Diaspora Bonds to Help Build up Infrastructure

Many people are aware of the significant role played in global development by remittance payments from migrant workers working in the wealthy North to the global South. But they may not be aware of the significant sums migrant workers have saved in bank accounts in these wealthy countries. Across the global South, efforts are underway to lure these sums back to home countries to boost development efforts.

As the hard-earned money migrant workers save sits in bank accounts in wealthy Western countries earning very low interest rates – a consequence of the current global economic crisis – so-called “Diaspora Bonds” seek to offer a way to earn good interest returns and help build up home countries at the same time.

The money can help developing countries build facilities they need but cannot afford: roads, bridges, railways, water supplies, power, sewerage, street lighting. It is a way to bypass dependence on foreign aid and borrowing from aid agencies or the general marketplace.

US $501 billion in remittance payments was sent in 2011, of which US $372 billion went to developing countries, involving some 192 million migrants or 3 per cent of the world’s population (World Bank). On top of this, migrants from developing countries have saved an estimated US $400 billion – and these funds are being targeted by those selling diaspora bonds (The Economist).

The idea is being promoted by the World Bank and draws on the successful experiences with bonds for Israel and India. Both countries have long histories of turning to diaspora communities to raise funds through bonds.

The bonds work by playing on patriotism and the genuine desire of migrants to want to see conditions improve back home. As the thinking goes, patriotic investors are more likely to be patient. This is critical because many countries cannot offer rapid profits and a quick pay off – something sought by short-term investors obsessed with the ups and downs of the stock market. They are also sterner investors, less likely to run away when the going gets tough. Their local knowledge means they will not panic and pull their investments when bad news hits the headlines. And probably best of all, they don’t mind if the local currency declines in value – that just means they can pick up a local house on the cheap or buy a business for even less money.

One business working in this area is Homestrings (homestrings.com): Motto “Come make a difference.” An Internet platform offering diaspora bonds, it is run by founder and chief executive officer Eric-Vincent Guichard. An American born to a Guinean father and American mother, he spent 20 years growing up in rural Guinea and knows the country well. He also heads up GRAVITAS Capital Advisors, Inc. (gravitascapital.com), founded in 1996, which advises governments on how to manage their assets. A graduate of HarvardBusinessSchool and a former World Bank scholar, he is based in Washington, D.C.

According to its website, Homestrings works like this: “It all starts with your ability to scan through a catalog of projects, funds and public-private partnership opportunities that focus on regions you come from or that you care deeply about. Each of these projects and/or funds is detailed in a Fact Sheet that is set up to help you do the due diligence needed to make an investment decision. Then, Homestrings directs your investment into the selected project or fund, with the help of our administrator.”

Investments are monitored on a monthly or quarterly basis and are selected for their socio-economic impact and investment profitability.

The website has a personal “Dashboard” that allows investors to use the site to vote for or against investments and make comments. And Homestrings will promote the investments that receive the most support and positive comments.

To make an investment, a potential investor selects a fund or project that matches their interest. They read the Fact Sheet and choose. The funds are then passed on to the investment bond and an interest percentage or dividend is paid at regular intervals. Investors can keep track of the investment through the personal Dashboard on the website.

Fact Sheets are organized by geographical region, industry focus, and development theme. Investments “cover infrastructure, health care, education, transportation, and small and medium sized enterprise finance – all critical areas of economic growth.”

The Homestrings Catalog of investments includes the governments of Kenya, Senegal, Ghana, Nigeria and also AFREN PLC, which is looking to finance oil and gas exploration off the coast of Nigeria.

Dramatic improvements in global communications in the past five years have also made it much easier for everyone involved to stay in touch and for bond promoters to identify and target potential customers.

The World Bank is currently advising countries on how to run diaspora bond schemes. Kenya, Nigeria and the Philippines have schemes in the works, according to The Economist.

Ethiopia has announced the “Renaissance Dam Bond” (http://grandmillenniumdam.net/). Proceeds will be used to fund the construction of the Grand Renaissance Dam, the largest hydroelectric power plant in Africa, able to generate 5,250 megawatts. Ethiopia tried a similar scheme before with the Millennium Corporate Bond to raise funds for the Ethiopian Electric Power Corporation (EEPCO). This did not entirely meet expectations and sales were slow. Reasons given for this included a perception that EEPCO could not meet payment expectations when the hydroelectric power plant was operating. There was also a lack of trust in the government and its financial stability and the overall political risks.

The second attempt at a bond is believed to better thought through. It comes with an aggressive marketing and awareness-raising campaign aimed at the diaspora, and it starts at US $50, making it more affordable for more people.  It can be used as collateral in Ethiopia – an advantage for those wanting to do business back in the home country.

For potential investors, it is worth remembering that bonds are debts that are rewarded with regular interest payments and paid back at the end of the bond term. They are not risk-free and the risk can lie either in the sovereign solvency of the country or in the investment.

The secret to a successful bond issue is to keep up good relations with the diaspora; countries that are too oppressive could find themselves short of people willing to take up the offer.

By David South, Development Challenges, South-South Solutions

Published: October 2012

Development Challenges, South-South Solutions was launched as an e-newsletter in 2006 by UNDP's South-South Cooperation Unit (now the United Nations Office for South-South Cooperation) based in New York, USA. It led on profiling the rise of the global South as an economic powerhouse and was one of the first regular publications to champion the global South's innovators, entrepreneurs, and pioneers. It tracked the key trends that are now so profoundly reshaping how development is seen and done. This includes the rapid take-up of mobile phones and information technology in the global South (as profiled in the first issue of magazine Southern Innovator), the move to becoming a majority urban world, a growing global innovator culture, and the plethora of solutions being developed in the global South to tackle its problems and improve living conditions and boost human development. The success of the e-newsletter led to the launch of the magazine Southern Innovator.  

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African Supercomputers to Power Next Phase of Development

Information technology developments in Africa have long lagged behind those in other parts of the world. But the transformation being brought about by the widespread adoption and use of mobile phones – each one a mini-computer – and the expansion of undersea fibre optic cable connections to Africa are creating the conditions for an exciting new phase of computing growth on the continent.

Despite the global economic crisis, Africa is on course to see annual consumer spending reach US $1.4 trillion by 2020, nearly double the US $860 billion in 2008 (McKinsey). On top of this, by 2050, a projected 63 per cent of Africa’s population will be urban dwellers. With Africa’s middle class the fastest-growing in the world – doubling in less than 20 years – matching computing power with this consuming urban population could unleash a treasure trove of opportunity for information technology entrepreneurs.

These developments are creating the conditions for game-changing computing in the next years. And this is encouraging the creation of a new supercomputer (http://en.wikipedia.org/wiki/Supercomputer) for Africa in Kenya that will double the total number of supercomputers in Africa. Hugely powerful compared to personal or commercial computers, supercomputers use cutting-edge technology to carry out high-speed calculations involving vast quantities of data.

Expanded supercomputing power brings numerous advantages to both economic and human development. It will radically alter what can be accomplished in Africa – allowing mass data processing to be done, highly complex and data dense applications to be run, and very large research projects to be conducted on the continent rather than overseas.

Increasing computing power in Africa will bring in its wake, it is hoped, a surge in economic and research opportunities.

It will help African researchers and scientists to undertake globally competitive projects, rather than seeing this work done overseas. It will also open up a vast range of possibilities for African entrepreneurs and businesses to do complex data processing, modelling and research and will enable them to become more sophisticated operations.

The new supercomputer, the iHub Cluster, is being built in the Kenyan capital by one of Africa’s pioneering information technology hubs – iHub Nairobi (http://ihub.co.ke/pages/home.php) – in partnership with Internet products and services company Google and microchip maker Intel Corporation.

Africa’s first supercomputer is located in South Africa and is ranked 497 in terms of computing power on the list of 500 supercomputers in the world (http://www.top500.org/).

It is located in the “Tsessebe cluster” in Cape Town’s Centre for High Performance Computing (http://www.chpc.ac.za/).

“With mobile devices coming in multiple cores, it is important for developers to be exposed to higher performance computing; we are hoping to debut at a higher level than ‘Tsessebe cluster’,” Jimmy Gitonga, the project team leader for the iHub cluster, told Computer World.

Africa suffers from poor supercomputer capacity and this has had a knock-on affect on everything to do with economic development. The iHub supercomputer hopes to help universities and colleges to gain competitive edge and be able to undertake more complex research in the fields of media, pharmaceuticals and biomedical engineering.

“In Africa, we need to be on top of the mobile scene, its our widest used device,” Gitonga told Computer World.

Some of the practical applications for the iHub supercomputer in East Africa and the Horn of Africa include improving weather forecasting and drought prediction, increasing the ability to give advance warning of droughts and famines in the region.

“Most of the United Nations agencies and international agencies operating in the region have extensive field research on how to tackle natural disasters in the region. Imagine if they had affordable space where they can meet with developers and test resource-hungry applications,” Gitonga said.

The iHub also wants to offer the services of the supercomputer to researchers and organizations who have had to go abroad to have their data processed. The iHub supercomputer hopes to be used by mobile phone developers, gamers, universities and research institutions.

In the last two years, China had pushed the United States out of the number one spot for supercomputers. The Tianhe-1A located at the National Supercomputing Center in Tianjin (http://www.nscc-tj.gov.cn/en/), China, was the fastest computer in the world from October 2010 to June 2011.

For those looking to see how they can make the most of the growing supercomputer capability in Africa, examples from other countries offer a good idea. Supercomputers can be used for weather forecasting, climate research, oil and gas exploration, physical simulations like when testing aircraft, complex modelling for medical research, processing complex social data necessary for delivering effective social programmes or running modern health care systems.

By David South, Development Challenges, South-South Solutions

Published: October 2012

Development Challenges, South-South Solutions was launched as an e-newsletter in 2006 by UNDP's South-South Cooperation Unit (now the United Nations Office for South-South Cooperation) based in New York, USA. It led on profiling the rise of the global South as an economic powerhouse and was one of the first regular publications to champion the global South's innovators, entrepreneurs, and pioneers. It tracked the key trends that are now so profoundly reshaping how development is seen and done. This includes the rapid take-up of mobile phones and information technology in the global South (as profiled in the first issue of magazine Southern Innovator), the move to becoming a majority urban world, a growing global innovator culture, and the plethora of solutions being developed in the global South to tackle its problems and improve living conditions and boost human development. The success of the e-newsletter led to the launch of the magazine Southern Innovator.  

Follow @SouthSouth1

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Africa to Get Own Internet Domain

Africa is in the midst of an Internet revolution that is set only to accelerate. The continent is one of the last places to experience the information technology revolution that has swept the world in the past two decades.

Africa has been at a disadvantage for several reasons, the most basic of which has been the lack of bandwidth capacity available from the undersea cables that connect other continents to the Internet. A map showing the world’s undersea cable links says it all: the majority of traffic goes between Europe and the United States (http://www.telegeography.com/telecom-resources/telegeography-infographics/submarine-cable-map/).

But this is changing: a glance at recent developments with the launching of the Seacom, EASSy, MainOne and other cables shows a continent getting better connected by the year (http://manypossibilities.net/african-undersea-cables/).

With seven out of the 10 fastest-growing economies in the world between 2011 and 2015 projected to be in sub-Saharan Africa, the conditions are ripe to grow African Internet businesses. For example, Ghana, with its booming information technology sector, boasted 13 percent economic growth last year, among the fastest in the world.

In eight of the past 10 years, sub-Saharan Africa has grown faster than Asia (The Globe and Mail).

While Africa has come late to the Internet party, the continent can benefit from two decades of experience elsewhere to avoid making the mistakes others have. Africa can upload tried and tested Internet platforms and can also create new, Africa-specific platforms that tackle the continent’s own needs and challenges.

One of the ways to make the most of the opportunities presented by the Internet is to have an Africa-specific Internet domain name. A domain name (http://en.wikipedia.org/wiki/Domain_name) is the suffix placed after the period in Internet URL (uniform resource locator) (http://en.wikipedia.org/wiki/Uniform_resource_locator) addresses. Common ones familiar to most people who use the Internet include .com (for commercial websites), .org (for non-profit websites and organizations), .co.uk (for British businesses) or .ca (for Canadian organizations).

The dot Africa (.africa) domain name will be available in the next 15 months according to the Internet Corporation for Assigned Names and Numbers (ICANN) (http://www.icann.org/). It is currently reviewing 500 African organizations that have expressed interest in managing the domain name registrations, and will choose one at the beginning of 2013.

Countries such as Kenya and South Africa – two places in Africa with booming information technology sectors – are hoping to make the most of the new dot Africa domain name.

The idea is to use the dot Africa domain name to build a stronger brand for the continent’s Internet that will be bigger than the individual country domain names. Sophia Bekele, executive director of DotConnectAfrica, told CNN the suffixes for individual African countries had proven unpopular during the decade since their introduction.

Her organization found that 80 per cent of African domain name registrants had opted for “.com” or “.org” suffixes, which were price competitive, reliable to register and had wide recognition.

The country-level domain names suffered from being “usually owned by governments, and governments are typically not very good at marketing,” she told CNN.

Bekele’s research found young developers involved in creating local content felt a stronger affinity with the “.africa” suffix than to the “.com” domains. And the new suffix will let companies unify their presence across the continent under a single online brand.

A major benefit of the “.africa” domain will be that proceeds from African domain registrations remain on the continent, rather than flowing offshore. DotConnectAfrica says it plans to reinvest surpluses into developing the African Internet sector.

The African Union Commission (http://www.au.int/en/commission) is also looking to register the .afrique (French language websites) and .afriqia (Arabic language websites).

The AUC’s head of information society, Moctar Yedaly, told CNN the commission’s vision for the .africa domain is not just commercial.

“It may well be a very good business in terms of money generating. If it may generate some revenue we can use for the development of ICT in Africa, then that is all very good, but that’s not my primary goal,” he told CNN. “My primary goal is to ensure the identity of Africa, the image, the culture are well-maintained.”

By David South, Development Challenges, South-South Solutions

Published: October 2012

Development Challenges, South-South Solutions was launched as an e-newsletter in 2006 by UNDP's South-South Cooperation Unit (now the United Nations Office for South-South Cooperation) based in New York, USA. It led on profiling the rise of the global South as an economic powerhouse and was one of the first regular publications to champion the global South's innovators, entrepreneurs, and pioneers. It tracked the key trends that are now so profoundly reshaping how development is seen and done. This includes the rapid take-up of mobile phones and information technology in the global South (as profiled in the first issue of magazine Southern Innovator), the move to becoming a majority urban world, a growing global innovator culture, and the plethora of solutions being developed in the global South to tackle its problems and improve living conditions and boost human development. The success of the e-newsletter led to the launch of the magazine Southern Innovator.  

Follow @SouthSouth1

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Geothermal Energy to Boost Global South’s Development

The geothermal heat produced by the earth’s molten core is a resource receiving more and more attention across the global South. Properly harnessed, geothermal energy (http://en.wikipedia.org/wiki/Geothermal_energy) offers a low-cost, non-polluting source of power and hot water that does not harm the environment or contribute to climate change (http://en.wikipedia.org/wiki/Climate_change).

The country that has made the most of this resource is the Scandinavian island nation of Iceland (http://www.visiticeland.com/), one of the world’s most volcanically active places.

The country was once one of the poorest in Europe, dependent on fishing as its main income source. But by 2007-2008, Iceland was ranked as having the highest level of human development in the world.

One of the contributors to this impressive improvement in human development is the tapping of the country’s geothermal energy reserves (http://www.geothermal.is/).

According to the Geothermal Energy Association (GEA), “Iceland is widely considered the success story of the geothermal community. The country of just over 300,000 people is now fully powered by renewable forms of energy, with 17 per cent of electricity and 87 per cent of heating needs provided by geothermal energy.”

Worldwide, geothermal energy supplies power to 24 countries, producing enough electricity to meet the needs of 60 million people (GEA).

The Philippines generates 23 per cent of its electricity from geothermal energy, and is the world’s second biggest producer behind the U.S.  Geothermal energy is also helping provide power in Indonesia, Guatemala, Costa Rica and Mexico.

Energy is critical to advances in human development. Electricity enables the introduction of lighting in homes, the use of washing machines and other modern appliances and of communications tools such as computers and televisions.

Geothermally heated water can be used to heat homes, provide hot water for bathing, heat swimming pools and bathing places and power electricity turbines. Industry can benefit from the low-cost energy, giving a boost to economic development.

And, crucially, it does not harm the natural environment like conventional energy sources such as coal, gas or nuclear power with its legacy of radioactive waste.

While not all countries are as well positioned as volcanically active Iceland or the Philippines, many can find a way to tap this natural resource.

Interest in this power source is increasing in Central and South America, whose energy consumption is forecast to increase by 72 per cent by 2035 (International Energy Outlook 2011).

South America currently relies heavily on hydro-electric power, but this is proving insufficient to meet the growing demand (http://www.esmap.org/esmap/node/1136). A World Bank study says “Latin American and Caribbean countries could boost region-wide electricity supply by 30 percent by 2030 by diversifying the energy mix to include hydropower, natural gas, and renewable energy” (ESMAP).

The report estimates the region has the potential to generate 300 terawatts of geothermal energy per year, roughly equivalent to the output of fifty 1,000-megawatt power plants or the emission of 210 million metric tons of carbon greenhouse gases (ARPA).

The areas best placed to tap this resource are located along the Pacific Rim from Mexico to Chile, and in parts of the Caribbean.

The 2012 Geothermal International Market Overview Report by the Geothermal Energy Association (GEA) (http://www.geo-energy.org/reports.aspx) found Argentina, Chile and Peru are moving ahead with plans.

In Argentina, Earth Heat Resources (http://www.earthheat.com.au/) is developing geothermal energy in the volcanic Copahue region in partnership with Xtrata Pachon SA (http://www.xstratacopper.com/EN/Operations/Pages/ElPachon.aspx).

Because of government support and legislation, there are now 83 geothermal exploration concessions under review in Chile, according to Renewable Energy World.com.

The Renewable Energy Center (http://www.ecpamericas.org/initiatives/?id=23) has been established in Chile and is the fruit of a partnership between the US Department of Energy (DOE) and the Chilean National Energy Commission. It is being used to gather data on global best practices and techniques to be adapted for use in Chile, and hopes to become a knowledge source for the region. A law is also in place to oblige power utilities with a capacity above 200 megawatts (MW) to have 10 per cent of their energy come from renewable sources.

Central America has already enthusiastically embraced geothermal resources, according to the report by the GEA.

Currently, El Salvador and Costa Rica derive 24 per cent (204 MW) and 12 per cent (163 MW) of their electricity production from geothermal energy. Nicaragua and Guatemala are also generating a portion of their electricity from geothermal energy.

And Central America has still more geothermal potential it can tap. Estimates place this between 3,000 megawatts and 13,000 megawatts at 50 identified geothermal sites.

By David South, Development Challenges, South-South Solutions

Published: October 2012

Development Challenges, South-South Solutions was launched as an e-newsletter in 2006 by UNDP's South-South Cooperation Unit (now the United Nations Office for South-South Cooperation) based in New York, USA. It led on profiling the rise of the global South as an economic powerhouse and was one of the first regular publications to champion the global South's innovators, entrepreneurs, and pioneers. It tracked the key trends that are now so profoundly reshaping how development is seen and done. This includes the rapid take-up of mobile phones and information technology in the global South (as profiled in the first issue of magazine Southern Innovator), the move to becoming a majority urban world, a growing global innovator culture, and the plethora of solutions being developed in the global South to tackle its problems and improve living conditions and boost human development. The success of the e-newsletter led to the launch of the magazine Southern Innovator.  

Follow @SouthSouth1

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Free Magazine Boosts Income for Rickshaw Drivers

In the bustling, congested cities of Asia, rickshaws and auto-rickshaws are common forms of transport. Smaller, cheaper and more nimble than cars, they play a key role in the transit infrastructure, helping to get people to work and to get around.

According to a report by the World Resources Institute (wri.org) and EMBARQ – a global network of experts on sustainable transport solutions – India’s auto rickshaws are “an increasingly important part of urban transport in cities.”

The report estimates the number of auto rickshaws at between 15,000 and 30,000 in medium-sized cities and over 50,000 in large cities. The report found they make up between 10 and 20 per cent of daily motorized road transport trips for people in Bangalore, Mumbai, Pune and Rajkot.

And it’s not just the economic role played in transporting people: auto rickshaws are made in India and their production there doubled between 2003 and 2010, making them a source of manufacturing jobs too.

As India’s cities continue to grow – estimates forecast urban populations surging from 340 million in 2008 to 590 million by 2030 – auto rickshaws could have a bright future as they remain an affordable and safe transport solution.

The monthly magazine Meter Down (http://meterdown.co.in/) – launched in 2010 – is targeting the large captive audience of Mumbai’s rickshaw passengers with news and advertising. It is modelled on the familiar free newspapers found in cities around the world. Usually, these newspapers are distributed at subway and metro stations or in metal boxes at bus stops. Meter Down takes a different twist on this concept, distributing the publication directly to rickshaw passengers.

Mumbai is a crowded and very busy Indian city with an estimated 14 million people. Many residents spend a lot of time commuting – and a lot of time stuck in traffic jams. They need something to occupy them and to keep them informed about the news. This also presents a significant opportunity for businesses to communicate messages and advertising products and services.

Founded by three university graduates, Meter Down is trying to reach young professionals with a bit of money who can afford to ride to work in auto rickshaws.

It is distributed through 7,000 auto rickshaws in Mumbai, according to The Guardian newspaper, and is also being distributed in Pune and Ahmedabad.

The clever bit is the incentive for the drivers to carry the magazine: they receive 35 to 40 per cent of the profit from advertising sales.

This is added to the 400 to 500 rupees they make in a normal shift, according to the Mumbai Autorickshawmen’s Union.

But isn’t it a challenge to read a printed publication while bouncing along the road? The publishers came up with a solution: no story is to be longer than 300 words and the magazine has many large-size photographs to make it visually appealing and easy on the eye. Then there is the issue of passengers leaving with a copy of the magazine, denying the next passenger their read. The solution they came up for this is to tie the magazine to the rickshaw.

One of the biggest problems for any new start-up publication is how to scale up and reach more readers. Meter Down cleverly has the mechanism to scale built into its business model: “The market for this is as big as the total number of auto-rickshaws in each city,” Dedhia told The Guardian. “We have successfully scaled the model and tweak it as per different specific needs. Since auto-rickshaws are present in every part of the country, we can expand the network everywhere.”

Meter Down’s founders estimate that each rickshaw makes 90 to 95 trips every day. They have calculated this leads to a potential readership of 600,000 people. To increase revenue sources, the magazine also sells advertising space on the back and inside of the rickshaws.

For people in wealthier countries, rickshaws may seem like a rough way to get to work, but they are actually, for Indians, the more expensive option. A three-mile ride in Mumbai costs 68 rupees (US $1.27), according to The Guardian, which is 10 times the cost of a second-class train ticket.

For Meter Down, this means targeting the magazine and the ads at a market of readers with money and a willingness to buy products and services. It looks like things could be on the up for Meter Down!

By David South, Development Challenges, South-South Solutions

Published: September 2012

Development Challenges, South-South Solutions was launched as an e-newsletter in 2006 by UNDP's South-South Cooperation Unit (now the United Nations Office for South-South Cooperation) based in New York, USA. It led on profiling the rise of the global South as an economic powerhouse and was one of the first regular publications to champion the global South's innovators, entrepreneurs, and pioneers. It tracked the key trends that are now so profoundly reshaping how development is seen and done. This includes the rapid take-up of mobile phones and information technology in the global South (as profiled in the first issue of magazine Southern Innovator), the move to becoming a majority urban world, a growing global innovator culture, and the plethora of solutions being developed in the global South to tackle its problems and improve living conditions and boost human development. The success of the e-newsletter led to the launch of the magazine Southern Innovator.  

Follow @SouthSouth1

Google Books: https://books.google.co.uk/books?id=QZtjxQ5L9gEC&dq=development+challenges+september+2012&source=gbs_navlinks_s

Slideshare: http://www.slideshare.net/DavidSouth1/development-challengessouthsouthsolutionsseptember2012issue

Southern Innovator Issue 1: https://books.google.co.uk/books?id=Q1O54YSE2BgC&dq=southern+innovator&source=gbs_navlinks_s

Southern Innovator Issue 2: https://books.google.co.uk/books?id=Ty0N969dcssC&dq=southern+innovator&source=gbs_navlinks_s

Southern Innovator Issue 3: https://books.google.co.uk/books?id=AQNt4YmhZagC&dq=southern+innovator&source=gbs_navlinks_s

Southern Innovator Issue 4: https://books.google.co.uk/books?id=9T_n2tA7l4EC&dq=southern+innovator&source=gbs_navlinks_s

Southern Innovator Issue 5: https://books.google.co.uk/books?id=6ILdAgAAQBAJ&dq=southern+innovator&source=gbs_navlinks_s

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