BusinessDay 22 Mar 2018

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24 BUSINESS DAY Thursday 22 March 2018 Harvard Business Review Global Business Perspectives CONNECTING THE WORLD ONE BUSINESS AT A TIME Dispute resolution for India and Bangladesh KATIE SHONK Sometimes in international negotiations, disputes are left to fester for years until parties decide there is something to be gained from reaching a dispute resolution. In an example of a cross-cultural negotiation case study, the nations of Bangladesh and India seized an opportunity to push the restart button on their bumpy relationship by resolving one such ongoing international conflict. LIVING IN NO MAN’S LAND For decades, small plots of land belonging to India and Bangladesh were completely surrounded by the other nation’s territory on each side of the twisting 4,000-kilometer border between the two countries. The origins of these socalled enclaves — 111 Bangladeshi, 51 Indian — were obscure. The dots of land, just 15 square miles in total, may have been bargaining chips in a 1711 international negotiation in the region, according to The Economist magazine. Villagers in Nalcity, Bangladesh, are pictured through the window of a Bangladeshi military helicopter as they greet the arrival of relief supplies from the U.S. on Nov. 23, 2007. The impact of cyclone Sidr on Bangladesh can be compared to a “mini-tsunami” and there is a continued urgent need for international aid, the United Nations humanitarian affairs office said Friday. (CREDIT: Ruth Fremson/The New York Times) Isolated from their home countries, the enclaves had long been neglected. With neither India nor Bangladesh allowing the other to administer the enclaves, residents were trapped without hospitals, schools, courts or travel privileges in the nation that surrounded them. In the 1970s, the Indian and newly formed Bangladeshi governments agreed to swap their territories, such that each would acquire the enclaves within its borders. India said it would forgo compensation for an approximate net loss of about 10,000 acres. Those living in the enclaves could decide whether to move to their homeland to remain its citizens or stay put and become nationals of their new country, according to Reuters. However, the international negotiation proved unpopular and remained unratified for decades. DUSTING OFF AN OLD DISPUTE — RESOLUTION FOR AN OLD DEAL That changed in 2015, when the prime ministers of both countries recognized that resolving the international conflict would benefit not only the enclaves’ residents but also them personally. Indian Prime Minister Narendra Modi sought to deflect attention from domestic setbacks with the landswap agreement. And Bangladeshi Prime Minister Sheikh Hasina, who had been widely criticized for authorizing violent crackdowns against her political opposition, saw an opportunity to demonstrate her legitimacy through an international negotiation with the world’s largest democracy, according to the Observer. During a brief visit to Bangladesh’s capital, Dhaka, Modi oversaw the signing of about 20 agreements with India’s neighbor, including the land-swap deal. Simultaneously, Indian conglomer- ates signed draft contracts to invest about $5 billion in improving Bangladesh’s aging power sector. Those who had been stranded in the enclaves, many for their entire lives, expressed relief that their fate had been finally settled. Most decided to stay put, accept a change in citizenship, and await the arrival of infrastructure and administration. “We didn’t have hospitals, schools, electricity — nothing,” Madhusudan Mohanto, a resident of an enclave in Bangladesh, told The Wall Street Journal. “Now we hope we’ll get our rights back.” Indian officials said the enclave agreement signaled that their nation was equipped to tackle more difficult border disputes with China and Pakistan. The deal also allowed India, long perceived by Bangladeshi leaders and citizens as overbearing on territorial and migration issues, to build trust and goodwill as it prepared to wrap up a more difficult dispute with Bangladesh about rights to the waters of the Teesta River, which flows through both countries. (Katie Shonk is the editor of the Program on Negotiation at Harvard Law School.) 2017 Harvard Business School Publishing Corp. Distributed by The New York Times Syndicate
Innovation Apps Fin-Tech Start-up Gadgets Ecommerce IOTs Broadband Infrastructure Bank IT Security Thursday 22 March 2018 BUSINESS DAY African Startups: Of Unicorns, Gazelles and corporate breakfasts (2) 25 COLLINS ONUEGBU (Guest Writer) In most parts of Africa, the financial system is at infancy. Venture Capital and Private equity are mostly focused on the things Africa needs and that are just being built - from physical infrastructure we can see, like malls, roads and railways to manufacturing and banking. Technology and services are a work in progress. So, is copying the American model of valuation the right way to go for Africa? Or should we create our own lexicon to manage our own African journey? This is precisely the underlying reason for the Gazelle versus Unicorn conversation. If we must stick to valuations for our own Unicorns, should we stick to the $1B America has defined? Or perhaps reduce the benchmark from $1B to $100m? Claiming an American billion and African billion are not necessarily the same? Or better still use a yardstick that measures the power of the average African consumer against his United States counterparts. After all, these Unicorns will in the end sell services to individuals who have a certain capacity to purchase their services. If we follow this model, perhaps our Unicorns could be anywhere in the same range as $100m plus or minus $50m. But let’s discard the Unicorns and go to the Gazelle concept. As I said earlier, private equity in Africa is now focused on what’s considered critical and immediate infrastructure and services for Africa. These ventures are backed mostly from the impact they make on Africa for delivering basic services. And they are based on models proven in other climes. It’s easy to understand the cash flow of a new mall that opens in Lagos or Nairobi, or that high-rise office building in Africa’s highbrow neighborhoods. For a startup, what you can see is simple: revenue; that very real measure of customers wanting and consuming your products. Gazelle makes sense if it focuses on what our level of investment sophistication can understand in our part of the world. So, let’s assume we are comfortable with the African gazelle that’s based on revenue as the measure. What should this measure be? If we decide to stick to an African billion, should the billion be one billion South African Rand ($84m)? Or One billion Nigerian Naira ($2.7m)? Or one billion Kenyan shillings ($9.8m)? Or any of the other myriad of currencies across Africa. From the currency swings in Africa, should we assume the Nigerian billion for instance, companies from other parts of Africa will be minting Gazelles by the hundreds. And if we assume the South African billion, companies from most of Africa will struggle to get into the band. I will hazard a suggestion. I will lean on the Kenyan billion which is approximately $10m and suggest that if any startup in Africa generates revenue up to $10m within its first 5 years, we should classify it as an African Gazelle. Irrespective of whatever it’s valued by venture capitalist and private equity. This will allow us in Africa to focus on what’s important to us; growing companies based on real value: solving visible African problems that we can see and feel and customers can experience and pay for. Perhaps when we grow the ecosystem to a certain level of maturity, we can develop or upgrade our measurement systems to reflect the reality of that day. My friends in the African Business Angel Network and the entire African ecosystem are free to weigh in, challenge, agree, and disagree. But I am sure we can reach some consensus and move to more important matters of supporting startups get up there. More important for me though is the underlying reasons for looking for unicorns and gazelles. In the US, a Unicorn is a sign of the strength of the American dream; that you can build something from scratch and scale it to the point of becoming a billionaire by solving a problem that no one has solved. The investment community rides on your back and idea to make money. Shareholders pile in at IPO and the ecosystem benefits, and in addition, recover from other bad bets on the startups that could not make it to IPO stardom. In Africa, this is not yet the tale. A few startups are heading to IPO in Africa. But it is a tiny trickle. Exit for the entire investment ecosystem is not yet fully defined. We will mature to that in the nearest future. So, what are the options? By minting and identifying Gazelles who are doing $10m revenues in Africa and growing, the investment ecosystem can support these companies to keep growing; first, within their countries, then, across Africa. And if an Africa listing is possible in their future, take them to list in Lagos or Nairobi or Joburg. And what if a listing is not possible? A company with grounded revenue that’s providing service to customers should be able to generate dividend for investors while they wait for the IPO. In a recent conversation with Tomi Davies, we did agree that it may make sense to change the investor exit narrative for our region to include holding the equity of companies long enough to recover some value from dividends. This could mean, mixing our investment portfolio to include traditional companies that generate solid revenue and companies that are scaling with revenue as secondary immediate consideration. I will like to conclude this conversation by putting on the table the exit options which we are not promoting in Africa. When we have identified the gazelles and all of us investors are falling over ourselves to support them to success, what happens to the other successful startups that are not getting attention? Nigeria is famed to have 37m SMEs. After 5 years, lots of this startup will join the band of these 37m SMEs. Unless they have already flamed out and died. It does not mean that these companies are necessarily bad nor the ideas behind them. Some companies are driven by great ideas that are not meant to become large companies but will grow on their own to become successful. In developed markets like America, these companies end up as breakfast for the large corporates and older companies. When you look at the books of Google, Microsoft or Facebook, you see their acquisitions. It is made of mostly yesterdays smart startups who get acquired and absorbed into the larger organization to keep them growing. In fact, I suspect there are several startups founders who aim to be the next breakfast for Google. The guys that founded WhatsApp are not complaining that they were eaten up by Facebook. It is time the investment community, the startup community and older tech and non-tech firms across Africa recognize and encourage this class of exit for startups whose great ideas are just good enough to end up as part of the bigger entities. We may find this a better and more realistic exit for most of the companies that will never see an IPO and will never become Gazelles talk of becoming Unicorns. But their ideas and services are needed to deepen the offering and services in the African market. For the startups that never make it to becoming Unicorns or Gazelles, joining the Breakfast Club may not be altogether a bad proposition. Innovations & Start-up series Polycrete Asphalt: An innovation that converts waste to concrete CALEB OJEWALE Innovations abound in different forms, and when it comes to technology, it essentially focuses on the ability of disruptive minds that seek to evolve the way things are currently done. Aina Olugbenga Expiray, who describes himself as “an Economist, geologist and civil engineer”, has in his own way, chosen to disrupt the way materials are compounded for construction purposes in Nigeria. His innovation, ‘Polycrete Asphalt’, can convert the piles of waste generated in large cities like Lagos into a new source of concrete. Aina gives some insights below. What is Polycrete Asphalt Polycrete is a cheaper and more durable alternative to the conventional asphalt. Polycrete can be used to make interlocking bricks, and is a perfect solution for roads. It is 20% cheaper and proven to last up 35years when used for road construction, a better alternative to waste eradication How Polycrete Asphalt developed In 2010, Aina was sent on an exchange programme to India from Lagos State University, and was opportuned to meet some Indians working on a similar project. Upon his return to Nigeria, Aina started sourcing for materials by contacting friends in India and doing research on the internet. This invention has led to the construction of locally made asphalt machine. How much waste is needed for a given area 4500 tons of waste will generate enough polycrete asphalt to cover 100square meters How is this significant for Lagos It will interest you to know that 45000 metric tons from total waste generated in Lagos can be converted to 2km of road every week. What is the process of making the Polycrete Asphalt 84 percent of the final product is made from waste while 16 percent represents the binding aggregate. The materials converted are plastic, polythene wastes, and silt packed from blocked drainages or swept from roads. These materials are treated through a process called photodegradation which reduces the non biodegradable property of polymer to 0.5% and the silt is treated as well. The output is transferred into the asphalt machine that processes them into the asphalt, and moulds in different shapes and sizes. Team: Frank Eleanya, frank.eleanya@businessdayonline.com; Caleb Ojewale, caleb.ojewale@businessdayonline.com
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BusinessDay 22 Mar 2018

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