“Africa is a great opportunity for Israeli entrepreneurs, because they appreciate the entrepreneurial ability of Israel because of the ‘Startup Nation’ image. They have great respect for water and agriculture technologies,” said an Israeli businessman, who has operated for years on the continent, assessing the potential of Prime Minister Benjamin Netanyahu’s recent visit to east Africa.
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Dozens of Israeli businesspeople joined Netanyahu on his visit to Kenya, Ethiopia, Uganda and Rwanda. Most concentrated on the areas of agriculture, water infrastructure and security.
Uganda, Rwanda and Ethiopia are countries that have seen economic growth of 5% to 10% a year recently.
These countries are gradually developing a new middle class, which is pushing their economies upward, said one of the Israeli businessmen. “You feel it in the construction of buildings and paving of roads. ” he said. It is a great achievement for the World Bank and International Monetary Fund after years of work, and now they are starting to see the fruits of their investment. The quality of government is also improving gradually, something that allows the growth of the middle class,” added the businessman.
The key is infrastructure, says Yehuda Ankonina, who owns a company that works as a subcontractor for large Israeli companies in Africa. “Gradually, in certain countries they began to invest in infrastructure and from that moment it was possible to start with other things. For example, it is possible to begin to think about projects in the areas of communications, energy and even cyber,” said Ankonina.
Africa is still a backwards continent in the sense where it is hard to do business, and east African countries are ranked seventh in the world in terms of the risk of doing business, according to Ashra, the government-owned company that provides credit insurance for foreign trade in developing countries. Still, an enormous economic opportunity exists because there is still so much to develop in Africa.
Brig. Gen. (res.) Emi Palant, the founder and chairman of El-Far Electronic Systems that makes perimeter security systems — or “smart fences” — when it comes to doing business in Africa, the continent has improved in every way. “Don’t discount Africa. We work in countries such as Kenya, South Africa, Nigeria and other countries on the west coast. These regions have high-level technology infrastructure and the work is orderly,” he says. They have proper tenders and regulations, and Africa has taken many steps forward in these matters. El-Far sends fences from Israel and trains local companies to construct them. Yigal Hayon, who sells equipment such as body armor and vests and represents a number of security companies in the region, says the most important factor in doing business in Africa is the relationship with the government. “Even if a tender is published, it is on the basis of a specific design,” he says. “This is a critical stage concerning the deal, because if someone describes your specific product it is reasonable to assume you will be the winner. In addition, in African countries there is a ‘short-list,’ in other words a list of companies the government turns to for supplies. You need connections too to be put on this list.”
The budgets in the United States are big, but they protect their own companies, says Hayon. In the Far East, China and India rule, and in South America the budgets are shrinking. So what is left? Africa, he says. “You can be big there and your products are considered to be those of a superpower. The president of Kenya said during the visit that Israel is a model for emulation for him — and he asked to invest there.”
A number of sectors show great potential for Israeli companies in Africa, and they include not just security and defense, but computer and communications technology, as well as agriculture, water and renewable energy, too.
Homeland security and protecting animals
The delegation that accompanied Netanyahu met with security officials, which was an expression of the major importance of defense and security deals — both equipment and knowledge — for Israel in Africa. As it happened, at the end of the trip the bloody civil war in South Sudan erupted once again. Sources in the know say Israeli weaponry is being used there, though in response to a question from Haaretz, the Defense Ministry declined to say whether it had allowed Israeli companies to sell weapons to South Sudan.
Kenya is an important center for Israeli defense industries and many have offices in Nairobi, says Itay Mack, an Israeli human rights lawyer, who works for greater transparency in Israel’s military sales around the world. Relative to other regions, Israeli defense exports to Africa are tiny. Last year, they totaled only about $400 million, some 3% of all defense exports.
The amount may be marginal, but it is growing, says Mack. “The main problem is that in certain places, because of a lack of political stability, it causes enormous damage. South Sudan is one example, but there are other examples,” says Mack, citing Ethiopia.
Israel’s three largest defense exporters were part of the delegation: Israel Aerospace Industries, Elbit Systems and Rafael Advanced Defense Systems, along with a number of smaller firms. Homeland security was a major feature of the businesses that accompanied Netanyahu. As opposed to the “classic” defense trade, such as weapons such as rifles, ammunition tanks or artillery, homeland security focuses on products such as surveillance systems, riot control gear and all sorts of defensive means.
IAI executives met with Air Force commanders in Ethiopia to try to complete a deal for drones. Rafael signed a memorandum of understanding with the Energy Ministry in Kenya to begin negotiating a deal for sophisticated security equipment to guard a natural gas pipeline to be built in the next few years. The project could reach $400 million over 10 years.
Another area with a demand for Israeli security technology is the fight against wild life poaching, to protect animals such as elephants, rhinoceroses and lions.
Computers: A long way to go
HackerU is the second largest training company in Israel in the field of computers, providing instruction in everything “from the level of turning on the computer to defense from sophisticated cyber attacks,” says vice president Itai Bar-Nahum, who along with CEO Gil Adani joined Netanyahu’s trip.
One day some of the Israeli businesspeople met with 30 officers from the Kenyan military and security services. They also met with computer science graduates who had only basic knowledge.
A couple knew the Java computer language, but in general their level of knowledge and the gaps between us was like comparing the level of a high school student to a college graduate with professional experience, said Adani. They were not embarrassed to show this gap — they are hungry for knowledge and have a desire to develop themselves. The company closed two small deals to train government employees in one of the countries. In addition, as a result of the trip the company is in discussions with a nonprofit organization funded by the British government to build three colleges in Kenya and neighboring countries — a contract worth $5 million. “I think they deserve it,” said Adani. “If Kenya and the countries around it want to develop economically, they cannot enable their important institutions, such as the police or banks, to be exposed to cyber attacks. For now, from what I saw, they are very vulnerable.”
Agriculture, water and renewable energy
The Barack Obama administration has renewed America’s interest in Africa, and in recent years they have invested resources there. One Israeli company that has taken advantage of the change is Global Energy, owned by Yosef Abramowitz, who also owns Arava Power, a pioneer in the Israeli solar energy business. He received a grant from the U.S. government to build a solar energy field in Rwanda, and today the company produces 6% of the country’s electricity. The company operates in nine other African countries, and on the recent visit Global Energy closed two handshake deals in Rwanda and Ethiopia, each worth about $500 million.
Two other companies in areas related to agriculture joined the delegation, LR and Mitrali, as well as the well-known drip irrigation pioneer Netafim, which this year closed a $225 million irrigation project in southern Ethiopia, the largest in the company’s history. Israel Chemicals is also active in Ethiopia, where the company is preparing to build a large plant to produce potash by pumping water up from underground reservoirs — a project that is expected to produce a quarter to a third of the amount the company produces at the Dead Sea. Another Israeli company, Tahal, is conducting the hydrologic survey for the ICL project. Tahal also operates in water and agriculture projects in Angola.
The Chinese have conquered Africa
It would seem that the Israelis have rediscovered Africa and now it is open to them completely. But that is a mistake, because while Israel and other Western nations went missing from Africa, China took their place. The Chinese made huge efforts, particularly in enormous infrastructure projects. Solel Boneh may still be paving roads in countries such as Nigeria, but that is a small remnant from the huge Israeli business in the 1960s and 1970s.
In general, it is now hard for Israelis to gain entry into such large projects, which have enormous financial potential, because the Chinese control such railroad, roads, bridge or dam projects. As opposed to Israeli companies, which use local manpower, the Chinese bring in their own companies, workers and equipment from home.
Even more important, they bring their own funding, usually financed by the government and the central bank — with very attractive terms, low interest rates over decades of payments. In return they receive rights to exploit natural resources from the government, said an Israeli businessman.