Can Singapore drive Africa’s growth?

By Nicholas Norbrook in Singapore
Posted on Thursday, 6 September 2012 07:23

“You would be surprised how many leaders of Africa tell us they want their country to become the Singapore of Africa!” says Singapore’s minister of state for foreign affairs, Masagos Zulkifli.

The entrepot state of Singapore has always been tied to the fortunes of global trade. So, when US investment bank Lehman Brothers collapsed in 2008 and sparked a downturn, the Singaporean manufacturing base started to suffer. This contributed to a hunt for a high-growth part of the world decoupled from the malaise hitting the US and affecting Asia. That destination was Africa.

“Since 2010, there have been many more trade missions to Africa,” explains Lim Ban Hoe, regional director for trade promotion body International Enterprise Singapore. Singapore-Africa trade jumped from $9bn in 2009 to nearly $14bn in 2011.

• Singapore-Africa: An island with continental ambitions

The Singapore-Africa relationship is not new, but much of it is happening under the radar of the respective national authorities. The Singaporean high commissioner to Nigeria, Shabbir Hassanbhai, explains that he was surprised to learn about a Singaporean company with offices in Nigeria that imports auto parts and has a turnover of $2m per month. “We would never have even known about them if they hadn’t approached us to help with a payment issue,” says Hassanbhai.

The Africa Report has been looking at the Singaporean companies active in Africa throughout this year. Singapore, like many Asian countries, is clearly interested in Africa. “Singapore cannot arrive with $5bn in financing like China’s Exim Bank,” reminds Hassanbhai. Singapore will not be working on the infrastructure-for-resources premise that underpins the Sino-African relationship. However, Singapore can deliver expertise for improving governance, process management and the use of technology. If African policy makers use Singaporean interest effectively, they could help their economies to make the transition from agriculture to agribusiness, to light manufacturing and industrialisation. In this way, these soft improvements are a match for the hard infrastructure provided by Chinese companies.

The demand in Africa is huge, we can’t meet it

Singapore also provides some typical ‘South-South’ benefits to its diplomatic and trade partners. For example, several of its companies offer low-cost products to African consumers. Kheng Keng Auto exports cars from Singapore and ­Japan, countries that have strict age limits for cars on the road. “The demand in Africa is huge, we can’t meet it,” says sales director Leo Tan. He says that the company sells about 200 cars per month on the continent, the average age of which is four or five years old.

Beyond inexpensive cars, many African countries need better ports to unleash their own export potential. Portek upgraded Algeria’s port of Bejaia and now manages two container terminals there after signing a deal with the port’s management in August 2004. By buying two mothballed cranes from the port of Baltimore in the US and re-engineering them to fit the needs of the Bejaia Mediterranean Terminal, Portek has doubled the throughput of freight traffic from 40,000 to 80,000 containers per year at a fraction of the cost of a large port operator such as Bolloré. It is also managing an inland port in Rwanda and installed two mobile cranes at Gabon’s Owendo port in April.

Moving up the value chain

Singapore is also helping African countries towards industrialisation, with the ultimate goal of moving away from the relentless export of raw commodities. In 1957, when Ghana’s President Kwame Nkrumah attempted to steer the country onto a modern economic trajectory, the government largely ignored the farming sector. Recent examples of industrialisation – from China to India to Vietnam – reveal the importance of parlaying the capital earned from agriculture into agribusiness and then into light manufacturing and up the value chain. Companies like Olam and Tolaram are moving in that direction. Dufil Prima Foods, a Tolaram subsidiary, opened a factory in Kaduna earlier this year, giving the lie to investor panic over northern Nigeria. Sourcing many ingredients locally, it will produce 200,000tn of noodles in 2012. The company is also building a wheat mill in Port Harcourt.

Whereas the majority of Africa’s cashews are sent to India for processing, Olam is opening four cashew processing factories across Côte d’Ivoire, Ghana and Nigeria. This will bring Africa’s processing capacity to more than 125,000tn per year. The Singaporean agribusiness is also opening a $60m wheat mill in Ghana and a tomato processing plant in Nigeria, where it is already processing cocoa. Its other projects include cocoa processing in Côte d’Ivoire and a $1.7bn fertiliser plant in Gabon.

In his book Unfair Trade, Conor Woodman heaps some rare praise on Olam’s work in stimulating cotton production in northern Côte d’Ivoire, citing the higher prices that benefit farmers. That is not to say that the company should be given a free pass – in 2007 the International Finance Corporation divested from Olam over a logging scandal in the Democratic Republic of Congo. But given how Olam has sought to change, it does suggest governance structures within Singapore companies are more solid than in, for example, Chinese companies. “Today, we own the largest contiguous Forest Stewardship Council-certified concession of natural forest in the world. Almost 1.4m ha in Congo is FSC certified”, says Olam chief executive, Sunny Verghese.

We helped China build one of its first industrial parks

Boosting production and fostering local transformation are just the starting points of this journey. Both companies are planning or building special economic zones (SEZ) – areas free of red tape, which provide quality infrastructure that manufacturing companies can use with ease, something Singapore has done before. “Actually, we helped China build one of its first industrial parks,” says Lee Yi Shyan, minister of state for trade and industry. Tolaram’s SEZ in Nigeria is dependent on a final investment decision for a new port, which should be approved later in 2012, allowing construction work on the multipurpose zone to begin in 2013.

Call for action

Ranveer Chauhan, Olam’s regional head for Africa, explains that African leaders play a crucial role in this development dynamic and that it was the decision by the Gabonese government to ban the export of unprocessed logs that pushed Olam to invest in an SEZ at Nkok that focuses on timber processing. Olam controls a 60% stake, while the government holds the remaining 40%. Construction of the site is not yet complete and it already has a 80% tenancy rate. Meanwhile, the government of Côte d’Ivoire has asked Agritech Group to set up an agribusiness training facility in the country.

Just as Bengali factory owners copied the Indian textile manufacturers who set up shop in Bangladesh, African entrepreneurs will imitate and one day outstrip Singaporean processors, as long as African governments support them in their endeavours.

Nothing is more complementary to infrastructure in a country’s development than education. Every five years, administrators and teachers rewrite Singapore’s educational syllabus in concert with leading members of the private sector. This is an attempt to project Singapore’s economy into the future and ask what skills graduates will need in 15 to 20 years. Singapore’s science and maths teaching is rated as among the best in the world. The government spends just 3.3% of gross domestic product (GDP) on education each year – the UK, for example, spends twice that – but still outperforms European countries. Singapore is also focusing on the balance of tertiary training. “Of the 40,000 babies born each year, 25% will go to university, 60% will get technical education and 15% will have trade certificates,” says Masagos. Every year, Nigeria imports about S$10m ($7.9m) worth of textbooks from Singapore-based Marshall Cavendish.

Of the 40,000 babies born each year, 25% will go to university…

This pursuit of excellence via education is replicated in the civil service. To walk inside the gleaming Civil Service College (CSC) is to peer under the hood of Singapore’s efficient governance. Just like with the education programme, the CSC does regular surveys of what the government needs. Training budgets are decentralised to the ministries and various government agencies.

Each civil servant has to undertake 100 hours of training per year, with 60% focused on his job and 40% on whatever interests him, reminiscent of Google’s rule that employees can spend one day per week on personal projects. Civil servants regularly change posts “in order to keep ideas and people fresh,” says Tina Tan, director of the CSC.

Getting good governance

A reactive, high-performance civil service is the instrument through which elected leaders deliver political, social and economic goods. The Singaporean government wants to share its experience. Some development challenges, such as urbanisation, require cross-ministerial collaboration. So in a project sponsored in conjunction with the Commonwealth Secretariat, the CSC has created a study programme for ministerial permanent secretaries, with a focus on Botswana, Namibia and Mauritius.

“We realised that many of these permanent secretaries had never met one another socially before,” explains Flynn Ong, who ran a team-building course for Botswana’s high-ranking civil servants. “But after this weekend, they had all exchanged cell phone numbers with each other and had built up a rapport which hopefully will carry over into their professional lives.”

Singapore has a role to play in e-government, too, something that countries like Ghana are already using to their advantage. In the 1980s, Singapore’s ports were congested, corrupt and inefficient. Importers required a piece of paper with two dozen official stamps to clear a cargo, a process that could take up to two weeks. After the innovative TradeNet platform was launched in 1988, all the relevant agencies used one electronic document. “Nowadays, pre-registered Malaysian trucks barrelling towards our border posts loaded with fruit send off their request on a smartphone while they are en route and get their licence in under a second,” says CrimsonLogic chief executive Leong Peng Kiong.

CrimsonLogic, the company licensed to sell the software, is now recording tens of millions of dollars in revenue in Africa. CrimsonLogic software is in use in Ghana, where GCNet is the reason goods now clear Ghana’s ports in record time. Mauritius Network Services is another customer and Congo-Brazzville’s President Denis Sassou-Nguesso expressed interest in setting up a similar deal this year.

We don’t want to be known as a place where illicit flows transit

E-government doesn’t just mean better ports. Up to 1991, Singapore had a backlog of over 2,000 cases in its courts, some of which could take up to seven years to clear. Cases are now heard within 30 days. Crimson­Logic is now installing an e-judiciary system in the Namibian capital, Windhoek, as well as in Mauritius. Singapore’s IDA International is helping Kenya’s government improve its e-governance.

Developmental authority

Getting the most out of Singapore will not be easy. The ‘developmental authoritarianism’ that allows the city-state to get things done is not an easy fit to Africa, though Ethiopia’s Premier Meles Zenawi and Rwanda’s President Paul Kagame are certainly trying. Though Singapore is keen to promote itself as a base for African countries to enter Southeast Asian markets, there are only a handful that have the ambition and ability to do so, outside, for example, Dangote Group and Sasol.

Africa also needs to be wary of the capital flight that is conducted through Singapore-registered shell companies. “We don’t want to be known as a place where illicit flows transit”, says Masagos. “Yes, there probably are nameplate companies. But if we get any complaints we will investigate, and we are signatory to all of the anti-money-laundering agreements.”

There is no guarantee that Singaporean companies will continue to be attracted to Africa. One hindrance to their expansion outside Southeast Asia is the opening up of Myanmar. A free trade agreement between the Association of Southeast Asian Nations and an African regional economic community like the East African Community may be on the cards, as will the potential opening up of Singapore Airlines’ second Africa route, to Abuja, in 2013.

These are surmountable obstacles. Taking the best of Singapore and applying it at home to improve governance and kickstart industrialisation is no small prize for African leaders●

This article was first published in the August-September, 2012 edition of The Africa Report (before the announcement of the death of Ethiopian Prime Minister, Meles Zenawi), on sale at newsstands, via our print subscription or our digital edition.

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