The World Bank predicts that the African Continental Free Trade Area (AfCFTA) will boost regional income by $450bn by the year 2035 and lift 30-million people out of poverty. This should be a game-changer for entrepreneurs.
As an organisation positioning itself as the leading Pan-African banking group on the continent, we see critical challenges to address before we can capture the projected growth.
Frictionless commerce: While the Fintech ecosystem has received significant investment, African-focused entrepreneurs have voiced a key concern in the alignment gaps between physical and financial “supply-chains”.
Bringing the entire trade finance ecosystem together would make it easy for banks to source data that will assist in providing funding to players in the trade finance space.
An entrepreneur who imports goods into Mozambique to move them through Zimbabwe and ultimately to Zambia, will face challenges in physically moving goods across multiple countries but also in managing multiple currencies and repatriating funds. Until we can cut the red tape and make transacting seamless, we are going to struggle to stimulate intra-African trade unless we can modernise logistics and financial systems simultaneously.
Big data-driven decisions: Since 2013, blueberry exports out of SA have seen substantial growth. The demand for “super foods” from the UK has seen the berry industry become an export success story.
Leveraging of big data with a focus on emerging trends should steer the decision on tariffs, rebates and duties to sustain growth over time. SA enjoys significant technology, data and financial services capabilities compared to many of its African peers.
If we can’t identify what is happening on the ground in places like Kenya, Ghana and Nigeria, it will be difficult to make decisions around pricing, supply and demand and the duties payable for each region. This is an area where Absa is investing substantially in technology and human-capital to help all stakeholders — both internal and external — to make smarter decisions.
Clients looking to expand their footprint on the continent need to know they not only have a banking partner who has a presence on the ground but one who also understands the social and environmental, regulatory, logistics, financial and has access to market opportunities.
Developing the means of production: A key take-away from the COVID-19 pandemic — and more recent events in Ukraine — is that it is easy for global supply chains to be disrupted and in turn for emerging markets, like Africa, to become vulnerable.
The automotive sector is a perfect example. Countries like SA have benefited from major foreign investment and many jobs have been created. However, the disruption to the global supply of semi-conductor microchips has stalled new production capabilities.
Africa is a net importer of many goods and does not have sufficient local manufacturing capacity or skills.
Manufacturing requires long-term capital commitments and banks are working closely with export credit agencies to create opportunities for growth. Development finance institutes (DFIs) are investing in incubation to help develop entrepreneurs across multiple sectors.
We are having a number of discussions with multinational technology businesses who want to develop a presence in Africa. US and European investors are excited by the scale of the African fintech story. Sizeable venture capital investments over the past 12 months are proof of this.
On top of this are some obvious success stories from the likes of the Chinese automakers offering high quality, lower cost motor vehicle options and downstream opportunities for local businesses in Africa.
Other successes include agriculture and wine exports. $450bn in increased economic activity represents a real opportunity and if we can create an enabling environment for entrepreneurs, jobs and economic prosperity will follow.
Absa looks forward to working with entrepreneurs who want their slice of nearly half a trillion dollars.
• Tshabalala is head of FI sales and risk distribution at Absa CIB while Pillay is head of sales, Southern Africa Trade and Working Capital Product
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