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tralac’s Daily News Selection

tralac’s Daily News Selection

13 Nov 2019

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Committee on Private Sector Development, Regional Integration, Trade, Infrastructure, Industry and Technology (11-12 December, Addis Ababa)

In 2019, the ECA Conference of African Ministers of Finance, Planning and Economic Development was held in Marrakech. Emerging from that meeting was the message that there was a clear need for African countries to integrate digitization into their national development strategies and plans, and for the private sector to work collaboratively with Governments in both policy formulation and implementation. African countries could harness the opportunities of a digital economy through the implementation of policies, programmes and regulations designed to remove national barriers, promote connectivity, digital skills, research, innovation and entrepreneurship.

Extracts from the pdf Issues Paper (709 KB) : The present issues paper explores the role of the private sector in harnessing the full potential of digitization to deepen the integration of African countries. Following this introductory section, the paper is organized as follows: sections II, III and IV provide discussions on the nexus between digitization and trade, digitization and industrialization, and digitization and infrastructure development, respectively, from a regional integration perspective, while highlighting the role of the private sector. Section V explores the opportunities and challenges of digitization and the role of the private sector in tackling these challenges. Section VI presents the conclusion and questions raised for discussion.

Enhancing trade integration through digitization. Furthermore, regional markets, such as the one created by the AfCFTA, can be served more effectively using digital technologies (including ecommerce, e-payments, e-governments, regional broadband infrastructures and smart cities). E-commerce is expanding rapidly in developing countries as more goods and services are traded online, facilitated by improved connectivity and the rapid proliferation of mobile phones, social media and new innovations. For e-commerce to expand the market access of manufactured products in Africa, it is important that there are uniform cross-border e-commerce rules and regulations. Cognizant of this, several African countries are implementing policies, individually and collectively, towards harmonization for the digital economy. Digitization constitutes part of the broader effort to eliminate non-tariff barriers through paperless trade and digitization of trade measures, which also reduce international trade costs. If efficient technology is not deployed, this may create another non-tariff barrier. Most regional economic communities continue to improve their trade facilitation measures by embracing digital technologies to complement, and make more effective, the physical infrastructure connecting the regional economic community member States.

Digitization in the transport sector. There are, however, several hurdles to the application of digital technologies in the transportation sector in Africa. For example, a lack of funding hampers the implementation of IT projects in African countries, in particular cross-border projects such as those designed in the context of the SMART corridor initiative. The inadequate capacity of member States and regional organizations to implement such projects, or even to raise the awareness and understanding of stakeholders on the importance of IT systems, has also been identified as a challenge.

Industrialization in the digital era. The large-scale uptake of digital technologies in Africa is still under way. As a relatively new phenomenon, there are fewer tried and tested routes to learn from in navigating industrialization in the digital era. This makes the recommending of policy responses to industrialization through digitization inherently difficult. Governments can respond by improving their policymaking processes so that they are more reactive to a fast-changing environment – in other words, policymaking needs to be both adaptive and properly coordinated.


Africa Investment Forum 2019: selected updates

  1. Potential of the Fourth Industrial Revolution in Africa. A report compiled by the African Development Bank reveals a continent that is embracing the brave new world of the Fourth Industrial Revolution but needs to improve access to finance, skills and inclusive growth. The report, titled “Potential of the Fourth Industrial Revolution in Africa”, was launched on Monday at the Africa Investment Forum, found significant uptake already in Africa of the Internet of Things – a market that could be worth as much as $12.6bn by 2021 – and strong investment growth in new technology-led areas of AI, Big Data Analytics, blockchain, additive manufacturing and drones. Main conclusions: In 2019, approximately 6,500 technology start-ups were identified on the continent, among which around 10% develop 4IR applications (712 start-ups). These 4IR start-ups received $210m of venture capital investments. Africa’s large population, which is expected to double by 2050 to 2.4 billion, presents both a source of data to feed innovation in 4IR technologies as well as a valuable market. There is margin for growth on the supply side as proposed products and services in Africa stand way below the estimated demand levels. Overall, the importance of export-led manufacturing will be diminished by these technologies, as manufacturing facilities will be relocated to developed countries. However, the two most promising sectors for 4IR market applications are agriculture and energy.

    Extract (pdf): The private sector has also begun to explore the impact of Blockchain on trade logistics. IBM has conducted two pilots using Blockchain within the context of trade logistics. One pilot was conducted with Maersk to track shipments of flowers from Kenya to Rotterdam. A second pilot was conducted with the Singapore Customs Administration, which incorporates customs in the supply chain. This suggests a real potential for integrating customs and border authorities with the supply chain to achieve significant benefits in terms of facilitation. There has been a significant increase in banks’ interest in the development and use of Blockchain technology in the context of trade finance operations. For example, Barclays and Wave, an innovative start-up company, executed a global trade transaction platform using distributed ledger technology. This platform, where trade documentation was processed with funds remitted via Swift, facilitated a letter of credit transaction in a very short time. Deutsche Bank, HSBC, KBC, Natixis, Rabobank, Société Générale and UniCredit have decided to cooperate to develop and commercialise a Digital Trade Chain consortium, the aim of which is to simplify trade finance for businesses. The banks worked with IBM to assist with the development of the platform.

    Downloads include five country case studies – Cameroon, Morocco, Nigeria, South Africa, Uganda; two benchmarking reports – South Korea and India; and a SADC regulation case study

  2. The European Investment Bank has announced a $1.1bn lending programme to help women entrepreneurs on the continent. EIB Vice President, Ambroise Fayolle, also revealed that the bank has signed three further agreements to boost sustainable development on the continent. But the major deal is what the EIB has dubbed SheInvest. The EIB expects the gender-lending initiative to allow women to play a more active role in economies. Note: The SheInvest initiative will focus its efforts on investing in digital innovation, as well as providing financial products and services designed to support women who would not usually have access to finance; with the goal of shoring up women’s economic opportunities and social inclusion. It will also support women in Africa in gaining access to finance, will be informed by the criteria set in the 2X Challenge, an EIB-endorsed initiative promoting gender equality in the financial sector.

  3. FinDev Canada invests in gender-lens fund to bolster women-owned SMEs in Africa. FinDev Canada has announced an investment of $7.5m to Alitheia IDF, a fund supporting women-owned and led businesses, to boost women’s economic empowerment and access to finance in Sub-Saharan Africa. A joint venture between women-owned and led funds Alitheia Capital in Nigeria and IDF Capital in South Africa, Alitheia IDF Fund was seeded with $12.5m from the African Development Bank. The first fund of its kind in Africa, AIF uses a gender-lens investing approach to support high-growth African SMEs that help improve women’s access to finance and foster their economic empowerment.

  4. AfDB, US International Development Finance Corporation MoU to mobilise private capital for Africa’s development. Adam Boehler, DFC Chief Executive Officer: “The MOU will help harness the diverse strengths of DFC and the AfDB to make tangible progress on our shared goals across the continent. To tackle the multitude of urgent development challenges facing Africa—from infrastructure development to financial inclusion and food security—collaboration with like-minded partners is essential.” African Development Bank president Akinwumi Adesina: “Through these efforts, DFC and the Bank aim to invest a combined $2bn, with a goal of mobilizing an additional $3bn from the private sector alongside its investments. Doing so would support total investment of $5bn in regional development projects. The partners will use debt financing, equity investments, political risk insurance, and other financial tools to meet these goals.”

  5. “Build mutual trust to attract capital to Africa,” says investors’ panel. African, European and American investors and the President of the African Development Bank held a panel discussion on Tuesday at the Africa Investment Forum 2019 to collectively reflect on the theme: “Destination Africa: Leveraging Institutional Investors”. Panellists included Adam Boehler, Chief Executive Officer of the United States International Development Finance Corporation; Rob Hersov, founder of the Invest Africa platform; Uche Orji, CEO of the Nigeria Sovereign Investment Authority; and Sola David Borha, CEO of Africa Regions, Standard Bank. Linda Mateza, CEO of the South African Eskom Pension and Provident Fund; Lerry Knox, CEO of the Sovereign Infrastructure Group; and Richard Ingram, Executive Director of the Teachers’ Retirement System of Illinois also participated in the panel.

    Hersov said: “To mobilize investment on the African continent, it all comes down to trust. Many of our investors have never set foot in Africa, because they believe that everything happens on the trading floors of the United States. So why come to Africa? This is a problem to solve and see the opportunities: of the 54 countries that form Africa, we have 16 in which we can invest.” Richard Ingram added that US investors had realized the importance of African markets. However, he said: “There is a need to remove certain obstacles in their perception and to invest in projects where demand is already present.” Knox took this thought further, saying a regulatory framework needed to be established. Orji recommended the building of trust to attract capital to Africa, calling for “the creation of co-investment funds. We must work in synergy. The sovereign wealth funds of Morocco, Angola and Nigeria have a role to play. If multilateral development banks wish to invest, we will help them.”

  6. MOU brings good news for Africa’s rail networks. Afreximbank and Thelo DB on Tuesday signed a MoU at the Africa Investment Forum in Johannesburg. The agreement will give both parties an opportunity to develop, finance and operate railway projects across Africa. Thelo DB is looking at projects in Southern, East and West Africa, which the company believes are home to corridors that transcend country borders. “The MOU solves a very important part of the puzzle for us, which is, when we’re doing these big capital projects, how do we finance them? Rather than building our own expertise as Thelo DB, working in an integrated manner with Afreximbank magically gives us a solution to that challenge. So we can now sit down with our clients and say not only do we bring technical capacity of a global standard, we bring you unbelievable capital mobilisation in the MOU we signed this morning,” said Ronald Ntuli, Thelo Group Chairman.

  7. Peter Fabricius: Africa is changing from aid recipient to trade partner. “The way we talk about Africa — and the way we talk about Africa-Europe relations — has radically changed during my time in office,” said Neven Mimica, the European Union’s Commissioner for International Co-operation and Development, who has been in the job for five years. “Gone is the narrative of “donor-recipient” and the outdated perception of Africa as a primary commodity exporter or a continent of instability,” he told journalists on the sidelines of the investment forum. “Gone is the narrative of charity and development assistance. Now is the time for investment, win-win partnership based on mutual interests,” he said, noting that by 2050, Africa would be home to one-fourth of the world population and remain the world’s youngest region.

  8. CNBC Africa multimedia: Hello Tractor CEO Jehiel Oliver on unlocking opportunities for African farmers; Africa’s new free trade deal presents great opportunities for MTN; Moloi-Motsepe on what the free-trade agreement means for Africa’s fashion industry

Today’s Quick Links:

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Halima Dangote takes charge of Dangote Group Commercial Operations

EU Council approves EU-Singapore Free Trade Agreement, which takes effect on 21 November

World Bank: Bangladesh can boost its exports with better logistics

Data Blog: Which countries reduced poverty rates the most?

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This post has been sourced on behalf of tralac and disseminated to enhance trade policy knowledge and debate. It is distributed to recipients across Africa and internationally, serving in the AU, RECs, national government trade departments and research and development agencies.

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