Africans Doing Business: Countries across the African Continent are becoming more and more keen on doing business together
Author: Basssem Aly
Egypt signed two memoranda of understanding (MoU) this week with Djibouti and Angola covering bilateral relations in terms of investments and cooperation in agriculture, tourism, industry, infrastructure, mining, construction and health, respectively.
The two agreements were signed during the Investment for Africa Forum (IAF) held in Egypt’s New Administrative Capital earlier this week. Organised by the Ministry of Investment and international cooperation, the forum brought together government representatives and individuals from the private sector, civil society, and international financial institutions to talk about inclusive and sustainable growth in the African continent.
The forum was just one sign among many of increasing volumes of business taking place between countries on the African continent.
According to Egypt’s Central Agency for Public Mobilisation and Statistics (CAPMAS), the government statistics agency, total trade exchanges between Egypt and the African countries increased to $3.2 billion during the first eight months of 2018, around $700 million more than the year before.
The value of Egyptian exports reached $2.8 billion between January and August of 2018. The value of imports to Egypt from the African countries during the same period was $1.3 billion.
Egypt “is located at a strategic north-eastern position on the African continent, indeed at the ‘crossroads’ to both the Middle Eastern Gulf countries as well as the European states along the Mediterranean,” Harry Broadman, chair of the emerging markets practice at the Berkeley Research Group in the US told Al-Ahram Weekly.
“It thus provides a natural, and advantageous, outlet to those important markets for African countries located in the middle and southern portions of the continent who wish to export northwards to Europe and the Middle East.”
This week’s forum was not only about Egypt’s economic ties with Africa, however, but also focused on enhancing intra-African trade and business activities.
In a speech at the event, President Abdel-Fattah Al-Sisi called for finding “solutions based on regional integration to transform Africa into a global industrialisation hub to provide job opportunities for African citizens and attract foreign investments.
“Africa’s success in achieving the UN Sustainable Development Goals requires accelerating the pace of infrastructure development through cross-border projects, which are among the priorities of the African Union, including the project linking Cairo to Cape Town, the north-south electricity-linking project, and linking the Mediterranean Sea to Lake Victoria,” Al-Sisi added.
A major initiative that could help to bring Africa closer together is the African Continental Free-Trade Area (AfCFTA), which entered into force on 30 May. As a result, many of the “restrictions and barriers hindering intra-African trade are being dismantled, which means that investors can go into the continent without difficulties,” Obi Emekekwue, global head of communications at the Afreximbank, said.
AfCFTA will lead to the “opening up of the entire African market as a single market,” he said.
“As one of the most advanced economies in Africa, Egypt’s investors stand a unique chance to benefit from expanding into other African countries because Egyptian industries can more cost effectively meet the needs of many of these countries in terms of many of the products they currently import from outside the continent,” he added.
Emekekwue emphasised the increasing consumption potential of the continent because of the “increasing growth and expansion of the African middle class”.
Broadman agreed on AfCFTA’s potential, saying that if free-trade rules were implemented across the continent, this would vastly open up flows of intra-African trade and investment.
“Unlike in other regions of the world, most African countries trade more with countries outside the continent than between each other at the moment,” he said.
According to the UN Conference on Trade and Development’s (UNCTAD) Economic Development in Africa Report 2019, AfCFTA could generate welfare gains of $16.1 billion and boost intra-African trade by 33 per cent in its transition phase alone.
Bineswaree Bolaky, a co-author of the report, told the Weekly in July that the removal of tariffs, supplemented by trade facilitation in the African Continental Free Trade Area, could lead to intra-African trade increasing by 52.3 per cent or $34.6 billion in 2022.
However, Andy Mckay, University of Sussex economics professor who previously gave policy recommendations to governments of developing countries, is skeptical about the extent to which AfCFTA will be really implemented, saying that the past record on this has been poor.
“Countries have signed up to many free trade agreements and regional integration arrangements, but actual implementtaion, in terms of really liberalising trade has been limited,” Mckay pointed out.
“There has been a bit more progress recently in the East African Community but countries have been very reluctant to liberalise trade because they fear some of their industries will lose out,” he said.
African countries are also hopefull AfCFTA will help attract more attention to Africa from investors in other parts of the world.
According to a report in the Gulf newspaper Gulf News, the United Arab Emirates is seeking to leverage its expertise in construction, shipping, logistics, tourism and energy to persuade the world that it is a suitable entrance gate to Africa.
The Gulf country annually organises a Global Business Forum to discuss investment and business opportunities in Africa.
South Africa’s Central Energy Fund (CEF) said earlier this month that it expected to produce more than 300,000 barrels of crude oil a day thanks to a refinery that will be established along its east coast.
The project, announced in January, will start operating in 2028, creating the region’s largest refinery. It is a partnership between South Africa and Saudi Arabia’s Aramco, the world’s biggest oil company, in further evidence of external business interest in Africa.
AfCFTA could also be a way for Africa to withstand global economic challenges, including the so-called “trade war” between the United States and China.
African Development Bank (AfDB) President Akinwumi Adesina told the news agency Reuters on Monday that the African states had to diversify their exports and add value to raw materials in order to avoid the fallout from economic tensions between the world’s two largest economies.
“Many African countries export... raw materials to China. If China’s economy weakens, [then] demand for raw materials from Africa weakens,” he said.
He also underlined the fact that “Africa trades quite a lot with Europe but also with the UK,” and this could be disrupted by the upcoming Brexit. He called on Africa to focus on the “most important things” and “what works for it,” in other words, a free-trade area for Africa.
But challenges persist to AfCFTA’s success. On 14 November, Nigeria, Niger and Benin, all signatories to AfCFTA, decided to establish a joint border patrol to combat smuggling across neighbouring states in West Africa.
Nigeria partially closed its borders in August to fight smuggling, and in October it indefinitely stopped trade through its land borders.
Developing infrastructure in Africa is another concern, as the African countries need it to both attract local and foreign investment and to facilitate the development of their societies.
A 2015 report prepared by the World Bank and the UN Economic Commission for Africa concluded that “adapting infrastructure planning and design… has great potential to reduce climate-change impacts in drier areas and to take better advantages of higher water availability in wetter areas” in Africa.
In his address to the IAF, President Al-Sisi called on regional and international institutions and Africa’s development partners to participate in achieving their goals and ambitions through financing the needs of development in Africa and the necessary infrastructure.
Egypt was highlighted during the event as an example of how infrastructure could serve development. Prime minister Mustafa Madbouli told those present that the private sector would not have invested in the New Administrative Capital, if it had not been for the government’s efforts in preparing the infrastructure for private developers.
He added that overhauling the infrastructure and energy sectors would encourage the private sector to pump new investment into the economy.