Insights

Kina Advisory provides insights on topical issues facing the industry today as companies operate and invest in Africa. Read through our latest thought pieces that give an insight into Kina’s way of thinking, as we discuss ideas that challenge the way business in Africa is conducted, offer solutions to those challenges and highlight the success of others.

 

How to build a successful business in Africa

22|03|2016

Kina Advisory CEO, Rosalind Kainyah, explains the philosophy that drives the company, how it makes a difference to Kina’s clients, and what it takes to build a successful business in Africa.

 

Can a company ‘minimise’ its tax payments and still be socially responsible?

25|01|2016

I came across an article in The Economist (Jan 2nd 2016) on whether firms can be “socially responsible” while avoiding taxes. It reminded me of when the late Australian business mogul Kerry Packer was asked by a government committee if he was a tax avoider. His response was: “I am minimizing my tax. And if anybody in this country doesn’t minimize their tax they want their heads read because, as a government, I can tell you: you’re not spending it that well that we should be donating extra.” It’s a typically controversial quote from a controversial figure. I am not saying that I agree with Packer, but his words do bring to mind some important questions about the relationship between business, the state and society. 

Less tax, more good works

Is it possible for a company to avoid tax and at the same time call itself socially responsible because it is has an impressive CSR budget? Some argue that money saved by paying less in taxes can be put to work far more usefully by corporations, who can invest it directly into jobs, training and opportunities, and other ‘good works’, than by governments, who tend to spread it too thinly to provide tangible benefits to local communities.

I do not agree, for two reasons:

First, I think we start getting into great complexities when there is any link between social investment and taxes. I think the two should be completely separated. Taxes are usually paid on income after taking out all ‘allowable’ expenditure. I think companies can always include money spent on social investment projects as part of such expenditure. This means it comes out of their gross earnings and the company is then taxed on its net earnings. This is why we advise that social investment should be linked to business objectives, so that they can genuinely be part of project costs. Even a company’s pure philanthropic activities can be treated as costs before tax.

Second, I think it encourages bad habits in governments when companies take over their responsibilities. Companies and individuals pay taxes so that governments can provide public services. It is not for companies to say: because governments won’t do what they are supposed to do with their tax dollars, we will take over their role. They should join with other citizens to ensure governments do what is right.

CSR: a taxing dilemma

Ultimately, however, making this an argument about taxes versus social investment completely misses the point of what CSR should be about. It’s not about either, or. CSR is about your entire approach to business: It’s about making corporate decisions that will generate important long-term benefits for the country in which you operate. Such as employing local people over expatriates; using local goods and services rather than importing from abroad; and training local people in the skills you need.

Work with, not against, government

If a company believes its CSR policy justifies paying less tax, then it has missed the entire point of CSR. Paying your fair share of tax is socially responsible, as is making a tangible benefit to the communities in which you operate. Genuine CSR is a about aligning your own corporate objectives with the legitimate aspirations of the host country. It is about partnership and having the right kind of conversations with governments and with society. This is what ensures a more profitable and sustainable business in the long-term.

Rosalind Kainyah, MBE, Founder and Managing Director

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Nurturing Africa’s most plentiful natural resource: talent

10|12|2015

African countries need to create a deeper pool of skilled and competent workers for the current and future job markets. That is why I am always on the lookout for new and original ideas to help boost education and skills development. I came across a company the other day that pays people in Nigeria to learn computer programming and then hires them out to work remotely for Fortune 500 companies in the US.

Fostering talent

This is a brilliant way to foster the kind of talent that African countries need to develop both socially and economically. Sure, some might argue that it is a shame they are using their skills to benefit companies outside of Africa. But this concern is far outweighed by the enormous opportunities it gives Africans to get valuable experience in global companies. Experience that can then be brought back and put to good use at home.

Private enterprise, public benefit

The company is called Andela and it provides a shining example of how the private sector can create a profitable business, while at the same time promoting broad and inclusive socio-economic development. The big question is: can this model be used on a much wider scale across Africa? It could be an ideal solution to the problem of training people in remote communities that don’t necessarily have the required resources or institutions on the ground.

I will continue to keep my eye out for original ideas that could release the potential of Africa’s latent workforce. In the words of the company itself: “It’s time to stop viewing [Africa] as simply a youth bulge—it is a talent bulge.”

Quick facts about Andela

Here are some quick facts about Andela and its raison d’être, courtesy of The Wall Street Journal:

  • Andela was founded to train the top 1% of tech talent across the continent. After six months in their software-development programme, young men and women work remotely for Fortune 500 companies and start-ups around the world while receiving continuing training and support.
  • With more than one billion people, approximately 60% of them under age 25, and more than 25% of young people out of work in many places, Africa is home to the world’s largest pool of brainpower and talent.
  • While the populations of rich countries shrink and age, Africa’s overall population is expected to double by 2050. Nigeria alone is projected to have more than 750 million people by 2100.

Rosalind Kainyah, MBE, Founder and Managing Director

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A different approach to PE in Africa

30|11|2015

I’m due to moderate a panel on private equity investment at The Global African Investment Summit this week so I’ve been diligently doing my research. I found an excellent interview with Kofi Bucknor, a senior Ghanaian banker and private equity veteran in Africa. He made a number of really interesting points that we then discussed in more detail together later. I plan to bring them up on my panel.

Small is beautiful

Kofi’s central argument was that PE firms in Africa might need to tweak their investment models. He believes that too much money is flowing into too few sectors. As an example, Kofi says that as much as 50% of PE investment in Africa goes into the energy sector, oil and gas and related industries. These tend to be mature businesses that have already established themselves.

 Early stage investment

But what about the smaller and medium sized African companies in sectors like health, education and entertainment? Companies that serve a clear consumer need. Investments in small companies operating in these sectors are more likely to have a direct and positive impact on local communities than big one-off investments in mature industries like oil and gas. And it is a profitable strategy too. Investing in businesses at an earlier stage will, over the long term, creating much bigger uplift in returns. In the words of Kofi:

“More time needs to be spent growing businesses and creating giants.”

 Mobilise local savings

Kofi also talked about the sources of investment too. He argued that the best way to benefit African communities in the long term was to mobilise domestic savings. Garner money from local sources and use it fund investment vehicles that support local SMEs.

 Are Governments holding back business?

However, the greatest challenge to the growth of African domestic business is the macro-economic backdrop.  African governments hold far too much debt. And burdensome budget deficits tend to be funded by yet more borrowing. It might be ok if government spending was channelled towards investments that promoted economic growth. But it doesn’t seem to be. The only real impact of all this borrowing is higher interest rates, which are bad for business.

So maybe governments should ‘step out the way’ and borrow less, so the continent can attract the capital it needs. Capital that can then be directed towards investments in businesses that innovate and promote inclusive and sustained economic growth.

I’m really looking forward to discussing these issues, and more, at our panel next week. I hope to see you there!

Rosalind Kainyah, MBE, Founder and Managing Director

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What we are up to & News

04|04|2018

Key to investment success in developing countries

Published in the The New Model Corporate Affairs Director’, Managing Director Rosalind Kainyah discusses understanding the socio-economic environment and creating the right conversations as key to success in investing in new markets in developing countries and the role of the Corporate Affairs Director. Click here to read the full article.

29|03|2018

Ghanaian women empowered in business

Empowering women in business is a key aspect of the fifth sustainable development goals. The 2018 Mastercard Index of Women’s Entrepreneurship (MIWE) names Ghana as having the highest percentage of female business owners at 46.4%.

It is encouraging to read about businesses led by women that also consider environmental sustainability, such as the collaboration between Redavia, a German rental solar company, implementing a solar farm for the Ghanaian hospitality group Linda Dor.

27|03|2018

Congratulations to the Young CEO of the Year

Kina Advisory congratulates Dr Amy Jadesimi, CEO of LADOL for winning the Young CEO of the Year award at the 2018 Africa CEO Forum. Amy is a role model for young and old, men and women alike https://t.co/stvCAA5FEr.

19|12|2017

Commemorating Harvard Kennedy School’s Professor Calestous Juma

We at Kina are shocked by the passing of Kenya’s and Harvard Kennedy School’s Professor Calestous Juma. It’s hard to believe that the boundless energy with which he engaged the world through all media on innovation and international development is gone forever. Our last such interaction followed his piece on the limits of leapfrogging for Africa’s development. Inspired by the thought piece, I gave a perspective from the business angle, to which Calestous further responded to me privately.

We are fortunate at Kina to count one of his former students as one of our team. Like the millions of others in Africa and the world who loved his brain and followed his work, we all claim a piece of Calestous, but we can’t claim to understand the grief of those who were closest to him. We can only offer our heartfelt sympathies and continue to build on and implement some of the ideas he shared to help shape Africa’s development.

05|12|2017

Rosalind shares insights on Africa’s hidden figures with This is Africa

Managing Director, Rosalind Kainyah shares her insights on how big business can play a role in bringing the ‘hidden figures’ in Africa’s informal economy into the formal. Click here to view article.