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SABLE Advisory Board Member, Global Sourcing Council
Doing Business in Africa. This was the title of the breakfast session in which Brand South Africa was asked to participate in, at the Commonwealth Business Forum (CBF) held in the Malta Island this week. The topic was opportune because as Brand South Africa we acknowledge that South Africa is not an island of its own, it is a country located within the African Continent. We recognise that for South Africa to succeed, Africa must first succeed. As a result Brand South Africa is always keen to brand Africa first prior to branding South Africa as a country. The Commonwealth Business Forum preceded the Commonwealth Heads of Government Meeting (CHOGM) which begins today.
Taking along the theme of CHOGM 2015 Adding Global Value I focused my presentation on four key areas. First, what are the growth sectors within Africa. Second, what is the window of opportunity for Africa. Third, what is South Africa’s approach to doing business in Africa and fourth, what is the African Union Agenda for 2063.
Growth Sectors in Africa
The sectors which present the most growth in Africa are energy, manufacturing, agriculture, mining, infrastructure, logistics, raw materials and what Ernst & Young calls ‘Consumer Facing Industries’ (retail, teleceommunications, banking).
In terms of countries, the biggest agricultural producers are Egypt, Kenya, and South Africa. There is room to expand modern farming in Tanzania and the Democratic Republic of Congo. The retail and consumer markets to watch are Kenya, South Africa and Nigeria. South Africa and Ethiopia are the key manufacturing regions. On the other hand infrastructure and logistics is set to grow across the African continent.
Opportunities for Africa
The following three (3) areas are what in my view, present opportunities for Africa. The demographic dividend often referred to as the Youth Bulge is a great opportunity. This refers to Africa’s youthful population and the fact that 65% of Sub-Saharan Africa’s 1 billion population is under the age of 35 years. This presents Africa as a source of skills for the future. The young people are also the current and future consumers of global goods and services. Furthermore, Africa becomes a consumption point because the middle class is growing. In fact, Africa is home to the world’s fastest growing middle class.
Any global company looking to grow its labour force should look into Africa. Not only that, the young people in Africa could serve as knowledge workers for global services firms wherein, through the use of technology, African workers can perform tasks and use Information Communication Technology (ICT) as an enabler for services. This can increase the efficiency of companies across the world as work could be performed across the day and overnight in order to meet the real-time needs of consumers whilst on the other hand allowing the African workers to add value in the global value chain.
Second on my list is the notion of social enterprises and social entrepreneurs underpinned by social innovation. Gone are the days when Africans went out with a begging bowl. Africans are now playing a part in solving their own problems and are making money in the process. What this calls for is for partnerships with the rest of the World. The exciting thing about social entrepreneurship is that the entrepreneurs concerned look around their surroundings, identify the social challenges, formulate solutions and ‘make things happen’. In essence, it’s a classical case of ‘Doing Business Whilst Doing Good’.
The third area that presents an opportunity for Africa is the continent’s own uptake of technology and innovation.
I have seen venture capitalists who spend 6 months in a year in Africa and 6 months in their home countries. The 6 months that they spend in Africa is filled with scouting for start up companies. A number of start up companies, technology hubs, incubators, accelerators, and innovation hubs have mushroomed in various countries across the continent.
Africans have adapted to technology in ways never imagined before. They are also at the forefront of devising new ways of solving old problems or adapting the way in which problems have always been solved thus innovation.
What this calls for is for venture capitalists, seed funders, crowd sourcers, and angel f unders amongst others, to rally up and support such initiatives or what I call ‘The Rise of the Start Up’ so that they can be scaled up and in that way ensure their sustainability.
South Africa’s approach to doing business in Africa
Prior to getting onto South Africa’s approach to doing business in Africa, let me first highlight some of the known-unknowns about South Africa. South Africa’s regulation of security exchanges and reporting standards are the best in the world. South Africa’s banks are the second most sound in the world. South Africa’s corporate boards are the second most efficacious. The financial services and protection of minority shareholders in South Africa are the third best in the world. South Africa continues to perform well in a number of categories assessed by the World Economic Forum (WEF) in its Global Competitiveness Report.
In terms of South Africa’s approach to intra-Africa trade, there is first a recognition that for South Africa to grow it needs strong partnerships with other countries on the continent. The South African government works to identify new productive activities in Africa. These include agricultural value chain, electricity (hydro and green energy generation), and beneficiation of minerals and integrated manufacturing supply chains. South Africa also supports developmental corridors across Southern and Central Africa.
The National Development Plan (NDP), which is the blueprint for South Africa’s economic development activities between now and 2030 indicates in chapter 7, the objective of increasing intra-regional trade in SADC (Southern African Development Community) from the existing 7% to 25% trade by 2030. Moreover, the aim is to increase South Africa’s trade with regional neighbours from the current 15% of global trade to 30% by 2030.
South Africa achieves its goal of development and integration across Africa through: 1. Market integration through free trade agreement negotiations. 2. Industrial development through the development of regional value-chains. 3. Infrastructure development focusing on development of road, rail , ports, energy, ICT and infrastructure and improving efficiencies at border posts. The aim is to use the infrastructure programme to spur industrial development by promoting local and regional sourcing of inputs.
There is a move to have a tripartite free trade agreement. This will see to the consolidation of SADC-EAC-COMESA trade agreements. Discussions are underway in this regard. Currently 92% of product lines are traded at 0% duty within SADC.
The African Union has declared 2015 the year of women’s empowerment and the development towards Africa’s Agenda 2063. Africa’s Agenda 2063 is a vision for Africa’s socio-economic transformation within the next 50 years. Agenda 2063 consists of seven pillars amongst which is Aspiration number 7, which seeks to position Africa as a strong, united and influential player and partner.
Key to this growth will be the development of infrastructure and Maritime Transportation. These are two elements that affect the Cost of Doing Business. The development of Shipping will ensure increased market access and an increase in employment. The improvement of logistics and connectivity across the continent will lead to an ease of movement between countries in Africa.
It is comforting to note that six (6) of the world’s ten (10) fastest growing economies are from Africa. The African Union seeks to sustain this growth and increase it further.
All the above take place against the backdrop of a more stable Africa. Africa has witnessed improved stability and a reduction in conflict over the past few years. There are more democratically elected governments now than any time in history. To be specific, two-thirds of governments in Africa are democratically elected compared to just eight (8) in 1991. That there are less social challenges than before leads to a more stable and business friendly Africa. More however needs to be done in order to structure mutually beneficial partnerships with indigenous populations as this would ensure guarantees particularly where mineral resources are concerned as 50% of the world’s mineral resources are found in Africa. The business stability in this regard would in turn lead to happier societies not only in Africa, but across the globe.
Originally published in GlobalSouthAfricans.com
About Pumela Salela
Pumela Salela is a board member of the Global Sourcing Council and an ambassador for sustainable and socially responsible outsourcing in Africa. She sits on the executive committee of the Tri-Sister City Alliance, the first sister-city alliance between BRICS cities, in order to create jobs for knowledge workers. Recently, she was appointed to serve on the advisory council of the World BPO Forum. Salela also serves on the advisory board of the World Summit on Internet and Social Media. The Rockefeller Foundation acknowledged her contribution and innovation in formulating systems that address poverty by selecting Salela to be one of 18 global recipients of the foundation’s inaugural Global Fellowship on Social Innovation, and she was the only South African to receive the honor.
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