Africa Focus Season 4 Episode 3 - Trade and Investment in Africa

Summary

In this conversation with RMB's Chief Economist, Isaah Mhlanga, the focus is on Africa's economic resilience and strategic role in global economies. Isaah outlines the importance of trade and investment, particularly through infrastructure, rail corridors, and the Africa Free Trade Area. He emphasizes the need for patient capital, and the potential of sectors like minerals, education, healthcare, and agriculture to drive investment. He also discusses the role of the Pan-African Payment System and the G20 presidency, highlighting Africa's growing influence in global trade and its efforts to address challenges like climate change and equitable crisis management.

Takeaways

• 😀 Africa's economic resilience is a critical focus, and the continent must leverage opportunities to remain competitive in a world of uncertainty.
• 😀 Infrastructure development, including social, water, electricity, and road infrastructure, is essential for the continent’s progress and investment attraction.
• 😀 Institutional investors, such as pension funds and asset managers, play a key role in funding large infrastructure projects that require patient capital.
• 😀 Intra-Africa trade is very low, with only 15% of African trade occurring within the continent, compared to 40% in regions like Europe and North America. This presents significant growth potential.
• 😀 People mobility within Africa is a key factor in boosting intra-Africa trade, as it allows for more efficient investment decisions and better integration of economies.
• 😀 Logistical infrastructure, including air travel, rail, and border crossing systems, is vital for the success of the Africa Free Continental Trade Area (AfCFTA).
• 😀 The African continent's natural endowments, such as critical minerals, agriculture, and a large young workforce, are key drivers of investment opportunities.
• 😀 Education and skills development are crucial for Africa’s growth. The digitalization of education and edutech solutions can help bridge the skills gap across the continent.
• 😀 Healthcare investment is crucial for improving medical access and outcomes, with health tech becoming a significant area for development and funding.
• 😀 South Africa's G20 presidency offers an opportunity for Africa to place its development issues on the global agenda, advocating for reduced debt servicing and equitable access to critical resources like vaccines.
• 😀 Africa needs increased climate financing from wealthier nations, as the continent is the least responsible for global emissions but is disproportionately affected by climate change impacts.

Q & A

Why is trade and investment crucial for Africa at this moment?

Trade and investment are vital for Africa's economic growth, particularly given the continent's large infrastructure needs in areas like schools, healthcare, electricity, and transport. Investments from institutional players like pension funds, with patient capital, are necessary to address these infrastructure gaps.

What is the Africa Free Trade Area, and why is it important?

The Africa Free Trade Area, operational since 2021, aims to increase intra-Africa trade, which is currently at only 15%. By reducing trade barriers, the initiative encourages quicker economic growth and fosters greater regional integration, but challenges such as improved mobility and logistics must first be addressed.

How does intra-Africa trade compare to other regions like Europe and North America?

Intra-Africa trade is relatively low, comprising only 15% of the continent’s total trade. In contrast, regions like Europe and North America have trade levels exceeding 40%, highlighting the potential for significant growth in Africa's intra-regional trade.

What are the key sectors driving investment in Africa?

Key sectors attracting investment in Africa include mining (due to the continent's rich mineral resources), education (addressing the skills gap through digital technologies), healthcare (via health tech), agriculture (leveraging Africa's large arable land), and financial inclusion (through digital infrastructure to enable financial services in rural areas).

What role does infrastructure play in the success of the Africa Free Trade Area?

Infrastructure, particularly transport and logistics, is a critical enabler of the Africa Free Trade Area. Efficient movement of goods and services requires improved roads, railways, ports, and air connectivity. The ability for people to move freely and assess investment opportunities is also vital for the success of this initiative.

How has the Pan-African Payment and Settlement System impacted Africa's trade?

The Pan-African Payment and Settlement System provides an alternative to global payment systems like SWIFT, reducing transaction costs and risks associated with reliance on external networks. It enables smoother, more secure financial transactions within Africa, promoting local trade and reducing dependence on foreign financial systems.

What is the Lobito Corridor, and why is it seen as a game changer for Africa?

The Lobito Corridor, connecting Zambia, the DRC, and Angola via rail, is seen as a game changer due to its ability to facilitate the transportation of bulk goods like copper across multiple countries. It helps streamline logistics, reduce transportation costs, and promote greater economic integration across the region.

What challenges does the Lobito Corridor address in terms of transportation?

The Lobito Corridor addresses challenges related to inefficient and costly transportation across African borders. It enhances connectivity between countries, facilitates smoother trade flows, and reduces the need for infrastructure redesign when transporting goods across borders.

How does the G20 presidency provide an opportunity for Africa?

South Africa's G20 presidency, which represents the continent, allows African issues to be integrated into the global agenda. This includes advocating for equitable access to crisis management resources, securing climate financing, and reducing the cost of financing for critical infrastructure, giving Africa a stronger voice on the global stage.

What are the main themes for South Africa’s G20 presidency, and why are they important for Africa?

The themes for South Africa's G20 presidency—people, planet, and equality—are important for Africa because they focus on addressing the continent’s unique challenges. These include improving access to vaccines during crises, securing climate financing for adaptation to climate change, and reducing the costs of infrastructure development, all of which are critical to Africa’s development.