African Business 2020 edition

AFRICA OVERVIEW but

AFRICA OVERVIEW but housing, education and healthcare will have to expand. As things stand, about 120-million Africans are unemployed and about 40% of the population live below the poverty line (.25 daily). Urbanisation is already happening at a fast pace: this is again an opportunity and a challenge. The fact that Africa is arriving somewhat later in the digital age could be an advantage because there are opportunities to leapfrog technologies. This is happening in mobile banking, where mobile telephones are delivering financial services across the continent. The AfricArena conference is one of several platforms where African startups and innovators display their wares. Held since 2017 in Cape Town, the conference has helped to cement ties between French tech companies and South African entrepreneurs. At the 2018 conference, 70 startups from 32 countries pitched to more than 600 conference attendees. A speaker noted that the continent has 442 tech hubs and thousands of digital entrepreneurs but there is a need for more Venture Capital (VC) funds. Jake Bright told the conference that there are 51 Africa-focused VC funds globally, 22 of which are locally run (Bizcommunity). Another scramble In March 2019, The Economist’s cover story was “The new scramble for Africa. And how Africans could win it.” After laying out the extent to which the familiar giants (US, EU and China) are investing in and finding partners in Africa, the newspaper noted that other nations such as Turkey, India and Russia are also showing interest. A McKinsey report is quoted stating that 10 000 Chinese companies now operate in Africa. In six years to 2016, 320 new embassies opened in Africa and Turkish Airlines now flies to 50 African destinations (The Economist). The argument that Africans can win the “scramble” is based on individual African nations avoiding bilateral agreements with much more powerful foreign partners. The preferential trade agreement with the US, AGOA, is about to come to an end and the Trump administration does not like multilateral deals. China often offers soft loans or grants to sweeten deals to poor countries. As The Economist editorial says of this power imbalance, “It could be reduced somewhat with a free-trade area or if African regional blocs clubbed together. After all, the benefits of infrastructure projects spill across borders.” As it happens, Africa has introduced a free trade agreement. In 2018 the African Continental Free Trade Area (AfCFTA) agreement was signed by 49 countries, making it one of the most comprehensive and potentially influential agreements ever signed on the continent. Since then, all but one country has signed the agreement. Although no-one expects that the agreement will immediately lead to borderless trade with no tariffs, there is great symbolic importance in the signing. Problems remain with the movement of people and certificates of origin among other things, and the more likely trend will be for regional economic communities (RECs) and large countries within RECs to accelerate steps towards integration. Large infrastructure projects such as rail and energy corridors that traverse the continent could be gamechangers. Regional corridors are intended to boost intra-African trade. The North-South Corridor in the Southern African region AFRICAN BUSINESS 2020 14

AFRICA OVERVIEW runs through 26 countries and ends at the Port of Durban. Ten corridors are being developed across the continent to make the movement of goods easier and to improve access to ports. Standard Bank has launched a product to assist African importers in evaluating and choosing Chinese suppliers. Faced with daunting variety, language and cultural differences, the prospect of having to pay cash upfront to unseen suppliers or limiting supply choices to a small group of previously used suppliers, African importers can use the Africa China Export Proposition (ACEP) to validate quality while having sight of the logistics process. Standard Bank is using its partnership with shareholder the Industrial and Commercial Bank of China (ICBC) to create the ACEP, which puts importers in touch with agents and is underpinned by a letter of credit. Standard Bank is Africa’s biggest bank and ICBC is the world’s biggest bank. Another country showing increased interest in Africa is Japan. To understand the scale of the potential investment from Japan, it is worth noting that there are currently about 13 000 Japanese firms invested in China. In 2017 there were 800 Japanese companies in Africa, but the number is growing. In that year Japan imported African goods to the value of .3-billion. Foreign direct investment increased to -billion in 2016, from .9-billion in 2007. The Tokyo International Conference on African Development (TICAD) is held annually. Various bodies are promoting ties with Africa, such as the Japan External Trade Organization (JETO) and the Japan Oil, Gas and Metals National Corporation (JOGMEC), which focusses on resources. The Japan International Cooperation Agency (JICA) supports infrastructure projects such as a 0-million bridge over the Nile River in Uganda. Setting worthy goals The African Union’s Agenda 2063 lays out ambitious goals for the continent. The flagship projects designed to achieve these goals cover infrastructure, education, freedom of trade and movement of people, arts, culture and technology. The projects are: • Integrated high-speed train network • Formulation of an African commodities strategy • Establishment of the African continental free trade area (AfCFTA) • The African passport and free movement of people • Silencing the guns by 2020 • Implementation of the Grand Inga Dam (hydropower) Project • Establishment of a single African air-transport market (SAATM) • Establishment of an annual African economic forum • Establishment of African financial institutions • The pan-African e-network • Africa outer space strategy • Cyber security • An African virtual and e-university • Great African museum • Encyclopaedia Africana. The African Development Bank Group comprises the African Development Bank (AfDB), the African Development Fund (ADF) and the Nigeria Trust Fund (NTF). The AfDB is a key funder of infrastructure projects and has set itself a set of goals known as the High Five: light up and power Africa; feed Africa; industrialise Africa; integrate Africa; and improve the quality of life for the people of Africa. The bank’s “African Economic Outlook 2019” highlights energy and infrastructure as key areas for investment. If Africa is to prosper, infrastructure has to be improved and built. An agreement between China and the African Union Commission as part of Agenda 2063 aims to link all of Africa’s capital cities by air, rail and road. On the energy front, one of the bank’s projects, the Desert to Power Initiative in the Sahel region, will bring power to 250-million people who were previously unconnected. Another key conclusion of the AEO 2019 is that Africa should increase agricultural production in order to establish or increase manufacturing capacity. This would in turn lead to industrialisation. To quote the report, “To avoid the informality trap and chronic unemployment, Africa needs to industrialise and add value to its abundant agricultural, mineral and other natural resources. ■ 15 AFRICAN BUSINESS 2020