Africa's Bond Villain

About private jet traffic jams, my encounter with Ivan Glasenberg, and how Africans can get rich. A version was published on 3 December 2013 at http://www.businessdailyafrica.com/Opinion-and-Analysis/Kenyans--long-walk-to-earning-billions-will-start/-/539548/2096040/-/hwo0jy/-/index.html

In June last year, I went to St. Petersburg in Russia for a conference. The most remarkable thing about it was not that the sun was up all night, or the bacchanalia that is northern Russia in midsummer. It was the fact that we got stuck in an hour of traffic on the taxiway of St. Pete’s airport, because of the number of private jets that had landed before us. They bore grandees of all kinds – from Henry Kissinger to Lloyd Blankfein and others.

One of the luminaries who had so clogged up that airport with his personal aircraft was one of the most powerful men you have never heard of, but who encapsulates where the real economic power in the world lies. And what makes it all the more remarkable is that the man is an African (well, he started off as one anyway), and he has more influence over the global economy than his bland looks could ever capture.

Ivan Glasenberg is the head honcho at Glencore Xstrata, and his presence at the St. Petersburg International Economic Forum (which was what the conference was, and is President Vladimir Putin’s attempt at a riposte to the World Economic Forum at Davos) showed with what regard he and his company are held in global affairs.

Glencore – at the time, Glasenberg was busy putting together the deal to acquire Xstrata – trades in many of the world’s necessary commodities. The company is one of the few that has cornered the global market on such crucial commodities as iron ore, copper, coal and oil. Glasenberg can easily be caricatured as the classic Bond villain (not least because at different points in his life, he has held South African, Israeli, Swiss and Australian citizenship; and has done business in places like Katanga in the DRC; and is worth north of $8 billion). But his movie-worthy existence (and the fact that he left a certain African journalist star-struck by giving him his mobile number) is not the reason why he matters to us here in Kenya.

Kenya produces quite a few commodities that the world needs (or at least is in love with). Our coffee and tea are world-class (and soon, so will our oil and gas). But as every student who has studied economic geography in high school will tell you, we get very little out of the eventual value of the commodities we sell to the world. Much of that has been blamed on the fact that we export these in primary form, and thus leave much of the value to be scooped up by those who blend and brand the commodities for the end-consumer.

Thus our answer to this has been the sometimes-amateurish attempt to brand our own commodities – to ensure that consumers actually know that they’re drinking Kenyan coffee or tea. These efforts haven’t gone too far, partly because they are not rigorous enough; but they’re also misplaced, because if we want to actually capture value, we need to create more Ivan Glasenbergs.

One of the few to dip their toes successfully is a Tanzanian company called Export Trading Group, which buys agricultural commodities from small farmers and trades them to buyers in such markets as China and India. Sounds ordinary enough, until you see the news that last year, tony buyout firm The Carlyle Group invested $210 million in the company. The Wall Street Journal also reported that Standard Chartered had also invested $74 million in the group, and these two investments still represented only a minority share in the firm (which would seem to value it in excess of $600 million – or KSh 51 billion).

It takes a strong stomach, though, in the cutthroat world and razor-thin margins of commodity trading. Last week, the Financial Times reported on the woes of a man named Anthony Ward – better known in the commodities world as ‘Chocfinger’ (an ode to ‘Goldfinger’), who had in 2009 amassed physical cocoa stocks equivalent to 7 percent of the world’s crop. He took the wrong bets at crucial times (his company, Armajaro, also trades in sugar, cotton and coffee), and was forced to do a deal with a rival firm.

Expect to hear more about trading companies, and not just in agricultural products. Trafigura, which is infamous for a toxic waste spill in Cote d’Ivoire in 2006, owns energy firm Puma, which was involved in an unsuccessful buyout of KenolKobil earlier this year. Vitol owns the Vivo Energy brand, which bought out Shell’s downmarket fuel business all over Africa. Companies such as Cargill and Archer Daniels Midland seek to control the world’s food market.

Unless we get into the commodities trading game, we will continue tilting at the windmills that are our weak ‘branding’ efforts. If we do so successfully however – or at the very least emulate the Tanzanian company ETG – we can expect to see our very own traffic jam of private jets at JKIA.