You want to start a new business and you wonder what to do. Many of us hesitate to enter a business line because it seems too difficult, too complicated, it requires a large investment, returns may be slow, etc. Instead, we look for something that others seem to be successful in and we want to do something similar. This may not work however because we fail to think enough about the idea behind starting up the business. Getting the right idea is important because the business will never be stronger than the idea on which it is based. Consider the following:
If it is set up in direct competition with many other businesses, it will fight for survival.
If it is established in a sector that is in long term decline, it has no future.
If it requires large amounts of start up capital, it may never get off the ground.
However, if the idea behind the business is carefully considered on the basis of simple but relevant criteria, it can provide the business owner with a sound foundation for the future. Why do people so often end up setting up a “Me too” kind of business? Maybe because that kind of business happens to be fashionable; or because of a lack of training and an absence of skill tends to drive people into the same kind of businesses; or because people are not encouraged to be more creative and try something else. In Ethiopia we see this often. We do what others do and when we share another idea, we often meet resistance and are discouraged to try something else. So, what can we do different to generate a business idea, which has a better chance to succeed? Here follow some suggestions.
Brainstorm. Write down as many business ideas that come to your mind. Open-up and diverge your ideas. Include different sectors and services. Any idea is welcome at this stage, and you may end up with some 15 to 20 ideas. It may be helpful to ask any of the following questions to generate as many ideas as possible:
What needs do people and organizations have? The need of others is the basis for many businesses. Identify what needs a business may satisfy.
What are potential solutions to needs and problems that people and organizations may have?
What skills do you have that may be used as a basis for a business?
What assets do you have that may provide a business opportunity?
After having generated some 15 to 20 ideas, you now need to begin a process of filtering out those ideas that may not be viable after all. Consider the following:
Fixed capital. Some ideas may be dropped because the investment cost is too high for you.
Working capital. Other ideas will be dropped because they require holding large inventories.
Competition. There may be already too many such businesses in the sector.
Some sectors may already be in a long-term decline.
Is it really something you want to do? Some ideas may not appeal to you at all.
Do you have the skills for a particular kind of business idea?
This process should bring the original number of ideas down to about 2 or 3, which you now need to prioritise. Once you have done this, you need to think about a market survey and making a business plan, which will help in taking the right steps to set up your business and to access financing for example and apply for a loan.
A business plan should clearly identify the problem the business is going to address, not only the solution. A good understanding of a particular problem or need will lead to success. First confirm the need, then build the product. Show you understand the problem and your solution will be more convincing.
Next, be focussed. Avoid the description of the entire industrial sector and focus on the business instead. Define the target market and provide a relevant description, with figures that show the size of the market.
Next, highlight the “So what.” For readers to reach your conclusions, rather than their own, you need to guide them. It is not enough to describe facts as different readers may draw different conclusions. For example, the fact that some people don’t wear shoes doesn’t indicate whether there is a huge potential market for shoes or no market at all.
Show evidence of market acceptance, in particular with a new product or concept. Consumer behaviour is hard to predict. A common pitfall is to assume that customers will behave in the way you expect. Reality is different and common sense is the least accurate way to predict consumer behaviour.
Now describe the implementation approach. A good idea is unlikely to be unique. If it is good, expect a few other people to be thinking about it. If it’s really good, you may find others working on it already. The difference is in implementation. This is the real challenge. Even if the idea is not unique, you can make a difference in the way you carry it out. And that is what investors are looking for.
Finally, be coherent with figures. There will never be accurate figures until the business is underway and even then, some pieces may be missing. It is always possible however to use comparisons, benchmarks, and reference points. Use them to estimate market size, market share and profit margins. Readers of your business plan will in the first instance not be able to double check the figures. They would rather look at the coherence of figures and check that they are consistent with the strategy.
Now you can share your idea with investors for example or the bank and get ready to start up.
The Government of the Republic of South Sudan has pledged to establish a coordinating structure to accelerate infrastructure projects along the Lamu Port-South Sudan-Ethiopia-Transport (LAPSSET) Corridor. This announcement was made by the Transport Minister, Madut Biar Yel, in Juba from May 17 to 19 at the conclusion of a three-day ministerial council meeting attended by ministers and senior officials from Kenya, Ethiopia, and South Sudan. The Ministers adopted the Juba Commitments, an 11-paragraph resolution, which calls on member states of LAPSSET to integrate corridor projects into their national development plans and develop a 10-year strategic plan for their implementation. One of the panelists during the conference was Kebour Ghenna. Kebour Ghenna is the Executive Director of the Pan African Chamber of Commerce and Industry (PACCI), which represents the interests of business and trade associations in Africa. He talked to Capital’s Groum Abate PACCI’s involvement in accelerating integrations like LAPSSET and AfCFTA. Excerpts;
Capital: How do you see the role of the Pan African Chamber of Commerce and Industry in promoting economic integration across the African continent?
Kebour Ghenna: The Pan African Chamber of Commerce and Industry’s role is to fight for the interests of Africa’s business and enterprise before inter-governmental organizations involved in trade issues and negotiations. We represent business in various events of the United Nations, engage with international regulatory agencies, the court of public opinion, and governments around the world. We also advocate, connect, inform, and fight for business growth and Africa’s success.
Capital: In what ways does the Pan African Chamber of Commerce and Industry collaborate with other organizations, such as the African Union, to promote economic integration in Africa?
Kebour Ghenna: We collaborate with the AUC and other international organizations to promote economic integration in Africa. One way is by working together to create a favorable business environment that attracts foreign investment and encourages intra-Africa trade. We also collaborate on advocacy efforts aimed at reducing trade barriers and promoting regulatory harmonization across the continent. We also work together to share information and best practices on issues such as infrastructure development, agricultural transformation, and energy access.
Capital: What are some of the key challenges that the Pan African Chamber of Commerce and Industry has encountered in promoting economic integration in Africa, and how have you addressed these challenges?
Kebour Ghenna: Let me go over the three or four key challenges that are challenges in promoting economic integration in Africa: First, inadequate Infrastructure which as you know hinders trade and cross-border investment, making it difficult for businesses to expand. Second lack of access to finance is also another crucial problem. Many African businesses struggle to access capital that they need to grow due to weak financial systems and a lack of credible financial instruments. PACCI has addressed this challenge by advocating for improved access to finance through partnerships with international finance institutions and regional banks. Third, I can mention various trade barriers: Non-tariff barriers to trade such as corruption, bureaucratic red tape, and informal trade practices present significant challenges to businesses trying to operate in Africa. PACCI is working with local associations to promote regulatory harmonization and reduce red tape at border posts. Fourth I want to mention insufficient capacity affecting many small and medium-sized enterprises in Africa that lack the skills, technology, and resources needed to successfully compete in global markets. PACCI has addressed this issue by supporting capacity-building initiatives like mentoring and training programs, which help to build up the capabilities of African entrepreneurs.
These are some of the challenges that PACCI faces when promoting economic integration in Africa. However, through its partnerships with national chambers of commerce and industry associations, governments, international organizations, and private sector entities, we feel we are well-positioned to overcome these obstacles and contribute towards a thriving African economy.
Capital: Can you tell me more about LAPSSET and what role will the private sector have on this initiative?
Kebour Ghenna: By and large, LAPSSET is a flagship project of Kenya’s government-sponsored Vision 2030. LAPSSET stands for: Lamu Port–South Sudan–Ethiopia Transport i.e. LAPSSET corridor ¬project is an ambitious infrastructure development project. It consists (at least for now) of a railway, a ¬highway, a fibre-optic cable and a crude oil pipeline linking oil fields in South Sudan, plus Turkana county in the far -north-west…. to a 32-berth port at Lamu on the Kenyan coast. A 50-km wide “special economic zone” straddling the corridor to attract investors in also part of it, accompanied by several associated projects, including three planned resort cities, oil processing facilities and airports.
The private sector will have a crucial role in building healthy vibrant communities. Local and regional business associations should build business partnerships, advocate for free movement of people, goods and capital, in other words borders should be open, people and businesses should move easily from one country to another. Business from the 3 countries should be incentivized to make investments in each other’s countries.
Capital: What would be the main reasons for businesses to invest in LAPSSET corridor?
(Photo: Anteneh Aklilu)
Kebour Ghenna: Because of the size of the proposed LAPSSET projects, initially the major private sector players will be large multi-national companies with smaller and medium companies participating as sub-contractors.
What I want to underline is that large multi-nationals favor mega-projects. We as continental chamber of commerce welcome an ambitious LAPSSET.
Look, businesses are inherently optimistic – they wouldn’t take risks if they weren’t. Having said that businesses in LAPSSET corridor, but also anywhere else, would always want to know how easy it is to do business, whether there is political stability, the quality of the workforce,, whether there is a growing and dynamic business environment, and an attractive, transparent and stable tax regime.
Capital: How does the Pan African Chamber of Commerce and Industry support the growth and development of small and medium-sized enterprises (SMEs) in Africa, and what impact do you think this has on economic integration in the continent?
Kebour Ghenna: Overall PACCI pays an important role in fostering an enabling environment for SMEs in Africa by advocating for their interests, providing capacity building initiatives, facilitating networking opportunities, improving access to finance, influencing policies and fostering knowledge sharing.
Capital: In your opinion, what are the most promising sectors for economic growth and development in Africa, and how is the Pan African Chamber of Commerce and Industry supporting these sectors?
Kebour Ghenna: While the specific opportunities may vary depending on the country or region, some of the promising sectors are: agriculture and agri-business because of the vast arable land available and favorable climate conditions, Renewable energy is another sector I would say is promising because of the abundant renewable energy resources, including solar, wind, hydro and geothermal. Third I will mention manufacturing and industrialization which can drive economic transformation and job creation. ICT is another growth area because of a rapidly growing middle class and increasing mobile and Internet penetration.
There are also other sectors to consider such as financial services, mining, tourism, education, which hold potential for growth and development.
Capital: Looking ahead, what are some of the key priorities for the Pan African Chamber of Commerce and Industry in promoting economic integration in Africa, and how do you plan to achieve these priorities?
Kebour Ghenna: Our top priorities is to push for the implementation of the African Continental Free Trade Agreement by addressing trade barriers, enhancing trade infrastructure, finance, information, policy, firms’ productive capacity. We focus also in assisting women businesses grow and promote social, environmental and economic sustainability practices and how to apply them in a business context.
The conversion of direct advance (DA) to long term government bonds lead to a share drop of over six folds from the total claims of the National Bank of Ethiopia (NBE) on the government.
In the past and current budget year, the government has been aggressively taking DA from the central bank to fill its budget deficit which was hard hit by lack of inflow from oversea partners.
In the first and second quarter of the budget year, the government has taken 60 billion and 40 billion birr respectively, which are very huge amounts when compared to the whole of last year that the government took from NBE as DA.
In the past years however, the central government has been strongly controlling itself from taking finance from the central bank and has shifted to the finance amassed from alternative instruments like treasury bills but pushing factors like reconstruction and aid has forced it to take the DA.
Since the reformist government come to power, one of the major moves undertaken was the reform of government expenditure and its source of finance.
For instance, in the middle of the 2019/20 budget year the treasury bills (Tbills) propelled the market which attracted more buyers providing an opportunity for the government to use the finance stemming from Tbills as opposed NBE’s DA.
Last year despite the money obtained from Tbills being huge, the government was forced to take more DA to fill the demand in finance for rehabilitation and support that arose from the conflict in the northern part of the country.
In spite of the DA growing swiftly over the years, in the past few years its share from the total public sector domestic debt has been lower particularly when compared with the experience before 2019.
Experts argued that one of the reasons for the expansion of the DA was the lowest flows of external loans and the expansion of the budget deficit.
According to NBE’s second quarter report for the 2022/23 budget year, financial activities of NBE gross claims on the central government reached 474 billion birr at the end of December 2022, which is about 52.2 percent higher than a year earlier.
Of this sum, government bonds accounted for 91.6 percent and direct advance 8.4 percent.
“Direct advance decreased by 64.8 percent compared to the same quarter of 2021/22 due to its conversion into government bond,” it said.
As per the policy shift, the transfer of direct advance to long term government bond in the quarter stood at 40 billion which is a declined by almost 82 percent and 65 percent when contrasted with last year similar period and the year prior to that, respectively.
At the end of the first quarter, the DA amount was 219.5 billion birr. In the first quarter, the gross claims of NBE on the central government were 417 billion birr and of the stated amount, the DA share was 52.6 percent with the balance being for government bonds.
Now the DA share on gross claims has dropped by 626 percent in contrast to the share in the first quarter of the fiscal year. Similarly, due to the conversion of the DA to bonds, the share of DA has dropped to about eight percent of the total claim.
In the first quarter of the budget year, the DA surged by 93.4 percent in comparison to a similar period of last year to reach 219.5 billion birr from 113.5 billion birr, while in the second quarter it has dropped sharply due to the amounts being transferred to a long term bond.
Similarly at the first quarter, the bond growth rate amount was negative 0.4 percent when compared to the same period of the 2021/22 fiscal year.
At the end of the first quarter the total amount of bond was 197.5 billion birr, which was 198.4 billion birr a year ago. But on the second quarter of the 2022/23 fiscal year, it has surged to 434 billion birr because of it received the DA.
Recently, the Ministry of Finance (MoF) stated that as at October 7, 2022 the total outstanding of DA which was 236.5 billion birr was converted into long term bond.
According to MoF’s first quarter debt bulletin, following the decision to convert the DA to interest bearing long term government bond it has climbed by 123 percent to stand at 428.8 billion birr from 192.2 billion birr in June 2022.
On the second quarter of the fiscal year, the bond reached 434 billion birr which is an expansion of 119.3 percent with respect to the same quarter of last year.
According to NBE’s quarterly reports, in the second quarter of the fiscal year that ended in December 2022, banks deposit at NBE has shot up 27.3 percent compared to the amount a year ago, standing at 184.5 billion birr that was 145 billion birr at the end of December 2021.
The quarterly report stated that NBE’s deposit liabilities rose 18.8 percent over last year due to monetary policy changes on the reserve requirement ratio.
