No. 143: Three AM Reads: Falling Commodity Prices | Kenyan Regulators Split over Bitcoin | IMF Making the Rounds

Coffee Prices Are Going to Drop 6% This Year, But My Americano Will Still Be $4

The World Bank put out its forecasts for global commodity prices last week, and it expects coffee, cocoa, and tea prices to fall 6%. Ivory Coast’s President Ouattara recently called on the country’s cocoa farmers to increase their output and quality of their beans in light of falling cocoa prices. Apparently, greater-than-expected supply of these commodities is driving the price drop, so I’m not sure how increasing output helps with that. Feel free to send me notes explaining that. Increasing cocoa bean quality could help with competitiveness in a crowded market, but cocoa is such a slow developing crop that expectations for quality to improve in a year is not realistic.

Kenyan Regulators Split on Virtual Currencies  

The Central Bank of Kenya and the Capital Markets Authority don’t agree on the use of virtual currencies like Bitcoin in Kenya. The CBK argues that the unregulated nature of Bitcoin exchanges leaves users vulnerable to losses, while the CMA has left the door open for the regulator and fintech players to feel each other out and determine how to move forward with the potential use of Bitcoin in the country. To be clear, Bitcoin startups like Bitpesa are operating in Kenya, though not without challenges. Last year, the Central Bank of Kenya effectively shut down Bitpesa’s operations by shutting down its bank accounts. Ultimately, both regulators will figure out what to do about virtual currencies. Hopefully, they won’t find themselves flat-footed like they did during the rise of mobile payments platforms.

IMF is Making It’s Rounds – Egypt, then Zambia

The IMF has a team in Egypt currently discussing a $1.7B loan, expected to be disbursed in June. Next up, Zambia is slated to continue talks with the IMF this month for a $1.6B loan. The IMF has been working with Mozambique in dealing with it’s hidden debt issue. In all, there are about 20 African countries that have taken money from the IMF. I look forward to seeing that number decrease significantly over the next decade. We’ll see how realistic of a hope that is.

No. 73: Why You Should Pay Attention to Africa’s Retail and Fashion

For us, today, Africa is more important than the U.S. In five to 10 years, Africa can become the new frontier for luxury. – Ermenegildo Zegna

While reading this Quartz piece on Africa’s fashion opportunity, I came across this Global Retail Development Index put together by A.T Kearney. The Index ranks the top 30 developing countries for retail investment based on market attractiveness, country and business risk, market saturation, and time pressure. Time pressure relates to how quickly a country’s retail sector is growing. If it is growing really quickly, a retail investor needs to move fast to take advantage of growth before it’s too late.

Botswana (18th), Nigeria (23rd) and Angola (30th) are on the list for 2015, with Ghana, Zambia, and Namibia on the verge of breaking onto the list.

The report points to Sub-Saharan Africa mirroring China in 1987 when retail brands were beginning to enter the country. Nearly 30 years later, retail growth is extremely fast and retailers are beginning to really focus in on profitability now that they are approaching scale. The authors of the report believe Africa could be at this point in 2040 or so, though it will probably be a bumpy ride.

One of my mentors was recently telling me about the tens of thousands of dollars of champagne his clients bought during a night on the town in Lagos a few years ago. It’s no secret that Nigeria’s wealthy have a lot of disposable income and that champagne is in demand on Banana Island. I had no idea, though, that retail sales of champagne in Nigeria was second only to France. The report authors point to this as an anecdote on the opportunity for luxury brands in Sub-Saharan Africa.

Speaking of luxury, Hannel Rupert, a South African entrepreneur, wrote an op-ed in Business of Fashion calling for luxury brands to partner with Africa’s fashion industry, moving beyond fashion for charity campaigns or one-off collaborations. A good place to start, in her opinion, is to bring some end-process manufacturing to countries like Ethiopia, Cameroon and South Africa which have strong capabilities in areas like leather crafting.

I worked on a retail project a few years ago, working with a client who had quality issues with its product lines but wanted to figure out a way to tap in the U.S. retail market. Established brands bringing their expertise on details like this could help deal with issues like this. At the same time, there are already a burgeoning number of African fashion shops that put out really high quality material. Having access to end-process manufacturing that matched their products could help them reach scale in Africa and the rest of the world.

As an aside, I finally watched Jidenna’s Classic Man music video. Does anyone know if Ikire Jones made the white blazer Jidenna wears in the film?

As a further aside, Angola made the list for the Global Retail Development Index. I’m sure a lot of folks immediately thought about Luanda’s high cost of living. The New Yorker has a piece in its June 1 issue on the inequality of Angola’s oil boom. The author cold have spent more time on the U.S.-Russia proxy war. Over the decades that Angola was in civil war, how U.S. support did Jonas Savimbi and UNITA get? What more detail can we get about the Heritage Foundation, Grover Norquist and Jack Abramoff supporting Savimbi? How was President dos Santos able to maintain control in the face of a U.S.-supported rebel group? How did all of that contribute to Angola’s current political and economic environment? Just a few questions the author could have explored.

Back to fashion. The Quartz Africa piece mentions McKinsey’s Lions on the move report that came out in 2010. The authors forecasted spending power in Sub-Saharan Africa reaching $1.4 trillion by 2020. Perhaps a halfway-point check-in on how the continent is doing relative to that forecast is in the works?

This African fashion conversation is very exciting and I look forward to seeing where it goes. As of late, President Muhammad Buhari’s swagger has had me thinking about taking Traditional Wear Fridays to the next level and pulling out the Fugu.

Photo credit: Daily Mail | Nigeria

No. 21: Lessons From a Zambian Poultry Entrepreneur

Sydney Musonda with his first batch of chickens

Never have I been so excited about chickens! Earlier this year in Uganda, I and Sydney Musonda developed a business model for a chicken farm he would run in Zambia. He spent the next five months pursuing financing for his venture and secured funding in November. To date, he has purchased 205 day-old chicks and secured a facility to house them. He will be ready to make his first sales at the end of January.

Sydney and I recently caught up on his venture and our conversation reinforced two things concerning entrepreneurship. The first is that the external environment, both political and macroeconomic, will always make things challenging for entrepreneurs. The second is that entrepreneurs can leverage these kinds of challenges to grow their confidence, brand, and business model.

During the five months Sydney spent pursuing funding, he had a difficult time getting potential investors to buy into his idea. He got a significant amount of great feedback on his model, yet the investors he approached were having difficulty with their finances and were concerned about the political environment in Zambia at the time, it being an election year.

Zambia is one of the better performing economies on the African continent, with its current $16.19 billion GDP projected to grow at an average rate of 6.9 percent between now and 2015, though the country is still trying to make sure that growth is inclusive. Like most of the world though, the economic crisis in the European Union is surely having an impact Zambia’s economy as well.

The country seems to have transitioned well to President Michael Sata’s administration and Patriotic Front party after President Rupiah Banda’s three-year term and the Movement for Multi-Party Democracy’s 20-year control of power. In the months leading up to the election, there was tension on the ground. Sydney shared that one of the banks was taken over by the Zambian government showing that their concern was not completely unfounded.

Despite the challenges he faced, Sydney says that his confidence continued to grow pitch after pitch. He was able to glean advice from the investors he approached and found the feedback helpful in refining his model. In the face of his disappointments, he did not give up and finally secured his funding.

Sydney is launching his business at what seems to be a promising period in Zambia’s poultry industry. Mathews Ngosa, President of Poultry Association of Zambia, noted that Zambia’s poultry industry closed at 2011, having produced 40 million broiler chickens and 2.1 million layers. He projects production growth to land between 20-25 percent, a marked difference from the 40 percent reduction in growth the country experienced in 2009, and an increase from the 17.5 percent growth in 2010.

I look forward to watching Sydney grow his business. The energy in his voice was so infectious as we spoke, and I am really excited that he has progressed this far with his venture. I am sure he will face further challenges considering that his venture is still young but I think his tenacity will help him drive the business forward.