In contrast to Germany, Kenya has taken extreme economic blows due to the multitude of miscommunications between the government, its citizens, and law enforcement. Despite Kenya’s relatively harsh responses – among which include a mandated curfew and law enforcement acting on personal judgement – the virus remains overwhelming for the country.
Ryan Morfin: Welcome to Non-Beta Alpha. I’m Ryan Morfin. On today’s episode, we have Andreas Zeller calling in from Berlin, Germany. Andreas is a managing partner at Open Capital Advisors at African Consulting and Financial Advisory Firm that works with governments and companies in the 21st century. This is Non-Beta Alpha.
Andreas, welcome to the show.
Andreas Zeller: Thanks, Ryan.
Ryan Morfin: Well, we really are honored to have you today. You have a unique perspective calling in from Berlin, Germany. Germany has been one of the best suited countries to deal with the coronavirus. But you also have tremendous experience since you live and work in Nairobi, Kenya, and you kind of see the other side of the coin, some of the countries that are less fortunate to have economic infrastructure and access to a banking system that can prop up in the economy. So really curious to hear the dichotomy of both of those types of countries and learn a little bit from your perspective. Thanks for joining us.
Andreas Zeller: Absolutely. Great to be on.
Ryan Morfin: Why don’t we start off with Germany? Germany and Angela Merkel seemed to have gotten this under control and want to know from a performance standpoint, what’s driving that healthcare system to just do such a good job of having a low mortality rate and putting people out of the hospital and back into their homes?
Andreas Zeller: Well, it’s definitely tough here. I mean, I remember when this emerged early March. It really was Italy in terms of Europe that was the concern. Now today, I think Germany’s at just about 80,000 cases, which is not insignificant. It has definitely been a hard hit country, but what that’s corresponded to is, as you said, low mortality rate and a very quick and effective response. I’ve been really impressed by, I mean, at least from my perspective, obviously as a person on the ground not involved in the inner workings of government here, the clarity of communications. It’s been very open, it’s been very clear, it’s been very regular. Hasn’t felt like there’s been misdirection. Hasn’t felt like there’s been anything hidden. It’s been very clear in terms of what we need to do and when and how, where resources can be found, aggressive testing that happened really early on. Knowing that the government was prioritizing any sort of solution, trying to find the best and brightest around the world to advise them early on gave a lot of confidence.
So now even with that many affected, I do get the sense that morale has hit everywhere in the world as it is here, but people feel a lot of confidence in leadership and taking direction and acting as they need to to try and beat this thing.
Ryan Morfin: What’s fascinating to me is that the mortality rate is 0.4% today. It seems that the older population in Germany just isn’t catching the virus. The average age I think is 46. Where in a lot of other countries, it’s an older demographic. Why do you suppose that is?
Andreas Zeller: I don’t think there’s any perfect answer and a lot of this is anecdotal based on just conversations. More than anything, I think there’s a cultural reason behind it. I don’t think there’s a medical reason. I guess you could argue that there’s a certain degree of testing or hospitalization solutions. But even there, I mean, that might not necessarily be so dissimilar from elsewhere in the world. What I mean by cultural is when people talk about elderly homes, staying enclosed, they really mean it. People have really followed a lot of these directives very clearly. They didn’t have to. They haven’t always been a sort of directives that are immediately followed up by say police presence or enforcement. It really is a lot of voluntary followup.
For example, in the apartment building where I’m staying and have for the last month, there were immediately notices written by tenants on the wall saying, “Look, we all have to be in this together. We’re not leaving, but we’re here to help each other. So if anybody needs groceries,” people we’re trying to help each other out, but also recognizing that they were following the recommendations by the authority. I feel like that’s meant not gathering in public places. That’s meant staying inside and that’s resulted in a lower mortality rate.
Ryan Morfin: Yeah, it’s fascinating. I mean, Germany is obviously outperforming the rest of Europe. It’s interesting, 82% of the cases are people under 50 years old, which is kind of alarming, but those people tend to have that demographic tend to have the best outcomes. Can you talk about early testing? It seems that Germany, for whatever reason, was able to get the testing of their population accelerated faster than anywhere else. What can you say about that? Have you been tested? Do you know people who have been through this process? How is it designed? Because the way people get tested is also a very important trigger, if you will, for contagiousness. A lot of people in New York City are waiting in lines at hospitals and getting the virus while they’re waiting in line to get tested.
Andreas Zeller: Yeah. I don’t know too much about how testing has actually been distributed, but there has definitely been a dynamic that I think is important, which is the request of the population to not request a test. The restraint that I think many people have followed when they feel symptoms, not to rush to try and get in a long line to be tested, but to stay inside, to stay in quarantine.
Ryan Morfin: That’s a great point.
Andreas Zeller: The counter factual there is almost more important than the number of testing kits you have, which Germany does not have more of I think than most other countries. I’m not sure, but that’s my sense.
Ryan Morfin: Well, and the German economy is really like a Swiss watch, really well-maintained. What economic policies has Merkel and her team put in place to cover unemployment of some of the hardest hit sectors?
Andreas Zeller: Well, one thing I’d say that’s been impressive is that Germany has not been a Spain and Italy or a France in terms of the level of shelter in place or equivalent. Nor even a Bay area in the US. People can travel freely. I go out on my bike every day to go to the office and back home. There is a degree of mobility that I think has really enabled more than just a core set of central services to continue work. So there’s a degree of continuity that comes there, albeit on the backdrop of making sure that you don’t have people clustering, you have people who are really taking a lot of care around sanitary condition.
I think there’s one dimension around trying to keep as much of the economy running as possible within this sort of controlled situation. I think the other is his willingness to drop the sort of fiscal constraint that Germany has been famous for in the past to the EU. Germany has been very fiscally conservative, and now they basically announced, I think they call it unlimited lending option to businesses to keep them afloat. So really trying to put a stimulus package together that the likes of which Germany has never seen or Europe has never seen.
Ryan Morfin: Yeah. I noticed they did some type of a policy where they will cover 80% of the payroll for people to stay employed to cover the bridge of the crisis, which I think is quite… I mean, it’s very strict criteria to register, but if you can prove your company has been fatally wounded by this, they’ll cover your payroll for a few months, which is interesting. We have something maybe similar brewing here, but I don’t think this is as easy of a calculation that they have in Germany.
On the flip side of this, you live in Nairobi, Kenya, and you work across Africa. We haven’t seen, I think, the spread into Africa. I think it’s probably because the testing regime isn’t there and the infrastructure’s not there. Maybe share your thoughts about what you hear on the ground in Kenya and the rest of Africa and what we might see in the years to come or months to come.
Andreas Zeller: Yeah. The vast majority of our team is based in Africa and Kenya, Uganda, Zambia, and Nigeria. So we’ve got daily perspective across all those countries, but Kenya is the bulk of it. It’s where I spend a lot of my head space every day, though I’m not there physically right now because of the travel restrictions. The real challenge is exactly as you said, nobody’s really aware of how far it’s spread yet. As much as there’ve been some pretty direct measures taken by government, and frankly, some of the most impressive government actions in a while at the time, as difficult as it is to shut down an economy that’s already struggling, the need to do so is significant.
So restrictions, for example, on curfew, there’s a curfew in place in Kenya now that you can’t be on the streets at all after 7:00 PM. In Uganda and Nigeria, all public transport has been shut down completely. Can’t leave your house. It’s incredibly difficult for very dense communities that don’t have proper infrastructure anyway and typically don’t spend much time inside. They’ve done what they had to do. The real question is how sustainable that is given you don’t have the opportunity to do a bailout like you would in Germany or the US. It’s at a tipping point potentially now where everybody’s hoping that the spread can be contained before you see some real economic disaster, but everybody’s also trying to plan scenarios and rush to the right places to preempt for the possible.
Ryan Morfin: One of the drugs that’s been highlighted by governments and doctors around the world is this chloroquine anti-malarial drug. Does Africa have a fairly robust supply of these anti-malarial medications given the prevalence of malaria?
Andreas Zeller: Yeah. Anti-malarials are everywhere in Africa. I’m not sure about that one in particular, but as you said, everywhere. Very readily accessible. The challenge is, it’s expensive, right? So the question once again is who pays? Now there’s of course a drug aid program. The government has various pharmaceutical distribution points that are hypothetically government subsidized, but they’re typically out of stock most places you go. Again, it becomes a real challenge to try and distribute to such a dispersed pretty low income population.
Ryan Morfin: Yeah. President Kenyatta, I think that’s how you say his name, and steel magnet Narendra Raval have just pledged a huge infusion of private sector capital to come in and start paying for medical infrastructure development. What role and how robust is the role of the private sector to help really stabilize a lot of these African countries and governments?
Andreas Zeller: I just spent several hours on the phone yesterday and the day before with a number of CEOs and Kenya firms that we know well who manufacture soap and sanitary products, and who distribute them all around the country and have tens of thousands of distribution points. I was really positively surprised they’re stepping up their offering to produce that cost during the period. They’re offering to distribute at cost or fully subsidized. They want to get products out there. They want to help. A state house, which is the Kenyan white house equivalent, is onboard fully with them. Some of that partnership, I’ve never seen the likes of it, which is really encouraging. At the same time, there’s not as much depth. A lot of the private sector, these GDPs are smaller, businesses are smaller in scope and limited resources.
Ryan Morfin: Yeah. At least in the Western world, this is more of a food access issue, a bottleneck of supply chains, not really food supply. Do you anticipate there maybe a food supply issue in some of these African countries given the disruption in the economy?
Andreas Zeller: There may well be. The challenge is everybody’s wrestling with this dichotomy. Right now there is a lot of challenge around interpreting what essential services means, who can be out on the streets, who can be driving around, who can be in trucks at various checkpoints. And oftentimes that legislation, which was passed by decree almost immediately, hasn’t been trickled down to law enforcement. Police are often making their own judgment calls about what is and isn’t appropriate and that creates a lot of confusion, which makes it more difficult for businesses to do their jobs, for example, distribute products. That’s then reduced and curtailed some of those distribution channels that might otherwise be open. Again, we take a lot for granted in the US and Germany and elsewhere in terms of just the smoothness with which the government can actually translate immediate legislation to action on the ground and oftentimes that’s more challenging in other economies.
Ryan Morfin: Andreas, you used to work at the World Bank. What role do you think these multinational institutions are going to have in trying to stabilize the world economy? Right now it’s been the global central banks, the big ones, but what do you anticipate the IMF World Bank are going to do to try to stimulate the economy or stabilize it?
Andreas Zeller: Yeah. Well, I’ve been happy to see some immediate COVID funds come together. Both the World Bank and IFC, its private sector arm, have put together funds and repurposed funds that are billions of dollars towards this effort. They recognize it’s a drop in the bucket, but they’re putting it together. And most importantly, they’re channeling it quickly. A lot of that’s going to flow through banks, for example, in Africa. Some of it will flow through governments, but that’ll take more time and be harder to structure, try and get that money to a private sector immediately. Some of it also can be funding vehicles. I think the challenge really is you’re trying to preempt an issue right now, but once the issue really becomes, if it does, uncontrollable, you’re dealing with an economic crisis that will take likely trillions of dollars to bridge. That’s a broader global question, how we can do that.
Ryan Morfin: Yeah. I mean, there’s also the NGOs that are floating around Africa trying to help. Who are the major players right now in East Africa or Central Africa on the healthcare side today? Who’s doing the most, do you think?
Andreas Zeller: Well, I mean, we’ve been talking with USAID once a week. They’ve been really doing phenomenal work. They are talking a lot about not only aid, but private sector support. The British have been really active too, DFID. Both have been donors pumping hundreds of millions of dollars into Kenya and East Africa and they’re really trying to focus on what they can do to help. I think that’s critical. A lot of other European countries are following suit as well, especially in Francophone West Africa, the French, as well as other donors. NGOs tend to be a bit smaller but are very active on the front lines too, often in communities they know very deeply, which is just as critical.
Ryan Morfin: That’s interesting. Western aid and USAID, the UK, Germany, all helping with their international donor programs. And a dichotomy there, and I’m curious what you think the view on the ground is in Kenya, the Chinese have been very active commercially tying aid to commercial projects in Africa over the last decade. Do you think there’ll be any resentment from governments that the Chinese kind of withheld the information in the short term in January and December when they knew there was a new respiratory issue? Now it’s going to come and wreck havoc on the global economy. Do you think there’ll be any blow back in Africa on the Chinese Africa relationship?
Andreas Zeller: Interestingly, there’s actually been a very positive response to China. Jack Ma and other Chinese business people have been stepping off planes, unloading testing kits and masks throughout East Africa, which has been a lot more of a quick and concrete response than some of the donors have provided. Yes, that’s only a drop in the bucket. But the fact is they’re trying to come and provide actual hard content to address the issue. Now, the real challenge is, will the dollars follow? Will China aid [inaudible 00:16:29]? In the past in issues like this, China has not been as active on the donor front for Africa. They’ve been around to build infrastructure typically funded by their own loans, but it hasn’t translated into aid that’s really critically needed. So the question really is not even how the disease occurred, but rather will they step up and help them to get medication?
Ryan Morfin: I know this is one perspective, but what do you think the German sentiment is around that issue? Are people frustrated that they didn’t get better information? I mean, I know the UK has voiced frustration. The US Senate has also done the same, US Intelligent Community has also come out with a report yesterday saying that they definitely withheld information. What do you think the German sentiment is on that issue?
Andreas Zeller: I think historically the first to react have been obviously US and China given various disputes between the two. Germany and the EU has tended to stay out of that as the EU tries to figure out its place in the world. I have not heard any sentiment there to that extent. I’m not sure to what extent in political circles that’s the case. I think the resentment has… Not resentment, but the concern has been more how Germany will have to play a role within the European community to potentially support other European countries that may not be as fiscally responsible in crises like these.
Ryan Morfin: Well, that’s a great question. I mean, there’s talk of COVID bonds being floated in Europe for some of the economies like Greece and Spain and Italy that are already having fiscal problems, monetary problems. But a question is, I guess, how is this going to get funded? Do you think the European Union is going to have to step in and float some type of specialty bond or is each country on their own? And if they are each on their own, does this weaken the European solidarity around EU?
Andreas Zeller: That’s the key question. It wasn’t helped by Brexit before the corona crisis obviously. There’s been a lot of conversation about the future of the EU and of fiscal arrangements within it. I think the corona crisis has also made everybody look domestically more than ever before. Germany has an obligation it feels to its citizens first and foremost around stimulus, which is why you saw the reaction that you did. I think they’re taking a very egocentric mindset as well, but it’s really a question of to whom do you have an obligation for the first duty of care? I think in crises like this, that becomes extra challenging. So I’m really curious to see what happens.
Ryan Morfin: One of the questions is the migration across Europe. Are borders getting closed right now, or is it still a pretty easy kind of free floating Visa regime?
Andreas Zeller: Nope, it’s closed. Borders are closed for all but essential travel. So outside of each individual country returning to that country, borders are otherwise closed, and that’s to prevent spread for frankly vacations and other travel that may have haphazardly spread the virus.
Ryan Morfin: I know there’s a lot of refugees coming still from Syria through Turkey into the European Union. Have they tried to cramp that down? I know in the US, the Southern border has now been militarized by North Comm, which is the military command structure for the North American continent. Have you seen a mobilization because you’re closing the borders in Europe to try to stop the flow of migrants coming in from Turkey?
Andreas Zeller: I just read an article the other day that one of the Merkel interviews stated that refugees were still being accepted by Germany, which I was surprised, frankly, because if you’ve got closed borders in a sort of crisis you’ve got, it seems like it’d be challenging to keep that flow open, but they’ve done it. I imagine the flow is significantly reduced because of that, because of border controls, because they are heavily policed now. The airports are pretty empty. Flights are, I assume based on what people have told me, all have been canceled. Nearly all have been canceled. So I imagine it’s a pretty small steady flow of prearranged refugees at this point.
Ryan Morfin: Andreas, you spent time on Wall Street, you spent time with the World Bank. I’m curious, especially for our viewers that don’t have Africa on the map often for their investment allocations, what are some of the things that attracted you to Africa? Why is people like Jack Dorsey, Twitter, Bill Gates, why are they so focused… Jack Ma, all these billionaires are really excited about Africa as you are. What is driving that interest and that excitement about the future of the 21st century of Africa?
Andreas Zeller: Yeah, it’s interesting. I mean, when I was at Credit Suisse doing MNA and in New York and at IFC doing private equity around the world based in DC, what was interesting is that the lack of investment float Africa relative to its population, its potential, and that’s only growing. Africa becomes a super critical investment destination with too little capital flowing and a lot of up market opportunity, both to export and domestically. Yeah, there’s a lot of challenge in the market, but if you understand how to navigate it, understand what sectors really have growth potential and can operate a sophisticated enough operation locally, those flood gates open. It’s been really impressive last 10 years I’ve lived in Kenya, just seeing the degree of investment that’s come into various opportunities and the potential return. We’ve seen this, not only in technology, which is of course a major growth sector, but also just in agribusiness and energy, renewable energy and manufacturing and some of these core fundamental drivers sectors.
As we look forward in Africa, it scales well beyond the billion people it is now, it can’t be ignored and it’s going to be one of the most central places for return. Obviously you have to do it carefully, but that’s what’s attracted me.
Ryan Morfin: No doubt. In terms of this coronavirus situation that we’re in globally, we’re going to have to make sure that it’s taken care of in Africa too because without taking care of it as a global pandemic, we’re going to continue to see waves spring across the world. Well, we’d welcome to have you back in the coming weeks or months ahead when you get back to Nairobi. I’m sure there’s going to unfortunately be a lot of evolving changes on the fight against coronavirus in Africa, and we’d love to pick your brain. Please reach out to us when you’re back in Nairobi. Stay safe. Thank you so much for joining the show, Andreas.
Andreas Zeller: Absolutely, and thanks for doing it. It’s really helpful communication for everyone.
Ryan Morfin: Thanks a lot. Thank you for listening to Non-Beta Alpha. Before we go, please remember to subscribe and leave us a review on Apple Podcast or our YouTube channel. On our next episode, we’re going to talk to one of the owners of 44 Farms, one of the largest organic cattle farms in the country, what they’re doing to ensure that food supply equals food access and some of the interesting things in genetics that are going into our food supply today that all Americans should be made aware of. This is Non-Beta Alpha, and now you know.
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