Standard Bank Talks In-Market Insights

In Market Insights - The year that was: Africa is not a country

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Inflation and disinflation trends regionally have not been homogeneous. East Africa is on a disinflation trajectory, while the West African region is seeing stubbornly high numbers. Currency devaluation and resource constraints have attributed to this. However, economic reform, as well as infrastructure investment shows a positive story for the continent, as we navigate our way back to being the second fastest growing region.

In this episode of In-Market Insights, we delve into how different corporates have adopted various strategies to address these challenges and embrace new opportunities.
12 Dec 2024 English South Africa Business · Investing

Audio transcript

00:00 Godfrey Mutizwa: Hello everybody and welcome to this edition of
00:02 the In-Market Insights podcast brought to you by Standard Bank.
00:06 My name is Godfrey Mutiswa.
00:07 As we race towards the close of the year, we look back on the year that was.
00:12 We look at the unique market trends and themes that defined 2024.
00:16 Without doubt, one of the big stories emerging out of the Africa
00:20 region was the disinflation picture.
00:23 According to the International Monetary Fund, inflation across
00:26 the regions remains in double digits in a third of the countries.
00:31 So what has been the response of monetary authorities to all of this?
00:34 Joining me for a discussion today is Anne Aliker, Head, Plan Coverage CIB.
00:40 And Godfrey Mwanza, Economist, Africa Regions.
00:42 Gent and lady, welcome.
00:44 Anne Aliker: Thank you.
00:45 Godfrey Manzwa: Thanks for having us.
00:45 Godfrey Mutizwa: Let me begin with you, Godfrey.
00:47 I like to say that Africa is not a country.
00:50 Many people laugh at me.
00:51 Godfrey Manzwa: Absolutely not.
00:52 I think you're right when you say Africa is not a country.
00:56 That's more sort of applicable in the way that inflation is very disparate.
01:00 The experience of inflation this year and going into next year is very
01:04 different in East Africa compared to West Africa compared to the
01:07 southern parts of Africa as well.
01:09 Overall, inflation is declining compared to last year, and will
01:14 continue to decline, next year as well.
01:17 The IMF is right in that.
01:18 But when we look at East Africa in particular, inflation is very low.
01:21 Very, very controlled, very, very subdued inflation.
01:24 In the case of Kenya, obviously the sort of industrial hub of East
01:28 Africa, inflation is sort of, you know, over decades, over the last
01:32 decade, it's the lowest that it's been.
01:34 I think there was a last print of 2.7 percent year-on-year.
01:37 That's very, very low inflation.
01:39 And the monetary authorities are responding with lower interest rates.
01:44 Whereas if you look at West Africa, both the big, markets we
01:48 look at there, Ghana and Nigeria.
01:51 Both have very high double digit inflation.
01:53 In the case of Nigeria, over 30 percent because of the reforms that
01:56 have happened over the last 18 months.
01:59 And we're not seeing a decline in interest rates there from the monetary authorities.
02:04 We think we'll see that, in maybe the first half of 2025.
02:09 Same thing with Ghana, right?
02:11 Inflation is still quite high, above 20%.
02:14 The process of disinflation is yet to really take hold in those markets.
02:17 Godfrey Mutizwa: Yeah.
02:18 I want to talk to Anne about how companies are responding to this,
02:21 but perhaps before we bring Anne in.
02:23 Let's talk a little bit, as you said, some of the monetary policy authorities have
02:27 tightened, but just give us, if you like, a little bit of, picture in terms of how
02:32 they are tackling this inflation, which in parts of the continent remains stubborn.
02:38 Godfrey Manzwa: So that's a good question because, you know, what matters also
02:41 is not just that there's inflation, but also what's causing that inflation.
02:44 So, in the South, for instance, what's caused inflation is
02:48 essentially a supply shock.
02:50 You've had a really bad drought, in countries like Zambia,
02:54 Botswana, in Malawi as well.
02:57 So when it comes to a supply shock, you know, Central Bank can increase rates.
03:02 But the only thing that will really long term fix that kind of inflation is
03:07 increase in supply of, you know, what the shortage is and in the case of the
03:11 South, it's electricity and food, right?
03:13 Affected by the drought and hydroelectric power.
03:16 In East Africa, the inflation has been stopped.
03:22 As I said, inflation is quite low in East Africa at the moment, and, interest rates
03:26 are actually going to be coming down.
03:27 Godfrey Mutizwa: Yeah, absolutely.
03:28 So, Anne, let's talk about how companies are responding to all of
03:31 this, given, the difficulty, in parts.
03:34 For instance, if you look at Southern Africa, part of the reason why we're
03:37 seeing high inflation and therefore perhaps central banks being hesitant
03:41 in terms of taking interest rates down is because this is externally driven.
03:46 Anne Aliker: Yeah, it's always interesting to listen to discussions
03:48 around inflation and interest rates, because at the end of the day, it's how
03:53 it affects the companies on the ground.
03:55 Because all companies in essence, they produce goods and services, and
04:00 they sell it into the consumer base.
04:02 So looking at inflation, there are some companies who will consistently operate
04:11 far more effectively than others.
04:13 But the inflation has actually impacted the purchasing power.
04:17 So what we see from our clients is constrained ability to produce
04:22 the same good at a price point that the consumer can buy that.
04:26 So even though in East Africa inflation is coming down,
04:29 Godfrey, our clients see that too.
04:32 The reality is it is after a prolonged period of time.
04:36 That has impacted the purchasing power of the consumer, and that
04:40 inevitably means that clients have to be far more agile and creative
04:45 in reducing the cost of production.
04:49 And that sort of, if you're in Zambia, quite nicely segues into the challenge
04:53 around availability of electricity and the need to use alternative
04:59 sources of power, which in and of itself increases the production cost.
05:04 Godfrey Mutizwa: Yeah.
05:04 And when you look at that picture, is this something that is uniform
05:07 across the continent in terms of how companies are navigating this?
05:10 Anne Aliker: In terms of how companies are navigating it?
05:14 No, it's not uniform because the situation isn't uniform across the continent.
05:20 If I look at West Africa, persistent high inflation has been a real challenge.
05:25 Some companies, however, have been able to grow despite this.
05:30 It means what has happened is that is they are effective operators.
05:34 They're extremely efficient.
05:36 Generally, they have the scale.
05:38 So what has happened is they've been able to take market share from other companies.
05:43 That reduces the competitive aspect.
05:47 So that'll be interesting to see in '25 and '26.
05:52 But, the better off operators have actually grown and have
05:54 grown quite significantly.
05:56 Godfrey Mutizwa: Let's talk the macro picture in terms of the
05:59 countries in particular, when you look at foreign currencies.
06:03 2024 was notable for two big devaluations.
06:08 There was one in Nigeria, I think at the beginning of the year, and
06:11 then we also had Ethiopia come in.
06:15 Give us again a little bit of a granular detail, if you will, Godfrey, in terms
06:20 of the situation that you're seeing as far as currencies are concerned
06:24 and how obviously, they're impacting companies as well, and will come in.
06:28 Godfrey Manzwa: Yeah, absolutely.
06:28 I mean, there were big devaluations, as you mentioned, Nigeria in February, 2024.
06:42 When the new government, they're not so new now, just over a year
06:45 now, came in middle of last year.
06:48 So there was a devaluation middle of last year, a devaluation early this year, and
06:54 you've seen quite a dramatic shift in the policies that govern the way foreign
06:59 currencies managed in that country.
07:02 We think it's positive.
07:03 It is one of those things that does come with pain in the short term and
07:08 in the long term the hope is that that's going to create a much more
07:11 sustainable foreign currency market.
07:14 You're already seeing increased in liquidity, dollar liquidity, dollar
07:18 supply from foreign investors.
07:21 And a much more two way market than what you saw before.
07:24 Overall, on the African continent, you know, one thing that's positive
07:28 is that this year you've seen lower current account deficits.
07:32 And your current account basically just is how the external balance
07:38 of a country is accounted for.
07:41 And that's really comprises of trade and, in the case of countries like Nigeria,
07:48 a big part of that is also remittance.
07:50 Overall, the current account in a country like Nigeria has improved
07:54 quite dramatically, remittance flows has increased the oil output
07:59 has also increased, well, oil export revenue has also increased.
08:02 So the situation in a country like Nigeria on the current account is improving.
08:06 You're seeing that across a lot of different countries
08:09 as well on the continent.
08:10 In the case of Ethiopia, that was really dramatic.
08:14 It's a historic devaluation.
08:18 The embrace of more free market liberal pricing of currency and other
08:24 things in the economies was a real change of direction for that country.
08:28 We're hopeful long term that also, again, it creates a much
08:31 more sort of sustainable market.
08:33 Godfrey Mutizwa: Yeah.
08:33 And I imagine, Anne, that increases costs for companies, right?
08:36 One, the challenge of finding foreign exchange.
08:38 And then secondly, also, of course, the issue of dealing with costs that
08:44 are unique in their own markets.
08:45 Anne Aliker: Yeah.
08:46 I think really the story for 2024 has been some easing of availability
08:50 of US dollars, which is, I think what Godfrey was talking about.
08:54 2023 when we looked at Nigeria or Kenya, to some extent, Tanzania, a little bit in
09:00 Malawi, it was actually the availability of dollars that was a real problem.
09:05 So that has eased in 2024.
09:08 So whilst the cost in some markets, Nigeria, was much, much higher in
09:14 Kenya it came down, you know, so in Kenya, if you recall, they were
09:18 able to, raise another euro bond.
09:20 The market was far more accepting of that, availability
09:25 of dollars was more prevalent.
09:28 So that reduced the import, the cost of imports in Kenya.
09:33 And if you think of the continent as a whole, so whilst Africa is not a
09:36 country, Godfrey, across the continent, we still are primarily import dependent.
09:43 So the cost of the dollar is quite important in terms of the production
09:47 of goods and services, and the price at which it is sold to the consumer.
09:53 But availability; far easier on the continent overall.
09:58 Still some pockets of challenges, Tanzania is still a challenge.
10:02 It comes through eventually, but we would like to see that ease.
10:08 From a companies perspective, what has been the actual impact?
10:13 And it's useful to look at the continent in the regions.
10:16 When I look at East Africa, East Africa trades quite a
10:20 bit by itself, within itself.
10:23 So whilst the traditional view, it's Kenyan companies exporting into Uganda
10:28 and Tanzania, we do see a lot more of the Tanzanian companies exporting into Uganda.
10:34 And increasingly a growing quiet confidence from Ugandan
10:39 companies, both exporting into Kenya and to some extent into DRC.
10:45 So the Ugandan companies who historically have not exported a great deal into
10:49 Kenya, for them the availability of dollars has really surprised them.
10:54 Because that's not an issue in Uganda.
10:57 Now, those are sort of the practical challenges and limitations
11:01 we've seen on the ground.
11:02 Godfrey Mutizwa: Yeah, and do you want to come in?
11:04 Godfrey Manzwa: Sure, yeah, I mean, it's such an important point that Anne raises.
11:08 Tanzania was actually a very interesting surprise for a country like Zambia
11:14 as well, trading into Zambia as well.
11:15 Not just to sort of traditional East African trading partners.
11:19 So, you know, El Nino and the drought that caused the output of, you
11:25 know, all Maize, and other sort of food stuffs in the southern region.
11:30 In Zambia and in and in Malawi we had a, in Zambia the harvest was
11:34 about 1.5 million tonnes of maize, as opposed to 3.2 million tonnes
11:39 in 2023 because of the drought.
11:41 A lot of that gap was met by imports from Tanzania.
11:46 Right?
11:46 There was a government to government deal, where Zambia was importing 650,000
11:51 tonnes from Tanzania, and Tanzania had a bumper harvest with estimates
11:56 between 8 and 10 million tonnes.
11:59 So, I think that's a very important point in terms of, you know,
12:03 trade between countries, not your traditional just the East African
12:07 community in the case of Tanzania, but also to the South on what happens.
12:11 Godfrey Mutizwa: Yeah.
12:11 I was going to say, actually, East Africa is unique in many ways, isn't it?
12:14 The most integrated region probably out of all the major regions
12:18 across the African continent.
12:20 And then also in terms of growth, the growth engine for the African
12:22 continent for the past few years.
12:24 I will talk about the growth picture, but I wanted to know from you,
12:27 Anne, when you look to West Africa.
12:30 How has that picture been in terms of how companies have been coping?
12:33 Anne Aliker: Yeah, it's Nigeria being the largest economy has
12:38 continued to be a challenge.
12:41 But if I think of the story of Nigeria, if you go back three, four
12:45 years, there's been significant focus on backward integration.
12:49 And if we recall, the central bank in Nigeria for a long time was
12:52 actually making available relatively cost effective sources of funding.
12:57 So companies could focus and invest in an ability to backward integrate.
13:03 So that to some extent reduces some of the pressure.
13:06 But what it really did is, perhaps concentrate it to particular players.
13:15 Nigeria, the devaluation of the Naira has really impacted companies.
13:20 Godfrey Mutizwa: Yeah, and we've seen it in the results, right?
13:22 Anne Aliker: We've seen it in the results.
13:24 You see it on the ground.
13:26 You feel it when you speak to the consumers.
13:28 You feel it when you're speaking in particular to the
13:30 fast-moving consumer companies.
13:32 Consumer packaged goods.
13:34 They have had to be extremely creative, and I think it has made some of the
13:40 more, the foreign investors think very, very deeply and keenly as to what they
13:46 want to do in a particular market.
13:49 Godfrey Mutizwa: Yeah, we've seen a few exits, right?
13:50 Anne Aliker: We have seen a few exits, which to some extent were a surprise
13:55 because those companies have been in Nigeria for a very long time.
13:59 But ultimately, people make a call based on what they expect going forward, based
14:06 on the volatility and unpredictability that impacts their businesses.
14:12 Tough picture.
14:13 I want to talk about happy things.
14:15 Let's talk about growth.
14:16 I think often we talk about Africa and we talk about our challenges, but we forget
14:21 that we've got some good story going.
14:22 And one of the good stories we've got going is on growth.
14:25 The IMF says in Sub-Saharan Africa.
14:27 For instance, we're home to nine of the world's top 20 fastest
14:32 growing economies this year.
14:34 I can mention Rwanda, Ethiopia, Senegal, etc.
14:37 Godfrey, give us the granular detail.
14:39 Godfrey Manzwa: Sure, absolutely.
14:40 It is very much a positive picture.
14:42 I think, just to take a step back, if you look at the sort of last 24 years,
14:47 sort of the first 24 years of the century, we've had kind of a two-speed
14:53 Sub-Saharan African growth picture.
14:55 In the first 14 years, we're growing something like three times, you know, per
15:00 capita, faster than the rest of the world.
15:02 We slowed down a lot between 2014 and now, and we're picking up again.
15:06 There was a period when Africa, Sub-Saharan Africa, was the second
15:09 fastest growing region in the world.
15:13 Obviously, East Asia, particularly China, was number one, and we lost
15:17 that silver medal, if you will, sort of between 2014 and more recently.
15:24 But we're getting back that mantle and going forward over the next five years.
15:30 The expectation is that Africa will become again the second fastest
15:34 growing region in the world.
15:36 Godfrey Mutizwa: Yeah.
15:36 I want to know who is growing.
15:37 And why?
15:38 Because often when you look at the continent, there's a distinction
15:41 between the resource rich countries and countries without natural resources.
15:46 What are we seeing this time around?
15:48 Godfrey Manzwa: I think that story, by and large, will continue.
15:52 The reason why you have resource dependent countries growing slower, is because
15:58 they sort of focus all their energy and resources towards that resource
16:02 as opposed to being more diversified.
16:05 So in East Africa, we keep on going back there.
16:07 It's just generally more diversified.
16:09 And the thing with economics, like, you know, like your savings account,
16:12 there's an element of compounding, right?
16:14 So you already have a pretty diversified economy.
16:17 You can grow in sort of multiple dimensions.
16:19 If you already have a, if you have a very concentrated economy, it's
16:23 harder to diversify at the beginning.
16:25 So I think in the short term, the short to medium term, I think growth will still
16:28 be mostly driven by the more diversified economies, particularly in the East.
16:33 The countries that you mentioned in the West, countries like Senegal,
16:37 quite diversified, now add oil to it.
16:40 Ivory Coast, quite diversified, a lot of infrastructure investment going on there.
16:45 Yeah.
16:46 One of the interesting points that's been made is that while you are
16:49 seeing this very happy picture of accelerating economic growth, it's
16:54 in some of your smaller economies.
16:56 The big guys are laggards.
16:58 So your Nigeria, your South Africa, for instance.
17:00 But I want to know if that's a picture that's mirrored on the company.
17:03 Anne Aliker: It's an interesting question.
17:04 Actually, when you asked about happy, happy themes, and do we see growth as one?
17:11 Most definitely.
17:12 And where does it play out for me?
17:15 Ultimately, at the end of the day, I run a client business.
17:19 So unless my clients are growing, unless we can see sectors and geographies
17:24 where the clients are actually growing, my business wouldn't grow.
17:28 But we don't talk about a lack of growth opportunity for us,
17:32 which means we're seeing it in our client base, in particular sectors,
17:36 and in particular geographies.
17:38 So where am I seeing some growth?
17:40 You talked about exits a little bit earlier, but those exits were
17:45 not companies simply abandoning their businesses and moving away.
17:50 They were selling their businesses to entities that have the
17:54 capability and ability to operate effectively in that market.
17:58 And those are companies that have actually grown year on year, if
18:02 I look back the last 10 years.
18:04 And I see no reason why they would slow down.
18:07 So certainly within the consumer packaged goods.
18:10 Fast moving consumer goods.
18:12 We're seeing domestic businesses grow quite well.
18:15 It makes sense.
18:16 They're close to the client.
18:19 They're close to the consumer.
18:20 They adapt.
18:21 They are more agile.
18:23 We're also seeing a lot of growth in the sectors that are necessary
18:29 for everybody else to grow.
18:31 So, Godfrey spoke a little bit about energy earlier, so we're talking
18:34 about energy in South Africa.
18:36 Yeah.
18:36 And that's been a fabulous result.
18:39 Godfrey Mutizwa: I want to talk a little bit about that.
18:40 Anne Aliker: I mean, it's, it's been incredible.
18:42 And I think everyone in South Africa should be proud of themselves.
18:45 Godfrey Mutizwa: What about the regions?
18:46 We speak about East Africa dominating the integration in the region being an
18:50 example for the rest of the continent.
18:52 Anne Aliker: The regions.
18:53 So East Africa is very integrated, but if we think about scale.
18:59 Scale in South Africa is much larger.
19:01 Scale in Nigeria is larger.
19:04 I think with the growth that we're seeing in Tanzania, some nascent
19:09 growth in Uganda, and I say that with a smile because I am from
19:12 Uganda, so it's good to see it.
19:15 We can start to see scale potentially coming into East Africa.
19:19 East Africa has always been a fairly consistent market.
19:23 Good growth.
19:24 diverse economy.
19:26 Some predictability.
19:28 But the question has always been around scale.
19:31 And that's a question the external investors ask us.
19:35 But on the ground, you have a lot of domestic businesses
19:39 that are starting to grow.
19:40 And that's always good and useful to see.
19:44 Godfrey Mutizwa: Yeah, absolutely.
19:46 We, of course, when you, while we ask for foreign investors to come in, local
19:50 investors must be leading the charge for that growth to be sustainable.
19:53 Let's talk about where the money is going.
19:55 You spoke about energy.
19:57 Anne Aliker: Where is the money going?
20:00 Money is going into energy.
20:01 Money is going into infrastructure.
20:04 Money is going into strategic minerals.
20:07 I don't think we can shy away from that, but I think it's a positive story.
20:12 I don't think it's a negative story.
20:14 Often I hear people talking about, oh, well, the external investors
20:18 only want to come in, invest in the mines, be it in DRC or Angola or South
20:23 Africa and take the goods abroad.
20:28 Yes, that is part of it, but with that investment comes
20:31 investment in infrastructure.
20:34 And within, with investment in infrastructure comes the ability to move
20:38 goods, be they the strategic minerals or actually fast moving consumer goods, which
20:44 the people on the ground actually desire, need, and are a great signal of growth.
20:50 I mean, if you look at the DRC in particular, you look at
20:52 Kinshasa, Kinshasa is a huge city.
20:55 And often we forget it's going to be one of the largest
20:58 cities in the world by 2030.
21:00 That means it is a city that is creating demand, not just from companies within the
21:10 DRC, but from the surrounding companies.
21:13 Godfrey Mutizwa: Yeah, I want to talk about the DRC opportunity, but a
21:15 little more colour, please, Godfrey.
21:17 I want you to put on your economist hat and talk a little bit about
21:20 the energy story because we know Africa is energy hungry, right?
21:24 600 million Africans still have no access to power.
21:27 We've seen big initiatives, including one from the African Development Bank
21:31 working together with the World Bank.
21:36 Let's talk a little bit about, where that money is going in terms of energy.
21:39 Is it traditional sources?
21:41 Or are we talking here about the renewable story truly, truly, truly
21:45 beginning to attract the kind of money that we needed to grow it?
21:48 Godfrey Manzwa: Yeah, it's a very, very important theme.
21:50 When it comes to climate change and the impact we have seen, you
21:57 know, the drought have on the South that I mentioned earlier, and how
22:01 that has crippled hydroelectric power generation in the South.
22:06 One thing that I've seen is an increased willingness to invest
22:12 in things like thermal coal.
22:15 So, solar is going to be a theme, thermal coal is going to be a theme, and anywhere
22:22 where you can get investments to increase electricity output is, I think, what
22:27 you're likely to see going forward.
22:29 Because that is, from a sort of macroeconomic growth perspective,
22:33 growth is population growth multiplied by some kind of productivity factor.
22:39 And nothing enhances productivity quite as much, particularly from
22:43 the level where we are at on the African continent than electricity.
22:48 But just to touch on something that Anne said as well, in terms of investment
22:54 in strategic minerals, that's also extremely important in terms of the
23:00 model of the kind of funding that we get.
23:03 So for instance, we've got a lot of debt from China and other sources sort of in
23:08 the last sort of decades of pre Covid.
23:11 A lot of that was dollar debt, right?
23:13 It paid for infrastructure, but not necessarily infrastructure
23:17 that earned you dollars.
23:19 Right.
23:19 So if you build a road, you know, from the airport to town, that's great for
23:24 commuters, but it's not necessarily going to increase your dollar earnings.
23:28 But you borrowed it, you borrowed dollars for it.
23:31 But for the strategic minerals, if you are, even if governments borrow
23:35 in foreign currency to build rail, for instance, to extract those critical
23:40 minerals that you can then export, then that actually is more direct.
23:45 It has more economic logic.
23:47 Projects like that.
23:48 Godfrey Mutizwa: Absolutely.
23:49 So, our story around infrastructure is well known.
23:52 I've grown tired of how big that is.
23:54 Is that a hundred billion?
23:56 Is that three hundred billion in terms of deficits every year that we can't find?
23:59 And are we beginning to see private capital looking at infrastructure?
24:04 Anne Aliker: So the quick answer is yes, but in practical terms, whilst
24:09 there is a lot of investment in infrastructure on the continent, the
24:12 reality is the deficit is significant.
24:15 And so we need far more of it.
24:17 And we need the governments to continue to get involved.
24:20 But where are we seeing this investment from the private sector?
24:25 Ports, and ports are a really important thing.
24:29 Logistics, and logistics, at the end of the day, is the way in which we move
24:34 goods and people across the continent.
24:37 Still a lot more to be done within that.
24:40 And when you come to talk about the DRC, I think we should talk about the
24:43 infrastructure for the strategic minerals.
24:45 Because we will eventually connect East and West.
24:48 Finally.
24:50 Which will also, I think, lead to significant development in Central,
24:58 Southern Central Africa, and here I'm thinking of countries such as Zambia.
25:02 But we are seeing private sector funds, infrastructure funds that have a long
25:08 life investing in infrastructure assets.
25:12 And that's really important because the life of the fund is consistent with the
25:19 sort of returns one can generate from the infrastructure and the financing, the
25:26 appropriate financing that's required.
25:27 Godfrey Mutizwa: You remind me of a conversation we used to have
25:29 years ago about the fact that Africa is not short of money.
25:35 We have got pension funds that are invested in overseas markets where they
25:40 are earning, sick returns when the opportunity at home is quite limited.
25:47 Anne Aliker: My personal passion is actually what I call the trapped
25:52 capital in the various pension funds.
25:54 So I think we're all familiar with South Africa.
25:56 South Africa is a large formal economy that actually works incredibly well.
26:01 And many of those funds do invest in energy or infrastructure.
26:06 And if you look at the asset managers, a lot of them are
26:09 creating infrastructure funds.
26:12 But you go outside of South Africa, whether you talk about Zambia or Uganda
26:18 or Kenya or Nigeria, you have a lot of fairly large domestic pension funds and
26:25 that capital is trapped in one country.
26:27 But our infrastructure needs create, connect one country to another.
26:32 So to the extent that could be unlocked at least a little bit, I think we would
26:38 see a significant increase in investment in the right infrastructure opportunities.
26:44 And off the back of that growth of, consumer packaged goods.
26:48 Godfrey Mutizwa: Coming into, so let's say we're into it.
26:51 Let's talk about this wonderful creation by the political leaders of the continent.
26:57 I think in terms of speed of implementation, I have not
27:00 seen anything as fast and I've been around a few decades.
27:04 Let's talk about what it is doing on the ground and practically how we
27:08 are seeing, I want to talk companies.
27:11 But I want to talk the big picture too, just in terms of whether we are
27:14 beginning to see the kind of impact that the founding fathers envisaged
27:19 when they talked about integrating the continent and also those who
27:22 finally implemented the vision.
27:24 Are we seeing fruits yet?
27:26 Anne Aliker: I'd say it's early days yet.
27:27 Godfrey Mutizwa: It is early.
27:27 Anne Aliker: It's very early days yet, which means in practical
27:30 terms, if I look at the individual companies, I'm not yet seeing it.
27:35 Yeah.
27:36 And that is not to disagree with anything you've said because when I
27:39 look at the regulations, when I look at the fact that the different countries
27:45 have actually signed the various agreements and seem to be committed
27:50 to it, then I think it will work.
27:54 But it's only been a few years and when we talk about the free trade
27:58 agreement across the continent, I don't think it should be a surprise that
28:02 my response is it is early days yet.
28:05 It is also not a surprise that typically companies will
28:10 grow their own market first.
28:11 Godfrey Mutizwa: Yeah before they look outside.
28:14 Anne Aliker: Then they'll look at the neighbouring countries, and
28:16 then they'll look further afield.
28:18 So that takes time.
28:23 So we're not yet seeing, for example, East African companies selling into Angola.
28:28 Yeah.
28:28 We are seeing Angola companies invest in DRC in fast moving consumer goods.
28:35 That is not the same as saying that they are exporting into the DRC.
28:40 So there is still some work to do, there's still some energy required
28:43 to get it moving effectively.
28:47 West Africa?
28:48 We talk about East Africa being, integrated, but from a West Africa
28:53 perspective, you do see some commodities between Ghana and Nigeria
28:57 and vice versa between, Ivory Coast and Ghana when it comes to cocoa.
29:03 You see the governments collaborating on that.
29:07 Godfrey Mutizwa: Let's gravitate to the DRC and talk about
29:10 how big this opportunity is.
29:12 In particular, given the growing interest we have seen.
29:15 The United States has been talking about the Bitou Corridor.
29:20 We know that, on the East African side, we've been talking about other various
29:24 corridors that we've been creating, but at the centre of it all is the
29:27 Democratic Republic of the Congo.
29:29 Let me share a little story about the DRC with you.
29:32 I saw a definition somewhere on the internet.
29:34 I can't remember who said it, but they said the Democratic Republic of the Congo
29:38 is the richest country in the world.
29:41 In terms of resources, but in the crowd.
29:45 Let's talk about getting those resources out and the
29:47 opportunity that it represents.
29:49 I will begin with you, Anne.
29:50 Anne Aliker: Yeah, I guess I wasn't really hesitating.
29:52 I was just thinking about the significance of the opportunity.
29:56 I went to the DRC for the first time this year, and unlike many
30:00 people, I didn't land in Kinshasa.
30:02 I landed in Lubumbashi and drove to Kulwezi.
30:07 Now, for those of you who may not know, that is in the Katanga region.
30:11 It's where the copper and the cobalt is.
30:13 Godfrey Mutizwa: The rich mining region.
30:14 Anne Aliker: Rich mining region.
30:15 There are a number of significant mines that have been developed
30:20 over the last few years.
30:22 What's interesting about those mines is it takes time to build and develop a mine.
30:28 But those mines have started to export their product.
30:33 So those mines are now generating cash and revenue, both for the
30:39 shareholders and for the DRC.
30:43 Now, that talks to a significant amount of money that potentially
30:50 becomes trapped in the DRC.
30:51 So what are we now seeing?
30:53 We're seeing the mine service companies also set up in the DRC.
30:58 These are very large mines and these are global service companies.
31:03 I was
31:06 both impressed and actually awed by the significance of the opportunity there.
31:14 We went to see one mine that very kindly put up a chart of
31:21 the large copper mines globally.
31:23 And then made the statement, we are number 18, but quarter one
31:27 next year will be number two.
31:28 Godfrey Mutizwa: Oh, wow.
31:29 Anne Aliker: And it's about the quality of the mineral and
31:34 the ore that's in the ground.
31:37 And where in the ground it is.
31:40 So you don't have too many deep mines.
31:42 It's still surface mining.
31:44 Yeah?
31:45 And it's surface mining because it is on the surface.
31:48 It is not surface mining because people are doing the wrong thing.
31:52 And that's a significant opportunity both for the DRC and for the region,
31:56 because of course, the DRC, that mineral must be exported in some
32:02 form or shape, even if there is some processing that takes place in the DRC.
32:08 Ultimately, it's going to be used in batteries elsewhere in the world.
32:14 And, it'll attract revenue to the DRC, revenue to the region.
32:21 It will, the miners will demand and require investment in infrastructure
32:26 in order to export their product.
32:29 So there is, there is a wonderful, combination of, not influences, a
32:39 wonderful combination of incentives here.
32:43 It is the miners who will need to invest in some form or
32:46 other in the infrastructure.
32:48 And by that, I don't mean that they will put their own money in the
32:51 ground, but you know that they're going to use the infrastructure.
32:54 That same infrastructure will move other goods.
32:57 Godfrey Mutizwa: And we're certainly hoping that some of that money will
33:01 go into processes, those minerals into value that ends the country
33:08 and the people of the DRC more.
33:10 We need to round up.
33:12 And, as we–
33:12 Anne Aliker: Can I just comment on that?
33:13 I would certainly hope so.
33:15 And, I think–
33:16 Godfrey Mutizwa: It's not a dirty word, but inficiation, right?
33:18 Anne Aliker: No, it's not a dirty word at all, but let's look at
33:21 it also from this perspective.
33:23 Nobody wants to export soil out.
33:26 So even the mining companies are incentivised to do some processing in DRC.
33:31 Because I think sometimes we forget that people are very commercial.
33:36 Companies are commercial.
33:37 Shareholders want a return.
33:39 Exporting soil doesn't provide a return.
33:41 Godfrey Mutizwa: Sure, so we need to do more.
33:45 Anne Aliker: I think they'll want to do more themselves.
33:48 That's the bit that I think many of us forget.
33:50 Nobody wants to export soil.
33:52 Godfrey Mutizwa: Agreed.
33:53 Godfrey, let me come to you and take the positive picture that we're getting from
33:57 the DRC and then add to the story that we spoke about earlier about the nine
34:02 countries in Africa that are growing faster in the world than many parts of
34:09 the world and ask the question, heading into 2025, how does that picture look?
34:14 The picture is very positive from a growth perspective.
34:17 As I mentioned before, we're going to reclaim our place as the
34:20 second fastest growing region in the world, the Sub-Saharan Africa.
34:24 There'll be some that will grow faster, some slower, but the average
34:27 is going to be, according to the IMF over the next five years, about 4.2%.
34:32 Which will be the second fastest growing region in the world, and that's important,
34:35 4.2% on average is maybe about 2% in real terms, per capita, which is important.
34:44 What you want for real transformation over a generation is just continued growth.
34:50 You want sometimes it to be faster, some slower, but it just needs to
34:53 be positive all the time and for a very, very long period of time.
34:56 Godfrey Manzwa: And of course, that's going to be powered
34:57 by the companies, right?
34:58 Is that a picture that you also see?
35:00 Anne Aliker: Definitely.
35:01 I mean, if I think about my own personal budgets and requirements from my boss.
35:09 It's all about growth because the companies are growing.
35:12 Maybe the one thing I will say from a macro perspective, we're
35:15 still growing off a relatively low base across the continent.
35:19 So the growth is important.
35:22 I think it is positive.
35:24 It needs to continue in the medium term to make a significant difference, both to
35:31 the quality of lives and the purchasing power of the consumer on the continent.
35:35 And on that happy note, we end it.
35:38 Africa's inflation picture is improving.
35:41 And its economic growth is accelerating, building scale in its companies.
35:46 I want to thank my guests for tonight's program.
35:49 Anne Alika, Head of Client Coverage CIB and Godfrey Manza,
35:53 Economist, Africa Regions.
35:55 Until next time, goodbye.

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