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Egyptian-Japanese missed opportunities

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CAIRO – 6 August 2019: Lots of missed opportunities need to be reconsidered for further cooperation between Egypt and Japan in the near future. The two countries still have a lot of potential for joint coordination in several aspects.

Taking a closer look on Japan would make you re-think of it as more than just a technologically sophisticated country, and for Egypt, as more than a North African developing, and economically growing country.

Egypt, which is currently the head of the African Union, is looking for more discussions and solutions to several national and African issues, including the countries’ economic reform and growth as a priority.

Other issues including enhancing peace and security, countering terrorism, developing health, education and infrastructure are among the challenges that need a second look in Africa. That is in addition to poverty, forced displacement and illegal immigration.

What could Africa as a nation with all its particularchallenges and prioritiesbenefit from cooperating with Japan?

The policy of the “closed door” was forced in Japan for hundreds of years. Per this policy, very few things could have the opportunity to enter or leave the country. This affected the country’s trade, culture and military and led to the transformation of the country.

Many things happened during wars and conflicts, especially World War II,forwhich the country officially apologized. Years after all of this, Japan has become more than just atechnologically-advanced country;it is a country which is still seeking to learn, and communicate.

“Japan is an isolated country.It is far from Africa. It needs nearly a day of traveling so we can reach each other,” President of Japan International Cooperation Agency (JICA) Shinichi Kitaoka said during a meeting that included ten journalists from different African countries, reviewing the Japanese-African relations and the aspects of ongoing cooperation.

During the meeting,Kitaoka said that Japan supports other countries to grow and be independent through providing ODA loans. “Loan is something to support being independent. Countries need to know how to utilize these loans and give themback after several years,” Kitaoka explained.

“We made mistakes in World War II, invaded other Asian countries, so we wanted to give back to these countries, and this is what we did during the past years. However, as the Asian countries have developed, we think that Africa has to be the main focus of Japan at the meantime,” Kitaoka added.

TICAD, as a start

In 1993, Japan and Africa started holding Tokyo International Conference on African Development (TICAD). TICAD was held for the first time in Tokyo on October 5 and 6, 1993, aiming to enhance dialogue between African-Japanese leaders, promote Africa’s development, peace and security, strengthen relations between the countries, and establish strong partnerships between Tokyo and Africa.

The international conference which has been held regularly since then is not just led by Japan, despite being a Japanese initiative. Several international partners shared the organization of TICAD, which is co-sponsored by the United Nations, along with the Japanese government. The partners include the United Nations Development Programme (UNDP), the African Union Commission (AUC) and the World Bank.

On August 28, TICAD7 is expected to be held inthe presence of all African leaders, including Egypt’s President Abdel Fatah al-Sisi. Many things were announced to be discussed.

During meeting with JICA and Japan External Trade Organization (JETRO) officials in Tokyo in July, Business Today knew several details about the awaited conference including the side eventsbeing held for the first time with an Egyptian start up participation among other African startups invited to the conference.

Under the theme “Africa and Yokohama, Sharing Passion for the Future,” several issues are going to be discussed during the conference. Technology and innovation wereannounced to be part ofall discussions this year.

But, as discussions have been ongoing between Africa and Japan extensively since 1993, what else could be done, so no opportunities would be missed, especially between Egypt and Japan?

Startups

Egypt is a rising market for startups. According to start-up platform MAGNiTT’s 2018 Mena Venture Investment Report, Egypt is the fastest growing startup ecosystem and the second largest after the UAE.

Egypt’s share of the total number of seed funding agreements grew by 7 percent y-o-y to $196.5 million, representing 22 percent of all MENA closes in 2018. “Egypt is seeing a second wave of entrepreneurs and investors that are more mature and experienced. The population is also starting to embrace technology for everyday activities,” Algebra Ventures Managing Partner ZiadMokhtar said.

Accordingly, Egypt’s entrepreneurs could not just see golden opportunities during TICAD7, but also for what a city like Kobe could offer to them.

Kobe is a Japanese city promoting itself as the young people and innovators’ first choice. During a presentation for Kobe officials at the city administrative headquarters, they focused on the city’s goal to become an environment where entrepreneurs can grow easily and create their new business.

The start-up visa for foreigners is among the very special things offered by Kobe city. Meeting with the city officials, they explained that they can offer a startup visa that allows foreign entrepreneurs to stay in Japan for one year maximum.

After getting the approval of the city officials, entrepreneurs will be able to start their business in Japan and enjoy a subsidy provided by the government “covering half of rent and communication cost, 2million ($1.8K) Yen personnel expenses for hi-tech engineersand a maximum of13 million ($120K) subsidies for 3years.”

However, after the first year of operating in Japan, startups need to meet the city’s demands to continue operating for further periods. The city’s criteriainclude the business has “a maximum of two fulltime staff or a capital exceeding 5million Yen”.

This Japanese city is offering a start-up visa for entrepreneurs even if they do not have an existing business at their own countries. The officials affirmed to Business Today that no legal consequences will be imposed onthe startups or the founders if they fail to meet the demands. They added that the Japanese perspective towards startups is different than the African one, and they believe that startups will have a fair chance in Japan to succeed and continue.

Age, health and society

The challenges in Japan and Egypt are severely different. Egypt deals with the high and rapidly growing population as a problem which is equally dangerous to terrorism, according to President Abdel Fatah al-Sisi’s earlier statements. Japan is suffering from the rising number of elderly people and the reluctance of young people to marry and have children. According to statistics reviewed during a presentation at the National Hospital Organization, Nagasaki Medical Center, Japan in the future willsuffer population reduction.

Japan’s Ministry of Health is currently working to promote increasing the population, according to doctorAtsumasa Komori from Nagasaki Medical Center. “The increasing numberof elderly people in Japan is our biggest problem,” he said.

Enhancing communications between Japanese and African nations and increasing the cultural exchanging channels could offera solution for both countries.

“Egypt’s steadily growing population should be used as a privilege,”JICA’s Middle East division Director Masataka TAKESHITA said during an interview with Business Today at JICA’s headquarters’ in Tokyo. He assured that the country’s population is one of the positive sides that should be exploited in the best ways.

He pointed out that Egypt still needs to work on creating more job opportunitiesamid the government’s economic reforms.

Japan has many successful experiments on human development especially in Asia, according to Shigeru Ushio, director-general for African Affairs department and assistant minister offoreign affairs.

Egypt and Japan had a lot of meetings and discussions ahead of TICAD7, set to be held on August 28 in Yokohoma city, according to Ushio, who affirmed that both parties held a number of senior officials’ meetings.

He added that Japan has huge commitments with Egypt. “The Egyptian government always sends high level seniors to Japan to follow up on updates of our agreements and discussions and we respect their views and leadership,” Ushio added.

He pointed out during a limited press conference held in the attendance of the African media representatives that Egypt and Japan held a lot of discussions, especially regarding human development aspects where Japan has a number of successful experiences in cooperation with other countries.

“We believe development is the key to do anything, as we have done this with many countries, especially in Asia, and believe that the time has come to do it with Africa now,” Ushio stated

With Further discussions among officials in both countries, maybe Japan and Egypt can reach a solution for them both.

Agriculture

“I am interested in Delta. If there is a chance to conduct research and see what we can do in this area, we are certainly interested in it,” Yasuhiro Tsujimoto, a member of the Crop, Livestock, and Environment division at Japan International Research Center for Agricultural Science (JIRACAS) told Business Today during a presentation at JIRACAS headquarters in Tsukuba.

Tsujimoto was reviewing his pilot project implemented in Madagascar since 2001. He said that the final results of his project, which aims at improving rice production in Africa, cannot be officially announced yet. He added, however, that if JIRACAS found that any of its research results are suitable with Egypt’s agriculture conditions and climate, it will definitely share it.

He also explained that his project, entitled “FY VARY project”, aims at the improvement of rice yield production under law fertilizer input and poor soil fertility environment in SSA. It was mainly conducted as a pilot experiment in Madagascar, and is scheduled to continue until 2022.

Answering Business Today’s question about JIRACAS’ researches in North African countries, and especially Egypt, in order to raise the production rate and quality, Yasuhiro said the institute is not currently conducting research in North Africa, especially with the existence of a nearby universities and institutes interested in conducting researches on Egypt’s climate and agriculture conditions.

“We are not conducting current research in North Africa, as other universes are doing research. We are focusing more on doing what no one else has done before, especially in other African countries,” Yasuhiro said.

The Food and Agriculture Organization of the United Nations (FAO) published a research on rice production in Africa titled, “Rice production in Africa, current situation and issues”. The study states that, “With the exception of a few countries that have attained self-sufficiency in rice production, rice demand exceeds production and large quantities of rice are imported to meet demand at a huge cost in hard currency.”

According to a FAO study, Africa consumes a total of 11.6 million tons of milled rice per year, of which 3.3 million tons (33.6 percent) areimported.

Egypt, in particular, has imposed restrictions on planting rice since the beginning of 2018 due to fears of water shortage. The government has decided to reduce the area of rice cultivation from 1 million feddans to 724,000feddans. Furthermore, planting rice was prohibited in certain governorates, including Aswan, Luxor, Qena, Sohag, Assiut, Minya, BeniSuef, Fayoum, New Valley, Giza, Cairo, Qaliubiya, Menoufia, MarsaMatrouh, North Sinai, South Sinai and Red Sea.

According to reports, Nigeria was named the largest producer of rice in Africa, replacing Egypt which was known of being on top of Africa’s production in this regard.

In March 2019, Egypt’s government has announced raising the allowed area of rice cultivation, to be once again 1 million feddans, in order to reduce the import expenses for rice.

Also Read Interview: African Energy Chamber Executive Chairman, NJ Ayuk on Transforming Africa’s Energy Sector

Education

Egypt and Japan already have a “successful implemented experience” regarding educational cooperation, according to JICA’s Egypt Office Chief Representative, Yoshifumi Omura, during an interview with Business Today.

Nearly 100 schools are to be opened during the several coming years. Some 35 schools have already opened their doors and received Egyptian students for the academic year 2018/2019. Five more schools are expected to open during the next year.

The 100 schools will be based on “Tokkatsu”. As identified by Japanese Asakawa elementary school principal, Ms. Hiromi Shimizu, Tokkatsu is a kind of student activity which builds the students’ characters to make them more independent and positive. She said that studies have been conducted on students’ behavior before and after applying the Tokkatsu activities, and showed significant transformation in students’ behaviors. Students turn into more engaging and open individuals who are willing to participate in discussions without fear.

Many Egyptian teachers came to Japan to take the Tokkatsu training, according to Shimizu. She added that she met and trained some of them, and even became friends with them.

“We understand that we have an education system different from the one in Egypt, or any other country; however, Tokkatsu is not just about learning, it is also about building personalities,” Shimizu said.
By the end of the academic year, teachers will have to fill a form to check if all of the Tokkatsu goals have been achieved during the year. This is the only aspect through which they can check if Tokkatsu was successful or not.

“Tokkatsu can be applied anywhere around the world. Eventually, Tokkatsu is about changing people’s mind sets to be more motivated to participate in the society even more,” Shimizu said.

“Of course we expected to face some difficulties and problems in the beginning because the whole idea is new. But, so far, I can say that the experience is pretty much successful, despite everything that happened during setting up the process last year,” JICA’s Egypt Office Chief Representative, Yoshifumi Omura, said.

Japan is not a countrywithso many natural sources; however, they managed to create different sources to strengthen their economy. JICA’s Kitaoka reviewed during the meeting with the Africanjournalists that Japan focused after World War II on reforming the country’s economy. Several years later, Japan, a country which survived two atomic bombings, turned from an invading country during the war to a supporting country for its neighbors.

 

Credit: Aya Samir/ Egypt Today

Economy

Nigeria’s informal economy: A catalyst for economic growth

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Balogun market, Lagos, Nigeria. Pic: Megainsights

In a country like Nigeria that lacks social safety nets and has a minimum wage of less than US$98, a significant section of the population have no choice other than to turn to the informal sector as a survival strategy. However, there is every potential for the informal sector to be more than just a means of survival.  If carried out effectively, government engagement with the informal sector can lead to an invaluable economy boost.

The informal sector: What are its contributions?

In a nutshell, an informal sector business is an unregistered business owned by one or more members of one or more households selling goods and services. Informal workers are workers engaging in work without formal employment contracts or workers producing goods for final use by their households. Jobs under this category include paid domestic workers, drivers, subsistence farmers and artisans. Over 61% of the world’s working population work in the informal sector. 85.8% of employment in Africa is in the informal sector. Over 65% of the working population in Nigeria is in the informal sector. In the 2016 fiscal year, 41% percent of GDP came from the informal sector and the informal economy also accounted for 73.7% of created jobs.

Whether the numbers tell the full story or not, the contribution of the informal sector to economic growth is more than negligible. Notwithstanding, the informal sector does not figure as prominently as it should in economic growth plans, even in previous administrations. The seven point agenda of the Umaru Musa Yar’adua administration did not consider the informal sector; neither did the transformation agenda of the Goodluck Jonathan administration.

Why must we pay more attention to the informal sector? Simple. The present and projected demographic of the Nigerian population demands it. Nearly 65 percent of Nigeria’s population is between the age of 15 and 64. Only about 8% of the adult population is formally employed.25% of Nigerian children aged between 5 and 17 are engaged in labour, all of whom are most likely in the informal economy. About 43 percent of women in Nigeria, particularly Northern Nigeria are married before the ages of 18 and in all likelihood have little to no chance of obtaining higher education. The chances of such individuals ending up in the informal economy are very high.

There are about 44.3 million small business owners in the sector employing about 22.9 million people. It is important to harness the potential contributions of the informal economy, which is responsible for the employment of such a significant section of the working population, to the fullest.

How can we remodel the informal economy? Two points will be made here. First of all, greater attention should be paid to proper regulation and structuring of activities in the informal economy. In doing so, the government could create an organization responsible for the registration of businesses in the informal sector all over the country. Such organization would be established by law and its activities monitored by established bodies. Subdivisions of such organization(s) at state and local government level could be established for effective monitoring at all levels. The Economic Growth and Recovery Plan (ERGP) developed by the Muhammadu Buhari Administration in 2017 places the responsibility of monitoring the informal economy on the Ministry of Industry, Trade and Investment. It remains to be seen whether this function will be carried out effectively by this organization.

Also Read Interview: African Energy Chamber Executive Chairman, NJ Ayuk on Transforming Africa’s Energy Sector

Any formalization processes that will be carried out under the ERGP or any other economic plan should comply with International Labour Organization (ILO) standards in that it provides opportunities for income security, livelihoods and entrepreneurship. If the informal economy can be formalized through registration of informal businesses and workers, an obvious dilemma would be how to develop a proper taxation regime. If formalization does not result in taxation, government revenue from a significant aspect of the economy is reduced. Taxation on the other hand may discourage business owners and workers from being registered. A possible solution may be granting tax reliefs to registered businesses and workers below a certain income or profit level with income derived from taxation of formalized units being redirected towards investment in such sectors.

Furthermore, effort should be directed towards removing any ‘stigma’ associated with the informal economy. 61% of all workers worldwide are informally employed and as discussed earlier, the informal sector makes significant contributions to the Nigerian economy. Concerted effort must be made towards promoting the informal sector as a viable economic growth/poverty reduction mechanism. Informal workers are also skilled workers and the informal economy is also a skilled economy.

Accordingly,the government can create and sponsor low-cost well-equipped skill platforms that connects individuals willing to work in the informal sector and experts together. The current government appear to be taking steps in this regard. In 2015, the government approved the establishment of Vocational Enterprise Institutions(VEIS) and Innovative Enterprise Institutions(IEIS), secondary schools which work with businesses to provide vocational and technical training. There are now about 82 VEIs and 152 IEIs in Nigeria.

However, these institutions, as with other educational institutions in Nigeria, suffer from funding problems and are also expensive for many of the prospective beneficiaries. The government could provide assistance in this regard by subsidizing costs for prospective attendees. Alternatively, the government could collaborate with private organizations to organize periodic technical training programmes for members of the public. The allocations to the Ministry of Education in the 2019 budget proposal and projects listed under it do not indicate that the government is willing to make significant investment in this regard anytime soon.

It may be unheralded but the strong contributions of the informal economy to employment and economic growth cannot be easily discountenanced. With proper structuring, it could be an economic goldmine.

 

Author

Oluwafifehan Ogunde is a research specialist and legal consultant. He has a PhD in Law from the University of Nottingham and is a qualified barrister and solicitor of the Federal Republic of Nigeria.

 

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Economy

International Youth Day: How government can get 140,000 Youths out of unemployment in 2 years

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Tochukwu Egesi, Innovation Corner CEO

International Youth Day is an awareness day designated by the United Nations. The purpose of the day is to draw attention to a given set of cultural and legal issues surrounding youth. This year’s edition of the Youth Day was held in Aba hosted by Vision Alive Foundation. A program which aims to promote youth development and inclusion across the world along with the sustainable development goals.

Speaking at the event, Tochukwu Egesi, Innovation Corner CEO used the opportunity to recommend 5 ways the government can lift young people out of poverty in the state and support their growth.

These five recommendations include:

1.  Abia Apprenticeship Program: Aba hosts over 65,000 independent businesses popularly known as Shops and an international Market known as Ariaria.  Tochukwu, therefore encouraged the government to go back to the apprenticeship system and develop an annual program that will assign one youth to each shop for 1 year and support them with stipends for transportation, after which the government will provide a guarantee for the CBN to give 200,000 to  1 million naira for the youth to establish their own trade anywhere in Nigeria and Africa leveraging non-technology and technology means for the trade. This program alone will support 130,000 youths in two years.  

2. Abia Venture Fund: Tochukwu acknowledged the efforts of the government for setting up the Abia Investment House. Tochukwu, therefore recommended that the government through the investment house set up an annual fund of 1 Billion Naira to support youths that have built a technology solution or a technology enabled business to enable them scale. Tochukwu also pointed out that this investment could be an equity investment, hence the funding is an asset to the state that will also turn into an avenue to increase our internally generated revenue in the future.

3. Public Education Lab: There is so much demand for education to be transformed to meet the demands of the 4th Industrial revolution. Tochukwu recommended that the government sets up a public education innovation lab that will be responsible for developing and sourcing innovations within and outside Abia state that will support the government in transforming the education sector in Abia state.

Leftmost: Former Minister for Aviation, Chief Osita Chidoka, Tochukwu Egesi(CEO, Innovation Corner), Lady Ngozi Okechukwu (National Orientation Agency Director Abia State) and Former Minister for Education and Presidential Candidate Dr. Oby Ezekwesili

4. Competency based appointment: Tochukwu used the opportunity to decry the federal process of appointment which is based on compensation of party loyalists rather than competency of candidates. He recommended that Competency should be above Compensation in political appointments in the state.

5. Office of Innovation and Partnership: Tochukwu stated that the Ministry of Technology exists to regulate and integrate technology in the state. Hence, its unlikely to generate innovation and drive technology related partnerships in the state. He therefore called on the government, as a matter of urgency setup an office of innovation and partnerships that will work with the governor to develop and attract innovative approaches to social development in the state. He stated that other states such as Ondo state has a similar office as well as countries like Sierra Leone and Rwanda.

Also Read Lebohang Lebogo: First generation drone pilot delivering blood for SANBS

Also in attendance at the Youth day  were Former Education Minister and Presidential Candidate Dr. Oby Ezekwesili, Former Aviation Minister Chief Osita Chidoka, National Orientation Agency Director, Aba State Lady Ngozi Okechukwu and a representative of the Speaker House of Assembly Abia.

 

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Economy

Shell’s annual revenue equals South Africa’s GDP

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JOHANNESBURG – Royal Dutch Shell, more commonly referred to as Shell, is the world’s largest energy company with annual revenues equivalent to the South African gross domestic product (GDP).

It explores for crude oil and natural gas around the world, both in conventional fields and from sources such as tight rock, shale and coal formations. Through its subsidiaries, the company also performs activities related to chemicals, power generation and renewable resources.

Although dependent on the oil price, Shell’s exposure to falling oil prices has been significantly reduced following major cost optimisations, divesting of non-core assets and the acquisition of the BG Group in early 2016.

Operationally, conventional oil and gas will continue to play a major role for Shell, but its integrated gas segment is where the real growth is to be found with more than fifteen major products.

Further growth in global liquefied natural gas (LNG) demand, particularly in emerging markets presents significant opportunity.

The company has entered a harvesting phase after years of exploration investment. It plans to pay out at least $125billion (R1.9trillion) to shareholders in dividends and share buybacks from 2021 to 2025. That is approximately half of its current market capitalisation. It has also been reducing is net debt since the oil price glut in 2016 and aims to further reduce its gearing to about 20percent over the next five years.

Shell remains the strongest free cash flow generator among the major oil and gas companies and has never cut its dividend, even during times when oil prices were below $40. A stable and predictable dividend yield of about 6.5percent and recently authorised share repurchase programme worth $25bn make it an attractive opportunity for income-seeking investors.

Based on the company’s new projections for 2025, it is evident that Shell will be able to fund capital expenditure and current dividends even at oil prices below $40. Although difficult to forecast, consensus oil price forecasts over the next five years gradually trend upwards towards $70 per barrel, which would give Shell a significant safety margin.

Oil prices have, however, been very volatile over the past five years and are no longer as predictable due to an oil industry fundamentally changed by the US oil production boom, uncertainty over Opec’s clout, the fluctuating value of the US dollar and shifts in oil demand.

A tailwind for Shell is the distinct possibility of interest rate cuts by the US Federal Reserve. In such an environment companies with high income distributions to shareholders are often preferred over lower-yielding bonds.

Trading at 2020 forward price-to-earnings multiples below 10 times, with a free cash flow yield of 10percent and a dividend yield of 6.5percent, its valuation is undemanding compared to its own history and peers. Shell is well-positioned to benefit investors who prioritise income from their portfolios.

Frants Preis, CFA is a portfolio manager at Vega Asset Management based in Pretoria. Shell shares are owned on behalf of clients.

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