Rwanda Rwanda

I am now in Kigale, the capital of Rwanda. Most people have heard about Rwanda because of the 1994 genocide. The first thing I did when I got here was visit the genocide museum. The museum is very well done. I came out of the museum learning much more about the genocide than I had known previously. It was also more moving than I had expected, people sobbing while reading the displays and watching the videos about the horrors of the genocide. There was also a broader memorial to the other genocides of the past century on the upper floor and pictures and short bios of children that were victims of the genocide.

After visiting the museum, I wandered around the city a bit to get myself oriented. Everyone is generally pretty friendly and although Rwandans tend to stare at me a lot compared to other countries I've visited, I felt it was pretty safe throughout the city. Rwanda is also known for its conservation efforts and clean streets. They ban plastic bags in the country and every third Sunday of the month, Rwandans are required to clean up the streets as part of a community service program. Finally, most Rwandans do not speak English very well, speaking French more commonly. Therefore it was difficult to communicate and interact with a lot of locals. I found it frustrating since a lot of the Rwandans are friendly and wanted to start up conversation with me.

Traveling Through East Africa

Today I head to Rwanda to experience a bit of a different side of Africa. I am hoping to secure a gorilla tracking permit so that I could go and see some gorillas in the wild. The area I am visiting is where Diane Fossey did her work on the mountain gorillas and the book/movie, "Gorillas in the Mist" is based, Volcanoes National Park in Rwanda. I would also like to visit the genocide museum and the hotel where the movie "Hotel Rwanda" was based on, which I watched in South Africa just before leaving for Rwanda.

Afterwards, I am not quite sure what I will be doing. I am debating between climbing in Kilimanjaro and just hanging out near the Rwenzoris mountain range in Uganda. On September 1, I take a flight from Dar Es Salaam, Tanzania back to the U.S. So between now and then, I am not sure what I will be doing exactly, but I am looking forward to seeing more of Africa. This point forward, most of my blog entries will be able my travel experiences in East Africa.

Lessons Learned

Today was my last day at HBD. In the end, I had a good experience in my internship, learning about investing in businesses in Africa and gaining an understanding of certain industries, which should be useful in my career in the future. I had a conversation with somebody from the World Bank yesterday and she asked me about how my experience had been and what I thought I had learned from working in South Africa. I hadn't thought about it much until just then, but this was my response.

Because a segment of the population in South Africa has high education levels, it makes sense to seek out entrepreneurs with ideas to create meaningful businesses. HBD is one of the few true venture capital firms in South Africa and probably the rest of Africa as well. However, most of the products and services that these entrepreneurs offer are not suited for markets in Africa. Instead, they usually look to the U.S. or European markets as places to eventually scale up in their business plans. This means that these products and services that the entrepreneurs are developing are not necessarily going to benefit the people living in Africa, but rather those living in developed markets.

Therefore, from my perspective and understanding, VC in Africa is really an outpost for talent and ideas to bring back to the developed markets. In otherwords, VC in Africa is just an extension of the bigger developed markets of the U.S. and Europe and not necessarily an integrated part of the African markets. This model seems to be useful for HBD VC, but wasn't necessarily what I expected when I came here.

I imagine the private equity markets might be a different story, since they invest in companies in more mature industries that may have a footing in African markets, such as retail and real estate. But my goal was to understand how entrepreneurship in high growth companies in Africa might spur growth in the rest of the economy, and I haven't seen too much evidence of that as of yet.

Medical Treatment in Botswana

Dial 'M' for Mobile Payments

During my time at HBD Venture Capital, I’ve looked a lot at the mobile payments industry. One of HBD’s portfolio companies is Fundamo, a mobile banking and payments service provider, which works with financial institutions and mobile phone operators to create products and solutions in the mobile payments space.

The growth of mobile phones is recognized as one of the few success stories in Africa. Industry watchers mostly attribute the growth of mobile phones in Africa to a lack of infrastructure, creating the demand for communication systems based on mobile technology. The prevalence of mobile phones has already surpassed the prevalence of computers and the internet in Africa. Prepaid cost structures and cheap phones produced by handset manufacturers make mobile devices affordable for the poor. Some even argue that mobile phones could help alleviate poverty by providing the poor with access to services. For example, fishermen are able to use their mobile phone to get pricing information from local markets, creating a better match-up between supply and demand and more profit for the fishermen. See this CNN article for more coverage on the mobile phone boom in Africa.

Therefore, there is a lot of hype over the mobile payments industry and there are several key companies that play in this space. However, because the mobile payments industry is pretty much in its early stages, it is hard to figure out what technologies are hype and what will become the enduring standards. Here is an overview of the industry and where I think it is going:

First thing that is confusing is the terminology. Mobile payments, mobile banking, mobile finance, what does it all mean?

• There are three different categories of products and services your phone can provide: mobile banking, mobile payments and mobile commerce. These services can also be called mobile transactions.
  
• Mobile banking is basically internet banking services extended to the mobile device, such as checking your account balance and paying bills.
  
• Mobile payments includes any products and services for use by the mobile phone to make payments or facilitiate transactions. This includes wallets, domestic transfers, cross-border remittances and proximity payments. None of these technologies are standardized and there is a lot of debate to which ones will take off and which ones will flounder.
  
• Mobile commerce is a catch-all term that includes anything from coupons, advertising, to ticketing (imagine swiping your mobile phone to access the subway system or to fly on a plane).
  

Who are the major industry watchers?

• From what I could gather, the Yankee Group and Juniper Research are the two main authorities for research on the industry. You will find some information on their websites, however most detailed reports costs a lot of money.

What is the current market size and/or growth potential?

• Your guess is as good as mine. Yankee Group and Juniper Research attempt to estimate this, however, even their own estimates vary wildly from month to month. However, the growth of mobile transactions should mirror the growth of internet commerce and its trends (with an obvious 5-year lag). If we were to characterize growth in three stages, emergence, explosion and ubiquity, internet would be coming out of its explosion stage and into its ubiquity stage, whereas mobile would still be in its emergence stage. One thing is for certain, growth is inevitable.
  

What are the "hot" techologies in the mobile payments space?

• NFC or "Near Field Communication" is the use of RFID technology to create a proximity payment solution. What this means is that you will be able to pay for a good at a merchant by swiping your mobile phone in front of a POS terminal, instead of having to take out your debit/credit cards. Only problem with this is that there is a significant amount of capital investment required for this system to be fully implemented. However, a large retailer such as Wal-Mart, fed up with paying fees to Visa/Mastercard, may decide to implement such a system.
• International remittances is a $318billion market currently dominated by MoneyGram and WesternUnion. Due to the ubiquity of mobile phones, even in poor migrant communities, the international remittances solutions may be a big market for mobile payments.

What are the biggest concerns or risk factors for the industry going forward?

• Since the industry is still in its early stages, there is still much need for the standardization of technologies. For example, will the use of SMS to transfer funds be the dominant mode of payments. Or will NFC-enabled devices take off?
• Business model and revenue sharing issues still pose a big challenge for the industry. For example, how will financial institutions and mobile phone operators work together to create a workable business model where both parties benefit.
• Financial regulations of financial transactions, especially cross-border transactions, require legal knowledge and the ability to work with and educate regulators from various countries.

In conclusion, the mobile banking and payments industry presents an attractive opportunity for entrepreneurs, and a possible interesting and innovative way to serve the unbanked in the developing world. Growth is inevitable, although there are certainly a number of challenges that need to be overcome in order to realize this growth. A successful entrepreneur in this space will have the technical expertise and marketing ability to convince consumers to adopt their products and will also have the ability to manage the complicated external environment and various players in the supply chain.

Climbing Table Mountain

One tourist attraction that is a must do while in Cape Town is to go to the top of Table Mountain, which is a range of mountains that overlooks the city of Cape Town and is what makes the city look so picturesque. I’ve hiked up Table Mountain three times since I’ve been in South Africa. It’s probably been one of my favorite things to do here. You can either take the cable car up to the top, or hike up one of the numerous trails up to the top. It’s not an easy hike. It is mostly a steep incline to the top on stone stairs. It can take anywhere from 1 to 3 hours to the top, depending on which route you take. Table Mountain attracts a lot of clouds so it is important that you attempt the climb when it is a sunny day, otherwise you might end up with bad weather on the way down, which is not the safest thing to do. Also, local South Africans will warn you not to go alone because there is a risk of muggings, but as long as you stick to the popular routes and go on a sunny day, it should be pretty safe. The most popular route goes up a gorge to the left of upper cable station, if you are looking at Table Mountain from the Gardens area. To get to the trailhead, just keep going on the road past the lower cable car station for another 5 minutes and you will see the trailhead.

Once you reach the top, there are beautiful views of one of the most beautiful cities in the world. There are clear views of the Atlantic and Indian Oceans. Also you will be able to see the Table Mountain range all the way to Cape Point on a clear day. Also, there are plenty of extreme sports to participate in at Table Mountain, including abseiling, hanggliding and basejumping. At the upper cable car station, you will meet all the other tourists that took the easy way up. There is a restaurant and gift shop. (Great place to pick up some water and an apple). One thing I would not advise you to do is run all the way back down. Ok, that’s what I did and now my calves are really sore.

Happy Birthday Nelson Mandela

Today the first democratically elected president of South Africa, Nelson Mandela, turns 90. Happy birthday!

Tsotsi: Movie Review

When I asked South Africans for a movie recommendation from their country, almost unanimously they mention Tsotsi, which is a story about a boy from the Soweto township (near Johannesburg) that commits violence and crime to get through life. However, an event while he is committing a crime turns him towards a path of redemption. The movie won an Oscar in 2005 for best foreign film and I would recommend it to anyone looking to get a glimpse of South African life in a township.

Driving Down to Cape Point

Every tourist that visits South Africa should make plans to drive down to Cape Point. It is one of the most beautiful drives I’ve ever been on, rivaling the Pacific Coast Highway in California for scenery. However, the drive is much shorter than driving the California Coast. You will need at least 3-4 hours if you make quick stops along the way. Leave a day for a more leisurely approach. I went with a group of travelers I met while in Cape Town but you could easily join a tour guide/bus.

Driving from Cape Town south along the east coast of the Cape Peninsula, you’ll want to make stops along the sleepy but scenic towns such as Kalk Bay/Muizenburg and enjoy some local cuisine with ocean views. We stopped by Olympia Café in Kalk Bay, which has a really nice breakfast/brunch menu and is a great way to start off the day. In Muizenberg, you can take surf lessons, but the breaks are a bit too easy for non-beginners. Then we drove down to Boulder Beach, where you can see African penguins. Funny creatures. Then there are a lot of other small towns, including Simonstown, and a naval port (I forgot what it was called).

Finally, at the tip of the Cape Peninsula, you’ll reach a park where you have to pay an entrance fee in order to get to Cape Point. The park is vast and you’ll see baboons along the way. Stay away from them, they can be a bit aggressive. There is a parking lot where all the tourists congregate to make up the trail to Cape Point, where you get views of where the Indian and Atlantic oceans meet. There are steep drops to the beach floor so be careful. There are many side trails and one could spend several hours exploring the area.

On the way back up, we took the western route up the Cape Peninsula. By this time the sun was setting, because we spent more time at Cape Point then originally planned. Having seafood at a restaurant at Hout Bay was the plan, but then we got lost so we had pizza at a local joint. The drive up to Cape Town on the western coast included some windy and steep roads, with really nice views. However, it was dark when we were driving so couldn’t enjoy much of it.

Bungee Jumping World's Highest

This past weekend, I drove with 3 others to Jefferies Bay to go bungee jumping for my first time at Bloukrans Bridge. Apparently it is the highest bungee jump in the world at 216m or 708ft. There have been higher jumps, but none commercially available. To get to Bloukrans, we drove on the so called Garden Route, which is a stretch of highway along the coast in South Africa with a lot of sights and nice towns to visit along the way. I traveled with Chyrstal, Martin and Linan. Chrystal is from Holland and is doing some volunteer work at a children’s home in Durbanville, the same town I am working in. Martin is from Norway and came to Mozambique to do some volunteer work and is now traveling in Africa. Linan is from the U.S. and is doing an internship for a refugee organization in South Africa. We all met in Cape Town a few weekends ago and kept in touch since we are planning to stay in South Africa for a while.

The drive took about 7 hours to Jefferies Bay. It would have been a nice drive, except it was raining most of the day. The night we got to Jefferies Bay, we were all tired so we had some dinner and called it an early night. The next morning we left for Bloukrans Bridge, about an hour drive from Jefferies Bay. It only takes about 6 hours from Cape Town but we wanted to stay at Jefferies Bay for the weekend. We slammed some Red Bulls as we anxiously arrived at Bloukrans. Martin was the only one that had bungee jumped before. Linan was still deciding whether to do it. She finally decided to jump once we got there. I never had jumped, but I figured, how bad could it be?

Walking on the catwalk right below the bridge was the first time my heart really started racing. The catwalk comprised of a flimsy thin wire mesh keeping me from falling to the gorge floor. I kept telling myself to look forward, but kept looking down as I walked to the jumping stage. Once at the jumping stage, everyone was excited, music was pumping and the employees were prepping us with instructions on how to jump and so on. We all were called up to the platform in no particular order. I was last of the four of us. When I was getting suited up, my heart started racing again. The guy who was helping me kept saying random stuff I couldn’t understand with a heavy Afrikaans accent. I just wanted him to shut up so I could concentrate on jumping. Once I got to the edge, I had to place my toes over the edge. I got real freaked out when I looked down, so I immediately looked forward. Then the countdown began, 5, 4, 3, 2, 1 and I took a leap of faith.

The jump was a serious trip. A rush of adrenalin, feelings of disbelief/surrealism, happiness that I was still alive and worry since I still had to be pulled up to safety. It happened real fast but I remember seeing the ground getting closer and closer, and then farther and farther as I bounced back and forth. Blood rushing to my head and pressure on my eyes as I was hanging upside down. Finally, I was pulled up by the guy hanging from a rope for a job. What a job. Then I was pulled back to the jumping platform and I was happy to be alive. We went back to Jefferies Bay and got trashed
.

Transition to What?

In light of today's summit talks between the leaders of several African nations and Zimbabwe, one of the proposals on the table is to form a transitional government between Mugabe's government and the opposition under the leadership of Tsvangirai. Notably absent from the talks is South African President Thabo Mbeki. A transitional/provisional/caretaker government would perform the administration functions of the government while tensions eased and electoral reforms pursued. The main question is, who will oversea the process and will the transitional government yield a free and fair election in the future?

Calculating Market Size

I read an interesting article about how although Belgium has about the same number of internet users as South Africa, the size of the internet advertising market is $236m vs. $30m in South Africa. With a population of over 47m people, $30m seems dismal compared to other countries and one might interpret this as large market potential.

However, the number of tax payers in South Africa numbers only 4.6m. Many firms that estimate South Africa's market potential miscalculate by basing it on its population or by extrapolating per capita GDP times population. However, when calculating market potential in South Africa, one must be cognizant that South Africa has a 50% poverty rate and a seriously polarized society. One cannot simply use metrics used in the U.S. or Europe to calculate market size in South Africa.

South Africa Needs to Play a Bigger Role in the Zimbabwe Crisis

The opposition to Mugabe's government in Zimbabwe recently announced the withdrawal from elections, due to its belief that a fair and free election in Zimbabwe is no longer achievable. Opposition leader Morgan Tsvangirai has asked the United Nations to intervene in Zimbabwe. However, South Africa and the Southern Africa Development Community (SADC) have to be an active player in any negotiations with Zimbabwe. A denounciation from the SADC would have much more legitamacy than from the West, since the Mugabe government is so entrenched in anti-white rhetoric/policies.

However, South Africa continues to play a limited role in any upcoming negotiations. Aziz Pahad, the South African Foreign Affairs Deputy Minister, stated "[It] is a decision the Zimbabwean people must take as there is no country that has the right or authority to impose that decision. It is not in our power to say anything to the Zimbabweans about the processes or what form of government they must have at what stage." However, at what stage does South Africa decide to get involved, especially considering there is little evidence that the people of Zimbabwe are going to have any say in the outcome regarding its future? Are they going to wait until we have another situation similar to what happened in Kenya? South Africa continues to be a shining example of democracy in Africa, yet it does little to promote it in its neighboring countries.

The Land of Opportunity

The idea of doing business in Africa is often met with critics and predictions of doom and gloom due to its unfavorable environment. Political instability, conflict, red tape, corruption, inadequate infrastructure and disease are often cited for reasons why you should not invest in Africa. The World Bank issues an annual Doing Business report that shows countries in Africa on average are some of the worst places in the world to do business, and the region with the lowest growth in reform to promote business.

However, there are examples of successes that show that opportunities exist in the vast continent of Africa. For example, mobile phones have been suprisingly profitable. An article in the Economist, Africa Calling, dicusses how Mr. Michael Joseph of Safaricom, took over a company in Kenya with 20,000 customers in 2000 and grew it to a business with 10.5 million customers today. His boses at Vodacom (controller of Safaricom) predicted the market would top out at 400,000 customers. They were off by an order of magnitude and Safaricom recently made an annual profit of $223.7 million.

Graham Mackay of SABMiller is also very optimistic about opportunities in Africa. Expansions of breweries into places like Uganda have been very successful. With interests in 29 African countries and investments of $2.4 billion, SABMiller is one of the largest investors in southern Africa. Mackay says, "If there was any more of Africa, we'd be investing in it." Since 40% of the economy is informal, local knowledge is extremely important. Investing in Africa requires a different set of skills, argues another article by the Economist, Different Skills Required. Business managers cite as the most common constraint on doing business, complicated logistics, poor infrastructure, abundant red tape, shortage of skilled labor and HIV/AIDS.

All businesses face challenges. And as the article in the Economist argues, some require a different set of skills. The set of skills vary depending on the type of environment and industry your enterprise resides. A large corporation in the U.S. will have developed a set of complex skills useful for operating in places with a strong rule of law, developed free markets and formal institutions. These type of organizations are not well-equipped to deal with a complex external environment and informal institutions in places such as Africa. However, I would argue that opportunities exist for an organization that is highly flexible and is primarily focused on developing core competencies such as local knowledge and working with informal networks.

Placing businesses into buckets of categories based on the type of challenges they face that is core to their success, I would place them into the following categories:

INNOVATION

• high growth industry
• heavy investments in technology or R&D
  
• business friendly environment with little or no government intervention and regulation
• on the technology frontier
• access to high skill labor
  
• i.e. Apple and Intel

SCALE

• mature low but steady growth industry
• business friendly environment
• drive profit by cost-cutting and/or increasing scale
• access to high skill labor
  
• i.e. GE and Kraft
  

ADOPTION

• transitioning business environment
• adopt global business practices and technologies to a new environment
• some access to mid to high skill labor
  
• government intervention and regulation, although business friendly
• i.e. Lenovo and Genpact
  

PIONEER

• unfavorable or conflictual business environment
• significant resources dedicated to adopting global business practices and technologies to a new environment (discovery costs)
  
• limited access to mid to high skill labor
  
• high degree of government intervention, regulation, rents
  
• i.e. Safaricom and SABMiller
  

In conclusion, every business focuses on building a skill set appropriate to the type of challenges they face. This is no different for a business that operates in highly unfavorable business environments such as Africa. It is erroneous to believe that you cannot do business in Africa. Instead focusing on on developing the appropriate skillset (i.e. lowering discovery costs, interconnectedness with government, utilizing informal networks and so forth), could yield a vast continent of opportunities for the right players.

Note: Criminal organizations effectively utilize informal networks. More on this in a later blog.

How Much Does Your Gov't Spend on You?

Some of my colleagues will be working in governments such as Southern Sudan, Liberia and Cape Verde to promote development. I charted the government expenditures for our respective countries per capita and in total (let me know if my numbers are inaccurate).

Liberia clearly has the smallest budget in both total and per capita terms. With $27 per person, the government of Liberia has to rebuild the country from scratch, having experienced two civil wars as recently as 2003. With $27 per person, the government of Ellen Johnson-Sirleaf is charged with rebuilding roads, developing a modern health care system, providing clean water and food distribution infrastructure and providing education and social programs. They have a big task ahead of them. Good luck Team Liberia!

2002: A Space Odyssey - Mark Shuttleworth

In 2002, Mark Shuttleworth became the first African in space, as a participant aboard the Russian Soyuz TM-34 mission, paying approximately $20 million (USD). Besides his interest in space, Mark is actively involved with the development of open source software and other internet technologies, including ownership of Canonical, the commerical sponsor of Ubuntu, a free Linux-based operating system. He founded Thwate in 1995, which specialized in digital certificates and internet security. He then sold it to Verisign in 1999 for about $575 million (USD).

In 2000, Mark started HBD Venture Capital, a fund to invest in startups and entrepreneurs in South Africa. With a $150 million (USD) sized fund, HBD has about 11 portfolio companies, in the media, telecom, internet and retail industries. HBD is one of very few venture capital firms in South Africa. He also created the Shuttleworth Foundation with the aim of driving social innovation in education.

T.I.A. - This Is Africa

After watching the movie, “Blood Diamonds,” a colleague and I used the phrase “T.I.A.” whenever something went wrong at work. Now that I am in Africa, I am able to use the phrase with a bit more authority.

I was at a bar in the Long Street area of Cape Town this weekend hanging out with some other travelers, interns and students. A beggar woman strolled into the bar and started asking for some donations. Unsuccessful at winning our money, she eventually left and we thought nothing of it until one of us realized that she had unwittingly stole a watch off of his hand and camera from his side pant pocket. I’ve seen informal redistribution before but never with such skill. T.I.A. – This Is Africa.

Dreaming with BRICs

For one of my first projects at HBD Venture Capital, I completed a study of trends in the private equity and venture capital markets for the BRIC countries. BRIC stands for Brazil, Russia, India and China. A research report by Goldman Sachs in 2003 argues that the BRIC nations will overcome the G6 nations in GDP by the year 2050. The paper outlines the growth projections underlying its thesis and argues that China and India will become the dominant global suppliers of manufactured goods and services and Brazil and Russia will be the dominant suppliers of raw materials.

Although I agree that the economies of the BRIC nations will be a force to reckon with, there are a lot of factors that need to be overcome in order for the projections to hold. For instance, the World Bank issues a ranking of “Doing Business” for all the countries in the world. Singapore, New Zealand and the U.S. are ranked in the top 3, while the Democratic Republic of Congo is ranked last of 178 countries. Brazil, Russia, India and China are ranked 122, 106, 120 and 83, respectively. The ranking is done on a number of indicators, such as:

• Indicator: ranking of Brazil, Russia, India, China
• Starting a business: 122, 50, 111, 135
• Dealing with licenses: 107, 177, 134, 175
• Protecting investors: 64, 83, 33, 83
• Enforcing contracts: 106, 19, 177, 20

In other words, the World Bank study supports the argument that there are a lot of improvements that need to be made before the economies of the BRIC nations can sustain long-term growth.

A summary of trends in the private equity and venture capital markets for the BRIC countries:

Brazil

• Second wave of growth after the 1998-2002 financial crisis, spurred by improvements in legislation and policies to reduce legal and credit risk to promote long-term investment, and not attract the volatile and speculative capital inflows of the 1990s which led to the crisis
  
• One of the 10 most entrepreneurial countries according to the Monitor Group

Russia

• Strong government influence on supporting innovation sectors (i.e. state-supported funds such as $1.2bn Russian Venture Company created in 2007 and focus on technoparks, technology transfer centers and special economic zones)
• Technology sectors still in early stages (IT sector relatively new and older scientists/academia not familiar with commercialization of technology)

India

• Crowded PE/VC market (over 300 funds in India with another 60+ being raised)
• Wider sector coverage (most VC deals in 2007 were in IT/BPO sector, however a lot more deals in engineering services, medical devices and energy in 2008)

China

• Uncertain legal environment due to changing property and operating laws (exit opportunities in stock market and overseas markets unclear and state still a large stakeholder)
  
• Most VC deals in 2008 were in internet and media sectors.
  

Is South Africa a Rouge Democracy?

President Thabo Mbeki apparently sent a four-page letter to President Bush criticizing him for getting involved in Zimbabwe and accusing him of taking sides against President Mbeki’s government and Zimbabwe according to Washington Post columnist Michael Gerson. He allegedly told Bush to “butt out, that Africa was his.” Gerson, in reaction, wrote that South Africa is increasingly becoming a rogue democracy, actively blocking United Nations discussions on human rights abuses in Zimbabwe, as well as other countries such as Belarus, Cuba, North Korea and Uzbekistan. South Africa was the only democracy to vote against a resolution over Myanmar. Gerson said, “South Africa remains an example of freedom – while devaluing and undermining freedom of others. It is a product of a conscience it does not display.” Any thoughts on whether South Africa is becoming a “rouge democracy?”

Doom and Gloom or A New Era of Growth for South Africa?

Yesterday, it was announced that South Africa’s GDP growth fell to about 2%, the lowest it’s been since 2001. Inflation, which has been steady at 2-4% for the past 5 years, is hovering above 10%. Amid fears of inflation, the South African Reserve Bank is considering raising interest rates by 200 basis points above its current rate of 15% (prime rate). With 25% unemployment, 50% of the population living under poverty and 22% HIV/AIDS prevalence rate, there is list of problems the South African economy faces. The recent spate of xenophobic attacks on foreign immigrants is adding to this list of problems. Refugee camps are springing up and creating a new class of disenfranchised South Africans.

Yet there is optimism for hope. South Africa is a well-endowed country due to extensive infrastructure and institutional development during its colonial and apartheid period. There are certain aspects of society here that place it on par with the rest of the industrialized world. It is in a position to be a gateway for channeling the vast natural resources from the African continent to the rest of the world. There is excitement surrounding the upcoming 2010 World Cup, although South Africans are concerned the construction projects will not be completed in time. In the end, if the government of South African can manage to promote trade routes with its neighboring countries and continue its track record of promoting business and growth in the country, there is potential for growth to continue.

Driving on the Left Side of the Road

I arrived in Cape Town International Airport on May 27, 2008, jetlagged and sleepy-eyed, and was informed by the British Airways attendants that my luggage had not arrived and was stuck in some terminal at Heathrow. Without any luggage but with my carryon backpack in tote, I headed to the car rental station where I haggled with the attendant about renting a car and wanting to deny insurance because my credit card and insurance in the U.S. covers damage or loss to the car. After an hour of trying to explain myself and numerous phone calls to who knows where, I gave in and told them to give me the insurance and off I drove to my new home.

In South Africa, driving on the left side of the road has been one of the biggest challenges I have faced so far. In contrast to many of my colleagues that are off to developing countries in places like Liberia and Southern Sudan, dealing with dirt roads, sporadic electricity and mosquitoes the size of oranges, I am adapting to 8 lane highways with cars that zip at 140km/hour, learning to use dishwashers and washer/dryers that have funny symbols on them, mistaking a South African beef jerky called “biltong” as dog food and learning that Afrikaans is a dialect of Dutch, not German (oops, no wonder people looked at me funny when I said, “Gutentag!”).

I sort of wish I was experiencing a truly developing country, being an international development graduate student with limited developing country experience. However, I am optimistic that working in South Africa will give me a good insight to doing business in Africa. Often South Africa is termed the “gateway to Africa,” due to its potential to be a catalyst for growth for the rest of the continent. If only certain minor issues such as, trade border restrictions, ethnic conflict, government corruption, xenophobia (the recent hot topic) and distrust of the West, can be overcome. There is a great sense of optimism in the country, especially with the upcoming 2010 World Cup. However, South Africa is still sore from the wounds of Apartheid and a society divided along racial and class lines. Society is complex here, which affects doing business here. In the end, I am looking forward to the experiences I will have gained from working here.