGEN, KENYA'S leading power generating company, has drilled o the biggest geothermal well in Africa and fifth biggest in the world. The well, christened Olkaria OW-921 has a production capacity of the 30MW of geothermal energy. 

The 3KM deep well is located at Ol karia and is one of the five largest geothermal wells in the world. It was completed in 46 days. The firm is the leading geothermal in Africa.

This new discovery firmly establishes Kenya as major geothermal power house in the world. It is also a major help in the realization of the goal to produce 5000MW in the next four years. The well will be connected to Olkaria IV power station. Ol Karia geothermal fields are located some 230 Kilometres North west of Nairobi, the capital city.

Meanwhile, KenGen will commission an additional 280MW of geothermal power next month. This will raise her generating capacity to 11462MW. The firm plans to produce another 30000MWby 2018 bringing her total capacity to more than 5000MW. For further reading Go to:

Thursday, 21 August 2014

Ebola phobia: Bigger problem than Ebola itself

A Poster from CDC&P Nigeria
Don't eat bushmeat
Keep calm and carry on- The Economist

THE FEAR OF THE DREADED  disease, Ebola, what we shall call Ebolaphobia, is proving more disruptive and expensive than the disease itself. Although the numbers are not yet crunched, some indications are emerging. The affected parts of West Africa will suffer significant economic costs. For instance Liberia which has already lost $12 million so far and has already indicated that she will miss the projected GDP growth of 5.9 per cent in 2014 by significant margin.

Ebola will shave off two percentage points from Sierra Leone’s growth target. As of now, projections have been downgraded to 12 per cent this year from the projected 14 per cent.  It could shrink even further if the virus is not controlled soon.  In Nigeria, the economic cost of Ebola is tagged at $3.5billion dollars. Yet only 12 people have been confirmed to be infected so far, with two of them dead.  Although $3.5 of the colossal US$500 billion 

 In Kenya, Kenya Airways is the unfortunate victim of the fear of the disease. The airline has been forced to suspend flights to Sierra Leone and Liberia due pressure at home.

 Yet, all these costs are the consequence of fear of the disease –not the disease itself. So far, just about 2500 people are infected by the disease in three West African countries namely, Liberia, Sierra Leone and Guinea. Some 1350 people have succumbed to the disease since January. Given the low numbers of the infected, the colossal loses are irrational.  Why do they happen?

 A World Bank study shows that zoonotic diseases like Ebola cost economies anything between $500 million and $50 billion. The bulk of the costs, experts say, comprise of efforts to avoid infection such as reduced travel and discretionary spending. These account for 60 per cent of all costs. Illness and missed work account for 28 per cent of GDP losses, while mortality - and the resulting reduction in productivity - account for the remaining 12 per cent.

Explains the Economist, “The economic costs of epidemics are often out of proportion to their death toll. The outbreak of Severe Acute Respiratory Syndrome (SARS) in 2003 is estimated to have caused over $50 billion-worth of damage to the global economy, despite infecting only about 8,000 people and causing fewer than 800 deaths. That is because panic and confusion can be as disruptive as the disease itself. Studies of past outbreaks have shown that lethal diseases that lack a cure tend to provoke overreactions. This is true even if the risk of transmission is low, as is the case with Ebola.”

So the cost of fear is way higher the direct cost of treating, managing and even the cost productivity caused by death. This fear has adversely affected critical sectors of the economy including; aviation, tourism and hospitality, trade, medicine and agriculture.

 In the case of Ebola, the World Health Organization stoked the panic by declaring the “epidemic an international emergency.” Reaction was swift; West Africa was isolated by careless pronouncement. Soon Airlines, led by British airways suspended flights to West Africa. Other countries with their own form of suspension including such comical ones as: Africans being barred from Bars in Korea, prostitutes in India were advised to avoid Africa clients and such other comical bans. Korean Air has also suspended flights to Nairobi which is a 10 -hour- flight from the epicentre of the epidemic in West Africa.

 Perhaps Korean Air was reacting to a statement by WHO that Kenya is a high risk location. This statement, given what is scientifically known about the transmission of Ebola was reckless, unprofessional and irresponsible.  The same organization has issued statements showing that Ebola cannot be transmitted through sharing a flight with an affected person.

 Ebola, although fatal, is not infectious.  It is transmitted through direct contact with bodily fluids of an infected person, or exposure to objects such as needles that have been contaminated with infected secretions," said Stephan Monroe, deputy director of the CDC's National Center for Emerging and Zoonotic Infectious Diseases.   It is highly unlikely to be transmitted in crowded places as trains and air planes since it is not air bone, nor it transmitted by neither water nor insects such as Mosquito.

This means that among the best preventive measures is to isolate the infected person and avoid burial ceremonies in case of death. The next measure, according to the Nigerian Centre for Disease control and Prevention is to avoid eating bush meat. 
 Ebola’s natural host is the fruit bat. But other wild animals such as chimpanzees, gorillas, fruit bats, monkeys, forest antelope and porcupines are also carriers. Consequently, the disease gets into the human population after people come in close contact with the blood, organs or bodily fluids of infected animals.

  Given what is known about Ebola, it is easier to prevent perhaps than Malaria and difficult to catch if we do not create, by our own actions, the environment conducive to infection. The conditions include, hunting wild animals for meat and handling corpses of animals or man.  In fact, Ebola it seems is only a threat to the rural folk and medical personnel. These are definitely not urban dwellers and are not the kind of people air travelers come into contact with frequently.

The fear is irrational and Africa cannot afford the cost of Ebola phobia.  The Phobia has already cost us a tidy sum in terms if economic growth and business. We need to go easy on the rhetorric.

Saturday, 16 August 2014

New World Order but watch out for the pitfalls

Trade, not aid is the new mantra
THANKS TO THE BIRTH of China as the leading developing economy, the new world order has been born. In the new order driven by the corporate sector, politics is taking a back seat as Corporate Moguls push the aficionado in the direction of opening new markets.

 In this new order, such fancy ideologies as “human rights,” civil society good governance and yes, democracy are being sidelined.  The new mantra: trade and investment-not aid. In recent weeks, we have seen the West, which champions such lofty issues as gay rights tone down on such issues in favour of doing business with the developing world, especially Africa.

 And the developing world, specifically Africa, has taken the center stage in this new world order.  This is because the continent is in the second decade of robust economic growth and is headed for the pole position. A growth pole region is a region whose growth sparks growth in other regions.

In tandem with the changed circumstances, the economic narrative of the continent has changed from aid to trade and investment. In effect, Africa has elbowed politicians out of its growth agenda. Instead, economics has taken hold.

Consequently, all regions of the world are seeking a foothold in Africa, to be part of the growth.   This is why; According to Bloomberg 10 of the 15 fastest growing economies in the world are in Africa. Its middle class stands at 355 million people, slightly more than a third of its population and still counting.  The continent boasts of the youngest population in the world and by 2040, Africa will have the largest labor force in the world. 

The bulging middle class is driving the growth of domestic demand and will drive it in the long run. Currently, consumption expenditure in Africa stands at US$1.3 trillion a year and is expected to double by 2040. Now that is a region and a continent every business executive would like to have a part in.

Adding vigor to the new world order is the Birth of the New Development Bank or the BRICS bank which will definitely disrupt the current world economic order.  The order currently dominated by the developed North will now have to contend with the reality of a major development financier in the South.

 Investment not aid is the new mantra 
This will lead to improved customer service as both banks vie for customers. The US-Africa summit in Washington last week is a good example.  Africa took home US$ 17 billion worth of investment commitments by corporate America.  Little came from the US government itself but it also did not lecture Africa heads of state on governance and Human rights. In fact, such irritants to Africans as gay rights were swept under the carpet. They are likely to remain there for a very long time.

The developing countries themselves are likely to favor NDB, as a welcome jolt to the existing world economic order which is deemed insensitive to their needs. No one expects the developing world to troop out of the Bretton Woods institutions en masse or even at all. But the fact that they have one of their own lending to them could make it the lender of the first choice.

No one expects the World Bank and IMF to sit back and watch the new Kid on the block eat their lunch. Far from that, we expect them to compete for customers. That competition is what the developing world needs to leverage “to make hay while the sun shines.” We expect customer-friendly attitudes and policies from both institutions. The Bretton Woods institutions are seen as too intrusive in their lending policies, are expected to start softening their stance and become customer friendly.

A South-South Bank demonstrates one thing, that the developing world has come to grips with its agenda- development- and has identified its major handicap as finance.  The developing world’s major economic draw-back is poor infrastructure.  Currently, it seeks friendly financial support from China, which has responded generously. In Africa, China has offered US$30 billion over the next few years to develop infrastructure.

 It is expected the New Development Bank will focus heavily on infrastructure development- logistics, energy, and water in order to improve the lives of their people and buoy economic growth.  These are also the areas that the BRICS countries are also focusing on meaning that they are in good company for other developing countries are desperate in need of funding for infrastructure projects.

Infrastructure, especially logistical and energy is currently the main focus of development in the developing world and it is expected to remain a major item on their agenda for a long time. This is a sensible move for the forward and backward linkages of infrastructure development in the developing world are massive. They open a world of opportunities.

 China has been very generous in funding infrastructure projects in the developing world. And this has rattled the West. And the West, fronted by Bretton woods institutions-the World and IMF and the European Commission, have in the recent past been seen to copy China’s act, especially in the speed of approving projects. It is not clear whether the speed of disbursement is equally high.

Assuming the speed is equally high, then the developing world borrowers are spoilt for choice.
It is here that the developing world must be extremely alert regarding its development priorities so that they do not get swayed by marketing gimmicks.  The ready availability of credit is likely to tempt some to overdo things, including investing in fantasy projects.

We are already beginning to see symptoms of over-investing which could lead to unnecessary debt.  A case in point is the proposed double-decker highway in Nairobi, Kenya.  The World Bank has approved a US$260 million. The project is viewed an unnecessary since there is a dual carriageway Southern by-pass under construction. The 49 Km road will divert traffic from Mombasa highway and ease congestion on the existing Uhuru Highway and the City Centre.

 In addition, there is also investment going on for a commuter Railway which is expected to further ease traffic on the road leading to the Jomo Kenyatta International airport. In fact, the feeling is; the money should be diverted to other projects such as water or irrigation schemes to improve food security.

China’s generosity in funding infrastructure projects in the developing world has jolted the West. It has attracted a lot of African countries towards China whose aid terms are considered reasonable. China will also be the lead partner in the new Development bank, given her status as the largest economy in the developing world and the second largest in the world. The new BRICS bank is, therefore, an additional feather in China’s cap.

Given that the bank’s terms are likely to mimic those of the shareholders, that is sympathetic to the needs of the developing world, the Bank is likely to attract a lot of developing countries desperate for funds to finance their infrastructure development programmes.

This has the west also crafting partnership strategies for the developing world in which they have upped their involvement with the developing world. For instance, the World Bank has come up with a new partnership strategy with Kenya that will cost US$4 billion between 2014 and 2018, an average of US$800 million a year. This is quite a leap for the bank which over a ten year period between 1999 and 2012 committed a total of US$3.6 billion in the same country.  Already some US$50 million has been released to train Kenyans on the management of the oil industry.

To sum up, the entry of NDB will create a new world order where development partners will be competing for attention in the developing world. Such competition could motivate some officials to overindulge. Let the developing world leverage the expected competition for its own benefit.

Wednesday, 6 August 2014

US-Africa summit: Africa’s Diplomatic coup?

The events at White House dinner
THANKS TO THE DISMAL SCIENCE, the US government has caved in to pressure from its corporate sector that is keen to do business in Africa. The country is now hosting two score plus African heads of state in Washington DC in a history setting US-African leaders’ summit.  And Americans must endure traffic jams for two days because Africa is in town.

 That the Summit is driven by economics is not in doubt. According to Al Jazeera, US$1 billion in business deals is on the table.  Africa itself is not talking about aid. It is talking investment, trade –economics.  It is talking to corporate America and corporate America is listening. This is a diplomatic coup as the government will also have to listen to its citizens.

The west has woken up to the fact that Africa is driving its own agenda. It needs trade, investment and infrastructure development. These three and the rest will fit in place, so goes the Africa script.  The west has finally sat up and taken note:  Africa is the place to be if you want to turn your economic fortunes around. Such American niceties as human rights and Gay rights have taken a back burner in this summit. This is expected, business is about profit not about rights and fantasies. 
Also Read.

 Why is Africa having its way? A   few statistics show why the world must listen to Africa now. According to Bloomberg 10 of the 15 fastest growing economies in the world are in Africa. The continent itself is in the second decade of robust economic growth, ranking second only to Asia. Its middle class stands at 355 million people, slightly more than a third of its population and still counting. The continent boasts of the youngest population in the world and by 2040, Africa will have the largest labour force in the world.  The bulging middle class is driving the growth of domestic demand and will drive it in the long run.

In effect, Africa is headed to be the economic growth pole. A growth pole is a region whose growth leads to growth in other regions. Other regions,-West, east, Asian Tigers have had their day.  Now, to quote, a song, “it’s time for Africa.” A growth pole does not grow by its own. It needs the backing of others in order to grow sensibly. And that’s why anyone country or continent that wants to grow must pitch a tent in Africa. That is why the adage in the US is: “getting into Africa is not an Option, it is the only choice.”

How did we get there?  Largely by our own bootstraps but with a little support from others: Good house-keeping, an end of wars, expanding domestic demand due to the growth of the middle class were Africa’s own making. Good commodity prices that have fostered African progress were external. But by and large, the causes of the progress are home brewed. Africa has learnt to make the right decisions and implement them.  The results are summarized in the “narrative of Africa rising.”

Owing to robust economic growth the per capita domestic revenue mobilization has risen to U$441 shrinking foreign aid to $41 per capita. The continent is lifting an estimated 15 million people out of poverty a year. This means that so far an estimated 90 million have been lifted out of poverty putting the size of the middle class at 430 million people three years down the road.

So why has Politics been shunned? In 1985, during the Women’ Conference in Nairobi, activists from the West dared say “Africa women are oppressed because they enter into Polygamous marriages.”  The answer did not come from African men. It came from the Women in the conference. A stern “keep off this, you don’t understand it.” They were silenced and the issue is never raised in subsequent conferences. The same goes for political lectures such as the rights of gays and lesbians. Africa’s stand is known and firm. Gays are frowned at. Obama will not risk uproar over such trivia.  Africa is asserting itself and getting its way. Read also

 This is what is at stake: Africa imports US$50 billion worth of US goods which keeps at least 250,000 Americans employed says, Joe Biden, the US Vice President. Further, Africa’s consumption expenditure is US$1.3 trillion a year and is expected to double by 2030. This is a mouthwatering market for many a business executive.

The corporate sector that is driving the agenda for the summit wants the US change attitude in order to open this market for them. Corporate America is keen for a large slice of this market. So irritating non-issues like gay rights should be kept off the summit. Corporate America is engaging with Africa not as a choice, but as a necessity.  No President would put a necessity to risk.

 What could be at risk is the Civil Society in Africa. Since their governments did not take a begging bowl to the US capital, they have effectively sidelined the politicians. Africa is talking about toll roads, new power stations, new seaports, Railway lines, airport, Pipelines…name it. They are talking business and therefore talking to corporate America.  They are talking about where US companies can make profits in Africa and Corporate America is listening. Next- to toe the line will be the government and the civil society will be on its own.

 China, Japan, have regular summits with Africa. Will the US follow suit? The stakes are stacked in favour.  So who is next? Europe?  Africa is the place to be.