Sam Pa, middleman in many Sino-African business deals, detained in China

The FT reports: 

The future of a secretive Hong Kong-based business network at the heart of China’s advance into Africa has been thrown into doubt after reports that its frontman, a jet-setting tycoon with seven names and ties to the intelligence services, has been caught up in a Communist party investigation.

Mr Pa’s detention came a day after Chinese state media announced that Su Shulin, the governor of Fujian Province and a former chairman of state-owned oil group Sinopec, had been placed under investigation for “suspected serious disciplinary offences” by the ruling party’s anti-graft body.

Mr. Pa was the main focus of a May 2015 US military report on predatory investments in the Continent’s extractive sector. It will be interesting to see if Pa’s arrest has any tangible effect on Chinese dealings with the handful of economically opaque dictatorial regimes on the Continent (esp Angola).

On Predatory Investment in Africa’s Extractive Industries

The U.S. military’s African Center for Strategic Studies has a pretty interesting and detailed report on Sam Pa, his group of companies, and involvement in shady deals in the extractive sector in Africa. In Mr. Pa we have got the Hong Kong/Chinese equivalent of the shady Israeli billionaire Dan Gertler who’s playground is mainly the DRC (Global Witness has a thick dossier on Mr. Gertler; See also an FT piece on his partner, Benny Steinmetz, who recently got (figuratively) burned after a too-good-to-be-true deal went sour in Guinea).

Focusing on Mr. Pa and his business network in several African states, the ACSS report examines the networks and (corrupt) practices of the Hong Kong-based 88 Queensway Group. It outlines Mr. Pa’s business strategy as one based on:

Cultivating relationships with high-level government officials in politically isolated resource-rich states through infusions of cash, promises of billions of dollars in infrastructural development, and support for the security sector [….] Starting in Angola in 2003, Queensway has been engaged in the extractive industries in at least nine African countries, including Guinea, Madagascar, Tanzania, and Zimbabwe.

…… In many ways the prototypical predatory investor, Queensway frequently appears in resource-rich states in Africa where it can operate with high levels of opacity. In Angola and Zimbabwe, for example, few details from the contracts pertaining to Queensway’s investments—reportedly worth up to $9 billion in each country—have ever been disclosed to the public. In states where contracts have been unearthed, such as Guinea and Tanzania, the deals were revealed to be flagrantly unfavorable to the citizens of the host country. Having allegedly bribed African government officials and engaged in illicit arms trafficking and diamond smuggling, Queensway’s deals in Africa have often had a disastrous impact on governance.

You can download the full report here.

HT Financial Times

Kenya’s Milk Consumption is the Highest in the Developing World

Last year the French company Danone (maker of Activia yogurt) bought a 40% stake in the Kenyan dairy firm Brookside, a sign of the growing importance of the dairy market in the wider eastern Africa region. But the story doesn’t end with the big household names. Smallholder farmers are also getting a piece of the dairy bonanza in Kenya:

[youtube.com/watch?v=AmlwgKeOiEA]

HT Sarora Dairies

On a related note, here is how a company in China is helping industrialize the country’s dairy sector:

A milk scandal erupted in China in 2008 when the industrial chemical melamine was found in dairy products nationwide. While many Chinese dairy companies faced huge losses or bankruptcy as a result, one small firm, Dairy United, accelerated its development. Dairy United is one of the fastest-growing and most innovative Chinese dairy producers, one that features an unusual organizational structure and business model. Unlike most corporate and cooperative dairies that purchase cows on the market, Dairy United leases dairy cows from local farmers, giving it access to its primary asset without a large up-front investment, and letting the firm grow its dairy herds with newborn heifers. In return, farmers receive fixed payments biannually, but relinquish control rights and residual claims to the firm. Thus, Dairy United’s leasing is helping transform Chinese milk production from a backyard, labor-intensive activity to a more industrialized mode of farming. The case is particularly interesting for understanding applications of agency theory in agribusiness.

That is according to a new paper in the American Journal of Agricultural Economics (which I hope chaps at the Ministry of Agriculture in Nairobi subscribe to).