The Shiny Roads & Bridges Will Not Build Themselves

A few weeks ago, I was at a lawyers’ mini confab on infrastructure and cross-border investments in Africa and learnt about Mauritius, the Netherlands and the UK being some of the most favourable countries through which to route your investment to Nigeria.

 

After the polite nattering was done and most of those in attendance, with sensitive stomachs had left, I was privileged to have drinks with some fine lawyers and one or two people representing heavy investments in PPP infrastructure in Nigeria. Experience has shown that the greatest benefit (and knowledge sharing) at these summits arise when the cameras have been turned off, the taps of the world’s greatest social lubricant, alcohol, have been turned on and people are free to speak and curse as they like. Coincidentally, the Lekki bridge judgement had just been announced, so it naturally featured in our conversation.

 

The following are some of the golden nuggets shared by the prestigious gathering. It’s all anecdotal, so it’s probably unsafe to quote any of this outside your watering hole.

 

There is a local demand for infrastructure that Nigeria on its own cannot afford to build. This is widely accepted amongst industry analysts and is the justification for public-private partnerships with the various levels of Nigeria’s government. The roads, bridges, tunnels, power stations, water and drainage networks, houses, hospitals, etc., that government should provide as basic amenities will need significant funding from private (and, usually, foreign) parties to happen.

 

The Government is sending out mixed messages on its vision for PPP. The first problem here, and this is my personal opinion, is that not enough of the decision makers know enough about the structure of PPPs, to not bungle it. The concessionaire for MMA2, for example, was frequently summoned by various committees to come and account for the money he was spending during construction! They would typically order work to stop and he would fly to Abuja at his own expense to explain that government did not give him a penny. The general aviation terminal was also supposed to be shut down and there was to be no further airport development within Lagos State. We all know how Arik refused to vacate the GAT and that a new airport will be built in Lekki. His lenders are circling.

 

Same with Lagos State and the Lekki-Ikoyi bridge. Everyone present at our soiree agreed that it was infrastructure that was needed, that it was world class and that it was properly delivered. The issue is that under the concession agreement with the Lekki Concession Company (of the Lekki-Epe toll road), reportedly, no further alternative route is to be built within 300 metres of the toll road.

 

Why the fuss? Well, when you approach lenders for project financing, it is understood that loan repayment comes from revenues generated by the project. The revenue projections determine the conditions for lending and even the slightest default could trigger significant penalties. It is estimated that 25,000 vehicles go through the Lekki-Ikoyi bridge daily and that traffic at the LCC Admiralty Toll dropped to 75,000 vehicles daily from about 90,000 after the bridge became operational. A 15,000 vehicle hit on your daily bottom line is not insignificant.

 

There are hoardes of potential investors at the gates. This conversation was had before our glorious week of rebasing, so it was not yet known for sure that we were twice as large an economy as had previously been thought. However, even with the old GDP figures, there were many people out there itching to come and invest. The snag is that most of the intended projects are not bankable. The issue with bankability is not that a healthy ROI does not exist – it is that political and local community risks are way too high. See for example, how the Chevron toll is yet to become active, then go back to the principle that a funded project repays its own debt. What happens to the deficit in actual revenue versus projected? Think also to how things can go pear-shaped if a different party/regime comes into office. We have the old Buhari and railways project as a reminder here too.

 

The Fix? The government has to decide whether it needs PPP help or not. If yes, then it should be doing all it can to boost confidence in the Nigerian PPP. Politicians and policy makers need to stop being so twitchy. Nigerians also need to decide if they’re happy with the status quo or want these new shiny roads and bridges. Yes, we pay taxes but if the 24% unemployment and 60% youth unemployment figures are to be believed, coupled with huge numbers of people either underpaying or not paying taxes at all, then it may be erroneous to think that the taxes and national income are enough to do everything.

 

There was debate on the propriety or otherwise of the Lekki-Ikoyi bridge judgement too, but that’s gist for another blog post.

Coming to America and the Nollywood Igwe

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Igwe Jaffe Joffe, Crown Prince Akeem and the Queen

It may be surprising, but I think that Coming to America may be having its greatest period of influence ever on African entertainment, 26 years after its release in 1988. On Nollywood, in particular. The movie, one of my personal favourite comedies,  follows the story of Akeem, crown prince of the fictional African Kingdom of  Zamunda, who comes to America to find a bride. It was Eddie Murphy at the height of his powers.

Anyway, a couple of weeks ago, I had to take an ABC Coach to go to Cotonou to see a man about a thing. A fairly short distance but thumbs up to the Federal Road Safety Commission and the Customs and Immigration Services with their 10 checkpoints each between LASU and the border, and then at the border itself, for tacking on an extra few hours. ABC filled the intervening journey time with their “in-flight” Nollywood entertainment.

Apart from seeing previews with Funke Akindele basically reprising her Jenifa character in a variety of non-Jenifa-franchise movies clearly aimed at boosting her crossover appeal (our very own Steven Seagal, if you like), there were  loads of “Igwe” films.  Kings and crown princes from various miniature kingdoms, purportedly in southeastern Nigeria, living in varying degrees of mostly anachronistic opulence. It wasn’t out of place, for instance, to see a prince or princess, who lived in a palace with marble floors and modern furniture, go for walks in the forest barefooted. Or for neighbouring kingdoms, whose Igwes both drive 2003+ Mercedes Benzes to gather up their “soldiers”, dress them in animal-skin loin-cloth, arm them with spears and shields and then “go to war”.

More than anachronisms however, were the unmistakable influences from King Jaffe Joffa of Zamunda, with servants in uniform, kings and princes with lionskin/lionhead sashes, right down to even the caps that Akeem and Semi wore. Then, there was the movie where three princesses tried to outdo each other to be chosen by the crown prince of some other kingdom, at the banquet put on by their father (more Disney Princess than Akeem, I’ll admit) and another where the monarch had people throwing flower petals on the ground for him to walk on.

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The Royal Petal Throwers

I’m probably not in Nollywood’s target demographic but I couldn’t help thinking about the differences between  Zamunda and the “kingdoms” in the Igwe movies. Zamunda was a country, so Jaffe’s wealth was more understandable and more likely than the usually unexplained wealth of the movie Igwe. Also, from my understanding of traditional monarchies in Nigeria, succession to the throne is not hereditary, at least not in the sense of passing from Father to Son to Grandson. It more often than not is determined by a council of kingmakers and, as such, crown princes are an unlikely notion. I may be wrong about this however.

I think, more than the inconsistencies, which will surely be eliminated over time, it is truly remarkable, in 2014, to still see shades of Akeem and his father in the carriage and costume of the Nollywood kings and princes. Tribute to an enduring piece of movie magic.

Cracking Digital Music in Nigeria

One of the courses I treated with the greatest disdain in University was GES 101. I can’t  remember the official title of the course now but I do remember that one of the topics was language and how culture and technology affect language. This has been proved true and become more evident as we march forcefully on into the 21st century.  Until about 5 years ago, tablets were medicine, tweets were onomatopoeic sounds, swiping meant stealing and streaming was something only a river or estuary did. The secondary (?) meanings that all these words and many more have acquired, one could argue, are actually close to achieving primary status now.

 

The advances in technology have presented new challenges for distributors of entertainment content. The market is swinging firmly away from scheduled to content to “on demand” or “a la carte”, where the user/consumer merely pays for access and is thereafter able to determine the order in which he will watch or listen to the content.  The consumer could also decide to purchase the content outright, and with purchase comes the ability to move content between storage devices. Delivering content in this manner will require the consumer to have enough space to store his content library. Thus, advances in digital broadcast have also been accompanied by exponential growth in storage technology.

 

A result of all this progress is that while my dad still has a collection of vinyl records occupying roughly twenty cubic feet of space somewhere in my late grandmother’s house, I can carry infinitely larger amounts of music around on a device no larger than my palm. This is good for the honest consumer but it makes piracy a whole lot easier.

 

Forgive me for being Captain Obvious so far, but a context needed to be set.

 

Piracy – in this context, the unauthorised distribution or selling copies of music – has always been with us and will probably always be with us. The problem is worse in many African countries, including Nigeria, where the government’s anti-piracy efforts are extremely feeble where they exist at all. Today, anyone can be a pirate, as is evident with so-called “offline downloads” being the primary concern of many labels and artistes in Nigeria.

 

“Offline downloads” is the copying that goes on, frequently for paltry sums, from laptops or external hard drives to USB storage devices. It has been reported that the “content aggregators” (with sincere apologies to legitimate content aggregators) charge as little as one naira per track copied.  With more and more cars and even portable radios coming with auxiliary USB audio sockets, one can see why members of the Copyright Society of Nigeria (COSON) are alarmed.

 

The Nigerian industry is also peculiar in the way its revenue stream works. Piracy killed record sales decades ago. The industry tried to solve this problem by selling record masters to distributors at the major piracy centres (tragically ironic, right?). Even at that, many emerging artistes are willing to give their music away for free on popular blogs and websites in return, hopefully, for exposure and recognition, which ought to translate into touring and performing income.

 

Thus, music is largely freely available on both the supply and demand sides of the music equilibrium. How then can digital translate to money for the local, large-scale distributors?

 

The challenge before Iroking and Spinlet, Nigeria’s two main digital distributors – the companies adopting the Spotify/Deezer models of monetising content – is to convince a large enough number of people to agree that paying for music is worthwhile.  In a country of 160 million people with a median age of 19, the market is certainly there. Potentially.  However, even Spotify, with its 24 million users (6 million of whom are paying subscribers) is yet to turn a profit, in its 7th year of operation. iTunes, it is claimed, is running barely above break-even (another great infographic here for dataheads), though Deezer claims to be profitable.

 

These companies exist in countries with mature copyright enforcement systems, where music royalties have been a dependable source of livelihood since forever. This means that there already exists a culture for paying for music. In spite of this, however, musicians are complaining that the revenue from streaming isn’t anything to get excited about. According to Zoe Keating (crossover classical musician) these are the different streaming rates that various distributors offered her (very useful table, actually). So, if neither the streamers nor the streamed are making money (though this point is heavily disputed), what’s the point of this business model? What will the point of this business model be in Africa, in Nigeria?

 

To understand profitability in the business, one must first understand how the service is priced. Most digital music distributors, in addition to outright sales, have a free (advert-supported) service, a limited subscription service (ad-free, but limited number of streams), and a premium subscription service (ad-free, unlimited streams). Therefore, first of all, the difference between outright sales and streams must be taken into account.

 

A physical CD in Nigeria is usually priced between N150 and N1,500 (not counting “deluxe” editions).  This pricing model can easily be adopted for digital sales. A stream, on the other hand, occurs when a track (not downloaded) is listened to for at least 30 seconds. The minimum listening period varies (some agreements say 45 seconds) but the first problem streaming has is how you quantify a listen. Do you randomly estimate how many listens can be extracted from a CD before it becomes unplayable? If a 9-track album costs N150, this equates to about N16 to “own” each track for life. How many times should a streamer be able to listen to a track before his use translates to N16 for the artist? Is this even the metric that distributors and artists/collecting societies use?

 

Speaking of collecting societies, one must commend COSON and the efforts they have made thus far in ensuring that music makers receive royalties for the use of their music. It is not clear however, whether they will function as an aggregator in respect of their dealings with digital distributors. Their primary revenue targets to date have been radio and tv stations, hotels, events venues, etc. and this category of people should rightly pay COSON a licence fee. However, should an Iroking or a Spinlet pay COSON a licence fee, given that each artist enters into a licensing agreement with the digital distributors? If yes, would that not effectively be double licensing, as the artists will collect under their individual licensing agreements, regardless of whatever fee COSON extracts. More importantly, was it the intention of the artists when joining COSON that the collecting society would take over all licensing activity? These are the issues that will need to be clarified as digital music expands in Nigeria.

 

The Value Added Service (VAS) companies that collaborate with telcos to sell ring-back and call-back tones are currently the silent winners in this quest to monetise digital music. Personally, I would never willingly activate a ring-back tone but I am a single subscriber in a pool expected to surpass 128million by 2014. The VAS market in Nigeria is currently valued at over N78.5bn and “may actually be moving towards $1bn in the next three years” .

 

In addition  to all that’s been said here, artists should consider ditching the “listen for free” model and start steering their fans towards platforms where listening generates them money. This may mean starving the blogs of some content and some blogs therefore going rogue and becoming pirate broadcasters (lawsuits, yaaay!!) but if physical sales are dead, then digital must reward maximally.

As for who will win the race to crack digital music in Nigeria, Iroking and Spinlet need to take on and subdue Deezer and Amazon first and hope that Spotify doesn’t decide to expand its operations to Nigeria before then. The catalogue is everything!

 

 

 

(IL)LITERACY IN LEADERSHIP

 

The Nigerian quest for leadership continues and, unfortunately for progressives, zoning and entitlement to others standing down so that a particular region can enjoy its turn to produce the next president is the current preoccupation of the ruling elite and the chasing pack. The pro-zoning argument is mostly that it corrects marginalisation and encourages “a feeling of belonging”. As there is a gaping lack of evidence that any region has benefitted from being the sitting president’s home-region, one must question what exactly those who protest it are being marginalised from?

 

The North (I use these geo-political groupings only very nominally) has produced the majority of the country’s heads of government post-Independence. The consensus is however that it is largely the region lacking the most in infrastructure, education and several other key development indices. The South-West had its own turn but no one can point to the exclusive benefit this conferred on the region during those eight years. The incumbent is from the South-South and it would also be hard to point to anything that has accrued to that region specifically. What then can the accusation of marginalisation be in reference to, if the regions do not enjoy special benefits for producing the president? This zoning argument also scales down to politics at the state level, where the governorship “must” be rotated between the different regions that comprise the states. Marginalisation apparently also exists at the state and local government levels too. The majority of the country must therefore be suffering from this malaise of marginalisation at every point in time.

 

My guess is that it is not the benefits that would accrue to the region that these marginalisation politicians refer to. It is more than likely to be the benefits that accrue to the members of the office-holder’s circle of trust and their hangers-on – the ability to influence appointments (and accumulate political capital), the potential to increase their own personal wealth and [in the tiniest of whispers] the opportunity to assist with how looted funds, if any, will be laundered.. If the President or Governor emerges from your region, you can expect a handsome personal reward depending on how close a friend you are or how prominent a role you played in his election. The cry of marginalisation cannot have very much to do with the progress of the officer-producing region.

 

It is extremely idealistic but I am hopeful that one day, marginalisation will cease to be the motivation or justification for a candidate’s eligibility, and the most important factor in our choices at the ballot will be the quality of the candidate’s learning and the strength of his character. I have often wondered whether the prosperity of the world’s richest nations has anything to do with how well-educated their leaders are. I finally did some digging this week and the results are in the table that follows. The table tries as much as is possible to either go as far back into time as 1980 or, where the information was not readily available, to list the last four heads of government. The table omits schools outside the US and the UK, as most of us (Nigerian readers) are unlikely to be familiar with their pedigree.

 

Name of Head of Government

Profession/Education

 
UNITED KINGDOM  

David Cameron

Oxford University, 1st Class in Philosophy Politics & Economics  

Gordon Brown

1st class History

University of Edinburgh, PhD History

 

Tony Blair

Oxford, 2nd Class BA Arts, later became a barrister  

John Major

O-Levels, Correspondence course in banking  

Margaret Thatcher

Oxford, 2nd Class Honours BSc Chemistry, later became a barrister

 

 
UNITED STATES OF AMERICA  

Barack Obama

Columbia University (Political Science, International Relations); Harvard Law School

 

George W. Bush

Yale University (History), Harvard Business School (MBA)

 

Bill Clinton

Georgetown University (BSc Foreign Service); Oxford (Philosophy, Politics & Economics); Yale Law School

 

George H. W. Bush

Yale University, BA Economics

 

Ronald Reagan

Eureka College, BA Economics

 
GERMANY  

Angela Merkel

PhD, Physical Chemistry

 

Gerhardt Schroeder

Law

 

Helmut Kohl

History & Political Science

 

Helmut Schmidt

Army conscript

 
FRANCE  

Francois Hollande

Political Studies

 

Nicolas Sarkozy

Law

 

Jacques Chiraq

Political Studies

 

Francois Mitterand

Political Science

 
JAPAN  
Shinzo Abe Political Science, Public policy  
Yoshihiko Noda Political Sciences & Economics  
Naoto Kan Patent Attorney  
Yukio Hatoyama PhD, Industrial Engineering  
Junichiro Koizumi Economics  
SWEDEN  
Fredrik Reinfeldt Business & Economics  
Göran Persson Social & Political Sciences (didn’t graduate)  
Ingvar Carlsson

 

Diploma in Business Economics, BSc in political science  
AUSTRALIA  
Julia Gillard BA, Law
Kevin Rudd BA Arts, Asian Studies
John Howard BA, Law
Paul Keating (No higher education)
Bob Hawke BA Arts, Oxford
SINGAPORE
Tony Tan BSc Physics (1st Class)

MSc, MIT

PhD Applied Mathematics

 
S R Nathan Social Studies  
Ong Teng Cheong Architecture  
Wee Kim Wee Journalist (Political Features)  

 

There is a preponderance of degrees in political science, law, business, economics and arts (with Singapore throwing its own unique party). Leaders educated in the science of statehood, jurisprudence, commerce and humanities. Of course, this is incomplete, almost half-arsed, data and not much can be gleaned from it. For instance, we do not know from this table if the citizens of these countries prefer leaders with this sort of education or whether it is each country’s political infrastructure that ensures that the cream rises to the top. The table does not examine the presidents’ cabinets and the quality of the team they are surrounded with. We cannot tell if the countries are rich because their leaders are well-educated or whether the leaders are well-educated because the countries are rich.

Regardless, there does appear to be a correlation between the level to which a country’s leaders over time have been educated and how prosperous the country is. This is more so when Sub-Saharan Africa (in which a huge number of the world’s poorest countries are located) is examined in a similar vein and we see several countries that have been pillaged [mostly] by soldiers in the period under review. The soldiers that have usurped civilian rule have also mostly not been of the senior ilk – coups are rarely planned by generals. Many of these countries have also endured long stretches during with the same head of government. Imagine a first-year medical student performing heart surgeries, and answerable to no one for the inevitable cock-ups.

Going forward, while I realise that the “masses” probably do not care much for what university the president went to nor, indeed, if he even went at all, the nature of candidates’ education must be taken into greater consideration. It should come as no surprise, for instance, when people who know nothing of the theories of state get onto our television screens and spout heresies. How can we expect such people to be aware of their own responsibilities in the social contract? When merit is perpetually sacrificed on the altar of marginalisation, how can we expect progress or growth? Perhaps our change advocacy needs to make much more of an issue of this.