The Tuesday, June 23, edition of the Citi Business News on-air series focused on the opportunities African countries are presented with (Africanacity) in the implementation of the African Continental Free Trade Area (AfCFTA).
Ellen Ohene-Afoakwa, the Regional Corporate Director for Africa at Absa Bank, who spoke on the above topic identified improved transportation, infrastructure, and foreign investment among others as the panacea to Africa’s huge economic boost in terms of trade.
She outlined what she described as five essential opportunity areas Africa must take advantage of to reduce trade barriers for industrialization and structural changes on the continent.
Here are her five areas:
Education of Africa’s youthful population: This presents accelerated development for economic growth and innovation. The average age in Africa is 19.7 years compared to Asia’s 32 years and Europe’s 43 years. Africa by 2040, will have the largest workforce and how do we harness this opportunity to our advantage and growth and development?
The key areas we need to focus on are education and training of the youth. African governments need to deliberately harness the potential of the youthful population so they can play a key role in the development of the continent. Governments will have to relook their human capacity development budget.
There are countries in Africa where education budgets are as low as four to six percent of the national spending and so something needs to be done about that. Africa is the workforce of the world, come 2040 and this is to exchange the workforce for revenue.
So we need specific skills and we need to be deliberate about these skills. Now we need critical thinkers, problem solvers, innovators, people who add value and those with entrepreneurial skills because we cannot continue to depend on people to create jobs for us. We need to create our own jobs and employ our people. These are things we need to leverage our resources on to improve our economies.
Huge potential for industrialization: Africa is a continent booming with enormous growth opportunities. From abundance in agriculture; it will interest you to know that 50 percent of the world’s arable land is found in Africa. We have a lot of mineral resources and we have a fast-growing population and market as well. This is a very important factor for industrialization.
We can leverage our abundant natural and human resources to industrialize. So what prevents us from really processing cocoa for instance instead of exporting it in its raw form? We can increase our local production to reduce our import bill on the continent. Africa’s contribution to global trade is currently around three percent although Africa has 17 percent of the world’s population.
This is a huge opportunity to add value so that we can export and make money. The total import bill for Africa is around 11.8 billion dollars so if we able to produce locally, we can reduce all these and be self-sustainable. In Africa, we have a lot of resources so I believe we have to start our industrialization by leveraging on our strength. We have a lot of cotton for textiles and apparel so we can focus on textiles and apparel for exports.
We have cereals like maize, millet, and rice, who do we produce the cornflakes we have been importing? Our breweries are importing barley and malt. Why don’t we grow cassava, sorghum, and millet for our breweries to use instead of importing? We have a lot of pharmaceutical companies that are world-class, but why can’t we leverage on that tp produce for the region instead of importing.
When COVID-19 came in, we have seen a lot of companies producing PPE to meet local demand, it means we have what it takes to leverage on our strength to make sure that we change and focus on what we can do as Africans. We can even focus on food alone to reduce our food import and provide food for the rest of the world.
Infrastructure and urbanization: For inter-Africa trade to really flourish, we need to be interconnected. And for Africa to be interconnected, we need to look at how we commute, cross-border railways, air routes, water routes, and roads. We need to look at all those infrastructures.
We need about 170 billion dollars in investments every year to unleash Africa’s potential. This is huge because 600 Africans access the electricity grid so power and electricity are key and a real opportunity for people to invest in.
We also need to look at strategic facilities; like financial hubs, economic zones, and trade harvests that can really help to grow our businesses in Africa. Low connectivity in our rural areas, poor internet access, poor online access are all opportunities that investors and stakeholders can focus on to really improve Africa’s economic growth.
Governments and entrepreneurs must capitalize on Africa’s infrastructural gap in order to create jobs and retain capital in Africa. This they can do by awarding contracts locally and making sure that we really collaborate instead of bringing people from outside to execute a project.
In this case, the money stays in Africa to create jobs for the youth of Africa. Africa has the second-highest urbanization rate in the world. By 2050, 56 percent of its population will be urban so as we urbanize, we need to look at our infrastructure base.
Investment opportunities: For us to be able to achieve the infrastructure, it needs investments. So how do we raise the capital needed as Africans to be able to invest to develop and grow? We need to look at how to de-risk investments for the private sector to really be the engine of growth.
We have banks that are willing to support and mobilize funds for development. We also have to partner development financing institutions to see how we can leverage to give long-term funding for infrastructural growth. We can also look at export credit-based agency financing where we see countries bringing in equipment for longer tenure so that we can pay.
We can also use crowdfunding where we develop infrastructural funding platforms. So it is about us changing the way we think about trying to save and investing in our countries.
Technological wave: Governments in Africa will have to leverage on technology to help the continent to develop. It will interest you to know that Africa’s mobile penetration is 43 percent.
We can tap into this to improve education, delivery of healthcare, our payment solutions, insurance, savings, and also lending. With mobile data across Africa is expected to increase by seven-folds, it means it is a huge opportunity. Research has shown that the level of technological advancements of a country is linked to its GDP growth.
So for us to develop us, Africa, we need to look at technology to harness the opportunities technology presents to really help in our development. Online and mobile banking is key and with the spread of mobile phones in Africa, the continent’s entrepreneurs can use this to across as a medium to sell their products and I think that with technology, the private sector can also improve.
The mass adoption of digital services that have emerged in recent years to help drive economic growth. This is something we need to focus to create jobs for Africa’s teeming youth.
About Citi Business Festival
The 2020 edition of the Citi Business Festival has a line-up of radio and TV discussions.
It is featuring virtual business fora that would be live on Citi TV.
The month-long festival of business events and on-air activities provides inspiration, business ideas, and information for persons who are starting, building or growing their businesses.
This year’s edition of the Citi Business Festival is brought to you by Citi FM and Absa bank. It is supported by GIPC and Ghana’s comprehensive business news website, citibusinessnews.com.