Ibukun Awosika: An Inspiration to Nigerian Entrepreneurs

Mrs Ibukun Awosika exemplifies the Nigerian entrepreneurial spirit, represents the true face of Nigerian business and highlights the opportunities that Nigeria presents to entrepreneurs. When Awosika took up work for a furniture company as a young, fresh-faced 25 year this was her first job after completing her studies. She was not satisfied with the way the company operated but developed a passion for furniture and decided to create her own business. She quickly set about doing things the right way, applied her high personal value set to business and Sokoa was born. With next to no start-up capital but by putting customers first, Awosika has built one of West Africa’s largest furniture businesses. She is a well-known personality and became an inspiration to many aspiring Nigerian entrepreneurs after appearing as one of the investors in Nigeria’s version of the popular business reality show Dragon’s Den. She also hosts the popular television programme Business – His Way, which helps promote high ethical standards and is the author of a book under the same name. Awosika covers a wide range of business issues and relates them to the Christian teachings to show how through conformity with her religion, lasting business success result.

"With next to no start-up capital but by putting customers first, Awosika has built one of West Africa’s largest furniture businesses."

Entrepreneurs across the globe would do well to regard Mrs Ibukun Awosika as a role model. Her approach to continual personal development, further education and doing the best job possible is exemplary. And her financial prudence and high moral standards are at the very core of her success. The fact that she so willingly and effectively shares her knowledge and experience makes her a model for many other successful business leaders too. In appointing Awosika to the board overseeing Nigeria’s new Sovereign Wealth fund, President Goodluck Jonathan’s government has made a proper and wise choice.


Bentley Motors Middle East: World's Biggest Workshop in Dubai

Sales

[caption id="attachment_4732" align="alignright" width="350"] Continental GT[/caption]

In March this year, Bentley Motors announced its financial results for the year ending 31 December 2012, reporting a significantly increased operating profit of Euros 100.5m compared to Euros 8m in 2011.

Bentley boosted its total turnover by 29.9% to Euros 1.453 billion and its profit margin increased to 7%. Demonstrating the global reach of Bentley’s business, exports accounted for 87.3% of Bentley’s total turnover, equating to a total export value of Euros 1.269 billion. The company’s market share in the luxury segment rose by 4.9 percentage points to 20.1%.

Bentley Motors Middle East continued the successful performance of 2012 with a record first-half of 2013 and an increase of 28 per cent against the same period last year for deliveries to customers.

"The previous year was the best ever year for Bentley Motors in the Middle East and 2013 is set to beat that record."

The Continental GT V8 and Continental GTC V8 have achieved increasing popularity in the Middle East since their launch in 2012 and accounted for a large portion of Continental GT sales. Combined with the Continental GT W12, GTC W12, GT Speed, and GT Speed Convertible, the GT sales accounted for 70 per cent of total sales in the first half of 2013 for the Middle East region.

The United Arab Emirates and Kingdom of Saudi Arabia are the strongest performing countries in the region, contributing to over 50% of overall sales.

GT Speed

At the start of this year Bentley launched the New Continental GT Speed, the fastest production car to date, with the ability to go to speed of up to 329 km/h. The convertible version of this vehicle is now available and is the fastest four-seater convertible in the world!

The new GT Speed Convertible combines the sensory pleasures of roof-down luxury touring with the shattering performance of a 625 PS (616 bhp) twin-turbocharged 6.0 litre W12, while delivering a fifteen per cent improvement in fuel efficiency. The close-ratio eight-speed transmission, uprated and lowered suspension and retuned steering provide exhilarating acceleration and sharp, communicative handling without detriment to the renowned ride comfort of Bentley’s Continental convertible. Permanent all-wheel drive ensures optimum traction and power delivery whatever the road conditions.

Mulsanne

[caption id="attachment_4733" align="alignleft" width="350"] Mulsanne[/caption]

The Middle East remains one of the most important markets in the world for the flagship Bentley Mulsanne. The model also enjoyed a strong first half with sales increasing by 70 per cent compared with the same period last year. The Mulsanne is a pure example of the Grand Touring Bentley, combining coach-built elegance and hand crafted luxury with immense power and sportiness that together offer the world’s most exclusive driving experience. It is a luxury car that makes the joy of driving its central focus. In an era of mass production, it stands at the pinnacle of British luxury motoring.

With a 0-100 km/h sprint time of just 5.3 seconds and a top speed of 296 km/h the 505 bhp (512 PS/377 kw) Mulsanne, with its class-leading torque of 1020Nm, has always offered thunderous levels of performance for an ultra-luxury sedan.

The Mulsanne’s beautifully balanced proportions convey a unique sense of dynamism and movement. These are reinforced by muscular haunches and sharply sculpted, gracefully flowing lines, hinting at the phenomenal levels of power and torque that are in reserve at all times.

In common with all Bentley vehicles, customers of Mulsanne have the opportunity to create a truly bespoke car from a palette of over 100 paint colours, a class-leading choice of unbleached premium quality veneers and marquetry options and a selection of 25 leather hides. The beautiful cabin alone takes Bentley’s craftsmen and women over 170 hours to create.

Mulsanne fitted luggage set

Bentley has also launched this year, a stylish range of luggage to fit effortlessly into the flagship Mulsanne model. The luggage, hand-made by Schedoni of Italy, allows customers to tailor the specification of the set to match the hides within their own car. The design of this range is inspired directly from the key styling elements within the inner door panelling of the Mulsanne. The full set consists of two large cases, two foldable garment bags and two small cases.

New Flying Spur

[caption id="attachment_4734" align="alignright" width="350"] Flying Spur[/caption]

Bentley’s presence in the Middle East is set to be strengthened later this year with the introduction of the new Flying Spur. The new luxury sedan made its global debut at the Salon International de l’Auto in Geneva earlier this year. Benefiting from the highest levels of luxury, craftsmanship and performance, as well as the latest technologies, the new Flying Spur is set to make a big impact on the region’s luxury car market.

Bentley Middle East has dealerships in Bahrain, Kuwait, Lebanon, Oman, Qatar, Saudi Arabia and the UAE, all of which have already taken orders for the New Flying-Spur. Its predecessor was a huge success for Bentley in the region. With its unrivalled blend of effortless driveability, exquisite luxury and craftsmanship, sculpted design and state-of-the-art technology it is sure to be very well received in the Middle East.

World’s Biggest Bentley Workshop

The Middle East is home to a specially designed workshop, which holds the title if the world’s biggest Bentley workshop in Dubai, UAE.

Al Habtoor Motors, Bentley Motors’ long-standing importer for the UAE, has invested AED 300 million in the 3millon sq. ft. site, of which 189,000 sq. ft. is dedicated to Bentley. The state-of-the-art centre is air-conditioned from the moment customers step out of their vehicle and walk into the luxurious reception area.

The reception area is vast and comfortable with televisions, refreshments and Wi-Fi, allowing customers to wait for their vehicle in a relaxing environment. For those wanting to shop, the reception area displays merchandise from the extensive Bentley collection.

Located behind the reception area, the extensive workshop is a world-class facility offering the latest technology, equipment and systems to improve further the efficiency and quality of service, repairs and renovation. A one-stop-shop, the Bentley workshop is able to carry out PDI’s, servicing, repairs, body shop repairs, paintwork and restoration. The workshop has 190 vehicle bays and 250 customer and visitor car parking spaces, and will allow technicians to perform maintenance on up to 40 vehicles simultaneously.

For owners of heritage models, the Bentley workshop has the expertise, capacity and equipment to restore classic models. The body repair, restoration and heritage area of the business is now even better placed to look after customers from all over the UAE. Cherishing cars as enthusiastically as owners themselves, the skilled technicians and craftsmen will deliver the finest results.

Crewe, UK.

Bentley Motors employs around 4,000 people in Crewe, UK which is home to all its operations including design, R&D, engineering and production. The combination of fine craftsmanship, using skills that have been handed down through generations, alongside engineering expertise and cutting-edge technology is unique to UK luxury vehicle manufacturers such as Bentley. It is also an example of high-value British manufacturing at its best. Bentley exports over £1bn worth of goods per year.

Having just celebrated its 75th anniversary, Bentley’s Crewe  Factory has many great achievements from its original construction to producing cars for over 60 years that sit at the pinnacle of luxury automotive manufacturing. Originally constructed to manufacture the Merlin engines which powered Spitfire and Hurricane fighters, the factory is now home to more than 4,000 Bentley employees who helped manufacture over 8,500 Bentley cars last year for discerning customers all over the world.

The manufacturer recently installed 20,000 solar panels with a capacity of 5MW, the UK’s largest roof-mounted solar panel installation, which will generate up to 40 per cent of Bentley’s energy requirements and reduce CO2 usage by 2000 tonnes per year.

The panels will also generate enough energy to power over 1,200 households in Crewe, proving the valuable contribution the factory has made to the local and wider community.

Partnerships – Breitling

2013 has seen the launch of many new and exciting products, created with luxury and performance in mind in collaboration with partnership brands.

Bentley and Breitling have again combined British chic and Swiss horological excellence to create a limited edition, ultra-sporty Bentley Light Body Midnight Carbon chronograph. The limited edition watch conceals a light and sturdy titanium chassis featuring a highly resistant carbon-based coating beneath its all-black exterior.

The dashboard-style dial displays exclusive Breitling technical features highlighted by red-rimmed indications. The originality and strength of the design are accentuated by the hands and hour-markers, also clad in matt black and enhanced by a luminescent coating ensuring optimal readability in the dark. The midnight black rubber strap is distinguished by its central raised motif echoing that of the knurled bezel – a refined nod to the famous radiator grilles gracing the prow of a Bentley.

The watch is limited to only 1,000 pieces worldwide, the unrivalled performance of this elegant and reliable watch is powered by a self-winding chronograph movement chronometer.

 ‘Lalique for Bentley’ and ‘Bentley for Men’

The collaboration between Bentley and Art & Fragrance, owner of Lalique, creates the bespoke ‘Lalique for Bentley Crystal Edition’, an impressive crystal flacon with the legendary ‘Flying B’ Bentley mascot. The eau de parfum itself, composed by Mylène Alran, from the French perfume house Robertet, is a fitting elixir of fine woody notes and exquisite leather to complement the epicentres of excellence within Bentley’s craftsmanship.

The ‘Bentley for Men’ and the high-impact ‘Bentley for Men Intense’ fragrances are created by top French perfumer Nathalie Lorson, from the perfume house Firmenich.  She has skilfully transformed the quintessence of the luxury automotive brand Bentley into a superb and unmistakeable fragrance experience. To do so, the finest perfume raw ingredients have been used, including those must-haves for Bentley’s debut fragrance, fine wood and leather notes.


The Spotlight on David Beckham

One of the best known faces on the planet, David Beckham, 38 years old, became an Image Ambassador for Chinese Football after his twenty year playing career came to an end last season. The League in China is known for its corruption and Beckham for his sense of fair play and so some good should certainly come out of the partnership. Visiting China in late June, he was photographed at a children’s hospital and his personal appearance in Shanghai caused a stampede with seven people injured.

In his glory days, Beckham was the world’s best paid player (taking into account sponsorship income) spending time at clubs including Manchester United, Real Madrid, Milan, Los Angeles Galaxy and Paris St-Germain and representing his country in international matches. However, as Sir Alex Ferguson pointed out in 2007, ‘He is such a big celebrity that football is only a small part.’

“The spotlight will always be on me, but it`s something I`m learning to live with as the years go by”.

Married to Victoria, fashion designer and former girl group singer, Beckham is a style icon and has been voted the UK’s most influential man under 40 years. He received an OBE ten years ago and has since 2005 has been a UNICEF Goodwill Ambassador focusing on sports for development. He is a patron of Elton John’s Aids Foundation and other HIV and children’s charities and clearly loves working with young people.

I we are looking to the world of football for a role model then David Beckham would seem to be a sane and obvious choice. He becomes our sporting Hero for the Summer issue.


Female Head of Petrobras is the ‘Inside Outsider’

As the first female CEO of a major global oil company appointed by Brazil’s first female president, there has been much interest in Maria das Graças Silva Foster. But her acquired role at Petrobras should have come as no surprise. There is often debate as to whether it is best to promote internally or bring in a new face when looking for a chief executive. Foster may well have been an excellent choice because as Joseph Bower at Harvard would say, she is very much an “inside outsider” - and being a women has probably helped her achieve this. There is no doubting her insider knowledge of the intricate workings of the Company. Since starting as an intern after completing a Masters in chemical engineering, her entire career (including a stint as Secretary for Oil, Natural Gas and Renewable Fuels at the Ministry for Mines and Energies) gives Foster intimate knowledge not only of the company but also of the company’s largest financial stakeholder namely, the Brazilian Government. Foster, however, is not an outsider simply because she is a women in a largely man’s world: her Favela upbringing may well have helped give her an outsider’s perspective and this - combined with a no-nonsense approach - has helped mould a leader to take Petrobras forward while balancing the needs of a multitude of stakeholders. Petrobras is encountering challenges not faced by some of the other large oil companies, but expectations are high and we believe that Foster is the one to help Petrobras reach its full potential.


Super-Size My Pay: US Fast Food Workers Walk Off Job

Thousands of workers in the US fast food industry went on strike earlier this week to demand a super-sizing of their pay. The walkout started on Monday in New York City and has now spread to several major cities. The Fast Food Forward campaign demands a minimum pay of $15 per hour. This would more than double the current industry standard of $7.25 / hour (the federally mandated minimum hourly wage).

Employers refuse to even entertain the thought of increased pay even though, just last week, McDonald’s effectively stated that its workers need a second job in order to eke out a living. Employees using that company’s “budgeting tool” – developed jointly by VISA and Wealth Watch International to instil financial literacy – soon find that the ends of a 40-hour work week at McDonald’s do not meet.

The National Restaurant Association on Wednesday put out a press statement claiming that any wage hike – however modest in scope – would “negatively impact” a fast food outlet’s ability to hire people or maintain jobs.

Meanwhile the Employment Policies Institute (EPI), a restaurant industry lobbying group, took out a full-page ad in the USA Today newspaper introducing the iServer of the future: The touch screen version of a restaurant worker. Averse of subtleties, EPI got its message across loud and clear: Improved pay actually hurts those employed in the fast food industry.

Fast Food Forward director Jonathan Westin was not impressed. “If our workers could indeed be replaced by iServers without affecting customer satisfaction, the industry would have done so already. This just goes to show the lack of respect for the human element that characterizes the fast food industry. Workers are deemed to be merely replaceable property. We’re not just demanding a living wage, we also ask for a bit of respect.”

The average fast food worker in New York earns slightly over $11,000 annually whereas the median income in the city hovers around $48,500. Last week US president Barack Obama renewed his call for the federal minimum wage to be raised to $9 an hour which would return its purchasing power to the level the minimum had at the start of the Reagan presidency in 1981.


Otaviano Canuto, World Bank Group: China, Brazil - Two Tales of a Growth Slowdown

China and Brazil are both facing a growth slowdown, as compared to the period prior to the global financial crisis. They were both able to respond with aggressive anti-cyclical policies to the post-Lehman quasi-collapse of the global economy. In both cases, such policies led to a growth rebound by reinvigorating previous patterns of growth. This brought forth the exhaustion of such patterns and the need to transit to other growth regimes.

Their previous growth models were mirror images to each other, in the sense that ultra-high investment to GDP ratios in China contrasted with low ratios in Brazil. China climbed up the ladder toward an upper middle income status along the last three decades, becoming the second largest economy in the world. Brazil in turn has remained in its relative position, in a sort of “middle income trap”, notwithstanding its improved macroeconomic performance – combined with substantial poverty reduction - in the 2000s. Both countries are currently facing a common challenge of reforming policies toward new growth directions, as well as a legacy from the post-Lehman crisis response.

China: From the Great Transformation to the Great Transition

The Chinese economy has changed dramatically over the last three decades. While its per-capita income was only a third of that of Sub-Saharan Africa in 1978, it has now reached an upper-middle income status, lifting more than half a billion people out of poverty. The numbers are dramatic: per capita income has doubled for more than a billion people in just 12 years (Chart 1). What was once a primarily rural, agricultural economy has been transformed into an increasingly urban and diversified economic structure, with decentralization and market-based relations rising relative to the traditional government driven command-based economy.

Chart 1 – China’s GNI Per Capita Source: Schellekens (2013)

Keeping that extraordinary pace of transformation over the next decades will demand a change of course (World Bank and DRC, 2013). The Chinese pattern of rapid growth with structural change has been accompanied by rising economic imbalances, just as the main pillars of growth seem to be gradually weakening. High and sustained GDP growth rates were based on elevated investment to GDP ratios, which in turn were only possible with low shares of wage income and domestic consumption, as well as with cheap and repressed finance. Another factor was dynamic markets abroad willing and capable to absorb a huge Chinese export expansion. Today, the economic doldrums faced by advanced economies are challenging the growth pattern associated with twin current and capital account surpluses. Growing income disparities were a domestic flipside of that model, becoming potential sources of social strain, in addition to changes in the external environment.

Schellekens (2013) highlights three mutually reinforcing paths of transformation ahead in the Chinese economy. First, a structural slowdown of growth looks clearly to be in the cards. The productivity increases and growth seen through transferring resources from low-productivity agriculture activities to industry -- a typical feature of economies moving from low- to middle-income levels (Canuto, 2013) -- has to a large extent already happened. On the demographic front, the old-age dependency ratio will likely double in the next two decades. Furthermore, gains in economic efficiency and technological progress based on absorption of existing, imported technologies have from now on to be increasingly replaced by local innovative efforts. The set of second-generation policy reforms necessary for that will require time to bear fruit, whereas low-hanging fruits in terms of productivity increases will be less available (Chart 2).

Chart 2 – China: Prospects of Labor-related Sources of Growth Source: Schellekens (2013)

Second, a required rebalance is expected. Higher shares of services and consumption, following rising wages, with a decrease in exports, savings and investment ratios to GDP, must accompany the increased reliance on domestic sources of aggregate demand. Government consumption is also to rise, in order to meet social demands, as well as the needs of operations and maintenance. The income gap between coastal areas and middle and western regions should fall as the pool of underemployed labor shrinks. Interestingly, the perception of rising prosperity by the population will likely be higher than before, with rising purchasing power, despite somewhat lower GDP growth rates.

Chart 3 – China: Investment and Consumption as Shares of GDP Source: Schellekens (2013)

Third, a shift up the value chain in both tradable and non-tradable activities shall augment the previous paths of change. A transition to more sophisticated production processes is a target being already pursued.

Ripples of China’s Transformation

Ripples of China's economic metamorphosis will be felt abroad in the years ahead. One channel of transmission is likely to be through their demand for imports. Its growth rebalancing will tend to favor commodities more associated with consumption, like agricultural goods, while metals and minerals will be negatively impacted in relative terms by the investment slowdown (although the latter may be partially offset by a still rising demand for residential construction and durable goods in the medium term). Meanwhile the rising share of services will lead to import leaks depending on current trends toward increasing tradability. Current imports of capital goods will move toward more sophisticated ranges.

A second channel will be through the erosion of China's current competitive edge on low-cost labor-intensive manufacturing. Notwithstanding some reasons pointed out by Schellekens (2013) for why the out-migration of those activities "may not happen overnight and may never play out fully", a window of opportunity will open to those countries with appropriate endowments and policy actions to benefit from the Chinese domestic factor price evolution.

Finally, a third channel of transmission will be China's march up the value chain, establishing a new front of head-to-head competition abroad. Both winners and losers may be produced in the rest of the world, depending on whether a country faces the challenge by introducing its own structural reforms to support innovation and adaptation to the new context, including by strengthening its position in the range of high-end goods and services.

The metamorphosis of the Chinese economy may involve painful growing pains, including the risks of a hard landing that many analysts attribute to the current transition. A set of structural reforms will be essential, including a strengthening of the public provision of social services and protection, in order to induce lower household savings. Furthermore, as we outlined in Canuto (2013), the experience of economies that have succeeded in moving up the income ladder suggests a need to reinforce property rights and other market-economy features. It is in remolding banking out of a “command-and-control” system that, perhaps, the challenge will be highest. Particularly because of the legacy in terms of excess credit – especially through non-banking institutions – and over-investment that followed the stimulus package after 2008.

Brazil: The Twilight of a Consumer-Led Boom

After the 2008-09 global financial shock, Brazilian unemployment rates have remained at low levels and the economy rebounded in 2010, as a result of aggressive fiscal and monetary crisis-response policies (Chart 4). However, the overall GDP performance has been lackluster, and prospects for 2013 look not much brighter. The sharp downfall of production, investment and exports of the Brazilian manufacturing industry in the last two years has signaled that something deeper is at play (Canuto, Cavallari, and Reis, 2013).

Chart 4 – Brazil: GDP growth and unemployment rates Source: World Bank

Brazil had indeed a good ride, with a long spell of economic growth. Poverty rates and income inequality have diminished steadily now for more than a decade, with the labor market dynamics playing the major role, besides targeted social policies and a steady rise in access to education (Canuto, 2012). But some of the economic drivers from last decade have clearly been exhausted.

Some structural reforms and policy refinements enacted mainly in the period spanning from 1994-2005 yielded results in terms of productivity increases along the first decade of the new millennium. I would highlight the consolidation of stabilization gains – in terms of lower macroeconomic risk premiums and correspondingly higher levels of sustainable credit across the board - after the government transition in 2003 with a reassured (and tested) commitment to fiscal responsibility and macroeconomic stability. Benefits from the post-privatization revamp in telecommunications, as well as institutional innovations improving credit risks in several fronts – e.g., payroll-bill loans, a new bankruptcy law, and improved recovery of guarantees – also helped. Steady technology-laden productivity gains in agriculture have also been remarkable.

Favorable external factors also supported the Brazilian domestic real-side economic dynamics. Commodity price rises and improved terms of trade - Chart 5 - enabled not only the strengthening of balance-of-payments conditions and external accounts, but also generated domestic positive wealth effects in a reasonably widespread way, through agriculture land and real estate. Notice that terms-of-trade gains have not fully reversed and commodity prices have been hovering around current levels.

Chart 5 – Brazil’s Terms of Trade Source: FUNCEX

The combination of favorable external factors (including wealth effects), productivity gains, improved household credit risk, and government policies of raising minimum wages at a pace above those productivity gains then sparked a self-reinforcing virtuous dynamic between steady decrease of unemployment rates (Chart 4) and booming domestic aggregate demand (Chart 6). However, such pattern of growth was poised to exhibit a limited – even if long – breadth, unless boosted or superseded by other sources of dynamism. The growth spurt in 2010 was a sort of last vent of the previous pattern of growth, as counter-cyclical policies mainly anticipated the use of the remaining existing space for sustainable household credit.

Chart 6 – Brazil: domestic demand growth and investment ratios Source: World Bank

What happened to “animal spirits”?

The subsequent fall in investment ratios – which remained all the way below 20% (Chart 6) - has taken place on the private-sector side: according to the Institute of International Finance (IIF) estimates, the ratio of private investment to GDP declined from 14.3% to 12.7% last year, more than compensating for the increase of 0.4 percentage points in public investments to 5.4% of GDP. So, why haven’t the entrepreneurial “animal spirits” waken up and taken the lead at some point of the long growth spell? Why have private sector investments retrenched more recently?

First of all, it is worth noticing that low investment ratios since the 1980s have been a flipside of low infrastructure investments, a factor that has become an increasingly tightening bottleneck – and productivity deterrent - as the economy grew in size. Furthermore, while the macroeconomic dimension of the Brazilian “investment climate” improved, the pace of microeconomic reforms nearly stalled in the last few years. Key financial intermediation reforms have been implemented, but complex tax systems and costly business transactions still correspond to a heavy toll on the value added generated by private investments. Large physical investments face hindrances derived from complex, uncertain and costly processes of authorization and implementation.

Second, those factors became especially stringent on the manufacturing-industry side as the recent pattern of growth unfolded. While the resource-based tradable side of the economy was ring-fenced by a favorable price dynamics abroad, and non-tradable services could respond to rising wage costs by marking-up their prices, the non-resource tradable part of the economy faced increasing costs – real wages and service inputs, including infrastructure-related ones – and crushed profit rates. Despite creeping ratios of manufacturing import penetration, the surviving manufacturing park could chug along while domestic demand kept going up. That’s why, suddenly, the combination of rising costs and the perceived inflexion on consumer demand growth looked like a “competitiveness cliff” (Canuto, Cavallari and Reis, 2013).

This is illustrated in Chart 7, where those effects are examined through the lens of different wage gains by consumers and producers. Nominal wages are deflated there not only by the index of consumer prices (IPCA), but also by the GDP deflator for the specific sector. Gains realized by consumers can be gauged by deflating wages by the consumer price index (IPCA). Clearly, the latter benefited from higher terms of trade. However, few producers could take partial advantage of better prices and pay higher wages, alleviating some of cost pressures. Demand for labor can still be argued as greater than in the absence of this external shock, and the economy moved toward full employment. Therefore, cost pressures revealed to be much more intense in non-commodity-related industrial sectors. Notice how real wage costs went up particularly after 2008.

Chart 7 – Brazil: real average wages Source: Canuto, Cavallari and Reis (2013)

Third, the path to a reorientation of public policy chosen by the government has not lifted animal spirits as intended. The intensive resort to targeted tax relief and trade measures, and to expanding subsidized lending partially backfired as they generated a wait-and-see (or rent-seeking) attitude by investors. The manifested proclivity to cap or drive rates of return in energy and infrastructure concessions has also shun investors. Confidence on policy making eroded further as those targeted fiscal measures were seen as a failed attempt to avoid anti-inflation fiscal and monetary policies, particularly as inflation rates slid toward the upper limit of the 2.5-6.5% inflation target.

In a chapter apart, Petrobras has been overburdened with ambitious and conflictive objectives: raise corporate financial leverage to comply with its responsibilities on Pre-salt oil exploration, contribute to lower inflation by absorbing imported oil price hikes, and implement local-content requirements. Is investments and purchases – and corresponding multiplier-accelerator effects - have been below potential.

Moving to an investment-led new growth cycle will be faster if attention is focused on those structural factors that have maintained investment ratios below the 20% ceiling, instead of attempting short-cuts with policy tinkering. A framework of public-private partnerships that leads to a more intense crowding-in of private investment and management in infrastructure is necessary. The overall agenda of improving the investment climate and “doing-business” conditions must also be retaken.

Furthermore, a review of the current pattern of government expenditures, with shrinkage of transfers non-targeted to the poor, should also open fiscal space for raising public investments. In this regard, the mass movement on streets last June, during the FIFA Confederation Cup, may have constituted a wake-up call for such a review. In what may be called a “football spring” – given that the beauty and costliness of newly-built stadiums seem to have constituted a trigger of widespread manifestation – the population complained about the current quality of public services (health, transportation, security, and education) and a perceived aloofness by the political establishment. Public sector management and governance issues have now come to the fore on the political agenda, and there is no sustainable way to respond to that but by undergoing a review of government tax and spending policies.

Concluding Remarks

Together with other emerging markets and developing countries, China and Brazil are among those countries expected to play a major role in rescuing the global economy from its current doldrums. Depending on their ability to tap on existing potential sources of growth, those countries may even reverse roles with advanced economies and “switchover” positions as growth locomotives in the global economy (Canuto and Giugale, 2010). However, as illustrated by the Chinese and Brazilian experiences – including the on-going inflection on their growth trajectories –appropriate domestic reforms and policies shall be in place for that scenario to become full-fledged.

About the Author

Otaviano Canuto is Senior Advisor on BRICS Economies in the Development Economics Department, World Bank, a new position established by President Kim to bring a fresh research focus to this increasingly critical area. He previously served as the Bank’s Vice President and Head of the Poverty Reduction Network (PREM), a division of more than 700 economists and other professionals working on economic policy, poverty reduction, gender equality and analytic work for client countries. He also served as an Executive Director of the Board of the World Bank from 2004-2007. Outside of the Bank he has held leadership positions at the Inter-American Development Bank where he was Vice President for Countries, and for the Government of Brazil where he was Secretary for International Affairs at the Ministry of Finance. He also has an extensive academic background, serving as Professor of Economics at the University of São Paulo and University of Campinas (UNICAMP) in Brazil.

References

Canuto, O. and Giugale, M. (eds.), 2010. The day after tomorrow: a handbook on the future of economic policy in developing countries, Washington: World Bank.

Canuto, O., 2012, Bucking the trend: poverty reduction and inequality in Latin America, Huffington Post, June 7.

Canuto, O., 2013. Overcoming middle-income growth traps, Capital Finance International, Winter 2012-2013, p.88-89.

Canuto, O., Cavallari, M., and Reis, J.G., 2013. The Brazilian competitiveness cliff, Economic Premise n.105, World Bank, February.

Schellekens, P., 2013. A changing China: implications for developing countries, Economic Premise n.118, World Bank, May.

World Bank and DRC – Development Research Center of the State Council, The People’s Republic of China, 2013. China 2030: Building a modern, harmonious, and creative society.


Karen Agustiawan - Confirmed for Second Term at Pertamina

Karen Agustiawan had her tenure as CEO of PT Pertamina (the Indonesian state owned oil company) extended for a further five years in June this year. In recent years most of her predecessors have not even completed a full term and it has been decades since a CEO at Pertamina has been reappointed. This is a major vote of confidence in Agustiawan’s efforts to turn Pertamina into a truly global player. Having studied engineering physics, Agustiawan kicked off her career with Mobil Oil in Indonesia and the US and only joined Pertamina in 2006 following several years at Halliburton. There is no doubting her technical ability and strategic thinking, but we feel it has been her focus on the human capital at Pertamina that will turn the company into a global player. The mission she has set for Pertamina over the next five years is ambitious saying, ‘Pertamina must be able to contribute at least 50 percent of the country’s total production’. The past five years have given Agustiawan the time to create a team strong enough to make the big decisions needed to achieve this target. With Pertamina extending its reach on a global basis the Company has a leader with experience, courage and the skill to transform.


Maxima - Busy at Work

The people of The Netherlands quickly came to adore the young, attractive Argentinian economist Maxima Zorreguieta who married their Crown Prince Prince Wilem-Alexander in 2002. Trained as a private banker with a good understanding of emerging markets, she is the daughter of a former minister of Agriculture. Her father’s connection with the Junta of the late 1970s meant that her parents were not present at the wedding and watched her become Queen Consort in April 2013 on television at home. Maxima said that she was ‘at peace’ with the decision understanding that the occasion was a constitutional celebration.

Maxima is our hero not only because of the sterling work she has done over the years in the cause of financial inclusiveness but also for the skill with which she has carried out significant work alongside her duties as a member of the Royal Family. Our hope is that she will be able to continue to support this very worthy cause now that she is Queen and it does seems likely. Maxima appears to be very comfortable with and serious about the work she does in the limelight and could be a role model for other young royals. She is one of the few royal supporters of gay rights and has also done useful work to assist the integration of immigrants into Dutch society.

“At present there are 2,700 million people in the world without access to a financial service; that is to say 50% of the world population does not have access to financial basics, they can’t save, they can’t use money to invest, they can’t generate profits, and sometimes they can’t buy food for their children.”

In 2009, Maxima became the United Nation’s Special Advocate for Inclusive Finance for Development. She has described financial inclusivity as ‘universal access to a range of financial services for everyone needing them, provided by a variety of sound and sustainable financial institutions’. Two years after the UN appointment, Maxima became Honoury President of the Global alliance of G-20 for Financial Inclusion.


Doomsayers Enjoying a Field Day with Deutsche Bank

A tiny but apparently growing number of pundits is pretty sure the Deutsche Bank will shortly tumble and fall. As a systemic – if not essential – bank, the DB will not descend into insolvency on its own. Those in the know predict that at least two other main players, Citigroup and Barclays, will fail as well. Much like dominoes, scores of lesser banks will follow suit.

Financial mayhem, economic doom and societal gloom on an unprecedented scale are in store for the world. However, in the end gold will save the day purging the global financial system of funny money and ensuring a return to honest, as opposed to creative, banking.

Repeat the above about 10,000 times and you’ll soon understand the nature of the Internet and the practice of news aggregation: automated websites that fill an untold number of pages by pulling in news articles from across the net.

The rumblings regarding the Deutsche Bank’s future prospects, or lack thereof, originated with two pundits. One is a former head trader at the Royal Bank of Scotland who fancies the title “guerrilla economist”. The other is Mr Jim Willie, a statistician and economic analyst with some 23 years of experience under his belt.

"A tiny but apparently growing number of pundits is pretty sure the Deutsche Bank will shortly tumble and fall."

Mr Willie posted a rather longish essay on the GoldenJackass website. As the first part of the name implies, this site is a holdout of a peculiar species of economists clamouring for the return of the gold standard. In his essay Mr Willie sketches a dire future brought about by robber bankers whose despicable antics end up destroying the fiat monetary system.

For Mr Willie there is no doubt that gold is the answer to all our troubles to come. The essay, perhaps unintentionally, also reaffirms the old adage: There are lies; there are damn lies and then there are statistics (attributed to Mark Twain).

Meanwhile the guerrilla economist, also a harbinger of the Deutsche Bank’s demise, gathers a modest following. The American broadcaster, film maker, journalist and financial analyst Max Keiser, whose Keiser Report airs on the Russian RT network, late last month felt the need to inform the world via a tweet that the DB now is on “suicide watch”. Mr Keiser received this precious nugget of information from an unnamed source in Geneva.

Mr Keiser is the founder of the Karmabanque hedge fund which was recently described by The Guardian as a “fantastical scheme”. The newspaper also accused Mr Keiser of trying to carve out a living “beyond the normal forces and controls of society”.

So if we are to believe a cast consisting of a mysterious guerrilla economist, an apologist for the gold standard and a notorious schemer with airtime on Mr Putin’s mouthpiece, the Deutsche Bank and similarly large banks in the UK and the US are quite doomed. And so are we by the way.

Now that’s not to say that all is peachy and systemic important banks do not face serious issues. However the end is not nearly as neigh as some doomsayers are now proclaiming.


Reef of Contention: Spain Talks Tough on Gibraltar

[caption id="attachment_4881" align="alignright" width="270"] Gibraltar[/caption]

The Spanish government is taking a cue from Argentina: Whenever beset by apparently insurmountable problems and tanking approval ratings, find some external issue in order to rally the nation around the flag.

In times of domestic troubles, successive Argentine governments have found comfort and solace in the territorial dispute over the Falkland Islands. Taken off the backburner, it is sure to rouse the national spirit and draw attention away from more pressing matters.

With the economy stuck on hold and a corruption scandal getting perilously close to the prime minister’s office, the government of Spain could do with a national feel-good issue. As it happens, Gibraltar has come to the rescue.

From Madrid, Foreign Affairs Minister José García-Margallo on Sunday gave voice to Spain’s newly-found national indignation, warning the British that “the party is over”. The minister then duly proceeded to enumerate and explain the many nasty measures his government is cooking up to make life on The Rock exceedingly disagreeable.

"From Madrid, Foreign Affairs Minister José García-Margallo on Sunday gave voice to Spain’s newly-found national indignation, warning the British that “the party is over”."

This apparently needs doing since the Spanish seem upset over a few concrete blocks that were dumped into the sea from Gibraltar fishing vessels. These blocks are to form an artificial reef that in time may boost local fish stocks. However Spanish fishermen from across the bay complain that the reef might come to hinder navigation.

As always most attentive to its citizens complaints, the Spanish government promptly embarked on a campaign to express its annoyance. Previously relaxed border controls were ramped up resulting in monumental traffic jams on both sides of the crossing. People leaving or entering Gibraltar were made to suffer delays of up to seven hours in the searing heat while Spanish border guards leisurely checked their documents and belongings.

And this is just the beginning. Foreign Affairs Minister García-Margallo warned that Spain may impose a tax of up to €50 for anyone crossing the border into or out of Gibraltar. The proceeds of this tax would go toward defraying the added costs imposed on Spanish fishermen by the reef of contention.

Spain also mulls rerouting Gibraltar’s internet traffic, forcing online gaming companies operating from the British territory to use Spanish servers which in turn would bring them under Madrid’s unforgiving tax regime.

Other measures being considered are closing Spanish airspace to flights bound to, or departing from, Gibraltar Airport and subjecting the 6,000 or so Gibraltar residents that own property in Spain to a rigorous tax audit.

Meanwhile the Foreign Office in London voiced its “concern” over the hard-line attitude adopted by the Spanish government and is looking “further into the matter”.

Previous Spanish governments had adopted a much more conciliatory stance on Gibraltar, an attitude now vociferously denounced by Minister García-Margallo as “misguided”. However it is quite unclear what the Spanish now aim to accomplish with their act. A transfer of sovereignty is out of the question as few - if any - Gibraltar voters are inclined to approve a change in status.

Other than drawing attention away from pressing domestic issues – of which there are plenty – it is hard to gauge Minister García-Margallo’s true intentions. Perhaps there are none and this is just a case of a mid-summer flaring up of emotions. A bit more self-control and restraint might be called for.


Now Even More Powerful: Our Hero Helen Clark

Helen Clark, born in 1950, served as New Zealand’s prime minister from 1999 to 2008. She was the first woman to be elected PM of her country and upon leaving office was celebrated as the ‘Greatest Living New Zealander’ in a newspaper poll. Her term of office coincided with strong growth in the economy and government concern about sustainability (she tackled problems over climate change). Her administrations were considered very strong on foreign policy and international issues. She proved to be an enthusiastic supporter of free trade and during her premiership New Zealand became the first developed country to sign a free trade agreement with China.

“Any serious shift towards more sustainable societies has to include gender equality”.

As prime minister, Clark set out to strengthen the United Nations and, in 2009, upon leaving office, took up a key role at the United Nations Development Programme (UNDP). In March 2012 she confirmed that she would be seeking a second term in the office of Administrator overseeing an annual budget of $5.8 billion and a staff of 8,000 spread across 177 countries. The General Assembly confirmed her reappointment on April 12th this year. She was the first woman to lead the organisation and spearheads efforts to eradicate extreme poverty and promote good governance. Her proposed solutions to these problem centre focus on gender equality and reproductive health.

Clark is our Hero not only because of the endorsement she received from citizens after leaving office (in how many other countries would a former premier receive that sort of accolade?) but also because of the work she has taken on since leaving government. Forbes magazine ranked her 21st most powerful woman in the world in 2013 – up forty places since the days of her premiership.


Sheri McCoy: The Avon Lady

Sheri McCoy is one of the relatively few global business leaders to have risen through the ranks of a major multinational. Having been overlooked in the search for a CEO at Johnson & Johnson, where she had risen to the position of vice-chairman during her 30 year career, she has taken on that role at Avon. It may be fair to say that Johnson & Johnson’s loss has been Avon’s gain. McCoy did not take over the leadership of Avon at the easiest of times: the company’s financial reputation was at a low ebb following the SEC probe into bribery charges and the business model was under pressure in key markets. Avon needed a new leader and in McCoy they not only have someone whose personal value set is an excellent match with that of the company but at chief executive that also brings to bear the ability to identify  and exploit new opportunities and focus on the bottom line. Given Avon’s first quarter 2013 results there would appear to be good reason for the  optimistic view that a successful new chapter in Avon’s long history is about to open. We wish Sheri McCoy and Avon well as the Company continues to empower women across the globe.


Shareholder Value: Outdated and an Obstacle to Corporate Success

The pursuit of increased shareholder value is much overrated, may hurt corporations and is certainly not the legal requirement some CEOs hold it to be.

[caption id="attachment_4889" align="alignright" width="151"] Lynn Stout[/caption]

In her book The Shareholder Value Myth, legal scholar Lynn Stout of the Clarke Law Institute at Cornell University Law School spells out that under current US legislation boards of directors are beholden to the corporation only. Hence, they are to balance the interests of all stakeholders: Workers, customers, creditors, suppliers, society and - yes – shareholders.

Though recent court rulings and a few legislative initiatives seem to favour shareholders, the primacy of their interest is by no means established in US law. Indeed the notion that shareholder value must reign supreme is a relatively new one.

As a corporate ideology, shareholder value was first proposed at the University of Chicago in the late 1960s. It was seen as a way to revert the worrying decline in the competitive prowess of US industry. At the time it seemed to make some sense: Force executives out of their complacency (and ivory towers), have them pay more attention to the bottom line and encourage risk-taking and innovation.

However recent academic studies conclude that shareholder value as a guiding principle has now run its course. The latest financial upheavals have clearly shown that the more a bank is beholden to its shareholders, the likelier it is to fail and become the recipient of public bailout monies. A misguided focus on shareholder value must be added to the roster of causes for the crash.

"However recent academic studies conclude that shareholder value as a guiding principle has now run its course."

The body of empirical evidence undermining the wisdom of pursuing shareholder value is impressive. Since the notion took hold in the 1990s and became the guiding principle of corporate America, the performance of the stock market has been lacklustre at best while the number of publically traded companies has declined sharply.

The UK, where shareholders have a bigger say than most anywhere else, saw its corporate sector shrink close to insignificance. It now can claim only three spots on Fortune Magazine’s list of the hundred largest corporations in the world (two of which – Shell and Unilever – it has to share with the Dutch).

Business-guru Jim Collins, formerly a professor at Stanford University, has found that in the long run the most successful corporations are those that are guided by broader goals and principles than shareholder value only. According to Mr Collins maintaining a narrow focus on a return on equity does not ensure success and indeed might hamper a corporation’s growth and profitability.

Another complaint levelled against the relentless pursuit of shareholder value is that it might not be best for society at large, particularly when corporations exploit natural resources or depend on public trust as is the case with banks.

Furthermore, it doesn’t seem sensible to elevate shareholders, who may – and often do – sell their interests at a moment’s notice, to a position of maximum authority. A corporation at the mercy of jittery or fickle shareholders will find it difficult to credibly commit to any long-term plan or policy.

Former General Electric CEO Jack Welch in 2009 famously remarked that shareholder value is “the dumbest idea in the world”. While that may be somewhat of an overstatement, fact remains that it certainly is no panacea for the challenges faced by corporations today.

The current trend to award more and more power to shareholders, even in the face of monumental failures, is rather worrisome. Corporate responsibility and corporate community involvement – the central theme in the upcoming CFI.co issue – demand a more balanced approach and, perhaps, a rethinking of the corporations’ role in society.


Mohamed Al Jaber: The Arabs and Technology

Mohamed Al Jaber, born in Jeddah in 1959, is a UNESCO special envoy who likes constructive dialogue and so do we. He believes in building bridges between the Middle East and the wider world and we applaud him for this too.

As chairman and CEO of MBI International, Al Jaber has made a fortune from the development of hotel and resorts most of which are located in Europe. As is the case with many business leaders from this part of the world, he has diversified his portfolio and the MBI Group has food processing and oil service interests and has developed compounds for expatriate accommodation in Saudi Arabia. Al Jaber is the majority shareholder in a business valued in excess of $7 billion.

Our billionaire Middle East Hero is a prominent philanthropist who set up the very well organised MBI Al Jaber Foundation in London and has endowed a chair in Middle East studies at the capital’s School of Oriental and African Studies (SOAS). Last year the Foundation sponsored UNESCO’s Euro-Arab Dialogue Conference held in Vienna.

“It’s about time for the Arab world to be a contributor in the world of technology – and one day to be an exporter of technology.  I think it has all it needs to be a player… The challenge now is to move fast.”

The Foundation offers sponsorships for graduate students from the Middle East to study in Europe and anyone who is familiar with these programmes will confirm that young people from the region become the most effective ambassadors of their respective countries. Al Jabr likes to connect cultures through wilderness expeditions and there is little doubt that bringing young people together in this way breaks down the barriers very quickly. He is a strong backer of female education.

Through the generosity of Mohamed Al Jaber, restoration of mosques and manuscripts destroyed recently by militant Islamists in Mali is taking place. We are pleased to see that in more spheres than one Al Jaber is fighting back against senseless extremism.


Pepsico’s Indra Nooyi: Everything with Purpose

Indra Nooyi has been CEO of PepsiCo since 2006 and chairman since 2007. PepsiCo are famous for their product slogans and in an era of company mission statements, the Company has developed the slogan: “Performance with Purpose”. Under Nooyi’s leadership, PepsiCo have been striving to achieve their mission and of course they are a moving target. However, there is no doubt that in PepsiCo’s case they have a leader who is up to the task. In fact, “Performance with Purpose” would be an excellent way of describing Nooyi’s own career.” Everything with Purpose” might be even more accurate.

There is, of course, no single factor that enables leaders to drive their organisations forward through uncertain times but maybe in Nooyi’s case it is her ability to identify and nurture talent and turn that talent into a strong, cohesive team. Nooyi seems to have the ability not only to empathise with others needs but to almost walk in their shoes. She has taken this as far as writing to the parents of her executive team explaining how proud she is of their children. This attention to detail and thought behind the detail is what we feel sets Nooyi apart from the field since her days as an MBA student at the Indian Institute of Management, Calcutta. PepsiCo have survived intact the attempts to break up the company and look set to continue the global challenge to Coca Cola. Good reactions are to be expected after the recent R&D which is very much at the core of PepsiCo’s drive for “Performance with Purpose”.


Political Game Changer in Turkey: The Decline and Fall of the Deep State

[caption id="attachment_4918" align="alignright" width="256"] Istanbul, Turkey[/caption]

It has taken a court in Turkey almost five years to wrap up the trial of 531 suspected members of Ergenekon, an ultra-nationalist organization bent on overthrowing the government. On Monday the court handed down its last verdicts: 19 life sentences. The recipients were mostly army officers who were found guilty of attempting to stage a coup. Others who assisted in the preparations also received lengthy prison terms.

The verdicts reached during the Ergenekon trial establish two important parameters that strengthen Turkish democracy. The court ruled first that the conquest of power is a legitimate aspiration for any political grouping. The judges then went on to castigate those that pursue their aspirations of power outside the boundaries imposed by law.

However political analyst Hüseyin Kocabiyik, a former consultant to Prime Minister Tansu Çiller, doesn’t think Ergenekon has been entirely dismantled: “The group’s links to the media, the civil service and some political parties have yet to be severed.” Still Mr Kocabiyik considers the trial to have significantly contributed to Turkey’s political maturity.

"The court ruled first that the conquest of power is a legitimate aspiration for any political grouping. The judges then went on to castigate those that pursue their aspirations of power outside the boundaries imposed by law."

The armed forces now seem a largely spent political force. The high command earlier this week issued a statement to the effect that it respects and applauds the court’s verdicts. Also significant was the collective salute given to the prime minister at the most recent meeting of the Supreme Military Council. This novelty came as a direct result of the Ergenekon trial and underlines the primacy of civilians in Turkey’s political life.

The one loose end remaining concerns Başkent University Rector Mehmet Haberal who was one of the defendants. Mr Haberal, who owns a television station, was released for time served after being sentenced to 12½ years for his involvement with Ergenekon. In 2011 he was elected to the Grand National Assembly on the ticket of the Republican People’s Party (CHP).

It is widely expected that Mr Haberal will run for president in next year’s election. He’ll do so with the backing of both the CHP and the National Movement Party. According to Bekir Günay of the Istanbul University’s Eurasia Institute, Mr Haberal may yet be the undoing of the wider democratic accomplishments made possible by the Ergenekon trial: “As a politician, Mehmet Haberal strives to maintain the Ottoman’s state classical power pyramid of the military, the civil service and academia against which successive elected governments had to struggle.”

This is the Deep State: The shady but highly effective power structure that has ruled Turkey since the introduction of a multiparty system in 1946. The Deep State placed severe restrictions on the reach of elected governments. These were usually removed from power by the military in case of perceived overreach.

Next year Turkish voters may for the first time elect a president through a direct ballot. Mr Günay sees these elections as the perfect antidote to the politics of nostalgia as embodied by Mehmet Haberal.  “Turkish voters are not to be underestimated. They are quite mature and will undoubtedly opt for more democracy rather than less. The Ergenekon trial has shown the nation that nobody stands above the law. The court’s rulings give civilian politics a solid boost. It is now up to the politicians to show that they can handle this newfound authority.”


Empty Threats: Little to Fear from the Chattering Classes

[caption id="attachment_4935" align="alignright" width="279"] NSA Headquarters[/caption]

Western intelligence services are sounding the alarm over a possible terrorist attack soon to strike Yemen or another country in the Middle East. Spying agencies noted a significant increase of “chatter” prompting the US government to close its embassy in Sana’a and advise its citizens to abandon Yemen lest they become targets. By now the US has closed no less than 22 of its embassies citing these mostly vague threats.

Curiously enough the alarm coincided with the unveiling of the wholesale Internet spying operations run by the US National Security Agency (NSA). It would seem that NSA spies and their western minions have been intercepting mind-boggling amounts of data on any person – not just suspects – making use of an Internet connection.

It is just too good to be true for the NSA to produce a credible terrorist threat at the very moment the world is learning about the extent of its dubious, invasive and rather inefficient spying practices.

"These warnings, by now a regular feature of life, have a perfect failure record."

Intelligence agencies, however, see things quite differently and argue, rather unconvincingly, that the early detection of threats has prevented evil-doers from carrying out their sinister plans. The NSA just can’t lose: Sound the alarm and if nothing happens, it wins. If, on the other hand, an attack does take place – a most improbable scenario – it wins as well by claiming prescience.

This is logic perverted on a scale just as grand as the digital snooping operations brought to light by NSA whistle blower Edward Snowden who has now received temporary asylum in Russia. This prompted US president Barack Obama to cancel an upcoming tête-à-tête with Vladimir Putin. That will teach those recalcitrant Russians.

It never fails to amaze how a few disgruntled people with guns and a holy book can make a nation as powerful as the US give up a significant chunk of its civil liberties. Columnist Conor Friedersdorf of The Atlantic Monthly recently crunched some numbers in an attempt to put the threat posed by terrorists in perspective.

In the first decade of the century, terrorists killed about 3,000 American citizens (9/11) while gun violence claimed well over 360,000 lives. Over the same period drunk-driving accidents killed almost 150,000 Americans.

Yet untold billions of dollars are being spent on charting, analysing and recording the world’s digital communications in the largely vain hope of finding a wayward terrorist posing an actual threat.

US writer and lecturer Dan Gardner, author of Future Babble: Why Expert Predictions Fail and Why We Believe them Anyway, argues that it is not rational to part with liberties and do away with privacy in order to stay marginally safer from a threat that is over a thousand times smaller than the one suffered by commuters in the US. In 2011, 32,367 Americans died on their way to work.

While on these numbers, consider this: Ronald Bailey, science correspondent for Reason magazine, calculated that an American is four times more likely to be struck by a lightning bolt than by a terror attack.

It is high time we stop being captivated by vague and unspecific intelligence on terrorists and their mostly empty threats and rhetoric. The world has almost infinitely more pressing problems that need addressing.

If the US government insists, as it seems to be doing, that it is a good idea to throw billions of dollars at the elimination of a threat less likely to be fatal than a lightning bolt, then perhaps the rest of the world should consider moving on.


France Cordova: A Stunning Career Record

Inspired by Niels Bohr, Albert Einstein and the Apollo 11 Moon Landing, France Cordova became an astro-physisist and worked at Los Alamos for most of the 1980s.

Cordova, now aged 65, was the first of twelve children born to a Mexican father and American mother. After Los Alamos she carved out a stunning academic career becoming Chancellor of UC Riverside in 2002 and President of Purdue University five years later. She celebrated the latter appointment by hosting an ice-cream social (Handshakes and Milkshakes) and has become a role model for a diverse new generation of scientists.

Like our Spring Hero Freeman Hrabowski, France Cordova has little time for those who pigeon-hole students by saying that certain works is for boys and girls don’t go to graduate school. She is a champion of ambitious youth and works especially hard to bring females and minorities to the sciences. Cordova created a leading research university at Riverside, with its seventy percent representation of minorities, and developed Project Copernicus to encourage better science teaching.

"We know that the universe emits not only invisible light, but also X-rays and gamma rays, sometimes in fits and bursts. I marvel at all these things, and I marvel more at the evolution of thinking and discovery that has led to our understanding. I think sometimes, there is nothing finer, nothing deeper, nothing truer, than to be connected to the tide of the universe. I am thrilled to analyse data, to write papers to try to explain nature, to further, a little, the collective knowledge about the universe."

Our Hero Cordova was named one of ‘America’s 100 Brightest Scientists Under 40’ by Science Digest Magazine, was a winner of NASA’s Distinguished Service Medal and is a fellow of the American Association for the Advancement of Science.


Taiwan’s Cher Wang: A Different Set of Challenges

Cher Wang is chairman and co-founder of Taiwan’s tech giant HTC and VIA Technologies. Wang has encountered a rather different set of challenges to most entrepreneurs as the daughter of the late Wang Yung-Ching who was one of Taiwan’s most successful and wealthy industrialists. In certain respects it is harder to become a successful entrepreneur emerging from the shadow of wealth and reputation. For an entrepreneur this can be a real burden which many fail to overcome. By any measure Wang has succeeded in proving her own capabilities. Upon graduating in economics from Berkeley, she started her first job at a US computer company. It was there that she formulated her ideas for a new company developing and producing smaller lighter devices. HTC was born in 1997 and has gone on to become one of the world’s largest smartphone developers. One of Wang’s key strengths has been her ability to identify and fill the needs of key strategic partners. This has enabled HTC to secure partnerships with major mobile and software providers alike. But probably her greatest achievement to date has been in turning HTC into an ally of both Microsoft and Google.

Wang certainly seems to have inherited much of her late father’s business acumen but maybe most important she has learned from the example of her parent’s high personal values set. This has made her the trustworthy partner that could bring to HTC the support of two rival giants.


Complimentary Currencies: Development Tool on Trial in Kenya

[caption id="attachment_4945" align="alignright" width="275"] Bangla-Pesa: Alternative Currency[/caption]

The Central Bank of Kenya has asked the public prosecutor to charge American economist and former Peace Corps volunteer Will Ruddick with forgery. Earlier this year Mr Ruddick and five others were duly arrested by police and thrown in jail. Released on bail, Mr Ruddick and his co-workers now face criminal trial.

Will Ruddick leads the non-profit organization Koru-Kenya that aims to alleviate poverty in the slums of Mombasa. In May of this year the group succeeded in rallying the small businesses of a poor district known as Bangladesh around the idea of the Bangla-Pesa: An alternative and strictly local currency that would facilitate the exchange of goods and services.

The setup worked. Within a matter of weeks local businesses reported an increase in their turnover of some 22% on average. Employment levels are also on the increase.

However Kenyan authorities were not impressed. Mombasa is home to a secessionist movement and the colourful Bangla-Peso vouchers were initially seen as a possible precursor to a national currency of a future state. When it proved impossible to sustain these far-fetched suspicions with solid evidence, Will Ruddick and his co-workers were simply charged with forgery.

The Bangla-Pesa is at heart a zero interest loan. Any business wishing to sign up for the program must first find four others to vouch for its solvency. Once that is done, the new member gains access to a credit of 400 Bangla-Pesa (about €3.50). This money may then be freely spent at any of the 200 or so businesses already participating in the project.

“The Bangla-Pesa is merely a promissory note. As such it is a perfectly legal financial instrument. Moreover, the Bangla-Pesa cannot be exchanged for Kenyan Shillings. The state prosecutor has basically no case.”

The Bangla-Pesa is by no means unique. In a group of settlements collectively known as Kongowea, elsewhere in Kenya, a complimentary currency – the Eco-Pesa – was introduced as far back as August 2010 to facilitate and enable residents to tackle a serious waste management problem. The Eco-Pesa soon proved a success: It stimulated trade between local small businesses while simultaneously ridding the community of 20 tonnes of trash.

According to investment banker Jimnah Mbaru, who helped develop the Nairobi Stock Exchange, the criminal proceedings against Mr Ruddick make little, if any, sense: “The Bangla-Pesa is merely a promissory note. As such it is a perfectly legal financial instrument. Moreover, the Bangla-Pesa cannot be exchanged for Kenyan Shillings. The state prosecutor has basically no case.”

[caption id="attachment_4951" align="alignleft" width="151"] A demo Tano (5) Bangladesh Business Network Voucher[/caption]

Will Ruddick remains optimistic that the Kenyan courts will allow him and his organization to continue the project. The American has great plans and would like to see the system of complimentary currencies replicated not just in poverty-stricken Kenyan communities but all over Africa: “This system now has a proven track record of reducing poverty. It costs next to nothing to set up and manage. No other means of development is so cheap and effective”.

In Brazil complimentary currencies are now part of official government policy although here too the central bank initially tried to have the people involved charged with money laundering and forgery. However the Banco Palmas, issuer of Palmas vouchers, obtained a resounding victory when a judge ruled that it is a constitutional right for people to have access to credit. In a sneer to monetary authorities, the court also pointed to the fact that the central bank was doing “nothing of note” for poor people.

The Brazilian Central Bank has since embraced complimentary currencies as a tool for development and now actively supports such initiatives all over the country.

It is hoped that the Kenyan authorities will come to see the light as well. Alternative means of exchange do not, as some economists argue, drive up inflation or – conversely – devalue the official currency. When goods and services remain unsold and people unemployed, as is the case in many developing countries such as Kenya, adding liquidity to the system merely encourages productivity and employment, not inflation.

A crowd-funding drive is currently underway to gather funds for Mr Ruddick’s legal defense. A number of European NGOs have already pledged support and even the United Nations Non-Governmental Liaison Service (UN-NGLS) has now weighed in with an official letter of support.


The Magic Number to Watch in Dubai: 2020

[caption id="attachment_4972" align="alignright" width="227"] Dubai[/caption]

For Dubai the magic number is 2020. This is of course when the city-state hopes to host the World Expo. However, 2020 is also to herald the arrival of a new era. The emirate’s rulers seem decided to propel Dubai to the world’s forefront across a wide range of sectors: Fashion 2020, Tourism 2020 and – indeed – Strategic Plan 2020. In about seven years from now Dubai will yet again have been reinvented.

This latest spurt of development is the brainchild Dubai’s Crown Prince and Chairperson of the Executive Council, Sheik Hamdan bin Mohammed Al Maktoum (aka “Fazza”). A poet by heart, the crown prince is above all a man of grand gestures and ambitious plans some of which might even border the audacious.

Establishing Dubai as a global fashion hub by 2020 is just one of those less-than-obvious goals the emirate has set. Dubai Fashion 2020 includes the building of a massive design district to house both the creative and manufacturing elements of the industry. The plan aims to attract specialized businesses and investment from all over the world. Secretary-general Abdulla Al Shaibani of the Executive Council leaves little room for doubt: “With Dubai Fashion 2020 we seek to become the world’s premier destination for the industry’s top players adding yet another pillar to our economy.”

Meanwhile, Tourism 2020 is already well on its way to attaining the goals set. Visitor arrivals are up 11% over last year and now stand at 5.5 million. Average hotel occupancy rates have crept up to 84%. Director Helal Saeed Al Marri of the Department of Tourism says the country is now well poised to become a prime tourist destination as envisioned in the 2020 plan: “The most recent figures are most encouraging. We are attracting increased numbers of business and leisure travellers from a range of source markets.”

“With Dubai Fashion 2020 we seek to become the world’s premier destination for the industry’s top players adding yet another pillar to our economy.”

The average length of stay is up as well thanks to Dubai’s earlier investment in festivals and cultural events such as Shopping and Literature festivals and the Summer Surprises, a family and shopping oriented series of happenings.

The crowning achievement must be the World Expo 2020. Dubai put its candidacy up at the very last moment but now seems to lead the pack. The emirate competes against bids by Sao Paulo (Brazil), Izmir (Turkey) and Yekaterinburg (Russia). Last June the organizing body of the World Expo, the Paris-based Bureau of International Expositions (BIE), ruled that the bid by Ayutthaya (Thailand) did not meet its requirements and dropped the city from the list of contenders.

In November, 166 BIE delegates decide which of the four cities will host the World Expo 2020. As a country that seems to be booming not just economically but also with vitality and confidence, Dubai stands a good chance of taking the coveted prize. Its candidacy already has the backing of both France and the UK.

An economic impact report on the World Expo 2020 commissioned by the Dubai government predicts that the event will generate almost 280,000 jobs. Up to 33 million visitors can be expected to visit the emirate during the six month run of the event. In the build-up to the BIE vote, Dubai authorities are particularly keen to emphasize their country’s global outlook.

The World Expo 2020 features the theme Connecting Minds, Creating the Future. Sitting at the crossroads of the world, there is little doubt that Dubai is a place where connections are made. And as far as creating the future goes: The City State stands testimony to man’s ability to create something out of virtually nothing.

Analysts familiar with the inner workings of the Bureau of International Expositions expect the emirate to see its bid honoured. Not only has the World Expo – since its inception 162 years ago – never been held in the Arab world, the event could also do with some of the elegance, splendour, perfection and efficiency Dubai generally brings to hosting world-class happenings.

Reem al Hashemi, managing-director of the committee set up to promote Dubai’s Expo 2020 submission, is pretty confident of the city-state’s chances: “We possess the infrastructure, experience and credentials necessary to ensure the success of an enterprise of such a vast magnitude and I’m sure others will recognize these facts and vote accordingly.”


Motsepe: First African to sign the Giving pledge

Patrice Motsepe, aged 51, is a South African mining magnate born in Soweto who is now reputed to be the richest man in his country. This year he joined The Giving Pledge and has resolved to make over half his $2.4 billion fortune to charitable causes.

Motsepe is the first African to sign up and we hope that he will be an inspiration to others. His generosity is an answer to those who say that only the elite came to benefit from black empowerment post-apartheid. The stated objectives of the Patrice Motsepe Foundation are to improve the lifestyles and living conditions of the poor, disabled and unemployed. The Foundation supports female empowerment, young people and all marginalised South Africans.

"The State needs to create an enabling business and country environment, while business should keep its focus on not only creating value for shareholders, but on creating real value for communities and the people of South Africa."

A specialist in mining and business law, Motsepe was the first black partner in the firm Bowman Gilfillan. He was soon to set up a mining services business which brought profit-sharing to employees. Three years later, in 1997, with the price of gold at historic lows, he started buying up mines on very favourable terms from Anglo Gold and this would become the basis of his great wealth.


Kiran Shaw and Biocon: What a Team

Kiran Mazumdar Shaw is the founder and managing director of Biocon which is one of Asia’s leading biotech enterprises. Shaw’s success can be explained in part by the low expectations many male managers had of a woman’s ability to fulfil certain roles in the 70s and 80s. Her upbringing was such that she was strongly encouraged to believe that she could do anything her brothers could do. Unfortunately she found that the estimation of others was rather different. After graduating in Zoology from Bangalore University she went on to post graduate studies at Melbourne University with a view to becoming a brewmaster. Probably because of her sex, Shaw was unable to get the sort of employment she considered appropriate. As a result she used her scientific and brewing skills to found Biocon. Working from a garage in Bangalore with very limited starting capital she started manufacturing plant enzymes. Shaw may have had no formal scientific training but her business acumen was instinctive, a combination of an intuitive understanding of risk and team building expertise. And what a team she has managed to build over the past 30 years. Biocon has become one of the world’s leading pharmaceutical companies driven by Shaw’s belief in fair play and innovation. Shaw believes in putting something back into society and has not only used her wealth philanthropically but has also given generously of her expertise. For a young girl bought up by a professional family that instilled in her a sense of fair play and the belief that anything is possible, she has certainly answered those who rejected her and must have delighted her proud parents.


As Spain and Argentina Team Up, Royal Navy Sets Sail for Gibraltar

[caption id="attachment_4989" align="alignright" width="222"] Cougar 13[/caption]

A significant chunk of the Royal Navy has set sail for the Mediterranean and the Gulf region on what is billed a “routine deployment”. The British fleet now underway is to engage in a long series of exercises – collectively known as Cougar 13 – with friendly navies to hone both skills and procedures.

The first task awaiting the Royal Navy is altogether slightly less amicable. A few of the warships are due for a port call in Gibraltar. HMS Westminster, a Type 23 frigate, and some Royal Fleet Auxiliary vessels will tie up to the rock in order to show the flag and remind the Spanish watching from across the bay that Britain has no intention to let go of this relic of former times.

Whilst all parties involved repeat ad nauseam that the port call was planned months ago and is a most mundane and routine affair, the visit comes at a time of heightened tensions between the UK and Spain.

The Spanish government refuses to back down on its earlier decision to sharply increase custom checks at to lone border crossing that connects Gibraltar to the Spanish hinterland. Thousands of mostly Spanish commuters now regularly see their patience tried with waits of up to seven hours. The checks are a tit-for-tat response to a fishing dispute.

"Whilst all parties involved repeat ad nauseam that the port call was planned months ago and is a most mundane and routine affair, the visit comes at a time of heightened tensions between the UK and Spain."

Things are slowly getting out of hand. As Spain’s government mulls its next steps, Foreign Minister José García-Margallo is about to depart on a trip to South America for consultations with his Argentinean counterpart Héctor Timerman. Both Spain and Argentina pursue claims on British overseas territories.

Mr García-Margallo, not known for mincing words, is said to entertain thoughts of forming a common front with Argentina and taking the Gibraltar row to the United Nations. In fact Mr García-Margallo wants to give voice to his indignation from just about any rooftop: He now also considers legal action at the International Court of Justice in The Hague and possibly the EU’s own courts as well.

Over the weekend, Spanish Prime Minister Mariano Rajoy, beset by an escalating corruption scandal at home, said that his country is not engage in any nefarious scheming against Gibraltar and merely seeks to apply EU border regulations. While part of the union, Gibraltar lies outside the Schengen Area whose 26 members have abolished passport control at their common borders.

According to Mr Rajoy the border checks are not disproportionate and comply with all EU rules. However, in the same breath the prime minister let it be known that there is some wiggle room provided Britain agrees to talks on the status of its territory. In other words: the interpretation of EU rules may be relaxed once Britain decides to placate the Spanish.

Meanwhile the European Commission has acquiesced to a request from the Foreign Office in London to send a fact-finding mission to the territory. EU officials will arrive in early September and must determine if the border checks comply with regulations regarding the free movement of people as enshrined in the European charter.

The Gibraltar row is a typical case of much ado about nothing. Nearly all UK-Spain bilateral matters regarding Gibraltar were settled in 2006 after two years of negotiations in Córdoba. These Córdoba Agreements put an end to centuries of periodic flare-ups.

Spain’s Foreign Affairs Minister García-Margallo says he now wants to commit his country to a 180 degrees policy turn on Gibraltar. The minister’s motives for this monumental shift remain quite unclear, as does the objective of the exercise.

In the meantime, however, the Royal Navy may expect an exuberant welcome by the 30,000 or so residents of Gibraltar when its ships arrive in the famed harbour early next week.


Our Hero Justina Mutale: Postive Runway

Founder and CEO of the NGO Positive Runway, Justina Mutale was admitted to the UK’s Black 100+ Hall of Fame in July last year. The project sets out to identify top black achievers in Britain and we were not at all surprised to see her included. A Zambian, she was the first person from Southern/Eastern Africa to be included in the Hall. Most members go on to be mentioned in the UK Honours List.

Positive Runway was set up to fight HIV/Aids and tours the world leveraging the popularity of beauty, fashion, music and celebrity. The organisation benefits from Justina’s event management skills which were learned at the Commonwealth Secretariat and, of course, her undeniable good looks. The Miss Zamba Pageant has been designed by Justina Mutale as ‘Beauty with Purpose’ with winners raising funds to support children orphaned by AIDS. Positive Runway is represented in 40 countries across six continents.

"Positive Runway uses the allure of movie stars, models, fashion designers, musical artistes and others to shout out a string of positive messages to ‘Stop the Spread’ in the belief that when words and other formal efforts fail, celebrity, music, beauty and entertainment will speak effectively to the young generation."

In June this year, Ms. Mutale, who is also Diaspora Ambassador & Spokesperson of the Enough Food for Everyone If campaign, delivered a letter to David Cameron outlining views of what should be considered at the G8 summit in terms of food security.


Zhang Xin: The Sheer Scale of Achievement

Zhang Xin and her husband founded Soho - one of China’s most successful property businesses - a little less than twenty years ago. She has become one of the country’s most prominent self-made billionaires. There are thousands of Chinese entrepreneurs with similar rags to riches tales but what sets Xin apart is the sheer scale of her achievement. Of course Xin’s husband has played a major part in Soho’s success and it is impossible to know how successful either would have been individually (although it would appear to be a fairly safe assumption that they would both have done very well). What is clear is Xin’s passion for the design of buildings, her focus on strategy and the ability to raise capital in developed markets. These have all been major factors in her rise to fame. Xin’s design decisions have been bold - making a major contribution to the vibrancy of Beijing’s central business district. Maybe it is these strengths and her instinct for financial prudence ( Xin still refuses to fly first class) that has taken the business to the level that thousands of her fellow entrepreneurs can only aspire to. What is certain is that Beijing would not look the same without her.


Corruption as the Scourge of Development: The Case of Venezuela

[caption id="attachment_5002" align="alignright" width="299"] Corrupt: Radwan Sabbagh[/caption]

Corruption is the scourge of development. From outright stealing and cooking the books to kickbacks and price-fixing; corruption permeates some societies, stifles their growth and denies untold millions a measure of prosperity.

A case in point is Venezuela where billions of dollars have yet again gone missing. Leaked documents from an investigation by the military intelligence agency (DGIM) reveal gross misconduct at the state-owned mining company Ferrominera whose director Radwan Sabbagh, now under lock and key, siphoned off some 1.2 billion dollars. Some of his closest associates were also arrested.

The investigation into the misconduct at Ferrominera got off to a rocky start when the colonel sent to uncover the truth was found to have made tens of millions of dollars blackmailing the company’s management.

Venezuelan president Nicolás Maduro has vowed to tackle his country’s issues with corruption. He has a big job ahead of him. The corruption at Ferrominera is but the top of the proverbial iceberg. Things are even worse at foreign-exchange regular Cadivi.

"Venezuelan president Nicolás Maduro has vowed to tackle his country’s issues with corruption."

According to Central Bank Governor Edmée Betancourt fraudulent foreign trade transactions account for annual losses of between 15 and 20 billion dollars. This money is mostly lost through fake imports. Cadivi releases dollars at the official exchange rate of 6.3 bolívars to trading companies which then promptly sell those dollars on the back market for up to five times as much.

Venezuela ranks at the bottom of the annual Transparency Index that tracks corruption in 178 countries. In fact even notoriously shady places such as Zimbabwe and Haiti conduct their official business in a more honest and straightforward manner than Venezuela does.

Meanwhile suffer the poor. While the World Bank found that between 1998 and 2009 more than a quarter of Venezuela’s population was lifted out of poverty, results could have been even more impressive but for the constant drain of money from state coffers through dishonesty.

Poverty reduction schemes are now mostly under-funded and subject to monetary erosion with an inflation running at well over 39% annually. Political analysts fear that any increase, however modest, in poverty levels might unleash social unrest which in turn could undermine the government’s capabilities of forcing through the change that is needed to steer Venezuela away from the abyss it is now getting uncomfortably close to.


CFI.co Hero Mahindra on Giving in India

Anand Mahindra, born in 1955, was appointed chairman of the family conglomerate in August 2012 and has been managing director since 1997. He has been able to progress the business magnificently mainly through a succession of inspired mergers and acquisitions.

Mahindra is a notable Indian philanthropist with strong views about the importance of giving but takes up a position that is in some opposition to the Billionaire’s Club. In 2010, he donated $10 million to Harvard (he was class of 77) to encourage ‘cross-cultural and inter-disciplinary exchange of ideas in an international setting’. We are all in favour of that and further applaud Mahindra as a regular giver to a variety of good causes at home as well as abroad.

Our Hero is against the trend of billionaires promoting philanthropy by circling the globe and calling on their own. As Mahindra says, ‘Why wait for people to become billionaires before they become philanthropists?’ He goes on to comment that, ‘While it is nice to get large sums from billionaires, perhaps the real challenge is getting five million people to donate one hundred rupees each year. To me, philanthropy is not a matter of a one-off donation. It’s a matter of an inner urge and a culture. And to be sustainable, philanthropy needs to become a part of everyone’s value system and of everyone’s culture.’

“The culture of individual giving does seem to have become somewhat diluted in India in this era of ‘I, me, myself’. In the World Giving Index created by the Charities Aid Foundation, India ranks a lowly 134th out of 153 nations in terms of the percentage of population that gave to charity… So, although we come from a culture where wandering sadhus and bhikshus could once live entirely on the charity of the people to meet their needs, the rise in incomes could well be leading to a drop in generosity towards others.”

Mahindra set up the Nanhi Kali Foundation in the 1980s when a modest financial donation could sponsor the education and wellbeing of a child for an entire year. This experience taught him that it is not the desire to give that is lacking: what is required is proven good governance and organisations that people can trust to use their money effectively and honestly. We agree wholeheartedly with that analysis. And, as Mahindra says, ‘Donors rarely abandon a child they have helped set on the road to a brighter future’.


Alison Cooper Calls for Realistic and Intelligent Targets

Alison Cooper is the CEO of Imperial Tobacco and her track record since taking up this office in 2010 has clearly demonstrated her leadership skills. She is carefully manoeuvring the company through the challenges the tobacco industry faces while maximising profits and diversifying into an FMCG business. After graduating in Mathematics, Cooper worked for Deloitte Haskins & Sells (now part of PwC), joining Imperial in 1999. We thought it fitting to include Cooper not only for her leadership skills but for her forthright views on the proposed quotas for female board member representation. Cooper said during a recent Bloomberg interview, “I am not someone who supports quotas because quotas are around the demand side of the equation and you need to look at the supply side. And quick fixes on the supply side are not necessarily quality fixes. I don’t like to think we’re a commodity.” We are inclined to agree with Cooper. If the achievements of Alison Cooper’s peers in our list of 10 female businesses are anything to go by, helping to facilitate women’s rise through the ranks to build up organisations can only add to the talent pool. The more talented individuals we have - be they men or women - that can fulfil their full business potential, the greater the opportunities for employment and sustainable growth. Maybe policy makers should be making greater efforts to achieve this; the economic benefits of ensuring that more talented women are able make the kind of contributions of Cooper and her peers here have achieved should not be underestimated. So let’s forget about quotas and look for realistic and intelligent targets.


Africapitalism: A Way to Unleash Africa’s Potential

[caption id="attachment_5024" align="alignright" width="196"] Tony Elumelu[/caption]

Doing well in business whilst doing good for Africa. That is the challenge set by Nigerian banker-turned-philanthropist Tony Elumelu who earlier this week announced a five-fold increase in the number of grants his foundation provides to business start-ups.

The Tony Elumelu Foundation aims to identify new businesses that can contribute to Africa’s development through both innovation and social engagement. Mr Elumelu wants to see the private sector take a leading role in moving Africa forward and commit to the continent’s future through long-term investments that create economic prosperity and, by extension, social wealth.

The Nigerian banker, a disciple of Harvard Business School professor Michael Porter, calls his development strategy Africapitalism which seeks to equip the continent with a clear competitive advantage. For Mr Elumelu there is little room for doubt that Africa will shortly find, and claim, its niche in the world economy: “With the level of talent we currently see, there should be no reason why Africa cannot deliver the world’s next Bill Gates or Steve Jobs.”

Tony Elumelu is the architect of Sub-Saharan Africa’s largest bank merger when he acquired, in 2005, the United Bank for Africa and fused it with his own Standard Trust Bank. Barely five years later, the bank resulting from this merger had expanded into 19 African countries and was serving well over seven million customers. Mr Elumelu retired from banking in 2010 to found Heirs Holdings, an investment vehicle with interests across a broad range of economic sectors.

“With the level of talent we currently see, there should be no reason why Africa cannot deliver the world’s next Bill Gates or Steve Jobs.”

Through his foundation Mr Elumelu now tries to encourage young entrepreneurs to follow in his footsteps: “My objective is to prove that the African private sector can indeed be the primary generator of development. This can be accomplished by enhancing the competitiveness and management capacities of private business.”

Mr Elumelu strongly objects to Africapitalism being branded “capitalism with an African twist”. His economic philosophy encompasses rather more: “I see Africapitalism as a rallying cry for empowering the erstwhile much-maligned private sector to drive the continent’s economic and social growth.”

The timing is right. At the second annual Forbes Afrique Economic summit in Brazzaville, Congo, regional leaders emphasized the need to move away from development models that rely too heavily on government guidance and state participation.

The summit’s host, President Denis Sossou N’Guesso of Congo, delivered a remarkable speech in which he called upon governments to allow for more liberal policies that foment the emergence of a strong and entrepreneurial middle class that will create “a better future for Africa.”

This appeal was echoed by the four other heads of state attending the summit in Brazzaville. President Blaise Compaoré of Burkina Faso appealed to African businesses to invest in the future by replacing the short-term, “quick-profit” mentality prevalent up to now with a more sustained commitment. Mr Elumelu added that short-term investments generally fail to make an impact: “It took the United Bank for Africa all of twenty years to become a major player. Now the bank has both the size and scope to make a difference.”

Former UN Secretary General Kofi Annan, also attending the Brazzaville summit, drew attention to the need for good governance. Mr Annan said that Africa’s future success rests on three pillars: Peace and security, the rule of law and economic development.

The rule of law in particular is essential if private enterprise is to flourish and prosper across Africa: “Without it business stands no chance of contributing in any meaningful way to lasting development.”

Mr Annan concluded that Africa is going through “momentous times” and said the continent is well poised to benefit from the untold billions of dollars now side-lined and holed up in tax havens around the world. Once Africa can convince investors that these monies can be better spent in supporting a nascent and vibrant local business class, the continent’s development will take flight.