An anticipated increase in demand for goods and services within Africa has the potential to give innovative companies with turnovers of between R300-million and R1,2-billion the opportunity to expand beyond the limits of their own borders, writes Karl Gotte, head of commercial banking at Standard Bank.
Investment between Africa’s regions will also be a crucial driver of financial integration, which at the moment remains too limited.
The latest African Economic Outlook (AEO) 2016 notes banks operating in Africa account for about one-third of Africa’s total value of trade finance, estimated at USD 320 billion. However only 19% of bank trade finance is devoted to intra-African trade and this is not uniformly distributed across Africa.
The key is to be able to benefit from strong consumer demand and financial services have a crucial role to play in facilitating this development.
As the leading bank on the continent, Standard Bank will continue to play a leading role and has already been facilitating major networking events from East to West Africa to encourage cross-border collaboration, business partnerships, trade and development. We believe more “open innovation” and trusted partnerships are needed to open the doors that are needed to bring about change at the regional and Pan African levels.
We will continue to drive this growth, for example, by combining these events with our successful business incubator programmes, which gives businesses the tools and platforms they need to succeed. Entrepreneurs and entrepreneurial activity will be the lifeblood of our regional economies in the future – and they need the financial sector to support them every step of the way.
As a bank which calls Africa home, Standard Bank has already done a lot of the “hard yards” in the past and is well positioned today to drive this growth.
While the opportunities are immense, bringing down trade costs remains a major hurdle. It is estimated for example that intra-African trade costs are around 50% higher than in East Asia, and are the highest of intra-regional costs in any developing region. The result of these high costs is that Africa has integrated with the rest of the world faster than with itself.
However, from a financing perspective, significant green shoots are taking root. Foreign direct investment into Africa has risen from about USD 10 billion in 2000 to about USD 55 billion in 2015, with investment within Africa playing a key role in this expansion – led by South Africa, Nigeria and Kenya in sectors like banking, retail and telecommunications.
With the right commitment and foundations in place so many markets in Africa can become dominant players. For example, only 5% of Africa’s imported cereals come from other African countries. In Europe, by comparison trade between nations typically accounts for more than 50% of all transactions.
Africa’s total exports comprise 80% raw commodities and 20% manufacturing. In contrast, 60% of intra-Africa trade is manufactured products, against 40% for primary commodities. The AEO report rightly points out that manufacturing is a good driver of productive employment and would push Africa further up the global value chain.
By 2050, Africa’s population will rise to over 2-billion people, representing 25% of the world’s population, against 15% today. Both cities and rural areas will grow fast and their interactions will intensify and jobs will need to be created for the youth entering the labour market.
The key for businesses is to have the right processes in place to manage the disruptive nature of the all of these changes. A more agile, versatile and innovative approach will be needed to doing business.
Entrenching a pan-African mindset to business will take time – but it needs to happen. If businesses are to take full advantage of these opportunities, the region needs more companies that develop true scale.
According to McKinsey’s recent Lions on the Move report, the vast majority of Africa’s 100 top companies built growth by developing a strong position in their home market first – only 14 started with Pan-African strategies. Nearly half of the 100 major firms have remained focused on their home market even as they have grown in scale, while the rest have steadily expanded into regional or pan-African markets. Not surprisingly, almost all the companies that have remained focused on their home market are based in Africa’s biggest economies.
The points is that multinationals usually build pan-African business and the experience of multinationals demonstrates that pan-African presence takes time to develop, requiring a long-term vision and a step-by-step approach. Most of the large multinationals operating in Africa have been on the continent for more than 25 years, according to the report, and most are present in more than ten countries, and their longevity and geographic footprint are closely correlated to their revenue base.
It has been found that companies that have moved from domestic to regional strategies have used their “first mover advantage” to build scale quickly at home and then use that as the basis for moving aggressively into other markets. Yet a meaningful presence in one or more of Africa’s largest markets is an essential part of a successful pan-African growth strategy.
Despite recent shocks and challenges, Africa’s household consumption and business spending are both growing strongly, offering companies a $5,6-trillion opportunity by 2025, according to McKinsey.
While Africa’s manufacturing sector today underperforms those of other emerging economies, output could expand to nearly $1-trillion in 2025 if Africa’s manufacturers were to produce more to meet domestic demand from consumers and businesses, and work with governments to address factors hindering their ability to produce and export goods.
It is time for companies and governments, as well as the financial sector, to play a greater role in ensuring more economies can benefit from intra-African trade – the future for Africa shines very brightly if they do.
What’s Happening To Democracy In Africa?
Yoweri Museveni and Bobi Wine (Source: PML Daily)
Nobody was genuinely surprised that Uganda’s Electoral Commission declared the incumbent, 76-year-old Yoweri Museveni of the National Resistance Movement (NRM) the winner of the country’s violent Presidential ballot. It was a forgone conclusion. The victory is Museveni’s sixth since fighting his way to power in 1986. Although his 35-year rule has been extended, this time around the desperate groans for change were felt across the entire world.
African leaders have a long history of using violence and fear against political opponents. At the time of writing, Bobi Wine, Uganda’s 38-year-old musician turned formidable political opponent, is under house arrest. Wine insists that the election was rigged against him and his life is under threat. Many of his supporters and close political allies have been tortured and detained by the country’s security forces. After his arrest in November at least 54 people died following protests. This is taking place all under the watchful gaze of the media, the United Nations and the African Union. At one point Museveni ordered the shutdown of the internet.
2021 will be a busy political season for the African continent with more than 13 countries heading to the polls to elect new leaders. The invasion of the Capitol and the legacy of President Donald Trump is proof that Africa can no longer look outside of its borders for positive influence. Constitutional change, fair elections, independent courts and free media is fundamental if Africa is to truly govern itself. Without these basic pillars of a democracy, civil war is the inevitable outcome.
Incumbent President Mohamed Abdullahi Mohamed will face former president Sharif Sheikh Ahmed. The threat of political violence still lingers as the tensions among key parties remain high and electoral preparations are lagging.
Former prime minister Mohammed Bazoum of the ruling party will go head-to-head with former president Mahamane Ousmane. Niger is attempting its first peaceful transfer of power since gaining independence from France 60 years ago.
Republic of Congo
The President of the Republic of Congo, Denis Sassou Nguesso, who is one of the world’s longest-serving leaders is seeking a fourth term. His challengers include Mathias Dzon, who is the former Minister of Finance between 1997-2002 and Guy-Brice Parfait Kolélas, who came second in the highly contested 2016 presidential election that Sassou Nguesso won. Congo is an oil-rich but impoverished country. It is in the grip of a deep economic crisis, triggered by the slump in oil prices but worsened by long-standing debt and the impact of the coronavirus pandemic.
President Jorge Carlos Fonseca is stepping down in 2021 following the conclusion of his second and constitutionally limited five-year term.
President Idriss Déby is seeking his sixth term in office, having previously overseen the removal of term limits in 2005 and then their restoration in 2018—though they are not to be applied retroactively. The 68-year-old former military leader came to power in 1990 following the toppling of the despotic Hissan Habré.
Ismail Omar Guelleh, President of the small but strategically vital country of Djibouti in the Horn of Africa, announced in late December he would be running for a fifth term in presidential elections this April.
Benin will hold its presidential election on April 11, 2021, the country’s election commission announced Tuesday. The first round of the election will take place on April 11 in the West African nation, the Independent Election Commission said in a statement. A second round will be held on May 9 if none of the candidates passed the 50% threshold, the commission added. Although current President Patrice Talon said that when he was elected for the first time in 2016, he would remain in the government for only one term, his candidacy for a second term is seen as almost certain.
Ethiopia will hold a parliamentary election on June 5 as Prime Minister Abiy Ahmed seeks to quell political and ethnic violence in several regions. Abiy’s Prosperity Party, a pan-Ethiopian movement he founded a year ago, faces challenges from increasingly strident ethnically based parties seeking more power for their regions. Africa’s second most populous nation has a federal system with 10 regional governments, many of which have boundary disputes with neighbouring areas or face low-level unrest.
São Tomé and Príncipe
President Evaristo Carvalho is seeking his second 5-year term in presidential elections in July. Carvalho was previously prime minister, president of the national assembly, and minister of defence. São Tomé and Príncipe enjoys a competitive multiparty democracy and a history of peaceful transfer of power between parties. The 2021 elections are expected to be freely contested and transparent.
Presidential elections will be held in August 2021. The election will be the sixth (and, he says, last) attempt by opposition leader Hakainde Hichilema of the United Party for National Development to win the presidency. Hichilema was the business-friendly candidate in 2016 who campaigned on fixing the then struggling economy.
The Gambia’s upcoming elections will be the first since Yahya Jammeh lost power in 2017. President Adama Barrow’s first term has largely been about rebuilding after more than 20 years of Jammeh’s rule. This mammoth task requires reforming every sector of the country, not least of which the economy and the security sector and finding avenues for the country’s youthful population.
In November 2020, Libyan politicians convened by the UN Support Mission in Libya (UNSMIL) to sketch out a plan to reunify the country agreed that Libya would have elections on December 24, 2021—the 70th anniversary of Libyan independence in 1951.
By: Juliana Olayinka (Broadcast Journalist)
Coronavirus and Societal Inequality- Nonny Ugboma
Coronavirus image: credit politico
In reflecting on the impact of the COVID-19 pandemic on the world, there is a huge realisation that the world has reached a critical juncture and there is a harsh wake-up call of the impact of in-country inequality both in advanced and developing nations.
The massive gap between the haves and have-nots may have exacerbated the havoc caused by the spread of the coronavirus! This means that we can no longer ignore, what is arguably, the worst global crisis–societal inequality.
Interestingly, inequality is not a problem found in the global south alone as it has also been growing in advanced countries like the UK and USA since the 1980s. In the USA in 2018, the total income of the top 10% is 1.8 times more than the total income of the bottom 40%, according to the Palma ratios published in the OECD report on inequality. The figure for the UK was 1.6 in 2018.
The inequality statistics is even more alarming in the global south with the total income of South Africa’s top 10% being 7 times more than the bottom 40% as at 2015. It will be interesting to know what the 2020 figures would be across the globe.
So, solving the inequality crisis should be governments’ priority in 2021 and beyond. The pandemic has already shown that the state of our collective health can only be as strong as the weakest link– the very low income group – and that this monstrous virus does not care about income brackets or status as everyone is a qualified host.
When it comes to exposure to the virus, the fact is, in addition to front-line health workers, low-income earners are also exposed and are more likely to be transmission vectors because they are key to the provision of essential services as cleaners, cashiers, waiters, couriers, and drivers to name a few.
The bottom line is that we are all vulnerable because these essential members of our society come into contact with people at different levels of society and they are faced with choices that touch every stratum! For instance, whilst the extremely rich and middle-income professionals are able to take time off, to work from home or self-isolate, the lower income group, usually hourly-paid or zero-hour workers, cannot afford to stay home because without work they will not be paid, and without pay they cannot provide for themselves or their families. The implication is that they are more likely to put themselves and others at risk.
However, we note that the level of devastation of this virus in Sub-Saharan Africa has not been as pundits had expected with these countries’ high poverty rates and poor health systems. Experts are speculating that, paradoxically, it appears that these harsh conditions may have helped insulate the mostly young population from dying from Covid-19. Nevertheless, this does not mean that inequality in Africa is not negatively affecting the transmission in the poorer countries.
On the contrary. Residents of developing countries like Nigeria should be a lot more concerned because they live in extremely connected and linked societies. The more resilient and asymptomatic poor are often in close contact with the working class and affluent as they are employed as cooks, domestic workers, drivers and artisans. Also, no matter how isolated people keep their domestic workers, they eventually have to come in contact with others in the markets ,the over-crowded public transportation systems or poor housing facilities.
The resultant effect of the inter-connectedness of the different levels of the society is that the elderly, as well as those who lead more insulated lifestyles with various underlying health matters are more vulnerable and more likely to develop serious symptoms and complications. Furthermore, the number of existing public health facilities are not adequate to handle the treatment and private facilities are too expensive thereby resulting in more deaths for this group of the society.
Therefore, it can no longer be business as usual because the more unequal the society continues to be, the more unsafe it will be for the rich in all aspects! Governments, especially in developing countries, should see this as a wake-up call to rethink policies to address inequality in the long-term, not just by providing short-term reliefs. Instead of focusing on growth indices, governments would need to work collaboratively with the private sector and other sectors in a mission-oriented approach to build public infrastructure and to ensure the establishment of more inclusive institutions and systems that sustainably create social value.
Changing the African narrative
In a recent controversial tweet on the internet, it was argued that Africans have failed to become successful producers except in the area of reproduction. To cement the argument, the writer observed that, while scholars around the world are cracking their heads in an attempt to find the COVID vaccine, Africa is on the sidelines waiting to receive whatever shall be produced and possibly have it freely donated. The statement has some elements of truth which point to the narrative that Africa has created for itself for so many years despite being a continent blessed with an abundance of resources that the entire world longs for.
In fact, Africa suffers from a paradox of plenty in that, despite the huge endowment of both human and natural resources and attaining political independence from colonial masters, it still remains highly underdeveloped. How possible is it that the continent with the most of the worlds’ natural resources, hardworking labour force and favourable climate conditions could have earned the title of being labelled poor and be reduced to beggars than those that have less resources? The scenario that Africa has created of being rich but not prosperous has presented a paradox whose puzzle needs a careful consideration to spot the missing link to enable Africa retain its rightful title, “The prosperous land of opportunity.”
Free Trade Area
Tired of being considered a third world continent and dependence on the western world on increased trade, African leaders from 44 nations gathered at the African Union Summit in March 2018 and signed a treaty to create what will be considered the world’s largest single market called the Continental Free Trade Area (AfCFTA). The aim of this treaty is boost intra-African trade by making Africa a single market of 1.2 billion people and a cumulative Gross Domestic Product (GDP) of over $3.4 trillion.
Actually the UN Economic Commission for Africa (UNECA) has estimated that the implementation of this treaty has capacity to increase intra-Africa trade by 52% by 2022 and even double the share of intra-Africa trade in a decade. In addition, the AfCFTA is expected to enhance competitiveness for various firms through the exploration of opportunities for high production, access to larger continental markets and better allocation and usage of resources in the nations.
What is worrying about Africa is the fact that it trades more with countries outside the continent more than among member countries. The share of exports from Africa with the rest of the world ranged from 80 – 90 percent for the period 2000 to 2017 (Economic Development in Africa Report, 2019) while intra Africa exports averaged only 16.6 percent. Worse still, the report indicates that sub-Saharan Africa has the highest cost to export compared with other regions and this implies the benefits from trade are lessened.
The question that begs an answer is, why doesn’t Africa trade more with itself? What is puzzling more is the fact that Africa exports materials in their raw form and imports the commodities after they are processed by highly industrialised countries at a higher cost. It is a wonder why Africa is still poor despite being the major supplier of raw materials that are highly demanded around the globe, where does Africa get it wrong? The lack of effective collaboration has been a major hindrance to the progress of Africa.
African countries can develop better if they begin to collaborate in diverse areas of development by each analysing their comparative advantage and combining synergies to achieve a common goal. Industrialisation can best be achieved when the current existing market within the continent is harnessed and tariff policies that increase the cost of trade are dealt with. Africa needs to define what it would want to achieve, identify opportunities within, create policies that harness the potentials from different countries for the benefit of all and work together because a united Africa with concentrated efforts will achieve much than a divided one working in Isolation.
It is interesting to note the underdevelopment statistics that Africans are ever posting in a bid to get support from developed countries. At times, it seems leaders are competing to show that their countries suffers more and needs more donations but this has created a dependence syndrome that is eventually becoming perpetual. Africa needs to come to terms with the fact that, we are not entitled to the help rendered and the more we act as beggars, the more likely we fail to progress. Whenever negotiating, Africans must never go to the table as beggars but partners in the achievement of common goals.
Africa’s overdependence on the west on basically everything makes it vulnerable to exploitation and thereafter, inability to develop. But to overcome the entitlement syndrome, there is need for the collaboration and efforts of individuals, countries, leaders and basically all who want to see a better Africa. Some of the most accomplished people in developed countries are originally from Africa but have been offered opportunities in these countries and are making an impact. Africa should not think it is the duty of anyone to help it overcome the diverse challenges it suffers but it needs home grown solutions and the contribution of various stakeholders.
The world is currently faced with the COVID-19 pandemic and while others are working to mitigate the impact and create the vaccine, Africa is waiting to receive but what if the west refuses to share with Africa, what is the next step. To change the narrative, Africa needs to realize that no one owes it a living and as such, self-reliance techniques must now be put to practice.
While it is true that Africa is not yet advanced and has challenges to overcome, the sooner it begins to believe in its capabilities to change the narrative and harness its potential, the quicker it shall be to develop. The continent is indeed a force to reckon with but only needs a push which must begin now because it’s time to think and Act Smart.
Aurthor: Nchimunya Muvwende is an Economist
Press Release22 hours ago
Business Africa Online Announces Its Strategic Advisory Board
Aviation15 hours ago
Qatar Airways Expands Africa Network with Increase in Flight Frequencies
Press Release10 hours ago
Novarick Appoints Otonye Lolomari as Non-Executive Director
CEO Corner2 hours ago
AVCA Board appoints Abi Mustapha-Maduakor as CEO