Leading an Advisory Group like KPMG in East Africa is no miniscule task. That is why we took the opportunity to chat with KPMG CEO for East Africa, Josphat Mwaura, about the economic climate in East Africa.
Josphat paints a striking economic picture of the pros and cons for Ventures Africa.
Ventures Africa (VA): What is getting you excited in East Africa as an advisory group KPMG?
Josphat Mwaura (JM): When I look at East Africa, and I keep saying this and thankfully the rest of the world is recognizing this, East Africa presents some of the most exciting investment opportunities, I dare say, anywhere in the world.
For this reason, we have one market already, five countries that have come together under the East Africa Community –and you can come in through Rwanda, you can come in through Uganda and Tanzania to do business in a region that has 150 million people.
This region is endowed with everything, from the largest freshwater lake to the highest mountain, the coastline, natural resources, with natural gas in Tanzania, oil in Kenya and in Uganda and notwithstanding a fairly well standing middle-class, so you have a ready consumer market.
Combined with the points of entry is access to markets, with our historical relationship with Europe Kenya and Ethiopia are reaping dividends in horticulture, with historical relationships with Middle-East, with India and now China, the market for anything coming out of East Africa is huge.
Governments have recognised this opportunity and they are facilitating that development. The level of infrastructure development in Africa is tremendous and there is a number of significant projects under way, being regionally cooperative projects between Kenya, Uganda, Tanzania, Rwanda and Ethiopia, not forgetting Southern Sudan.
We have for example a new port coming up on the coastline of Kenya going all the way up to Ethiopia, South-Sudan and Uganda. We also have projects in road, rail and an oil pipeline being developed and not least the expansions of electricity to fuel this development – making up the reasons why we are excited about East Africa.
VA: Just yesterday a Global Shaper shared with me that Rwanda has a lower level of corruption than that of Tanzania. Because their country is landlocked, they have a problem stemming out of Tanzania. What is being done about such challenges?
JM: The issue of corruption is endemic and I am the first one to admit. Not just in East Africa, but globally. Because of the levels of interest, there is a systemic level that derives from such interest. One of the opportunities that we have to address corruption is re-looking at the role of government. I agree to an extent that government has a primary responsibility to fighting corruption by setting up the systems and provide capacity and people with integrity, but as you know corruption takes two to tango.
There are two initiatives that are underway that I am involved in; the first is to get business to sign up to a code of conduct – committing to zero tolerance for corruption. So when you are coming to business in the region, by signing up you are making it clear that you will not and also making it clear to whomever you may do business with that you will not participate in any level of corruption.
Finally, we have to build a mass of people who choose to participate in legal business investing and activity. If we build such a critical mass, it makes it easier to achieve premium returns by avoiding corruption.
The second point is, there is always someone who is in support of it gets away with it and someone who is not in support with it. To this extent we are creating a platform for whistleblowing. For example KPMG East Africa we are just about to launch a whistleblowing centre, where we have created avenues for anonymously reporting corruption via email, sms and by telephone and analyse such reports. We have also created social media handles for people to also get involved in reporting corruption.
VA: You certainly are excited about your region. There are others who are also excited about this region for the wrong reasons –in particular security in Kenya and the region for that matter of fact?
JM: the security problem has a number of facets to it. Unfortunately we have been laden with that problem because some of them, the rest of the world watched the situation deteriorate. When the Somali government collapsed in the 1990’s and basically there was a failed state for a couple of decades, this was fertile ground for breeding radicalism. The US tried to come in but generally the problem was left to simmer.
We have however taken steps against this problem in the form, Ethiopia, Kenya and the African Union has decided this cannot be allowed to continue. So you have now a collective force to fight the issue, which for all tens and purposes is a global phenomenon.
In Kenya for example, we have a number of issues to look at, First of all is the issue of exclusion. Because of a rapidly growing population and economic development has not occurred at the same pace, there are many disenfranchised and possibly they felt they had no other option than to join the enemy, as it were.
This is changing where local people are being engaged by local governments, and national governments are developing and implementing inclusive policies for the youth and get them involved in education, livelihoods and economic mainstreaming.
The second is de-radicalisation. Terrorist networks have sophisticated networks for recruitment to sign-up and go through induction and so we have to wean back the hearts of such people.
The third element is the strengthening of security institutions. Our security institutions need to have the capacity to detect, disrupt and respond effectively to threats to Kenya as a whole.
VA: It has just been released. Now Kenya has an expansive agricultural sector and many are self-sustainable. Of note is that 66% ofSub-Saharan soil is degraded. So what has the impact been for the region and secondly, what are some of the investments you know of for your region?
JM: Let’s take the conversation to a broader level. I have a concept which I call the national value chain in every country and it starts with what you have been endowed with in terms of the land and what is in that land, the population and the climatic conditions you enjoy. These you take advantage of for agriculture, for fisheries for tourism and then to a more sophisticated level into value addition in agriculture, manufacturing, wholesale retail and eventually export.
Land and population go together where on the one hand we have a demographic dividend placing pressure on the land. One of the issues the continent has to deal with is settlement planning. This is for economic mainstreaming where people live a good quality of life and providing for diversity in the economy, this has to be done properly.
What we have in Kenya for counter the effects of climate change are large scale irrigation projects – where in Kenya we have the One Million Acre Project to put under irrigation to counter the effect of degradation of the land. Ultimately this will result in soil conservation and in re-forestation and our country is known for this.
VA: Kenya has a large unemployed youth population. Help us with some of the lessons you know of and share key investment coming into Kenya that will aid youth employment in the immediate to medium future?
JM: I do know we have very proactive policies for engaging the youth. What has happened in the last decade is that the problem of youth and women unemployment has been confronted in Kenya.
What the government has done is there are a number of policies; One, atcentral government level we have established funds for supporting youth enterprise for youth and women. Secondly, as part of procurement, we have provided for youth and women to access a minimum 30 percent of government contracts.
This is actually a personal crusade; this is focus for our social investment programme. By increasing economic participation, especially youth and women and increasing livelihoods, you are expanding the market for business by increasing purchasing power.
Skills development and mentoring, where I am also personally involved in a project in my village where young people participate in a race with a winning take of about $100 where they can pay school fees or buy goats – things relevant for their lifestyle. We need to move away from employment towards enterprise and sustaining already successful livelihoods, returning sufficient returns.
The second level is promoting SME’s and we run competitions for businesses turning over more than $1m to register, provide three years of audited financials. We then go and celebrate these companies that add to the supply chain and participate then in higher levels of transactions.
The penny needs to drop for business – when the penny drops and a critical mass gets involved in transforming communities into productive entities – then we are all going to grow our market!
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