Trade & Investment

US-Sudan deal hinges on Israel normalisation funds

The US signed a Memorandum of Understanding (MoU) with Sudan on Wednesday to provide a “bridge loan” to the heavily indebted country so it can begin to clear $16bn in arrears owed to the World Bank.

Stevin Mnuchin, US treasury secretary, completed a one-day visit to Khartoum where he committed to lending to Sudan if certain conditions laid out by the MoU and the Bank are met.

The move comes after Sudan’s removal from Washington’s state sponsors of terrorism list in December, which had been blocking the bankrupt country from engaging with multilateral lenders.

Mnuchin, however, did not expand on the exact conditions that Sudan must meet to receive US lending.

Cameron Hudson, senior fellow at the Atlantic Council’s Africa Center, believes they are the same conditions as those outlined in Sudan’s staff monitored programme with the IMF.

The most important requirement is unifying the exchange rate to get rid of Sudan’s parallel market, he says. 

Businesses and individuals operate in Sudan with an official exchange rate alongside a parallel “black market” rate.        

But this “could take months or longer” while Sudan does not have the forex reserves necessary to defend and stabilise the official rate. Without a unified rate it may not be able to receive financial assistance.

Sudan has more than $60bn in foreign debt after decades of economic mismanagement, conflict and sanctions during the rule of former president Omar al-Bashir.

The United Arab Emirates (UAE) had promised Sudan $750m to sign the US-brokered Abraham Accords normalising relations with Israel, says Hudson.

Sudan signed a non-binding declaration of support for the Abraham Accords on Wednesday, which follows similar public rapprochements between Israel and historic foes UAE, Bahrain and Morocco.

If the UAE’s funds are delivered, it would be enough money to unify the exchange rate and pave the way to Sudan receiving debt relief from the World Bank, Hudson explains.

“[US Treasury Secretary Mnuchin] can convince UAE to release the funds for Sudan, which will unlock the bridge loan from the US, which will start the arrears clearance at the Bank/Fund, which ultimately leads to debt relief. The question is, can Mnuchin convince UAE to release the funds?”

Mnunchin said: “This will create significant positive opportunities for Sudan in unlocking significant amounts of funds both at the World Bank, the IMF and at the United States.”

Trade & Investment

How can Africa ensure AfCFTA succeeds?

On October 29, 2020, the WTO nominations committee advanced Ngozi Okonjo-Iweala to the group’s 164 members as the next head of the organisation. She would be the first woman and first African to head the trade body. It was a culmination of months of lobbying and campaigning by African governments and institutions – including Cyril Ramaphosa, the South African president and current chair of the African Union. 

Just one member country did not support Okonjo-Iweala’s appointment at the delegates’ meeting – the US. This was as much a demonstration of America’s power as it was a display of the weakness of the African bloc. At the time of writing, a decision on who should be the future head of the WTO had still not been reached.

In a global economy dominated by continent-sized economies like the US, China, India and the European Union, Africa’s 54 small, balkanised individual units will continue to reap sub-optimal results in global economics and politics. The African Continental Free Trade Area (AfCFTA) presents an opportunity to both bolster intra-regional trade and increase Africa’s negotiating position on the international stage. 

But Africa’s perennial position on the bottom rung of the global economic ladder remains a paradox. The continent is home to 17% of the world’s population and the largest share of youth in the world, with 30% of the world’s oil and mineral endowment. Yet Africa is also home to 70% of the world’s poor. Around 30% of the continent’s population lives in landlocked, resource-poor countries, and intra-African trade is the lowest of all regions of the world. 

As a part of its response to this quandary, Africa’s leaders have elected to pool their economic resources and create a single market out of the 54 nations that comprise the African Union. On completion, this would become the largest free trade area in the world. The AfCFTA will cover a market of more than 1.2bn people and up to $3 trillion in combined GDP, with the potential to increase intra-African trade by over 50%. With Nigeria’s ratification of the agreement it is gaining legitimacy and is well on its way to implementation. 

Three challenges

But the world into which the AfCFTA takes its first step is changing in radical ways that portend a turbulent future. 

First is the impact of the coronavirus: according to the IMF the crisis “threatens to throw the region off its stride, reversing the development progress of recent years and slow the region’s growth prospects in the years to come.” 

Secondly, there’s the unfolding debt crisis, with Zambia as the canary in the coal mine. Debt levels were already elevated before Covid-19 and the pandemic has heightened the crisis. Seventy-three countries (low and middle income) at risk of debt distress qualify for the G20’s Debt Service Suspension Initiative (DSSI), which was approved in April. More than a third of those countries are in Africa. 

African countries that have not signed up, including Benin, Kenya, Ghana and Nigeria, are concerned that joining the DSSI would affect their credit ratings and close off access to capital markets. Writing in the Financial Times on 11 October, Ghanaian finance minister Ken Ofori-Atta noted that African finance ministers had requested a debt standstill of two years and $300bn in concessional financing over three years. Even though this is less than 3% of the over $12 trillion that OECD countries have spent shoring up their economies, it is still not available for Africa.

Finally, we are witnessing a partial unwinding of globalisation and the emergence of a world characterised by rivalry and protectionism. 

A recent Pew Research survey showed a majority in most industrialised countries hold a negative opinion of China, the highest levels measured in over a decade. US officials have succeeded in convincing industrialised counterparts in Europe to eschew Chinese hardware in their communication systems. 

The campaign has extended to Egypt and Brazil as the US seeks to build a “clean network”. As the US and China ramp up restrictions and bans on firms from the other country, the trade war will soon reach Africa’s shores – and it could not have picked a worse moment. 

Two essential commitments

The three challenges described above make the African economic integration project significantly harder than it already was. But they also drive home the economic exigency and political imperative of seeing the project through. There are currently eight regional economic communities on the continent that range from completely useless to only partially functional. I therefore have two recommendations going forward.

1. Commitment to making the project succeed

This is an African project that will require African commitment to succeed. It must proceed regardless of what happens elsewhere. We can expect external actors to continue to pursue policies that run counter to Africa’s objectives as long as such policies benefit them. Even as we have made clear our intent to move trade along a multilateral track, Africa’s largest partners may seek to pursue a bilateral one. 

For example, the UK will continue to pursue bilateral trade deals with individual African countries as it exits the European Union. The US remains committed to negotiating a bilateral trade deal to use as a model in Africa, and China recently completed a bilateral agreement with Mauritius. 

None of these actions preclude moving forward with the AfCFTA. Despite the rhetoric of Africa’s external partners, the continent’s prosperity has never been the true objective of their policies and we cannot expect that to change now.

2. Commitment to better governance

Africa’s massive infrastructure gap cannot be closed by borrowing alone. With about $89 trillion in assets under management, Africa needs to attract private finance, but capital is a coward. In the first four months of the pandemic over $100bn fled emerging markets. 

African states where the rule of law remains capricious and whimsical do not inspire confidence. Whether is the Ethiopian government bombing its own people in the north, Nigeria’s SARS police unit kidnapping, extorting, torturing and killing its citizens with abandon or the Tanzanian government constricting the democratic space, we are our own enemies. Altering constitutions after term limits have expired or capture of the state by narrow interests all undermine any chance of a successful regional integration plan. 

Unless we commit to better governance, the AfCFTA will be submerged by continental-level dysfunction – a shame given that it holds such promise.

Gyude Moore is a senior policy fellow at the Center for Global Development. He previously served as Liberia’s minister of public works.

Technology & Information

South Africa is first African country to secure Covid vaccine

South Africa has secured 1.5m doses of the Oxford-AstraZeneca vaccine to fight the deadly coronavirus pandemic, a government official said on Thursday.

The government will receive 1m doses of AstraZeneca’s AZN.L vaccine in January and 500,000 in February from the Serum Institute of India (SII), South African health minister Dr Zweli Mkhize said in a statement.

The country’s 1.25m health workers will be prioritised in a phased roll-out along with the most vulnerable. The government hopes to acquire enough vaccines to inoculate at least 67% of the population in an effort to achieve herd immunity, a separate statement released earlier this week said.

Now that the first tranche of vaccines have been secured, the task is to engage stakeholders to secure vaccines for the rest of the 58m population,  Mkhize added.

“Government is continuing its engagements with vaccine manufacturers to ensure the country’s needs are met,” he said in a statement. 

South Africa is also attempting to acquire vaccinations through Covax – a global collaboration of governments, businesses and health and philanthropic organisations working to accelerate vaccine development, production, and equitable access for middle- and low-income countries.  

Since its launch in September, 180 countries have signed up to Covax, 40 of which are African low-income countries.

The initiative, which plans to inoculate up to 20% of the population of participating countries, could “theoretically” be extended to cover 50% of the population, says Professor Greg Hussey, director of the University of Cape Town’s Vaccines for Africa initiative, but Covax depends on vaccine supply from pharmaceutical companies.

The programme has secured hundreds of millions of Oxford-AstraZeneca doses, considered by some experts as the best candidate for Africa developed so far due to the availability of required cold storage. 

A down payment for vaccines to cover 10% of the population has now been made to Covax, after the government missed its payment window in December, a source on the Ministerial Advisory Committee for Covid-19 vaccines told African Business.

New strain “not a game-changer”

A new, more contagious strain of Covid-19, first found on South Africa’s east coast late last year, is driving a second wave of infections.

The results of a study by the Fred Hutchinson Cancer Research Centre in Seattle released on Tuesday found that the new strain carrying the mutation E484K “will have greatly reduced susceptibility to neutralisation by the . . . serum antibodies of some individuals”.

Despite their findings, which were not peer reviewed, Professor Hussey believes it unlikely that new strain can defy vaccines.

“It’s unlikely that the variants circulating would overcome the vaccine,” said Hussey.

“When you get a vaccine, the vaccine produces an immune response. Once we’re exposed to a virus the immune system kicks in and then hopefully overcomes the virus. The immune system will still respond to whatever variant it is.

“We have to see how the process evolves, but right now we don’t have a definitive answer. There may be some impact [of the new strain’s resistance to the vaccine] but it won’t be significant.”

A new laboratory study conducted by Pfizer found that the Pfizer/BioNTech Covid-19 vaccine appeared to be “effective” against the new rapid spread mutant strains.

This week, South Africa reached a grim milestone as deaths surpassed 30,000. New cases spiked at 20,000 in 24 hours, bringing the total number of cases in the country to 1.5m.

Trade & Investment

Nigeria unveils plans to employ 774,000

Nigeria has launched an ambitious public works programme to employ hundreds of thousands of unskilled workers who have been unable to earn a living as a result of the Covid-19 pandemic.  

The programme aims to employ 774,000 itinerant workers and unskilled labourers – 1000 from each of the country’s 774 local government areas – in public works projects for an initial three months.  

The successful applicants, who will be chosen by local selection committees comprising religious organisations, NGOs and local government, will be paid around 20,000 naira a month ($50). 

Examples of the work will include traffic control, rehabilitating roads, and clearing gutters and bushes, according to Festus Keyamo, minister of state for labour and employment. 

“Every local government has unique needs but the general objective is to maintain public infrastructure and do some kind of community service,” he told the BBC’s Africa Today programme. 

The Covid-19 pandemic has compounded Nigeria’s entrenched lack of economic opportunity. Nigeria’s unemployment rate climbed to 27.1% in the second quarter of 2020, according to official statistics, comprising some 21.7m Nigerians. 

The underemployment rate – a measure of those working less than 40 hours a week, or in jobs that underutilise a worker’s skills, time, or education – increased to 28.6%. The economy is expected to shrink by 4.3% this year, according to IMF projections. The price of oil – the country’s dominant export – is languishing at around $51 a barrel.   

The public works scheme, which is influenced by India and Malaysia and recalls the 1930s New Deal of US President Franklin Roosevelt, is unlikely to make a significant dent in the country’s long-term unemployment problem, but Keyamo said it will provide a “palliative” to the “very bottom of the economy” amid the shock of Covid-19.  

‘Exit strategy’ 

The programme has been designed with an ‘exit strategy’ after its expiry in three months. Keyamo says that workers are expected to reinvest their wages in expanding their small enterprises, while government is considering making the scheme an annual event or extending it beyond the initial three months. The government is also considering the establishment of a similar programme to employ Nigerians on large-scale agriculture projects.  

Nevertheless, there are concerns that the scheme will offer an opportunity for corruption at the local government level, with the offer of jobs and financial support a potential source of patronage. Keyamo said that his department would investigate any complaints of malpractice.  

“All you can do is set parameters as much as you can…to ensure a free and fair process,” he said.  

President Muhammadu Buhari approved 26bn naira ($68m) for the programme in October, but some applicants told local media in December that they were losing hope in the scheme amid repeated delays.  

Finance & Services

Covid fightback still priority for AfDB in 2021

How has the bank reacted in 2020 and where is Africa as a continent today?

Khaled Sherif, VP for Regional Development, Integration and Business Delivery: Undoubtedly, Covid has had a major impact. The big six oil producing countries depend for about 75% of their total revenue on the commodity. They are looking at fiscal deficits that they had not obviously anticipated. Other countries faced similar challenges. Most countries depend on two or three primary exports, and many countries are highly dependent on one or two sources of income such as tourism, which has obviously taken a massive hit. The bank effectively stopped its lending and put together a $10bn crisis relief facility, to give countries some fiscal space to deal with this setback. It’s important to note that the fiscal crisis has been the biggest threat that many African countries have faced from this pandemic.

$10bn is small when you look at the stimulus that Western countries were able to put into their economies. Are you working with the other development institutions to look at new instruments?

Khaled: If you look at where the African continent is, it basically needs something in the neighbourhood of $130bn to get through this crisis. We are all trying to pool resources but this is an exercise that is much bigger than just the multilaterals. Bilateral negotiations need to take place, specifically with China, the largest single creditor on the continent. Through entities like the African Legal Support Facility we are also trying to make sure that we’re helping our client countries negotiate appropriately to ensure we don’t solve a short-term problem by creating a bigger one in the future. Creditors including China have shown an absolute desire to help African countries in every way they can, so if anything I think there has been a show of good faith for the struggles of the continent.

How has Covid changed your gender work priorities?

Vanessa Moungar, Director of Gender, Women and Civil Society: Women are disproportionately affected by global health crises. From a social perspective women are truly bearing the brunt of the economic and social fallout in general of the pandemic.

When you’re looking at the economic side of things, Covid-19 has been exacerbating the lack of access to markets, finance, inputs and other productive resources because of the disruptions in global value chains and their reductions overall in purchasing power and mobility.

In Africa, 89% of our employment is estimated to be informal, and 92% of women are employed in the informal economy. They can only be disproportionately affected and all small businesses have been struggling to survive. We conducted a study in July, across 30 African countries, collecting primary data on the direct impact on women entrepreneurs. It revealed that 80% of female small and medium-sized enterprises had to temporarily or permanently shut down due to restrictions from the pandemic.

The bank launched the Covid-19 response facility to support African governments and the private sector. All operations funded under this facility incorporated gender considerations in their design and outcomes, focusing on impact, on reducing women’s vulnerability, enhancing their safety and economic resilience. Within the packages you could see interventions specifically supporting women entrepreneurs by directing support to informal workers and the hardest hit women-led businesses in the form of cash transfers, subsidised loans or tax exemptions.

We also looked at expanding basic social protection in some countries, specifically targeting female health workers to ensure they exercise in a safe environment. In many of our countries they represent over 60% of the labour force in the health sector.

Are we seeing new fault lines in fragile states?

Khaled: They have definitely been seriously negatively impacted. We are beginning to see a dangerous pattern across the African continent where consumption is beginning to taper off. When consumption tapers off, does that translate into additional unemployment? That is going to be a much more dangerous phenomenon in fragile states, where typically unemployment can be 20, 30 or 40%, and that is basically the norm.

We are concerned about what is happening in fragile states. Not to paint too much of a gloomy picture, but if you look at a country like Sierra Leone which is a gold exporter and a net oil importer, they should be in a better position vis-a-vis most, but they’re not, because we’re seeing consumption taper off in countries across the continent as a whole and that is very concerning.

On gender, how will you build back better for 2021?

Vanessa: First, it is really about mainstreaming gender into all the bank’s operations and projects.

We also recognise the need to have specific targeted interventions in areas where we feel we have a strong comparative advantage and this is where the AFAWA Initiative was born. AFAWA stands for Affirmative Finance Action for Women in Africa. The bank looked at its strength and its ability to really influence the financial sector to increase access to finance and private sector participation for women entrepreneurs. It’s not just access to finance, it’s access to markets, information,  training and also the existence of the right enabling environment.

In terms of business delivery for 2021, what are the bank’s prior­ities?

Khaled: Our priority for 2021 is to make sure we build back better. That basically means that we continue to provide budget support to ensure that countries can withstand the shock of a curtailment of their exports. In 2021 we will be looking at a series of budget support operations and crisis relief operations, since we don’t want to lose the gains that we’ve made, particularly in infrastructure. To make sure we don’t lose the gains for regional integration, and in light of the AfCFTA, we are obviously focusing our ability to lend to new operations on anything that regionally integrates markets – that will allow for cross-border exports to prosper and to develop infrastructure that connects countries.

We’re also beginning to see cases of currency devaluations, but the fundamental laws of economics are being broken, and currency falls are being accompanied by a fall in exports. Many industries, such as in North Africa, are assembly and dependent on intermediate inputs from abroad, and so anybody who’s in the assembly business is being priced out the market because their intermediate inputs are becoming more expensive. A lot of work is going into making sure that our industries become less dependent on intermediate inputs from abroad so they can withstand these kinds of shocks in the future.

What are the positives from this pandemic?

Khaled: I would say there are five positives. One, you have not seen economic meltdown, to a degree because of the support of the multilaterals and the bilaterals. Two, there have been no political meltdowns or significant social unrest, which is actually a positive sign given that Africa has a net import bill in excess of $35bn, a figure that could rise to $110bn if current trends continue. We have seen social safety nets play a role in supporting the poorest, and in some countries that meant putting them in place in record time. Fourth point, civil service salaries continued to be paid and then five, we haven’t seen major defaults so far from the countries affected by the pandemic. So Africa has shown it can withstand a shock of this type and we go into 2021 with the hope that we can build back better.

Vanessa: We’ve been very flexible and adaptable despite a very constrained environment and reacted as quickly as we could to support countries and really play our role as a development financial institution of the continent.

Secondly, the pandemic highlighted entrenched inequalities which helps bring them to the fore of the conversation. More than ever we’ll be putting people at the centre of our interventions when we think about developing any sort of projects.

Lastly, we’ve enhanced our engagement with civil society organisations, and they played a critical role in the immediate response to the crisis.

Energy & Resources

Siemens Gamesa inks first wind power deal in Ethiopia

Wind power company Siemens Gamesa has signed its first deal to build a 100 MW wind farm in Ethiopia. 

The renewable energy giant, formed in 2016 through the merger of German-based Siemens Wind Power and Spain-based Gamesa Corporación Tecnológica, will deliver 29 wind turbines to state-owned utility Ethiopia Electric Power (EEP).

The Assela project is set to be commissioned by 2023 and it should help power over 400,000 Ethiopian households in the country’s rapidly growing population of 115m.

The wind farm will be located between the towns of Adama and Assela, approximately 150km south of Addis Ababa. It will feed an incremental 100 MW into Ethiopia’s electricity grid, which currently generates 4,500 MW.

Roberto Sabalza, CEO for Onshore Southern Europe and Africa, said that Siemens Gamesa is looking to expand its operations across Africa, to help drive a green revolution. 

He added that in Ethiopia, the project would help the country to “install more renewables and meet transformational energy targets.” 

Currently around 90% of Ethiopia’s installed generation capacity comes from hydropower.

Despite lofty plans to increase generation capacity to over 17,000 MW by 2020 and to 35,000 MW by 2037, becoming one of Africa’s key energy exporters – the vision has not been met with bankable projects.

Ethiopia’s energy ambitions rest with the Grand Ethiopian Renaissance Dam (GERD) on the Blue Nile which has a projected capacity of 6,000 MW, almost doubling Ethiopia’s current output.

The $4bn hydropower dam, which will be key to Ethiopia’s economic development, is at the centre of a bitter ongoing dispute with downstream Egypt and Sudan who have voiced concerns over water scarcity. A new round of three-way talks begins this week in the virtual presence of South African officials as the stakeholders try to find a solution by next month.

Fears were raised over the escalation of the spat after President Trump dived into the dispute with speculations that Cairo would bomb the dam.

Ethiopia has set an ambitious target to supply 100% of its domestic energy demand through renewable energy by 2030. According to the African Development Bank (AfDB), wind has an installed capacity potential of 10,000 MW, up from 324 MW at present.  

According to a Wood Mackenzie forecast, around 2,000 MW of wind power will be installed in Ethiopia by 2029. The Assela wind project will be financed by the Danish Ministry of Foreign Affairs via Danida Business Finance (DBF) adding to a loan agreement signed between the Ethiopian Ministry of Finance and Economic Cooperation (MoFEC) and Danske Bank.

Spain-based Siemens Gamesa, with 107 GW of installed capacity worldwide, accounts for 55% of all wind power produced on the continent. It has projects in Egypt, South Africa, Morocco, Kenya, Mauritania, Tunisia and Mauritius. 

Technology & Information

Universal Music pushes play on Africa expansion

Universal Music Group (UMG) has named a new CEO of its Africa division as the multinational music giant looks to capitalise on growing markets for recorded music across the continent.  

The US music company, majority owned by French media giant Vivendi, has promoted Sipho Dlamini to CEO of Universal Music South Africa and Sub-Saharan Africa.  

Dlamini, who joined the company in 2016, where he has promoted South African artists and African music around the world, will now oversee all of UMG’s operations within English-speaking Africa.  

UMG, which has divisions in Nigeria, Kenya, and South Africa, and a presence in French-speaking Côte d’Ivoire, Senegal, Cameroon and Morocco, says it will continue to expand on the continent in 2021. 

Global record labels are increasingly attracted to Africa’s vast and growing young population, the growth of internet and smartphones, and the increasing popularity of homegrown genres, including Nigeria’s Afrobeats. 

Streaming is increasingly popular – in South Africa, streaming should generate around $50.8m in 2022, more than three times what was generated in 2017, according to PwC, although steep data prices elsewhere could hold back growth. 

In 2018, UMG licensed its catalogue to Boomplay, Africa’s largest local streaming platform. 

UMG’s recent hits include albums by Nigerian Afrobeats star Tiwa Savage, South African rapper Nasty C and Kenya’s Sauti Sol.

As well as promoting artists within Africa, UMG, which has a presence in 60 countries, also aims to foster a global audience for African music. The company has agreed a strategic partnership between Nigeria’s Aristokrat Records and Universal Music France and launched Def Jam Africa as a standalone label dedicated to African hip-hop, Afrobeats and Trap music, with resources across five countries.  

The firm has also announced additional hires as it looks to grow its regional footprints. Lagos-based Chinedu Okeke, a live music entrepreneur, has been named managing director of Universal Music Nigeria and will expand existing operations in Nigeria and other English-speaking West African markets. Johannesburg-based Elouise Kelly, a former managing director at advertising and media agency Ogilvy, has been appointed chief operating officer at Universal Music South Africa and Sub-Saharan Africa.  

“I am thrilled to announce these strategic appointments, as we look to further develop our domestic infrastructure and label rosters within Africa,” said Adam Granite, executive vice-president for market development.  

“Most integral to achieving our long-term ambitions, is to build a strong leadership team on the ground, with deep foundations in each country to help grow a dynamic ecosystem for all to benefit in the future.” 

Finance & Services

2021 needs to be Africa’s ‘focus on the money’ year

Amid all the distress of the Covid-19 pandemic in 2020, progress on the African Continental Free Trade Agreement (AfCFTA) has been a bright light.

The Secretariat was established in Ghana, and Africa’s most populous economy, Nigeria, joined 33 other countries in ratifying the agreement. This progress is important. The AfCFTA has been a long time coming. 2020 marks two decades since a major decision among African governments to strengthen the coordination of the continent’s economic policy. The turn of the millennium saw, in Lomé, Togo, the Constitutive Act of the African Union agreed – setting the stage for the AfCFTA 20 years later.

But much more was envisioned in Lomé, and as 2020 also brings new concerns about African financial stability in the wake of Covid-19, the time is now to turn from trade to money, money, money.

The triple emphasis is appropriate, because the idea governments committed to all the way back in 2000 was to create a set of three, exclusively African financial organisations: an African Central Bank (ACB); an African Monetary Fund (AMF), and an African Investment Bank (AIB).

The vision was similar to what we see in Europe today – a single currency; a European Central Bank (ECB) that can bail out European economies on their terms; and a separate, exclusively European Investment Bank (EIB) that can fund infrastructure and leverage private investment into long-term projects in the region. There are similar analogies for American states and Chinese provinces.

The rationale for the three African financial institutions is as clear as the rationale for the AfCFTA. Right now, Africa’s dependence on the rest of the world for finance is a major impediment to development. Debt-to-GDP ratios on the continent can rise not because of actual increases in borrowing for road, rail or even digital infrastructure projects, but simply because risk perceptions of Africa worsen.

Having emerged highly damaged from the external-interest-rate-hike-induced debt crisis in the 1990s and accompanying structural adjustment policies required by the IMF and World Bank for bailouts, this need for financial independence was starkly obvious to African leaders 20 years ago.

Indeed, post-2000, some progress was made. The key documents for the AIB were drawn up back in 2006. So far, 22 African countries have signed up, and six formally ratified – Togo, Libya, Congo, Chad, Burkina Faso and Benin. Similarly, the documents for the AMF were drawn up, and a location for headquarters identified – Yaoundé, Cameroon.

The documents were adopted in 2014, and so far, 12 African countries have signed on the dotted line. One of them – Chad – has even made a capital deposit. Only the ACB is still pending, with an expected timeframe for the establishment around 2028~2034.

Lenders shun Africa

But if 2020 is to have any impact on African integration in 2021, it has to be to a reminder that this external financial dependency is unsustainable. 

The majority of African leaders and citizens have done everything they can to fight against Covid-19, in sharp contrast to many other countries around the world.

Analysts at our firm, Development Reimagined, found that 37 African countries implemented some degree of social distancing measures before recording 10 cases. Ten of these countries implemented the measures before seeing any cases at all. African governments together have put aside at least $68bn collectively to deal with Covid-19, through measures that we estimate reach 175m people. 

By the end of May, 37 African governments had announced special financing support for SMEs. Five – Ethiopia, Ghana, Kenya, Uganda and Mozambique – had special schemes to encourage local firms to repurpose to manufacture PPEs and other health equipment. 

Covid-19 demonstrates Africa is not an incompetent, high-risk continent. Governments are active and involved, and citizens respond. Indeed, research from the Political Economic Research Institute (PERI) and Global Financial Integrity (GFI) have proven that Africa is a net creditor to the global economy.

But the reality is that this understanding does not – as yet – translate into money. The perception of risk persists. Pleas from African governments to external lenders to take some responsibility to help create fiscal space to address Covid-19 have gone mostly unanswered. 

Where they are answered – for example through the G20 Debt Service Suspension Initiative (DSSI) – they are limited to the poorest countries, and come loaded with new conditions, potentially taking governments back to the 1990s. 

In November this year, bondholders determined that Zambia was “defaulting”, after the government asked for “breathing space” in the form of a six-month payment suspension valued at under $50m, meaning Zambia’s access to finance for potential growth-inducing projects will be curtailed.

The government had prior to this announced direct Covid-19 expenses of over $100m. Figuratively speaking, if a country asks for breathing space, it can be deduced that such a country feels it is suffocating. Economic development or recovery cannot happen under such conditions.

Levelling the playing field

So what can African governments and stakeholders do in these circumstances? Others have advocated for the – unconditional – release of special drawing rights, held by the IMF, as was done in the 2008 financial crisis for wealthy nations. We have argued in African Business magazine and elsewhere for new, innovative and longer-term solutions such as a “borrowers’ club”.

But the work on Africa’s own, exclusively African financial organisations is also a crucial, long-term answer that can be combined with others. Yes, the African Development Bank (AfDB) exists, and is an incredibly important institution for Africa. But as we saw play out in mid-2020 with external questioning of the Bank’s president, Akinwumi Adesina, the fact that the AfDB board and capital is inclusive of non-African countries, suggests its financial decisions and attitude to risk are heavily externally influenced as well.

The fact is, European, American, Chinese and other populations benefit hugely from integration and independence of their own financial systems. These systems allow for elimination of foreign exchange issues that disrupt trade; they enable exchange rate stability to avoid competitive depreciation; and they also enable new debt to be issued promptly to shield citizens and businesses from challenges such as Covid-19 – without prior, protracted consultation, negotiation and concessions with the rest of the world. African citizens – and others around the world – deserve these benefits too. The playing field needs levelling.

The whole point behind the creation of the African Union and the plan for its new trade, financial and other institutions 20 years ago was this levelling. A unified position was required to effectively deal with dire economic conditions that plague the African continent. 

The fact that the AfCFTA has swung into action in the year of a pandemic provides ample inspiration for a further, proactive 2021 agenda. The work has already been done on the documents for these key financial bodies. It’s time for African governments to get signing again. 2021 needs to be all about the money.

Hannah Ryder is the CEO of Development Reimagined, a pioneering African-led international development consultancy based in China.

Ovigwe Eguegu is a policy adviser at Development Reimagined and a specialist in geopolitics.

Finance & Services

Ecobank’s Ellevate Programme empowers African businesswomen

Pan-African bank Ecobank has launched its Ellevate Programme to support businesses in Africa developed, managed and owned by women. It is also targeting those with a high percentage of female board members, more than 30% female employees and who market their products mainly at women. Such initiatives are much needed given limited access to financing for female-led businesses across the continent.

While a third of African small and medium-sized enterprises (SMEs) are owned by women and one in four African women are self-employed, female entrepreneurs face structural and cultural barriers to expanding their businesses. They are also likely to lag behind male-owned SMEs in terms of sales and number of employees. As a result, women accounted for just 33% of the continent’s GDP in 2018 and the African Development Bank estimates the financing gap for women-led business at $42bn a year.

Rather than pilot the project in a couple of markets, Ellevate was launched on 27 November in all 33 countries where Ecobank operates. In a webinar organised to promote the launch, the CEO of Ecobank Group, Ade Ayeyemi, said that women represented an untapped economic resource in Africa because unnecessary barriers prevented them from fully participating in the economy, including poor access to external finance, their lack of perceived credibility as business owners and managers, cultural gender discrimination, and violence against women.

Ellevate offers end-to-end, differentiated business solutions, financial support, general advice and networking opportunities. Among its customised lending products, loans are offered at discounted interest rates, often with extended tenure. Minimum 50% risk sharing guarantees and asset financing schemes have also been made available, while Ecobank is allocating 10% of its loan portfolio specifically to women.

It has also launched its Emerald clubs to act as mentoring services, where established female entrepreneurs can offer advice to their up and coming counterparts. Training is being offered to female entrepreneurs through the bank’s SME Academy, which it operates in conjunction with its business schools network. The training is designed to produce “well rounded women business leaders” and will be certified by well recognised educational institutions. 

Ecobank is also creating an e-commerce platform to allow female entrepreneurs to showcase their products and services. Services can also be accessed through their helpdesk.

Cash management solutions are provided to allow customers to receive and make payments, plus digital solutions to allow cashless transactions. The latter is particularly attractive as a result of efforts to reduce the frequency of direct contact between people in order to prevent the spread of Covid-19. Ecobank offers Omni Lite online banking and EcobankPay digital payments to support both aims.

Covid impact

Moreover, although the income gap between men and women is narrowing, Covid-19 has reversed some of the progress made on gender equality because women disproportionally work in insecure labour markets. 

Marieme Esther Dassanou, the Coordinator of the AfDB’s Affirmative Finance Action for Women in Africa (AFAWA), said women had borne most of the burden of looking after children when schools closed to suppress spread of the coronavirus. She cited a July study that showed that 80% of women-led SMEs had been forced to temporarily or permanently close during the pandemic.

Both to help them recover and support the growth of female entrepreneurs more generally, Dassanou said that financial products and services had to be tailored to the type of businesses that women run. They need flexible financing to help them bounce back from the pandemic, so AFAWA is working with Ecobank and other financial institutions to promote access to finance, including by providing more flexible collateral options. AFAWA aims to unlock $5bn financing for women entrepreneurs within the next six years,

For its part, Ecobank hopes that Ellevate will attract at least 5,000 female-led or owned businesses a year, while lending at least $100m to them annually on favourable terms. A wide range of different companies and organisations have already been supported, from schools and hotels to fashion retailers

Personal experience

Deborah Odutayo, a television producer and executive director at Royal Roots Communication Network, agreed that “access to market finance has been a challenge for women in Africa”, preventing their businesses from meeting global standards. Changing this will require economic barriers to be broken down to help create female economic giants, thereby changing the narrative of a poor Africa, she said.

Female entrepreneurs have ability, innovation, strength and the capability to think on their feet, so they can make a real difference when supported by an enabling environment, said Odutayo. They need attractive interest rates for loans and special concessions on business registration. Odutayo said that some banks already offer lower interest rates and zero charges on business bank accounts to female entrepreneurs.

Apart from attractive products, Ecobank’s Group Executive Commercial Banking, Josephine Anan Ankomah, said that women entrepreneurs also needed a different relationship with their banks – one that is based on authentic relationships, rather than the traditional transaction-based approach. They are not looking for products but rather for solutions that help them to achieve their goals, plus networking and recognition, she explained.

Giving the webinar keynote speech, H.E. Graça Machel said that the initiative could help millions of women because there are networks of women across the continent ready to learn and be trained. The future of Africa and its economic development depends on how we empower African women, she said. Every female entrepreneur directly helped by Ellevate will encourage many more to enter the business world and become the business banking customers of the future.

Agribusiness & Manufacturing

Olam excels in top employer awards

Olam International has been recognised by the Top Employers Institute, the global authority on recognising excellence in people practices, for its excellence in HR practices for the Africa region. Operations in Cote d’Ivoire, Ghana, Nigeria, South Africa, as well as the Netherlands, were also separately recognised for their HR best practices at the virtual awards ceremony held on 28 January.

The Top Employers Institute highlighted Olam as excelling in each of the assessment categories of People Strategy; Organisation & Change; Career; Digital HR; Work Environment; Employer Branding; Talent Acquisition & Onboarding; Performance Management; Learning; Wellbeing, Rewards & Recognition; Diversity & Inclusion, and Sustainability.

Jaideep Biswas, Regional Head of Human Resources, Africa, said, “People are critical to our business growth and success, and we are delighted to be recognised for our focus on attracting and developing talent across our operations in Africa. A key priority has been ensuring that we keep our people engaged by ensuring the work they do is enriching and inspiring. The recognition by the Top Employers Institute demonstrates the effectiveness of our approach to caring for our employees’ wellbeing and overall career aspirations.”

Over the past three decades, Olam has grown to become one of the largest employers in Africa with a strong emphasis on best-in-class talent practices to engage a strong and diverse talent pool to support its business operations. These certifications demonstrate Olam’s ongoing commitment to identify, attract, develop and retain skilled talent at scale using innovative approaches tailored to each country’s specific needs.

This year, the awards were presented at a virtual ceremony and brought together HR leaders and their peers to connect, inspire, and celebrate a better world of work. Organisations spanning 32 African countries have been named Top Employers 2021 in Africa for their outstanding HR strategies and people practices.

David Plink, CEO of Top Employers Institute, remarked, “In addition to the adverse impacts on global health systems and economies, businesses faced the significant hurdle of supporting their people in adapting to new ways of work. In our research, we were glad to see that Africa’s Top Employers put their employees first from the outset of the global health crisis. They responded and adapted quickly to the ever-changing situation.”

Olam has operations in 21 countries across Africa with over 19,000 full-time employees working across its food and agri-business operations.

Olam International is a leading food and agri-business supplying food, ingredients, feed, and fibre to 25,200 customers worldwide. Its value chain spans over 60 countries and includes farming, processing, and distribution operations, as well as a sourcing network of an estimated 5m farmers.