The Africa Trade and Economic Cooperation Forum 2013

August 22, 2013 rachel_eaton

Isabelle Alenus-Crosby

Optimising Africa’s transportation infrastructure in order to increase international trade was top of the agenda at the 12th United States-Sub-Saharan Africa Trade and Economic Cooperation Forum (AGOA 2013) held last week at the African Union Headquarters in Addis Ababa, Ethiopia.

The African Growth and Opportunity Act (AGOA) was signed into law by President Clinton in May 2000 with the objective of expanding U.S. trade and investment with sub-Saharan Africa and to facilitate the region’s integration into the global economy.

Since the inception of AGOA, there has been a 300 % increase in total two-way trade between the United States and the African continent, and 2012 was proclaimed to have been the most successful year thus far.

With the current Act expiring in September 2015, this year’s Forum concluded that for the initiative to remain successful, Africa’s top priority is now to expand its trade infrastructure. Especially landlocked countries are currently unable to take full advantage of the opportunities that AGOA offers. Most of the roads connected to ports are congested, creating transportation bottlenecks not seen anywhere else in the world. For instance, it takes 24 days for a container to travel from Mombasa to Kigali and 20 days for a container to be cleared at the port of Dar es Salaam.

An integrated transportation network is therefore so crucial that according to some delegates Africa’s continued success depends almost entirely on it. A call to extend the Act for another 15 years has already been proposed by the African Union, and President Obama’s office has vowed to better communicate the enormous potential that this could mean for investors worldwide.

Insight

Causing a stir: The fifth BRICS Summit

April 9, 2013 rachel_eaton

Isabelle Alenus-Crosby

The BRICS account for 21% of world GDP (IMF), 17% of world trade, and over 40% of the world’s population. This year, BRICS is expected to grow at almost 5%, well above the world average (at 3.6%).

This year’s summit therefore received quite a lot of media attention, and not just due to the attendance of the brand-new Chinese President Xi Jinping, nor because of the above statistics.

For South Africa, which makes up just 2.5% of total GDP in BRICS, the summit was an opportunity to showcase its role as an investment gateway to Africa and President Zuma therefore invited 15 African heads of state to attend. Tensions between South Africa and Nigeria (surrounding Nigeria’s belief that they should also be part of BRICS) means that President Goodluck Jonathan did not attend, but other heads of state including Angola, Cote d’Ivoire, Senegal, Uganda, Ethiopia and Egypt, did. Each country actively showcased its nation, grabbing the momentum of the African continent’s current economic boom.

What caused the greatest stir however, were the talks about the establishment of a development bank, which would rival the World Bank and the IMF, and is meant to fund infrastructure and development projects in member states and developing nations, through a joint foreign reserves fund.

The discussions of where the bank will be, or how much money each nation will contribute, did not reach a conclusion. Several experts and officials have said the bank will start with 50 billion dollars, divided equally. BRICS members are clearly seeking greater sway in global finance to match their rising economic power. Undoubtedly the “New Development Bank” will be top of next year’s agenda. The 2014 Summit will be held in Brazil.

Insight

The “Where and Why” of investing in Africa

March 11, 2013 rachel_eaton

Isabelle Alenus-Crosby

Gong recently hosted a breakfast meeting chaired by The Economist’s Business Editor, Robert Guest.

One of the topics discussed was that too much “ignorant” money is going into Africa simply because there are not enough listed companies outside of Nigeria. The big question is therefore “where to invest?” Where are the various opportunities that tomorrow’s Africa presents, and what makes one country more attractive than another?

With 54 diverse markets offering unique prospects and challenges, most delegates had different opinions. What they didn’t have however, was conflicting opinions. Most agreed that there are still only a handful of good entry point to expand into Africa today.

Here are the top 5.

1. With a population of 170 million people, a growing middle class, and a reputable stock exchange, Nigeria is a notable market for those looking to target a large consumer base in Africa. With reformed petroleum regulations, Nigeria has also become an appealing market for multinational companies.

2. Ghana is doing incredibly well and has proven to be politically stable. The fact that Ghana and Nigeria have space programmes is a measure of how much these two countries are ahead of the game. The difference between Ghana and other countries is that everything (power, institutions, infrastructure) works. With the discovery of offshore oil, the country now really has everything to soon be claiming the number 1 spot.

3. Kenya is more business friendly compared to other regions on the continent. In addition, there is access to good human capital, excellent IT infrastructure, and IT skills.

4. Tanzania has always been politically stable and is therefore emerging as the most effective gateway for trade into Eastern, Southern and Central Africa. It has lucrative investment opportunities in infrastructure, privatization and value-adding facilities, and oil has recently been discovered off-shore.

5. Mozambique is developing at a rapid pace, has much oil and is also politically stable.

I should add that Ethiopia received an honourable mention at the Gong breakfast meeting; It has become Africa’s fastest-growing non-energy economy and Diageo and Heineken recently paid nearly $400m combined to acquire state breweries in the country. Ethiopia is not for the faint-hearted, however. Its population of 85 million people still ranks among the world’s poorest.

The conclusion was to watch what the diaspora is doing – and they are returning first and foremost to our top 3.

Insight

The market that had bankers at Davos excited this year was Africa

January 30, 2013 rachel_eaton

Isabelle Alenus-Crosby

This is what Peter Sands, CEO of Standard Chartered, told Reuters at the World Economic Forum last Friday.

Many African politicians attended the Forum, above all to present their nations in a positive light and thus attract more investors.

The heads of state and government from Guinea, Ethiopia, Nigeria, Rwanda, Tanzania, Kenya and Mauritius all debated the future of their continent over dinner. The event was called an “Interactive Dinner Session”, and journalists were not allowed in. Only entrepreneurs and investors were. South Africa and Nigeria, the biggest economic powers in Africa south of the Sahara, didn’t feel the need to attend the dinner, but instead focused on promoting agriculture in their respective countries. Feeding Africa seems high on their agenda, following the expected population explosion. Nigeria intends to modernize its agriculture via large-scale investment programmes, knowing that its Human Resources are more important to the country’s future than its oil. The aim is to become self-sufficient and eventually an exporter.

One point where everyone agreed was that if Africa were to invest heavily into infrastructure, it could uplift all people still living in poverty.

Some studies suggest that some $100 billion (74.2 billion euros) would have to be invested each year to achieve real improvement, and African representatives at the Davos forum hoped to raise awareness for the issue. They argued that whoever fails to invest in Africa today, will be sorry tomorrow. And almost all attendees seemed to agree with them.

Finally, the European Central Bank president Mario Draghi ended the Forum by stating that “positive contagion” on financial markets was not yet feeding into the economy at large, but that the eurozone should see recovery in the second half of the year.

Good news all round…

Insight

Developments in the insurance/reinsurance market – An African perspective.

January 14, 2013 rachel_eaton

Isabelle Alenus-Crosby

Demand for insurance and reinsurance continues to grow globally, but nowhere as quickly as in Africa.

Rating agencies are awarding stronger ratings to African Reinsurance providers despite the continuing economic crisis in the West.

The Economist states that seven African countries, including Nigeria, Ethiopia and Mozambique, are forecast to be among the 10 fastest–growing economies over next 5 years. Nigeria has by far the largest population in Sub-Saharan Africa, which, combined with being the second largest economy (after South Africa), gives it the highest potential for life insurance.

The middle class in each of these countries is fueling a growing demand for goods & services. Demand for insurance products, new or otherwise, should therefore follow. According to Continental Reinsurance “this urban consumer class, that is expanding faster that the middle class base anywhere else in the world, is the insurance industry’s biggest opportunity. However, with the exception of South Africa, little headway has been made in unlocking it”.

Africa has not escaped the general increase in the worldwide incidence of natural catastrophes that, according to an AON report, saw 900 occurrences globally in 2012, compared to 820 in 2011. The African continent experienced widespread flooding in Mozambique, Kenya, Tanzania, South Africa, and Nigeria, and severe drought in parts of the horn of Africa. The lack of insurance in these areas shows that the market is still very much in its infancy, and, with the exception of South Africa, should translate into immense potential.

“Unlocking” is certainly the key word.

Archives

The Africa Trade and Economic Cooperation Forum 2013

Causing a stir: The fifth BRICS Summit

The “Where and Why” of investing in Africa

The market that had bankers at Davos excited this year was Africa

Developments in the insurance/reinsurance market – An African perspective.

Part of The Wilful Group