HGM Mag Oct11 Global Web Sec

HIGH GROWTH MARKETS
Insight and perspective on todays global economic hot spots October2011
In with the IT crowd

How Juliana Rotich andagroupofKenyabasedbloggerscameupwithcrowd-mapping technologytomakeemergenciesmoremanageableandgovernmentsmoreaccountable.
Chinese in Africa Whataretheyreallyupto? Frugal engineering Productdesignfromemergingmarkets Off the cuff AchatwithinvestorMarkMobius
Dear reader,
South south cooperation has a growing influence on investment flows around the world. Yearly FDI statistics show an increasing share of emerging markets activities in other developing markets. Importantly, this also changes a historically widespread perception that still these activities are mainly driven by US and European markets. Sub-Saharan Africa
is at the forefront of this development, with several countries attracting billions from flourishing Asian economies, particularly China and India. Trade is sky-rocketing between both continents with a rapidly expanding share of industrial and consumer goods, not just commodities. Our Growth Focus feature explains the prospects for African markets, and the consequences for competing US and Europe-based multinationals (see page 10).
Mark Mobius: Interviewing the investor. p.46
Current growth on the continent could easily be overlooked, as reports of starvation in East Africa have been hitting the headlines. But there are positive signs too: research from two Brookings Institution scholars shows that increased global trade especially by BRIC nations helped half a billion people escape poverty in the last six years. And that one of the prime targets of the UN Millennium Development Goals to halve the global poverty rate from its 1990 level by 2015 was probably achieved ahead of schedule. Never before have so many been lifted out of poverty in such a short time. That is little consolation to the 1,500 Somalis who have been arriving daily at refugee camps in Kenya this summer, fleeing drought and famine. But in their opinion piece (see page 22), the two US academics take the long view, and illustrate that the world is being transformed from being mostly poor to mostly middle class. At first this may sound a bit like demographer speak, but in a way its also the idea behind the UN strategic policy initiative called the UN Global Compact. KPMG is a signatory of that compact. We are convinced that on the issues of eradicating hunger, increasing accountability, and generating wealth, the private sector can play a vital role.
Alan Buckle Global Deputy Chairman KPMG International
2
Talking telecoms: Africas new mobile services. p.36
Photos: Cover: Bernd Hartung pp 2-3: H. de Oliveira/EXPANSION-REA/laif, Paolo Woods / Anzenberger, Pablo Castagnola, Till Mllenmeister, KPMG Illustration: Lizzie Roberts
Global briefs
4 Chinese house building, Mexican theme parks, Russian auto market, Vietnamese inflation Global view Second-tier cities Brazilian retail, onshoring call centers, Chinese expat managers, grumpy pandas
6 8
Growth focus
10 Chinese in Africa The Great Game of the 21st century? 17 The Kenya model Investment in manufacturing suggests a new Chinese strategy for the continent
2011 KPMG International Cooperative (KPMG International). KPMG International provides no client services and is a Swiss entity with which the independent member firms of the KPMG network are affiliated.
CONTENTS
High Growth Markets_October 2011
Wheres the beef? Argentina before the elections. p.38
Constructing a new continent? Chinese investment offers new hope for Africa. p.10
Ushahidi: Inspiring and incubating ICT in Africa. p.32
19 Bucks from Brazil Chinese investment isnt the only game in town 20 Nigeria or Ghana? Comparing two different West African economies
Business insight
24 Frugal engineering Product design for emerging markets also offers an inspiration for developed economies 32 Ushahidi How a group of Kenyan bloggers came up with influential crowd-sourcing software and more 36 Do you speak telecoms? Buzzwords in Africas wireless world
44 The Next 11 Bored with the BRICs? Heres the emerging new team of high-growth markets
Off the cuff

46 Mark Mobius Pioneers perspective
Opinion
22 Making poverty history Globalization means fewer poor and a ballooning global middle class
Backstories
48 Travel advisory The Baku story
More online
World markets
38 Argentina dreams on Pre-election snapshot of the Latin giant 43 Cristiano Rattazzi Fiat Argentina president interviewed
49 Picture gallery Jan Bannings Bureaucratics series 50 Calendar Events in emerging markets 51 Key contacts at KPMG worldwide
3
For PDFs of this magazine, plus back issues, visit our website, where you will also find more business insight on high growth markets. www.hgm-magazine.com
GLOBAL BRIEFS
Observations, trends, indicators
22.16%
ARGENTINA FORMULA ONE
80 60 40 20
Vietnams inflation rate in July, up from 20.82 percent in June and the countrys 11th straight rise in prices. Is high growth stoking an inflationary bubble? Source: Bloomberg News
SAUDI ARABIA HOUSING
Buenos Aires back in the race?

After more than a decade on the sidelines, Argentina whose first F1 race was in the 1950s wants back into Formula One, and is making plans for a new track north of Buenos Aires. Dubbed Velociudad, it is backed by Populous, a UK specialist in major sporting venues. Since its financially mandated pit-stop, the Argentinean F1 has been overtaken by newcomers. Recent F1 debutants include South Korea, which hosted its first Grand Prix in 2010, and India, scheduled to come on track in late 2011. Argentina is not the only former F1 regular to be mulling a return. Mexico, which held its last race in 1992, is considering an upgrade of a circuit in Mexico City.
Chinese homes for Saudi poor
Gulf housing problems might be addressed by Asian expertise
ould China solve Saudi Arabias housing problem? Thats a view touted by experts such as Ben Simpfendorfer, bank analyst behind the Silk Road Economy blog. Saudi Arabias public housing problems are well known, and becoming more acute at a time when its government faces growing unrest. Saudi developers preference for high-end projects means a ballooning shortage of homes for low- and middle-income earners. (Estimates of the annual shortfall range as high as 200,000, the Middle East Economic Digest reports.) The solution, Simpfendorfer suggests, could lie with Chinese construction giants such as China State Construction Engineering Corporation already among the worlds biggest home-builders and well-versed in erecting apartment complexes at home and in North Africa. Chinese companies are already engaged in infrastructure development in the Gulf; while Asian rivals, such as MMC Corporation of Malaysia, have already advanced into the construction field.
RUSSIA AUTO INDUSTRY
Ready to overtake Germany?
Tax breaks now powering Russian auto market acceleration
BRAZIL SAIL AWAY
Luxury yachts for Latin America

As another sign of the drift to high-growth markets, European luxury yacht-makers are setting course for Brazil. Ferretti an Italian firm whose yachts cost up to US$100 million apiece is among those targeting Latin Americas new super rich. With over 7,000 miles of coastline, a developed sailing culture, and a booming economy, Brazil offers all the right ingredients, according to Ferretti more so than other new markets, such as China. The company, whose Mediterranean home market is stagnant, expects to boost its workforce in Brazil by more than 60 percent, and increase sales by 15 percent a year. 4
Scrappage scheme: Now that the clunkers are on the scrap heap, its time to buy some new cars.
Photos: Sergei Karpukhin/Reuters, Pedro Santo/4SEE/laif, Kiyoshi Ota/GettyImages (2)
ussia is back on track to overtake Germany as Europes biggest car market. The revival which, officials say, will see 2.7 million cars sold this year is thanks to the combination of a successful cash-forclunkers scheme and tax breaks to attract foreign investment. The government spent over US$1 billion on the scrappage scheme introduced in spring 2010 and wound up this summer to get Russians buying cars after a slump in demand. High taxes on
imports also helped local manufacturers. But the tax breaks offer longer-term potential. These allow foreign manufacturers who commit to produce at least 300,000 cars in Russia on their own or with local partners to import components free of duty. Essentially the scheme buys in investment. But given the size and potential of the Russian market, its a deal automakers are prepared to make. Volkswagen and Ford have already committed to do so; Fiat is considering its options.
QR code
This issue of High Growth Markets comes with a new element QR codes (short for quick response). These matrix barcodes contain encoded information such as text, URL, or other data, and lead to further material relating to the articles they accompany. How to use it: 1) Use a mobile device with an integrated camera of at least 2 megapixel resolution. 2) Depending on your operating system, a QR reader can be downloaded for your device from one of the various app stores. 3) Install software, and launch it. 4) Take a picture of the QR code with your device. 5) The QR reader will refer you automatically to the encoded website or data. Note: To use the QR code your device must be connected to the Internet. In using QR codes you may be charged mobile communication fees according to your tariff. For further information please contact your service provider. Follow our QR codes to essays and videos, interviews and articles, surveys and services, and much more from KPMG.
Through KidZanias looking glass: Children play at being judges in Lisbon and veterinarians in Tokyo. MEXICO KIDS STUFF
KidZania centers proving a successful Mexican export

KidZanias parallel play worlds of grown-up activities for children are spreading from Mexico to Japan, the Gulf, and beyond.
ids love to play at being grown-ups. Middle-class parents in crowded cities want to ensure that their offspring get to play safely. Companies like to pitch early and often to tomorrows consumers. Link all of that together and you have the makings of a potentially lucrative business. Welcome to KidZania, a Mexican company that is now successfully exporting its theme-parks-with-a-difference around the world. The centers allow kids to check into a parallel real world where they can work as doctors or dentists, firefighters or couriers, in an environment that looks authentic and is packed with genuine products and ads. The centers have their own governments, and the children are paid in KidZos, which can be exchanged for candy or saved in
KidZania bank accounts that can be drawn on from KidZania ATMs. Sounds weird? Not to the target audience of four- to fourteen-year-olds. When the first center opened in Mexico City in 1999, the company expected 400,000 visits in the first year. It got double that number. Since then it has expanded to Japan and the Gulf; plans are afoot for Kuala Lumpur, Shanghai, So Paulo, and Moscow. Xavier Lpez Anconca, chief executive, is aiming for 13 million worldwide visits a year roughly the number that head to Disneyland. Lpez says the centers are only copying the real world and teaching children valuable social skills, such as how to handle money. Here kids learn, experientially, that you have to earn it; nobody teaches that at school.
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GLOBAL BRIEFS Observations, trends, indicators
Kabul St. Petersburg
+119%
-2%
London
+87%
Moscow
+9%
+1% +91%
Kuwait City
Baghdad Istanbul
+33%
New York
+59%
+43%
Lahore
+8%
+20%
Tehran
+60%
+46%
+24% +138%
Casablanca
+111% Cairo +31%
+25% +236% +400%

Colombo
+236% +80%
+67%
Lagos
Kinshasa
+114%
+138%
Nairobi
Bogot
+24%
+133%
Lima
This model city, highly rated for quality of life (good public transport, largest green area per inhabitant in Brazil), is an important cultural and economic center and lies in a time zone close that of the eastern United States.
Curitiba
+106%
Luanda
+95%
+200%
+73%
+267% +300%
+317%
+340%
+16%
+163%
Curitiba
+14%
So Paulo Belo Horizonte
+21%
+512%
Johannesburg
+24%
+202% +110%
+29%
Santiago de Chile
+10%
Buenos Aires
+8%
+171%
+211%
+78%
+97%
The capital of Chile (and home to more than a third of its population) is an important financial center with a large talent pool, some significant cost advantages, and a cultural affinity to the United States.
Santiago de Chile
The Angolan government sees its capital as a new Dubai. Oil wealth has surged into local banks and animated the construction sector. Diamond exports and Lusophone connections to Brazil are other growth drivers.
Luanda
The growth of second-tier cities is changing the landscape of the urban world, challenging the primacy of traditional megacities, and driving global GDP growth. Most of these newly booming cities are in China, but other emerging markets are also providing new urban contenders.
The world has 23 megacities metropolitan areas with populations in excess of 10 million. The household names of the urban world, these first-tier cities produce some 14 percent of global GDP and are often regarded as the drivers of global growth, though research now shows that most are not growing any faster than their host economies. Between now and 2025, as the urban world shifts south and east, these traditional megacities are set to be joined by 13 new ones seven of them in 6
China, and only one (Chicago) in the developed world. Meanwhile, a host of dynamic second-tier cities, most in emerging markets, will both lead worldwide urban expansion and drive global economic growth. Our map shows a selection of the worlds fastest-growing cities in terms of GDP growth the wider the blue circle, the greater the projected GDP growth; and the taller the green bar, the bigger the expansion in population. Note that some cities such as Kinshasa and Luanda in Africa, or Chit-
tagong and Surat in South Asia are growing from a very low base. China, whose growth has been fueled by the rise of new megacities, is clearly leading the way. India, whose urbanization is nowhere near so advanced, comes a distant second. In Latin America, too, the largest cities are being challenged by fast-expanding middleweights. There are few fast-growing cities in Europe and North America, though London, Moscow, New York, and Los Angeles are likely to hold their own.
Illustration: KircherBurkhardt Infografik Sources: McKinsey Global Institute, KPMG
Global view: Second-tier cities
Chittagong
Bangladeshs busiest port is a major commercial and industrial center. Its special economic zone has been attracting foreign direct investment, and the city is seen as a possible outsourcing location for India-based services.
The wider the blue circle, the greater the projected growth in GDP The taller . the green bar, the greater the expected increase in population.
How to read the graphs
Population growth
GDP growth
Legend
Chittagong
+69%
Seoul
+89% +460%
Taipei
-1%
Tokyo
+2%
Densely populated areas
First-tier cities
Second-tier cities
Los Angeles
+9%
+19% Ho Chi Minh City +194% +53% Manila +33% Bangkok +24% +162%
+16%
+41%
Mexico City
+11%
232% +41%
Medan Singapore +464%
+113%
Chengdu
+20%
38% +141%
Jakarta
+35%
The capital of Sichuan Province is the scientific, business, and financial center of southwest China, as well as a major traffic and communications hub. So far, 139 Fortune Top 500 companies have set up operations here.
+337%
+73%
Beijing Shenyang
Vietnams largest city is a major port, popular tourist destination, and economic center with a young population, large talent pool, and salaries and costs of living lower than in Hanoi. There are moves to develop it into an IT hub.
Ho Chi Minh City
+32%
Tianjin
+48% +608% +785%

Shanghai
+815%
Chengdu Xian
+79%
+41% +720% +47% +868%

Nanjing
CHINA
The megalopolis youve never heard ofis one of the most important manufacturing centers of southwest China, strong in the automotive, chemical, pharmaceutical, construction, food, and biological engineering sectors.
+56%
Chongqing
+1,118%
Chongqing
+38%
Wuhan
Hangzhou
+65%
+37%
+718%
+1,185%
Delhi
Foshan
+869%
Shenzhen
+788% +55%
+69%
+49% +897%
Hong Kong
Ahmedabad
+41%
+788%
Surat
The second-largest city in Maharashtra state (after Mumbai) is a major educational and manufacturing hub and especially strong in the automotive, engineering, white-goods, and foodprocessing sectors.
Pune
Guangzhou
Dongguan
+15%
+43%
+60%
+105%
+598% +445% +1,267%
+519%
Mumbai
+32%
+40%
INDIA
Hyderabad
Pune
+686% +550%
+23%
Bangalore
+37%
+763% +45%
+523%
+763%
The capital of Andhra Pradesh is rated by the World Bank as the second-best Indian city for ease of doing business. The IT sector is strong, attracting talent from across the country and leading to the citys nickname Cyberabad.
Hyderabad
Where to grow: KPMGs Global Frontiers Project offers an ever-expanding directory of locations for outsourcing. 7
GLOBAL BRIEFS Observations, trends, indicators
313m
Number of Africans (34.3% of total population) now judged to be middleclass; up from 196 million (27.2%) in 2000. Source: African Development Bank
FURRY ANIMALS
Grumpy panda is branding hit

Think of a panda. Cute, right? Not if youre Jiji, a Chinese designer and father of a hot fashion property: the grumpy panda. By upending Chinas signature bear into an evil scowler, the Shanghai-based artist created an icon for the Hi Panda label. The panda epitomizes young peoples thoughts and expressions, Jiji told China Daily. They are rebellious, independent, and willing to be distinguished from others. Such ursine surliness now sells in several upscale European outlets, including Harvey Nichols in London and Galeries Lafayette in Paris. North America is the next goal for a brand that many in China hold up as proof that the country does more than just massproduce textiles.
Faire le shopping in So Paulo: Leading French retailers target Brazils new bourgeoisie. BRAZIL RETAILERS
A fast-growing Brazilian middle class with money to spend has attracted the attention of French and US retail giants.
Carrefour vs. Casino in Brazil

market. But things got messy as Carrefour ran into a familiar rival, fellow French retailer and GPA shareholder Casino. Casino says it was not consulted about the merger by Abilio Diniz, septuagenarian founder of GPA. Casino is reportedly considering legal action for violation of a shareholders pact. Things then also got a bit political when Brazils sovereign wealth fund, which was supposed to help finance the deal, got cold feet. Brazilian media say President Dilma Rousseff ordered the fund to withdraw. Now that the GPA deal is on ice, there has been speculation that Walmart may step in and buy Carrefours Brazil operation, creating the countrys biggest food retailer with about 26 percent of the market. Walmart first approached Carrefour to explore a purchase in 2009, but talks foundered over price.
razil is looking good to international retailers. South Americas powerhouse economy boasts a fast-growing middle class many of whom like to shop. No big surprise, then, that well-established players such as Carrefour have tapped Brazil as a growth prospect. The French behemoth, suffering tighter margins in Europe, is doing good business in Latin America. In the second quarter its sales in the region rose 6.4 percent, compared with a 3 percent decline in Europe. Given those numbers its understandable that Carrefour would like to do more business in Brazil. If only it was so simple: the aisles are getting crowded. Carrefour was ready to merge its Brazilian business with that of local champion Grupo Po de Acar (GPA). The combined venture would have had 27 percent of the
8
CHINA PEAK LABOR
Robots to replace Foxconn workers

Maybe Chinas Lewisian Turning Point when the pool of surplus rural labor begins to run out, leading to hikes in industrial wages is even nearer than we thought in the last edition of High Growth Markets. In early August, the Taiwanese company Foxconn, one of the worlds largest manufacturers of electronic products, announced that it intends to replace many of its million or so workers in China with robots. The company cites labor costs as the reason . Foxconns move also comes after a spate of worker suicides.
Dont call us! Were moving to Glasgow. Or maybe Liverpool. INDIA CALL CENTERS
Onshoring: The new offshoring
British companies are moving call-center operations back to Blighty
ime to hang up on Indian call centers? The offshore sector that became a highlight of the Indian growth story and gave cinema goers Slumdog Millionaire has suffered a series of recent knocks as international clients repatriate their call-center operations. The latest to do so is Santander UK, the British unit of the Spanish banking giant, which said it was onshoring call-center operations to Glasgow and Liverpool. Customers prefer our call centers to be in the
UK and not offshore, explained Ana Botn, chief executive. Santanders decision follows similar moves by United Utilities, Powergen (owned by E.ON of Germany), and BT. Customer desire for native speakers and a marked rise in wage costs in India are among the reasons cited for the moves. The trend reversal is even sweeping up Indian companies. British media report that several Indian companies are now setting up call centers in the United Kingdom.
MONGOLIA BANKING CHINA EXPATS
Photos: Marta Nascimento/REA/laif, Ginies/SIPA, Johann Rousselot/laif, Bloomberg/GettyImages
In search of proper food
More deals than deal-makers

Mongolia has become well known as a resources hot-spot. But while the worlds miners have already rumbled the potential beneath the steppes, deal-hungry bankers have been slower off the mark. Eric Zurrin of Resource Investment Capital, a Mongolia-focused bank, says that, in terms of dealmaking, Ulan Bator is the opposite of London or New York, where twenty banks chase the same deal. In Mongolia there are more opportunities than there are advisors, he told the Financial Times. Expect that to change. With business tight elsewhere, the remoteness, bitter cold, and choking smog of the Mongolian capital never mind the commercial opportunities may soon start to look quite appealing. 9
Working conditions can be tough for Chinas new pioneers
hinas businesses are becoming more international. No longer mere low-cost manufacturers of stuff that is then packed in containers and sold around the world, Chinese companies are now expanding their operations abroad in a trend that presents executives with a tricky challenge: how to prepare staff for life away from home. Expat work and living may be a well-developed phenomenon for established international businesses from the Western world. For many of their Chinese peers it is still new ground. Given the pace of business expansion overseas investment by Chinese companies was US$59 billion in 2010, up 36 percent on the previous year, and way above the US$900 million invested in 1990 it is one that needs addressing fast. Problems include cultural differences, lack of language skills, and lack of established structures Chinese expats are often pioneer managers expected to build up their own local operation. Chinese expats typically do not enjoy the perks that their Western colleagues have come to expect from overseas postings. Pay is less than at multinationals. Housing allowances vary from meager to non-existent (there have been reports of expats bunking three or four to a room in shared housing), and there is little or no provision for families to join them abroad. And many Chinese managers also complain about the lack of proper Chinese food, according to academics from China Europe International Business School. The good news is that companies are now adapting and improving the conditions of expats as well as developing programs to prepare managers for the move abroad. Whether they can sort the food out is another matter.
GROWTH FOCUS
The China syndrome Does Chinese investment represent Africas big chance? p.12 The Kenya strategy Model for the whole continent? p.17 Historic ties Brazilian companies have a foot in the door p.19 Nigeria-Ghana Two different propositions p.20
Infrastructure:The Imboulou dam, being built by China National Mechanical & Equipment Corporation, will double electricity production in the Republic of the Congo. 10
Photo: Paolo Woods/Anzenberger
Is China building a new Africa?

Southsouth investment is overwhelmingly a story of the Chinese in Africa. From resource deals through investment in manufacturing to setting up stalls in local street markets, the impact of the Asian superpowers scramble for a continent is almost impossible to overstate.
11
New continent, same drill: Chinese laborers have laid hundreds of kilometers of railway tracks in Angola. Their forebears built Americas First Transcontinental Railroad in the 1860s.
12
Pretty in pink: This textile factory in South Africa is owned by a Chinese company. Managers live on the premises to save money.
hina is the 21st-century story of Africa. It is nearly impossible to overstate the impact of the Asian superpowers drive to invest in the continent, and while Africas trade relations with other emerging partners such as India, Brazil, South Korea, and Turkey are growing in importance, southsouth investment is mostly still a Chinese game. Some estimate that there are now more than 750,000 Chinese living and working in Africa, and the continents airlines Ethiopian, South African, and Kenyan Airways have been quick to serve this labor migration with regular flights connecting Beijing, Guangzhou, and Shanghai with Addis Ababa, Joburg, and Nairobi. For Africa this new relationship has translated into impressive growth. According to the latest African Economic Outlook report, produced by the African Development Bank, the OECD, and the United Nations, Africas total trade was worth US$673 billion in 2009, up from just US$247 billion at the start of the century. In 2008 China overtook the United States as Africas biggest trading partner with imports and exports worth a record US$107 billion. Since 2000, Chinas share of trade with Africa has grown nearly 300 percent, while the shares of the US and Europe have decreased by 19 and 17 percent respectively, according to the OECD. The US and Europe still account for more than half of Africas trade, but their share has quickly eroded, according to the African Economic Outlook. Africas rebalancing act turns the page on 50 years of overreliance on the West. Links with the traditional partners face profound changes. The IMF predicts continental growth of close to 5 percent at a time when many world economies are struggling. Dr. Martyn Davies, chief executive of Johannesburg consultancy Fron-
tier Advisory, says African growth and Chinese investment are now inextricably linked. Chinese demand for commodities is underpinning African GDP growth. The robust growth rates of subSaharan Africa are due in large part to this new coupling, and in time a component of Chinas growth will become dependent on Africas ability to supply those commodities, says Davies. Analysis by Frontier Advisory shows a closeto-perfect correlation 92 percent between Chinese and African growth since 1999. If the Chinese are confident in Africas growth, perhaps thats because they are confident of their own commodity demand curve over the next two decades, Davies says.
Africas rebalancing act turns the page on fifty years of overreliance on the West.
atthew Walker, associate director for Global Infrastructure China Markets at KPMG, agrees. Chinas demand for resources will continue as Chinas economy continues to grow at 7 to 10 percent over the next ten years plus, he says. But it is no longer just about resources. The whole of the continent is a frontier market for the Chinese. Chinas trading relationship with Africa is not new. Recent archaeological finds in Kenya sugGrowing Africa gest that Chinese traders reached Africas SwaGDP growth in % hili coast 600 years ago. The discovery of Chi2010 2011 nese porcelain in a 16th-century cemetery is 10.0 9.4 evidence of an ancient China-Africa relation8.8 8.4 ship, says Professor Qin Dashu of Beijing Universitys School of Archaeology and Museology. 5.9 In the mid-20th century, as Africa struggled to 4.7 break free of colonialism, Mao Zedong supported 3.1 2.6 Africas socialist liberation movements. In return, African states voted China onto the UN Security Council in 1971. Since then it has continued with China India Sub- United the quid pro quo of financial for political supSaharan States port. All but four of Africas 53 states have sevAfrica ered diplomatic ties with Taiwan, helping to keep > Source: IMF (2010)
Photos: xxxxxxxxxx
Photos: Per-Anders Pettersson (3), Greg Marinovich
Rising Ethiopia: Chinese investment focuses on infrastructure, as with these construction projects in Addis Ababa.
13
GROWTH FOCUS Investing in Africa
avies also points out that culture clashes are to be expected between two rather non-globalized, rather traditional, indigenous cultures. The relationship may have deep historical roots, but China and Africa are still getting to know one another. A report commissioned by the office of UN Under-Secretary-General and Special Advisor on Africa Cheick Sidi Diarra warned of complementary win-win and competitive win-lose relationships as Africa engages with other emerging economies. The concern is that while China has a plan for Africa, Africa may not have a plan for China. The UN Conference on Trade and Development (UNCTAD) reinforces this point, arguing that African countries must mainstream their relationship with emerging economies. Southsouth cooperation has the potential to enhance Africas capacity to deal with the challenges of poverty, poor infrastructure, development of productive capacity, and emerging threats associated with climate change as well as the food, energy, financial, and economic crises, UNCTAD said in its 2010 Economic Develop-
Ringing in the new: The expat community in Johannesburg, South Africa, gathers to celebrate Chinese New Year.
14
Photos: Per-Anders Pettersson (3)
the island nation in the diplomatic cold while, as a bloc, China-friendly African states can vote down censure of China at international meetings over its domestic human rights record. Free from the troubled colonial history that blights relations between many European countries and Africa, China and Chinese people have often found a warm welcome on the continent. However, a few high-profile missteps have soured the ChinaAfrica relationship and, through the lens of casual xenophobia, individual incidents have come to be regarded by some as the Chinese way. The violent actions of Chinese managers at a mining company in Zambia mean Chinese employers are seen as brutal; the washing away of a shoddily built road (also in Zambia) and cracks in the walls of a new hospital in Angola mean Chinese construction is considered slapdash; oil exploration in a national park in Gabon means the Chinese are believed to care nothing for the environment. Chinese willingness to work long hours in tough conditions has spawned rumors of African employees forced to labor like slaves or Chinese work gangs that are really imported prisoners working out their sentences. Both the Western and the African press have propagated the notion that there is something insidious about Chinas involvement in Africa. Chinese companies must share the blame, partly because of cultural insensitivity and the poor business practices that some undoubtedly do engage in, and partly because they are simply not very good at public relations, a discipline largely ignored in China.
The relationship may have deep historical roots, but China and Africa are still getting to know one another.
ment in Africa report. These potential benefits of cooperation are however not automatic. They accrue to countries that have taken adequate and proactive steps to exploit them.
ot every country in sub-Saharan Africa is equally well-equipped or wellprepared to take advantage of south south investment in general and Chinas appetite in particular. But, as economist James Shikwati, director of the Nairobi-based Inter Region Economic Network and author of Geological Resources and Good Governance in SubSaharan Africa points out, The Chinese are not a threat if the right structures are in place. There is no African Australia, says Davies, referring to the way in which that nation has proactively sought to align itself with Chinas economic growth. African countries need to align their developmental requirements with Chinas strategic interests, and there is a phenomenal confluence between the two. Some are already doing this, with Ethiopia and Ghana at the forefront, but economies rich in natural resources and especially oil, such as Angola, DR Congo, Nigeria, and Sudan, are still Chinas first port of call. Chinas been investing in Africa for a long time, says Walker. Historically it was politically driven, but for the last 20 years the focus has been on resources: either direct investment in resources or infrastructure-for-resources deals, but always with one eye on strategic resources. Traditionally the Chinese government identifies a country rich in a resource that it needs, and offers a loan, often worth billions, with a very low interest rate to be paid back through a supply of the commodity in demand. The loan is then used to satisfy the African countrys need for basic infrastructure, a road, railway, dam, or hospital. Chinese companies are given the contract >
Smoke break: Supervisor at a copper smelter in Zambia pauses for a smoke in his room. Chinese expats often live where they work and rarely interact with the locals.
On the road: Employees of the Henan company in Zambia have a break from their road-building jobs to take silly photos and play ping-pong. 15
Capital contrasts: Chinese companies are building the African Union complex in Addis Ababa, Ethiopia. Shopping malls are also going up, though only 15% of households have flush toilets.
utives. It represents a shift in the appreciation of opportunities in Africa: China clearly sees opportunities in the consumer class in Africa that other foreign investors have yet to appreciate. Chinas interest in Africa is diversifying as the continent is increasingly seen as a place to do any and all kinds of business. Africa is still viewed by most Chinese people as a place that offers resources and wildlife, but the increasing Chinese expatriate community in places such as Angola, South Africa, Kenya, Zambia, and Zimbabwe is creating spin-offs in local market understanding and an appreciation of the opportunities that are filtering back to China, says Freemantle. It is no longer all about state-owned or even just state-backed companies; Chinas private sector is increasingly investing in Africa. Technology giant Huawei supplies USB modems to increasingly Internet-savvy populations across the continent. Telecoms company ZTE provides affordable smartphones and has a growing presence in many African markets. There wont be any let-up in the desire to do resources deals; rather, the perception of Africa has changed from it being one big mine to being a potential partner in its own right, hence the diversification of the industries in which China is willing to invest, says Walker.
Downtown Nairobi: The Kenyan capital is developing a generation of Western-trained managers, though famine exists across the border with Somalia.
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Whats the deal? KPMGs Emerging Markets International Acquisition Tracker offers research-based insight and analysis of the M&A landscape. 16
to build the infrastructure, and a flood of expatriate workers complete the job and then go home. Chinas involvement is often couched in terms of a new Scramble for Africa akin to the 19thcentury carve-up by European nations. But the reality is more complex. Increasingly, Chinese workers who come to build the infrastructure involved in resource deals are deciding to stay. Simon Freemantle, senior analyst in Standard Banks African Political Economy Unit, says that Angola is a perfect example of both the old and the new engagements acting concurrently. Chinese investment has traditionally followed largescale, state-led bilateral engagements. In Angola, loans totalling US$15 billion since 2002 have enabled a lot of Chinese investment in other sectors, he says.
he first deals were oil for loans, but then Chinese procurement company Sinotrans began supplying the Chinese company CITIC, which is constructing new housing projects in the capital Luanda, and workers on the infrastructure projects recognized opportunities in the local market. Says Freemantle: In Angola today you have every strata of Chinese expatriate from a peasant with literally no skills operating as he would in China, to informal traders, salon owners, taxi drivers, right up to the high-level business exec-
avies sees three ways in which China is currently engaging economically with Africa. First is the big state-capital play: typically government-to-government, construction and engineering. Second are the very large numbers of Chinese micro-entrepreneurs: traders, wholesalers, and retailers who are totally apolitical and coming to Africa to make their fortune. Third and this is starting now is substantive, sizeable, private-sector companies from China coming purely because they see opportunity here. Freemantle has identified the same trend of Chinese state-owned institutions being joined in Africa by private Chinese firms. Chinese companies are increasingly operating independent of state funding, he says. They are focused on construction, telecommunications, and the consumer sector, and it is the latter that is fast emerging as the new frontier for Chinese investment. The McKinsey & Company consultanacy has forecast Africas consumer market to be worth US$1.4 trillion by 2020, yet it is a sector that many companies from the West, where Africa is still viewed more as a developmental burden than as a commercial opportunity, have yet to wake up to. US retail giant Walmart recently bought its way into Africa with the US$2.4 billion purchase of South Africas Massmart, but such a deal is the exception, not the norm: Chinese investors are leading the charge. >
Is Chinas strategy in Kenya a glimpse of things to come?

Chinese companies are now setting up manufacturing bases in Africa. By Tristan McConnell.
s bilateral trade between China and Kenya continues to climb, reaching US$1.8 billion in 2010 up from US$1.3 billion the previous year ties between the two countries are also changing in significant ways. In Kenya, Chinese companies have been establishing a presence in manufacturing, making goods and selling them locally, throwing them into competition with Kenyan and Western companies. This is an indication, perhaps, of the future shape of Chinas engagement with Africa. Rather than importing ready-made commodities from Chinese factories, there is a growing trend towards manufacturing in Africa supplying, for example, Kenyan-made Chinese cars and electronics, food, and drinks. The largest investment so far is from Beijings Foton Motors, which is building a US$13 million plant to assemble trucks, pickups, and commercial vehicles for sale in East Africa. While the assembly plant is under construction, Fotons vehicles are being assembled by locally owned Kenyan Vehicle Manufacturers (KVM), one of three companies that have traditionally dominated the market. When the bespoke factory is completed in May of next year, KVMs contract will be terminated and Foton will become a competitor rather than a customer. KVM and others may lose out, but Foton insists that 90 percent of its 500-strong workforce at the new plant will be Kenyans, thus boosting employment and imparting skills. The Foton deal exemplifies the shifting focus of Chinese investment and its implications for Kenyan companies. Foton is just one of at least 18 Chinese companies that have set up in Kenya over the last two years, according to Kenya Investment Authority statistics. Others include companies with a growing continental presence, such as electronics firm Huawei and telecoms company ZTE, as well as smaller companies in the food, drinks, and clothing sectors.
New kids on the block: Eighteen Chinese firms opened offices in Kenya in the last 24 months.
Photos: Per-Anders Pettersson, Marta Nascimento/REA/laif, Sven Torfinn/Panos/laif
The investment in domestic manufacturing will help correct a worrying trade imbalance: in 2009, Kenya exported US$28 million worth of goods to China, but its imports were worth US$845 million. Raw materials such as sisal, cotton, tea, coffee, scrap metal, animal skins, and cut flowers leave Kenya, which is in turn flooded with Chinese electronics, industrial machinery, chemicals, fertilizer, textiles, and plastic kitchenware.
rivate Chinese companies with a foothold in Kenya see East Africas as a market ripe for exploitation, and their government is seeking to ease access to that market with ambitious infrastructure projects. The most important is Chinas plan to fund a new deepwater port in Lamu that would be the terminus of a planned regional network of roads, railways, and oil pipelines linking eastern DR Congo, Rwanda, Uganda, South Sudan, and Kenya to the Indian Ocean and from there to China and the rest of the world. The network will facilitate the movement of goods, both Chinese and African, around a market of more than 140 million people with a growing disposable income.
Manufacturing may be only the beginning. Ambassador Liu Guangyuan recently said he was encouraging Chinese farmers to come to Kenya, where, he said, there is more than twice as much arable land per capita than in China. China is ready to introduce its experience, advanced technology in agriculture, tractors, and spray irrigation to Kenya, he said. Tourism is also growing rapidly, with 28,000 Chinese holidaymakers visiting Kenya last year. They mill about the lobbies of Nairobis upmarket hotels alongside tour groups from Europe and the US. Their presence is fleeting, but the influx of Chinese expatriates who come to live, work, and invest has a social and cultural influence. Restaurants, shops, and hotels designed with the expatriate Chinese customer in mind are just as popular with Kenyans. However, true integration seems a way off. At one Chinese hotel and restaurant in a Nairobi suburb the menu includes that most Kenyan of dishes, nyama choma, or grilled meat, but the young manager who smiles and sweeps his arm in welcome cannot speak a word of English or Swahili.
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China has been an emerging market itself and is used to providing solutions in those sort of environments.
President Hu Jintao established the US$5 billion China-Africa Development Fund (CADF) in 2007 to help fund private Chinese ventures in Africa. Although it has been slow to disburse funds only about US$1 billion had been lent by 2010 there have been some notable CADF-backed deals, such as First Automobile Works (FAW) US$100 million investment in car manufacturing in South Africa. The Hazan factory in Nigeria is the biggest shoemaker in Africa. In Ethiopia, the Chineseowned Friendship Tannery produces leather goods. There are Chinese agricultural programs in Senegal and textile factories in Mauritius. But not everyone welcomes Chinas diversification because, while competition is good for consumers, its bad for manufacturers and workers. Tanzanias government has said it welcomes Chinas investors but not its vendors or shoe-shiners. Shikwati is in no doubt that competition is a good thing for the growing economies of this region. There are complaints from the small and medium-sized enterprises and the old monopolies in manufacturing, but we have to ask what are the eventual benefits for everybody? We should not fear the Chinese but partner with them. You cant shut the door now, it is too late, so we must tap into their interests, Shikwati continues. We need clear regulations before allowing the Chinese to enjoy the largesse of our markets. Instead of complaining we need to prepare for the
flood that is coming, because it can sweep us off our feet or we can harness it for our own benefit, but either way it is coming. The willingness of Chinese entrepreneurs to engage at every level of Africas economic life marks them out as different from Western businessmen. They are geared up for it, says Walker. China has been an emerging market itself for a long time, so they are used to providing the right solutions in those sorts of environments. Freemantle agrees: There are a lot of similarities between Africa as an emerging market and Chinas own domestic market. But perhaps the biggest difference is not in business culture or the willingness to get hands dirty in markets that can sometimes have a distinctly Wild West feel, but in access to financing. The deep pockets of the China Development Bank (CDB) or the Export-Import Bank of China (EXIM) are enabling multibillion dollar investments. One of the most critical differences between China and other investors in Africa is access to debt finance, says Walker. Although Chinese banks usually support only projects with major Chinese involvement, their liquidity and risk appetite are currently far beyond that of Western banks, and this is unlikely to change any time soon.
Off and running: Nigerian schoolchildren in their blue and red uniforms prepare for a more optimistic future.
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Sign of the times: In Lusaka, Zambia, China presents educational as well as economic opportunities.
Tristan McConnell is based in Nairobi, where he contributes to The Times and other British publications.
Photos: Anthony Asael/Hoa-Qui/laif, Thomas Lekfeldt/Moment/Agentur Focus, Odebrecht Archives
here are similarities as well as differences between Chinese and European investors. Freemantle warns that the recent unrest in North Africa has had quite a profound effect on Chinese investors in terms of their analysis of the opportunities and the risks that accompany any kind of large-scale investment. Tens of thousands of Chinese citizens laborers, traders, and businessmen had to be evacuated from Libya earlier this year as the civil war there began, and that shock, says Freemantle, has been the cause of a subtle readjustment. China is now taking another look at closer-to-home Asian markets as well as the emerging markets of Latin America which might offer greater stability, but smaller returns. The point is that this is exactly what a Western company would do. It tells us that Chinese investment does not follow a completely different model, that because of government backing they can go anywhere. For now, however, a key focus for China is Africa, and this presents Africa with a rare opportunity for engagement and development. Chinese investment is enabling and disruptive concurrently, sums up Davies. China is Africas single largest trading partner; it is the largest lender to the continent, the single largest financer of infrastructure, and the largest private investor; and its the only country investing in manufacturing in Africa right now.
Coasting into Africa: From oil terminals to power stations, few companies are more widely involved in the continent than Brazils Odebrecht.
Brazilian companies make the most of historic ties with Africa
The Odebrecht construction company is a player in infrastructure projects. By Joe Leahy.

in the world after Nigeria. By some estimates, more than half of Brazils population is African in origin. Brazil also has an edge on its competitors, China and India, in countries such as Angola because of their shared Portuguese colonial history and language. Aside from Angola, Lusophone Africa includes Mozambique and a number of smaller countries, although the Latin American giant now also does huge business in dollar value terms with Nigeria, Algeria, and South Africa. Brazils investment in Africa is led by its largest state-run companies, such as oil giant Petrobras, which has invested US$1.9 billion in Nigerias oil and natural gas sectors, as well as making investments in alternative energy. Brazils mining giant, Vale, meanwhile has ploughed about US$700 million into the coal, oil, and natural gas sectors in Mozambique.
hen Brazils former president Luiz Incio Lula da Silva went to Angola in June for a conference on Brazils role in the African continent, it was no coincidence that the Odebrecht company helped to organize the event. Emlio Odebrecht, the chairman of Brazils biggest construction company, was pictured in the Angolan media at the same time visiting the countrys head of state, Jos Eduardo dos Santos, to discuss the groups extensive operations in Africa. Facing each other on either side of the South Atlantic, Africa and Brazil are natural partners. So important has Africa become for Brazilian companies such as Odebrecht that the continent now contributes half as much to Brazils trading volumes as China US$25 billion compared to more than US$50 billion for China, according to South Africas Standard Bank. Brazilian imports from Africa were US$3.25 billion between January and March, nearly 21 percent higher against a year earlier, while exports rose 39.4 percent to US$2.55 billion. This relationship has been fostered by Lula da Silva, who, during countless trips to Africa as president, was proud of pointing out that Brazil has the secondlargest black population of any country
ew companies, however, have a wider presence in the continent than Odebrecht. In Mozambique, it is helping Vale with the civil engineering and infrastructure for its coal mines. Elsewhere in the country, it is also building a power station and constructing rail and port infrastructure. In South Africa, Odebrecht has helped with mine and tunnel construction. In Angola, it built the Capanda hydroelectric
plant, as well as condominium and sanitation projects. In Botswana, the company built a dam, and in Liberia it helped ArcelorMittal on projects and exploration for iron ore. Odebrecht last year became the largest private-sector employer in Angola, with operations in food and ethanol production and office construction. And it had extensive operations in Libya, prior to the eruption of the civil war there. Felipe Montoro Jens, director of investment at the group, says the company tries to localize wherever possible, which makes it a more welcome corporate citizen in the African countries in which it operates. What Odebrecht usually tries to do is use local people, not expatriate Brazilians, says Jens. This even extends to using the local currency for doing business, rather than demanding payments in dollars or other foreign exchange. In Angola, we get paid in kwanza, he says. This approach contrasts with that of many Chinese companies, which are known for bringing in large numbers of foreign workers to try to speed projects up. Fostering personal ties is important too, particularly given the natural affinity Brazilians share with their hosts in Lusophone countries. Hence the abundant photo opportunities during Lula da Silvas recent visit to Angola.
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Weighing up Nigeria and Ghana

Two West African countries are attracting the lions share of investor attention but for dramatically different reasons. Report by Paul Kalu.
hana and Nigeria appear to be at the forefront of the new scramble to tap the vast resources and economic potential of Africa. World Bank data shows Nigeria was at the top of the list in Africa for private-sector investments in utilities including water, telecommunications, roads, and energy from 2001 to 2009. Ghana was in position seven. West Africa is dominated by Nigeria in terms of population and sheer market potential, but it is only in the last ten years that steady economic growth and an influx of foreign investments have unlocked this potential and brought Nigeria to the point where it can now be considered along with other key developing nations as a serious destination for investment by foreign companies. Nearby Ghana with its much smaller population and economy has always been in Nigerias shadow, though it has traditionally received attention and development aid from the donor community. But the recent discovery of oil off Ghanas coast also brings it into the international private investment arena. This is evident in the fact that private-sector investments in infrastructure were barely US$70 million over the last ten years of military rule in Nigeria (1990-1999), compared with US$600 million in Ghana during the same period. However, the tables turned in the next ten years as Nigeria saw private-sector investments in infrastructure in excess of US$23 billion while Ghanas investments rose by a healthy albeit small in comparison 500 percent to US$3.8 billion. The majority of infrastructure investment has been in the telecoms sector, generating phenomenal growth rates. Mobile phone penetration in Ghana and Nigeria reached 65 and 50 percent respectively in 2010, up from virtually nothing in 2000. So although growth in many African coun-
tries is hindered by infrastructural constraints such as poor roads and inadequate power supply, the rapid growth in mobile phones has helped overcome some of these hurdles and given many countries the opportunity to surge forward. It is estimated that a 10 percent rise in mobile phone penetration can increase the GDP of developing markets by as much as 1.2 percent. All that glitters Africas growth has also come from more traditional primary sector sources, not least due to recent high prices for mineral and agricultural commodities. Ghanas gold mines have been the main driving force of its economy for the best part of a century, and its cocoa industry has also contributed its fair share. It was in 2008, however, that the countrys long search for that elusive black gold finally paid off with the discovery of a reserve of 15 billion barrels of oil off the countrys coast. The country produced its first barrel of oil only last year. As a result, Ghanaian GDP growth, which averaged 5.4 percent between 2000 and 2010, is forecast to surge to almost 14 percent in 2011. This is driven by oil-related investments, and it is anticipated that Tullow Oils US$120 million IPO on the Ghana Stock Exchange in June will be the first of many. Although until now: Ghana was often seen as an investment backwater, it is increasingly on many an investors travel itinerary. Atose Emmanuel Aguele, managing director of Union Petroleum, a regional leader in the liquefied petroleum sector, maintains that the allure of Ghana is growing. Ghana runs a relatively efficient refining and distribution oil and gas sector, says Aguele. When I joined the industry 20 years ago, Nigerias LPG consumption was 150,000 million tonnes per year; Ghanas was
Ghana Following the discovery of a 15-billion-barrel oil reserve off the countrys coast, Ghanaian GDP is forecast to grow by almost 14 percent this year.
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Photo: GettyImages/Thinkstock (2)
12,000 million tonnes, says Aguele. I had visited Ghana with a view to invest in that country. I remember walking away saying the market in Ghana was too small, and concentrating my efforts in Nigeria. Today the Nigerian market stands at 70,000 million tonnes and Ghana is nearly at 150,000 million tonnes. Big brother However you look at it, Ghana still presents a small investment opportunity next to Nigeria, its regional big brother. Nigeria has many strikes against it in the international investing community, and it is certainly not for the faint of heart, as Aguele attests. Nigeria is often at the top of corruption league tables. Priorities are often askew here; a UN report on oil spills in the Niger River Delta, caused by vandalism and aging pipelines, claims it will take 30 years to clean them up. But with these high risks come high returns, as Nigerias GDP growth of 400 percent over the 10 years to 2009 demonstrates. Add to this a young and growing educated population, estimated to hit 250 million by 2050, and a burgeoning middle class with an increasing appetite for consumer goods and services, and investors are overcoming their fear of the country. Confidence in the consumption capacity of Nigeria is well illustrated by significant investments in the cement and drinks industries, alongside the now commonplace investments in telecommunications. The Dangote Group, for instance, is pumping US$3.9 billion into new cement plants across Africa with a combined capacity of 50 million tonnes of cement over the next two years. More than half of this is being invested in Nigeria, where the company aims to raise its production capacity from 8 to 20 million tonnes. Dangotes CEO, Aliko Dangote, once quipped to journalists that, If I have any money in this life, I would invest it in Africa. The irony is that Dangote is already ranked the wealthiest man in Africa by Forbes. South Africas SABMiller has also announced that it is investing US$100 million in a new plant in eastern Nigeria to boost its brewing capacity in the country. SABMiller entered the Nigerian market in 2009 with the acquisition of a small brewery in Port Harcourt; now the company plans to give the current market leaders Heineken with 70 percent of the market, and Guinness with 20 percent a run for their
money. But even they are not resting on their laurels Heineken announced in January the acquisition of five existing breweries in the country for an estimated US$750 million, and Guinness announced in March a US$350 million investment to expand its biggest plants. Size isnt everything For all its size, Nigeria is, on a per capita basis, still on a par with Ghana on many things. Both countries have seen GDP per capita virtually triple in the last ten years from less than US$400 per head to over US$1,200. Electricity production in Nigeria may be 2.5 times more than in Ghana, but it amounts to slightly less than 20 watts per person, compared with 50 watts per person in Ghana. Hence, Ghana may be relatively small next to its big brother Nigeria, but on a like for like basis, it holds its own. Ghanas projected GDP growth of 14 percent this year coupled with the relative ease of doing business (the World Banks annual Doing Business report ranked Ghana at No. 67 in 2011, compared with No. 137 for Nigeria) makes this an attractive combination for some investors. Another oil industry executive with extensive experience of both countries recognizes the attractions of Nigeria in the form of market size, natural resource wealth, and an energetic workforce. But he is deterred by the lack of infrastructure and the high levels of fraud and corruption he has experienced in Nigeria. I would invest in Ghana for the short term while waiting for Nigeria to organize itself, says the insider, who asked not to be named. But I wouldnt be there for long; Nigeria still has all the opportunities. But Ghanas positive factors probably lend themselves better to investors looking to set up and run a business in Ghana, than to those just looking to make a financial investment. In Nigeria, the reverse is the case; the market is deep, wide, and liquid enough to sustain significant financial investments. For instance, the Nigerian stock market is currently worth US$50 billion and lists 215 equities with a turnover ratio in 2010 of 13 percent; Ghanas stock market, on the other hand, lists 35 equities, is currently valued at US$3.5 billion, and had a turnover ratio of just 3 percent last year.
Paul Kalu is an advisor and analyst working for clients in the private and non-profit sectors on investments in Africa. He is based in Lagos, Nigeria.
Nigeria Confidence in its consumption capacity is illustrated by substantial investment in breweries from SABMiller, Heineken, and Guinness.
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OPINION
Global poverty
2005
Quantifying povertys global decline

Is globalization making poverty history? Brookings Institution researchers Laurence Chandy and Geoffrey Gertz argue that the ascent of emerging markets is accompanied by a statistical decline in the planets poorest.
lobal poverty is rapidly falling. This phenomenon is a natural corollary to the rise of emerging markets witnessed since the turn of the century and augurs the start of a new economic era. Official estimates of global poverty are compiled by the World Bank and stretch back 30 years. The most recent tally is for the year 2005, at which point the World Bank estimates that 1.37 billion people one in every four people in the developing world lived below the international poverty line of US$1.25 a day. Of course, a lot has changed since 2005. The economies of the developing world have expanded by 50 percent in real terms, reflected in the take-off of emerging markets. In new research, the Brookings Institution captures how this unprecedented economic growth has transformed the global poverty landscape. By combining the most recent national household survey results with the very latest data on private consumption growth for 119 developing countries, we generate global poverty estimates which bring us right up to the present day. Our analysis suggests that, since 2005, half a billion people have escaped poverty, bringing the global poverty count to below 900 million. This means
that the prime target of the Millennium Development Goals to halve the global poverty rate from its 1990 level by 2015 was probably achieved some seven years ahead of schedule. Never before have so many people been lifted out of poverty in such a short period of time.
merging markets are at the heart of this story, led by the BRICs. The two Asian giants, China and India, can account for a massive four-fifths of the total reduction in global poverty. China has long led the global war on poverty and has nearly completed its journey out of destitution with a poverty rate today estimated at only 3 percent. India is on a similar trajectory but a decade behind: home to one third of the worlds poor six years ago, it is now driving the global decline in poverty, lifting tens of millions above the poverty line every year. In Russia and Brazil, two economies that are further developed, poverty was already on the way out by 2005. Today, Russia appears to have fully escaped extreme poverty, and Brazil is quickly approaching that point, thanks to an economic rebirth and the delivery of effective social programs at scale. The next wave of emerging markets can also claim a stake in this success story. Collectively, the so-called
Poverty in emerging markets 2005 and 2011

One grain of rice equals ten million people living below the international poverty line.
Source: Brookings Institution
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2011
We are on the cusp on an age of mass development which will see the world transformed from being mostly poor to mostly middle class.
N-11 nations (see page 45) have seen an estimated 50 million of their citizens climb above the international poverty line since 2005, bringing their combined poverty rate down from 27 percent six years ago to just 20 percent today. Yet to focus exclusively on those escaping poverty in emerging markets would understate the role this new class of economic powerhouses has played over the past six years. The impact of economic success in emerging markets is spilling across borders to other poor countries, helping spark development and poverty reduction far afield. First, southsouth economic relationships are blossoming as emerging powers deepen their trade and investment ties with the worlds poorest countries, and diversify into new markets. Over the past decade, the BRICs share of Africas exports has more than doubled, stimulating growth and job creation in many of the continents fledgling economies. As the latest African Economic Outlook notes, China is investing in infrastructure across the region, India is working in skill-intensive services, and Brazil has established itself as a key partner in agro-processing.
Photo: Getty Images/Thinkstock, KircherBurkhardt Infografik, Private(2)
Third, emerging markets have convincingly demonstrated to the poorest economies the invaluable role that markets and good economic governance play in development. These ideas are hardly new, having been advocated by the World Bank, IMF, and WTO for years. Yet there is a difference when prescriptions emanate from Washington or Geneva, too often compromised by condescending tones and divisive ideologies, and when lessons are conveyed in examples of real-world success by developing country peers.
econd, the robust performance of many emerging markets through the Great Recession helped to buoy the global economy and prevent an economic crisis from turning into a human crisis among the worlds poorest countries. Emerging markets have not only propped up aggregate demand but also helped spur rising commodity prices,which have benefited many lowincome resource-based economies. With demand from advanced economies diminished since 2007 and expected to be tepid at best for the foreseeable future, the importance of emerging market growth to the worlds poor has never been greater.
he remarkable fall in poverty achieved over the last six years is a heartwarming story and a significant achievement for humanity. But it is also much more than that. Progress in poverty reduction is part of a broader transformation in the global economy that will create a wellspring of new business opportunities worldwide. As poverty declines, the global middle class defined as those living on between US$10 and US$100 a day will balloon, from under 2 billion today up to 5 billion by 2030. We are on the cusp of an age of mass development, which will see the world transformed from being mostly poor to mostly middle class. Those same millions who are pulling themselves out of absolute poverty today will soon emerge as the producers, consumers, innovators, and investors who will drive the economy of the 21st century.
Laurence Chandy is a fellow, and Geoffrey Gertz a research analyst, in the Global Economy and Development program at the Brookings Institution.This commentary is adapted from their recent paper, Poverty in Numbers. 23
BUSINESS INSIGHT
Frugal innovation Product design for emerging markets also has a role in the developed world p.26 Entry-level engineering Armin Bruck of Siemens interviewed p.31 Mobile testimony Crowd-sourcing innovations from Kenya p.32 Talking telecoms Some essential vocabulary p.36
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Bull market for frugal engineering

A fundamental rethink of product design is striking gold in emerging markets, writes Jeremy Gray.
Photos: Outlook Publishing India Pvt Ltd.
Cool idea: Specially designed mini-fridges from Godrej are equipped with a fancy new cooling chip and sold off the back of bullock carts. 25
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he dust swirls as a bullock cart stops in Osmanabad, a small town in the western Indian state of Maharashtra. Dressed in saris, a bright and flowing traditional garb, two village girls jump down from the cart to demonstrate the latest product a mini-refrigerator. The sales banter is clear: no frills, no worries, easy financing. Their mundane-looking cargo is in reality anything but ordinary. Resembling a designer ice chest from a Western department store, the cheerful 43-liter chotuKool (little cool) weighs
Companies are now doing much more than stripping features and costs from established products.
just 9 kilos, has a fancy cooling chip similar to those in PC fans, and happily continues to keep everything chilled on batteries whenever there is one of Indias all-too-frequent power outages. The manufacturer, Indian appliance giant Godrej, helps arrange a purchase of the US$75 unit through microfinancing. Meanwhile, some 235 kilometers west in the city of Pune, Mahesh Yagnaraman is poring over the sales figures for a pint-sized stove that has been designed for housewives. First Energy, a start-up which Yagnaraman runs together with
Procter & Gamble have been selling single-use bags of shampoo and detergent for decades. Samsung introduced a sari cycle in washing machines to prevent the long, traditional garment from tangling with other clothes. These companies are doing more than just stripping features and costs from established products. They are taking a closer look at the needs of consumers and designing products from the bottom up. This clean sheet approach means engineering processes are broken down and reassembled in the most cost-effective manner and geared to that emerging market. This is frugal engineering, a term coined by Renaults chief executive Carlos Ghosn in 2006 to describe Tata Motors Nano, the famously spartan car. GEs chief executive, Jeff Immelt, and Vijay Govindarajan of the Tuck Business School call the trend reverse innovation, the idea being that frugal products will likely trickle up to the industrialized world. The approach also trashed the notion that mature-market products are good enough to fulfill the needs of emerging markets.
BP, stops by villages such as Osmanabad to show off the Oorja, a bargain at US$23. This is the country of the jugaad (pronounced joo-gaar), a low-cost, jerry-built vehicle. Jugaad has also come to mean ingenuity, something that companies are adopting in large numbers. As Indias relative wealth grows, a spirit of invention is being applied to mass-produced goods with startling results. Adapting products to the needs of customers in emerging markets is, in itself, nothing new. Multinational companies including Unilever and
Smokeless: Trading tradition for technology in India, this biomass stove from BP First Energy cooks without wood, saving time and reducing emissions.
his trickle may easily become a flood. Tata plans to sell a Nano-like car in Europe and North America. Haier of China came up with a compact washing machine that has been marketed to 68 countries including the developed world. Galanz makes a low-cost, energy-efficient microwave oven small enough to fit into cramped Chinese kitchens, but also good enough in price and basic quality for advanced economies. What these items lack in bells and whistles, they make up in fulfilling the basic needs of a broad consumer base. Less than two decades on, in an erstwhile top-end, low-volume business, Galanz now controls 60 percent of the global market for microwave ovens. Steep inflation for raw materials in countries such as China and India is eating into their competitive edge, but so far few policymakers question their ability to produce more mind-boggling, highly frugal efficiencies to adjust. The trickle-up phenomenon is a well-known feature in services, as scores of call centers across the globe will confirm. But the Made in India label has also won respect for goods, thanks in no small measure to the countrys booming economy. Because India has now become the worlds largest consumer market after the United States and China, the potential rewards have lured the kind of investment that makes possible the mass output and marketing of such products. Before the Indian economy opened up in the 1990s, local products tended to be of shoddy quality and had the unfortunate habit of breaking down. How times have changed. Disposable >
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Siemens has boosted R&D staff in emerging markets from 6,900 to 15,500 in the last three years.
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income in India is rising rapidly, and people have started demanding products that are better suited to their tastes not just big-ticket items such as cars and household appliances, but also food, clothing, and consumer electronics. Frugal products are hitting the Indian market in droves. Telecoms engineer Anurag Gupta came up with Zero System, a mobile-phone bank account that uses a fingerprint scanner for ID verification. Tata Swachs water filter produces 3,000 liters of purified water, enough to supply a family of five with drinking water for a year.
VLS rollaway laundry booths will wash, dry, and iron clothes for US$0.40 per pound, and have a self-contained water supply crucial in neighborhoods that lack running water.
rugal does not mean poor quality, either. The chotuKool mini-fridge has high-end insulation, and the usual compressor has been replaced by a state-of-the-art cooling chip. The First Energy stove has a perforated chamber that sucks in the exact amount of air needed to keep the fire burning at optimal cooking temper-
using less expensive raw materials and manufacturing at room temperature instead of in specially heated dry rooms. Brivo, Medtronic, and Weigao are among the nimble upstarts who slashed the cost of medical equipment and supplies, frequently undercutting their larger, better-funded competitors. These companies arent simply relying on cheap labor to get ahead. But they definitely work longer, if not harder. Galanz, the worlds largest maker of microwave ovens, employs three shifts of workers to keep production lines running 24 hours a day, seven days a week at least three times longer than a typical plant in the US or Europe. Outsiders thought our advantage came from lower labor costs, says Yu Yaochang, a group vice-president of Galanz, which is based in the southern province of Guangdong, a hotbed of economic activity. Actually it comes from improved labor productivity, he says.
ature, and is virtually smoke-free. Indians would happily claim frugal engineering as their very own contribution to new management thinking. In reality, various other emerging markets have also hopped onto the frugal bandwagon. Dental devices made in Brazil, for instance, are simply designed but rank among the most sophisticated in the world. They are also relatively inexpensive to make and operate. Companies in China are proving remarkably adept at this game. BYD, a maker of rechargeable batteries, reduced the price of lithium-ion cells by
Frugal financing: This Andhra Pradesh family received a flexible repayment loan to buy a simple tractor, which is rented to neighbors when theyre not using it.
his understates the incredibly lean structures that Galanz already has in place. Long before a new model pops out, the company brings key players in the supply chain to heel. As it was reorganizing its microwave efforts in the early 2000s, Galanz asked and then demanded that makers of electrical converters for its microwaves shift their production lines to Galanz. Some balked, but many were lured by prospective profits from high volumes. In a jiffy, the company learned how to make converters more efficiently, and repeated the trick in vast sections of its supply chain. This is a key element of what Galanz means by integration effectively bringing other suppliers under its control and the benefits of controlling the classic means of production. Not surprisingly, multinationals are boosting research and development spending in emerging markets, particularly in India and China. Over the past three years, German engineering giant Siemens has increased the number of employees working in its research and development departments in emerging markets by 6,900 to 15,500. Much of that extra brainpower is to be used for launching new products in India. Though Siemens is tight-lipped about prototypes, the product roster is believed to include road traffic management systems, solar-powered X-ray machines, fetal heart monitors, wind power generators, and a smart camera. Like many of its competitors, Siemens formally calls these entry-level products aimed at the bottom of the income pyramid (see interview p.31). Siemens currently generates about 30 percent of its revenue in emerging markets, and has added 31 manufacturing facilities in China and India over the past five years alone. GE cuts one of the highest profiles. Its John F. Welch R&D center is its biggest and most gen- >
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BUSINESS INSIGHT Frugal engineering
Blackberry 9900 vs. Nokia 1100

The latest Blackberry (right) boasts a high-res touch screen, GPS, WiFi, and 3.2 megapixel camera with LED flash. The Nokia 1100 (below), designed for the developing world, had a dust-proof keyboard and nonslip grip for humid conditions. Nokia sold over a billion before the model was discontinued.
Tata Nano vs. Nissan Micra

Evolved from the rickshaw, the Tata Nano (above) now competes in Europe with cars such as the Nissan Micra (below), designed to meet consumer expectations that are fashionably green and urban.
erously funded outside the US. Here, the signature product is an electrocardiograph that costs US$1,000 one-tenth of models of the past. This innovation comes at a time when an overhaul of the US healthcare system is casting a spotlight on costs, and on steps to reverse the tide. At a meeting with the governments jobs council in June, US President Obama appealed for the creation of 10,000 engineering jobs a year to maintain Americas lead in technology and innovation.
The nimblest companies are ready for this creative disruption, adjusting their product lines to deal with more differentiated demand.
after MFI was made available. This would not have worked with traditional distribution channels. You need to visit these communities and sell the concept directly, says Bhattacharya. In the countryside where retail networks are thin on the ground, close cooperation between MFI agents and manufacturers such as Godrej reaches more people with cheap, instant financing options. Firms have different triggers for engaging in frugal innovation, and self-defense is a good reason. In the late 1990s, Mettler-Toledo (MT), a Swiss-American maker of weighing scales, found itself at the crossroads of radically different strategies one that focused on emerging markets, and one that continued to focus on its established,
R
The frugal future: Read a piece by KPMGs Ian Gomes, chairman of High Growth Markets, UK, on The Irresistible Rise of Frugal Engineering. 30
ural homes are big potential consumers of frugal products, but reaching them can be a challenge. In India, China, and many other emerging markets, microfinancing gives purchasing power to low-income clients who lack access to banking and financial services. Traditionally, banks have not been interested in supporting these clients, many of whom earn less than US$1 a day, due to maintenance costs. In emerging markets, rural distribution coupled with microfinancing, or MFI, is increasingly vital to the success of frugal products. Biswanath Bhattacharya, a director at KPMG India, notes how in a district in South India, mobile phone use was just 10 percent but jumped to 30 percent
advanced customer base. China and other emerging markets offered enormous sales potential for low-cost scales, and in time, their manufacturers would become a competitive threat. We would rather cannibalize our own business than lose it altogether, said a senior member of Mettler-Toledos laboratory division. More than a decade later, the decision turned out to be right. MT is now a significant player in the lowcost segment for weighing scales in China and other emerging markets. To get there, the company faced organizational challenges in product range and its public image, heretofore associated with expensive, high-end products.
Innovations for the entry level

Armin Bruck, managing director of Siemens Indian subsidiary Siemens Ltd, talks about the enormous potential in entry-level products for the emerging world.
Siemens Ltd is working on many entry-level products for India and other emerging markets. How big is the future potential? Our new product initiative has been set up to design simple products to meet the entry-level requirements of that market segment. The addressable market size in India for such products is around US$30 billion. We have over 60 products in the pipeline, and by 2012 nearly 50 percent of these products will be ready for launch in the market. To achieve this, we are setting up an entire value chain of R&D, design, and manufacturing. Why is India a major center of entry-level engineering? And why is this taking off just now? Within Siemens, this is not a new story. The development towards this direction started a few years ago, as we are very close to the market and can respond very quickly to changing demands. The Indian market is quite unique. We have great potential for our highend products and are very well established with leadership positions in most of those markets. But we also see there is a huge market potential for entry-level products that are functional without the bells and whistles. Given the size of the market and its potential, it is imperative that we target this segment with the quality and reliability Siemens offers. As we have been in India for over 140 years and have a strong local team, we are confident that we can compete in this market, as it is our strong belief that local people know what works best for their markets. Does entry-level design represent a fundamental shift away from the practice of building unique selling propositions into a product? Is entry-level design a USP in itself? Entry-level design does not take away the fact that these products have to deliver according to the expectations of their customers. It is a sizable market that is price sensitive, and the solutions must be affordable. Yes, entry-level design itself is its USP. For example, entrylevel users want simple user interfaces; they do not need or appreciate bells and whistles. They expect a rugged design to suit their imperfect environmental conditions such as high power fluctuation, dusty ambience, and above all a product needing very little maintenance. Are the best entry-level products always re-engineered from the bottom up? Not necessarily. It works both ways at Siemens. While we have localized a lot of the high-end technology for India by setting up 21 factories here, our R&D team is also creating products that are made in India, for India. We have 20 R&D centers in India, and their task is to understand the local needs and determine how those needs could be best fulfilled.
Photos: Rajanish Kakade/AP/DDP PR Nissan, PR Blackberry, PR Nokia, Pillai/AFP/GettyImages ,
or frugal engineering to work, companies need to free up their organizational structures. In 2005, when GEs managers began to conceive the US$1,000 electrocardiograph, they shifted R&D experts away from high-end products for the developed world. They created cross-functional marketing and engineering teams, instead of relying on traditional corporate silos to come up with the goods. Similar to Galanz and its microwave ovens, GE developed a local supply chain whose members were actively involved in project development, rather than focusing purely on getting lower prices. Just as in the 1970s, when cheap, cleverly made Japanese cars shook up Western car markets, the spread of frugal products could have farreaching consequences. The market for medical devices, in particular, will be ripe for picking as governments begin to drop regulatory hurdles for device approval. The nimblest companies will be ready for this creative disruption, adjusting their product lineup to deal with more differentiated demand. In theory there should be room for both the cut-rate, mobile X-ray scanner and the elaborate top-end model, provided the latter really does do more. The resulting product differentiation is nothing new, says Frank Douglas, former chief scientific officer of pharmaceutical giant Aventis. Douglas is leading a coalition of public and private healthcare organizations, with backing from the likes of GE which advocates lower-cost, value-driven engineering for US medical care. Technological innovation means that formerly expensive, high-end products are moving downstream, a welcome development for Americas cash-strapped CMS, the government-run Centers for Medicare and Medicaid Services. For manufacturers, differentiation need not mean a horrible disruption. Some will always want to build the Porsches and Ferraris, and others will want to build the Fords, says Douglas with a smile.
Jeremy Gray is a journalist based in Berlin, Germany. His work has appeared in publications as diverse as The Financial Times and Cond Nast Traveller.
Armin Bruck of Siemens: Addressing a 21 billion market.
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BUSINESS INSIGHT Ushahidi
Nurturing Africas Silicon Savannah

How a group of bloggers is using technology to make governments more accountable and rescue operations more effective, while also fostering the ICT sector in Africa. Report by Andrea Bohnstedt and Kevin Cote.
he barbecued spareribs were piled high and the beer was flowing a couple of months ago at P.As Ribhouse in the Liberian capital of Monrovia. To an outsider, it might look like an unlikely setting for a meeting that could represent one of the best hopes for pulling off a fair and peaceful election in October, when Liberians go to the polls to pass judgment on the tenure of President Ellen John-Sirleaf. The guests at P.As included an unusual mixture of local IT specialists and election monitors who were learning ways that the Internet and web-based software could help document and communicate independent poll results in a country still recovering from 14 years of civil war. We wanted to introduce them to ways to grow Liberias online presence at a critical time in history, when so many Liberians want to encourage democratic elections at home but may not know how many tools are out there for sharing perspectives locally and abroad, blogged Internet activist Kate Cummings, who organized the meeting. Cummings is the director of Ushahidi Liberia, a sister organization of the Kenya-based Ushahidi, which is variously a company, a piece of software, and an online platform transforming governance in Africa, and abroad. Ushahidi is one of the few social enterprises that has, in a few short years of existence, dramatically changed how individuals and communities can influence democracy and economic development around the world, said Hilde Schwab, chairwoman of Germanys Schwab Foundation, which this spring awarded Ushahidi and its executive director, Juliana Rotich, with the Social Entrepreneur of the Year award for Africa. Ushahidi was created by a group of tech-savvy Kenyan bloggers, including Rotich, living in and outside the country at the time of the disputed elections in 2007. These disputes ignited violence that ultimately killed 1,500 people and displaced hundreds of thousands in the following year. The impulse came from a Harvard-educated Kenyan lawyer living in South Africa. Ory Okol-
Aftermath: The violence that followed the disputed Kenyan elections of 2007 inspired a collaborative effort to document incidents on the web.
Hilde Schwab, chairwoman, The Schwab Foundation
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Photos: Till Mllenmeister/laif, Till Mllenmeister
Ushahidi has dramatically changed how communities can influence democracy and economic development.
lohs blogs, Kenyanpundit.com and Mzalendo. com, were already established sources of independent analysis of Kenyas political scene. But when she traveled to Nairobi to cover the 2007 elections she was quickly overwhelmed by events, lacking the capacity to record the hundreds of posts she was receiving. Okolloh posted an appeal for developers and other bloggers to collaborate in creating a platform incorporating Google Earth that would document incidents in the whirlwind of political, ethnic, and random violence in the elections deadly aftermath.
mong those answering the appeal were Rotich, and other technology activists including Erik Hersman and David Kobia. In just days they came up with a free piece of software that creates websites to which eyewitnesses could send news by e-mail or SMS and have it attached to a Google map. They called it Ushahidi testimony in Swahili. The application incorporates software called FrontlineSMS, which transforms a laptop or mobile phone into a text broadcast hub. It is related to developments in open source applications for managing disasters, implemented in the >
Networker: From her base in Nairobi, Ushahidis Juliana Rotich leads a core team of IT specialists and web activists spread around the world. 33
BUSINESS INSIGHT Ushahidi
Incubator: The iHub at Ushahidis HQ is a focal point for the ICT community in Nairobi. Founder Erik Hersman (far left) outlines iHubs principles: innovation, community, entrepreneurship, business mentoring, and research.
2005 earthquakes in Pakistan, the 2006 mudslides in the Philippines, and the 2008 earthquake in China. Ushahidi, the organization, is one of the pioneers of crowdsourcing, which pulls together the power of multitudes via Web 2.0 technologies for commercial or humanitarian goals. Today, Okolloh is Googles policy manager for Africa, while Ushahidi continues to develop new products. One such is Crowdmap easy-to-learn crowdsourcing software that can be downloaded, customized, and deployed quickly, without lengthy prior training. Crowdmapping is really important, says Rotich. Theres been massive growth, much faster than we ever anticipated. Rotich, who studied computer science at the University of Missouri and left her job as a data analyst to head up Ushahidi, says the application has been downloaded for over 15,000 deployments.
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Homepage: Ushahidis website contains information about the company and its mission, and offers videos and software downloads. It can be found at www.ushahidi.com. 34
he International Organization for Migration has been using Ushahidis system to track and then evacuate migrants stranded in Libya. Within three weeks of the Haiti earthquake, Ushahidi volunteers had mapped around 2,500 reports with data from SMSs, e-mails, and Twitter, and passed the locations of trapped victims to rescue authorities. The application works on Apple and Android operating systems, and they are working on a Java app for Blackberry that could be available in months. Ushahidis Crowdmap is currently being used to document power cuts in India and by a munici-
pal government in Germany to monitor traffic. In the United States one user is tracking weather conditions for skiers. It lowers the barriers for use of technology for regular people, says Rotich, but also for established organizations like Amnesty International. None of Ushahidis founders had given any thought to what would happen to the platform beyond its use to document Kenyas post-election violence. Rotich credits Ethan Zuckerman, an American academic, blogger, and digital activist, with encouraging them to put more energy into the prototype to make the tool available to others. While developing the prototype, they decided to formalize the organization and registered it as a nonprofit to accept more funding. Money from Humanity United gave them scope to reduce time at their regular jobs and, in Rotichs case, take up a full-time position with Ushahidi. Ushahidi today has a core team of 15, spanning seven time zones from Kampala to Louisville. Beyond Liberia, it is also spreading to Brazil and Korea. It acts as a technology partner for organizations that want to set up a crowdsourcing platform for specific campaigns or initiatives.
lthough Ushahidi now does deployments on a commercial basis, most of these are still in the nonprofit sector. The World Bank has commissioned them for several projects, including one in Beijing to collect crowdsourced information on public transport. Other
Digital bridge: Regular workshops and seminars bring IT specialists from around the world to the iHub.
clients include training crisis-mappers for the US Institute of Peace, Humanity United in Liberia, or the Nike Foundation. Ushahidi is currently backed by the Omidyar Network, the MacArthur Foundation, the Knight Foundation, and others. But Rotich says the team is keen to reduce its dependence on donations and to do more commercial work. Still, it remains true to its activist roots. Ushahidi relied solely on volunteers in the early days, and knows the empowering potential of technology. Thats why it created the Nairobi iHub, one of Africas first ICT incubators. All founding members were bloggers, says Rotich. We always felt that there was a lack of a central space in Nairobi. We wanted a space where techies and bloggers can work, and where Ushahidi can help to foster skills and innovation. The iHub is run by Ushahidi cofounder and Africa tech blogger Erik Hersman. It is a tech community space set up to help budding techies not only with a physical work environment, but also with a meeting place to discuss ideas. It is a light and airy space with a balcony running around its large windows, a coffee bar and a
Connected: The iHub, a spin-off from Ushahidi, is open to the public and a gathering place for developers, bloggers, and designers.
Photos: Till Mllenmeister (5)
Crowdmapping is really important. There has been massive growth, much faster than we anticipated.
Juliana Rotich, Ushahidi executive director
steady stream of local and international visitors. Nokia, Samsung, and others have sponsored events and held competitions at the iHub. The iHub is one part of a consortium that is hosting a technology incubator for East Africa called the m:Lab. Financed by the World Banks infoDev program, the m:Lab offers training, certification, and coaching for specialists part of what Ushahidi calls Africas growing Silicon Savannah. With an online community of more than 4,000 people in East Africas most advanced ICT sector, Nairobi has become a focal point. The city is fertile ground for ICT innovations. It has a relatively well-educated youth, high mobile phone penetration rates, and a hugely successful mobile money service, M-PESA, launched by Safaricom in 2007 (see page 37). The iHub community still largely consists of ambitious young developers with a limited background on how to grow and run a business, but in cooperation with Kenyas ICT Board, created to promote the development of the ICT sector, the iHub acts as a channel for that kind of knowledge too. Says Okolloh: Ushahidi is an important example of the talent that we have not just in Kenya, but on the continent. That we can develop and not just consume software, and that there are many meaningful ways for diaspora Kenyans to contribute to their country.
Andrea Bohnstedt is the publisher of Ratio magazine.
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BUSINESS INSIGHT Telecoms
Africa calling
The Telecommunications Industry Association forecasts that the number of wireless subscribers will surge from what is currently 1.4 billion worldwide to 5.5 billion by 2015, with most of the growth from emerging markets. Heres a list of words youre liable to hear if you spend ten minutes talking to a telecoms person in sub-Saharan Africa.
Off-grid
Infrastructure shortcomings are characteristic for many emerging markets. Outside urban areas, access to grid electricity is not always guaranteed (and even within urban areas, a backup generator is a necessity to cope with frequent power outages). Taking a fuel truck to off-grid base stations becomes even more of a headache if the roads are in need of repairs and security is bad. The use of renewable energy sources would allow network operators to connect even more remote areas to the network. With its Green Power for Mobile initiative, the GSM Association is intending to help the industry deploy renewables at 118,000 off-grid base stations (the sites that host the transmitting technology) by 2012. Companies such as Alcatel, Motorola, and others are looking into the integration of alternative energy sources into their network designs. The solution also offers business opportunities for emergingmarket SMEs: Kenyas WinAfrique, for example. This companys hybrid generator also charges a battery, and switches off as soon as the battery is full, thus saving on both fuel and maintenance costs.
Esoko
Mobile phones made a huge difference to small farmers in remote locations. They were suddenly able to check on prices for their goods without having to invest time and money into traveling to the next market. Esoko, an IT company incorporated in Ghana, aims to improve this basic information is money principle by providing an information platform for the agricultural sector that is accessible from any mobile phone or PC with an internet connection. There are options: a subscription-based service for key agricultural information such as prices, offers, and weather alerts that farmers receive by SMS. Esoko also gives larger organizations a means to both push and retrieve information. Governments or agricultural enterprises with many growers can use the service as a market information system. The platform allows them to send bulk SMSs and track field data and inventories. Several partnership options ensure that both Esoko and larger users generate revenues, which is crucial to avoid relying on donations and having to abandon the service when funds run out. Seeing the commercial potential, Esoko dropped its original name, Trade-net, a company which built partnerships in 15 countries across Africa. At the relaunch early this year, the company announced that the Soros Economic Development Fund and the International Finance Corporation would jointly invest $2 million.
Buy and cell: Read two reports from KPMG the Mobile Payments Outlook 2011 and Monetizing Mobile and watch a discussion of their implications.
Minute-factory model
In mid-2010, Indias Bharti Airtel took a huge step towards building a global brand by acquiring the Africa operations of Middle Eastern Zain for US$10.7 billion and with it an instant footprint across 15 countries in sub-Saharan Africa. Airtels home market has given them extensive experience with a low-income subscriber base, and they have imported a business model to suit it. Airtels minute factory strategy means outsourcing IT and network-building resources, and converting normally fixed costs to flexible costs. New capacity is built only when the demand for lines increases. This is easy in India, where outsourcing practically grew up and where it has become a key industry. But replicating the Indian model may not be so easy in sub-Saharan Africa where there are few obvious candidates for outsourcing. Airtel has brought some of its outsourcing partners along to the party, including IMB and Tech Mahindra.
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Illustration: Lizzie Roberts
mHealth
A growing number of initiatives experiment with mobile technology to improve healthcare services in an environment with underfinanced, clumsy public health systems and infrastructure challenges that affect the provision of healthcare services in rural areas. In a comprehensive overview of what was being piloted in Latin America, Africa, and Southeast Asia, Vital Wave Consulting identified six main mobile health areas: education and awareness, remote data collection, remote monitoring, communication and other support for health workers, diagnostic and treatment support, and tracking of disease and epidemic outbreaks. Most mHealth initiatives are donor-supported efforts to integrate the technology into national health systems. On a commercial basis, Nokia has rolled out Life Tools, an SMS-based subscription service that includes health content, in India, Indonesia, China, and Nigeria.
M-PESA
Kenya put mobile money on the map with Safaricoms popular M-PESA service. A precursor allowed subscribers to send call credit to other subscribers. Vodafones Safaricom saw the wider potential in disentangling cash from airtime. High mobile penetration rates meant more people were going to have access to a phone than to formal financial services. Sending money via their handsets offered a faster, safer alternative to taking it in person or entrusting it to third parties. Today, M-PESA is ubiquitous. Most of Safaricoms more than 17 million Kenyan subscribers were registered on M-PESA, which last year transferred the equivalent of over US$8.7 billion in about 305 million transactions. M-PESA includes a number of bill-pay partners, so that anything from utility bills to airline tickets can be paid with mobile money. An agreement with Western Union now also allows remittances to be sent straight into mobile accounts. If the concept appears intuitive for markets where many cannot rely on financial institutions, the copycats were slower than Michael Joseph, the former Safaricom CEO who managed M-PESAs 2007 rollout, had expected. Several emerging-market mobile operators now offer mobile money services, but no one has been quite as successful as Safaricom. Partly this is because of its market dominance. Even after Airtels aggressive entry, Safaricom still has more than a 70 percent market share, with a network of 27,000 agents across Kenya compared to about 1,000 retail bank branches. Technology makes it possible, but you need numbers and dedication to make it work, according to Joseph. This means an extensive agent network, and Safaricom has invested heavily in training those agents to ensure its marketing effort pays off.
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The leapfrog factor

Mobile technology has triggered a lot of innovation in emerging markets. After successfully investing in Europes digital industry, Vincent Kouwenhoven realized that there might be the opportunity to do it all over again. Sub-Saharan Africa, he says, looks like Europe in 1997 in terms of internet penetration and launch of dedicated platforms and apps. But he also says Africa will leapfrog much of this with mobile broadband apps. Kouwenhoven and his partner Brian Hirman set up the eVentures Africa Fund to invest in early-stage start-ups in key markets. Their advantage is that they are willing to invest small sums and commit early, which suits the current state of the mobile applications development industry. Private equity firms like TBL Mirror Fund and Fanisi Fund, in contrast, are looking for established ICT firms that provide more comprehensive mobile and digital solutions. Nigerian MTech Communications, which specializes in mobile value-added services, content, portal development etc, have successfully listed at the Nigerian Stock Exchange.
Competition
With its minute-factory model, Airtel launched aggressive tariff competition in sub-Saharan Africa. Good news for subscribers, but less so for investors in telecoms stocks, as it affected the profitability of telcos across the region. Whether Airtels strategy is sustainable or not is yet to be seen. In Sri Lanka, where Airtel is present, regulators eventually imposed a floor on mobile tariffs. Regulators in Africa currently lean towards putting a floor on interconnect fees, the biggest barrier to further price drops. The industry also worries that plunging profits will affect investments in network expansion and upgrades.
WORLD MARKETS
Argentina emerges Affluence is in the air, but are agricultural exports enough to keep Argentina growing? p.40 Fiat moves forward A few questions for Fiat Argentina president Cristiano Rattazzi p.43 The Next 11 Where do you go for somewhere new to grow? p.44
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Cristina on the land: Gonzalo Rodriguezs portrait of President Cristina Fernndez de Kirchner was created on a field of soy stubble.
Argentinas illusion
A snapshot of Argentina before elections in October shows a market with rapidly spreading wealth, and dramatic increases in exports of soybeans and wine. But the country led by President Cristina Fernndez de Kirchner remains plagued by recession and a related decline in profits. Chris Kraul reports.
Photo: Juan Pereira/Diario UNO de Entre Ro/Reuters
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On the way out? Beef remains a prime Argentine export, but many cattle ranchers are moving to soy farming.
Argentina is producing what the world wants, which is food. Its hard to see that demand tailing off soon.
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hat a difference a decade has made for Argentina, which is enjoying a boom rarely seen since the countrys halcyon days early last century when farm exports made it a cornucopia to the world and one of the globes ten largest economies. The gross national product of this country famed for its beef, soccer, tango, and Evita is expected to grow 8.3 percent in 2011 on top of its 9 percent expansion last year, according to a UN forecast. Incomes and consumer spending are shooting up, overseas shipments of farm products, autos, and other goods have increased by leaps and bounds, and poverty has been cut significantly. The current unemployment rate among skilled workers of between 1 and 2 percent equates, for all practical purposes, to full employment, according to economist Dante Sica of abeceb.com. Affluence is in the air, and visitors to Buenos Aires see it in the capitals construction boom, particularly in the gleaming Puerto Madero area, Argentinas version of Londons Canary Wharf. Its a redeveloped warehouse district where dozens of office, commercial, and residential buildings totaling 930,000 square meters (10 million square feet) of space have gone up in the last six years, with several more high-rises planned. Mutinational tenants include firms such as Google, 3M, Repsol, Standard Bank, and Mapfre. Its all a stunning turnaround since the dark days of 2002, when the country was a certifiable
basket case, having defaulted on US$130 billion in bonds the previous December, and allowed the peso to devalue by two-thirds. Bank accounts were frozen for a year under the infamous corralito (Spanish for fence) to block capital flight and halt a run on the banks. That year the economy shrank by 14 percent as businesses went bust, leaving hundreds of thousands jobless. All this caused political unrest, signs of which cropped up in July 2001 when then finance minister Domingo Cavallo, the architect of a failed neoliberal economic model, was pelted with rotten eggs as he left his daughters wedding at a church in the capitals fancy Recoleta neighborhood. Things soon went from bad to worse. The country would go through five presidents in a few weeks, and near daily disturbances turned downtown Buenos Aires into a war zone for several months, during which 20 demonstrators were killed by police.
hose hard times are now dimming memories, thanks in large part to prosperity generated by the global commodities boom. Foreign demand has skyrocketed for Argentinas soy, corn, wheat, and beef, and exports overall are expected to reach US$80 billion this year, more than triple the US$25.6 billion in foreign sales in 2002, according to FIEL, an economics think tank in Buenos Aires. Those sales have infused the economy with cash and stimulated consumption, while heavy taxes on those exports have produced a bonanza for the government.
from US$900 per month. The economic dislocation caused by the crisis left 50 percent of manufacturing capacity unused, which is good for competitiveness. As a result, there is not a single manufacturing sector in the country that has not grown since the crisis, Sica says. In addition to passenger cars and trucks, sales of Argentinean farm equipment have also revved up steadily, says Carlos Meniavere, a sales rep at the Apache farm equipment company based in Las Parejas, Santa Fe state. This year has gone very well in internal and external markets, in all senses of the word, says Meniavere. The social unrest of a decade ago has calmed although not entirely disappeared due to robust employment growth totaling three million new jobs since the crisis, or triple the jobs created in the 1990s. Poverty under President Cristina Fernndez de Kirchner and her late husband and immediate predecessor Nstor Kirchner, who died last October, has fallen to about 21 percent of the population from 27 percent in 2003, says J. Alberto Schuster, Senior Partner of KPMG Argentina in Buenos Aires.
Argentine soybean exports

Million metric tons (MMT) 14 12 10 8 6 4 2 0
99 01 03 05 07 09 11
Source: The Hightower Report
Argentina is producing what the world wants, which is food, and its hard to see that demand tailing off anytime soon, says Gustavo Caonero, an economist at Deutsche Bank in Buenos Aires. Additionally, its an economy that is practically debt-free in a world that has an excess of leverage. That represents huge growth potential. Demand in China, India, and elsewhere for Argentinas soy products will boost the national crop to about 50 million tons this year, up sharply from 30 million tons in 2000, the year before the crisis struck, according to Ricardo Negri, a researcher with CREA, a government statistics agency. Meanwhile, the price of protein-rich soybeans has more than doubled over that time, compounding the windfall. The nations wine industry has also been drinking to its economic health. Vintners exported US$734 million worth of spirits in 2010 six times the value of foreign shipments in 2000. Argentina now is the worlds fifth-largest wine producer and ninth-largest exporter. But there is more to Argentinas economic rebound than farm products. The devaluation and economic collapse of a decade ago made the countrys factories highly competitive across the region. As a result, half the 900,000 cars and trucks that Argentina will manufacture this year will be exported, a 39 percent increase over foreign auto shipments last year, says Sica. The two-thirds devaluation made the labor market highly attractive, reducing labor costs overnight to US$300 per month minimum wage
sense of social inclusion has grown under the Kirchners, partly because of an expanded welfare program for Argentinas poorest families that guarantees them a cash stipend of several hundred dollars per month if their children attend school and get regular medical checkups, he says. Under Kirchner, the program has expanded to include two million families. Argentina is experiencing a good moment. The economic landscape is encouraging because we produce food items for a globalizing market, our income per capita is rising, we are close to >
Photos: Pablo Castagnola (2), Sabine Vielmo/Gruppe28
Labeling at the Bianchi winery: Argentina is now the worlds ninth-largest wine exporter. 41
New boom: Businessmen in Puerto Madero (right) breathe in the new air of affluence, while President Fernndez de Kirchner (left) campaigns for a second term.
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The good times we are living in are largely an illusion, like being in Disney World.
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nd yet, there are clouds on the horizon that are making some companies attracted by Argentinas economic growth balk at relocating, and firms that are already here hold back on expansion. Worsening fiscal trends are alarming enough to lead some analysts such as Daniel Gerold of G&G Energy Consultants of Buenos Aires to predict that the president will ease back on costly social programs and change policies to make the country more investor-friendly after the election, assuming she wins. The good times we are living in are largely an illusion, like being in Disney World, Gerold says. And I think Argentinas stay in Disney World is about to end. The most ominous cloud is inflation, now running at 25 percent a rate exceeded in South America only by Venezuelas. It is being fueled
Photos: Mabromata/AFP/GettyImages, Klaus Bossemeyer/Bilderberg/La Phototheque/Avenue Images, Marcos Brindicci / Reuters
Brazil, the emerging regional giant, and there is equilibrium in the governments finances, says KPMGs Schuster. Considering this generally positive panorama, pundits make President Fernndez de Kirchner the odds-on favorite to win a second fouryear term in elections to be held in late October. Although the opposition candidate Mauricio Macri comfortably won the Buenos Aires mayorship at the end of July, analysts still expect Argentineans to vote for a continuation of Kirchnerismo, a hybrid of Argentinas long prevailing populism that reached its zenith under the first administration of President Juan Pern (1946 1955). His mythic wife Evita established a special connection with Argentinas working class, inspired a Broadway musical, and is still the object of public veneration. There are two fundamentals of Cristinas support that make her the favorite, says Manuel Mora Y Araujo, a political analyst and sociologist at Universidad Torcuato di Tella in Buenos Aires. The economy is running well, and there are jobs, money, and credit. Also, she has expanded the poverty reduction program and raised pensions for the retired. She has solidified her base.
by President Fernndez de Kirchners lavish social spending and energy subsidies that some observers argue the country can no longer afford. The bill for the subsidies this year could reach US$15 billion, up from US$12 billion last year, at a time when its trade and budget surpluses are narrowing, says Abel Viglione, senior economist at FIEL. Rising inflation has hit companies hard because recent contract agreements with labor unions have included wage increases of 25 percent or more, while the government is holding producers to price increases in line with the official 10 percent rate of inflation. (Analysts such as Viglione scoff at the official 10 percent rate, saying actual inflation is more than double that.) The mismatch has put employers in a vise. The government response has been to put pressure on the private sector to keep prices down. Not with controls its more informal than that. If you are a manufacturer, you might get a call from Secretary [of Internal Commerce Guillermo] Moreno suggesting you keep prices low. And you listen, says Daniel Kerner, an Argentina analyst for Eurasia Group in Buenos Aires. KPMGs Schuster says inflation has played its role in a three-year trend in declining profits he has seen among clients not involved in the more lucrative auto, farming, and tourism industries. Were living on the edge, Schuster says. About half of all government subsidies go toward discounting the price of diesel, natural gas, and electricity. Electric bills have not risen appreciably since 2002, says G&Gs Gerold, and prices are about 40 percent of true market rates. The government has also put caps on what oil companies can charge for crude oil and refined products, which has resulted in a sharp decline in foreign energy investment over the last decade by companies who see better returns elsewhere, says Daniel Montamat of Montamat and Associates energy consultants in Buenos Aires. Foreign direct investment overall has fallen to about US$4 billion per year, half the level of the late 1990s, according to Eduardo Fracchia, an economist who specializes in competitiveness at Austral University in Pilar. He blames the >
Talking cars with Fiat

Fiat Argentina president Cristiano Rattazzi tells Chris Kraul about selling to Brazil.
The country will produce about 900,000 cars and trucks this year 26 percent more units than in 2010, on top of 39 percent unit growth last year. Can this be sustained? What is assuring growth is Brazil. Sixty percent of Argentinas car production goes there, and in Fiats case more than eighty percent. But car markets are strong all over Latin America. There is a lot of pent-up demand. Economic expansion here is fueled by the global boom in farm commodities. Are you concerned it could end? Argentina is one of the worlds largest soy producers, and output has nearly doubled in a decade despite a 35 percent tax on exports that has made it difficult for marginal producers to compete. Soy prices have risen from US$140 per ton in 2001 to nearly US$500 per ton presently. Sure, prices can go lower, anything can happen. But there is more going on than just food demand from China. Biofuels have created an enormous market for soy that we dont see going away. On the contrary, it will only grow larger, partly because of the competition between food and fuel producers.
Accelerating: Rattazzi says Fiat production in Argentina could jump 65 percent by the end of 2012.
have to have a critical mass of demand for auto parts, and Brazil is a big market a super market. Fiats plant in Belo Horizonte, Brazil, is the largest car factory in the world, producing around 3,000 cars a day. We are making about 600 or 610 cars a day here, a figure that could rise to 1,000 cars per day at the end of 2012. At that point, auto-parts manufacturers will be more interested in being next to us. But these things have to be kept in balance because you dont want to be just exporting.
Latin America in August. Fiat plans a big investment there. How does the retail car market here differ from that in other countries? And the heavy government fuel subsidies do they matter to Fiat? The car market here is like a European market, and in that sense differs from Brazils. Consumers prefer stronger engines; in Brazil its not that important. As for subsidies, they make fuel cheaper but less secure. Subsidies have created distortions in the local market, increasing demand by reducing cost while fuel supplies are in decline. It puts enormous stress on the trade balance when you have to spend billions to import energy. These subsidies arent sustainable. Argentina has a huge Italian immigrant community. A plus for Fiat? In theory, yes; in practice you buy the best car, at the best price. There are sentimentalists who buy Fiat because they are Italian, but markets in general are not that sentimental. But we build very good cars. We are leaders in Brazil with 2324 percent of sales, ahead of GM and Volkswagen. In Argentina, we have about 10 percent of the market and are happy with that for now. But we will have more supply, more cars to sell, by the end of 2012 after expanding our plant capacity.
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Do the competitive advantages that Argentina enjoyed after the 2001 devaluation still exist? Its nothing compared with the advanArgentina has a healthy auto units tages that existed from 2002 to 2008. trade surplus, but could see a The cost of labor has eaten up much US$1 billion deficit in of the advanauto parts this year. tage. Its more Why? expensive to build Simple. Brazil is the cars in Argenbigger destination tina and Brazil than Cristano Rattazzi is a former for parts because in Mexico, where Fiat race-car driver who has its auto market is Fiat has a presence been chairman of Fiat Auto five or six times through Chrysler, Argentina S.A. since 1996. He larger than ours, which is about 20 perstudied in Milan and graduand so supplicent more economical. ated from Harvard with an ers are there Its why Toluca, MexMBA in 1973. He is president for econoico, has been chosen of the Latin American Entremies of to build the Cinquecento preneur Council in Argentina. scale. You model that was launched in
Pole position
WORLD MARKETS Argentina
N-11: Its a handy name tag, but the new emerging markets are a pretty diverse bunch.
Need a back up beyond the BRICs? Heres the Next 11
The new wave of emerging nations assessed by Frederick Studemann.

risk. FDI data supports this. Between 2007 and 2010, some of the N-11 saw the amount of inward investment double, according to FDI Markets. The strongest performers were South Korea, Indonesia, Bangladesh, and Egypt. For established players from the developed world, these markets will become an important source of future returns, reckons Gervais, highlighting sectors such as health care, pharmaceuticals, and heavy engineering, and citing companies like Siemens and John Deere. Dominic Swords, visiting professor at Henley Business School, says the N-11 are possibly where China was 10 to 15 years ago in terms of high growth. The China factor is significant, he says, as it is one of the common features of what is otherwise, despite the neat name tag, a pretty diverse bunch of countries. Their trade patterns have been moving more towards China and India than the North Atlantic rim.
s there a world beyond BRICs? The opportunities offered by the countries of that popular acronym Brazil, Russia, India, and China have already been embraced by investors and international business. Where next? Part of the answer lies in a second wave of countries ranging from the likes of Indonesia, a popular destination for international players such as chemicals giant BASF to expand into from their established bases in China, to countries such as South Korea, relatively far along the development track but overshadowed by all the recent attention showered on the BRICs. For this new group of high-growth markets, Goldman Sachs came up with the tag Next Eleven (or N-11). Along with Indonesia and South Korea, the 11 is made up of Bangladesh, Egypt, Iran, Mexico, Nigeria, Pakistan, the Philippines, Turkey, and Vietnam. This is a group of nations that, with their growth over the next 40 years, can potentially rival the G-7 in economic importance, Don Gervais of Goldman Sachs asset management unit said in a recent interview with AdvisorOne. The members of this group all boast tremendous economic growth (over the next decade, Gervais reckons, they and the BRICs will account for 60 percent of global growth), big populations (20 percent of the world total), growing middle classes, and diversification that offers investors the chance of spread
tronics sectors, while the Philippines has notched up remarkable growth in business process outsourcing and now boasts around 15 percent of the global market. Turkey, meanwhile, has successfully built up its manufacturing base. Others rely more on exploiting resources, whether in the crude sense of Nigeria exporting oil, or in the increasingly value-added activities in Indonesia and Malaysia, where global preeminence in palm-oil biodiesels has moved beyond the simple growing and exporting of the raw material to the development of technology and know-how.
is point is echoed by Stephen King, chief economist at HSBC, who emphasizes the importance of connections between high-growth countries. Collectively they form what he dubs a modern-day Silk Road of trading partners. The old bilateral relationships are becoming less important. Professor Swords says the N-11 offer a wide range of skills. South Korea, the most advanced of the bunch, has established itself in the automotive and elec-
n the other hand, these countries demonstrate dramatically varying degrees of stability. By mid-year, in Egypt, the local stock exchange index had fallen to 31 percent below its level at the start of the year as the Arab Spring swept over North Africa, while growth for 2011 was marked down to 2.4 percent from 5.7 percent. Both Nigeria and Pakistan also represent a high degree of political risk, while Iran is pretty much out of bounds for even the most steelynerved investors King cautions against getting too carried away with labels such as N-11, as they dont deal with the failures that come through. Roll back a century or so and any list of top high-growth markets would almost certainly have included Argentina. History, however, turned out a little different.
44
decline on uncertain rules of the game, as well as government intervention in markets. Because of these drawbacks, Argentina ranked number 87 worldwide, and last among large Latin American countries, in a recent business climate survey to which Fracchia contributed.
P
Photos: Enrique Marcarian/Reuters, Mabromata/AFP/GettyImages Illustration: KircherBurkhardt Infografik
rice controls and declining investment have created a vicious cycle for Argentina. Oil and gas production is declining, boosting the need for costly imports to compensate. Crude production is averaging about 600,000 barrels a day, or 28 percent less than in the late 1990s. Crude and natural gas reserves have plummeted to 1.5 billion barrels and 14 trillion cubic feet, respectively, a 50 percent decline, not because Argentina is running out of resources but because oil companies arent investing to develop them. At the same time, cheap prices have only stimulated demand, meaning that the government has to import liquid natural gas to keep power plants running and diesel to fuel the nations buses and trucks. As a result, Argentina will probably become a net energy importer in 2011 for the first time in two decades, with an energy trade balance of minus US$3 billion, versus a surplus of US$7 billion as recently as 2005, says energy consultant Montamat. The competitive advantages that devaluation made possible early last decade and that set the stage for Argentinas decade of growth have largely vanished partly because the government has kept the value of the peso unnaturally strong to boost consumption. Critics say the peso is 10 to 15 percent overvalued, which is gradually making exports less competitive. Also drawing fire are President Fernndez de Kirchners sometimes arbitrary farm policies, including a special tax on soy that provoked widespread demonstrations by farmers in 2008. Other restrictions have made Argentinas iconic
cattle industry less attractive, and many ranchers are converting to soy farming. In my corner of Crdoba state, 95 percent of the ranchers have converted to soy beans, says cattle rancher Christian Vasquez. Over the past decade, Argentinas aggregated cattle herd has declined to about 50 million head from 62 million. Although he insists ranching is in his blood, Vasquez admits that he is thinking about renting his 120-hectare (290-acre) ranch to soy farmers because the rent that he can charge has tripled since 2006. Signs of declining consumer and business confidence are evident. Most ominous for Caonero of Deutsche Bank is that the capital flight that tipped the economy into the abyss a decade ago has reared its ugly head. Over the first six months of this year, US$10 billion left the country, as people changed pesos to dollars, and we think that rate of capital flight could double over the rest of the year, Caonero says. This shows that confidence is not solid, that people are expecting a change in the exchange rate.
Auto production in Argentina
734,023
597,086 432,101 260,402
2004
2006
2008
2010
Source: Marklines
hatever the case, most analysts here see the next ten years as more difficult than the last decade. Consultant Montamat recommends that businesses considering moving to or expanding in Argentina keep a close eye on possible changes in government policies, brace for exchange-rate turbulence, and assume that energy subsidies now in place will be discontinued because, he believes, they are fiscally unsustainable. Expect to pay international rates for energy and, if the project in Argentina makes economic sense, then go ahead. Because these subsidies cant last much longer, Montamat says.
Chris Kraul covers South America for the Los Angeles Times. He is based in Bogot, Colombia.
Poverty not yet history: Sevenmonth-old Lucia (left) lives in a shack and suffers malnutrition, while dentists work on the Childrens Hospital Train (right).
45
OFF THE CUFF

with Mark Mobius
The adventurer of emerging markets

Mark Mobius has been preaching about the value of investing in developing markets since long before most people even knew what they were. Joseph Leahy has a brief encounter with the guru of high growth at Templeton Emerging Markets Group.
r. Mobius, despite many years in Asia and at Templeton, you still have a pioneer spirit your blog is called Investment Adventures in Emerging Markets. Where did you get this fascination with emerging markets? Ive had a particular affection for emerging markets, which began on my first trip to Japan almost 50 years ago. That was in the 1960s, and, if you think back to then, Japan was an emerging country and they had this incredible growth and incredible boom and I saw that development. Because Id come from the East Coast of the United States and never been out of the country apart from once, it was a big eye-opener for me, a completely different way of life. So I decided to make my career in Asia and emerging markets. I joined Templeton in 1987 to manage the [Templeton Emerging Markets] fund.
You said recently that a second financial crisis is possible. You mentioned the use of speculative derivatives as a likely contributor to the next crisis, as it was in 2008. Yes, I said that a financial crisis could be around the corner, but I didnt know when that corner would arrive. My main point was that there will always be financial crises and we, as investors, must be ready for them in order to benefit from them, and not be harmed by them. One important concern is the use of derivatives as speculative tools, or deriv-
atives that involve high levels of leverage where the investor did not adequately control the implied leverage and resulting market exposures and liabilities. Misusing these financial instruments contributed significantly to the global financial crisis in 2008, and they continue to be used today. The total value of derivatives in the world at the end of 2010 was more than US$600 trillion. Thats ten times the worlds total GDP. What are your expectations for growth in emerging markets? I believe emerging markets are now in a secular bull market. The IMF has estimated that emerging markets will grow an average of 7.1 percent in 2010 and 6.4 percent in 2011, well above the 2.7 percent and 2.2 percent growth [in 2010 and 2011, respectively] estimated for developed markets. Meanwhile, foreign reserves in China are the largest in the world, totaling more than US$2.6 trillion.
The total value of derivatives in the world at the end of 2010 was US$600 trillion. Thats ten times the worlds total GDP.
46
The combined value of emerging stock markets could soon exceed the combined value of those in the US, Europe, and Japan.
government spending that could in turn lead to inflation this could lead to political instability, a persistent poverty trap, and a widening gap between the rich and the poor. To what extent are we seeing hot money flows into emerging markets versus long-term capital investments from corporates? Are capital controls necessary in emerging markets? Emerging economies may indeed face inflationary pressures from the capital inflows spurred by continued loose monetary policies in developed markets. If central banks in emerging markets, including Brazil, continue to buy dollars to prevent their currencies from appreciating too quickly, thereby increasing their foreign reserves, they may appear increasingly safe to investors looking for markets with higher growth and yields. This may lead to a vicious cycle.
growth potential, are also very interesting to us. Does corporate governance remain a key concern in emerging markets? The need for better corporate governance is a global phenomenon and is not exclusive to emerging markets. We are seeing growing awareness of the importance of corporate governance in countries such as Russia, China, and India, but reform takes time. What will the BRICs look like in ten years time? How will China and India compare with developed markets, such as the US, in size and sophistication? Will they still be emerging markets? I believe the BRICs will continue to do quite well at different times. Each of these countries has unique characteristics and, as such, their markets will react differently under various conditions. We have invested and we intend to continue to invest in all four markets. Outside of the BRIC markets, we think the Next 11 countries [Bangladesh, Egypt, Indonesia, Iran, Mexico, Nigeria, Pakistan, Philippines, South Korea, Turkey, and Vietnam; see page 44] will be important and interesting to watch, being a varied group with different characteristics and development stages. Take Bangladesh, for example. A very poor country with many problems. However, it is benefiting from low labor rates with growing importance in its agriculture and exports sectors. And we have much more developed markets in comparison, such as South Korea, where we are seeing opportunities in oil, gas, electronics, banking, and in shipbuilding and repairs. We are also keeping an eye on South Africa, Kazakhstan, Poland, Ukraine, Argentina, Chile, and Colombia. What are the prospects for Argentina? With the presidential elections scheduled for late October, the focus remains on political developments in the country. In the event of Mrs. Kirchner obtaining a second mandate [for another four years], it remains to be seen as to whether the government will take the necessary steps to prevent a correction in the economy. The current economic policies have not been consistent given the stable but high inflation rate at around 25 percent, a semi-fixed exchange rate, and declining trade and fiscal surpluses. (For more on Argentina, see page 38.)
47
In focus: Mobius has been a pioneer of investments in emerging markets for three decades.
Southeast Asia has always fascinated you. Can you expand on your investment thesis for the region today in the context of the rise of China and India? Similarly, Russia has more than US$450 The GDP of Southeast Asia is about the billion, while India and Brazil have more same size as Indias, and, within two than US$250 billion each in reserves. decades, it is expected that the region I believe emerging stock markets will have a larger and younger populacould be much larger than they are tion than in today, and in the next decade Europe. It is their combined value could also a major exceed the combined value exporter of of the US, Japanese, and soft commodEuropean equity marities such as kets. Domestic demand Mark Mobius is execupalm oil, rice, in emerging countries tive chairman of Templeton tapioca, coconut will play an even more Emerging Markets Group. oil, and rubber. I important role in the He has received a wealth think the outlook future. However, if of awards for his pioneerfor Southeast Asia governments fail to ing investments in emergremains very posikeep up with this ing markets. He received his tive. Countries such new and rising PhD in economics and politias Thailand and Indoconsumer middle cal science from MIT and is nesia have seen very class for examjoint chairman of the World rapid growth in the last ple, through a Bank/OECD Global Corporate decade, and frontier lack of employGovernance Forum Investor markets like Vietnam and ment and high Responsibility Taskforce. Laos, with their strong unproductive
Mr. Mobius
Photo: H.de Oliveira/EXPANSION-Rea/laif
BACKSTORIES
Global bites
CLIMATE
Up in flames: The Azerbaijani capitals new firethemed high-rise cluster looms above old Baku.
BAKU MEANS wind-pounded city and locals stride along the seafront with their faces protected from the strong breezes and smelly Caspian. Warm in summer (26 degrees Celsius, 79 Fahrenheit), damp in winter (4 degrees Celsius, 39.5 Fahrenheit), Baku has paid for its riches any beach within a short drive is too polluted for recreational use.
occupies a panoramic rooftop next to the renovated medieval faades of the Old City. NIGHTLIFE
COCKTAILS and karaoke charac-
MONEY
AZERI NEW MANATS (US$100
currently buys around 78) are available at ubiquitous exchange offices and ATMs in the airport and city center. Credit cards are widely accepted at major stores and hotels. GETTING AROUND
HOTELS WILL ARRANGE airport
transfers for around US$5070. Taxis are parked all over the city center agree a fee first. A few kilometers shouldnt cost more than US$57. The best taxi service to call is 189 (+994 12 189) your cell phone receives a message when the driver is approaching. Baku is often gridlocked, so allow plenty of time to make your appointment. BUSINESS ETIQUETTE
LOCAL CONNECTIONS count
terize a nightlife scene that mostly runs way past midnight. Cocktails are best mixed at the Dragon Lounge, upstairs from the Chinar restaurant (see above) while the Pride lounge bar (T. Aliyarbekova 9; +994 50 314 0660) boasts Bakus largest karaoke selection. The nightspot where expats and chic Bakuvians go to be seen is the Latin-leaning Face Club (Nizami 10, Torgova; +994 12 497 4471). Live music centers on the indigenous folk style known as mugham; the seafront International Mugham Centre (Boulevard Park; +994 12 437 0030) stages regular performances. Jazz is equally popular, with nightly shows at the Baku Jazz Centre (Rashid Behbudov 19; +994 12 493 6196; www.jazz.az). TIME OFF
FIRST-TIME VISITORS head for
TRAVEL ADVISORY
Baku
Azerbaijans capital on the Caspian Sea is currently in development overdrive.
for everything when doing business here; otherwise any venture may drown in infuriating bureaucracy and backhanders to a pecking order of officials. Allow plenty of time for business meetings, and organize a translator in both Azeri and Russian. Make regular eye contact with your counterpart, who will invite you to share a large pot of heavily sugared tea. DINING
BAKUS RESTAURATEURS are
wash in oil and gas profits, this Soviet-republic capital turned business hub by the Caspian Sea is throwing up luxury hotels, panoramic restaurants, and high-end cocktail bars. The oil boom of a century ago transformed Baku from a medieval backwater into a destination for globe-trotting entrepreneurs. Now the city is undergoing another makeover. Caspian Dubai is what the ruling Aliyev dynasty wants to read in foreign coverage of its showcase capital. Its Old City of mosques and caravanserais, focal Fountain Square with contemporary statuary, the pedestrianized Bulvar promenade all are gleaming anew and kept so by an army of uniformed sweepers from early morning. In late 2011, four five-star hotels are opening in a three-month span that also sees the launch of a destination restaurant beside Bakus first modern mall, and a Carpet Museum fashioned in the revolutionary design of a rolled-up rug. Three skyscrapers molded in the shape of roaring flames (Azerbaijan is the Land of Fire) dominate the skyline. Azerbaijans recent Eurovision Song Contest victory means Baku hosts the international media event in 2012, forcing a rigid leadership to relax draconian visa processes. Until then, tourists are few but oil and gas keep expat workers and consultants flooding in. Peterjon Cresswell
reliant on goods imported by dint of a byzantine system of taxes, duties, and sweeteners. Prices, therefore, are at a level similar to London or Paris, without the same quality. Wine, often of dubious origin, can double any bill. Service is hit or miss. Local dishes center on kebabs, grilled meats, and soups. Pan-Asian cuisine is all the rage at Bakus destination restaurants, notably the Chinar (Shovket Alakbarova 1, Sabayil; +994 12 492 0888; www.chinar-dining.com), whose tasteful design, Londontrained staff, and capable kitchen push it ahead of the competition. The city-center Zakura (A. Alizade 9, Torgova; +994 12 498 1818; www.zakura.az) is a classy sushi spot. For location, the Terrace Garden (Sultan Inn, Boyuk Gala 20, Icheri Sheher; +994 12 437 2305; www.sultaninn.com)
FURTHER INFO
THE MODEST Baku Tourism
Information Centre (U Hadjibeyov 36; +994 12 498 1244; www. tourism.az; 9am-6pm daily) can provide rudimentary information. The website www.bakutourism.az complements www.bakupages. com and www.axtaraq.biz.
48
Photos: GES/Markus Gilliar, Jan Banning/laif (9)
the Old City, self-contained behind high walls, where twisting, narrow streets contain half a dozen embassies, a dozen mosques, two dozen restaurants, and far too many carpet shops. Key sights are the Maiden Tower (Neftchilar Prospect; +994 12 492 8304), whose obscure origins and stunning rooftop view make it Bakus biggest tourist draw, and the fortified complex of the (mainly) 15th-century Shirvanshahs Palace (Icheri Sheher; +994 12 492 1073). Both cost little to enter and contain poorly documented collections of motley artefacts. The most worthwhile attraction is the Museum of Modern Art (Safarov Yusuf 5; +994 12 490 8404), where a wealth of work by dissident artists in light, contemporary surroundings reflects the rapid cultural flowering in the wake of independence. Pedestrianized main drag Nizami, and the seafront Bulevar, feature Zara, Versace, and Hugo Boss, but the shopping scene lacks character. Classic bazaars are sadly lacking, so browsers must make do with the Teze market (Samed Vergun). Expect traders of fake caviar, car boots stuffed with vegetables, butchers stalls, and purveyors of kittens, puppies, and baby rabbits.
India: Harsh Deo Prasad is panchyat sewak (a sort of village secretary) in Tehta, Jehanabad.
United States: Rudy Flores is aTexas Ranger based in Palestine, Anderson County,Texas.
Indonesia: Heru Waluyo is a briptu (brigadier of police) in Kemang, Jakarta.
Yemen: Nadja Ali Gayt is an advisor for the Ministry of Agriculture in Manakhah, Sana. PICTURE GALLERY
Russia: Loedmilla Ivanova Visjegorotsoeva (front) at the Department of Licenses,Tomsk.
Liberia: Major Adolph Dalaney works in the Reconstruction Room of the Monrovia traffic police.
The world of the Bureaucratics

Jan Bannings photo series captures civil servants in their natural habitat on five continents.
China: Jiang Ji Yuan is chairman of the Art and Literature Association of Taian City, Shandong.
France: Roger Vacher is a narcotics agent with the national police in Clermont-Ferrand.
49 Bolivia: Rodolfo Villca Flores is chief supervisor of market and sanitary services in Betanzos.
BACKSTORIES Global bites
CALENDAR OCTOBER 2011APRIL 2012
Events in emerging markets

See some new films in Dubai, race a cyclo in Saigon, celebrate with a splash in Bangladesh, review the future in Buenos Aires, and catch up with chocolate fashions in Shanghai.
ARGENTINA
ARTFUTURA, held October 2123
at the MALBA and other cultural spaces in Buenos Aires, explores the rapidly evolving relationship between art and new media, video games, and digital animation. The theme of ArtFutura XXI is Reviewing the Future an exploration of topics such as augmented reality, data aesthetics, and artificial life. CHINA
SALON DU CHOCOLAT The pop-
ular Parisian celebration of chocolate in all its forms comes to Shanghais Exhibition Center January 1315. Over 65 chocolate companies will tempt visitors with their confections, and there will also be a fashion show in which models prowl the catwalk in dresses made of chocolate, as well as educational events and live cooking demonstrations. INDIA
THE DUBAI INTERNATIONAL FILM FESTIVAL is a week-long December extravaganza, launched in 2004, that exemplifies the emirates penchant for ambition, hype, hubris, and fun. The 2010 event was the biggest so far, with 157 films from 59 countries. Of these, 41 were world premieres and 70 were of Arab origin. The growth in local film production is a testament to DIFFs active encouragement of regional cinema. An event in a city with barely any film industry, DIFF has nevertheless established itself as a key player in the region by developing sales and development projects such as the Dubai Film Market and Dubai Film Connection. Theres something so strong about this festival, said Colin Firth last year at the regional premiere of The Kings Speech. Saeed Al Daheri, an Emirati first-time director, presented Two Guys and a Goat The Night Before Eid. For Arab directors screening here, he beamed, doors will open and people around the world will begin to recognize our work.
DELHI INTERNATIONAL ARTS FESTIVAL Indias most important
cultural festival this November celebrates Delhis 100th year as the nations capital with a broad spectrum of professional and amateur performances music, classical and contemporary dance, poetry readings, theater, cinema at around 50 city venues. KENYA
THE NAIROBI MARATHON has grown, since its inception in 2003, to become the principal sporting event in a country that is home to some of the worlds greatest long-distance runners. Thousands of competitors arrive from around Kenya and abroad to slog it out on a route that weaves right through Nairobi city center.
NIGERIA
ABUJA CARNIVAL Every Novem-
THE RAKHAIN COMMUNITY,
a group of tribes mostly living in the Coxs Bazar district of Bangladesh, celebrate their new year every April 1719 with a three-day water festival. During the Shangrain, as its known, young Rakhain boys and girls throw water over each other. The Rakhain, who are Buddhists, believe that water washes away the impurities of the past, getting the new year off to a sparkling clean start. Its also a great way to let that cute young thing from school know that youve taken a shine to him or her.
THE SAIGON CYCLO CHALLENGE,
which takes place each year in March, is a race around town in the citys iconic bicycle-taxis. In the normal run of things, among hectic modern traffic, these traditional conveyances are nearly extinct. Only a few remain in operation, catering mainly to tourists seeking a romantic experience of days gone by. But they come out in force for the annual challenge, which attracts a variety of corporate sponsors and is a fun way to raise money for assorted childrens charities.
ber, the streets of Lagos host a display of Nigerias phenomenal cultural diversity. There are dance troupes, drummers, float parades, street parties, exhibitions, a regatta, and a live music festival in Eagles Square. Now in its seventh edition, Abuja is gradually assuming the status of Africas most prestigious cultural carnival. SINGAPORE
MILLION DOLLAR DUCK RACE
Each November, thousands of red and yellow rubber ducks are set loose to race down the Singapore river. Theres a decent cash prize for the winning duck, great sums are raised for charity, and an accompanying carnival is held on the riverbank.
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KEY CONTACTS
KPMGs High Growth Markets Practice Network
Thorsten Amann
KPMG in Germany tel +49 89 9282-1115 tamann@kpmg.com
Mark Barnes
KPMG in the USA tel +1 313 230-3316 mbarnes1@kpmg.com
Richard Reid
KPMG in the UK tel +44 207 311-8956 richard.reid@kpmg.co.uk
Willy Kruh
KPMG in Canada tel +1 416 777-8710 wkruh@kpmg.ca
Gauthier Acket
KPMG in France tel +33 1 5568-6064 gacket@kpmg.fr
KPMG practices in key growth markets and regions
Tim Bashall
Head of Markets, KPMG in Africa tel +27 11 6477-700 tim.bashall@kpmg.co.za
J. Alberto Schuster
Ricardo S. Anhesini
Head of Markets, KPMG in Brazil tel +55 11 2183-3141 rsouza@kpmg.com.br
Senior Partner, KPMG in Argentina tel +54 11 4316-5829 aschuster@kpmg.com.ar
Mark Bownas
Head of Markets, KPMG in CEE tel +36 1 8877-122 mark.bownas@kpmg.hu
Edwin Fung
Head of Markets, Head Global China Practice, KPMG in China tel +86 10 8508-7032 edwin.fung@kpmg.com.cn
Photos: 2010 Dubai International Film Festival (3), M.Yousuf Tushar/Photo Bangla/images.de, www.saigonchildren.com, KPMG (14)
Rajesh Jain
Head of Markets, KPMG in India tel +9 122 3090-2370 rcjain@kpmg.com
Diego Medone
Executive Director of Markets, Latin America tel +54 11 4316-5700 dmedone@kpmg.com
Hossam Fahmy
Executive Partner of Markets, MESA region tel +971 6 574-2214 hfahmy@kpmg.com
Mark van der Plas
Head of Markets, KPMG in Russia and in CIS tel +7 495 937-2525 markvanderplas@kpmg.ru
High Growth Markets

PUBLISHED BY KPMG AG Wirtschaftsprfungsgesellschaft Klingelhferstrasse 18 10785 Berlin, Germany GLOBAL EDITOR & PROJECT MANAGEMENT Dirk Zander tel +49 30 2068-1671 dirkzander@kpmg.com EDITORIAL Alan Buckle, Global Deputy Chairman, KPMG International alan.buckle@kpmg.co.uk EDITORIAL, DESIGN & PRODUCTION KircherBurkhardt GmbH Heiligegeistkirchplatz 1 10178 Berlin, Germany www.kircher-burkhardt.com
2011 KPMG International Cooperative (KPMG International), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis--vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved. Printed in the United Kingdom. Publication No. 314742 The KPMG name, logo and cutting through complexity are registered trademarks or trademarks of KPMG International. The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act upon such information without appropriate professional advice after a thorough examination of the particular situation. The views and opinions expressed herein are those of the authors and interviewees and do not necessarily represent the views and opinions of KPMG International or KPMG member firms.
51
JULIANAROTICH:WEBACTIVIST
Ushahidigivesavoiceto thousandswhilenurturing ITskillsinNairobi

Inthefaceofimmensechallengesaroundtheworld,the ideathatwecangetawayfromrehashingthesameold challengesandfocusontangiblewaysforwardissomethingthatIfoundinspirational.Whatstruckmeistheroleof technologyinenablingpeopletosay,thisisnotonlywhat Isee,butthisiswhatcanbedone.Wemustconsiderthe immensepotentialofusingtechnologyinnewwaystoprovideinformationandservices.Ushahidiisspreadingthe adoptionofitsdatacollectionandinteractivemapping technologyaroundtheworld,asitprovidesachannel forpeopletocreatetheirownnarrative. More on how Rotich and her organization are making governments more accountable on page 32.

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HIGH GROWTH MARKETS

Insight and perspective on todays global economic hot spots October2011

In with the IT crowd

Mark Mobius: Interviewing the investor. p.46

Talking telecoms: Africas new mobile services. p.36

Ushahidi: Inspiring and incubating ICT in Africa. p.32

Off the cuff

SAUDI ARABIA HOUSING

Buenos Aires back in the race?

Chinese homes for Saudi poor

Gulf housing problems might be addressed by Asian expertise

RUSSIA AUTO INDUSTRY

Ready to overtake Germany?

Tax breaks now powering Russian auto market acceleration

BRAZIL SAIL AWAY

Luxury yachts for Latin America

Photos: Sergei Karpukhin/Reuters, Pedro Santo/4SEE/laif, Kiyoshi Ota/GettyImages (2)

High Growth Markets_October 2011

KidZania centers proving a successful Mexican export

GLOBAL BRIEFS Observations, trends, indicators

Kabul St. Petersburg

+111% Cairo +31%

+25% +236% +400%

So Paulo Belo Horizonte

Illustration: KircherBurkhardt Infografik Sources: McKinsey Global Institute, KPMG

Global view: Second-tier cities

High Growth Markets_October 2011

How to read the graphs

Densely populated areas

Ho Chi Minh City

+48% +608% +785%

+41% +720% +47% +868%

+598% +445% +1,267%

GLOBAL BRIEFS Observations, trends, indicators

Grumpy panda is branding hit

Carrefour vs. Casino in Brazil

High Growth Markets_October 2011

CHINA PEAK LABOR

Robots to replace Foxconn workers

Onshoring: The new offshoring

British companies are moving call-center operations back to Blighty

MONGOLIA BANKING CHINA EXPATS

Photos: Marta Nascimento/REA/laif, Ginies/SIPA, Johann Rousselot/laif, Bloomberg/GettyImages

In search of proper food

More deals than deal-makers

Working conditions can be tough for Chinas new pioneers

Photo: Paolo Woods/Anzenberger

Is China building a new Africa?

High Growth Markets_October 2011

Photos: Per-Anders Pettersson (3), Greg Marinovich

GROWTH FOCUS Investing in Africa

Photos: Per-Anders Pettersson (3)

High Growth Markets_October 2011

Is Chinas strategy in Kenya a glimpse of things to come?

Photos: Per-Anders Pettersson, Marta Nascimento/REA/laif, Sven Torfinn/Panos/laif

GROWTH FOCUS Investing in Africa

Photos: Anthony Asael/Hoa-Qui/laif, Thomas Lekfeldt/Moment/Agentur Focus, Odebrecht Archives

Brazilian companies make the most of historic ties with Africa

The Odebrecht construction company is a player in infrastructure projects. By Joe Leahy.

GROWTH FOCUS Investing in Africa

Weighing up Nigeria and Ghana

Photo: GettyImages/Thinkstock (2)

High Growth Markets_October 2011

Insight and perspective on todays global economic hot spots October2011