Africa Top10 Business News

Africa’s New Trade Deal Launches

Africa Continental Free Trade Area

Africa is taking a giant step towards harnessing its economic might now that 52 of the continent’s 55 countries have signed a free trade agreement that forms the Africa Continental Free Trade Area (AfCFTA). The new continental trade agreement creates a single market for goods and services by removing existing trade barriers across Africa. This multinational market has a combined gross domestic product of $2m and a population of more than one billion people. The rollout of AfCFTA is expected to boost Africa’s regional and international trade, according to the Brookings Institution, a nonprofit public policy organisation in Washington, DC. A January 2019 essay by the United Nations Economic Commission for Africa noted that lifting trade barriers across Africa should “increase the value of intra-African trade by between 15 percent (or $50 billion) and 25 percent (or $70 billion),” by 2040. Historically, it has been challenging for African countries to diversify export destinations. But AfCFTA will make more Africa-produced goods available among member countries.


Nigeria’s State of Economy

Nigeria's State of Economy

The stock index is down 0.4% year-to-date while emerging markets are up 2.3% and the MSCI Frontier Markets 100 is up 10.2%. As one of the better  known, investable African equity markets, anyone who tried their luck with the Global X Nigeria (NGE) exchange-traded fund is down 27.7% over the last 12 months. In five years, the Nigeria ETF has blown up, now down over 74.5%. Frontier and emerging indexes are better than Nigeria. It’s also worse than South Africa, Africa’s largest stock market, and Egypt, Africa’s second largest. In terms of foreign direct investment, back in 2013 inflows totaled $5.6 billion, most of it in the telecom and energy sectors. Last year, Nigeria’s FDI flattened to $2 billion. Equity investment between 2013 and 2018 has fallen from around $2.9 billion in 2013 to just $139 million in 2018. Nigeria’s GDP contracted 13.8% in the first quarter, wiping out last year’s economic gains. The only country to do that of late is Venezuela. And like Venezuela, Nigeria has also dealt with blackouts in the power grid—six of them this year.

The Cost of South Africa’s New Cabinet

South Africa's New Cabinet

President Cyril Ramaphosa has announced his new cabinet, trimming the number of ministries from 36 to 28. While the number of departments was reduced to 28, the actual cabinet was only reduced by 8 people. The new cabinet will now be made up of 64 members (from 72 before) – including president Ramaphosa, deputy president David Mabuza, 28 ministers and 34 deputies. These extra deputies will come at a cost for South African taxpayers as they are scheduled to receive R1,977,795 each in the 2018/19 financial year. Ramaphosa’s new ministers are slated to earn R2,401,633 while returning deputy president David Mabuza is set to earn R2,825,470. For comparison purposes, a normal member of the National Assembly (MP) will earn R1,106,940, while the leader of a minority party will earn R1,309,563. Had the cabinet been kept the same (at 72 members, with 36 ministers and 34 deputies) the total cost – excluding the president – would have come to R156.5 million – thus Ramaphosa’s reduced cabinet only saved the country R19.2 million.


Africa’s Economies Can’t Afford to Miss Out on the Digital Revolution

Africa’s Economies

Hundreds of millions of venture capital dollars are flowing into the region which remains the fastest growing mobile phone market in the world, and an emerging competitor in the global race for tech. With innovation hubs sprouting up throughout the continent, solutions are being found to solve uniquely African problems and dissolve barriers to trade, financial services and capital. But governments need to do more to seize on the opportunities of the global digital economy, which is set to grow from $11.5 trillion in 2016 to over $23 trillion by 2025. The continent’s burgeoning populations and embryonic levels of technology and underdeveloped infrastructure can be turned to an advantage if countries adopt new technologies straight away and use them to leapfrog into the 21st century. The week of round tables and expert discussions sought to equip ministers and financial policymakers with the technocratic know-how to reform their economies and legal systems to promote innovation in the digital age. Delegations from 40 African countries shared their experiences on issues ranging from investing in the technical skills of future workforces, to using technology to build more inclusive and efficient financial institutions. 


Betting on West Africa

West Africa

Why pay the government of Germany to hold onto your money if you can get yields upward of 5% on euro-pegged debt in West Africa? That’s the message the region’s biggest French-speaking economy, Ivory Coast, is trying to get across as it fine-tunes processes to make it easier for foreign investors to buy its local-currency debt. While foreigners are legally permitted to hold the bloc’s securities, administrative burdens have made it difficult to attract offshore interest. By contrast, foreign investors hold almost half the securities with maturities of two years or longer that were issued in 2018 by neighboring Ghana, which is not a member of the union and has a floating currency. But the situation may change soon. One offshore investor took part in Ivory Coast’s May 27 auction of one-year securities as a “test run” for broader participation in future, said Kadi Fadika-Coulibaly, chief executive officer of brokerage Hudson & Cie, which is a primary dealer for the country’s debt. Moody’s Investors Service rates Ivory Coast’s debt at Ba3, or three levels below investment grade, on par with Turkey.


Top 5 Opportunities for Investment in Djibouti

Investment in Djibouti

Bordering the Gulf of Aden and the Red Sea and situated between Eritrea and Somalia, Djibouti is the route to the sea for African countries such as South Sudan and Ethiopia. Ethiopian imports and exports account for more than 65% of the port activity at Djibouti’s container terminal. In the absence of a local Djiboutian consumer base, the foreign military presence provides a major portion of the consumer spending. The Somalis, known as big players in the trading and informal Djiboutian market, place their cash in real estate to avoid having money in banks. The country is also home to internationally renowned scuba diving places in the north. Unfounded and founded security concerns have kept the tourism sector from growing. At the same time, Djibouti’s touristic areas could use a heavy boost from investment in moderately priced, quality hotels as well as other touristic amenities. Salt production, logistics and education are also key sectors.


East Africa Needs to Take Care of its Waters

East Africa Waters

A thriving trade in fish maw – made from the swim bladders of fish – could lead to the extinction of the Nile perch fish in east Africa’s Lake Victoria. Demand for fish maw has spawned such a lucrative business enterprise in the region that it is raising concerns of overfishing. The high profits involved mean that traders keep a low profile, and are secretive about their haul’s eventual destination, according to the women who gut the perch to extract the precious maw. Fish maw has various uses, including the manufacture of surgical sutures, but it is also a delicacy in China, where it is served in soups or stews in addition to being used as a source of collagen. It is also used to make water-resistant glue and in the production of isinglass, a refining agent involved in the manufacture of beer and wine. Ironically, Nile perch is an invasive species. It was introduced to Lake Victoria in 1950, and has been blamed for the disappearance of the native fish and interfering with the lake’s ecosystem. But it is now an important part of the local economy. According to a report commissioned by the German development agency GIZ in collaboration with the Lake Victoria Fisheries Organisation in August 2018, the Chinese agents supplying maw had better opportunities for business growth compared with others in Uganda. There is still little knowledge of this trade in the region, and this in itself contributes to unsustainable fishing. For example no guidelines or policy exist to regulate the fish swim bladder trade in Kenya, Uganda and Tanzania.


Innovation will be Key in Transforming the Continent’s Urban Areas

United Nations Habitat Assembly

Some 3,000 delegates, including four presidents, cabinet ministers, urban planners and population experts are attending the United Nations Habitat Assembly meeting this week in Nairobi. They are seeking better urban and sustainable planning to deal with rising populations as well the effects of climate change. At the inaugural U.N Habitat Assembly, delegates will put their heads together hoping to find solutions to make big cities more habitable. For Africa, urgent solutions are needed as the United Nations estimates nearly half of the continent’s populations live in slums. At the end of the five day summit, delegates plan to come up with a ministerial declaration with proposals on how to make cities more inclusive, safe, resilient and sustainable by 2030.


Africa-focused Private Equity Firm Goes Big

Africa-focused Private Equity

Helios Investment Partners LLP plans to raise a fund of about $1.25 billion to invest across the continent. The London-based company, led by Tope Lawani and Babatunde Soyoye, is in talks with asset managers and development agencies about what would be its largest private equity fund for African investments, the people said, asking not to be named because the discussions are private. Helios could start the fund this year, but is no rush to do so, the company, which manages about $3.6 billion, closed a $1.1 billion Africa-focused fund in 2015 after exceeding a $1 billion target. Yet, foreign interest in Africa has been fickle. New York-based Blackstone Group LP is scaling back in Africa after less than five years and Bob Diamond, the former Barclays Plc chief, is turning his attention elsewhere after struggling to get his banking venture off the ground.


Environmentally-friendly Furniture Maker Strives to be the IKEA of Africa

IKEA of Africa

Ciiru Waweru is a Kenyan entrepreneur who deploys the latest technology in her furniture factory, using computer-controlled cutting machines to make children-friendly fittings. Yet every day, a donkey cart delivers water to the FunKidz workshop located in Kikuyu town, just 20 kilometers (12 miles) northwest of the capital Nairobi. Water supply isn’t her only challenge: electricity is unreliable too and the facility has to use diesel generators time and again. Besides reducing productivity, these factors make the production process more expensive, hindering the final products’ competitiveness in the local and global market. Almost a decade since starting her company, FunKidz has however distinguished itself as a quality furniture brand, spreading beyond Kenya’s borders. FunKidz’s strategy aligns with a slew of programs launched in Kenya in the past year aimed at enabling sustainable businesses and planting 1.8 billion trees. Even as the East African nation aims to enhance its manufacturing sector from 9.2% to 20% of its gross domestic product by 2022, businesses have been encouraged to adopt climate mitigating practices and green technologies. Waweru says she’s struggled with training and retaining women at her factory but hopes her new business model will create a supply chain that employs more women, especially farmers, who can be paid to collect, shred, dry and package the waste. This also plays into her hope that authorities would boost small-scale, decentralized manufacturing businesses that can make products that are currently exported.


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