Go$ng green in Africa

TEL AVIV, Israel – When Golda Meir first visited Africa in 1958, she had a vision. As a young country in the process of nation building, Meir believed Israel could share valuable lessons and expertise with Africa.

“Like them,” she said, “we had shaken off foreign rule; like them, we had to learn for ourselves how to reclaim the land, how to increase the yields of our crops, how to irrigate, how to raise poultry, how to live together, and how to defend ourselves.”

Meir began by developing cooperative agricultural and urban planning programs in Africa, earning Israel a top-notch reputation in the field that is still enjoyed today.

As businessmen have gradually become Israel’s new ambassadors, however, insiders argue that altruistic parallels between the Jewish and African experience have largely fizzled out. The idealism of early Zionists has been largely replaced by economic competition, a pessimistic outlook and, often, less than “kosher” business practices.

Along with the cooperative development programs that characterized Israel’s early relations with the continent, over the last 50 years business with Africa has expanded to include weaponry and security technologies, diamonds, machinery, infrastructure and metals.

Agriculture and water technologies also play a large role in the exchange, although not as heavily as in the 1960s. Cellular technologies are a growing industry, and, according to representatives from the Israeli Ministry of Foreign Affairs (MFA), renewable energy may be the next up-and-coming field.

For Israeli companies able to combine Africa’s rich resources and large market with Israel’s most infamous export – know-how – industry insiders say there may be a wealth of potential.

“Especially with the meltdown in Western economies, Israelis recognize Africa as the new frontier,” says Avram Joffe, chairman of the Israel-South Africa Chamber of Commerce.

“What we are primarily buying from Israel right now are skills, not products,” says Friday Okai, minister at the Nigerian Embassy in Israel and head of the Economic Department.

According to statistics from the MFA, mutual trade between Israel and Africa reaches about $1.8 billion a year – admittedly a low figure for an entire continent. Israel’s trade with South Korea alone, for example, was worth $1.6 billion between January and June 2008, and is estimated to reach $2 billion by the end of the year.

So, if the potential is so great, then why are the numbers so small?

Both MFA representatives and industry insiders say that the figure represents only a small fraction of the actual trade going on between Israel and Africa. These records do not include other sources of trade, such as Israeli investments in the continent, Israeli companies registered abroad and specific products or services, such as security technologies or diamonds.

While there are currently at least 55 registered Israeli companies doing business in Nigeria, Okai says there are many more informal business activities going on outside of the primary sectors of telecommunications, construction, agriculture and pharmaceuticals.

Such statistics are, therefore, far from reflecting the actual scope of trade, says Shahar Shelef, the MFA’s deputy director of the West and Central Africa Division, and Michal Weiler-Tal, an MFA representative from the economic department of the Africa and America Division.

Some companies operating in Africa may not be registered as Israeli, instead conducting business through a third party. A large part of business is conducted on a low-profile basis because African countries don’t always want to be associated with Israel, nor does Israel want to be publicly linked with dubious African regimes, explains Joffe.

“Some companies want to be registered as European because it’s easier to do business without waving an Israeli flag,” says Weiler-Tal.

Still, politics and diplomacy rarely deter companies interested in doing business in the region, she says.

“There are very few countries that do not have formal relations with Israel. But the historical experience is very clear – the absence of diplomatic ties has never prevented business ties,” says Dr. Naomi Chazan, former deputy speaker of the Knesset and professor of political science at The Hebrew University, specializing in Africa.

Boasting diplomatic relations with 39 out of 47 countries in Sub-Saharan Africa, Israel currently has nine diplomatic missions in the region – in Angola, Cameroon, the Ivory Coast, Ethiopia, Eritrea, Kenya, Nigeria, Senegal and South Africa.

Strong political or historical ties to Israel, however, do not necessarily translate into strong economic relations, says Weiler-Tal, while African countries without any diplomatic ties to Israel still use Israeli products and services.

In fact, says Chazan, businesses create an Israeli presence in African countries where there are no permanent Israeli representatives.

“I think [business and diplomacy] both complement each other,” says Okai, noting that since Nigeria reestablished diplomatic ties with Israel in 1992, business between the countries has improved.

Yet, while Israel’s relations with Ethiopia are among the strongest in Africa, trade is considerably low for a country that hosts an Israeli mission, says Weiler-Tal. South Africa, on the other hand, has the most trade with Israel but has a complex, and at times, unfriendly political attitude.

“There are cautious signs that the South African government is becoming more receptive to Israel,” says Joffe. “While South African’s foreign policy remains biased against Israel, in the last year some leading politicians and black business leaders have made statements that Israeli know-how and expertise could help South Africa’s development.”

Israeli companies and individuals are primarily involved in the high-tech/telecom, security and diamond sectors in South Africa, with bilateral trade amounting to $674 million in 2006, according to Joffe.

Israel’s Central Bureau of Statistics reports that Israel’s imports from South Africa, excluding diamonds, totalled $292.5 million during 2004 and Israel’s exports to South Africa totaled $239.9 million.

But while there are “pockets of excellence” and a lot of “potential,” Israeli companies should be prepared for significant challenges. Even in South Africa, one of Africa’s most modern and industrialized countries, Israeli companies face a challenging mix of first world and third world conditions, says Joffe.

Since 2007, an electricity crisis has plagued the country with rolling black-outs, causing significant damage to industry, business and overall confidence in the country.

“Can you imagine what that does to business?” asks Joffe. “And even more damaging is the negative effect it has on skilled South Africans’ confidence in the future of the country. People see the electricity cuts as a sign of the country’s inevitable deterioration; the parallels with other African countries’ post-independence trajectories are frightening.”

Providing adequate infrastructure and power supplies are admittedly the biggest challenges for businessmen in Nigeria as well, says Okai.

“Generally, we have a very negative image. . . But in industrial cities where most businesses are located, on average, the government has been doing a lot to improve the situation,” he says.

A company’s products and services in Africa must be on par with what they produce in other countries, explain Shelef and Weiler-Tal, but the challenges on the ground are much greater in Africa, where instability and political upheaval often characterize daily life.

“South Africa is a dangerous country, no doubt about it,” says Joffe.

Crimes – like carjacking and robbery – are common and often violent. At least two Israeli businessmen have been killed in South Africa in the past few months.

“But given Israel’s exposure to terror and war, Israelis tend to have a greater tolerance for this type of environment and do not shy away from doing business there,” Joffe adds.

“Israelis are generally not scared of political instability – they are used to it and seem to have a knack for getting on the right horses. They cover all their bases; they cultivate the right people,” says Yossi Cohen [not his real name], an Israeli business consultant with more than seven years experience working in Africa.

Rather than violence and political instability, Israeli companies’ concerns lie in bureaucracy and fear of the unknown, Weiler-Tal and Shelef say.

“They know how to handle business in the Western world but they aren’t familiar with Africa and its culture,” says Weiler-Tal.

The differences in the business culture, however, may very well be part of the appeal.

Everything can be seen as either an obstacle or an opportunity, explains Joffe. “The cup is always half empty or half full.”

“Israeli companies will tell you, even if they have to spend more money to get power, the business returns are quite high and worth it,” says Okai, addressing the challenges of infrastructure and energy. “Once they do business in Nigeria, they do not want to leave.”

“Israelis are willing to work in an unstructured, ambiguous environment without rules, whereas Western companies tend to stay away from that,” says Joffe. “It creates a vacuum that Israelis can fill.”

“Every crisis is an opportunity,” says Cohen.

For businessmen who aren’t afraid to get their hands “dirty,” a business environment without rules may produce opportunities to win big. Sometimes, when Israeli companies consult with Cohen about working in Africa, they tell him that they don’t want to do business in an uncorrupt, transparent country.

Bribery in many different forms, claims Cohen, is standard practice throughout Africa, and some rely on it to do business.

“In a normal African country there is only one person who makes the decisions. As soon as you find – [and bribe] – him, you are set.”

Most business opportunities are based on government tenders, especially in the fields of infrastructure, security and energy.

“There is no way to do it ‘kosher.’ Even the humanitarian field is corrupt,” says Cohen.

Israeli companies are rarely held responsible for corruption, he says, because, among other reasons, they operate through local African companies to avoid liability. This is also the reason that annual trade figures between Israel and Africa are so low – they don’t reflect the actual amount of money being made off Africa, he says.

“Nobody cares because it’s Africa,” says Cohen, who began his career working in Africa for an international organization.

Cohen believes that corruption, racism and unbalanced power relations are common to the business climate in Africa.

Israelis, he says, are particularly good at adapting to this business and political environment, and are able to offer cheaper services and quality staff, giving them an advantage over Western companies.

“Very respectable companies are responsible for large chunks of the economic relations [with Africa], but there are also some very shady characters who really epitomize the ugly Israel,” Chazan says, particularly “in the period when Israel did not have diplomatic relations with Africa.”

MFA representatives realize that corruption and bribery do exist, but emphasize that it is their priority to help Africa by facilitating interaction between the continent and the private sector – meeting Africa’s needs with Israel’s expertise.

“But, if you want to feel clean,” says Cohen, “you cannot do business in Africa.”

MFA Trade Statistics between Israel and its Top Partners in Africa:

Year 2006 (in TH$)
South Africa 957,437.09
Nigeria 77,673.69
Kenya 65,750.20
Namibia 100,671.27
Ethiopia 36,863.23

Year 2007 (in TH$)
South Africa 1,128,469.12
Nigeria 207,040.94
Kenya 118,644.51
Namibia 160,140.28
Ethiopia 43,029.32

Jan-Jun 2008 (in TH$)
South Africa 680,157.11
Nigeria 111,291.07
Kenya 66,178.28
Namibia 61,808.53

Ethiopia 35,536.64

Main trading commodities:
Import: Precious stones and metals (raw)
Mineral products

Export: Machinery
Chemical products
Precious stones and metals (processed)

*Note that these figures do not include other categories or sources such as Israeli companies that are registered abroad, and other investment in Africa.