Shipping Issues

Is this really happening?

Ok, so now that I want to ship two cars quickly to Abidjan before any import restrictions are put in place it seems Murphy’s law has stricken:

First I get this from the shipping company:

Good morning Martin,

Due to the strike action in Nigeria over the last while the vessels have in turn been delayed coming back to Europe therefore the sailing date will not be the 25.01.2012 as previously scheduled.

The next sailing will be delayed by a couple of weeks. I have not got the confirmed sailing date yet but should have it this week.

And then I see this on Bloomberg:

No Slower Steaming as Container Lines Run Like Clippers: Freight
Container ships can’t go any slower.

Shipping lines are running out of options to stop losses as sailing speeds reach their lower limit, exhausting a solution that helped restore profitability in 2010.

The global container fleet is now cruising near record-low speeds after slowing 11 percent from August when the freight rate market collapsed, according to data compiled by Bloomberg and Lloyd’s Register.

[…]

“Some of these container ships are now so slow that they’re close to the speeds of the old sailing ships. The clippers might actually have been faster.”

Slow-steaming, pioneered by A.P. Moeller-Maersk’s container unit, Maersk Line, helps carriers cut costs when times are tough. By sailing at lower speeds, ships need less fuel and can offset capacity stresses by using more vessels to make up for the longer sailing times.

[…]

Maersk Line says it may be able to bring its speeds down even further. The company cut its average speed to about 17 knots last year from 20 knots in 2008, according to Morten Engelstoft, Maersk Line’s chief operating officer. The company’s whole fleet currently sails at about 16-18 knots, he said.

“There is still some potential for slow-steaming, both for us and probably for the industry,” Engelstoft said in a Jan. 23 interview. “We are looking into the possibility of super slow- steaming. That would be 12-16 knots.”

The 19th-century clippers, the fastest ships of their time, transported tea to the U.K. and U.S. from China and India, according to the website of the U.K. Tea Council. The ships, which had three or more masts and dozens of sails, could reach a peak average speed of more than 16 knots.

Any spare room for two Toyotas?

Inevitable snags

Well, guess doing business is rarely entirely straightforward, and that the real test is how one handles the hurdles and snags that inevitably come up along the way.  In this case I have already changed shipping company to one that isn’t affected by strikes in Nigeria, so one down.

There is not too much to be done about the speed of container ships, but it only means the cars will arrive a couple of days later to Abidjan and that, hopefully, shouldn’t matter. The upside is that shipping stuff around the world is going to get cheap for – it seems – a good while going forward.

The Baltic Dry Index which tracks worldwide international shipping prices of various dry bulk cargoes has dropped sharply over the last month. It’s a bit of a bad sign for the world economy and for rubber prices, but it also opens up opportunities.

The Baltic Dry Index for the last 3 months
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Avoiding Fraud

Rule #1: Don’t Lose Money   Rule #2: Don’t Forget Rule No #1

I think the no 1 reason for small scale  investments in Africa made by people living outside Africa to fail, isn’t poor infrastructure, political risks or red tape, but dishonesty on the side of the person managing things locally in Africa.

I’ve heard many stories of people getting ripped off by their partner in Africa. And it isn’t primarily a story of Africans fooling naive European investors. Most people that I know that invest like me in Africa, are Africans living in Europe, and most of them let family members manage their investments, but even then things can, and do go wrong.  When talking business with Africans in the diaspora, how to avoid your local partner taking your investment for his own benefit is always a major topic, and everybody seem to have stories of (extended) family members being dishonest with them.

I actually tried to tackle the issue of  how this problem can be so prevalent  in one of my first posts called The Issue of Trust.

Some specific advice

Regarding how to avoid fraud, here are a few ideas:

  • Don’t entrust all your investments to a single person. It’s not only about not having all eggs in the same basket. With a smaller size of the investment the risk/reward equation for dishonesty gets better.
  • Go to Africa often and check on your investments. Many Africans living abroad don’t go back for decades – and that makes the risk of behaving badly diminish for the local partner.
  • Minimize envy – this is what Africans in the diaspora have told me about handling family members –  don’t let them know about all your investments, only the ones they manage, and pay them decently. Seeing that your half-brother living in Europe is very successful while you are not, and handling his money, makes for a dangerous combination.
  • Divide up the investment in small amounts.  One big amount increases the temptation for dishonesty.
  • Require the local partner to transfer profits to you frequently. I have an Ivorian bank account where those that manage my investments can deposit cash, and I can check on the account through online banking.
  • Work with a law firm that can act directly on the ground if there is a problem. A big part of the fraud problem are weak legal systems across Africa combined with norms that include some toleration of white collar crime. With the new government in the Ivory Coast my trust in the Ivorian legal system has improved, and think there is a similar effect on ordinary Ivorians.  People know that laws matter more than before, and if you are dealing with someone who has a law firm working for them, being dishonest is taking a great risk.
  • Have contracts and keep things in the formal sector.  Otherwise the benefits of there being a reasonably functioning legal system aren’t very big. That’s given that there is a reasonably functioning legal system of course – in some places one might be better off in the informal sector.
  • Conduct very careful selection of partners where honesty and integrity is a key criteria. Having known someone for a long time so a track record is built up  is the best way I know to judge a man’s (or woman’s) integrity. Apparently there are some studies showing that the width of a man’s face matters for trustworthiness, which is interesting but I’m not sure if it’s very useful.
  • Choose partners that already have an income or some wealth. Incentives to be fraudulent for someone who has nothing are much stronger than for other people.
  • As Ronald Reagan said: “Trust but verify”.  I have someone who independently checks – in a friendly way – on the work of those who manages the investments.

Yes, it has happened to me

Since I started investing in the Ivory Coast I have been the victim of fraud twice, in both cases due to dishonest workers on the Cocody house. One builder that stole building material, and this year a carpenter that took an advance but didn’t do any work.  Fortunately none of it had any major impact on investments, but it’s two good reminders to be careful.

Rubber Trees

Waiting for trees to grow

The last few times I’ve been in the Ivory Coast I’ve heard a lot of talk of hevea or rubber tree plantations.  Since early 2000s, among well-off Ivorians there seems to be a trend to invest in rubber trees. I considered joining in, but never did for the following reasons:

  • It takes up to 7 years from planting a tree until one can start getting rubber from it.  While I like long term thinking and investing, I figured I would be in a better position after seven years investing, and re-investing profits from something else like taxis or real estate.
  • I thought synthetic rubber would squeeze out the use of natural rubber over time.
  • I like to invest in something linked to the growth of the Ivorian economy – on which I’m quite bullish. Selling stuff to the growing African middle class seems to be the right place to be.  Global demand for rubber has nothing to do with the Ivory Coast, and all to do with the developed world’s and China’s industrial demand for it.
  • Ivory Coast’s and Africa’s exports are already dominated by raw materials. It would feel better to do something with a little more value added.

“I sure as hell wouldn’t want to be in a 747 about to land on synthetic tires”

However, I’ve read a bit about natural rubber and started to re-think some of the above.

Apparently there are plenty of uses where natural rubber is better suited than synthetic rubber – and it’s not looking like it will change.  In fact, according to www.rubber-foundation.org, the share of natural rubber of total world rubber production has gone up from 41.6% 1998 to 46% 2008, and is projected to increase further.

Despite the brilliance of industrial chemists, there is still no synthetic able to match natural rubber’s resistance to fatigue and vibration. Natural rubber still claims more than 40% of the market, a figure that has been slowly rising. Only medical rubber can be steam cleaned in a medical sterilizer, then thrust into a freezer – and still adhere flexibility to glass and steel. Big airplane and truck tires are almost entirely natural rubber; radial tires use natural rubber in their sidewalls, whereas the earlier bias-ply tires were entirely synthetic. High-tech manufacturers and utilities use high-performance natural rubber hoses, gaskets and O-rings. So do condom manufacturers.
[…]
“I sure as hell wouldn’t want to be in a 747 about to land on synthetic tires” the director of the U.S. National Defense Stockpile Center has said.

From the excellent book “1493” by Charles Mann, part of my post-Christmas reading

As to having to wait 7 years to get any returns, my problem with that was that the initial investment could be better put elsewhere.  Now, I have learned that a typical small scale rubber tree plantation deal in the Ivory Coast doesn’t have much of an upfront cost. It works like this; a village that owns land but doesn’t have the funds to cultivate it, allows an investor to plant and maintain rubber trees, and then the profits are typically split 25% to the village and 75% to the investor.  Planting the trees doesn’t cost much, and the invested funds mainly go to pay the  upkeep during the 7 years, paid monthly.

Rubber trees in the Ivory Coast

A plantation that has grown for a couple of years can of course be bought or sold, so nobody really has to wait 7 years. However, there are a lot of things that can go wrong in these type of deals, and if I ever invest in a rubber tree plantation, I’ll probably start from scratch.

My remaining concerns about rubber tree investments still stand though. Natural rubber is a curious product, being agriculturally produced but used industrially.   Demand for it is much more correlated to stuff like iron ore or copper than other agricultural products like wheat, soy-beans or apples.  And here lies a problem, since I have a gloomy outlook on the industrialised world’s economic prospects and believe China will see a real estate crash. Demand from China has been a big factor in driving up industrial commodity prices over the last decade and I don’t think this demand is sustainable.

Also, the 7 year lag of rubber, makes long term forecasting and planning important – and that’s not always something humans excel in.   I have a feeling a lot of rubber trees are planted when prices are high, thus contributing to reducing prices 7 years later.

It seems like major new plantations were started in Asia in 2006-2007:

On the supply front, natural rubber trees were planted in large scale in both 2006 and 2007. Once planted, it takes approximately 6 to 7 years for rubber trees to begin producing sap. Supply is therefore inelastic in the short–term and will be limited until 2013. It is estimated that newly planted acreage of natural rubber trees totals in excess of 1 million hectares. According to the International Rubber Study Group (IRSG), global natural rubber output is expected to total 10.83 mm tons, (up approximately 5% year-over-year). Although helpful in the short-term, long-term supply will not increase markedly until 2013.

From http://www.glovesbyweb.com/general/commodity-prices-of-natural-rubber-synthetic-rubber-and-vinyl

So it looks like increased supply could coincide with decreased demand in 2013-2014 – and it’s not difficult to see what that would do to natural rubber prices.

The coolness factor

On the other hand 2013-2014 could be a good time to start a plantation, and one never know what will happen. And I got to admit that I would enjoy being able to say that I own a rubber tree plantation.

Rubber trees originally come from the Amazon in Brazil but due to leaf blight plantations in the whole of Latin America don’t work out too well. Instead, 90% of the world production of natural rubber comes from Asia (and 2% from the Ivory Coast), and if leaf blight were to hit Asia things would change dramatically.

Natural rubber price since 1981

Top Guy

Hierarchy

I’ve always found it weird to be dealing with organisations that are highly hierarchical. When ideas or proposals are judged more on the status within the organisation of the person proposing them, than on their own merit, something’s got to be fundamentally wrong. I guess it’s near impossible to do away with hierarchy altogether, but in any knowledge-based organisation I think it would make sense to de-emphasise hierarchical differences.

There’s tons of research around these things, but Im going to go with a quote from Stanford Professor Robert Sutton  commenting on why Google probably is a worthy No1 on Fortune’s best place to work list:

Google does not unduly emphasize status differences among people at different levels or within in the same level.  If you watch how people interact there — receptionists and executives, young engineers and senior executives, and people from less prestigious versus more prestigious parts of the company — the more powerful people treat the less powerful people with an unusually large amount of respect, even deference, and the less powerful people don’t cower or kiss-up nearly as much as I see in most places.   Yes, Googlers are sometimes guilty of being arrogant when it comes to outsiders (although I see signs of modesty creeping in), but I have to give Larry and Serge credit for creating such norms mutual respect from the start and building an organization that appears to have sustained them.

Still, despite all advantages of taking it easy with hierarchy, finding organisations that operate in an opposite way of Google is not difficult. Starting in Sweden one doesn’t need to go very far south to find places where highly hierarchical organisations seems to be the norm – I’d put Germany and France in this camp, as well as the Ivory Coast.

The boss is abroad, sorry, we can’t do anything to help you

One thing I’ve encountered many times in West Africa in both the public and private sector – and found equally frustrating each time – is that you got an organisation where only the top guy can take initiatives and decisions.  Anybody else in the organisation isn’t authorised to take decisions on even the smallest details so things can get done. So you have to get in contact with the top guy who is often very busy and hard to reach, and sometimes expects you to wait for hours to get an audience.

Here is a story I found in the Ivorian newspaper “Le Democrate” yesterday about importing cars that appears to be a straight forward example of the top guy phenomenon:

Le 2GE (Groupement de gestion des entreprises) chargées de confectionner les plaques d’immatriculation et de tatouer les vitres des véhicules automobiles manque de tôles. C’est l’amer constat que les importateurs dénoncent au guichet unique, depuis hier. Pour les usagers cette déconvenue entraîne un blocage du système de fonctionnement du guichet unique. Pis, les importateurs et transitaires dénoncent l’absence d’interlocuteurs capable d’apporter les solutions à leurs problèmes. Et pour cause, le directeur général de cette structure, Niamoutié Kouao est absent de la Côte d’Ivoire depuis un mois. Toute chose qui fait dire aux importateurs que l’Etat gagnerait à mieux définir la convention de concession qui le lie au 2GE, et par ricochet toutes les structures sous la direction de Niamoutié Kouao. Nos tentatives pour avoir la version de la direction sont restées sans suite. Cependant, nos colonnes restent ouvertes pour mieux éclairer l’opinion sur autre affaire.

Quick and shortened translation with the help of Google translate:

[2GE, the firm that makes the license plates for Ivorian cars has run out of sheet metal. Since yesterday, importers note bitterly that the whole import process has grind to a halt.  Worse, importers and freight forwarders denounce the lack of partners capable of providing solutions to their problems. And for good reason, as the General Manager of 2GE, Niamoutié Kouao has been absent from the Ivory Coast for the last month. Our attempts to get the version of the management were not responded to.]

I wonder how deeply entrenched the top guy phenomenon is. Could it possibly start changing if you have succesful companies operating more like Google making a mark on the Ivorian market? How does for example MTN’s corporate culture look like?

Like a Slow River

Then of course to be successful business-wise in a different culture than your own, you got to adapt.  You could see the top guy phenomenon as a competitive advantage of foreign firms that are aware of it, relative to those that act as if things are the same as on their home market.

“The slow pace of doing business in a country like Nigeria is often a source of much frustration for South Africans. I will tell you one little thing about doing business in Nigeria: time is like a slow river. If you can grasp this mindset and learn to manage it, you will do well in Africa.”

–  Nissi Ekpott, Nigerian entrepreneur based in South Africa, from the altogether interesting article Business culture in SA different than in rest of continent, says entrepreneur in How We Made It in Africa

Guess this Ekpott guy is right, there are frustrations but you got to live with them – almost embrace them – and it’s worth it as the opportunities are far greater than the frustrations.

Along the same line:

“This is the place to be . . . with all its challenges. Let’s go and work hard. I know there are hurdles and [conditions in Africa] are not every day the way we would like it to be, but look through that [and] see the opportunities because they are ample.”

– Johan van Deventer, MD, Freshmark (South Africa)

A Gamble

Ok, I have bought cars #2 and #3, Toyotas of year 2000 and 2001.  Thought I might as well try to get a few ones in before the import restrictions take effect.

It’s a bit of a gamble, but in a worst case scenario the import restrictions takes effect while the cars are en route, and they get blocked at port.  In that case I’ll lose the purchase amount and the transport, which would suck, but I think it’s worth the risk.

In Senegal when they introduced similar restrictions and too old cars arrived, I think the owner was asked for a very high penalty fee, and if it wasn’t paid, the car would be auctioned off.  In Senegal though, there was over a year from the announcement of the restrictions to them taking effect.  Ivorian authorities are likely to move quicker.

Car #3

Import limits on used cars

I’m saying it again: Come on Ouattara, don’t disappoint now!

There’s been a lot of good news and propositions coming out of the Ivorian government, but think I’ve just found a bad one.  And it’s something that affects my business:  It seems the Ivorian government intends to introduce a ban on importing used cars older than a certain age.  The government seems to be aiming to set the limit to 5 years whereas the transport industry wants it raised to at least 10 years.

Quite a lot of West African countries have these kind of restrictions, from a quick surf I see:

Senegal – 5 years since 2003

Guinea – 5 years since 2011 

Ghana – No limit but penalty fees for cars older than 10 years (just like in the Ivory Coast right now)

Nigeria – 15 years (according to the Import prohibition list of the Nigeria customs) It seems that they started with a 5 year limit in 2001 and then progressively increased it.

The case for a restriction

The thinking behind these restrictions seems to be:

  • National pride – not wanting their country to be a dumping ground for old cars from the developed world
  • Aesthetics – a wish to make their country look better with more new cars on the roads
  • Environment – old cars pollute more
  • Congestion – with less cars imported, congestion on the roads could be mitigated

and maybe:

  • Protectionism – even if there is no domestic car industry, the limit could be an attempt to promote one or at least promote domestic assembly of car parts

The case against

And here’s why I still think these import restrictions don’t make much sense:

  • Cars up to 5 years old are expensive – a vast majority of Ivorian citizens can not afford them. A small elite that can afford new cars (and don’t use taxis) won’t be affected, but transport costs for everybody else will increase, thus increasing poverty, and reducing mobility and business activity.
  • Public transport in Abidjan is very limited, and has to a large degree been replaced by Woro-Woros (Taxis taking multiple passengers on a hop-on hop-off basis along a set route).  With a 5 year limit, the return on importing a Woro-woro is so low that it doesn’t make economic sense to import cars to make Woro-Woros. So that would mean game over on expanding my taxi business in it’s current form. Also, transport costs would go up as the supply of Woro-Woros grind to a halt making basic transportation unaffordable for some Abidjan residents.
  • But prices won’t go up so much so it makes sense to import 5 year old cars, due to the existing car park.  A limit actually causes old wrecks to be more valuable, so everybody will keep patching up the existing cars as long as possible. Contrary to the intention of the import restriction, the car park is likely to get older, nullifying any pride, aesthetic, or environmental benefits. You kind of get a Cuba situation (though Cuba happened to have quite beautiful cars prior to Castros revolution).
  • The elite that can afford new cars aren’t likely to buy many small Toyotas, so there won’t be a trickle down of cheaper cars suitable for taxi service.
  • It will create incentives for smugglers and for corruption of custom officers.
  • Government revenue through import duties will go down  as fewer cars will be imported – and as mentioned in the Customs post import duties is a very important part of government revenue.  Admittedly though,  the Ivorian government is also proposing to reduce import duties which I think is a good thing, but does contributes to reduce revenue.

All in all it’s a bit like a tax that – like all taxes – has a negative effect on people that pay it (in this case ordinary Ivorians paying for transport) but that instead of increasing revenue to the government does the opposite.  The only positive thing I can see is that it’s likely to mitigate the trend of increasing congestion in Abidjan a bit.

Senegal has had a strictly imposed 5 year limit for quite a while now. Here are some of the reactions to it I’ve picked up on Senegalese Internet forums:  [Sorry about the French, too tired to translate now]

Voila un système qui en fait provoque le contraire de ce qui est prévu. Qui au Sénégal a les moyens de se payer une voiture de moins de 5 ans? Qui ? Une certaine élite voila. Donc le résultat est que en fait les propriétaires de vielles bagnoles continuent de les rafistoler étant donné qu’ils n’ont pas les moyens de s’en acheter une autre et c’est en fait cela qui contribue à donner cette image de parc automobile poubelle.

Avec cette loi, la moindre poubelle vaut une fortune. Le Sénégal est le  pays d’Afrique de l’ouest où le parc auto est en aussi mauvais état

la seule motivation etait que Wade veut prèserver ses actions et celles de sa famille dans l’usine de montage à thies vos appreciations sont fausses vous confondez le confort de vos gros cylindre avec les vèhicules morgue roulante sur nos routes.le renouvellement de notre parc automobile se fait à deux niveaux, les riches et voleurs, ils n’ont pas de problème car l’augmentation des voitures neuves ne concerne que la minoritè riche de la societè mais fait un tour dans nos garages et l’interieur ,tu te rendras compte qu’il y’a un apprauvissement de notre parc automobile

le renouvellemt de nos vehicules ne se fera jamais de l’interieur seulement 5% des senegalais ont les moyens de par leur revenus de se tapper un vèhicule neuf et autre echec les accidents deviennent de plus en plus cruels

vous parlez de cette mesure de limitation des voitures importèes, pour moi c’est une grande BETISE, le senegal ne fabrique pas voiture, et ces dernieres coutent maintenant tres chères là bas, essayez de prendre un taxi 90% des taxis,une fois dedans tu pries pour arriver chez toi sans problème

Paved roads

Islands of paved roads

One thing I noticed last time in Abidjan was that there are plenty of areas of the city that are like islands of paved roads that can’t be reached with paved roads. One would think that main connecting roads would be paved first, but what I think is happening is that a private sector developer buys a specific area and builds both houses and roads there.  Then it is the government’s responsibility to sort out connecting roads, and well, the Ivorian government hasn’t been very good at that over the last ten years.

Paving roads should be in a government’s interest though, it not only makes life easier for citizens and reduces transport costs for the private sector, but is also apparently a key factor in people’s perception of government. Here are results from a Mexican study I found via chrisblattman.com:

Families living along streets that were treated with pavement were 0.304 points more satisfied with the local government than those in the control group (on a 4-point scale).

Satisfaction with the State and Federal government also increased significantly, by 0.168 and 0.140 points. In other words, the direct effect of the local policy is about twice as large as the indirect effects.

…the indirect effect does not occur along party lines, but reflects a generalized improved perception for all other branches of government.

Finally… the return for the implementing politician in terms of vote share is 7 percentage points (20% increase in share) if an unpaved electoral section gets fully paved under the politician’s watch.

My Cocody house is actually in a paved road island area.  I was going there with some prospective tenants on a rough unpaved road and they asked if there was any other way to reach the house.  I had to tell them that yes, there are other paths, but unfortunately they aren’t paved either.

Building roads and bridges

On the other hand, the good news is that the Ouattara government is doing progress in paving and building roads. And when roads get paved real estate values increase.

An unpaved road in central Abidjan with a road-building machine on it

The worst thing with unpaved roads is when there are heavy rains – and that’s a frequent occurrence in Abidjan. Roads then often become impassable or force speeds  to be reduced to crawling, virtually shutting down whole sections of the city. Here’s how it looks, same street as above:

4x4s sell rather well in Abidjan

Speaking of infrastructure, I recently saw a video of the planned construction of the so called 3rd bridge of Abidjan crossing the lagoon, and the connecting highway ramp/roundabout at Riviera II.  I hadn’t quite realised how long the bridge would be – 2 km, and over three times the length of any of the existing bridges.   The thing with the bridge project is that it was planned something like 15 years ago, but then nothing happened.  One of Gbagbo’s aides even built a house on the mouth of the bridge. Now the house has to be demolished and there is a bit of of brouhaha over that.

Anyhow, here’s the video:

Sensing a new trend

Oui, on va rentrer

In the last six months when talking to Ivorians and Africans in general living in Europe, it seems like everybody is seriously planning on returning to Africa for good.  Two or three years ago I didn’t at all hear the same talk, so it looks like a new trend.

And it makes a lot of sense with a stagnating (at best) European economy and many African economies doing better than at any time since independence.  Also, if you are reasonably well off, there are plenty of business opportunities as well as advantages in terms of lifestyle (weather, childcare, affordability of maids etc) when living in Africa. On top of that I think issues such as hidden xenophobia and a sense of feeling snubbed contribute to incentives to moving to Africa.

What’s surprised me recently is hearing several Ivorians living in Europe for over 10 years, with good jobs, children growing up in Europe, and European passports, having moved to Abidjan or saying they are planning a permanent move. One said he was happy to switch from going up early to go to work in the cold and rain, to having his own business and own office in Abidjan.

Temporary Migration

All of this doesn’t mean less people will want to emigrate out of Africa though.  With Africa getting wealthier, I believe emigration will actually increase as the effect of more people having the means to emigrate is greater than the effect of increased number of people wealthy enough not to have economic incentives to emigrate.  Difference in average living standards between a growing Africa and a stagnating developed world will still be large enough to push migration for quite some time. (Though more Africans may choose to go to Asia instead of Europe in the future.)

What’s happening is that migration is temporary and circular. Philippe Legrain explains it well in an Economist article entitled Moving out, on and back:

“Circular” migration, in which people come and go between destinations, is on the rise, as is “on-migration”, where a migrant moves first from China to Canada, say, and then on to America. OECD researchers reckon that at least 19% of migrants who arrived in America at the turn of the millennium had left for other destinations five years later. On-migration is also common among migrants from Africa and Asia. Europeans, for their part, tend to live abroad for only a limited time.

“The notion that migration is a one-way movement of permanent settlement is outdated. Most of it is temporary—and it’s time the debate about immigration recognised this reality,” argues Philippe Legrain, an analyst of immigration and the author of “Aftershock”, a recent book analysing economic changes in the wake of the financial crash.

Far from disappearing in the wake of the crash, Ms Sumption says, migration is still “a sensible long-term investment for many people.” Although hard times may change migrants’ destinations, they do not sap the will to move in search of a better life. This is good news: migrants did not contribute to the economic crisis, and they may yet help to overcome it.

Catching the Entrepreneurship bug

Last Friday I got several month’s advance rent plus deposit from the new tenant moving in to the Cocody house. It’s the best single day positive cashflow since I started the business, and quite a great feeling – very different from receiving a salary.

I think it’s because the cashflow comes from pursuing one’s own independent idea/dream and building something from scratch, instead contributing to someone else’s agenda. It’s kind of like a waking up moment, seeing that it’s possible to opt out from a day-job at a big company and a life with terms to a great extent dictated by someone else,  and that opportunities and possibilities are pretty great.

Guess I’ve caught the entrepreneurship bug or something. As usual Steve Jobs expresses the whole thing very well, this time in a 46 second long video:

 

When you grow up you tend to get told the world is the way it is and you’re life is just to live your life inside the world. Try not to bash into the walls too much. Try to have a nice family, have fun, save a little money.

That’s a very limited life. Life can be much broader once you discover one simple fact: Everything around you that you call life was made up by people that were no smarter than you and you can change it, you can influence it, you can build your own things that other people can use.

Once you learn that, you’ll never be the same again.

Our current release schedule does not include the Ivory Coast

A typical release is planned many months in advance,  and regrettably, your planet is one of those scheduled for demolition

On the online banking website of the bank where Im a customer, you can send money to Burkina Faso, Togo and even to “US Minor Outlaying Islands” which according to Wikipedia have no permanent residents. However, you cannot send money to the Ivory Coast.

In March 2010 I asked them about it and got the following answer:

Apologies for the delay in coming back to you on your query. I have investigated this with our International Payments area and have been advised that currently there are EU and US sanction in place against Ivory Coast. Until such time as these sanctions are relaxed there will be no option to make a payment to this country using Internet Banking.

Since the sanctions are gone, but the Ivory Coast is still not on the drop down menu for international payments I emailed them last week and got the following response:

Dear Martin,

Thank you for your email. I acknowledge that currently the Internet Banking website does not offer the International Payment facility to the Ivory Coast.

I assure you that we endeavour to meet the needs of our customers and continually benchmark our product offering against our competitors. We operate a scheduled release system for updating Internet Banking. A typical release is planned many months in advance, unfortunately our current release schedule does not include the addition of the Ivory Coast for International Payments.

However, thank you for your feedback. We have taken note of  your suggestion and will submit it for inclusion in our future Release Plans.

Yup, that’s a lovely bureaucratic answer. My local bank is clearly not owned by Richard Branson, and  I can start seeing where Douglas Adams got inspiration for the Vogons in the Hitch Hiker’s Guide to the Galaxy:

People of Earth, your attention, please. This is Prostetnic Vogon Jeltz of the Galactic Hyperspace Planning Council. As you will no doubt be aware, the plans for development of the outlying regions of the Galaxy require the building of a hyperspatial express route through your star system. And regrettably, your planet is one of those scheduled for demolition. The process will take slightly less than two of your Earth minutes. Thank you.

There’s no point in acting surprised about it. All the planning charts and demolition orders have been on display at your local planning department in Alpha Centauri for 50 of your Earth years, so you’ve had plenty of time to lodge any formal complaint and it’s far too late to start making a fuss about it now. … What do you mean you’ve never been to Alpha Centauri? Oh, for heaven’s sake, mankind, it’s only four light years away, you know. I’m sorry, but if you can’t be bothered to take an interest in local affairs, that’s your own lookout. Energize the demolition beams.

The Maverick in Me

Richard Branson

Other holiday reading I’ve been doing is Richard Branson’s autobiography “Losing my Virginity”.   I had lots of “yes exactly!!” moments while reading it, and a few “ok, he is crazy” moments, but overall it’s a very inspiring entrepreneurship tale with lots of things that resonated with me in Bransons way of conducting business and outlook on life.   Just makes me wish I had started my business venture much earlier.

Things I liked:

  • The emphasis on curiosity, adventure and having fun in business (and in life).  When working on my business, it really doesn’t feel like work at all – I enjoy it too much.  I think it was the same for Branson from the very start, just that he has done it full time his whole life, and for me it’s (so far) just a side-activity to my day-job.
    As for curiosity, here’s an excerpt from the Sense of Wonder post:

One of the things that I find exciting about West Africa and the Ivory Coast – is that it’s so different from everything one can experience living in Europe (or most of the rest of the world). It kind of naturally spurs a curiosity to figure out how the place works. Setting up a business is turning out to be a pretty good way of channeling that curiosity and exploring how things work. And it should work the other way too, that  curiosity – if it can be kept up – should be good for the business (and far from only for the business).

  • Keeping things relatively informal with minimal bureaucracy and hierarchy. When things get too big Branson says he takes the deputy managers and promotes them to be in charge of a new company.  This way the Virgin group has 415 companies, and I have well… 3 very small ones: Real Estate, Taxis and Chicken Farm which are managed entirely independently.  Doing business in Africa has its issues, but one advantage is that the tax code, rules and regulations are kept relatively simple, making it easier to keep things informal and reducing bureaucracy.
  • The screw it, let’s do it – attitude.
  • “Maverickness”, not taking much notice of conventional wisdom and the way things are supposed to be done.

From the book:

Fun

First and foremost, any business proposal has to sound fun. If there is a market that is just served by two giant corporations, it appears to me there’s room for some healthy competition. As well as having fun, I love stirring the pot. I love giving big companies a run for their money – especially if they’re offering expensive poor-quality products.

“The maverick in me was also quietly amused that the guy who brought you The Sex Pistols could sort out your pension, too.”  – Branson, upon setting up Virgin Money

Love this quote.  Setting up a chicken farm in the Ivory Coast is quite a maverick thing to do for a full time employed engineer from Sweden I guess, but as maverickness goes, I see the bar has been raised.

Informal and restless

Virgin Money may appear to have been an incongruous departure for Virgin, the rock’n’roll company: it was a lateral leap in the same way as it had been from records to an airline.  But it was still all about service, value for money and offering a simple product.  The vision I have for Virgin does not run along the orthodox lines of building up a company with a vast  head office and a pyramid of command from a central board of directors. I am not saying that such a structure is wrong – far from it. It makes for formidable companies from Coca-Cola to Pearson to Microsoft. It is just that my mind doesn’t work like that. I am too informal and restless, and I like to move on.

Curiosity and Adventure

I have always lived my life thriving on opportunity and adventure. Some of the best ideas come out of the blue, and you have to keep an open mind to see their virtue. Just as an American lawyer called me to set up an airline in 1984, a Swedish ballooning fanatic asked me to fly over the Atlantic with him in 1987. The proposals come thick and fast and I have no idea what the next will be. I do, however, know that, if I listen carefully enough, the good ideas somehow all fit into the framework that Virgin has become. By nature I am curious about life, and this extends to my business. That curiosity has led me down many unexpected paths and introduced me to many extraordinary people. Virgin is a collection of such people and its success rests on them.

Embrace Change

If there’s a good business plan, limited downside, good people and a good product, we’ll go for it. In some ways it all boils down to convention. As you may have noticed, I do not set much store by such so-called wisdom. Conventionally, you concentrate on what you are doing and never stray beyond fairly narrow boundaries when running a company. Not only do I find that restrictive, but I also think that it’s dangerous. If you only run record shops and refuse to embrace change, when something new like the Internet or MP3 is launched you will lose your sales to the person who makes use of the new medium.

When we established as a mail-order record company, and thus dependent on the post, out of the blue came a six-month postal strike. If we hadn’t reinvented ourselves, we would have gone bust. There was no choice. Within days of the strike we had opened our first Virgin Records shop. It may have been up a dark, narrow flight of stairs above a shoe shop and have consisted merely of some shelves, a shabby sofa and a till, but in its own small way it taught us all we know about retailing. I can draw a straight line from that tiny shop to the Virgin Megastores in London, Paris and New York. It’s just a matter of scale, but first you have to believe you can make it happen.

No retiring

At this point [after selling Virgin Records and having £500 million in the bank] I could of course have retired and concentrated my energies on learning how to paint watercolours or how to beat my mum at golf. It wasn’t, and still isn’t, in my nature to do so. People asked me, “Why don’t you have some fun now?” but they were missing the point. As far as I was concerned, this was fun. Fun is the core of the way I like to do business and it has been key to everything I’ve done from the outset. More than any other element, fun is the secret of Virgin’s success.

You have to be out there

Even though I’m often asked to define my “business philosophy”, I generally won’t do so, because I don’t believe it can be taught as it was a recipe. There aren’t ingredients and techniques that will guarantee success. Parameters exist that, if followed, will ensure a business can continue, but you cannot clearly define our business success and then bottle it as you would a perfume. It’s not that simple: to be successful, you have to be out there, you have to hit the ground running; and, if you have a good team around you and more than your fair share of luck, you might make something happen. But you certainly can’t guarantee it just by following someone else’s formula.

Business is a fluid, changing substance, and, as far as I’m concerned, the group will never stand still.

Encouraging signs

Preliminary performance check

In the The ball is in your camp President Ouattara! post published the 11 April 2011 I outlined my expectations for the new government. The last point was an improvement for the Ivory Coast in international rankings of governance, produced by the likes of Transparency International, Freedom House and Heritage Foundation.

These rankings are probably the easiest way to gauge how the Ivorian government is doing, but they are a lagging indicator and I don’t think any of them have yet been published for a time period after Gbagbo’s fall.

So to check the Ouattara government performance – principally that they are not too corrupt – one has to look at datapoints here and there from what they have actually done.  So, here are a few encouraging things I’ve seen so far:

  • Infrastructure projects: A surprising amount has actually been achieved, roads have been built and paved, potholes fixed, new bridges built, construction started on a few big projects. And this is a very good indicator. With high corruption it’s difficult to get much done, because everything will cost a lot more, and result in infighting about who gets which bribe. Then there is the not so uncommon case where nothing gets done and all the money ends up in the pockets of the responsible politicians.
Opening ceremony for a bridge in Cocody
  • This is anecdotal evidence, but I’ve heard that a top level employee of a large international organisation, upon arriving to the Ivory Coast, said he’d never seen an African government work this hard.
  • Reduction of staff at the national television RTI and Air Ivoire, both badly run overstaffed companies where hiring had been far from meritocratic.
  • Reduction of checkpoints to officially 33 nationally. There are still illegal checkpoints, but at least in Abidjan the situation is better than in many years.
  • In the budget for 2012 there are more funds put aside for investments than in the last 3 to 4 decades (according to the responsible minister – haven’t checked myself)

In European media, when you hear about the Ivory Coast, beside Gbagbo going to the Hague, it’s usually about the limited bouts of violence that have happened.  I kind of think that stuff like the above is more significant and more important for the future.

Stealing It

Stories like the above are essentially about corruption, or how people with power use it to steal wealth produced by others – which has been a natural state of affairs in human history –  and how/if actions, institutions and structures are put in place to reduce it.

In Paul Graham’s book Hackers and Painters there is a chapter called Stealing It which is quite illuminating about corruption:

In conflicts, those on the winning side would receive the estates confiscated from the losers. In England in the 1060s, when William the Conqueror distributed the estates of the defeated Anglo-Saxon nobles to his followers, the conflict was military. By the 1530s, when Henry VIII distributed the estates of the monasteries to his followers, it was mostly political. But the principle was the same. Indeed, the same principle is at work now in Zimbabwe.

In more organized societies, like China, the ruler and his officials used taxation instead of confiscation. But here too we see the same principle: the way to get rich was not to create wealth, but to serve a ruler powerful enough to appropriate it.

This started to change in Europe with the rise of the middle class. Now we think of the middle class as people who are neither rich nor poor, but originally they were a distinct group. In a feudal society, there are just two classes: a warrior aristocracy, and the serfs who work their estates. The middle class were a new, third group who lived in towns and supported themselves by manufactoring and trade.

Starting in the tenth and eleventh centuries, petty nobles and former serfs banded together in towns that gradually became powerful enough to ignore the local feudal lords. Like serfs, the middle class made a living largely by creating wealth. (In port cities like Genoa and Pisa they also engaged in piracy). But unlike serfs they had an incentive to create a lot of it. Any wealth a serf created belonged to his master. There was not much point in making more than you could hide. Whereas the independence of townsmen allowed them to keep whatever wealth they created.

Once it became possible to get rich by creating wealth society as a whole started to get rich very rapidly. Nearly everything we have was created by the middle class. Indeed, the other two classes have effectively disappeared in industrial societies, and their names have been given to either end of the middle class. (In the original sense of the word, Bill Gates is middle class.)

But it was not till the Industrial Revolution that wealth creation definetly replaced corruption as the best way to get rich. In England, at least, corruption only became unfashionable (and in fact only started to be called “corruption”) when there started to be other, faster ways to get rich.

Seventeenth century England was much like the third world today, in that government office was a recognised route to wealth. The great fortunes of that time were still derived more from what we now call corruption than from commerce. By the nineteenth century that had changed. There continued to be bribes, as thee are still everywhere, but politics had been left to men who were driven more by vanity than by greed.