2018 Smith School EMF: Investment and Business Development

2018 Smith School EMF: Investment and Business Development

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Thank, you very much for for this opportunity we have an, exciting, panel with a, significant. Transactional. Experience, and we. Are going to try to cover as many issues as possible. At. The granular, level and, then open it up for for questions so that we can impart the the, various experiences, on. This panel, I'd. Like to start with each one of you sort. Of an opening, statement to talk about your experiences. Focusing. Primarily on this concept of mobilizing. Capital. For, Africa, and then we can go into key, facets, of your. Experiences. So I'll start with you. Sure. Good. Morning or I guess we're moving into afternoon. Everyone. My, name is Ludwig Sen I, think I was introduced earlier but, I, am a director at the, export-import. Bank of the US I'm, a graduate, of the MBA program here. Back in 2002, so quite a while ago it was a good program back, then I think it still is a great a great program so I, am, very happy to be here today and share the. Dyess with my esteemed. Panelists, so thank you. At. First I feel obliged to give, you a little bit of background about Exim Bank and. Then just. Perhaps. A few general comments about. The. Work of, Exim, Bank in Africa, and my personal experience as well. The. Export-import. Bank is a. Hundred percent owned government, agency, it's an independent agency, of the US government, it's the official export, credit agency. Of the US and the whole idea behind export. Credit agencies, whether you support the idea or not is to level the playing field for. Exporters. From respective. Countries, so my. Job at Exim is to, support US. Exports. US exports, around, the globally, and also, to Africa. So take for example if, you, have a large infrastructure, project, being developed in Nigeria, a power, project, that's buying gas. Turbines, from the US we, can finance that project. Because. It's purchasing. The gas turbines, from the US. And what. We how, we calculate, our financing, is actually, based on what. Is actually bought from the US right so our mission is to support, US. Jobs through, exports. And. So that's what brings us to the table we. Don't compete, with with, the with commercial, banks the, idea behind export, credit agencies, is to kind of augment, what they do there, are certain markets where commercial banks are not interested, or they cannot provide the type of, financing. That is needed whether it's tenor or they can't accept the risk and those, are ideal places for, export. Credit agencies, such as XM, to step in and meet the gap so we're known as banks. Of last resort, accident. Is known as a bank of last resort that's, the role that. We play so. We. As mandated, as part of our charter, actually. Have a mandate. To support, transactions. In sub-saharan, Africa, and so we have a senior-level committee that's designed, to help us reach.

Our Goals and to pursue. Initiatives. We're very focused on that me, being in the power sector we're, also very focused, on energy, projects. We have renewables. Initiative. So we're very interested, in doing renewables. Projects, renewable. Energy projects, on the continent, as well and. Just. One one more, quick comment. That. I don't want to fail to make is that, one. Of the things, that because. I know we have some developers, and business, owners here but, one, of the things that I do want folks to take away is that the US government as a whole has. A variety of, programs along. The, continuum of finance, for different. Types of businesses, within the African marketplace, we, have upfront, programs, from like USTDA. With. Feasibility. Financing. Pre-feasibility. Financing. All the way to say, an Exim Bank that comes in at, the very end when you're talking about large infrastructure, projects, to. Finance, those projects. So you have Department of Commerce, you have USAID. You have power Africa, that was also mentioned earlier, which. Has done a lot of work and, creating. The or helping the enabling. Environment and. Then you have a bank like XM that could come in when it comes to the larger, infrastructure. Projects, and help, those projects, go forward, so. Great. Thank you very much tom. Would you like to chime in on your, perspective yeah. So I'm Tom Coogan from, the United States African Development Foundation. And. I'm actually, joined by my colleague, here Michelle Mackenzie who also is a US ADF. USATF. Is an independent, government agency in, some ways similar to the Exim Bank where, we have our own, board of directors and we get our appropriation. Directly from Congress and. What. We do is we focus on, African. Owned and African, managed organizations. For, creating. A pathway to prosperity. For. Those four underserved, communities, in Africa and and what does that mean. We. Have a program in 20. Countries programs, in 20 countries where. We have a local partner and. Then we give seed capital. Generally. Grants, to, organizations. In. Order to help. Them, first. Develop capacity, in some cases and then expand, for, profitable, expansion, so they can scale up what they're doing we, look for the organization, itself to be profitable, and then we look for the benefits. To the grassroots members. Or in other ways benefits, to the grassroots, we. Do this in three ways we work with agricultural, cooperatives. Financing. An evaluate, approach generally, and, we have those, programs in in all 20 countries we're working with off-grid energy as a member of power Africa, we sit at the table with Exim Bank and others as. One of the 12. Interagency, organizations. Working under, power Africa, and. We're, financing off-grid, energy in. A major way in 10 countries in Africa and then we're expanding, that and we're doing it in smaller ways but hoping to expand into all 20 countries where we work, that. Does take the form of that, could be solar. I'll. Get into the in, a minute but that I could about two-thirds of what we fund is solar, the. Other third biogas, biomass, hydro. Mini-hydro. Wind and other, types of the innovations, sometimes hybrids, and, we also do you Thunder preneur ship so, we have a nascent, use the youth entrepreneurship, program, in about.

Two Countries, and in small ways we're doing that we're funding young African, entrepreneurs. To. In, most cases to. Start, up or to expand, the small businesses, they're working with we began, with the Yali, program the, young, African Leadership Initiative, and. Then we've expanded beyond, that and we're, continuing, to do that we just concluded. In Nairobi, Kenya at, the end, of February the young. The. Young. Entrepreneur. Young, African, entrepreneurship. Summits, are. Twenty. Eighteen and I was the first one that that's been held and we're going to continue to do that on an annual basis, and, we. Had about 55 young. African entrepreneurs there. We, had about. A hundred participants, including, you, know banks. Other finance, institutions, other. Mentorship. Opportunities, were. Funded in, in. That case we're funded by, citi bank as well as using our own funding, and. Mentioned. Earlier of public-private. Partnerships, so we also work extensively. In, the, public private partnership, arena we, have funding. From some of our governments, for, example the government of Uganda we. Have a $10,000,000, five, year program with the government, ganda where they, fund half we fund half of our projects, they give us the money directly we, we work with corporations, like Citibank, or GE Africa, GE Africa has funded us directly under our off-grid, energy initiative. We've. Since, the very beginning for about the past four years we, work with other other. Types of organizations, and we're rapidly. Expanding, these type of partnerships, and really, doing. Outreach for these type of partnership, opportunities. We. In. The off-grid power, sector, it was mentioned earlier over, 600, million Africans. Are currently, without. Power have no direct access to power and one anecdote. That I that, I like, to tell is, the. Dallas, Cowboys, Stadium on. Game, day, uses. More electricity than. The country, of Liberia. It's. Hard to believe and but we and we're, doing programs, in Liberia, for example where we've. We've. Doing, small solar. Mini grids a hundred, households in, one case and expanding, that in other cases, some. Solar home systems, where were expanding, organizations. That are selling. And implementing, those and. We. Had the president first. Female president in Africa. Ellen Sirleaf Johnson. Come. To our site and said power Africa, and USATF are actually doing something and turned the lights on and helped inaugurate, one of our sites in the in central Liberia. We. Had. Wanted to talk about and how we identify, that also under power I would mention we're doing a extensive. Women in energy program, we started this a year and a half ago we're, identifying women. Energy. Entrepreneurs in, Africa, we started with three countries we're expanding it this year where we give them seed capital for funding, to to, expand, their enterprises, and then help them on a profitable. Growth and, expansion trajectory. We're. Also focusing, on power what, we call the power agricultural. Nexus and what, that means is. You. Rural areas are though really is where there really is a power. Deficit, and in, rural areas is also our most of the agriculture, takes place so, we've. Been working, on innovations, and funding organizations. That are doing things like. Solar-powered. Water pumping, for irrigation, solar-powered. Grain milling where you can grain you can you can mill corn, for example right, right at the farmgate. Solar-powered. Refrigeration. For fish it's a you know for preserve. Have, less post-harvest, losses or for vegetables, or in other ways we, have programs there in Nigeria. And Kenya and other, places and. We're. Also along, the lines of a public-private, capital, or. Public-private, partnerships, we're working with all on which is an organization. That's. Basically. Shell oil but, in Nigeria, but they are the impact, investment, arm of Shell Oil and that's. On my mind because yesterday, and morning we've been approving, and reviewing and approving some, projects. That we're doing together and what, we're doing there is we're. Giving, seed capital to. Half of the, funding to an organization, in Nigeria, and, all on is giving a, convertible. Loan and, or a small, piece of equity, we're doing this together they're. Going to continue. To work with the organization, or over the years eventually, so that they can they can move up and kind of a mentorship role but also in a capital role and, this is we, signed this just last December and we're will be funding that those those.

Projects, Within the next two months, so. That's just a little sample, of what we do and I've got a lot more to talk about but, sure. I'll stop there thank thank you very much Brienne. Would usually I mean about the US Chamber of Commerce. Good, morning everyone it's a thrill to be joined by such esteemed panelists. And an honor to be with you today I, was asked to talk a little bit about my background, and what we do with the chamber my, bio, has already been highlighted what might be useful is. To talk a little bit about the, way in which I came, to the work that I'm now doing at, the u.s. chamber, because. It might be helpful in terms of touching on some of the themes that came up as part of the last presentation, around kind. Of aid and trade. And, the, shift I think that's rapidly, underway, in terms of the, private sector and private sector being leveraged, to. Really, further. Development. Objectives, so, I spent. The last two decades or so working on the continent, of Africa did. My undergrad, in African, Studies at Georgetown and, then spent. Time both overseas, and also in Washington working, in the development space with. The organization, called the National Democratic Institute and, while. Living in South Africa, I witnessed. Firsthand some. Of the trends, that the, prior. Speaker. Discussed, in terms of, the. Growth of. Overseas. Or. Foreign direct investment, really. Overshadowing. The overseas. Development assistance and. Also, the, youth bulge a, growing. Entrepreneurial. And young, elation across, the continent. And new. Business models that were being pioneered. By American. Companies looking. To invest in the continent, and, I went to graduate school then, to look at market-based approaches, to development and to understand, better the. Ways in which American. Companies, could really tap into the potential that exists on the continent, so. Now. At, the US Chamber of Commerce and I should mention also in. The intervening period between graduate, school and joining, the chamber I spent, two years in. The Obama administration, working on power, Africa, trade Africa the, young African leaders initiative and, worked closely with Tom on power Africa, and. Many other colleagues, that were driving. This change that I mentioned, in. Terms of leveraging private capital, to achieve development objectives, and worked at. The intersection, of. Legislation. Legislation and, also. The. Executive branch to explain. The value of taxpayer, investments, in these new programs. So. For, the last year. Or so I've been working at the Chamber of Commerce and have, been helping. Companies. Navigate. Some of the regulatory and political risks that they encounter, when they enter emerging economies, I. Wrote my thesis on, Walmart's. Experience, entering, South Africa, and. One of the regulatory experiences. That they encountered, that's, pretty well documented was, on competition. And, specifically, issues. Around labor practices, and policies and, so that's. The kind of work that we, really do at the u.s. chamber we. Help to support businesses, in, terms of, identifying. Some, of the strategic risks. That they might encounter when they enter markets but, then also work. To connect, them to the wide range of tools that exist within federal government, that's already been discussed, some.

That Are at the, ex-im bank the. US African Development Foundation if needed but. Also tapping into, the. Resources, that exist within governments. African. Governments, that also help, to. Promote, exports. And imports and. To ensure, that. That. Companies get access, to the resources that they need once. They entered, those markets, and so I. Look forward to, conversations. For. The further dialogue about how our members which. Basically. Represent, three, million companies. We are a fully private sector we are a member, based organization. We, have a 300, million or so budget. And. Around, the world whether. It's in Africa or here. In the US we, help to protect. The interests, of business and. Then we also in. Instances. Where needed, advocate. On behalf of the business sector to, promote. Trade and investment, and at, the us-africa Business Center, we are the preeminent. Vehicle. That's. A private sector entity, promoting, trade and investment across the continent, our members, see enormous, potential on. The continent, and have. A very long-term and, strategic approach to how they look at the markets across the continent, we're tracking many, of the. Issues. That were highlighted by the last presenter in terms of the, African. Continent o free trade agreement but. Also efforts that are underway here, in the u.s. in terms of. Consolidating. Some of the tools that exist within government. Such. As through the build act which. Is looking at. Financing. And consolidating, some of those tools that currently, exist in multiple agencies, and making, sure that we're, unlocking. The financial, assets, and resources that. Could assist, private, sector and being more strategic in, how they enter markets, okay. Thank you, Brienne it's quite, interesting I've been, given, a challenge of being both a. Moderator. And also, a presenter. So I'll try to do as best I can to managers to for. My perspective. About. Six years ago what, was really exciting as an, opportunity was looking at global, remittances, and trying. To think, about how do you connect remittances. To development. Finance but. How, do you connect. What. People are sending home with. The. The. Productive sector and, what we found it was that that you know you basically need to tranche. Out, those. Flows and into. Two categories so the professional, diaspora, and in migrant workers and in, cases where, parts. Of Africa where the. Majority of the rinses are coming from professional, Gasper ie people who were sent abroad to study have. Gotten good jobs or, sending. Money back to their relatives, for fees school. Fees pharmaceuticals. Etc, and also building a, property. Those. Individuals. Are treated in the very special category when it comes to regulatory. The. Regulatory context, in the country in which they live, migrant. Workers which is much more of a Asian. Germane issue, are treated. Also, in a very different way and therefore how you treat those flows, and how you connect those flows and the channels that you use to connect those flows through the productive sector are very very, different. The third element that we discovered, was the use of crowdfunding or, the phenomenon of crowdfunding as, a way. Of, allowing. All, the, aspirins to participate, whether they're professionals, or whether they're migrant workers whether, they're retail investors, unsophisticated, in. In financial, whether they are Wall Street traders and we, discovered a wide array of tools that could be used to make that connection so. I'm not going to spend too much time on that but I'm happy to speak about some of the details of what we've learned and we've learned a lot on this, subject over the past six. Years and we were working with the African vellum bank with the Asian bone bank and with, USA I need to share our experience. In that in, that field I want, to switch back to my. Moderator. Role what I'd like to do is instead of having sort of this, rotational. Thing I'd like to open it up to a sort of a conversation, on the issue so that we get a lot more input, from, everybody, there's. A lot to cover, clearly. But what I'd like to do is first talk about a, transaction. Right a typical, transaction, but. I mean when you're more. Not. Necessarily the most successful, one but one that's most typical, to what your, your. Organization's. Offer and walk, us through, where. Does it come from where, does it focus on how, is it put together what. Are the challenges both, here, from a policy standpoint and, then there from a regulatory and, reality, standpoint, I want to start with you. Udx, can. You talk about export. Finance take the particular, transaction, choose whatever field you want agriculture. Health care would. Have you and let's walk us through I'm going, to constrain you I want to give you no more than two to three minutes okay, and I'd like the.

Two Of you to also chime in on some of the key aspects. To. Do that well, I'll talk about power since that's, something that I that I focus, on a. Large. Infrastructure, project, right a power project say of 50 megawatt. Let's use renewable, energy, so. A solar. Farm in. West. Africa, what. I find with. These transactions. Especially. Transactions. That I'm seeing coming from the continent, versus. Other places within the world, is that, you. I get. Pitched a lot of deals that, are. Much. Larger if, I could say very diplomatically, than they actually need to be. And. I. Think, you, know working. With developers, and having them understand, that the, lender, pitch is very different, from the equity pitch right because they come to me they, say ah does it mean what is equity pitching, yes so so they'll come to me and say you know the ROI on this, particular you, know investment. Is fair i standing for return on investment return on investment, thank you for this particular. Investment. Is you know 15 to 22 percent or you know they give me all of these stats how much money I can make and really as a lender lenders. Don't don't, don't participate in the upside we. Just want our debt. To be repaid, right and, we just want to make sure that. The. Project can be built it can be implemented, it can be operated and that we can be repaid, according. To the schedule and so. The challenge, in working with developers, and helping them to. Know. How to approach. The. Lender institution. What lenders, are looking at it's very different. From what venture, capital, venture. Capitalist or private. Equity is looking, at it's, very important. With. A lot. Of projects, that, I see. That. Come in from the continent, a lot of early stage work, is needed. And so I've been you, know working within the bank and we've been having conversations, as to how can we start to engage on, transactions.

Very Early, while, developers, are really still putting things together when. You talk about very large infrastructure, projects, they can be five to ten years in the making before. They even get to me right a project, that can be financed, that's bankable, a lot. Of work has has, gone into that and what I've noticed on the continent, is that engagement a little, bit earlier. Really. Helps bring the project together because a lot of times the. Government, governments. Are involved. In the project right because you're talking about power there's, a dearth of power power, is very strategic hence. The government is very focused on it a lot of times the, off taker or so, if you have a generating, plant it's going to sell energy it's, usually going to sell energy to, a utility. Utility is usually nationally. Owned so the government, is sitting behind the utility, utility. Is probably, operating in the red many utilities, do so, they will, require, the support of the government so coming in as a lender and talking. To the federal government, early, and letting them know what. Will, be required, in, this documentation. In order, to entice, international. Lenders to come to the table has, been very key in helping some of these projects, come together so, that's something that we've been doing so you're, suggesting that. Projects. Can either come from the continent or come from the US but you want to get involved in the project, preparation ie in the project structuring and in a bit self is. That because it's driven by constraints. Within your organization as to how you make decisions on funding or is that is that what's, driving you, to to, get involved early on it's, really the the, project structure right so for the larger, infrastructure. Projects, they, usually come on come, in on a project, finance basis. Right and what project finance is in a very short nutshell, in. A nutshell is you're. Developing a special purpose vehicle, and SPV, to, own an asset it's a greenfield, asset so it doesn't exist it, doesn't currently have any cash flow but yet you want to borrow money from me to build it and to operate it right so it's. Very different from coming, in and financing, a business that has that, has been an existence for the last 10 years 20. Years that has operating. Revenue that's profitable, that's easy for me to underwrite, and we underwrite those types of loans as well but, the infrastructure, projects, think they come in on a project finance basis, and so a lot is involved. There and so there's a lot of there are a lot of agreements, that need to be in place there, are a lot of terms and conditions, that need to be factored into these agreements to, get us comfortable, as international. Lenders and so when we come to the table early, before these, agreements are signed we can ensure that this project, once all of the facets are put together will, be bankable be commercially, reasonable what, are the key success factors of a large project, that you've taken in that you've successful in finance. Yeah. I would, say first of all the. Project just, it. Fits within the environment right so, if, you talk about renewable let's, use that as. An example, we, like to see, projects. Come in that, have, been, tendered, through, an official process. Right, for transparency. So. We. We do see sole-source projects, where there's only. One developer, has been considered, one sponsor has been considered, they have been awarded a contract and. Some time and those projects, can go through successfully. Sometimes, those projects, have issues. Right because it was a bilateral. Negotiation. You have a change of administration and, all of a sudden the contracts, are no, longer valued, or don't want to be honored so transparency. Is very key, I'd. Like to see that. The. Project can be built right. Because that's key that's, how I'm gonna get repaid as the project is actually built and it's built on time and built on budget, and, so I need, a contractor. Who can actually build it who's. Done it in that environment who's. Done, in that environment or a similar environment who's, used that technology, and also has the pockets, to stand behind the obligations. Of building, it and so, one of the challenges that I've seen, on the continent, is that, a local, developer, will come in and. Not have the experience, of implementing, a project and the first thing that I do is, is, try and suggest, or it to the extent that I can as matchmake, have you considered, you, know working with an international developer.

Who Has this experience, that can help you implement this project usually. It's not very, tasteful, because when you join, when ujv like that and you bring joint venture and you, bring another, party to the table that's more experience, they're going to want to cut a large. Cut of the deal and usually, the local developer, doesn't want to provide that right that's a precondition, to getting. Financed from you you have to you have to have the experience you have to demonstrate that you can build, it and. That it, will be built successfully. And that you can you can operate, it so I'm assuming here that in addition, to providing. Finance, you do matchmaking, and the idea is that if you find a. Prospective. Joint venture entity, that adds to, the credibility of the project which facilitates. You know the financing, when you're on your end yeah. I just want to be clear our official, role is not to do the matchmaking, if we can we try right, and we should make suggestions, but, that's really what brings the strength to the transaction. Is the sponsor. The development, team what we call the EPC, the engineering, procurement and. Contracting. Right having, that experience to actually build the thing make, sure that it works so, that you know lenders will come to the table when a financing, because they, know they're gonna get repaid okay, Tom your. Involvement, with power Africa and your interaction, with the. Exim Bank can you talk, about that. We. Haven't worked directly with Exim, Bank but. There are, there, you know on that continuum of Finance we're, probably at the very beginning where we provide seed capital and Exim, Bank is probably at, the somewhat, at the other end where they're doing major projects. What is the nature of the seed capital at you offering so. We do I, mentioned. One where we do a 50. Percent grant and fifty percent convertible, loans but, generally we give up we start with a grant. And what we do I could walk through very quickly like a process, for the off-grid energy projects. What we do is uh we. We. Do what we call off-grid challenge, so, we advertise in a country we AFER's we solicit, for proposals, and projects, then. We we have a panel of outside judges as, well as people within USATF that, that score those review, those and then we we, do a selection, depending. On how much you. Know what our budget is for that country sometimes, three sometimes five, projects, roughly at about a hundred thousand, dollars each so what. We do is a an. Example would be I'm thinking of a gve. In, the Niger Delta in, Nigeria, we we, were able to so part, of the key thing is identifying you. Know these projects, and these entrepreneurs. So. There was a small organization. That had done some, certain, amount of off-grid energy work, in the, solar field but not not a real lot we. Funded them to do a micro. Mini grid in in a rural. Community of about a hundred households, and. So in effect what they did is they became a mini. Utility, but, they showed and demonstrated, that that model worked and then they've actually been able to expand significantly since, then I think they're at. This point they have over almost, two million dollars in financing about 1.8, million in financing where they've expanded in different states but, we so, we do that identification we have a local partner that, works with. With the organizations, for implementation, to support them so that they are able to you, know when. They run into a problem or, as they go through the process they can do that we look for very strong. Financial systems so they're able to report well and and track their own finances, and. Then we have. Meneses, about the challenges, I think for our organization. Those challenges, that we see, with the organization, first of all the. Or the key success factors you would say is that, the. First one be project design you have to have a very good project design if, you if you don't have one that can be fixed but do, you help within we. We, do a limited, amount of help with that I would say that that we don't so that would be kind of in a pre-application stage, do you point to a network of people who can provide that kind of service we. Often. Do that what we do find is we get we do get a. Great. Excess of well-designed, projects, okay good yeah and. So. We focus, on those then secondly management, so the man that or the manager of the organization, to make this work without. A well-designed, project, without good management, that is not. Gonna work very well and and, we support that in certain ways that we build capacity through, training and also through especially.

Through The financial systems and then I think thirdly, key success factor is, that. They have a vision and a profitable, plan, for. Expansion, and scalability, where, are they going once once they've done this and how are they how they gonna profitably, expand, what's, their vision for the next two years three years five years so. I think with, those what we found is we've had we've, had really good success with, implementing. These kind of projects okay breanne you want to chime in on your. Let. Me say that the US, Chamber of Commerce is not directly, involved, in deal structuring, but. Based. On my experience in, power Africa, and. Also some of the well, known challenges. As, investors. Enter. Markets. One. Of the typical. Difficulties. That our members, encounter, is working. With officials, that may. Not have familiarity, with these very complex, financial, transactions. And so for. Example with the core Betty power project, in Ethiopia, a significant. Renewable, energy project, with power, Africa support, it. Took well. Longer than anticipated to, work with government officials that really, many. Of whom, don't even have their, own bank account right so some. Of the conversations. That we're having here in terms of how do you structure debt and equity. And how do you unlock, the potential that exists, in a renewable power project, it, took a long time for, government. Officials. USAID. That is spearheading. Some of that work in. Ethiopia, to really walk, the. Government. Officials through that process, a, something. That our members, also look for when. They're considering, investments. Apart, from the business conducive, environment, that has already been mentioned is also, whether or not they'll be repaid, and, so in getting their capital, out in the market is another key criteria, and. So that's also. In an issue that, I think a lot of our members have encountered, where they then, seek. Support. From. An organization, like the chamber to, access the regulatory. Kind. Of tools and to get to the right people to get. Their finances. Get. Repaid, and also get issues. That, they might encounter from a regulatory standpoint.

Addressed. So. Chiming in from the Diaspora. Angle, what we've seen particularly in the case of off-grid. And this, is in the UK unfortunately, out in the US where, defib. Which is the equivalent of the US Agency for International Development. Has. Partnered, with local, crowdfunding. Platforms, like Linda Hann and ethics, ETH. Ex2. Provides, short-term. Loans to, the. Crowd retail. Investors, including the Diaspora to finance, companies. That provides off-grid, technologies, in Africa, they, recently had a 20 million dollar, program. Which involves partial guarantees, of those those, loans and. They've been extremely successful as. URI technologies, which is one of the providers was, able to raise about 1.7, million, pounds over, the space of two months through. Crowdfunding technology. In order to match. Development. Capital provided by differed those. Are the kind of innovations, that you see in terms of channeling. Funding, from the retail from the Diaspora into, projects, that a well-structured transparent. All the issues that you that you mentioned something, that could be you know quite transformative. If it's brought, into the u.s. into, the u.s. context, I'd like to shift a, little bit and talk about some. Of the macro issues that are going on in in, Africa and how you perceive that either as an opportunity as a thread or else. We're. Seeing what's called devolution ie, where the central, federal government, or central government, is pushing, Authority, both. In terms of project selection and in terms of, financing. To, the municipalities. We've seen in Nigeria, with Abuja, we're seeing it in Kenya, with the the. Province, of Nairobi, and. McKinsey. Itself, McKinsey. Africa came up with a report that, suggests, two things one that, investment, opportunities are more focused on municipalities. Ie cities in SLA states, and. Then number two that, the future, that. We're going to see in Africa is the, rapid. Growth of mega, cities that the, you. Know the, provinces. Around. Nairobi. Around, Abuja. And in, Ethiopia, or basically, be so big that those are going to be the major sources of growth how, do you perceive that where, do you see potential opportunities, that and how would you structure your, activities. In relation to that evolution. Would. Yak sorry. That. That's a that's, a very interesting, that's. A very interesting trend there's one comment. That I'd like to make before I answer, that and that is. Exim. Bank is actually. Where. I said, I focus, a lot on the larger infrastructure, projects, we. Also have other products. Within, the bank that. Are more short-term in, nature what. I do is long term sometimes, up to 18 year financing. We. Do have short term products. That our US exporter. Facing, so if you are a u.s. exporter, and you're exporting, into, the African market we, do have financial products, for you as well mostly. In the form of working capital guarantees. Receivables. Insurance. So, those products, are available. As well as when you talk about the continuum, of financing. With. Regard to Eric's question about devolution, and. Municipalities. And large mega, cities, one. Of the places, where I have personally. Experience, this is actually. In, India right when, we first started financing. Renewable. Energy projects, in India it was really on the national, level in terms of the government, support, okay. As the program, continued. To be, continued. To evolve. That. Was spread out to the, municipality. Level and I can be honest with you from my personal experience, it was a bit the, the credit, was, a bit, more difficult to underwrite, right. But they are moving forward that program generally has, its challenges and I don't want to focus on that here we're focused on Africa, but, it is a bit more challenging because, you don't have the sovereign you, don't have the Full Faith and Credit of the nation sitting behind whatever obligations.

That You are actually, underwriting. But the projects, that we are that we tend to work on them when we see the large, infrastructure. Projects, they're. Usually located, and because. Of the nature right it's very industrial. So. They're very they're usually located in a remote. Area but, they serve but there's they're situated. To, serve obviously. The major clusters. Of population. Right so they will that power will make it to a cry will make it to Lagos will make it to Abuja, all of those major cities, but, the one thing to consider there. Within. That paradigm is how does it make it there and that's, the grid right, and that's one of the issues where. We see is a problem, in terms of implement, implementing, these larger power, projects, is it. Can the grid is the grid is, it sustainable, especially with renewable power which tends to be intermittent. Power you don't get it 24, hours a day it's not stable it's not slowed. Unless you have battery or some other stuff with supplementary, power and so, it can the grid, be stable, with the renewable, power can, the grid, support, all of this new power coming, on to the grid and obviously, you. Know transmission. And distribution. Is. You're. Talking about very large networks, here in the US if you just drive, down the street take a look at the power lines that's a lot, of infrastructure. It takes a lot, time to build that stuff, there. As I said on the panel it's where someone talked about the. Amount of money that it would take to build out to the grid to where it needs to be and, I think it was you know hundreds. Of billions of dollars right. So we can get we can try and get the power, projects. Bill which is challenging, but you also have to have the supporting, infrastructure. To. Do that some. You I, want you to try them on this question but you know I'd, like for you to also sort. Of plug in the the youth entrepreneurship, element right can you talk about mega cities you're, potentially talking about youth employment, challenges. And can, you try to talk. About what you guys are doing in that space and with it what does it mean in this in this new environment. Yeah. That's it's a really really good question and I think, devolution. Works both, ways, we've seen in Kenya you know that they've actually pushed, money out to the counties you, know but as far as the rise of mega city goes. That's happened, and is happening you know that you know Lagos is one of the largest cities in a world what what. I call a wonderful, meg magnificent. Chaos a place. Like that a. Cry, we were just there Michelle. And I recently I, had, an experience arrived, at the edge of town just dark, thinking Oh getting. Back to where we're going you know early and it took us three hours to get across town. Those. And but. That's important because you, know yes there's a concentration of, resources, it's. A concentration, of. Start-up. Businesses, and and innovation. And it's a concentration of you, know of well, of all, kinds of things are there that you you're really not going to get into rural areas but, what we do see then is, like. With the youth entrepreneurs, the the, real innovation we're finding is generally, in you, know in a place like Nairobi, in a, place like Lagos. But. But. Then they're actually taking those those, innovations, and applying, those to rural areas and we're seeing that with off-grid energy, but. We're seeing that with also like our youth entrepreneurs, so we've.

Well. One example, Brenda. Kasich. CJ, who is, in, Kampala. She. Had weed weed funded her she was doing a, small. They're. Called recycling, plastic. Recycling, she actually then identified, that she, found that she had, was. Able to actually. Make, a glasses from the plastic, that she'd recycled. And saw saw this need and then. Actually, has been producing. Those and selling those through schools so she actually you, know took one you, know innovation, you, know and then moved it into another area and so, that includes you know rural areas where sometimes they'll do testing in a school and find that you know the parents never knew that the children actually needed eyeglasses and you. Know it can really change things and these are very low costs and she's made a very successful business, out of that that. That would be one example so it's it's, it, is true that mega cities in the concentration, and and that's where you're gonna find the, innovation, and that's we're gonna find the kind of the excitement, and what's going on and that's where the and. I'm not saying that's where the youth want to be but that's where we often identify, these young, entrepreneurs but. They're also moving those, innovations. To the rural areas brienna, chairman's, sure so I, would, just say that in terms of the. Rapid, moves that we're seeing towards. Devolution. That. Governments. Are also looking. At their, development. Trajectories. Through the lens of job creation, and. They're viewing the private sector is a partner, in creating, jobs. And. As a result the. Opportunities. That are offered through devolution. Also. Create new, opportunities that, previously, hadn't, emerged in terms of reaching, rural. Or remote populations. And. I think businesses, are coming up with creative models, to reach some of those those. Rural populations. And so, they're. Also I think some complex. Regulatory challenges, that also emerge if now, you're no longer negotiating. Just with federal government but you're negotiating with municipal, government, and you have to now pay taxes, at multiple. Levels and. So that dynamic, is also creating, new regulatory. Challenges, I think for businesses that are seeking to navigate, these contexts, and, there are actually, I think that presents, a really great business opportunity new. Organizations. Have been created, to help companies. Also figure, out how. To be strategic as the editor so I'm one that comes to mind is an organization, called frame F our aym. Which. Is actually. Pulled. Together this, great database, of, data that had in the past been used primarily for health, and educational, purposes, but. Use, that data to actually identify where. Are the, highest. Sect. The highest potential for say a product, that might be a. Product, that a Procter & Gamble might be, might. Be producing, a detergent. Or something they, may look at where is the most likely. Demographic. Of individuals, located, from, a kilometer. To kilometer. Square. Area, to, target, the delivery. Of a product, in an area where it's most likely to be profitable. And. So. You're seeing also I think from, the standpoint of innovation, new. Sources. Of data being tapped to, kind of create and. And sort, of surface. These new business opportunities, that, help businesses, look, through, the. Lens of these markets, that are more challenging to navigate or, where, you don't have as much data. That's. Readily accessible a, little, bit more accessible, and available and. So I think, that that's a trend that we're going to continue to see and. Then the other thing that I'll just mention in terms of innovation and. Jobs creation, is. That you're, also seeing. Companies. Pioneering. New approaches, to. Looking. At how. For, example to. Assist. Rural. Communities, get access, to the, Internet for example, through. The creation, of. Zoom. You, know something, that's like you know suspended, in the air that. Actually helps remote, populations get, access to Internet and that also unlocks, a whole new potential. That's created, by the, digital economy, that.

Microsoft, Facebook, and a number of other groups are pioneering, and so our companies, are pioneering it's I think, that's also an. Opportunity. And. Then a third trend I would I, would elaborate on is just the public-private, partnerships, potential, there. So ups for example, in, terms of delivery, of humanitarian assistance, has. Partnered with companies to use drones, to actually deliver, health. Goods. To, remote. Communities and so I think that these. You. Know the devolution and what you're seeing in terms of reaching more remote populations, is. Also creating, and exposing, new business opportunities, and forcing, the development, of new business, models great. I want to end with with one, question before, we go to lunch books I see you know very hungry eyes there. China. China, clearly. Has has. Made inroads into, Africa, both at, the national level and now at the municipal level and even at the private sector level where they're providing a whole range of, services. And sources of finance so retail finance. Municipal. Finance as well as national finance and. Even power Africa when you look at the actual numbers in the context of China's. Contributions. It's. Challenging, can, you speak to China. Its. Role how are you perceiving it and. How are you addressing it from your perspective. Well. Yeah. China is always the, one Tuffy that comes up when you talk about, working. In Africa especially these. Big bigger, infrastructure. Projects. And you, know I can only speak, anecdotally. From what, I've seen what I've seen on my personal, travels, and. What, I've seen in meetings talking with developers government. Officials, and. I'm. Sure many of the projects, are built well and are. Delivering. The, capacity, the energy, or whatever it is they're supposed to deliver but there are a number of projects that don't, recently, I was in Nigeria and if. You fly into international. Murtala, Mohammed Airport, there's a large building, standing, right there and it's been there for a year and it has not opened yet. And, so, there. Are lots. Of issues. That. In. In in, you know working with. With. You. Know Chinese contractors. But I think you you need to do your due diligence right, because a lot of projects are going for a lot of projects, are working, but you can't be attracted, by a low just. Strictly. A low price you have to make sure that the project can be implemented, because at the end of the day you're, going to waste more money chasing. Chinese. Money if you're not bringing the. Right parties, to, the table okay. Tom, I think. I'd. Make a couple comments there one. Clearly. We need. To be aware that China, is being very strategic in their investments, and what they're doing and I think it's such a challenge to us that the US and and others, to to, be strategic, as well and to. Be able to do that in the right way in. The off-grid energy field, we. Actually have there's American companies that that compete, and have better quality, and compete on price in. Things like batteries, connectors. Inverters. And things like that on commodities, you know not, so much but. One, of the things that we've been battling actually, and you know an off-grid energy is the. Awareness, of solar. Is is, it has a very negative perception. In in a lot of rural places in Africa because the. Products that have come from China are, very low quality very. Cheap they've got them out there and then they just tend and you know not, work and it yeah, actually you know it created. A very bad impression on solar, so we've had to overcome that, in a lot of ways with, higher quality products. And actually things that work and we found you know and with, some of our projects, where you have a 99.9%. Uptime, you, know a solar mini grid, with. You know proper batteries which. Is you, know better than a National Grid by you know a factor of two or three so, I guess those are the two two things I'd like to point out yeah sure. So many of our members. Are. Facing. An. Enormous degree of, competition. From Chinese, companies like there's no question that American. Companies have been well, behind the, clip that we've seen in. Terms of the, pace of Chinese and, investment I think a lot of that is helped by state-sponsored. Support. Particularly. In the infrastructure, space if you look at China's. Investments. 50 billion dollars I think in 2014. Through. State-sponsored, financing. Vehicles, that really enable. Chinese, companies to compete. For deals. That are government. Procurements. That, American. Investors for. A variety of reasons are unable, to compete, with just, on the financing, alone but, then when. You compound that with the fact that. That. The, that. The Chinese government also, sees, Africa. Through the lens of the strategic, long-term.

Engagement And, mineral. Extraction, and. The fact that I think for. For. A long, time you know American, investors, have been more risk-averse, they, also face stricter. Compliance, around. Foreign. Corrupt Practices. Act and, then add to that also the. Fact that on, cost right. American. Companies, are also not quite as competitive, but. I think that this is also why the chamber supports, initiatives, like the global procurement. Initiative which, encourages. Countries. And governments to look at best value, as opposed to best, price, and. So those. Kinds of initiatives really. I think will change the trajectory. Along. With some of the other reforms, that are being currently, considered, through legislative proposals, around financing. The. Ease of accessing, the tools available through, XM, OPIC and other agencies. And, then also I, think that we really do have. An. Important, hurdle, in, terms of helping. To, support. American. Companies to understand, the. Long term value, and. The benefits, and, the return on equity and, investment. It. Exists. In Africa's. Growth markets, and. So we've, put forward a set of recommendations at. The chamber to the Trump administration looking. At a wide range of different types of policy. Interventions, that could be helpful, and supportive, in. Terms of growing American, companies presence, on the continent, but, also we're seeing that, through. Direct. Experience that. Governments have had working with Chinese, companies that there's also a preference, to work with American companies and we're tapping into that as well it's. Just just to add on to that I think that that, definitely does exist, that. I do see, a preference, to work with American companies I do see that in. Many different sectors, but. I think the lure of the low price is. The issue and one. Of the things that was mentioned earlier and, one of the things that we're facing that, we don't have an answer to is the way we operate as an export credit agency, we, are we've. Signed an agreement called the OECD, arrangement, and what it does in many other developed, country. Export. Agencies, credit agencies, have signed that agreement and, under that agreement it provides for terms. And conditions for which you can offer your financing. It also provides, for minimum. Pricing, right so that, exports. Are competing, in terms of you, know price, and quality, right. And not, necessarily, money being thrown at, the, project, or, at the exports, from the state-sponsored entities. So we've signed it many of the European Union have signed it. Obviously. China has not signed it and that's, something Russians. Have not signed it and that's something that you. Know we deal with every, day they are able to do things and offer pricing, that we cannot, offer because we. Have signed, on to this this Agreement great. On, that note what I'd like to do in the interest of time is open, it up for, how. Many questions a. Couple. Questions and, then we can wrap up before, lunch could you please identify yourself. And your organization before. You ask, the question and then, if anybody, on the, panel are you directing the question - thank, you. Dr., ibrahim with the smith school the, questions to the whole panel, how. Do you see the trump administration and.

Comments, On twitter that he makes about africa may. Affect decisions, of. These countries making business, doing business with the US compared. To china probably, will treat, them as equals thank, you so. We'll take a couple and we will. Oh. Sure. Good morning Andrew, Sanchez I'm from George, Mason University, the. Question I do have a, lot of the speakers before talked a lot about revenue. And debt specifically. For you miss Sun, I'm sorry I got the name wrong but as. A lender you talk, about getting your money back obviously. Have you seen any of the issues that like. The World Bank mentioned, about, debt with, the. Whole issue with debt and Africa. Specifically, okay. We'll take those those two questions. When. Stuck with your second one first sure. I'd, be happy to I'm. Glad that you did ask that question thank you for that question because. Actually. There were a lot of interesting things in that presentation, and. One, of them was you, know sustainable. Debt and as, I laid out before I'm especially, when you're talking about energy, projects, right and energy. Drives, the, economy right. Businesses. Need, cheap, reliable. Energy in order to manufacture you, got to run that engine so, you really need that power. And usually, power that comes from the grid versus, you, know diesel, diesel power but, one of the things that we're seeing is a lot of times one. Of the stakeholders. In. You. Know the structure of the transaction is the utility the utility is, not credit worthy right. And. So you look for state, support one, of the challenges, that we're seeing these days is that. That. Federal. Government's, government's are unable. Because, they. May have signed on to some World Bank program. They're. Unable to. To. Stand behind the obligations. Of the, utility, because, that is contingent. Debt right, that you have to disclose. On your balance sheet and you get a hit for that so that, is a challenge that we're seeing nowadays. And we have to be more innovative, to come up with a structure to, ensure you. Know to ensure repayment, one thing that I didn't talk about earlier is that as an, ECA we're. Not grant making, we're. Not development, finance finance. Institutions. There are a lot of different types of institutions that sit along the continuum, of Finance, we, have a mandate for a reasonable, assurance of, repayment so, we are looking at credit worthy transactions. We do want to get paid we, are guardians, of US taxpayer, dollars, because that's where we're dispersing, from right and so we have to come up with these these. Structures, to, make these deals creditworthy. Without, in some cases. Having. The. Obligations. The, the. Sovereigns. Standing behind the, obligations. Of the of the project, or just. Generally speaking but, one, of the things that we've done is just kind of limit, those obligations to. Certain. Events, right, and sometimes that is more feasible that's more palatable, that can be accepted, and. So that's that's one of the things that we've done but it has been very challenging when you're talking about debt levels, and I think what was reported earlier, seventy percent debt levels, and you know lots of floats on the euro bond market. And you. Know current. Payments, that are coming due and how those, payments, be made so those are real issues. Any. Other comment so that from the from. The other panelists. Yeah. So the second question was about the the, Trump effect would focus. On that, everyone's. Looking to me I'll I. Think. I mentioned Trump first so I'm happy to, so. There's. No question that many. Of the negative comments that have been made as. Well as the signals, that have been sent have not been helpful right now. I. Do think that it's important, though to look, at I think it's still early days in some respects because, if. You look historically at. The. Ways in which presidents. Engage the continent it's often in a second administration a, second.

Term And, so, in. Some, ways there's still a lot, on the table so secretary. Ross, the. Head of the Commerce. Department will be headed to Africa, at, the end of June. Early July, and, will be visiting, Kenya. Cote, d'Ivoire Ethiopia. And. I'm missing a country Ghana thank you. And, there. Will be I, think quite. A, bit in terms of commercial engagement, I think it's also important. To recognize the name in the commercial, space some. Of the. Architecture, of President. Obama's past initiatives, have still. Remained in place so power, Africa is one of them but. Then also the president's, Advisory Council, on doing business in Africa, which. Is the the. Council under which secretary, Ross will be taking his upcoming fact-finding, trip I, think also you. Know has continued, to keep a clip, in terms of. Assessing. What are the major barriers. In terms of and. For all of you who are in the audience I encourage you to take a look at the the. Report, which, came out late last year it has nine different dimensions. That were. The. Council's recommendation, or the council's actually, identified. Obstacles, to working in Africa and now a set of recommendations is, emerging, and. So I. Think we still have to see what. The impact might be, obviously. From a diplomatic standpoint, it, hasn't been helpful in terms of the overall, strategy. And. Just the appreciation. Of the continent, as a partner, but, I think there's also something. That is somewhat, palatable, in the Trump messaging, around getting the best deal, and. Oddly. In my anecdotal, conversations. With with. Africans, that I speak with there's. Something around kind of this notion about, whether, or not there can be negotiations, under, which you know Africa stands to get a better deal, and, the, concept, of America. First is certainly not new. China, has been looking at its approach with Africa. As China first and it's time I think that Africans, also look at their countries. Is Africa. First and. So there, will be I think still. Discussions. Underway and we're close closely, tracking that and. Still. Look to what. Might emerge from the upcoming trip and our members are quite active, and engaging and trying to figure. Out where. There are opportunities. Thank. You from, the Diaspora standpoint, on a lighter note I think the response is, fairly evident in the Black Panther, movie gross office. Box, office numbers so on, that note I want to thank the. The panelists. I think this has been an, incredible, contribution, discussion, and also the the Smith School thank you.

2018-06-09 06:42

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